Sanmina-SCI Reports Results for the Third Quarter Fiscal 2011

Sanmina-SCI Corporation

Condensed Consolidated Balance Sheets

(In thousands)

(GAAP)

July 2,

October 2,

2011

2010

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$    582,816

$    592,812

Accounts receivable, net

1,042,092

1,018,612

Inventories

885,502

844,347

Prepaid expenses and other current assets

78,251

81,191

Assets held for sale

46,954

53,047

Total current assets

2,635,615

2,590,009

Property, plant and equipment, net

562,766

570,258

Other non-current assets

118,247

141,529

Total assets

$ 3,316,628

$ 3,301,796

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$    958,075

$    923,038

Accrued liabilities

134,483

140,371

Accrued payroll and related benefits

125,636

122,934

Short-term debt

60,400

65,000

Total current liabilities

1,278,594

1,251,343

Long-term liabilities:

Long-term debt

1,154,129

1,240,666

Other

136,851

148,186

Total long-term liabilities

1,290,980

1,388,852

Total stockholders' equity

747,054

661,601

Total liabilities and stockholders' equity

$ 3,316,628

$ 3,301,796

Sanmina-SCI Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(GAAP)

(Unaudited)

Three Months Ended

Nine Months Ended

July 2,

July 3,

July 2,

July 3,

2011

2010

2011

2010

Net sales

$ 1,674,200

$ 1,625,170

$ 4,905,709

$ 4,630,923

Cost of sales

1,542,599

1,501,055

4,529,230

4,279,644

Gross profit

131,601

124,115

376,479

351,279

Operating expenses:

Selling, general and administrative

67,043

65,392

187,726

191,364

Research and development

5,797

3,057

14,877

9,407

Amortization of intangible assets

958

926

2,875

3,163

Restructuring and integration costs

6,336

6,196

15,885

13,405

Asset impairment

-

600

85

1,100

Gain on sales of long-lived assets

(1,440)

(13,796)

(3,465)

(13,796)

    Total operating expenses

78,694

62,375

217,983

204,643

Operating income

52,907

61,740

158,496

146,636

Interest income

356

558

1,490

1,536

Interest expense

(24,843)

(27,119)

(77,773)

(80,476)

Other income (expense), net

(17,013)

(2,046)

(13,735)

37,729

Interest and other, net

(41,500)

(28,607)

(90,018)

(41,211)

Income before income taxes

11,407

33,133

68,478

105,425

Provision for income taxes

4,248

11,570

19,895

14,389

Net income

$        7,159

$      21,563

$      48,583

$      91,036

Basic income per share

$          0.09

$          0.27

$          0.61

$          1.15

Diluted income per share

$          0.09

$          0.26

$          0.58

$          1.10

Weighted-average shares used in computing

per share amounts:

 Basic

80,579

79,544

80,223

79,040

 Diluted

83,141

83,693

83,275

82,404

Sanmina-SCI Corporation

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

July 2,

April 2,

July 3,

July 2,

July 3,

2011

2011

2010

2011

2010

GAAP Revenue

$ 1,674,200

$ 1,569,058

$ 1,625,170

$ 4,905,709

$ 4,630,923

Adjustments

Customer bankruptcy reorganization (1)

-

-

570

-

570

Non-GAAP Revenue

$ 1,674,200

$ 1,569,058

$ 1,625,740

$ 4,905,709

$ 4,631,493

GAAP Gross Profit

$    131,601

$    116,831

$    124,115

$    376,479

$    351,279

GAAP gross margin

7.9%

7.4%

7.6%

7.7%

7.6%

Adjustments

Stock compensation expense (2)

1,773

1,013

487

3,825

4,593

Amortization of intangible assets

157

157

-

471

-

Contingency item expected to reverse in a future period (3)

-

-

3,039

-

3,039

Customer bankruptcy reorganization (1)

-

(759)

1,329

(759)

1,329

Non-GAAP Gross Profit

$    133,531

$    117,242

$    128,970

$    380,016

$    360,240

Non-GAAP gross margin

8.0%

7.5%

7.9%

7.7%

7.8%

GAAP operating income

$      52,907

$      44,634

$      61,740

$    158,496

$    146,636

GAAP operating margin

3.2%

2.8%

3.8%

3.2%

3.2%

Adjustments

Stock compensation expense (2)

6,057

4,237

2,367

13,981

12,371

Contingency item expected to reverse in a future period (3)

-

-

3,039

-

3,039

Amortization of intangible assets

1,115

1,116

926

3,346

3,163

Customer bankruptcy reorganization (1)

-

(759)

1,937

(759)

1,937

Restructuring, acquisition and integration costs

6,336

4,510

7,390

15,885

14,599

Gain on sales of long-lived assets

(1,460)

(398)

(13,796)

(3,485)

(13,796)

Asset impairment

-

-

600

85

1,100

Non-GAAP operating income

$      64,955

$      53,340

$      64,203

$    187,549

$    169,049

Non-GAAP operating margin

3.9%

3.4%

3.9%

3.8%

3.6%

GAAP net income

$        7,159

$      13,065

$      21,563

$      48,583

$      91,036

Adjustments:

Operating income adjustments (see above)

12,048

8,706

2,463

29,053

22,413

Gain on sale of business

-

-

-

-

(3,710)

Loss on repurchase of debt (4)

18,344

-

369

18,344

1,197

Gain from litigation settlement (5)

-

-

-

-

(35,556)

Nonrecurring tax items

(2,425)

3,157

2,222

1,355

(6,258)

Non-GAAP net income

$      35,126

$      24,928

$      26,617

$      97,335

$      69,122

GAAP Income Per Share:

Basic

$          0.09

$          0.16

$          0.27

$          0.61

$          1.15

Diluted

$          0.09

$          0.16

$          0.26

$          0.58

$          1.10

Non-GAAP Income Per Share:

Basic

$          0.44

$          0.31

$          0.33

$          1.21

$          0.87

Diluted

$          0.42

$          0.30

$          0.32

$          1.17

$          0.84

Weighted-average shares used in computing per share amounts:

Basic

80,579

80,242

79,544

80,223

79,040

Diluted

83,141

83,940

83,693

83,275

82,404

(1)

Relates to revenue reversal and inventory and bad debt reserves associated with customer bankruptcy reorganization announcements.

(2)

Stock compensation expense was as follows:

Three Months Ended

Nine Months Ended

July 2,

April 2,

July 3,

July 2,

July 3,

2011

2011

2010

2011

2010

Cost of sales

$        1,773

$        1,013

$           487

$        3,825

$        4,593

Selling, general and administrative

4,209

3,184

2,215

9,998

7,910

Research and development

75

40

(335)

158

(132)

Stock compensation expense - total company

$        6,057

$        4,237

$        2,367

$      13,981

$      12,371

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

(5)

Represents cash received in connection with a litigation settlement.

Schedule I

The commentary above includes non-GAAP measures of gross profit, gross margin, 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 customer bankruptcy 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 for customer bankruptcy reorganizations, 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 and generally 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.