Good evening. My name is Rachel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sanmina First Quarter Fiscal 2014 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Paige Bombino. Ma'am, you may begin your conference.

Thank you, Rachel. Good afternoon, ladies and gentlemen, and welcome to Sanmina's First Quarter Fiscal 2014 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 our website. Please turn to Slide 2, the Safe Harbor statement. During this conference call, we may make projections or other forward-looking statements regarding our 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 operations 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 annual reports filed with the Securities and Exchange Commission. These documents contain risk factors that can cause the actual results to differ materially from our projections or forward-looking statements. You will note in our press release and slides issued today that we have provided you with a statement of operation for the 3 months ending December 28, 2013, 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 our website. In general, on a non-GAAP information, excludes restructuring costs, acquisition and integration costs, noncash stock-based compensation expense, amortization expense and other infrequent or unusual items to the extent material. Any comments we make on this call, as they relate 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 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 and thank you all for being here today with us. With me on today's conference call is Bob Eulau, our CFO.

Hello, everyone.

Our agenda today, Bob will review our financial results for the first quarter fiscal year 2014. I will follow up with comments relative to Sanmina's results and future goals, then Bob and I will open for question and answers. And now, I'd like to turn this call over to Bob. Bob?

Thanks, Jure. Please turn to Slide 3. Overall, the first quarter was about as expected from a revenue standpoint and better than expected from a margin perspective. Revenue of $1.447 billion was down 3.8% on a sequential basis, and down 3.2% from the first quarter last year. Our gross margin came in at 7.8%, which was unchanged for the third consecutive quarter. Operating margin decreased 30 basis points from last quarter to 3.4%. Non-GAAP EPS was $0.41, which was at the high end of our guidance for the quarter. This was based on 87.3 million shares outstanding on a fully-diluted basis. Cash generation was good this quarter with cash flow from operations at $38 million, and free cash flow at $25 million. We invested about $57.7 million to acquire assets for a major oil and gas services company, which will substantially accelerate our progress in that market segment. We also invested $25.2 million in open market repurchases of our common stock. I'll discuss the balance sheet in more detail in a few minutes. Please turn to Slide 4. Revenue was down 3.8% or $58 million from Q4 to $1.447 billion. From a GAAP perspective, we reported net income of approximately $23 million, which results in earnings per share of $0.26. This was down relative to last quarter by $0.18, but up $0.25 from a year ago. The fourth quarter GAAP results included an incremental release of our valuation allowance against deferred tax assets, which we did not have this quarter. The tax benefit recorded last quarter totaled $21.5 million or $0.25 per share. If we adjust for the tax benefit from last quarter, EPS is up on both a sequential and a year-over-year basis. The restructuring cost for Q1 were $3.7 million. Going forward, the restructuring cost we expect are…

Ladies and gentlemen, I will review business environment for the December quarter. I'll talk about the short-term business environment, typically March quarter, the quarter we are in. And I'll talk to you more about outlook for the rest of the calendar year 2014. As Bob said, Sanmina revenue for the first quarter was slightly down sequentially as a result of seasonality and slower ramp up of new projects. Basically, first quarter results came in per our expectations. So in summary, results for our plan, very small surprises, one way or another. Overall, we see things getting better and we worked on some good activities during the quarter. Now please turn to Slide 11. As you can see on this slide, I want to talk to you about our first quarter revenue by end markets. For first quarter, we had Top 10 customer represent about 49.2% of our revenue, and we had 1 customer over 10%. Now let me give you a couple more comments what was going on in our market segments. For Communication Networks, for the first quarter, we did forecast demand to be flat to the last quarter. During the quarter, we saw weaker demand than what we expected beginning of the quarter. We also saw some scheduled push outs during the quarter, which resulted demand was down 8.9%. If you look at the Defense, Industrial, and Medical, we forecast that to be flat. Industrial was nicely up. We had a strong growth there. Defense was down, and Medical was slightly down. Overall, it was a flat plus 0.9%. Computing and Storage, we did forecast to be down. We basically continue to experience weaker demand in this segment. So overall, it was 3.2% down. For Multimedia, we did forecast to be down. But overall, all the key markets…

