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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the fiscal year ended September 30, 1996.
or
/ / 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)
Delaware 77-0228183
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
355 East Trimble Road, San Jose, CA 95131
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (408) 435-8444
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of class)
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 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 X No
Indicate by check mark if disclosures of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate value of voting stock held by non-affiliates of the
Registrant was approximately $664,082,000 as of September 30, 1996, based upon
the average of the high and low prices of the Registrant's Common Stock reported
for such date on the Nasdaq National Market. Shares of Common Stock held by each
executive officer and director and by each person who owns 10% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. The determination of affiliate status is not necessarily a
conclusive determination for other purposes. As of September 30, 1996, the
Registrant had outstanding 16,889,923 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information is incorporated into Part III of this report by
reference to the Proxy Statement for the Registrant's 1996 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. Certain information is incorporated into Parts II and IV of
this report by reference to the Registrant's annual report to stockholders for
the year ended September 30, 1996.
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PART I
ITEM 1. BUSINESS
THE COMPANY
Sanmina Corporation ("Sanmina" or the "Company") is a leading
independent provider of customized integrated electronics manufacturing services
("EMS"), including turnkey electronic assembly and manufacturing management
services, to original equipment manufacturers ("OEMs") in the electronics
industry. Sanmina's electronic manufacturing services consist primarily of the
manufacture of complex printed circuit board assemblies using surface mount
("SMT") and pin through-hole ("PTH") interconnection technologies, the
manufacture of custom designed backplane assemblies, fabrication of complex
multi-layer printed circuit boards, and testing and assembly of completed
systems. In addition to assembly, turnkey manufacturing management also involves
procurement and materials management, as well as consultation on printed circuit
board design and manufacturability. Sanmina, through its Golden Eagle Systems
("Golden Eagle") subsidiary, which was acquired in January 1996, also
manufactures custom cable assemblies for electronics industry OEMs.
SMT and PTH printed circuit board assemblies are printed circuit
boards on which various electronic components, such as integrated circuits,
capacitors, microprocessors and resistors have been mounted. These assemblies
are key functional elements of many types of electronic products. Backplane
assemblies are large printed circuit boards on which connectors are mounted to
interconnect printed circuit boards, integrated circuits and other electronic
components. Interconnect products manufactured by Sanmina generally require
greater manufacturing expertise and have shorter delivery cycles than mass
produced interconnect products and therefore typically have higher profit
margins.
Sanmina's customers include leading OEMs in the telecommunications,
networking (data communications), industrial and medical instrumentation and
computer systems sectors. Sanmina's manufacturing and assembly plants are
located in Northern California, Richardson, Texas, Manchester, New Hampshire,
Raleigh, North Carolina, Guntersville, Alabama and Guaymas, Mexico. Golden
Eagle's manufacturing facility is located in Carrollton, Texas. Sanmina plans to
expand its operations internationally with the opening of an EMS facility in the
Dublin, Ireland area. Sanmina expects to open this facility in the first half of
calendar 1997.
Sanmina was formed in 1989 by Morgan Stanley Venture Capital Fund L.P.
to acquire the printed circuit board and backplane operations of its predecessor
company, which has been in the printed circuit board and backplane business
since 1980. Sanmina's principal offices are located at 355 East Trimble Road,
San Jose, California 95131. Sanmina's telephone number is (408) 435-8444.
Sanmina and the Sanmina logo are trademarks of the Company. Trademarks
of other corporations are also referred to in this report.
This Report on Form 10-K contains certain forward looking statements
regarding future events with respect to the Company. Actual events and/or future
results operations may differ materially as a result of the factors described
herein and in the documents incorporated herein by reference, including, in
particular, those factors described under "Factors Affecting Operating Results."
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INDUSTRY OVERVIEW
Sanmina is benefiting from increased market acceptance of the use of
manufacturing specialists in the electronics industry. Many electronics OEMs
have adopted and are becoming increasingly reliant upon manufacturing
outsourcing strategies, and Sanmina believes the trend towards outsourcing
manufacturing will continue. Electronics industry OEMs use EMS specialists for
many reasons including the following:
Reduce Time to Market. Due to intense competitive pressures in the
electronics industry, OEMs are faced with increasingly shorter product
life-cycles and therefore have a growing need to reduce the time required to
bring a product to market. OEMs can reduce their time to market by using a
manufacturing specialist's established manufacturing expertise and
infrastructure.
Reduce Capital Investment. As electronic products have become more
technologically advanced, the manufacturing process has become increasingly
automated, requiring a greater level of investment in capital equipment.
Manufacturing specialists enable OEMs to gain access to advanced manufacturing
facilities, thereby reducing the OEMs' overall capital equipment requirements.
Focus Resources. Because the electronics industry is experiencing
greater levels of competition and more rapid technological change, many OEMs
increasingly are seeking to focus their resources on activities and technologies
in which they add the greatest value. By offering comprehensive electronic
assembly and turnkey manufacturing services, manufacturing specialists allow
OEMs to focus on core technologies and activities such as product development,
marketing and distribution.
Access Leading Manufacturing Technology. Electronic products and
electronics manufacturing technology have become increasingly sophisticated and
complex, making it difficult for OEMs to maintain the necessary technological
expertise in process development and control. OEMs are motivated to work with a
manufacturing specialist in order to gain access to the specialist's process
expertise and manufacturing know-how.
Improve Inventory Management and Purchasing Power. Electronics
industry OEMs are faced with increasing difficulties in planning, procuring and
managing their inventories efficiently due to frequent design changes, short
product life cycles, large investments in electronic components, component price
fluctuations and the need to achieve economies of scale in materials
procurement. By using a manufacturing specialist's volume procurement
capabilities and expertise in inventory management, OEMs can reduce production
and inventory costs.
Access Worldwide Manufacturing Capabilities. OEMs are increasing their
international activities in an effort to lower costs and access foreign markets.
Manufacturing specialists with worldwide capabilities are able to offer such
OEMs a variety of options on manufacturing locations to better address their
objectives regarding cost, shipment location, frequency of interaction with
manufacturing specialists and local content requirements of end-market
countries.
The total estimated 1996 market for the EMS industry is $24.8 billion
for the United States and Canada. Sanmina primarily markets its manufacturing
services to electronics industry OEMs in the United States and Canada. The
United States EMS industry is highly fragmented, with several large
manufacturers with over $500 million in annual revenues, and numerous other
manufacturers with annual revenues from under $10 million to several hundred
million dollars. Industry sources estimate that the United States sales of
backplane assemblies and printed circuit boards in 1996 were $1.3 billion and
$6.8 billion respectively, and approximately 40% of backplane assemblies and 20%
of printed circuit boards were accounted for by OEM in-house ("captive")
production. In addition, industry sources estimate that the total merchant
market for custom cable and wiring harness assemblies is $6.2 billion.
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Beginning in the first half of calendar 1997, Sanmina is expected to begin
marketing and providing electronic manufacturing services in Ireland. The market
for these products will include Western Europe, and the total EMS market for
Western Europe in 1996 was estimated at $8.5 billion.
SANMINA BUSINESS STRATEGY
Sanmina's objective is to provide OEMs with a total EMS solution.
Sanmina's strategy encompasses several key elements:
- Concentrate on high value added products and services for
leading OEMs. Sanmina focuses on leading manufacturers of
advanced electronic products that generally require
custom-designed, more complex interconnect products and short
lead-time manufacturing services. By focusing on complex
interconnect products and manufacturing services for leading
OEMs, Sanmina is able to realize higher margins than many
other participants in the interconnect and EMS industries.
- Leverage vertical integration. Building on its integrated
manufacturing capabilities, Sanmina can provide its customers
with a broad range of high value added manufacturing services
from fabrication of bare boards to final system assembly and
test. The cable assembly capabilities of Golden Eagle provide
Sanmina with further opportunities to leverage its vertical
integration. By manufacturing printed circuit boards and
custom cable assemblies used in its EMS assemblies, Sanmina,
through its vertical integration, is able to provide greater
value added and realize additional manufacturing margin. In
addition, Sanmina's vertical integration provides it with
greater control over quality, delivery and cost, and enables
the Company to offer its customers a complete EMS solution.
- Focus on high growth customer sectors. Sanmina has focused its
marketing efforts on key, fast growing industry sectors.
Sanmina's customers include leading OEM companies in
telecommunications, networking (data communications),
industrial and medical instrumentation and high-end computer
systems. Sales efforts will focus on increasing penetration of
its existing customer base as well as attracting new
customers, thus diversifying its revenue across a wider base.
- Geographic expansion of manufacturing facilities. Sanmina has
significantly expanded and upgraded its operations through the
October 1993 opening of its Richardson, Texas facility, which
doubled the Company's backplane production capacity, the
October 1994 acquisition of a state-of-the-art contract
manufacturing plant in San Jose, the January 1996 opening of
Sanmina's new contract manufacturing facility in Manchester,
New Hampshire, the March 1996 opening of Sanmina's new EMS
facility in Raleigh, North Carolina and the November 1996
acquisition of the former Comptronix Corporation contract
manufacturing facilities located in Guntersville, Alabama and
Guaymas, Mexico. These facilities provide the Company with
operations in key geographic markets for the electronics
industry. In the first half of calendar 1997, Sanmina plans to
open an EMS facility in the Dublin, Ireland area to serve
customers in the European market. Sanmina will continue to
aggressively and opportunistically pursue future expansion
opportunities in other markets.
- Aggressive pursuit of acquisition opportunities. Sanmina's
strategy involves the pursuit of business acquisition
opportunities, particularly when these opportunities have the
potential to enable Sanmina to increase its net sales while
maintaining operating margin, access new geographic markets,
implement Sanmina's vertical integration strategy and/or
obtain facilities and equipment
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on terms more favorable than those generally available in the
market. This strategy led to the acquisitions of Sanmina's San
Jose EMS operations, Manchester and Guntersville EMS
operations and Sanmina's custom cable operations through its
acquisition of Golden Eagle. In addition, in November 1996,
Sanmina acquired certain assets of the custom manufacturing
services division of Lucent Technologies, including equipment,
customer contracts and inventory. This acquisition provides
Sanmina with several new key customer accounts as well as with
equipment that will be moved to various Sanmina facilities.
Sanmina intends to continue to evaluate acquisition
opportunities on a ongoing basis.
- Develop long-term customer relationships. Sanmina seeks to
establish "partnerships" with its customers by focusing on
state-of-the-art technology, quick-turnaround manufacturing
and comprehensive management support for materials and
inventory. Sanmina also works closely with its customers to
help them manage their manufacturing cycle and reduce their
time to market. While Sanmina will continue to emphasize
growth with its current customers, it has been successful in
attracting new clients. To further these efforts, the Company
intends to continue to expand its direct sales staff. Sanmina
believes its direct sales force is one of its key competitive
advantages.
- Extend technology leadership. Today Sanmina can provide
services from the fabrication of circuit boards to complete
system assemblies. In providing these services, Sanmina uses a
variety of processes and technologies. Sanmina strives for
continuous improvement of its processes and has adopted a
number of quality improvement and measurement techniques to
monitor its performance. Sanmina has also made significant
capital expenditures during fiscal 1996 to upgrade plant and
equipment at its facilities. Sanmina intends to stay on the
leading edge of technology development and will evaluate new
interconnect and packaging technologies as they emerge.
CUSTOMERS, MARKETING AND SALES
Sanmina's customers include a diversified base of OEMs in the
telecommunications, networking (data communications), industrial and medical
instrumentation and computer systems segments of the electronics industry. The
following table shows the estimated percentage of Sanmina's fiscal 1996 sales in
each of these segments.
<TABLE>
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Telecommunications -- 56%
Networking (Data Communications) -- 20%
Industrial and Medical Instrumentation -- 19%
Computer Systems -- 5%
</TABLE>
Sanmina develops relationships with its customers and markets its
manufacturing services through a direct sales force augmented by a network of
manufacturers' representative firms and a staff of in-house customer support
specialists. Sanmina's sales resources are directed at multiple management and
staff levels within target accounts. Sanmina's direct sales personnel work
closely with the customers' engineering and technical personnel to better
understand their requirements. Sanmina's manufacturers' representatives are
managed by the Company's direct sales personnel, rather than from corporate
headquarters, in order to provide for greater accountability and responsiveness.
The Company has also expanded its customer base through acquisitions.
In particular, the acquisition of the Comptronix Guntersville, Alabama
operations and certain assets of the former custom manufacturing services
division of Lucent Technologies provided the Company with several new key
customer accounts with significant growth potential.
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Historically, Sanmina has had substantial recurring sales from
existing customers. Sanmina also conducts advertising and public relations
activities, as well as receiving referrals from current customers.
Although Sanmina seeks to diversify its customer base, a small number
of customers are responsible for a significant portion of the Company's net
sales. In fiscal 1996 and fiscal 1995, DSC Communications and Alcatel each
accounted for more than 10% of Sanmina's net sales. In addition, during fiscal
1996 and 1995, Sanmina's ten largest customers accounted for approximately 65%
and 67%, respectively, of Sanmina's net sales. Although there can be no
assurance that the Company's principal customers will continue to purchase
products and services from the Company at current levels, if at all, the Company
expects to continue to depend upon its principal customers for a significant
portion of its net sales. The Company's customer concentration could increase or
decrease, depending on future customer requirements, which will be dependent in
large part on market conditions in the electronics industry segments in which
the Company's customers participate. The loss of one or more major customers or
declines in sales to major customers could have a material adverse effect on
Sanmina's business, financial condition and results of operations.
MANUFACTURING SERVICES
Sanmina specializes in manufacturing complex printed circuit board
assemblies, backplane assemblies and printed circuit boards that are used in the
manufacture of sophisticated electronic equipment. Sanmina had been
manufacturing backplane assemblies since 1981 and, in October 1993, Sanmina
began providing electronic assembly and turnkey manufacturing management
services including the assembly and testing of sophisticated electronic systems.
For fiscal 1996, approximately 92% of Sanmina's net sales consisted of assembly
revenues and approximately 8% of Sanmina's net sales consisted of printed
circuit boards. Assembly revenues are sales derived from shipments to Sanmina's
customers from one of Sanmina's value added assembly facilities and includes the
value of the printed circuit board which is, in most cases, manufactured at one
of the Company's printed circuit board facilities. Printed circuit board
revenues are sales derived from shipments directly to Sanmina's customers from
one of Sanmina's printed circuit board facilities.
