NASDAQ: SANM

29.73 -1.70 -5.41% Volume: 449,614 May 17, 2019

Sanmina Reports Second Quarter Financial Results

04/29/2019

SAN JOSE, Calif., April 29, 2019 /PRNewswire/ -- Sanmina Corporation ("Sanmina" or the "Company") (NASDAQ: SANM), a leading integrated manufacturing solutions company, today reported financial results for the second quarter fiscal 2019 ended March 30, 2019.

"We exceeded our expectations for the quarter.  Revenue was stronger than anticipated driven by our teams' excellent job in securing supply to catch up to demand.  Our ability to control our costs, drive efficiencies and leverage our operating model drove operating margins to 4.1 percent.  Non-GAAP EPS of $0.91 was up 9 percent sequentially and 81 percent over the second quarter of fiscal 2018.  Cash flow from operations was $105.7 million as our team made positive strides in reducing our inventory levels.   I am extremely pleased with the hard work and execution by our team in meeting our customers' requirements," stated Michael Clarke, Chief Executive Officer.

(In thousands, except per share data)

Q2:2019


Q1:2019


Q2:2018



Revenue

$2,126,639


$2,188,018


$1,675,629



GAAP: 








Operating income

$78,115


$77,543


$48,774



Operating margin

3.7%


3.5%


2.9%



Net income

$40,885


$37,952


$24,632



Diluted earnings per share

$0.57


$0.54


$0.33



Non-GAAP: (1)








Operating income

$87,388


$85,790


$52,127



Operating margin

4.1%


3.9%


3.1%



Net income

$65,046


$59,168


$36,986



Diluted earnings per share

$0.91


$0.83


$0.50





(1)

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: $405.5 million
  • Cash flow from operations: $105.7 million

"Our strong results over the first six months of fiscal 2019 are a testament to our teams' ability to provide value to our customers through our technical capabilities, market expertise and operational excellence.  We remain confident in our ability to drive profitable growth and positive cash flow from operations over the remainder of fiscal 2019," added Mr. Clarke.

Third Quarter Fiscal 2019 Outlook
The following outlook is for the third fiscal quarter ending June 29, 2019.  These statements are forward-looking and actual results may differ materially. 

  • Revenue between $1.925 billion to $2.025 billion
  • GAAP diluted earnings per share between $0.60 to $0.70
  • Non-GAAP diluted earnings per share between $0.72 to $0.82 

Company Conference Call Information
Sanmina will hold a conference call to review its financial results for the second quarter on Monday, April 29, 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 2839978.

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, 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 third quarter fiscal 2019 results and expectations for the remainder of fiscal 2019, 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; 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 30,


September 29,




2019


2018




(Unaudited)

ASSETS










Current assets:





Cash and cash equivalents

$    405,494


$       419,528


Accounts receivable, net

1,312,887


1,177,219


Contract assets

401,705


-


Inventories

1,006,548


1,374,004


Prepaid expenses and other current assets

48,454


43,676



Total current assets

3,175,088


3,014,427







Property, plant and equipment, net

639,901


642,913

Deferred tax assets

312,081


344,124

Other


79,617


83,669



Total assets

$ 4,206,687


$    4,085,133







LIABILITIES AND STOCKHOLDERS' EQUITY










Current liabilities:





Accounts payable

$ 1,439,397


$    1,547,399


Accrued liabilities 

208,839


136,427


Accrued payroll and related benefits

126,932


124,748


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

643,360


593,321



Total current liabilities

2,418,528


2,401,895







Long-term liabilities:





Long-term debt

-


14,346


Other

207,440


196,048



Total long-term liabilities

207,440


210,394







Stockholders' equity

1,580,719


1,472,844



Total liabilities and stockholders' equity

$ 4,206,687


$    4,085,133

 

Sanmina Corporation

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

(GAAP)

(Unaudited)












Three Months Ended


Six Months Ended



March 30,


March 31,


March 30,


March 31,



2019


2018


2019


2018










Net sales

$ 2,126,639


$ 1,675,629


$ 4,314,657


$ 3,420,429

Cost of sales

1,973,537


1,560,931


4,012,218


3,196,265


Gross profit

153,102


114,698


302,439


224,164










Operating expenses:









Selling, general and administrative

64,186


65,384


127,214


128,987


Research and development

7,599


8,221


14,036


15,836


Restructuring and other costs 

3,202


(7,681)


5,531


16,779


     Total operating expenses

74,987


65,924


146,781


161,602










Operating income

78,115


48,774


155,658


62,562











Interest income

364


287


558


572


Interest expense 

(8,472)


(6,826)


(16,743)


(13,040)


Other income (expense), net

(891)


(483)


(6,885)


2,747

Interest and other, net

(8,999)


(7,022)


(23,070)


(9,721)










Income before income taxes

69,116


41,752


132,588


52,841










Provision for income taxes 

28,231


17,120


53,751


183,119










Net income (loss)

$      40,885


$      24,632


$      78,837


$  (130,278)




















Basic income (loss) per share

$          0.59


$          0.35


$          1.15


$        (1.83)


Diluted income (loss) per share

$          0.57


$          0.33


$          1.11


$        (1.83)











Weighted-average shares used in computing per share amounts:









  Basic

68,821


70,441


68,556


71,096


  Diluted

71,446


73,582


71,162


71,096

 

Sanmina Corporation

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(Unaudited)










Three Months Ended



March 30,


Dec. 29,


March 31,



2019


2018


2018








GAAP Operating Income

$      78,115


$      77,543


$      48,774


GAAP operating margin

3.7%


3.5%


2.9%

Adjustments:







Stock compensation expense (1)

6,626


5,816


10,295


Amortization of intangible assets

190


636


1,812


Distressed customer charges (2)

(555)


(344)


(163)


Restructuring costs

3,012


2,139


(8,591)

Non-GAAP Operating Income

$      87,388


$      85,790


$      52,127


Non-GAAP operating margin

4.1%


3.9%


3.1%















GAAP Net Income

$      40,885


$      37,952


$      24,632








Adjustments:







Operating income adjustments (see above)

9,273


8,247


3,353


Adjustments for taxes (3)

14,888


12,969


9,001

Non-GAAP Net Income

$      65,046


$      59,168


$      36,986















GAAP Net Income Per Share:







Basic

$          0.59


$          0.56


$          0.35


Diluted

$          0.57


$          0.54


$          0.33








Non-GAAP Net Income Per Share:







Basic

$          0.95


$          0.87


$          0.53


Diluted

$          0.91


$          0.83


$          0.50








Weighted-average shares used in computing per share amounts:







Basic

68,821


68,303


70,441


Diluted

71,446


70,901


73,582















(1)

Stock compensation expense was as follows: 














Cost of sales

$        2,582


$        1,735


$        1,851


Selling, general and administrative

3,939


3,990


8,388


Research and development

105


91


56


  Total

$        6,626


$        5,816


$      10,295








(2)

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








(3)

GAAP provision for income taxes

$       28,231


$       25,520


$       17,120









Adjustments:







  Tax impact of operating income adjustments

189


168


125


  Discrete tax items

(3,741)


2,127


(2,552)


  Other deferred tax adjustments

(11,336)


(15,264)


(6,574)









Subtotal - adjustments for taxes

(14,888)


(12,969)


(9,001)









Non-GAAP provision for income taxes

$       13,343


$       12,551


$         8,119






















Q3 FY19 Earnings Per Share Outlook:

Q3 FY19 EPS Range





Low


 High 











GAAP diluted earnings per share

$          0.60


$          0.70




  Stock compensation expense 

$          0.12


$          0.12




Non-GAAP diluted earnings per share

$          0.72


$          0.82



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, 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