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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form 10-K
|
|
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(Mark
one)
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☒
|
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
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For the
fiscal year ended
September 28, 2019
or
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☐
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period
from to .
Commission
File Number 0-21272
Sanmina
Corporation
(Exact name of
registrant as specified in its charter)
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|
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|
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DE
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77-0228183
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification Number)
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|
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2700 N.
First St.,
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San
Jose
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CA
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95134
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(Address of principal
executive offices)
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(Zip Code)
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Registrant's telephone number,
including area code:
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408
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964-3500
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Title of each
class
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Trading symbol(s)
|
Name of each exchange on which
registered
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Common
Stock
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SANM
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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, or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
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|
|
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|
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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 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
$1,648,359,348
as of March 30,
2019, based upon the last reported sale price of the common stock
on the NASDAQ Global Select Market on March 29, 2019.
As of
October 31,
2019, the
number of shares outstanding of the registrant's common stock
was 69,976,917.
DOCUMENTS
INCORPORATED BY REFERENCE
Certain
information is incorporated into Part III of this report by
reference to the Proxy Statement for the registrant's 2020 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.
SANMINA
CORPORATION
INDEX
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 1. Business
Overview
Sanmina
Corporation (“we” or “Sanmina”) 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;
|
|
|
•
|
final system
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, final system assembly and test,
and direct-order-fulfillment. This segment generated approximately
80% of our total revenue in 2019.
|
|
|
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, logistics
and repair services. CPS generated approximately 20% of our total
revenue in 2019.
|
We have
manufacturing facilities in 22 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 final system assembly and
test. Our operations located in lower cost areas engage primarily
in higher-volume component and subsystem manufacturing and assembly
for products ranging in complexity from lower complexity products
to highly complex products.
We have become
one of the largest global manufacturing solutions providers by
capitalizing on our competitive strengths including
our:
|
|
•
|
product design
and engineering resources;
|
|
|
•
|
vertically
integrated manufacturing solutions;
|
|
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advanced
component technologies;
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global
manufacturing capabilities, supported by robust IT systems and a
global supplier base;
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customer-focused
organization;
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expertise in
serving diverse end markets; and
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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 design
services, core technology development and additional, more complex
manufacturing services. Today, EMS companies manufacture and test
complete systems and manage their customers' entire supply chains.
Industry-leading EMS companies offer end-to-end services including
product design and engineering, manufacturing, final system
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:
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focus on core
competencies;
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access leading
design and engineering capabilities;
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improve supply
chain management and purchasing power;
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reduce operating
costs and capital investment;
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access global
manufacturing services; and
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accelerate time
to market.
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Our Business
Strategy
Our vision is to
be the trusted leader in providing products, services and supply
chain solutions to accelerate customer success. Key elements 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, final system 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, enhancing our ability 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. As a result of this customer-centric
approach, we have experienced business growth from both existing
and new customers and will continue to cultivate these partnerships
with additional products and value-added solutions.
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
complex products that are subject to 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.
Pursuing Strategic Transactions. We seek to undertake
strategic transactions that give us the opportunity to access 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 22 countries on six
continents.
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
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 over 30 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 22 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 repair partners are located
in an additional 27 countries.
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 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) 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.
Final System Assembly and Test. We provide final system
assembly and test in which assemblies and modules are combined to
form complete, finished products. Products for which we currently
provide final system assembly and test include wireless base
stations, wireline communications switches, optical networking
products, high-end servers, industrial and automotive products, LED
lighting fixtures, diagnostic medical equipment, point of sale
devices, and storage. We often integrate Sanmina-manufactured
printed circuit board assemblies with enclosures, cables and memory
modules. Our final assembly activities may also involve integrating
components and modules that others manufacture. The complex,
finished products we produce typically require extensive test
protocols. We offer both functional and environmental test
services. We also test products for conformity to applicable
industry, product integrity and regulatory standards. Our test
engineering expertise enables us to design functional test
processes that assess critical performance elements including
hardware, software and reliability. By incorporating rigorous test
processes into the manufacturing process, we can help assure our
customers that their products will function as
designed.
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
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 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, integrated
circuits and other electronic components. We fabricate backplanes
in our printed circuit board plants. 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 bare backplane. In
addition, many of the newer, advanced technology backplanes require
SMT attachment of passive discrete components as well as 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 technology and
“know-how” which enable backplanes to run at data rates in excess
of 40 gigahertz. We currently have capabilities to manufacture
backplanes with greater than 60 layers in sizes up to 26x40 and
22x52 inches and up to 0.425 inch in thickness, using 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
design intent. We are one of a limited number of manufacturers with
these 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 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 (soft tool and hard
progressive tools), frames, racks, and data storage cabinets
integrated with various electronic components and sub-systems for
power management, thermal management, sensing functions and control
systems.
We manufacture a
broad range of enclosures for a wide range of products from set-top
boxes, medical equipment, and 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 industry.
Our mechanical
systems expertise is available at several of our state-of-the-art
facilities worldwide. Our operations provide metal fabrication by
soft tools, 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.
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. This includes fully
automated “lights-out” machinery that continues production in the
absence of human operators. 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,
microelectronics and enterprise solutions for OEM's as well as
cloud and communications service providers. Our mission and
philosophy is 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 and RF components and
module and blade manufacturing, as well as system integration and
test.
Viking Technology. Viking supplies leading edge
Non-Volatile DIMMs (NVDIMM), Solid State Drives (SSD) and DRAM
solutions.
With a range of
products that spans both SSD and DRAM technologies, Viking provides
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 NVDIMM and new storage class memory. These investments will
enable Viking to support the large and growing server market with
products that optimize performance, capacity, and persistence in
enhancing its customer’s applications. In addition, Viking will
continue to focus on the enterprise and embedded markets with a
further emphasis on medical, military and automotive
applications.
Viking'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 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). In addition to its broad DRAM
offering, Viking specializes in DRAM and Flash chip stacking,
allowing for higher density Modules and drives ordinarily
unachievable through normal chip manufacturing.
Viking’s custom
build capabilities, extended temperature ranges, locked BOM
support, test capabilites, manufacturing capabilities and logistics
services, create a unique combination of value adds. These
capabilities have enabled Viking to further differentiate itself in
an industry that is becoming increasingly competitive.
Viking Enterprise Solutions. Viking designs and
manufactures both standard and custom storage and server products,
including high performance SSD arrays, high performance HDD (Hard
Disk Drive) arrays, cold storage, and cloud solutions including
software to manage and provision storage across multiple fabrics.
Some products are customized for streaming video applications.
Viking provides complete rack scale solutions to
customers.
SCI Technology Inc. (SCI). SCI has been providing
engineering services, products, manufacturing, test, and depot and
repair solutions to the global defense and aerospace industry for
more than 60 years. SCI offers advanced products for aircraft
systems and tactical communications, as well as 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.
Logistics and Repair Services. Our logistics and repair
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 products that are subject to rapid
technological change. We believe that markets involving complex,
rapidly changing products offer opportunities to produce products
with higher margins because they require 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 utilize our
end-to-end component, engineering and complex assembly services to
support 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. We have significant experience in manufacturing
high precision components that are 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 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 and regulatory services. The
manufacturing 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 manufacturing
facilities comply with ISO 13485 (formerly EN 46002) and ISO 9001.
We manufacture 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, and fiber-optic systems for defense
related applications. We believe our experience in serving the
defense, aerospace and high-reliability electronics industry, as
well as our product design and engineering capabilities, are our
key competitive strengths.
Automotive.
We provide
services to the automotive industry for which we manufacture
sensors, controllers, engine control units, infotainment modules,
eMobility sub-modules, 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 focus on infrastructure equipment
including LTE, 5G and microwave wireless RF filters and antennas,
wireline access, switching, routing, optical networking and
transmission and enterprise networking systems. Our product design
and engineering team has extensive experience designing and
industrializing advanced communications products and components for
these markets. 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, transmission hardware and switching along with
core, service and edge routers among others. 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 allowing for assembly and
distribution of products all over the world. In addition, we
manufacture a broad range of products with embedded processor
capability including point of sale equipment, casino gaming
equipment, digital home gateways, professional audio-video
equipment, a variety of touch-screen-operated 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 final system 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 2019, 2018
and 2017. In 2017, Motorola Solutions, Inc. also represented 10% or
more of our net sales.
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
With the
continued diversification 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.
Marketing
and Sales
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
marketing and sales staff supports our business strategy of
providing end-to-end solutions by 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 a dedicated 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.
Environmental
Matters
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 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 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 and remediation
activities at other sites in Orange County, California. There are
some sites, including our acquired facility in Gunzenhausen,
Germany, that 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.
Employees
As of
September 28, 2019, we had approximately 43,000 employees,
including approximately 9,000 temporary employees. 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.
INFORMATION
ABOUT OUR EXECUTIVE OFFICERS
The following
table sets forth the name, position and age of our current
executive officers and their ages as of October 31,
2019.
|
|
|
|
Name
|
Age
|
Position
|
Jure Sola
|
68
|
Executive
Chairman
|
Hartmut Liebel
|
56
|
Chief Executive
Officer
|
Kurt Adzema
|
50
|
Executive Vice President,
Chief Financial Officer
|
Alan Reid
|
56
|
Executive Vice President,
Global Human Resources
|
Dennis Young
|
68
|
Executive Vice President,
Worldwide Sales and Marketing
|
Jure Sola has served as our Executive
Chairman since October 2017. Mr. Sola 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.
Hartmut Liebel has served as our Chief
Executive Officer since September 2019. Mr. Liebel had initially
served as President and Chief Operating Officer when he joined us
in July 2019. Prior to that, Mr. Liebel was President and Chief
Executive Officer of privately owned iQor, a leading global
provider of intelligent customer interaction and product
outsourcing solutions, from June 2013 until August 2018
and as a board member of iQor from August 2018 through July
2019. Mr. Liebel was Chief Executive Officer, Aftermarket
Services, of Jabil Inc., from 2005 until May 2013, and
previously held the positions of President, Aftermarket Services
and Executive Vice President and Chief Operating Officer,
Aftermarket Services at Jabil, which he joined in
2002.
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 January 2011 until
September 2019. Prior to January 2011, Mr. Adzema held the
positions of Vice President of Strategy and Corporate Development
and Senior Vice President, Finance and Chief Financial Officer 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.
Item
1A.
Risk Factors
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 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 any of these
industries in general, or our customers in particular, and lead to
reductions in net sales, thus harming our business. These factors
include:
|
|
•
|
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;
|
|
|
•
|
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 in
the oil and gas industry, which decrease orders from affected
customers.
|
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:
|
|
•
|
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;
|
|
|
•
|
fluctuations in
component prices, component shortages and extended component lead
times caused by high demand, natural disaster 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;
|
|
|
•
|
mix of products
ordered by and shipped to major customers, as high volume and low
complexity manufacturing services typically have lower gross
margins than more complex and lower volume services;
|
|
|
•
|
our ability to
pass tariffs through to our customers;
|
|
|
•
|
resolution of
claims with our customers;
|
|
|
•
|
degree to which
we are able to 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;
|
|
|
•
|
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 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:
|
|
•
|
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;
|
|
|
•
|
compliance with
laws concerning the export of U.S. technology, including the
International Traffic in Arms Regulations and the Export
Administration Regulations, sanctions administered by the Office of
Foreign Asset Controls and the Foreign Corrupt Practices
Act;
|
|
|
•
|
compliance with
foreign 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.;
|
|
|
•
|
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; and
|
|
|
•
|
potentially
increased risk of misappropriation of intellectual
property.
|
We operate in
countries that have experienced labor unrest, political instability
or conflict and strife, including Brazil, China, India, Israel,
Malaysia 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.
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.
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 United States,
the substantial majority of our manufacturing operations are
located outside the United States. 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 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 tariffs or other potential
changes in the U.S.'s, or its trading partners', trade policies
would materially reduce our revenue and net income, an effect that
would be compounded if the amount of these tariffs increases or
should they be applied to additional categories of components, as
is currently proposed. 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.
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 are currently experiencing, and may continue to
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 have resulted and could continue to
result in increased component prices and delays in product
shipments to customers, both of which have decreased our revenue
and margins, as well as increases of inventory of other components,
which have reduced 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. In addition, we, along with our
suppliers and customers, rely on various energy sources in our
manufacturing and transportation activities. There has been
significant volatility in the prices of energy during the recent
past and such volatility is likely to continue in the
future.
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. 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. In
addition, 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.
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 will 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.
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 Components, Products and Services (CPS)
business, which, if not successful, could cause our future gross
margins and operating results to be lower.
A key part of our
strategy 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 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.
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.
Consolidation in the electronics industry may adversely affect our
business by increasing customer buying power and increasing prices
we pay for components.
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.
Cyberattacks and other disruptions of our 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 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.
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.
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 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.
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 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
key 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 guaranty that any such indemnity could
be fully enforced. We sometimes design products on a contract basis
or jointly with our customers. In these 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
risks could cause a reduction in our revenue, an increase in our
costs and a reduction in our net income and could damage our
reputation with our customers.
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, we may experience a reduction of our net
income. 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.
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.
Enforcement
activity relating to these laws can increase as a result of
increased governmental scrutiny, media attention due to violations
by other companies, changes in law, political and other factors.
For example, 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. Allegations that we have
violated such laws could lead to fines from or settlements with
federal, state or foreign regulatory authorities or damages payable
to employees, which fines and damages could be substantial and
which would reduce our net income.
We are subject to a number of U.S. governmental procurement rules
and regulations and failure to comply with such rules and
regulations could result in damages or reduction of future
revenue.
We are subject to
a number of laws and regulations relating to the award,
administration and performance of U.S. government contracts and
subcontracts, including Federal Acquisition Regulations and
the Defense Federal Acquisition Regulations. Such laws and
regulations govern, price negotiations, cost accounting standards,
procurement practices and many other aspects of performance under
government contracts and subcontracts. These rules are complex, our
performance under them is subject to audit by the Defense Contract
Audit Agency, the Office of Federal Contract Compliance Programs
and other government regulators, and in most cases must be complied
with by our suppliers. If an audit or investigation reveals a
failure to comply with regulations, we could become subject to
civil or criminal penalties and administrative sanctions, including
government pre-approval of our government contracting activities,
termination of the contract, payment of fines and suspension or
debarment from doing further business with the U.S. government and
could also be subject to claims for breach of contract by our
customers. Any of these actions could increase our expenses, reduce
our revenue and damage our reputation as a reliable government
supplier.
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 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 earthquake, 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.
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.
Over the years,
environmental laws have become, and in the future may continue to
become, more stringent, imposing greater compliance costs and
increasing risks and penalties associated with violations. We
operate in several environmentally sensitive locations and are
subject to potentially conflicting and changing regulatory agendas
of government authorities, business and environmental groups.
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.
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,
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 and 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 may be unable to generate sufficient liquidity to expand our
operations, which may reduce the business our customers and vendors
are able to do with us; 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 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 could cause our
stock price to fall and reduce our customers' and vendors'
willingness to do business with us.
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. Similarly, if one or more
counterparties to our 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. 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 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 financial covenants 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. In addition, 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, for any reason, some or 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.
If we are unable to maintain our technological and manufacturing
process expertise, our business could be adversely
affected.
Regular
improvements to and refinements of our manufacturing processes are
necessary to remain competitive in the marketplace. As a result, we
are continually evaluating the cost-effectiveness and feasibility
of new manufacturing processes. In some cases, we must make capital
expenditures and incur engineering expense in order to qualify and
validate any such new process in advance of booking new business
that could utilize such processes. Such investments utilize cash
and reduce our margins and net income. Any failure to adequately
invest in manufacturing technology could reduce our competitiveness
and, potentially, our future revenue and net income.
If we manufacture or design defective 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. Defects in the
products we design or manufacture 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 medical, automotive, defense and aerospace
and oil and gas manufacturing services because defects in these
types of products can result in death or significant injury to end
users of these products or environmental harm. Even when our
customers are contractually responsible for defects in the design
of a product, we could nonetheless be named in a product liability
suit over such defects and could be required to expend significant
resources to defend ourselves. 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.
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 and tsunamis. Our insurance coverage with
respect to damages to our facilities or our customers' products
caused by natural disasters is limited and is subject to
deductibles and coverage limits 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 earthquake. 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.
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 U.S. GAAP. Our
preparation of financial statements in accordance with U.S. 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, significant changes to the lease accounting
rules have been enacted and will be effective for us in fiscal
2020. We could incur significant costs to implement these new
rules, including costs to modify our IT systems or implement new IT
solutions. 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. For example, during the fourth quarter of 2018, we
identified a material weakness in our internal control over
financial reporting related to the failed operation of a management
review control, which did not result in a restatement of
previously-issued financial statements. This material weakness has
been remediated as of September 28, 2019.
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.
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. 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, general market
fluctuations and macroeconomic conditions, any of which may cause
the market price of our common stock to fluctuate.
Item 1B.
Unresolved Staff Comments
None.
Item 2.
Properties
Facilities.
Our customers
sell their products throughout the world and therefore need to
access manufacturing services on a global basis. We maintain
extensive operations in lower cost locations including Latin
America, Eastern Europe, China, India and Southeast Asia. To
enhance our integrated manufacturing solutions offerings, we seek
to locate our facilities either near our customers or their end
markets in major centers for the electronics industry or, when
appropriate, in lower cost locations. Many of our plants located
near customers or their end markets are focused primarily on new
product introduction and final system 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. Through this process, we have
closed certain facilities not required to satisfy current demand
levels.
As of
September 28, 2019, the approximate square
footage of our active manufacturing facilities by country was as
follows:
|
|
|
|
|
Approximate
Square Footage
|
Argentina
|
1,335
|
|
Australia
|
42,334
|
|
Brazil
|
260,506
|
|
Canada
|
136,237
|
|
China
|
2,367,809
|
|
Columbia
|
2,721
|
|
Czech Republic
|
70,870
|
|
England
|
11,174
|
|
Finland
|
128,405
|
|
Germany
|
362,972
|
|
Hungary
|
499,661
|
|
India
|
379,115
|
|
Ireland
|
120,000
|
|
Israel
|
182,292
|
|
Malaysia
|
501,843
|
|
Mexico
|
2,422,217
|
|
Singapore
|
537,058
|
|
South Africa
|
3,810
|
|
Scotland
|
30,581
|
|
Sweden
|
102,526
|
|
Thailand
|
326,293
|
|
United States
|
2,673,027
|
|
Total
|
11,162,786
|
|
As of
September 28, 2019, 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
2020 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
certification to demonstrate our ability to consistently provide
product that meets customer and applicable regulatory requirements
and enhance customer satisfaction through its effective
application. ISO 9001:2015 certification is of particular
importance to our customers throughout the world.
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. 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. This defense and aerospace
operation is AS9100 2016 certified. The defense and aerospace
operation maintains 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
Two of our
subsidiaries, Sanmina-SCI do Brasil Technology Ltda. and Sanmina do
Brasil Integration Ltda., are currently parties to nine
administrative and judicial proceedings in the Federal Revenue
Service of Brazil, the Chamber of Appeals of Administrative Court
of Brazil, and the Higher Federal Court of Brazil. The cases were
brought against the subsidiaries at various times between November
2006 and May 2013 by the Brazilian Federal Revenue Service. The
claims allege that these subsidiaries failed to comply with certain
bookkeeping and tax rules for certain periods between 2001 and
2011. The claims seek payment by the subsidiaries of social fund
contributions and income and excise taxes allegedly owed by the
subsidiaries, as well as fines. The subsidiaries made counterclaims
against the Federal Revenue Service seeking recovery of certain
income taxes and social fund contributions which they believe they
overpaid. The administrative agencies and the court reached
decisions in the cases against the subsidiaries between March 2007
and April 2014, all of which were appealed. Beginning in the second
quarter of 2014 and continuing through the fourth quarter of 2017,
the administrative agencies and court ruled on several of the
subsidiaries' appeals, finding partially in favor of the
subsidiaries in some cases and against them in others. In addition,
one of the counterclaims against the Federal Revenue Service was
dismissed in December 2017. The subsidiaries continue to appeal the
remaining adverse determinations in the administrative proceedings
and continue to pursue the remaining counterclaim against the
Federal Revenue Service. The subsidiaries believe they have
meritorious positions in these remaining matters.
In June 2008, we
were named by the Orange County Water District in a suit alleging
that our 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 us 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 our petition to review this decision and, in
December 2017, the Court of Appeal remanded the case back to the
Superior Court for further proceedings. A trial currently is
scheduled to commence on September 14, 2020. We intend to contest
the plaintiff’s claims vigorously.
In addition, from
time to time, we may be involved in routine legal proceedings, as
well as demands, claims and threatened litigation that arise in the
normal course of our business. 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 defense costs, diversion
of management
resources and
other factors. We record liabilities for legal proceedings when a
loss becomes probable and the amount of loss can be reasonably
estimated.
See also Note 9
of Notes to Consolidated Financial Statements.
Item
4.
Mine Safety Disclosures.
Not
applicable.
PART
II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
Market
Information
Our common stock
is traded on the Nasdaq Global Select Market under the symbol SANM.
As of October 31,
2019, we
had approximately 927 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) is assumed
to have been made in our common stock on September 27,
2014 and
in each of such indices at month end starting on September 27, 2014
and its relative performance is tracked through September 28,
2019.
* $100 invested
on 9/27/2014, including reinvestment of dividends, as applicable.
Indexes calculated on a month-end basis.
Copyright @ 2019
Standard & Poor's, a division of S&P Global. All rights
reserved.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/27/2014
|
|
10/3/2015
|
|
10/1/2016
|
|
9/30/2017
|
|
9/29/2018
|
|
9/28/2019
|
Sanmina
Corporation
|
|
100.00
|
|
|
98.94
|
|
|
131.81
|
|
|
171.99
|
|
|
127.78
|
|
|
148.70
|
|
S&P
500
|
|
100.00
|
|
|
99.39
|
|
|
114.72
|
|
|
136.07
|
|
|
160.44
|
|
|
167.27
|
|
NASDAQ
Electronic Components
|
|
100.00
|
|
|
93.00
|
|
|
128.29
|
|
|
176.92
|
|
|
205.07
|
|
|
217.10
|
|
Sanmina's
stock price performance included in this graph is not necessarily
indicative of future stock price performance.
Stock
Repurchases
In September
2017, our Board of Directors authorized us to repurchase up
to $200
million of
our common stock in the open market or in negotiated transactions
off the market. This program has no expiration date. The Company
did not repurchase any shares under its repurchase program during
the fourth quarter of 2019. As of September 28,
2019, an
aggregate of $101 million
remains available
under this repurchase program. Subsequent to the end of fiscal
2019, our Board of Directors authorized us to purchase an
additional $200 million
of our common
stock on the same terms as the program approved in September 2017
which brought the total Board authorized amount to
$301
million.
During
2019, we repurchased an aggregate
of 0.3
million shares of our common stock
for $7
million,
an average price per share of $25.68 (excluding
commissions).
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.
FIVE YEAR
SELECTED FINANCIAL HIGHLIGHTS
Consolidated
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
|
September 28,
2019
|
|
September 29,
2018
|
|
September 30,
2017
|
|
October 1,
2016
|
|
October 3,
2015
|
|
(In
thousands, except per share data)
|
Net sales
|
$
|
8,233,859
|
|
|
$
|
7,110,130
|
|
|
$
|
6,868,619
|
|
|
$
|
6,481,181
|
|
|
$
|
6,374,541
|
|
Operating income
|
286,117
|
|
|
119,441
|
|
|
226,467
|
|
|
224,785
|
|
|
203,101
|
|
Income from continuing
operations before income taxes
|
245,619
|
|
|
97,539
|
|
|
213,480
|
|
|
204,617
|
|
|
176,193
|
|
Provision for (benefit from)
income taxes (1)
|
104,104
|
|
|
193,072
|
|
|
74,647
|
|
|
16,779
|
|
|
(201,068
|
)
|
Net income
(loss)
|
$
|
141,515
|
|
|
$
|
(95,533
|
)
|
|
$
|
138,833
|
|
|
$
|
187,838
|
|
|
$
|
377,261
|
|
Net income (loss) per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
2.05
|
|
|
$
|
(1.37
|
)
|
|
$
|
1.86
|
|
|
$
|
2.50
|
|
|
$
|
4.61
|
|
Diluted
|
$
|
1.97
|
|
|
$
|
(1.37
|
)
|
|
$
|
1.78
|
|
|
$
|
2.38
|
|
|
$
|
4.41
|
|
Shares used in computing per
share amounts:
|
|
|
|
|
|
|
|
|
|
Basic
|
69,129
|
|
|
69,833
|
|
|
74,481
|
|
|
75,094
|
|
|
81,818
|
|
Diluted
|
71,678
|
|
|
69,833
|
|
|
78,128
|
|
|
78,787
|
|
|
85,641
|
|
(1) We
released $96.2 million and $288.7 million of valuation allowance
attributable to certain U.S. and foreign deferred tax assets in
2016 and 2015, respectively, 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. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
September 28,
2019
|
|
September 29,
2018
|
|
September 30,
2017
|
|
October 1,
2016
|
|
October 3,
2015
|
|
(In
thousands)
|
Cash and cash
equivalents
|
$
|
454,741
|
|
|
$
|
419,528
|
|
|
$
|
406,661
|
|
|
$
|
398,288
|
|
|
$
|
412,253
|
|
Net working capital
(1)
|
$
|
1,237,907
|
|
|
$
|
612,532
|
|
|
$
|
1,000,207
|
|
|
$
|
974,389
|
|
|
$
|
942,423
|
|
Total assets
|
$
|
3,905,513
|
|
|
$
|
4,085,133
|
|
|
$
|
3,847,363
|
|
|
$
|
3,625,222
|
|
|
$
|
3,493,264
|
|
Long-term debt (excluding
current portion)
|
$
|
346,971
|
|
|
$
|
14,346
|
|
|
$
|
391,447
|
|
|
$
|
434,059
|
|
|
$
|
423,949
|
|
Stockholders'
equity
|
$
|
1,642,573
|
|
|
$
|
1,472,844
|
|
|
$
|
1,647,684
|
|
|
$
|
1,609,803
|
|
|
$
|
1,520,471
|
|
(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.
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, synergies or other financial
items; 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
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 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.
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, final system 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
2019. Our
CPS business consists of multiple operating segments which do not
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
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 2019, 2018 and 2017 were each 52
weeks.
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. For example,
gross margins of 6.4% and 10% in 2019 for our IMS and CPS
businesses, respectively, were below our target model expectations
at current revenue levels due to inefficiencies and other factors.
We continue to address these challenges on both a short-term and
long-term basis. For example, we closed several underperforming CPS
plants in 2018.
Sales to our ten
largest customers typically represent approximately 50% of our net
sales. A single customer represented 10% or more of our net sales
in 2019 and 2018 and two customers each represented
10% or more of our net sales in 2017.
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.
Both the U.S. and
China have recently imposed tariffs impacting certain products
imported into such countries. 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.
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. 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 for certain reserves and
contingent liabilities, including those related to product returns,
accounts receivable, inventories, income taxes, warranty
obligations, environmental matters, contingencies and litigation.
We base our estimates on historical experience and 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. 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
logistics 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.
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.
Accounts
Receivable and Other Related Allowances— We estimate uncollectible
accounts, product returns and other adjustments related to current
period net sales to establish valuation allowances. In making these
estimates, we analyze the creditworthiness of our customers, past
experience, specific facts and circumstances, and the overall
economic climate in the industries we serve. If actual
uncollectible accounts, product returns or other adjustments differ
significantly from our estimates, the amount of sales or operating
expenses we report could be affected. The ultimate realization of
our accounts receivable is a significant credit risk. This risk is
mitigated by (i) making a significant portion of sales to
financially sound companies, (ii) ongoing credit evaluation of
our customers, (iii) frequent contact with our customers,
especially our most significant customers, which enables us to
monitor changes in their business operations and to respond
accordingly and (iv) obtaining, in certain cases, a guaranty from a
customer's parent entity when our customer is not the ultimate
parent entity or a letter of credit from the customer's bank. To
establish our allowance for doubtful accounts, we evaluate credit
risk related to specific customers based on their financial
condition and the current economic environment; however, we are not
able to predict with absolute certainty whether our customers will
become unable to meet their financial obligations to us. We believe
the allowances we have established are adequate under the
circumstances; however, a change in the economic environment or a
customer's financial condition could cause our estimates of
allowances, and consequently the provision for doubtful accounts,
to change, which could have a significant adverse impact on our
financial position and/or results of operations. Our allowance for
product returns and other adjustments is primarily established
using historical data.
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 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.
Goodwill—
We test goodwill
for impairment on an annual basis and whenever events or changes in
circumstances indicate that the carrying amount of goodwill may not
be recoverable, as assessed at a reporting unit level. If, based on
a qualitative assessment, we determine it is more-likely-than-not
that goodwill is impaired, we perform a quantitative assessment to
determine whether the fair value of our reporting unit is less than
its carrying value and, if so, we perform a further analysis to
determine the amount, if any, of the impairment.
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.
Results of
Operations
Years Ended
September 28, 2019,
September 29, 2018
and
September 30, 2017.
The following
table presents our key operating results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
|
September 28,
2019
|
|
September 29,
2018
|
|
September 30,
2017
|
|
(In
thousands)
|
Net sales
|
$
|
8,233,859
|
|
|
$
|
7,110,130
|
|
|
$
|
6,868,619
|
|
Gross profit
|
$
|
591,938
|
|
|
$
|
463,783
|
|
|
$
|
519,911
|
|
Gross margin
|
7.2
|
%
|
|
6.5
|
%
|
|
7.6
|
%
|
Operating
expenses
|
$
|
305,821
|
|
|
$
|
344,342
|
|
|
$
|
293,444
|
|
Operating income
|
$
|
286,117
|
|
|
$
|
119,441
|
|
|
$
|
226,467
|
|
Operating margin
|
3.5
|
%
|
|
1.7
|
%
|
|
3.3
|
%
|
Net income (loss)
(1)
|
$
|
141,515
|
|
|
$
|
(95,533
|
)
|
|
$
|
138,833
|
|
|
|
(1)
|
Our net loss in
2018 includes the impact of the Tax Act, which increased income tax
expense by approximately $161 million.
|
Net Sales
Net sales
increased from
$7.1 billion for 2018 to
$8.2 billion for
2019, an
increase of
15.8%. In
general, this increase was driven primarily by stronger demand in
each of our end markets and continued stabilization of lead times
for supply-constrained parts, which allowed us to meet customer
demand. Net sales increased from
$6.9 billion for 2017 to
$7.1 billion for 2018, an increase of
3.5%.
Sales by end market were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
|
2019 vs.
2018
|
|
2018 vs.
2017
|
|
September 28,
2019
|
|
September 29,
2018
|
|
September 30,
2017
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
|
(Dollars in
thousands)
|
Industrial, Medical, Defense
and Automotive
|
$
|
4,572,006
|
|
|
$
|
3,681,788
|
|
|
$
|
3,396,130
|
|
|
$
|
890,218
|
|
|
24.2
|
%
|
|
$
|
285,658
|
|
|
8.4
|
%
|
Communications
Networks
|
2,906,575
|
|
|
2,684,609
|
|
|
2,650,850
|
|
|
221,966
|
|
|
8.3
|
%
|
|
33,759
|
|
|
1.3
|
%
|
Cloud Solutions
|
755,278
|
|
|
743,733
|
|
|
821,639
|
|
|
11,545
|
|
|
1.6
|
%
|
|
(77,906
|
)
|
|
(9.5
|
)%
|
Total
|
$
|
8,233,859
|
|
|
$
|
7,110,130
|
|
|
$
|
6,868,619
|
|
|
$
|
1,123,729
|
|
|
15.8
|
%
|
|
$
|
241,511
|
|
|
3.5
|
%
|
Comparison
of 2019 to 2018 by End Market
In addition to
the impact of continued stabilization of lead times for
supply-constrained parts, sales to customers in our industrial,
medical, defense and automotive markets increased primarily as a
result of program ramps and new customer programs. Sales to
customers in our communications networks end market increased
primarily as a result of new program wins for optical, routing and
5G products.
Comparison
of 2018 to 2017 by End Market
In 2018, sales to
customers in our industrial, medical, defense, and automotive end
market increased 8.4%, primarily as a result of increased demand
and new program wins for medical products and certain programs
ramping for automotive products, partially offset by decreased
demand for industrial products. Sales to customers in our
communications networks end market increased 1.3%, primarily as a
result of new program wins and increased demand for existing
wireless products. Sales to customers in our cloud solutions end
market decreased 9.5%, primarily due to reduced demand from a
storage customer.
Gross Margin
Gross margin
was 7.2%, 6.5% and 7.6% in 2019, 2018 and 2017, respectively. 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.
The decrease in
gross margin from 2017 to 2018 was primarily due to a decline in
our IMS gross margin, partially offset by a $4.8 million credit
associated with a reduction in an accrual for contingent
consideration related to an acquisition completed in a previous
period. The contingent consideration accrual reversal is not
allocated to our operating segments. IMS gross margin decreased
from 7.2% in 2017, to 6.0% in 2018, due primarily to under
absorption of labor and overhead costs caused by lower than
anticipated revenue due to parts shortages, high fixed costs and yield
issues associated with new program ramps, and unfavorable program
mix. CPS gross margin decreased to 8.1% in 2018, from 8.9% in 2017,
primarily due to increased inventory adjustments in our products
group.
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:
|
|
•
|
changes in
customer demand and sales volumes for our vertically integrated
system components and subassemblies;
|
|
|
•
|
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;
|
|
|
•
|
parts shortages and extended parts lead times caused by high demand
or natural disasters, and related operational disruption and
inefficiencies;
|
|
|
•
|
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;
|
|
|
•
|
wage inflation and rising materials costs;
|
|
|
•
|
resolution of claims with our customers;
|
|
|
•
|
our ability to pass tariffs through to our customers;
and
|
|
|
•
|
our ability to transition the location of and ramp manufacturing
and assembly operations when desired or requested by a customer in
a timely and cost-effective manner.
|
Selling, General and Administrative
Selling, general
and administrative expenses were $260.0
million, $250.9 million
and
$251.6
million in 2019, 2018 and 2017, respectively. As a
percentage of net sales, selling, general and administrative
expenses were 3.2%, 3.5% and 3.7% for 2019, 2018 and 2017, respectively. 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 $27.6
million, $30.8 million
and
$33.7
million in 2019, 2018 and 2017, respectively. As a
percentage of net sales, research and development expenses
were 0.3%, 0.4% and 0.5% in 2019, 2018 and 2017, respectively. The decrease
in absolute dollars from 2018 to 2019 and from 2017 to 2018 was
primarily due to an increase in billable customer engineering
projects that required our engineering resources.
Restructuring
Restructuring
costs were $13.8
million, $29.1 million
and
$1.3
million in 2019, 2018 and 2017, respectively.
In the first
quarter of 2018, we began implementing restructuring actions to
address the closure and/or relocation of three of our manufacturing
facilities. In addition, we are still in the process of completing
restructuring actions under other plans.
The following
table is a summary of restructuring costs associated with these
plans:
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
|
September 28,
2019
|
|
September 29,
2018
|
|
(In
thousands)
|
Severance costs
(approximately 2,900 employees)
|
$
|
1,900
|
|
|
$
|
26,425
|
|
Other exit costs (generally
recognized as incurred)
|
3,247
|
|
|
4,984
|
|
Total
|
5,147
|
|
|
31,409
|
|
Severance
reimbursement
|
—
|
|
|
(10,000
|
)
|
Total - Q1 FY18
Plan
|
5,147
|
|
|
21,409
|
|
Costs incurred for other
plans
|
8,606
|
|
|
7,737
|
|
Total - all
plans
|
$
|
13,753
|
|
|
$
|
29,146
|
|
Q1 FY18
Plan
Actions under the
Q1 FY18 plan began in the first quarter of 2018 and are expected to
occur through calendar 2019. Cash payments of severance and other
costs began in the second quarter of 2018 and are expected to occur
through the end of calendar 2019. In connection with this plan, we
entered into a contractual agreement with a third party pursuant to
which up to $10 million
of severance and
retention costs incurred by us will be reimbursed. We recorded this
amount as a reduction of restructuring costs in the second quarter
of 2018 and, as of September 28,
2019, $5 million
was included in
accounts receivable on the consolidated balance sheets. Costs
incurred for other exit costs consist primarily of costs to
maintain vacant facilities that are owned and contract termination
costs.
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 IMS segment
incurred a benefit under all restructuring plans of
$4 million
during the year
ended September 28,
2019,
primarily as a result of recovery from a third party of certain
environmental remediation costs. This compares to costs incurred
of $12
million for the year ended
September 29,
2018. Our
CPS segment incurred costs under all restructuring plans of
$18
million and $17 million
for the years
ended September 28,
2019 and September 29,
2018,
respectively. As of September 28,
2019 and September 29,
2018, we
had accrued liabilities of $5 million
and
$24
million,
respectively, for restructuring costs (exclusive of long-term
environmental remediation liabilities).
In addition to
costs expected to be incurred under the 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.
On October 28,
2019, we adopted a Company-wide right-sizing plan. Under this plan,
we expect to incur restructuring charges of approximately
$10
million to $20
million,
consisting primarily of cash severance costs, over the first half
of 2020.
Goodwill Impairment
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. We had no such
charges in 2019 or 2017.
Interest and Other, net
Interest expense
was $30.8
million, $27.7 million
and
$21.9
million in 2019, 2018 and 2017, 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. Interest expense increased $5.8 million in 2018 primarily
due to higher daily average borrowings on our revolving credit
facility during the year driven by higher inventory
levels.
Other income
(expense), net was $(10.8)
million, $4.6 million
and
$7.7
million in 2019, 2018 and 2017, respectively. The following
table summarizes the primary components of other income, net (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended
|
|
September 28,
2019
|
|
September 29,
2018
|
|
September 30,
2017
|
Foreign exchange
gains
|
$
|
281
|
|
|
$
|
766
|
|
|
$
|
4,709
|
|
Other, net
|
(11,127
|
)
|
|
3,798
|
|
|
2,973
|
|
Total
|
$
|
(10,846
|
)
|
|
$
|
4,564
|
|
|
$
|
7,682
|
|
Other, net
decreased from a $4 million
gain in 2018 to
an $11
million loss in 2019 due primarily to
an increase in fees related to increased sales of accounts
receivable during 2019 driven primarily by pressure from customers
to extend their payment terms. We sold approximately
$2.7
billion,
of accounts receivable in 2019, compared to
approximately $900 million
in
2018.
Provision for Income Taxes
We recorded
income tax expense of $104.1
million, $193.1 million
and
$74.6
million in 2019, 2018 and 2017, respectively. Our effective
tax rate was 42.4%, 197.9% and 35.0% for 2019, 2018 and 2017, respectively. Income tax
expense for 2019 is higher than the expected U.S. statutory rate
primarily due to a tax-related restructuring transaction that
resulted in deferred tax expense of $22 million
and foreign
operations that resulted in higher tax than the U.S. statutory
rate.
Income tax
expense for 2018 was $118.4 million higher than income tax expense
for 2017, despite a decrease in pre-tax income of $115.9 million in
2018. This was primarily attributable to the impact of the Tax Act,
which increased income 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 US tax rate from 35%
to 21%, and a $4.8 million discrete tax benefit resulting from a
settlement with a foreign tax authority 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
|
September 28,
2019
|
|
September 29,
2018
|
|
September 30,
2017
|
|
|
|
(In
thousands)
|
|
|
Net cash
provided by (used in):
|
|
|
|
|
|
Operating
activities
|
$
|
382,965
|
|
|
$
|
156,424
|
|
|
$
|
250,961
|
|
Investing
activities
|
(127,641
|
)
|
|
(116,178
|
)
|
|
(107,898
|
)
|
Financing
activities
|
(220,218
|
)
|
|
(28,335
|
)
|
|
(135,493
|
)
|
Effect of exchange rate
changes
|
107
|
|
|
956
|
|
|
803
|
|
Increase in cash and cash
equivalents
|
$
|
35,213
|
|
|
$
|
12,867
|
|
|
$
|
8,373
|
|
Key Working
Capital Management Measures
|
|
|
|
|
|
As
of
|
|
September 28,
2019
|
|
September 29,
2018
|
Days sales outstanding
(1)
|
56
|
|
56
|
Contract asset days
(2)
|
19
|
|
—
|
Inventory turns
(3)
|
7.7
|
|
5.5
|
Days inventory on hand
(4)
|
47
|
|
67
|
Accounts payable days
(5)
|
70
|
|
75
|
Cash cycle days
(6)
|
52
|
|
48
|
|
|
(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 are calculated as the ratio of average contract assets to
average daily net sales for the quarter. This is a new measure in
the first quarter of 2019 due to our adoption of the new revenue
accounting standard.
|
|
|
(3)
|
Inventory turns
(annualized) are calculated as the ratio of four times our cost of
sales for the quarter to average inventory. The improvement in
inventory turns in 2019 was primarily due to the adoption of ASC
606, a new revenue recognition standard, at the beginning of 2019
which resulted in the Company no longer capitalizing costs for
work-in-progress and finished goods for the vast majority of the
Company’s revenue streams.
|
|
|
(4)
|
Days inventory on hand 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
is calculated as days inventory on hand plus days sales outstanding
minus accounts payable days.
|
Cash and cash
equivalents were
$455 million at
September 28, 2019 and
$420 million at September 29,
2018. 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, repurchases
of capital stock and other factors. Our working capital was
approximately $1.2 billion
and
$0.6
billion at September 28,
2019 and September 29,
2018,
respectively. The increase in net working capital in 2019 resulted
primarily from net working capital being reduced in 2018 because
our Secured Notes due in 2019 were classified as current debt in
2018.
Net cash provided
by operating activities was $383
million, $156 million
and
$251 million for
2019, 2018 and 2017, 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 and accrued 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 2019, we
generated $346 million
of cash from
earnings, excluding non-cash items, and $37 million
of cash from the
reduction of our net operating assets resulting primarily from a
decrease in inventories of $121
million, a
decrease in accounts receivable of $55 million
and an increase
in accrued liabilities of $54
million,
partially offset by a decrease in accounts payable of
$183
million and an increase in contract
assets of $21
million.
These changes in net operating assets exclude the impact of the
initial adoption of ASC 606. Inventory decreased primarily due to
improved availability of supply-constrained parts. The decrease in
accounts receivable is attributable to a higher level of sales of
accounts receivable. Accrued liabilities increased primarily due to
a higher level of sales of accounts receivable for which we, as a
servicer, collected on behalf of the financial institutions to
which the receivables were sold, but had not yet remitted the
collected funds to such financial institutions. Accounts payable
decreased due primarily to an unfavorable shift in supplier payment
terms mix from suppliers with whom we have longer payment terms to
suppliers with whom we have shorter payment terms and an
unfavorable shift in the linearity of material receipts. This shift
resulted in DPO decreasing from 75 days at the end of 2018
to
70
days at the end
of 2019. Contract assets recognized when the Company has recognized
revenue, but has not issued an invoice to its customer for payment,
increased in 2019 due primarily to certain customers delaying
delivery of certain orders at the end of 2019.
Net cash used in
investing activities was $128
million, $116 million
and
$108
million for 2019, 2018 and 2017, respectively. In 2019, we
used $135
million of
cash for capital expenditures and received proceeds of
$8 million
primarily from
sales of certain properties. In 2018, we used $119 million of cash
for capital expenditures, received proceeds of $5 million primarily
from sales of certain properties and used $2 million for funding
our deferred compensation plan.
Net cash used in
financing activities was $220
million, $28 million
and
$135
million for 2019, 2018 and 2017, respectively. 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. In 2018,
we repurchased $158 million of common stock (including $12 million
in settlement of employee tax withholding obligations), borrowed
$130 million of cash under the Cash Flow Revolver, repaid $3
million of long-term debt and received $4 million of proceeds from
issuances of common stock pursuant to stock option
exercises.
Secured
Debt. During the second quarter of
2017, we prepaid the balance of the amount due under our secured
debt due 2017 for $40 million plus accrued interest.
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 the term loan provided for in the 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.
On May 31, 2019,
we drew down the Term Loan and used the proceeds to repay our
Secured Notes as discussed above. As of September 28,
2019,
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, 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, 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
September 28,
2019, no borrowings were outstanding
under the Amended Cash Flow Revolver and, as of September 29,
2018, $215 million
of borrowings
were outstanding under the Amended Cash Flow Revolver. As of
September 28,
2019, $8 million
of letters of
credit were outstanding under the Amended Cash Flow Revolver
and $692
million was available to
borrow.
Short-term
Borrowing Facilities. As of
September 28, 2019, certain of our foreign
subsidiaries had a total of $69 million
of short-term
borrowing facilities, under which no borrowings were outstanding.
These facilities expire at various dates through
the first quarter
of 2021.
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, 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
September 28,
2019, 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. We repurchased 0.3 million
and
5.0
million shares of our common stock
for $7
million and $146 million
in the open
market in 2019 and 2018, respectively. As of September 28,
2019, $101
million remains available under
program authorized by the Board of Directors, none of which is
subject to an expiration date. Subsequent to the end of 2019, our
Board of Directors authorized us to purchase an additional
$200
million of
our common stock on the same terms as the program approved in
September 2017 which brought the total Board authorized amount
to $301
million.
One of the objectives of our share repurchase plan is to offset the
dilution that results from the issuance of shares under our equity
incentive plans. For example, over the past 3 years, we
issued 7
million shares under our equity
incentive plans and repurchased 10 million
shares under our
share repurchase plan.
During 2018, 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 the banks that are party to the RPA. As of
September 28,
2019, a
maximum of $552 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 September 28,
2019 and September 29,
2018, we
sold approximately $2.7 billion
and
approximately $900
million,
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 September 28,
2019 and September 29,
2018, $241 million
and
$189
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 September 28,
2019 and September 29,
2018, $76 million
and
$23
million,
respectively, had been collected but not yet remitted. This amount
is classified in accrued liabilities on the consolidated balance
sheets.
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. As of
September 28,
2019 and September 29,
2018,
interest rate swaps with an aggregate notional amount of
$350
million and $50
million,
respectively, were outstanding. The aggregate effective interest
rate of these swaps as of September 28,
2019 was
approximately 4.3%. As of September 28,
2019, 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
$20
million,
of which $4 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. As of
September 28,
2019, we
had accrued liabilities of $36 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
September 28,
2019, we
had a liability of $106 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 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. Our primary sources of liquidity as
of
September 28, 2019 consisted of (1) cash and
cash equivalents of
$455 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
$69
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. Should demand for our services decrease
significantly over the next 12 months, should we experience
increases in our inventories, delinquent or uncollectible accounts
receivable, or should the counterparties to our accounts receivable
sales program not agree to fund our requests, our cash provided by
operations could be adversely impacted.
As of
September 28, 2019, 63% 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.
Contractual
Obligations
The following is
a summary of our long-term debt, including interest, and operating
lease obligations as of September 28,
2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due
by Period
|
Contractual
Obligations
|
Total
|
|
Less than 1
year
|
|
1- 3
years
|
|
3-5
years
|
|
More
than
5
years
|
|
(In
thousands)
|
Long-term debt obligations,
including current portion and interest
|
$
|
390,038
|
|
|
$
|
38,475
|
|
|
$
|
37,500
|
|
|
$
|
314,063
|
|
|
$
|
—
|
|
Operating lease
obligations
|
72,707
|
|
|
18,472
|
|
|
27,284
|
|
|
9,880
|
|
|
17,071
|
|
Total contractual
obligations
|
$
|
462,745
|
|
|
$
|
56,947
|
|
|
$
|
64,784
|
|
|
$
|
323,943
|
|
|
$
|
17,071
|
|
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
September 28, 2019, we were unable to reliably
estimate when cash settlements with taxing authorities may occur
with respect to our unrecognized tax benefits of
$106
million.
Additionally, we have defined benefit pension plans with an
underfunded amount of $44 million
at
September 28, 2019. 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
September 28, 2019, 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 2019 and 2018. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
September 28, 2019
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
(In
thousands, except per share data)
|
Net sales
|
$
|
2,188,018
|
|
|
$
|
2,126,639
|
|
|
$
|
2,026,995
|
|
|
$
|
1,892,207
|
|
Gross profit
|
$
|
149,337
|
|
|
$
|
153,102
|
|
|
$
|
147,794
|
|
|
$
|
141,705
|
|
Gross margin
|
6.8
|
%
|
|
7.2
|
%
|
|
7.3
|
%
|
|
7.5
|
%
|
Operating income
|
$
|
77,543
|
|
|
$
|
78,115
|
|
|
$
|
67,374
|
|
|
$
|
63,085
|
|
Operating margin
|
3.5
|
%
|
|
3.7
|
%
|
|
3.3
|
%
|
|
3.3
|
%
|
Net income
|
$
|
37,952
|
|
|
$
|
40,885
|
|
|
$
|
42,921
|
|
|
$
|
19,757
|
|
Basic net income per
share
|
$
|
0.56
|
|
|
$
|
0.59
|
|
|
$
|
0.62
|
|
|
$
|
0.28
|
|
Diluted net income per
share
|
$
|
0.54
|
|
|
$
|
0.57
|
|
|
$
|
0.60
|
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
September 29, 2018
|
|
First
Quarter
(1)
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
(2)
|
|
(In
thousands, except per share data)
|
Net sales
|
$
|
1,744,800
|
|
|
$
|
1,675,629
|
|
|
$
|
1,813,366
|
|
|
$
|
1,876,335
|
|
Gross profit
|
$
|
109,466
|
|
|
$
|
114,698
|
|
|
$
|
118,536
|
|
|
$
|
121,083
|
|
Gross margin
|
6.3
|
%
|
|
6.8
|
%
|
|
6.5
|
%
|
|
6.5
|
%
|
Operating income
|
$
|
13,788
|
|
|
$
|
48,774
|
|
|
$
|
47,060
|
|
|
$
|
9,819
|
|
Operating margin
|
0.8
|
%
|
|
2.9
|
%
|
|
2.6
|
%
|
|
0.5
|
%
|
Net income
(loss)
|
$
|
(154,910
|
)
|
|
$
|
24,632
|
|
|
$
|
33,963
|
|
|
$
|
782
|
|
Basic net income per
share
|
$
|
(2.16
|
)
|
|
$
|
0.35
|
|
|
$
|
0.49
|
|
|
$
|
0.01
|
|
Diluted net income per
share
|
$
|
(2.16
|
)
|
|
$
|
0.33
|
|
|
$
|
0.47
|
|
|
$
|
0.01
|
|
(1) Includes income tax
expense of $162 million
related to
enactment of the Tax Act.
(2) Includes a
goodwill impairment charge of $31 million
and a
$12.5
million pre-tax adjustment to correct
errors that occurred from fiscal 2016 through the third quarter of
fiscal 2018 with respect to the accounting for certain long-term
government contracts in one of our CPS divisions.
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
borrowings under our Amended Cash Flow Revolver as the interest
rate we pay for borrowings is determined at the time of borrowing
based on a floating index. Although we can elect to fix the
interest rate at the time of borrowing, the facility does expose us
to market risk for changes in interest rates. 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, although we currently have a
four-year contract that hedges a non-functional currency
denominated note payable due in 2020. 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, net, in the consolidated
statements of operations. As of
September 28, 2019, we had outstanding foreign
currency forward contracts to exchange various foreign currencies
for U.S. dollars in the aggregate notional amount of
$299
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 sales
denominated in currencies other than those used to pay for
materials and labor, (2) forecasted non-functional currency labor
and overhead expenses, (3) forecasted non-functional currency
operating expenses, and (4) anticipated capital expenditures
denominated in a currency other than the functional currency of the
entity making the expenditures. 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 the aggregate notional amount of
$107 million as of
September 28, 2019.
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).”
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 September 28, 2019 and September 29, 2018,
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 September 28, 2019, 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 September 28, 2019, 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 September 28, 2019 and September 29,
2018,
and the results
of its operations and its
cash flows for
each of the three years in the period ended September 28, 2019 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 September 28, 2019, based on
criteria established in Internal
Control - Integrated Framework (2013) issued by the
COSO.
Change in
Accounting Principle
As discussed in
Note 2 to the consolidated financial statements, the Company
changed the manner in which it accounts for revenues from contracts
with customers 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 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 - Adoption of New Accounting Standard for Revenue from
Contracts with Customers
As described in
Note 2 to the consolidated financial statements, the Company
adopted the new accounting standard for recognizing revenue from
contracts with customers (the “new revenue accounting standard”) as
of the beginning of its first quarter of 2019 using the modified
retrospective approach, whereby the cumulative effect of initially
applying the guidance was recognized as an adjustment to beginning
retained earnings at the date of adoption. This adjustment resulted
in an increase to beginning retained earnings of $28 million. The
adoption of the new revenue accounting standard resulted in a
change to the manner in which the Company recognizes revenue for
the majority of its revenue streams, including integrated
manufacturing solutions, components, repair services and defense
and aerospace programs. Prior to the adoption of the new revenue
accounting standard, the Company generally recognized revenue from
its integrated manufacturing solutions, the Company’s largest
revenue stream, upon shipment or delivery of a product to a
customer. Under the new revenue accounting standard, the Company
recognizes revenue from the sale of these products on an over time
basis as the products are manufactured. For revenue streams for
which revenue is being recognized on an over time basis under the
new revenue accounting standard, work-in-progress and finished
goods inventory were reduced to zero upon adoption and an
associated contract asset was recorded to reflect amounts that
would have been recognized as revenue prior to adoption. This
adjustment resulted in recognition of a contract asset of $376
million and a decrease in inventory of $350 million as of the
beginning of the first fiscal quarter of 2019.
The principal
considerations for our determination that performing procedures
relating to revenue recognition and the adoption of the new
accounting standard for revenue from contracts with customers is a
critical audit matter are there was a significant amount of
judgment by management to (i) determine whether contracts with
customers from the integrated manufacturing solutions segment
should be recognized on an over time basis under the new revenue
accounting standard, and (ii) determine the adjustments upon
adoption for the integrated manufacturing solutions segment. This
in turn, led to significant auditor effort and a high degree of
subjectivity in applying procedures and evaluating the audit
evidence obtained related to management’s adoption of the new
revenue accounting standard.
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 Company’s adoption of the
new revenue accounting standard, including controls over the
determination of whether revenue from the integrated manufacturing
solutions segment should be recognized over time as well as
controls over the determination of the adjustments upon adoption
for the integrated manufacturing solutions segment. These
procedures also included, among others, evaluating management’s
process for determining the application of the new revenue
accounting standard to the Company’s revenue, including the
integrated manufacturing solutions segment, evaluating the
reasonableness of management’s judgments and accounting conclusions
and assessing the impacts of adoption identified by management. We
examined revenue arrangements on a test basis, which included
assessing the terms and conditions of the arrangement and testing
management’s application of the new revenue accounting standard. We
also performed procedures to test the adjustments upon
adoption.
/s/
PricewaterhouseCoopers LLP
San Jose,
California
November 8,
2019
We have served
as the Company’s auditor since 2016.
SANMINA
CORPORATION
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
As
of
|
|
September 28,
2019
|
|
September 29,
2018
|
|
(In
thousands, except par value)
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
454,741
|
|
|
$
|
419,528
|
|
Accounts receivable, net of
allowances of $12,481 and $12,211 as of September 28, 2019 and
September 29, 2018, respectively
|
1,128,379
|
|
|
1,177,219
|
|
Contract assets
|
396,300
|
|
|
—
|
|
Inventories
|
900,557
|
|
|
1,374,004
|
|
Prepaid expenses and other
current assets
|
40,952
|
|
|
43,676
|
|
Total current
assets
|
2,920,929
|
|
|
3,014,427
|
|
Property, plant and
equipment, net
|
630,647
|
|
|
642,913
|
|
Deferred income tax assets,
net
|
279,803
|
|
|
344,124
|
|
Other
|
74,134
|
|
|
83,669
|
|
Total assets
|
$
|
3,905,513
|
|
|
$
|
4,085,133
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable
|
$
|
1,336,914
|
|
|
$
|
1,547,399
|
|
Accrued
liabilities
|
180,107
|
|
|
136,427
|
|
Accrued payroll and related
benefits
|
127,647
|
|
|
124,748
|
|
Short-term debt, including
current portion of long-term debt
|
38,354
|
|
|
593,321
|
|
Total current
liabilities
|
1,683,022
|
|
|
2,401,895
|
|
Long-term
liabilities:
|
|
|
|
Long-term debt
|
346,971
|
|
|
14,346
|
|
Other
|
232,947
|
|
|
196,048
|
|
Total long-term
liabilities
|
579,918
|
|
|
210,394
|
|
Commitments and Contingencies
(Note 9)
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Preferred stock, $.01 par
value, authorized 5,000 shares, none issued and
outstanding
|
—
|
|
|
—
|
|
Common stock, $.01 par value,
authorized 166,667 shares; 105,551 and 103,128 shares issued and
69,720 and 67,777 shares outstanding as of September 28, 2019 and
September 29, 2018, respectively
|
697
|
|
|
678
|
|
Treasury stock, 35,831 and
35,351 shares as of September 28, 2019 and September 29, 2018,
respectively, at cost
|
(804,118
|
)
|
|
(791,366
|
)
|
Additional paid-in
capital
|
6,266,812
|
|
|
6,222,310
|
|
Accumulated other
comprehensive income
|
42,259
|
|
|
73,944
|
|
Accumulated
deficit
|
(3,863,077
|
)
|
|
(4,032,722
|
)
|
Total stockholders'
equity
|
1,642,573
|
|
|
1,472,844
|
|
Total liabilities and
stockholders' equity
|
$
|
3,905,513
|
|
|
$
|
4,085,133
|
|
See accompanying
notes to the consolidated financial statements.
SANMINA
CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
|
September 28,
2019
|
|
September 29,
2018
|
|
September 30,
2017
|
|
(In
thousands, except per share amounts)
|
|
|
Net sales
|
$
|
8,233,859
|
|
|
$
|
7,110,130
|
|
|
$
|
6,868,619
|
|
Cost of sales
|
7,641,921
|
|
|
6,646,347
|
|
|
6,348,708
|
|
Gross profit
|
591,938
|
|
|
463,783
|
|
|
519,911
|
|
Operating
expenses:
|
|
|
|
|
|
Selling, general and
administrative
|
260,032
|
|
|
250,924
|
|
|
251,568
|
|
Research and
development
|
27,552
|
|
|
30,754
|
|
|
33,716
|
|
Restructuring
costs
|
13,753
|
|
|
29,146
|
|
|
1,339
|
|
Goodwill
impairment
|
—
|
|
|
30,610
|
|
|
—
|
|
Other
|
4,484
|
|
|
2,908
|
|
|
6,821
|
|
Total operating
expenses
|
305,821
|
|
|
344,342
|
|
|
293,444
|
|
|
|
|
|
|
|
Operating income
|
286,117
|
|
|
119,441
|
|
|
226,467
|
|
|
|
|
|
|
|
Interest income
|
1,111
|
|
|
1,268
|
|
|
1,265
|
|
Interest expense
|
(30,763
|
)
|
|
(27,734
|
)
|
|
(21,934
|
)
|
Other income (expense),
net
|
(10,846
|
)
|
|
4,564
|
|
|
7,682
|
|
Interest and other,
net
|
(40,498
|
)
|
|
(21,902
|
)
|
|
(12,987
|
)
|
Income before income
taxes
|
245,619
|
|
|
97,539
|
|
|
213,480
|
|
Provision for income
taxes
|
104,104
|
|
|
193,072
|
|
|
74,647
|
|
Net income
(loss)
|
$
|
141,515
|
|
|
$
|
(95,533
|
)
|
|
$
|
138,833
|
|
|
|
|
|
|
|
Net income (loss) per
share:
|
|
|
|
|
|
Basic
|
$
|
2.05
|
|
|
$
|
(1.37
|
)
|
|
$
|
1.86
|
|
Diluted
|
$
|
1.97
|
|
|
$
|
(1.37
|
)
|
|
$
|
1.78
|
|
|
|
|
|
|
|
Weighted-average shares used
in computing per share amounts:
|
|
|
|
|
|
Basic
|
69,129
|
|
|
69,833
|
|
|
74,481
|
|
Diluted
|
71,678
|
|
|
69,833
|
|
|
78,128
|
|
See accompanying
notes to the consolidated financial statements.
SANMINA
CORPORATION
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
|
September 28,
2019
|
|
September 29,
2018
|
|
September 30,
2017
|
|
(In
thousands)
|
|
|
Net income
(loss)
|
$
|
141,515
|
|
|
$
|
(95,533
|
)
|
|
$
|
138,833
|
|
Other comprehensive income
(loss), net of tax:
|
|
|
|
|
|
Foreign currency translation
adjustments
|
(1,621
|
)
|
|
(3,063
|
)
|
|
588
|
|
Derivative financial
instruments:
|
|
|
|
|
|
Changes in unrealized gain
(loss)
|
(21,508
|
)
|
|
(982
|
)
|
|
819
|
|
Amount reclassified into net
income
|
1,955
|
|
|
859
|
|
|
(592
|
)
|
Pension benefit
plans:
|
|
|
|
|
|
Changes in unrecognized net
actuarial gain (loss) and unrecognized transition cost
|
(11,450
|
)
|
|
(460
|
)
|
|
8,833
|
|
Amortization of actuarial
loss (gain) and transition cost
|
939
|
|
|
796
|
|
|
1,765
|
|
Total other comprehensive
income (loss)
|
$
|
(31,685
|
)
|
|
$
|
(2,850
|
)
|
|
$
|
11,413
|
|
Comprehensive income
(loss)
|
$
|
109,830
|
|
|
$
|
(98,383
|
)
|
|
$
|
150,246
|
|
See accompanying
notes to the consolidated financial statements.
SANMINA
CORPORATION
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
and Additional Paid-in Capital
|
|
Treasury
Stock
|
|
|
|
|
|
|
|
Number
of
Shares
|
|
Amount
|
|
Number
of
Shares
|
|
Amount
|
|
Accumulated
Other
Comprehensive
Income
|
|
Accumulated
Deficit
|
|
Total
|
|
(In
thousands)
|
BALANCE AT OCTOBER 1,
2016
|
98,141
|
|
|
$
|
6,120,509
|
|
|
(25,110
|
)
|
|
$
|
(456,796
|
)
|
|
$
|
65,381
|
|
|
$
|
(4,119,291
|
)
|
|
$
|
1,609,803
|
|
Issuances under stock
plans
|
3,531
|
|
|
27,129
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,129
|
|
Stock-based
compensation
|
—
|
|
|
37,450
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37,450
|
|
Repurchases of treasury
stock
|
—
|
|
|
—
|
|
|
(4,898
|
)
|
|
(176,944
|
)
|
|
—
|
|
|
—
|
|
|
(176,944
|
)
|
Other comprehensive
income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,413
|
|
|
—
|
|
|
11,413
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
138,833
|
|
|
138,833
|
|
BALANCE AT SEPTEMBER 30,
2017
|
101,672
|
|
|
$
|
6,185,088
|
|
|
(30,008
|
)
|
|
$
|
(633,740
|
)
|
|
$
|
76,794
|
|
|
$
|
(3,980,458
|
)
|
|
$
|
1,647,684
|
|
Issuances under stock
plans
|
1,456
|
|
|
4,407
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,407
|
|
Stock-based
compensation
|
—
|
|
|
33,493
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33,493
|
|
Repurchases of treasury
stock
|
—
|
|
|
—
|
|
|
(5,343
|
)
|
|
(157,626
|
)
|
|
—
|
|
|
—
|
|
|
(157,626
|
)
|
Other comprehensive
loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,850
|
)
|
|
—
|
|
|
(2,850
|
)
|
Cumulative effect of new
accounting pronouncement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43,269
|
|
|
43,269
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(95,533
|
)
|
|
(95,533
|
)
|
BALANCE AT SEPTEMBER 29,
2018
|
103,128
|
|
|
$
|
6,222,988
|
|
|
(35,351
|
)
|
|
$
|
(791,366
|
)
|
|
$
|
73,944
|
|
|
$
|
(4,032,722
|
)
|
|
$
|
1,472,844
|
|
Issuances under stock
plans
|
2,423
|
|
|
13,539
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,539
|
|
Stock-based
compensation
|
—
|
|
|
30,844
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,844
|
|
Repurchases of treasury
stock
|
—
|
|
|
138
|
|
|
(480
|
)
|
|
(12,752
|
)
|
|
—
|
|
|
—
|
|
|
(12,614
|
)
|
Other comprehensive
loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31,685
|
)
|
|
—
|
|
|
(31,685
|
)
|
Cumulative effect of new
accounting pronouncement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28,130
|
|
|
28,130
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
141,515
|
|
|
141,515
|
|
BALANCE AT SEPTEMBER 28,
2019
|
105,551
|
|
|
$
|
6,267,509
|
|
|
(35,831
|
)
|
|
$
|
(804,118
|
)
|
|
$
|
42,259
|
|
|
$
|
(3,863,077
|
)
|
|
$
|
1,642,573
|
|
See accompanying
notes to the consolidated financial statements.
SANMINA
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
|
September 28,
2019
|
|
September 29,
2018
|
|
September 30,
2017
|
|
(In
thousands)
|
|