Edgar Filing: SANMINA-SCI CORP

form10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

	For the quarterly period ended March 28, 2009
	or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to .

	Commission File Number 0-21272

Sanmina-SCI Corporation

(Exact name of registrant as specified in its charter)

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

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

(408) 964-3500

(Registrant’s telephone number, including area code)

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

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

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

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

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

Yes o No x

As of April 29, 2009, there were 488,403,939 shares outstanding of the issuer’s common stock, $0.01 par value per share.

SANMINA-SCI CORPORATION

INDEX

		Page
	PART I. FINANCIAL INFORMATION

Item 1.	Interim Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	32
	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors Affecting Operating Results	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 4.	Submission of Matters to a Vote of Security Holders	38
Item 6.	Exhibits	39
Signatures		40

SANMINA-SCI CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	As of
	March 28,		September 27,
	2009		2008
	(Unaudited)
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	851,497	$	869,801
Accounts receivable, net of allowances of $13,654 and $14,934 at March 28, 2009 and September 27, 2008, respectively		710,087		986,312
Inventories		706,024		813,359
Prepaid expenses and other current assets		69,743		100,399
Assets held for sale		46,121		43,163
Total current assets		2,383,472		2,813,034
Property, plant and equipment, net		574,692		599,908
Other		132,321		117,785
Total assets	$	3,090,485	$	3,530,727
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	679,484	$	908,151
Accrued liabilities		149,611		191,022
Accrued payroll and related benefits		98,389		139,522
Total current liabilities		927,484		1,238,695
Long-term liabilities:
Long-term debt		1,451,623		1,481,985
Other		99,339		114,089
Total long-term liabilities		1,550,962		1,596,074
Commitments and contingencies (Note 8)
Stockholders’ equity		612,039		695,958
Total liabilities and stockholders’ equity	$	3,090,485	$	3,530,727

See accompanying notes.

SANMINA-SCI CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended						Six Months Ended
	March 28, 2009			March 29, 2008			March 28, 2009			March 29, 2008
	(Unaudited)
	(In thousands, except per share data)
Net sales	$	1,195,107		$	1,817,431		$	2,614,371		$	3,595,571
Cost of sales		1,126,517			1,692,786			2,461,983			3,341,997
Gross profit		68,590			124,645			152,388			253,574
Operating expenses:
Selling, general and administrative		57,055			79,336			120,042			168,414
Research and development		4,720			4,253			8,912			8,859
Amortization of intangible assets		1,023			1,650			2,673			3,300
Restructuring costs		15,574			48,019			24,809			54,798
Asset impairment		3,384			—			7,182			—
Total operating expenses		81,756			133,258			163,618			235,371

Operating income (loss)		(13,166	)		(8,613	)		(11,230	)		18,203

Interest income		1,829			5,229			5,279			11,446
Interest expense		(28,112	)		(31,611	)		(57,295	)		(66,974	)
Other income (expense), net		4,923			4,272			5,476			(368	)
Interest and other expense, net		(21,360)			(22,110	)		(46,540	)		(55,896	)

Loss from continuing operations before income taxes		(34,526	)		(30,723	)		(57,770	)		(37,693	)
Provision for income taxes		3,012			9,214			5,041			11,697
Net loss from continuing operations		(37,538	)		(39,937	)		(62,811	)		(49,390	)
Income from discontinued operations, net of tax		—			15,523			—			32,892
Net loss	$	(37,538	)	$	(24,414	)	$	(62,811	)	$	(16,498	)

Basic and diluted income (loss) per share from:
Continuing operations	$	(0.07	)	$	(0.08	)	$	(0.12	)	$	(0.09	)
Discontinued operations	$	—		$	0.03		$	—		$	0.06
Net loss	$	(0.07	)	$	(0.05	)	$	(0.12	)	$	(0.03	)

Weighted average shares used in computing per share amounts		500,718			530,747			512,459			530,200

See accompanying notes.

SANMINA-SCI CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended
	March 28, 2009			March 29, 2008
	(Unaudited)
	(In thousands)
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss	$	(62,811	)	$	(16,498	)
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		44,781			52,045
Stock-based compensation expense		8,488			7,285
Non-cash restructuring costs		1,770			1,910
Provision for doubtful accounts, product returns and other net sales adjustments		(1,141	)		921
Deferred income taxes		2,899			(3,281	)
Impairment of assets and long-term investments		8,182			—
(Gain)/loss on extinguishment of debt		(13,490	)		2,237
Other, net		(585	)		(186	)
Changes in operating assets and liabilities:
Accounts receivable		266,942			821
Inventories		96,996			55,991
Prepaid expenses and other assets		25,805			255
Accounts payable		(209,319	)		(44,394	)
Accrued liabilities and other long-term liabilities		(82,320	)		18,521
Cash provided by operating activities		86,197			75,627
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of long-term investments		(200	)		—
Net proceeds from maturities of short-term investments		—			10,906
Purchases of property, plant and equipment		(44,691	)		(73,419	)
Proceeds from sales of property, plant and equipment		588			26,939
Cash paid for businesses acquired, net of cash acquired		—			(4,264	)
Cash used in investing activities		(44,303	)		(39,838	)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Change in restricted cash		(25,380	)		—
Repayments of long-term debt		(19,597	)		(120,000	)
Repurchases of common stock		(19,196	)		—
Cash used in financing activities		(64,173	)		(120,000	)
Effect of exchange rate changes		3,975			11,337
Decrease in cash and cash equivalents		(18,304	)		(72,874	)
Cash and cash equivalents at beginning of period		869,801			933,424
Cash and cash equivalents at end of period	$	851,497		$	860,550
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	53,724		$	63,474
Income taxes (excludes refunds of $1.8 million and $2.8 million for the six months ended March 28, 2009 and March 29, 2008, respectively)	$	16,575		$	15,342

See accompanying notes.

SANMINA-SCI CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

The accompanying condensed consolidated financial statements of Sanmina-SCI Corporation (“Sanmina-SCI”, “we”, “our”, “us”, “the Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to those rules or regulations. The interim condensed consolidated financial statements are unaudited, but reflect all normal recurring and non-recurring adjustments that are, in the opinion of management, necessary for a fair presentation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended September 27, 2008, included in the Company’s 2008 Annual Report on Form 10-K.

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

During 2008, the Company sold its personal computing and associated logistics business (“PC Business”). Unless otherwise noted, the following discussions in the notes to the condensed consolidated financial statements pertain to continuing operations.

Results of operations for the six months ended March 28, 2009 are not necessarily indicative of the results that may be expected for the full fiscal year. The Company reclassified $16.8 million from accounts receivable, net to accounts payable on the September 27, 2008 condensed consolidated balance sheet to conform to the current presentation. This amount represents net credit balances associated with customer claims and adjustments.

The Company operates on a 52 or 53 week year ending on the Saturday nearest September 30. Fiscal 2009 will be 53 weeks, with the additional week included in the fourth quarter. All references to years relate to fiscal years unless otherwise noted.

Recent Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Financial Accounting Standards (FAS) 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination that Arise from Contingencies”. An acquirer will recognize at fair value, at the acquisition date, an asset acquired or a liability assumed that arises from a contingency if the acquisition date fair value of that asset or liability can be determined during the measurement period. If the acquisition date fair value cannot be determined during the measurement period, an asset or liability shall be recognized at the acquisition date if (i) information available before the end of the measurement period indicates that it is probable that an asset existed or that a liability had been incurred at the acquisition date, and (ii) the amount of the asset or liability can be reasonably estimated. FSP FAS 141(R)-1 will be effective for the Company’s business combinations for which the acquisition date is on or after the beginning of 2010.

In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”, which provides additional guidance in evaluating certain factors that are indicative of a significant decrease in the volume and level of activity for an asset or liability when compared to normal market activity. Additionally, this statement clarifies the circumstances to consider when evaluating whether a transaction is not orderly, in which quoted prices may not be determinative of fair value. FSP FAS 157-4 will be effective for the Company for the three months ending June 27, 2009. The Company is currently assessing the impact of FSP FAS 157-4 on its results of operations and financial position.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments”, which requires disclosures about fair value of financial instruments for interim reporting periods, including disclosures of how the carrying amount relates to the assets or liabilities reported in the statement of financial position and the methods and significant assumptions used to estimate the fair value of financial instruments. FSP FAS 107-1 and APB 28-1 will be effective for the Company for the three months ending June 27, 2009.

In December 2008, the FASB issued FSP FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets”, which provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. Specifically, employers are required to disclose information about investment policies and strategies, categories of plan assets, fair value measurement of plan assets and significant concentrations of credit risk. FSP FAS 132(R)-1 will be effective for the Company in 2010.

In February 2008, the FASB issued FSP FAS 157-2, “The Effective Date of FASB Statement No. 157”, which delays the effective date of SFAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FSP 157-2 will be effective for the Company in 2010 and is expected to apply only to assets held for sale.

In December 2007, the FASB issued SFAS No. 141(R) (Revised 2007), “Business Combinations”. This statement defines the acquirer as the entity that obtains control of one or more businesses in the business combination, establishes the acquisition date as the date that the acquirer achieves control and requires the acquirer to recognize the assets acquired, liabilities assumed and any noncontrolling interest at their fair values as of the acquisition date. In addition, SFAS No. 141(R) requires expensing of acquisition-related and restructure-related costs, remeasurement of earnout provisions at fair value, measurement of equity securities issued at the date of close of the transaction and capitalization of in-process research and development related intangibles. SFAS No. 141(R) is effective for the Company’s business combinations for which the acquisition date is on or after the beginning of 2010.

Note 2. Stock-Based Compensation

Stock compensation expense was as follows:

	Three Months Ended				Six Months Ended
	March 28, 2009		March 29, 2008		March 28, 2009		March 29, 2008
	(In thousands)
Cost of sales	$	2,000	$	1,581	$	3,865	$	3,281
Selling, general & administrative		2,237		2,077		4,449		3,557
Research and development		89		80		174		177
Continuing operations		4,326		3,738		8,488		7,015
Discontinued operations		—		140		—		270
Total	$	4,326	$	3,878	$	8,488	$	7,285

	Three Months Ended				Six Months Ended
	March 28, 2009		March 29, 2008		March 28, 2009		March 29, 2008
	(In thousands)
Stock options	$	2,482	$	2,027	$	4,949	$	3,954
Restricted stock awards		43		209		227		57
Restricted stock units		1,801		1,502		3,312		3,004
Continuing operations		4,326		3,738		8,488		7,015
Discontinued operations		—		140		—		270
Total	$	4,326	$	3,878	$	8,488	$	7,285

The Company’s 1999 Stock Plan (“1999 Plan”) was terminated as to future grants on December 1, 2008. Although the 1999 Plan has been terminated, it will continue to govern all awards granted under it prior to its termination date. On January 26, 2009, the Company’s stockholders approved the 2009 Incentive Plan and the reservation of 45.0 million shares of common stock for issuance thereunder.

At March 28, 2009, an aggregate of 102.1 million of shares were authorized for future issuance under the Company's stock plans, which include stock options, stock purchase rights and restricted stock awards and units. A total of 39.6 million shares of common stock were available for grant under the Company's stock plans as of March 28, 2009. Awards that expire or are cancelled without delivery of shares generally become available for issuance under the plans.

Stock Options

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

	Three Months Ended						Six Months Ended
	March 28, 2009			March 29, 2008			March 28, 2009			March 29, 2008
Volatility		73.0	%		60.2	%		78.5	%		59.1	%
Risk-free interest rate		1.65	%		2.91	%		2.16	%		3.39	%
Dividend yield		0	%		0	%		0	%		0	%
Expected life of options	5.0 years			5.0 years			5.0 years			5.0 years

Stock option activity was as follows:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value of In-The-Money Options
				($)		(Years)		($)
Outstanding, September 27, 2008		46,259,242			5.14		7.31		1,116,547
Granted		6,824,000			0.49
Cancelled/Forfeited/Expired		(4,598,158	)		9.42
Outstanding, December 27, 2008		48,485,084			4.08		7.80		—
Exercisable, December 27, 2008		19,602,568			6.86		6.15		—
Granted		5,710,950			0.30
Cancelled/Forfeited/Expired		(2,494,241	)		3.00
Outstanding, March 28, 2009		51,701,793			3.71		7.78		399,344
Vested and expected to vest, March 28, 2009		45,053,238			3.98		7.62		313,984
Exercisable, March 28, 2009		20,633,779			6.46		6.12		—

The weighted-average grant date fair value of stock options granted during the three and six months ended March 28, 2009 was $0.18 and $0.26, respectively. The weighted-average grant date fair value of stock options granted during the three and six months ended March 29, 2008 was $0.76 and $0.90, respectively. No stock options were exercised during these periods. The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value of in-the-money options that would have been received by the option holders had all option holders exercised their options at the Company’s closing stock price on the date indicated.

As of March 28, 2009, there was $27.7 million of total unrecognized compensation expense related to stock options. This amount is expected to be recognized over a weighted average period of 3.9 years.

Restricted Stock Awards

Activity with respect to the Company’s nonvested restricted stock awards was immaterial for the three and six months ended March 28, 2009. At March 28, 2009, unrecognized compensation expense related to restricted stock awards was immaterial.

Restricted Stock Units

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

At March 28, 2009, unrecognized compensation expense related to restricted stock units was $6.7 million, and is expected to be recognized over a weighted average period of eleven months.

Activity with respect to the Company’s nonvested restricted stock units was as follows:

	Number of Shares			Weighted- Grant Date Fair Value		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
				($)		(Years)		($)
Non-vested restricted stock units at September 27, 2008		4,826,490			3.53		1.15		7,915,444
Vested		(40,000	)		1.63
Cancelled		(78,000	)		3.72
Non-vested restricted stock units at December 27, 2008		4,708,490			3.55		0.91		2,265,835
Granted		1,565,520			0.30
Vested		(1,265,841	)		2.97
Cancelled		(413,083	)		2.57
Non-vested restricted stock units at March 28, 2009		4,595,086			2.68		0.89		1,700,182
Non-vested restricted stock units expected to vest at March 28, 2009		3,538,216			2.68		0.89		1,309,140

Note 3. Income Tax

The Company’s effective tax rate for the three and six months ended March 28, 2009 was 8.7%, compared to 30.0% for the three months ended March 29, 2008 and 31.0% for the six months ended March 29, 2008. The Company’s future effective income tax rate depends on various factors, such as the geographic composition of pre-tax income/(loss), implementation of tax planning strategies and possible outcomes of audits. Management carefully monitors these factors and timely adjusts the interim income tax rate accordingly.

As of September 27, 2008, the Company had a long-term liability for net unrecognized tax benefits, including accrued interest, of $25.9 million, all of which, if recognized, would result in a reduction of the Company’s effective tax rate. During the three months ended March 28, 2009, the Company’s liability decreased $1.8 million due primarily to favorable conclusions with foreign tax authorities and foreign currency revaluation. The Company’s liability decreased $6.2 million for the six months ended March 28, 2009 due primarily to favorable conclusions with foreign tax authorities and payments made in connection with such matters, offset partially by accruals for current year tax positions.

The Company’s policy is to classify interest and penalties on unrecognized tax benefits as income tax expense. Such amounts were not material for the three or six months ended March 28, 2009 and March 29, 2008.

In general, the Company is no longer subject to United States of America federal or state income tax examinations for years before 2003, except to the extent that tax attributes in these years were carried forward to years remaining open for audit, and to examinations for years prior to 2001 in its major foreign jurisdictions.

The Company does not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months.

Note 4. Inventories

Components of inventories were as follows:

	As of
	March 28, 2009		September 27, 2008
	(In thousands)
Raw materials	$	510,735	$	591,119
Work-in-process		91,936		106,784
Finished goods		103,353		115,456
Total	$	706,024	$	813,359

Note 5. Comprehensive Income (Loss)

SFAS No. 130, “Reporting Comprehensive Income”, establishes standards for the reporting of comprehensive income and its components. Comprehensive income includes certain items that are reflected in stockholders’ equity, but not included in net income.

Other comprehensive income (loss) was as follows:

	Three Months Ended						Six Months Ended
	March 28, 2009			March 29, 2008			March 28, 2009			March 29, 2008
	(In thousands)
Net loss	$	(37,538	)	$	(24,414	)	$	(62,811	)	$	(16,498	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(775	)		8,390			(7,514	)		14,961
Unrealized holding gains (losses) on derivative financial instruments		15,389			(13,420	)		(13,798	)		(23,419	)
Minimum pension liability		(462	)		(1,431	)		(1,554	)		(1,460	)
Comprehensive loss	$	(23,386	)	$	(30,875	)	$	(85,677	)	$	(26,416	)

The net unrealized gain on derivative financial instruments for the three months ended March 28, 2009 was primarily attributable to a decline in the fair market value of the Company’s liability under its interest rate swaps, which was primarily caused by changes in the Company’s credit default swap rate.

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

	As of
	March 28, 2009			September 27, 2008
	(In thousands)
Foreign currency translation adjustments	$	74,329		$	81,843
Unrealized holding losses on derivative financial instruments		(36,605	)		(22,807	)
Unrecognized net actuarial loss and unrecognized transition cost related to pension plans		(4,813	)		(3,259	)
Total	$	32,911		$	55,777

Note 6. Earnings Per Share

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

	Three Months Ended						Six Months Ended
	March 28, 2009			March 29, 2008			March 28, 2009			March 29, 2008
	(In thousands, except per share data)
Numerator:
Net loss from continuing operations	$	(37,538	)	$	(39,937	)	$	(62,811	)	$	(49,390	)
Income from discontinued operations, net of tax		—			15,523			—			32,892
Net loss	$	(37,538	)	$	(24,414	)	$	(62,811	)	$	(16,498	)

Denominator:
Weighted average number of shares—basic and diluted		500,718			530,747			512,459			530,200

Basic and diluted income (loss) per share from:
—Continuing operations	$	(0.07	)	$	(0.08	)	$	(0.12	)	$	(0.09	)
—Discontinued operations	$	—		$	0.03		$	—		$	0.06
—Net loss	$	(0.07	)	$	(0.05	)	$	(0.12	)	$	(0.03	)

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

	Three Months Ended				Six Months Ended
	March 28, 2009		March 29, 2008		March 28, 2009		March 29, 2008
Dilutive securities:
Employee stock options		49,869,669		44,609,718		46,994,959		43,853,721
Restricted stock awards and units		2,715,173		4,346,410		3,261,628		4,794,504
Total anti-dilutive shares		52,584,842		48,956,128		50,256,587		48,648,225

As of March 28, 2009, all of the Company’s outstanding stock options and restricted stock awards and units were anti-dilutive under SFAS No. 128, “Earnings Per Share”, either because the exercise price was higher than the Company’s stock price or the application of the treasury stock method resulted in an anti-dilutive effect. Had the Company reported net income instead of a net loss for the three and six months ended March 28, 2009, none of the 52.6 million and 50.3 million, respectively, potentially dilutive securities would have been included in the calculation of diluted earnings per share.

Note 7. Debt

Long-term debt consisted of the following:

	As of
	March 28, 2009		September 27, 2008
	(In thousands)
$300 Million Senior Floating Rate Notes due 2010 (“2010 Notes”)	$	175,700	$	180,000
$300 Million Senior Floating Rate Notes due 2014 (“2014 Notes”)		270,645		300,000
8.125% Senior Subordinated Notes due 2016		600,000		600,000
6.75% Senior Subordinated Notes due 2013 (“6.75% Notes”)		400,000		400,000
Unamortized Interest Rate Swaps		5,278		1,985
Total long-term debt	$	1,451,623	$	1,481,985

During the second quarter of 2009, the Company redeemed $4.3 million and $29.4 million of its 2010 and 2014 Notes, respectively. Upon redemption, holders of the notes received $19.6 million, plus accrued interest of $0.3 million. In connection with these redemptions, the Company recorded a gain of $13.5 million, net of unamortized debt issuance costs of $0.6 million, in other income (expense), net on the condensed consolidated statement of operations.

On November 19, 2008, the Company terminated its revolving credit facility and entered into a new credit facility. In connection with the termination of the revolving credit facility, the Company also terminated an interest rate swap associated with its 6.75% Notes. As a result of terminating the swap, the Company was required to discontinue hedge accounting for the terminated swap and the remaining three swaps designated under SFAS 133 as hedges of the 6.75% Notes. These swaps were being accounted for as fair value hedges. At the date hedge accounting was discontinued, the swaps had a fair value of $5.7 million, which will be amortized as a reduction to interest expense over the remaining life of the debt. During the second quarter of 2009, the Company received termination notices from its remaining counterparties exercising their right pursuant to embedded call options to cancel interest rate swaps, totaling $300 million in aggregate notional principal, associated with the Company’s 6.75% Notes. In connection with the termination of the swaps, the Company received a payment consisting of a call premium of $10.1 million plus accrued interest. During the period from November 22, 2008 through the termination of the swaps (period during which hedge accounting was discontinued), changes in the fair value of the swaps were recorded in other income (expense), net on the condensed consolidated statement of operations and resulted in a $5.7 million gain.

New Credit Facility. During the first quarter of 2009, the Company entered into a Loan, Guaranty and Security Agreement, among the Company, the financial institutions party thereto from time to time as lenders, and Bank of America, N.A., as agent for such lenders.

The new credit facility provides for a $135 million secured revolving credit facility, subject to a reduction of between $25 million and $50 million depending on the amount of the Company’s borrowing base. The new credit facility has an initial $50 million letter of credit sublimit. As of March 28, 2009, no loans and $30.3 million of letters of credit were outstanding under this agreement. The facility may be increased by an additional $200 million upon obtaining additional commitments from the lenders then party to the new credit facility or from new lenders. The new credit facility expires on the earlier of (i) the date that is 90 days prior to the maturity date of the 2010 Notes or the 6.75% Notes, in each case if such notes are not repaid, redeemed, defeased, refinanced or reserved for under the borrowing base under the new credit facility prior to such date or (ii) November 19, 2013 (the “Maturity Date”).

Loans may be advanced under the new credit facility based on eligible accounts receivable and inventory balances. If at any time the aggregate principal amount of the loans outstanding plus the face amount of undrawn letters of credit under the new credit facility exceed the borrowing base then in effect, the Company must make a payment or post cash collateral (in the case of letters of credit) in an amount sufficient to eliminate such excess.

Loans under the new credit facility bear interest, at the Company’s option, at a rate equal to LIBOR or a base rate equal to Bank of America, N.A.’s announced prime rate, in each case plus a spread. A commitment fee accrues on any unused portion of the commitments under the new credit facility at a rate per annum based on usage. Principal, together with accrued and unpaid interest, is due on the Maturity Date.

The Company’s obligations under the new credit facility are secured by (1) all U.S. and Canadian accounts receivable (with automatic lien releases occurring at time of sale of each accounts receivable transaction for those customers included in the U.S. factoring facility); (2) all U.S. and Canadian deposit accounts (except accounts used for collections for certain transactions); (3) all U.S. and Canadian inventory and associated obligations and documents; and (4) a 65% pledge of the capital stock of certain subsidiaries of the Company.

The Company is currently subject to covenants that, among other things, place certain limitations on the Company’s ability to incur additional debt, make investments, pay dividends, and sell assets. The Company was in compliance with these covenants as of March 28, 2009.

Note 8. Commitments and Contingencies

Litigation and other contingencies. From time to time, the Company is a party to litigation, claims and other contingencies, including environmental matters and examinations and investigations by government 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 SFAS No. 5, “Accounting for Contingencies”, or other applicable accounting standards. As of March 28, 2009, the Company had reserves of $27.8 million for these matters, which the Company believes is adequate. Such reserves are included in accrued liabilities or other long-term liabilities on the condensed consolidated balance sheet.

As of March 28, 2009, the Company was in the process of remediating environmental contamination at one of its sites in the United States of America. The Company expects to incur costs of $10.7 million for assessment, testing and remediation of this site, and intends to sell this site upon completion of its remediation efforts. Actual costs could differ from the amount estimated upon completion of this process. To date, $5.5 million of such costs have been incurred. During the second quarter of 2009, the Company recorded an impairment charge of $0.9 million related to this site due to a decrease in the estimated fair value of the site.

On January 14, 2009, one of the Company’s customers, Nortel Networks, filed a petition for reorganization under bankruptcy law. As a result, the Company performed an analysis as of December 27, 2008 to quantify its potential exposure, considering factors such as which legal entities of the customer are included in the bankruptcy reorganization, future demand from Nortel Networks, and administrative and reclamation claim priority. As a result of the analysis, the Company determined that certain accounts receivable may not be collectible and therefore deferred recognition of revenue in the amount of $5.0 million for shipments made in the first quarter of 2009. Additionally, the Company determined that certain inventory balances may not be recoverable and provided a reserve for such inventories in the amount of $5.0 million in the first quarter of 2009. The Company updated its analysis at March 28, 2009 and determined that no additional reserves were necessary. The Company’s estimates are subject to change as additional information becomes available.

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

	As of
	March 28, 2009			March 29, 2008
	(In thousands)
Beginning balance – end of prior year	$	18,974		$	23,094
Additions to accrual		6,237			10,567
Utilization of accrual		(8,752	)		(10,673	)
Ending balance – current quarter	$	16,459		$	22,988

Note 9. Restructuring Costs

Costs associated with restructuring activities, other than those activities related to business combinations, are accounted for in accordance with SFAS No. 146,”Accounting for Costs Associated with Exit or Disposal Activities”, or SFAS No. 112, “Employers’ Accounting for Postemployment Benefits”, as applicable. Pursuant to SFAS No. 112, restructuring costs related to employee severance are recorded when probable and estimable based on the Company’s policy with respect to severance payments. For all other restructuring costs, a liability is recognized in accordance with SFAS No. 146 only when incurred. Costs associated with restructuring activities related to business combinations are accounted for in accordance with EITF 95-3,”Recognition of Liabilities in Connection with a Purchase Business Combination”.

2009 Restructuring Plan

During the first quarter of 2009, the Company initiated a restructuring plan as a result of a slowdown in the global electronics industry and worldwide economy. The plan is designed to improve capacity utilization levels and reduce costs by consolidating manufacturing and other activities in locations with higher efficiencies and lower costs. Costs associated with this plan are expected to include employee severance, costs related to owned and leased facilities and equipment that are no longer in use, and other costs associated with the exit of certain contractual arrangements due to facility closures. The plan is expected to be completed during 2009 and total costs for this plan are expected to be in the range of $25 million to $35 million. Below is a summary of restructuring costs associated with facility closures and other consolidation efforts implemented under the plan:

	Employee Termination Severance and Related Benefits			Leases and Facilities Shutdown and Consolidation Costs
	Cash			Cash			Total
	(In thousands)
Balance at September 27, 2008	$	—		$	—		$	—
Charges to operations		7,009			482			7,491
Charges utilized		(2,229	)		(482	)		(2,711	)
Balance at December 27, 2008		4,780			—			4,780
Charges to operations		7,524			1,160			8,684
Charges utilized		(5,662	)		(1,160	)		(6,822	)
Balance at March 28, 2009	$	6,642		$	—		$	6,642

During the three and six months ended March 28, 2009, the Company recorded restructuring charges of $7.5 million and $14.5 million, respectively, for employee termination costs, of which $7.9 million has been utilized and $6.6 million is expected to be paid during the remainder of 2009. These costs were provided to approximately 1,300 employees who were terminated during the period.

Restructuring Plans — Prior Years

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

	Employee Termination Severance and Related Benefits			Leases and Facilities Shutdown and Consolidation Costs			Impairment of Assets or Redundant Assets
	Cash			Cash			Non-Cash			Total
				(In thousands)
Balance at September 30, 2006	$	21,349		$	9,804		$	—		$	31,153
Charges (recovery) to operations		35,169			11,195			(831	)		45,533
Charges recovered (utilized)		(47,873	)		(12,132	)		831			(59,174	)
Reversal of accrual		(2,505	)		(441	)		—			(2,946	)
Balance at September 29, 2007		6,140			8,426			—			14,566
Charges to operations		64,126			16,519			2,456			83,101
Charges utilized		(45,248	)		(19,765	)		(2,456	)		(67,469	)
Reversal of accrual		(833	)		(892	)		—			(1,725	)
Balance at September 27, 2008		24,185			4,288			—			28,473
Discontinued operations		5,607			—			—			5,607
Balance at September 27, 2008, including discontinued operations		29,792			4,288			—			34,080
Charges to operations		3,222			1,989			644			5,855
Charges utilized		(11,651	)		(2,587	)		(644	)		(14,882	)
Reversal of accrual		(4,067	)		(44	)		—			(4,111	)
Balance at December 27, 2008		17,296			3,646			—			20,942
Charges to operations		2,953			2,905			1,121			6,979
Charges utilized		(11,299	)		(2,839	)		(1,121	)		(15,259	)
Reversal of accrual		(89	)		—			—			(89	)
Balance at March 28, 2009	$	8,861		$	3,712		$	—		$	12,573

During the three months ended March 28, 2009, the Company recorded restructuring charges for employee termination costs for approximately 380 employees who were terminated during the period. In connection with restructuring actions the Company has already implemented under these restructuring plans, the Company expects to pay remaining facilities related restructuring liabilities of $3.7 million through 2010 and the majority of severance costs of $8.9 million through the remainder of 2009.

All Restructuring Plans

In connection with all of the Company’s restructuring plans, restructuring costs of $19.2 million were accrued as of March 28, 2009, of which $18.6 million was included in accrued liabilities and $0.6 million was included in other long-term liabilities on the condensed consolidated balance sheet.

Note 10. Business Segment, Geographic and Customer Information

SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information”, establishes standards for reporting information about operating segments, products and services, geographic areas of operations and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance. The Company operates in one operating segment.

Geographic information is as follows:

	Three Months Ended				Six Months Ended
	March 28, 2009		March 29, 2008		March 28, 2009		March 29, 2008
	(In thousands)
Net sales:
Domestic	$	329,780	$	581,755	$	717,618	$	1,161,322
International		865,327		1,235,676		1,896,753		2,434,249
Total net sales	$	1,195,107	$	1,817,431	$	2,614,371	$	3,595,571

Operating Income:
Domestic	$	(30,830	)	$	2,276		$	(47,423	)	$	13,353
International		17,664			(10,889	)		36,193			4,850
Total operating income (loss)	$	(13,166	)	$	(8,613	)	$	(11,230	)	$	18,203

Note 11. Financial Instruments

The Company partially adopted SFAS No. 157, “Fair Value Measurements”, at the beginning of 2009 for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The Company has elected to defer the adoption related to non-financial assets and liabilities in accordance with FSP FAS 157-2, “Effective Date of FASB Statement No. 157”. The partial adoption of SFAS No. 157 did not have a material impact on the Company’s condensed consolidated financial statements as of and for the three or six months ended March 28, 2009, except as discussed below related to the fair value of the Company’s interest rate swaps.

The Company’s financial assets and financial liabilities subject to the requirements of FAS 157 are as follows:

·	Money market funds

·	Mutual funds

·	Time deposits

·	Corporate bonds

·	Foreign currency forward and option contracts

·	Interest rate swaps

SFAS No. 157 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and also considers assumptions that market participants would use when pricing an asset or liability.

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

		Level 1:		Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 1 assets and liabilities consist of money market fund deposits, time deposits and marketable debt and equity instruments.

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

		Level 3:		Inputs that are unobservable to the valuation methodology which are significant to the measurement of the fair value of assets or liabilities.

The following table presents information as of March 28, 2009 with respect to assets and liabilities measured at fair value on a recurring basis:

		Presentation in the Condensed Consolidated Balance Sheet
	Fair Value Measurements Using Level 1, Level 2 or Level 3	Cash and cash equivalents		Prepaid expenses and other current assets		Other assets		Accrued liabilities			Other long-term liabilities
		(In thousands)
Assets:
Money Market Funds	Level 1	$	373,077	$	—	$	—	$	—		$	—
Mutual Funds	Level 2		—		—		2,407		—			—
Time Deposits	Level 1		88,105		—		14,095		—			—
Corporate Bonds	Level 2		—		—		2,532		—			—
Derivatives designated as hedging instruments under FAS 133: Foreign Currency Forward Contracts	Level 2		—		6		—		—			—
Derivatives not designated as hedging instruments under FAS 133: Foreign Currency Forward Contracts	Level 2		—		1,408		—		—			—
Total assets measured at fair value		$	461,182	$	1,414	$	19,034	$	—		$	—

Liabilities:
Derivatives designated as hedging instruments under FAS 133: Interest Rate Swaps	Level 2	$	—	$	—	$	—	$	—		$	(36,752	)
Derivatives not designated as hedging instruments under FAS 133: Foreign Currency Forward Contracts	Level 2		—		—		—		(17,628	)		—
Total liabilities measured at fair value		$	—	$	—	$	—	$	(17,628	)	$	(36,752	)

The Company sponsors deferred compensation plans for eligible employees and non-employee members of its board of directors that allow participants to defer payment of part or all of their compensation. These plans are accounted for in accordance with EITF Issue 97-14, “Accounting for Deferred Compensation Arrangements Where Amounts Earned Are Held in a Rabbi Trust and Invested”. Assets and liabilities associated with these plans of approximately $7.0 million as of March 28, 2009 are recorded as other non-current assets and other long-term liabilities in the condensed consolidated balance sheet. The Company’s results of operation are not affected by these plans since changes in the fair value of the assets are offset by changes in the fair value of the liabilities. As such, assets and liabilities associated with these plans have not been included in the above table.

The Company has elected to use the income approach to value derivatives, using observable Level 2 market expectations at the measurement date and standard valuation techniques to convert future amounts to a single present value amount assuming that participants are motivated, but not compelled to transact. Level 2 inputs include futures contracts on LIBOR for the first three years, LIBOR cash and swap rates, interest rates, foreign currency forward rates and credit risk at commonly quoted intervals. Mid-market pricing is used as a practical expedient for fair value measurements. SFAS 157 requires the fair value measurement of an asset or liability to reflect the nonperformance risk of the entity and the counterparty. Therefore, the counterparty’s creditworthiness when in an asset position and the Company’s creditworthiness when in a liability position has also been considered in the fair value measurement of derivative instruments. As of March 28, 2009, the fair value of the Company’s interest rates swaps has been reduced by $12.6 million due to consideration of the Company’s creditworthiness, as determined by credit default swap rates published by Bloomberg. The effect of nonperformance risk on the fair value of foreign currency forward contracts was not material as of March 28, 2009.

The Company adopted SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” in the second quarter of 2009. SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.

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

Interest rate swaps are entered into on occasion to manage interest rate risk associated with the Company's borrowings. The Company issued $600 million of floating rate notes in 2007 and entered into interest rate swap agreements with two independent swap counterparties to partially hedge its interest rate exposure related to floating rate debt. The swap agreements, with an aggregate notional amount of $300 million and expiration dates in 2014, effectively convert a portion of the variable interest rate obligation to a fixed interest rate obligation and are accounted for as cash flow hedges under SFAS No. 133. Under the terms of the swap agreements, the Company pays the independent swap counterparties a fixed rate of 5.594% and, in exchange, the swap counterparties pay the Company an interest rate equal to the three-month LIBOR. These swap agreements effectively fix the interest rate at 8.344% through 2014. The Company is required to maintain collateral, in the form of cash, under its interest rate swap agreements. As of March 28, 2009, $25.4 million of collateral had been pledged against these swaps and is included in other non-current assets on the condensed consolidated balance sheet.

Forward and/or option contracts on various foreign currencies are entered into monthly to manage foreign currency risk associated with forecasted foreign currency transactions and certain monetary assets and liabilities denominated in foreign currencies.

The Company’s primary foreign currency cash flows are in certain Asian and European countries, Brazil, Canada and Mexico. The Company utilizes foreign currency forward and/or option contracts to hedge certain operational (“cash flow”) exposures resulting from changes in foreign currency exchange rates. Such exposures result from forecasted sales denominated in currencies different from those for cost of sales and other expenses. These contracts are typically less than 12 months in duration and are accounted for as cash flow hedges under SFAS 133.

The Company enters into short-term foreign currency forward contracts to hedge currency exposures associated with certain assets and liabilities denominated in foreign currencies. The Company typically has forward contracts on approximately 15 foreign currencies at each period end. These contracts have maturities of three months or less and are not designated as accounting hedges under SFAS 133. Accordingly, all outstanding foreign currency forward contracts are marked-to-market at the end of each period with unrealized gains and losses included in other income (expense), net, in the condensed consolidated statements of operations. For the three and six months ended March 28, 2009, the Company recorded a loss of $5.5 million and a gain of $13.2 million, respectively, associated with these forward contracts.

As of March 28, 2009, the Company had the following outstanding foreign currency forward contracts that were entered into to hedge foreign currency exposures:

Foreign Currency Forward Contracts	Number of Contracts		Notional Amount (USD in thousands)
			Designated		Non-designated
Buy SGD		4	$	3,715	$	68,090
Buy MXN		5		5,564		13,384
Buy CAD		3		—		8,672
Buy HKD		1		—		4,969
Buy JPY		2		—		9,929
Buy ILS		1		—		14,618
Buy MYR		1		—		4,204
Buy HUF		2		—		4,516
Sell BRL		1		—		8,962
Sell CNY		1		—		23,432
Sell EUR		1		—		191,490
Sell GBP		1		—		13,604
Sell SEK		1		—		5,961
Sell INR		1		—		4,507
Total notional amount			$	9,279	$	376,338

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (AOCI), an equity account, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in current earnings and were not material for the three or six months ended March 28, 2009. As of March 28, 2009, AOCI related to foreign currency forward contracts was not material and AOCI related to interest rate swaps was a loss of $36.5 million, of which $11.9 million is expected to be amortized to interest expense over the next 12 months.

The following table presents the effect of cash flow hedging relationships on the Company’s condensed consolidated statement of operations for the three months ended March 28, 2009:

Derivatives in SFAS 133 Cash Flow Hedging Relationship	Amount of Gain/(Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	(In thousands)
Interest rate swaps	$	12,848		Interest expense	$	(2,612	)
Foreign currency forward contracts		(1,052	)	Cost of sales		(982	)
Total	$	11,796			$	(3,594	)

The following table presents the effect of cash flow hedging relationships on the Company’s condensed consolidated statement of operations for the six months ended March 28, 2009:

Derivatives in SFAS 133 Cash Flow Hedging Relationship	Amount of Gain/(Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	(In thousands)
Interest rate swaps	$	(18,340	)	Interest expense	$	(4,605	)
Foreign currency forward contracts		(5,739	)	Cost of sales		(5,678	)
Total	$	(24,079	)		$	(10,283	)

Note 12. Stock Repurchase Program

On October 27, 2008, the Company’s Board of Directors authorized the Company to spend up to approximately $35 million on share repurchases. Purchases of common shares shall be made at prevailing market prices or in privately negotiated transactions. The authorization is effective through December 2009. During the three and six months ended March 28, 2009, the Company repurchased 23.0 million shares and 44.0 million shares, respectively, of its common stock for a total of $7.6 million and $19.2 million, respectively, including commissions.

Note 13. Sales of Accounts Receivable

On June 26, 2008, the Company entered into a two-year global revolving trade receivables purchase agreement ("Global Receivables Program") with a financial institution that allows the Company to sell accounts receivable from its EMS customers. The maximum face amount of accounts receivable that may be outstanding at any time under this agreement is $250 million. The purchase price for receivables sold under this program ranges from 95% to 100% of the face amount. The Company pays LIBOR plus a spread for the period from the date a receivable is sold to the date the receivable is collected. Sold receivables are subject to certain limited recourse provisions. The Company continues to service, administer and collect sold receivables on behalf of the purchaser in exchange for a servicing fee.

The Global Receivables Program has a foreign component and a U.S. component. The foreign component is governed by a Revolving Trade Receivables Purchase Agreement ("Foreign Facility") dated June 26, 2008. There were no sales of receivables under the foreign component during the three or six months ended March 28, 2009.

The U.S. component is governed by a Credit and Security Agreement dated November 24, 2008 that requires the Company to make an absolute transfer of accounts receivable to a special purpose entity (Borrower) to ensure that such transferred receivables are unavailable to the Company's creditors and to ensure the interests of such transferred receivables are fully transferred to the Borrower and its agent. Transfers of receivables under the U.S. component for the three months ended March 28, 2009 were $42.4 million, for which the Company received proceeds of $40.2 million. All amounts transferred were outstanding as of March 28, 2009. No receivables were transferred under the U.S. component during the three months ended December 27, 2008.

The Borrower is a qualifying special purpose entity as defined in SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”, and accordingly, the Company does not consolidate this entity pursuant to FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities.”

In accordance with SFAS No. 140, accounts receivable sold are removed from the Company's condensed consolidated balance sheets and reflected as cash provided by operating activities in the condensed consolidated statements of cash flows.

Note 14. Subsequent Events

On March 29, 2009, the Company completed its purchase of all outstanding stock of certain entities of JDS Uniphase Corp. (JDSU) and began to provide manufacturing services to JDSU pursuant to an arrangement entered into at the same time. The Company expects to make an immaterial net cash payment in connection with this transaction.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including any statements regarding trends in future revenues or results of operations, gross margin or operating margin, expenses, earnings or losses from operations, synergies or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning developments, performance or industry ranking; any statements regarding future economic conditions or performance; any statements regarding pending investigations, claims or disputes; any statements regarding the financial impact of customer bankruptcies; any statements regarding future cash outlays for acquisitions; any statements concerning the adequacy of our liquidity; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Generally, the words “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” “may,” “will,” “should,” “estimate,” “predict,” “potential,” “continue” and similar expressions identify forward-looking statements. Our forward-looking statements are based on current expectations, forecasts and assumptions and are subject to the risks and uncertainties contained in or incorporated from Part II, Item 1A of this report. As a result, actual results could vary materially from those suggested by the forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this report with the Securities and Exchange Commission.

Overview

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

Recently, the business environment has become challenging due to adverse global economic conditions. These conditions have slowed global economic growth and have resulted in recessions in many countries, including the U.S., Europe and certain countries in Asia. As a consequence, many of the industries to which we provide products have recently experienced significant financial difficulty, with some entities filing for bankruptcy. Such significant financial difficulty, if experienced by one or more of our customers, may negatively affect our business due to the decreased demand from these financially distressed customers, the potential inability of these companies to make full payment on amounts owed to us, or both.

We exited our PC and associated logistics services business (“PC Business”) in 2008 and have reflected this business as a discontinued operation in the condensed consolidated statements of operations for all prior periods presented.

Unless otherwise noted, all references to our operating results in this Management’s Discussion and Analysis of Financial Condition and Results of Operations pertain only to our continuing operations and all references to years refer to our fiscal years ending on the last Saturday of each year closest to September 30. Fiscal 2009 will be a 53 week year, with the additional week included in the fourth quarter.

A relatively small number of customers have historically generated a significant portion of our net sales. Sales to our ten largest customers represented 51.2% and 49.1% of our net sales for the three and six months ended March 28, 2009, respectively. Sales to our ten largest customers represented 50.2% and 48.8% of our net sales for the three and six months ended March 29, 2008, respectively. No customer represented 10% or more of our net sales for any of these periods.

We typically generate a significant portion of our net sales from international operations. Sales from international operations during the three months ended March 28, 2009 and March 29, 2008 were 72.4% and 68.0%, respectively, of our total net sales. During the six months ended March 28, 2009 and March 29, 2008, 72.6% and 67.7%, respectively, of our total net sales were derived from non-U.S. operations. The concentration of international operations has resulted from a desire on the part of many of our customers to source production in lower cost locations such as Asia, Latin America and Eastern Europe. We expect this trend to continue.

Historically, we have had substantial recurring sales to existing customers. We generally do not obtain firm, long-term commitments from our customers. Orders are placed by our customers using purchase orders, some of which are governed by supply agreements. These agreements generally have terms ranging from three to five years and cover the manufacture of a range of products. Under these agreements, a customer typically agrees to purchase its requirements for particular products in particular geographic areas from us. These agreements generally do not obligate the customer to purchase minimum quantities of products.

Critical Accounting Policies and Estimates

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

For a complete description of our key critical accounting policies and estimates, refer to our 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 24, 2008.

Results of Operations

Key operating results

	Three Months Ended						Six Months Ended
	March 28, 2009			March 29, 2008			March 28, 2009			March 29, 2008
	(In thousands)
Net sales	$	1,195,107		$	1,817,431		$	2,614,371		$	3,595,571
Gross profit	$	68,590		$	124,645		$	152,388		$	253,574
Operating income (loss)	$	(13,166	)	$	(8,613	)	$	(11,230	)	$	18,203
Net loss from continuing operations	$	(37,538	)	$	(39,937	)	$	(62,811	)	$	(49,390	)
Income from discontinued operations, net of tax	$	—		$	15,523		$	—		$	32,892
Net loss	$	(37,538	)	$	(24,414	)	$	(62,811	)	$	(16,498	)

Net loss from continuing operations includes restructuring costs of $15.6 million and $48.0 million for the three months ended March 28, 2009 and March 29, 2008, respectively, and $24.8 million and $54.8 million for the six months ended March 28, 2009 and March 29, 2008, respectively. Additionally, net loss for the six months ended March 28, 2009 includes a $10 million reduction in gross profit associated with Nortel Networks’ petition for reorganization under bankruptcy law. Lastly, net loss for the three months ended March 28, 2009 includes a gain on repurchase of debt of $13.5 million.

Key performance measures

	Three Months Ended
	March 28, 2009		December 27, 2008		September 27, 2008
Days sales outstanding(1)		54		57		51
Inventory turns(2)		6.4		6.8		7.7