SANMINA CORP/DE - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED SEPTEMBER 29, 2001

OR

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 0-21272

SANMINA-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 NORTH FIRST STREET, SAN JOSE, CA 95134
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 964-3500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
(Title of Class)

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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

The aggregate value of voting stock held by non-affiliates of the
Registrant was approximately $4,256,825,124 as of September 29, 2001, based upon
the average of the high and low prices of the Registrant's Common Stock reported
for such date on the Nasdaq National Market. Shares of Common Stock held by each
executive officer and director and by each person who owns 10% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. The determination of affiliate status is not necessarily a
conclusive determination for other purposes. As of September 29, 2001, the
Registrant had outstanding 318,819,000 shares of Common Stock.
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DOCUMENTS INCORPORATED BY REFERENCE

Certain information is incorporated into Part III of this report by
reference to the Proxy Statement for the Registrant's 2002 annual meeting of
stockholders to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A not later than 120 days after the end of the fiscal year covered
by this Form 10-K.
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SANMINA-SCI CORPORATION

INDEX

1

PART I

ITEM 1. BUSINESS

Sanmina-SCI Corporation ("Sanmina-SCI") is a leading independent provider
of customized integrated electronic manufacturing services, known as EMS,
including turnkey electronic assembly and manufacturing management services, to
original equipment manufacturers, or OEMs, in the electronics industry. Our
electronics manufacturing services consist primarily of the design and
manufacture of complex printed circuit board assemblies using surface mount and
pin-through-hole interconnection technologies, the manufacture of custom
designed backplane assemblies, fabrication of complex multi-layered printed
circuit boards, the manufacture of custom cables and wire harness assemblies,
the manufacture of optoelectronic assemblies and custom fiber optic cables, the
manufacture of electronic enclosure systems that house large electronic systems
and subsystems, testing and assembly of completed systems, and global order
fulfillment. In addition to the services above, turnkey manufacturing management
also involves procurement and materials management, as well as engineering
consultation on printed circuit board design, signal integrity analysis,
reliability testing, product homologation services, and manufacturing processes.
As a result of these services, Sanmina-SCI can offer an end to end total EMS
solution to its customers.

Surface mount and pin-through-hole printed circuit board assemblies are
printed circuit boards on which various electronic components, such as
integrated circuits, capacitors, microprocessors and resistors, are mounted.
These assemblies are key functional elements of many types of electronic
products. Backplane assemblies are large printed circuit boards on which
connectors are mounted to interconnect other printed circuit boards, integrated
circuits and other electronic components. Optoelectronic assemblies are
typically printed circuit assemblies employing fiber optic module integration,
including fusion splicing of functional optical signal processing modules.
Interconnect products manufactured by Sanmina-SCI generally require greater
manufacturing expertise and have shorter delivery cycles than mass produced
interconnect products, and therefore, typically have higher profit margins.

Our customers include leading OEMs in the communications, high-speed
computer systems, medical and industrial instrumentation, multimedia
entertainment and personal computers. Our principal customers on a combined
basis include Alcatel, Cisco Systems, Compaq, Dell Computer, Ericsson, Hewlett
Packard, Houston Tracker, Nokia, Nortel Networks, Phillips and Tellabs.

We locate our manufacturing facilities near our customers and,
increasingly, our customers' end users. On a combined basis, Sanmina-SCI
manufactures its products in 107 decentralized plants, consisting of 71
electronics assembly facilities, 9 printed circuit board fabrication facilities,
3 cable assembly facilities, 23 enclosure assembly facilities and 1 other
manufacturing facility. Sanmina-SCI has electronics assembly, printed circuit
fabrication, enclosure manufacturing, cable manufacturing and global technology
solution centers domestically in Alabama, Arizona, California, Colorado,
Kentucky, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York,
North Carolina, South Dakota, Texas, Utah, Virginia and Wisconsin, and
internationally in Australia, Belgium, Brazil, Canada, China, Finland, France,
Hungary, Israel, Ireland, Malaysia, Mexico, The Netherlands, Singapore, Spain,
Sweden, Thailand and the United Kingdom. In addition to these facilities,
Sanmina-SCI has a 49.9% ownership interest in INBOARD, the remainder of which is
owned by Siemens AG. INBOARD is a manufacturer of complex printed circuit boards
and is located in Germany.

We have pursued and intend to continue to pursue business acquisition
opportunities, particularly when these opportunities have the potential to
enable us to increase our net sales while maintaining operating margins, to
access new customers, technologies or geographic markets, to implement our end
to end total manufacturing solution strategy or to increase capacity and obtain
facilities and equipment. In particular, we expect that we will continue to
pursue opportunities to acquire assembly operations being divested by
electronics industry OEMs, particularly those in the communications sector and
other principal technology sectors served by Sanmina-SCI.

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RECENT DEVELOPMENTS

In December 2001, SCI Systems, Inc. merged with a wholly-owned subsidiary
of Sanmina Corporation and following the transaction, SCI is a wholly owned
subsidiary of Sanmina-SCI. Under the terms of the merger, SCI stockholders
received 1.36 shares of Sanmina common stock for each share of SCI. In
connection with the merger, Sanmina changed its corporate name to Sanmina-SCI
Corporation and three former members of SCI's board of directors joined the
board of directors of Sanmina-SCI.

In October 2001, Sanmina-SCI purchased certain assets of Electro Mechanical
Solutions ("E-M-Solutions"). This transaction includes the purchase of certain
manufacturing operations in the United States, as well as the stock of
E-M-Solutions' subsidiaries incorporated in Mexico and Northern Ireland. The
cash purchase price for this transaction was $110.65 million, $20 million of
which is subject to reduction based on a post-closing audit of E-M-Solutions'
balance sheet.

In September 2001, pursuant to an asset purchase agreement and related
agreements with International Business Machines Corporation, or IBM, and IBM
Japan Limited, or IBM Japan, SCI acquired IBM's design and product testing and
engineering and EMS operations based in Yasu, Japan. The cash purchase price for
this transaction was $90 million.

In connection with the acquisition, an SCI subsidiary, AET Holdings,
Limited, or AET, and IBM entered into two five year supply agreements under
which AET will provide to IBM card design and product testing and engineering
services, fulfillment and manufacturing coordination, and EMS services for
products developed by IBM's Storage Technology and Personal Computer Divisions,
including mobile computing products. The products to be supplied by AET include
certain electronic cards for IBM's notebook personal computers and storage
devices. AET will design and coordinate the manufacture of electronic cards for
IBM as an IBM preferred supplier, but is required to remain competitive under
terms described in the supply agreements, which relate primarily to market terms
for price, delivery and quality of product.

As part of the acquisition, another subsidiary of SCI, SCI Japan
Technologies, Ltd., or SCI Japan, also agreed to use certain employees of IBM
Japan under employment arrangements which may last two or three years. During
that period, SCI Japan may retain certain employees of IBM Japan. The companies
also entered into other transition service arrangements. SCI is actively
pursuing similar transactions, and may enter into similar arrangements as other
manufacturers outsource component manufacturing..

In August 2001, SCI entered into an asset purchase agreement with Nortel
Networks, Ltd. and Nortel Networks, U.K., Ltd. for the purchase of certain of
their assets located in St. Laurent, Quebec and Monkstown, Northern Ireland. The
St. Laurent transaction closed in September 2001 and the Monkstown transaction
closed in November 2001. The cash purchase price for these transactions was
approximately $124 million.

In August 2001, SCI and Nokia UK Ltd entered into an asset purchase
agreement providing for SCI's acquisition of Nokia UK Ltd's Camberley, U.K. test
and repair center. At closing, SCI and Nokia entered into a multi-year repair
service agreement and other related agreements. Under the repair service
agreement, SCI will provide wireless diagnostics; testing and repair services to
Nokia for its mobile communication base station products located in Europe, the
Middle East and Africa. The cash purchase price for this transaction was
approximately $97 million.

In June 2001, SCI and Nortel Networks, Inc. entered into an asset purchase
agreement providing for SCI's purchase of manufacturing equipment and inventory
located at Nortel Network's Boston, Massachusetts systems house. This
transaction closed on August 3, 2001, at which time SCI and Nortel Networks
entered into a multi-year supply agreement under which SCI will manufacture
products for Nortel Networks. The final cash purchase price is contingent on
achieving certain revenue levels but will not exceed $4 million.

INDUSTRY OVERVIEW

We are benefiting from increased market acceptance of the use of
manufacturing specialists in the electronics industry. Many electronics OEMs
have adopted, and are becoming increasingly reliant upon,

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manufacturing outsourcing strategies, and we believe the trend towards
outsourcing manufacturing will continue. Electronics industry OEMs use EMS
specialists for many reasons including the following:

- Reduce Time to Market. Due to intense competitive pressures in the
electronics industry, OEMs are faced with increasingly shorter product
life cycles and, therefore, have a growing need to reduce the time
required to bring a product to market. OEMs can reduce their time to
market by using a manufacturing specialist's established manufacturing
expertise, global presence and infrastructure.

- Reduce Capital Investment. As electronic products have become more
technologically advanced, the manufacturing process has become
increasingly automated, requiring a greater level of investment in
capital equipment. Manufacturing specialists enable OEMs to gain access
to advanced manufacturing facilities, thereby reducing the OEMs' overall
capital equipment requirements.

- Focus Resources. Because the electronics industry is experiencing
greater levels of competition and more rapid technological change, many
OEMs are increasingly seeking to focus their resources on activities and
technologies in which they add the greatest value. By offering
comprehensive electronic assembly and turnkey manufacturing services,
manufacturing specialists allow OEMs to focus on core technologies and
activities such as product development, marketing and distribution.
Comprehensive design services from semiconductor design through New
Product Introduction (NPI) of complete functional product prototypes is
becoming a routine customer need and EMS companies have added significant
internal resources during 2001 to serve this new demand.

- Access Leading Manufacturing Technology. Electronic products and
electronics manufacturing technology have become increasingly
sophisticated and complex, making it difficult for OEMs to maintain the
necessary technological expertise in process development and control.
OEMs are motivated to work with a manufacturing specialist in order to
gain access to the specialist's process expertise and manufacturing
knowledge.

- Improve Inventory Management and Purchasing Power. Electronics industry
OEMs are faced with increasing difficulties in planning, procuring and
managing their inventories efficiently due to frequent design changes,
short product lifecycles, large investments in electronic components,
component price fluctuations and the need to achieve economies of scale
in materials procurement. By using a manufacturing specialist's volume
procurement capabilities and expertise in inventory management, OEMs can
reduce production and inventory costs.

- Access Worldwide Manufacturing Capabilities. OEMs are increasing their
international activities in an effort to lower costs and access foreign
markets. Manufacturing specialists with worldwide capabilities are able
to offer such OEMs a variety of options on manufacturing locations to
better address their objectives regarding cost, shipment location,
frequency of interaction with manufacturing specialists and local content
requirements of end-market countries.

SANMINA-SCI BUSINESS STRATEGY

Our objective is to provide OEMs with a total EMS solution. Our strategy
encompasses several key elements:

- Concentrate on high value added products and services for leading
OEMs. We focus on leading manufacturers of advanced electronic products
that generally require custom designed, more complex interconnect
products and short lead-time manufacturing services. By focusing on
complex interconnect products and manufacturing services for leading
OEMs, we are able to realize higher margins than many other participants
in the interconnect and EMS industries.

- Leverage vertical integration. Building on our integrated manufacturing
capabilities, we can provide our customers with a broad range of high
value added manufacturing services from design to fabrication of bare
printed circuit boards, to final system assembly and test. The cable
assembly capabilities of Sanmina-SCI provide us with further
opportunities to leverage our vertical integration. By manufacturing
printed circuit boards, electronic enclosure systems, and custom cable
assemblies

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used in our EMS assemblies, we, through our vertical integration, are
able to add greater value and realize additional manufacturing margin. In
addition, our vertical integration provides greater control over quality,
delivery and cost, and enables us to offer our customers a complete EMS
solution.

- Focus on high growth customer sectors. We have focused our marketing
efforts on key, fast growing industry sectors. Our customers include
leading OEM companies in communications, industrial and medical
instrumentation and computer sectors. Sales efforts will focus on
increasing penetration of our existing customer base as well as
attracting new customers, thus diversifying our revenue across a wider
base.

- Geographic expansion of manufacturing facilities. Since 1993, we have
significantly expanded and upgraded our operations through the opening of
and acquisition of new facilities and operations in various locations
throughout the United States, including Northern California, Southern
California, the Dallas-Fort Worth area, the greater Boston area, the
greater Chicago area and other locations. Internationally, we have
established operations in Canada, China, France, Germany, Ireland,
Mexico, Sweden and Finland. With the acquisition of Segerstrom, we have
added facilities in Brazil, Hungary, Scotland and additional facilities
in Sweden, Finland and the Atlanta, Georgia area. As a result of our
merger with SCI, Sanmina-SCI will have a manufacturing presence in over
20 countries. These facilities provide us with operations in key
geographic markets for the electronics industry. We will continue to
aggressively and opportunistically pursue future expansion opportunities
in other markets.

- Aggressive pursuit of acquisition opportunities. Our strategy involves
the pursuit of business acquisition opportunities, particularly when
these opportunities have the potential to enable us to increase our net
sales while maintaining operating margin, access new customers,
technologies and geographic markets, implement our vertical integration
strategy and obtain facilities and equipment on terms more favorable than
those generally available in the market. These acquisitions have involved
both acquisitions of entire companies as well as acquisitions of selected
assets, principally equipment, inventory and customer contracts and, in
certain cases, facilities or facility leases. We intend to continue to
evaluate and pursue acquisition opportunities on an ongoing basis.

- Develop long-term customer relationships. We seek to establish
"partnerships" with our customers by focusing on early stage involvement
in product design, state-of-the-art technology, quick-turnaround
manufacturing and comprehensive management support for materials and
inventory. We also work closely with our customers to help them manage
their manufacturing cycle and reduce their time to market. While we will
continue to emphasize growth with our current customers, we have been
successful in attracting new customers. To further these efforts, we
intend to continue to expand our direct sales and support staff. We
believe our direct sales force and support staff are two of our key
competitive advantages.

- Extend technology leadership. Today we can provide a total EMS solution
with services ranging from design services to fabrication of circuit
boards and complete system assemblies. In providing these services, we
use a variety of processes and technologies. We strive for continuous
improvement of our processes and have adopted a number of quality
improvement and measurement techniques to monitor our performance. We
have also recently made significant capital expenditures to upgrade plant
and equipment at our facilities. We intend to stay on the leading edge of
technology development and will evaluate new interconnect and packaging
technologies as they emerge.

CUSTOMERS, MARKETING AND SALES

Our customers include a diversified base of OEMs in the communications,
high-speed computer systems, medical and industrial instrumentation, multimedia
entertainment and personal computers segments of the electronics industry. Our
principal customers on a combined basis include Alcatel, Cisco Systems, Compaq,
Dell Computer, Ericsson, Hewlett Packard, Houston Tracker, Nokia, Nortel
Networks, Phillips and Tellabs.

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The following table shows the approximate percentage, on a combined basis, for
Sanmina-SCI, for our fiscal 2001 sales in each of these industry sectors.

Communications.............................................. 45%
Personal computers.......................................... 22%
High-Speed Computer Systems................................. 17%
Medical and Industrial Instrumentation...................... 9%
Multimedia entertainment.................................... 7%

We develop relationships with our customers and market our manufacturing
services through a direct sales force augmented by a network of manufacturers'
representative firms and a staff of in-house customer support specialists. Our
sales resources are directed at multiple management and staff levels within
target accounts. Our direct sales personnel work closely with the customers'
engineering and technical personnel to better understand their requirements. Our
manufacturers' representatives are managed by our direct sales personnel, rather
than from corporate headquarters, in order to provide for greater accountability
and responsiveness. We also conduct advertising and public relations activities,
as well as receiving referrals from current customers.

Historically, we have had substantial recurring sales from existing
customers. We have also expanded our customer base through acquisitions and
organic growth. In particular, the acquisition of the Alabama operations of
Comptronix Corporation and certain assets of the former custom manufacturing
services division of Lucent Technologies provided us with several new key
customer accounts with significant growth potential. In addition, the November
1997 acquisition of Elexsys International Inc., the November 1998 acquisition of
Altron Incorporated, the December 1998 acquisition of Telo Electronics, Inc.,
and the March 1999 acquisition of Manu-Tronics, Inc. provided us with several
major new customer accounts. Our October and November 1999 acquisitions of
certain Nortel Networks assembly operations have expanded our customer
relationship with Nortel Networks. This relationship was enhanced by our
acquisition of a Nortel Networks design engineering group in August 2000. Our
recent transactions with Alcatel, Harris and Lucent will provide us with the
opportunity to significantly expand our relationship with these customers. Our
acquisitions of Hadco Corporation and Essex AB and our acquisition of EMS
operations in China enabled us to broaden our customer base as well our
geographic base. Our acquisition of Segerstrom has further expanded our global
footprint as well as our enclosure systems and full system build capabilities,
further strengthening our industry leading position in providing our customers
with a total manufacturing solution. Our merger with SCI has resulted in the
creation of a leading global EMS company serving major electronics industry
markets with a full range of manufacturing and related services in key domestic
and international technology centers.

Although we seek to diversify our customer base, a small number of
customers are responsible for a significant portion of our net sales. Prior to
the merger and during fiscal 2001, 2000, and 1999, sales to Sanmina-SCI's ten
largest customers accounted for 51.1%, 54.8% and 48.1%, respectively, of
Sanmina-SCI's net sales. On a combined basis, for fiscal year 2001, the ten
largest customers would have accounted for 55.3%, of Sanmina-SCI's net sales.
Prior to the merger and for fiscal 2001, no single customer individually
exceeded 10.0% of Sanmina-SCI's net sales. For fiscal 2000, sales to one
customer, Nortel Networks, represented more than 10.0% of Sanmina-SCI's net
sales. For fiscal year 1999, no single customer individually exceeded 10.0% of
Sanmina-SCI's net sales.

Although we cannot assure you that our principal customers will continue to
purchase products and services from us at current levels, if at all, we expect
to continue to depend upon our principal customers for a significant portion of
our net sales. Our customer concentration could increase or decrease, depending
on future customer requirements, which will be dependent in large part on market
conditions in the electronics industry segments in which our customers
participate. The loss of one or more major customers, or declines in sales to
major customers, could harm our business and operating results.

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MANUFACTURING SERVICES

We specialize in manufacturing complex printed circuit board assemblies,
backplane assemblies and printed circuit boards that are used in the manufacture
of sophisticated electronic equipment. We began manufacturing backplane
assemblies in 1981 and began providing electronic assembly and turnkey
manufacturing management services, including the assembly and testing of
sophisticated electronic systems, in October 1993.

We seek to establish "partnerships" with our customers by providing a
responsive, flexible total manufacturing services solution. These services
include computer integrated manufacturing, known as CIM, and design and
engineering services, quick-turnaround NPI manufacturing of prototype and
preproduction assemblies, and materials procurement and management. CIM services
provided by us consist of developing manufacturing processes, tooling and test
sequences for new products from customer designs. We also evaluate customer
designs for manufacturability and test, and, when appropriate, recommend design
changes to reduce manufacturing cost or lead times or to increase manufacturing
yields and the quality of the finished product. Once engineering is completed,
we manufacture prototype or preproduction versions of that product on a
quick-turnaround basis. We expect that the demand for engineering and
quick-turnaround prototype and preproduction manufacturing services will
increase as OEMs' products become more complex and as product life cycles
shorten. Materials procurement and handling services provided by us include
planning, purchasing, warehousing and financing of electronic components and
enclosures used in the assemblies and systems.

MANUFACTURING AND ENGINEERING

Manufacturing Processes. We produce complex, technologically advanced
surface mount and pin-through-hole assemblies, backplane assemblies and
multi-layer printed circuit boards, custom cable assemblies, enclosures and full
systems that meet increasingly tight tolerances and specifications demanded by
OEMs. Multi-layering, which involves placing multiple layers of electrical
circuitry on a single printed circuit board or backplane, expands the number of
circuits and components that can be contained on the interconnect product and
increases the operating speed of the system by reducing the distance that
electrical signals must travel. Increasing the density of the circuitry in each
layer is accomplished by reducing the width of the circuit tracks and placing
them closer together on the printed circuit board or backplane. Today, we are
capable of efficiently producing commercial quantities of printed circuit boards
with up to 60 layers and circuit track widths as narrow as three mils.
Additionally, 2 mil line patterning is done on a growing percentage of new
customer designs. The manufacture of complex multilayer interconnect products
often requires the use of sophisticated circuit interconnections between certain
layers (called "blind or buried vias") and adherence to strict electrical
characteristics to maintain consistent circuit transmission speeds (referred to
as "controlled impedance"). Customer requirements for higher signal speed PCBs
increasingly requires the application of recently developed polymer laminate
materials; close development relationships with key laminate materials suppliers
are essential for successful factory and EMS product qualification. These
technologies require very tight lamination and etching tolerances and are
especially critical for printed circuit boards with ten or more layers.

The manufacture of printed circuit boards involves several steps: etching
the circuit image on copper-clad epoxy laminate, pressing the laminates together
to form a panel, drilling holes and depositing copper or other conductive
material to form the inter-layer electrical connections and, lastly, cutting the
panels to shape. Certain advanced interconnect products require additional
critical steps, including dry film imaging, photoimageable soldermask
processing, computer controlled drilling and routing, automated plating and
process controls and achievement of controlled impedance. Manufacture of printed
circuit boards used in backplane assemblies requires specialized expertise and
equipment because of the larger size of the backplane relative to other printed
circuit boards and the increased number of holes for component mounting.

In addition to volume fabrication of printed circuit boards, Sanmina-SCI
has facilities that specialize in prototype and pre-production manufacturing.
Prototypes typically require lead times of three to seven days, and often as
short as 24 hours. Prototype development at these facilities has included
multi-layer printed circuit boards of up to 60 layers, embedded discrete
components, heavy copper substrates, sequential

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lamination, cavity substrates, thermal management products, single chip
carriers, planar magnetics, advanced surface finishes and various high
performance substrates for the high frequency microwave market. These facilities
also support advanced attachment technologies such as Direct Chip Attach (DCA)
and High Density Interconnect (HDI). In combining the design of a printed
circuit with the manufacture of the prototype, Sanmina-SCI can reduce the length
of the design/manufacture cycle. By working closely with customers at the design
and prototype stage, Sanmina-SCI believes it strengthens long-term relationships
with its customers and gains an advantage in securing a preferred vendor status
when customers begin volume production. Pre-production is the manufacture of
limited quantities of electronic interconnects during the transition period from
prototype to volume production. Pre-production generally requires quick-turn
delivery to accommodate time-to-volume pressures or as a temporary solution for
unforeseen customer demands. Pre-production is done both in the quick-turn
prototype and volume production facilities.

The manufacture of surface mount and pin-through-hole assemblies involves
the attachment of various electronic components, such as integrated circuits,
capacitors, microprocessors and resistors to printed circuit boards. The
manufacture of backplane assemblies involves attachment of electronic
components, including printed circuit boards, integrated circuits and other
components, to the backplane, which is a large printed circuit board that we
also manufacture. We use surface mount, pin-through-hole and press-fit
technologies in backplane assembly.

The integration of all these processes allows us to offer an end-to-end
total EMS solution.

Substantially all of our manufacturing facilities are certified under ISO
9002, a set of standards published by the International Organization of
Standardization and used to document, implement and demonstrate quality
management and assurance systems in design and manufacturing. As part of the ISO
9002 certification process, we have developed a quality systems manual and an
internal system of quality controls and audits. Although ISO 9002 certification
is of particular importance to the companies doing business in the European
Community, we believe that United States electronics manufacturers are
increasing their use of ISO 9002 registration as a criteria for suppliers.

In addition to ISO 9000, many of our facilities have been TL 9000
certified. TL 9000 is relatively new telecommunications standard. The TL 9000
Quality System Requirements and Quality System Metrics are designed specifically
for the telecommunications industry to promote consistency, efficiency, and
improved customer satisfaction. Included in the TL 9000 system are
performance-based metrics that measure the reliability and quality performance
of the product.

The majority of our facilities are also Telcordia (formerly Bellcore),
British Approval Board for Telecommunications (BABT), and Underwriters
Laboratories (UL), compliant. These standards define requirements for quality,
manufacturing process control and manufacturing documentation and are required
by many OEMs in the electronics industry, including suppliers to AT&T and the
Regional Bell Operating Companies.

Facilities. On a combined basis, Sanmina-SCI manufactures products in 107
decentralized plants, consisting of 71 electronics assembly facilities, 9
printed circuit board fabrication facilities, 3 cable assembly facilities, 23
enclosure assembly facilities and 1 other manufacturing facility. Generally,
each of our decentralized plants has its own production, purchasing, and
materials management and quality capabilities located on site. The production
expertise of some plants overlaps, which enables us to allocate production based
on product type and available capacity at one or more plants. With assembly
facilities located in major electronics industry centers throughout the country,
including, including Silicon Valley, Southern California, the Dallas-Forth Worth
area, the Research Triangle Park area, New England, the greater Chicago area and
Northern Alabama, as well as international locations including Australia,
Belgium, Brazil, Canada, China, Finland, France, Hungary, Israel, Ireland,
Malaysia, Mexico, The Netherlands, Singapore, Spain, Sweden, Thailand, and The
United Kingdom, we are also able to allocate production based on geographic
proximity to the customer, process capabilities and available capacity.
Decentralized plants can focus on particular product types and respond quickly
to customers' specific requirements. We believe that decentralized facilities
also allow us to achieve improved accountability, quality control and cost
control.

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In November 1998, we entered into a lease with an option to purchase a
330,000 square foot campus facility located in San Jose, California. The
facility consists of four buildings on a single site. We consolidated our
corporate headquarters and some of our San Jose area assembly operations at this
facility. We believe that our existing facilities, together with facilities
expansion and upgrades that are in process or that we are currently evaluating,
are adequate to meet our reasonably foreseeable requirements for at least the
next two years. We continually evaluate our expected future facilities
requirements.

TECHNOLOGY DEVELOPMENT

Our close involvement with our customers at the early stages of their
product development positions us at the leading edge of technical innovation in
the manufacturing of SMT and PTH assemblies, backplane assemblies, and printed
circuit boards. We selectively seek orders that require the use of
state-of-the-art materials or manufacturing techniques in order to further
develop our manufacturing expertise. Current areas of manufacturing process
development include reducing circuit widths and hole sizes, establishing new
standards for particle contamination and developing new manufacturing processes
for the use with new materials and new surface mount connector and component
designs.

Recent developments in the electronics industry have necessitated
improvements in the types of laminate used in the manufacture of interconnect
products. New laminate materials may contain new chemical formulations to
achieve better control of flow, resin systems with high glass transition
temperatures, reduced surface imperfections and greatly improved dimensional
stability. Future generations of interconnect products will require lower
dielectric loss polymers for better total signal transmission integrity, ultra
fine lines, multilayers of much greater complexity and thickness, and extremely
small holes in the 3 to 10 mil range. The materials designed to meet these
requirements, such as BT epoxy, cyanate esters, polyamide quartz, thermoplastic
composites, and Kevlar epoxy, are beginning to appear in the marketplace.
Widespread commercial use of these materials will depend upon statistical
process control and improved manufacturing procedures to achieve the required
yields and quality. In addition, Hadco has developed a material technology known
as Buried Capacitance as well as various other microvia processes which are
designed to provide improved electrical performance, decreased EMI emissions,
and greater interconnect densities on printed circuit boards.

We have developed expertise and techniques, which we use in the manufacture
of circuit boards, backpanels and subsystems. Generally, we rely on common law
trade secret protection and on confidentiality agreements with our employees to
protect our expertise and techniques.

SUPPLIER RELATIONSHIPS

We order materials and components based on purchase orders received and
accepted and seek to minimize our inventory of materials or components that are
not identified for use in filling specific orders.

Historically, the majority of raw materials used in Sanmina-SCI's
manufacture of printed circuit boards and components used in backplane and
system assemblies have been readily available. However, in the recent past there
have been shortages of electronic components that have affected the ability of
Sanmina-SCI and other manufacturers to complete and ship assemblies on a timely
basis. Component shortages can force Sanmina-SCI to delay shipments to
customers, which could harm Sanmina-SCI's results of operations for a particular
fiscal period and could also expose Sanmina-SCI to contractual penalties for
failure to complete deliveries as scheduled. Accordingly, component shortages
could harm Sanmina-SCI's business, financial condition and results of
operations.

INTELLECTUAL PROPERTY

Sanmina-SCI holds various United States and foreign patents directed to
printed circuit boards and methods of manufacturing printed circuit boards.
Although Sanmina-SCI seeks to protect certain proprietary technology and other
intangible assets through patents and trademark filings, it has relatively few
patents and relies primarily on trade secret protection. There can be no
assurance that Sanmina-SCI will be able to protect its trade secrets or that
others will not independently develop substantially equivalent proprietary
information
9

and techniques or otherwise gain access to Sanmina-SCI's trade secrets. The
future success of Sanmina-SCI will depend on the continued development of
processes and capabilities. Sanmina-SCI believes that its accumulated experience
with respect to materials and process technology is also important to its
operations.

ENVIRONMENTAL CONTROLS

We are subject to a variety of local, state, federal environmental laws and
regulations in the United States and elsewhere relating to the treatment,
storage, use, discharge, emission and disposal of chemicals, solid waste and
other hazardous materials used during their manufacturing processes, as well as
occupational safety and health laws, and product take back, product labeling and
product content requirements. The failure to comply with present and future laws
and regulations could restrict our ability to expand facilities or could require
us to acquire costly equipment or to incur other significant expenses to comply
with environmental regulations including the payment of fines and penalties.
Proper waste disposal is a major consideration for printed circuit board
manufacturers because metals and chemicals are used in the manufacturing
process. Water used in the printed circuit board manufacturing process must be
treated to remove metal particles and other contaminants before it can be
discharged into municipal sanitary sewer systems. In addition, although the
electronics assembly process generates significantly less wastewater than
printed circuit board fabrication, maintenance of environmental controls is also
important in the electronics assembly process. Each of our printed circuit board
and electronics assembly plants has personnel responsible for monitoring
environmental compliance.

Each plant, to the extent required by law, operates under environmental
permits issued by the appropriate governmental authority. These permits must be
renewed periodically and are subject to revocation in the event of violations of
environmental laws. There can be no assurance that violations will not occur in
the future as a result of human error, equipment failure or other causes. In the
event of a future violation of environmental laws, we could be held liable for
damages, fines, costs of remedial actions, and we could be subject to revocation
of permits. Any such revocation could require us to cease or limit production at
one or more of our facilities, thereby having an adverse impact on our results
of operations.

We have through our acquisitions, and in some cases with respect to our own
sites, discovered contamination in the soil, groundwater and in the interior of
certain sites. For example, contamination has been discovered in soil and
groundwater of current and former operating sites including the Mountain View
and Irvine, California sites associated with our November 1997 acquisition of
Elexsys International, Inc., the Wilmington, Massachusetts site associated with
our November 1998 acquisition of Altron Corporation, the Derry, New Hampshire,
Owego, New York and Ft. Lauderdale, Florida sites associated with our June 2000
acquisition of Hadco Corporation and SCI's Brockville, Ontario site. Lead dust
contamination associated with printed circuit board assembly has been discovered
in SCI's Arab, Alabama, Colorado Springs, Colorado and San Jose, California
facilities. In addition, there are certain sites where the potential for
contamination exists, but has not been confirmed

We believe, based on the limited information currently available, that the
cost of any groundwater or soil clean-up that may be required at these
facilities would not materially harm our business, financial condition and
results of operations. Nevertheless, the process of remediating contamination in
soil, groundwater and inside the facilities is costly, and there can be no
assurance that the costs of such activities would not harm our business,
financial condition and results of operations. Sanmina-SCI has, with its
consultants, performed environmental review of acquired sites and has
established a reserve to address these liabilities. The issues associated with
these and other contaminated sites and the reserves for liabilities associated
with the contamination are described in detail under "Factors Affecting
Operating Results." We also have been named as a potentially responsible party
at contaminated disposal sites such as the Casmalia Resources Site, the
Allworth, Inc. site and several other sites as a result of the past disposal of
hazardous waste by Sanmina-SCI, companies we acquired or their corporate
predecessors. While liabilities for such historic disposal activities have not
been material to our financial condition to date, there can be no guarantee that
past disposal activities will not result in material liability to us in the
future. These disposal site liabilities and the reserves associated with them
are further described under "Factors Affecting Operating Results."

10

BACKLOG

Sanmina-SCI's backlog prior to the merger was approximately $0.7 billion at
September 29, 2001. Sanmina-SCI's backlog, on a combined basis, would have been
approximately $3.4 billion at September 29, 2001. Backlog consists of purchase
orders received, including, in certain instances, forecast requirements released
for production under customer contracts. Cancellation and postponement charges
generally vary depending upon the time of cancellation or postponement, and a
certain portion of our backlog may be subject to cancellation or postponement
without significant penalty. Typically, a substantial portion of our backlog is
scheduled for delivery within the next six months.

COMPETITION

Significant competitive factors in the market for advanced backplane
assemblies and printed circuit boards include product quality, responsiveness to
customers, manufacturing and engineering skills, and price. We believe that
competition in the market sectors we serve is based more on product quality and
responsive customer service and support than on price, in part because the cost
of interconnect products we manufacture is usually low relative to the total
cost of the equipment for which they are components, and in part because of the
greater importance of product reliability and prompt delivery to our customers.
We believe that our primary competitive strengths are our ability to provide
leading edge technology and to provide an end to end total EMS solution which
includes responsive, flexible, short lead-time manufacturing services, our
engineering and manufacturing expertise and our customer service support.

We face intense competition from a number of established competitors in our
various product markets. Certain of our competitors have greater financial and
manufacturing resources than we do, including significantly greater surface
mount assembly capacity. During periods of recession in the electronic industry,
our competitive advantages in the areas of quick-turnaround manufacturing and
responsive customer service may be of reduced importance to electronics OEMs,
who may become more price sensitive. In addition, captive interconnect product
manufacturers may seek orders in the open market to fill excess capacity,
thereby increasing price competition. Although we generally do not pursue
high-volume, highly price sensitive interconnect product business, we may be at
a competitive disadvantage with respect to price when compared to manufacturers
with lower cost structures, particularly those manufacturers with more extensive
offshore facilities where labor and other costs are lower.

EMPLOYEES

As of September 2001, Sanmina-SCI, on a combined basis, would have had
48,774 full-time employees, including 47,156 in manufacturing and engineering,
575 in marketing and sales and 1,043 in general administration and finance. None
of our U.S. employees are represented by a labor union and we have never
experienced a work stoppage or strike. We believe our relationship with our
employees is good.

ITEM 2. PROPERTIES

Our facilities consist of assembly, fabrication, enclosure, cable and
other, and global technology solution centers, located domestically and
internationally. These facilities, on a combined basis, comprise an aggregate of
approximately 14.9 million square feet, including square footage that is
currently unoccupied due to restructuring and consolidation activities, of which
5.4 million square feet are leased. Leases for these facilities

11

expire between 2001 and 2010. The leases generally may be extended at our
option. Our principal facilities are located as follows:

- ---------------

(1) Includes facilities located nearby in Santa Clara, Fremont, Milpitas and
Mountain View.

We believe that our existing facilities, together with facilities
expansions and upgrades that are in process or that we are currently evaluating,
are adequate to meet our reasonably foreseeable requirements for at least the
next two years. We continually evaluate our expected future facilities
requirements.

ITEM 3. LEGAL PROCEEDINGS

Sanmina-SCI and certain of its subsidiaries, namely Hadco and SCI, are
involved in various administrative proceedings related to environmental matters.
These matters are described in greater detail under "Factors Affecting Operating
Results." Although Sanmina-SCI could incur significant costs relating to these
matters, Sanmina-SCI believes, on the limited information currently available,
that the cost of any remediation that may be required at these facilities would
not materially harm our business, financial condition or results of operations.

Sanmina-SCI is a party to certain other legal proceedings that have arisen
in the ordinary course of its business. The amounts in controversy in these
matters are not material to Sanmina-SCI, and Sanmina-SCI believes that the
resolution of these proceedings will not have a material adverse effect on
Sanmina-SCI's business, financial condition and results of operations.

On June 13, 2001, Sanmina-SCI filed a complaint against Metricom, Inc. in
the California state court. The complaint arose out of a July 2, 1999 Agreement
for Electronic Manufacturing Services and seeks compensation for cancellation
charges arising under this agreement. Sanmina-SCI's damages consist of the cost
of certain materials and work-in-process. Metricom has filed for Chapter 11
bankruptcy, and as a result, Sanmina-SCI's claim has been stayed. Accordingly,
Sanmina-SCI has filed a claim for its damages in the bankruptcy proceedings.
Sanmina-SCI currently estimates it has no additional exposure on this matter
(after exhausting allocated reserves).

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

EXECUTIVE OFFICERS OF THE COMPANY

Pursuant to General Instruction G(3), the information regarding the
Company's executive officers required by Item 401(b) of Regulation S-K is hereby
included in Part I of this report.

The following table sets forth the name of each executive officer of the
Company, the office held by such officer and the age, as of December, 2001, of
such officer.

13

Mr. Sola co-founded Sanmina-SCI in 1980 and initially held the position of
Vice President of Sales and Marketing and was responsible for the development
and growth of Sanmina-SCI's sales organization. He became Vice President and
General Manager in October 1987 with responsibility for all manufacturing
operations as well as sales and marketing. Mr. Sola was elected President in
October 1989 and has served as Chairman of the Board and Chief Executive Officer
since April 1991. Mr. Sola relinquished the title of President when Mr. Furr was
appointed to such position in March 1996. As of the consummation of the merger,
Mr. Sola serves as Co-Chairman of the Sanmina-SCI Board of Directors and
continues as Chief Executive Officer of Sanmina-SCI.

Mr. Sapp joined SCI in 1962, and after holding several positions, was
promoted to President and Chief Operating Officer in 1981. In July 1999, Mr.
Sapp was appointed Chief Executive Officer of SCI Systems, Inc. and had served
as Chairman of the Board and Chief Executive Officer since July 2000. As of the
consummation of the merger, Mr. Sapp serves as Co-Chairman of the Sanmina-SCI
Board of Directors.

Mr. Furr joined Sanmina-SCI as Vice President and Chief Financial Officer
in August 1992. In March 1996, Mr. Furr was appointed President and Chief
Operating Officer. In December 1999, Mr. Furr was appointed to Sanmina-SCI's
Board of Directors. Mr. Furr is a Certified Public Accountant. As of the
consummation of the merger, Mr. Furr continues as President, Chief Operating
Officer and a Director of Sanmina-SCI.

Mr. Ackel became Chief Financial Officer and Executive Vice President at
Sanmina-SCI in June 2000. Mr. Ackel joined Sanmina-SCI after 25 years of
experience with Arthur Andersen LLP. As a partner for Arthur Andersen LLP, Mr.
Ackel worked with a number of high technology and manufacturing clients. He has
a Bachelor of Science Degree from California State University at Hayward, is a
Certified Public Accountant and a member of the California State Society of
CPA's and the AICPA. As of the consummation of the merger, Mr. Ackel continues
as Executive Vice President and Chief Financial Officer of Sanmina-SCI.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Sanmina-SCI's common stock is traded on the Nasdaq National Market under
the symbol SANM. The following table lists the high and low closing prices for
Sanmina-SCI's common stock as reported on Nasdaq.

As of December 10, 2001, we had approximately 2,828 common stockholders of
record. On December 10, 2001, the last reported sales price of Sanmina-SCI's
common stock on the Nasdaq National Market was $23.50 per share.

We have never declared or paid any cash dividends on our common stock. We
currently expect to retain future earnings for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future.

14

ITEM 6. SELECTED FINANCIAL DATA

FIVE YEAR SELECTED FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This report contains forward-looking statements within the meaning of
Section 72A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual events and/or future results of operations may
differ materially from those contemplated by such forward-looking statements, as
a result of the factors described herein, and in the documents incorporated
herein by reference, including, in particular, those factors described under
"Factors Affecting Operating Results."

OVERVIEW

Sanmina-SCI Corporation ("Sanmina-SCI") was incorporated in Delaware in May
1989 to acquire its predecessor company which had been in the printed circuit
board and backplane business since 1980. Sanmina-SCI is a leading independent
provider of customized integrated electronic manufacturing services ("EMS"),
including turnkey electronic assembly and manufacturing management services, to
original

15

equipment manufacturers ("OEMs") in the electronics industry. Our principal
customers on a combined basis include Alcatel, Cisco Systems, Compaq, Dell
Computer, Ericsson, Hewlett Packard, Houston Tracker, Nokia, Nortel Networks,
Phillips and Tellabs. Sanmina-SCI's electronics manufacturing services consist
primarily of the design and manufacture of complex printed circuit board
assemblies using surface mount ("SMT") and pin-through hole ("PTH")
interconnection technologies, the manufacture of custom designed backplane
assemblies, fabrication of complex multi-layered printed circuit boards, metal
stamping and plating, electronic enclosure systems, subsystem assembly, testing,
and assembly of completed systems and direct order fulfillment. In addition to
assembly, turnkey manufacturing management also involves procurement and
materials management, as well as consultation on printed circuit board design
and manufacturing. Sanmina-SCI also manufactures custom cable and wire harness
assemblies.

Sanmina-SCI, prior to its merger with SCI, manufactured its products in 53
decentralized plants, consisting of 28 electronics assembly facilities, 9
printed circuit board fabrication facilities, 3 cable assembly facilities, 12
enclosure assembly facilities and 1 other manufacturing facility. Sanmina-SCI,
prior to its merger with SCI, had electronics assembly, printed circuit board
fabrication, enclosure manufacturing, cable manufacturing and global technology
solution centers domestically in Alabama, Arizona, California, Massachusetts,
New Hampshire, New York, North Carolina, Texas, Utah and Wisconsin and
internationally in Brazil, Canada, China, Finland, France, Hungary, Ireland,
Malaysia, Mexico, Scotland and Sweden. In addition to the above facilities,
Sanmina-SCI had a 49.9% ownership interest in INBOARD, the remainder of which is
owned by Siemens AG. INBOARD is a manufacturer of complex printed circuit boards
located in Germany.

In December 2001, SCI Systems, Inc. merged into a wholly-owned subsidiary
of Sanmina-SCI Corporation. Under the terms of the merger, SCI stockholders
received 1.36 shares of Sanmina-SCI common stock for each share of SCI. In
connection with the merger, Sanmina Corporation changed its corporate name to
Sanmina-SCI Corporation and three former members of SCI's board of directors
joined the board of directors of Sanmina-SCI.

In October 2001, Sanmina-SCI purchased certain assets of Electro Mechanical
Solutions, Inc., a privately-held manufacturer of electronic enclosures. This
transaction includes the purchase of certain manufacturing operations in the
United States, in Mexico and Northern Ireland. The cash purchase price for this
transaction was $110.65 million, $20 million of which is subject to reduction
based on a post-closing audit of E-M-Solutions' balance sheet.

In March 2001, Sanmina-SCI acquired AB Segerstrom & Svensson
("Segerstrom"), a global supplier of integrated enclosure systems to the
communications sector. The transaction was structured as a stock for stock
exchange and was accounted for as a pooling of interests. Under the terms of the
agreement, each Segerstrom common share and convertible debenture was converted
into approximately 0.4519 shares of Sanmina-SCI common stock. Sanmina-SCI
acquired approximately 94% of the outstanding shares of Segerstrom pursuant to
its offer to acquire Segerstrom. Sanmina-SCI has commenced a compulsory
acquisition process for the remaining shares in accordance with Swedish law and
business practice. Sanmina-SCI has issued approximately 11.6 million shares of
common stock in connection with the acquisition of Segerstrom. This number
represents 94% of outstanding shares and convertible debentures of Segerstrom,
and the remaining 6% will be acquired under the compulsory acquisition process,
which is expected to be completed within the next 12 months. Segerstrom has
manufacturing facilities in Brazil, Finland, Scotland and Sweden.

Prior to being acquired by Sanmina-SCI, Segerstrom operated under a
calendar year end, and accordingly, Segerstrom's statements of operations,
shareholders' equity and cash flows for the year ended December 31, 2000 have
been combined with the corresponding Sanmina-SCI consolidated statements for the
year ended September 30, 2000. During Sanmina-SCI's fiscal 2001, Segerstrom's
year-end was changed from December 31 to a 52 or 53 week year ending on the
Saturday nearest September 30 to conform to Sanmina-SCI's fiscal year end.
Accordingly, an adjustment was made to retained earnings in the first quarter of
fiscal 2001 to eliminate the duplication of $5.3 million of net income for
Segerstrom, for the three months of Segerstrom operations ended December 31,
2000. Segerstrom's revenues for the three months ended December 31, 2000 were
$96 million. For the three months ended December 31, 2000, Segerstrom cash
provided by operating activities of $5.9 million, cash used for investing
activities of $4.8 million and cash

16

provided by financing activities of $0.4 million have been excluded from
Sanmina-SCI's consolidated statement of cash flows for year ended September 29,
2001.

