Company Quick10K Filing
Sanmina
Price32.45 EPS2
Shares72 P/E16
MCap2,326 P/FCF6
Net Debt-69 EBIT276
TEV2,257 TEV/EBIT8
TTM 2019-09-28, in MM, except price, ratios
10-Q 2020-06-27 Filed 2020-07-31
10-Q 2020-03-28 Filed 2020-04-29
10-Q 2019-12-28 Filed 2020-01-30
10-K 2019-09-28 Filed 2019-11-08
10-Q 2019-06-29 Filed 2019-08-01
10-Q 2019-03-30 Filed 2019-05-02
10-Q 2018-12-29 Filed 2019-02-07
10-K 2018-09-29 Filed 2018-11-15
10-Q 2018-06-30 Filed 2018-08-03
10-Q 2018-03-31 Filed 2018-05-02
10-Q 2017-12-30 Filed 2018-02-02
10-K 2017-09-30 Filed 2017-11-13
10-Q 2017-07-01 Filed 2017-07-28
10-Q 2017-04-01 Filed 2017-04-28
10-Q 2016-12-31 Filed 2017-02-03
10-K 2016-10-01 Filed 2016-11-18
10-Q 2016-07-02 Filed 2016-07-29
10-Q 2016-04-02 Filed 2016-04-29
10-Q 2016-01-02 Filed 2016-01-29
10-K 2015-10-03 Filed 2015-11-19
10-Q 2015-06-27 Filed 2015-07-24
10-Q 2015-03-28 Filed 2015-04-24
10-Q 2014-12-27 Filed 2015-01-30
10-K 2014-09-27 Filed 2014-11-13
10-Q 2014-06-28 Filed 2014-07-25
10-Q 2014-03-29 Filed 2014-04-28
10-Q 2013-12-28 Filed 2014-01-31
10-K 2013-09-28 Filed 2013-11-27
10-Q 2013-06-29 Filed 2013-07-30
10-Q 2013-03-30 Filed 2013-04-30
10-Q 2012-12-29 Filed 2013-02-04
10-K 2012-09-29 Filed 2012-11-21
10-Q 2012-06-30 Filed 2012-07-31
10-Q 2012-03-31 Filed 2012-05-01
10-Q 2011-12-31 Filed 2012-01-26
10-K 2011-10-01 Filed 2011-11-22
10-Q 2011-07-02 Filed 2011-08-01
10-Q 2011-04-02 Filed 2011-04-26
10-Q 2011-01-01 Filed 2011-02-08
10-K 2010-10-02 Filed 2010-11-24
10-Q 2010-07-03 Filed 2010-08-05
10-Q 2010-04-03 Filed 2010-04-30
10-Q 2010-01-02 Filed 2010-02-05
8-K 2020-07-29 Earnings, Exhibits
8-K 2020-04-27
8-K 2020-03-09
8-K 2020-01-27
8-K 2019-12-09
8-K 2019-10-28
8-K 2019-10-14
8-K 2019-10-01
8-K 2019-09-09
8-K 2019-09-09
8-K 2019-07-29
8-K 2019-07-08
8-K 2019-05-31
8-K 2019-04-29
8-K 2019-04-05
8-K 2019-03-11
8-K 2019-01-22
8-K 2018-11-30
8-K 2018-11-15
8-K 2018-10-29
8-K 2018-09-15
8-K 2018-09-14
8-K 2018-09-10
8-K 2018-08-31
8-K 2018-07-30
8-K 2018-06-25
8-K 2018-04-23
8-K 2018-03-26
8-K 2018-03-04
8-K 2018-02-01
8-K 2018-01-29
8-K 2018-01-19
8-K 2018-01-12

SANM 10Q Quarterly Report

Note 1. Basis of Presentation
Note 2. Revenue Recognition
Note 3. Financial Instruments
Note 4. Debt
Note 5. Leases
Note 6. Accounts Receivable Sale Program
Note 7. Contingencies
Note 8. Restructuring
Note 9. Income Tax
Note 10. Stockholder's Equity
Note 11. Business Segment, Geographic and Customer Information
Note 12. Earnings per Share
Note 13. Stock - Based Compensation
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.29 sanminaex102920200627.htm
EX-31.1 sanminaex31120200627.htm
EX-31.2 sanminaex31220200627.htm
EX-32.1 sanminaex32120200627.htm
EX-32.2 sanminaex32220200627.htm

Sanmina Earnings 2020-06-27

Balance SheetIncome StatementCash Flow
4.43.52.61.80.90.02012201420172020
Assets, Equity
2.21.71.20.80.3-0.22012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 27, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 .

Commission File Number 0-21272
Sanmina Corporation
(Exact name of registrant as specified in its charter)
DE77-0228183
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification Number)
  
2700 N. First St.,San Jose,CA95134
(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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [x]    No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer
[X]
Accelerated filer [ ]
Non-accelerated filer [  ]
Smaller reporting company
  Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  No
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common StockSANMNASDAQ Global Select Market

As of July 24, 2020, there were 67,763,797 shares outstanding of the issuer's common stock, $0.01 par value per share.



SANMINA CORPORATION

INDEX

Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.


2




SANMINA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
 As of
 June 27,
2020
 September 28,
2019
(Unaudited)
 (In thousands)
ASSETS 
Current assets: 
Cash and cash equivalents$1,117,217  $454,741  
Short-term investments30,000    
Accounts receivable, net of allowances of $9,336 and $12,481 as of June 27, 2020 and September 28, 2019, respectively
1,042,011  1,128,379  
Contract assets381,249  396,300  
Inventories883,670  900,557  
Prepaid expenses and other current assets45,965  40,952  
Total current assets3,500,112  2,920,929  
Property, plant and equipment, net574,799  630,647  
Deferred tax assets277,285  279,803  
Other122,503  74,134  
Total assets$4,474,699  $3,905,513  
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities:  
Accounts payable$1,252,116  $1,336,914  
Accrued liabilities175,793  180,107  
Accrued payroll and related benefits111,699  127,647  
Short-term debt, including current portion of long-term debt673,437  38,354  
Total current liabilities2,213,045  1,683,022  
Long-term liabilities:  
Long-term debt333,675  346,971  
Other274,497  232,947  
Total long-term liabilities608,172  579,918  
Contingencies (Note 7)
Stockholders' equity1,653,482  1,642,573  
Total liabilities and stockholders' equity$4,474,699  $3,905,513  

See accompanying notes to condensed consolidated financial statements.

3


SANMINA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months EndedNine Months Ended
June 27,
2020
June 29,
2019
June 27,
2020
June 29,
2019
(Unaudited)
(In thousands, except per share data)
Net sales$1,654,691  $2,026,995  $5,085,412  $6,341,652  
Cost of sales1,523,218  1,879,200  4,711,636  5,891,418  
Gross profit131,473  147,795  373,776  450,234  
Operating expenses:
Selling, general and administrative59,314  66,768  184,722  193,982  
Research and development5,181  7,272  16,148  21,308  
Restructuring and other2,875  6,381  27,253  11,912  
Total operating expenses67,370  80,421  228,123  227,202  
Operating income64,103  67,374  145,653  223,032  
Interest income764  330  1,492  888  
Interest expense(8,460) (7,599) (20,377) (24,342) 
Other income (expense), net3,200  (1,480) (3,142) (8,365) 
Interest and other, net(4,496) (8,749) (22,027) (31,819) 
Income before income taxes59,607  58,625  123,626  191,213  
Provision for income taxes14,727  15,704  35,519  69,455  
Net income$44,880  $42,921  $88,107  $121,758  
Net income per share:
Basic$0.66  $0.62  $1.26  $1.77  
Diluted$0.64  $0.60  $1.23  $1.70  
Weighted average shares used in computing per share amounts:
Basic68,216  69,499  69,657  68,872  
Diluted69,645  72,007  71,504  71,460  

See accompanying notes to condensed consolidated financial statements.


4


SANMINA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months EndedNine Months Ended
June 27,
2020
June 29,
2019
June 27,
2020
June 29,
2019
(Unaudited)
(In thousands)
Net income$44,880  $42,921  $88,107  $121,758  
Other comprehensive income (loss), net of tax:
Change in foreign currency translation adjustments1,199  469  (971) (18) 
Derivative financial instruments:
Change in net unrealized amount(624) (8,206) (5,550) (17,181) 
Amount reclassified into net income1,002  392  1,345  157  
Defined benefit plans:
Changes in unrecognized net actuarial losses and unrecognized transition costs(619) (76) (391) 323  
Amortization of actuarial losses and transition costs332  341  978  776  
Total other comprehensive income (loss)1,290  (7,080) (4,589) (15,943) 
Comprehensive income$46,170  $35,841  $83,518  $105,815  

See accompanying notes to condensed consolidated financial statements.
5


SANMINA CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
Three Months EndedNine Months Ended
June 27,
2020
June 29,
2019
June 27,
2020
June 29,
2019
(Unaudited)
(In thousands)
Common Stock and Additional Paid-in Capital
Balance, beginning of period$6,287,370  $6,244,907  $6,267,509  $6,222,988  
Issuances under stock plans276  3,380  5,448  12,719  
Stock-based compensation expense7,354  8,136  22,043  20,578  
Other issuances      138  
Balance, end of period6,295,000  6,256,423  6,295,000  6,256,423  
Treasury Stock
Balance, beginning of period(886,151) (803,514) (804,118) (791,366) 
Repurchases of treasury stock(18,067) (604) (100,100) (12,752) 
Balance, end of period(904,218) (804,118) (904,218) (804,118) 
Accumulated Other Comprehensive Income
Balance, beginning of period36,380  65,081  42,259  73,944  
Other comprehensive income (loss)1,290  (7,080) (4,589) (15,943) 
Balance, end of period37,670  58,001  37,670  58,001  
Accumulated Deficit
Balance, beginning of period(3,819,850) (3,925,755) (3,863,077) (4,032,722) 
Cumulative effect of new accounting pronouncement (1)      28,130  
Net income44,880  42,921  88,107  121,758  
Balance, end of period(3,774,970) (3,882,834) (3,774,970) (3,882,834) 
Total stockholders' equity$1,653,482  $1,627,472  $1,653,482  $1,627,472  
Common Stock Shares Outstanding
Number of shares, beginning of period107,126  104,796  105,551  103,128  
Issuances under stock plans228  613  1,803  2,281  
Number of shares, end of period107,354  105,409  107,354  105,409  
Treasury Shares
Number of shares, beginning of period(38,924) (35,806) (35,831) (35,351) 
Repurchases of treasury stock(689) (25) (3,782) (480) 
Number of shares, end of period(39,613) (35,831) (39,613) (35,831) 

(1) Due to the adoption of ASU 2014-09 "Revenue from Contracts with Customers (Topic 606)" using the modified retrospective approach.








See accompanying notes to condensed consolidated financial statements.
6


SANMINA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
June 27,
2020
 June 29,
2019
(Unaudited)
(In thousands)
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income$88,107  $121,758  
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Depreciation and amortization85,663  88,441  
Stock-based compensation expense22,043  20,578  
Deferred income taxes9,852  27,182  
Goodwill and other asset impairments8,409    
Other, net846  (1,361) 
Changes in operating assets and liabilities:
Accounts receivable84,259  (50,805) 
Contract assets15,051  (11,807) 
Inventories16,658  108,043  
Prepaid expenses and other assets6,167  2,144  
Accounts payable(62,779) (172,654) 
Accrued liabilities(53,610) 61,249  
Cash provided by operating activities220,666  192,768  
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment(54,787) (102,025) 
Proceeds from sales of property, plant and equipment890  4,057  
Purchases of investments(30,000) (499) 
Cash used in investing activities(83,897) (98,467) 
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Repayments of long-term debt(29,674) (378,416) 
Proceeds from long-term debt  375,000  
Proceeds from revolving credit facility borrowings1,909,000  3,223,525  
Repayments of revolving credit facility borrowings(1,259,000) (3,317,525) 
Debt issuance costs  (2,727) 
Net proceeds from stock issuances5,448  12,719  
Repurchases of common stock(100,100) (12,614) 
Cash provided by (used in) financing activities525,674  (100,038) 
Effect of exchange rate changes33  482  
Increase (decrease) in cash and cash equivalents662,476  (5,255) 
Cash and cash equivalents at beginning of period454,741  419,528  
Cash and cash equivalents at end of period$1,117,217  $414,273  
Cash paid during the period for:
Interest, net of capitalized interest$14,305  $25,291  
Income taxes, net of refunds$18,902  $23,767  
Unpaid purchases of property, plant and equipment at the end of period$10,578  $30,018  


See accompanying notes to condensed consolidated financial statements.
7


SANMINA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Sanmina 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 U.S. 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 adjustments, consisting primarily of normal recurring adjustments, that are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended September 28, 2019, included in the Company's 2019 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 unaudited condensed consolidated financial statements and accompanying notes. Due to the COVID-19 global pandemic, the global economy and financial markets have been disrupted and there continues to be a significant amount of uncertainty about the length and severity of the consequences caused by the pandemic. The Company has considered information available to it as of the date of issuance of these financial statements and, other than two customer bankruptcies in the third quarter of 2020, the impact of which was immaterial, and the impairments described in Note 3, the Company is not aware of any specific events or circumstances that would require an update to its estimates or judgments, or a revision to the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information becomes available. Actual results could differ materially from these estimates.

Results of operations for the third quarter of 2020 are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year.

The Company operates on a 52 or 53 week year ending on the Saturday nearest September 30. Fiscal 2019 was a 52-week year and fiscal 2020 will be a 53-week year, with the extra week occurring during the fourth quarter. All references to years relate to fiscal years unless otherwise noted.

Recent Accounting Pronouncements Adopted

In December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)", which is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and which also clarifies and amends existing guidance to improve consistent application. The Company adopted this ASU in the second quarter of 2020. The impact of adoption was not material.

In February 2018, the FASB issued ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income", which allows companies to reclassify stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act (H.R. 1) from accumulated other comprehensive income to retained earnings. The Company adopted this ASU at the beginning of fiscal 2020. There was no impact upon adoption.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements for Accounting For Hedging Activities", simplifying hedge accounting guidance and improving the financial reporting of hedging relationships by allowing an entity to better align its risk management activities and financial reporting for hedging relationships through changes to both designation and measurement for qualifying hedging relationships and the presentation of hedge results. This standard eliminates the requirement to separately measure and report hedge ineffectiveness, resulting in full recognition of the change in fair value that impacts earnings in the same income statement line item that is used to present the earnings effect of the hedged item. In addition, the guidance allows more flexibility in the requirements to qualify for and maintain hedge accounting. The Company adopted this ASU at the beginning of fiscal 2020. The impact of adoption was not material.

In February 2016, the FASB issued ASU 2016-02, "Leases: Amendments to the FASB Accounting Standards Codification (Topic 842)". This ASU requires the Company to recognize on the balance sheet the assets and liabilities for the
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rights and obligations created by leases with terms of more than twelve months. This ASU also requires disclosures enabling the users of financial statements to understand the amount, timing and uncertainty of cash flows arising from leases. In addition, the FASB provided a practical expedient transition method that allows entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, as opposed to applying the requirements retrospectively and providing comparative prior period financial statements. The Company adopted the new standard on September 29, 2019, the first day of fiscal 2020, and applied the above practical expedient transition method. The Company elected certain other transition options which, among other things, allowed the Company to carry forward its prior conclusions about lease identification and classification.

Upon adoption of the new standard, the Company recognized approximately $65 million of right-of-use ("ROU") assets and lease liabilities. Adoption of the new standard did not have a material impact on the Company's consolidated statements of income or consolidated statements of cash flows.

Refer to Note 5 for additional information and disclosures related to the adoption of ASC 842.

Recent Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)", which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. The Company has not yet applied any of the expedients and exceptions and is currently evaluating the impact of the provisions of ASU 2020-04.

In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." The new guidance aligns the requirements for capitalizing implementation costs incurred in a cloud-based hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for the Company at the beginning of fiscal 2021, including interim periods within that reporting period.

In June 2016, the FASB issued ASU 2016-13 "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which replaces the existing incurred loss impairment methodology with an expected credit loss methodology and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This new standard is effective for the Company at the beginning of fiscal 2021, including interim periods within that reporting period. The Company does not expect the impact of adoption to be significant.

Note 2. Revenue Recognition

The Company is a leading global provider of integrated manufacturing solutions, components, products and repair, logistics and after-market services. For purposes of determining when to recognize revenue, and in what amount, the Company applies a 5-step model: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the Company satisfies a performance obligation. Each of these steps involves the use of significant judgments, as discussed below.
Step 1 - Identify the contract with a customer
A contract is defined as an agreement between two parties that creates enforceable rights and obligations. The Company generally enters into a master supply agreement (“MSA”) with its customers that provides the framework under which business will be conducted, and pursuant to which a customer will issue purchase orders or other binding documents to specify the quantity, price and delivery requirements for products or services the customer wishes to purchase. The Company generally considers its contract with a customer to be a firm commitment, consisting of the combination of an MSA and a purchase order or any other similar binding document.
Step 2 - Identify the performance obligations in the contract
A performance obligation is a promised good or service that is material in the context of the contract and is both capable of being distinct (customer can benefit from the good or service on its own or together with other readily available resources) and distinct within the context of the contract (separately identifiable from other promises). The Company reviews its contracts to identify promised goods or services and then evaluates such items to determine which of those items are performance obligations. The majority of the Company’s contracts have a single performance obligation since the promise to
9


transfer an individual good or service is not separately identifiable from other promises in the contract. The Company’s performance obligations generally have an expected duration of one year or less.
Step 3 - Determine the transaction price
The Company’s contracts with its customers may include certain forms of variable consideration such as early payment discounts, volume discounts and shared cost savings. The Company includes an estimate of variable consideration when determining the transaction price and the appropriate amount of revenue to be recognized. This estimate is limited to an amount which will not result in a significant reversal of revenue in a future period. Factors considered in the Company’s estimate of variable consideration are the potential amount subject to these contract provisions, historical experience and other relevant facts and circumstances.
Step 4 - Allocate the transaction price to the performance obligations in the contract
A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. In the event that more than one performance obligation is identified in a contract, the Company is required to allocate a portion of the transaction price to each performance obligation. This allocation would generally be based on the relative standalone price of each performance obligation, which most often would represent the price at which the Company would sell similar goods or services separately.
Step 5 - Recognize revenue when (or as) a performance obligation is satisfied
The Company is required to assess whether control of a product or services promised under a contract is transferred to the customer at a point-in-time or over time as the product is being manufactured or the services are being provided. If the criteria in ASC 606 for recognizing revenue on an over time basis are not met, revenue must be recognized at the point-in-time determined by the Company at which its customer obtains control of a product or service.
The Company has determined that revenue for the majority of its contracts is required to be recognized on an over time basis. This determination is based on the fact that 1) the Company does not have an alternative use for the end products it manufactures for its customers and has an enforceable right to payment, including a reasonable profit, for work-in-progress upon a customer’s cancellation of a contract for convenience or 2) the Company’s customer simultaneously receives and consumes the benefits provided by the Company’s services. For these contracts, revenue is recognized on an over time basis using the cost-to-cost method (ratio of costs incurred to date to total estimated costs at completion) which the Company believes best depicts the transfer of control to the customer. At least 95% of the Company's revenue is recognized on an over time basis, which is as products are manufactured or services are performed. Because of this, and the fact that there is no work-in-process or finished goods inventory associated with contracts for which revenue is recognized on an over-time basis, 99% or more of the Company’s inventory at the end of a given period is in the form of raw materials. For contracts for which revenue is required to be recognized at a point-in-time, the Company recognizes revenue when it has transferred control of the related goods, which generally occurs upon shipment or delivery of the goods to the customer.

Contract Assets

A contract asset is recognized when the Company has recognized revenue, but has not issued an invoice to its customer for payment. Contract assets are classified separately on the condensed consolidated balance sheets and transferred to accounts receivable when rights to payment become unconditional. Because of the Company’s short manufacturing cycle times, the transfer from contract assets to accounts receivable generally occurs within the next fiscal quarter.
Other

Other than the impact upon adoption of ASC 606 at the beginning of the first quarter of 2019, which was limited to beginning retained earnings, the application of ASC 606 has not materially impacted any financial statement line item for any period presented herein.
Taxes assessed by governmental authorities that are both imposed on and concurrent with a specific revenue-producing transaction, and are collected by the Company from a customer, are excluded from revenue.
Shipping and handling costs associated with outbound freight after control of a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of sales.

The Company applies the following practical expedients or policy elections under ASC 606:

The promised amount of consideration under a contract is not adjusted for the effects of a significant financing component because, at inception of a contract, the Company expects the period between when a good or service is transferred to a customer and when the customer pays for that good or service will generally be one year or less.
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The Company has elected to not disclose information about remaining performance obligations that have original expected durations of one year or less, which is substantially all of the Company’s remaining performance obligations.
Incremental costs of obtaining a contract are not capitalized if the period over which such costs would be amortized to expense is less than one year.

Disaggregation of revenue

In the following table, revenue is disaggregated by segment, market sector and geography.
Three Months EndedNine Months Ended
June 27,
2020
June 29,
2019
June 27,
2020
June 29,
2019
(In thousands)
Segments:
IMS$1,342,343  $1,709,835  $4,167,063  $5,268,795  
CPS312,348  317,160  918,349  1,072,857  
Total$1,654,691  $2,026,995  $5,085,412  $6,341,652  
End Markets:
Industrial, Medical, Automotive and Defense$937,876  $1,114,348  $3,012,065  $3,459,395  
Communications Networks595,408  736,281  $1,676,597  $2,276,920  
Cloud Solutions121,407  176,366  396,750  605,337  
Total$1,654,691  $2,026,995  $5,085,412  $6,341,652  
Geography:
Americas (1)$815,044  $1,003,024  $2,538,673  $3,268,600  
EMEA207,060  273,735  724,815  777,989  
APAC632,587  750,236  1,821,924  2,295,063  
Total$1,654,691  $2,026,995  $5,085,412  $6,341,652  
(1) Mexico represents approximately 60% of the Americas revenue and the U.S. represents approximately 35%.


Note 3. Financial Instruments

Fair Value Measurements

Fair Value of Financial Instruments

The fair values of cash equivalents (35% of cash and cash equivalents), short-term investments, accounts receivable, accounts payable and short-term debt approximate carrying value due to the short-term duration of these instruments. Cash equivalents and short-term investments are invested in time deposits and money market funds, both of which are measured using Level 1 inputs. Additionally, the fair value of variable rate long-term debt approximates carrying value as of June 27, 2020.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company's primary financial assets and financial liabilities measured at fair value on a recurring basis are deferred compensation plan assets and defined benefit plan assets, which are both measured using Level 1 inputs. Deferred compensation plan assets were $39 million and $36 million as of June 27, 2020 and September 28, 2019, respectively. Defined benefit plan assets were $39 million as of September 28, 2019 and are measured at fair value only in the fourth quarter of each year. Other financial assets and financial liabilities measured at fair value on a recurring basis include foreign exchange contracts and interest rate swaps, which are both measured using Level 2 inputs. Foreign exchange contracts were not material
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as of June 27, 2020 or September 28, 2019. Interest rate swaps had a negative value of $31 million and $20 million as of June 27, 2020 and September 28, 2019, respectively.

Offsetting Derivative Assets and Liabilities

The Company has entered into master netting arrangements with each of its derivative counterparties that allows net settlement of derivative assets and liabilities under certain conditions, such as multiple transactions with the same currency maturing on the same date. The Company presents its derivative assets and derivative liabilities on a gross basis on the unaudited condensed consolidated balance sheets. The amount that the Company had the right to offset under these netting arrangements was not material as of  June 27, 2020 or September 28, 2019.

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

Other non-financial assets, such as goodwill and other long-lived assets, are measured at fair value as of the date such assets are acquired or in the period an impairment is recorded. During the second quarter of 2020, commodity prices in the oil and gas market experienced a sharp decline due to a combination of an oversaturated supply and a decrease in demand caused by the COVID-19 global pandemic. This commodity price decline resulted in a negative impact to the projected cash flows of the Company’s oil and gas reporting unit that is part of the Company's Components, Products and Services ("CPS") operating segment and, therefore, the Company performed a goodwill impairment test for this particular reporting unit. The Company concluded that the fair value of the reporting unit was below its carrying value, resulting in a goodwill impairment charge of $7 million. The fair value of the reporting unit was estimated based on the present value of future discounted cash flows. The Company also recorded an impairment charge of $2 million in the second quarter of 2020 for certain long-lived assets. These impairment charges are included in "Restructuring and Other" on the condensed consolidated statements of income.

Derivative Instruments

Foreign Exchange Rate Risk

The Company is exposed to certain risks related to its ongoing business operations. The primary risk managed by using derivative instruments is foreign currency exchange 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 non-functional currencies. The Company's primary foreign currency cash flows are in certain Asian and European countries, Brazil, Israel and Mexico.

The Company had the following outstanding foreign currency forward contracts that were entered into to hedge foreign currency exposures:
 As of
June 27,
2020
 September 28,
2019
Derivatives Designated as Accounting Hedges:
   Notional amount (in thousands)$115,073  $106,564  
   Number of contracts45  46  
Derivatives Not Designated as Accounting Hedges:
   Notional amount (in thousands)$278,735  $299,127  
   Number of contracts39  43  

The Company 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 non-functional currency sales and (2) forecasted non-functional currency materials, labor, overhead and other expenses. These contracts are designated as cash flow hedges for accounting purposes and are generally one to two months in duration but, by policy, may be up to twelve months in duration.

For derivative instruments that are designated and qualify as cash flow hedges, the Company excludes time value from its assessment of hedge effectiveness and recognizes the amount of time value in earnings over the life of the derivative instrument. Gains or losses on the derivative not caused by changes in time value are recorded in Accumulated Other Comprehensive Income ("AOCI"), a component of equity, and reclassified into earnings in the same period or periods during
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which the hedged transaction affects earnings. The amount of gain or loss recognized in Other Comprehensive Income on derivative instruments and the amount of gain or loss reclassified from AOCI into income were not material for any period presented herein. Pursuant to a new accounting standard, as of the beginning of 2020, the Company is no longer required to separately measure and report hedge ineffectiveness. The amount of hedge ineffectiveness was not material for any 2019 period presented.

The Company enters into short-term foreign currency forward contracts to hedge currency exposures associated with certain monetary assets and liabilities denominated in non-functional currencies. These contracts have maturities of up to two months and are not designated as accounting hedges. 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 unaudited condensed consolidated statements of income. The amount of gains (losses) associated with these forward contracts was not material for any period presented herein. From an economic perspective, the objective of the Company's hedging program is for gains and losses on forward contracts to substantially offset gains and losses on the underlying hedged items. In addition to the contracts disclosed in the table above, the Company has numerous contracts that have been closed from an economic and financial accounting perspective and will settle early in the first month of the following quarter. Since these offsetting contracts do not expose the Company to risk of fluctuations in exchange rates, these contracts have been excluded from the above table.

Interest Rate Risk

The Company enters into forward interest rate swap agreements with independent counterparties to partially hedge the variability in cash flows due to changes in the benchmark interest rate (LIBOR) associated with anticipated variable rate borrowings. These interest rate swaps have a maturity date of December 1, 2023 and effectively convert the Company's variable interest rate obligations to fixed interest rate obligations. These swaps are accounted for as cash flow hedges under ASC Topic 815, Derivatives and Hedging. As of June 27, 2020 and September 28, 2019, interest rate swaps with an aggregate notional amount of $350 million were outstanding. The aggregate effective interest rate of these swaps as of June 27, 2020 was approximately 4.3%. Due to a decline in interest rates since the time the swaps were put in place, these interest rate swaps had a negative value of $31 million as of June 27, 2020, of which $9 million is included in accrued liabilities and the remaining amount is included in other long-term liabilities on the condensed consolidated balance sheets.

Note 4. Debt

Long-term debt consisted of the following:
 As of
 June 27,
2020
September 28,
2019
 (In thousands)
Term loan due 2023 ("Term Loan"), net of issuance costs$357,112  $370,409  
Non-interest bearing promissory notes  14,916  
Total long-term debt357,112  385,325  
Less: Current portion of non-interest bearing promissory notes  14,916  
Current portion of long-term debt
23,437  23,438  
Long-term debt$333,675  $346,971  

Term Loan maturities as of June 27, 2020 by fiscal year are as follows:
(In Thousands)
Remainder of 2020$9,375  
202118,750  
202218,750  
202314,062  
2024300,000  
$360,937  

As of June 27, 2020, there was $650 million in borrowings and $8 million of letters of credit outstanding under the Fourth Amended and Restated Credit Agreement (the "Amended Cash Flow Revolver").
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As of June 27, 2020, certain foreign subsidiaries of the Company had a total of $72 million of short-term borrowing facilities available, under which no borrowings were outstanding.

Debt covenants

The Company's Amended Cash Flow Revolver requires the Company to comply with certain financial covenants, namely a maximum leverage ratio and a minimum interest coverage ratio, in both cases measured on the basis of a trailing 12 month look-back period. In addition, the Company's debt agreements contain a number of restrictive covenants, including restrictions on incurring additional debt, making investments and other restricted payments, selling assets and paying dividends, subject to certain exceptions. The Company was in compliance with these covenants as of June 27, 2020.

Note 5. Leases

The Company's leases consist primarily of operating leases for buildings and land. These leases have initial lease terms of up to 44 years and, upon adoption of ASC 842, are recorded on the Company's balance sheet as lease liabilities and corresponding right-of-use ("ROU") assets. Certain of these leases contain an option to extend the lease term for additional periods or to terminate the lease after an initial non-cancelable term. Renewal options are considered in the measurement of the Company's initial lease liability and corresponding ROU asset only if it is reasonably certain that the Company will exercise such options. Leases with lease terms of twelve months or less are not recorded on the Company's balance sheet.

ROU assets and lease liabilities recorded in the condensed consolidated balance sheet as of June 27, 2020 are as follows:
 As of
 June 27,
2020
 (In thousands)
Other assets (1)$55,462  
 
Accrued liabilities17,833  
Other long-term liabilities37,772  
Total lease liabilities
$55,605  
 
Weighted average remaining lease term (in years)6.88
Weighted average discount rate3.13 %

(1) Net of accumulated amortization of $12 million.

The Company’s lease liability and ROU assets represent the present value of future lease payments which, pursuant to the Company's accounting election, are a combination of lease components and non-lease components such as maintenance and utilities. Since the Company's leases generally do not provide an implicit rate, the Company uses an incremental borrowing rate based on information available at the lease commencement date for purposes of determining the present value of lease payments. The Company's incremental borrowing rate is based on the term of the lease, the economic environment of the lease and the effect of collateralization, if any. Upon adoption of ASC 842, the Company used an incremental borrowing rate as of that date for all leases that commenced prior to that date.

Operating lease expense, which is recognized on a straight-line basis over the term of a lease, was $5 million and $13 million for the three and nine months ended June 27, 2020, respectively. Cash payments for operating leases were $14 million for the nine months ended June 27, 2020. Certain of the Company’s lease payments are variable because such payments adjust periodically based on changes in consumer price and other indexes.

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Future lease payments under non-cancelable operating leases as of June 27, 2020, by fiscal year, are as follows:
 Operating Leases
 (In thousands)
Remainder of 2020$6,299  
202116,884  
202212,156  
20235,725  
20243,985  
Thereafter17,012  
Total lease payments
62,061  
Less: imputed interest