Sanmina-SCI Corporation F2Q10 (Qtr End 04/0310) Earnings Call Transcript

Sanmina-SCI Corporation F2Q10 (Qtr End 04/0310) Earnings Call Transcript
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Sanmina-SCI Corporation (SANM)

F2Q10 (Qtr End 04/0310) Earnings Call Transcript

April 26, 2010 5:00 pm ET

Executives

Paige Bombino – Director, IR

Jure Sola – Chairman & CEO

Bob Eulau – EVP & CFO

Hari Pillai – President & COO

Analysts

Jim Suva – Citi

William Stein – Credit Suisse

Louis Miscioscia – Collins Stewart

Sherri Scribner – Deutsche Bank Securities

Christian Schwab – Craig-Hallum Capital

Shawn Harrison – Longbow Research

Sean Hannan – Needham & Company

Ryan [ph] – RBC Capital Markets

Presentation

Operator

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Previous Statements by SANM
» Sanmina-SCI Corporation F1Q10 (Qtr End 01/02/10) Earnings Call Transcript
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» Sanmina-SCI Corporation. F3Q09 (Qtr End 06/27/09) Earnings Call Transcript

Good afternoon. My name is Kirsten and I will be your conference operator today. At this time, I would like to welcome everyone to the Sanmina-SCI second quarter fiscal 2010 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions) Thank you.

I would now like to turn the call over to our host, Ms. Paige Bombino, Director of Investor Relations. Please go ahead.

Paige Bombino

Thank you, Kirsten. Good afternoon, ladies and gentlemen and welcome to Sanmina-SCI's second quarter fiscal 2010 earnings call. Today's call is being recorded and is posted along with a copy of the earnings release and a slide presentation on the quarter at www.sanmina-sci.com in the Investor Relations section. You can follow along with our prepared remarks in the slides posted on our Website.

Please turn to slide two, the Safe Harbor statement. During this conference call, we may make projections or other forward-looking statements regarding the future events or future financial performance of the company. We caution you that such statements are just projections. The company's actual results of operations may differ significantly as a result of various factors, including the state of the economy, economic conditions in the electronics industry, changes in customer requirements and sales volume, competition, and technological change.

We refer you to our documents the company files from time to time with the Securities & Exchange Commission. These documents contain and identify important factors that could cause actual results to differ materially from our projections or forward-looking statements. You'll note in our press release issued today that we have provided you with a statement of operations for the three months ended April 3rd, 2010 on a GAAP basis, as well as certain non-GAAP financial information.

A reconciliation between the GAAP and non-GAAP financial information is also provided in the press release and is posted on our Website. In general, our non-GAAP information excludes restructuring and integration costs, impairment charges, gains or losses of extinguishment of debt, non-cash stock-based compensation expense, amortization expense, and other infrequent or unusual items to the extent material.

Any comments we make on this call as they relate to the income statement measures will be directed at our non-GAAP financial results. Accordingly, unless otherwise stated in this conference call, when we refer to gross profit, gross margin, SG&A and R&D expenses, operating income, operating margin, net income and earnings per share, we are referring you to our non-GAAP information.

I would now like to turn the call over to Jure Sola, Chairman and Chief Executive Officer.

Jure Sola

Thanks, Paige. Good afternoon ladies and gentlemen and welcome. Thank you for all being here today. Joining me on today’s conference call is Bob Eulau, our CFO.

Bob Eulau

Good afternoon everyone.

Jure Sola

Hari Pillai, our President and Chief Operating Officer.

Hari Pillai

Good afternoon everybody.

Jure Sola

On

today’s agenda, we have for you, that Bob Eulau will review our financial results for the second quarter of fiscal year 2010. Then I will follow with some comments relative to Sanmina-SCI results and future goals. Then Bob, Hari, and I will open for Q&A.

And now, I would like to turn the call over to Bob. Bob?

Bob Eulau

Thanks, Jure. Please turn to slide 3. As you can see, we had another solid quarter from a financial perspective. Revenue of $1.53 billion was up 3% on a sequential basis and up 28% over the second quarter last year. This was at the high end of our guidance of $1.45 billion to $1.55 billion and follows the December quarter when we had 9% sequential growth.

The revenue growth coupled with the restructuring and other cost reduction actions completed last year led to an additional 20 basis points sequential increase in gross margin to 7.8% on a non-GAAP basis. This implies a contribution of 15.8% on the incremental revenue, which was a little better than the range of 10% to 15% that we had expected. Having aside [ph], while there has been some variability by quarter, our contribution margin over the last 12 months has been 14.7%.

Accordingly, we believe that a 10% to 15% contribution margin over the next few quarters continues to be very achievable. Non-GAAP EPS was at $0.29 per share. This was based on 82.8 million shares outstanding on a fully diluted basis.

Please turn to slide four. I will start by making a few comments on the GAAP numbers. For the second quarter, we reported a GAAP net income of approximately $10 million, which is equal to $0.12 per share. The decline in GAAP net income from last quarter is primarily related to the one-time benefit that we received last quarter. Restructuring totaled $3.9 million for the quarter, which was up slightly from $3.3 million last quarter.

We will continue to see some minimal restructuring charges on our GAAP P&L of approximately $3 million to $4 million per quarter that relate to the cost for past restructuring actions that are booked as incurred in accordance with GAAP. These expenses primarily relate to real estate which is held-for-sale. We expect these expenses to decline overtime as properties are sold. My remaining comments will focus on the non-GAAP financials for the second quarter.

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