SANMINA CORPORATION This quarterly report on Form 10-Q 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 revenue or results of operations, gross margin, operating margin, expenses, earnings or losses from operations, or cash flow; any statements of the plans, strategies and objectives of management for future operations and the anticipated benefits of such plans, strategies and objectives; any statements regarding future economic conditions or performance; any statements regarding litigation or pending investigations, claims or disputes; any statements regarding the timing of closing of, future cash outlays for, and benefits of acquisitions; any statements regarding expected restructuring costs and benefits; any statements concerning the adequacy of our current liquidity and the availability of additional sources of liquidity; any statements regarding the potential or expected impact of the COVID-19 pandemic on our business, results of operations and financial condition; any statements regarding the potential impact of supply chain shortages and changes in component pricing on our business; any statements regarding the future impact of tariffs on our business; any statements relating to the expected impact of accounting pronouncements not yet adopted; any statements regarding future repurchases of our common stock; 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 and uncertainties, including those contained in Part II, Item 1A of this report. As a result, actual results could vary materially from those suggested by the forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this report with theSecurities and Exchange Commission . Investors and others should note that the Company announces material financial information to its investors using its investor relations website (http://ir.sanmina.com/investor-relations/overview/default.aspx),SEC filings, press releases, public conference calls and webcasts. The Company uses these channels to communicate with its investors and the public about the Company, its products and services and other issues. It is possible that the information the Company posts on its investor relations website could be deemed to be material information. Therefore, the Company encourages investors, the media, and others interested in the Company to review the information it posts on its investor relations website. The contents of our investor relations website are not incorporated by reference into this quarterly report on Form 10-Q or in any other report or document we file with theSEC .Sanmina Corporation and its subsidiaries (the "Company", "we" or "us") operate on a 52 or 53 week year ending on the Saturday nearestSeptember 30 . Fiscal 2021 will be a 52-week year and fiscal 2020 was a 53-week year, with the extra week included in the fourth quarter of fiscal 2020. All references to years relate to fiscal years unless otherwise noted.
Overview
We are a leading global provider of integrated manufacturing solutions, components, products and repair, logistics and after-market services. Our revenue is generated from sales of our products and services primarily to original equipment manufacturers (OEMs) that serve the industrial, medical, defense and aerospace, automotive, communications networks and cloud infrastructure solutions industries.
Our operations are managed as two businesses:
1.Integrated Manufacturing Solutions ("IMS"). Our IMS segment consists of printed circuit board assembly and test, high-level assembly and test, direct-order-fulfillment and memory from our Viking Technology division.
2.Components, Products and Services ("CPS"). Components include interconnect
systems (printed circuit board fabrication, backplane, cable assemblies and
plastic injection molding) and mechanical systems (enclosures and precision
machining). Products include enterprise solutions from our Viking Enterprise
Solutions division; RF, optical and microelectronic; defense and aerospace
products from SCI Technology ; and cloud-based manufacturing execution software
from our 42Q division. Services include design, engineering, logistics and
repair services.
Our only reportable segment for financial reporting purposes is IMS, which
represented approximately 80% of our total revenue in the first nine months of
2021. Our CPS business consists of multiple operating segments which do not
individually meet the quantitative thresholds for being presented as reportable
segments under the accounting rules for segment reporting. Therefore, financial
information for these operating segments is aggregated and presented in a single
category entitled "Components, Products and Services".
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Our strategy is to leverage our comprehensive product and service offerings,
advanced technologies and global capabilities to further penetrate diverse end
markets that we believe offer significant growth opportunities and have complex
products that require higher value-added services. We believe this strategy
differentiates us from our competitors and will help drive more sustainable
revenue growth and provide opportunities for us to ultimately achieve operating
margins that exceed industry standards.
There are many challenges to successfully executing our strategy. For example,
we compete with a number of companies in each of our key end markets. This
includes companies that are much larger than we are and smaller companies that
focus on a particular niche. Although we believe we are well-positioned in each
of our key end markets and seek to differentiate ourselves from our competitors,
competition remains intense and profitably growing our revenues has been
challenging.
We are dependent on certain suppliers, including limited and sole source
suppliers, to provide key components we incorporate into our products. Recently,
and due in part to increased worldwide demand for electronic products and
components across a number of end markets, we are experiencing delays in
delivery and shortages of certain components, particularly certain types of
capacitors, resistors and discrete semiconductors needed for many of the
products we manufacture. We expect these delays and shortages to persist at
least through the end of calendar 2021 and that such shortages could result in
delays in shipments to our customers during the period of such shortages. Any
such delays would reduce our revenue, gross profit and net income for the
periods affected, and would also result in an increase in our inventory of other
components, which would reduce our operating cash flow. In addition, recent
inflationary pressures may lead to sustained increases in the prices we pay for
components, which may require us to attempt to adjust our product pricing to
reflect such changes. Any failure to adjust our pricing in response to
inflationary changes would decrease our gross margins and profitability.
In March 2020 , the World Health Organization declared COVID-19 to be a pandemic.
Our results of operations have been negatively impacted by rapidly changing
market and economic conditions caused by the COVID-19 pandemic, as well as by
numerous measures imposed by government authorities to try to contain the virus.
These conditions and measures disrupted our operations and those of our
customers, interrupted the supply of components, temporarily limited the types
of products we could manufacture and the capacity of our logistics providers to
deliver those products, and resulted in temporary closures of manufacturing
sites and reduced staffing as mandated by government orders. Although employee
infections have not yet had a significant impact on our operations, these
conditions and measures require us to perform contact tracing, exclude
potentially infected employees from the workplace and clean work areas used by
infected employees. Recently, there has been increased COVID-19 infections in
countries in which we have operations. Should employee infections become
widespread, our ability to sustain production at desired levels would be
significantly and negatively impacted. We are unable to accurately predict the
full impact that the COVID-19 pandemic will have on us due to a number of
uncertainties, including the impact of the pandemic on our customers'
businesses, the number of employees who may become infected or exposed to
infected persons whom we would then be required to exclude from our plants, the
imposition of government restrictions on staffing, the need for temporary plant
closures, supply chain shortages and other disruptions to our business and
operations, the capacity of our logistic providers, the duration of the
outbreak, the distribution and availability of COVID-19 vaccines, and the number
of vaccinated people, the geographic locations of any future outbreaks,
including outbreaks caused by variants of COVID-19, and actions that government
authorities may take. However, it is likely that the pandemic will continue to
have a negative impact on our business, results of operations and financial
condition for the foreseeable future.
Separately, we have incurred restructuring charges of approximately $29 million ,
consisting primarily of severance costs, under our company-wide restructuring
plan adopted in October 2019 ("Q1 FY20 Plan"). Additionally, actions under the
Q1 FY20 Plan are expected to be implemented through the fourth quarter of 2021
and cash payments of severance are expected to occur through the end of calendar
2021.
A small number of customers have historically generated a significant portion of
our net sales. Sales to our ten largest customers have typically represented
approximately 55% of our net sales. One customer represented 10% or more of our
net sales for each period presented.
We typically generate about 80% of our net sales from products manufactured in
our foreign operations. The concentration of foreign operations has resulted
primarily from a desire on the part of many of our customers to manufacture in
lower cost regions such as Asia , Latin America and Eastern Europe .
Historically, we have had substantial recurring sales to existing customers. We
typically enter into supply agreements with our major OEM customers. These
agreements generally have terms ranging from three to five years and can cover
the manufacture of a range of products. Under these agreements, a customer
typically purchases its requirements for specific products in particular
geographic areas from us. However, these agreements generally do not obligate
the customer to purchase
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minimum quantities of products, which can have the effect of reducing revenue
and profitability. In addition, some customer contracts contain cost reduction
objectives, which can also have the effect of reducing revenue from such
customers.
Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States ("GAAP"). 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 liabilities. On an ongoing basis, we evaluate the process used to develop estimates related to accounts receivable, inventories, income taxes, environmental matters, litigation and other contingencies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Due to the COVID-19 pandemic, the global economy and financial markets have been disrupted and there is a significant amount of uncertainty about the length and severity of the consequences caused by the pandemic. We have considered information available to us as of the date of issuance of these financial statements and are not aware of any specific events or circumstances that would require an update to our estimates or judgments, or a revision to the carrying value of our assets or liabilities. Our estimates may change as new events occur and additional information becomes available. Our actual results may differ materially from these estimates.
