Sanmina Corp 10-Q for FY2020 Q1

Sanmina Corp (SANM)

10-Q 2020-01-30 For: 2019-12-28

Added on April 08, 2026

About this 10-Q

Sanmina Corp filed this 10-Q on January 30, 2020, covering the quarter ended December 28, 2019 (FY2020 Q1).

Headline figures

Quarter ended December 28, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.84B; down 15.9% from $2.19B a year earlier
Net income: $38.35M; up 1.0% from net income of $37.95M a year earlier
Diluted EPS: $0.53; down 1.9% from $0.54 a year earlier

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DE			77-0228183
(State or other jurisdiction of			(I.R.S. Employer
incorporation or organization)			Identification Number)

2700 N. First St.,	San Jose,	CA	95134
(Address of principal executive offices)			(Zip Code)
	(408)	964-3500
(Registrant's telephone number, including area code)



Large Accelerated Filer	[X]	Accelerated filer [ ]	Non-accelerated filer [ ]	Smaller reporting company	☐
				Emerging growth company	☐



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock	SANM	NASDAQ Global Select Market



		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Interim Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 6.	Exhibits	44
Signatures		45



	As of
	December 28, 2019		September 28, 2019
	(Unaudited)
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	430,564	$	454,741
Accounts receivable, net of allowances of $9,327 and $12,481 as of December 28, 2019 and September 28, 2019, respectively	1,063,922		1,128,379
Contract assets	421,860		396,300
Inventories	843,764		900,557
Prepaid expenses and other current assets	45,131		40,952
Total current assets	2,805,241		2,920,929
Property, plant and equipment, net	612,214		630,647
Deferred tax assets	276,820		279,803
Other	135,460		74,134
Total assets	$	3,829,735	$	3,905,513
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,180,179	$	1,336,914
Accrued liabilities	204,749		180,107
Accrued payroll and related benefits	106,476		127,647
Short-term debt, including current portion of long-term debt	38,728		38,354
Total current liabilities	1,530,132		1,683,022
Long-term liabilities:
Long-term debt	342,537		346,971
Other	277,681		232,947
Total long-term liabilities	620,218		579,918
Contingencies (Note 8)
Stockholders' equity	1,679,385		1,642,573
Total liabilities and stockholders' equity	$	3,829,735	$	3,905,513



(Mark one)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Three Months Ended
	December 28, 2019			December 29, 2018
	(Unaudited)
	(In thousands, except per share data)
Net sales	$	1,840,171		$	2,188,018
Cost of sales	1,705,289			2,038,681
Gross profit	134,882			149,337

Operating expenses:
Selling, general and administrative	63,151			63,028
Research and development	5,200			6,437
Restructuring and other	9,350			2,329
Total operating expenses	77,701			71,794

Operating income	57,181			77,543

Interest income	310			194
Interest expense	(5,877		)	(8,271		)
Other income (expense), net	1,318			(5,994		)
Interest and other, net	(4,249		)	(14,071		)

Income before income taxes	52,932			63,472
Provision for income taxes	14,587			25,520
Net income	$	38,345		$	37,952

Net income per share:
Basic	$	0.55		$	0.56
Diluted	$	0.53		$	0.54

Weighted average shares used in computing per share amounts:
Basic	70,178			68,303
Diluted	72,598			70,901


•	The promised amount of consideration under a contract is not adjusted for the effects of a significant financing component because, at inception of a contract, the Company expects the period between when a good or service is transferred to a customer and when the customer pays for that good or service will generally be one year or less.


•	The Company has elected to not disclose information about remaining performance obligations that have original expected durations of one year or less, which is substantially all of the Company’s remaining performance obligations.


•	Incremental costs of obtaining a contract are not capitalized if the period over which such costs would be amortized to expense is less than one year.



	(In Thousands)
Remainder of 2020	$	18,750
2021	18,750
2022	18,750
2023	14,062
2024	300,000
	$	370,312



	Operating Leases
	(In thousands)
Remainder of 2020	$	14,600
2021	15,711
2022	11,115
2023	5,125
2024	4,018
Thereafter	17,323
Total lease payments	67,892
Less: imputed interest	7,411
Total	$	60,481



	Restructuring Expense
	Three Months Ended
	December 28, 2019		December 29, 2018

Severance costs (approximately 1,450 employees)	$	6,728	$	—
Other exit costs (recognized as incurred)	8		—
Total - Q1 FY20 plan	6,736		—
Costs incurred for other plans	2,424		2,139
Total - all plans	$	9,160	$	2,139


(1)	For purposes of evaluating segment performance, management excludes certain items from its measure of gross profit. These items consist of stock-based compensation expense, amortization of intangible assets and charges or credits resulting from distressed customers.



	Three Months Ended
	December 28, 2019			December 29, 2018
	(Unaudited)
	(In thousands)
Net income	$	38,345		$	37,952
Other comprehensive income (loss), net of tax:
Change in foreign currency translation adjustments	717			(252		)
Derivative financial instruments:
Change in net unrealized amount	3,380			(6,497		)
Amount reclassified into net income	(195		)	2,410
Defined benefit plans:
Changes in unrecognized net actuarial losses and unrecognized transition costs	(187		)	290
Amortization of actuarial losses and transition costs	544			198
Total other comprehensive income (loss)	4,259			(3,851		)
Comprehensive income	$	42,604		$	34,101



