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What changed in SANMINA CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of SANMINA CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+260 added−263 removedSource: 10-K (2024-11-27) vs 10-K (2023-11-16)

Top changes in SANMINA CORP's 2024 10-K

260 paragraphs added · 263 removed · 216 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

63 edited+9 added−11 removed98 unchanged
Biggest changeOur diversity, equity and inclusion principles are reflected in our employee training, in particular with respect to our policies against harassment and bullying and the elimination of bias in the workplace. 14 Table of Contents Management Engagement Practices We believe in a direct management-employee engagement model by which managers and employees maintain a regular dialogue about working conditions, compensation, compliance with laws and applicable standards, safety and advancement opportunities.
Biggest changeManagement Engagement Practices We believe in a direct management-employee engagement model by which managers and employees maintain a regular dialogue about working conditions, compensation, compliance with laws and applicable standards, safety and advancement opportunities. This model is also reflected in our training and compliance programs, which emphasize the need to report concerns about violations of policy or law.
Our capabilities 9 Table of Contents include complex medium and large format mill and lathe machining of aluminum, stainless steel, plastics, ferrous and nonferrous alloys and exotic alloys. We also have helium and hydrostatic leak-test capabilities. By leveraging our established supply chain, we oversee lapping, anodizing, electrical discharge machining, heat-treating, cleaning, laser inspection, painting and packaging.
Our capabilities include complex medium and large format mill and lathe machining of aluminum, stainless steel, plastics, ferrous and nonferrous alloys and exotic alloys. We also 9 Table of Contents have helium and hydrostatic leak-test capabilities. By leveraging our established supply chain, we oversee lapping, anodizing, electrical discharge machining, heat-treating, cleaning, laser inspection, painting and packaging.
We monitor the current economic environment and its potential impact on both the customers we serve as well as our end markets and closely manage our costs and capital resources so that we can respond appropriately as circumstances change.
We monitor the current economic environment and its potential impact on both the customers we serve and our end markets, and closely manage our costs and capital resources so that we can respond appropriately as circumstances change.
(“SCI”) subsidiary; and cloud-based smart manufacturing execution software from our 42Q division. Services include design, engineering, and logistics and repair. CPS generated approximately 20% of our total revenue in 2023. We target markets that we believe offer significant growth opportunities and in which OEMs sell complex mission critical products that are subject to strict regulatory requirements and/or rapid technological change.
(“SCI”) subsidiary; and cloud-based smart manufacturing execution software from our 42Q division. Services include design, engineering, and logistics and repair. CPS generated approximately 20% of our total revenue in 2024. We target markets that we believe offer significant growth opportunities and in which OEMs sell complex mission critical products that are subject to strict regulatory requirements and/or rapid technological change.
We make available through our website, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or SEC.
We make available through our website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”).
We manage our operations as two businesses: 1) Integrated Manufacturing Solutions (“IMS”). Our IMS business consists of printed circuit board assembly and test, high-level assembly and test and direct-order-fulfillment. This segment generated approximately 80% of our total revenue in 2023. 2) Components, Products and Services (“CPS”).
We manage our operations as two businesses: 1) Integrated Manufacturing Solutions (“IMS”). Our IMS business consists of printed circuit board assembly and test, high-level assembly and test and direct-order-fulfillment. This segment generated approximately 80% of our total revenue in 2024. 2) Components, Products and Services (“CPS”).
In recent years, the industry has expanded to respond to customer demands for products and services beyond electronic components, including product design and engineering, manufacturing, high-level assembly and test, direct order fulfillment and logistics services, after-market product services and support, and global supply chain management.
In recent years, the industry has expanded to respond to customer demand for products and services beyond electronic components, including product design and engineering, manufacturing, high-level assembly and test, direct order fulfillment and logistics services, after-market product services and support, and global supply chain management.
Our direct-order-fulfillment services include BTO and CTO capabilities: in BTO, we build a system with the particular configuration ordered by the OEM customer; in CTO, we configure systems to an end customer's order, for example by installing software desired by the end customer.
Our direct-order-fulfillment services include build-to-order (“BTO”) and configure-to-order (“CTO”) capabilities: in BTO, we build a system with the particular configuration ordered by the OEM customer; in CTO, we configure systems to an end customer's order, for example by installing software desired by the end customer.
Our experienced tooling, process, quality and resin engineers work concurrently using a scientific molding approach to develop cost-effective, highly reliable manufacturing solutions for medical, industrial, defense, multimedia, computing and data storage customers. Advanced Microsystems Technologies . Our Advanced Microsystems Technologies product technology and engineering division focuses on optical, RF and microelectronics design and manufacturing services.
Our experienced tooling, process, quality and resin engineers work concurrently using a scientific molding approach to develop cost-effective, highly reliable manufacturing solutions for medical, industrial, defense, multimedia, computing and data storage customers. Advanced Microsystems Technologies . Our Advanced Microsystems Technologies division focuses on optical, RF and microelectronics design and manufacturing services.
We embrace diverse perspectives and empower our employees to improve our organization, help us innovate, and continuously strengthen our workplace. 13 Table of Contents As a founding member of the RBA, its principles are fundamental to our corporate culture and core values and are reflected in our commitments to our customers, stakeholders, employees and communities in which we do business around the world.
We embrace diverse perspectives and empower our employees to improve our organization, help us innovate, and continuously strengthen our workplace. As a founding member of the RBA, its principles are fundamental to our corporate culture and core values and are reflected in our commitments to our customers, stakeholders, employees and communities in which we do business around the world.
A core component of our strategy is to attract, build and retain long-term partnerships with companies in growth industries that will benefit from our global/regional footprint and unique value proposition in advanced electronics manufacturing. 5 Table of Contents Promoting New Product Introduction (“NPI”) and Joint Design Manufacturing (“JDM”) Solutions.
A core component of our strategy is to attract, build and retain long-term partnerships with companies in growth industries that will benefit from our global/regional footprint and unique value proposition in advanced electronics manufacturing. Promoting New Product Introduction (“NPI”) and Joint Design Manufacturing (“JDM”) Solutions.
Nokia and Motorola each represented 10% or more of our net sales in 2022. We typically enter into supply agreements with our major OEM customers with terms ranging from three to five years. Our supply agreements generally do not obligate the customer to purchase minimum quantities of products.
Nokia represented 10% or more of our net sales in 2023 and 2022. We typically enter into supply agreements with our major OEM customers with terms ranging from three to five years. Our supply agreements generally do not obligate the customer to purchase minimum quantities of products.
We have aligned our work programs, processes and procedures to the RBA Code of Conduct to help ensure a safe and positive work environment for our employees that emphasizes learning and professional development, respect for individuals and ethical conduct, and that is facilitated by a direct management-employee engagement model.
We have aligned our work programs, processes and procedures to the RBA Code of Conduct to help ensure a safe and 13 Table of Contents positive work environment for our employees that emphasizes learning and professional development, respect for individuals and ethical conduct, and that is facilitated by a direct management-employee engagement model.
In addition, we have been found liable in a lawsuit alleging operations at our current and former facilities in Orange County, California contributed to groundwater contamination, 12 Table of Contents and also have ongoing investigation activities at and adjacent to a former facility to determine the extent of any soil, soil vapor, and groundwater contamination.
In addition, we have been found liable in a lawsuit alleging operations at our current and former facilities in Orange County, California contributed to groundwater contamination, and also have ongoing investigation activities at and adjacent to a former facility to determine the extent of any soil, soil vapor, and groundwater contamination.
We work with our customers to anticipate their future product and manufacturing requirements and align our technology investment activities with their needs. We use our design expertise to develop product technology platforms that we can customize by incorporating other components and subassemblies to meet the needs of particular OEMs.
We work with our customers to anticipate their future product and manufacturing requirements and align our technology investment activities with their needs. We use our design expertise to develop product technology platforms that we can customize by incorporating other components 5 Table of Contents and subassemblies to meet the needs of particular OEMs.
All reports we file with the SEC are also available free of charge via EDGAR through the SEC's website at http://www.sec.gov . 16 Table of Contents
All reports we file with the SEC are also available free of charge via EDGAR through the SEC's website at http://www.sec.gov . 15 Table of Contents
We continue to invest in factory automation, process improvements, robotics and artificial intelligence (“AI”) to further enhance our efficiency output. We maintain extensive operations in lower-cost locations and we plan to expand our presence as appropriate to meet the needs of our customers. We believe we are well positioned to take advantage of future opportunities on a global/regional basis.
We continue to invest in factory automation, process improvements, robotics and AI to further enhance our efficiency output. We maintain extensive operations in lower-cost locations and we plan to expand our presence as appropriate to meet the needs of our customers. We believe we are well positioned to take advantage of future opportunities on a global/regional basis.
Our enterprise-wide ERP systems provide us with company-wide information regarding component inventories and orders to help optimize inventories, planning and purchasing at the facility level. 7 Table of Contents Expertise in Serving Diverse End Markets. We have experience in serving customers in the industrial, medical, defense and aerospace, automotive, communications networks and cloud infrastructure end markets.
Our enterprise-wide ERP systems provide us with company-wide information regarding component inventories and orders to help optimize inventories, planning and purchasing at the facility level. Expertise in Serving Diverse End Markets. We have experience in serving customers in the industrial, medical, defense and aerospace, automotive, communications networks and cloud infrastructure end markets.
Finally, there are some sites, including our acquired facility in Gunzenhausen, Germany, which are known to have groundwater contamination caused by a third-party, and that third-party has provided indemnification to us for the related liability. However, in certain situations, third-party indemnities may not be effective to reduce our liability for environmental contamination.
Finally, there are some sites, including our acquired facility in Gunzenhausen, Germany, 12 Table of Contents which are known to have groundwater contamination caused by a third-party, and that third-party has provided indemnification to us for the related liability. However, in certain situations, third-party indemnities may not be effective to reduce our liability for environmental contamination.
We believe our end-to-end solutions allow us to develop closer relationships with our customers and more effectively compete for their future business. Product Design and Engineering Resources. We provide product design and engineering services for new product designs, cost reductions and Design-for-Manufacturability/Assembly/Test (“DFx”). Our engineers work with our customers during the complete product life cycle.
We believe our end-to-end solutions allow us to develop closer relationships with our customers and more effectively compete for their future business. Product Design and Engineering Resources. We provide product design and engineering services for new product designs, cost reductions and Design-for-Manufacturability/Assembly/Test (“DFx”). Our engineers work with our customers 6 Table of Contents during the complete product life cycle.
The average tenure of our employees is approximately eight years and approximately 30% of our employees have been employed by us for more than ten years.
The average tenure of our employees is approximately eight years and approximately 34% of our employees have been employed by us for more than ten years.
In the U.S., we are subject to the requirements of the United States Department of Labor’s Occupational Safety & Health Administration (“OSHA”) and we are guided by the Environmental Health and Safety principles as described in the RBA’s Code of Conduct worldwide. We conduct regular self-assessments and audits to ensure compliance with our health and safety guidelines and regulatory requirements.
In the U.S., we are subject to the requirements of the United States Department of Labor’s OSHA and we are guided by the Environmental Health and Safety principles as described in the RBA’s Code of Conduct worldwide. We conduct regular self-assessments and audits to ensure compliance with our health and safety guidelines and regulatory requirements.
This system enables us to forecast future supply and demand imbalances and develop strategies to help our customers manage their component requirements, especially during supply shortages that have affected our industry in the recent past.
This system enables us to forecast 7 Table of Contents future supply and demand imbalances and develop strategies to help our customers manage their component requirements, especially during supply shortages that have affected our industry in the recent past.
In some international locations, our employees are represented by labor unions on either a national or plant level or are subject to collective bargaining agreements. 15 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table sets forth the name, position and age of our current executive officers and their ages as of September 30, 2023.
In some international locations, our employees are represented by labor unions on either a national or plant level or are subject to collective bargaining agreements. 14 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table sets forth the name, position and age of our current executive officers and their ages as of September 28, 2024.
Region Approximate Breakdown of Employees Americas 56 % APAC 33 % EMEA 11 % Total 100 % Core Principles At Sanmina, we believe our employees are the key to our success. We cultivate an agile, innovative workplace culture fueled by collaboration, diversity, equity and inclusion. Having highly engaged employees is essential to our culture and achieving our mission.
Region Approximate Breakdown of Employees Americas 58 % APAC 32 % EMEA 10 % Total 100 % Core Principles At Sanmina, we believe our employees are the key to our success. We cultivate an agile, innovative workplace culture fueled by collaboration, diversity, equity and inclusion. Having highly engaged employees is essential to our culture and achieving our mission.
Our mission is to deliver leading-edge technology solutions that enable our customer products while optimizing the value and performance of our customers’ applications. We currently supply a wide range of optical products from 10G to 800G supporting optical communication, AI, high performance computing and data center marketplaces.
Our mission is to deliver leading-edge technology solutions that enable our customer products while optimizing the value and performance of our customers’ applications. We currently supply a wide range of optical products from 100G to 1.6T supporting optical communication, AI, high performance computing, quantum computing and data center marketplaces.
Our facilities also support full system level assembly and test and logistic support for a variety of complex electronic systems, including radio base stations and transmission equipment for 5G wireless networks, optical central offices and wireline switching and routing hardware, server and storage systems for data centers, carriers central offices and video streaming service providers, surgical controllers, ultrasound systems, patient monitoring systems, automotive sensor assemblies, and electric vehicle power control systems and modules.
Our facilities also support full system level assembly and test and logistic support for a variety of complex electronic systems, including radio base stations and transmission equipment for wireless networks, optical central offices and wireline switching and routing hardware, server and storage systems for data centers, carriers central offices and video streaming service providers, high-volume disposable sensors and drug delivery devices, lab diagnostics, surgical controllers, ultrasound systems, patient monitoring systems, automotive sensor assemblies, and electric vehicle power control systems and modules.
Our IT systems provide full traceability of the product returns, the repair process, component swaps, manufacturing process (when manufactured by Sanmina) and product test results. 10 Table of Contents 42Q. Our 42Q division provides an innovative, world-class cloud-based smart manufacturing execution solution that is scalable, flexible, secure and easy to implement.
Our IT systems provide full traceability of 10 Table of Contents the product’s lifecycle, from manufacturing and distribution to product returns, the repair process, component swaps and product test results. 42Q. Our 42Q division provides an innovative, world-class cloud-based smart manufacturing execution solution that is scalable, flexible, secure and easy to implement.
To date, lead dust remediation costs have not been material to our results of operations. We also monitor for airborne concentrations of lead in our buildings and are unaware of any significant lead concentrations that exceed the applicable OSHA or other local standards.
To date, lead dust remediation costs have not been material to our results of operations. We also monitor for airborne concentrations of lead in our buildings and are unaware of any significant lead concentrations that exceed the applicable Occupational Safety & Health Administration (“ OSHA”) or other local standards.
Industry Overview The industry in which we operate has historically been comprised of companies that provide a range of design and manufacturing services to companies that utilize electronic components in their products.
Industry Overview Our industry has historically been comprised of companies that provide a range of design and manufacturing services to companies that utilize electronic components in their products.
Standardized processes and procedures make transitioning of products easier for our customers. Our worldwide engineering teams support designers in Design for Manufacturability analysis and assemblers with field applications support. Backplanes and Backplane Assemblies. Backplanes are typically very large printed circuit boards that serve as the backbones of sophisticated electronics products, such as internet routers.
Standardized processes and procedures make transitioning of products easier for our customers. Our field applications engineering personnel support designers with material selection and design for manufacturability advice. Backplanes and Backplane Assemblies. Backplanes are typically very large printed circuit boards that serve as the backbones of sophisticated electronics products, such as internet routers and switches.
Any of such results would increase our expenses, reduce our revenue and damage our reputation as both a commercial and government supplier. Human Capital Resources General Information About Our Human Capital Resources As of September 30, 2023, we had approximately 34,000 employees and approximately 4,000 temporary employees, in 21 countries.
Any of such results would increase our expenses, reduce our revenue and damage our reputation as both a commercial and government supplier. Human Capital Resources General Information About Our Human Capital Resources As of September 28, 2024, we had approximately 37,000 employees, including 5,000 temporary employees in 21 countries.
We offer a suite of world-class precision machining services in the U.S. and Israel. We use advanced numerically controlled machines enabling the manufacture of components that are machined to very tight tolerances and we often perform further assembly services with these components in clean-room environments.
We offer a suite of world-class precision machining services in multiple locations. We use advanced numerically controlled machines enabling the machining to very tight tolerances and we often perform further assembly services with these components in clean-room environments.
In addition to our manufacturing and repair locations, we support our customers’ logistics and repair requirements through a certified partner network. Comprehensive IT Systems and Global Supply Chain Management.
In addition to our manufacturing, distribution and repair locations, we support our customers’ logistics and repair requirements through a network of certified partners around the world. Comprehensive IT Systems and Global Supply Chain Management.
Backplanes provide interconnections for printed circuit board assemblies, power supplies, and other electronic components. Backplane fabrication is significantly more complex than printed circuit board fabrication due to the large size and thickness of the backplanes. We manufacture backplane assemblies by press-fitting high-density connectors into plated through-holes in the fabricated backplane.
Backplane fabrication is significantly more complex than printed circuit board fabrication due to the large size and thickness of the backplanes. We assemble backplanes by press-fitting high-density connectors into plated through-holes in the fabricated backplane.
With our extensive market knowledge and global/regional footprint, we can align these solutions to our facilities in each region around the world. Sales to our ten largest customers typically represent approximately 50% of our net sales. Nokia represented 10% or more of our net sales in 2023 and 2021.
With our extensive market knowledge and global/regional footprint, we can align these solutions to our facilities in each region around the world. Sales to our ten largest customers represented 47% of our net sales in 2024. Motorola represented 10% or more of our net sales in 2024 and 2022.
Name Age Position Jure Sola 72 Chairman and Chief Executive Officer Kurt Adzema 54 Executive Vice President, Chief Financial Officer Alan Reid 60 Executive Vice President, Global Human Resources Charles C. Mason 58 Executive Vice President, Worldwide Sales Jure Sola has served as our Chairman and Chief Executive Officer since August 2020.
Name Age Position Jure Sola 73 Chairman and Chief Executive Officer Jonathan Faust 47 Executive Vice President, Chief Financial Officer Alan Reid 61 Executive Vice President, Global Human Resources Charles C. Mason 59 Executive Vice President, Worldwide Sales Jure Sola has served as our Chairman and Chief Executive Officer since August 2020.
We also provide mechanical assembly and integration services where we often assemble, integrate and test cables with electromechanical systems or sub-systems. We design and manufacture a broad range of high-speed data, radio frequency and fiber optic cabling products. We build cable assemblies that are used in power systems typically classified as low and medium voltage. Fabricated Metal Parts.
We design and manufacture a broad range of high-speed data, radio frequency and fiber optic cabling products. We build cable assemblies that are used in power systems typically classified as low and medium voltage. Fabricated Metal Parts.
We have developed proprietary technologies and process “know-how” which enable backplanes to run at data rates in excess of 50 gigahertz. We currently have capabilities to manufacture backplanes at greater than 60 layers in sizes up to 26x40 inches and up to a nominal thickness of 0.425 inches and in a wide variety of high-performance laminate materials.
We currently have capabilities to manufacture backplanes at greater than 60 layers in sizes up to 26x40 inches and up to a nominal thickness of 0.425 inches and in a wide variety of high-performance laminate materials.
All references in this report to years refer to our fiscal years unless otherwise noted. Our end-to-end solutions, combined with our global supply chain management expertise, allow us to manage our customers' products throughout their life cycles.
The combination of our advanced technologies, extensive manufacturing expertise and economies of scale enables us to meet the specialized needs of our customers. All references in this report to years refer to our fiscal years unless otherwise noted. Our end-to-end solutions, combined with our global supply chain management expertise, allow us to manage our customers' products throughout their life cycles.
Our customers benefit significantly from our experience in these areas, including product cost reduction, minimization of assets deployed for manufacturing, accelerated time-to-market and a simplified supply chain.
These solutions are provided in every major region worldwide, with design and prototyping close to our customer’s product development centers. Our customers benefit significantly from our experience in these areas, including product cost reduction, minimization of assets deployed for manufacturing, accelerated time-to-market and a simplified supply chain.
Employees have access to courses through our learning and development platforms including Pilgrim, Sanmina Online Education and Sanmina University. Our performance review process is intended to promote transparent communication of team member performance, which we believe is a key factor in our success.
Employees have access to courses through multiple learning and development platforms. Our performance review process is intended to promote transparent communication of team member performance, which we believe is a key factor in our success. Performance reviews enable ongoing assessments, reviews, and mentoring to identify career development and learning opportunities for our employees.
Our customer-focused organization with 34,000 employees supports our customers from 21 countries on four continents. We locate our facilities near our customers and their end markets in major centers for the electronics industry or in lower-cost locations. The combination of our advanced technologies, extensive manufacturing expertise and economies of scale enables us to meet the specialized needs of our customers.
Our customer-focused organization with 37,000 employees, including 5,000 temporary employees, supports our customers from 21 countries on four continents. We locate our facilities near our customers and their end markets in major centers for the electronics industry or in lower-cost locations.
SCI has the infrastructure and facility security clearance to support the stringent certifications, regulations, processes and procedures required by these customers. Global Services. Sanmina Global Services complements our end-to-end manufacturing strategy by integrating engineering, supply chain, manufacturing, logistics, repair and environmentally friendly disposition into a seamless solution for customers, for both Sanmina manufactured, and non-Sanmina manufactured products around the world.
Sanmina Global Services complements our end-to-end manufacturing strategy by integrating a full range of post-manufacturing and after-market services, engineering, supply chain, manufacturing, logistics, repair and environmentally friendly disposition into a seamless solution for customers, for both Sanmina-manufactured, and non-Sanmina-manufactured products around the world.
Our design and NPI centers provide turnkey system design services, including: electrical, mechanical, thermal, software, layout, simulation, test development, design verification, validation, regulatory compliance and testing services.
Our design and NPI centers provide turnkey system design services, including: electrical, mechanical, thermal, software, layout, simulation, test development, design verification, validation, regulatory compliance and testing services. We design high-speed digital, analog, radio frequency, mixed-signal, wired, wireless, optical and electro-mechanical modules and systems.
Other Regulations We are also subject to a number of domestic and foreign regulations relating to our operations worldwide. In particular, our sales activities must comply with restrictions relating to the export of controlled technology and sales to denied or sanctioned parties contained in the U.S. International Traffic in Arms Regulations, U.S.
In particular, our sales activities must comply with restrictions relating to the export of controlled technology and sales to denied or sanctioned parties contained in the U.S. International Traffic in Arms Regulations, U.S. Export Administration Regulations and sanctions administered by the Office of Foreign Asset Controls of the U.S. Treasury Department.
We believe the primary competitive factors in our industry include manufacturing technology, quality, global/regional footprint, delivery, 11 Table of Contents responsiveness, provision of value-added solutions and price. We believe we are extremely competitive with regard to all of these factors.
We compete with different companies depending on the type of solution or geographic area. We believe the primary competitive factors in our industry include manufacturing technology, quality, global/regional footprint, delivery, responsiveness, provision of value-added solutions and price.
These are among the largest and most complex commercially manufactured backplanes and the test equipment we have ensures the quality and performance of these backplane systems is “world class.” We are capable of testing the signal integrity of these backplanes, and often also utilize state of the art x-ray equipment to verify defect-free installation of the new high density/high speed connectors.
We are capable of testing the signal integrity of these backplanes, and often also utilize state of the art x-ray equipment to verify defect-free installation of the new high density/high speed connectors. Cable Assemblies. Cable assemblies are used to connect modules, assemblies and subassemblies, including backplane assemblies in electronic systems.
The expiration and abandonment of patents reduces our ability to assert claims against competitors or others who use similar technologies and to license such patents to third parties. We have registered a number of trademarks and have pending trademark applications in both the U.S. and internationally.
For other proprietary processes, we rely primarily on trade secret protection. A number of our patents have expired or will expire in the near term. The expiration and abandonment of patents reduces our ability to assert claims against competitors or others who use similar technologies and to license such patents to third parties.
Cable Assemblies. Cable assemblies are used to connect modules, assemblies and subassemblies, including backplane assemblies in electronic systems. We provide a broad range of cable assembly products and services, from cable assemblies and harnesses for automobiles to very complex harnesses for industrial products and semiconductor manufacturing equipment.
We provide a broad range of cable assembly products and services, from cable assemblies and harnesses for automobiles to very complex harnesses for industrial products and semiconductor manufacturing equipment. We also provide mechanical assembly and integration services where we often assemble, integrate and test cables with electromechanical systems or sub-systems.
In these engagement models, our customers bring market knowledge and product requirements and we provide complete design engineering and new product introductions services. For JDM products, the intellectual property is typically jointly owned by us and the customer, and we perform manufacturing and logistics services. For CDM projects, customers pay for all services and own the intellectual property.
For JDM products, the intellectual property is typically jointly owned by us and the customer, and we perform manufacturing and logistics services. For CDM projects, customers pay for all services and own the intellectual property. Vertically Integrated Manufacturing Solutions. We provide a range of vertically integrated manufacturing solutions, including high-technology components, new product introduction and test development services.
Our Viking Technology division provides advanced high technology hardware products, such as Solid-State Drives (SSDs), DRAM memory modules, and Non-Volatile DIMMs. Furthermore, Viking Technology specializes in delivering state-of-the-art ruggedized Microelectronics Multi-Chip Package (MCP) memory solutions. Viking Technology product offerings cater to the networking, industrial, transportation, medical, AI, data centers, and defense and aerospace markets. Viking Enterprise Solutions.
Our Viking Technology division provides advanced high-technology hardware products, such as Solid-State Drives (SSDs), DRAM memory modules, Non-Volatile DIMMs and the latest Compute Express Link (“CXL”) attached memory which increases efficiency by allowing composability, scalability, and flexibility for heterogeneous and distributed computer architectures. Furthermore, Viking Technology specializes in delivering state-of-the-art ruggedized Microelectronics Multi-Chip Package (MCP) memory solutions.
With decades of experience in automated system assembly and test, we have focused on glucose meters, disposable sensors, IOT communication modules and disposable drug delivery systems. These products require highly specialized manufacturing capabilities and processes, as well as integrated IT systems and, in some cases, industry-specific certifications. Direct-Order-Fulfillment. We provide direct-order-fulfillment for our OEM customers.
These products require highly specialized manufacturing capabilities and processes, as well as integrated IT systems and, in most cases, rigorous regulatory compliance and certifications. Direct-Order-Fulfillment. We provide direct-order-fulfillment for our OEM customers.
Intellectual Property We hold U.S. and foreign patents and patent applications relating to, among other things, printed circuit board manufacturing technology, enclosures, cables, memory modules, optical technology, medical devices and computing and storage. For other proprietary processes, we rely primarily on trade secret protection. A number of our patents have expired or will expire in the near term.
We believe we are extremely competitive with regard to all of these factors. 11 Table of Contents Intellectual Property We hold U.S. and foreign patents and patent applications relating to, among other things, printed circuit board manufacturing technology, enclosures, cables, memory modules, optical technology, medical devices and computing and storage.
Sanmina, Viking, Viking Enterprise Solutions, Viking Technology and 42Q are registered trademarks of Sanmina Corporation.
We have registered a number of trademarks and have pending trademark applications in both the U.S. and internationally. Sanmina, Viking, Viking Enterprise Solutions, Viking Technology and 42Q are registered trademarks of Sanmina Corporation.
SCI offers advanced products for aircraft systems and tactical communications, unmanned aerial systems and components, counter-unmanned aerial systems and components, and fiber-optics capabilities for use in a variety of defense-related applications. SCI's customers include U.S. government agencies, U.S. allies and major defense and aerospace prime contractors.
Our SCI subsidiary has provided engineering services, products, manufacturing, test, and depot and repair solutions to the global defense and aerospace industry for more than 60 years. SCI offers advanced products for aircraft systems and tactical communications, unmanned aerial systems and components, counter-unmanned aerial systems and components, and fiber-optics capabilities for use in a variety of defense-related applications.
Our Viking Enterprise Solutions division (“VES”) is a market leader in high-performance storage platforms for hyperscale and enterprise data centers worldwide.
Our Viking Enterprise Solutions division (“VES”) is a market leader in high-performance storage platforms for both enterprise and hyperscaler data centers globally. Our differentiated nonvolatile memory express (“NVMe”) flash and disk-based storage solutions enable VES to meet the growing demands for data processing and storage efficiency.
Almost 50% of our employees worldwide are female and, in the U.S., non-Caucasian employees account for approximately 57% of the employee base.
Approximately 49% of our employees worldwide are female and, in the U.S., non-Caucasian employees account for approximately 60% of the employee base. Our diversity, equity and inclusion principles are reflected in our employee training, in particular with respect to our policies against harassment and bullying and the elimination of bias in the workplace.
Our components, products and services business faces competition from EMS and non-EMS companies that often have a regional product, service or industry-specific focus. In addition, our potential customers may also compare the benefits of outsourcing their manufacturing to us with the merits of manufacturing products themselves. We compete with different companies depending on the type of solution or geographic area.
Competition Our business is highly competitive. We compete against numerous domestic and foreign electronic manufacturing service providers, diversified manufacturing service providers and design providers. In addition, our potential customers may also compare the benefits of outsourcing their manufacturing to us with the merits of manufacturing products themselves.
We consider their recommendations together with other information when determining the appropriate amount to accrue for environmental liabilities. Our capital expenditures for environmental control facilities were not material in any of the last three fiscal years and we do not expect to make material expenditures for this purpose during the current fiscal year.
We consider their recommendations together with other information when determining the appropriate amount to accrue for environmental liabilities. Other Regulations We are also subject to a number of domestic and foreign regulations relating to our operations worldwide.
We report our end markets as follows: 1) Industrial, Medical, Defense and Aerospace, and Automotive: a. Industrial. Security and safety, industrial power inverters, renewable energy (solar and wind), LED lighting, EV chargers, smart meters, airport security, test and measurement, warehouse asset management equipment, semiconductor equipment and heavy machinery. b. Medical.
We report our end markets as follows: 1) Industrial, Medical, Defense and Aerospace, and Automotive: a. Industrial. Power generation, distribution, storage and controls for grid, data center, commercial and home applications. Industry 4.0 enabling, warehouse and factory asset management equipment, test and measurement systems and connected factory manufacturing software.
With advances in interconnect speeds and architectural changes to disaggregate storage and compute for scale, VES is well positioned with a product portfolio to take advantage of these trends. SCI. Our SCI subsidiary has provided engineering services, products, manufacturing, test, and depot and repair solutions to the global defense and aerospace industry for nearly 60 years.
VES provides solutions ideal for a wide range of applications including rack scale data storage and AI and machine learning workloads. With advances in interconnect speeds and architectural shifts towards disaggregating storage from compute for scalability and efficiency in large data centers, VES is well positioned to take advantage of these trends. SCI.
This model is also reflected in our training and compliance programs, which emphasize the need to report concerns about violations of policy or law. None of our U.S. employees are represented by a labor union.
None of our U.S. employees are represented by a labor union.
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Lab diagnostic, patient monitoring, medical imaging, disposable glucose sensors and insulin pumps, glucose meters, genome sequencing, ventilators and medication delivery. c. Defense and Aerospace. Aircraft systems, tactical and secure network communications systems, unmanned aerial systems, and counter-unmanned aerial systems. 4 Table of Contents d. Automotive.
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Next generation semiconductor emulation and fabrication equipment supporting current and next generation artificial intelligence (“AI”) solutions. b. Medical. Disposable, wearable and consumable products supporting glucose sensing, insulin and drug delivery, cancer treatment, diagnostic cartridges and general health monitoring. Lab diagnostic, life sciences, 4 Table of Contents lab processing equipment, high volume automated labs, point of care and personal use devices.
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Autonomous and advanced driver assistance systems computing and sensing, Light Detection and Ranging (“LIDAR”) and radar systems, e-motor power management, infotainment, safety systems and electronic control systems. 2) Communications Networks and Cloud Infrastructure: Networking, IP routing, advanced optical systems and transceivers, 5G and other wireless systems, data center applications, edge solutions, enterprise computing and storage.
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Next generation imagining, monitoring and therapeutic delivery systems. c. Defense and Aerospace. Federal, regional, municipal and commercial surveillance systems, secure network communication systems and personal protection devices. Federal and commercial manned and unmanned aerospace products. d. Automotive and Transportation. Power conversion and battery management for battery electric vehicles and hybrid electric vehicles. Heavy equipment, agricultural, commercial and passenger vehicles.
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We design high-speed digital, analog, radio frequency, mixed-signal, wired, wireless, optical and electro-mechanical modules and systems. 6 Table of Contents Our engineering engagement models include Joint Design Manufacturing (“JDM”), Contract Design Manufacturing (“CDM”) and consulting engineering for DFx and Value Engineering (cost reduction re-design).
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Autonomous, driver assistance and remote control vehicle applications. 2) Communications Networks and Cloud Infrastructure: Next generation fixed wireless networks. Optical (400G, 800G, 1.6T) shelves, modules and transceivers. Switches, servers, storage, racks and cooling for traditional data centers, edge compute and AI centric data center applications.
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Vertically Integrated Manufacturing Solutions. We provide a range of vertically integrated manufacturing solutions, including high-technology components, new product introduction and test development services. These solutions are provided in every major region worldwide, with design and prototyping close to our customer’s product development centers.
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Our engineering engagement models include JDM, Contract Design Manufacturing (“CDM”) and consulting engineering for DFx and Value Engineering (cost reduction re-design). In these engagement models, our customers bring market knowledge and product requirements and we provide complete design engineering and new product introductions services.
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Leveraging our portfolio of proven product designs, VES provides advanced data center products, including NVMe flash memory and disk-based storage server appliances, JBOD storage systems and related products for a variety of storage and data center applications including rack scale and AI/ML solutions.
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These are among the largest and most complex commercially manufactured backplanes and the test equipment we have ensures the quality and performance of these backplane systems is “world class”.
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Competition Our business is highly competitive. We compete against numerous domestic and foreign electronic manufacturing service providers, diversified manufacturing service providers and design providers. For our integrated manufacturing solutions business, we face competition from other major global EMS companies such as Benchmark Electronics, Inc., Celestica, Inc., Flex Ltd., Hon Hai Precision Industry Co., Ltd. (Foxconn), Jabil Inc. and Plexus Corp.
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The compact and rugged design of these MCPs makes them ideal for Size, Weight, and Power (SWaP) optimized applications. Viking Technology product offerings cater to the networking, industrial, transportation, medical, AI, data centers, and defense and aerospace markets. Viking Enterprise Solutions.
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Export Administration Regulations and sanctions administered by the Office of Foreign Asset Controls of the U.S. Treasury Department.
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SCI's customers include U.S. government agencies, U.S. allies and major defense and aerospace prime contractors. SCI has the infrastructure and facility security clearance to support the stringent certifications, regulations, processes and procedures required by these customers. Global Services.
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The performance reviews enable ongoing assessments, reviews, and mentoring to identify career development and learning opportunities for our employees. Our emphasis on employee retention, talent reviews, employee evaluations and succession planning contributed to a promotion rate of approximately 9% in 2023.
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Jonathan Faust has served as our Executive Vice President and Chief Financial Officer since December 2023. Mr. Faust previously served as Global Controller and Head of Corporate Finance & Services of Hewlett Packard Enterprise (“HP”), which he joined in August 2021. From February 2020 until July 2021, Mr. Faust was Chief Financial Officer of Aruba, a HP company. Mr.
Removed
Kurt Adzema has served as our Executive Vice President and Chief Financial Officer since October 2019. Mr. Adzema previously served as the Executive Vice President, Finance and Chief Financial Officer of Finisar Corporation, an optical components company, from March 2010 until September 2019. Prior to March 2010, Mr.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

60 edited+12 added−5 removed113 unchanged
Biggest changeOur operating results can vary due to a number of significant uncertainties, including: • our ability to replace declining sales from end-of-life programs and customer disengagements with new business wins; • conditions in the global economy as a whole and in the industries we serve, which have been significantly impacted by the COVID-19 pandemic, supply chain disruptions, inflationary pressures and rising interest rates; • fluctuations in component prices, component shortages and extended component lead times caused by high demand and supply chain constraints, disruptions relating to the COVID-19 pandemic, geopolitical events, such as the war in Ukraine and conflict in the Middle East, natural disasters or otherwise; • timing and success of new product developments and ramps by our customers, which create demand for our services, but which can also require us to incur start-up costs relating to new tooling and processes; • levels of demand in the end markets served by our customers; • timing of orders from customers, the accuracy of their forecasts which drive the amount of components we order and the extent to which customers reschedule or cancel their orders; • our inventory levels, which have been driven higher as a result of ongoing supply chain disruptions, with higher levels of inventory reducing our operating cash flow; • customer payment terms and the extent to which we factor customer receivables during the quarter; • increasing labor costs in the regions in which we operate; • mix of products ordered by and shipped to major customers, as high volume and low complexity manufacturing services typically have lower gross margins than more complex and lower volume services; • our ability to pass tariffs and price increases of components through to our customers; • resolution of quality or other claims made by our customers; • the degree to which we are able to fully utilize our available manufacturing capacity or expand, when necessary to satisfy customer demand; • customer insolvencies resulting in bad debt or inventory exposures that are in excess of our reserves; 17 Table of Contents • our ability to efficiently move manufacturing operations to lower cost regions when requested by our customers; • changes in our tax provision due to changes in our estimates of pre-tax income in the jurisdictions in which we operate, uncertain tax positions and our continued ability to utilize our deferred tax assets; • political and economic developments in countries in which we or our customers or our suppliers have operations, which could restrict our operations or those of our suppliers and/or customers or increase our costs; and • Accuracy of management’s estimates for materials, labor and subcontractor costs relating to long-term contracts particularly for new products, as any impact due to changes in estimates must be recognized in the period of change.
Biggest changeOur operating results can vary due to a number of significant uncertainties, including: • our ability to replace declining sales from end-of-life programs and customer disengagements with new business wins; • conditions in the global economy as a whole and in the industries we serve, which have been significantly impacted by supply chain disruptions, inflationary pressures and higher interest rates; • fluctuations in component prices, component shortages and extended component lead times caused by high demand and supply chain constraints and disruptions caused by geopolitical events, such as the war in Ukraine and conflict in the Middle East, natural disasters or otherwise; • timing and success of new product developments and ramps by our customers, which create demand for our services, but which can also require us to incur start-up costs relating to new tooling and processes; • levels of demand in the end markets served by our customers and the amount of inventory held by them; • timing of orders from customers, the accuracy of their forecasts which drive the amount of components we order and the extent to which customers reschedule or cancel their orders; • the extent to which our customers may choose to in-source the manufacturing of their products; • our inventory levels, which in the past have been driven higher as a result of supply chain disruptions, with higher levels of inventory reducing our operating cash flow; • our customers’ inventory levels, which, if high, decrease demand for new orders for products; • customer payment terms and the extent to which we factor customer receivables during the quarter; • increasing labor costs in the regions in which we operate; • mix of products ordered by and shipped to major customers, as high volume and low complexity manufacturing services typically have lower gross margins than more complex and lower volume services; • our ability to pass tariffs and price increases of components through to our customers; 16 Table of Contents • quality or other claims made by our customers; • the degree to which we are able to fully utilize our available manufacturing capacity or expand, when necessary to satisfy customer demand; • customer insolvencies resulting in bad debt or inventory exposures that are in excess of our reserves; • our ability to efficiently move manufacturing operations to lower cost regions when requested by our customers; • changes in our tax provision due to changes in our estimates of pre-tax income in the jurisdictions in which we operate, uncertain tax positions and our continued ability to utilize our deferred tax assets; • political and economic developments in countries in which we or our customers or our suppliers have operations, which could restrict our operations or those of our suppliers and/or customers or increase our costs; and • accuracy of management’s estimates of materials, labor and subcontractor costs relating to long-term contracts, particularly for new products, as any impact due to changes in estimates must be recognized in the period of change.
Variability in our operating results may also lead to variability in cash generated by operations, which can adversely affect our ability to make capital expenditures, engage in strategic transactions and repurchase stock. We are subject to risks arising from our international operations. The substantial majority of our net sales are generated through our non-U.S. operations.
Variability in our operating results may also lead to variability in cash generated by operations, which can adversely affect our ability to make capital expenditures, repurchase stock and engage in strategic transactions. We are subject to risks arising from our international operations. The substantial majority of our net sales are generated through our non-U.S. operations.
In particular, our insurance coverage with respect to damages to or closure of our facilities, or damages to our customers’ products caused by cyberattacks and certain natural disasters, such as earthquakes, epidemics and pandemics (such as the COVID-19 pandemic), is limited and is subject to policy deductibles, coverage limits, and exclusions, and as a result, may not be sufficient to cover all of our losses.
In particular, our insurance coverage with respect to damages to or closure of our facilities, or damages to our customers’ products caused by cyberattacks, outages and certain natural disasters, such as earthquakes, epidemics and pandemics (such as the COVID-19 pandemic), is limited and is subject to policy deductibles, coverage limits, and exclusions, and as a result, may not be sufficient to cover all of our losses.
These factors include: • intense competition among our customers and their competitors, leading to reductions in prices for their products and increases in pricing pressure placed on us; • failure of our customers’ products to gain widespread commercial acceptance, which could decrease the volume of orders our customers place with us; • changes in regulatory requirements affecting the products we build for our customers, leading to product redesigns or obsolescence and potentially causing us to lose business; and • the negative effects of inflation, rising interest rates and any potential resultant recession on customers’ end markets and their demand for our products and services.
These factors include: • intense competition among our customers and their competitors, leading to reductions in prices for their products and increases in pricing pressure placed on us; • failure of our customers’ products to gain widespread commercial acceptance, which could decrease the volume of orders our customers place with us; • changes in regulatory requirements affecting the products we build for our customers, leading to product redesigns or obsolescence and potentially causing us to lose business; and • the negative effects of inflation, high interest rates and any potential resultant recession on customers’ end markets and their demand for our products and services.
As our key employees choose to retire or terminate their employment with us, we will be required to replace them with new employees with the required experience, which has become challenging in the U.S. recently due to the strong employment market.
As our key employees choose to retire or terminate their employment with us, we will be required to replace them with new employees with the required experience, which has become challenging in the U.S. due to the strong employment market.
Unanticipated changes in our income tax rates or exposure to additional tax liabilities or expiration of our net operating loss carryforwards could increase our taxes and decrease our net income; developments in pending audits could result in an increase in our tax expenses which would decrease our net income.
Changes in our income tax rates or exposure to additional tax liabilities or expiration of our net operating loss carryforwards could increase our taxes and decrease our net income; developments in pending audits could result in an increase in our tax expenses which would decrease our net income.
Any of these factors could reduce the revenue and margins of our CPS businesses, which in turn would have an adverse and potentially disproportionate effect on our overall revenues and profitability.
Any of these factors could reduce the revenue and margins of our CPS businesses, which in turn would have an adverse and potentially disproportionate effect on our overall revenue and profitability.
Customer bankruptcies also entail the risk of potential recovery by the bankruptcy estate of amounts previously paid to us that are deemed a preference under bankruptcy laws. There can be no assurance that additional customers will not declare bankruptcy or suffer financial distress, in which case our future revenues, net income and cash flow could be reduced.
Customer bankruptcies also entail the risk of potential recovery by the bankruptcy estate of amounts previously paid to us that are deemed a preference under bankruptcy laws. There can be no assurance that additional customers will not declare bankruptcy or suffer financial distress, in which case our future revenue, net income and cash flow could be reduced.
Over the past three years, our supply chain has been significantly impacted by interruptions in supplier and port operations resulting from the COVID-19 pandemic, the resumption of strong worldwide demand for electronic products and components following the easing of COVID-19 restrictions, and geopolitical events, such as the war in Ukraine and the conflict in the Middle East.
Over the past four years, our supply chain has been significantly impacted by interruptions in supplier and port operations resulting from the COVID-19 pandemic, the resumption of strong worldwide demand for electronic products and components following the easing of COVID-19 restrictions and geopolitical events, such as the war in Ukraine and the conflict in the Middle East.
Although we believe our existing cash resources and sources of liquidity, together with cash generated from operations, will be sufficient to meet our working capital requirements for at least the next 12 months, should demand for our services increase significantly over the next 12 months or should we experience significant increases in delinquent or uncollectible accounts receivable for any reason, including recessionary economic conditions, 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.
Although we believe our existing cash resources and sources of liquidity, together with cash generated from operations, will be sufficient to meet our working capital requirements for at least the next 12 months, should demand for our services increase significantly over the next 12 months or should we experience significant increases in delinquent or uncollectible accounts receivable for any reason, including recessionary economic conditions, our cash provided by operations 23 Table of Contents could decrease significantly and we could be required to seek additional sources of liquidity to continue our operations at their current level.
We may be unable to generate sufficient liquidity to maintain or expand our operations, which would reduce the amount of business our customers and vendors are able to do with us and impact our ability to continue operations at current levels without seeking additional funding; increasing interest rates will reduce our net income and operating cash flow; we could experience losses if one or more financial institutions holding our cash or other financial counterparties were to fail; repatriation of foreign cash could increase our taxes.
We may be unable to generate sufficient liquidity to maintain or expand our operations, which would reduce the amount of business our customers and vendors are able to do with us and impact our ability to continue operations at current levels without seeking additional funding; high interest rates reduce our net income and operating cash flow; we could experience losses if one or more financial institutions holding our cash or other financial counterparties were to fail; repatriation of foreign cash could increase our taxes.
Although customers are generally liable for components we procure on their behalf, finished goods and work-in-process at the time of cancellation, customers may fail to honor this commitment or we may be unable to, or, for other business reasons, choose not to, enforce our contractual rights.
Although customers are generally liable for components we procure on their behalf, finished goods and work in progress at the time of cancellation, customers may fail to honor this commitment or we may be unable to, or, for other business reasons, choose not to, enforce our contractual rights.
In particular, our activities must comply with the restrictions relating to the export of controlled technology and sales to denied or sanctioned parties contained in the International Traffic in Arms Regulations (“ITAR”), the U.S. Export Administration Regulations and sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”). The U.S.
In particular, our activities must comply with the restrictions relating to the export of controlled technology and sales to denied or sanctioned parties contained in the International Traffic in Arms Regulations, the U.S. Export Administration Regulations and sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department. The U.S.
Although our cash and cash equivalents were not deposited in any of such banks, should the financial institutions in which our cash and cash equivalents are deposited fail and not be backstopped by the federal government or otherwise guaranteed, all or a portion of our uninsured funds on deposit with such institutions could be lost.
Although none of our cash and cash equivalents were deposited with any of such banks, should the financial institutions in which our cash and cash equivalents are deposited fail in the future and not be backstopped by the federal government or otherwise guaranteed, all or a portion of our uninsured funds on deposit with such institutions could be lost.
If we are not able to comply with these covenants or if an event of default were to occur and not be cured, all of our outstanding debt would become immediately due and payable and the incurrence of additional debt under our Credit Agreement would not be allowed, either of which would have a material adverse effect on our liquidity and ability to continue to conduct our business.
If we are not able to comply with these covenants or if an event of default were to occur and not be cured or waived by our lenders, all of our outstanding debt would become immediately due and payable and the incurrence of additional debt under our Credit Agreement would not be allowed, either of which would have a material adverse effect on our liquidity and ability to continue to conduct our business.
In addition, inflationary pressures resulting from supply chain constraints and generally improved economic conditions have led to sustained increases in the prices we pay for components and materials used in production and in our labor and transportation costs.
In addition, inflationary pressures resulting from supply chain constraints and strong economic conditions generally have led to sustained increases in the prices we pay for components and materials used in production and in our labor and transportation costs.
Further, geopolitical events like the war in Ukraine and conflict in the Middle East may also impact our operations by affecting our supply chain or impacting our plants located in the region of instability. Risks of Investing in Our Stock The market price of our common stock is volatile and is impacted by factors other than our financial performance.
Further, geopolitical events like the war in Ukraine and conflict in the Middle East may also impact our operations by affecting our supply chain or impacting our plants located in the region of instability. 26 Table of Contents Risks of Investing in Our Stock The market price of our common stock is volatile and is impacted by factors other than our financial performance.
If successful, such claims could force our customers and us to stop importing or producing products or components of products that use the challenged intellectual property, to pay up to treble damages and to obtain a license to the relevant technology or to redesign those products or services so as not to use the infringed technology.
If successful, such claims could force our customers and us to stop importing or producing products or components of products that use the challenged intellectual property, to pay up to treble damages and to obtain a license to the 20 Table of Contents relevant technology or to redesign those products or services so as not to use the infringed technology.
In addition, because the interest rate we pay for borrowings under the Credit Agreement and the interest rate used to calculate the purchase price for receivables under our factoring programs are variable, recent sustained increases in interest rates resulting from actions taken by the Federal Reserve to reduce inflation both increases the amount of interest expense we pay, which reduces net income, and also reduces the amount of proceeds we receive from purchasers under our receivables factoring program, which reduces operating cash flow.
In addition, because the interest rate we pay for borrowings under the Credit Agreement and the interest rate used to calculate the purchase price for receivables under our factoring programs are variable, the currently high interest rates resulting from actions taken by the Federal Reserve to reduce inflation both increases the amount of interest expense we pay, which reduces net income, and also reduces the amount of proceeds we receive from purchasers under our receivables factoring program, which reduces operating cash flow.
These laws and regulations are complex, require extensive compliance efforts and expenditures in the form of additional systems and personnel, and, in some cases, require us to ensure that our suppliers adhere to such regulations. Furthermore, our compliance with such regulations is subject 20 Table of Contents to audit or investigation by governmental authorities.
These laws and regulations are complex, require extensive compliance efforts and expenditures in the form of additional systems and personnel, and, in some cases, require us to ensure that our suppliers adhere to such regulations. Furthermore, our compliance with such regulations is subject to audit or investigation by governmental authorities.
General Risk Factors We are subject to intense competition in the EMS industry, which could cause us to lose sales and, therefore, harm our financial performance. The EMS industry is highly competitive and the industry has experienced a surplus of manufacturing capacity.
General Risk Factors We are subject to intense competition in the electronics manufacturing services (“EMS”) industry, which could cause us to lose sales and, therefore, harm our financial performance. The EMS industry is highly competitive and the industry has experienced a surplus of manufacturing capacity.
A sustained increase in energy prices for any reason could increase our raw material, components, operations and transportation costs, which we may not be able to pass on to our customers and which would therefore reduce our profitability, as would increased operating costs and investments due to our adoption, whether voluntary or mandatory, of measures to reduce our carbon footprint.
A sustained increase in energy prices for any reason could increase our raw material, components, operations and transportation costs, which we may 21 Table of Contents not be able to pass on to our customers and which would therefore reduce our profitability, as would any increase in operating costs and investments due to our adoption, whether voluntary or mandatory, of measures to reduce our carbon footprint.
We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, generation, storage, discharge and disposal of hazardous substances and waste in the ordinary course of our 22 Table of Contents manufacturing operations.
We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, generation, storage, discharge and disposal of hazardous substances and waste in the ordinary course of our manufacturing operations.
We realize a substantial portion of our revenues from communications equipment customers. This market is highly competitive, particularly in the area of price.
We realize a substantial portion of our revenue from communications equipment customers. This market is highly competitive, particularly in the area of price.
Cancellations, reductions or 18 Table of Contents push-outs of orders by customers and reduced customer forecasts, whether due to changes in individual customer circumstances or end market changes or recessionary conditions in general, could cause our inventory levels to increase, consume working capital, lead to write-offs of inventory that customers fail to purchase for any reason, which could reduce our sales, net income and liquidity.
Cancellations, reductions or push-outs of orders by customers and reduced customer forecasts, whether due to changes in individual customer circumstances, such as customer inventory levels, or end market changes or recessionary conditions in general, could cause our inventory levels to increase, consume working capital, lead to write-offs of inventory that customers fail to purchase for any reason, which could reduce our sales, net income and liquidity.
Consolidation in the electronics industry among our customers, our suppliers and/or our competitors may increase, which could result in a small number of very large electronics companies offering products in multiple sectors of the electronics industry.
Consolidation in the electronics industry among our customers, our suppliers and/or our competitors may increase, which could result in a small number of very large electronics companies offering products in multiple sectors of the electronics 24 Table of Contents industry.
These conditions limited our ability to manufacture and ship all of the products for which we have demand and that require these components and have resulted in an increase in our inventories of other components that cannot be assembled into finished products without these components.
These conditions have limited and may continue to limit our ability to manufacture and ship all of the products for which we have demand and that require these components and have resulted and may continue to result in an increase in our inventories of other components that cannot be assembled into finished products without these components.
Commerce Department recently released rules that in some cases significantly restrict the export of U.S. technology to or from China. These laws could negatively impact our operations in China by making it more difficult to import components containing U.S. technology into China and to export finished products containing such components out of China.
Commerce Department has released rules that in some cases significantly restrict the export of U.S. technology to or from China. These laws could negatively impact our operations in China by making it more difficult to import components containing U.S. technology into China and to export finished products 19 Table of Contents containing such components out of China.
We may be required to defend against allegations that we have violated such laws. Allegations that we have violated labor laws could lead to damages being awarded to employees or fines from or settlements with plaintiffs or federal, state or foreign regulatory authorities, the amounts of which could be substantial, and which would reduce our net income.
Allegations that we have violated labor laws could lead to damages being awarded to employees or fines from or settlements with plaintiffs or federal, state or foreign regulatory authorities, the amounts of which could be substantial, and which would reduce our net income.
Our liquidity is dependent on a number of factors, including profitability, business volume, inventory levels, the extension of trade credit by our suppliers, the degree of alignment of payment terms from our suppliers with payment terms granted to our customers, the amount we invest in our facilities and equipment, the timing of acquisitions and divestitures, the schedule for repayment of our outstanding indebtedness, the timing of stock repurchases, the amount available to borrow under our credit agreement and the amount of accounts receivable eligible for sale under our factoring programs.
Our liquidity is dependent on a number of factors, including profitability, business volume, inventory levels, the extension of trade credit by our suppliers, the degree of alignment of payment terms from our suppliers with payment terms granted to our customers, the amount we invest in our facilities and equipment, the timing of acquisitions and divestitures, the schedule for repayment of our outstanding indebtedness, the timing of stock repurchases, the amount available to borrow under the Fifth Amended and Restated Credit Agreement, dated as of September 27, 2022, as amended (the “Credit Agreement”), and the amount of accounts receivable eligible and accepted for sale under our factoring programs.
For example, in April 2023, a court issued a ruling finding us and other defendants liable for certain investigation and remediation costs relating to a site owned by a predecessor company in Southern California at which a disposal was alleged to have occurred.
For example, in April 2023, a court issued a ruling finding us and other defendants liable for certain investigation and remediation costs relating to a site owned by a predecessor company in Southern California at which a disposal was alleged to have occurred, which claim has since been settled subject to court approval.
For example, in the first quarter of 2022, we paid approximately $4 million in a judicially approved settlement in connection with a lawsuit against us alleging violations of California Labor Code provisions governing overtime, meal and rest periods, wages, wage statements and reimbursements of business expenses.
For example, in the first quarter of fiscal 2022, we paid approximately $4 million in a judicially approved settlement in connection with a lawsuit against us alleging violations of California Labor Code provisions governing overtime, meal and rest periods, wages, wage statements and reimbursements of business expenses, and in fiscal 2024, four putative class actions were filed in California alleging similar violations.
For example, in the first quarter of fiscal 2023, we entered into a joint venture with a wholly-owned subsidiary of Reliance Industries Limited intended to create a world-class electronic manufacturing hub in India.
For example, in the first quarter of fiscal 2023, we entered into a joint venture with a wholly owned subsidiary of Reliance Strategic Business Ventures Limited (“RSBVL”) that is intended to create a world-class electronic manufacturing hub in India.
The COVID-19 pandemic 1) caused our customers to reduce their demand from us, 2) interrupted the availability of components we need for our customers’ 19 Table of Contents products, 3) limited the operations and productivity of our manufacturing resources and 4) created health risks to our employees.
Our business, operations and results of operations were significantly and negatively impacted by the COVID-19 pandemic. The COVID-19 pandemic 1) caused our customers to reduce their demand from us, 2) interrupted the availability of components we need for our customers’ products, 3) limited the operations and productivity of our manufacturing resources and 4) created health risks to our employees.
Finally, if one or more counterparties to our interest rate or foreign currency hedging instruments were to fail, we could suffer losses and our hedging of risk could become less effective. 24 Table of Contents As of September 30, 2023, approximately 59% of our cash was held in foreign jurisdictions.
Finally, if one or more counterparties to our interest rate or foreign currency hedging instruments were to fail, we could suffer losses and our hedging of risk could become less effective. As of September 28, 2024, approximately 65% of our cash was held in foreign jurisdictions.
Certain foreign NOLs will begin expiring in 2024. As and when the NOLs begin expiring, our federal and state income tax rates will increase, which will reduce our net income. We can experience losses due to foreign exchange rate fluctuations and currency controls, which could reduce our net income and impact our ability to repatriate funds.
When our NOLs expire, our state income tax rates will increase, which will reduce our net income. We can experience losses due to foreign exchange rate fluctuations and currency controls, which could reduce our net income and impact our ability to repatriate funds.
Additionally, if one or more counterparties to our insurance coverage were to fail, we would bear the entire amount of an otherwise insured loss. Recruiting and retaining our key personnel is critical to the continued growth of our business.
Should we sustain a significant uncovered loss, our net income will be reduced. Additionally, if one or more counterparties to our insurance coverage were to fail, we would bear the entire amount of an otherwise insured loss. Recruiting and retaining our key personnel is critical to the continued growth of our business.
For example, the SEC has recently adopted rules requiring that issuers provide significantly increased disclosures concerning cybersecurity risk management, strategy, governance and incident reporting and adopt more stringent executive compensation clawback policies and California 23 Table of Contents has enacted legislation that will require large companies doing business in the state to provide significant disclosures concerning their greenhouse gas emissions and financial risks relating to climate change.
For example, the SEC has recently adopted rules requiring that issuers provide significantly increased disclosures concerning cybersecurity risk management, strategy, governance and incident reporting and adopt more stringent executive compensation clawback policies and several agencies and governments, including the SEC, the EU and California have enacted legislation or adopted rules that will require large companies to provide significant disclosures concerning their greenhouse gas emissions and financial risks relating to climate change.
Any such shortages could result in delays in shipments to our customers, which would reduce our revenue, margins and operating cash flow for the periods affected.
Any such delays or shortages, including due to natural disasters or geopolitical issues or conflicts, could result in delays in shipments to our customers, which would reduce our revenue, margins and operating cash flow for the periods affected.
Certain of our customers have experienced significant financial difficulties in the past, with a few filing for bankruptcy. Financial difficulties experienced by one or more of our customers, could negatively affect our business by decreasing demand from such customers and through the potential inability of these companies to make full payment on amounts owed to us.
Financial difficulties experienced by one or more of our customers, could negatively affect our business by decreasing demand from such customers and through the potential inability of these companies to make full payment on amounts owed to us.
Although conditions have improved, our operations could again be similarly and negatively impacted in the event of any future outbreaks, including outbreaks caused by variants of COVID-19, such as the Omicron variant of COVID-19 and its subvariants, and actions that government authorities may take in response.
Our operations could again be similarly and negatively impacted in the event of any future outbreaks, including outbreaks caused by new variants of COVID-19, and actions that government authorities may take in response to such future outbreaks.
Developments in these or future audits could adversely affect our tax provisions, including through the disallowance or reduction of deferred tax assets or the assessment of back taxes, interest and penalties, any of which could result in a material increase to income tax expense and therefore a material decrease in our net income.
However, an adverse result in this matter or additional developments in these or future audits would adversely affect our tax provisions, including through the disallowance or reduction of deferred tax assets or the assessment of back taxes, interest and penalties, any of which could result in a material increase to our income tax expense and therefore a material decrease in our net income and could have a material adverse impact on our condensed consolidated financial statements.
Our policies generally have deductibles and/or limits or may be limited to certain lines or business or customer engagements that reduce the amount of our potential recoveries from insurance. As a result, not all of our potential business losses are covered under our insurance policies. Should we sustain a significant uncovered loss, our net income will be reduced.
Our policies generally 25 Table of Contents have deductibles and/or limits or may be limited to certain lines or business or customer engagements that reduce the amount of our potential recoveries from insurance. As a result, not all of our potential business losses are covered under our insurance policies.
Should we be unable to recruit new employees to fill key positions with us, our operations and growth prospects could be negatively impacted. 26 Table of Contents We may not be successful in implementing and integrating strategic transactions or in divesting assets or businesses, which could harm our operating results; we could become required to book a charge to earnings should we determine that goodwill and other acquired assets are impaired.
We may not be successful in implementing and integrating strategic transactions or in divesting assets or businesses, which could harm our operating results; we could become required to book a charge to earnings should we determine that goodwill and other acquired assets are impaired.
The success of this joint venture is subject to a number of risks and uncertainties, including the timing of the joint venture obtaining “Trusted Source” designation under the India government’s “Make in India” initiative, adverse changes in the key markets the joint venture will target and the risks described above under the caption “We are subject to risks arising from our international operations.” Strategic transactions involve a number of risks, uncertainties and costs, including integrating acquired operations and workforce, businesses and products, resolving quality issues involving acquired products, incurring severance and other restructuring costs, diverting management attention from their normal operational duties, maintaining customer, supplier or other favorable business relationships of acquired operations, terminating unfavorable commercial arrangements, losing key employees, integrating the systems of acquired operations into our management information systems and satisfying the liabilities of acquired businesses, including liability for past violations of law and material environmental liabilities.
Strategic transactions involve a number of risks, uncertainties and costs, including integrating acquired operations and workforce, businesses and products, resolving quality issues involving acquired products, incurring severance and other restructuring costs, diverting management attention from their normal operational duties, maintaining customer, supplier or other favorable business relationships of acquired operations, terminating unfavorable commercial arrangements, losing key employees, integrating the systems of acquired operations into our management information systems and satisfying the liabilities of acquired businesses, including liability for past violations of law and material environmental liabilities.
Customer order cancellations, push-outs and reduced forecasts could reduce our sales, net income and liquidity. We generally do not obtain firm, long-term purchase commitments from our customers and our bookings may generally be canceled prior to the scheduled shipment date.
We generally do not obtain firm, long-term purchase commitments from our customers and our bookings may generally be canceled prior to the scheduled shipment date.
Despite our business continuity planning, including maintaining redundant data sites and network availability, both our internal and cloud-based infrastructure may be susceptible to outages due to fire, floods, power loss, telecommunications failures, terrorist attacks and similar events. In addition, our systems, like those of other large companies, are regularly subject to third party hacking attempts.
Despite our business continuity planning, including maintaining redundant data sites and network availability, both our internal and cloud-based infrastructure may be susceptible to outages due to fire, floods, power loss, telecommunications failures, terrorist attacks, performance failures by our IT vendors and similar events.
Further, as of September 30, 2023, we have cumulative net operating loss carryforwards (“NOLs”) for federal, state and foreign tax purposes of $155 million, $337 million and $433 million, respectively. Our federal and state NOLs begin expiring in fiscal years 2028 and 2024, respectively, and expire completely at various dates through September 29, 2035.
Further, as of September 28, 2024, we have cumulative net operating loss carryforwards (“NOLs”) for state and foreign tax purposes of $255 million and $446 million, respectively, and none for federal. The state NOLs begin expiring in fiscal 2025, and expire at various dates through September 26, 2043. Certain foreign NOLs begin expiring in fiscal 2025.
The COVID-19 pandemic had, and any future outbreak could have, a significant impact on our results of operations and financial condition by reducing demand from our customers, interrupting the flow of components needed for our customers’ products, limiting the operations and productivity of our manufacturing facilities and creating health risks to our employees.
While we seek to pass on to our customers the increased prices for components and shipping, plus a margin, our gross margins and profitability could decrease, perhaps significantly, over a sustained period of time if we are unable to do so. 18 Table of Contents The COVID-19 pandemic had, and any future outbreak could have, a significant impact on our results of operations and financial condition by reducing demand from our customers, interrupting the flow of components needed for our customers’ products, limiting the operations and productivity of our manufacturing facilities and creating health risks to our employees.
In such situations, we may become subject to claims that products we design infringe third party intellectual property rights and may also be required to indemnify our customer against liability caused by such claims. 21 Table of Contents Any of these events could reduce our revenue, increase our costs and damage our reputation with our customers.
We sometimes design products on a contract basis or jointly with our customers. In such situations, we may become subject to claims that products we design infringe third party intellectual property rights and may also be required to indemnify our customer against liability caused by such claims.
From time to time, we receive formal and informal inquiries from government agencies and regulators regarding our compliance. For example, we have received and are responding to several Civil Investigative Demands from the U.S. Department of Justice relating to certain contracts, projects, proposals, and business activities of our SCI subsidiary.
From time to time, we receive formal and informal inquiries from government agencies and regulators regarding our compliance. For example, we responded to several Civil Investigative Demands from the U.S.
Finally, such facility includes covenants requiring, among other things, that we timely file quarterly and annual financial statements with the SEC, comply with all laws, pay all taxes and maintain casualty insurance.
Collectively, these covenants could constrain our ability to grow our business through acquisition or engage in other strategic transactions. Such facility also contains customary events of default. Finally, such facility includes covenants requiring, among other things, that we timely file quarterly and annual financial statements with the SEC, comply with all laws, pay all taxes and maintain casualty insurance.
There can be no assurance that we will not experience declines in demand in this or in other end markets in the future. Our operating results are subject to significant uncertainties, which can cause our future sales, net income and cash generated from operations to be variable.
Our operating results are subject to significant uncertainties, which can cause our future sales, net income and cash generated from operations to be variable.
Significant judgment is required in determining our worldwide provision for taxes and, in the ordinary course of business, there are many transactions and calculations for which the ultimate tax 25 Table of Contents determination is uncertain.
We are or may become subject to income, sales, value-added, goods and services, withholding and other taxes in the United States and various foreign jurisdictions. Significant judgment is required in determining our worldwide provision for taxes and, in the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.
Increasing regulatory burdens and corporate governance requirements could make it more difficult for us to attract and retain qualified members of our Board of Directors and qualified executive officers. Liquidity and Credit Risks Our customers could experience credit problems, which could reduce our future revenues and net income.
Increasing regulatory burdens and corporate governance requirements impose both internal and external costs on us, require significant management attention and oversight and could make it more difficult for us to attract and retain qualified members of our Board of Directors and qualified executive officers.
We expect to continue to depend upon a relatively small number of customers for a significant percentage of our sales for the foreseeable future. The loss of, a significant reduction in sales or pricing to, or an inability to recover components liabilities from our largest customers could therefore substantially reduce our revenue and margins.
The loss of, a significant reduction in sales or pricing to, or an inability to recover components liabilities from our largest customers could therefore substantially reduce our revenue and margins. 17 Table of Contents Customer order cancellations, push-outs and reduced forecasts could reduce our sales, net income and liquidity.
Any decision by a large number of our customers to cease using our manufacturing services due to the application of tariffs would materially reduce our revenue and net income. In addition, our gross margins would be reduced in the event we are for any reason unable to pass on any tariffs that we incurred to our customers.
Any decision by a large number of our customers to cease using our manufacturing services due to the application of tariffs would materially reduce our revenue and net income. Depending on the outcome of the U.S. presidential election, a broad increase in tariffs on all imported components is possible.
Allegations of failures to comply with domestic or international employment and related laws could result in the payment of significant damages, which would reduce our net income. We are subject to a variety of domestic and foreign employment laws, including those related to safety, wages and overtime, discrimination, harassment, organizing, whistleblowing, classification of employees, privacy and severance payments.
Any of these events could reduce our revenue, increase our costs and damage our reputation with our customers. Allegations of failures to comply with domestic or international employment and related laws could result in the payment of significant damages, which would reduce our net income.
These factors are exacerbated by the fact that we are dependent on a number of limited and sole source suppliers to provide key components that we incorporate into our products. Although conditions have recently improved, we expect some level of delays and shortages to continue to persist in some form in the short to medium term.
Although conditions have generally improved, we expect some level of delays and shortages to continue to persist in some form in the short to medium term.
For example, as disclosed in Item 9A of this annual report, we have identified material weaknesses in the control environment at one of our divisions due in part to the division maintaining an inappropriate tone at the top. This division accounted for approximately 3% of our revenues on an annual basis.
For example, as disclosed in Item 9A of this annual report on Form 10-K, we have identified 22 Table of Contents several material weaknesses relating to the control environment at one of our divisions and a material weakness in our internal controls over accounting for certain payments received for inventory.
Removed
While we seek to pass on to our customers the increased prices for components and shipping, plus a margin, our gross margins and profitability could decrease, perhaps significantly, over a sustained period of time if we are unable to do so.
Added
In addition, recent customer finished goods inventory adjustments reduced demand for our services from this end market, negatively impacting our revenue during fiscal 2024. There can be no assurance when this adjustment will be complete or that we will not experience declines in demand in this or in other end markets in the future.
Removed
Our business, operations and results of operations were significantly and negatively impacted by the COVID-19 pandemic over the past three years and may continue to be impacted in the future to some degree.
Added
We expect to continue to depend upon a relatively small number of customers for a significant percentage of our sales for the foreseeable future.
Removed
We sometimes design products on a contract basis or jointly with our customers.
Added
These factors are exacerbated by the fact that we are dependent on a limited number of sole source suppliers to provide key components that we incorporate into our products. In the case of semiconductors, most third-party manufacturing is concentrated among a small number of suppliers located in the same geographic area.
Removed
Collectively, these covenants could constrain our ability to grow our business through acquisition or engage in other strategic transactions. Such facility also contains customary events of default, including that a material business interruption or cessation has not occurred.
Added
Our gross margins would be reduced in the event we are for any reason unable to pass on any tariffs that we incur to our customers.
Removed
We are or may become subject to income, sales, value-added, goods and services, withholding and other taxes in the United States and various foreign jurisdictions.
Added
Department of Justice relating to certain contracts, projects, proposals, and business activities of our SCI subsidiary and a qui tam lawsuit filed by a former SCI employee was recently unsealed relating to these matters.
Added
We are subject to a variety of domestic and foreign employment laws, including those related to safety, wages and overtime, meal and rest periods, discrimination, harassment, collective bargaining, whistleblowing, classification of employees, privacy and severance payments. We may be required to defend against allegations that we have violated such laws.
Added
For example, in July 2024, a misconfigured system update initiated by one of our network security vendors caused our worldwide manufacturing operations to be temporarily disrupted. In addition, our systems, like those of other large companies, are regularly subject to third-party hacking attempts.
Added
Liquidity and Credit Risks Our customers could experience credit problems, which could reduce our future revenue and net income. Certain of our customers have experienced significant financial difficulties in the past, with a few filing for bankruptcy.
Added
In connection with one such audit, on November 17, 2023, we received a Revenue Agent’s Report (“RAR”) from the Internal Revenue Service (the “IRS”), which asserted an underpayment of tax of approximately $8 million for fiscal 2009. The proposed underpayment results from the IRS’s proposed disallowance of a $503 million worthless stock deduction previously taken by us.
Added
We disagree with the IRS’s position as asserted in the RAR and are vigorously contesting this matter through the applicable IRS administrative and judicial procedures, as appropriate.
Added
Should we be unable to recruit new employees to fill key positions with us, our operations and growth prospects could be negatively impacted.
Added
The success of this joint venture is subject to a number of risks and uncertainties, including the joint venture obtaining “Trusted Source” designation under the India government’s “Make in India” initiative, adverse changes in the key markets the joint venture targets and the risks described above under the caption “We are subject to risks arising from our international operations”.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed7 unchanged
Biggest changeAs of September 30, 2023, the approximate square footage of our active manufacturing facilities by region was as follows: Approximate Square Footage Americas 5,706,824 APAC 4,252,032 EMEA 1,372,443 Total 11,331,299 As of September 30, 2023, our active manufacturing facilities consist of nine million square feet in facilities that we own and two million square feet in leased facilities with lease terms expiring between 2023 and 2042.
Biggest changeAs of September 28, 2024, the approximate square footage of our active manufacturing facilities by region was as follows: Approximate Square Footage Americas 5,706,824 APAC 4,479,735 EMEA 1,372,443 Total 11,559,002 As of September 28, 2024, our active manufacturing facilities consist of nine million square feet in facilities that we own and two million square feet in leased facilities with lease terms expiring between 2024 and 2042.
These operations are AS9100 Rev D, 2016 certified and maintain other certifications in accordance with various U.S. military specifications, ANSI and other standards as appropriate for defense and aerospace suppliers. Other selected operations around the world are also AS9100 Rev. D certified. Our automotive facilities are strategically located worldwide.
These operations are AS9100 Rev D certified and maintain other certifications in accordance with various U.S. military specifications, ANSI and other standards as appropriate for defense and aerospace suppliers. Other selected operations around the world are also AS9100 Rev. D certified. Our automotive facilities are strategically located worldwide.
Item 2. Properties We own or lease facilities located primarily in the geographies listed below. We believe that our properties are generally in good condition, are well maintained and are generally suitable and adequate to carry out our business at expected capacity for the foreseeable future.
Item 2. Properties We own or lease facilities located primarily in the geographies listed below. We believe our properties are generally in good condition, are well maintained and are generally suitable and adequate to carry out our business at expected capacity for the foreseeable future.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+0 added−2 removed1 unchanged
Biggest changeAll rights reserved. 31 Table of Contents 9/29/2018 9/28/2019 10/3/2020 10/2/2021 10/1/2022 9/30/2023 Sanmina Corporation 100.00 116.38 96.20 141.96 166.96 196.67 S&P 500 100.00 104.25 120.05 156.07 131.92 160.44 Peer Group 100.00 99.51 101.04 160.44 151.51 276.77 Sanmina's stock price performance included in this graph is not necessarily indicative of future stock price performance.
Biggest changeAll rights reserved. 9/28/2019 10/3/2020 10/2/2021 10/1/2022 9/30/2023 9/28/2024 Sanmina Corporation 100.00 82.66 121.98 143.46 168.99 214.41 S&P 500 100.00 115.15 149.70 126.54 153.89 209.84 Peer Group 100.00 101.54 161.23 152.26 278.13 337.71 Sanmina's stock price performance included in this graph is not necessarily indicative of future stock price performance. 31 Table of Contents Dividends We have never declared or paid cash dividends on our common stock.
Index performance is calculated on a month-end basis. Copyright @ 2023 Standard & Poor's, a division of S&P Global.
Index performance is calculated on a month-end basis. Copyright @ 2024 Standard & Poor's, a division of S&P Global.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on the Nasdaq Global Select Market under the symbol SANM. As of November 9, 2023, we had approximately 739 holders of record of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on the Nasdaq Global Select Market under the symbol SANM. As of November 14, 2024, we had approximately 712 holders of record of our common stock.
An investment of $100 (with reinvestment of all dividends, if any) is assumed to have been made in our common stock on September 29, 2018 and in each of such indices at month end starting on September 29, 2018 and its relative performance is tracked through September 30, 2023. * $100 invested on 9/29/2018 in stock or index, including reinvestment of dividends.
An investment of $100 (with reinvestment of all dividends, if any) is assumed to have been made in our common stock on September 28, 2019 and in each of such indices at month end starting on September 28, 2019 and its relative performance is tracked through September 28, 2024. * $100 invested on 9/28/2019 in stock or index, including reinvestment of dividends.
The following graph compares the cumulative 5-year total stockholder return on our common stock relative to the cumulative total returns of the S&P 500 index and a new peer group index consisting of Flex Ltd., Jabil Inc., Celestica Inc., Benchmark Electronics, Inc., and Plexus Corp. In previous years, we compared our cumulative total returns to the NASDAQ Electronic Components index.
The following graph compares the cumulative 5-year total stockholder return on our common stock relative to the cumulative total returns of the S&P 500 index and a peer group index consisting of Flex Ltd., Jabil Inc., Celestica Inc., Benchmark Electronics, Inc., and Plexus Corp.
Dividends We have never declared or paid cash dividends on our common stock. We currently expect to retain future earnings for use in our operations, for expansion of our business, share repurchases and debt repayment and do not anticipate paying cash dividends in the foreseeable future.
We currently expect to retain future earnings for use in our operations, expansion of our business, share repurchases and debt repayments and do not anticipate paying cash dividends in the foreseeable future. Additionally, our ability to pay dividends is limited pursuant to covenants contained in our credit agreements. See also “Item 7.
See also “Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.” Stock Repurchases During the third quarter of 2023, our Board of Directors authorized us to repurchase up to $200 million of our common stock in the open market or in negotiated private transactions. This program has no expiration date.
(3) During the third quarter of fiscal 2022 and third quarter of fiscal 2023, our Board of Directors authorized us to repurchase up to $200 million and $200 million of our common stock, respectively, in the open market or in negotiated private transactions. These programs have no expiration date.
Period (1) Total Number of Shares Purchased Average Price Paid Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Dollar Value of Shares That May Yet Be Purchased Under The Programs (2) July 2, 2023 - July 29, 2023 — $ — — $ 312,321,196 July 30, 2023 - August 26, 2023 458,368 $ 55.17 458,368 $ 287,034,902 August 27, 2023 - September 30, 2023 145,408 $ 52.99 145,408 $ 279,329,725 Total 603,776 $ 54.64 603,776 (1) All months shown are our fiscal months.
Period (1) Total Number of Shares Purchased Average Price Paid Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Programs (3) Maximum Dollar Value of Shares That May Yet Be Purchased Under The Programs (2) June 30, 2024 - July 27, 2024 — $ — — $ 117,824,163 July 28, 2024 - August 24, 2024 564,460 $ 69.05 564,460 $ 78,846,811 August 25, 2024 - September 28, 2024 380,451 $ 68.18 380,451 $ 52,906,153 Total 944,911 $ 68.70 944,911 (1) All months shown are our fiscal months.
The table below sets forth information regarding repurchases of our common stock during the fourth quarter of 2023.
Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.” Stock Repurchases The table below presents information regarding repurchases of our common stock during the fourth quarter of 2024.
Removed
This year, we have elected to replace such index with the new peer group index, as the NASDAQ Electronic Components index was discontinued in December 2022 and is no longer available for comparison this year, and because the companies included in the new peer group are in the same industry as we are.
Removed
Additionally, our ability to pay dividends is limited pursuant to covenants contained in our credit agreements.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

72 edited+23 added−29 removed50 unchanged
Biggest changeSales by end market were as follows: Year Ended 2023 vs. 2022 2022 vs. 2021 September 30, 2023 October 1, 2022 October 2, 2021 Increase/(Decrease) Increase/(Decrease) (Dollars in thousands) Industrial, Medical, Defense and Aerospace, and Automotive $ 5,388,877 $ 4,744,088 $ 3,871,754 $ 644,789 13.6 % $ 872,334 22.5 % Communications Networks and Cloud Infrastructure 3,546,171 3,175,534 2,866,602 370,637 11.7 % 308,932 10.8 % Total $ 8,935,048 $ 7,919,622 $ 6,738,356 $ 1,015,426 12.8 % $ 1,181,266 17.5 % Comparison of 2023 to 2022 by End Market Sales in both our industrial, medical, defense and automotive end market, as well as our communications networks and cloud infrastructure end market, increased primarily as a result of stronger overall demand, particularly in the first half of the year, improved material availability resulting from easing of supply chain challenges and a ramp up of certain new customer programs.
Biggest changeSales by end market were as follows: Year Ended 2024 vs. 2023 2023 vs. 2022 September 28, 2024 September 30, 2023 October 1, 2022 Increase/(Decrease) Increase/(Decrease) (Dollars in thousands) Industrial, Medical, Defense and Aerospace, and Automotive $ 4,915,880 $ 5,388,877 $ 4,744,088 $ (472,997) (8.8) % $ 644,789 13.6 % Communications Networks and Cloud Infrastructure 2,652,448 3,546,171 3,175,534 (893,723) (25.2) % 370,637 11.7 % Total $ 7,568,328 $ 8,935,048 $ 7,919,622 $ (1,366,720) (15.3) % $ 1,015,426 12.8 % Comparison of 2024 to 2023 by End Market The decrease in sales was primarily due to reduced demand caused by customers in some end markets, particularly communications networks, making adjustments to absorb their finished goods inventory.
Fluctuations in our gross margin may be caused by a number of factors, including: • the impacts of 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; 38 Table of Contents • changes in the mix of high and low margin products demanded by our customers; • competition in the EMS industry and pricing pressures from OEMs due to greater focus on cost reduction; • the amount of our provisions for excess and obsolete inventory, including those associated with distressed customers; • levels of operational efficiency and production yields; • our performance on long-term contracts, including our ability to recover claims for cost overruns; and • our ability to transition the location of and ramp up manufacturing and assembly operations when requested by a customer in a timely and cost-effective manner.
Fluctuations in our gross margin may be caused by a number of factors, including: • the impacts of 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; • changes in the mix of high and low margin products demanded by our customers; 38 Table of Contents • competition in the EMS industry and pricing pressures from OEMs due to greater focus on cost reduction; • the amount of our provisions for excess and obsolete inventory, including those associated with distressed customers; • levels of operational efficiency and production yields; • our performance on long-term contracts, including our ability to recover claims for cost overruns; and • our ability to transition the location of and ramp up manufacturing and assembly operations when requested by a customer in a timely and cost-effective manner.
We believe this strategy differentiates us from our competitors and will help drive more sustainable revenue growth and provide opportunities for us to achieve operating margins that exceed industry standards. A core component of our business strategy is to establish long-term customer partnerships with companies. Historically, we have had substantial recurring sales to existing customers.
We believe this strategy differentiates us from our competitors and will help drive more sustainable revenue growth and provide opportunities for us to achieve operating margins that exceed industry standards. A core component of our business strategy is to establish and retain long-term customer partnerships with companies. Historically, we have had substantial recurring sales to existing customers.
Our IMS segment consists of printed circuit board assembly and test, high-level assembly and test and direct-order-fulfillment. 2) Components, Products and Services (“CPS”). Components include printed circuit boards, backplanes and backplane assemblies, cable assemblies, fabricated metal parts, precision machined parts, and plastic injected molded parts.
Our IMS segment consists of printed circuit board assembly and test, high-level assembly and test and direct-order-fulfillment. 2) Components, Products and Services (“CPS”). Components include advanced printed circuit boards, backplanes and backplane assemblies, cable assemblies, fabricated metal parts, precision machined parts, and plastic injected molded parts.
We believe that cash held in the United States, together with liquidity available under our Credit Agreement and cash from foreign subsidiaries that could be remitted to the United States without tax consequences, will be sufficient to meet our United States liquidity needs for at least the next twelve months.
We believe that cash held in the United States, together with liquidity available under our Credit Agreement and cash from foreign subsidiaries that could be remitted to the United States without tax consequences, will be sufficient to meet our United States liquidity needs for at least the next 12 months.
(“SCI”) subsidiary; and cloud-based smart manufacturing execution software from our 42Q division. Services include design, engineering, and logistics and repair. Our only reportable segment for financial reporting purposes is IMS, which represented approximately 80% of our total revenue in 2023.
(“SCI”) subsidiary; and cloud-based smart manufacturing execution software from our 42Q division. Services include design, engineering, and logistics and repair. Our only reportable segment for financial reporting purposes is IMS, which represented approximately 80% of our total revenue in 2024.
Therefore, financial information for these operating segments is combined and presented in a single category entitled “Components, Products and Services”. 33 Table of Contents Our strategy is to leverage our comprehensive product and service offerings, advanced technologies and global capabilities to further penetrate diverse end markets that we believe offer significant growth opportunities and have complex products that require higher value-added services.
Therefore, financial information for these operating segments is combined and presented in a single category entitled “CPS”. 33 Table of Contents Our strategy is to leverage our comprehensive product and service offerings, advanced technologies and global capabilities to further penetrate diverse end markets that we believe offer significant growth opportunities and have complex products that require higher value-added services.
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.
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 42 Table of Contents 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.
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 2023, we generated $235 million of cash from operations.
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 2024, we generated $340 million of cash from operations.
Off-Balance Sheet Arrangements As of September 30, 2023, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC, that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. 44 Table of Contents
Off-Balance Sheet Arrangements As of September 28, 2024, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC, that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. 43 Table of Contents
Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense. 36 Table of Contents We must also make judgments regarding the realizability of deferred tax assets.
Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense. We must also make judgments regarding the realizability of deferred tax assets.
All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including any statements regarding trends in future revenue or results of operations, gross margin, operating margin, expenses, earnings or losses from operations, or cash flow; any statements of the plans, strategies and objectives of management for future operations and the anticipated benefits of such plans, strategies and objectives; any statements regarding future economic conditions or performance; any statements regarding 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 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 our expectations concerning developments in the audit by the IRS of certain tax returns filed by us; any statements relating to the expected impact of accounting pronouncements not yet adopted; any statements regarding future repurchases of our common stock; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing.
All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including any statements regarding trends in future revenue or results of operations, gross margin, operating margin, expenses, earnings or losses from operations, or cash flow; any statements of the plans, strategies and objectives of management for future operations and the anticipated benefits of such plans, strategies and objectives; any statements regarding future economic conditions or performance; any statements regarding 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, including our Indian joint venture; 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 impact of any future outbreaks, including outbreaks caused by new variants of COVID-19 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 future tax rates and our expectations concerning developments in the audit by the IRS of certain tax returns filed by us, including the potential impact of the IRS revenue agent’s report received by us in November 2023; any statements relating to the expected impact of accounting pronouncements not yet adopted; any statements regarding future repurchases of our common stock; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to our expectations for future events and time periods.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This report on annual report Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to our expectations for future events and time periods.
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 included in the total estimated costs at completion.
In our Defense and Aerospace division, we apply the cost-to-cost method for government contracts which requires the use of significant judgments with respect to estimated materials, labor and subcontractor costs included in the total estimated costs at completion.
We determined the voting interest model was applicable under ASC 810 and concluded that, despite not having a majority ownership interest, we have a controlling financial interest in SIPL through the management services contract.
We determined the voting interest model was applicable under ASC 810 and 36 Table of Contents concluded that, despite not having a majority ownership interest, we have a controlling financial interest in SIPL through the management services contract.
The decrease in accounts payable is primarily attributable to lower inventory receipts and an unfavorable mix of supplier payment terms, resulting in DPO decreasing from 90 days in 2022 to 81 days in 2023.
The decrease in accounts payable was primarily attributable to lower inventory receipts and an unfavorable mix of supplier payment terms, resulting in DPO decreasing from 90 days in 2022 to 80 days in 2023.
SIPL’s cash and cash equivalents balance of $186 million as of September 30, 2023 is not available for general corporate purposes and must be retained in SIPL to fund its operations. Contractual Obligations As part of our ongoing operations, we enter into contractual arrangements that obligate us to make future cash payments.
SIPL’s cash and cash equivalents balance of $200 million as of September 28, 2024 is not available for general corporate purposes and must be retained in SIPL to fund its operations. Contractual Obligations As part of our ongoing operations, we enter into contractual arrangements that obligate us to make future cash payments.
Selling, General and Administrative Selling, general and administrative expenses were $255 million, $245 million and $235 million in 2023, 2022 and 2021, respectively. As a percentage of net sales, selling, general and administrative expenses were 2.9%, 3.1% and 3.5% for 2023, 2022 and 2021, respectively.
Selling, General and Administrative Selling, general and administrative expenses were $266 million, $255 million and $245 million in 2024, 2023 and 2022, respectively. As a percentage of net sales, selling, general and administrative expenses were 3.5%, 2.9% and 3.1% for 2024, 2023 and 2022, respectively.
In 2023, we repurchased $107 million of common stock (including $23 million in settlement of employee tax withholding obligations), repaid an aggregate of $18 million of long-term debt, paid a final payment of $9 million 41 Table of Contents in connection with a previous business combination, received $216 million from sale of shares of SIPL to RSBVL, received $8 million proceeds from short-term borrowing and received $3 million of proceeds from issuances of common stock pursuant to stock option exercises.
In 2023, we repurchased $107 million of common stock (including $23 million in settlement of employee tax withholding obligations), repaid an aggregate of $18 million of long-term debt, paid a final payment of $9 million in connection with a previous business combination, received $216 million from sale of shares of SIPL to RSBVL and received $8 million proceeds from short-term borrowing.
As of September 30, 2023 and October 1, 2022, $162 million and $194 million, respectively, of accounts receivable sold under the RPA and subject to servicing by us remained outstanding and had not yet been collected. Our sole risk with respect to receivables we service is with respect to commercial disputes regarding such receivables.
As of September 28, 2024 and September 30, 2023, $34 million and $162 million, respectively, of accounts receivable sold under the RPA and subject to servicing by us remained outstanding and had not yet been collected. Our sole risk with respect to receivables we service is with respect to commercial disputes regarding such receivables.
As of September 30, 2023, approximately 41% 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.
As of September 28, 2024, approximately 34% 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.
These obligations impact our liquidity and capital resource needs. Our estimated future obligations consist of leases, the Term Loan Due 2027, pension plan funding obligations and unrecognized tax benefits as of September 30, 2023.
These obligations impact our liquidity and capital resource needs. Our estimated future obligations consist of leases, our Term Loan Due 2027, pension plan funding obligations and unrecognized tax benefits as of September 28, 2024.
A summary of our long-term debt obligations as of September 30, 2023 can be found in Note 7, “Debt” of the notes to the Consolidated Financial Statements contained in this report. We have defined benefit pension plans with an underfunded amount of $35 million as of September 30, 2023.
A summary of our long-term debt obligations as of September 28, 2024 can be found in Note 6 “Debt” of the notes to the Consolidated Financial Statements contained in this report. We have defined benefit pension plans with an underfunded amount of $39 million as of September 28, 2024.
Our primary sources of liquidity as of September 30, 2023 consisted of (1) cash and cash equivalents of $668 million; (2) our Credit Agreement, under which $787 million, net of outstanding borrowings and letters of credit, was available; (3) our foreign short-term borrowing facilities of $72 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.
Our primary sources of liquidity as of September 28, 2024 consisted of (1) cash and cash equivalents of $626 million; (2) our Credit Agreement, under which $786 million, net of outstanding borrowings and letters of credit, was available; (3) our foreign short-term borrowing facilities of $71 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.
Under each of the programs noted above, we sell our entire interest in a trade receivable for 100% of face value, less a discount. For the years ended September 30, 2023 and October 1, 2022, we sold approximately $3 billion and $2 billion, respectively, of accounts receivable under these programs.
Under each of the programs noted above, we sell our entire interest in an accounts receivable for 100% of face value, less a discount. For the years ended September 28, 2024 and September 30, 2023, we sold approximately $1.1 billion and $2.6 billion, respectively, of accounts receivable under these programs.
As of September 30, 2023 and October 1, 2022, $33 million and $49 million, respectively, had been collected but not yet remitted. This amount is classified in accrued liabilities on the consolidated balance sheets.
As of September 28, 2024 and September 30, 2023, $3 million and $33 million, respectively, had been collected but not yet remitted. This amount is classified in accrued liabilities on the consolidated balance sheets.
A summary of our operating lease obligations as of September 30, 2023 can be found in Note 8, “Leases” of the notes to the Consolidated Financial Statements contained in this report.
A summary of our operating lease obligations as of September 28, 2024 can be found in Note 7 “Leases” of the notes to the Consolidated Financial Statements contained in this report.
Revolving Credit Facility. Our Credit Agreement provides for an $800 million revolving credit facility and a $350 million secured term loan (the “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.
The Fifth Amended and Restated Credit Agreement, dated as of September 27, 2022, as amended, (the “Credit Agreement”), provides for an $800 million revolving credit facility and a $350 million secured term loan (the “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.
Lastly, pursuant to arrangements under which vendors consign inventory to us, we may be required to purchase such inventory after a certain period of time. To date, we have not been required to purchase a significant amount of inventory pursuant to these time limitations.
Accordingly, our liability from purchase obligations under these purchase orders is not expected to be significant. Lastly, pursuant to arrangements under which vendors consign inventory to us, we may be required to purchase such inventory after a certain period of time. To date, we have not been required to purchase a significant amount of inventory pursuant to these time limitations.
Trade receivables sold pursuant to the RPA are serviced by us. In addition to the RPA, we participate in trade receivables sales programs that have been implemented by certain of our customers, as in effect from time to time. We do not service trade receivables sold under these other programs.
In addition to the RPA, we participate in accounts receivable sales programs that have been implemented by certain of our customers, as in effect from time to time. We do not service accounts receivable sold under these other programs.
These fluctuations can significantly affect our cash flows from operating activities. During 2023, we generated $527 million of cash from earnings, excluding non-cash items, and used $292 million of cash primarily because of a decrease in accounts payable of $414 million and an increase in accounts receivable of $89 million, partially offset by a decrease in inventories of $210 million.
During 2023, we generated $527 million of cash from earnings, excluding non-cash items, and used $292 million of cash primarily because of a decrease in accounts payable of $418 million and an increase in accounts receivable of $89 million, partially offset by a decrease in inventories of $210 million.
The decrease in inventories is primarily due to lower business volume and our efforts to reduce inventory to more appropriate levels by working with customers to ensure their demand forecasts are reasonable and incorporate appropriate lead times to secure materials.
The decrease in inventories was primarily due to lower business volume and our efforts to reduce inventory to more appropriate levels primarily by working with customers to ensure their demand forecasts are reasonable and incorporate appropriate lead times to secure materials. The increase in accounts receivable was primarily attributable to higher business volume and unfavorable customer payment terms mix.
As of September 30, 2023, we had accrued liabilities of $34 million related to such matters. We cannot accurately predict the outcome of these matters or the amount or timing of cash flows that may be required to defend ourselves or to settle such matters or that these reserves will be sufficient to fully satisfy our contingent liabilities.
We cannot accurately predict the outcome of these matters or the amount or timing of cash flows that may be required to defend ourselves or to settle such matters or that these reserves will be sufficient to fully satisfy our contingent liabilities. As of September 28, 2024, we had a liability of $57 million for uncertain tax positions.
"Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Amendment No. 1 on Form 10-K/A to our Annual Report on Form 10-K for the fiscal year ended October 1, 2022 filed with the SEC on May 22, 2023 for discussion of our results of operations for the fiscal year ended October 1, 2022 compared to the fiscal year ended October 2, 2021.
“Management's Discussion and Analysis of Financial Condition and Results of Operations” contained in our annual report on Form 10-K for the fiscal year ended September 30, 2023 filed with the SEC on November 16, 2023 for discussion of our results of operations for the fiscal year ended September 30, 2023 compared to the fiscal year ended October 1, 2022.
As of September 30, 2023, no borrowings and $13 million of letters of credit were outstanding under the Credit Agreement, under which $787 million was available to borrow. There were no borrowings outstanding under the Credit Agreement as of October 1, 2022. Short-term Borrowing Facilities . We had $8 million of short-term borrowings outstanding as of September 30, 2023.
As of September 28, 2024, no borrowings and $14 million of letters of credit were outstanding under the Credit Agreement, under which $786 million was available to borrow. There were no borrowings outstanding under the Credit Agreement as of September 30, 2023. Short-term Borrowing Facilities.
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 $1.8 billion and $1.4 billion as of September 30, 2023 and October 1, 2022, respectively.
Cash and cash equivalents were $626 million at September 28, 2024 and $668 million at September 30, 2023. 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.
If it is determined that a claim has been approved, the amount of the claim, if any, that can be included in transaction price is estimated considering a number of factors such as the length of time expected to lapse until uncertainty about the claim has been resolved and the extent to which our experience with claims for similar contracts has predictive value. 35 Table of Contents For contracts for which revenue is required to be recognized at a point-in-time, we recognize revenue when we have transferred control of the related goods, which generally occurs upon shipment or delivery of the goods to the customer.
If it is determined that a claim has been approved, the amount of the claim, if any, that can be included in transaction price is estimated considering a number of factors such as the length of time expected to lapse until uncertainty about the claim has been resolved and the extent to which our experience with claims for similar contracts has predictive value.
Liquidity and Capital Resources Year Ended September 30, 2023 October 1, 2022 October 2, 2021 (In thousands) Net cash provided by (used in): Operating activities $ 235,168 $ 330,854 $ 338,342 Investing activities (192,458) (132,214) (91,325) Financing activities 94,505 (314,299) (77,318) Effect of exchange rate changes 498 (4,510) (199) Increase (decrease) in cash and cash equivalents $ 137,713 $ (120,169) $ 169,500 40 Table of Contents Key Working Capital Management Measures As of September 30, 2023 October 1, 2022 Days sales outstanding (1) 55 48 Contract asset days (2) 20 19 Inventory turns (3) 5.1 5.0 Days inventory on hand (4) 72 73 Accounts payable days (5) 81 90 Cash cycle days (6) 66 50 (1) Days sales outstanding (a measure of how quickly we collect our accounts receivable), or “DSO”, is calculated as the ratio of average accounts receivable, net, to average daily net sales for the quarter.
We do not expect any material impact from these tax law changes in fiscal 2025. 39 Table of Contents Liquidity and Capital Resources Year Ended September 28, 2024 September 30, 2023 October 1, 2022 (In thousands) Net cash provided by (used in): Operating activities $ 340,216 $ 235,168 $ 330,854 Investing activities (114,396) (192,458) (132,214) Financing activities (269,707) 94,505 (314,299) Effect of exchange rate changes 2,177 498 (4,510) Increase (decrease) in cash and cash equivalents $ (41,710) $ 137,713 $ (120,169) Key Working Capital Management Measures As of September 28, 2024 September 30, 2023 Days sales outstanding (1) 56 55 Contract asset days (2) 18 20 Inventory turns (3) 5.2 5.1 Days inventory on hand (4) 70 72 Accounts payable days (5) 71 80 * Cash cycle days (6) 73 67 * (1) Days sales outstanding (a measure of how quickly we collect our accounts receivable), or “DSO”, is calculated as the ratio of average accounts receivable, net, to average daily net sales for the quarter.
Long-lived Assets — We review property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.
These transactions are reported as transfers of non-financial assets – i.e., reported on a net basis in the income statement. Long-lived Assets — We review property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.
Net sales increased from $6.7 billion for 2021 to $7.9 billion for 2022, an increase of 17.5%.
Net sales increased from $7.9 billion for 2022 to $8.9 billion for 2023, an increase of 12.8%.
CPS gross margin increased to 11.6% in 2023 from 10.6% in 2022, primarily due to improved operating efficiencies and a favorable mix of products, the effects of which were partially offset by losses on certain fixed-price customer contracts. We have experienced fluctuations in gross margin in the past and may continue to do so in the future.
CPS gross margin increased to 12.8% in 2024 from 11.6% in 2023, primarily due to significant losses recognized on certain fixed-price customer contracts in 2023 compared to 2024, the effect of which was partially offset by unfavorable product mix. We have experienced fluctuations in gross margin in the past and may continue to do so in the future.
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. Accordingly, our liability from purchase obligations under these purchase orders is not expected to be significant.
Orders for standard, or catalog, items can typically be canceled with little or no financial penalty. 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.
Each of these steps may involve the use of significant judgments. We recognize revenue for the majority of our contracts on an over time basis.
We recognize revenue for the majority of our contracts on an over time basis.
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.
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. See Note 15 “Employee Benefit Plans” of the notes to the Consolidated Financial Statements contained in this report.
Year Ended September 30, 2023 October 1, 2022 October 2, 2021 (In thousands) Net sales $ 8,935,048 $ 7,919,622 $ 6,738,356 Gross profit $ 743,211 $ 622,206 $ 526,441 Gross margin 8.3 % 7.9 % 7.8 % Operating expenses $ 287,553 $ 272,727 $ 270,505 Operating income $ 455,658 $ 349,479 $ 255,936 Operating margin 5.1 % 4.4 % 3.8 % Net income attributable to common shareholders $ 309,970 $ 240,384 $ 249,546 Net Sales Net sales increased from $7.9 billion for 2022 to $8.9 billion for 2023, an increase of 12.8%.
Year Ended September 28, 2024 September 30, 2023 October 1, 2022 (In thousands) Net sales $ 7,568,328 $ 8,935,048 $ 7,919,622 Gross profit $ 640,429 $ 743,211 $ 622,206 Gross margin 8.5 % 8.3 % 7.9 % Operating expenses $ 304,935 $ 287,553 $ 272,727 Operating income $ 335,494 $ 455,658 $ 349,479 Operating margin 4.4 % 5.1 % 4.4 % Net income attributable to common shareholders $ 222,536 $ 309,970 $ 240,384 Net Sales Net sales decreased from $8.9 billion for 2023 to $7.6 billion for 2024, a decrease of 15.3%.
As a result, the timing of future repurchases depends upon our future capital needs, market conditions and other factors. As of September 30, 2023, an aggregate of $279 million remains available under these programs.
As a result, the timing of future repurchases depends upon our future capital needs, market conditions and other factors.
Additionally, certain of our foreign subsidiaries had a total of $72 million of short-term borrowing facilities available, under which no borrowings were outstanding as of September 30, 2023. These facilities expire at various dates through the first quarter of 2025.
We had no short-term borrowings outstanding as of September 28, 2024 and $8 million of short-term borrowings outstanding as of September 30, 2023. Additionally, certain of our foreign subsidiaries had a total of $71 million of short-term borrowing facilities available, under which no borrowings were outstanding as of September 28, 2024.
Provision for Income Taxes We recorded income tax expense of $85 million, $62 million and $32 million in 2023, 2022 and 2021, respectively. Our effective tax rate was 21%, 20% and 11% for 2023, 2022 and 2021, respectively. The increase in tax in absolute dollars for 2023 was primarily due to increased profit before tax.
Provision for Income Taxes We recorded income tax expense of $80 million, $85 million and $62 million in 2024, 2023 and 2022, respectively. Our effective tax rate was 25%, 21% and 20% for 2024, 2023 and 2022, respectively.
Net cash provided by operating activities was $235 million, $331 million and $338 million for 2023, 2022 and 2021, respectively. Our working capital metrics tend to fluctuate from quarter-to-quarter based on factors such as the linearity of our shipments to customers and purchases from suppliers, customer and supplier mix, and payment terms with customers and suppliers.
Our working capital metrics tend to fluctuate from quarter-to-quarter based on factors such as the linearity of our 40 Table of Contents shipments to customers and purchases from suppliers, customer and supplier mix, and payment terms with customers and suppliers. These fluctuations can significantly affect our cash flows from operating activities.
Under the Credit Agreement, the percentage of our total accounts receivable that can be sold and outstanding at any time is 50%. Therefore, as of September 30, 2023, a maximum of $450 million of sold receivables could be outstanding at any point in time under this program, as amended, as required by our Credit Agreement.
Therefore, as of September 28, 2024, a maximum of $490 million of sold receivables could be outstanding at any point in time under this program, as amended, as required by our Credit Agreement. Accounts receivables sold pursuant to the RPA are serviced by us.
Other Liquidity Matters During 2023 and 2022 we repurchased 1.6 million shares and 8.0 million shares of our common stock for $84 million and $317 million (including commissions), respectively, under stock repurchase programs authorized by the Board of Directors.
Some of these facilities expire at various dates through the second quarter of 2025 and are expected to be renewed. Other Liquidity Matters During 2024 and 2023, we repurchased 4.0 million shares and 1.6 million shares of our common stock for $227 million and $84 million (including commissions), respectively, under stock repurchase programs authorized by the Board of Directors.
If a change in estimate is deemed necessary, the impact of the change is recognized in the period of change. Additionally, contract modifications for claims are assessed each quarter to determine whether the claims have been approved.
Additionally, contract modifications for claims are assessed each quarter to determine whether the claims have been approved.
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 proceeds from issuances of a term loan, incurred $3 million of costs in connection with the amendment to the term loan and received $2 million of proceeds from issuances of common stock pursuant to stock option exercises.
In 2024, we repurchased $254 million of common stock (including $26 million in settlement of employee tax withholding obligations), repaid an aggregate of $22 million of long-term debt and received $6 million of proceeds from issuances of common stock pursuant to stock option exercises.
These agreements generally have terms ranging from three to five years and cover the manufacture of a range of products. Under these agreements, a customer typically purchases its requirements for specific products in particular geographic areas from us. However, these agreements generally do not obligate the customer to purchase minimum quantities of products.
Under these agreements, a customer typically purchases its requirements for specific products in particular geographic areas from us. However, these agreements generally do not obligate the customer to purchase minimum quantities of products. In addition, some customer contracts contain cost reduction objectives, which can have the effect of reducing revenue from such customers.
We also intend to continue to invest in factory automation, process improvements, robotics and artificial intelligence, keeping up with the trends in technology to further enhance our efficiency output. We believe our end-to-end manufacturing solutions combined with our global supply chain management expertise differentiates us from our competitors and enables us to better serve the needs of OEMs.
We also intend to continue to invest in factory automation, process improvements, robotics and artificial intelligence, keeping up with the trends in technology to further enhance our efficiency output.
Net cash provided by (used in) financing activities was $95 million, $(314) million and $(77) million for 2023, 2022 and 2021, respectively.
Net cash used in investing activities was $114 million, $192 million and $132 million for 2024, 2023 and 2022, respectively. In 2024 and 2023, we used $111 million and $191 million, respectively, of cash for capital expenditures. Net cash provided by (used in) financing activities was $(270) million, $95 million and $(314) million for 2024, 2023 and 2022, respectively.
These estimates consider costs incurred to date and estimated costs to be incurred over the remaining expected period of performance to satisfy a performance obligation. Such estimates are reviewed each quarter by a group of employees that includes representatives from numerous functions such as engineering, materials, contracts, manufacturing, program management, finance and senior management.
Therefore, such estimates are reviewed each quarter by a group of employees that includes representatives from numerous functions such as engineering, materials, contracts, manufacturing, program management, finance and senior management. If a change in estimate is deemed necessary, the impact of the change is recognized in the period of change.
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.
We enter into forward interest rate swap agreements with independent counterparties to partially hedge the variability in cash flows due to changes in Secured Overnight Financing Rate benchmark interest rate associated with anticipated variable rate borrowings. See Note 5 “Financial Instruments and Concentration of Credit Risk” of the notes to the Consolidated Financial Statements contained in this report for details.
Sales to our ten largest customers typically represent approximately 50% of our net sales in any given year. Nokia represented 10% or more of our net sales in 2023, 2022 and 2021. Motorola represented 10% or more of our net sales in 2022. We typically enter into supply agreements with our major OEM customers.
Sales to our ten largest customers typically represent approximately 50% of our net sales in any given year. We typically enter into supply agreements with our major OEM customers. These agreements generally have terms ranging from three to five years and cover the manufacture of a range of products.
However, our business faces many challenges. For example, we compete with a number of companies in each of our key end markets. This includes companies that are much larger than we are and smaller companies that focus on a particular niche product, service or end market.
This includes companies that are much larger than we are and smaller companies that focus on a particular niche product, service or end market. Although we believe we are well-positioned in each of our key end markets and offer many advantages compared to our competitors, competition remains intense and profitably growing our revenues has been challenging.
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. The amount available under the RPA is uncommitted and, as such, is available at the discretion of our third-party banking institutions.
As of September 28, 2024, an aggregate of $53 million remains available under these programs. 41 Table of Contents We are party to a Receivables Purchase Agreement (the “RPA”) with certain third-party banking institutions for the sale of accounts receivable generated from sales to certain customers.
See Note 5, “Financial Instruments” of the notes to the Consolidated Financial Statements contained in this report for details. 42 Table of Contents 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.
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. As of September 28, 2024, we had accrued liabilities of $39 million related to such matters.
Although the final resolution of this proposed adjustment remains uncertain, we continue to believe that it is more likely than not that our tax position will be sustained. An unfavorable resolution of this matter could have a material, adverse impact on our Consolidated Financial Statements.
We do not expect resolution of this matter within twelve months and cannot predict with any certainty the timing of such resolution. Although the final resolution of this matter remains uncertain, we continue to believe that it is more likely than not our tax position will be sustained.
Additionally, we evaluate whether contract modifications for claims have been approved and, if so, estimate the amount, if any, of variable consideration that can be included in the transaction price of the contract. This division is an operating segment whose results are combined with thirteen other operating segments and reported under CPS.
Additionally, we evaluate whether contract modifications for claims have been approved and, if so, estimate the amount, if any, of variable consideration that can be included in the transaction price of the contract. Estimates of materials, labor and subcontractor costs expected to be incurred to satisfy a performance obligation are updated on a quarterly basis.
(6) Cash cycle days (a measure of how quickly we convert investments in inventory to cash) is calculated as days inventory on hand plus days sales outstanding minus accounts payable days. Cash and cash equivalents were $668 million at September 30, 2023 and $530 million at October 1, 2022.
(6) Cash cycle days (a measure of how quickly we convert investments in inventory to cash) is calculated as days inventory on hand plus days sales outstanding minus accounts payable days. * Certain prior period ratios reflect immaterial updates due to reclassifications of certain financial statement amounts to conform to the current period presentation.
The increase in absolute dollars in 2023 from 2022 was primarily due to an increase in our deferred compensation liability resulting from an increase in the market value of participant investment accounts and higher professional fees. Research and Development Research and Development expenses were $26 million, $21 million and $21 million in 2023, 2022 and 2021, respectively.
The increase in absolute dollars in 2024 from 2023 was primarily due to higher stock compensation expense from new equity grants, higher variable compensation and an increase in deferred compensation caused by strong stock market performance that increased the market value of participant investment accounts, partially offset by lower professional fees.
In addition, some customer contracts contain cost reduction objectives, which can have the effect of reducing revenue from such customers. We typically generate about 80% of our net sales from products manufactured in our foreign operations.
We generate about 80% of our net sales from products manufactured in our foreign operations.
Given that maintaining low costs is the cornerstone of our success and growth, we are proactively handling cost impacts through a combination of well-calibrated pricing actions and targeted cost-saving measures to enhance overall stockholder value. 34 Table of Contents Critical Accounting Policies and Estimates Management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
As our end markets evolve and grow, our ability to optimize our product and portfolio mix towards higher value opportunities will continue to be an important driver for our business going forward. 34 Table of Contents Critical Accounting Policies and Estimates Management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
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 generally short-term in nature. Orders for standard, or catalog, items can typically be canceled with little or no financial penalty.
The Company’s long-term liabilities arising from unrecognized tax benefits can be found in Note 10 “Income Tax” of the notes to the Consolidated Financial Statements contained in this report. We also have outstanding firm purchase orders with certain suppliers for the purchase of inventory which are generally short-term in nature.
Other income (expense), net, decreased $6 million in 2023 due primarily to a gain of $5 million in the market value of participant investment accounts in our deferred compensation plan in 2023 compared to a loss of $6 million in 2022, a $7 million allowance in 2022 that was provided for a note receivable compared to none in 2023, partially offset by a $13 million increase in fees in 2023 for accounts receivable factoring.
The decrease in other expense in 2024 was primarily caused by a $12 million decrease in discount of sold receivables in 2024 due to significantly lower factoring levels and an incremental gain of $5 million in the market value of participant investment accounts in our deferred compensation plan.
As a percentage of net sales, Research and Development expenses were 0.3% for 2023, 2022 and 2021. The increase in absolute dollars in 2023 from 2022 was primarily due to higher expense for additional design support on projects and higher material costs as we continue to focus on supporting customer requirements.
The increase in absolute dollars in 2024 from 2023 was primarily due to higher expenses for design and engineering support for existing and new projects. Other Expense Other expense was $1 million in 2024, $20 million in 2023 and a $26 million in 2022.
We are currently being audited by the Internal Revenue Service (“IRS”) for fiscal years 2008 through 2010. On 39 Table of Contents September 26, 2023, we received a final Notice of Proposed Adjustment from the IRS related to a worthless stock deduction and disallowance of the resulting net operating loss carryforward in the 2009 fiscal year.
As a result of an audit by the Internal Revenue Service (“IRS”) for fiscal 2008 through 2010, we received a Revenue Agent’s Report (“RAR”) on November 17, 2023 asserting an underpayment of tax of approximately $8 million for fiscal 2009. The asserted underpayment results from the IRS’s proposed disallowance of a $503 million worthless stock deduction in fiscal 2009.
Removed
Although we believe we are well-positioned in each of our key end markets and offer many advantages compared to our competitors, competition remains intense and profitably growing our revenues has been challenging. Additionally, we are impacted by macroeconomic challenges such as inflation, market volatility, fluctuations in currency exchange rates, supply chain issues, and actual or threatened wars or conflicts.
Added
Trends and Uncertainties We believe our end-to-end manufacturing solutions combined with our global supply chain management expertise differentiates us from our competitors and enables us to better serve the needs of OEMs. However, our business faces many challenges. For example, we compete with a number of companies in each of our key end markets.
Removed
These challenges can increase the prices and reduce the availability of components we acquire, as well as increase our labor and operating costs. We have been able to partially mitigate the impact of rising prices through our contractual pricing rights with customers.
Added
Additionally, we are impacted by macroeconomic challenges such as inflation, supply chain constraints, foreign currency fluctuations, high interest rates, market volatility, recession concerns, tariffs and other factors that have been and could be in the future exacerbated by geopolitical conflicts such as the war in Ukraine, conflict in the Middle East and results of the U.S. presidential election.
Removed
However, further pricing increases may result in a decline in our future profitability and we expect the macroeconomic challenges to continue in the future. Over the past several years, the U.S., China, the E.U. and several other countries imposed tariffs impacting certain imported products.
Added
Although supply chain constraints have been easing, we expect headwinds to our revenue growth that will continue in 2025 due to customers absorbing their finished goods inventory in some of our end markets. Despite these challenges, we remain focused on improving our operations, building flexibility and efficiencies in our processes and adjusting our business models to changing circumstances.
Removed
Although our customers are generally liable to us for reimbursement of tariffs we pay on components imported for the manufacture of their products, there can be no assurance that we will be successful in recovering all of the tariffs that are owed to us. Unrecovered tariffs paid on behalf of our customers reduce our gross margins.
Added
We intend to continue diversifying into mission critical markets and creating a portfolio of more complex, higher technology products with longer product life cycles.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFrom an economic perspective, the objective of our hedging program is for gains or losses on forward contracts to substantially offset gains and losses on the underlying hedged items. As of September 30, 2023, we had outstanding foreign currency forward contracts to exchange various foreign currencies for U.S. dollars in an aggregate notional amount of $338 million.
Biggest changeAs of September 28, 2024, we had outstanding foreign currency forward contracts to exchange various foreign currencies for U.S. dollars in an aggregate notional amount of $366 million. We also utilize foreign currency forward contracts to hedge certain operational (“cash flow”) exposures resulting from changes in foreign currency exchange rates.
We enter into short-term foreign currency forward contracts to hedge currency exposures associated with certain monetary assets and liabilities denominated in non-functional currencies such as Mexican peso, Chinese renminbi and Indian rupee. These contracts generally have maturities of up to two months and these forward contracts are not designated as part of a hedging relationship for accounting purposes.
We enter into short-term foreign currency forward contracts to hedge currency exposures associated with certain monetary assets and liabilities denominated in non-functional currencies such as Indian rupee, Mexican peso and Chinese renminbi. These contracts generally have maturities of up to two months and these forward contracts are not designated as part of a hedging relationship for accounting purposes.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk Our primary exposure to market risk for changes in interest rates relates to our Term Loan Due 2027, under which $333 million is currently outstanding, and borrowings under our revolving credit facility, for which the interest rate we pay is based on a floating index.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk Our primary exposure to market risk for changes in interest rates relates to our Term Loan Due 2027, under which $319 million is currently outstanding, and borrowings under our revolving credit facility, for which the interest rate we pay is based on a floating index.
We had forward contracts related to cash flow hedges in various foreign currencies in an aggregate notional amount of $126 million as of September 30, 2023. The net impact of an immediate 10 percent change in exchange rates would not be material to our consolidated financial statements, provided we accurately forecast and estimate our foreign currency exposure.
We had forward contracts related to cash flow hedges in various foreign currencies in an aggregate notional amount of $117 million as of September 28, 2024. The net impact of an immediate 10 percent change in exchange rates would not be material to our consolidated financial statements, provided we accurately forecast and estimate our foreign currency exposure.
As of September 30, 2023, we had interest rate swaps with an aggregate notional amount of $650 million that effectively convert our floating rate Term Loan Due 2027 to a fixed rate term loan. An immediate 10 percent change in interest rates would not have a significant impact on our results of operations.
As of September 28, 2024, we had interest rate swaps with an aggregate notional amount of $300 million that effectively convert our floating rate Term Loan Due 2027 to a fixed rate term loan. An immediate 10 percent change in interest rates would not have a significant impact on our results of operations.
For more information about our debt and derivative instruments, see Note 5 “Financial Instruments” and Note 7 “Debt” of the notes to the Consolidated Financial Statements included in this report. Foreign Currency Exchange Risk We transact business in foreign currencies.
For more information about our debt and derivative instruments, see Note 5 “Financial Instruments and Concentration of Credit Risk” and Note 6 “Debt” of the notes to the Consolidated Financial Statements included in this report. Foreign Currency Exchange Risk We transact business in foreign currencies.
These contracts may be up to twelve months in duration and are designated as cash flow hedges for accounting purposes. The effective portion of changes in the fair value of the contracts is recorded in stockholders' equity as a separate component of accumulated other comprehensive income and recognized in earnings when the hedged item affects earnings.
The effective portion of changes in the fair value of the contracts is recorded in stockholders' equity as a separate component of accumulated other comprehensive income and recognized in earnings when the hedged item affects earnings.
Accordingly, all outstanding foreign currency forward contracts are marked-to-market at the end of the period with unrealized gains and losses included in other income (expense), net, in the consolidated statements of income.
Accordingly, all outstanding foreign currency forward contracts are marked-to-market at the end of the period with unrealized gains and losses included in other expense, in the consolidated statements of income. From an economic perspective, the objective of our hedging program is for gains or losses on forward contracts to substantially offset gains and losses on the underlying hedged items.
We also utilize foreign currency forward contracts to hedge certain operational (“cash flow”) exposures resulting from changes in foreign currency exchange rates. Such exposures result from (1) forecasted non-functional currency sales and (2) forecasted non-functional currency materials, labor, overhead and other expenses.
Such exposures result from (1) forecasted non-functional currency sales and (2) forecasted non-functional currency materials, labor, overhead and other expenses. These contracts may be up to twelve months in duration and are designated as cash flow hedges for accounting purposes.

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