Sanmina seeks to establish "partnerships" with its customers by
providing a responsive, flexible total manufacturing services solution. These
services include computer integrated manufacturing ("CIM") and engineering
services, quick-turnaround manufacturing and prototype and reproduction
interconnect products and materials procurement and management. CIM services
provided by Sanmina consist of developing manufacturing processes, tooling and
test sequences for new products from product designs received from customers.
Sanmina also evaluates customer designs for manufacturability and test, and,
when appropriate, recommends design changes to reduce manufacturing cost or lead
times or to increase manufacturing yields and the quality of the finished
product. Once engineering is completed, Sanmina manufactures prototype or
preproduction versions of that product on a quick-turnaround basis. Sanmina
expects that the demand for engineering and quick-turnaround prototype and
preproduction manufacturing services will increase as OEMs' products become more
complex and as product life cycles shorten. Materials procurement and handling
services provided by Sanmina include planning, purchasing, warehousing and
financing of electronic components and enclosures used in the assemblies and
systems.
Prices of Sanmina's SMT or PTH assemblies, backplane assemblies,
printed circuit board assemblies, cable assemblies or systems vary depending
upon their size and complexity, the specified manufacturing turnaround time, the
extent of design and engineering services provided by the Company, the market
for the various electronic components used and the quantity ordered. These
prices of SMT and PTH assemblies, backplane assemblies, and systems typically
range from several hundred dollars to several thousand dollars per unit. Prices
of printed circuit boards manufactured by Sanmina typically range from several
dollars to $7,000 per unit. Prices of custom cable assemblies manufactured by
Sanmina typically range from several dollars to $1,000 per unit.
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MANUFACTURING AND ENGINEERING
Facilities
Sanmina manufactures its products in 12 decentralized plants,
consisting of eight assembly facilities and four printed circuit board
fabrication facilities. Generally, each of Sanmina's decentralized plants have
their own production, purchasing, and materials management and quality
capabilities located on site. The production expertise of some plants overlaps,
which enables Sanmina to allocate production based on product type and available
capacity at one or more plants. With assembly facilities located in major
electronics industry centers throughout the country, including Silicon Valley,
the Dallas-Forth Worth area, the Research Triangle area, New England and
northern Alabama, Sanmina is also able to allocate production based on
geographic proximity to the customer, process capabilities and available
capacity. Sanmina believes that this flexible approach differs from that of its
competition. Decentralized plants can focus on particular product types and
respond quickly to customers' specific requirements. Sanmina believes that
decentralized facilities also allow it to achieve improved accountability,
quality control and cost control. Each plant is managed as a separate profit
center, and each plant manager's compensation depends, in part, upon that plant
meeting quality, shipment and gross profit targets.
Sanmina has pursued a strategy of expanding the capacity and
geographic scope of its assembly capability in order to position itself to serve
electronics industry OEMs in key geographic markets. In October 1993, Sanmina
established a backplane assembly operation in Richardson, Texas in order to
better serve major customers in the Dallas-Forth Worth area, and in 1995,
Sanmina expanded its operation in Texas by doubling the production capacity of
such facility. In October 1994, the Company acquired a 100,000 square foot,
state-of-the-art contract assembly facility in San Jose, California. This
facility in San Jose now serves as the cornerstone of Sanmina's Northern
California assembly operations. Following the acquisition, a smaller assembly
operation was consolidated with, and the Company's corporate headquarters were
moved to, this facility in San Jose. In June 1995, Sanmina acquired a contract
assembly company in Manchester, New Hampshire in order to address the New
England market, and in January 1996, these operation were moved into a new,
72,000 square foot state-of-the-art assembly facility built to the Company's
specifications.
In January 1996, Sanmina acquired Golden Eagle Systems which gave the
Company a value added custom cable and wiring harness facility in Carrollton,
Texas. In the first quarter of fiscal 1997, Sanmina expanded the custom cable
operations of Golden Eagle by purchasing a 72,000 square foot facility in
Carrollton. Sanmina expects to move into this new facility in January 1997. In
November 1996, Sanmina acquired the Guntersville, Alabama and Guaymas, Mexico
assembly facilities and operation of Comptronix Corporation. This acquisition
provides the Company with manufacturing operations in the Huntsville, Alabama
area, a major center of electronics industry activity. The Guaymas, Mexico
facility provides Sanmina with operations in a lower-cost environment than
Sanmina's other facilities. The acquisition also provides Sanmina with several
significant new customers.
In the first half of calendar 1997, Sanmina expects to open its first
overseas EMS facility, which will be located near Dublin, Ireland.
Manufacturing Processes
Sanmina produces complex, technologically advanced SMT and PTH
assemblies, backplane assemblies and multilayer printed circuit boards, custom
cable assemblies and full systems that meet increasingly tight tolerances and
specifications demanded by OEMs. Multilayering, which involves placing multiple
layers of electrical circuitry on a single printed circuit board or backplane,
expands the number of circuits and components that can be contained on the
interconnect product and increases the operating speed of the system by reducing
the distance that electrical
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signals must travel. Increasing the density of the circuitry in each layer is
accomplished by reducing the width of the circuit tracks and placing them closer
together on the printed circuit board or backplane. Interconnect products having
narrow, closely spaced circuit tracks are known as "fine line" products. Today,
Sanmina and other industry leaders are capable of efficiently producing
commercial quantities of printed circuit boards with up to 36 layers and circuit
track widths as narrow as three mils. The manufacture of complex multilayer
interconnect products often requires the use of sophisticated circuit
interconnections between certain layers (called "blind or buried vias") and
adherence to strict electrical characteristics to maintain consistent circuit
transmission speeds (referred to as "controlled impedance"). These technologies
require very tight lamination and etching tolerances and are especially critical
for printed circuit boards with ten or more layers.
The manufacture of printed circuit boards involves several steps:
etching the circuit image on copper-clad epoxy laminate, pressing the laminates
together to form a panel, drilling holes and depositing copper or other
conductive material to form the inter-layer electrical connections and, lastly,
cutting the panels to shape. Certain advanced interconnect products require
additional critical steps, including dry film imaging, photoimageable soldermask
processing, computer controlled drilling and routing, automated plating and
process controls and achievement of controlled impedance. Manufacture of printed
circuit boards used in backplane assemblies requires specialized expertise and
equipment because of the larger size of the backplane relative to other printed
circuit boards and the increased number of holes for component mounting.
The manufacture of SMT and PTH assemblies involves the attachment of
various electronic components, such as integrated circuits, capacitors,
microprocessors and resistors to printed circuit boards. The manufacture of
backplane assemblies involves attachment of electronic components, including
printed circuit boards, integrated circuits and other components, to the
backplane, which is a large printed circuit board manufactured by Sanmina.
Sanmina uses SMT, PTH and press-fit technologies in backplane assembly.
Ten of Sanmina's manufacturing facilities are certified under ISO
9002, a set of standards published by the International Organization of
Standardization and used to document, implement and demonstrate quality
management and assurance systems in design and manufacturing. As part of the ISO
9002 certification process, the Company has developed a quality systems manual
and an internal system of quality controls and audits. Although ISO 9002
certification is of particular importance to the companies doing business in the
European Community, Sanmina believes that United States electronics
manufacturers are increasing their use of ISO 9002 registration as a criteria
for suppliers.
In addition to ISO 9002 certification, Sanmina is BellCore, British
Approval Board for Telecommunications ("BABT") and Underwriters Laboratories
("UL") compliant. These qualifications establish standards for quality,
manufacturing process control and manufacturing documentation and are required
by many OEMs in the electronics industry, including suppliers to AT&T and the
Regional Bell Operating Companies.
The Company orders materials and components based on purchase orders
received and accepted and seeks to minimize its inventory of materials or
components that are not identified for use in filling specific orders. Materials
used in manufacturing printed circuit boards are readily available in the open
market and the Company has not to date experienced any significant shortages of
such materials. Electronic components used by Sanmina in producing SMT and PTH
assemblies and its backplane assemblies are purchased by Sanmina and, in certain
circumstances, it may be required to bear the risk of component price
fluctuations. In addition, shortages of certain types of electronic components
have occurred in the past and may occur in the future. Component shortages or
price fluctuations could have an adverse effect on the Company's SMT and PTH
assemblies and its backplane assembly business, thereby adversely affecting the
Company's results of operations. Due to the continued expansion of the Company's
contract manufacturing and backplane assembly businesses as a percentage of the
Company's net sales, component shortages
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and price fluctuations would adversely affect the Company's results of
operations to a greater extent than in prior fiscal years.
Technology Development
Sanmina's close involvement with its customers at the early stages of
their product development positions it at the leading edge of technical
innovation in the manufacturing of SMT and PTH assemblies, backplane assemblies,
and printed circuit boards. Sanmina selectively seeks orders that require the
use of state-of-the-art materials or manufacturing techniques in order to
further develop its manufacturing expertise. Current areas of manufacturing
process development include reducing circuit widths and hole sizes, establishing
new standards for particle contamination and developing new manufacturing
processes for the use with new materials and new surface mount connector and
component designs.
Recent developments in the electronics industry have necessitated
improvements in the types of laminate used in the manufacture of interconnect
products. New laminate materials may contain new chemical formulations to
achieve better control of flow, resin systems with high glass transition
temperatures, reduced surface imperfections and greatly improved dimensional
stability. Future generations of interconnect products will require ultra fine
lines, multilayers of much greater complexity and thickness, and extremely small
holes in the 4 to 10 mil range. The materials designed to meet these
requirements, such as BT epoxy, cyanate esters, polyamide quartz, and Kevlar
epoxy, are beginning to appear in the marketplace. Widespread commercial use of
these materials will depend upon statistical process control and improved
manufacturing procedures to achieve the required yields and quality.
Sanmina holds no patents. Sanmina believes that patents are not
important competitive factors in its market.
ENVIRONMENTAL CONTROLS
Proper waste disposal is a major consideration for printed circuit
board manufacturers because metals and chemicals are 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 the municipal sanitary sewer system. Maintenance of
environmental controls is also important in the electronics assembly process,
notwithstanding the fact that these processes generate significantly less
wastewater than the printed circuit board fabrication process. Each of Sanmina's
printed circuit board and electronics assembly plants has personnel responsible
for monitoring environmental compliance. These individuals report to Sanmina's
director of environmental compliance, who has overall responsibility for
environmental matters.
Each plant operates under effluent discharge permits issued by the
appropriate governmental authority. These permits must be renewed periodically
and are subject to revocation in the event of violations of environmental laws.
The Company believes that the waste treatment equipment in all of its plants is
currently in compliance with environmental protection requirements in all
material respects. However, there can be no assurance that violation will not
occur in the future as a result of human error, equipment failure or other
causes. In the event of a future violation of environmental laws, the Company
could be held liable for damages and for the costs of remedial actions and could
be also subject to revocation of effluent discharge permits. Any such revocation
could require the Company to cease or limit production at one or more of its
facilities, thereby having an adverse impact on the Company's results of
operations. Sanmina is also subject to environmental laws relating to the
storage, use and disposal of chemicals, solid waste and other hazardous
materials as well as air quality regulations. Furthermore, environmental laws
could become more stringent over time, and the costs of compliance with and
penalties associated with violation of more stringent laws could be substantial.
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BACKLOG
Sanmina's backlog was $100.3 million at September 30, 1996 and $59.1
million at September 30, 1995. Backlog consists of purchase orders received by
the Company, including, in certain instances, forecast requirements released for
production under customer contracts. Cancellation and postponement charges
generally vary depending upon the time of cancellation or postponement, and a
certain portion of the Company's backlog may be subject to cancellation or
postponement without significant penalty. Typically, approximately 70% of the
Company's backlog is scheduled for delivery within 120 days.
COMPETITION
Significant competitive factors in the market for advanced backplane
assemblies and printed circuit boards include product quality, responsiveness to
customers, manufacturing and engineering skills, and price. Sanmina believes
that competition in the market segments served by Sanmina is based more on
product quality and responsive customer service and support than on price, in
part because the cost of interconnect products manufactured by Sanmina is
usually low relative to the total cost of the equipment for which they are
components and in part because of the greater importance of product reliability
and prompt delivery to Sanmina's customers. Sanmina believes that its primary
competitive strengths are its ability to provide responsive, flexible, short
lead-time manufacturing services, its engineering and manufacturing expertise
and its customer service support.
Sanmina faces intense competition from a number of established
competitors in its various product markets. Certain of Sanmina's competitors
have greater financial and manufacturing resources than Sanmina, including
significantly greater SMT assembly capacity. During periods of recession in the
electronic industry, the Company's competitive advantages in the areas of
quick-turnaround manufacturing and responsive customer service may be of reduced
importance to electronics OEMs, who may become more price sensitive. In
addition, captive interconnect product manufacturers may seek orders in the open
market to fill excess capacity, thereby increasing price competition. Although
the Company generally does not pursue high-volume, highly price-sensitive
interconnect product business, it may be at a competitive disadvantage with
respect to price when compared to manufacturers with lower cost structures,
particularly those manufacturers with offshore facilities where labor and other
costs are lower.
EMPLOYEES
At September 30, 1996, Sanmina had 1,726 full-time employees,
including 1,624 in manufacturing and engineering, 56 in marketing and sales, and
46 in general administration and finance. None of Sanmina's employees is
represented by a labor union and Sanmina has never experienced a work stoppage
or strike. Sanmina believes its relationship with its employees is good.
The Company's success depends to a large extent upon the continued
services of key managerial and technical employees. The loss of such personnel
could have a material adverse effect on the Company. To date, the Company has
not experienced significant difficulties in attracting or retaining such
personnel. Although the Company is not aware that any of its key personnel
currently intend to terminate their employment, their future services cannot be
assured.
-10-
<PAGE> 11
FACTORS AFFECTING BUSINESS AND RESULTS OF OPERATIONS
In addition to the information set forth in this report on Form 10-K
and in the documents incorporated herein by reference, the following factors
should be carefully considered by prospective investors in the Company's
securities.
Dependence on Electronics Industry. Sanmina's customers are
manufacturers in the telecommunications, networking (data communications),
industrial and medical instrumentation and computer systems segments of the
electronics industry. These industry segments, and the electronics industry as a
whole, are subject to rapid technological change and product obsolescence.
