Sanmina-SCI Announces First Quarter Fiscal 2011 Results

SAN JOSE, Calif., Jan. 24, 2011 /PRNewswire/ -- Sanmina-SCI Corporation ("Sanmina-SCI" or the "Company") (Nasdaq: SANM), a leading global Electronics Manufacturing Services (EMS) company, today reported financial results for the first fiscal quarter ended January 1, 2011.

First Quarter Fiscal 2011 Highlights

• Revenue of $1.66 billion
• Non-GAAP operating margin of 4.2 percent
• Non-GAAP diluted earnings per share of $0.45
• GAAP operating margin of 3.7 percent
• GAAP diluted earnings per share of $0.34

Revenue for the first quarter increased 12.5 percent to $1.66 billion, compared to $1.48 billion for the same period of fiscal 2010. 

GAAP Financial Results

GAAP net income in the first quarter was $28 million, a diluted earnings per share of $0.34, compared to $59 million, a diluted earnings per share of $0.74 for the same period of fiscal 2010. GAAP net income in the first quarter of fiscal 2010 included a one-time benefit of $36 million, or $0.44 diluted earnings per share related to a litigation settlement.  

Non-GAAP Financial Results(1)

Non-GAAP gross profit in the first quarter was $129 million, or 7.8 percent of revenue, compared to $112 million, or 7.6 percent in the same period a year ago.  

Non-GAAP operating income in the first quarter was $69 million, or 4.2 percent of revenue, compared to $49 million, or 3.3 percent in the first quarter fiscal 2010.  

Non-GAAP net income in the first quarter was $37 million, a diluted earnings per share of $0.45, compared $18 million, a diluted earnings per share of $0.23 for the same period of fiscal 2010.  

		Three Month Periods
(In millions, except per share and margin data)		Q1:2011	Q4:2010	Q1:2010
GAAP(2):
Revenue		$1,662	$1,688	$1,478
Net income		$28	$31	$59
Diluted earnings per share		$0.34	$0.38	$0.74
Non-GAAP(1):
Revenue		$1,662	$1,687	$1,478
Gross profit		$129	$132	$112
Gross margin		7.8%	7.8%	7.6%
Operating income		$69	$69	$49
Operating margin		4.2%	4.1%	3.3%
Net income		$37	$38	$18
Diluted earnings per share		$0.45	$0.46	$0.23

Balance Sheet Results

As of January 1, 2011, cash and cash equivalents amounted to $549 million.  Cash cycle days were 52 days and inventory turns were 7.3x for the quarter.  

"Demand for the first quarter was in line with expectations and our second quarter outlook supports our view of a flat first half of fiscal 2011.  We remain encouraged by our customers' forecasts, increased market demand and new program ramps that will drive revenue growth in the second half of the fiscal year and should allow us to achieve our operating margin and EPS goals for 2011," stated Jure Sola, Sanmina-SCI's Chairman and Chief Executive Officer.  

Second Quarter Fiscal 2011 Outlook

The following forecast is for the second fiscal quarter ending March 2, 2011.  These statements are forward-looking and actual results may differ materially.  

• Revenue between $1.62 billion to $1.67 billion
• Non-GAAP diluted earnings per share between $0.40 to $0.43

(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:  revenue, gross profit, gross margin, operating income, operating margin, net income and 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 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 second quarter outlook information only on a non-GAAP basis due to the inherent uncertainties associated with forecasting the timing and amount of acquisitions, restructuring, impairment and other unusual and infrequent items.

(2)GAAP net income in the first quarter of fiscal 2010 included a one-time benefit of $36 million, or $0.44 diluted earnings per share related to a litigation settlement.

Company Conference Call Information

Sanmina-SCI will hold a conference call regarding this announcement on Monday, January 24, 2011 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 37310920.

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 and delivers superior quality and support to OEMs primarily in the communications, defense and aerospace, industrial and medical instrumentation, multimedia, enterprise computing and storage, clean-tech 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 Company's outlook for future revenue, operating margin and earnings per share, 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 a deterioration in the markets for the Company's customers' products and a resulting decrease in the Company's customers' ability to pay for the Company's products and which therefore could reduce the Company's revenue; customer bankruptcy filings, which could cause the Company to record charges to its earnings; 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, which would increase the Company's costs and decrease its net income; 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.

SANMF

Sanmina-SCI Corporation
Condensed Consolidated Balance Sheets
(In thousands)
(GAAP)
			January 1,		October 2,
			2011		2010
			(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents		$    548,519		$    592,812
	Accounts receivable, net		1,002,839		1,018,612
	Inventories		832,710		844,347
	Prepaid expenses and other current assets		87,005		81,191
	Assets held for sale		49,689		53,047
		Total current assets	2,520,762		2,590,009
Property, plant and equipment, net			573,932		570,258
Other non-current assets			138,414		141,529
		Total assets	$ 3,233,108		$ 3,301,796
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$    839,253		$    923,038
	Accrued liabilities		148,228		140,371
	Accrued payroll and related benefits		108,798		122,934
	Short-term debt		53,400		65,000
		Total current liabilities	1,149,679		1,251,343
Long-term liabilities:
	Long-term debt		1,240,329		1,240,666
	Other		143,098		148,186
		Total long-term liabilities	1,383,427		1,388,852
Total stockholders' equity			700,002		661,601
		Total liabilities and stockholders' equity	$ 3,233,108		$ 3,301,796

Sanmina-SCI Corporation
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(GAAP)
(Unaudited)
		Three Months Ended
		January 1,		January 2,
		2011		2010
Net sales		$ 1,662,451		$ 1,478,302
Cost of sales		1,534,404		1,368,615
	Gross profit	128,047		109,687
Operating expenses:
	Selling, general and administrative	58,471		62,415
	Research and development	4,166		3,098
	Amortization of intangible assets	958		1,178
	Restructuring and integration costs	5,039		3,338
	Asset impairment	85		-
	Gain on sales of long-lived assets	(1,627)		-
	Total operating expenses	67,092		70,029
Operating income		60,955		39,658
	Interest income	572		381
	Interest expense	(26,661)		(26,777)
	Other income, net	1,217		39,655
Interest and other, net		(24,872)		13,259
Income before income taxes		36,083		52,917
Provision for (benefit from) income taxes		7,724		(6,465)
Net income		$      28,359		$      59,382
	Basic income per share	$          0.36		$          0.76
	Diluted income per share	$          0.34		$          0.74
	Weighted-average shares used in computing
	per share amounts:
	Basic	79,846		78,615
	Diluted	82,825		80,575

Sanmina-SCI Corporation
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share amounts)
(Unaudited)
			Three Months Ended
			January 1,		October 2,		January 2,
			2011		2010		2010
GAAP Revenue			$ 1,662,451		$ 1,687,768		$ 1,478,302
Adjustments
	Customer bankruptcy reorganization (1)		-		(570)		-
Non-GAAP Revenue			$ 1,662,451		$ 1,687,198		$ 1,478,302
GAAP Gross Profit			$    128,047		$    131,711		$    109,687
	GAAP gross margin		7.7%		7.8%		7.4%
Adjustments
	Stock compensation expense (2)		1,039		859		2,066
	Amortization of intangible assets		157		209		-
	Customer bankruptcy reorganization (1)		-		(570)		-
Non-GAAP Gross Profit			$    129,243		$    132,209		$    111,753
	Non-GAAP gross margin		7.8%		7.8%		7.6%
GAAP operating income			$      60,955		$      58,163		$      39,658
	GAAP operating margin		3.7%		3.4%		2.7%
Adjustments
	Stock compensation expense (2)		3,687		2,796		4,652
	Amortization of intangible assets		1,115		601		1,178
	Customer bankruptcy reorganization (1)		-		(1,178)		-
	Restructuring, acquisition and integration costs		5,039		8,516		3,338
	Gain on sales of long-lived assets		(1,627)		(28)		-
	Asset impairment		85		-		-
Non-GAAP operating income			$      69,254		$      68,870		$      48,826
	Non-GAAP operating margin		4.2%		4.1%		3.3%
GAAP net income			$      28,359		$      31,399		$      59,382
Adjustments:
	Operating income adjustments (see above)		8,299		10,707		9,168
	Acquisition and integration costs		-		(541)		-
	Gain on sale of business		-		-		(3,710)
	(Gain) / loss on repurchase of debt (3)		-		-		828
	Gain from litigation settlement (4)		-		-		(35,556)
	Nonrecurring tax items		623		(3,760)		(11,644)
Non-GAAP net income			$      37,281		$      37,805		$      18,468
Non-GAAP Basic Income Per Share:			$          0.47		$          0.47		$          0.23
Non-GAAP Diluted Income Per Share:			$          0.45		$          0.46		$          0.23
Weighted-average shares used in computing Non-GAAP per share amounts:
	Basic		79,846		79,683		78,615
	Diluted		82,825		82,734		80,575
(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
			January 1,		October 2,		January 2,
			2011		2010		2010
	Cost of sales		$        1,039		$           859		$        2,066
	Selling, general and administrative		2,605		1,899		2,487
	Research and development		43		38		99
	Stock compensation expense - total company		$        3,687		$        2,796		$        4,652
(3)  Represents gain or loss, including write-off of unamortized debt issuance costs, on debt redeemed or repurchased prior to maturity.
(4)  Represents cash received in connection with a litigation settlement.

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, 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.

SOURCE Sanmina-SCI Corporation

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