ANALOG DEVICES INC

Previous wording

The following discussion includes results of operations and financial condition for the fiscal year ended November 2, 2024 (fiscal 2024) and the fiscal year ended October 28, 2023 (fiscal 2023) and year-over-year comparisons between fiscal 2024 and fiscal 2023. For discussion on results of operations and financial condition for fiscal 2023 and the fiscal year ended October 29, 2022 (fiscal 2022) and year-over-year comparisons between fiscal 2023 and fiscal 2022, please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for fiscal 2023 filed with the Securities and Exchange Commission on November 21, 2023. Our fiscal year is the 52-week or 53-week period ending on the Saturday closest to the last day in October. Fiscal 2024 was a 53-week fiscal period, while fiscal 2023 was a 52-week fiscal period. The additional week in fiscal 2024 is included in the first quarter ended February 3, 2024. Therefore, fiscal 2024 includes an additional week of operations as compared to fiscal 2023.

Current wording

The following discussion includes results of operations and financial condition for the fiscal year ended November 1, 2025 (fiscal 2025) and the fiscal year ended November 2, 2024 (fiscal 2024) and year-over-year comparisons between fiscal 2025 and fiscal 2024. For discussion on results of operations and financial condition for fiscal 2024 and the fiscal year ended October 28, 2023 (fiscal 2023) and year-over-year comparisons between fiscal 2024 and fiscal 2023, please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for fiscal 2024 filed with the Securities and Exchange Commission on November 26, 2024. Our fiscal year is the 52-week or 53-week period ending on the Saturday closest to the last day in October. Fiscal 2025 was a 52-week fiscal period, while fiscal 2024 was a 53-week fiscal period. The additional week in fiscal 2024 was included in the first quarter ended February 3, 2024. Therefore, fiscal 2025 includes one less week of operations as compared to fiscal 2024.

Previous wording

As indicated in the table above, the percentage of total revenue sold via each channel has remained relatively consistent in the periods presented, but can fluctuate from time to time based on end market revenue trends. As a percentage of total revenue, the decrease in the distributor channel is primarily due to the decrease in revenue in our Industrial end market.

Current wording

As indicated in the table above, the percentage of total revenue sold via each channel has remained relatively consistent in the periods presented but can fluctuate from time to time based on end market revenue trends. As a percentage of total revenue, the decrease in the distributor channel is primarily due to the decrease in the percentage of revenue from our Industrial end market.

Previous wording

In all periods presented, the predominant regions comprising “Rest of North and South America” are Canada and Mexico; the predominant regions comprising “Europe” are Germany, Sweden, Israel and the Netherlands; and the predominant regions comprising “Rest of Asia” are Taiwan, Malaysia, South Korea and Singapore.

Current wording

In all periods presented, the predominant regions comprising “Rest of North and South America” are Mexico and Canada; the predominant regions comprising “Europe” are Germany, the Netherlands, France and Israel; and the predominant regions comprising “Rest of Asia” are Taiwan, South Korea, Malaysia and Singapore.

Previous wording

Total revenue decreased in fiscal 2024 as compared to fiscal 2023 in all regions due to weaker macroeconomic conditions as discussed above under the heading Revenue Trends by End Market.

Current wording

Total revenue increased in fiscal 2025 as compared to fiscal 2024 in most regions due to broad-based demand increases as discussed above under the heading Revenue Trends by End Market.

Previous wording

Gross margin percentage in fiscal 2024 decreased by 690 basis points compared to fiscal 2023, primarily due to lower utilization of our factories due to decreased customer demand and unfavorable product mix.

Current wording

Gross margin percentage in fiscal 2025 increased by 440 basis points compared to fiscal 2024, primarily due to higher utilization of our factories due to increased customer demand as well as a decrease in amortization expense related to acquired intangible assets.

Previous wording

R&D expenses decreased in fiscal 2024 as compared to fiscal 2023 primarily as a result of lower R&D employee related variable compensation expenses, partially offset by the impact of an additional week of operations in fiscal 2024 as compared to fiscal 2023.

Current wording

R&D expenses increased in fiscal 2025 as compared to fiscal 2024, primarily as a result of higher R&D employee related variable compensation expenses and higher salary and benefit expenses, partially offset by the impact of an additional week of operations in fiscal 2024 as compared to fiscal 2025.

Previous wording

SMG&A expenses decreased in fiscal 2024 as compared to fiscal 2023, primarily as a result of lower variable compensation expenses, SMG&A employee related salary and benefit expenses and discretionary spending. The decrease was partially offset by an additional week of operations in fiscal 2024 as compared to fiscal 2023.

Current wording

SMG&A expenses increased in fiscal 2025 as compared to fiscal 2024, primarily as a result of higher SMG&A employee related variable compensation expenses and salary and benefit expenses, partially offset by an additional week of operations in fiscal 2024 as compared to fiscal 2025.

Previous wording

Amortization expenses decreased in fiscal 2024 as compared to fiscal 2023, primarily as a result of a portion of our acquired intangible assets becoming fully amortized during fiscal 2023.

Current wording

Amortization expenses decreased in fiscal 2025 as compared to fiscal 2024, primarily as a result of a portion of our acquired intangible assets becoming fully amortized.

Previous wording

Special charges, net decreased in fiscal 2024 as compared to fiscal 2023, primarily due to decreased charges related to our Q4 2023 Plan. See Note 5, Special Charges, Net, of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for more information.

Current wording

Special charges, net increased in fiscal 2025 as compared to fiscal 2024, primarily due to increased charges related to our Global Repositioning Actions. See Note 5, Special Charges, Net, of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for more information.

Previous wording

The year-over-year increase in nonoperating expense in fiscal 2024 as compared to fiscal 2023 was primarily the result of higher interest expense related to our debt obligations and lower net gains from other investments, partially offset by higher interest income.

Current wording

The year-over-year decrease in nonoperating expense in fiscal 2025 as compared to fiscal 2024 was primarily the result of higher interest income from higher cash, cash equivalents and short-term investments balances during fiscal 2025.

Previous wording

Our effective tax rates for fiscal 2024 and fiscal 2023 were below the U.S. statutory rate of 21% due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income. For fiscal 2024 and fiscal 2023 our pretax income was primarily generated in Ireland at a tax rate of 12.5%. Our effective tax rate for fiscal 2023 was also impacted by a discrete income tax benefit recorded of $81.7 million resulting from the approval granted by the Joint Committee on Taxation of our federal corporate income tax relief claim which reduced the amount of transition tax owed under the Tax Cuts and Jobs Act of 2017.

Current wording

Our effective tax rates for fiscal 2025 and fiscal 2024 were below the U.S. statutory rate of 21% due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income. For fiscal 2025 and fiscal 2024 our pretax income was primarily generated in Ireland at a tax rate of 12.5%. Our effective tax rate for fiscal 2025 was impacted by a net deferred tax expense of $153.8 million related to the remeasurement of our Global Intangible Low-Taxed Income related deferred tax assets and liabilities attributable to the passage of the One Big Beautiful Bill Act.

Previous wording

See Note 12, Income Taxes, of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further discussion.

Current wording

See Note 10, Income Taxes, of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.

Previous wording

The decrease in net income in fiscal 2024 as compared to fiscal 2023 was a result of a $1,790.3 million decrease in operating income and a $40.3 million increase in nonoperating expense, partially offset by a $151.4 million decrease in provision for income taxes.

Current wording

The increase in net income in fiscal 2025 as compared to fiscal 2024 was a result of a $899.7 million increase in operating income and a $35.1 million decrease in nonoperating expense, partially offset by a $302.7 million increase in provision for income taxes.

Previous wording

At November 2, 2024, our principal source of liquidity was $2.4 billion of cash, cash equivalents and short-term investments, of which approximately $1.3 billion was held in the United States, with the balance held outside the United States in various foreign subsidiaries. We manage our worldwide cash requirements by, among other things, reviewing available funds held by our foreign subsidiaries and the cost effectiveness by which those funds can be accessed in the United States. We do not expect current regulatory restrictions or taxes on repatriation to have a material adverse effect on our overall liquidity, financial condition or results of operations. Our cash, cash equivalents and short-term investments consist of highly liquid investments, including money market funds and corporate and bank obligations. We maintain these balances with counterparties with high credit ratings, and continually monitor the amount of credit exposure to any one issuer and diversify our investments in order to minimize our credit risk.

Current wording

At November 1, 2025, our principal source of liquidity was $3.7 billion of cash, cash equivalents and short-term investments, of which approximately $2.4 billion was held in the United States, with the balance held outside the United States in various foreign subsidiaries. We manage our worldwide cash requirements by, among other things, reviewing available funds held by our foreign subsidiaries and the cost effectiveness by which those funds can be accessed in the United States. We do not expect current regulatory restrictions or taxes on repatriation to have a material adverse effect on our overall liquidity, financial condition or results of operations. Our cash, cash equivalents and short-term investments consist of highly liquid investments, including money market funds and corporate and bank obligations. We maintain these balances with counterparties with high credit ratings and continually monitor the amount of credit exposure to any one issuer and diversify our investments in order to minimize our credit risk.

Previous wording

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities. The decrease in cash provided by operating activities during fiscal 2024 as compared to fiscal 2023 was primarily a result of lower net income adjusted for noncash items partially offset by changes in working capital.

Current wording

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities. The increase in cash provided by operating activities during fiscal 2025 as compared to fiscal 2024 was primarily a result of higher net income adjusted for noncash items and changes in working capital.

Previous wording

Investing cash flows generally consist of capital expenditures and cash used for acquisitions. The decrease in cash used for investing activities during fiscal 2024 as compared to fiscal 2023 was primarily the result of a decrease in cash used for capital expenditures, partially offset by the net impact of purchases and maturities of short-term investments during fiscal 2024.

Current wording

Investing cash flows generally consist of purchases of property, plant and equipment, available-for-sale investments and acquisitions of other businesses. The change in cash used for investing activities during fiscal 2025 as compared to fiscal 2024 was primarily the result of the net impact of purchases and maturities of available-for-sale investments, partially offset by a decrease in cash used for capital expenditures.

Previous wording

Financing cash flows generally consist of payments of dividends to shareholders, repurchases of common stock, issuance and repayment of debt and proceeds from the sale of shares of common stock pursuant to employee equity incentive plans. The decrease in cash used for financing activities during fiscal 2024 as compared to fiscal 2023 was primarily the result of lower common stock repurchases.

Current wording

Financing cash flows generally consist of payments of dividends to shareholders, repurchases of common stock, issuance and repayment of debt and proceeds from the sale of shares of common stock pursuant to employee equity incentive plans. The increase in cash used for financing activities during fiscal 2025 as compared to fiscal 2024 was primarily the result of increased common stock repurchases and dividend payments to shareholders, partially offset by the net proceeds from our debt obligations.

Previous wording

(1)We use the average of the current year and prior year ending net accounts receivable and ending inventory balance in our calculation of days sales outstanding and days cost of sales in inventory, respectively. Cost of sales amounts used in the calculation of days cost of sales in inventory include accounting adjustments related to amortization of developed technology intangible assets acquired and depreciation related to the write-up of fixed assets to fair value as a result of the acquisition of Maxim.

Current wording

(1)We use the average of the current year and prior year ending net accounts receivable and ending inventory balance in our calculation of days sales outstanding and days cost of sales in inventory, respectively.

Previous wording

The decrease in accounts receivable for fiscal 2024 compared to fiscal 2023 was primarily the result of variations in the timing of collections and billings and decreased revenue levels in the fourth quarter of fiscal 2024 as compared to the fourth quarter of fiscal 2023.

Current wording

The increase in accounts receivable for fiscal 2025 compared to fiscal 2024 was primarily the result of variations in the timing of collections and billings and increased revenue levels in the fourth quarter of fiscal 2025 as compared to the fourth quarter of fiscal 2024.

Previous wording

Inventory decreased in fiscal 2024 as compared to fiscal 2023, primarily as a result of our efforts to balance manufacturing production, demand and inventory levels. Our inventory levels are impacted by our need to support forecasted sales demand and variations between those forecasts and actual demand.

Current wording

Inventory increased in fiscal 2025 as compared to fiscal 2024, primarily as a result of our efforts to balance manufacturing production, demand and inventory levels. Our inventory levels are impacted by our need to support forecasted sales demand and variations between those forecasts and actual demand.

Previous wording

Current liabilities decreased to $3.0 billion at November 2, 2024 from $3.2 billion recorded at the end of fiscal 2023, primarily due to decreases in accrued liabilities and current debt, partially offset by increases in income taxes payable.

Current wording

Current liabilities increased to $3.2 billion at November 1, 2025 from $3.0 billion recorded at the end of fiscal 2024, primarily due to increases in accrued liabilities and income taxes payable, partially offset by a decrease in current debt.

Previous wording

Our Third Amended and Restated Revolving Credit Agreement, dated as of June 23, 2021, with Bank of America N.A. as administrative agent and the other banks identified therein as lenders, which was subsequently amended on December 20, 2022 and July 24, 2023 (as amended, the Revolving Credit Agreement) provides for a five year unsecured revolving credit facility in an aggregate principal amount not to exceed $2.5 billion (subject to certain terms and conditions).

Current wording

Our Fourth Amended and Restated Revolving Credit Agreement, dated as of April 11, 2025, with Bank of America N.A. as administrative agent and the other banks identified therein as lenders (the Revolving Credit Agreement) provides for a five year unsecured revolving credit facility in an aggregate principal amount not to exceed $3.0 billion (subject to certain terms and conditions).

Previous wording

We may borrow under this revolving credit facility in the future and use the proceeds for repayment of existing indebtedness, stock repurchases, acquisitions, capital expenditures, working capital and other lawful corporate purposes. The terms of the Revolving Credit Agreement impose restrictions on our ability to undertake certain transactions, to create certain liens on assets and to incur certain subsidiary indebtedness. In addition, the Revolving Credit Agreement contains a consolidated leverage ratio covenant of total consolidated funded debt to consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) of not greater than 3.5 to 1.0. As of November 2, 2024, we were in compliance with these covenants. See Note 13, Revolving Credit Facility, of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further information on our revolving credit facility.

Current wording

We may borrow under the Revolving Credit Agreement in the future and use the proceeds for repayment of existing indebtedness, stock repurchases, acquisitions, capital expenditures, working capital and other lawful corporate purposes. The terms of the Revolving Credit Agreement impose restrictions on our ability to undertake certain transactions, to create certain liens on assets and to incur certain subsidiary indebtedness. In addition, the Revolving Credit Agreement contains an interest coverage covenant which requires the ratio of consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) to consolidated interest charges to be greater than 3.0 to 1.0. As of November 1, 2025, we were in compliance with these covenants. See Note 11, Revolving Credit Facility, of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K for further information on our revolving credit facility.

Previous wording

As of November 2, 2024, we had approximately $7.0 billion of carrying value outstanding on our senior notes. The difference in the carrying value of the debt and the principal is due to the unamortized discount and issuance fees and other adjustments on these instruments. The indentures governing certain of our debt instruments contain covenants that may limit our ability to: incur, create, assume or guarantee any debt or borrowed money secured by a lien upon a principal property; enter into sale and lease-back transactions with respect to a principal property; and consolidate with or merge into, or transfer or lease all or substantially all of our assets to, any other party. As of November 2, 2024, we were compliant with these covenants. See Note 14, Debtof the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further information on our outstanding debt.

Current wording

As of November 1, 2025, we had approximately $8.1 billion of carrying value outstanding on our senior notes. The difference in the carrying value of the debt and the principal is due to the unamortized discount and issuance fees and other adjustments on these instruments. The indentures governing certain of our debt instruments contain covenants that may limit our ability to: incur, create, assume or guarantee any debt or borrowed money secured by a lien upon a principal property; enter into sale and lease-back transactions with respect to a principal property; and consolidate with or merge into, or transfer or lease all or substantially all of our assets to, any other party. As of November 1, 2025, we were compliant with these covenants. See Note 12, Debtof the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K for further information on our outstanding debt.

Previous wording

Under our commercial paper program, we may issue short-term, unsecured commercial paper notes in amounts up to a maximum aggregate face amount of $2.5 billion outstanding at any time, with maturities of up to 397 days from the date of issuance. As of November 2, 2024, we had $547.7 million of outstanding borrowings under the commercial paper program recorded in the Consolidated Balance Sheet. We intend to use the net proceeds of the commercial paper program for general corporate purposes, including without limitation, repayment of indebtedness, stock repurchases, acquisitions, capital expenditures and working capital.

Current wording

Under our commercial paper program, we may issue short-term, unsecured commercial paper notes in amounts up to a maximum aggregate face amount of $3.0 billion outstanding at any time, with maturities of up to 397 days from the date of issuance. As of November 1, 2025, we had $446.6 million of outstanding borrowings under the commercial paper program recorded in the Consolidated Balance Sheet. We intend to use the net proceeds of the commercial paper program for general corporate purposes, including without limitation, repayment of indebtedness, stock repurchases, acquisitions, capital expenditures and working capital.

Previous wording

As of November 2, 2024, $1.7 billion remained available for repurchase under the current authorized program. The repurchased shares are held as authorized but unissued shares of common stock. Future repurchases of common stock will be dependent upon our financial position, results of operations, outlook, liquidity and other factors we deem relevant.

Current wording

As of November 1, 2025, our Board of Directors had authorized us to repurchase $26.7 billion of our common stock under our common stock repurchase program and $9.7 billion remained available for repurchases under the current authorized program. Repurchased shares are held as authorized but unissued shares of common stock. Unless terminated earlier by resolution of our Board of Directors, the repurchase program will expire when the full dollar amount of the authorization has been used to repurchase shares under the program. Future repurchases of common stock will be dependent upon our financial position, results of operations, outlook, liquidity and other factors we deem relevant.

Previous wording

Net additions to property, plant and equipment were $730.5 million in fiscal 2024 as we invested to enhance our global resiliency and continue to diversify our global manufacturing footprint. We expect capital expenditures for fiscal 2025 to be between approximately 4% and 6% of fiscal 2025 revenue. These capital expenditures will be funded with a combination of cash on hand and cash expected to be generated from future operations, together with existing and anticipated available short- and long-term financing.

Current wording

Net additions to property, plant and equipment were $533.6 million in fiscal 2025. We expect capital expenditures for fiscal 2026 to be between approximately 4% and 6% of fiscal 2026 revenue. These capital expenditures will be funded with a combination of cash on hand and cash expected to be generated from future operations, together with existing and anticipated available short- and long-term financing.

Previous wording

On November 25, 2024, our Board of Directors declared a cash dividend of $0.92 per outstanding share of common stock. The dividend will be paid on December 20, 2024 to all shareholders of record at the close of business on December 9, 2024 and is expected to total approximately $456.6 million. We currently expect quarterly dividends to continue in future periods, although they remain subject to determination and declaration by our Board of Directors. The payment of future dividends, if any, will be based on several factors, including our financial performance, outlook and liquidity.

Current wording

On November 24, 2025, our Board of Directors declared a cash dividend of $0.99 per outstanding share of common stock. The dividend will be paid on December 22, 2025 to all shareholders of record at the close of business on December 8, 2025 and is expected to total approximately $484.8 million. We currently expect quarterly dividends to continue in future periods, although they remain subject to determination and declaration by our Board of Directors. The payment of future dividends, if any, will be based on several factors, including our financial performance, outlook and liquidity.

Previous wording

As of November 2, 2024, our total liabilities associated with uncertain tax positions was $185.8 million, which are included in non-current income taxes payable in our Consolidated Balance Sheets contained in Item 8 of this Annual Report on Form 10-K. Due to the complexity associated with our tax uncertainties, we cannot make a reasonably reliable estimate of the period in which we expect to settle the non-current liabilities associated with these uncertain tax positions. Therefore, we have not included these uncertain tax positions in the above contractual obligations table.

Current wording

As of November 1, 2025, our total liabilities associated with uncertain tax positions was $199.7 million, which are included in non-current income taxes payable in our Consolidated Balance Sheets contained in Part II, Item 8 of this Annual Report on Form 10-K. Due to the complexity associated with our tax uncertainties, we cannot make a reasonably reliable estimate of the period in which we expect to settle the non-current liabilities associated with these uncertain tax positions. Therefore, we have not included these uncertain tax positions in the above contractual obligations table.

Previous wording

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) and are adopted by us as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards will not have a material impact on our future financial condition and results of operations. See Note 2s, New Accounting Pronouncements, of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for a description of recently issued and adopted accounting pronouncements, including the dates of adoption and impact on our financial condition and results of operations.

Current wording

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) and are adopted by us as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards will not have a material impact on our future financial condition and results of operations. See Note 2s, New Accounting Pronouncements, of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K for a description of recently issued and adopted accounting pronouncements, including the dates of adoption and impact on our financial condition and results of operations.

Previous wording

Goodwill is subject to impairment tests annually or more frequently if events or changes in circumstances suggest that the carrying value of goodwill may not be recoverable, utilizing either the qualitative or quantitative method. We test goodwill for impairment at the reporting unit level, which we determined is consistent with our identified operating segments, on an annual basis on the first day of the fourth quarter (on or about August 4 th) or more frequently if we believe indicators of impairment exist or we reorganize our operating segments or reporting units.

Current wording

We evaluate goodwill for impairment annually, as well as whenever events or changes in circumstances suggest that the carrying value of goodwill may not be recoverable, utilizing either the qualitative or quantitative method. We have determined that the business operates as a single operating segment and has a single reporting unit for the purpose of goodwill impairment testing. We test goodwill on an annual basis on the first day of the fourth quarter (August 3, 2025 in fiscal 2025) or more frequently if indicators of impairment exist or we reorganize our business.

Previous wording

–the amount by which the fair values of each reporting unit exceeded their carrying values as of the date of the most recent quantitative impairment analysis, which indicated there would need to be substantial negative developments in the markets in which these reporting units operate in order for there to be potential impairment;

Current wording

–the amount by which the fair value of our reporting unit exceeded its carrying value as of the date of the most recent quantitative impairment analysis, which indicated there would need to be substantial negative developments in the markets in which our reporting unit operates in order for there to be potential impairment;

Previous wording

–the carrying values of these reporting units as of the assessment date compared to their previously calculated fair values as of the date of the most recent quantitative impairment analysis;

Current wording

–the carrying value of our reporting unit as of the assessment date compared to the previously calculated fair value as of the date of the most recent quantitative impairment analysis;

Previous wording

–changes in the value of major U.S. stock indices that could suggest declines in overall market stability that could impact the valuation of our reporting units;

Current wording

–changes in the value of major U.S. stock indices that could suggest declines in overall market stability that could impact the valuation of our reporting unit;

Previous wording

–changes in our market capitalization and overall enterprise valuation to determine if there were any significant decreases that could be an indication that the valuation of our reporting units had significantly decreased; and

Current wording

–changes in our market capitalization and overall enterprise valuation to determine if there were any significant decreases that could be an indication that the valuation of our reporting unit had significantly decreased; and

Previous wording

–whether there had been any significant increases to the weighted-average cost of capital rates for each reporting unit, which could materially lower our prior valuation conclusions under a discounted cash flow approach.

Current wording

–whether there had been any significant increases to the weighted-average cost of capital rates used, which could materially lower our prior valuation conclusions under a discounted cash flow approach.

Previous wording

If we elect not to use this option, or we determine that it is more likely than not that the fair value of a reporting unit is less than its net book value, then we perform the quantitative goodwill impairment test. The quantitative goodwill impairment test requires an entity to compare the fair value of a reporting unit with its carrying amount. If fair value is determined to be less than carrying value, an impairment loss is recognized for the amount of the carrying value that exceeds the amount of the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. Additionally, we consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. We determine the fair value of our reporting units using a weighting of the income and market approaches. Under the income approach, we use a discounted cash flow methodology which requires management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the market approach, we use the guideline public company method. Under this method we utilize information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation multiples that are applied to the operating performance of the reporting unit being tested, in order to obtain their respective fair values. In order to assess the reasonableness of the calculated reporting unit fair values, we reconcile the aggregate fair values of our reporting units determined, as described above, to our total company market capitalization, allowing for a reasonable control premium.

Current wording

If we elect not to use this option, or we determine that it is more likely than not that the fair value of our reporting unit is less than its net book value, then we perform the quantitative goodwill impairment test. The quantitative goodwill impairment test requires us to compare the fair value of our reporting unit with its carrying amount. If fair value is determined to be less than carrying value, an impairment loss is recognized for the amount of the carrying value that exceeds the amount of the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. Additionally, we consider income tax effects from any tax deductible goodwill on the carrying amount of our reporting unit when measuring the goodwill impairment loss, if applicable. We determine the fair value of our reporting unit using a weighting of the income and market approaches. Under the income approach, we use a discounted cash flow methodology which requires management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the market approach, we use the guideline public company method. Under this method we utilize information from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit, to create valuation multiples that are applied to the operating performance of the reporting unit being tested, in order to obtain the respective fair value. In order to assess the reasonableness of the calculated reporting unit fair value, we reconcile the fair value of our reporting unit determined, as described above, to our total company market capitalization, allowing for a reasonable control premium.

Previous wording

During fiscal 2024 and fiscal 2023, we elected to use the qualitative method of assessing goodwill for all of our reporting units. In all periods presented, we concluded the reporting units’ fair values exceeded their carrying amounts as of the assessment dates and no risk of impairment existed.

Current wording

During fiscal 2025, we used a combination of the quantitative and qualitative methods of assessing goodwill. During fiscal 2024, we used the qualitative method of assessing goodwill. In all periods presented, we concluded the reporting unit fair values exceeded their carrying amounts as of the assessment dates and no risk of impairment existed.

Previous wording

See Note 12, Income Taxes, of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further discussion.

Current wording

See Note 10, Income Taxes, of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.