SAN
JOSE, Calif., May 11, 2023
/PRNewswire/ -- 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
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|
|
|
|
|
|
|
Sanmina
Corporation
|
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
|
|
|
|
|
|
|
|
|
|
Sanmina
Corporation
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sanmina
Corporation
|
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
|
|
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
|
|
|
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.
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SOURCE Sanmina Corporation