Sanmina-SCI Corporation (SANM) F2Q 2012 Earnings Call April 24, 2012 5:00 p.m. EDT Executives Paige Bombino – IR Director Jure Sola – Chairman and CEO Bob Eulau – CFO Analysts Sean Hannan – Needham & Company Craig Hettenbach – Goldman Sachs Wamsi Mohan – Bank of America Shawn Harrison – Longbow Research Brian Alexander – Raymond James & Associates Jim Suva – Citigroup Sherri Scribner – Deutsche Bank Christian Schwab – Craig-Hallum Capital Group Austin Bernandez – Analyst Amit Daryanani – RBC Capital Markets Presentation Operator
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You will note in our press release and slides issued today that we have provided you with statements of operations for the three months and six months ended March 31, 2012 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 slides posted on our website. In general, our non-GAAP information excludes restructuring costs, acquisition and integration costs, 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 it relates to the income statement measures will be directed at our non-GAAP financial results. Accordingly, unless otherwise stated in the conference call, when we refer to gross profit, gross margin, operating income, operating margin, net income and earnings per share, we are referring 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 to our conference call. Here with me today is Bob Eulau, our CFO. Bob Eulau Good afternoon, everyone. Jure Sola Well, the agenda we have today is that Bob will review our financial results for the second quarter fiscal year 2012. I will follow up with the comments relative to Sanmina-SCI results and future goals. Then Bob and I will open for question-and-answers. And now I would like to turn the call over to Bob. Bob Eulau Okay. Thanks, Jure. And please turn to slide three. Overall, the second quarter was challenging but not significantly different from what we had expected. Revenue of $1.46 billion was down 2.6% on a sequential basis and down 6.8% from the second quarter last year. This was at the low end of our guidance of $1.45 billion to $1.55 billion.
Our gross margin came in at 7.4%, which was up 10 basis points from the first quarter. Operating margin declined 20 basis points from the first quarter to 3.1%. Non-GAAP EPS was $0.27, which was at the midpoint of our guidance for the quarter. This was based on 84.1 million shares outstanding on a fully diluted basis.Finally, cash generation was strong this quarter, with cash flow from operations of $60 million and free cash flow at $46 million. I’ll discuss cash in more detail in a few minutes. Please turn to slide four. Revenue was down 2.6% or $39 million from Q1 to $1.46 billion. From a GAAP perspective, we reported a net loss of approximately $1 million, which results in earnings per share of negative $0.02. This was down relative to last quarter by $0.12. The GAAP loss included a $6.5 million charge for the call premium and unamortized issuance costs associated with the redemption of $150 million of debt during the quarter. There was also a $2.8 million reserve that was taken for a customer that declared bankruptcy during the quarter. Restructuring costs totaled $5.5 million for Q2. The cost primarily reflects what we’ve been recognizing as expenses are incurred related to real estate. Looking forward, we will continue to see some ongoing restructuring charges on our GAAP P&L of approximately $4 million to $5 million per quarter that primarily relate to real estate which is being held for sale. My remaining comments will focus on the non-GAAP financials for the second quarter. At $108 million, gross profit was down $2 million from the prior quarter. Gross margin came in at 7.4%, which was 10 basis points higher than the previous quarter. Gross margin was towards the high end of the range that we had anticipated for the quarter. Read the rest of this transcript for free on seekingalpha.com