Discontinuance or modification of products containing components manufactured by
the Company could adversely affect the Company's results of operations. The
electronics industry is also subject to economic cycles and has in the past
experienced, and is likely in the future to experience, recessionary periods. A
general recession in the electronics industry could have a material adverse
effect on Sanmina's business, financial condition and results of operations. The
Company typically does not obtain long-term volume purchase contracts from its
customers and has recently experienced reduced lead times in customer orders.
Nonetheless, customer orders may be canceled and volume levels may be changed or
delayed. The timely replacement of canceled, delayed or reduced contracts with
new business cannot be assured.
Factors Affecting Operating Results. The Company's results of
operations have varied and may continue to fluctuate significantly from period
to period, including on a quarterly basis. Operating results are affected by a
number of factors, including timing of orders from major customers, mix of
products ordered by and shipped to major customers, the volume of orders as
related to the Company's capacity, ability to effectively manage inventory and
fixed assets, timing of expenditures in anticipation of future sales, economic
conditions in the electronics industry and the mix of products between backplane
assemblies and printed circuit boards. Operating results can also be
significantly influenced by development and introduction of new products by the
Company's customers. From time to time, the Company experiences changes in the
volume of sales to each of its principal customers, and operating results may be
affected on a period-to-period basis by these changes. The Company's customers
generally require short delivery cycles, and a substantial portion of the
Company's backlog is typically scheduled for delivery within 120 days. Quarterly
sales and operating results therefore depend in large part on the volume and
timing of bookings received during the quarter, which are difficult to forecast.
The Company's backlog also affects its ability to plan production and inventory
levels, which could lead to fluctuations in operating results. In addition, a
significant portion of the Company's operating expenses are relatively fixed in
nature and planned expenditures are based in part on anticipated orders. Any
inability to adjust spending quickly enough to compensate for any revenue
shortfall may magnify the adverse impact of such revenue shortfall on the
Company's results of operations. Results of operations in any period should not
be considered indicative of the results to be expected for any future period,
and fluctuations in operating results may also result in fluctuations in the
price of the Company's Common Stock.
Competition and Technological Change. The electronic interconnect
product industry is highly fragmented and is characterized by intense
competition. Sanmina competes in the technologically advanced segment of the
interconnect product market, which is also highly competitive but is much less
fragmented than the industry as a whole. Sanmina's competitors consist primarily
of larger manufacturers of interconnect products, and some of these competitors
have greater manufacturing and financial resources than Sanmina as well as
greater SMT assembly capacity. As a participant in the interconnect industry,
Sanmina must continually develop improved manufacturing processes to accommodate
its customers' needs for increasingly complex products. During periods of
recession in the electronics industry, the Company's competitive advantages in
the areas of quick-turnaround manufacturing and responsive customer service may
be of reduced importance to electronics OEMs, who may become more price
sensitive. In addition, captive interconnect product manufacturers may seek
orders in the open market to fill excess
-11-
<PAGE> 12
capacity, thereby increasing price competition. Although the Company generally
does not pursue high-volume, highly price sensitive interconnect product
business, it may be at a competitive disadvantage with respect to price when
compared to manufacturers with lower cost structures, particularly those with
offshore facilities where labor and other costs are lower.
Risks Associated with Acquisitions and Expansions. Sanmina has, for
the past several fiscal years, pursued a strategy of growth. This growth has
come in part through acquisitions. These acquisitions have involved both
acquisitions of entire companies, such as the June 1995 acquisition of Assembly
Solutions in Manchester, New Hampshire and the January 1996 acquisition of
Golden Eagle, and acquisitions of selected assets, principally equipment,
inventory and customer contracts and, in certain cases, facilities or facility
leases. Such acquisitions include the November 1996 acquisitions of the
Guntersville, Alabama and Guaymas, Mexico operations of Comptronix Corporation
and certain assets of the custom manufacturing services division of Lucent
Technologies. In addition to these acquisitions, Sanmina has also grown its
operations through internal expansion, such as the opening of its Richardson,
Texas assembly facility, its Raleigh, North Carolina assembly facility and its
planned Dublin, Ireland assembly facility. Acquisitions of companies and
businesses and expansion of operations involves certain risks, including (i) the
potential inability to successfully integrate acquired operations and businesses
or to realize anticipated synergies, economies of scale or other value, (ii)
diversion of management's attention, (iii) difficulties in scaling up production
at new sites and coordinating management of operations at new sites and (iv)
loss of key employees of acquired operations. No assurance can be given that the
Company will not incur problems in integrating the former Lucent and Comptronix
operations acquired in November 1996 or any future acquisition, and there can be
no assurance that these acquisitions or any other future acquisition will result
in a positive contribution to the Company's results of operations. Furthermore,
there can be no assurance that the Company will realize value from any such
acquisition which equals or exceeds the consideration paid. In addition, there
can be no assurance that the Company will realize anticipated strategic and
other benefits from expansion of existing operations to new sites. Any such
problems could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, future acquisitions
by the Company may result in dilutive issuances of equity securities, the
incurrence of additional debt, large one-time write-offs and the creation of
goodwill or other intangible assets that could result in amortization expense.
These factors could have a material adverse effect on the Company's business,
financial condition and results of operations.
Risks Associated with International Operations. The Company intends to
open its first overseas facility, to be located in Dublin, Ireland, in the first
half of calendar 1997. A number of risks are inherent in international
operations and transactions. International sales and operations may be limited
or disrupted by the imposition of government controls, export license
requirements, political instability, trade restrictions, changes in tariffs, and
difficulties in staffing, coordinating communications among and managing
international operations. Additionally, the Company's business, financial
condition and results of operations may be adversely affected by fluctuations in
international currency exchange rates as well as increases in duty rates,
difficulties in obtaining export licenses, constraints on its ability to
maintain or increase prices, and competition. There can be no assurance that the
Company will realize the anticipated strategic benefits of its expansion in
Ireland or that the Company's Irish operations will contribute positively to the
Company's business, financial condition and results of operations. Furthermore,
difficulties encountered in scaling up production at the new Irish facility or
in coordinating the Company's United States and Irish operations, as well as any
failure of the Irish operations to realize anticipated revenue growth, could,
individually or in the aggregate, have a material adverse effect on the
Company's business, financial condition and results of operations.
Leverage and Subordination. On August 16, 1995, the Company issued
$86.25 million principal amount of 5.5% Convertible Subordinated Notes due on
August 15, 2002 (the "Notes") under an indenture dated August 15, 1995 (the
"Indenture") which increased Sanmina's ratio of long-term debt to total
capitalization. As a result of this
-12-
<PAGE> 13
indebtedness, the Company's principal and interest obligations have increased
substantially. The degree to which the Company is leveraged could adversely
affect the Company's ability to obtain additional financing for working capital,
acquisitions or other purposes and could make it more vulnerable to industry
downturns and competitive pressures. The Notes are convertible into Common
Stock, at the option of the Note holder, at a conversion price of $28.1925 per
share, subject to adjustments in certain events. The Notes are subordinated in
right of payment to all existing and future senior indebtedness of the Company.
The Indenture does not limit the amount of future indebtedness, including senior
indebtedness, that the Company can create, incur, assume or guarantee. By reason
of the subordination, the event of the Company's liquidation or dissolution,
holders of senior indebtedness may receive more, ratably, and holders of the
Notes may receive less, ratably, than the other creditors of the Company.
Possible Volatility of Note and Stock Price. The trading price of the
Notes and the Company's Common Stock could be subject to significant
fluctuations in response to variations in quarterly operating results,
developments in the electronics industry, general economic conditions, changes
in securities analysts' recommendations regarding the Company's securities and
other factors. In addition, the stock market in recent years has experienced
significant price and volume fluctuations which have affected the market prices
of technology companies and which have often been unrelated to or
disproportionately impacted by the operating performance of such companies.
These broad market fluctuations may adversely affect the market price of the
Common Stock and the Notes. In addition, volatility in the price of the
Company's Common Stock, changes in prevailing interest rates and changes in
perceptions of the Company's creditworthiness may in the future adversely affect
the price of the Notes.
ITEM 2. PROPERTIES
Sanmina's principal facilities comprise an aggregate of approximately
700,000 square feet. Except for the Company's 72,500 square foot Manchester, New
Hampshire facility and the newly acquired 72,000 square foot facility to be
occupied by the Company's Golden Eagle subsidiary, all of the facilities are
leased, and the leases for these facilities expire from 1997 through 2002. The
leases generally may be extended at the Company's option. In addition, the
Company's Guntersville, Alabama facilities are leased under leases with the
Guntersville, Alabama industrial development board. Under the leases, no rent is
payable and the facilities may be purchased by the Company for nominal
consideration at any time up to and including the expiration of the respective
terms of such leases. Sanmina has seven principal facilities located in the
greater San Jose, California area, with other facilities located in Richardson,
Texas, Manchester, New Hampshire, Guntersville, Alabama, Raleigh, North Carolina
and Guaymas, Mexico. Golden Eagle's facility, which is owned by the Company, is
located in Carrollton, Texas. In addition, Sanmina has entered into an agreement
to purchase a 50,000 square foot facility located in Dublin, Ireland, and
Sanmina expects to commence operations in such facility in the first half of
calendar 1997. See "Item 1 -- Manufacturing and Engineering -- Facilities."
Sanmina believes that its facilities are adequate to meet its
reasonably foreseeable requirements for at least the next two years. The Company
continually evaluates its expected future facilities requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently a party to any material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
-13-
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information required by this item is incorporated by reference to
page 16 of the Registrant's 1996 annual report to stockholders under the caption
"quarterly results."
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The information required by this item is incorporated by reference to
page 14 of the Registrant's 1996 annual report to stockholders under the caption
"Selected Consolidated Financial Data."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is incorporated by reference to
pages 12 through 19 of the Registrant's 1996 annual report to stockholders under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to
pages 21 through 29 of the Registrant's 1996 annual report to stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
-14-
<PAGE> 15
PART III
Certain information required by Part III is omitted from this Report
on Form 10-K in that the Registrant will file a definitive proxy statement
within 120 days after the end of its fiscal year pursuant to Regulation 14A with
respect to the 1997 Annual Meeting of Stockholders (the "Proxy Statement") to be
held January 31, 1997 and certain information included therein is incorporated
herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item relating to directors is
incorporated by reference to the information under the caption "Proposal No. 1
- -- Election of Directors" in the Proxy Statement.
The executive officers of the Registrant, who are elected by the board
of directors, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jure Sola 45 Chairman and Chief Executive Officer
Randy W. Furr 42 President and Chief Operating Officer and Acting Chief
Financial Officer
Eric Naroian 34 Vice President of Sales
Michael Sparacino 42 Vice President of Marketing
</TABLE>
Mr. Sola co-founded Sanmina in 1980 and initially held the position of
Vice President of Sales and was responsible for the development and growth of
the Company's sales organization. He became Vice President and General Manager
in October 1987 with responsibility for all manufacturing operations as well as
sales and marketing. Mr. Sola was elected President in October 1989 and has
served as Chairman of the Board and Chief Executive Officer since April 1991.
Mr. Sola relinquished the title of President when Mr. Furr was appointed to such
position in March 1996.
Mr. Furr joined Sanmina as Vice President and Chief Financial Officer
in August 1992. In March 1996, Mr. Furr was appointed President and Chief
Operating Officer. In addition, Mr. Furr is currently serving as Acting Chief
Financial Officer, although a search for a new Chief Financial Officer is
underway. From April to August 1992, Mr. Furr was Vice President and Chief
Financial Officer of Aquarius Systems Inc. North America ("ASINA"), a
manufacturer of personal computers. Prior to working at ASINA, he held numerous
positions in both financial and general management for General Signal
Corporation during a 13 year period, serving most recently as Vice President and
General Manager of General Signal Thinfilm Company. Mr. Furr is a Certified
Public Accountant.
Mr. Naroian joined Sanmina in August 1993 as the Western Regional
Sales Manager. From July 1987 to until joining Sanmina, Mr. Naroian was the Vice
President of Sales and Marketing at Sigma Circuits, Inc., a manufacturer of
electronic interconnect products. Mr. Naroian became Vice President of Sales for
the Company in February 1995.
-15-
<PAGE> 16
Mr. Sparacino joined Sanmina in December 1995 as Vice President of
Sales and Marketing. From December 1993 until joining Sanmina, Mr. Sparacino
served as Vice President of Sales and Marketing of Tanon Corporation, an
electronics contract manufacturing company. From 1984 until December 1993, Mr.
Sparacino held various sales, marketing and manufacturing management positions
with Solectron Corporation, serving most recently as Director of Sales.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to
the information under the caption "Executive Compensation" in the Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to
the information under the caption "Record Date and Stock Ownership" in the Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to
the information under the caption "Certain Transactions" in the Proxy Statement.
-16-
<PAGE> 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following Financial Statements of Sanmina
Corporation and Report of Independent Public
Accountants are incorporated by reference to pages 21
through 29 of the Registrant's 1996 annual report to
stockholders:
Report of Independent Public Accountants
Consolidated Balance Sheets, As of September
30, 1996 and 1995
Consolidated Statements of Operations, Years
Ended September 30, 1996, 1995 and 1994
Consolidated Statements of Stockholders'
Equity, Years Ended September 30, 1996, 1995
and 1994
Consolidated Statements of Cash Flows, Years
Ended September 30, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
2. Financial Statement Schedule
The following financial statement schedule of Sanmina
Corporation is filed as part of this report on Form
10-K and should be read in conjunction with the
Financial Statements of Sanmina Corporation
incorporated by reference herein:
Schedule II -- Valuation and Qualifying
Accounts
Report of Independent Public Accountants on
Schedule
All other schedules are omitted because they are not
applicable or the required information is shown in
the Financial Statements or the notes thereto.
3. Exhibits
Refer to (c) below.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K
during the fiscal quarter ended September 30, 1996.
-17-
<PAGE> 18
On November 15, 1996, the Company filed with the
Commission a report on Form 8-K relating to the
acquisition of the Guntersville, Alabama assets and
business of Comptronix Corporation. Pro forma financial
information relating to such transaction will be filed
with the Commission within the time frame prescribed by
Regulation S-X and the rules regarding reporting on
Form 8-K.
(c) Exhibits
Exhibit
Number Description
- --------------------------------------------------------------------------------
3.2 Restated Certificate of Incorporation of Registrant.
3.3(1) Bylaws of Registrant, as amended.