A complete description of our critical accounting policies and estimates is
contained in our Annual Report on Form 10-K for the fiscal year ended
Results of Operations
Key Operating Results
Three Months Ended Nine Months Ended
July 3, June 27, July 3, June 27,
2021 2020 2021 2020
(In thousands)
Net sales $ 1,657,741 $ 1,654,691 $ 5,112,667 $ 5,085,412
Gross profit $ 136,590 $ 131,473 $ 420,923 $ 373,776
Operating income $ 74,265 $ 64,103 $ 214,547 $ 145,653
Net income $ 117,375 $ 44,880 $ 212,433 $ 88,107
Net Sales
Sales by end market were as follows (dollars in thousands):
Three Months Ended Nine Months Ended
July 3, June 27, July 3, June 27,
2021 2020 Increase/(Decrease) 2021 2020 Increase/(Decrease)
Industrial, Medical, Defense and
Automotive $ 957,095 $ 937,876 $ 19,219 2.0 % $ 2,970,407 $ 3,012,065 $ (41,658) (1.4) %
Communications Networks and
Cloud Infrastructure 700,646 716,815 (16,169) (2.3) % 2,142,260 2,073,347 68,913 3.3 %
Total $ 1,657,741 $ 1,654,691 $ 3,050 0.2 % $ 5,112,667 $ 5,085,412 $ 27,255 0.5 %
Net sales increased by 0.5% or less in the three and nine months ended
Gross Margin
Gross margin increased to 8.2% for the third quarter of 2021 from 7.9% for the
third quarter of 2020. IMS gross margin increased to 7.6% for the third quarter
of 2021, from 7.0% for the third quarter of 2020 primarily due to increased
operational efficiencies and the benefit of cost reduction and containment
efforts implemented in 2020, some of which were in response to the COVID-19
pandemic. CPS gross margin decreased to 11.2% for the third quarter of 2021,
from 12.1% for the third quarter of 2020, primarily due to less favorable mix
and costs associated with ramping several defense related programs.
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Gross margin increased to 8.2% for the nine months ended July 3, 2021 from 7.3%
for the nine months ended June 27, 2020 . IMS gross margin increased to 7.3% for
the nine months ended July 3, 2021 , from 6.4% for the nine months ended June 27,
2020 primarily due to increased operational efficiencies and the benefit of cost
reduction and containment efforts described above. Additionally, there was a
greater impact on operational efficiencies and additional costs in the nine
months ended June 27, 2020 due to the COVID-19 pandemic. CPS gross margin
increased to 12.6% for the nine months ended July 3, 2021 , from 11.3% for the
nine months ended June 27, 2020 , primarily due to the factors described above
with respect to IMS gross margin, more favorable mix and the continued benefits
of certain plant closures, partially offset by costs associated with ramping
several defense related programs.
We have experienced fluctuations in gross margin in the past and may continue to
do so in the future. Fluctuations in our gross margins may also be caused by a
number of other factors, including:
•the ongoing impacts of the COVID-19 pandemic on our operations, the operations
of our suppliers and on our customers' businesses;
•capacity utilization which, if lower, results in lower margins due to fixed
costs being absorbed by lower volumes;
•changes in the mix of high and low margin products demanded by our customers;
•competition in the EMS industry and pricing pressures from OEMs due to greater
focus on cost reduction;
•the amount of our provisions for excess and obsolete inventory, including those
associated with distressed customers;
•levels of operational efficiency and production yields;
•customer design changes that may increase our costs and delay or reduce our
production of products; and
•our ability to transition the location of and ramp manufacturing and assembly
operations when requested by a customer in a timely and cost-effective manner.
Selling, General and Administrative
Selling, General and Administrative expenses decreased$1.9 million , from$59.3 million , or 3.6% of net sales, in the third quarter of 2020 to$57.4 million , or 3.5% of net sales, in the third quarter of 2021. The decrease in dollars was primarily due to bad debt expense associated with two customers that declared bankruptcy in the third quarter of 2020. Selling, General and Administrative expenses decreased$7.2 million , from$184.7 million , or 3.6% of net sales, in the nine months endedJune 27, 2020 to$177.5 million , or 3.5% of net sales, in the nine months endedJuly 3, 2021 . The decrease in dollars was primarily due to reduced headcount as a result of actions under our Q1 FY20 restructuring plan, reduced travel and certain other expenses in response to the COVID-19 pandemic, and bad debt expense associated with two customers that declared bankruptcy in the third quarter of 2020.
Research and Development
Research and Development expenses increased$0.1 million , from$5.2 million , or 0.3% of net sales, in the third quarter of 2020 to$5.3 million , or 0.3% of net sales, in the third quarter of 2021. Research and Development expenses decreased$0.7 million , from$16.1 million , or 0.3% of net sales, in the nine months endedJune 27, 2020 to$15.4 million , or 0.3% of net sales, in the nine months endedJuly 3, 2021 . 26 --------------------------------------------------------------------------------
Restructuring and Other
Restructuring
The following table provides a summary of restructuring costs:
Restructuring Expense
Three Months Ended Nine Months Ended
July 3, June 27, July 3, June 27,
2021 2020 2021 2020
(In thousands)
Severance costs $ (1,618) $ 1,430 $ 9,874 $ 12,882
Other exit costs 989 17 998 69
Total - Q1 FY20 Plan (629) 1,447 10,872 12,951
Costs incurred for other plans 247 1,366
2,530 7,377
Total - all plans $ (382) $ 2,813 $ 13,402 $ 20,328
Q1 FY20 Plan
On October 28, 2019 , we adopted a Company-wide restructuring plan ("Q1 FY20
Plan"). During the three months ended July 3, 2021 , we revised our estimate of
the amount of severance to be paid under the Q1 FY20 Plan to reflect voluntary
attrition, differences between estimated and actual amounts paid during the
quarter and other factors. As of July 3, 2021 , we had incurred restructuring
charges of approximately $29 million , consisting primarily of severance costs,
under the Q1 FY20 Plan. Cash payments of severance are expected to occur through
the end of calendar 2021.
Other Plans
Other plans include a number of plans for which costs are not expected to be
material individually or in the aggregate.
All Plans
Our IMS segment incurred costs of $9 million and $10 million for the nine months
ended July 3, 2021 and June 27, 2020 , respectively. Our CPS segment incurred
costs of $4 million and $8 million for the nine months ended July 3, 2021 and
June 27, 2020 , respectively. In addition, $1 million and $2 million of costs
were incurred during the nine months ended July 3, 2021 and June 27, 2020 ,
respectively, for corporate headcount reductions that were not allocated to our
IMS and CPS segments. We had accrued liabilities of $9 million as of July 3,
2021 and October 3, 2020 for restructuring costs (exclusive of long-term
environmental remediation liabilities).
In addition to costs expected to be incurred under the Q1 FY20 Plan, we expect
to incur restructuring costs in future periods primarily for vacant facilities
and former sites for which we are or may be responsible for environmental
remediation.
Other
During the second quarter of 2020, commodity prices in the oil and gas market experienced a sharp decline due to a combination of an oversaturated supply and a decrease in demand caused by the COVID-19 pandemic. This commodity price decline negatively impacted the projected cash flows of our oil and gas reporting unit, which is part of our CPS operating segment. Therefore, we performed a goodwill impairment test for this particular reporting unit and concluded that the fair value of the reporting unit was below its carrying value, resulting in an impairment charge of$7 million . The fair value of the reporting unit was estimated based on the present value of future discounted cash flows. Interest Expense Interest expense for the three months endedJuly 3, 2021 andJune 27, 2020 , was$5 million and$8 million , respectively and$15 million and$20 million for the nine months endedJuly 3, 2021 andJune 27, 2020 , respectively. The decrease in interest expense in 2021 for both periods is primarily due to lower daily average borrowings on our Fourth Amended and Restated Credit Agreement (the "Amended Cash Flow Revolver"). 27 --------------------------------------------------------------------------------
Other Income (Expense), Net
Other income (expense), net for the three months endedJuly 3, 2021 andJune 27, 2020 was an income of$29 million and$3 million , respectively. Other income (expense), net for the nine months endedJuly 3, 2021 andJune 27, 2020 , was income of$37 million and expense of$3 million , respectively. The change for the nine month period was primarily due to a$15 million sale of intellectual property in the third quarter of 2021, an$8 million gain on liquidation of a foreign entity in the third quarter of 2021, a significant decline in the market value of participant investment accounts in our deferred compensation plan in the second quarter of 2020 caused by the COVID-19 pandemic, and receipt of settlement payments of$8 million in 2021 in connection with certain anti-trust class action matters. The change for the three month period is primarily due to the intellectual property sale and gain on liquidation of a foreign entity referenced above.
Provision for (benefit from) Income Taxes
Our provision for (benefit from) income taxes for the three months endedJuly 3, 2021 andJune 27, 2020 was$(18) million ((19)% of income before taxes) and$15 million (25% of income before taxes), respectively and$25 million (11% of income before taxes) and$36 million (29% of income before taxes) for the nine months endedJuly 3, 2021 andJune 27, 2020 , respectively. Income tax expense for the three and nine months endedJuly 3, 2021 decreased primarily due to the recognition of a$43 million tax benefit resulting from the release of certain foreign tax reserves due to lapse of time and expiration of statutes of limitations. 28 --------------------------------------------------------------------------------
Liquidity and Capital Resources
Nine Months Ended
July 3, June 27,
2021 2020
(In thousands)
Net cash provided by (used in):
Operating activities $ 246,621 $ 220,666
Investing activities (60,835) (83,897)
Financing activities (42,736) 525,674Effect of exchange rate changes on cash and cash equivalents 268
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Increase (Decrease) in cash and cash equivalents$ 143,318
Key Working Capital Management Measures
As of
July 3, October 3,
2021 2020
Days sales outstanding (1) 62 54
Contract asset days (2) 19 20
Inventory turns (3) 7.3 7.3
Days inventory on hand (4) 50 50
Accounts payable days (5) 72 70
Cash cycle days (6) 59 54
(1) Days sales outstanding (a measure of how quickly we collect our accounts receivable), or "DSO", is calculated as the ratio of average accounts receivable, net, to average daily net sales for the quarter.
(2) Contract asset days (a measure of how quickly we transfer contract assets to accounts receivable) are calculated as the ratio of average contract assets to average daily net sales for the quarter. (3) Inventory turns (annualized) (a measure of how quickly we sell inventory) are calculated as the ratio of four times our cost of sales for the quarter to average inventory.
(4) Days inventory on hand (a measure of how quickly we turn inventory into sales) is calculated as the ratio of average inventory for the quarter to average daily cost of sales for the quarter.
(5) Accounts payable days (a measure of how quickly we pay our suppliers), or "DPO", 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 to average accounts payable.
(6) Cash cycle days (a measure of how quickly we convert investments in inventory to cash) is calculated as days inventory on hand plus days sales outstanding and contract assets days minus accounts payable days.
Cash and cash equivalents were$624 million atJuly 3, 2021 and$481 million atOctober 3, 2020 . Our cash levels vary during any given quarter depending on the timing of collections from customers and payments to suppliers, borrowings under our credit facilities, sales of accounts receivable under numerous programs we utilize, repurchases of capital stock and other factors. Our working capital was$1.5 billion and$1.3 billion as ofJuly 3, 2021 andOctober 3, 2020 , respectively. Net cash provided by operating activities was$247 million and$221 million for the nine months endedJuly 3, 2021 andJune 27, 2020 , respectively. Cash flows from operating activities consist of: (1) net income adjusted to exclude non-cash items such as depreciation and amortization, deferred income taxes, gain on liquidation of foreign entity, impairments and stock-based compensation expense and (2) changes in net operating assets, which are comprised of accounts receivable, contract assets, inventories, prepaid expenses and other assets, accounts payable, accrued liabilities and other long-term liabilities. Our working capital metrics tend to fluctuate from quarter-to-quarter based on factors such as the linearity of our shipments to customers and purchases from suppliers, customer and supplier mix, the extent to which we factor customer 29 --------------------------------------------------------------------------------
receivables and the negotiation of payment terms with customers and suppliers. These fluctuations can significantly affect our cash flows from operating activities.
During the nine months endedJuly 3, 2021 , we generated$329 million of cash primarily from earnings, excluding non-cash items, and consumed$82 million of cash due primarily to an increase in accounts receivable. Individual components of operating assets and liabilities fluctuate for a number of reasons, including linearity of purchases and sales, the mix of customer and supplier payment terms within our accounts receivable and accounts payable, and the amount and timing of sales of accounts receivable. The increase in accounts receivable is primarily attributable to reduced factoring of accounts receivable, which caused DSO to increase from 54 days as ofOctober 3, 2020 to 62 days as ofJuly 3, 2021 . This decrease in factoring also resulted in a decrease in accrued liabilities since there were no outstanding remittances as ofJuly 3, 2021 , versus$39 million as ofOctober 3, 2020 , that had been collected but not yet remitted to the financial institutions that purchased the receivables. Net cash used in investing activities was$61 million and$84 million for the nine months endedJuly 3, 2021 andJune 27, 2020 , respectively. During the nine months endedJuly 3, 2021 , we used$43 million of cash for capital expenditures, paid$21 million in connection with a business combination and received$5 million from the sale of intellectual property. During the nine months endedJune 27, 2020 , we used$54 million of cash for capital expenditures and purchased$30 million of short-term investments. Net cash (used in) and provided by financing activities was$(43) million and$526 million for the nine months endedJuly 3, 2021 andJune 27, 2020 , respectively. During the nine months endedJuly 3, 2021 , we used$31 million of cash to repurchase common stock (including$10 million related to employee tax withholding on vested restricted stock units), repaid an aggregate of$14 million of long-term debt and received$3 million of net proceeds from issuances of common stock pursuant to stock option exercises. During the nine months endedJune 27, 2020 , we borrowed$650 million of cash under our Amended Cash Flow Revolver, used$100 million of cash to repurchase common stock (including$12 million related to employee tax withholdings on vested restricted stock units), repaid an aggregate of$30 million of long-term debt and received$5 million of net proceeds from issuances of common stock pursuant to stock option exercises.
Other Liquidity Matters
Our Board of Directors has authorized us to repurchase shares of our common stock, subject to a dollar limitation. The timing of repurchases depends upon capital needs to support the growth of our business, market conditions and other factors. We repurchased 0.7 million and 3.4 million shares of our common stock for$22 million and$88 million during the nine months endedJuly 3, 2021 andJune 27, 2020 , respectively. As ofJuly 3, 2021 ,$113 million remains available under the stock repurchase program authorized by the Board of Directors, which does not have an expiration date. Although stock repurchases are intended to increase stockholder value and to offset the dilution that results from the issuance of shares under our equity plans, repurchases of shares also reduce our liquidity. As a result, the timing of future repurchases depends upon our future capital needs, market conditions and other factors. We entered into a Receivable Purchase Agreement (the "RPA") with certain third-party banking institutions for the sale of trade receivables generated from sales to certain customers, subject to acceptance by, and a funding commitment from, the banks that are party to the RPA. As ofJuly 3, 2021 , a maximum of$555 million of sold receivables can be outstanding at any point in time under this program, as amended, subject to limitations under our Amended Cash Flow Revolver. Additionally, the amount available under the RPA is uncommitted and, as such, is available at the discretion of our third-party banking institutions. OnJanuary 16, 2019 , we entered into an amendment to our Amended Cash Flow Revolver which increased the percentage of our total accounts receivable that can be sold and outstanding at any time from 30% to 40%. Trade receivables sold pursuant to the RPA are serviced by us. In addition to the RPA, we have the option to participate in trade receivables sales programs that have been implemented by certain of our customers, as in effect from time to time. We do not service trade receivables sold under these other programs. The sale of receivables under all of these programs is subject to the approval of the banks or customers involved and there can be no assurance that we will be able to sell the maximum amount of receivables permitted by these programs when desired. Under each of the programs noted above, we sell our entire interest in a trade receivable for 100% of face value, less a discount. During the nine months endedJuly 3, 2021 andJune 27, 2020 , we sold approximately$406 million and$1.4 billion , respectively, of accounts receivable under these programs. Upon sale, these receivables are removed from the condensed consolidated balance sheets and cash received is presented as cash provided by operating activities in the condensed consolidated statements of cash flows. Discounts on sold receivables were not material for any period presented. As ofJuly 3 , 30 -------------------------------------------------------------------------------- 2021 andOctober 3, 2020 ,$15 million and$97 million , respectively, of accounts receivable sold under the RPA and subject to servicing by us remained outstanding and had not yet been collected. Our sole risk with respect to receivables we service is with respect to commercial disputes regarding such receivables. Commercial disputes include billing errors, returns and similar matters. To date, we have not been required to repurchase any receivable we have sold due to a commercial dispute. Additionally, we are required to remit amounts collected as servicer on a weekly basis to the financial institutions that purchased the receivables. There were no outstanding remittances as ofJuly 3, 2021 and$39 million had been collected but not yet remitted as ofOctober 3, 2020 . The unremitted amount was classified in accrued liabilities on the condensed consolidated balance sheets. We enter into forward interest rate swap agreements with independent counterparties to partially hedge the variability in cash flows due to changes in the benchmark interest rate (LIBOR) associated with anticipated variable rate borrowings. These interest rate swaps have a maturity date ofDecember 1, 2023 , and effectively convert our variable interest rate obligations to fixed interest rate obligations. These swaps are accounted for as cash flow hedges under ASC Topic 815, Derivatives and Hedging. Interest rate swaps with an aggregate notional amount of$350 million were outstanding as ofJuly 3, 2021 andOctober 3, 2020 . The aggregate effective interest rate under these swaps as ofJuly 3, 2021 was approximately 4.3%. As ofJuly 3, 2021 , due to a decline in interest rates since the time the swaps were put in place, these interest rate swaps had a negative value of$21 million as ofJuly 3, 2021 , of which$9 million is included in accrued liabilities and the remaining amount is included in other long-term liabilities on the condensed consolidated balance sheets. In the ordinary course of business, we are or may become party to legal proceedings, claims and other contingencies, including environmental, regulatory, warranty and employee matters and examinations by government agencies. As ofJuly 3, 2021 , we had accrued liabilities of$37 million related to such matters. We cannot accurately predict the outcome of these matters or the amount or timing of cash flows that may be required to defend ourselves or to settle such matters or that these reserves will be sufficient to fully satisfy our contingent liabilities. As ofJuly 3, 2021 , we had a liability of$74 million for uncertain tax positions. Our estimate of liabilities for uncertain tax positions is based on a number of subjective assessments, including the likelihood of a tax obligation being assessed, the amount of taxes (including interest and penalties) that would ultimately be payable, and our ability to settle any such obligations on favorable terms. Therefore, the amount of future cash flows associated with uncertain tax positions may be significantly higher or lower than our recorded liability and we are unable to reliably estimate when cash settlement may occur. During the quarter endedJuly 3, 2021 , our liability for uncertain tax positions decreased materially due to lapse of time. Our liquidity needs are largely dependent on changes in our working capital, including sales of accounts receivable under our receivables sales programs and the extension of trade credit by our suppliers, investments in manufacturing inventory, facilities and equipment, repayments of obligations under outstanding indebtedness and repurchases of common stock. We generated$247 million of cash from operations in the third quarter of 2021. Our primary sources of liquidity as ofJuly 3, 2021 consisted of (1) cash and cash equivalents of$624 million ; (2) our Amended Cash Flow Revolver, under which$692 million , net of outstanding borrowings and letters of credit, was available; (3) our foreign short-term borrowing facilities of$69 million , all of which was available; (4) proceeds from the sale of accounts receivable under our receivables sales programs, if accepted by the counterparties to such programs; and (5) cash generated from operations. Subject to satisfaction of certain conditions, including obtaining additional commitments from existing and/or new lenders, we may increase the revolver commitments under the Amended Cash Flow Revolver by an additional$200 million . We believe our existing cash resources and other sources of liquidity, together with cash generated from operations, will be sufficient to meet our working capital requirements through at least the next 12 months. However, should demand for our services decrease significantly over the next 12 months or should we experience significant increases in delinquent or uncollectible accounts receivable for any reason, including in particular continued or worsening economic conditions caused by the COVID-19 pandemic, our cash provided by operations could decrease significantly and we could be required to seek additional sources of liquidity to continue our operations at their current level. We distribute our cash among a number of financial institutions that we believe to be of high quality. However, there can be no assurance that one or more of such institutions will not become insolvent in the future, in which case all or a portion of our uninsured funds on deposit with such institutions could be lost. As ofJuly 3, 2021 , 51% of our cash balance was held inthe United States . Should we choose or need to remit cash tothe United States from our foreign locations, we may incur tax obligations which would reduce the amount of cash ultimately available tothe United States . We believe that cash held inthe United States , together with liquidity available under our Amended Cash Flow Revolver and cash from foreign subsidiaries that could be remitted tothe United States without tax consequences, will be sufficient to meet ourUnited States liquidity needs for at least the next twelve months. 31 --------------------------------------------------------------------------------
Off-Balance Sheet Arrangements
As ofJuly 3, 2021 , we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by theSEC , that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. 32
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