Sanmina Reports First Quarter Fiscal 2017 Results

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Jan 30, 2017, 15:02 ET

SAN JOSE, Calif., Jan. 30, 2017 /PRNewswire/ -- Sanmina Corporation ("Sanmina" or the "Company") (NASDAQ: SANM), a leading integrated manufacturing solutions company, today reported financial results for the first fiscal quarter ended December 31, 2016.

First Quarter Fiscal 2017 Summary

Revenue of $1.72 billion
GAAP operating margin of 3.4 percent
GAAP diluted earnings per share of $0.58
Non-GAAP⁽¹⁾ operating margin of 4.2 percent
Non-GAAP⁽¹⁾ diluted earnings per share of $0.75

Revenue for the first quarter was $1.72 billion, compared to $1.67 billion in the prior quarter and $1.53 billion for the same period of fiscal 2016.

GAAP operating income in the first quarter was $58.7 million or 3.4 percent of revenue, compared to $54.1 million or 3.5 percent of revenue for the first quarter fiscal 2016. GAAP net income in the first quarter was $44.9 million, compared to $27.1 million for the same period a year ago. GAAP diluted earnings per share were $0.58, compared to $0.33 in the first quarter of fiscal 2016.

Non-GAAP operating income in the first quarter was $71.7 million or 4.2 percent of revenue, compared to $61.0 million or 4.0 percent of revenue in the first quarter fiscal 2016. Non-GAAP net income in the first quarter was $57.7 million, compared to $46.8 million in the same period a year ago. Non-GAAP diluted earnings per share for the quarter were $0.75, compared to $0.58 for the same period a year ago.

"Solid execution and growth in our end-markets were key drivers for our improved financial results in the quarter. Revenue was up 3 percent sequentially and 12 percent year over year," stated Jure Sola, Chairman and Chief Executive Officer of Sanmina Corporation. "Our value-added services, diversified markets and innovative technologies are key differentiators for Sanmina which allow us to capitalize on opportunities with new and existing customers. Based on our results for the first quarter and our outlook for the second quarter, we are optimistic that fiscal 2017 will be another growth year," concluded Mr. Sola.

Balance Sheet Summary

Ending cash and cash equivalents were $405.2 million
Cash flow from operations was $53.9 million
Inventory turns were 6.6x
Cash cycle days were 40.4 days

Second Quarter Fiscal 2017 Outlook

The following forecast is for the second fiscal quarter ending April 1, 2017. These statements are forward-looking and actual results may differ materially.

Revenue between $1.675 billion to $1.725 billion
Non-GAAP diluted earnings per share between $0.67 to $0.72

Company Conference Call Information

Sanmina will hold a conference call to review its financial results for the first quarter on Monday, January 30, 2017 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 54219140.

⁽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 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 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. Sanmina provides its second quarter fiscal 2017 outlook for earnings per share 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 the incurrence of discrete tax events and deferred tax changes.

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 2017 and expectations for fiscal 2017 being another growth year, 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; risks arising from our international operations; competition that could cause us to lose sales; consolidation among our customers and suppliers that could adversely affect our business; 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 31,	October 1,
			2016	2016
			(Unaudited)
ASSETS

Current assets:
	Cash and cash equivalents		$ 405,240	$ 398,288
	Accounts receivable, net		993,049	973,680
	Inventories		963,905	946,239
	Prepaid expenses and other current assets		55,394	57,445
		Total current assets	2,417,588	2,375,652

Property, plant and equipment, net			620,911	617,524
Deferred tax assets			513,020	514,314
Other			116,468	117,732
		Total assets	$ 3,667,987	$ 3,625,222

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
	Accounts payable		$ 1,171,230	$ 1,121,135
	Accrued liabilities		115,371	124,386
	Accrued payroll and related benefits		105,232	127,326
	Short-term debt		43,416	28,416
		Total current liabilities	1,435,249	1,401,263

Long-term liabilities:
	Long-term debt		393,298	434,059
	Other		176,674	180,097
		Total long-term liabilities	569,972	614,156

Stockholders' equity			1,662,766	1,609,803
		Total liabilities and stockholders' equity	$ 3,667,987	$ 3,625,222


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

		Three Months Ended
		December 31,	January 2,
		2016	2016

Net sales		$ 1,719,977	$ 1,534,714
Cost of sales		1,587,815	1,411,076
	Gross profit	132,162	123,638

Operating expenses:
	Selling, general and administrative	65,140	57,693
	Research and development	8,171	9,647
	Amortization of intangible assets	918	692
	Restructuring costs	728	553
	Asset impairments	-	1,000
	Gain on sales of long-lived assets	(1,451)	-
	Total operating expenses	73,506	69,585

Operating income		58,656	54,053

	Interest income	201	148
	Interest expense	(5,267)	(5,878)
	Other income (expense), net	1,257	(218)
Interest and other, net		(3,809)	(5,948)

Income before income taxes		54,847	48,105

Provision for income taxes		9,983	20,967

Net income		$ 44,864	$ 27,138


	Basic income per share	$ 0.61	$ 0.35
	Diluted income per share	$ 0.58	$ 0.33

	Weighted-average shares used in computing
	per share amounts:
	Basic	73,554	77,921
	Diluted	77,175	81,205


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

		Three Months Ended
		December 31,	January 2,
		2016	2016

GAAP Operating Income		$ 58,656	$ 54,053
	GAAP operating margin	3.4%	3.5%
Adjustments:
	Stock compensation expense (1)	11,977	4,052
	Amortization of intangible assets	1,820	1,360
	Restructuring costs	728	553
	Gain on sales of long-lived assets	(1,451)	-
	Asset impairments	-	1,000
Non-GAAP Operating Income		$ 71,730	$ 61,018
	*Non-GAAP operating margin*	4.2%	4.0%


GAAP Net Income		$ 44,864	$ 27,138

Adjustments:
	Operating income adjustments (see above)	13,074	6,965
	Deferred and non-recurring tax adjustments	(205)	12,707
Non-GAAP Net Income		$ 57,733	$ 46,810


GAAP Net Income Per Share:
	Basic	$ 0.61	$ 0.35
	Diluted	$ 0.58	$ 0.33

Non-GAAP Net Income Per Share:
	Basic	$ 0.78	$ 0.60
	Diluted	$ 0.75	$ 0.58

Weighted-average shares used in computing per share amounts:
	Basic	73,554	77,921
	Diluted	77,175	81,205


(1)	Stock compensation expense was as follows:

		Three Months Ended
		December 31,	January 2,
		2016	2016

	Cost of sales	$ 2,863	$ 1,405
	Selling, general and administrative	8,840	2,566
	Research and development	274	81
	Total	$ 11,977	$ 4,052

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 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 equity awards 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, 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