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Sanmina Reports First Quarter Financial Results

January 27, 2020 GMT

SAN JOSE, Calif., Jan. 27, 2020 /PRNewswire/ -- Sanmina Corporation (“Sanmina” or the “Company”) (NASDAQ: SANM), a leading integrated manufacturing solutions company, today reported financial results for the first quarter fiscal 2020 ended December 28, 2019.

“We are pleased with our results for the first quarter. Revenue and non-GAAP earnings per share exceeded the high-end of our outlook. Our focus on operational execution and financial discipline is evident in our results,” stated Hartmut Liebel, Chief Executive Officer. “We remain focused on driving profitable revenue growth, lean, high-performance manufacturing processes and cash generation.”

(In thousands, except per share data)

Q1:FY20

Q4:FY19

Q1:FY19

Revenue

$1,840,171

$1,892,207

$2,188,018

GAAP:




Operating income

$57,181

$63,085

$77,543

Operating margin

3.1%

3.3%

3.5%

Net income

$38,345

$19,757

$37,952

Diluted earnings per share

$0.53

$0.27

$0.54

Non-GAAP:(1)




Operating income

$73,437

$79,627

$85,790

Operating margin

4.0%

4.2%

3.9%

Net income

$57,426

$60,611

$59,168

Diluted earnings per share

$0.79

$0.84

$0.83


(1)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, all 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 furnished with this release.

Balance Sheet and Cash Flow

Second Quarter Fiscal 2020 Outlook
The following outlook is for the second fiscal quarter ended March 28, 2020. The anticipated sequential revenue decline in the second fiscal quarter is primarily the result of seasonality. These statements are forward-looking and actual results may differ materially.

Company Conference Call Information
Sanmina will hold a conference call to review its financial results for the first quarter on Monday, January 27, 2020 at 5:00 p.m. ET (2:00 p.m. PT). The access numbers are: domestic 866-891-4420 and international 201-383-2868. 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 2664629.

About Sanmina
Sanmina Corporation, a Fortune 500 company, 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, cloud solutions, industrial, defense, medical 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 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; the amount of restructuring charges relating to the Company-wide right-sizing plan actually recorded in the second quarter; 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 28,


September 28,




2019


2019










(Unaudited)

ASSETS











Current assets:





Cash and cash equivalents

$ 430,564


$ 454,741


Accounts receivable, net

1,063,922


1,128,379


Contract assets

421,860


396,300


Inventories

843,764


900,557


Prepaid expenses and other current assets

45,131


40,952



Total current assets

2,805,241


2,920,929







Property, plant and equipment, net

612,214


630,647

Deferred tax assets

276,820


279,803

Other

135,460


74,134



Total assets

$ 3,829,735


$ 3,905,513







LIABILITIES AND STOCKHOLDERS' EQUITY










Current liabilities:





Accounts payable

$ 1,180,179


$ 1,336,914


Accrued liabilities

204,749


180,107


Accrued payroll and related benefits

106,476


127,647


Short-term debt, including current portion of long-term debt

38,728


38,354



Total current liabilities

1,530,132


1,683,022







Long-term liabilities:





Long-term debt

342,537


346,971


Other

277,681


232,947



Total long-term liabilities

620,218


579,918







Stockholders' equity

1,679,385


1,642,573



Total liabilities and stockholders' equity

$ 3,829,735


$ 3,905,513







Sanmina Corporation

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

(GAAP)

(Unaudited)








Three Months Ended








Dec. 28,


Dec. 29,



2019


2018






Net sales

$ 1,840,171


$ 2,188,018

Cost of sales

1,705,289


2,038,681


Gross profit

134,882


149,337






Operating expenses:





Selling, general and administrative

63,151


63,028


Research and development

5,200


6,437


Restructuring and other costs

9,350


2,329


Total operating expenses

77,701


71,794






Operating income

57,181


77,543







Interest income

310


194


Interest expense

(5,877)


(8,271)


Other income (expense), net

1,318


(5,994)

Interest and other, net

(4,249)


(14,071)






Income before income taxes

52,932


63,472






Provision for income taxes

14,587


25,520






Net income

$ 38,345


$ 37,952












Basic income per share

$ 0.55


$ 0.56


Diluted income per share

$ 0.53


$ 0.54







Weighted-average shares used in computing per share amounts:





Basic

70,178


68,303


Diluted

72,598


70,901

Sanmina Corporation

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(Unaudited)












Three Months Ended




Dec. 28,


Sept. 28,


Dec. 29,




2019


2019


2018









GAAP Operating Income


$ 57,181


$ 63,085


$ 77,543


GAAP operating margin


3.1%


3.3%


3.5%

Adjustments:








Stock compensation expense (1)


6,906


10,266


5,816


Amortization of intangible assets


190


190


636


Distressed customer charges (2)


-


(49)


(344)


Restructuring costs


9,160


2,411


2,139


Goodwill and other asset impairments


-


3,724


-

Non-GAAP Operating Income


$ 73,437


$ 79,627


$ 85,790


Non-GAAP operating margin


4.0%


4.2%


3.9%

















GAAP Net Income


$ 38,345


$ 19,757


$ 37,952









Adjustments:








Operating income adjustments (see above)


16,256


16,542


8,247


Adjustments for taxes (3)


2,825


24,312


12,969

Non-GAAP Net Income


$ 57,426


$ 60,611


$ 59,168

















GAAP Net Income Per Share:








Basic


$ 0.55


$ 0.28


$ 0.56


Diluted


$ 0.53


$ 0.27


$ 0.54









Non-GAAP Net Income Per Share:








Basic


$ 0.82


$ 0.87


$ 0.87


Diluted


$ 0.79


$ 0.84


$ 0.83









Weighted-average shares used in computing per share amounts:








Basic


70,178


69,898


68,303


Diluted


72,598


72,294


70,901

















(1)

Stock compensation expense was as follows:
















Cost of sales


$ 2,912


$ 2,711


$ 1,735


Selling, general and administrative


3,925


7,550


3,990


Research and development


69


5


91


Total


$ 6,906


$ 10,266


$ 5,816









(2)

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









(3)

GAAP provision for income taxes


$ 14,587


$ 34,649


$ 25,520










Adjustments:








Tax impact of operating income adjustments


391


337


168


Discrete tax items


(2,526)


(3,983)


2,127


Deferred tax adjustments


(690)


(20,666)


(15,264)










Subtotal - adjustments for taxes


(2,825)


(24,312)


(12,969)










Non-GAAP provision for income taxes


$ 11,762


$ 10,337


$ 12,551









Q2 FY20 Earnings Per Share Outlook*:


Q2 FY20 EPS Range






Low


High












GAAP diluted earnings per share


$ 0.53


$ 0.63




Stock compensation expense


$ 0.12


$ 0.12




Non-GAAP diluted earnings per share


$ 0.65


$ 0.75











Q1 FY20 Earnings Per Share Outlook*:


Q1 FY20 EPS Range






Low


High












GAAP diluted earnings per share


$ 0.52


$ 0.62




Stock compensation expense


$ 0.13


$ 0.13




Non-GAAP diluted earnings per share


$ 0.65


$ 0.75











* Due to uncertainty regarding the timing of recognition of restructuring charges that will be incurred during the first half of fiscal 2020 in connection with the Company's rightsizing plan, an estimate of restructuring charges is not included in the outlook for Q1 FY20 or Q2 FY20 GAAP EPS.









Schedule 1

The commentary and financial information above includes non-GAAP measures of operating income, operating margin, net income and diluted 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