4.2(1) Specimen Stock Certificate.
10.4(1) Form of Indemnification Agreement.
10.2(4) Amended 1990 Incentive Stock Plan.
10.3(1) 1993 Employee Stock Purchase Plan.
10.9(k)(2) Amended and Restated Credit Agreement dated as of August 18,
1993 among Sanmina Corporation, Chemical Bank and other
lenders.
10.9(k)(a) Amendment dated July 27, 1995 to Amended and Restated Credit
Agreement dated August 18, 1993.
10.9(1)(2) Revolving Credit Note, $12,000,000.00, Chemical Bank.
10.10(1) Lease for premises at 2109 O'Toole Avenue, Suites A-E, San
Jose, California (Portion of Plant I).
10.11(1) Lease for premises at 2101 O'Toole Avenue, San Jose,
California (Portion of Plant I).
10.12(1) Lease for premises at 2539 Scott Boulevard, Santa Clara,
California (Plant III).
10.14(1) Lease for premises at 2060-2068 Bering Drive, San Jose,
California (Plant II).
10.15(1) Lease for premises at 4220 Business Center Drive, Fremont,
California (Plant V).
10.16(1) Lease for premises at McCarthy Boulevard, Milpitas,
California (Plant VI).
10.17(1) Lease for premises at 2121 O'Toole Avenue, San Jose,
California (Corporate Headquarters).
10.19(2) Lease for premises at 1250 American Parkway, Richards, Texas
(Plant VII).
-18-
<PAGE> 19
10.20(2) Lease for premises at 6453 Kaiser Drive, Fremont, California
(Plant VIII).
10.21(3) Asset Purchase Agreement dated September 28, 1994 between
Registrant and Comptronix Corporation.
10.22(4) Lease for premises at 355 East Trimble Road, San Jose,
California.
10.23(5) Stock Purchase Agreement dated May 31, 1995 between Sanmina
Corporation, Assembly Solutions, Inc. and the principal
stockholders of Assembly Solutions, Inc.
10.24(6) Indenture dated August 15, 1995 between Registrant and Norwest
Bank Minnesota, N.A. as Trustee.
10.25(7) Asset Purchase Agreement dated September 20, 1996 between
Registrant and Comptronix Corporation.
13 Annual Report to Stockholders.
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule
- --------------------------
(1) Incorporated by reference to the like-numbered exhibits previously
filed with Registrant's Registration Statement on Form S-1, No.
33-70700 filed with the Securities and Exchange Commission ("SEC") on
February 19, 1993.
(2) Incorporated by reference to the like-numbered exhibits previously
filed with Registrant's Registration Statement on Form S-1 No. 33-70700
filed with the SEC on October 22, 1993.
(3) Incorporated by reference to exhibit no. 2 previously filed with
Registrant's Report on Form 8-K filed with the SEC on October 28, 1994.
(4) Incorporated by reference to the like-numbered exhibits previously
filed with Registrant's Report on Form 10-K filed with the SEC on
December 29, 1994.
(5) Incorporated by reference to the like-numbered exhibit previously filed
with Registrant's Report on Form 10-Q filed with the SEC on July 31,
1995.
(6) Incorporated by reference to the like-numbered exhibit previously filed
with Registrant's Report on Form 10-K for the fiscal year ended
September 30, 1995.
(7) Incorporated by reference to exhibit 2 previously filed with the
Registrant's Report on Form 8-K filed with the SEC on November 15,
1996.
-19-
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SANMINA CORPORATION Date: December 23, 1996
By: /s/ JURE SOLA
------------------------------------
Jure Sola
Chairman and Chief Executive Officer
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Jure Sola and Randy W. Furr,
jointly and severally, his or her attorneys-in-fact, and each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ JURE SOLA Chairman, Chief Executive Officer December 23, 1996
- -------------------------- and Director (Principal Executive
Jure Sola Officer)
/s/ RANDY W. FURR President and Chief December 23, 1996
- -------------------------- Operating Officer, Acting
Randy W. Furr Chief Financial Officer (Principal
Financial and Accounting Officer)
/s/ NEIL BONKE Director December 23, 1996
- --------------------------
Neil Bonke
/s/ JOHN BOLGER Director December 23, 1996
- --------------------------
John Bolger
/s/ BERNARD VONDERSCHMITT Director December 23, 1996
- --------------------------
Bernard Vonderschmitt
</TABLE>
-20-
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SANMINA CORPORATION Date: December 23, 1996
By:
------------------------------------
Jure Sola
Chairman and Chief Executive Officer
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Jure Sola and Randy W. Furr,
jointly and severally, his or her attorneys-in-fact, and each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------- Chairman, Chief Executive Officer December 23, 1996
Jure Sola and Director (Principal Executive Officer)
- ------------------------- President and Chief December 23, 1996
Randy W. Furr Operating Officer, Acting
Chief Financial Officer (Principal
Financial and Accounting Officer)
- ------------------------- Director December 23, 1996
Neil Bonke
- ------------------------- Director December 23, 1996
John Bolger
- ------------------------- Director December 23, 1996
Bernard Vonderschmitt
</TABLE>
-20-
<PAGE> 22
Schedule II
SANMINA CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT
PERIOD EXPENSES DEDUCTIONS END OF PERIOD
------ -------- ---------- -------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts and
Returns
Fiscal year ended September 30, 1994 .... $353 $271 $-- $ 624
Fiscal year ended September 30, 1995 .... $624 $361 $56 $ 929
Fiscal year ended September 30, 1996 .... $929 $527 $38 $1,418
</TABLE>
S-1
<PAGE> 23
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Stockholders
of Sanmina Corporation:
We have audited in accordance with generally accepted auditing standards, the
financial statements included in Sanmina Corporation's annual report to
shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated October 23, 1996. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The schedule at Item
14(a)2 above is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
San Jose, California
October 23, 1996
S-2
<PAGE> 24
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
3.2 Restated Certificate of Incorporation of Registrant
13 Annual Report to Stockholders
21 Subsidiaries of the Registrant
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 3.2
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED
CERTIFICATE OF "SANMINA CORPORATION", FILED IN THIS OFFICE ON THE THIRTY-FIRST
DAY OF JANUARY, A.D. 1996, AT 4:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[STATE OF DELAWARE SEAL]
/s/ Edward J. Freel
-------------------------------
[SEAL] Edward J. Freel,
Secretary of State
AUTHENTICATION: 7819573
2195845 8100
960031438 DATE: 02-07-96
<PAGE> 2
RESTATEMENT OF THE RESTATED CERTIFICATE OF INCORPORATION
OF
SANMINA CORPORATION
Sanmina Corporation (formerly known as Sanmina Holdings, Inc.), a
corporation organized and existing under the laws of the State of Delaware,
hereby certifies that:
1. The name of the corporation is Sanmina Corporation. Sanmina
Corporation was originally incorporated under the name of Sanmina Holdings,
Inc., and the original Certificate of Incorporation was filed with the Secretary
of State of the State of Delaware on May 9, 1989.
2. This Certificate restates and amends the provisions of the Restated
Certificate of Incorporation of Sanmina Corporation to read as set forth in
Exhibit A attached to this Certificate.
3. This restatement and amendment of the Restated Certificate of
Incorporation of Sanmina Corporation has been duly adopted by the Board of
Directors of Sanmina Corporation in accordance with Sections 242 and 245 of the
General Corporation Law of the State of Delaware, and by the holders of each
class of outstanding stock entitled to vote thereon as a class at an annual
stockholders meeting called and held upon notice in accordance with Section 222
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Sanmina Corporation has caused this Certificate of
Restatement of the Restated Certificate of Incorporation to be signed by Jure
Sola, its President, and attested by Christopher D. Mitchell, its Assistant
Secretary, this 31st day of January 1996.
SANMINA CORPORATION
By: /s/ Jure Sola
--------------------------
Jure Sola, President
ATTEST:
/s/ Christopher D. Mitchell
- --------------------------------------
Christopher D. Mitchell, Assistant
Secretary
<PAGE> 3
RESTATED CERTIFICATE OF INCORPORATION
OF
SANMINA CORPORATION
1. The name of this corporation is Sanmina Corporation (the
"Corporation").
2. The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Zip Code 19801. The name of its registered
agent at such address is The Corporation Trust Company.
3. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
4. The Corporation is authorized to issue two classes of capital stock:
Preferred Stock, $0.01 par value per share, and Common Stock, $0.01 par value
per share. The total number of shares of Preferred Stock which the Corporation
shall have the authority to issue is 5,000,000 all of which are undesignated
series of preferred stock ("Blanket Preferred"). The total number of shares of
Common Stock which the Corporation shall have the authority to issue is
75,000,000.
The Blanket Preferred may be issued from time to time in one
or more series. The Board of Directors of this corporation is authorized to
determine or alter the rights, preferences, privileges and restrictions granted
to or imposed upon any wholly unissued series of Blanket Preferred, and or
within the limitations or restrictions stated in any resolution(s) of the Board
of Directors originally fixing the number of shares of Blanket Preferred
constituting any series, to increase or decrease (but not below the number of
any such series of Blanket Preferred than outstanding) the number of shares of
such series of Blanket Preferred subsequent to the issue of shares of that
series of Blanket Preferred, to determine the designation of any series and to
fix the number of shares of any series of Blanket Preferred.
5. The Corporation is to have perpetual existence.
The relative rights, preferences, privileges and restrictions granted
to or imposed upon the respective classes of shares of capital stock or holders
thereof are as set forth below.
SECTION 1. Common Stock.
(a) Rights and Privileges; No Preemptive Rights. Except as
otherwise expressly provided in this Restated Certificate of Incorporation, all
outstanding shares of Common Stock shall entitle the holders thereof to the same
rights and privileges. The holders of shares of Common Stock
<PAGE> 4
shall have no preemptive or preferential rights of subscription to any shares of
any class of capital stock of the Corporation.
(b) Dividends and Distributions. When, as and if dividends or
distributions are declared on outstanding shares of Common Stock, whether
payable in cash, in property or in securities of the Corporation, the holders of
outstanding shares of Common Stock shall be entitled to share equally, share for
share, in such dividends and distributions.
(c) Liquidation. Upon any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the holders of
outstanding shares of Common Stock shall be entitled to share equally, share for
share, in the assets of the Corporation to be distributed among the holders of
shares of the Common Stock.
(d) Voting Rights.
(1) The holders of outstanding shares of Common Stock
shall have the right to vote on the election and removal of all of the members
of the Board of Directors of the Corporation and on all other matters to be
voted on by the stockholders of the Corporation.
(2) At every meeting with respect to matters on which
the holders of outstanding shares of Common Stock are entitled to vote, the
holders of outstanding shares of Common Stock shall be entitled to one vote per
share.
SECTION 2. Director's Liability. No director of the Corporation shall
be personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director; provided, however, that nothing
contained herein shall eliminate or limit the liability of a director of the
Corporation to the extent provided for by the applicable law (i) for any breach
of the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or knowing violation of law, (iii) for authorizing the payment of a dividend or
repurchase of stock, or (iv) for any transaction from which the director derived
an improper personal benefit. The limitation of liability provided herein shall
continue after a director has ceased to occupy such position as to acts or
omissions occurring during such director's term or terms of office.
SECTION 3. Management of the Affairs of the Corporation.
(a) The business and affairs of the Corporation shall be
managed by its Board of Directors, which may exercise all the powers of the
Corporation and do all such lawful acts and things that are not conferred upon
or reserved to the stockholders by law, by this Certificate of Incorporation or
by the By-laws of the Corporation.
(b) Election of directors of the Corporation need not be by
written ballot, except and to the extent provided in the By-laws of the
Corporation.
-2-
<PAGE> 5
(c) Except as may be otherwise expressly provided in the
By-laws of the Corporation, the Board of Directors of the Corporation is
expressly authorized to adopt, amend or repeal the By-laws of the Corporation.
SECTION 4. Amendments. No amendment to this Restated Certificate of
Incorporation may be made unless it shall have been approved by the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock.
SECTION 5. Private Property. The private property of the stockholders
of the Corporation shall not be subject to the payment of corporate debts to any
extent whatsoever.
SECTION 6. Residual Rights. All rights accruing to the outstanding
shares of the Corporation not expressly provided for or to the contrary herein
shall be vested in the Common Stock.
-3-
<PAGE> 1
EXHIBIT 13
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
Years Ended September 30, 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
In thousands, except per share amounts
Statement of Operations Data:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 265,076 $ 167,787 $ 115,125 $ 88,474 $ 65,096
Gross profit 63,545 39,110 27,950 20,900 10,169
Selling, general and administrative expenses 16,593 11,752 9,240 7,830 5,911
Amortization expense 1,723 291 665 665 665
Write-off of goodwill -- -- 11,190 -- --
Provision for plant closing costs -- -- 3,629 -- 952
Operating income 45,229 27,067 3,226 12,405 2,641
Interest income (expense), net 83 924 369 (2,538) (3,916)
Income (loss) before provision for income
taxes and extraordinary item 45,312 27,991 3,595 9,867 (1,275)
Net income (loss) $ 28,095 $ 16,954 $ (3,109) $ 5,097 $ (1,450)
Earnings (loss) per share - fully diluted:
Income (loss) before extraordinary item $ 1.50 $ 1.00 $ (0.20) $ 0.52 $ (0.16)
Extraordinary item -- -- -- (0.07) --
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C> <C> <C> <C>
Net income (loss) per share $ 1.50 $ 1.00 $ (0.20) $ 0.45 $ (0.16)
Shares used in computing per share amounts 20,812 17,392 15,488 11,448 8,932
</TABLE>
<TABLE>
<CAPTION>
As of September 30, 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------
Balance Sheet Data:
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital $145,309 $128,904 $ 38,055 $ 8,394 $ 6,968
Total assets 230,541 188,106 64,467 45,553 45,768
Long-term debt 86,250 86,250 -- 4,438 35,145
Stockholders' equity 103,685 67,181 46,738 26,123 86
</TABLE>
FINANCIAL TABLE OF CONTENTS
Management's Discussion and Analysis 12
Statement of Financial Responsibility 20
Consolidated Balance Sheets 21
Consolidated Statements of Operations 22
Consolidated Statements of Stockholders' Equity 23
Consolidated Statements of Cash Flows 24
Notes to Consolidated Financial Statements 25
Report of Independent Public Accountants 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Sanmina Corporation ("Sanmina" or "the Company") is a leading electronics
contract manufacturer providing a full spectrum of integrated electronic
manufacturing services ("EMS"). Services include the manufacture of complex
printed circuit
<PAGE> 3
board assemblies using surface mount ("SMT") and pin-through hole ("PTH")
interconnection technologies, the manufacture of custom-designed backplane
assemblies and subassemblies, the manufacture of complex, multi-layered printed
circuit boards, the testing and assembly of electronic subsystems and systems
and, through its Golden Eagle Systems ("Golden Eagle") subsidiary, the
manufacture of custom cable and wire harness assemblies. In addition, EMS also
involves procurement and materials management, as well as consultation regarding
printed circuit board design and manufacturability. The Company provides these
services to a diversified base of leading original equipment manufacturers
("OEMs") in the telecommunications, networking (data communications), industrial
and medical instrumentation, and computer systems segments of the electronics
industry. Principal customers include Alcatel, Bay Networks, DSC Communications,
MCI Communications and Nortel (formerly Northern Telecom).
