SANM 10-Q Quarterly Report July 2, 2011

SANMINA CORP

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10-Q 1 sanmina-sci_july2201110q.htm FORM 10-Q Sanmina-SCI_July 2 2011_10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



(Mark one)
[x]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 2, 2011



[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 0-21272

Sanmina-SCI Corporation

(Exact name of registrant as specified in its charter)



	Delaware		77-0228183
	(State or other jurisdiction of		(I.R.S. Employer
	incorporation or organization)		Identification Number)

	2700 N. First St., San Jose, CA		95134
	(Address of principal executive offices)		(Zip Code)

(408) 964-3500

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ x ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer [x]	Accelerated filer [ ]	Non-accelerated filer [ ]	Smaller reporting company [ ]
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [x]

As of July 28, 2011, there were 80,657,540 shares outstanding of the issuer's common stock, $0.01 par value per share.

SANMINA-SCI CORPORATION

INDEX



		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Interim Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	28
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors Affecting Operating Results	30
Item 6.	Exhibits	42
Signatures		43

SANMINA-SCI CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS



	As of
	July 2, 2011		October 2, 2010
	(Unaudited)
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	582,816	$	592,812
Accounts receivable, net of allowances of $16,204 and $16,752, respectively	1,042,092		1,018,612
Inventories	885,502		844,347
Prepaid expenses and other current assets	125,205		134,238
Total current assets	2,635,615		2,590,009
Property, plant and equipment, net	562,766		570,258
Other	118,247		141,529
Total assets	$	3,316,628	$	3,301,796
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	958,075	$	923,038
Accrued liabilities	134,483		140,371
Accrued payroll and related benefits	125,636		122,934
Short-term debt	60,400		65,000
Total current liabilities	1,278,594		1,251,343
Long-term liabilities:
Long-term debt	1,151,883		1,240,666
Other	136,851		148,186
Total long-term liabilities	1,288,734		1,388,852
Commitments and contingencies (Note 6)
Stockholders' equity	749,300		661,601
Total liabilities and stockholders' equity	$	3,316,628	$	3,301,796

See accompanying notes.

SANMINA-SCI CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME



	Three Months Ended						Nine Months Ended
	July 2, 2011			July 3, 2010			July 2, 2011			July 3, 2010
	(Unaudited)
	(In thousands, except per share data)
Net sales	$	1,674,200		$	1,625,170		$	4,905,709		$	4,630,923
Cost of sales	1,542,599			1,501,055			4,529,230			4,279,644
Gross profit	131,601			124,115			376,479			351,279

Operating expenses:
Selling, general and administrative	67,043			65,392			187,726			191,364
Research and development	5,797			3,057			14,877			9,407
Amortization of intangible assets	958			926			2,875			3,163
Restructuring and integration costs	6,336			6,196			15,885			13,405
Asset impairment	—			600			85			1,100
Gain on sales of long-lived assets, net	(1,440		)	(13,796		)	(3,465		)	(13,796		)
Total operating expenses	78,694			62,375			217,983			204,643

Operating income	52,907			61,740			158,496			146,636

Interest income	356			558			1,490			1,536
Interest expense	(24,843		)	(27,119		)	(77,773		)	(80,476		)
Other income (expense), net	(14,767		)	(2,046		)	(11,489		)	37,729
Interest and other, net	(39,254		)	(28,607		)	(87,772		)	(41,211		)

Income before income taxes	13,653			33,133			70,724			105,425
Provision for income taxes	4,248			11,570			19,895			14,389
Net income	$	9,405		$	21,563		$	50,829		$	91,036

Net income per share:
Basic	$	0.12		$	0.27		$	0.63		$	1.15
Diluted	$	0.11		$	0.26		$	0.61		$	1.10

Weighted average shares used in computing per share amounts:
Basic	80,579			79,544			80,223			79,040
Diluted	83,141			83,693			83,275			82,404

See accompanying notes.

SANMINA-SCI CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	Nine Months Ended
	July 2, 2011			July 3, 2010
	(Unaudited)
	(In thousands)
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income	$	50,829		$	91,036
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	75,368			64,565
Stock-based compensation expense	14,894			12,371
Provision (benefit) for doubtful accounts, product returns and other net sales adjustments	(65		)	3,633
Deferred income taxes	(1,254		)	994
Asset impairment	85			1,100
Loss on extinguishment of debt	16,098			1,197
Gain on sale of assets and business	(3,465		)	(17,506		)
Other, net	165			650
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(19,949		)	(242,264		)
Inventories	(39,238		)	(74,221		)
Prepaid expenses and other assets	4,145			4,749
Accounts payable	42,109			119,338
Accrued liabilities and other long-term liabilities	16,139			(10,078		)
Cash provided by (used in) operating activities	155,861			(44,436		)

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(82,800		)	(44,139		)
Proceeds from sales of property, plant and equipment	23,753			30,809
Cash paid in connection with business combinations	(14,656		)	(14,676		)
Cash used in investing activities	(73,703		)	(28,006		)

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Change in restricted cash	11,567			1,110
Proceeds from (repayments of) short-term borrowings	(4,600		)	50,600
Repayments of long-term debt	(590,623		)	(219,867		)
Proceeds from issuance of long-term debt, net of issuance costs	489,030			—
Net proceeds from stock issuances	4,225			2,515
Cash used in financing activities	(90,401		)	(165,642		)
Effect of exchange rate changes	(1,753		)	3,502
Decrease in cash and cash equivalents	(9,996		)	(234,582		)
Cash and cash equivalents at beginning of period	592,812			899,151
Cash and cash equivalents at end of period	$	582,816		$	664,569

Cash paid during the period for:
Interest	$	63,257		$	54,544
Income taxes, net of refunds	$	7,860		$	31,786

See accompanying notes.

SANMINA-SCI CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

The accompanying condensed consolidated financial statements of Sanmina-SCI Corporation (the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) have been omitted pursuant to those rules or regulations. The interim condensed consolidated financial statements are unaudited, but reflect all normal recurring and non-recurring adjustments that are, in the opinion of management, necessary for a fair presentation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended October 2, 2010 , included in the Company's 2010 Annual Report on Form 10-K.

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

Results of operations for the nine months ended July 2, 2011 are not necessarily indicative of the results that may be expected for the full fiscal year.

The Company operates on a 52 or 53 week year ending on the Saturday nearest September 30. Fiscal 2011 and 2010 are each 52-week years. All references to years relate to fiscal years unless otherwise noted.

Note 2. Inventories

Components of inventories were as follows:



	As of
	July 2, 2011		October 2, 2010
	(In thousands)
Raw materials	$	632,475	$	599,773
Work-in-process	114,927		126,270
Finished goods	138,100		118,304
Total	$	885,502	$	844,347

Note 3. Fair Value

Fair Value Option for Long-term Debt

The Company has elected not to record its long-term debt instruments at fair value, but has measured them at fair value for disclosure purposes. As of July 2, 2011, the carrying amount and estimated fair value of the Company's long-term debt instruments were $1,157.4 million and $1,147.8 million , respectively. Fair value was estimated based on either the most recent traded price, a quoted price or other market sources (Level 2 inputs).

Assets/Liabilities Measured at Fair Value on a Recurring Basis

The Company's primary financial assets and financial liabilities are as follows:


•	Money market funds


•	Time deposits


•	Foreign currency forward contracts


•	Interest rate swaps

Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures , defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market

participants at the measurement date. When determining fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and also considers assumptions that market participants would use when pricing an asset or liability.

Inputs to valuation techniques used to measure fair value are prioritized into three broad levels (fair value hierarchy), as follows:

Level 1: Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs that reflect quoted prices, other than quoted prices included in Level 1, that are observable for the assets or liabilities, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in less active markets; or inputs that are derived principally from or corroborated by observable market data by correlation.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of assets or liabilities.

There were no transfers between levels in the fair value hierarchy during any period presented herein. The following table presents information as of July 2, 2011 with respect to assets and liabilities measured at fair value on a recurring basis:



	Money market funds		Time deposits		Derivatives designated as hedging instruments under ASC 815: Foreign Currency Forward Contracts and Interest Rate Swaps			Derivatives not designated as hedging instruments under ASC 815: Foreign Currency Forward Contracts			Total
	Level 1		Level 1		Level 2			Level 2
	(In thousands)
Balance Sheet Classification:
Cash and cash equivalents	$	435	$	22,640	$	—		$	—		$	23,075
Prepaid expenses and other current assets	—		—		11			1,548			1,559
Accrued liabilities (1)	—		—		(92		)	(4,405		)	(4,497		)
Other long-term liabilities (1)	—		—		(38,391		)	—			(38,391		)
Total	$	435	$	22,640	$	(38,472	)	$	(2,857	)	$	(18,254	)

(1) Liabilities, or credit balances, are presented as negative amounts.

The following table presents information as of October 2, 2010 with respect to assets and liabilities measured at fair value on a recurring basis:



	Money market funds		Time deposits		Derivatives designated as hedging instruments under ASC 815: Foreign Currency Forward Contracts and Interest Rate Swaps			Derivatives not designated as hedging instruments under ASC 815: Foreign Currency Forward Contracts			Total
	Level 1		Level 1		Level 2			Level 2
	(In thousands)
Balance Sheet Classification:
Cash and cash equivalents	$	791	$	99,110	$	—		$	—		$	99,901
Prepaid expenses and other current assets	—		—		10			8,282			8,292
Accrued liabilities (1)	—		—		(42		)	(10,475		)	(10,517		)
Other long-term liabilities (1)	—		—		(40,296		)	—			(40,296		)
Total	$	791	$	99,110	$	(40,328	)	$	(2,193	)	$	57,380

(1) Liabilities, or credit balances, are presented as negative amounts.

The Company sponsors deferred compensation plans for eligible employees and non-employee members of its Board of Directors that allow participants to defer payment of part or all of their compensation. The Company's results of operations are not significantly affected by these plans since changes in the fair value of the assets substantially offset changes in the fair value of the liabilities. As such, assets and liabilities associated with these plans have not been included in the above tables. Assets and liabilities associated with these plans of approximat ely $12.0 million a s of July 2, 2011 and $10.8 million as of October 2, 2010 are recorded as other non-current assets and other long-term liabilities in the condensed consolidated balance sheet.

The Company values derivatives using observable Level 2 market expectations at the measurement date and standard valuation techniques to convert future amounts to a single present value amount assuming that participants are motivated, but not compelled, to transact. The Company seeks high quality counterparties for all financing arrangements. For interest rate swaps, Level 2 inputs include short-term LIBOR rates, futures contracts on LIBOR between two and four years, longer term swap rates at commonly quoted intervals, and credit default swap rates for the Company and relevant counterparties. For currency contracts, Level 2 inputs include foreign currency spot and forward rates and interest rates at commonly quoted intervals. Mid-market pricing is used as a practical expedient for fair value measurements. ASC Topic 820 requires the fair value measurement of an asset or liability to reflect the nonperformance risk of the entity and the counterparty. Therefore, the counterparty's creditworthiness when in an asset position and the Company's creditworthiness when in a liability position have been considered in the fair value measurement of derivative instruments. The effect of nonperformance risk on the fair value of derivative instruments was not material as of July 2, 2011 and October 2, 2010 .

Non-Financial Assets Measured at Fair Value on a Nonrecurring Basis

The Company's assets held-for-sale consist of land and buildings that are measured at fair value on a nonrecurring basis since these assets are subject to fair value adjustments only when the carrying amount of such assets exceeds the fair value of such assets or such assets have been previously impaired and the fair value exceeds the carrying amount by less than the amount of the impairment that has been recognized. Level 2 inputs consist of independent third party valuations based on market comparables. The carrying value of the Company's assets held-for-sale was $47.0 million as of July 2, 2011 and is included in prepaid expenses and other current assets in the condensed consolidated balance sheet.

Note 4. Derivative Financial Instruments

The Company is exposed to certain risks related to its ongoing business operations. The primary risks managed by using derivative instruments are interest rate risk and foreign exchange rate risk.

Interest Rate Risk

Interest rate swaps are entered into on occasion to manage interest rate risk associated with borrowings under the Company's long-term debt arrangements.

Cash Flow Hedges

The Company has $257.4 million of floating rate notes outstanding as of July 2, 2011 and has entered into interest rate swap agreements with two independent swap counterparties to hedge its interest rate exposure. The swap agreements, with an aggregate notional amount of $257 million and expiration dates of June 15, 2014 , effectively convert the variable interest rate obligation to a fixed interest rate obligation and are accounted for as cash flow hedges under ASC Topic 815, Derivatives and Hedging . Under the terms of the swap agreements, the Company pays the independent swap counterparties a fixed rate and the swap counterparties pay the Company an interest rate equal to the three-month LIBOR . These swap agreements effectively fix the interest rate at 8.344% through maturity.

Fair Value Hedge

The Company has $500 million of fixed-rate senior notes outstanding as of July 2, 2011 and has entered into an interest rate swap to hedge its exposure to interest rates related to these notes. The swap agreement, with a notional amount of $500 million and an expiration date of May 15, 2019 , was entered into contemporaneously with the 2019 Notes and effectively converts these notes from fixed-rate debt to variable-rate debt. Pursuant to the interest rate swap, the Company pays the swap counterparty a variable rate equal to the three-month LIBOR plus a spread and receives a fixed rate of 7.0% from the swap counterparty. In accordance with ASC 815, the interest rate swap is accounted for as a fair value hedge but is exempt from periodic assessment of hedge effectiveness. Therefore, the change in the fair value of the 2019 Notes resulting from changes in interest rates is assumed to be equal and opposite to the change in the fair value of the interest rate swap. As of July 2, 2011, the fair value of the interest rate swap, based on observable market data (Level 2), was $5.5 million and is included in other long-term liabilities on the Company's condensed consolidated balance sheet.

Foreign Exchange Rate Risk

Forward contracts on various foreign currencies are used to manage foreign currency risk associated with forecasted foreign currency transactions and certain monetary assets and liabilities denominated in foreign currencies. The Company's primary foreign currency cash flows are in certain Asian and European countries, Israel and Mexico.

The Company had the following outstanding foreign currency forward contracts that were entered into to hedge foreign currency exposures:



	As of
	July 2, 2011	October 2, 2010
Derivatives Designated as Accounting Hedges:
Notional amount (in thousands)	$121,386	$80,370
Number of contracts	44	26
Derivatives Not Designated as Accounting Hedges:
Notional amount (in thousands)	$356,947	$290,688
Number of contracts	29	26

The Company enters into short-term foreign currency forward contracts to hedge currency exposures associated with certain monetary assets and liabilities denominated in foreign currencies. These contracts have maturities of up to two months and are not designated as accounting hedges under ASC 815. Accordingly, these contracts are marked-to-market at the end of each period with unrealized gains and losses recorded in other income (expense), net, in the condensed consolidated statements of income. For the three and nine months ended July 2, 2011 , the Company recorded losses of $1.7 million and gains of $1.7 million , respectively, associated with these forward contracts. For the three and nine months ended July 3, 2010 , the Company recorded gains of $14.0 million and $27.3 million , respectively, associated with these forward contracts. Gains and losses on forward contracts substantially offset gains and losses on the underlying hedged items for all periods presented herein.

The Company also utilizes foreign currency forward contracts to hedge certain operational (“cash flow”) exposures resulting from changes in foreign currency exchange rates. Such exposures generally result from 1) forecasted sales denominated in currencies other than those used to pay for materials and labor and 2) anticipated capital expenditures denominated in a currency other than the functional currency of the entity making the expenditures. These contracts are up to twelve months in duration and are accounted for as cash flow hedges under ASC 815.

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (AOCI), an equity account, and

reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on derivative instruments representing hedge ineffectiveness are recognized in current earnings and were not material for any period presented herein. As of July 2, 2011 , AOCI related to foreign currency forward contracts was not material and AOCI related to interest rate swaps was a loss of $31.5 million , of which $13.0 million is expected to be amortized to interest expense over the next 12 months.

The following table presents the effect of cash flow hedging relationships on the Company's condensed consolidated statement of income for the three and nine months ended July 2, 2011 and July 3, 2010 , respectively:



Derivative Type and Income Statement Location	Amount of Gain/(Loss) Recognized in OCI on Derivative (Effective Portion)											Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	Three Months Ended						Nine Months Ended					Three Months Ended						Nine Months Ended
	July 2, 2011			July 3, 2010			July 2, 2011			July 3, 2010		July 2, 2011			July 3, 2010			July 2, 2011			July 3, 2010
	(In thousands)
Interest rate swaps - Interest expense	$	(4,658	)	$	(8,106	)	$	(2,721	)	(11,567	)	$	(3,393	)	$	(3,416	)	$	(10,208	)	$	(10,001	)
Foreign currency forward contracts - Cost of sales	605			(867		)	1,541			(196	)	594			(861		)	1,504			(78		)
Total	$	(4,053	)	$	(8,973	)	$	(1,180	)	(11,763	)	$	(2,799	)	$	(4,277	)	$	(8,704	)	$	(10,079	)

Note 5. Debt

Long-term debt consisted of the following:



	As of
	July 2, 2011			October 2, 2010
	(In thousands)
6.75% Senior Subordinated Notes due 2013 (“6.75% Notes”)	—			380,000
$300 Million Senior Floating Rate Notes due 2014 (“2014 Notes”)	257,410			257,410
8.125% Senior Subordinated Notes due 2016 (“2016 Notes”)	400,000			600,000
$500 Million Senior Notes due 2019 (“2019 Notes”)	500,000			—
Fair value adjustment (1)	(5,527		)	3,256
Total long-term debt	$	1,151,883		$	1,240,666

(1) Represents fair value hedge accounting balance related to interest rate swaps. See Note 4 for discussion of interest rate swap entered into during the current period.

On May 10, 2011 , the Company issued $500.0 million aggregate principal amount of senior notes due 2019 (the "2019 Notes"). The 2019 Notes will mature on May 15, 2019 and bear interest at an annual rate of 7% , payable semi-annually in arrears . In connection with issuance of the 2019 Notes, the Company incurred debt issuance costs of $11.0 million . These costs are included in other non-current assets on the condensed consolidated balance sheet and are being amortized to interest expense over the term of the 2019 Notes using the effective interest method.

The 2019 Notes are senior unsecured obligations of the Company and are fully and unconditionally guaranteed on a senior, unsecured basis by substantially all of the Company's domestic subsidiaries. The Company may redeem all or any portion of the 2019 Notes at any time prior to May 15, 2014, at par plus accrued and unpaid interest plus a make-whole premium . The Company may redeem all or any portion of the 2019 Notes beginning on or after May 15, 2014, at redemption prices ranging from 100% - 105.25% of the principal amount of the 2019 Notes, plus accrued and unpaid interest . Following a change of control, as defined, each holder of the 2019 Notes shall have the right to require the Company to repurchase all or any portion of such holder's 2019 Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest .

The indenture for the 2019 Notes includes certain covenants that place limitations on, among other things: debt, restricted payments, liens, asset sales, the Company's ability to create or permit restrictions on distributions from the Company's restricted subsidiaries, transactions with affiliates and consolidating or merging with other companies. The restrictive covenants are subject to a number of important exceptions and qualifications set forth in the indenture.

The indenture provides for customary events of default, including payment defaults, breaches of covenants, certain payment defaults at final maturity or acceleration of other indebtedness, failure to pay certain judgments, certain events of bankruptcy, insolvency and reorganization involving the Company or certain of its subsidiaries and certain instances in which a guarantee ceases to be in full force and effect. If any event of default occurs and is continuing, subject to certain exceptions, the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding 2019 Notes may declare all the 2019 to be due and payable immediately, together with any accrued and unpaid interest. In the event of default resulting from certain events of bankruptcy, insolvency or reorganization involving the Company or certain of its subsidiaries, the 2019 Notes will be due and payable immediately without any declaration or other act on the part of the trustee or the holders of the 2019 Notes.

As discussed in Note 4, the Company entered into an interest rate swap to hedge its exposure to changes in the fair value of the 2019 Notes resulting from changes in interest rates. As of July 2, 2011, the fair value hedge accounting adjustment related to the 2019 Notes was $5.5 million and has been recorded as a reduction to long-term debt.

On May 10, 2011, in conjunction with a tender offer, the Company repurchased $279.3 million in aggregate principal amount of its 2013 Notes and $200.0 million in aggregate principal amount of its 2016 Notes. The aggregate purchase price for the notes was $488.7 million , consisting of $280.1 million for the 2013 Notes and $208.6 million for the 2016 Notes. The repurchases were funded in part by the issuance of the 2019 Notes discussed above. On June 10, 2011, the remaining outstanding 2013 Notes of $100.7 million in aggregate principal amount were repurchased at par.

In accordance with ASC Topic 470, Debt , the Company determined that all debt redeemed in connection with these transactions has been extinguished. Therefore, the Company recognized a loss on extinguishment of $16.1 million , consisting of redemption premiums of $9.4 million , third party costs of $1.3 million and a net write-off of unamortized debt costs of $5.4 million .

Short-term debt

During 2010, one of the Company's subsidiaries in China entered into a $50 million unsecured working capital loan facility that contains certain negative covenants that, upon default, permit the bank to deny any further advances or extension of credit or to terminate the loan agreement. Additionally, one of the Company's subsidiaries in India entered into a $35 million working capital loan facility that contains no covenants.

Information with respect to short-term debt facilities is as follows:



	As of July 2, 2011
	China Working Capital Loan Facility	India Working Capital Loan Facility

Amount outstanding (in millions)	$30.0	$30.4
Facility expiration date	April 2012	June 2012
Interest rate	3-month LIBOR plus spread	LIBOR plus spread

Note 6. Commitments and Contingencies

Litigation and other contingencies. From time to time, the Company is a party to litigation, claims and other contingencies, including environmental and employee matters and examinations and investigations by governmental agencies, which arise in the ordinary course of business. The Company records a contingent liability when it is probable that a loss has been incurred and the amount of loss is reasonably estimable in accordance with ASC Topic 450, Contingencies or other applicable accounting standards. As of July 2, 2011 and October 2, 2010 , the Company had reserves of $20.0 million and $22.3 million , respectively, for these matters, which the Company believes are adequate. Such reserves are included in accrued liabilities and other long-term liabilities on the condensed consolidated balance sheet.

Warranty Reserve . The following table presents information with respect to the warranty reserve, which is included in accrued liabilities in the condensed consolidated balance sheets:



	As of
	July 2, 2011			July 3, 2010
	(In thousands)
Beginning balance — end of prior year	$	17,752		$	15,716
Additions to accrual	7,401			12,734
Utilization of accrual	(8,652		)	(8,994		)
Ending balance — current quarter	$	16,501		$	19,456

Operating Leases. The Company leases certain of its land, facilities and equipment under non-cancelable operating leases expiring at various dates through 2040. The Company is responsible for utilities, maintenance, insurance and property taxes under these leases. Future minimum lease payments, net of sublease income, under operating leases are as follows:



	(In thousands)
Current	$	25,231
Year 2	18,352
Year 3	11,502
Year 4	8,099
Year 5	7,734
Thereafter	36,741
Total	$	107,659

Note 7. Restructuring

Costs associated with restructuring activities are accounted for in accordance with ASC Topic 420, Exit or Disposal Cost Obligations , or ASC Topic 712, Compensation - Nonretirement Postemployment Benefits , as applicable. Pursuant to ASC 712, restructuring costs related to employee severance are recorded when probable and estimable. For restructuring costs other than employee severance accounted under ASC 712, a liability is recognized in accordance with ASC 420 only when incurred.

During 2011, the Company changed its management structure and expects to incur employee severance and benefits costs of $2.2 million in cash and stock compensation expense. As of July 2, 2011, $0.8 million of cash remains payable and is expected to be paid by May 5, 2013 .

Restructuring Plans — 2010 and prior

The Company initiated a restructuring plan in 2010 as a result of a business combination. Pursuant to this plan, the Company expects to incur costs up to $15.0 million to consolidate certain facilities and eliminate redundant employees, of which $9.8 million has been incurred to date. The amount of costs ultimately incurred will depend on the Company's ability to recover ongoing lease costs for vacant facilities by subleasing such facilities to third parties.

Due to completion of all actions under restructuring plans initiated prior to 2011 and immateriality of the remaining accrual balance related to such plans, these plans have been combined for disclosure purposes. The Company expects to incur restructuring costs in future periods associated primarily with vacant facilities until such time as those facilities have been sold or leased to third parties.

Below is a summary of restructuring costs associated with facility closures and other consolidation efforts that were implemented prior to 2011:



	Employee Termination Severance and Related Benefits			Leases and Facilities Shutdown and Consolidation Costs			Total
	(In thousands)
Balance at October 2, 2010	$	5,430		$	1,102		$	6,532
Charges to operations	970			3,498			4,468
Charges utilized	(2,596		)	(2,054		)	(4,650		)
Balance at January 1, 2011	3,804			2,546			6,350
Charges to operations	359			3,844			4,203
Charges utilized	(1,396		)	(4,821		)	(6,217		)
Balance at April 2, 2011	2,767			1,569			4,336
Charges to operations	544			3,621			4,165
Charges utilized	(1,153		)	(4,271		)	(5,424		)
Balance at July 2, 2011	$	2,158		$	919		$	3,077

Costs incurred with respect to facilities consist primarily of 1) costs to maintain vacant facilities that are owned until such facilities can be sold and 2) the portion of the Company's lease payments that have not been recovered due to the absence of sublease income for vacant leased properties. The Company expects to pay the majority of accrued restructuring costs by September 2012 .

Note 8. Earnings Per Share

Basic and diluted amounts per share are calculated by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period, as follows:



	Three Months Ended				Nine Months Ended
	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
	(In thousands, except per share data)
Numerator:
Net income	$	9,405	$	21,563	$	50,829	$	91,036

Denominator:
Weighted average number of shares
—basic	80,579		79,544		80,223		79,040
—diluted	83,141		83,693		83,275		82,404

Net income per share:
—basic	$	0.12	$	0.27	$	0.63	$	1.15
—diluted	$	0.11	$	0.26	$	0.61	$	1.10

The following table presents weighted-average dilutive securities that were excluded from the above calculation because their inclusion would have had an anti-dilutive effect:



	Three Months Ended		Nine Months Ended
	July 2, 2011	July 3, 2010	July 2, 2011	July 3, 2010
	(In thousands)
Employee stock options	7,149	3,939	6,229	6,072
Restricted stock awards and units	472	15	238	24
Total anti-dilutive shares	7,621	3,954	6,467	6,096

Securities are anti-dilutive because 1) the exercise price is higher than the Company's stock price or 2) the application of the treasury stock method resulted in an anti-dilutive effect.

Note 9. Comprehensive Income

Other comprehensive income, net of tax as applicable, was as follows:



	Three Months Ended						Nine Months Ended
	July 2, 2011			July 3, 2010			July 2, 2011			July 3, 2010
	(In thousands)
Net income	$	9,405		$	21,563		$	50,829		$	91,036
Other comprehensive income:
Foreign currency translation adjustments	1,915			615			10,268			1,684
Unrealized holding gains (losses) on derivative financial instruments	(1,254		)	(4,695		)	7,524			(1,684		)
Minimum pension liability	(14		)	(462		)	(41		)	(735		)
Comprehensive income	$	10,052		$	17,021		$	68,580		$	90,301

The net unrealized gain (loss) on derivative financial instruments is primarily attributable to changes in the fair market value of the Company's liability under its interest rate swaps that are accounted for as cash flow hedges. The fair market value

of these swaps changes primarily as a result of changes in interest rates.

Accumulated other comprehensive income, net of tax as applicable, consisted of the following:



	As of
	July 2, 2011			October 2, 2010
	(In thousands)
Foreign currency translation adjustments	$	115,112		$	104,844
Unrealized holding losses on derivative financial instruments	(31,438		)	(38,962		)
Unrecognized net actuarial loss and unrecognized transition cost related to pension plans	(11,706		)	(11,665		)
Total	$	71,968		$	54,217

Note 10. Business Segment, Geographic and Customer Information

ASC Topic 280, Segment Reporting , establishes standards for reporting information about operating segments, products and services, geographic areas of operations and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company operates in one reportable segment, Electronic Manufacturing Services.

Information by geographic segment, determined based on the country in which a product is manufactured, was as follows:



	Three Months Ended				Nine Months Ended
	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
	(In thousands)
Net sales
Domestic	$	312,245	$	350,497	$	899,769	$	997,594
Mexico	301,919		310,824		952,742		933,466
China	448,527		464,099		1,319,075		1,326,354
Other international	611,509		499,750		1,734,123		1,373,509
Total	$	1,674,200	$	1,625,170	$	4,905,709	$	4,630,923

Number of customers representing more than 10% of net sales	1		2		1		1




Operating income
Domestic	$	(2,711	)	$	(26,872	)	$	(14,210	)	$	(77,626	)
International	55,618			88,612			172,706			224,262
Total	$	52,907		$	61,740		$	158,496		$	146,636

Note 11. Stock-Based Compensation

Stock compensation expense by function and type of instrument was as follows:



	Three Months Ended					Nine Months Ended
	July 2, 2011		July 3, 2010			July 2, 2011		July 3, 2010
	(In thousands)
Cost of sales	$	1,773	$	487		$	3,825	$	4,593
Selling, general and administrative	4,208		2,215			9,998		7,910
Research and development	75		(335		)	157		(132		)
Restructuring	914		—			914		—
Total	$	6,970	$	2,367		$	14,894	$	12,371



	Three Months Ended					Nine Months Ended
	July 2, 2011		July 3, 2010			July 2, 2011		July 3, 2010
	(In thousands)
Stock options	$	5,497	$	3,488		$	10,908	$	10,180
Restricted stock units	1,473		(1,121		)	3,986		2,191
Total	$	6,970	$	2,367		$	14,894	$	12,371

As of July 2, 2011 , an aggregate of 15.9 million shares were authorized for future issuance and 3.0 million shares of common stock were available for grant under the Company's stock plans, which include stock options and restricted stock awards and units.

Stock Options

Assumptions used to estimate the fair value of stock options granted were as follows:



	Three Months Ended				Nine Months Ended
	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Volatility	90.6	%	81.2	%	85.0	%	81.3	%
Risk-free interest rate	1.6	%	2.4	%	1.7	%	2.4	%
Dividend yield	—	%	—	%	—	%	—	%
Expected life of options (years)	4.0		5.0		4.7		5.0

Stock option activity was as follows:



	Number of Shares		Weighted- Average Exercise Price ($)	Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value of In-The-Money Options ($)
	(In thousands)				(In thousands)
Outstanding, October 2, 2010	11,078		14.39	7.44	35,417
Granted	788		11.23
Exercised/Cancelled/Forfeited/Expired	(388	)	19.17
Outstanding, January 1, 2011	11,478		14.01	7.38	35,587
Granted	861		15.90
Exercised/Cancelled/Forfeited/Expired	(743	)	12.95
Outstanding, April 2, 2011	11,596		14.22	7.32	28,698
Granted	90		10.14
Exercised/Cancelled/Forfeited/Expired	(658	)	19.89
Outstanding, July 2, 2011	11,028		13.85	7.12	21,190
Vested and expected to vest, July 2, 2011	10,068		14.34	6.97	18,756
Exercisable, July 2, 2011	6,546		17.36	6.11	9,817

The weighted-average grant date fair value of stock options granted during the three and nine months ended July 2, 2011 was $6.56 and $8.87 , respectively. The weighted-average grant date fair value of stock options granted during the three and nine months ended July 3, 2010 was $11.06 and $6.53 , respectively. The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value of in-the-money options that would have been received by the option holders had all option holders exercised their options at the Company's closing stock price on the date indicated.

As of July 2, 2011 , unrecognized compensation expense related to stock options was $23.3 million , and is expected to be recognized over a weighted average period of 3.6 years.

Restricted Stock Units

The Company grants restricted stock units to executive officers, directors and certain management employees. These units vest over periods ranging from one to four years and are automatically exchanged for shares of common stock at the vesting date. Compensation expense associated with these units is recognized ratably over the vesting period.

As of July 2, 2011 , unrecognized compensation expense related to restricted stock units was $15.5 million , and is expected to be recognized over a weighted average period of 2.4 years.

Activity with respect to the Company's non-vested restricted stock units was as follows:



	Number of Shares		Weighted- Average Grant Date Fair Value ($)	Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($)
	(In thousands)				(In thousands)
Outstanding, October 2, 2010	938		9.78	2.12	10,200
Granted	784		11.23
Vested/Cancelled	(38	)	13.30
Outstanding, January 1, 2011	1,684		10.41	2.13	18,744
Granted	445		15.91
Vested/Cancelled	(44	)	17.77
Outstanding, April 2, 2011	2,085		11.43	2.04	21,901
Granted	25		10.56
Vested/Cancelled	(280	)	10.40
Outstanding, July 2, 2011	1,830		11.57	1.82	17,040
Expected to vest, July 2, 2011	1,236		11.90	1.82	11,510

Item 2. 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 (the “Exchange Act”). These statements relate to our expectations for future events and time periods. 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 revenues or results of operations, gross margin or operating margin, expenses, earnings or losses from operations, synergies or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning developments, performance or industry ranking; any statements regarding future economic conditions or performance; any statements regarding pending investigations, claims or disputes; any statements regarding the financial impact of customer bankruptcies; any statements regarding timing of closing of, future cash outlays for and benefits of acquisitions; any statements concerning the adequacy of our liquidity; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Generally, the words “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” “may,” “will,” “should,” “estimate,” “predict,” “potential,” “continue” and similar expressions identify forward-looking statements. Our forward-looking statements are based on current expectations, forecasts and assumptions and are subject to the risks and uncertainties contained in or incorporated from Part II, Item 1A of this report. As a result, actual results could vary materially from those suggested by the forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this report with the Securities and Exchange Commission.

Overview

We are a leading independent global provider of customized, integrated electronics manufacturing services, or EMS. Our revenue is generated from sales of our services primarily to original equipment manufacturers, or OEMs, in the communications; industrial, defense and medical; enterprise computing and storage; and multimedia markets.

Our strategy is to leverage our comprehensive service offering, vertically integrated manufacturing services, 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. We believe this strategy differentiates us from our competitors and will drive more sustainable revenue growth and provide opportunities for us to ultimately achieve operating margins that exceed industry standards.

There are many challenges to successfully executing our strategy. For example, we compete with a number of companies in each of our key end markets. These include companies that are much larger than we are and smaller companies that focus on a particular niche. Although we believe we are well-positioned in each of our key end markets and are continuing to differentiate ourselves from our competitors, competition remains intense. Additionally, growing and leveraging our components manufacturing services to drive vertical integration and improve our operating margins continues to be challenging due to excess capacity and operational inefficiencies. Lastly, revenue from defense and aerospace and optical customers has decreased throughout 2011 and is expected to decrease further in our upcoming quarter. This creates pressure on our operating margins since our defense and aerospace business is typically one of our higher-margin businesses and a high level of infrastructure exists for optical products. We continue to address these challenges on both a short-term and long-term basis.

In late 2008, the business environment became challenging due to adverse global economic conditions. These conditions slowed global economic growth and resulted in recessions in many countries, including the U.S., Europe and certain countries in Asia. These conditions materially and adversely impacted our financial condition and results of operations for 2009. Global economic conditions improved throughout 2010, resulting in a substantial increase in our business volume. Our revenue increased on a quarterly basis throughout 2010. Although revenue was down sequentially in each of the first two quarters of 2011, revenue levels increased in the third quarter of 2011 and were up 5.9% for the nine months ended July 2, 2011 compared to the same period in 2010. Additionally, the third quarter of 2011 was our seventh consecutive profitable quarter, resulting primarily from increased business volume, continuing improvements in our components business, and the realization of benefits from our previous restructuring actions. Although our results of operations have not been impacted significantly by the recent natural disaster and related nuclear plant situation in Japan, there can be no assurance that future periods will not be significantly impacted. Our quarterly results of operations tend to fluctuate and may not be indicative of results to be expected for any future periods.

A relatively small number of customers have historically generated a significant portion of our net sales. Sales to our ten largest customers represented 50.2% and 49.2% of our net sales for the three and nine months ended July 2, 2011 , respectively.

Sales to our ten largest customers represented 50.0% and 50.3% of our net sales for the three and nine months ended July 3, 2010 , respectively. Additionally, one customer represented more than 10% of our net sales during the three months ended July 2, 2011 , two customers represented more than 10% of our net sales during the three months ended July 3, 2010 , and one customer represented more than 10% of our net sales for the nine months ended July 2, 2011 and July 3, 2010 .

We perform a significant portion of our manufacturing in international locations. Sales derived from products manufactured in international operations during the three months ended July 2, 2011 and July 3, 2010 were 81.3% and 78.4% , respectively, of our total net sales. During the nine months ended July 2, 2011 and July 3, 2010 , 81.7% and 78.5% , respectively, of our total net sales were derived from non-U.S. operations. This stems from a desire on the part of many of our customers to source production in lower cost locations such as Asia and Latin America. We expect this trend to continue.

Historically, we have had substantial recurring sales from existing customers. 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. These agreements generally do not obligate the customer to purchase minimum quantities of products. In some circumstances, our supply agreements with customers provide for cost reductions during the term of the agreement such that revenue and margin attributable to these contracts may reduce over their terms.

Critical Accounting Policies and Estimates

Management's discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. We review the accounting policies used in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate the process used to develop estimates for certain reserves and contingent liabilities, including those related to product returns, accounts receivable, inventories, investments, intangible assets, income taxes, warranty obligations, environmental matters, restructuring, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates.

For a complete description of our critical accounting policies and estimates, refer to our 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 24, 2010.

Results of Operations

Key operating results



	Three Months Ended				Nine Months Ended
	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
	(In thousands)
Net sales	$	1,674,200	$	1,625,170	$	4,905,709	$	4,630,923
Gross profit	$	131,601	$	124,115	$	376,479	$	351,279
Operating income	$	52,907	$	61,740	$	158,496	$	146,636
Net income	$	9,405	$	21,563	$	50,829	$	91,036

Net income includes restructuring and integration costs of $6.3 million and $6.2 million for the three months ended July 2, 2011 and July 3, 2010 , respectively, and $15.9 million and $13.4 million for the nine months ended July 2, 2011 and July 3, 2010 , respectively. Net income for the three and nine months ended July 2, 2011 includes a loss on extinguishment of debt of $16.1 million. Net income for the nine months ended July 3, 2010 includes other income of $35.6 million in connection with a legal settlement.

Net Sales

Net sales increased from $1.6 billion in the third quarter of 2010 to $1.7 billion in the third quarter of 2011, an increase of 3.0% . Net sales increased from $4.6 billion for the nine months ended July 3, 2010 to $4.9 billion for the nine months ended July 2, 2011, an increase of 5.9% . Sales by end market were as follows (dollars in thousands):



	Three Months Ended									Nine Months Ended
	July 2, 2011		July 3, 2010		Increase/(Decrease)					July 2, 2011		July 3, 2010		Increase/(Decrease)
Communications	$	804,080	$	682,941	$	121,139		17.7	%	$	2,342,270	$	1,712,875	$	629,395		36.7	%
Industrial, defense and medical	401,011		401,074		(63		)	—	%	1,210,225		1,198,495		11,730			1.0	%
Enterprise computing and storage	235,113		254,983		(19,870		)	(7.8	)%	671,327		842,391		(171,064		)	(20.3	)%
Multimedia	233,996		286,172		(52,176		)	(18.2	)%	681,887		877,162		(195,275		)	(22.3	)%
Total	$	1,674,200	$	1,625,170	$	49,030		3.0	%	$	4,905,709	$	4,630,923	$	274,786		5.9	%

The increase in our communications end market is primarily attributable to increased demand from existing customers , both for established programs and new program wins for new technologies introduced by our customers . Despite a significant decrease in demand from defense customers, sales in our industrial defense and medical end market have been relatively flat due to stronger demand from industrial and medical customers. Sales to customers in our enterprise computing and storage end market decreased as a result of certain customer programs going end-of-life , the effect of which was not completely offset by new programs . Sales to customers in our multimedia market decreased primarily as a result of reduced demand from one program .

Gross Margin

Gross margin increased from 7.6% for the three months ended July 3, 2010 to 7.9% for the three months ended July 2, 2011 , and from 7.6% for the nine months ended July 3, 2010 to 7.7% for the nine months ended July 2, 2011 . The increase for both the three and nine months ended July 2 , 2011 was primarily the result of profit contribution from increased business volume and improved performance in components manufacturing services .

We expect gross margins to continue to fluctuate based on overall production and shipment volumes and changes in the mix of products demanded by our major customers . Fluctuations in our gross margins may also be caused by a number of other factors , some of which are outside of our control , including (a) greater competition in the EMS industry and pricing pressures from OEMs due to greater focus on cost reduction; (b) provisions for excess and obsolete inventory that we are not able to charge back to a customer or sales of inventories previously written down; (c) changes in operational efficiencies; (d) pricing pressure on electronic components resulting from economic conditions in the electronics industry; and (e) our ability to transition manufacturing and assembly operations to lower cost regions in an efficient manner .

Operating Expenses

Selling, general and administrative

Selling, general and administrative expenses increased from $65.4 million , or 4.0% of net sales, in the third quarter of 2010 to $67.0 million , or 4.0% of net sales, in the third quarter of 2011 . For the nine month period, selling, general and administrative expenses decreased from $191.4 million , or 4.1% of net sales, in 2010 to $187.7 million , or 3.8% of net sales, in 2011. The increase for the three months ended July 2 , 2011 was primarily due to increased personnel costs resulting from increased headcount , partially offset by lower bad debt and acquisition related costs . The decrease for the nine months ended July 2 , 2011 was primarily due to reduced incentive compensation and bad debt expense , partially offset by higher personnel costs resulting from increased headcount .

Research and Development

Research and development expenses increased from $3.1 million , or 0.2% of net sales, in the third quarter of 2010 to $5.8 million , or 0.3% of net sales, in the third quarter of 2011 . Research and development expenses increased from $9.4 million , or 0.2% of net sales, for the nine months ended July 3, 2010 to $14.9 million , or 0.3% of net sales, for the nine months ended July 2, 2011 . The increase for both the three and nine month periods was primarily attributable to investments in new projects in multiple business units .

Restructuring

Costs associated with restructuring activities are accounted for in accordance with ASC Topic 420, Exit or Disposal Cost Obligations, or ASC Topic 712, Compensation - Nonretirement Postemployment Benefits , as applicable. Pursuant to ASC Topic 712, restructuring costs related to employee severance are recorded when probable and estimable. For restructuring costs other

than employee severance accounted for under ASC Topic 712, a liability is recognized in accordance with ASC Topic 420 only when incurred.

During 2011, we changed our management structure and expect to incur employee severance and benefits costs of $2.2 million in cash and stock compensation expense. As of July 2, 2011, $0.8 million of cash remains payable and is expected to be paid by May 5, 2013.

Restructuring Plans — 2010 and prior

We initiated a restructuring plan in 2010 as a result of a business combination. Pursuant to this plan, we expect to incur costs up to $15.0 million to consolidate certain facilities and eliminate redundant employees, of which $9.8 million has been incurred to date. The amount of costs ultimately incurred will depend on our ability to recover ongoing lease costs for vacant facilities by subleasing such facilities to third parties.

Due to completion of all actions under restructuring plans initiated prior to 2011 and immateriality of the remaining accrual balance related to such plans, these plans have been combined for disclosure purposes. We expect to incur restructuring costs in future periods associated primarily with vacant facilities until such time as those facilities have been sold or leased to third parties.

Below is a summary of restructuring costs associated with facility closures and other consolidation efforts that were initiated prior to 2011:



	Employee Termination Severance and Related Benefits			Leases and Facilities Shutdown and Consolidation Costs			Total
	(In thousands)
Balance at October 2, 2010	$	5,430		$	1,102		$	6,532
Charges to operations	970			3,498			4,468
Charges utilized	(2,596		)	(2,054		)	(4,650		)
Balance at January 1, 2011	3,804			2,546			6,350
Charges to operations	359			3,844			4,203
Charges utilized	(1,396		)	(4,821		)	(6,217		)
Balance at April 2, 2011	2,767			1,569			4,336
Charges to operations	544			3,621			4,165
Charges utilized	(1,153		)	(4,271		)	(5,424		)
Balance at July 2, 2011	$	2,158		$	919		$	3,077

Costs incurred with respect to facilities consist primarily of 1) costs to maintain vacant facilities that are owned until such facilities can be sold and 2) the portion of our lease payments that have not been recovered due to the absence of sublease income for vacant leased properties. We expect to pay the majority of accrued restructuring costs by September 2012.

Gain on Sales of Long-lived Assets

For the three and nine months ended July 2, 2011 , we recorded gains on sales of long-lived assets of $1.4 million and $3.5 million, respectively. For the three and nine months ended July 3, 2010 , we recorded gains on sales of long-lived assets of $13.8 million . These gains were primarily related to the sale of certain properties held-for-sale.

Interest Expense

Interest expense decreased to $24.8 million for the three months ended July 2, 2011 , from $27.1 million for the three months ended July 3, 2010 , and to $77.8 million for the nine months ended July 2, 2011 , from $80.5 million for the nine months ended July 3, 2010 . The decrease for both periods was primarily attributable to a net reduction of $80 million in our long-term debt and the favorable impact of replacing $580 million of fixed-rate debt with $500 million of lower variable rate debt.

Other Income (Expense), net

The following table presents the major components of other income (expense), net:



	Three Months Ended						Nine Months Ended
	July 2, 2011			July 3, 2010			July 2, 2011			July 3, 2010
	(In thousands)
Foreign exchange gains (losses)	$	759		$	(2,353	)	$	3,148		$	(2,170	)
Loss on extinguishment of debt (see Note 5) (1)	(16,098		)	(369		)	(16,098		)	(1,197		)
Litigation settlement	—			—			—			35,556
Other, net	572			676			1,461			5,540
Total other income (expense), net	$	(14,767	)	$	(2,046	)	$	(11,489	)	$	37,729

We reduce our exposure to currency fluctuations through the use of foreign currency hedging instruments; however, hedges are established based on forecasts of foreign currency transactions. To the extent actual amounts differ from forecasted amounts, we will have exposure to currency fluctuations, resulting in foreign exchange gains or losses.

(1) Amount is $2.2 million less than that reported in our earnings release due to a correction identified after the earnings release.

Provision for Income Taxes

We estimate our annual effective tax rate at the end of each quarterly period. Our estimate takes into account the geographic mix of our expected pre-tax income (loss), expected total annual pre-tax income (loss), implementation of tax planning strategies and possible outcomes of audits and other uncertain tax positions. To the extent there are fluctuations in any of these variables during a period, our provision for income taxes may vary.

Our provision for income taxes was an expense of $19.9 million for the nine months ended July 2, 2011 , compared to an expense of $14.4 million for the nine months ended July 3, 2010 . Despite lower pre-tax income in 2011, our year-to-date tax provision is higher than the amount for the comparable period in 2010 primarily as a result of favorable resolution of an uncertain tax position in 2010.

Liquidity and Capital Resources



	Nine Months Ended
	July 2, 2011			July 3, 2010
	(In thousands)
Net cash provided by (used in):
Operating activities	$	155,861		$	(44,436	)
Investing activities	(73,703		)	(28,006		)
Financing activities	(90,401		)	(165,642		)
Effect of exchange rate changes on cash and cash equivalents	(1,753		)	3,502
Decrease in cash and cash equivalents	$	(9,996	)	$	(234,582	)

Key liquidity performance measures



	Three Months Ended
	July 2, 2011	April 2, 2011	January 1, 2011	October 2, 2010
Days sales outstanding (1)	54	56	55	52
Inventory turns (2)	7.2	7.0	7.3	7.3
Accounts payable days (3)	54	53	52	55
Cash cycle days (4)	51	55	52	47

(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.

(2) Inventory turns (annualized) are calculated as the ratio of four times our cost of sales for the quarter to average inventory.

(3) Accounts payable days (a measure of how quickly we pay our suppliers) is calculated as the ratio of 365 days divided by accounts payable turns, in which accounts payable turns is calculated as the ratio of four times our cost of sales for the quarter to average accounts payable.

(4) Cash cycle days is calculated as the ratio of 365 days to inventory turns, plus days sales outstanding minus accounts payable days.

Cash and cash equivalents were $582.8 million at July 2, 2011 and $592.8 million at October 2, 2010 . Our cash levels vary during any given quarter depending on the timing of collections from customers and payments to suppliers, borrowings under credit facilities and other factors. Our working capital was $1.4 billion as of July 2, 2011 and $1.3 billion as of October 2, 2010 .

Net cash provided by (used in) operating activities was $155.9 million and $(44.4) million for the nine months ended July 2, 2011 and July 3, 2010 , respectively. For the nine months ended July 2, 2011, cash flows from operating activities consist of: 1) net inflows of $152.7 million from net income adjusted to exclude non-cash items such as depreciation and amortization, stock-based compensation expense, etc., and 2) net inflows of $3.2 million from changes in net operating assets, which are comprised of accounts receivable, inventories, prepaid expenses and other assets, accounts payable, and accrued liabilities and other long-term liabilities.

During the nine months ended July 2, 2011 , we generated $3.2 million of cash from the reduction of our net operating assets. Accounts payable increased $42.1 million , versus a $39.2 million increase in inventories. This is a result of a decrease in accounts payable days from 55 days at October 2, 2010 to 54 days at July 2, 2011. The decrease resulted primarily from a change in the composition of our accounts payable from suppliers with longer payment terms to suppliers with shorter payment terms. Despite a slight decrease in revenue in the third quarter of 2011 versus the fourth quarter of 2010, accounts receivable increased $19.9 million as a result of a longer collection cycle caused by a change in the composition of our accounts receivable from customers with shorter payment terms to customers with longer payment terms. This change resulted in our

DSO increasing from 52 days at October 2, 2010 to 54 days at July 2, 2011 . The increase in accounts receivable was mitigated by an increase in accrued liabilities and a decrease in prepaid expenses and other assets. Our working capital metrics tend to fluctuate from quarter-to-quarter based on factors such as the linearity of our shipments and purchases, customer and supplier mix, and the negotiation of payment terms with customers and suppliers. These fluctuations can significantly affect our cash flows from operating activities.

Net cash used in investing activities was $73.7 million and $28.0 million for the nine months ended July 2, 2011 and July 3, 2010 , respectively. During the nine months ended July 2, 2011 , we used $82.8 million of cash for capital expenditures, received proceeds of $23.8 million from asset sales, and used $14.7 million of cash in connection with a previous business combination. During the nine months ended July 3, 2010 , we used $44.1 million of cash for capital expenditures, received proceeds of $30.8 million from asset sales, and made business acquisition related payments of $14.7 million .

Net cash used in financing activities was $90.4 million and $165.6 million for the nine months ended July 2, 2011 and July 3, 2010 , respectively. During the nine months ended July 2, 2011 , we issued $500.0 million of long-term debt and received net proceeds of $489.0 million. Additionally, we repurchased $580.0 million of long-term debt for a purchase price of $589.4 million, plus third party costs of $1.3 million. During the nine months ended July 3, 2010 , we repaid $219.9 million of our long-term debt, including $24.1 million acquired through an acquisition, and borrowed $50.6 million under two short-term debt facilities.

Other Liquidity Matters.

During the current quarter, we significantly improved our long-term debt profile. We issued $500 million of debt with a maturity date of 2019 and used the proceeds, together with existing cash, to redeem $380 million of debt due in 2013 and $200 million of debt in 2016. As a result, our next long-term debt maturity is in 2014 and the average life of our long-term debt was extended to 5.7 years. Additionally, our interest rate profile improved significantly as our new debt of $500 million has been converted to variable-rate debt through an interest rate swap and the debt we redeemed had fixed rates of 6.75% and 8.125%.

Our debt agreements currently contain a number of restrictive covenants, including prohibitions on incurring additional debt, making investments and other restricted payments, paying dividends and redeeming or repurchasing capital stock and debt, subject to certain exceptions. We were in compliance with these covenants as of July 2, 2011 . Our debt agreements do not contain any financial maintenance covenants that are currently applicable to us. We may be required to seek waivers or amendments to certain covenants for our debt instruments if we are unable to comply with the requirements of the covenants in the future. We may not be able to obtain such waivers or amendments on terms acceptable to us or at all, and, in such case, these covenants could materially adversely impact our ability to conduct our business or carry out our restructuring plans.

Our next long-term debt maturity is in 2014. We may, however, consider early redemptions of our debt in future periods, possibly using proceeds from additional debt or equity financings. In addition to our existing covenant requirements, future debt financing may require us to comply with financial ratios and covenants. Equity financing, if required, may result in dilution to existing stockholders.

During 2010, one of our subsidiaries in China entered into a $50 million unsecured working capital loan facility. Borrowings under the facility bear interest at a rate equal to the three month LIBOR plus a spread. The loan facility expires in April 2012 and contains certain negative covenants that, upon default, permit the bank to deny any further advances or extension of credit or to terminate the loan agreement. As of July 2, 2011, $30 million had been borrowed under this facility and was outstanding and we were in compliance with all covenants.

Also during 2010, one of our subsidiaries in India entered into a $35 million working capital loan facility that contains no covenants and expires on June 30, 2012. Borrowings under the facility bear interest at a rate equal to LIBOR plus a spread. As of July 2, 2011, $30.4 million had been borrowed under this facility and was outstanding.

As of July 2, 2011 , we have a liability of $53.8 million for uncertain tax positions. Our estimate of our liability for uncertain tax positions is based on a number of subjective assessments, including the likelihood of a tax obligation being assessed, the amount of taxes (including interest and penalties), that would ultimately be payable, and our ability to settle any such obligations on favorable terms. Therefore, the amount of future cash flows associated with uncertain tax positions may be significantly higher or lower than our recorded liability.

In connection with our acquisition of BreconRidge Corporation, we paid $15.5 million of purchase consideration in 2011 and expect to pay $2.0 million of purchase consideration in November 2011.

We have entered into, and continue to enter into, various transactions that periodically require collateral. These obligations have historically arisen from customs, import/export, VAT, utility services, debt financing, foreign exchange contracts and interest rate swaps. We have collateralized, and may from time to time collateralize, such obligations as a result of counterparty requirements or for economic reasons. As of July 2, 2011 , we had collateral of $16.5 million in the form of cash against certain of our collateralized obligations. Cash used for collateral reduces our cash available for other purposes.

Our liquidity needs are largely dependent on changes in our working capital, including inventory requirements, the extension of trade credit by our suppliers, the degree of alignment of payment terms from our suppliers to payment terms granted to our customers, and restrictions on our ability to move cash between subsidiaries and repatriate cash to the U.S., investments in facilities and equipment, repayments of obligations under outstanding indebtedness and repurchases of our outstanding debt. Our primary sources of liquidity include 1) cash of $582.8 million ; 2) our $235 million credit facility, of which we were eligible to borrow $165.0 million as of July 2, 2011 based on the levels of eligible accounts receivable and inventories at that date; 3) short-term borrowing facilities of $85.0 million , of which $24.6 million was available as of July 2, 2011 ; and 4) cash generated from operations.

We believe our existing cash resources and other sources of liquidity, together with cash generated from operations, will be sufficient to meet our working capital requirements for the next 12 months. Should our working capital requirements increase significantly over the next 12 months or we experience increases in delinquent or uncollectible accounts receivable, our cash provided by operations would be adversely impacted.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our primary exposure to market risk for changes in interest rates relates to certain of our outstanding debt obligations. Currently, we do not use derivative financial instruments in our investment portfolio. As of July 2, 2011 , we had no short-term investments.

As of July 2, 2011 , we had $1.2 billion of long-term debt, of which $400.0 million bears interest at a fixed rate, $257.4 million of variable rate debt has been converted to fixed rate through the use of interest rate swaps and $500.0 million of fixed rate debt has been converted to variable rate debt through the use of an interest rate swap. Accordingly, our exposure to interest rates is limited to variable rate long-term debt of $500.0 million and $60.4 million of variable-rate short-term borrowings outstanding as of July 2, 2011 . The effect of an immediate 10% change in interest rates would not have a significant impact on our results of operations.

Foreign Currency Exchange Risk

We transact business in foreign countries. Our foreign exchange policy requires that we take certain steps to limit our foreign exchange exposures related to certain assets and liabilities and forecasted cash flows. However, our policy does not require us to hedge all foreign exchange exposures. Further, foreign currency hedges are based on forecasted transactions, the amount of which may differ from that actually incurred. As a result, we experience foreign exchange gains and losses in our results of operations.

Our primary foreign currency cash flows are in certain Asian and European countries, Israel and Mexico. We enter into short-term foreign currency forward contracts to hedge currency exposures associated with certain monetary assets and liabilities denominated in foreign currencies. These contracts typically have maturities of up to two months and are not designated as part of a hedging relationship in accordance with ASC 815. 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 condensed consolidated statements of income. As of July 2, 2011 , we had outstanding foreign currency forward contracts to exchange various foreign currencies for U.S. dollars in the aggregate notional amount of $356.9 million .

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 sales denominated in currencies other than those used to pay for materials and labor and 2) anticipated capital expenditures denominated in a currency other than the functional currency of the entity making the expenditures. In addition, the Company also hedges capital expenditures related to certain plant expansions in Asia. These contracts are up to twelve months in duration and are accounted for as cash flow hedges under ASC 815. 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 is recognized in the condensed consolidated statement of income when the hedged item affects earnings. We had forward contracts related to cash flow hedges in various foreign currencies in the aggregate notional amount of $121.4 million as of July 2, 2011 . The net impact of an immediate 10% change in exchange rates would not be material to our condensed consolidated financial statements, provided we accurately forecast our foreign currency exposure. If such forecasts are materially inaccurate, we could incur significant gains or losses.

Item 4. Controls and Procedures

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended July 2, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that their objectives are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits of disclosure controls and procedures must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of disclosure controls and procedures can provide absolute assurance that all disclosure control issues and instances of fraud, if any, within the Company have been detected. Nonetheless, our Chief Executive Officer and Chief Financial Officer have concluded that, as of July 2, 2011 , (1) our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives, and (2) our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding its required disclosure.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Please refer to Item 1 of Part II to our Quarterly Report on Form 10-Q for the quarter ended January 1, 2011.

See also Note 6 of Notes to Condensed Consolidated Financial Statements.

From time to time, we may be involved in other routine legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of our business. The ultimate outcome of any litigation is uncertain and unfavorable outcomes could have a negative impact on our results of operations and financial condition. Regardless of outcome, litigation can have an adverse impact on us as a result of incurrence of defense costs, diversion of management resources and other factors. We record liabilities for legal proceedings when a loss becomes probable and the amount of loss can be reasonably estimated.

Item 1A. Risk Factors Affecting Operating Results

We may experience component shortages or price increases, which could cause us to delay shipments to customers and reduce our sales and net income; the natural disaster in Japan could also reduce our sales and profitability.

We are dependent on certain suppliers, including limited and sole source suppliers, to provide key components we incorporate into our products. We have experienced, and may experience in the future, delays in component deliveries, which in turn could cause delays in product shipments to customers, result in reduced revenue from and have an adverse effect on our relationship with the affected customer, and our reputation generally as a reliable service provider. In addition, component shortages, whether anticipated or not, can increase our cost of goods sold and therefore decrease our gross margin since we may be required to pay higher prices for components in short supply and redesign or reconfigure products to accommodate substitute components. Additionally, we may purchase components in advance of our requirements for those components as a result of a threatened or anticipated shortage. In this event, we may incur additional inventory carrying costs and have a heightened risk of exposure to inventory obsolescence, the cost of either of which may not be recoverable from our customers. Such costs would reduce our margins and net income. Finally, if key components become scarce, we may be required to look to second tier vendors or to procure components through brokers. Such components may be of lesser quality than those otherwise available and could cause us to incur costs to qualify such components or to replace them if they prove to be defective. In some cases, suppliers seek to obtain credit insurance for our or our subsidiaries' payment obligations as a condition to continuing to do business with us. Should such insurance not be available, our ability to continue to procure components and deliver manufactured products to our customers could be adversely impacted.

While we have not to date been significantly impacted by the March 2011 earthquake and tsunami in Japan, many of our customers are headquartered there and some of the components sourced for our customers' products are manufactured in Japan. As a result, our customers based in Japan may order reduced amounts of product from us resulting from interruptions in their own businesses and diminished demand from Japanese consumers and we may find it difficult to procure components that are currently sourced from Japanese suppliers, either of which would adversely impact our business. Such tightening of supply could prevent us from building products that require Japanese sourced components or increase our expenses as we are forced to find alternative sources of supply. Should such reduction of demand and tightening supply conditions arise and then continue over an extended period of time, our revenue, margins and net income could be reduced, perhaps significantly.

Adverse market conditions in the electronics industry could reduce our future sales and earnings per share.

We cannot accurately predict future levels of demand for our customers' electronics products. Consequently, our past operating results, earnings and cash flows may not be indicative of our future operating results, earnings and cash flows. During the past two years, adverse worldwide economic conditions led to challenging conditions in the electronics industry. A number of factors, including lower asset values, price instability, geopolitical issues, the availability and cost of credit, high unemployment and concerns about the stability and solvency of financial institutions, financial markets, businesses, and sovereign nations slowed global economic growth and resulted in recessions in many countries, including in the United States, Europe and certain countries in Asia. The conditions resulted in our customers delaying purchases or placing purchase orders for lower volumes of products than previously experienced or anticipated.

While these conditions have abated somewhat during the past year, there is still risk of an economic downturn, which could result in our customers or potential customers reducing or delaying orders, the insolvency of key suppliers, which could result in production delays, shorter payment terms from suppliers due to reduced availability of credit default insurance in the market, the inability of customers to obtain credit, and the insolvency of one or more customers. Any of these effects could impact our ability to effectively manage inventory levels and collect receivables, increase our need for cash, and decrease our net revenue and profitability.

Many of the industries to which we provide products have previously experienced significant financial difficulty, with some of the participants filing for bankruptcy. Such significant financial difficulty, if experienced by one or more of our customers, may negatively affect our business due to the decreased demand of these financially distressed customers, the lengthening of customer payment terms, the potential inability of these companies to make full payment on amounts owed to us, or any of these factors. 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 law. We do not carry insurance against the risk of customer default on their payment obligations to us.

We may be unable to obtain sufficient financing to reduce our debt levels or maintain or expand our operations,

which may cause our stock price to fall and reduce the business our customers and vendors do with us.

Our liquidity needs are largely dependent on changes in working capital, including inventory requirements, the extension of trade credit by our suppliers, the degree of alignment of payment terms from our suppliers to payment terms granted to our customers, investments in facilities and equipment, acquisitions, repayments of obligations under outstanding indebtedness and repurchases of our outstanding debt. In connection with the management of our liquidity needs, we entered into a five-year $135 million asset-backed credit facility in November 2008, which we later increased to $235 million, under which we could borrow $165 million as of July 2, 2011. We also have $85 million in foreign short-term financing facilities under which $24.6 million remained available to be borrowed as of July 2, 2011. Our next long-term debt maturity is in 2014. In the event we need additional capital, whether for working capital, debt repayment or otherwise, there can be no assurance that debt or equity capital will be available on acceptable terms or at all. New financing arrangements, if available, could result in us issuing additional equity securities, which could cause dilution to existing stockholders. If additional or continued financing, including the continued extension of trade credit by our suppliers, is not available when required, our ability to repay, reduce or refinance our debt, maintain or increase our rates of production and expand our manufacturing capacity, as well as our overall liquidity, will be harmed, which could cause our stock price to fall and reduce our customers' and vendors' willingness to do business with us.

Our credit arrangements contain covenants which may adversely impact our business and the failure to comply with such covenants could cause our outstanding debt to become immediately payable.

Our debt agreements do not contain financial covenants currently applicable to us, but do include a number of negative covenants, including restrictions on incurring additional debt, making investments and other restricted payments, acquiring new businesses, paying dividends and redeeming or repurchasing capital stock and debt, subject to certain exceptions. These covenants could constrain our ability to grow our business through acquisition or engage in other transactions which the covenants would otherwise restrict, including refinancing our existing debt. In addition, such agreements include affirmative covenants requiring, among other things, that we file quarterly and annual financial statements with the SEC. If we are not able to comply with all of these covenants, for any reason, some or all of our outstanding debt as well as all amounts payable under our interest rate swaps on such debt, (if any) could become immediately due and payable and the incurrence of additional debt under our asset-backed credit facility would not be allowed.

Our early redemptions of debt and repurchases of stock have reduced our working capital and liquidity; debt refinancing can entail higher interest expense, which would lower our net income; interest payments on variable rate debt can increase, which would lower our net income.

During 2010 and in the first nine months of fiscal 2011, we redeemed $195.7 million and $580 million of our long-term debt, respectively. Although redemptions of debt improve our operating results by reducing our interest expense, these redemptions have reduced our liquidity. If we should repurchase or redeem additional debt or equity, our working capital and liquidity would be further reduced. In addition, should we undertake to refinance any of our outstanding long-term debt, the next maturity of which is 2014, there can be no assurance that the terms of such refinancing, particularly the interest rate, would be favorable to us. Should we be forced to replace lower interest rate debt with higher interest rate debt, our net income would be reduced. In addition, an aggregate of $500 million of our long-term debt and $60.4 million in short-term borrowings bear interest at a variable rate based upon LIBOR. Should LIBOR increase substantially in the future, our interest payments on this debt would also increase, lowering our net income. Additionally, at present there is uncertainty whether the United States government will increase its debt ceiling and avoid defaulting on its debt obligations. If the United States defaults on its obligations or if its credit rating declines, interest rates may rise which would increase our interest costs and reduce our net income.

We could experience credit problems with our customers, which would reduce our future revenues and net income.

While we seek to mitigate the impact of collection problems with our customers on our financial results by evaluating their creditworthiness on an ongoing basis and by maintaining an allowance for doubtful accounts that is assessed for adequacy quarterly, economic conditions have in the past caused certain of our customers to extend or default on their payments, declare bankruptcy or both. Should customer defaults increase substantially or exceed the level of our allowance, our revenue, net income and cash position would be reduced, perhaps significantly.

We are subject to intense competition in the EMS industry which could cause us to lose sales and therefore hurt our financial performance.

The EMS industry is highly competitive and the industry has been experiencing a surplus of manufacturing capacity, particularly in light of the slowdowns in the U.S. and certain international economies. Our competitors include major global EMS providers such as Celestica, Inc., Flextronics International Ltd., Hon Hai (Foxconn) and Jabil Circuit, Inc., as well as other EMS companies that have a regional, product, service or industry specific focus. Some of those companies have greater manufacturing and financial resources than we do. We also face competition from current and potential OEM customers who may elect to manufacture their own products internally rather than outsourcing to EMS providers.

We may not be able to offer prices as low as some of our competitors because those competitors may have lower operating costs as a result of their geographic location, greater economies of scale or the services they provide or because these competitors are willing to provide EMS services at prices we are unable or unwilling to offer. There can be no assurance that we will not lose business in the future in response to such competitive pricing or other inducements which may be offered by our competitors, which would decrease our sales and net income.

Our operating results are subject to significant uncertainties, which make predictability of our future sales and net income difficult.

Our operating results are subject to significant uncertainties, including:


•	conditions in the economy as a whole and in the electronics industry;


•	fluctuations in components prices and component shortages caused by high demand, natural disaster or otherwise, which could cause us to be unable to meet customer delivery schedules, increase our costs and potentially decrease our profitability;


•	timing of new product development by our customers which creates demand for our services;


•	levels of demand in the end markets served by our customers;


•	our ability to replace declining sales from end of life programs with new business wins;


•	timing of orders from customers and the accuracy of their forecasts;


•	inventory levels of customers, which if high relative to their normal sales volume, could cause them to reduce their orders to us;


•	timing of expenditures in anticipation of increased sales, customer product delivery requirements and shortages of components or labor;


•	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;


•	degree to which we are able to utilize our available manufacturing capacity;


•	our ability to maintain desired plant operating efficiencies, including achieving acceptable yields, effectively planning production and managing our inventory and fixed assets to avoid high carrying costs and excess working capital;


•	our ability to effectively plan production and manage our inventory and fixed assets;


•	customer insolvencies resulting in bad debt or inventory exposures that are in excess of our reserves;


•	our ability to efficiently move manufacturing activities to lower cost regions without adversely affecting customer relationships while controlling costs related to the closure of facilities and employee severance;


•	pricing and other competitive pressures;


•	fluctuations in the values of our assets, including real property and assets held for sale, which could result in charges to income;


•	volatility of foreign currency exchange rates;


•	changes in our tax provision due to our estimates of pre-tax income in the jurisdictions in which we operate; and


•	political and economic developments in countries in which we have operations. .

A portion of our operating expenses is relatively fixed in nature and planned expenditures are based in part on anticipated orders, which are difficult to predict. If we do not receive anticipated orders as expected, our profitability will decline. Moreover, our ability to reduce our costs as a result of current or future restructuring efforts may be limited because consolidation of operations can be a costly and lengthy process to complete.

Our strategy to pursue higher margin business depends in part on the success of our components business, which if not successful, could cause our future gross margins and operating results to be lower.

Our components business, which includes printed circuit boards, mechanical systems, optical components and cable manufacturing, is a key part of our strategy to grow our future margins and profitability by expanding our vertical

integration capabilities. In order to grow this portion of our business profitably, we must continue to make substantial investments in the development of our components capabilities, research and development activities, test and tooling equipment and skilled personnel. Given the relatively higher fixed cost structure of this business, our success is greatly dependent upon obtaining sufficient orders for our components manufacturing services which is difficult to predict. The success of our components business also depends on our ability to achieve commercially viable production yields and to manufacture components in commercial quantities to the specifications and quality standards required by customers. In particular, our customers require that all new components used in their products be qualified in advance which can be costly both in terms of time and cost and may not result in the customers' acceptance of our components. Any of these factors could cause components revenue or margins to be less than expected, which would have an overall adverse effect on our revenues and profitability.

If demand for our higher-end, higher margin manufacturing services does not increase, our future gross margins and operating results may be lower than expected.

We typically earn lower gross margins when we provide less complex EMS services. We experience continued pressure from OEMs to reduce prices, and competition remains intense. Pricing pressure is typically more intense for less complex, lower margin EMS services. This price competition has affected, and could continue to adversely affect, our gross margins. If demand for our higher-end, higher margin manufacturing services does not increase in the future, our gross margins and operating results in future periods may be lower than expected.

We generally do not obtain long-term volume purchase commitments from customers and, therefore, cancellations, reductions in production quantities and delays in production by our customers could reduce our sales and net income.

We generally do not obtain firm, long-term purchase commitments from our customers and our bookings may generally be cancelled prior to the scheduled shipment date. Customers may cancel their orders, reduce production quantities or delay production for a number of reasons, including significant decreases in demand for their products and services. Although the customer is generally liable for finished goods and work-in-process at the time of cancellation, we may be unable or, for other business reasons, choose not to enforce our contractual rights. Cancellations, reductions or delays of orders by customers would:


•	reduce our sales and net income by decreasing the volumes of products that we manufacture for our customers;


•	delay or eliminate recovery of our expenditures for inventory purchased in preparation for customer orders; and


•	lower our asset utilization, which would result in lower gross margins and lower net income.

In addition, customers sometimes require that we transfer the manufacturing of their products from one facility to another to achieve cost reductions and other objectives. These transfers have resulted in increased costs to us due to facility downtime or less than optimal utilization of our manufacturing capacity. These transfers also have required us to close or reduce operations at certain facilities, particularly those in high cost locations such as the United States, Canada and Western Europe, and as a result we have incurred significant costs for the closure of facilities, employee severance and related matters. We also have encountered occasional delays and complications related to the transition of manufacturing programs to new locations. We may be required to relocate our manufacturing operations in the future and, accordingly, we may incur additional costs that decrease our net income.

Energy price increases may negatively impact our results of operations.

Certain of the components that we use in our manufacturing activities are petroleum-based. In addition, we, along with our suppliers and customers, rely on various energy sources (including oil) in our transportation activities. While significant uncertainty currently exists about the future levels of energy prices, significant long-term increases are possible. Increased energy prices could cause an increase to our raw material costs and transportation costs. In addition, increased transportation costs of certain of our suppliers could be passed along to us. We may not be able to increase our product prices enough to offset these increased costs. In addition, any increase in our product prices may reduce our future customer orders and profitability.

Adverse changes in the key end markets we target could harm our business by reducing our sales.

We provide EMS services to companies that sell products in the communications, industrial, defense, medical,

enterprise computing and storage and multimedia markets. Adverse changes in any of these markets could reduce demand for our customers' products and make these customers more sensitive to the cost of our EMS services, either of which could reduce our sales, gross margins and net income. Factors affecting any of our customers' industries in general, or our customers in particular, have led to reductions in net sales in certain end markets, and such factors could seriously harm our business in the future. These factors include:


•	short product life cycles leading to continuing new requirements and specifications for our customers products, the failure of which to meet could cause us to lose business;


•	failure of our customers' products to gain widespread commercial acceptance which could decrease the volume of orders customers place with us;


•	recessionary periods in our customers' markets which decrease orders from affected customers; and


•	in the case of our defense business, reduced government spending levels resulting from budgetary pressures and constraints or political uncertainty regarding future budgets.

We rely on a relatively small number of customers for a substantial portion of our sales, and declines in sales to these customers would reduce our net sales and net income.

One customer represented more than 10% of our net sales and sales to our ten largest customers represented 49.2% of our net sales during the first nine months of 2011. We expect to continue to depend upon a relatively small number of customers for a significant percentage of our sales. Consolidation among our customers may further concentrate our business in a limited number of customers and expose us to increased risks related to dependence on a small number of customers. In addition, a significant reduction in sales to any of our large customers or significant pricing and margin pressures exerted by such a customer would adversely affect our operating results. In the past, some of our large customers have significantly reduced or delayed the volume of manufacturing services ordered from us as a result of changes demand for their product, consolidations or divestitures or for other reasons. In particular, certain of our customers have from time to time entered into manufacturing divestiture transactions with other EMS companies, and such transactions could reduce our revenues with these customers. We cannot assure you that present or future large customers will not terminate their manufacturing arrangements with us or significantly change, reduce or delay the amount of manufacturing services ordered from us, any of which would reduce our net sales and net income.

We are subject to risks arising from our international operations.

We conduct our international operations primarily in Asia, Latin America, Canada and Europe, and we continue to consider additional opportunities to make foreign acquisitions and construct new foreign facilities. We generated 81.7% of our net sales from non-U.S. operations for the nine months ended July 2, 2011 and a significant portion of our manufacturing material was provided by international suppliers during this period. As a result of our international operations, we are affected by economic and political conditions in foreign countries, including:


•	the imposition of government controls;


•	compliance with U.S. and foreign laws concerning trade and employment practices;


•	difficulties in obtaining or complying with export license requirements;


•	trade restrictions;


•	changes in tariffs;


•	labor unrest, including strikes, and difficulties in staffing;


•	inflexible employee contracts in the event of business downturns;


•	coordinating communications among and managing international operations;


•	fluctuations in currency exchange rates;


•	currency controls;


•	increases in duty and/or income tax rates;


•	adverse rulings in regards to tax audits;


•	excess costs associated with reducing employment or shutting down facilities;


•	misappropriation of intellectual property; and


•	constraints on our ability to maintain or increase prices.

Our operations in certain foreign locations receive favorable income tax treatment in the form of tax holidays or other incentives. In the event that such tax holidays or other incentives are not extended, are repealed, or we no longer qualify for such programs, our taxes may increase, which would reduce our net income.

Additionally, a significant portion of our worldwide cash reserves are generated by, and therefore held in, foreign

jurisdictions. Certain of such jurisdictions restrict the amount of cash that can be transferred to the U.S or impose taxes and penalties on such transfers of cash. To the extent we have excess cash in foreign locations that could be used in, or is needed by, our U.S. operations, we may incur significant taxes to repatriate these funds.

We operate in countries that have experienced labor unrest and political instability, including China, India, Thailand and other countries in Southeast Asia and we have experienced work stoppages and similar disruptions in certain foreign jurisdictions, including India. To the extent such developments prevent us from adequately staffing our plants and manufacturing and shipping products in those jurisdictions, our margins and net income could be reduced and our reputation as a reliable supplier could be negatively impacted.

Our results can be adversely affected by rising labor costs.

There is uncertainty with respect to rising labor costs, in particular within the lower-cost regions in which we operate. Recently, in China, labor disputes and strikes based partly on wages have slowed or stopped production at certain manufacturers. In some cases, employers have responded by significantly increasing the wages of workers at such plants. Any increase in labor costs that we are required to make in order to retain qualified personnel and are unable to recover in our pricing to our customers could adversely impact our operating results.

