Paige Bombino - Vice President-Investor Relations Jure Sola - Chairman & Chief Executive Officer Robert K. Eulau - Chief Financial Officer & Executive Vice President.

Osten H. Bernardez - Cross Research LLC Sean K. F. Hannan - Needham & Co. LLC Joe H. Wittine - Longbow Research LLC Mark Trevor Delaney - Goldman Sachs & Co. James Dickey Suva - Citigroup Global Markets, Inc. (Broker) Mitch Steves - RBC Capital Markets LLC.

Good evening. My name is Laurie and I will be your conference operator today. At this time, I would like to welcome everyone to the Sanmina Corporation's Fourth Quarter and Fiscal Year End 2015 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

Thank you. Paige Bombino, Vice President-Investor Relations, you may begin your conference..

Thank you, Laurie. Good afternoon, ladies and gentlemen, and welcome to Sanmina's fourth quarter and fiscal year 2015 earnings call. A copy of today's release is available on our website in the Investor Relations section. You can follow along with our prepared remarks in the slides posted on the website. Please turn to the Safe Harbor statement.

During this conference call, we may make projections or other forward-looking statements regarding the future events or the future financial performance of the Company. We caution you that such statements are just projections.

The Company's actual results of operation may differ significantly as a result of various factors including the state of the global economy, economic conditions in the electronics industry, changes in customer requirements and sales volume, competition, and technological change.

We refer you to our quarterly and the annual reports filed with the Securities and Exchange Commission. These documents contain risk factors that could cause actual results to differ materially from our projections or forward-looking statements.

You'll note in our press release and slides issued today that we have provided you with statements of operations for the 3 months and 12 months ended October 3, 2015 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 the 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 (02:05-02:30)..

One moment, ladies and gentlemen, as we are experiencing technical difficulties..

All right. Thanks..

Sorry for the issue with our phone line, ladies and gentlemen. I'm going to go ahead and backtrack a little bit here in the prepared remarks and then we'll go ahead and get the call started.

So, you'll note in the press release and slides issued today that we have provided you with statements of operations for the 3 months and 12 months ended October 3, 2015 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 the 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 today are related to the income statement measures, will be directed at our non-GAAP financial results.

Accordingly, unless otherwise stated in this conference call, when we refer to our gross profit, gross margin, operating income, operating margin, taxes, 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..

Thanks, Paige. Good afternoon, ladies and gentlemen. Welcome to this conference call. Thank you all for being here with us. With me on today's conference call is Bob Eulau, our CFO..

Hello, everyone..

The agenda we have is that Bob will review our financial result for the fourth quarter and fiscal year 2015. I will follow up with additional comments about Sanmina's results and future goals then Bob and I will open for question-and-answers. And I'll turn this call over to Bob.

Bob?.

Okay, thanks, Jure. Please turn to slide 3. Overall, the fourth quarter was a solid finish to the fiscal year. Revenue of $1.64 billion was up 6.4% on a sequential basis but down 3% from the fourth quarter last year.

Our gross margin came in at 7.8% which was down 20 basis points from the third quarter and down 10 basis points from the fourth quarter last year. Operating margin was consistent with last quarter at 3.8%. Non-GAAP EPS was $0.57 which was toward the high end of our guidance for the quarter.

This was based on 83.4 million shares outstanding on a fully diluted basis. During the quarter, we used $52 million to repurchase a total of 2.5 million common shares. Finally, with the sequential revenue growth and the 14-week quarter, cash generation was challenging this quarter.

Cash flow from operations was negative $1 million, and free cash flow was at negative $28 million. I'll discuss cash in more detail in a few minutes. Please turn to slide 4. From a GAAP perspective, revenue was up 6.4% or $98 million from Q3 to $1.637 billion.

We reported net income of approximately $315 million which included earnings per share of – it resulted in earnings per share of $3.78 for the fourth quarter. This was up relative to last quarter by $3.49. The GAAP results included an incremental release of our valuation allowance against deferred tax assets.

The tax benefit recorded in this quarter totaled $287 million or $3.45 per share versus the benefit of $87.6 million or $1.01 per share which was recognized last year. With this adjustment, we are now expecting to use most of our U.S. net operating losses prior to their expiration. We have a remaining valuation allowance for our U.S.

net operating losses of about $100 million. For the year, revenue finished at $6.375 billion which was up by $160 million, while our GAAP net income increased by $180 million to $377 million, primarily due to a larger tax benefit being recognized this year. Accordingly, GAAP earnings per share for the year were $4.41 versus $2.27 last year.

The restructuring costs for Q4 were $1.2 million. We expect these costs to be in the range of $2 million to $3 million next quarter. As of the end of the year, we have about $25 million in real estate on the market at list price after having sold around $120 million of property in the last six years.

My remaining comments will focus on the non-GAAP financials for the fourth quarter in the fiscal year 2015. At $128.4 million, gross profit was up $5 million from the prior quarter. We think this is a very good outcome, given the fact that we had an extra week of overhead and operating expenses.

Gross margin came in at 7.8% which was 20 basis points lower than we reported in Q3. Operating expenses were up $2.5 million for the quarter at $66.7 million. This represents a 10 basis point improvement in operating expenses as a percent of revenue compared to Q3.

Spending was higher this quarter primarily due to the extra week of expenses we incurred given our fiscal calendar. At $61.7 million, operating income increased by 4.2% from the prior quarter but was down 13.5% from Q4 last year. Operating margin was 3.8% which was the same as last quarter.

Other income and expense at $5.9 million was down $200,000 when compared with last quarter and down $1.6 million or 21% from the fourth quarter last year. The tax rate for the quarter was 14.4% of pre-tax income which was in the range we had expected. On a non-GAAP basis, we earned $47.7 million in net income or $0.57 per share.

Earnings per share were up 8.5% from Q3 and down 6.8% from Q4 last year. On slide 5, we are showing you some of our key non-GAAP P&L metrics. Revenue was up $98 million or 6.4% from last quarter. Demand was up in all segments on a sequential basis.

On a year-over-year basis, we were up in industrial, medical and defense which continues to show good momentum. Compared to Q4 last year, total revenue was down $51 million or 3% primarily driven by the communications network segment. Moving on to gross profit.

We achieved a 4% increase in gross profit in Q4, while gross margin at 7.8% was down 20 basis points from the prior quarter. We have been very consistent in our gross margin ranging from 7.7% to 8.2% over last 10 quarters. Our operating profit increased 4.2% from last quarter to $61.7 million. This led to operating margin of 3.8%.

Net interest expense was up $400,000 at $6.1 million for Q4 primarily due to the extra week of interest expense. Please turn to slide 6 where we're providing more information on the segments that we report.

The Integrated Manufacturing Solutions segment represents printed circuit assembly and test, final system assembly and test, as well as direct order fulfillment. As you can see from the graph on the left, the IMS segment revenue was up $60 million or 4.8% from last quarter. Our gross margin decreased by 20 basis points from Q3.

The second segment for us is Components, Products & Services. Components include printed circuit board fabrication, backplane assemblies, cable assemblies, enclosures, precision machining, and plastic injection molding.

Products include computing and storage products, defense and aerospace products, memory and solid-state drive modules, as well as optical and RF modules. Services include design and engineering, as well as logistics and repair services.

In aggregate, the revenue for this segment was up $43 million or 12.7% with gross margin down 30 basis points from Q3 to 9.3%. About half of the revenue growth during the quarter was attributable to the acquisition we completed in July.

This gross margin decline reflects lower profitability in the Components businesses, partially offset by better profitability in the product and services areas. Now, I'd like to turn your attention to the balance sheet on slide 7. Our cash and cash equivalents were $412 million. Cash was down $4 million from the previous quarter.

Accounts receivable were up $3 million, and inventory was up $45 million. We'll talk more about inventory in a moment. Property, plant and equipment was up $26 million primarily due to the acquisition of CST and the completion of a new building. Total assets increased significantly due to the release of the valuation allowance for deferred tax assets.

Current and long-term deferred tax assets increased by $266 million from the June quarter and by $242 million from Q4 last year. From a liability standpoint, we had a $55 million decrease in accounts payable during the quarter. This was driven primarily by early purchases in the 14-week quarter.

We used our short-term cash flow revolver to fund working capital, complete the CST acquisition and to repurchase $52 million in equity. Specifically, we repurchased 2.5 million common shares at an average price of $20.53 per share.

