<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 1, 2000
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)
<TABLE>
<S> <C>
DELAWARE 77-0228183
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
2700 N. FIRST ST., SAN JOSE, CA 95134
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
408/964-3500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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. [X] Yes [ ] No
As of August 7, 2000, there were 151,391,529 shares outstanding of the
issuer's common stock, $0.01 par value.
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<PAGE> 2
SANMINA CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Interim Financial Statements
Condensed Consolidated Statements of Operations.... 1
Condensed Consolidated Balance Sheets.............. 2
Condensed Consolidated Statements of Cash Flows.... 3
Notes to Condensed Consolidated Financial
Statements.......................................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 17
Item 3. Quantitative and Qualitative Disclosures about
Market Risks.............................................. 23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................... 24
Item 6. Exhibits and Reports on Form 8-K.................... 24
Signature.......................................... 25
</TABLE>
i
<PAGE> 3
SANMINA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ------------------------
JULY 1, JULY 3, JULY 1, JULY 3,
2000 1999 2000 1999
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales.................................. $1,000,632 $604,622 $2,639,580 $1,729,693
Cost of sales.............................. 853,266 494,517 2,235,849 1,433,057
---------- -------- ---------- ----------
Gross profit............................. 147,366 110,105 403,731 296,636
---------- -------- ---------- ----------
Operating expenses
Selling, general and administrative...... 69,131 38,584 154,638 115,338
Amortization of goodwill................. 5,110 3,971 15,241 11,786
Provision for plant closing and
relocation costs...................... -- -- -- 16,875
Write down of long-lived assets.......... 8,750 -- 8,750 11,400
Merger and restructuring costs........... 47,201 -- 47,201 5,479
---------- -------- ---------- ----------
Total operating expenses......... 130,192 42,555 225,830 160,878
---------- -------- ---------- ----------
Operating income........................... 17,174 67,550 177,901 135,758
Other income (expense), net................ 2,147 (5,483) (4,310) (18,185)
---------- -------- ---------- ----------
Income before provision for income
taxes............................... 19,321 62,067 173,591 117,573
Provision for income taxes................. 17,500 22,602 73,416 43,752
---------- -------- ---------- ----------
Net income................................. $ 1,821 $ 39,465 $ 100,175 $ 73,821
========== ======== ========== ==========
Earnings per share:
Basic.................................... $ 0.01 $ 0.29 $ 0.69 $ 0.54
Diluted.................................. $ 0.01 $ 0.27 $ 0.65 $ 0.51
Shares used in computing per share amounts:
Basic.................................... 150,818 137,481 145,200 136,432
Diluted.................................. 158,995 144,958 153,202 144,039
</TABLE>
See accompanying notes.
1
<PAGE> 4
SANMINA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
JULY 1, OCTOBER 2,
2000 1999
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 397,273 $ 148,754
Short-term investments.................................... 342,954 318,457
Accounts receivable, net.................................. 542,481 335,288
Inventories............................................... 480,496 299,261
Deferred income taxes..................................... 40,723 34,414
Prepaid expenses and other................................ 31,018 19,959
---------- ----------
Total current assets.............................. 1,834,945 1,156,133
Property, plant and equipment, net.......................... 604,525 549,434
Long-term investments....................................... 53,108 53,056
Goodwill and intangibles.................................... 279,499 229,070
Deposits and other.......................................... 14,120 19,748
---------- ----------
$2,786,197 $2,007,441
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 409,430 $ 280,914
Accrued liabilities and other............................. 163,585 122,781
Income taxes payable...................................... 12,061 10,088
---------- ----------
Total current liabilities......................... 585,076 413,783
---------- ----------
Long-term liabilities:
Convertible subordinated notes............................ 354,965 355,259
Long-term debt and other.................................. 306,030 374,305
---------- ----------
Total long-term liabilities....................... 660,995 729,564
---------- ----------
Stockholders' equity:
Common stock.............................................. 1,511 800
Additional paid-in capital................................ 1,066,598 480,651
Accumulated other comprehensive loss...................... (6,398) (1,864)
Retained earnings......................................... 478,415 384,507
---------- ----------
Total stockholders' equity........................ 1,540,126 864,094
---------- ----------
$2,786,197 $2,007,441
========== ==========
</TABLE>
See accompanying notes.
2
<PAGE> 5
SANMINA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------
JULY 1, JULY 3,
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 100,175 $ 73,821
Adjustments to reconcile net income to cash provided by
operating activities:
Adjustment to conform year end of pooled entities...... (6,267) --
Depreciation, amortization and other................... 127,243 96,656
Relocation, plant closing, merger costs and other
charges............................................... 47,201 23,686
Write down of long-lived assets........................ 8,750 11,400
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable.................................. (214,394) (56,072)
Inventories.......................................... (145,083) (34,782)
Prepaid expenses, deposits and other................. (29,659) (1,365)
Accounts payable and accrued liabilities............. 117,877 25,128
Income tax accounts.................................. 1,358 16,161
--------- ---------
Cash provided by operating activities............. 7,201 154,633
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments....................... (289,812) (263,164)
Proceeds from maturity of short-term investments.......... 265,315 121,645
Purchases of long-term investments........................ -- (52,850)
Purchases of property and equipment, net of
acquisitions........................................... (129,992) (88,421)
Cash paid for businesses acquired, net of cash acquired... (109,848) (19,369)
--------- ---------
Cash used for investing activities................ (264,337) (302,159)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (payments) of long-term liabilities.............. (75,826) 284,783
Proceeds from sale of common stock, net................... 581,481 26,971
--------- ---------
Cash provided by financing activities............. 505,655 311,754
--------- ---------
Increase in cash and cash equivalents....................... 248,519 164,228
Cash and cash equivalents at beginning of period............ 148,754 96,425
--------- ---------
Cash and cash equivalents at end of period.................. $ 397,273 $ 260,653
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................................. $ 15,158 $ 29,361
Income taxes.............................................. $ 73,022 $ 34,065
</TABLE>
See accompanying notes.
3
<PAGE> 6
SANMINA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Sanmina
Corporation (the "Company" or "Sanmina") have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules or regulations. The
interim financial statements are unaudited, but reflect all adjustments that
are, in the opinion of management, necessary for a fair presentation.
The results of operations for the three months and/or nine months ended
July 1, 2000 are not necessarily indicative of the results that may be expected
for the year ending September 30, 2000. These condensed consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto for the year ended October 2, 1999, included in Sanmina's annual report
on Form 10-K.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the unaudited condensed
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.
Sanmina's fiscal year ends on the Saturday nearest September 30. All
general references to years relate to fiscal years unless otherwise noted.
NOTE 2 -- ACQUISITIONS
On June 1, 2000, Sanmina acquired Essex AB ("Essex"), a major electronics
manufacturing services (EMS) supplier in Scandinavia. The transaction was
structured as a stock-for-stock exchange and was accounted for as a pooling of
interests. Under the terms of the agreement, each share of Essex Common Stock
was converted into approximately 10.20 shares of Sanmina Common Stock.
Approximately 2.0 million shares of common stock were issued to acquire Essex.
Essex has four manufacturing facilities in Sweden and Finland. Capabilities
include engineering design, printed circuit board assembly, system integration
and test, as well as distribution and repair.
On June 23, 2000, Sanmina completed its acquisition of Hadco Corporation
("Hadco"), a major manufacturer of advanced electronic interconnect products. As
a result of the transaction, which was structured as a merger, each outstanding
share of Hadco Common Stock was converted into 1.40 shares of Sanmina Common
Stock and Hadco became a wholly-owned subsidiary of Sanmina. Approximately 19.6
million shares of common stock were issued to acquire Hadco. The transaction was
accounted for as a pooling of interests. Hadco's key customers include leading
electronic manufacturers in the communications, industrial automation, and
high-end computing industries. Through the acquisition of Hadco, Sanmina
received added circuit fabrication capacity enabling Sanmina to meet customer
demands for higher layer count, higher density, and advanced printed circuit
boards.
As mentioned above, the mergers were accounted for as poolings of interests
and the condensed consolidated financial statements have been restated to
reflect the combined operations of all entities for the periods presented. The
year-ends of the merged companies have not been conformed for periods prior to
fiscal 2000. For the periods after fiscal 1999 the quarters and year-ends have
adopted Sanmina's year-end of a 52 or 53 week year ending on the Saturday
nearest September 30.
Prior to being acquired by Sanmina, Essex operated under a calendar year
end, and, accordingly, Essex' statements of operations, shareholders' equity and
cash flows for the three and nine month periods ended September 30, 1999 have
been combined with the corresponding Sanmina consolidated statements for the
three and nine month periods ended July 3, 1999. During fiscal 2000, Essex'
year-end was changed from
4
<PAGE> 7
SANMINA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
December 31 to a 52 or 53 week year ending on the Saturday nearest September 30
to conform to Sanmina's fiscal year end. Accordingly, Essex' operations for the
three months ended December 31, 1999, which included net sales of $54 million
and net income of $1.6 million have been included in the consolidated results of
Sanmina for fiscal 2000 and was reported as an adjustment to retained earnings
in the third quarter of fiscal 2000.
Prior to the merger with Sanmina, Hadco's fiscal year ended on the last
Saturday in October and, accordingly, Hadco's statements of operations,
shareholders' equity and cash flows for the three and nine month periods ended
July 31, 1999 have been combined with the corresponding Sanmina consolidated
statements for the three and nine month periods ended July 3, 1999. For fiscal
2000, Hadco adopted Sanmina's fiscal year end of the Saturday nearest September
30. As a result, operations for the one month ended October 31, 1999, which
included net sales of $109 million and net income of $4.7 million have been
included in the consolidated results of fiscal 2000 and was reported as an
adjustment to retained earnings in the third quarter of fiscal 2000.
As a result of the pooling of interests accounting for Essex and Hadco,
Sanmina has restated its historical results of operations to include the results
of operations of Essex and Hadco. The financial information presented gives
effect to such restatement. A reconciliation of the financial statements for the
nine months ended July 3, 1999, to previously reported information is as follows
(in thousands):
<TABLE>
<S> <C>
REVENUE:
Sanmina................................................ $ 866,169
Essex.................................................. 122,270
Hadco.................................................. 743,926
Eliminations........................................... (2,672)
----------
Combined....................................... $1,729,693
==========
NET INCOME:
Sanmina................................................ $ 59,568
Essex.................................................. 1,031
Hadco.................................................. 13,222
----------
Combined....................................... $ 73,821
==========
</TABLE>
The merger and restructuring costs of $47.2 million are comprised of $27.3
million for executive severance, expected work force attrition and related costs
(accrual made in accordance with the criteria in EITF 94-3 "Liability
Recognition for Costs to Exit an Activity" (including certain costs incurred in
a restructuring)), $15.9 million for investment banking and related fees and
expenses, $2.9 million for accounting, legal and related fees and expenses, and
$1.1 million of other related restructuring costs.
On June 27, 2000, Sanmina acquired InterWorks for a cash purchase price of
approximately $45 million. Interworks is a designer and manufacturer of standard
and custom modular subsystems, focused on meeting the growing needs of the
networking equipment and communications sectors. This transaction was accounted
for as a purchase. InterWorks designs, manufactures, tests and distributes a
complete line of Digital Signal Processor modular solutions and advanced memory
products to leading electronics original equipment manufacturers serving the
networking and telecommunications markets. Pro forma information reflecting the
acquisition of Interworks has not been presented, as the operations of
Interworks are not material to Sanmina's restated consolidated financial
statements.
5
<PAGE> 8
SANMINA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 3 -- 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.
NOTE 4 -- COMPREHENSIVE INCOME
Statement of Financial Accounting Standards ("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 nine months ended July 1, 2000, the net unrealized holding
loss on investments and foreign currency translation adjustments were
approximately $0.5 million and $2.2 million, respectively. For the nine months
ended July 3, 1999, the net unrealized holding loss on investments and foreign
currency translation adjustments were approximately $0.3 million and $1.4
million, respectively. Comprehensive income for the nine months ended July 1,
2000 and July 3, 1999 was $97.5 million and $72.2 million respectively.
NOTE 5 -- 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.
During the third quarter of fiscal 2000, such evaluation, with respect to
the merger with Hadco, indicated that the fair value of certain intangible
assets related to Hadco were less than their carrying value. Accordingly, in the
third quarter of fiscal 2000, Sanmina recorded an adjustment to write down $8.75
million of intangible assets. The fair value of the intangible assets at the
time of original acquisition by Hadco was based on expected future cash flows to
be generated from the assets based on reasonable and supportable assumptions.
The existing customer relationships, and in-place workforce, valued at the time
of the original acquisition by Hadco, however, could not be supported at their
current carrying values at the time of the merger. As a result, based on future
expected cash flows from the related customer base, and from experienced and
expected work force attrition, Sanmina recorded adjustments to the carrying
value of these intangible assets in the amounts of $7.5 million and $1.25
million, respectively.
6
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SANMINA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 6 -- INVENTORIES
Inventories, stated at the lower of cost or market (first-in, first-out
method), consist of:
<TABLE>
<CAPTION>
JULY 1, OCTOBER 2,
2000 1999
-------- ----------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.......................................... $251,634 $182,711
Work-in-process........................................ 153,027 87,811
Finished goods......................................... 75,835 28,739
-------- --------
$480,496 $299,261
======== ========
</TABLE>
NOTE 7 -- EARNINGS PER SHARE ("EPS")
Basic EPS was computed by dividing net income by the weighted average
number of shares of common stock outstanding during the third quarter and first
nine months of fiscal 2000 and 1999. Diluted EPS for the third quarter and first
nine months of fiscal 2000 and 1999 includes dilutive common stock equivalents
using the treasury stock method, and assumes that the convertible debt
instruments were converted into common stock, if dilutive. Reconciliations of
the net income and weighted average number of shares used for the diluted
earnings per share computations for the third quarter and first nine months of
fiscal 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------- -------------------
JULY 1, JULY 3, JULY 1, JULY 3,
2000 1999 2000 1999
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net income............................................ $ 1,821 $ 39,465 $100,175 $ 73,821
Add back after-tax interest expense for convertible
subordinated debt................................... -- -- 99 --
-------- -------- -------- --------
Income for calculating earnings per share............. $ 1,821 $ 39,465 $100,274 $ 73,821
======== ======== ======== ========
Weighted average number of shares outstanding during
the period.......................................... 150,818 137,481 145,200 136,432
Applicable number of shares for stock options
outstanding for the period.......................... 8,177 7,477 7,833 7,607
Weighted average number of shares if convertible
subordinated debt were converted.................... -- -- 169 --
-------- -------- -------- --------
Weighted average number of shares..................... 158,995 144,958 153,202 144,039
======== ======== ======== ========
Diluted earnings per share............................ $ 0.01 $ 0.27 $ 0.65 $ 0.51
======== ======== ======== ========
</TABLE>
NOTE 8 -- EQUITY OFFERING
On February 8, 2000, Sanmina completed a public offering of 9,550,000
shares of Common Stock at $59.00 per share. These shares were weighted in the
second quarter of fiscal year 2000 based upon the number of days outstanding,
and fully weighted for the third quarter. The net proceeds will be used for
working capital and other general corporate purposes.
