EX-99.1 2 a10-8729_1ex99d1.htm EX-99.1

Exhibit 99.1

 

FOR IMMEDIATE RELEASE

 

SANMINA-SCI ANNOUNCES SECOND QUARTER FISCAL 2010 RESULTS

 

SAN JOSE, CA (April 26, 2010) - Sanmina-SCI Corporation (the “Company”/Nasdaq: SANM), a leading global Electronics Manufacturing Services (EMS) company, today reported financial results for the second fiscal quarter ended April 3, 2010.

 

Second Quarter Fiscal 2010 Highlights

 

·                  Revenue of $1.53 billion, in line with outlook of $1.45 - $1.55 billion

·                  GAAP gross margin of 7.7 percent, 30 bps Q/Q and 200 bps Y/Y improvement

·                  GAAP operating margin of 3.0 percent, 30 bps Q/Q and 410 bps Y/Y improvement

·                  Non-GAAP gross margin of 7.8 percent, 20 bps Q/Q and 190 bps Y/Y improvement

·                  Non-GAAP operating margin of 3.7 percent, 40 bps Q/Q and 270 bps Y/Y improvement

 

Q/Q — compared to the prior quarter

Y/Y — compared to the same quarter a year ago

 

Revenue for the second quarter was $1.53 billion, up 3.3 percent compared to $1.48 billion in the prior quarter ended January 2, 2010 and up 27.8 percent compared to $1.20 billion in the same period a year ago.

 

GAAP Financial Results(1)

 

GAAP net income in the second quarter was $10 million, a diluted earnings per share of $0.12, compared to a net income of $59 million, a diluted earnings per share of $0.74 in the prior quarter.  GAAP net loss for the same period a year ago was $38 million, a diluted loss per share of $0.45.

 

Non-GAAP Financial Results(1)(2)

 

Non-GAAP gross profit in the second quarter was $120 million, or 7.8 percent of revenue, up 20 basis points, compared to gross profit of $112 million, or 7.6 percent of revenue in the prior quarter.  Non-GAAP gross profit for the same period a year ago was $71 million, or 5.9 percent of revenue.

 

Non-GAAP operating income was $56 million, up 14.7 percent, compared to $49 million in the prior quarter and up 390 percent compared to $11 million in the same period a year ago.  Operating margin for the second quarter was 3.7 percent, up 40 basis points, compared to 3.3 percent in the prior quarter and a 270 basis point improvement compared to 1 percent in the second quarter fiscal 2009.

 

Non-GAAP net income in the second quarter was $24 million, a diluted earnings per share of $0.29, compared to a net income of $18 million, a diluted earnings per share of $0.23 in the prior quarter.  Non-GAAP net loss for the same period a year ago was $31 million, a diluted loss per share of $0.37.

 

 

 

Three Month Periods

 

(In millions, except per share data)

 

Q2:2010

 

Q1:2010

 

Q2:2009

 

 

 

 

 

 

 

 

 

Revenue

 

$

1,527

 

$

1,478

 

$

1,195

 

GAAP:

 

 

 

 

 

 

 

Net income (loss)

 

$

10

 

$

59

 

$

(38

)

Diluted earnings (loss) per share(1)

 

$

0.12

 

$

0.74

 

$

(0.45

)

Non-GAAP(2):

 

 

 

 

 

 

 

Gross profit

 

$

120

 

$

112

 

$

71

 

Gross margin

 

7.8

%

7.6

%

5.9

%

Operating income

 

$

56

 

$

49

 

$

11

 

Operating margin

 

3.7

%

3.3

%

1.0

%

Net income (loss)

 

$

24

 

$

18

 

$

(31

)

Diluted earnings (loss) per share(1)

 

$

0.29

 

$

0.23

 

$

(0.37

)

 

Balance Sheet Results

 

As of April 3, 2010 cash and cash equivalents amounted to $673 million, compared to $727 million for the quarter ended January 2, 2010.  Cash cycle days were 42 days and inventory turns were 7.1x for the quarter.

 



 

“This was our fourth consecutive quarter of solid financial performance and I am pleased with our progress and execution to plan.  We are confident that as demand continues to improve, our operating leverage will drive margin expansion in 2010.  We believe that our strategy to focus on higher value added services, diversified markets and innovative technologies will allow us to capitalize on opportunities with new and existing customers, positioning Sanmina-SCI extremely well for the future,” stated Jure Sola, Sanmina-SCI’s Chairman and Chief Executive Officer.

 

Third Quarter Fiscal 2010 Outlook

 

The following forecast is for the third fiscal quarter ending July 3, 2010.  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 $0.30 to $0.36

 

Sanmina-SCI Makes Strategic Move to Expand RF/Microwave and Micro/Opto-Electronic Capabilities

 

The Company has executed a definitive agreement to acquire BreconRidge Corporation, an innovative design, engineering and manufacturing services provider for RF/microwave and micro/opto-electronic products that service the networking/communications, medical, industrial, aerospace and defense markets.  As part of the transaction, Sanmina-SCI will acquire a world-class design and engineering team with expertise in advanced broadband applications (currently up to 100+ Gb/s) and wireless/radar/satellite applications, and state of the art manufacturing operations in Canada and China.

 

The agreement is subject to certain customary closing conditions and is expected to close in the next 30 days.  The purchase price will be up to $53 million, including equity and assumption of certain liabilities and is subject to post closing adjustments.  BreconRidge’s revenue run rate is approximately $45 million per quarter. The Company expects revenue to be in the range of $250 to $300 million per year over the next twelve months with the increase in technology and service offerings.  The transaction is expected to be accretive to earnings per share on a non-GAAP basis within the first year.

 

“This acquisition strengthens both our position and our customer base in RF/microwave and micro/opto-electronic technologies.  We are excited to work with BreconRidge’s great customers and look forward to continuing to provide them with enhanced design, engineering and manufacturing capabilities.  Upon completion of this transaction, Sanmina-SCI will be the leading electronics manufacturing services provider for these rapidly expanding leading-edge technologies,” stated Sola.

 


(1)Earnings Per Share Calculation

 

The Company completed a reverse split of its common stock at a ratio of one for six, effective August 14, 2009. Earnings per share data contained in this release for periods prior to such date have been calculated on a post split basis.

 

(2)Non-GAAP Financial Information

 

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:  revenue, gross profit, gross margin, operating income, operating margin, net income (loss) and earnings (loss) 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), integration costs (consisting of costs associated with the integration of acquired businesses into our operations), impairment charges for goodwill and intangible assets, amortization expense and other infrequent or unusual items (including charges for customer bankruptcy reorganizations, litigation settlements and discrete tax events), 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 from GAAP to non-GAAP results is included in the financial statements contained in this release and is also available on the Investor Relations section of our website at www.sanmina-sci.com.  Sanmina-SCI provides third quarter outlook information only on a non-GAAP basis due to the inherent uncertainties associated with forecasting the timing and amount of restructuring, impairment and other unusual and infrequent items.

 



 

Company Conference Call Information

 

Sanmina-SCI will hold a conference call regarding this announcement on Monday, April 26, 2010 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-sci.com.  Additional information in the form of a slide presentation is available by logging onto Sanmina-SCI’s website at www.sanmina-sci.com.  A replay of today’s conference call will be available for 48-hours.  The access numbers are: domestic 800-642-1687 and international 706-645-9291, access code is 68715353.

 

About Sanmina-SCI

 

Sanmina-SCI Corporation is a leading electronics contract manufacturer serving the fastest-growing segments of the global Electronics Manufacturing Services (EMS) market. Recognized as a technology leader, Sanmina-SCI provides end-to-end manufacturing solutions, delivering superior quality and support to OEMs primarily in the communications, defense and aerospace, industrial and medical instrumentation, multimedia, enterprise computing and storage, renewable energy and automotive technology sectors. Sanmina-SCI has facilities strategically located in key regions throughout the world. More information regarding the company is available at http://www.sanmina-sci.com.

 

Sanmina-SCI Safe Harbor Statement

 

Certain statements contained in this press release, including the closing date and anticipated benefits of the Company’s pending acquisition of BreconRidge and the Company’s outlook for future revenue and earnings per share and statements concerning future customer demand and growth 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 failure of future sales from BreconRidge to meet forecasts, any failure to obtain any required approvals for the closing of the BreconRidge acquisition, a return of adverse conditions in the market for the Company’s customers’ products and the global economy as a whole, which could negatively impact the Company’s revenue and the Company’s customers’ ability to pay for the Company’s products; additional customer bankruptcy filings; supply shortages, negatively impacting pricing, inventory levels and shipping schedules; the sufficiency of the Company’s cash position and other sources of liquidity to operate and expand its business; impact of the restrictions contained in the Company’s credit agreements and indentures upon the Company’s ability to operate and expand its business; competition negatively impacting the Company’s revenues and margins; any failure of the Company to effectively assimilate acquired businesses and achieve the anticipated benefits of its acquisitions; the need to adopt future restructuring plans as a result of changes in the Company’s business; and the other factors set forth in the Company’s annual report for fiscal 2009 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-SCI Contact

Paige Bombino

Director, Investor Relations

408-964-3610

 

SANMF

 



 

Schedule I

 

The tables contained above include non-GAAP measures of revenue, gross profit, gross margin, operating income, operating margin, net income and earnings per share.  Management excludes from these measures stock-based compensation, restructuring 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 and Integration Costs, which consist of severance, lease termination, exit costs and other charges primarily related to closing and consolidating manufacturing facilities and those associated with the integration of acquired businesses into our operations, 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 resulting primarily from the Company’s net book value exceeding its market capitalization due to weak macroeconomic conditions, 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 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.

 



 

Sanmina-SCI Corporation

Condensed Consolidated Balance Sheets

(In thousands)

(GAAP)

 

 

 

April 3,

 

October 3,

 

 

 

2010

 

2009

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

672,962

 

$

899,151

 

Accounts receivable, net

 

819,359

 

668,474

 

Inventories

 

815,652

 

761,391

 

Prepaid expenses and other current assets

 

80,941

 

78,128

 

Assets held for sale

 

70,610

 

68,902

 

Total current assets

 

2,459,524

 

2,476,046

 

 

 

 

 

 

 

Property, plant and equipment, net

 

539,322

 

543,497

 

Other non-current assets

 

84,882

 

104,354

 

Total assets

 

$

3,083,728

 

$

3,123,897

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

884,618

 

$

780,876

 

Accrued liabilities

 

111,554

 

140,926

 

Accrued payroll and related benefits

 

107,805

 

98,408

 

Current portion of long-term debt

 

 

175,700

 

Total current liabilities

 

1,103,977

 

1,195,910

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

Long-term debt

 

1,261,340

 

1,262,014

 

Other

 

113,953

 

146,903

 

Total long-term liabilities

 

1,375,293

 

1,408,917

 

 

 

 

 

 

 

Total stockholders’ equity

 

604,458

 

519,070

 

Total liabilities and stockholders’ equity

 

$

3,083,728

 

$

3,123,897

 

 



 

Sanmina-SCI Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(GAAP)

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

April 3,

 

March 28,

 

April 3,

 

March 28,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,527,451

 

$

1,195,107

 

$

3,005,753

 

$

2,614,371

 

Cost of sales

 

1,409,974

 

1,126,517

 

2,778,589

 

2,461,983

 

Gross profit

 

117,477

 

68,590

 

227,164

 

152,388

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

63,557

 

57,055

 

125,972

 

120,042

 

Research and development

 

3,252

 

4,720

 

6,350

 

8,912

 

Amortization of intangible assets

 

1,059

 

1,023

 

2,237

 

2,673

 

Restructuring and integration costs

 

3,871

 

15,574

 

7,209

 

24,809

 

Asset impairment

 

500

 

3,384

 

500

 

7,182

 

Total operating expenses

 

72,239

 

81,756

 

142,268

 

163,618

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

45,238

 

(13,166

)

84,896

 

(11,230

)

 

 

 

 

 

 

 

 

 

 

Interest income

 

597

 

1,829

 

978

 

5,279

 

Interest expense

 

(26,580

)

(28,112

)

(53,357

)

(57,295

)

Other income, net

 

120

 

4,923

 

39,775

 

5,476

 

Interest and other income, net

 

(25,863

)

(21,360

)

(12,604

)

(46,540

)

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

19,375

 

(34,526

)

72,292

 

(57,770

)

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

9,284

 

3,412

 

2,819

 

5,841

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

10,091

 

$

(37,938

)

$

69,473

 

$

(63,611

)

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per share

 

$

0.13

 

$

(0.45

)

$

0.88

 

$

(0.74

)

Diluted income (loss) per share

 

$

0.12

 

$

(0.45

)

$

0.85

 

$

(0.74

)

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing per share amounts:

 

 

 

 

 

 

 

 

 

Basic

 

79,001

 

83,453

 

78,808

 

85,410

 

Diluted

 

82,782

 

83,453

 

81,773

 

85,410

 

 



 

Sanmina-SCI Corporation

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

April 3,

 

January 2,

 

March 28,

 

April 3,

 

March 28,

 

 

 

2010

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Revenue

 

$

1,527,451

 

$

1,478,302

 

$

1,195,107

 

$

3,005,753

 

$

2,614,371

 

Adjustments

 

 

 

 

 

 

 

 

 

 

 

Customer bankruptcy reorganization (1)

 

 

 

 

 

5,000

 

Non-GAAP Revenue

 

$

1,527,451

 

$

1,478,302

 

$

1,195,107

 

$

3,005,753

 

$

2,619,371

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Gross Profit

 

$

117,477

 

$

109,687

 

$

68,590

 

$

227,164

 

$

152,388

 

GAAP gross margin

 

7.7

%

7.4

%

5.7

%

7.6

%

5.8

%

Adjustments

 

 

 

 

 

 

 

 

 

 

 

Stock compensation expense (2)

 

2,040

 

2,066

 

2,000

 

4,106

 

3,865

 

Amortization of intangible assets

 

 

 

 

 

233

 

Customer bankruptcy reorganization (1)

 

 

 

 

 

10,000

 

Non-GAAP Gross Profit

 

$

119,517

 

$

111,753

 

$

70,590

 

$

231,270

 

$

166,486

 

Non-GAAP gross margin

 

7.8

%

7.6

%

5.9

%

7.7

%

6.4

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income (loss)

 

$

45,238

 

$

39,658

 

$

(13,166

)

$

84,896

 

$

(11,230

)

GAAP operating margin

 

3.0

%

2.7

%

-1.1

%

2.8

%

-0.4

%

Adjustments

 

 

 

 

 

 

 

 

 

 

 

Stock compensation expense (2)

 

5,352

 

4,652

 

4,326

 

10,004

 

8,488

 

Amortization of intangible assets

 

1,059

 

1,178

 

1,023

 

2,237

 

2,906

 

Stock option investigation

 

 

 

300

 

 

450

 

Customer bankruptcy reorganization (1)

 

 

 

 

 

10,000

 

Restructuring and integration costs

 

3,871

 

3,338

 

15,574

 

7,209

 

24,809

 

Asset impairment

 

500

 

 

3,384

 

500

 

7,182

 

Non-GAAP operating income

 

$

56,020

 

$

48,826

 

$

11,441

 

$

104,846

 

$

42,605

 

Non-GAAP operating margin

 

3.7

%

3.3

%

1.0

%

3.5

%

1.6

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss)

 

$

10,091

 

$

59,382

 

$

(37,938

)

$

69,473

 

$

(63,611

)

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

Operating income adjustments (see above)

 

10,782

 

9,168

 

24,607

 

19,950

 

53,835

 

Net gain on derivative financial instruments and other (3)

 

 

 

 

 

(4,993

)

Impairment of long-term investment

 

 

 

1,000

 

 

1,000

 

Gain on sale of business

 

 

(3,710

)

 

(3,710

)

 

(Gain) / loss on repurchase of debt (4)

 

 

828

 

(13,490

)

828

 

(13,490

)

Gain from litigation settlement (5)

 

 

(35,556

)

 

(35,556

)

 

Nonrecurring tax items

 

3,164

 

(11,644

)

(5,128

)

(8,480

)

(4,458

)

Non-GAAP net income (loss)

 

$

24,037

 

$

18,468

 

$

(30,949

)

$

42,505

 

$

(31,717

)

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Basic Income (Loss) Per Share:

 

$

0.30

 

$

0.23

 

$

(0.37

)

$

0.54

 

$

(0.37

)

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Diluted Income (Loss) Per Share:

 

$

0.29

 

$

0.23

 

$

(0.37

)

$

0.52

 

$

(0.37

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing Non-GAAP per share amounts:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

79,001

 

78,615

 

83,453

 

78,808

 

85,410

 

Diluted

 

82,782

 

80,575

 

83,453

 

81,773

 

85,410

 

 


(1)   Relates to revenue reversal and inventory reserves associated with a customer’s bankruptcy reorganization announcement.

 

(2)   Stock compensation expense was as follows:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

April 3,

 

January 2,

 

March 28,

 

April 3,

 

March 28,

 

 

 

2010

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

$

2,040

 

$

2,066

 

$

2,000

 

$

4,106

 

$

3,865

 

Selling, general and administrative

 

3,208

 

2,487

 

2,237

 

5,695

 

4,449

 

Research and development

 

104

 

99

 

89

 

203

 

174

 

Stock compensation expense - total company

 

$

5,352

 

$

4,652

 

$

4,326

 

$

10,004

 

$

8,488

 

 

(3)          Relates primarily to a gain on interest rate swaps not accounted for as hedging instruments during a portion of Q1 FY09 due to termination of a swap.

 

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

 

(5)   Represents cash received in connection with a litigation settlement.