Sanmina Reports Second Quarter Fiscal 2014 Results

SAN JOSE, Calif., April 22, 2014 /PRNewswire/ -- 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. ETJure 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 paige.bombino@sanmina.com.  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.

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SOURCE Sanmina Corporation



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