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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: April 28, 1999
(Date of earliest event reported: April 28, 1999)
Commission File Number: 0-21272
SANMINA CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 77-0228183
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(State of incorporation or organization) (IRS Employer I.D. No.)
355 East Trimble Road, San Jose, California 95131
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(Address of principal executive offices)
(408) 954-5500
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(Registrant's telephone number, including area code)
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Item 5. Other Events
In November 1998, Sanmina Corporation ("Sanmina" or the "Company")
completed the acquisition of Altron, Incorporated ("Altron") in a transaction
accounted for as a pooling of interests. In March 1999, Sanmina completed the
acquisition of Manu-Tronics, Inc. ("Manu-Tronics") in a transaction accounted
for as a pooling of interests. As a result of these pooling transactions,
Sanmina has restated its historical results of operations to combine the results
of operations of Altron and Manu-Tronics.
Set forth below are restated selected consolidated financial data for
Sanmina for the years ended September 30, 1994, 1995, 1996, 1997 and 1998 and
the fiscal quarters ended December 27, 1997 and January 2, 1999.
Also set forth below is a Management's Discussion and Analysis of
Financial Condition and Results of Operations covering the Company's results of
operations for the fiscal years ended September 30, 1996, 1997 and 1998 and the
quarters ended December 27, 1997 and January 2, 1999. This Management's
Discussion and Analysis of Financial Condition and Results of Operations
discussion has been prepared based on the restated financial information.
The Company will on or prior to May 4, 1999 file an amendment to its
report on Form 10-K for the year ended September 30, 1998 and an amendment to
its report on Form 10-Q for the quarter ended January 2, 1999, each of which
will contain restated financial statements and information.
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Selected Consolidated Financial Data:
THREE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, -------------------------
------------------------------------------------------------- DECEMBER 27, JANUARY 2,
1994 1995 1996 1997 1998 1997 1999
--------- --------- --------- --------- --------- ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIO DATA)
STATEMENT OF OPERATIONS DATA:
Net sales .............................. $ 360,034 $ 469,394 $ 617,487 $ 803,064 $ 991,821 $ 220,671 $ 275,533
Gross profit ........................... 63,295 94,156 132,800 162,420 207,872 46,030 52,284
Selling, general and administrative
expenses ............................ 32,618 36,278 45,483 63,856 67,165 15,558 20,079
Amortization of goodwill ............... 665 568 2,000 2,283 3,127 636 751
Write-off of goodwill .................. 11,190 -- -- -- -- -- --
Write down of long-lived assets ........ -- -- -- -- -- -- 11,400
Provision for restructuring of
operations .......................... 5,729 -- -- -- -- -- --
Provision for plant closing costs ...... -- -- -- 8,876 -- -- 16,875
Merger costs ........................... -- -- -- -- 3,945 3,945 5,479
Operating income (loss) ................ 13,093 57,310 85,317 87,405 133,635 25,891 (2,300)
--------- --------- --------- --------- --------- --------- ---------
Other income (expense), net ............ (2,560) (681) (760) (1,691) (272) (244) 1,738
Income (loss) before provision
for income taxes and
extraordinary item .................. 10,533 56,629 84,557 85,714 133,363 25,647 (562)
Gain from exchange of
convertible subordinated
debentures for common stock,
net of expenses ..................... 10,167 1,833 -- -- -- -- --
Net income (loss) ...................... $ 8,361 $ 37,497 $ 55,014 $ 49,356 $ 85,629 $ 16,266 $ (562)
========= ========= ========= ========= ========= ========= =========
Diluted earnings (loss) per share:
Income (loss) before
extraordinary item .................. $ (.05) $ .76 $ 1.04 $ .91 $ 1.52 $ .29 $ (.01)
Extraordinary item ..................... .26 .04 -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) per share ............ $ .21 $ .80 $ 1.04 $ .91 $ 1.52 $ .29 $ (.01)
========= ========= ========= ========= ========= ========= =========
Shares used in computing per
share amounts ....................... 39,737 47,972 55,666 57,616 58,597 58,437 57,380
AS OF SEPTEMBER 30, AS OF
-------------------------------------------------------- JANUARY 2,
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- ----------
BALANCE SHEET DATA:
Cash, cash equivalents and
short-term
investments ......................... $ 37,752 $150,439 $155,069 $152,520 $181,504 $129,768
Working capital ........................ 71,493 200,703 228,620 251,350 300,337 274,152
Total assets ........................... 184,238 368,858 450,134 553,478 658,367 677,840
Long-term debt ......................... 30,861 113,997 117,726 120,307 19,408 21,792
Stockholders' equity ................... 95,039 166,493 233,959 297,870 481,985 487,213
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
Statements in this discussion and analysis include forward-looking
information statements within the meaning of Section 27A of the Securities Act
of 1933, as amended and Section 21E of the Securities and Exchange Act of 1934,
as amended. These statements involve known and unknown risks and uncertainties.
Our actual results in future periods may be significantly different from any
future performance suggested in this Memorandum. References to "Sanmina" or the
"Company" refer to Sanmina Corporation and its subsidiaries, unless the context
requires otherwise or the text indicates otherwise.
OVERVIEW
Sanmina is a leading independent provider of customized integrated
electronic manufacturing services ("EMS"), including turnkey electronic assembly
and manufacturing management services, to original equipment manufacturers
("OEM") in the electronics industry. Sanmina's electronics 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-layered 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 manufacturing. Sanmina,
through its Sanmina Cable Systems ("SCS") subsidiary (formerly known as Golden
Eagle Systems), also manufactures custom cable and wire harness assemblies for
electronic industry OEMs. In addition, as part of the Elexsys International
("Elexsys") acquisition completed in November 1997, the Company acquired and
currently operates a metal stamping and plating business.
Sanmina's assembly plants are located in Northern California,
Richardson, Texas, Manchester, New Hampshire, Durham, North Carolina,
Guntersville, Alabama, and Dublin, Ireland. Sanmina's printed circuit board
fabrication facilities are located in Northern California, Southern California,
and Nashua, New Hampshire. SCS's manufacturing facility is located in
Carrollton, Texas. As a result of Sanmina's November 1998 merger with Altron
Incorporated ("Altron"), Sanmina has added new fabrication and assembly plants
in the Boston, Massachusetts area, Northern California, and Richardson, Texas.
In addition, as a result of Samina's recent acquisitions of Telo Electronics
Incorporated ("Telo") and Manu-Tronics, Inc. ("Manu-Tronics"), Sanmina has added
new assembly plants in San Jose, California and in Kenosha, Wisconsin.
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 margins, to access new geographic markets, to implement Sanmina's
vertical integration strategy and/or to obtain facilities and equipment on terms
more favorable than those generally available in the market.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 2, 1999 AND DECEMBER 27, 1997
The following table sets forth, for the three months ended January 2,
1999 and December 27, 1997, certain items as a percentage of net sales.
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THREE MONTHS ENDED
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JANUARY 2, 1999 DECEMBER 27, 1997
--------------- -----------------
Net sales .................................................. 100.0% 100.0%
Cost of sales .............................................. 81.0 79.1
Gross Profit ............................................ 19.0 20.9
Selling, general and administrative ........................ 7.3 7.1
Amortization of goodwill ................................... .3 .3
Provision for plant closing and relocation ................. 6.1 --
Write down of long lived assets ............................ 4.1 --
Merger costs ............................................... 2.0 1.8
Operating income (loss) ................................. (.8) 11.7
Other income (expense), net ................................ .6 (.1)
Income (loss) before income taxes ....................... (.2) 11.6
Provision for income taxes ................................. -- 4.2
Net income (loss) .......................................... (.2)% 7.4%
Net Sales. Net sales for the first quarter of fiscal 1999 ended January
2, 1999 increased by 25% to $275.5 million from $220.7 million in the
corresponding quarter of the prior year. The increase in net sales was due
primarily to increased shipments of EMS assemblies to both existing and new
customers. The Company experienced growth across the customer base and its four
key target markets of telecommunications, networking (data communications),
industrial and medical instrumentation and high-speed computer systems. The
overall increase in net sales reflects the continuing trend toward outsourcing
within the electronics industry. For the first quarter of fiscal 1999,
approximately 87% of the Company's net sales represented value-added EMS
assembly shipments with the remaining portion consisting of printed circuit
board fabrication shipments. For fiscal 1998, EMS assembly revenues comprised
84% of Sanmina's revenues. The increase in the percentage of revenues
represented by EMS assembly revenues was mainly due to the increased shipments
of EMS assemblies to both existing and new customers.
Gross Margin. Gross margin decreased from 20.9% in the first quarter of
fiscal 1998 to 19.0% in the first quarter of the current year. The decrease in
gross margins for the first quarter of fiscal 1999 was primarily attributable to
charges recorded in the first quarter of fiscal 1999 related to the write down
of obsolete inventory and assets from acquired companies. Excluding these
charges of $7.5 million, gross margins would have increased from 20.9% in the
first quarter of fiscal 1998 to 21.7% in the first quarter of the current year.
The increase is a result of normal changes in the mix of products shipped to
certain customers and normal changes in customer mix. Due to increased
competition, product and customer mix, the Company may experience future
decreases in gross margins.
Operating Expenses. In absolute dollars, operating expenses increased
from $20.1 million in the first quarter of fiscal 1998 to $54.6 million in the
first quarter of fiscal 1999. As a percentage of sales, operating expenses
increased from 9.2% in the first quarter of 1998 to 19.8% in the first quarter
of the current year. The increase in operating expenses for the first quarter of
fiscal 1999 was mainly attributable to certain charges recorded in the first
quarter of fiscal 1999. These charges of $36.1 million related to plant closing
and relocation costs, write down of long lived assets, merger and other costs.
The first quarter of fiscal 1998 included a charge of $3.9 million for merger
related costs associated with the acquisition of Elexsys International, Inc.
Operating margins decreased from 11.7% in the first quarter of 1998 to (.8%) in
the first quarter of the current year. The decrease in operating margins is due
to the charges, discussed above, recorded in the first quarter of fiscal 1999.
Excluding these charges, operating margins would have increased from 13.5% in
the first quarter of fiscal 1998 to 15.0% in the first quarter of the current
year. The increase was primarily attributable to the Company's ability to grow
revenues at a faster rate than operating expenses.
The operating margins reflect the Company's strategy of seeking to grow
revenues while maintaining operating margins at relatively constant levels. The
dollar increase in selling and general and administrative expenses was primarily
the result of increased expenditures to support higher sales volume. 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
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higher sales volume. However, operating expenses as a percentage of sales are
anticipated to remain relatively constant or decrease depending upon sales
volume and the Company's ability to achieve expected operating efficiencies as a
result of the integration of the merged Altron operations.
Other Income and Expense. For the first quarter of fiscal 1999, the
Company reported net other income of $1.7 million compared to net other expense
of $244,000 for the corresponding quarter of last year. In the first quarter of
fiscal 1998, the Company repaid approximately $12.8 million of outstanding
Elexsys debt. In addition, in August 1998, $86.3 million of outstanding
convertible subordinated notes, issued by the Company in August 1995, were
converted into Common Stock as a result of a redemption call for such notes
issued by the Company. The decrease in outstanding debt resulted in the
reduction in interest expense for the first three months of fiscal 1999.
Provision for Income Taxes. As there was a net loss for the three
months ended January 2, 1999, the Company did not record an income tax benefit.
The Company's provision for income taxes for the three month period ended
December 27, 1997 was based upon the Company's estimate of the effective tax
rate for fiscal 1998 of 36.5%.
FISCAL YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
The following table sets forth, for the periods indicated, certain
statements of operations data expressed as a percentage of net sales.
YEARS ENDED SEPTEMBER 30,
------------------------------
1998 1997 1996
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Net sales ........................................ 100.0% 100.0% 100.0%
Cost of sales .................................... 79.0 79.8 78.5
Gross profit ..................................... 21.0 20.2 21.5
Operating expenses:
Selling, general and administrative ........... 6.8 7.9 7.4
Amortization of goodwill ...................... .3 .3 .3
Plant closure costs ........................... -- 1.1 --
Merger costs .................................. .4 -- --
Total operating expenses ......................... 7.5 9.3 7.7
Operating income ................................. 13.5 10.9 13.8
Other expense, net ............................... (.1) (.2) (.1)
Provision for income taxes ....................... 4.8 4.5 4.8
Net income (loss) ................................ 8.6% 6.2% 8.9%
Net Sales. Net sales in fiscal 1998 increased 23.5% to $991.8 million
from $803.1 million in fiscal 1997, which was an increase of 30.1% from fiscal
1996 sales of $617.5 million. The increase in net sales for fiscal 1998 was due
primarily to increased shipments of EMS assemblies to both existing and new
customers. The increase in net sales for fiscal 1997 was the result of increased
volumes of business from established customers, the addition of several new
major customers during the year and the addition of customers resulting from
acquisitions completed during the year. EMS assembly revenues represented 84.0%
of net sales in 1998 as compared to 78.8% in 1997 and 73.7% in 1996. During
these periods, Sanmina's printed circuit board fabrication operations focused
increasingly on manufacturing printed circuit boards used in EMS assemblies
manufactured by the Company, rather than manufacturing "bare" boards for sale to
third parties. Growth in EMS assembly revenues during these periods was
influenced by the electronics industry trend towards outsourcing, expansion of
the Company's operations, both through acquisitions and Company-originated
expansions, and a generally positive economic environment in the
telecommunications, networking (data communications) and industrial and medical
instrumentation segments of the electronics industry. These segments continued
to experience overall growth during these periods.
Gross Margin. Gross margin was 21.0%, 20.2%, and 21.5% in fiscal 1998,
1997, and 1996 respectively. The Company expects gross margins to continue to
fluctuate based on product mix and customer mix. The increase in gross margin
for fiscal 1998 was due to the Company's ability to realize
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synergies associated with the Elexsys acquisition. Gross margin decreased to
20.2% in fiscal 1997 from 21.5% for fiscal 1996. The decline in gross margin was
primarily the result of the Elexsys acquisition, which had a lower gross margin
on a stand-alone basis. As part of the Elexsys acquisition, Sanmina assumed
certain backlog obligations which, combined with the increased overhead
associated with the acquisition, negatively affected gross margins during fiscal
1997. Synergies achieved through integration of acquired operations, including
the former operations of Elexsys, have contributed to the increase in gross
margins experienced in 1998. As the integration of these operations is complete,
the Company does not anticipate achieving incremental gross margin improvements
in future periods as a result of synergies achieved in connection with these
acquisitions. Due to increased competition, product and customer mix, the
Company may experience decreases in gross margins. Due to the nature of the
Altron operations, which are most heavily concentrated in the Boston,
Massachusetts area, and the gross margin improvements achieved during fiscal
1998, the Company does not believe that synergies which may be realized from the
Altron acquisition will enable it to achieve gross margin improvements during
fiscal 1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal 1998, 1997 and 1996 were $67.2 million, $63.9
million, and $45.5 million respectively. The percentage decreases in selling,
general and administrative expenses for fiscal 1998 were due to the Company's
ability to realize synergies associated with the Elexsys acquisition.
This also reflects the Company's strategy of seeking sales growth while
maintaining or reducing operating expenses as a percentage of net sales. The
absolute dollar increases in selling, general and administrative expenses from
fiscal 1996 to 1997 were primarily the result of increased expenditures to
support higher sales volume.
Amortization of Goodwill. The Company incurred $3.1 million, $2.3
million and $2.0 million in amortization expense for fiscal years 1998, 1997 and
1996 respectively. These amortization expenses reflect the amortization of
goodwill related to acquisitions, which were accounted for as purchase
transactions, including the January 1996 acquisition of SCS and the February
1998 acquisition of Pragmatech.
Merger Costs. In 1998, the Company recorded a charge of $3.9 million
related to the acquisition of Elexsys. In addition, in connection with the
acquisition of Altron, the Company recorded a $5.5 million charge during the
first quarter of fiscal 1999.
Other Income and Expense. In fiscal 1998, net other expense was
$272,000 as compared to net other expense of $1.7 million and $760,000 in fiscal
1997 and 1996, respectively. For fiscal 1998, the decrease in net other expense
was the result of a decrease in outstanding debt. In the first quarter of fiscal
1998, the Company paid approximately $12.8 million of outstanding Elexsys debt.
In addition, in August 1998, $86.3 million of outstanding convertible
subordinated notes, issued by the Company in August 1995, were converted into
Common Stock as a result of a redemption call for such notes issued by the
Company. For fiscal 1997, the increase in net other expense was a result of
interest expense on the $86.3 million of convertible subordinated notes, and a
decrease in short-term investments in fiscal 1997 compared to fiscal 1996. These
reduced short-term investment balances were due to a decline in the Company's
cash balances as a result of the use of cash to fund certain acquisitions and
capital improvement programs during fiscal 1997.
Provision for Income Taxes. For fiscal 1998, 1997 and 1996, the
Company's effective tax rate was 35.8%, 42.4% and 34.9%, respectively. The
effective rate in 1997 increased from fiscal 1996 because the fiscal 1997 losses
of Elexsys were not tax benefited. For fiscal 1998, the rate decreased as
utilization of net operating loss carryforwards of Elexsys were recognized.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents, and short-term investments as of January 2,
1999 were $129.8 million as compared to $181.5 million at September 30, 1998.
The decrease was mainly attributable to a long-term
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cash deposit of $52.9 million made in connection with the Company's operating
lease for its new campus facility. For the three months ending January 2, 1999,
cash generated from operations was $16.9 million compared to $36.4 million for
the same period of fiscal 1998. The decrease between years primarily relates to
the one-time charges, approximately $43.6 million, recorded in the first quarter
of fiscal 1999. Working capital decreased to $274.2 million as of January 2,
1999 compared to $300.3 million at September 30, 1998. This was mainly due to
the use of cash for the long-term deposit.
Net cash used for investing activities for the first three months of
fiscal 1999 primarily related to the purchase of short-term and long-term
investments and equipment for which the Company paid a total of approximately
$38.9 million in cash. Additionally, in the first quarter of fiscal 1999, the
Company paid approximately $10.1 million in cash for acquisitions.
Net cash provided by financing activities for the first three months of
fiscal year 1999 related to the proceeds from sale of common stock. The proceeds
were slightly offset by $2.1 million paid for other long-term liabilities.
The Company has entered into an operating lease agreement for new
facilities in San Jose, California, where it will establish its corporate
headquarters and certain of its assembly operations. In connection with these
transactions, the Company pledged $52.9 million of its cash and investments as
collateral for certain obligations of the leases.
The Company generated cash from operating activities of $107.5 million,
$77.4 million and $58.4 million in fiscal years 1998, 1997 and 1996,
respectively. These increases in cash generated from operations each year were
primarily due to the Company's increase in profitability. In August 1998, the
Company called for redemption an aggregate principal amount of $86.3 million in
convertible subordinated notes which were originally issued in August 1995. The
notes were converted to Sanmina Common Stock at a price of $14.09 per share, or
70.94 shares of Sanmina's Common Stock per $1,000 principal amount of Notes.
Cash was paid in lieu of fractional shares.
Cash used for investing activities, including net purchases of
short-term investments, during fiscal 1998, 1997 and 1996 was $52.9 million,
$78.0 million and $139.2 million, respectively. Investing activities during 1998
included $55.3 million in property, plant and equipment. Additionally, on
February 23, 1998, the Company paid approximately $5.7 million in cash to
acquire Pragmatech.
During fiscal 1997, investing activities included the November 1996
acquisition of the assets of the former Comptronix Corporation for which the
Company paid cash of approximately $17.6 million, as well as investments in
property, plant and equipment of $70.7 million. Investing activities during 1996
included investments in property, plant and equipment at the Company's EMS
operations in New Hampshire, Texas and North Carolina and equipment upgrades at
the Company's printed circuit board fabrication facilities.
Cash used for financing activities was $19.5 million in fiscal 1998. In
fiscal 1998, the Company paid approximately $7.5 million in outstanding debt.
The payments for other long-term liabilities of $25.4 million, which included
the $12.8 million of outstanding Elexsys debt, were offset by the proceeds from
exercise of stock options and stock purchase rights of $11.1 million. Cash
provided by financing activities was $9.3 million and $4.6 million in fiscal
1997 and 1996, respectively. Financing activities in fiscal 1997 and 1996
consisted primarily of receipt of proceeds from exercise of stock options and
stock purchase rights.
The Company's future needs for financial resources include increases in
working capital to support anticipated sales growth and investment in
manufacturing facilities and equipment. Working capital was $300.3 million at
September 30, 1998. The Company has evaluated and will continue to evaluate
possible business acquisitions. In this regard, the Company anticipates
incurring facilities related expenditures during fiscal 1999 in connection with
the relocation of its San Jose, California area assembly facilities and its
corporate headquarters to a new campus facility.
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The Company believes that its capital resources, together with cash
generated from operations, will be sufficient to meet its working capital and
capital expenditure requirements through at least the next twelve months. The
Company may seek to raise additional capital through the issuance of either debt
or equity securities. Debt financing may require the Company to pledge assets as
collateral and comply with financial ratios and covenants.
Equity financing may result in dilution to stockholders.
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amendment to report on Form 8-K to be signed
on its behalf by the undersigned hereunto duly authorized.
SANMINA CORPORATION
By: /s/ Randy W. Furr
------------------------------------
Randy W. Furr,
President and
Chief Operating Officer
Date: April 28, 1999