What changed in this filing

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Item 1A. Risk Factors

2021-11-12 compared with 2020-11-13 · 148 added, 146 removed, 182 unchanged (62% of the section changed)

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The COVID-19 pandemic has had, and will likely continue to have, a significant impact on our results of operations and financial condition by reducing demand from our customers, interrupting the flow of components needed for our customers’ products, limiting the operations or productivity of our manufacturing facilities, restricting the types of products we can build for our customers and creating health risks to our employees.

Our global operations expose us to the effects of the COVID-19 pandemic, which has now spread across the globe and is impacting economic activity worldwide.

Our business and operations have been significantly and negatively impacted by the COVID-19 pandemic.

In particular, the pandemic:

• Resulted in the temporary closure of our facilities in China during the second quarter of 2020;

• Resulted in the temporary closure of certain of our facilities;

• Reduced the amount of staffing we are permitted to maintain at certain of our plants;

• Required us in some cases to pay staff who are not able to work due to government orders;

• Limited the capacity of logistics providers to deliver the products we manufacture;

• Reduced demand for certain of our customers’ products, particularly in the automotive end market;

• Prevented us from building certain products not deemed as essential under local, state and national public health orders covering the locations of our plants during portions of the second and third quarters of 2020;

• Required us in some cases to pay staff who are not able to work due to government orders or illness;

• Limited the capacity of logistics providers to deliver components for and the products we manufacture;

• Reduced demand for certain of our customers’ products;

• Temporarily prevented us from building certain products not deemed as essential under certain local, state and national public health orders;

• Resulted in interruptions of supply of components, either because our suppliers have themselves been prevented from operating or because major distribution channels (e.g., sea transport) have been disrupted by the pandemic.

Collectively, these conditions reduced our revenue in the last nine months of our fiscal 2020 and it is unclear when these impacts will be fully resolved.

Further, although we have implemented infection control measures recommended or required by the applicable public health authorities, and have not to date experienced a significant number of COVID-19 infections among our employees, should infections among our employees increase significantly, our operations could be impacted if we become required to temporarily exclude significant numbers of employees from our plants due to either infection or exposure to an infected person and/or close impacted plants in order to clean them or as a result of government orders.

Furthermore, as a result of government orders, a large number of our employees have been working remotely since the end of the second quarter of fiscal 2020.

Although these restrictions have been relaxed in some geographies, and we have not experienced any significant disruptions to date as a result of remote work arrangements, should a substantial number of our employees supporting general and administrative functions, particularly at our California headquarters location, continue to be required to work remotely for an extended period of time, we could experience disruptions and reduced efficiencies.

More generally, the COVID-19 pandemic raises the possibility of an extended global economic downturn and has caused volatility in financial markets, which could affect demand for our products and services and impact our results and financial condition even after the pandemic is contained and the business restrictions are lifted.

In particular, t he pandemic also increases the risk that our customers and suppliers will face financial difficulties, which could impact their ability or willingness to satisfy their payment or delivery obligations to us.

Although we have not experienced any significant increase in customer defaults as a result of the pandemic to date, the risk of such defaults will increase if pandemic conditions do not end or if commercial and social restrictions originally put in place in response to them by local, state and national governments are reinstituted.

For example, both France and Germany have recently restored restrictions on activity that had been lifted after the first phase of the pandemic.

We are unable to accurately predict the full impact that COVID-19 will have on us due to a number of uncertainties, including the impact of the pandemic on our customers’ businesses, the number of employees who may become infected or exposed to infected persons who we would then be required to temporarily exclude from our plants, the imposition of government restrictions on staffing and the types of products we are permitted to build, the need for temporary plant closures, supply chain shortages and other interruptions, the duration of the outbreak, the geographic locations of any future outbreaks, and actions that government authorities may take.

Collectively, these conditions reduced our revenue during the last 12 months and we cannot predict when these and other impacts from the pandemic will be fully resolved.

Further, although we have implemented infection control measures recommended or required by the applicable public health authorities, and have not experienced a significant number of COVID-19 infections among our employees to date, should infections among our employees increase significantly, our operations could be impacted if we become required to temporarily exclude significant numbers of employees from our plants due to either infection or exposure to an infected person and/or close impacted plants in order to clean them or as a result of government orders.

Furthermore, various local, state and national governments and agencies issued various safety regulations and guidelines intended to help prevent the transmission of COVID-19 in the workplace.

These regulations are complex, costly to implement, subject to frequent change and to audit and investigation by governmental authorities, including the Occupational Health and Safety Administration (OSHA), their state counterparts and local health departments.

Any failure by us to materially comply with COVID-19-related safety rules and regulations in any of its facilities could result in sanctions, fines, as well as negative publicity for us.

Recently, two executive orders were issued by which we will be required to mandate that U.S.

employees of our commercial plants be vaccinated against COVID-19 (or tested weekly) and that all of our employees supporting federal contracts be vaccinated against COVID-19 without a testing option.

Employee reaction to such a mandate may be negative and we may be forced to terminate employees who do not comply with the mandate.

In such event, we could experience labor shortages at certain of our facilities, which could impact production.

More generally, the COVID-19 pandemic raises the possibility of an extended global economic downturn and has caused volatility in financial markets, which has affected and could continue to affect demand for our products and services and impact our results and financial condition even after the pandemic is contained.

In particular, t he pandemic also resulted in certain of our customers and suppliers experiencing financial difficulties, which could impact their ability or willingness to satisfy their payment or delivery obligations, respectively, to us in the future.

Although we have not experienced any significant increase in customer defaults as a result of the pandemic to date, the risk of such defaults will increase if pandemic conditions continue indefinitely or if commercial and social restrictions originally put in place in response to pandemic conditions by local, state and national governments increase or are reinstated based on changes in community infection and hospitalization rates.

We are unable to accurately predict the full impact that the COVID-19 pandemic will have on us due to a number of uncertainties, including the duration of ongoing supply chain constraints directly and indirectly caused by the pandemic, the extent of the impact of the pandemic on our customers’ businesses, the number of our employees who may become infected or exposed to infected persons whom we would then be required to temporarily exclude from our plants, the need for temporary plant closures caused by large scale employee infections, the duration of the outbreak, the continued efficacy and availability of COVID-19 vaccines, the geographic locations of any future outbreaks, including outbreaks caused by variants of COVID-19 and actions that government authorities may take in response, such as the potential reimposition of government restrictions on

staffing and the types of products we are permitted to build.

However, we believe it is likely that the pandemic will continue to have a negative impact on our business, results of operations and financial condition for the foreseeable future.

Worldwide supply chain shortages are currently limiting our ability to manufacture and ship all of the product for which we have demand;

our profitability will be reduced if we are unable to pass on increasing component costs.

Our supply chain is being significantly impacted by a number of factors relating to the COVID-19 pandemic, including interruptions in supplier and port operations due to infections during a time of a resumption of strong worldwide demand for electronic products and components across a number of end markets.

As a result, we are experiencing delays in delivery and shortages of certain components, particularly certain types of capacitors, resistors and discrete semiconductors needed for many of the products we manufacture.

These conditions are currently limiting our ability to manufacture and ship all of the product for which we have demand and are exacerbated by the fact that we are dependent on a number of limited and sole source suppliers to provide key components we incorporate into our products.

We expect these delays and shortages to persist at least through the middle of calendar 2022 and that such shortages could result in delays in shipments to our customers during the period of such shortages.

Any such delays would reduce our revenue and margins for the periods affected and would also result in an increase in our inventory of other components, which would reduce our operating cash flow.

In addition, inflationary pressures resulting from supply chain constraints and improving economic conditions in certain countries are leading to sustained increases in the prices we pay for components and may also result in increases in the pricing of commodities such as gold, copper and other metals that are used in the manufacture of such components.

We do not hedge against the risk of these fluctuations, but rather attempt to adjust our product pricing to reflect such changes.

Should we not be able to increase our product prices enough to offset these increased costs, our gross margins and profitability could decrease, perhaps significantly over a sustained period of time.

We rely on a variety of common carriers to transport our raw materials and components from our suppliers to us, and to transport our products to our customers.

The use of common carriers is subject to a number of risks, including increased costs due to rising energy prices and labor, vehicle and insurance costs, and hijacking and theft resulting in losses of shipments, delivery delays resulting from labor shortages, disturbances and strikes and other factors beyond our control.

Although we attempt to mitigate our liability for any losses resulting from these risks through contracts with our customers, suppliers and insurance carriers, any costs or losses that cannot be mitigated could reduce our profitability, require us to manufacture replacement product or damage our relationships with our customers.

Adverse changes in the key end markets we target could harm our business by reducing our sales.

We provide products and services to companies that serve the industrial, medical, defense and aerospace, automotive, communications networks and cloud solutions industries.

Adverse changes in any of these end markets could reduce demand

for our customers' products or make these customers more sensitive to the cost of our products and services, either of which could reduce our sales, gross margins and net income.

We provide products and services to companies that serve the industrial, medical, defense and aerospace, automotive, communications networks and cloud infrastructure industries.

Adverse changes in any of these end markets could reduce demand for our customers' products or make these customers more sensitive to the cost of our products and services, either of which could reduce our sales, gross margins and net income.

A number of factors could affect these industries in general and our customers in particular, leading to reductions in net sales.

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• changes in regulatory requirements affecting the products we build for our customers, leading to product redesigns or obsolescence and potentially causing us to lose business;

• recessionary periods in our customers' markets, which decrease orders from affected customers, such as the currently depressed conditions due to the COVID-19 pandemic.

• recessionary periods in our customers' markets, which decrease orders from affected customers.

We realize a substantial portion of our revenues from communications equipment customers.

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• our ability to replace declining sales from end-of-life programs and customer disengagements with new business wins;

• conditions in the economy as a whole and in the industries we serve, which are being significantly impacted by the current COVID-19 pandemic;

• fluctuations in component prices, component shortages and extended component lead times caused by high demand, natural disasters, epidemics or pandemics, such as the COVID-19 pandemic, or otherwise;

• conditions in the global economy as a whole and in the industries we serve, which are being significantly impacted by the COVID-19 pandemic;

• fluctuations in component prices, component shortages and extended component lead times caused by high demand, disruptions relating to the COVID-19 pandemic, natural disasters or otherwise;

• timing and success of new product developments and ramps by our customers, which create demand for our services, but which can also require us to incur start-up costs relating to new tooling and processes;

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• timing of orders from customers and the accuracy of their forecasts;

• inventory levels of customers, which if high relative to their normal sales volume, could cause them to reduce their orders to us;

• our inventory levels, which have been driven higher as a result of supply chain disruptions caused by the COVID-19 pandemic, with higher levels of inventory reducing our operating cash flow;

• customer payment terms and the extent to which we factor customer receivables during the quarter;

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• resolution of claims with our customers;

• the degree to which we are able to fully utilize our available manufacturing capacity;

• the degree to which we are able to fully utilize our available manufacturing capacity, including due to restrictions under local, state and national public health orders covering the locations of our plants and employee health conditions as a result of the COVID-19 pandemic;

• customer insolvencies resulting in bad debt or inventory exposures that are in excess of our reserves;

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As a result, we are affected by economic, political and other conditions in the foreign countries in which we do business, including:

• changes in trade and tax laws that may result in us or our customers being subjected to increased taxes, duties and tariffs, which could increase our costs and/or reduce our customers’ willingness to use our services in countries in which we are currently manufacturing their products;

• rising labor costs;

• compliance with foreign laws, including labor laws which generally provide for increased notice, severance and consultation requirements compared to U.S.

• changes in trade and tax laws that may result in us or our customers being subject to increased taxes, duties and tariffs, which could increase our costs and/or reduce our customers’ willingness to use our services in countries in which we are currently manufacturing their products;

• compliance with foreign laws, including labor laws that generally provide for increased notice, severance and consultation requirements compared to U.S.

• labor unrest, including strikes;

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• potentially increased risk of misappropriation of intellectual property.

• an outbreak of a contagious disease, such as COVID-19, which may cause us or our suppliers and/or customers to temporarily suspend our operations in the affected city or country.

We operate in countries that have experienced labor unrest, political instability or conflict and strife, including Brazil, China, India, Israel, Malaysia, Mexico and Thailand, and we have experienced work stoppages and similar disruptions in these foreign jurisdictions.

To the extent such developments prevent us from adequately staffing our plants and manufacturing and shipping products in those jurisdictions, our margins and net income could be reduced and our reputation as a reliable supplier could be negatively impacted.

We operate in countries that have experienced labor unrest, political instability or conflict and strife in the past, including China, India, Israel, Malaysia, Mexico and Thailand, and we have experienced work stoppages and similar disruptions at our plants in these countries.

To the extent such developments in these countries or similar events elsewhere prevent us from adequately staffing our plants and manufacturing and shipping products in those jurisdictions, our margins and net income could be reduced and our reputation as a reliable supplier could be negatively impacted.

Certain of our foreign manufacturing facilities are leased from third parties.

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Although we maintain significant manufacturing capacity in the U.S., the substantial majority of our manufacturing operations are located outside the U.S.

This manufacturing footprint has allowed us to provide cost-effective volume manufacturing for our customers.

As a result of continuing trade disputes, the U.S., China, the E.U.

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Further, although we are required to pay tariffs upon importation of the components, we may not be able to recover these amounts from customers until sometime later, if at all, which would adversely impact our operating cash flow in a given period.

Our supply chain is subject to a number of economic, regulatory and environmental risks that could increase our costs or cause us to delay shipments to customers, reducing our revenue and margins and increasing our inventory.

Our supply chain is subject to a number of risks and uncertainties.

For example, we are dependent on certain suppliers, including limited and sole source suppliers, to provide key components we incorporate into our products.

We have in the past experienced, and may experience in the future, delays in delivery and shortages of components, particularly certain types of capacitors, resistors and discrete semiconductors used in many of the products we manufacture.

These conditions, as well as the interruptions in supply of components and reduced capacity of logistics providers caused by the COVID-19 global pandemic, have resulted and could in the future result in increased component prices and delays in product shipments to customers, both of which would decrease our revenue and margins, as well as increase our inventory of other components, which would reduce our operating cash flow.

Our components are manufactured using a number of commodities, including petroleum, gold, copper and other metals that are subject to frequent and unpredictable changes in price due to worldwide demand, investor interest and economic conditions.

We do not hedge against the risk of these fluctuations, but rather attempt to adjust our product pricing to reflect such changes.

Should significant increases in commodities prices occur and should we not be able to increase our product prices enough to offset these increased costs, our gross margins and profitability could decrease, perhaps significantly.

Concern over climate change has led to state, federal and international legislative and regulatory initiatives aimed at reducing carbon dioxide and other greenhouse gas emissions and there is increased stockholder interest in corporate sustainability initiatives.

Collectively, such initiatives could lead to an increase in the price of energy over time.

A sustained increase in energy prices for any reason could increase our raw material, components, operations and transportation costs.

We could also suffer reputational damage if our sustainability practices are not perceived to be adequate.

Finally, government regulations, such as the Dodd-Frank Act disclosure requirements relating to conflict minerals, and customer interest in responsible sourcing could decrease the availability and increase the prices of components used in our customers' products.

We may not be able to increase our product prices enough to offset these increased costs, in which case our profitability would be reduced.

We rely on a variety of common carriers to transport our raw materials and components from our suppliers to us, and to transport our products to our customers.

The use of common carriers is subject to a number of risks, including increased costs due to rising energy prices and labor, vehicle and insurance costs, and hijacking and theft resulting in losses of shipments, delivery delays resulting from labor disturbances and strikes and other factors beyond our control.

Cancellations, reductions in production quantities, delays in production by our customers and changes in customer requirements could reduce our sales and net income.

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Cancellations, reductions or delays of orders by customers could increase our inventory levels, lead to write-offs of inventory that we are not able to resell to the customer, reduce our sales and net income, delay or eliminate recovery of our expenditures for inventory purchased in preparation for customer orders and lower our asset utilization, all of which could result in lower gross margins and lower net income.

Our strategy to pursue higher margin business depends in part on the success of our CPS business, which, if not successful, could cause our future gross margins and operating results to be lower.

A key part of our strategy to capitalize on our end-to-end solutions is to grow our CPS business, which includes printed circuit boards, backplane and cable assemblies and plastic injection molding, mechanical systems, memory, RF, optical and microelectronic solutions, defense and aerospace products and data storage solutions and design, engineering, logistics and repair services.

Our strategy to pursue higher margin business depends in part on the success of our CPS businesses, which, if not successful, could cause our future gross margins and operating results to be lower.

A key part of our strategy to capitalize on our end-to-end solutions is to grow our CPS business, which includes printed circuit boards, backplane and cable assemblies and plastic injection molding, mechanical systems, memory, RF, optical and microelectronic solutions, and data storage solutions and design, engineering, logistics and repair services and our SCI defense and aerospace products business.

A decrease in orders for these components, products and services can have a disproportionately adverse impact on our profitability since these components, products and services generally carry higher than average contribution margins than our core IMS business.

In addition, in order to grow this portion of our business profitably, we must continue to make substantial investments in the development of our product development capabilities, research and development activities, test

and tooling equipment and skilled personnel, all of which reduce our operating results in the short term.

In addition, in order to grow this portion of our business profitably, we must continually make substantial investments in the development of our product development capabilities, research and development activities, test and tooling equipment and skilled personnel, all of which reduce our operating results in the short term.

The success of our CPS business also depends on our ability to increase sales of our proprietary products, convince our customers to agree to purchase our components for use in the manufacture of their products, rather than directing us to buy them from third parties, and expand the number of our customers who contract for our design, engineering, logistics and repair services.

We may face challenges in achieving commercially viable yields and difficulties in manufacturing components in the quantities and to the specifications and quality standards required by our customers, as well as in qualifying our components for use in our customers' designs.

We may face challenges in achieving commercially viable yields and difficulties in manufacturing components in the

quantities and to the specifications and quality standards required by our customers, as well as in qualifying our components for use in our customers' designs.

Our proprietary products and design, engineering, logistics and repair services must compete with products and services offered by established vendors which focus solely on development of similar technologies or the provision of similar services.

