Concentration of Risk and Segment Data

9 Months Ended

May. 31, 2015

Concentration of Risk and Segment Data [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 31,2015, the Company’s five largest customers accounted for approximately 51% of its net revenue and 79customers accounted for approximately 90% of its net revenue. Sales to these customers were reported in the Electronics Manufacturing Services (“EMS”) and Diversified Manufacturing Services (“DMS”) 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 segment 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 segment 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. Prior to the first quarter of fiscal year 2015, the Company’s operating segments consisted of three segments – DMS, Enterprise & Infrastructure and High Velocity Systems.On September 1, 2014, the Company changed 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 two segments – EMS and DMS, which are also the Company’s reportable segments. All prior period disclosures presented have been restated to reflect this change.

The EMS segment is focused around leveraging IT, supply chain design and engineering, technologies largely centered on core electronics, sharing of the Company’s large scale manufacturing infrastructure and the ability to serve a broad range of end markets. The EMS segment includes customers primarily in the automotive, computing, digital home, energy, industrial, networking, printing, storage and telecommunications industries. The DMS segment is focused on providing engineering solutions, heavy participation in consumer markets, access to higher growth markets and a focus on material sciences and technologies. The DMS segment includes customers primarily in the consumer lifestyles, healthcare, mobility and packaging industries.

On April 1, 2014, the Company completed the sale of the AMS business except for the Malaysian operations, for which the sale was completed on December 31, 2014. The AMS business was included in the DMS segment, and the results of operations of this business are classified as discontinued operations for all periods presented. See Note2 – “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 (loss) 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,		May 31,		May 31,		May 31,
		2015		2014		2015		2014
	Net revenue
	EMS	$	2,741,910	$	2,641,344	$	8,001,299	$	7,877,554
	DMS		1,616,731		1,144,531		5,217,083		3,828,347
		$	4,358,641	$	3,785,875	$	13,218,382	$	11,705,901

Segment income and reconciliation of income
	before tax
EMS			$	95,349	$	44,683	$	212,664	$	171,055
DMS				65,109		666		294,400		94,853
	Total segment income		$	160,458	$	45,349	$	507,064	$	265,908
Reconciling items:
	Amortization of intangibles			5,724		5,679		17,097		18,180
	Stock-based compensation expense and related
		charges		20,094		14,561		53,106		6,627
	Restructuring and related charges			(782)		12,446		31,833		65,652
	Distressed customer charges			―		11,371		―		15,113
	Loss on disposal of subsidiaries			―		2,905		―		2,905
	Other expense			1,880		1,520		5,238		4,547
	Interest income			(2,836)		(1,060)		(6,452)		(2,109)
	Interest expense			31,997		32,107		95,884		97,270
Income (loss) from continuing operations before tax			$	104,381	$	(34,180)	$	310,358	$	57,723

	May 31, 2015		August 31, 2014
Total assets
EMS	$	2,632,642	$	2,300,262
DMS		3,682,890		3,460,769
Other non-allocated assets		2,650,001		2,699,046
Assets of discontinued operations		―		19,669
	$	8,965,533	$	8,479,746

As of May 31,2015, the Company operated in 25 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 86.6% and 87.1% of net revenue during the three months and nine months endedMay 31,2015, respectively, compared to 83.4% and 84.1% of net revenue during the three months and nine months endedMay 31,2014, respectively.