1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM --------------- TO ---------------.
COMMISSION FILE NUMBER: 0-21272
SANMINA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 77-0228183
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
355 EAST TRIMBLE ROAD, SAN JOSE, CA 95131
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 954-5500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosures of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate value of voting stock held by non-affiliates of the Registrant
was approximately $1,385,072,000 as of September 30, 1998, based upon the
average of the high and low prices of the Registrant's Common Stock reported for
such date on the Nasdaq National Market. Shares of Common Stock held by each
executive officer and director and by each person who owns 10% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. The determination of affiliate status is not necessarily a
conclusive determination for other purposes. As of September 30, 1997, the
Registrant had outstanding 48,265,295 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information is incorporated into Part III of this report by
reference to the Proxy Statement for the Registrant's 1999 annual meeting of
stockholders to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A not later than 120 days after the end of the fiscal year covered
by this Form 10-K. Certain information is incorporated into Parts II and IV of
this report by reference to the Registrant's annual report to stockholders for
the year ended September 30, 1998.
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PART I
ITEM 1. BUSINESS
THE COMPANY
Sanmina Corporation ("Sanmina" or "the Company") is a leading
independent provider of customized integrated electronic manufacturing services
("EMS"), including turnkey electronic assembly and manufacturing management
services, to original equipment manufacturers ("OEM") in the electronics
industry. Sanmina's electronics manufacturing services consist primarily of the
manufacture of complex printed circuit board assemblies using surface mount
("SMT") and pin-through hole ("PTH") interconnection technologies, the
manufacture of custom designed backplane assemblies, fabrication of complex
multi-layered printed circuit boards, and testing and assembly of completed
systems. In addition to assembly, turnkey manufacturing management also involves
procurement and materials management, as well as consultation on printed circuit
board design and manufacturing. Sanmina, through its Sanmina Cable Systems
("SCS") subsidiary (formerly known as Golden Eagle Systems), also manufactures
custom cable and wire harness assemblies for electronic industry OEMs. In
addition, as part of the Elexsys International ("Elexsys") acquisition completed
in November 1997, the Company acquired and currently operates a metal stamping
and plating business.
SMT and PTH printed circuit board assemblies are printed circuit boards on
which various electronic components, such as integrated circuits, capacitors,
microprocessors and resistors have been mounted. These assemblies are key
functional elements of many types of electronic products. Backplane assemblies
are large printed circuit boards on which connectors are mounted to interconnect
printed circuit boards, integrated circuits and other electronic components.
Interconnect products manufactured by Sanmina generally require greater
manufacturing expertise and have shorter delivery cycles than mass produced
interconnect products and therefore typically have higher profit margins.
Sanmina's customers include leading OEMs in the telecommunications,
networking (data communications), industrial and medical instrumentation and
high-speed computer systems sectors. Sanmina's assembly plants are located in
Northern California, Richardson, Texas, Manchester, New Hampshire, Durham, North
Carolina, Guntersville, Alabama, and Dublin, Ireland. Sanmina's printed circuit
board fabrication facilities are located in Northern California, Southern
California, Nashua, New Hampshire, and Peterborough, England. SCS's
manufacturing facility is located in Carrollton, Texas. As a result of the
Pragmatech Inc. ("Pragmatech") acquisition, completed in February 1998, Sanmina
added new assembly plants in Northern California. In addition, as a result of
Sanmina's recent acquisition of Altron Inc. ("Altron"), Sanmina has added new
fabrication and assembly plants in the Boston Massachusetts area, Northern
California, and Richardson, Texas.
Sanmina was formed in 1989 to acquire the printed circuit board and
backplane operations of its predecessor company, which has been in the printed
circuit board and backplane business since 1980. Sanmina's principal offices are
located at 355 East Trimble Road, San Jose, California 95131. Sanmina's
telephone number is (408) 954-5500.
Sanmina and the Sanmina logo are trademarks of the Company. Trademarks of
other corporations are also referred to in this report.
This Report on Form 10-K contains certain forward looking statements
regarding future events with respect to the Company. Actual events and/or future
results of operations may differ materially as a result of the factors described
herein and in the documents incorporated herein by reference, including, in
particular, those factors described under "Factors Affecting Operating Results."
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INDUSTRY OVERVIEW
Sanmina is benefiting from increased market acceptance of the use of
manufacturing specialists in the electronics industry. Many electronics OEMs
have adopted and are becoming increasingly reliant upon manufacturing
outsourcing strategies, and Sanmina believes the trend towards outsourcing
manufacturing will continue. Electronics industry OEMs use EMS specialists for
many reasons including the following:
Reduce Time to Market. Due to intense competitive pressures in the
electronics industry, OEMs are faced with increasingly shorter product
life-cycles and therefore have a growing need to reduce the time required to
bring a product to market. OEMs can reduce their time to market by using a
manufacturing specialist's established manufacturing expertise and
infrastructure.
Reduce Capital Investment. As electronic products have become more
technologically advanced, the manufacturing process has become increasingly
automated, requiring a greater level of investment in capital equipment.
Manufacturing specialists enable OEMs to gain access to advanced manufacturing
facilities, thereby reducing the OEMs' overall capital equipment requirements.
Focus Resources. Because the electronics industry is experiencing greater
levels of competition and more rapid technological change, many OEMs
increasingly are seeking to focus their resources on activities and technologies
in which they add the greatest value. By offering comprehensive electronic
assembly and turnkey manufacturing services, manufacturing specialists allow
OEMs to focus on core technologies and activities such as product development,
marketing and distribution.
Access Leading Manufacturing Technology. Electronic products and electronics
manufacturing technology have become increasingly sophisticated and complex,
making it difficult for OEMs to maintain the necessary technological expertise
in process development and control. OEMs are motivated to work with a
manufacturing specialist in order to gain access to the specialist's process
expertise and manufacturing know-how.
Improve Inventory Management and Purchasing Power. Electronics industry OEMs
are faced with increasing difficulties in planning, procuring and managing their
inventories efficiently due to frequent design changes, short product life
cycles, large investments in electronic components, component price fluctuations
and the need to achieve economies of scale in materials procurement. By using a
manufacturing specialist's volume procurement capabilities and expertise in
inventory management, OEMs can reduce production and inventory costs.
Access Worldwide Manufacturing Capabilities. OEMs are increasing their
international activities in an effort to lower costs and access foreign markets.
Manufacturing specialists with worldwide capabilities are able to offer such
OEMs a variety of options on manufacturing locations to better address their
objectives regarding cost, shipment location, frequency of interaction with
manufacturing specialists and local content requirements of end-market
countries.
The total estimated 1998 market for the EMS industry is $95 billion
worldwide. Sanmina primarily markets its manufacturing services to electronics
industry OEMs in the United States and Canada. The United States EMS industry is
highly fragmented, with a few manufacturers with over $1 billion in annual
revenues, several large manufacturers with over $500 million in annual revenues,
and numerous other manufacturers with annual revenues from under $10 million to
several hundred million dollars. Industry sources estimate that the United
States sales of backplane assemblies and printed circuit boards in 1998 were
approximately $1.8 billion and $8.3 billion respectively, and approximately 40%
of backplane assemblies and 7% of printed circuit boards were accounted for by
OEM in-house ("captive") production. In addition, industry sources estimate that
the total merchant market for custom cable and wiring harness assemblies is
approximately $7.6 billion. In June 1997, Sanmina opened an EMS facility in
Dublin, Ireland to service the European market, principally western Europe.
Also, as part of the Elexsys acquisition, Sanmina added a printed circuit board
facility in Peterborough, England. The total EMS market for Western Europe in
1998 was estimated at $15.5 billion.
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SANMINA BUSINESS STRATEGY
Sanmina's objective is to provide OEMs with a total EMS solution. Sanmina's
strategy encompasses several key elements:
-Concentrate on high value added products and services for leading
OEMs. Sanmina focuses on leading manufacturers of advanced electronic
products that generally require custom-designed, more complex
interconnect products and short lead-time manufacturing services. By
focusing on complex interconnect products and manufacturing services
for leading OEMs, Sanmina is able to realize higher margins than many
other participants in the interconnect and EMS industries.
-Leverage vertical integration. Building on its integrated
manufacturing capabilities, Sanmina can provide its customers with a
broad range of high value added manufacturing services from fabrication
of bare boards to final system assembly and test. The cable assembly
capabilities of Sanmina Cable Systems provide Sanmina with further
opportunities to leverage its vertical integration. By manufacturing
printed circuit boards and custom cable assemblies used in its EMS
assemblies, Sanmina, through its vertical integration, is able to
provide greater value added and realize additional manufacturing
margin. In addition, Sanmina's vertical integration provides it with
greater control over quality, delivery and cost, and enables the
Company to offer its customers a complete EMS solution.
-Focus on high growth customer sectors. Sanmina has focused its
marketing efforts on key, fast growing industry sectors. Sanmina's
customers include leading OEM companies in telecommunications,
networking (data communications), industrial and medical
instrumentation and high-end computer systems. Sales efforts will focus
on increasing penetration of its existing customer base as well as
attracting new customers, thus diversifying its revenue across a wider
base.
-Geographic expansion of manufacturing facilities. Since 1993, Sanmina
has significantly expanded and upgraded its operations through the
opening of and acquisition of new facilities in Richardson, Texas, San
Jose, California, Manchester, New Hampshire and Durham, North Carolina.
In November 1996, Sanmina acquired the former Comptronix Corporation
contract manufacturing facilities located in Guntersville, Alabama. In
June 1997, Sanmina opened an EMS facility in the Dublin, Ireland area
to serve customers in the European market. In November 1997, Sanmina
acquired Elexsys, which has facilities in Northern and Southern
California, New Hampshire and England. These facilities provide the
Company with operations in key geographic markets for the electronics
industry. Sanmina will continue to aggressively and opportunistically
pursue future expansion opportunities in other markets.
-Aggressive pursuit of acquisition opportunities. Sanmina's strategy
involves the pursuit of business acquisition opportunities,
particularly when these opportunities have the potential to enable
Sanmina to increase its net sales while maintaining operating margin,
access new geographic markets, implement Sanmina's vertical integration
strategy and/or obtain facilities and equipment on terms more favorable
than those generally available in the market. These acquisitions have
involved both acquisitions of entire companies, such as the June 1995
acquisition of Assembly Solutions in Manchester, New Hampshire, the
January 1996 acquisition of Golden Eagle Systems, now known as Sanmina
Cable Systems, the November 1997 merger with Elexsys, the February 1998
acquisition of Pragmatech and the November 1998 merger with Altron. In
addition, Sanmina has in other instances acquired selected assets,
principally equipment, inventory and customer contracts and, in certain
cases, facilities or facility leases. Acquisitions of this nature
completed by Sanmina include the November 1996 acquisitions of the
Guntersville, Alabama operations of Comptronix Corporation and certain
assets of the custom manufacturing services division of Lucent
Technologies. These acquisitions provide Sanmina with several new key
customer accounts as well as with equipment that has been moved to
various Sanmina facilities. Sanmina intends to continue to evaluate
acquisition opportunities on a ongoing basis.
-Develop long-term customer relationships. Sanmina seeks to establish
"partnerships" with its customers by focusing on state-of-the-art
technology, quick-turnaround manufacturing and comprehensive management
support for materials and inventory. Sanmina also works closely with
its customers to help them manage their manufacturing cycle and reduce
their time to market. While Sanmina will continue to emphasize growth
with its current customers, it has been successful in attracting new
clients. To further these efforts, the Company intends to continue to
expand its direct sales staff. Sanmina believes its direct sales force
is one of its key competitive advantages.
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- Extend technology leadership. Today Sanmina can provide services from
the fabrication of circuit boards to complete system assemblies. In
providing these services, Sanmina uses a variety of processes and
technologies. Sanmina strives for continuous improvement of its
processes and has adopted a number of quality improvement and
measurement techniques to monitor its performance. Sanmina has also
recently made significant capital expenditures to upgrade plant and
equipment at its facilities. Sanmina intends to stay on the leading edge
of technology development and will evaluate new interconnect and
packaging technologies as they emerge.
CUSTOMERS, MARKETING AND SALES
Sanmina's customers include a diversified base of OEMs in the
telecommunications, networking (data communications), industrial and medical
instrumentation and high-speed computer systems segments of the electronics
industry. The following table shows the estimated percentage of Sanmina's fiscal
1998 sales in each of these segments.
Telecommunications............................................ 53%
Networking (Data Communications).............................. 28%
Industrial and Medical Instrumentation........................ 12%
Computer Systems.............................................. 7%
Sanmina develops relationships with its customers and markets its
manufacturing services through a direct sales force augmented by a network of
manufacturers' representative firms and a staff of in-house customer support
specialists. Sanmina's sales resources are directed at multiple management and
staff levels within target accounts. Sanmina's direct sales personnel work
closely with the customers' engineering and technical personnel to better
understand their requirements. Sanmina's manufacturers' representatives are
managed by the Company's direct sales personnel, rather than from corporate
headquarters, in order to provide for greater accountability and responsiveness.
The Company has also expanded its customer base through acquisitions. In
particular, the acquisition of the Comptronix Guntersville, Alabama operations
and certain assets of the former custom manufacturing services division of
Lucent Technologies provided the Company with several new key customer accounts
with significant growth potential. In addition, the November 1997 acquisition of
Elexsys also provided the Company with several major new customer accounts. The
November 1998 acquisition of Altron also provided the Company with several major
new customer accounts.
Historically, Sanmina has had substantial recurring sales from existing
customers. Sanmina also conducts advertising and public relations activities, as
well as receiving referrals from current customers.
Although Sanmina seeks to diversify its customer base, a small number of
customers are responsible for a significant portion of Sanmina's net sales.
During fiscal 1998 and 1997, sales to Sanmina's ten largest customers accounted
for 59% and 52%, respectively, of Sanmina's net sales. For fiscal 1998, sales to
Cisco Systems and DSC Communications each represented more than 10% of the
Company's net sales. For fiscal 1997, sales to DSC represented more than 10% of
the Company's net sales. Although there can be no assurance that Sanmina's
principal customers will continue to purchase products and services from Sanmina
at current levels, if at all, Sanmina expects to continue to depend upon its
principal customers for a significant portion of its net sales. Sanmina's
customer concentration could increase or decrease, depending on future customer
requirements, which will be dependent in large part on market conditions in the
electronics industry segments in which Sanmina's customers participate. The loss
of one of more major customers or declines in sales to major customers could
have a material adverse effect on Sanmina's business, financial condition and
results of operations.
MANUFACTURING SERVICES
Sanmina specializes in manufacturing complex printed circuit board
assemblies, backplane assemblies and printed circuit boards that are used in the
manufacture of sophisticated electronic equipment. Sanmina had been
manufacturing backplane assemblies since 1981 and, in October 1993, Sanmina
began providing electronic assembly and turnkey manufacturing management
services including the assembly and testing of sophisticated electronic systems.
For fiscal 1998, approximately 84% of Sanmina's net sales consisted of assembly
revenues and approximately 16% of Sanmina's net sales consisted of printed
circuit boards. Assembly revenues are sales derived from shipments to Sanmina's
customers from one of Sanmina's value added assembly facilities and includes the
value of the printed circuit board which is, in most cases, manufactured at one
of the Company's printed circuit board facilities. Printed circuit board
revenues are sales derived from shipments directly to Sanmina's customers from
one of Sanmina's printed circuit board facilities.
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Sanmina seeks to establish "partnerships" with its customers by providing a
responsive, flexible total manufacturing services solution. These services
include computer integrated manufacturing ("CIM") and engineering services,
quick-turnaround manufacturing and prototype and reproduction interconnect
products and materials procurement and management. CIM services provided by
Sanmina consist of developing manufacturing processes, tooling and test
sequences for new products from product designs received from customers. Sanmina
also evaluates customer designs for manufacturability and test, and, when
appropriate, recommends design changes to reduce manufacturing cost or lead
times or to increase manufacturing yields and the quality of the finished
product. Once engineering is completed, Sanmina manufactures prototype or
preproduction versions of that product on a quick-turnaround basis. Sanmina
expects that the demand for engineering and quick-turnaround prototype and
preproduction manufacturing services will increase as OEMs' products become more
complex and as product life cycles shorten. Materials procurement and handling
services provided by Sanmina include planning, purchasing, warehousing and
financing of electronic components and enclosures used in the assemblies and
systems.
Prices of Sanmina's SMT or PTH assemblies, backplane assemblies, printed
circuit board assemblies, cable assemblies or systems vary depending upon their
size and complexity, the specified manufacturing turnaround time, the extent of
design and engineering services provided by the Company, the market for the
various electronic components used and the quantity ordered. These prices of SMT
and PTH assemblies, backplane assemblies, and systems typically range from
several hundred dollars to several thousand dollars per unit. Prices of printed
circuit boards manufactured by Sanmina typically range from several dollars to
$7,000 per unit. Prices of custom cable assemblies manufactured by Sanmina
typically range from several dollars to $10,000 per unit.
MANUFACTURING AND ENGINEERING
Facilities
Sanmina manufactures its products in 27 decentralized plants, consisting of
19 assembly facilities and 8 printed circuit board fabrication facilities. These
facilities include the Altron plants acquired in November 1998. Generally, each
of Sanmina's decentralized plants have their own production, purchasing, and
materials management and quality capabilities located on site. The production
expertise of some plants overlaps, which enables Sanmina to allocate production
based on product type and available capacity at one or more plants. With
assembly facilities located in major electronics industry centers throughout the
country, including Silicon Valley, Southern California, the Dallas-Forth Worth
area, the Research Triangle area, New England and Northern Alabama, Sanmina is
also able to allocate production based on geographic proximity to the customer,
process capabilities and available capacity. Sanmina believes that this flexible
approach differs from that of its competition. Decentralized plants can focus on
particular product types and respond quickly to customers' specific
requirements. Sanmina believes that decentralized facilities also allow it to
achieve improved accountability, quality control and cost control. Each plant is
managed as a separate profit center, and each plant manager's compensation
depends, in part, upon that plant meeting quality, shipment and gross profit
targets.
Sanmina has pursued a strategy of expanding the capacity and geographic
scope of its assembly capability in order to position itself to serve
electronics industry OEMs in key geographic markets. In October 1993, Sanmina
established a backplane assembly operation in Richardson, Texas in order to
better serve major customers in the Dallas-Forth Worth area, and in 1995,
Sanmina expanded its operation in Texas by doubling the production capacity of
such facility. In October 1994, the Company acquired a 100,000 square foot,
state-of-the-art contract assembly facility in San Jose, California. This
facility in San Jose now serves as the cornerstone of Sanmina's Northern
California assembly operations. Following the acquisition, a smaller assembly
operation was consolidated with, and the Company's corporate headquarters were
moved to, this facility in San Jose. In June 1995, Sanmina acquired a contract
assembly company in Manchester, New Hampshire in order to address the New
England market, and in January 1996, these operation were moved into a new,
72,000 square foot state-of-the-art assembly facility built to the Company's
specifications.
In January 1996, Sanmina acquired Sanmina Cable Systems (formerly known as
Golden Eagle Systems) which gave the Company a value added custom cable and
wiring harness facility in Carrollton, Texas. In the first quarter of fiscal
1997, Sanmina expanded the custom cable operations of Sanmina Cable Systems by
purchasing a 72,000 square foot facility in Carrollton and the Sanmina Cable
Systems operations have been moved into this facility. In November 1996, Sanmina
acquired the Guntersville, Alabama assembly facilities and operations of
Comptronix Corporation. This acquisition provides the Company with manufacturing
operations in the Huntsville, Alabama area, a major center of electronics
industry activity. The acquisition also provides Sanmina with several
significant new customers.
In June 1997, Sanmina opened its first overseas EMS assembly facility in
Dublin, Ireland. In November 1997, Sanmina acquired Elexsys, which has an
assembly facility located in Northern California and printed circuit board
fabrication facilities in Northern and Southern California, Nashua, New
Hampshire and Peterborough, England. In November 1998, Sanmina acquired
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Altron, which has assembly facilities located in Woburn, Massachusetts,
Richardson, Texas, Fremont, California, and a printed circuit board fabrication
facility in Wilmington, Massachusetts. In November 1998, Sanmina acquired the
electronics manufacturing services of Harris Canada, which provided Sanmina with
its first facility in Canada.
In November 1998, Sanmina entered into a lease with an option to purchase
for a 330,000 square foot campus facility located in San Jose, California. The
facility consists of 4 buildings on a single site. Sanmina intends to
consolidate its corporate headquarters and San Jose area assembly operations at
this facility. Consolidation activities will begin in calendar 1999. Sanmina's
San Jose area printed circuit board fabrication facilities will not be
consolidated at the campus facility and will remain at their current locations.
Manufacturing Processes
Sanmina produces complex, technologically advanced SMT and PTH assemblies,
backplane assemblies and multilayer printed circuit boards, custom cable
assemblies and full systems that meet increasingly tight tolerances and
specifications demanded by OEMs. Multilayering, which involves placing multiple
layers of electrical circuitry on a single printed circuit board or backplane,
expands the number of circuits and components that can be contained on the
interconnect product and increases the operating speed of the system by reducing
the distance that electrical signals must travel. Increasing the density of the
circuitry in each layer is accomplished by reducing the width of the circuit
tracks and placing them closer together on the printed circuit board or
backplane. Interconnect products having narrow, closely spaced circuit tracks
are known as "fine line" products. Today, Sanmina and other industry leaders are
capable of efficiently producing commercial quantities of printed circuit boards
with up to 36 layers and circuit track widths as narrow as three mils. The
manufacture of complex multilayer interconnect products often requires the use
of sophisticated circuit interconnections between certain layers (called "blind
or buried vias") and adherence to strict electrical characteristics to maintain
consistent circuit transmission speeds (referred to as "controlled impedance").
These technologies require very tight lamination and etching tolerances and are
especially critical for printed circuit boards with ten or more layers.
The manufacture of printed circuit boards involves several steps: etching
the circuit image on copper-clad epoxy laminate, pressing the laminates together
to form a panel, drilling holes and depositing copper or other conductive
material to form the inter-layer electrical connections and, lastly, cutting the
panels to shape. Certain advanced interconnect products require additional
critical steps, including dry film imaging, photoimageable soldermask
processing, computer controlled drilling and routing, automated plating and
process controls and achievement of controlled impedance. Manufacture of printed
circuit boards used in backplane assemblies requires specialized expertise and
equipment because of the larger size of the backplane relative to other printed
circuit boards and the increased number of holes for component mounting.
The manufacture of SMT and PTH assemblies involves the attachment of various
electronic components, such as integrated circuits, capacitors, microprocessors
and resistors to printed circuit boards. The manufacture of backplane assemblies
involves attachment of electronic components, including printed circuit boards,
integrated circuits and other components, to the backplane, which is a large
printed circuit board manufactured by Sanmina. Sanmina uses SMT, PTH and
press-fit technologies in backplane assembly.
All but one of Sanmina's manufacturing facilities are certified under ISO
9002, a set of standards published by the International Organization of
Standardization and used to document, implement and demonstrate quality
management and assurance systems in design and manufacturing. As part of the ISO
9002 certification process, the Company has developed a quality systems manual
and an internal system of quality controls and audits. Although ISO 9002
certification is of particular importance to the companies doing business in the
European Community, Sanmina believes that United States electronics
manufacturers are increasing their use of ISO 9002 registration as a criteria
for suppliers.
In addition to ISO 9002 certification, Sanmina is BellCore, British Approval
Board for Telecommunications ("BABT") and Underwriters Laboratories ("UL")
compliant. These qualifications establish standards for quality, manufacturing
process control and manufacturing documentation and are required by many OEMs in
the electronics industry, including suppliers to AT&T and the Regional Bell
Operating Companies.
The Company orders materials and components based on purchase orders
received and accepted and seeks to minimize its inventory of materials or
components that are not identified for use in filling specific orders. Materials
used in manufacturing printed circuit boards are readily available in the open
market and the Company has not to date experienced any significant shortages of
such materials. Electronic components used by Sanmina in producing SMT and PTH
assemblies and its backplane assemblies are purchased by Sanmina and, in certain
circumstances, it may be required to bear the risk of component price
fluctuations. In addition, shortages of certain types of electronic components
have occurred in the past and may occur in the future. Component shortages or
price fluctuations could have an adverse effect on the Company's SMT and PTH
assemblies and
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its backplane assembly business, thereby adversely affecting the Company's
results of operations. Due to the continued expansion of the Company's contract
manufacturing and backplane assembly businesses as a percentage of the Company's
net sales, component shortages and price fluctuations would adversely affect the
Company's results of operations to a greater extent than in prior fiscal years.
Technology Development
Sanmina's close involvement with its customers at the early stages of their
product development positions it at the leading edge of technical innovation in
the manufacturing of SMT and PTH assemblies, backplane assemblies, and printed
circuit boards. Sanmina selectively seeks orders that require the use of
state-of-the-art materials or manufacturing techniques in order to further
develop its manufacturing expertise. Current areas of manufacturing process
development include reducing circuit widths and hole sizes, establishing new
standards for particle contamination and developing new manufacturing processes
for the use with new materials and new surface mount connector and component
designs.
Recent developments in the electronics industry have necessitated
improvements in the types of laminate used in the manufacture of interconnect
products. New laminate materials may contain new chemical formulations to
achieve better control of flow, resin systems with high glass transition
temperatures, reduced surface imperfections and greatly improved dimensional
stability. Future generations of interconnect products will require ultra fine
lines, multilayers of much greater complexity and thickness, and extremely small
holes in the 4 to 10 mil range. The materials designed to meet these
requirements, such as BT epoxy, cyanate esters, polyamide quartz, and Kevlar
epoxy, are beginning to appear in the marketplace. Widespread commercial use of
these materials will depend upon statistical process control and improved
manufacturing procedures to achieve the required yields and quality.
The Company has developed expertise and techniques which it uses in the
manufacture of circuit boards, backpanels and subsystems. Generally, the Company
relies on common law trade secret protection and on confidentiality agreements
with its employees to protect its expertise and techniques. The Company owns but
five patent and believes that patents have not historically constituted a
significant form of intellectual property right in its industry.
ENVIRONMENTAL CONTROLS
Proper waste disposal is a major consideration for printed circuit board
manufacturers because metals and chemicals are used in the manufacturing
process. Water used in the printed circuit board manufacturing process must be
treated to remove metal particles and other contaminants before it can be
discharged into the municipal sanitary sewer system. In addition, although the
electronics assembly process generates significantly less waste water than
printed circuit board fabrication, maintenance of environmental controls is also
important in the electronics assembly process. Each of Sanmina's printed circuit
board and electronics assembly plants has personnel responsible for monitoring
environmental compliance. These individuals report to Sanmina's director of
environmental compliance, who has overall responsibility for environmental
matters.
Each plant operates under effluent discharge permits issued by the
appropriate governmental authority. These permits must be renewed periodically
and are subject to revocation in the event of violations of environmental laws.
There can be no assurance that violations will not occur in the future as a
result of human error, equipment failure or other causes. In the event of a
future violation of environmental laws, Sanmina could be held liable for damages
and for the costs of remedial actions and could be also subject to revocation of
effluent discharge permits. Any such revocation could require Sanmina to cease
or limit production at one or more of its facilities, thereby having an adverse
impact on Sanmina's results of operations. Sanmina is also subject to
environmental laws relating to the storage, use and disposal of chemicals, solid
waste and other hazardous materials as well as air quality regulations.
Furthermore, environmental laws could become more stringent over time, and the
costs of compliance with and penalties associated with violation of more
stringent laws could be substantial.
In November 1997, Sanmina acquired Elexsys, which, by virtue of such
acquisition, became a wholly-owned subsidiary of Sanmina. Several facilities
owned or occupied by Elexsys at the time of the acquisition, or formerly owned
or occupied by Elexsys or companies acquired by Elexsys, had either soil
contamination or contamination of groundwater underneath or near the facility
including the following: Contamination was discovered at Elexsys' Irvine,
California facility in 1989 and Elexsys voluntarily installed a groundwater
remediation system at the facility in 1994. The California Regional Water
Quality Control Board has requested that Sanmina extend the investigation of the
groundwater contamination at the Irvine facility to off-site areas. It is
unknown what the results of this additional investigation will be and whether
any additional remediation activities will be required. Sanmina has been
required by the California Department of Toxic Substances Control to undertake
investigation of soil and/or groundwater at certain facilities formerly owned or
occupied by a predecessor company to Elexsys in Mountain View, California.
Depending upon the results of this soil sampling and groundwater testing,
Sanmina could be ordered to undertake soil and/or groundwater cleanup. To date,
Sanmina has not been ordered to undertake any soil or groundwater cleanup
activities at the
9
Mountain View facilities, and does not believe any such activities should be
required. Test results received to date are not sufficient to enable Sanmina to
determine whether or not such cleanup activities are likely to be mandated.
Contamination has also been discovered at other current and former
Elexsys facilities and has been reported to the relevant regulatory agencies. No
remediation or further investigation of such contamination has been required by
regulatory agencies. To date, the cost of the various investigations and the
cost of operating the remediation system at the Irvine facility have not been
material to Sanmina's financial condition. However, in the event Sanmina is
required to undertake additional groundwater or soil cleanup, the costs of such
cleanup are likely to be substantial. Sanmina is currently unable to estimate
the amount of such soil and groundwater cleanup costs because no soil or
groundwater cleanup has been ordered and Sanmina cannot determine from available
test results what remediation activities, if any, are likely to be required.
Sanmina believes, based on the limited information currently available, that the
cost of any groundwater or soil clean-up that may be required would not have a
material adverse effect on Sanmina's business, financial condition and results
of operations. Nevertheless, the process of remediating contaminated soil and
groundwater is costly, and if Sanmina is required to undertake substantial
remediation activities at one or more of the former Elexsys facilities, there
can be no assurance that the costs of such activities costs would not have a
material adverse effect on Sanmina's business, financial condition and results
of operations.
Altron was advised in 1993 by Olin Corporation that contamination
resulting from activities of prior owners of property owned by Olin Corporation
and located close to the Altron manufacturing plant in Wilmington,
Massachusetts, had migrated under the Altron plant. Olin has assumed full
responsibility for any remediation activities that may be required and has
agreed to indemnify and hold Altron harmless from any and all costs,
liabilities, fines, penalties, charges and expenses arising from and relating to
any action or requirement, whether imposed by statute, ordinance, rule,
regulation, order, decree or by general principles of law to remediate, clean up
or abate contamination emanating from the Olin site, Although the Company
believes that Olin's assumption of responsibility will result in no remediation
cost to Altron from the contamination, there can be no assurance that Altron
will not be subject to some costs regarding this matter, but Altron does not
anticipate that such costs, if any, will be material to its financial condition.
BACKLOG
Sanmina's backlog was approximately $233 million at September 30, 1998 and
approximately $175 million at September 30, 1997. Backlog consists of purchase
orders received by the Company, including, in certain instances, forecast
requirements released for production under customer contracts. Cancellation and
postponement charges generally vary depending upon the time of cancellation or
postponement, and a certain portion of the Company's backlog may be subject to
cancellation or postponement without significant penalty. Typically, a
substantial portion of the Company's backlog is scheduled for delivery within
120 days.
COMPETITION
Significant competitive factors in the market for advanced backplane
assemblies and printed circuit boards include product quality, responsiveness to
customers, manufacturing and engineering skills, and price. Sanmina believes
that competition in the market segments served by Sanmina is based more on
product quality and responsive customer service and support than on price, in
part because the cost of interconnect products manufactured by Sanmina is
usually low relative to the total cost of the equipment for which they are
components and in part because of the greater importance of product reliability
and prompt delivery to Sanmina's customers. Sanmina believes that its primary
competitive strengths are its ability to provide responsive, flexible, short
lead-time manufacturing services, its engineering and manufacturing expertise
and its customer service support.
Sanmina faces intense competition from a number of established competitors
in its various product markets. Certain of Sanmina's competitors have greater
financial and manufacturing resources than Sanmina, including significantly
greater SMT assembly capacity. During periods of recession in the electronic
industry, the Company's competitive advantages in the areas of quick-turnaround
manufacturing and responsive customer service may be of reduced importance to
electronics OEMs, who may become more price sensitive. In addition, captive
interconnect product manufacturers may seek orders in the open market to fill
excess capacity, thereby increasing price competition. Although the Company
generally does not pursue high-volume, highly price-sensitive interconnect
product business, it may be at a competitive disadvantage with respect to price
when compared to manufacturers with lower cost structures, particularly those
manufacturers with offshore facilities where labor and other costs are lower.
EMPLOYEES
At September 30, 1998, Sanmina had 4,005 full-time employees, including
3,746 in manufacturing and engineering, 136 in marketing and sales, and 123 in
general administration and finance. None of Sanmina's employees is represented
by a labor union and Sanmina has never experienced a work stoppage or strike.
Sanmina believes its relationship with its employees is good.
10
The Company's success depends to a large extent upon the continued services
of key managerial and technical employees. The loss of such personnel could have
a material adverse effect on the Company. To date, the Company has not
experienced significant difficulties in attracting or retaining such personnel.
Although the Company is not aware that any of its key personnel currently intend
to terminate their employment, their future services cannot be assured.
FACTORS AFFECTING BUSINESS AND RESULTS OF OPERATIONS
In addition to the information set forth in this report on Form 10-K and in
the documents incorporated herein by reference, the following factors should be
carefully considered by prospective investors in the Company's securities.
Sanmina is subject to risks related to Year 2000 problems. Many
currently installed computer systems and software products are coded to accept
only two digit entries in the date code field. As the Year 2000 approaches,
these code fields will need to accept four digit entries to distinguish years
beginning with "19" from those beginning with "20." As a result, in less than
two years, computer systems and/or software products used by many companies may
need to be upgraded to comply with such Year 2000 requirements. Sanmina is
currently expending resources to review its products and services, as well as
its internal use software in order to identify and modify those products,
services and systems that are not Year 2000 compliant. Additionally, Sanmina is
in the process of evaluating the need for contingency plans with respect to Year
2000 requirements. The necessity of any contingency plan must be evaluated on a
case-by-case basis and will vary considerably in nature depending on the Year
2000 issue it may need to address. There can be no assurance however, that
Sanmina will be able to solve all potential Year 2000 issues. Sanmina's reliance
on its key suppliers, and therefore on the proper functioning of their
information systems and software, is increasing, and there can be no assurance
that another company's failure to address Year 2000 issues could not have an
adverse effect on Sanmina. Sanmina has initiated formal communications with each
of its significant suppliers and customers to determine the extent to which
Sanmina is vulnerable to those third parties' failure to remediate their own
Year 2000 issues. Sanmina is requesting that third party vendors represent their
products and services to be Year 2000 compliant and that they have a program to
test for Year 2000 compliance. However, the response of those third parties is
beyond Sanmina's control. To the extent that Sanmina does not receive adequate
responses by December 31, 1998, it is prepared to develop contingency plans,
with completion of these plans scheduled for no later than March 31, 1999. At
this time, Sanmina cannot estimate the additional cost, if any, that might
develop from such contingency plans. Breakdowns in Sanmina's computer systems
and applications, such as its manufacturing application software, its bar-coding
systems, and the computer chips embedded in its plant equipment, as well as
other Year 2000-related problems such as disruptions in the delivery of
materials, power, heat or water to Sanmina's facilities, could prevent Sanmina
from being able to manufacture and ship its products. Sanmina plans to replace
or upgrade or otherwise work around any of its date driven systems that are not
Year 2000 compliant. Sanmina's Year 2000 Project Team completed compliance
solutions or work arounds by January 31, 1999, and intends to complete
compliance testing by June 30, 1999. If Sanmina fails to correct a material Year
2000 problem, its normal business activities and operations could be
interrupted. Such interruptions could materially and adversely affect Sanmina's
results of operations, liquidity and financial condition. To date, Year 2000
costs are not considered by Sanmina to be material to its financial condition.
Sanmina currently estimates that, in order to complete Year 2000 compliance,
Sanmina will be required to incur expenditures of approximately $1.1 million.
Dependence on Electronics Industry. Sanmina's business is heavily
dependent on the health of the electronics industry. Sanmina's customers are
manufacturers in the telecommunications, networking (data communications),
industrial and medical instrumentation and computer systems segments of the
electronics industry. These industry segments, and the electronics industry as a
whole, are subject to rapid technological change and product obsolescence.
Sanmina's customers can discontinue or modify products containing components
manufactured by Sanmina. Such discontinuance or modification could adversely
affect Sanmina's results of operations. The electronics industry is also subject
to economic cycles and has in the past experienced, and is likely in the future
to experience, recessionary periods. A general recession in the electronics
industry could have a material adverse effect on Sanmina's business, financial
condition and results of operations. Sanmina typically does not obtain long-term
volume purchase contracts from its customers and has recently experienced
reduced lead times in customer orders. Customer orders may be canceled and
volume levels may be changed or delayed. In particular, Sanmina experienced
certain cancellation and rescheduling of shipment dates of customer orders
during the fourth fiscal quarter of 1998. The timely replacement of canceled,
delayed or reduced contracts with new business cannot be assured.
Factors Affecting Operating Results. Sanmina's results of operations
have varied and may continue to fluctuate significantly from period to period,
including on a quarterly basis. Sanmina's operating results are affected by a
number of factors. These factors include timing of orders from major customers,
mix of product ordered by and shipped to major customers, the volume of orders
as related to Sanmina's capacity, the ability of Sanmina to effectively manage
inventory and fixed assets, and the ability of Sanmina to time expenditures in
anticipation of future sales. Sanmina's results are also affected by the mix of
products between backplane assemblies and printed circuit boards. Sanmina's
results are also affected by general economic conditions in the electronics
industry. Sanmina's results can also be significantly influenced by development
and introduction of new products
11
by Sanmina's customers. From time to time, Sanmina experiences changes in the
volume of sales to each of its principal customers, and operating results may be
affected on a period-to-period basis by these changes. Sanmina's customers
generally require short delivery cycles, and a substantial portion of Sanmina's
backlog is typically scheduled for delivery within 120 days. Quarterly sales and
operating results therefore depend in large part on the volume and timing of
bookings received during the quarter, which are difficult to forecast. Sanmina's
backlog also affects its ability to plan production and inventory levels, which
could lead to fluctuations in operating results. In addition, a significant
portion of Sanmina's operating expenses are relatively fixed in nature and
planned expenditures are based in part on anticipated orders. Any inability to
adjust spending quickly enough to compensate for any revenue shortfall may
magnify the adverse impact of such revenue shortfall on Sanmina's results of
operations. Results of operations in any period should not be considered
indicative of the results to be expected for any future period. In addition,
fluctuations in operating results may also result in fluctuations in the price
of Sanmina Common Stock.
Competition and Technological Change. The electronic interconnect
product industry is highly fragmented and it is characterized by intense
competition. Sanmina competes in the technologically advanced segment of the
interconnect product market, which is also highly competitive but is much less
fragmented than the industry as a whole. Sanmina's competitors consist primarily
of larger manufacturers of interconnect products, and some of these competitors
have greater manufacturing and financial resources than Sanmina as well as
greater SMT assembly capacity. As a participant in the interconnect industry,
Sanmina must continually develop improved manufacturing processes to accommodate
its customers' needs for increasingly complex products. During periods of
recession in the electronics industry, Sanmina's competitive advantages in the
areas of quick turnaround manufacturing and responsive customer service may be
of reduced importance to electronics OEMs, who may become more price sensitive.
In addition, captive interconnect product manufacturers seek orders in the open
market to fill excess capacity, thereby increasing price competition. Sanmina
may be at a competitive disadvantage with respect to price when compared to
manufacturers with lower cost structures, particularly those with offshore
facilities where labor and other costs are lower.
Risks Associated with Acquisitions and Expansions. Sanmina has, for the
past several fiscal years, pursued a strategy of growth. This growth has come in
part through acquisitions. These acquisitions have involved both acquisitions of
entire companies, such as the June 1995 acquisition of Assembly Solutions in
Manchester, New Hampshire, the January 1996 acquisition of Golden Eagle Systems,
now known as Sanmina Cable Systems, the November 1997 merger with Elexsys, the
February 1998 acquisition of Pragmatech and the November 1998 merger with
Altron. In addition, Sanmina has in other instances acquired selected assets,
principally equipment, inventory and customer contracts and, in certain cases,
facilities or facility leases. Acquisitions of this nature completed by Sanmina
include the November 1996 acquisitions of the Guntersville, Alabama operations
of Comptronix Corporation and certain assets of the custom manufacturing
services division of Lucent Technologies. In addition to these acquisitions,
Sanmina has also grown its operations through internal expansion, such as the
opening of its Richardson, Texas assembly facility, its Durham, North Carolina
assembly facility and its Dublin, Ireland assembly facility. Acquisitions of
companies and businesses and expansion of operations involves certain risks,
including the following:
* the potential inability to successfully integrate acquired operations and
businesses or to realize anticipated synergies, economies of scale or
other value,
* diversion of management's attention,
* difficulties in scaling up production at new sites and coordinating
management of operations at new sites,
* loss of key employees of acquired operations.
Accordingly, Sanmina may experience problems in integrating the Altron
operations or operations associated with any future acquisition. Accordingly,
there can be no assurance that the merger with Altron or any other future
acquisition will result in a positive contribution to Sanmina's results of
operations. Furthermore, there can be no assurance that Sanmina will realize
value from any such acquisition, which equals or exceeds the consideration paid.
In particular, the successful combination of Sanmina and Altron will require
substantial effort from each company, including the integration and coordination
of sales and marketing efforts. The diversion of the attention of management and
any difficulties encountered in the transition process, including, the
interruption of, or a loss of momentum in, Altron's activities, problems
associated with integration of management information and reporting systems, and
delays in implementation of consolidation plans, could have an adverse impact on
Sanmina's ability to realize the anticipated benefits of the Merger. Therefore,
there can be no assurance that Sanmina will realize any of these anticipated
benefits. In addition, there can be no assurance that Sanmina will realize
anticipated strategic and other benefits from expansion of existing operations
to new sites. Any such problems could have a material adverse effect on
Sanmina's business, financial condition and results of operations. In addition,
future acquisitions by Sanmina may result in dilutive issuances of equity
securities, the incurrence of additional debt, large one-time write-offs and the
creation of goodwill or other intangible assets that could result in
amortization expense. These factors could have a material adverse effect on
Sanmina's business, financial condition and results of operations.
Risks Associated with International Operations. Sanmina opened its first
overseas facility, located in Dublin, Ireland, in
12
June 1997. In addition, Sanmina has obtained a printed circuit board fabrication
facility in Peterborough, England as a result of the acquisition of Elexsys. A
number of risks are inherent in international operations and transactions.
International sales and operations may be limited or disrupted by the imposition
of government controls, export license requirements, political instability,
trade restrictions, changes in tariffs, and difficulties in staffing,
coordinating communications among and managing international operations.
Additionally, Sanmina's business, financial condition and results of operations
may be adversely affected by fluctuations in international currency exchange
rates as well as increases in duty rates, difficulties in obtaining export
licenses, constraints on its ability to maintain or increase prices, and
competition. There can be no assurance that Sanmina will realize the anticipated
strategic benefits of its expansion in Ireland or that Sanmina's international
operations will contribute positively to Sanmina's business, financial condition
and results of operations. Furthermore, difficulties encountered in scaling up
production at overseas facilities or in coordinating Sanmina's United States and
international operations, as well as any failure of the international operations
to realize anticipated revenue growth, could, individually or in the aggregate,
have a material adverse effect on Sanmina's business, financial condition and
results of operations.
Possible Volatility of Note and Stock Price. The trading price of the
Sanmina Common Stock has been and could in the future be subject to significant
fluctuations in response to variations in quarterly operating results,
developments in the electronics industry, general economic conditions, changes
in securities analysts' recommendations regarding Sanmina's securities and other
factors. In addition, the stock market in recent years has experienced
significant price and volume fluctuations which have affected the market prices
of technology companies and which have often been unrelated to or
disproportionately impacted by the operating performance of such companies.
These broad market fluctuations may adversely affect the market price of
Sanmina's Common Stock.
ITEM 2. PROPERTIES
Sanmina's principal facilities, including Altron, comprise an aggregate of
approximately 1.6 million square feet. Except for the Company's 72,000 square
foot Manchester, New Hampshire facility, the 72,000 square foot facility
occupied by Sanmina Cable Systems in Carrollton, Texas, a 70,000 square foot
facility located in Nasuha, New Hampshire, a 204,000 square foot facility
located in Wilmington, Massachusetts, a 104,000 square foot facility located in
Woburn, Massachusetts, and the Company's 50,000 square foot facility located in
Dublin, Ireland, all of the facilities are leased, and the leases for these
facilities expire from 1998 through 2013. The leases generally may be extended
at the Company's option. In addition, the Company's Guntersville, Alabama
facilities are leased under leases with the Guntersville, Alabama industrial
development board. Under the leases, no rent is payable and the facilities may
be purchased by the Company for nominal consideration at any time up to and
including the expiration of the respective terms of such leases. Sanmina has
twelve principal facilities located in the greater San Jose, California area,
with other facilities located in Southern California, Richardson, Texas,
Manchester, New Hampshire, Guntersville, Alabama, Durham, North Carolina,
Peterborough, England, and Calgary, Canada
In November 1998, Sanmina entered into a lease with an option to
purchase for a 330,000 square foot campus facility located in San Jose,
California. The facility consists of 4 buildings on a single site. Sanmina
intends to consolidate its corporate headquarters and San Jose area assembly
operations at this facility. Consolidation activities will begin in calendar
1999. Sanmina's San Jose area printed circuit board fabrication facilities will
not be consolidated at the campus facility and will remain at their current
locations. Sanmina believes that its facilities are adequate to meet its
reasonably foreseeable requirements for at least the next two years. The Company
continually evaluates its expected future facilities requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently a party to any material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information required by this item is incorporated by reference to page
25 of the Registrant's 1998 annual report to stockholders under the caption
"quarterly results."
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference to page
20 of the Registrant's 1998 annual report to stockholders under the caption
"Selected Financial Data."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is incorporated by reference to pages
22 through 28 of the Registrant's 1998 annual report to stockholders under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to pages
30 through 38 of the Registrant's 1998 annual report to stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
14
PART III
Certain information required by Part III is omitted from this Report on Form
10-K in that the Registrant will file a definitive proxy statement within 120
days after the end of its fiscal year pursuant to Regulation 14A with respect to
the 1999 Annual Meeting of Stockholders (the "Proxy Statement") to be held
January 29, 1999 and certain information included therein is incorporated herein
by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item relating to directors is incorporated
by reference to the information under the caption "Proposal No. 1 -- Election of
Directors" in the Proxy Statement.
The executive officers of the Registrant, who are elected by the board of
directors, are as follows:
NAME AGE POSITION
- ----------------------------------- --- -----------------------------------------
Jure Sola.......................... 47 Chairman and Chief Executive Officer
Randy W. Furr...................... 44 President and Chief Operating Officer
Bernard J. Whitney................. 42 Executive Vice President and Chief Financial
Officer
Michael J. Landy................... 44 Executive Vice President of Sales and Marketing
Mr. Sola co-founded Sanmina in 1980 and initially held the position of Vice
President of Sales and Marketing and was responsible for the development and
growth of the Company's sales organization. He became Vice President and General
Manager in October 1987 with responsibility for all manufacturing operations as
well as sales and marketing. Mr. Sola was elected President in October 1989 and
has served as Chairman of the Board and Chief Executive Officer since April
1991. Mr. Sola relinquished the title of President when Mr. Furr was appointed
to such position in March 1996.
Mr. Furr joined Sanmina as Vice President and Chief Financial Officer in
August 1992. In March 1996, Mr. Furr was appointed President and Chief Operating
Officer. From April to August 1992, Mr. Furr was Vice President and Chief
Financial Officer of Aquarius Systems Inc. North America ("ASINA"), a
manufacturer of personal computers. Prior to working at ASINA, he held numerous
positions in both financial and general management for General Signal
Corporation during a 13 year period, serving most recently as Vice President and
General Manager of General Signal Thinfilm Company. Mr. Furr is a Certified
Public Accountant.
Mr. Whitney joined Sanmina as Vice President and Chief Financial Officer in
August 1997. From June 1995 to July 1997, he worked for Network General
Corporation, a network fault and performance management solutions company,
serving first as Corporate Controller, then in May 1996, he was named Vice
President of Finance. Prior to joining Network General, he worked for Conner
Peripherals serving in a variety of positions in corporate finance from February
1987 to June 1995.
Mr. Landy became Vice President of Sales and Marketing at Sanmina in October
1997. He joined Sanmina in August 1993 as General Manager of the Company's
Richardson, Texas operations and in 1995 was promoted to Vice President Assembly
Operations for the Central Region of the United States. Prior to his employment
with Sanmina, Mr. Landy held a senior management position with a
telecommunications corporation.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the
information under the caption "Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to the
information under the caption "Record Date and Stock Ownership" in the Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the
information under the caption "Certain Transactions" in the Proxy Statement.
15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. FINANCIAL STATEMENTS
The following Financial Statements of Sanmina Corporation and Report of
Independent Public Accountants are incorporated by reference to pages
30 through 39 of the Registrant's 1998 annual report to stockholders:
Report of Independent Public Accountants
Consolidated Balance Sheets, As of September 30, 1998 and 1997
Consolidated Statements of Operations, Years Ended September 30,
1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity, Years Ended
September 30, 1998, 1997 and 1996
Consolidated Statements of Cash Flows, Years Ended September 30,
1998, 1997 and 1996
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULE
The following financial statement schedule of Sanmina Corporation is
filed as part of this report on Form 10-K and should be read in
conjunction with the Financial Statements of Sanmina Corporation
incorporated by reference herein:
Schedule II -- Valuation and Qualifying Accounts
Report of Independent Public Accountants on Schedule
All other schedules are omitted because they are not applicable or
the required information is shown in the Financial Statements or the
notes thereto.
3. EXHIBITS
Refer to (c) below.
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the fiscal
quarter ended September 30, 1998.
On December 14, 1998, the Company filed with the Commission a report on
Form 8-K relating to the acquisition of Altron. Pro forma financial
information relating to such transaction will be filed with the
Commission within the time frame prescribed by Regulation S-X and the
rules regarding reporting on Form 8-K.
16
(c) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ---------- ----------------------------------------------------------------------------
3.2(8) Restated Certificate of Incorporation of Registrant.
3.3(1) Bylaws of Registrant, as amended.
4.2(1) Specimen Stock Certificate.
10.4(1) Form of Indemnification Agreement.
10.2(4) Amended 1990 Incentive Stock Plan.
10.3(1) 1993 Employee Stock Purchase Plan.
10.9(k)(2) Amended and Restated Credit Agreement dated as of August 18, 1993
among Sanmina Corporation, Chemical Bank and other lenders.
10.9(k)(5) Amendment dated July 27, 1995 to Amended and Restated Credit Agreement dated
August 18, 1993.
10.9(1)(2) Revolving Credit Note, $12,000,000.00, Chemical Bank.
10.10(1) Lease for premises at 2109 O'Toole Avenue, Suites A-E, San Jose, California
(Portion of Plant I).
10.11(1) Lease for premises at 2101 O'Toole Avenue, San Jose, California (Portion of Plant I).
10.12(1) Lease for premises at 2539 Scott Boulevard, Santa Clara, California (Plant III).
10.14(1) Lease for premises at 2060-2068 Bering Drive, San Jose, California (Plant II).
10.15(1) Lease for premises at 4220 Business Center Drive, Fremont, California (Plant V).
10.16(1) Lease for premises at McCarthy Boulevard, Milpitas, California (Plant VI).
10.17(1) Lease for premises at 2121 O'Toole Avenue, San Jose, California (Corporate Headquarters).
10.19(2) Lease for premises at 1250 American Parkway, Richards, Texas (Plant VII).
10.20(2) Lease for premises at 6453 Kaiser Drive, Fremont, California (Plant VIII).
10.21(3) Asset Purchase Agreement dated September 28, 1994 between Registrant and
Comptronix Corporation.
10.22(4) Lease for premises at 355 East Trimble Road, San Jose, California.
10.23(5) Stock Purchase Agreement dated May 31, 1995 between Sanmina Corporation,
Assembly Solutions, Inc. and the principal stockholders of Assembly Solutions, Inc.
10.24(6) Indenture dated August 15, 1995 between Registrant and Norwest Bank Minnesota,
N.A. as Trustee.
10.25(7) Asset Purchase Agreement dated September 20, 1996 between Registrant and
Comptronix Corporation.
10.26(9) Agreement and Plan of Merger dated July 22, 1997 among Registrant, SANM
Acquisition Subsidiary, Inc. and Elexsys International, Inc.
10.26(10) Agreement and Plan of Merger dated September 2, 1998 among Registrant, SANM
Acquisition Subsidiary, Inc. and Altron, Inc.
10.27 Synthetic lease agreement.
11.1 Statement of Computation of Earnings Per Share
13 Annual Report to Stockholders.
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
(1) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Registration Statement on Form S-1, No. 33-70700 filed
with the Securities and Exchange Commission ("SEC") on February 19, 1993.
(2) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Registration Statement on Form S-1 No. 33-70700 filed
with the SEC on October 22, 1993.
(3) Incorporated by reference to exhibit no. 2 previously filed with
Registrant's Report on Form 8-K filed with the SEC on October 28, 1994.
(4) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Report on Form 10-K filed with the SEC on December 29,
1994.
17
(5) Incorporated by reference to the like-numbered exhibit previously filed
with Registrant's Report on Form 10-Q filed with the SEC on July 31, 1995.
(6) Incorporated by reference to the like-numbered exhibit previously filed
with Registrant's Report on Form 10-K for the fiscal year ended September
30, 1995.
(7) Incorporated by reference to exhibit 2 previously filed with the
Registrant's Report on Form 8-K filed with the SEC on November 15, 1996.
(8) Incorporated by reference to the like numbered exhibit previously filed
with Registrant's Report on Form 10-K for the fiscal year ended September
30, 1997.
(9) Incorporated by reference to exhibit 2.1 previously filed with Registrant's
Report on Form 8-K filed with the SEC on November 21, 1997.
(10) Incorporated by reference to exhibit 2.1 previously filed with
Registrant's Report on Form 8-K filed with the SEC on September 4, 1998.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SANMINA CORPORATION
By:
Jure Sola
Chairman and Chief Executive Officer
Date: December 22, 1998
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jure Sola and Randy W. Furr, jointly and
severally, his or her attorneys-in-fact, and each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------ -----------------
Chairman, Chief Executive December 22, 1998
- ---------------------------------------- Officer and Director
Jure Sola (Principal Executive Officer)
Executive Vice President and December 22, 1998
- ---------------------------------------- Chief Financial Officer
Bernard J. Whitney (Principal Financial and
Accounting Officer)
Director December 22, 1998
- ----------------------------------------
Samuel Altschuler
Director December 22, 1998
- ----------------------------------------
Neil Bonke
Director December 22, 1998
- ----------------------------------------
John Bolger
Director December 22, 1998
- ----------------------------------------
Bernard Vonderschmitt
Director December 22, 1998
- ----------------------------------------
Mario M. Rosati
19
SCHEDULE II
SANMINA CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
---------- ---------- ---------- ----------
Allowance for Doubtful Accounts and Returns
Fiscal year ended September 30, 1996............ $1,387 $ 532 $214 $1,705
Fiscal year ended September 30, 1997............ $1,705 $2,133 $218 $3,620
Fiscal year ended September 30, 1998............ $3,620 $1,994 $945 $4,669
S-1
20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Stockholders
of Sanmina Corporation:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in Sanmina Corporation's annual report to
shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated October 23, 1998. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The schedule at Item
14(a)2 above is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
San Jose, California
October 23, 1998
S-2
21
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -------------------------------------------------------------------
10.27 Synthetic lease agreement.
11.1 Statement of Computation of Earnings Per Share
13 Annual Report to Stockholders
21 Subsidiaries of the Registrant
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule