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Electronics Production | January 26, 2006

Sanmina-SCI Q1 earnings fell 13 %

EMS provider Sanmina-SCI Corp. reported that its first-quarter profit fell 13 percent because of one-time charges and declining sales.
For the first quarter ended December 31, 2005, Sanmina-SCI reported revenue of $2.86 billion, an increase of 3.5%, from $2.77 billion in the fourth quarter of fiscal 2005 ended October 1, 2005.

Net income for the first fiscal quarter of 2006 was $39.6 million, up 26.4% over the fourth quarter. Diluted earnings per share for the quarter was $0.08. Operating income was $76.1 million, up 21.9% over the fourth quarter of fiscal 2005. Operating income as a percentage of revenue for the quarter was 2.7% versus 2.3% for the prior quarter and 2.5% for the first quarter of fiscal 2005. Gross profit was $171.1 million, up 11.1% over the fourth quarter of fiscal 2005. Gross margin was 6.0%, up from the prior quarter of 5.6% and up from 5.4% in the first quarter of fiscal 2005.

For the first quarter of fiscal 2006, the company reported net income of $21.2 million, versus $5.3 million for the fourth quarter fiscal 2005 and $24.4 million for the same period a year ago. Diluted earnings per share for the quarter were $0.04.

The GAAP financial statements for the first quarter 2006 included a one-time favorable income tax adjustment of $64.0 million relating to previously-accrued income taxes that were reversed as a result of a settlement reached with the U.S. Internal Revenue Service. The settlement was in relation to certain U.S. tax audits that were concluded during the quarter.

Notification of approval of the settlement by the Congressional Joint Committee on Taxation was received following the filing of the Company's annual report on Form 10-K for fiscal 2005. Of the $64.0 million adjustment, $27.9 million was recorded as an income tax benefit to earnings. The remaining $36.1 million was recorded as an adjustment to goodwill for pre-merger tax items associated with SCI Systems. (Non-GAAP results exclude this one-time benefit.)

At December 31, 2005, the Company reported $1.04 billion in cash and cash equivalents and short-term investments. At quarter-end, the Company reported a current ratio of 1.8, working capital of $1.79 billion, and stockholders' equity of $2.4 billion.

"This was a good quarter for Sanmina-SCI as we saw improvements in our business. These improvements in our first quarter can be attributed in large part to our continued focus on the fundamentals, improved product mix and improved operating efficiencies. Though there is still more work to be done, we do believe the Company is well positioned for long-term growth," stated Jure Sola, Chairman and Chief Executive Officer of Sanmina-SCI

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