What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-04-05 compared with 2024-01-09 · 170 added, 142 removed, 201 unchanged (61% of the section changed)

8 unchanged sentences

We conduct our operations in facilities that are located worldwide, including but not limited to, China, India, Malaysia, Mexico, Singapore and the United States.

We derived a substantial majority, 86.4% of net revenue from our international operations for the three months ended November 30, 2023.

We derived a substantial majority, 82.5% and 84.7%, of net revenue from our international operations for the three months and six months ended February 29, 2024, respectively.

Our global manufacturing production sites allow customers to manufacture products simultaneously in the optimal locations for their products.

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Our DMS segment includes customers primarily in the automotive and transportation, connected devices, healthcare and packaging, and mobility industries.

On December 29, 2023 (the “Closing Date”), we completed the sale of our product manufacturing business in Chengdu, including its supporting component manufacturing in Wuxi (the “Business”) for pre-tax cash proceeds of approximately $2.2 billion, subject to certain post-closing adjustments.

The sale of the Business represented the divestiture of our mobility business.

We monitor the current economic environment and its potential impact on both the customers we serve as well as our end-markets and closely manage our costs and capital resources so that we can respond appropriately as circumstances change.

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"Management's Discussion and Analysis of Financial Condition and Results of Operations" section contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023 for further discussion of the items disclosed in Item 2.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" section as of November 30, 2023 contained herein.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" section as of February 29, 2024 contained herein.

Summary of Results

The following table sets forth, for the periods indicated, certain key operating results and other financial information (in millions, except per share data):

Three months ended

November 30, 2023

November 30, 2022

Three months ended Six months ended

February 29, 2024 February 28, 2023 February 29, 2024 February 28, 2023

Net revenue $ 6,767 $ 8,134 $ 15,154 $ 17,769

Gross profit $ 630 $ 661 $ 1,405 $ 1,404

Operating income $ 1,131 $ 359 $ 1,434 $ 721

Net income attributable to Jabil Inc.

$ 927 $ 207 $ 1,121 $ 430

Earnings per share – basic $ 7.41 $ 1.55 $ 8.80 $ 3.21

7 unchanged sentences

Three months ended

November 30, 2023 (1)

August 31, 2023 (1)

November 30, 2022

February 29, 2024 November 30, 2023 (1)

February 28, 2023

Sales cycle (2)

48 days 42 days 50 days

Inventory turns (annualized) (3)

4 turns 5 turns 4 turns

Days in accounts receivable (4)

35 days 43 days 41 days

Days in inventory (5)

87 days 78 days 93 days

Days in accounts payable (6)

(1) The calculation of these key performance indicators includes assets and liabilities held for sale for the three months ended November 30, 2023 and August 31, 2023, respectively.

74 days 78 days 84 days

(1) The calculation of these key performance indicators includes assets and liabilities held for sale for the three months ended November 30, 2023.

(2) The sales cycle is calculated as the sum of days in accounts receivable and days in inventory, less the days in accounts payable;

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(4) Days in accounts receivable is calculated as accounts receivable, net, divided by net revenue multiplied by 90 days.

During the three months ended November 30, 2023, the increase in days in accounts receivable from the prior sequential quarter was primarily due to the timing of collections.

During the three months ended February 29, 2024, the decrease in days in accounts receivable from the prior sequential quarter and the three months ended February 28, 2023, was primarily due to the timing of collections.

(5) Days in inventory is calculated as inventories, net and contract assets divided by cost of revenue multiplied by 90 days.

During the three months ended November 30, 2023, the decrease in days in inventory from the prior sequential quarter was primarily driven by higher consumption of inventory to support sales during the quarter and improved working capital management.

During the three months ended February 29, 2024, the increase in days in inventory from the prior sequential quarter was primarily driven by the timing of sales.

During the three months ended February 29, 2024, the decrease in days in inventory from the three months ended February 28, 2023, was primarily driven by improved working capital management.

(6) Days in accounts payable is calculated as accounts payable divided by cost of revenue multiplied by 90 days.

During the three months ended November 30, 2023, the decrease in days in accounts payable from the three months ended November 30, 2022, was primarily due to cash payments and timing of purchases during the quarter.

During the three months ended February 29, 2024, the decrease in days in accounts payable from the prior sequential quarter was primarily due to timing of purchases and cash payments during the quarter.

During the three months ended February 29, 2024, the decrease in days in accounts payable from the three months ended February 28, 2023, was primarily driven by improved working capital management.

Critical Accounting Policies and Estimates

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and any potential termination, or substantial winding down, of significant customer relationships.

Three months ended

(dollars in millions)

November 30, 2023

November 30, 2022

Net revenue decreased during the three months ended November 30, 2023, compared to the three months ended November 30, 2022.

Three months ended Six months ended

(dollars in millions) February 29, 2024 February 28, 2023 Change February 29, 2024 February 28, 2023 Change

Net revenue $ 6,767 $ 8,134 (16.8) % $ 15,154 $ 17,769 (14.7) %

Net revenue decreased during the three months ended February 29, 2024, compared to the three months ended February 28, 2023.

Specifically, the EMS segment net revenue decreased 18% primarily due to:

(i) a 12% decrease in revenues from existing customers within our 5G, wireless and cloud business, which continued transitioning to a customer-controlled consignment model in fiscal year 2024, (ii) a 7% decrease in revenues from existing customers within our digital print and retail business, and (iii) a 2% decrease in revenues from existing customers within our industrial and semi-capital equipment business.

(i) a 12% decrease in revenues from existing customers primarily within our 5G and wireless business, and the continued transitioning to a customer-controlled consignment model in our cloud business during fiscal year 2024, (ii) a 5% decrease in revenues from existing customers within our digital print and retail business, and (iii) a 4% decrease in revenues from existing customers within our industrial and semi-capital equipment business.

The decrease is partially offset by a 3% increase in revenues from existing customers within our networking and storage business.

The DMS segment net revenue decreased 16% due to:

(i) a 5% decrease in revenues from existing customers within our connected devices business and (ii) a 3% decrease from existing customers within our mobility business.

(i) a 17% decrease primarily driven by the divestiture of our mobility business and (ii) a 2% decrease in revenues from existing customers within our connected devices business.

The decrease is partially offset by a 3% increase in revenues from existing customers within our automotive and transportation business.

On September 26, 2023, we announced the signing of a definitive agreement to divest our mobility business to an affiliate of BYD Electronic (International) Company Limited (“BYDE”) in a cash transaction valued at approximately $2.2 billion.

Net revenue decreased during the six months ended February 29, 2024, compared to the six months ended February 28, 2023.

Specifically, the EMS segment net revenue decreased 20% primarily due to:

(i) a 12% decrease in revenues from existing customers within our 5G, wireless and cloud business, primarily driven by the continued transitioning to a customer-controlled consignment model in our cloud business during fiscal year 2024, (ii) a 6% decrease in revenues from existing customers within our digital print and retail business, and (iii) a 3% decrease in revenues from existing customers within our industrial and semi-capital equipment business.

The decrease is partially offset by a 1% increase in revenues from existing customers within our networking and storage business.

The DMS segment net revenue decreased 10% due to:

(i) a 9% decrease primarily driven by the divestiture of our mobility business and (ii) a 4% decrease in revenues from existing customers within our connected devices business.

The decrease is partially offset by a 3% increase in revenues from existing customers within our automotive and transportation business.

On December 29, 2023, the Closing Date, we completed the sale.

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The following table sets forth, for the periods indicated, revenue by segment expressed as a percentage of net revenue:

Three months ended

November 30, 2023

November 30, 2022

Three months ended Six months ended

February 29, 2024 February 28, 2023 February 29, 2024 February 28, 2023

EMS 49 % 50 % 46 % 48 %

DMS 51 % 50 % 54 % 52 %

Total 100 % 100 % 100 % 100 %

The following table sets forth, for the periods indicated, foreign source revenue expressed as a percentage of net revenue:

Three months ended

November 30, 2023

November 30, 2022

Three months ended Six months ended

February 29, 2024 February 28, 2023 February 29, 2024 February 28, 2023

Foreign source revenue 82.5 % 84.0 % 84.7 % 85.0 %

Three months ended

(dollars in millions)

November 30, 2023

November 30, 2022

Three months ended Six months ended

(dollars in millions) February 29, 2024 February 28, 2023 February 29, 2024 February 28, 2023

Gross profit $ 630 $ 661 $ 1,405 $ 1,404

Percent of net revenue 9.3 % 8.1 % 9.3 % 7.9 %

Gross profit as a percentage of net revenue increased for the three months ended November 30, 2023, compared to the three months ended November 30, 2022, primarily due to product mix, improved profitability across various businesses, and depreciation and amortization for long-lived assets no longer being recorded while these assets are classified as held for sale.

Gross profit as a percentage of net revenue increased for the three months and six months ended February 29, 2024, compared to the three months and six months ended February 28, 2023, primarily due to depreciation and amortization for long-lived assets related to the mobility divestiture no longer being recorded while these assets were classified as held for sale and product mix.

Selling, General and Administrative

Three months ended

(in millions)

November 30, 2023

November 30, 2022

Three months ended Six months ended

(in millions) February 29, 2024 February 28, 2023 Change February 29, 2024 February 28, 2023 Change

Selling, general and administrative $ 308 $ 285 $ 23 $ 622 $ 604 $ 18

Selling, general and administrative expenses decreased during the three months ended November 30, 2023, compared to the three months ended November 30, 2022.

The decrease is primarily due to a $6 million decrease in salary and salary related expenses.

Selling, general and administrative expenses increased during the three months ended February 29, 2024, compared to the three months ended February 28, 2023.

The increase is primarily due to a $19 million increase in salary and salary related expenses.

Selling, general and administrative expenses increased during the six months ended February 29, 2024, compared to the six months ended February 28, 2023.

The increase is primarily due to a $13 million increase in salary and salary related expenses.

Research and Development

Three months ended

(dollars in millions)

November 30, 2023

November 30, 2022

Three months ended Six months ended

(dollars in millions) February 29, 2024 February 28, 2023 February 29, 2024 February 28, 2023

Research and development $ 10 $ 8 $ 20 $ 17

Percent of net revenue 0.1 % 0.1 % 0.1 % 0.1 %

Research and development expenses remained consistent as a percentage of net revenue during the three months ended November 30, 2023, compared to the three months ended November 30, 2022.

Research and development expenses remained consistent as a percentage of net revenue during the three months and six months ended February 29, 2024, compared to the three months and six months ended February 28, 2023.

Amortization of Intangibles

Three months ended

(in millions)

November 30, 2023

November 30, 2022

Three months ended Six months ended

(in millions) February 29, 2024 February 28, 2023 Change February 29, 2024 February 28, 2023 Change

Amortization of intangibles $ 9 $ 9 $ — $ 15 $ 17 $ (2)

Amortization of intangibles remained relatively consistent during the three months ended November 30, 2023, compared to the three months ended November 30, 2022.

Amortization of intangibles remained relatively consistent during the three months and six months ended February 29, 2024, compared to the three months and six months ended February 28, 2023.

Restructuring, Severance and Related Charges

Three months ended

(in millions)

November 30, 2023

November 30, 2022

Three months ended Six months ended

(in millions) February 29, 2024 February 28, 2023 Change February 29, 2024 February 28, 2023 Change

Restructuring, severance and related charges $ 70 $ — $ 70 $ 197 $ 45 $ 152

Restructuring, severance and related charges increased during the three months ended November 30, 2023, compared to the three months ended November 30, 2022, primarily related to the 2024 Restructuring Plan.

Restructuring, severance and related charges increased during the three months and six months ended February 29, 2024, compared to the three months and six months ended February 28, 2023, primarily due to charges related to the 2024 Restructuring Plan.

2024 Restructuring Plan

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Based on the analysis done to date, we currently expect to recognize approximately $300 million in pre-tax restructuring and other related costs over the course of our 2024 fiscal year.

The restructuring and other related charges are expected to include $150 million to $180 million of employee severance and benefit costs;

$80 million to $120 million of asset write-off costs;

and $30 million to $40 million of contract termination costs and other related costs.

The charges relating to the 2024 Restructuring Plan are currently expected to result in net cash expenditures of approximately $200 million that will be payable over the course of our fiscal years 2024 and 2025.

The exact timing of these charges and cash outflows, as well as the estimated cost ranges by category type, have not been finalized.

This information will be subject to the finalization of timetables for the transition of functions, consultation with employees and their representatives as well as the statutory severance requirements of the jurisdictions impacted, and the amount and timing of the actual charges may vary due to a variety of factors.

The amount and timing of the actual charges may vary due to a variety of factors, including the finalization of timetables for the transition of functions, consultation with employees and their representatives, as well as the impact of jurisdictional statutory severance requirements.

Our estimates for the charges discussed above exclude any potential income tax effects.

See Note 12 – “Restructuring, Severance and Related Charges” to the Condensed Consolidated Financial Statements for further discussion of restructuring, severance and related charges.

Costs from the Divestiture of Businesses

Three months ended

(in millions)

November 30, 2023

November 30, 2022

Costs from the divestiture of businesses

Costs from the divestiture of businesses increased during the three months ended November 30, 2023, related to transaction costs incurred from the planned divestiture of our mobility business.

Gain from the Divestiture of Businesses

Three months ended Six months ended

(in millions) February 29, 2024 February 28, 2023 Change February 29, 2024 February 28, 2023 Change

Gain from the divestiture of businesses $ (944) $ — $ (944) $ (944) $ — $ (944)

In the second quarter of fiscal year 2024, we completed the divestiture of our mobility business.

As a result of the transaction, we recorded a pre-tax gain of $944 million, subject to certain post-closing adjustments that are expected to be finalized in the third quarter of fiscal year 2024.

See Note 15 – “Business Acquisitions and Divestitures” to the Condensed Consolidated Financial Statements for additional information.

Acquisition and Divestiture Related Charges

Three months ended Six months ended

(in millions) February 29, 2024 February 28, 2023 Change February 29, 2024 February 28, 2023 Change

Acquisition and divestiture related charges $ 46 $ — $ 46 $ 61 $ — $ 61

Acquisition and divestiture related charges increased during the three months and six months ended February 29, 2024, related to transaction and disposal costs incurred in connection with the divestiture of our mobility business.

See Note 15 – “Business Acquisitions and Divestitures” to the Condensed Consolidated Financial Statements for additional information.

Other Expense

Three months ended

(in millions)

November 30, 2023

November 30, 2022

Three months ended Six months ended

(in millions) February 29, 2024 February 28, 2023 Change February 29, 2024 February 28, 2023 Change

Other expense $ 22 $ 17 $ 5 $ 43 $ 32 $ 11

The change in other expense during the three months ended November 30, 2023, compared to the three months ended November 30, 2022, is primarily due to an increase in fees due to higher interest rates on our trade accounts receivable sales programs and global asset-backed securitization programs.

The change in other expense during the three months and six months February 29, 2024, compared to the three months and six months February 28, 2023, is primarily due to an increase in fees due to higher interest rates on our trade accounts receivable sales programs and global asset-backed securitization programs.

Interest Expense, Net

Three months ended

(in millions)

November 30, 2023

November 30, 2022

Three months ended Six months ended

(in millions) February 29, 2024 February 28, 2023 Change February 29, 2024 February 28, 2023 Change

Interest expense, net $ 47 $ 55 $ (8) $ 94 $ 103 $ (9)

Interest expense, net remained relatively consistent during the three months ended November 30, 2023, compared to the three months ended November 30, 2022.

Interest expense, net decreased during the three months and six months ended February 29, 2024, compared to the three months and six months ended February 28, 2023, primarily due to lower borrowings on our credit facilities and commercial paper program.

Income Tax Expense

Three months ended

November 30, 2023

November 30, 2022

Three months ended Six months ended

February 29, 2024 February 28, 2023 Change February 29, 2024 February 28, 2023 Change

Effective income tax rate 12.7 % 27.6 % (14.9) % 13.6 % 26.6 % (13.0) %

The effective income tax rate differed for the three months ended November 30, 2023, compared to the three months ended November 30, 2022, primarily due to:

(i) a change in the jurisdictional mix of earnings, driven in part by restructuring charges, (ii) a $19 million income tax benefit for the reversal of a non-U.S.

unrecognized tax benefit due to audit closure for the three months ended November 30, 2023, and (iii) an $11 million income tax benefit for the reversal of a portion of the U.S.

valuation allowance related to an acquisition for the three months ended November 30, 2023.

The effective income tax rate differed for the three months and six months ended February 29, 2024, compared to the three months and six months ended February 28, 2023, primarily due to:

(i) a change in the jurisdictional mix of earnings, driven in part by restructuring charges and (ii) the gain from the divestiture of the mobility business and corresponding $58 million of income tax expense during the three months ended February 29, 2024.

Non-GAAP (Core) Financial Measures

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We determine an annual normalized tax rate (“normalized core tax rate”) for the computation of the non-GAAP (core) income tax provision to provide better consistency across reporting periods.

In estimating the normalized core tax rate annually, we utilize a full-year financial projection of core earnings that considers the mix of earnings across tax jurisdictions, existing tax positions, and other significant tax matters.

In estimating the normalized core tax rate annually, we utilize a full-year financial projection of core earnings that considers the mix of earnings across tax jurisdictions, existing tax

positions, and other significant tax matters.

We may adjust the normalized core tax rate during the year for material impacts from new tax legislation or material changes to our operations.

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GAAP Financial Results to Non-GAAP Measures

Three months ended

(in millions, except for per share data)

November 30, 2023

November 30, 2022

Three months ended Six months ended

(in millions, except for per share data) February 29, 2024 February 28, 2023 February 29, 2024 February 28, 2023

Operating income (U.S.

$ 1,131 $ 359 $ 1,434 $ 721

Amortization of intangibles 9 9 15 17

2 unchanged sentences

Net periodic benefit cost (2)

Costs from the divestiture of businesses

Gain from the divestiture of businesses (3)

(944) — (944) —

Acquisition and divestiture related charges (3)

Adjustments to operating income (793) 32 (597) 131

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Net income attributable to Jabil Inc.

$ 927 $ 207 $ 1,121 $ 430

Adjustments to operating income (793) 32 (597) 131

Net periodic benefit cost (2)

(3) (3) (5) (7)

Adjustments for taxes (4)

1 unchanged sentence

Diluted earnings per share (U.S.

$ 7.31 $ 1.52 $ 8.66 $ 3.14

Diluted core earnings per share (Non-GAAP)

$ 1.68 $ 1.88 $ 4.30 $ 4.19

Diluted weighted average shares outstanding (U.S.

GAAP and Non-GAAP) 126.9 136.3 129.5 137.1

(1) Charges recorded during the three months ended November 30, 2023, related to the 2024 Restructuring Plan.

Charges recorded during the three months ended November 30, 2022, related to headcount reduction to further optimize our business activities.

(1) Charges recorded during the three months and six months ended February 29, 2024, related to the 2024 Restructuring Plan.

Charges recorded during the three months and six months ended February 28, 2023, related to headcount reduction to further optimize our business activities.

(2) We are reclassifying the pension components in other expense to core operating income as we assess operating performance, inclusive of all components of net periodic benefit cost, with the related revenue.

There is no impact to core earnings or diluted core earnings per share for this adjustment.

(3) Tax adjustments for the three months ended November 30, 2023, were partially driven by an income tax benefit for the reversal of a non-U.S.

unrecognized tax benefit due to audit closure.

(3) We completed the divestiture of our mobility business and recorded a pre-tax gain of $944 million, subject to certain post-closing adjustments that are expected to be finalized in the third quarter of fiscal year 2024.

We incurred transaction and disposal costs in connection with the sale of approximately $46 million and $61 million during the three months and six months ended February 29, 2024, respectively.

(4) Tax adjustments for the three months and six months ended February 29, 2024, were partially driven by an income tax expense associated with the divestiture of the mobility business.

Adjusted Free Cash Flow

Three months ended

(in millions)

November 30, 2023

November 30, 2022

Six months ended

(in millions) February 29, 2024 February 28, 2023

Net cash provided by operating activities (U.S.

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ProcureAbility is a procurement services provider specializing in technology-enabled advisory, managed services, digital, staffing, and recruiting solutions.

The acquisition of ProcureAbility assets was accounted for as a business combination using the acquisition method of accounting.

The acquisition of ProcureAbility was accounted for as a business combination using the acquisition method of accounting.

Assets acquired of $87 million, including $40 million in intangible assets and $38 million in goodwill, and liabilities assumed of $26 million were recorded at their estimated fair values as of the acquisition date.

The allocation of the purchase price is considered preliminary pending final valuation for the Company.

The excess of the purchase price over the fair value of the acquired assets and assumed liabilities was recorded to goodwill and was fully allocated to the DMS segment.

The majority of the goodwill is currently not expected to be deductible for income tax purposes.

The results of operations were

included in our condensed consolidated financial results beginning on November 1, 2023.

The results of operations were included in our condensed consolidated financial results beginning on November 1, 2023.

Pro forma information has not been provided as the acquisition of ProcureAbility is not deemed to be significant.

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Ltd., a Hong Kong limited liability company (“Purchaser” or “BYDE”), our product manufacturing business in Chengdu, including our supporting component manufacturing in Wuxi (the “Business”) for cash consideration of approximately $2.2 billion, subject to certain customary purchase price adjustments.

As of August 31, 2023, we determined the Business met the criteria to be classified as held for sale.

Accordingly, we presented the assets and liabilities of the Business as held for sale in the Consolidated Balance Sheets as of November 30, 2023 and August 31, 2023.

Asset and liabilities classified as held for sale had a carrying value less than the estimated fair value less cost to sell and, thus, no adjustment to the carrying value of the disposal group was necessary.

Depreciation and amortization expense for long-lived assets was not recorded for the period in which these assets were classified as held for sale.

The divestiture did not meet the criteria to be reported as discontinued operations and we continued to report the operating results for the Business in the Condensed Consolidated Statement of Operations in the DMS segment until the Closing Date.

On December 29, 2023, the Closing Date, we completed the sale.

As of November 30, 2023, and August 31, 2023, the assets and liabilities of the Business were classified as held for sale and the carrying value is less than the estimated fair value less cost to sell and, thus, no adjustment to the carrying value of the disposal group is necessary.

For the three months ended November 30, 2023, depreciation and amortization expense for long-lived assets are not recorded while these assets are classified as held for sale.

The divestiture did not meet the criteria to be reported as discontinued operations and we continued to report the operating results for the Business in our Condensed Consolidated Statement of Operations in the DMS segment until the Closing Date.

As a result of the transaction, we derecognized net assets of approximately $1.2 billion, and recorded a pre-tax gain of $944 million, subject to post-closing adjustments, subject to certain post-closing adjustments that are expected to be finalized in the third quarter of fiscal year 2024.

