Flextronics Announces Second Quarter Results

October 27, 2010

Net sales increased 27% year-over-year and 13% sequentially
Adjusted EPS increased 77% year-over-year and 21% sequentially
ROIC of 31.9%

 

SINGAPORE, Oct 27, 2010 /PRNewswire via COMTEX/ --

Flextronics (Nasdaq: FLEX) today announced results for its second quarter ended October 1, 2010 as follows:

 

(US$ in millions, except EPS)


Three Month Periods Ended


October 1,

2010


October 2,

2009

Net sales

$ 7,422


$ 5,832

Adjusted operating income (1)

$ 213


$ 149

GAAP operating income

$ 199


$ 123

Adjusted net income (1)

$ 179


$ 104

GAAP net income

$ 144


$ 20

Adjusted EPS (1)

$ 0.23


$ 0.13

GAAP EPS

$ 0.18


$ 0.02









(1) A reconciliation of non-GAAP financial measures to GAAP financial measures is presented in Schedule II attached to this press release.

Second Quarter Results

Net sales for the second quarter ended October 1, 2010 increased 27% to $7.4 billion compared to net sales for the quarter ended October 2, 2009 of $5.8 billion. Adjusted operating income increased $64 million or 43% to $213 million, compared to adjusted operating income of $149 million for the year ago quarter. Adjusted net income for the second quarter ended October 1, 2010 was $179 million, an increase of $75 million or 72%, and adjusted EPS increased $0.10 or 77% to $0.23, compared to $104 million and $0.13, respectively, for the year ago quarter. GAAP operating income, net income, and EPS were all up significantly year-over-year.

"We are very pleased with the results and the continued improvement achieved sequentially and year-over-year," said Mike McNamara, CEO of Flextronics. "We continue to improve quarter-over-quarter with sales increasing 13% to $7.4 billion. Every market segment and business unit also grew sequentially and year-over-year. Flextronics' asset management has been outstanding which has driven substantial improvements and consistency in our return on invested capital (ROIC). For the quarter, ROIC increased to a record 31.9%, well above the 22.2% of a year ago, and up from 28.8% last quarter."

Paul Read, CFO of Flextronics added, "We improved on our industry leading cash conversion cycle by two days to 12 days, generated $509 million in cash flow from operations, and $385 million of free cash flow during the quarter. This allowed us to repurchase an additional $195 million of our shares for a total of $300 million repurchased year-to-date while still increasing our strong cash position to $1.8 billion."

Guidance

For the third quarter ending December 31, 2010, revenue is expected to increase to a range of $7.5 billion to $7.7 billion and adjusted EPS is expected to be in the range of $0.23 to $0.25 per share.

GAAP earnings per share are expected to be lower than the guidance provided herein by approximately $0.04 per diluted share for quarterly intangible amortization and stock-based compensation expense.

Conference Calls and Web Casts

A conference call hosted by Flextronics's management will be held today at 2:00 PM (PT) / 5:00 PM (ET) to discuss the Company's financial results for the second quarter ended October 1, 2010.

The conference call will be broadcast via the Internet and may be accessed by logging on to the Company's website at www.flextronics.com. Additional information in the form of a slide presentation may also be found on the Company's site. A replay of the broadcast will remain available on the Company's website afterwards.

Minimum requirements to listen to the broadcast are Microsoft Windows Media Player software (free download at http://www.microsoft.com/windows/windowsmedia/download/default.asp) and at least a 28.8 Kbps bandwidth connection to the Internet.

About Flextronics

Headquartered in Singapore (Singapore Reg. No. 199002645H), Flextronics is a leading Electronics Manufacturing Services (EMS) provider focused on delivering complete design, engineering and manufacturing services to automotive, computing, consumer, industrial, infrastructure, medical and mobile OEMs. Flextronics helps customers design, build, ship, and service electronics products through a network of facilities in 30 countries on four continents. This global presence provides design and engineering solutions that are combined with core electronics manufacturing and logistics services, and vertically integrated with components technologies, to optimize customer operations by lowering costs and reducing time to market. For more information, please visit www.flextronics.com.

This press release contains forward-looking statements within the meaning of U.S. securities laws, including statements related to future expected revenues and earnings per share. These forward-looking statements involve risks and uncertainties that could cause the actual results to differ materially from those anticipated by these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. These risks include: that future revenues and earnings may not be achieved as expected; our dependence on industries that continually produce technologically advanced products with short life cycles; our ability to respond to changes in economic trends, to fluctuations in demand for customers' products and to the short-term nature of customers' commitments; competition in our industry, particularly from ODM suppliers in Asia; our dependence on a small number of customers for the majority of our sales and our reliance on strategic relationships with major customers; the challenges of effectively managing our operations, including our ability to manage manufacturing processes, utilize available manufacturing capacity, control costs and manage changes in our operations; production difficulties, especially with new products; the risk of future restructuring charges that could be material to our financial condition and results of operations; our ability to design and quickly introduce world-class components products that offer significant price and/or performance advantages over competitive products; the impact on our margins and profitability resulting from substantial investments and start-up and integration costs in our components, design and ODM businesses; supply shortages of required electronic components; compliance with legal and regulatory requirements, including regulatory quality standards applicable to medical devices; the challenges of international operations, including fluctuations in exchange rates beyond hedged boundaries leading to unexpected charges; changes in government regulations and tax laws, including any effects related to the expiration of tax holidays; our exposure to potential litigation relating to intellectual property rights, product warranty and product liability; our dependence on our key personnel; our ability to comply with environmental laws; the challenges of integrating acquired companies and assets; the effects that the current macroeconomic environment could have on our business and demand for our products as well as on our liquidity and our ability to access credit markets; and the effects that current credit and market conditions could have on the liquidity and financial condition of customers or suppliers, including any impact on their ability to meet contractual obligations to us on terms and conditions previously negotiated. Additional information concerning these and other risks is described under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our reports on Form 10-K and 10-Q that we file with the U.S. Securities and Exchange Commission. The forward-looking statements in this press release are based on current expectations and Flextronics assumes no obligation to update these forward-looking statements.


SCHEDULE I


FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)





Three Month Periods Ended




October 1,

2010


October 2,

2009

GAAP:






Net sales


$ 7,422,338


$ 5,831,761


Cost of sales


7,024,691


5,519,778


Restructuring charges


-


12,403








Gross profit


397,647


299,580








Selling, general and administrative expenses


198,954


176,246


Restructuring charges


-


187








Operating income


198,693


123,147








Intangible amortization


21,439


22,710


Other expense, net


-


91,999


Interest and other expense, net


22,838


38,091








Income (loss) before income taxes


154,416


(29,653)








Provision for income taxes


10,000


(49,312)


Net income


$ 144,416


$ 19,659







EPS:







GAAP


$ 0.18


$ 0.02


Non-GAAP


$ 0.23


$ 0.13








Diluted Shares used in computing per share amounts


784,271


817,260







See Schedule II for the reconciliation of GAAP to non-GAAP financial measures. See the accompanying notes on Schedule IV attached to this press release.


SCHEDULE II


FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)

(In thousands, except per share amounts)

(unaudited)









Three Month Periods Ended



October 1,
2010

% of
Sales

October 2,
2009

% of
Sales







Net Sales


$ 7,422,338


$ 5,831,761








GAAP gross profit


$ 397,647

5.4%

$ 299,580

5.1%

Stock-based compensation expense


2,651


2,440


Restructuring and other charges

(2)

-


12,403


Non-GAAP gross profit


$ 400,298

5.4%

$ 314,423

5.4%







GAAP SG&A Expenses


$ 198,954

2.7%

$ 176,246

3.0%

Stock-based compensation expense


11,283


10,962


Non-GAAP SG&A Expenses


$ 187,671

2.5%

$ 165,284

2.8%







GAAP operating income


$ 198,693

2.7%

$ 123,147

2.1%

Stock-based compensation expense


13,934


13,402


Restructuring

(2)

-


12,590


Non-GAAP operating income


$ 212,627

2.9%

$ 149,139

2.6%







GAAP provision for income taxes


$ 10,000

0.1%

$ (49,312)

-0.8%

Restructuring and other charges


-


351


Settlement of tax contingencies

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