UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark one)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 3, 2020
or
For the transition period from to .
Commission File Number 0-21272
Sanmina Corporation
(Exact name of registrant as specified in its charter)
DE
(State or other jurisdiction of incorporation or organization)
77-0228183
(I.R.S. Employer Identification Number)
2700 N. First St., San Jose
(Address of principal executive offices)
CA
95134
(Zip Code)
Registrant's telephone number, including area code:
408 964-3500
Title of each class
Common Stock
Trading symbol(s)
SANM
Name of each exchange on which registered
NASDAQ Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange
Act.
Large Accelerated Filer
☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant was approximately $1,055,950,774 as of March 28,
2020, based upon the last reported sale price of the common stock on the NASDAQ Global Select Market on March 27, 2020.
As of November 5, 2020, the number of shares outstanding of the registrant's common stock was 65,065,619.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information is incorporated into Part III of this report by reference to the Proxy Statement for the registrant's 2021 annual meeting of stockholders to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K.
Table of Contents
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Signatures
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
SANMINA CORPORATION
INDEX
PART I
PART II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors and Executive Officers of the Registrant
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
PART IV
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Item 1. Business
Overview
Sanmina Corporation (“we” or “Sanmina” or the "Company") is a leading global provider of integrated manufacturing solutions, components, products
and repair, logistics and after-market services. We provide these comprehensive offerings primarily to original equipment manufacturers, or OEMs, in the
following industries: industrial, medical, defense and aerospace, automotive, communications networks and cloud solutions. The combination of our advanced
technologies, extensive manufacturing expertise and economies of scale enables us to meet the specialized needs of our customers. We were originally
incorporated in Delaware in May 1989.
Our end-to-end solutions, combined with our global expertise in supply chain management, enable us to manage our customers' products throughout their
life cycles. These solutions include:
• product design and engineering, including concept development, detailed design, prototyping, validation, preproduction services and manufacturing
design release and product industrialization;
• manufacturing of components, subassemblies and complete systems;
• high-level assembly and test;
• direct order fulfillment and logistics services;
• after-market product service and support; and
• global supply chain management.
We operate in the Electronics Manufacturing Services (EMS) industry and manage our operations as two businesses:
1) Integrated Manufacturing Solutions (IMS). Our IMS business consists of printed circuit board assembly and test, high-level assembly and test, and
direct-order-fulfillment. This segment generated approximately 80% of our total revenue in 2020.
2) Components, Products and Services (CPS). Components include interconnect systems (printed circuit board fabrication, backplane, cable assemblies
and plastic injection molding) and mechanical systems (enclosures and precision machining). Products include memory from our Viking Technology
division; enterprise solutions from our Viking Enterprise Solutions division; radio frequency (RF), optical and microelectronic; defense and
aerospace products from SCI Technology; and cloud-based manufacturing execution software from our 42Q division. Services include design,
engineering, global services (logistics and repair). CPS generated approximately 20% of our total revenue in 2020.
We have manufacturing facilities in 21 countries on six continents. We locate our facilities near our customers and their end markets in major centers for
the electronics industry or in lower cost locations. Many of our operations located near our customers and their end markets are focused primarily on new product
introduction, lower-volume, higher-complexity component and subsystem manufacturing and assembly, and high-level assembly and test. Our operations located
in lower cost areas engage primarily in higher-volume component and subsystem manufacturing and assembly for both higher and lower complexity products.
As one of the largest global manufacturing solutions providers with operations in 21 countries on six continents we are able to capitalize on our
competitive strengths including our:
• customer-focused organization with 37,000 employees;
• mission critical end-to-end solutions;
• product design and engineering resources;
• vertically integrated global manufacturing capabilities;
• comprehensive IT systems and a flexible global supplier base;
• expertise in serving diverse end markets; and
• expertise in industry standards and regulatory requirements.
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Industry Overview
EMS companies are the principal beneficiaries of the increased use of outsourced manufacturing services by the electronics and other industries.
Outsourced manufacturing refers to an OEM's use of EMS companies to manufacture their products, rather than using internal manufacturing resources. As the
EMS industry has evolved, OEMs have increased their reliance on EMS companies for end-to-end services including product design and engineering,
manufacturing, high-level assembly and test, direct-order-fulfillment and logistics services, after-market product service and support, and global supply chain
management.
We believe OEMs will continue to outsource manufacturing because it allows them to:
• focus on core competencies;
• access leading design and engineering capabilities;
• optimize their supply chain while reducing risk and maximizing purchasing power;
• reduce operating costs and capital investment;
• access global manufacturing services; and
• accelerate time to market.
Our Business Strategy
Our vision is to be the trusted leader in providing mission critical products, services and supply chain solutions to accelerate customer success. Key
elements of our business strategy to deliver this vision include:
Capitalizing on Our Comprehensive Solutions. We intend to capitalize on our end-to-end solutions, which we believe will allow us to sell additional
solutions to our existing customers and attract new customers. Our end-to-end solutions include product design and engineering, manufacturing, high-level
assembly and test, direct order fulfillment and logistics services, after-market product service and support, and global supply chain management. Our vertically
integrated manufacturing solutions enable us to manufacture additional system components and subassemblies for our customers. When we provide a customer
with a number of services, such as component manufacturing or higher value-added solutions, we are often able to improve our margins and profitability.
Consequently, our goal is to increase the number of manufacturing programs for which we provide multiple solutions. To achieve this goal, our sales and
marketing organization seeks to cross-sell our solutions to customers.
Extending Our Technology Capabilities. We rely on advanced processes and technologies to provide our products, components and vertically integrated
manufacturing solutions. We continually improve our manufacturing processes and develop more advanced technologies, providing competitive advantage to our
customers. We work with our customers to anticipate their future product and manufacturing requirements and align our technology investment activities with their
needs. We use our design expertise to develop product technology platforms that we can customize by incorporating other components and subassemblies to meet
the needs of particular OEMs. These technologies enhance our ability to manufacture complex, high-value added products, maximizing our potential to continue to
win business from existing and new customers.
Attracting and Retaining Long-Term Customer Partnerships. A core component of our strategy is to attract, build and retain long-term partnerships with
companies in growth industries that will benefit from our global footprint and unique value proposition in advanced electronics manufacturing.
Promoting New Product Introduction (NPI) and Joint Design Manufacturing (JDM) Solutions. As a result of customer feedback, and our customers'
desire to manage research and development expenses, we offer product design services to develop systems and components jointly with our customers. Our NPI
services include quick-turn prototyping, supply chain readiness, functional test development and release-to-volume production. In a JDM model, our customers
bring market knowledge and product requirements and we bring complete design engineering and NPI services. Our design engineering offerings include product
architecture development, detailed design, simulation, test and validation, system integration, regulatory and qualification services.
Continuing to Penetrate Diverse End Markets. We focus our marketing and sales efforts on major end markets within the electronics technology
industry. We target markets we believe offer significant growth opportunities and for which OEMs sell mission critical products that are subject to strict regulatory
requirements and/or rapid technological change because the manufacturing of these products requires higher value-added services. We intend to continue to
diversify our business across market segments and customers to reduce our dependence on any particular market or customer.
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Pursuing Strategic Transactions. We continually seek to identify and undertake strategic transactions that give us the opportunity to grow our business
by accessing new customers' products, manufacturing solutions, repair service capabilities, intellectual property, technologies and geographic markets. In addition,
we plan to continue to pursue OEM divestiture transactions that will augment existing strategic customer relationships or build new relationships with customers in
attractive end markets. In an OEM divestiture transaction, we purchase manufacturing assets and hire employees from a customer and enter into a long-term supply
agreement with such customer to provide products previously manufactured by them. Potential future transactions may include a variety of different business
arrangements, including acquisitions, asset purchases, spin-offs, strategic partnerships, restructurings and divestitures.
Continuing to Seek Cost Savings and Efficiency Improvements. We seek to optimize our facilities to provide cost-effective services for our customers.
We maintain extensive operations in lower cost locations, including Latin America, Eastern Europe, China, Southeast Asia and India, and we plan to expand our
presence in these lower cost locations as appropriate, taking into consideration tariffs and other factors, to meet the needs of our customers. We believe we are well
positioned to take advantage of future opportunities on a global basis as a result of our existing manufacturing footprint in 21 countries on six continents.
COVID-19
In March 2020, the World Health Organization declared COVID-19 to be a pandemic, which continues to spread throughout the U.S. and the world.
During the last nine months of our fiscal 2020, our results of operations were negatively impacted by reduced demand from our customers resulting from the
negative impact of the pandemic and government containment measures on their end markets, supply shortages and temporary shutdowns of certain of our
facilities.
We are unable to accurately predict the full impact that COVID-19 will have on us due to a number of uncertainties, including the impact of the pandemic
on our customers' businesses, the number of employees who may become infected or exposed to infected persons who we would then be required to exclude from
our plants, the imposition of government restrictions on staffing and the types of products we are permitted to build, the need for temporary plant closures, supply
chain shortages and other interruptions, the duration of the outbreak, the geographic location of any future outbreaks, and actions that government authorities may
take. However, it is likely that the pandemic will continue to have a negative impact on our business, results of operations and financial condition for the
foreseeable future.
Our Competitive Strengths
We believe our competitive strengths differentiate us from our competitors and enable us to better serve the needs of OEMs. Our competitive strengths
include:
End-to-End Solutions. We provide solutions throughout the world to support our customers' products during their entire life cycle, from product design
and engineering, through manufacturing, to direct order fulfillment, logistics and after-market product service and support. Our end-to-end solutions are among the
most comprehensive in the industry because we focus on adding value before and after the actual manufacturing of our customers' products. These solutions also
enable us to 1) provide our customers with a single source of supply for their design, supply chain and manufacturing needs, 2) reduce the time required to bring
products to market, 3) lower product costs and 4) allow our customers to focus on those activities they expect to add the highest value to their business. We believe
our end-to-end solutions allow us to develop closer relationships with our customers and more effectively compete for their future business.
Product Design and Engineering Resources. We provide product design and engineering services for new product designs, cost reductions and Design-
for-Manufacturability/Assembly/Test (DFx) reviews. Our engineers work with our customers during the complete product life cycle. Our design and NPI centers
provide turnkey system design services, including: electrical, mechanical, thermal, software, layout, simulation, test development, design verification, validation,
regulatory compliance and testing services. We design high-speed digital, analog, radio frequency, mixed-signal, wired, wireless, optical and electro-mechanical
modules and systems.
Our engineering engagement models include Joint Design Manufacturing (JDM), Contract Design Manufacturing (CDM) and consulting engineering for
DFx, Value Engineering (cost reduction re-design), and design for global environmental compliance regulations such as the European Union's Restrictions of
Hazardous Substances (RoHS) and Waste Electrical and Electronic Equipment (WEEE). We focus on industry segments that include industrial, medical, defense
and aerospace, automotive, communications networks and cloud solutions. System solutions for these industry segments are supported by our
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vertically integrated component technologies, namely printed circuit boards, backplanes, enclosures, cable assemblies, precision machining, plastics, memory
modules, and optical, RF and microelectronics modules.
In these engagement models, our customers bring market knowledge and product requirements. We provide complete design engineering and new product
introductions (NPI) services. For JDM products, typically the intellectual property is jointly owned by us and the customer, and we perform manufacturing and
logistics services. For CDM projects, customers pay for all services and own the intellectual property.
Vertically Integrated Manufacturing Solutions. We provide a range of vertically integrated manufacturing solutions, including high-technology
components, new product introduction and test development services. These solutions are provided in every major region worldwide, with design and prototyping
close to our customer’s product development centers. Our customers benefit significantly from our experience in these areas, including product cost reduction,
minimization of assets deployed for manufacturing, accelerated time-to-market and a simplified supply chain. Key system components we manufacture include
high-technology printed circuit boards and printed circuit board assemblies, backplanes and backplane assemblies, enclosures, cable assemblies, plastic injection
molded products, precision machined components, optical and RF modules and memory modules. These components and sub-assemblies are integrated into a final
product or system, configured and tested to our customer’s or the end-customer’s specifications and delivered to the final point of use, with Sanmina managing the
entire supply chain. By manufacturing system components and subassemblies ourselves, we enhance continuity of supply and reduce costs for our customers. In
addition, we are able to have greater control over the supply chain of our customers' products.
Customers also benefit from our combined design, technology and manufacturing experience with specific products and markets. For example, in
communications networks, we have 40 years of experience in developing high-speed printed circuit boards (PCBs) and backplanes. Examples of products for
which our experience and vertically integrated model provide competitive advantage include wireless base stations, network switches, routers and gateways,
optical switches, servers and storage appliances, automotive products, avionics and satellite systems, magnetic resonance imaging (MRI) and computer
tomography (CT) scanners, and equipment used in semiconductor manufacturing processes, including equipment for photolithography, chemical mechanical
polishing, vapor deposition and robotics for wafer transfer. For these and many other products, customers can gain competitive advantage with our manufacturing
technology, while reducing the capital requirements associated with manufacturing and global supply chain management.
Advanced Component Technologies. We provide advanced component technologies, which we believe allow us to differentiate ourselves from our
competitors. These advanced technologies include the fabrication of complex printed circuit boards, backplanes, enclosures, precision machining and plastic
components. For example, we produce some of the most advanced printed circuit boards and backplanes in the world, with up to 70 layers, that are manufactured
with a range of low signal loss, high-performance materials and include features such as buried capacitance and thin-film resistors, high-density interconnects and
micro via technology. We also manufacture high-density flex and rigid-flex printed circuit boards with up to 32 layers and 8 transition layers for the defense and
aerospace markets and high-end medical electronics market.
Our printed circuit board assembly technologies include micro ball grid arrays, chip scale packages, fine-pitch discretes and small form factor radio
frequency and optical components, chip on board, as well as advanced packaging technologies used in high pin count applications for specific integrated circuits
and network processors. We use innovative design solutions and advanced metal forming techniques to develop and fabricate high-performance indoor and outdoor
chassis, enclosures, racks and frames. Our assembly services use advanced technologies, including precision optical alignment, multi-axis precision stages and
machine vision technologies. We use sophisticated procurement and production management tools to effectively manage inventories for our customers and
ourselves. We have also developed build-to-order (BTO) and configure-to-order (CTO) systems and processes that enable us to manufacture and ship finished
systems in as little as 8 hours after receipt of an order. We utilize a centralized Technology Council to coordinate the development and introduction of new
technologies to meet our customers' needs in various locations and to increase technical collaboration among our facilities and divisions.
Global Manufacturing Capabilities. Most of our customers compete and sell their products on a global basis. As such, they require global solutions that
include regional manufacturing for selected end markets, especially when time to market, local manufacturing or content and low cost solutions are critical
objectives. Our global network of manufacturing facilities in 21 countries provides our customers a combination of sites to maximize both the benefits of regional
and low cost manufacturing solutions and repair services, and to help alleviate tariff costs. Our current repair network is located in an additional eight countries.
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We offer customers five regions in which all of our technology and components, integrated manufacturing and logistics solutions can be implemented and
can serve both regional and global business needs. To manage and coordinate our global operations, we employ an enterprise-wide Enterprise Resource Planning
(ERP) system at substantially all of our manufacturing locations that operates on a single IT platform and provides us with company-wide inventory planning and
purchasing capabilities. This system enables us to standardize planning and purchasing at the facility level and to help optimize inventory management and
improve asset utilization worldwide. Our systems also enable our customers to receive key information regarding the status of their programs.
We purchase large quantities of electronic components and other materials from a wide range of suppliers. Our primary supply chain goal is to
consolidate our global spend to create the synergy and leverage to drive our supply base for better cost competitiveness, more favorable terms and leading-edge
supply chain solutions. As a result, we often receive more favorable terms and supply chain solutions from suppliers, which generally enables us to provide our
customers with greater total cost reductions than they could obtain themselves. Our strong supplier relationships are beneficial when electronic components and
other materials are in short supply and provide us the necessary support to better optimize the use of our inventories.
Supply chain management also involves the planning, purchasing, transportation and warehousing of product components. A key objective of our supply
chain management services is to reduce excess component inventory in the supply chain by scheduling deliveries of components at a competitive price and on a
just-in-time basis. We use sophisticated production management systems to manage our procurement and manufacturing processes in an efficient and cost effective
manner. We collaborate with our customers to enable us to respond to their changing component requirements and to reflect any changes in these requirements in
our ERP system. This system enables us to forecast future supply and demand imbalances and develop strategies to help our customers manage their component
requirements, especially during supply shortages that have affected our industry in the past. Our enterprise-wide ERP systems provide us with company-wide
information regarding component inventories and orders to help optimize inventories, planning and purchasing at the facility level.
Customer-Focused Organization. We believe customer relationships are critical to our success and we are focused on providing a high level of customer
service. Our key customer accounts are managed by dedicated account teams, including a global account manager directly responsible for account management.
Global account managers coordinate activities across divisions to effectively satisfy our customers' requirements and have direct access to our senior management
to quickly address customer opportunities and needs. Local customer account teams further support the global teams.
Expertise in Serving Diverse End Markets. We have experience in serving our customers in the industrial, medical, defense and aerospace, automotive,
communications networks and cloud solutions end markets. Our diversification across end markets reduces our dependence upon any one customer or segment. In
order to cater to the specialized needs of customers in particular market segments, we have dedicated personnel, and in some cases facilities, with industry-specific
capabilities and expertise.
Expertise in Industry Standards and Regulatory Requirements. We maintain compliance with industry standards and regulatory requirements applicable
to certain markets, including, among others, medical, automotive, energy and defense and aerospace.
Our Products and Solutions
We offer our OEM customers a diverse set of products and solutions with a focus on wireless, wireline and optical communications and network
infrastructure equipment, such as switches, routers and base stations, computing and storage systems, defense and commercial avionics and communications,
medical imaging, diagnostic and patient monitoring systems, point-of-sale, gaming systems, semiconductor tools for metrology, lithography, dry and wet
processing, industrial products, including large format printers and automated teller machines, energy and clean technology products such as solar and wind
products, LED lighting, smart meters and battery systems, electric vehicle power control systems, automotive infotainment devices, and automotive engine-control
modules. These products may require us to use some or all of our end-to-end solutions, including design, component technologies and logistics and repair services.
Integrated Manufacturing Solutions includes:
Printed Circuit Board Assembly and Test. Printed circuit board assembly involves attaching electronic components, such as integrated circuits,
capacitors, microprocessors, resistors and memory modules, to printed circuit boards. The most common technologies used to attach components to printed circuit
boards employ surface mount technology (SMT)
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and pin-through-hole assembly (PTH). SMT is an automated assembly system that places and solders components to the printed circuit board. In PTH, components
are inserted into holes punched in the circuit board. Another method is press-fit-technology, in which components are pressed into holes on the printed circuit
board. We use SMT, PTH, press-fit and other attachment technologies that are focused on miniaturization and increasing the density of component placement on
printed circuit boards. These technologies, which support the needs of our customers to provide greater functionality in smaller products, include chip-scale
packaging, ball grid array, direct chip attach and high density interconnect. We perform in-circuit and functional testing of printed circuit board assemblies. In-
circuit testing verifies that all components are properly inserted and attached, and that electrical circuits are complete. We perform functional tests to confirm the
board or assembly operates in accordance with its final design and manufacturing specifications. We either design and procure test fixtures and develop our own
test software, or we use our customers' test fixtures and test software. In addition, we provide environmental stress tests of the board or assembly that are designed
to confirm that the board or assembly will meet the environmental stresses, such as heat, to which it will be subjected.
High-Level Assembly and Test. We provide high-level assembly and test in which assemblies and modules are combined to form complete, finished
products. Products for which we currently provide high-level assembly and test include electro-mechanical assemblies, sterilized fluid and blood analysis systems,
food dispensing equipment, diagnostic medical devices, high-voltage power management systems, rotating x-ray equipment for airport security, particle analyzers
for homeland security, motorized magnetic resonance imaging units, radio base stations and transmission equipment for 5G wireless networks, optical central
stations and wireline switching and routing hardware, server and storage systems for data centers, carriers central offices and video streaming service providers.
These products require highly specialized manufacturing capabilities and, processes and integrated IT systems.
Our specialized processes such as cable routing, pulley, gear assembly, lubrication, sterilization, hi-pot voltage testing for safety, functional
calibration, liquid management, refrigeration systems, food-grade treatment of surfaces, containers and conduits, x-ray and magnetic testing, battery assembly and
test, loading and configuration of firmware and software regionalization based on customer needs and supply chain optimization for large, bulky, or otherwise
logistic-intensive and for tariff minimization.
Direct-Order-Fulfillment. We provide direct-order-fulfillment for our OEM customers. Direct-order-fulfillment involves receiving customer orders,
configuring products to quickly fill the orders and delivering the products either to the OEM, a distribution channel, or directly to the end customer. We manage
our direct-order-fulfillment processes using a core set of common systems and processes that receive order information from the customer and provide
comprehensive supply chain management, including procurement and production planning. These systems and processes enable us to process orders for multiple
system configurations and varying production quantities including single units. Our direct-order-fulfillment services include BTO and CTO capabilities: in BTO,
we build a system with the particular configuration ordered by the OEM customer; in CTO, we configure systems to an end customer's order, for example by
installing software desired by the end customer. The end customer typically places this order by choosing from a variety of possible system configurations and
options. Using advanced manufacturing processes and a real-time warehouse management and data control system on the manufacturing floor, we can meet a 48 to
72 hour turn-around-time for BTO and CTO requests. We support our direct-order-fulfillment services with logistics that include delivery of parts and assemblies
to the final assembly site, distribution and shipment of finished systems and processing of customer returns.
Components, Products and Services includes:
Product Design and Engineering. Our design and engineering groups provide customers with comprehensive services from initial product design
and detailed product development to prototyping and validation, production launch and end-of-life support for a wide range of products covering all our market
segments. These groups complement our vertically integrated manufacturing capabilities by providing component level design services for printed circuit boards,
backplanes and a variety of electro-mechanical systems. Our offerings in design engineering include product architecture, detailed development, simulation, test
and validation, integration and regulatory and qualification services, and our NPI services include quick-turn prototypes, functional test development and release-
to-volume production. We also offer post-manufacturing and end-of-life support, including repair and sustaining engineering support through our Global Services
division. We can also complement our customer's design team with our unique skills and services which can be used to develop custom, high-performance
products that are manufacturable and cost optimized to meet product and market requirements. Such engineering services can help in improving a customer’s time-
to-market and cost-to-market objectives.
Printed Circuit Boards. We have the ability to produce multilayer printed circuit boards on a global basis with high layer counts and fine line
circuitry. We have also developed several proprietary technologies and processes which improve
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electrical performance, connection densities and reliability of printed circuit boards. Our ability to support NPI and quick-turn fabrication followed by
manufacturing in both North America and Asia allows our customers to accelerate their time-to-market as well as their time-to-volume. Standardized processes and
procedures make transitioning of products easier for our customers. Our technology roadmaps provide leading-edge capabilities and high yielding processes. Our
engineering teams are available on a worldwide basis to support designers in Design for Manufacturability (DFM) analysis and assemblers with field applications
support.
Printed circuit boards are made of fiberglass/resin-laminated material layers and contain copper circuits which interconnect and transmit electrical
signals among the components that make up electronic systems. Increasing the density of the circuitry in each layer is accomplished by reducing the width of the
circuit traces and placing them closer together in the printed circuit board along with adding layers and via hole structures. We are currently capable of efficiently
producing printed circuit boards with up to 70 layers and circuit trace widths as narrow as two mils (50 microns) in production volumes. Specialized production
equipment along with an in-depth understanding of high performance laminate materials allow us to fabricate some of the largest form factor and highest speed
(frequencies in excess of 40 gigahertz) backplanes available in the industry.
Backplanes and Backplane Assemblies. Backplanes are typically very large printed circuit boards that serve as the backbones of sophisticated
electronics products, such as internet routers. Backplanes provide interconnections for printed circuit board assemblies, power supplies, and other electronic
components. We fabricate backplanes in our printed circuit board factories. Backplane fabrication is significantly more complex than printed circuit board
fabrication due to the large size and thickness of the backplanes. We manufacture backplane assemblies by press-fitting high density connectors into plated
through-holes in the fabricated backplane. In addition, many of the newer, advanced technology backplanes require SMT attachment of passive discrete
components as well as active high-pin count ball grid array packages. These advanced assembly processes require specialized equipment and a strong focus on
quality and process control. We also perform in-circuit and functional tests on backplane assemblies. We have developed proprietary technologies and process
“know-how” which enable backplanes to run at data rates in excess of 50 gigahertz. We currently have capabilities to manufacture backplanes at greater than 60
layers in sizes up to 26x40 inches and up to a nominal thickness of 0.425 inches and in a wide variety of high performance laminate materials. These are among the
largest and most complex commercially manufactured backplanes and the test equipment we have ensures the quality and performance of these backplane systems
is “world class.” We are not only fully capable of the electronic integrity testing of these backplanes, but can also utilize state of the art x-ray equipment to verify
defect-free installation of the new high density/high speed connectors. Lastly, performance of the backplane system is checked through a signal integrity tester to
ensure the product will meet its design intent. We are one of a limited number of manufacturers with this comprehensive suite of capabilities.
Cable Assemblies. Cable assemblies are used to connect modules, assemblies and subassemblies in electronic devices. We provide a broad range of
cable assembly products and services, from cable assemblies and harnesses for automobiles, to complex harnesses for industrial products and semiconductor
manufacturing equipment. We design and manufacture a broad range of high-speed data, radio frequency and fiber optic cabling products. Our cable assemblies
are often used in large rack systems to interconnect subsystems and modules. Our manufacturing footprint with facilities in the U.S., Mexico, the EU and China
enables us to support our customers NPI and volume production needs on a global basis.
Plastic Injection Molded Products. Plastic injection molded products are used to create a vast array of everyday items; from very small intricate
mechanical components, to cosmetic enclosures designed to protect sensitive electronic equipment. Our diverse capability within the plastic injection molding
space spans all major markets and industries. We are equipped with nearly 80 plastic injection molding machines with clamping pressure ranging from 28 tons to
1,000 tons. Our experienced tooling, process, quality and resin engineers work concurrently using a scientific molding approach to develop cost effective, highly
reliable manufacturing solutions for medical, industrial, defense, multimedia, computing and data storage customers. We apply the principles of scientific molding,
combined with strategic partnerships with U.S. and Asian toolmakers to enable delivery of cost effective high-quality plastic manufacturing solutions.
Mechanical Systems. Mechanical systems are used across all major markets to house and protect complex, critical and fragile electronic
components, modules and sub-systems so that the system's functional performance is not compromised due to mechanical, environmental or any other usage
conditions. Our mechanical systems manufacturing services are capable of fabricating mechanical components, such as cabinets, chassis (via soft tool and hard
progressive tools), frames, racks, and data storage enclosures integrated with various electronic components and sub-systems with power management, thermal
management, sensing functions and control systems.
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We manufacture a broad range of enclosures for a wide range of products from set-top boxes, medical equipment, alternative energy storage, data
management shelves as well as data storage, to large and highly complex mechanical systems, such as those used in indoor and outdoor wireless base station
products and high precision vacuum chambers for the semiconductor, telecom, networking, healthcare, aerospace and homeland security industries.
Our mechanical systems expertise is available at several of our state-of-the-art facilities worldwide. Our operations provide metal fabrication by soft
tools methodology, high-volume metal stamping and forging by hard tools with stage and progressive tools, plastic injection molding, robotic welding, powder
coating, wet painting, plating and cleaning processes.
We also offer a suite of world-class precision machining services in the U.S., Mexico and Israel. We use advanced numerically controlled machines
enabling the manufacture of components to very tight tolerances and the assembly of these components in clean environments. Our capabilities include complex
medium and large format mill and lathe machining of aluminum, stainless steel, plastics, ferrous and nonferrous alloys and exotic alloys. We also have helium and
hydrostatic leak-test capabilities. By leveraging our established supply chain, we do lapping, anodizing, electrical discharge machining (EDM), heat-treating,
cleaning, laser inspection, painting and packaging. We have dedicated facilities supporting machining and complex integration with access to a range of state-of-
the-art, computer-controlled machining equipment that can satisfy rigorous demands for production and quality meeting very tight tolerances. This includes fully
automated “lights-out” machinery that continues production in the absence of human operators that can operate 24/7. With some of the largest horizontal milling
machines in the U.S., we are a supplier of vacuum chamber systems for the semiconductor, flat-panel display, LED equipment, industrial, medical and AS9100-
certified aerospace markets.
Optical Technology. Optical Technology is our high-end product technology and engineering division that focuses on RF, optical and
microelectronics products. Our mission and philosophy are to deliver leading-edge technology solutions that help optimize the value and performance of our
customers’ applications.
Optical and radio frequency (RF) components are key building blocks of many systems. We produce both passive and active optical components as
well as modules that are built from a combination of industry standard and/or custom components, interconnected using microelectronic and micro-optic
technologies to achieve a unique function.
Based on microelectronic design and manufacturing technologies, we provide RF and optical components, modules and systems for customers in
the communications, networking, medical, industrial, military and aerospace markets. Our experience in RF and optical communication and networking products
spans long-haul/ultra-long-haul and metro regions for transport/transmission, as well as access and switching applications, including last-mile solutions. We are
currently supplying product to the 10G, 40G, 100G, 200G and 400G optical communication marketplace based on foundational IP within optical and RF
technologies. In the medical market, we develop and manufacture components and subassemblies that support Sanmina’s medical operations for products such as
blood analyzers, food contamination analyzers, and specialized optical spectrometers and fluorometers utilizing the latest optical technologies. Our optical
technology service offerings are designed to deliver end-to-end solutions with special focus on product design, test infrastructure development and
industrialization, optical, millimeter waive and RF components and module and blade manufacturing, as well as system integration and test.
Viking Technology. Viking Technology supplies leading edge Solid State Drives (SSD), DRAM memory modules and Non-Volatile DIMMs
(NVDIMM), along with state-of-the-art multi-chip memory packaging (MCP) solutions.
Viking Technology provides DRAM memory & Flash storage solutions ranging from high-performance computing SSDs tailored for the enterprise
market to small form factor flash and DRAM modules optimized for industrial, telecommunications, and military markets. To continue its leadership in the
memory space, Viking Technology is investing in several advanced technologies such as memory packaging, multi-chip packaging, system-in-package, and
storage class memory. These investments will enable Viking Technology to support a wider range of markets and applications. Viking Technology will continue its
focus on the enterprise and embedded markets with further emphasis on markets such as military, defense and aerospace and industrial/automotive applications.
Viking Technology's comprehensive memory product offerings include Enterprise Class & Industrial Grade SSDs available across a wide portfolio
of standard and OEM customized form-factors (2.5”, 1.8” SlimSATA, mSATA, M.2, PCIe/NVMe SSDs, SATADIMM™, DFC and eUSB). Viking Technology
also supports the broadest range of DDR4, DDR3, DDR2, DDR and SDRAM modules; from High-Density to Small-Form Factor with Error Checking and
Correction (ECC Memory).
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Viking Technology also specializes in DRAM and Flash Multi-chip packaging (MCP) technology, allowing for higher density packages optimized
for the military aerospace, autonomous vehicles, and communications satellite applications. Viking’s ParallelCell family of products are multi-chip package (MCP)
solutions that are bare silicon die and wafer level stacking solutions, capable of reducing the overall footprint of memory modules into a single chip.
These MCP solutions are tested in industrial, extended and military temperature ranges. Viking MCP memory products are designed for applications
in which Size, Weight and Power (SWaP) are key requirements. Our future generations of MCPs will be optimized for radiation tolerant and space compliant
applications.
Viking Enterprise Solutions. Viking Enterprise Solutions is a market leader in high-performance storage platforms for hyperscale and enterprise
data centers worldwide. Leveraging our portfolio of proven product designs, Viking Enterprise Solutions provides advanced data center products, including NVMe
flash memory and disk-based storage server appliances, JBOD storage systems and related products for a variety of storage and data center applications including
rack scale solutions. With advances in interconnect speeds and architectural changes to disaggregate storage and compute for scale, Viking Enterprise Solutions is
well positioned with a product portfolio to take advantage of these trends.
Viking Enterprise Solutions provides end-to-end, design and manufacturing solutions for both platform-based and fully customized data center products.
From our US-based design and development team, we provide a full array of design services from early product conceptualization, through design, product
validation and world-wide product certifications. In addition, our team supports all phases of product manufacturing, including NPI, support for unique product
configurations, RMA and product end-of-life support.
SCI Technology Inc. (SCI). SCI has provided engineering services, products, manufacturing, test, and depot and repair solutions to the global
defense and aerospace industry for nearly 60 years. SCI offers advanced products for aircraft systems and tactical communications, unmanned aerial systems and
components, counter-unmanned aerial systems and components, and fiber-optics capabilities for use in a variety of defense-related applications.
SCI's customers include U.S. government agencies, U.S. allies and major defense and aerospace prime contractors. SCI has the infrastructure and
facility security clearance to support the stringent certifications, regulations, processes and procedures required by these customers.
42Q. 42Q provides an innovative, world-class cloud-based manufacturing execution solution (MES) that is scalable, flexible, secure and easy to
implement. Our solution provides customers advantages in efficiencies and costs relative to legacy systems and offers traceability and genealogy, multi-plant
visibility, compliance management and on-demand work instructions.
Global Services. Our global services focus on highly complex and mission-critical products and processes. We support the logistics and repair needs
of customers in the communications, defense, embedded computing and medical markets worldwide. Through our operational infrastructure of 34 Sanmina sites
and 27 repair partner sites, we provide a wide range of services, including direct-order-fulfillment, configure-to-order, supplier, inventory and warranty
management, reverse logistics, repair, asset recovery, sustaining engineering, test development and end-of-life management to embrace the specific needs of our
customers.
Drawing on a robust set of information systems, we offer configurable environments tailored to meet specific customer needs, including customized
web portals, order and serial number tracking, special routings and promotions. Local, regional and global solutions are supported by a robust set of business
processes that focus on inventory reduction and risk mitigation. This can improve cycle times by leveraging infrastructure, people and technology to enable reliable
shipments of products to end users worldwide generally within 24 to 72 hours, depending on our customer’s requirements.
Logistics and repair services complement our end-to-end manufacturing strategy by integrating engineering, supply chain, manufacturing, logistics
and repair into a seamless solution for customers around the world.
Our End Markets
We target markets that we believe offer significant growth opportunities and where OEMs sell complex mission critical products that are subject to strict
regulatory requirements and/or rapid technological change. We believe that markets involving complex, rapidly changing products offer opportunities to produce
products with higher margins because they require
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higher value-added manufacturing services and may also include our advanced vertically integrated components. Our diversification across market segments and
customers helps mitigate our dependence on any particular market or customer.
Industrial/Medical/Defense/Automotive
Industrial. We provide end-to-end component, engineering and complex assembly services to the industrial market. We support a wide range of segments,
including transportation, power management, industrial controls, instrumentation and test equipment, inspection and public safety equipment, capital equipment,
and self-service kiosk solutions. Our significant experience in the precision machining of components is utilized in highly complex systems such as vacuum
chambers, photolithography tools, etch tools, wafer handling systems, airport security, 3D printing, flat panel display test and repair equipment, chem-mech
planarization tools, optical inspection and x-ray equipment, explosive detection equipment, and large format printing machines. We have specialized and dedicated
facilities for the assembly of large / complex electro-mechanical, thermal and liquid-management equipment for applications, including ATMs, beverage
dispensing, cash-counting and management systems, electro-mechanical patient transfer tables, industrial printers and semiconductor capital equipment.
We also manufacture sub-assemblies for machine-control units, such as high-speed machining tools, liquid management equipment and complex
hydraulic-electro-mechanical systems, for applications such as industrial-grade printing and liquid dispensing.
We are committed to serving companies that are leading the energy and clean technology revolution in the solar, wind, battery systems, LED lighting
fixtures (including indoor, outdoor, industrial-grade and construction lighting products), and smart infrastructure industries. We leverage traditional EMS for clean
technology customers in areas related to power electronics, control and distribution, smart meters and full-system integration of complex industrial power inverters.
Beyond traditional EMS, our extensive range of electro-mechanical design and complex system manufacturing capabilities are an excellent fit across all clean
technology segments. Our design and manufacturing operations are strategically located in close proximity to clean technology business hubs.
Medical. We provide comprehensive manufacturing and related services to the medical industry, including design, logistics, repair and regulatory
services. The design, manufacturing and repair of products for the medical industry often requires compliance with domestic and foreign regulations, including the
Food and Drug Administration's (FDA's) quality system regulations and the European Union's medical device directive. In addition to complying with these
standards, our medical facilities comply with ISO 13485 (formerly EN 46002) and ISO 9001, where required. We manufacture components, sub-assemblies and
systems for a broad range of medical devices, including blood glucose meters, computed tomography scanner assemblies, respiration systems, blood analyzers,
molecular diagnostics, cosmetic surgery systems, ultrasound imaging systems and a variety of patient monitoring equipment.
Defense. We offer our end-to-end services to the defense, aerospace and high-reliability electronics industry. We design, manufacture and support a
comprehensive range of defense and aerospace products, including avionics systems and processors, cockpit and wireless communications systems, tactical and
secure network communications systems, radar subsystems, machine vision systems, unmanned aircraft airframes and avionics, and fiber-optic systems for defense
related applications. We believe our experience, as well as product design and engineering capabilities, are key competitive strengths in these markets.
Automotive. We provide manufacturing services to the automotive industry for sensors, controllers, engine control units, infotainment modules, eMobility
sub-modules, LIDAR, Electric Vehicle (EV) charging system sub-modules, heating ventilation and air-conditioning (HVAC) control modules, a wide array of
LED (Light Emitting Diode) interior and exterior light assemblies, as well as cables for interconnect solutions. We also provide design support, product and
process qualification, manufacturing, supply chain management, supplier quality assurance and end-of-life services. Substantially all of our automotive facilities
are IATF 16949 certified and produce printed circuit boards, printed circuit board assemblies, cable assemblies and higher level electronic assemblies.
Communications Networks
In the communications sector, we leverage our extensive product design and engineering capabilities to develop and manufacture advanced
communications productions and components for LTE, 5G and microwave wireless RF filters and antennas, wireline access, switching, routing, optical networking
and transmission and enterprise networking systems. Products we manufacture include wireless base stations, remote radio heads and small cells, point-to-point
microwave systems and other fronthaul/backhaul solutions, satellite receivers and various radio frequency appliances, optical PON, metro and long-haul,
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transmission hardware and switching along with core, service and edge routers. We also design and manufacture advanced optical, RF and microelectronic
components which are key elements in many of these products.
Cloud Solutions
We provide comprehensive design and manufacturing solutions, as well as BTO and CTO services, to the embedded computing and data storage markets.
We tightly couple our vertically integrated supply chain with manufacturing and logistics enabling the assembly and distribution of products all over the world. In
addition, we manufacture a broad range of products with embedded processor capabilities, including digital home gateways, professional audio-video equipment, a
variety of touch-screen equipment and internet connected entertainment devices. Our vertical integration capabilities include racks, enclosures, cables, complex
multi-layer printed circuit boards, printed circuit assemblies and backplanes, fiber optics and high-level assembly and test, direct order fulfillment and repair
services. In addition, we have designed and developed some of the most compact and powerful storage modules available in the market today, which we have
coupled with our global, vertically integrated supply chain to deliver some of the most compelling embedded computing and storage solutions to the data storage
industry.
Customers
Sales to our ten largest customers typically represent approximately 50% of our net sales. Nokia represented 10% or more of our net sales in 2020, 2019
and 2018.
We seek to establish and maintain long-term relationships with our customers. Historically, we have had substantial recurring sales from existing
customers. We seek to expand our customer base through our marketing and sales efforts as well as acquisitions. We have been successful in broadening
relationships with customers by providing vertically integrated products and services as well as multiple products and services in multiple locations.
We typically enter into supply agreements with our major OEM customers with terms ranging from three to five years. Our supply agreements generally
do not obligate the customer to purchase minimum quantities of products. However, the customer is typically liable for the cost of the materials and components
we have ordered to meet their production forecast but which are not used, provided that the material was ordered in accordance with an agreed-upon procurement
plan. In some cases, the procurement plan contains provisions regarding the types of materials for which our customers will assume responsibility. Our supply
agreements generally contain provisions permitting cancellation and rescheduling of orders upon notice and are subject to cancellation charges and, in some cases,
rescheduling charges. Order cancellation charges vary by product type, depending how far in advance of shipment a customer notifies us of an order cancellation.
In some circumstances, our supply agreements with customers include provisions for cost reduction objectives during the term of the agreement, which can have
the effect of reducing revenue and profitability from these arrangements.
Seasonality
Because of the diversity of our customer base, we generally have not experienced significant seasonality in our business in recent years. However, we
cannot predict whether this trend will continue.
Backlog
We generally do not obtain firm, long-term commitments from our customers and our customers usually do not make firm orders for product delivery
more than thirty to ninety days in advance. Additionally, customers may cancel or postpone scheduled deliveries, in some cases without significant penalty.
Therefore, we do not believe the backlog of expected product sales covered by firm orders is a meaningful measure of future sales.
Sales and Marketing
Our sales efforts are organized and managed on a regional basis with regional sales managers in geographic regions throughout the world.
We develop relationships with our customers and market our vertically integrated manufacturing solutions through our direct sales force and marketing
and sales staff. Our sales resources are directed at multiple management and staff levels within target accounts. Our direct sales personnel work closely with the
customers' engineering and technical personnel to understand their requirements. Our sales and marketing staff supports our business strategy of providing end-to-
end solutions by
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encouraging cross-selling of vertically integrated manufacturing solutions and component manufacturing across a broad range of major OEM products. To achieve
this objective, our marketing and sales staff works closely with our various manufacturing and design and engineering groups and engages in marketing and sales
activities targeted at key customer opportunities.
Each of our key customer accounts is managed by an account team, including a global account manager directly responsible for account management.
Global account managers coordinate activities across divisions to satisfy customer requirements and have direct access to our senior management to quickly
address customer concerns. Local customer account teams further support the global teams.
Competition
For our integrated manufacturing solutions business, we face competition from other major global EMS companies such as Benchmark Electronics, Inc.,
Celestica, Inc., Flex Ltd., Hon Hai Precision Industry Co., Ltd. (Foxconn), Jabil Inc. and Plexus Corp. Our components, products and services business faces
competition from EMS and non-EMS companies that often have a regional product, service or industry-specific focus. In addition, our potential customers may
also compare the benefits of outsourcing their manufacturing to us with the merits of manufacturing products themselves.
We compete with different companies depending on the type of solution or geographic area. We believe the primary competitive factors in our industry
include manufacturing technology, quality, global footprint, delivery, responsiveness, provision of value-added solutions and price. We believe our primary
competitive strengths include our ability to provide global end-to-end solutions, product design and engineering resources, vertically integrated manufacturing
solutions, advanced technologies, global manufacturing capabilities, global supplier base, customer focus and responsiveness, expertise in serving diverse end
markets, and expertise in industry standards and regulatory requirements.
Intellectual Property
We hold U.S. and foreign patents and patent applications relating to, among other things, printed circuit board manufacturing technology, enclosures,
cables, memory modules, optical technology, medical devices and computing and storage. For other proprietary processes, we rely primarily on trade secret
protection. A number of our patents have expired or will expire in the near term. The expiration and abandonment of patents reduces our ability to assert claims
against competitors or others who use similar technologies and to license such patents to third parties. We have registered a number of trademarks and have
pending trademark applications in both the U.S. and internationally.
Compliance with Government Regulations
Environmental Regulations
We are subject to a variety of local, state, federal and foreign environmental laws and regulations relating to the storage and use of hazardous materials
used in our manufacturing processes, as well as the storage, treatment, discharge, emission and disposal of hazardous waste that are by-products of these processes.
We are also subject to occupational safety and health laws, product labeling and product content requirements, either directly or as required by our customers.
Proper waste disposal is a major consideration for printed circuit board manufacturers due to the metals and chemicals used in the manufacturing process. Water
used in the printed circuit board manufacturing process must be treated to remove metal particles and other contaminants before it can be discharged into municipal
sanitary sewer systems. We operate on-site wastewater treatment systems at our printed circuit board manufacturing plants in order to treat wastewater generated in
the fabrication process.
Additionally, the electronics assembly process can generate lead dust. Upon vacating a facility, we are responsible for remediating lead dust from the
interior of the manufacturing facility. Although there are no applicable standards for lead dust remediation in manufacturing facilities, we endeavor to remove the
residues. To date, lead dust remediation costs have not been material to our results of operations. We also monitor for airborne concentrations of lead in our
buildings and are unaware of any significant lead concentrations in excess of the applicable OSHA or other local standards.
We have a range of corporate programs that aim to reduce the use of hazardous materials in manufacturing. We developed corporate-wide standardized
environmental management systems, auditing programs and policies to enable better management of environmental compliance activities. For example, almost all
of our manufacturing facilities are certified under ISO 14001, a set of standards and procedures relating to environmental compliance management. In addition, the
electronics industry must adhere to the European Union's Restrictions of Hazardous Substances (RoHS) and Waste Electrical and
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Electronic Equipment (WEEE). Parallel initiatives have been adopted in other jurisdictions throughout the world, including several states in the U.S. and the
Peoples' Republic of China. RoHS limits the use of lead, mercury and other specified substances in electronics products. WEEE requires producers to assume
responsibility for the collection, recycling and management of waste electronic products and components. We have implemented procedures intended to ensure our
manufacturing processes are compliant with RoHS and the European Union's Registration, Evaluation and Authorization of Chemicals (REACH) legislation, when
required. WEEE compliance is primarily the responsibility of OEMs.
Asbestos containing materials, or ACM, are present at several of our manufacturing facilities. Although ACM is being managed and controls have been
put in place pursuant to ACM operations and maintenance plans, the presence of ACM could give rise to remediation obligations and other liabilities.
Our facilities generally operate under environmental permits issued by governmental authorities. For the most part, these permits must be renewed
periodically and are subject to revocation in the event of violations of environmental laws. Any such revocation may require us to cease or limit production at one
or more of our facilities, adversely affecting our results of operations.
In connection with certain acquisitions, we have incurred liabilities associated with environmental contamination. These include ongoing investigation
and remediation activities at a number of current and former sites, including those located in Owego, New York; Derry, New Hampshire; and Brockville, Ontario.
In addition, we have been named in a lawsuit alleging operations at our current and former facilities in Orange County, California contributed to groundwater
contamination, and also have ongoing investigation activities at and adjacent to a former facility to determine the extent of any soil, soil vapor, and groundwater
contamination. Finally, there are some sites, including our acquired facility in Gunzenhausen, Germany, which are known to have groundwater contamination
caused by a third-party, and that third-party has provided indemnification to us for the related liability. However, in certain situations, third-party indemnities may
not be effective to reduce our liability for environmental contamination.
We use environmental consultants primarily for risk assessments and remediation, including remedial investigation and feasibility studies, remedial action
planning and design and site remediation. Our consultants provide information regarding the nature and extent of site contamination, acceptable remediation
alternatives and estimated costs associated with each remediation alternative. We consider their recommendations together with other information when
determining the appropriate amount to accrue for environmental liabilities.
Our capital expenditures for environmental control facilities were not material in any of the last three fiscal years and we do not expect to make material
expenditures for this purpose during the current fiscal year.
Other Regulations
We are also subject to a number of domestic and foreign regulations relating to our operations worldwide. In particular, our sales activities must comply
with restrictions relating to the export of controlled technology and sales to denied or sanctioned parties contained in the U.S. International Traffic in Arms
Regulations (ITAR), U.S. Export Administration Regulations and sanctions administered by the Office of Foreign Asset Controls of the U.S. Treasury Department
(OFAC). We must also comply with regulations relating to the award, administration and performance of U.S. government contracts and subcontracts with respect
to our defense business, including regulations that govern price negotiations, cost accounting standards, procurement practices, termination at the election of the
government and many other aspects of performance under government contracts and subcontracts. These regulations are complex, require extensive compliance
efforts and expenditures in the form of additional personnel, systems and processes, and, in some cases, require us to ensure that our suppliers adhere to such
regulations. Furthermore, our compliance with these regulations is subject to audit or investigation by governmental authorities and, from time to time, we receive
formal and informal inquiries from government agencies and regulators regarding our compliance. Should we be found to have violated one or more of such
regulations, we could become subject to civil damages (which in some cases can be trebled) or criminal penalties and administrative sanctions, including fines,
penalties, appointment of government monitors, termination of our government contracts and, ultimately, debarment from doing further business with the U.S.
government. Any of such results would increase our expenses, reduce our revenue and damage our reputation as both a commercial and government supplier.
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Human Capital Resources
General Information About Our Human Capital Resources
As of October 3, 2020, we had approximately 37,000 employees, including approximately 7,000 temporary employees, in 23 countries. Approximately
52% of our employees are located in the Americas, 11% are located in EMEA and 37% are located in China and Asia Pacific.
Core Principles
The principles of the Responsible Business Alliance (RBA) are fundamental to our corporate culture and core values and are reflected in our
commitments to our customers, stakeholders, employees and communities in which we do business around the world. These commitments drive us to provide a
safe and positive work environment for our employees that emphasizes learning and professional development, respect for individuals and ethical conduct, and that
is facilitated by a direct management-employee engagement model.
For over a decade, we have tracked human capital metrics that we consider to be key to our business, including health and safety, career growth and
development, turnover, hiring and diversity and inclusion. Management regularly reviews these metrics and seeks to improve them.
Health and Safety
The health and safety of our employees is of utmost important to us. We conduct regular self-assessments and audits to ensure compliance with our health
and safety guidelines and regulatory requirements. Our ultimate goal is to achieve a level of work-related injuries as close to zero as possible through continuous
investment in our safety programs. We provide protective gear (e.g. eye protection, masks and gloves) as required by applicable standards and as appropriate given
employee job duties. Additionally, during the COVID-19 pandemic, we have invested heavily to help ensure the health of our employees. Through the use of
education and awareness, provision of necessary PPE, and changes to our manufacturing sites and screening, we strive to make our workplaces a safe place for
employees during the workday.
Career Growth and Development
We invest resources in professional development and growth as a means of improving employee performance and improving retention. For example, we
launched our “Sanmina University” online training platform over a decade ago to provide employees with continuous learning, professional training and
development opportunities. Over 12,000 employees took courses on this platform in 2020. Our emphasis on employee retention, talent reviews, employee
evaluations and succession planning contributed to a promotion rate of approximately 5% in 2020.
Turnover
We continually monitor employee turnover rates, both regionally and as a whole, as our success depends upon retaining our highly trained manufacturing
and operating personnel. We believe the combination of competitive compensation and career growth and development opportunities have helped increase
employee tenure and reduce voluntary turnover. The average tenure of our employees is approximately eight years and more than one fourth of our employees
have been employed by us for more than ten years.
Hiring Practices
We recruit the best people for the job without regard to gender, ethnicity or other protected traits and it is our policy to comply fully with all domestic,
foreign and local laws relating to discrimination in the workplace.
Diversity and Inclusion
Recognizing and respecting our global presence, we strive to maintain a diverse and inclusive workforce everywhere we operate. Almost 50% of our
employees worldwide are female and, in the U.S., non-Caucasian employees account for more than 50% of the employee base. Our diversity and inclusion
principles are also reflected in our employee training, in particular with respect to our policies against harassment and bullying and the elimination of bias in the
workplace.
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Management Engagement Practices
We believe in a direct management-employee engagement model by which managers and employees maintain a regular dialogue about working
conditions, compensation, compliance, safety and advancement opportunities. This model is also reflected in our training programs, which emphasize the need to
report concerns about violations of policy or law. None of our U.S. employees are represented by a labor union. In some international locations, our employees are
represented by labor unions on either a national or plant level or are subject to collective bargaining agreements.
Available Information
Our Internet address is http://www.sanmina.com. We make available through our website, free of charge, our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange
Commission, or SEC. All reports we file with the SEC are also available free of charge via EDGAR through the SEC's website at http://www.sec.gov.
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The following table sets forth the name, position and age of our current executive officers and their ages as of October 31, 2020.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Name
Jure Sola
Kurt Adzema
Alan Reid
Dennis Young
Age
69
51
57
69
Position
Chairman and Chief Executive Officer
Executive Vice President, Chief Financial Officer
Executive Vice President, Global Human Resources
Executive Vice President, Worldwide Sales and Marketing
Jure Sola has served as our Chairman and Chief Executive Officer since August 2020. Prior to that time, from October 2017 until August 2020, Mr. Sola
served as our Executive Chairman. Mr. Sola also served as our Chief Executive Officer from April 1991 until October 2017, as Chairman of our Board of Directors
from April 1991 until December 2001 and from December 2002 until October 2017, and as Co-Chairman of our Board of Directors from December 2001 until
December 2002. In 1980, Mr. Sola co-founded Sanmina and initially held the position of Vice President of Sales. In October 1987, he became the Vice President
and General Manager of Sanmina, responsible for manufacturing operations, sales and marketing. Mr. Sola served as our President from October 1989 to March
1996.
Kurt Adzema has served as our Executive Vice President and Chief Financial Officer since October 2019. Mr. Adzema previously served as the
Executive Vice President, Finance and Chief Financial Officer of Finisar Corporation, an optical components company, from March 2010 until September 2019.
Prior to March 2010, Mr. Adzema held the positions of Vice President of Strategy and Corporate Development at Finisar, which he joined in 2005. Prior to joining
Finisar, Mr. Adzema held various positions at SVB Alliant, a subsidiary of Silicon Valley Bank which advised technology companies on merger and acquisition
transactions, at Montgomery Securities/Banc of America Securities, an investment banking firm, and in the financial restructuring group of Smith Barney.
Alan Reid has served as our Executive Vice President of Global Human Resources since October 2012. Mr. Reid has held various roles at Sanmina,
including Senior Vice President of Global Human Resources and Human Resources Director of EMEA, from July 2001 to October 2012. Prior to joining us, he
was Group Human Resources Manager at Kymata Ltd., an optoelectronic technology startup from June 2000 to July 2001. Prior to Kymata, Mr. Reid held various
roles in operations and human resources with The BOC Group PLC. (British Oxygen Company), a global industrial gases and engineering company, from
September 1986 to June 2000.
Dennis Young has served as our Executive Vice President of Worldwide Sales and Marketing since March 2003. Prior to joining Sanmina, Mr. Young
served as Senior Vice President of Sales from May 2002 to March 2003 and Vice President of Sales from March 1998 to May 2002, of Pioneer-Standard
Electronics, a provider of industrial and consumer electronic products.
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Item 1A. Risk Factors
End Market and Operational Risks
The COVID-19 pandemic has had, and will likely continue to have, a significant impact on our results of operations and financial condition by reducing
demand from our customers, interrupting the flow of components needed for our customers’ products, limiting the operations or productivity of our
manufacturing facilities, restricting the types of products we can build for our customers and creating health risks to our employees.
Our global operations expose us to the effects of the COVID-19 pandemic, which has now spread across the globe and is impacting economic activity
worldwide. In particular, the pandemic:
•
•
•
•
•
•
•
Resulted in the temporary closure of our facilities in China during the second quarter of 2020;
Reduced the amount of staffing we are permitted to maintain at certain of our plants;
Required us in some cases to pay staff who are not able to work due to government orders;
Limited the capacity of logistics providers to deliver the products we manufacture;
Reduced demand for certain of our customers’ products, particularly in the automotive end market;
Prevented us from building certain products not deemed as essential under local, state and national public health orders covering the locations of our
plants during portions of the second and third quarters of 2020; and
Resulted in interruptions of supply of components, either because our suppliers have themselves been prevented from operating or because major
distribution channels (e.g., sea transport) have been disrupted by the pandemic.
Collectively, these conditions reduced our revenue in the last nine months of our fiscal 2020 and it is unclear when these impacts will be fully resolved.
Further, although we have implemented infection control measures recommended or required by the applicable public health authorities, and have not to
date experienced a significant number of COVID-19 infections among our employees, should infections among our employees increase significantly, our
operations could be impacted if we become required to temporarily exclude significant numbers of employees from our plants due to either infection or exposure to
an infected person and/or close impacted plants in order to clean them or as a result of government orders. Furthermore, as a result of government orders, a large
number of our employees have been working remotely since the end of the second quarter of fiscal 2020. Although these restrictions have been relaxed in some
geographies, and we have not experienced any significant disruptions to date as a result of remote work arrangements, should a substantial number of our
employees supporting general and administrative functions, particularly at our California headquarters location, continue to be required to work remotely for an
extended period of time, we could experience disruptions and reduced efficiencies.
More generally, the COVID-19 pandemic raises the possibility of an extended global economic downturn and has caused volatility in financial markets,
which could affect demand for our products and services and impact our results and financial condition even after the pandemic is contained and the business
restrictions are lifted. In particular, the pandemic also increases the risk that our customers and suppliers will face financial difficulties, which could impact their
ability or willingness to satisfy their payment or delivery obligations to us. Although we have not experienced any significant increase in customer defaults as a
result of the pandemic to date, the risk of such defaults will increase if pandemic conditions do not end or if commercial and social restrictions originally put in
place in response to them by local, state and national governments are reinstituted. For example, both France and Germany have recently restored restrictions on
activity that had been lifted after the first phase of the pandemic.
We are unable to accurately predict the full impact that COVID-19 will have on us due to a number of uncertainties, including the impact of the pandemic
on our customers’ businesses, the number of employees who may become infected or exposed to infected persons who we would then be required to temporarily
exclude from our plants, the imposition of government restrictions on staffing and the types of products we are permitted to build, the need for temporary plant
closures, supply chain shortages and other interruptions, the duration of the outbreak, the geographic locations of any future outbreaks, and actions that government
authorities may take. However, we believe it is likely that the pandemic will continue to have a negative impact on our business, results of operations and financial
condition for the foreseeable future.
Adverse changes in the key end markets we target could harm our business by reducing our sales.
We provide products and services to companies that serve the industrial, medical, defense and aerospace, automotive, communications networks and
cloud solutions industries. Adverse changes in any of these end markets could reduce demand
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for our customers' products or make these customers more sensitive to the cost of our products and services, either of which could reduce our sales, gross margins
and net income. A number of factors could affect these industries in general and our customers in particular, leading to reductions in net sales. These factors
include:
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intense competition among our customers and their competitors, leading to reductions in prices for their products and increases in pricing pressure placed
on us;
failure of our customers' products to gain widespread commercial acceptance, which could decrease the volume of orders customers place with us. For
example, our sales and margins have been negatively impacted in the past by the slower than expected ramp of 5G programs by our communications
customers;
changes in regulatory requirements affecting the products we build for our customers, leading to product redesigns or obsolescence and potentially
causing us to lose business; and
recessionary periods in our customers' markets, which decrease orders from affected customers, such as the currently depressed conditions due to the
COVID-19 pandemic.
We realize a substantial portion of our revenues from communications equipment customers. This market is highly competitive, particularly in the area of
price. Should any of our larger customers in this market fail to effectively compete with their competitors, they could reduce their orders to us or experience
liquidity difficulties, either of which could have the effect of substantially reducing our revenue and net income. There can be no assurance that we will not
experience declines in demand in this or in other end markets in the future.
Our operating results are subject to significant uncertainties, which can cause our future sales, net income and cash generated from operations to be variable.
Our operating results can vary due to a number of significant uncertainties, including:
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our ability to replace declining sales from end-of-life programs and customer disengagements with new business wins;
conditions in the economy as a whole and in the industries we serve, which are being significantly impacted by the current COVID-19 pandemic;
fluctuations in component prices, component shortages and extended component lead times caused by high demand, natural disasters, epidemics or
pandemics, such as the COVID-19 pandemic, or otherwise;
timing and success of new product developments and ramps by our customers, which create demand for our services, but which can also require us to
incur start-up costs relating to new tooling and processes;
levels of demand in the end markets served by our customers;
timing of orders from customers and the accuracy of their forecasts;
inventory levels of customers, which if high relative to their normal sales volume, could cause them to reduce their orders to us;
customer payment terms and the extent to which we factor customer receivables during the quarter;
increasing labor costs in the regions in which we operate;
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margins than more complex and lower volume services;
our ability to pass tariffs through to our customers;
resolution of claims with our customers;
the degree to which we are able to fully utilize our available manufacturing capacity;
customer insolvencies resulting in bad debt or inventory exposures that are in excess of our reserves;
our ability to efficiently move manufacturing operations to lower cost regions when required;
changes in our tax provision due to changes in our estimates of pre-tax income in the jurisdictions in which we operate, uncertain tax positions, and our
ability to utilize our deferred tax assets; and
political and economic developments in countries in which we have operations, which could restrict our operations or those of our suppliers and/or
customers or increase our costs.
Variability in our operating results may also lead to variability in cash generated by operations, which can adversely affect our ability to make capital
expenditures, engage in strategic transactions and repurchase stock.
We are subject to risks arising from our international operations.
The substantial majority of our net sales are generated through our non-U.S. operations. As a result, we are affected by economic, political and other
conditions in the foreign countries in which we do business, including:
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changes in trade and tax laws that may result in us or our customers being subjected to increased taxes, duties and tariffs, which could increase our costs
and/or reduce our customers’ willingness to use our services in countries in which we are currently manufacturing their products;
rising labor costs;
compliance with foreign laws, including labor laws which generally provide for increased notice, severance and consultation requirements compared to
U.S. laws;
labor unrest, including strikes;
difficulties in staffing due to immigration or travel restrictions imposed by national governments, including the U.S.;
security concerns;
political instability and/or regional military tension or hostilities;
fluctuations in currency exchange rates, which may either increase or decrease our operating costs and for which we have significant exposure;
the imposition of currency controls;
exposure to heightened corruption risks;
aggressive, selective or lax enforcement of laws and regulations by national governmental authorities;
potentially increased risk of misappropriation of intellectual property; and
an outbreak of a contagious disease, such as COVID-19, which may cause us or our suppliers and/or customers to temporarily suspend our operations in
the affected city or country.
We operate in countries that have experienced labor unrest, political instability or conflict and strife, including Brazil, China, India, Israel, Malaysia,
Mexico and Thailand, and we have experienced work stoppages and similar disruptions in these foreign jurisdictions. To the extent such developments prevent us
from adequately staffing our plants and manufacturing and shipping products in those jurisdictions, our margins and net income could be reduced and our
reputation as a reliable supplier could be negatively impacted.
Certain of our foreign manufacturing facilities are leased from third parties. To the extent we are unable to renew the leases covering such facilities as
they expire on reasonable terms, or are forced to move our operations at those facilities to other locations as a result of a failure to agree upon renewal terms,
production for our customers may be interrupted, we may breach our customer agreements, we could incur significant start-up costs at new facilities and our lease
expense may increase, potentially significantly.
We rely on a relatively small number of customers for a substantial portion of our sales, and declines in sales to these customers could reduce our net sales and
net income.
Sales to our ten largest customers have historically represented approximately half of our net sales. We expect to continue to depend upon a relatively
small number of customers for a significant percentage of our sales for the foreseeable future. The loss of, or a significant reduction in sales or pricing to, our
largest customers could substantially reduce our revenue and margins.
Current U.S. trade policy could increase the cost of using both our onshore and offshore manufacturing services for our U.S. customers, leading them to
reduce their orders to us.
Although we maintain significant manufacturing capacity in the U.S., the substantial majority of our manufacturing operations are located outside the
U.S. This manufacturing footprint has allowed us to provide cost-effective volume manufacturing for our customers. As a result of continuing trade disputes, the
U.S., China, the E.U. and several other countries have imposed tariffs on certain imported products. In particular, the U.S. has imposed tariffs impacting certain
components and products imported from China by us into the U.S. These tariffs apply to both components imported into the U.S. from China for use in the
manufacture of products at our U.S. plants and to certain of our customers’ products that we manufacture for them in China and that are then imported into the U.S.
Any decision by a large number of our customers to cease using our manufacturing services due to the continued application of tariffs would materially reduce our
revenue and net income. In addition, our gross margins would be reduced in the event we are for any reason unable to pass on any tariffs that we incurred to our
customers. Although our customers are generally liable for tariffs we pay on their behalf on importation of components used in the manufacture of their products,
our gross margins would be reduced in the event we were for any reason unable to recover tariffs or duties from our customers. Further, although we are required
to pay tariffs upon importation of the components, we may not be able to recover these amounts from customers until sometime later, if at all, which would
adversely impact our operating cash flow in a given period.
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Our supply chain is subject to a number of economic, regulatory and environmental risks that could increase our costs or cause us to delay shipments to
customers, reducing our revenue and margins and increasing our inventory.
Our supply chain is subject to a number of risks and uncertainties. For example, we are dependent on certain suppliers, including limited and sole source
suppliers, to provide key components we incorporate into our products. We have in the past experienced, and may experience in the future, delays in delivery and
shortages of components, particularly certain types of capacitors, resistors and discrete semiconductors used in many of the products we manufacture. These
conditions, as well as the interruptions in supply of components and reduced capacity of logistics providers caused by the COVID-19 global pandemic, have
resulted and could in the future result in increased component prices and delays in product shipments to customers, both of which would decrease our revenue and
margins, as well as increase our inventory of other components, which would reduce our operating cash flow.
Our components are manufactured using a number of commodities, including petroleum, gold, copper and other metals that are subject to frequent and
unpredictable changes in price due to worldwide demand, investor interest and economic conditions. We do not hedge against the risk of these fluctuations, but
rather attempt to adjust our product pricing to reflect such changes. Should significant increases in commodities prices occur and should we not be able to increase
our product prices enough to offset these increased costs, our gross margins and profitability could decrease, perhaps significantly.
Concern over climate change has led to state, federal and international legislative and regulatory initiatives aimed at reducing carbon dioxide and other
greenhouse gas emissions and there is increased stockholder interest in corporate sustainability initiatives. Collectively, such initiatives could lead to an increase in
the price of energy over time. A sustained increase in energy prices for any reason could increase our raw material, components, operations and transportation
costs. We could also suffer reputational damage if our sustainability practices are not perceived to be adequate. Finally, government regulations, such as the Dodd-
Frank Act disclosure requirements relating to conflict minerals, and customer interest in responsible sourcing could decrease the availability and increase the prices
of components used in our customers' products. We may not be able to increase our product prices enough to offset these increased costs, in which case our
profitability would be reduced.
We rely on a variety of common carriers to transport our raw materials and components from our suppliers to us, and to transport our products to our
customers. The use of common carriers is subject to a number of risks, including increased costs due to rising energy prices and labor, vehicle and insurance costs,
and hijacking and theft resulting in losses of shipments, delivery delays resulting from labor disturbances and strikes and other factors beyond our control.
Although we attempt to mitigate our liability for any losses resulting from these risks through contracts with our customers, suppliers and insurance carriers, any
costs or losses that cannot be mitigated could reduce our profitability, require us to manufacture replacement product or damage our relationships with our
customers.
Cancellations, reductions in production quantities, delays in production by our customers and changes in customer requirements could reduce our sales and
net income.
We generally do not obtain firm, long-term purchase commitments from our customers and our bookings may generally be canceled prior to the
scheduled shipment date. Although a customer is generally liable for raw materials we procure on their behalf, finished goods and work-in-process at the time of
cancellation, the customer may fail to honor this commitment or we may be unable or, for other business reasons, choose not to enforce our contractual rights.
Cancellations, reductions or delays of orders by customers could increase our inventory levels, lead to write-offs of inventory that we are not able to resell to the
customer, reduce our sales and net income, delay or eliminate recovery of our expenditures for inventory purchased in preparation for customer orders and lower
our asset utilization, all of which could result in lower gross margins and lower net income.
Our strategy to pursue higher margin business depends in part on the success of our CPS business, which, if not successful, could cause our future gross
margins and operating results to be lower.
A key part of our strategy to capitalize on our end-to-end solutions is to grow our CPS business, which includes printed circuit boards, backplane and
cable assemblies and plastic injection molding, mechanical systems, memory, RF, optical and microelectronic solutions, defense and aerospace products and data
storage solutions and design, engineering, logistics and repair services. A decrease in orders for these components, products and services can have a
disproportionately adverse impact on our profitability since these components, products and services generally carry higher than average contribution margins than
our core IMS business. In addition, in order to grow this portion of our business profitably, we must continue to make substantial investments in the development
of our product development capabilities, research and development activities, test
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and tooling equipment and skilled personnel, all of which reduce our operating results in the short term. The success of our CPS business also depends on our
ability to increase sales of our proprietary products, convince our customers to agree to purchase our components for use in the manufacture of their products,
rather than directing us to buy them from third parties, and expand the number of our customers who contract for our design, engineering, logistics and repair
services. We may face challenges in achieving commercially viable yields and difficulties in manufacturing components in the quantities and to the specifications
and quality standards required by our customers, as well as in qualifying our components for use in our customers' designs. Our proprietary products and design,
engineering, logistics and repair services must compete with products and services offered by established vendors which focus solely on development of similar
technologies or the provision of similar services. Any of these factors could cause our CPS revenue and margins to be less than expected, which would have an
overall adverse and potentially disproportionate effect on our revenues and profitability.
Customer requirements to transfer business may increase our costs.
Our customers sometimes require that we transfer the manufacturing of their products from one of our facilities to another to achieve cost reductions,
tariff reductions and other objectives. These transfers have resulted in increased costs to us due to facility downtime, less than optimal utilization of our
manufacturing capacity and delays and complications related to the transition of manufacturing programs to new locations. These transfers, and any decision by a
significant customer to terminate manufacturing services in a particular facility, could require us to close or reduce operations at certain facilities and, as a result,
we may incur in the future significant costs for the closure of facilities, employee severance and related matters. We may be required to relocate additional
manufacturing operations in the future and, accordingly, we may incur additional costs that decrease our net income. Any of these factors could reduce our
revenues, increase our expenses and reduce our net income.
Liquidity and Credit Risks
We may be unable to generate sufficient liquidity to maintain or expand our operations, which may reduce the business our customers and vendors are able to
do with us and impact our ability to continue operations at current levels without seeking additional funding; we could experience losses if one or more
financial institutions holding our cash or other financial counterparties were to fail; repatriation of foreign cash could increase our taxes.
Our liquidity is dependent on a number of factors, including profitability, business volume, inventory requirements, the extension of trade credit by our
suppliers, the degree of alignment of payment terms from our suppliers with payment terms granted to our customers, investments in facilities and equipment,
acquisitions, repayments of our outstanding indebtedness, stock repurchase activity, the amount available under our accounts receivable sales programs and
availability under our revolving credit facility. In the event we need or desire additional liquidity to maintain or expand our business, make acquisitions or
repurchase stock, there can be no assurance that such additional liquidity will be available on acceptable terms or at all. A failure to maintain adequate liquidity
would prevent us from purchasing components and satisfying customer demand, which would reduce both our revenue and profitability.
Although we believe our existing cash resources and sources of liquidity, together with cash generated from operations, will be sufficient to meet our
working capital requirements for at least the next 12 months, should demand for our services change significantly over the next 12 months or should we experience
significant increases in delinquent or uncollectible accounts receivable for any reason, including in particular continued or worsening economic conditions caused
by the COVID-19 global pandemic, our cash provided by operations could decrease significantly and we could be required to seek additional sources of liquidity to
continue our operations at their current level. In such a case, there can be no assurance that such additional sources of financing would be available.
A principal source of our liquidity is our cash and cash equivalents, which are held with various financial institutions. Although we distribute such funds
among a number of financial institutions that we believe to be of high quality, there can be no assurance that one or more of such institutions will not become
insolvent in the future, in which case all or a portion of our uninsured funds on deposit with such institutions could be lost. In addition, a little more than one-third
of our cash and cash equivalents, and all of our short-term investments, are in the form of short-term time deposits and money market funds. Under certain market
conditions, the market value of these instruments can fall below the amount on deposit. Should this phenomenon, known as “breaking the buck,” occur and should
we seek to withdraw our cash equivalents at such time, we could receive less than the face value of our deposits. Finally, if one or more counterparties to our
interest rate or foreign currency hedging instruments were to fail, we could suffer losses and our hedging of risk could become less effective.
Additionally, a majority of our worldwide cash reserves are generated by, and therefore held in, foreign jurisdictions. Some of these jurisdictions restrict
the amount of cash that can be transferred to the U.S. or impose taxes and penalties on such transfers of cash. To the extent we have excess cash in foreign
locations that could be used in, or is needed by, our U.S.
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operations, we may incur significant foreign taxes to repatriate these funds which would reduce the net amount ultimately available for such purposes.
Our Amended Cash Flow Revolver contains covenants that may adversely impact our business; the failure to comply with such covenants or the occurrence of
an event of default could cause us to be unable to borrow additional funds and cause our outstanding debt to become immediately payable.
Our Amended Cash Flow Revolver contains a maximum leverage and minimum interest coverage ratio, in both cases measured on the basis of a trailing
12 month look-back period, and a number of restrictive covenants, including restrictions on incurring additional debt, making investments and other restricted
payments, selling assets and paying dividends, subject to certain exceptions, with which we must comply. Collectively, these covenants could constrain our ability
to grow our business through acquisition or engage in other transactions. Such facility also contains customary events of default, including that a material business
interruption or cessation has not occurred. Finally, such facility includes covenants requiring, among other things, that we file quarterly and annual financial
statements with the SEC, comply with all laws, pay all taxes and maintain casualty insurance. If we are not able to comply with these covenants or if an event of
default were to occur and not be cured, all of our outstanding debt could become immediately due and payable and the incurrence of additional debt under our
revolving credit facility would not be allowed, any of which would have a material adverse effect on our liquidity and ability to continue to conduct our business.
Our customers could experience credit problems, which could reduce our future revenues and net income.
Some companies in the industries for which we provide products have previously experienced significant financial difficulty, with a few filing for
bankruptcy in the past. Such financial difficulty, if experienced by one or more of our customers, may negatively affect our business due to the decreased demand
from these financially distressed customers, the lengthening of customer payment terms, the potential inability of these companies to make full payment on
amounts owed to us or to purchase inventory we acquired to support their businesses. Customer bankruptcies also entail the risk of potential recovery by the
bankruptcy estate of amounts previously paid to us that are deemed a preference under bankruptcy laws. There can be no assurance that additional customers will
not declare bankruptcy.
Regulatory, Compliance and Litigation Risks
We are subject to a number of U.S. export control and other regulatory requirements, the failure to comply with which could result in damages or reduction of
future revenue.
We are subject to a number of laws and regulations relating to the export of U.S. technology, anti-corruption and the award, administration and
performance of U.S. government contracts and subcontracts. In particular, our sales activities must comply with the restrictions relating to the export of controlled
technology and sales to denied or sanctioned parties contained in the International Traffic in Arms Regulations (ITAR), the U.S. Export Administration
Regulations and sanctions administered by the Office of Foreign Asset Controls of the U.S. Treasury Department (OFAC). We must also comply with the
regulations relating to the award, administration and performance of U.S. government contracts and subcontracts with respect to our defense business, including
regulations that govern price negotiations, cost accounting standards, procurement practices, termination at the election of the government and many other aspects
of performance under government contracts and subcontracts. These laws and regulations are complex, require extensive compliance efforts and expenditures in
the form of additional personnel, systems and personnel and, in some cases, require us to ensure that our suppliers adhere to such regulations. Furthermore, our
compliance with such regulations is subject to audit or investigation by governmental authorities and, from time to time, we receive formal and informal inquiries
from government agencies and regulators regarding our compliance. Should Sanmina be found to have violated one or more of such laws or regulations, we could
become subject to civil damages (which in some cases could be trebled) or criminal penalties and administrative sanctions, including appointment of government
monitors, termination of our government contracts and, ultimately, debarment from doing further business with the U.S. government. Any of such results would
increase our expenses, reduce our revenue and damage our reputation as both a commercial and government supplier.
If we are unable to protect our intellectual property or if we infringe, or are alleged to infringe, upon the intellectual property of others, we could be required to
pay significant amounts in costs or damages.
We rely on a combination of copyright, patent, trademark and trade secret laws and contractual restrictions to protect our intellectual property rights.
However, a number of our patents covering certain aspects of our manufacturing processes or products have expired and will continue to expire in the future. Such
expirations reduce our ability to assert claims against
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competitors or others who use or sell similar technology. Any inability to protect our intellectual property rights could diminish or eliminate the competitive
advantages that we derive from our proprietary technology.
We are also subject to the risk that current or former employees violate the terms of their proprietary information agreements with us. Should a current or
former employee use or disclose any of our or our customers' proprietary information, we could become subject to legal action by our customers or others, our key
technologies could become compromised and our ability to compete could be adversely impacted.
In addition, we may become involved in administrative proceedings, lawsuits or other proceedings if others allege that the products we manufacture for
our customers or our own manufacturing processes and products infringe on their intellectual property rights. If successful, such claims could force our customers
and us to stop importing or producing products or components of products that use the challenged intellectual property, to pay up to treble damages and to obtain a
license to the relevant technology or to redesign those products or services so as not to use the infringed technology. The costs of defense and potential damages
and/or impact on production of patent litigation could be significant and have a materially adverse impact on our financial results. In addition, although our
customers typically indemnify us against claims that the products we manufacture for them infringe others’ intellectual property rights, there is no guaranty that
these customers will have the financial resources to stand behind such indemnities should the need arise, nor is there any guarantee that any such indemnity could
be fully enforced. We sometimes design products on a contract basis or jointly with our customers. In such situations, we may become subject to claims that
products we design infringe third party intellectual property rights and may also be required to indemnify our customer against liability caused by such claims.
Any of these events could reduce our revenue, increase our costs and damage our reputation with our customers.
If we manufacture or design defective products, if there are manufacturing defects in the components we incorporate into customer products or if our
manufacturing processes do not comply with applicable statutory and regulatory requirements and standards, we could be subject to claims, damages and fines
and lose customers.
We manufacture products to our customers' specifications, and in some cases our manufacturing processes and facilities need to comply with various
statutory and regulatory requirements and standards. For example, many of the medical products that we manufacture, as well as the facilities and manufacturing
processes that we use to produce them, must comply with standards established by the U.S. Food and Drug Administration and products we manufacture for the
automotive end market are generally subject to the ISO/TS 16949:2009 standard. In addition, our customers' products and the manufacturing processes that we use
to produce them often are highly complex. As a result, products that we design or manufacture may at times contain design or manufacturing defects, and our
manufacturing processes may be subject to errors or may not be in compliance with applicable statutory and regulatory requirements and standards. Finally,
customer products can experience quality problems or failures as a result of defects in the components they specify to be included in the products we manufacture
for them. Defects in the products we design or manufacture, even if caused by components specified by the customer, may result in product recalls, warranty
claims by customers, including liability for repair costs, delayed shipments to customers or reduced or canceled customer orders. The failure of the products that
we design or manufacture or of our manufacturing processes and facilities to comply with applicable statutory and regulatory requirements and standards may
subject us to legal fines or penalties, cause us to lose business and, in some cases, require us to shut down or incur considerable expense to correct a manufacturing
program or facility. In addition, these defects may result in product liability claims against us. The magnitude of such claims may increase as we continue to
expand our presence in the medical and automotive end markets since defects in these types of products can result in death or significant injury to end users of
these products. Even when our customers are contractually responsible for defects in the design of a product and defects in components used in the manufacture of
such products, there is no guarantee that these customers will have the financial resources to indemnify us for such liabilities and we could nonetheless be required
to expend significant resources to defend ourselves if named in a product liability suit over such defects. Additionally, insolvency of our customers may result in us
being held ultimately liable for our customers’ design defects, which could significantly reduce our net income.
Allegations of failures to comply with domestic or international employment and related laws could result in the payment of significant damages, which would
reduce our net income.
We are subject to a variety of domestic and foreign employment laws, including those related to safety, wages and overtime, discrimination, organizing,
whistle-blowing, classification of employees, privacy and severance payments. We may be required to defend against allegations that we have violated such laws.
For example, in October 2018, a contractor who had been retained by us through a third-party temporary staffing agency from November 2015 to March 2016 filed
a lawsuit against us in the Santa Clara County Superior Court on behalf of himself and all other similarly situated Company contractors and
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employees in California, alleging violations of California Labor Code provisions governing overtime, meal and rest periods, wages, wage statements and
reimbursement of business expenses. Allegations that we have violated labor laws could lead to damages being awarded to employees or fines from or settlements
with plaintiffs or federal, state or foreign regulatory authorities, the amounts of which could be substantial, and which would reduce our net income.
Any failure to comply with applicable environmental laws could adversely affect our business by causing us to pay significant amounts for cleanup of
hazardous materials or for damages or fines.
We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, generation, storage,
discharge and disposal of hazardous substances and waste in the ordinary course of our manufacturing operations. If we violate environmental laws or if we own or
operate, or owned or operated in the past, a site at which we or a predecessor company caused contamination, we may be held liable for damages and the costs of
remedial actions. Although we estimate and regularly reassess our potential liability with respect to violations or alleged violations and accrue for such liability,
our accruals may not be sufficient. Any increase in existing reserves or establishment of new reserves for environmental liability would reduce our net income. Our
failure or inability to comply with applicable environmental laws and regulations could also limit our ability to expand facilities or could require us to acquire
costly equipment or to incur other significant expenses to comply with these laws and regulations.
Partly as a result of certain of our acquisitions, we have incurred liabilities associated with environmental contamination. These liabilities include ongoing
investigation and remediation activities at a number of current and former sites. The time required to perform environmental remediation can be lengthy and there
can be no assurance that the scope, and therefore cost, of these activities will not increase as a result of the discovery of new contamination or contamination on
adjoining landowner's properties or the adoption of more stringent regulatory standards covering sites at which we are currently performing remediation activities.
We cannot assure that past disposal activities will not result in liability that will materially affect us in the future, nor can we provide assurance that we do
not have environmental exposures of which we are unaware and which could adversely affect our future operating results. Changes in or restrictions on discharge
limits, emissions levels, permitting requirements and material storage or handling could require a higher than anticipated level of remediation activities, operating
expenses and capital investment or, depending on the severity of the impact of the foregoing factors, costly plant relocation, any of which would reduce our net
income.
Cyberattacks and other disruptions of our information technology ("IT") network and systems could interrupt our operations, lead to loss of our customer and
employee data and subject us to damages.
We rely on internal and cloud-based networks and systems furnished by third parties for worldwide financial reporting, inventory management,
procurement, invoicing, employee payroll and benefits administration and email communications, among other functions. In addition, our 42Q manufacturing
execution solutions software used by us and certain of our customers operates in the cloud. Despite our business continuity planning, including redundant data sites
and network availability, both our internal and cloud-based infrastructure may be susceptible to outages due to fire, floods, power loss, telecommunications
failures, terrorist attacks and similar events. In addition, despite the implementation of network security measures that we believe to be reasonable, both our
internal and our cloud-based infrastructure may also be vulnerable to hacking, computer viruses, the installation of malware and similar disruptions either by third
parties or employees with access to key IT infrastructure. Cybersecurity attacks can come in many forms, including distributed denial of service attacks, advanced
persistent threat, phishing and business email compromise efforts. Hacking, malware and other cybersecurity attacks, if not prevented, could lead to the collection
and disclosure of sensitive personal or confidential information relating to our customers, employees or others, exposing us to legal liability and causing us to
suffer reputational damage. In addition, our SCI defense division is subject to U.S. government regulations requiring the safeguarding of certain unclassified
government information and to report to the U.S. government certain cyber incidents that affect such information. The increasing sophistication of cyberattacks
requires us to continually evaluate new technologies and processes intended to detect and prevent these attacks. Our insurance coverage for cyber-attacks is
limited. There can be no assurance that the security measures we choose to implement will be sufficient to protect the data we manage. If we and our cloud
infrastructure vendors are not successful in preventing such outages and cyberattacks, our operations could be disrupted, we could incur losses, including losses
relating to claims by our customers, employees or privacy regulators relating to loss of personal or confidential business information, the willingness of customers
to do business with us may be damaged and, in the case of our defense business, we could be debarred from future participation in U.S. government programs.
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Changes in financial accounting standards or policies have affected, and in the future may affect, our reported financial condition or results of operations;
there are inherent limitations to our system of internal controls; changes in securities laws and regulations have increased, and are likely to continue to
increase, our operating costs.
We prepare our consolidated financial statements in conformity with GAAP. Our preparation of financial statements in accordance with GAAP requires
that we make estimates and assumptions that affect the recorded amounts of assets, liabilities and net income during the reporting period. A change in the facts and
circumstances surrounding those estimates could result in a change to our estimates and could impact our future operating results.
These principles are subject to interpretation by the Financial Accounting Standards Board ("FASB"), the SEC and various bodies formed to interpret and
create accounting policies. A change in those policies can have a significant effect on our reported results and may affect our reporting of transactions which are
completed before a change is announced. For example, in fiscal 2019, we implemented the new revenue recognition standard, which is complex and requires
significant management judgment. Although we believe the judgments we applied in implementation of the new revenue recognition standard are appropriate,
there can be no assurance that we will not be required to change our judgments relating to implementation of such standard in the future, whether as a result of new
guidance or otherwise. A significant change in our accounting judgments could have a significant impact on our reported revenue, gross profits or balance sheets.
In general, changes to accounting rules or challenges to our interpretation or application of the rules by regulators may have a material adverse effect on our
reported financial results or on the way we conduct business.
Our system of internal and disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives. However, no
evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been or will be detected. As a
result, there can be no assurance that our system of internal and disclosure controls and procedures will be successful in preventing all errors, theft and fraud, or in
informing management of all material information in a timely manner. Furthermore, due to the health risks caused by the COVID-19 global pandemic to
employees who operate and monitor our internal controls and due to the requirement that a large number of employees work remotely, the COVID-19 global
pandemic impact on staffing could cause challenges for the effective operation of our internal controls.
Finally, corporate governance, public disclosure and compliance practices continue to evolve based upon continuing legislative action, SEC rulemaking
and stockholder activism. As a result, the number of rules and regulations applicable to us may increase, which could also increase our legal and financial
compliance costs and the amount of time management must devote to compliance activities. Increasing regulatory burdens could also make it more difficult for us
to attract and retain qualified members of our Board of Directors, particularly to serve on our Audit Committee, and qualified executive officers in light of an
increase in actual or perceived workload and liability for serving in such positions.
General Risk Factors
We are subject to intense competition in the EMS industry, which could cause us to lose sales and, therefore, harm our financial performance.
The EMS industry is highly competitive and the industry has experienced a surplus of manufacturing capacity. Our competitors include major global
EMS providers, including Benchmark Electronics, Inc., Celestica, Inc., Flex Ltd., Hon Hai Precision Industry Co., Ltd. (Foxconn), Jabil Circuit, Inc. and Plexus
Corp., as well as other companies that have a regional, product, service or industry-specific focus. We also face competition from current and potential OEM
customers who may elect to manufacture their own products internally rather than outsourcing to EMS providers.
Competition is based on a number of factors, including end markets served, price and quality. We may not be able to offer prices as low as some of our
competitors for any number of reasons, including the willingness of competitors to provide EMS services at prices we are unable or unwilling to offer. There can
be no assurance that we will win new business or maintain existing business due to competitive factors, which could decrease our sales and net income. In addition,
due to the extremely price sensitive nature of our industry, business that we do win or maintain may have lower margins than our historical or target margins. As a
result, competition may cause our gross and operating margins to fall.
Consolidation in the electronics industry may adversely affect our business by increasing customer buying power and increasing prices we pay for components.
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Consolidation in the electronics industry among our customers, our suppliers and/or our competitors may increase, which could result in a small number
of very large electronics companies offering products in multiple sectors of the electronics industry. In addition, if one of our customers is acquired by another
company that does not rely on us to provide EMS services, we may lose that customer's business. Similarly, consolidation among our suppliers could result in a
sole or limited source for certain components used in our customers' products. Any such consolidation could cause us to be required to pay increased prices for
such components, which could reduce our gross margin and profitability.
Unanticipated changes in our tax rates or exposure to additional tax liabilities could increase our taxes and decrease our net income; our projections of future
taxable income that drove the release of our valuation allowance in prior years could prove to be incorrect, which could cause a charge to earnings; recent
corporate tax reform measures have reduced the value of our deferred tax assets and could result in taxation of untaxed foreign earnings.
We are or may become subject to income, sales, value-added, goods and services, withholding and other taxes in the United States and various foreign
jurisdictions. Significant judgment is required in determining our worldwide provision for taxes and, in the ordinary course of business, there are many transactions
and calculations for which the ultimate tax determination is uncertain. Our effective tax rates and liability for other taxes could increase as a result of changes in
the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in enacted tax laws, the
effectiveness of our cash and tax management strategies, our ability to negotiate advance pricing agreements with foreign tax authorities, compliance with local
trade laws and other factors. Recent international initiatives require multinational enterprises, like ours, to report profitability on a country-by-country basis, which
could increase scrutiny by foreign tax authorities. In addition, our tax determinations are regularly subject to audit by tax authorities. For example, we are currently
undergoing audits of our tax returns for certain recent tax years in a number of jurisdictions, including the United States. Developments in these or future audits
could adversely affect our tax provisions, including through the disallowance or reduction of deferred tax assets or the assessment of back taxes, interest and
penalties, any of which could result in an increase to income tax expense and therefore a decrease in our net income.
We can experience losses due to foreign exchange rate fluctuations and currency controls, which could reduce our net income and impact our ability to
repatriate funds.
Because we manufacture and sell the majority of our products abroad, our operating results can be negatively impacted due to fluctuations in foreign
currency exchange rates, particularly in volatile currencies to which we are exposed, such as the Euro, Mexican peso, Malaysian ringgit, Chinese renminbi and
Brazilian real. We use financial instruments, primarily short-term foreign currency forward contracts, to hedge our exposure to exchange rate fluctuations.
However, the success of our foreign currency hedging activities in preventing foreign exchange losses depends largely upon the accuracy of our forecasts of future
sales, expenses, capital expenditures and monetary assets and liabilities. As such, our foreign currency hedging program may not fully cover our exposure to
exchange rate fluctuations. If our hedging activities are not successful, our net income may be reduced. In addition, certain countries in which we operate have
adopted currency controls requiring that local transactions be settled only in local currency rather than in our functional currency, which is generally different than
the local currency. Such controls could require us to hedge larger amounts of local currency than we otherwise would and/or prevent us from repatriating cash
generated by our operations in such countries.
We may not have sufficient insurance coverage for potential claims and losses, which could leave us responsible for certain costs and damages.
We carry various forms of business and liability insurance in types and amounts we believe are reasonable and customary for similarly situated companies
in our industry. However, our insurance program does not generally cover losses due to failure to comply with typical customer warranties for workmanship,
product and medical device liability, intellectual property infringement, product recall claims, certain natural disasters, such as earthquakes, epidemics or
pandemics, such as the COVID-19 outbreak, and environmental contamination. In addition, our policies generally have deductibles and/or limits or may be limited
to certain lines or business or customer engagements that reduce the amount of our potential recoveries from insurance. As a result, not all of our potential business
losses are covered under our insurance policies. Should we sustain a significant uncovered loss, our net income will be reduced. Additionally, if one or more
counterparties to our insurance coverage were to fail, we would bear the entire amount of an otherwise insured loss.
Recruiting and retaining our key personnel is critical to the continued growth of our business.
Our success depends upon the continued service of our key personnel, particularly our highly skilled sales and operations executives, managers and
engineers with many years of experience in electronics and contracts manufacturing. Such
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individuals can be difficult to identify, recruit and retain and are heavily recruited by our competitors. Should any of our key employees choose to retire or
terminate their employment with us, we will be required to replace them with new employees with the required experience. Should we be unable to recruit new
employees to fill key positions with us, our operations, financial controls and growth prospects could be negatively impacted.
We may not be successful in implementing and integrating strategic transactions or in divesting assets or businesses, which could harm our operating results;
we could become required to book a charge to earnings should we determine that goodwill and other acquired assets are impaired.
From time to time, we may undertake strategic transactions that give us the opportunity to access new customers and new end markets, increase our
proprietary product offerings, obtain new manufacturing and service capabilities and technologies, enter new geographic manufacturing locations, lower our
manufacturing costs and increase our margins, and to further develop existing customer relationships. Strategic transactions involve a number of risks,
uncertainties and costs, including integrating acquired operations and workforce, businesses and products, resolving quality issues involving acquired products,
incurring severance and other restructuring costs, diverting management attention, maintaining customer, supplier or other favorable business relationships of
acquired operations, terminating unfavorable commercial arrangements, losing key employees, integrating the systems of acquired operations into our management
information systems and satisfying the liabilities of acquired businesses, including liability for past violations of law and material environmental liabilities. Any of
these risks could cause our strategic transactions not to be ultimately profitable.
In addition, we have in the past recorded, and may be required to record in the future, goodwill and other intangible assets in connection with our
acquisitions. We evaluate, at least on an annual basis, whether events or circumstances have occurred that indicate all, or a portion, of the carrying amount of our
goodwill and other intangible assets may no longer be recoverable. Should we determine in the future that our goodwill or other intangible assets have become
impaired, an impairment charge to earnings would become necessary, which could be significant. For example, during our fiscal 2018 annual goodwill impairment
analysis, we fully impaired goodwill of $31 million associated with the acquisition of a storage software business we purchased in 2016.
We are subject to risks associated with natural disasters and global events.
We conduct a significant portion of our activities, including manufacturing, administration and information technology management in areas that have
experienced natural disasters, such as major earthquakes, hurricanes, floods, tsunamis and epidemics or pandemics, such as the COVID-19 outbreak. Our insurance
coverage with respect to damages to or closure of our facilities, or damages to our customers' products caused by natural disasters, is limited and is subject to
policy deductibles, coverage limits, and exclusions, and as a result, may not be sufficient to cover all of our losses. For example, our policies have very limited
coverage for damages due to earthquakes or losses caused by business disruptions. In addition, such coverage may not continue to be available at commercially
reasonable rates and terms. In the event of a major earthquake or other disaster affecting one or more of our facilities, our operations and management information
systems, which control our worldwide procurement, inventory management, shipping and billing activities, could be significantly disrupted. Such events could
delay or prevent product manufacturing for an extended period of time. Any extended inability to continue our operations at affected facilities following such an
event could reduce our revenue.
Risks Of Investing In Our Stock
The market price of our common stock is volatile and is impacted by factors other than our financial performance.
The stock market in recent years has experienced significant price and volume fluctuations that have affected our stock price. Recent stock market
fluctuations related to the current COVID-19 pandemic have been particularly significant. These fluctuations have often been unrelated to our operating
performance. Factors that can cause such fluctuations include announcements by our customers, competitors or other events affecting companies in the electronics
industry, currency fluctuations, the impact of natural disasters and global events, such as the current COVID-19 pandemic, general market fluctuations and
macroeconomic conditions, any of which may cause the market price of our common stock to fluctuate widely.
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Item 1B. Unresolved Staff Comments
None.
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Item 2. Properties
Facilities. Our customers sell their products throughout the world and therefore need access to manufacturing services globally. For this reason, we
maintain facilities both near our major customers and their end markets and also in lower cost locations, including Latin America, Eastern Europe, China, India and
Southeast Asia. Many of our plants located near customers or their end markets are focused primarily on new product introduction and high-level assembly and
test, and plants located in lower cost areas are engaged primarily in higher volume, less complex component and subsystem manufacturing and assembly.
We continually evaluate our global manufacturing operations and adjust our facilities and operations to keep our manufacturing capacity in line with
demand and our manufacturing strategy and to provide cost efficient services to our customers. As a result, we have closed certain facilities not required to satisfy
current demand levels in the past and may continue to do so in the future.
As of October 3, 2020, the approximate square footage of our active manufacturing facilities by country was as follows:
Australia
Brazil
Canada
China
Columbia
Czech Republic
England
Finland
Germany
Hungary
India
Ireland
Israel
Malaysia
Mexico
Singapore
South Africa
Scotland
Sweden
Thailand
United States
Total
Approximate
Square Footage
42,334
241,435
136,237
2,095,419
2,721
70,870
11,174
128,405
363,134
499,661
366,278
120,000
182,292
501,843
2,417,424
533,858
3,810
30,581
102,526
326,293
2,762,879
10,939,174
As of October 3, 2020, our active manufacturing facilities consist of nine million square feet in facilities that we own and two million square feet in leased
facilities with lease terms expiring between 2021 and 2042.
We regularly evaluate our expected future facilities requirements and believe our existing facilities are adequate to meet our requirements for the next 12
months.
Certifications and Registrations. Certifications and registrations under industry standards are important to our business because many customers rely on
them to confirm our adherence to manufacturing process and quality standards. Certain markets, such as telecommunications, medical, defense, aerospace,
automotive and oil and gas, require adherence to industry-specific standards. Substantially all of our manufacturing facilities are certified to ISO 9001:2015, a
standard published by the International Organization for Standardization. As part of the ISO 9001:2015 certification process, we have a highly developed quality
management system and continually improve its effectiveness in accordance with its requirements. We use this
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certification to demonstrate our ability to consistently provide product that meets customer and applicable regulatory requirements and enhance customer
satisfaction through its effective application.
In addition to ISO 9001:2015, many of our facilities are TL 9000 6.0 certified. The TL 9000 quality system requirements and quality system metrics are
designed specifically for the telecommunications industry to promote consistency and efficiency, reduce redundancy and improve customer satisfaction. Included
in the TL 9000 system are performance-based metrics that quantify reliability and quality performance of the product. The majority of our facilities are also
compliant with the standards set by Underwriters Laboratories (UL). These standards define requirements for quality, manufacturing process control and
manufacturing documentation and are required by many OEMs in the communications sector of the electronics industry.
Our medical systems division has identified certain manufacturing facilities to be centers of excellence for medical products manufacturing. These
facilities are ISO 13485:2016 certified and, where appropriate, FDA registered and MDSAP certified. All such facilities are fully compliant with the FDA's quality
systems regulations.
Our defense and aerospace operations are headquartered in Huntsville, Alabama and are housed in a facility dedicated to meeting the specialized needs of
our defense and aerospace customers. These defense and aerospace operations are AS9100 2016 certified and maintain other certifications in accordance with
various U.S. military specifications, ANSI and other standards as appropriate for defense and aerospace suppliers. Other selected operations around the world are
also AS9100 2016 certified.
Our automotive facilities are strategically located worldwide. Substantially all of our automotive facilities are certified to IATF16949:2016, the
automotive industry standard.
Our oil and gas related manufacturing operations are, as applicable, certified to American Petroleum Institute (API) requirements.
Item 3. Legal Proceedings
In June 2008, the Company was named by the Orange County Water District in a suit alleging that its actions contributed to polluted groundwater
managed by the plaintiff. The complaint seeks recovery of compensatory and other damages, as well as declaratory relief, for the payment of costs necessary to
investigate, monitor, remediate, abate and contain contamination of groundwater within the plaintiff’s control. In April 2013, all claims against the Company were
dismissed. The plaintiff appealed this dismissal and the appellate court reversed the judgment in August 2017. In November 2017, the California Supreme Court
denied the Company’s petition to review this decision and, in December 2017, the Court of Appeals remanded the case back to the Superior Court for further
proceedings. The first part of a multi-phase trial is scheduled to commence on April 12, 2021. The Company intends to contest the plaintiff’s claims vigorously.
In October 2018, a contractor who had been retained by the Company through a third party temporary staffing agency from November 2015 to March
2016 filed a lawsuit against the Company in the Santa Clara County Superior Court on behalf of himself and all other similarly situated Company contractors and
employees in California, alleging violations of California Labor Code provisions governing overtime, meal and rest periods, wages, wage statements and
reimbursement of business expenses. The complaint seeks certification of a class of all non-exempt employees, whether employed directly or through a temporary
staffing agency, employed from four years before the filing of the initial complaint to the time of trial. Additionally, on November 1, 2019, another contractor
retained through a temporary staffing agency filed a lawsuit against the Company in the Santa Clara County Superior Court. The complaint, which includes a
single cause of action under California’s Private Attorneys General Act of 2004, alleges Labor Code violations substantially similar to those alleged in the October
2018 class action lawsuit and seeks penalties on behalf of the State of California and other “aggrieved employees” (defined to be current and former hourly, non-
exempt employees employed by the Company between August 22, 2018 and the present). The Company intends to vigorously defend these matters.
On December 20, 2019, the Company sued its former customer, Dialight plc (“Dialight”), in the United States District Court for the Southern District of
New York to collect approximately $10 million in unpaid accounts receivable and net obsolete inventory obligations. Later the same day, Dialight commenced its
own action in the same court. Dialight’s complaint, which asserts claims for fraudulent inducement, breach of contract and gross negligence/willful misconduct,
alleges that Sanmina fraudulently misrepresented its capabilities to induce Dialight to enter into a Manufacturing Services Agreement (“Dialight MSA”), and then
breached its obligations under the Dialight MSA relating to quality, on-time delivery and supply
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chain management. Dialight seeks an unspecified amount of compensatory and punitive damages. The Company intends to vigorously prosecute its claim against
Dialight. Further, the Company strongly disagrees with Dialight’s allegations and intends to defend against them vigorously.
In addition, from time to time, we may become involved in routine legal proceedings, demands, claims, threatened litigation and regulatory inquiries and
investigations, that arise in the normal course of our business. We record liabilities for such matters when a loss becomes probable and the amount of loss can be
reasonably estimated. The ultimate outcome of any litigation is uncertain and unfavorable outcomes could have a negative impact on our results of operations and
financial condition. Regardless of outcome, litigation can have an adverse impact on us as a result of incurrence of litigation costs, diversion of management
resources, and other factors.
See also Note 10 of Notes to Consolidated Financial Statements.
Item 4. Mine Safety Disclosures.
Not applicable.
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Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
PART II
Our common stock is traded on the Nasdaq Global Select Market under the symbol SANM. As of November 5, 2020, we had approximately 873 holders
of record of our common stock.
The following graph compares the cumulative 5-year total stockholder return on our common stock relative to the cumulative total returns of the S&P 500
index and the NASDAQ Electronic Components index. An investment of $100 (with reinvestment of all dividends, if any) is assumed to have been made in our
common stock on October 3, 2015 and in each of such indices at month end starting on October 3, 2015 and its relative performance is tracked through October 3,
2020.
* $100 invested on 10/3/2015, including reinvestment of dividends, as applicable. Indexes calculated on a month-end basis.
Copyright @ 2020 Standard & Poor's, a division of S&P Global. All rights reserved.
Sanmina Corporation
S&P 500
NASDAQ Electronic Components
10/3/2015
10/1/2016
9/30/2017
9/29/2018
9/28/2019
10/3/2020
100.00
100.00
100.00
133.22
115.43
137.85
173.84
136.91
189.88
129.15
161.43
219.72
150.30
168.30
231.54
124.24
193.80
339.75
Sanmina's stock price performance included in this graph is not necessarily indicative of future stock price performance.
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Dividends
We have never declared or paid cash dividends on our common stock. We currently expect to retain future earnings for use in our operations, for
expansion of our business, and potentially for share repurchases and do not anticipate paying cash dividends in the foreseeable future. Additionally, our ability to
pay dividends is limited pursuant to covenants contained in our various debt agreements. See also “Item 7-Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources.”
Stock Repurchases
In October 2019, our Board of Directors authorized us to repurchase up to an additional $200 million of our common stock in the open market or in
negotiated transactions off the market. This program has no expiration date.
The table below sets forth information regarding repurchases of our common stock during the fourth quarter of 2020.
Period (1)
Month #1
June 28, 2020 through July 25, 2020
Month #2
July 26, 2020 through August 22, 2020
Month #3
August 23, 2020 through October 3, 2020
Total
(1) All months shown are our fiscal months.
TOTAL NUMBER OF
SHARES PURCHASED
AVERAGE PRICE
PAID PER SHARE
(2)
TOTAL NUMBER OF
SHARES PURCHASED
AS PART OF PUBLICLY
ANNOUNCED
PROGRAMS
MAXIMUM DOLLAR
VALUE OF SHARES
THAT MAY YET BE
PURCHASED UNDER
THE PROGRAMS
(2)
992,781
—
2,009,971
3,002,752
$
$
$
$
24.46
—
26.96
26.13
992,781
—
2,009,971
3,002,752
$
$
$
188,947,750
188,947,750
134,752,463
(2) Amounts do not include commission payable on shares repurchased. The total average price paid per share is a weighted average based on the total number
of shares repurchased during the period.
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Item 6. Selected Financial Data
The following selected financial data should be read in conjunction with “Item 7-Management's Discussion and Analysis of Financial Condition and
Results of Operations” and “Item 8-Financial Statements and Supplementary Data,” included elsewhere in this Form 10-K.
Consolidated Statements of Operations Data:
FIVE YEAR SELECTED FINANCIAL HIGHLIGHTS
Net sales
Operating income
Income from continuing operations before income taxes
Provision for income taxes (1)
Net income (loss)
Net income (loss) per share:
Basic
Diluted
Shares used in computing per share amounts:
Basic
Diluted
October 3, 2020
September 28,
2019
Year Ended
September 29,
2018
September 30,
2017
October 1, 2016
$
$
$
$
(In thousands, except per share data)
$
$
$
$
6,960,370
227,687
200,758
61,045
139,713
2.02
1.97
69,041
70,793
$
$
$
$
8,233,859
286,117
245,619
104,104
141,515
2.05
1.97
69,129
71,678
$
$
$
$
7,110,130
119,441
97,539
193,072
(95,533)
(1.37)
(1.37)
69,833
69,833
$
$
$
$
6,868,619
226,467
213,480
74,647
138,833
1.86
1.78
74,481
78,128
6,481,181
224,785
204,617
16,779
187,838
2.50
2.38
75,094
78,787
(1) We released $96.2 million of valuation allowance attributable to certain U.S. and foreign deferred tax assets in 2016, upon our conclusion that it was more
likely than not that we would be able to realize the benefit of a portion of our deferred tax assets in the future. Further, income tax expense in 2018 was unusually
high due to a $161 million non-cash charge upon enactment of the U.S. Tax Cuts and Jobs Act.
Consolidated Balance Sheets Data:
Cash and cash equivalents
Net working capital (1)
Total assets
Long-term debt (excluding current portion)
Stockholders' equity
October 3, 2020
September 28,
2019
As of
September 29,
2018
(In thousands)
September 30,
2017
October 1, 2016
$
$
$
$
$
480,526
1,296,853
3,772,656
329,249
1,629,916
$
$
$
$
$
454,741
1,237,907
3,905,513
346,971
1,642,573
$
$
$
$
$
419,528
612,532
4,085,133
14,346
1,472,844
$
$
$
$
$
406,661
1,000,207
3,847,363
391,447
1,647,684
$
$
$
$
$
398,288
974,389
3,652,222
434,059
1,609,803
(1) The reduction in net working capital from 2017 to 2018 resulted primarily from the reclassification of our Secured Notes due in 2019 from long-term debt to
current debt. The increase in net working capital from 2018 to 2019 resulted primarily from the issuance of a $375 million Term Loan due in 2023, the proceeds of
which were used to repay the Secured Notes due in 2019.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are
statements that could be deemed to be forward-looking statements, including any statements regarding trends in future revenue or results of operations, gross
margin, operating margin, expenses, earnings or losses from operations, cash flow; any statements of the plans, strategies and objectives of management for future
operations and the anticipated benefits of such plans, strategies and objectives; any statements regarding future economic conditions or performance; any
statements regarding pending investigations, claims or disputes; any statements regarding the timing of closing of, future cash outlays for, and benefits of
acquisitions; any statements regarding expected restructuring costs and benefits; any statements concerning the adequacy of our current liquidity and the
availability of additional sources of liquidity; any statements regarding the potential or expected impact of the COVID-19 pandemic on our business, results of
operations and financial condition; any statements regarding the impact of future potential tariffs on our business; any statements regarding the impact of changes
in tax laws; any statements relating to the expected impact of accounting pronouncements not yet adopted; any statements regarding future repurchases of our
common stock; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Generally, the words “anticipate,”
“believe,” “plan,” “expect,” “future,” “intend,” “may,” “will,” “should,” “estimate,” “predict,” “potential,” “continue” and similar expressions identify
forward-looking statements. Our forward-looking statements are based on current expectations, forecasts and assumptions and are subject to risks and
uncertainties, including those contained in Part I, Item 1A of this report. As a result, actual results could vary materially from those suggested by the forward
looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring
subsequent to filing this report with the Securities and Exchange Commission. Investors and others should note that the Company announces material financial
information to its investors using its investor relations website (http://ir.sanmina.com/investor-relations/overview/default.aspx), SEC filings, press releases, public
conference calls and webcasts. The Company uses these channels to communicate with its investors and the public about the Company, its products and services
and other issues. It is possible that the information the Company posts on its investor relations website could be deemed to be material information. Therefore, the
Company encourages investors, the media, and others interested in the Company to review the information it posts on its investor relations website. The contents
of our investor relations website are not incorporated by reference into this annual report on Form 10-K or in any other report or document we file with the SEC.
Overview
We are a leading global provider of integrated manufacturing solutions, components, products and repair, logistics and after-market services. Our revenue
is generated from sales of our products and services primarily to original equipment manufacturers (OEMs) that serve the industrial, medical, defense and
aerospace, automotive, communications networks and cloud solutions industries.
Our operations are managed as two businesses:
1) Integrated Manufacturing Solutions (IMS). Our IMS segment consists of printed circuit board assembly and test, high-level assembly and test, and
direct-order-fulfillment.
2) Components, Products and Services (CPS). Components include interconnect systems (printed circuit board fabrication, backplane, cable assemblies
and plastic injection molding) and mechanical systems (enclosures and precision machining). Products include memory from our Viking
Technology division; enterprise solutions from our Viking Enterprise Solutions division; RF, optical and microelectronic; defense and aerospace
products from SCI Technology; and cloud-based manufacturing execution software from our 42Q division. Services include design, engineering,
logistics and repair services.
Our only reportable segment for financial reporting purposes is IMS, which represented approximately 80% of our total revenue in 2020. Our CPS
business consists of multiple operating segments which do not individually meet the quantitative thresholds for being presented as reportable segments under the
accounting rules for segment reporting. Therefore, financial information for these operating segments is aggregated and presented in a single category entitled
“Components, Products and Services”.
All references in this section to years refer to our fiscal years ending on the Saturday nearest to September 30. Fiscal 2020 is a 53-week year, with the
extra week occurring during the fourth quarter of 2020. Fiscal 2019 and 2018 were each 52 weeks.
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Our strategy is to leverage our comprehensive product and service offerings, advanced technologies and global capabilities to further penetrate diverse
end markets that we believe offer significant growth opportunities and have complex products that require higher value-added services. We believe this strategy
differentiates us from our competitors and will help drive more sustainable revenue growth and provide opportunities for us to ultimately achieve operating
margins that exceed industry standards.
There are many challenges to successfully executing our strategy. For example, we compete with a number of companies in each of our key end markets.
This includes companies that are much larger than we are and smaller companies that focus on a particular niche. Although we believe we are well-positioned in
each of our key end markets and seek to differentiate ourselves from our competitors, competition remains intense and profitably growing our revenues has been
challenging. In addition, the COVID-19 global pandemic created a unique and challenging environment in which our revenue and profitability in 2020 have been
significantly impacted and will likely continue to be negatively impacted in at least the near term.
In March 2020, the World Health Organization declared COVID-19 to be a pandemic. During the last nine months of our fiscal 2020, our results of
operations were negatively impacted by rapidly changing market and economic conditions caused by the COVID-19 outbreak, as well as by numerous measures
imposed by government authorities to try to contain the virus. These conditions and measures disrupted our operations and those of our customers, interrupted the
supply of components, limited the types of products we can manufacture and the capacity of our logistics providers to deliver those products, and resulted in
temporary closures of manufacturing sites and reduced staffing as mandated by government orders. Although employee infections have not yet had a significant
impact on our operations, they do require us to perform contact tracing, exclude potentially infected employees from the workplace and clean work areas used by
infected employees. Should employee infections become widespread, they would have a significant and negative impact on our ability to sustain production at
desired levels. We are unable to accurately predict the full impact that COVID-19 will have on us due to a number of uncertainties, including the impact of the
pandemic on our customers' businesses, the number of employees who may become infected or exposed to infected persons who we would then be required to
exclude from our plants, the imposition of government restrictions on staffing and the types of products we are permitted to build, the need for temporary plant
closures, supply chain shortages and other interruptions, the duration of the outbreak, the geographic locations of any future outbreaks, and actions that government
authorities may take. However, it is likely that the pandemic will continue to have a negative impact on our business, results of operations and financial condition
for the foreseeable future.
Separately, we incurred restructuring charges of $18 million, consisting of severance costs, under our company-wide restructuring plan adopted in
October 2019 ("Q1 FY20 Plan"). Additional actions under this plan are expected to be implemented through the second quarter of fiscal 2021 and cash payments
of severance are expected to occur through the fourth quarter of fiscal 2021.
Sales to our ten largest customers typically represent approximately 50% of our net sales in any given year. Sales to Nokia represented 10% or more of
our net sales in 2020, 2019 and 2018.
We typically generate about 80% of our net sales from products manufactured in our foreign operations. The concentration of foreign operations has
resulted primarily from a desire on the part of many of our customers to manufacture in lower cost locations in regions such as Asia, Latin America and Eastern
Europe.
Historically, we have had substantial recurring sales to existing customers. We typically enter into supply agreements with our major OEM customers.
These agreements generally have terms ranging from three to five years and cover the manufacture of a range of products. Under these agreements, a customer
typically agrees to purchase its requirements for specific products in particular geographic areas from us. However, these agreements generally do not obligate the
customer to purchase minimum quantities of products. In addition, some customer contracts contain cost reduction objectives, which can have the effect of
reducing revenue from such customers.
The U.S., China, the E.U. and several other countries have imposed tariffs impacting certain imported products. Although our customers are generally
liable to us for reimbursement of tariffs we pay on components imported for the manufacture of their products, there can be no assurance that we will be successful
in recovering all of the tariffs that are owed to us. Unrecovered tariffs paid on behalf of our customers reduce our gross margins. Also, although we are required to
pay tariffs upon importation of the components, we may not recover these amounts from customers until sometime later, which adversely impacts our operating
cash flow in a given period. However, we currently do not expect the net impact of tariffs, after recovery from customers, to be material to us.
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Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which
have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). We review the accounting policies used in
reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, net sales and expenses and related disclosure of contingent liabilities. On an ongoing basis, we evaluate the process used to develop
estimates related to accounts receivable, inventories, income taxes, environmental matters, litigation and other contingencies. We base our estimates on historical
experience and on various other assumptions that we believe are reasonable for making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Due to the COVID-19 global pandemic, the global economy and financial markets have been disrupted and there is a
significant amount of uncertainty about the length and severity of the consequences caused by the pandemic. We have considered information available to us as of
the date of issuance of these financial statements and, other than the impairments described in Note 5, are not aware of any specific events or circumstances that
would require an update to our estimates or judgments, or a revision to the carrying value of our assets or liabilities. Our estimates may change as new events occur
and additional information becomes available. Our actual results may differ materially from these estimates.
We believe the following critical accounting policies reflect the more significant judgments and estimates used by us in preparing our consolidated
financial statements:
Revenue Recognition. We derive revenue principally from sales of integrated manufacturing solutions, components and Company-proprietary products.
Other sources of revenue include logistic and repair services; design, development and engineering services; defense and aerospace programs; and sales of raw
materials to customers whose requirements change after we have procured inventory to fulfill the customer’s forecasted demand.
For purposes of determining when to recognize revenue, and in what amount, we apply a 5-step model: (1) identify the contract with a customer; (2)
identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the
contract; and (5) recognize revenue when (or as) we satisfy a performance obligation. Each of these steps involves the use of significant judgments.
We recognize revenue for the majority of our contracts on an over time basis. This is due to the fact that 1) we do not have an alternative use for the end
products we manufacture for our customers and have an enforceable right to payment, including a reasonable profit, for work-in-progress upon a customer’s
cancellation of a contract for convenience or 2) our customer simultaneously receives and consumes the benefits provided by our services. For these contracts,
revenue is recognized on an over time basis using the cost-to-cost method (ratio of costs incurred to date to total estimated costs at completion) which we believe
best depicts the transfer of control to the customer. Revenue streams for which revenue is recognized on an over time basis include sales of vertically integrated
manufacturing solutions (integrated manufacturing solutions and components); logistics and repair services; design, development and engineering services; and
defense and aerospace programs.
Application of the cost-to-cost method for government contracts in our Defense and Aerospace division requires the use of significant judgments with
respect to estimated materials, labor and subcontractor costs. This division is an operating segment whose results are aggregated with ten other operating segments
and reported under CPS for segment reporting purposes. In 2020, CPS revenue and gross profit was $1.3 billion and $157 million, respectively.
We update our estimates of materials, labor and subcontractor costs on a quarterly basis. These updated estimates are reviewed each quarter by a group of
employees that includes representatives from numerous functions such as engineering, materials, contracts, manufacturing, program management, finance and
senior management. If a change in estimate is deemed necessary, the impact of the change is recognized in the period of change.
For contracts for which revenue is required to be recognized at a point-in-time, we recognize revenue when we have transferred control of the related
goods, which generally occurs upon shipment or delivery of the goods to the customer. Revenue streams for which revenue is recognized at a point-in-time include
Company-proprietary products and sales of raw materials.
Inventories— We state inventories at the lower of cost (first-in, first-out method) and net realizable value. Cost includes raw materials, labor and
manufacturing overhead. We regularly evaluate the carrying value of our inventories and make provisions to reduce excess and obsolete inventories to their
estimated net realizable values. The ultimate realization of
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inventory carrying amounts is affected by changes in customer demand for inventory that customers are not contractually obligated to purchase and inventory held
for specific customers who are experiencing financial difficulties. Inventory write-downs are recorded based on forecasted demand, past experience with specific
customers, the ability to redistribute inventory to other programs or return inventories to our suppliers, and whether customers are contractually obligated and have
the ability to pay for the related inventory. Certain payments received from customers for inventories that have not been shipped to customers or otherwise
disposed of are netted against inventory.
We generally procure inventory based on specific customer orders and forecasts. Customers generally have limited rights of modification (for example,
rescheduling or cancellations) with respect to specific orders. Customer modifications of orders affecting inventory previously procured by us and our purchases of
inventory beyond customer needs may result in excess and obsolete inventory. Although we may be able to use some excess inventory for other products we
manufacture, a portion of this excess inventory may not be returnable to vendors or recoverable from customers. Write-offs or write-downs of inventory could be
caused by:
• changes in customer demand for inventory, such as cancellation of orders, and our purchases of inventory beyond customer needs that result in excess
quantities on hand that we are not able to return to the vendor, use to fulfill orders from other customers or charge back to the customer;
• financial difficulties experienced by specific customers for whom we hold inventory; and
• declines in the market value of inventory.
Long-lived Assets—We review property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset or asset group may not be recoverable. An asset group is the unit of accounting that represents the lowest level for which identifiable cash flows
are largely independent of the cash flows of other groups of assets. An asset or asset group is considered impaired if its carrying amount exceeds the undiscounted
future net cash flows the asset or asset group is expected to generate. If an asset or asset group is considered impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the asset or asset group exceeds its fair value. For asset groups for which a building is the primary asset, we
estimate fair value primarily based on data provided by commercial real estate brokers. For other assets, we estimate fair value based on projected discounted
future net cash flows, which requires significant judgment.
Income Taxes— We estimate our income tax provision or benefit in each of the jurisdictions in which we operate, including estimating exposures related
to examinations by taxing authorities. We believe our accruals for tax liabilities are adequate for all open years based on our assessment of many factors, including
past experience and interpretations of tax law applied to the facts of each matter. Although we believe our accruals for tax liabilities are adequate, tax regulations
are subject to interpretation and the tax controversy process is inherently lengthy and uncertain; therefore, our assessments can involve a series of complex
judgments about future events and rely heavily on estimates and assumptions. To the extent the probable tax outcome of these matters changes, such changes in
estimate will impact our income tax provision in the period in which such determination is made. We only recognize or continue to recognize tax positions that
meet a “more likely than not” threshold of being upheld. Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax
expense.
We must also make judgments regarding the realizability of 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. We evaluate positive
and negative evidence each reporting period when assessing the need for a valuation allowance. A valuation allowance is established for deferred tax assets if we
believe realization of such assets is not more likely than not. Our judgments regarding future taxable income may change due to changes in market conditions, new
or modified tax laws, tax planning strategies or other factors. If our assumptions, and consequently our estimates, change in the future, the valuation allowances we
have established may be increased or decreased, resulting in a respective increase or decrease in income tax expense.
Our effective tax rate is highly dependent upon the amount and geographic distribution of our worldwide income or losses, the tax regulations, rates and
holidays in each geographic region, the utilization of net operating losses, the availability of tax credits and carryforwards, and the effectiveness of our tax planning
strategies.
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Results of Operations
Years Ended October 3, 2020, September 28, 2019 and September 29, 2018.
The following table presents our key operating results.
Net sales
Gross profit
Gross margin
Operating expenses
Operating income
Operating margin
Net income (loss) (1)
October 3,
2020
Year Ended
September 28,
2019
(In thousands)
September 29,
2018
6,960,370
525,707
7.6 %
298,020
227,687
3.3 %
139,713
$
$
$
$
$
8,233,859
591,938
7.2 %
305,821
286,117
3.5 %
141,515
$
$
$
$
$
7,110,130
463,783
6.5 %
344,342
119,441
1.7 %
(95,533)
$
$
$
$
$
(1) Our net loss in 2018 includes the impact of the Tax Act, which resulted in a one-time non-cash charge to income tax expense of $161 million.
Net Sales
Net sales decreased from $8.2 billion for 2019 to $7.0 billion for 2020, a decrease of 15.5%. Net sales increased from $7.1 billion for 2018 to $8.2 billion
for 2019, an increase of 15.8%. Sales by end market were as follows:
October 3, 2020
Year Ended
September 28,
2019
September 29,
2018
2020 vs. 2019
2019 vs. 2018
Increase/(Decrease)
Increase/(Decrease)
Industrial, Medical, Defense and Automotive
Communications Networks
Cloud Solutions
Total
$
$
4,127,720
2,323,712
508,938
6,960,370
$
$
4,572,006
2,906,575
755,278
8,233,859
$
$
(Dollars in thousands)
3,681,788
2,684,609
743,733
7,110,130
$
$
(444,286)
(582,863)
(246,340)
(1,273,489)
(9.7)% $
(20.1)%
(32.6)%
(15.5)% $
890,218
221,966
11,545
1,123,729
24.2 %
8.3 %
1.6 %
15.8 %
Comparison of 2020 to 2019 by End Market
The decrease in sales was caused primarily by two factors. First, sales in 2019 were favorably impacted by the increased availability of components, the
availability of which had been constrained in 2018. Improved availability of these components in 2019 allowed us to catch up to pent-up demand, beginning in the
first quarter of 2019 and continuing throughout 2019. Secondly, beginning in the second quarter of 2020, our sales were negatively impacted by the COVID-19
global pandemic, which resulted in supply shortages, restrictions on the types of products we could manufacture and disruptions to our operations and those of our
customers.
Comparison of 2019 to 2018 by End Market
In addition to the impact of improved availability of components as discussed above, sales to customers in our industrial, medical, defense and automotive
markets increased primarily as a result of program ramps and new customer programs, and sales to customers in our communications networks end market
increased primarily as a result of new program wins for optical, routing and 5G products.
Gross Margin
Gross margin was 7.6%, 7.2% and 6.5% in 2020, 2019 and 2018, respectively. IMS gross margin increased to 6.7% in 2020 from 6.4% in 2019. The
increase was primarily due to cost reduction and containment efforts implemented in 2020, some of which were in response to the COVID-19 global pandemic.
Additionally, our self-insured medical claims in the U.S. were
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significantly lower in 2020 primarily because elective medical procedures were suspended in most states throughout a portion of the year due to the COVID-19
global pandemic. Lastly, certain of our foreign subsidiaries received government subsidies in 2020 to help mitigate the impact of COVID-19. We do not expect to
receive the same level of funding in the future. CPS gross margin increased to 11.5% in 2020 from 10.0% in 2019. The increase was primarily due to continued
benefits of certain plant closures during the past two years and the factors described above with respect to IMS gross margin.
The increase in gross margin from 2018 to 2019 was primarily due to increased revenue levels and improved operational efficiencies. IMS gross margin
increased to 6.4% in 2019, from 6.0% in 2018, due primarily to increased revenue and inefficiencies in 2018 ramping certain new programs. CPS gross margin
increased to 10.0% in 2019, from 8.1% in 2018, primarily due to operational improvements and continued benefits of certain plant closures during the past 18
months.
We have experienced fluctuations in gross margin in the past and may continue to do so in the future. Fluctuations in our gross margin may be caused by
a number of factors, including:
•
•
•
•
•
•
•
the ongoing impacts of the COVID-19 global pandemic on our operations and those of our suppliers and on our customers' businesses;
changes in the overall volume of our business, which affect the level of capacity utilization;
changes in the mix of high and low margin products demanded by our customers;
greater competition in the EMS industry and pricing pressures from OEMs due to greater focus on cost reduction;
provisions for excess and obsolete inventory, including those associated with distressed customers;
levels of operational efficiency and production yields; and
our ability to transition the location of and ramp manufacturing and assembly operations when requested by a customer in a timely and cost-effective
manner.
Selling, General and Administrative
Selling, general and administrative expenses were $240.9 million, $260.0 million and $250.9 million in 2020, 2019 and 2018, respectively. As a
percentage of net sales, selling, general and administrative expenses were 3.5%, 3.2% and 3.5% for 2020, 2019 and 2018, respectively. The decrease in 2020 in
absolute dollars was primarily due to lower incentive compensation expense, reduced headcount in 2020 as a result of actions under our Q1 FY20 restructuring
plan, and reduced travel and certain other expenses in 2020 in response to the COVID-19 global pandemic. The increase in 2019 in absolute dollars was due
primarily to higher incentive compensation expense attributable to our improved financial performance in fiscal year 2019.
Research and Development
Research and development expenses were $22.6 million, $27.6 million and $30.8 million in 2020, 2019 and 2018, respectively. As a percentage of net
sales, research and development expenses were 0.3%, 0.3% and 0.4% in 2020, 2019 and 2018, respectively. The decrease in absolute dollars from 2019 to 2020
resulted primarily from reduced headcount as a result of consolidating engineering resources in our enterprise computing and storage end market. The decrease in
absolute dollars from 2018 to 2019 was primarily due to an increase in billable customer engineering projects that required our engineering resources.
Restructuring
Restructuring costs were $27 million, $14 million, and $29 million in 2020, 2019, and 2018, respectively.
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The following table is a summary of restructuring costs:
Severance costs (approximately 2,350 employees)
Other exit costs (recognized as incurred)
Total - Q1 FY20 plan
Severance costs (approximately 2,900 employees)
Other exit costs (recognized as incurred)
Total
Severance reimbursement
Total - Q1 FY18 Plan
Costs incurred for other plans
Total - all plans
Q1 FY20 Plan
October 3, 2020
Year Ended
September 28, 2019
(In thousands)
September 29, 2018
$
$
17,919
71
17,990
178
1,971
2,149
—
2,149
6,644
26,783
$
$
$
—
—
—
1,900
3,247
5,147
—
5,147
8,606
13,753
—
—
—
26,425
4,984
31,409
(10,000)
21,409
7,737
29,146
On October 28, 2019, we adopted a Company-wide restructuring plan ("Q1 FY20 Plan"). Additional actions under this plan are expected to be
implemented through the second quarter of fiscal 2021 and cash payments of severance are expected to occur through the fourth quarter of fiscal 2021.
Q1 FY18 Plan
All actions under our Q1 FY18 Plan have been implemented and all severance has been paid. In connection with this plan, we entered into a contractual
agreement with a third party pursuant to which $10 million of severance and retention costs incurred by us was reimbursed. Costs incurred for other exit costs
consist primarily of costs to maintain vacant facilities that are owned.
Other plans
Other plans include a number of plans for which costs are not expected to be material individually or in the aggregate.
All Plans
Our Integrated Manufacturing Solutions ("IMS") segment incurred costs of $13 million for the year ended October 3, 2020. This compares to a benefit
incurred of $4 million for the year ended September 28, 2019, primarily as a result of a recovery from a third party of certain environmental remediation costs. Our
CPS segment incurred costs of $9 million and $18 million for the years ended October 3, 2020 and September 28, 2019, respectively. In addition, $5 million of
costs were incurred during the year ended October 3, 2020 for Corporate headcount reductions that were not allocated to our IMS and CPS segments. We had
accrued liabilities of $9 million and $5 million as of October 3, 2020 and September 28, 2019, respectively, for restructuring costs (exclusive of long-term
environmental remediation liabilities).
In addition to costs expected to be incurred under the Q1 FY20 Plan and Q1 FY18 Plan, we expect to incur restructuring costs in future periods primarily
for vacant facilities and former sites for which we are or may be responsible for environmental remediation.
Goodwill Impairment
During the second quarter of 2020, commodity prices in the oil and gas market experienced a sharp decline due to a combination of an oversaturated
supply and a decrease in demand caused by the COVID-19 global pandemic. This commodity price decline negatively impacted the projected cash flows of our oil
and gas reporting unit, which is part of our CPS operating segment. Therefore, we performed a goodwill impairment test for this particular reporting unit and
concluded that the fair value
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of the reporting unit was below its carrying value, resulting in an impairment charge of $7 million. The fair value of the reporting unit was estimated based on the
present value of future discounted cash flows. We had no such charges in 2019.
During our 2018 annual goodwill impairment analysis, we concluded that the fair value of one of our CPS operating segments was below its carrying
value, resulting in an impairment charge of $31 million. The fair value of the reporting unit was estimated based on the present value of future discounted cash
flows.
Interest Expense
Interest expense was $28.9 million, $30.8 million and $27.7 million in 2020, 2019 and 2018, respectively. Interest expense increased $3.0 million in 2019
primarily due to higher daily average borrowings on our revolving credit facility during the year driven by higher inventory levels early in the year.
Other Income (Expense), net
Other income (expense), net consists of numerous items including fees paid in connection with sales of accounts receivable, gains or losses on deferred
compensation assets, pension service costs, foreign currency remeasurement gains or losses, etc. Other was a net expense of $0.3 million in 2020, a net expense of
$10.8 million in 2019 and a net income of $4.6 million 2018. The fluctuations between periods were caused by many factors, the most significant of which was the
amount of accounts receivable we sold in each period and the resulting amount of fees incurred for such sales. We sold $1.7 billion of accounts receivable in 2020,
compared to $2.7 billion in 2019 and $0.9 billion in 2018.
Provision for Income Taxes
We recorded income tax expense of $61.0 million, $104.1 million and $193.1 million in 2020, 2019 and 2018, respectively. Our effective tax rate was
30.4%, 42.4% and 197.9% for 2020, 2019 and 2018, respectively. Our effective tax rate for 2020 was lower than 2019 primarily due to a tax-related restructuring
transaction in 2019 that resulted in deferred tax expense of $22 million.
Our effective tax rate for 2019 was lower than 2018 primarily due to the impact of the U.S. Tax Cuts and Jobs Act in 2018, which increased tax expense
$161 million because of a non-cash reduction in the carrying value of our net deferred tax assets, partially offset by a decrease in the U.S. tax rate from 35% to
21%, and a $4.8 million discrete tax benefit resulting from a settlement with a foreign tax audit in the third quarter of 2018.
A valuation allowance is established or maintained when, based on currently available information and other factors, it is more likely than not that all or a
portion of the deferred tax assets will not be realized. We regularly assess our valuation allowance against deferred tax assets on a jurisdiction by jurisdiction basis.
We consider all available positive and negative evidence, including future reversals of temporary differences, projected future taxable income, tax planning
strategies and recent financial results. Significant judgment is required in assessing our ability to generate revenue, gross profit, operating income and jurisdictional
taxable income in future periods.
Liquidity and Capital Resources
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes
Increase in cash and cash equivalents
October 3,
2020
Year Ended
September 28,
2019
(In thousands)
September 29,
2018
$
$
300,555
(64,409)
(210,280)
(81)
25,785
$
$
382,965
(127,641)
(220,218)
107
35,213
$
$
156,424
(116,178)
(28,335)
956
12,867
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Key Working Capital Management Measures
Days sales outstanding (1)
Contract asset days (2)
Inventory turns (3)
Days inventory on hand (4)
Accounts payable days (5)
Cash cycle days (6)
October 3,
2020
54
20
7.3
50
70
54
As of
September 28,
2019
56
19
7.7
47
70
52
(1) Days sales outstanding (a measure of how quickly we collect our accounts receivable), or "DSO", is calculated as the ratio of average accounts receivable, net,
to average daily net sales for the quarter.
(2) Contract asset days (a measure of how quickly we transfer contract assets to accounts receivable) are calculated as the ratio of average contract assets to
average daily net sales for the quarter.
(3) Inventory turns (annualized) (a measure of how quickly we sell inventory) are calculated as the ratio of four times our cost of sales for the quarter to average
inventory.
(4) Days inventory on hand (a measure of how quickly we turn inventory into sales) is calculated as the ratio of average inventory for the quarter to average daily
cost of sales for the quarter.
(5) Accounts payable days (a measure of how quickly we pay our suppliers), or "DPO", is calculated as the ratio of 365 days to accounts payable turns, in which
accounts payable turns is calculated as the ratio of four times our cost of sales for the quarter to average accounts payable.
(6) Cash cycle days (a measure of how quickly we convert investments in inventory to cash) is calculated as days inventory on hand plus days sales outstanding
minus accounts payable days.
Cash and cash equivalents were $481 million at October 3, 2020 and $455 million at September 28, 2019. Our cash levels vary during any given period
depending on the timing of collections from customers and payments to suppliers, borrowings under credit facilities, sales of accounts receivable under numerous
programs we utilize, repurchases of capital stock and other factors. Our working capital was approximately $1.3 billion and $1.2 billion at October 3, 2020 and
September 28, 2019, respectively.
Net cash provided by operating activities was $301 million, $383 million and $156 million for 2020, 2019 and 2018, respectively. Cash flows from
operating activities consists of: (1) net income adjusted to exclude non-cash items such as depreciation and amortization, deferred income taxes and stock-based
compensation expense and (2) changes in net operating assets, which are comprised of accounts receivable, contract assets, inventories, prepaid expenses and other
assets, accounts payable, accrued liabilities and other long-term liabilities. Our working capital metrics tend to fluctuate from quarter-to-quarter based on factors
such as the linearity of our shipments to customers and purchases from suppliers, customer and supplier mix, and payment terms with customers and suppliers.
These fluctuations can significantly affect our cash flows from operating activities.
During 2020, we generated $302 million of cash from earnings, excluding non-cash items, and used $1 million of cash because of an increase in our net
operating assets and liabilities. Our net sales in the fourth quarter of 2020 decreased 1% from net sales in the fourth quarter of 2019. This relatively consistent level
of business volume resulted in a relatively consistent level of net operating assets and liabilities, despite certain significant fluctuations within individual
components of operating assets and liabilities. For example, cash generated from reductions in 2020 of $84 million and $40 million in accounts receivable and
inventories, respectively, was used to reduce accounts payable by $107 million in 2020. Individual components of operating assets and liabilities fluctuate for a
number of reasons, including linearity of purchases and sales, the mix of customer and supplier payment terms within our accounts receivable and accounts
payable, and the amount and timing of sales of accounts receivable.
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Net cash used in investing activities was $64 million, $128 million and $116 million for 2020, 2019 and 2018, respectively. In 2020, we used $66 million
of cash for capital expenditures. In 2019, we used $135 million of cash for capital expenditures and received proceeds of $8 million primarily from sales of certain
properties.
Net cash used in financing activities was $210 million, $220 million and $28 million for 2020, 2019 and 2018, respectively. In 2020, we repurchased
$179 million of common stock (including $13 million in settlement of employee tax withholding obligations), repaid an aggregate of $39 million of long-term debt
and received $8 million of proceeds from issuances of common stock pursuant to stock option exercises. In 2019, we repurchased $13 million of common stock
(including $6 million in settlement of employee tax withholding obligations), borrowed $215 million of cash under our Amended Cash Flow Revolver, repaid $378
million of long-term debt using $375 million of proceeds from the issuance of a term loan, received $14 million of proceeds from issuances of common stock
pursuant to stock option exercises and incurred $3 million of debt issuance costs in connection with our revolving credit amendment.
Senior Secured Notes Due 2019 ("Secured Notes"). In 2014, we issued $375 million of Secured Notes that matured on June 1, 2019 and paid interest at an
annual rate of 4.375%. During the third quarter of 2019, we repaid the Secured Notes upon maturity using the proceeds from a term loan provided for in our
Amended Cash Flow Revolver. There was no gain or loss associated with the extinguishment of the Secured Notes.
Revolving Credit Facility. During the first quarter of 2019, we entered into a Fourth Amended and Restated Credit Agreement (the "Amended Cash Flow
Revolver") that provided for a committed $375 million term loan ("Term Loan").
On April 5, 2019, we entered into an amendment to the Amended Cash Flow Revolver that increased the amount available under the facility from $500
million to $700 million upon satisfaction of certain conditions, including repayment in full of our Secured Notes.
As of October 3, 2020, costs incurred in connection with the Amended Cash Flow Revolver and Term Loan are classified as long-term debt and are being
amortized to interest expense over the life of the Term Loan using the effective interest method.
Following the satisfaction and discharge of the Indenture dated as of June 4, 2014, using the proceeds of the Term Loan, and the release of all liens
securing the Secured Notes, our debt structure changed as follows, effective June 3, 2019: (i) revolving commitments under the Amended Cash Flow Revolver
increased to a total of $700 million in revolving commitments, (ii) the accordion feature of the Amended Cash Flow Revolver was reset so that we can obtain,
subject to the satisfaction of specified conditions and commitment of the lenders, additional revolving commitments in an aggregate amount of up to $200 million
and (iii) our and our subsidiary guarantors’ obligations under the Amended Cash Flow Revolver became secured by substantially all of the assets (excluding real
property) of our company and the subsidiary guarantors, subject to certain exceptions.
Loans under the Amended Cash Flow Revolver bear interest, at our option, at either the LIBOR or a base rate, in each case plus a spread determined
based on our credit rating. Interest on the loans is payable quarterly in arrears with respect to base rate loans and at the end of an interest period in the case of
LIBOR loans. The outstanding principal amount of all loans under the Amended Cash Flow Revolver, including, the Term Loan, together with accrued and unpaid
interest, is due on November 30, 2023 and we are required to repay a portion of the principal amount of the loan equal to 1.25% in quarterly installments.
As of October 3, 2020, no borrowings and $8 million of letters of credit were outstanding under the Amended Cash Flow Revolver, under which $692
million was available to borrow. There were no borrowings outstanding under the Amended Cash Flow Revolver as of September 28, 2019.
Short-term Borrowing Facilities. As of October 3, 2020, certain of our foreign subsidiaries had a total of $72 million of short-term borrowing facilities
available, under which no borrowings were outstanding. These facilities expire at various dates through the second quarter of 2022.
Debt Covenants
The Amended Cash Flow Revolver requires us to comply with a minimum consolidated interest coverage ratio, measured at the end of each fiscal quarter,
and at all times a maximum consolidated leverage ratio. The Amended Cash Flow Revolver contains customary affirmative covenants, including covenants
regarding the payment of taxes and other obligations,
46
Table of Contents
maintenance of insurance, reporting requirements and compliance with applicable laws and regulations. Further, the Amended Cash Flow Revolver contains
customary negative covenants limiting our ability and that of our subsidiaries to, among other things, incur debt, grant liens, make investments, make acquisitions,
make certain restricted payments and sell assets, subject to certain exceptions.
As of October 3, 2020, we were in compliance with our covenants.
Other Liquidity Matters
Our Board of Directors has authorized us to repurchase shares of our common stock, subject to a dollar limitation. The timing of repurchases depend upon
capital needs to support the growth of our business, market conditions and other factors. Although stock repurchases are intended to increase stockholder value,
purchases of shares reduce our liquidity. During the first quarter of 2020, the Board of Directors authorized us to purchase an additional $200 million of our
common stock on the same terms as previously approved repurchase programs with no expiration date. We repurchased 6.4 million and 0.3 million shares of our
common stock for $166 million and $7 million in the open market in 2020 and 2019, respectively. As of October 3, 2020, $135 million remains available under the
current authorized program. Although stock repurchases are intended to increase stockholder value by reducing the number of outstanding shares and to offset the
dilution that results from the issuance of shares under the Company’s equity plans, repurchases of shares also reduce the Company's liquidity. As a result, the
timing of future repurchases depends upon the Company’s future capital needs, market conditions and other factors.
We entered into a Receivables Purchase Agreement (the “RPA”) with certain third-party banking institutions for the sale of trade receivables generated
from sales to certain customers, subject to acceptance by, and a funding commitment from, the banks that are party to the RPA. As of October 3, 2020, a maximum
of $554 million of sold receivables can be outstanding at any point in time under this program, as amended, subject to limitations under our Amended Cash Flow
Revolver. Additionally, the amount available under the RPA is uncommitted and, as such, is available at the discretion of our third-party banking institutions. On
January 16, 2019, we entered into an amendment to our Amended Cash Flow Revolver which increased the percentage of our total accounts receivable that can be
sold and outstanding at any time from 30% to 40%. Trade receivables sold pursuant to the RPA are serviced by us.
In addition to the RPA, we have the option to participate in trade receivables sales programs that have been implemented by certain of our customers, as
in effect from time to time. We do not service trade receivables sold under these other programs.
The sale of receivables under all of these programs is subject to the approval of the banks or customers involved and there can be no assurance that we
will be able to sell the maximum amount of receivables permitted by these programs when desired.
Under each of the programs noted above, we sell our entire interest in a trade receivable for 100% of face value, less a discount. For the years ended
October 3, 2020 and September 28, 2019, we sold approximately $1.7 billion and approximately $2.7 billion, respectively, of accounts receivable under these
programs. Upon sale, these receivables are removed from the consolidated balance sheets and cash received is presented as cash provided by operating activities in
the consolidated statements of cash flows. Discounts on sold receivables were not material for any period presented. As of October 3, 2020 and September 28,
2019, $97 million and $241 million, respectively, of accounts receivable sold under the RPA and subject to servicing by us remained outstanding and had not yet
been collected. Our sole risk with respect to receivables we service is with respect to commercial disputes regarding such receivables. Commercial disputes include
billing errors, returns and similar matters. To date, we have not been required to repurchase any receivable we have sold due to a commercial dispute. Additionally,
we are required to remit amounts collected as servicer on a weekly basis to the financial institutions that purchased the receivables. As of October 3, 2020 and
September 28, 2019, $39 million and $76 million, respectively, had been collected but not yet remitted. This amount is classified in accrued liabilities on the
consolidated balance sheets.
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We enter into forward interest rate swap agreements with independent counterparties to partially hedge the variability in cash flows due to changes in the
benchmark interest rate (LIBOR) associated with anticipated variable rate borrowings. These interest rate swaps have a maturity date of December 1, 2023, and
effectively converts a portion of our variable interest rate obligations under our Amended Cash Flow Revolver to fixed interest rate obligations. These swaps are
accounted for as cash flow hedges under ASC Topic 815, Derivatives and Hedging. Interest rate swaps with an aggregate notional amount of $350 million were
outstanding as of October 3, 2020 and September 28, 2019. The aggregate effective interest rate of these swaps as of October 3, 2020 was approximately 4.3%. As
of October 3, 2020, due to a decline in interest rates since the time the swaps were put in place, these interest rate swaps had a negative value of $29 million, of
which $9 million is included in accrued liabilities and the remaining amount is included in other long-term liabilities on the consolidated balance sheets.
In the ordinary course of business, we are or may become party to legal proceedings, claims and other contingencies, including environmental, warranty
and employee matters and examinations by government agencies. As of October 3, 2020, we had accrued liabilities of $37 million related to such matters. We
cannot accurately predict the outcome of these matters or the amount or timing of cash flows that may be required to defend ourselves or to settle such matters or
that these reserves will be sufficient to fully satisfy our contingent liabilities.
As of October 3, 2020, we had a liability of $115 million for uncertain tax positions. Our estimate of liabilities for uncertain tax positions is based on a
number of subjective assessments, including the likelihood of a tax obligation being assessed, the amount of taxes (including interest and penalties) that would
ultimately be payable, and our ability to settle any such obligations on favorable terms. Therefore, the amount of future cash flows associated with uncertain tax
positions may be significantly higher or lower than our recorded liability and we are unable to reliably estimate when cash settlement may occur.
Our liquidity needs are largely dependent on changes in our working capital, including sales of accounts receivable under our receivables sales programs
and the extension of trade credit by our suppliers, investments in manufacturing inventory, facilities and equipment, repayments of obligations under outstanding
indebtedness and repurchases of common stock. In 2020, we generated $301 million of cash from operations and had $481 million of cash and cash equivalents as
October 3, 2020. Our primary sources of liquidity as of October 3, 2020 consisted of (1) cash and cash equivalents of $481 million; (2) our Amended Cash Flow
Revolver, under which $692 million, net of outstanding borrowings and letters of credit, was available; (3) our foreign short-term borrowing facilities of $72
million, all of which was available; (4) proceeds from the sale of accounts receivable under our receivables sales programs and (5) cash generated from operations.
Subject to satisfaction of certain conditions, including obtaining additional commitments from existing and/or new lenders, we may increase the revolver
commitments under the Amended Cash Flow Revolver by an additional $200 million.
We believe our existing cash resources and other sources of liquidity, together with cash generated from operations, will be sufficient to meet our working
capital requirements through at least the next 12 months. However, should demand for our services decrease significantly over the next 12 months or should we
experience significant increases in delinquent or uncollectible accounts receivable for any reason, including in particular continued or worsening economic
conditions caused by the COVID-19 global pandemic, our cash provided by operations could decrease significantly and we could be required to seek
additional sources of liquidity to continue our operations at their current level.
We distribute our cash among a number of financial institutions that we believe to be of high quality. However, there
can be no assurance that one or more of such institutions will not become insolvent in the future, in which case all or a portion
of our uninsured funds on deposit with such institutions could be lost.
As of October 3, 2020, 50% of our cash balance was held in the United States. Should we choose or need to remit cash to the United States from our
foreign locations, we may incur tax obligations which would reduce the amount of cash ultimately available to the United States. We believe that cash held in the
United States, together with liquidity available under our Amended Cash Flow Revolver and cash from foreign subsidiaries that could be remitted to the United
States without tax consequences, will be sufficient to meet our United States liquidity needs for at least the next twelve months.
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Contractual Obligations
The following is a summary of our long-term debt and operating lease obligations as of October 3, 2020:
Payments Due by Period
Contractual Obligations
Long-term debt obligations, including current portion
Operating lease obligations
Total contractual obligations
Total
Less than 1
year
$
$
351,563
60,029
411,592
$
$
18,750
18,128
36,878
1- 3 years
(In thousands)
$
32,813
20,622
53,435
$
3-5 years
More than
5 years
$
$
300,000
8,094
308,094
$
$
—
13,185
13,185
We also have outstanding firm purchase orders with certain suppliers for the purchase of inventory, which are not included in the table above. These
purchase orders are generally short-term in nature. Orders for standard, or catalog, items can typically be canceled with little or no financial penalty. Our policy
regarding non-standard or customized items dictates that such items are only ordered specifically for customers who have contractually assumed liability for the
inventory, although exceptions are made to this policy in certain situations. In addition, a substantial portion of catalog items covered by our purchase orders are
procured for specific customers based on their purchase orders or a forecast under which the customer has contractually assumed liability for such material.
Accordingly, our liability from purchase obligations under these purchase orders is not expected to be significant. Lastly, pursuant to arrangements under which
vendors consign inventory to us, we may be required to purchase such inventory after a certain period of time. To date, we have not been required to purchase a
significant amount of inventory pursuant to these time limitations.
As of October 3, 2020, we were unable to reliably estimate when cash settlements with taxing authorities may occur with respect to our unrecognized tax
benefits of $115 million. Additionally, we have defined benefit pension plans with an underfunded amount of $51 million at October 3, 2020. We will be required
to provide additional funding to these plans in the future if our returns on plan assets are not sufficient to meet our funding obligations. None of the amounts
described in this paragraph are included in the table above.
Off-Balance Sheet Arrangements
As of October 3, 2020, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC,
that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues, or expenses, results of
operations, liquidity, capital expenditures, or capital resources that is material to investors.
Quarterly Results (Unaudited)
The following tables contain selected unaudited quarterly financial data for each quarter of fiscal 2020 and 2019. In management's opinion, the unaudited
data has been prepared on the same basis as the audited information and includes all adjustments (consisting only of normal recurring adjustments) necessary for a
fair statement of the data for the periods presented. Our results of operations have varied and may continue to fluctuate significantly from quarter to quarter. The
results of operations in any period should not be considered indicative of the results to be expected from any future period.
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Net sales
Gross profit
Gross margin
Operating income
Operating margin
Net income
Basic net income per share
Diluted net income per share
Net sales
Gross profit
Gross margin
Operating income
Operating margin
Net income
Basic net income per share
Diluted net income per share
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year ended October 3, 2020
(In thousands, except per share data)
1,840,171
134,882
7.3 %
57,181
3.1 %
38,345
0.55
0.53
$
$
$
$
$
$
1,590,550
107,421
6.8 %
24,369
1.5 %
4,882
0.07
0.07
$
$
$
$
$
$
1,654,691
131,473
7.9 %
64,103
3.9 %
44,880
0.66
0.64
$
$
$
$
$
$
1,874,958
151,931
8.1 %
82,034
4.4 %
51,606
0.77
0.75
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year ended September 28, 2019
(In thousands, except per share data)
2,188,018
149,337
6.8 %
77,543
3.5 %
37,952
0.56
0.54
$
$
$
$
$
$
2,126,639
153,102
7.2 %
78,115
3.7 %
40,885
0.59
0.57
$
$
$
$
$
$
2,026,995
147,794
7.3 %
67,374
3.3 %
42,921
0.62
0.60
$
$
$
$
$
$
1,892,207
141,705
7.5 %
63,085
3.3 %
19,757
0.28
0.27
$
$
$
$
$
$
$
$
$
$
$
$
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Our primary exposure to market risk for changes in interest rates relates to our Term Loan of $352 million under our Amended Cash Flow Revolver for
which the interest rate we pay is determined at the time of borrowing based on a floating index. As of October 3, 2020, we had interest rate swaps with an
aggregate notional amount of $350 million that effectively convert $350 million of our outstanding floating rate debt to fixed rate debt. An immediate 10 percent
change in interest rates would not have a significant impact on our results of operations.
Foreign Currency Exchange Risk
We transact business in foreign currencies. Our foreign exchange policy requires that we take certain steps to limit our foreign exchange exposures
resulting from certain assets and liabilities and forecasted cash flows. However, our policy does not require us to hedge all foreign exchange exposures.
Furthermore, our foreign currency hedges are based on forecasted transactions and estimated balances, the amount of which may differ from that actually incurred.
As a result, we can experience foreign exchange gains and losses in our results of operations.
Our primary foreign currency cash flows are in certain Asian and European countries, Israel, Brazil and Mexico. We enter into short-term foreign
currency forward contracts to hedge currency exposures associated with certain monetary assets and liabilities denominated in non-functional currencies. These
contracts generally have maturities of up to two months. Accordingly, these forward contracts are not designated as part of a hedging relationship for accounting
purposes. All outstanding foreign currency forward contracts are marked-to-market at the end of the period with unrealized gains and losses included in other
income (expense), net, in the consolidated statements of operations. As of October 3, 2020, we had outstanding foreign currency forward contracts to exchange
various foreign currencies for U.S. dollars in an aggregate notional amount of $352 million.
We also utilize foreign currency forward contracts to hedge certain operational (“cash flow”) exposures resulting from changes in foreign currency
exchange rates. Such exposures result from (1) forecasted non-functional currency sales and (2) forecasted non-functional currency materials, labor, overhead and
other expenses. These contracts may be up to twelve months in duration and are designated as cash flow hedges for accounting purposes. The effective portion of
changes in the fair value of the contracts is recorded in stockholders' equity as a separate component of accumulated other comprehensive income and recognized
in earnings when the hedged item affects earnings. We had forward contracts related to cash flow hedges in various foreign currencies in an aggregate notional
amount of $113 million as of October 3, 2020.
The net impact of an immediate 10 percent change in exchange rates would not be material to our consolidated financial statements, provided we
accurately forecast and estimate our foreign currency exposure. If such forecasts are materially inaccurate, we could incur significant gains or losses.
Item 8. Financial Statements and Supplementary Data
The information required by this item is included below and incorporated by reference from the financial statement schedule included in “Part IV-
Item 15(a)(2)” and the selected quarterly financial data referred to in “Part II-Item 7-Management's Discussion and Analysis of Financial Condition and Results of
Operations-Quarterly Results (Unaudited).”
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Sanmina Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Sanmina Corporation and its subsidiaries (the “Company”) as of October 3, 2020 and
September 28, 2019, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three
years in the period ended October 3, 2020, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2)
(collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of October 3,
2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 3,
2020 and September 28, 2019, and the results of its operations and its cash flows for each of the three years in the period ended October 3, 2020 in conformity with
accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of October 3, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Changes in Accounting Principles
As discussed in Notes 2 and 4 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2020 and the manner in
which it accounts for revenue in 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for
its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting
appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over
financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
52
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expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or
required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii)
involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical
audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition - Cost-to-cost method for government contracts in the Defense and Aerospace division
As described in Notes 2 and 4 to the consolidated financial statements, revenues for the CPS segment were $1.3 billion for the year ended October 3, 2020, of
which the defense and aerospace division represents a portion of the segment. The Company recognizes revenue for defense and aerospace government contracts
on an over time basis using the cost-to-cost method (ratio of costs incurred to date to total estimated costs at completion), which management believes best depicts
the transfer of control to the customer. Recognition of revenue on government contracts requires the use of significant judgment with respect to estimated
materials, labor, and subcontractor costs.
The principal considerations for our determination that performing procedures relating to revenue recognition - cost-to-cost method for government contracts in the
defense and aerospace division is a critical audit matter are the significant judgment by management when determining the estimated costs for such contracts,
which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating the audit evidence related to
management’s determination of estimated materials, labor, and subcontractor costs.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial
statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the cost-to-cost
method for government contracts in the defense and aerospace division. These procedures also included, among others, (i) testing management’s process for
determining the estimation of costs for a sample of defense and aerospace government contracts, (ii) testing the completeness and accuracy of underlying data used
in the estimate, and (iii) evaluating the reasonableness of management’s determination of estimated materials, labor, and subcontractor costs. Evaluating the
reasonableness of the estimated materials, labor and subcontractor costs used involved assessing management’s ability to reasonably estimate costs for government
contracts by assessing the nature and status of government contracts, performing retrospective reviews of government contract estimates and changes in estimates
over time, and obtaining evidence to support estimated costs.
/s/ PricewaterhouseCoopers LLP
San Jose, California
November 13, 2020
We have served as the Company’s auditor since 2016.
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SANMINA CORPORATION
CONSOLIDATED BALANCE SHEETS
Current assets:
ASSETS
Cash and cash equivalents
Accounts receivable, net of allowances of $8,570 and $12,481 as of October 3, 2020 and September 28, 2019,
respectively
Contract assets
Inventories
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Deferred income tax assets, net
Other
Total assets
Current liabilities:
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable
Accrued liabilities
Accrued payroll and related benefits
Short-term debt, including current portion of long-term debt
Total current liabilities
Long-term liabilities:
Long-term debt
Other
Total long-term liabilities
Commitments and Contingencies (Note 10)
Stockholders' equity:
Preferred stock, $0.01 par value, authorized 5,000 shares, none issued and outstanding
Common stock, $0.01 par value, authorized 166,667 shares; 107,629 and 105,551 shares issued and 64,999 and 69,720
shares outstanding as of October 3, 2020 and September 28, 2019, respectively
Treasury stock, 42,630 and 35,831 shares as of October 3, 2020 and September 28, 2019, respectively, at cost
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
See accompanying notes to the consolidated financial statements.
54
As of
October 3,
2020
September 28,
2019
(In thousands, except par value)
$
480,526
$
454,741
1,043,334
396,583
861,281
37,718
2,819,442
559,242
273,470
120,502
3,772,656
1,210,049
171,761
122,029
18,750
1,522,589
329,249
290,902
620,151
$
$
1,128,379
396,300
900,557
40,952
2,920,929
630,647
279,803
74,134
3,905,513
1,336,914
180,107
127,647
38,354
1,683,022
346,971
232,947
579,918
—
—
650
(983,143)
6,300,887
34,886
(3,723,364)
1,629,916
3,772,656
$
697
(804,118)
6,266,812
42,259
(3,863,077)
1,642,573
3,905,513
$
$
$
Table of Contents
Net sales
Cost of sales
Gross profit
Operating expenses:
Selling, general and administrative
Research and development
Restructuring and other
Goodwill impairment
Total operating expenses
Operating income
Interest income
Interest expense
Other income (expense), net
Interest and other, net
Income before income taxes
Provision for income taxes
Net income (loss)
Net income (loss) per share:
Basic
Diluted
SANMINA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
October 3,
2020
Year Ended
September 28,
2019
(In thousands, except per share amounts)
September 29,
2018
$
$
6,960,370
6,434,663
525,707
$
8,233,859
7,641,921
591,938
7,110,130
6,646,347
463,783
240,931
22,564
27,916
6,609
298,020
260,032
27,552
18,237
—
305,821
250,924
30,754
32,054
30,610
344,342
227,687
286,117
119,441
2,322
(28,903)
(348)
(26,929)
200,758
61,045
139,713
2.02
1.97
69,041
70,793
$
$
$
1,111
(30,763)
(10,846)
(40,498)
245,619
104,104
141,515
2.05
1.97
69,129
71,678
$
$
$
1,268
(27,734)
4,564
(21,902)
97,539
193,072
(95,533)
(1.37)
(1.37)
69,833
69,833
$
$
$
Weighted-average shares used in computing per share amounts:
Basic
Diluted
See accompanying notes to the consolidated financial statements.
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SANMINA CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Derivative financial instruments:
Change in net unrealized amount
Amount reclassified into net income
Defined benefit plans:
Changes in unrecognized net actuarial losses and unrecognized transition cost
Amortization of actuarial losses and transition cost
Total other comprehensive losses
Comprehensive income (loss)
October 3,
2020
Year Ended
September 28,
2019
(In thousands)
September 29,
2018
$
139,713
$
141,515
$
(95,533)
(925)
(3,646)
1,332
(6,240)
2,106
(7,373)
132,340
$
$
(1,621)
(3,063)
(21,508)
1,955
(11,450)
939
(31,685)
109,830
$
$
(982)
859
(460)
796
(2,850)
(98,383)
$
$
See accompanying notes to the consolidated financial statements.
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Table of Contents
SANMINA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock and Additional
Paid-in Capital
Treasury Stock
Number of
Shares
Amount
Number of
Shares
BALANCE AT SEPTEMBER 30, 2017
Issuances under stock plans
Stock-based compensation
Repurchases of treasury stock
Other comprehensive loss
Cumulative effect of new accounting pronouncement
Net loss
BALANCE AT SEPTEMBER 29, 2018
Issuances under stock plans
Stock-based compensation
Repurchases of treasury stock
Other comprehensive loss
Cumulative effect of new accounting pronouncement
Net income
BALANCE AT SEPTEMBER 28, 2019
Issuances under stock plans
Stock-based compensation
Repurchases of treasury stock
Other comprehensive loss
Net income
BALANCE AT OCTOBER 3, 2020
101,672
1,456
—
—
—
—
—
103,128
2,423
—
—
—
—
—
105,551
2,078
—
—
—
—
107,629
$
$
$
$
6,185,088
4,407
33,493
—
—
—
—
6,222,988
13,539
30,844
138
—
—
—
6,267,509
7,793
26,235
—
—
—
6,301,537
(30,008)
—
—
(5,343)
—
—
—
(35,351)
—
—
(480)
—
—
—
(35,831)
—
—
(6,799)
—
—
(42,630)
$
$
$
$
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
76,794
—
—
—
(2,850)
—
—
73,944
—
—
—
(31,685)
—
—
42,259
—
—
—
(7,373)
—
34,886
$
$
$
$
(3,980,458)
—
—
—
—
43,269
(95,533)
(4,032,722)
—
—
—
—
28,130
141,515
(3,863,077)
—
—
—
—
139,713
(3,723,364)
$
$
$
$
1,647,684
4,407
33,493
(157,626)
(2,850)
43,269
(95,533)
1,472,844
13,539
30,844
(12,614)
(31,685)
28,130
141,515
1,642,573
7,793
26,235
(179,025)
(7,373)
139,713
1,629,916
$
$
Amount
(In thousands)
(633,740)
—
—
(157,626)
—
—
—
(791,366)
—
—
(12,752)
—
—
—
(804,118)
—
—
(179,025)
—
—
(983,143)
$
$
See accompanying notes to the consolidated financial statements.
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Table of Contents
SANMINA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization
Stock-based compensation expense
Deferred income taxes
Impairment of goodwill and other assets
Other, net
Changes in operating assets and liabilities:
Accounts receivable
Contract assets
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued liabilities
Cash provided by operating activities
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of investments
Sale of investments
Cash used in investing activities
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from revolving credit facility borrowings
Repayments of revolving credit facility borrowings
Repayments of long-term debt
Proceeds from long-term debt
Debt issuance costs
Net proceeds from stock issuances
Repurchases of common stock
Other, net
Cash used in financing activities
Effect of exchange rate changes
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash paid during the year:
Interest, net of capitalized interest
Income taxes, net of refunds
Unpaid purchases of property, plant and equipment at end of period
October 3,
2020
Year Ended
September 28,
2019
(In thousands)
September 29,
2018
$
139,713
$
141,515
$
(95,533)
114,218
26,235
13,567
8,409
(239)
83,623
(283)
39,564
17,798
(106,640)
(35,410)
300,555
(65,982)
1,573
(30,000)
30,000
(64,409)
1,909,000
(1,909,000)
(39,048)
—
—
7,793
(179,025)
—
(210,280)
(81)
25,785
454,741
480,526
20,477
30,700
12,371
$
$
$
$
116,949
30,844
54,668
—
2,219
54,947
(20,814)
121,383
10,018
(182,521)
53,757
382,965
(134,674)
7,532
(499)
—
(127,641)
3,884,325
(4,099,325)
(378,416)
375,000
(2,727)
13,539
(12,614)
—
(220,218)
107
35,213
419,528
454,741
30,143
32,132
27,279
$
$
$
$
118,820
32,825
173,591
30,610
1,777
(69,076)
—
(324,168)
7,797
268,421
11,360
156,424
(118,881)
4,722
(2,019)
—
(116,178)
4,040,600
(3,910,600)
(3,416)
—
—
4,407
(157,625)
(1,701)
(28,335)
956
12,867
406,661
419,528
26,156
34,819
49,546
$
$
$
$
See accompanying notes to the consolidated financial statements.
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Note 1. Organization of Sanmina
SANMINA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sanmina Corporation (“Sanmina,” or the “Company”) was incorporated in Delaware in 1989. The Company is a leading global provider of integrated
manufacturing solutions, components, products and repair, logistics and after-market services. The Company provides these comprehensive solutions primarily to
original equipment manufacturers (OEMs) that serve the industrial, medical, defense and aerospace, automotive, communications networks and cloud solutions
industries.
The Company's operations are managed as two businesses:
1) Integrated Manufacturing Solutions (IMS). IMS is a single operating segment consisting of printed circuit board assembly and test, high-level
assembly and test, and direct-order-fulfillment.
2) Components, Products and Services (CPS). Components include interconnect systems (printed circuit board fabrication, backplane, cable
assemblies and plastic injection molding) and mechanical systems (enclosures and precision machining). Products include memory from our
Viking Technology division; enterprise solutions from our Viking Enterprise Solutions division; RF, optical and microelectronic; defense and
aerospace products from SCI Technology; and cloud-based manufacturing execution software from the Company's 42Q division. Services include
design, engineering, global services (logistics and repair).
The Company's only reportable segment is IMS, which represented approximately 80% of total revenue in 2020. The CPS business consists of multiple
operating segments which do not individually meet the quantitative thresholds for being presented as reportable segments. Therefore, financial information for
these operating segments is aggregated and presented in a single category entitled “Components, Products and Services”.
Basis of Presentation
Fiscal Year. The Company operates on a 52 or 53 week year ending on the Saturday nearest September 30. Fiscal 2020 is a 53-week year, with the extra
week occurring during the fourth quarter of 2020. Fiscal 2019 and 2018 were each 52 weeks. All references to years relate to fiscal years unless otherwise noted.
Principles of Consolidation. The consolidated financial statements include the Company's accounts and those of its subsidiaries. All intercompany
balances and transactions have been eliminated.
Note 2. Summary of Significant Accounting Policies
Management Estimates and Uncertainties. The preparation of consolidated financial statements in conformity with generally accepted accounting
principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting
period. Significant estimates made in preparing the consolidated financial statements relate to allowances for accounts receivable; provisions for excess and
obsolete inventories, environmental matters, and legal exposures; determining liabilities for uncertain tax positions; determining the realizability of deferred tax
assets; determining fair values of tangible and intangible assets for purposes of impairment tests; determining fair values of equity awards; and determining
forfeiture rates for purposes of calculating stock compensation expense. Actual results could differ materially from these estimates.
Financial Instruments and Concentration of Credit Risk. Financial instruments consist primarily of cash and cash equivalents, accounts receivable,
foreign currency forward contracts, interest rate swap agreements, accounts payable and debt obligations. The fair value of these financial instruments
approximates their carrying amount as of October 3, 2020 and September 28, 2019 due to the nature or short maturity of these instruments, or the fact that the
instruments are recorded at fair value on the consolidated balance sheets.
Accounts Receivable and Other Related Allowances. The Company had an allowance of $9 million and $12 million as of October 3, 2020 and
September 28, 2019, respectively, for uncollectible accounts, product returns and other net sales adjustments. One of the Company's most significant risks is the
ultimate realization of its accounts receivable. This risk is
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mitigated by ongoing credit evaluations of customers and frequent contact with customers, especially the most significant customers, which enable the Company to
monitor changes in its customers' business operations and respond accordingly. To establish the allowance for doubtful accounts, the Company estimates credit risk
associated with accounts receivable by considering the creditworthiness of its customers, past experience, specific facts and circumstances, and the overall
economic climate in industries that it serves. To establish the allowance for product returns and other adjustments, the Company primarily utilizes historical data.
Accounts Receivable Sales. The Company entered into a Receivables Purchase Agreement (the “RPA”) with certain third-party banking institutions for
the sale of trade receivables generated from sales to certain customers, subject to acceptance by, and a funding commitment from, the banks that are party to the
RPA. Trade receivables sold pursuant to the RPA are serviced by the Company.
In addition to the RPA, the Company has the option to participate in trade receivables sales programs that have been implemented by certain of the
Company's customers, as in effect from time to time. The Company does not service trade receivables sold under these other programs. Under each of the
programs noted above, the Company sells its entire interest in a trade receivable for 100% of face value, less a discount. Accounts receivable balances sold are
removed from the consolidated balance sheets and the related proceeds are reported as cash provided by operating activities in the consolidated statements of cash
flows.
Inventories. Inventories are stated at the lower of cost (first-in, first-out method) and net realizable value. Cost includes labor, materials and
manufacturing overhead.
Provisions are made to reduce excess and obsolete inventories to their estimated net realizable values. The ultimate realization of inventory carrying
amounts is primarily affected by changes in customer demand. Inventory provisions are established based on forecasted demand, past experience with specific
customers, the age and nature of the inventory, the ability to redistribute inventory to other programs or back to suppliers, and whether customers are contractually
obligated and have the ability to pay for the related inventory. Certain payments received from customers for inventory held by the Company are recorded as a
reduction of inventory.
Long-lived Assets. Property, plant and equipment are stated at cost or, in the case of property and equipment acquired through business combinations, at
fair value as of the acquisition date. Depreciation is provided on a straight-line basis over 20 to 40 years for buildings and 3 to 15 years for machinery, equipment,
furniture and fixtures. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or useful life of the asset.
The Company reviews property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset or asset group may not be recoverable. An asset group is the unit of accounting which represents the lowest level for which identifiable cash flows are largely
independent of the cash flows of other groups of assets. An asset or asset group is considered impaired if its carrying amount exceeds the undiscounted future net
cash flows the asset or asset group is expected to generate. If an asset or asset group is considered to be impaired, the impairment to be recognized is measured as
the amount by which the carrying amount of the asset or asset group exceeds its fair value. For asset groups for which the primary asset is a building, the Company
estimates fair value based on data provided by commercial real estate brokers. For other asset groups, the Company estimates fair value based on projected
discounted future net cash flows.
Foreign Currency Translation. For foreign subsidiaries using the local currency as their functional currency, assets and liabilities are translated to U.S.
dollars at exchange rates in effect at the balance sheet date and income and expenses are translated at average exchange rates. The effects of these translation
adjustments are reported in stockholders' equity as a component of accumulated other comprehensive income ("AOCI"). For all entities, remeasurement
adjustments for non-functional currency monetary assets and liabilities are included in other income, net in the accompanying consolidated statements of
operations. Remeasurement gains and losses arising from long-term intercompany loans denominated in a currency other than an entity's functional currency are
recorded in AOCI if repayment of the loan is not anticipated in the foreseeable future.
Derivative Instruments and Hedging Activities. The Company conducts business on a global basis in numerous currencies and certain of the Company's
outstanding debt has a variable interest rate. Therefore, the Company is exposed to movements in foreign currency exchange rates and interest rates. The Company
uses derivatives, such as foreign currency forward contracts and interest rate swaps, to minimize the volatility of earnings and cash flows associated with changes
in foreign currency exchange rates and interest rates.
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The Company accounts for derivative instruments and hedging activities in accordance with ASC Topic 815, Derivatives and Hedging, which requires
each derivative instrument to be recorded on the consolidated balance sheets at its fair value as either an asset or a liability. If a derivative is designated as a cash
flow hedge, the Company excludes time value from its assessment of hedge effectiveness and recognizes the amount of time value in earnings over the life of the
derivative. Gains or losses on the derivative not caused by changes in time value are recorded in Accumulated Other Comprehensive Income ("AOCI"), a
component of equity, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. If a derivative is designated
as a fair value hedge, changes in the fair value of the derivative and of the item being hedged are recognized in earnings in the current period.
Derivative instruments are entered into for periods of time consistent with the related underlying exposures and are not entered into for speculative
purposes. At the inception of a hedge, the Company documents all relationships between derivative instruments and related hedged items, as well as its risk-
management objectives and strategies for the hedging transaction.
The Company's foreign currency forward contracts and interest rate swaps potentially expose the Company to credit risk to the extent the counterparties
may be unable to meet the terms of the agreement. The Company minimizes such risk by seeking high quality counterparties.
Leases. The Company's leases consist primarily of operating leases for buildings and land. These leases have initial lease terms of up to 44 years and,
upon adoption of ASC 842, are recorded on the Company's balance sheet as lease liabilities and corresponding right-of-use ("ROU") assets. Certain of these leases
contain an option to extend the lease term for additional periods or to terminate the lease after an initial non-cancelable term. Renewal options are considered in the
measurement of the Company's initial lease liability and corresponding ROU asset only if it is reasonably certain that the Company will exercise such options.
Leases with lease terms of twelve months or less are not recorded on the Company's balance sheet.
The Company’s lease liability and ROU assets represent the present value of future lease payments which, pursuant to the Company's accounting election,
are a combination of lease components and non-lease components such as maintenance and utilities. Operating lease expense is recognized on a straight line basis
over the term of the lease. Certain of the Company’s lease payments are variable because such payments adjust periodically based on changes in consumer price
and other indexes. Variable payments are expensed as incurred and not included in the measurement of lease liabilities and ROU assets. Since the Company's
leases generally do not provide an implicit rate, the Company uses an incremental borrowing rate based on information available at the lease commencement date
for purposes of determining the present value of lease payments. The Company's incremental borrowing rate is based on the term of the lease, the economic
environment of the lease and the effect of collateralization, if any. Upon adoption of ASC 842, the Company used an incremental borrowing rate as of that date for
all leases that commenced prior to that date.
Revenue Recognition. The Company derives revenue principally from sales of integrated manufacturing solutions, components and Company-proprietary
products. Other sources of revenue include logistics and repair services; design, development and engineering services; defense and aerospace programs; and sales
of raw materials to customers whose requirements change after the Company has procured inventory to fulfill the customer’s forecasted demand.
For purposes of determining when to recognize revenue, and in what amount, the Company applies a 5-step model: (1) identify the contract with a
customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance
obligations in the contract; and (5) recognize revenue when (or as) the Company satisfies a performance obligation. Each of these steps involves the use of
significant judgments.
The Company recognizes revenue for the majority of its contracts on an over time basis. This is due to the fact that 1) the Company does not have an
alternative use for the end products it manufactures for its customers and has an enforceable right to payment, including a reasonable profit, for work-in-progress
upon a customer’s cancellation of a contract for convenience or 2) the Company’s customer simultaneously receives and consumes the benefits provided by the
Company’s services. For these contracts, revenue is recognized on an over time basis using the cost-to-cost method (ratio of costs incurred to date to total
estimated costs at completion) which the Company believes best depicts the transfer of control to the customer. Revenue streams for which revenue is recognized
on an over time basis include sales of vertically integrated manufacturing solutions (integrated manufacturing solutions and components); global services (logistics
and repair); design, development and engineering services; and defense and aerospace programs.
Application of the cost-to-cost method for government contracts in the Company’s Defense and Aerospace division requires the use of significant
judgments with respect to estimated materials, labor and subcontractor costs. This division is an operating segment whose results are aggregated with ten other
operating segments and reported under Components, Products
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and Services ("CPS") for segment reporting purposes. In 2020, CPS revenue and gross profit was $1.3 billion and $157 million, respectively.
The Company updates its estimates of materials, labor and subcontractor costs on a quarterly basis. These updated estimates are reviewed each quarter by
a group of employees that includes representatives from numerous functions such as engineering, materials, contracts, manufacturing, program management,
finance and senior management. If a change in estimate is deemed necessary, the impact of the change is recognized in the period of change.
For contracts for which revenue is required to be recognized at a point-in-time, the Company recognizes revenue when it has transferred control of the
related goods, which generally occurs upon shipment or delivery of the goods to the customer. Revenue streams for which revenue is recognized at a point-in-time
include Company-proprietary products and sales of raw materials.
Refer to Note 4 for further discussion.
Income taxes. The Company estimates its income tax provision or benefit in each of the jurisdictions in which it operates, including estimating exposures
and making judgments regarding the realizability of deferred tax assets. The carrying value of the Company's net deferred tax assets is based on the Company's
belief that it is more likely than not that the Company 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 which do not meet the “more likely than not” criteria discussed above.
The Company's tax rate is highly dependent upon the geographic distribution of its worldwide income or losses, the tax regulations and tax holidays in
each geographic region, the availability of tax credits and carryforwards, including net operating losses, and the effectiveness of its tax planning strategies.
The Company makes an assessment of whether each income tax position is “more likely than not” of being sustained on audit, including resolution of
related appeals or litigation, if any. For each income tax position that meets the “more likely than not” recognition threshold, the Company then assesses the largest
amount of tax benefit that is greater than 50% likely of being realized upon effective settlement with the tax authority. Interest and penalties related to
unrecognized tax benefits are recognized as a component of income tax expense.
Recent Accounting Pronouncements Adopted in Fiscal Year 2020
In December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)", which is intended to simplify various
aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and which also clarifies and amends existing
guidance to improve consistent application. The Company adopted this ASU in the second quarter of 2020. The impact of adoption was not material.
In February 2018, the FASB issued ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax
Effects from Accumulated Other Comprehensive Income", which allows companies to reclassify stranded tax effects resulting from the U.S. Tax Cuts and Jobs
Act (H.R. 1) from accumulated other comprehensive income to retained earnings. The Company adopted this ASU at the beginning of fiscal 2020. There was no
impact upon adoption.
In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements for Accounting For Hedging Activities",
simplifying hedge accounting guidance and improving the financial reporting of hedging relationships by allowing an entity to better align its risk management
activities and financial reporting for hedging relationships through changes to both designation and measurement for qualifying hedging relationships and the
presentation of hedge results. This standard eliminates the requirement to separately measure and report hedge ineffectiveness, resulting in full recognition of the
change in fair value that impacts earnings in the same income statement line item that is used to present the earnings effect of the hedged item. In addition, the
guidance allows more flexibility in the requirements to qualify for and maintain hedge accounting. The Company adopted this ASU at the beginning of fiscal 2020.
The impact of adoption was not material.
In February 2016, the FASB issued ASU 2016-02, "Leases: Amendments to the FASB Accounting Standards Codification (Topic 842)". This ASU
requires the Company to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases with terms of more than twelve
months. This ASU also requires disclosures enabling
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the users of financial statements to understand the amount, timing and uncertainty of cash flows arising from leases. In addition, the FASB provided a practical
expedient transition method that allows entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained
earnings in the period of adoption, as opposed to applying the requirements retrospectively and providing comparative prior period financial statements. The
Company adopted the new standard on September 29, 2019, the first day of fiscal 2020, and applied the above practical expedient transition method. The Company
elected certain other transition options which, among other things, allowed the Company to carry forward its prior conclusions about lease identification and
classification.
Upon adoption of the new standard, the Company recognized approximately $65 million of right-of-use ("ROU") assets and lease liabilities. Adoption of
the new standard did not have a material impact on the Company's consolidated statements of income or consolidated statements of cash flows.
Refer to Note 8 for additional information and disclosures related to the adoption of ASC 842.
Recent Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)", which provides optional expedients and exceptions for applying
U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The amendments are effective for all entities as of March
12, 2020 through December 31, 2022. The Company has not yet applied any of the expedients and exceptions and is currently evaluating the impact of the
provisions of ASU 2020-04.
In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for
Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." The new guidance aligns the requirements for capitalizing
implementation costs incurred in a cloud-based hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred
to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for the Company at the
beginning of fiscal 2021, including interim periods within that reporting period.
In June 2016, the FASB issued ASU 2016-13 "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments", which replaces the existing incurred loss impairment methodology with an expected credit loss methodology and requires consideration of a broader
range of reasonable and supportable information to inform credit loss estimates. This new standard is effective for the Company at the beginning of fiscal 2021,
including interim periods within that reporting period. The Company does not expect the impact of adoption to be significant.
Note 3. Balance Sheet Details
Property, Plant and Equipment, net
Property, plant and equipment consisted of the following:
Machinery and equipment
Land and buildings
Leasehold improvements
Furniture and fixtures
Construction in progress
Less: Accumulated depreciation and amortization
Property, plant and equipment, net
Depreciation expense was $113 million, $115 million and $112 million for 2020, 2019 and 2018, respectively.
63
As of
October 3,
2020
September 28,
2019
(In thousands)
1,479,768
657,716
44,786
24,501
3,750
2,210,521
(1,651,279)
559,242
$
$
1,448,812
639,667
44,015
23,619
39,420
2,195,533
(1,564,886)
630,647
$
$
Table of Contents
Note 4. Revenue Recognition
The Company is a leading global provider of integrated manufacturing solutions, components, products and repair, logistics and after-market services. For
purposes of determining when to recognize revenue, and in what amount, the Company applies a 5-step model: (1) identify the contract with a customer; (2)
identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the
contract; and (5) recognize revenue when (or as) the Company satisfies a performance obligation. Each of these steps involves the use of significant judgments, as
discussed below.
Step 1 - Identify the contract with a customer
A contract is defined as an agreement between two parties that creates enforceable rights and obligations. The Company generally enters into a master
supply agreement (“MSA”) with its customers that provides the framework under which business will be conducted, and pursuant to which a customer will issue
purchase orders or other binding documents to specify the quantity, price and delivery requirements for products or services the customer wishes to purchase. The
Company generally considers its contract with a customer to be a firm commitment, consisting of the combination of an MSA and a purchase order or any other
similar binding document.
Step 2 - Identify the performance obligations in the contract
A performance obligation is a promised good or service that is material in the context of the contract and is both capable of being distinct (customer can
benefit from the good or service on its own or together with other readily available resources) and distinct within the context of the contract (separately identifiable
from other promises). The Company reviews its contracts to identify promised goods or services and then evaluates such items to determine which of those items
are performance obligations. The majority of the Company’s contracts have a single performance obligation since the promise to transfer an individual good or
service is not separately identifiable from other promises in the contract. The Company’s performance obligations generally have an expected duration of one year
or less.
Step 3 - Determine the transaction price
The Company’s contracts with its customers may include certain forms of variable consideration such as early payment discounts, volume discounts and
shared cost savings. The Company includes an estimate of variable consideration when determining the transaction price and the appropriate amount of revenue to
be recognized. This estimate is limited to an amount which will not result in a significant reversal of revenue in a future period. Factors considered in the
Company’s estimate of variable consideration are the potential amount subject to these contract provisions, historical experience and other relevant facts and
circumstances.
Step 4 - Allocate the transaction price to the performance obligations in the contract
A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is
satisfied. In the event that more than one performance obligation is identified in a contract, the Company is required to allocate a portion of the transaction price to
each performance obligation. This allocation would generally be based on the relative standalone price of each performance obligation, which most often would
represent the price at which the Company would sell similar goods or services separately.
Step 5 - Recognize revenue when (or as) a performance obligation is satisfied
The Company is required to assess whether control of a product or services promised under a contract is transferred to the customer at a point-in-time or
over time as the product is being manufactured or the services are being provided. If the criteria in ASC 606 for recognizing revenue on an over time basis are not
met, revenue must be recognized at the point-in-time determined by the Company at which its customer obtains control of a product or service.
The Company has determined that revenue for the majority of its contracts is required to be recognized on an over time basis. This determination is based
on the fact that 1) the Company does not have an alternative use for the end products it manufactures for its customers and has an enforceable right to payment,
including a reasonable profit, for work-in-progress upon a customer’s cancellation of a contract for convenience or 2) the Company’s customer simultaneously
receives and consumes the benefits provided by the Company’s services. For these contracts, revenue is recognized on an over time basis using the cost-to-cost
method (ratio of costs incurred to date to total estimated costs at completion) which the Company believes best depicts the transfer of control to the customer. At
least 95% of the Company's revenue is recognized on an over time basis, which is as products are manufactured or services are performed. Because of this, and the
fact that there is no work-in-process or finished goods inventory associated with contracts for which revenue is recognized on an over-time basis, 99% or more of
the Company’s inventory at the end of a given period is in the form of raw materials. For contracts for which revenue is
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required to be recognized at a point-in-time, the Company recognizes revenue when it has transferred control of the related goods, which generally occurs upon
shipment or delivery of the goods to the customer.
Application of the cost-to-cost method for government contracts in the Company’s Defense and Aerospace division requires the use of significant
judgments with respect to estimated materials, labor and subcontractor costs. This division is an operating segment whose results are aggregated with ten other
operating segments and reported under Components, Products and Services ("CPS") for segment reporting purposes. In 2020, CPS revenue and gross profit was
$1.3 billion and $157 million, respectively.
The Company updates its estimates of materials, labor and subcontractor costs on a quarterly basis. These updated estimates are reviewed each quarter by
a group of employees that includes representatives from numerous functions such as engineering, materials, contracts, manufacturing, program management,
finance and senior management. If a change in estimate is deemed necessary, the impact of the change is recognized in the period of change.
Contract Assets
A contract asset is recognized when the Company has recognized revenue, but has not issued an invoice to its customer for payment. Contract assets are
classified separately on the consolidated balance sheets and transferred to accounts receivable when rights to payment become unconditional. Because of the
Company’s short manufacturing cycle times, the transfer from contract assets to accounts receivable generally occurs within the next fiscal quarter.
Other
Other than the impact upon adoption of ASC 606 at the beginning of the first quarter of 2019 which was limited to beginning retained earnings, the
application of ASC 606 has not materially impacted any financial statement line item for any period presented herein.
Taxes assessed by governmental authorities that are both imposed on and concurrent with a specific revenue-producing transaction, and are collected by
the Company from a customer, are excluded from revenue.
Shipping and handling costs associated with outbound freight after control of a product has transferred to a customer are accounted for as fulfillment costs
and are included in cost of sales.
The Company applies the following practical expedients or policy elections under ASC 606:
• The promised amount of consideration under a contract is not adjusted for the effects of a significant financing component because, at inception of a
contract, the Company expects the period between when a good or service is transferred to a customer and when the customer pays for that good or
service will generally be one year or less.
• The Company has elected to not disclose information about remaining performance obligations that have original expected durations of one year or
less, which is substantially all of the Company’s remaining performance obligations.
• Incremental costs of obtaining a contract are not capitalized if the period over which such costs would be amortized to expense is less than one year.
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Disaggregation of revenue
In the following table, revenue is disaggregated by segment, market sector and geography.
Segments:
IMS
CPS
Total
End Markets:
Communications Networks
Industrial, Medical, Automotive and Defense
Cloud Solutions
Total
Geography:
Americas (1)
EMEA
APAC
Total
October 3,
2020
Year Ended
September 28,
2019
(In thousands)
September 29,
2018
$
$
$
$
$
$
5,699,751
1,260,619
6,960,370
2,323,712
4,127,720
508,938
6,960,370
3,450,527
995,838
2,514,005
6,960,370
$
$
$
$
$
$
6,858,676
1,375,183
8,233,859
2,906,575
4,572,006
755,278
8,233,859
4,194,652
1,051,192
2,988,015
8,233,859
$
$
$
$
$
$
5,814,591
1,295,539
7,110,130
2,684,609
3,681,788
743,733
7,110,130
3,600,967
841,961
2,667,202
7,110,130
(1) Mexico represents approximately 60% of the Americas revenue and the U.S. represents approximately 35%.
Note 5. Financial Instruments
Fair Value Measurements
Fair Value of Financial Instruments
The fair values of cash equivalents (generally 10% or less of cash and cash equivalents), accounts receivable, accounts payable and short-term debt
approximate carrying value due to the short-term duration of these instruments. Additionally, the fair value of variable rate long-term debt approximates carrying
value as of October 3, 2020.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company's primary financial assets and financial liabilities measured at fair value on a recurring basis are deferred compensation plan assets and
defined benefit plan assets, which are both measured using Level 1 inputs. Other financial assets and financial liabilities measured at fair value on a recurring basis
include foreign exchange contracts and interest rate swaps, which are both measured using Level 2 inputs. Foreign exchange contracts were not material as of
October 3, 2020 or September 28, 2019. The interest rate swaps had a negative value of $29 million and $20 million, as of October 3, 2020 and September 28,
2019, respectively.
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Offsetting Derivative Assets and Liabilities
The Company has entered into master netting arrangements with each of its derivative counterparties that allows net settlement of derivative assets and
liabilities under certain conditions, such as multiple transactions with the same currency maturing on the same date. The Company presents its derivative assets
and derivative liabilities on a gross basis on the consolidated balance sheets. The amount that the Company had the right to offset under these netting arrangements
was not material as of October 3, 2020 or September 28, 2019.
Non-Financial Assets Measured at Fair Value on a Nonrecurring Basis
Other non-financial assets, such as intangible assets, goodwill and other long-lived assets, are measured at fair value as of the date such assets are
acquired or in the period an impairment is recorded. During the second quarter of 2020, commodity prices in the oil and gas market experienced a sharp decline
due to a combination of an oversaturated supply and a decrease in demand caused by the COVID-19 global pandemic. This commodity price decline resulted in a
negative impact to the projected cash flows of the Company’s oil and gas reporting unit that is part of the Company's Components, Products and Services ("CPS")
operating segment and, therefore, the Company performed a goodwill impairment test for this particular reporting unit. The Company concluded that the fair value
of the reporting unit was below its carrying value, resulting in a goodwill impairment charge of $7 million. The fair value of the reporting unit was estimated based
on the present value of future discounted cash flows. The Company also recorded an impairment charge of $2 million in the second quarter of 2020 for certain
long-lived assets. These impairment charges are included in "Restructuring and other" on the condensed consolidated statements of income.
Derivative Instruments
Foreign Exchange Rate Risk
The Company is exposed to certain risks related to its ongoing business operations. The primary risk managed by using derivative instruments is foreign
currency exchange risk.
Forward contracts on various foreign currencies are used to manage foreign currency risk associated with forecasted foreign currency transactions and
certain monetary assets and liabilities denominated in non-functional currencies. The Company's primary foreign currency cash flows are in certain Asian and
European countries, Brazil, Israel and Mexico.
The Company had the following outstanding foreign currency forward contracts that were entered into to hedge foreign currency exposures:
Derivatives Designated as Accounting Hedges:
Notional amount (in thousands)
Number of contracts
Derivatives Not Designated as Accounting Hedges:
Notional amount (in thousands)
Number of contracts
As of
October 3, 2020
September 28, 2019
$113,300
48
$352,062
45
$106,564
46
$299,127
43
The Company utilizes foreign currency forward contracts to hedge certain operational (“cash flow”) exposures resulting from changes in foreign currency
exchange rates. Such exposures generally result from (1) forecasted non-functional currency sales and (2) forecasted non-functional currency materials, labor,
overhead and other expenses. These contracts are designated as cash flow hedges for accounting purposes and are generally one-to-two months in duration but, by
policy, may be up to twelve months in duration.
For derivative instruments that are designated and qualify as cash flow hedges, the Company excludes time value from its assessment of hedge
effectiveness and recognizes the amount of time value in earnings over the life of the derivative instrument. Gains or losses on the derivative not caused by changes
in time value are recorded in Accumulated Other Comprehensive Income ("AOCI"), a component of equity, and reclassified into earnings in the same period or
periods during which the hedged transaction affects earnings. The amount of gain or loss recognized in Other Comprehensive Income ("OCI") on derivative
instruments and the amount of gain or loss reclassified from AOCI into income were not material for any period
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presented herein. Pursuant to a new accounting standard, as of the beginning of 2020, the Company is no longer required to separately measure and report hedge
ineffectiveness. The amount of hedge ineffectiveness was not material for 2019 or 2018.
The Company enters into short-term foreign currency forward contracts to hedge currency exposures associated with certain monetary assets and
liabilities denominated in non-functional currencies. These contracts have maturities of up to two months and are not designated as accounting hedges.
Accordingly, these contracts are marked-to-market at the end of each period with unrealized gains and losses recorded in other income (expense), net, in the
consolidated statements of operations. The amount of gains or losses associated with these forward contracts was not material for any period presented herein.
From an economic perspective, the objective of the Company's hedging program is for gains and losses on forward contracts to substantially offset gains and losses
on the underlying hedged items. In addition to the contracts disclosed in the table above, the Company has numerous contracts that have been closed from an
economic and financial accounting perspective and will settle early in the first month of the following quarter. Since these offsetting contracts do not expose the
Company to risk of fluctuations in exchange rates, these contracts have been excluded from the above table.
Interest Rate Risk
The Company enters into forward interest rate swap agreements with independent counterparties to partially hedge the variability in cash flows due to
changes in the benchmark interest rate (LIBOR) associated with anticipated variable rate borrowings. These interest rate swaps have a maturity date of
December 1, 2023, and effectively convert the Company's variable interest rate obligations to fixed interest rate obligations. These swaps are accounted for as cash
flow hedges under ASC Topic 815, Derivatives and Hedging. Interest rate swaps with an aggregate notional amount of $350 million were outstanding as of
October 3, 2020 and September 28, 2019. The aggregate effective interest rate of these swaps as of October 3, 2020 was approximately 4.3%. Due to a decline in
interest rates since the time the swaps were put in place, these interest rate swaps had a negative value of $29 million, of which $9 million is included in accrued
liabilities and the remaining amount is included in other long-term liabilities on the consolidated balance sheets.
Note 6. Financial Instruments and Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist primarily of cash, cash equivalents, trade accounts receivable, foreign
currency forward contracts and interest rate swap agreements. The carrying value of assets such as cash, cash equivalents and accounts receivable is expected to
approximate fair value due to the short duration of the assets. The Company maintains its cash and cash equivalents with recognized financial institutions that
management believes to be of high credit quality. One of the Company's most significant credit risks is the ultimate realization of accounts receivable. This risk is
mitigated by ongoing credit evaluations of, and frequent contact with, the Company's customers, especially its most significant customers, thus enabling it to
monitor changes in business operations and respond accordingly. The Company generally does not require collateral for sales on credit. The Company considers
these concentrations of credit risks when estimating its allowance for doubtful accounts. Foreign currency forward contracts and interest rate swaps are maintained
with high quality counterparties to reduce the Company's credit risk and are recorded on the Company's balance sheets at fair value.
Nokia represented more than 10% of the Company's net sales in 2020, 2019 and 2018 and 10% or more of the Company's gross accounts receivable as of
October 3, 2020 and September 28, 2019.
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Note 7. Debt
Long-term debt consisted of the following:
Term loan due 2023 ("Term Loan"), net of issuance costs
Non-interest bearing promissory notes
Total long-term debt
Less: Current portion of non-interest bearing promissory notes
Current portion of long-term debt
Long-term debt
As of
October 3,
2020
September 28,
2019
(In thousands)
347,999
—
347,999
—
18,750
329,249
$
370,409
14,916
385,325
14,916
23,438
346,971
$
Secured Notes. In 2014, the Company issued $375 million of senior secured notes due 2019 ("Secured Notes"). The Secured Notes were repaid upon
maturity on June 1, 2019. There was no gain or loss associated with the extinguishment of the Secured Notes.
Non-interest Bearing Promissory Notes. On February 1, 2016, the Company completed an acquisition and financed $15 million of the purchase price with
the acquiree using a four-year non-interest bearing promissory note. The Company repaid these notes during the second quarter of 2020.
Revolving Credit Facility.
During the first quarter of 2019, the Company entered into a Fourth Amended and Restated Credit Agreement (the "Amended Cash Flow Revolver") that
provided for a committed $375 million Term Loan.
On April 5, 2019, the Company entered into an amendment to the Amended Cash Flow Revolver that increased the amount available under the facility
from $500 million to $700 million.
On May 31, 2019, the Company drew down the Term Loan and used the proceeds to repay the Company's Secured Notes as discussed above. As of
October 3, 2020, costs incurred in connection with the amendment of the Amended Cash Flow Revolver and Term Loan are classified as long-term debt and are
being amortized to interest expense over the life of the Term Loan using the effective interest method.
Following the satisfaction and discharge of the Indenture dated as of June 4, 2014, using the proceeds of the Term Loan, and the release of all liens
securing the Secured Notes, the Company’s debt structure changed as follows, effective June 3, 2019: (i) revolving commitments under the Amended Cash Flow
Revolver increased for a total of $700 million in revolving commitments, (ii) the accordion feature of the Amended Cash Flow Revolver was reset so that the
Company can obtain, subject to the satisfaction of specified conditions and commitments of the lenders, additional revolving commitments in an aggregate amount
of up to $200 million, and (iii) the Company and its subsidiary guarantors’ obligations under the Amended Cash Flow Revolver became secured by substantially
all of the assets (excluding real property) of the Company and the subsidiary guarantors, subject to certain exceptions.
Loans under the Amended Cash Flow Revolver bear interest, at the Company's option, at either the LIBOR or a base rate, in each case plus a spread
determined based on the Company's credit rating. Interest on the loans is payable quarterly in arrears with respect to base rate loans and at the end of an interest
period in the case of LIBOR loans. The outstanding principal amount of all loans under the Amended Cash Flow Revolver, including, the Term Loan, together
with accrued and unpaid interest, is due on November 30, 2023. The Company is required to repay a portion of the principal amount of the Term Loan equal to
1.25% in quarterly installments.
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Maturities of the Term Loan as of October 3, 2020 by fiscal year are as follows:
2021
2022
2023
2024
(In Thousands)
18,750
18,750
14,062
300,000
351,562
$
Certain of the Company’s domestic subsidiaries are required to be guarantors in respect of the Amended Cash Flow Revolver. The Company and the
subsidiary guarantors’ obligations under the Amended Cash Flow Revolver are secured by property of the Company and such guarantors, including, but not limited
to cash, accounts receivables, inventory and the shares of the Company's subsidiaries, subject to limited exceptions.
The Amended Cash Flow Revolver requires the Company to comply with a minimum consolidated interest coverage ratio, measured at the end of each
fiscal quarter, and at all times a maximum consolidated leverage ratio. The Amended Cash Flow Revolver contains customary affirmative covenants, including
covenants regarding the payment of taxes and other obligations, maintenance of insurance, reporting requirements and compliance with applicable laws and
regulations.
The Company enters into forward interest rate swap agreements with independent counterparties to partially hedge the variability in cash flows due to
changes in the benchmark interest rate (LIBOR) associated with anticipated variable rate borrowings. These interest rate swaps have a maturity date of
December 1, 2023, and effectively convert the Company's variable interest rate obligations to fixed interest rate obligations. These swaps are accounted for as cash
flow hedges under ASC Topic 815, Derivatives and Hedging. Interest rate swaps with an aggregate notional amount of $350 million were outstanding as of
October 3, 2020 and September 28, 2019. The aggregate effective interest rate of these swaps as of October 3, 2020 was approximately 4.3%. As of October 3,
2020, due to a decline in interest rates since the time the swaps were put in place, these interest rate swaps had a negative value of $29 million, of which $9 million
is included in accrued liabilities and the remaining amount is included in other long-term liabilities on the consolidated balance sheets.
As of October 3, 2020, no borrowings and $8 million of letters of credit were outstanding under the Amended Cash Flow Revolver, under which $692
million was available to borrow. There were no borrowings outstanding under the Amended Cash Flow Revolver as of September 28, 2019.
Foreign Short-term Borrowing Facilities. As of October 3, 2020, certain foreign subsidiaries of the Company had a total of $72 million of short-term
borrowing facilities available, under which no borrowings were outstanding. These facilities expire at various dates through the second quarter of 2022.
Debt Covenants
The Company's Amended Cash Flow Revolver requires the Company to comply with certain financial covenants, namely a maximum leverage ratio and a
minimum interest coverage ratio, in both cases measured on the basis of a trailing 12 month look-back period. In addition, the Company's debt agreements contain
a number of restrictive covenants, including restrictions on incurring additional debt, making investments and other restricted payments, selling assets and paying
dividends, subject to certain exceptions. The Company was in compliance with these covenants as of October 3, 2020.
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Note 8. Leases
ROU assets and lease liabilities recorded in the condensed consolidated balance sheet as of October 3, 2020 are as follows:
Other assets (1)
Accrued liabilities
Other long-term liabilities
Total lease liabilities
Weighted average remaining lease term (in years)
Weighted average discount rate
(1) Net of accumulated amortization of $16 million.
$
$
$
As of
October 3, 2020
(In thousands)
52,552
16,659
37,015
53,674
6.88
3.13 %
Cash paid in satisfaction of operating lease liabilities was $19 million for the year ended October 3, 2020.
Operating lease expense, which includes immaterial amounts of short-term leases, variable lease costs and sublease income, was $21 million, $26 million
and $27 million for the years ended October 3, 2020, September 28, 2019 and September 29, 2018, respectively.
Future lease payments under non-cancelable operating leases as of October 3, 2020, by fiscal year, are as follows:
Operating Leases
(In thousands)
18,128
13,366
7,256
4,012
4,082
13,185
60,029
6,355
53,674
$
$
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: imputed interest
Total
follows:
As of September 28, 2019, prior to the adoption of ASC 842, future minimum lease payments, net of sublease income, under operating leases were as
2020
2021
2022
2023
2024
Thereafter
Total
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Operating Leases
(In thousands)
18,472
15,916
11,368
5,887
3,993
17,071
72,707
$
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Note 9. Accounts Receivable Sale Program
The Company has entered into a Receivable Purchase Agreement (the “RPA”) with certain third-party banking institutions for the sale of trade
receivables generated from sales to certain customers, subject to acceptance by, and a funding commitment from, the banks that are party to the RPA. Trade
receivables sold pursuant to the RPA are serviced by the Company.
In addition to the RPA, the Company has the option to participate in trade receivables sales programs that have been implemented by certain of the
Company's customers, as in effect from time to time. The Company does not service trade receivables sold under these other programs.
Under each of the programs noted above, the Company sells its entire interest in a trade receivable for 100% of face value, less a discount. For the years
ended October 3, 2020 and September 28, 2019, the Company sold approximately $1.7 billion and approximately $2.7 billion, respectively, of accounts receivable
under these programs. Upon sale, these receivables are removed from the consolidated balance sheets and cash received is presented as cash provided by operating
activities in the consolidated statements of cash flows. Discounts on sold receivables were not material for any period presented. As of October 3, 2020 and
September 28, 2019, $97 million and $241 million, respectively, of accounts receivable sold under the RPA and subject to servicing by the Company remained
outstanding and had not yet been collected. The Company's sole risk with respect to receivables it services is with respect to commercial disputes regarding such
receivables. Commercial disputes include billing errors, returns and similar matters. To date, the Company has not been required to repurchase any receivable it
has sold due to a commercial dispute. Additionally, the Company is required to remit amounts collected as servicer under the RPA on a weekly basis to the
financial institutions that purchased the receivables. As of October 3, 2020 and September 28, 2019, $39 million and $76 million, respectively, had been collected
but not yet remitted. This amount is classified in accrued liabilities on the consolidated balance sheets.
Note 10. Contingencies
From time to time, the Company is a party to litigation, claims and other contingencies, including environmental, regulatory and employee matters and
examinations and investigations by governmental agencies, which arise in the ordinary course of business. The Company records a contingent liability when it is
probable that a loss has been incurred and the amount of loss is reasonably estimable in accordance with ASC Topic 450, Contingencies, or other applicable
accounting standards. As of October 3, 2020 and September 28, 2019, the Company had reserves of $37 million and $36 million, respectively, for environmental
matters, warranty, litigation and other contingencies (excluding reserves for uncertain tax positions), which the Company believes are adequate. However, there
can be no assurance that the Company's reserves will be sufficient to settle these contingencies. Such reserves are included in accrued liabilities and other long-
term liabilities on the consolidated balance sheets.
Legal Proceedings
Environmental Matters
The Company is subject to various federal, state, local and foreign laws and regulations and administrative orders concerning environmental protection,
including those addressing the discharge of pollutants into the environment, the management and disposal of hazardous substances, the cleanup of contaminated
sites, the materials used in products, and the recycling, treatment and disposal of hazardous waste. As of October 3, 2020, the Company had been named in a
lawsuit and several administrative orders alleging certain of its current and former sites contributed to groundwater contamination. One such order demands that
the Company and other alleged defendants remediate groundwater contamination at four landfills located in Northern California to which the Company may have
sent wastewater in the past. The Company is participating in a working group of other alleged defendants to better understand its potential exposure in this action
and has reserved its estimated exposure for this matter as of October 3, 2020. However, there can be no assurance that the Company's reserve will ultimately be
sufficient.
In June 2008, the Company was named by the Orange County Water District in a suit alleging that its actions contributed to polluted groundwater
managed by the plaintiff. The complaint seeks recovery of compensatory and other damages, as well as declaratory relief, for the payment of costs necessary to
investigate, monitor, remediate, abate and contain contamination of groundwater within the plaintiff’s control. In April 2013, all claims against the Company were
dismissed. The plaintiff appealed this dismissal and the appellate court reversed the judgment in August 2017. In November 2017, the California Supreme Court
denied the Company’s petition to review this decision and, in December 2017, the Court of Appeal
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remanded the case back to the Superior Court for further proceedings. The first part of a multi-phase trial is scheduled to commence on April 12, 2021. The
Company intends to contest the plaintiff’s claims vigorously.
Other Matters
In October 2018, a contractor who had been retained by the Company through a third party temporary staffing agency from November 2015 to March
2016 filed a lawsuit against the Company in the Santa Clara County Superior Court on behalf of himself and all other similarly situated Company contractors and
employees in California, alleging violations of California Labor Code provisions governing overtime, meal and rest periods, wages, wage statements and
reimbursement of business expenses. The complaint seeks certification of a class of all non-exempt employees, whether employed directly or through a temporary
staffing agency, employed from four years before the filing of the initial complaint to the time of trial. Additionally, on November 1, 2019, another contractor
retained through a temporary staffing agency filed a lawsuit against the Company in the Santa Clara County Superior Court. The complaint, which includes a
single cause of action under California’s Private Attorneys General Act of 2004, alleges Labor Code violations substantially similar to those alleged in the October
2018 class action lawsuit and seeks penalties on behalf of the State of California and other “aggrieved employees” (defined to be current and former hourly, non-
exempt employees employed by the Company between August 22, 2018 and the present). The Company intends to vigorously defend these matters.
In December 2019, the Company sued a former customer, Dialight plc (“Dialight”), in the United States District Court for the Southern District of New
York to collect approximately $10 million in unpaid accounts receivable and net obsolete inventory obligations. Later the same day, Dialight commenced its own
action in the same court. Dialight’s complaint, which asserts claims for fraudulent inducement, breach of contract, and gross negligence/willful misconduct, alleges
that the Company fraudulently misrepresented its capabilities to induce Dialight to enter into a Manufacturing Services Agreement (the “Dialight MSA”), and then
breached its obligations contained in the Dialight MSA relating to quality, on-time delivery and supply chain management. Dialight seeks an unspecified amount of
compensatory and punitive damages. The Company intends to vigorously prosecute its claim against Dialight. Further, the Company strongly disagrees with
Dialight’s allegations and intends to defend against them vigorously.
For each of the matters noted above, the Company is unable to reasonably estimate a range of possible loss at this time.
Other Contingencies
One of the Company's most significant risks is the ultimate realization of accounts receivable and customer inventory exposures. This risk is partially
mitigated by ongoing credit evaluations of, and frequent contact with, the Company's customers, especially its most significant customers, thus enabling the
Company to monitor changes in business operations and respond accordingly. Customer bankruptcies also entail the risk of potential recovery by the bankruptcy
estate of amounts previously paid to the Company that are deemed a preference under bankruptcy laws. Given the current economic environment resulting from the
COVID-19 global pandemic, the Company continues to closely monitor the impact of the pandemic on all aspect of its business, including customer payment
patterns and available information with respect to the financial condition of its customers and suppliers in order to identify potential problems early and implement
risk mitigation measures.
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Note 11. Restructuring
Restructuring costs were $27 million, $14 million, and $29 million in 2020, 2019, and 2018, respectively.
The following table is a summary of restructuring costs:
Severance costs (approximately 2,350 employees)
Other exit costs (recognized as incurred)
Total - Q1 FY20 plan
Severance costs (approximately 2,900 employees)
Other exit costs (recognized as incurred)
Total
Severance reimbursement
Total - Q1 FY18 Plan
Costs incurred for other plans
Total - all plans
Q1 FY20 Plan
October 3, 2020
Year Ended
September 28, 2019
(In thousands)
September 29, 2018
$
$
17,919
71
17,990
178
1,971
2,149
—
2,149
6,644
26,783
$
$
$
—
—
—
1,900
3,247
5,147
—
5,147
8,606
13,753
—
—
—
26,425
4,984
31,409
(10,000)
21,409
7,737
29,146
On October 28, 2019, the Company adopted a Company-wide restructuring plan ("Q1 FY20 Plan"). Additional actions under this plan are expected to be
implemented through the second quarter of fiscal 2021 and cash payments of severance are expected to occur through the fourth quarter of fiscal 2021.
Q1 FY18 Plan
All actions under our Q1 FY18 Plan have been implemented and all severance has been paid. In connection with this plan, the Company entered into a
contractual agreement with a third party pursuant to which $10 million of severance and retention costs incurred by the Company was reimbursed. Costs incurred
for other exit costs consist primarily of costs to maintain vacant facilities that are owned.
Other plans
Other plans include a number of plans for which costs are not expected to be material individually or in the aggregate.
All Plans
The Company’s Integrated Manufacturing Solutions ("IMS") segment incurred costs of $13 million for the year ended October 3, 2020. This compares to
a benefit incurred of $4 million for the year ended September 28, 2019, primarily as a result of a recovery from a third party of certain environmental remediation
costs. The Company’s CPS segment incurred costs of $9 million and $18 million for the years ended October 3, 2020 and September 28, 2019, respectively. In
addition, $5 million of costs were incurred during the year ended October 3, 2020 for Corporate headcount reductions that were not allocated to the Company's
IMS and CPS segments. The Company had accrued liabilities of $9 million and $5 million as of October 3, 2020 and September 28, 2019, respectively, for
restructuring costs (exclusive of long-term environmental remediation liabilities).
In addition to costs expected to be incurred under the Q1 FY20 Plan and Q1 FY18 Plan, the Company expects to incur restructuring costs in future
periods primarily for vacant facilities and former sites for which the Company is or may be responsible for environmental remediation.
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Note 12. Income Taxes
Domestic and foreign components of income before income taxes were as follows:
Domestic
Foreign
Total
The provision for income taxes consists of the following:
Federal:
Current
Deferred
State:
Current
Deferred
Foreign:
Current
Deferred
Total provision for income taxes
Impact of U.S. Tax Reform
October 3,
2020
Year Ended
September 28,
2019
(In thousands)
September 29,
2018
$
$
96,993
103,765
200,758
$
$
153,696
91,923
245,619
$
$
16,215
81,324
97,539
October 3,
2020
Year Ended
September 28,
2019
(In thousands)
September 29,
2018
$
$
(917)
9,460
1,705
2,579
46,376
1,842
61,045
$
$
868
45,910
$
(122)
170,994
2,747
2,961
45,929
5,689
104,104
$
32
(3,672)
20,287
5,553
193,072
On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law. In accordance with ASC 740, Income Taxes, the Company
is required to recognize the effect of the Tax Act in the period of enactment, which was the Company’s first quarter of fiscal 2018 that ended on December 30,
2017. The many changes in the Tax Act include a permanent reduction in the maximum federal corporate income tax rate from 35% to 21% effective as of January
1, 2018. Because of this reduction in rate, the Company was required to revalue its U.S. deferred tax assets and liabilities to the new rate in the Company's first
quarter of 2018. The Tax Act also required a mandatory deemed repatriation of undistributed earnings and profits, at the rate of either 15.5% for cash or 8% for
non-liquid assets.
The Tax Act also includes provisions for Global Intangible Low-Taxed Income (“GILTI”), which imposes taxes on foreign income in excess of a deemed
return on tangible assets of foreign corporations. These new provisions were effective for the Company in fiscal year 2019. During the first quarter of 2019, the
Company elected to record the effects of GILTI as a period cost.
The Company's provision for income taxes for 2020, 2019 and 2018 was $61 million (30% of income before taxes), $104 million (42% of income before
taxes) and $193 million (198% of income before taxes), respectively. The effective tax rate for 2020 is higher than the expected U.S. statutory rate of 21%
primarily due to foreign operations that are taxed at rates higher than the U.S. statutory rate.
During 2019, the Company recorded $22 million of deferred tax expense for a tax-related restructuring transaction.
During 2018, the Company recorded a net income tax expense for the impact of the Tax Act of $161 million, which was comprised of $175 million for
remeasurement of the Company’s U.S deferred tax assets, zero for the mandatory deemed repatriation of undistributed earnings and profits, and a tax benefit of
$14 million for the conversion to a territorial system.
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The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows:
Deferred tax assets:
U.S. net operating loss carryforwards
Foreign net operating loss carryforwards
Intangibles
Accruals not currently deductible
Property, plant and equipment
Tax credit carryforwards
Reserves not currently deductible
Stock compensation expense
Federal benefit of foreign operations
Derivatives and other impacts of OCI
Lease deferred tax asset
Other
Valuation allowance
Total deferred tax assets
Deferred tax liabilities on undistributed earnings
Deferred tax liabilities on branch operations
Revenue recognition
Lease deferred tax liability
Net deferred tax assets
Recorded as:
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
As of
October 3, 2020
September 28, 2019
(In thousands)
$
$
$
$
168,570
111,418
22,684
49,022
24,545
15,948
13,389
6,519
16,973
10,793
10,929
3,063
(111,127)
342,726
(16,240)
(32,351)
(14,258)
(10,781)
269,096
273,470
(4,374)
269,096
$
$
$
$
184,188
117,403
19,422
45,117
28,710
13,601
15,266
10,249
14,006
3,145
—
2,744
(115,998)
337,853
(18,690)
(34,378)
(9,456)
—
275,329
279,803
(4,474)
275,329
The Company offsets deferred tax assets and liabilities by tax-paying jurisdiction. The resulting net amounts by tax jurisdiction are then aggregated
without further offset.
A valuation allowance is established or maintained when, based on currently available information and other factors, it is more likely than not that all or a
portion of the deferred tax assets will not be realized. The Company regularly assesses its valuation allowance against deferred tax assets on a jurisdiction by
jurisdiction basis. The Company considers all available positive and negative evidence, including future reversals of temporary differences, projected future taxable
income, tax planning strategies and recent financial results. Significant judgment is required in assessing the Company's ability to generate revenue, gross profit,
operating income and jurisdictional taxable income in future periods. The Company's valuation allowance as of October 3, 2020 relates primarily to foreign net
operating losses, with the exception of $15 million related to U.S. state net operating losses.
The Company provides deferred tax liabilities for the tax consequences associated with the undistributed earnings that are expected to be repatriated to
subsidiaries' parent unless the subsidiaries' earnings are considered indefinitely reinvested. As of October 3, 2020, income taxes and foreign withholding taxes have
not been provided for approximately $363 million of cumulative undistributed earnings of several non-U.S. subsidiaries. The Company intends to reinvest these
earnings indefinitely in operations outside of the U.S. Determination of the amount of unrecognized deferred tax liabilities on these undistributed earnings is not
practicable.
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As of October 3, 2020, the Company has cumulative net operating loss carryforwards for federal, state and foreign tax purposes of $700 million, $376
million and $505 million, respectively. The federal and state net operating loss carryforwards begin expiring in 2025 and 2021, respectively, and expire at various
dates through September 29, 2035. Certain foreign net operating losses start expiring in 2021. However, the majority of foreign net operating losses carryforward
indefinitely. As of October 3, 2020, the Company has federal tax credits of $13 million that expire between 2031 and 2040. The Tax Reform Act of 1986 and
similar state provisions impose restrictions on the utilization of net operating loss and tax credit carryforwards in the event of an “ownership change” as defined in
the Internal Revenue Code. The utilization of certain net operating losses may be restricted due to changes in ownership and business operations.
Following is a reconciliation of the statutory federal tax rate to the Company's effective tax rate:
Federal tax at statutory tax rate
Tax Act impact
Effect of foreign operations
Permanent items
Discrete charge for restructuring transaction
Federal credits
Other
State income taxes, net of federal benefit
Effective tax rate
October 3,
2020
Year Ended
September 28,
2019
September 29,
2018
21.00 %
—
9.41
(0.59)
—
(1.31)
(0.06)
1.96
30.41 %
21.00 %
—
9.30
0.40
8.88
(0.07)
0.68
2.19
42.38 %
24.50 %
165.16
7.92
(1.37)
—
(1.28)
1.77
1.24
197.94 %
A reconciliation of the beginning and ending amount of total liabilities for unrecognized tax benefits, excluding accrued penalties and interest, is as
follows:
Balance, beginning of year
Increase (decrease) related to prior year tax positions
Increase related to current year tax positions
Settlements
Decrease related to lapse of applicable statute of limitations
Balance, end of year
October 3,
2020
Year Ended
September 28,
2019
(In thousands)
September 29,
2018
$
$
66,677
1,327
9,907
—
(3,299)
74,612
$
$
60,787
(1,731)
8,902
(626)
(655)
66,677
$
$
67,022
(5,917)
8,392
(7,648)
(1,062)
60,787
The Company had reserves of $40 million and $39 million as of October 3, 2020 and September 28, 2019, respectively, for the payment of interest and
penalties relating to unrecognized tax benefits. During 2020 and 2019, the Company recognized a net income tax expense for interest and penalties of $1 million in
each year compared to a net income tax benefit of $3 million in 2018. The Company recognizes interest and penalties related to liabilities for unrecognized tax
benefits as a component of income tax expense. Should the Company be able to ultimately recognize all of these uncertain tax positions, it would result in a benefit
to net income and a reduction of the effective tax rate of $68 million, $62 million and $58 million for years 2020, 2019 and 2018, respectively.
The Company conducts business globally and, as a result, files income tax returns in the United States federal jurisdiction and various state and foreign
jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The Company is currently being
audited by the Internal Revenue Service for tax years 2008 through 2010. To the extent the final tax liabilities are different from the amounts accrued, this would
result in an increase or decrease in net operating loss carryforwards which would impact tax expense. Additionally, the Company is being audited by various state
tax agencies and certain foreign countries. To the extent the final tax liabilities are different from the amounts accrued, the increases or decreases would be
recorded as income tax expense or benefit in the consolidated statements of operations. Although the Company believes that the resolution of these audits will not
have a material adverse impact on the Company’s results of operations, the outcome is subject to uncertainty.
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In general, the Company is no longer subject to United States federal or state income tax examinations for years before 2003, and to foreign examinations
for years prior to 2004 in its major foreign jurisdictions. It is reasonably possible that the balance of gross unrecognized tax benefits could decrease in the next 12
months by approximately $20 million related to the resolution of audits and expiration of statutes of limitations. In addition, there could be a corresponding
decrease in accrued interest and penalties of approximately $30 million.
Note 13. Earnings Per Share
Basic and diluted earnings per share amounts are calculated by dividing net income by the weighted average number of shares of common stock
outstanding during the period, as follows:
October 3,
2020
Year Ended
September 28,
2019
(In thousands, except per share amounts)
September 29,
2018
Numerator:
Net income (loss)
Denominator:
Weighted average common shares outstanding
Effect of dilutive stock options and restricted stock units
Denominator for diluted earnings per share
Net income (loss) per share:
Basic
Diluted
$
139,713
$
141,515
$
(95,533)
69,041
1,752
70,793
69,129
2,549
71,678
69,833
—
69,833
$
$
2.02
1.97
$
$
2.05
1.97
$
$
(1.37)
(1.37)
Weighted-average dilutive securities that were excluded from the above calculation because their inclusion would have had an anti-dilutive effect under
ASC Topic 260, Earnings per Share, due to application of the treasury stock method were not material for any period presented.
Note 14. Stockholders' Equity
The Company's 2009 Stock Plan ("2009 Plan") expired as to future grants on January 26, 2019. Although the 2009 Plan expired, it will continue to govern
all awards granted under it prior to its expiration date. On March 11, 2019, the Company's stockholders approved the Company's 2019 Equity Incentive Plan
("2019 Plan") and the reservation of 4 million shares of common stock for issuance thereunder, plus any shares subject to stock options or similar awards granted
under the 2009 Plan that expire or otherwise terminate without having been exercised in full and shares issued pursuant to awards granted that are forfeited by the
Company.
As of October 3, 2020, an aggregate of 8.0 million shares were authorized for future issuance under the Company's stock plans, of which 3.6 million of
such shares were issuable upon exercise of outstanding options and delivery of shares upon vesting of restricted stock units and 4.4 million shares of common stock
were available for future grant. Awards other than stock options and stock appreciation rights reduce common stock available for grant by 1.36 shares for every
share of common stock subject to such an award. Awards under the 2019 Plan and 2009 Plan that expire or are cancelled without delivery of shares generally
become available for issuance under the 2019 Plan. The 2019 Plan will expire as to future grants in December 2028.
Stock Repurchase Program
During the fourth quarter of 2017, the Board of Directors approved a $200 million stock repurchase plan and during the first quarter of 2020, the Board of
Directors authorized the Company to purchase an additional $200 million of its common stock. Neither plan provides for an expiration date. During 2020, 2019
and 2018, the Company repurchased 6.4 million shares, 0.3 million shares and 5.0 million shares of its common stock for $166 million, $7 million and $146
million (including commissions), respectively, under these plans and as of October 3, 2020, $135 million remains available under such plans. Although stock
repurchases are intended to increase stockholder value by reducing the number of outstanding shares and to
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offset the dilution that results from the issuance of shares under the Company’s equity plans, repurchases of shares also reduce the Company's liquidity. As a result,
the timing of future repurchases depends upon the Company’s future capital needs, market conditions and other factors.
In addition to the repurchases discussed above, the Company repurchased 398,000, 207,000 and 334,000 shares of its common stock during 2020, 2019,
and 2018, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock units. The Company paid $13 million, $6
million and $12 million, respectively, to applicable tax authorities in connection with these repurchases.
Accumulated Other Comprehensive Income
Accumulated other comprehensive income, net of tax as applicable, consisted of the following:
Foreign currency translation adjustments
Unrealized holding losses on derivative financial instruments
Unrecognized net actuarial loss and unrecognized transition cost for benefit plans
Total
Note 15. Business Segment, Geographic and Customer Information
As of
October 3,
2020
September 28,
2019
$
$
(In thousands)
85,343
(22,202)
(28,255)
34,886
$
$
86,268
(19,888)
(24,121)
42,259
ASC Topic 280, Segment Reporting, establishes standards for reporting information about operating segments, products and services, geographic areas of
operations and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated
regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance.
The Company's operations are managed as two businesses:
1) Integrated Manufacturing Solutions (IMS). IMS is a reportable segment consisting of printed circuit board assembly and test, high-level assembly
and test, and direct order fulfillment.
2) Components, Products and Services (CPS). Components include interconnect systems (printed circuit board fabrication, backplane, cable assemblies
and plastic injection molding) and mechanical systems (enclosures and precision machining). Products include memory from our Viking
Technology division; enterprise solutions from our Viking Enterprise Solutions division; RF, optical and microelectronics; defense and aerospace
products from SCI Technology; and cloud-based manufacturing execution software from the Company's 42Q division. Services include design,
engineering, global services (logistics and repair).
The Company evaluated its operating segments to determine whether they can be aggregated into reportable segments. Factors considered in this
evaluation were similarity of economic characteristics, products, production processes, type or classes of customers, distribution methods and regulatory
environments. The Company determined that it has only one reportable segment - IMS, which generated approximately 80% of the Company's total revenue in
2020. The Company's CPS business consists of multiple operating segments which, based on this evaluation, do not meet the quantitative threshold for being
presented individually as reportable segments. Therefore, financial information for these operating segments is aggregated and presented in a single category
entitled “Components, Products and Services".
The accounting policies for each segment are the same as those disclosed by the Company for its consolidated financial statements. Intersegment sales
consist primarily of sales of components from CPS to IMS.
The Company's chief operating decision making group is the Chief Executive Officer and Chief Financial Officer and they allocate resources and assess
performance of operating segments based on a measure of revenue and gross profit that excludes items not directly related to the Company's ongoing business
operations. These items are typically either non-recurring or non-cash in nature.
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Segment information is as follows:
Gross sales:
IMS
CPS
Intersegment revenue
Net Sales
Gross Profit:
IMS
CPS
Total
Unallocated items (2)
Total
Depreciation and amortization:
IMS
CPS
Total
Unallocated corporate items (3)
Total
Capital expenditures (receipt basis):
IMS
CPS
Total
Unallocated corporate items (3)
Total
October 3, 2020
5,733,180
1,365,712
(138,522)
6,960,370
381,638
156,844
538,482
(12,775)
525,707
81,169
26,718
107,887
6,331
114,218
23,933
23,915
47,848
3,227
51,075
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Year Ended
September 28,
2019
(In thousands)
6,907,129
1,555,117
(228,387)
8,233,859
444,168
156,221 (1)
600,389
(8,451)
591,938
81,997
25,632
107,629
9,320
116,949
79,943
28,629
108,572
3,836
112,408
September 29,
2018
5,847,958
1,458,754
(196,582)
7,110,130
352,361
117,835
470,196
(6,413)
463,783
76,071
30,048
106,119
12,701
118,820
87,421
28,696
116,117
2,480
118,597
$
$
$
$
$
$
$
$
(1) During the fourth quarter of 2018, the Company recorded a $12.5 million pre-tax adjustment to correct errors that occurred from 2016 through the third
quarter of 2018 with respect to the accounting for certain long-term contracts in one of the Company’s CPS divisions. These errors are immaterial to all prior
periods. The impact of this out-of-period adjustment on the full year fiscal 2018 was $11 million which is also immaterial to 2018.
(2) For purposes of evaluating segment performance, management excludes certain items from its measures of gross profit. These items consist of stock-based
compensation expense, amortization of intangible assets, charges or credits resulting from distressed customers, litigation settlements and acquisition-related
items.
(3) Primarily related to selling, general and administration functions.
Segment assets, consisting of accounts receivable, inventories and fixed assets, are substantially proportional to segment sales.
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Net sales by geographic segment, determined based on the country in which a product is manufactured were as follows:
Net sales:
Americas (1)
EMEA
APAC
Total
October 3,
2020
Year Ended
September 28,
2019
(In thousands)
September 29,
2018
$
$
3,450,527
995,838
2,514,005
6,960,370
$
$
4,194,652
1,051,192
2,988,015
8,233,859
$
$
3,600,967
841,961
2,667,202
7,110,130
(1) Mexico represents approximately 60% of the Americas revenue and the U.S. represents approximately 35%.
Percentage of net sales represented by ten largest customers
Number of customers representing 10% or more of net sales
55.5 %
1
54.2 %
1
53.0 %
1
Property, plant and equipment, net:
Americas
EMEA
APAC
Total
Note 16. Stock-Based Compensation
Stock-based compensation expense was attributable to:
Stock options
Restricted stock units, including performance-based awards
Total
Stock-based compensation expense was recognized as follows:
Cost of sales
Selling, general and administrative
Research and development
Total
Restricted and Performance Stock Units
As of
October 3,
2020
September 28,
2019
(In thousands)
$
$
327,991
63,089
168,162
559,242
$
$
369,985
72,040
188,622
630,647
October 3,
2020
(1,145)
27,380
26,235
October 3,
2020
10,099
15,897
239
26,235
$
$
$
$
Year Ended
September 28,
2019
(In thousands)
1,250
29,594
30,844
Year Ended
September 28,
2019
(In thousands)
9,757
20,807
280
30,844
$
$
$
$
September 29,
2018
1,779
31,046
32,825
September 29,
2018
8,187
25,206
(568)
32,825
$
$
$
$
The Company grants restricted stock units and restricted stock units with performance conditions ("PSUs") to executive officers, directors and certain
other employees. These units vest over periods ranging from one year to four years and/
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or upon achievement of specified performance criteria and are automatically exchanged for shares of common stock at the vesting date. If performance metrics are
not met within specified time limits, the award will be canceled. Compensation expense associated with restricted stock units and PSUs is recognized ratably over
the vesting period, subject to probability of achievement for PSUs.
During the first two quarters of 2020, the Company granted PSUs for 304,500 shares for which vesting is contingent on cumulative non-GAAP earnings
per share measured over three fiscal years. If a minimum threshold is not achieved, no shares will vest. If the minimum threshold is achieved or exceeded, the
number of shares of common stock that will be issued will range from 80% to 120% of the number of PSUs granted, depending on the extent of performance.
Additionally, the number of shares that vest may be adjusted up or down by up to 15% based on the Company's total shareholder return relative to that of its peer
group over this same period. These PSUs will expire on December 31, 2022 if such performance conditions have not been met.
Activity with respect to the Company's restricted stock units and PSUs was as follows:
Outstanding as of September 30, 2017
Granted
Vested/Forfeited/Cancelled
Outstanding as of September 29, 2018
Granted
Vested/Forfeited/Cancelled
Outstanding as of September 28, 2019
Granted
Vested/Forfeited/Cancelled
Outstanding as of October 3, 2020
Expected to vest as of October 3, 2020
Number of Shares
(In thousands)
Weighted Average
Grant-Date Fair
Value
($)
Weighted-Average
Remaining
Contractual Term
(Years)
Aggregate Intrinsic
Value
($)
(In thousands)
3,359
1,102
(1,158)
3,303
1,843
(1,993)
3,153
1,340
(1,925)
2,568
2,093
27.56
33.51
25.31
30.33
25.09
29.46
27.82
32.51
28.62
29.67
29.85
1.51
124,800
1.21
97,913
1.30
102,720
1.23
1.26
71,571
58,337
The fair value of restricted stock units that vested during the year was $43 million for 2020, $29 million for 2019 and $36 million for 2018. As of
October 3, 2020, unrecognized compensation expense of $34 million is expected to be recognized over a weighted average period of 1.3 years. Additionally, as of
October 3, 2020, unrecognized compensation expense related to performance-based restricted stock units for which achievement of performance criteria was not
currently considered probable was $7 million.
Note 17. Employee Benefit Plans
The Company has various defined contribution retirement plans that cover the majority of its domestic employees. These retirement plans permit
participants to elect to have contributions made to the retirement plans in the form of salary deferrals. Under these retirement plans, the Company may match a
portion of employee contributions. Amounts contributed by the Company were not material for any period presented herein.
The Company sponsors a deferred compensation plan for eligible employees that allows participants to defer payment of all or part of their compensation.
Deferrals under this plan were immaterial. Assets associated with these plans were $40 million and $36 million as of October 3, 2020 and September 28, 2019,
respectively. Liabilities associated with these plans were $40 million and $36 million as of October 3, 2020 and September 28, 2019, respectively. These amounts
are recorded in other non-current assets and other long-term liabilities on the consolidated balance sheets.
Defined benefit plans covering certain employees in the United States and Canada were frozen in 2001. Employees who had not yet vested will continue
to be credited with service until vesting occurs, but no additional benefits will accrue.
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The Company also provides defined benefit pension plans in certain other countries. The assumptions used for calculating the pension benefit obligations
for non-U.S. plans depend on the local economic environment and regulations. The measurement date for the Company's defined benefit plans is October 3, 2020.
The funded status and plan assets for the defined benefit plans and amount reported on the consolidated balance sheets were as follows:
Plan Assets
Projected Benefit Obligation
Underfunded Status
Current Liabilities
Non-current liabilities
Total liabilities
October 3, 2020
As of
September 28, 2019
September 29, 2018
U.S.
Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
$
$
$
$
15,430 $
25,704
10,274 $
— $
10,274
10,274 $
23,575 $
64,453
40,878 $
2,054 $
38,824
40,878 $
15,421 $
24,221
8,800 $
— $
8,800
8,800 $
23,877 $
58,842
34,965 $
1,443 $
33,522
34,965 $
16,784 $
22,586
5,802 $
— $
5,802
5,802 $
26,114
50,930
24,816
1,430
23,386
24,816
The Company’s investment strategy is designed to help ensure that sufficient pension assets are available to pay benefits as they become due. Plan assets
are invested in mutual funds that are valued using the NAV that is quoted in active markets (Level 1 input). These plans are managed consistent with regulations or
market practices of the country in which the assets are invested. As of October 3, 2020 there were no significant concentrations of credit risk related to pension
plan assets. All other amounts and assumptions were not material for any period presented herein.
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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our management, including our Chief Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud. Disclosure controls and procedures, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that their objectives are met. Further, the design of disclosure controls and procedures
must reflect the fact that there are resource constraints, and the benefits of disclosure controls and procedures must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of disclosure controls and procedures can provide absolute assurance that all disclosure control issues
and instances of fraud, if any, have been detected. Nonetheless, our Chief Executive Officer and Chief Financial Officer have concluded that, as of October 3,
2020, (1) our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives, and (2) our disclosure controls and
procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
(b) Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-
15(f) under the Exchange Act). Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness
of our internal control over financial reporting as of October 3, 2020. In making this assessment, our management used the criteria established in Internal Control-
Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our management has concluded that,
as of October 3, 2020, our internal control over financial reporting was effective based on the COSO criteria.
The effectiveness of our internal control over financial reporting as of October 3, 2020 has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report which appears under Item 8.
(c) Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
that occurred during the quarter ended October 3, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
Item 9B. Other Information
None.
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The information called for by Items 10, 11, 12, 13 and 14 of Part III are incorporated by reference from our definitive Proxy Statement to be filed in
connection with our 2021 Annual Meeting of Stockholders pursuant to Regulation 14A, except that the information regarding our executive officers called for by
Item 401(b) of Regulation S-K has been included in Part I of this report.
PART III
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Item 15. Exhibits and Financial Statement Schedules
PART IV
(a)
(1)
Financial Statements. The following financial statements are filed under Item 8 hereof as part of this report:
Report of Independent Registered Public Accounting Firm
Financial Statements:
Consolidated Balance Sheets, As of October 3, 2020 and September 28, 2019
Consolidated Statements of Operations, Years Ended October 3, 2020, September 28, 2019 and September 29, 2018
Consolidated Statements of Comprehensive Income (Loss), Years Ended October 3, 2020, September 28, 2019 and September 29, 2018
Consolidated Statements of Stockholders' Equity, Years Ended October 3, 2020, September 28, 2019 and September 29, 2018
Consolidated Statements of Cash Flows, Years Ended October 3, 2020, September 28, 2019 and September 29, 2018
Notes to Consolidated Financial Statements
Page
52
54
55
56
57
58
59
(2)
Financial Statement Schedules. The following financial statement schedule of Sanmina Corporation is filed
as part of this report on Form 10-K immediately after the signature pages hereto and should be read in
conjunction with our Financial Statements included in this Item 15:
Schedule II-Valuation and Qualifying Accounts, Years Ended October 3, 2020, September 28,
2019 and September 29, 2018
All other schedules are omitted because they are not applicable or the required information is shown in the
Financial Statements or the notes thereto.
(3)
Exhibits. Refer to Item 15(b) immediately below.
86
Table of Contents
(b) Exhibits
Exhibit
Number
3.1(1)
3.2(2)
3.3(3)
3.4(4)
3.5(5)
3.6(6)
3.7(7)
3.8(8)
4.1(9)
4.5 (10)
10.1(11)*
10.2(12)*
10.3(13)*
10.4(14)*
10.5(15)*
10.6(16)*
10.7(17)*
10.8(18)*
10.9(19)*
10.10(20)
10.11(21)*
10.12(22)
10.13(23)
10.14(24)
10.15(25)*
10.16(26)*
10.17(27)*
10.18(28)*
10.19(29)*
10.20(30)‡
10.21(31) ‡
Description
Restated Certificate of Incorporation of the Registrant, dated January 31, 1996.
Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant, dated March 9, 2001.
Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock of the Registrant, dated
May 31, 2001.
Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant, dated December 7, 2001.
Amended and Restated Bylaws of the Registrant dated December 1, 2008.
Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant, as amended, dated July 27, 2009.
Certificate of Ownership and Merger as filed with the Secretary of State of the State of Delaware and effective November 15, 2012.
Certificate of Amendment of Amended and Restated Bylaws dated December 7, 2015
Indenture, dated as of June 4, 2014, among Sanmina Corporation, certain subsidiaries of Sanmina Corporation as guarantors and
U.S. Bank National Association as trustee.
Description of the Registrant's Securities
Amended and Restated Sanmina-SCI Corporation Deferred Compensation Plan for Outside Directors.
Amended and Restated Sanmina-SCI Corporation Deferred Compensation Plan dated June 9, 2008.
Revised form of Officer and Director Indemnification Agreement.
2009 Incentive Plan, as amended on March 5, 2018.
Deferred Compensation Plan for Outside Directors amended and restated effective January 1, 2009.
Form of Stock Option Agreement for use under the 2009 Incentive Plan.
Form of Restricted Stock Unit Agreement for use under the 2009 Incentive Plan.
Form of Restricted Stock Agreement for use under the 2009 Incentive Plan.
Form of Change of Control Severance Benefit Agreement.
Amendment to employment offer letter between Sanmina Corporation and Alan Reid dated March 12, 2010.
Form of Restricted Stock Unit Agreement under 2009 Incentive Plan for director grants.
Purchase Agreement, dated as of May 20, 2014, by and among Sanmina Corporation, certain subsidiaries of Sanmina Corporation,
as guarantors, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the initial purchasers.
Second Amendment to the Sanmina Corporation Deferred Compensation Plan adopted as of May 12, 2015.
Fourth Amended and Restated Credit Agreement, dated as of November 30, 2018, by and among Sanmina Corporation, the lenders
from time to time party thereto and Bank of America, N.A., as Administrative Agent.
First Amendment to the Sanmina-SCI Corporation Deferred Compensation Plan.
Amendment No. 3 to Sanmina-SCI Corporation Deferred Compensation Plan.
First Amendment to the Sanmina-SCI Corporation Deferred Compensation Plan for Outside Directors.
Second Amendment to the Sanmina Corporation Deferred Compensation Plan for Outside Directors.
Fourth Amendment to the Sanmina Corporation Deferred Compensation Plan.
Receivables Purchase Agreement, dated March 26, 2018, among Sanmina Corporation, the sellers and buyers from time to time
party thereto and the Bank of Tokyo-Mitsubishi UFG, Ltd., as administrative agent.
Joinder and Amendment No. 1 to the Receivables Purchase Agreement dated June 25, 2018 among Sanmina Corporation, MUFG
Bank Ltd. (formerly known as The Bank of Tokyo-Mitsubishi UFG, Ltd.), Wells Fargo Bank N.A., Bank of the West and MUFG
Bank Ltd., as administrative agent.
87
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10.22(14)*
10.23(14)*
10.24
10.25
10.26(14)±
10.27(24)‡
10.28(32)
10.29(33)*
10.30(32)*
10.31(32)*
10.32(34)
10.33(34) ±
10.34 (10)
10.35 (35)
10.36
14.1 (10)
21.1
23.1
31.1
31.2
32.1(36)
32.2(36)
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Fifth Amendment to Sanmina Corporation Deferred Compensation Plan.
Sixth Amendment to Sanmina Corporation Deferred Compensation Plan.
Intentionally omitted
Intentionally omitted
Joinder Agreement and Amendment No. 2 to the Receivables Purchase Agreement, dated September 17, 2018, among Sanmina
Corporation, Sanmina-SCI Systems Pte. Ltd., MUFG Bank Ltd., Wells Fargo Bank N.A., Bank of the West and MUFG Bank Ltd.,
as administrative agent.
Amendment No. 3 to the Receivables Purchase Agreement, dated December 21, 2018, among Sanmina Corporation, Sanmina-SCI
Systems Pte. Ltd., MUFG Bank Ltd., Wells Fargo Bank N.A., Bank of the West and MUFG Bank Ltd., as administrative agent.
Amendment No. 1 to Fourth Amended and Restated Credit Agreement, dated as of January 16, 2019, by and among Sanmina
Corporation, the lenders from time to time party thereto and Bank of America, N.A., as Administrative Agent.
2019 Equity Incentive Plan, as amended
Form of Restricted Stock Unit Award Agreement for use under 2019 Equity Incentive Plan
Form of Stock Option Award Agreement for use under 2019 Equity Incentive Plan
Amendment No. 2 to the Fourth Amended and Restated Credit Agreement dated as of April 5, 2019, by and among Sanmina
Corporation, the lenders from time to time party thereto and Bank of America N.A., as Administrative Agent.
Amendment No. 4 to the Receivables Purchase Agreement, dated April 3, 2019, among Sanmina Corporation, Sanmina-SCI
Systems Pte. Ltd., MUFG Bank Ltd., Wells Fargo Bank N.A., Bank of the West and MUFG Bank Ltd., as administrative agent.
Amended and Restated Security Agreement, dated as of June 3, 2019, among Sanmina Corporation, certain subsidiaries of Sanmina
Corporation party thereto as grantors and Bank of America, N.A. as administrative agent
Separation and Release Agreement dated January 10, 2020 between Sanmina Corporation and Michael Clarke
Separation and Release Agreement dated August 14, 2020 between Sanmina Corporation and Hartmut Liebel (filed herewith)
Code of Business Conduct and Ethics of the Registrant
Subsidiaries of the Registrant (filed herewith).
Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm (filed herewith).
Certification of the Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
Certification of the Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 (furnished herewith).
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 (furnished herewith).
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded
within the Inline XBRL document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Compensatory plan in which an executive officer or director participates.
‡ Portions of this exhibit have been omitted pursuant to an order granting confidential treatment and this exhibit has been filed separately with the SEC.
± Portions of this exhibit have been omitted in accordance with Item 601(b)(10)(iv) of Regulation S-K under the Securities Act of 1933.
88
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(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
(28)
Incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1996, SEC File
No. 000-21272, filed with the Securities and Exchange Commission (“SEC”) on December 24, 1996.
Incorporated by reference to Exhibit 3.1(a) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2001, filed with
the SEC on May 11, 2001.
Incorporated by reference to Exhibit 3.1.2 to the Registrant's Registration Statement on Form S-4, filed with the SEC on August 10, 2001.
Incorporated by reference to Exhibit 3.1.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 29, 2001, filed with the
SEC on December 21, 2001.
Incorporated by reference to Exhibit 3.2 to Registrant's Current Report on Form 8-K, filed with the SEC on December 5, 2008.
Incorporated by reference to Exhibit 3.6 to Registrant's Current Report on Form 8-K, filed with the SEC on August 19, 2009.
Incorporated by reference to Exhibit 3.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 29, 2012, filed with the
SEC on November 21, 2012
Incorporated by reference to Exhibit 3.8 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 11, 2015.
Incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K filed with the SEC on June 5, 2014.
Incorporated by reference to same numbered exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 28, 2019,
filed with the SEC on November 8, 2019.
Incorporated by reference to Exhibit 10.75 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2008, filed with the
SEC on August 4, 2008.
Incorporated by reference to Exhibit 10.74 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2008, filed with the
SEC on August 4, 2008.
Incorporated by reference to Exhibit 10.42 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2008, filed with the
SEC on August 4, 2008.
Incorporated by reference to the same numbered exhibit to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 29, 2018
filed with the SEC on November 15, 2018.
Incorporated by reference to Exhibit 10.40 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 28, 2009, filed with
the SEC on May 5, 2009.
Incorporated by reference to Exhibit 10.43 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 28, 2009, filed with
the SEC on May 5, 2009
Incorporated by reference to Exhibit 10.44 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 28, 2009, filed with
the SEC on May 5, 2009
Incorporated by reference to Exhibit 10.45 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 28, 2009, filed with
the SEC on May 5, 2009
Incorporated by reference to Exhibit 10.48 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended January 2, 2010, filed with
the SEC on February 5, 2010.
Incorporated by reference to Exhibit 10.48 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 28, 2013, filed with
the SEC on January 31, 2014.
Incorporated by reference to Exhibit 10.49 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2014 filed with
the SEC on April 28, 2014.
Incorporated by reference to Current Report on Form 8-K filed by the Registrant with the SEC on May 21, 2014.
Incorporated by reference to Exhibit 10.30 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 27, 2015 filed with the
SEC on July 24, 2015.
Incorporated by reference to same numbered exhibit to the Registrant’s Quarterly Report on Form 10-Q for the first fiscal quarter ended December 29,
2018 filed with the SEC on February 7, 2019.
Incorporated by reference to Exhibit 10.28 to Registrant’s Annual Report on Form 10-K for the fiscal year ended October 2, 2015, filed with the SEC
on November 19, 2015.
Incorporated by reference to Exhibit 10.29 to Registrant’s Annual Report on Form 10-K for the fiscal year ended October 2, 2015, filed with the SEC
on November 19, 2015.
Incorporated by reference to Exhibit 10.30 to Registrant’s Annual Report on Form 10-K for the fiscal year ended October 2, 2015, filed with the SEC
on November 19, 2015.
Incorporated by reference to Exhibit 10.31 to Registrant’s Annual Report on Form 10-K for the fiscal year ended October 2, 2015, filed with the SEC
on November 19, 2015.
89
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(29)
(30)
(31)
(32)
(33)
(34)
(35)
Incorporated by reference to Exhibit 10.32 to Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017, filed with the
SEC on November 13, 2017.
Incorporated by reference to Exhibit 10.33 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2018 filed with
the SEC on May 2, 2018.
Incorporated by reference to Exhibit 10.34 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2018 filed with the
SEC on August 3, 2018.
Incorporated by reference to same number exhibit to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2019 filed
with the SEC on May 2, 2019.
Incorporated by reference to same number exhibit to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 28, 2020 filed
with the SEC on April 29, 2020.
Incorporated by reference to same number exhibit to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 29, 2019 filed
with the SEC on August 1, 2019.
Incorporated by reference from Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 29, 2019 filed with the SEC on
January 30, 2020.
(36) This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that
Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities Exchange Act of 1934,
whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
(c) Financial Statement Schedules. See Item 15(a)(2) above.
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Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: November 13, 2020
Sanmina Corporation
(Registrant)
By:
/s/ Jure Sola
Jure Sola
Chief Executive Officer
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Table of Contents
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Jure Sola and Kurt Adzema and each of them, his or her true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and
all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every
act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Signature
/s/ JURE SOLA
Jure Sola
/s/ KURT ADZEMA
Kurt Adzema
/s/ BRENT BILLINGER
Brent Billinger
/s/ EUGENE A. DELANEY
Eugene A. Delaney
/s/ JOHN P. GOLDSBERRY
John P. Goldsberry
/s/ RITA S. LANE
Rita S. Lane
/s/ JOSEPH LICATA
Joseph Licata
/s/ KRISH PRABHU
Krish Prabhu
/s/ MARIO M. ROSATI
Mario M. Rosati
/s/ JACKIE M. WARD
Jackie M. Ward
Title
Date
Chairman and Chief Executive Officer and Director
(Principal Executive Officer)
November 13, 2020
Chief Financial Officer
(Principal Financial Officer)
Controller
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
92
November 13, 2020
November 13, 2020
November 13, 2020
November 13, 2020
November 13, 2020
November 13, 2020
November 13, 2020
November 13, 2020
November 13, 2020
Table of Contents
The financial statement Schedule II-VALUATION AND QUALIFYING ACCOUNTS is filed as part of this Form 10-K.
FINANCIAL STATEMENT SCHEDULE
SANMINA CORPORATION
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
Allowances for Doubtful Accounts, Product Returns and Other Net Sales Adjustments
Fiscal year ended September 29, 2018
Fiscal year ended September 28, 2019
Fiscal year ended October 3, 2020
Balance at
Beginning of
Period
Charged to
Operations
Charges Utilized
Balance at End
of Period
(In thousands)
$
$
$
14,334
12,211
12,481
$
$
$
(2,123)
270
(3,911)
$
$
$
—
—
—
$
$
$
12,211
12,481
8,570
93
EXHIBIT 10.36
SEPARATION AND RELEASE AGREEMENT
This Separation and Release Agreement ("Agreement") is made by and between Sanmina Corporation, for itself and on behalf of all
its subsidiaries and affiliates, hereinafter referred to as the “Company,” and Hartmut Liebel, hereinafter referred to as “Employee”
and is dated as of August 14, 2020 (the “Effective Date”).
WHEREAS, Employee has been employed by the Company since July 1, 2019; and
WHEREAS, the Company and Employee have mutually agreed to voluntarily terminate their employment relationship and to
provide for certain payments and releases of claims;
NOW THEREFORE, in consideration of the mutual promises made herein, the Company and Employee (collectively
referred to as the “Parties”) hereby agree as follows:
1.
Termination of Employment and Severance Benefits.
(a) Employee hereby resigns from his positions as Chief Executive Officer and as a member of the Board of
Directors, effective as of the Effective Date.
(b) Notwithstanding the foregoing, Employee’s employment with the Company shall continue until the close of
business on August 24, 2020 (the “Termination Date”), at which time it shall terminate. On the Termination Date,
the Company shall pay Employee for all salary and accrued vacation through the Termination Date.
(c) On the Company’s first regular payroll date following the date this Agreement becomes effective pursuant to
Section 13 hereof, the Company shall pay Employee a lump sum of $1,462,500.
(d) In addition, effective as of the Termination Date, the Company shall accelerate the vesting of the equity awards
granted to Employee under the Company’s 2019 Equity Incentive Plan that are listed on Exhibit A hereto. Except
as provided in Exhibit A hereto, all equity awards granted by the Company to Employee that are not vested as of
the Termination Date shall be canceled as of the Termination Date.
(e) All payments made by the Company under this Agreement shall be subject to applicable withholding and
reporting obligations of the Company, including without limitation, obligations to withhold, if applicable, for
applicable federal, state and local income and employment taxes.
2.
No Other Benefits. Other than as provided herein, Employee shall not be entitled to participate in any of the
Company’s benefit plans following the Termination Date, except as provided in such plans. Employees agrees and acknowledges
that he will not be entitled to participate in or receive any payment under the Company’s 2020 Corporate Bonus Plan.
3.
Company Property/Non Disclosure of Confidential Business Information. Employee shall continue to maintain the
confidentiality of all confidential and proprietary information of the Company and shall continue to comply with
the terms and conditions of the Confidentiality Agreement between Employee and the Company, copy attached
hereto as Exhibit B. Employee shall immediately return all the Company property, and confidential and
proprietary information that is in his possession.
4. Non-disparagement. Each Party agrees not to make any disparaging or defamatory remarks, in writing, orally, or
electronically, about the other, including, in the case of Employee, about any of the Company’s practices, products, and services.
This restriction applies to all formats and platforms now known or hereafter developed, whether written, printed, oral or electronic
(including, without limitation, emails, blogs, internet and social media sites, chat or news rooms, podcasts, webcasts or any online
forum).
5. Payment of Salary. Employee acknowledges and represents that the Company has paid all salary, wages, and any and all
other benefits due to Employee as of the Effective Date of this Agreement (other than payment of salary accrued through the
Effective Date payable by the Company in arrears).
6. General Release, Claims Not Released, and Related Provisions.
(a) General Release of Claims. Employee, individually and on behalf of Employee’s heirs, executors,
administrators, representatives, attorneys, successors, and assigns, knowingly and voluntarily releases, forever
discharges, and covenants not to sue in any court the Company, its subsidiaries, affiliates, divisions,
predecessors, insurers, successors, and assigns, and their current and former employees, attorneys, officers,
directors, and agents thereof, both individually and in their business capacities, and their employee benefit
plans and programs and the trustees, administrators, fiduciaries, and insurers of such plans and programs
(collectively, the “Released Parties”), to the full extent permitted by law, of, from and with respect to any and
all claims, known and unknown, asserted and unasserted, which Employee has or may have against the
Released Parties from the beginning of time to the date of execution of this Agreement, including, but not
limited to, any alleged violation of:
• Title VII of the Civil Rights Act of 1964;
• The Civil Rights Act of 1991;
•
Sections 1981 through 1988 of Title 42 of the United States Code, as amended;
• The Employee Retirement Income Security Act of 1974 (“ERISA”) (as modified below);
2
• The Immigration Reform and Control Act;
• The Americans with Disabilities Act of 1990;
• The Age Discrimination in Employment Act of 1967 (“ADEA”);
• The Workers Adjustment and Retraining Notification Act;
• The Occupational Safety and Health Act;
• The Sarbanes-Oxley Act of 2002;
• The Fair Credit Reporting Act;
• The Family and Medical Leave Act;
• The Equal Pay Act;
• The Genetic Information Nondiscrimination Act of 2008;
• The California Family Rights Act – Cal. Gov’t Code § 12945.2;
• The California Fair Employment and Housing Act – Cal. Gov’t Code § 12900 et seq.;
• The California Unruh Civil Rights Act – Cal. Civ. Code § 51 et seq.;
•
Statutory Provisions Regarding the Confidentiality of AIDS Information – Cal. Health & Safety Code §
120775 et seq.;
• The California Confidentiality of Medical Information Act – Cal. Civ. Code § 56 et seq.;
• The California Parental Leave Law – Cal. Lab. Code § 230.7 et seq.;
• The California Apprenticeship Program Bias Law – Cal. Lab. Code § 3070 et seq.;
• The California Equal Pay Law – Cal. Lab. Code § 1197.5;
• The California Whistleblower Protection Law – Cal. Lab. Code § 1102.5;
• The California Military Personnel Bias Law – Cal. Mil. & Vet. Code § 394;
•
Statutory Provisions Regarding California Family and Medical Leave – Cal. Lab. Code § 233;
3
•
Statutory Provisions Regarding California Electronic Monitoring of Employees – Cal. Lab. Code § 435;
• The California Occupational Safety and Health Act, as amended, California Labor Code § 6300 et seq.,
and any applicable regulations thereunder;
• The California Obligations of Investigative Consumer Reporting Agencies Law – Cal. Civ. Code §
1786.10 et seq.;
• The California Political Activities of Employees Law – Cal. Lab. Code § 1101 et seq.;
• The California Domestic Violence Victim Employment Leave Law – Cal. Lab. Code § 230.1;
• The California Court Leave Law – Cal. Lab. Code § 230;
• Those other applicable provisions of the California Labor Code that lawfully may be released;
• The Florida Civil Rights Act – Fla. Stat. § 760.01, et seq.;
Florida’s Private Whistleblower Protection Act – Fla. Stat. § 448.101, et seq.;
Florida’s Statutory Provision Regarding Retaliation/Discrimination for Filing a Workers Compensation
Claim – Fla. Stat. § 440.205;
Florida’s Statutory Provision Regarding Wage Rate Discrimination Based on Sex – Fla. Stat. § 448.07;
•
•
•
• The Florida Equal Pay Act – Fla. Stat. § 725.07;
• The Florida Omnibus AIDS Act – Fla. Stat. § 760.50;
•
•
•
•
•
Florida’s Statutory Provisions Regarding Employment Discrimination on the Basis of and Mandatory
Screening or Testing for Sickle-Cell Trait – Fla. Stat. §§ 448.075, 448.076;
Florida Minimum Wage Statute – § 218.077-78;
Florida’s Wage Payment Laws, Fla. Stat. §§ 448.01, 448.08;
Florida’s General Labor Regulations, Fla. Stat. ch. 448;
Florida’s Prohibition Against Discrimination Based on AIDS – § 760.50;
4
•
•
•
•
•
Florida’s Discrimination on the Basis of Sickle Cell Trait Law – § 448.075;
Florida’s Domestic Violence Leave Law – § 741.313;
Florida's Preservation and Protection of the Right to Keep and Bear Arms in Motor Vehicles Act – §
790.251;
Florida’s Public Sector Drug Free Workplace Law;
Florida’s Clean Indoor Air Act;
• Any other federal, state or local civil or human rights law or any other federal, state or local law,
regulation or ordinance;
• Any public policy, contract, tort or common law; and
• Any basis for recovering costs, fees or other expenses, including attorneys’ fees, incurred in these matters.
Without limiting the generality of the foregoing, Employee expressly releases and waives any and all claims set forth or that could
have been set forth. This shall be a full and final release of all claims, known and unknown, foreseen and unforeseen, which have
accrued to Employee against the Released Parties up to and including the date of Employee’s execution of this Agreement,
regardless of the adequacy of the compensation or the extent or character of the injuries and/or damages, known or unknown, and is
intended to buy peace from any such claims. Employee expressly acknowledges and assumes all risk, chance, or hazard that any
injuries and/or damages resulting from Employee’s employment and/or separation from employment with the Company may
become permanent, progressing, greater, or more extensive than is known, anticipated, or expected.
(b) Claims Not Released. Employee is not waiving any rights Employee may have to: (i) Employee’s own
vested accrued employee benefits under the Company’s health, welfare, or retirement benefit plans as of the Termination Date; (ii)
benefits or rights to seek benefits under applicable workers’ compensation or unemployment insurance or indemnification statutes;
(iii) pursue claims that by law cannot be waived by signing this Agreement; (iv) enforce this Agreement; or (v) challenge the validity
of this Agreement.
(c) Government Agencies. Nothing in this Agreement prohibits or prevents Employee from filing a charge
with or participating, testifying, or assisting in any investigation, hearing, action, or other proceeding before any federal, state, or
local government agency (e.g. EEOC, NLRB, SEC, etc.), nor does anything in this Agreement preclude, prohibit, or otherwise limit,
in any way, Employee’s rights and abilities to contact, communicate with, report matters to, or otherwise participate in any
whistleblower program administered by any such government agencies. In addition, nothing in this Agreement, including, but not
limited to, the
5
release of claims, prohibits Employee from: (1) reporting possible violations of federal law or regulations, including any possible
securities laws violations, to any governmental agency or entity, including, but not limited to, the U.S. Department of Justice, the
U.S. Securities and Exchange Commission, the U.S. Congress, or any agency Inspector General; (2) making any other disclosures
that are protected under the whistleblower provisions of federal law or regulations; or (3) otherwise fully participating in any federal
whistleblower programs, including, but not limited to, any such programs managed by the U.S. Securities and Exchange
Commission or the Occupational Safety and Health Administration. However, to the maximum extent permitted by law and
expressly excluding Employee’s participation in any federal whistleblower programs, Employee agrees that if such an administrative
claim is made, Employee shall not be entitled to recover any individual monetary relief or other individual remedies.
(d) Collective/Class Action Waiver. If any claim is not subject to release, to the extent permitted by law,
Employee waives any right or ability to be a class or collective action representative or to otherwise participate in any putative or
certified class, collective, or multi-party action or proceeding based on such a claim in which the Company, or any of the other
Released Parties identified in this Agreement, is a party.
7. Waiver of California Civil Code section 1542. To effect a full and complete general release as described above,
Employee expressly waives and relinquishes all rights and benefits of section 1542 of the Civil Code of the State of California, and
does so understanding and acknowledging the significance and consequence of specifically waiving section 1542. Section 1542 of
the Civil Code of the State of California states as follows:
A general release does not extend to claims that the creditor or releasing party does not know or
suspect to exist in his or her favor at the time of executing the release and that, if known by him
or her, would have materially affected his or her settlement with the debtor or released party.
Thus, notwithstanding the provisions of section 1542, and to implement a full and complete release and discharge of the Released
Parties, Employee expressly acknowledges this Agreement is intended to include in its effect, without limitation, all claims
Employee does not know or suspect to exist in Employee’s favor at the time of signing this Agreement, and that this Agreement
contemplates the extinguishment of any such claims. Employee affirms that Employee has read this Agreement, including this
waiver of California Civil Code section 1542, and that Employee has consulted with or had the opportunity to consult with counsel
of Employee’s choosing about this Agreement and specifically about the waiver of section 1542, and that Employee understands this
Agreement and the section 1542 waiver, and so Employee freely and knowingly enters into this Agreement. Employee further
acknowledges that Employee later may discover facts different from or in addition to those Employee now knows or believes to be
true regarding the matters released or described in this Agreement, and even so Employee agrees that the releases and agreements
contained in this Agreement shall remain effective in all respects notwithstanding any later discovery of any different or additional
facts. Employee expressly assumes any and all risk of any mistake in connection with
6
the true facts involved in the matters, disputes, or controversies released or described in this Agreement or with regard to any facts
now unknown to Employee relating thereto.
8. Acknowledgements and Affirmations.
(a) Employee affirms that Employee has not filed or caused to be filed any claim, complaint, or action against any
of the Released Parties in any forum or form, and that Employee presently is not a party to any claim,
complaint, or action against any of the Released Parties in any forum or form.
(b) Employee also affirms that Employee has no known workplace injuries or occupational diseases and that
Employee has been granted or has not been denied any leave to which Employee was entitled under the
Family and Medical Leave Act or disability accommodation laws.
(c) Employee affirms that all of the Company’s decisions regarding Employee’s pay and benefits through the date
of Employee’s execution of this Agreement were not discriminatory based on race, color, religion, sex,
gender, gender identity, gender expression, sexual orientation, marital status, national origin, ancestry, mental
and physical disability, medical condition, age, pregnancy, denial of medical and family care leave, pregnancy
disability leave, or any other classification protected by law.
(d) Employee affirms that as of the date Employee signs this Agreement, Employee is not Medicare eligible (i.e., is
not sixty-five (65) years of age or older; is not suffering from end-stage renal failure; has not received Social
Security Disability Insurance benefits for twenty-four (24) months or longer, etc.). Nonetheless, if the Centers
for Medicare & Medicaid Services (the “CMS”) (this term includes any related agency representing
Medicare’s interests) determines that Medicare has an interest in the payment to Employee under this
Agreement, Employee agrees to indemnify, defend, and hold the Released Parties harmless from any action by
the CMS relating to medical expenses of Employee. Employee agrees to reasonably cooperate with the
Released Parties upon request with respect to (i) any information needed to satisfy the reporting requirements
under Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007, and (ii) any claim the CMS
may make and for which Employee is required to indemnify the Released Parties under this Section. Further,
Employee agrees to waive any and all future actions against the Released Parties for any private cause of
action for damages pursuant to 42 U.S.C. § 1395y(b)(3)(A).
9. Non-Solicitation. For a period of one (1) year from the Termination Date, in order to protect the confidential information
of the Company, Employee agrees that he will not, directly or indirectly, or by action in concert with others, influence, induce or
seek to influence or induce any person who is engaged as an employee, agent or independent contractor of the Company to terminate
his or her relationship with the Company.
7
10. No Admission of Liability. No action taken by the Parties hereto, or either of them, either previously or in connection
with this Agreement shall be deemed or construed to be (a) an admission of the truth or falsity of any claims heretofore made or (b)
an acknowledgment or admission by either party of any fault or liability whatsoever to the other party or to any third party.
11. Job References and Unemployment Insurance. Employee shall direct all individuals inquiring about Employee’s
employment with the Company to the Company’s Human Resources Department, which will follow the Company’s policy by
responding with only Employee’s last position and dates of employment, except that this provision shall not apply to any request
from a prospective employer who provides a release signed by Employee pursuant to the Fair Credit Reporting Act or any state
counterpart. The Company will respond truthfully to any requests for information from any state agency. However, the Company
agrees that it will not appeal an award of unemployment benefits to Employee or oppose an appeal or further action brought by
Employee to obtain benefits.
12. Consideration and Revocation Periods – Notice.
(a) Employee acknowledges that Employee already has attained the age of forty (40) and understands that this is a
full release of all existing claims, whether currently known or unknown, including, but not limited to, claims for age
discrimination under the Age Discrimination in Employment Act.
(b) Employee further acknowledges that Employee has been advised to consult with an attorney of Employee’s own
choosing before signing this Agreement, in which Employee waives important rights, including those under the Age
Discrimination in Employment Act.
(c) By executing this Agreement, Employee also acknowledges that Employee has been afforded at least twenty-
one (21) calendar days to consider the meaning and effect of this Agreement and to discuss the contents and meaning of this
Agreement, as well as the alternatives to signing this Agreement, with an attorney of Employee’s choosing. Employee agrees
that the twenty-one (21) day consideration period began on the date this Agreement first was delivered to Employee and that
if the Company changes any of the terms of the offer contained in this Agreement (whether the changes are material or not),
the twenty-one (21) day consideration period shall not be restarted but shall continue without interruption.
(d) Employee understands that the releases contained in this Agreement do not extend to any rights or claims that
Employee has under the Age Discrimination in Employment Act that first arise after execution of this Agreement.
(e) If Employee signs this Agreement before the twenty-one (21) day consideration period expires, the seven (7)
day revocation period (described in Section O below) immediately shall begin. If Employee signs this Agreement before the
twenty-one (21) day consideration period expires, Employee agrees that Employee knowingly and voluntarily has accepted
the shortening of the twenty-one (21) day consideration period and that the Company has not promised Employee anything or
made any representations that are
8
not contained in this Agreement. In addition, if Employee signs this Agreement before the twenty-one (21) day consideration
period expires, Employee acknowledges and affirms that the Company has not threatened to withdraw or alter the offer
contained in this Agreement prior to the expiration of the twenty-one (21) day consideration period.
(f) Employee may revoke this Agreement for a period of seven (7) calendar days following the date Employee signs
it. Any revocation during this period must be submitted in writing and state, “I hereby revoke my acceptance of our
be emailed to Alan Reid
Agreement
(alan.reid@sanmina.com), or mailed to Alan Reid, 2700 North First Street, San Jose, 95134, and postmarked within
seven (7) calendar days after Employee’s execution of this Agreement. This Agreement shall not become effective and
enforceable until the seven (7) day revocation period has expired.
Claims.” The revocation must
and General
Release of
All
13. Effective Date. Unless revoked, this Agreement shall be effective on the eighth (8 ) day after Employee executes it.
th
14. Final and Binding Arbitration Governing Law. The Parties agree that in the event any disputes arise relating to the terms
of this Agreement, their interpretation, and any of the matters herein released, the Parties shall submit such disputes to final and
binding arbitration in San Jose, California before the American Arbitration Association (AAA) applying the laws of the State of
California, notwithstanding any conflict of laws rules. The Company shall be responsible for any arbitration filing fee and other case
management or administrative fee required by AAA. The cost of the arbitrator and, if charged separately, meeting room will be split
equally between the parties. In an action to enforce any term or terms of this Agreement or to seek damages for breach of this
Agreement, the prevailing party in that action shall be entitled to recover reasonable attorney’s fees.
15. Authority. The Company represents and warrants that the undersigned has the authority to act on behalf of the Company
and to bind the Company and all who may claim through it to the terms and conditions of this Agreement and Employee represents
and warrants that he has the capacity to act on his own behalf and on behalf of all who might claim through him to bind them to the
terms and conditions of this Agreement. Each Party warrants and represents that there are no liens or claims of lien or assignments in
law or equity or otherwise against any of the claims or causes of action released herein.
16. No Representations. Each party represents that it has had the opportunity to consult with an attorney, and has carefully
read and understands the scope and effect of the provisions of this Agreement. Neither party has relied upon any representations or
statements made by the other party hereto which are not specifically set forth in this Agreement.
17. Assignment. Employee’s rights and obligations under this Agreement shall not be assignable by Employee. The
Company's rights and obligations under this Agreement shall be assignable by the Company.
18. Successors. This Agreement shall be binding upon and inure to the benefit of, and shall be enforceable by, Employee and
the Company, their respective heirs, executors, administrators and assigns. In the event the Company is merged, consolidated,
liquidated by a parent corporation, or
9
otherwise combined into one or more corporations, the provisions of this Agreement shall be binding upon and inure to the benefit
of the parent corporation or the corporation resulting from such merger or to which the assets shall be sold or transferred, which
corporation from and after the date of such merger, consolidation, sale or transfer shall be deemed to be the Company for purposes
of this Agreement.
19. Headings. The headings of sections herein are included solely for convenience of reference and shall not control the
meaning or interpretation of any of the provisions of this Agreement.
20. Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.
21. Entire Agreement. This Agreement represents the entire agreement and understanding between the Company and
Employee with respect to his employment relationship with the Company, his compensation by the Company and his separation
from the Company and supersedes and replaces any and all prior agreements and understandings with respect thereto; provided,
however, that the Confidentiality Agreement referred to in Section 3 hereof shall not be superseded by this Agreement.
22. No Oral Modification. This Agreement may only be amended in writing signed by Employee and the Company’s
Executive Vice President, Global Human Resources.
24. Counterparts. This Agreement may be executed in counter parts, and each counterpart shall have the same force and effect
as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.
EMPLOYEE UNDERSTANDS AND ACKNOWLEDGES THAT EMPLOYEE HAS UP TO TWENTY-ONE (21)
CALENDAR DAYS TO REVIEW THIS AGREEMENT PRIOR TO SIGNING IT. EMPLOYEE FURTHER
UNDERSTANDS AND ACKNOWLEDGES THAT ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO
THIS AGREEMENT DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL TWENTY-ONE (21)
CALENDAR DAY CONSIDERATION PERIOD.
FOR THE AVOIDANCE OF ANY DOUBT, IF EMPLOYEE ELECTS NOT TO SIGN THIS AGREEMENT WITHIN
THE TWENTY-ONE CALENDAR DAY CONSIDERATION PERIOD, THE COMPANY’S OFFER OF
CONSIDERATION WILL BE, AND WILL BE DEEMED, WITHDRAWN WITHOUT FURTHER ACTION OR NOTICE,
AND THIS AGREEMENT, AND EACH OF ITS TERMS, SHALL BE NULL AND VOID.
HAVING ELECTED TO EXECUTE THIS AGREEMENT, TO FULFILL THE PROMISES AND TO RECEIVE THE
CONSIDERATION SET FORTH IN SECTION 1 HEREOF, EMPLOYEE FREELY AND KNOWINGLY, AND AFTER
DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT INTENDING TO WAIVE, SETTLE AND RELEASE ALL
CLAIMS EMPLOYEE HAS OR MIGHT HAVE AGAINST THE RELEASED PARTIES AS OF THE DATE OF
EXECUTION OF THIS AGREEMENT.
10
IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.
SANMINA CORPORATION
Dated: August 20, 2020
Dated: August 20, 2020
By: /s/ Alan Reid
Alan Reid
Executive Vice President, Global Human Resources
/s/ Hartmut Liebel
Hartmut Liebel
11
EXHIBIT A
EQUITY AWARDS BEING ACCELERATED
Grant Type
Grant Date
Number of Unvested Shares attributable to grant as
of August 21, 2020
Number of Unvested Shares
Accelerated
RSU
December 16, 2019
25,000
8,333
12
EXHIBIT B
CONFIDENTIALITY AGREEMENT EXECUTED BY EMPLOYEE
13
LIST OF SUBSIDIARIES
EXHIBIT 21.1
Entity Name
AET Holdings Limited
CertainSource Technology Group Inc.
CST Real Estate LLC
Davos Group Limited
Hadco Corporation
Hadco Santa Clara, Inc.
MPSTOR Limited
Primary Sourcing Corp.
Sanmina (B.V.I.) Ltd
Sanmina Dutch Holdings B.V.
Sanmina Enclosures Systems Hungary Limited Liability Company
Sanmina Holdings, Inc.
Sanmina Ireland Unlimited Company
Sanmina SAS
Sanmina-SCI (China) Limited
Sanmina-SCI (H.K.) Limited
Sanmina-SCI (Shenzhen) Limited
Sanmina-SCI AB
Sanmina-SCI Central Services
Sanmina-SCI Circuits (Wuxi) Co., Ltd
Sanmina-SCI Corporation (Malaysia) Sdn Bhd
Sanmina-SCI Corporation Africa (Pty) Ltd.
Sanmina-SCI Corporation Argentina SA
Sanmina-SCI Corporation Colombia S.A.S.
Sanmina-SCI Czech Republic s.r.o.
Sanmina-SCI de Mexico S.A. de C.V.
Sanmina-SCI do Brasil Integration Ltda.
Sanmina-SCI do Brasil Ltda.
Sanmina-SCI do Brasil Technology Ltda.
Sanmina-SCI Dutch Holdings B.V.
Sanmina-SCI Electronics Pte. Ltd.
Sanmina-SCI EMS Haukipudas Oy
Sanmina-SCI Enclosure Systems (Asia) Limited
Sanmina-SCI Enclosure Systems (Shenzhen) Limited
Sanmina-SCI Enclosure Systems (Suzhou) Co. Ltd.
Sanmina-SCI Germany GmbH
Sanmina-SCI Holding (Thailand) Limited
Sanmina-SCI Holding GmbH & Co. KG
Sanmina-SCI Holdings Australia PTY LTD
Sanmina-SCI Hungary Electronics Manufacturing LLC
Sanmina-SCI Hungary Holding Limited Liability Company
Sanmina-SCI India Private Limited
Sanmina-SCI Israel EMS Ltd.
Jurisdiction
Mauritius
Texas
Texas
British Virgin Islands
Massachusetts
Delaware
Ireland
Texas
British Virgin Islands
Netherlands
Hungary
Delaware
Ireland
France
Hong Kong
Hong Kong
China
Sweden
France
China
Malaysia
South Africa
Argentina
Colombia
Czech Republic
Mexico
Brazil
Brazil
Brazil
Netherlands
Singapore
Finland
Hong Kong
China
China
Germany
Thailand
Germany
Australia
Hungary
Hungary
India
Israel
Entity Name
Sanmina-SCI Israel Medical Systems Ltd
Sanmina-SCI Optical Technology (Shenzhen) Ltd
Sanmina-SCI Pte. Ltd.
Sanmina-SCI RSP de Mexico, S.A. de C.V.
Sanmina-SCI Systems (Kunshan) Co., Limited
Sanmina-SCI Systems (Malaysia) Sdn. Bhd.
Sanmina-SCI Systems (Thailand) Ltd.
Sanmina-SCI Systems Australia Pty Ltd
Sanmina-SCI Systems de Mexico S.A. de C.V.
Sanmina-SCI Systems Holdings, LLC
Sanmina-SCI Systems Ireland Limited
Sanmina-SCI Systems Israel LTD.
Sanmina-SCI Systems Japan, Ltd.
Sanmina-SCI Systems Singapore Pte. Ltd.
Sanmina-SCI Systems Tel Aviv Ltd.
Sanmina-SCI Technology India Pvt Ltd
Sanmina-SCI Technology Limited
Sanmina-SCI U.K. Limited
Sanmina-SCI/TAG de Mexico, S.A. de C.V.
SCI Brockville Corp.
SCI Technology, Inc.
SensorWise, Inc.
Jurisdiction
Israel
China
Singapore
Mexico
China
Malaysia
Thailand
Australia
Mexico
Delaware
Ireland
Israel
Japan
Singapore
Israel
India
Cayman Islands
United Kingdom
Mexico
Canada
Alabama
Texas
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EXHIBIT 23.1
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-131360, 333-61042, 333-50282,
333-39316, 333-95467, 333-84221, 333-84039, 333-76279, and 333-71313) and on Form S-8 (Nos. 333-237898, 333-231175, 333-228406,
333-221515, 333-214706, 333-203596, 333-195455, 333-188085, 333-182042, 333-172128, 333-165435, 333-157099, 333-84704, 333-
112605, 333-108942, 333-104692, 333-100236, 333-87946, 333-84704, 333-83110, 333-75616, 333-64294, 333-39930, 333-79259, and 333-
23565) of Sanmina Corporation of our report dated November 13, 2020 relating to the financial statements and financial statement schedule
and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
______________________
San Jose, California
November 13, 2020
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302(A) OF
THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.1
I, Jure Sola, certify that:
1. I have reviewed this Annual Report on Form 10-K of Sanmina Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal
quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
Registrant's auditors and the audit committee of the Registrant's Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the Registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over
financial reporting.
November 13, 2020
Date:
/s/ JURE SOLA
Jure Sola
Chief Executive Officer (Principal Executive Officer)
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302(A) OF
THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.2
I, Kurt Adzema, certify that:
1. I have reviewed this Annual Report on Form 10-K of Sanmina Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal
quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
Registrant's auditors and the audit committee of the Registrant's Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the Registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over
financial reporting.
November 13, 2020
Date:
/s/ KURT ADZEMA
Kurt Adzema
Chief Financial Officer (Principal Financial Officer)
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
Pursuant to the requirement set forth in Section 1350 of Chapter 63 of Title 18 of the United States of America Code (18 U.S.C. §1350), Jure Sola, Chief
Executive Officer of Sanmina Corporation (the “Company”), hereby certifies that, to the best of his knowledge:
1. The Company's Annual Report on Form 10-K for the fiscal year ended October 3, 2020, to which this Certification is attached as Exhibit 32.1 (the
“Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
IN WITNESS WHEREOF, the undersigned has set his hand hereto as of November 13, 2020.
This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be
incorporated by reference into any filing of Sanmina Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.
/s/ JURE SOLA
Jure Sola
Chief Executive Officer (Principal Executive Officer)
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
Pursuant to the requirement set forth in Section 1350 of Chapter 63 of Title 18 of the United States of America Code (18 U.S.C. §1350), Kurt
Adzema, Chief Financial Officer of Sanmina Corporation (the “Company”), hereby certifies that, to the best of his knowledge:
1. The Company's Annual Report on Form 10-K for the fiscal year ended October 3, 2020, to which this Certification is attached as Exhibit 32.2 (the
“Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
IN WITNESS WHEREOF, the undersigned has set his hand hereto as of November 13, 2020.
This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be
incorporated by reference into any filing of Sanmina Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.
//s/ KURT ADZEMA
Kurt Adzema
Chief Financial Officer (Principal Financial Officer)