REVENUE RECOGNITION

9 Months Ended

Jun. 29, 2024

Revenue from Contract with Customer [Abstract]

Revenue from Contract with Customer [Text Block]

Revenue Recognition

The Company has determined that revenue for the majority of its contracts is required to be recognized on an over-time basis. This is primarily due to the fact that the Company does not have an alternative use for the end products it manufactures for its customers and has an enforceable right to payment, including a reasonable profit, for work-in-progress upon a customer’s cancellation of a contract for convenience. In certain circumstances, the Company recognizes over time because its customer simultaneously receives and consumes the benefits provided by the Company’s services or the Company’s customer controls the end product as the Company performs manufacturing services (continuous transfer of control). For these contracts, revenue is recognized on an over time basis using the cost-to-cost method (ratio of costs incurred to date to total estimated costs at completion) which the Company believes best depicts the transfer of control to the customer. Revenue streams for which revenue is recognized on an over time basis include sales of vertically integrated manufacturing solutions (integrated manufacturing solutions and components); logistics and repair services; design, development and engineering

services; and defense and aerospace programs. At least 95% of the Company’s revenue is recognized on an over time basis, which is as products are manufactured or services are performed. Because of this, and the fact that there is no work-in-progress or finished goods inventory associated with contracts for which revenue is recognized on an over-time basis, 99% or more of the Company’s inventory at the end of a given period is in the form of raw materials. For contracts for which revenue is required to be recognized at a point-in-time, the Company recognizes revenue when it has transferred control of the related goods, which generally occurs upon shipment or delivery of the goods to the customer.

Application of the cost-to-cost method for government contracts in the Company’s Defense and Aerospace division requires the use of significant judgments with respect to estimated materials, labor and subcontractor costs included in the total estimated costs at completion. Additionally, the Company evaluates whether contract modifications for claims have been approved and, if so, estimates the amount, if any, of variable consideration that can be included in the transaction price of the contract. This division is an operating segment whose results are combined with thirteen other operating segments and reported under Components, Products and Services (“CPS”) for segment reporting purposes.

Changes in the Company’s estimates of transaction price and/or costs to complete result in a favorable or unfavorable impact to revenue and operating income. The impact of changes in estimates on revenue and operating income resulting from application of the cost-to-cost method for recognizing revenue was as follows:

	Three Months Ended				Nine Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Revenue	(In thousands)
Favorable	$	5,270	$	2,115	$	15,980	$	5,950
Unfavorable	(3,795)		(10,341)		(10,522)		(19,850)
Net	$	1,475	$	(8,226)	$	5,458	$	(13,900)

	Three Months Ended				Nine Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Operating income	(In thousands)
Favorable	$	7,547	$	2,704	$	23,248	$	7,079
Unfavorable	(6,385)		(21,028)		(16,757)		(41,062)
Net	$	1,162	$	(18,324)	$	6,491	$	(33,983)

Contract Assets

A contract asset is recognized when the Company has recognized revenue, but has not issued an invoice to its customer for payment. Contract assets are classified separately on the condensed consolidated balance sheets and transferred to accounts receivable when rights to payment become unconditional. Because of the Company’s short manufacturing cycle times, the transfer from contract assets to accounts receivable generally occurs within the next fiscal quarter.

The following table presents revenue disaggregated by segment, market sector and geography.

	Three Months Ended				Nine Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
	(In thousands)
Segments:
Integrated Manufacturing Solutions (“IMS”)	$	1,468,259	$	1,811,530	$	4,418,009	$	5,657,800
CPS	373,171		395,588		1,132,814		1,225,229
Total	$	1,841,430	$	2,207,118	$	5,550,823	$	6,883,029
End Markets:
Industrial, Medical, Defense and Aerospace, and Automotive	$	1,181,489	$	1,344,068	$	3,663,208	$	4,045,939
Communications Networks and Cloud Infrastructure	659,941		863,050		1,887,615		2,837,090
Total	$	1,841,430	$	2,207,118	$	5,550,823	$	6,883,029
Geography:
Americas (1)	$	966,321	$	1,131,925	$	2,885,983	$	3,380,454
APAC (2)	638,991		743,372		1,843,828		2,511,205
EMEA	236,118		331,821		821,012		991,370
Total	$	1,841,430	$	2,207,118	$	5,550,823	$	6,883,029

(1)    Mexico represents approximately 60% and 65% of Americas net sales for the three months ended June 29, 2024 and July 1, 2023, respectively, and the U.S. represents approximately 35% of Americas net sales both the three months ended June 29, 2024 and July 1, 2023. Mexico represents approximately 60% and 70% of Americas net sales and the U.S. represents approximately 35% and 30% of Americas net sales for the nine months ended June 29, 2024 and July 1, 2023, respectively.

(2)    Malaysia represents approximately 30% of APAC net sales for both the three and nine months ended June 29, 2024 and approximately 25% of APAC net sales for both the three and nine months ended July 1, 2023.

As an electronics manufacturing services company, the Company primarily provides manufacturing and related services for products built to its customers’ unique specifications. Therefore, it is impracticable for the Company to provide revenue from external customers for each product and service it provides.

Sales to the Company’s ten largest customers typically represent approximately 50% of net sales. Net sales from these customers are derived from multiple segments. The following table presents the percentage of total net sales to each significant customer that represented 10% or more of the Company’s net sales.

	Three Months Ended				Nine Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Nokia:
IMS	*		10.7	%	*		13.9	%
CPS	*		0.6	%	*		0.6	%
Total	*		11.3	%	*		14.5	%
Motorola:
IMS	9.8	%	*		10.0	%	*
CPS	0.2	%	*		0.2	%	*
Total	10.0	%	*		10.2	%	*

* Less than 10% of the Company’s net sales.