From a long-term debt perspective, as of the end of the quarter, we have $424 million which has been fairly consistent throughout the year. At the end of the quarter, our gross leverage was approximately 1.7. Overall our capital structure continues to be in great shape.

Please turn to slide 8 where we will review our balance sheet metrics for the fourth quarter. Cash was down $4 million from Q3 but very consistent with prior quarters. Cash flow from operations for the quarter was low at negative $1 million, and net capital expenditures for the quarter were $28 million.

The net capital expenditures include a building purchase of $21 million offset by the sale of $15.5 million of real estate during the quarter. This led to negative $28.7 million in free cash flow. We expect to return to more normal levels of positive free cash flow next quarter and in fiscal year 2016.

Inventory dollars were up $45 million from last quarter at $919 million, while the inventory turns were disappointing at 6.2 times. Compared to Q4 last year, inventory turns were down as well. We think there were several factors in the inventory build, and we should start to see improvement next quarter.

We're showing cash cycle days which combines our cycle time for inventory, accounts receivable and accounts payable. Overall, cash cycle time increased from 42.2 days last quarter to 44.6 days.

This was driven by 2.6 days of increase in inventory with increases in accounts receivable days sales outstanding and accounts payable days outstanding, mostly offsetting one another. We believe that we should be able to make progress in our cash cycle time over the next couple of quarters.

In conclusion, return on invested capital declined to 13.4% for the quarter. Roughly two-thirds of the decline in ROIC was caused by the increase in deferred tax assets that we discussed earlier. Please turn to slide 9. I want to take a couple of minutes to reflect on our longer-term cash generation and the impact it has had on our capital structure.

Cash flow from operations for fiscal year 2015 was good. In fact, in the last five years, our cash flow from operations was outstanding as we generated approximately $1.25 billion. During this same five-year period, our free cash flow was around $900 million.

This cash generation is the driving force behind our ability to reduce our long-term debt, repurchase equity and fund small strategic acquisitions. In the upper right quadrant, we are showing the decline in total debt over the last five years. Over the last five years, total debt is down $758 million.

In the lower left quadrant we are showing our net interest expense over the last five years. One of the key benefits of the debt reduction is a lower interest expense we now experience. This graph shows the great progress we have made with fiscal year 2015 net interest expense at $24 million which is $73 million lower than fiscal year 2011.

We expect that annual net interest expense will be around $24 million for FY 2016. Obviously everything else being equal, the lower interest expense enables us to generate significantly more cash than we did just a few years ago. In the lower right quadrant, we are showing our gross leverage at the end of each of the last five years.

We define gross leverage as total debt divided by EBITDA. As a result of the reduction of debt and solid EBITDA over the last four years, our gross leverage ratio has improved dramatically. As you can see in the chart, our gross leverage was at 3.4 at the end of fiscal year 2011 and stands at 1.7 today.

This lower leverage gives us more business and financial flexibility as opportunities arise. Please turn to slide 10. With all the progress we have made in the last few years reducing our debt, the balance sheet is in excellent condition.

This, coupled with the strong cash generation, has given us the opportunity to repurchase common stock over the last two years. In fact, over the last two years, we have repurchased approximately 10 million shares at a total cost of $196 million. In September, the Board of Directors authorized an incremental $200 million program.

We expect to continue to generate cash in the coming years, and we will remain focused on creating benefits for shareholders with the cash we generate. Please turn to slide 11. I would now like to share with you our guidance for the first quarter of fiscal year 2016. Our view is that revenue will be in the range of $1.55 to $1.6 billion.

We expect that gross margin will be in the range of 7.9% to 8.3%. Operating expense should be $64 million to $66 million. This leads to an operating margin in the range of 3.8% to 4.2%. We expect that other income and expense will be in the range of $6 million to $7 million.

Our tax rate should be around 15%, and we expect our fully-diluted share count to be around 83 million shares, plus or minus half a million shares. When you consider all this guidance, we believe that you will end up with earnings per share in the range of $0.56 to $0.60.

Finally, for your cash flow modeling, we expect the capital expenditures will be around $25 million, while depreciation and amortization will also be around $25 million. Overall, we're very pleased with fiscal year 2015. We executed consistently in FY 2015 and positioned ourselves well for the future.