Any of these factors could cause our CPS revenue and margins to be less than expected, which would have an overall adverse and potentially disproportionate effect on our revenues and profitability.

Any of these factors could reduce our CPS business revenue and margins, which in turn would have an adverse and potentially disproportionate effect on our overall revenues and profitability.

Customer requirements to transfer business may increase our costs.

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Any of these factors could reduce our revenues, increase our expenses and reduce our net income.

Liquidity and Credit Risks

We may be unable to generate sufficient liquidity to maintain or expand our operations, which may reduce the business our customers and vendors are able to do with us and impact our ability to continue operations at current levels without seeking additional funding;

we could experience losses if one or more financial institutions holding our cash or other financial counterparties were to fail;

repatriation of foreign cash could increase our taxes.

Our liquidity is dependent on a number of factors, including profitability, business volume, inventory requirements, the extension of trade credit by our suppliers, the degree of alignment of payment terms from our suppliers with payment terms granted to our customers, investments in facilities and equipment, acquisitions, repayments of our outstanding indebtedness, stock repurchase activity, the amount available under our accounts receivable sales programs and availability under our revolving credit facility.

In the event we need or desire additional liquidity to maintain or expand our business, make acquisitions or repurchase stock, there can be no assurance that such additional liquidity will be available on acceptable terms or at all.

A failure to maintain adequate liquidity would prevent us from purchasing components and satisfying customer demand, which would reduce both our revenue and profitability.

Although we believe our existing cash resources and sources of liquidity, together with cash generated from operations, will be sufficient to meet our working capital requirements for at least the next 12 months, should demand for our services change significantly over the next 12 months or should we experience significant increases in delinquent or uncollectible accounts receivable for any reason, including in particular continued or worsening economic conditions caused by the COVID-19 global pandemic, our cash provided by operations could decrease significantly and we could be required to seek additional sources of liquidity to continue our operations at their current level.

In such a case, there can be no assurance that such additional sources of financing would be available.

A principal source of our liquidity is our cash and cash equivalents, which are held with various financial institutions.

Although we distribute such funds among a number of financial institutions that we believe to be of high quality, there can be no assurance that one or more of such institutions will not become insolvent in the future, in which case all or a portion of our uninsured funds on deposit with such institutions could be lost.

In addition, a little more than one-third of our cash and cash equivalents, and all of our short-term investments, are in the form of short-term time deposits and money market funds.

Under certain market conditions, the market value of these instruments can fall below the amount on deposit.

Should this phenomenon, known as “breaking the buck,” occur and should we seek to withdraw our cash equivalents at such time, we could receive less than the face value of our deposits.

Finally, if one or more counterparties to our interest rate or foreign currency hedging instruments were to fail, we could suffer losses and our hedging of risk could become less effective.

Additionally, a majority of our worldwide cash reserves are generated by, and therefore held in, foreign jurisdictions.

Some of these jurisdictions restrict the amount of cash that can be transferred to the U.S.

or impose taxes and penalties on such transfers of cash.

To the extent we have excess cash in foreign locations that could be used in, or is needed by, our U.S.

operations, we may incur significant foreign taxes to repatriate these funds which would reduce the net amount ultimately available for such purposes.

Our Amended Cash Flow Revolver contains covenants that may adversely impact our business;

the failure to comply with such covenants or the occurrence of an event of default could cause us to be unable to borrow additional funds and cause our outstanding debt to become immediately payable.

Our Amended Cash Flow Revolver contains a maximum leverage and minimum interest coverage ratio, in both cases measured on the basis of a trailing 12 month look-back period, and a number of restrictive covenants, including restrictions on incurring additional debt, making investments and other restricted payments, selling assets and paying dividends, subject to certain exceptions, with which we must comply.

Collectively, these covenants could constrain our ability to grow our business through acquisition or engage in other transactions.

Such facility also contains customary events of default, including that a material business interruption or cessation has not occurred.

Finally, such facility includes covenants requiring, among other things, that we file quarterly and annual financial statements with the SEC, comply with all laws, pay all taxes and maintain casualty insurance.

If we are not able to comply with these covenants or if an event of default were to occur and not be cured, all of our outstanding debt could become immediately due and payable and the incurrence of additional debt under our revolving credit facility would not be allowed, any of which would have a material adverse effect on our liquidity and ability to continue to conduct our business.

Our customers could experience credit problems, which could reduce our future revenues and net income.

Some companies in the industries for which we provide products have previously experienced significant financial difficulty, with a few filing for bankruptcy in the past.

Such financial difficulty, if experienced by one or more of our customers, may negatively affect our business due to the decreased demand from these financially distressed customers, the lengthening of customer payment terms, the potential inability of these companies to make full payment on amounts owed to us or to purchase inventory we acquired to support their businesses.

Customer bankruptcies also entail the risk of potential recovery by the bankruptcy estate of amounts previously paid to us that are deemed a preference under bankruptcy laws.

There can be no assurance that additional customers will not declare bankruptcy.

Regulatory, Compliance and Litigation Risks

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government contracts and subcontracts.

In particular, our sales activities must comply with the restrictions relating to the export of controlled technology and sales to denied or sanctioned parties contained in the International Traffic in Arms Regulations (ITAR), the U.S.

Export Administration Regulations and sanctions administered by the Office of Foreign Asset Controls of the U.S.

In particular, our activities must comply with the restrictions relating to the export of controlled technology and sales to denied or sanctioned parties contained in the International Traffic in Arms Regulations (ITAR), the U.S.

Export Administration Regulations and sanctions administered by the Office of Foreign Assets Control of the U.S.

Treasury Department (OFAC).

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Furthermore, our compliance with such regulations is subject to audit or investigation by governmental authorities and, from time to time, we receive formal and informal inquiries from government agencies and regulators regarding our compliance.

Should Sanmina be found to have violated one or more of such laws or regulations, we could become subject to civil damages (which in some cases could be trebled) or criminal penalties and administrative sanctions, including appointment of government monitors, termination of our government contracts and, ultimately, debarment from doing further business with the U.S.

Should we be found to have violated one or more of such laws or regulations, we could become subject to civil damages (which in some cases could be trebled) or criminal penalties and administrative sanctions, including appointment of government monitors, termination of our government contracts and, ultimately, debarment from doing further business with the U.S.

Any of such results would increase our expenses, reduce our revenue and damage our reputation as both a commercial and government supplier.

If we manufacture or design defective products, if there are manufacturing defects in the components we incorporate into customer products or if our manufacturing processes do not comply with applicable statutory and regulatory requirements and standards, we could be subject to claims, damages and fines and lose customers.

We manufacture products to our customers' specifications, and in some cases our manufacturing processes and facilities need to comply with various statutory and regulatory requirements and standards.

For example, many of the medical products that we manufacture, as well as the facilities and manufacturing processes that we use to produce them, must comply with standards established by the U.S.

Food and Drug Administration and products we manufacture for the automotive end market are generally subject to the IATF 16949:2016 standard.

In addition, our customers' products and the manufacturing processes that we use to produce them often are highly complex.

As a result, products that we design or manufacture may at times contain design or manufacturing defects, and our manufacturing processes may be subject to errors or may not be in compliance with applicable statutory and regulatory requirements and standards.

Finally, customer products can experience quality problems or failures as a result of defects in the components they specify to be included in the products we manufacture for them.

Defects in the products we design or manufacture, even if caused by components specified by the customer, may result in product recalls, warranty claims by customers, including liability for repair costs, delayed shipments to customers or reduced or canceled customer orders.

The failure of the products that we design or manufacture or of our manufacturing processes and facilities to comply with applicable statutory and regulatory requirements and standards may subject us to legal fines or penalties, cause us to lose business and, in some cases, require us to shut down or incur considerable expense to correct

a manufacturing program or facility.

In addition, these defects may result in product liability claims against us.

The magnitude of such claims may increase as we continue to expand our presence in the medical and automotive end markets since defects in these types of products can result in death or significant injury to end users of these products.

Even when our customers are contractually responsible for defects in the design of a product and defects in components used in the manufacture of such products, there is no guarantee that these customers will have the financial resources to indemnify us for such liabilities and we could nonetheless be required to expend significant resources to defend ourselves if named in a product liability suit over such defects.

If we are unable to protect our intellectual property or if we infringe, or are alleged to infringe, upon the intellectual property of others, we could be required to pay significant amounts in costs or damages.

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However, a number of our patents covering certain aspects of our manufacturing processes or products have expired and will continue to expire in the future.

Such expirations reduce our ability to assert claims against

competitors or others who use or sell similar technology.

Such expirations reduce our ability to assert claims against competitors or others who use or sell similar technology.

Any inability to protect our intellectual property rights could diminish or eliminate the competitive advantages that we derive from our proprietary technology.

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Any of these events could reduce our revenue, increase our costs and damage our reputation with our customers.

We manufacture products to our customers' specifications, and in some cases our manufacturing processes and facilities need to comply with various statutory and regulatory requirements and standards.

For example, many of the medical products that we manufacture, as well as the facilities and manufacturing processes that we use to produce them, must comply with standards established by the U.S.

Food and Drug Administration and products we manufacture for the automotive end market are generally subject to the ISO/TS 16949:2009 standard.

In addition, our customers' products and the manufacturing processes that we use to produce them often are highly complex.

Finally, customer products can experience quality problems or failures as a result of defects in the components they specify to be included in the products we manufacture for them.

In addition, these defects may result in product liability claims against us.

Additionally, insolvency of our customers may result in us being held ultimately liable for our customers’ design defects, which could significantly reduce our net income.

Allegations of failures to comply with domestic or international employment and related laws could result in the payment of significant damages, which would reduce our net income.

We are subject to a variety of domestic and foreign employment laws, including those related to safety, wages and overtime, discrimination, organizing, whistle-blowing, classification of employees, privacy and severance payments.

We are subject to a variety of domestic and foreign employment laws, including those related to safety, wages and overtime, discrimination, harassment, organizing, whistle-blowing, classification of employees, privacy and severance payments.

We may be required to defend against allegations that we have violated such laws.

For example, in October 2018, a contractor who had been retained by us through a third-party temporary staffing agency from November 2015 to March 2016 filed a lawsuit against us in the Santa Clara County Superior Court on behalf of himself and all other similarly situated Company contractors and

employees in California, alleging violations of California Labor Code provisions governing overtime, meal and rest periods, wages, wage statements and reimbursement of business expenses.

Allegations that we have violated labor laws could lead to damages being awarded to employees or fines from or settlements with plaintiffs or federal, state or foreign regulatory authorities, the amounts of which could be substantial, and which would reduce our net income.

Any failure to comply with applicable environmental laws could adversely affect our business by causing us to pay significant amounts for cleanup of hazardous materials or for damages or fines.

We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, generation, storage, discharge and disposal of hazardous substances and waste in the ordinary course of our manufacturing operations.

If we violate environmental laws or if we own or operate, or owned or operated in the past, a site at which we or a predecessor company caused contamination, we may be held liable for damages and the costs of remedial actions.

Although we estimate and regularly reassess our potential liability with respect to violations or alleged violations and accrue for such liability, our accruals may not be sufficient.

Any increase in existing reserves or establishment of new reserves for environmental liability would reduce our net income.

Our failure or inability to comply with applicable environmental laws and regulations could also limit our ability to expand facilities or could require us to acquire costly equipment or to incur other significant expenses to comply with these laws and regulations.

Partly as a result of certain of our acquisitions, we have incurred liabilities associated with environmental contamination.

These liabilities include ongoing investigation and remediation activities at a number of current and former sites.

The time required to perform environmental remediation can be lengthy and there can be no assurance that the scope, and therefore cost, of these activities will not increase as a result of the discovery of new contamination or contamination on adjoining landowner's properties or the adoption of more stringent regulatory standards covering sites at which we are currently performing remediation activities.

We cannot assure that past disposal activities will not result in liability that will materially affect us in the future, nor can we provide assurance that we do not have environmental exposures of which we are unaware and which could adversely affect our future operating results.

Changes in or restrictions on discharge limits, emissions levels, permitting requirements and material storage or handling could require a higher than anticipated level of remediation activities, operating expenses and capital investment or, depending on the severity of the impact of the foregoing factors, costly plant relocation, any of which would reduce our net income.

