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Electronics Production | April 23, 2009

Sanmina-SCI post loss in Q2, but saw signs of stabilization in March

Sanmina-SCI’s eevenue for the second quarter was $1.2 billion, compared to $1.4 billion in the prior quarter ended December 27, 2008. GAAP net loss in the second quarter was $37.5 million, compared to a net loss of $25.3 million in the prior quarter.
Non-GAAP gross profit in the second quarter was $70.6 million, or 5.9 percent of revenue, compared to gross profit of $95.9 million, or 6.7 percent of revenue in the first quarter. Non-GAAP operating income was $11.4 million, or 1 percent of revenue in the quarter compared to $31.2 million, or 2.2 percent of revenue in the prior quarter.

Non-GAAP net loss in the second quarter was $30.9 million, compared to a net loss of $768 thousand in the prior quarter.

"The difficult economic challenges we continued to face in the second quarter impacted all of our market segments. Demand was weak in January and February, but we did see signs of stabilization in March. As we await further economic recovery, we are cautiously optimistic that the third quarter will continue to stabilize," stated Jure Sola, Chairman and Chief Executive Officer.

"We continue to make progress in those areas we can control and I am pleased with our ability to manage our working capital metrics and generate cash in the second quarter. Our cash position increased $55 million sequentially while we retired $34 million of debt in the quarter. We are well positioned to weather the economic uncertainties with a strong balance sheet and a healthy debt maturity profile. We remain focused on cost reduction initiatives, inventory management, positive cash flow generation, increased liquidity and providing innovative technology to our customers."

Third Quarter Fiscal 2009 Outlook
The following internal forecast for the third fiscal quarter ending June 27, 2009 is based on current market demand. These statements are forward-looking and actual results may differ materially.

"Short-term visibility has improved slightly as we enter the third quarter. We are taking aggressive actions to make the company more efficient at the current revenue level which will allow us to enhance our future financial performance as market demand normalizes," concluded Sola.

Management excludes certain charges and expenses from the data it uses to evaluate the condition of the business because, in its view, such charges and expenses do not relate to the ongoing core operations of the business. For example, the features and costs of products and the locations of manufacture can change over time, and these changes in some instances may require reorganization or closure of certain plants and the layoffs of related employees. These actions, in turn, generate restructuring expense applicable to the particular plant reorganized or closed. Including these charges in the operating results evaluated by management would prevent the Company from discovering the underlying performance of individual plants or business units which, but for changes in customer requirements, would have continued operations. Such individual plant-level information is consolidated to present to management a view of the Company's operations as a whole. Similarly, since not all employees hold equal numbers of stock options, inclusion of stock compensation expense in operating results would decrease the perceived performance of business units whose employees hold more stock options compared to business units whose employees hold fewer stock options. As a result, management can only discover long-term trends in the Company's core business operations by evaluating key operational expenses such as ongoing purchases of inventory for assembly, payment of payroll obligations for continuing employees, interest expense relating to the Company's debt obligations and lease payments for operating facilities. Moreover, we believe the exclusion of these charges provides for a more accurate comparison of our results to those of our peers due to the varying available valuation methodologies, subjective assumptions and variety of award types.’

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