What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-11-12 compared with 2020-11-13 · 108 added, 162 removed, 282 unchanged (49% of the section changed)

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These statements relate to our expectations for future events and time periods.

All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including any statements regarding trends in future revenue or results of operations, gross margin, operating margin, expenses, earnings or losses from operations, cash flow;

any statements of the plans, strategies and objectives of management for future operations and the anticipated benefits of such plans, strategies and objectives;

any statements regarding future economic conditions or performance;

any statements regarding pending investigations, claims or disputes;

any statements regarding the timing of closing of, future cash outlays for, and benefits of acquisitions;

any statements or expectations regarding litigation or pending investigations;

any statements regarding expected restructuring costs and benefits;

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any statements regarding the potential or expected impact of the COVID-19 pandemic on our business, results of operations and financial condition;

any statements regarding the impact of future potential tariffs on our business;

any statements regarding the future impact of supply chain shortages and changes in component pricing on our business;

any statements regarding the future impact of potential tariffs on our business;

any statements regarding the impact of changes in tax laws;

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We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this report with the Securities and Exchange Commission.

Investors and others should note that the Company announces material financial information to its investors using its investor relations website ( http://ir.sanmina.com/investor-relations/overview/default.aspx ) , SEC filings, press releases, public conference calls and webcasts.

The Company uses these channels to communicate with its investors and the public about the Company, its products and services and other issues.

It is possible that the information the Company posts on its investor relations website could be deemed to be material information.

Therefore, the Company encourages investors, the media, and others interested in the Company to review the information it posts on its investor relations website.

Investors and others should note that we announce material financial information to our investors using our investor relations website ( http://ir.sanmina.com/investor-relations/overview/default.aspx ) , SEC filings, press releases, public conference calls and webcasts.

We use these channels to communicate with our investors and the public about us, our products and services and other issues.

It is possible that the information we post on our investor relations website could be deemed to be material information.

Therefore, we encourage investors, the media, and others interested in our company to review the information we post on our investor relations website.

The contents of our investor relations website are not incorporated by reference into this annual report on Form 10-K or in any other report or document we file with the SEC.

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2) Components, Products and Services (CPS).

Components include interconnect systems (printed circuit board fabrication, backplane, cable assemblies and plastic injection molding) and mechanical systems (enclosures and precision machining).

Products include memory from our Viking Technology division;

enterprise solutions from our Viking Enterprise Solutions division;

RF, optical and microelectronic;

Components include interconnect systems (printed circuit board fabrication, backplanes, cable assemblies and plastic injection molding) and mechanical systems (enclosures and precision machining).

Products include memory solutions from our Viking Technology division;

high-performance storage platforms for hyperscale and enterprise solutions from our Viking Enterprise Solutions (VES) division;

optical, radio frequency RF, optical and microelectronic (microE) design and manufacturing services from our Advanced Micro Systems Technologies division;

defense and aerospace products from SCI Technology;

and cloud-based manufacturing execution software from our 42Q division.

Services include design, engineering, logistics and repair services.

Services include design, engineering and logistics and repair.

Our only reportable segment for financial reporting purposes is IMS, which represented approximately 80% of our total revenue in 2021.

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All references in this section to years refer to our fiscal years ending on the Saturday nearest to September 30.

Fiscal 2020 is a 53-week year, with the extra week occurring during the fourth quarter of 2020.

Fiscal 2019 and 2018 were each 52 weeks.

Fiscal 2021 and 2019 were each 52-week years and fiscal 2020 was a 53-week year, with the extra week included in the fourth quarter of fiscal 2020.

All references to years relate to fiscal years unless otherwise noted.

Our strategy is to leverage our comprehensive product and service offerings, advanced technologies and global capabilities to further penetrate diverse end markets that we believe offer significant growth opportunities and have complex products that require higher value-added services.

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Although we believe we are well-positioned in each of our key end markets and seek to differentiate ourselves from our competitors, competition remains intense and profitably growing our revenues has been challenging.

In addition, the COVID-19 global pandemic created a unique and challenging environment in which our revenue and profitability in 2020 have been significantly impacted and will likely continue to be negatively impacted in at least the near term.

In March 2020, the World Health Organization declared COVID-19 to be a pandemic.

During the last nine months of our fiscal 2020, our results of operations were negatively impacted by rapidly changing market and economic conditions caused by the COVID-19 outbreak, as well as by numerous measures imposed by government authorities to try to contain the virus.

These conditions and measures disrupted our operations and those of our customers, interrupted the supply of components, limited the types of products we can manufacture and the capacity of our logistics providers to deliver those products, and resulted in temporary closures of manufacturing sites and reduced staffing as mandated by government orders.

Although employee infections have not yet had a significant impact on our operations, they do require us to perform contact tracing, exclude potentially infected employees from the workplace and clean work areas used by infected employees.

Should employee infections become widespread, they would have a significant and negative impact on our ability to sustain production at desired levels.

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 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.

However, 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.

Separately, we incurred restructuring charges of $18 million, consisting of severance costs, under our company-wide restructuring plan adopted in October 2019 ("Q1 FY20 Plan").