Sanmina-SCI's results of operations have varied and may continue to
fluctuate significantly from period to period, including on a quarterly basis.
Sanmina-SCI's operating results are affected by a number of factors. These
factors include timing of orders from major customers, mix of product ordered by
and shipped to major customers, the volume of orders as related to Sanmina-SCI's
capacity, the ability of Sanmina-SCI to effectively manage inventory and fixed
assets, pricing and competitive pressures, component shortages, which could
cause Sanmina-SCI to be unable to meet customer delivery schedules, and the
ability of Sanmina-SCI to time expenditures in anticipation of future sales.
Sanmina-SCI's results are also affected by the mix of products between backplane
assemblies and printed circuit boards as well as general economic conditions in
the electronics industry. Sanmina-SCI's results can also be significantly
influenced by development and introduction of new products by Sanmina-SCI's
customers. From time to time, Sanmina-SCI experiences changes in the volume of
sales to each of its principal customers, and operating results may be affected
on a period-to-period basis by these changes. Sanmina-SCI's customers generally
require short delivery cycles, and a substantial portion of Sanmina-SCI's
backlog is typically scheduled for delivery within six months. Quarterly sales
and operating results therefore depend in large part on the volume and timing of
bookings received during the quarter, which are difficult to forecast,
especially with the uncertainty and slowdown of Sanmina-SCI's customers'
end-markets.

Sanmina-SCI's backlog also affects its ability to plan production and
inventory levels, which could lead to fluctuations in operating results. In
addition, a significant portion of Sanmina-SCI's operating expenses are
relatively fixed in nature and planned expenditures are based in part on
anticipated orders. Any inability to adjust spending quickly enough to
compensate for any revenue shortfall may magnify the adverse impact of such
revenue shortfall on Sanmina-SCI's results of operations. Results of operations
in any period should not be considered indicative of the results to be expected
for any future period. In addition, fluctuations in operating results may also
result in fluctuations in the price of Sanmina-SCI's convertible subordinated
notes and common stock.

Sanmina-SCI's customers include a diversified base of OEMs in the
communications (telecommunications and networking), high-speed computer systems,
industrial and medical instrumentation, multimedia entertainment and personal
computers sectors of the electronics industry. These industry sectors, and the
electronics industry as a whole, are subject to rapid technological change and
product obsolescence. Discontinuance or modification of products being
manufactured by Sanmina-SCI could adversely affect Sanmina-SCI's results of
operations. The electronics industry is also subject to economic cycles and has
in the past experienced, and is likely in the future to experience, recessionary
periods. In particular, many sectors of the electronics industry, including
particularly the telecommunications sector, are currently experiencing a
significant downturn in economic conditions. This downturn is leading to reduced
demand for the services provided by EMS companies, including Sanmina-SCI. These
changes in demand and in economic conditions have resulted and may continue to
result in customer rescheduling of orders and shipments, which could affect
Sanmina-SCI's results of operations. In addition, a protracted general recession
in the electronics industry could have a material adverse effect on
Sanmina-SCI's business, financial condition and results of operations.
Sanmina-SCI has no firm long-term volume commitments from its customers and over
the last few years has experienced reduced lead-time in customer orders. In
addition, customer orders can be canceled and volume levels can be changed or
delayed. The timely replacement of cancelled, delayed or reduced orders with new
business cannot be assured. There can be no assurance that any of Sanmina-SCI's
current customers will continue to use Sanmina-SCI's manufacturing services. The
loss of one or more of Sanmina-SCI's principal customers, or reductions in sales
to any of such customers, could have a material adverse effect on Sanmina-SCI's
business, financial condition and results of operations.

Sanmina-SCI has pursued, and intends to continue to pursue, business
acquisition opportunities, particularly when these opportunities have the
potential to enable Sanmina-SCI to increase its net sales while maintaining
operating margins, to access new geographic markets, to implement Sanmina-SCI's
vertical integration strategy and/or to obtain access to new customers,
geographic regions, facilities and equipment on

17

terms more favorable than those generally available in the market. Acquisitions
of companies and businesses and expansion of operations involves certain risks,
including

- the potential inability to successfully integrate acquired operations and
businesses or to realize anticipated synergies, economies of scale or
other value,

- diversion of management's attention,

- difficulties in scaling up productions at new sites and coordinating
management of operations at new sites and

- loss of key employees of acquired operations.

No assurance can be given that Sanmina-SCI will not incur problems with
integrating acquired operations, including the integration of SCI, which is
currently underway. In addition, there can be no assurance that Sanmina-SCI's
recent acquisitions, including the Sanmina-SCI merger, or any future acquisition
will result in a positive contribution to Sanmina-SCI's results of operations.
Furthermore, there can be no assurance that Sanmina-SCI will realize value from
any such acquisition that equals or exceeds the consideration paid. In addition,
there can be no assurance that Sanmina-SCI will realize anticipated strategic
and other benefits from expansion of existing operations to new sites. Any such
problems could have a material adverse effect on Sanmina-SCI's business,
financial condition and results of operations. In addition, future acquisitions
may result in dilutive issuances of equity securities, the incurrence of
additional debt, large one-time write-offs and the creation of other intangible
assets that could result in amortization expense and goodwill.

In addition, Sanmina-SCI expects to pursue opportunities to acquire
assembly operations being divested by electronics industry OEMs. Sanmina-SCI
expects that competition for these opportunities among electronics manufacturing
services firms will be intense because these transactions typically enable the
acquirer to enter into long-term supply arrangements with the divesting OEM.
Accordingly, Sanmina-SCI's future results of operations could be adversely
affected if Sanmina-SCI is not successful in attracting a significant portion of
the OEM divestiture transactions it pursues. In addition, due to the large scale
and long-term nature of supply arrangements typically entered into in OEM
divestiture transactions and because cost reductions are generally a major
reason why the OEM is divesting operations, pricing of manufacturing services
may be less favorable to the manufacturer than in standard contractual
relationships. Accordingly, as Sanmina-SCI enters into new OEM divestiture
transactions, Sanmina-SCI may experience erosion in gross margins.

18

RESULTS OF OPERATIONS

Fiscal Years Ended September 29, 2001, September 30, 2000 and October 2, 1999

The following table sets forth, for the periods indicated, certain
statements of operations data expressed as a percentage of net sales.

Net Sales. Net sales in fiscal 2001 decreased 4.4% to $4,054.0 million
from $4,239.1 million in fiscal 2000. Net sales in fiscal 2000 increased 61.8%
to $4,239.1 million in fiscal 2000 from $2,620.6 million in fiscal 1999. The
decrease in net sales for fiscal 2001 was primary due to a downturn in economic
conditions worldwide and in the electronics industry in general, and the
communications sector in particular. This downturn has had a significant impact
on our customers and the markets in which they sell their products and services
during the last nine months of fiscal year 2001. These economic conditions have
resulted in a reduced demand for services provided by Sanmina-SCI and other EMS
companies. The increase in net sales for fiscal 2000 as compared to fiscal 1999
was due primarily to a more positive economic environment, resulting in
increased shipments of printed circuit boards and EMS assemblies to both
existing and new customers obtained both through acquisitions and internal
growth. Sanmina-SCI's printed circuit board fabrication operations focused
increasingly on manufacturing printed circuit boards used in EMS assemblies and
subassemblies manufactured by Sanmina-SCI. Growth in EMS assembly revenues
between fiscal 1999 and 2000 was influenced by the electronics industry trend
towards outsourcing, expansion of Sanmina-SCI's operations, both through
acquisitions and Sanmina-SCI originated expansions, and a generally positive
economic environment in the communications, medical and industrial
instrumentation, and high speed computer systems sectors of the electronics
industry. These industry sectors continued to experience overall growth during
fiscal 1999 and fiscal 2000.

19

The following summarizes financial information by geographic segment (in
thousands):

Domestic sales for fiscal 2001 decreased by 3.6% to $3.1 billion from $3.2
billion and international sales decreased by 6.7% to $986.8 million from $1.1
billion in the corresponding period of the prior year. The decrease in sales in
both geographic segments is primarily due to the downturn in economic conditions
worldwide. Domestic sales for fiscal 2000 increased by 48.9% to $3.2 billion
from $2.1 billion and international sales increased 118.4% to $1.1 billion from
$484.1 million in the corresponding period of the prior year.

As a result of the acquisition of Segerstrom and the prior pooling of
interests accounting for Hadco and Essex, Sanmina-SCI has restated its
historical results of operations to include the results of operations of these
entities. The financial information presented gives effect to this restatement.
A reconciliation of the financial statements for the year ended September 30,
2000, to previously reported information is as follows (in thousands):

In the last two fiscal years, Sanmina-SCI has made substantial strategic
acquisitions of communication product manufacturing operations and electronics
industry related enclosure manufacturers. These acquisitions contributed to end
market diversification and represented 6.7% and 39.8% of net revenue in fiscal
2001 and 2000.

