Sanmina(SANM)2024-11-27 19:21Manufacturing Facilities and Operations - The company's total manufacturing facilities cover approximately 11,559,002 square feet, with 5,706,824 square feet in the Americas, 4,479,735 square feet in APAC, and 1,372,443 square feet in EMEA[207] - As of September 28, 2024, the company owns 9 million square feet of manufacturing facilities and leases 2 million square feet with lease terms expiring between 2024 and 2042[207] - About 80% of the company's net sales are generated from products manufactured in foreign operations, with plans to expand presence in regions like Asia, Latin America, and Eastern Europe[243] Stock and Shareholder Information - The company's common stock is traded on the Nasdaq Global Select Market under the symbol SANM, with approximately 712 holders of record as of November 14, 2024[222] - The company's stock price increased from $100 on September 28, 2019, to $214.41 on September 28, 2024, outperforming the S&P 500 index during the same period[226] - The company repurchased 944,911 shares of its common stock during the fourth quarter of 2024 at an average price of $68.70 per share[230] - The company repurchased $254 million of common stock in 2024, including $26 million for employee tax withholding obligations[289] - The company repurchased 4.0 million shares of common stock for $227 million in 2024, with $53 million remaining available under the repurchase programs[293] Cybersecurity and Information Security - The company's SCI Technology subsidiary is certified under the U.S. Cybersecurity Maturity Model Certification (CMMC) program[200] - The company employs cybersecurity measures including end-to-end email encryption, two-factor authentication, and strong password requirements[198] - The company provides annual cybersecurity and information security compliance training to relevant employees, including simulated phishing campaign tests[199] - The company's Board oversees cybersecurity risks, with regular reports from the Chief Information Officer (CIO) and oversight from the Audit Committee[203] Revenue and Financial Performance - The company's Integrated Manufacturing Solutions (IMS) segment represented approximately 80% of total revenue in 2024[238] - Approximately 50% of the company's net sales in any given year come from its ten largest customers[241] - Net sales decreased by 15.3% to $7.57 billion in 2024 from $8.94 billion in 2023, primarily due to reduced demand in communications networks and cloud infrastructure[266][267] - Gross margin improved to 8.5% in 2024 from 8.3% in 2023, with CPS gross margin increasing to 12.8% from 11.6% due to fewer losses on fixed-price contracts[268] - Operating income decreased to $335.5 million in 2024 from $455.7 million in 2023, with operating margin declining to 4.4% from 5.1%[265] - Net income attributable to common shareholders fell to $222.5 million in 2024 from $310.0 million in 2023[265] - Revenue for the CPS segment was $1.5 billion for the year ended September 28, 2024, with the defense and aerospace division representing a portion of the segment[329] - Net sales for the year ended September 28, 2024, were $7,568,328 thousand, a decrease of 15.3% compared to $8,935,048 thousand in the previous year[340] - Gross profit for the year ended September 28, 2024, was $640,429 thousand, down 13.8% from $743,211 thousand in the previous year[340] - Operating income for the year ended September 28, 2024, was $335,494 thousand, a decrease of 26.4% compared to $455,658 thousand in the previous year[340] - Net income attributable to common shareholders for the year ended September 28, 2024, was $222,536 thousand, down 28.2% from $309,970 thousand in the previous year[340] - Basic earnings per share for the year ended September 28, 2024, were $4.00, a decrease of 25.4% compared to $5.36 in the previous year[340] - Comprehensive income attributable to common shareholders for the year ended September 28, 2024, was $218,398 thousand, down 32.7% from $324,524 thousand in the previous year[343] - Total other comprehensive loss for the year ended September 28, 2024, was $(4,138) thousand, compared to a gain of $14,554 thousand in the previous year[343] - Net income before noncontrolling interest for the year ended September 28, 2024 was $237.75 million, compared to $327.51 million in 2023 and $240.38 million in 2022[349] Research and Development - Research and development expenses increased to $29 million in 2024 from $26 million in 2023, representing 0.4% of net sales[273] - Research and development expenses for the year ended September 28, 2024, were $28,514 thousand, an increase of 7.9% compared to $26,427 thousand in the previous year[340] Cash Flow and Financial Position - Net cash provided by operating activities rose to $340.2 million in 2024 from $235.2 million in 2023, driven by improved working capital management[279][286] - Days sales outstanding (DSO) increased to 56 days in 2024 from 55 days in 2023, while inventory turns improved to 5.2 from 5.1[279] - Cash and cash equivalents decreased to $626 million at September 28, 2024, from $668 million at September 30, 2023[283] - Capital expenditures were $111 million in 2024, down from $191 million in 2023[288] - Net cash used in financing activities was $(270) million in 2024, compared to $95 million in 2023 and $(314) million in 2022[289] - The company has an $800 million revolving credit facility and a $350 million secured term loan due in 2027, with an additional $200 million available through an accordion feature[290] - As of September 28, 2024, $786 million was available under the Credit Agreement, with no borrowings and $14 million of letters of credit outstanding[291] - The company sold approximately $1.1 billion of accounts receivable in 2024, compared to $2.6 billion in 2023[297] - As of September 28, 2024, the company had $626 million in cash and cash equivalents and $786 million available under the Credit Agreement[300] - Cash and cash equivalents decreased from $667.57 million as of September 30, 2023, to $625.86 million as of September 28, 2024[337] - Accounts receivable increased from $1.23 billion as of September 30, 2023, to $1.34 billion as of September 28, 2024[337] - Inventories decreased from $1.48 billion as of September 30, 2023, to $1.44 billion as of September 28, 2024[337] - Total current assets slightly decreased from $3.88 billion as of September 30, 2023, to $3.87 billion as of September 28, 2024[337] - Total liabilities decreased from $2.03 billion as of September 30, 2023, to $1.94 billion as of September 28, 2024[337] - Long-term debt decreased from $312.33 million as of September 30, 2023, to $299.82 million as of September 28, 2024[337] - Accumulated deficit improved from -$2.93 billion as of September 30, 2023, to -$2.71 billion as of September 28, 2024[337] - Total stockholders' equity increased from $2.32 billion as of September 30, 2023, to $2.36 billion as of September 28, 2024[337] - Cash provided by operating activities increased to $340.22 million in 2024 from $235.17 million in 2023 and $330.85 million in 2022[349] - Depreciation and amortization expenses rose to $122.42 million in 2024 from $118.24 million in 2023 and $108.78 million in 2022[349] - Cash used in investing activities decreased to $114.40 million in 2024 from $192.46 million in 2023 and $132.21 million in 2022[349] - Cash and cash equivalents at the end of 2024 were $625.86 million, down from $667.57 million in 2023 and $529.86 million in 2022[349] Tax and Regulatory Matters - The company's effective tax rate is influenced by geographic income distribution, tax regulations, and the utilization of net operating losses and tax credits[261] - The company recorded income tax expense of $80 million in 2024, with an effective tax rate of 25%, up from 21% in 2023[275] - The company has a liability of $57 million for uncertain tax positions, with a potential decrease of $8 million in the next 12 months[299] - Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in future years, with a valuation allowance for assets not meeting the "more likely than not" criteria[394][396] Inventory and Cost Management - Inventory is stated at the lower of cost and net realizable value, with provisions made for excess and obsolete inventories based on forecasted demand and customer financial difficulties[252] - The company's raw materials inventories are generally acquired in anticipation of specific customer orders and pursuant to customer-specific design specifications[367] - The company's inventory at the end of a given period is 99% or more in the form of raw materials due to revenue recognition over time for most contracts[386] Property, Plant, and Equipment - Property, plant and equipment are depreciated on a straight-line basis over 20 to 40 years for buildings and 3 to 15 years for machinery, equipment, furniture and fixtures[368] Derivatives and Hedging - The company uses derivatives such as foreign currency forward contracts and interest rate swaps to minimize earnings and cash flow volatility due to foreign currency exchange rates and interest rate changes[372] - Derivative instruments are recorded on the consolidated balance sheets at fair value, with gains or losses not caused by time value changes recorded in AOCI and reclassified into earnings[373] - The company has $366 million in outstanding foreign currency forward contracts to hedge currency exposures[314] - The company has $117 million in foreign currency forward contracts designated as cash flow hedges[315] Leases and Contracts - The company's leases have initial terms of up to 44 years, with certain leases containing options to extend or terminate, and leases with terms of 12 months or less are not recorded on the balance sheet[376] - Revenue is recognized over time for at least 95% of the company's contracts, primarily due to the lack of alternative use for end products and enforceable right to payment for work in progress[386] - The company applies the cost-to-cost method for government contracts in the Defense and Aerospace division, requiring significant judgments on estimated costs[387] - Contract assets are recognized when revenue is recognized but no invoice has been issued, and these assets are generally transferred to accounts receivable within the next fiscal quarter[390] - The company does not adjust the promised amount of consideration for significant financing components, as the period between transfer and payment is generally one year or less[392] Stock-Based Compensation - Stock-based compensation for the year ended September 28, 2024, was $57,407 thousand, an increase of 13.9% compared to $50,402 thousand in the previous year[346] - Stock-based compensation expense is recognized over the requisite service period, with adjustments made if the probability of vesting changes for performance-based awards[393] - Stock-based compensation expense increased to $57.41 million in 2024 from $50.40 million in 2023 and $39.61 million in 2022[349] Revenue Recognition and Accounting - Revenue recognition for the majority of contracts is on an over-time basis using the cost-to-cost method, with favorable revenue impacts of $12.22 million in 2024 and $6.02 million in 2023[246][249] - Operating income impacts from changes in estimates were favorable by $21.23 million in 2024 and unfavorable by $16.10 million in the same year[251] - The company consolidates its Indian manufacturing entity, SIPL, despite holding only 49.9% of the shares, due to a management services contract granting unilateral control[256][258] - Allowances for uncollectible accounts were approximately $7 million as of September 28, 2024, down from $8 million in 2023[363] Other Financial Metrics - Repurchases of treasury stock for the year ended September 28, 2024, amounted to $254,298 thousand, an increase of 137.4% compared to $107,093 thousand in the previous year[346] - The Integrated Manufacturing Solutions (IMS) segment represented approximately 80% of total revenue in 2024[355]