2003 Annual Report em power Corporate Profile Sanmina-SCI Corporation is the world’s Premier Electronics Manufacturing provider, serving the fastest-growing segments of the global electronics manufacturing services (EMS) market. Sanmina-SCI provides end-to-end manufacturing solutions, delivering unsurpassed quality and support to large OEMs primarily in the automotive, communications, computing, defense and aerospace, industrial and semiconductor capital equipment, medical, and multimedia markets. Sanmina-SCI is at the forefront of the industry due to its commitment to leading-edge technology, cost-effective manufacturing and unparalleled customer service. Sanmina-SCI stock trades on the NASDAQ under the symbol SANM. Visit us at www.sanmina-sci.com to learn more. This report contains forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual events and/or future results of operations may differ materially from those contemplated by such forward-looking statements, as a result of the factors described herein, and in the documents incorporated herein by reference, including, in particular, those factors described under “Factors Affecting Operating Results” included under Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Sanmina-SCI’s report on form 10-K for fiscal 2003. Significant factors that affect Sanmina-SCI’s business include changes in economic conditions in the electronics industry in general and in the electronics industry sectors served by Sanmina-SCI in particular; changes in demand for our higher end, most complex manufacturing, engineering and design services and changes in product and services mix because lower volume, more complex manufacturing related services typically provide us with higher margins than higher volume, less complex services; lack of long term volume purchase commitments from principal customers and changes and fluctuations in demand for our services from our principal customers; risks associated with our entry into the original design manufacture (ODM) business through the acquisition of Newisys, Inc.; possible need to affect further restructuring of our business and operations; risks associated with competition, technological change and consolidation in the electronics industry; risks related to the global nature of our business and operations including currency fluctuations, varying international economic conditions, political concerns and the need to manage a global enterprise; risks related to environmental matters that affect our business and operations; and risks related to intellectual property rights. empower 1 Sanmina-SCI is the most fully integrated, customer-focused electronics manufacturer in the world. Our strategy is straightforward: Meet or exceed our customers’ current and growing demands by leveraging our best-in-class technologies, processes and performance. Work in close proximity to our customers and remain flexible to accommodate their evolving needs. Provide unequaled design and engineering services. Employ the human capital to make it happen. And by doing so, empower the world’s largest OEMs with high-end solutions for their latest innovations. 2 Sanmina-SCI empower customers letter to our shareholders Sanmina-SCI is a well-balanced company possessing innovative, high- cost regions in Asia, Eastern Europe and Latin America. Our global performance technology, cost-efficient manufacturing solutions, and facilities span more than 20 countries and five continents. The fun- solid financial strength. At the same time, we have a results-driven cul- damental strategy behind our refined global footprint is to ensure ture that recognizes employee achievement and fosters integrity, trust that we pursue opportunities to achieve cost efficiencies, while and collaboration. Our entire team is customer-focused and commit- simultaneously retaining our flexibility and responsiveness, espe- ted to delivering superior results to both customers and investors. cially for those customers who require rapid time-to-market or whose high-end, complex product requirements demand our oper- ations be in close proximity to their facilities or end-markets. 2003 results In 2003, we met the ongoing challenge of aweak economy by pursuing opportunities to increase our operating This year we also made significant progress with our corporate- efficiencies, leverage our advanced technology and manufacturing wide information technology system. The thrust of our IT strategy capabilities, and diversify our customer end-markets. As a result, we is to make certain we have world-class systems capability, global delivered improved financial results and built a foundation ready to consistency with common platforms, superior supply chain man- capitalize on momentum in our end-markets. agement visibility, and internal as well as customer ease of access. Our best-of-breed software technology includes applications in For the year ended September 27, 2003, Sanmina-SCI reported product design and engineering, order and production status, net sales of $10.4 billion. During the year, we worked hard to material planning and logistics. Our standardized systems and restore our financial vigor and flexibility. Reflecting our strong centralized interfaces provide repeatability and process consistency, working capital and cash management disciplines, we reduced our guaranteeing that we meet customer specific performance require- debt by $732 million (based on accreted amount due on the ments and industry standards throughout our global footprint. September 2005 put date for our zero coupon debentures) and Our goal is to deliver “design anywhere, build anywhere, and generated over $550 million in operating cash flow. In addition, deliver anywhere” excellence in performance. many of our balance sheet financial metrics, including cash cycle days and inventory turns improved. At year-end September 27, 2003, The EMS outsourcing market is robust with industry analysts the Company reported $1.1 billion in cash and short-term invest- estimating growth to $200 billion by 2007. The trend in outsourc- ments, a current ratio of 2.0, working capital of $2.1 billion and ing is growing as OEMs strive to increase operating efficiencies, shareholders’ equity of $3.3 billion. Our sound balance sheet pro- reduce working capital requirements, improve component purchas- vides us with the necessary speed and flexibility to evaluate a range ing power, accelerate product time-to-market, and access world- of strategic investment opportunities. class global manufacturing, logistics and distribution capabilities. To achieve profitable growth, OEMs are leveraging their core The fundamental goal of all of our initiatives is to empower our competencies in application solutions and marketing. In 2003, customers, helping them to improve their competitive position and Sanmina-SCI benefited from the market’s momentum through to deliver superior products and services to their end-markets. This multi-year outsourcing agreements. These agreements furthered year we focused our efforts on finalizing the integration of the the Company’s leadership in two of its targeted markets; global December 2001 merger with SCI, completing the installation of a cor- server manufacturing and distribution and communications. The porate-wide, common information technology system, right-sizing our awarding of these contracts to Sanmina-SCI underscores the operations, expanding our original equipment manufacturer (OEM) Company’s proven track record in technology expertise, manufac- outsourcing relationships, investing in new technologies and processes, turing efficiency, global capabilities as well as flexible and reliable and, finally, implementing our customer-focused strategy. customer service. Our entire team has been unyielding in its commitment to a success- Technical leadership in our industry has long been a key part of ful Sanmina-SCI, ensuring that every employee works together our differentiation in the EMS market and in 2003 we continued seamlessly to meet customer demands for excellence in performance. to invest significantly to ensure that our design and engineering We have the most talented managers, designers, engineers, materials capabilities remain unequaled. Over the past several years, as our professionals and technicians, including the largest direct technical customers compete in their respective challenging end markets, business development group, in the industry. Sanmina-SCI employs we have been asked to play a bigger role in product development or the human capital to make our customers successful. provide original design manufacturing (ODM) solutions. Specifically, our customers want a company that not only offers world-class strategic initiatives During the year, we continued manufacturing and design capabilities, but combines those capabil- to optimize our global manufacturing operations, consolidating ities with innovative and cost effective design solutions – thus capacity and transferring certain manufacturing operations to lower providing a true end-to-end solution. empower 3 Jure Sola, Chairman and Chief Executive Officer Randy W. Furr,President and Chief Operating Officer Responding to our customers’ requests and the opportunity to fabrication and assembly, backplane assembly, cable assembly, expand our service offerings, during 2003 we acquired Newisys, Inc., memory modular solutions, optical modules,