Sanmina Corp 8-K, filed May 11, 2023
Sanmina Corp (SANM)
About this 8-K
Sanmina Corp filed this 8-K on May 11, 2023, reporting on events of May 10, 2023.
Items reported
- Item 2.02: Financial results
- Item 4.02: Earlier financial statements no longer reliable
- Item 9.01: Financial statements and exhibits
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FORM
CURRENT REPORT
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ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On May 11, 2023, Sanmina Corporation (the “Company”) issued the press release attached as Exhibit 99.1 announcing unaudited financial results for its fiscal quarter ended April 1, 2023.
The information set forth in this Item 2.02, including the exhibit hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. In addition, the information in this Item 2.02 shall not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
Item 4.02 NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED AUDIT REPORT OR COMPLETED INTERIM REVIEW
One of the Company’s divisions, which accounts for approximately 3% of the Company’s total revenue on an annual basis and is part of its Components, Products and Services business (the “division”), primarily enters into long-term fixed price customer contracts on a project basis. The rules under U.S. generally accepted accounting principles require that the estimated amount of revenue and profit expected to be realized upon completion of a profitable contract is recognized over the life of the contract. However, if a contract is expected to be unprofitable upon completion, 100% of the loss must be recognized in the period in which it is initially estimated that a contract will result in a loss upon completion. To the extent a contract has any actual or anticipated cost overruns, the Company may have the ability to seek recovery from its customers.
During the preparation of its unaudited consolidated financial statements for the fiscal quarter ended April 1, 2023, the Company determined that certain personnel in the division had failed to properly substantiate and update cost estimates for materials and other costs over the life of certain contracts. As a result, the Company conducted an independent investigation under the direction of the Audit Committee of the Company’s Board of Directors (the “Audit Committee”). The division, like other Company divisions, has a stand-alone finance organization, which reports directly to the Company finance organization and indirectly to the management of the division. References in the findings below refer solely to the division unless otherwise noted. The independent investigation found that:
| · | In connection with the preparation and review of quarterly contract cost and other estimates, an internal control in the Company’s accounting process for the division’s contracts with customers, certain division personnel made inappropriate and unsupported adjustments to reduce certain cost estimates and failed to appropriately evaluate and increase other cost estimates to reflect cost overruns and other costs associated with delays in completing certain contracts. |
| · | The division had a culture that did not recognize or emphasize the importance of rigor in the division’s quarterly contract estimate review process or its significance to the Company’s internal control over financial reporting and accounting and financial reporting determinations with respect to the division’s contracts with customers. Instead, the division’s tone at the top and other control weaknesses enabled participants in the quarterly contract estimate review process to tolerate, place undue reliance on or otherwise fail to challenge unsupported adjustments and assumptions to contract cost estimates that had been made based on unsubstantiated optimism and/or a desire to avoid adverse outcomes. |
| · | The division had an ineffective finance function that did not provide sufficient oversight on financial accounting and reporting matters or effective challenge to adjustments or other improper practices in the quarterly contract estimate review process. |
| · | Certain division personnel lacked sufficient understanding of the division’s policies and procedures for the quarterly contract estimate review process as well as the relevant cost and contract accounting practices and requirements. |
| · | Certain division personnel provided materially inaccurate and incomplete information to, including in response to inquiries from, Company management and the Company’s internal and independent auditors concerning contract cost estimates and related items. |
2
Primarily as a result of these findings, revenue was over/(understated) by approximately $10.2 million, $18.3 million, ($29.1 million), and $5.6 million, and GAAP earnings per share was over/(understated) by approximately $0.09, $0.29, $0.25, and ($0.06) in the fiscal years ended October 3, 2020, October 2, 2021 and October 1, 2022, and the first fiscal quarter ended December 31, 2022, respectively (collectively, the “Affected Periods”). The associated interim periods for the Affected Periods were also impacted. Because these misstatements are material to the Affected Periods compared to the previously reported results of operations for such periods, on May 10, 2023, the Audit Committee concluded that the consolidated financial statements for the Affected Periods included in the Company’s Annual Reports on Form 10-K for the fiscal years ended October 3, 2020, October 2, 2021 and October 1, 2022 and the unaudited condensed consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q for the quarterly fiscal periods included in such fiscal years and for the first fiscal quarter ended December 31, 2022 should no longer be relied upon. Any previously issued or filed reports, press releases, earnings releases and investor presentations or other communications describing the Company’s consolidated financial statements and other related financial information covering the Affected Periods should also no longer be relied upon.
Additionally, the Audit Committee concluded that management’s report on internal control over financial reporting for the fiscal year ended October 1, 2022, the opinion of PricewaterhouseCoopers LLP (“PwC”), the Company’s independent registered public accounting firm, on the consolidated financial statements for fiscal years ended October 3, 2020, October 2, 2021 and October 1, 2022, as well as PwC’s opinion on the effectiveness of the Company’s internal control over financial reporting as of October 1, 2022, should also no longer be relied upon. Additionally, the Company’s management has concluded that in light of the findings described above, the Company’s disclosure controls and procedures for the Affected Periods were not effective.
The Audit Committee has discussed the matters disclosed in this Item 4.02 with PwC.
The Company intends to complete and file the restated consolidated financial statements for the Affected Periods on Form 10-K/A for the fiscal year ended October 1, 2022 and Form 10-Q/A for the first fiscal quarter ended December 31, 2022 and to file its Quarterly Report on Form 10-Q for the fiscal quarter ended April 1, 2023 as promptly as possible following the filing of this Form 8-K. The Company anticipates that it will disclose material weaknesses in its internal control over financial reporting in such reports relating to the findings described above.
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as “expects,” “believes,” “estimates,” “projects,” “intends,” “plans,” “seeks,” “may,” “will,” “should” or “anticipates” or the negative or other variations of these or similar words. Although the Company believes that its expectations are based on reasonable assumptions within the bounds of the Company’s knowledge of its business, there can be no assurance that actual results, including the impact of the restatement, will not differ materially from our expectations. Meaningful factors that could cause actual results to differ from expectations include, but are not limited to, risks relating to the final impact of the restatement on the Company’s consolidated financial statements; the impact of the restatement on the Company’s evaluation of the effectiveness of its internal control over financial reporting and disclosure controls and procedures; delays in the preparation of the consolidated financial statements; the risk that additional information will come to light during the course of the independent investigation that alters the scope or magnitude of the restatement; the risk that the amounts ultimately recovered from customers are less than the amount of cost overruns that the Company is required to record in its consolidated financial statements; and the risk that the Company will be unable to obtain, if needed, any required waivers under its credit agreement with respect to a significant delay in filing periodic reports with the Securities and Exchange Commission, which could affect its liquidity. The Company does not intend to update publicly any forward-looking statements except as required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report may not occur.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits.
| Exhibit No | Description | |
| 99.1 | Press Release issued by Sanmina Corporation on May 11, 2023 | |
| 104 | Cover Page Interactive Data File (embedded within the inline XBRL document) |
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
| SANMINA CORPORATION | ||
| By: | /s/ Kurt Adzema | |
| Kurt Adzema | ||
| Executive Vice President and Chief Financial Officer | ||
| Date: May 11, 2023 | ||
4
Exhibit 99.1
FINANCIAL NEWS
Sanmina’s Second Quarter Fiscal 2023 Financial Results
San Jose, CA – May 11, 2023. Sanmina Corporation (“Sanmina” or the “Company”) (NASDAQ: SANM), a leading integrated manufacturing solutions company, today reported preliminary financial results for the fiscal second quarter ended April 1, 2023 and outlook for its fiscal third quarter ending July 1, 2023.
Second Quarter Fiscal 2023 Financial Highlights § Revenue: $2.32 billion § GAAP operating margin: 5.2% § GAAP diluted EPS: $1.33 § Non-GAAP(1) operating margin: 5.8% § Non-GAAP diluted EPS: $1.59 |
Additional Second Quarter Highlights § Cash flow from operations: $65 million § Ending cash and cash equivalents: $718 million § Non-GAAP pre-tax ROIC: 33.9% |
(1)Non-GAAP financial measures exclude charges or gains relating to: stock-based compensation expenses; restructuring costs (including employee severance costs, environmental investigation, remediation and related costs and other 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, 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 delivered strong top and bottom line results for the second quarter reflecting continued improvement in the supply chain environment coupled with excellent operational execution by our team to support customer demand. The team continues to demonstrate remarkable resilience in this dynamic market,” stated Jure Sola, Chairman and Chief Executive Officer. “We are focused on the fundamentals and confident in our business model. Based on our results for the first half of the fiscal year and outlook for the third quarter, our fiscal 2023 is shaping up to be a healthy growth year.”
Expanded Share Repurchase Program
Sanmina’s Board of Directors has authorized the repurchase of up to an additional $200 million of Sanmina’s common stock. The stock repurchase program has no expiration date. As of April 1, 2023 approximately $164 million remained available under a previously authorized program. The expansion of this program is consistent with Sanmina’s capital allocation priorities.
Third Quarter Fiscal 2023 Outlook
The following outlook is for the fiscal third quarter ending July 1, 2023. These statements are forward-looking and actual results may differ materially.
| § | Revenue between $2.2 billion to $2.3 billion |
| § | GAAP diluted earnings per share between $1.29 to $1.39 |
| § | Non-GAAP diluted earnings per share between $1.50 to $1.60 |
Safe Harbor Statement
The statements above concerning our financial outlook for the third quarter fiscal 2023 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, most notably ongoing supply chain constraints, including those resulting from the continuing impacts of the COVID-19 pandemic, and geopolitical uncertainty, including from the conflict in Ukraine. 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 risk 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.
Restatement of Historical Financial Results
One of the Company’s divisions, which accounts for approximately 3% of the Company’s total revenue on an annual basis and is part of its Components, Products and Services business, primarily enters into long-term fixed price customer contracts on a project basis. The rules under U.S. generally accepted accounting principles require that the estimated amount of revenue and profit expected to be realized upon completion of a profitable contract is recognized over the life of the contract. However, if a contract is expected to be unprofitable upon completion, 100% of the loss must be recognized in the period in which it is initially estimated that a contract will result in a loss upon completion. To the extent a contract has any actual or anticipated cost overruns, the Company may have the ability to seek recovery from its customers.
During the preparation of its unaudited consolidated financial statements for the fiscal quarter ended April 1, 2023, the Company determined that certain personnel in the division had failed to properly substantiate and update cost estimates for materials and other costs over the life of certain contracts. Primarily as a result of these findings, revenue was over/(understated) by approximately $10.2 million, $18.3 million, ($29.1 million), and $5.6 million, and GAAP earnings per share was over/(understated) by approximately $0.09, $0.29, $0.25, and ($0.06) in the fiscal years ended October 3, 2020, October 2, 2021 and October 1, 2022, and the first fiscal quarter ended December 31, 2022, respectively. See 8-K filed today for additional details.
Company Conference Call Information
Sanmina will hold a conference call to review its financial results for the second quarter and outlook for the third quarter fiscal 2023 on Thursday, May 11, 2023 at 5:00 p.m. ET (2:00 p.m. PT). The access numbers are: domestic 877-550-2105 and international 848-488-9190. The conference will also be webcast live over the Internet. You can log on to the live webcast at Q2 FY'23 Earnings. 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 800-645-7964 and international 757-849-6722, access code is 4095.
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 industrial, medical, defense, automotive, communications networks and cloud infrastructure markets. Sanmina has facilities strategically located in key regions throughout the world. More information about the Company is available at www.sanmina.com.
Sanmina Contact
Paige Melching
SVP, Investor Communications
408-964-3610
Condensed Consolidated
Balance Sheets
(in thousands)
(GAAP)
| April 1, | October 1, | |||||||
| 2023 | 2022 | |||||||
| Restated | ||||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 718,203 | $ | 529,857 | ||||
| Accounts receivable, net | 1,208,808 | 1,138,894 | ||||||
| Contract assets | 486,290 | 461,739 | ||||||
| Inventories | 1,552,568 | 1,698,081 | ||||||
| Prepaid expenses and other current assets | 69,091 | 62,044 | ||||||
| Total current assets | 4,034,960 | 3,890,615 | ||||||
| Property, plant and equipment, net | 616,998 | 575,170 | ||||||
| Deferred tax assets | 196,191 | 209,554 | ||||||
| Other | 181,307 | 160,192 | ||||||
| Total assets | $ | 5,029,456 | $ | 4,835,531 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 1,828,699 | $ | 2,041,434 | ||||
| Accrued liabilities | 282,414 | 281,599 | ||||||
| Accrued payroll and related benefits | 126,373 | 130,892 | ||||||
| Short-term debt, including current portion of long-term debt | 17,500 | 17,500 | ||||||
| Total current liabilities | 2,254,986 | 2,471,425 | ||||||
| Long-term liabilities: | ||||||||
| Long-term debt | 320,779 | 329,237 | ||||||
| Other | 235,697 | 215,333 | ||||||
| Total long-term liabilities | 556,476 | 544,570 | ||||||
| Stockholders' equity | 2,217,994 | 1,819,536 | ||||||
| Total liabilities and stockholders' equity | $ | 5,029,456 | $ | 4,835,531 | ||||
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(GAAP) (Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| April 1, | April 2, | April 1, | April 2, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Restated | Restated | |||||||||||||||
| Net sales | $ | 2,320,103 | $ | 1,915,070 | $ | 4,675,911 | $ | 3,671,396 | ||||||||
| Cost of sales | 2,128,914 | 1,768,575 | 4,289,336 | 3,383,604 | ||||||||||||
| Gross profit | 191,189 | 146,495 | 386,575 | 287,792 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | 63,390 | 61,817 | 124,120 | 123,292 | ||||||||||||
| Research and development | 6,394 | 5,472 | 11,993 | 10,249 | ||||||||||||
| Gain on sale of assets | - | - | - | (4,610 | ) | |||||||||||
| Restructuring and other costs | 804 | 2,932 | 1,435 | 4,346 | ||||||||||||
| Total operating expenses | 70,588 | 70,221 | 137,548 | 133,277 | ||||||||||||
| Operating income | 120,601 | 76,274 | 249,027 | 154,515 | ||||||||||||
| Interest income | 2,539 | 349 | 5,472 | 658 | ||||||||||||
| Interest expense | (9,286 | ) | (4,870 | ) | (17,967 | ) | (9,747 | ) | ||||||||
| Other income (expense), net | (2,768 | ) | (1,408 | ) | (9,480 | ) | 664 | |||||||||
| Interest and other, net | (9,515 | ) | (5,929 | ) | (21,975 | ) | (8,425 | ) | ||||||||
| Income before income taxes | 111,086 | 70,345 | 227,052 | 146,090 | ||||||||||||
| Provision for income taxes | 25,779 | 21,724 | 46,631 | 41,292 | ||||||||||||
| Net income before noncontrolling interest in subsidiary earnings | 85,307 | 48,621 | 180,421 | 104,798 | ||||||||||||
| Noncontrolling interest in subsidiary earnings | 5,686 | - | 8,786 | - | ||||||||||||
| Net income attributable to common shareholders | $ | 79,621 | $ | 48,621 | $ | 171,635 | $ | 104,798 | ||||||||
| Basic income per share | $ | 1.37 | $ | 0.77 | $ | 2.96 | $ | 1.65 | ||||||||
| Diluted income per share | $ | 1.33 | $ | 0.76 | $ | 2.87 | $ | 1.60 | ||||||||
| Weighted-average shares used in computing per share amounts: | ||||||||||||||||
| Basic | 58,269 | 62,845 | 57,999 | 63,622 | ||||||||||||
| Diluted | 59,819 | 64,271 | 59,863 | 65,365 | ||||||||||||
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share amounts)
(Unaudited)
| Three Months Ended | |||||||||||||
| April 1, | December 31, | April 2, | |||||||||||
| 2023 | 2022 | 2022 | |||||||||||
| Restated | Restated | ||||||||||||
| GAAP Operating Income | $ | 120,601 | $ | 128,426 | $ | 76,274 | |||||||
| GAAP operating margin | 5.2 | % | 5.5 | % | 4.0 | % | |||||||
| Adjustments: | |||||||||||||
| Stock compensation expense (1) | 12,534 | 11,609 | 9,330 | ||||||||||
| Amortization of intangible assets | 249 | 233 | 263 | ||||||||||
| Legal and other (2) | 695 | - | - | ||||||||||
| Restructuring costs | 804 | 631 | 2,932 | ||||||||||
| Transaction costs | - | - | 500 | ||||||||||
| Non-GAAP Operating Income | $ | 134,883 | $ | 140,899 | $ | 89,299 | |||||||
| Non-GAAP operating margin | 5.8 | % | 6.0 | % | 4.7 | % | |||||||
| GAAP Net Income | $ | 79,621 | $ | 92,014 | $ | 48,621 | |||||||
| Adjustments: | |||||||||||||
| Operating income adjustments (see above) | 14,282 | 12,473 | 13,025 | ||||||||||
| Legal and other (2) | (3,630 | ) | - | (110 | ) | ||||||||
| Adjustments for taxes (3) | 4,844 | (1,506 | ) | 5,855 | |||||||||
| Non-GAAP Net Income | $ | 95,117 | $ | 102,981 | $ | 67,391 | |||||||
| GAAP Net Income Per Share: | |||||||||||||
| Basic | $ | 1.37 | $ | 1.59 | $ | 0.77 | |||||||
| Diluted | $ | 1.33 | $ | 1.54 | $ | 0.76 | |||||||
| Non-GAAP Net Income Per Share: | |||||||||||||
| Basic | $ | 1.63 | $ | 1.78 | $ | 1.07 | |||||||
| Diluted | $ | 1.59 | $ | 1.72 | $ | 1.05 | |||||||
| Weighted-average shares used in computing per share amounts: | |||||||||||||
| Basic | 58,269 | 57,727 | 62,845 | ||||||||||
| Diluted | 59,819 | 59,867 | 64,271 | ||||||||||
| (1) | Stock compensation expense was as follows: | ||||||||||||
| Cost of sales | $ | 4,025 | $ | 4,242 | $ | 2,948 | |||||||
| Selling, general and administrative | 8,304 | 7,142 | 6,276 | ||||||||||
| Research and development | 205 | 225 | 106 | ||||||||||
| Total | $ | 12,534 | $ | 11,609 | $ | 9,330 | |||||||
| (2) | Represents expenses, charges and recoveries associated with certain legal matters. | ||||||||||||
| (3) | GAAP provision for income taxes | $ | 25,779 | $ | 20,852 | $ | 21,724 | ||||||
| Adjustments: | |||||||||||||
| Tax impact of operating income adjustments | 1,288 | 1,986 | 346 | ||||||||||
| Discrete tax items | (1,082 | ) | 5,845 | (3,526 | ) | ||||||||
| Deferred tax adjustments | (5,050 | ) | (6,325 | ) | (2,675 | ) | |||||||
| Subtotal - adjustments for taxes | (4,844 | ) | 1,506 | (5,855 | ) | ||||||||
| Non-GAAP provision for income taxes | $ | 20,935 | $ | 22,358 | $ | 15,869 | |||||||
| Q3 FY23 Earnings Per Share Outlook*: | Q3 FY23 EPS Range | ||||||||||||
| Low | High | ||||||||||||
| GAAP diluted earnings per share | $ | 1.29 | $ | 1.39 | |||||||||
| Stock compensation expense | $ | 0.21 | $ | 0.21 | |||||||||
| Non-GAAP diluted earnings per share | $ | 1.50 | $ | 1.60 | |||||||||
* Due to uncertainty regarding the timing of recognition of restructuring charges, impairment charges and other unusual or infrequent items, if any, that could be incurred during the third quarter of FY23, an estimate of such items is not included in the outlook for Q3 FY23 GAAP EPS.
Sanmina Corporation
Condensed Consolidated Cash Flow
($ in thousands)
(unaudited)
| Three Month Periods | ||||||||||||||||||||
| ($ in thousands) | Q2'23 | Q1'23 | Q4'22 | Q3'22 | Q2'22 | |||||||||||||||
| Restated | Restated | Restated | Restated | |||||||||||||||||
| GAAP Net Income before NCI | $ | 85,307 | $ | 95,114 | $ | 58,364 | $ | 77,222 | $ | 48,621 | ||||||||||
| Depreciation and amortization | 29,282 | 28,536 | 26,686 | 27,065 | 27,567 | |||||||||||||||
| Other, net | 17,075 | 20,727 | 33,886 | 18,108 | 14,179 | |||||||||||||||
| Net change in net working capital | (67,086 | ) | (107,153 | ) | (37,038 | ) | (20,712 | ) | (11,394 | ) | ||||||||||
| Cash provided by operating activities | 64,578 | 37,224 | 81,898 | 101,683 | 78,973 | |||||||||||||||
| Purchases of long-term investments | (700 | ) | (800 | ) | (300 | ) | (700 | ) | (1,000 | ) | ||||||||||
| Net purchases of property & equipment | (63,458 | ) | (36,530 | ) | (48,155 | ) | (37,434 | ) | (27,263 | ) | ||||||||||
| Cash used in investing activities | (64,158 | ) | (37,330 | ) | (48,455 | ) | (38,134 | ) | (28,263 | ) | ||||||||||
| Net share repurchases | (13,376 | ) | (7,836 | ) | (23,438 | ) | (124,365 | ) | (113,146 | ) | ||||||||||
| Net borrowing activities | (4,375 | ) | (4,375 | ) | 27,987 | (4,688 | ) | (4,688 | ) | |||||||||||
| Proceeds from other notes receivable | - | - | - | 500 | - | |||||||||||||||
| Proceeds from sale of non-controlling interest | - | 215,799 | - | - | - | |||||||||||||||
| Cash provided by (used for) financing activities | (17,751 | ) | 203,588 | 4,549 | (128,553 | ) | (117,834 | ) | ||||||||||||
| Effect of exchange rate changes | 220 | 1,975 | (1,440 | ) | (1,584 | ) | (700 | ) | ||||||||||||
| Net change in cash & cash equivalents | $ | (17,111 | ) | $ | 205,457 | $ | 36,552 | $ | (66,588 | ) | $ | (67,824 | ) | |||||||
| Free cash flow: | ||||||||||||||||||||
| Cash provided by operating activities | $ | 64,578 | $ | 37,224 | $ | 81,898 | $ | 101,683 | $ | 78,973 | ||||||||||
| Net purchases of property & equipment | (63,458 | ) | (36,530 | ) | (48,155 | ) | (37,434 | ) | (27,263 | ) | ||||||||||
| Proceeds from sale of intellectual property | - | - | - | 500 | - | |||||||||||||||
| $ | 1,120 | $ | 694 | $ | 33,743 | $ | 64,749 | $ | 51,710 | |||||||||||
Sanmina Corporation
Pre-Tax Return on invested Capital (ROIC)
($ in thousands)
(unaudited)
| Three Month Periods | ||||||||||||||||||||||
| ($ in thousands) | Q2 FY23 | Q1 FY23 | Q4 FY22 | Q3 FY22 | Q2 FY22 | |||||||||||||||||
| Restated | Restated | Restated | Restated | |||||||||||||||||||
| GAAP operating income | $ | 120,601 | $ | 128,426 | $ | 103,350 | $ | 91,614 | $ | 76,274 | ||||||||||||
| x | 4.0 | 4.0 | 4.0 | 4.0 | 4.0 | |||||||||||||||||
| Annualized GAAP operating income | 482,404 | 513,704 | 413,400 | 366,456 | 305,096 | |||||||||||||||||
| Average invested capital (1) | ÷ | 1,592,563 | 1,485,054 | 1,398,566 | 1,353,671 | 1,327,399 | ||||||||||||||||
| GAAP pre-tax ROIC | 30.3 | % | 34.6 | % | 29.6 | % | 27.1 | % | 23.0 | % | ||||||||||||
| Non-GAAP operating income | $ | 134,883 | $ | 140,899 | $ | 117,232 | $ | 107,242 | $ | 89,299 | ||||||||||||
| x | 4.0 | 4.0 | 4.0 | 4.0 | 4.0 | |||||||||||||||||
| Annualized non-GAAP operating income | 539,532 | 563,596 | 468,928 | 428,968 | 357,196 | |||||||||||||||||
| Average invested capital (1) | ÷ | 1,592,563 | 1,485,054 | 1,398,566 | 1,353,671 | 1,327,399 | ||||||||||||||||
| Non-GAAP pre-tax ROIC | 33.9 | % | 38.0 | % | 33.5 | % | 31.7 | % | 26.9 | % | ||||||||||||
(1) Invested capital is defined as total assets (not including cash and cash equivalents and deferred tax assets) less total liabilities (excluding short-term and long-term debt).
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, environmental investigation, remediation and related 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) generally 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 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.