The contract manufacturer Sanmina-SCI (NASDAQ:SANM) yesterday finally filed its 10-Q for the quarter ended July 1, a mere four months late. The company recorded $223 million in additional expense to cover stock option pricing issues. As Citigroup’s Jim Suva notes, that basically wiped out four years of historical profits.
Suva waded into the 360-page document - some light holiday reading for your plane ride back to visit Mom - and found that Sanmina’s review of its financials found a bunch of other problems as well:
- Overstatement of goodwill by $29 million.
- Interest rate swap misclassification lowers equity by $22 million.
- Reduced restructuring asset accounts lower equity by $17 million.
- Adjustments to inter-company transactions increases tax payables by $27 million.
Maybe Sanmina needs to hire some more accountants.
Suva concludes that he remains “professionally skeptical that Sanmina’s controls are sufficiently robust enough to monitor and catch future problems before they become material, including quarterly sales and earnings trends.” He adds that the company is likely to incur additional costs to improve its internal control systems. Which certainly seems like a good idea under the circumstances.
Suva continues to rate the stock a Hold.
Sanmina shares are up 8 cents today at $3.60 - a gain of 2.27%.
SANM 1-yr chart: