Sanmina Reports Third Quarter Financial Results
SAN JOSE, Calif., July 29, 2020 /PRNewswire/ -- Sanmina Corporation ("Sanmina" or the "Company") (NASDAQ: SANM), a leading integrated manufacturing solutions company, today reported financial results for the third quarter fiscal 2020 ended June 27, 2020.
"I am pleased to report that revenue grew 4% over the prior quarter and that we exceeded our expectations for revenue, margin and earnings per share, despite the continued challenges associated with COVID-19 and the macroeconomic environment," stated Hartmut Liebel, Chief Executive Officer. "I am encouraged by the actions taken by our leadership team and employees to control expenses while continuing to meet our commitments and the demands of our customers."
(In
thousands,
except
per share
data)
Q3:FY20
Q2:FY20
Q3:FY19
Revenue $1,654,691 $1,590,550 $2,026,995
GAAP:
Operating
income $64,103 $24,369 $67,374
Operating
margin 3.9% 1.5% 3.3%
Net income $44,880 $4,882 $42,921
Diluted
earnings
per share $0.64 $0.07 $0.60
Non-
GAAP:
(1)
Operating
income $75,831 $47,180 $81,087
Operating
margin 4.6% 3.0% 4.0%
Net income $59,995 $22,779 $59.173
Diluted
earnings
per share $0.86 $0.32 $0.82
---
(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 other
unusual or infrequent items (e.g.
charges or benefits associated with
distressed customers, litigation
settlements or recoveries, gains and
losses on sales of assets and
redemptions of debt, deferred tax
and discrete tax items).
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
financial information 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
-- Ending cash and cash equivalents: $1.1 billion, including $650 million
of borrowings on our cash flow revolver as of the end of the quarter
-- Cash flow from operations: $64 million
-- Free cash flow: $54 million
-- Repurchased 667,000 shares for approximately $17.5 million
Fourth Quarter Fiscal 2020 Outlook
The following outlook for the fourth fiscal quarter ending October 3, 2020 takes into account any additional revenue and expenses associated with a 14 week quarter. These statements are forward-looking and actual results may differ materially.
-- Revenue between $1.73 billion to $1.83 billion
-- GAAP diluted earnings per share between $0.62 to $0.72
-- Non-GAAP diluted earnings per share between $0.73 to $0.83
The outlook above constitutes 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, mostly notably the ongoing impacts of the COVID-19 pandemic, which have reduced demand from our customers, caused supply chain interruptions and created health risks for our employees and which could result in restrictions on where we can build products, the levels of staffing at our plants and the types of products we can build for our customers. Other factors that could cause our results to differ from our outlook include 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.
Company Conference Call Information
Sanmina will hold a conference call to review its financial results for the third quarter on Wednesday, July 29, 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 7076214.
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 Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(GAAP)
June 27,
September 28,
2020 2019
(Unaudited)
ASSETS
---
Current assets:
Cash and cash
equivalents $1,117,217 $454,741
Short-term
investments 30,000 -
Accounts
receivable, net 1,042,011 1,128,379
Contract assets 381,249 396,300
Inventories 883,670 900,557
Prepaid expenses
and other current
assets 45,965 40,952
Total
current
assets 3,500,112 2,920,929
Property, plant and equipment, net 574,799 630,647
Deferred tax assets 277,285 279,803
Other 122,503 74,134
Total
assets $4,474,699 $3,905,513
LIABILITIES AND STOCKHOLDERS' EQUITY
---
Current liabilities:
Accounts payable $1,252,116 $1,336,914
Accrued
liabilities 175,793 180,107
Accrued payroll and
related benefits 111,699 127,647
Short-term debt,
including current
portion of long-
term debt 673,437 38,354
Total
current
liabilities 2,213,045 1,683,022
Long-term liabilities:
Long-term debt 333,675 346,971
Other 274,497 232,947
Total
long-
term
liabilities 608,172 579,918
Stockholders' equity 1,653,482 1,642,573
Total
liabilities
and
stockholders'
equity $4,474,699 $3,905,513
Sanmina Corporation
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(GAAP)
(Unaudited)
Three Months Ended Nine Months Ended
June 27,
June 29,
June 27,
June 29,
2020 2019 2020 2019
Net sales $1,654,691 $2,026,995 $5,085,412 $6,341,652
Cost of sales 1,523,218 1,879,200 4,711,636 5,891,418
---
Gross profit 131,473 147,795 373,776 450,234
Operating expenses:
Selling, general and
administrative 59,314 66,768 184,722 193,982
Research and development 5,181 7,272 16,148 21,308
Restructuring and other costs 2,875 6,381 27,253 11,912
Total operating expenses 67,370 80,421 228,123 227,202
Operating income 64,103 67,374 145,653 223,032
Interest income 764 330 1,492 888
Interest expense (8,460) (7,599) (20,377) (24,342)
Other income (expense), net 3,200 (1,480) (3,142) (8,365)
Interest and other, net (4,496) (8,749) (22,027) (31,819)
---
Income before income taxes 59,607 58,625 123,626 191,213
Provision for income taxes 14,727 15,704 35,519 69,455
---
Net income $44,880 $42,921 $88,107 $121,758
Basic income per share $0.66 $0.62 $1.26 $1.77
Diluted income per share $0.64 $0.60 $1.23 $1.70
Weighted-average shares used in
computing per share amounts:
Basic 68,216 69,499 69,657 68,872
Diluted 69,645 72,007 71,504 71,460
Sanmina Corporation
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
June 27,
March 28,
June 29,
2020 2020 2019
GAAP Operating Income $64,103 $24,369 $67,374
GAAP operating margin 3.9% 1.5% 3.3%
Adjustments:
Stock compensation expense (1) 7,354 7,783 8,136
Amortization of intangible assets 63 63 190
Distressed customer charges (2) 1,499 (804)
Restructuring costs 2,812 8,356 6,191
Goodwill and other asset impairments 6,609 -
Non-GAAP Operating Income $75,831 $47,180 $81,087
Non-GAAP operating margin 4.6% 3.0% 4.0%
GAAP Net Income $44,880 $4,882 $42,921
Adjustments:
Operating income adjustments (see above) 11,728 22,811 13,713
Litigation settlements (3) (259) (830)
Adjustments for taxes (4) 3,387 (4,655) 3,369
Non-GAAP Net Income $59,995 $22,779 $59,173
GAAP Net Income Per Share:
Basic $0.66 $0.07 $0.62
Diluted $0.64 $0.07 $0.60
Non-GAAP Net Income Per Share:
Basic $0.88 $0.32 $0.85
Diluted $0.86 $0.32 $0.82
Weighted-average shares used in computing per share amounts:
Basic 68,216 70,584 69,499
Diluted 69,645 72,245 72,007
(1)
Stock compensation expense was as follows:
Cost of sales $2,772 $2,582 $2,729
Selling, general and administrative 4,496 5,127 5,328
Research and development 86 74 79
Total $7,354 $7,783 $8,136
(2) Relates to accounts receivable and inventory write-downs (recoveries) associated
with distressed customers.
(3) Represents cash received in connection with certain litigation
settlements.
(4)
GAAP provision for income taxes $14,727 $6,205 $15,704
Adjustments:
Tax impact of operating income adjustments 602 222 263
Discrete tax items 3,152 3,244 2,240
Deferred tax adjustments (7,141) 1,189 (5,872)
Subtotal - adjustments for taxes (3,387) 4,655 (3,369)
Non-GAAP provision for income taxes $11,340 $10,860 $12,335
Q4 FY20 Earnings Per Share Outlook*: Q4 FY20 EPS Range
Low
High
GAAP diluted earnings per share $0.62 $0.72
Stock compensation expense $0.11 $0.11
Non-GAAP diluted earnings per share $0.73 $0.83
* Due to uncertainty regarding the timing of recognition of restructuring charges, impairment charges and charges for other unusual or infrequent items, if any, that could be incurred during the fourth
quarter, an estimate of such charges is not included in the outlook for Q4 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 unusual or infrequent items, as adjusted for taxes, as more fully described below.
Management excludes these items principally because such charges or benefits 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 the 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 our ongoing, core business. The material limitations to management's approach include the fact that the charges, benefits and expenses excluded are nonetheless charges, benefits and expenses 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 to GAAP results 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 awards and may use different 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 costs, 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 and exit activities 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 or benefits 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 Unusual or Infrequent Items, such as charges or benefits associated with distressed customers, litigation settlements or recoveries, gains and losses on sales of assets and redemptions of debt, deferred tax and discrete tax items, are excluded because such items are typically non-recurring, difficult to predict or not directly related to the Company's ongoing or core operations and are therefore excluded by management in assessing the current operating performance of the Company and forecasting earnings trends. However, items excluded by the Company may be different from those excluded by the Company's competitors. In addition, these items may 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 exclude from 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 in which 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
