NASDAQ: SANM

32.31 -0.47 -1.43% Volume: 108,459 November 14, 2019

Sanmina Reports Fourth Quarter And Fiscal Year End Financial Results

10/28/2019

SAN JOSE, Calif., Oct. 28, 2019 /PRNewswire/ -- Sanmina Corporation ("Sanmina" or the "Company") (NASDAQ: SANM), a leading integrated manufacturing solutions company, today reported financial results for the fourth quarter and fiscal year ended September 28, 2019.

"We delivered good financial results per our plan for the fourth quarter.  The team did an excellent job driving operational efficiency and mix improvements which led to better than expected operating margin, non-GAAP earnings per share and free cash flow," stated Jure Sola, Executive Chairman.

"Our focus on operational execution and financial excellence is evident in our strong fiscal 2019 results.  Revenue grew 16 percent, operating margin expanded 110 basis points to 4.1 percent, non-GAAP earnings per share increased 60 percent to $3.40 compared to fiscal 2019 and we delivered strong free cash flow of $256 million.  I am proud of our team for delivering solid results in fiscal 2019," concluded Sola. 

(In thousands, except per share data)

Q4:2019

Q3:2019

Q4:2018

FY:2019

FY:2018

Revenue

$1,892,207

$2,026,995

$1,876,335

$8,233,859

$7,110,130

GAAP:  






Operating income

$63,085

$67,374

$9,819

$286,117

$119,441

Operating margin

3.3%

3.3%

0.5%

3.5%

1.7%

Net income (loss)  

$19,757

$42,921

$782

$141,515

$(95,533)

Diluted earnings (loss) per share(1)

$0.27

$0.60

$0.01

$1.97

$(1.37)

Non-GAAP: (2)






Operating income

$79,627

$81,087

$58,749

$333,892

$212,800

Operating margin

4.2%

4.0%

3.1%

4.1%

3.0%

Net income

$60,611

$59,173

$42,546

$243,998

$155,912

Diluted earnings per share

$0.84

$0.82

$0.60

$3.40

$2.13



(1)

Fiscal 2018 GAAP loss per share includes a non-cash tax charge of $2.33 per share as a result of the U.S. Tax Cuts & Jobs Act and a non-cash goodwill impairment charge of $0.44 per share.



(2)

Non-GAAP financial measures 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, all 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 furnished with this release.

Balance Sheet and Cash Flow

  • Ending cash and cash equivalents: $454.7 million
  • Cash flow from operations: Q4 $190.2 million and FY'19 $383.0 million
  • Free cash flow: Q4 $161.0 million and FY'19 $255.8 million

Expanded Share Repurchase Program
In line with Sanmina's capital allocation priorities and confidence in our future cash generation, the Board of Directors has authorized the repurchase of up to an additional $200 million of Sanmina's common stock. The new stock repurchase program has no expiration date.  As of September 28, 2019, $100.8 million remained available under the current program approved in September 2017.  This brings the outstanding Board authorized common stock repurchase amount to $300.8 million. Since the beginning of fiscal 2014, the Company has repurchased approximately 26.4 million shares for approximately $649 million.  The Company continues to view its share repurchase program as opportunistic. 

Company-wide Right-sizing Plan
On October 28, 2019, the Company adopted a company-wide right-sizing plan.  Under this plan, the Company expects to incur restructuring charges of approximately $10 million to $20 million, consisting primarily of cash severance costs. 

First Quarter Fiscal 2020 Outlook
The following outlook is for the first fiscal quarter ending December 28, 2019.  These statements are forward-looking and actual results may differ materially. 

  • Revenue between $1.725 billion to $1.825 billion
  • GAAP diluted earnings per share between $0.52 to $0.62
  • Non-GAAP diluted earnings per share between $0.65 to $0.75

"We expect demand to be soft in the first half of the fiscal year as a result of excess inventory in the channel, slower than anticipated 5G deployment and global economic uncertainty.  As a result, we have initiated a plan to right size the organization to further improve operational efficiencies and optimize our cost structure.  This right-sizing, coupled with our focus on the quality of our revenue, will support our ongoing operating margin, non-GAAP earnings per share and cash generation objectives," stated Hartmut Liebel, Chief Executive Officer.  

"Our leading edge technology, market diversification, operational excellence and financial discipline are key differentiators for Sanmina.  Our strong team is well positioned to deliver superior service, innovation and support to our customers as well as enhanced value for our stockholders.  I am excited about Sanmina's future," concluded Liebel.   

Company Conference Call Information
Sanmina will hold a conference call to review its financial results for the fourth quarter on Monday, October 28, 2019 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 7073198.

About Sanmina
Sanmina Corporation, a Fortune 500 company, 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, cloud solutions, industrial, defense, medical 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 first quarter and the expected cost and anticipated benefits of the Company's right-sizing plan, 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; significant uncertainties that can cause our future sales and net income to be variable; reliance on a small number of customers for a substantial portion of our sales; risks arising from our international operations; the amount of restructuring charges relating to the Company-wide right-sizing plan actually recorded in the first quarter; 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)




September 28,


September 29,




2019


2018










(Unaudited)

ASSETS










Current assets:





Cash and cash equivalents

$       454,741


$       419,528


Accounts receivable, net

1,128,379


1,177,219


Contract assets

396,300


-


Inventories

900,557


1,374,004


Prepaid expenses and other current assets

40,952


43,676



Total current assets

2,920,929


3,014,427







Property, plant and equipment, net

630,647


642,913

Deferred tax assets

279,803


344,124

Other


74,134


83,669



Total assets

$    3,905,513


$    4,085,133







LIABILITIES AND STOCKHOLDERS' EQUITY










Current liabilities:





Accounts payable

$    1,336,914


$    1,547,399


Accrued liabilities 

180,107


136,427


Accrued payroll and related benefits

127,647


124,748


Short-term debt, including current portion of long-term debt

38,354


593,321



Total current liabilities

1,683,022


2,401,895







Long-term liabilities:





Long-term debt

346,971


14,346


Other

232,947


196,048



Total long-term liabilities

579,918


210,394







Stockholders' equity

1,642,573


1,472,844



Total liabilities and stockholders' equity

$    3,905,513


$    4,085,133

 

Sanmina Corporation

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

(GAAP)

(Unaudited)












Three Months Ended


Twelve Months Ended












Sept. 28,


Sept. 29,


Sept. 28,


Sept. 29,



2019


2018


2019


2018










Net sales

$ 1,892,207


$ 1,876,335


$ 8,233,859


$ 7,110,130

Cost of sales

1,750,503


1,755,252


7,641,921


6,646,347


Gross profit

141,704


121,083


591,938


463,783










Operating expenses:









Selling, general and administrative

66,050


60,516


260,032


250,924


Research and development

6,244


6,774


27,552


30,754


Restructuring and other costs 

6,325


43,974


18,237


62,664


     Total operating expenses

78,619


111,264


305,821


344,342










Operating income

63,085


9,819


286,117


119,441











Interest income

223


204


1,111


1,268


Interest expense 

(6,421)


(7,410)


(30,763)


(27,734)


Other income (expense), net

(2,481)


817


(10,846)


4,564

Interest and other, net

(8,679)


(6,389)


(40,498)


(21,902)










Income before income taxes

54,406


3,430


245,619


97,539










Provision for income taxes 

34,649


2,648


104,104


193,072










Net income (loss)

$      19,757


$           782


$    141,515


$    (95,533)




















Basic income (loss) per share

$          0.28


$          0.01


$          2.05


$        (1.37)


Diluted income (loss) per share

$          0.27


$          0.01


$          1.97


$        (1.37)











Weighted-average shares used in computing per share amounts:









  Basic

69,898


68,236


69,129


69,833


  Diluted

72,294


71,500


71,678


69,833

 

Sanmina Corporation

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(Unaudited)














Three Months Ended


Twelve Months Ended



Sept. 28,


June 29,


Sept. 29,


Sept. 28,


Sept. 29,



2019


2019


2018


2019


2018












GAAP Operating Income

$      63,085


$      67,374


$        9,819


$    286,117


$    119,441


GAAP operating margin

3.3%


3.3%


0.5%


3.5%


1.7%

Adjustments:











Stock compensation expense (1)

10,266


8,136


4,127


30,844


32,825


Amortization of intangible assets

190


190


1,092


1,206


6,516


Reversal of contingent consideration accrual (2)

-


-


-


-


(4,812)


Distressed customer charges (3)

(49)


(804)


(73)


(1,752)


(926)


Restructuring costs

2,411


6,191


13,174


13,753


29,146


Goodwill and other asset impairments

3,724


-


30,610


3,724


30,610

Non-GAAP Operating Income

$      79,627


$      81,087


$      58,749


$    333,892


$    212,800


Non-GAAP operating margin

4.2%


4.0%


3.1%


4.1%


3.0%























GAAP Net Income (Loss)

$      19,757


$      42,921


$           782


$    141,515


$    (95,533)












Adjustments:











Operating income adjustments (see above)

16,542


13,713


48,930


47,775


93,359


Litigation settlements (4)

-


(830)


(475)


(830)


(762)


Adjustments for taxes (5)

24,312


3,369


(6,691)


55,538


158,848

Non-GAAP Net Income

$      60,611


$      59,173


$      42,546


$    243,998


$    155,912























GAAP Net Income (Loss) Per Share:











Basic

$          0.28


$          0.62


$          0.01


$          2.05


$        (1.37)


Diluted

$          0.27


$          0.60


$          0.01


$          1.97


$        (1.37)












Non-GAAP Net Income Per Share:











Basic

$          0.87


$          0.85


$          0.62


$          3.53


$          2.23


Diluted

$          0.84


$          0.82


$          0.60


$          3.40


$          2.13












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











Basic

69,898


69,499


68,236


69,129


69,833


Diluted

72,294


72,007


71,500


71,678


69,833












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











Basic

69,898


69,499


68,236


69,129


69,833


Diluted

72,294


72,007


71,500


71,678


73,200























(1)

Stock compensation expense was as follows: 













Cost of sales

$        2,711


$        2,729


$        1,833


$        9,757


$        8,187


Selling, general and administrative

7,550


5,328


3,164


20,807


25,206


Research and development

5


79


(870)


280


(568)


  Total

$      10,266


$        8,136


$        4,127


$      30,844


$      32,825












(2)

Represents a reduction in an accrual for contingent consideration related to an acquisition completed in a previous period.












(3)

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












(4)

Represents cash received in connection with certain litigation settlements.












(5)

GAAP provision for income taxes

$       34,649


$       15,704


$         2,648


$     104,104


$     193,072













Adjustments:











  Tax impact of operating income adjustments

337


263


990


957


1,889


  Discrete tax items

(3,983)


2,240


177


(3,357)


3,230


  Other deferred tax adjustments

(20,666)


(5,872)


4,220


(53,138)


(2,871)


  Impact of US Tax Reform

-


-


1,304


-


(161,096)













Subtotal - adjustments for taxes

(24,312)


(3,369)


6,691


(55,538)


(158,848)













Non-GAAP provision for income taxes

$       10,337


$       12,335


$         9,339


$       48,566


$       34,224












Q1 FY20 Earnings Per Share Outlook*:

Q1 FY20 EPS Range









Low


 High 



















GAAP diluted earnings per share

$          0.52


$          0.62








  Stock compensation expense 

$          0.13


$          0.13








Non-GAAP diluted earnings per share

$          0.65


$          0.75


















Q4 FY19 Earnings Per Share Outlook:

Q4 FY19 EPS Range









Low


 High 



















GAAP diluted earnings per share

$          0.61


$          0.71








  Stock compensation expense 

$          0.12


$          0.12








Non-GAAP diluted earnings per share

$          0.73


$          0.83








*

Due to uncertainty regarding the timing of recognition of restructuring charges that will be incurred during the first half of fiscal 2020 in connection with the Company's rightsizing plan, the Q1 FY20 outlook for GAAP EPS does not include an estimate of restructuring charges.

Schedule 1

The commentary and financial information above includes non-GAAP measures of operating income, operating margin, net income and diluted earnings per share.  Management excludes from these measures stock-based compensation, restructuring, acquisition and integration expenses, impairment charges, amortization charges and other infrequent items, as adjusted for taxes, 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 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 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. 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