7
<PAGE> 10
SANMINA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 9 -- LONG-TERM DEBT AND OTHER
Long-term debt and other consists of the following (in thousands):
<TABLE>
<CAPTION>
JULY 1, OCTOBER 30,
2000 1999
-------- -----------
<S> <C> <C>
Variable rate mortgages..................................... $ 592 $ 640
Revolving credit facility................................... -- 75,000
9 1/2% Senior subordinated notes due 2008................... 199,467 199,422
Obligations under capital leases with interest rates ranging
from 7% to 7 3/4%......................................... 4,393 5,762
-------- --------
204,452 280,824
Less -- Current portion..................................... (2,458) (2,515)
-------- --------
Long-term debt.............................................. 201,994 278,309
Other liabilities........................................... 104,036 95,996
-------- --------
Total long-term debt and other.................... $306,030 $374,305
======== ========
</TABLE>
In July 2000, Sanmina's Hadco subsidiary initiated an offer to purchase an
aggregate of $200 million of 9 1/2% senior subordinated notes due 2008 issued by
Hadco in May 1998. This offer to purchase was required by the terms of the
indenture under which the notes were issued as a result of the change in control
of Hadco which occurred when Hadco was acquired by Sanmina. The purchase in the
offer is 101% of the principal amount of the notes. Holders have until August
23, 2000 to elect to have their notes redeemed. Sanmina will fund the redemption
of any notes that holders elect to have redeemed. Any notes that are not
redeemed will remain outstanding, although Sanmina may in the future elect to
purchase notes through open market or negotiated transactions, additional tender
or exchange offers or otherwise.
NOTE 10 -- COMMITMENTS
In November 1998, Sanmina entered into an operating lease agreement for a
new corporate headquarters and new facilities for its principal Northern
California assembly facilities. 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. Sanmina has
classified this amount as a long-term investment in the accompanying
consolidated balance sheets.
NOTE 11 -- SUBSEQUENT EVENTS
On July 10, 2000, Sanmina acquired a PCB assembly and system assembly
facility located in Shenzhen, Guang Dong province in China. The acquisition,
which will be accounted for as a purchase, also includes administrative offices
in Hong Kong and a branch procurement office in Taiwan. The purchase price was
approximately $65 million in cash. The facilities in China include a
manufacturing facility with administrative and dormitory buildings. The business
focuses on PCB assembly and targets the telecommunication, networking, computer
and medical electronics markets.
Also on July 10, 2000, Sanmina announced that it has signed a definitive
agreement to acquire certain Electronics Computer-Aided Design (ECAD),
Electronics Systems Packaging Design (ESP) and Product Integrity (PI) operations
from Nortel Networks. The agreement calls for the acquisition of test facilities
and related equipment and would involve the transfer of employees in several
expert physical design teams. The transaction is expected to close during the
fourth quarter of fiscal 2000 and will be accounted for as a purchase. The
purchase price for this acquisition was approximately $6.5 million in cash.
8
<PAGE> 11
SANMINA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 12 -- 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 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,
including the financial information related to Hadco and Essex, 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 back plane 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 of Sanmina's 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 13 -- RECENT ACCOUNTING PRONOUNCEMENT
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101). SAB 101 summarizes certain areas of the
Staff's views in applying generally accepted accounting principles to revenue
recognition in financial statements and is effective for fiscal years beginning
after December 31, 2000. Sanmina does not believe that SAB 101 will have a
material effect on the financial statements.
In March 2000, the FASB issued Financial Standards Board Interpretation No.
44, "Accounting for Certain Transactions involving Stock Compensation -- an
Interpretation of APB Opinion No. 25" ("FIN No. 44"). FIN No. 44 addresses the
application of APB No. 25 to clarify, among other issues, (a) the definition of
employee for purposes of applying APB No. 25, (b) the criteria for determining
whether a plan qualifies as a noncompensatory plan, (c) the accounting
consequence of various modifications to the terms of a previously fixed stock
option or award, and (d) the accounting for an exchange of stock compensation
awards in a business combination. FIN No. 44 is effective July 1, 2000, but
certain conclusions cover specific events that occur after either December 15,
1998, or January 12, 2000. To the extent FIN No. 44 covers events occurring
during the period after applying the interpretation, the events will be
recognized on a prospective basis from July 1, 2000. Sanmina is currently
evaluating FIN No. 44 and does not expect that it will have a material effect on
its financial position or results of operations.
NOTE 14 -- SUPPLEMENTAL GUARANTOR CONSOLIDATING CONDENSED FINANCIAL STATEMENTS
Basis of presentation. On May 18, 1998, Sanmina's recently acquired entity,
Hadco, sold $200 million aggregate principal amount of 9 1/2% Senior
Subordinated Notes due in 2008 (the "Notes"). The Notes are fully and
unconditionally guaranteed on a senior subordinated basis, jointly and
severally, by certain of Hadco's (now Sanmina's) wholly-owned domestic
subsidiaries (the "Guarantors"). The Guarantors are Hadco Santa Clara, Inc.,
Hadco Phoenix, Inc., CCIR of Texas Corp. and CCIR of California Corp. The
consolidating condensed financial statements of the Guarantors are presented
below and should be read in connection with the Consolidated Condensed Financial
Statements of the Company. Separate financial statements of the Guarantors are
not presented because (i) the Guarantors are wholly-owned and have fully
9
<PAGE> 12
SANMINA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
and unconditionally guaranteed the Notes on a joint and several basis and (ii)
the Company's management has determined such separate financial statements are
not material to investors and believes the consolidating condensed financial
statements presented are more meaningful in understanding the financial position
of the Guarantors.
There are no significant restrictions on the ability of the Guarantors to
make distributions to the Company.
10
<PAGE> 13
SANMINA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SUPPLEMENTAL GUARANTOR CONSOLIDATING CONDENSED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
AS OF JULY 1, 2000
-----------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current assets:
Cash, cash equivalents and
short-term investments......... $ (2,124) $ 2,724 $ 739,627 $ -- $ 740,227
Accounts receivable, net.......... 65,934 8,799 467,748 -- 542,481
Inventories....................... 39,269 4,538 436,689 -- 480,496
Deferred income taxes............. -- -- 40,723 -- 40,723
Prepaid expenses and other........ 1,727 110 29,181 -- 31,018
--------- ------- ---------- --------- ----------
Total current assets...... 104,806 16,171 1,713,968 -- 1,834,945
Property, plant, and equipment,
net............................ 136,806 48,142 419,577 -- 604,525
Intercompany receivable........... 35,950 3,329 23,994 (63,273) --
Investments in subsidiaries....... 8,986 -- 289,971 (298,889) 68
Goodwill and intangibles.......... 162,432 -- 117,067 -- 279,499
Deposits and other................ 52 -- 67,108 -- 67,160
--------- ------- ---------- --------- ----------
$ 449,032 $67,642 $2,631,685 $(362,162) $2,786,197
========= ======= ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable.................. $ 42,552 $ 8,371 $ 358,507 $ -- $ 409,430
Intercompany payable.............. 17,894 45,379 -- (63,273) --
Accrued payroll and other employee
benefits....................... 1,840 423 41,773 -- 44,036
Other accrued expenses............ 51,726 542 77,031 -- 129,299
Current portion of long-term
debt........................... 2,168 57 86 -- 2,311
--------- ------- ---------- --------- ----------
Total current
liabilities............. 116,180 54,772 477,397 (63,273) 585,076
--------- ------- ---------- --------- ----------
Long-term debt, net of current
portion........................ 2,031 (4) (2,027) -- --
--------- ------- ---------- --------- ----------
Deferred tax liability............ 44,676 -- (44,179) -- 497
--------- ------- ---------- --------- ----------
Other long-term liabilities....... -- -- 660,498 -- 660,498
--------- ------- ---------- --------- ----------
Stockholders' investment:
Common Stock................... 3 8,303 1,511 (8,306) 1,511
Additional paid in capital..... 400,624 21,482 1,066,468 (421,976) 1,066,598
Unrealized holding gain (loss)
on investments and cumulative
foreign currency translation
adjustments.................. -- -- (6,398) -- (6,398)
Deferred compensation.......... -- -- -- -- --
Retained earnings.............. (114,482) (16,911) 478,415 131,393 478,415
--------- ------- ---------- --------- ----------
Less: treasury stock........... -- -- -- -- --
--------- ------- ---------- --------- ----------
Total stockholders'
investment.............. 286,145 12,874 1,539,996 (298,889) 1,540,126
--------- ------- ---------- --------- ----------
$ 449,032 $67,642 $2,631,685 $(362,162) $2,786,197
========= ======= ========== ========= ==========
</TABLE>
11
<PAGE> 14
SANMINA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SUPPLEMENTAL GUARANTOR CONSOLIDATING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED BALANCE SHEET (CONTINUED)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
AS OF OCTOBER 2, 1999
-----------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current assets:
Cash, cash equivalents and
short-term investments......... $ (2,679) $ 1,378 $ 468,512 $ -- $ 467,211
Accounts receivable, net.......... 49,926 7,566 277,796 -- 335,288
Inventories....................... 28,085 6,590 264,586 -- 299,261
Deferred income taxes............. -- -- 34,414 -- 34,414
Prepaid expenses and other........ 2,221 244 17,494 -- 19,959
--------- -------- ---------- --------- ----------
Total current assets...... 77,553 15,778 1,062,802 -- 1,156,133
Property, plant, and equipment,
net............................ 141,510 49,638 358,286 -- 549,434
Intercompany receivable........... 24,783 3,122 46,365 (74,270) --
Investments in subsidiaries....... 12,162 -- 280,444 (292,606) --
Goodwill and intangibles.......... 179,319 -- 49,751 -- 229,070
Deposits and other................ 29 -- 72,775 -- 72,804
--------- -------- ---------- --------- ----------
$ 435,356 $ 68,538 $1,870,423 $(366,876) $2,007,441
========= ======== ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable.................. $ 41,842 $ 5,583 $ 233,489 -- $ 280,914
Intercompany payable.............. 28,089 46,181 -- (74,270) --
Accrued payroll and other employee
benefits....................... 1,628 300 (1,928) -- --
Other accrued expenses............ 37,355 97 91,346 -- 128,798
Current portion of long-term
debt........................... 2,114 73 1,884 -- 4,071
--------- -------- ---------- --------- ----------
Total current
liabilities............. 111,028 52,234 324,791 (74,270) 413,783
--------- -------- ---------- --------- ----------
Long-term debt, net of current
portion........................ 3,307 43 299,947 -- 303,297
--------- -------- ---------- --------- ----------
Deferred tax liability............ 44,676 -- (44,676) -- --
--------- -------- ---------- --------- ----------
Other long-term liabilities....... -- -- 426,267 -- 426,267
--------- -------- ---------- --------- ----------
Stockholders' investment:
Common stock................... 3 8,303 800 (8,306) 800
Additional paid-in-capital..... 400,624 21,352 480,651 (421,976) 480,651
Unrealized holding gain (loss)
on investments and cumulative
foreign currency translation
adjustments.................. -- -- (1,680) -- (1,680)
Deferred compensation.......... -- -- (184) -- (184)
Retained earnings.............. (124,282) (13,394) 384,507 137,676 384,507
--------- -------- ---------- --------- ----------
Less: treasury stock........... -- -- -- -- --
--------- -------- ---------- --------- ----------
Total stockholders'
investment.............. 276,345 16,261 864,094 (292,606) 864,094
--------- -------- ---------- --------- ----------
$ 435,356 $ 68,538 $1,870,423 $(366,876) $2,007,441
========= ======== ========== ========= ==========
</TABLE>
12
<PAGE> 15
SANMINA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SUPPLEMENTAL GUARANTOR CONSOLIDATING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JULY 1, 2000
------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATION
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTALS
------------ ------------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............................ $133,816 $15,599 $851,217 $ -- $1,000,632
Cost of sales........................ 110,330 15,747 727,189 -- 853,266
-------- ------- -------- ------- ----------
Gross profit....................... 23,486 (148) 124,028 -- 147,366
Operating expenses before goodwill... 2,574 1,306 121,202 -- 125,082
Amortization of goodwill............. 3,051 -- 2,059 -- 5,110
-------- ------- -------- ------- ----------
Income (loss) from operations...... 17,861 (1,454) 767 -- 17,174
Other income, (expense) net.......... 333 1,257 (1,017) 1,574 2,147
Interest expense..................... (52) (6) 58 -- --
-------- ------- -------- ------- ----------
Income (loss) before provision for
income taxes.................... 18,142 (203) (192) 1,574 19,321
Provision for income taxes........... 8,816 246 8,438 -- 17,500
Equity in income (loss) of
subsidiary......................... (2,023) -- 8,877 (6,854) --
-------- ------- -------- ------- ----------
Net income................. $ 7,303 $ (449) $ 247 $(5,280) $ 1,821
======== ======= ======== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED JULY 1, 2000
------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATION
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTALS
------------ ------------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales........................... $352,207 $46,425 $2,240,948 $ -- $2,639,580
Cost of sales....................... 306,728 44,239 1,884,882 -- 2,235,849
-------- ------- ---------- -------- ----------
Gross profit...................... 45,479 2,186 356,066 -- 403,731
Operating expenses before
goodwill.......................... 7,187 3,040 200,362 -- 210,589
Amortization of goodwill............ 9,154 -- 6,087 -- 15,241
-------- ------- ---------- -------- ----------
Income (loss) from operations..... 29,138 (854) 149,617 -- 177,901
Other income, (expense) net......... 1,320 1,961 (11,651) 4,060 (4,310)
Interest expense.................... (179) (18) 197 -- --
-------- ------- ---------- -------- ----------
Income (loss) before provision for
income taxes................... 30,279 1,089 138,163 4,060 173,591
Provision for income taxes.......... 15,135 583 57,698 -- 73,416
Equity in income (loss) of
subsidiary........................ (3,554) -- 15,650 (12,096) --
-------- ------- ---------- -------- ----------
Net income................ $ 11,590 $ 506 $ 96,115 $ (8,036) $ 100,175
======== ======= ========== ======== ==========
</TABLE>
13
<PAGE> 16
SANMINA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SUPPLEMENTAL GUARANTOR CONSOLIDATING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JULY 3, 1999
------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATION
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTALS
------------ ------------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............................ $113,971 $12,359 $478,292 $ -- $604,622
Cost of sales........................ 98,357 12,020 384,140 -- 494,517
-------- ------- -------- ------- --------
Gross profit....................... 15,614 339 94,152 -- 110,105
Operating expenses before goodwill... 2,301 763 35,520 -- 38,584
Amortization of goodwill............. 3,049 -- 922 -- 3,971
-------- ------- -------- ------- --------
Income (loss) from operations...... 10,264 (424) 57,710 -- 67,550
Other income, (expense) net.......... (284) 51 (6,100) 850 (5,483)
Interest expense..................... (82) (7) 89 -- --
-------- ------- -------- ------- --------
Income (loss) before provision for
income taxes.................... 9,898 (380) 51,699 850 62,067
Provision for income taxes........... 5,146 108 17,348 -- 22,602
Equity in income (loss) of
subsidiary......................... (1,338) -- 4,264 (2,926) --
-------- ------- -------- ------- --------
Net income................. $ 3,414 $ (488) $ 38,615 $(2,076) $ 39,465
======== ======= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED JULY 3, 1999
------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATION
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTALS
------------ ------------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales........................... $343,967 $34,583 $1,351,143 $ -- $1,729,693
Cost of sales....................... 304,773 34,436 1,093,848 -- 1,433,057
-------- ------- ---------- ------- ----------
Gross profit...................... 39,194 147 257,295 -- 296,636
Operating expenses before
goodwill.......................... 6,727 2,326 140,039 -- 149,092
Amortization of goodwill............ 9,175 -- 2,611 -- 11,786
-------- ------- ---------- ------- ----------
Income (loss) from operations..... 23,292 (2,179) 114,645 -- 135,758
Other income, (expense) net......... (914) (358) (18,586) 1,673 (18,185)
Interest expense.................... (297) (12) 309 -- --
-------- ------- ---------- ------- ----------
Income (loss) before provision for
income taxes................... 22,081 (2,549) 96,368 1,673 117,573
Provision for income taxes.......... 12,424 220 31,108 -- 43,752
Equity in income (loss) of
subsidiary........................ (4,442) -- 6,888 (2,446) --
-------- ------- ---------- ------- ----------
Net income (loss)......... $ 5,215 $(2,769) $ 72,148 $ (773) $ 73,821
======== ======= ========== ======= ==========
</TABLE>
14
<PAGE> 17
SANMINA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SUPPLEMENTAL GUARANTOR CONSOLIDATING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED JULY 1, 2000
----------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATION
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTALS
------------ ------------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities................. $ 15,688 $ 4,723 $ (17,270) $ 4,060 $ 7,201
-------- ------- --------- ------- ---------
Cash flows from investing activities:
Foreign sales corp. dividend......... -- (4,060) 4,060 -- --
Purchase of property, plant, and
equipment......................... (14,454) (3,347) (112,778) -- (130,579)
Proceeds from sale of property,
plant, and Equipment.............. 543 33 (576) -- --
Purchase of short-term investments... -- -- (289,812) -- (289,812)
Proceeds from short-term
investments....................... -- -- 265,315 -- 265,315
Cash paid/acquired from
acquisition....................... -- -- (109,848) -- (109,848)
Proceeds from sale of assets......... -- -- 587 -- 587
Investments in subsidiaries.......... -- 4,060 -- (4,060) --
-------- ------- --------- ------- ---------
Net cash used in investing
activities...................... (13,911) (3,314) (243,052) (4,060) (264,337)
-------- ------- --------- ------- ---------
Cash flows from financing activities:
Principal payments of long-term
debt.............................. (1,222) (63) (65,475) -- (66,760)
Proceeds from issuance of long-term
debt.............................. -- -- 65,000 -- 65,000
Repurchase of convertible
debentures........................ -- -- (294) -- (294)
Proceeds from equity offering, net... -- -- 540,196 -- 540,196
Payments on long-term liabilities.... -- -- (73,772) -- (73,772)
Proceeds from sale of stock.......... -- -- 41,285 -- 41,285
-------- ------- --------- ------- ---------
Net cash used in financing
activities...................... (1,222) (63) (506,940) -- 505,655
-------- ------- --------- ------- ---------
Net increase (decrease) in cash and
cash equivalents and short-term
investments.......................... 555 1,346 246,618 -- 248,519
Cash, cash equivalents, and short-term
investments, beginning of period..... (2,679) 1,378 150,055 -- 148,754
-------- ------- --------- ------- ---------
Cash, cash equivalents, and short-term
investments, end of period........... $ (2,124) $ 2,724 $ 396,673 $ -- $ 397,273
======== ======= ========= ======= =========
</TABLE>
15
<PAGE> 18
SANMINA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SUPPLEMENTAL GUARANTOR CONSOLIDATING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED JULY 3, 1999
----------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATION
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTALS
------------ ------------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities................ $ 14,303 $ 6,440 $ 132,217 $ 1,673 $ 154,633
-------- ------- --------- ------- ---------
Cash flows from investing activities:
Foreign sales corp. dividend........ -- (1,673) 1,673 -- --
Purchase of property, plant, and
equipment........................ (14,097) (5,648) (68,846) -- (88,591)
Proceeds from sale of property,
plant, and Equipment............. 131 12 (143) -- --
Purchase of short-term
investments...................... -- -- (263,164) -- (263,164)
Proceeds from short-term
investments...................... -- -- 121,645 -- 121,645
Purchase of long-term investments... -- -- (52,850) -- (52,850)
Cash paid/acquired from
acquisition...................... -- -- (19,369) -- (19,369)
Proceeds from sale of assets........ -- -- 170 -- 170
Investments in subsidiaries......... -- 1,673 -- (1,673) --
-------- ------- --------- ------- ---------
Net cash used in investing
activities..................... (13,966) (5,636) (280,884) (1,673) (302,159)
-------- ------- --------- ------- ---------
Cash flows from financing activities:
Principal payments of long-term
debt............................. (1,354) (254) 1,608 -- --
Proceeds from note payable.......... -- -- 12,705 -- 12,705
Issuance of convertible debentures,
net.............................. -- -- 341,085 -- 341,085
Payments on long-term liabilities... -- -- (69,007) -- (69,007)
Proceeds from sale of stock......... -- -- 26,971 -- 26,971
-------- ------- --------- ------- ---------
Net cash used in financing
activities..................... (1,354) (254) 313,362 -- 311,754
-------- ------- --------- ------- ---------
Net increase (decrease) in cash and
cash equivalents and short-term
investments......................... (1,017) 550 164,695 -- 164,228
Cash, cash equivalents, and short-term
investments, beginning of period.... 836 2 95,587 -- 96,425
-------- ------- --------- ------- ---------
Cash, cash equivalents, and short-term
investments, end of period.......... $ (181) $ 552 $ 260,282 $ -- $ 260,653
======== ======= ========= ======= =========
</TABLE>
16
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
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 manufacture, 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 Texas LP subsidiary (formerly known as Sanmina Cable Systems and
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.
Sanmina Texas LP'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 agreement to acquire certain manufacturing
assets of Harris, Sanmina added an assembly plant in San Antonio, Texas. 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. In addition, Sanmina also added an enclosure facility in Clinton, North
Carolina in March 2000, with the acquisition of Alcatel's electronic enclosure
systems facility. With the acquisition of Hadco on June 23, 2000, Sanmina added
printed circuit board fabrication facilities in metropolitan Boston, southern
New Hampshire, New York state, Watsonville, California, San Jose, California,
Santa Clara California, Austin, Texas, Phoenix, Arizona and Kuching, Malaysia.
This acquisition also added backplane and system assembly operations in Salem,
New Hampshire and San Jose, California. By acquiring Essex in June, 2000,
Sanmina added assembly plants in Sweden and Finland. On June 27, 2000, Sanmina
purchased InterWorks, thus adding an EMS Technology Division in Orange County,
California.
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, pricing and
competitive pressures, supplier component shortages, which could cause Sanmina
to be unable to meet customer delivery schedules, 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 backplane 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 six months. Quarterly sales and operating results
17
<PAGE> 20
therefore depend in large part on the volume and timing of bookings received
during the quarter, which are difficult to forecast.
The nature of 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 adversely impact 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's convertible
subordinated notes and Common Stock.
Sanmina's customers include a diversified base of OEMs in the
communications (telecommunications and networking), 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. Discontinuance
or modification of products being manufactured by Sanmina could adversely affect
Sanmina's results of operations. The electronics industry is also subject to
economic cycles and has in the past experienced, and is likely in the future to
experience, recessionary periods. A general recession in the electronics
industry could have a material adverse effect on Sanmina's business, financial
condition and results of operations. In addition, Sanmina does not have firm
long-term volume commitments from its customers and over the last few years has
experienced reduced lead-time in customer orders. In addition, customer orders
can be canceled and volume levels can be changed or delayed. The timely
replacement of canceled, delayed or reduced orders with new business cannot be
assured. There can be no assurance that any of Sanmina's current customers will
continue to use Sanmina's manufacturing services. The loss of one or more of
Sanmina's principal customers, or reductions in sales to any of such customers,
could have a material adverse effect on Sanmina's business, financial condition
and results of operations.
Sanmina has pursued, and intends to continue to pursue, business
acquisition opportunities, particularly when these opportunities have the
potential to enable Sanmina to increase its net sales while maintaining
operating margin, to access new geographic markets, to implement Sanmina's
vertical integration strategy and/or to obtain facilities and equipment on terms
more favorable than those generally available in the market place. Acquisitions
of companies and businesses and expansion of operations involves certain risks,
including (i) the potential inability to successfully integrate acquired
operations and businesses or to realize anticipated synergies, economies of
scale or other value, (ii) diversion of management's attention, (iii)
difficulties in scaling up productions at new sites and coordinating management
of operations at new sites and (iv) loss of key employees of acquired
operations. No assurance can be given that Sanmina will experience such issues
with integrating acquired operations, and there can be no assurance that
Sanmina's recent acquisitions, or any 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 paid. 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 issues could have a
material adverse effect on Sanmina's business, financial condition and results
of operations. In addition, future acquisitions 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.
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 as these transactions typically enable the acquirer 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.
18
<PAGE> 21
Sanmina did not experience any interruption to its business activities or
incur any impairment to its financial condition or results of operations as a
result of passing into calendar year 2000. Sanmina will continue to monitor its
own internal systems and products to determine the impact, if any, of problems
associated with the Year 2000.
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. Sanmina's future results from operations could vary
significantly from these contemplated by such forward-looking statements as a
result of the factors described herein. The financial and other information
contained herein should be read in conjunction with Sanmina's annual report on
Form 10-K for the fiscal year ended October 2, 1999.
RESULTS OF OPERATIONS
The following table sets forth, for the three and nine months ended July 1,
2000 and July 3, 1999, certain items as a percentage of net sales. The table and
the discussion below should be read in connection with the condensed
consolidated financial statements and the notes thereto, which appear elsewhere
in this report.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
JULY 1, 2000 JULY 3, 1999 JULY 1, 2000 JULY 3, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales............................... 85.3 81.8 84.7 82.9
Gross profit.............................. 14.7 18.2 15.3 17.1
Selling, general and administrative......... 6.9 6.4 5.9 6.7
Amortization of goodwill.................... 0.5 0.6 0.6 0.6
Provision for plant closing and
relocation................................ -- -- -- 1.0
Write down of long-lived assets............. 0.9 -- 0.3 0.7
Merger costs................................ 4.7 -- 1.8 0.3
Operating income.......................... 1.7 11.2 6.7 7.8
Other income, net........................... 0.2 (0.9) (0.1) (1.0)
Income before income taxes................ 1.9 10.3 6.6 6.8
Provision for income taxes.................. 1.7 3.8 2.8 2.5
Net income........................ 0.2 6.5 3.8 4.3
</TABLE>
Sales for the third quarter of fiscal 2000 increased by 65.5% to $1 billion
from $604.6 million in the corresponding quarter of the prior year. For the nine
months ended July 1, 2000, sales increased by 52.6% to $2.6 billion from $1.7
billion in the first nine months of fiscal year 1999. The results reflect
continued strong demand for Sanmina's advanced technologies and total
manufacturing solution capabilities. The increase in net sales for the third
quarter of fiscal 2000 was due primarily to increased shipments of EMS
assemblies to both existing and new customers obtained through internal growth
and strategic acquisitions. Sales to Nortel Networks continued to increase
substantially in the third quarter of fiscal 2000 as compared to the third
quarter of the prior year due to the purchase of certain manufacturing
facilities from Nortel Networks by Sanmina in the first quarter of fiscal 2000.
The overall growth in EMS assembly revenues during the first nine months of
fiscal 2000 was influenced by the expansion of Sanmina's existing operations
through acquisitions as well as a generally positive economic environment in the
communications, medical and industrial instrumentation, and high-speed computer
segments of the electronics industry. Sales to companies in the communications
market segment, representing both voice and data, contributed 74% of Sanmina's
net revenues for the third quarter of fiscal 2000. We attribute the strength in
the communications sector to the demand for Internet infrastructure switching,
the demand for high-speed Internet access equipment, and wireless infrastructure
equipment. Revenue growth was also influenced by the electronics industry trend
towards outsourcing.
On June 1, 2000, Sanmina acquired Essex AB ("Essex"), a major electronics
manufacturing services (EMS) supplier in Scandinavia. The transaction was
structured as a stock-for-stock exchange and was accounted for as a pooling of
interests. Under the terms of the agreement, each share of Essex Common Stock
was converted into approximately 10.20 shares of Sanmina Common Stock.
Approximately 2.0 million shares
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<PAGE> 22
of common stock were issued to acquire Essex. Essex has four manufacturing
facilities in Sweden and Finland. Capabilities include engineering design,
printed circuit board assembly, system integration and test, as well as
distribution and repair.
On June 23, 2000, Sanmina completed its acquisition of Hadco Corporation
("Hadco"), a major manufacturer of advanced electronic interconnect products. As
a result of the transaction, which was structured as a merger, each outstanding
share of Hadco Common Stock was converted into 1.40 shares of Sanmina Common
Stock and Hadco became a wholly-owned subsidiary of Sanmina. Approximately 19.6
million shares of common stock were issued to acquire Hadco. The transaction was
accounted for as a pooling of interests. Hadco's key customers include leading
electronic manufacturers in the communications, industrial automation, and
high-end computing industries. Through the acquisition of Hadco, Sanmina
received added circuit fabrication capacity enabling Sanmina to meet customer
demands for higher layer count, higher density, and advanced printed circuit
boards.
As mentioned above, the mergers were accounted for as pooling of interests
and the condensed consolidated financial statements have been restated to
reflect the combined operations of all entities for the periods presented. The
year-ends of the merged companies have not been conformed for periods prior to
fiscal 2000. For the periods after fiscal 1999 the quarters and year-ends have
adopted Sanmina's year-end of a 52 or 53 week year ending on the Saturday
nearest September 30.
Prior to being acquired by Sanmina, Essex operated under a calendar year
end, and, accordingly, Essex' statements of operations, shareholders' equity and
cash flows for the three and nine month periods ended September 30, 1999 have
been combined with the corresponding Sanmina consolidated statements for the
three and nine month periods ended July 3, 1999. During fiscal 2000, Essex'
year-end was changed from December 31 to a 52 or 53 week year ending on the
Saturday nearest September 30 to conform to Sanmina's fiscal year end.
Accordingly, Essex' operations for the three months ended December 31, 1999,
which included net sales of $54 million and net income of $1.6 million have been
included in the consolidated results of Sanmina for fiscal 2000 and was reported
as an adjustment to retained earnings in the third quarter of fiscal 2000.
Prior to the merger with Sanmina, Hadco's fiscal year ended on the last
Saturday in October and, accordingly, Hadco's statements of operations,
shareholders' equity and cash flows for the three and nine month periods ended
July 31, 1999 have been combined with the corresponding Sanmina consolidated
statements for the three and nine month periods ended July 3, 1999. For fiscal
2000, Hadco adopted Sanmina's fiscal year end of the Saturday nearest September
30. As a result, operations for the one month ended October 31, 1999, which
included net sales of $109 million and net income of $4.7 million have been
included in the consolidated results of fiscal 2000 and was reported as an
adjustment to retained earnings in the third quarter of fiscal 2000.
20
<PAGE> 23
As a result of the pooling of interests accounting for Essex and Hadco,
Sanmina has restated its historical results of operations to include the results
of operations of Essex and Hadco. The financial information presented gives
effect to such restatement. A reconciliation of the financial statements for the
nine months ended July 3, 1999, to previously reported information is as follows
(in thousands):
<TABLE>
<S> <C>
REVENUE:
Sanmina........................................ $ 866,169
Essex.......................................... 122,270
Hadco.......................................... 743,926
Eliminations................................... (2,672)
----------
Combined....................................... $1,729,693
==========
NET INCOME:
Sanmina........................................ $ 59,568
Essex.......................................... 1,031
Hadco.......................................... 13,222
----------
Combined....................................... $ 73,821
==========
</TABLE>
The merger and restructuring costs of $47.2 million are comprised of $27.3
million for executive severance, expected work force attrition and related costs
((accrual made in accordance with the criteria in EITF 94-3 "Liability
Recognition for Costs to Exit an Activity" (including certain costs incurred in
a restructuring)), $15.9 million for investment banking and related fees and
expenses, $2.9 million for accounting, legal and related fees and expenses, and
$1.1 million of other related restructuring costs.
On June 27, 2000, Sanmina acquired InterWorks for a cash purchase price of
approximately $45 million. Interworks is a designer and manufacturer of standard
and custom modular subsystems, focused on meeting the growing needs of the
networking equipment and communications sectors. This transaction was accounted
for as a purchase. InterWorks designs, manufactures, tests and distributes a
complete line of Digital Signal Processor modular solutions and advanced memory
products to leading electronics original equipment manufacturers serving the
networking and telecommunications markets. Pro forma information reflecting the
acquisition of Interworks has not been presented, as the operations of
Interworks are not material to Sanmina's restated consolidated financial
statements.
Gross margin decreased from 18.2% in the third quarter of fiscal 1999 to
14.7% in the third quarter of fiscal 2000. For the nine months ended July 1,
2000, gross margin decreased to 15.3% from 17.1% in the first nine months of
fiscal year 1999. The decrease in gross margins for the third quarter and first
nine months of fiscal year 2000 was attributable to pricing terms negotiated as
part of OEM divestiture transactions, principally the Nortel Networks
transaction which was completed in the first quarter of fiscal 2000 and
transactions with Harris and Alcatel which were completed during fiscal 2000.
Changes in product and customer mix also contributed to the decline in gross
margin. Sanmina expects gross margins to continue to fluctuate based on the mix
of products ordered by and shipped to major customers, increased competition,
and pricing terms negotiated as part of OEM divestiture transactions.
Selling, general and administrative expenses increased from $38.6 million
in the third quarter of fiscal 1999 to $69.1 million in the third quarter of
fiscal 2000. As a percentage of sales, selling, general and administrative
expenses increased from 6.4% in the third quarter of fiscal 1999 to 6.9% for the
third quarter of fiscal 2000. The absolute dollar increase in selling, general
and administrative expenses was primarily the result of increased expenditures
to support higher sales volume. Sanmina anticipates that selling, general and
administrative expenses will continue to increase in absolute dollars due to
projected additions to the sales force and other administrative expenditures to
support higher sales volume. For the nine months ended July 1, 2000, selling,
general and administrative expenses increased to $154.6 million from $115.3
million for the first nine months ended July 3, 1999. As a percentage of sales,
selling, general and administrative expenses decreased from 6.7% for the first
nine months of fiscal 1999 to 5.9% for the first nine months of fiscal 2000.
Selling, general and administrative expenses as a percentage of sales are
anticipated to remain relatively
21
<PAGE> 24
constant or decrease depending upon sales volume and Sanmina's ability to
achieve expected operating efficiencies as a result of the integration of
acquired businesses.
Operating expenses increased from $42.6 million in the third quarter of
fiscal 1999 to $130.2 million in the third quarter of fiscal 2000. As a
percentage of sales, operating expenses increased from 7.0% to 13.0% in the
third quarter of fiscal 2000. For the nine months ended, operating expenses in
absolute dollars increased from $160.9 million in fiscal 1999 to $225.8 million
in fiscal 2000 and operating expenses as a percentage of sales decreased from
9.3% in fiscal 1999 to 8.6% in fiscal 2000. The increase in operating expenses
for the first nine months of fiscal 2000 as compared to the first nine months
ended in fiscal 1999 was mainly attributable to certain charges recorded in the
third quarter of fiscal 2000. These charges of $47.2 million related to merger
costs. The merger and restructuring costs of $47.2 million are comprised of
$27.3 million for executive severance, expected work force attrition and related
costs ((accrual made in accordance with the criteria in EITF 94-3 "Liability
Recognition for Costs to Exit an Activity" (including certain costs incurred in
a restructuring)), $15.9 million for investment banking and related fees and
expenses, $2.9 million for accounting, legal and related fees and expenses, and
$1.1 million of other related restructuring costs. Excluding merger and
restructuring charges from the first nine months of fiscal 2000, operating
expenses as a percentage of sales decreased from 7.2% in the first nine months
of fiscal 1999 to 5.8% in the first nine months of fiscal 2000. This decrease in
operating expenses as a percentage of sales reflects Sanmina's strategy to
leverage its operating margin by growing the top line at a faster rate than its
operating expenses.
During the third quarter of fiscal 2000, such evaluation, with respect to
the merger with Hadco, indicated that the fair value of certain intangible
assets related to Hadco were less than their carrying value. Accordingly, in the
third quarter of fiscal 2000, Sanmina recorded an adjustment to write down $8.75
million of intangible assets. The fair value of the intangible assets at the
time of original acquisition by Hadco was based on expected future cash flows to
be generated from the assets based on reasonable and supportable assumptions.
The existing customer relationships, and in-place workforce, valued at the time
of the original acquisition by Hadco, however, could not be supported at their
current carrying values at the time of the merger. As a result, based on future
expected cash flows from the related customer base, and from experienced and
expected work force attrition, Sanmina recorded adjustments to the carrying
value of these intangible assets in the amounts of $7.5 million and $1.25
million, respectively.
For the third quarter of fiscal 2000, Sanmina reported net other income of
$2.1 million compared to net other loss of $5.5 million for the corresponding
quarter of the prior year. For the first nine months of fiscal 2000, Sanmina
reported net other loss of $4.3 million compared to net other loss of $18.2
million for the first nine months of fiscal 1999. The increase was primarily
attributable to the interest earned on the higher cash balances available
following the $540.2 million net proceeds from the issuance of common stock
completed in the second quarter of fiscal 2000.
Sanmina's provision for income taxes for the third quarter of fiscal 2000
is based upon Sanmina's estimate of the effective tax rate for fiscal year 2000
of 38.0%. For the third quarter of fiscal 1999, Sanmina's effective tax rate was
36.4%. The increase in the rate for the current year and quarter is largely the
result of a change in the mix and size of income inclusive of acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents, and short-term investments as of July 1, 2000 were
$740.2 million as compared to $467.2 million at October 2, 1999. For the nine
months ending July 1, 2000, cash provided by operations was $7.2 million, which
was primarily due to increases in payables and depreciation resulting from
higher inventory levels required to meet current demand. Working capital
increased to $1.2 billion as of July 1, 2000 compared to $742.4 million at
October 2, 1999 primarily due to the proceeds received from the issuance of
common stock in February 2000 and increases in receivables and inventories.
Net cash used for investing activities for the first nine months of fiscal
2000 primarily related to the purchase of short-term investments of $289.8
million, and the purchase of property, plant, and equipment of $130.0 million
required to meet customer demand. In addition, Sanmina paid approximately $109.8
million in
22
<PAGE> 25
cash for businesses acquired. In connection with the purchase of equipment and
inventory from Harris, Sanmina has additional cash commitments of $28 million to
purchase additional facilities of Harris.
Net cash provided by financing activities for the first nine months of
fiscal year 2000 primarily related to the $540.2 million of proceeds from the
issuance of common stock in February 2000.
Sanmina has entered into an operating lease agreement for new facilities in
San Jose, California which house its corporate headquarters and certain assembly
operations. In connection with these transactions, Sanmina pledged $52.9 million
as collateral for certain obligations of the lease.
In July 2000, Sanmina's Hadco subsidiary initiated an offer to purchase an
aggregate of $200 million of 9 1/2% senior subordinated notes due 2008 issued by
Hadco in May 1998. This offer to purchase was required by the terms of the
indenture under which the notes were issued as a result of the change in control
of Hadco which occurred when Hadco was acquired by Sanmina. The purchase in the
offer is 101% of the principal amount of the notes. Holders have until August
23, 2000 to elect to have their notes redeemed. Sanmina will fund the redemption
of any notes that holders elect to have redeemed. Any notes that are not
redeemed will remain outstanding, although Sanmina may in the future elect to
purchase notes through open market or negotiated transactions, additional tender
or exchange offers or otherwise.
On July 10, 2000, Sanmina acquired a PCB assembly and system assembly
facility located in Shenzhen, Guang Dong province in China. The acquisition,
which will be accounted for as a purchase, also includes administrative offices
in Hong Kong and a branch procurement office in Taiwan. The purchase price was
approximately $65 million in cash. The facilities in China include a
manufacturing facility with administrative and dormitory buildings. The business
focuses on PCB assembly and targets the telecommunication, networking, computer
and medical electronics markets.
Also on July 10, 2000, Sanmina announced that it has signed a definitive
agreement to acquire certain Electronics Computer-Aided Design (ECAD),
Electronics Systems Packaging Design (ESP) and Product Integrity (PI) operations
from Nortel Networks. The agreement calls for the acquisition of test facilities
and related equipment and would involve the transfer of employees in several
expert physical design teams. The transaction is expected to close during the
fourth quarter of fiscal 2000 and will be accounted for as a purchase. The
purchase price for this acquisition was approximately $6.5 million in cash.
Sanmina expects to make additional capital expenditures relating to
facility and equipment enhancements as well as information systems upgrades in
existing facilities. Future liquidity needs will be dependent upon, among other
factors, the extent of capital investments made by Sanmina in plant and
equipment, working capital needs of acquired businesses, levels of shipments by
Sanmina and changes in volumes of business and other factors. Sanmina believes
that its existing cash resources, together with cash generated from operations,
will be sufficient to meet Sanmina's liquidity and working capital requirements
through at least the next 12 months.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has not been a material change in our exposure to interest rate and
foreign currency risks since the date of our report on Form 10-K for the fiscal
year ended October 2, 1999.
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 to
ensure the safety and preservation of our 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 our 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
23
<PAGE> 26
held with any one issuer and by investing funds in marketable securities with
active secondary or resale markets.
Foreign Currency Exchange Risk
Sanmina enters into foreign exchange contracts to hedge certain of its
assets and liabilities denominated in foreign currencies. At July 1, 2000,
Sanmina had forward contracts to exchange various foreign currencies for U.S.
dollars in the gross amount of $17.9 million. Market value gains and losses on
forward exchange contracts are recognized as offsets to the exchange gains or
losses on the hedged transactions.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Sanmina is not currently a party to any material pending legal proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
27.1 Financial Data Schedule for nine month period ended July 1, 2000
27.2 Financial Data Schedule for the nine month period ended July 3, 1999
</TABLE>
(b) Reports on Form 8-K
On July 7, 2000, Sanmina filed a report on Form 8-K relating to the
acquisition of Hadco.
24
<PAGE> 27
SIGNATURE
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.
Date: August 11, 2000 SANMINA CORPORATION
(Registrant)
By: /s/ RANDY W. FURR
------------------------------------
Randy W. Furr
President and Chief Operating
Officer
By: /s/ RICK R. ACKEL
------------------------------------
Rick R. Ackel
Executive Vice President and
Chief Financial Officer
25
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
27.1 Financial Data Schedule for nine month period ended July 1, 2000
27.2 Financial Data Schedule for the nine month period ended July 3, 1999
</TABLE>
