PR Newswire | May 3, 2021 04:02PM EDT

05/03 15:02 CDT

Sanmina Reports Second Quarter Fiscal 2021 Financial Results SAN JOSE, Calif., May 3, 2021

SAN JOSE, Calif., May 3, 2021 /PRNewswire/ -- Sanmina Corporation ("Sanmina" or the "Company") (NASDAQ: SANM), a leading integrated manufacturing solutions company, today reported financial results for the fiscal second quarter ended April 3, 2021 and outlook for its fiscal third quarter ending July 3, 2021.

Second Quarter Fiscal 2021 Financial Highlights

? Revenue: $1.7 billion, midpoint of outlook ? GAAP operating margin: 3.8 percent ? GAAP diluted EPS: $0.70 ? Non-GAAP^(1) operating margin: 5.0 percent ? Non-GAAP diluted EPS: $1.01, exceeded outlook

Additional Second Quarter Highlights

? Non-GAAP pre-tax ROIC: 27.6 percent ? Cash flow from operations: $81 million ? Free cash flow: $67 million ? Ending cash and cash equivalents: $575 million

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, expenses, charges and recoveries^ relating to certain legal matters, gains and losses on sales of assets,(1) deferred tax adjustments 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.

"We achieved solid financial results for the second fiscal quarter, despite the challenges associated with supply chain constraints and the typical seasonality. This performance was driven by broad end-market demand, favorable mix and operational execution. I commend our employees for their commitment to deliver on our customers' expectations," stated Jure Sola, Chairman and Chief Executive Officer of Sanmina Corporation.

"Our third quarter outlook reflects strong demand across our customer base while taking into account our current understanding of the supply constraints facing the industry and the COVID-19 pandemic. Our focus on fundamentals, coupled with the quality of our customer relationships, gives us confidence in the long-term financial prospects of our company."

Third Quarter Fiscal 2021 OutlookThe following outlook is for the third fiscal quarter ending July 3, 2021. These statements are forward-looking and actual results may differ materially.

* Revenue between $1.675 billion to $1.775 billion * GAAP diluted earnings per share between $0.71 to $0.81 * Non-GAAP diluted earnings per share between $0.84 to $0.94

The statements above concerning our expectations for customer demand during the third quarter and financial outlook 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, 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 and our ability to fully staff our plants. 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 InformationSanmina will hold a conference call to review its financial results for the second quarter and outlook for the third quarter on Monday, May 3, 2021 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 is4858475.

About SanminaSanmina 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)

April 3, October 3,

2021 2020

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents $ 575,176 $ 480,526

Accounts receivable, net 1,122,962 1,043,334

Contract assets 334,957 396,583

Inventories 785,406 861,281

Prepaid expenses and other current assets 38,584 37,718

Total current assets 2,857,085 2,819,442

Property, plant and equipment, net 529,651 559,242

Deferred tax assets 259,943 273,470

Other 123,550 120,502

Total assets $ 3,770,229 $ 3,772,656

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 1,108,994 $ 1,210,049

Accrued liabilities 176,148 171,761

Accrued payroll and related benefits 114,704 122,029

Short-term debt, including current portion of long-term debt 18,750 18,750

Total current liabilities 1,418,596 1,522,589

Long-term liabilities:

Long-term debt 320,405 329,249

Other 296,121 290,902

Total long-term liabilities 616,526 620,151

Stockholders' equity 1,735,107 1,629,916

Total liabilities and stockholders' equity $ 3,770,229 $ 3,772,656

Sanmina Corporation

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

(GAAP)

(Unaudited)

Three Months Ended Six Months Ended

April 3, March 28, April 3, March 28,

2021 2020 2021 2020

Net sales $ 1,699,677 $ 1,590,550 $ 3,454,926 $ 3,430,721

Cost of sales 1,556,579 1,483,129 3,170,593 3,188,418

Gross profit 143,098 107,421 284,333 242,303

Operating expenses:

Selling, general and administrative 61,142 62,257 120,109 125,408

Research and development 5,353 5,767 10,158 10,967

Restructuring and other costs 11,880 15,028 13,784 24,378

Total operating expenses 78,375 83,052 144,051 160,753

Operating income 64,723 24,369 140,282 81,550

Interest income 244 418 474 728

Interest expense (4,880) (6,040) (9,834) (11,917)

Other income (expense), net 6,143 (7,660) 8,010 (6,342)

Interest and other, net 1,507 (13,282) (1,350) (17,531)

Income before income taxes 66,230 11,087 138,932 64,019

Provision for income taxes 19,193 6,205 43,874 20,792

Net income $ 47,037 $ 4,882 $ 95,058 $ 43,227

Basic income per share $ 0.72 $ 0.07 $ 1.46 $ 0.61

Diluted income per share $ 0.70 $ 0.07 $ 1.42 $ 0.60

Weighted-average shares used in computing per share amounts:

Basic 65,249 70,584 65,244 70,377

Diluted 66,957 72,245 66,887 72,429

Sanmina Corporation

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(Unaudited)

Three Months Ended

April 3, Jan. 2, March 28,

2021 2021 2020

GAAP Operating Income $ 64,723 $ 75,559 $ 24,369

GAAP operating margin 3.8% 4.3% 1.5%

Adjustments:

Stock compensation expense (1) 9,224 8,209 7,783

Amortization of intangible assets - - 63

Distressed customer charges (2) (296) (325) -

Legal and other (3) - 1,873 -

Restructuring costs 11,880 1,904 8,356

Goodwill and other asset impairments - - 6,609

Non-GAAP Operating Income $ 85,531 $ 87,220 $ 47,180

Non-GAAP operating margin 5.0% 5.0% 3.0%

GAAP Net Income $ 47,037 $ 48,021 $ 4,882

Adjustments:

Operating income adjustments (see above) 20,808 11,661 22,811

Legal and other (3) (4,807) - (259)

Adjustments for taxes (4) 4,402 8,652 (4,655)

Non-GAAP Net Income $ 67,440 $ 68,334 $ 22,779

GAAP Net Income Per Share:

Basic $ 0.72 $ 0.74 $ 0.07

Diluted $ 0.70 $ 0.72 $ 0.07

Non-GAAP Net Income Per Share:

Basic $ 1.03 $ 1.05 $ 0.32

Diluted $ 1.01 $ 1.02 $ 0.32

Weighted-average shares used in computing per shareamounts:

Basic 65,249 65,243 70,584

Diluted 66,957 66,818 72,245

(1) Stock compensation expense was as follows:

Cost of sales $ 3,629 $ 3,421 $ 2,582

Selling, general and administrative 5,479 4,718 5,127

Research and development 116 70 74

Total $ 9,224 $ 8,209 $ 7,783

(2) Relates to accounts receivable and inventory write-downs (recoveries) associated with distressed customers.

(3) Represents expenses, charges and recoveries associated with certain legal matters.

(4) GAAP provision for income taxes $ 19,193 $ 24,681 $ 6,205

Adjustments:

Tax impact of operating income adjustments 284 280 222

Discrete tax items (232) (6,451) 3,244

Deferred tax adjustments (4,454) (2,481) 1,189

Subtotal - adjustments for taxes (4,402) (8,652) 4,655

Non-GAAP provision for income taxes $ 14,791 $ 16,029 $ 10,860

Q3 FY21 Earnings Per Share Outlook*: Q3 FY21 EPS Range

Low High

GAAP diluted earnings per share $ 0.71 $ 0.81

Stock compensation expense $ 0.13 $ 0.13

Non-GAAP diluted earnings per share $ 0.84 $ 0.94

* Due to uncertainty regarding the timing of recognition of restructuringcharges, impairment charges and other unusual or infrequent items, if any, thatcould be incurred during the third quarter of FY21, an estimate of such itemsis not included in the outlook for Q3 FY21 GAAP EPS.

Sanmina Corporation

Pre-Tax Return on Invested Capital (ROIC)

(in thousands)

(Unaudited)

Q2 FY21

Pre-tax Return on Invested Capital (ROIC)

GAAP operating income $ 64,723

x 4.0

Annualized GAAP operating income 258,892

Average invested capital (1) / 1,237,417

GAAP pre-tax ROIC 20.9%

Non-GAAP operating income $ 85,531

x 4.0

Annualized non-GAAP operating income 342,124

Average invested capital (1) / 1,237,417

Non-GAAP pre-tax ROIC 27.6%

(1) Invested capital is defined as total assets (not including cash and cashequivalents and deferred tax assets) less total liabilities (excludingshort-term and long-term debt).

Sanmina Corporation

Condensed Consolidated Cash Flow Statement

(in thousands)

(Unaudited)

Three Month Periods

Q2'21 Q2'20

GAAP Net Income $ 47,037 $ 4,882

Depreciation and amortization 27,196 28,042

Other, net 19,498 16,029

Net change in net working capital (12,642) 86,775

Cash provided by operating activities 81,089 135,728

Net purchases of property & equipment (14,349) (16,410)

Cash used in investing activities (14,349) (16,410)

Net share repurchases (1,502) (64,163)

Net borrowing activities (4,688) 629,702

Cash used in financing activities (6,190) 565,539

Effect of exchange rate changes (1,404) (836)

Net change in cash & cash equivalents $ 59,146 $ 684,021

Free cash flow:

Cash provided by operating activities $ 81,089 $ 135,728

Net purchases of property & equipment (14,349) (16,410)

$ 66,740 $ 119,318

Schedule 1

The statements above and financial information provided in this earnings release include non-GAAP measures of operating income, operating margin, net income, diluted earnings per share and pre-tax return on invested capital (ROIC). 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 equity awards granted to employees and directors, 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 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, expenses, charges and recoveries relating to certain legal matters, gains and losses on sales of assets, deferred tax adjustments 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 not considered 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