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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.10pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.03pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.17pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+1
unable+1
disruption+1
retaliatory+1
exacerbate+1
Positive rising
adequately+1
enhance+1
benefit+1
Risk Factors (Item 1A)
10,717 words
Item 1A. Risk Factors
Business and Operational Risks
Our ability to schedule production, manage capital expenditures, and maximize the efficiency of our manufacturing capacity is highly dependent on the actions of our customers, who generally do not commit to long-term production schedules and cancel orders, change production quantities, delay production, and/or change sourcing strategy.
Most of our customers do not commit to firm production schedules for more than one quarter. We make significant decisions, including determining the levels of business that we will seek and accept, production schedules and locations, component procurement commitments, personnel needs, and other resource requirements, based on our estimate of customer requirements. Our inability to forecast the level of customer orders with certainty makes it difficult to schedule production and maximize utilization of our manufacturing capacity and supply chain capabilities.
Many factors outside of our control impact our customers and their ordering behavior, including recession in end markets, changing technology and industry standards, commercial acceptance for products and shifting market demand, product obsolescence, global pandemics, and of business. Customers have their orders, changed production quantities or designs, production, changed their sourcing strategy, and their relationships with us. We cannot you that present or future customers will not their service arrangements with us or significantly change, reduce, , or the amount of services ordered. Such changes, , and have led to, and may lead in the future to, a in our production and our possession of excess or inventory that we may not be to sell to customers or third parties. This has, and may again, result in write downs of inventories, reduction in the number of products that we sell, in payment for inventory that we purchased, and reductions in the use of our manufacturing facilities. As many of our costs and operating expenses are relatively fixed, a reduction in customer demand, particularly a reduction in demand for a product that represents a significant amount of revenue, can our gross profit margins and results of operations. In the past, we have also been required to increase staffing and other expenses in order to meet anticipated demand. On occasion, customers have required rapid increases in production for one or more of their products or requested that we relocate our manufacturing operations or transfer manufacturing from one facility to another, which our resources and may reduce operating margins.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
loss+8
restructuring+4
volatility+3
terminated+2
termination+1
Positive rising
gain+3
effective+3
rebound+3
benefit+2
advances+1
MD&A (Item 7)
10,754 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are one of the leading providers of worldwide manufacturing services and solutions. We provide comprehensive electronics design, production, and product management services to companies in various industries and end markets. We derive substantially all of our revenue from production and product management services (collectively referred to as “manufacturing services”), which encompass the act of producing tangible components that are built to customer specifications and are then provided to the customer.
At August 31, 2025, we have three reporting segments: Regulated Industries, Intelligent Infrastructure, and Connected Living and Digital Commerce. Our Regulated Industries segment is focused on regulated markets and includes revenues from customers primarily in the automotive and transportation, healthcare and packaging, and renewable energy infrastructure industries. Our Intelligent Infrastructure segment is focused on the modern digital ecosystem including artificial intelligence (“AI”) infrastructure and includes revenues from customers primarily in the capital equipment, cloud and data center infrastructure, and networking and communications industries. Our Connected Living and Digital Commerce segment is focused on digitalization and automation, including warehouse automation and robotics, and includes revenues from customers primarily in the connected living and digital commerce industries.
Our cost of revenue includes the cost of electronic components and other materials that comprise the products we manufacture; the cost of labor and manufacturing overhead; and adjustments for excess and inventory. As a provider of turnkey manufacturing services, we are responsible for procuring components and other materials. This requires us to commit significant working capital to our operations and to manage the purchasing, receiving, inspecting, and stocking of materials. At times, we collect deposits from our customers related to the purchase of inventory in order to effectively manage our working capital. Although we bear the risk of fluctuations in the cost of materials and excess scrap, our ability to purchase components and materials may contribute significantly to our operating results. While we periodically negotiate cost of materials adjustments with our customers, rising component and material prices may affect our margins. Net revenue from each product that we manufacture consists of an element based on the costs of materials in that product and an element based on the labor and manufacturing overhead costs allocated to that product. Our gross margin for any product depends on the mix between the cost of materials in the product and the cost of labor and manufacturing overhead allocated to the product.
Our business at times experiences periods of rapid growth which can place considerable demands upon our management team and our operational, financial, and management information systems. Our ability to manage growth effectively requires us to continue to implement and improve these systems; avoid cost overruns; maintain customer, supplier, and other favorable business relationships during transition periods; efficiently and effectively dedicate resources to existing customers as well as new projects; acquire or construct additional facilities; occasionally transfer operations to different facilities; acquire equipment in anticipation of demand; procure materials and components; continue to develop the management skills of our managers and supervisors; adapt relatively quickly to new markets or technologies and continue to hire, train, motivate and manage our employees. Our failure to effectively manage growth, as well as our failure to realize the anticipated benefits of the actions we take to try to manage our growth, could have a material adverse effect on our results of operations.
In addition, we sometimes experience difficulty forecasting the timing of our receipt of payment from customers. The necessary process to begin manufacturing can be lengthy. Because we make capital expenditures during this ramping-up process and do not receive payment until after we produce and ship the customer’s products, any delays or unanticipated costs in the ramping-up process have, and may again have, a significant adverse effect on our cash flows and our results of operations. Servicing our largest customers may also require us to increase our capital expenditures.
Because we depend on a limited number of customers, a reduction in sales to any one of those customers has and could again cause a significant decline in our revenue.
We currently depend, and expect to continue to depend for the foreseeable future, upon a relatively small number of customers for a significant percentage of our net revenue and upon their continued existence, growth, viability, and financial stability. See “Business – The Company.” In some instances, particular manufacturing services we provide for a customer represent a significant portion of the overall revenue we receive from that customer. As a result of this concentration, a reduction in business from one or more of our largest customers could have a material adverse effect on our results of operations. In addition, if one or more of our significant customers were to become insolvent or otherwise become unable to pay us on a timely basis, or at all, our operating results and financial condition could be adversely affected.
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Efficient component and material purchasing is critical to our manufacturing processes and contractual arrangements. A shortage of components or an increase in price could interrupt our operations and reduce our profit, increase our inventory carrying costs, increase our risk of exposure to inventory obsolescence and cause us to purchase components of a lesser quality.
Strategic and efficient component and materials purchasing is an aspect of our strategy. Inflation rates have increased and may continue to rise. Our suppliers have raised their prices and may continue to raise prices. When prices rise, they impact our margins and results of operations if we are not able to pass the increases through to our customers or otherwise offset them. Most of our significant long-term customer contracts permit quarterly or other periodic prospective adjustments to pricing based on decreases and increases in component prices and other factors; however, we could bear the risk of component price increases that occur between any such re-pricings or, if such re-pricing is not permitted, during the balance of the term of the particular customer contract. There can be no assurance that we will continue to be able to purchase the components and materials needed to manufacture customer products at favorable prices. Accordingly, certain component price increases could adversely affect our gross profit margins and results of operations.
Some of the products we manufacture require one or more components that are only available from a single source. Some of these components are subject to supply shortages from time to time. In some cases, supply shortages will substantially curtail production of all assemblies using a particular component. A supply shortage can also increase our cost of goods sold if we have to pay higher prices for components in limited supply, or cause us to have to redesign or reconfigure products to accommodate a substitute component. In the past there have been industry wide conditions, pandemics, natural disasters and global events that have caused material and component shortages. In fiscal year 2023, our supply chain was impacted by component shortages, most notably in the semiconductor industry. Our production of a customer’s product has and could again be negatively impacted by any quality, reliability or availability issues with any of our component suppliers. The financial condition of our suppliers could affect their ability to supply us with components and their ability to satisfy any warranty obligations they may have, which could have a material adverse effect on our results of operations.
If a component shortage is threatened or anticipated, we have and may in the future purchase such components early to avoid a delay or interruption in our operations. Purchasing components early has, and may again cause us to incur additional inventory carrying costs and experience inventory obsolescence, both of which may not be recoverable from our customers and could adversely affect our gross profit margins and results of operations. A component shortage will require us to look to second tier vendors or to procure components through brokers. Component availability may be impacted by a supplier’s decision to change part design, performance specifications, manufacturing process, manufacturing locations, and/or use of subcontractors, or by both planned and unforeseen product discontinuation.
Although the impact of the Russia/Ukraine conflict on our supply chain has not been significant, some sub-tier suppliers providing raw materials such as palladium, neon gas, and high-grade aluminum are partially dependent on supply from the regions that may be impacted by the conflict. We will continue to closely monitor the supply availability and price fluctuations of these raw materials. In addition, we source some parts from certain suppliers located in Israel. Although the impact of the Russia/Ukraine conflict and conflicts in the Middle East on our supply chain has not been significant to date, we cannot assure you that this will continue to be the case. Price increases resulting from such shortages and/or other factors which we cannot recover from our customers may adversely impact our results of operations.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business – Components Procurement.”
Customer relationships with emerging companies present more risks than with established companies.
Customer relationships with emerging companies present special risks because we do not have an extensive product or customer relationship history. There is less demonstration of market acceptance of their products, making it harder for us to anticipate requirements as compared to established customers. Our credit risk on these customers, especially in trade accounts receivable and inventories, and the risk that these customers will be unable to fulfill indemnification obligations to us, are potentially increased. We sometimes offer these customers extended payment terms, loans, and other support and financial accommodations which increases our financial exposure and has impacted our financial results in the past.
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The success of our business is dependent on our ability to keep pace with technological changes and competitive conditions in our industry and our ability to effectively adapt our services as our customers react to technological changes and competitive conditions in their respective industries.
If we are unable to offer technologically advanced, cost effective, quick response manufacturing services that are differentiated from our competition (including utilization of machine learning and artificial intelligence) and adapt those services as our customers’ requirements change, demand for our services will decline. There are significant risks involved in our efforts to keep pace with technological developments and no assurance can be provided that the usage of such technology will enhance our business.
Introducing new business models or programs requiring implementation of new competencies, such as new process technologies and our development of new products or services, has and could affect our operations and financial results.
The introduction of new business models or programs requiring implementation or development of new competencies, such as new process technology within our operations and our independent development of new products or services, presents challenges in addition to opportunities. The success of new business models or programs depends on a number of factors including, but not limited to, a sufficient understanding of the new business or markets, timely and successful product development (by us and/or our customer), market acceptance, our ability to manage the risks associated with new business models or programs and new product production ramp-up, the effective management of purchase commitments and inventory levels in line with anticipated product demand, our development or acquisition of appropriate intellectual property, the availability of supplies in adequate quantities and at appropriate costs to meet anticipated demand, and the risk that new products may have quality or other defects in the early stages of introduction. Accordingly, we cannot determine in advance the ultimate result of new business models or programs.
As a result, we must make long-term investments, develop or obtain appropriate intellectual property, and commit significant resources before knowing whether our assumptions will accurately reflect customer demand. After the development of a new business model, program, product, or service, we typically must be able to manufacture appropriate volumes quickly and at low cost. To accomplish this, we endeavor to accurately forecast volumes, mixes of products and configurations; however, we do not always succeed at doing so.
The addition of new customers has also introduced different demand cycles. For example, cloud-based service providers are cyclically different from our traditional customers, creating changes to our historical revenue patterns and increasing the complexity of the management of our working capital requirements.
We compete with numerous other diversified manufacturing service providers, electronic manufacturing services, design providers, and others.
