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Electronics Production | February 03, 2009

Sanmina-SCI with maximum exposure of $20 million from Nortel bankruptcy

US based EMS-provider Sanmina-SCI stated in its quarterly SEC filing an estimated “maximum exposure” of $20 million related to bankruptcy protection filing of Nortel Networks.
On January 14, 2009, one of the company’s customers, Nortel Networks, filed a petition for reorganization under bankruptcy law. As a result, Sanmina-SCI performed an analysis to quantify its potential exposure considering factors such as which legal entities of the customer are included in the bankruptcy reorganization, future demand from Nortel Networks and administrative claim priority.

Based on its analysis, Sanmina-SCI estimated a maximum exposure of approximately $20.0 million related to outstanding accounts receivable and on-hand inventory. The company considered collectibility of accounts receivable and determined that certain amounts may not be collectible. Therefore, the company deferred recognition of revenue in the amount of $5.0 million for shipments made during the three months ended December 27, 2008.

Additionally, Sanmina-SCI determined that certain inventory balances may not be recoverable and provided a reserve for such inventories in the amount of $5.0 million during the three months ended December 27, 2008. The company’s estimates are subject to change as additional information becomes available.

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