Sanmina Reports Third Quarter Fiscal 2015 Results

Jul 20, 2015, 16:02 ET from Sanmina Corporation

SAN JOSE, Calif., July 20, 2015 /PRNewswire/ -- Sanmina Corporation ("Sanmina" or the "Company") (NASDAQ GS: SANM), a leading integrated manufacturing solutions company, today reported financial results for the third fiscal quarter ended June 27, 2015.

Third Quarter Fiscal 2015 Summary

  • Revenue of $1.54 billion
  • GAAP operating margin of 3.1 percent
  • GAAP diluted earnings per share of $0.29
  • Non-GAAP(1) operating margin of 3.8 percent
  • Non-GAAP(1) diluted earnings per share of $0.53

Revenue for the third quarter was $1.54 billion, compared to $1.53 billion in the prior quarter and $1.60 billion for the same period of fiscal 2014.  

GAAP operating income in the third quarter was $47.3 million or 3.1 percent of revenue, compared to $53.3 million or 3.3 percent of revenue for the same period ended June 28, 2014.  GAAP net income in the third quarter was $24.5 million, compared to $20.7 million for the same period a year ago.  GAAP diluted earnings per share for the quarter were $0.29, compared to $0.24 in the third quarter of fiscal 2014. 

Non-GAAP operating income in the third quarter was $59.2 million or 3.8 percent of revenue, compared to $60.9 million or 3.8 percent of revenue in the third quarter fiscal 2014.  Non-GAAP net income in the third quarter was $45.1 million, compared to $45.3 million in the same period a year ago.  Non-GAAP diluted earnings per share were $0.53 for the third quarter in both fiscal years.  

Balance Sheet Summary

  • Ending cash and cash equivalents were $416.5 million
  • Cash flow from operations was $112.7 million
  • Repurchased approximately 2.3 million common shares for $47.7 million
  • Inventory turns were 6.5x
  • Cash cycle days were 42.2 days

"We delivered solid results for the third quarter despite a mixed market environment.  Consistent execution coupled with ongoing diversification were key drivers for overall improvement in our financial results," stated Jure Sola, Chairman and Chief Executive Officer of Sanmina Corporation.  "We generated excellent cash flow from operations for the quarter which allowed us to accelerate our strategic initiatives and execute our share repurchase program creating value for our customers and shareholders."

"Our outlook for the fiscal fourth quarter reflects stabilization in the market.  We remain confident the second half of the calendar year will continue to improve," concluded Sola.

Fourth Quarter Fiscal 2015 Outlook
The following forecast is for the fourth fiscal quarter ending October 3, 2015.  These statements are forward-looking and actual results may differ materially. 

  • Revenue between $1.55 billion to $1.65 billion
  • Non-GAAP diluted earnings per share between $0.52 to $0.58

Company Conference Call Information
Sanmina will hold a conference call regarding financial results for the third quarter of fiscal 2015 on Monday, July 20, 2015 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 63475093.

(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 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 fourth quarter fiscal 2015 outlookonly 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 energy 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 fourth quarter fiscal 2015 and expectations about improvements in the second half of the calendar 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; credit problems experienced by our customers; 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)







June 27,


September 27,







2015


2014
















(Unaudited)



ASSETS
















Current assets:







Cash and cash equivalents



$    416,471


$       466,607


Accounts receivable, net



934,152


979,475


Inventories



874,224


893,178


Prepaid expenses and other current assets


100,524


111,714



Total current assets



2,325,371


2,450,974










Property, plant and equipment, net



564,662


563,016

Other



266,812


299,099



Total assets



$ 3,156,845


$    3,313,089










LIABILITIES AND STOCKHOLDERS' EQUITY














Current liabilities:








Accounts payable



$ 1,090,171


$    1,139,845


Accrued liabilities 



115,906


110,357


Accrued payroll and related benefits


115,771


126,541


Short-term debt



8,416


157,394



Total current liabilities



1,330,264


1,534,137










Long-term liabilities:







Long-term debt



423,798


386,681


Other



143,531


145,516



Total long-term liabilities



567,329


532,197










Stockholders' equity



1,259,252


1,246,755



Total liabilities and stockholders' equity


$ 3,156,845


$    3,313,089

 

 

Sanmina Corporation

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

(GAAP)

(Unaudited)












Three Months Ended


Nine Months Ended












June 27,


June 28,


June 27,


June 28,



2015


2014


2015


2014










Net sales

$ 1,539,271


$ 1,604,727


$ 4,737,963


$ 4,528,937

Cost of sales

1,418,709


1,477,814


4,375,792


4,172,272


Gross profit

120,562


126,913


362,171


356,665










Operating expenses:









Selling, general and administrative

59,736


63,029


176,177


184,543


Research and development

8,339


7,829


23,967


24,563


Amortization of intangible assets

314


425


1,164


1,373


Restructuring costs 

7,711


2,302


12,451


8,571


Asset impairments

-


-


1,954


-


Gain on sales of long-lived assets

(2,821)


-


(3,957)


(530)


     Total operating expenses

73,279


73,585


211,756


218,520










Operating income

47,283


53,328


150,415


138,145











Interest income

273


210


827


1,190


Interest expense 

(6,017)


(8,439)


(18,651)


(23,394)


Other expense, net

(1,248)


(6,101)


(3,141)


(4,597)

Interest and other, net

(6,992)


(14,330)


(20,965)


(26,801)










Income before income taxes

40,291


38,998


129,450


111,344










Provision for income taxes 

15,816


18,277


67,571


46,682










Net income

$      24,475


$      20,721


$      61,879


$      64,662




















Basic income per share

$          0.30


$          0.25


$          0.75


$          0.78


Diluted income per share

$          0.29


$          0.24


$          0.72


$          0.75











Weighted-average shares used in computing per share amounts:









  Basic

81,700


82,467


82,357


82,988


  Diluted

85,493


86,235


86,308


86,597

 

 


Sanmina Corporation

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(Unaudited)














Three Months Ended


Nine Months Ended




June 27,


June 28,


June 27,


June 28,




2015


2014


2015


2014











GAAP Operating Income


$      47,283


$     53,328


$   150,415


$   138,145


GAAP operating margin


3.1%


3.3%


3.2%


3.1%

Adjustments










Stock compensation expense (1)


4,273


4,238


15,478


13,270


Amortization of intangible assets


774


1,074


2,694


2,799


Distressed customer charges (2)


1,700


-


4,802


383


Restructuring costs


7,711


2,302


12,451


8,571


Contingency item (3)


-


-


-


124


Gain on sales of long-lived assets


(2,552)


-


(3,748)


(530)


Asset impairments


-


-


1,954


-

Non-GAAP Operating Income


$      59,189


$     60,942


$   184,046


$   162,762


Non-GAAP operating margin


3.8%


3.8%


3.9%


3.6%





















GAAP Net Income


$      24,475


$     20,721


$     61,879


$     64,662











Adjustments:










Operating income adjustments (see above)


11,906


7,614


33,631


24,617


Loss on extinguishment of debt (4)


847


8,192


3,760


8,192


Litigation settlements (5)


-


(1,310)


(273)


(1,571)


Deferred and non-recurring tax adjustments


7,860


10,074


42,586


23,156

Non-GAAP Net Income


$      45,088


$       45,291


$   141,583


$   119,056





















GAAP Net Income Per Share:










Basic


$          0.30


$         0.25


$         0.75


$         0.78


Diluted


$          0.29


$         0.24


$         0.72


$         0.75











Non-GAAP Net Income Per Share:










Basic


$          0.55


$         0.55


$         1.72


$         1.43


Diluted


$          0.53


$         0.53


$         1.64


$         1.37











Weighted-average shares used in computing per share amounts:










Basic


81,700


82,467


82,357


82,988


Diluted


85,493


86,235


86,308


86,597













(1)

Stock compensation expense was as follows: 






Three Months Ended


Nine Months Ended




June 27,


June 28,


June 27,


June 28,




2015


2014


2015


2014








Cost of sales


$          1,412


$         1,298


$       4,479


$        3,864


Selling, general and administrative


2,810


2,916


10,872


9,369


Research and development


51


24


127


37


  Total


$          4,273


$         4,238


$     15,478


$      13,270



(2)

Relates to inventory and bad debt reserves associated with distressed customers.



(3)

Represents a non-recurring contingency that the Company ultimately resolved favorably in Q4 FY14.



(4)

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



(5)

Represents cash received in connection with certain litigation settlements.

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.

Logo - http://photos.prnewswire.com/prnh/20110707/SF30965LOGO

 

SOURCE Sanmina Corporation



RELATED LINKS

http://www.sanmina.com