Sanmina Corp.: Q2 FY2026 earnings call

What management said about Q2 FY2026, from the documents filed with the SEC on 27 April 2026: press release. Guidance figures: 7 new. The quarter’s numbers.

Key takeaways

Results exceeded prior guidance: Management said revenue, non-GAAP operating margin and non-GAAP diluted EPS all exceeded the second-quarter guidance. Second-quarter revenue was $4.01 billion. Source
ZT Systems shipments moved into Q2: ZT Systems revenue exceeded management's expectations. Accelerated compute shipments previously planned for the second half of the fiscal year moved into the second quarter. Source
Non-GAAP diluted EPS was $3.16: Non-GAAP diluted EPS was $3.16, against $2.38 in the first quarter and $1.41 a year earlier. Non-GAAP operating margin was 6.4%, against 6.0% and 5.6% in those periods. Source
$59 million contingent consideration charge: Management said the quarter included a $59 million fair value adjustment to contingent consideration, along with certain employee compensation and professional services tied to ZT. Source
Operating cash flow was $399 million: Operating cash flow was $398.8 million in the quarter, against $156.9 million a year earlier, and $577.5 million for the first half. Source
Free cash flow was $342 million: Free cash flow was $342.1 million, after $56.6 million of net purchases of property, plant and equipment in the quarter. Source
New $600 million buyback authorization: The Board authorized repurchases of up to $600 million of common stock with no expiration date, after the prior program was fully used. Source

“We remain focused on profitable growth, margin expansion, cash generation and shareholder value creation,”
Jure Sola, Chairman and CEO of Sanmina Corporation

Guidance

Area	Period	Figure	Against last quarter
Revenue Source	Third quarter fiscal 2026 (ends June 27, 2026)	$3.2 billion to $3.5 billion	New
Non-GAAP operating margin Source	Third quarter fiscal 2026	6.4% to 6.9%	New
Non-GAAP diluted EPS Source	Third quarter fiscal 2026	$2.55 to $2.85	New
Revenue Source	Fiscal year 2026	$13.7 billion to $14.3 billion	New
Non-GAAP operating margin Source	Fiscal year 2026	6.3% to 6.6%	New
Non-GAAP diluted EPS Source	Fiscal year 2026	$10.75 to $11.35	New
Share repurchase authorization Source	No expiration date	Up to $600 million	New

What changed from last quarter

New guidance: Third-quarter ranges given for the quarter ending June 27, 2026, replacing the second-quarter ranges in the prior release. Source
New: New share repurchase authorization of $600 million with no expiration date. Source
Ended: Prior repurchase program fully used as of March 28, 2026. Source

Results and growth drivers

Results exceeded prior guidance: Management said revenue, non-GAAP operating margin and non-GAAP diluted EPS all exceeded the second-quarter guidance. Second-quarter revenue was $4.01 billion. Source
ZT Systems shipments moved into Q2: ZT Systems revenue exceeded management's expectations. Accelerated compute shipments previously planned for the second half of the fiscal year moved into the second quarter. Source
Core Sanmina grew 7.3%: Management described core Sanmina revenue growth of 7.3% year over year as in line with its expectations. Source
GAAP diluted EPS rose from a year ago: GAAP net income attributable to common shareholders was $93.6 million, or $1.70 per diluted share, against $64.2 million, or $1.16 per diluted share, a year earlier. Source
Non-GAAP diluted EPS was $3.16: Non-GAAP diluted EPS was $3.16, against $2.38 in the first quarter and $1.41 a year earlier. Non-GAAP operating margin was 6.4%, against 6.0% and 5.6% in those periods. Source

Costs and acquisition charges

Acquisition-related expense of $72.6 million: Acquisition, integration and other expense was $72.6 million in the quarter and $115.9 million for the first half. The prior-year quarter had none. Source
$59 million contingent consideration charge: Management said the quarter included a $59 million fair value adjustment to contingent consideration, along with certain employee compensation and professional services tied to ZT. Source
Inventory step-up charge ended: Amortization of the ZT inventory fair value step-up was $49.0 million in the first quarter and nil in the second quarter. Source
Stock compensation expense rose: Stock compensation expense was $24.1 million in the quarter, against $15.8 million a year earlier. Management excludes it from non-GAAP results. Source
GAAP operating margin rose from Q1: GAAP operating margin was 3.9%, against 2.3% in the first quarter and 4.6% a year earlier. GAAP operating income was $157.0 million. Source

“This gives us the capacity to continue returning capital to shareholders while investing in the business and maintaining our leverage within our target range, consistent with our capital allocation framework,”
Jon Faust, Executive Vice President and Chief Financial Officer of Sanmina

Cash flow and working capital

Operating cash flow was $399 million: Operating cash flow was $398.8 million in the quarter, against $156.9 million a year earlier, and $577.5 million for the first half. Source
Free cash flow was $342 million: Free cash flow was $342.1 million, after $56.6 million of net purchases of property, plant and equipment in the quarter. Source
Working capital added to cash: Net change in net working capital contributed $120.2 million to operating cash flow in the quarter, against $44.2 million a year earlier. Source
Receivables and inventories rose: Accounts receivable reached $2.23 billion and inventories $3.03 billion, against $1.40 billion and $1.99 billion at September 27, 2025. Source
Cash balance reached $1.58 billion: Cash and cash equivalents were $1.58 billion at March 28, 2026, against $926.3 million at September 27, 2025. Source

Capital returns and buybacks

New $600 million buyback authorization: The Board authorized repurchases of up to $600 million of common stock with no expiration date, after the prior program was fully used. Source
Quarter buybacks of $160 million: The company repurchased 1.1 million shares for $160 million in the quarter, and $239.2 million in the first half. Source
Tax withholding payments on awards: Payments for tax withholding on stock-based compensation were $22.4 million in the quarter and $56.1 million in the first half. Source

“In addition, core Sanmina grew 7.3% year-over-year, in line with expectations.”
Jure Sola, Chairman and CEO of Sanmina Corporation

Acquisition and balance sheet

ZT cash paid mostly in Q1: Cash paid for business acquisitions, net of cash acquired, totaled $1.36 billion in the first half. The second quarter amount was $1.1 million. Source
Goodwill rose to $358.8 million: Goodwill was $358.8 million at March 28, 2026, against $30.4 million at September 27, 2025. Other assets were $379.1 million, against $108.8 million. Source
Long-term debt rose to $2.0 billion: Long-term debt was $2.00 billion at March 28, 2026, against $283.0 million at September 27, 2025, after $2.2 billion of long-term debt proceeds in the first half. Source

Non-GAAP reporting basis

Exclusions described as non-core: Excluded items include stock compensation, restructuring, acquisition and integration costs, impairments, amortization and other unusual items, net of tax effects. Source
Non-GAAP operating income reconciled: Non-GAAP operating income was $256.8 million, against GAAP operating income of $157.0 million, after $99.8 million of operating income adjustments. Source
Tax effect of adjustments: Adjustments for taxes reduced non-GAAP net income by $19.5 million in the quarter, against $28.2 million in the first quarter. Source

Coming up, as management said on 27 April 2026

Third-quarter period ends June 27: Management gave third-quarter guidance for the quarter ending June 27, 2026. Source

Earlier plans management reported on

Ahead: Management said second-quarter revenue, non-GAAP operating margin and non-GAAP diluted EPS exceeded the guidance it had given. Source
On track: Management said core Sanmina revenue growth was in line with expectations. Source
Not stated: Management said accelerated compute shipments previously expected in the second half moved into the second quarter. Source

Other quarters

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.

As filed with the SEC

Open the filing on EDGAR

FINANCIAL NEWS

Sanmina Reports Second Quarter Fiscal 2026 Financial Results

Board of Directors Authorize $600 Million Share Repurchase Program

San Jose, CA - April 27, 2026. Sanmina Corporation (“Sanmina” or the “Company”) (NASDAQ: SANM), a leading integrated manufacturing solutions company, today reported financial results for the second quarter ended March 28, 2026 and outlook for its third fiscal quarter ending June 27, 2026.

Second Quarter Fiscal 2026 Financial Highlights•Revenue: $4.01 billion•GAAP operating margin: 3.9%•GAAP diluted EPS: $1.70•Non-GAAP operating margin: 6.4%•Non-GAAP diluted EPS: $3.16

Additional Highlights•Cash flow from operations: $399 million •Free cash flow: $342 million •Share repurchases: 1.1 million shares for $160 million •Ending cash and cash equivalents: $1.58 billion

See Schedule 1 below for information regarding the items excluded from and our use of non-GAAP financial measures. A reconciliation of the non-GAAP financial information contained in this release to their most directly comparable GAAP measures is included in the financial statements furnished with this release.

Free cash flow is defined as net cash provided by operating activity adjusted for net purchases of property and equipment. See Condensed Consolidated Cash Flow Statement included in the financial statements furnished with this release.

“We delivered great results for the second quarter. Revenue, non-GAAP operating margin and non-GAAP diluted EPS all exceeded our outlook,” stated Jure Sola, Chairman and CEO of Sanmina Corporation. “ZT Systems revenue significantly exceeded our expectations, driven by strong execution and customer demand, resulting in new accelerated compute shipments previously expected in the second half of the year to shift into the second quarter. In addition, core Sanmina grew 7.3% year-over-year, in line with expectations.”

“Based on our results for the first half of the year and our outlook for the third quarter, we expect to deliver revenue in the range of $13.7 to $14.3 billion for fiscal 2026, and we see strong growth potential ahead. We remain focused on profitable growth, margin expansion, cash generation and shareholder value creation,” Sola concluded.

Third Quarter Fiscal 2026 Outlook

Revenue between $3.2 billion to $3.5 billion
Non-GAAP operating margin between 6.4% to 6.9%*
Non-GAAP diluted earnings per share between $2.55 to $2.85*

Fiscal Year 2026 Outlook

Revenue between $13.7 billion to $14.3 billion
Non-GAAP operating margin between 6.3% to 6.6%*
Non-GAAP diluted earnings per share between $10.75 to $11.35*

*This is a forward-looking non-GAAP financial measure that cannot be reconciled to its equivalent GAAP financial measure without unreasonable effort.

Board of Directors Authorize Share Repurchase Program

Sanmina's Board of Directors has authorized the repurchase of up to $600 million of Sanmina's common stock. The stock repurchase program has no expiration date. The Company exhausted its prior repurchase program as of March 28, 2026.

“Our Board’s new share repurchase authorization reflects our strong balance sheet and free cash flow generation. This gives us the capacity to continue returning capital to shareholders while investing in the business and maintaining our leverage within our target range, consistent with our capital allocation framework," stated Jon Faust, Executive Vice President and Chief Financial Officer of Sanmina.

Safe Harbor Statement

The statements above relating to our financial outlook for the third quarter fiscal 2026 and fiscal year 2026 constitute forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in these statements as a result of a number of factors, including the risk that the integration of and expected benefits from the ZT Systems acquisition may not be realized or may take longer to realize than anticipated; adverse changes in the key markets we target, in particular the cloud and AI infrastructure sectors; the impact of recent or future changes in tariffs and trade policy, which may adversely affect our costs, supply chain, and customer demand; our reliance on a limited number of customers for a substantial portion of our sales; risks arising from our international operations and expansion into new geographic markets; geopolitical uncertainty, including relating to the conflict in the Middle East, and the other risk factors set forth in the Company's annual and quarterly reports filed with the Securities Exchange Commission.

The Company is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements made in this earnings release, the conference call or the Investor Relations section of our website whether as a result of new information, future events or otherwise, unless otherwise required by law.

Company Conference Call Information

Sanmina will hold a conference call to review its financial results for the second quarter and outlook for the third quarter of fiscal 2026 on Monday, April 27, 2026 at 5:00 p.m. ET (2:00 p.m. PT). The access numbers are: domestic 800-836-8184 and international 646-357-8785. The conference call will also be webcast live over the Internet. You can log on to the live webcast at Q2'26 Earnings. Additional information in the form of a slide presentation is available on Sanmina’s website at www.sanmina.com. A replay of the conference call will be available for 48-hours. The access numbers are: domestic 888-660-6345 and international 646-517-4150, access code is 18902#.

About Sanmina

Sanmina Corporation, a Fortune 500 company, is a leading integrated manufacturing solutions provider serving the fastest growing segments of the global Electronics Manufacturing Services (EMS) market. Recognized as a technology leader, Sanmina provides end-to-end manufacturing solutions, delivering superior quality and support to Original Equipment Manufacturers (OEMs) primarily in the industrial and energy, medical, defense and aerospace, automotive and transportation, communications networks, and cloud and AI infrastructure markets. Sanmina has facilities strategically located in key regions throughout the world. More information about the Company is available at www.sanmina.com.

Sanmina Contact

Paige Melching

SVP, Investor Communications

408-964-3610

	March 28, 2026		September 27, 2025
Sanmina Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(GAAP)
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$1,575,517		$926,267
Accounts receivable, net		2,229,744		1,400,129
Contract assets		473,144		425,944
Inventories		3,026,666		1,988,462
Prepaid expenses and other current assets	306,365		124,656
Total current assets	7,611,436		4,865,458
Property, plant and equipment, net		993,331		682,354
Deferred income tax assets		326,415		171,218
Goodwill		358,783		30,386
Other assets	379,124		108,757
Total assets	$9,669,089		$5,858,173
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$2,508,961		$1,578,895
Accrued liabilities		312,473		179,605
Deferred revenue and customer advances		1,231,292		878,474
Accrued payroll and related benefits		217,330		167,541
Short-term debt, including current portion of long-term debt	172,000		17,500
Total current liabilities	4,442,056		2,822,015
Long-term liabilities:
Long-term debt		1,999,762		282,974
Other liabilities	615,462		214,021
Total long-term liabilities	2,615,224		496,995
Stockholders' equity	2,611,809		2,539,163
Total liabilities and stockholders' equity	$9,669,089		$5,858,173

	Three Months Ended				Six Months Ended
	March 28, 2026		March 29, 2025		March 28, 2026		March 29, 2025
Sanmina Corporation
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(GAAP)
(Unaudited)
Net sales	$4,013,271		$1,984,080		$7,202,964		$3,990,428
Cost of sales	3,659,480		1,807,845		6,606,811		3,646,278
Gross profit	353,791		176,235		596,153		344,150
Operating expenses:
Selling, general and administrative	113,549		76,313		228,435		147,158
Research and development	7,991		7,316		16,649		14,340
Acquisition, integration and others	72,584		-		115,947		-
Amortization of intangibles	1,865		-		3,052		-
Restructuring	794		990		1,464		2,426
Total operating expenses	196,783		84,619		365,547		163,924
Operating income	157,008		91,616		230,606		180,226
Interest income	8,433		3,723		16,491		7,119
Interest expense	(32,138)		(4,979)		(56,860)		(9,980)
Other income (expense), net	(2,165)		(1,955)		2,483		(2,684)
Interest and other, net	(25,870)		(3,211)		(37,886)		(5,545)
Income before income taxes	131,138		88,405		192,720		174,681
Provision for income taxes	33,323		17,890		43,150		33,282
Net income before noncontrolling interest	97,815		70,515		149,570		141,399
Less: Net income attributable to noncontrolling interest	4,169		6,307		6,638		12,188
Net income attributable to common shareholders		$93,646		$64,208		$142,932		$129,211
Net income attributable to common shareholders per share:
Basic	$1.72		$1.18		$2.63		$2.38
Diluted	$1.70		$1.16		$2.58		$2.32
Weighted-average shares used in computing per share amounts:
Basic	54,331		54,405		54,245		54,304
Diluted	55,108		55,511		55,313		55,681