To respond to competitive pressures and customer requirements, we may further expand internationally in lower cost locations, particularly in Asia, Eastern Europe and Latin America. As we pursue these expansions, we may be required to make additional capital expenditures. In addition, the cost structure in certain countries that are now considered to be favorable may increase as economies develop or as such countries join multinational economic communities or organizations, causing local wages to rise. As a result, we may need to continue to seek new locations with lower costs and the employee and infrastructure base to support electronics manufacturing. We cannot assure you that we will realize the anticipated strategic benefits of our international operations or that our international operations will contribute positively to our operating results.

As a result of our components ordering policies, and customer-requested ship dates, we may incur carrying costs or not be compensated for components, work-in-process or finished goods, which would decrease our margins and net income.

In order to satisfy customer orders, we are frequently required to order components and other parts in advance of customer payment, particularly for long lead-time items. Furthermore, we may be required to keep additional components, work-in-process and finished goods in inventory in order to meet customer delivery dates. While our supply agreements with our customers generally allocate most of the liability for payment for such items to the customers, we may nonetheless incur additional carrying costs or not ultimately be compensated for these items should the customer default upon its obligations. To the extent we incur any such costs, our gross margins and net income would be reduced.

Our business could be adversely affected by any delays, or increased costs, resulting from issues that our common carriers are dealing with in transporting our materials, our products, or both.

We rely on a variety of common carriers to transport our materials from our suppliers to us, and to transport our products from us to our customers. Problems suffered by any of these common carriers, whether due to a natural disaster, labor problem, increased energy prices or some other issue, could result in shipping delays, increased costs, or some other supply chain disruption, and could therefore have a material adverse effect on our operations.

If we manufacture or design defective products, or if our manufacturing processes do not comply with applicable statutory and regulatory requirements, we could be subject to damages and fines and lose customers.

We manufacture products to our customers' specifications, and in some cases our manufacturing processes and facilities may need to comply with applicable statutory and regulatory requirements. For example, many of the medical devices that we manufacture, as well as the facilities and manufacturing processes that we use to produce them, are regulated by the United States Food and Drug Administration. In addition, our customers' products and the manufacturing processes that we use to produce them often are highly complex. As a result, products that we design or manufacture may at times contain design or manufacturing defects, and our manufacturing processes may be subject to errors or may not be in compliance with applicable statutory and regulatory requirements. Defects in the products we design or manufacture may result in product recalls, warranty claims by customers, including liability for repair costs, delayed shipments to customers or reduced or cancelled customer orders. If these defects or deficiencies are significant,

our business reputation may also be damaged. The failure of the products that we design or manufacture or of our manufacturing processes and facilities to comply with applicable statutory and regulatory requirements may subject us to legal fines or penalties and, in some cases, require us to shut down or incur considerable expense to correct a manufacturing program or facility. In addition, these defects may result in product liability claims against us. The magnitude of such claims may increase as we expand our medical, automotive, and aerospace and defense manufacturing services because defects in medical devices, automotive components and aerospace and defense systems could seriously harm users of these products. Even if our customers are responsible for defects in the design of a product, we could nonetheless be named in a product liability suit over such defects and could be required to expend significant resources defending ourselves.

We also design products on a contract basis or jointly with our customers. The design services that we provide can expose us to different or greater potential liabilities than those we face when providing our regular manufacturing services. For example, we have increased exposure to potential product liability claims resulting from injuries caused by defects in products we design, as well as potential claims that products we design infringe third-party intellectual property rights. Such claims could subject us to significant liability for damages and, regardless of their merits, could be time-consuming and expensive to resolve. Any such costs and damages could be significant and would reduce our net income.

Our key personnel are critical to the continued growth of our business and we cannot assure you that they will remain with us.

Our success depends upon the continued service of our key personnel. Generally, these employees are not bound by employment or non-competition agreements. We cannot assure you that we will retain our key employees, particularly our highly skilled operations managers and engineers involved in the manufacture of existing products and development of new products and processes. The competition for these employees is intense. In addition, if one or more of our key employees were to join a competitor or otherwise compete directly or indirectly with us or otherwise become unavailable to us, we could lose customers and our sales and gross margins could decrease.

If we are unable to maintain our technological and manufacturing process expertise, our business could be adversely affected.

Improvements to and refinements of our manufacturing processes are necessary to manufacture next generation products for our customers in a cost-efficient manner. As a result, we are continually evaluating the cost-effectiveness and feasibility of new manufacturing processes. In some cases, we will be required to make capital expenditures and incur engineering expense in order to qualify and validate any such new process. Such expenses would reduce our net income. In addition, any delay in the deployment of such new process, or problems commencing volume production using a new process could also reduce our margins and net income and harm our reputation with our customers.

Unanticipated changes in our tax rates or exposure to additional income tax liabilities could increase our taxes and decrease our net income.

We are subject to income, sales, value-added 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. Our effective tax rates could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws and other factors. Our tax determinations are regularly subject to audit by tax authorities and developments in those audits could adversely affect our tax provisions, including through assessment of back taxes, interest and penalties. Although we believe that our tax estimates are reasonable, the final determination of tax audits or tax disputes may be different from what is reflected in our historical tax provisions which could lead to an increase in our taxes payable and a decrease in our net income.

Our international sales are subject to laws relating to trade, export controls and foreign corrupt practices, the violation of which could adversely affect our operations.

We are required to comply with all applicable domestic and foreign export control laws, including the International Traffic in Arms Regulations (“ITAR”) and the Export Administration Regulations (“EAR”). Some items manufactured by us are controlled for export by the United States Department of Commerce's Bureau of Industry and Security under the EAR. In addition, we are subject to the Foreign Corrupt Practices Act and international counterparts that bar bribes or unreasonable gifts for foreign governments and officials. Violation of any of these laws or regulations

could result in significant sanctions, including large monetary penalties and suspension or debarment from participation in future government contracts, which could reduce our future revenue and net income.

We are subject to a number of U.S. governmental procurement rules and regulations, the failure to comply with which could result in damages or reduction of future revenue.

We are subject to a number of laws and regulations relating to the award, administration and performance of U.S. government contracts and subcontracts. Such laws and regulations govern, among other things, price negotiations, cost accounting standards and other aspects of performance under government contracts. These rules are complex and our performance under them is subject to audit by the Defense Contract Audit Agency and other government regulators. If an audit or investigation reveals a failure to comply with regulations or other improper activities, we may be subject to civil or criminal penalties and administrative sanctions by either the government or the prime customer, including termination of the contract, payment of fines and suspension or debarment from doing further business with the U.S. government. Any of these actions would increase our expenses, reduce our revenue and damage our reputation as a reliable government supplier.

We can experience losses due to foreign exchange rate fluctuations, which would reduce our net income.

Because we manufacture and sell a substantial portion of our products abroad, our operating costs are subject to fluctuations in foreign currency exchange rates. If the U.S. dollar weakens against the foreign currencies in which we denominate certain of our trade accounts payable, fixed purchase obligations and other expenses, the U.S. dollar equivalent of such expenses would increase. We use financial instruments, primarily short-term foreign currency forward contracts, to hedge certain forecasted foreign currency commitments arising from trade accounts receivable, trade accounts payable and fixed purchase obligations. Our foreign currency hedging activities depend largely upon the accuracy of our forecasts of future sales, expenses, capital expenditures and monetary assets and liabilities. As such, our foreign currency forward contracts may exceed or not cover our full exposure to exchange rate fluctuations. If these hedging activities are not successful, we may experience significant unexpected expenses from fluctuations in exchange rates. Although we believe our foreign exchange hedging policies are reasonable and prudent under the circumstances, we can provide no assurances that we will not experience losses arising from currency fluctuations in the future, which could be significant.

Consolidation in the electronics industry may adversely affect our business by increasing competition or customer buying power and increasing prices we pay for components.

Consolidation in the electronics industry among our customers, our suppliers and/or our competitors may increase as companies combine to achieve further economies of scale and other synergies. Consolidation in the electronics industry could result in an increasing number of very large electronics companies offering products in multiple sectors of the electronics industry. The significant purchasing and market power of these large companies could increase competitive pressures on us. In addition, if one of our customers is acquired by another company that does not rely on us to provide EMS services either because it has its own production facilities or relies on another provider of similar services, we may lose that customer's business. In addition, consolidation in the electronics industry may also result in excess manufacturing capacity among EMS companies, which could drive our profitability down. Similarly, consolidation among our suppliers could result in a sole or limited source for certain components used in our customers' products. Any such consolidation could cause us to be required to pay increased prices for such components, which would reduce our gross margin and profitability.

Restructuring of our operations could require us to take an accounting charge which would reduce our net income.

We have incurred significant expenses related to restructuring of our operations in the past. For example, we have moved, and may continue to move, our operations from higher-cost to lower-cost locations to meet customer requirements. We have incurred costs related to workforce reductions, work stoppages and labor unrest resulting from the closure of our facilities in higher cost locations. In addition, we have incurred unanticipated costs related to the transfer of operations to lower-cost locations, including costs related to integrating new facilities, managing operations in dispersed locations and realigning our business processes. We also have incurred costs to restructure operations that have been acquired in order to integrate them into our Company. We expect to be required to record additional charges related to restructuring activities in the future, but cannot predict the timing or amount of such charges. Any such charges would reduce our net income.

Our failure to comply with applicable environmental laws could adversely affect our business by causing us to pay

significant amounts for clean up of hazardous materials or for damages or fines.

We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, storage, discharge and disposal of hazardous substances and wastes in the ordinary course of our manufacturing operations. We also are subject to laws and regulations governing the recyclability of products, the materials that may be included in products, and the obligations of a manufacturer to dispose of these products after end users have finished using them. If we violate environmental laws or if we occupy or occupied in the past a site at which a predecessor company caused contamination, we may be held liable for damages and the costs of remedial actions. We cannot assure you that we will not violate environmental laws and regulations in the future as a result of human error, equipment failure or other causes. Although we estimate and regularly reassess our potential liability with respect to violations or alleged violations and accrue for such liability, we cannot assure you that our accruals will be sufficient to cover the actual costs we incur as a result of these violations or alleged violations or that no violations will not occur for which a reserve has not been established. Any increase in existing reserves or establishment of new reserves for environmental liability would reduce our net income. Our failure to comply with applicable environmental laws and regulations could also limit our ability to expand facilities or could require us to acquire costly equipment or to incur other significant expenses to comply with these laws and regulations.

Asbestos containing materials, or ACM, are present at several of our manufacturing facilities. Although the ACM is being managed and controls have been put in place pursuant to ACM operations and maintenance plans, the presence of ACM could give rise to remediation obligations and other liabilities. No governmental or third-party claims relating to ACM have been brought at this time.

Our plants generally operate under environmental permits issued by governmental authorities. For the most part, these permits must be renewed periodically and are subject to revocation in the event of violations of environmental laws. Although we have not experienced any material revocations to date, any such revocation could require us to cease or limit production at one or more of our facilities, thereby having an adverse impact on our results of operations.

Primarily as a result of certain of our acquisitions, we have incurred liabilities associated with environmental contamination. These liabilities include ongoing investigation and remediation activities at a number of sites, including our facilities located in Irvine, California; Owego, New York; Derry, New Hampshire; Fort Lauderdale, Florida and Phoenix, Arizona. We have been named in a lawsuit alleging operations at our former facility in Santa Ana, California contributed to groundwater contamination. There can be no assurance that any other similar third-party or governmental claims will not arise and will not result in material liability to us. In addition, there are some sites, including our acquired facility in Gunzenhausen, Germany, that are known to have groundwater contamination caused by a third-party, and that third-party has provided indemnity to us for the liability.

We have also been named as a potentially responsible party at one contaminated disposal site, operated by another party at the Casmalia Resources site in Southern California, as a result of the past disposal of hazardous waste by companies we have acquired or by our corporate predecessors. Although liabilities for such historical disposal activities have not materially affected our financial condition to date, we cannot assure you that past disposal activities will not result in liability that will materially affect us in the future, nor can we provide assurance that we do not have environmental exposures of which we are unaware and which could adversely affect our operating results.

Over the years, environmental laws have become, and in the future may continue to become, more stringent, imposing greater compliance costs and increasing risks and penalties associated with violations. We operate in several environmentally sensitive locations and are subject to potentially conflicting and changing regulatory agendas of political, business and environmental groups. Changes in or restrictions on discharge limits, emissions levels, permitting requirements and material storage or handling could require a higher than anticipated level of operating expenses and capital investment or, depending on the severity of the impact of the foregoing factors, costly plant relocation.

In addition, the electronics industry became subject to the European Union's RoHS (Restriction of Hazardous Substances) and WEEE (Waste from Electrical and Electronic Equipment) directives which took effect beginning in 2005. Parallel initiatives have been adopted in other jurisdictions, including several states in the United States and the People's Republic of China. RoHS prohibits the use of lead, mercury and certain other specified substances in electronics products and WEEE requires industry OEMs to assume responsibility for the collection, recycling and management of waste electronic products and components. Although we believe we have implemented procedures to make our manufacturing process RoHS compliant, non-compliance could result in significant costs and/or penalties. In the case of WEEE, the compliance responsibility rests primarily with OEMs rather than with EMS companies. However, OEMs may turn to EMS companies for assistance in meeting their WEEE obligations, which could increase our costs.

Failure to comply with employment and related laws could result in the payment of significant damages, which would reduce our net income; employee theft or fraud could result in loss.

We are subject to a variety of domestic and foreign employment laws, including those related to safety, discrimination, whistle-blowing, classification of employees, wages and severance payments. Such laws are subject to change as a result of judicial decisions or otherwise and there can be no assurance that we will not be found to have violated any such laws in the future. Such violations could lead to the assessment of significant fines against us by federal, state or foreign regulatory authorities or to the award of damages claims (including severance payments) against us in judicial proceedings by employees, any of which would reduce our net income. Certain of our employees have access to or signature authority with respect to bank accounts or other company assets, which could expose us to fraud or theft by such employees. In cases of fraud or theft by any such employee, we would incur losses, which may not be recoverable from the employee and which may not be fully covered by insurance.

We may not be successful in implementing and integrating strategic transactions or in divesting non-strategic assets, which could cause our financial results to fail to meet our forecasts.

From time to time, we may undertake strategic transactions that give us the opportunity to access new customers and new end-customer markets, to obtain new manufacturing and service capabilities and technologies, to enter new geographic manufacturing locations, to lower our manufacturing costs and improve the margins on our product mix, and to further develop existing customer relationships. Strategic transactions involve many difficulties and uncertainties, including the following:


•	integrating acquired operations and businesses;


•	regulatory approvals or other conditions to closing that delay the completing of strategic transactions beyond the time anticipated;


•	allocating management resources;


•	scaling up production and coordinating management of operations at new sites;


•	separating operations or support infrastructure for entities divested;


•	managing and integrating operations in geographically dispersed locations;


•	maintaining customer, supplier or other favorable business relationships of acquired operations and terminating unfavorable relationships;


•	integrating the acquired company's systems into our management information systems;


•	satisfying unforeseen liabilities of acquired businesses, including environmental liabilities, which could require the expenditure of material amounts of cash;


•	operating in the geographic market or industry sector of the business acquired in which we may have little or no experience;


•	improving and expanding our management information systems to accommodate expanded operations; and


•	losing key employees of acquired operations.

Any of these factors could prevent us from realizing the anticipated benefits of a strategic transaction, and our failure to realize these benefits could reduce our sales below and increase our costs above our forecasts. Acquisitions may also be dilutive to our earnings per share if our projections and assumptions about the acquired business' future operating results prove to be inaccurate. As a result, although our goal is to improve our business and maximize stockholder value, any transactions that we complete may ultimately fail to increase our sales and net income and stock price.

If we are unable to protect our intellectual property or infringe, or are alleged to infringe, upon intellectual property of others, we could lose sales or be required to pay significant amounts in costs or damages.

We rely on a combination of copyright, patent, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We cannot be certain that the steps we have taken will prevent unauthorized use of our intellectual property. Any failure to protect our intellectual property rights would diminish or eliminate the competitive advantages that we derive from our proprietary technology. We rely in part upon patents to protect our intellectual property position. However, a number of our patents covering certain aspects of our manufacturing processes or products have expired or will expire in the near future. Such expirations reduce our ability to assert claims against competitors or others who use or sell similar technology.

We may become involved in litigation in the future to protect our intellectual property or because others may

allege that we infringe on their intellectual property. These claims and any resulting lawsuits could subject us to significant liability for damages and invalidate our proprietary rights. In addition, these lawsuits, regardless of their merits, likely would be time consuming and expensive to resolve and would divert management's time and attention. Any potential intellectual property litigation alleging our infringement of a third-party's intellectual property also could force us or our customers to:


•	stop producing products that use the challenged intellectual property;


•	obtain from the owner of the infringed intellectual property, at our expense, a license to sell the relevant technology at an additional cost, which license may not be available on reasonable terms, or at all; or


•	redesign those products or services that use the infringed technology.

Any costs we incur from having to take any of these actions could be substantial and would reduce our net income.

We may not have sufficient insurance coverage for certain of the risks and liabilities we assume in connection with the products and services we provide to our customers, which could leave us responsible for certain costs and damages incurred by our customers.

We carry various forms of business and liability insurance in amounts we believe are reasonable and customary for similarly situated companies in our industry. However, we do not have insurance coverage for all of the risks and liabilities we assume in connection with the products and services we provide to our customers, such as potential warranty, product liability, intellectual property infringement and product recall claims. As a result, such liability claims may not be covered under our insurance policies. Should we sustain a significant uncovered loss, our net income would be reduced.

Changes in financial accounting standards or policies have affected, and in the future may affect, our reported financial condition or results of operations. Additionally, changes in securities laws and regulations have increased, and are likely to continue to increase, our operating costs.

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States, or U.S. GAAP. Our preparation of financial statements in accordance with U.S. GAAP requires that we make estimates and assumptions that affect the recorded amounts of assets and liabilities, disclosure of those assets and liabilities at the date of the financial statements and the recorded amounts of expenses during the reporting period. A change in the facts and circumstances surrounding those estimates could result in a change to our estimates and could impact our future operating results.

In addition, these principles are subject to interpretation by the Financial Accounting Standards Board (FASB), the SEC and various bodies formed to interpret and create accounting policies. A change in those policies can have a significant effect on our reported results and may affect our reporting of transactions which are completed before a change is announced. Accounting policies affecting many other aspects of our business, including rules relating to revenue recognition, off-balance sheet transactions, stock-based compensation, restructurings, acquisition accounting, asset disposals and asset retirement obligations, leases, intangible assets, derivative and other financial instruments and in-process research and development charges, have recently been revised or are under review. Changes to those rules or the questioning of how we interpret or implement those rules may have a material adverse effect on our reported financial results or on the way we conduct business. For example, a preliminary timetable by which U.S. companies would adopt International Financial Reporting Standards has been promulgated by the SEC. Although at a very early stage of consideration by regulatory agencies, adoption of such standards could substantially change our reporting practices in a number of areas, including revenue recognition and recording of assets and liabilities.

Finally, corporate governance, public disclosure and compliance practices continue to evolve based upon continuing legislative action, SEC rulemaking and stockholder advisory group policies. As a result, the number of rules and regulations applicable to us may increase, which would also increase our legal and financial compliance costs and the amount of time management must devote to compliance activities. In turn, these developments could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive officers in light of an increase in actual or perceived liability for serving in such positions.

Outages, computer viruses, break-ins and similar events could disrupt our operations.

We rely on information technology networks and systems, some of which are owned and operated by third parties, to process, transmit and store electronic information. In particular, we depend on our information technology infrastructure for a variety of functions, including worldwide financial reporting, inventory management, procurement, invoicing and email communications. Any of these systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, terrorist attacks and similar events. Despite the implementation of network security measures, our systems and those of third parties on which we rely may also be vulnerable to computer viruses, break-ins and similar disruptions. If we or our vendors are unable to prevent such outages and breaches, our operations could be disrupted.

We are subject to risks associated with natural disasters and global events.

We conduct a significant portion of our activities including manufacturing, administration and information technology management in areas that have experienced natural disasters, such as major earthquakes, hurricanes, and tsunamis. Our insurance coverage with respect to damages to our facilities or our customers' products caused by natural disasters is limited and is subject to deductibles and coverage limits. Such coverage may not be adequate or continue to be available at commercially reasonable rates and terms. In the event of a major earthquake or other disaster affecting one or more of our facilities, our operations and management information systems, which control our worldwide procurement, inventory management, shipping and billing activities, could be significantly disrupted. Such events could also delay or prevent product manufacturing and shipment for the time required to transfer production or repair, rebuild or replace the affected manufacturing facilities. This time frame could be lengthy and result in significant expenses for repair and related costs. While we have in place disaster recovery plans, there can be no assurance that such plans will be sufficient to allow our operations to continue in the event of every natural or man-made disaster, pandemic or other extraordinary event. Any extended inability to continue our operations at unaffected facilities following such an event would reduce our revenue and potentially damage our reputation as a reliable supplier.

Our profitability could be adversely impacted by climate change initiatives.

Concern over climate change has led to state, federal and international legislative and regulatory initiatives aimed at reducing carbon dioxide and other greenhouse gas emissions. While we don't expect existing or currently proposed initiatives to directly impact our business operations, these measures could lead to an increase in the cost of energy used in the manufacture of our products as a result of restrictions placed upon power generators and distributors. We can't currently estimate the impact of any such indirect costs. However, should our operating costs in fact rise as a result of any current, proposed or future greenhouse gas initiatives, and we are not able to pass such costs to our customers, our profitability would be reduced.

Item 6. Exhibits



Exhibit Number		Description

4.1 (1)		Indenture, dated as of May 10, 2011, among Sanmina-SCI Corporation, certain subsidiaries of Sanmina-SCI Corporation, as a guarantors, and U.S. Bank National Association, as trustee.

4.2 (1)		Form of Note for Sanmina-SCI Corporation's 7% Senior Notes due 2019.

4.3 (1)		Third Supplemental Indenture, dated as of May 10, 2011, by and between Sanmina- SCI Corporation and U.S. Bank National Association, as trustee.

10.38		Agreement and Release between the Company and Hari Pillai dated May 5, 2011 (filed herewith).
10.39		Purchase Agreement among the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities, Inc., Goldman Sachs & Co. and Morgan Stanley & Co. Incorporated dated April 26, 2011 (filed herewith).

31.1		Certification of the Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of the Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1 (2)		Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

32.2 (2)		Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101.INS (3)		XBRL Instance Document

101.SCH (3)		XBRL Taxonomy Extension Schema Document

101.CAL (3)		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF (3)		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB (3)		XBRL Taxonomy Extension Label Linkbase Document

101.PRE (3)		XBRL Taxonomy Extension Presentation Linkbase Document

________________________

(1) Incorporated by reference to the same number exhibit of the Registrant's Current Report on Form 8-K filed on May 10, 2011.

(2)

This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.


(3)	To be filed within 30 days after the earlier of the due date or filing date of this Form 10-Q, as permitted by Section II(B)(4) of Securities and Exchange Commission Release No. 34-59324 effective April 13, 2009.

SIGNATURES

Pursuant to the Requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		SANMINA-SCI CORPORATION
		(Registrant)

		By:	/s/ JURE SOLA
			Jure Sola
			Chief Executive Officer (Principal Executive Officer)

Date:	August 1, 2011

		By:	/s/ ROBERT K. EULAU
			Robert K. Eulau
			Executive Vice President and
			Chief Financial Officer (Principal Financial Officer)

Date:	August 1, 2011

EXHIBIT INDEX



Exhibit Number		Description

4.1 (1)		Indenture, dated as of May 10, 2011, among Sanmina-SCI Corporation, certain subsidiaries of Sanmina-SCI Corporation, as a guarantors, and U.S. Bank National Association, as trustee.

4.2 (1)		Form of Note for Sanmina-SCI Corporation's 7% Senior Notes due 2019.

4.3 (1)		Third Supplemental Indenture, dated as of May 10, 2011, by and between Sanmina- SCI Corporation and U.S. Bank National Association, as trustee.

10.38		Agreement and Release between the Company and Hari Pillai dated May 5, 2011 (filed herewith).
10.39		Purchase Agreement among the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities, Inc., Goldman Sachs & Co. and Morgan Stanley & Co. Incorporated dated April 26, 2011 (filed herewith).

31.1		Certification of the Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of the Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1 (2)		Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

32.2 (2)		Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101.INS (3)		XBRL Instance Document

101.SCH (3)		XBRL Taxonomy Extension Schema Document

101.CAL (3)		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF (3)		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB (3)		XBRL Taxonomy Extension Label Linkbase Document

101.PRE (3)		XBRL Taxonomy Extension Presentation Linkbase Document

________________________

(1) Incorporated by reference to the same number exhibit of the Registrant's Current Report on Form 8-K filed on May 10, 2011.

(2)


(3)	To be filed within 30 days after the earlier of the due date or filing date of this Form 10-Q, as permitted by Section II(B)(4) of Securities and Exchange Commission Release No. 34-59324 effective April 13, 2009.

TABLE OF CONTENTS

Note 1. Basis Of Presentationprint Note 2. Inventoriesprint Note 3. Fair Valueprint Note 4. Derivative Financial Instrumentsprint Note 5. Debtprint Note 6. Commitments and Contingenciesprint Note 7. Restructuringprint Note 8. Earnings Per Shareprint Note 9. Comprehensive Incomeprint Note 10. Business Segment, Geographic and Customer Informationprint Note 11. Stock-based Compensationprint Item 2. Management's Discussion and Analysis Of Financial Condition and Results Of Operationsprint Item 3. Quantitative and Qualitative Disclosures About Market Riskprint Item 4. Controls and Proceduresprint Part II. Other Informationprint Item 1. Legal Proceedingsprint Item 1A. Risk Factors Affecting Operating Resultsprint Item 6. Exhibitsprint

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