Concentration of Risk and Segment Data

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. For 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 2018, the Company’s five largest customers accounted for approximately 48% of its net revenue and 80 customers accounted for approximately 90% of its net revenue. As the Company is a provider of manufacturing services and solutions and products are built based on customer specifications, it is impracticable to provide revenues from external customers for each product and service. Sales to the following customer that 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 the customer, were as follows:



	Percentage of Net Revenue Fiscal Year Ended August 31,						Percentage of Accounts Receivable as of August 31,
	2018		2017		2016		2018	2017
Apple, Inc.⁽¹⁾	28	%	24	%	24	%	*	*

* Amount was less than 10% of total.


⁽¹⁾	Sales to this customer were reported in the DMS operating segment.

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

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 two segments – EMS and DMS, which are also the Company’s reportable segments. The segments are organized based on the economic profiles of the services performed, including manufacturing capabilities, market strategy, margins, return on capital and risk profiles.

The EMS segment is focused around leveraging IT, supply chain design and engineering, technologies largely centered on core electronics, utilizing the Company’s large scale manufacturing infrastructure and the ability to serve a broad range of end markets. The EMS segment is typically lower-margin but high volume business that is produced at a quicker rate (i.e. cycle time) and in higher quantities and includes customers primarily in the automotive and transportation, capital equipment, computing and storage, defense and aerospace, digital home, industrial and energy, networking and telecommunications, point of sale and printing industries.

The DMS segment is focused on providing engineering solutions, with an emphasis on material sciences and technologies. The DMS segment is typically higher-margin business and includes customers primarily in the consumer wearables, healthcare, mobility and packaging industries.

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. Segment income does not include amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, distressed customer charges, acquisition and integration costs, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges, business interruption and impairment charges, net, 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 those at which we would transact with third parties.

The following tables set forth operating segment information (in thousands):



	Fiscal Year Ended August 31,
	2018		2017		2016
Net revenue
EMS	$	12,268,600	$	11,077,622	$	11,029,132
DMS	9,826,816		7,985,499		7,323,954
	$	22,095,416	$	19,063,121	$	18,353,086



	Fiscal Year Ended August 31,
	2018			2017			2016
Segment income and reconciliation of income before tax
EMS	$	451,149		$	436,110		$	373,732
DMS	316,998			230,893			256,588
Total segment income	$	768,147		$	667,003		$	630,320
Reconciling items:
Amortization of intangibles	(38,490		)	(35,524		)	(37,121		)
Stock-based compensation expense and related charges	(98,511		)	(48,544		)	(58,997		)
Restructuring and related charges	(36,902		)	(160,395		)	(11,369		)
Acquisition and integration costs	(8,082		)	—			—
Distressed customer charges	(32,710		)	(10,198		)	—
Business interruption and impairment charges, net⁽¹⁾	(11,299		)	—			—
Loss on disposal of subsidiaries	—			(2,112		)	—
Other expense	(37,563		)	(28,448		)	(8,380		)
Interest income	17,813			12,525			9,128
Interest expense	(149,002		)	(138,074		)	(136,536		)
Income before income tax	$	373,401		$	256,233		$	387,045

⁽¹⁾Charges, net of insurance proceeds of $24.9 million, for the fiscal year ended August 31, 2018 relate to business interruption and asset impairment costs associated with damage from Hurricane Maria, which impacted our operations in Cayey, Puerto Rico, which is classified as a component of cost of revenue and selling, general and administrative expenses in the Consolidated Statements of Operations.



	August 31, 2018		August 31, 2017
Total assets
EMS	$	3,456,866	$	2,778,820
DMS	5,378,436		5,290,468
Other non-allocated assets	3,210,339		3,026,707
	$	12,045,641	$	11,095,995

The Company operates in 29 countries worldwide. Sales to unaffiliated customers are based on the Company 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,
	2018		2017		2016
External net revenue:
Singapore	$	7,193,414	$	5,585,837	$	4,983,711
China	4,585,355		4,012,950		3,873,212
Mexico	3,533,437		3,207,059		3,043,609
Malaysia	1,389,851		1,119,384		1,113,456
Hungary	897,033		944,448		1,130,466
Other	2,651,632		2,547,750		2,499,241
Foreign source revenue	20,250,722		17,417,428		16,643,695
U.S.	1,844,694		1,645,693		1,709,391
Total	$	22,095,416	$	19,063,121	$	18,353,086



	August 31,
	2018		2017
Long-lived assets:
China	$	1,770,732	$	1,922,676
Singapore	191,506		204,181
Mexico	256,086		196,218
Taiwan	130,062		136,685
Malaysia	113,011		74,341
Hungary	91,063		89,814
Spain	79,991		83,064
Poland	60,847		55,617
Other	334,466		343,473
Long-lived assets related to foreign operations	3,027,764		3,106,069
U.S.	1,077,128		1,015,389
Total	$	4,104,892	$	4,121,458