Concentration of Risk and Segment Data

9 Months Ended

May 31, 2012

Concentration of Risk and Segment Data

5. Concentration of Risk and Segment Data

a. Concentration of Risk

Sales of the Company’s products are concentrated among specific customers. During the nine months ended May 31, 2012, the Company’s five largest customers accounted for approximately 48% of its net revenue and 53 customers accounted for approximately 90% of its net revenue. Sales to these customers were reported in the Diversified Manufacturing Services (“DMS”), Enterprise & Infrastructure (“E&I”) and High Velocity Systems (“HVS”) operating segments.

The Company procures components from a broad group of suppliers. Almost all of the products manufactured by the Company require one or more components that are available from only a single source.

Production levels for a portion of the DMS and HVS segments are subject to seasonal influences. The Company may realize greater net revenue during its first fiscal quarter due to higher demand for consumer related products manufactured in the DMS and HVS segments during the holiday selling season. Therefore, quarterly results should not be relied upon as necessarily being indicative of results for the entire fiscal year.

b. Segment Data

Operating segments are defined as components of an enterprise that engage in business activities from which they may earn revenues and incur expenses; for which separate financial information is available; and whose operating results are regularly reviewed by the chief operating decision maker to assess the performance of the individual segment and make decisions about resources to be allocated to the segment.

The Company derives its revenue from providing comprehensive electronics design, production and product management services. Management, including the Chief Executive Officer, the Chief Financial Officer and the Chief Operating Officer (collectively, the chief operating decision maker) evaluates performance and allocates resources on a segment basis. The Company’s operating segments consist of three segments – DMS, E&I and HVS.

The DMS segment is composed of dedicated resources to manage higher complexity global products in regulated industries and bring materials and process technologies including design and aftermarket services to global customers. The E&I and HVS segments offer integrated global supply chain solutions designed to provide cost effective solutions for certain customer groups. The E&I segment is focused on customers primarily in the computing, storage, networking and telecommunication sectors. The HVS segment is focused on the particular needs of the consumer products industry, including mobility, display, set-top boxes and peripheral products such as printers and point of sale terminals.

Net revenue for the operating segments is attributed to the segment in which the service is performed. An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net revenue less cost of revenue, segment selling, general and administrative expenses, segment research and development expenses and an allocation of corporate manufacturing expenses and selling, general and administrative expenses, and does not include distressed customer charges, stock-based compensation expense and related charges, amortization of intangibles, restructuring and impairment charges, settlement of receivables and related charges, loss on disposal of subsidiaries, other expense, interest income, interest expense, income tax expense or adjustment for net income (loss) attributable to noncontrolling interests. Total segment assets are defined as accounts receivable, inventories, net customer-related machinery and equipment, intangible assets net of accumulated amortization and goodwill. All other non-segment assets are reviewed on a global basis by management. Transactions between operating segments are generally recorded at amounts that approximate arm’s length.

The following table sets forth operating segment information (in thousands):

	Three months ended						Nine months ended
	May 31, 2012			May 31, 2011			May 31, 2012			May 31, 2011
Net revenue
DMS	$	1,871,508		$	1,532,902		$	5,546,347		$	4,328,907
E&I		1,323,816			1,382,633			3,747,482			3,783,550
HVS		1,055,594			1,312,153			3,520,032			4,126,075
	$	4,250,918		$	4,227,688		$	12,813,861		$	12,238,532
Segment income and reconciliation of income before income tax
	Three months ended						Nine months ended
	May 31, 2012			May 31, 2011			May 31, 2012			May 31, 2011
DMS	$	122,334		$	94,338		$	353,612		$	275,522
E&I		29,306			54,052			73,173			163,410
HVS		38,689			29,383			134,283			89,096
Total segment income		190,329			177,773			561,068			528,028
Reconciling items:
Distressed customer charge		10,149			—			10,149			—
Stock-based compensation expense and related charges		20,123			20,053			59,857			59,854
Amortization of intangibles		3,454			5,187			13,399			16,821
Restructuring and impairment charges		—			—			—			628
Settlement of receivables and related charges		—			—			—			13,607
Loss on disposal of subsidiaries		—			—			—			23,944
Other expense		1,899			1,771			6,503			2,418
Interest income		(733	)		(897	)		(1,579	)		(2,486	)
Interest expense		26,462			25,149			78,303			73,088
Income before income tax	$	128,975		$	126,510		$	394,436		$	340,154

	May 31, 2012		August 31, 2011
Total assets
DMS	$	2,889,723	$	2,417,256
E&I		1,179,049		1,194,774
HVS		1,051,434		1,232,378
Other non-allocated assets		2,252,632		2,213,532
	$	7,372,838	$	7,057,940

The Company operates in 29 countries worldwide. Sales to unaffiliated customers are based on the Company’s location that maintains the customer relationship and transacts the external sale. Total foreign net revenue represented 84.4% and 85.7% of net revenue during the three months and nine months ended May 31, 2012, respectively, compared to 85.8% and 85.7% of net revenue for the three months and nine months ended May 31, 2011, respectively.