SMT and PTH printed circuit board assemblies are printed circuit boards on which
various electronic components, such as integrated circuits, capacitors,
microprocessors and resistors have been mounted. These assemblies are key
functional elements of many types of electronic products. Backplane assemblies
are large printed circuit boards on which connectors are mounted to receive and
interconnect printed circuit boards, integrated circuits and other electronic
components. The manufacture of SMT and PTH printed circuit board assemblies,
backplanes, multi-layered printed circuit boards and other advanced interconnect
products require sophisticated engineering and manufacturing expertise and
equipment.
OEMs are increasingly relying on independent EMS providers, such as Sanmina,
rather than captive production for their complex interconnect products. Sanmina
believes that the greater reliance by OEMs on independent suppliers is due to
the manufacturing specialization and expertise, responsiveness, flexibility, and
shorter delivery cycles that these suppliers can provide. OEMs are requiring
suppliers to provide a full range of manufacturing services. These services
include quick-turnaround manufacturing and assembly, engineering support,
materials procurement and handling, functional inspection and testing, and
just-in-time delivery. Outsourcing to independent EMS providers allows OEMs to
concentrate on their core technologies and competencies.
Sanmina's strategy is to capitalize on its capability to manufacture complex,
multi-layered printed circuit boards and backplanes, as well as custom cable
assemblies and wire harnesses, by providing additional value-added EMS for
leading OEMs in high growth sectors of the electronics industry. This strategy
has enabled Sanmina to realize relatively higher margins than many other
participants in the EMS industry. Sanmina seeks to establish "partnerships" with
its customers by being involved in the early stages of their product development
and by providing a broad range of services.
Sanmina's strategy also involves expanding the capacity and geographic scope of
its assembly capability, both through internal growth and acquisitions, in order
to position itself to serve electronics industry OEMs in key geographic markets.
In October 1993, Sanmina established a backplane assembly operation in
Richardson, Texas in order to better serve major customers in the Dallas-Forth
Worth area, and in 1995, Sanmina expanded its operation in Texas by doubling the
production capacity of this facility. In October 1994, the Company acquired a
100,000 square foot, state-of-the-art EMS facility in San Jose, California. This
facility now serves as the cornerstone of Sanmina's northern California EMS
operations. Following the acquisition, a smaller EMS operation was consolidated
with the Company's corporate headquarters at this facility in San Jose. To
address the New England market, in June 1995, Sanmina acquired Assembly
Solutions, Inc. ("ASI"), an EMS company in Manchester, New Hampshire. In January
1996, the New Hampshire operations were moved into a new 72,000 square foot
state-of-the-art EMS facility built to the Company's specifications. In January
1996, the Company also completed the acquisition of Golden Eagle, a manufacturer
of custom cable and wire harness assemblies. This acquisition further
strengthened Sanmina's service offerings by allowing the Company to provide a
greater portion of the value of the subsystems and systems the Company
manufacturers for its customers. In November 1996, Sanmina acquired the
Guntersville, Alabama and Guaymas, Mexico EMS facilities and operations of
Comptronix Corporation. This acquisition provided the Company with manufacturing
operations in the Huntsville, Alabama area, a major center of electronics
industry activity. In the first calendar quarter of 1997, Sanmina expects to
open a manufacturing facility in Dublin, Ireland to serve customers in the
European market. Sanmina will continue to aggressively and opportunistically
pursue future expansion opportunities in other geographic markets.
<PAGE> 4
Sanmina's acquisition strategy also involves pursuing transactions in which
Sanmina can obtain new customer accounts and/or acquire equipment and other
assets at lower cost than otherwise available. In furtherance of this strategy,
in November 1996, the Company completed the acquisition of certain assets,
consisting primarily of manufacturing equipment, inventory and customer
contracts of the custom manufacturing services division of Lucent Technologies,
located in Greensboro, North Carolina. Most of the acquired equipment will be
used to expand the capacity and capabilities of the Company's Raleigh, North
Carolina and Manchester, New Hampshire facilities. The customer contracts will
provide Sanmina with several key new accounts, each with growth potential.
Sanmina's manufacturing operations are conducted in twelve decentralized plants,
consisting of eight EMS facilities and four printed circuit board fabrication
facilities. The production expertise of some plants overlaps, which enables
Sanmina to allocate production based on product type and available capacity at
one or more plants. With assembly facilities located in major electronics
industry centers throughout the country, including Silicon Valley, the
Dallas-Forth Worth area, North Carolina's Research Triangle Park area, New
England and northern Alabama, Sanmina is also able to allocate production based
on the geographic location of its customers, as well as on other factors such as
services or technology required or available capacity. Sanmina believes that
this flexible approach differs from that of its competition. Decentralized
plants allow the Company to focus on particular product types and to respond
quickly to customers' specific requirements. Sanmina believes that decentralized
facilities also allow it to achieve improved accountability, higher quality and
better cost control. Each plant is managed as a separate profit center, and each
plant manager's compensation depends, in part, upon that plant meeting quality,
delivery and shipment targets. Ten of Sanmina's facilities are certified under
ISO 9002, a set of standards used to document, implement and demonstrate quality
management and assurance systems in manufacturing.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains certain forward-looking statements regarding future events
with respect to the Company. Actual events and/or future results of operations
may differ materially from those contemplated by such forward-looking
statements, as a result of the factors described herein, and in the documents
incorporated herein by reference, including, in particular, those factors
described under "Factors Affecting Operating Results."
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain statements of
operations data expressed as a percentage of net sales.
<TABLE>
<CAPTION>
Years Ended September 30, 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 76.0 76.7 75.7
Gross profit 24.0 23.3 24.3
Operating expenses:
Selling, general and
administrative expenses 6.3 7.0 8.0
Amortization and write-off
of goodwill 0.6 0.2 10.3
Plant closure costs -- -- 3.2
Total operating expenses 6.9 7.2 21.5
Operating income 17.1 16.1 2.8
Interest income, net -- 0.6 0.3
Provision for income taxes 6.5 6.6 5.8
Net income (loss) 10.6% 10.1% (2.7)%
</TABLE>
NET SALES Net sales in fiscal 1996 increased 58% to $265.1 million from $167.8
million in fiscal 1995. Net sales
<PAGE> 5
increased by 46% to $167.8 million in fiscal 1995 from $115.1 million in fiscal
1994. The increases in net sales were due primarily to increased shipments of
EMS assemblies to both existing and new customers. EMS assembly revenues
represented 92% of net sales in 1996 as compared to 83% in 1995 and 71% in 1994.
During these periods, Sanmina's printed circuit board fabrication operations
focused increasingly on manufacturing printed circuit boards used in EMS
assemblies manufactured by the Company, rather than manufacturing "bare" boards
for sale to third parties. Growth in EMS assembly revenues during these periods
was influenced by the electronics industry trend towards outsourcing, expansion
of the Company's operations, both through acquisitions and Company-originated
expansions, and a generally positive economic environment in the
telecommunications, networking (data communications) and industrial and medical
instrumentation segments of the electronics industry. These segments continued
to experience overall growth during these periods.
GROSS MARGIN Gross margin increased to 24.0% for fiscal 1996 as compared to
23.3% for fiscal 1995. The improvement in gross margin for fiscal 1996 was a
result of better absorption of fixed costs due to higher sales and normal
changes in product and customer mix. The Company expects gross margins to
continue to fluctuate based on product mix and customer mix. Gross margins may
also be adversely affected in future fiscal periods by lower gross margins at
operations acquired by the Company. Gross margin decreased to 23.3% in fiscal
1995 from 24.3% for fiscal 1994. The decline in gross margin was primarily the
result of the acquisition of the San Jose EMS operation in October 1994. As part
of the acquisition, Sanmina assumed certain backlog obligations which, combined
with the increased overhead associated with the acquisition, negatively affected
gross margins during the period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative
expenses for fiscal 1996 increased to $16.6 million from $11.8 million for
fiscal 1995, but decreased as a percentage of sales. Selling, general and
administrative expenses for fiscal 1995 increased to $11.8 million from $9.2
million for fiscal 1994, but decreased as a percentage of sales. The absolute
dollar increases in selling, general and administrative expenses were primarily
the result of increased expenditures to support higher sales volume. The
percentage decreases in selling, general and administrative expenses were due to
increases in sales volumes, which outpaced the Company's growth in
administrative and operating expenses. This reflects the Company's strategy of
seeking sales growth while maintaining or reducing operating expenses as a
percentage of net sales.
Net Sales
(millions of dollars)
96
265.1
95
167.8
94
115.1
<PAGE> 6
Selling, General, and Administrative Expenses
(as a percentage of net sales)
96
6.3%
95
7.0%
94
8.0%
Operating Income
(as a percentage of net sales)
* includes effect of write-off of
goodwill and provision
for plant closing costs.
96
17.1%
95
16.1%
94
2.8%*
AMORTIZATION OF GOODWILL The Company incurred $1.7 million and $291,000 in
amortization expense for fiscal years 1996 and 1995, respectively. Fiscal 1995
reflects three months of goodwill amortization expense related to the ASI
acquisition. Fiscal 1996 reflects a full year of amortization for ASI and nine
months of goodwill amortization related to the Golden Eagle acquisition.
WRITE-OFF OF GOODWILL In 1994, Sanmina evaluated whether it should continue to
carry the unamortized goodwill which
<PAGE> 7
originated at its formation in 1989. As a result of this evaluation, the Company
wrote off the remaining unamortized goodwill balance of $11.2 million (see Note
3 of Notes to Consolidated Financial Statements).
PROVISION FOR PLANT CLOSING COSTS In 1994, the Company recorded charges of $3.6
million related to the closure of redundant facilities, relocation of certain
functions and the write-off of goodwill associated with one of the closed
facilities (see Note 9 of Notes to Consolidated Financial Statements).
NET INTEREST INCOME For fiscal 1996, net interest income was $83,000 as compared
to net interest income of $924,000 for fiscal 1995. The decrease in net interest
income was a result of interest expense on the $86.3 million of convertible
subordinated notes issued by the Company in August 1995, and lower interest
rates on investments in fiscal 1996 compared to fiscal 1995. For fiscal 1995,
net interest income was $924,000 as compared to net interest income of $369,000
for fiscal 1994. The increase in net interest income resulted from the Company's
increased cash position as a result of cash generated through operations as well
as higher interest rates on invested funds during fiscal 1995.
PROVISION FOR INCOME TAXES For fiscal 1996, 1995 and 1994, the Company's
effective tax rate, excluding the write-off of goodwill previously discussed,
was 38.0%, 39.4% and 40.0%, respectively. The effective rate approximates the
statutory rate primarily as a result of all of the Company's operations being
located within the United States. The lower rate in 1996 as compared to 1995 and
1994 reflects the increased benefit of interest earned on tax-free investments
and the increased benefit derived from the Company's foreign sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its growth primarily through cash generated from
operations and financing transactions. In August 1995, the Company completed an
$86.3 million private placement of convertible debt. The notes are not callable
for redemption by the Company for three years and will mature in 2002.
The Company generated cash from operating activities of $26.8 million, $23.2
million and $11.8 million in fiscal years 1996, 1995 and 1994, respectively.
These increases in cash generated from operations each year were primarily due
to the Company's increase in profitability as a result of higher sales volume.
Cash used for investing activities, including net purchases of short-term
investments, during fiscal 1996, 1995 and 1994 was $105.7 million, $14.1 million
and $15.3 million, respectively. Purchases of short-term investments in 1996
(net of maturities) were $78.5 million. Investing activities during 1996 also
included investments in property, plant and equipment at the Company's EMS
operations in New Hampshire, Texas and North Carolina and equipment upgrades at
the Company's printed circuit board fabrication facilities. Investing activities
in 1995 consisted primarily of acquisitions of EMS operations in San Jose,
California and Manchester, New Hampshire. Investing activities in 1994 consisted
primarily of purchases of short-term investments.
Cash provided by financing activities was $1.2 million, $83.5 million and $17.5
million in 1996, 1995 and 1994, respectively. Financing activities in 1996
consisted primarily of receipt of proceeds from exercise of stock options and
stock purchase rights. In 1995, the Company completed a convertible debt
offering resulting in net proceeds to the Company of $83.9 million. Financing
activities in 1994 consisted primarily of cash generated from the Company's
November 1993 Common Stock offering.
The Company's future needs for financial resources include increases in working
capital to support anticipated sales growth and investment in manufacturing
facilities and equipment. Working capital was $145.3 million at September 30,
1996 and $128.9 million at September 30, 1995. The Company has evaluated and
will continue to evaluate possible business acquisitions.
<PAGE> 8
The Company believes that its capital resources, together with cash generated
from operations, will be sufficient to meet its working capital and capital
expenditure requirements through at least fiscal 1997.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock Based Compensation" be- came effective for the Company on October 1, 1996.
The Company plans to continue to account for stock based compensation
arrangements under Accounting Principles Board Opinion No. 25 and to adopt the
disclosure only provisions of SFAS No. 123. Accordingly, the adoption of SFAS
No. 123 is not expected to have a material impact on the Company's operating
results.
QUARTERLY RESULTS
The following table contains selected unaudited quarterly financial data for the
eight fiscal quarters in the period ended September 30, 1996. 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 presentation of the data for the periods
presented. The Company's results of operations have varied and may continue to
fluctuate significantly from quarter to quarter. Results of operations in any
period should not be considered indicative of the results to be expected from
any future period. In March 1996, the Company effected a two-for-one stock split
in the form of a stock dividend. Accordingly, all share and per share data has
been adjusted to retroactively reflect the stock split.
