Sanmina Reports First Quarter Financial Results

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Jan 28, 2019, 16:02 ET

SAN JOSE, Calif., Jan. 28, 2019 /PRNewswire/ -- Sanmina Corporation ("Sanmina" or the "Company") (NASDAQ: SANM), a leading integrated manufacturing solutions company, today reported financial results for the first quarter fiscal 2019 ended December 29, 2018.

"We delivered revenue of $2.19 billion, up 16.6 percent sequentially, operating margin expanded 80 basis points from last quarter to 3.9 percent and earnings per share were up 40 percent to $0.83 compared to the prior quarter. Our first quarter financial performance reflects solid momentum across all of our end-markets," stated Michael Clarke, Chief Executive Officer.

(In thousands, except per share data)	Q1:2019		Q4:2018		Q1:2018
Revenue	$2,188,018		$1,876,335		$1,744,800
GAAP:
Operating income	$77,543		$9,819		$13,788
Operating margin	3.5	%	0.5	%	0.8	%
Net income (loss)	$37,952		$782		$(154,910)
Earnings (loss) per share	$0.54		$0.01		$(2.16)⁽¹⁾
Non-GAAP:⁽²⁾
Operating income	$85,790		$58,749		$47,459
Operating margin	3.9	%	3.1	%	2.7	%
Net income	$59,168		$42,546		$36,468
Diluted earnings per share	$0.83		$0.60		$0.48


⁽¹⁾	The first quarter of 2018 GAAP loss per share includes a non-cash tax charge of $2.27 per share as a result of the U.S. Tax Cuts & Jobs Act.
⁽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 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.

Balance Sheet and Cash Flow

Ending cash and cash equivalents: $409.3 million
Cash flow from operations: $(78.4) million

"Looking ahead, our customer base and pipeline remain solid. Based on our solid first quarter results and with our outlook for the second quarter, we are confident we will profitably grow revenue and strengthen our financial results in fiscal 2019," stated Clarke.

Second Quarter Fiscal 2019 Outlook
The following outlook is for the second fiscal quarter ending March 30, 2019. These statements are forward-looking and actual results may differ materially.

Revenue between $1.9 billion to $2.0 billion
GAAP diluted earnings per share between $0.59 to $0.69, including stock-based compensation expense of $0.11
Non-GAAP diluted earnings per share between $0.70 to $0.80

Company Conference Call Information
Sanmina will hold a conference call to review its financial results for the first quarter on Monday, January 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 5289284.

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 second quarter fiscal 2019 results, 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)
			December 29,	September 29,
			2018	2018

			(Unaudited)
ASSETS

Current assets:
	Cash and cash equivalents		$ 409,290	$ 419,528
	Accounts receivable, net		1,344,536	1,177,219
	Contract assets		419,484	-
	Inventories		1,054,166	1,374,004
	Prepaid expenses and other current assets		46,296	43,676
		Total current assets	3,273,772	3,014,427

Property, plant and equipment, net			643,518	642,913
Deferred tax assets			323,931	344,124
Other			75,632	83,669
		Total assets	$ 4,316,853	$ 4,085,133

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
	Accounts payable		$ 1,531,927	$ 1,547,399
	Accrued liabilities		215,215	136,427
	Accrued payroll and related benefits		117,631	124,748
	Short-term debt, including current portion of long-term debt		708,362	593,321
		Total current liabilities	2,573,135	2,401,895

Long-term liabilities:
	Long-term debt		14,361	14,346
	Other		196,740	196,048
		Total long-term liabilities	211,101	210,394

Stockholders' equity			1,532,617	1,472,844
		Total liabilities and stockholders' equity	$ 4,316,853	$ 4,085,133

Sanmina Corporation
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(GAAP)
(Unaudited)

		Three Months Ended

		Dec. 29,	Dec. 30,
		2018	2017

Net sales		$ 2,188,018	$ 1,744,800
Cost of sales		2,038,681	1,635,334
	Gross profit	149,337	109,466

Operating expenses:
	Selling, general and administrative	63,028	63,603
	Research and development	6,437	7,615
	Restructuring and other costs	2,329	24,460
	Total operating expenses	71,794	95,678

Operating income		77,543	13,788

	Interest income	194	285
	Interest expense	(8,271)	(6,214)
	Other income (expense), net	(5,994)	3,230
Interest and other, net		(14,071)	(2,699)

Income before income taxes		63,472	11,089

Provision for income taxes		25,520	165,999

Net income (loss)		$ 37,952	$ (154,910)


	Basic income (loss) per share	$ 0.56	$ (2.16)
	Diluted income (loss) per share	$ 0.54	$ (2.16)

	Weighted-average shares used in computing
	per share amounts:
	Basic	68,303	71,605
	Diluted	70,901	71,605

Sanmina Corporation
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share amounts)
(Unaudited)

		Three Months Ended
		Dec. 29,	Sep. 29,	Dec. 30,
		2018	2018	2017

GAAP Operating Income		$ 77,543	$ 9,819	$ 13,788
	GAAP operating margin	3.5%	0.5%	0.8%
Adjustments:
	Stock compensation expense (1)	5,816	4,127	8,642
	Amortization of intangible assets	636	1,092	1,820
	Distressed customer charges (2)	(344)	(73)	(333)
	Restructuring costs	2,139	13,174	23,542
	Goodwill and other asset impairments	-	30,610	-
Non-GAAP Operating Income		$ 85,790	$ 58,749	$ 47,459
	*Non-GAAP operating margin*	3.9%	3.1%	2.7%


GAAP Net Income (Loss)		$ 37,952	$ 782	$ (154,910)

Adjustments:
	Operating income adjustments (see above)	8,247	48,930	33,671
	Litigation settlements (3)	-	(475)	(287)
	Adjustments for taxes (4)	12,969	(6,691)	157,994
Non-GAAP Net Income		$ 59,168	$ 42,546	$ 36,468


GAAP Net Income (Loss) Per Share:
	Basic	$ 0.56	$ 0.01	$ (2.16)
	Diluted	$ 0.54	$ 0.01	$ (2.16)

Non-GAAP Net Income Per Share:
	Basic	$ 0.87	$ 0.62	$ 0.51
	Diluted	$ 0.83	$ 0.60	$ 0.48

Weighted-average shares used in computing GAAP per share amounts:
	Basic	68,303	68,236	71,605
	Diluted	70,901	71,500	71,605

Weighted-average shares used in computing non-GAAP per share amounts:
	Basic	68,303	68,236	71,605
	Diluted	70,901	71,500	75,485


(1)	Stock compensation expense was as follows:

	Cost of sales	$ 1,735	$ 1,833	$ 2,448
	Selling, general and administrative	3,990	3,164	6,164
	Research and development	91	(870)	30
	Total	$ 5,816	$ 4,127	$ 8,642

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

(3)	Represents cash received in connection with certain litigation settlements

(4)	GAAP provision for income taxes	$ 25,520	$ 2,648	$ 165,999

	Adjustments:
	Tax impact of operating income adjustments	168	990	656
	Discrete tax items	2,127	177	700
	Other deferred tax adjustments	(15,264)	4,220	3,050
	Impact of US Tax Reform	-	1,304	(162,400)

	Subtotal - adjustments for taxes	(12,969)	6,691	(157,994)

	Non-GAAP provision for income taxes	$ 12,551	$ 9,339	$ 8,005

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