Our business is highly competitive, and our manufacturing processes are generally not subject to significant proprietary protection. We compete against numerous domestic and foreign electronic manufacturers, manufacturing service providers, design providers, and others. The significant purchasing power and market power of these competitors, many of which are large companies, has and could increase pricing and competitive pressures for us. Most of our competitors have international operations and significant financial resources and some have substantially greater manufacturing, research and development (R&D) and marketing resources. These competitors may:
• respond more quickly to new or emerging technologies or changes in customer requirements;
• have technological expertise, engineering capabilities, and/or manufacturing resources that are greater than ours;
• have greater name recognition, critical mass, and geographic market presence;
• be betterable to take advantage of acquisition opportunities;
• devote greater resources to the development, promotion, and sale of their services and execution of their strategy;
• be better positioned to compete on price for their services;
• have excess capacity, and be betterable to utilize such excess capacity;
• have greater direct buying power from component suppliers, distributors, and raw material suppliers;
• have lower cost structures as a result of their geographic location or the services they provide;
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• be willing or able to make sales or provide services at lower margins than we do;
• have increased vertical capabilities, providing them greater cost savings.
We also face competition from the manufacturing operations of our current and potential customers, who are continually evaluating the merits of manufacturing products internally against the advantages of outsourcing. In the past, some of our customers moved a portion of their manufacturing from us in order to more fully utilize their excess internal manufacturing capacity.
The actions of competitors and current and potential customers have and could cause a decline in our sales and/or compression of our profits.
Our business has and could be adversely affected by any delays, or increased costs, resulting from common carrier or transportation issues.
We rely on a variety of common carriers across the globe to transport our materials from our suppliers and to our customers. Problemssuffered by any of these common carriers, including natural disaster, pandemic, labor problems, increased energy prices, or criminal activity, have and could result in shipping delays for products or materials, increased costs, or other supply chain disruptions, and could therefore have a negative impact on our ability to receive products from suppliers and deliver products to customers, resulting in a material adverse effect on our operations.
We may not be able to maintain our engineering, technological, and manufacturing expertise.
Many of the markets for our manufacturing and engineering services are characterized by rapidly changing technology and evolving process development. The continued success of our business will depend upon our ability to:
• hire, retain and expand our pool of qualified engineering and technical personnel;
• maintain and continually improve our technological expertise;
• develop and market manufacturing services that meet changing customer needs; and
• anticipate and respond to technological changes in manufacturing processes on a cost-effective and timely basis.
Although we use the assembly and testing technologies, equipment, and processes that are currently required by our customers, we cannot be certain that we will be able to maintain or develop the capabilities required by our customers in the future. The emergence of new technology, industry standards, or customer requirements may render our equipment, inventory, or processes obsolete or noncompetitive. The acquisition and implementation of new technologies and equipment and the offering of new or additional services to our customers has in the past and may again in the future require significant expense or capital investment, which could reduce our operating margins and our operating results. In facilities that we newly establish or acquire, we may not be able to insert or maintain our engineering, technological and manufacturing process expertise. Our failure to anticipate and adapt to our customers’ changing technological needs and requirements or to hire sufficient personnel to maintain our engineering, technological and manufacturing expertise could have a material adverse effect on our results of operations.
We depend on attracting and retaining officers, managers, and skilled personnel.
Our success depends to a large extent upon the continued services of our officers, managers, and skilled personnel. These employees are not generally bound by employment or non-competition agreements, and we cannot assure you that we will retain them. To aid in managing our growth and strengthening our pool of management and skilled personnel, we will need to internally develop, recruit, and retain skilled management personnel. If we are not able to do so, our business and our ability to continue to grow could be harmed.
We derive a substantial majority of our revenues from our international operations, which are subject to a number of different risks and often require more management time and expense than our domestic operations.
Our international operations are subject to a number of risks, including:
• difficulties in staffing and managing foreign operations and attempting to ensure compliance with our policies, procedures, and applicable local laws;
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• less flexible employee relationships that can be difficult and expensive to terminate due to, among other things, labor laws and regulations;
• rising labor costs (including the introduction or expansion of certain social programs), in particular within the lower-cost regions in which we operate, due to, among other things, demographic changes and economic development in those regions;
• labor unrest and dissatisfaction, including potential labor strikes or claims;
• increased scrutiny by the media and other third parties of labor practices within our industry (including working conditions, compliance with employment and labor laws and compensation) which may result in allegations of violations, more stringent and burdensome labor laws, and regulations, higher labor costs, and/or loss of revenues if our customers become dissatisfied with our labor practices and diminish or terminate their relationship with us;
• burdens of complying with a wide variety of foreign laws, including those relating to export and import duties, domestic and foreign import and export controls, trade barriers (including tariffs and quotas), environmental policies and privacy issues, and local statutory corporate governance rules;
• risk of non-compliance with the U.S. Foreign Corrupt Practices Act (the “FCPA”) or similar regulations in other jurisdictions;
• less favorable, less predictable, or relatively undefined, intellectual property laws;
• lack of sufficient or available locations from which to operate or inability to renew leases on terms that are acceptable to us or at all;
• unexpected changes in regulatory requirements and laws or government or judicial interpretations of such regulatory requirements and laws and adverse trade policies, and adverse changes to any of the policies of either the U.S. or any of the foreign jurisdictions in which we operate;
• adverse changes in tax rates or accounting rules and the manner in which the U.S. and other countries tax multinational companies or interpret their tax laws or accounting rules or restrictions on the transfer of funds to us from our operations outside the U.S.;
• limitations on imports or exports of components or products, or other trade sanctions;
• political and economic instability and unsafe working conditions;
• geopolitical unrest, including the invasion of Ukraine, the possibility of military activity in countries near or adjacent to Ukraine, and the sanctions and other actions taken by the European Union, the United States, and other governments around the world in response;
• the Israel-Hamas war, attacks on shipping vessels in the Red Sea, the possibility of military activity in countries near or adjacent to Israel, and the sanctions and other actions that have or may be taken by other governments around the world in response could impact the Company although we have limited business in Israel;
• risk of governmental expropriation of our property;
• inadequate infrastructure for our operations (e.g., lack of adequate power, water, transportation, and raw materials);
• legal or political constraints on our ability to maintain or increase prices;
• health concerns, epidemics, and related government actions;
• increased travel costs and difficulty in coordinating our communications and logistics across geographic distances and multiple time zones;
• economies that are emerging or developing or that are subject to greater currency volatility, negative growth, high inflation, limited availability of foreign exchange, and other risks;
• higher potential for theft, misappropriation, or unauthorized access to or use of technology, data, or intellectual property; and
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• international trade disputes have and could result in tariffs and other protectionist measures that have and could adversely affect our business. Tariffs have and could increase the costs of the components and raw materials we use in the manufacturing process as well as import and export costs for finished products. Countries could adopt other protectionist measures that could limit our ability to manufacture products or provide services. Increased costs to our U.S. customers who use our non-U.S. manufacturing sites and components may adversely impact demand for our services and our results of operation and financial condition. Additionally, international trade disputes may cause our customers to decide to relocate the manufacturing of their products to another location, either within country, or into a new country. Relocations may require considerable management time as well as expenses related to market, personnel and facilities development before any significant revenue is generated, which may negatively affect our margin. Furthermore, there can be no assurance that all customer manufacturing needs can be met in available locations within the desired timeframe, or at all, which may cause us to lose business, which may negatively affect our financial condition and results of operation.
In particular, a significant portion of our manufacturing, design, support and storage operations are conducted in our facilities in China, and revenues associated with our China operations are important to our success. Therefore, our business, financial condition, and results of operations may be materially adversely affected by economic, political, legal, regulatory, competitive, infrastructure and other factors in China. International trade disputes or political differences with China have and could result in tariffs and other measures that could adversely affect the Company’s business. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement and control over economic growth. In addition, our operations in China are governed by Chinese laws, rules, and regulations, some of which are relatively new. The Chinese legal system continues to rapidly evolve, which may result in uncertainties with respect to the interpretation and enforcement of Chinese laws, rules, and regulations that could have a material adverse effect on our business. China experiences high turnover of direct labor in the manufacturing sector due to the intensely competitive and fluid market for labor, and the retention of adequate labor is a challenge. If our labor turnover rates are higher than we expect, or we otherwise fail to adequately manage our labor needs, then our business and results of operations could be adversely affected. We are also subject to risks associated with our subsidiaries organized in China. For example, regulatory and registration requirements and government approvals affect the financing that we can provide to our subsidiaries. If we fail to receive required registrations and approvals to fund our subsidiaries organized in China, or if our ability to remit currency out of China is limited, then our business and liquidity could be adversely affected.
Beginning in February 2025, the U.S. implemented tariffs on a variety of countries and commodities, including, among others, tariffs on aluminum and steel derivative products, imports of certain Canadian and Mexican goods, and imports of Chinese goods, universal tariffs on imports from most countries, and reciprocal tariffs on select countries. In response, certain countries have imposed, or are considering, retaliatory tariffs on U.S. exports. The global tariff landscape continues to shift rapidly, with changes impacting businesses and markets around the world. These increased tariffs have impacted and may continue to impact end, customer demand. If we are unable to fully pass on these costs, our operating results and cash flows could be adversely impacted.
These factors may harm our results of operations. Also, any measures that we may implement to reduce risks of our international operations may not be effective, may increase our expenses, and may require significant management time and effort. Entry into new international markets requires considerable management time as well as start-up expenses related to market, personnel and facilities development before any significant revenue is generated. As a result, initial operations in a new market may operate at low margins or may be unprofitable.
Although we have implemented policies and procedures designed to cause compliance with the FCPA and similar laws, there can be no assurance that all of our employees and agents, as well as those companies to which we outsource certain of our business operations, will not take actions in violation of our policies which could have a material adverse effect on our operations.
Energy price increases or shortages may negatively impact our results of operations.
Certain of the components that we use in our manufacturing activities are petroleum-based. In addition, we, along with our suppliers and customers, rely on various energy sources (including oil) in our facilities and transportation activities. An increase in energy prices, which have been volatile historically, or energy shortages or restrictions could cause disruption in our operations and/or increase in our raw material costs and transportation costs. In addition, increased transportation costs of certain of our suppliers and customers could be passed along to us. We may not be able to increase our product prices enough to offset these increased costs. In addition, any increase in our product prices may reduce our future customer orders and profitability.
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We have on occasion not achieved, and may not in the future achieve, expected profitability from our acquisitions; divestitures may adversely affect our business, reputation, financial condition, results of operations, or cash flows.
We have in the past and will continue to seek and complete acquisitions and divestitures. We cannot assure you that we will be able to successfully integrate the operations and management of our recent acquisitions. Similarly, we cannot assure you that we will be able to identify future strategic acquisitions and adequately conduct due diligence, consummate these potential acquisitions on favorable terms, if at all, or if consummated, successfully integrate the operations and management of future acquisitions. Acquisitions involve significant risks, which could have a material adverse effect on us including:
• Financial risks, such as: (1) overpayment; (2) an increase in our expenses and working capital requirements; (3) exposure to liabilities of the acquired businesses, with contractually-based time and monetary limitations on a seller’s obligation to indemnify us; (4) integration costs or failure to achieve synergy targets; (5) incurrence of additional debt; (6) valuation of goodwill and other intangible assets; (7) possible adverse tax and accounting effects; (8) the risk that we acquire manufacturing facilities and assume significant contractual and other obligations with no guaranteed levels of revenue; (9) the risk that, in the future, we may have to close or sell acquired facilities at our cost, which may include substantial employee severance costs and asset write-offs, which have resulted, and may result, in our incurring significant losses; and (10) costs associated with environmental risks including fines, remediation and clean-up.
