Category: High Tech

Sanmina Reports Second Quarter Fiscal 2014 Results

SAN JOSE, Calif., April 22, 2014 - Sanmina Corporation ("Sanmina" or the "Company") (NASDAQ GS: SANM), a leading integrated manufacturing solutions company, today reported financial results for the second fiscal quarter ended March 29, 2014.

Second Quarter Fiscal 2014 Summary

  • Revenue of $1.48 billion
  • GAAP operating margin of 3.1 percent
  • GAAP diluted earnings per share of $0.24
  • Non-GAAP(1) operating margin of 3.6 percent
  • Non-GAAP(1) diluted earnings per share of $0.44

Revenue for the second quarter was $1.48 billion, compared to $1.45 billion in the prior quarter and $1.43 billion for the same period of fiscal 2013.  

GAAP operating income in the second quarter was $45.3 million or 3.1 percent of revenue, compared to $45.8 million or 3.2 percent of revenue for the same period ended March 30, 2013.  GAAP net income in the second quarter was $20.8 million, compared to $21.2 million for the same period a year ago.  GAAP diluted earnings per share for the quarter were $0.24, compared to $0.25 in the second quarter of fiscal 2013. 

Non-GAAP operating income in the second quarter was $53.2 million or 3.6 percent of revenue, compared to $40.0 million or 2.8 percent of revenue in the second quarter fiscal 2013.  Non-GAAP net income in the second quarter was $38.3 million, compared to $25.3 million in the same period a year ago.  Non-GAAP diluted earnings per share were $0.44, compared to $0.30 for the same period a year ago.  

Balance Sheet Summary

  • Ending cash and cash equivalents were $390.6 million
  • Cash flow from operations was $8.5 million
  • Repurchased 1.1 million common shares for a total of $18.8 million
  • Inventory turns were 6.8x
  • Cash cycle days were 48.5 days

"I am pleased with our second quarter results.  Our outlook for revenue growth in the second half of the year remains optimistic as new programs ramp and demand improves across a broad set of customers.  We continue to invest in technology and business processes which offer a distinct advantage to our customers.  As we further diversify our business, we believe our revenue and profitability will continue to improve," stated Jure Sola, Chairman and Chief Executive Officer of Sanmina Corporation.

Third Quarter Fiscal 2014 Outlook

The following forecast is for the third fiscal quarter ending June 28, 2014.  These statements are forward-looking and actual results may differ materially. 

  • Revenue between $1.50 billion to $1.60 billion
  • Non-GAAP diluted earnings per share between $0.45 to $0.49

Upcoming Investor and Analyst Day

Sanmina will host an Investor and Analyst Day on Tuesday, May 6, 2014 in New York, NY.  The event will begin at 9:00 a.m. ET and conclude at approximately 1:00 p.m. ET.  Jure Sola, Chairman and Chief Executive Officer, along with members of the management team will provide a closer look into the Company.   

Financial analysts and institutional investors who are interested in attending the event should contact Paige Bombino at (408) 964-3610 or email This email address is being protected from spambots. You need JavaScript enabled to view it..  For other interested parties, a simultaneous webcast of the event will be available on the company website at www.sanmina.com, in the investor relations section.

Company Conference Call Information

Sanmina will hold a conference call regarding results for the second quarter fiscal year 2014 on Tuesday, April 22, 2014 at 5:00 p.m. ET (2:00 p.m. PT).  The access numbers are: domestic 877-273-6760 and international 706-634-6605. The conference will also be broadcast live over the Internet.  You can log on to the live webcast at www.sanmina.com.  Additional information in the form of a slide presentation is available by logging onto Sanmina's website at www.sanmina.com.  A replay of the conference call will be available for 48-hours.  The access numbers are: domestic 855-859-2056 and international 404-537-3406, access code is 28874977.

(1)

In the commentary set forth above and/or in the financial statements included in this earnings release, we present the following non-GAAP financial measures: operating income, operating margin, net income and diluted earnings per share.  In computing each of these non-GAAP financial measures, we exclude charges or gains relating to: stock-based compensation expenses, restructuring costs (including employee severance and benefits costs and charges related to excess facilities and assets), acquisition and integration costs (consisting of costs associated with the acquisition and integration of acquired businesses into our operations), impairment charges for goodwill and other assets, amortization expense and other infrequent or unusual items (including charges associated with distressed customers, litigation settlements, gains and losses on sales of assets and redemptions of debt, discrete tax events and deferred tax changes), to the extent material or which we consider to be of a non-operational nature in the applicable period. See Schedule 1 below for more information regarding our use of non-GAAP financial measures, including the economic substance behind each exclusion, the manner in which management uses non-GAAP measures to conduct and evaluate the business, the material limitations associated with using such measures and the manner in which management compensates for such limitations. A reconciliation from GAAP to non-GAAP results is included in the financial statements contained in this release and is also available on the Investor Relations section of our website at www.sanmina.com.  Sanmina provides third quarter fiscal 2014 outlook only on a non-GAAP basis due to the inherent uncertainties associated with forecasting the timing and amount of acquisitions, restructuring activities, asset impairments and other unusual and infrequent items.

About Sanmina
Sanmina Corporation is a leading integrated manufacturing solutions provider serving the fastest-growing segments of the global Electronics Manufacturing Services (EMS) market. Recognized as a technology leader, Sanmina provides end-to-end manufacturing solutions, delivering superior quality and support to OEMs primarily in the communications, defense and aerospace, industrial and semiconductor systems, medical, multimedia, computing and storage, automotive and clean technology sectors. Sanmina has facilities strategically located in key regions throughout the world. More information regarding the company is available at www.sanmina.com.

Sanmina Safe Harbor Statement
Certain statements contained in this press release, including the Company's outlook for the third quarter and its expectations regarding revenue and profitability, constitute forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in these statements as a result of a number of factors, including changes to or a deterioration in the markets for the Company's customers' products; competition that could adversely impact the Company's pricing and therefore result in a reduction of revenues and margins;  dependence on a relatively small number of customers, the loss of or reduction in business from any of which could significantly reduce our revenue and net income; inability of customers to pay for the Company's products due to insolvency  or otherwise; any failure of the Company's Components, Products and Services business to meet expectations; and the other factors set forth in the Company's annual and quarterly reports filed with the Securities Exchange Commission ("SEC").

The Company is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements made in this earnings release, the conference call or the Investor Relations section of our website whether as a result of new information, future events or otherwise, unless otherwise required by law.

 

Sanmina Corporation

Condensed Consolidated Balance Sheets

(In thousands)

(GAAP)

       

March 29,

 

September 28,

       

2014

 

2013

             
       

(Unaudited)

   

ASSETS

       
             

Current assets:

       
 

Cash and cash equivalents

 

$    390,622

 

$       402,875

 

Accounts receivable, net

 

953,347

 

944,816

 

Inventories

 

799,663

 

781,560

 

Prepaid expenses and other current assets

 

88,218

 

75,337

   

Total current assets

 

2,231,850

 

2,204,588

             

Property, plant and equipment, net

 

546,366

 

540,151

Other

 

241,995

 

251,109

   

Total assets

 

$ 3,020,211

 

$    2,995,848

             

LIABILITIES AND STOCKHOLDERS' EQUITY

       
             

Current liabilities:

       
 

Accounts payable

 

$    917,780

 

$       956,488

 

Accrued liabilities 

 

108,445

 

109,363

 

Accrued payroll and related benefits

 

113,986

 

118,572

 

Short-term debt

 

85,682

 

22,301

   

Total current liabilities

 

1,225,893

 

1,206,724

             

Long-term liabilities:

       
 

Long-term debt

 

557,241

 

562,512

 

Other

 

133,560

 

135,048

   

Total long-term liabilities

 

690,801

 

697,560

             

Stockholders' equity

 

1,103,517

 

1,091,564

   

Total liabilities and stockholders' equity

 

$ 3,020,211

 

$    2,995,848

             

 

Sanmina Corporation

Condensed Consolidated Statements of Income

(In thousands, except per share amounts)

(GAAP)

(Unaudited)

                 
   

Three Months Ended

 

Six Months Ended

                 
   

Mar. 29,

 

Mar. 30,

 

Mar. 29,

 

Mar. 30,

   

2014

 

2013

 

2014

 

2013

                 

Net sales

$ 1,476,712

 

$ 1,427,642

 

$ 2,924,210

 

$ 2,922,587

Cost of sales

1,357,745

 

1,327,338

 

2,694,458

 

2,725,355

 

Gross profit

118,967

 

100,304

 

229,752

 

197,232

                 

Operating expenses:

             
 

Selling, general and administrative

62,332

 

58,954

 

121,514

 

118,822

 

Research and development

8,829

 

6,020

 

16,734

 

11,415

 

Amortization of intangible assets

474

 

474

 

948

 

948

 

Restructuring and integration costs 

2,565

 

6,925

 

6,269

 

10,872

 

Asset impairments

-

 

1,100

 

-

 

1,100

 

Gain on sales of long-lived assets

(530)

 

(18,967)

 

(530)

 

(23,185)

 

     Total operating expenses

73,670

 

54,506

 

144,935

 

119,972

                 

Operating income

45,297

 

45,798

 

84,817

 

77,260

                 
 

Interest income

174

 

246

 

980

 

444

 

Interest expense 

(7,482)

 

(10,416)

 

(14,955)

 

(23,500)

 

Other income (expense), net

626

 

(1,477)

 

1,504

 

(16,399)

Interest and other, net

(6,682)

 

(11,647)

 

(12,471)

 

(39,455)

                 

Income before income taxes

38,615

 

34,151

 

72,346

 

37,805

                 

Provision for income taxes 

17,775

 

12,960

 

28,405

 

15,993

                 

Net income

$      20,840

 

$      21,191

 

$      43,941

 

$      21,812

                 
                 
 

Basic income per share

$          0.25

 

$          0.26

 

$          0.53

 

$          0.27

 

Diluted income per share

$          0.24

 

$          0.25

 

$          0.51

 

$          0.26

                 
 

Weighted-average shares used in computing per share amounts:

             
 

  Basic

82,728

 

82,543

 

83,247

 

82,226

 

  Diluted

86,144

 

84,683

 

86,723

 

84,369

 

 

Sanmina Corporation

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(Unaudited)

                   
     

Three Months Ended

 

Six Months Ended

     

Mar. 29,

 

Mar. 30,

 

Mar. 29,

 

Mar. 30,

     

2014

 

2013

 

2014

 

2013

                   

GAAP Operating Income

 

$      45,297

 

$      45,798

 

$      84,817

 

$      77,260

 

GAAP operating margin

 

3.1%

 

3.2%

 

2.9%

 

2.6%

Adjustments

               
 

Stock compensation expense (1)

 

4,757

 

4,342

 

9,032

 

9,008

 

Amortization of intangible assets

 

1,251

 

474

 

1,725

 

948

 

Distressed customer charges (2)

 

(290)

 

321

 

383

 

5,412

 

Restructuring, acquisition and integration costs

 

2,565

 

6,925

 

6,269

 

10,872

 

Contingency item expected to reverse in a future period (3)

 

124

 

-

 

124

 

-

 

Gain on sales of long-lived assets

 

(530)

 

(18,967)

 

(530)

 

(23,185)

 

Asset impairments

 

-

 

1,100

 

-

 

1,100

Non-GAAP Operating Income

 

$      53,174

 

$      39,993

 

$    101,820

 

$      81,415

 

Non-GAAP operating margin

 

3.6%

 

2.8%

 

3.5%

 

2.8%

                   
                   

GAAP Net Income

 

$      20,840

 

$      21,191

 

$      43,941

 

$      21,812

                   

Adjustments:

               
 

Operating income adjustments (see above)

 

7,877

 

(5,805)

 

17,003

 

4,155

 

Loss on repurchases of debt (4)

 

-

 

1,401

 

-

 

1,401

 

Loss on dedesignation of interest rate swap (5)

 

-

 

-

 

-

 

14,903

 

Litigation settlements (6)

 

(261)

 

-

 

(261)

 

-

 

Nonrecurring tax items

 

9,823

 

8,498

 

13,082

 

7,253

Non-GAAP Net Income

 

$      38,279

 

$      25,285

 

$      73,765

 

$      49,524

                   
                   

GAAP Net Income Per Share:

               
 

Basic

 

$          0.25

 

$          0.26

 

$          0.53

 

$          0.27

 

Diluted

 

$          0.24

 

$          0.25

 

$          0.51

 

$          0.26

                   

Non-GAAP Net Income Per Share:

               
 

Basic

 

$          0.46

 

$          0.31

 

$          0.89

 

$          0.60

 

Diluted

 

$          0.44

 

$          0.30

 

$          0.85

 

$          0.59

                   

Weighted-average shares used in computing per share amounts:

               
 

Basic

 

82,728

 

82,543

 

83,247

 

82,226

 

Diluted

 

86,144

 

84,683

 

86,723

 

84,369

                   
                   

(1)

Stock compensation expense was as follows: 

               
                   
     

Three Months Ended

 

Six Months Ended

     

Mar. 29,

 

Mar. 30,

 

Mar. 29,

 

Mar. 30,

     

2014

 

2013

 

2014

 

2013

           
 

Cost of sales

 

$        1,364

 

$        1,291

 

$        2,566

 

$        2,631

 

Selling, general and administrative

 

3,382

 

3,004

 

6,453

 

6,299

 

Research and development

 

11

 

47

 

13

 

78

 

  Total

 

$        4,757

 

$        4,342

 

$        9,032

 

$        9,008

                   

(2)

Relates to inventory and bad debt reserves / recoveries associated with distressed customers.

(3)

Represents a non-recurring contingency that the Company expects to resolve favorably in future periods.  However, there can be no assurance of the exact amount or timing of this recovery.

(4)

Represents a loss, including write-off of unamortized debt issuance costs, on debt redeemed or repurchased prior to maturity.

(5)

Represents a non-cash loss resulting from dedesignation of an interest rate swap.

(6)

Represents cash received in connection with a litigation settlement.

 

Schedule I

 

The commentary and financial information above includes non-GAAP measures of operating income, operating margin, net income and earnings per share. Management excludes from these measures stock-based compensation, restructuring, acquisition and integration expenses, impairment charges, amortization charges and other infrequent items, to the extent material or which we consider to be of a non-operational nature in the applicable period, and as more fully described below.

 

Management excludes these items principally because such charges are not directly related to the Company's ongoing core business operations. We use such non-GAAP measures in order to (1) make more meaningful period-to-period comparisons of Company's operations, both internally and externally, (2) guide management in assessing the performance of the business, internally allocating resources and making decisions in furtherance of Company's strategic plan, (3) provide investors with a better understanding of how management plans and measures the business and (4) provide investors with a better understanding of the ongoing, core business. The material limitations to management's approach include the fact that the charges and expenses excluded are nonetheless charges required to be recognized under GAAP. Management compensates for these limitations primarily by using GAAP results to obtain a complete picture of the Company's performance and by including a reconciliation of non-GAAP results back to GAAP in its earnings releases.

 

Additional information regarding the economic substance of each exclusion, management's use of the resultant non-GAAP measures, the material limitations of management's approach and management's methods for compensating for such limitations is provided below.

 

Stock-based Compensation Expense, which consists of non-cash charges for the estimated fair value of stock options and unvested restricted stock units granted to employees, is excluded in order to permit more meaningful period-to-period comparisons of the Company's results since the Company grants different amounts and value of stock options in each quarter. In addition, given the fact that competitors grant different amounts and types of equity award and may use different option valuation assumptions, excluding stock-based compensation permits more accurate comparisons of the Company's core results with those of its competitors.

 

Restructuring, Acquisition and Integration Expenses, which consist of severance, lease termination, exit costs and other charges primarily related to closing and consolidating manufacturing facilities and those associated with the acquisition and integration of acquired businesses, are excluded because such charges (1) can be driven by the timing of acquisitions which are difficult to predict, (2) are not directly related to ongoing business results and (3) do not reflect expected future operating expenses. In addition, given the fact that the Company's competitors complete acquisitions and adopt restructuring plans at different times and in different amounts than the Company, excluding these charges permits more accurate comparisons of the Company's core results with those of its competitors. Items excluded by the Company may be different from those excluded by the Company's competitors and restructuring and integration expenses include both cash and non-cash expenses. Cash expenses reduce the Company's liquidity. Therefore, management also reviews GAAP results including these amounts.

 

Impairment Charges, which consist of non-cash charges, are excluded because such charges are non-recurring and do not reduce the Company's liquidity. In addition, given the fact that the Company's competitors may record impairment charges at different times, excluding these charges permits more accurate comparisons of the Company's core results with those of its competitors.

 

Amortization Charges, which consist of non-cash charges impacted by the timing and magnitude of acquisitions of businesses or assets, are also excluded because such charges do not reduce the Company's liquidity. In addition, such charges can be driven by the timing of acquisitions, which is difficult to predict. Excluding these charges permits more accurate comparisons of the Company's core results with those of its competitors because the Company's competitors complete acquisitions at different times and for different amounts than the Company.

 

Other Items, which consist of other infrequent or unusual items (including charges associated with distressed customers, litigation settlements, gains and losses on sales of assets and redemptions of debt, discrete tax events and deferred tax changes), to the extent material or non-operational in nature, are excluded because such items are typically non-recurring, difficult to predict or not directly related to the Company's ongoing core operations. However, items excluded by the Company may be different from those excluded by the Company's competitors. In addition, these expenses include both cash and non-cash expenses. Cash expenses reduce the Company's liquidity. Management compensates for these limitations by reviewing GAAP results including these amounts.