Concentration of Risk and Segment Data

12 Months Ended

Aug. 31, 2012

Concentration of Risk and Segment Data

11. Concentration of Risk and Segment Data

a. Concentration of Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables. The Company maintains cash and cash equivalents with various domestic and foreign financial institutions. Deposits held with the financial institutions may exceed the amount of insurance provided on such deposits, but may generally be redeemed upon demand. The Company performs periodic evaluations of the relative credit standing of the financial institutions and attempts to limit exposure with any one institution. With respect to trade receivables, the Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains an allowance for potential credit losses on trade receivables.

Sales of the Company’s products are concentrated among specific customers. For fiscal year 2012, the Company’s five largest customers accounted for approximately 48% of its net revenue and 54 customers accounted for approximately 90% of its net revenue. Sales to the following customers who accounted for 10% or more of the Company’s net revenues, expressed as a percentage of consolidated net revenue, and the percentage of accounts receivable for each customer, were as follows:

	Percentage of Net Revenue Fiscal Year Ended August 31,									Percentage of Accounts Receivable August 31,
	2012			2011			2010			2012			2011
Apple, Inc.		13	%		*			*			17	%		*
Cisco Systems, Inc		10	%		13	%		15	%		*			*
Research in Motion Limited		10	%		15	%		15	%		*			10	%

* Amount was less than 10% of total

Sales to the above customers were reported in the DMS, E&I and 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.

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. Prior to the first quarter of fiscal year 2011, the Company managed its business based on three segments, Electronic Manufacturing Services, Consumer and Aftermarket Services. On September 1, 2010, the Company reorganized its reporting structure to align with the chief operating decision maker’s management of resource allocation and performance assessment. Accordingly, the Company’s operating segments now consist of three segments – DMS, E&I and HVS. All disclosures for fiscal year 2010 below have been restated to reflect this change.

The DMS segment is composed of dedicated resources to manage higher complexity global products in regulated and other industries and introduce materials and process technologies including design and aftermarket services to global customers. The E&I and HVS segments offer integrated global manufacturing and 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 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):

	Fiscal Year Ended August 31,
	2012			2011			2010
Net revenue
DMS	$	7,476,730		$	6,018,332		$	4,223,955
E&I		5,080,417			5,180,011			4,407,013
HVS		4,594,794			5,320,484			4,778,443
	$	17,151,941		$	16,518,827		$	13,409,411
	2012			2011			2010
Segment income and reconciliation of income before income tax
DMS	$	455,596		$	389,188		$	248,967
E&I		105,583			199,731			186,335
HVS		175,000			126,275			55,628
Total segment income	$	736,179		$	715,194		$	490,930
Reconciling items:
Distressed customer charges		(16,014	)		—			—
Stock-based compensation expense and related charges		(81,409	)		(76,230	)		(104,609	)
Amortization of intangibles		(16,825	)		(22,051	)		(25,934	)
Restructuring and impairment charges		—			(628	)		(8,217	)
Settlement of receivables and related charges		—			(13,607	)		—
Loss on disposal of subsidiaries		—			(23,944	)		(24,604	)
Other expense		(8,943	)		(2,986	)		(4,087	)
Interest income		2,041			3,132			2,956
Interest expense		(106,129	)		(97,693	)		(79,168	)
Income before income tax	$	508,900		$	481,187		$	247,267

	August 31,
	2012		2011
Total assets
DMS	$	3,002,982	$	2,417,256
E&I		1,157,464		1,194,774
HVS		970,819		1,232,378
Other non-allocated assets		2,671,876		2,213,532
	$	7,803,141	$	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. The following tables set forth external net revenue, net of intercompany eliminations, and long-lived asset information where individual countries represent a material portion of the total (in thousands):

	Fiscal Year Ended August 31,
	2012		2011		2010
External net revenue:
Mexico	$	3,658,873	$	3,876,239	$	3,438,436
China		3,425,641		3,343,669		2,410,590
U.S.		2,466,079		2,314,098		2,049,700
Singapore		2,030,492		938,381		122,280
Hungary		1,430,180		1,794,869		1,230,788
Malaysia		1,148,899		1,167,594		1,164,255
Brazil		661,676		710,863		609,198
Other		2,330,101		2,373,114		2,384,164
	$	17,151,941	$	16,518,827	$	13,409,411

	August 31,
	2012		2011		2010
Long-lived assets:
China	$	718,970	$	574,583	$	483,181
U.S.		339,409		266,171		255,108
Mexico		191,388		198,868		212,409
Malaysia		132,027		114,819		102,700
Singapore		121,291		98,569		74,538
Taiwan		110,610		116,121		110,237
Poland		83,978		117,090		98,395
Hungary		78,841		89,995		90,091
Other		216,712		190,424		157,301
	$	1,993,226	$	1,766,640	$	1,583,960

Total foreign source net revenue was approximately $14.7 billion, $14.2 billion and $11.4 billion for fiscal years 2012, 2011 and 2010, respectively. Total long-lived assets related to the Company’s foreign operations were approximately $1.7 billion, $1.5 billion and $1.3 billion for fiscal years 2012, 2011 and 2010, respectively.