Additional actions under this plan are expected to be implemented through the second quarter of fiscal 2021 and cash payments of severance are expected to occur through the fourth quarter of fiscal 2021.

In addition, the COVID-19 pandemic created a unique and challenging environment in which our revenue and profitability in 2021 and 2020 were significantly and negatively impacted and will likely continue to be significantly and negatively impacted in at least the near term.

Our results of operations have been negatively impacted by rapidly changing market and economic conditions caused by the COVID-19 pandemic, as well as by numerous measures imposed by government authorities to try to contain the virus.

These conditions and measures disrupted our operations and those of our customers, interrupted the supply of components, temporarily limited the types of products we could manufacture and the capacity of our logistics providers to deliver those products, and resulted in temporary closures of manufacturing sites and reduced staffing as mandated by government orders.

Although employee infections have not yet had a significant impact on our operations, these conditions and measures require us to perform contact tracing, exclude potentially infected employees from the workplace and clean work areas used by infected employees.

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 employees who may become infected or exposed to infected persons whom we would then be required to 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.

Separately, over the past two years, we incurred restructuring charges of $29 million under our company-wide restructuring plan adopted in October 2019 ("Q1 FY20 Plan").

These charges consist primarily of severance, the majority of which had been paid as of the end of fiscal 2021.

Remaining cash payments are expected to occur through the end of fiscal 2022.

Sales to our ten largest customers typically represent approximately 50% of our net sales in any given year.

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These agreements generally have terms ranging from three to five years and cover the manufacture of a range of products.

Under these agreements, a customer typically agrees to purchase its requirements for specific products in particular geographic areas from us.

However, these agreements generally do not obligate the customer to purchase minimum quantities of products.

In addition, some customer contracts contain cost reduction objectives, which can have the effect of reducing revenue from such customers.

Under these agreements, a customer typically purchases its requirements for specific products in particular geographic areas from us.

However, these agreements generally do not obligate the customer to purchase minimum quantities of products, which can have the effect of reducing revenue and profitability.

In addition, some customer contracts contain cost reduction objectives, which can also have the effect of reducing revenue from such customers.

The U.S., China, the E.U.

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Unrecovered tariffs paid on behalf of our customers reduce our gross margins.

Also, although we are required to pay tariffs upon importation of the components, we may not recover these amounts from customers until sometime later, which adversely impacts our operating cash flow in a given period.

Also, although we are required to pay

tariffs upon importation of the components, we may not recover these amounts from customers until sometime later, which adversely impacts our operating cash flow in a given period.

However, we currently do not expect the net impact of tariffs, after recovery from customers, to be material to us.

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We base our estimates on historical experience and on various other assumptions that we believe are reasonable for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Due to the COVID-19 global pandemic, the global economy and financial markets have been disrupted and there is a significant amount of uncertainty about the length and severity of the consequences caused by the pandemic.

Due to the COVID-19 pandemic, the global economy and financial markets were disrupted and there is a significant amount of uncertainty about the length and severity of the consequences caused by the pandemic.

We have considered information available to us as of the date of issuance of these financial statements and, other than the impairments described in Note 5, are not aware of any specific events or circumstances that would require an update to our estimates or judgments, or a revision to the carrying value of our assets or liabilities.

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and (5) recognize revenue when (or as) we satisfy a performance obligation.

Each of these steps involves the use of significant judgments.

Each of these steps may involve the use of significant judgments.

We recognize revenue for the majority of our contracts on an over time basis.

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This division is an operating segment whose results are aggregated with ten other operating segments and reported under CPS for segment reporting purposes.

In 2020, CPS revenue and gross profit was $1.3 billion and $157 million, respectively.

In 2021, CPS revenue and gross profit were $1.3 billion and $177 million, respectively.

We update our estimates of materials, labor and subcontractor costs on a quarterly basis.

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Results of Operations

Years Ended October 3, 2020, September 28, 2019 and September 29, 2018.

Years Ended October 2, 2021, October 3, 2020 and September 28, 2019.

The following table presents our key operating results.

2020 September 28,

2021 October 3,

2020 September 28,

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Operating margin 4.2 % 3.3 % 3.5 %

Net income (loss) (1) $ 139,713 $ 141,515 $ (95,533)

(1) Our net loss in 2018 includes the impact of the Tax Act, which resulted in a one-time non-cash charge to income tax expense of $161 million.

Net income $ 268,998 $ 139,713 $ 141,515

Net sales decreased from $7.0 billion for 2020 to $6.8 billion for 2021, a decrease of 2.9%.

Net sales increased from $7.1 billion for 2018 to $8.2 billion for 2019, an increase of 15.8%.

Net sales decreased from $8.2 billion for 2019 to $7.0 billion for 2020, a decrease of 15.5%.

Sales by end market were as follows:

Year Ended 2021 vs.

October 3, 2020 September 28, 2019 September 29, 2018 Increase/(Decrease) Increase/(Decrease)

October 2, 2021 October 3, 2020 September 28, 2019 Increase/(Decrease) Increase/(Decrease)

(Dollars in thousands)

Industrial, Medical, Defense and Automotive $ 3,890,041 $ 4,127,720 $ 4,572,006 $ (237,679) (5.8) % $ (444,286) (9.7) %

Communications Networks 2,323,712 2,906,575 2,684,609 (582,863) (20.1) % 221,966 8.3 %

Cloud Solutions 508,938 755,278 743,733 (246,340) (32.6) % 11,545 1.6 %

Communications Networks and Cloud Infrastructure 2,866,602 2,832,650 3,661,853 33,952 1.2 % (829,203) (22.6) %

Total $ 6,756,643 $ 6,960,370 $ 8,233,859 $ (203,727) (2.9) % $ (1,273,489) (15.5) %

Comparison of 2021 to 2020 by End Market

The decrease in sales in our industrial, medical, defense and automotive end market was caused primarily by the continuing negative impact of the COVID-19 pandemic in 2021, which resulted in supply shortages, restrictions on the types of products we could manufacture and disruptions to our operations and those of our customers.

In particular, there was a shortage of components in our industrial segment starting in the second half of 2021 that prevented us from shipping all of the product for which we had demand.

The slight increase in sales in our communications networks and cloud infrastructure end market was primarily due to a more significant impact from the COVID-19 pandemic in 2020 than in 2021.

Comparison of 2020 to 2019 by End Market

The decrease in sales was caused primarily by two factors.

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Improved availability of these components in 2019 allowed us to catch up to pent-up demand, beginning in the first quarter of 2019 and continuing throughout 2019.

Secondly, beginning in the second quarter of 2020, our sales were negatively impacted by the COVID-19 global pandemic, which resulted in supply shortages, restrictions on the types of products we could manufacture and disruptions to our operations and those of our customers.

Comparison of 2019 to 2018 by End Market

In addition to the impact of improved availability of components as discussed above, sales to customers in our industrial, medical, defense and automotive markets increased primarily as a result of program ramps and new customer programs, and sales to customers in our communications networks end market increased primarily as a result of new program wins for optical, routing and 5G products.

Secondly, beginning in the second quarter of 2020, our sales were negatively impacted by the COVID-19 pandemic, which resulted in supply shortages, restrictions on the types of products we could manufacture and disruptions to our operations and those of our customers.

Gross margin was 8.2%, 7.6% and 7.2% in 2021, 2020 and 2019, respectively.

IMS gross margin increased to 7.1% in 2021 from 6.7% in 2020, primarily due to increased operational efficiencies and the benefit of cost reduction and containment efforts implemented in 2020, some of which were in response to the COVID-19 pandemic.

CPS gross margin increased to

12.7% in 2021 from 11.5% in 2020, primarily due to increased volume, operational efficiencies, favorable product mix and the benefit of cost reduction and containment efforts described above.

IMS gross margin increased to 6.7% in 2020 from 6.4% in 2019.

The increase was primarily due to cost reduction and containment efforts implemented in 2020, some of which were in response to the COVID-19 global pandemic.

The increase was primarily due to cost reduction and containment efforts implemented in 2020, some of which were in response to the COVID-19 pandemic.

Additionally, our self-insured medical claims in the U.S.

significantly lower in 2020 primarily because elective medical procedures were suspended in most states throughout a portion of the year due to the COVID-19 global pandemic.

were significantly lower in 2020 primarily because elective medical procedures were suspended in most states throughout a portion of the year due to the COVID-19 pandemic.

Lastly, certain of our foreign subsidiaries received government subsidies in 2020 to help mitigate the impact of COVID-19.

We do not expect to receive the same level of funding in the future.

CPS gross margin increased to 11.5% in 2020 from 10% in 2019.

The increase was primarily due to continued benefits of certain plant closures during the past two years and the factors described above with respect to IMS gross margin.

The increase in gross margin from 2018 to 2019 was primarily due to increased revenue levels and improved operational efficiencies.

IMS gross margin increased to 6.4% in 2019, from 6.0% in 2018, due primarily to increased revenue and inefficiencies in 2018 ramping certain new programs.

CPS gross margin increased to 10.0% in 2019, from 8.1% in 2018, primarily due to operational improvements and continued benefits of certain plant closures during the past 18 months.

We have experienced fluctuations in gross margin in the past and may continue to do so in the future.

Fluctuations in our gross margin may be caused by a number of factors, including:

• the ongoing impacts of the COVID-19 global pandemic on our operations and those of our suppliers and on our customers' businesses;

• changes in the overall volume of our business, which affect the level of capacity utilization;

• the ongoing impacts of the COVID-19 pandemic on our operations and those of our suppliers and on our customers' businesses;

• capacity utilization which, if lower, results in lower margins due to fixed costs being absorbed by lower volumes;

• changes in the mix of high and low margin products demanded by our customers;

• greater competition in the EMS industry and pricing pressures from OEMs due to greater focus on cost reduction;

• provisions for excess and obsolete inventory, including those associated with distressed customers;

• competition in the EMS industry and pricing pressures from OEMs due to greater focus on cost reduction;

• the amount of our provisions for excess and obsolete inventory, including those associated with distressed customers;

• levels of operational efficiency and production yields;

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As a percentage of net sales, selling, general and administrative expenses were 3.5%, 3.5% and 3.2% for 2021, 2020 and 2019, respectively.

The decrease in 2020 in absolute dollars was primarily due to lower incentive compensation expense, reduced headcount in 2020 as a result of actions under our Q1 FY20 restructuring plan, and reduced travel and certain other expenses in 2020 in response to the COVID-19 global pandemic .

The increase in 2019 in absolute dollars was due primarily to higher incentive compensation expense attributable to our improved financial performance in fiscal year 2019.

The decrease in absolute dollars in 2021 was primarily attributable to reduced headcount in 2021 resulting from continued actions under our Q1 FY20 Plan and reduced travel and certain other expenses in 2021 in continued response to the COVID-19 pandemic.

The decrease in absolute dollars 2020 was primarily due to lower incentive compensation expense, reduced headcount in 2020 resulting from actions under our Q1 FY20 Plan, and reduced travel and certain other expenses in 2020 in response to the COVID-19 pandemic .

Research and Development

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The decrease in absolute dollars from 2019 to 2020 resulted primarily from reduced headcount as a result of consolidating engineering resources in our enterprise computing and storage end market.

The decrease in absolute dollars from 2018 to 2019 was primarily due to an increase in billable customer engineering projects that required our engineering resources.

Restructuring

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The following table is a summary of restructuring costs:

October 3, 2020 September 28, 2019 September 29, 2018

October 2, 2021 October 3, 2020 September 28, 2019

(In thousands)

Severance costs (approximately 2,350 employees)

$ 17,919 $ — $ —

Other exit costs (recognized as incurred) 71 — —

Total - Q1 FY20 plan 17,990 — —

Severance costs (approximately 2,900 employees)

178 1,900 26,425

Severance costs $ 9,405 $ 17,919 $ —

Other exit costs (recognized as incurred) 1,834 71 —

2,149 5,147 31,409

Severance reimbursement — — (10,000)

Total - Q1 FY20 Plan 11,239 17,990 —

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$ 15,057 $ 26,783 $ 13,753

On October 28, 2019, we adopted a Company-wide restructuring plan ("Q1 FY20 Plan").

All actions under our Q1 FY18 Plan have been implemented and all severance has been paid.

In connection with this plan, we entered into a contractual agreement with a third party pursuant to which $10 million of severance and retention costs incurred by us was reimbursed.

Costs incurred for other exit costs consist primarily of costs to maintain vacant facilities that are owned.

On October 28, 2019, we adopted a Company-wide restructuring plan ("Q1 FY20 Plan") under which we have incurred restructuring costs of approximately $29 million as of October 2, 2021.

These costs consist primarily of severance, the majority of which had been paid as of the end of fiscal 2021.

Remaining cash payments are expected to occur through the end of fiscal 2022.

Actions under this plan are substantially complete.

Other plans include a number of plans for which costs are not expected to be material individually or in the aggregate.

Our Integrated Manufacturing Solutions ("IMS") segment incurred costs of $13 million for the year ended October 3, 2020.

This compares to a benefit incurred of $4 million for the year ended September 28, 2019, primarily as a result of a recovery from a third party of certain environmental remediation costs.

Our CPS segment incurred costs of $9 million and $18 million for the years ended October 3, 2020 and September 28, 2019, respectively.

In addition, $5 million of costs were incurred during the year ended October 3, 2020 for Corporate headcount reductions that were not allocated to our IMS and CPS segments.

We had accrued liabilities of $9 million and $5 million as of October 3, 2020 and September 28, 2019, respectively, for restructuring costs (exclusive of long-term environmental remediation liabilities).

In addition to costs expected to be incurred under the Q1 FY20 Plan and Q1 FY18 Plan, we expect to incur restructuring costs in future periods primarily for vacant facilities and former sites for which we are or may be responsible for environmental remediation.

Our Integrated Manufacturing Solutions ("IMS") segment incurred costs of $9 million and $13 million for the year ended October 2, 2021 and October 3, 2020, respectively.

Our CPS segment incurred costs of $5 million and $9 million for the years ended October 2, 2021 and October 3, 2020, respectively.

In addition, we incurred costs of $1 million and $5 million for the years ended October 2, 2021 and October 3, 2020, respectively, for corporate headcount reductions that were not allocated to our IMS and CPS segments.

We had accrued liabilities of $6 million and $9 million as of October 2, 2021 and October 3, 2020, respectively, for restructuring costs (exclusive of long-term environmental remediation liabilities).

We expect to incur restructuring costs in future periods primarily for vacant facilities and former sites for which we are or may be responsible for environmental remediation.

Goodwill Impairment

During the second quarter of 2020, commodity prices in the oil and gas market experienced a sharp decline due to a combination of an oversaturated supply and a decrease in demand caused by the COVID-19 global pandemic.

This commodity price decline negatively impacted the projected cash flows of our oil and gas reporting unit, which is part of our CPS operating segment.

Therefore, we performed a goodwill impairment test for this particular reporting unit and concluded that the fair value

of the reporting unit was below its carrying value, resulting in an impairment charge of $7 million.

Therefore, we performed a goodwill impairment test for this particular reporting unit and concluded that the fair value of the reporting unit was below its carrying value, resulting in an impairment charge of $7 million.

The fair value of the reporting unit was estimated based on the present value of future discounted cash flows.

We had no such charges in 2019.

During our 2018 annual goodwill impairment analysis, we concluded that the fair value of one of our CPS operating segments was below its carrying value, resulting in an impairment charge of $31 million.

The fair value of the reporting unit was estimated based on the present value of future discounted cash flows.

Interest Expense

Interest expense was $19.6 million, $28.9 million and $30.8 million in 2021, 2020 and 2019, respectively.

Interest expense increased $3.0 million in 2019 primarily due to higher daily average borrowings on our revolving credit facility during the year driven by higher inventory levels early in the year.

Interest expense decreased $9 million in 2021 primarily due to lower daily average borrowings under our revolving credit facility.

Other Income (Expense), net

Other income (expense), net consists of numerous items including fees paid in connection with sales of accounts receivable, gains or losses on deferred compensation assets, pension service costs, foreign currency remeasurement gains or losses, etc.

Other was a net expense of $0.3 million in 2020, a net expense of $10.8 million in 2019 and a net income of $4.6 million 2018.

The fluctuations between periods were caused by many factors, the most significant of which was the amount of accounts receivable we sold in each period and the resulting amount of fees incurred for such sales.

We sold $1.7 billion of accounts receivable in 2020, compared to $2.7 billion in 2019 and $0.9 billion in 2018.

Other income (expense) was a net income of $44.3 million in 2021, a net expense of $0.3 million in 2020 and a net expense of $10.8 million in 2019.

Other net income in 2021 consists primarily of a $15 million gain from the sale of certain intellectual property assets, an $8 million gain on liquidation of a foreign entity and receipt of payments of $16 million in connection with settlements of certain anti-trust class action matters.

Provision for Income Taxes

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Our effective tax rate was 12.4%, 30.4% and 42.4% for 2021, 2020 and 2019, respectively.

Our effective tax rate for 2021 was lower than the expected U.S.

statutory rate of 21% primarily due to a $43 million tax benefit resulting from the release of foreign tax reserves due to lapse of time and expiration of statutes of limitations.

Our effective tax rate for 2020 was lower than 2019 primarily due to a tax-related restructuring transaction in 2019 that resulted in deferred tax expense of $22 million.

Our effective tax rate for 2019 was lower than 2018 primarily due to the impact of the U.S.

Tax Cuts and Jobs Act in 2018, which increased tax expense $161 million because of a non-cash reduction in the carrying value of our net deferred tax assets, partially offset by a decrease in the U.S.

tax rate from 35% to 21%, and a $4.8 million discrete tax benefit resulting from a settlement with a foreign tax audit in the third quarter of 2018.

A valuation allowance is established or maintained when, based on currently available information and other factors, it is more likely than not that all or a portion of the deferred tax assets will not be realized.

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Liquidity and Capital Resources

2020 September 28,

2021 October 3,

2020 September 28,

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Key Working Capital Management Measures

2020 September 28,

2021 October 3,

Days sales outstanding (1) 64 54

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(6) Cash cycle days (a measure of how quickly we convert investments in inventory to cash) is calculated as days inventory on hand plus days sales outstanding minus accounts payable days.

Cash and cash equivalents were $481 million at October 3, 2020 and $455 million at September 28, 2019.

Cash and cash equivalents were $650 million at October 2, 2021 and $481 million at October 3, 2020.

Our cash levels vary during any given period depending on the timing of collections from customers and payments to suppliers, borrowings under credit facilities, sales of accounts receivable under numerous programs we utilize, repurchases of capital stock and other factors.

Our working capital was approximately $1.3 billion and $1.2 billion at October 3, 2020 and September 28, 2019, respectively.

Our working capital was approximately $1.5 billion and $1.3 billion as of October 2, 2021 and October 3, 2020, respectively.

Net cash provided by operating activities was $338 million, $301 million and $383 million for 2021, 2020 and 2019, respectively.

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These fluctuations can significantly affect our cash flows from operating activities.

During 2020, we generated $302 million of cash from earnings, excluding non-cash items, and used $1 million of cash because of an increase in our net operating assets and liabilities.

Our net sales in the fourth quarter of 2020 decreased 1% from net sales in the fourth quarter of 2019.

This relatively consistent level of business volume resulted in a relatively consistent level of net operating assets and liabilities, despite certain significant fluctuations within individual components of operating assets and liabilities.

For example, cash generated from reductions in 2020 of $84 million and $40 million in accounts receivable and inventories, respectively, was used to reduce accounts payable by $107 million in 2020.

Individual components of operating assets and liabilities fluctuate for a number of reasons, including linearity of purchases and sales, the mix of customer and supplier payment terms within our accounts receivable and accounts payable, and the amount and timing of sales of accounts receivable.

During 2021, we generated $423 million of cash from earnings, excluding non-cash items, and used $84 million of cash because of an increase in our net operating assets and liabilities, resulting primarily from increases in accounts receivable and inventories of $147 million and $167 million, respectively, partially offset by an increase in accounts payable of $236 million.

The increase in accounts receivable is primarily attributable to reduced sales of accounts receivable and an unfavorable shift in linearity of product shipment to customers.

The increase in inventory is primarily due to shortages of certain components that prevented us from shipping all products for which we had both demand and other components necessary to build such products.

The increase in accounts payable is due primarily to a favorable shift in supplier payment terms mix from suppliers with whom we have shorter payment terms to suppliers with whom we have longer payment terms and a favorable shift in the linearity of material receipts.

Net cash used in investing activities was $91 million, $64 million and $128 million for 2021, 2020 and 2019, respectively.

In 2021, we used $73 million of cash for capital expenditures, paid $21 million in connection with a business combination, purchased $3 million of long-term investments and received $5 million from the sale of certain intellectual property assets.

In 2020, we used $66 million of cash for capital expenditures.

In 2019, we used $135 million of cash for capital expenditures and received proceeds of $8 million primarily from sales of certain properties.

Net cash used in financing activities was $77 million, $210 million and $220 million for 2021, 2020 and 2019, respectively.

In 2021, we repurchased $64 million of common stock (including $10 million in settlement of employee tax withholding obligations), repaid an aggregate of $19 million of long-term debt, received $3 million of proceeds from issuances of common stock pursuant to stock option exercises and received $3 million of installment payments from the sale of certain intellectual property assets.

In 2020, we repurchased $179 million of common stock (including $13 million in settlement of employee tax withholding obligations), repaid an aggregate of $39 million of long-term debt and received $8 million of proceeds from issuances of common stock pursuant to stock option exercises.

In 2019, we repurchased $13 million of common stock (including $6 million in settlement of employee tax withholding obligations), borrowed $215 million of cash under our Amended Cash Flow Revolver, repaid $378 million of long-term debt using $375 million of proceeds from the issuance of a term loan, received $14 million of proceeds from issuances of common stock pursuant to stock option exercises and incurred $3 million of debt issuance costs in connection with our revolving credit amendment.

Senior Secured Notes Due 2019 ("Secured Notes") .

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Revolving Credit Facility.

During the first quarter of 2019, we entered into a Fourth Amended and Restated Credit Agreement (the "Amended Cash Flow Revolver") that provided for a committed $375 million term loan ("Term Loan").

On April 5, 2019, we entered into an amendment to the Amended Cash Flow Revolver that increased the amount available under the facility from $500 million to $700 million upon satisfaction of certain conditions, including repayment in full of our Secured Notes.

As of October 3, 2020, costs incurred in connection with the Amended Cash Flow Revolver and Term Loan are classified as long-term debt and are being amortized to interest expense over the life of the Term Loan using the effective interest method.

Following the satisfaction and discharge of the Indenture dated as of June 4, 2014, using the proceeds of the Term Loan, and the release of all liens securing the Secured Notes, our debt structure changed as follows, effective June 3, 2019:

(i) revolving commitments under the Amended Cash Flow Revolver increased to a total of $700 million in revolving commitments, (ii) the accordion feature of the Amended Cash Flow Revolver was reset so that we can obtain, subject to the satisfaction of specified conditions and commitment of the lenders, additional revolving commitments in an aggregate amount of up to $200 million and (iii) our and our subsidiary guarantors’ obligations under the Amended Cash Flow Revolver became secured by substantially all of the assets (excluding real property) of our company and the subsidiary guarantors, subject to certain exceptions.

During the first quarter of 2019, we entered into a Fourth Amended and Restated Credit Agreement that provides for a committed $375 million term loan ("Term Loan"), which was further amended on April 5, 2019 to provide for a total of $700 million in revolving commitments, together with an accordion feature by which we can obtain, subject to the satisfaction of specified conditions and commitment of the lenders, additional revolving commitments in an aggregate amount of up to $200 million (the "Amended Cash Flow Revolver").

Loans under the Amended Cash Flow Revolver bear interest, at our option, at either the LIBOR or a base rate, in each case plus a spread determined based on our credit rating.

Interest on the loans is payable quarterly in arrears with respect to base rate loans and at the end of an interest period in the case of LIBOR loans.

Interest on the loans is payable quarterly in arrears with respect to base

rate loans and at the end of an interest period in the case of LIBOR loans.

The outstanding principal amount of all loans under the Amended Cash Flow Revolver, including, the Term Loan, together with accrued and unpaid interest, is due on November 30, 2023 and we are required to repay a portion of the principal amount of the loan equal to 1.25% in quarterly installments.

Our and our subsidiary guarantors’ obligations under the Amended Cash Flow Revolver are secured by substantially all of the assets (excluding real property) of Sanmina and its subsidiary guarantors, subject to certain exceptions.

As of October 2, 2021, no borrowings and $8 million of letters of credit were outstanding under the Amended Cash Flow Revolver, under which $692 million was available to borrow.

There were no borrowings outstanding under the Amended Cash Flow Revolver as of September 28, 2019.

There were no borrowings outstanding under the Amended Cash Flow Revolver as of October 3, 2020.

Short-term Borrowing Facilities .

As of October 2, 2021, certain of our foreign subsidiaries had a total of $69 million of short-term borrowing facilities available, under which no borrowings were outstanding.

These facilities expire at various dates through the second quarter of 2022.

These facilities expire at various dates through the first quarter of 2023.

Debt Covenants

The Amended Cash Flow Revolver requires us to comply with a minimum consolidated interest coverage ratio, measured at the end of each fiscal quarter, and at all times a maximum consolidated leverage ratio.

The Amended Cash Flow Revolver contains customary affirmative covenants, including covenants regarding the payment of taxes and other obligations,

maintenance of insurance, reporting requirements and compliance with applicable laws and regulations.

The Amended Cash Flow Revolver contains customary affirmative covenants, including covenants regarding the payment of taxes and other obligations, maintenance of insurance, reporting requirements and compliance with applicable laws and regulations.

Further, the Amended Cash Flow Revolver contains customary negative covenants limiting our ability and that of our subsidiaries to, among other things, incur debt, grant liens, make investments, make acquisitions, make certain restricted payments and sell assets, subject to certain exceptions.

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Although stock repurchases are intended to increase stockholder value, purchases of shares reduce our liquidity.

During the first quarter of 2020, the Board of Directors authorized us to purchase an additional $200 million of our common stock on the same terms as previously approved repurchase programs with no expiration date.

We repurchased 6.4 million and 0.3 million shares of our common stock for $166 million and $7 million in the open market in 2020 and 2019, respectively.

During the first quarter of 2020, the Board of Directors authorized us to purchase $200 million of our common stock on the same terms as previously approved repurchase programs with no expiration date.

We repurchased 1.5 million and 6.4 million shares of our common stock for $54 million and $166 million in the open market in 2021 and 2020 under this program, respectively.

As of October 2, 2021, $81 million remains available under the current authorized program.

Although stock repurchases are intended to increase stockholder value by reducing the number of outstanding shares and to offset the dilution that results from the issuance of shares under the Company’s equity plans, repurchases of shares also reduce the Company's liquidity.

As a result, the timing of future repurchases depends upon the Company’s future capital needs, market conditions and other factors.

Although stock repurchases are intended to increase stockholder value by reducing the number of outstanding shares and to offset the dilution that results from the issuance of shares under our equity plans, repurchases of shares also reduce our liquidity.

As a result, the timing of future repurchases depends upon our future capital needs, market conditions and other factors.

We entered into a Receivables Purchase Agreement (the “RPA”) with certain third-party banking institutions for the sale of trade receivables generated from sales to certain customers, subject to acceptance by, and a funding commitment from, the banks that are party to the RPA.

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Under each of the programs noted above, we sell our entire interest in a trade receivable for 100% of face value, less a discount.

For the years ended October 3, 2020 and September 28, 2019, we sold approximately $1.7 billion and approximately $2.7 billion, respectively, of accounts receivable under these programs.

For the years ended October 2, 2021 and October 3, 2020, we sold $0.5 billion and $1.7 billion, respectively, of accounts receivable under these programs.

Upon sale, these receivables are removed from the consolidated balance sheets and cash received is presented as cash provided by operating activities in the consolidated statements of cash flows.

Discounts on sold receivables were not material for any period presented.

As of October 3, 2020 and September 28, 2019, $97 million and $241 million, respectively, of accounts receivable sold under the RPA and subject to servicing by us remained outstanding and had not yet been collected.

As of October 2, 2021 and October 3, 2020, $7 million and $97 million, respectively, of accounts receivable sold under the RPA and subject to servicing by us remained outstanding and had not yet been collected.

Our sole risk with respect to receivables we service is with respect to commercial disputes regarding such receivables.

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Additionally, we are required to remit amounts collected as servicer on a weekly basis to the financial institutions that purchased the receivables.

As of October 3, 2020 and September 28, 2019, $39 million and $76 million, respectively, had been collected but not yet remitted.

As of October 2, 2021 and October 3, 2020, $18 million and $39 million, respectively, had been collected but not yet remitted.

This amount is classified in accrued liabilities on the consolidated balance sheets.

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These swaps are accounted for as cash flow hedges under ASC Topic 815, Derivatives and Hedging.

Interest rate swaps with an aggregate notional amount of $350 million were outstanding as of October 3, 2020 and September 28, 2019.

Interest rate swaps with an aggregate notional amount of $350 million were outstanding as of October 2, 2021 and October 3, 2020.

The aggregate effective interest rate of these swaps as of October 2, 2021 was approximately 4.3%.

As of October 3, 2020, due to a decline in interest rates since the time the swaps were put in place, these interest rate swaps had a negative value of $29 million, of which $9 million is included in accrued liabilities and the remaining amount is included in other long-term liabilities on the consolidated balance sheets.

Due to a decline in interest rates since the time the swaps were put in place, these interest rate swaps had a negative value of $19 million as of October 2, 2021, of which $9 million is included in accrued liabilities and the remaining amount is included in other long-term liabilities on the consolidated balance sheets.

In the ordinary course of business, we are or may become party to legal proceedings, claims and other contingencies, including environmental, warranty and employee matters and examinations by government agencies.

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We believe our existing cash resources and other sources of liquidity, together with cash generated from operations, will be sufficient to meet our working capital requirements through at least the next 12 months.

However, should demand for our services decrease 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.

However, should demand for our services decrease 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, 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.

We distribute our cash among a number of financial institutions that we believe to be of high quality.

However, 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.

However, 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.

As of October 2, 2021, 62% of our cash balance was held in the United States.

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Contractual Obligations

The following is a summary of our long-term debt and operating lease obligations as of October 3, 2020:

Payments Due by Period

Contractual Obligations Total Less than 1 year 1- 3 years 3-5 years More than

(In thousands)

Long-term debt obligations, including current portion $ 351,563 $ 18,750 $ 32,813 $ 300,000 $ —

Operating lease obligations 60,029 18,128 20,622 8,094 13,185

Total contractual obligations $ 411,592 $ 36,878 $ 53,435 $ 308,094 $ 13,185

As part of our ongoing operations, we enter into contractual arrangements that obligate us to make future cash payments.

These obligations impact our liquidity and capital resource needs.

Our estimated future obligations consist of leases, the Term Loan, pension plan funding obligations and unrecognized tax benefits as of October 2, 2021.

A summary of our operating lease obligations as of October 2, 2021 can be found in Note 8, “Leases”, to the Consolidated Financial Statements contained in this report.

A summary of our long-term debt obligations as of October 2, 2021 can be found in Note 7, “Debt”, to the Consolidated Financial Statements contained in this report.

We have defined benefit pension plans with an underfunded amount of $46 million as of October 2, 2021.

We will be required to provide additional funding to these plans in the future if our returns on plan assets are not sufficient to meet our funding obligations.

Additionally, as of October 2, 2021, we were unable to reliably estimate when cash settlements with taxing authorities may occur with respect to our long-term liabilities arising from unrecognized tax benefits of $85 million.

We also have outstanding firm purchase orders with certain suppliers for the purchase of inventory, which are not included in the table above.

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To date, we have not been required to purchase a significant amount of inventory pursuant to these time limitations.

As of October 3, 2020, we were unable to reliably estimate when cash settlements with taxing authorities may occur with respect to our unrecognized tax benefits of $115 million.

Additionally, we have defined benefit pension plans with an underfunded amount of $51 million at October 3, 2020.

We will be required to provide additional funding to these plans in the future if our returns on plan assets are not sufficient to meet our funding obligations.

None of the amounts described in this paragraph are included in the table above.

Off-Balance Sheet Arrangements

As of October 2, 2021, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC, that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

Quarterly Results ( Unaudited )

The following tables contain selected unaudited quarterly financial data for each quarter of fiscal 2020 and 2019.

In management's opinion, the unaudited data has been prepared on the same basis as the audited information and includes all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the data for the periods presented.

Our results of operations have varied and may continue to fluctuate significantly from quarter to quarter.

The results of operations in any period should not be considered indicative of the results to be expected from any future period.

Year ended October 3, 2020

First Quarter Second Quarter Third Quarter Fourth Quarter

(In thousands, except per share data)

Net sales $ 1,840,171 $ 1,590,550 $ 1,654,691 $ 1,874,958

Gross profit $ 134,882 $ 107,421 $ 131,473 $ 151,931

Gross margin 7.3 % 6.8 % 7.9 % 8.1 %

Operating income $ 57,181 $ 24,369 $ 64,103 $ 82,034

Operating margin 3.1 % 1.5 % 3.9 % 4.4 %

Net income $ 38,345 $ 4,882 $ 44,880 $ 51,606

Basic net income per share $ 0.55 $ 0.07 $ 0.66 $ 0.77

Diluted net income per share $ 0.53 $ 0.07 $ 0.64 $ 0.75

Year ended September 28, 2019

First Quarter Second Quarter Third Quarter Fourth Quarter

(In thousands, except per share data)

Net sales $ 2,188,018 $ 2,126,639 $ 2,026,995 $ 1,892,207

Gross profit $ 149,337 $ 153,102 $ 147,794 $ 141,705

Gross margin 6.8 % 7.2 % 7.3 % 7.5 %

Operating income $ 77,543 $ 78,115 $ 67,374 $ 63,085

Operating margin 3.5 % 3.7 % 3.3 % 3.3 %

Net income $ 37,952 $ 40,885 $ 42,921 $ 19,757

Basic net income per share $ 0.56 $ 0.59 $ 0.62 $ 0.28

Diluted net income per share $ 0.54 $ 0.57 $ 0.60 $ 0.27

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 7. Management’s Discussion and Analysis