Concentration of Risk and Segment Data

6 Months Ended

Feb. 29, 2020

Concentration of Risk

Sales of the Company’s products are concentrated among specific customers. During the six months ended February 29, 2020, the Company’s five largest customers accounted for approximately 47% of its net revenue and 72 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, impairment on securities, 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
	February 29, 2020						February 28, 2019
	EMS		DMS		Total		EMS		DMS		Total
Timing of transfer
Point in time	$	986,570	$	1,141,881	$	2,128,451	$	836,863	$	1,464,832	$	2,301,695
Over time	2,843,384		1,153,248		3,996,632		2,967,864		797,431		3,765,295
Total	$	3,829,954	$	2,295,129	$	6,125,083	$	3,804,727	$	2,262,263	$	6,066,990



	Six months ended
	February 29, 2020						February 28, 2019
	EMS		DMS		Total		EMS		DMS		Total
Timing of transfer
Point in time	$	2,377,480	$	3,011,360	$	5,388,840	$	1,257,524	$	3,566,483	$	4,824,007
Over time	5,870,026		2,371,915		8,241,941		6,050,306		1,698,952		7,749,258
Total	$	8,247,506	$	5,383,275	$	13,630,781	$	7,307,830	$	5,265,435	$	12,573,265

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



	Three months ended						Six months ended
	February 29, 2020			February 28, 2019			February 29, 2020			February 28, 2019
Segment income and reconciliation of income before income tax
EMS	$	84,829		$	88,654		$	189,529		$	172,749
DMS	74,619			102,405			247,234			271,970
Total segment income	$	159,448		$	191,059		$	436,763		$	444,719
Reconciling items:
Amortization of intangibles	(13,577		)	(7,777		)	(29,717		)	(15,423		)
Stock-based compensation expense and related charges	(15,109		)	(15,697		)	(45,332		)	(32,946		)
Restructuring and related charges	(29,604		)	(817		)	(74,855		)	(6,842		)
Distressed customer charge	—			—			(14,963		)	—
Business interruption and impairment charges, net⁽¹⁾	—			—			—			2,860
Acquisition and integration charges	(7,752		)	(12,785		)	(23,886		)	(21,675		)
Impairment on securities	(12,205		)	—			(12,205		)	—
Other expense (net of periodic benefit cost)	(11,277		)	(11,757		)	(24,274		)	(25,307		)
Interest income	5,336			4,760			11,280			9,139
Interest expense	(46,183		)	(46,160		)	(91,094		)	(88,812		)
Income before income tax	$	29,077		$	100,826		$	131,717		$	265,713

⁽¹⁾Charges, net of insurance proceeds of $2.9 million for the six months ended February 28, 2019, relate to business interruption and asset impairment costs associated with damage from Hurricane Maria, which impacted our operations in Cayey, Puerto Rico.

As of February 29, 2020, the Company operated in 31 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):



	Three months ended				Six months ended
	February 29, 2020		February 28, 2019		February 29, 2020		February 28, 2019
External net revenue:
Singapore	$	1,216,369	$	1,588,931	$	3,247,285	$	3,907,604
Mexico	1,153,619		1,052,781		2,344,957		2,048,202
China	968,386		1,199,016		2,123,321		2,517,454
Malaysia	505,424		414,433		996,230		793,961
Ireland	181,790		205,480		435,875		281,199
Other	1,035,235		891,648		2,050,948		1,837,335
Foreign source revenue	5,060,823		5,352,289		11,198,616		11,385,755
U.S.	1,064,260		714,701		2,432,165		1,187,510
Total	$	6,125,083	$	6,066,990	$	13,630,781	$	12,573,265



	February 29, 2020		August 31, 2019
Long-lived assets:
China	$	1,488,548	$	1,579,904
Mexico	404,896		418,641
Switzerland	217,065		158
Malaysia	208,576		154,386
Singapore	148,583		156,028
Taiwan	118,315		123,608
Hungary	99,435		85,809
Vietnam	93,495		85,728
Other	470,688		462,261
Long-lived assets related to foreign operations	3,249,601		3,066,523
U.S.	1,148,011		1,146,335
Total	$	4,397,612	$	4,212,858