Cyberattacks and other disruptions of our information technology ("IT") network and systems could interrupt our operations, lead to loss of our customer and employee data and subject us to damages.

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Despite our business continuity planning, including redundant data sites and network availability, both our internal and cloud-based infrastructure may be susceptible to outages due to fire, floods, power loss, telecommunications failures, terrorist attacks and similar events.

In addition, despite the implementation of network security measures that we believe to be reasonable, both our internal and our cloud-based infrastructure may also be vulnerable to hacking, computer viruses, the installation of malware and similar disruptions either by third parties or employees with access to key IT infrastructure.

Cybersecurity attacks can come in many forms, including distributed denial of service attacks, advanced persistent threat, phishing and business email compromise efforts.

In addition, despite the implementation of numerous network security measures, both our internal and our cloud-based infrastructure may also be vulnerable to hacking, computer viruses, the installation of malware and similar disruptions either by third parties or employees with access to key IT infrastructure.

Cybersecurity attacks can come in many forms, including distributed denial of service attacks, advanced

persistent threat, phishing, business email compromise efforts and ransomware attacks.

Recently, a cyberattack involving malware delivered through network monitoring software sold by SolarWinds resulted in the penetration of the systems of a multitude of governmental and commercial entities.

While we were not affected by this cyberattack, there can be no assurance that a future malware attack will not be successful in breaching our systems.

Hacking, malware and other cybersecurity attacks, if not prevented, could lead to the collection and disclosure of sensitive personal or confidential information relating to our customers, employees or others, exposing us to legal liability and causing us to suffer reputational damage.

In addition, our SCI defense division is subject to U.S.

In addition, our SCI defense and aerospace businesses are subject to U.S.

government regulations requiring the safeguarding of certain unclassified government information and to report to the U.S.

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government programs.

Any failure to comply with applicable environmental laws could adversely affect our business by causing us to pay significant amounts for cleanup of hazardous materials or for damages or fines.

Although we estimate and regularly reassess our potential liability with respect to violations or alleged violations and accrue for such liability, our accruals may not be sufficient.

Any increase in existing reserves or establishment of new reserves for environmental liability would reduce our net income.

Partly as a result of certain of our acquisitions, we have incurred liabilities associated with environmental contamination.

These liabilities include ongoing investigation and remediation activities at a number of current and former sites.

Global, national and corporate initiatives addressing climate change could increase our costs.

Concern over climate change may lead to state, federal and international legislative and regulatory initiatives aimed at reducing carbon dioxide and other greenhouse gas emissions through incentives, taxes or mandates and there is increased stockholder interest generally in voluntary corporate commitments to reduce the generation of greenhouse gases.

Collectively, such initiatives and commitments could lead to an increase in both the price of energy and our operating costs.

A sustained increase in energy prices for any reason could increase our raw material, components, operations and transportation costs, which we may not be able to pass on to our customers and which would therefore reduce our profitability, as would increased operating costs due to our adoption, whether voluntary or mandatory, of measures to reduce our carbon footprint.

We could also suffer reputational damage if our practices are perceived to be inadequate.

Changes in financial accounting standards or policies have affected, and in the future may affect, our reported financial condition or results of operations;

there are inherent limitations to our system of internal controls;

changes in securities laws and regulations have increased, and are likely to continue to increase, our operating costs .

We prepare our consolidated financial statements in conformity with GAAP.

Our preparation of financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the recorded amounts of assets, liabilities and net income during the reporting period.

changes in corporate governance policies and practices may impact our business .

We prepare our consolidated financial statements in conformity with U.S.

Generally Accepted Accounting Principles ("GAAP").

The preparation of our financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the recorded amounts of assets, liabilities and net income during the reporting period.

A change in the facts and circumstances surrounding those estimates could result in a change to our estimates and could impact our future operating results.

These principles are subject to interpretation by the Financial Accounting Standards Board ("FASB"), the SEC and various bodies formed to interpret and create accounting policies.

GAAP is subject to interpretation by the Financial Accounting Standards Board ("FASB"), the SEC and various bodies formed to interpret and create accounting policies.

A change in those policies can have a significant effect on our reported results and may affect our reporting of transactions which are completed before a change is announced.

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Although we believe the judgments we applied in implementation of the new revenue recognition standard are appropriate, there can be no assurance that we will not be required to change our judgments relating to implementation of such standard in the future, whether as a result of new guidance or otherwise.

A significant change in our accounting judgments could have a significant impact on our reported revenue, gross profits or balance sheets.

A significant change in our accounting judgments could have a significant impact on our reported revenue, gross profit, assets and liabilities.

In general, changes to accounting rules or challenges to our interpretation or application of the rules by regulators may have a material adverse effect on our reported financial results or on the way we conduct business.

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As a result, there can be no assurance that our system of internal and disclosure controls and procedures will be successful in preventing all errors, theft and fraud, or in informing management of all material information in a timely manner.

Furthermore, due to the health risks caused by the COVID-19 global pandemic to employees who operate and monitor our internal controls and due to the requirement that a large number of employees work remotely, the COVID-19 global pandemic impact on staffing could cause challenges for the effective operation of our internal controls.

Finally, corporate governance, public disclosure and compliance practices continue to evolve based upon continuing legislative action, SEC rulemaking and stockholder activism.

As a result, the number of rules and regulations applicable to us may increase, which could also increase our legal and financial compliance costs and the amount of time management must devote to compliance activities.

Increasing regulatory burdens could also make it more difficult for us to attract and retain qualified members of our Board of Directors, particularly to serve on our Audit Committee, and qualified executive officers in light of an increase in actual or perceived workload and liability for serving in such positions.

Finally, corporate governance, public disclosure and compliance practices continue to evolve based upon continuing legislative action, SEC rulemaking and policy positions taken by large institutional stockholders and proxy advisors.

As a result, the number of rules, regulations and standards applicable to us may become more burdensome to comply with, could increase scrutiny of our practices and policies by these or other groups and increase our legal and financial compliance costs and the amount of time management must devote to governance and compliance activities.

Increasing regulatory burdens and corporate governance requirements could also make it more difficult for us to attract and retain qualified members of our Board of Directors, particularly to serve on our Audit Committee, and qualified executive officers.

Liquidity and Credit Risks

Our customers could experience credit problems, which could reduce our future revenues and net income.

Some companies in the industries for which we provide products have previously experienced significant financial difficulties, with a few filing for bankruptcy in the past.

In particular, the COVID-19 pandemic has resulted in certain of our customers experiencing financial difficulties.

Such financial difficulties, if experienced by one or more of our customers, may negatively affect our business due to the decreased demand from these financially distressed customers, the lengthening of customer payment terms, the potential inability of these companies to make full payment on amounts owed to us or to purchase inventory we acquired to support their businesses.

Customer bankruptcies also entail the risk of potential recovery by the bankruptcy estate of amounts previously paid to us that are deemed a preference under bankruptcy laws.

There can be no assurance that additional customers will not declare bankruptcy, including as a result of changes in their end markets due to the COVID-19 pandemic.

We may be unable to generate sufficient liquidity to maintain or expand our operations, which would reduce the amount of business our customers and vendors are able to do with us and impact our ability to continue operations at current levels without seeking additional funding;

we could experience losses if one or more financial institutions holding our cash or other financial counterparties were to fail;

repatriation of foreign cash could increase our taxes.

Our liquidity is dependent on a number of factors, including profitability, business volume, inventory requirements, the extension of trade credit by our suppliers, the degree of alignment of payment terms from our suppliers with payment terms granted to our customers, the amount we invest in our facilities and equipment, the timing of acquisitions and divestitures, the schedule for repayment of our outstanding indebtedness, the timing of stock repurchases, the availability under our Amended Cash Flow Revolver and the amount of accounts receivable eligible for sale under our factoring programs.

In the event we need or desire additional liquidity beyond the sources described above to maintain or expand our business levels, make acquisitions

or repurchase stock, there can be no assurance that such additional liquidity will be available on acceptable terms or at all.

Any failure to maintain adequate liquidity would prevent us from maintaining operations at current or desired levels, which in turn would reduce both our revenue and profitability.

Although we believe our existing cash resources and sources of liquidity, together with cash generated from operations, will be sufficient to meet our working capital requirements for at least the next 12 months, should demand for our services increase significantly over the next 12 months or should we experience significant increases in delinquent or uncollectible accounts receivable for any reason, including in particular continued or worsening economic conditions caused by the COVID-19 pandemic or otherwise, our cash provided by operations could decrease significantly and we could be required to seek additional sources of liquidity to continue our operations at their current level.

In such a case, there can be no assurance that such additional sources of financing would be available.

A principal source of our liquidity is our cash and cash equivalents, which are held with various financial institutions.

Finally, if one or more counterparties to our interest rate or foreign currency hedging instruments were to fail, we could suffer losses and our hedging of risk could become less effective.

Approximately 40% of our cash is held in foreign jurisdictions.

Some of these jurisdictions restrict the amount of cash that can be transferred to the U.S.

or impose taxes and penalties on such transfers of cash.

To the extent we have excess cash in foreign locations that could be used in, or is needed by, our U.S.

operations, we may incur significant foreign taxes to repatriate these funds which would reduce the net amount ultimately available for such purposes.

Our Amended Cash Flow Revolver contains covenants that may adversely impact our business;

the failure to comply with such covenants or the occurrence of an event of default could cause us to be unable to borrow additional funds and cause our outstanding debt to become immediately payable.

Our Amended Cash Flow Revolver contains a maximum leverage and minimum interest coverage ratio, in both cases measured on the basis of a trailing 12-month look-back period, and a number of restrictive covenants, including restrictions on incurring additional debt, making investments and other restricted payments, selling assets and paying dividends, subject to certain exceptions, with which we must comply.

Collectively, these covenants could constrain our ability to grow our business through acquisition or engage in other transactions.

Such facility also contains customary events of default, including that a material business interruption or cessation has not occurred.

If we are not able to comply with these covenants or if an event of default were to occur and not be cured, all of our outstanding debt would become immediately due and payable and the incurrence of additional debt under our Amended Cash Flow Revolver would not be allowed, either of which would have a material adverse effect on our liquidity and ability to continue to conduct our business.

General Risk Factors

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Consolidation in the electronics industry among our customers, our suppliers and/or our competitors may increase, which could result in a small number of very large electronics companies offering products in multiple sectors of the electronics industry.

In addition, if one of our customers is acquired by another company that does not rely on us to provide EMS services, we may lose that customer's business.

If one of our customers is acquired by another company that does not rely on us to provide EMS services, we may lose that customer's business.

Similarly, consolidation among our suppliers could result in a sole or limited source for certain components used in our customers' products.

Any such consolidation could cause us to be required to pay increased prices for such components, which could reduce our gross margin and profitability.

Unanticipated changes in our tax rates or exposure to additional tax liabilities could increase our taxes and decrease our net income;

Any such consolidation could cause us to be required to pay increased prices for such components if we are unable to pass on such increases to our customers, which could reduce our gross margin and profitability.

Unanticipated changes in our income tax rates or exposure to additional tax liabilities could increase our taxes and decrease our net income;

our projections of future taxable income that drove the release of our valuation allowance in prior years could prove to be incorrect, which could cause a charge to earnings.

recent corporate tax reform measures have reduced the value of our deferred tax assets and could result in taxation of untaxed foreign earnings.

We are or may become subject to income, sales, value-added, goods and services, withholding and other taxes in the United States and various foreign jurisdictions.

Significant judgment is required in determining our worldwide provision for taxes and, in the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.

Our effective tax rates and liability for other taxes could increase as a result of changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in enacted tax laws, the effectiveness of our cash and tax management strategies, our ability to negotiate advance pricing agreements with foreign tax authorities, compliance with local trade laws and other factors.

Our effective income tax rates and liability for other taxes could increase as a result of changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in enacted tax laws, the effectiveness of our cash and tax management strategies, our ability to negotiate advance pricing agreements with foreign tax authorities, compliance with local trade laws and other factors.

Recent international initiatives require multinational enterprises, like ours, to report profitability on a country-by-country basis, which could increase scrutiny by foreign tax authorities.

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However, the success of our foreign currency hedging activities in preventing foreign exchange losses depends largely upon the accuracy of our forecasts of future sales, expenses, capital expenditures and monetary assets and liabilities.

As such, our foreign currency hedging program may not fully cover our exposure to exchange rate fluctuations.

As such, our foreign currency hedging program may not fully cover all of our exposure to exchange rate fluctuations.

If our hedging activities are not successful, our net income may be reduced.

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We carry various forms of business and liability insurance in types and amounts we believe are reasonable and customary for similarly situated companies in our industry.

However, our insurance program does not generally cover losses due to failure to comply with typical customer warranties for workmanship, product and medical device liability, intellectual property infringement, product recall claims, certain natural disasters, such as earthquakes, epidemics or pandemics, such as the COVID-19 outbreak, and environmental contamination.

In particular, our insurance coverage with respect to damages to or closure of our facilities, or damages to our customers' products caused by cyberattacks and certain natural disasters, such as earthquakes, epidemics and pandemics (such as the COVID-19 pandemic), is limited and is subject to policy deductibles, coverage limits, and exclusions, and as a result, may not be sufficient to cover all of our losses.

For example, our policies have very limited coverage for damages due to earthquakes or losses caused by business disruptions.

In addition, such coverage may not continue to be available at commercially reasonable rates and terms.

In addition, our policies generally have deductibles and/or limits or may be limited to certain lines or business or customer engagements that reduce the amount of our potential recoveries from insurance.

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Our success depends upon the continued service of our key personnel, particularly our highly skilled sales and operations executives, managers and engineers with many years of experience in electronics and contracts manufacturing.

individuals can be difficult to identify, recruit and retain and are heavily recruited by our competitors.

Should any of our key employees choose to retire or terminate their employment with us, we will be required to replace them with new employees with the required experience.

Such individuals can be difficult to identify, recruit and retain and are heavily recruited by our competitors.

As our key employees choose to retire or terminate their employment with us, we will be required to replace them with new employees with the required experience.

Should we be unable to recruit new employees to fill key positions with us, our operations, financial controls and growth prospects could be negatively impacted.

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we could become required to book a charge to earnings should we determine that goodwill and other acquired assets are impaired.

From time to time, we may undertake strategic transactions that give us the opportunity to access new customers and new end markets, increase our proprietary product offerings, obtain new manufacturing and service capabilities and technologies, enter new geographic manufacturing locations, lower our manufacturing costs and increase our margins, and to further develop existing customer relationships.

Strategic transactions involve a number of risks, uncertainties and costs, including integrating acquired operations and workforce, businesses and products, resolving quality issues involving acquired products, incurring severance and other restructuring costs, diverting management attention, maintaining customer, supplier or other favorable business relationships of acquired operations, terminating unfavorable commercial arrangements, losing key employees, integrating the systems of acquired operations into our management information systems and satisfying the liabilities of acquired businesses, including liability for past violations of law and material environmental liabilities.

From time to time, we may undertake strategic transactions that give us the opportunity to access new customers and new end markets, increase our proprietary product offerings, obtain new manufacturing and service capabilities and technologies, enter new geographic manufacturing locations, lower our manufacturing costs, increase our margins or further develop existing customer relationships.

Strategic transactions involve a number of risks, uncertainties and costs, including integrating acquired operations and workforce, businesses and products, resolving quality issues involving acquired products, incurring severance and other restructuring costs, diverting management attention from their normal operational duties, maintaining customer, supplier or other favorable business relationships of acquired operations, terminating unfavorable commercial arrangements, losing key employees, integrating the systems of acquired operations into our management information systems and satisfying the liabilities of acquired businesses, including liability for past violations of law and material environmental liabilities.

Any of these risks could cause our strategic transactions not to be ultimately profitable.

We may also choose to divest plants, businesses or products lines in the future.

Divestitures reduce revenue and, potentially, margins and can involve the risk of retained liabilities from the operations divested, including environmental liabilities.

In addition, we have in the past recorded, and may be required to record in the future, goodwill and other intangible assets in connection with our acquisitions.

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We are subject to risks associated with natural disasters and global events.

We conduct a significant portion of our activities, including manufacturing, administration and information technology management in areas that have experienced natural disasters, such as major earthquakes, hurricanes, floods, tsunamis and epidemics or pandemics, such as the COVID-19 outbreak.

Our insurance coverage with respect to damages to or closure of our facilities, or damages to our customers' products caused by natural disasters, is limited and is subject to policy deductibles, coverage limits, and exclusions, and as a result, may not be sufficient to cover all of our losses.

For example, our policies have very limited coverage for damages due to earthquakes or losses caused by business disruptions.

In addition, such coverage may not continue to be available at commercially reasonable rates and terms.

We conduct a significant portion of our activities, including manufacturing, administration and information technology management, in areas that have experienced natural disasters, such as major earthquakes, hurricanes, floods, tsunamis and epidemics or pandemics, such as the COVID-19 pandemic.

In the event of a major earthquake or other disaster affecting one or more of our facilities, our operations and management information systems, which control our worldwide procurement, inventory management, shipping and billing activities, could be significantly disrupted.

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The stock market in recent years has experienced significant price and volume fluctuations that have affected our stock price.

Recent stock market fluctuations related to the current COVID-19 pandemic have been particularly significant.

Recent stock market fluctuations related to the COVID-19 pandemic have been particularly significant.

These fluctuations have often been unrelated to our operating performance.

Factors that can cause such fluctuations include announcements by our customers, competitors or other events affecting companies in the electronics industry, currency fluctuations, the impact of natural disasters and global events, such as the current COVID-19 pandemic, general market fluctuations and macroeconomic conditions, any of which may cause the market price of our common stock to fluctuate widely.

Factors that can cause such fluctuations include announcements by our customers, suppliers, competitors or other events affecting companies in the electronics industry, such as component shortages, currency fluctuations, the impact of natural disasters and global events, such as the COVID-19 pandemic, geopolitical tensions, general market fluctuations and macroeconomic conditions, any of which may cause the market price of our common stock to fluctuate widely.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors