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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 OCTOBER 2, 1999.
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 INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
2700 NORTH FIRST STREET, SAN JOSE, CA 95134
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 964-3500
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 $4,351,055,645 as of October 2, 1999, 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 October 2, 1999, the
Registrant had outstanding 58,891,980 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 2000 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 October 2, 1999.
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PART I
ITEM 1. BUSINESS
THE COMPANY
Sanmina is a leading independent provider of customized integrated
electronic manufacturing services ("EMS"), including turnkey electronic assembly
and manufacturing management services, to original equipment manufacturers
("OEMs") 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 plane
assemblies, fabrication of complex multi-layered printed circuit boards,
electronic enclosure systems 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 manufacturing. Sanmina, through its Sanmina Cable Systems ("SCS")
subsidiary (formerly known as Golden Eagle Systems), also manufactures custom
cable and wire harness assemblies for electronic 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 communications, medical and
industrial instrumentation and high-speed computer sectors. Sanmina's assembly
plants are located in Northern California, Richardson, Texas, Manchester, New
Hampshire, Durham, North Carolina, Guntersville, Alabama, Calgary, Alberta,
Canada and Dublin, Ireland. Sanmina's printed circuit board fabrication
facilities are located in Northern California, Southern California, and Nashua,
New Hampshire. SCS's manufacturing facility is located in Carrollton, Texas. As
a result of Sanmina's November 1998 merger with Altron Inc. ("Altron"), Sanmina
has added new fabrication and assembly plants in the Boston, Massachusetts area,
Northern California, and Plano, Texas. In addition, as a result of Sanmina's
mergers with Telo Electronics Incorporated ("Telo") and Manu-Tronics, Inc.
("Manu-Tronics") in December 1998 and March 1999 respectively, Sanmina has added
new assembly plants in San Jose, California and the greater Chicago area. As
part of Sanmina's agreement to acquire certain assembly operations from Nortel
Networks Corporation, Sanmina added another assembly plant in Calgary, Alberta,
Canada and Chateaudun, France on October 1, 1999 and November 3, 1999,
respectively. As part of Sanmina's acquisition of Devtek Electronics Packaging
Systems Division on October 5, 1999, Sanmina added an enclosure facility in
Toronto, Ontario, Canada.
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 assets while maintaining operating margins,
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 particular, Sanmina expects that it
will continue to pursue opportunities to acquire assembly operations being
divested by electronics industry OEMs.
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 2700 North First Street, San Jose, California 95134. Sanmina's
telephone number is (408) 964-3500.
Sanmina and the Sanmina logo are trademarks of Sanmina. Trademarks of other
corporations are also referred to in this report.
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This Report on Form 10-K contains certain forward looking statements
regarding future events with respect to Sanmina. 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."
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 are
increasingly 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
knowledge.
- 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 lifecycles, 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.
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.
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- 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
Sanmina Cable Systems provide Sanmina with further opportunities to
leverage its vertical integration. By manufacturing printed circuit
boards, electronic enclosure systems, 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 greater control over
quality, delivery and cost, and enables Sanmina 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 communications, industrial and medical
instrumentation and computer sectors. 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. In
June 1997, Sanmina opened an EMS facility in the Dublin, Ireland area to
serve customers in the European market. In November 1997, Sanmina
acquired Elexsys, which has facilities in Northern and Southern
California, and New Hampshire. In November 1998, Sanmina acquired Altron,
which has facilities in the Boston, Massachusetts area. Also in November
1998, Sanmina acquired a facility in Calgary, Alberta, Canada from Harris
Corporation. In addition, as a result of Sanmina's acquisitions of Telo
and Manu-Tronics in December 1998 and March 1999, Sanmina has added new
facilities in San Jose, California and the greater Chicago area. These
facilities provide Sanmina with operations in key geographic markets for
the electronics industry. 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. 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 Systems, now known as Sanmina Cable Systems,
the November 1997 merger with Elexsys, the November 1998 merger with
Altron, the December 1998 merger with Telo and the March 1999 merger with
Manu-Tronics. In addition, Sanmina has in other instances acquired
selected assets, principally equipment, inventory and customer contracts
and, in certain cases, facilities or facility leases. Acquisitions of
this nature completed by Sanmina 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 November 1998, Sanmina acquired a facility in Calgary,
Alberta, Canada from Harris Corporation. As part of Sanmina's agreement
to acquire certain assembly operations from Nortel Networks Corporation,
Sanmina added another assembly plant in Calgary, Alberta, Canada and
Chateaudun, France on October 1, 1999 and November 3, 1999, respectively.
As part of Sanmina's acquisition of Devtek Electronics Packaging Systems
Division on October 5, 1999, Sanmina added an enclosure facility in
Toronto, Ontario, Canada. Sanmina intends to continue to evaluate and
pursue 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, Sanmina 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
communications (telecommunications and networking), medical and industrial
instrumentation and high-speed computer systems segments of the electronics
industry. The following table shows the estimated percentage of Sanmina's fiscal
1999 sales in each of these segments.
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Communications.............................................. 70%
Medical and Industrial Instrumentation...................... 16
High-Speed Computer Systems................................. 14
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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 Sanmina's direct sales personnel, rather than from corporate
headquarters, in order to provide for greater accountability and responsiveness.
Sanmina 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 Sanmina with several new key customer accounts with
significant growth potential. In addition, the November 1997 merger with
Elexsys, the November 1998 merger with Altron, the December 1998 merger with
Telo, and the March 1999 merger with Manu-Tronics also provided Sanmina with
several major new customer accounts. Sanmina's October and November 1999
acquisitions of certain Nortel Networks assembly operations will provide Sanmina
with an expanded customer relationship with Nortel.
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 Sanmina's net sales.
During fiscal 1999 and 1998, sales to Sanmina's ten largest customers accounted
for 54% and 53%, respectively, of Sanmina's net sales. For fiscal 1999, sales to
Cisco Systems represented more than 10% of Sanmina's net sales. For fiscal 1998,
sales to Cisco Systems and DSC Communications represented more than 10% of
Sanmina's net sales. Although there can be no assurance that Sanmina's principal
customers will continue to purchase products and services from Sanmina at
current levels, if at all, Sanmina expects to continue to depend upon its
principal customers for a significant portion of its net sales. Sanmina'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 Sanmina'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 has been
manufacturing backplane assemblies since 1981 and began providing electronic
assembly and turnkey manufacturing management services, including the assembly
and testing of sophisticated electronic systems, in October 1993.
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 Sanmina, 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 over ten thousand dollars per unit. Prices of printed circuit
boards manufactured by Sanmina typically range from several dollars to $10,000
per unit. Prices of custom cable assemblies manufactured by Sanmina typically
range from several dollars to $10,000 per unit.
MANUFACTURING AND ENGINEERING
Facilities. Sanmina manufactures its products in 31 decentralized plants,
consisting of 24 assembly facilities and 7 printed circuit board fabrication
facilities. Generally, each of Sanmina's decentralized plants has its 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 Park area, New
England, the greater Chicago area 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.
In November 1998, Sanmina entered into a lease with an option to purchase a
330,000 square foot campus facility located in San Jose, California. The
facility consists of four buildings on a single site. Sanmina intends to
consolidate its corporate headquarters and some of its San Jose area assembly
operations at this facility. As of October 2, 1999, approximately 75% of the
buildings were occupied. The remaining buildings will be occupied in fiscal year
2000. Sanmina's San Jose area printed circuit board fabrication facilities will
not be consolidated at the campus facility and will remain at their current
locations.
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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 is capable of
efficiently producing commercial quantities of printed circuit boards with up to
52 layers and circuit track widths as narrow as three mils. The manufacture of
complex multilayer interconnect products often requires the use of sophisticated
circuit interconnections between certain layers (called "blind or buried vias")
and adherence to strict electrical characteristics to maintain consistent
circuit transmission speeds (referred to as "controlled impedance"). These
technologies require very tight lamination and etching tolerances and are
especially critical for printed circuit boards with ten or more layers.
The manufacture of printed circuit boards involves several steps: etching
the circuit image on copper-clad epoxy laminate, pressing the laminates together
to form a panel, drilling holes and depositing copper or other conductive
material to form the inter-layer electrical connections and, lastly, cutting the
panels to shape. Certain advanced interconnect products require additional
critical steps, including dry film imaging, photoimageable soldermask
processing, computer controlled drilling and routing, automated plating and
process controls and achievement of controlled impedance. Manufacture of printed
circuit boards used in backplane assemblies requires specialized expertise and
equipment because of the larger size of the backplane relative to other printed
circuit boards and the increased number of holes for component mounting.
The manufacture of SMT and PTH assemblies involves the attachment of
various electronic components, such as integrated circuits, capacitors,
microprocessors and resistors to printed circuit boards. The manufacture of
backplane assemblies involves attachment of electronic components, including
printed circuit boards, integrated circuits and other components, to the
backplane, which is a large printed circuit board manufactured by Sanmina.
Sanmina uses SMT, PTH and press-fit technologies in backplane assembly.
All 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, Sanmina 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.
Sanmina 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 Sanmina 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 Sanmina's SMT and PTH
assemblies and its backplane assembly business, thereby adversely affecting
Sanmina's results of operations. Due to the continued expansion of Sanmina's
contract manufacturing and backplane assembly businesses as a
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percentage of Sanmina's net sales, component shortages and price fluctuations
would adversely affect Sanmina's results of operations to a greater extent than
in prior fiscal years.
TECHNOLOGY DEVELOPMENT
Sanmina's close involvement with its customers at the early stages of their
product development positions it at the leading edge of technical innovation in
the manufacturing of SMT and PTH assemblies, backplane assemblies, and printed
circuit boards. Sanmina selectively seeks orders that require the use of
state-of-the-art materials or manufacturing techniques in order to further
develop its manufacturing expertise. Current areas of manufacturing process
development include reducing circuit widths and hole sizes, establishing new
standards for particle contamination and developing new manufacturing processes
for the use with new materials and new surface mount connector and component
designs.
Recent developments in the electronics industry have necessitated
improvements in the types of laminate used in the manufacture of interconnect
products. New laminate materials may contain new chemical formulations to
achieve better control of flow, resin systems with high glass transition
temperatures, reduced surface imperfections and greatly improved dimensional
stability. Future generations of interconnect products will require ultra fine
lines, multilayers of much greater complexity and thickness, and extremely small
holes in the 4 to 10 mil range. The materials designed to meet these
requirements, such as BT epoxy, cyanate esters, polyamide quartz, and Kevlar
epoxy, are beginning to appear in the marketplace. Widespread commercial use of
these materials will depend upon statistical process control and improved
manufacturing procedures to achieve the required yields and quality.
Sanmina has developed expertise and techniques which it uses in the
manufacture of circuit boards, backpanels and subsystems. Generally, Sanmina
relies on common law trade secret protection and on confidentiality agreements
with its employees to protect its expertise and techniques. Sanmina owns five
patents and believes that patents have not historically constituted a
significant form of intellectual property right in its industry.
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. In addition, although the
electronics assembly process generates significantly less waste water than
printed circuit board fabrication, maintenance of environmental controls is also
important in the electronics assembly 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.
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, Sanmina 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 Sanmina to cease
or limit production at one or more of its facilities, thereby having an adverse
impact on Sanmina'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 November 1997, Sanmina merged with Elexsys, which, by virtue of such
merger, became a wholly owned subsidiary of Sanmina. Several facilities owned or
occupied by Elexsys at the time of the merger, or formerly owned or occupied by
Elexsys or companies acquired by Elexsys, had either soil contamination or
contamination of groundwater underneath or near the facility. Contamination was
discovered at Elexsys'
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Irvine, California facility in 1989 and Elexsys voluntarily installed a
groundwater remediation system at the facility in 1994. Additional investigation
is being undertaken by other parties in the area at the request of the
California Regional Water Quality Control Board. It is unknown whether any
additional remediation activities will be required as a result of such
investigations or whether any third party claims will be brought against Sanmina
alleging that they have been damaged in any way by the existence of the
contamination at the Irvine facility. Sanmina has been required by the
California Department of Toxic Substances Control to undertake investigation of
soil and/or groundwater at certain facilities formerly owned or occupied by a
predecessor company to Elexsys in Mountain View, California. Depending upon the
results of this soil sampling and groundwater testing, Sanmina could be ordered
to undertake soil and/or groundwater cleanup. To date, Sanmina has not been
ordered to undertake any soil or groundwater cleanup activities at the Mountain
View facilities, and does not believe any such activities should be required.
Test results received to date are not sufficient to enable Sanmina to determine
whether or not such cleanup activities are likely to be mandated. Contamination
has also been discovered at other current and former Elexsys facilities and has
been reported to the relevant regulatory agencies. No remediation or further
investigation of such contamination has been required by regulatory agencies. To
date, the cost of the various investigations and the cost of operating the
remediation system at the Irvine facility have not been material to Sanmina's
financial condition. However, in the event Sanmina is required to undertake
additional groundwater or soil cleanup, the costs of such cleanup are likely to
be substantial. Sanmina is currently unable to estimate the amount of such soil
and groundwater cleanup costs because no soil or groundwater cleanup has been
ordered and Sanmina cannot determine from available test results what
remediation activities, if any, are likely to be required. Sanmina believes,
based on the limited information currently available, that the cost of any
groundwater or soil clean-up that may be required would not have a material
adverse effect on Sanmina's business, financial condition and results of
operations. Nevertheless, the process of remediating contaminated soil and
groundwater is costly, and if Sanmina is required to undertake substantial
remediation activities at one or more of the former Elexsys facilities, there
can be no assurance that the costs of such activities would not have a material
adverse effect on Sanmina's business, financial condition and results of
operations.
Altron was advised in 1993 by Olin Corporation that contamination resulting
from activities of prior owners of property owned by Olin Corporation and
located close to the Altron manufacturing plant in Wilmington, Massachusetts,
had migrated under the Altron plant. Olin has assumed full responsibility for
any remediation activities that may be required and has agreed to indemnify and
hold Altron harmless from any and all costs, liabilities, fines, penalties,
charges and expenses arising from and relating to any action or requirement,
whether imposed by statute, ordinance, rule, regulation, order, decree or by
general principles of law to remediate, clean up or abate contamination
emanating from the Olin site. Although Sanmina believes that Olin's assumption
of responsibility will result in no remediation cost to Altron from the
contamination, there can be no assurance that Altron will not be subject to some
costs regarding this matter. Sanmina does not anticipate that such costs, if
any, will be material to its financial condition or results of operations.
Sanmina has been named as a potentially responsible party at several
contaminated disposal sites as a result of the past disposal of hazardous waste
by companies acquired by Sanmina or their corporate predecessors. While
liabilities for such historic disposal activities has not been material to
Sanmina's financial condition to date, there can be no guarantee that past
disposal activities will not result in material liability to Sanmina in the
future.
BACKLOG
Sanmina's backlog was approximately $539 million at October 2, 1999, and
approximately $295 million at September 30, 1998. Backlog consists of purchase
orders received by Sanmina, 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 Sanmina's backlog may be subject to
cancellation or postponement without significant penalty. Typically, a
substantial portion of Sanmina's backlog is scheduled for delivery within 210
days.
9
<PAGE> 10
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, Sanmina'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 Sanmina
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
As of October 2, 1999, Sanmina had approximately 7,220 full-time employees,
including approximately 6,800 in manufacturing and engineering, approximately
220 in marketing and sales, and approximately 200 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.
Sanmina'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 Sanmina. To date, Sanmina has not experienced
significant difficulties in attracting or retaining such personnel. Although
Sanmina is not aware that any of its key personnel currently intend to terminate
their employment, their future services cannot be assured.
ITEM 2. PROPERTIES
Sanmina's principal facilities comprise an aggregate of approximately 2.5
million square feet. Except for Sanmina's 72,000 square foot Manchester, New
Hampshire facility, the 160,000 square foot facility occupied by Sanmina Cable
Systems in Carrollton, Texas, a 70,000 square foot facility located in Nashua,
New Hampshire, a 200,000 square foot facility located in Wilmington,
Massachusetts, a 104,000 square foot facility located in Woburn, Massachusetts,
a 44,200 square foot facility located in Irvine, California, a 197,600 square
foot facility located in Kenosha, Wisconsin, a 105,000 square foot facility
located in Guntersville, Alabama, and Sanmina's 52,000 square foot facility
located in Dublin, Ireland, all of the facilities are leased, and the leases for
these facilities expire between 1999 and 2006. The leases generally may be
extended at Sanmina's option. Sanmina has fourteen principal facilities located
in the greater San Jose, California area, with other facilities located in
Southern California, Plano, Texas, Richardson, Texas, Manchester, New Hampshire,
Guntersville, Alabama, Durham, North Carolina, Wilmington and Woburn,
Massachusetts, the greater Chicago area, Calgary, Canada, and Dublin, Ireland.
In November 1998, Sanmina entered into a lease with an option to purchase a
330,000 square foot campus facility located in San Jose, California. The
facility consists of four buildings on a single site. Sanmina intends to
consolidate its corporate headquarters and some of its San Jose area assembly
operations at this facility. As of October 2, 1999, approximately 75% of the
buildings were occupied. The remaining buildings
10
<PAGE> 11
will be occupied in fiscal year 2000. Sanmina's San Jose area printed circuit
board fabrication facilities will not be consolidated at the campus facility and
will remain at their current locations. Sanmina believes that its facilities are
adequate to meet its reasonably foreseeable requirements for at least the next
two years. Sanmina continually evaluates its expected future facilities
requirements.
ITEM 3. LEGAL PROCEEDINGS
Sanmina is not currently a party to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
11
<PAGE> 12
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
23 of the Registrant's 1999 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
18 of the Registrant's 1999 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
19 through 26 of the Registrant's 1999 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
28 through 40 of the Registrant's 1999 annual report to stockholders.
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
12
<PAGE> 13
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 2000 Annual Meeting of Stockholders (the "Proxy Statement") to be
held on January 28, 2000 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.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of Sanmina, and certain information
about them as of December 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jure Sola................................. 47 Chairman, Chief Executive Officer and
Director(1)
John Bolger............................... 53 Director(2)
Neil Bonke................................ 58 Director(1)(2)
Randy W. Furr............................. 45 President, Chief Operating Officer and
Director
Elizabeth D. Jordan....................... 36 Executive Vice President and Chief
Financial Officer
Michael J. Landy.......................... 45 Executive Vice President of Sales and
Marketing
Mario Rosati.............................. 53 Director
Joseph Schell............................. 53 Director
Bernard Vonderschmitt..................... 76 Director(1)
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
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 Sanmina'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. Bolger has been a director of Sanmina since 1994. From June 1989
through April 1992, he served as Vice President of Finance and Administration of
Cisco Systems, Inc., a manufacturer of computer networking systems. Mr. Bolger
is currently an independent business consultant and serves as a director of
Integrated Device Technology, Inc., Integrated Systems, Inc., TCSI, Inc. and
Mission West Properties, Inc.
Mr. Bonke has been a director of Sanmina since 1995. He also serves on the
Board of Directors of Electroglas, Inc., FSI International and SpeedFam
International, all semiconductor equipment companies. Mr. Bonke previously
served as the Chairman of the Board of Electroglas, Inc. From April 1993 to
April 1996, he served as Chief Executive Officer of Electroglas. From September
1990 to April 1993, Mr. Bonke was a Group V.P. and President of Semiconductor
Operations of General Signal Corp.
Mr. Furr joined Sanmina as Vice President and Chief Financial Officer in
August 1992. In March 1996, Mr. Furr was appointed President and Chief Operating
Officer. In December 1999, Mr. Furr was appointed to Sanmina's board of
directors. 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
13
<PAGE> 14
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.
Ms. Jordan became Chief Financial Officer and Executive Vice President at
Sanmina in June 1999. Ms. Jordan joined Sanmina in October 1997 as Corporate
Controller and was named Vice President of Finance in October 1998. From August
1992 to October 1997, Ms. Jordan worked for Network General Corporation, a
network fault and performance management solutions company, serving most
recently as Director of Corporate Accounting. Prior to Network General, she
served in a variety positions in the banking industry and in public accounting.
Mr. Landy became Executive Vice President of Sales and Marketing at Sanmina
in October 1997. He was named an Executive Vice President of Sanmina in October
1998. He joined Sanmina in August 1993 as General Manager of Sanmina'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.
Mr. Rosati has been a director of Sanmina since 1997. He has been a member
of the law firm Wilson Sonsini Goodrich & Rosati, Professional Corporation since
1971. Mr. Rosati is a director of Aehr Test Systems, a manufacturer of computer
hardware testing systems, Genus, Inc., a semiconductor equipment manufacturer,
Ross Systems, Inc., a software company, C-ATS Software, Inc., a financial
database software company, MyPoints.com, Inc., a web and email-based direct
marketing company, Symyx Technologies, Inc., a combinatorial materials science
company and The Management Network Group, Inc., a management consulting firm
focused on the telecommunications industry, all publicly-held companies. He is
also a director of several privately-held companies.
Mr. Schell was appointed to the board of directors in December 1999. From
1985 to 1999, he served as Senior Managing Director at Montgomery Securities
(recently named Banc of America Securities). Mr. Schell also serves on the board
of directors of Dycom Industries, Inc. and the Good Guys, Inc., both publicly
traded companies.
Mr. Vonderschmitt has been a director of Sanmina since October 1990. He
co-founded Xilinx, Inc., a manufacturer of field programmable gate array
semiconductor products and related system software, served as its Chief
Executive Officer and as a director from its inception in February 1984 through
February 1996, and has served as the Chairman of its Board of Directors since
February, 1996. He is also a director of International Microelectronic Products,
Inc., and Credence Systems 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 28 through
40 of the Registrant's 1999 annual report to stockholders:
Report of Independent Public Accountants
Consolidated Balance Sheets, As of October 2, 1999 and September 30, 1998
Consolidated Statements of Operations, Years Ended October 2, 1999,
September 30, 1998 and 1997
Consolidated Statements of Comprehensive Income, Years Ended October 2,
1999, September 30, 1998 and 1997
Consolidated Statements of Stockholders' Equity, Years Ended October 2,
1999, September 30, 1998 and 1997
Consolidated Statements of Cash Flows, Years Ended October 2, 1999,
September 30, 1998 and 1997
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
On December 14, 1998, the Company filed a report on Form 8-K relating to
the merger with Altron.
On February 10, 1999, the Company filed a report on Form 8-K/A relating to
the merger with Altron.
On April 29, 1999, the Company filed a report on Form 8-K relating to the
merger with Manu-Tronics.
On April 30, 1999, the Company filed a report on Form 8-K relating to the
offering of convertible subordinated notes.
(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.
4.3 Convertible subordinated notes issued in April 1999.
10.2(4) Amended 1990 Incentive Stock Plan.
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.3(1) 1993 Employee Stock Purchase Plan.
.109(k)(2) Amended and Restated Credit Agreement dated as of August 18,
1993 among Sanmina Corporation, Chemical Bank and other
lenders.
.109(k)(5) Amendment dated July 27, 1995 to Amended and Restated Credit
Agreement dated August 18, 1993.
.109(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.
10.26(10) Agreement and Plan of Merger dated September 2, 1998 among
Registrant, SANM Acquisition Subsidiary, Inc. and Altron,
Inc.
10.27(11) Synthetic lease agreement.
10.28(12) Agreement and Plan of Merger dated March 30, 1999 among
Registrant, SANM Acquisition Subsidiary, Inc. and
Manu-Tronics, Inc.
13 Annual Report
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.
16
<PAGE> 17
(3) Incorporated by reference to exhibit no. 2 previously filed with
Registrant's Report on Form 8-K filed with the SEC on October 28, 1994.
(4) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Report on Form 10-K filed with the SEC on December 29,
1994.
(5) Incorporated by reference to the like-numbered exhibit previously filed
with Registrant's Report on Form 10-Q filed with the SEC on July 31, 1995.
(6) Incorporated by reference to the like-numbered exhibit previously filed
with Registrant's Report on Form 10-K for the fiscal year ended September
30, 1995.
(7) Incorporated by reference to exhibit 2 previously filed with the
Registrant's Report on Form 8-K filed with the SEC on November 15, 1996.
(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.
(10) Incorporated by reference to exhibit 2.1 previously filed with Registrant's
Report on Form 8-K filed with the SEC on September 4, 1998.
(11) 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, 1998.
(12) Incorporated by reference to exhibit 2.1 previously filed with Registrant's
Report on Form 8-K filed with the SEC on April 29, 1999.
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 14, 1999
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
--------- ----- ----
<S> <C> <C>
/s/ JURE SOLA Chairman, Chief Executive December 14, 1999
- ----------------------------------------------------- Officer and Director
Jure Sola (Principal Executive
Officer)
/s/ RANDY W. FURR President, Chief Operating December 14, 1999
- ----------------------------------------------------- Officer and Director
Randy W. Furr
/s/ ELIZABETH D. JORDAN Executive Vice President and December 14, 1999
- ----------------------------------------------------- Chief Financial Officer
Elizabeth D. Jordan (Principal Financial and
Accounting Officer)
/s/ NEIL BONKE Director December 14, 1999
- -----------------------------------------------------
Neil Bonke
/s/ JOHN BOLGER Director December 14, 1999
- -----------------------------------------------------
John Bolger
/s/ MARIO M. ROSATI Director December 14, 1999
- -----------------------------------------------------
Mario M. Rosati
/s/ JOSEPH M. SCHELL Director December 14, 1999
- -----------------------------------------------------
Joseph M. Schell
/s/ BERNARD VONDERSCHMITT Director December 14, 1999
- -----------------------------------------------------
Bernard Vonderschmitt
</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, 1997.................. $2,730 $2,288 $273 $4,745
Fiscal year ended September 30, 1998.................. $4,745 $1,994 $945 $5,794
Fiscal year ended October 2, 1999..................... $5,794 $4,117 $463 $9,448
</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 22, 1999. 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 is the responsibility of Sanmina'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 22, 1999
S-2
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
13 Annual Report
21 Subsidiaries of the Registrant
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 13
FINANCIAL TABLE OF CONTENTS
<TABLE>
<S> <C>
Selected Financial Data {18}
Management's Discussion and Analysis {19}
Statement of Financial Responsibility {27}
Consolidated Balance Sheets {28}
Consolidated Statements of Operations
and Comprehensive Income {29}
Consolidated Statements of Stockholders' Equity {30}
Consolidated Statements of Cash Flows {31}
Notes to the Consolidated Financial Statements {32}
Report of Independent Public Accountants {40}
</TABLE>
17
<PAGE> 2
SELECTED FINANCIAL DATA
S a n m i n a C o r p o r a t i o n
<TABLE>
<CAPTION>
Year Ended
----------------------------------------------------------------
October 2, September 30,
---------- --------------------------------------------------
(in thousands, except per share amounts) 1999 1998 1997 1996 1995
- ---------------------------------------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales $1,214,744 $991,821 $803,064 $617,487 $469,394
Cost of sales 962,595 783,949 640,644 484,687 375,238
Gross profit 252,149 207,872 162,420 132,800 94,156
Selling, general and administrative expenses 74,796 67,165 63,856 45,483 36,278
Amortization of goodwill 3,269 3,127 2,283 2,000 568
Provision for plant closing
and relocation costs 16,875 -- 8,876 -- --
Write down of long-lived assets 11,400 -- -- -- --
Merger costs 5,479 3,945 -- -- --
Operating income 140,330 133,635 87,405 85,317 57,310
Other income (expense), net 7,549 (272) (1,691) (760) (681)
Income before provision for income taxes
and extraordinary item 147,879 133,363 85,714 84,557 56,629
Provision for income taxes 54,182 47,734 36,358 29,543 20,965
Gain from exchange of convertible
subordinated debentures for
common stock, net of expenses -- -- -- -- 1,833
Net income $ 93,697 $ 85,629 $ 49,356 $ 55,014 $ 37,497
========== ======== ======== ======== ========
Diluted earnings per share:
Income before extraordinary item $ 1.52 $ 1.52 $ 0.91 $ 1.04 $ 0.76
Extraordinary item -- -- -- -- 0.04
Net income per share $ 1.52 $ 1.52 $ 0.91 $ 1.04 $ 0.80
Shares used in computing
diluted per share amounts 61,662 58,597 57,616 55,666 47,972
========== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
As of
----------------------------------------------------------------
October 2, September 30,
---------- --------------------------------------------------
(in thousands) 1999 1998 1997 1996 1995
- --------------------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital $ 667,784 $300,337 $251,350 $228,620 $200,703
Total assets 1,201,713 658,367 553,478 450,134 368,858
Long-term debt 357,980 19,408 120,307 117,726 113,997
Stockholders' equity 626,347 481,985 297,870 233,959 166,493
========== ======== ======== ======== ========
</TABLE>
18
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
S a n m i n a C o r p o r a t i o n
OVERVIEW
Sanmina Corporation ("Sanmina") was incorporated in Delaware in May 1989 to
acquire its predecessor company which had been in the printed circuit board and
backplane business since 1980. Sanmina is a leading independent provider of
customized integrated electronic 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-layered printed
circuit boards, electronic enclosure systems 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 manufacturing. Sanmina, through its Sanmina
Cable Systems ("SCS") subsidiary (formerly known as Golden Eagle Systems), also
manufactures custom cable and wire harness assemblies for electronic industry
OEMs. In addition, as part of the Elexsys International ("Elexsys") merger
completed in November 1997, Sanmina acquired and currently operates a metal
stamping and plating business.
Sanmina's assembly plants are located in Northern California, Richardson, Texas,
Manchester, New Hampshire, Durham, North Carolina, Guntersville, Alabama, and
Dublin, Ireland. Sanmina's printed circuit board fabrication facilities are
located in Northern California, Southern California, and Nashua, New Hampshire.
SCS's manufacturing facility is located in Carrollton, Texas. As a result of
Sanmina's November 1998 merger with Altron Incorporated ("Altron"), Sanmina has
added new fabrication and assembly plants in the Boston, Massachusetts area,
Northern California, and Plano, Texas. In addition, as a result of Sanmina's
merger with Telo Electronics Incorporated ("Telo") and Manu-Tronics, Inc.
("Manu-Tronics"), Sanmina has added new assembly plants in San Jose, California
and in the greater Chicago area. As part of Sanmina's agreement to acquire
certain assembly operations of Nortel Networks Corporation, Sanmina added an
assembly plant in Calgary, Alberta, Canada on October 1, 1999. In addition,
Sanmina also added an assembly plant in Chateaudun, France in November 1999. As
part of Sanmina's acquisition of Devtek Electronics Packaging Systems Division
on October 5, 1999, Sanmina added an enclosure facility in Toronto, Ontario,
Canada.
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 margins, 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 particular, Sanmina expects that it
will continue to pursue opportunities to acquire assembly operations being
divested by electronics industry OEMs.
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, and in the documents incorporated herein by reference,
including, in particular, those factors described under "Factors Affecting
Operating Results."
RESULTS OF OPERATIONS
Fiscal Years Ended October 2, 1999, September 30, 1998 and 1997
The following table sets forth, for the periods indicated, certain statements of
operations data expressed as a percentage of net sales.
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
October 2, September 30, September 30,
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 79.2 79.0 79.8
Gross profit 20.8 21.0 20.2
Operating expenses:
Selling, general and
administrative 6.2 6.8 7.9
Amortization of goodwill 0.3 0.3 0.3
Provision for plant closing
and relocation costs 1.4 -- 1.1
Write down of
long-lived assets 0.9 -- --
Merger costs 0.4 0.4 --
Total operating expenses 9.2 7.5 9.3
Operating income 11.6 13.5 10.9
Other income (expenses), net 0.6 (0.1) (0.2)
Provision for income taxes (4.5) (4.8) (4.5)
Net income 7.7% 8.6% 6.2%
===== ===== =====
</TABLE>
Net Sales Net sales in fiscal 1999 increased 22.5% to $1,214.7 million from
$991.8 million in fiscal 1998, which was an increase of 23.5% from fiscal 1997
sales of $803.1 million. The increase in net sales for fiscal 1999 was due
primarily to increased shipments of EMS assemblies to both existing and new
customers obtained both through acquisitions and internal growth. The increase
in net sales for fiscal 1998 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 acquisitions completed
during the year. Sanmina's printed circuit board fabrication operations focused
increasingly on manufacturing printed circuit boards used in EMS assemblies
manufactured by Sanmina, 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
19
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
S a n m i n a C o r p o r a t i o n
Net Sales
(in millions of dollars)
<TABLE>
<S> <C>
1997 803.1
1998 991.8
1999 1,214.7
</TABLE>
Selling, General and Administrative Expenses
(as a percentage of net sales)
<TABLE>
<S> <C>
1997 7.9%
1998 6.8%
1999 6.2%
</TABLE>
Gross Margins
(as a percentage of net sales)
<TABLE>
<S> <C>
1997 20.2%
1998 21.0%
1999 20.8%
</TABLE>
towards outsourcing, expansion of Sanmina's operations, both through
acquisitions and Company-originated expansions, and a generally positive
economic environment in the communications, medical and industrial
instrumentation, and computer segments of the electronics industry. These
segments continued to experience overall growth during these periods.
Gross Margin Gross margin was 20.8%, 21.0%, and 20.2% in fiscal 1999, 1998,
and 1997, respectively. Sanmina expects gross margins to continue to fluctuate
based on product and customer mix. The decrease in gross margin for fiscal 1999
was primarily attributable to charges recorded in the first quarter of fiscal
1999 related to the write down of obsolete inventory and other manufacturing
related assets from acquired companies. In the fourth quarter of fiscal 1999,
Sanmina experienced increased competition, different product and customer mix
which resulted in decreases in gross margins. The increase in gross margin for
fiscal 1998 was due to Sanmina's ability to realize synergies associated with
the Elexsys acquisition. As the integration of these operations is complete,
Sanmina does not anticipate achieving incremental gross margin improvements in
future periods as a result of synergies achieved in connection with these
acquisitions. Due to increased competition, product and customer mix, and
pricing structures negotiated in OEM divestiture transactions, including the
recent Nortel Networks transactions and possible future transactions, Sanmina
may experience decreases in gross margins.
Selling, General and Administrative Expenses Selling, general and
administrative expenses for fiscal 1999, 1998, and 1997 were $74.8 million,
$67.2 million, and $63.9 million, respectively. The percentage decreases in
selling, general and administrative expenses for fiscal 1999 were due to
Sanmina's ability to grow sales while maintaining or reducing operating expenses
as a percentage of net sales. The absolute dollar increases in selling, general
and administrative expenses were primarily the result of increased expenditures
to support higher sales volume.
Amortization of Goodwill Sanmina incurred $3.3 million, $3.1 million, and $2.3
million in amortization expense for fiscal years 1999, 1998, and 1997,
respectively. These amortization expenses reflect the amortization of goodwill
related to acquisitions, which were accounted for as purchase transactions.
Plant Closing and Relocation Costs Plant closing and other non-recurring
charges of $16.9 million are a result of Sanmina's acquisitions in the first
quarter of fiscal 1999 and Sanmina's planned relocation to a new campus
facility. Sanmina closed certain manufacturing plants in Fremont, California and
Woburn, Massachusetts and merged the operations from these facilities into
existing manufacturing facilities within the same regions. These closures were
made to eliminate duplicate facilities and other costs resulting from the merger
with Altron. Concurrent with the plant closures, Sanmina reduced its workforce
in the same regions by approximately 50 people. Plant closing, relocation and
severance costs totaled $12.8 million, of which $2.0 million was unpaid as of
fiscal year end 1999. In conjunction with the closure of manufacturing
facilities and Sanmina's planned relocation to its new campus facility in fiscal
2000, other non-recurring costs include payments required under lease contracts
(less any applicable sublease income) after the properties are abandoned, any
applicable lease buyout costs, restoration costs associated with certain lease
arrangements and the costs to maintain facilities during the period after
abandonment. Asset related write-offs consist of excess equipment and leasehold
improvements to facilities that were abandoned and whose estimated fair market
value is zero. Sanmina's move to the new campus facility commenced in fiscal
1999 and is expected to be completed in the second quarter of fiscal 2000.
Noncancelable lease payments on vacated facilities will be paid out through most
of fiscal 2000. Sanmina also discontinued the use of enterprise-wide software
and hardware used internally by the acquired companies, as these were no longer
required post acquisition. The closing of the plants discussed above, and the
costs related to the integration of information systems and hardware, were all
incurred in fiscal 1999. Total other non-recurring charges totaled $4.1 million.
20
<PAGE> 5
Write Down of Long-Lived Assets Sanmina continually evaluates whether long-
lived assets have been impaired in value. This process includes evaluating
whether projected results of operations of acquired businesses would support the
carrying value of related assets including the future amortization of the
remaining unamortized balance of goodwill. In the first quarter of fiscal 1999,
such evaluation with respect to the acquisition of Pragmatech, Incorporated
("Pragmatech"), indicated the fair value of assets related to Pragmatech were
less than the carrying value of the Pragmatech assets. Accordingly, in the first
quarter of fiscal 1999, Sanmina recorded an adjustment to write down the
remaining $11.4 million of unamortized goodwill arising from the acquisition.
The fair value of Pragmatech at the acquisition date was based on the estimated
future cash flows to be generated from the assets based on reasonable and
supportable assumptions. Financial projections prepared at the time of the
acquisition of Pragmatech reflected Sanmina's belief that Sanmina would continue
to provide electronics manufacturing services to existing Pragmatech customers
and would grow the Pragmatech business at Pragmatech's existing facilities.
However, the existing Pragmatech customer relationships could not be
restructured to conform to Sanmina's pricing and revenue models, and as a
result, the relationships with the former Pragmatech customers have terminated.
In addition, Sanmina closed several of the former Pragmatech facilities in
fiscal 1998. As a result of these operational factors, Sanmina's analysis of
projected revenues, results of operations, and cash flows attributable to the
few remaining Pragmatech customers did not support the carrying value of
Pragmatech assets, including the unamortized goodwill.
Merger costs of $5.5 million consisted of fees for investment bankers,
attorneys, accountants, and other direct merger related expenses, all of which
have been paid in fiscal 1999 and relate to those mergers that were accounted
for using the pooling-of-interests method. In 1998, Sanmina recorded a charge of
$3.9 million related to the merger with Elexsys.
Other Income and Expense In fiscal 1999, net other income was $7.5 million as
compared to net other expense of $272,000 and $1.7 million in fiscal 1998 and
1997, respectively. For fiscal 1999, the increase in net other income was the
result of a decrease in outstanding debt. In addition, there was interest income
from the higher cash balances available following the $341.1 million (net of
issuance costs) issuance of convertible subordinated notes. The interest income
was slightly offset by the interest expense associated with the convertible
subordinated notes. In the first quarter of fiscal 1998, Sanmina repaid
approximately $12.8 million of outstanding Elexsys debt. In addition, in August
1998, $86.3 million of outstanding convertible subordinated notes, issued by
Sanmina in August 1995, were converted into Common Stock as a result of a
redemption call for such notes issued by Sanmina.
Provision for Income Taxes For fiscal 1999, 1998, and 1997, Sanmina's effective
tax rate was 36.6%, 35.8%, and 42.4%, respectively. The provision for income
taxes for fiscal year 1999 is based upon Sanmina's estimate of an effective tax
rate of 36.5%. In the first quarter of fiscal 1999, Sanmina did not record a
provision for income taxes due to a net loss. For fiscal 1998, the rate
decreased as utilization of net operating loss carryforwards of Elexsys were
recognized. Also, the lower rate in fiscal 1998 represents the benefit of
foreign operations and merged companies taxed at a reduced rate.
LIQUIDITY AND CAPITAL RESOURCES
Sanmina generated cash from operating activities of $115.1 million, $106.2
million, and $77.4 million in fiscal years 1999, 1998, 1997, respectively. These
increases in cash generated from operations each year were primarily due to
Sanmina's increase in profitability.
Cash used for investing activities included net purchases of short-term
investments during fiscal 1999, 1998, and 1997 of $418.1 million, $52.9
million, and $78.0 million, respectively. For fiscal 1999, Sanmina paid
approximately $537.2 million for short-term and long-term investments as well as
equipment. Additionally, Sanmina paid approximately $75.1 million in cash for
acquired business. These payments were offset by $194.2 million in maturities of
short-term investments.
Investing activities during 1998 included $55.3 million in property, plant and
equipment. Additionally, on February 23, 1998, Sanmina paid approximately $5.7
million in cash to acquire Pragmatech.
During fiscal 1997, investing activities included the November 1996 acquisition
of the assets of the former Comptronix Corporation for which Sanmina paid cash
of approximately $17.6 million, as well as investments in property, plant and
equipment of $70.7 million.
Net cash provided by financing activities for fiscal 1999 consisted primarily of
$341.1 million in net proceeds from the issuance of convertible subordinated
notes. The issuance proceeds were partly offset by $22.3 million in payments for
long-term notes and liabilities. Proceeds from the exercise of stock options and
stock purchase rights were $32.6 million in fiscal 1999.
Cash used for financing activities was $19.5 million in fiscal 1998. In fiscal
1998, Sanmina paid approximately $7.5 million in outstanding debt. The payments
for other long-term liabilities of $25.4 million, which included the $12.8
million of outstanding Elexsys debt, were offset by the proceeds from exercise
of stock options and stock purchase rights of $11.1 million. In August 1998,
Sanmina called for redemption an aggregate principal amount of $86.3 million in
convertible subordinated notes which were originally issued in August 1995. The
notes were converted to Sanmina Common Stock at a price of $14.09 per share, or
70.94 shares of Sanmina's Common Stock per $1,000 principal amount of Notes.
Cash was paid in lieu of fractional shares.
21
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
S a n m i n a C o r p o r a t i o n
Cash provided by financing activities was $9.3 million in fiscal 1997. Financing
activities in fiscal 1997 consisted primarily of receipt of proceeds from
exercise of stock options and stock purchase rights.
Sanmina'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 $667.8 million at October 2, 1999.
Sanmina has evaluated and will continue to evaluate possible business
acquisitions. In this regard, Sanmina anticipates incurring facilities related
expenditures during fiscal 2000 in connection with the relocation of its San
Jose, California area assembly facilities and its corporate headquarters to a
new campus facility.
Sanmina has entered into an operating lease agreement for new facilities in San
Jose, California, where it will establish its corporate headquarters and certain
of its assembly operations. In connection with these transactions, Sanmina
pledged $52.9 million of its cash and investments as collateral for certain
obligations of the lease.
Sanmina 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 the next twelve months. Sanmina may
seek to raise additional capital through the issuance of either debt or equity
securities. Debt financing may require Sanmina to pledge assets as collateral
and comply with financial ratios and covenants. Equity financing may result in
dilution to stockholders.
YEAR 2000
Sanmina Corporation is subject to potential risks related to Year 2000 problems.
Many computer systems and software products are unable to distinguish years
beginning with "19" from those beginning with "20." As a result, computer
systems and/or software products used by many companies may need to be upgraded
to comply with such Year 2000 requirements. Sanmina Corporation is currently
expending resources to review its products and services, as well as its internal
business and manufacturing systems in order to identify and modify those
products, services and systems that are not Year 2000 compliant. There can be no
assurance, however, that Sanmina will be able to solve all potential Year 2000
issues. Sanmina's reliance on its key suppliers, and therefore on the proper
functioning of their information systems and software, is increasing, and there
can be no assurance that another company's failure to address Year 2000 issues
could not have an adverse effect on Sanmina.
Sanmina initiated formal communications with each of its significant suppliers
and customers to determine the extent to which Sanmina is vulnerable to those
third parties' failure to remediate their own Year 2000 issues. Based on
inquiries to date, the Company believes satisfactory progress has been made by
its major vendors and customers on Year 2000 readiness. However, in the event a
product manufactured by Sanmina contained Year 2000 problems attributable to a
design or product development flaw, it is likely that sales of such product
would be adversely affected, which would adversely affect Sanmina's
manufacturing services revenues attributable to such product. Such a situation
could have a material adverse effect on Sanmina's business, financial condition
and results of operations.
The Company has updated much of its existing software for Year 2000 compliance
by acquiring new or upgraded third party software packages, and by modifying
existing internally developed software. The possibility exists, however, that
the Company may fail to correct an internal Year 2000 issue in its software or
manufacturing equipment. The Company believes this possibility would not
significantly impact its operations, as it should be able to effectively conduct
its business using Year 2000 compliant software and equipment currently
installed.
Other Year 2000-related problems such as disruptions in the delivery of
materials, power, heat or water to Sanmina's facilities, could prevent Sanmina
from being able to manufacture and ship its products. Not only could the
Company's production be disrupted if one of its utility providers fails to be
fully Year 2000 ready, but also indirectly if a parts supplier's utility
provider is not Year 2000 ready. A prolonged utility outage could significantly
adversely affect the Company until production is shifted to other facilities or
to suppliers not impacted by utility outages.
To date, Year 2000 costs are not considered by Sanmina to be material to its
financial condition. Sanmina has estimated the cost of its Year 2000 project is
approximately $1.7 million. Through October 2, 1999, approximately $1.5 million
of this amount has been expended.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133 establishes
accounting and reporting standards requiring every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133 also requires changes in the derivative's fair value be
recognized currently in results of operations unless specific hedge accounting
criteria are met. SFAS No. 133, as amended by SFAS No. 137, is effective for
fiscal years beginning after June 15, 2000. The Company does not expect SFAS No.
133 to have a material impact on its financial statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
Sanmina's exposure to market risk for changes in interest rates relate primarily
to Sanmina's investment portfolio. Currently, Sanmina does not use derivative
financial instruments in its investment portfolio. Sanmina invests in high
credit quality issuers and, by policy, limits the amount of principal exposure
to any one issuer. As stated in Sanmina's policy, Sanmina seeks
22
<PAGE> 7
to ensure the safety and preservation of its invested principal funds by
limiting default and market risk.
Sanmina seeks to mitigate default risk by investing in high-credit quality
securities and by positioning its investment portfolio to respond to a
significant reduction in a credit rating of any investment issuer, guarantor or
depository. Sanmina seeks to mitigate market risk by limiting the principal and
investment term of funds held with any one issuer and by investing funds in
marketable securities with active secondary or resale markets.
The table below presents carrying amounts and related average interest rates by
year of maturity for Sanmina's investment portfolio as of October 2, 1999 (in
thousands):
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------------------------------------------------
(in thousands) 2000 2001 2002 2003 2004 Thereafter Total
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash equivalents, short-term,
and long-term investments 365,505 11,670 - 937 52,850 2,414 433,376
Average interest rate 5.1% 5.7% - 7.6% 5.2% 5.9% 5.1%
</TABLE>
FOREIGN CURRENCY EXCHANGE RISK
Sanmina transacts business in foreign countries. Sanmina's primary foreign
currency cash flows are in certain European countries. Currently, Sanmina does
not employ a foreign currency hedge program with respect to transactions and
expenditures originating in these or any other foreign countries. Sanmina
believes that its foreign currency exchange risk is immaterial.
QUARTERLY RESULTS (UNAUDITED)
The following table contains selected unaudited quarterly financial data for the
eight fiscal quarters in the period ended October 2, 1999. In management's
opinion, the unaudited data has been prepared on the same basis as the audited
information and includes all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the data for the periods
presented. Sanmina's results of operations have varied and may continue to
fluctuate significantly from quarter to quarter. Results of operations in any
period should not be considered indicative of the results to be expected from
any future period. In June 1998, Sanmina effected a two-for-one stock split in
the form of a stock dividend. Accordingly, all share and per share data has been
adjusted to retroactively reflect the stock split. Common stock prices reflect
high and low reported sales prices, as reported by the Nasdaq National Market.
The mergers with Elexsys, Altron and Manu-Tronics were accounted for as a
pooling of interests, and therefore, all prior periods presented were restated
to combine the results of the companies.
<TABLE>
<CAPTION>
(in thousands, except Year Ended
percentages and per -------------------------------------------------------------------------------------------------
share amounts) OCTOBER 2, 1999 SEPTEMBER 30, 1998
---------------------------------------------- -----------------------------------------------
Quarter First Second Third Fourth First Second Third Fourth
- ------- ----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 275,533 $281,140 $309,496 $348,575 $220,671 $240,886 $267,617 $262,647
Gross profit 52,284 61,615 66,374 71,876 46,030 51,178 56,941 53,723
Gross margin 19.0% 21.9% 21.4% 20.6% 20.9% 21.2% 21.3% 20.5%
Operating income/(loss) (2,300) 43,503 47,595 51,532 25,891 34,247 38,454 35,043
Net income/(loss) (562) 28,772 31,358 34,129 16,266 22,564 24,761 22,038
Net income/(loss) per
share (diluted) $ (0.01) $ 0.47 $ 0.51 $ 0.55 $ 0.29 $ 0.40 $ 0.43 $ 0.40
Shares used in computing
per share amounts 57,380 61,754 61,847 62,306 58,437 58,327 58,921 58,783
Common stock prices:
High $ 62.50 $ 75.56 $ 81.22 $ 83.24 $ 44.00 $ 40.19 $ 46.88 $ 47.56
Low $ 23.88 $ 49.50 $ 57.31 $ 64.13 $ 28.72 $ 26.69 $ 33.88 $ 23.50
</TABLE>
FACTORS AFFECTING BUSINESS AND RESULTS OF OPERATIONS
This annual report contains forward-looking statements which involve risks and
uncertainties. Our actual results could differ materially from those anticipated
by such forward looking statements as a result of certain factors, including
those set forth below. You should carefully consider the risks described below
in connection with any evaluation of our business and prospects. Additional
risks and uncertainties not presently known to us or that we currently deem
immaterial may also impair our business operations. If any of the following
risks actually occur, our business, financial condition or results of operation
could be materially adversely affected. In that case, the trading price of our
common stock and our convertible subordinated notes could decline.
Sanmina is heavily dependent on the electronics industry. Sanmina's business is
heavily dependent on the health of the electronics industry. Sanmina's customers
are manufacturers in the telecommunications, networking (data communications),
industrial and medical instrumentation and high-speed 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. Sanmina's customers can discontinue or modify products containing
components manufactured by Sanmina. Such discontinuance or modification could
adversely affect Sanmina's results of operations. The electronics industry is
23
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
S a n m i n a C o r p o r a t i o n
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. Sanmina typically does not obtain
long-term volume purchase contracts from its customers and has recently
experienced reduced lead times in customer orders. Customer orders may be
canceled and volume levels may be changed or delayed. In particular, Sanmina
experienced certain cancellation and rescheduling of shipment dates of customer
orders during the fourth fiscal quarter of 1998. The timely replacement of
canceled, delayed or reduced contracts with new business cannot be assured.
Sanmina's results of operations can be affected by a variety of factors
Sanmina's results of operations have varied and may continue to fluctuate
significantly from period to period, including on a quarterly basis. Sanmina's
operating results are affected by a number of factors. These factors include
timing of orders from major customers, mix of product ordered by and shipped to
major customers, the volume of orders as related to Sanmina's capacity, the
ability of Sanmina to effectively manage inventory and fixed assets, and the
ability of Sanmina to time expenditures in anticipation of future sales.
Sanmina's results are also affected by the mix of products between back-plane
assemblies and printed circuit boards. Sanmina's results are also affected by
general economic conditions in the electronics industry. Sanmina's results can
also be significantly influenced by development and introduction of new products
by Sanmina's customers. From time to time, Sanmina 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. Sanmina's customers
generally require short delivery cycles, and a substantial portion of Sanmina's
backlog is typically scheduled for delivery within 210 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. Sanmina'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 Sanmina'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 Sanmina'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. In addition,
fluctuations in operating results may also result in fluctuations in the price
of Sanmina Notes and Common Stock.
Sanmina experiences customer concentration A small number of customers are
responsible for a significant portion of Sanmina's net sales. During fiscal 1999
and 1998, sales to Sanmina's ten largest customers accounted for 54% and 53%,
respectively, of Sanmina's net sales. For fiscal 1999, sales to Cisco Systems
represented more than 10% of Sanmina's net sales. For fiscal 1998, sales to
Cisco Systems and DSC Communications represented more than 10% of Sanmina's net
sales. Although there can be no assurance that Sanmina's principal customers
will continue to purchase products and services from Sanmina at current levels,
if at all, Sanmina expects to continue to depend upon its principal customers
for a significant portion of its net sales. Sanmina'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 Sanmina's customers participate. The loss of one of 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.
Sanmina is subject to risks associated with its strategy of 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 January 1996
acquisition of Golden Eagle Systems, now known as Sanmina Cable Systems, the
November 1997 merger with Elexsys, the February 1998 acquisition of Pragmatech,
the November 1998 merger with Altron, the December 1998 merger with Telo and the
March 1999 merger with Manu-Tronics.
In addition, Sanmina has in other instances acquired selected assets,
principally equipment, inventory and customer contracts and, in certain cases,
facilities or facility leases. Acquisitions of this nature completed by Sanmina
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 October and November 1999, Sanmina
acquired certain assembly operations of Nortel Networks.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 the following:
- - the potential inability to successfully integrate acquired operations and
businesses or to realize anticipated synergies, economies of scale or other
value,
- - diversion of management's attention,
- - difficulties in scaling up production at new sites and coordinating
management of operations at new sites, loss of key employees of acquired
operations.
Accordingly, Sanmina may experience problems in integrating the recently
acquired operations or operations associated with any future acquisition.
Accordingly, there can be no assurance that any recent or future acquisition
will result in a positive contribution to Sanmina's results of operations.
Furthermore, there can be no assurance that Sanmina will realize value from any
such acquisition which equals or exceeds the consideration
24
<PAGE> 9
paid. In particular, the successful combination of Sanmina and any future
acquisition 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, the
activities of any future acquisition, 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 any future acquisition. In addition, there
can be no assurance that Sanmina 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 Sanmina's business, financial condition
and results of operations. In addition, future acquisitions by Sanmina 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 Sanmina's business, financial condition and results
of operations.
In addition, Sanmina expects to pursue opportunities to acquire assembly
operations being divested by electronics industry OEMs. Sanmina expects that
competition for these opportunities among electronics manufacturing services
firms will be intense because these transactions typically enable the acquiror
to enter into long-term supply arrangements with the divesting OEM. Accordingly,
Sanmina's future results of operations could be adversely affected if Sanmina is
not successful in attracting a significant portion of the OEM divestiture
transactions it pursues. In addition, due to the large scale and long-term
nature of supply arrangements typically entered into in OEM divestiture
transactions and because cost reductions are generally a major reason why the
OEM is divesting operations, pricing of manufacturing services may be less
favorable to the manufacturer than in standard contractual relationships.
Accordingly, as Sanmina enters into new OEM divestiture transactions, Sanmina
may experience erosion in gross margins.
Sanmina is subject to competition and technological change The electronic
interconnect product industry is highly fragmented and it 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, Sanmina'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 seek orders in the open market to fill excess capacity, thereby
increasing price competition. Sanmina 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.
Environmental matters are a key consideration in Sanmina's business 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. In addition, although the electronics assembly
process generates significantly less waste water than printed circuit board
fabrication, maintenance of environmental controls is also important in the
electronics assembly 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.
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, Sanmina 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 Sanmina to cease
or limit production at one or more of its facilities, thereby having an adverse
impact on Sanmina'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.
Sanmina is subject to certain environmental contingencies at sites operated by
acquired companies In November 1997, Sanmina merged with Elexsys International,
Inc. which, by virtue of such a merger, became a wholly-owned subsidiary of
Sanmina. Several facilities owned or occupied by Elexsys at the time of the
merger, or formerly owned or occupied by Elexsys or companies acquired by
Elexsys, had either soil contamination or contamination of groundwater
underneath or near the facility including the following: contamination was
discovered at Elexsys' Irvine, California facility in 1989 and Elexsys
voluntarily installed a groundwater remediation system at the facility in 1994.
Additional investigation is being undertaken by other parties in the area at the
request of the California Regional Water Quality Control Board. It is unknown
whether any additional remediation activities will be required as a result of
such
25
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
S a n m i n a C o r p o r a t i o n
investigations or whether any third party claims will be brought against Sanmina
alleging that they have been damaged in any way by the existence of the
contamination at the Irvine facility. Sanmina has been required by the
California Department of Toxic Substances Control to undertake investigation of
soil and/or groundwater at certain facilities formerly owned or occupied by a
predecessor company to Elexsys in Mountain View, California. Depending upon the
results of this soil sampling and groundwater testing, Sanmina could be ordered
to undertake soil and/or groundwater cleanup. To date, Sanmina has not been
ordered to undertake any soil or groundwater cleanup activities at the Mountain
View facilities, and does not believe any such activities should be required.
Test results received to date are not sufficient to enable Sanmina to determine
whether or not such cleanup activities are likely to be mandated.
Contamination has also been discovered at other current and former Elexsys
facilities and has been reported to the relevant regulatory agencies. No
remediation or further investigation of such contamination has been required by
regulatory agencies. To date, the cost of the various investigations and the
cost of operating the remediation system at the Irvine facility have not been
material to Sanmina's financial condition. However, in the event Sanmina is
required to undertake additional groundwater or soil cleanup, the costs of such
cleanup are likely to be substantial. Sanmina is currently unable to estimate
the amount of such soil and groundwater cleanup costs because no soil or
groundwater cleanup has been ordered and Sanmina cannot determine from available
test results what remediation activities, if any, are likely to be required.
Sanmina believes, based on the limited information currently available, that the
cost of any groundwater or soil clean-up that may be required would not have a
material adverse effect on Sanmina's business, financial condition and results
of operations. Nevertheless, the process of remediating contaminated soil and
groundwater is costly, and if Sanmina is required to undertake substantial
remediation activities at one or more of the former Elexsys facilities, there
can be no assurance that the costs of such activities costs would not have a
material adverse effect on Sanmina's business, financial condition and results
of operations.
In November, 1998, Sanmina merged with Altron Incorporated which, by virtue of
such merger, became a wholly owned subsidiary of Sanmina. Altron was advised in
1993 by Olin Corporation that contamination resulting from activities of prior
owners of property owned by Olin Corporation and located close to the Altron
manufacturing plant in Wilmington, Massachusetts, had migrated under the Altron
plant. Olin has assumed full responsibility for any remediation activities that
may be required and has agreed to indemnify and hold Altron harmless from any
and all costs, liabilities, fines, penalties, charges and expenses arising from
and relating to any action or requirement, whether imposed by statute,
ordinance, rule, regulation, order, decree or by general principles of law to
remediate, clean up or abate contamination emanating from the Olin site.
Although Sanmina believes that Olin's assumption of responsibility will result
in no remediation cost to Altron from the contamination, there can be no
assurance that Altron will not be subject to some costs regarding this matter,
but Sanmina does not anticipate that such costs, if any, will be material to its
financial condition or results of operations.
Sanmina has been named as a potentially responsible party at several
contaminated disposal sites as a result of the past disposal of hazardous waste
by companies acquired by Sanmina or their corporate predecessors. While
liabilities for such historic disposal activities have not been material to
Sanmina's financial condition to date, there can be no guarantee that past
disposal activities will not result in material liability to Sanmina in the
future.
Sanmina's international operations involve additional risks Sanmina opened its
first overseas facility, located in Dublin, Ireland, in June 1997. A number of
risks are inherent in international operations and transactions. International
sales and operations may be limited or disrupted by the imposition of government
controls, export license requirements, political instability, trade
restrictions, changes in tariffs, and difficulties in staffing, coordinating
communications among and managing international operations. Additionally,
Sanmina'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 Sanmina will realize the anticipated strategic
benefits of its expansion in Ireland or that Sanmina's international operations
will contribute positively to Sanmina's business, financial condition and
results of operations. Furthermore, difficulties encountered in scaling up
production at overseas facilities or in coordinating Sanmina'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 Sanmina's business, financial condition and
results of operations.
Sanmina's stock price and convertible note price may be volatile. The trading
price of the Sanmina Common Stock has been and could in the future 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 Sanmina's securities
and other factors. The trading price of Sanmina's outstanding convertible notes
could also be volatile and could be subject to significant fluctuations based on
these 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 been unrelated to or disproportionately
impacted by the operating performance of such companies. These broad market
fluctuations may adversely affect the market price of Sanmina's Common Stock and
Sanmina's convertible subordinated notes.
26
<PAGE> 11
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 October 2, 1999, September 30, 1998, and 1997
were audited by Arthur Andersen LLP, independent public accountants.
Sanmina 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 Sanmina for
compliance. In addition, solely for the purposes of planning and performing its
audit of Sanmina's consolidated financial statements, Arthur Andersen LLP
obtained an understanding of, and selectively tested, certain aspects of
Sanmina'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, Sanmina'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.
<TABLE>
<S> <C> <C>
November 30, 1999
/s/ Jure Sola /s/ Randy W. Furr /s/ Elizabeth D. Jordan
Jure Sola Randy W. Furr Elizabeth D. Jordan
Chairman of the Board and President and Executive Vice President and
Chief Executive Officer Chief Operating Officer Chief Financial Officer
</TABLE>
27
<PAGE> 12
CONSOLIDATED BALANCE SHEETS
S a n m i n a C o r p o r a t i o n
<TABLE>
<CAPTION>
As of
---------------------------------
October 2, September 30,
(in thousands, except per share amounts) 1999 1998
------------ ---------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 136,145 $ 87,978
Short-term investments 318,457 93,526
Accounts receivable, net of allowance for
doubtful accounts of $9,448 and $5,794 191,120 133,010
Inventories 206,319 102,940
Deferred income taxes 22,934 19,389
Prepaid expenses and other 10,195 8,220
Total current assets 885,170 445,063
Property and Equipment:
Machinery and equipment 322,321 279,277
Furniture and fixtures 5,911 5,695
Leasehold improvements 33,315 49,247
Land and buildings 54,070 21,636
415,617 355,855
Less: Accumulated depreciation and amortization 208,813 164,093
Net property and equipment 206,804 191,762
Other Assets:
Intangibles, net of accumulated amortization
of $9,447 and $8,093 45,712 19,030
Long-term investments 52,850 -
Deposits and other 11,177 2,512
----------- --------
Total assets $ 1,201,713 $658,367
=========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,556 $ 5,865
Accounts payable 154,827 89,030
Accrued liabilities 26,958 16,711
Accrued payroll and related benefits 24,930 21,603
Income taxes payable 9,115 11,517
----------- --------
Total current liabilities $ 217,386 $144,726
=========== ========
Long-term Liabilities:
Convertible subordinated debt 355,259 5,767
Other liabilities 2,721 25,889
----------- --------
Total long-term liabilities $ 357,980 $ 31,656
=========== ========
Commitments and Contingencies (notes 5 and 7)
Stockholders' Equity:
Preferred stock, $.01 par value:
Authorized: 5,000 shares; outstanding: none - -
Common stock, $.01 par value:
Authorized: 200,000 shares; outstanding:
58,892 shares and 56,380 shares 589 564
Additional paid-in capital 291,435 238,933
Accumulated other comprehensive income (loss) (1,049) 386
Retained earnings 335,372 242,379
626,347 482,262
Less treasury stock at cost - 277
Total stockholders' equity 626,347 481,985
----------- --------
Total liabilities and stockholders' equity $ 1,201,713 $658,367
=========== ========
</TABLE>
See accompanying notes.
28
<PAGE> 13
CONSOLIDATED STATEMENTS OF OPERATIONS
S a n m i n a C o r p o r a t i o n
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
October 2, September 30, September 30,
(in thousands, except per share amounts) 1999 1998 1997
------------ ------------- -------------
<S> <C> <C> <C>
Net sales $1,214,744 $ 991,821 $ 803,064
Cost of sales 962,595 783,949 640,644
Gross profit 252,149 207,872 162,420
Operating Expenses:
Selling, general and administrative 74,796 67,165 63,856
Amortization of goodwill 3,269 3,127 2,283
Provision for plant closing and relocation costs 16,875 - 8,876
Write down of long-lived assets 11,400 - -
Merger costs 5,479 3,945 -
Total operating expenses 111,819 74,237 75,015
Operating income 140,330 133,635 87,405
Other income (expense), net 7,549 (272) (1,691)
Income before provision for income taxes 147,879 133,363 85,714
Provision for income taxes 54,182 47,734 36,358
---------- --------- ---------
Net income $ 93,697 $ 85,629 $ 49,356
========== ========= =========
Earnings per share:
Basic $ 1.62 $ 1.70 $ 1.02
Diluted 1.52 1.52 0.91
Shares used in computing per share amounts:
Basic 57,974 50,301 48,301
Diluted 61,662 58,597 57,616
</TABLE>
See accompanying notes.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
October 2, September 30, September 30,
(in thousands, except per share amounts) 1999 1998 1997
----------- ------------- -------------
<S> <C> <C> <C>
Net income $ 93,697 $85,629 $49,356
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment (505) 102 24
Unrealized holding gain (loss) on investments (404) 94 24
Comprehensive income $ 92,788 $85,825 $49,404
</TABLE>
See accompanying notes.
29
<PAGE> 14
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
S a n m i n a C o r p o r a t i o n
<TABLE>
<CAPTION>
Common Stock and Accumulated
Additional Paid in Capital Other
-------------------------- Comprehensive Treasury
Number Retained Income Stock
(in thousands) of Shares Amount Earnings (Loss) at Cost Total
-------------- --------- --------- ----------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1996 47,853 $ 119,735 $ 114,504 $ (3) $ (277) $233,959
Exercise of common stock options 924 6,681 - - - 6,681
Issuance of common stock under
employee stock purchase plan 221 3,163 - - - 3,163
Cumulative translation adjustment - - - 42 - 42
Unrealized holding gain on
investments - - - 42 - 42
Income tax benefit of disqualified
dispositions - 4,923 - - - 4,923
Distributions by Manu-Tronics - - (296) - - (296)
Net income - - 49,356 - - 49,356
BALANCE AT SEPTEMBER 30, 1997 48,998 134,502 163,564 81 (277) 297,870
Exercise of common stock options 1,081 6,811 - - - 6,811
Issuance of common stock under
employee stock purchase plan 182 4,038 - - - 4,038
Conversion of subordinated debt 6,119 86,250 - - - 86,250
Adjustment to conform year end of
pooled entity - - (3,169) - - (3,169)
Cumulative translation adjustment - - - 159 - 159
Unrealized holding gain on
investments - - - 146 - 146
Income tax benefit of disqualified
dispositions - 7,896 - - - 7,896
Distributions by Manu-Tronics - - (3,645) - - (3,645)
Net income - - 85,629 - - 85,629
BALANCE AT SEPTEMBER 30, 1998 56,380 239,497 242,379 386 (277) 481,985
Exercise of common stock options 1,336 26,430 - - - 26,430
Issuance of common stock under
employee stock purchase plan 251 6,472 - - - 6,472
Conversion of subordinated debt 7 398 - - - 398
Retirement of treasury stock - (277) - - 277 -
Issuance of common stock for
businesses acquired 918 3,763 832 - - 4,595
Cumulative translation adjustment - - - (797) - (797)
Unrealized holding loss on
investments - - - (638) - (638)
Income tax benefit of disqualified
dispositions - 15,741 - - - 15,741
Distributions by Manu-Tronics - - (1,536) - - (1,536)
Net income - - 93,697 - - 93,697
------- --------- --------- -------- ------- ---------
BALANCE AT OCTOBER 2, 1999 58,892 $ 292,024 $ 335,372 $(1,049) $ - $ 626,347
======= ========= ========= ======== ======= ==========
</TABLE>
See accompanying notes
30
<PAGE> 15
CONSOLIDATED STATEMENTS OF CASH FLOWS
S a n m i n a C o r p o r a t i o n
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------
October 2, September 30, September 30,
(in thousands) 1999 1998 1997
----------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 93,697 $ 85,629 $ 49,356
Adjustments to reconcile net income to cash provided by
operating activities:
Adjustment to conform year end of pooled entities - (1,332) -
Depreciation and amortization 45,487 37,052 29,114
Relocation, plant closing, merger costs, and other charges 23,686 3,945 8,876
Write down of long-lived assets 11,400 - -
Provision for doubtful accounts 3,654 2,001 505
Deferred taxes - - 2,345
(Gain) loss on disposal of fixed assets 30 (748) 205
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable (59,519) (16,998) (20,493)
Inventories (98,099) (5,996) (22,268)
Prepaid expenses, deposits and other 23,422 (366) (570)
Accounts payable and accrued liabilities 72,153 (6,737) 32,417
Income tax accounts (769) 9,727 (2,106)
--------- --------- ---------
Cash provided by operating activities 115,142 106,177 77,381
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (419,123) (101,169) (138,351)
Proceeds from maturity of short-term investments 194,192 106,591 149,605
Purchases of long-term investments (52,850) - -
Cash paid for property and equipment (65,275) (55,288) (70,706)
Net cash paid for businesses acquired (75,108) (5,666) (18,879)
Proceeds from sale of assets 78 2,591 332
--------- --------- ---------
Cash used for investing activities (418,086) (52,941) (77,999)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt - - 8,033
Payments on line of credit, net - (7,498) (1,543)
Issuance (repurchase) of convertible subordinated debt,
net of issuance costs 340,742 (5,681) -
Payments of long-term liabilities (22,256) (17,417) (7,788)
Proceeds from sale of common stock, net of issuance costs 32,625 11,060 10,594
Cash provided by (used for) financing activities 351,111 (19,536) 9,296
INCREASE IN CASH AND CASH EQUIVALENTS 48,167 33,700 8,678
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 87,978 54,278 45,600
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 136,145 $ 87,978 $ 54,278
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year:
Interest $ 1,054 $ 7,311 $ 7,964
Income taxes $ 48,086 $ 37,822 $ 35,728
NON-CASH FINANCING INFORMATION:
Conversion of subordinated debt to equity $ 398 $ 86,250 $ -
</TABLE>
See accompanying notes.
31
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
S a n m i n a C o r p o r a t i o n
NOTE 1. ORGANIZATION OF THE COMPANY
Sanmina Corporation ("Sanmina") was incorporated in Delaware in 1989 to acquire
its predecessor company which had been in the printed circuit board and
backplane business since 1980. Sanmina 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 inter-connection technologies, the manufacture of custom-designed backplane
assemblies, fabrication of complex multi-layered printed circuit boards, the
manufacture of custom cable and wire harness assemblies, and testing and
assembly of completed systems. In addition, Sanmina provides procurement and
materials management, as well as consultation on board design and manufacturing.
Sanmina's manufacturing plants are located in California, Massachusetts, Texas,
New Hampshire, North Carolina, Wisconsin, Alabama, Utah, Canada and Ireland.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year Effective October 1, 1998, Sanmina changed its fiscal year end from
September 30 to a 52 or 53-week year ending on the Saturday nearest September
30. Accordingly, the 1999 fiscal year ended on October 2, whereas the previous
two years ended on September 30. All general references to years relate to
fiscal years unless otherwise noted.
Principles of Consolidation The consolidated financial statements include the
accounts of Sanmina 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 Sanmina considers all highly liquid investments purchased with
an original maturity of three months or less to be cash equivalents.
Short Term Investments Sanmina'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 holding gains or losses are recognized in results of operations. The
specific identification method is used to determine the cost of securities sold.
Realized gains and losses have not been material to date. As of October 2, 1999,
the difference between the aggregate fair value and cost basis was a net
unrealized loss of $431,000. Sanmina 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 Sanmina's investments by
major security type is as follows (in thousands):
<TABLE>
<CAPTION>
Amortized Aggregate Unrealized Unrealized
Cost Fair Value Gain Loss
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
AS OF OCTOBER 2, 1999
U.S. government and
agency securities $149,169 $148,951 $ 2 $(220)
State and municipal
securities 68,510 68,462 4 (52)
U.S. corporate and
bank debt 160,767 160,602 34 (199)
-------- -------- ----- -----
$378,446 $378,015 $ 40 $(471)
======== ======== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Amortized Aggregate Unrealized Unrealized
Cost Fair Value Gain Loss
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
AS OF SEPTEMBER 30, 1998
U.S. government and
agency securities $ 35,912 $ 35,990 $ 79 $(1)
State and municipal
securities 55,247 55,301 55 (1)
U.S. corporate and
bank debt 33,292 33,367 77 (2)
-------- -------- ----- ---
$124,451 $124,658 $ 211 $(4)
======== ======== ===== ===
</TABLE>
Approximately $59.6 million and $31.1 million of the total investments in debt
securities as of October 2, 1999 and September 30, 1998 respectively, are
included in cash and cash equivalents; the remaining balance is classified as
short-term investments. As of October 2, 1999, debt securities with a fair value
of $352.6 million mature within one year and $25.4 million mature beyond one
year.
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
--------------------------
October 2, September 30,
1999 1998
---------- ------------
<S> <C> <C>
Raw materials $ 134,042 $ 55,179
Work-in-process 58,498 34,528
Finished goods 13,779 13,233
--------- ---------
$ 206,319 $ 102,940
========= =========
</TABLE>
Property and Equipment Property and equipment are stated at cost or, in the
case of property and equipment acquired through business combinations, at fair
value based upon the allocated purchase price at the acquisition date.
Depreciation and amortization are provided on a straight-line basis over the
estimated useful lives of the related assets (three to five years, or
twenty-five years in the case of buildings) or, in the case of leasehold
improvements, over the remaining term of the related lease, if shorter.
32
<PAGE> 17
Intangibles Intangibles relate to goodwill arising from Sanmina's acquisitions.
Goodwill is amortized on a straight-line basis over the estimated useful life of
five to fifteen years. These intangibles consist of goodwill and non-compete
agreements. The realizability of intangible assets which are included in Other
Assets, net, in the accompanying consolidated balance sheets, is evaluated
periodically as events or circumstances indicate a possible inability to recover
the net carrying amount. Such evaluation is based on various analyses, including
cash flow and profitability projections that incorporate, as applicable, the
impact of recent business combinations. The analyses involve a significant level
of management judgment in order to evaluate the ability of Sanmina to perform
within projections. During the year ended October 2, 1999, Sanmina determined
that an impairment loss had occurred related to the intangibles associated with
the acquisition of Pragmatech (see Note 6).
Revenue Recognition Sanmina 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.
Comprehensive Income SFAS No. 130 "Reporting Comprehensive Income" establishes
standards for reporting and display of comprehensive income and its components.
SFAS No. 130 requires companies to report a "comprehensive income" that includes
unrealized holding gains and losses and other items that have previously been
excluded from net income and reflected instead in stockholders' equity.
Comprehensive income for Sanmina consists of net income plus the effect of
unrealized holding gains or losses on investments classified as
available-for-sale and foreign currency translation adjustments. For the year
ended October 2, 1999, the cumulative unrealized holding loss on investments and
cumulative foreign currency translation adjustment was ($638,000) and
($797,000), respectively. For the year ended September 30, 1998, the cumulative
unrealized holding gain on investments and cumulative foreign currency
translation adjustments was $146,000 and $159,000, respectively.
New Accounting Standards In June 1998, FASB issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities". SFAS No. 133 requires that
derivative instruments be recorded in the balance sheet at their fair market
value, with changes in the fair value recorded in the income statement unless
specific hedging criteria is met. SFAS No. 133 is effective for fiscal years
beginning after June 15, 2000 and cannot be applied retroactively. Management
does not believe the adoption of SFAS No. 133 will have a material impact on
Sanmina's financial statement disclosures.
Note 3. EARNINGS PER SHARE
In fiscal 1998, Sanmina adopted the provisions of SFAS No. 128, "Earnings Per
Share." Basic EPS was computed by dividing net income by the weighted average
number of shares of common stock outstanding. Diluted EPS includes dilutive
common stock equivalents, using the treasury stock method, and assumes that the
convertible debt instruments were converted into common stock upon issuance, if
dilutive. A reconciliation of the net income and weighted average number of
shares used for the diluted earnings per share computations follows:
<TABLE>
<CAPTION>
Year Ended
----------------------------------------
(in thousands, October 2, September 30, September 30,
except per share amounts) 1999 1998 1997
---------- ------------- ------------
<S> <C> <C> <C>
Net income $93,697 $85,629 $49,356
Add back after-tax interest
expense for convertible
subordinated debt - 3,676 3,101
--------- --------- --------
Income for calculating diluted
earnings per share $93,697 $89,305 $52,457
========= ========= ========
Weighted average
number of shares
outstanding during
the period 57,974 50,301 48,301
Applicable number of
shares for stock
options outstanding
for the period 3,688 2,870 3,196
Weighted average
number of shares
if convertible
subordinated debt
were converted - 5,426 6,119
Weighted average
number of shares 61,662 58,597 57,616
--------- --------- --------
Diluted earnings per share $ 1.52 $ 1.52 $ 0.91
========= ========= ========
</TABLE>
For the year ended October 2, 1999, 4,035,000 potentially dilutive shares and
after-tax interest expense were not included in the computation of diluted
earnings per share because to do so would increase the profit per share.
NOTE 4. CONVERTIBLE SUBORDINATED DEBT
On May 1, 1999, Sanmina issued $350 million of 4.25% convertible subordinated
notes (the "New Notes") due on May 1, 2004. The New Notes are convertible into
common stock, at the option of the note holder, at a conversion price of
approximately $88.67 per share, subject to adjustments in certain events. The
New Notes are subordinated in right of payment to all existing and future senior
indebtedness, as defined, of Sanmina. The New Notes are redeemable at the option
of Sanmina on or after May 6, 2002. Interest is payable semi-annually on May 1
and November 1.
In 1995, Sanmina issued $86.3 million of 5.5% convertible subordinated notes
(the "Notes") which were due in 2002. The Notes were convertible into common
stock, at the option of the note holder, and were redeemable at the option of
Sanmina 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. On August 19, 1998,
33
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
S a n m i n a C o r p o r a t i o n
Sanmina called for redemption of the notes which represented $86.3 million in
debt. All note holders elected to convert their notes to equity.
In 1987, Elexsys issued $32 million of 5.5% convertible subordinated debentures
(the "Debentures") due on March 1, 2012. The Debentures are currently
convertible into shares of common stock at $59.85, subject to adjustment under
certain conditions. The Debentures are redeemable by Sanmina at declining
premiums prior to March 1, 1997 and thereafter at 100 percent of the principal
amount. The Debentures are also redeemable through the operation of a sinking
fund at 100 percent of the principal amount. Interest is payable semi-annually
on September 1 and March 1 of each year. Mandatory annual sinking fund payments,
sufficient to retire 5 percent of the aggregate principal amount of the
Debentures issued, were to be made on each March 1 commencing in 1997. As a
result of two exchanges of common stock for $16 million and $4 million of the
Debentures in fiscal 1994 and fiscal 1995, respectively, Sanmina now has sinking
fund credits available to offset these obligations for twelve and one-half
years, thus no sinking fund payments will be required until 2009. In addition,
Sanmina repurchased approximately $0.1 million (including premiums) of
Debentures during fiscal 1998. The Debentures are subordinated to all senior
indebtedness of Sanmina. As of October 2, 1999, $5.3 million of the Debentures
remain outstanding.
NOTE 5. COMMITMENTS
Sanmina leases its facilities under operating leases expiring at various dates
through August 2007. Sanmina is responsible for utilities, maintenance,
insurance and property taxes under the leases. Minimum future lease payments
under operating leases are approximately as follows (in thousands):
<TABLE>
<C> <C>
Fiscal Years Ending
2000 $10,392
2001 8,560
2002 7,514
2003 6,422
2004 2,022
Thereafter 4,029
-------
$38,939
=======
</TABLE>
Rent expense under operating leases was approximately $11.7 million, $6.4
million and $6.1 million for the years ended October 2, 1999, September 30,
1998, and 1997, respectively.
In November 1998, Sanmina entered into an operating lease agreement for a new
corporate headquarters and new facilities for its principal Northern California
assembly operations. This campus facility, which comprises approximately 330,000
square feet, is located in San Jose, California. A condition of this operating
lease is that Sanmina pledges $52.9 million to the administrative agent until
the end of the lease's initial term, which is included in long-term investments
in the accompanying balance sheet.
NOTE 6. ACQUISITIONS
In November 1997, Sanmina merged with Elexsys International, Inc. ("Elexsys").
Under the terms of the merger agreement, Sanmina's common stock was exchanged
for all of Elexsys' outstanding common stock. Approximately 3.3 million shares
of common stock were issued to acquire Elexsys. The merger was accounted for as
a pooling-of-interests, and therefore, all prior periods presented were restated
to combine the results of the two companies.
In November 1998, Sanmina merged with Altron, Incorporated ("Altron"). Under the
terms of the merger agreement, each share of Altron common stock was converted
into 0.4545 shares of Sanmina common stock. Approximately 7.2 million shares of
common stock were issued to acquire Altron. The merger was accounted for as a
pooling-of-interests, and therefore, all prior periods presented were restated
to combine the results of the companies. Altron's year end was December 31. For
purposes of the restatement, Altron's restated year ended September 30, 1998 was
combined with Sanmina's year ended September 30, 1998 and Altron's years ended
December 31, 1997 and December 31, 1996 were combined with Sanmina's years'
ended September 30, 1997 and September 30, 1996 respectively. As a result, the
net sales and net income of Altron for the quarter ended December 31, 1997, have
been included in both fiscal 1998 and 1997. An adjustment of $3.2 million to
account for the duplication of net income has been made to retained earnings in
fiscal 1998.
On December 28, 1998, Sanmina merged with Telo Electronics, Incorporated, a
California corporation ("Telo"). Sanmina issued approximately 950,000 shares of
Sanmina common stock in exchange for 100% of the outstanding common stock of
Telo. The merger was accounted for as a pooling of interests. Due to the
immateriality of this acquisition to Sanmina's consolidated financial position
and results of operations, Telo has been included in Sanmina's consolidated
results of operations as of the beginning of fiscal 1999 (October 1, 1998), and
therefore, amounts presented for periods prior to fiscal 1999 have not been
restated to include Telo's historical results of operations.
In March 1999, Sanmina merged with Manu-Tronics, Incorporated, a Wisconsin
corporation ("Manu-Tronics"). Sanmina issued approximately 868,000 shares of
Sanmina common stock in exchange for 100% of the outstanding common stock of
Manu-Tronics. The merger was accounted for as a pooling-of-interests, and
therefore, all prior periods presented were restated to combine the results of
the two companies.
34
<PAGE> 19
A reconciliation of the Revenue and Net income (loss) for the year ended
September 30, 1998 and 1997, to previously reported information, is as follows
(in thousands):
<TABLE>
<CAPTION>
Year Ended
---------------------------------
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Revenue:
Sanmina $722,581 $ 405,212
Elexsys - 164,575
Altron 201,207 172,428
Manu-Tronics 68,033 60,849
-------- ---------
Combined $991,821 $ 803,064
======== =========
Net income (loss):
Sanmina $ 68,151 $ 40,902
Elexsys - (10,377)
Altron 13,088 14,667
Manu-Tronics 4,390 4,164
-------- ---------
Combined $ 85,629 $ 49,356
======== =========
</TABLE>
On February 23, 1998, Sanmina acquired Pragmatech, Inc. ("Pragmatech") in a
stock purchase transaction. The purchase price was approximately $5.7 million.
The acquisition, which was accounted for as a purchase, included the payment of
cash and the assumption of liabilities. Accordingly, the results of operations
for the year ended September 30, 1998, include the results of operations of this
business from the date of acquisition. The purchase price was allocated to the
net liabilities assumed on a fair value basis. The acquisition resulted in
goodwill of $11.5 million which was to be amortized over a ten year period.
During fiscal 1999, Sanmina recorded an adjustment to write down the remaining
$11.4 million of unamortized goodwill arising from the acquisition. The fair
value of Pragmatech at the acquisition date was based on the estimated future
cash flows to be generated from the assets based on reasonable and supportable
assumptions. Financial projections prepared at the time of the acquisition of
Pragmatech reflected Sanmina's belief that Sanmina would continue to provide
electronics manufacturing services to existing Pragmatech customers and would
grow the Pragmatech business at Pragmatech's existing facilities. However, the
existing Pragmatech customer relationships could not be restructured to conform
to Sanmina's pricing and revenue models, and as a result, the relationships with
the former Pragmatech customers have terminated. In addition, Sanmina closed
several of the former Pragmatech facilities in fiscal 1998. As a result of these
operational factors, Sanmina's analysis of projected revenues, results of
operations, and cash flows attributable to the few remaining Pragmatech
customers did not support the carrying value of Pragmatech assets, including the
unamortized goodwill.
The unaudited pro forma financial information for the years ended September 30,
1998 and 1997 is presented below as if Pragmatech had been acquired on October
1, 1996:
<TABLE>
<CAPTION>
Year Ended
(Unaudited)
--------------------------------
(in thousands, September 30, September 30,
except per share data) 1998 1997
------------- -------------
<S> <C> <C>
Revenue $1,018,817 $857,618
Net Income 83,074 47,478
Net income per share - diluted $ 1.48 $ 0.88
Diluted shares used in
calculating per share amounts 58,597 57,616
</TABLE>
In the first quarter of fiscal 1999, Sanmina incurred plant closing and other
non-recurring charges of $16.9 million. The charges were a result of Sanmina's
acquisitions and Sanmina's planned relocation to a new campus facility. Sanmina
closed certain manufacturing plants in Fremont, California and Woburn,
Massachusetts and merged the operations from these facilities into existing
manufacturing facilities within the same regions. These closures were made to
eliminate duplicate facilities and other costs resulting from the merger with
Altron. Concurrent with the plant closures, Sanmina reduced its workforce in the
same regions by approximately 50 people. Plant closing, relocation and severance
costs totaled $12.8 million, of which $2.0 million was unpaid as of fiscal year
ended 1999. In conjunction with the closure of manufacturing facilities and
Sanmina's planned relocation to its new campus facility in fiscal 2000, other
non-recurring costs include payments required under lease contracts (less any
applicable sublease income) after the properties are abandoned, any applicable
lease buyout costs, restoration costs associated with certain lease arrangements
and the costs to maintain facilities during the period after abandonment. Asset
related write-offs consist of excess equipment and leasehold improvements to
facilities that were abandoned and whose estimated fair market value is zero.
Sanmina's move to the new campus facility commenced in fiscal 1999 and is
expected to be completed in the second quarter of fiscal 2000. Noncancelable
lease payments on vacated facilities will be paid out through most of fiscal
2000. Sanmina also discontinued the use of enterprise-wide software and hardware
used internally by the acquired companies, as these were no longer required post
acquisition. The closing of the plants discussed above, and the costs related to
the integration of information systems and hardware, were all incurred in fiscal
1999. Total other non-recurring charges totaled $4.1 million.
Merger costs of $5.5 million consisted of fees for investment bankers,
attorneys, accountants, and other direct merger related expenses, all of which
have been paid in fiscal 1999 and relate to those acquisitions that were
accounted for using the pooling-of-interests method. In 1998, Sanmina recorded a
charge of $3.9 million related to the merger with Elexsys.
35
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
S a n m i n a C o r p o r a t i o n
On August 4, 1999 Sanmina announced the agreement to acquire certain operations
of Nortel Networks Corporation's Wireless Electro-Mechanical Subsystem Assembly
("EMSS"). As part of the agreement, Sanmina would acquire certain assets of
Nortel's EMSS operations in Calgary, Alberta, Canada, and Chateaudun, France. On
October 1, 1999, Sanmina completed the acquisition of certain Calgary EMSS
assets and liabilities for a purchase price of approximately $47.2 million which
was accounted for as a purchase. The purchase price was allocated to the net
assets acquired, which consisted of inventories, equipment, and accrued payroll
related expenses, on a fair value basis. The results of operations for the year
ended October 2, 1999, include the results of operations of this business from
the date of acquisition. The acquisition resulted in goodwill of $29.6 million
which is being amortized over a fifteen year period.
The unaudited pro forma financial information for the years ended October 2,
1999 and September 30, 1998 is presented below as if the Calgary EMSS operations
had been acquired on October 1, 1997:
<TABLE>
<CAPTION>
Year Ended
(Unaudited)
------------------------------
(in thousands, October 2, September 30,
except per share data) 1999 1998
----------- -------------
<S> <C> <C>
Revenue $1,345,744 $1,119,021
Net income 93,728 85,623
Net income per share - diluted $ 1.52 $ 1.52
Diluted shares used in calculating
per share amounts 61,662 58,597
</TABLE>
On October 5, 1999, Sanmina acquired Devtek Electronic Packaging Systems
Division ("DEPS") of Devtek Electronics Enclosure, Inc.. The purchase price was
approximately $26.5 million. The acquisition, which was accounted for as a
purchase, included the payment of cash and the assumption of debt.
Sanmina has also completed several other smaller acquisitions during fiscal
1999. These transactions involved the purchase of either stock or assets in
exchange for cash and were accounted for as purchase transactions. Pro forma
statements of operations reflecting these acquisitions are not shown, as they
would not differ materially from reported results.
NOTE 7. CONTINGENCIES
In the normal course of business, Sanmina is subject to certain litigation
matters. Sanmina does not believe the ultimate resolution of any such pending or
threatened litigation matters would have a material adverse effect on Sanmina's
financial position or results of operations.
NOTE 8. STOCKHOLDERS' EQUITY
Common Stock In June 1998. Sanmina effected a two-for-one stock split payable in
the form of a dividend. Accordingly, all share and per share data has been
adjusted to retroactively reflect the stock split.
SANMINA STOCK OPTION PLANS
Stock Option Plans The 1990 Incentive Stock Plan (the "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 Sanmina's Common Stock at amounts not less than 100% of the fair market value
of the shares on the date of the grant.
On January 29, 1999, shareholders approved an amendment to adopt Sanmina's 1999
Stock Plan (the "1999 Plan"). The 1999 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 Sanmina'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 (the "Director Plan") provides for the automatic
grant of stock options to outside directors of Sanmina or any subsidiary of
Sanmina 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 Sanmina'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.
Altron, prior to its merger with Sanmina, had stock option plans. In connection
with the merger of Sanmina and Altron, any options outstanding that were
initially granted under the Altron plans are exercisable into Sanmina common
stock. Any forfeitures of Altron options are returned to the Sanmina stock
option plans.
Options 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 but unissued under all Sanmina option plans are 11,930,114 at October
2, 1999.
36
<PAGE> 21
Option activity under the Sanmina option plans is as follows:
<TABLE>
<CAPTION>
Options Outstanding
--------------------------------
Weighted Avg.
Shares Exercise Price
------ -----------------
<S> <C> <C>
BALANCE AT SEPTEMBER 30, 1996 4,155,954 $ 8.12
Granted 1,764,790 $ 20.83
Exercised (735,292) $ 6.64
Cancelled (235,310) $ 11.43
BALANCE AT SEPTEMBER 30, 1997 4,950,142 $ 12.69
Granted 1,835,700 $ 34.09
Exercised (1,039,179) $ 7.87
Cancelled (258,789) $ 21.06
BALANCE AT SEPTEMBER 30, 1998 5,487,874 $ 20.39
Altron Plan 966,446 $ 25.26
Granted 1,980,061 $ 46.49
Exercised (1,247,124) $ 19.66
Cancelled (616,732) $ 35.65
BALANCE AT OCTOBER 2, 1999 6,570,525 $ 27.57
</TABLE>
The following table summarizes information regarding stock options outstanding
under Sanmina option plans at October 2, 1999:
<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 10/2/99 Contractual Life Exercise Price As of 10/2/99 Exercise Price
- --------------- ------------- ---------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.50 - $ 12.19 1,758,960 5.29 $ 8.22 1,480,205 $ 7.82
$ 12.94 - $ 23.88 1,780,363 7.50 $ 20.71 726,295 $ 19.46
$ 25.00 - $ 40.84 1,745,708 7.62 $ 32.80 567,347 $ 32.16
$ 41.43 - $ 80.63 1,285,494 9.35 $ 56.41 90,588 $ 49.51
$ 0.50 - $ 80.63 6,570,525 7.31 $ 27.57 2,864,435 $ 16.91
</TABLE>
The number of exercisable options and the weighted average exercise price as of
September 30, 1998 and 1997 was 2,275,307 at $14.08 per share and 1,832,211 at
$8.65 per share, respectively.