We grew revenue by 3%, but we were able to grow our earnings per share by 10%. Growth continues to be our number one objective but is imperative that we grow with the right kind of business. At this point, I will turn the discussion back over to Jure for more comments on our target markets and our business strategy..

Thanks, Bob. Ladies and gentlemen, I'd like to add a few more comments. I'll talk about our business environment for the fourth quarter and fiscal year 2015, and outlook for the first quarter and the rest of the fiscal year 2016. As Bob mentioned, we delivered a solid result for the fourth quarter in line with our outlook.

We have stable and good growth from all of our end markets up 6% quarter-over-quarter growth, so it was good. Again, overall good quarter and solid operational execution. But I know the Company can do better, as we have a lot of leverage in our business model. For fiscal year 2015, we delivered solid and consistent results.

We accomplished a lot in fiscal year 2015. We delivered good and sustainable growth in this challenging environment. We focused on quality of our revenue, expanded our customer base, and I can tell you we are building a stronger company and positioning Sanmina for a better future. Please turn to slide number 13.

Let me talk to you about fourth quarter revenue by end markets. Top 10 customers were 47.8% of our revenue in the quarter. We also continued to diversify revenue by end markets and customers, doing a good job here. Book-to-bill for the fourth quarter was positive 1.02 to 1. Industrial, medical and defense was 40% of our revenue in the quarter.

That was up nicely, up 5.7%, driven by industrial and defense; medical was flat. Communication networks was 38% of our revenue. It was nicely up, up 8.5%, driven by networking and optical products. Mobile broadband was stable. Embedded computing and storage was 22% of our revenue that was also up nicely up 3.8% driven by storage and automotive business.

Now, please turn to slide 14. I'd like to make some few comments regarding our outlook by market segments for the first quarter of 2016. For the first quarter, we see overall stable market environment. For industrial, medical and defense, we are forecasting this overall to be slightly down. And let me break it down into pieces.

For industrial and medical, we expect stable demand. For oil and gas, we continue to see more weakness. For defense, we are forecasting to be slightly up. We have some good stable projects that we're working on.

But for industrial, medical and defense for fiscal year 2016, we expect another strong growth to continue or another strong year of growth to continue. For communication networks, we're forecasting for the quarter to be flat. For networking and optical products, we expect to be a stable demand during the quarter.

For mobile broadband, we're forecasting to be slightly down. Communication networks for our fiscal year 2016, we believe, will be a predictable and stable demand. For embedded computing and storage, we're forecasting slightly down for the quarter. For multimedia and automotive, we're forecasting slightly down. For storage, we're forecasting flat.

For fiscal year 2015, storage and automotive are positioned well for a nice growth. So let me talk to you more about what we expect for the rest of the fiscal year 2016. We are optimistic that fiscal year 2016 will be a good year. We made a lot of positive steps in fiscal year 2015 that will drive sustainable and profitable growth in fiscal year 2016.

We expect to see strong growth with our customer base, driven by strong pipeline of new and existing customers. These programs will start to ramp in January-February timeframe. Also, we extended a very important partnership with Motorola Solutions. We expect that this transaction to close in our second quarter of fiscal year 2016.

We will be manufacturing for them government, public safety equipment. Again, this transaction will close in the second quarter. At that time, we'll be able to talk to you more about it. But overall, it's a very positive thing. We had a long-term partnership with Motorola Solution as they decide (26:21) to outsource.

We're fortunate enough to be their partner for many years to come. Additionally, pipeline of new opportunities is positive. Let me make a comment on global economy. Global economy is hard to predict, but it could be challenging. I personally expect it to be stable.

And in this environment, Sanmina is well positioned to continue to make improvements, drive our focal strategy and continue to win in our markets. Let me make a few comments on our strategy. I can tell you that our strategy is working. The key to Sanmina's strategy is to focus on our customers' success.

Our strategy is to build around customers' most important needs, also focus on Sanmina core strengths and provide higher technology solutions for mission-critical products and services. We are focused on delivering end-to-end solutions for our customers. We drive operational excellence at every level.

And most important, we provide quality and fun work environment for our people. And bottom line is to maximize shareholder value. Please turn to slide 15. In summary, fourth quarter was a solid quarter in line with our outlook for fiscal year 2015 and we all know it was a challenging environment.

But we delivered the revenue growth, operating margin improvements, EPS expansion, and solid cash generation. Also during the year, we continued to diversify with a strong growth in industrial, medical and defense, and that was up a little over 17% for the year.

Again, forecasting first quarter for 2016, I would call this normal seasonality, good forecast, and we expect to generate positive cash flow. For fiscal year 2016, we're going to continue to diversify our end markets – I think that's the key to our success – and grow with the right revenue.

Growth will be driven by new programs that are ramping and the pipeline of new opportunities. So, ladies and gentlemen, I would like to again take this opportunity to say thank you for your time and support. And operator, we are now ready to open the lines for question-and-answers. Thanks again.

Operator?.

Your first question is from Osten Bernardez of Cross Research. Your line is open..

Hey. Good afternoon. Thanks for taking my question..

Hello, Osten..

Hi, Osten..

Hey there.

So, Jure, could you just elaborate a bit more in terms of why was Sanmina able to outperform its peers during the quarter and what types of projects, what type of new programs are driving that business for you?.

Well, Osten, it's not just one quarter. We've been positioning our Company to basically try to make improvements every day. I think our strategy is working. We have a pipeline of very good mix of some good project. We're able to expand our customer base and all those things add up together. But at end of the day, it's all about execution and focus.

I think we've been fortunate also that some of the programs that we're on are doing well. And hopefully, economy will cooperate that we can continue to improve and that's really the goal..

And from a technology standpoint, if you could elaborate, is it primarily are we talking about optical components?.

Well, first of all, everything that we build in Sanmina is more – we're focusing on higher-end mission-critical product which includes a fair amount of optical components in our communications side of our business as we focus on our high-end optical networks. That's one of our cores. So definitely, things like that give us a benefit.

But again, we had a strong industrial, medical and defense group that did well. So I would say it's – not to say that we did perfectly, Osten. As I said earlier, I think we can do better and that there's still room for improvements..

Got it.

And then just looking at the fiscal 2016, how do you see the mix between your IMS and Components business changing, and what should we be thinking about the margins for that business going forward?.

Well, we are still committed to our long-term goals to deliver the industry-leading margins. I think we are closer now than two years ago. I think we have a customer base. We have balance sheet, and I think we have some strong leadership to get us there. We do expect to see some improvements in our Components, Products & Services this year.

On the IMS side, we expect to continue to tune things up and grow. So we expect to grow from both sides, but I think we got some good opportunities again in our Components, Products & Services in 2016 that will help us improve our margins..

Thank you..

Your next question comes from the line of Sean Hannan of Needham & Company. Your line is open..

Yeah. Good evening, folks. Thanks for taking my question here..

Hello, Sean..

Hi, Sean..

Hi. So we have about 32% of our business as we look out to fiscal 2016 in the communication side being effectively stable, at least that's the viewpoint today. Then about 68%, you're expecting some growth. And of that 68%, you've got 40% there tied to industrial, medical and defense that would be strong growth.

So, as I step back and I try to just calibrate what does it mean to grow in fiscal 2016, it would almost seem to appear that we should have a better growth year than what was accomplished in fiscal 2015.

Is that an appropriate takeaway, or how should we be thinking about your summary viewpoint there?.

First of all, it's hard to predict the market. I think the Company is positioned as I look at the long term. I think in this quarter that I just talked about, I think we're positioned to have, what I could say, a good year but we're going to take the one quarter at a time..

Okay. I guess if I look specifically into the industrial, medical, defense segment, you folks have done a great job in growing that and you seem to be really optimistic for this year.

Is the pipeline of opportunities and new ramps positioning us again for at least a double-digit year? I'm not necessarily asking if you could repeat a 17% year-over-year growth. But when I think of strong growth, double digit certainly is in the realm and just trying to understand how you're characterizing that..

Yeah. I think in that side of the business, with the project that we have in the pipeline, we have a pretty good chance to grow double digit..

Okay. Last question here for the moment. So on the SG&A side, though I certainly appreciate the tick-up from a dollar standpoint based on the 14-week quarter, so if I back out and look on a per week basis, you're down maybe $150,000 or so per week versus the prior quarter.

But overall, as a percentage of revenue versus how you exited fiscal 2014 and how you started this year, you're still a bit higher. So I just want to see if we can get some more clarity around how to think about SG&A dollars from this point and working that percentage of revenues to maximize your operating margins there. Thanks..

Let me turn this over to Bob.

Bob?.

Okay. Yeah. So if you look over our long-time horizon, we've been in a fairly tight range on operating expenses overall. You asked about SG&A, but we have increased our spending on R&D over time, and we've made a number of moves on the SG&A side to be more efficient.

The main thing that happens now is just noise in terms of incentive compensation schemes, deferred compensation. We had a one-time event here in Q4 that won't repeat itself for another six years or so with the 14 weeks. So, yeah, I think you're going to see operating expenses stay in the general range they've been in for quite a while.

And we believe that the guidance that we gave of $64 million to $66 million is a pretty reasonable range..

Very good. Thanks so much for the feedback, folks..

Okay. Thanks, Sean..

Your next question comes from the line of Joe Wittine of Longbow Research. Your line is open..

Hi. Thanks. First, a clarification. Jure, you mentioned new programs ramping in January and February..

Right..

And then you mentioned the Motorola transaction. I just want to be crystal clear.

Are those two related, or are you talking about other programs besides this one in January and February?.

Definitely, Motorola is in that mix, Motorola Solution..

And then also, I just want to be crystal clear. You're talking about – you said transaction, so I assume you're going to acquire facilities and equipment that go along with this program..

Yes. We're going to pick up some people and equipment and factory, yes..

Okay. I guess I look forward to the eventual details there..

Yes. We'll do that. We'll give you guys more in that in next call in January timeframe..

Okay. Bob, on the Components' gross margin, any other color you can give? I think you said within the "Components, Products & Services," it was the Components portion, but I just got an e-mail pointing out that gross margin within Components – I'm talking about the segment here – is down on a year-over-year basis for eight straight quarters.

So I guess the question is, is mix structurally declining there for any reason, or is this kind of more execution-related that you hope to correct?.

I would say, far and away, the biggest issue for us is revenue in the Components areas, both mechanical systems and printed circuit board business. I think structurally, they're in good shape. I think that every factory can always improve. But I think they're generally doing okay. And what we really need is revenue there.

And we're working on trying to generate more revenue from third parties as well as trying to drive more vertical integration..

Okay. But the top line is moving in the right direction. So is this more a product of the legacy EMS market segment? They are declining while defense, industrial, medical, et cetera doesn't use as much internal components as the other pieces did..

Yeah. We haven't analyzed it that specifically. We believe components are used across all the segments, all the market segments we're in and its different types of components potentially. But they're all using our Components businesses. I wouldn't draw any conclusions from that..

Got it. And then finally just a non-GAAP question here. The distressed customer charge, Bob, these are becoming more frequent and bigger as part of the non-GAAP reporting.

So anything to note as far as what drove the increase in the last fiscal year and this quarter especially?.

Yeah. It's actually the same customer. We had reserved about 50% of the exposure roughly a year ago. And the way that claims were trading, we felt that we needed to write it down to zero. So we did that now..

Okay. Got it. Thanks, guys..

Thanks, Joe..

Your next question comes from the line of Mark Delaney of Goldman Sachs. Your line is open..

Hello, Mark..

Hi. Good afternoon. Appreciate taking the questions. First question is about some of the macro trends that the Company has seen.

And getting back to some of the better trends Sanmina has seen relative to the peer group, I was hoping if you could just put some context around maybe potential timing differences, maybe what some of the other rest of the supply chain is reporting versus what you're guiding to.

And just kind of reflecting on 1Q of fiscal 2015, the Company did very well. And then when we got to the second quarter in the March quarter, it turned out that there've been some overshipment as you finished up programs and just seeing things later than some of the rest of the supply chain, especially in comm infrastructure.

Can you just talk about to what extent you guys have comfort that it's not one of those situations again?.

Yeah, first of all, Mark, it's hard for me to comment what other suppliers or competitors do every day. I can tell you that our business is coming per plan. Yeah, we operate not in a perfect environment, but I believe that what we accomplished this year was a lot, positioning the Company and winning some new programs during the year.

So I think the new programs and some of these stable customers that we have are driving our growth. And it's going to give us stability in a short term and hopefully lot more growth longer term. I believe that's how we position. We are also aggressively working on some other opportunities that we feel very, very comfortable in 2016.

So I would say our business, as I said in my prepared statement, is stable. We're confident. It's all about taking one day at a time. But I'm pretty optimistic. I'm a lot more optimistic about this year today than I was 90 years ago – I'm sorry, 90 days ago. I feel like an old 90 years. So, we feel more better about 2016 today than 90 days ago.

Let's put it that way..

Okay. And could you give us a little bit more scent on the Motorola transaction and just kind of – you said you already have a partnership there.

But what sort of incremental revenue should we expect, and what kind of EPS impact do you think you might see on an incremental basis if that closes?.

Yeah. First of all, we do expanding our partnership. It's a partnership that we had for many years. We are basically building one of their most complicated, most critical products for the company. We've proven ourselves for many years, and we are honored to go into this partnership.

This transaction will close in first quarter of our fiscal year 2016, and I will be giving you guys more details on that in the second quarter. But we're very excited, and it's a great customer and it has a great potential. That's all I can say right now, Mark..

Okay.

And then just lastly from me, can you clarify the impact of the extra week in terms of revenue expenses and cash flow?.

I'll turn it over to Bob..

Yeah. As I said last quarter, the revenue is always very hard to understand what the true impact is. It's hard to forecast it now that the quarter is complete. We don't know what the real impact was. Our best guess is still that it probably increased revenues somewhere in the neighborhood of $25 million to $50 million.

But we'll never be able to prove that to you, but I think that's probably a reasonable guess. In terms of cash flow, we did have a challenge because of the 14-week quarter that affected the linearity of the material purchases relative to when we shipped during the quarter.

And so we ended up having AP go down quite a bit, as I mentioned in my comments. So that was a bit of a challenge. And then I mentioned inventory flow which was a challenge for us. From a earnings standpoint, there is no doubt in my mind that the 14th week caused our earnings to be lower than it otherwise would have been.

We absolutely know we had a 14th week of expenses for both operating expenses and overhead expenses. And we didn't get a full week's worth of incremental revenue and gross profit. So I'm pretty confident that profit would have been quite a bit better had we not had that extra week of spending..

Thank you very much..

Yes..

Your next question comes from the line of Jim Suva of Citi. Your line is open..

Hello, Jim..

Thank you. Hello and thanks and congratulations to your team at Sanmina. I might have kind of two questions. I'll just put them out there now so you can think about it a little bit. I think, Jure, you made some comments about you expect to see some growth next year.

I just wanted to kind of clarify, does that growth include depending MSI additional transaction, or is that without because if we look at Q1, it looks like we're already starting off with a challenging down year-over-year? And then my second question would be – I think it's more for Bob – is cash flow from operations.

The past three years, it's actually been coming down even though there's been less interest expense.

So can you talk a little bit about cash flow from operations of kind of what's going on there, and should we expect an uptake, or why is cash flow from operations actually going down the past few years?.

Hey, Jim. Let me talk about the growth question. Yeah, we do – first of all, we do expect to grow in 2016 over fiscal year 2015. We think overall we're going to have a better year. Definitely, MSI project is part of that growth. That's something that we worked on for a long time.

We're going to hopefully start shipping to them in the second quarter of fiscal year 2016. I think for the first quarter, we are here exactly what we expected at six months ago. We knew that the second half of calendar year 2015 for us will be a little bit better than the first half of calendar year 2015. So that's coming per our plan.

No major surprises in the short term. So I think we're well positioned. So, we do expect to have a better year on top line and on the bottom line and across all other metrics that we are looking at, at least what we see today, unless the whole economy goes in the wrong direction, Jim.

So assuming that, as I said, the economy is stable, nothing crazy goes on, Sanmina should have a very good year in 2016.

Bob?.

Yeah. So, Jim, on that cash flow from operations, we were disappointed in how the fiscal year finished as well. We ended up at $175 million for FY 2015. FY 2013, FY 2014 were great years, some $318 million and $309 million, so very strong years in terms of cash flow from ops.

And like I said in my prepared remarks, over $1.25 billion generated in the last five years. We had a couple of things going on. The biggest one was probably the inventory build that occurred during FY 2015. Our turns exited at 6.2 versus the 7.0 exit we had the prior year.

So that's roughly $80 million in cash that we had tied up in inventory that we would obviously prefer not to have. I think as you look forward to FY 2016, we're going to do better on the working capital management.

I mentioned we got hurt a little bit on accounts payable here with the 14-week quarter at the end of this year, and I feel pretty confident that you'll see a rebound in cash flow from ops in Q1..

Okay. And then on the last quarter, you mentioned a small oil and gas acquisition. And then on this conference call, you mentioned a company that started with, I think, the letter C if I heard correctly.

Are those the same companies or are those different?.

Yes. No, it's the same company. It's a small oil and gas engineering and manufacturing company. Its name was CST and, sorry, that wasn't more clear but same company..

No problem.

And then lastly, the distressed customer, you no longer producing for them or you are, like was there a write-off with a line or product, or you're completely going separate ways with that distressed customer?.

No. As I mentioned before, it's the same customer that we had a write-off for roughly a year ago or so. At that time, their claims – they're in bankruptcy. Their claims were trading at roughly $0.50 on the dollar. In the last quarter, that really changed and so we felt like we needed to reserve the full amount.

We're no longer building any product for them, and we'll obviously try to recover whatever we can through the bankruptcy process..

Great. Thanks for your clarifications and details, gentlemen..

Thanks, Jim..

Thank you..

Operator, we have time for one more call, please..

Thank you. Your final question is from Mitch Steves of RBC Capital Markets. Your line is open..

Hey. Thanks for taking the question, guys. I just had two quick ones but I can combine them. So one on the comm side, a lot of the competitors, Benchmark and Plexus, stated that the margin profile was just lower which is why they're walking away from the business.

So I just wanted to confirm that there's going to be no change essentially on the gross or operating margin structure for the comm side? And then secondly, for the first quarter, I'm assuming that you're including both Motorola and the CST oil and gas transaction in the guidance, and I just wanted to try to see if you guys can comment on the annual run rate CST, if you guys can't comment on the Motorola piece?.

Yeah. First of all, Motorola, there's no revenue on the new projects for Motorola in the first quarter of fiscal year 2016. That transaction will be closing second quarter of fiscal year 2016, if I understood you correct. And we should have some revenue in the second quarter of fiscal year 2016.

Did I answer that question, Mitch?.

Yes, yes..

Okay. That small oil company that we bought, it's really that we acquired – it's a small revenue. It's really acquired for product design, engineering and technology as we are building – we still believe in oil and gas long term. We have a few good customers. So, yeah, it's a small revenue.

We had a little bit revenue last quarter, and we'll continue to have some revenue. Good thing is they are profitable. Actually, oil and gas is profitable for us. It's just that it's not growing, so it's really not from an overall margin. But we're kind of surviving through this tough period.

But we think the long-term oil and gas is still a area that we want to find growth. Back to your first question regarding net working, I can't make a comment to what Benchmark and – I think you mentioned Benchmark and Plexus talking about. Every customer is different. Every project is different. We are in a competitive environment.

I think it all depends what type of solution and what technology do you play in all of these businesses. Sanmina, we are a niche player. We focus on a high technology. We know that side of the business. We grew up in that side of the business. We believe we have a competitive advantage.

At the end of the day, just like any customers, we have to find – you have to deliver the right solution to your customer in order to make a little bit of money. And I believe Sanmina delivers a competitive advantage. It's the area that we can compete, and we compete in a high end.

So I think from a margin point of view, I don't see – it's always been competitive. No major changes there. We just have to be more efficient and find a way to make an extra penny..

Got it. Thank you very much..

Thanks, Mitch..

Yes. Thank you..

Well, ladies and gentlemen, that's all we have for today. Hopefully, we answered most of your question. If not, please give us a call. And looking forward to our next quarter results 90 days from now..

Thanks, everybody. Bye..

Ladies and gentlemen, this concludes today's conference call. You may now disconnect..