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Sanmina Reports Third Quarter Fiscal 2018 Results

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Sanmina Reports Third Quarter Fiscal 2018 Results

PR Newswire

SAN JOSE, Calif., July 30, 2018 /PRNewswire/ -- Sanmina Corporation ("Sanmina" or the "Company") (NASDAQ:SANM), a leading integrated manufacturing solutions company, today reported financial results for the third fiscal quarter ended June 30, 2018.

Third Quarter Fiscal 2018 Summary

  • Revenue of $1.81 billion
  • GAAP operating margin of 2.6 percent
  • GAAP diluted earnings per share of $0.47
  • Non-GAAP(1) operating margin of 3.0 percent
  • Non-GAAP(1) diluted earnings per share of $0.55

Revenue for the third quarter was $1.81 billion, compared to $1.68 billion in the prior quarter and $1.71 billion for the same period of fiscal 2017.  

GAAP operating income in the third quarter was $47.1 million or 2.6 percent of revenue, compared to $66.6 million or 3.9 percent of revenue for the third quarter fiscal 2017.  GAAP net income in the third quarter was $34.0 million, compared to GAAP net income of $36.4 million for the same period a year ago.  GAAP diluted earnings per share was $0.47 for the third quarter fiscal 2018 and third quarter of fiscal 2017.

Non-GAAP operating income in the third quarter was $54.5 million or 3.0 percent of revenue, compared to $71.4 million or 4.2 percent of revenue in the third quarter fiscal 2017.  Non-GAAP net income in the third quarter was $39.9 million, compared to $58.0 million in the same period a year ago.  Non-GAAP diluted earnings per share for the quarter was $0.55, compared to $0.74 for the same period a year ago.

"We achieved a significant milestone in our third quarter with revenue of $1.81 billion, the highest quarterly revenue since 2008 when the company refined its strategy to focus on our customers' mission critical products, services and supply chain needs," stated Bob Eulau, Chief Executive Officer of Sanmina Corporation. "Revenue was up 8.2 percent sequentially and 6 percent year over year driven by new program ramps and solid demand across all of our end-market segments.  Despite strong revenue, profitability was negatively impacted by unfavorable costs and inefficiencies associated with the ongoing supply constrained environment."

"As we look to the fourth quarter, I am confident in our team's ability to grow revenue on a sequential and year over year basis and I expect margins to improve as we reduce our cost inefficiencies.  Our pipeline continues to be strong and we are optimistic about closing fiscal 2018 on a strong note."

 Balance Sheet Summary

  • Ending cash and cash equivalents were $404.8 million
  • Cash flow from operations was $61.8 million
  • Inventory turns were 5.9x
  • Cash cycle days were 48.5 days

Fourth Quarter Fiscal 2018 Outlook
The following forecast is for the fourth fiscal quarter ending September 29, 2018.  These statements are forward-looking and actual results may differ materially. 

  • Revenue between $1.825 billion to $1.875 billion
  • GAAP diluted earnings per share between $0.50 to $0.56, including stock-based compensation expense of $0.11 and amortization of intangible assets of $0.02
  • Non-GAAP diluted earnings per share between $0.63 to $0.69

Company Conference Call Information
Sanmina will hold a conference call to review its financial results for the third quarter on Monday, July 30, 2018 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 1879359.

(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, 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.   

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 and expected improvements in fourth quarter fiscal 2018 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)





June 30,


September 30,





2018


2017












(Unaudited)



ASSETS












Current assets:






Cash and cash equivalents


$    404,777


$       406,661


Accounts receivable, net


1,153,930


1,110,334


Inventories


1,187,006


1,051,669


Prepaid expenses and other current assets


48,279


47,586



Total current assets


2,793,992


2,616,250








Property, plant and equipment, net


635,733


640,275

Deferred tax assets


345,780


476,554

Other



117,023


114,284



Total assets


$ 3,892,528


$    3,847,363








LIABILITIES AND STOCKHOLDERS' EQUITY












Current liabilities:






Accounts payable


$ 1,348,917


$    1,280,106


Accrued liabilities 


145,954


116,582


Accrued payroll and related benefits


109,155


130,939


Short-term debt


236,280


88,416


Current portion of long-term debt


375,000


-



Total current liabilities


2,215,306


1,616,043








Long-term liabilities:






Long-term debt


14,562


391,447


Other


185,904


192,189



Total long-term liabilities


200,466


583,636








Stockholders' equity


1,476,756


1,647,684



Total liabilities and stockholders' equity


$ 3,892,528


$    3,847,363















 

Sanmina Corporation

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

(GAAP)

(Unaudited)












Three Months Ended


Nine Months Ended












June 30,


July 1,


June 30,


July 1,



2018


2017


2018


2017










Net sales

$ 1,813,366


$ 1,711,377


$ 5,233,795


$ 5,113,616

Cost of sales

1,694,830


1,580,689


4,891,095


4,717,556


Gross profit

118,536


130,688


342,700


396,060










Operating expenses:









Selling, general and administrative

61,421


58,708


190,408


186,236


Research and development

8,144


8,394


23,980


25,002


Amortization of intangible assets

890


918


2,718


2,754


Restructuring costs 

1,021


(3,908)


15,972


121


Gain on sales of long-lived assets

-


-


-


(1,451)


     Total operating expenses

71,476


64,112


233,078


212,662










Operating income

47,060


66,576


109,622


183,398











Interest income

492


219


1,064


658


Interest expense 

(7,284)


(5,503)


(20,324)


(16,256)


Other income, net

1,000


952


3,747


6,021

Interest and other, net

(5,792)


(4,332)


(15,513)


(9,577)










Income before income taxes

41,268


62,244


94,109


173,821










Provision for income taxes 

7,305


25,840


190,424


60,836










Net income (loss)

$      33,963


$      36,404


$    (96,315)


$    112,985




















Basic income (loss) per share

$          0.49


$          0.48


$        (1.37)


$          1.52


Diluted income (loss) per share

$          0.47


$          0.47


$        (1.37)


$          1.45











Weighted-average shares used in computing 









per share amounts:









  Basic

68,907


75,332


70,366


74,548


  Diluted

72,053


78,241


70,366


77,917

 

Sanmina Corporation

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(Unaudited)










Three Months Ended




June 30,


July 1,




2018


2017







GAAP Operating Income


$      47,060


$      66,576


GAAP operating margin


2.6%


3.9%

Adjustments:






Stock compensation expense (1)


9,761


7,289


Amortization of intangible assets


1,792


1,820


Reversal of contingent consideration accrual (2)


(4,812)


-


Distressed customer charges (3)


(357)


(400)


Restructuring costs


1,021


(3,908)

Non-GAAP Operating Income


$      54,465


$      71,377


Non-GAAP operating margin


3.0%


4.2%













GAAP Net Income


$      33,963


$      36,404







Adjustments:






Operating income adjustments (see above)


7,405


4,801


Adjustments for taxes (4)


(1,456)


16,805

Non-GAAP Net Income


$      39,912


$      58,010













GAAP Net Income Per Share:






Basic


$          0.49


$          0.48


Diluted


$          0.47


$          0.47







Non-GAAP Net Income Per Share:






Basic


$          0.58


$          0.77


Diluted


$          0.55


$          0.74







Weighted-average shares used in computing per share amounts:






Basic


68,907


75,332


Diluted


72,053


78,241



















(1)

Stock compensation expense was as follows: 












Cost of sales


$        2,055


$        1,880


Selling, general and administrative


7,490


5,276


Research and development


216


133


  Total


$        9,761


$        7,289







(2)

Represents a reduction in an accrual for contingent consideration related to an acquisiton completed in a previous period.







(3)

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







(4)

GAAP provision for income taxes


$         7,305


$       25,840








Adjustments:






  Tax impact of operating income adjustments


118


206


  Discrete tax items


4,905


(1,089)


  Other deferred tax adjustments


(3,567)


(15,922)








Subtotal - adjustments for taxes


1,456


(16,805)








Non-GAAP provision for income taxes


$         8,761


$         9,035

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 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 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 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

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