SANMINA CORP

Previous wording

Our only reportable segment for financial reporting purposes is IMS, which represented approximately 80% of our total revenue for the six months ended March 30, 2024. Our CPS business consists of multiple operating segments which do not individually meet the quantitative thresholds for being presented as reportable segments. Therefore, financial information for these operating segments is combined and presented in a single category entitled “CPS”.

Current wording

Our only reportable segment for financial reporting purposes is IMS, which represented approximately 80% of our total revenue for the nine months ended June 29, 2024. Our CPS business consists of multiple operating segments which do not individually meet the quantitative thresholds for being presented as reportable segments. Therefore, financial information for these operating segments is combined and presented in a single category entitled “CPS”.

Previous wording

Our business continues to be exposed to macroeconomic challenges such as inflation, supply chain constraints, foreign currency fluctuations, rising interest rates, market volatility, recession concerns and other factors that have been exacerbated by geopolitical conflicts such as the war in Ukraine and conflict in the Middle East. Although the supply chain constraints have been easing, we expect to see headwinds to our revenue growth at least in the short term due to customers absorbing their finished goods inventory in some of our end markets. Despite these many challenges, we remain focused on improving our operations, building flexibility and efficiencies in our processes and adjusting our business models to changing circumstances. We intend to continue diversifying into mission critical markets, creating a portfolio with longer product life cycles and higher technology and complex products. As our end markets evolve and grow, our ability to optimize our product and portfolio mix towards higher value opportunities will continue to be an important driver for our business going forward. Additionally, given that maintaining low costs is a cornerstone to our success and growth, we proactively handle cost impacts through a combination of well-calibrated pricing actions and targeted cost-saving measures to enhance overall stockholder value.

Current wording

Our business continues to be exposed to macroeconomic challenges such as inflation, supply chain constraints, foreign currency fluctuations, high interest rates, market volatility, recession concerns and other factors that have been exacerbated by geopolitical conflicts such as the war in Ukraine and conflict in the Middle East. Although the supply chain constraints have been easing, we are experiencing and expect to see headwinds to our revenue growth in the near term due to customers absorbing their finished goods inventory in some of our end markets. Despite these many challenges, we remain focused on improving our operations, building flexibility and efficiencies in our processes and adjusting our business models to changing circumstances. We intend to continue diversifying into mission critical markets, creating a portfolio with longer product life cycles and higher technology and more complex products. As our end markets evolve and grow, our ability to optimize our product and portfolio mix towards higher value opportunities will continue to be an important driver for our business going forward. Additionally, given that maintaining low costs is a cornerstone to our success and growth, we proactively handle cost impacts through a combination of well-calibrated pricing actions and targeted cost-saving measures to enhance overall stockholder value.

Previous wording

We recognize revenue for the majority of our contracts on an over time basis. This is primarily due to the fact that 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. In certain circumstances, we recognize over time because our customer simultaneously receives and consumes the benefits provided by our services or, our customer controls the end product as we perform manufacturing services (continuous transfer of control). 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.

Current wording

We recognize revenue for the majority of our contracts on an over time basis. This is primarily due to the fact that 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. In certain circumstances, we recognize over time because our customer simultaneously receives and consumes the benefits provided by our services or, our customer controls the end product as we perform manufacturing services (continuous transfer of control).

Previous wording

Changes in our estimates of transaction price and/or cost result in a favorable or unfavorable impact to our revenue and operating income. The impact of changes in estimates on revenue and operating income resulting from application of the cost-to-cost method for recognizing revenue was as follows:

Current wording

Changes in our estimates of transaction price and/or costs to complete result in a favorable or unfavorable impact to revenue and operating income. The impact of changes in estimates on revenue and operating income resulting from application of the cost-to-cost method for recognizing revenue was as follows:

Previous wording

Net sales decreased to $1.8 billion for the three months ended March 30, 2024 from $2.3 billion for the three months ended April 1, 2023, a decrease of 20.9%. Sales by end market were as follows:

Current wording

Sales by end market were as follows:

Previous wording

Net sales decreased 20.9% in the three months ended March 30, 2024 compared to the three months ended April 1, 2023 and 20.7% in the six months ended March 30, 2024 compared to the six months ended April 1, 2023 primarily due to reduced demand driven by customers continuing to absorb their finished goods inventory in some end markets, particularly telecommunications. The impact of this was partially offset by new program wins.

Current wording

Net sales decreased 16.6% in the three months ended June 29, 2024 compared to the three months ended July 1, 2023 and 19.4% in the nine months ended June 29, 2024 compared to the nine months ended July 1, 2023 primarily due to reduced demand driven by customers continuing to absorb their finished goods inventory in some end markets, particularly telecommunications. The impact of this was partially offset by new program wins.

Previous wording

Gross margin was 8.4% and 8.2% for the three months ended March 30, 2024 and April 1, 2023, respectively. IMS gross margin increased slightly to 7.7% for the three months ended March 30, 2024 from 7.5% for the three months ended April 1, 2023. CPS gross margin increased to 12.9% for the three months ended March 30, 2024 from 11.8% for the three months ended April 1, 2023, primarily due to improved operational efficiencies.

Current wording

Gross margin was 8.3% for both the three months ended June 29, 2024 and July 1, 2023. IMS gross margin decreased to 7.6% for the three months ended June 29, 2024 from 8.3% for the three months ended July 1, 2023. CPS gross margin increased to 11.5% for the three months ended June 29, 2024 from 8.8% for the three months ended July 1, 2023, primarily due to significant losses on certain fixed-price customer contracts recognized in the third quarter of 2023 compared to the third quarter of 2024.

Previous wording

Gross margin was 8.5% and 8.3% for the six months ended March 30, 2024 and April 1, 2023, respectively. IMS gross margin increased to 7.6% for the six months ended March 30, 2024 from 7.2% for the six months ended April 1, 2023, primarily due to improved operational efficiencies. CPS gross margin decreased to 12.9% for the six months ended March 30, 2024 from 13.2% for the six months ended April 1, 2023, primarily due to lower volume and unfavorable product mix.

Current wording

Gross margin was 8.5% and 8.3% for the nine months ended June 29, 2024 and July 1, 2023, respectively. IMS gross margin was 7.6% for both the nine months ended June 29, 2024 and July 1, 2023. CPS gross margin increased to 12.4% for the nine months ended June 29, 2024 from 11.8% for the nine months ended July 1, 2023, primarily due to significant losses recognized on certain fixed-price customer contracts in the third quarter of 2023 compared to 2024, which was partially offset by unfavorable product mix.

Previous wording

•the impacts of supply chain constraints on our operations, the operations of our suppliers and on our customers’ businesses;

Current wording

•the impact of supply chain constraints on our operations, the operations of our suppliers and on our customers’ businesses;

Previous wording

Selling, general and administrative expenses for the three months ended March 30, 2024 and April 1, 2023 were $69 million and $63 million, respectively. As a percentage of net sales, selling, general and administrative expenses were 3.8% and 2.7% for the three months ended March 30, 2024 and April 1, 2023, respectively. The increase in absolute dollars was primarily due to higher incentive compensation in the second quarter of 2024.

Current wording

Selling, general and administrative expenses for the three months ended June 29, 2024 and July 1, 2023 were $62 million and $69 million, respectively. As a percentage of net sales, selling, general and administrative expenses were 3.4% and 3.1% for the three months ended June 29, 2024 and July 1, 2023, respectively. The decrease in absolute dollars was primarily due to lower variable compensation and professional fees, partially offset by higher stock compensation expense from new equity grants.

Previous wording

Selling, general and administrative expenses for the six months ended March 30, 2024 and April 1, 2023 were $134 million and $124 million, respectively. As a percentage of net sales, selling, general and administrative expenses were 3.6% and 2.7% for the six months ended March 30, 2024 and April 1, 2023, respectively. The increase in absolute dollars was primarily due to higher incentive compensation and an increase in our deferred compensation liability caused by strong stock market performance that increased the market value of participant investment accounts during the six months ended March 30, 2024.

Current wording

Selling, general and administrative expenses for the nine months ended June 29, 2024 and July 1, 2023 were $196 million and $193 million, respectively. As a percentage of net sales, selling, general and administrative expenses were 3.5% and 2.8% for the nine months ended June 29, 2024 and July 1, 2023, respectively. The increase in absolute dollars was primarily due to higher stock compensation expense from new equity grants which was partially offset by lower variable compensation and professional fees.

Previous wording

Other income (expense) for the six months ended March 30, 2024 and April 1, 2023 was $2 million and $(9) million, respectively. The increase in other income (expense) for the three months ended March 30, 2024 was primarily due to a $7 million decrease in fees for accounts receivable factoring and a $3 million increase in the market value of participant investment accounts in our deferred compensation plan compared to the same period in 2023.

Current wording

Other expense for both the three months ended June 29, 2024 and July 1, 2023 was $3 million. Other expense for the nine months ended June 29, 2024 and July 1, 2023 was $1 million and $12 million, respectively. The decrease in other expense for the nine months ended June 29, 2024 was primarily due to a $9 million decrease in discounts on sold receivables and a $2 million increase in the market value of participant investment accounts in our deferred compensation plan compared to the same period in 2023.

Previous wording

Our provision for income taxes for the three months ended March 30, 2024 and April 1, 2023 was $19 million (26% of income before taxes) and $26 million (23% of income before taxes), respectively.

Current wording

Our provision for income taxes for the three months ended June 29, 2024 and July 1, 2023 was $20 million (27% of income before taxes) and $17 million (17% of income before taxes), respectively. Our provision for income taxes for the nine months ended June 29, 2024 and July 1, 2023 was $60 million (26% of income before taxes) and $64 million (20% of income before taxes), respectively. The tax rate was lower for the three and nine months ended July 1, 2023 due to the higher discrete items, including recognized tax benefits from the release of certain foreign tax reserves due to lapse of time and expiration of statutes of limitations.

Previous wording

Cash and cash equivalents were $651 million at March 30, 2024 and $668 million at September 30, 2023. Our cash levels vary during any given quarter depending on the timing of collections from customers and payments to suppliers, borrowings under our credit facilities, sales of accounts receivable under numerous programs we utilize, repurchases of common stock and other factors. Our working capital was $1.8 billion as of March 30, 2024 and September 30, 2023.

Current wording

Cash and cash equivalents were $658 million at June 29, 2024 and $668 million at September 30, 2023. Our cash levels vary during any given quarter depending on the timing of collections from customers and payments to suppliers, borrowings under our credit facilities, sales of accounts receivable under numerous programs we utilize, repurchases of common stock and other factors. Our working capital was $1.9 billion and $1.8 billion of June 29, 2024 and September 30, 2023, respectively.

Previous wording

Net cash provided by operating activities was $198 million and $102 million for the six months ended March 30, 2024 and April 1, 2023, respectively. 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, the extent to which we factor customer receivables and the negotiation of payment terms with customers and suppliers. These fluctuations can significantly affect our cash flows from operating activities.

Current wording

Net cash provided by operating activities was $288 million and $158 million for the nine months ended June 29, 2024 and July 1, 2023, respectively. 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, the extent to which we factor customer receivables and the negotiation of payment terms with customers and suppliers. These fluctuations can significantly affect our cash flows from operating activities.

Previous wording

During the six months ended March 30, 2024, we generated $213 million of cash primarily from earnings, excluding non-cash items, and used $15 million of cash due primarily to decreases in accounts payable and accrued liabilities, which were partially offset by a decrease in accounts receivable and inventories. The decrease in accounts receivable, inventory and accounts payable was primarily attributable to a decrease in business volume.

Current wording

During the nine months ended June 29, 2024, we generated $317 million of cash primarily from earnings, excluding non-cash items, and used $29 million of cash due primarily to decreases in accounts payable and accrued liabilities, which were partially offset by decreases in accounts receivable and inventories. The decreases in accounts receivable, inventory, accounts payable and accrued liabilities were primarily attributable to a decrease in business volume.

Previous wording

During the six months ended April 1, 2023, we generated $276 million of cash primarily from earnings, excluding non-cash items, and used $174 million of cash due primarily to an increase in accounts receivable and a decrease in accounts payable, partially offset by a decrease in inventory. The increase in accounts receivable was primarily attributable to an increase in sales and billings to customers for their inventory obligations. The decrease in accounts payable was primarily attributable to lower inventory receipts and unfavorable supplier payment terms mix. The decrease in inventory was primarily due to improved availability of supply-constrained parts.

Current wording

During the nine months ended July 1, 2023, we generated $409 million of cash primarily from earnings, excluding non-cash items, and used $251 million of cash primarily due to an increase in accounts receivable and a decrease in accounts payable, partially offset by a decrease in inventory. The increase in accounts receivable was primarily attributable to an increase in business volume. The decrease in inventory was primarily due to our efforts to reduce inventory to more appropriate levels by working with customers to ensure their demand forecasts are reasonable and incorporate the appropriate lead times to secure materials. The decrease in accounts payable was primarily attributable to lower inventory receipts.

Previous wording

Net cash used in investing activities was $65 million and $101 million for the six months ended March 30, 2024 and April 1, 2023, respectively, primarily related to cash for capital expenditures.

Current wording

Net cash used in investing activities was $88 million and $154 million for the nine months ended June 29, 2024 and July 1, 2023, respectively, primarily related to cash for capital expenditures.

Previous wording

Net cash provided by (used in) financing activities was $(150) million and $186 million for the six months ended March 30, 2024 and April 1, 2023, respectively. During the six months ended March 30, 2024, we used $133 million of cash to repurchase common stock (including $25 million paid to applicable tax authorities in connection with these repurchases) and repayment of $17 million of borrowings. During the six months ended April 1, 2023, we received $216 million from sale of shares to Reliance Strategic Business Ventures Limited (“RSBVL”), used $22 million of cash to repurchase common stock primarily related to employee tax withholding on vested restricted stock units and repaid $9 million of long-term debt.

Current wording

Net cash provided by (used in) financing activities was $(209) million and $121 million for the nine months ended June 29, 2024 and July 1, 2023, respectively. During the nine months ended June 29, 2024, we used $189 million of cash to repurchase common stock (including $26 million paid to applicable tax authorities in connection with these repurchases) and repayment of $22 million of borrowings. During the nine months ended July 1, 2023, we received $216 million from the sale of shares to Reliance Strategic Business Ventures Limited, used $74 million of cash to repurchase common stock (including $26 million related to employee tax withholding on vested restricted stock units), repaid $13 million of long-term debt and paid a final payment of $9 million in connection with a previous business combination.

Previous wording

During the six months ended March 30, 2024 and April 1, 2023, we repurchased 2 million and 4 thousand shares of our common stock for $107 million and $0.2 million, respectively, under stock repurchase programs authorized by the Board of Directors. These programs have no expiration dates and the timing of repurchases will 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, they also reduce our liquidity. As of March 30, 2024, an aggregate of $172 million remained available under these programs.

Current wording

During the nine months ended June 29, 2024 and July 1, 2023, we repurchased 3 million and 1 million shares of our common stock for $162 million and $51 million, respectively, under stock repurchase programs authorized by the Board of Directors. These programs have no expiration dates and the timing of repurchases will 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, they also reduce our liquidity. As of June 29, 2024, an aggregate of $118 million remained available under these programs.

Previous wording

We are party to a Receivables Purchase Agreement (the “RPA”) with certain third-party banking institutions for the sale of trade receivables generated from sales to certain customers. The amount available under the RPA is uncommitted and, as such, is available at the discretion of our third-party banking institutions. Under the Fifth Amended and Restated Credit Agreement (the “Credit Agreement”), the percentage of our total accounts receivable that can be sold and outstanding at any time is 50%. Therefore, as of March 30, 2024, a maximum of $450 million of sold receivables could be outstanding at any point in time under this program, as amended, as required by our Credit Agreement. Trade receivables sold pursuant to the RPA are serviced by us.

Current wording

We are party to a Receivables Purchase Agreement, as amended (the “RPA”), with certain third-party banking institutions for the sale of trade receivables generated from sales to certain customers. The amount available under the RPA is uncommitted and, as such, is available at the discretion of our third-party banking institutions. Under the Fifth Amended and Restated Credit Agreement (the “Credit Agreement”), the percentage of our total accounts receivable that can be sold and outstanding at any time is 50%. Therefore, as of June 29, 2024, a maximum of $490 million of sold receivables could be outstanding at any point in time under this program, as amended, as required by our Credit Agreement. Trade receivables sold pursuant to the RPA are serviced by us.

Previous wording

Under each of the programs noted above, we sell our entire interest in a trade receivable for 100% of face value, less a discount. During the six months ended March 30, 2024 and April 1, 2023, we sold approximately $797 million and $1.7 billion, respectively, of accounts receivable under these programs. As of March 30, 2024 and September 30, 2023, $144 million and $162 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 March 30, 2024 and September 30, 2023, $8 million and $33 million, respectively, had been collected but not yet remitted. This amount is classified in accrued liabilities on the condensed consolidated balance sheets.

Current wording

Under each of the programs noted above, we sell our entire interest in a trade receivable for 100% of face value, less a discount. During the nine months ended June 29, 2024 and July 1, 2023, we sold approximately $1 billion and $2 billion, respectively, of accounts receivable under these programs. As of June 29, 2024 and September 30, 2023, $127 million and $162 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 June 29, 2024 and September 30, 2023, $7 million and $33 million, respectively, had been collected but not yet remitted. This amount is classified in accrued liabilities on the condensed consolidated balance sheets.

Previous wording

We enter into forward interest rate swap agreements with independent counterparties to partially hedge the variability in cash flows due to changes in the Secured Overnight Financing Rate benchmark interest rate associated with anticipated variable rate borrowings. See Note 3, “Financial Instruments” of the notes to Condensed Consolidated Financial Statements contained in this report for details.

Current wording

We enter into forward interest rate swap agreements with independent counterparties to partially hedge the variability in cash flows due to changes in the Secured Overnight Financing Rate benchmark interest rate associated with anticipated variable rate borrowings. See Note 3, “Financial Instruments” of the notes to the Condensed Consolidated Financial Statements contained in this report for details.

Previous wording

In the ordinary course of business, we are or may become party to legal proceedings, claims and other contingencies, including environmental, regulatory, warranty and employee matters and examinations by government agencies. As of March 30, 2024, we had accrued liabilities of $40 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.

Current wording

In the ordinary course of business, we are or may become party to legal proceedings, claims and other contingencies, including environmental, regulatory, warranty and employee matters and examinations by government agencies. As of June 29, 2024, we had accrued liabilities of $37 million related to such matters. We cannot accurately predict the outcome of these matters or the amount or timing of cash flows that may be required to defend ourselves or to settle such matters or that these reserves will be sufficient to fully satisfy our contingent liabilities.

Previous wording

As of March 30, 2024, we had a liability of $54 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.

Current wording

As of June 29, 2024, we had a liability of $51 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.

Previous wording

Our liquidity is largely dependent on changes in our working capital, including sales of accounts receivable under our receivables sales programs and the extension of trade credit by our suppliers, investments in manufacturing inventory, facilities and equipment, repayments of obligations under outstanding indebtedness and repurchases of common stock. We generated $198 million of cash from operations for the six months ended March 30, 2024. Our primary sources of liquidity as of March 30, 2024 consisted of (1) cash and cash equivalents of $651 million (an aggregate of $210 million of our cash is held by Sanmina SCI India Private Limited (“SIPL”), our existing Indian manufacturing entity, that may not be used for general corporate purposes and must be retained in SIPL to fund its operations); (2) our Credit Agreement, under which $787 million, net of outstanding borrowings and letters of credit, was available; (3) our foreign short-term borrowing facilities of $71 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 revolving commitments under the Credit Agreement up to an additional $200 million.

Current wording

Our liquidity is largely dependent on changes in our working capital, including sales of accounts receivable under our receivables sales programs and the extension of trade credit by our suppliers, investments in manufacturing inventory, facilities and equipment, repayments of obligations under outstanding indebtedness and repurchases of common stock. We generated $288 million of cash from operations for the nine months ended June 29, 2024. Our primary sources of liquidity as of June 29, 2024 consisted of (1) cash and cash equivalents of $658 million (an aggregate of $188 million of our cash is held by Sanmina SCI India Private Limited (“SIPL”), our existing Indian manufacturing entity, that may not be used for general corporate purposes and must be retained in SIPL to fund its operations); (2) our Credit Agreement, under which $786 million, net of outstanding borrowings and letters of credit, was available; (3) our foreign short-term borrowing facilities of $71 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 revolving commitments under the Credit Agreement up to an additional $200 million.

Previous wording

As of March 30, 2024, 31% 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 Credit Agreement 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.

Current wording

As of June 29, 2024, 35% 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 Credit Agreement 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.