	Three Months Ended
	December 28, 2019			December 29, 2018
	(Unaudited)
	(In thousands)
Common Stock and Additional Paid-in Capital
Balance, beginning of period	$	6,267,509		$	6,222,988
Issuances under stock plans	4,852			3,568
Stock-based compensation expense	6,906			5,816
Balance, end of period	6,279,267			6,232,372
Treasury Stock
Balance, beginning of period	(804,118		)	(791,366		)
Repurchases of treasury stock	(17,550		)	(11,842		)
Balance, end of period	(821,668		)	(803,208		)
Accumulated Other Comprehensive Income
Balance, beginning of period	42,259			73,944
Other comprehensive income (loss)	4,259			(3,851		)
Balance, end of period	46,518			70,093
Accumulated Deficit
Balance, beginning of period	(3,863,077		)	(4,032,722		)
Cumulative effect of new accounting pronouncement (1)	—			28,130
Net income	38,345			37,952
Balance, end of period	(3,824,732		)	(3,966,640		)
Total stockholders' equity	$	1,679,385		$	1,532,617

Common Stock Shares Outstanding
Number of shares, beginning of period	105,551			103,128
Issuances under stock plans	1,290			1,028
Number of shares, end of period	106,841			104,156
Treasury Shares
Number of shares, beginning of period	(35,831		)	(35,351		)
Repurchases of treasury stock	(553		)	(449		)
Number of shares, end of period	(36,384		)	(35,800		)



	Three Months Ended
	December 28, 2019			December 29, 2018
	(Unaudited)
	(In thousands)
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income	$	38,345		$	37,952
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Depreciation and amortization	28,735			29,792
Stock-based compensation expense	6,906			5,816
Deferred income taxes	3,005			11,583
Other, net	(322		)	353
Changes in operating assets and liabilities:
Accounts receivable	65,449			(160,974		)
Contract assets	(25,560		)	(43,998		)
Inventories	57,357			(30,708		)
Prepaid expenses and other assets	2,372			3,033
Accounts payable	(139,304		)	(2,845		)
Accrued liabilities	(15,812		)	71,560
Cash provided by (used in) operating activities	21,171			(78,436		)

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(28,466		)	(37,166		)
Proceeds from sales of property, plant and equipment	420			575
Cash used in investing activities	(28,046		)	(36,591		)

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Repayments of long-term debt	(4,688		)	—
Proceeds from revolving credit facility borrowings	717,000			1,043,825
Repayments of revolving credit facility borrowings	(717,000		)	(928,825		)
Debt issuance costs	—			(2,003		)
Net proceeds from stock issuances	4,852			3,568
Repurchases of common stock	(17,550		)	(11,842		)
Cash provided by (used in) financing activities	(17,386		)	104,723

Effect of exchange rate changes	84			66
Decrease in cash and cash equivalents	(24,177		)	(10,238		)
Cash and cash equivalents at beginning of period	454,741			419,528
Cash and cash equivalents at end of period	$	430,564		$	409,290



	As of
	December 28, 2019		September 28, 2019
	(In thousands)
Raw materials	$	841,462	$	898,077
Work-in-process	1,026		869
Finished goods	1,276		1,611
Total	$	843,764	$	900,557


(1)	Mexico represents approximately 60% of the Americas revenue and the U.S. represents approximately 35%.




Percentage of net sales represented by ten largest customers	55	%	54	%
Number of customers representing 10% or more of net sales	2		2



	Number of Shares		Weighted- Average Grant Date Fair Value ($)	Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($)
	(In thousands)				(In thousands)
Outstanding as of September 28, 2019	3,153		27.82	1.30	102,720
Granted	815		33.11
Vested/Forfeited/Cancelled	(678	)	28.84
Outstanding as of December 28, 2019	3,290		28.92	1.59	109,780
Expected to vest as of December 28, 2019	2,774		29.11	1.44	92,557


1.	Integrated Manufacturing Solutions ("IMS"). Our IMS segment consists of printed circuit board assembly and test, final system assembly and test and direct-order-fulfillment.


•	changes in customer demand and sales volumes for our vertically integrated system components and subassemblies;


•	changes in the overall volume of our business, which affect the level of capacity utilization;


•	changes in the mix of high and low margin products demanded by our customers;


•	parts shortages and extended parts lead times caused by high demand or natural disasters, and related operational disruption and inefficiencies;


•	greater competition in the EMS industry and pricing pressures from OEMs due to greater focus on cost reduction;


•	provisions for excess and obsolete inventory, including those associated with distressed customers;


•	our ability to pass tariffs we incur upon importation of components for production of our customers’ products through to our customers; and


•	our ability to transition the location of and ramp manufacturing and assembly operations when desired or requested by a customer in a timely and cost-effective manner.


(1)	Days sales outstanding (a measure of how quickly we collect our accounts receivable), or "DSO", is calculated as the ratio of average accounts receivable, net, to average daily net sales for the quarter.


(2)	Contract asset days are calculated as the ratio of average contract assets to average daily net sales for the quarter.


(3)	Inventory turns (annualized) are calculated as the ratio of four times our cost of sales for the quarter to average inventory.


(4)	Days inventory on hand is calculated as the ratio of average inventory for the quarter to average daily cost of sales for the quarter.


(5)	Accounts payable days (a measure of how quickly we pay our suppliers), or "DPO", is calculated as the ratio of 365 days divided by accounts payable turns, in which accounts payable turns is calculated as the ratio of four times our cost of sales for the quarter to average accounts payable.


(6)	Cash cycle days is calculated as days inventory on hand plus days sales outstanding and contract assets day minus accounts payable days.


•	intense competition among our customers and their competitors, leading to reductions in prices for their products and increases in pricing pressure placed on us;


•	failure of our customers' products to gain widespread commercial acceptance which could decrease the volume of orders customers place with us;