Concentration of Risk and Segment Data

3 Months Ended

Nov. 30, 2019

Concentration of Risk

Sales of the Company’s products are concentrated among specific customers. During the three months ended November 30, 2019, the Company’s five largest customers accounted for approximately 49% of its net revenue and 65 customers 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. Some of the products manufactured by the Company require one or more components that are available from only a single source.

Segment Data

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 charges, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, restructuring of securities loss, goodwill impairment charges, business interruption and impairment charges, net, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations, other expense (excluding certain components of net periodic benefit cost), interest income, interest expense, income tax expense or adjustment for net income (loss) attributable to noncontrolling interests. Transactions between operating segments are generally recorded at amounts that approximate those at which we would transact with third parties.

The following table presents the Company’s revenues disaggregated by segment (in thousands):



	Three months ended
	November 30, 2019						November 30, 2018
	EMS		DMS		Total		EMS		DMS		Total
Timing of transfer
Point in time	$	1,390,910	$	1,869,479	$	3,260,389	$	420,661	$	2,101,651	$	2,522,312
Over time	3,026,642		1,218,667		4,245,309		3,082,442		901,521		3,983,963
Total	$	4,417,552	$	3,088,146	$	7,505,698	$	3,503,103	$	3,003,172	$	6,506,275

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



	Three months ended
	November 30, 2019			November 30, 2018
Segment income and reconciliation of income before income tax
EMS	$	104,700		$	84,095
DMS	172,615			169,565
Total segment income	$	277,315		$	253,660
Reconciling items:
Amortization of intangibles	(16,140		)	(7,646		)
Stock-based compensation expense and related charges	(30,223		)	(17,249		)
Restructuring and related charges	(45,251		)	(6,025		)
Distressed customer charge	(14,963		)	—
Business interruption and impairment charges, net⁽¹⁾	—			2,860
Acquisition and integration charges	(16,134		)	(8,890		)
Other expense (net of periodic benefit cost)	(12,997		)	(13,550		)
Interest income	5,944			4,379
Interest expense	(44,911		)	(42,652		)
Income before income tax	$	102,640		$	164,887

⁽¹⁾Charges, net of insurance proceeds of $2.9 million for the three months ended November 30, 2018, relate to business interruption and asset impairment costs associated with damage from Hurricane Maria, which impacted our operations in Cayey, Puerto Rico.

As of November 30, 2019, the Company operated in 30 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 table sets forth, for the periods indicated, foreign source revenue expressed as a percentage of net revenue:



	Three months ended
	November 30, 2019		November 30, 2018
Foreign source revenue	81.8	%	92.7	%