Concentration of Risk and Segment Data

9 Months Ended

May 31, 2014

Segment Reporting [Abstract]

Concentration of Risk and Segment Data

6. 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, 2014, the Company’s five largest customers accounted for approximately 45% of its net revenue and 67 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. 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 and other industries and introduce materials and process technologies including design 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.

On April 1, 2014, the Company completed the sale of the AMS business (except for the Malaysian operations due to certain regulatory approvals that are still pending in that jurisdiction), which was included in the DMS segment. Accordingly, for all periods presented, the results of operations of this business are classified as discontinued operations. See Note 2 – “Discontinued Operations” for further details.

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 amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, distressed customer charges, acquisition costs and certain purchase accounting adjustments, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges, income (loss) from discontinued operations, gain on sale of discontinued operations, 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 property, plant 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 tables set forth operating segment information (in thousands):

	Three months ended						Nine months ended
	May 31, 2014			May 31, 2013			May 31, 2014			May 31, 2013
Net revenue
DMS	$	1,610,293		$	1,522,034		$	5,154,712		$	5,250,433
E&I		1,335,197			1,375,626			3,906,365			4,155,076
HVS		840,385			1,298,564			2,644,824			3,330,290
	$	3,785,875		$	4,196,224		$	11,705,901		$	12,735,799
	Three months ended						Nine months ended
	May 31, 2014			May 31, 2013			May 31, 2014			May 31, 2013
Segment income and reconciliation of income before income tax
DMS	$	17,885		$	85,955		$	144,950		$	290,982
E&I		26,011			30,844			95,206			96,883
HVS		1,453			41,762			25,752			94,984
Total segment income		45,349			158,561			265,908			482,849
Reconciling items:
Amortization of intangibles		5,679			2,221			18,180			6,591
Stock-based compensation expense and related charges		14,561			14,433			6,627			47,620
Restructuring and related charges		12,446			23,182			65,652			23,182
Distressed customer charges		11,371			—			15,113			—
Loss on disposal of subsidiaries		2,905			—			2,905			—
Impairment of notes receivable and related charges		—			25,597			—			25,597
Other expense		1,520			1,422			4,547			4,545
Interest income		(1,060	)		(381	)		(2,109	)		(1,263	)
Interest expense		32,107			30,709			97,270			89,464
(Loss) income from continuing operations before tax	$	(34,180	)	$	61,378		$	57,723		$	287,113

	May 31, 2014		August 31, 2013
Total assets
DMS	$	3,380,999	$	3,580,133
E&I		1,011,219		1,118,347
HVS		802,992		1,031,911
Other non-allocated assets		3,003,122		2,879,439
Assets of discontinued operations		22,998		543,951
	$	8,221,330	$	9,153,781

As of May 31, 2014, the Company operates in 24 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 83.7% and 84.3% of net revenue during the three months and nine months ended May 31, 2014, respectively, compared to 86.1% and 86.5% of net revenue during the three months and nine months ended May 31, 2013, respectively.