-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QgnK1APTWyV3+Vqbh5Ch5ZpwG5s/szMyoWnmzV+dwGXstNmG3i3PA7WYwe+gepY1 jFLR5HWRMAG9fP/ims1V4g== 0000891618-97-000359.txt : 19970211 0000891618-97-000359.hdr.sgml : 19970211 ACCESSION NUMBER: 0000891618-97-000359 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961228 FILED AS OF DATE: 19970207 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANMINA CORP/DE CENTRAL INDEX KEY: 0000897723 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 770228193 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21272 FILM NUMBER: 97520827 BUSINESS ADDRESS: STREET 1: 355 EAST TRIMBLE ROAD CITY: SAN JOSE STATE: CA ZIP: 95131 BUSINESS PHONE: 4084358444 MAIL ADDRESS: STREET 1: 355 EAST TRIMBLE ROAD CITY: SAN JOSE STATE: CA ZIP: 95131 FORMER COMPANY: FORMER CONFORMED NAME: SANMINA HOLDINGS INC DATE OF NAME CHANGE: 19930223 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended December 28, 1996 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to ___________ Commission File Number: 0-21272 Sanmina Corporation (Exact name of registrant as specified in its charter) DELAWARE 77-0228183 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 355 EAST TRIMBLE ROAD, SAN JOSE, CA 95131 (Address of principal executive offices) (Zip Code) 408/435-8444 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Number of shares outstanding of the issuer's common stock, $0.01 par value, as of December 28, 1996: 16,943,308. 1 2 SANMINA CORPORATION INDEX
PART I. FINANCIAL INFORMATION ITEM 1. Interim Financial Statements Condensed Consolidated Statements of Operations 3 Condensed Consolidated Balance Sheets 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Interim Condensed Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 PART II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 6. Exhibits and Reports on Form 8-K 12 Signature 13
2 3 SANMINA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS IN THOUSANDS EXCEPE PER SHARE DATA (UNAUDITED)
Three Months Ended -------------------------------- December 28, December 30, 1996 1995 -------------- --------------- Net sales $ 88,868 $ $52,170 Cost of sales 67,805 39,544 ------------ ------------- Gross profit 21,063 12,626 ------------ ------------- Operating expenses: Selling, general and administrative 5,401 3,385 Amortization of goodwill 501 219 ------------ ------------- Total operating expenses 5,902 3,604 ------------ ------------- Income from operations 15,161 9,022 Interest income (expense), net (122) 151 ------------ ------------- Income before provision for income taxes 15,039 9,173 Provision for income taxes 5,865 3,486 ------------ ------------- NET INCOME $ 9,174 $ 5,687 ============ ============= Earnings per share: Primary $ 0.51 $ 0.33 Fully Diluted $ 0.47 $ 0.32 Shares used in computing per share amounts: Primary 18,076 17,232 Fully Diluted 21,267 20,330
3 4 SANMINA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS IN THOUSANDS
December 28, September 30, 1996 1996 -------------- -------------- ASSETS (unaudited) Current assets: Cash and cash equivalents $ 35,205 $ 29,568 Short-term investments 57,606 85,374 Accounts receivable, net 49,828 30,421 Inventories 45,028 32,109 Deferred income taxes 6,852 6,852 Prepaid expenses and other 1,085 999 ------------ ------------- Total current assets 195,604 185,323 Property, plant and equipment, net 49,905 34,868 Deposits and other 10,411 10,350 ------------ ------------- $ 255,920 $ 230,541 ============ ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 36,133 $ 24,401 Accrued liabilities 12,608 10,209 Income taxes payable 6,990 5,404 ------------ ------------- Total current liabilities 55,731 40,014 ------------ ------------- Long-term liabilities: Convertible subordinated notes 86,250 86,250 Other liabilities 592 592 ------------ ------------- Total long-term liabilities 86,842 86,842 ------------ ------------- Stockholders' equity: Common stock 170 169 Additional paid-in capital 61,994 61,520 Unrealized gain on investments 32 19 Retained earnings 51,151 41,977 ------------ ------------- Total stockholders' equity 113,347 103,685 ------------ ------------- $ 255,920 $ 230,541 ============ =============
See accompanying notes. 4 5 SANMINA CORPORATION CONDENSED STATEMENTS OF CASH FLOWS IN THOUSANDS (UNAUDITED)
Three Months Ended -------------------------------- December 28, December 30, 1996 1995 -------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 9,174 $ 5,687 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 2,841 1,647 Loss on disposal of assets - 11 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (14,378) (1,917) Inventories (3,076) (2,611) Prepaid expenses, deposits and other (649) 18 Accounts payable and accrued liabilities 14,132 2,069 Income tax accounts 1,586 (1,789) ------------ ------------- Cash provided by operating activities 9,630 3,115 ------------ ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of short-term investments 27,781 5 Purchases of property and equipment (4,495) (5,149) Purchase of certain assets of Comptronix Corporation (17,645) - Purchase of certain assets of Lucent Technologies' Custom Manufacturing Operations (10,109) - ------------ ------------- Cash used for investing activities (4,468) (5,144) ------------ ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of long-term liabilities - (106) Proceeds from sale of common stock 475 201 ------------ ------------- Cash provided by financing activities 475 95 ------------ ------------- Increase (decrease) in cash and cash equivalents 5,637 (1,934) Cash and cash equivalents at beginning of period 29,568 107,290 ------------ ------------- Cash and cash equivalents at end of period $ 35,205 $ 105,356 ------------ -------------
See accompanying notes. 5 6 SANMINA CORPORATION NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Basis of Presentation The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules or regulations. The interim financial statements are unaudited, but reflect all adjustments which are, in the opinion of management, necessary for a fair presentation. The results of operations for the three months ended December 28, 1996 are not necessarily indicative of the results that may be expected for the entire year ending September 30, 1997. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto for the year ended September 30, 1996 included in the Company's Annual Report to Shareholders. Note 2 - Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary in Texas. All intercompany accounts and transactions have been eliminated. Note 3 - Inventories The components of inventories are as follows (in thousands):
December 28, September 30, 1996 1996 ----------- ----------- Raw materials $22,988 $13,797 Work-in-process 13,062 10,986 Finished goods 8,978 7,326 ----------- ----------- $ 45,028 $ 32,109 =========== ===========
Note 4 - Earnings per Share Primary earnings per share are computed using the weighted average number of shares of common and dilutive common stock equivalent shares from stock options (using the treasury stock method). Fully diluted earnings per share include the dilutive effect from the assumed conversion of the Company's outstanding convertible subordinated notes. Note 5 - Acquisitions On November 1, 1996, the Company purchased the assets of Comptronix Corporation, a contract manufacturing company based in Guntersville, Alabama, for cash consideration of $17.6 million. The assets include Comptronix' plant and equipment located in Guntersville, its Guaymas, Mexico operations, customer contracts, inventories and accounts receivable. The acquisition was accounted for as a purchase. Accordingly, the results of operations for the quarter ended December 28, 1996 include the results of operations of this business from the date of acquisition forward. 6 7 The unaudited pro forma financial information for the three months ended December 30, 1995 and December 30, 1996 are presented below and assume the acquisition occurred as of the beginning of each of the periods presented (in thousands): Three Months Ended
December 28, December 30, 1996 1995 ----------- ----------- Revenue $92,213 $74,859 Net income $7,705 $4,598 Net income per share: Primary $.43 $.27 Fully diluted $.40 $.26 Weighted average common shares outstanding: Primary 18,076 17,232 Fully diluted 21,267 20,330
Also in November 1996, Sanmina entered into an agreement to purchase substantially all of the inventory and fixed assets of the Lucent Technologies' Custom Manufacturing Services operation in Greensboro, North Carolina. The total purchase price of this transaction was $10.1 million and was paid in cash. The acquisition was accounted for as a purchase. Pro forma financial information has not been presented as the results of operations of the acquired business are not material to the Company's consolidated financial statements. Note 6 - 1996 Supplemental Stock Plan Effective October 1996, the Company's board of directors reserved an additional 50,000 shares for issuance under the 1996 Supplemental Stock Option Plan (the "Supplemental Plan") for a total of 300,000 shares authorized. The Supplemental Plan permits only the grant of nonstatutory options and provides that options must have an exercise price at least equal to the fair market value of the Company's Common Stock on the date of grant. Options under the Supplemental Plan may be granted to employees and consultants, except that executive officers and directors may not be granted options under the Supplemental Plan. At January 31 1997, 292,751 shares were subject to options granted pursuant to the Supplemental Plan. The Company does not intend to issue additional options under the Supplemental Plan. 7 8 SANMINA CORPORATION Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Sanmina Corporation ("Sanmina" or the "Company") is a leading independent provider of customized integrated electronics manufacturing services ("EMS"), including turnkey electronic assembly and manufacturing management services, to original equipment manufacturers ("OEM") in the electronics industry. Sanmina's electronic manufacturing services consist primarily of the manufacture of complex printed circuit board assemblies using surface mount ("SMT") and pin through-hole ("PTH") interconnection technologies, the manufacture of custom designed backplane assemblies, fabrication of complex multi-layer printed circuit boards, and testing and assembly of completed systems. In addition to assembly, turnkey manufacturing management also involves procurement and materials management, as well as consultation on printed circuit board design and manufacturability. Sanmina, through its Golden Eagle Systems ("Golden Eagle") subsidiary, which was acquired in January 1996, also manufactures custom cable assemblies for electronics industry OEMs. Sanmina's manufacturing and assembly plants are located in Northern California, Richardson, Texas, Manchester, New Hampshire, Raleigh, North Carolina, Guntersville, Alabama and Guaymas, Mexico. Golden Eagle's manufacturing facility is located in Carrollton, Texas. Sanmina plans to expand its operations internationally with the opening of an EMS facility in Dublin, Ireland area. Sanmina expects to open this facility in the first half of calendar 1997. Sanmina's operating results are affected by a number of factors, including timing of orders from major customers, mix of products ordered by and shipped to major customers, the volume of orders as related to the Company's capacity, ability to effectively manage inventory and fixed assets, timing of expenditures in anticipation of future sales, economic conditions in the electronics industry and the mix of products between backplane assemblies and printed circuit boards. Operating results can also be significantly influenced by development and introduction of new products by the Company's customers. From time to time, the Company experiences changes in the volume of sales to each of its principal customers, and operating results may be affected on a period-to-period basis by these changes. The Company's customers generally require short delivery cycles, and a substantial portion of the Company's backlog is typically scheduled for delivery within 120 days. Quarterly sales and operating results therefore depend in large part on the volume and timing of bookings received during the quarter, which are difficult to forecast. The Company's backlog also affects its ability to plan production and inventory levels, which could lead to fluctuations in operating results. In addition, a significant portion of the Company's operating expenses are relatively fixed in nature and planned expenditures are based in part on anticipated orders. Any inability to adjust spending quickly enough to compensate for any revenue shortfall may magnify the adverse impact of such revenue shortfall on the Company's results of operations. Results of operations in any period should not be considered indicative of the results to be expected for any future period, and fluctuations in operating results may also result in fluctuations in the price of the Company's Common Stock. Sanmina's customers are manufacturers in the telecommunications, networking (data communications), industrial and medical instrumentation and computer systems segments of the electronics industry. These industry segments, and the electronics industry as a whole, are subject to rapid technological change and product obsolescence. Discontinuance or modification of products containing components manufactured by the Company could adversely affect the Company's results of operations. 8 9 The electronics industry is also subject to economic cycles and has in the past experienced, and is likely in the future to experience, recessionary periods. A general recession in the electronics industry could have a material adverse effect on Sanmina's business, financial condition and results in operations. In addition, the Company has no firm long-term volume commitments from its customers and over the last few years has experienced reduced lead-time in customer orders. In addition, customer orders can be canceled and volume levels can be changed or delayed. The timely replacement of canceled, delayed or reduced orders with new business cannot be assured. There can be no assurance that any of the Company's current customers will continue to use the Company's manufacturing services. The loss of one or more of the Company's principal customers, or reductions in sales to any of such customers, could have a material adverse effect on the Company's business, financial condition and results of operations. Sanmina has pursued, and intends to continue to pursue, business acquisition opportunities, particularly when these opportunities have the potential to enable Sanmina to increase its net sales while maintaining operating margin, access new geographic markets, implement Sanmina's vertical integration strategy and/or obtain facilities and equipment on terms more favorable than those generally available in the market. Acquisitions of companies and businesses and expansion of operations involves certain risks, including (i) the potential inability to successfully integrate acquired operations and businesses or to realize anticipated synergies, economies of scale or other value, (ii) diversion of management's attention, (iii) difficulties in scaling up productions at new sites and coordinating management of operations at new sites and (iv) loss of key employees of acquired operations. No assurance can be given that the Company will not incur problems in integrating acquired operations, and there can be no assurance that the Company's recent acquisitions or any other future acquisition will result in a positive contribution to the Company's results of operations. Furthermore, there can be no assurance that the Company will realize value from any such acquisition which equals or exceeds the consideration paid. In addition, there can be no assurance that the Company will realize anticipated strategic and other benefits from expansion of existing operations to new sites. Any such problems could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, future acquisitions by the Company may result in dilutive issuances of equity securities, the incurrence of additional debt, large one-time write-offs and the creation of goodwill or other intangible assets that could result in amortization expense. This report contains forward-looking statements within the meaning of Section 72A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company's future results from operations could vary significantly from these contemplated by such forward-looking statements as a result of the factors described herein. The financial and other information contained herein should be read in conjunction with the Company's annual report to stockholders annual report on Form 10-K for the fiscal year ended September 30, 1996. 9 10 RESULTS OF OPERATIONS The following table sets forth, for the three months ended December 28, 1996 and December 30, 1995, certain items as a percentage of net sales. The table and the discussion below should be read in connection with the condensed consolidated financial statements and the notes thereto which appear elsewhere in this report.
Three Months Ended 12/28/96 12/30/95 -------- -------- Net sales 100.0% 100.0% Cost of sales 76.3 75.8 Gross Profit 23.7 24.2 Selling, general and administrative 6.1 6.5 Amortization .5 .4 Operating income 17.1 17.3 Interest income (expense) (.2) .3 Income before income taxes 16.9 17.6 Provision for income taxes 6.6 6.7 Net income 10.3 10.9
Sales for the first quarter of fiscal 1997 ended December 28, 1996 increased by 70% to $88.9 million from $52.2 million in the corresponding quarter of the prior year. This increase in net sales is due primarily to increased orders from existing customers, the addition of new customers and growth in the Company's assembly business. The overall increase in net sales reflects the continuing trend toward outsourcing within the electronics industry. For the first quarter of fiscal 1997, approximately 95% of the Company's net sales represented electronic assembly services with the remaining portion representing printed circuit board fabrication revenue. Gross margin decreased from 24.2% in the first quarter of fiscal 1996 to 23.7% in the first quarter of the current year. The decrease in gross margin for the first quarter of 1997 is a result of normal changes in the mix of products shipped to certain customers as well as normal changes in customer mix. The Company expects gross margins to fluctuate based on product mix and customer mix. In absolute dollars, operating expenses increased from $3.6 million in the first quarter of fiscal 1996 to $5.9 million in the first quarter of fiscal 1997. However, as a percentage of sales, operating expenses decreased to 6.6% in the first quarter of the current year from 6.9% in the first quarter of 1996. The dollar increase in selling and general and administrative expenses was primarily the result of increased expenditures to support higher sales volume. Further contributing to the absolute dollar increase in operating expenses for the first quarter of the current year is the amortization of goodwill incurred in the Golden Eagle acquisition. The first quarter of fiscal 1996 reflects goodwill amortization expense related to the Assembly Solutions, Inc. ("ASI") acquisition only, whereas the first quarter of the current year reflects amortization of goodwill for both the ASI and Golden Eagle acquisitions. The Company anticipates that operating expenses will increase in absolute dollars during the next few quarters due to projected additions to the sales force and other administrative expenditures to support higher sales volume. However, operating expenses as a percentage of sales are anticipated to remain relatively constant or decrease depending upon sales volume. For the first quarter of fiscal 1997 the Company reported net interest expense of $122,000 compared to net interest income of $151,000 for the corresponding quarter of last year. The decrease in net interest income during the current quarter was a result of a decrease in cash investments due primarily to the two acquisitions the Company made in November 1996 and, to a lesser extent, to the investment made by the Company during the first quarter of 1997 in manufacturing and assembly equipment and facilities. 10 11 The Company's effective tax rates for the first quarter of fiscal 1997 increased to 39% from 38% for the corresponding period of the prior year. This increase primarily results from the smaller impact that the Company's tax credits have on taxable income as a result of the overall absolute dollar increase in the Company's pretax income. LIQUIDITY AND CAPITAL RESOURCES Cash generated from operations for the three months ending December 28, 1996 was $9.6 million compared to $3.1 million for the first quarter of 1996. The increase between years primarily relates to an increase in net income between periods. Investing activities for the first quarter of the fiscal year 1997 primarily related to the November acquisition of certain assets of Lucent Technologies' Custom Manufacturing Services operation, as well as, the assets of Comptronix Corporation for which it paid a total of approximately $27.8 million in cash. Additionally, the Company purchased $4.5 million in equipment and leasehold improvements in the first three months of fiscal 1997. As a result of these transactions, working capital decreased to $139.9 million as of December 28, 1996 compared to $145.3 million at September 30, 1996. The Company anticipates that its working capital requirements will increase in order to support the anticipated higher volume of business. Additionally, the Company expects to make additional capital expenditures relating to facility and equipment enhancements in existing facilities. The Company has and will continue to evaluate potential acquisition opportunities. The Company currently has no pending agreements, commitments or understandings regarding any specific acquisition. The Company believes that existing cash resources and cash generated from operations will be sufficient to satisfy its working capital requirements through at least the end of the current fiscal year. 11 12 SANMINA CORPORATION PART II. OTHER INFORMATION Item 1: Legal Proceedings The Company is not currently a party to any material pending legal proceedings. Item 6: Exhibits and Reports on Form 8-K a) Exhibits
EXHIBIT NUMBER DESCRIPTION -------- ----------- 27.1 Financial Data Schedule
b) Reports on Form 8-K On November 15, 1996, the Company filed a report on Form 8-K relating to its acquisition of the assets of Comptronix Corporation. On January 15, 1997, the company filed an amendment to this report on Form 8-K containing certain pro forma and other financial information required by Items 2 and 7 of Form 8-K. 12 13 SANMINA CORPORATION SIGNATURE Pursuant to the Requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Sanmina Corporation (Registrant) Date: February 6, 1997 By: /s/ RANDY FURR ------------------------ President, Chief Operating Officer and Acting Chief Financial Officer 13 14 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27.1 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 3-MOS SEP-30-1997 DEC-28-1996 1 35,205 57,606 49,828 2,395 45,028 195,604 76,514 26,609 255,920 55,731 86,842 0 0 170 113,177 255,920 88,868 88,868 67,805 67,805 5,902 265 (122) 15,039 5,865 9,174 0 0 0 9,174 $0.51 $0.47 Interest expense is net of interest income, the net amount is an interest income.
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