		Three Months Ended
		March 28, 2026	December 27, 2025	March 29, 2025
Sanmina Corporation
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share amounts)
(Unaudited)
GAAP Operating income		$157,008	$73,598	$91,616
	GAAP Operating margin	3.9%	2.3%	4.6%
Adjustments:
	Stock compensation expense (1)	24,066	23,620	15,790
	Amortization of inventory fair value adjustment (2)	-	49,000	-
	Amortization of intangible assets (3)	2,332	1,720	-
	Acquisition, integration and others (4)	72,584	43,363	2,091
	Distressed customer charges (5)	-	-	159
	Restructuring	794	670	990
Non-GAAP Operating income		$256,784	$191,971	$110,646
	Non-GAAP Operating margin	6.4%	6.0%	5.6%
GAAP Net income attributable to common shareholders		$93,646	$49,286	$64,208
Adjustments:
	Operating income adjustments (see above)	99,776	118,373	19,030
	Legal (6)	-	(3,745)	-
	Gain on sale of investment (7)	-	(4,710)	-
	Loss on debt extinguishment	-	1,345	-
	Adjustments for taxes (8)	(19,497)	(28,199)	(5,201)
Non-GAAP Net income attributable to common shareholders		$173,925	$132,350	$78,037
GAAP Net income attributable to common shareholders per share:
	Basic	$1.72	$0.91	$1.18
	Diluted	$1.70	$0.89	$1.16
Non-GAAP Net income attributable to common shareholders per share:
	Basic	$3.20	$2.44	$1.43
	Diluted	$3.16	$2.38	$1.41
Weighted-average shares used in computing per share amounts:
	Basic	54,331	54,160	54,405
	Diluted	55,108	55,519	55,511
(1)	Stock compensation expense
	Cost of sales	$5,535	$5,995	$4,931
	Selling, general and administrative	18,127	17,274	10,580
	Research and development	404	351	279
	Total	$24,066	$23,620	$15,790
(2)	Relates to the amortization of the fair value step up on inventory from the ZT acquisition.
(3)	Relates to amortization of intangible assets acquired from the ZT acquisition.
(4)	Q2'26 results include a $59M fair value adjustment to contingent consideration alongside certain employee compensation and professional services related to the ZT acquisition. Q1'26 figures largely reflect bridge loan facility costs and legal fees in connection with the ZT acquisition.
(5)	Relates to accounts receivable and inventory write-downs or recoveries associated with distressed customers.
(6)	Represents expenses, charges and recoveries associated with certain legal matters.
(7)	Relates to gain on sale of equity interest.
(8)	Adjustments for taxes include the tax effects of the various adjustments we exclude from our non-GAAP measures, and adjustments related to deferred tax and discrete tax items.

	Three Months Ended
	March 28, 2026	March 29, 2025	March 28, 2026	March 29, 2025
Sanmina Corporation
Condensed Consolidated Cash Flow
(in thousands)
(GAAP)
(Unaudited)
Net income before noncontrolling interest	$97,815	$70,515	$149,570	$141,399
Depreciation and intangibles amortization	47,085	28,208	86,616	60,053
Amortization of inventory fair value adjustment	-	-	49,000	-
Deferred income taxes	49,628	(802)	46,397	4,534
Change in fair value of contingent consideration	59,000	-	59,000	-
Other, net	25,007	14,723	46,032	30,541
Net change in net working capital	120,223	44,214	140,871	(15,731)
Cash provided by operating activities	398,758	156,858	577,486	220,796
Purchases of investments	-	(14,340)	-	(14,640)
Proceeds from sales of investments	-	49,309	8,710	49,309
Net purchases of property, plant and equipment	(56,621)	(30,647)	(143,390)	(47,568)
Cash paid for businesses acquisition, net of cash acquired	(1,132)	-	(1,356,933)	-
Cash used in investing activities	(57,753)	4,322	(1,491,613)	(12,899)
Proceeds from long-term debt	-	-	2,200,000	-
Repayment of borrowings	-	(4,375)	(301,875)	(8,750)
Repurchases of common stock	(159,450)	(84,340)	(239,244)	(100,453)
Payments for tax withholding on stock-based compensation	(22,360)	(29,312)	(56,075)	(37,655)
Debt issuance costs	-	-	(28,703)	-
Cash provided by (used in) financing activities	(181,810)	(118,027)	1,574,103	(146,858)
Effect of exchange rate changes	(225)	1,165	(412)	(179)
Net change in cash, cash equivalents and restricted cash equivalents	$158,970	$44,318	$659,564	$60,860
Free cash flow:
Cash provided by operating activities	$398,758	$156,858	$577,486	$220,796
Net purchases of property, plant and equipment	(56,621)	(30,647)	(143,390)	(47,568)
	$342,137	$126,211	$434,096	$173,228

Schedule 1

The statements above and financial information provided in this earnings release include non-GAAP measures of operating income, operating margin, net income and earnings per share. Management excludes from these measures stock-based compensation, restructuring, acquisition and integration expenses, impairment charges, amortization charges and other unusual or infrequent items, as adjusted for taxes, as more fully described below.

Management excludes these items principally because such charges or benefits are not directly related to the Company’s ongoing core business operations. We use such non-GAAP measures in order to (1) make more meaningful period-to-period comparisons of the Company’s operations, both internally and externally, (2) guide management in assessing the performance of the business, internally allocating resources and making decisions in furtherance of Company’s strategic plan, (3) provide investors with a better understanding of how management plans and measures the business and (4) provide investors with a better understanding of our ongoing, core business. The material limitations to management’s approach include the fact that the charges, benefits and expenses excluded are nonetheless charges, benefits and expenses required to be recognized under GAAP and, in some cases, consume cash which reduces the Company’s liquidity. Management compensates for these limitations primarily by reviewing GAAP results to obtain a complete picture of the Company’s performance and by including a reconciliation of non-GAAP results to GAAP results in its earnings releases.

Additional information regarding the economic substance of each exclusion, management’s use of the resultant non-GAAP measures, the material limitations of management’s approach and management’s methods for compensating for such limitations is provided below.

Stock-based Compensation Expense, which consists of non-cash charges for the estimated fair value of equity awards granted to employees and directors, is excluded in order to permit more meaningful period-to-period comparisons of the Company’s results since the Company grants different amounts and value of equity awards each quarter. In addition, given the fact that competitors grant different amounts and types of equity awards and may use different valuation assumptions, excluding stock-based compensation permits more accurate comparisons of the Company’s core results with those of its competitors.

Restructuring, Acquisition, Integration and Other Expenses, which consist of employee severance, lease termination costs, exit costs, environmental investigation, remediation and related employee costs and other charges primarily related to closing and consolidating manufacturing facilities, and those associated with the acquisition, integration and other expenses of acquired businesses including fair value adjustments related to contingent consideration liability, are excluded because such charges (1) can be driven by the timing of acquisitions and exit activities which are difficult to predict, (2) are not directly related to ongoing business results and (3) generally do not reflect expected future operating expenses. In addition, given the fact that the Company’s competitors complete acquisitions and adopt restructuring plans at different times and in different amounts than the Company, excluding these charges or benefits permits more accurate comparisons of the Company’s core results with those of its competitors. Items excluded by the Company may be different from those excluded by the Company’s competitors and restructuring and integration expenses include both cash and non-cash expenses. Cash expenses reduce the Company’s liquidity. Therefore, management also reviews GAAP results including these amounts.

Impairment Charges for Goodwill and Other Assets, which consist of non-cash charges, are excluded because such charges are non-recurring and do not reduce the Company’s liquidity. In addition, given the fact that the Company’s competitors may record impairment charges at different times, excluding these charges permits more accurate comparisons of the Company’s core results with those of its competitors.

Amortization Charges, which consist of non-cash charges impacted by the timing and magnitude of acquisitions of businesses or assets, are also excluded because such charges do not reduce the Company’s liquidity. In addition, such charges can be driven by the timing of acquisitions, which is difficult to predict. Excluding these charges permits more accurate comparisons of the Company’s core results with those of its competitors because the Company’s competitors complete acquisitions at different times and for different amounts than the Company.

Other Unusual or Infrequent Items, such as charges or benefits associated with distressed customers, expenses, charges and recoveries relating to certain legal matters, and gains and losses on sales of assets, are excluded because such items are typically non-recurring, difficult to predict or not directly related to the Company’s ongoing or core operations and are therefore not considered by management in assessing the current operating performance of the Company and forecasting earnings trends. However, items excluded by the Company may be different from those excluded by the Company’s competitors. In addition, these items include both cash and non-cash expenses. Cash expenses reduce the Company’s liquidity. Management compensates for these limitations by reviewing GAAP results including these amounts.

Adjustments for Taxes, which consist of the tax effects of the various adjustments that we exclude from our non-GAAP measures and adjustments related to deferred tax and discrete tax items. Including these adjustments permits more accurate comparisons of the Company's core results with those of its competitors. We determine the tax adjustments based upon the various applicable effective tax rates. In those jurisdictions in which we do not expect to realize a tax cost or benefit (due to a history of operating losses or other factors), a reduced tax rate is applied.