[Operator Instructions] And your first question comes from the line of Brian Alexander. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Jure and Bob, maybe just to start out, this M&A transaction that you talked about, I think, you spent a little over $57 million in December. Oil and gas services related, I don't recall seeing a press release on it but I could have missed it. So could you just talk about this in more detail. How much revenue are we talking about here? What's the margin profile of this business relative to your corporate average? And is this an area that you think you'll be investing more in over time or is this more of a one-off type of deal that we should be thinking about?

Well, Brian, let me add a few comments on what I already said on and I'll turn it over to Bob to talk a little bit more about on the financial side. First of all, we've been trying to expand in oil and gas industry now for many years and we had a few small customers here and there. At this time, we don't like to talk about the customer itself. It is a major win for us. It's definitely into the precision machining, assembly and system build for oil and gas industry. I think, the beginning of the relationship, we did acquire some assets. And the reason we did that because it really puts us into business immediately with these key customers. So definitely, if you look at it from a margin perspective in precision machining, we do deliver better margins. It's an area that we are going to diversify into and because these margins are a lot better than your typical EMS business. So we're very excited about the opportunity, and most importantly, we are very excited. It's a real partnership that we worked with this customer for, like I said, for a long, long time and we put it together. And again, it's a good opportunity, but the ball is in Sanmina's court, we got to do a lot work. If we do things right, I think, future is exciting. Bob?

Yes. So obviously, I agree with Jure's point. We've been talking for quite a while how we think we're extremely well-positioned in the Industrial segment. And specifically, we think we are very well-positioned in oil and gas with both our precision machining capability and our electronics capability. So we're excited. We think we're in the early stages in this business. It's a business that's characterized by higher fixed cost, but higher contribution margins than we typically see for our company. So we're very excited about it. We've been doing business in oil and gas for a while. This is a major step forward for us, and I think, really creates a promising future in that segment. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Any revenue that you could share with us on the specific win? How significant is it?

It'll be ramping up over time. We don't -- as you know, we don't like to give specifics on customers. But it'll be a nice step forward in terms of revenue and we believe it can grow to be very significant over time.

And just if I can add to that. This business, we expect it to be nicely profitable in a few months from now. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Okay. Great. And then, just a follow-up on the Components business where you saw the margins come down sequentially from 11% to 9% on roughly flat revenue. I think, you called out, Bob, some challenges in the mechanicals part of the business in several sites. Can you just drill down on that a little bit more and talk about the nature of those challenges? Was that really company-specific? Was it end market-driven? And what do you have to do to fix that and how long do you think it takes?

Well, we were disappointed. And some of these issues were self-inflicted wounds. Some of it was a result of slow demand. I think, the issues are all fairly well-understood at this stage, and I expect that in the current quarter, in the March quarter, we'll see pretty significant improvement in most of the areas where we had issues.

Your next question is from Mark Delaney.

So I was hoping, first, maybe you could elaborate a little bit more on the strength in the Multimedia segment that you guys saw. I think, you noted in your prepared remarks that it was in several different areas. Can you elaborate a little bit more, is this some of the new product opportunities that you're hoping to do, or was this more of a cyclical benefit in some of the areas that you had previously been addressing?

Yes, Mark, we didn't really get a lot of significant upside because of seasonality. In this, Multimedia, what we call, we got a set-top box business, gaming equipment, automotive, electronics and some high-end cameras and a couple of other things. And so the key to -- for us -- and again, right now, when it comes to set-top business, we only have 1 customer in the bucket, very good customer and we -- but we are diversifying that group into some really good businesses. And that's really -- these other businesses, I think, helped pretty well, and especially the gaming, automotive, and we expect that through our -- what we see in a pipeline, to really grow that side of the business, but it's going to come from other sides beside the set-top box business.

Okay. Understood. Can you elaborate a little bit more on your comments for this oil and gas acquisition? You talked about it, Jure, being nicely profitable next quarter. And I know you guys don't want to get into too much specifics, but how much revenue it's adding, but do you already expect it to be a positive for your corporate average margins in the March quarter?

Well, I don't know if we are able -- we expected to be profitable in March quarter. But I would say, we expect the June quarter to be better than corporate average. It's the nature of the business that precision machining is better than our corporate average. As I -- just to add what I said earlier when Brian asked the question, it's really part of our strategy getting into this field. I think, Sanmina's assets are best positioned through this type of industry because we have a lot of high-end technology there, including precision machining, electronics, special packaging. Again, we invested, in the last 3 years, a lot of time and money in this segment. So I believe it's a part of our strategy trying to diversify our portfolio into the quality of the customer. So this is a quality customer, #1. If customer, if we do our job, needs us and we can be with this customer for many, many years to come, so that's why we are excited about it and these are types of customers that we are working very hard to gain.

If I could sneak one last one in. Jure, you talked about your expectations for improved bookings this quarter. Can you help us understand, is that something that you're already seeing or that's just your best estimate of what you expect for the quarter?

Yes, last quarter book-to-bill was basically 1, it was flat, and we did expect that. For this quarter, we do expect bookings to be stronger based on really the projects that we're involved in and some of the programs that got pushed out into this quarter. I think, if you -- for those that listened to our call last time, really not major things happen, except as I said earlier, we are more confident about the rest of the year today than 90 days ago, because 90 days in this business is a lot. But knowing the programs that we are working on, knowing the customers that are talking to us on a daily basis, I'm personally a lot more confident. And I believe the bookings will be a lot stronger in the second quarter.

Your next question is from the line of Jim Suva.

A quick question again on the acquisition. I know you mentioned now that this year, you're pretty confident in seeing some modest or slight growth. Without that acquisition, would you still be making the same question -- or same statement? And then, this acquisition also, did you buy like a building or just some equipment that you're transferring from the customer into your building? Because we're just trying to figure out if you have the opportunity to load more customers in there? Or how we should think about potential restructuring in the future or how this all takes place?

Okay. Well, first of all, we don't expect any restructuring in the future on this one. This is -- number one, I think, this is the -- we bought basically a running -- it's a brand-new operation that our customers were starting -- trying to start themselves. We went into partnership, for example, that made sense for us to partner and we take over these assets, which is basically a building and high-end technology precision machining equipment and people. So we are adding a lot of know-how here and really growing this business. So this -- I know, Jim, what you're trying to do is you're a pretty smart guy trying to figure out the numbers. Definitely, this revenue that we are getting through this oil and gas will help us -- gives us a lot more confidence that growth will come. As you know, when you forecast something for next 9 months, it's always difficult. You got to have some great -- good opportunity that you are very confident you're going to get and there are some other opportunity, there could be some risk. And it's not risk what we do ourselves. It's the risk in the markets that we're involved in. There are customers, they have orders, they get pushed out. So we are trying to really -- when we talk about the growth for next year, yes, definitely, this helps. It gives us more confidence. But there's always good and bad in a forecast, and hopefully, there's going to be more bad -- more good than bad. You want to take, Bob?

Yes, just to provide a little more color, Jim. I believe, and based on what we're seeing in the business right now, we'd be growing year-over-year without this acquisition. And when we made those remarks last quarter, that was our thought process. In terms of the assets that we're acquiring, there is a building. As Jure said, it's only a year or 2 old. And there's a significant new equipment in this building as well. Some of the equipment has a long lead time. It's hard to acquire. And so we're fortunate to get involved in this as this factory was ramping -- beginning to ramp up on its own. So it's -- as we said, it's a business that has much higher than average contribution margin for us. It's one that's going to have more fixed cost. It's going to have more depreciation. But as we continue to load this site, we think that it'll contribute quite a bit to the company.

Jim, if I can add to that. I think, the way you look at this is really more, as I said, we worked on this for a long time. From the beginning, the purpose of this partnership, both from a customer side and our side, it's a real partnership. It only works when both sides are committed long-term. But again, it's very strategic from our part because of the business that we want to get in. And also, it's strategic to be able to win a customer like this that is -- that needs a partnership for many years to come. So it's strategic, but at the end of the day, still, it's the ball in our court we got to execute.

Great. And then, as a follow-up on a different topic. Communications was a bit softer or supposed to be flat and was actually down about 9%, and you mentioned some pushouts and things. Can you help us understand, was it more geographic-specific, such as North America or Asia or Europe, or was it weather-related as many parts of the world or U.S. are more colder than California right now? Or more technology delays or can we kind of think about that as far as the expectation is?

As you know, I don't know exactly I can throw those in a bucket, but I would say there was really more pushouts for -- from an endpoint -- end customer and we believe that these orders are not lost. I think, it's more like timing.

And your next question comes from the line of Sean Hannan. Sean K.F. Hannan - Needham & Company, LLC, Research Division: Just want to see if I can circle back actually on 2 topics that had been hit on. So oil and gas, the assets that you acquired, is there a way to give us a little bit more of an indication in terms of the types of application that these programs would be relevant to? Is this kind of downhole drilling types of efforts within the oil and gas industry or can you give us a little bit more color around that?

Yes. This will be more related on a high end of oil and gas when it comes to precision machining, including the downhole. Sean K.F. Hannan - Needham & Company, LLC, Research Division: Okay. All right. And then, in terms of new programs, I think, Jure, if I heard you correctly, or maybe if you can help to refine what I think I heard. It sounds like new programs that you won in '13, you're starting now to get a little bit better momentum around those. There may have been a little bit of a pause or some delays in terms of bookings and then ramping some of those programs in this last December quarter, but you're getting signals now that this is starting to pick up. Is that accurate and then to what degree is that uniform across your segments?

Yes. Number one, for new programs that I'm talking about, it's really the ramps. Anytime you win a new program, there is a process through NPI and transfer and so on, depends if you transferring to somebody else or if you're winning as a new design. So definitely, it ramps. And also, I think, the forecast itself were not as strong the last year. We're starting to see a better forecast and most importantly customers are starting to take products. So we believe that these projects will contribute a fair amount in 2014 and beyond. On top of that, we believe that we've got some good exciting things that we are working on right now that is basically in our control, in the high percentage. And we believe that those also will continue. I think our existing customer base, existing businesses I say, I think, is important to understand. Our relationships are strong, our collaboration with our customer is great. We are trying -- it's a competitive business, but we're working very close together to add technology, add a lot on the supply chain, eliminate the time to market and eliminate the waste. So a lot of these good things that, I think, we worked on is starting to pay off for us and we continue to invest in that side of our customers so that we can win more. So the way, again, I would look at the whole package is that things are better for us. We are more confident that 2014 is going to be a little bit better. But we have to take one quarter at a time. As Jim Suva said, congratulations, but that was for last quarter, we need to deliver this one. So we'll take one quarter at a time. But I like the way the company is positioned. We did a lot of work in the last couple of years. Stronger balance sheet. A lot of good things. It's all about growth. Growth, growth, growth for us right now. And I think we have lined things up and we will invest more to drive the right growth, as both Bob and I talked about earlier. Sean K.F. Hannan - Needham & Company, LLC, Research Division: Okay, jure, that's helpful. But in terms of whether that's uniform within your segments. Is there anything though from a market behavior standpoint where it's more specific for some of your segments or is this uniform across all of your business?

Yes. Sorry I forgot to answer that question, Sean. First of all, as we mentioned, both Bob and I, on the industrial side of the business, I think, that part of the business for us will have a highest percentage of growth in 2014 because of these projects that we worked on. I think, Defense part -- I'm talking all group there. Defense, we are positioned pretty well, but in that market, it's going to be challenging in the next couple of years. In Medical, we've got a lot of new wins. So it's all about taking those medical products to the market. So we are very -- I would say, the highest percentage of expansion we will have on what we call Defense, Industrial and Medical segment, okay? We do expect, as you know, Computing and Storage, we've been investing a lot of money in that side of the business. We believe we've got some -- both -- we are adding a lot of technology to our customer. We've got some good ODM products internally that have been kind of stagnated. I would expect that also in the second half to do a little bit better. I think, Communication Networks itself will continue to be stable. I think the customer base we have is stable. I think they've got -- our customers have some good growth programs. Yes, we had some down in the first quarter, but as I said earlier, I think -- I don't think those orders were lost, I think it was a more timing issue. And the multimedia, we're diversifying the market segment. So I think a lot of the new customers will drive that. So overall, I would say across-the-board, things are moving in the right direction in 2014. But the biggest growth, we will have in Defense, Industrial and Medical.

And your next question is from Osten Bernardez.

To begin, I guess, could you clarify for me or add more color with respect to your commentary on the mechanical side of your business in terms of what happened during the quarter? You noted having some comfort with what's going on there and what you expect going forward. Is there -- are you -- do you foresee greater demand or has there been any alterations to the operations to make sure that, that -- that those margins sort of pick up? Or is this just a matter of certain business coming in?

So Osten, I'll answer that. As I mentioned before, really, there were 2 root causes. One is demand was down a bit, but we also created some issues on our own, and so we had some execution problems. The good news is, I think, we understood them very quickly. And I think, the execution issues will be resolved this quarter, so it's -- and we believe the demand will be stronger this quarter. So we think that mechanical systems will come back pretty well. But it was definitely a disappointment this quarter and that's why we called it out.

Okay. And then, it was good to see the share repurchase during the quarter, in addition to the oil and gas investment that you made. I guess, going forward, any change in the way you view how you want to sort of use cash you have on hand given that this is your first time utilizing your latest share repurchase authorization that you do have some debt that you could start redeeming in a few months if you wanted to?

Yes, I view this quarter as a reasonable substantiation of the priorities that we've been articulating. So as we've said for quite some time, of course, we want to make sure we have the cash to grow the business. And then, it's a matter of doing very strategic M&A activities similar to the investment that we made in the December quarter. And then, it's a matter of being very analytical in terms of is it better for our shareholders to repurchase equity or better to repurchase debt? So we're very committed to creating shareholder value and we'll continue to do those analyses in realtime as we believe we'll be -- continue to be fortunate in terms of generating cash.

And I guess, lastly for me, when I compare -- when I look at your outlook for Communications, is it fair to assume that you're expecting the back half to be -- obviously, it will be back half-loaded, but do you expect that half-to-half growth to be better than it was in 2013 fiscal?

Well, first of all, percentage, as you can see this quarter, is 46% of our revenue. So in order for us to grow for a year, that part of that has to grow from what it is today.

And I don't remember the actual percentage numbers last year. But clearly, over the last 2 to 3 years, we've seen seasonality where the first half of our fiscal year is weaker than the second half. And we're seeing those same signals again this year and that's why we're pretty confident we will see growth in the second half.

And your next question comes from the line of Christian Schwab.

So just a follow-up on Communications. Can you tell us what type of infrastructure equipment that we could be monitoring that would have the biggest impact to an improvement/stability in the second half of the year? Is it base stations? Is it optical? What should we be looking at?

Well, first of all, I said in my prepared statements, the question that we think the networking and wireless infrastructure will drive most of our growth, especially in the second half, definitely 4G will drive that. There's a lot of optical on the networking side. So the good thing is that we are involved in all the new technologies with almost every key customer in that segment. And so as long as that industry moves in the right direction, I believe that Sanmina is well-positioned to gain. So again, networking and wireless infrastructure.

Your next question is from Wamsi Mohan.

Bob, Jure, on the -- just to be clear, on the margins in CPS, that did not relate to the oil and gas assets, those are independent issues, because you mentioned precision machining, so I just wanted to make sure that it was not related to the oil and gas assets?

No. I mean, that acquisition was just on, I believe, the 18th of December, right before the holidays. So we really didn't produce anything to speak of in the December quarter for that particular customer in that factory.

And Bob, the mechanical systems, sort of, that you identified the issues, how do you get hit with at multiple sites with similar issues? Or were they multiple issues at different sites and you just sort of figured out what happened at each sites independently, or was it related to some particular ramp up program?

Unfortunately, it was really different issues at the different sites. And as I said, some of it was related to our own execution, some of it was related to demand situation. The good news is we think that these issues are ones that, at this point, we've already remediated. And assuming the demand picture comes in the way we are expecting, we think that segment will come back pretty nicely in the March quarter.

Could you quantify the impact on the margin in the quarter because of the weaker margins that you realized because of mechanical?

I don't want to get into that much detail within the segment, it's a slippery slope. But I can tell you, I mean, it's a major explanation for the decline.

And then, Bob, on the tax rate, it sounded like you might explore some alternative to Mexico. Could you give any more color on that?

Well, we're evaluating alternatives right now. And obviously, everything we do has to be within the constraints of the law in Mexico and every country that we operate in. So this is a change in the regime. It happened fairly quickly and fairly dramatically. And so we need to reevaluate that. I don't want to say exactly the things we're evaluating. But I think there may be some opportunity to improve, but there's nothing that we can talk about at this stage.

And your last question comes from the line of Sherri Scribner.

This is [indiscernible] just calling on behalf of Sherri Scribner. Jure, I just had a question actually, and I know we sort of touched upon this commentary, you mentioned a soft first half of fiscal year '14, and I was just wondering, what is it that you're seeing in the market? You had mentioned cyclical benefits and seasonality, but is there anything else in terms of just particular segment?

Well, we had some flatness, I would say, in the first quarter because of seasonality. I think, in the second quarter, we're having a little bit less seasonality. I mean, 90 days ago, I thought we're going to have a little bit more than we -- so for us, things are more stable for the second quarter. I think, for a third quarter and fourth quarter, even beginning of the year, we thought we're going to have a stronger second half than first half. I think, in last 90 days, we are more optimistic for a couple of reasons. I think, we're still right that the second half is going to be a little bit better. And #2, I think, some of the programs that we are involved and working on, I believe, they will grow faster and will help us both on the top line and the bottom line. So putting all this together gives us a lot more confidence than 90 days ago.

Okay. All right. Great. And I had a follow-up question. Just with regards to what kind of demand trends you're seeing in the server and storage?

Well, it's been, as I mentioned earlier on my prepared statement, we did forecast it to be down for the first quarter and we had a weaker demand, well, basically, weaker demand what we thought is going to happen, it was down 3% quarter-over-quarter. For this second quarter, we are forecasting to be flat. We're still pretty optimistic about opportunities because we're working on some good things. I just hope they happen sooner than later. So we're still committed to the market. We think it's -- we have a lot of technology. We invested a lot of technology in this market. We're putting a lot of R&D money into this market right now. So let's say I'm a little bit more optimistic than negative, but we just have to deliver it first. Well, ladies and gentlemen, I want to, again, thank you. We are -- if we didn't answer all your questions, we are available. Please get a hold of us anytime. And looking forward to talking to you again in next 90 days. Bye-bye.

Thanks, everyone. Have a nice evening.

Bye-bye.

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