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Sanmina Corporation Message Board

  • Stocksystm Stocksystm Aug 14, 2002 9:45 PM Flag

    Bear Stearns

    I copied this from Raging Bull:

    More from Bear Stearns...

    Granted the report is a few weeks old, but nevertheless, it is helpful information...

    Key Points
    *** Down as much as 29% intraday yesterday from its intraday high, we believe selling in Sanmina-SCI�s stock related to
    Moody�s review is overdone: (1) operating margins have bottomed, (2) the company is heading into seasonal strength for
    revenues, and (3) free cash flow generation is robust.

    *** Operating margins bottomed in March, improving 19 basis points to 1.12% (after intangible amortization), or 20%
    sequentially in June and we currently expect operating margins to increase again in September to 1.25%.

    *** Sanmina-SCI is going into a period of seasonal strength in PCs (39% of total sales) with key customers including HP
    (10%+ of sales), IBM (10%+ of sales), Dell, and Compaq. Sanmina-SCI also manufactures HP Inkjet printers (a shared
    program with Flextronics).

    *** The company�s balance sheet improved in the June quarter and it generated significant free-cash flow. Sanmina-SCI�s
    debt-to-cap ratio is 30%, its cash on the balance sheet increased by $153 million to $1.1 billion, which is attributable
    primarily to ongoing inventory reductions.

    Inventories were reduced $29.6 million or 4% in the quarter (excluding inventory from acquisitions, it would have
    declined $100 million or 8% sequentially) which combined with the 8.6% sales increase led to a solid rise in inventory
    turns from 7.1x to 7.9x.

    Accounts receivable decreased $58 million from $1.5 billion to $1.4 billion, largely as a result of the company�s ongoing
    focus on improving collections, although DSOs showed no measurable improvement remaining at 51 days.

    Cash conversion cycle (CCC) days improved from 56 days to 51 days versus a proforma peak of 78 in September 2001.
    Cash flow from operations was approximately $365 million in Q3; after capital expenditures of $35 million, the company
    generated approximately $330 million in free cash flow during the quarter (versus $278 million last quarter) of which
    approximately $150 million was spent on acquisitions.

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