Sanmina Employee Stock Purchase Plan Sanmina's employee stock purchase plan
(the "Purchase Plan") provides for the issuance of up to 2,300,000 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 October 2, 1999, 1,615,303 shares had been issued under the
Purchase Plan.
ALTRON OPTION PLANS
Altron, prior to its merger with Sanmina, had stock option plans. These plans
and the activity therein are separately discussed below for prior period
informational purposes. All outstanding Altron options for fiscal 1999 are
included in the table above. In connection with the merger of Sanmina and
Altron, any options outstanding that were initially granted under the Altron
plans are exercisable into Sanmina common stock. Any forfeitures of Altron
options are returned to the Sanmina stock option plans. The following Altron
plan information reflects the merger exchange ratio of 0.4545 shares of Sanmina
common stock for each share of Altron common stock.
The Altron 1989 Nonqualified Stock Option Plan for Non-Employee Directors
provided for options exercisable over five years commencing 12 months from the
date of grant and expiring 10 years from the date of grant.
The Altron 1991 Stock Option Plan provided for incentive stock options granted
at fair market value at the date of grant and nonqualified stock options granted
at prices determined by a committee of the Board of Directors. All options are
exercisable over a five-year period, commencing 12 months from the date of grant
unless accelerated and expire 10 years from the date of grant.
The Altron 1992, 1993 and 1995 Stock Option Plans for Non-Employee Directors
provided for options exercisable over a two-year period from the date of grant
and expiring 10 years from the date of grant.
The Altron 1996 Stock Option Plan for Non-Employee Directors provided for
options exercisable over a three-year period commencing 12 months from the date
of grant and expiring 10 years from the date of grant.
37
<PAGE> 22
The following table summarizes the stock option activity for the period ended
September 30, 1998:
<TABLE>
<CAPTION>
Options Outstanding
--------------------------------
Weighted Avg.
Shares Exercise Price
-------- ------------------
<S> <C> <C>
OUTSTANDING AT DECEMBER 30, 1995 699,526 $ 13.97
Granted 260,202 $ 30.65
Exercised (109,194) $ 7.85
Cancelled (5,863) $ 26.69
OUTSTANDING AT DECEMBER 28, 1996 844,671 $ 19.82
Granted 305,652 $ 33.38
Exercised (103,874) $ 7.92
Cancelled (50,458) $ 29.28
OUTSTANDING AT JANUARY 3, 1998 995,991 $ 24.73
------- ---------
OUTSTANDING AT SEPTEMBER 30, 1997(*) 777,830 $ 21.76
Granted 363,373 $ 31.66
Exercised (83,433) $ 13.46
Cancelled (91,324) $ 32.06
Outstanding at September 30, 1998 966,446 $ 25.26
</TABLE>
(*) - Because Altron had a different fiscal year end, the above table was
modified to reflect information based on Sanmina's fiscal year end
September 30, 1998.
The following table summarizes information about Altron's stock options
outstanding and exercisable at September 30, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------ ---------------------------------
Weighted Weighted Weighted
Exercise Average Number Remaining Average Number of Average
Price Range of Options Contractual Life Exercise Price Options Exercise Price
- ----------- -------------- ---------------- -------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
$ 2.68 - $ 3.59 43,723 2.3 $ 3.03 43,723 $ 3.03
$ 4.73 1,841 4.3 $ 4.73 1,841 $ 4.73
$ 10.36 - $ 14.79 136,549 5.0 $ 11.42 127,550 $ 11.24
$ 19.32 - $ 28.05 361,716 7.2 $ 22.97 208,369 $ 23.15
$ 29.44 - $ 43.19 422,617 8.6 $ 34.02 71,758 $ 37.14
-------- -------
966,446 453,241
======== =======
</TABLE>
As of October 2, 1999, Sanmina has reserved the following shares of authorized
but unissued common stock:
<TABLE>
<S> <C>
Convertible subordinated debt 4,035,181
Stock option plans 11,930,114
Employee stock purchase plan 684,697
----------
16,649,992
==========
</TABLE>
Stock-based Compensation Sanmina 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, Sanmina's net income and net income per share
would have been reduced to the following pro forma amounts (in thousands, except
per share data):
<TABLE>
<CAPTION>
Year Ended
----------------------------------------------
October 2, September 30, September 30,
1999 1998 1997
----------- ------------- --------------
<S> <C> <C> <C>
Net income:
As reported $ 93,697 $ 85,629 $ 49,356
Pro forma 53,906 63,207 37,020
Basic EPS:
As reported $ 1.62 $ 1.70 $ 1.02
Pro forma 0.93 1.26 0.77
Diluted EPS:
As reported $ 1.52 $ 1.52 $ 0.91
Pro forma 0.87 1.14 0.70
</TABLE>
The weighted average fair values of options granted by Sanmina during fiscal
1999, 1998, and 1997 was $46.53, $18.50, and $12.24 per share, respectively. The
weighted average for values of options granted by Altron during fiscal 1998 and
1997 was $17.76 and $20.46, 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 fol-
38
<PAGE> 23
lowing weighted-average assumptions used for grants in fiscal
1999, 1998 and 1997, respectively.
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------
October 2, September 30, September 30,
1999 1998 1997
---------- ------------- -------------
<S> <C> <C> <C>
Volatility 64% 52% - 75% 53%- 78%
Risk-free interest rate 5.20% 4.81%- 5.72% 5.83%- 6.66%
Dividend yield 0% 0% 0%
Sanmina expected lives
(management
and directors)
beyond vesting 0.8 0.6 1.0
Sanmina expected
lives (employees)
beyond vesting. 0.3 0.3 0.6
</TABLE>
NOTE 9. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------
October 2, September 30, September 30,
1999 1998 1997
---------- ------------- -------------
<S> <C> <C> <C>
Federal:
Current $ 49,139 $ 48,797 $ 28,641
Deferred (8,094) (7,728) (153)
41,045 41,069 28,488
State:
Current 14,366 7,617 7,207
Deferred (1,229) (952) 663
13,137 6,665 7,870
-------- -------- --------
Total provision for
income taxes $ 54,182 $ 47,734 $ 36,358
======== ======== ========
</TABLE>
The provision for income taxes differs from the amount estimated by applying the
statutory Federal income tax rate to income before taxes as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------
October 2, September 30, September 30,
1999 1998 1997
---------- ------------- ------------
<S> <C> <C> <C>
Federal tax at
statutory rate $ 51,758 $ 45,147 $ 35,194
State income taxes,
net of federal benefit 8,275 6,148 4,905
Foreign subsidiary loss 358 410 -
Effect of non-deductible
goodwill amortization 870 672 692
Tax exempt interest income (718) (713) (436)
FSC benefit (1,428) (179) (530)
Tax credits (361) (792) (412)
Change in valuation
allowance (2,740) (11,598) (3,168)
Other (1,832) 8,639 113
-------- -------- --------
Total provision for
income taxes $ 54,182 $ 47,734 $ 36,358
======== ======== =========
</TABLE>
The components of the net deferred income tax asset are as follows (in
thousands):
<TABLE>
<CAPTION>
As of
------------------------------
October 2, September 30,
1999 1998
---------- -------------
<S> <C> <C>
Cumulative temporary differences:
State income taxes $ 3,778 $ 1,726
Accrued vacation 1,585 1,232
Allowance for doubtful accounts 3,824 1,772
Depreciation 908 (511)
Inventory reserve 7,869 6,255
Accrued bonuses 1,285 2,251
General reserve 1,742 1,645
Environmental reserve 1,622 2,216
Accrued plant closing costs 162 450
Net operating loss carryforwards 2,159 4,245
Tax credit carryforwards 368 405
Other 159 2,459
-------- --------
Total deferred income tax asset 25,461 24,145
-------- --------
Valuation allowance (2,527) (5,267)
-------- --------
Net deferred income tax asset $ 22,934 $ 18,878
======== ========
</TABLE>
The valuation allowance provides a reserve against deferred tax assets that may
expire or become unutilized by Sanmina. In accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes," Sanmina
believes it is more likely than not Sanmina will not realize a portion of the
benefits of these deferred tax assets, and accordingly, has provided a valuation
allowance for them. Foreign net operating loss carryforwards of $8.8 million
will carryforward indefinitely. Federal minimum tax credit carryforwards of
$0.37 million will also carryforward indefinitely.
NOTE 10. BUSINESS SEGMENT AND CONCENTRATION OF CREDIT RISK
Sanmina adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," during fiscal 1999. SFAS No. 131
established standards for reporting information about operating segments in
annual financial statements and requires selected information about operating
segments in interim financial reports issued to stockholders. It also
established standards for related disclosures about product and services and
geographic areas. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision makers, or decision making group, in
deciding how to allocate resources and in assessing performance. Sanmina's chief
operating decision maker is the Chief Operating Officer.
Based on the evaluation of financial information by the Chief Operating Officer,
Sanmina 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. Although Sanmina seeks to diversify
its customer base, a small number of customers are responsible for a significant
portion
39
<PAGE> 24
of Sanmina's net sales. During fiscal 1999, 1998, and 1997 sales to Sanmina's
ten largest customers accounted for 54% and 53%, and 43% respectively, of
Sanmina's net sales.
Sales to major customers who accounted for more than 10% of net sales were as
follows:
<TABLE>
<CAPTION>
Year Ended
---------------------------------------
October 2, September 30, September 30,
1999 1998 1997
---------- ------------- -------------
<S> <C> <C> <C>
Customer A 14.2% 14.8% (*)
Customer B (*) 13.9% 12.6%
</TABLE>
(*) less than 10% of net sales
Sanmina'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 Sanmina to monitor current changes in business operations and to
respond accordingly.
NOTE 11. SUBSEQUENT EVENT (UNAUDITED)
On November 3, 1999, Sanmina completed the acquisition of certain Chateaudun
EMSS assets and liabilities of Nortel Networks Corporation for a purchase price
of approximately $14.2 million, which was also accounted for as a purchase. The
purchase price was allocated to the net assets acquired, which consisted of
inventories, equipment, and accrued payroll related expenses, on a fair value
basis. The acquisition resulted in goodwill of $6.0 million, which will be
amortized over fifteen years.
- --------------------------------------------------------------------------------
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 its subsidiaries as of October 2, 1999
and September 30, 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended October 2, 1999,
September 30, 1998, and September 30, 1997. These financial statements are the
responsibility of Sanmina'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 its
subsidiaries as of October 2, 1999 and September 30, 1998, and the results of
their operations and their cash flows for the years ended October 2, 1999,
September 30, 1998, and September 30, 1997 in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
San Jose, California Arthur Andersen LLP
October 22, 1999
40
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
<TABLE>
SUBSIDIARY JURISDICTION OF INCORPORATION
---------- -----------------------------
<S> <C>
Sanmina Cable Systems Texas
Elexsys International Delaware
Neutronic Stamping & Plating subsidiary of Elexsys International
Symtron Corporation subsidiary of Elexsys International
Anetec Technology, Inc. subsidiary of Elexsys International
Pritec Corporation subsidiary of Elexsys International
Symtron Systems, Inc. subsidiary of Elexsys International
Elxi Acquisition, Inc. subsidiary of Elexsys International
Elexsys International UK subsidiary of Elexsys International
TELO Electronics, Inc. California
Manu-Tronics, Inc. Wisconsin
Sanmina B.V. Netherlands
Sanmina Canada Holding Co. Canada
Sanmina Canada(1) Canada
Sanmina Ireland Ltd(2) Ireland
Sanmina United Kingdom United Kingdom
Altron Systems Corporation(3) Massachusetts
Altron Securities Corporation(3) Massachusetts
Sanmina Foreign Sales Corporation Barbados
Sanmina Canada ULC Canada
Sanmina International AG Switzerland
</TABLE>
(1) A subsidiary of Sanmina Canada Holding Company.
(2) A subsidiary of Sanmina B.V.
(3) A subsidiary of Altron Incorporated.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated October 22, 1999 included in this Form 10-K, into Sanmina'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 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> OCT-02-1999
<CASH> 136,145
<SECURITIES> 318,457
<RECEIVABLES> 191,120
<ALLOWANCES> 9,448
<INVENTORY> 206,319
<CURRENT-ASSETS> 885,170
<PP&E> 415,617
<DEPRECIATION> 208,813
<TOTAL-ASSETS> 1,201,713
<CURRENT-LIABILITIES> 217,386
<BONDS> 357,980
0
0
<COMMON> 589
<OTHER-SE> 625,758
<TOTAL-LIABILITY-AND-EQUITY> 1,201,713
<SALES> 1,214,744
<TOTAL-REVENUES> 1,214,744
<CGS> 962,595
<TOTAL-COSTS> 962,595
<OTHER-EXPENSES> 111,819
<LOSS-PROVISION> 2,587
<INTEREST-EXPENSE> 7,549<F1>
<INCOME-PRETAX> 147,879
<INCOME-TAX> 54,182
<INCOME-CONTINUING> 93,697
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93,697
<EPS-BASIC> 1.62<F2>
<EPS-DILUTED> 1.52<F3>
<FN>
<F1>Interest Expense is net of Interest Income, the positive amount is income and
the negative is interest expense.
<F2>EPS is reported as "Basic EPS" as prescribed by SFAS 128.
<F3>EPS is reported as "Diluted EPS" as prescribed by SFAS 128.
</FN>
</TABLE>