Gross Margin. Gross margins were 13.4%, 16.0%, and 16.6% in fiscal 2001,
2000, and 1999, respectively. The decrease in margins between 2001 and 2000 was
primarily attributable to applying fixed costs to a lower base of revenues,
changes in product and customer mix and additions to inventory reserves to
account for changing customer demand, as compared to the prior year. Sanmina-SCI
expects gross margins to continue to be influenced by product and customer mix.
The 2001, 2000 and 1999 gross margin reflects charges related to the write down
of obsolete inventory and other manufacturing related assets. In 2001, 2000 and
1999,

20

$152.6 million, $29.4 million and $4.9 million of raw materials inventory was
written down, respectively. These writedowns were related to:

- inventory written down to lower of cost or market (first-in, first-out
method),

- raw materials held specific to customers who were no longer in business,

- litigation and

- changes in customer demand for inventory that resulted in excess
quantities on hand.

Inventory is procured by Sanmina-SCI based on specific customer orders.
Correspondingly, customer modifications in orders for inventory previously
procured by (e.g. cancellations as well as inventory that is highly customized
and therefore not available for use by other customers) resulted in excess and
obsolete inventory for the related customers that could not be recovered through
put back to vendors or the specific customer concerned. The 2000 and 1999 gross
margin also reflects an offsetting increase to the gross margin resulting from
improved mix and capacity utilization from printed circuit boards and assembly
operations from acquired companies. The decrease in margins between 2000 and
1999 was primarily attributable to pricing terms negotiated as part of OEM
divestiture transactions, principally the Nortel Networks transaction that was
completed in the first quarter of fiscal 2000 and transactions with Harris
Corporation and Alcatel, which were completed during 2000. This decrease was
partially offset by the realization of synergies associated with the completion
of the acquisition of Hadco Corporation during the fourth quarter of the fiscal
year. Due to increased competition, product and customer mix, and pricing
structures negotiated in OEM divestiture transactions, including the recent
transactions and possible future transactions, Sanmina-SCI may continue to
experience decreases in gross margins.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal 2001, 2000, and 1999 were $239.7 million,
$235.7 million, and $174.1 million, respectively. The percentages based upon
sales were 5.9%, 5.6%, and 6.7%, respectively. The percentage increase in
selling, general and administrative expenses for fiscal 2001 was primarily due
to a lower base of revenues. The percentage decreases in selling, general and
administrative expenses for fiscal 2000 and 1999 were due to Sanmina-SCI's
ability to grow sales while maintaining or reducing operating expenses as a
percentage of net sales, including synergies gained from acquisitions. The
absolute dollar increases in selling, general and administrative expenses for
fiscal 2000 and 1999 were primarily the result of increased expenditures to
support higher sales volume. In particular, the balance in the reserve for
doubtful accounts increased from $10.9 million in fiscal 1999 to $27.8 million
in fiscal 2000 as a result of doubtful accounts arising from a larger accounts
receivable base. The gross accounts receivable balance for fiscal 1999 was
$388.3 million as compared to fiscal 2000, which was $742.3 million or a 91%
increase year over year. Correspondingly, the net sales for 1999 was $2.6
billion as compared to 2000 which was $4.2 billion or a 61.8% increase year over
year. For fiscal 2001, the balance in the reserve for doubtful accounts
increased to $48.6 million from $27.8 million in fiscal 2000. Gross accounts
receivable for fiscal 2001 was $458.5 million as compared to fiscal 2000, which
was $742.3 million or a 38.2% decrease year over year. The increase in the
reserve for doubtful accounts in fiscal 2001 was related to deterioration in the
economic environment affecting certain customers ability to pay primarily in the
communications sector. Selling, general and administrative expenses as a
percentage of sales are anticipated to remain relatively constant or decrease
slightly, depending on sales volume and our ability to scale back on operations
to be in line with anticipated customer demand. In addition, we expect to
continue to achieve operating synergies as a result of integration of acquired
businesses and Sanmina-SCI's focus on controlling operating expenses.

Amortization of Goodwill and Intangibles. Sanmina-SCI incurred $26.4
million, $23.5 million, and $16.5 million in amortization expense for fiscal
years 2001, 2000, and 1999, respectively. These amortization expenses reflect
the amortization of intangibles and goodwill related to those acquisitions which
were accounted for as purchase transactions.

Merger and restructuring costs. In fiscal year ended 1999, Sanmina-SCI
closed certain manufacturing plants in Fremont, California and Woburn,
Massachusetts and merged the operations from these facilities into existing
manufacturing facilities within the same regions. These closures were made to
eliminate duplicate
21

facilities and other costs resulting from the merger with Altron in fiscal 1999.
Concurrent with the plant closures, Sanmina-SCI reduced its workforce in the
same regions by approximately 50 people. Sanmina-SCI also incurred restructuring
costs related to lease payments (less any applicable sublease income) for
properties abandoned and Sanmina-SCI's planned relocation to its new campus
facility in fiscal 2000. Asset related write-offs consisted of excess equipment
and leasehold improvements to facilities that were abandoned and whose estimated
fair market value were zero. Sanmina-SCI's move to the new campus facility
commenced in fiscal 1999 and was completed in the second quarter of fiscal 2000.
Noncancelable lease payments on vacated facilities were paid in full as of the
end of fiscal 2000. Sanmina-SCI also discontinued the use of enterprise-wide
software and hardware used internally by the acquired companies, as these were
no longer required post acquisition. The closing of the plants discussed above,
and the costs related to the integration of information systems and hardware,
were all incurred in fiscal 1999.

In fiscal 1999, and prior to its acquisition by Sanmina-SCI, Segerstrom
closed a factory in Stockholm, Sweden and merged the operations into existing
facilities in Sweden and Finland. These costs included severance payments to
involuntarily terminate employees, lease termination and facility exit costs and
asset write-offs related to excess equipment and leasehold improvements for
facilities that were abandoned and whose estimated fair value was zero.

At the end of fiscal 1999 and in accordance with EITF 94-3, an accrual of
approximately $10.1 million remained. The balance of the accrued amounts were
fully paid in fiscal 2000. Below is a summary detailing the specific components
of restructuring costs for fiscal 1999:

Merger costs of $5.5 million were also recorded in 1999, of which $3.2
million was paid during fiscal year ended 1999 and the balance of $2.3 million
paid in fiscal year ended 2000. These costs consisted of fees for investment
bankers, attorneys, accountants and other direct merger related expenses and
relate to those acquisitions that were accounted for using the pooling of
interests method.

In June 2000, Sanmina-SCI acquired Hadco Corporation ("Hadco") in a pooling
of interests business combination. Sanmina-SCI recorded, in accordance with EITF
94-3, involuntary termination costs representing expected severance costs of 885
employee positions due to attrition and expected synergies arising from the
closure of duplicate facilities. At the end of fiscal 2000, approximately $11.8
million had been paid representing primarily severance payments to 13 members of
Hadco senior management pursuant to employee agreements. At the time of the
original EITF 94-3 plan, Sanmina-SCI expected to downsize duplicate Hadco
facilities in the six months immediately following the merger. Severance
agreements with affected employees specified that if the employees were
terminated within six months of the merger date, they would receive specified
severance amounts, which was the amount originally accrued. However, the volume
of activity in that six month period picked up significantly, and personnel at
these particular facilities were needed. Subsequent to the six months following
the merger, Sanmina-SCI experienced an economic slowdown and terminated the
remaining 834 identified positions. As the ultimate termination of the remaining
positions was after the expiration of the original six month severance period,
Sanmina-SCI determined it would not extend the severance agreement time periods.
This determination, and the completion of the termination of the affected
employees was reached in the quarter ending June 30, 2001 and accordingly,
Sanmina-SCI reversed the balance of the accrual of approximately $14 million
through the line item "Restructuring Costs" in the statement of operations for
the three months ended June 30, 2001. All restructuring activities related to
the Hadco acquisition were completed as of June 30, 2001. In June 2000,
Sanmina-SCI acquired Essex AB

22

("Essex") in a pooling of interests business combination. Sanmina-SCI recorded,
in accordance with EITF 94-3, involuntary termination costs representing
expected severance costs of 38 employee positions. As of the end of fiscal 2000,
no amounts had been paid. As of Sanmina-SCI's fiscal quarter ended June 30,
2001, Sanmina-SCI had completed the termination of the identified positions, but
at a significantly reduced cost than originally anticipated. Sanmina-SCI
reversed the balance of the accrual at June 30, 2001 of approximately $449,000
through the line item "Restructuring Costs" in the statement of operations for
the three months ended June 30, 2001. Restructuring activities related to the
Essex acquisition were completed as of June 30, 2001.

Below is a summary detailing the specific components of restructuring costs
for fiscal 2000:

Merger costs of $19.9 million were recorded in 2000, and consisted of fees
for investment bankers, attorneys, accountants and other direct merger related
expenses related to those acquisitions accounted for using the pooling of
interests method. Merger costs of approximately $18.5 million were paid during
fiscal year ended 2000 with the remainder paid in fiscal 2001.

In March 2001, Sanmina-SCI acquired Segerstrom in a pooling of interests
business combination. Sanmina-SCI recorded in accordance with EITF 94-3,
expected involuntary employee termination costs of approximately $7.2 million
for 470 employee positions. As of the end of Sanmina-SCI's fiscal year 2001, 302
employees have been terminated for an approximate cost of $3.5 million.
Sanmina-SCI also incurred restructuring costs of $5.2 million related to
consolidation of duplicate facilities primarily in Europe. The balance of the
terminations, at the originally estimated and accrued amount for involuntary
employee termination costs, and the consolidation of duplicate facilities are
expected to be completed by March 2002.

In June 2001, Sanmina-SCI consolidated certain manufacturing plants in
Calgary, Alberta, Canada and Salem, Massachusetts and merged the operations from
these facilities into existing manufacturing facilities in other regions. These
consolidations were made to eliminate duplicate facilities and reduce capacity
in line with the reduced customer demand experienced at that time. As part of
the consolidation, Sanmina-SCI reduced its workforce in the same regions by
approximately 665 people. In addition, Sanmina-SCI incurred restructuring and
other costs, primarily related to discontinued use of enterprise-wide software
systems used internally by acquired companies (no longer required
post-acquisition); integration of new information systems at acquired companies;
costs related to consolidation of duplicate facilities and write-offs of
redundant fixed assets. These activities are expected to be completed by June
2002.

In July 2001, due to the slowdown in the EMS industry and the economy
worldwide, Sanmina-SCI closed certain manufacturing facilities throughout North
America and Europe, and merged operations from these facilities into existing
manufacturing facilities. These plant closures were made to eliminate duplicate
facilities and better align capacity to reduced levels of customer demand.
Concurrent with the plant closures, Sanmina-SCI reduced its workforce in the
same regions by approximately 2,967 people. Sanmina-SCI also incurred
restructuring costs related to lease payments (less any applicable sublease
income) for properties abandoned. Asset related write-offs consisted of excess
equipment and leasehold improvements to facilities that were abandoned and whose
estimated fair market value were zero. The closing of the plants discussed above
are expected to be completed by the fourth quarter of fiscal 2002.

23

Below is a summary detailing the specific components of restructuring costs
for fiscal 2001:

Merger costs of $12.5 million were recorded in 2001 and consisted of fees
for investment banking, accounting, legal and related fees and expenses for the
Segerstrom acquisition, which was accounted for using the pooling of interests
method. Merger costs of approximately $9.7 million were paid during fiscal year
2001. The remaining amounts will be paid in fiscal 2002.

Below is a summary of the activity related to merger and restructuring
accruals for the year ended September 29, 2001 and September 30, 2000:

24

Sanmina-SCI continues to rationalize manufacturing facilities and headcount
to better scale capacity to current market and operating conditions. In
connection therewith, Sanmina-SCI will incur additional restructuring charges in
fiscal year 2002.

Write Down of Long-Lived Assets. Sanmina-SCI reviews long-lived and
intangible assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable in
accordance with SFAS No. 121, "Accounting for Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of." An asset is considered impaired if
its carrying amount (including the unamortized portion of goodwill allocated to
the asset) exceeds the future net cash flow the asset is expected to generate.
If such asset is considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the asset, including the
allocated goodwill, if any, exceeds its fair value. Sanmina-SCI assesses the
recoverability of its long-lived and intangible assets by determining whether
the unamortized balances can be recovered through undiscounted future net cash
flows of the acquired operation. The amount of goodwill impairment, if any, is
measured based on projected discounted future net cash flows using a discount
rate reflecting Sanmina-SCI's average cost of funds.

During the fourth quarter of 2001, an evaluation under SFAS No. 121
indicated that the fair value of certain intangible assets and unamortized
goodwill originally acquired as part of the June 2000 Hadco merger were less
than their carrying value. Accordingly, Sanmina-SCI recorded an adjustment to
write down $40.3 million of intangible assets and unamortized goodwill. The fair
value of the intangible assets and unamortized goodwill at the time of the
original acquisition by Sanmina-SCI was based on expected future cash flows to
be generated from the assets based on the facts and circumstances that existed
at the date the acquisition was complete. The existing customer relationships,
in-place workforce, tradename and trademarks and unamortized goodwill, valued at
the time of the original acquisition, became impaired in the quarter ended
September 29, 2001 due to closure or consolidation of the related manufacturing
facilities. As a result, based on future expected discounted cash flows from the
customer base, from experienced and expected work force attrition and from
future utilization of tradename and trademarks, Sanmina-SCI recorded an
adjustment to the carrying value of these intangible assets and allocated
goodwill in the amounts of $10.6 million, $3.7 million, $3.6 million and $22.4
million, respectively, in the fourth quarter of fiscal 2001.

During the third quarter of 2000, an evaluation under SFAS No. 121
indicated that the fair value of certain intangible assets acquired as part of
the Hadco merger were less than their carrying value. Accordingly, Sanmina-SCI
recorded an adjustment to write down $8.8 million of intangible assets. The fair
value of the intangible assets at the time of the original acquisition by Hadco
was based on expected future cash flows to be generated from the assets based on
the facts and circumstances that existed at the date the acquisitions were
complete. The existing customer relationships, and in-place workforce, valued at
the time of the original acquisition, became impaired at the time of the merger
in June 2000, due to the closure or consolidation of the related manufacturing
facilities. As a result, based on future expected cash flows from the related
customer base, and from experienced and expected work force attrition,
Sanmina-SCI has recorded an adjustment to the carrying value of these intangible
assets in the amounts of $7.5 million and $1.3 million, respectively, in the
third quarter of fiscal 2000.

During fiscal year ended October 2, 1999, an evaluation under SFAS No. 121
indicated that the fair value of certain intangible assets related to the
Pragmatech, Inc. ("Pragmatech") acquisition were less than their carrying value.
Accordingly, Sanmina-SCI recorded an adjustment to write down the remaining
$11.4 million of unamortized goodwill arising from the acquisition. The fair
value of Pragmatech at the acquisition date was based on the estimated future
cash flows to be generated from the assets based the facts and circumstances
that existed at the date the acquisition was complete. Financial projections
prepared at the time of the acquisition of Pragmatech reflected Sanmina-SCI's
belief that Sanmina-SCI would continue to provide electronics manufacturing
services to existing Pragmatech customers and would grow the Pragmatech business
at Pragmatech's existing facilities. However, the existing Pragmatech customer
relationships could not be restructured to conform to Sanmina-SCI's pricing and
revenue models, and as a result, the relationships with the former Pragmatech
customers have terminated. In addition, Sanmina-SCI closed several of the former
Pragmatech facilities in fiscal 1998. As a result of these operational factors,
Sanmina-SCI's analysis of projected revenues, results of operations, and cash
flows attributable to the few remaining
25

Pragmatech customers did not support the carrying value of Pragmatech assets,
including the unamortized goodwill.

Excluding merger and restructuring charges and writedown of long-lived
assets, for fiscal 2001, operating expenses as a percentage of sales were 6.6%,
as compared to 6.1% for fiscal 2000 and 7.3% for fiscal 1999.

Other Income and Expense, net. In fiscal 2001, net other income was $19.3
million as compared to net other expense of $3.5 million, and $27.7 million for
2000 and 1999, respectively. The components of other income and expense are
primarily interest expense on borrowings, convertible subordinated notes and
interest income on cash balances and short-term investments. For fiscal 2001 and
2000, the increase in net other income and the decrease in net other expense,
respectively, was largely due to interest received from additional cash flows
from operations, cash received from equity offerings, the issuance of
convertible debt and the retirement of subordinated notes.

Provision for Income Taxes. For fiscal 2001, 2000, and 1999, Sanmina-SCI's
effective tax rate was 51.2%, 40.0%, and 38.2%, respectively. The effective tax
rate for 2001 is higher than previous years due largely to the effects of
significant non-deductible charges related to the acquisition of Segerstrom and
the write-off of nondeductible goodwill.

Extraordinary Charge. In fiscal 2000, Sanmina-SCI recorded an
extraordinary charge, net of tax effect, of approximately $5.0 million.
Sanmina-SCI was required to offer to redeem $198.9 million of the Hadco 9 1/2%
Senior Subordinated Notes due 2008, or the 9 1/2% Notes, according to the terms
in the change of control provision when Sanmina-SCI acquired Hadco. The
redemption was at 101% of the principal amount of the 9 1/2% Notes. On August
24, 2000, Sanmina-SCI redeemed $187.9 million of the outstanding 9 1/2% Notes.
The redemption premium and deferred debt costs related to the 9 1/2% Notes were
expensed by Sanmina-SCI in the fourth quarter of fiscal 2000 as an early
extinguishment of debt, and was reflected as an extraordinary charge. These
costs were approximately $8.0 million. All 9 1/2% Notes not redeemed as part of
the offer will remain outstanding. Sanmina-SCI may elect to purchase the
remaining outstanding notes through the open market or negotiated transactions,
additional tenders, or exchange offers. There were no extraordinary charges in
fiscal 2001 or fiscal 1999.