NASDAQ: SANM

29.15 +0.20 +0.69% Volume: 670,594 September 21, 2018

Sanmina Reports Second Quarter Fiscal 2018 Results

04/23/2018

SAN JOSE, Calif., April 23, 2018 /PRNewswire/ -- Sanmina Corporation ("Sanmina" or the "Company") (NASDAQ: SANM), a leading integrated manufacturing solutions company, today reported financial results for the second fiscal quarter ended March 31, 2018.

Second Quarter Fiscal 2018 Summary

  • Revenue of $1.68 billion
  • GAAP operating margin of 2.9 percent
  • GAAP diluted earnings per share of $0.33
  • Non-GAAP(1) operating margin of 3.1 percent
  • Non-GAAP(1) diluted earnings per share of $0.50

Revenue for the second quarter was $1.68 billion, compared to $1.74 billion in the prior quarter and $1.68 billion for the same period of fiscal 2017.  

GAAP operating income in the second quarter was $48.8 million or 2.9 percent of revenue, compared to $58.2 million or 3.5 percent of revenue for the second quarter fiscal 2017.  GAAP net income in the second quarter was $24.6 million, compared to GAAP net income of $31.7 million for the same period a year ago.  GAAP diluted earnings per share was $0.33, compared to GAAP diluted earnings per share of $0.41 in the second quarter of fiscal 2017.

Non-GAAP operating income in the second quarter was $52.1 million or 3.1 percent of revenue, compared to $70.9 million or 4.2 percent of revenue in the second quarter fiscal 2017.  Non-GAAP net income in the second quarter was $37.0 million, compared to $59.1 million in the same period a year ago.  Non-GAAP diluted earnings per share for the quarter was $0.50, compared to $0.76 for the same period a year ago.

"Results for the second quarter were better than expected," stated Bob Eulau, Chief Executive Officer of Sanmina Corporation.  "Our outlook for the third quarter reflects new programs moving to volume production and better demand.  As new programs come online and yields continue to improve, we remain optimistic about the second half of the year."

Balance Sheet Summary

  • Ending cash and cash equivalents were $405.3 million
  • Cash flow from operations was $25.7 million
  • Inventory turns were 5.7x
  • Cash cycle days were 51.1 days

Third Quarter Fiscal 2018 Outlook
The following forecast is for the third fiscal quarter ending June 30, 2018.  These statements are forward-looking and actual results may differ materially. 

  • Revenue between $1.70 billion to $1.75 billion
  • GAAP diluted earnings per share between $0.34 to $0.42, including stock-based compensation expense of $0.14 and amortization of intangible assets and restructuring costs of $0.05
  • Non-GAAP diluted earnings per share between $0.53 to $0.61

Upcoming Investor and Analyst Day
Sanmina will host an Investor and Analyst Day on Tuesday, May 22, 2018 in New York.  The event will begin at 9:00 a.m. ET and conclude at approximately 12:00 p.m. ETBob Eulau, Chief Executive Officer, along with members of the management team will provide a closer look into the Company.  Those interested in attending the event should contact Paige Bombino at 408-964-3610 or email paige.bombino@sanmina.com

Company Conference Call Information
Sanmina will hold a conference call to review its financial results for the second quarter on Monday, April 23, 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 1077239.

(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 third quarter of fiscal 2018 and improvements in the second half of 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; reliance on a small number of customers for a substantial portion of our sales; risks arising from our international operations; competition that could cause us to lose sales; 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 31,


September 30,




2018


2017




(Unaudited)



ASSETS










Current assets:





Cash and cash equivalents

$    405,277


$       406,661


Accounts receivable, net

1,087,713


1,110,334


Inventories

1,122,018


1,051,669


Prepaid expenses and other current assets

55,510


47,586



Total current assets

2,670,518


2,616,250







Property, plant and equipment, net

635,127


640,275

Deferred tax assets

354,658


476,554

Other


119,052


114,284



Total assets

$ 3,779,355


$    3,847,363







LIABILITIES AND STOCKHOLDERS' EQUITY










Current liabilities:





Accounts payable

$ 1,224,062


$    1,280,106


Accrued liabilities 

125,332


116,582


Accrued payroll and related benefits

123,549


130,939


Short-term debt

244,416


88,416



Total current liabilities

1,717,359


1,616,043







Long-term liabilities:





Long-term debt

393,236


391,447


Other

205,770


192,189



Total long-term liabilities

599,006


583,636







Stockholders' equity

1,462,990


1,647,684



Total liabilities and stockholders' equity

$ 3,779,355


$    3,847,363

 

Sanmina Corporation

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

(GAAP)

(Unaudited)












Three Months Ended


Six Months Ended



March 31,


April 1,


March 31,


April 1,



2018


2017


2018


2017

Net sales

$ 1,675,629


$ 1,682,262


$ 3,420,429


$ 3,402,239

Cost of sales

1,560,931


1,549,052


3,196,265


3,136,867


Gross profit

114,698


133,210


224,164


265,372










Operating expenses:









Selling, general and administrative

65,384


62,388


128,987


127,528


Research and development

8,221


8,437


15,836


16,608


Amortization of intangible assets

910


918


1,828


1,836


Restructuring costs 

(8,591)


3,301


14,951


4,029


Gain on sales of long-lived assets

-


-


-


(1,451)


     Total operating expenses

65,924


75,044


161,602


148,550










Operating income

48,774


58,166


62,562


116,822











Interest income

287


238


572


439


Interest expense 

(6,826)


(5,486)


(13,040)


(10,753)


Other income (expense), net

(483)


3,812


2,747


5,069

Interest and other, net

(7,022)


(1,436)


(9,721)


(5,245)










Income before income taxes

41,752


56,730


52,841


111,577










Provision for income taxes 

17,120


25,013


183,119


34,996










Net income (loss)

$      24,632


$      31,717


$  (130,278)


$      76,581











Basic income (loss) per share

$          0.35


$          0.42


$        (1.83)


$          1.03


Diluted income (loss) per share

$          0.33


$          0.41


$        (1.83)


$          0.99











Weighted-average shares used in computing per share amounts:









  Basic

70,441


74,761


71,096


74,156


  Diluted

73,582


77,864


71,096


77,531

 

Sanmina Corporation

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(Unaudited)








Three Months Ended



March 31,


April 1,



2018


2017

GAAP Operating Income

$      48,774


$      58,166


GAAP operating margin

2.9%


3.5%

Adjustments:





Stock compensation expense (1)

10,295


7,642


Amortization of intangible assets

1,812


1,820


Distressed customer charges (3)

(163)


-


Restructuring costs

(8,591)


3,301

Non-GAAP Operating Income

$      52,127


$      70,929


Non-GAAP operating margin

3.1%


4.2%






GAAP Net Income

$      24,632


$      31,717






Adjustments:





Operating income adjustments (see above)

3,353


12,763


Adjustments for taxes (2)

9,001


14,589

Non-GAAP Net Income

$      36,986


$      59,069






GAAP Net Income Per Share:





Basic

$          0.35


$          0.42


Diluted

$          0.33


$          0.41






Non-GAAP Net Income Per Share:





Basic

$          0.53


$          0.79


Diluted

$          0.50


$          0.76






Weighted-average shares used in computing per share amounts:





Basic

70,441


74,761


Diluted

73,582


77,864






(1)

Stock compensation expense was as follows: 










Cost of sales

$        1,851


$        2,035


Selling, general and administrative

8,388


5,376


Research and development

56


231


  Total

$      10,295


$        7,642






(2)

GAAP provision for income taxes

$       17,120


$       25,013







Adjustments:





  Tax impact of operating income adjustments

125


934


  Discrete tax items

(2,552)


(1,105)


  Other deferred tax adjustments

(6,574)


(14,418)







Subtotal - adjustments for taxes

(9,001)


(14,589)







Non-GAAP provision for income taxes

$         8,119


$       10,424






(3)

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

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 results with those of its competitors. We determine the tax adjustments based upon the various applicable effective tax rates.  In those jurisdictions where we do not expect to realize a tax cost or benefit (due to a history of operating losses or other factors), a reduced tax rate is applied.

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SOURCE Sanmina Corporation

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