• Operating risks, such as: (1) the diversion of management’s attention and resources to the integration of the acquired businesses and their employees and to the management of expanding operations; (2) the risk that the acquired businesses will fail to maintain the quality of services that we have historically provided; (3) the need to implement financial and other systems and add management resources; (4) the need to maintain customer, supplier or other favorable business relationships of acquired operations and restructure or terminateunfavorable relationships; (5) the potential for deficiencies in internal controls of the acquired operations; (6) the inability to attract and retain the employees necessary to support the acquired businesses; (7) potential inexperience in a line of business that is either new to us or that has become materially more significant to us as a result of the transaction; (8) unforeseendifficulties (including any unanticipated liabilities) in the acquired operations; (9) the impact on us of any unionized work force we may acquire or any labor disruptions that might occur; (10) the possibility that the acquired business’s past transactions or practices before our acquisition may lead to future commercial or regulatory risks; (11) the difficulty of presenting a unified corporate image; (12) the possibility that we will have unutilized capacity due to our acquisition activity; (13) when acquiring an operation from a customer and continuing or entering into a supply arrangement, our inability to meet the expectations of the customer as to volume, product quality, timeliness and cost reductions.
Although we conduct what we believe to be a prudent level of due diligence regarding the businesses we purchase, in light of the circumstances of each transaction, an unavoidable level of risk remains regarding the actual condition of these businesses. Until we actually assume operating control of such businesses and their assets and operations, we may not be able to ascertain the actual value or understand the potential liabilities of the acquired entities and their operations.
Many of our acquisitions involve operations outside of the U.S., which are subject to various risks including those described in “Risk Factors – We derive a substantial majority of our revenue from our international operations, which may be subject to a number of risks and often require more management time and expense than our domestic operations.”
We have acquired and may continue to pursue the acquisition of manufacturing and supply chain management operations from our customers (or potential customers). In these acquisitions, the divesting company will typically enter into a supply arrangement with the acquirer. Therefore, our competitors often also pursue these acquisitions. In addition, certain divesting companies may choose not to offer to sell their operations to us because of our current supply arrangements with other companies or may require terms and conditions that may impact our profitability. If we are unable to attract and consummate some of these acquisition opportunities at favorable terms, our growth and profitability could be adversely impacted.
In addition, divestitures involve significant risks, including without limitation, difficulty finding financially sufficient buyers or selling on acceptable terms in a timely manner. Divestitures could adversely affect our profitability and, under certain circumstances, require us to record impairment charges or a loss as a result of the transaction. In addition, completing divestitures is costly, diverts management’s attention and could leave us with certain continuing liabilities.
These and other factors could harm our ability to achieve anticipated levels of profitability or realize other anticipated benefits of an acquisition or divestiture and could adversely affect our business and operating results.
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We face risks arising from the restructuring of our operations.
In recent years, we have undertaken initiatives to restructure our business operations with the intention of improving utilization and realizing cost savings. These initiatives have included changing the number and location of our production facilities, largely to align our capacity and infrastructure with current and anticipated customer demand. The process of restructuring entails, among other activities, moving production between facilities, transferring programs from higher cost geographies to lower cost geographies, closing facilities, reducing the level of staff, realigning our business processes, and reorganizing our management.
Restructurings could adversely affect us, including a decrease in employee morale, delays encountered in finalizing the scope of, and implementing, the restructurings, failure to achieve targeted cost savings, and failure to meet operational targets and customer requirements due to the restructuring process. These risks are further complicated by our extensive international operations, which subject us to different legal and regulatory requirements that govern the extent and speed of our ability to reduce our manufacturing capacity and workforce.
We have and may be required to take additional charges in the future to align our operations and cost structures with global economic conditions, market demands, cost competitiveness, and our geographic footprint as it relates to our customers' production requirements or following divestitures. We have and may consolidate or divest certain manufacturing facilities or transfer certain of our operations to other geographies. If we are required to take additional restructuring charges in the future, our operating results, financial condition, and cash flows could be adversely impacted.
Disruptions to our information systems, including security breaches, losses of data or outages, and other security issues, have and could in the future adversely affect our operations.
We rely on information systems, some of which are managed by third parties, to store, process, and transmit confidential information, including financial reporting, inventory management, procurement, invoicing, and electronic communications, belonging to our customers, our suppliers, our employees, and/or us. Any delay or disruption in the operation of these information systems could result in material adverse consequences, including disruption of operations, loss of information, and unanticipated increases in costs. We monitor and mitigate our exposure to cybersecurity issues and modify our systems when warranted, and we have implemented business continuity items including data backups at alternative sites, multi-factor authentication, regular risk assessment, and other cybersecurity safeguards. Nevertheless, these systems are vulnerable to, and at times have suffered from, among other things, damage from power loss or natural disasters, computer system and network failures, loss of telecommunication services, physical and electronic loss of data, terrorist attacks, computer viruses, cyberattacks, and security breaches, ranging from uncoordinated individual attempts to gainunauthorized access to our IT systems to sophisticated and targeted measures. These include industrial espionage attacks, data theft, malware, phishing, ransomware attacks, or other cybersecurity threats or incidents. The increased use of mobile technologies and the internet of things can heighten these and other operational risks. If we, or the third parties who own and operate certain of our information systems, are unable to prevent such breaches, losses of data, and outages, our operations could be disrupted. Also, the time and funds spent on monitoring and mitigating our exposure and responding to breaches, including the training of employees, the purchase of protective technologies and the hiring of additional employees and consultants to assist in these efforts could adversely affect our financial results. The increasing sophistication of cyberattacks requires us to continually evaluate the threat landscape and new technologies and processes intended to detect and prevent these attacks. There can be no assurance that the security measures and systems configurations we choose to implement will be sufficient to protect the data we manage. Any theft or misuse of information resulting from a security breach could result in, among other things, loss of significant and/or sensitive information, litigation by affected parties, financial obligations resulting from such theft or misuse, higher insurance premiums, governmental investigations, negative reactions from current and potential future customers (including potential negative financial ramifications under certain customer contract provisions), and poor publicity. Any of these could adversely affect our financial results. The increased use of artificial intelligence (“AI”) technologies in our services and operations may exacerbate these risks. In addition, if any of our contractors, consultants, vendors or service providers use any third-party AI-powered software or other tools in connection with our business or the services they provide to us, it may lead to the inadvertent disclosure of our confidential information through its incorporation into publicly available training sets, which may impact our ability to realize the benefit of, or adequately maintain or protect, our confidential information, harming our competitive position and business. In addition, we must comply with increasingly complex regulations intended to protect business and personal data in the U.S. and globally. In many cases, these laws apply not only to third-party transactions, but also restrict transfers of personal information among the Company and its international subsidiaries. Several jurisdictions have passed laws in this area, and additional jurisdictions are considering imposing additional restrictions or have laws that are pending. These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction. Complying with emerging and changing requirements causes the Company to incur substantial costs and has required and may in the future require the Company to change its business practices. Compliance with these regulations can be costly and any failure to comply could result in legal and reputational risks as well as penalties, fines and damages that could adversely affect our financial results.
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Regulatory Risks
We are subject to extensive government regulations and industry standards and the terms of complex contracts; a failure to comply with current and future regulations and standards, or the terms of our contractual arrangements, could have an adverse effect on our business, customer relationships, reputation, and profitability.
We are subject to extensive government regulation and industry standards relating to the products we design and manufacture as well as how we conduct our business, including regulations and standards relating to labor and employment practices, workplace health and safety, the environment, sourcing and import/export practices, the market sectors we support, privacy and data protection, the regulations that apply to government contracts, machine learning, and artificial intelligence, and many other facets of our operations. The regulatory climate in the U.S. and other countries has become increasingly complex and fragmented, and regulatory activity has increased in recent periods. Failure or noncompliance with such regulations or standards could have an adverse effect on our reputation, customer relationships, profitability, and results of operations. In addition, we regularly enter into a large number of complex contractual arrangements as well as operate pursuant to the terms of a significant number of ongoing intricate contractual arrangements. Our failure or our customers’ failure to comply with the terms of such arrangements could expose us to claims or other demands and could have an adverse effect on our reputation, customer relationships, profitability, and results of operations.
If we manufacture products containing design or manufacturing defects, demand for our services may decline, our reputation may be damaged, and we may be subject to liability claims.
Our customers’ products and the manufacturing processes and design services that we use to produce them often are highly complex. Defects in the products we manufacture or design, whether caused by a design, manufacturing or component failure or error, or deficiencies in our manufacturing processes, have occurred and may result in delayed shipments to customers or reduced or canceled customer orders. If these defects or deficiencies are significant, our business reputation may also be damaged. The failure of the products that we manufacture or of our manufacturing processes or facilities may subject us to regulatory enforcement, fines, or penalties and, in some cases, require us to shut down, temporarily halt operations or incur considerable expense to correct a manufacturing process or facility. In addition, these defects have resulted in, and may in the future result in, liability claimsagainst us, expose us to liability to pay for the recall or remanufacture of a product, or adversely affect product sales or our reputation. Even if our customers are responsible for the defects or defective specifications, they may not, or may not have resources to, assume responsibility for any costs or liabilities arising from these defects, which could expose us to additional liability claims. Any of these actions could increase our expenses, reduce our revenue or damage our reputation as a supplier to these customers.
We may face heightened liability risks specific to our medical device business as a result of additional healthcare regulatory related compliance requirements and the potential severe consequences (e.g., death or seriousinjury) that could result from manufacturing defects or malfunctions of the medical devices we manufacture or design.
As a service provider engaged in the business of designing and manufacturing medical devices for our customers, we have compliance requirements in addition to those relating to other industries we serve within our business. We are required to register with the U.S. Food and Drug Administration (“FDA”) and are subject to periodic inspection by the FDA for compliance with the FDA’s Quality System Regulation (“QSR”), including current Good Manufacturing Practices (cGMPs). This regulation establishes requirements for manufacturers of medical devices to implement design and process manufacturing controls, quality control, labeling, handling, and documentation procedures. The FDA, through periodic inspections and post-market surveillance, continuously and rigorously monitors compliance with these QSR requirements and other applicable regulatory requirements. If any FDA inspection reveals noncompliance, and we do not address the FDA’s concerns to its satisfaction, the FDA may elect to take enforcement action against us, including issuing inspection observations or a notice of violation or a warning letter, imposing fines, bringing an action against the Company and its officers, requiring a recall of the products we manufactured, issuing an import detention on products entering the U.S. from an offshore facility, or temporarily halting operations at or shutting down a manufacturing facility.
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Beyond the FDA, our medical device business is also subject to applicable state and foreign regulatory requirements. Within the European Union (“EU”), we are required to fulfill certain internationally recognized standards and must undergo periodic inspections to obtain and maintain certifications to these standards. Continued noncompliance to the EU regulations could stop the flow of products into the EU from us or from our customers. In China, the National Medical Products Administration controls and regulates the manufacture and commerce of healthcare products. We must comply with the regulatory laws applicable to medical device manufacturers, or our ability to manufacture products in China could be impacted. In Japan, the Pharmaceutical Affairs Laws regulate the manufacture and commerce of healthcare products. These regulations also require that subcontractors manufacturing products intended for sale in Japan register with authorities and submit to regulatory audits. Other foreign countries where we operate have similar laws regarding the regulation of medical device manufacturing. In the event of any noncompliance with these requirements, interruption of our operations and/or ability to allow commerce in these markets could occur, which in turn could cause our reputation and business to suffer.
Compliance or the failure to comply with current and future environmental, health and safety, product stewardship, and producer responsibility laws or regulations could cause us significant expense.
We are subject to a variety of federal, state, local, and foreign environmental, health and safety, product stewardship, and producer responsibility laws and regulations, including those arising from global pandemics or relating to the use, generation, storage, discharge, and disposal of hazardous chemicals used during our manufacturing process, those governing worker health and safety, those requiring design changes, supply chain investigation or conformity assessments, and those relating to the recycling or reuse of products we manufacture. If we fail to comply with any present or future regulations or timely obtain any needed permits, we could become subject to liabilities, and we could face fines or penalties, the suspension of production, or prohibitions on sales of products we manufacture. In addition, such regulations could restrict our ability to expand our facilities or could require us to acquire costly equipment, or to incur other significant expenses, including expenses associated with the recall of any non-compliant product or with changes in our operational, procurement, and inventory management activities.
Certain environmental laws impose liability for the costs of investigation, removal, and remediation of hazardous or toxic substances on an owner, occupier, or operator of real estate, or on parties who arranged for hazardous substance treatment or disposal, even if such person or company was unaware of, or not responsible for, contamination at the affected site. Soil and groundwater contamination may have occurred at or near, or may have arisen from, some of our facilities. From time to time we investigate, remediate, and monitor soil and groundwater contamination at certain of our operating sites. In certain instances where contamination existed prior to our ownership or occupation of a site, landlords or former owners have retained some contractual responsibility for contamination and remediation. However, failure of such persons to perform those obligations could result in us being required to address such contamination. As a result, we may incur clean-up costs in such potential removal or remediation efforts. In other instances, we may be responsible for clean-up costs and other liabilities, including the possibility of claims due to health risks by both employees and non-employees, as well as other third-party claims in connection with contaminated sites.
In addition, there is an increasing governmental focus around the world on global warming and environmental impact issues, which has resulted in new environmental, health, and safety regulations that may affect us, our suppliers, and our customers. This could cause us to incur additional direct costs for compliance, as well as increased indirect costs resulting from our customers, suppliers, or both, incurring additional compliance costs that get passed on to us. These costs may adversely impact our operations and financial condition.
We have limited insurance coverage for potential environmental liabilities associated with current operations, and we do not anticipate increasing such coverage in the future.
We are subject to litigation and proceedings, which may result in substantial expenses, settlement costs, or judgments; require the time and attention of key management resources; and result in adverse publicity, any of which may negatively impact our financial performance.
We are party to various legal actions incidental to our business, as plaintiff or defendant, as well as various other claims, suits, investigations, and legal or governmental proceedings. Regardless of the merits of the claims, litigation or governmental proceedings may be both time-consuming and disruptive to our business. The defense and ultimate outcome of any lawsuits or other legal proceedings may result in higher expenses, which could have a material adverse effect on our business, financial condition, or results of operations. We cannot predict the final outcome of such lawsuits or proceedings or the likelihood that other proceedings will be initiated against us. Accordingly, the cost of defendingagainst such lawsuits or proceedings, or any future lawsuits or proceedings, may be high and, in any event, these legal proceedings may result in the diversion of our management's time and attention away from our business. In the event that there is an adverse ruling in any legal proceeding,
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we may be required to make payments to third parties that could be in excess of any amounts accrued and could have a material adverse effect on our reputation, financial condition, and/or results of operations.
Our operations result in exposure to intellectual property claims.
Our operations expose us to intellectual property rights claims from third parties, some of whom may hold key intellectual property rights in areas in which we operate. Intellectual property clearance or licensing efforts or activities, if any, may be inadequate to anticipate and avoid intellectual property claims. Our customers or suppliers, or their customers or suppliers, could also become subject to intellectual property claims.
Even though many, but not all, of our contracts require others to indemnify Jabil for intellectual property claims relating to their products, designs, or technology, any such party may not, or may not have the resources to, assume responsibility for such claims. We may be responsible for claims that our services, designs, technologies, products, or components, equipment, or processes we supply or use, infringe, misappropriate, or otherwise violate third party intellectual property rights. Providing turnkey design solutions, designs, technologies, products, and other services may expose us to different or greater potential liabilities than those we face providing traditional manufacturing services. These liabilities may include an increase in exposure to claims that products we design or supply, or processes, materials, or components we use, infringe, misappropriate, or otherwise violate third-party intellectual property rights. Customers for our products and services in which we provide significant design or technology contributions sometimes require that we indemnify them against risk of intellectual property claims.
If any intellectual property claims are brought, regardless of their merits, we could be required to expend significant resources in the defense or settlement of such claims, or in the defense or settlement of related indemnification claims. Intellectual property rights claims could subject us to significant liability for damages, potential injunctive action, or hamper our normal operations such as by interfering with the availability of components or have a material adverse effect on our results of operations and financial position. In the event of such a claim, we may spend significant amounts of money and effort to develop non-infringing alternatives or obtain and maintain licenses. We may not be successful in developing such alternatives or obtaining and maintaining such licenses on reasonable terms or at all. We, or suppliers or customers, may be required to or decide to discontinue products or services, and such discontinuance may result in a significant decrease in our business and/or could have a material adverse effect on our results of operations and financial position. These risks may be heightened in connection with our customer relationships with emerging companies.
The success of certain aspects of our business depends in part on our ability to obtain, protect, and leverage intellectual property rights.
In certain circumstances, we strive to obtain and protect certain intellectual property rights related to solutions, designs, processes, and products that we create. We believe that obtaining a significant level of protected proprietary technology may give us a competitive advantage. In addition to selectively relying on patent rights, we rely on unpatented proprietary know-how and trade secrets and employ various methods, including non-disclosure agreements, with our customers, employees, and suppliers and our internal security systems, policies, and procedures to protect our know-how and trade secrets. However, we cannot be certain the measures we employ will result in protected intellectual property rights or will result in the prevention of unauthorized use of our technology. If we are unable to obtain and protect intellectual property rights embodied within our solutions, designs, processes, and products, this could reduce or eliminate competitive advantages of our proprietary technology, which would harm our business and could have a material adverse effect on our results of operations and financial position.
Even if we take steps to protect certain intellectual property rights, these mechanisms may not afford complete or sufficient protection, and misappropriation or unauthorized use may still occur. Further, there can be no assurance that we will be able to acquire or enforce our patent or other rights, if any, and that others will not independently develop similar know-how and trade secrets, or develop better solutions, designs, processes and products than us. We have not historically sought patent protection for many of our proprietary processes, designs or other patentable intellectual property. Further, we may not be able to prevent current or former customers, employees, contractors and other parties from breaching non-disclosure agreements and misappropriating proprietary information. If any of the foregoing occur, it could impair our ability to compete, result in a significant decrease in our business and/or could have material adverse effect on our results of operations and financial position.
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Financial Risks
Exposure to financially troubled customers or suppliers may adversely affect our financial results.
We provide manufacturing services to companies and industries that have in the past, and may in the future, experience financial difficulty. When customers experience financial difficulty, we have difficulty recovering amounts owed to us from these customers, and demand for our products from these customers sometimes declines. Additionally, if our suppliers experience financial difficulty, we could have difficulty sourcing supplies necessary to fulfill production requirements. When one or more of our customers becomes insolvent or otherwise is unable to pay for the services provided by us on a timely basis, or at all, our operating results and financial condition are adversely affected. Such adverse effects have included and may in the future include one or more of the following: an increase in our provision for doubtful accounts, a charge for inventory writeoffs, an impairment of contract assets, a reduction in revenue, and an increase in our working capital requirements due to higher inventory levels and increases in days our accounts receivable are outstanding. In addition, because we securitize certain of our accounts receivable, our securitization program could be negatively affected by customer financial difficulty affecting the recovery of a significant amount of receivables.
When financial markets experience significant turmoil, the financial arrangements we may need to enter into, refinance or repay and our customers may be adversely affected.
Credit market turmoil could negatively impact the counterparties and lenders to our forward foreign exchange contracts, trade accounts receivable securitization and sale programs, unsecured credit and term loan facilities, commercial paper program, various foreign subsidiary credit facilities and other debt facilities. These potential negative impacts could limit our ability to borrow under these financing agreements, contracts, facilities and programs or renew or obtain future additional financing. Credit market turmoil could also negatively impact certain of our customers and certain of their respective customers, which could cause them to reduce or cancel their orders and have a negative effect on our results of operations.
We are subject to the risk of increased taxes.
We base our tax position upon the anticipated nature and conduct of our business and upon our understanding of the tax laws of the various countries in which we have assets or conduct activities. Our tax position, however, is subject to review and possible challenge by taxing authorities (including application of transfer pricing rules to our intercompany transactions) and to possible changes in law. We cannot determine in advance the extent to which some jurisdictions may assess additional tax or interest and penalties on such additional taxes. In addition, our effective tax rate has been and may be increased by changes in the mix of earnings between jurisdictions, changes in the valuation of deferred tax assets and liabilities, changes in our cash management strategies, changes in local tax rates, or taxing authorities adopting more aggressive interpretations of tax laws. In addition, acquisitions and/or divestitures may cause our effective tax rate to increase, depending on the jurisdictions in which the operations are located.
The Organization for Economic Co-operation and Development (“OECD”) and participating countries continue to work toward the enactment of a 15% global minimum corporate tax rate. Many countries, including countries in which we have tax incentives, have enacted or are in the process of enacting laws based on the OECD’s proposals. Our effective tax rate and cash tax liability could be adversely impacted by these rules in future years.
Several countries in which we are located allow for tax incentives to attract and retain business. We have obtained incentives where available and practicable. Our taxes could increase if certain tax incentives are retracted, which could occur if we are unable to satisfy the conditions on which such incentives are based, if they are not renewed upon expiration, or if tax rates applicable to us in such jurisdictions otherwise increase. Further, the global minimum tax is expected to reduce the benefits achieved from tax incentives.
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Our credit rating may be downgraded.
Our credit is and certain of our financial instruments and our commercial paper are rated by credit rating agencies. Any potential future negative change in our credit ratings may make it more expensive for us to raise additional capital on terms that are acceptable to us, if at all; negatively impact the price of our common stock; increase our interest payments under existing debt agreements; cause us to lose the ability to utilize our commercial paper program; and have other negative implications on our business, many of which are beyond our control. In addition, the interest rate payable under the Credit Facility (as such terms are define d in Note 7 – “Notes Payable and Long-Term Debt” to the Consolidated Financial Statements) is subject to adjustment from time to time if our credit ratings change. Thus, any potential future negative change in our credit rating may increase the interest rate payable on the Credit Facility and certain of our other borrowings.
Our amount of debt could significantly increase in the future.
The Company has a number of debt facilities. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” a nd Note 7 – “Notes Payable and Long-Term Debt” to the Consolidated Financial Statements for further details.
Should we desire to consummate significant additional acquisition opportunities, undertake significant additional expansion activities, or make substantial investments in our infrastructure or in support of customer opportunities, our capital needs would increase and could result in our need to increase borrowings under our revolving credit facilities or access public or private debt and equity markets. There can be no assurance, however, that we would be successful in raising additional debt or equity on terms that we would consider acceptable. An increase in the level of our indebtedness, among other things, could:
• make it difficult for us to obtain any necessary financing in the future for other acquisitions, working capital, capital expenditures, debt service requirements, or other purposes;
• limit our flexibility in planning for, or reacting to changes in, our business;
• make us more vulnerable in the event of a downturn in our business; and
• impact certain financial covenants that we are subject to in connection with our debt and asset-backed securitization program.
There can be no assurance that we will be able to meet future debt service obligations.
An adverse change in the interest rates for our borrowings has and could adversely affect our financial condition.
We pay interest on outstanding borrowings under our revolving credit facilities and certain other debt obligations at interest rates that fluctuate based upon changes in various base interest rates. An adverse change in the base rates upon which our interest rates are determined has and may continue to have a material adverse effect on our financial position, results of operations and cash flows. If certain economic or fiscal issues occur, interest rates have and could rise, which would increase our interest costs and reduce our net income. Also, increased interest rates could make any future fixed interest rate debt obligations more expensive.
We are subject to risks of currency fluctuations and related hedging operations.
Although a significant number of our operations are located outside the United States, the majority of our business is conducted in U.S. dollars. Changes in exchange rates will affect our net revenue, cost of sales, operating margins, and net income. We cannot predict the impact of future exchange rate fluctuations. We use financial instruments, primarily forward contracts, to hedge our exposure to exchange rate fluctuations. We believe that our hedging activities enable us to largely protect ourselves from future exchange rate fluctuations. If, however, these hedging activities are not successful, if the counterparties to these hedging activities default on their obligations to us or if we change or reduce these hedging activities in the future, we may experience significant unexpected expenses from fluctuations in exchange rates. In addition, certain countries in which we operate have adopted, or may adopt, currency controls requiring that local transactions be settled only in local currency. Such controls could require us to hedge larger amounts of local currency than we have in the past.
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An impairment in the value of our assets would reduce the value of our assets and reduce our net income in the year in which the write-off occurs.
We have recorded intangible assets, including goodwill, in connection with business acquisitions. 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. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired. Refer t o Note 6 – “Goodwill and Other Intangible Assets” to the Consolidated Financial Statements f or further discussion of the impairment testing of goodwill and identifiable intangible assets. A decline in general economic conditions or global equity valuations could impact the judgments and assumptions about the fair value of our businesses, and we could be required to record impairment charges on our goodwill or other identifiable intangible assets in the future, which could impact our consolidated balance sheet, as well as our consolidated statements of operations.
General Risk Factors
Changes in financial accounting standards or policies have affected, and in the future may affect, our reported financial condition or results of operations.
We prepare our financial statements in conformity with U.S. GAAP. These principles are subject to interpretation by the Financial Accounting Standards Board (FASB), the American Institute of Certified Public Accountants, the SEC, and various bodies formed to interpret and create appropriate accounting policies. A change in these policies can have a significant effect on our reported results and may affect our reporting of transactions that are completed before a change is announced. Changes to those rules or questions as to how we interpret or implement them may have a material adverse effect on our reported financial results or on the way we conduct business.
We are subject to risks associated with natural disasters, climate change, and global events.
Our operations and those of our customers and suppliers have been and may again be subject to natural disasters, climate change-related events, pandemics, or other business disruptions, which could seriouslyharm our results of operation and increase our costs and expenses. We are susceptible to losses and interruptions caused by hurricanes (including in Florida, where our headquarters are located), earthquakes, power shortages, telecommunications failures, water or other natural resource shortages, tsunamis, floods, typhoons, drought, fire, extreme weather conditions, rising sea level, geopolitical events such as direct or indirect terrorist acts or acts of war, other natural or manmade disasters, boycotts and sanctions, or widespread criminal activities. Such events could make it difficult or impossible to manufacture or to deliver products to our customers, receive production materials from our suppliers, or perform critical functions, which could adversely affect our business globally or in certain regions. While we maintain similar manufacturing capacities at different locations and coordinate multi-source supplier programs on many of our materials, which we believe betterenables us to respond to these types of events, we cannot be sure that our plans will fully protect us from all such disruptions. Our insurance coverage with respect to natural disasters is limited and is subject to deductibles and coverage limits. Such coverage may not be adequate or may not continue to be available at commercially reasonable rates and terms.
While we manufacture our products in a large number of diversified facilities and maintain insurance covering our facilities, including business interruption insurance, a catastrophicloss of the use of all or a portion of one of our key manufacturing facilities due to accident, labor issues, weather conditions, natural disaster or otherwise, whether short- or long-term, could have a material adverse effect on us.
Expectations relating to environmental, social, and governance considerations expose the Company to potential liabilities, increased costs, reputational harm, and other adverse effects on the Company’s business.
Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance considerations relating to businesses, including climate change and greenhouse gas emissions, and human and civil rights. In addition, we make statements about our environmental, social, and governance goals and initiatives through our sustainability report. Responding to these environmental, social, and governance considerations and implementation of these goals and initiatives involves risks and uncertainties and requires investments. We cannot guarantee that we will achieve our goals and initiatives. Any failure, or perceived failure, to achieve our goals, further our initiatives, adhere to our public statements, comply with federal, state, or international environmental, social, and governance laws and regulations, or meet evolving and sometimes conflicting shareholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition, and stock price.
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obsolete
efficiently
negatively
Our operating results are impacted by the level of capacity utilization of manufacturing facilities; indirect labor costs; and selling, general, and administrative expenses. Operating income margins have generally improved during periods of high production volume and high capacity utilization. During periods of low production volume, we generally have reduced operating income margins.
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.
Beginning in February 2025, the U.S. implemented tariffs on a variety of countries and commodities, including, among others, tariffs on aluminum and steel derivative products, imports of certain Canadian and Mexican goods, imports of Chinese goods, universal tariffs on imports from most countries, and reciprocal tariffs on select countries. In response, certain countries have imposed, or are considering, retaliatory tariffs on U.S. exports. The global tariff landscape continues to shift rapidly, with changes impacting businesses and markets around the world. While these increased tariffs have and may continue to impact end customer demand, we expect that we will recover the tariff costs by passing them on to our customers. If we are unable to fully pass on these costs, our operating results and cash flows could be adversely impacted.
We have consistently utilized advanced circuit design, production design and manufacturing technologies to meet the needs of our customers. To support this effort, our engineering staff focuses on developing and refining design and manufacturing technologies to meet specific needs of specific customers. Most of the expenses associated with these customer-specific efforts are reflected in our cost of revenue. In addition, our engineers engage in research and development (“R&D”) of new technologies that apply generally to our operations. The expenses of these R&D activities are reflected in the research and development line item within our Consolidated Statements of Operations.
An important element of our strategy is the expansion of our global production facilities. The majority of our revenue and materials costs worldwide are denominated in U.S. dollars, while our labor and utility costs in operations outside the U.S. are denominated in local currencies. We economically hedge certain of these local currency costs, based on our evaluation of the potential exposure as compared to the cost of the hedge, through the purchase of foreign currency exchange contracts. Changes
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in the fair market value of such hedging instruments are reflected within the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income.
See Note 14 – “Concentration of Risk and Segment Data” to the Consolidated Financial Statements.
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):
Fiscal Year Ended August 31,
Net revenue
Gross profit
Operating income
Net income attributable to Jabil Inc.
Earnings per share – basic
Earnings per share – diluted
Key Performance Indicators
Management regularly reviews financial and non-financial performance indicators to assess the Company’s operating results. Changes in our operating assets and liabilities are largely affected by our working capital requirements, which are dependent on the effective management of our sales cycle as well as timing of payments. Our sales cycle measures how quickly we can convert our manufacturing services into cash through sales. We believe the metrics set forth below are useful to investors in measuring our liquidity, as future liquidity needs will depend on fluctuations in levels of inventory, accounts receivable, and accounts payable.
The following table sets forth, for the quarterly periods indicated, certain of management’s key financial performance indicators:
Three Months Ended
August 31, 2025
May 31, 2025
August 31, 2024
Sales cycle (1)
18 days
24 days
34 days
Inventory turns (annualized) (2)
5 turns
5 turns
5 turns
Days in accounts receivable (3)
44 days
46 days
46 days
Days in inventory (4)
69 days
74 days
76 days
Days in accounts payable (5)
96 days
96 days
88 days
(1) The sales cycle is calculated as the sum of days in accounts receivable and days in inventory, less the days in accounts payable; accordingly, the variance in the sales cycle quarter over quarter is a direct result of changes in these indicators.
(2) Inventory turns (annualized) are calculated as 360 days divided by days in inventory.
(3) Days in accounts receivable is calculated as accounts receivable, net, divided by net revenue multiplied by 90 days. During the three months ended August 31, 2025, the decrease in days in accounts receivable from the prior sequential quarter and the three months ended August 31, 2024, was primarily driven by an increase in net revenue and the timing of payments.
(4) Days in inventory is calculated as inventory and contract assets divided by cost of revenue multiplied by 90 days. During the three months ended August 31, 2025, the decrease in days in inventory from the prior sequential quarter and the three months ended August 31, 2024, 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 August 31, 2025, the increase in days in accounts payable from the three months ended August 31, 2024, was primarily due to higher purchases of customer-controlled consignment components and the timing of cash payments.
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Critical Accounting Policies and Estimates
The preparation of our Consolidated Financial Statements and related disclosures in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances. We have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of our Consolidated Financial Statements. For further discussion of our significant accounting policies, refer to Note 1 – “Des cription of Business and Summary of Significant Accounting Policies” to the Consolidated Financial Statements.
Revenue Recognition
For our over time customers, we believe the measure of progress which best depicts the transfer of control is based on costs incurred to date, relative to total estimated cost at completion (i.e., an input method). This method is a faithful depiction of the transfer of goods or services because it results in the recognition of revenue on the basis of our to-date efforts in the satisfaction of a performance obligation relative to the total expected efforts in the satisfaction of the performance obligation. We believe that the use of an input method best depicts the transfer of control to the customer, which occurs as we incur costs on our contracts. The transaction price of each performance obligation is generally based upon the contractual standalone selling price of the product or service.
Inventory Valuation
We purchase inventory based on forecasted demand and record inventory at the lower of cost and net realizable value. Management regularly assesses inventory valuation based on current and forecasted usage, customer inventory-related contractual obligations, and other lower of cost and net realizable value considerations. If actual market conditions or our customers’ product demands are less favorable than those projected, additional valuation adjustments may be necessary.
Long-Lived Assets
We have recorded intangible assets, including goodwill, in connection with business acquisitions. Estimated useful lives of amortizable intangible assets are determined by management based on an assessment of the period over which the asset is expected to contribute to future cash flows. The fair value of acquired amortizable intangible assets impacts the amounts recorded as goodwill. We review amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
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. We may elect to perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. If the qualitative assessment is not performed or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds the carrying value, the recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired, and a loss is recognized in the amount equal to that excess.
For further discussion related to impairment analyses performed during fiscal year 2025, and performed as a result of the organizational realignment, refer to Note 6 – “Goodwill and Other Intangible Assets” and Note 14 – “ Concentration of Risk and Segment Data ” to the Consolidated Financial Statements.
Income Taxes
We estimate our income tax provision in each of the jurisdictions in which we operate, a process that includes estimating exposures related to examinations by taxing authorities. We must also make judgments regarding the ability to realize deferred tax assets. The carrying value of our net deferred tax assets is based on our belief that it is more likely than not that we will generate sufficient future taxable income in certain jurisdictions to realize these deferred tax assets. A valuation allowance has been established for deferred tax assets that we do not believe meet the “more likely than not” criteria. We assess whether an uncertain tax position taken or expected to be taken in a tax return meets the threshold for recognition and measurement in the Consolidated Financial Statements. Our judgments regarding future taxable income as well as tax positions taken or expected to be taken in a tax return may change due to changes in market conditions, changes in tax laws or other factors. If our
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assumptions and consequently our estimates change in the future, the valuation allowances and/or tax reserves established may be increased or decreased, resulting in a respective increase or decrease in income tax expense. For further discussion related to our income taxes, refer to Note 16 – “Income Taxes” to the Consolidated Financial Statements.
Recent Accounting Pronouncements
S ee Note 20 – “New Accounting Guidance” to the Consolidated Financial Statements for a discussion of recent accounting guidance.
Results of Operations
Refer to Item 7. "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 en ded August 31, 2024, for the results of operations discussion for the fiscal year ended August 31, 2024, compared to the fiscal year ended August 31, 2023 .
Net Revenue
Generally, we assess revenue on a global customer basis regardless of whether the growth is associated with organic growth or as a result of an acquisition. Accordingly, we do not differentiate or separately report revenue increases generated by acquisitions as opposed to existing business. In addition, the added cost structures associated with our acquisitions have historically been relatively insignificant when compared to our overall cost structure.
The distribution of revenue across our segments has fluctuated, and will continue to fluctuate, as a result of numerous factors, including the following: fluctuations in customer demand; efforts to diversify certain portions of our business; business growth from new and existing customers; specific product performance; and any potential termination, or substantial winding down, of significant customer relationships.
Fiscal Year Ended August 31,
Change
(dollars in millions)
Net revenue
Net revenue increased during the fiscal year ended August 31, 2025, compared to the fiscal year ended August 31, 2024. Specifically, the Intelligent Infrastructure segment net revenue increased 34% primarily due to: (i) a 30% increase in revenues from existing customers within our cloud and data center infrastructure business and (ii) a 10% increase in revenues from existing customers within our capital equipment business. The increase was partially offset by a 6% decrease in revenues from existing customers within our networking and communications business. The Connected Living and Digital Commerce segment net revenue decreased 25% due to a 27% decrease in revenues primarily driven by the divestiture of the Mobility Business within our connected living business. The decrease was partially offset by a 2% increase in revenues from existing customers within our digital commerce business. The Regulated Industries segment net revenue decreased 3% primarily due to: (i) a 2% decrease in revenues from existing customers within our automotive and transportation business, and (ii) a 1% decrease in revenues from existing customers within our healthcare and packaging business.
The following table sets forth, for the periods indicated, revenue by segment expressed as a percentage of net revenue:
Fiscal Year Ended August 31,
Regulated Industries
Intelligent Infrastructure
Connected Living and Digital Commerce
Total
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The following table sets forth, for the periods indicated, foreign source revenue expressed as a percentage of net revenue:
Fiscal Year Ended August 31,
Foreign source revenue
(1) Decrease from prior periods was primarily driven by domestic revenue growth within our Intelligent Infrastructure segment during the fiscal year ended August 31, 2025 and the divestiture of the Mobility Business during the fiscal year ended August 31, 2024.
Gross Profit
Fiscal Year Ended August 31,
(dollars in millions)
Gross profit
Percent of net revenue
Gross profit as a percentage of net revenue decreased for the fiscal year ended August 31, 2025, compared to the fiscal year ended August 31, 2024, primarily due to product mix in our Connected Living and Digital Commerce and Intelligent Infrastructure segments.
Selling, General and Administrative
Fiscal Year Ended August 31,
Change
(in millions)
Selling, general and administrative
Selling, general and administrative expenses decreased during the fiscal year ended August 31, 2025, compared to the fiscal year ended August 31, 2024. The decrease is primarily due to: (i) a $17 million decrease in other selling, general and administrative expenses primarily driven by the divestiture of the Mobility Business during the fiscal year ended August 31, 2024, (ii) a $10 million decrease in office and support costs, (iii) a $7 million decrease due to lower salary and salary related expenses, and (iv) a $4 million decrease in business interruption and impairment charges, net.
Research and Development
Fiscal Year Ended August 31,
(dollars in millions)
Research and development
Percent of net revenue
Research and development expenses remained consistent as a percent of net revenue during the fiscal year ended August 31, 2025, compared to the fiscal year ended August 31, 2024.
Amortization of Intangibles
Fiscal Year Ended August 31,
Change
(in millions)
Amortization of intangibles
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Amortization of intangibles increased during the fiscal year ended August 31, 2025, compared to the fiscal year ended August 31, 2024, primarily due to (i) additional amortization associated with intangible assets related to the acquisitions of Mikros Technologies LLC and Pharmaceutics International, Inc. that occurred during the fiscal year ended August 31, 2025 and (ii) amortization related to the Green Point trade name, which was reclassified to a definite-lived intangible asset during the fiscal year ended August 31, 2024.
Restructuring, Severance, and Related Charges
Fiscal Year Ended August 31,
Change
(in millions)
Restructuring, severance and related charges
Restructuring, severance and related charges decreased during the fiscal year ended August 31, 2025, compared to the fiscal year ended August 31, 2024, primarily due to higher restructuring, severance and related charges, related to the 2024 Restructuring Plan, during the fiscal year ended August 31, 2024. The decrease is partially offset by increased restructuring, severance and related charges, related to the 2025 Restructuring Plan, during the fiscal year ended August 31, 2025.
2025 Restructuring Plan
On September 24, 2024, our Board of Directors approved a restructuring plan to align our support infrastructure to further optimize organizational effectiveness. This action includes headcount reductions across our Selling, General and Administrative (“SG&A”) and manufacturing cost base and capacity realignment (the “2025 Restructuring Plan”). The 2025 Restructuring Plan reflects our intention only and restructuring decisions, including the timing of such decisions, at certain locations remain subject to consultation with our employees and their representatives.
We expect to recognize approximately $200 million in pre-tax restructuring and other related costs related to the 2025 Restructuring Plan. The restructuring and other related charges are expected to include $60 million to $70 million of employee severance and benefit costs; $65 million to $70 million of asset write-off costs; and $55 million to $65 million of contract termination costs and other related costs. 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.
2024 Restructuring Plan
On September 26, 2023, our Board of Directors approved a restructuring plan to (i) realign our cost base for stranded costs associated with the sale and realignment of the Mobility Business and (ii) optimize our global footprint. This action includes headcount reductions across our SG&A cost base and capacity realignment (the “2024 Restructuring Plan”).
The 2024 Restructuring Plan, totaling approximately $300 million in pre-tax restructuring and other related costs, was substantially complete as of August 31, 2024.
See Note 15 – “Restructuring, Severance and Related Charges” to the Consolidated Financial Statements for further discussion of restructuring, severance and related charges.
Loss (Gain) from the Divestiture of Businesses
Fiscal Year Ended August 31,
Change
(in millions)
Loss (gain) from the divestiture of businesses
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Charges recorded during the fiscal year ended August 31, 2025, relate primarily to a pre-tax loss of $97 million recognized for the divestiture of our operations in Italy. During the fiscal year ended August 31, 2024, we completed the divestiture of the Mobility Business and recorded a pre-tax gain of $942 million. Certain post-closing adjustments were realized in March 2025, which resulted in the recognition of a $54 million pre-tax gain during the fiscal year ended August 31, 2025.
See Note 17 – “Business Acquisitions and Divestitures” to the Consolidated Financial Statements for additional information.
Acquisition and Divestiture Related Charges
Fiscal Year Ended August 31,
Change
(in millions)
Acquisition and divestiture related charges
Acquisition and divestiture related charges decreased during the fiscal year ended August 31, 2025, compared to the fiscal year ended August 31, 2024, primarily due to transaction and disposal costs incurred in connection with the divestiture of the Mobility Business during the fiscal year ended August 31, 2024. The decrease is partially offset by transaction costs incurred in connection with pursuing acquisition opportunities during the fiscal year ended August 31, 2025.
See Note 17 – “Business Acquisitions and Divestitures” to the Consolidated Financial Statements for additional information.
Loss on Securities
Fiscal Year Ended August 31,
Change
(in millions)
Loss on securities
Loss on securities during the fiscal year ended August 31, 2025, relates to an impairment of an investment in Preferred Stock.
Other Expense
Fiscal Year Ended August 31,
Change
(in millions)
Other expense
Other expense increased during the fiscal year ended August 31, 2025, compared to the fiscal year ended August 31, 2024, primarily due to an increase in fees related to higher utilization on our trade accounts receivable sales programs and global asset-backed securitization program. The increase was partially offset by lower interest rates related to these programs.
Interest Expense, net
Fiscal Year Ended August 31,
Change
(in millions)
Interest expense, net
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Interest expense, net decreased during the fiscal year ended August 31, 2025, compared to the fiscal year ended August 31, 2024, due to lower interest rates and lower borrowings primarily on our credit facilities and commercial paper program.
Income Tax Expense
Fiscal Year Ended August 31,
Change
Effective income tax rate
The effective income tax rate differed for the fiscal year ended August 31, 2025, compared to the fiscal year ended August 31, 2024, primarily due to: (i) a change in the jurisdictional mix of earnings and (ii) the gain from the divestiture of the Mobility Business and corresponding $58 million of income tax expense during the fiscal year ended August 31, 2024.
The Organization for Economic Co-operation and Development (“OECD”) and participating countries continue to work toward the enactment of a 15% global minimum corporate tax rate. Many countries, including countries in which we have tax incentives, have enacted or are in the process of enacting laws based on the OECD’s proposals. These tax changes did not have a material impact to our effective income tax rate for the fiscal year ended August 31, 2025.
On July 4, 2025, the U.S. One Big Beautiful Bill Act (“OBBBA”) was enacted which includes permanent extensions of certain expiring provisions of the Tax Cuts and Jobs Act and makes significant modifications to the U.S. international tax framework. The legislation has multiple effective dates, with certain provisions effective in fiscal year 2025 and others implemented through the fiscal year ended August 31, 2027. The OBBBA did not have a material impact to our consolidated financial statements for the fiscal year ended August 31, 2025; however, we will continue to monitor developments and evaluate any potential future impacts.
Non-GAAP (Core) Financial Measures
The following discussion and analysis of our financial condition and results of operations include certain non-GAAP financial measures as identified in the reconciliation below. The non-GAAP financial measures disclosed herein do not have standard meaning and may vary from the non-GAAP financial measures used by other companies or how we may calculate those measures in other instances from time to time. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. Also, our “core” financial measures should not be construed as an inference by us that our future results will be unaffected by those items that are excluded from our “core” financial measures.
Management believes that the non-GAAP “core” financial measures set forth below are useful to facilitate evaluating the past and future performance of our ongoing manufacturing operations over multiple periods on a comparable basis by excluding the effects of the amortization of intangibles, stock-based compensation expense and related charges, restructuring, severance and related charges, distressed customer charges, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges, business interruption and impairment charges, net, (gain) loss from the divestiture of businesses, acquisition and divestiture related charges, loss on debt extinguishment, (gain) loss on securities, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations and certain other expenses, net of tax and certain deferred tax valuation allowance charges. Among other uses, management uses non-GAAP “core” financial measures to make operating decisions, assess business performance and as a factor in determining certain employee performance when evaluating incentive compensation.
In fiscal year 2023, the Company adopted 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, the Company utilizes 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. The Company may adjust the normalized core tax rate during the year for material impacts from new tax legislation or material changes to the Company’s operations.
Prior to fiscal year 2023, the Company determined the tax effect of the items included and excluded from core earnings quarterly.
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We are reporting “core” operating income, “core” earnings and cash flows to provide investors with an additional method for assessing operating income and earnings, by presenting what we believe are our “core” manufacturing operations. A significant portion (based on the respective values) of the items that are excluded for purposes of calculating “core” operating income and “core” earnings also impacted certain balance sheet assets, resulting in a portion of an asset being written off without a corresponding recovery of cash we may have previously spent with respect to the asset. In the case of restructuring, severance and related charges, we may make associated cash payments in the future. In addition, although, for purposes of calculating “core” operating income and “core” earnings, we exclude stock-based compensation expense (which we anticipate continuing to incur in the future) because it is a non-cash expense, the associated stock issued may result in an increase in our outstanding shares of stock, which may result in the dilution of our stockholders’ ownership interest. We encourage you to consider these matters when evaluating the utility of these non-GAAP financial measures.
Adjusted free cash flow is defined as net cash provided by (used in) operating activities less net capital expenditures (acquisition of property, plant and equipment less proceeds and advances from the sale of property, plant and equipment). We report adjusted free cash flow as we believe this non-GAAP financial measure is useful to investors in measuring our ability to generate cash internally and fund future growth and to provide a return to shareholders.
Included in the tables below are a reconciliation of the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures as provided in our Consolidated Financial Statements:
Refer to Item 7. "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, 2024 for the non-GAAP financial measures discussion for the fiscal year ended August 31, 2024 compared to the fiscal year ended August 31, 2023.
Reconciliation of U.S. GAAP Financial Results to Non-GAAP Measures
Fiscal Year Ended August 31,
(in millions, except for per share data)
Operating income (U.S. GAAP)
Amortization of intangibles
Stock-based compensation expense and related charges
Restructuring, severance and related charges (1)
Net periodic benefit cost (2)
Business interruption and impairment charges, net (3)
Loss (gain) from the divestiture of businesses (4)
Acquisition and divestiture related charges
Adjustments to operating income
Core operating income (Non-GAAP)
Net income attributable to Jabil Inc. (U.S. GAAP)
Adjustments to operating income
Loss on securities (5)
Net periodic benefit cost (2)
Adjustment for taxes (6)
Core earnings (Non-GAAP)
Diluted earnings per share (U.S. GAAP)
Diluted core earnings per share (Non-GAAP)
Diluted weighted average shares outstanding (U.S. GAAP and Non-GAAP)
(1) Charges recorded during the fiscal year ended August 31, 2025 and 2024, primarily related to the 2025 Restructuring Plan and 2024 Restructuring Plan, respectively. Charges recorded during the fiscal year ended August 31, 2023, related to headcount reduction to further optimize our business activities.
(2) Pension service cost is recognized in cost of revenue and all other components of net periodic benefit cost, including return on plan assets, are presented in other expense. 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.
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(3) Charges recorded during the fiscal year ended August 31, 2025, relate primarily to costs associated with damage from Hurricanes Helene and Milton, which impacted our operations in St. Petersburg, Florida and Asheville and Hendersonville, North Carolina. Charges recorded during the fiscal year ended August 31, 2024, related to costs associated with product quality liabilities. Charges recorded during the fiscal years ended August 31, 2025, and 2024, are classified as a component of cost of revenue and selling, general and administrative expenses in the Consolidated Statements of Operations.
(4) Charges recorded during the fiscal year ended August 31, 2025, relate primarily to a pre-tax loss of $97 million recognized for the divestiture of our operations in Italy. We completed the divestiture of the Mobility Business and recorded a pre-tax gain of $942 million during the fiscal year ended August 31, 2024. Certain post-closing adjustments were realized in March 2025, which resulted in the recognition of a $54 million pre-tax gain during the fiscal year ended August 31, 2025.
(5) Charges recorded during the fiscal year ended August 31, 2025, relate to an impairment of an investment in Preferred Stock.
(6) Tax adjustments for the fiscal year ended August 31, 2025, were partially driven by an income tax benefit associated with a reduction in unrecognized tax benefits from a lapse in statute of limitations. Tax adjustments for the fiscal year ended August 31, 2024, were partially driven by an income tax expense associated with the divestiture of the Mobility Business. The adjustment for taxes for the fiscal year ended August 31, 2023, primarily related to a change in the indefinite reinvestment assertion associated with operations that were classified as held for sale.
Adjusted Free Cash Flow
Fiscal Year Ended August 31,
(in millions)
Net cash provided by operating activities (U.S. GAAP)
Acquisition of property, plant and equipment (“PP&E”) (1)
Proceeds and advances from sale of PP&E (1)
Adjusted free cash flow (Non-GAAP)
(1) Certain customers co-invest in PP&E with us. As we acquire PP&E, we recognize the cash payments in acquisition of PP&E. When our customers reimburse us and obtain control, we recognize the cash receipts in proceeds and advances from the sale of PP&E.
Quarterly Results (Unaudited)
The following table sets forth certain unaudited quarterly financial information for the three months ended August 31, 2025, and 2024. In the opinion of management, this information has been presented on the same basis as the audited consolidated financial statements appearing elsewhere, and all necessary adjustments (consisting primarily of normal recurring accruals) have been included in the amounts stated below to present fairly the unaudited quarterly results when read in conjunction with the audited consolidated financial statements and related notes thereto. The operating results for any quarter are not necessarily indicative of results for any future period.
Three Months Ended
(in millions, except for per share data)
August 31, 2025
August 31, 2024
Net revenue
Gross profit
Operating income
Net income attributable to Jabil Inc.
Earnings per share – basic
Earnings per share – diluted
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Acquisitions and Divestitures
Acquisitions
Fiscal Year 2026
On September 1, 2025, we completed the acquisition of Rebound Technologies Group Holdings Limited (“Rebound Technologies”) for cash consideration transferred of $134 million. Rebound Technologies is a global supply chain service provider headquartered in the United Kingdom offering end-to-end solutions including global sourcing, data driven analytics, proactiveshortage management and obsolescence strategies. The final purchase price is subject to adjustment based on conditions within the purchase agreement.
Fiscal Year 2025
On February 3, 2025, we completed the acquisition of Pharmaceutics International, Inc. (“Pii”) for cash consideration transferred of $309 million. The final purchase price is subject to adjustment based on certain customary conditions as outlined in the purchase agreement. Pii is a contract development and manufacturing organization specializing in early stage, clinical, and commercial volume aseptic filling, lyophilization, and oral solid dose manufacturing. The acquisition is expected to enhance our existing Regulated Industries service offerings, which includes the development and commercial production of auto-injectors, pen injectors, inhalers, and on-body pumps.
The acquisition of Pii was accounted for as a business combination using the acquisition method of accounting. Assets acquired of $357 million, including $149 million in intangible assets and $142 million in goodwill, and liabilities assumed of $48 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 Regulated Industries segment. Goodwill is primarily attributable to expected synergies enabling comprehensive support for customers in drug development, clinical trials, and product commercialization at scale. The majority of the goodwill is currently not expected to be deductible for income tax purposes. The results of operations were included in our consolidated financial results beginning on February 3, 2025. Pro forma information has not been provided as the acquisition of Pii is not deemed to be significant.
On October 1, 2024, we completed the acquisition of Mikros Technologies LLC (“Mikros Technologies”) for consideration transferred of $63 million. Mikros Technologies is a leader in the engineering and manufacturing of liquid cooling solutions for thermal management. The final purchase price is subject to adjustment based on certain customary conditions as outlined in the purchase agreement.
The acquisition of Mikros Technologies was accounted for as a business combination using the acquisition method of accounting. Assets acquired of $63 million, including $40 million in intangible assets and $17 million in goodwill, 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 Intelligent Infrastructure segment. The majority of the goodwill is currently expected to be deductible for income tax purposes. The results of operations were included in our consolidated financial results beginning on October 1, 2024. Pro forma information has not been provided as the acquisition of Mikros Technologies is not deemed to be significant.
Fiscal Year 2024
On November 1, 2023, we completed the acquisition of ProcureAbility Inc. (“ProcureAbility”) for approximately $60 million in cash. ProcureAbility is a procurement services provider specializing in technology-enabled advisory, managed services, digital, staffing, and recruiting solutions.
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 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 Regulated Industries 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 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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Divestitures
Fiscal Year 2025
On August 1, 2025, through our indirect subsidiary, Jabil Circuit Italia S.r.l. (“JCI”), we divested our operations in Italy. As a result of the transaction, we derecognized net assets of approximately $36 million and recorded a pre-tax loss of $97 million during the fiscal year ended August 31, 2025, subject to post-closing adjustments that are still being finalized. As part of the terms of the agreement, we also paid cash consideration of $63 million to the buyer. The operating results of this business were immaterial to our consolidated results of operations.
Fiscal Year 2024
We announced on September 26, 2023, that, through our indirect subsidiary, Jabil Circuit (Singapore) Pte. Ltd., a Singapore private limited company (“Singapore Seller”), we agreed to sell to an affiliate of BYD Electronic (International) Co. Ltd., a Hong Kong limited liability company (“Purchaser” or “BYDE”), the Singapore Seller’s product manufacturing business in Chengdu, including its supporting component manufacturing in Wuxi, (the “Mobility Business”), for cash consideration of approximately $2.2 billion, subject to certain customary purchase price adjustments.
As of August 31, 2023, we determined the Mobility Business met the criteria to be classified as held for sale. Assets 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 Mobility Business in our Consolidated Statements of Operations in the DMS segment until December 29, 2023 (the “Closing Date”).
On the Closing Date, we completed the sale of the Mobility Business. As a result of the transaction, we derecognized net assets of approximately $1.2 billion and recorded a pre-tax gain of $942 million in the fiscal year ended August 31, 2024. Certain post-closing adjustments were realized in March 2025, which resulted in the recognition of a $54 million pre-tax gain during the fiscal year ended August 31, 2025. In addition, we agreed to indemnify BYDE 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 $67 million during the fiscal year ended August 31, 2024, which are included in continuing operations in our Consolidated Statements of Operations.
Refer to Note 17 – “Business Acquisitions and Divestitures” to the Consolidated Financial Statements for discussion.
Liquidity and Capital Resources
We believe that our level of liquidity sources – which includes cash on hand, available borrowings under our revolving credit facilities and commercial paper program, additional proceeds available under our global asset-backed securitization program and under our uncommitted trade accounts receivable sale programs, and cash flows provided by operating activities – and our access to the capital markets will be adequate to fund our capital expenditures, the payment of any declared quarterly dividends, any share repurchases under the approved program, any potential acquisitions, our working capital requirements and our contractual obligations for the next 12 months and beyond. We continue to assess our capital structure and evaluate the merits of redeploying available cash.
Cash and Cash Equivalents
As of August 31, 2025, we had approximately $1.9 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 August 31, 2025, could be repatriated to the United States without potential tax expense.
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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)
Senior
Notes
Senior
Notes
Senior
Notes
Senior
Notes
Senior
Notes
Senior
Notes
Borrowings under
revolving credit
facilities (1)(2)
Total notes
payable and
credit facilities
Balance as of August 31, 2023
Borrowings
Payments
Other
Balance as of August 31, 2024
Borrowings
Payments
Other
Balance as of August 31, 2025
Maturity Date
Jan 12, 2028
Jan 15, 2030
Jan 15, 2031
Apr 15, 2026
May 15, 2027
Feb 1, 2029
Jun 18, 2030
Original Facility/ Maximum Capacity
$500 million
$500 million
$600 million
$500 million
$500 million
$300 million
$4.0 billion (2)
(1) On June 18, 2025, we entered into a senior unsecured credit agreement (the “Agreement”). The Agreement provides for a five-year revolving credit facility in the initial amount of $3.2 billion (the “Revolving Credit Facility”), which may, subject to the lender’s discretion, potentially be increased by up to an aggregate amount of $1.0 billion. The Revolving Credit Facility expires on June 18, 2030, subject to unlimited successive one-year extension options (subject to the lenders’ discretion), provided that the tenor of the Revolving Credit Facility shall at no time exceed five-years. Interest and fees on advances under the Revolving Credit Facility are based on our non-credit enhanced long-term senior unsecured debt rating as determined by S&P Global Ratings, Moody’s Ratings and Fitch Ratings. In connection with our entry into the Agreement, we terminated our $3.2 billion credit agreement dated January 22, 2020.
Interest for borrowings under the Revolving Credit Facility is charged at a rate equal to either 0.00% to 0.45% above the base rate or 0.90% to 1.45% above the benchmark rate, as applicable, based on our credit ratings. The base rate represents the greatest of: (i) Citibank, N.A.’s prime rate, (ii) 0.50% above the federal funds rate, and (iii) 1.0% above one-month Term SOFR, but not less than zero. The benchmark rate represents Term SOFR, EURIBOR, TIBOR or Daily Simple SOFR, as applicable, for the applicable interest period, but not less than zero. Fees include a facility fee based on the revolving credit commitments of the lenders and a letter of credit fee based on the amount of outstanding letters of credit.
(2) As of August 31, 2025, we had $4.0 billion in available unused borrowing capacity under our existing revolving credit facilities, of which $3.2 billion was available under the Revolving Credit Facility. The Revolving 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 Consolidated Statements of Cash Flows, and have been excluded from the table above.
In the ordinary course of business, we have letters of credit and surety bonds with banks and insurance companies outstanding of $92 million as of August 31, 2025. Unused letters of credit were $67 million as of August 31, 2025. Letters of credit and surety bonds are generally available for draw down in the event we do not perform.
We have a shelf registration statement with the SEC registering the potential sale of an indeterminate amount of debt and equity securities in the future to augment our liquidity and capital resources.
Our Senior Notes and our credit facilities contain various financial and nonfinancial covenants. 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 August 31, 2025, and 2024, we were in compliance with our debt covenants. Refer to Note 7 – “Notes Payable and Long-Term Debt” to the Consolidated Financial Statements for further details.
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Global Asset-Backed Securitization Program
Certain Jabil entities participating in the global asset-backed securitization program continuously sell designated pools of trade accounts receivable to a special purpose entity, which in turn sells certain of the receivables at a discount to conduits administered by an unaffiliated financial institution on a monthly basis. 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. As these accounts receivable are sold without recourse, we do not retain the associated risks following the transfer of such accounts receivable to the respective financial institutions.
We continue servicing the receivables sold and in exchange receive an immaterial servicing fee under the global asset-backed securitization program. In conjunction with our global asset-backed securitization program, we are required to remit amounts collected as a servicer under the global asset-backed securitization program to a special purpose entity. We do not record a servicing asset or liability on the 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 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 August 31, 2025.
Effective January 23, 2025, the terms of the global asset-backed securitization program were amended to extend the termination date from January 2025 to January 2028. The maximum amount of net cash proceeds available at any one time is $700 million.
The outstanding balance of receivables sold and not yet collected on accounts where we have continuing involvement was approximately $372 million and $338 million as of August 31, 2025, and 2024, respectively. During the fiscal year ended August 31, 2025, we sold $4.2 billion of trade accounts receivable, and we received cash proceeds of $4.1 billion. The receivables that were sold were removed from the Consolidated Balance Sheets and the cash received was included as cash provided by operating activities on the Consolidated Statements of Cash Flows.
The global asset-backed securitization program requires compliance with several covenants including compliance with the interest ratio and debt to EBITDA ratio of the Revolving Credit Facility. As of August 31, 2025, we were in compliance with all covenants under our global asset-backed securitization program. Refer to Note 8 – “Asset-Backed Securitization Program” to the Consolidated Financial Statements for further details on the program.
Trade Accounts Receivable Sale Programs
Following is a summary of the uncommitted trade accounts receivable sale programs with unaffiliated financial institutions. Under the programs we may elect to sell receivables, and the unaffiliated financial institutions may elect to purchase, at a discount, on an ongoing basis (in millions):
Program
Maximum
Amount (1)(2)
CNY
(1) Maximum amount of trade accounts receivable that may be sold under a facility at any one time.
(2) 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.
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In conjunction with our trade accounts receivable sale programs, we are required to remit amounts collected as a servicer under the trade accounts receivable sale programs to the unaffiliated financial institutions that purchased the receivables. The outstanding balance of receivables sold and not yet collected on accounts where we have continuing involvement was approximately $927 million and $367 million as of August 31, 2025, and 2024, respectively. During the fiscal year ended August 31, 2025, we sold $11.4 billion of trade accounts receivable under these programs and we received cash proceeds of $11.3 billion. The receivables that were sold were removed from the Consolidated Balance Sheets and the cash received was included as cash provided by operating activities on the Consolidated Statements of Cash Flows.
Cash Flows
The following table sets forth selected consolidated cash flow information (in millions):
Fiscal Year Ended August 31,
Net cash provided by operating activities
Net cash (used in) provided by investing activities
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Operating Activities
Net cash provided by operating activities during the fiscal year ended August 31, 2025, was primarily due to non-cash expenses and net income 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, an increase in inventories, and an increase in prepaid expenses and other current assets. 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. The increase in inventories is primarily to support expected sales levels in the first quarter of fiscal year 2026. The increase in prepaid expenses and other current assets is primarily driven by the timing of purchases of customer-controlled consignment components.
Investing Activities
Net cash used in investing activities during the fiscal year ended August 31, 2025, consisted primarily of the acquisition of Pharmaceutics International, Inc., Mikros Technologies, LLC and certain other third-party assets, capital expenditures principally to support ongoing business in the Regulated Industries, Intelligent Infrastructure, and Connected Living and Digital Commerce segments and the disposition of the Italy operations, partially offset by proceeds and advances from the sale of property, plant and equipment and a working capital adjustment related to the divestiture of the Mobility Business.
Financing Activities
Net cash used in financing activities during the fiscal year ended August 31, 2025, 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 exercise of stock options and issuance of common stock under employee stock purchase plan.
Capital Expenditures
For Fiscal Year 2026, we anticipate our net capital expenditures to be in the range of 1.5% to 2.0% of net revenue. In general, our capital expenditures support ongoing maintenance in our Regulated Industries, Intelligent Infrastructure, and Connected Living and Digital Commerce segments and investments in capabilities and targeted end markets. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative, and regulatory factors, among other things.
Dividends and Share Repurchases
Following is a summary of the dividends and share repurchases for the fiscal years indicated below (in millions):
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Dividends Paid (1)
Share Repurchases (2)
Total
Fiscal years 2016 – 2022
Fiscal year 2023
Fiscal year 2024
Fiscal year 2025
Total
(1) The difference between dividends declared and dividends paid is due to dividend equivalents for unvested restricted stock units that are paid at the time the awards vest.
(2) Excludes commissions and excise taxes.
We currently expect to continue to declare and pay regular quarterly dividends in amounts similar to our past declarations. However, the declaration and payment of future dividends are discretionary and will be subject to determination by our Board of Directors each quarter following its review of our financial performance and global economic conditions.
We repurchase shares of our common stock under share repurchase programs authorized by our Board of Directors. The following Board approved share repurchase programs were executed through a combination of open market transactions and accelerated share repurchase (“ASR”) agreements (in millions):
Board Approval Date
Amount Authorized
Shares Repurchased
Total Cash Utilized
Remaining Authorization
Authorization Completion Date
2022 Share Repurchase Program
2023 Share Repurchase Program
Amended 2023 Share Repurchase Program
2025 Share Repurchase Program
2026 Share Repurchase Program (2)
(1) 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.
(2) As of October 10, 2025, 0.6 million shares had been repurchased for $135 million and $865 million remains available under the 2026 Share Repurchase Program.
Under ASR agreements, we make payments to the participating financial institutions and receive an initial delivery of shares of common stock. The final number of shares delivered upon settlement of the ASR agreements is determined based on a discount to the volume weighted average price of our common stock during the term of the agreements. At the time the shares are received by the Company, the initial delivery and the final receipt of shares upon settlement of the ASR agreements results in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted earnings per share.
The terms of ASR agreements, structured as outlined above, were as follows (in millions, except average price):
Agreement Execution Date
Agreement Settlement Date
Agreement Amount
Initial Shares Delivered
Additional Shares Delivered
Total Shares Delivered
Average Price Paid Per Share
(1) In September 2024, as part of the amended 2023 Share Repurchase Program, an ASR transaction was completed, and 1.0 million additional shares were delivered under the Q4 FY 2024 ASR agreements.
(2) In December 2024, as part of the 2025 Share Repurchase Program, we entered into ASR agreements to repurchase $310 million, excluding excise tax, of our common stock. Under the ASR agreements, we made payments of $310 million to participating financial institutions and received an initial delivery of shares of common stock. In March 2025, the ASR transaction was completed, and 0.2 million additional shares were delivered under the Q2 FY 2025 ASR agreements.
(3) In March 2025, as part of the 2025 Share Repurchase Program, we entered into ASR agreements to repurchase $309 million, excluding excise tax, of our common stock. Under the ASR agreements, we made payments of $309 million to
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participating financial institutions and received an initial delivery of shares of common stock. In July 2025, the ASR transaction was completed and no additional shares were delivered under the Q3 FY 2025 ASR agreements.
In addition, we repurchased shares of our common stock through the open market as follows (in millions):
Fiscal Year Ended August 31,
Shares
Cost
Shares
Cost
Shares
Cost
Open market share repurchases (1)
(1) As of October 10, 2025, 0.6 million shares had been repurchased for $135 million through open market transactions under the 2026 Share Repurchase Program.
Warrants
On December 27, 2024, we issued a warrant (the “Warrant”) to Amazon.com NV Investment Holdings LLC (“Warrantholder”) to acquire up to 1,158,539 of our ordinary shares (“Warrant Shares”) at an initial exercise price of $137.7671 per share, which is the preceding 30 trading day VWAP. The Warrant allows for cashless exercise and expires December 27, 2031. The Warrant Shares are subject to vesting for payments for purchased products and services over the seven-year Warrant term, with 59,582 of the Warrant Shares having vested upon issuance.
Upon the consummation of an acquisition transaction (as defined in the Warrant), subject to certain exceptions, the unvested portion of the Warrant will vest in full. So long as the Warrant is unexercised, the Warrant does not entitle the Warrantholder to any voting rights or any other common stockholder rights. The exercise price and the number of Warrant Shares are subject to customary anti-dilution adjustments.
The estimated fair value of the Warrant was determined as of the issuance date, using the Black-Scholes option pricing model. The following assumptions were used in the model:
December 27, 2024
Stock price
Exercise price
Expected life
7.0 years
Expected volatility (1)
Risk-free interest rate
(1) The expected volatility was estimated using the historical volatility derived from the Company’s common stock.
The following table summarizes the Warrant activity for the fiscal year ended August 31, 2025:
Warrant Shares
Outstanding as of August 31, 2024
Changes during the period
Shares granted
Shares vested
Outstanding as of August 31, 2025
Exercisable as of August 31, 2025
Contractual Obligations
Our contractual obligations as of August 31, 2025, are summarized below. As disclosed below, while we have certain non-cancelable purchase order obligations for property, plant and equipment, we generally do not enter into non-cancelable purchase orders for materials until we receive a corresponding purchase commitment from our customer. Non-cancelable purchase orders do not typically extend beyond the normal lead time of several weeks, at most. Purchase orders beyond this time frame are typically cancellable.
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Payments due by period (in millions)
Total
Less than 1
year
1-3 years
3-5 years
After 5 years
Notes payable and long-term debt
Future interest on notes payable and long-term debt (1)
Operating lease obligations (2)
Finance lease obligations (2)(3)(4)
Non-cancelable purchase order obligations (5)
Pension and postretirement contributions and payments (6)
Total contractual obligations (7)
(1) Consists of interest on notes payable and long-term debt outstanding as of August 31, 2025.
(2) Excludes $176 million of payments related to leases signed but not yet commenced. Additionally, certain leases signed but not yet commenced contain residual value guarantees and purchase options not deemed probable.
(3) Includes $144 million of payments related to a lease with a variable interest entity (“VIE”), for which the Company is not the primary beneficiary. This is also the Company’s maximum exposure to loss related to the VIE.
(4) Excludes $280 million of residual value guarantees that could potentially come due in future periods. The Company does not believe it is probable that any amounts will be owed under these guarantees. Therefore, no amounts related to the residual value guarantees are included in the lease payments used to measure the right-of-use assets and lease liabilities.
(5) Consists of purchase commitments entered into as of August 31, 2025, primarily for property, plant and equipment and software pursuant to legally enforceable and binding agreements.
(6) Includes the estimated company contributions to funded pension plans during fiscal year 2026 and the expected benefit payments for unfunded pension and postretirement plans from fiscal years 2026 through 2035. These future payments are not recorded on the Consolidated Balance Sheets but will be recorded as incurred.
(7) As of August 31, 2025, we have $109 million recorded as a long-term liability for uncertain tax positions. In addition, we agreed to indemnify BYDE from certain liabilities that may arise post-close that relate to periods prior to the Closing Date. We are not able to reasonably estimate the timing of payments, or the amount by which these liabilities will increase or decrease over time, and accordingly, they have been excluded from the above table.
