What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-11-10 compared with 2021-11-12 · 114 added, 120 removed, 270 unchanged (46% of the section changed)

5 unchanged sentences

any statements regarding future economic conditions or performance;

any statements or expectations regarding litigation or pending investigations;

any statements regarding expected restructuring costs and benefits;

any statements regarding litigation or pending investigations, claims or disputes;

any statements regarding the timing of closing of, future cash outlays for, and benefits of acquisitions and other strategic transactions, any statements regarding expected restructuring costs and benefits;

any statements concerning the adequacy of our current liquidity and the availability of additional sources of liquidity;

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

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

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

any statements regarding the impact of changes in tax laws;

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

any statements regarding the potential impact of supply chain shortages and inflation on our business;

any statements regarding the future impact of tariffs and export controls on our business;

any statements relating to the expected impact of accounting pronouncements not yet adopted;

6 unchanged sentences

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

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

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

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

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

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

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

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

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

5 unchanged sentences

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).

Components include printed circuit boards, backplanes and backplane assemblies, cable assemblies, fabricated metal parts, precision machined parts, and plastic injected molded parts.

Products include memory solutions from our Viking Technology division;

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

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

optical, radio frequency (RF) and microelectronic (microE) design and manufacturing services from Advanced Microsystems Technologies;

defense and aerospace products from SCI Technology;

2 unchanged sentences

Our only reportable segment for financial reporting purposes is IMS, which represented approximately 80% of our total revenue in 2022.

Our CPS business consists of multiple operating segments which do not individually meet the quantitative thresholds for being presented as reportable segments under the accounting rules for segment reporting.

Therefore, financial information for these operating segments is aggregated and presented in a single category entitled “Components, Products and Services”.

Our 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 combined and presented in a single category entitled “Components, Products and Services”.

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

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

Fiscal 2022 and 2021 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.

5 unchanged sentences

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

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

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

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

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

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

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

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

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

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

Additionally, the COVID-19 pandemic created a unique and challenging environment in which our revenue and profitability in 2021 and 2020 were significantly and negatively impacted.

These impacts arose from rapidly changing market and economic conditions caused by the pandemic, as well as by numerous measures imposed by government authorities to try to limit the spread of the virus.

These conditions and measures disrupted our operations and those of our customers, interrupted the supply of components, reduced the capacity of our logistics providers to deliver the components we use and ship the products we manufacture and resulted in temporary closures of manufacturing sites and reduced staffing of our plants.

Although conditions have improved in many of the regions in which we operate, we cannot predict when the COVID-19 pandemic will cease to present risks to our business due to a large number of uncertainties, including the duration of ongoing supply chain constraints directly and indirectly caused by the pandemic, the extent of the impact of the pandemic on our customers’ businesses, the number of employees who may become infected or exposed to infected persons, the need for temporary plant closures caused by large scale employee infections, the duration of the outbreak, the continued efficacy and availability of COVID-19 vaccines, the geographic locations of any future outbreaks, including outbreaks caused by variants of COVID-19, such as the Omicron variant and its subvariants, and actions that government authorities may take in response.

For example, China continues to maintain a “zero tolerance” policy towards COVID-19 infections, which has disrupted and could continue to disrupt our operations and our suppliers’ operations there.

Thus, we believe the pandemic and related supply chain disruptions could continue to have a negative impact on our business, results of operations and financial condition for the foreseeable future.

Separately, over the past three years, we incurred restructuring charges of $31 million under our company-wide restructuring plan adopted in October 2019 (“Q1 FY20 Plan”).

These charges consist primarily of severance.

Substantially all cash payments have occurred.

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

Sales to Nokia represented 10% or more of our net sales in 2021, 2020 and 2019.

Sales to Nokia and Motorola each represented 10% or more of our net sales in 2022.

Nokia represented 10% or more of our net sales in 2021 and 2020.

We typically generate about 80% of our net sales from products manufactured in our foreign operations.

10 unchanged sentences

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

Also, although we are required to pay

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

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

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

However the net impact of tariffs, after recovery from customers, has not been, and is not expected to be, material to us.

On October 3, 2022, subsequent to the end of the fourth quarter of 2022, we completed a joint venture transaction in which we entered into a Share Subscription and Purchase Agreement (the “SSPA”) and a Joint Venture and Shareholders’ Agreement (the “Shareholders’ Agreement”) with Reliance Strategic Business Ventures Limited (“RSBVL”), a wholly owned subsidiary of Reliance Industries Limited.

Pursuant to the SSPA and the Shareholders’ Agreement, the parties established Sanmina SCI India Private Limited (“SIPL”), our existing Indian manufacturing entity, as a joint venture to engage in manufacturing in India of telecommunications equipment, data center and internet equipment, medical equipment, clean technology equipment and other high-tech equipment.

As a result of the transaction, RSBVL acquired shares of SIPL for approximately $215 million of cash such that immediately after the closing of the transaction, RSBVL holds 50.1% of the outstanding shares of SIPL and Sanmina holds the remaining 49.9% of the outstanding shares of SIPL.

The amount received from RSBVL was based on preliminary calculations and is subject to adjustment based on final calculations.

Given the terms of the agreements entered into by the parties concerning management of the joint venture, we expect to continue to consolidate SIPL in future periods.

Critical Accounting Policies and Estimates

30 unchanged sentences

Application of the cost-to-cost method for government contracts in our 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 CPS for segment reporting purposes.

This division is an operating segment whose results are combined with eleven other operating segments and reported under CPS.

In 2022, CPS revenue and gross profit were $1.5 billion and $194 million, respectively.

40 unchanged sentences

Results of Operations

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

Years Ended October 1, 2022, October 2, 2021 and October 3, 2020.

The following table presents our key operating results.

2022 October 2,

2020 September 28,

2021 October 3,

(In thousands)

6 unchanged sentences

Net income $ 256,121 $ 268,998 $ 139,713

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

Net sales increased from $6.8 billion for 2021 to $7.9 billion for 2022, an increase of 16.8%.

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

1 unchanged sentence

Year Ended 2022 vs.

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

October 1, 2022 October 2, 2021 October 3, 2020 Increase/(Decrease) Increase/(Decrease)

(Dollars in thousands)

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

Industrial, Defense, Medical and Automotive $ 4,714,941 $ 3,890,041 $ 4,127,720 $ 824,900 21.2 % $ (237,679) (5.8) %

Communications Networks and Cloud Infrastructure 3,175,534 2,866,602 2,832,650 308,932 10.8 % 33,952 1.2 %

1 unchanged sentence

Comparison of 2022 to 2021 by End Market

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

The increase in sales was primarily due to three factors.

First, there was stronger demand overall in each of our end markets, driven in part by the continued stabilization of lead times for supply constrained parts.

Secondly, we were able to pass to our customers the vast majority of the increased cost of components caused by supply constraints.

Lastly, we added several new programs that contributed to increased sales in 2022.

Comparison of 2021 to 2020 by End Market

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

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

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

Comparison of 2020 to 2019 by End Market

The decrease in sales was caused primarily by two factors.

First, sales in 2019 were favorably impacted by the increased availability of components, the availability of which had been constrained in 2018.

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

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

Gross margin was 8.1%, 8.2% and 7.6% in 2022, 2021 and 2020, respectively.

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

CPS gross margin increased to

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

IMS gross margin increased to 7.2% in 2022 from 7.1% in 2021.

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

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

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

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

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

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

Despite an increase in revenue, IMS gross margin increased only slightly because there was little to no markup on the increased cost of components that we were able to pass on to our customers.

Despite higher revenues, CPS gross margin decreased to 11.9% in 2022 from 12.7% in 2021, primarily due to a less favorable mix of revenue between the individual businesses in CPS.

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

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

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

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

• the ongoing impacts of the COVID-19 pandemic and related supply chain constraints on our operations, the operations of our suppliers and on our customers' businesses;

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

7 unchanged sentences

As a percentage of net sales, selling, general and administrative expenses were 3.1%, 3.5% and 3.5% for 2022, 2021 and 2020, respectively.

The increase in absolute dollars in 2022 was primarily due to higher incentive compensation, partially offset by a decrease in our deferred compensation liability resulting from a decline in the market value of participant investment accounts in 2022.

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

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

Research and Development

Research and development expenses were $20.9 million, $22.6 million and $27.6 million in 2021, 2020 and 2019, respectively.

As a percentage of net sales, research and development expenses were 0.3%, 0.3% and 0.3% in 2021, 2020 and 2019, respectively.

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

Restructuring

1 unchanged sentence

The following table is a summary of restructuring costs:

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

October 1, 2022 October 2, 2021 October 3, 2020

(In thousands)

5 unchanged sentences

$ 11,425 $ 15,057 $ 26,783

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

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

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

Actions under this plan are substantially complete.

On October 28, 2019, we adopted a Company-wide restructuring plan (“Q1 FY20 Plan”) under which we have incurred restructuring costs of approximately $31 million through October 1, 2022.

These charges consist primarily of severance.

Substantially all cash payments have occurred and actions under this plan are complete.

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

1 unchanged sentence

Our CPS segment incurred costs of $10 million and $5 million for the years ended October 1, 2022 and October 2, 2021, respectively.

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

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

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

Goodwill Impairment

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

We had accrued liabilities of $6 million as of October 1, 2022 and October 2, 2021 for restructuring costs (exclusive of long-term environmental remediation liabilities).

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

Goodwill And Other Impairments

We recorded an impairment charge of $2 million in 2022 and 2020 for certain long-lived assets.

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

2 unchanged sentences

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

We had no such charges in 2019.

We had no such charge in 2022 and 2021.

Gain on Sale of Long-lived Assets

During the first quarter of 2022, we recognized a gain of $4.6 million primarily from the sale of a certain real property.

Interest Expense

Interest expense was $22.5 million, $19.6 million and $28.9 million in 2022, 2021 and 2020, respectively.

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

Interest expense increased $3 million in 2022 primarily due to higher daily average borrowings under our revolving credit facility.

Interest expense decreased $9 million in 2021 compared to 2020 due primarily to lower daily average borrowings under our revolving credit facility in 2021.

Other Income (Expense), net

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

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

Other income (expense), net was $(26.3) million in 2022, $44.3 million in 2021 and a $(0.3) million in 2020.

Other income (expense), net of $(26.3) million in 2022 consists primarily of a $7 million allowance that was provided for a note receivable from the 2021 sale of certain intellectual property assets based on our expectation that we will incur credit losses with the counterparty, a $6 million decline in the market value of participant investment accounts in our deferred compensation plan in 2022, $5 million in fees for sales of accounts receivable, a pension settlement charge of $2 million for the termination of our frozen U.S.

defined benefit plan and a loss on extinguishment of debt of $1 million consisting of a write-off of unamortized debt issuance costs.

Other income (expense), net of $44.3 million in 2021 consists primarily of receipt of payments of $16 million in connection with settlements of certain anti-trust class action matters, a $15 million gain from the sale of certain intellectual property assets and an $8 million gain on liquidation of a foreign entity.

Provision for Income Taxes

1 unchanged sentence

Our effective tax rate was 20.1%, 12.4% and 30.4% for 2022, 2021 and 2020, respectively.

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

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

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

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.

We regularly assess our valuation allowance against deferred tax assets on a jurisdiction by jurisdiction basis.

We consider 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 our ability to generate revenue, gross profit, operating income and jurisdictional taxable income in future periods.

Our effective tax rates for 2022 and 2021 were lower than the expected U.S.

statutory rate of 21.0% primarily due to a $16 million and $43 million tax benefit, respectively, resulting from the release of foreign tax reserves due to lapse of time and expiration of statutes of limitations.

Liquidity and Capital Resources

2022 October 2,

2020 September 28,

2021 October 3,

(In thousands)

4 unchanged sentences

Effect of exchange rate changes (4,510) (199) (81)

Increase in cash and cash equivalents $ 169,500 $ 25,785 $ 35,213

Increase (decrease) in cash and cash equivalents $ (120,169) $ 169,500 $ 25,785

Key Working Capital Management Measures

14 unchanged sentences

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

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

Our working capital was approximately $1.5 billion as of October 1, 2022 and October 2, 2021.

Net cash provided by operating activities was $331 million, $338 million and $301 million for 2022, 2021 and 2020, respectively.

3 unchanged sentences

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

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

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

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

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

During 2022, we generated $446 million of cash from earnings, excluding non-cash items, and used $115 million of cash because of an increase in our net operating assets and liabilities, resulting primarily from increases in inventories and contract assets of $663 million and $155 million, respectively, partially offset by increases in accounts payable and accrued liabilities of $554 million and $134 million, respectively.

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

The increase in contract assets is primarily due to an increase in overall demand in 2022, which resulted in a higher level of services performed for which revenue has been recognized, but products had not been delivered to the customer.

The increase in accounts payable is primarily attributable to an increase in inventory.

The increase in accrued liabilities is primarily due to an increase in advance payments from customers and an increase in amounts collected under our accounts receivable sales program that had not been remitted as of the end of the quarter to the financial institutions that purchased the receivables.

DSO decreased from 64 days as of 2021 to 48 days as of 2022 due primarily to an increase in accounts receivable factoring.

Net cash used in investing activities was $132 million, $91 million and $64 million for 2022, 2021 and 2020, respectively.

In 2022, we used $139 million of cash for capital expenditures, purchased $2 million of long-term investments and received $8 million primarily from the sale of a certain property.

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

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

Net cash used in financing activities was $314 million, $77 million and $210 million for 2022, 2021 and 2020, respectively.

In 2022, we repurchased $331 million of common stock (including $14 million in settlement of employee tax withholding obligations), repaid an aggregate of $333 million of long-term debt using $350 million of proceed from the issuance of a term loan, incurred $3 million of costs in connection with the amendment of the Fourth Amended and Restated Loan Agreement, dated as of November 30, 2018 (the “Existing Credit Agreement”) and received $2 million of proceeds from issuances of common stock pursuant to stock option exercises.

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

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

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

In 2014, we issued $375 million of Secured Notes that matured on June 1, 2019 and paid interest at an annual rate of 4.375%.

During the third quarter of 2019, we repaid the Secured Notes upon maturity using the proceeds from a term loan provided for in our Amended Cash Flow Revolver.

There was no gain or loss associated with the extinguishment of the Secured Notes.

Revolving Credit Facility.

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

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

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

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

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

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

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

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

During the fourth quarter of 2022, we entered into a Fifth Amended and Restated Credit Agreement (“Credit Agreement”) that amended and restated the Existing Credit Agreement.

The Credit Agreement provides for an $800 million revolving credit facility and a $350 million secured term loan (“Term Loan Due 2027”), 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.

Costs incurred in connection with the Credit Agreement of $3 million are classified as long-term debt and are being amortized to interest expense over the life of the Term Loan Due 2027 using the effective interest method.

The Term Loan Due 2027 was fully drawn on the Closing Date and proceeds were used to repay the term loan outstanding under the Existing Credit Agreement.

Upon repayment, we recorded a loss on extinguishment of debt of $1 million consisting of a write-off of unamortized debt issuance costs for the Existing Credit Agreement.

Loans under the Credit Agreement bear interest, at our option, at either the Secured Overnight Financing Rate benchmark interest rate (“SOFR”) or a base rate, in each case plus a spread determined based on our credit rating.

Interest on the loans is payable quarterly in arrears with respect to base rate loans and at the end of an interest period (and at three-month intervals if the interest period exceeds three months) in the case of SOFR loans.

The outstanding principal amount of all loans under the Credit Agreement, including the Term Loan Due 2027, together with accrued and unpaid interest, is due on September 27, 2027.

We are required to repay a portion of the principal amount of the Term Loan Due 2027 equal to 1.25% of the principal in quarterly installments.

Our and our subsidiary guarantors’ obligations under the Credit Agreement are secured by substantially all of the assets (excluding real property) of Sanmina and its subsidiary guarantors, including cash, accounts receivable, inventory and the shares of certain of our subsidiaries, subject to certain exceptions.

As of October 1, 2022, no borrowings and $9 million of letters of credit were outstanding under the Credit Agreement, under which $791 million was available to borrow.

There were no borrowings outstanding under the Credit Agreement as of October 2, 2021.

Short-term Borrowing Facilities .

As of October 1, 2022, certain of our foreign subsidiaries had a total of $70 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.

These facilities expire at various dates through the second quarter of 2024.

Debt Covenants

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

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

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

As of October 2, 2021, we were in compliance with our covenants.

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

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

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

As of October 1, 2022, we were in compliance with these covenants.

Other Liquidity Matters

Our Board of Directors has authorized us to repurchase shares of our common stock, subject to a dollar limitation.

The timing of repurchases depend upon capital needs to support the growth of our business, market conditions and other factors.

During 2022 and 2021 we repurchased 8.0 million shares and 1.5 million shares of our common stock for $317 million and $54 million (including commissions), respectively, under stock repurchase programs authorized by the Board of Directors.

These programs have no expiration dates and the timing of repurchases will depend upon capital needs to support the growth of our business, market conditions and other factors.

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

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

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

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

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

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

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

As of October 2, 2021, a maximum of $554 million of sold receivables can be outstanding at any point in time under this program, as amended, subject to limitations under our Amended Cash Flow Revolver.

As of October 1, 2022, an aggregate of $164 million remains available under these programs.

We are party to 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.

As of October 1, 2022, a maximum of $539 million of sold receivables can be outstanding at any point in time under this program, as amended, subject to limitations under our Existing Credit Agreement.

Additionally, the amount available under the RPA is uncommitted and, as such, is available at the discretion of our third-party banking institutions.

On January 16, 2019, we entered into an amendment to our Amended Cash Flow Revolver which increased the percentage of our total accounts receivable that can be sold and outstanding at any time from 30% to 40%.

Under the Credit Agreement, the percentage of our total accounts receivable that can be sold and outstanding at any time is 50%.

Trade receivables sold pursuant to the RPA are serviced by us.

10 unchanged sentences

To date, we have not been required to repurchase any receivable we have sold due to a commercial dispute.

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

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

As of October 1, 2022 and October 2, 2021, $49 million and $18 million, respectively, had been collected but not yet remitted.

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

We enter 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.

We enter 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 (Term SOFR) associated with anticipated variable rate borrowings.

These interest rate swaps have a maturity date of December 1, 2023, and effectively converts a portion of our variable interest rate obligations under our Amended Cash Flow Revolver to fixed interest rate obligations.

2 unchanged sentences

The aggregate effective interest rate of these swaps as of October 1, 2022 was approximately 4.1%.

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.

Given the recent rise in interest rates and the continued likelihood of additional rate increases, these interest rate swaps had a positive value of $6 million as of October 1, 2022, of which the majority is included in prepaid expenses and other current assets and the remaining amount is included in other assets on the consolidated balance sheets.

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

4 unchanged sentences

Therefore, the amount of future cash flows associated with uncertain tax positions may be significantly higher or lower than our recorded liability and we are unable to reliably estimate when cash settlement may occur.

Our liquidity needs are largely dependent on changes in our working capital, including sales of accounts receivable under our receivables sales programs and the extension of trade credit by our suppliers, investments in manufacturing inventory, facilities and equipment, repayments of obligations under outstanding indebtedness and repurchases of common stock.

In 2021, we generated $338 million of cash from operations and had $650 million of cash and cash equivalents as October 2, 2021.

Our liquidity is largely dependent on changes in our working capital, including sales of accounts receivable under our receivables sales programs and the extension of trade credit by our suppliers, investments in manufacturing inventory, facilities and equipment, repayments of obligations under outstanding indebtedness and repurchases of common stock.

In 2022, we generated $331 million of cash from operations.

Our primary sources of liquidity as of October 1, 2022 consisted of (1) cash and cash equivalents of $530 million;

(2) our Amended Cash Flow Revolver, under which $692 million, net of outstanding borrowings and letters of credit, was available;

(2) our Credit Agreement, under which $791 million, net of outstanding borrowings and letters of credit, was available;

(3) our foreign short-term borrowing facilities of $70 million, all of which was available;

(4) proceeds from the sale of accounts receivable under our receivables sales programs and (5) cash generated from operations.

Subject to satisfaction of certain conditions, including obtaining additional commitments from existing and/or new lenders, we may increase the revolver commitments under the Amended Cash Flow Revolver by an additional $200 million.

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

However, should demand for our services decrease significantly over the next 12 months or should we experience significant increases in delinquent or uncollectible accounts receivable for any reason, including in particular continued or worsening economic conditions caused by the COVID-19 pandemic, our cash provided by operations could decrease significantly and we could be required to seek additional sources of liquidity to continue our operations at their current level.

However, should demand for our services decrease significantly over the next 12 months, should we be unable to recover on inventory obligations owed to us by our customers or should we experience significant increases in delinquent or uncollectible accounts receivable for any reason, our cash provided by operations could decrease significantly and we could be required to seek additional sources of liquidity to continue our operations at their current level.

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

However, there can be no assurance that one or more of such institutions will not become insolvent in the future, in which case all or a portion of our uninsured funds on deposit with such institutions could be lost.

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

As of October 1, 2022, approximately 50% of our cash balance was held in the United States.

Should we choose or need to remit cash to the United States from our foreign locations, we may incur tax obligations which would reduce the amount of cash ultimately available to the United States.

8 unchanged sentences

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

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

Additionally, as of October 1, 2022, we were unable to reliably estimate when cash settlements or closure of audits with taxing authorities may occur with respect to our long-term liabilities arising from unrecognized tax benefits of $65 million.

The statutes of limitations for these matters range up to 10 years, and unsettled liabilities are released upon expiration of the statutes.

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

2 unchanged sentences

Our policy regarding non-standard or customized items dictates that such items are only ordered specifically for customers who have contractually assumed liability for the inventory, although exceptions are made to this policy in certain situations.

In addition, a substantial portion of catalog items covered by our purchase orders are procured for specific customers based on their purchase orders or a forecast under which the customer has contractually assumed liability for such material.

Accordingly, our liability from purchase obligations under these purchase orders is not expected to be significant.

4 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis