SANMINA CORP 10-K

Item 8. Financial Statements and Supplementary Data The information required by this item is included below and incorporated by reference from the financial statement schedule included in “Part IV-Item 15(a)(2)”. 50 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Sanmina Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Sanmina Corporation and its subsidiaries (the “Company”) as of October 2, 2021 and October 3, 2020, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended October 2, 2021, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of October 2, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 2, 2021 and October 3, 2020, and the results of its operations and its cash flows for each of the three years in the period ended October 2, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 2, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Changes in Accounting Principles As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2020 and the manner in which it accounts for revenue in 2019. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and 51 Table of Contents expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition - Cost-to-cost method for government contracts in the Defense and Aerospace division As described in Notes 2 and 4 to the consolidated financial statements, revenues for the CPS segment were $1.3 billion for the year ended October 2, 2021, of which the defense and aerospace division represents a portion of the segment. The Company recognizes revenue for defense and aerospace government contracts on an over time basis using the cost-to-cost method (ratio of costs incurred to date to total estimated costs at completion), which management believes best depicts the transfer of control to the customer. Recognition of revenue on government contracts requires the use of significant judgment with respect to estimated materials, labor, and subcontractor costs. The principal considerations for our determination that performing procedures relating to revenue recognition - cost-to-cost method for government contracts in the defense and aerospace division is a critical audit matter are the significant judgment by management when determining the estimated costs for such contracts, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating the audit evidence related to management’s determination of estimated materials, labor, and subcontractor costs. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the cost-to-cost method for government contracts in the defense and aerospace division. These procedures also included, among others, (i) testing management’s process for determining the estimation of costs for a sample of defense and aerospace government contracts, (ii) testing the completeness and accuracy of underlying data used in the estimate, and (iii) evaluating the reasonableness of management’s determination of estimated materials, labor, and subcontractor costs. Evaluating the reasonableness of the estimated materials, labor and subcontractor costs used involved assessing management’s ability to reasonably estimate costs for government contracts by assessing the nature and status of government contracts, performing retrospective reviews of government contract estimates and changes in estimates over time, and obtaining evidence to support estimated costs. /s/ PricewaterhouseCoopers LLP San Jose, California November 12, 2021 We have served as the Company’s auditor since 2016. 52 Table of Contents SANMINA CORPORATION CONSOLIDATED BALANCE SHEETS As of October 2, 2021 October 3, 2020 (In thousands, except par value) ASSETS Current assets: Cash and cash equivalents $ 650,026 $ 480,526 Accounts receivable, net of allowances of approximately $ 7 million and $ 9 million as of October 2, 2021 and October 3, 2020, respectively 1,192,434 1,043,334 Contract assets 348,741 396,583 Inventories 1,036,511 861,281 Prepaid expenses and other current assets 53,952 37,718 Total current assets 3,281,664 2,819,442 Property, plant and equipment, net 532,985 559,242 Deferred income tax assets, net 235,117 273,470 Other 156,953 120,502 Total assets $ 4,206,719 $ 3,772,656 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,464,693 $ 1,210,049 Accrued liabilities 161,896 171,761 Accrued payroll and related benefits 117,648 122,029 Short-term debt, including current portion of long-term debt 18,750 18,750 Total current liabilities 1,762,987 1,522,589 Long-term liabilities: Long-term debt 311,572 329,249 Other 253,532 290,902 Total long-term liabilities 565,104 620,151 Commitments and Contingencies (Note 10) Stockholders' equity: Preferred stock, $ 0.01 par value, authorized 5,000 shares, none issued and outstanding — — Common stock, $ 0.01 par value, authorized 166,667 shares; 108,734 and 107,629 shares issued and 64,307 and 64,999 shares outstanding as of October 2, 2021 and October 3, 2020, respectively 643 650 Treasury stock, 44,427 and 42,630 shares as of October 2, 2021 and October 3, 2020, respectively, at cost ( 1,047,202 ) ( 983,143 ) Additional paid-in capital 6,338,863 6,300,887 Accumulated other comprehensive income 40,690 34,886 Accumulated deficit ( 3,454,366 ) ( 3,723,364 ) Total stockholders' equity 1,878,628 1,629,916 Total liabilities and stockholders' equity $ 4,206,719 $ 3,772,656 See accompanying notes to the consolidated financial statements. 53 Table of Contents SANMINA CORPORATION CONSOLIDATED STATEMENTS OF INCOME Year Ended October 2, 2021 October 3, 2020 September 28, 2019 (In thousands, except per share amounts) Net sales $ 6,756,643 $ 6,960,370 $ 8,233,859 Cost of sales 6,204,838 6,434,663 7,641,921 Gross profit 551,805 525,707 591,938 Operating expenses: Selling, general and administrative 234,537 240,931 260,032 Research and development 20,911 22,564 27,552 Restructuring and other 15,057 27,916 18,237 Goodwill impairment — 6,609 — Total operating expenses 270,505 298,020 305,821 Operating income 281,300 227,687 286,117 Interest income 925 2,322 1,111 Interest expense ( 19,551 ) ( 28,903 ) ( 30,763 ) Other income (expense), net 44,331 ( 348 ) ( 10,846 ) Interest and other, net 25,705 ( 26,929 ) ( 40,498 ) Income before income taxes 307,005 200,758 245,619 Provision for income taxes 38,007 61,045 104,104 Net income $ 268,998 $ 139,713 $ 141,515 Net income per share: Basic $ 4.12 $ 2.02 $ 2.05 Diluted $ 4.01 $ 1.97 $ 1.97 Weighted-average shares used in computing per share amounts: Basic 65,318 69,041 69,129 Diluted 67,084 70,793 71,678 See accompanying notes to the consolidated financial statements. 54 Table of Contents SANMINA CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended October 2, 2021 October 3, 2020 September 28, 2019 (In thousands) Net income $ 268,998 $ 139,713 $ 141,515 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments ( 9,223 ) ( 925 ) ( 1,621 ) Derivative financial instruments: Change in net unrealized amount 3,034 ( 3,646 ) ( 21,508 ) Amount reclassified into net income 4,863 1,332 1,955 Defined benefit plans: Changes in unrecognized net actuarial losses and unrecognized transition cost 4,713 ( 6,240 ) ( 11,450 ) Amortization of actuarial losses and transition cost 2,417 2,106 939 Total other comprehensive income (loss) $ 5,804 $ ( 7,373 ) $ ( 31,685 ) Comprehensive income $ 274,802 $ 132,340 $ 109,830 See accompanying notes to the consolidated financial statements. 55 Table of Contents SANMINA CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Common Stock and Additional Paid-in Capital Treasury Stock Number of Shares Amount Number of Shares Amount Accumulated Other Comprehensive Income Accumulated Deficit Total (In thousands) BALANCE AT SEPTEMBER 29, 2018 103,128 $ 6,222,988 ( 35,351 ) $ ( 791,366 ) $ 73,944 $ ( 4,032,722 ) $ 1,472,844 Issuances under stock plans 2,423 13,539 — — — — 13,539 Stock-based compensation — 30,844 — — — — 30,844 Repurchases of treasury stock — 138 ( 480 ) ( 12,752 ) — — ( 12,614 ) Other comprehensive loss — — — — ( 31,685 ) — ( 31,685 ) Cumulative effect of new accounting pronouncement 28,130 28,130 Net income — — — — — 141,515 141,515 BALANCE AT SEPTEMBER 28, 2019 105,551 $ 6,267,509 ( 35,831 ) $ ( 804,118 ) $ 42,259 $ ( 3,863,077 ) $ 1,642,573 Issuances under stock plans 2,078 7,793 — — — — 7,793 Stock-based compensation — 26,235 — — — — 26,235 Repurchases of treasury stock — — ( 6,799 ) ( 179,025 ) — — ( 179,025 ) Other comprehensive loss — — — — ( 7,373 ) — ( 7,373 ) Net income — — — — — 139,713 139,713 BALANCE AT OCTOBER 3, 2020 107,629 $ 6,301,537 ( 42,630 ) $ ( 983,143 ) $ 34,886 $ ( 3,723,364 ) $ 1,629,916 Issuances under stock plans 1,105 2,993 — — — — 2,993 Stock-based compensation — 34,976 — — — — 34,976 Repurchases of treasury stock — — ( 1,797 ) ( 64,059 ) — — ( 64,059 ) Other comprehensive income — — — — 5,804 — 5,804 Net income — — — — — 268,998 268,998 BALANCE AT OCTOBER 2, 2021 108,734 $ 6,339,506 ( 44,427 ) $ ( 1,047,202 ) $ 40,690 $ ( 3,454,366 ) $ 1,878,628 See accompanying notes to the consolidated financial statements. 56 Table of Contents SANMINA CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended October 2, 2021 October 3, 2020 September 28, 2019 (In thousands) CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income $ 268,998 $ 139,713 $ 141,515 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 109,656 114,218 116,949 Stock-based compensation expense 34,976 26,235 30,844 Deferred income taxes 33,724 13,567 54,668 Impairment of goodwill and other assets — 8,409 — Gain on sale of intellectual property ( 15,000 ) — — Gain on liquidation of foreign entity ( 8,263 ) — — Other, net ( 1,371 ) ( 239 ) 2,219 Changes in operating assets and liabilities, net of amounts acquired: Accounts receivable ( 146,516 ) 83,623 54,947 Contract assets 47,842 ( 283 ) ( 20,814 ) Inventories ( 167,186 ) 39,564 121,383 Prepaid expenses and other assets ( 6,486 ) 17,798 10,018 Accounts payable 236,270 ( 106,640 ) ( 182,521 ) Accrued liabilities ( 48,302 ) ( 35,410 ) 53,757 Cash provided by operating activities 338,342 300,555 382,965 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Purchases of property, plant and equipment, net of proceeds from asset sales ( 73,296 ) ( 65,982 ) ( 134,674 ) Proceeds from sales of property, plant and equipment 1,084 1,573 7,532 Purchases of investments ( 2,705 ) ( 30,000 ) ( 499 ) Sale of investments — 30,000 — Cash paid for business acquisition, net of cash acquired ( 21,408 ) — — Proceeds from sale of intellectual property 5,000 — — Cash used in investing activities ( 91,325 ) ( 64,409 ) ( 127,641 ) CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds from revolving credit facility borrowings 399,600 1,909,000 3,884,325 Repayments of revolving credit facility borrowings ( 399,600 ) ( 1,909,000 ) ( 4,099,325 ) Repayments of long-term debt ( 18,752 ) ( 39,048 ) ( 378,416 ) Proceeds from long-term debt — — 375,000 Debt issuance costs — — ( 2,727 ) Net proceeds from stock issuances 2,993 7,793 13,539 Repurchases of common stock ( 64,059 ) ( 179,025 ) ( 12,614 ) Proceeds from collection of notes receivable 2,500 — — Cash used in financing activities ( 77,318 ) ( 210,280 ) ( 220,218 ) Effect of exchange rate changes ( 199 ) ( 81 ) 107 Increase in cash and cash equivalents 169,500 25,785 35,213 Cash and cash equivalents at beginning of year 480,526 454,741 419,528 Cash and cash equivalents at end of year $ 650,026 $ 480,526 $ 454,741 Cash paid during the year: Interest, net of capitalized interest $ 15,264 $ 20,477 $ 30,143 Income taxes, net of refunds $ 33,358 $ 30,700 $ 32,132 Unpaid purchases of property, plant and equipment at end of period $ 20,929 $ 12,371 $ 27,279 See accompanying notes to the consolidated financial statements. 57 Table of Contents SANMINA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Organization of Sanmina Sanmina Corporation (“Sanmina,” or the “Company”) was incorporated in Delaware in 1989. The Company is a leading global provider of integrated manufacturing solutions, components, products and repair, logistics and after-market services. The Company provides these comprehensive solutions primarily to original equipment manufacturers (OEMs) that serve the industrial, medical, defense and aerospace, automotive, communications networks and cloud solutions industries. The Company's operations are managed as two businesses: 1) Integrated Manufacturing Solutions (IMS). IMS is a single operating segment consisting of printed circuit board assembly and test, high-level assembly and test and direct-order-fulfillment. 2) Components, Products and Services (CPS). 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) and microelectronic (microE) design and manufacturing services from Advanced Micro Systems Technologies; defense and aerospace products from SCI Technology; and cloud-based manufacturing execution software from the Company's 42Q division. Services include design, engineering and logistics and repair. The Company's only reportable segment is IMS, which represented approximately 80 % of total revenue in 2021. The CPS business consists of multiple operating segments which do not individually meet the quantitative thresholds for being presented as reportable segments. Therefore, financial information for these operating segments is aggregated and presented in a single category entitled “Components, Products and Services”. Basis of Presentation Fiscal Year. The Company operates on a 52 or 53 week year ending on the Saturday nearest September 30. Fiscal 2021 and 2019 were each 52 weeks and fiscal 2020 was a 53-week year, with the extra week occurring during the fourth quarter of fiscal 2020. All references to years relate to fiscal years unless otherwise noted. Principles of Consolidation. The consolidated financial statements include the Company's accounts and those of its subsidiaries. All intercompany balances and transactions have been eliminated. Note 2. Summary of Significant Accounting Policies Management Estimates and Uncertainties. The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. 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. The Company has considered information available to it as of the date of issuance of these financial statements and is not aware of any specific events or circumstances that would require an update to its estimates or judgments, or a revision to the carrying value of its assets or liabilities. Significant estimates made in preparing the consolidated financial statements relate to allowances for accounts receivable; provisions for excess and obsolete inventories, environmental matters, and legal exposures; determining liabilities for uncertain tax positions; determining the realizability of deferred tax assets; and determining fair values of tangible and intangible assets for purposes of impairment tests. These estimates may change as new events occur and additional information becomes available. Actual results could differ materially from these estimates. Financial Instruments and Concentration of Credit Risk. Financial instruments consist primarily of cash and cash equivalents, accounts receivable, foreign currency forward contracts, interest rate swap agreements, accounts payable and debt obligations. The fair value of these financial instruments approximates their carrying amount as of October 2, 2021 and 58 Table of Contents October 3, 2020 due to the nature or short maturity of these instruments, or because, in some cases, the instruments are recorded at fair value on the consolidated balance sheets. Accounts Receivable and Other Related Allowances. The Company had allowances of approximately $ 7 million and $ 9 million as of October 2, 2021 and October 3, 2020, respectively, for uncollectible accounts, product returns and other net sales adjustments. To establish the allowance for doubtful accounts, the Company estimates credit risk associated with accounts receivable by considering the creditworthiness of its customers, past experience, specific facts and circumstances, and the overall economic climate in industries that it serves. To establish the allowance for product returns and other adjustments, the Company primarily utilizes historical data. Accounts Receivable Sales. The Company 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. Trade receivables sold pursuant to the RPA are serviced by the Company. In addition to the RPA, the Company has the option to participate in trade receivables sales programs that have been implemented by certain of the Company's customers, as in effect from time to time. The Company does not service trade receivables sold under these other programs. Under each of the programs noted above, the Company sells its entire interest in a trade receivable for 100 % of face value, less a discount. Accounts receivable balances sold are removed from the consolidated balance sheets and the related proceeds are reported as cash provided by operating activities in the consolidated statements of cash flows. Inventories. Inventories are stated at the lower of cost (first-in, first-out method) and net realizable value. Cost includes labor, materials and manufacturing overhead. Provisions are made to reduce excess and obsolete inventories to their estimated net realizable values. The ultimate realization of inventory carrying amounts is primarily affected by changes in customer demand. Inventory provisions are established based on forecasted demand, past experience with specific customers, the age and nature of the inventory, the ability to redistribute inventory to other programs or back to suppliers, and whether customers are contractually obligated and have the ability to pay for the related inventory. Certain payments received from customers for inventory held by the Company are recorded as a reduction of inventory. Long-lived Assets. Property, plant and equipment are stated at cost or, in the case of property and equipment acquired through business combinations, at fair value as of the acquisition date. Depreciation is provided on a straight-line basis over 20 to 40 years for buildings and 3 to 15 years for machinery, equipment, furniture and fixtures. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or useful life of the asset . The Company reviews property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An asset group is the unit of accounting which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets. An asset or asset group is considered impaired if its carrying amount exceeds the undiscounted future net cash flows the asset or asset group is expected to generate. If an asset or asset group is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset or asset group exceeds its fair value. For asset groups for which the primary asset is a building, the Company estimates fair value based on data provided by commercial real estate brokers. For other asset groups, the Company estimates fair value based on projected discounted future net cash flows. Foreign Currency Translation. For foreign subsidiaries using the local currency as their functional currency, assets and liabilities are translated to U.S. dollars at exchange rates in effect at the balance sheet date and income and expenses are translated at average exchange rates. The effects of these translation adjustments are reported in stockholders' equity as a component of accumulated other comprehensive income ("AOCI"). For all entities, remeasurement adjustments for non-functional currency monetary assets and liabilities are included in other income (expense), net in the accompanying consolidated statements of income. Remeasurement gains and losses arising from long-term intercompany loans denominated in a currency other than an entity's functional currency are recorded in AOCI if repayment of the loan is not anticipated in the foreseeable future. Derivative Instruments and Hedging Activities. The Company conducts business on a global basis in numerous currencies and certain of the Company's outstanding debt has a variable interest rate. Therefore, the Company is exposed to movements in foreign currency exchange rates and interest rates. The Company uses derivatives, such as foreign currency 59 Table of Contents forward contracts and interest rate swaps, to minimize the volatility of earnings and cash flows associated with changes in foreign currency exchange rates and interest rates. The Company accounts for derivative instruments and hedging activities in accordance with ASC Topic 815, Derivatives and Hedging, which requires each derivative instrument to be recorded on the consolidated balance sheets at its fair value as either an asset or a liability. If a derivative is designated as a cash flow hedge, the Company excludes time value from its assessment of hedge effectiveness and recognizes the amount of time value in earnings over the life of the derivative. Gains or losses on the derivative not caused by changes in time value are recorded in Accumulated Other Comprehensive Income ("AOCI"), a component of equity, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. If a derivative is designated as a fair value hedge, changes in the fair value of the derivative and of the item being hedged are recognized in earnings in the current period. Derivative instruments are entered into for periods of time consistent with the related underlying exposures and are not entered into for speculative purposes. At the inception of a hedge, the Company documents all relationships between derivative instruments and related hedged items, as well as its risk-management objectives and strategies for the hedging transaction. The Company's foreign currency forward contracts and interest rate swaps potentially expose the Company to credit risk to the extent the counterparties may be unable to meet the terms of the agreement. The Company minimizes such risk by seeking high quality counterparties. Leases. The Company's leases consist primarily of operating leases for buildings and land and have initial lease terms of up to 44 years. Certain of these leases contain an option to extend the lease term for additional periods or to terminate the lease after an initial non-cancelable term. Renewal options are considered in the measurement of the Company's initial lease liability and corresponding right-of-use ("ROU") asset only if it is reasonably certain that the Company will exercise such options. Leases with lease terms of twelve months or less are not recorded on the Company's balance sheet. The Company’s lease liability and ROU assets represent the present value of future lease payments which are a combination of lease components and non-lease components such as maintenance and utilities. Operating lease expense is recognized on a straight line basis over the term of the lease. Certain of the Company’s lease payments are variable because such payments adjust periodically based on changes in consumer price and other indexes. Variable payments are expensed as incurred and not included in the measurement of lease liabilities and ROU assets. Since the Company's leases generally do not provide an implicit rate, the Company uses an incremental borrowing rate based on information available at the lease commencement date for purposes of determining the present value of lease payments. The Company's incremental borrowing rate is based on the term of the lease, the economic environment of the lease and the effect of collateralization, if any. The Company adopted ASC 842 on September 29, 2019, the first day of fiscal 2020. Upon adoption of the new standard, the Company recognized approximately $ 65 million of ROU assets and lease liabilities. Adoption of the new standard did not have a material impact on the Company’s consolidated statements of income or consolidated statements of cash flows. Revenue Recognition. The Company derives revenue principally from sales of integrated manufacturing solutions, components and Company-proprietary products. Other sources of revenue include logistics and repair services; design, development and engineering services; defense and aerospace programs; and sales of raw materials to customers whose requirements change after the Company has procured inventory to fulfill the customer’s forecasted demand. For purposes of determining when to recognize revenue, and in what amount, the Company applies a 5-step model: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the Company satisfies a performance obligation. Each of these steps may involve the use of significant judgments. The Company recognizes revenue for the majority of its contracts on an over time basis. This is due to the fact that 1) the Company does not have an alternative use for the end products it manufactures for its customers and has an enforceable right to payment, including a reasonable profit, for work-in-progress upon a customer’s cancellation of a contract for convenience or 2) the Company’s customer simultaneously receives and consumes the benefits provided by the Company’s services. For these contracts, revenue is recognized on an over time basis using the cost-to-cost method (ratio of costs incurred to date to total estimated costs at completion) which the Company believes best depicts the transfer of control to the customer. Revenue streams for which revenue is recognized on an over time basis include sales of vertically integrated manufacturing solutions (integrated manufacturing solutions and components); global services (logistics and repair); design, development and engineering services; and defense and aerospace programs. 60 Table of Contents Application of the cost-to-cost method for government contracts in the Company’s Defense and Aerospace division requires the use of significant judgments with respect to estimated materials, labor and subcontractor costs. This division is an operating segment whose results are aggregated with ten other operating segments and reported under Components, Products and Services ("CPS") for segment reporting purposes. In 2021, CPS revenue and gross profit was $ 1.3 billion and $ 177 million, respectively. The Company updates its estimates of materials, labor and subcontractor costs on a quarterly basis. These updated estimates are reviewed each quarter by a group of employees that includes representatives from numerous functions such as engineering, materials, contracts, manufacturing, program management, finance and senior management. If a change in estimate is deemed necessary, the impact of the change is recognized in the period of change. For contracts for which revenue is required to be recognized at a point-in-time, the Company recognizes revenue when it has transferred control of the related goods, which generally occurs upon shipment or delivery of the goods to the customer. Revenue streams for which revenue is recognized at a point-in-time include Company-proprietary products and sales of raw materials. Refer to Note 4 for further discussion. The Company adopted ASC 606 as of the beginning of its first quarter of 2019 using the modified retrospective approach, whereby the cumulative effect of initially applying the guidance was recognized as an adjustment to beginning retained earnings at the date of adoption. This adjustment resulted in an increase to beginning retained earnings of $ 28 million. Income taxes. The Company estimates its income tax provision or benefit in each of the jurisdictions in which it operates, including estimating exposures and making judgments regarding the realizability of deferred tax assets. The carrying value of the Company's net deferred tax assets is based on the Company's belief that it is more likely than not that the Company will generate sufficient future taxable income in certain jurisdictions to realize these deferred tax assets. A valuation allowance has been established for deferred tax assets which do not meet the “more likely than not” criteria discussed above . The Company's tax rate is dependent upon the geographic distribution of its worldwide income or losses, the tax regulations and tax holidays in each geographic region, the availability of tax credits and carryforwards, including net operating losses, and the effectiveness of its tax planning strategies. The Company makes an assessment of whether each income tax position is “more likely than not” of being sustained on audit, including resolution of related appeals or litigation, if any. For each income tax position that meets the “more likely than not” recognition threshold, the Company then assesses the largest amount of tax benefit that is greater than 50% likely of being realized upon effective settlement with the tax authority. Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense. Recent Accounting Pronouncements Adopted in Fiscal Year 2021 In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." The new guidance aligns the requirements for capitalizing implementation costs incurred in a cloud-based hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU was effective for the Company at the beginning of fiscal 2021. There was no impact upon adoption of this ASU. In June 2016, the FASB issued ASU 2016-13 "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which replaces the existing incurred loss impairment methodology with an expected credit loss methodology and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU was effective for the Company at the beginning of fiscal 2021.The impact of adoption of this ASU was not material. 61 Table of Contents Recent Accounting Pronouncements Not Yet Adopted In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)", which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. The Company has not yet applied any of the expedients and exceptions and is currently evaluating the impact of the provisions of this ASU. Note 3. Balance Sheet and Income Statement Details Property, Plant and Equipment, net Property, plant and equipment consisted of the following: As of October 2, 2021 October 3, 2020 (In thousands) Machinery and equipment $ 1,491,156 $ 1,479,768 Land and buildings 645,639 657,716 Leasehold improvements 44,899 44,786 Furniture and fixtures 25,394 24,501 Construction in progress 40,524 3,750 2,247,612 2,210,521 Less: Accumulated depreciation and amortization ( 1,714,627 ) ( 1,651,279 ) Property, plant and equipment, net $ 532,985 $ 559,242 Depreciation expense was $ 109 million, $ 113 million and $ 115 million for 2021, 2020 and 2019, respectively. Other Income (Expense), net Other income (expense), net was primarily composed of the following in 2021: The Company sold certain intellectual property assets for $ 15 million, of which $ 8 million was received in cash and $ 7 million is due in two remaining installments, the last of which is due August 31, 2022 . A foreign entity of the Company was substantially liquidated and the Company reclassified $ 8 million of cumulative translation adjustments associated with this entity from accumulated other comprehensive income to other income (expense), net in the consolidated statements of income. There were no other significant reclassifications from accumulated other comprehensive income to the consolidated statements of income for any period presented. The Company received $ 16 million in connection with settlements of certain anti-trust class action matters. Note 4. Revenue Recognition The Company is a leading global provider of integrated manufacturing solutions, components, products and repair, logistics and after-market services. For purposes of determining when to recognize revenue, and in what amount, the Company applies a 5-step model: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the Company satisfies a performance obligation. Each of these steps may involve the use of significant judgments, as discussed below. Step 1 - Identify the contract with a customer A contract is defined as an agreement between two parties that creates enforceable rights and obligations. The Company generally enters into a master supply agreement (“MSA”) with its customers that provides the framework under which business will be conducted, and pursuant to which a customer will issue purchase orders or other binding documents to specify the quantity, price and delivery requirements for products or services the customer wishes to purchase. The Company 62 Table of Contents generally considers its contract with a customer to be a firm commitment, consisting of the combination of an MSA and a purchase order or any other similar binding document. Step 2 - Identify the performance obligations in the contract A performance obligation is a promised good or service that is material in the context of the contract and is both capable of being distinct (customer can benefit from the good or service on its own or together with other readily available resources) and distinct within the context of the contract (separately identifiable from other promises). The Company reviews its contracts to identify promised goods or services and then evaluates such items to determine which of those items are performance obligations. The majority of the Company’s contracts have a single performance obligation since the promise to transfer an individual good or service is not separately identifiable from other promises in the contract. The Company’s performance obligations generally have an expected duration of one year or less. Step 3 - Determine the transaction price The Company’s contracts with its customers may include certain forms of variable consideration such as early payment discounts, volume discounts and shared cost savings. The Company includes an estimate of variable consideration when determining the transaction price and the appropriate amount of revenue to be recognized. This estimate is limited to an amount which will not result in a significant reversal of revenue in a future period. Factors considered in the Company’s estimate of variable consideration are the potential amount subject to these contract provisions, historical experience and other relevant facts and circumstances. Step 4 - Allocate the transaction price to the performance obligations in the contract A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. In the event that more than one performance obligation is identified in a contract, the Company is required to allocate a portion of the transaction price to each performance obligation. This allocation would generally be based on the relative standalone price of each performance obligation, which most often would represent the price at which the Company would sell similar goods or services separately. Step 5 - Recognize revenue when (or as) a performance obligation is satisfied The Company is required to assess whether control of a product or services promised under a contract is transferred to the customer at a point-in-time or over time as the product is being manufactured or the services are being provided. If the criteria in ASC 606 for recognizing revenue on an over time basis are not met, revenue must be recognized at the point-in-time determined by the Company at which its customer obtains control of a product or service. The Company has determined that revenue for the majority of its contracts is required to be recognized on an over time basis. This determination is based on the fact that 1) the Company does not have an alternative use for the end products it manufactures for its customers and has an enforceable right to payment, including a reasonable profit, for work-in-progress upon a customer’s cancellation of a contract for convenience or 2) the Company’s customer simultaneously receives and consumes the benefits provided by the Company’s services. For these contracts, revenue is recognized on an over time basis using the cost-to-cost method (ratio of costs incurred to date to total estimated costs at completion) which the Company believes best depicts the transfer of control to the customer. At least 95 % of the Company's revenue is recognized on an over time basis, which is as products are manufactured or services are performed. Because of this, and the fact that there is no work-in-process or finished goods inventory associated with contracts for which revenue is recognized on an over-time basis, 99 % or more of the Company’s inventory at the end of a given period is in the form of raw materials. For contracts for which revenue is required to be recognized at a point-in-time, the Company recognizes revenue when it has transferred control of the related goods, which generally occurs upon shipment or delivery of the goods to the customer. Application of the cost-to-cost method for government contracts in the Company’s Defense and Aerospace division requires the use of significant judgments with respect to estimated materials, labor and subcontractor costs. This division is an operating segment whose results are aggregated with ten other operating segments and reported under Components, Products and Services ("CPS") for segment reporting purposes. In 2021, CPS revenue and gross profit was $ 1.3 billion and $ 177 million, respectively. The Company updates its estimates of materials, labor and subcontractor costs on a quarterly basis. These updated estimates are reviewed each quarter by a group of employees that includes representatives from numerous functions such as engineering, materials, contracts, manufacturing, program management, finance and senior management. If a change in estimate is deemed necessary, the impact of the change is recognized in the period of change. 63 Table of Contents Contract Assets A contract asset is recognized when the Company has recognized revenue, but has not issued an invoice to its customer for payment. Contract assets are classified separately on the consolidated balance sheets and transferred to accounts receivable when rights to payment become unconditional. Because of the Company’s short manufacturing cycle times, the transfer from contract assets to accounts receivable generally occurs within the next fiscal quarter. Other Taxes assessed by governmental authorities that are both imposed on and concurrent with a specific revenue-producing transaction, and are collected by the Company from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control of a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of sales. The Company applies the following practical expedients or policy elections under ASC 606: • The promised amount of consideration under a contract is not adjusted for the effects of a significant financing component because, at inception of a contract, the Company expects the period between when a good or service is transferred to a customer and when the customer pays for that good or service will generally be one year or less. • The Company has elected to not disclose information about remaining performance obligations that have original expected durations of one year or less, which is substantially all of the Company’s remaining performance obligations. • Incremental costs of obtaining a contract are not capitalized if the period over which such costs would be amortized to expense is less than one year. Disaggregation of revenue In the following table, revenue is disaggregated by segment, market sector and geography. Year Ended October 2, 2021 October 3, 2020 September 28, 2019 (In thousands) Segments: IMS $ 5,454,269 $ 5,699,751 $ 6,858,676 CPS 1,302,374 1,260,619 1,375,183 Total $ 6,756,643 $ 6,960,370 $ 8,233,859 End Markets: Communications Networks and Cloud Infrastructure $ 2,866,602 $ 2,832,650 $ 3,661,853 Industrial, Medical, Defense and Automotive 3,890,041 4,127,720 4,572,006 Total $ 6,756,643 $ 6,960,370 $ 8,233,859 Geography: Americas (1) $ 3,182,849 $ 3,450,527 $ 4,194,652 EMEA 1,055,831 995,838 1,051,192 APAC 2,517,963 2,514,005 2,988,015 Total $ 6,756,643 $ 6,960,370 $ 8,233,859 (1) Mexico represents approximately 60 % of the Americas revenue and the U.S. represents approximately 35 %. 64 Table of Contents Note 5. Financial Instruments Fair Value Measurements Fair Value of Financial Instruments The fair values of cash equivalents (generally 10 % or less of cash and cash equivalents), accounts receivable, accounts payable and short-term debt approximate carrying value due to the short-term duration of these instruments. Additionally, the fair value of variable rate long-term debt approximates carrying value as of October 2, 2021. Assets and Liabilities Measured at Fair Value on a Recurring Basis The Company's primary financial assets and financial liabilities measured at fair value on a recurring basis are deferred compensation plan assets and defined benefit plan assets, which are both measured using Level 1 inputs. Deferred compensation plan assets were $ 46 million and $ 40 million as of October 2, 2021 and October 3, 2020, respectively. Defined benefit plan assets were $ 40 million and $ 39 million as of October 2, 2021 and October 3, 2020, respectively. Other financial assets and financial liabilities measured at fair value on a recurring basis include foreign exchange contracts and interest rate swaps, which are both measured using Level 2 inputs. Foreign exchange contracts were not material as of October 2, 2021 or October 3, 2020 . Interest rate swaps had a negative value of $ 19 million and $ 29 million, as of October 2, 2021 and October 3, 2020, respectively. Offsetting Derivative Assets and Liabilities The Company has entered into master netting arrangements with each of its derivative counterparties that allows net settlement of derivative assets and liabilities under certain conditions, such as multiple transactions with the same currency maturing on the same date. The Company presents its derivative assets and derivative liabilities on a gross basis on the consolidated balance sheets. The amount that the Company had the right to offset under these netting arrangements was not material as of October 2, 2021 or October 3, 2020 . Non-Financial Assets Measured at Fair Value on a Nonrecurring Basis Other non-financial assets, such as intangible assets, goodwill and other long-lived assets, are measured at fair value as of the date such assets are acquired or in the period an impairment is recorded. During 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 pandemic. This commodity price decline resulted in a negative impact to the projected cash flows of the Company’s oil and gas reporting unit that is part of the Company's Components, Products and Services ("CPS") operating segment and, therefore, the Company performed a goodwill impairment test for this particular reporting unit. The Company concluded that the fair value of the reporting unit was below its carrying value, resulting in a goodwill impairment charge of $ 7 million. The fair value of the reporting unit was estimated based on the present value of future discounted cash flows. The Company also recorded an impairment charge of $ 2 million in 2020 for certain long-lived assets, which is included in "Restructuring and other" on the consolidated statements of income. Derivative Instruments Foreign Exchange Rate Risk The Company is exposed to certain risks related to its ongoing business operations. The primary risk managed by using derivative instruments is foreign currency exchange risk. Forward contracts on various foreign currencies are used to manage foreign currency risk associated with forecasted foreign currency transactions and certain monetary assets and liabilities denominated in non-functional currencies. The Company's primary foreign currency cash flows are in certain Asian and European countries, Brazil, Israel and Mexico. 