SANMINA-SCI CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

	July 2, 2005			October 2, 2004
	(Unaudited)
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	1,219,725		$	1,108,949
Short-term investments	45,963			19,718
Accounts receivable, net	1,602,723			1,668,973
Inventories	948,674			1,064,518
Deferred income taxes	23,048			303,965
Prepaid expenses and other	117,043			96,523
Total current assets	3,957,176			4,262,646
Property, plant and equipment, net	713,557			782,642
Goodwill	1,689,807			2,254,979
Other intangible assets, net	31,638			35,891
Other assets	88,577			210,478
Total assets	$	6,480,755		$	7,546,636
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	225,210		$	609,746
Accounts payable	1,489,362			1,630,833
Accrued liabilities	449,308			381,123
Accrued payroll and related benefits	157,010			164,357
Total current liabilities	2,320,890			2,786,059
Long-term liabilities:
Long-term debt, net of current portion	1,695,145			1,311,377
Other	102,462			94,489
Total long-term liabilities	1,797,607			1,405,866
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock	5,442			5,420
Treasury stock	(188,575		)	(188,607		)
Additional paid-in-capital	5,727,736			5,719,137
Accumulated other comprehensive income	42,928			32,690
Accumulated deficit	(3,225,273		)	(2,213,929		)
Total stockholders’ equity	2,362,258			3,354,711
Total liabilities and stockholders’ equity	$	6,480,755		$	7,546,636

See accompanying notes.

SANMINA-SCI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended						Nine Months Ended
	July 2, 2005			June 26, 2004			July 2, 2005			June 26, 2004
	(In thousands, except per share data)
	(Unaudited)
Net sales	$	2,831,264		$	3,069,783		$	8,969,372		$	8,902,450
Cost of sales	2,670,438			2,911,260			8,481,412			8,457,637
Gross profit	160,826			158,523			487,960			444,813
Operating expenses:
Selling, general and administrative	92,091			85,028			266,484			243,378
Research and development	7,364			7,326			22,132			21,245
Amortization of intangible assets	1,894			2,059			5,995			6,460
Integration costs	153			261			436			4,043
Restructuring costs	20,041			17,349			98,102			108,459
Goodwill impairment	—			—			600,000			—
Total operating expenses	121,543			112,023			993,149			383,585
Operating income (loss)	39,283			46,500			(505,189		)	61,228
Interest income	16,108			6,811			41,311			16,775
Interest expense	(45,813		)	(33,232		)	(133,322		)	(92,050		)
Other expense, net	(3,721		)	(10,430		)	(8,705		)	(15,314		)
Other income (expense), net	(33,426		)	(36,851		)	(100,716		)	(90,589		)
Income (loss) before provision for income taxes	5,857			9,649			(605,905		)	(29,361		)
Provision (benefit) for income taxes	6,059			(1,702		)	405,439			(12,625		)
Net income (loss)	$	(202	)	$	11,351		$	(1,011,344	)	$	(16,736	)
Earnings (loss) per share:
Basic	$	(0.00	)	$	0.02		$	(1.94	)	$	(0.03	)
Diluted	$	(0.00	)	$	0.02		$	(1.94	)	$	(0.03	)
Weighted-Average Shares used in computing per share amounts:
Basic	521,584			517,173			520,163			515,159
Diluted	521,584			528,275			520,163			515,159

See accompanying notes.

SANMINA-SCI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
	July 2, 2005			June 26, 2004
	(In thousands)
	(Unaudited)
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss	$	(1,011,344	)	$	(16,736	)
Adjustments to reconcile net loss to cash provided by operating activities:
Restructuring costs, impairment of fixed assets	7,721			14,195
Depreciation and amortization	135,250			142,612
Recovery of provision for doubtful accounts receivable	(2,178		)	(2,861		)
Deferred compensation	7,200			9,256
(Gain) loss on disposal of property, plant and equipment	589			(320		)
Loss from investment in 50% or less owned companies	—			15,146
Deferred tax asset valuation allowance	367,239			—
Write-off deferred financing costs in connection with bond redemption	6,127			—
Goodwill impairment	600,000			—
Proceeds from sale of accounts receivable	184,096			—
Other, net	978			(189		)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(102,260		)	(67,626		)
Inventories	125,729			(121,134		)
Prepaid expenses, and other	(17,880		)	(9,246		)
Income tax accounts	22,245			5,720
Accounts payable and accrued liabilities	(82,573		)	71,510
Cash provided by operating activities	240,939			40,327
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of short-term investments	(56,199		)	(63,234		)
Proceeds from maturities of short-term investments	30,626			92,353
Purchases of long-term investments	(1,015		)	(12,583		)
Purchases of property, plant and equipment	(48,408		)	(60,645		)
Proceeds from sale of property, plant and equipment	33,663			23,448
Cash paid for businesses acquired, net of cash acquired	(83,269		)	(51,500		)
Cash used in investing activities	(124,602		)	(72,161		)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Repurchase of convertible notes	(398,726		)	—
Payments of long-term debt	(14,898		)	(12,592		)
Proceeds from long-term debt, net of issuance costs	403,307			64
Payments of notes and credit facilities, net	(3,455		)	(13,663		)
Proceeds from sale of common stock, net of issuance costs	11,171			25,894
Cash used in financing activities	(2,601		)	(297		)
Effect of exchange rate changes	(2,960		)	1,218
Increase (decrease) in cash and cash equivalents	110,776			(30,913		)
Cash and cash equivalents at beginning of period	1,108,949			1,027,394
Cash and cash equivalents at end of period	$	1,219,725		$	996,481

See accompanying notes.

SANMINA-SCI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1—Basis of Presentation

The accompanying condensed consolidated financial statements of Sanmina-SCI Corporation (“Sanmina-SCI”) (“the Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules or regulations. The interim financial statements are unaudited, but reflect all normal recurring adjustments and non-recurring adjustments that are, in the opinion of management, necessary for a fair presentation.

The results of operations for the nine months ended July 2, 2005 are not necessarily indicative of the results that may be expected for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto for the year ended October 2, 2004, included in Sanmina-SCI’s Annual Report on Form 10-K.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

As a result of the Company’s ongoing efforts to remediate the conditions that resulted in the material weakness disclosed in Item 9A of the 2004 Annual Report on Form 10-K, and in Item 4 of this report on Form 10-Q, several adjustments were identified and recorded in the condensed consolidated statement of operations for the three and nine month periods ended July 2, 2005, which relate to previous periods.

The adjustments described above that were recorded in the three month period ended July 2, 2005 had the following net effect on the Company’s reported results of operations for the three month period ended July 2, 2005: (1) the Company’s reported gross margin of approximately 5.7% excluding the adjustments discussed above was 6.0%, (2) the reported operating income of approximately $39.3 million excluding the adjustments was $48.6 million, (3) the reported provision for income taxes of approximately $6.1 million excluding the adjustments was $19.4 million and (4) the reported net loss of approximately $202,000 excluding the adjustments was $3.9 million loss.

The Company believes that the effect of these adjustments is immaterial to the three and nine month periods ended July 2, 2005, all prior periods and is expected to be immaterial to the forecasted fiscal 2005 results of operations. The Company’s materiality analysis included the consideration of Accounting Principles Board Opinion (“APB”) No. 28 “Interim Financial Reporting” and the results of operations for the quarter ended July 2, 2005 as well as other quantitative and qualitative measures as discussed in Staff Accounting Bulletin No. 99 “Materiality”.

Auction rate securities in the amount of $7.2 million have been reclassified from cash and cash equivalents to short-term investments in the October 2, 2004 consolidated balance sheet to conform to the fiscal 2005 financial statement presentation. The purchases and sales of these auction rate securities has been reclassified in the condensed consolidated statements of cash flows, which decreased cash flows used in investing activities by $9.3 million for the nine months ended June 26, 2004. In addition, certain other amounts reported in previous periods have been reclassified to conform to the current presentation.

Note 2—Summary of Significant Accounting Policies

Fiscal Year. Sanmina-SCI operates on a 52 or 53-week year ending on the Saturday nearest September 30. Accordingly, the 2004 fiscal year ended on October 2 and the 2005 fiscal year will end on October 1. All general references to years relate to fiscal years unless otherwise noted.

Principles of Consolidation. The consolidated financial statements include the accounts of Sanmina-SCI and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.

Foreign Currency Translation. For foreign subsidiaries using the local currency as their functional currency, assets and liabilities are translated at exchange rates in effect at the balance sheet date and income and expenses are translated at average exchange rates. The effects of these translation adjustments are reported as a separate component of stockholders’ equity. Remeasurement adjustments for non-functional currency monetary assets and liabilities are included in other expense, net in the accompanying condensed consolidated statements of operations.

Derivative Instruments and Hedging Activities. Sanmina-SCI accounts for derivative instruments and hedging activities in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 138, “Accounting for Certain Derivative Instruments and Hedging Activities—an Amendment of SFAS 133” and SFAS 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” In accordance with these standards, every derivative instrument is recorded in the balance sheet as either an asset or liability measured at its fair value. If the derivative is designated as a cash flow hedge, the effective portion of changes in the fair value of the derivative is recorded in stockholders’ equity as a separate component of accumulated other comprehensive income and is recognized in the statement of operations when the hedged item affects earnings. Ineffective portions of changes in fair value of cash flow hedges are immediately recognized in earnings. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in the current period statement of operations in other expense, net.

Sanmina-SCI conducts business on a global basis in several currencies. As such, it is exposed to adverse movements in foreign currency exchange rates. Sanmina-SCI uses various derivatives, such as foreign currency forward contracts and foreign currency option contracts, to reduce foreign exchange risks. Sanmina-SCI’s objective in holding derivatives is to minimize the volatility of earnings and cash flows associated with changes in foreign currency. Derivatives are not used for trading or speculative purposes.

Sanmina-SCI’s foreign exchange forward and option contracts expose the Company to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. Sanmina-SCI minimizes such risk by limiting its counterparties to major financial institutions. Management does not expect material losses as a result of default by counterparties.

Cash and Cash Equivalents. Sanmina-SCI considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At July 2, 2005, cash and cash equivalents includes $25.5 million of restricted cash and cash equivalents, primarily relating to accounts collateralizing letters of credit.

Inventories. Inventories are stated at the lower of cost (first-in, first-out method) or market. Cost includes labor, material and manufacturing overhead. We regularly review inventories on hand and record a provision to write-down excess and obsolete inventories to its estimated net realizable value. It is possible that estimates of net realizable values can change in the near term. The components of inventories, net of provisions, are as follows:

	As of
	July 2, 2005		October 2, 2004
	(In thousands)
Raw materials	$	624,219	$	673,815
Work-in-process	208,085		189,077
Finished goods	116,370		201,626
	$	948,674	$	1,064,518

Exit Costs. Sanmina-SCI recognizes restructuring charges related to its plans to exit certain activities resulting from the identification of excess manufacturing and administrative facilities that it chooses to close or consolidate. In connection with its exit activities, Sanmina-SCI records restructuring charges for employee termination costs, long-lived asset impairments, costs related to leased facilities to be abandoned or subleased, and other exit-related costs. These charges were incurred pursuant to formal plans developed by management and accounted for in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” Emerging Issues Task Force, or EITF, Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)” and EITF 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.” Where applicable, employee termination costs are recorded pursuant to SFAS No. 112, “Employer’s Accounting for Postemployment Benefits.” Fixed assets that are written off as a result of restructuring plans are typically held for sale or scrapped. The recognition of restructuring charges requires Sanmina-SCI’s management to make judgments and estimates regarding the nature, timing, and amount of costs associated with the planned exit activity, including estimating sublease income and the fair value, less sales costs, of equipment to be disposed of. Management’s estimates of future liabilities may change, requiring us to record additional restructuring charges or reduce the amount of liabilities already recorded. At the end of each reporting period, Sanmina-SCI evaluates the remaining accrued balances to ensure their adequacy, that no excess accruals are retained, and the utilization of the provisions are for their intended purposes in accordance with developed exit plans.

Goodwill and Intangibles. Costs in excess of the fair value of tangible and identifiable intangible assets acquired and liabilities assumed in a purchase business combination are recorded as goodwill. SFAS No. 142, “Goodwill and Other Intangible Assets,” requires that companies no longer amortize goodwill, but instead test for impairment at least annually using a two-step approach. Sanmina-SCI evaluates goodwill, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. Sanmina-SCI has determined that there are two reporting units: international and domestic. The fair values of the reporting units are estimated using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies’ data. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss, if any.

During the three month period ended April 2, 2005, Sanmina-SCI recorded a goodwill impairment loss of $600 million for its domestic reporting unit in accordance with SFAS No. 142. The factors that led to the Company’s decision to provide a valuation allowance against certain of its deferred tax assets (see Note 5), coupled with the recent decline in the market price of the Company’s common stock, led the

Company to perform an impairment analysis of its goodwill prior to the annual test scheduled for the fourth quarter of fiscal 2005. As a result of this impairment analysis, the Company concluded that a portion of its goodwill associated with its domestic reporting unit was impaired, and accordingly, recognized an impairment loss of $600 million. This analysis indicated that there was no impairment of goodwill or long-lived assets associated with the Company’s international reporting unit.

Goodwill information for each reporting unit is as follows (in thousands):

	As of October 2, 2004		Additions to Goodwill			Goodwill Impairment			Adjustments to Goodwill				As of July 2, 2005
Reporting units:
Domestic	$	1,221,406		$	15,791	$	(600,000	)		$	(9,439	)	$	627,758
International	1,033,573			31,360		—				(2,884		)	1,062,049
Total	$	2,254,979		$	47,151	$	(600,000	)		$	(12,323	)	$	1,689,807

Additions to goodwill represent the initial allocation of goodwill to businesses acquired in the current period as well as earnouts. Certain acquisition agreements that we entered into in connection with purchase business combinations may require us to pay additional consideration determined by the future performance of the acquired entity. The amount and likelihood of such payments is not determinable as of July 2, 2005, therefore, future adjustments are possible. Adjustments to goodwill included in the table above primarily represent purchase price allocation and tax adjustments related to business combinations consummated in prior periods.

Sanmina-SCI has certain identifiable intangible assets that are subject to amortization. The gross and net carrying amounts at July 2, 2005 and October 2, 2004, are as follows:

	July 2, 2005								October 2, 2004
	Gross Carrying Amount		Accumulated Amortization				Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization				Net Carrying Amount
Intangible assets	$	52,056		$	(20,418	)	$	31,638	$	49,723		$	(13,832	)	$	35,891

Intangible asset amortization expense for the three month periods ended July 2, 2005 and June 26, 2004, was approximately $1.9 million and $2.1 million, respectively, and for the nine month periods ended July 2, 2005 and June 26, 2004 was approximately $6.0 million and $6.5 million, respectively.

Estimated annual amortization expense for intangible assets at July 2, 2005 is as follows (in thousands):

Fiscal Year:
2005 (remainder)	$	2,140
2006	6,991
2007	6,777
2008	6,777
2009	3,211
2010	1,555
Thereafter	4,187
	$	31,638

Revenue Recognition. Sanmina-SCI generally recognizes revenue at the point of shipment to its customers, under the contractual terms which in general are FOB shipping point or when services have been performed. Sanmina-SCI also derives revenues from sales of certain inventory, including raw materials, to customers who reschedule, amend or cancel purchase orders after Sanmina-SCI has procured inventory to fulfill their purchase orders. Title to the product or the inventory transfers upon shipment and the customer’s assumption of the risks and rewards of ownership of the product. In some cases, Sanmina-SCI will recognize revenue upon receipt of shipment by the customer or at its designated location. Except in specific circumstances, there are no formal customer acceptance requirements or further Sanmina-SCI obligations to the product or the inventory subsequent to shipment. In specific circumstances in which there are such customer acceptance requirements or further Sanmina-SCI obligations, revenue is recognized at the point of formal acceptance and upon completion of obligations. Provisions are made for estimated warranty costs, sales returns, and adjustments at the time of shipment. Provisions for estimated warranty costs, sales returns, and pricing adjustments were not material for the three month and nine month periods ended July 2, 2005.

Warranty Reserves. Sanmina-SCI establishes a warranty provision on shipped products based on individual manufacturing contract requirements and past warranty experience. Each period end the balance is reviewed to ensure its adequacy. Accrued warranty reserves at July 2, 2005 and October 2, 2004 were less than one percent of total current liabilities.

Earnings Per Share. Basic earnings (loss) per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings or loss per share includes dilutive common stock equivalents, using the treasury stock method, and assumes that the convertible debt instruments were converted into common stock upon issuance, if dilutive. For the three month periods ended July 2, 2005 and June 26, 2004, 15,344,130 and 20,112,918 potentially dilutive shares from the conversion of convertible subordinated debt and the add back of after-tax interest expense of $4.2 million and $12.3 million, respectively, were not included in the computation of diluted earning (loss) per share because to do so would be anti-dilutive. For the nine month periods ended July 2, 2005 and June 26, 2004, 16,933,726 and 20,112,918 potentially dilutive shares from the conversion of convertible subordinated debt and add back of after tax interest expense of $22.6 million and $17.8 million respectively, were not included in the diluted earnings (loss) per share calculations because of their anti-dilutive effect. Stock options with exercise prices greater than the average fair market price for a period, which are defined as anti-dilutive, are not included in the diluted earnings (loss) per share calculations because of their anti-dilutive effect. For the three month periods ended July 2, 2005 and June 26, 2004, 53,587,211 and 17,089,408 stock options, respectively, were anti-dilutive and excluded from the diluted earnings per share calculation due to either the exercise prices being greater than the average fair market price or due to Sanmina-SCI incurring net losses in each of these quarters. For the nine month periods ended July 2, 2005 and June 26, 2004, 48,245,537 and 21,625,021 stock options, respectively, were anti-dilutive and excluded from the diluted earnings (loss) per share calculation due to either the exercise prices being greater than the average fair market price or due to Sanmina-SCI incurring net losses in each of these fiscal periods. Contingently issuable stock, such as restricted stock, is included in the diluted earnings (loss) per share calculations unless anti-dilutive. For the three month period ended July 2, 2005, 3,922,966 of restricted stock were anti-dilutive due to Sanmina-SCI incurring net losses in the quarter and therefore excluded from the diluted earnings per share calculation. For the three month period ended June 26, 2004, 33,231 shares of restricted stock were anti-dilutive and therefore excluded from the diluted earnings per share calculation. For the nine month periods ended July 2, 2005 and June 26, 2004, 2,293,765 and 696,314 shares of restricted stock, respectively, were anti-dilutive due to Sanmina-SCI incurring net losses in each of these periods and excluded from the diluted earnings (loss) per share

calculation. The following table sets forth the calculation of basic and diluted earnings per share (in thousands, except per share data):

	Three Months Ended					Nine Months Ended
	July 2, 2005			June 26, 2004		July 2, 2005			June 26, 2004
	(In thousands, except per share data)
Numerator:
Net income (loss)	$	(202	)	$	11,351	$	(1,011,344	)	$	(16,736	)
Denominator:
Weighted average shares—basic	521,584			517,173		520,163			515,159
Effect of dilutive potential common shares	—			11,102		—			—
Weighted average number of shares—diluted	521,584			528,275		520,163			515,159
Net income (loss) per share—basic	$	(0.00	)	$	0.02	$	(1.94	)	$	(0.03	)
Net income (loss) per share—diluted	$	(0.00	)	$	0.02	$	(1.94	)	$	(0.03	)

Stock-Based Compensation. SFAS No. 123, as amended by SFAS No. 148, permits companies to (i) recognize as expense the fair value of stock-based awards, or (ii) continue to apply the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations (“APB 25”), and provide pro forma net income and earnings per share disclosures for employee stock compensation as if the fair-value-based method defined in SFAS No. 123 had been applied. Sanmina-SCI continues to apply the provisions of APB 25 and provide the pro forma disclosures with respect to its stock-based compensation plans in accordance with the provisions of SFAS Nos. 123 and 148.

Sanmina-SCI uses the Black-Scholes option-pricing model to determine the pro forma impact under SFAS Nos. 123 and 148 on the Company’s net income (loss) and earnings (loss) per share. The model utilizes certain information, such as the interest rate on a risk-free security maturing generally at the same time as the option being valued, and requires certain assumptions, such as the expected amount of time an option will be outstanding until it is exercised or it expires, to calculate the fair value of stock options granted. The assumptions used for the three and nine month periods ended July 2, 2005 and June 26, 2004 are presented below:

	Three Months Ended				Nine Months Ended
Stock Options	July 2, 2005		June 26, 2004		July 2, 2005		June 26, 2004
Volatility	53.85	%	75.00	%	62.95	%	75.00	%
Risk-free interest rate	3.90	%	3.85	%	3.89	%	3.85	%
Dividend yield	0	%	0	%	0	%	0	%
Expected life of option(1)	5.0 years		4.3 years		4.6 years		4.3 years

	Three Months Ended				Nine Months Ended
Employee Stock Purchase Plan	July 2, 2005		June 26 2004		July2, 2005		June 26, 2004
Volatility	50.29	%	75.00	%	61.76	%	75.00	%
Risk-free interest rate	3.43	%	3.85	%	3.73	%	3.85	%
Dividend yield	0	%	0	%	0	%	0	%
Expected life	0.5 years		0.5 years		0.5 years		0.5 years

(1) The expected life of options for the three and nine month periods ended June 26, 2004 have been conformed to the current fiscal year presentation of measuring expected life of options from grant date. There was no material impact to previously disclosed pro forma net income (loss).

For the three and nine month periods of fiscal 2004 and through the first six months of fiscal 2005, the Company used its historical volatility as its basis to estimate expected volatility. In light of recent accounting guidance related to stock options (Staff Accounting Bulletin 107 and SFAS 123R), the Company reevaluated the volatility used to estimate the value of employee stock options granted in the third quarter of fiscal 2005. Management determined that implied volatility related to a blend of publicly traded options and historical volatility is more reflective of market conditions and a better indicator of expected volatility than using only historical volatility. Concurrently, the Company recomputed the weighted average expected term of options using updated historical information on vesting periods, options exercised and employee termination patterns.

Sanmina-SCI has several stock option plans which are described in the Company’s most recent Annual Report on Form 10-K. Sanmina-SCI accounts for its stock option plans and employee stock purchase plan in accordance with APB Opinion No. 25 and related interpretations. Had compensation cost for all plans been determined consistent with SFAS Nos. 123 and 148, Sanmina-SCI’s net income (loss) and earnings (loss) per share would have been the following pro forma amounts (in thousands, except per share data):

	Three Months Ended						Nine Months Ended
	July 2, 2005			June 26, 2004			July 2, 2005			June 26, 2004
	(In thousands, except per share data)
Net income (loss):
As reported	$	(202	)	$	11,351		$	(1,011,344	)	$	(16,736	)
Stock-based employee compensation expense included in reported net income (loss), net of tax	1,344			2,934			4,507			5,049
Stock-based employee compensation expense determined under fair value method, net of tax	(65,598		)	(12,969		)	(136,417		)	(41,720		)
Pro forma	$	(64,456	)	$	1,316		$	(1,143,254	)	$	(53,407	)
Basic earnings (loss) per share:
As reported	$	(0.00	)	$	0.02		$	(1.94	)	$	(0.03	)
Pro forma	$	(0.12	)	$	0.00		$	(2.20	)	$	(0.10	)
Diluted earnings (loss) per share:
As reported	$	(0.00	)	$	0.02		$	(1.94	)	$	(0.03	)
Pro forma	$	(0.12	)	$	0.00		$	(2.20	)	$	(0.10	)

On May 2, 2005, the Company’s Board of Directors approved the acceleration of vesting of “underwater” unvested stock options held by approximately 4,500 employees, executive officers and non-employee directors. This approval was based on the recommendation of the Compensation Committee of the Board of Directors. A stock option was considered “underwater” if the option exercise price was greater than $7.00 per share. The vesting of options granted after November 1, 2004 was not accelerated. The closing stock price at the date the acceleration was approved by the Company’s Board of Directors was $4.00. The Compensation Committee, which consists entirely of independent directors, as well as the independent directors on the full Board of Directors unanimously approved the acceleration of vesting of underwater stock options including those underwater stock options held by the Chief Executive Officer and the other executive officers of the Company. These actions were taken in accordance with the applicable provisions of all of the Company’s stock option plans.

The decision to accelerate vesting of these underwater stock options was made primarily to minimize recognizing compensation expense in future financial statements upon the adoption of Statement of Financial Accounting Standards No. 123R (revised 2004), “Share-Based Payment” (see discussion below) because the Company believes underwater stock options may not be offering the affected employees sufficient incentive when compared to the potential future compensation expense that would have been attributable to these stock options. As the exercise price of all the stock options affected was greater than their fair market price on the date of vesting acceleration, there will be no impact under APB 25 on our condensed consolidated statements of operations. The future compensation expense that will be avoided, based on the Company’s implementation date for SFAS 123R of October 2, 2005, is approximately $19 million, $8 million, and $3 million in fiscal 2006, 2007, and 2008, respectively. As the options were accelerated to vest immediately, an additional compensation cost amounting to approximately $60 million, which represented the unamortized cost of accelerated unvested options, was recognized in the pro forma income statements (noted above) for the three and nine month periods ended July 2, 2005.

Sales of Accounts Receivable. Sanmina-SCI has agreements with one financial institution to sell accounts receivable from selected customers. These transfers are recorded as sales and accounted for in accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” Sanmina-SCI sold accounts receivable totaling $84.4 million for the three month period ended July 2, 2005. The loss on the sale of the accounts receivable is not material to the statement of operations. When Sanmina-SCI sells receivables, it retains the servicing rights to the underlying accounts receivable. The fair value of the retained servicing rights is not material to the statement of operations. As of July 2, 2005, $84.4 million of sold accounts receivable remain subject to certain limited recourse provisions. Sanmina-SCI has not experienced any credit losses under these recourse provisions.

Recent Accounting Pronouncements. FASB Staff Position (“FSP”) No. 109-2 “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (“FSP 109-2), provides guidance under SFAS No. 109, “Accounting for Income Taxes”, with respect to recording the potential impact of the repatriation provisions of the American Jobs Creation Act of 2004 (the “Jobs Act”) on income tax expense and deferred tax liabilities. The Jobs Act was enacted on October 22, 2004. FSP 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to evaluate the effect of the Jobs Act on it plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109. The Company believes the application of FSP No. 109-2 will not have a material effect on the income tax provision.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) should be recognized as current period charges, and that fixed production overheads should be allocated to inventory based on normal capacity of production facilities. This statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of SFAS No. 151 is not expected to have a significant impact on the Company’s results of operations or financial position.

In December 2004, FASB issued SFAS No. 123 (revised 2004) “Share-based Payment,” which requires companies to recognize in the statement of operations grant date fair value of stock options and other equity-based compensation issued to employees. This statement supersedes Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” but does not change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS No. 123 as originally issued. SFAS No. 123 (revised 2004) is effective as of the beginning of Sanmina-SCI’ first quarter of fiscal 2006. Although, the Company has not concluded its evaluation of SFAS 123R, it is believed the effect on the results of operations will be similar to the amounts disclosed in

the pro-forma stock compensation footnote (excluding the $60 million one-time acceleration charge as discussed in note 2).

In December 2004, FASB issued Statement of Financial Accounting Standards No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions (“SFAS 153”). This statement amends APB Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. Under SFAS 153, if a nonmonetary exchange of similar productive assets meets a commercial-substance criterion and the fair value is determinable, the transaction must be accounted for at fair value resulting in recognition of any gain or loss. The provisions of SFAS 153 are effective for nonmonetary transactions in fiscal periods that begin after June 15, 2005. Sanmina-SCI does not anticipate that the adoption of this standard will have a material impact on its financial position or results of operations.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”. SFAS 154 replaces APB Opinion No. 20, “Accounting Changes”, and SFAS No. 3 “Reporting Accounting Changes in Interim Financial Statements” and is effective for fiscal years beginning after December 15, 2005. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change.

Note 3—Restructuring Costs

Costs associated with restructuring activities initiated on or after January 1, 2003, other than those activities related to purchase business combinations, are accounted for in accordance with SFAS No. 146 and SFAS No. 112 where applicable. Accordingly, costs associated with such plans are recorded as restructuring costs in the consolidated statements of operations when a liability is incurred. The accrued restructuring costs are included in “accrued liabilities” in the condensed consolidated balance sheets. Below is a summary of the activity related to restructuring costs recorded pursuant to SFAS No. 146 and SFAS No. 112 through the third quarter of fiscal year 2005.

	Employee Termination Benefits				Lease and Contract Termination Costs				Other Restructuring Costs				Impairment of Fixed Assets				Total
	(In thousands)
	Cash				Cash				Cash				Non-cash
Balance at October 2, 2004		$	15,496			$	1,587			$	42			$	—		$	17,125
Charges to operations		12,660				2,873				1,363				1,224			18,120
Charges utilized		(11,718		)		(1,805		)		(200		)		(1,224		)	(14,947		)
Balance at January 1, 2005		16,438				2,655				1,205				—			20,298
Charges to operations		42,346				8,216				1,366				4,004			55,932
Charges utilized		(28,176		)		(6,720		)		(2,374		)		(4,004		)	(41,274		)
Balance at April 2, 2005		30,608				4,151				197				—			34,956
Charges to operations		16,278				835				1,603				718			19,434
Charges utilized		(5,837		)		(2,314		)		(1,015		)		(718		)	(9,884		)
Balance at July 2, 2005		$	41,049			$	2,672			$	785			$	—		$	44,506

During the nine months ended July 2, 2005, Sanmina-SCI recorded restructuring charges of approximately $93.4 million, of which $91.4 million relates to our phase three restructuring plan and the remainder relates to our phase two restructuring plan. These charges included employee termination benefits of approximately $71.3 million, lease and contract termination costs of approximately $11.9 million, other restructuring costs of approximately $4.3 million, incurred primarily to prepare facilities for closure, and impairment of fixed assets of approximately $5.9 million consisting of excess facilities and equipment to be disposed of. The employee termination benefits were related to the involuntary termination of approximately 1,900 employees, the majority of which were involved in manufacturing activities. Approximately $45.7 million for employee termination benefits was utilized during the nine months ended July 2, 2005. A total of approximately 9,300 employees were terminated during the nine months ended July 2, 2005 pursuant to this restructuring plan. Sanmina-SCI also utilized $10.8 million of lease and contract termination costs and $3.6 million of the other restructuring costs during the nine months ended July 2, 2005.

Costs associated with restructuring activities initiated prior to January 1, 2003, other than those activities related to purchase business combinations, are accounted for in accordance with EITF 94-3 and SFAS 112 where applicable. Accordingly, costs associated with such plans are recorded as restructuring costs in the consolidated statements of operations generally at the commitment date. The accrued restructuring costs are included in “accrued liabilities” in the condensed consolidated balance sheet. Below is a summary of the activity related to restructuring costs recorded pursuant to EITF 94-3 and SFAS 112 pursuant to Sanmina-SCI’s ongoing restructuring plans through the third quarter of fiscal year 2005.

	Employee Severance and Related Expenses				Facilities Shutdown and Consolidation Costs				Write-off Impaired or Redundant Fixed Assets				Total
	Cash				Cash				Non-cash
Balance at October 2, 2004		$	1,227			$	14,925			$	—		$	16,152
Charges to operations		329				1,216				760			2,305
Charges utilized		(1,180		)		(3,473		)		(760		)	(5,413		)
Balance at January 1, 2005		376				12,668				—			13,044
Charges to operations		96				593				3,033			3,722
Charges utilized		—				(1,914		)		(1,015		)	(2,929		)
Reversal of accruals		—				—				(2,018		)	(2,018		)
Balance at April 2, 2005		472				11,347				—			11,819
Charges to operations		29				578				—			607
Charges utilized		(201		)		(1,904		)		—			(2,105		)
Balance at July 2, 2005		$	300			$	10,021			$	—		$	10,321

The following sections separately present the charges to the restructuring liability and charges utilized that are set forth in the above table on an aggregate basis.

Fiscal 2002 Plans

lease payments for permanently vacated properties and associated costs, and utilized charges of $17.7 million related to the shutdown of these facilities. Sanmina-SCI also incurred charges to operations of $74.3 million in fiscal years 2002 and 2003 related to the impairment of buildings and excess equipment and leasehold improvements at permanently vacated facilities.

During fiscal 2004, Sanmina-SCI recorded charges to operations of approximately $1.9 million and utilized $2.6 million for employee severance expenses. Approximately 10 employees were terminated during fiscal 2004. During fiscal 2004, Sanmina-SCI also recorded charges to operations of approximately $26.7 million and utilized approximately $16.1 million for non-cancelable lease payments, lease termination costs and related costs for the shutdown of facilities. In addition, in fiscal 2004 Sanmina-SCI reversed approximately $3.6 million of accrued employee severance due to lower than anticipated payments at various plants and approximately $5.8 million of accrued facilities shutdown costs due to a change in use of the facilities or achieving greater sublease income than we anticipated. Sanmina-SCI also incurred charges to operations of $3.5 million related to the impairment of buildings and leasehold improvements at permanently vacated facilities in fiscal 2004. The closing of the plants discussed above as well as employee terminations and other related activities have been completed, however, the leases of the related facilities expire in 2009; therefore, the remaining accrual will be reduced over time as the lease payments, net of sublease income, are made.

During the nine months ended July 2, 2005, Sanmina-SCI recorded charges to operations of $75,000 and utilized $88,000 for employee severance costs. There was no reduction of work force during the nine months ending July 2, 2005 pursuant to the September 2002 restructuring plan. In addition, Sanmina-SCI recorded charges of $439,000 and utilization of $2.1 million due to shutdown costs for closed facilities. In addition, $800,000 was charged to operations and utilized due to the impairment of fixed assets to be disposed of.

October 2001 Restructuring. In October 2001, Sanmina-SCI approved a plan pursuant to EITF 94-3 to close and consolidate certain of its manufacturing facilities throughout North America and Europe as a result of the continued slowdown in the industry and economy worldwide. In fiscal years 2002 and 2003, Sanmina-SCI recorded net charges to operations of $34.7 million for the expected involuntary termination of approximately 5,400 employees associated with these plant closures, and utilized charges of approximately $24.5 million as a result of terminating approximately 5,000 employees. Sanmina-SCI also incurred net charges to operations of $46.1 million in fiscal years 2002 and 2003 for non-cancelable lease payments for permanently vacated properties and other costs related to the shutdown of facilities, and utilized approximately $44.2 million of these charges in fiscal years 2002 and 2003. In fiscal year 2003, Sanmina-SCI reversed accrued severance charges of $6.3 million and accrued lease cancellation charges of $700,000 due to lower than estimated settlement costs at three European sites. Sanmina-SCI also incurred and utilized charges to operations of $56.4 million in fiscal years 2002 and 2003 related to the write-offs of fixed assets consisting of excess equipment and leasehold improvements to facilities that were permanently vacated.

During fiscal 2004, Sanmina-SCI recorded charges to operations of approximately $5.2 million for employee severance costs and approximately $4.8 million for non-cancelable lease payments and other costs related to the shutdown of facilities. Sanmina-SCI utilized accrued severance charges of approximately $6.6 million and accrued facilities shutdown related charges of $3.7 million during fiscal 2004. During fiscal 2004, Sanmina-SCI reversed approximately $1.3 million of accrued severance and approximately $530,000 of accrued lease costs due to lower than expected payments at various sites. Sanmina-SCI has terminated all employees affected under this plan. The remaining accrued severance at July 2, 2005 is expected to be paid within the next six months. Manufacturing activities at the facilities affected by this plan ceased in fiscal year 2003 or prior; however, final payments of accrued costs may not occur until later periods.

During the nine months ended July 2, 2005, Sanmina-SCI recorded charges to operations of $336,000 for employee severance costs, $195,000 for facility shutdown charges and $313,000 for impairment of fixed assets. Sanmina-SCI utilized accrued severance charges of $1.2 million, accrued facilities shutdown related charges of $1.6 million, and reversed an accrual for approximately $2.0 million for impairment of fixed assets.

Fiscal 2001 Plans

Segerström Restructuring. In March 2001, Sanmina-SCI acquired Segerström in a pooling of interests business combination and announced the restructuring plan. During fiscal years 2001 and 2002, Sanmina-SCI recorded net charges to operations of $5.7 million for the involuntary termination of 470 employee positions, and utilized $5.4 million of these charges in fiscal years 2001, 2002 and 2003. During those periods Sanmina-SCI also recorded charges to operations of $5.2 million related to the consolidation of facilities, of which $1.3 million was utilized in fiscal years 2001, 2002 and 2003. During fiscal 2004, Sanmina-SCI utilized approximately $300,000 of accrued severance charges. In addition, during fiscal 2004 Sanmina-SCI recorded charges to operations of approximately $103,000 and utilized approximately $818,000 with respect to the shutdown and consolidation of facilities. Sanmina-SCI also reversed $642,000 of accrued facilities shutdown costs in fiscal 2004 due to lower than expected payments. During the nine months ended July 2, 2005, Sanmina-SCI utilized $835,000 with respect to the shutdown and consolidation of facilities. There was no reduction of work force during the nine months ending July 2, 2005 pursuant to the March 2001 restructuring plan.

July 2001 Restructuring. In July 2001, Sanmina-SCI approved a plan to close and merge manufacturing facilities throughout North America and Europe as a result of the ongoing slowdown in the EMS industry. During fiscal years 2001 and 2002, Sanmina-SCI recorded charges to operations of $24.0 million for severance costs for involuntary employee terminations, of which $22.7 million was utilized for the termination of approximately 3,800 employees during fiscal years 2001, 2002 and 2003. During those periods Sanmina-SCI recorded net charges to operations of $45.2 million for lease payments for permanently vacated properties and other costs related to the shutdown of facilities, of which $37.9 million was utilized during fiscal years 2001, 2002 and 2003. Also during fiscal years 2001 and 2002, Sanmina-SCI recorded and utilized $7.3 million of asset related write-offs of equipment and leasehold improvements to permanently vacated properties. During fiscal year 2003 Sanmina-SCI reversed accrued facilities costs of $768,000 due to the early termination of the related lease.

During fiscal 2004, Sanmina-SCI recorded approximately $4.1 million and utilized approximately $7.7 million of accrued costs related to the shutdown of facilities. In addition, Sanmina-SCI recorded charges to operations of approximately $1.1 million, utilized $164,000 and reversed approximately $2.1 million of accrued severance due to lower than anticipated payments during fiscal 2004. Manufacturing activities at the plants affected by this plan had ceased by the fourth quarter of fiscal 2002; however, the leases of the related facilities expire between 2005 and 2010, therefore, the remaining accrual will be reduced over time as the lease payments, net of sublease income.

During the nine months ended July 2, 2005, Sanmina-SCI recorded approximately $1.8 million and utilized approximately $2.8 million of accrued costs related to the shutdown of facilities. In addition, Sanmina-SCI recorded charges to operations of approximately $43,000 and utilized $113,000 related to employee severance. During the nine months ended July 2, 2005, Sanmina-SCI recorded and utilized $2.7 million for the impairment of fixed assets to be disposed of. There was no reduction of work force during the nine months ending July 2, 2005 pursuant to the July 2001 restructuring plan.

combination and included in the cost of the acquired entity. The accrued restructuring costs are included in “accrued liabilities” in the condensed consolidated balance sheet. Below is a summary of the activity related to restructuring costs recorded pursuant to EITF 95-3 for the periods in which restructuring activities have taken place through the third quarter of fiscal 2005.

	Employee Severance and Related Expenses				Facilities Shutdown and Consolidation Costs				Total
	Cash				Cash
Balance at October 2, 2004		$	42			$	2,178		$	2,220
Additions to restructuring accrual		—				—			—
Accrual utilized		(42		)		(568		)	(610		)
Balance at January 1, 2005		—				1,610			1,610
Additions to restructuring accrual		—				—			—
Accrual utilized		—				(64		)	(64		)
Balance at April 2, 2005		—				1,546			1,546
Additions to restructuring accrual		—				—			—
Accrual utilized		—				(213		)	(213		)
Balance at July 2, 2005		$	—			$	1,333		$	1,333

The following sections separately present the charges to the restructuring liability and charges utilized that are set forth in the above table on an aggregate basis.

SCI Acquisition Restructuring. In December 2001, Sanmina merged with SCI in a purchase business combination and formally changed its name to Sanmina-SCI Corporation. As part of the merger with SCI, Sanmina-SCI also recorded charges to the restructuring liability of $119.6 million during fiscal years 2002 and 2003 consisting of planned involuntary employee termination costs for approximately 7,900 employees and utilized $92.1 million in charges with respect to the termination of those employees. During fiscal years 2002 and 2003 Sanmina-SCI also incurred net charges to the restructuring liability of $41.0 million for restructuring costs related to lease payments for permanently vacated properties and other costs, and utilized approximately $26.3 million of these charges. Sanmina-SCI also incurred charges to the restructuring liability of $24.9 million of asset related write-offs consisting of excess equipment and leasehold improvements to facilities that were permanently vacated. During fiscal year 2003, Sanmina-SCI reversed a total of $24.0 million of accrued severance costs, approximately $18.4 million of which was due to lower than anticipated settlement costs at a major European manufacturing site, and approximately $5.6 million of which related to two plants that were not closed as initially planned due to a change in business requirements. Sanmina-SCI also reversed $1.0 million of accrued facilities shutdown costs due to lower than estimated costs at various sites. During fiscal 2004, Sanmina-SCI utilized a total of approximately $11.4 million of facilities-related accruals and $3.4 million of accrued severance. During the nine months ended July 2, 2005, Sanmina-SCI utilized $845,000 due to facilities shutdown.

Note 4—Comprehensive Income

SFAS No. 130 “Reporting Comprehensive Income” establishes standards for reporting and display of comprehensive income (loss) and its components. SFAS No. 130 requires companies to report “comprehensive income” that includes unrealized holding gains and losses and other items that have previously been excluded from net income (loss) and reflected instead in stockholders’ equity.

The components of other comprehensive income (loss) were as follows:

	Three Months Ended						Nine Months Ended
	July 2, 2005			June 26, 2004			July 2, 2005			June 26, 2004
	(In thousands)
Net income (loss)	$	(202	)	$	11,351		$	(1,011,344	)	$	(16,736	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(1,311		)	1,523			9,658			13,826
Unrealized holding gain (loss) on investments, net	767			(320		)	673			(1,631		)
Minimum pension liability	(43		)	(348		)	(94		)	2,724
Comprehensive income (loss)	$	(789	)	$	12,206		$	(1,001,107	)	$	(1,817	)

Accumulated other comprehensive income, net of tax, consists of the following:

	As of
	July 2, 2005			October 2, 2004
	(In thousands)
Foreign currency translation adjustment	$	48,068		$	38,410
Unrealized holding gains on investments	712			39
Minimum pension liability	(5,852		)	(5,759		)
Total accumulated other comprehensive income	$	42,928		$	32,690

Note 5—Income Taxes

The tax provision rate for the three and nine months ended July 2, 2005 for fiscal 2005 was 103.4% and (66.9%), respectively. For the three and nine months ended June 26, 2004, the tax benefit rate was (17.6%) and 43.0%, respectively. The significant negative effective rate in fiscal 2005 is due primarily to the recording of valuation allowance against certain deferred tax assets in the second quarter of fiscal 2005 (see discussion below), the majority of which relate to US operations.

As a result of the Company’s continuous migration of certain operating activities from high-cost to low-cost regions, we determined during the quarter ended April 2, 2005 that in accordance with Statement of Financial Accounting Standards No. 109, or SFAS 109, it was more likely than not that certain of the Company’s deferred tax assets primarily relating to our U.S operations would not be realized and accordingly recorded a valuation allowance of $379.2 million. During the third quarter of fiscal year 2005, the Company analyzed its deferred tax assets and associated valuation allowances and recognized a tax benefit of $11.5 million as an adjustment of the income tax reserve related to the above valuation allowances. The Company will continue to provide a valuation allowance against certain deferred tax assets until it becomes more likely than not that the deferred tax assets will be realizable. The Company will continue to evaluate the realizability of the deferred tax assets on a quarterly basis. Although we have established a valuation allowance against the carrying value of certain deferred tax assets, the underlying net operating loss carry forwards would still be available to offset future taxable income in the United States subject to applicable tax laws and regulations. The Company’s reported provision for income taxes for the third quarter is approximately $6.1 million. This amount includes the $11.5 million benefit referred to above. The tax expense for the third quarter is $19.4 million excluding the adjustments as discussed in Note 1 of the financial statements.

Note 6—Business Segment and Customer Information

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” established standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to stockholders. It also established standards for related disclosures about products and services, geographic areas and major customers. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.

Sanmina-SCI’s chief operating decision maker is its Chief Operating Officer. Based on the evaluation of financial information by the Chief Operating Officer, Sanmina-SCI operates in two geographic segments, domestic (United States of America) and international operations. Revenues are attributable to the country in which the product is manufactured. Each segment manufactures, tests and services a full spectrum of complex printed circuit boards, custom backplane interconnect devices, and electronic assembly services. The chief operating decision maker evaluates performance based upon each geographic segment’s operating income. Operating income is defined as income before interest income (expense), other income (expense), net and provision (benefit) for income taxes.

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

	Three Months Ended						Nine Months Ended
	July 2, 2005			June 26, 2004			July 2, 2005			June 26, 2004
	(In thousands)
Net sales:
Domestic	$	685,052		$	877,432		$	2,108,713		$	2,464,943
International	2,146,212			2,192,351			6,860,659			6,437,507
Intersegment	453,985			714,534			1,405,650			1,631,052
Less Intersegment	(453,985		)	(714,534		)	(1,405,650		)	(1,631,052		)
Total	$	2,831,264		$	3,069,783		$	8,969,372		$	8,902,450
Operating income (loss):
Domestic	$	(11,414	)	$	7,812		$	(628,732	)	$	25,006
International	50,697			38,688			123,543			36,222
Total	$	39,283		$	46,500		$	(505,189	)	$	61,228

	As of
	July 2, 2005		October 2, 2004
Long-lived assets (excludes goodwill, other intangible assets and deferred tax assets):
Domestic	$	253,451	$	309,351
International	479,899		492,938
Total	$	733,350	$	802,289

Although Sanmina-SCI seeks to diversify its customer base, a small number of customers are responsible for a significant portion of Sanmina-SCI’s net sales. During the three months ended July 2, 2005 and June 26, 2004, net sales to Sanmina-SCI’s ten largest customers accounted for 65.5% and 69.5%, respectively, of Sanmina-SCI’s net sales. For the nine months ended July 2, 2005 and June 26, 2004, sales to Sanmina-SCI’s ten largest customers accounted for 64.6% and 69.6%, respectively, of Sanmina-SCI’s net sales. During the three and nine month periods ended July 2, 2005, one customer individually represented 10% or more of Sanmina-SCI’s net sales. In the three months and the nine months ended June 26, 2004, two customers individually represented 10% or more of Sanmina-SCI’s net sales.

Consolidated net sales from international operations during the first nine months of fiscal 2005 and 2004, represented 76.5% and 72.3%, respectively. Consolidated net sales from international operations during the three month periods ended July 2, 2005 and June 26, 2004, represented 75.8% and 71.4%, respectively.

Note 7—Business Combinations

On October 26, 2004, Sanmina-SCI completed the acquisition of 100% of the voting equity interests in Pentex-Schweizer Circuits Limited, or Pentex, a printed circuit board fabrication provider with operations in China and Singapore. The acquisition of Pentex provides Sanmina-SCI with manufacturing facilities to support its customers’ requirements in this region and with the opportunity to leverage its vertical integration strategy. The total purchase price was approximately $77.2 million, paid in cash. The purchase price was initially allocated to the assets acquired, including goodwill, and the liabilities assumed based on management’s estimate of the fair value for purchase accounting purposes at the date of acquisition. The Company is currently finalizing their valuation of the acquired assets acquired and liabilities assumed, which may result in revisions to the purchase price allocation. The results of Pentex were included in the Company’s condensed consolidated statements of operations from the date of acquisition.

Pro forma results of operations have not been presented for the Pentex acquisition because the effect of the acquisition was not material to Sanmina-SCI’s operating results or financial condition.

Note 8—Commitments and Contingencies

Environmental Matters. Primarily as a result of certain of our acquisitions, Sanmina-SCI has exposures associated with environmental contamination at facilities. These exposures include ongoing investigation and remediation activities at a number of sites.

Sanmina-SCI uses an environmental consultant to assist in evaluating the environmental costs of the companies that it acquires as well as those associated with its ongoing operations, site contamination issues and historical disposal activities in order to establish appropriate accruals in Sanmina-SCI’s financial statements. As of July 2, 2005 and October 2, 2004, respectively, Sanmina-SCI has accrued $14.3 million and $16.9 million for such environmental liabilities, which is recorded as other long-term liabilities in the condensed consolidated balance sheets. Although Sanmina-SCI believes these accruals are adequate, Sanmina-SCI cannot be certain that the environmental costs will not exceed the accrued amounts.

Litigation and other contingencies. From time to time, Sanmina-SCI is a party to litigation and other contingencies, including examinations by taxing authorities, which arise in the ordinary course of business. Sanmina-SCI believes that the resolution of such litigation and other contingencies will not materially harm Sanmina-SCI’s business, financial condition or results of operations.

Note 9—Financing Activities

Issuance of 63¤4% Notes and related redemption of Zero Coupon Debentures. On February 24, 2005, Sanmina-SCI issued $400 million aggregate principal amount of its 63¤4% Senior Subordinated Notes due 2013 (the “63¤4% Notes”). Interest is payable on the 63¤4% Notes on March 1 and September 1 of each year, beginning on September 1, 2005 and the 63¤4% Notes are due on March 1, 2013.

The 63¤4% Notes are unsecured, senior subordinated obligations of the Company and will be subordinated in right of payment to all of the Company’s existing and future senior debt. The 63¤4% Notes are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated unsecured basis by substantially all of the Company’s domestic restricted subsidiaries (the “Guarantors”) for so long as those subsidiaries guarantee any of the Company’s other debt (other than unregistered senior debt and debt under the Company’s senior secured credit facility).

The Company may redeem the 63¤4% Notes, in whole or in part, at any time prior to March 1, 2009, at a redemption price that is equal to the sum of (1) the amount of the 63¤4% Notes to be redeemed, (2) accrued and unpaid interest on those 63¤4% Notes and (3) a make-whole premium. The Company may redeem the 63¤4% Notes, in whole or in part, beginning on March 1, 2009, at declining redemption prices ranging from 103.375% to 100% of the principal amount, plus accrued and unpaid interest to, but excluding, the redemption date, with the actual redemption price to be determined based on the date of redemption. At any time prior to March 1, 2008, the Company may redeem up to 35% of the 63¤4% Notes with the proceeds of certain equity offerings at a redemption price equal to 106.75% of the principal amount of the 63¤4% Notes, plus accrued and unpaid interest to, but excluding, the redemption date.

Following a change of control, the Company will be required to make an offer to repurchase all or any portion of the 63¤4% Notes at a purchase price of 101% of the principal amount, plus accrued and unpaid interest to, but excluding, the date of repurchase.

The 63¤4% Notes Indenture includes covenants that limit the ability of the Company and its restricted subsidiaries to, among other things: incur additional debt, make investments and other restricted payments, pay dividends on capital stock, or redeem or repurchase capital stock or subordinated obligations; create specified liens; sell assets; create or permit restrictions on the ability of our restricted subsidiaries to pay dividends or make other distributions to us; engage in transactions with affiliates; incur layered debt; and consolidate or merge with or into other companies or sell all or substantially all of the Company’s assets. The restricted covenants are subject to a number of important exceptions and qualifications.

The 63¤4% Notes Indenture provides for customary events of default, including payment defaults, breaches of covenants, certain payment defaults at final maturity or acceleration of other indebtedness, failure to pay certain judgments, certain events of bankruptcy, insolvency and reorganization and certain instances in which a guarantee ceases to be in full force and effect. If any event of default occurs and is continuing, subject to certain exceptions, the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding 63¤4% Notes may declare all the 63¤4% Notes to be due and payable immediately, together with any accrued and unpaid interest, if any, to the acceleration date. In the case of an event of default resulting from certain events of bankruptcy, insolvency or reorganization, such amounts with respect to the 63¤4% Notes will be due and payable immediately without any declaration or other act on the part of the trustee or the holders of the 63¤4% Notes.

Sanmina-SCI entered into interest rate swap transactions with independent third parties to effectively convert the fixed interest rate on the 63¤4% Notes to a variable rate. The interest rate swap agreements, which expire in 2013, are accounted for as fair value hedges under SFAS No. 133. The aggregate notional amount of the combined interest rate swap transactions is $400.0 million. Under the terms of the interest rate swap agreements, Sanmina-SCI pays the independent third parties an interest rate equal to the six-month LIBOR rate plus an interest rate spread ranging from 2.214% to 2.250%. In exchange, Sanmina-SCI receives a fixed rate of 63¤4%. At July 2, 2005, $1.0 million has been recorded in other long-term liabilities to reflect the fair value of the interest rate swaps, with a corresponding decrease to the carrying value of the 63¤4% Notes on the condensed consolidated balance sheet.

On March 25, 2005, Sanmina-SCI completed a tender offer for approximately $400 million accreted value of the Company’s outstanding Zero Coupon Convertible Subordinated Debentures Due 2020, or the Zero Coupon Debentures, at a tender price of $543.75 per $1,000 principal amount at maturity of the Zero Coupon Debentures. Net proceeds from the sale of our 63¤4% Notes of approximately $389.5 million in the aggregate after deducting the discounts and estimated expenses of this offering, together with cash on hand, were utilized to repurchase the Zero Coupon Debentures. Sanmina-SCI accepted $735,629,000 aggregate principal amount at maturity of the Zero Coupon Debentures that were validly tendered in response to the tender offer, representing approximately 64.3% of the total outstanding Zero Coupon

Debentures. The redemption of the Zero Coupon Debentures resulted in a loss on extinguishment of debt of $3.1 million in the quarter ended April 2, 2005, which is included in other income (expense), net in the accompanying condensed consolidated statement of operations.

Sale of Accounts Receivable. On April 1, 2005, Sanmina-SCI UK Limited and Sanmina-SCI Hungary Electronics Limited Liability Company each a wholly-owned subsidiary of Sanmina-SCI, (“Subsidiaries”) each entered into a Committed Account Receivable Purchase Agreement (collectively, the “Receivables Agreements”) with Citibank International Plc (the “Bank”). The Receivables Agreements have a term of one year and permit the Subsidiaries to sell specified accounts receivable to the Bank from time to time. The Company is currently limited by the senior secured credit facility which was amended on June 6, 2005 to the amount of foreign accounts receivable that may be sold under factoring or similar arrangements, including the Receivables Agreements. The revised document amends the aggregate face amount of accounts receivable that may be sold and outstanding at any time from $200 million to $400 million. The obligations of the Subsidiaries under the Receivables Agreements are guaranteed by the Company. Each Subsidiary has provided a lien in favor of the Bank in the account in which the proceeds of the sold receivables are remitted.

The purchase price for a receivable under a Receivables Agreement is equal to 100% of its face amount less a discount charge (based on LIBOR plus a spread) for the period from the date the receivable is sold to its maturity date. The Receivables Agreements provide for a commitment fee based on the unused portion of the facility. Accounts receivable sales under the Receivables Agreements were $84.4 million and $184.1 million for the three and nine month periods ended July 2, 2005. Discounting fees associated with these sales were not considered significant. The sold receivables are subject to certain limited recourse provisions. In accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liability,” the accounts receivable that were sold were removed from the condensed consolidated balance sheets and are reflected as cash provided by operating activities in the condensed consolidated statements of cash flows.

Note 10—Supplemental Guarantors Condensed Consolidating Financial Information

On December 23, 2002, Sanmina-SCI issued $750.0 million of its 10.375% Notes, which are more fully described in Sanmina-SCI’s most recent Annual Report on Form 10-K. On February 24, 2005, Sanmina-SCI issued $400.0 million of its 63¤4% Notes, which are more fully described in Note 9.

The condensed consolidating financial statements are presented below and should be read in connection with the condensed consolidated financial statements of Sanmina-SCI. Separate financial statements of the Guarantors are not presented because (i) the Guarantors are wholly-owned and have fully and unconditionally guaranteed the 10.375% Notes and the 63¤4% Notes on a joint and several basis, and (ii) Sanmina-SCI’s management has determined such separate financial statements are not material to investors. There are no significant restrictions on the ability of Sanmina-SCI or any Guarantor to obtain funds from its subsidiaries by dividend or loan.

The following condensed consolidating financial information presents: condensed consolidating balance sheets as of July 2, 2005 (unaudited) and October 2, 2004, and the unaudited condensed consolidating statements of operations for the three and nine months ended July 2, 2005 and June 26, 2004, and the unaudited condensed consolidating statements of cash flows for the nine months ended July 2, 2005 and June 26, 2004, of (a) Sanmina-SCI, the parent; (b) the guarantor subsidiaries; (c) the non-guarantor subsidiaries; (d) elimination entries necessary to consolidate Sanmina-SCI with the guarantor subsidiaries and the non-guarantor subsidiaries; and (e) Sanmina-SCI, the guarantor subsidiaries and the non-guarantor subsidiaries on a consolidated basis.

Investments in subsidiaries are accounted for on the equity method. The principal elimination entries eliminate investments in subsidiaries, intercompany balances and intercompany sales.

CONDENSED CONSOLIDATING BALANCE SHEET
As of July 2, 2005

	Sanmina-SCI			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Eliminations				Consolidated Total
	(In thousands)
ASSETS:
Current assets:
Cash and cash equivalents		$	545,953		$	60,065		$	613,707		$	—			$	1,219,725
Short-term investments		45,963			—			—			—				45,963
Accounts receivable, net		81,240			283,378			1,238,105			—				1,602,723
Accounts receivable—intercompany		240,480			—			—			(240,480		)		—
Inventories		84,774			277,971			585,929			—				948,674
Deferred income taxes		—			—			23,048			—				23,048
Prepaid expenses and other		42,918			28,254			64,949			(19,078		)		117,043
Total current assets		1,041,328			649,668			2,525,738			(259,558		)		3,957,176
Property, plant and equipment, net		123,697			113,737			476,123			—				713,557
Goodwill		15,463			612,295			1,062,049			—				1,689,807
Intercompany accounts		825,689			—			—			(825,689		)		—
Investment in subsidiaries		2,216,214			1,450,877			—			(3,667,091		)		—
Other intangible assets, net		539			30,746			353			—				31,638
Other assets		39,281			24,256			25,040			—				88,577
Total assets		$	4,262,211		$	2,881,579		$	4,089,303		$	(4,752,338	)		$	6,480,755
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Current portion of long-term debt		$	224,449		$	—		$	761		$	—			$	225,210
Accounts payable		196,788			357,132			935,442			—				1,489,362
Accounts payable—intercompany		—			31,877			208,603			(240,480		)		—
Accrued liabilities		254,664			26,566			187,156			(19,078		)		449,308
Accrued payroll and related benefits		49,911			15,046			92,053			—				157,010
Total current liabilities		725,812			430,621			1,424,015			(259,558		)		2,320,890
Long-term liabilities:
Long-term debt, net of current portion		1,141,572			522,134			31,439			—				1,695,145
Intercompany accounts noncurrent		—			25,529			800,160			(825,689		)		—
Other		32,569			46,255			23,638			—				102,462
Total long-term liabilities		1,174,141			593,918			855,237			(825,689		)		1,797,607
Stockholders’ equity:
Common stock		5,442			70,558			332,633			(403,191		)		5,442
Other stockholders’ equity accounts		2,356,816			1,786,482			1,477,418			(3,263,900		)		2,356,816
Total stockholders’ equity		2,362,258			1,857,040			1,810,051			(3,667,091		)		2,362,258
Total liabilities and stockholders’ equity		$	4,262,211		$	2,881,579		$	4,089,303		$	(4,752,338	)		$	6,480,755

CONDENSED CONSOLIDATING BALANCE SHEET
As of October 2, 2004

	Sanmina-SCI			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Eliminations				Consolidated Total
	(In thousands)
ASSETS:
Current assets:
Cash and cash equivalents		$	473,926		$	68,963		$	566,060		$	—			$	1,108,949
Short-term investments		19,718			—			—			—				19,718
Accounts receivable, net		169,105			207,392			1,292,476			—				1,668,973
Accounts receivable—intercompany		151,181			—			—			(151,181		)		—
Inventories		121,131			286,494			656,893			—				1,064,518
Deferred income taxes		159,598			78,121			66,246			—				303,965
Prepaid expenses and other		17,873			21,681			56,969			—				96,523
Total current assets		1,112,532			662,651			2,638,644			(151,181		)		4,262,646
Property, plant and equipment, net		178,013			113,154			491,475			—				782,642
Goodwill		27,226			1,194,180			1,033,573			—				2,254,979
Intercompany accounts		695,549			305,779			—			(1,001,328		)		—
Investment in subsidiaries		2,975,063			1,355,746			—			(4,330,809		)		—
Other intangible assets, net		1,628			34,221			42			—				35,891
Other assets		194,755			25,958			128,456			(138,691		)		210,478
Total assets		$	5,184,766		$	3,691,689		$	4,292,190		$	(5,622,009	)		$	7,546,636
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Current portion of long-term debt		$	608,092		$	534		$	1,120		$	—			$	609,746
Accounts payable		197,357			343,881			1,089,595			—				1,630,833
Accounts payable—intercompany		—			9,420			141,761			(151,181		)		—
Accrued liabilities		198,149			46,370			136,604			—				381,123
Accrued payroll and related benefits		43,401			31,726			89,230			—				164,357
Total current liabilities		1,046,999			431,931			1,458,310			(151,181		)		2,786,059
Long-term liabilities:
Long-term debt, net of current portion		762,986			520,818			27,573			—				1,311,377
Intercompany accounts noncurrent		—			—			1,001,328			(1,001,328		)		—
Deferred income tax liability		—			138,691			—			(138,691		)		—
Other		20,070			51,179			23,240			—				94,489
Total long-term liabilities		783,056			710,688			1,052,141			(1,140,019		)		1,405,866
Stockholders’ equity:
Common stock		5,420			70,558			310,186			(380,744		)		5,420
Other stockholders’ equity accounts		3,349,291			2,478,512			1,471,553			(3,950,065		)		3,349,291
Total stockholders’ equity		3,354,711			2,549,070			1,781,739			(4,330,809		)		3,354,711
Total liabilities and stockholders’ equity		$	5,184,766		$	3,691,689		$	4,292,190		$	(5,622,009	)		$	7,546,636

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended July 2, 2005

	Sanmina-SCI				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Consolidating Eliminations				Consolidated Total
	(In thousands)
	(Unaudited)
Net sales		$	170,997			$	898,205			$	2,231,259			$	(469,197	)		$	2,831,264
Cost of sales		156,749				875,658				2,107,228				(469,197		)		2,670,438
Gross profit		14,248				22,547				124,031				—				160,826
Operating expenses:
Selling, general and administrative and research and development		6,922				36,324				56,209				—				99,455
Amortization of intangible assets		711				1,183				—				—				1,894
Integration costs		—				28				125				—				153
Restructuring costs		1,878				1,164				16,999				—				20,041
Total operating expenses		9,511				38,699				73,333				—				121,543
Operating income (loss)		4,737				(16,152		)		50,698				—				39,283
Interest income		3,317				288				12,503				—				16,108
Interest expense		(28,263		)		(4,592		)		(12,958		)		—				(45,813		)
Intercompany income (expense), net		13,849				(754		)		(13,095		)		—				—
Other income (expense), net		7,195				(5,704		)		(5,212		)		—				(3,721		)
Other expense, net		(3,902		)		(10,762		)		(18,762		)		—				(33,426		)
Income (loss) before provision (benefit) for income taxes and equity in income (loss) of subsidiaries		835				(26,914		)		31,936				—				5,857
Provision (benefit) for income taxes		(12,903		)		—				18,962				—				6,059
Equity in income (loss) of subsidiaries		(13,940		)		(14,957		)		—				28,897				—
Net income (loss)		$	(202	)		$	(41,871	)		$	12,974			$	28,897			$	(202	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 26, 2004

	Sanmina-SCI				Guarantor Subsidiaries			Non-Guarantor Subsidiaries				Consolidating Eliminations				Consolidated Total
	(In thousands)
	(Unaudited)
Net sales		$	332,530		$	1,010,038			$	2,354,002			$	(626,787	)		$	3,069,783
Cost of sales		313,084			970,478				2,254,485				(626,787		)		2,911,260
Gross profit		19,446			39,560				99,517				—				158,523
Operating expenses:
Selling, general and administrative and research and development		15,758			28,629				47,967				—				92,354
Amortization of intangible assets		879			1,180				—				—				2,059
Integration costs		—			113				148				—				261
Restructuring costs		1,086			3,547				12,716				—				17,349
Total operating expenses		17,723			33,469				60,831				—				112,023
Operating income		1,723			6,091				38,686				—				46,500
Interest income		716			2,653				3,442				—				6,811
Interest expense		(21,945		)	(4,794		)		(6,493		)		—				(33,232		)
Intercompany income (expense), net		(11,351		)	2,886				8,465				—				—
Other income (expense), net		4,724			(2,197		)		(12,957		)		—				(10,430		)
Other expense, net		(27,856		)	(1,452		)		(7,543		)		—				(36,851		)
Income (Loss) before provision (benefit) for income taxes and equity in income (loss) of subsidiaries		(26,133		)	4,639				31,143				—				9,649
Provision (benefit) for income taxes		(3,679		)	(1,136		)		3,113				—				(1,702		)
Equity in income (loss) of subsidiaries		33,805			577				—				(34,382		)		—
Net income (loss)		$	11,351		$	6,352			$	28,030			$	(34,382	)		$	11,351

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended July 2, 2005

					Guarantor			Non-Guarantor				Consolidating			Consolidated
	Sanmina-SCI				Subsidiaries			Subsidiaries				Eliminations			Total
	(In thousands)
	(Unaudited)
Net sales		$	558,290		$	2,764,419			$	7,097,692		$	(1,451,029	)	$	8,969,372
Cost of sales		526,878			2,675,100				6,730,463			(1,451,029		)	8,481,412
Gross profit		31,412			89,319				367,229			—			487,960
Operating expenses:
Selling, general and administrative and research and development		18,810			97,787				172,019			—			288,616
Amortization of intangible assets		2,447			3,548				—			—			5,995
Integration costs		—			106				330			—			436
Goodwill impairment		15,000			585,000				—			—			600,000
Restructuring costs		19,133			7,633				71,336			—			98,102
Total operating expenses		55,390			694,074				243,685			—			993,149
Operating income (loss)		(23,978		)	(604,755		)		123,544			—			(505,189		)
Interest income		7,622			707				32,982			—			41,311
Interest expense		(87,278		)	(13,604		)		(32,440		)	—			(133,322		)
Intercompany income (expense), net		42,126			(16,301		)		(25,825		)	—			—
Other income (expense), net		(5,370		)	(3,263		)		(72		)	—			(8,705		)
Other expense, net		(42,900		)	(32,461		)		(25,355		)	—			(100,716		)
Income (loss) before provision for income taxes and equity in income(loss) of subsidiaries		(66,878		)	(637,216		)		98,189			—			(605,905		)
Provision for income taxes		148,630			160,134				96,675			—			405,439
Equity in income (loss) of subsidiaries		(795,836		)	106,017				—			689,819			—
Net income (loss)		$	(1,011,344	)	$	(691,333	)		$	1,514		$	689,819		$	(1,011,344	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended June 26, 2004

					Guarantor			Non-Guarantor			Consolidating			Consolidated
	Sanmina-SCI				Subsidiaries			Subsidiaries			Eliminations			Total
	(In thousands)
	(Unaudited)
Net sales		$	901,318		$	2,814,804		$	6,788,038		$	(1,601,710	)		$	8,902,450
Cost of sales		859,712			2,666,366			6,533,269			(1,601,710		)		8,457,637
Gross profit		41,606			148,438			254,769			—				444,813
Operating expenses:
Selling, general and administrative and research and development		37,973			83,743			142,907			—				264,623
Amortization of intangible assets		2,912			3,548			—			—				6,460
Integration costs		—			2,323			1,720			—				4,043
Restructuring costs		6,706			27,833			73,920			—				108,459
Total operating expenses		47,591			117,447			218,547			—				383,585
Operating income (loss)		(5,985		)	30,991			36,222			—				61,228
Interest income		2,436			6,536			7,803			—				16,775
Interest expense		(64,424		)	(13,930		)	(13,696		)	—				(92,050		)
Intercompany income (expense), net		(1,050		)	8,567			(7,517		)	—				—
Other income (expense), net		10,096			327			(25,737		)	—				(15,314		)
Other income (expense), net		(52,942		)	1,500			(39,147		)	—				(90,589		)
Income (loss) before provision (benefit) for income taxes and equity in income (loss) of subsidiaries		(58,927		)	32,491			(2,925		)	—				(29,361		)
Provision (benefit) for income taxes		(14,302		)	7,886			(6,209		)	—				(12,625		)
Equity in income (loss) of subsidiaries		27,889			(48,714		)	—			20,825				—
Net income (loss)		$	(16,736	)	$	(24,109	)	$	3,284		$	20,825			$	(16,736	)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended July 2, 2005

					Guarantor				Non-Guarantor				Consolidating			Consolidated
	Sanmina-SCI				Subsidiaries				Subsidiaries				Eliminations			Total
	(In thousands)
	(Unaudited)
Cash provided by (used in) operating activities		$	349,031			$	(365,790	)		$	257,698			$	—		$	240,939
Cash flows provided by (used in) investing activities:
Purchases of short-term investments		(56,199		)		—				—				—			(56,199		)
Proceeds from maturities of short-term investments		30,626				—				—				—			30,626
Purchases of long-term investments		(1,015		)		—				—				—			(1,015		)
Purchases of property, plant and equipment		(8,176		)		(8,481		)		(31,751		)		—			(48,408		)
Proceeds from sale of property, plant and equipment		6,337				8,429				18,897				—			33,663
Cash paid for businesses acquired, net of cash acquired		(4,820		)		(3,401		)		(75,048		)		—			(83,269		)
Cash used in investing activities		(33,247		)		(3,453		)		(87,902		)		—			(124,602		)
Cash flows provided by (used in) financing activities:
Repurchase of convertible notes		(398,726		)		—				—				—			(398,726		)
Payments of long-term debt		(675		)		(1,446		)		(12,777		)		—			(14,898		)
Proceeds from long-term debt, net of issuance costs		389,609				—				13,698				—			403,307
Payments from notes and credit facilities, net		—				(599		)		(2,856		)		—			(3,455		)
Proceeds from sale of common stock, net of issuance costs		11,171				—				—				—			11,171
Proceeds from (repayment of) intercompany debt		(245,136		)		362,390				(117,254		)		—			—
Cash provided by (used in) financing activities		(243,757		)		360,345				(119,189		)		—			(2,601		)
Effect of exchange rate changes		—				—				(2,960		)		—			(2,960		)
Increase (decrease) in cash and cash equivalents		72,027				(8,898		)		47,647				—			110,776
Cash and cash equivalents at beginning of period		473,926				68,963				566,060				—			1,108,949
Cash and cash equivalents at end of period		$	545,953			$	60,065			$	613,707			$	—		$	1,219,725

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended June 26, 2004

					Guarantor				Non-Guarantor				Consolidating			Consolidated
	Sanmina-SCI				Subsidiaries				Subsidiaries				Eliminations			Total
	(In thousands)
	(Unaudited)
Cash provided by (used in) operating activities		$	(29,881	)		$	17,995			$	52,213			$	—		$	40,327
Cash flows provided by (used in) investing activities:
Purchases of short-term investments		(63,234		)		—				—				—			(63,234		)
Proceeds from maturities of short-term investments		92,353				—				—				—			92,353
Purchases of long-term investments		(828		)		—				(11,755		)		—			(12,583		)
Purchases of property, plant and equipment		(12,821		)		(16,367		)		(31,457		)		—			(60,645		)
Proceeds from sale of property, plant and equipment		2,111				18,787				2,550				—			23,448
Cash paid for businesses acquired, net of cash acquired		(34,303		)		(12,679		)		(4,518		)		—			(51,500		)
Cash used in investing activities		(16,722		)		(10,259		)		(45,180		)		—			(72,161		)
Cash flows provided by (used in) financing activities:
Payments of long-term debt		—				(358		)		(12,234		)		—			(12,592		)
Proceeds from long term debt, net of issuance costs		—				64				—				—			64
Payment of notes and credit facilities, net		(612		)		116				(13,167		)		—			(13,663		)
Proceeds from sale of common stock, net of issuance costs		25,894				—				—				—			25,894
Proceeds from (repayment of) intercompany debt		15,513				(30,615		)		15,102				—			—
Cash provided by (used in) financing activities		40,795				(30,793		)		(10,299		)		—			(297		)
Effect of exchange rate changes		—				—				1,218				—			1,218
Decrease in cash and cash equivalents		(5,808		)		(23,057		)		(2,048		)		—			(30,913		)
Cash and cash equivalents at beginning of period		374,660				112,162				540,572				—			1,027,394
Cash and cash equivalents at end of period		$	368,852			$	89,105			$	538,524			$	—		$	996,481

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

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including any statements regarding trends in future revenues or results of operations, gross margin or operating margin, expenses, earnings or losses from operations, synergies or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning developments, performance or industry ranking; any statements regarding future economic conditions or performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Generally, the words “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” “may,” “will,” “should,” “estimate,” “predict,” “potential,” “continue” and similar expressions identify forward-looking statements. Our forward-looking statements are based on current expectations, forecasts and assumptions and are subject to risks, uncertainties and changes in condition, significance, value and effect. As a result of the factors described herein, including, in particular, those factors described under “Factors Affecting Operating Results,” We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this report with the Securities and Exchange Commission.

Overview

We are a leading independent global provider of customized, integrated electronics manufacturing services, or EMS. Our revenue is generated from sales of our services primarily to original equipment manufacturers, or OEMs, in the communications, personal and business computing, enterprise computing and storage, multimedia, industrial and semiconductor capital equipment, defense and aerospace, medical and automotive industries. We also generate sales from our original design manufacturing, or ODM, products where we design and develop servers and storage systems targeted to major OEMs. Our engineering services mainly focus on high-end products and we provide end-to-end design capabilities for printed circuit board design, backplane design, enclosure design, full system and final system design.

As a result of the downturn in the electronics industry, demand for our manufacturing services declined significantly during our 2001, 2002, and 2003 fiscal years. The decrease in demand for manufacturing services by OEMs resulted primarily from reduced capital spending by communications service providers. Consequently, our operating results were adversely affected as a result of the deterioration in the communications market and the other markets that we serve. In fiscal 2004 and the first half of fiscal 2005, we began to see evidence of a recovery in certain markets that we serve and while we expect to see growth in these markets in future quarters, we cannot determine if this recovery will be sustained or if other markets that we serve will also recover. We expect sales to decline in the fourth quarter of fiscal 2005 as compared to the third quarter of fiscal 2005. Sales for the fourth quarter of fiscal 2005 are projected to be in the range of $2.65 billion and $2.80 billion. We expect the declines in net sales to customers in our markets to range from five percent in certain markets to ten percent in other markets, which will be offset by increased sales to customers in other sectors, particularly customers in the communications infrastructure and personal and business computing sectors for which we expect up to a 5% increase in sales.

In response to the downturn in the electronics industry described above, we have initiated restructuring plans in recent years. Although we have begun to see evidence of a recovery in certain sectors of the electronics industry, in July 2004 we announced a phase three restructuring plan to further refine our overall cost structure and reduce operating costs in high cost locations. In January 2005, we announced an increase to the restructuring costs planned under our phase three restructuring plan from $100 million to approximately $175 million. This additional charge is to further reduce manufacturing capacity in high cost regions and leverage expanded capacity and technical capabilities in more cost-efficient regions. As of

July 2, 2005, we have incurred $99.2 million of restructuring costs pursuant to our phase three restructuring plan. We expect to incur approximately 45% to 55% of the total phase three restructuring costs in fiscal 2005 and substantially all of the remainder in fiscal 2006. Our restructuring plans were designed to reduce excess capacity and affect facilities across all services offered in our vertically integrated manufacturing organization. The majority of the restructuring charges recorded and expected to be recorded as a result of these plans relate to facilities located in North America and Europe, and in general, manufacturing activities at these plants were or are expected to be transferred to other facilities.

A relatively small number of customers historically have been responsible for a significant portion of our net sales. Sales to our ten largest customers accounted for 65.5% and 64.6% of our net sales in the three and nine months ended July 2, 2005, respectively, and our largest customer, accounted for 10% or more of our net sales for the three and nine months ended July 2, 2005. Sales to our two largest customers, each accounted for 10% or more of our net sales for the three and nine months ended June 26, 2004.

In recent fiscal years, we have generated a more significant portion of our net sales from international operations. During the first nine months of fiscal 2005 and 2004, 76.5% and 72.3%, respectively, of our consolidated net sales were derived from non-U.S. operations. Consolidated net sales from international operations during the three month periods ended July 2, 2005 and June 26, 2004, represented 75.8% and 71.4%, respectively. The continued shift toward international operations has resulted from overseas acquisitions and a desire on the part of many of our customers to move production to lower cost locations in regions such as Asia, Latin America and Eastern Europe. We expect this trend to continue.

We generally recognize revenue at the point of shipment to our customers. We generally determine the point of shipment to occur either at the freight on board, or FOB, shipping point or when services have been performed under our contract terms. We also derive revenue from sales of certain inventory, including raw materials, to customers that reschedule, amend or cancel purchase orders from us after we have procured inventory to fulfill their orders.

Historically, we have had substantial recurring sales from existing customers. We have also expanded our customer base through acquisitions. We typically enter into supply agreements with our major OEM customers. These agreements generally have terms ranging from three to five years and cover the manufacture of a range of products. Under these agreements, a customer typically agrees to purchase its requirements for particular products in particular geographic areas from us. These agreements generally do not obligate the customer to purchase minimum quantities of products. In some circumstances our supply agreements with customers provide for cost reduction objectives during the term of the agreement.

We have experienced fluctuations in gross margins in the past and may continue to in the future. Fluctuations in our gross margins may be caused by a number of factors, including:

· greater competition in the EMS industry requiring us to reduce prices for our services;

· changes in the mix of our high and low margin products demanded by our customers;

· changes in customer demand and sales volumes, including demand for our vertically integrated key system components and subassemblies;

· pricing pressures from OEMs due to the greater cost reduction focus of global OEMs;

· charges or write offs of excess and obsolete inventory that we are not able to charge back to a customer;

· pricing pressure on electronic components resulting from a downturn in the economic conditions in the electronics industry, with EMS companies competing more aggressively on price to obtain new or maintain existing business; and

· our ability to transition manufacturing and assembly operations to lower cost regions in an efficient manner.

We procure inventory based on specific customer orders and forecasts. Customers have certain rights of modification with respect to these orders and forecasts, and can change, reschedule or cancel orders upon notice and subject, in some cases, to cancellation and rescheduling charges. Order cancellation charges typically vary by product type and depend upon how far in advance of shipment a customer notifies us of the cancellation of an order. In addition, the customer generally remains liable for the cost of any materials and components that we have ordered to meet the customer’s production forecast but which are not used, provided that the material was ordered in accordance with an agreed-upon procurement plan and depending, in some cases, on the nature of the materials and components involved. As a result, customer modifications to orders and forecasts affecting inventory previously procured by us and our purchases of inventory beyond customer needs may result in excess and obsolete inventory for the related customers. Although we may be able to use some of these excess components and raw materials in other products we manufacture, a portion of the cost of this excess inventory may not be returned to the vendors or recoverable from customers. We also may not be able to recover the cost of obsolete inventory from vendors or customers.

Write offs or write-downs of inventory arise from:

· declines in the market value of inventory;

· raw materials held for specific customers who are experiencing financial difficulty; and

· changes in customer demand for inventory, such as cancellation of orders and our purchases of inventory beyond customer needs that result in excess quantities on hand and that we are not able to return to the vendor or charge back to the customer.

Summary Results of Operations

Net sales for the third quarter of fiscal 2005 decreased by 7.8% to $2.8 billion from $3.1 billion in the third quarter of fiscal 2004. The decrease in sales was primarily due to a decrease in sales to customers in the personal and business computing and multimedia sectors. For the nine months ended July 2, 2005, net sales increased by 0.8% to $9.0 billion from $8.9 billion in the nine months ended June 26, 2004. The increase in sales for the nine months ended July 2, 2005 was primarily due to an increase in the sales to communications, and medical and industrial instrumentation customers. The increases in sales to these customers was offset partially by decreases in sales to customers in the high end computing, personal and business computing and multimedia sectors.

The following table sets forth, for the periods indicated, key operating results:

	Three Months Ended						Nine Months Ended
	July 2, 2005			June 26, 2004			July 2, 2005			June 26, 2004
	(In thousands, except percentages)
	(Unaudited)
Net sales	$	2,831,264		$	3,069,783		$	8,969,372		$	8,902,450
Gross profit	160,826			158,523			487,960			444,813
Gross profit %	5.7		%	5.2		%	5.4		%	5.0		%
Operating income (loss)	39,283			46,500			(505,189		)	61,228
Net income (loss)	(202		)	11,351			(1,011,344		)	(16,736		)

The gross margin for the three and nine months ended July 2, 2005 increased to 5.7% and 5.4%, respectively, as compared to the same periods in the prior year primarily due to increased sales to

communications customers as well as cost savings realized as a result of our on-going restructuring activities.

As a result of the Company’s ongoing remediation efforts to remediate the conditions that resulted in the material weakness disclosed in Item 9A of the 2004 Annual Report on Form 10-K and in Item 4 of this report on Form 10-Q, several adjustments were identified and recorded in the condensed consolidated statement of operations for the three and nine month periods ended July 2, 2005, (as discussed in footnote one of the financial statements—“Basis of Presentation”) which relate to previous periods.

Key performance measures

The following table sets forth, for the periods indicated, certain key performance measures that management utilizes to assess operating results:

	Three Months Ended
	July 2, 2005		April 2, 2005		June 26, 2004
Days sales outstanding(1)		51		50		49
Inventory turns(2)		11.3		11.4		10.4
Accounts payable days(3)		51		50		51
Cash cycle days(4)		32		32		33

(1) Days sales outstanding is calculated as the ratio of ending accounts receivable, net, for the quarter divided by average daily net sales for the quarter.

(2) Inventory turns are calculated as the ratio of four times our cost of sales for the quarter divided by inventory, net, at period end.

(3) Accounts payable days is calculated as the ratio of 365 days divided by accounts payable turns, in which accounts payable turns is calculated as the ratio of four times our cost of sales for the quarter divided by accounts payable at period end.

(4) Cash cycle days is calculated as the ratio of 365 days divided by inventory turns plus days sales outstanding minus accounts payable days.

Days sales outstanding, accounts payable days and inventory turns for the quarter ended July 2, 2005 remained relatively flat compared to that of April 2, 2005.

Critical Accounting Policies and Estimates

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

Refer to our 2004 Annual Report on Form 10-K filed with the Securities and Exchange Commission for a complete list of our critical accounting policies. We believe the following critical accounting policies reflect our more significant judgments and estimates used in preparing our condensed consolidated financial statements:

Goodwill—Costs in excess of the fair value of tangible and identifiable intangible assets acquired and liabilities assumed in a business combination are recorded as goodwill. We evaluate goodwill, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair values of the reporting units are estimated using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies’ data. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired, and a second step impairment analysis is then performed to measure the amount of impairment loss. The process of determining the fair value of our reporting units is subjective and requires management to exercise judgment in making assumptions and estimates related to cash flows and discount rates, among other things. During the second quarter of fiscal 2005, we recorded an impairment loss of approximately $600 million in connection with an impairment test pursuant to SFAS No. 142. As of July 2, 2005, the remaining carrying value of goodwill was approximately $1.7 billion. In response to changes in industry and market conditions, we could further strategically realign our resources and consider restructuring, disposing of, or otherwise exiting businesses, which could change our estimates of the fair values of our reporting units, and, consequently, affect the outcome of our goodwill impairment tests.

Income taxes—We estimate our income tax provision or benefit in each of the jurisdictions in which we operate, including estimating exposures related to examinations by taxing authorities. We must also make judgments regarding the realizability of deferred tax assets. The carrying value of our net deferred tax asset is based on our belief that it is more likely than not that we will generate sufficient future taxable income in certain jurisdictions to realize these deferred tax assets. A valuation allowance has been established for deferred tax assets which we do not believe meet the more likely than not criteria established by SFAS No. 109, “Accounting for Income Taxes.” Our judgments regarding future taxable income may change due to changes in market conditions, changes in tax laws, tax planning strategies or other factors. If our assumptions and consequently our estimates change in the future, the valuation allowances we have established may be increased or decreased, impacting future income tax expense. On a quarterly basis, we have historically recorded an income tax provision or benefit based upon an estimated annual effective tax rate. During the third quarter of fiscal 2005, in accordance with FIN 18, “Accounting for Income Taxes in Interim Periods,” we excluded from the consolidated worldwide effective tax rate computation certain jurisdictions where no tax benefit of losses, either year-to-date or anticipated fiscal year, can be recognized. Accordingly, the tax provision for the third quarter of fiscal 2005 was recorded for

taxes on income generated in jurisdictions other than the U.S. and other than selected foreign jurisdictions in which the company has a full valuation allowance. The effective tax rate is highly dependent upon the geographic distribution of our worldwide earnings or loss, tax regulations in each geographic region, the availability of tax credits and carryforwards, and the effectiveness of our tax planning strategies. We regularly monitor the assumptions used in estimating our annual effective tax rate and adjust our estimates accordingly. If actual results differ from our estimates, future income tax expense could be materially affected.

Results of Operations

The following table sets forth, for the three and nine months ended July 2, 2005 and June 26, 2004, certain items in the condensed consolidated statement of operations expressed as a percentage of net sales. The table and the discussion below should be read in conjunction with the condensed consolidated financial statements and the notes thereto, which appear elsewhere in this report.

	Three Months Ended						Nine Months Ended
	July 2, 2005			June 26, 2004			July 2, 2005		June 26, 2004
Net sales		100.0	%		100.0	%	100.0	%		100.0	%
Cost of sales		94.3			94.8		94.6			95.0
Gross profit		5.7			5.2		5.4			5.0
Operating expenses:
Selling, general and administrative		3.3			2.8		3.0			2.7
Research and development		0.3			0.2		0.2			0.2
Amortization of intangible assets		—			0.1		—			0.1
Integration costs		—			0.0		—			0.0
Restructuring costs		0.7			0.6		1.1			1.3
Goodwill impairment		—			—		6.7			—
Total operating expenses		4.3			3.7		11.0			4.3
Operating income (loss)		1.4			1.5		(5.6	)		0.7
Interest income		0.5			0.2		0.5			0.2
Interest expense		(1.6	)		(1.1	)	(1.5	)		(1.0	)
Other expense, net		(0.1	)		(0.3	)	(0.1	)		(0.2	)
Other income (expense), net		(1.2	)		(1.2	)	(1.1	)		(1.0	)
Income (loss) before provision for income taxes		0.2			0.3		(6.8	)		(0.3	)
Provision (benefit) for income taxes		0.2			(0.1	)	4.5			(0.1	)
Net income (loss)		(0.0	)%		0.4	%	(11.3	)%		(0.2	)%

Net Sales

Net sales decreased by 7.8%, or $238.5 million, from $3.1 billion in the third quarter of fiscal 2004 to $2.8 billion in the third quarter of fiscal 2005. The decrease in sales was primarily due to a decrease in sales to customers in the personal and business computing and multimedia sectors. For the nine months ended July 2, 2005, net sales increased by 0.8% to $9.0 billion from $8.9 billion in the nine months ended June 26, 2004. The increase in sales for the nine months ended July 2, 2005 was primarily due to an increase in the sales to communications and medical and industrial instrumentation customers. The increases in sales to these customers was offset partially by decreases in sales to customers in the high end computing, personal and business computing and multimedia sectors.

The following summarizes financial information by geographic segment:

	Three Months Ended
	July 2, 2005				June 26, 2004
	(In thousands)
Net sales:
Domestic	$	685,052	24.2	%	$	877,432	28.6	%
International	2,146,212		75.8		2,192,351		71.4
Total	$	2,831,264	100.0	%	$	3,069,783	100.0	%

	Nine Months Ended
	July 2, 2005				June 26, 2004
	(In thousands)
Net sales:
Domestic	$	2,108,713	23.5	%	$	2,464,943	27.7	%
International	6,860,659		76.5		6,437,507		72.3
Total	$	8,969,372	100.0	%	$	8,902,450	100.0	%

Domestic sales for the third quarter.of fiscal 2005 decreased as compared to the third quarter of fiscal 2004 by 21.9% to $685.1 million from $877.4 million and international sales decreased by 2.1% to $2.1 billion from $2.2 billion. For the nine months ended July 2, 2005, domestic sales decreased by 14.5% to $2.1 billion from $2.5 billion for the same period in fiscal 2004 and international sales increased by 6.6% to $6.9 billion from $6.4 billion. The decrease in domestic net sales was primarily due to our restructuring activities to consolidate and move certain of our manufacturing operations to lower cost regions. Net sales from our international operations, as a percentage of consolidated net sales, increased to 75.8% in the third quarter of fiscal 2005 from 71.4% in third quarter of fiscal 2004. Net sales from out international operations as a percentage of consolidated net sales, were 76.5% and 72.3% in the first nine months of fiscal 2005 and fiscal 2004, respectively. The increase was primarily attributable to increased sales to existing international customers and the impact of the movement of manufacturing activities to lower cost international regions. The Company reported a net loss of approximately $202,000, excluding the adjustments as discussed in footnote one of the financial statements—“Basis of Presentation”, was $3.9 million loss.

Gross Margin

Gross margin increased from 5.2% in the third quarter of fiscal 2004 to 5.7% in the third quarter of fiscal 2005 and increased from 5.0% for the nine months ended June 26, 2004 to 5.4% for the nine months ended July 2, 2005. The increase was attributable primarily to increased sales of products to communications, medical and industrial instrumentation customers, favorable product mix, cost savings realized as a result of our ongoing restructuring activities and an increase in vertical integration sales. We expect gross margins to continue to fluctuate based on overall production and shipment volumes as well as changes in the mix of products ordered by and shipped to major customers. The Company’s reported gross margin of approximately 5.7% excluding the adjustments as discussed in footnote one of the financial statements “Basis of Presentation”, was 6.0% .

Operating Expenses

Selling, general and administrative expenses

Selling, general and administrative expenses increased from $85.0 million in the third quarter of fiscal 2004 to $92.1 million in the third quarter of fiscal 2005. Selling, general and administrative expenses

increased as a percentage of net sales, from 2.8% in the third quarter of fiscal 2004 to 3.3% in the third quarter of fiscal 2005. For the nine months ended July 2, 2005, selling, general and administrative expenses increased to $266.5 million from $243.4 million for the nine months ended June 26, 2004. Selling, general and administrative expenses increased as a percentage of net sales, from 2.7% for the first nine months of fiscal 2004 to 3.0% for the first nine months of fiscal 2005. The increase in selling, general, and administrative expenses in the third quarter of fiscal 2005 as compared to the third quarter of fiscal 2004 was attributable to a number of factors including increased sales and marketing expenses, internal costs and professional fees related to Sarbanes-Oxley Act Section 404 activities. The increase in selling, general, and administrative expenses for the nine months ended July 2, 2005, as compared to the nine months ended June 26, 2004 was also attributable to a number of factors including increased sales and marketing expenses, internal costs and professional fees related to Sarbanes-Oxley Act Section 404 activities, additional information technology expenses, and the inclusion of selling, general and administrative expenses associated with recently acquired businesses. Selling, general and administrative expenses as a percentage of sales are anticipated to remain relatively constant as a percentage of net sales, depending on sales volume and our business acquisition activity.

Research and development expenses

Research and development expenses increased modestly from $7.3 million in the third quarter of fiscal 2004 to $7.4 million in the third quarter of fiscal 2005. Research and development increased as a percentage of net sales, from 0.2% in the third quarter of fiscal 2004 to 0.3% in the third quarter of fiscal 2005. For the nine months ended July 2, 2005, research and development expenses increased to $22.1 million from $21.2 million for the nine months ended June 26, 2004. Research and development expenses as a percentage of net sales, remained the same at 0.2% for both the first nine months of fiscal 2004 and fiscal 2005. The balance of research and development expenses is mainly related to Newisys, our internally developed enterprise-class servers. The Newisys team of hardware and software design engineers engages in research and development activities focused on developing server and storage systems targeted to major OEMs.

Restructuring costs

In recent periods we have initiated restructuring plans as a result of the slowdown in the global electronics industry and the worldwide economy. These plans were designed to reduce excess capacity and affected facilities across all services offered in our vertically integrated manufacturing organization. The majority of the restructuring charges recorded as a result of these plans related to facilities located in North America and Europe, and in general, the majority of the manufacturing activities at these plants were transferred to other facilities.

	Employee Termination Benefits				Lease and Contract Termination Costs				Other Restructuring Costs				Impairment of Fixed Assets				Total
	(In thousands)
	Cash				Cash				Cash				Non-cash
Balance at October 2, 2004		$	15,496			$	1,587			$	42			$	—		$	17,125
Charges to operations		12,660				2,873				1,363				1,224			18,120
Charges utilized		(11,718		)		(1,805		)		(200		)		(1,224		)	(14,947		)
Balance at January 1, 2005		16,438				2,655				1,205				—			20,298
Charges to operations		42,346				8,216				1,366				4,004			55,932
Charges utilized		(28,176		)		(6,720		)		(2,374		)		(4,004		)	(41,274		)
Balance at April 2, 2005		30,608				4,151				197				—			34,956
Charges to operations		16,278				835				1,603				718			19,434
Charges utilized		(5,837		)		(2,314		)		(1,015		)		(718		)	(9,884		)
Balance at July 2, 2005		$	41,049			$	2,672			$	785			$	—		$	44,506

During the nine months ended July 2, 2005, Sanmina-SCI recorded restructuring charges of approximately $93.4 million, of which $91.4 million relates to our phase three restructuring plan and the remainder relates to our phase two restructuring plan. These charges included employee termination benefits of approximately $71.3 million, lease and contract termination costs of approximately $11.9 million, other restructuring costs of approximately $4.3 million, incurred primarily to prepare facilities for closure, and impairment of fixed assets of approximately $5.9 million consisting of excess facilities and equipment to be disposed of. This $5.9 million was fully utilized in the third quarter of 2005. The employee termination benefits were related to the involuntary termination of approximately 1,900 employees, the majority of which were involved in manufacturing activities. Approximately $45.7 million for employee termination benefits was utilized during the nine months ended July 2, 2005. A total of approximately 9,300 employees were terminated during the nine months ended July 2, 2005 pursuant to this restructuring plan. Sanmina-SCI also utilized $10.8 million of lease and contract termination costs and $3.6 million of the other restructuring costs during the nine months ended July 2, 2005.

is a summary of the activity related to restructuring costs recorded pursuant to EITF 94-3 and SFAS 112 pursuant to Sanmina-SCI’s ongoing restructuring plans through the third quarter of fiscal year 2005.

	Employee Severance and Related Expenses				Facilities Shutdown and Consolidation Costs				Write-off Impaired or Redundant Fixed Assets				Total
	Cash				Cash				Non-cash
Balance at October 2, 2004		$	1,227			$	14,925			$	—		$	16,152
Charges to operations		329				1,216				760			2,305
Charges utilized		(1,180		)		(3,473		)		(760		)	(5,413		)
Balance at January 1, 2005		376				12,668				—			13,044
Charges to operations		96				593				3,033			3,722
Charges utilized		—				(1,914		)		(1,015		)	(2,929		)
Reversal of accruals		—				—				(2,018		)	(2,018		)
Balance at April 2, 2005		472				11,347				—			11,819
Charges to operations		29				578				—			607
Charges utilized		(201		)		(1,904		)		—			(2,105		)
Balance at July 2, 2005		$	300			$	10,021			$	—		$	10,321

The following sections separately present the charges to the restructuring liability and charges utilized that are set forth in the above table on an aggregate basis.

Fiscal 2002 Plans

September 2002 Restructuring. In September 2002, Sanmina-SCI approved a plan pursuant to EITF 94-3 to close and consolidate certain of its manufacturing facilities in North America, Europe and Asia as a result of the ongoing slowdown in the industry. In fiscal years 2002 and 2003, Sanmina-SCI recorded charges to operations of $10.1 million for planned employee severance expenses related to the involuntary termination of approximately 800 employees, and utilized charges of approximately $5.8 million as a result of terminating approximately 790 employees. In fiscal 2002 and 2003 Sanmina-SCI also recorded charges to operations of $22.3 million for the shutdown of facilities related to non-cancelable lease payments for permanently vacated properties and associated costs, and utilized charges of $17.7 million related to the shutdown of these facilities. Sanmina-SCI also incurred charges to operations of $74.3 million in fiscal years 2002 and 2003 related to the impairment of buildings and excess equipment and leasehold improvements at permanently vacated facilities.

During fiscal 2004, Sanmina-SCI recorded charges to operations of approximately $1.9 million and utilized $2.6 million for employee severance expenses. Approximately 10 employees were terminated during fiscal 2004. During fiscal 2004, Sanmina-SCI also recorded charges to operations of approximately $26.7 million and utilized approximately $16.1 million for non-cancelable lease payments, lease termination costs and related costs for the shutdown of facilities. In addition, in fiscal 2004, Sanmina-SCI reversed approximately $3.6 million of accrued employee severance due to lower than anticipated payments at various plants and approximately $5.8 million of accrued facilities shutdown costs due to a change in use of the facilities or achieving greater sublease income than we anticipated. Sanmina-SCI also incurred charges to operations of $3.5 million related to the impairment of buildings and leasehold improvements at permanently vacated facilities in fiscal 2004. The closing of the plants discussed above as well as employee terminations and other related activities have been completed, however, the leases of the related facilities expire in 2009; therefore, the remaining accrual will be reduced over time as the lease payments, net of sublease income, are made.

months ending July 2, 2005 pursuant to the September 2002 restructuring plan. In addition, Sanmina-SCI recorded charges of $439,000 and utilization of $2.1 million due to shutdown costs for closed facilities. In addition, $800,000 was charged to operations and utilized due to the impairment of fixed assets to be disposed of.

During the nine months ended July 2, 2005, Sanmina-SCI recorded charges to operations of $336,000 for employee severance costs, $195,000 for facility shutdown charges and 313,000 for impairment of fixed assets. Sanmina-SCI utilized accrued severance charges of $1.2 million, accrued facilities shutdown related charges of $1.6 million, and reversed an accrual for $2.0 million for impairment of fixed assets during the nine months ended July 2, 2005.

Fiscal 2001 Plans

Acquisition related restructuring. Costs associated with restructuring activities related to a purchase business combination are accounted for in accordance with EITF 95-3. Accordingly, costs associated with such plans are recorded as a liability assumed as of the consummation date of the purchase business combination and included in the cost of the acquired entity. The accrued restructuring costs are included in “accrued liabilities” in the condensed consolidated balance sheet. Below is a summary of the activity related to restructuring costs recorded pursuant to EITF 95-3 for the periods in which restructuring activities have taken place through the third quarter of fiscal 2005.

	Employee				Facilities
	Severance and				Shutdown and
	Related				Consolidation
	Expenses				Costs				Total
	Cash				Cash
Balance at October 2, 2004		$	42			$	2,178		$	2,220
Additions to restructuring accrual		—				—			—
Accrual utilized		(42		)		(568		)	(610		)
Balance at January 1, 2005		—				1,610			1,610
Additions to restructuring accrual		—				—			—
Accrual utilized		—				(64		)	(64		)
Balance at April 2, 2005		—				1,546			1,546
Additions to restructuring accrual		—				—			—
Accrual utilized		—				(213		)	(213		)
Balance at July 2, 2005		$	—			$	1,333		$	1,333

The following sections separately present the charges to the restructuring liability and charges utilized that are set forth in the above table on an aggregate basis.

Ongoing Restructuring Activities

We continue to rationalize manufacturing facilities and headcount to better scale capacity to current market and operating conditions. In July 2004, we announced our phase three restructuring plan, which we initially expected to result in restructuring charges of up to approximately $100 million. In January 2005, we announced an increase to planned restructuring costs under our phase three restructuring plan from $100 million to approximately $175 million. This additional charge is to further reduce manufacturing capacity in high cost regions and leverage expanded capacity and technical capabilities in more cost-efficient regions. We undertook this smaller scale restructuring plan to further refine our overall cost structure and reduce operating costs in high cost locations. We expect to incur approximately 45 to 55% of the total phase three restructuring costs in fiscal 2005 and substantially all of the remainder in fiscal 2006. We expect approximately 80 to 85% of the charges to be cash charges and the remainder to be non-cash.

We also anticipate incurring restructuring charges in the remainder of fiscal 2005 under our phase two restructuring plan which was approved by management in the fourth quarter of fiscal year 2002. Total restructuring costs under this plan are expected to be approximately $275.0 million, of which an aggregate of approximately $267.2 million was incurred in fiscal 2002, 2003, 2004 and the first nine months of fiscal 2005. The costs consist of both cash and non-cash charges. As of October 2, 2004, we had completed or commenced all restructuring actions contemplated under our phase two restructuring plan. However, certain costs cannot be recorded until future quarters in accordance with generally accepted accounting principles. As a result of our phase two restructuring plan, we expect to achieve reductions in non-cash and cash costs, including depreciation, payroll and related benefits, and rent expense. We expect our annual savings from this phase two restructuring plan to aggregate approximately $100 to $200 million, affecting cost of sales and selling, general and administrative expense. We began to realize benefits from these savings in the fourth quarter of fiscal 2002 and fully realized the annual savings by the end of fiscal 2004.

We plan to fund cash restructuring costs with cash flows generated by operating activities.

Goodwill Impairment

During the quarter ended April 2, 2005, we recorded a goodwill impairment loss of $600 million for the domestic reporting unit in accordance with SFAS No. 142. The factors that led to our decision to

provide a valuation allowance against certain deferred tax assets (see Note 5 to the condensed consolidated financial statements), coupled with the recent decline in the market price of our common stock, led us to perform an impairment analysis of its goodwill prior to the annual test scheduled for the fourth quarter of fiscal 2005. As a result of this impairment analysis, we concluded that a portion of its goodwill associated with our domestic reporting unit was impaired, and accordingly, recognized an impairment loss of $600 million. This analysis indicated that there was no impairment of goodwill or long-lived assets associated with our international reporting unit.

Interest Expense

Interest expense increased to $45.8 million in the third quarter of fiscal 2005 compared to $33.2 million in the third quarter of fiscal 2004 and to $133.3 million for the nine months ended July 2, 2005 as compared to $92.1 million for the nine months ended June 26, 2004. The increases in interest expense for the respective periods are primarily related to higher interest rates on our 10.375% Notes due to a higher interest rate resulting from the interest rate swap transaction discussed below and incremental interest expense related to our 6¾% Notes (see Liquidity and Capital Resources).

We entered into an interest rate swap transaction with an independent third party to effectively convert the fixed interest rate on our 10.375% Notes to a variable rate. Under the terms of this swap agreement, we pay the independent third party an interest rate equal to the six-month LIBOR rate plus 6.2162%. In exchange, we receive a fixed rate of 10.375%. We have also entered into interest rate swap transactions with independent third parties to effectively convert the fixed interest rate on our 6¾% Notes to a variable rate. Under the terms of these swap agreements, we pay the independent third parties an interest rate equal to the six-month LIBOR rate plus a spread ranging from 2.214% to 2.250%. In exchange, we receive a fixed rate of 6¾%.

Provision for Income Taxes

As a result of the Company’s continuous migration of certain operating activities from high-cost to low-cost regions, we determined during the quarter ended April 2, 2005 that in accordance with Statement of Financial Accounting Standards No. 109, or SFAS 109, it was more likely than not that certain of the Company’s deferred tax assets primarily relating to our U.S operations would not be realized and accordingly recorded a valuation allowance of $379.2 million. During the third quarter of fiscal year 2005, the Company analyzed its deferred tax assets and associated valuation allowances and recognized a tax benefit of $11.5 million as an adjustment of the income tax reserve related to the above valuation allowances. The Company will continue to provide a valuation allowance against certain deferred tax assets until it becomes more likely than not that the deferred tax assets will be realizable. The Company will continue to evaluate the realizability of the deferred tax assets on a quarterly basis. Although we have established a valuation allowance against the carrying value of certain deferred tax assets, the underlying net operating loss carry forwards would still be available to offset future taxable income in the United States subject to applicable tax laws and regulations. The Company’s reported provision for income taxes for the third quarter is approximately $6.1 million. This amount includes the $11.5 million benefit referred to above. The tax expense for the third quarter is $19.4 million excluding the adjustment as discussed in Note 1 of the financial statements.

Liquidity and Capital Resources

Cash, cash equivalents, and short-term investments as of July 2, 2005 were $1.3 billion, including $25.5 million of restricted cash. Cash provided by operating activities was $240.9 million and $40.3 million during the nine months ended July 2, 2005 and June 26, 2004, respectively. The increase in cash provided by operating activities in the first nine months of fiscal 2005 as compared to the first nine months of fiscal 2004 is primarily generated by sale of accounts receivable and reduction of inventory balances, which is offset by an increase in the gross balance of accounts receivable. Working capital was $1.6 billion and $1.5 billion as of July 2, 2005 and October 2, 2004.

Net cash used for investing activities was $124.6 million and $72.2 million for the first nine months of fiscal 2005 and fiscal 2004, respectively. The increase in net cash used for investing activities in the first nine months of fiscal 2005 as compared to the first nine months of fiscal 2004 was due primarily to the increase in business acquisition activities, in particular the Pentex-Schweizer Circuits Limited, or Pentex, acquisition.

Net cash used for financing activities was $2.6 million in the nine months ended July 2, 2005 as compared to $0.3 million for the nine months ended June 26, 2004. In the first nine months of fiscal 2005, proceeds from the sale of common stock were $14.7 million less than in the first nine months of fiscal 2004, primarily due to the timing of employee stock purchase plan common stock purchases.

We have up to $500 million available for borrowings under our senior secured credit facility depending on the amount of outstanding letters of credit and letters of credit are available up to $150 million.

On February 24, 2005, we entered into an indenture among the Company, the Guarantors (as defined below) and U.S. Bank National Association as trustee, or the 63¤4% Notes Indenture, relating to the issuance by the Company of $400 million aggregate principal amount of its 63¤4% Senior Subordinated Notes due 2013, or the 63¤4% Notes. Interest is payable on the 63¤4% Notes on March 1 and September 1 of each year, beginning on September 1, 2005. The maturity date of the 63¤4% Notes is March 1, 2013.

The 63¤4% Notes are unsecured, senior subordinated obligations and will be subordinated in right of payment to all of our existing and future senior debt. The 63¤4% Notes are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated unsecured basis by substantially all of our domestic restricted subsidiaries, or the Guarantors, for so long as those subsidiaries guarantee any of our other debt (other than unregistered senior debt and debt under our senior secured credit facility).

We may redeem the 63¤4% Notes, in whole or in part, at any time prior to March 1, 2009, at a redemption price that is equal to the sum of (1) the amount of the 63¤4% Notes to be redeemed, (2) accrued and unpaid interest on those 63¤4% Notes and (3) a make-whole premium calculated in the manner specified in the 63¤4% Notes Indenture. We may redeem the 63¤4% Notes, in whole or in part, beginning on March 1, 2009, at declining redemption prices ranging from 103.375% to 100% of the principal amount, plus accrued and unpaid interest to, but excluding, the redemption date, with the actual redemption price to be determined based on the date of redemption. At any time prior to March 1, 2008, we may redeem up to 35% of the 63¤4% Notes with the proceeds of certain equity offerings at a redemption price equal to 106.75% of the principal amount of the 63¤4% Notes, plus accrued and unpaid interest to, but excluding, the redemption date.

Following a change of control, as defined in the 63¤4% Notes Indenture, we will be required to make an offer to repurchase all or any portion of the 63¤4% Notes at a purchase price of 101% of the principal amount, plus accrued and unpaid interest to, but excluding, the date of repurchase.

The 63¤4% Notes Indenture includes covenants that limit our ability and the ability of our restricted subsidiaries to, among other things: incur additional debt, make investments and other restricted payments, pay dividends on capital stock, or redeem or repurchase capital stock or subordinated

obligations; create specified liens; sell assets; create or permit restrictions on the ability of our restricted subsidiaries to pay dividends or make other distributions to us; engage in transactions with affiliates; incur layered debt; and consolidate or merge with or into other companies or sell all or substantially all of our assets. The restricted covenants are subject to a number of important exceptions and qualifications set forth in the 63¤4% Notes Indenture.

We have issued the 63¤4% Notes with a principal balance of $400.0 million due in 2013. We entered into interest rate swap transactions with independent third parties to effectively convert the fixed interest rate to a variable rate. The interest rate swap agreements, which expire in 2013, are accounted for as fair value hedges under SFAS No. 133. The aggregate notional amount of the combined interest rate swap transactions is $400.0 million. Under the terms of the interest rate swap agreements, we pay the independent third parties an interest rate equal to the six-month LIBOR rate plus an interest rate spread ranging from 2.214% to 2.250%. In exchange, we receive a fixed rate of 63¤4%. At July 2, 2005, $1.0 million has been recorded in other long-term liabilities to record the fair value of the interest rate swap transaction, with a corresponding decrease to the carrying value of the 63¤4% Notes on the condensed consolidated balance sheet.

On March 25, 2005, we completed a tender offer for approximately $400 million accreted value of our outstanding Zero Coupon Convertible Subordinated Debentures Due 2020, or the Zero Coupon Debentures, at a tender price of $543.75 per $1,000 principal amount at maturity of the Zero Coupon Debentures. Net proceeds from the sale of our 63¤4% Notes of approximately $389.5 million in the aggregate after deducting the discounts and estimated expenses of this offering, together with cash on hand, were utilized to repurchase the Zero Coupon Debentures. We accepted $735,629,000 aggregate principal amount at maturity of the Zero Coupon Debentures that were validly tendered in response to the tender offer, representing approximately 64.3% of the total outstanding Zero Coupon Debentures. The redemption of the Zero Coupon Debentures resulted in a loss on extinguishment of debt of $3.1 million in the quarter ended April 2, 2005, which is included in other income (expense) in the accompanying condensed consolidated statement of operations.

On April 1, 2005, Sanmina-SCI UK Limited and Sanmina-SCI Hungary Electronics Limited Liability Company (each, a “Subsidiary”), each a wholly-owned subsidiary of Sanmina-SCI, each entered into a Committed Account Receivable Purchase Agreement (collectively, the “Receivables Agreements”) with Citibank International Plc (the “Bank”). The Receivables Agreements have a term of one year and permit the Subsidiaries to sell specified accounts receivable to the Bank from time to time. The Company is currently limited by the senior secured credit facility which was amended on June 6, 2005 to the amount of foreign accounts receivable that may be sold under factoring or similar arrangements, including the Receivables Agreements. The revised document amends the aggregate face amount of accounts receivable that may be sold and outstanding at any time from $200 million to $400 million. The obligations of the Subsidiaries under the Receivables Agreements are guaranteed by the Company. Each Subsidiary has provided a lien in favor of the Bank in the account in which the proceeds of the sold receivables are remitted.

The purchase price for a receivable under a Receivables Agreement is equal to 100% of its face amount less a discount charge (based on LIBOR plus a spread) for the period from the date the receivable is sold to its maturity date. The Receivables Agreements provide for a commitment fee based on the unused portion of the facility. Accounts receivable sales under the Receivables Agreements were $84.4 million and $184.1 million for the three and nine month periods ended July 2, 2005. Discounting fees associated with these sales were not considered significant. The sold receivables are subject to certain limited recourse provisions. In accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liability,” the accounts receivable that were sold were removed from the condensed consolidated balance sheet and are reflected as cash provided by operating activities in the condensed consolidated statement of cash flows.

The covenants under our Credit and Guaranty Agreement, amended as of June 6, 2005, limit the amount of foreign accounts receivable that may be sold under factoring or similar arrangements, including the Receivables Agreements and Receivable Purchase Agreements to $400.0 million in aggregate face amount outstanding at any time.

Included in cash provided by operating activities for the nine months ended July 2, 2005 is $184.1 million of net proceeds from the sale of accounts receivable under the Receivables Agreements and Receivable Purchase Agreements. As of July 2, 2005, $84.4 million of sold accounts receivable remain subject to certain recourse provisions. Sanmina-SCI has not experienced any credit losses under these recourse provisions.

Contractual Obligations

The following is a summary of our obligations and commitments as of July 2, 2005:

			Fiscal Year(s)
Dollars in thousands	Total		Three Months 2005			2006		2007		2008		2009		Thereafter
Long-term debt and capital lease obligations(1)	$	1,920,354		$	432	$	244,166	$	523,040	$	907	$	844	$	1,150,965
Operating leases(2)	107,130			9,472		27,590		18,668		12,107		7,445		31,848
Total contractual obligations	$	2,027,484		$	9,904	$	271,756	$	541,708	$	13,014	$	8,289	$	1,182,813

(1) In September 2005, we will be required to repurchase up to $225.4 million accreted value of Zero Coupon Subordinated Debentures due 2020 if submitted for repurchase by the holders of these debentures at their option on the repurchase date. Accordingly, the accreted value of our Zero Coupon Subordinated Debentures due 2020 as of July 2, 2005 of $223.6 million is included in the fiscal 2005 maturities in the table above.

(2) Future operating lease payments include the obligations for closed facilities (totaling approximately $16.8 million) which have been fully or partially accrued in restructuring costs.

We also have outstanding firm purchase orders with certain suppliers for the purchase of inventory. These purchase orders are generally short-term in nature. Orders for standard, or catalog, items can typically be canceled with little or no financial penalty. Our policy regarding non-standard or customized items dictates that such items are only ordered specifically for customers who have contractually assumed liability for the inventory. In addition, a substantial portion of the catalog items covered by our purchase orders were procured for specific customers based on their purchase orders or a forecast under which the

customer has contractually assumed liability for such material. Accordingly, the amount of liability from purchase obligations under these purchase orders is not significant or meaningful.

Certain acquisition agreements that we entered into in connection with purchase business combinations may require us to pay additional consideration determined by the future performance of the acquired entity. The amount and likelihood of the payments are not determinable as of July 2, 2005.

We provided guarantees to various third parties in the form of letters of credit totaling $30.3 million as of July 2, 2005. The letters of credit cover various guarantees including interest rate swap agreements, workers’ compensation claims and customs duties.

Our future needs for financial resources include increases in working capital to support anticipated sales growth, investments in manufacturing facilities and equipment, and repayments of outstanding indebtedness. We have evaluated and will continue to evaluate possible business acquisitions within the parameters of the restrictions set forth in the agreements governing certain of our debt obligations. These possible business acquisitions could require substantial cash payments. Additionally, we anticipate incurring additional expenditures in connection with the integration of our recently acquired businesses and our restructuring activities. We expect to incur cash costs of approximately $108.9 million in future periods pursuant to our phase three restructuring plan announced in July 2004 and revised in January 2005.

We believe that our existing cash resources, together with cash generated from operations, will be sufficient to meet our working capital requirements through at least the next 12 months. Should demand for our products decrease over the next 12 months, the available cash provided by operations could be negatively impacted. We may seek to raise additional capital through the issuance of either debt or equity securities. Our senior secured credit facility and the indentures governing our 10.375% Notes and our 63¤4% Notes include covenants that, among other things, limit in certain respects us and our restricted subsidiaries from incurring debt, making investments and other restricted payments, paying dividends on capital stock, redeeming capital stock or subordinated obligations and creating liens. In addition to existing collateral and covenant requirements, future debt financing may require us to pledge assets as collateral and comply with financial ratios and covenants. Equity financing may result in dilution to stockholders.

In September 2005, we will be required to repurchase up to $225.4 million accreted value of Zero Coupon Subordinated Debentures due 2020, or Zero Coupon Debentures, if submitted for repurchase by the holders of these debentures at their option on the repurchase date of September 12, 2005. We currently intend to use cash on hand to fund the repurchase of Zero Coupon Debentures, although we may choose to pay the repurchase price in cash, in shares of our common stock valued at market price or in any combination of the two. We may redeem all or a portion of the Zero Coupon Debentures for cash at any time after September 12, 2005 at the issue price plus accrued original issue discount through the date of redemption.

Factors Affecting Operating Results

We are exposed to general market conditions in the electronics industry which could have a material adverse impact on our business, operating results and financial condition.

continue to be highly sensitive to costs and will likely continue to place pressure on EMS companies to minimize costs. This will likely result in continued significant price competition among EMS companies, and this competition will likely continue to affect our results of operations.

We cannot accurately predict future levels of demand for our customers’ electronics products. As a result of this uncertainty, we cannot accurately predict if the improvement in the electronics industry will continue. Consequently, our past operating results, earnings and cash flows may not be indicative of our future operating results, earnings and cash flows. In particular, if the economic recovery in the electronics industry does not demonstrate sustained momentum, and if price competition for EMS services continues to be intense, our operating results may be adversely affected.

If demand for our higher-end, higher margin manufacturing services does not improve, our future gross margins and operating results may be lower than expected.

Before the economic downturn in the communications sector and before our merger with SCI Systems, Inc., sales of our services to OEMs in the communications sector accounted for a substantially greater portion of our net sales and earnings than in recent periods. As a result of reduced sales to OEMs in the communications sector, our gross margins have declined because the services that we provided to these OEMs often were more complex, thereby generating higher margins than those that we provided to OEMs in other sectors of the electronics industry. For example, a substantial portion of our net sales are currently derived from sales of personal computers. Margins on personal computers are typically lower than margins that we have historically realized on communication products. OEMs are continuing to seek price decreases from us and other EMS companies and competition for this business remains intense. Although the electronics industry has begun to show indications of a recovery, pricing pressure on EMS companies continues to be strong and there continues to be intense price competition for EMS services. This price competition could adversely affect our gross margins. If demand for our higher-end, higher margin manufacturing services does not improve in the future, our gross margins and operating results in future periods may be adversely affected.

Our operating results are subject to significant uncertainties.

Our operating results are subject to significant uncertainties, including the following:

· economic conditions in the electronics industry;

· the timing of orders from major customers and the accuracy of their forecasts;

· the timing of expenditures in anticipation of increased sales, customer product delivery requirements and shortages of components or labor;

· the mix of products ordered by and shipped to major customers, as high volume and low complexity manufacturing services typically have lower gross margins than more complex and lower volume services;

· the degree to which we are able to utilize our available manufacturing capacity;

· our ability to effectively plan production and manage our inventory and fixed assets;

· our ability to efficiently move manufacturing activities to lower cost regions without adversely affecting customer relationships;

· pricing and other competitive pressures;

· seasonality in customers’ product requirements;

· fluctuations in component prices;

· political and economic developments in countries in which we have operations;

· component shortages, which could cause us to be unable to meet customer delivery schedules; and

· new product development by our customers.

A portion of our operating expenses is relatively fixed in nature, and planned expenditures are based, in part, on anticipated orders, which are difficult to estimate. If we do not receive anticipated orders as expected, our operating results will be adversely impacted. Moreover, our ability to reduce our costs as a result of current or future restructuring efforts may be limited because consolidation of operations can be costly and a lengthy process to complete.

If we receive other than an unqualified opinion on the adequacy of our internal control over financial reporting as of October 1, 2005 and future year-ends as required by Section 404 of the Sarbanes-Oxley Act of 2002 or we identify other issues in our internal controls, or if we are unable to deliver accurate and timely financial information, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the market price of our common stock and other securities.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission adopted rules requiring public companies to include a report of management on the company’s internal control over financial reporting in their Annual Reports on Form 10-K that contains an assessment by management of the effectiveness of the Company’s internal control over financial reporting. In addition, the independent registered public accounting firm auditing the Company’s financial statements must attest to and report on management’s assessment of the effectiveness of the Company’s internal control over financial reporting. For example, in connection with the audit of our financial statements as of and for the year ended October 2, 2004, management and our independent registered public accounting firm identified a material weakness in our system of internal controls. This matter is discussed in additional detail in Item 4, Controls and Procedures, and in our most recent Annual Report on Form 10-K. We have undertaken a rigorous review of our internal control over financial reporting in order to improve our internal controls, assure compliance with the Section 404 requirements, and ensure the delivery of accurate and timely financial information. We are currently implementing a number of measures intended to meet these objectives. We will need to make significant improvements in our internal controls on an ongoing basis. We will also need to complete and test necessary controls prior to the end of our current fiscal year in order to meet our Section 404 requirements. We cannot assure you that our review will not identify additional control deficiencies or that we will be able to implement improvements to our internal controls in a timely manner. As a result of these reviews or otherwise, we cannot assure you that we will not need to make adjustments to current period operating results or to operating results that have been previously publicly announced or otherwise experience an adverse effect on our operating results, financial condition or business. Moreover, if our independent registered public accounting firm interprets the Section 404 requirements and the related rules and regulations differently from us or if our independent registered public accounting firm are not satisfied with our internal control over financial reporting or with the level at which it is documented, operated or reviewed, they may decline to attest to management’s assessment or issue a qualified report. In addition, delays associated with the Sarbanes-Oxley Section 404 process could result in our inability to timely file our report on Form 10-K report for fiscal 2005. Any of these events could result in an adverse reaction in the financial markets or with customers, suppliers and others with whom we do business due to a loss of confidence in the reliability of our financial statements, which could harm our business and financial condition and cause the market price of our common stock and other securities to decline. Furthermore, failure to timely file our fiscal 2005 Form 10-K report could, particularly if we are unable to do so within the 15-day extension period available under Securities and Exchange Commission rules, affect our listing on the NASDAQ Stock Market or result in a default under agreements related to our debt securities. These events would likely have a material adverse effect on our business and financial condition, as well as on the market price and trading market for our securities, particularly if we were unable to remedy the situation in a short time period.

We may not be able to finance future needs or adapt our business plan to changes because of restrictions contained in the terms of our 10.375% Notes, our 63¤4% Notes and our senior secured credit facility.

Our senior secured credit facility and the indentures for the 10.375% Notes and the 63¤4% Notes contain various covenants that limit our ability to, among other things:

· incur additional debt, including guarantees by us or our restricted subsidiaries;

· make investments, pay dividends on our capital stock, or redeem or repurchase our capital stock or subordinated obligations, subject to certain exceptions;

· create specified liens;

· make capital expenditures;

· sell assets;

· make acquisitions;

· create or permit restrictions on the ability of our restricted subsidiaries to pay dividends or make other distributions to us;

· engage in transactions with affiliates;

· engage in sale and leaseback transactions;

· incur layered indebtedness; and

· consolidate or merge with or into other companies or sell all or substantially all of our assets.

Our ability to comply with covenants contained in the 10.375% Notes, the 63¤4% Notes, the senior secured credit facility and agreements governing other debt to which we are or may become a party may be affected by events beyond our control, including prevailing economic, financial and industry conditions. The senior secured credit facility requires us to comply with a fixed charge coverage ratio and a leverage ratio. Additional debt we incur in the future may subject us to further covenants.

Our failure to comply with these covenants could result in a default under the agreements governing the relevant debt. In addition, if any such default is not cured or waived, the default could result in an acceleration of debt under our other debt instruments that contain cross acceleration or cross-default provisions, which could require us to repay or repurchase debt, together with accrued interest, prior to the date it otherwise is due and that could adversely affect our financial condition. If a default occurs under our senior secured credit facility, we would be unable to borrow under our revolving credit facility and the lenders could cause all of the outstanding debt obligations under the senior secured credit facility to become due and payable, which could result in a default under the 10.375% Notes and the 63¤4% Notes and could lead to an acceleration of these respective obligations. Upon a default or cross-default, the collateral agent, at the direction of the lenders under the senior secured credit facility could proceed against the collateral. Even if we are able to comply with all of the applicable covenants, the restrictions on our ability to manage our business in our sole discretion could adversely affect our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions and other corporate opportunities that we believe would be beneficial to us.

An adverse change in the interest rates for our borrowings could adversely affect our financial condition.

Interest to be paid by us on any borrowings under any of our credit facilities and other long-term debt obligations may be at interest rates that fluctuate based upon changes in various base interest rates. An adverse change in the base rates upon which our interest rates are determined could have a material adverse effect on our financial position, results of operations and cash flows.

We generally do not obtain long-term volume purchase commitments from customers, and, therefore, cancellations, reductions in production quantities and delays in production by our customers could adversely affect our operating results.

We generally do not obtain firm, long-term purchase commitments from our customers. Customers may cancel their orders, reduce production quantities or delay production for a number of reasons. In the event our customers experience significant decreases in demand for their products and services, our customers may cancel orders, delay the delivery of some of the products that we manufacture or place purchase orders for fewer products than we previously anticipated. Even when our customers are contractually obligated to purchase products from us, we may be unable or, for other business reasons, choose not to enforce our contractual rights. Cancellations, reductions or delays of orders by customers would:

· adversely affect our operating results by reducing the volumes of products that we manufacture for our customers;

· delay or eliminate recoupment of our expenditures for inventory purchased in preparation for customer orders; and

· lower our asset utilization, which would result in lower gross margins.

In addition, customers may require that we transfer the manufacture of their products from one facility to another to achieve cost reductions and other objectives. These transfers may result in increased costs to us due to resulting facility downtime or less than optimal utilization of our manufacturing capacity.

We rely on a small number of customers for a substantial portion of our net sales, and declines in sales to these customers could adversely affect our operating results.

Sales to our 10 largest customers accounted for 64.6% of our net sales in the nine months ended July 2, 2005 and our largest customer, IBM, accounted for 10% or more of our net sales for that period. We depend on the continued growth, viability and financial stability of our customers, substantially all of which operate in an environment characterized by rapid technological change, short product life cycles, consolidation, and pricing and margin pressures. We expect to continue to depend upon a relatively small number of customers for a significant percentage of our revenue. Consolidation among our customers may further concentrate our business in a limited number of customers and expose us to increased risks relating to dependence on a small number of customers. In addition, a significant reduction in sales to any of our large customers or significant pricing and margin pressures exerted by a key customer would adversely affect our operating results. In December 2004, IBM announced that it was selling its personal computer business to Lenovo Group, Ltd., or Lenovo, a China-based manufacturer of personal computers. A substantial portion of our sales to IBM relate to personal computer products. In the event that we are unable to enter into new supply agreements with Lenovo for the former IBM personal computer business that was sold to Lenovo, our net sales and operating results could be adversely affected. In the past, some of our large customers have significantly reduced or delayed the volume of manufacturing services ordered from us as a result of changes in their business, consolidations or divestitures or for other reasons. We cannot assure you that present or future large customers will not terminate their manufacturing arrangements with us or significantly change, reduce or delay the amount of manufacturing services ordered from us, any of which would adversely affect our operating results.

If our business declines or improves at a slower pace than we anticipate, we may further restructure our operations, which may adversely affect our financial condition and operating results.

In July 2004, we announced our phase three restructuring plan, which we initially expected to result in restructuring charges of up to approximately $100 million. In January 2005, we announced an increase to planned restructuring costs under our phase three restructuring plan from $100 million to approximately

$175 million. During the fourth quarter of fiscal 2004 and the first nine months of fiscal 2005, we incurred $99.2 million of restructuring costs associated with this plan and expect to incur 45 to 55% of the total estimated costs by the end of fiscal 2005, with the remainder occurring in fiscal 2006. In addition, we anticipate incurring additional restructuring charges under our phase two restructuring plan, which was approved by management in the fourth quarter of fiscal 2002. Our phase two restructuring plan is expected to total approximately $275.0 million of both cash and non-cash restructuring charges, of which an aggregate of approximately $267.2 million was incurred in fiscal 2002, 2003 and 2004 and the first nine months of fiscal 2005. We cannot be certain as to the actual amount of these restructuring charges or the timing of their recognition for financial reporting purposes. We may need to take additional restructuring charges in the future if our business declines or improves at a slower pace than we anticipate or if the expected benefits of recently completed and currently planned restructuring activities do not materialize. These benefits may not materialize if we incur unanticipated costs in closing facilities or transitioning operations from closed facilities to other facilities or if customers cancel orders as a result of facility closures. If we are unsuccessful in implementing our restructuring plans, we may experience disruptions in our operations and higher ongoing costs, which may adversely affect our operating results.

We are subject to intense competition in the EMS industry, and our business may be adversely affected by these competitive pressures.

The EMS industry is highly competitive. We compete on a worldwide basis to provide electronics manufacturing services to OEMs in the communications, personal and business computing, enterprise computing and storage, multimedia, industrial and semiconductor capital equipment, defense and aerospace, medical and automotive industries. Our competitors include major global EMS providers such as Celestica, Inc., Flextronics International Ltd., Hon Hai (FoxConn), Jabil Circuit, Inc., and Solectron Corporation, as well as other EMS companies that often have a regional or product, service or industry specific focus. Some of these companies have greater manufacturing and financial resources than we do. We also face competition from current and potential OEM customers, who may elect to manufacture their own products internally rather than outsource the manufacturing to EMS providers.

In addition to EMS companies, we also compete, with respect to certain of the EMS services we provide, with original design manufacturers, or ODMs. These companies, typically based in Asia, design products and product platforms that are then sold to OEMs, system integrators and others who configure and resell them to end users. To date, ODM penetration has been greatest in the personal computer, including both desktop and notebook computers, and server markets.

We expect competition to intensify further as more companies enter markets in which we operate and the OEMs we serve continue to consolidate. To remain competitive, we must continue to provide technologically advanced manufacturing services, high quality service, flexible and reliable delivery schedules, and competitive prices. Our failure to compete effectively could adversely affect our business and results of operations.

Consolidation in the electronics industry may adversely affect our business.

In the current economic climate, consolidation in the electronics industry may increase as companies combine to achieve further economies of scale and other synergies. Consolidation in the electronics industry could result in an increase in excess manufacturing capacity as companies seek to divest manufacturing operations or eliminate duplicative product lines. Excess manufacturing capacity has increased, and may continue to increase, pricing and competitive pressures for the EMS industry as a whole and for us in particular. Consolidation could also result in an increasing number of very large electronics companies offering products in multiple sectors of the electronics industry. The significant purchasing power and market power of these large companies could increase pricing and competitive pressures for us. If one of our customers is acquired by another company that does not rely on us to provide services and has its own production facilities or relies on another provider of similar services, we

may lose that customer’s business. Any of the foregoing results of industry consolidation could adversely affect our business.

Our failure to comply with applicable environmental laws could adversely affect our business.

We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, storage, discharge and disposal of hazardous substances and wastes in the ordinary course of our manufacturing operations. We also are subject to laws and regulations governing the recyclability of products, the materials that may be included in products, and the obligations of a manufacturer to dispose of these products after end users have finished using them. If we violate environmental laws, we may be held liable for damages and the costs of remedial actions and may be subject to revocation of permits necessary to conduct our businesses. We cannot assure you that we will not violate environmental laws and regulations in the future as a result of our inability to obtain permits, human error, equipment failure or other causes. Any permit revocations could require us to cease or limit production at one or more of our facilities, which could adversely affect our business, financial condition and operating results. Although we estimate our potential liability with respect to violations or alleged violations and reserve for such liability, we cannot assure you that any accruals will be sufficient to cover the actual costs that we incur as a result of these violations or alleged violations. Our failure to comply with applicable environmental laws and regulations could limit our ability to expand facilities or could require us to acquire costly equipment or to incur other significant expenses to comply with these laws and regulations.

Over the years, environmental laws have become, and in the future may become, more stringent, imposing greater compliance costs and increasing risks and penalties associated with violations. We operate in several environmentally sensitive locations and are subject to potentially conflicting and changing regulatory agendas of political, business and environmental groups. Changes in or restrictions on discharge limits, emissions levels, permitting requirements and material storage or handling could require a higher than anticipated level of operating expenses and capital investment or, depending on the severity of the impact of the foregoing factors, costly plant relocation.

In addition to environmental laws and regulations that affect our own operations, recently a number of initiatives directed at reducing the use of hazardous materials in electronic devices and other products have begun to proliferate. Our customers will be required to comply with these initiatives, and we in turn will need to implement manufacturing processes that facilitate such compliance. We may incur additional costs, such as excess and obsolete inventory write-offs, that we are unable to pass on to our customers in order to meet the requirements of these initiatives.

We are potentially liable for contamination of our current and former facilities, including those of the companies we have acquired, which could adversely affect our business and operating results in the future.

We are potentially liable for contamination at our current and former facilities, including those of the companies we have acquired. These liabilities include ongoing investigation and remediation activities at a number of sites, including our facilities located in Irvine, California, (a non-operating facility acquired as part of our acquisition of Elexsys); Owego, New York (a current facility of our Hadco subsidiary); Derry, New Hampshire (a non-operating facility of our Hadco subsidiary); and Fort Lauderdale, Florida (a former facility of our Hadco subsidiary). Currently, we are unable to anticipate whether any third-party claims will be brought against us for this contamination. We cannot assure you that third-party claims will not arise and will not result in material liability to us. In addition, there are several sites, including our facilities in Wilmington, Massachusetts; Clinton, North Carolina; Brockville, Ontario; and Gunzenhausen, Germany that are known to have groundwater contamination caused by a third party, and that third party has provided indemnity to us for the liability. Although we do not currently expect to incur liability for clean-up costs or expenses at any of these sites, we cannot assure you that we will not incur such liability or that any such liability would not be material to our business and operating results in the future.

Our key personnel are critical to our business, and we cannot assure you that they will remain with us.

Our success depends upon the continued service of our executive officers and other key personnel. Generally, these employees are not bound by employment or non-competition agreements. We cannot assure you that we will retain our officers and key employees, particularly our highly skilled design, process and test engineers involved in the manufacture of existing products and development of new products and processes. The competition for these employees is intense. In addition, if Jure Sola, chairman and chief executive officer, Randy Furr, president and chief operating officer, or one or more of our other executive officers or key employees, were to join a competitor or otherwise compete directly or indirectly with us or otherwise be unavailable to us, our business, operating results and financial condition could be adversely affected.

Unanticipated changes in our tax rates or in our assessment of the realizability of our deferred tax assets or exposure to additional income tax liabilities could affect our operating results and financial condition.

We are subject to income taxes in both the United States and various foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and, in the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. Our effective tax rates could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws as well as other factors. For example, as a result of our continuous migration of certain operating activities from high-cost to low-cost regions, we determined during the second fiscal quarter of 2005 that it was more likely than not that certain of our deferred tax assets primarily relating to our U.S. operations would not be realized. As a result of this analysis, during the second quarter of fiscal 2005, we recorded a non-cash charge of $379.2 million in accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109). Our tax determinations are regularly subject to audit by tax authorities and developments in those audits could adversely affect our income tax provision. Should our ultimate tax liability exceed our estimates, our income tax provision and operating results could be affected.

During the second quarter of fiscal 2005, we recorded a goodwill impairment loss of $600 million, and there can be no assurance that it will not be necessary to record additional goodwill impairment or long-lived asset impairment charges in the future.

During the quarter ended April 2, 2005, we recorded a goodwill impairment loss of $600 million. The factors that led us to record a write-off of our deferred tax assets, which primarily related to U.S. operations, coupled with the recent decline in the market price of our common stock, led us to record this goodwill impairment loss. In particular, the shift of operations from U.S. facilities and other facilities in high cost locations to facilities in lower-cost locations has resulted in restructuring charges and a decline in sales with respect to our U.S. operations. In the event that the results of operations do not stabilize or improve, or the market price of our common stock declines further or does not rise, we could be required to record additional goodwill impairment or other long-lived asset impairment charges during fiscal 2005 or in future fiscal periods. Although these goodwill impairment charges are of a non-cash nature, they do adversely affect our results of operations in the periods in which such charges are recorded.

We are subject to risks arising from our international operations.

We conduct our international operations primarily in Asia, Latin America, Canada and Europe and we continue to consider additional opportunities to make foreign acquisitions and construct new foreign facilities. We generated 76.5% of our net sales from non-U.S. operations during the nine months ended July 2, 2005, and a significant portion of our manufacturing material was provided by international suppliers during this period. During the nine months ended fiscal 2004, we generated 72.3% of our net

sales from non-U.S. operations. As a result of our international operations, we are affected by economic and political conditions in foreign countries, including:

· the imposition of government controls;

· export license requirements;

· political and economic instability;

· trade restrictions;

· changes in tariffs;

· labor unrest and difficulties in staffing;

· coordinating communications among and managing international operations;

· fluctuations in currency exchange rates;

· increases in duty and/or income tax rates;

· earnings repatriation restrictions;

· difficulties in obtaining export licenses;

· misappropriation of intellectual property; and

· constraints on our ability to maintain or increase prices.

To respond to competitive pressures and customer requirements, we may further expand internationally in lower cost locations, particularly in Asia, Eastern Europe and Latin America. If we pursue expansion in these locations, we may incur additional capital expenditures. We cannot assure you that we will realize the anticipated strategic benefits of our international operations or that our international operations will contribute positively to, and not adversely affect, our business and operating results.

In addition, during fiscal 2004 and fiscal 2005, the decline in the value of the U.S. dollar as compared to the Euro and many other currencies has resulted in foreign exchange losses. To date, these losses have not been material to our results of operations. However, continued fluctuations in the value of the U.S. dollar as compared to the Euro and other currencies in which we transact business could adversely affect our operating results.

We are subject to risks of currency fluctuations and related hedging operations.

A portion of our business is conducted in currencies other than the U.S. dollar. Changes in exchange rates among other currencies and the U.S. dollar will affect our cost of sales, operating margins and revenues. We cannot predict the impact of future exchange rate fluctuations. In addition, certain of our subsidiaries that have non-U.S. dollar functional currencies transact business in U.S. dollars. We use financial instruments, primarily short-term foreign currency forward contracts, to hedge U.S. dollar and other currency commitments arising from trade accounts receivable, trade accounts payable and fixed purchase obligations. If these hedging activities are not successful or we change or reduce these hedging activities in the future, we may experience significant unexpected expenses from fluctuations in exchange rates.

We may not be successful in implementing strategic transactions, including business acquisitions, and we may encounter difficulties in completing and integrating acquired businesses or in realizing anticipated benefits of strategic transactions, which could adversely affect our operating results.

We seek to undertake strategic transactions that give us the opportunity to access new customers, manufacturing and service capabilities, technologies and geographic markets, to lower our manufacturing costs and improve the margins on our product mix, and to further develop existing customer relationships. For example, we recently completed the acquisition of Pentex in order to provide lower cost printed circuit board manufacturing capacity in China. In addition, we will continue to pursue OEM divestiture transactions. Strategic transactions may involve difficulties, including the following:

· integrating acquired operations and businesses;

· allocating management resources;

· scaling up production and coordinating management of operations at new sites;

· managing and integrating operations in geographically dispersed locations;

· maintaining customer, supplier or other favorable business relationships of acquired operations and terminating unfavorable relationships;

· integrating the acquired company’s systems into our management information systems;

· addressing unforeseen liabilities of acquired businesses;

· lack of experience operating in the geographic market or industry sector of the business acquired;

· improving and expanding our management information systems to accommodate expanded operations; and

· losing key employees of acquired operations.

Any of these factors could prevent us from realizing the anticipated benefits of a strategic transaction, and our failure to realize these benefits could adversely affect our business and operating results. In addition, we may not be successful in identifying future strategic opportunities or in consummating any strategic transactions that we pursue on favorable terms, if at all. Although our goal is to improve our business and maximize stockholder value, any transactions that we complete may impair stockholder or debt holder value or otherwise adversely affect our business and the market price of our stock. Moreover, any such transaction may require us to incur related charges, and may pose significant integration challenges and/or management and business disruptions, any of which could harm our operating results and business.

If we are unable to protect our intellectual property or infringe or are alleged to infringe upon intellectual property of others, our operating results may be adversely affected.

We rely on a combination of copyright, patent, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. As ODM services assume a greater degree of importance to our business, the extent to which we rely on intellectual property rights will increase. We cannot be certain that the steps we have taken will prevent unauthorized use of our technology. Our inability to protect our intellectual property rights could diminish or eliminate the competitive advantages that we derive from our proprietary technology.

We may become involved in litigation in the future to protect our intellectual property or because others may allege that we infringe on their intellectual property. The likelihood of any such claims may increase as we increase the ODM aspects of our business. These claims and any resulting lawsuits could subject us to significant liability for damages and invalidate our proprietary rights. In addition, these lawsuits, regardless of their merits, likely would be time consuming and expensive to resolve and would divert management’s time and attention. Any potential intellectual property litigation alleging our infringement of a third-party’s intellectual property also could force us or our customers to:

· stop producing products that use the challenged intellectual property;

· obtain from the owner of the infringed intellectual property a license to sell the relevant technology at an additional cost, which license may not be available on reasonable terms, or at all; and

· redesign those products or services that use the infringed technology.

Any costs we incur from having to take any of these actions could be substantial.

We and the customers we serve are vulnerable to technological changes in the electronics industry.

Our customers are primarily OEMs in the communications, high-end computing, personal computing, aerospace and defense, medical, industrial controls and multimedia sectors. These industry sectors, and the electronics industry as a whole, are subject to rapid technological change and product obsolescence. If our customers are unable to develop products that keep pace with the changing technological environment, our customers’ products could become obsolete, and the demand for our services could decline significantly. In addition, our customers may discontinue or modify products containing components that we manufacture, or develop products requiring new manufacturing processes. If we are unable to offer technologically advanced, easily adaptable and cost effective manufacturing services in response to changing customer requirements, demand for our services will decline. If our customers terminate their purchase orders with us or do not select us to manufacture their new products, our operating results could be adversely affected.

We may experience component shortages, which could cause us to delay shipments to customers and reduce our revenue and operating results.

In the past from time to time, a number of components purchased by us and incorporated into assemblies and subassemblies produced by us have been subject to shortages. These components include application-specific integrated circuits, capacitors and connectors. As our business begins to improve following the economic downturn, we may experience component shortages from time to time. Unanticipated component shortages have prevented us from making scheduled shipments to customers in the past and may do so in the future. Our inability to make scheduled shipments could cause us to experience a shortfall in revenue, increase our costs and adversely affect our relationship with the affected customer and our reputation generally as a reliable service provider. Component shortages may also increase our cost of goods sold because we may be required to pay higher prices for components in short supply and redesign or reconfigure products to accommodate substitute components. In addition, we may purchase components in advance of our requirements for those components as a result of a threatened or anticipated shortage. In this event, we will incur additional inventory carrying costs, for which we may not be compensated, and have a heightened risk of exposure to inventory obsolescence. As a result, component shortages could adversely affect our operating results for a particular period due to the resulting revenue shortfall and increased manufacturing or component costs.

If we manufacture or design defective products, or if our manufacturing processes do not comply with applicable statutory and regulatory requirements, demand for our services may decline and we may be subject to liability claims.

We manufacture products to our customers’ specifications, and, in some cases, our manufacturing processes and facilities may need to comply with applicable statutory and regulatory requirements. For example, medical devices that we manufacture, as well as the facilities and manufacturing processes that we use to produce them, are regulated by the Food and Drug Administration. In addition, our customers’ products and the manufacturing processes that we use to produce them often are highly complex. As a result, products that we manufacture or design may at times contain design or manufacturing defects, and our manufacturing processes may be subject to errors or not in compliance with applicable statutory and regulatory requirements. In addition, we are also involved in product and component design, and as we seek to grow our original design manufacturer business, this activity as well as the risk of design defects will increase. Defects in the products we manufacture or design may result in delayed shipments to customers or reduced or cancelled customer orders. If these defects or deficiencies are significant, our business reputation may also be damaged. The failure of the products that we manufacture or design or of our manufacturing processes and facilities to comply with applicable statutory and regulatory requirements may subject us to legal fines or penalties and, in some cases, require us to shut down or incur considerable expense to correct a manufacturing program or facility. In addition, these defects may result in liability claims against us. The magnitude of such claims may increase as we expand our medical, automotive, and aerospace and defense manufacturing services because defects in medical devices, automotive components, and aerospace and defense systems could seriously harm users of these products. Even if our customers are responsible for the defects, they may not, or may not have the resources to, assume responsibility for any costs or liabilities arising from these defects.

Recently enacted changes in the securities laws and regulations are likely to increase our costs.

The Sarbanes-Oxley Act of 2002 that became law in July 2002 has required changes in some of our corporate governance, securities disclosure and compliance practices. In response to the requirements of that Act, the Securities and Exchange Commission and the NASDAQ National Market have promulgated new rules on a variety of subjects. Compliance with these new rules, particularly Section 404 of The Sarbanes-Oxley Act of 2002 regarding management’s assessment of our internal control over financial reporting, has increased our legal and financial and accounting costs, and we expect these increased costs to continue indefinitely. We also expect these developments to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be forced to accept reduced coverage or incur substantially higher costs to obtain coverage. Likewise, these developments may make it more difficult for us to attract and retain qualified members of our board of directors or qualified executive officers.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposures to market risk for changes in interest rates relate primarily to our investment portfolio and certain debt obligations. Currently, we do not use derivative financial instruments in our investment portfolio. We invest in high credit quality issuers and, by policy, limit the amount of principal exposure to any one issuer. As stated in our policy, we seek to ensure the safety and preservation of our invested principal funds by limiting default and market risk.

We seek to mitigate default risk by investing in high-credit quality securities and by positioning our investment portfolio to respond to a significant reduction in a credit rating of any investment issuer, guarantor or depository. We seek to mitigate market risk by limiting the principal and investment term of

funds held with any one issuer and by investing funds in marketable securities with active secondary or resale markets.

The table below presents carrying amounts and related average interest rates by year of maturity for our investment portfolio as of July 2, 2005 (dollars in thousands):

	2005			2006			Total
	(In thousands, except percentages)
Cash equivalents and short-term investments	$	559,594		$	36,211		$	595,805
Average interest rate	3.22		%	3.43		%	3.23		%

We have issued the 10.375% Notes with a principal balance of $750.0 million due in 2010. We entered into an interest rate swap transaction with an independent third party to effectively convert the fixed interest rate to variable rates. The swap agreement, which expires in 2010, is accounted for as a fair value hedge under SFAS No. 133. The aggregate notional amount of the swap transaction is $750.0 million. Under the terms of the swap agreement, we pay the independent third party an interest rate equal to the six-month LIBOR rate plus 6.2162%. In exchange, we receive a fixed rate of 10.375%. At July 2, 2005 and October 2, 2004 respectively, ($10.3) million and $13.0 million have been recorded in other assets (long-term liabilities) to record the fair value of the interest rate swap transactions, with a corresponding increase (decrease) to the carrying value of the 10.375% Notes on the condensed consolidated balance sheet.

We have issued the 6¾% Notes with a principal balance of $400.0 million due in 2013. We entered into interest rate swap transactions with independent third parties to effectively convert the fixed interest rate to a variable rate. The swap agreements, which expire in 2013, are accounted for as fair value hedges under SFAS No. 133. The aggregate notional amount of the combined swap transactions is $400.0 million. Under the terms of the swap agreements, we pay the independent third parties an interest rate equal to the six-month LIBOR rate plus a spread ranging from 2.214% to 2.250%. In exchange, we receive a fixed rate of 6¾%. At July 2, 2005, $1.0 million has been recorded in other long-term liabilities to record the fair value of the interest rate swap transactions, with a corresponding decrease to the carrying value of the 6¾% Notes on the condensed consolidated balance sheet.

As of July 2, 2005, we also have $23.2 million of revolving credit agreements and $7.9 million of other term loans at interest rates that fluctuate. The average interest rates for the quarter ended July 2, 2005 were 4.25% for the revolving credit agreements and 4.81% for other term loans.

Foreign Currency Exchange Risk

We transact business in foreign countries. Our primary foreign currency cash flows are in certain Asian and European countries, Australia, Brazil, Canada, and Mexico. We enter into short-term foreign currency forward contracts to hedge those currency exposures associated with certain assets and liabilities denominated in foreign currencies. At July 2, 2005, we had forward contracts to exchange various foreign currencies for U.S. dollars in the aggregate notional amount of $437.4 million. The net unrealized gain on the contracts at July 2, 2005 is not material and is recorded in prepaid expenses and other on the condensed consolidated balance sheets. Market value gains and losses on forward exchange contracts are recognized in the consolidated statement of operations as offsets to the exchange gains and losses on the hedged transactions. The impact of these foreign exchange contracts was not material to the results of operations for the three and nine months ended July 2, 2005 and June 26, 2004. We also utilize foreign currency forward and option contracts to hedge certain forecasted foreign currency sales and cost of sales (“cash flow hedges”). Gains and losses on these contracts related to the effective portion of the hedges are recorded in other comprehensive income until the forecasted transactions occur. Gains and losses related to the ineffective portion of the hedges are immediately recognized in the Consolidated Statement of

Operations. At July 2, 2005, we had forward and option contracts related to cash flow hedges in various foreign currencies in the aggregate notional amount of $137.1 million. The net unrealized gain on the contracts at July 2, 2005 is not material and is recorded in prepaid expenses and other on the consolidated balance sheets. The impact of these foreign exchange contracts was not material to the results of operations for the three and nine months ended July 2, 2005 and June 26, 2004.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. As reported in our most recent Annual Report on Form 10-K for the fiscal year ended October 2, 2004, in connection with the audit of our consolidated financial statements for the year ended October 2, 2004, and in light of new, recently issued interpretative guidance in relation to the assessment of the operating effectiveness of a company’s internal controls, our management and our independent registered public accounting firm, KPMG LLP, reported to our audit committee the identification of a “material weakness” (as such term is defined under Public Company Accounting Oversight Board Auditing Standard No. 2) in our internal controls. Although the Company has commenced corrective actions to remediate on an ongoing basis the material weakness as described in our most recent Annual Report on Form 10-K, the material weakness continues to exist as of July 2, 2005. The Company’s management, including the CEO and CFO, has concluded that, except for the material weakness described above, and taking into account the efforts to address the material weakness, that as of July 2, 2005 our disclosure controls and procedures were designed and were functioning effectively so as to provide reasonable assurance that material information about us and our subsidiaries required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 are recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Control Over Financial Reporting

We have designed and have begun the process of implementing certain changes in our internal controls over financial reporting that are intended to address the material weakness noted above and to otherwise improve and strengthen our financial reporting process. The changes to our internal controls that we are implementing include new accounting procedures for significant financial accounts, new systems, policies and procedures for reconciling all the Company’s balance sheet accounts, and resolving in a timely manner, any reconciling items identified in the process and new processes and tools to properly record intercompany transactions and reconcile intercompany accounts in a timely and accurate manner. Under our new processes and procedures, every balance sheet account, including intercompany accounts, will have an individual that is responsible for the timely and periodic balancing and reconciliation of such accounts. The new systems and procedures which we are implementing are designed to provide these individuals, and our overall finance organization with the ability to facilitate timely account reconciliations and transaction recording. Finally, with regards to accounting responsibilities, we have hired additional qualified personnel many of which are certified public accountants. Additionally, we have provided extensive training to both new and existing personnel on policies, procedures, and tools relevant to their areas of responsibility, including training to enable our personnel to use our new systems and procedures. We will continue to implement these changes and will also evaluate and test them to ensure they improve the effectiveness of internal control over financial reporting. While these improvements are significant, they are not yet fully implemented and are therefore not sufficiently mature. As a result, as indicated above, the material weakness continues to exist as of July 2, 2005.

In addition, we have been engaged in an ongoing process of identifying, documenting and testing our internal controls over financial reporting in anticipation of our required compliance with Section 404 of the Sarbanes-Oxley Act at the end of our 2005 fiscal year. Under Section 404 of the Sarbanes-Oxley Act, our independent registered public accounting firm is required to report on the effectiveness of our internal control over financial reporting. We anticipate that we will make further changes to our internal controls as a result of our remediation activities and efforts to improve our overall processes.

Any system of internal controls, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the controls system’s objectives of facilitating timely and accurate recording of transactions and preventing errors or instances of fraud will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of all controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute certainty that all control gaps and instances of fraud will be detected and prevented. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by the isolated acts of particular individuals, collusion among two or more individuals or management override of the controls. The design of any system of internal controls is based in part on certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions.

x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended July 2, 2005
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Delaware	77-0228183
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
2700 N. First St., San Jose, CA	95134
(Address of principal executive offices)	(Zip Code)
(408) 964-3500
(Registrant’s telephone number, including area code)

			Page
PART I FINANCIAL INFORMATION
Item 1.	Interim Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets		3
	Condensed Consolidated Statements of Operations		4
	Condensed Consolidated Statements of Cash Flows		5
	Notes to Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		60
Item 4.	Controls and Procedures		62
PART II OTHER INFORMATION
Item 1.		Legal Proceedings	64
Item 4.		Submission of Matters to a Vote of Security Holders	64
Item 6.		Exhibits	64
Signatures

Exhibit Number		Description
3.1	(1)	Restated Certificate of Incorporation of the Registrant, dated January 31, 1996.
3.1.1	(2)	Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant, dated March 9, 2001.
3.1.2	(3)	Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock of the Registrant, dated May 31, 2001
3.1.3	(4)	Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant, dated December 7, 2001.
3.2	(5)	Amended and Restated Bylaws of the Registrant, dated December 1, 2003.
4.1	(6)	Indenture, dated as of February 24, 2005, among Registrant, certain subsidiaries of Registrant as guarantors thereunder and U.S. Bank National Association as trustee.
4.2	(7)	Exchange and Registration Rights Agreement, dated as of February 24, 2005, among Registrant, certain subsidiaries of Registrant and the initial purchasers party thereto.
4.3		Amendment No. 2 to Credit Guaranty Agreement, dated as of June 6, 2005, among Registrant, certain subsidiaries of the Registrant, the lenders party hereto, Citibank, N.A., as Collateral Agent, and Citicorp USA, Inc., as administrative agent
31.1		Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2		Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

	SANMINA-SCI CORPORATION
	(Registrant)
	By:	/s/ JURE SOLA
		Jure Sola
		Chief Executive Officer
Date: August 10, 2005
	By:	/s/ DAVID L. WHITE
		Executive Vice President and
		Chief Financial Officer
Date: August 10, 2005