In addition, we agreed to indemnify the Purchaser from certain liabilities that may arise post-close that relate to periods prior to the Closing Date.

We incurred transaction and disposal costs in connection with the sale of approximately $46 million and $61 million during the three months and six months ended February 29, 2024, respectively, which are included in continuing operations in the Condensed Consolidated Statement of Operations.

We perform a goodwill impairment analysis on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

In connection with the preparation of the Company’s financial statements for the quarter ended February 29, 2024, we completed an impairment analysis for goodwill recorded within the reporting unit impacted by the divestiture of the Business.

The quantitative assessment was used, and we determined that it is more likely than not that the fair value of the impacted reporting unit is in excess of the carrying value and that no impairment existed subsequent to the closing of the Business.

We allocated goodwill to the disposal group based on the relative fair value of the Business as compared to the impacted reporting unit.

In the second quarter of fiscal year 2024 and in connection with the divestiture of the Business, we made a strategic decision that the indefinite-lived (“Green Point”) trade name of $51 million acquired during the acquisition of Green Point should no longer be classified as an indefinite-lived intangible asset.

Accordingly, prior to reclassifying the trade name to a finite-lived intangible asset, we completed a quantitative assessment for impairment and determined the fair value of the asset exceeded the carrying value.

As such, the trade name was assigned a two-year estimated useful life and is being amortized on a straight-line basis as of the Closing Date.

Refer to Note 15 – “Business Acquisitions and Divestitures” to the Condensed Consolidated Financial Statements for discussion.

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Cash and Cash Equivalents

As of November 30, 2023, we had approximately $1.6 billion in cash and cash equivalents, of which a significant portion was held by our foreign subsidiaries.

Most of our foreign cash and cash equivalents as of November 30, 2023 could be repatriated to the United States without potential tax expense.

As of February 29, 2024, we had approximately $2.6 billion in cash and cash equivalents, of which a significant portion was held by our foreign subsidiaries.

Most of our foreign cash and cash equivalents as of February 29, 2024 could be repatriated to the United States without potential tax expense.

Notes Payable and Credit Facilities

Following is a summary of principal debt payments and debt issuance for our notes payable and credit facilities:

(in millions)

3.950% Senior Notes

3.600% Senior Notes

3.000% Senior Notes

1.700% Senior Notes

4.250% Senior Notes

5.450% Senior Notes

(in millions) 3.950% Senior Notes 3.600% Senior Notes 3.000% Senior Notes 1.700% Senior Notes 4.250% Senior Notes 5.450% Senior Notes Borrowings

facilities (1)(2)

loans Total notes

Balance as of August 31, 2023 $ 497 $ 496 $ 593 $ 498 $ 495 $ 296 $ — $ — $ 2,875

Balance as of November 30, 2023

Maturity Date

Jan 22, 2025 and Jan 22, 2027

Original Facility/ Maximum Capacity (1)

Borrowings — — — — — — 1,799 — 1,799

Payments — — — — — — (1,799) — (1,799)

Other 1 1 — — 1 — — — 3

Balance as of February 29, 2024 $ 498 $ 497 $ 593 $ 498 $ 496 $ 296 $ — $ — $ 2,878

Maturity Date Jan 12, 2028 Jan 15, 2030 Jan 15, 2031 Apr 15, 2026 May 15, 2027 Feb 1, 2029 Jan 22, 2026 and Jan 22, 2028 Jul 31, 2026

Original Facility/ Maximum Capacity $500 million

$3.9 billion (2)

(1) As of November 30, 2023, we had $3.8 billion in available unused borrowing capacity under our revolving credit facilities.

The senior unsecured credit agreement dated as of January 22, 2020 and amended on February 10, 2023 (the “Credit Facility”) acts as the back-up facility for commercial paper outstanding, if any.

We have a borrowing capacity

of up to $3.2 billion under our commercial paper program.

(1) On February 23, 2024, we entered into an amendment (the “Amendment”) to our senior unsecured credit agreement dated as of January 22, 2020 (as amended, the “Credit Facility”).

The Amendment, among other things, (i) instituted certain amendments to the sustainability-linked adjustments to the interest rates applicable to borrowings under the three-year revolving credit facility (the “Three-Year Revolving Credit Facility”) and the five-year revolving credit facility (the “Five-Year Revolving Credit Facility”) and (ii) extended the termination date of the Three-Year Revolving Credit Facility (with respect to the available commitments of the extending lenders) to January 22, 2026, and of the Five-Year Revolving Credit Facility (with respect to the available commitments of the extending lenders) to January 22, 2028, in each case subject to an additional one-year extension at the option of the Company.

(2) As of February 29, 2024, we had $3.9 billion in available unused borrowing capacity under our revolving credit facilities.

The Credit Facility acts as the back-up facility for commercial paper outstanding, if any.

We have a borrowing capacity of up to $3.2 billion under our commercial paper program.

Commercial paper borrowings with an original maturity of 90 days or less are recorded net within the Condensed Consolidated Statements of Cash Flows, and have been excluded from the table above.

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A violation of these covenants could negatively impact our liquidity by restricting our ability to borrow under the notes payable and credit facilities and potentially causing acceleration of amounts due under these notes payable and credit facilities.

As of November 30, 2023 and August 31, 2023, we were in compliance with our debt covenants.

As of February 29, 2024 and August 31, 2023, we were in compliance with our debt covenants.

Refer to Note 4 – “Notes Payable and Long-Term Debt” to the Condensed Consolidated Financial Statements for further details.

3 unchanged sentences

We continue servicing the receivables sold and in exchange receive a servicing fee under the global asset-backed securitization program.

Servicing fees related to the global asset-backed securitization program recognized during the three months ended November 30, 2023 and 2022 were not material.

Servicing fees related to the global asset-backed securitization program recognized during the three months and six months ended February 29, 2024 and February 28, 2023 were not material.

We do not record a servicing asset or liability on the Condensed Consolidated Balance Sheets as we estimate that the fee we receive to service these receivables approximates the fair market compensation to provide the servicing activities.

The special purpose entity in the global asset-backed securitization program is a wholly-owned subsidiary of the Company and is included in our Condensed Consolidated Financial Statements.

Certain unsold receivables covering up to the maximum amount of net cash proceeds available under the domestic, or U.S., portion of the global asset-backed securitization program are pledged as collateral to the unaffiliated financial institution as of November 30, 2023.

The global asset-backed securitization program expires on November 25, 2024 and the maximum amount of net cash proceeds available at any one time is $600 million.

During the three months ended November 30, 2023, we sold $1.0 billion of trade accounts receivable and we received cash proceeds of $1.0 billion.

As of November 30, 2023, we had no available liquidity under our global asset-backed securitization program.

The global asset-backed securitization program expires on November 25, 2024.

Effective February 20, 2024, the terms of the global asset-backed securitization program were amended to increase the maximum amount of net cash proceeds available at any one time from $600 million to $700 million.

During the three months and six months ended February 29, 2024, we sold $1.0 billion and $2.0 billion, respectively, of trade accounts receivable and we received cash proceeds of $1.0 billion and $1.9 billion, respectively.

As of February 29, 2024, we had up to $15 million in available liquidity under our global asset-backed securitization program.

The global asset-backed securitization program requires compliance with several covenants including compliance with the interest ratio and debt to EBITDA ratio of the Credit Facility.

As of November 30, 2023 and August 31, 2023, we were in compliance with all covenants under our global asset-backed securitization program.

As of February 29, 2024 and August 31, 2023, we were in compliance with all covenants under our global asset-backed securitization program.

Refer to Note 5 – “Asset-Backed Securitization Program” to the Condensed Consolidated Financial Statements for further details on the program.

Trade Accounts Receivable Sale Programs

As of November 30, 2023, we may elect to sell receivables and the unaffiliated financial institutions may elect to purchase specific accounts receivable at any one time, at a discount, on an ongoing basis up to a:

(i) maximum aggregate amount available of $2.3 billion under nine trade accounts receivable sale programs, (ii) maximum amount available of 100 million CHF under one trade accounts receivable sale program, and (iii) maximum amount available of 8.1 billion INR under one trade accounts receivable sale program.

As of February 29, 2024, we may elect to sell receivables and the unaffiliated financial institutions may elect to purchase specific accounts receivable at any one time, at a discount, on an ongoing basis up to a:

(i) maximum aggregate amount available of $2.1 billion under nine trade accounts receivable sale programs, (ii) maximum amount available of 100 million CHF under one trade accounts receivable sale program, (iii) maximum amount available of 8.1 billion INR under one trade accounts receivable sale program, and (iv) maximum amount available of 1.4 billion CNY under one trade accounts receivable sale program.

The trade accounts receivable sale programs either expire on various dates through 2028 or do not have expiration dates and may be terminated upon election of the Company or the unaffiliated financial institutions.

During the three months ended November 30, 2023, we sold $2.0 billion of trade accounts receivable under these programs and we received cash proceeds of $2.0 billion.

As of November 30, 2023, we had up to $1.4 billion in available liquidity under our trade accounts receivable sale programs.

In April 2024, we terminated our $700 million trade accounts receivable sale program which was set to expire on December 5, 2025 and entered into a new trade accounts receivable sale program with a maximum amount available of $200 million.

During the three months and six months ended February 29, 2024, we sold $1.8 billion and $3.9 billion, respectively, of trade accounts receivable under these programs and we received cash proceeds of $1.8 billion and $3.8 billion, respectively.

As of February 29, 2024, we had up to $1.0 billion in available liquidity under our trade accounts receivable sale programs.

The following table sets forth selected consolidated cash flow information (in millions):

Three months ended

November 30, 2023

November 30, 2022

Six months ended

February 29, 2024 February 28, 2023

Net cash provided by operating activities

Net cash used in investing activities

Net cash provided by (used in) investing activities

Net cash used in financing activities

(1,455) (371)

Effect of exchange rate changes on cash and cash equivalents (7) (3)

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

$ 762 $ (278)

Operating Activities

Net cash provided by operating activities during the three months ended November 30, 2023, was primarily due to a decrease in non-cash expenses, net income, inventories, and an increase in accounts payable, accrued expenses and other liabilities.

Net cash provided by operating activities was partially offset by an increase in accounts receivable, in prepaid expenses and other current assets, and in contract assets.

The decrease in inventories is primarily due to higher consumption of inventory to support sales during the quarter and improved working capital management.

The increase in accounts payable, accrued expenses and other liabilities is primarily due to the timing of purchases and cash payments.

The increase in accounts receivable is primarily driven by the timing of collections.

Net cash provided by operating activities during the six months ended February 29, 2024, was primarily due to a decrease in accounts receivable and inventories and non-cash expenses and net income.

Net cash provided by operating activities was partially offset by a decrease in accounts payable, accrued expense and other liabilities and an increase in prepaid expenses and other current assets, and in contract assets.

The decrease in accounts receivable is primarily driven by the timing of collections.

The decrease in inventories is primarily due to higher consumption of inventory to support sales and improved working capital management.

The decrease in accounts payable, accrued expenses and other liabilities is primarily due to the timing of purchases and cash payments.

The increase in prepaid expenses and other current assets is primarily due to the timing of payments.

1 unchanged sentence

Investing Activities

Net cash used in investing activities during the three months ended November 30, 2023 consisted primarily of capital expenditures, principally to support ongoing business in the DMS and EMS segments and the acquisition of ProcureAbility, partially offset by proceeds from the planned divestiture of our mobility business and proceeds and advances from the sale of property, plant and equipment.

Net cash provided by investing activities during the six months ended February 29, 2024 consisted primarily of proceeds from the divestiture of our mobility business and proceeds and advances from the sale of property, plant and equipment, partially offset by capital expenditures, principally to support ongoing business in the DMS and EMS segments and the acquisition of ProcureAbility and certain assets of Motorola Solutions Video Manufacturing.

Financing Activities

Net cash used in financing activities during the three months ended November 30, 2023 was primarily due to (i) the repurchase of our common stock under our share repurchase authorization, (ii) payments for debt agreements (iii) treasury stock minimum tax withholding related to vesting of restricted stock, and (iv) dividend payments.

Net cash used in financing activities was partially offset by borrowings under debt agreements.

Net cash used in financing activities during the six months ended February 29, 2024 was primarily due to (i) payments for debt agreements, (ii) the repurchase of our common stock under our share repurchase authorization, (iii) treasury stock minimum tax withholding related to vesting of restricted stock, and (iv) dividend payments.

Net cash used in financing activities was partially offset by (i) borrowings under debt agreements and (ii) net proceeds from the exercise of stock options and issuance of common stock under the employee stock purchase plan.

Capital Expenditures

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In September 2023, the Board of Directors amended and increased the 2023 Share Repurchase Program to allow for the repurchase of up to $2.5 billion of our common stock.

As part of the 2023 Share Repurchase Program, we entered into an accelerated share repurchase (“ASR”) agreement with a bank in September 2023 to repurchase $500 million

of our common stock.

As part of the amended 2023 Share Repurchase Program, we entered into an accelerated share repurchase (“ASR”) agreement with a bank in September 2023 to repurchase $500 million of our common stock.

During the first quarter of 2024, the ASR transaction was completed, and 3.9 million shares were delivered under the ASR agreement at an average price of $128.61.

The final number of shares delivered upon settlement of the ASR agreement was determined based on a discount to the volume weighted average price of our common stock during the term of the agreement.

As of November 30, 2023, 3.9 million shares had been repurchased for $500 million, excluding excise tax, and $2.0 billion remains available under the 2023 Share Repurchase Program approved in September 2023.

As of February 29, 2024, 10.4 million shares had been repurchased for $1.3 billion, excluding excise tax, and $1.2 billion remains available under the amended 2023 Share Repurchase Program.

Contractual Obligations

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis