What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-07-09 compared with 2024-04-05 · 110 added, 104 removed, 267 unchanged (44% of the section changed)

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

We derived a substantial majority, 80.5% and 83.4%, of net revenue from our international operations for the three months and nine months ended May 31, 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.

On December 29, 2023, we completed the sale of our product manufacturing business in Chengdu, including its supporting component manufacturing in Wuxi 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.

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

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 February 29, 2024 contained herein.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" section as of May 31, 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 Six months ended

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

Three months ended Nine months ended

May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Net revenue $ 6,765 $ 8,475 $ 21,919 $ 26,244

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Three months ended

February 29, 2024 November 30, 2023 (1)

February 28, 2023

May 31, 2024 February 29, 2024

Sales cycle (1)

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79 days 74 days 74 days

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

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

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.

During the three months ended May 31, 2024, the increase in days in accounts receivable from the prior sequential quarter and the three months ended May 31, 2023, was primarily driven by timing of collections.

(4) 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 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.

During the three months ended May 31, 2024, the decrease in days in inventory from the prior sequential quarter and the three months ended May 31, 2023, was primarily driven by higher consumption of inventory to support sales during the quarter and improved working capital management.

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

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.

During the three months ended May 31, 2024, the increase in days in accounts payable from the prior sequential quarter and the three months ended May 31, 2023, was primarily due to timing of purchases and cash payments during the quarter.

Critical Accounting Policies and Estimates

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

Three months ended Six months ended

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

Three months ended Nine months ended

(dollars in millions) May 31, 2024 May 31, 2023 Change May 31, 2024 May 31, 2023 Change

Net revenue $ 6,765 $ 8,475 (20.2) % $ 21,919 $ 26,244 (16.5) %

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 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 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.

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

Net revenue decreased during the three months ended May 31, 2024, compared to the three months ended May 31, 2023.

Specifically, the DMS segment net revenue decreased 23% due to:

(i) a 18% decrease primarily driven by the divestiture of our mobility business, (ii) a 3% decrease in revenues from existing customers within our connected devices business, (iii) a 1% decrease in revenues from existing customers within our healthcare and packaging businesses, and (iv) a 1% decrease in revenues from existing customers within our automotive and transportation business.

The EMS segment net revenue decreased 18% primarily due to:

(i) a 7% decrease in revenues from existing customers within our industrial and semi-capital equipment business, (ii) a 5% 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, (iii) a 4% decrease in revenues from existing customers within our networking and storage business, and (iv) a 2% decrease in revenues from existing customers within our digital print and retail business.

Net revenue decreased during the nine months ended May 31, 2024, compared to the nine months ended May 31, 2023.

Specifically, the EMS segment net revenue decreased 19% primarily due to:

(i) a 10% 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 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 1% increase in revenues from existing customers within our networking and storage business.

The DMS segment net revenue decreased 14% due to:

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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 Six months ended

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

Three months ended Nine months ended

May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

EMS 50 % 49 % 47 % 48 %

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

Three months ended Six months ended

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

Three months ended Nine months ended

May 31, 2024 (1)

May 31, 2023 May 31, 2024 (1)

Foreign source revenue 80.5 % 86.9 % 83.4 % 85.6 %

Three months ended Six months ended

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

(1) Decrease from prior periods is driven by the divestiture of our mobility business during the three months ended February 29, 2024.

Three months ended Nine months ended

(dollars in millions) May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Gross profit $ 608 $ 697 $ 2,013 $ 2,101

Percent of net revenue 9.0 % 8.2 % 9.2 % 8.0 %

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.

Gross profit as a percentage of net revenue increased for the three months and nine months ended May 31, 2024, compared to the three months and nine months ended May 31, 2023, primarily due to product mix and 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.

Selling, General and Administrative

Three months ended Six months ended

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

Three months ended Nine months ended

(in millions) May 31, 2024 May 31, 2023 Change May 31, 2024 May 31, 2023 Change

Selling, general and administrative $ 268 $ 307 $ (39) $ 890 $ 911 $ (21)

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.

Selling, general and administrative expenses decreased during the three months ended May 31, 2024, compared to the three months ended May 31, 2023, primarily due to a decrease in stock-based compensation expense associated with forfeitures of time-based, performance-based and market-based restricted stock awards during the three months ended May 31, 2024 and a decrease in salary and salary related expenses.

Selling, general and administrative expenses decreased during the nine months ended May 31, 2024, compared to the nine months ended May 31, 2023, primarily due to a decrease in stock-based compensation expense associated with forfeitures of time-based, performance-based and market-based restricted stock awards.

Research and Development

Three months ended Six months ended

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

Three months ended Nine months ended

(dollars in millions) May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Research and development $ 9 $ 8 $ 29 $ 25

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 and six months ended February 29, 2024, compared to the three months and six months ended February 28, 2023.

Research and development expenses remained consistent as a percentage of net revenue during the three months and nine months ended May 31, 2024, compared to the three months and nine months ended May 31, 2023.

Amortization of Intangibles

Three months ended Six months ended

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

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(in millions) May 31, 2024 May 31, 2023 Change May 31, 2024 May 31, 2023 Change

Amortization of intangibles $ 12 $ 7 $ 5 $ 27 $ 24 $ 3

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.

Amortization of intangibles increased during the three months and nine months ended May 31, 2024, compared to the three months and nine months ended May 31, 2023, primarily due to amortization related to the Green Point trade name, which was reclassified to a definite-lived intangible asset during fiscal year 2024.

Restructuring, Severance and Related Charges

Three months ended Six months ended

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

Three months ended Nine months ended

(in millions) May 31, 2024 May 31, 2023 Change May 31, 2024 May 31, 2023 Change

Restructuring, severance and related charges $ 55 $ — $ 55 $ 252 $ 45 $ 207

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.

Restructuring, severance and related charges increased during the three months and nine months ended May 31, 2024, compared to the three months and nine months ended May 31, 2023, primarily due to charges related to the 2024 Restructuring Plan.

2024 Restructuring Plan

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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

Three months ended Nine months ended

(in millions) May 31, 2024 May 31, 2023 Change May 31, 2024 May 31, 2023 Change

Gain from the divestiture of businesses $ — $ — $ — $ (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.

As a result of the transaction, we recorded a pre-tax gain of $944 million, subject to certain post-closing adjustments that are still being finalized.

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

Three months ended Nine months ended

(in millions) May 31, 2024 May 31, 2023 Change May 31, 2024 May 31, 2023 Change

Acquisition and divestiture related charges $ 3 $ — $ 3 $ 64 $ — $ 64

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.

Acquisition and divestiture related charges recorded during the three months and nine months ended May 31, 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 Six months ended

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

Three months ended Nine months ended

(in millions) May 31, 2024 May 31, 2023 Change May 31, 2024 May 31, 2023 Change

Other expense $ 22 $ 18 $ 4 $ 65 $ 50 $ 15

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.

Other expense increased during the three months ended May 31, 2024, compared to the three months ended May 31, 2023, is primarily due to an increase in fees due to higher utilization of our trade accounts receivable sales programs and global asset-backed securitization program, as well as higher interest rates on these programs.

Other expense increased during the nine months ended May 31, 2024, compared to the nine months ended May 31, 2023, primarily due to an increase in fees due to higher interest rates on our trade accounts receivable sales programs and global asset-backed securitization program, as well as higher utilization of our global asset-backed securitization program.

Interest Expense, Net

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

Three months ended Nine months ended

(in millions) May 31, 2024 May 31, 2023 Change May 31, 2024 May 31, 2023 Change

Interest expense, net $ 38 $ 51 $ (13) $ 132 $ 154 $ (22)

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.

Interest expense, net decreased during the three months ended May 31, 2024, compared to the three months ended May 31, 2023, primarily due to lower borrowings on our credit facilities and commercial paper program.

Interest expense, net decreased during the nine months ended May 31, 2024, compared to the nine months ended May 31, 2023, due to lower borrowings primarily on our credit facilities and commercial paper program.

The decrease is partially offset by an increase due to higher interest rates primarily on our credit facilities and commercial paper program.

Income Tax Expense

Three months ended Six months ended

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

Three months ended Nine months ended

May 31, 2024 May 31, 2023 Change May 31, 2024 May 31, 2023 Change

Effective income tax rate 35.7 % 24.0 % 11.7 % 16.6 % 25.7 % (9.1) %

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.

The effective income tax rate differed for the three months and nine months ended May 31, 2024, compared to the three months and nine months ended May 31, 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 the corresponding $58 million of income tax expense recorded during the three months ended February 29, 2024.

The European Union (EU) and other countries have committed to enacting substantial changes that would reshape international tax rules, including the introduction of a global minimum tax.

In December 2022, the EU approved a directive requiring member states to incorporate a 15% global minimum tax applied on a country-by-country basis into their respective laws effective for fiscal years beginning on or after December 31, 2023.

In addition, several non-EU countries have recently proposed and/or adopted legislation consistent with the global minimum tax framework.

As legislation becomes effective in more countries in which we do business, our taxes could increase and negatively impact our provision for income taxes.

We continue to monitor pending legislation and implementation by countries and evaluate the potential impact on our business in fiscal year 2025 and future periods.

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 Six months ended

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

Three months ended Nine months ended

(in millions, except for per share data) May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Operating income (U.S.

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Net periodic benefit cost (2)

Business interruption and impairment charges, net (3)

Gain from the divestiture of businesses (4)

(944) — (944) —

Acquisition and divestiture related charges (4)

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GAAP and Non-GAAP) 121.7 135.1 126.9 136.4

(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.

(1) Charges recorded during the three months and nine months ended May 31, 2024, related to the 2024 Restructuring Plan.

Charges recorded during the nine months ended May 31, 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) 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.

(3) Charges recorded during the three months and nine months ended May 31, 2024, related to costs associated with product quality liabilities, which is classified as a component of cost of revenue and selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

(4) 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 still being finalized.

We incurred transaction and disposal costs in connection with the sale of approximately $64 million during the nine months ended May 31, 2024.

(5) Tax adjustments for the nine months ended May 31, 2024, were partially driven by an income tax expense associated with the divestiture of the mobility business.

Adjusted Free Cash Flow

Six months ended

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

Nine months ended

(in millions) May 31, 2024 May 31, 2023

Net cash provided by operating activities (U.S.

$ 1,181 $ 1,048

Acquisition of property, plant and equipment (“PP&E”) (1)

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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 preliminary estimates and measurements are subject to change during the measurement period for assets acquired, liabilities assumed and tax adjustments.

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.

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

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.

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 certain post-closing adjustments that are still being finalized.

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 incurred transaction and disposal costs in connection with the sale of approximately $64 million during the nine months ended May 31, 2024, 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.

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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.

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 valued at $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.

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Cash and Cash Equivalents

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.

As of May 31, 2024, we had approximately $2.5 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 May 31, 2024 could be repatriated to the United States without potential tax expense.

Notes Payable and Credit Facilities

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Other 1 1 1 — 1 — — — 4

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

Balance as of May 31, 2024 $ 498 $ 497 $ 594 $ 498 $ 496 $ 296 $ — $ — $ 2,879

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

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(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.

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 May 31, 2024, we had $4.0 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.

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

As of May 31, 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.

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In addition, a foreign entity participating in the global asset-backed securitization program sells certain receivables at a discount to conduits administered by an unaffiliated financial institution on a daily basis.

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 and six months ended February 29, 2024 and February 28, 2023 were not material.

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

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 February 29, 2024.

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.

During the three months and nine months ended May 31, 2024, we sold $1.0 billion and $3.0 billion, respectively, of trade accounts receivable and we received cash proceeds of $1.0 billion and $2.9 billion, respectively.

As of May 31, 2024, we had no 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 February 29, 2024 and August 31, 2023, we were in compliance with all covenants under our global asset-backed securitization program.

As of May 31, 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 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:

As of May 31, 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 $1.9 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 1.9 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.

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.

During the three months and nine months ended May 31, 2024, we sold $2.1 billion and $6.0 billion, respectively, of trade accounts receivable under these programs and we received cash proceeds of $2.1 billion and $5.9 billion, respectively.

As of May 31, 2024, we had up to $693 million in available liquidity under our trade accounts receivable sale programs.

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

Six months ended

February 29, 2024 February 28, 2023

Nine months ended

May 31, 2024 May 31, 2023

Net cash provided by operating activities

$ 1,181 $ 1,048

Net cash provided by (used in) investing activities

2 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents (6) (4)

Net increase (decrease) in cash and cash equivalents

$ 762 $ (278)

Net increase in cash and cash equivalents

Operating Activities

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.

Net cash provided by operating activities during the nine months ended May 31, 2024, was primarily due to a decrease in inventories and non-cash expenses and net income.

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

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.

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

The increase in contract assets is primarily due to timing of revenue recognition for the over time customers.

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

Investing Activities

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.

Net cash provided by investing activities during the nine months ended May 31, 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 other third party assets.

Financing Activities

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 during the nine months ended May 31, 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.

15 unchanged sentences

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 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.

As of May 31, 2024, 14.2 million shares had been repurchased for $1.8 billion, excluding excise tax, and $676 million remains available under the amended 2023 Share Repurchase Program.

In June 2024, as part of the amended 2023 Share Repurchase Program, the Company repurchased $121 million, excluding excise tax, and entered into ASR agreements to repurchase an additional $555 million, excluding excise tax, of the Company’s common stock.

Under the ASR agreements, the Company made payments of $555 million to participating financial institutions and received an initial delivery of shares of common stock.

The delivery of any remaining shares will occur at the final settlement of the transactions under the ASR agreements.

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