NASDAQ: SANM

30.05 +0.10 +0.33% Volume: 70,982 August 16, 2018

Sanmina Reports First Quarter Fiscal 2018 Results

01/29/2018

SAN JOSE, Calif., Jan. 29, 2018 /PRNewswire/ -- Sanmina Corporation ("Sanmina" or the "Company") (NASDAQ: SANM), a leading integrated manufacturing solutions company, today reported financial results for the first fiscal quarter ended December 30, 2017.

First Quarter Fiscal 2018 Summary

  • Revenue of $1.74 billion
  • GAAP operating margin of 0.8 percent
  • GAAP loss per share of $2.16
  • Non-GAAP(1) operating margin of 2.7 percent
  • Non-GAAP(1) diluted earnings per share of $0.48

Revenue for the first quarter was $1.74 billion, compared to $1.76 billion in the prior quarter and $1.72 billion for the same period of fiscal 2017.  

GAAP operating income in the first quarter was $13.8 million or 0.8 percent of revenue, compared to $58.7 million or 3.4 percent of revenue for the first quarter fiscal 2017.  GAAP net loss in the first quarter was $154.9 million, compared to GAAP net income of $44.9 million for the same period a year ago.  GAAP loss per share was $2.16, compared to GAAP diluted earnings per share of $0.58 in the first quarter of fiscal 2017. (The first quarter of 2018 GAAP loss per share includes a non-cash tax charge of $2.27 per share as a result of the U.S. Tax Cuts & Jobs Act)

Non-GAAP operating income in the first quarter was $47.5 million or 2.7 percent of revenue, compared to $71.7 million or 4.2 percent of revenue in the first quarter fiscal 2017.  Non-GAAP net income in the first quarter was $36.5 million, compared to $57.7 million in the same period a year ago.  Non-GAAP diluted earnings per share for the quarter was $0.48, compared to $0.75 for the same period a year ago.

"As I mentioned in our preliminary announcement last week, we are disappointed with our actual results for the first quarter and expectations for the first half of fiscal 2018," stated Bob Eulau, Chief Executive Officer of Sanmina Corporation.  "Based on new programs moving to volume production, a solid pipeline of new business and the current forecasts from our customers we are confident the second half of fiscal 2018 will be stronger."

"I am excited about the opportunities ahead and the unique value Sanmina brings to its customers.  We have a dedicated and experienced team that is focused on operational excellence, driving improvements and optimizing our cost structure as we continue to execute on our strategy," concluded Eulau.

Balance Sheet Summary

  • Ending cash and cash equivalents were $404.9 million
  • Cash flow from operations was $8.4 million
  • Inventory turns were 6.1x
  • Cash cycle days were 46.1 days

Second Quarter Fiscal 2018 Outlook

The following forecast is for the second fiscal quarter ending March 31, 2018.  These statements are forward-looking and actual results may differ materially. 

  • Revenue between $1.60 billion to $1.70 billion
  • GAAP diluted earnings per share between $0.20 to $0.30, including stock-based compensation expense of $0.17 and amortization of intangible assets and restructuring costs of $0.03
  • Non-GAAP diluted earnings per share between $0.40 to $0.50

Company Conference Call Information

Sanmina will hold a conference call to review its financial results for the first quarter on Monday, January 29, 2018 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 webcast 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 on 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 5278659.

(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 charges associated with distressed customers, litigation settlements, gains and losses on sales of assets and redemptions of debt, deferred tax and discrete tax items to the extent material 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 of the non-GAAP results contained in this release to their most directly comparable GAAP measures is included in the financial statements contained in this release.   

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 Original Equipment Manufacturers (OEMs) primarily in the communications networks, storage, industrial, defense, medical, energy and industries that include embedded computing technologies such as point of sale devices, casino gaming and automotive. Sanmina has facilities strategically located in key regions throughout the world. More information about 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 second quarter of fiscal 2018 and expectations for the second half of fiscal 2018, 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 adverse changes to the key markets we target; risks arising from our international operations; competition that could cause us to lose sales; consolidation among our customers and suppliers that could adversely affect our business; 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)





December 30,


September 30,





2017


2017












(Unaudited)



ASSETS












Current assets:






Cash and cash equivalents


$       404,914


$       406,661


Accounts receivable, net


1,121,800


1,110,334


Inventories


1,079,638


1,051,669


Prepaid expenses and other current assets


46,345


47,586



Total current assets


2,652,697


2,616,250








Property, plant and equipment, net


635,000


640,275

Deferred tax assets


356,660


476,554

Other



114,223


114,284



Total assets


$    3,758,580


$    3,847,363








LIABILITIES AND STOCKHOLDERS' EQUITY












Current liabilities:






Accounts payable


$    1,260,432


$    1,280,106


Accrued liabilities 


121,001


116,582


Accrued payroll and related benefits


111,806


130,939


Short-term debt


169,416


88,416



Total current liabilities


1,662,655


1,616,043








Long-term liabilities:






Long-term debt


392,195


391,447


Other


202,142


192,189



Total long-term liabilities


594,337


583,636








Stockholders' equity


1,501,588


1,647,684



Total liabilities and stockholders' equity


$    3,758,580


$    3,847,363

 

Sanmina Corporation

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

(GAAP)

(Unaudited)








Three Months Ended








Dec. 30,


Dec. 31,



2017


2016






Net sales

$ 1,744,800


$ 1,719,977

Cost of sales

1,635,334


1,587,815


Gross profit

109,466


132,162






Operating expenses:





Selling, general and administrative

63,603


65,140


Research and development

7,615


8,171


Amortization of intangible assets

918


918


Restructuring costs 

23,542


728


Gain on sales of long-lived assets

-


(1,451)


     Total operating expenses

95,678


73,506






Operating income

13,788


58,656







Interest income

285


201


Interest expense 

(6,214)


(5,267)


Other income, net

3,230


1,257

Interest and other, net

(2,699)


(3,809)






Income before income taxes

11,089


54,847






Provision for income taxes 

165,999


9,983






Net income (loss)

$  (154,910)


$      44,864












Basic income per share

$        (2.16)


$          0.61


Diluted income per share

$        (2.16)


$          0.58







Weighted-average shares used in computing 





per share amounts:





  Basic

71,605


73,554


  Diluted

71,605


77,175

 

Sanmina Corporation

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(Unaudited)










Three Months Ended




Dec. 30,


Dec. 31,




2017


2016













GAAP Operating Income


$      13,788


$      58,656


GAAP operating margin


0.8%


3.4%

Adjustments:






Stock compensation expense (1)


8,642


11,977


Amortization of intangible assets


1,820


1,820


Distressed customer charges (2)


(333)


-


Restructuring costs


23,542


728


Gain on sales of long-lived assets


-


(1,451)

Non-GAAP Operating Income


$      47,459


$      71,730


Non-GAAP operating margin


2.7%


4.2%













GAAP Net Income (Loss)


$  (154,910)


$      44,864







Adjustments:






Operating income adjustments (see above), net of tax


26,480


8,268


Litigation settlements, net of tax (3)


(217)


-


Adjustments for deferred tax and discrete tax items


165,115


4,601

Non-GAAP Net Income


$      36,468


$      57,733













GAAP Net Income (Loss) Per Share:






Basic


$        (2.16)


$          0.61


Diluted


$        (2.16)


$          0.58







Non-GAAP Net Income Per Share:






Basic


$          0.51


$          0.78


Diluted


$          0.48


$          0.75







Weighted-average shares used in computing GAAP per share amounts:






Basic


71,605


73,554


Diluted


71,605


77,175







Weighted-average shares used in computing non-GAAP per share amounts:






Basic


71,605


73,554


Diluted


75,485


77,175













(1)

Stock compensation expense was as follows: 














Three Months Ended




Dec. 30,


Dec. 31,




2017


2016






Cost of sales


$        2,448


$        2,863


Selling, general and administrative


6,164


8,840


Research and development


30


274


  Total


$        8,642


$      11,977








(2)

Relates to recovery of previously written-off inventory and bad debt associated with distressed customers.



(3)

Represents cash received in connection with certain litigation settlements, net of tax

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 and, in some cases, consume cash which reduces the Company's liquidity. Management compensates for these limitations primarily by reviewing 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 equity awards 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 Infrequent Items, which consist of other infrequent or unusual items (including charges associated with distressed customers, litigation settlements and gains and losses on sales of assets and redemptions of debt), 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.

Adjustments for Taxes, which consist of the tax effects of the various adjustments that we include in our non-GAAP measures, and adjustments related to deferred tax and discrete tax items.  Including these adjustments permits more accurate comparisons of the Company's core results with those of its competitors.

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SOURCE Sanmina Corporation

Paige Bombino, Vice President, Investor Relations, Sanmina, (408) 964-3610