<TABLE>
<CAPTION>
Years Ended September 30, 1996 1995
In thousands, except percentages and per share amounts
Quarter One Two Three Four One Two Three Four
- ------- --- --- ----- ---- --- --- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $52,170 $63,222 $71,182 $78,502 $34,747 $39,345 $44,589 $49,106
Gross profit 12,626 15,180 17,024 18,715 7,981 9,051 10,291 11,787
Gross margin 24.2% 24.0% 23.9% 23.8% 23.0% 23.0% 23.1% 24.0%
Operating income 9,022 10,688 12,061 13,458 5,376 6,219 7,152 8,320
Net income 5,687 6,605 7,452 8,351 3,330 3,876 4,548 5,200
Net income per share (fully diluted) $0.32 $ 0.36 $ 0.40 $ 0.44 $ 0.20 $ 0.23 $ 0.27 $ 0.30
Shares used in computing
per share amounts 20,330 20,632 20,790 20,967 16,602 16,718 16,949 18,699
Common stock prices:
High $ 27.75 $ 31.50 $ 37.75 $ 40.50 $ 13.75 $ 16.75 $ 20.13 $ 24.88
Low 19.75 22.00 27.00 $ 21.00 10.25 13.32 15.63 $ 19.00
</TABLE>
FACTORS AFFECTING OPERATING RESULTS
In addition to the information set forth in this Management's Discussion and
Analysis of Financial Condition and Results of Operations and in the Company's
report on Form 10-K for the fiscal year ended September 30, 1996, the following
factors should be carefully considered by prospective investors in the Company's
securities.
<PAGE> 9
DEPENDENCE ON ELECTRONICS INDUSTRY AND KEY CUSTOMERS Sanmina's customers are
manufacturers in the telecommunications, networking (data communications),
industrial and medical instrumentation and computer system segments of the
electronics industry. These industry segments, and the electronics industry as a
whole, are subject to rapid technological change and product obsolescence.
Discontinuance or modification of products containing components manufactured by
the Company could adversely affect the Company's results of operations. The
electronics industry is also subject to economic cycles and has in the past
experienced, and is likely in the future to experience, recessionary periods. A
general recession in the electronics industry could have a materially adverse
effect on Sanmina's business, financial condition and results of operations. The
Company typically does not obtain long-term volume purchase contracts from its
customers and, as such, orders may be canceled and volume levels may be changed
or delayed. The timely replacement of canceled, delayed or reduced contracts
with new business cannot be assured.
Although Sanmina seeks to diversify its customer base, a small number of
customers are responsible for a significant portion of the Company's net
sales. There can be no assurance that the Company's principal customers will
continue to purchase products and services from the Company at current levels,
if at all, the Company expects to continue to depend upon its principal
customers for a significant portion of its net sales. The Company's customer
concentration could increase or decrease, depending on future customer
requirements, which will be dependent in large part on market conditions in the
electronics industry segments in which the Company's customers participate. The
loss of one or more major customers or declines in sales to major customers
could have a materially adverse effect on Sanmina's business, financial
condition and results of operations.
POSSIBLE FLUCTUATIONS IN OPERATING RESULTS The Company's results of operations
have varied and may continue to fluctuate significantly from period to period,
including on a quarterly basis. Operating results are affected by a number of
factors, including timing of orders from major customers, mix of products
ordered by and shipped to major customers, ability to effectively manage
inventory and fixed assets, timing of expenditures in anticipation of future
sales, economic conditions in the electronics industry and the mix of products
between backplane assemblies and printed circuit boards. Operating results can
also be significantly influenced by the development and introduction of new
products by the Company's customers. From time to time, the Company experiences
changes in the volume of sales to each of its principal customers, and operating
results may be affected on a period-to-period basis by these changes. The
Company's customers generally require short delivery cycles, and a substantial
portion of the Company's backlog is typically scheduled for delivery within 120
days. Quarterly sales and operating results therefore depend in large part on
the volume and timing of bookings received during the quarter. The Company's
backlog also affects its ability to plan production and inventory levels, which
could lead to fluctuations in operating results. In addition, a significant
portion of the Company's operating expenses are relatively fixed in nature and
planned expenditures are based in part on anticipated orders. An inability to
adjust spending quickly enough to compensate for any revenue shortfall may
magnify the adverse impact of such revenue shortfall on the Company's results of
operations. Results of operations in any period should not be considered
indicative of the results to be expected for any future period, and fluctuations
in operating results may also result in fluctuations in the price of the
Company's common stock.
COMPETITION AND TECHNOLOGICAL CHANGE The electronic interconnect products
industry is highly fragmented and is characterized by intense competition.
Sanmina competes in the technologically advanced segment of the interconnect
product market, which is also highly competitive but is much less fragmented
than the industry as a whole. Sanmina's competitors consist primarily of large
manufacturers of interconnect products, and some of these have greater
manufacturing and financial resources than Sanmina, as well as greater SMT
assembly capacity. As a participant in the interconnect industry, Sanmina must
continually develop improved manufacturing processes to accommodate its
customers' needs for increasingly complex products. During periods of recession
in the electronics industry, the Company's competitive advantages in the areas
of quick-turn manufacturing and responsive customer service may be of reduced
importance to electronics OEMs, who may become more price sensitive. In
addition, captive interconnect product manufacturers may seek
<PAGE> 10
orders in the open market to fill excess capacity, thereby increasing price
competition. Although the Company generally does not pursue high-volume, highly
price sensitive interconnect product business, it may be at a competitive
disadvantage with respect to price when compared to manufacturers with lower
cost structures, particularly those with off-shore facilities where labor and
other costs are lower.
RISK ASSOCIATED WITH ACQUISITIONS AND EXPANSIONS Sanmina has, for the past
several fiscal years, pursued a strategy of growth through acquisitions. These
acquisitions have included both acquisitions of entire companies, such as the
June 1995 acquisition of Assembly Solutions in Manchester, New Hampshire and the
January 1996 acquisition of Golden Eagle Systems, as well as acquisitions of
selected assets, principally equipment and customer contracts and, in certain
cases, facilities or facility leases. Such acquisitions include the November
1996 acquisitions of the Guntersville, Alabama and Guaymas, Mexico operations of
Comptronix Corporation and certain assets of the custom manufacturing services
division of Lucent Technologies, Inc. In addition to these acquisitions, Sanmina
has also grown its operations through internal expansion, such as the opening of
its Raleigh, North Carolina EMS facility and its planned Dublin, Ireland EMS
facility. Acquisitions of companies and businesses and expansion of operations
involves certain risks, including (i) the potential inability to successfully
integrate the acquired operations and businesses or to realize anticipated
synergies, economies of scale or other value, (ii) diversion of management's
attention, (iii) difficulties in scaling up production at new sites and
coordinating management of operations at new sites and (iv) loss of key
employees of acquired operations. No assurance can be given that the Company
will not incur problems in integrating the former Lucent and Comptronix
operations acquired in November 1996 or any future acquisition, and there can be
no assurance that these acquisitions or any future acquisition will result in a
positive contribution to the Company's results of operations. Furthermore, there
can be no assurance that the Company will realize value from any such
acquisition which equals or exceeds the consideration paid. In addition, there
can be no assurance that the Company will realize anticipated strategic and
other benefits from expansion of existing operations to new sites. Any such
problems could have a materially adverse effect on the Company's business,
financial condition and results of operations. In addition, future acquisitions
by the Company may result in diluted issuances of equity securities, the
incurrence of additional debt, large one-time write-offs and the creation of
goodwill or other intangible assets that could result in amortization expense.
These factors could have a materially adverse effect on the Company's business,
financial condition and results of operations.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS The Company intends to open its
first overseas facility, to be located in Dublin, Ireland, in the first calendar
quarter of 1997. A number of risks are inherent in international operations and
transactions. International sales and operations may be limited or disrupted by
the imposition of government controls, export license requirements, political
instability, trade restrictions, changes in tariffs, and difficulties in
staffing, coordinating communications among and managing international
operations. Additionally, the Company's business, financial condition and
results of operations may be adversely affected by fluctuations in international
currency exchange rates as well as increases in duty rates, difficulties in
obtaining export licenses, constraints on its ability to maintain or increase
prices and competition. There can be no assurance that the Company will realize
the anticipated strategic benefits of its expansion in Ireland or that the
Company's Irish operations will contribute positively to the Company's business,
financial condition, or results of operations. Furthermore, difficulties
encountered in scaling up production at the new Irish facility or in
coordinating the Company's United States and Irish operations, as well as any
failure of the Irish operations to realize anticipated revenue growth, could,
individually or in the aggregate, have a material adverse effect on the
Company's business, financial condition and results of operations.
RISKS ASSOCIATED WITH COMPONENT SHORTAGES The Company orders materials and
components based on customer orders received and accepted and seeks to minimize
its inventory of materials or components that are not identified for use in
filling specific orders. Materials used in manufacturing printed circuit boards
are readily available on the open market and the Company has not to date
experienced any significant shortages of such materials. Electronic components
used by Sanmina in producing SMT and PTH assemblies and its backplane assemblies
are purchased by Sanmina and, in certain circumstances, it may be required to
bear the risk of component price fluctuations. In addition, shortages
<PAGE> 11
of certain types of electronic components have occurred in the past and may
occur in the future. Component shortages or price fluctuations could have an
adverse effect on the Company's SMT and PTH assemblies and its backplane
assembly business, thereby adversely affecting the Company's results of
operations. Due to the continued expansion of the Company's EMS and backplane
assembly businesses as a percentage of the Company's net sales, component
shortages and price fluctuations would adversely affect the Company's results in
operations to a greater extent than in prior fiscal years.
ENVIRONMENTAL RISKS Proper waste disposal is a major consideration for printed
circuit board manufacturers because metals and chemicals are used in the
manufacturing process. Maintenance of environmental controls is also important
in the EMS process, notwithstanding the fact that these processes generate
significantly less wastewater than the printed circuit board fabrication
process. Each Sanmina plant operates under effluent discharge permits issued by
the appropriate governmental authority. These permits must be renewed
periodically and are subject to revocation in the event of violations of
environmental laws. The Company believes that the wastewater treatment equipment
in its plants is currently in compliance with environmental protection
requirements in all material respects. However, there can be no assurance that a
violation will not occur in the future as a result of human error, equipment
failure or other causes. In the event of a future violation of environmental
laws, the Company could be held liable for damages and for the costs of remedial
actions and could be also subject to revocation of effluent discharge permits.
Any such revocation could require the Company to cease or limit production at
one or more of its facilities, thereby having an adverse impact on the Company's
results of operations. Sanmina is also subject to environmental laws relating to
the storage, use and disposal of chemicals, solid waste and other hazardous
materials as well as air quality regulations. Furthermore, environmental laws
could become more stringent over time, and the costs of compliance and the
penalties associated with violation of more stringent laws could be substantial.
LEVERAGE AND SUBORDINATION On August 16, 1995 the Company issued $86.25 million
principal amount of 5.5% convertible subordinated notes due August 15, 2002 (the
"Notes"). This note issuance increased Sanmina's ratio of long-term debt to
total capitalization. As a result of this indebtedness, the Company's principal
and interest obligations have increased substantially. The degree to which the
Company is leveraged could adversely affect the Company's ability to obtain
additional financing for working capital, acquisitions or other purposes and
could make it more vulnerable to industry downturns and competitive pressures.
The Notes are convertible into Common Stock, at the option of each Note holder,
at a conversion price of $28.19 per share, subject to adjustments based on
certain events. The Notes are subordinated in right of payment to all existing
and future senior indebtedness of the Company. The Indenture relating to the
notes does not limit the amount of future indebtedness, including senior
indebtedness, that the Company can create, incur, assume or guarantee. By reason
of the subordination, in the event of the Company's liquidation or dissolution,
holders of senior indebtedness may receive more, ratably, and holders of the
Notes may receive less, ratably than the other creditors of the Company.
POSSIBLE VOLATILITY OF NOTE AND STOCK PRICE The trading price of the Notes and
the Company's Common Stock could be subject to significant fluctuations in
response to variations in quarterly operating results, developments in the
electronics industry, general economic conditions, changes in securities
analysts' recommendations regarding the Company's securities and other factors.
In addition, the stock market in recent years has experienced price and volume
fluctuations which have affected the market prices of technology companies and
which have often been unrelated to or disproportionately impacted by the
operating performance of such companies. These broad market fluctuations may
adversely affect the market price of the Common Stock and the Notes. In
addition, volatility in the price of the Company's Common Stock, changes in
prevailing interest rates and changes in perceptions of the Company's
creditworthiness may in the future adversely affect the price of the Notes.
<PAGE> 12
To the Stockholders:
The management of Sanmina is responsible for the preparation of the accompanying
consolidated financial statements. They have been prepared in conformity with
generally accepted accounting principles appropriate in the circumstances and,
as such, include estimates and judgments of management. Management also prepared
the other information in the annual report and is responsible for its accuracy
and consistency with the financial statements. The consolidated financial
statements for the years ended September 30, 1996, 1995, and 1994 were audited
by Arthur Andersen LLP, independent public accountants.
The Company maintains an accounting system and related internal controls that it
believes are sufficient to provide reasonable assurance that assets are
safeguarded, that transactions are executed and recorded in accordance with
management's authorization, and that the financial records are reliable for
preparing financial statements. The concept of reasonable assurance is based on
the recognition that the cost of the system of internal control must be related
to the benefits derived and that the balancing of those factors requires
estimates and judgments. The system is monitored regularly by the Company for
compliance. In addition, solely for the purposes of planning and performing its
audit of the Company's consolidated financial statements, Arthur Andersen LLP
obtained an understanding of, and selectively tested, certain aspects of the
Company's system of internal control.
The Board of Directors has an Audit Committee comprised solely of outside
directors. The Committee meets with management and the independent public
accountants in connection with its review of matters relating to the annual
financial statements, the Company's system of internal accounting controls and
the services of the independent public accountants. Arthur Andersen LLP has full
and free access to meet with the Committee, with or without management
representatives present, to discuss the results of its audits, the adequacy of
internal accounting controls and the quality of financial reporting.
November 1, 1996
Jure Sola Randy Furr
Chairman and Chief Executive Officer President and Chief Operating Officer
<PAGE> 13
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of September 30, (in thousands, except per share amounts) 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 29,568 $107,290
Short-term investments 85,374 6,817
Accounts receivable, net of allowance for
doubtful accounts of $1,418 and $929 30,421 23,847
Inventories 32,109 19,477
Deferred income taxes 6,852 4,400
Prepaid expenses 999 692
Total current assets 185,323 162,523
Property and Equipment:
Machinery and equipment 47,575 28,959
Furniture and fixtures 547 2,816
Leasehold improvements 7,412 5,273
Land and building 3,603 --
59,137 37,048
Less: Accumulated depreciation and amortization 24,269 18,249
Net property and equipment 34,868 18,799
Other Assets:
Intangibles, net of accumulated amortization of $2,013 and $291 8,014 4,080
Deposits and other 2,336 2,704
Total assets $230,541 $188,106
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 41 $107,275
Accounts payable 24,401 21,921
Accrued compensation and related liabilities 6,051 4,008
Other accrued liabilities 4,117 3,885
Income taxes payable 5,404 3,730
Total current liabilities 40,014 33,619
Long-term Liabilities:
Convertible subordinated debt 86,250 86,250
Other liabilities 592 1,056
Total long-term liabilities 86,842 87,306
Commitments and Contingencies (notes 5 and 7)
Stockholders' Equity:
Preferred stock, $.01 par value:
Authorized: 5,000 shares
Outstanding: none -- --
Common stock, $.01 par value:
Authorized: 75,000 shares
Outstanding: 16,890 shares and 16,408 shares 169 4,164
Additional paid-in capital 61,520 53,135
Unrealized holding gain on investments 19 --
Retained earnings 41,977 13,882
Total stockholders' equity 103,685 67,181
Total liabilities and stockholders' equity $230,541 $188,106
</TABLE>
See accompanying notes.
<PAGE> 14
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended September 30, (in thousands, except per share amounts) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 265,076 $ 167,787 $ 115,125
Cost of sales 201,531 128,677 87,175
Gross profit 63,545 39,110 27,950
Operating Expenses:
Selling, general and administrative 16,593 11,752 9,240
Amortization of goodwill 1,723 128,291 87,665
Write-off of goodwill -- -- 11,190
Provision for plant closing costs -- -- 3,629
Total operating expenses 18,316 12,043 24,724
Operating income 45,229 27,067 3,226
Interest Income (Expense):
Interest income 5,245 1,649 9,459
Interest expense (5,162) (725) (90)
Interest income, net 83 128,924 87,369
Income before provision for income taxes 45,312 27,991 3,595
Provision for income taxes 17,217 11,037 6,704
Net income (loss) $ 28,095 $ 16,954 $ (3,109)
Earnings (loss) per share:
Primary $ 1.60 $ 1.01 $ (0.20)
Fully diluted $ 1.50 $ 1.00 $ (0.20)
Shares used in computing per share amounts:
Primary 17,532 16,812 15,488
Fully diluted 20,812 17,392 15,488
</TABLE>
See accompanying notes.
<PAGE> 15
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Notes Retained Unrealized
Common Stock Additional Receivable Earnings Holding
---------------------- Paid-in from (Accumulated Gain on
In thousands Shares Amount Capital Stockholders Deficit) Investments Total
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1993 13,436 $ 134 $ 26,045 $ (93) $ 37 $ -- $ 26,123
Sale of common stock,
net of issuance costs of $1,525 2,000 20 20,455 -- -- -- 20,475
Exercise of common stock options 384 4 501 -- -- -- 505
Issuance of common stock under
employee stock purchase plan 192 2 876 -- -- -- 878
Repayment of notes receivable
from stockholders -- -- -- 93 -- -- 93
Income tax benefit of disqualified
dispositions -- -- 1,773 -- -- -- 1,773
Net loss -- -- -- -- (3,109) -- (3,109)
BALANCE AT SEPTEMBER 30, 1994 16,012 160 49,650 -- (3,072) -- 46,738
Exercise of common stock options 248 2 911 -- -- -- 913
Issuance of common stock under
employee stock purchase plan 148 2 1,042 -- -- -- 1,044
Income tax benefit of disqualified
dispositions -- -- 1,532 -- -- -- 1,532
Net income -- -- -- -- 16,954 -- 16,954
BALANCE AT SEPTEMBER 30, 1995 16,408 164 53,135 -- 13,882 -- 67,181
Issuance of common stock for purchase
of Golden Eagle Systems, Inc. 153 2 3,998 -- -- -- 4,000
Exercise of common stock options 226 2 1,596 -- -- -- 1,598
Issuance of common stock under
employee stock purchase plan 103 1 1,490 -- -- -- 1,491
Unrealized holding gain on investments -- -- -- -- -- 19 19
Income tax benefit of disqualified
dispositions -- -- 1,301 -- -- -- 1,301
Net income -- -- -- -- 28,095 -- 28,095
BALANCE AT SEPTEMBER 30, 1996 16,890 $ 169 $ 61,520 $ -- $ 41,977 $ 19 $ 103,685
</TABLE>
See accompanying notes.
<PAGE> 16
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended September 30, (in thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 28,095 $ 16,954 $ (3,109)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation and amortization 8,127 4,687 4,403
Write-off of goodwill -- -- 11,190
Provision for plant closing costs -- -- 3,629
Provision for doubtful accounts 527 361 5,271
Loss on disposal of fixed assets 25 -- 87,668
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (3,299) (6,092) (5,965)
Inventories (8,955) (4,289) (563)
Prepaid expenses, deposits and other 257 256 (60)
Accounts payable and accrued liabilities 1,550 10,304 1,866
Income tax accounts 432 1,042 150
Cash provided by operating activities 26,759 23,223 11,820
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (169,739) (13,675) (11,170)
Proceeds from maturity of short-term investments 91,201 18,028 --
Purchases of property and equipment, net of acquisitions (21,827) (9,925) (4,092)
Purchase of certain assets of Comptronix-San Jose,
net of liabilities assumed -- (6,241) --
Purchase of Assembly Solutions, Inc., net of cash acquired -- (2,820) --
Purchase of Golden Eagle Systems, Inc., net of cash acquired (5,287) -- --
Proceeds from sale of equipment and leasehold improvements -- 23,565 --
Cash used for investing activities (105,652) (14,068) (15,262)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on line of credit (1,546) -- (4,438)
Repayment of long-term obligations (372) (2,380) --
Proceeds from issuance of convertible debt, net of issuance costs -- 83,878 --
Proceeds from sale of common stock, net of issuance costs 3,089 1,957 21,858
Repayment of notes receivable from stockholders -- -- 93
Cash provided by financing activities 1,171 83,455 17,513
Increase (decrease) in cash and cash equivalents (77,722) 92,610 14,071
Cash and cash equivalents at beginning of year 107,290 14,680 609
Cash and cash equivalents at end of year $ 29,568 $ 107,290 $ 14,680
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year:
Interest $ 4,744 $ 16,976 $ 3,850
Income taxes $ 16,627 $ 10,054 $ 6,554
</TABLE>
See accompanying notes.
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION OF THE COMPANY
Sanmina Corporation (the "Company") was incorporated in Delaware in 1989 and is
a leading independent provider of customized integrated electronics
manufacturing services, including turnkey electronic assembly and manufacturing
management services to original equipment manufacturers in the electronics
industry. Sanmina's electronic assembly services consist primarily of the
manufacture of complex printed circuit board assemblies using surface mount and
pin-through hole interconnection technologies, the manufacture of
custom-designed backplane assemblies, fabrication of complex multi-layered
printed circuit boards, the manufacture of custom cable and wire harness
assemblies, and testing and assembly of completed systems. In addition to
assembly, turnkey manufacturing management also involves procurement and
materials management, as well as consultation on board design and
manufacturability. The Company's manufacturing plants are located in northern
California, Texas, New Hampshire, North Carolina and Alabama.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All inter-company
accounts and transactions have been eliminated.
USE OF ESTIMATES The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
CASH EQUIVALENTS The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash equivalents.
SHORT-TERM INVESTMENTS The Company's investments are classified as "available
for sale" and are recorded at their fair value, as determined by quoted market
prices, with any unrealized holding gains or losses classified as a separate
component of stockholders' equity. Upon sale of the investments, any previously
unrealized gains or losses are recognized in results of operations. Realized
gains and losses have not been material to date. As of September 30, 1996 the
difference between the aggregate fair value and cost basis was an unrealized
gain of $19,000. Gross unrealized gains and losses were not material at
September 30, 1996 and 1995. The Company's investments mature at various dates
through February 2000. However, the Company has the intent and ability to
liquidate the investments prior to the maturity period and, as such, has
classified its investments as short-term investments. The value of the Company's
investments by major security type is as follows (in thousands):
<TABLE>
<CAPTION>
As of September 30, 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Municipal bonds $ 65,434 $ 36,295
Corporate bonds 38,234 74,087
$103,668 $110,382
</TABLE>
Approximately $18.3 and $103.6 million of the total investments in debt
securities as of September 30, 1996 and 1995, respectively, are included in cash
and cash equivalents, the remaining balance is classified as short-term
investments.
INVENTORIES Inventories are stated at the lower of cost (first-in, first-out
method) or market. Cost includes labor, material and manufacturing overhead. The
components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
As of September 30, 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $13,797 $ 7,692
</TABLE>
<PAGE> 18
<TABLE>
<S> <C> <C>
Work-in-process 10,986 8,206
Finished goods 7,326 3,579
$32,109 $19,477
</TABLE>
PROPERTY AND EQUIPMENT Property and equipment are stated at cost or, in the case
of property and equipment acquired through business combinations, at fair value
based upon the allocated purchase price at the acquisition date. Depreciation
and amortization are provided on a straight-line basis over the estimated useful
lives of the related assets (three to five years or twenty-five years, in the
case of buildings) or, in the case of leasehold improvements, over the remaining
term of the related lease, if shorter.
INTANGIBLES Intangibles arising from the Company's acquisitions (see Note 6) are
amortized on a straight-line basis over the estimated useful life of five years.
REVENUE RECOGNITION The Company generally recognizes revenue from manufacturing
services at the time of product shipment. Where appropriate, provisions are made
at that time for estimated warranty and return costs.
NET INCOME (LOSS) PER SHARE Primary earnings per share amounts for 1996 and 1995
are computed using the weighted average number of shares of common stock and
dilutive common stock equivalents (using the treasury stock method). Loss per
share for 1994 is computed using the weighted average number of shares of common
stock outstanding. Primary earnings (loss) per share does not assume conversion
of the subordinated debentures into common shares (see Note 4). Fully diluted
earnings per share assumes full conversion of the subordinated debentures into
common shares and the elimination of the interest requirements, net of income
taxes. Conversion of the debentures was assumed during the portion of each
period that the securities were outstanding.
NEW ACCOUNTING STANDARD In October 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," which will be effective for the
Company's 1997 fiscal year. SFAS No. 123 allows companies which have stock-based
compensation arrangements with employees to adopt a new fair-value basis of
accounting for stock options and other equity instruments, or to continue to
apply the existing accounting rules under Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," but with additional
financial statement disclosure. The Company plans to continue to account for
stock-based compensation arrangements under APB Opinion No. 25, and therefore
does not anticipate SFAS No. 123 will have a material impact on its financial
position or results of operations.
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed of." SFAS No. 121 requires that long-lived assets be reviewed for
impairment and, if necessary, an impairment loss be recorded whenever events or
changes in circumstances indicate that the carrying amount of the asset may not
be recoverable. SFAS No. 121 is effective for fiscal year 1997. Management does
not believe the adoption of SFAS No.121 will have a material effect on the
financial position or results of operations of the Company.
NOTE 3. WRITE-OFF OF GOODWILL
Annually, the Company has evaluated whether projected results of a business
acquired in 1989 would support the future amortization of the remaining
unamortized balance of the goodwill generated as a result of the acquisition. In
the fourth quarter of fiscal 1994, such evaluation indicated that the projected
results would not do so. As such, in the fourth quarter of fiscal 1994, the
Company wrote-off the remaining $11.2 million of unamortized goodwill.
The projections prepared at the time of the acquisition in 1989 reflected the
Company's belief at that time that it would principally be a manufacturer of
third-party printed circuit boards. In 1991, the Company recognized the demand
from its customers for a higher level of manufacturing services. As a result,
the Company started to transition its business towards manufacturing more
complex backplane assemblies and sub-assemblies and, in 1993, to electronic
printed circuit board and system assembly. This change in strategy significantly
affected the mix and results of business. For example, the ini-
<PAGE> 19
tial projections prepared in 1989 reflected a third-party printed circuit board
to backplane assembly ratio (for both revenues and gross profits) of 75%/25%;
the actual results in 1994 were almost the opposite, being 29%/71%. This change
has resulted in non-achievement of the initial projections for third-party
printed circuit boards. Additionally, revised projections prepared as of
September 30, 1994 did not support the future amortization of the remaining
goodwill balance.
The methodology that the Company used to assess the recoverability of goodwill
was to project results of the third-party printed circuit board business forward
20 years, which represented the remaining life of the goodwill as of September
30, 1994, based on a historical trend line of actual results and its estimate of
an annual decline in revenue of 11%. Variable costs (as a percentage of
revenues) were assumed to decline as the capacity for third-party printed
circuit boards was reduced. Such projections yielded an operating loss (on an
undiscounted basis) of approximately $85 million through fiscal year 2014 (the
end of the 25 year amortization period) for the Company's third-party printed
circuit board fabrication business. Management of the Company believed that the
projected future results were the most likely scenario. As a result, the Company
did not believe that the goodwill should continue to be carried as an asset and
wrote it off in the fourth quarter of fiscal 1994.
NOTE 4. LONG-TERM DEBT
On August 16, 1995 the Company issued $86.3 million of 5.5% convertible
subordinated notes due on August 15, 2002. The notes are convertible into common
stock, at the option of the note holder, at a conversion price of approximately
$28.19 per share, subject to adjustments in certain events. The notes are
subordinated in right of payment to all existing and future senior indebtedness,
as defined, of the Company. The notes are redeemable at the option of the
Company on or after August 15, 1998, initially at 103.143% of the face value and
at decreasing prices thereafter to 100% at maturity, in each case together with
accrued interest. Interest is payable semi-annually on February 15 and August
15.
NOTE 5. COMMITMENTS
The Company leases its facilities under operating leases expiring at various
dates through October 2002. These leases contain various options to renew lease
terms through 2011. The Company is responsible for utilities, maintenance,
insurance and property taxes under the leases. Minimum future lease payments
under non-cancelable operating leases are approximately as follows (in
thousands):
<TABLE>
<CAPTION>
Years Ending September 30,
- --------------------------------------------------------------------------------
<C> <C>
1997 $2,717
1998 2,719
1999 2,066
2000 1,321
2001 486
2002 102
------
$9,411
======
</TABLE>
Rent expense under operating leases was approximately $2.7 million, $2.4
million, and $1.7 million for the years ended September 30, 1996, 1995 and 1994,
respectively.
NOTE 6. ACQUISITIONS
On October 14, 1994, the Company acquired substantially all of the inventory and
fixed assets of the San Jose, California electronics manufacturing operations of
Comptronix Corporation ("Comptronix - San Jose"). The total purchase price of
this transaction (including costs associated with the transaction) was
approximately $8.4 million, and was paid in cash and the assumption of certain
liabilities. The acquisition was accounted for as a purchase. Accordingly, the
results of operations for the year ended September 30, 1995 include the results
of operations of this business from the date of acquisition forward.
In connection with the acquisition, net assets acquired were as follows (in
thousands):
<PAGE> 20
<TABLE>
<S> <C>
Inventories $ 4,259
Property and other assets 4,121
-------
8,380
Less: Liabilities assumed (2,139)
-------
Net assets acquired $ 6,241
=======
</TABLE>
The unaudited pro forma financial information for 1994 is presented below and
combines the Company's statement of operations for the year ended September 30,
1994 with Comptronix - San Jose's divisional statement of revenue and expenses
before income taxes for the year ended December 31, 1993. Pro forma financial
information for 1995 has not been presented as the results of operations for the
acquired division for the two week period prior to the acquisition are not
significant and, therefore, reported results approximate pro forma results.
<TABLE>
<CAPTION>
Year Ended September 30, 1994 (in thousands) (Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
Revenue $ 177,440
Net loss (4,331)
Net loss per share $ (.28)
Weighted average common
shares outstanding 15,488
</TABLE>
On June 1, 1995 the Company acquired all of the outstanding stock of Assembly
Solutions, Inc. ("ASI"), a manufacturer of complex printed circuit board
assemblies located in Manchester, New Hampshire. The purchase price was
approximately $4.8 million (including costs associated with the transaction),
which was paid in cash of $3.3 million and in the issuance of $1.5 million in
debt.
The ASI acquisition was accounted for using the purchase method of accounting
and, accordingly, the results of operations of ASI since June 1995 have been
included in the accompanying consolidated statements of operations.
Approximately $500,000 of the purchase price was allocated to the fair market
value of the net assets acquired. The remaining amount ($4.3 million) was
allocated to covenants not-to-compete, which were entered into with certain key
ASI employees and managers, and to goodwill. Comparative pro forma information
has not been presented as the results of operations for ASI are not material to
the Company's financial statements.
On January 2, 1996, the Company acquired all of the outstanding stock of Golden
Eagle Systems, Inc. ("Golden Eagle"), a manufacturer of custom cable and wire
harness assemblies, located in Carrollton, Texas. The total purchase price of
the acquisition was approximately $10.1 million (including costs associated with
the transaction), which included a cash payment of $6.1 million and the issuance
of 153,290 shares of the Company's common stock. The Company may also be
required to pay management bonuses of up to $4 million based upon the earnings
of Golden Eagle during the two-year period of January 1, 1996 through December
31, 1997. To the extent such earnings targets are met, the bonus amounts will be
charged to operations in the periods in which they are earned.
The Golden Eagle acquisition was accounted for using the purchase method of
accounting and, accordingly, the results of operations of Golden Eagle since
January 2, 1996 have been included in the accompanying consolidated statements
of operations. The excess of purchase price over the estimated fair value of the
net assets acquired of approximately $5.7 million has been recorded as goodwill
to be amortized on a straight-line basis over five years. Comparative pro forma
information has not been presented as the results of operations for Golden Eagle
are not material to the Company's financial statements.
NOTE 7. CONTINGENCIES
In 1994, the Company was served with a complaint filed in California State Court
by KLA Instruments, Inc. ("KLA") against the Company and Anthem Electronics
("Anthem"). The claims arose under an agreement between KLA and Anthem in which
Anthem manufactured a component sub-assembly for KLA. The Company, while not a
party to the Anthem-KLA agreement, manufactured printed circuit boards used in
the subassemblies. In March 1996, a settlement of
<PAGE> 21
this matter was reached among KLA, Anthem and Sanmina. The settlement did not
have a material adverse impact on the Company's business, financial condition or
results of operations.
In the normal course of business, the Company may be subject to litigation
matters. The Company does not believe the ultimate resolution of any such
pending or threatened litigation matters would have a material adverse effect on
the Company's financial position or results of operations.
NOTE 8. STOCKHOLDERS' EQUITY
COMMON STOCK In October 1995, the Company's Board of Directors authorized an
increase to the number of shares of Common Stock authorized for issuance by
51,000,000 to a total of 75,000,000 shares. In March 1996, the Company effected
a two-for-one stock split payable in the form of a dividend. Accordingly, all
share and per share data has been adjusted to retroactively reflect the stock
split.
STOCK OPTION PLANS In fiscal 1990, the Company adopted the 1990 Incentive Stock
Plan (the "Plan") that provides for the grant of incentive stock options,
non-statutory stock options, and stock purchase rights to employees and other
qualified individuals to purchase shares of the Company's Common Stock. The Plan
provides for grants at amounts not less than 100% of the fair market value of
the shares on the date of the grant.
In March 1996, the Company's Board of Directors approved a 1996 Supplemental
Stock Option Plan ("the "Supplemental Plan") and reserved 250,000 shares for
issuance thereunder. The Supplemental Plan permits only the grant of
non-statutory options and provides that options must have an exercise price at
least equal to the fair market value of the Company's Common Stock on the date
of the grant. Options under the Supplemental Plan may be granted to employees
and consultants, except that executive officers and directors may not be granted
options under the Supplemental Plan.
Options under both plans vest as determined by the Board of Directors and in no
event may an option have a term exceeding ten years and one day from the date of
the grant. Total shares authorized for issuance under both plans are 3,050,000,
of which 239,181 are available for grant at September 30, 1996. Option activity
under both plans is as follows:
<TABLE>
<CAPTION>
Options Outstanding
------------------------------
Shares Price
Available Shares Per Share
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE AT
SEPTEMBER 30, 1993 194,914 1,126,280 $ 1.00-$48.50
Authorized 457,896 -- --
Granted (478,300) 478,300 $ 8.06-$13.13
Exercised -- (383,842) $ 1.00-$48.63
Cancelled 198,546 (198,546) $ 1.00-$12.88
BALANCE AT
SEPTEMBER 30, 1994 373,056 1,022,192 $ 1.00-$13.13
Authorized 1,000,000 -- --
Granted (887,000) 887,000 $12.13-$24.00
Exercised -- (248,382) $ 1.00-$15.50
Cancelled 66,696 (66,696) $ 1.00-$12.94
BALANCE AT
SEPTEMBER 30, 1995 552,752 1,594,114 $ 1.00-$24.00
Authorized 250,000 -- --
Granted (685,450) 685,450 $14.00-$39.38
Exercised -- (225,313) $ 1.00-$28.50
Cancelled 121,879 (121,879) $ 1.00-$28.50
BALANCE AT
SEPTEMBER 30, 1996 239,181 1,932,372 $ 1.00-$39.38
</TABLE>
<PAGE> 22
Options exercisable at September 30, 1996 are 532,963.
1993 EMPLOYEE STOCK PURCHASE PLAN In February 1993, the Company established an
employee stock purchase plan (the "1993 Plan") which provides for the issuance
of up to 650,000 shares of common stock. Under the 1993 Plan, employees may
purchase, on a periodic basis, a limited number of shares of common stock
through payroll deductions over a six-month period. The per share purchase price
is 85% of the fair market value of the stock at the beginning or end of the
offering period, whichever is lower. As of September 30, 1996, 503,186 shares
had been issued under the 1993 Plan.
As of September 30, 1996, the Company has reserved the following shares of
authorized but unissued Common Stock:
<TABLE>
<C> <C>
1990 Incentive Stock Plan 1,922,601
1993 Employee Stock Purchase Plan 146,814
1996 Supplemental Stock Plan 248,952
---------
2,318,367
=========
</TABLE>
NOTE 9. PROVISION FOR PLANT CLOSING COSTS
In the fourth quarter of fiscal 1994, the Company recorded a charge to
operations of $3.6 million to provide for the closure of two of its facilities
(one printed circuit board fabrication facility and one assembly facility) and
the relocation of its corporate headquarters. These closures and relocation were
prompted by the Company's acquisition in October 1994 of an electronics
manufacturing facility (see Note 6) and the results of a continuing evolution of
the Company's strategic direction to change from primarily a supplier of printed
circuit boards to a value-added electronics manufacturer. Included in the above
charge is the write-off of $2 million of goodwill related to the closure of the
printed circuit board fabrication plant. This goodwill originated as part of an
acquisition in 1989 (see Note 3). The remaining $1.6 million of this charge
consists primarily of the costs associated with the remaining lease commitments
on these facilities and the write-off of the related leasehold improvements and
certain fixed assets.
NOTE 10. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
Years Ended September 30, 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current Payable $ 16,335 $ 11,100 $ 5,537
Deferred (1,875) (2,261) (315)
14,460 8,839 5,222
State:
Current Payable 3,211 2,571 1,469
Deferred (454) (373) 13
2,757 2,198 1,482
Total provision for
income taxes $ 17,217 $ 11,037 $ 6,704
</TABLE>
The provision for income taxes differs from the amount estimated by applying the
statutory Federal income tax rate to income before taxes as follows (in
thousands):
<TABLE>
<CAPTION>
Years Ended September 30, 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal tax at statutory rate $ 15,859 $ 9,797 $ 1,258
State income taxes,
net of federal benefit 2,225 1,596 ,216
</TABLE>
<PAGE> 23
<TABLE>
<S> <C> <C> <C>
Effect of non-deductible
goodwill amortization
and write-off 3,493 2,578 5,671
Tax exempt interest income (359) (335) (116)
FSC benefit (355) (236) (78)
Tax credits (507) (303) --
Other (139) (440) (247)
Total provision for
income taxes $ 17,217 $ 11,037 $ 6,704
</TABLE>
The components of the net deferred income tax asset are as follows (in
thousands):
<TABLE>
<CAPTION>
As of September 30, 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Cumulative temporary differences:
State taxes $ 718 $ 488
Accrued vacation 210 253
Allowance for doubtful accounts 628 396
Depreciation 298 532
Inventory reserve 3,966 2,094
Accrued bonuses 380 236
Warranty reserve 304 346
Other 780 610
Total deferred income tax asset $7,284 $4,955
</TABLE>
NOTE 11. BUSINESS SEGMENT AND CONCENTRATION OF CREDIT RISK
The Company operates in one business segment - the manufacture, testing and
servicing of a full spectrum of complex printed circuit boards, custom backplane
interconnect devices, and electronic assembly services. Revenue is principally
derived from customers in the United States.
Sales to major customers who accounted for more than 10% of net sales were as
follows:
<TABLE>
<CAPTION>
Years Ended September 30, 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Customer - A 25.2% 21.9% 28.8%
Customer - B * * 10.9%
Customer - C 13.2% 13.2% *
</TABLE>
*less than 10% of net sales
The Company's most significant credit risk is the ultimate realization of its
accounts receivable. This risk is mitigated by (i) sales to well established
companies, (ii) ongoing credit evaluation of its customers, and (iii) frequent
contact with its customers, especially its most significant customers, thus
enabling the Company to monitor current changes in business operations and to
respond accordingly.
NOTE 12. SUBSEQUENT EVENTS
Effective November 1, 1996, the Company purchased the assets of Comptronix
Corporation, a contract manufacturing company based in Guntersville, Alabama.
The assets include Comptronix' plant and equipment located in Guntersville, its
Guaymas, Mexico operations, customer contracts, inventories and accounts
receivable.
Also in November 1996, Sanmina entered into an agreement to purchase
substantially all of the inventory and fixed assets of the Lucent Technologies'
Custom Manufacturing Services operation in Greensboro, North Carolina. The
acquisition was effective November 20, 1996. The total purchase price of this
transaction was $10.1 million and was paid in cash.
<PAGE> 24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders' of Sanmina Corporation:
We have audited the accompanying consolidated balance sheets of Sanmina
Corporation (a Delaware Corporation) and subsidiary as of September 30, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended September
30, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sanmina Corporation and
subsidiary as of September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1996 in conformity with generally accepted accounting principles.
San Jose, California
October 23, 1996 Arthur Andersen LLP
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION
------ ---------------
<S> <C>
Golden Eagle Systems, Inc............................... Texas
Sanmina Ireland......................................... Ireland
Sanmina, B.V. (1)....................................... The Netherlands
</TABLE>
(1) To be incorporated.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included (or incorporation by reference) in this Form 10-K, into the
Company's previously filed Registration Statements on Form S-8 File Nos.
33-66554 and 33-90244.
ARTHUR
ANDERSEN
LLP
San Jose, California
December 19, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 29,568
<SECURITIES> 85,374
<RECEIVABLES> 30,421
<ALLOWANCES> 1,418
<INVENTORY> 32,109
<CURRENT-ASSETS> 185,323
<PP&E> 59,137
<DEPRECIATION> 24,269
<TOTAL-ASSETS> 230,541
<CURRENT-LIABILITIES> 40,014
<BONDS> 86,842
0
0
<COMMON> 169
<OTHER-SE> 103,516
<TOTAL-LIABILITY-AND-EQUITY> 230,541
<SALES> 265,076
<TOTAL-REVENUES> 265,076
<CGS> 201,531
<TOTAL-COSTS> 201,531
<OTHER-EXPENSES> 18,316
<LOSS-PROVISION> 527
<INTEREST-EXPENSE> (83)
<INCOME-PRETAX> 45,312
<INCOME-TAX> 17,217
<INCOME-CONTINUING> 28,095
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,095
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 1.50
</TABLE>
