Sanmina Corp 10-Q for FY2020 Q2

Sanmina Corp (SANM)

10-Q 2020-04-29 For: 2020-03-28

Added on April 08, 2026

About this 10-Q

Sanmina Corp filed this 10-Q on April 29, 2020, covering the quarter ended March 28, 2020 (FY2020 Q2).

Headline figures

Quarter ended March 28, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.59B; down 25.2% from $2.13B a year earlier
Net income: $4.88M; down 88.1% from net income of $40.89M a year earlier
Diluted EPS: $0.07; down 87.7% from $0.57 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 (Loss)	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	32
Item 4.	Controls and Procedures	33
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 6.	Exhibits	47
Signatures		48



	As of
	March 28, 2020		September 28, 2019
	(Unaudited)
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	1,114,585	$	454,741
Accounts receivable, net of allowances of $10,089 and $12,481 as of March 28, 2020 and September 28, 2019, respectively	918,582		1,128,379
Contract assets	407,284		396,300
Inventories	883,727		900,557
Prepaid expenses and other current assets	39,121		40,952
Total current assets	3,363,299		2,920,929
Property, plant and equipment, net	591,738		630,647
Deferred tax assets	285,244		279,803
Other	119,904		74,134
Total assets	$	4,360,185	$	3,905,513
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,126,997	$	1,336,914
Accrued liabilities	225,330		180,107
Accrued payroll and related benefits	105,312		127,647
Short-term debt, including current portion of long-term debt	673,437		38,354
Total current liabilities	2,131,076		1,683,022
Long-term liabilities:
Long-term debt	338,105		346,971
Other	273,255		232,947
Total long-term liabilities	611,360		579,918
Contingencies (Note 8)
Stockholders' equity	1,617,749		1,642,573
Total liabilities and stockholders' equity	$	4,360,185	$	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						Six Months Ended
	March 28, 2020			March 30, 2019			March 28, 2020			March 30, 2019
	(Unaudited)
	(In thousands, except per share data)
Net sales	$	1,590,550		$	2,126,639		$	3,430,721		$	4,314,657
Cost of sales	1,483,129			1,973,537			3,188,418			4,012,218
Gross profit	107,421			153,102			242,303			302,439

Operating expenses:
Selling, general and administrative	62,257			64,186			125,408			127,214
Research and development	5,767			7,599			10,967			14,036
Restructuring and other	15,028			3,202			24,378			5,531
Total operating expenses	83,052			74,987			160,753			146,781

Operating income	24,369			78,115			81,550			155,658

Interest income	418			364			728			558
Interest expense	(6,040		)	(8,472		)	(11,917		)	(16,743		)
Other expense, net	(7,660		)	(891		)	(6,342		)	(6,885		)
Interest and other, net	(13,282		)	(8,999		)	(17,531		)	(23,070		)

Income before income taxes	11,087			69,116			64,019			132,588
Provision for income taxes	6,205			28,231			20,792			53,751
Net income	$	4,882		$	40,885		$	43,227		$	78,837

Net income per share:
Basic	$	0.07		$	0.59		$	0.61		$	1.15
Diluted	$	0.07		$	0.57		$	0.60		$	1.11

Weighted average shares used in computing per share amounts:
Basic	70,584			68,821			70,377			68,556
Diluted	72,245			71,446			72,429			71,162


•	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	$	14,063
2021	18,750
2022	18,750
2023	14,062
2024	300,000
	$	365,625



	Operating Leases
	(In thousands)
Remainder of 2020	$	10,328
2021	15,684
2022	10,977
2023	5,057
2024	3,936
Thereafter	16,519
Total lease payments	62,501
Less: imputed interest	6,580
Total	$	55,921



	Restructuring Expense
	Three Months Ended				Six Months Ended
	March 28, 2020		March 30, 2019		March 28, 2020		March 30, 2019

Severance costs (approximately 300 and 1,750 employees for the three and six months ended March 28, 2020, respectively)	$	4,725	$	—	$	11,453	$	—
Other exit costs (recognized as incurred)	44		—		52		—
Total - Q1 FY20 Plan	4,769		—		11,505		—
Costs incurred for other plans	3,587		3,012		6,011		5,151
Total - all plans	$	8,356	$	3,012	$	17,516	$	5,151


(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						Six Months Ended
	March 28, 2020			March 30, 2019			March 28, 2020			March 30, 2019
	(Unaudited)
	(In thousands)
Net income	$	4,882		$	40,885		$	43,227		$	78,837
Other comprehensive income (loss), net of tax:
Change in foreign currency translation adjustments	(2,887		)	(235		)	(2,170		)	(487		)
Derivative financial instruments:
Change in net unrealized amount	(8,306		)	(2,478		)	(4,926		)	(8,975		)
Amount reclassified into net income	538			(2,645		)	343			(235		)
Defined benefit plans:
Changes in unrecognized net actuarial losses and unrecognized transition costs	415			109			228			399
Amortization of actuarial losses and transition costs	102			237			646			435
Total other comprehensive loss	(10,138		)	(5,012		)	(5,879		)	(8,863		)
Comprehensive income (loss)	$	(5,256	)	$	35,873		$	37,348		$	69,974



	Three Months Ended						Six Months Ended
	March 28, 2020			March 30, 2019			March 28, 2020			March 30, 2019
	(Unaudited)
	(In thousands)
Common Stock and Additional Paid-in Capital
Balance, beginning of period	$	6,279,267		$	6,232,372		$	6,267,509		$	6,222,988
Issuances under stock plans	320			5,771			5,172			9,339
Stock-based compensation expense	7,783			6,626			14,689			12,442
Other issuances	—			138			—			138
Balance, end of period	6,287,370			6,244,907			6,287,370			6,244,907
Treasury Stock
Balance, beginning of period	(821,668		)	(803,208		)	(804,118		)	(791,366		)
Repurchases of treasury stock	(64,483		)	(306		)	(82,033		)	(12,148		)
Balance, end of period	(886,151		)	(803,514		)	(886,151		)	(803,514		)
Accumulated Other Comprehensive Income
Balance, beginning of period	46,518			70,093			42,259			73,944
Other comprehensive loss	(10,138		)	(5,012		)	(5,879		)	(8,863		)
Balance, end of period	36,380			65,081			36,380			65,081
Accumulated Deficit
Balance, beginning of period	(3,824,732		)	(3,966,640		)	(3,863,077		)	(4,032,722		)
Cumulative effect of new accounting pronouncement (1)	—			—			—			28,130
Net income	4,882			40,885			43,227			78,837
Balance, end of period	(3,819,850		)	(3,925,755		)	(3,819,850		)	(3,925,755		)
Total stockholders' equity	$	1,617,749		$	1,580,719		$	1,617,749		$	1,580,719

Common Stock Shares Outstanding
Number of shares, beginning of period	106,841			104,156			105,551			103,128
Issuances under stock plans	285			640			1,575			1,668
Number of shares, end of period	107,126			104,796			107,126			104,796
Treasury Shares
Number of shares, beginning of period	(36,384		)	(35,800		)	(35,831		)	(35,351		)
Repurchases of treasury stock	(2,540		)	(6		)	(3,093		)	(455		)
Number of shares, end of period	(38,924		)	(35,806		)	(38,924		)	(35,806		)



	Six Months Ended
	March 28, 2020			March 30, 2019
	(Unaudited)
	(In thousands)
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income	$	43,227		$	78,837
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Depreciation and amortization	56,777			58,880
Stock-based compensation expense	14,689			12,442
Deferred income taxes	1,952			23,410
Goodwill and other asset impairments	8,409			—
Other, net	568			587
Changes in operating assets and liabilities:
Accounts receivable	207,994			(129,741		)
Contract assets	(10,984		)	(26,219		)
Inventories	15,333			16,559
Prepaid expenses and other assets	11,687			436
Accounts payable	(185,175		)	(85,037		)
Accrued liabilities	(7,578		)	77,148
Cash provided by operating activities	156,899			27,302

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(45,088		)	(72,962		)
Proceeds from sales of property, plant and equipment	632			1,139
Cash used in investing activities	(44,456		)	(71,823		)

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Repayments of long-term debt	(24,986		)	—
Proceeds from revolving credit facility borrowings	1,909,000			2,242,225
Repayments of revolving credit facility borrowings	(1,259,000		)	(2,207,225		)
Debt issuance costs	—			(2,003		)
Net proceeds from stock issuances	5,172			9,339
Repurchases of common stock	(82,033		)	(12,010		)
Cash provided by financing activities	548,153			30,326

Effect of exchange rate changes	(752		)	161
Increase (decrease) in cash and cash equivalents	659,844			(14,034		)
Cash and cash equivalents at beginning of period	454,741			419,528



	As of
	March 28, 2020		September 28, 2019
	(In thousands)
Raw materials	$	881,465	$	898,077
Work-in-process	898		869
Finished goods	1,364		1,611
Total	$	883,727	$	900,557



	Three Months Ended				Nine Months Ended
	March 28, 2020		March 30, 2019		March 28, 2020		March 30, 2019
	(In thousands)
Net sales:
Americas (1)	$	817,061	$	1,101,698	$	1,723,629	$	2,265,576
EMEA	256,724		269,202		517,755		504,255
APAC	516,765		755,739		1,189,337		1,544,826
Total	$	1,590,550	$	2,126,639	$	3,430,721	$	4,314,657


(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	%	55	%	55	%	54	%
Number of customers representing 10% or more of net sales	1		1		1		1



	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	1,223		33.61
Vested/Forfeited/Cancelled	(1,316	)	26.77
Outstanding as of March 28, 2020	3,060		30.59	1.68	64,817
Expected to vest as of March 28, 2020	2,581		30.87	1.66	54,671


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.


•	disruptions to the operations of our customers, a continuation of government restrictions on staffing and the types of products we are permitted to build, plant closures and supply chain interruptions and shortages resulting from the COVID-19 pandemic;


•	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;


•	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 provisions associated with distressed customers;


•	our ability to transition the location of and ramp manufacturing and assembly operations when 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 (a measure of how quickly we transfer contract assets to accounts receivable) are calculated as the ratio of average contract assets to average daily net sales for the quarter.


(3)	Inventory turns (annualized) (a measure of how quickly we sell inventory) are calculated as the ratio of four times our cost of sales for the quarter to average inventory.


(4)	Days inventory on hand (a measure of how quickly we turn inventory into sales) 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 (a measure of how quickly we convert investments in inventory to cash) is calculated as days inventory on hand plus days sales outstanding and contract assets days minus accounts payable days.


•	Resulted in the temporary closure of our facilities in China during the second quarter;


•	Reduced the amount of staffing we are permitted to maintain at certain of our plants;


•	Required us in some cases to pay staff who are not able to work due to government orders;