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Note 1. Restatement of Condensed Consolidated Financial Statements | 9 Months Ended
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Jul. 01, 2023
Accounting Changes and Error Corrections [Abstract] |
Error Correction | Restatement of Condensed Consolidated Financial Statements Sanmina Corporation (the “Company” or “Sanmina”) identified misstatements in the unaudited condensed consolidated financial statements for the comparative periods of 2022 in conjunction with an independent investigation conducted by the Audit Committee of the Board of Directors, as further disclosed in the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on May 11, 2023. The comparative periods have been amended and restated to correct for such misstatements. More detailed information related to the amendment and restatement is contained in Amendment No. 1 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 1, 2022 and Amendment No. 1 to the Company’s Form 10-Q for the quarter ended December 31, 2022 as filed with the Securities and Exchange Commission on May 22, 2023. During the preparation of its unaudited consolidated financial statements for the fiscal quarter ended April 1, 2023, the Company determined that certain personnel in one of its divisions had failed to properly substantiate and update cost estimates for materials and other costs over the life of certain contracts. As a result, the Company conducted an independent investigation (the “Investigation”) under the direction of the Audit Committee of the Company’s Board of Directors (the “Audit Committee”). The division, like other Company divisions, has a stand-alone finance organization, which reports directly to the Company’s finance organization and indirectly to the management of the division. References in the findings below refer solely to this division unless otherwise noted. The Investigation found that: •In connection with the preparation and review of quarterly contract cost and other estimates, an internal control in the Company’s accounting process for the division’s contracts with customers, certain division personnel made inappropriate and unsupported adjustments to reduce certain cost estimates and failed to appropriately evaluate and increase other cost estimates to reflect cost overruns and other costs associated with delays in completing certain contracts. •The division had a culture that did not recognize or emphasize the importance of rigor in the division’s quarterly contract estimate review process or its significance to the Company’s internal control over financial reporting and accounting and financial reporting determinations with respect to the division’s contracts with customers. Instead, the division’s tone at the top and other control weaknesses enabled participants in the quarterly contract estimate review process to tolerate, place undue reliance on or otherwise fail to challenge unsupported adjustments and assumptions to contract cost estimates that had been made based on unsubstantiated optimism and/or a desire to avoid adverse outcomes. •The division had an ineffective finance function that did not provide sufficient oversight on financial accounting and reporting matters or effectively challenge adjustments or other improper practices in the quarterly contract estimate review process. •Certain division personnel lacked sufficient understanding of the division’s policies and procedures for the quarterly contract estimate review process as well as the relevant cost and contract accounting practices and requirements. •Certain division personnel provided materially inaccurate and incomplete information to, including in response to inquiries from, Company management and the Company’s internal and independent auditors concerning contract cost estimates and related items. The “Previously Reported” amounts in the following tables are amounts derived from the Form 10-Q for the period ended July 2, 2022. The amounts in columns labeled “Investigation Adjustments” represent the effect of adjustments resulting from an independent investigation conducted by the Audit Committee of the Board of Directors and the amounts in columns labeled “Other Adjustments” represent the effect of uncorrected misstatements in previously filed financial statements that were not material, individually or in the aggregate, to those previously filed financial statements. The effects of the restatement, including the related income tax effects, have been corrected in all impacted tables and footnotes throughout these condensed consolidated financial statements. The only impact to the Unaudited Condensed Consolidated Statements of Comprehensive Income and Unaudited Condensed Consolidated Statements of Stockholders’ Equity was to net income. Investigation Adjustments correct misstatements that resulted primarily from 1) increases to estimated costs at completion of a contract that previously did not properly reflect estimated costs remaining to be incurred to complete a contract, 2) reductions in the amount of transaction consideration expected to be received under a contract, and 3) segmentation of contracts that had previously been combined. The adjustments primarily affected net sales, cost of sales, contract assets and inventory. Other Adjustments primarily correct balance sheet misstatements related to inventory cut-off and advance payments from customers. The following table presents the impact of the financial statement adjustments on the Company’s previously reported Condensed Consolidated Statements of Income for the three and nine months ended July 2, 2022.
| Three Months Ended |  | Nine Months Ended |  |
| July 2, 2022 |  | July 2, 2022 |  |  |  |
| (Unaudited) |  | (Unaudited) |  |  |  |
| Previously Reported |  | Investigation Adjustments |  |  |  | As Restated |  | Previously Reported |  | Investigation Adjustments |  |  |  | As Restated |  |  |  |
| (In thousands, except per share data)
Net sales | $ | 2,019,059 |  |  | $ | 4,302 |  |  |  |  | $ | 2,023,361 |  |  | $ | 5,687,914 |  |  | $ | 6,843 |  |  |  |  | $ | 5,694,757 |  |  |  |  |
Cost of sales | 1,853,870 |  |  | 7,306 |  |  |  |  | 1,861,176 |  |  | 5,225,789 |  |  | 18,991 |  |  |  |  | 5,244,780 |  |  |  |  |
Gross profit | 165,189 |  |  | (3,004) |  |  |  |  | 162,185 |  |  | 462,125 |  |  | (12,148) |  |  |  |  | 449,977 |  |  |  |  |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Selling, general and administrative | 61,506 |  |  | — |  |  |  |  | 61,506 |  |  | 184,798 |  |  | — |  |  |  |  | 184,798 |  |  |  |  |
Research and development | 5,071 |  |  | — |  |  |  |  | 5,071 |  |  | 15,320 |  |  | — |  |  |  |  | 15,320 |  |  |  |  |
Restructuring and other | 3,994 |  |  | — |  |  |  |  | 3,994 |  |  | 3,730 |  |  | — |  |  |  |  | 3,730 |  |  |  |  |
Total operating expenses | 70,571 |  |  | — |  |  |  |  | 70,571 |  |  | 203,848 |  |  | — |  |  |  |  | 203,848 |  |  |  |  |
Operating income | 94,618 |  |  | (3,004) |  |  |  |  | 91,614 |  |  | 258,277 |  |  | (12,148) |  |  |  |  | 246,129 |  |  |  |  |
Interest income | 540 |  |  | — |  |  |  |  | 540 |  |  | 1,198 |  |  | — |  |  |  |  | 1,198 |  |  |  |  |
Interest expense | (5,615) |  |  | — |  |  |  |  | (5,615) |  |  | (15,362) |  |  | — |  |  |  |  | (15,362) |  |  |  |  |
Other income (expense), net | (7,774) |  |  | — |  |  |  |  | (7,774) |  |  | (7,110) |  |  | — |  |  |  |  | (7,110) |  |  |  |  |
Interest and other, net | (12,849) |  |  | — |  |  |  |  | (12,849) |  |  | (21,274) |  |  | — |  |  |  |  | (21,274) |  |  |  |  |
Income before income taxes | 81,769 |  |  | (3,004) |  |  |  |  | 78,765 |  |  | 237,003 |  |  | (12,148) |  |  |  |  | 224,855 |  |  |  |  |
Provision for income taxes | 2,226 |  |  | (683) |  |  |  |  | 1,543 |  |  | 45,606 |  |  | (2,771) |  |  |  |  | 42,835 |  |  |  |  |
Net Income | $ | 79,543 |  |  | $ | (2,321) |  |  |  |  | $ | 77,222 |  |  | $ | 191,397 |  |  | $ | (9,377) |  |  |  |  | $ | 182,020 |  |  |  |  |
Net income per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic | $ | 1.33 |  |  | $ | (0.04) |  |  |  |  | $ | 1.29 |  |  | $ | 3.07 |  |  | $ | (0.15) |  |  |  |  | $ | 2.92 |  |  |  |  |
Diluted | $ | 1.29 |  |  | $ | (0.04) |  |  |  |  | $ | 1.25 |  |  | $ | 2.98 |  |  | $ | (0.15) |  |  |  |  | $ | 2.83 |  |  |  |  |
Weighted average shares used in computing per share amounts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic | 59,970 |  |  | — |  |  |  |  | 59,970 |  |  | 62,404 |  |  | — |  |  |  |  | 62,404 |  |  |  |  |
Diluted | 61,702 |  |  | — |  |  |  |  | 61,702 |  |  | 64,292 |  |  | — |  |  |  |  | 64,292 |  |  |  |  |
The following table presents the impact of the financial statement adjustments on the Company’s previously reported Condensed Consolidated Balance Sheet as of October 1, 2022.
|  |  | As of |  |
|  |  | October 1, 2022 |  |  |  |
|  |  |  |  |  |  |  |  | Previously Reported |  | Investigation Adjustments |  | Other Adjustments |  | As Restated |  |  |  |
|  |  |  |  |  |  |  |  | (In thousands)
ASSETS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  |  |  |  |  |  |  | $ | 529,857 |  |  | $ | — |  |  | $ | — |  |  | $ | 529,857 |  |  |  |  |
Accounts receivable, net of allowances |  |  |  |  |  |  |  |  | 1,138,894 |  |  | — |  |  | — |  |  | 1,138,894 |  |  |  |  |
Contract assets |  |  |  |  |  |  |  |  | 503,674 |  |  | (27,953) |  |  | — |  |  | 475,721 |  |  |  |  |
Inventories |  |  |  |  |  |  |  |  | 1,691,081 |  |  | (21,705) |  |  | 14,723 |  |  | 1,684,099 |  |  |  |  |
Prepaid expenses and other current assets |  |  |  |  |  |  |  |  | 62,044 |  |  | — |  |  | — |  |  | 62,044 |  |  |  |  |
Total current assets |  |  |  |  |  |  |  |  | 3,925,550 |  |  | (49,658) |  |  | 14,723 |  |  | 3,890,615 |  |  |  |  |
Property, plant and equipment, net |  |  |  |  |  |  |  |  | 575,170 |  |  | — |  |  | — |  |  | 575,170 |  |  |  |  |
Deferred tax assets |  |  |  |  |  |  |  |  | 198,588 |  |  | 10,966 |  |  | — |  |  | 209,554 |  |  |  |  |
Other |  |  |  |  |  |  |  |  | 160,192 |  |  | — |  |  | — |  |  | 160,192 |  |  |  |  |
Total assets |  |  |  |  |  |  |  |  | $ | 4,859,500 |  |  | $ | (38,692) |  |  | $ | 14,723 |  |  | $ | 4,835,531 |  |  |  |  |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  |  |  |  |  |  |  |  | $ | 2,029,534 |  |  | $ | — |  |  | $ | 11,900 |  |  | $ | 2,041,434 |  |  |  |  |
Accrued liabilities |  |  |  |  |  |  |  |  | 275,735 |  |  | 1,441 |  |  | 4,423 |  |  | 281,599 |  |  |  |  |
Accrued payroll and related benefits |  |  |  |  |  |  |  |  | 130,892 |  |  | — |  |  | — |  |  | 130,892 |  |  |  |  |
Short-term debt, including current portion of long-term debt |  |  |  |  |  |  |  |  | 17,500 |  |  | — |  |  | — |  |  | 17,500 |  |  |  |  |
Total current liabilities |  |  |  |  |  |  |  |  | 2,453,661 |  |  | 1,441 |  |  | 16,323 |  |  | 2,471,425 |  |  |  |  |
Long-term liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Long-term debt |  |  |  |  |  |  |  |  | 329,237 |  |  | — |  |  | — |  |  | 329,237 |  |  |  |  |
Other |  |  |  |  |  |  |  |  | 215,333 |  |  | — |  |  | — |  |  | 215,333 |  |  |  |  |
Total long-term liabilities |  |  |  |  |  |  |  |  | 544,570 |  |  | — |  |  | — |  |  | 544,570 |  |  |  |  |
Contingencies (Note 8) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Stockholders’ equity |  |  |  |  |  |  |  |  | 1,861,269 |  |  | (40,133) |  |  | (1,600) |  |  | 1,819,536 |  |  |  |  |
Total liabilities and stockholders’ equity |  |  |  |  |  |  |  |  | $ | 4,859,500 |  |  | $ | (38,692) |  |  | $ | 14,723 |  |  | $ | 4,835,531 |  |  |  |  |
The following table presents the impact of the financial statement adjustments on the Company’s previously reported Condensed Consolidated Statements of Cash Flows for the nine month period ended July 2, 2022. There were no adjustments to cash flows provided by (used in) investing or financing activities for the nine month period ended July 2, 2022.
| Nine Months Ended
| July 2, 2022
| (Unaudited)
| Previously Reported |  | Investigation Adjustments |  | Other Adjustments |  | As Restated
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: |  |  |  |  |  |  |
Net income | $ | 191,397 |  |  | $ | (9,377) |  |  | $ | — |  |  | $ | 182,020 |
Adjustments to reconcile net income to cash provided by (used in) operating activities: |  |  |  |  |  |  |
Depreciation and amortization | 82,097 |  |  | — |  |  | — |  |  | 82,097 |
Stock-based compensation expense | 29,045 |  |  | — |  |  | — |  |  | 29,045 |
Deferred income taxes | 18,522 |  |  | (2,529) |  |  | — |  |  | 15,993 |
Other, net | (1,298) |  |  | — |  |  | — |  |  | (1,298) |
Changes in operating assets and liabilities, net of amounts acquired: |  |  |  |  |  |  |
Accounts receivable | (39,850) |  |  | — |  |  | (426) |  |  | (40,276) |
Contract assets | (110,565) |  |  | 6,210 |  |  | (8,251) |  |  | (112,606) |
Inventories | (559,118) |  |  | 6,544 |  |  | (277) |  |  | (552,851) |
Prepaid expenses and other assets | (13,269) |  |  | — |  |  | — |  |  | (13,269) |
Accounts payable | 507,632 |  |  | — |  |  | 277 |  |  | 507,909 |
Accrued liabilities | 144,363 |  |  | (848) |  |  | 8,677 |  |  | 152,192 |
Cash provided by operating activities | $ | 248,956 |  |  | $ | — |  |  | $ | — |  |  | $ | 248,956 |

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