Flextronics Reports Strong Third Quarter Results

January 20, 2011

Net sales increased 19% year-over-year and 6% sequentially
Adjusted EPS $0.25, GAAP EPS $0.26
Record ROIC of 33.6%

 

SINGAPORE, Jan. 20, 2011 /PRNewswire via COMTEX/ --

Flextronics (Nasdaq: FLEX) today announced results for its third quarter ended December 31, 2010 as follows:

 

(US$ in millions, except EPS)





Three Month Periods Ended




December 31,


December 31,


Y/Y



2010


2009


Growth


Net sales

$ 7,833


$ 6,556


19%


Adjusted operating income (1)

$ 232


$ 189


23%


GAAP operating income

$ 219


$ 167


31%


Adjusted net income (1)

$ 193


$ 138


40%


GAAP net income

$ 198


$ 93


113%


Adjusted EPS (1)

$ 0.25


$ 0.17


47%


GAAP EPS

$ 0.26


$ 0.11


136%









(1) An explanation and reconciliation of non-GAAP financial measures to GAAP financial measures

is presented in Schedule II attached to this press release.

Third Quarter Results

Net sales for the third quarter ended December 31, 2010 increased 19% to $7.8 billion compared to net sales for the quarter ended December 31, 2009 of $6.6 billion. Adjusted operating income increased $43 million or 23% to $232 million, compared to adjusted operating income of $189 million for the year ago quarter. Adjusted net income for the third quarter ended December 31, 2010 was $193 million, an increase of $55 million or 40%, and adjusted EPS increased $0.08 or 47% to $0.25, compared to $138 million and $0.17, respectively, for the year ago quarter. GAAP operating income, net income, and EPS were all up significantly year-over-year.

"The breadth and strength of our competitive position continues to improve and is reflected in our value-added supply chain services and solutions being in high-demand," said Mike McNamara, CEO of Flextronics. "We continue to improve quarter-over-quarter with sales increasing to $7.8 billion. Flextronics' asset management continues to be outstanding and has driven substantial improvements in our return on invested capital (ROIC). For the quarter, ROIC increased to a record 33.6%, above the 30.1% of a year ago, and up from 31.9% last quarter, and profit improvement continues on a strong, consistent pace."

Guidance

For the fourth quarter ending March 31, 2011, revenue is expected to be in the range of $7.1 billion to $7.4 billion and adjusted EPS is expected to be in the range of $0.21 to $0.23 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 third quarter ended December 31, 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, at commercially viable production yields and quantities; the impact on our margins and profitability resulting from our increased components offerings which have required 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






December 31,

2010


December 31,

2009



GAAP:








Net sales


$ 7,832,856


$ 6,556,137




Cost of sales


7,399,280


6,173,461




Restructuring charges


-


9,624












Gross profit


433,576


373,052












Selling, general and administrative expenses


215,070


205,614




Restructuring charges


-


162












Operating income


218,506


167,276












Intangible amortization


16,571


21,440




Interest and other expense, net


24,082


40,555












Income before income taxes


177,853


105,281












Provision for income taxes


(20,437)


12,411




Net income


$ 198,290


$ 92,870











EPS:








GAAP


$ 0.26


$ 0.11




Non-GAAP


$ 0.25


$ 0.17












Diluted Shares used in computing per share amounts


776,595


825,545



























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





December 31,
2010

% of
Sales

December 31,
2009

% of
Sales











Net Sales


$ 7,832,856


$ 6,556,137












GAAP gross profit


$ 433,576

5.5%

$ 373,052

5.7%



Stock-based compensation expense


2,553


2,733




Distressed customer charges

(2)

-


(26,439)




Restructuring charges

(3)

-


9,624




Non-GAAP gross profit


$ 436,129

5.6%

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