65 Table of Contents The Company had the following outstanding foreign currency forward contracts that were entered into to hedge foreign currency exposures: As of October 2, 2021 October 3, 2020 Derivatives Designated as Accounting Hedges: Notional amount (in thousands) $ 110,098 $ 113,300 Number of contracts 48 48 Derivatives Not Designated as Accounting Hedges: Notional amount (in thousands) $ 353,108 $ 352,062 Number of contracts 46 45 The Company utilizes foreign currency forward contracts to hedge certain operational (“cash flow”) exposures resulting from changes in foreign currency exchange rates. Such exposures generally result from (1) forecasted non-functional currency sales and (2) forecasted non-functional currency materials, labor, overhead and other expenses. These contracts are designated as cash flow hedges for accounting purposes and are generally one to two months in duration but, by policy, may be up to twelve months in duration. For derivative instruments that are designated and qualify as cash flow hedges, the Company excludes time value from its assessment of hedge effectiveness and recognizes the amount of time value in earnings over the life of the derivative instrument. Gains or losses on the derivative not caused by changes in time value are recorded in Accumulated Other Comprehensive Income ("AOCI"), a component of equity, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The amount of gain or loss recognized in Other Comprehensive Income on derivative instruments and the amount of gain or loss reclassified from AOCI into income were not material for any period presented herein. The Company enters into short-term foreign currency forward contracts to hedge currency exposures associated with certain monetary assets and liabilities denominated in non-functional currencies. These contracts have maturities of up to two months and are not designated as accounting hedges. Accordingly, these contracts are marked-to-market at the end of each period with unrealized gains and losses recorded in other income (expense), net, in the consolidated statements of income. The amount of gains or losses associated with these forward contracts was not material for any period presented herein. From an economic perspective, the objective of the Company's hedging program is for gains and losses on forward contracts to substantially offset gains and losses on the underlying hedged items. In addition to the contracts disclosed in the table above, the Company has numerous contracts that have been closed from an economic and financial accounting perspective and will settle early in the first month of the following quarter. Since these offsetting contracts do not expose the Company to risk of fluctuations in exchange rates, these contracts have been excluded from the above table. Interest Rate Risk The Company enters into forward interest rate swap agreements with independent counterparties to partially hedge the variability in cash flows due to changes in the benchmark interest rate (LIBOR) associated with anticipated variable rate borrowings. These interest rate swaps have a maturity date of December 1, 2023 , and effectively convert the Company's variable interest rate obligations to fixed interest rate obligations. 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 2, 2021 and October 3, 2020. The aggregate effective interest rate of these swaps as of October 2, 2021 was approximately 4.3 %. 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. Note 6. Financial Instruments and Concentration of Credit Risk Financial instruments that potentially subject the Company to credit risk consist primarily of cash, cash equivalents, trade accounts receivable, foreign currency forward contracts and interest rate swap agreements. The carrying value of assets such as cash, cash equivalents and accounts receivable is expected to approximate fair value due to the short duration of the assets. The Company maintains its cash and cash equivalents with recognized financial institutions that management believes to be of high credit quality. One of the Company's most significant credit risks is the ultimate realization of accounts receivable. This risk is mitigated by ongoing credit evaluations of, and frequent contact with, the Company's customers, especially its most 66 Table of Contents significant customers, thus enabling it to monitor changes in business operations and respond accordingly. The Company generally does not require collateral for sales on credit. The Company considers these concentrations of credit risks when estimating its allowance for doubtful accounts. Foreign currency forward contracts and interest rate swaps are maintained with high quality counterparties to reduce the Company's credit risk and are recorded on the Company's balance sheets at fair value. Nokia represented more than 10 % of the Company's net sales in 2021, 2020 and 2019 and 10 % or more of the Company's gross accounts receivable as of October 2, 2021 and October 3, 2020. Note 7. Debt Long-term debt consisted of the following: As of October 2, 2021 October 3, 2020 (In thousands) Term loan due 2023 ("Term Loan"), net of issuance costs $ 330,322 $ 347,999 Less: Current portion of long-term debt 18,750 18,750 Long-term debt $ 311,572 $ 329,249 Secured Notes. In 2014, the Company issued $ 375 million of senior secured notes due 2019 ("Secured Notes"). The Secured Notes were repaid upon maturity on June 1, 2019 . There was no gain or loss associated with the extinguishment of the Secured Notes. Non-interest Bearing Promissory Notes. On February 1, 2016 , the Company completed an acquisition and financed $ 15 million of the purchase price with the acquiree using a four-year non-interest bearing promissory note . The Company repaid these notes during 2020. Revolving Credit Facility. During the first quarter of 2019, the Company 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 the Company's option, at either the LIBOR or a base rate, in each case plus a spread determined based on the Company's 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. 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 . The Company is required to repay a portion of the principal amount of the Term Loan equal to 1.25 % in quarterly installments. Maturities of the Term Loan as of October 2, 2021 by fiscal year are as follows: (In Thousands) 2022 $ 18,750 2023 14,062 2024 300,000 $ 332,812 Certain of the Company’s domestic subsidiaries are required to be guarantors in respect of the Amended Cash Flow Revolver. The Company and the subsidiary guarantors’ obligations under the Amended Cash Flow Revolver are secured by property of the Company and such guarantors, including, but not limited to cash, accounts receivables, inventory and the shares of the Company's subsidiaries, subject to limited exceptions. 67 Table of Contents The Amended Cash Flow Revolver requires the Company 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. 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 October 3, 2020. Foreign Short-term Borrowing Facilities . As of October 2, 2021, certain foreign subsidiaries of the Company 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 first quarter of 2023 . Debt Covenants The Company's Amended Cash Flow Revolver requires the Company to comply with certain financial covenants, namely a maximum leverage ratio and a minimum interest coverage ratio, in both cases measured on the basis of a trailing 12 month look-back period. In addition, the Company's debt agreements contain 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. The Company was in compliance with these covenants as of October 2, 2021. Note 8. Leases ROU assets and lease liabilities recorded in the consolidated balance sheet as of October 2, 2021 are as follows: As of October 2, 2021 October 3, 2020 (In thousands) Other assets (1) $ 68,012 $ 52,552 Accrued liabilities $ 17,219 $ 16,659 Other long-term liabilities 38,587 37,015 Total lease liabilities $ 55,806 $ 53,674 Weighted average remaining lease term (in years) 14.46 6.88 Weighted average discount rate 2.72 % 3.13 % (1) Net of accumulated amortization of $ 29 million and $ 16 million as of October 2, 2021 and October 3, 2020, respectively. Cash paid for operating lease liabilities was $ 20 million and $ 19 million for the years ended October 2, 2021 and October 3, 2020, respectively. Operating lease expense, which includes immaterial amounts of short-term leases, variable lease costs and sublease income, was $ 21 million, $ 21 million and $ 26 million for the years ended October 2, 2021, October 3, 2020 and September 28, 2019, respectively. 68 Table of Contents Future lease payments under non-cancelable operating leases as of October 2, 2021, by fiscal year, are as follows: Operating Leases (In thousands) 2022 $ 18,475 2023 12,602 2024 8,366 2025 6,440 2026 4,155 Thereafter 11,341 Total lease payments 61,379 Less: imputed interest 5,573 Total $ 55,806 Note 9. Accounts Receivable Sale Program The Company has entered into a Receivable 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. Trade receivables sold pursuant to the RPA are serviced by the Company. In addition to the RPA, the Company has the option to participate in trade receivables sales programs that have been implemented by certain of the Company's customers, as in effect from time to time. The Company does not service trade receivables sold under these other programs. Under each of the programs noted above, the Company sells its entire interest in a trade receivable for 100 % of face value, less a discount. For the years ended October 2, 2021 and October 3, 2020, the Company sold approximately $ 0.5 billion and approximately $ 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 2, 2021 and October 3, 2020, $ 7 million and $ 97 million, respectively, of accounts receivable sold under the RPA and subject to servicing by the Company remained outstanding and had not yet been collected. The Company's sole risk with respect to receivables it services is with respect to commercial disputes regarding such receivables. Commercial disputes include billing errors, returns and similar matters. To date, the Company has not been required to repurchase any receivable it has sold due to a commercial dispute. Additionally, the Company is required to remit amounts collected as servicer under the RPA on a weekly basis to the financial institutions that purchased the receivables. 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. Note 10. Contingencies From time to time, the Company is a party to litigation, claims and other contingencies, including environmental, regulatory and employee matters and examinations and investigations by governmental agencies, which arise in the ordinary course of business. The Company records a contingent liability when it is probable that a loss has been incurred and the amount of loss is reasonably estimable in accordance with ASC Topic 450, Contingencies, or other applicable accounting standards. As of October 2, 2021 and October 3, 2020, the Company had reserves of $ 37 million for environmental matters, warranty, litigation and other contingencies (excluding reserves for uncertain tax positions), which the Company believes are adequate. However, there can be no assurance that the Company's reserves will be sufficient to settle these contingencies. Such reserves are included in accrued liabilities and other long-term liabilities on the consolidated balance sheets. Legal Proceedings Environmental Matters The Company is subject to various federal, state, local and foreign laws and regulations and administrative orders concerning environmental protection, including those addressing the discharge of pollutants into the environment, the 69 Table of Contents management and disposal of hazardous substances, the cleanup of contaminated sites, the materials used in products, and the recycling, treatment and disposal of hazardous waste. As of October 2, 2021, the Company had been named in a lawsuit and several administrative orders alleging certain of its current and former sites contributed to groundwater contamination. One such order demands that the Company and other alleged defendants remediate groundwater contamination at four landfills located in Northern California to which the Company may have sent wastewater in the past. The Company is participating in a working group of other alleged defendants to better understand its potential exposure in this action and has reserved its estimated exposure for this matter as of October 2, 2021. However, there can be no assurance that the Company's reserve will ultimately be sufficient. In June 2008, the Company was named by the Orange County Water District in a suit alleging that its actions contributed to polluted groundwater managed by the plaintiff. The complaint seeks recovery of compensatory and other damages, as well as declaratory relief, for the payment of costs necessary to investigate, monitor, remediate, abate and contain contamination of groundwater within the plaintiff’s control. In April 2013, all claims against the Company were dismissed. The plaintiff appealed this dismissal and the appellate court reversed the judgment in August 2017. In November 2017, the California Supreme Court denied the Company’s petition to review this decision and, in December 2017, the Court of Appeal remanded the case back to the Superior Court for further proceedings. The first phase of a multi-phase trial against the Company and several other defendants commenced on April 12, 2021 and is expected to last for several more months. Subsequent trial phases, if necessary, likely would occur in the 2022/2023 timeframe. The Company is contesting the plaintiff’s claims vigorously. Other Matters In October 2018, a contractor who had been retained by the Company through a third party temporary staffing agency filed a lawsuit 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. The complaint sought certification of a class of all non-exempt employees. Although the Company continued to deny any wrongdoing, on November 19, 2020, the Company reached an agreement to resolve all claims (the “Settlement”), which is also expected to result in the dismissal of a suit alleging substantially similar claims filed in the Santa Clara County Superior Court in June 2021. The final amount of the judicially approved Settlement was approximately $ 3.8 million, which will be paid during the first quarter of fiscal 2022. In December 2019, the Company sued a former customer, Dialight plc (“Dialight”), in the United States District Court for the Southern District of New York to collect approximately $ 10 million in unpaid accounts receivable and net obsolete inventory obligations. Later the same day, Dialight commenced its own action in the same court. Dialight’s complaint, which asserts claims for fraudulent inducement, breach of contract, and gross negligence/willful misconduct, alleges that the Company fraudulently misrepresented its capabilities to induce Dialight to enter into a Manufacturing Services Agreement (the “Dialight MSA”), and then breached its obligations contained in the Dialight MSA relating to quality, on-time delivery and supply chain management. Dialight seeks an unspecified amount of compensatory and punitive damages. The Company continues to vigorously prosecute its claim against Dialight. Further, the Company strongly disagrees with Dialight’s allegations and intends to defend against them vigorously. For each of the matters noted above, with the exception of the Settlement above, the Company is unable to reasonably estimate a range of possible loss at this time. 70 Table of Contents Note 11. Restructuring Restructuring costs were $ 15 million, $ 27 million, and $ 14 million in 2021, 2020, and 2019, respectively. The following table is a summary of restructuring costs: Year Ended October 2, 2021 October 3, 2020 September 28, 2019 (In thousands) Severance costs $ 9,405 $ 17,919 $ — Other exit costs (recognized as incurred) 1,834 71 — Total - Q1 FY20 Plan 11,239 17,990 — Costs incurred for other plans 3,818 8,793 13,753 Total - all plans $ 15,057 $ 26,783 $ 13,753 Q1 FY20 Plan On October 28, 2019, the Company adopted a Company-wide restructuring plan ("Q1 FY20 Plan") under which the Company has 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 Other plans include a number of plans for which costs are not expected to be material individually or in the aggregate. All Plans The Company’s Integrated Manufacturing Solutions ("IMS") segment incurred costs of $ 9 million and $ 13 million for the years ended October 2, 2021 and October 3, 2020, respectively. The Company’s CPS segment incurred costs of $ 5 million and $ 9 million for the years ended October 2, 2021 and October 3, 2020, respectively. In addition, the Company 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 the Company's IMS and CPS segments. The Company 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). The Company expects to incur restructuring costs in future periods primarily for vacant facilities and former sites for which the Company is or may be responsible for environmental remediation. Note 12. Income Taxes Domestic and foreign components of income before income taxes were as follows: Year Ended October 2, 2021 October 3, 2020 September 28, 2019 (In thousands) Domestic $ 200,300 $ 96,993 $ 153,696 Foreign 106,705 103,765 91,923 Total $ 307,005 $ 200,758 $ 245,619 71 Table of Contents The provision for income taxes consists of the following: Year Ended October 2, 2021 October 3, 2020 September 28, 2019 (In thousands) Federal: Current $ 705 $ ( 917 ) $ 868 Deferred 34,157 9,460 45,910 State: Current 4,241 1,705 2,747 Deferred ( 302 ) 2,579 2,961 Foreign: Current ( 906 ) 46,376 45,929 Deferred 112 1,842 5,689 Total provision for income taxes $ 38,007 $ 61,045 $ 104,104 The Company's provision for income taxes for 2021, 2020 and 2019 was $ 38 million ( 12 % of income before taxes), $ 61 million ( 30 % of income before taxes) and $ 104 million ( 42 % of income before taxes), respectively. The effective tax rate for 2021 is 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 in 2021. The effective tax rate for 2020 is higher than the expected U.S. statutory rate of 21% primarily due to foreign operations that are taxed at rates higher than the U.S. statutory rate. During 2019, the Company recorded $ 22 million of deferred tax expense for a tax-related restructuring transaction. 72 Table of Contents The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows: As of October 2, 2021 October 3, 2020 (In thousands) Deferred tax assets: U.S. net operating loss carryforwards $ 127,243 $ 168,570 Foreign net operating loss carryforwards 112,516 111,418 Intangibles 24,219 22,684 Accruals not currently deductible 43,932 49,022 Property, plant and equipment 25,494 24,545 Tax credit carryforwards 17,250 15,948 Reserves not currently deductible 11,534 13,389 Stock compensation expense 7,677 6,519 Federal benefit of foreign operations 18,336 16,973 Derivatives and other impacts of OCI 7,637 10,793 Lease deferred tax asset 11,563 10,929 Other — 3,063 Valuation allowance ( 115,258 ) ( 111,127 ) Total deferred tax assets 292,143 342,726 Deferred tax liabilities on undistributed earnings ( 14,775 ) ( 16,240 ) Deferred tax liabilities on branch operations ( 30,000 ) ( 32,351 ) Revenue recognition ( 1,702 ) ( 14,258 ) Lease deferred tax liability ( 11,349 ) ( 10,781 ) Other ( 2,495 ) — Net deferred tax assets $ 231,822 $ 269,096 Recorded as: Deferred tax assets $ 235,117 $ 273,470 Deferred tax liabilities ( 3,295 ) ( 4,374 ) Net deferred tax assets $ 231,822 $ 269,096 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. The Company regularly assesses its valuation allowance against deferred tax assets on a jurisdiction by jurisdiction basis. The Company considers all available positive and negative evidence, including future reversals of temporary differences, projected future taxable income, tax planning strategies and recent financial results. Significant judgment is required in assessing the Company's ability to generate revenue, gross profit, operating income and jurisdictional taxable income in future periods. The Company's valuation allowance as of October 2, 2021 relates primarily to foreign net operating losses, with the exception of $ 14 million related to U.S. state net operating losses. The Company provides deferred tax liabilities for the tax consequences associated with the undistributed earnings that are expected to be repatriated to subsidiaries' parent unless the subsidiaries' earnings are considered indefinitely reinvested. As of October 2, 2021, income taxes and foreign withholding taxes have not been provided for approximately $ 410 million of cumulative undistributed earnings of several non-U.S. subsidiaries. The Company intends to reinvest these earnings indefinitely in operations outside of the U.S. Determination of the amount of unrecognized deferred tax liabilities on these undistributed earnings is not practicable. 73 Table of Contents As of October 2, 2021, the Company has cumulative net operating loss carryforwards for federal, state and foreign tax purposes of $ 505 million, $ 353 million and $ 498 million, respectively. The federal and state net operating loss carryforwards begin expiring in fiscal years 2027 and 2024, respectively, and expire at various dates through September 29, 2035 . Certain foreign net operating losses start expiring in 2022. However, the majority of foreign net operating losses carryforward indefinitely. As of October 2, 2021, the Company has federal tax credits of $ 14 million that expire between 2031 and 2041. There are certain restrictions on the utilization of net operating loss and tax credit carryforwards in the event of an “ownership change” as defined in the Internal Revenue Code. The utilization of certain net operating losses may be restricted due to changes in ownership and business operations. Following is a reconciliation of the statutory federal tax rate to the Company's effective tax rate: Year Ended October 2, 2021 October 3, 2020 September 28, 2019 Federal tax at statutory tax rate 21.00 % 21.00 % 21.00 % Effect of foreign operations 7.33 13.02 10.28 Permanent items ( 1.86 ) ( 0.59 ) 0.40 Discrete charge for restructuring transaction — — 8.88 Federal credits ( 0.50 ) ( 1.31 ) ( 0.07 ) Other ( 0.17 ) ( 0.06 ) 0.68 State income taxes, net of federal benefit 1.01 1.96 2.19 Release of foreign tax reserves ( 14.43 ) ( 3.61 ) ( 0.98 ) Effective tax rate 12.38 % 30.41 % 42.38 % A reconciliation of the beginning and ending amount of total liabilities for unrecognized tax benefits, excluding accrued penalties and interest, is as follows: Year Ended October 2, 2021 October 3, 2020 September 28, 2019 (In thousands) Balance, beginning of year $ 74,612 $ 66,677 $ 60,787 Increase (decrease) related to prior year tax positions 6,063 1,327 ( 1,731 ) Increase related to current year tax positions 7,349 9,907 8,902 Settlements — — ( 626 ) Decrease related to lapse of time and expiration of statutes of limitations ( 20,243 ) ( 3,299 ) ( 655 ) Balance, end of year $ 67,781 $ 74,612 $ 66,677 The Company had reserves of $ 17 million and $ 40 million as of October 2, 2021 and October 3, 2020, respectively, for the payment of interest and penalties relating to unrecognized tax benefits. During 2021, the Company recognized a net income tax benefit for interest and penalties of $ 23 million due to lapse of time and expiration of statutes of limitations compared to a net income tax expense of $ 1 million in 2020. The Company recognizes interest and penalties related to liabilities for unrecognized tax benefits as a component of income tax expense. Should the Company be able to ultimately recognize all of these uncertain tax positions, it would result in a benefit to net income and a reduction of the effective tax rate of $ 58 million, $ 68 million and $ 62 million for years 2021, 2020 and 2019, respectively. The Company conducts business globally and, as a result, files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The Company is currently being audited by the Internal Revenue Service for tax years 2008 through 2010. To the extent the final tax liabilities are different from the amounts accrued, this would result in an increase or decrease in net operating loss carryforwards which could materially impact tax expense. Additionally, the Company is being audited by various state tax agencies and certain foreign countries. To the extent the final tax liabilities are different from the amounts accrued, the increases or decreases would be recorded as income tax expense or benefit in the consolidated statements of income. Although the Company believes that the resolution of these audits will not have a material adverse impact on the Company’s results of operations, the outcome is subject to uncertainty. 74 Table of Contents In general, the Company is no longer subject to United States federal or state income tax examinations for years before 2003, and to foreign examinations for years prior to 2005 in its major foreign jurisdictions. It is reasonably possible that the balance of gross unrecognized tax benefits could decrease in the next 12 months by approximately $ 15 million related to the resolution of audits and expiration of statutes of limitations. In addition, there could be a corresponding decrease in accrued interest and penalties of approximately $ 8 million. Note 13. Earnings Per Share Basic and diluted earnings per share amounts are calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period, as follows: Year Ended October 2, 2021 October 3, 2020 September 28, 2019 (In thousands, except per share amounts) Numerator: Net income $ 268,998 $ 139,713 $ 141,515 Denominator: Weighted average common shares outstanding 65,318 69,041 69,129 Effect of dilutive stock options and restricted stock units 1,766 1,752 2,549 Denominator for diluted earnings per share 67,084 70,793 71,678 Net income per share: Basic $ 4.12 $ 2.02 $ 2.05 Diluted $ 4.01 $ 1.97 $ 1.97 Weighted-average dilutive securities that were excluded from the above calculation because their inclusion would have had an anti-dilutive effect under ASC Topic 260, Earnings per Share , due to application of the treasury stock method were not material for any period presented. Note 14. Stockholders' Equity The Company's 2009 Stock Plan ("2009 Plan") expired as to future grants on January 26, 2019. Although the 2009 Plan expired, it will continue to govern all awards granted under it prior to its expiration date. On March 11, 2019, the Company's stockholders approved the Company's 2019 Equity Incentive Plan ("2019 Plan") and the reservation of 4 million shares of common stock for issuance thereunder, plus any shares subject to stock options or similar awards granted under the 2009 Plan that expire or otherwise terminate without having been exercised in full and shares issued pursuant to awards granted that are forfeited by the Company. As of October 2, 2021, an aggregate of 7.5 million shares were authorized for future issuance under the Company's stock plans, of which 3.7 million of such shares were issuable upon exercise of outstanding options and delivery of shares upon vesting of restricted stock units and 3.8 million shares of common stock were available for future grant. Awards other than stock options and stock appreciation rights reduce common stock available for grant by 1.36 shares for every share of common stock subject to such an award. Awards under the 2019 Plan and 2009 Plan that expire or are cancelled without delivery of shares generally become available for issuance under the 2019 Plan. The 2019 Plan will expire as to future grants in December 2028 . Stock Repurchase Program During the first quarter of 2020, the Board of Directors authorized the Company to purchase $ 200 million of its common stock. During 2021, 2020 and 2019, the Company repurchased 1.5 million shares, 6.4 million shares and 0.3 million shares of its common stock for $ 54 million, $ 166 million and $ 7 million (including commissions), respectively, under the plan and as of October 2, 2021, $ 81 million remains available under such plan, which has no expiration date. 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 75 Table of Contents liquidity. As a result, the timing of future repurchases depends upon the Company’s future capital needs, market conditions and other factors. In addition to the repurchases discussed above, the Company repurchased 286,000 , 398,000 and 207,000 shares of its common stock during 2021, 2020, and 2019, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock units. The Company paid $ 10 million, $ 13 million and $ 6 million, respectively, to applicable tax authorities in connection with these repurchases. Accumulated Other Comprehensive Income Accumulated other comprehensive income, net of tax as applicable, consisted of the following: As of October 2, 2021 October 3, 2020 (In thousands) Foreign currency translation adjustments $ 76,120 $ 85,343 Unrealized holding losses on derivative financial instruments ( 14,305 ) ( 22,202 ) Unrecognized net actuarial loss and unrecognized transition cost for benefit plans ( 21,125 ) ( 28,255 ) Total $ 40,690 $ 34,886 During the third quarter of 2021, a foreign entity of the Company was substantially liquidated and the Company reclassified $ 8 million of cumulative translation adjustments associated with this entity from accumulated other comprehensive income to other income (expense), net in the condensed consolidated statements of income. There were no other significant reclassifications from accumulated other comprehensive income to the condensed consolidated statements of income for any period presented. Note 15. Business Segment, Geographic and Customer Information ASC Topic 280, Segment Reporting , establishes standards for reporting information about operating segments, products and services, geographic areas of operations and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance. The Company's operations are managed as two businesses: 1) Integrated Manufacturing Solutions (IMS). IMS is a reportable segment consisting of printed circuit board assembly and test, high-level assembly and test and direct order fulfillment. 2) Components, Products and Services (CPS). 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) and microelectronics (microE) design and manufacturing services from Advanced Micro Systems Technologies; defense and aerospace products from SCI Technology; and cloud-based manufacturing execution software from the Company's 42Q division. Services include design, engineering and logistics and repair. The Company evaluated its operating segments to determine whether they can be aggregated into reportable segments. Factors considered in this evaluation were similarity of economic characteristics, products, production processes, type or classes of customers, distribution methods and regulatory environments. The Company determined that it has only one reportable segment - IMS, which generated approximately 80 % of the Company's total revenue in 2021. The Company's CPS business consists of multiple operating segments which, based on this evaluation, do not meet the quantitative threshold for being presented individually as reportable segments. Therefore, financial information for these operating segments is aggregated and presented in a single category entitled “Components, Products and Services". The accounting policies for each segment are the same as those disclosed by the Company for its consolidated financial statements. Intersegment sales consist primarily of sales of components from CPS to IMS. 76 Table of Contents The Company's chief operating decision making group is the Chief Executive Officer and Chief Financial Officer and they allocate resources and assess performance of operating segments based on a measure of revenue and gross profit that excludes items not directly related to the Company's ongoing business operations. These items are typically either non-recurring or non-cash in nature. Segment information is as follows: Year Ended October 2, 2021 October 3, 2020 September 28, 2019 (In thousands) Gross sales: IMS $ 5,485,612 $ 5,733,180 $ 6,907,129 CPS 1,397,742 1,365,712 1,555,117 Intersegment revenue ( 126,711 ) ( 138,522 ) ( 228,387 ) Net Sales $ 6,756,643 $ 6,960,370 $ 8,233,859 Gross Profit: IMS $ 391,339 $ 381,638 $ 444,168 CPS 177,248 156,844 156,221 Total 568,587 538,482 600,389 Unallocated items (1) ( 16,782 ) ( 12,775 ) ( 8,451 ) Total $ 551,805 $ 525,707 $ 591,938 Depreciation and amortization: IMS $ 77,076 $ 81,169 $ 81,997 CPS 27,770 26,718 25,632 Total 104,846 107,887 107,629 Unallocated corporate items (2) 4,810 6,331 9,320 Total $ 109,656 $ 114,218 $ 116,949 Capital expenditures (receipt basis): IMS $ 44,672 $ 23,933 $ 79,943 CPS 33,839 23,915 28,629 Total 78,511 47,848 108,572 Unallocated corporate items (2) 3,343 3,227 3,836 Total $ 81,854 $ 51,075 $ 112,408 (1) For purposes of evaluating segment performance, management excludes certain items from its measures of gross profit. These items consist of stock-based compensation expense, amortization of intangible assets, charges or credits resulting from distressed customers and litigation settlements. (2) Primarily related to selling, general and administration functions. Segment assets, consisting of accounts receivable, inventories and fixed assets, are substantially proportional to segment sales. 77 Table of Contents Net sales by geographic segment, determined based on the country in which a product is manufactured were as follows: Year Ended October 2, 2021 October 3, 2020 September 28, 2019 (In thousands) Net sales: Americas (1) $ 3,182,849 $ 3,450,527 $ 4,194,652 EMEA 1,055,831 995,838 1,051,192 APAC 2,517,963 2,514,005 2,988,015 Total $ 6,756,643 $ 6,960,370 $ 8,233,859 (1) Mexico represents approximately 60 % of the Americas revenue and the U.S. represents approximately 35 %. Percentage of net sales represented by ten largest customers 52.7 % 55.5 % 54.2 % Number of customers representing 10% or more of net sales 1 1 1 As of October 2, 2021 October 3, 2020 (In thousands) Property, plant and equipment, net: Americas $ 322,545 $ 327,991 EMEA 67,329 63,089 APAC 143,111 168,162 Total $ 532,985 $ 559,242 Note 16. Stock-Based Compensation Stock-based compensation expense was attributable to: Year Ended October 2, 2021 October 3, 2020 September 28, 2019 (In thousands) Stock options $ — $ ( 1,145 ) $ 1,250 Restricted stock units, including performance-based awards 34,976 27,380 29,594 Total $ 34,976 $ 26,235 $ 30,844 Stock-based compensation expense was recognized as follows: Year Ended October 2, 2021 October 3, 2020 September 28, 2019 (In thousands) Cost of sales $ 14,472 $ 10,099 $ 9,757 Selling, general and administrative 20,118 15,897 20,807 Research and development 386 239 280 Total $ 34,976 $ 26,235 $ 30,844 The Company grants restricted stock units and restricted stock units with performance conditions ("PSUs") to executive officers, directors and certain other employees. These units vest over periods ranging from one year to four years and/or upon achievement of specified performance criteria and are automatically exchanged for shares of common stock at the vesting date. If performance metrics are not met within specified time limits, the award will be canceled. Compensation expense 78 Table of Contents associated with restricted stock units and PSUs is recognized ratably over the vesting period, subject to probability of achievement for PSUs. During 2021 and 2020, the Company granted 373,000 and 304,500 PSUs shares, respectively, for which vesting is contingent on cumulative non-GAAP earnings per share measured over three fiscal years. If a minimum threshold is not achieved, no shares will vest. If the minimum threshold is achieved or exceeded, the number of shares of common stock that will be issued will range from 80 % to 120 % of the number of PSUs granted, depending on the extent of performance. Additionally, the number of shares that vest may be adjusted up or down by up to 15 % based on the Company's total shareholder return relative to that of its peer group over this same period. These PSUs will be cancelled if such performance conditions have not been met during the measurement period. Activity with respect to the Company's restricted stock units and PSUs was as follows: Number of Shares Weighted Average Grant-Date Fair Value ($) Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value ($) (In thousands) (In thousands) Outstanding as of September 29, 2018 3,303 30.33 1.21 97,913 Granted 1,843 25.09 Vested/Forfeited/Cancelled ( 1,993 ) 29.46 Outstanding as of September 28, 2019 3,153 27.82 1.30 102,720 Granted 1,340 32.51 Vested/Forfeited/Cancelled ( 1,925 ) 28.62 Outstanding as of October 3, 2020 2,568 29.67 1.23 71,571 Granted 1,529 34.26 Vested/Forfeited/Cancelled ( 1,143 ) 29.27 Outstanding as of October 2, 2021 2,954 32.21 1.23 113,591 Expected to vest as of October 2, 2021 2,629 32.10 1.17 101,111 The fair value of restricted stock units that vested during the year was $ 32 million for 2021, $ 43 million for 2020 and $ 29 million for 2019. As of October 2, 2021, unrecognized compensation expense of $ 47 million is expected to be recognized over a weighted average period of 1.2 years. Note 17. Employee Benefit Plans The Company has various defined contribution retirement plans that cover the majority of its domestic employees. These retirement plans permit participants to elect to have contributions made to the retirement plans in the form of salary deferrals. Under these retirement plans, the Company may match a portion of employee contributions. Amounts contributed by the Company were not material for any period presented herein. The Company sponsors a deferred compensation plan for eligible employees that allows participants to defer payment of all or part of their compensation. Deferrals under this plan were immaterial. Assets associated with these plans were $ 46 million and $ 40 million as of October 2, 2021 and October 3, 2020, respectively. Liabilities associated with these plans were $ 46 million and $ 40 million as of October 2, 2021 and October 3, 2020, respectively. These amounts are recorded in other non-current assets and other long-term liabilities on the consolidated balance sheets. Defined benefit plans covering certain employees in the United States and Canada were frozen in 2001. Employees who had not yet vested will continue to be credited with service until vesting occurs, but no additional benefits will accrue. The Company also provides defined benefit pension plans in certain other countries. The assumptions used for calculating the pension benefit obligations for non-U.S. plans depend on the local economic environment and regulations. The measurement date for the Company's defined benefit plans is October 2, 2021. 79 Table of Contents The funded status and plan assets for the defined benefit plans and amount reported on the consolidated balance sheets were as follows: As of October 2, 2021 October 3, 2020 September 28, 2019 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. (In thousands) Plan Assets $ 16,435 $ 23,575 $ 15,430 $ 23,575 $ 15,421 $ 23,877 Projected Benefit Obligation 22,943 63,217 25,704 64,453 24,221 58,842 Underfunded Status $ 6,508 $ 39,642 $ 10,274 $ 40,878 $ 8,800 $ 34,965 Current Liabilities $ — $ 2,674 $ — $ 2,054 $ — $ 1,443 Non-current liabilities 6,508 36,968 10,274 38,824 8,800 33,522 Total liabilities $ 6,508 $ 39,642 $ 10,274 $ 40,878 $ 8,800 $ 34,965 The Company’s investment strategy is designed to help ensure that sufficient pension assets are available to pay benefits as they become due. Plan assets are invested in mutual funds that are valued using the NAV that is quoted in active markets (Level 1 input). These plans are managed consistent with regulations or market practices of the country in which the assets are invested. As of October 2, 2021 there were no significant concentrations of credit risk related to pension plan assets. All other amounts and assumptions were not material for any period presented herein. Note 18. Acquisition On April 6, 2021 , the Company purchased all of the outstanding stock of a European subsidiary of a multinational company. This acquisition is expected to increase the Company's IMS capabilities in Europe. The Company also entered into a master supply agreement with the seller in connection with this acquisition. Total consideration paid in this acquisition was $ 38 million of cash, of which $ 29 million was paid upon closing and $ 9 million is due in April 2023 . The acquiree had $ 8 million of cash as of the acquisition date, resulting in a net cash outlay upon closing of $ 21 million. The pro-forma effect of the acquisition, as if it had occurred at the beginning of the year, was not material to the consolidated financial statements. The acquisition will be reported in the Company's IMS reportable segment. The Company's allocation of the purchase price was based on management's estimate of the acquisition-date fair values of the tangible and identifiable intangible assets acquired and liabilities assumed. The following represents the allocation of the purchase price to the acquired assets and liabilities assumed. (In thousands) Current assets, including cash acquired of $ 8.1 million $ 18,696 Noncurrent assets, including identifiable intangible assets of $ 4.4 million and goodwill of $ 8.5 million 30,711 Current liabilities ( 10,671 ) Noncurrent liabilities ( 152 ) Total net assets acquired $ 38,584 Goodwill reflects the expectation that the acquisition will enable the Company to increase its IMS capabilities in Europe. Goodwill and identifiable intangible assets are recorded in other non-current assets on the consolidated balance sheets. Identifiable intangible assets are being amortized over four years . 80 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.