Sanmina-SCI Reports Third Quarter Fiscal 2012 Results

SAN JOSE, Calif., July 23, 2012 /PRNewswire/ -- Sanmina-SCI Corporation ("Sanmina-SCI" or the "Company") (NASDAQ GS: SANM), a leading global integrated manufacturing services company, today reported financial results for the third fiscal quarter ended June 30, 2012.

(Logo:  http://photos.prnewswire.com/prnh/20110707/SF30965LOGO)

Third Quarter Fiscal 2012 Summary

  • Revenue of $1.55 billion
  • GAAP operating margin 2.3 percent
  • GAAP diluted earnings per share of $0.11
  • Non-GAAP(1) operating margin of 2.8 percent
  • Non-GAAP diluted earnings per share of $0.26

Revenue for the third quarter was $1.55 billion, compared to $1.46 billion in the prior quarter and $1.67 billion for the same period of fiscal 2011.  

GAAP operating income in the third quarter was $35.4 million or 2.3 percent of revenue, compared to $52.9 million or 3.2 percent of revenue for the same period ended July 2, 2011.  GAAP net income in the third quarter was $8.9 million, compared to $9.4 million for the same period a year ago.  GAAP diluted earnings per share for the quarter of $0.11, compared to GAAP diluted earnings per share of $0.11 in the third quarter fiscal 2011. 

Non-GAAP operating income in the third quarter was $44.1 million or 2.8 percent of revenue, compared to $65.0 million or 3.9 percent of revenue in the third quarter fiscal 2011.  Non-GAAP net income in the third quarter was $21.9 million, compared to $35.1 million in the same period a year ago. Non-GAAP diluted earnings per share were $0.26, compared to $0.42 for the same period a year ago.  

Cash and cash equivalents for the quarter ended June 30, 2012 were $394.9 million.  Cash flow from operations was $47.6 million.  Inventory turns improved to 6.8x from 6.1x in the prior quarter.   

"Revenue for the third quarter was up six percent sequentially as a result of growth in a number of our key markets.  However, weak demand in the components business negatively impacted profitability," stated Jure Sola, Chairman and Chief Executive Officer.  "I continue to be pleased with our focus on cash generation and capital structure, including our redemption today of the remaining 2016 notes."

"The macro-environment remains challenging and it's difficult to predict the future; however, based on new projects and forecasts from our strategic customers, we expect modest revenue growth and margin expansion in the fourth quarter," concluded Sola.

Fourth Quarter Fiscal 2012 Outlook

The following forecast is for the fourth fiscal quarter ending September 29, 2012.  These statements are forward-looking and actual results may differ materially. 

  • Revenue between $1.575 billion to $1.625 billion
  • Non-GAAP diluted earnings per share between $0.32 to $0.38

Company Completes Full Redemption of 2016 Notes 

The Company also announced that it has redeemed today $150.0 million in aggregate principal amount of its 8.125% Senior Subordinated Notes due 2016 (the "Notes") using borrowings under the Company's credit facilities and other financings.  This follows the Company's call for redemption of the Notes previously announced on June 22, 2012.  As a result, none of the Company's Notes remain outstanding.

(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 and discrete tax events), to the extent material or which we consider to be of a non-operational nature in the applicable period.  Beginning in the third quarter, in order to align our non-GAAP reporting practices with those of certain of our competitors, we revised our definition of unusual items to include charges associated with distressed customers, not just customers who have declared bankruptcy. 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-sci.com.  Sanmina-SCI provides fourth quarter fiscal 2012 outlook only on a non-GAAP basis due to the inherent uncertainties associated with forecasting the timing and amount of acquisitions, restructuring, impairment and other unusual and infrequent items.

Company Conference Call Information

Sanmina-SCI will hold a conference call regarding results for the third quarter fiscal 2012 on Monday, July 23, 2012 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-sci.com.  Additional information in the form of a slide presentation is available by logging onto Sanmina-SCI's website at www.sanmina-sci.com.  A replay of today's conference call will be available for 48-hours.  The access numbers are: domestic 855-859-2056 and international 404-537-3406, access code is 10354407.

About Sanmina-SCI

Sanmina-SCI Corporation is a leading integrated manufacturing services provider serving the fastest-growing segments of the global Electronics Manufacturing Services (EMS) market. Recognized as a technology leader, Sanmina-SCI provides end-to-end manufacturing solutions and delivers superior quality and support to OEMs primarily in the communications, defense and aerospace, industrial and medical instrumentation, multimedia, enterprise computing and storage, clean-tech and automotive technology sectors. Sanmina-SCI has facilities strategically located in key regions throughout the world. More information regarding the Company is available at http://www.sanmina-sci.com.

Sanmina-SCI Safe Harbor Statement

Certain statements contained in this press release, including the Company's outlook for future revenue and non-GAAP earnings per share and expectations for revenue and margin expansion, 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 a deterioration in the markets for the Company's customers' products; inability of customers to pay for the Company's products due to bankruptcy filings or otherwise, which could reduce the Company's revenues, margins and net income; reduction or cancelation of customer orders that would reduce revenues, margins and net income ;  the sufficiency of the Company's cash position and other sources of liquidity to operate and expand its business; an increase in short-term rates that would increase the Company's interest expense; component shortages, which could result in production delays or increases in manufacturing costs; the impact of the restrictions contained in the Company's credit agreements and indentures upon the Company's ability to operate and expand its business; competition negatively impacting the Company's revenues and margins; the need to adopt future restructuring plans as a result of changes in the Company's business, which would increase the Company's costs and decrease its net income; 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.

SANMF

 

Sanmina-SCI Corporation

Condensed Consolidated Balance Sheets

(In thousands)

(GAAP)





June 30,


October 1,





2012


2011












(Unaudited)



ASSETS












Current assets:






Cash and cash equivalents


$ 394,862


$ 640,288


Accounts receivable, net


1,017,355


1,014,121


Inventories


826,725


891,325


Prepaid expenses and other current assets


95,953


83,512



Total current assets


2,334,895


2,629,246








Property, plant and equipment, net


566,339


588,097

Other non-current assets


131,687


136,630



Total assets


$ 3,032,921


$ 3,353,973








LIABILITIES AND STOCKHOLDERS' EQUITY












Current liabilities:






Accounts payable


$ 895,859


$ 984,014


Accrued liabilities


116,525


109,478


Accrued payroll and related benefits


115,070


112,193


Short-term debt


30,000


60,200



Total current liabilities


1,157,454


1,265,885








Long-term liabilities:






Long-term debt


940,016


1,182,308


Other


129,699


135,263



Total long-term liabilities


1,069,715


1,317,571








Total stockholders' equity


805,752


770,517



Total liabilities and stockholders' equity


$ 3,032,921


$ 3,353,973

 

Sanmina-SCI Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(GAAP)

(Unaudited)












Three Months Ended


Nine Months Ended












June 30,


July 2,


June 30,


July 2,



2012


2011


2012


2011










Net sales

$ 1,549,302


$ 1,674,200


$ 4,514,750


$ 4,905,709

Cost of sales

1,444,050


1,542,599


4,194,125


4,529,230


Gross profit

105,252


131,601


320,625


376,479










Operating expenses:









Selling, general and administrative

60,965


67,043


183,046


187,726


Research and development

5,587


5,797


15,643


14,877


Amortization of intangible assets

672


958


2,395


2,875


Restructuring and integration costs

3,932


6,336


13,472


15,885


Asset impairment

-


-


2,077


85


Gain on sales of long-lived assets

(1,298)


(1,440)


(1,298)


(3,465)


    Total operating expenses

69,858


78,694


215,335


217,983










Operating income

35,394


52,907


105,290


158,496











Interest income

369


356


1,095


1,490


Interest expense

(16,131)


(24,843)


(58,361)


(77,773)


Other income (expense), net

(6,835)


(14,767)


(13,194)


(11,489)

Interest and other, net

(22,597)


(39,254)


(70,460)


(87,772)










Income before income taxes

12,797


13,653


34,830


70,724










Provision for income taxes

3,849


4,248


18,746


19,895










Net income

$ 8,948


$ 9,405


$ 16,084


$ 50,829




















Basic income per share

$ 0.11


$ 0.12


$ 0.20


$ 0.63


Diluted income per share

$ 0.11


$ 0.11


$ 0.19


$ 0.61











Weighted-average shares used in computing









per share amounts:









    Basic

81,519


80,579


81,213


80,223


    Diluted

83,566


83,141


83,469


83,275

Sanmina-SCI Corporation

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(Unaudited)
















Three Months Ended


Nine Months Ended




June 30,


March 31,


July 2,


June 30,


July 2,




2012


2012


2011


2012


2011













GAAP Gross Profit


$ 105,252


$ 106,348


$ 131,601


$ 320,625


$ 376,479


GAAP gross margin


6.8%


7.3%


7.9%


7.1%


7.7%

Adjustments












Stock compensation expense (1)


706


983


1,773


2,596


3,825


Amortization of intangible assets


-


-


157


104


471


Customer bankruptcy reorganization (2)


-


325


-


325


(759)

Non-GAAP Gross Profit


$ 105,958


$ 107,656


$ 133,531


$ 323,650


$ 380,016


Non-GAAP gross margin


6.8%


7.4%


8.0%


7.2%


7.7%

























GAAP Operating Income


$ 35,394


$ 30,208


$ 52,907


$ 105,290


$ 158,496


GAAP operating margin


2.3%


2.1%


3.2%


2.3%


3.2%

Adjustments












Stock compensation expense (1)


4,527


4,529


6,057


13,120


13,981


Amortization of intangible assets


672


767


1,115


2,499


3,346


Customer bankruptcy reorganization (2)


-


2,794


-


2,794


(759)


Restructuring, acquisition and integration costs


4,834


5,486


6,336


14,374


15,885


Gain on sales of long-lived assets


(1,298)


-


(1,460)


(1,298)


(3,485)


Asset impairment


-


1,024


-


2,077


85

Non-GAAP Operating Income


$ 44,129


$ 44,808


$ 64,955


$ 138,856


$ 187,549


Non-GAAP operating margin


2.8%


3.1%


3.9%


3.1%


3.8%

























GAAP Net Income (Loss)


$ 8,948


$ (1,439)


$ 9,405


$ 16,084


$ 50,829













Adjustments:












Operating income adjustments (see above)


8,735


14,600


12,048


33,566


29,053


Loss on repurchase of debt (3)


4,236


6,461


16,098


10,697


16,098


Nonrecurring tax items


(16)


2,906


(2,425)


6,883


1,355

Non-GAAP Net Income


$ 21,903


$ 22,528


$ 35,126


$ 67,230


$ 97,335

























GAAP Income (Loss) Per Share:












Basic


$ 0.11


$ (0.02)


$ 0.12


$ 0.20


$ 0.63


Diluted


$ 0.11


$ (0.02)


$ 0.11


$ 0.19


$ 0.61













Non-GAAP Income Per Share:












Basic


$ 0.27


$ 0.28


$ 0.44


$ 0.83


$ 1.21


Diluted


$ 0.26


$ 0.27


$ 0.42


$ 0.81


$ 1.17













Weighted-average shares used in computing per share amounts:












Basic - GAAP


81,519


81,225


80,579


81,213


80,223


Diluted - GAAP


83,566


81,225


83,141


83,469


83,275


Basic - Non-GAAP


81,519


81,225


80,579


81,213


80,223


Diluted - Non-GAAP


83,566


84,051


83,141


83,469


83,275

























(1)

Stock compensation expense was as follows:


























Three Months Ended


Nine Months Ended




June 30,


March 31,


July 2,


June 30,


July 2,




2012


2012


2011


2012


2011








Cost of sales


$ 706


$ 983


$ 1,773


$ 2,596


$ 3,825


Selling, general and administrative


3,793


3,519


4,209


10,442


9,998


Research and development


28


27


75


82


158


Stock compensation expense - total company


$ 4,527


$ 4,529


$ 6,057


$ 13,120


$ 13,981













(2)

Relates to inventory and bad debt reserves associated with customer bankruptcy reorganizations.













(3)

Represents a loss, including write-off of unamortized debt issuance costs, on debt redeemed or repurchased prior to maturity.

























Schedule I

The commentary 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, including distressed customer impacts, to the extent material or which we consider to be of a non-operational nature in the applicable period.

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 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 or availability under its credit facilities. 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 discrete tax events), 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.  

SOURCE Sanmina-SCI Corporation



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