sanm-20221231

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 December 31, 2022


☐			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)

77-0228183

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification Number)

2700 N. First St.,

San Jose,

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 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 class	Trading symbol(s)	Name of each exchange on which registered
Common Stock	SANM	NASDAQ Global Select Market

As of January 25, 2023, there were 58,357,666 shares outstanding of the issuer’s common stock, $0.01 par value per share.

SANMINA 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 Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 6.	Exhibits	45
Signatures		46

SANMINA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS


	As of
	December 31, 2022		October 1, 2022
	(Unaudited)
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	735,314	$	529,857
Accounts receivable, net of allowances of approximately $8 million as of December 31, 2022 and October 1, 2022	1,308,651		1,138,894
Contract assets	501,893		503,674
Inventories	1,728,000		1,691,081
Prepaid expenses and other current assets	80,675		62,044
Total current assets	4,354,533		3,925,550
Property, plant and equipment, net	591,155		575,170
Deferred tax assets	189,638		198,588
Other	171,886		160,192
Total assets	$	5,307,212	$	4,859,500
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,139,445	$	2,029,534
Accrued liabilities	292,212		275,735
Accrued payroll and related benefits	135,880		130,892
Short-term debt, including current portion of long-term debt	17,500		17,500
Total current liabilities	2,585,037		2,453,661
Long-term liabilities:
Long-term debt	325,007		329,237
Other	223,376		215,333
Total long-term liabilities	548,383		544,570
Contingencies (Note 7)
Stockholders’ equity	2,173,792		1,861,269
Total liabilities and stockholders’ equity	$	5,307,212	$	4,859,500

See accompanying notes to condensed consolidated financial statements.

SANMINA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended
	December 31, 2022		January 1, 2022
	(Unaudited)
	(In thousands, except per share data)
Net sales	$	2,361,361	$	1,757,325
Cost of sales	2,170,654		1,612,836
Gross profit	190,707		144,489

Operating expenses:
Selling, general and administrative	60,730		61,475
Research and development	5,599		4,777
Restructuring and other	631		1,414
Gain on sale of long-lived assets	—		(4,610)
Total operating expenses	66,960		63,056

Operating income	123,747		81,433

Interest income	2,933		309
Interest expense	(8,681)		(4,877)
Other income (expense), net	(6,712)		2,072
Interest and other, net	(12,460)		(2,496)

Income before income taxes	111,287		78,937
Provision for income taxes	19,788		20,303
Net income before noncontrolling interest	91,499		58,634
Less: Net income attributable to noncontrolling interest	3,100		—
Net income attributable to common shareholders	$	88,399	$	58,634

Net income attributable to common shareholders per share:
Basic	$	1.53	$	0.91
Diluted	$	1.48	$	0.89

Weighted average shares used in computing per share amounts:
Basic	57,727		64,399
Diluted	59,867		66,233

See accompanying notes to condensed consolidated financial statements.

SANMINA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended
	December 31, 2022		January 1, 2022
	(Unaudited)
	(In thousands)
Net income before noncontrolling interest	$	91,499	$	58,634
Other comprehensive income (loss), net of tax:
Change in foreign currency translation adjustments	6,183		(2,047)
Derivative financial instruments:
Change in net unrealized amount	4,469		1,964
Amount reclassified into net income before noncontrollling interest	(3,296)		2,063
Defined benefit plans:
Changes in unrecognized net actuarial losses and unrecognized transition costs	(751)		478
Amortization of actuarial losses and transition costs	345		238
Total other comprehensive income	6,950		2,696
Comprehensive income before noncontrolling interest	$	98,449	$	61,330
Less: Net income attributable to noncontrolling interest	3,100		—
Comprehensive income attributable to common shareholders	$	95,349	$	61,330

See accompanying notes to condensed consolidated financial statements.

SANMINA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


	Three Months Ended
	December 31, 2022		January 1, 2022
	(Unaudited)
	(In thousands)
Common Stock and Additional Paid-in Capital
Balance, beginning of period	$	6,381,348	$	6,339,506
Issuances under stock plans	173		1,050
Stock-based compensation expense	11,609		9,032

Sale of noncontrolling interest	78,169		—
Balance, end of period	6,471,299		6,349,588
Treasury Stock
Balance, beginning of period	(1,378,159)		(1,047,202)
Repurchases of treasury stock	(8,009)		(68,823)
Balance, end of period	(1,386,168)		(1,116,025)
Accumulated Other Comprehensive Income
Balance, beginning of period	56,325		40,690
Other comprehensive income	6,950		2,696
Balance, end of period	63,275		43,386
Accumulated Deficit
Balance, beginning of period	(3,198,245)		(3,454,366)
Net income attributable to common shareholders	88,399		58,634
Balance, end of period	(3,109,846)		(3,395,732)
Noncontrolling Interest
Balance, beginning of period	—		—
Sale of noncontrolling interest	132,132		—
Net income attributable to noncontrolling interest	3,100		—
Balance, end of period	135,232		—
Total stockholders’ equity	$	2,173,792	$	1,881,217

Common Stock Shares Outstanding
Number of shares, beginning of period	110,160		108,734
Issuances under stock plans	342		784
Number of shares, end of period	110,502		109,518
Treasury Shares
Number of shares, beginning of period	(52,766)		(44,427)
Repurchases of treasury stock	(136)		(1,771)
Number of shares, end of period	(52,902)		(46,198)

See accompanying notes to condensed consolidated financial statements.

SANMINA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended
	December 31, 2022		January 1, 2022
	(Unaudited)
	(In thousands)
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income before noncontrolling interest	$	91,499	$	58,634
Adjustments to reconcile net income before noncontrolling interest to cash provided by (used in) operating activities:
Depreciation and amortization	28,536		27,465
Stock-based compensation expense	11,609		9,032
Deferred income taxes	8,445		6,707




Other, net	(311)		(3,638)
Changes in operating assets and liabilities, net of amounts acquired:
Accounts receivable	(166,333)		(106,972)
Contract assets	1,781		(15,666)
Inventories	(32,595)		(207,300)
Prepaid expenses and other assets	(27,657)		(2,939)
Accounts payable	101,265		234,525
Accrued liabilities	20,985		68,452
Cash provided by operating activities	37,224		68,300

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(37,060)		(25,376)
Proceeds from sales of property, plant and equipment	530		8,014
Purchases of investments	(800)		—

Cash used in investing activities	(37,330)		(17,362)

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Repayments of long-term debt	(4,375)		(4,688)

Proceeds from revolving credit facility borrowings	737,200		16,000
Repayments of revolving credit facility borrowings	(737,200)		(16,000)

Net proceeds from stock issuances	173		1,050
Repurchases of common stock	(8,009)		(68,823)
Proceeds from sale of noncontrolling interest	215,799		—
Cash provided by (used in) financing activities	203,588		(72,461)

Effect of exchange rate changes	1,975		(786)
Increase (decrease) in cash and cash equivalents	205,457		(22,309)
Cash and cash equivalents at beginning of period	529,857		650,026
Cash and cash equivalents at end of period	$	735,314	$	627,717

Cash paid during the period for:
Interest, net of capitalized interest	$	6,772	$	2,479
Income taxes, net of refunds	$	9,507	$	5,569
Unpaid purchases of property, plant and equipment at the end of period	$	43,648	$	17,431

See accompanying notes to condensed consolidated financial statements.

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 October 1, 2022, included in the Company’s 2022 Annual Report on Form 10-K.

The unaudited condensed consolidated financial statements include all accounts of the Company, its wholly-owned subsidiaries and subsidiaries in which it has control. All intra-company accounts and transactions have been eliminated. Noncontrolling interest represents a noncontrolling investor’s interest in the results of operations of subsidiaries that the Company controls and consolidates.

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 pandemic, the global economy and financial markets have been disrupted and there is 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 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 first quarter of 2023 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 2023 and 2022 are each 52-week years. All references to years relate to fiscal years unless otherwise noted.

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 may involve 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 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.

Application of the cost-to-cost method for government contracts in the Company’s Defense and Aerospace division requires the use of significant judgments with respect to estimated materials, labor and subcontractor costs. This division is an operating segment whose results are combined with eleven other operating segments and reported under Components, Products and Services (“CPS”) for segment reporting purposes. During the three months ended December 31, 2022, CPS revenue and gross profit were $434 million and $62 million, respectively.

The Company updates its estimates of materials, labor and subcontractor costs on a quarterly basis. These updated estimates are reviewed each quarter by a group of employees that includes representatives from numerous functions such as engineering, materials, contracts, manufacturing, program management, finance and senior management. If a change in estimate is deemed necessary, the impact of the change is recognized in the period of change.

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 unaudited 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

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.

•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 Ended
	December 31, 2022		January 1, 2022
	(In thousands)
Segments:
IMS	$	1,927,112	$	1,416,911
CPS	434,249		340,414
Total	$	2,361,361	$	1,757,325

End Markets:
Industrial, Defense, Medical and Automotive	$	1,345,581	$	1,054,971
Communications Networks and Cloud Infrastructure	1,015,780		702,354
Total	$	2,361,361	$	1,757,325

Geography:
Americas (1)	$	1,141,304	$	797,020
APAC	914,341		691,071
EMEA	305,716		269,234
Total	$	2,361,361	$	1,757,325

(1) Mexico represents approximately 70% and 60% of the Americas revenue and the U.S. represents approximately 30% and 40% of the Americas revenue for the first quarter of 2023 and 2022, respectively.

Note 3. Financial Instruments

Fair Value Measurements

Fair Value of Financial Instruments

The fair values of cash equivalents (represents 22% of cash and cash equivalents), accounts receivable, accounts payable and short-term debt approximate carrying values due to the short-term duration of these instruments. Additionally, the fair value of variable rate long-term debt approximates carrying value as of December 31, 2022.

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 $37 million as of December 31, 2022 and October 1, 2022, respectively. Defined benefit plan assets were $17 million as of October 1, 2022 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 as of December 31, 2022 or October 1, 2022. Interest rate swaps had positive values of $7 million and $6 million as of December 31, 2022 and October 1, 2022, respectively.

Assets and Liabilities Measured at Fair Value on a Non-Recurring 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.

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 December 31, 2022 or October 1, 2022.

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, Israel and Mexico.

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


	As of
	December 31, 2022		October 1, 2022
Derivatives Designated as Accounting Hedges:
Notional amount (in thousands)	$	139,297	$	123,172
Number of contracts	50		50
Derivatives Not Designated as Accounting Hedges:
Notional amount (in thousands)	$	512,843	$	531,558
Number of contracts	42		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 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.

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 or 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 Secured Overnight Financing Rate (“SOFR”), which is the benchmark interest rate associated with anticipated variable rate borrowings. These interest rate swaps have a maturity date of December 1, 2023 and effectively convert a portion of 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. Interest rate swaps with an aggregate notional amount of $350 million were outstanding as of December 31, 2022 and October 1, 2022. The aggregate effective interest rate of these swaps as of December 31, 2022 was approximately 4.1%. These interest rate swaps had a positive value of $7 million and $6 million as of December 31, 2022 and October 1, 2022, respectively, of which the majority is included in prepaid expenses and other current assets and the remaining amount is included in other assets on the unaudited condensed consolidated balance sheets.

Note 4. Debt

Long-term debt consisted of the following:


	As of
	December 31, 2022		October 1, 2022
	(In thousands)
Term loan due 2027, net of issuance costs	$	342,507	$	346,737



Less: Current portion of Term Loan due 2027	17,500		17,500
Long-term debt	$	325,007	$	329,237

Term Loan maturities as of December 31, 2022 by fiscal year are as follows:


	(In Thousands)
Remainder of 2023	$13,125
2024	$13,125
2025	$17,500
2026	$21,875
2027	$280,000
	$	345,625

Revolving Credit Facility

During the fourth quarter of 2022, the Company entered into a Fifth Amended and Restated Credit Agreement (the “Credit Agreement”), that provides for an $800 million revolving credit facility and a $350 million secured term loan (“Term Loan Due 2027”). Subject to the satisfaction of certain conditions, including obtaining additional commitments from existing and/or new lenders, the Company may increase the revolving commitment up to an additional $200 million. The Term Loan Due 2027 was fully drawn upon on the closing date.

Loans under the Credit Agreement bear interest, at the Company's option, at either the SOFR or a base rate, in each case plus a spread determined based on the Company's credit rating. Interest on the loans is payable quarterly in arrears with respect to base rate loans and at the end of an interest period (or at three-month intervals if the interest period exceeds three months) in the case of SOFR loans. The outstanding principal amount of all loans under the Credit Agreement, including, the Term Loan Due 2027, together with accrued and unpaid interest, is due on September 27, 2027. The Company is required to repay a portion of the principal amount of the Term Loan Due 2027 equal to 1.25% of the principal in quarterly installments.

Certain of the Company’s domestic subsidiaries are guarantors under the Credit Agreement. The Company and the subsidiary guarantors’ obligations under the Credit Agreement are secured by a lien on substantially all of their respective assets (excluding real property), including cash, accounts receivable and the shares of certain Company subsidiaries, subject to certain exceptions.

As of December 31, 2022, there were no borrowings and $9 million of letters of credit outstanding under the Credit Agreement.

Foreign Short-term Borrowing Facilities

As of December 31, 2022, certain foreign subsidiaries of the Company had a total of $67 million of short-term borrowing facilities available, under which no borrowings were outstanding.

Debt Covenants

The Company's Credit Agreement requires the Company to comply with certain financial covenants, namely a maximum consolidated 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 December 31, 2022.

Note 5. Leases

The Company’s leases consist primarily of operating leases for buildings and land and have initial lease terms of up to 44 years. 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 right-of-use (“ROU”) assets 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 unaudited condensed consolidated balance sheet are as follows:


	As of
	December 31, 2022			October 1, 2022
	(In thousands)
Other assets	$	88,924		$	79,495

Accrued liabilities	$	19,112		$	16,695
Other long-term liabilities	57,307			48,566
Total lease liabilities	$	76,419		$	65,261

Weighted average remaining lease term (in years)	11.86			15.74
Weighted average discount rate	3.02		%	2.40		%

Lease expense and supplemental cash flow information related to operating leases are as follows:


	Three Months Ended
	December 31, 2022		January 1, 2022
	(In thousands)
Operating lease expense (1)	$	9,367	$	5,910

	Three Months Ended
	December 31, 2022		January 1, 2022
	(In thousands)
Cash paid for operating lease liabilities	$	5,549	$	4,809

(1) Includes immaterial amounts of short term leases, variable lease costs and sublease income.

Future lease payments under non-cancelable operating leases as of December 31, 2022, by fiscal year, are as follows:


	Operating Leases
	(In thousands)
Remainder of 2023	$	16,307
2024	19,081
2025	16,160
2026	12,103
2027	8,864
2028	2,355
Thereafter	8,930
Total lease payments	83,800
Less: imputed interest	7,381
Total	$	76,419

Note 6. Accounts Receivable Sale Program

The Company is a party to a Receivable Purchase Agreement (the “RPA”) with certain third-party banking institutions for the sale of trade receivables generated from sales to certain customers, subject to acceptance by, and a funding commitment from, the banks that are party to the RPA. Trade receivables sold pursuant to the RPA are serviced by the Company.

In addition to the RPA, the Company has the option to participate in trade receivables sales programs that have been implemented by certain of the Company’s customers, as in effect from time to time. The Company does not service trade receivables sold under these other programs.

Under each of the programs noted above, the Company sells its entire interest in a trade receivable for 100% of face value, less a discount. During the three months ended December 31, 2022 and January 1, 2022, the Company sold approximately $796 million and $93 million, respectively, of accounts receivable under these programs. Upon sale, these receivables are removed from the unaudited condensed consolidated balance sheets and cash received is presented as cash provided by operating activities in the unaudited condensed consolidated statements of cash flows. Discounts on sold receivables were not material for any period presented. As of December 31, 2022 and October 1, 2022, $149 million and $194 million, respectively, of accounts receivable sold under the RPA and subject to servicing by the Company remained outstanding and had not yet been collected. The Company’s sole risk with respect to receivables it services is with respect to commercial disputes regarding such receivables. Commercial disputes include billing errors, returns and similar matters. To date, the Company has not been required to repurchase any receivable it has sold due to a commercial dispute. Additionally, the Company is required to remit amounts collected as servicer under the RPA on a weekly basis to the financial institutions that purchased the receivables. As of December 31, 2022 and October 1, 2022, $65 million and $49 million, respectively, had been collected but not yet remitted. This amount is classified in accrued liabilities on the unaudited condensed consolidated balance sheets.

Note 7. Contingencies

From time to time, the Company is a party to litigation, claims and other contingencies, including environmental, regulatory 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 December 31, 2022 and October 1, 2022, the Company had reserves of $37 million and $38 million, respectively, for environmental matters, warranty, litigation and other contingencies (excluding reserves for uncertain tax positions), which the Company believes are adequate. However, there can be no assurance that the Company’s reserves will be sufficient to settle these contingencies. Such reserves are included in accrued liabilities and other long-term liabilities on the unaudited condensed consolidated balance sheets.

Legal Proceedings

Environmental Matters

The Company is subject to various federal, state, local and foreign laws and regulations and administrative orders concerning environmental protection, including those addressing the discharge of pollutants into the environment, the management and disposal of hazardous substances, the cleanup of contaminated sites, the materials used in products, and the recycling, treatment and disposal of hazardous waste. As of December 31, 2022, the Company had been named in a lawsuit and several administrative orders alleging certain of its current and former sites contributed to groundwater contamination. One such order demands that the Company and other alleged defendants remediate groundwater contamination at four landfills located in Northern California to which the Company may have sent wastewater in the past. The Company is participating in a working group of other alleged defendants to better understand its potential exposure in this action and has reserved its estimated exposure for this matter as of December 31, 2022. However, there can be no assurance that the Company's reserve will ultimately be sufficient.

In June 2008, the Company was named by the Orange County Water District in a suit alleging that a predecessor company’s actions at a plant the Company sold in 1998 contributed to polluted groundwater managed by the plaintiff. The complaint seeks recovery of compensatory and other damages, as well as declaratory relief, for the payment of costs necessary to investigate, monitor, remediate, abate and contain contamination

SEC Form 10-Q filed by Sanmina Corporation