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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, 1997.
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)
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<S> <C>
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)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 954-5500
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 $1,385,072,000 as of September 30, 1997, 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, 1997, the
Registrant had outstanding 17,317,842 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 1998 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, 1997.
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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,
Durham, North Carolina and Guntersville, Alabama. Golden Eagle's manufacturing
facility is located in Carrollton, Texas. In addition, as a result of Sanmina's
recent acquisition of Elexsys International, Inc. ("Elexsys"), Sanmina has added
new manufacturing and assembly plants in Northern California, Southern
California, Nashua, New Hampshire and Peterborough, England. Sanmina has also
recently expanded its operations internationally with the opening of a new EMS
facility in the Dublin, Ireland area in June 1997.
Sanmina was formed in 1989 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) 954-5500. The Company's former main telephone number,
(408) 435-8444, remains in service.
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 of 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 1997 market for the EMS industry is $34 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 1997 were $1.4 billion and $8.5 billion respectively,
and approximately 40% of backplane assemblies and 10% 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 $6.5 billion. In June 1997, Sanmina opened an EMS facility
in Dublin, Ireland to service the European market, principally western Europe.
The total EMS market for Western Europe in 1997 was estimated at $13.5 billion.
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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. Since 1993, Sanmina has
significantly expanded and upgraded its operations through the opening of
and acquisition of new facilities in Richardson, Texas, San Jose,
California, Manchester, New Hampshire and Durham, North Carolina. In
November 1996, Sanmina acquired the former Comptronix Corporation
contract manufacturing facilities located in Guntersville, Alabama and,
in November 1997, Sanmina acquired Elexsys, which has facilities in
Northern and Southern California, New Hampshire and England. These
facilities provide the Company with operations in key geographic markets
for the electronics industry. In June 1997, Sanmina opened 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 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 has been moved to various Sanmina facilities.
In November 1997, Sanmina acquired Elexsys, a major EMS company focused
on the mid-volume sector of the electronic interconnect industry. 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
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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 recently made significant
capital expenditures 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 1997 sales in
each of these segments.
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Telecommunications............................................ 55%
Networking (Data Communications).............................. 24%
Industrial and Medical Instrumentation........................ 15%
Computer Systems.............................................. 6%
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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. The November 1997 acquisition of Elexsys also
provided the Company with several major new customer accounts.
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 1997, sales to DSC Communications accounted for more than 10% of
Sanmina's net sales. In fiscal 1996, sales to DSC Communications and Alcatel
each accounted for more than 10% of Sanmina's net sales. In addition, during
fiscal 1997 and 1996, Sanmina's ten largest customers accounted for
approximately 63% and 65%, 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.
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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 1997, approximately 95% of Sanmina's net sales consisted of assembly
revenues and approximately 5% 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.
MANUFACTURING AND ENGINEERING
Facilities
Sanmina manufactures its products in 17 decentralized plants, consisting of
9 assembly facilities and 8 printed circuit board fabrication facilities. These
facilities include the Elexsys plants acquired in November 1997. 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, Southern California, 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.
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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 and the Golden Eagle operations have been moved into this facility.
In November 1996, Sanmina acquired the Guntersville, Alabama assembly facilities
and operations of Comptronix Corporation. This acquisition provides the Company
with manufacturing operations in the Huntsville, Alabama area, a major center of
electronics industry activity. The acquisition also provides Sanmina with
several significant new customers.
In June 1997, Sanmina opened its first overseas EMS assembly facility in
Dublin, Ireland.
In November 1997, Sanmina acquired Elexsys, which has an assembly facility
located in Northern California and printed circuit board fabrication facilities
in Northern and Southern California, Nashua, New Hampshire and Peterborough,
England.
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 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 manufac-
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ture 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.
Fifteen 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 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.
As of September 30, 1997, Sanmina holds no patents. Sanmina believes that
patents are not important competitive factors in its market.
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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 violations 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.
In addition, Elexsys is currently involved in environmental testing and
related remediation activities at certain of its facilities' locations and could
be required by regulatory authorities to undertake additional remediation
activities, including groundwater and soil remediation. Costs associated with
such remediation activities could be substantial and could have a material
adverse effect on the business, financial condition and results of operations of
Sanmina.
BACKLOG
Sanmina's backlog was $137 million at September 30, 1997 and $100.3 million
at September 30, 1996. 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, a substantial portion 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.
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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, 1997, Sanmina had 2,522 full-time employees, including
2,384 in manufacturing and engineering, 78 in marketing and sales, and 60 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.
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
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
10
<PAGE> 11
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 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, the January 1996 acquisition of Golden Eagle and the
November 1997 acquisition of Elexsys, 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 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 Durham, North Carolina assembly facility and its
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 Elexsys operations acquired in
November 1997 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 particular, the acquisition of
Elexsys is the largest single acquisition undertaken by Sanmina to date, and the
successful combination of Sanmina and Elexsys will require substantial effort
from each company, including the integration and coordination of sales and
marketing efforts. The diversion of the attention of management and any
difficulties encountered in the transition process, including, the interruption
of, or a loss of momentum in, Elexsys' activities, problems associated with
integration of management information and reporting systems, and delays in
implementation of consolidation plans, could have an adverse impact on Sanmina's
ability to realize the anticipated benefits of the Merger, and there can be no
assurance that any such benefits will be realized. 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.
11
<PAGE> 12
Risks Associated with International Operations. The Company opened its
first overseas facility, located in Dublin, Ireland, in June 1997. In addition,
the Company has recently obtained a printed circuit board fabrication facility
in Peterborough, England as a result of the acquisition of Elexsys. 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
International operations will contribute positively to the Company's business,
financial condition and results of operations. Furthermore, difficulties
encountered in scaling up production at overseas facilities or in coordinating
the Company's United States and international operations, as well as any failure
of the international 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 indebtedness, the Company's principal and
interest obligations have increased substantially. In addition, Elexsys had
$22.1 million of long-term obligations outstanding as of its September 1997
fiscal year end. As a result, the acquisition of Elexsys has increased Sanmina's
leverage. 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 1.0
million square feet. Except for the Company's 72,500 square foot Manchester, New
Hampshire facility, the newly acquired 72,000 square foot facility occupied by
the Company's Golden Eagle subsidiary, a 70,000 square foot former Elexsys
facility located in Nasuha, New Hampshire and the Company's 50,000 square foot
facility located in Dublin, Ireland, all of the facilities are leased, and the
leases for these facilities expire from 1998 through 2009. 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
12
<PAGE> 13
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, Durham, North Carolina and Guaymas,
Mexico. Golden Eagle's facility, which is owned by the Company, is located in
Carrollton, Texas. 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.
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 1997 annual report to stockholders under the caption
"quarterly results."
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference to page
12 of the Registrant's 1997 annual report to stockholders under the caption
"Selected 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
14 through 20 of the Registrant's 1997 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
22 through 30 of the Registrant's 1997 annual report to stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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 1998 Annual Meeting of Stockholders (the "Proxy Statement") to be
held January 30, 1998 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.
13
<PAGE> 14
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.......................... 46 Chairman and Chief Executive Officer
Randy W. Furr...................... 43 President and Chief Operating Officer
Vice President and Chief Financial
Bernard J. Whitney................. 41 Officer
Michael J. Landy................... 43 Vice President of Sales and Marketing
</TABLE>
Mr. Sola co-founded Sanmina in 1980 and initially held the position of Vice
President of Sales and Marketing 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. 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. Whitney joined Sanmina as Vice President and Chief Financial Officer in
August 1997. From June 1995 to July 1997, he worked for Network General
Corporation, a network fault and performance management solutions company,
serving first as Corporate Controller, then in May 1996, he was named Vice
President of Finance. Prior to joining Network General, he worked for Conner
Peripherals serving in a variety of positions in corporate finance from February
1987 to June 1995.
Mr. Landy became Vice President of Sales and Marketing at Sanmina in
October 1997. He joined Sanmina in August 1993 as General Manager of the
Company's Richardson, Texas operations and in 1995 was promoted to Vice
President Assembly Operations for the Central Region of the United States. Prior
to his employment with Sanmina, Mr. Landy held a senior management position with
a telecommunications corporation.
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.
14
<PAGE> 15
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 22 through 31 of the Registrant's 1997 annual report to
stockholders:
Report of Independent Public Accountants
Consolidated Balance Sheets, As of September 30, 1997 and 1996
Consolidated Statements of Operations, Years Ended September 30,
1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity, Years Ended
September 30, 1997, 1996 and 1995
Consolidated Statements of Cash Flows, Years Ended September 30,
1997, 1996 and 1995
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, 1997.
On November 21, 1997, the Company filed with the Commission a report on
Form 8-K relating to the acquisition of Elexsys. 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
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------
<C> <S>
3.2(8) 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.
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------
<C> <S>
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)(5) 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).
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.
10.26(9) Agreement and Plan of Merger dated July 22, 1997 among Registrant, SANM
Acquisition Subsidiary, Inc. and Elexsys International, Inc.
11.1 Statement of Computation of Earnings Per Share
13 Annual Report to Stockholders.
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
</TABLE>
- ---------------
(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.
16
<PAGE> 17
(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.
(8) 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,
1997.
(9) Incorporated by reference to exhibit 2.1 previously filed with Registrant's
Report on Form 8-K filed with the SEC on November 21, 1997
17
<PAGE> 18
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
By: /s/ JURE SOLA
------------------------------------
Jure Sola
Chairman and Chief Executive Officer
Date: December 22, 1997
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>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ ------------------
<C> <S> <C>
/s/ JURE SOLA Chairman, Chief Executive December 22, 1997
- ------------------------------------------ Officer and Director
Sure Sola (Principal Executive Officer)
/s/ RANDY W. FURR Pesident and Chief Operating December 22, 1997
- ------------------------------------------ Officer
Randy W. Furr
/s/ BERNARD WHITNEY Vice President and Chief December 22, 1997
- ------------------------------------------ Financial Officer (Principal
Bernard Whitney Financial and Accounting
Officer)
/s/ NEIL BONKE Director December 22, 1997
- ------------------------------------------
Neil Bonke
/s/ JOHN BOLGER Director December 22, 1997
- ------------------------------------------
John Bolger
/s/ BERNARD VONDERSCHMITT Director December 22, 1997
- ------------------------------------------
Bernard Vonderschmitt
/s/ MARIO M. ROSATI Director December 22, 1997
- ------------------------------------------
Mario M. Rosati
</TABLE>
18
<PAGE> 19
SCHEDULE II
SANMINA CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts and Returns
Fiscal year ended September 30, 1995............ $ 624 $ 361 $ 56 $ 929
Fiscal year ended September 30, 1996............ $ 929 $ 527 $ 38 $1,418
Fiscal year ended September 30, 1997............ $1,418 $1,044 $218 $2,244
</TABLE>
S-1
<PAGE> 20
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 21, 1997. 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 21, 1997
S-2
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------------------------------------------------------------------------------
<S> <C>
11.1 Statement of Computation of Earnings Per Share
13 Annual Report to Stockholders
21 Subsidiaries of the Registrant
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11.1
SANMINA CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRIMARY FULLY DILUTED
------- -------------
<S> <C> <C>
YEAR ENDED SEPTEMBER 30, 1997
Net income............................................................ $40,902 $40,902
Add interest expense on convertible subordinated debentures, net of
tax................................................................. -- 3,101
------- -------
$40,902 $44,003
======= =======
Weighted average shares outstanding................................... 17,104 17,104
Net effect of dilutive stock options.................................. 1,265 1,538
Assumed conversion of subordinated debentures -- 3,059
------- -------
Common and common equivalent shares used in computing per share
amounts............................................................. 18,369 21,701
======= =======
Net income per share.................................................. $ 2.23 $ 2.03
======= =======
YEAR ENDED SEPTEMBER 30, 1996
Net income............................................................ $28,095 $28,095
Add interest expense on convertible subordinated debentures, net of
tax................................................................. -- 3,151
------- -------
$28,095 $31,246
======= =======
Weighted average shares outstanding................................... 16,657 16,657
Net effect of dilutive stock options.................................. 875 1,096
Assumed conversion of subordinated debentures -- 3,059
------- -------
Common and common equivalent shares used in computing per share
amounts............................................................. 17,532 20,812
======= =======
Net income per share.................................................. 1.60 1.50
======= =======
YEAR ENDED SEPTEMBER 30, 1995
Net income............................................................ 16,954 16,954
Add interest expense on convertible subordinated debentures, net of
tax................................................................. -- 396
------- -------
$16,954 $17,350
======= =======
Weighted average shares outstanding................................... 16,204 16,204
Net effect of dilutive stock options.................................. 608 802
Assumed conversion of subordinated debentures......................... -- 386
Common and common equivalent shares used in computing per share
amounts............................................................. 16,812 17,392
======= =======
Net income per share.................................................. $ 1.01 $ 1.00
======= =======
</TABLE>
<PAGE> 1
EXHIBIT 13
FINANCIAL TABLE OF CONTENTS
Selected Financial Data {12}
Management's Discussion and Analysis {14}
Statement of Financial Responsibility {21}
Consolidated Balance Sheets {22}
Consolidated Statements of Operations {23}
Consolidated Statements of Stockholders' Equity {24}
Consolidated Statements of Cash Flows {25}
Notes to Consolidated Financial Statements {26}
Report of Independent Public Accountants {31}
<PAGE> 2
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales................................ $405,212 $265,076 $167,787 $115,125 $88,474
Gross profit............................. 94,764 63,545 39,110 27,950 20,900
Selling, general and administrative
expenses............................... 24,145 16,593 11,752 9,240 7,830
Amortization expense..................... 2,006 1,723 291 665 665
Write-off of goodwill.................... -- -- -- 11,190 --
Provision for plant closing costs........ 1,332 -- -- 3,629 --
Operating income......................... 67,281 45,229 27,067 3,225 12,405
Interest income (expense), net........... (228) 83 924 369 (2,538)
Income (loss) before provision for income
taxes and extraordinary item........... 67,053 45,312 27,991 3,595 9,867
Net income (loss)........................ $ 40,902 $ 28,095 $ 16,954 $ (3,109) $ 5,097
======== ======== ======== ======== =======
Earnings (loss) per share:
Income (loss) before extraordinary
item................................... $ 2.03 $ 1.50 $ 1.00 $ (0.20) $ 0.52
Extraordinary item....................... -- -- -- -- (0.07)
Net income (loss) per share -- fully
diluted................................ $ 2.03 $ 1.50 $ 1.00 $ (0.20) $ 0.45
Shares used in computing per share
amounts................................ 21,701 20,812 17,392 15,488 11,448
======== ======== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital........................... $173,977 $145,309 $128,904 $38,055 $ 8,394
Total assets.............................. 303,017 230,541 188,106 64,467 45,553
Long-term debt............................ 86,250 86,250 86,250 -- 4,438
Stockholders' equity...................... 155,883 103,685 67,181 46,738 26,123
======== ======== ======== ======= =======
</TABLE>
Sanmina Corporation (12)
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
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 ("OEM") in the electronics industry. Sanmina's
electronics 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.
Sanmina's fabrication and assembly plants are located in Northern California,
Richardson, Texas, Manchester, New Hampshire, Durham, North Carolina, and
Guntersville, Alabama. Golden Eagle's manufacturing facility is located in
Carrollton, Texas. In addition, as a result of Sanmina's recent acquisition of
Elexsys International, Inc. ("Elexsys"), Sanmina has added new fabrication and
assembly plants in Northern California, Southern California, Nashua, New
Hampshire and Peterborough, England. Sanmina has also recently expanded its
operations internationally with the opening of a new facility in Dublin, Ireland
in June 1997.
Sanmina has pursued, and intends to continue to pursue, business acquisition
opportunities, particularly when these opportunities have the potential to
enable Sanmina to increase its net sales while maintaining operating margin, to
access new geographic markets, to implement Sanmina's vertical integration
strategy and/or to obtain facilities and equipment on terms more favorable than
those generally available in the market. In this regard, on July 22, 1997,
Sanmina entered into an Agreement and Plan of Merger with Elexsys providing for
the acquisition of Elexsys by Sanmina in a stock-for-stock merger transaction
under which each share of Elexsys Common Stock would be converted into 0.33
shares of Sanmina Common Stock. The acquisition was completed on November 6,
1997.
This report contains forward-looking statements within the meaning of Section
72A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. 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, including, in particular, those factors described
under "Factors Affecting Operating Results."
RESULTS OF OPERATION
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,
------------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 76.6 76.0 76.7
Gross profit 23.4 24.0 23.3
Operating expenses:
Selling, general and
administrative expenses 6.0 6.3 7.0
Amortization of goodwill 0.5 0.6 0.2
Plant closure costs 0.3 -- --
Total operating expenses 6.8 6.9 7.2
Operating income 16.6 17.1 16.1
Interest income, net -- -- 0.6
Provision for income taxes 6.5 6.5 6.6
Net income 10.1% 10.6% 10.1%
</TABLE>
Net Sales Net sales in fiscal 1997 increased 53% to $405.2 million from $265.1
million in fiscal 1996 which was an increase of 58% from fiscal 1995 sales of
$167.8 million. The increase in net sales for fiscal 1997 was the result of
increased volumes of business from established customers, the addition of
several new major customers during the year and the addition of customers
resulting from two acquisitions completed during November 1996. The increase in
net sales for fiscal 1996 was the result of increased volumes of business from
established customers, the addition of new customers during the year and the
addition of customers resulting from the acquisition of Golden Eagle in January
1996. EMS assembly revenues represented 95% of net sales in 1997 as compared to
92% in 1996
Sanmina Corporation (14)
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
and 83% in 1995. 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 was 23.4%, 24.0% and 23.3% in fiscal 1997, 1996 and
1995 respectively. The changes in gross margin are principally attributable to
normal changes in the mix of products shipped to certain customers and changes
in the 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, including the former Elexsys operations.
Selling, General and Administrative Expenses Selling, general and
administrative expenses for fiscal 1997, 1996 and 1995 increased to $24.1
million, $16.6 million and $11.8 million respectively, but decreased as a
percentage of sales in each of those years. The absolute dollar increases were
primarily the result of increased expenditures to support higher sales volume.
The percentage decreases 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.
Amortization of Goodwill The Company recorded $2.0 million and $1.7 million in
amortization expense for fiscal years 1997 and 1996, respectively. Fiscal 1997
reflects a full year of amortization for both ASI and Golden Eagle. Fiscal 1996
reflects a full year of amortization for ASI and nine months of goodwill
amortization related to the Golden Eagle acquisition.
Provision for Plant Closing Costs In 1997, the Company recorded a charge to
operations of approximately $1.3 million related to the closure of one of its
printed circuit board fabrication facilities. This closure is a result 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. The charge consists primarily of the costs associated with the
remaining lease commitments on the facility and the write-off of certain
property, plant and equipment.
Net Interest Income (Expense) In fiscal 1997, net interest expense was $.2
million as compared to net interest income of $.1 million and $.9 million in
fiscal 1996 and 1995 respectively. For fiscal 1997, the decrease in net interest
income was a result of a decrease in short-term investments. For fiscal 1996,
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.
Provision for Income Taxes For fiscal 1997, 1996 and 1995, the Company's
effective tax rate was 39.0%, 38.0% and 39.4%, respectively. The effective rate
approximates the statutory rate primarily as a result of substantially all of
the Company's operations being located within the United States. The lower rate
in 1996 as compared to 1995 reflects the increased benefit of interest earned on
tax-free investments.
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 callable for
redemption by the Company in 1998 and will mature in 2002.
The Company generated cash from operating activities of $48.4 million, $26.8
million and $23.2 million in fiscal years 1997, 1996 and 1995, respectively.
These increases in cash generated from operations were primarily due to the
Company's increase in profitability.
Cash used for investing activities, including net purchases of short-term
investments, during fiscal 1997, 1996 and 1995 was $43.2 million, $105.7 million
and $14.1 million, respectively. Investing
Sanmina Corporation (15)
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
activities during fiscal year 1997 primarily relate to the November 1996
acquisition of the assets of the former Comptronix Corporation for which the
Company paid cash of approximately $17.6 million and investment in property,
plant, and equipment of $30.2 million. 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 California and
New Hampshire.
Cash provided by financing activities was $6.7 million, $1.2 million and $83.5
million in fiscal 1997, 1996 and 1995, respectively. Financing activities in
fiscal 1997 and 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.
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 $174.0 million at September 30,
1997 and $145.3 million at September 30, 1996. The Company has evaluated and
will continue to evaluate possible business acquisitions.
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 1998. The Company may seek to
raise additional capital through the issuance of either debt or equity
securities. Debt financing may require the Company to pledge assets as
collateral and comply with financial ratios and covenants. Equity financing may
result in dilution to stockholders.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128") which
is required to be adopted by the Company in its first quarter of fiscal 1998. At
that time, the Company will be required to change the method currently used to
compute earnings per share and to restate earnings per share amounts for all
prior periods. The Company does not expect the effect of adopting SFAS 128 to
have a material impact on earnings per share.
QUARTERLY RESULTS
The following table contains selected unaudited quarterly financial data for the
eight fiscal quarters in the period ended September 30, 1997. In management's
opinion, the unaudited quarterly data has been prepared on the same basis as the
audited annual 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.
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------------------------------------------------------------
(in thousands, except percentages and per share amounts) 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
Quarter First Second Third Fourth First Second Third Fourth
- ------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 88,868 $ 96,700 $105,406 $114,238 $ 52,170 $ 63,222 $ 71,182 $ 78,502
Gross profit 21,063 22,705 24,573 26,423 12,626 15,180 17,024 18,715
Gross margin 23.7% 23.5% 23.3% 23.1% 24.2% 24.0% 23.9% 23.8%
Operating income 15,161 16,408 17,822 17,890 9,022 10,688 12,061 13,458
Net income 9,174 9,913 10,820 10,995 5,687 6,605 7,452 8,351
Net income per share (fully diluted) $ 0.47 $ 0.50 $ 0.54 $ 0.54 $ 0.32 $ 0.36 $ 0.40 $ 0.44
Shares used in computing
per share amounts 21,267 21,271 21,547 21,814 20,330 20,632 20,790 20,967
Common stock prices:
High $ 55.00 $ 64.00 $ 66.00 $ 90.13 $ 27.75 $ 31.50 $ 37.75 $ 40.50
Low 38.13 40.13 43.75 $ 61.09 19.75 22.00 27.00 $ 21.00
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Sanmina Corporation (16)
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
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, 1997, the following
factors should be carefully considered by prospective investors in the Company's
securities.
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.
For fiscal 1997, sales to DSC represented more than 10% of the Company's net
sales. For fiscal 1996, sales to DSC Communications and Alcatel represented more
than 10% of the Company's net sales. In addition, during fiscal 1997 and 1996,
sales to Sanmina's ten largest customers accounted for 63% and 65% respectively,
of Sanmina'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
Sanmina Corporation (17)
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
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 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, the January 1996 acquisition of
Golden Eagle Systems, and the November 1997 acquisition of Elexsys International
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 Durham, North Carolina EMS
facility and its 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 Elexsys
operations acquired in November 1997 or any future acquisitions, 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 particular, the
acquisition of Elexsys is the largest single acquisition undertaken by Sanmina
to date, and the successful combination of Sanmina and Elexsys will require
substantial effort from each company, including the integration and coordination
of sales and marketing efforts. The diversion of the attention of management and
any difficulties encountered in the transition process, including, the
interruption of, or a loss of momentum in, Elexsys' activities, problems
associated with integration of management information and reporting systems, and
delays in implementation of consolidation plans, could have an adverse impact on
Sanmina's ability to realize the anticipated benefits of the Merger, and there
can be no assurance that any such benefits will be realized. 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 opened its first
overseas facility, located in Dublin, Ireland, in June of 1997. In addition, the
Company has recently obtained a printed circuit board fabrication facility in
Peterborough, England as a result of the acquisition of Elexsys. A number of
risks are inherent in international operations and transactions. International
sales and
Sanmina Corporation (18)
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
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 international 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
international 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 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 of 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.
In addition, Elexsys is currently involved in environmental testing and related
remediation activities at certain of its facilities' locations and could be
required by regulatory authorities to undertake additional remediation
activities, including groundwater and soil remediation. Costs associated with
such remediation activities could be substantial and could have a material
adverse effect on the business, financial condition and results of operations of
Sanmina.
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
Sanmina Corporation (19)
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
interest obligations have increased substantially. In addition, Elexsys had $22
million of long-term obligations outstanding as of its September 1997 fiscal
year end. As a result, the acquisition of Elexsys has increased Sanmina's
leverage. 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.
[NET SALES GRAPH]
[SELLING, GENERAL AND ADMINISTRATIVE EXPENSES GRAPH]
[OPERATING INCOME GRAPH]
Sanmina Corporation (20)
<PAGE> 10
STATEMENT OF FINANCIAL RESPONSIBILITY
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, 1997, 1996, and 1995 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, 1997
<TABLE>
<S> <C> <C>
/s/ JURE SOLA /s/ RANDY W. FURR /s/ BERNARD J. WHITNEY
Jure Sola Randy W. Furr Bernard J. Whitney
Chairman of the Board and President and Chief Operating Officer Vice President and Chief Financial Officer
Chief Executive Officer
</TABLE>
Sanmina Corporation (21)
<PAGE> 11
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of September 30,
----------------------
(in thousands, except per share amounts) 1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 41,447 $ 29,568
Short-term investments 80,804 85,374
Accounts receivable, net of allowance for
doubtful accounts of $2,244 and $1,418 51,329 30,421
Inventories 49,508 32,109
Deferred income taxes 9,115 6,852
Prepaid expenses 2,106 999
-------- --------
Total current assets 234,309 185,323
-------- --------
Property and equipment:
Land and buildings 9,984 3,603
Machinery and equipment 71,113 47,575
Furniture and fixtures 598 547
Leasehold improvements 14,062 7,412
-------- --------
95,757 59,137
Less: Accumulated depreciation and amortization 34,605 24,269
-------- --------
Net property and equipment 61,152 34,868
-------- --------
Goodwill, net of accumulated amortization of $4,018 and $2,013 6,009 8,014
Deposits and other 1,547 2,336
-------- --------
Total assets $303,017 $230,541
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 52 $ 41
Accounts payable 42,649 24,401
Accrued compensation and related liabilities 8,032 6,051
Other accrued liabilities 7,382 4,117
Income taxes payable 2,217 5,404
-------- --------
Total current liabilities 60,332 40,014
-------- --------
Long-term liabilities:
Convertible subordinated debt 86,250 86,250
Other liabilities 552 592
-------- --------
Total long-term liabilities 86,802 86,842
-------- --------
Commitments and contingencies (note 4)
Stockholders' Equity:
Preferred stock, $.01 par value:
Authorized: 5,000 shares
Outstanding: none -- --
Common stock, $.01 par value:
Authorized: 75,000 shares
Outstanding: 17,318 shares and 16,890 shares 173 169
Additional paid-in capital 72,770 61,520
Unrealized holding gain on investments 61 19
Retained earnings 82,879 41,997
-------- --------
Total stockholders' equity 155,883 103,685
-------- --------
Total liabilities and stockholders' equity $303,017 $230,541
======== ========
</TABLE>
See accompanying notes.
Sanmina Corporation (22)
<PAGE> 12
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended September 30,
-----------------------------------------
(in thousands, except per share amounts) 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 405,212 $ 265,076 $ 167,787
Cost of sales 310,448 201,531 128,677
--------- --------- ---------
Gross profit 94,764 63,545 39,110
--------- --------- ---------
Operating expenses:
Selling, general and administrative 24,145 16,593 11,752
Amortization of goodwill 2,006 1,723 291
Provision for plant closing costs 1,332 -- --
--------- --------- ---------
Total operating expenses 27,483 18,316 12,043
--------- --------- ---------
Operating income 67,281 45,229 27,067
Interest income (expense):
Interest income 4,883 5,245 1,649
Interest expense (5,111) (5,162) (725)
--------- --------- ---------
Interest income (expense), net (228) 83 924
--------- --------- ---------
Income before provision for income taxes 67,053 45,312 27,991
Provision for income taxes 26,151 17,217 11,037
--------- --------- ---------
Net income $ 40,902 $ 28,095 $ 16,954
========= ========= =========
Earnings per share:
Primary $ 2.23 $ 1.60 $ 1.01
Fully diluted 2.03 1.50 1.00
Shares used in computing per share amounts:
Primary 18,369 17,532 16,812
Fully diluted 21,701 20,812 17,392
</TABLE>
See accompanying notes.
Sanmina Corporation (23)
<PAGE> 13
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unrealized
Common Stock Additional Holding
-------------------- Paid-in Gain on Retained
(in thousands) Shares Amount Capital Investments Earnings Total
-------- -------- ---------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
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 19 41,977 103,685
Exercise of common stock options 333 3 4,789 -- -- 4,792
Issuance of common stock under
employee stock purchase plan 95 1 2,288 -- -- 2,289
Unrealized holding gain on investments -- -- -- 42 -- 42
Income tax benefit of disqualified dispositions -- -- 4,173 -- -- 4,173
Net income -- -- -- -- 40,902 40,902
------ -------- -------- --- -------- --------
BALANCE AT SEPTEMBER 30, 1997 17,318 $ 173 $ 72,770 $61 $ 82,879 $155,883
====== ======== ======== === ======== ========
</TABLE>
See accompanying notes.
Sanmina Corporation (24)
<PAGE> 14
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------------
(in thousands) 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 40,902 $ 28,095 $ 16,954
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 12,878 8,127 4,687
Provision for plant closing costs 1,332 -- --
Provision for doubtful accounts 826 527 361
Loss on disposal of fixed assets 124 25 --
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (16,705) (3,299) (6,092)
Inventories (11,883) (8,955) (4,289)
Prepaid expenses, deposits and other (751) 257 256
Accounts payable and accrued liabilities 22,173 1,550 10,304
Income tax accounts (542) 432 1,042
--------- --------- ---------
Cash provided by operating activities 48,354 26,759 23,223
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (123,416) (169,739) (13,675)
Proceeds from maturity of short-term investments 128,028 91,201 18,028
Purchases of property and equipment, net of acquisitions (30,181) (21,827) (9,925)
Purchase of certain assets of Comptronix, net of liabilities assumed (17,645) -- (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 -- -- 565
--------- --------- ---------
Cash used for investing activities (43,214) (105,652) (14,068)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on line of credit -- (1,546) --
Repayment of long-term obligations (342) (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 7,081 3,089 1,957
--------- --------- ---------
Cash provided by financing activities 6,739 1,171 83,455
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,879 (77,722) 92,610
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 29,568 107,290 14,680
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 41,447 $ 29,568 $ 107,290
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 4,777 $ 4,744 $ 76
Income taxes $ 27,995 $ 16,627 $ 10,054
</TABLE>
See accompanying notes.
Sanmina Corporation (25)
<PAGE> 15
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. Sanmina's services
consist primarily of the manufacture of complex printed circuit board assemblies
using surface mount and pin-through hole interconnection technologies,
custom-designed backplane assemblies, complex multi-layered printed circuit
boards, custom cable and wire harness assemblies and the testing and assembly of
completed systems. In addition Sanmina provides procurement and materials
management, as well as consultation on board design and manufacturability. The
Company's manufacturing plants are located in California, Texas, New Hampshire,
North Carolina, Alabama, and Ireland.
{NOTE 2} SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All intercompany
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, 1997 the
difference between the aggregate fair value and cost basis was a net unrealized
gain of $61,000. The Company's investments mature at various dates through
February 2003. 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,
---------------------
1997 1996
--------- --------
<S> <C> <C>
Municipal bonds $ 56,331 $ 65,434
Corporate bonds 43,928 38,234
--------- --------
$ 100,259 $103,668
========= ========
</TABLE>
Approximately $19.5 and $18.3 million of the total investments in debt
securities as of September 30, 1997 and 1996, 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,
---------------------
1997 1996
--------- --------
<S> <C> <C>
Raw materials $ 30,331 $ 13,797
Work-in-process 8,628 10,986
Finished goods 10,549 7,326
--------- --------
$ 49,508 $ 32,109
========= ========
</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). Leasehold improvements are amortized using the
straight-line method over the shorter of the estimated life of the asset or the
remaining term of the lease.
Goodwill. Goodwill arising from the Company's acquisitions (see Note 5) is
amortized on a straight-line basis over an 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 Per Share. Primary earnings per share is computed using the weighted
average number of shares of common stock and dilutive common stock equivalents
(using the treasury stock method). Primary earnings per share does not assume
conversion of the subordinated debentures into common shares (see Note 3). 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.
Sanmina Corporation (26)
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Stock-Based Compensation. Effective October 1, 1996, the Company adopted the
disclosure provisions of Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation." In accordance with the
provisions of SFAS 123, the Company continues to apply Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations in accounting for its stock option plans.
New Accounting Standards. In February 1997, the Financial Accounting Standards
Board (FASB) issued SFAS No. 128, "Earnings Per Share," which is required to be
adopted by the Company in its first quarter of fiscal 1998. At that time, the
Company will be required to change the method currently used to compute earnings
per share and to restate all prior periods. The Company does not expect the
effect of adopting SFAS 128 to have a material impact on earnings per share.
In February 1997, FASB issued SFAS No. 129, "Disclosure of Information about
Capital Structure," which will be adopted by the Company in fiscal 1999. SFAS
129 requires companies to disclose certain information about their capital
structure. SFAS 129 will not have a material impact on the Company's financial
statement disclosures.
In June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes standards for reporting and display of comprehensive income
and its components. SFAS 130 is effective for fiscal year 1999. Management does
not believe the adoption of SFAS 130 will have a material impact on the
Company's financial statement disclosures.
In June 1997, FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS 131 introduces a new model for segment
reporting, called the "management approach." SFAS 131 is effective for fiscal
year 1999. Management believes the adoption of SFAS 131 will increase its
disclosure requirements.
{NOTE 3} LONG-TERM DEBT
In 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 4} COMMITMENTS AND CONTINGENCIES
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 as follows (in thousands):
<TABLE>
<CAPTION>
Years Ending September 30,
--------------------------
<S> <C>
1998 $ 2,979
1999 2,414
2000 1,640
2001 836
2002 249
-------
$ 8,118
=======
</TABLE>
Rent expense under operating leases was approximately $3.1 million, $2.7 million
and $2.4 million for the years ended September 30, 1997, 1996 and 1995,
respectively.
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 5} ACQUISITIONS
On November 1, 1996, the Company purchased certain assets of Comptronix
Corporation ("Comptronix"), a contract manufacturing company based in
Guntersville, Alabama, for cash consideration of $17.6 million. The assets
included Comptronix's plant and equipment located in Guntersville, its Guaymas,
Mexico operations, customer contracts, inventories and accounts receivable. The
acquisition was accounted for as a purchase. Accordingly, the results of
operations for the year ended September 30, 1997, include the results of
operations of this business from the date of acquisition.
In connection with the acquisition, net assets acquired were as follows (in
thousands):
<TABLE>
<S> <C>
Accounts Receivable $ 5,029
Inventories 5,517
Property and equipment 7,100
-------
Net assets acquired $17,646
=======
</TABLE>
The unaudited pro forma financial information for 1996 is presented below and
combines the Company's statement of operations for the
Sanmina Corporation (27)
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
year ended September 30, 1996 with Comptronix's statement of operations for the
twelve month period ended September 30, 1996. Pro forma financial information
for 1997 has not been presented as the results of operations for the acquired
division for the one month period prior to the acquisition are not significant
and, therefore, reported results approximate pro forma results.
<TABLE>
<CAPTION>
(in thousands) Year Ended September 30, 1996
- -------------- -----------------------------
<S> <C>
(Unaudited)
Revenue $ 340,479
Net income 13,951
Net income per share $ 0.80
Shares used in calculating per share amount 17,531
</TABLE>
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 $2 million based upon the earnings
of Golden Eagle during the one-year period of January 1, 1997 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. Through September
30, 1997, such targets were not met.
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 6} PROVISION FOR PLANT CLOSING COSTS
In the fourth quarter of fiscal 1997, the Company recorded a charge to
operations of approximately $1.3 million to provide for the closure of one of
its printed circuit board fabrication facilities. This closure is a result 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. The $1.3 million charge consists primarily of the costs associated
with the remaining lease commitments on the facility and the write-off of
certain property, plant and equipment.
{NOTE 7} STOCKHOLDERS' EQUITY
Stock Option Plans. The 1990 Incentive Stock Plan 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 at amounts not less than 100% of the fair market value of the
shares on the date of the grant.
The 1995 Director Option Plan provides for the automatic grant of stock options
to outside directors of the Company or any subsidiary of the Company at amounts
not less than 100% of the fair market value of the shares on the date of grant.
The 1996 Supplemental Stock Option Plan (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, but executive officers and directors may
not be granted options under the Supplemental Plan.
Options under the three plans vest as determined by the Board of Directors and
in no event may an option have a term exceeding ten years from the date of the
grant. Total shares authorized for issuance under all plans is 4,050,000, of
which 562,396 are available for grant at September 30, 1997. Option activity
under all plans is as follows:
<TABLE>
<CAPTION>
Options Outstanding
-----------------------------
Shares Price
Available Shares Per Share
- ----------------------------------------------------------------------
<S> <C> <C> <C>
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
Authorized 1,000,000 -- --
Granted (757,400) 757,400 39.13 - 90.13
Exercised -- (333,218) 1.00 - 46.75
Cancelled 80,615 (80,615) 5.00 - 68.63
==================================================
BALANCE AT
SEPTEMBER 30, 1997 562,396 2,275,939 $ 1.00 - $90.13
==================================================
</TABLE>
Sanmina Corporation (28)
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes information regarding stock options outstanding
under the Company's option plans at September 30, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Vested and Exercisable
---------------------------------------------------- ---------------------------------
Weighted
Number Average Weighted Number Vested Weighted
Range of Outstanding Remaining Average And Exercisable Average
Exercise Prices As of 9/30/97 Contractual Life Exercise Price As of 9/30/97 Exercise Price
- --------------- ------------- ---------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
$ 1.00 - $ 12.75 569,148 6.37 $ 9.48 355,747 $ 8.98
$ 13.06 - $ 24.38 724,724 7.83 20.23 241,793 20.08
$ 25.63 - $ 45.13 811,167 9.01 38.23 135,257 35.48
$ 45.25 - $ 90.13 170,900 9.59 60.56 3,458 59.55
- --------------- ------------- ---------------- -------------- --------------- --------------
$ 1.00 - $ 90.13 2,275,939 8.02 $ 26.99 736,255 $17.73
=============== ============= ================ ============== =============== ==============
</TABLE>
Employee Stock Purchase Plan. The Company's employee stock purchase plan (the
"Purchase Plan") provides for the issuance of up to 650,000 shares of common
stock. Under the Purchase 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, 1997, 597,887 shares had been issued under the Purchase
Plan.
As of September 30, 1997, the Company has reserved the following shares of
authorized but unissued Common Stock:
<TABLE>
<S> <C>
Convertible debt 3,059,324
Stock option plans 2,838,335
Employee stock purchase plan 52,113
---------
5,949,772
=========
</TABLE>
Stock-based Compensation. The Company accounts for its stock option plans and
employee stock purchase plan under APB Opinion No. 25 and related
interpretations, under which no compensation cost has been recognized as the
exercise price per share for stock options was equal to the fair market value of
the stock on the date of grant and the Purchase Plan qualified as a
non-compensatory plan. Had compensation cost for these plans been determined
consistent with SFAS No. 123, the Company's net income and net income per share
would have been reduced to the following pro forma amounts (in thousands):
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------
1997 1996
--------- ---------
<S> <C> <C>
Net income: As reported $ 40,902 $ 28,095
Pro forma 33,236 23,832
Primary EPS: As reported $ 2.23 $ 1.60
Pro forma 1.81 1.36
Fully Diluted EPS: As reported $ 2.03 $ 1.50
Pro forma 1.67 1.30
</TABLE>
The weighted average fair values of options granted during fiscal 1996 and
fiscal 1997 were $14.92 and $26.75 per share, respectively. The fair value of
each stock option granted is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------
1997 1996
---- ----
<S> <C> <C>
Volatility 78% 78%
Risk-free interest rate 6.3% 6.2%
Dividend yield 0% 0%
Expected lives (management and directors) 6.0 yrs 6.0 yrs
Expected lives (employees) 5.6 yrs 5.6 yrs
</TABLE>
{NOTE 8} INCOME TAXES
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Federal:
Current $22,215 $16,335 $11,100
Deferred (1,535) (1,875) (2,261)
------- ------- -------
20,680 14,460 8,839
------- ------- -------
State:
Current 5,465 3,211 2,571
Deferred 6 (454) (373)
------- ------- -------
5,471 2,757 2,198
------- ------- -------
Total provision for
income taxes $26,151 $17,217 $11,037
======= ======= =======
</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):
Sanmina Corporation (29)
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Years Ended September 30,
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Federal tax at statutory rate $ 23,469 $ 15,859 $ 9,797
State income taxes,
net of federal benefit 3,292 2,225 1,596
Effect of non-deductible
goodwill amortization 692 493 78
Tax exempt interest income (436) (359) (335)
FSC benefit (530) (355) (236)
Tax credits (412) (507) (303)
Other 76 (139) 440
-------- -------- --------
Total provision for
income taxes $ 26,151 $ 17,217 $ 11,037
======== ======== ========
</TABLE>
The components of the net deferred income tax asset are as follows (in
thousands):
<TABLE>
<CAPTION>
As of September 30,
-------------------
1997 1996
------- -------
<S> <C> <C>
Cumulative temporary differences:
State taxes $ 1,128 $ 718
Accrued vacation 529 210
Allowance for doubtful accounts 849 628
Depreciation (500) 298
Inventory reserve 4,399 3,966
Accrued bonuses 58 380
Warranty reserve 287 304
Accrued plant closing costs 567 --
Other 1,497 780
------- -------
Total deferred income tax asset $ 8,814 $ 7,284
======= =======
</TABLE>
{NOTE 9} 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,
-----------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Customer - A 22.9% 25.2% 21.9%
Customer - B * 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 10} SUBSEQUENT EVENTS
In November 1997, the Company and Elexsys International Inc. (Elexsys) merged
through the issuance of 3,345,591 shares of the Company's common stock in
exchange for all of Elexsys' outstanding common stock and employee stock
options. The acquisition will be accounted for as a pooling of interests.
Sanmina Corporation (30)
<PAGE> 20
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 subsidiaries as of September 30, 1997
and 1996, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended September
30, 1997. 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
subsidiaries as of September 30, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1997 in conformity with generally accepted accounting principles.
San Jose, California /s/ ARTHUR ANDERSEN LLP
October 21, 1997 (except for the matter discussed Arthur Andersen LLP
in Note 10, as to which the date is November 6, 1997)
Sanmina Corporation (31)
<PAGE> 21
SALES OFFICES AND MARKETING LOCATIONS
SALES OFFICES MANUFACTURING LOCATIONS
Guntersville, Alabama Guntersville, Alabama
Irvine, California Fountain Valley, California
La Palma, California Fremont, California
Mission Viejo, California Irvine, California
San Jose, California Milpitas, California
Carleton Place, Canada Mountain View, California
Denver, Colorado Santa Clara, California
Peterborough, England San Jose, California
Fort Pierce, Florida Peterborough, England
Jensen Beach, Florida Dublin, Ireland
Norcross, Georgia Manchester, New Hampshire
Chicago, Illinois Nashua, New Hampshire
Dublin, Ireland Durham, North Carolina
Baltimore, Maryland Carrollton, Texas
Marlborough, Massachusetts Richardson, Texas
Minneapolis, Minnesota
Manchester, New Hampshire
Durham, North Carolina
Portland, Oregon
Brentwood, Tennessee
Austin, Texas
Carrollton, Texas
Richardson, Texas
Salt Lake City, Utah
Seattle, Washington
Wauwatosa, Wisconsin
Sanmina Corporation (32)
<PAGE> 22
CORPORATE INFORMATION
<TABLE>
<S> <C>
Board of Directors Corporate Headquarters
John Bolger (1) Sanmina Corporation
Consultant and Private Investor 355 East Trimble Road
San Jose, CA 95131
Neil Bonke (1) (2) (3) (408) 954-5500
Chairman of the Board Fax: (408) 943-1401
Electroglas, Inc.
Common Stock
Mario M. Rosati
Member Sanmina Corporation common stock
Wilson Sonsini Goodrich & Rosati is traded on the Nasdaq National Market
under the symbol SANM.
Jure Sola (2)
Chairman of the Board and Chief Executive Officer Corporate and Investor Information
Sanmina Corporation
Financial analysts, stockholders, interested
Bernard Vonderschmitt (2) (3) investors, and the financial media requesting
Chairman of the Board a copy of the Form 10-K Annual Report as filed
Xilinx, Inc. with the Securities and Exchange Commission,
or other information should contact:
(1) Member of the Audit Committee
(2) Member of Compensation Committee Bernard J. Whitney
(3) Member of Officer Stock Committee Vice President and Chief Financial Officer
Sanmina Corporation
Executive Officers 355 East Trimble Road
San Jose, CA 95131
Jure Sola (408) 954-5500
Chief Executive Officer and
Chairman of the Board of Directors Transfer Agent & Registrar
Randy W. Furr Correspondence concerning transfer
President and Chief Operating Officer requirements and lost certificates should
be addressed to the transfer agent:
Bernard J. Whitney
Vice President and Chief Financial Officer Norwest Bank Minnesota, N.A.
Stock Transfer
Michael Landy 161 North Concord Exchange
Vice President, Sales and Marketing Post Office Box 738
South St. Paul, MN 55075
Other Corporate Officers (800) 468-9716
Kelly Brooks Annual Meeting
Steve Bruton
Scott Crabtree The Annual Meeting of Shareholders
George Dudnikov of the Company will be held on
Nolan Egbert January 30, 1998 at 11:00 a.m.
Norm Evans at the Sheraton-San Jose,
Michael Giggey 1801 Barber Lane, Milpitas, CA
Larry Jean
Michael Keri Independent Public Accountants
Hari Pillai
Carter Smith Arthur Andersen LLP
Michael Sparacino San Jose, CA
Jim Ryan
Dan Vick Legal Counsel
Robin Walker Wilson Sonsini Goodrich & Rosati
Nate Woolsey Palo Alto, CA
</TABLE>
<PAGE> 1
EXHIBIT 21
List of Subsidiaries
Subsidiary Jurisidction of Incorporation
Golden Eagle Systems, Inc. Texas
Comptronix Corporation N/A
Elexsys International, Inc. Delaware
Sanmina B.V. Netherlands
Sanmina Ireland Ltd.(1) Ireland
- ---------------------------
(1) A subsidiary of Sanmina B.V.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included (or incorporated by reference) in this Form 10-K, into
the Company's previously filed Registration Statements on Form S-8 File Nos.
333-23565, 33-66554 and 33-90244.
ARTHUR ANDERSEN LLP
San Jose, California
December 17, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 41,447
<SECURITIES> 80,804
<RECEIVABLES> 51,329
<ALLOWANCES> 2,244
<INVENTORY> 49,508
<CURRENT-ASSETS> 234,309
<PP&E> 95,757
<DEPRECIATION> 34,605
<TOTAL-ASSETS> 303,017
<CURRENT-LIABILITIES> 60,332
<BONDS> 86,802
0
0
<COMMON> 173
<OTHER-SE> 155,710
<TOTAL-LIABILITY-AND-EQUITY> 303,017
<SALES> 405,212
<TOTAL-REVENUES> 405,212
<CGS> 310,448
<TOTAL-COSTS> 310,448
<OTHER-EXPENSES> 27,483
<LOSS-PROVISION> 1,044
<INTEREST-EXPENSE> (228)<F1>
<INCOME-PRETAX> 67,053
<INCOME-TAX> 26,151
<INCOME-CONTINUING> 40,902
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,902
<EPS-PRIMARY> 2.23
<EPS-DILUTED> 2.03
<FN>
<F1>Interest Expense is net of Interest Income; the net amount is an Interest
Expense.
</FN>
</TABLE>
