2008-07-24 15:02:00
Flextronics Announces Record First Quarter Results
Record first quarter net sales increase 62% to $8.4 billion
Record first quarter adjusted EPS increases 23% to $0.27
Company announces authorization for share repurchase
SINGAPORE, July 24 /EMWNews/ -- Flextronics (Nasdaq: FLEX)
today announced results for its first quarter ended June 27, 2008 as
follows:
(US$ in millions, except EPS)
Three Month Periods Ended
June 27, June 29,
2008 2007
Net sales $8,350 $5,157
GAAP operating income $205 $133
Adjusted operating income (1) $280 $153
GAAP net income $130 $107
Adjusted net income (1) $227 $134
GAAP EPS $0.16 $0.17
Adjusted EPS (1) $0.27 $0.22
(1) A reconciliation of non-GAAP financial measures to GAAP financial
measures is presented in Schedule II attached to this press release.
First Quarter Results
Record net sales for the first quarter ended June 27, 2008 increased
62% to $8.4 billion, which represents an increase of $3.2 billion over the
year ago quarter. Record adjusted operating profit for the first quarter
ended June 27, 2008 increased 83% over the year ago quarter to $280
million, while adjusted operating margin improved 40 basis points to 3.4%.
Record adjusted net income for the first quarter ended June 27, 2008
increased 69% over the year ago quarter to $227 million, while adjusted EPS
increased 23% to a first quarter record of $0.27.
"I am very pleased with our execution this past quarter, especially in
light of the challenging economic environment. I believe that the size and
breadth of our service offerings as well as the geographic and product
diversification of our company continues to provide us a unique competitive
advantage, particularly in this current environment. I am also pleased to
announce that we have recently received authorization from our Board of
Directors to repurchase up to ten percent of our outstanding ordinary
shares," said Mike McNamara, chief executive officer of Flextronics.
Guidance
For the second quarter ending September 26, 2008, revenue is expected
to be in the range of $8.5 billion to $9.0 billion and adjusted EPS is
expected to be in the range of $0.28 - $0.31 per share.
GAAP earnings per share are expected to be lower than the guidance
provided herein by approximately $0.05 per diluted share for quarterly
intangible amortization and stock-based compensation expense.
Flextronics Announces Share Repurchase Authorization
Today the Company announced that its Board of Directors has authorized
the repurchase of up to ten percent of the Company's outstanding ordinary
shares.
Share repurchases will be made pursuant to the Share Purchase Mandate
approved by the shareholders at the Company's Annual General Meeting. Until
the Company's 2008 Annual General Meeting, scheduled to take place in
September 2008, the Company is authorized to repurchase up to approximately
61 million shares. Following and contingent upon shareholder approval at
the 2008 Annual General Meeting in September, the amount authorized for
repurchase will be increased to up to approximately 83 million shares.
Share repurchases, if any, will be made in the open market at such times
and in such amounts as management deems appropriate. The Company intends to
effect any share purchases in compliance with SEC Rule 10b-18. The timing
and actual number of shares repurchased will depend on a variety of factors
including price, market conditions and applicable legal requirements. The
share repurchase program does not obligate the Company to repurchase any
specific number of shares and may be suspended or terminated at any time
without prior notice.
Conference Calls and Web Casts
A conference call hosted by Flextronics's management will be held today
at 2:30 p.m. PDT to discuss the Company's financial results for the first
quarter ended June 27, 2008. This call will be broadcast via the Internet
and may be accessed by logging on to the Company's website at
http://www.flextronics.com. Additional information in the form of slide
presentations may also be found on the Company's site. Replays of the
broadcasts 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 digital, industrial, infrastructure,
medical and mobile OEMs. With the acquisition of Solectron, pro forma
fiscal year 2008 revenues were more than US$33.6 billion. 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 http://www.flextronics.com
This press release contains forward-looking statements within the
meaning of U.S. securities laws, including statements related to future
revenue and earnings growth. 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. These risks
include that revenue and earnings growth may not occur as expected; our
dependence on industries that continually produce technologically advanced
products with short life cycles; that we may not fully realize the expected
synergies, revenues and earnings growth and cost savings from the Solectron
acquisition, and that we may incur significant costs and charges associated
with the acquisition; 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,
control costs and manage changes in our operations; the challenges of
integrating acquired companies and assets; not obtaining anticipated new
customer programs, or that if we do obtain them, that they may not
contribute to our revenue or profitability as expected or at all; our
ability to utilize available and recently expanded manufacturing capacity;
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; production difficulties, especially with new products; changes
in government regulations and tax laws; not realizing expected returns from
our retained interests in divested businesses; our exposure to potential
litigation relating to intellectual property rights, product warranty and
product liability; potential impairment of our intangible assets; our
dependence on the continued trend of outsourcing by OEMs; the risks to our
particular electronics and technology sector of economic instability and a
slowdown in consumer spending; the effects of customer bankruptcies; supply
shortages of required electronic components; the challenges of
international operations, including fluctuations in exchange rates beyond
hedged boundaries leading to unexpected charges; our dependence on our key
personnel; and our ability to comply with environmental laws. 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, 10-Q and 8-K 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
June 27, 2008 June 29, 2007
GAAP:
Net sales $8,350,246 $5,157,026
Cost of sales 7,867,162 4,866,454
Restructuring charges 26,317 9,753
Gross profit 456,767 280,819
Selling, general and administrative
expenses 248,626 146,588
Restructuring charges 2,898 921
Operating income 205,243 133,310
Intangible amortization 25,246 16,675
Interest and other expense, net 39,624 6,259
Income before income taxes 140,373 110,376
Provision for income taxes 10,061 3,429
Net income $130,312 $106,947
EPS:
GAAP $0.16 $0.17
Non-GAAP $0.27 $0.22
Diluted shares used in computing
per share amounts 840,444 615,541
See Schedule II for the reconciliation of GAAP to non-GAAP financial
measures.
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
June 27, % of June 29, % of
2008 Sales 2007 Sales
GAAP gross profit $456,767 5.5% $280,819 5.4%
Stock-based compensation expense 2,299 999
Restructuring and other charges (2) 4 7,821 9,753
Non-GAAP gross profit $506,887 6.1% $291,571 5.7%
GAAP SG&A Expenses $248,626 3.0% $146,588 2.8%
Stock-based compensation expense 13,061 7,726
Restructuring and other charges (2) 8,700 -
Non-GAAP SG&A Expenses $226,865 2.7% $138,862 2.7%
GAAP operating income $205,243 2.5% $133,310 2.6%
Stock-based compensation expense 15,360 8,725
Restructuring and other charges (2) 59,419 10,674
Non-GAAP operating income $280,022 3.4% $152,709 3.0%
GAAP net income $130,312 1.6% $106,947 2.1%
Stock-based compensation expense 15,360 8,725
Restructuring and other charges (2) 63,097 10,674
Intangible amortization 25,246 18,205
Other (3) - (9,309)
Adjustment for taxes (7,024) (961)
Non-GAAP net income $226,991 2.7% $134,281 2.6%
GAAP provision for income taxes $10,061 0.1% $3,429 0.1%
Restructuring and other charges 4,676
Intangible amortization 2,348 961
Non-GAAP provision for income taxes $17,085 0.2% $4,390 0.1%
EPS:
GAAP $0.16 $0.17
Non-GAAP $0.27 $0.22
See the accompanying notes on Schedule IV attached to this press release.
SCHEDULE III
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
UNAUDITED GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 27, 2008 March 31, 2008
ASSETS
Current Assets:
Cash and cash equivalents $1,761,728 $1,719,948
Accounts receivable, net 3,925,858 3,550,942
Inventories 4,456,094 4,118,550
Deferred income taxes 9,984 573
Other current assets 936,809 922,924
11,090,473 10,312,937
Property and equipment, net 2,536,100 2,465,656
Deferred income taxes 35,964 32,598
Goodwill and other intangibles, net 6,048,616 5,876,741
Other assets 812,938 836,983
$20,524,091 $19,524,915
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank borrowings, current portion
of long-term debt and capital lease
obligations $18,959 $28,591
Accounts payable 5,885,532 5,311,337
Other current liabilities 2,035,115 2,061,087
Total current liabilities 7,939,606 7,401,015
Long-term debt, net of current portion:
Acquisition Term Loan due 2012
and 2014 1,709,197 1,709,256
6 1/2 % Senior Subordinated Notes
due 2013 399,622 399,622
6 1/4 % Senior Subordinated Notes
due 2014 402,090 402,090
1 % Convertible Subordinated
Notes due 2010 500,000 500,000
Zero Coupon Convertible Junior
Subordinated Notes due 2009 195,000 195,000
Other long-term debt and capital
lease obligations 514,091 182,369
Other liabilities 545,279 571,119
Total shareholders' equity 8,319,206 8,164,444
$20,524,091 $19,524,915
SCHEDULE IV
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(1) To supplement Flextronics' unaudited selected financial data
presented on a basis consistent with Generally Accepted Accounting
Principles ("GAAP"), the Company discloses certain non-GAAP financial
measures that exclude certain charges, including non-GAAP gross profit,
non-GAAP selling, general and administrative expenses, non-GAAP operating
income, non-GAAP net income and non-GAAP net income per diluted share.
These supplemental measures exclude, among other things, stock-based
compensation expense, restructuring charges, intangible amortization, gains
or losses on divestitures and certain other items. These non-GAAP measures
are not in accordance with or an alternative for GAAP, and may be different
from non-GAAP measures used by other companies. We believe that these
non-GAAP measures have limitations in that they do not reflect all of the
amounts associated with Flextronics's results of operations as determined
in accordance with GAAP and that these measures should only be used to
evaluate Flextronics's results of operations in conjunction with the
corresponding GAAP measures. The presentation of this additional
information is not meant to be considered in isolation or as a substitute
for the most directly comparable GAAP measures. We compensate for the
limitations of non-GAAP financial measures by relying upon GAAP results to
gain a complete picture of Company performance.
In calculating non-GAAP financial measures, we exclude certain items to
facilitate a review of the comparability of the Company's operating
performance on a period-to-period basis because such items are not, in our
view, related to the Company's ongoing operational performance. We use
non-GAAP measures to evaluate the operating performance of our business,
for comparison with forecasts and strategic plans, for calculating return
on investment, and for benchmarking performance externally against
competitors. In addition, management's incentive compensation is determined
using certain non-GAAP measures. Also, when evaluating potential
acquisitions, we exclude certain of the items described below from
consideration of the target's performance and valuation. Since we find
these measures to be useful, we believe that investors benefit from seeing
results "through the eyes" of management in addition to seeing GAAP
results. We believe that these non-GAAP measures, when read in conjunction
with the Company's GAAP financials, provide useful information to investors
by offering:
-- the ability to make more meaningful period-to-period comparisons of
the Company's on-going operating results;
-- the ability to better identify trends in the Company's underlying
business and perform related trend analyses;
-- a better understanding of how management plans and measures the
Company's underlying business; and
-- an easier way to compare the Company's operating results against
analyst financial models and operating results of competitors that
supplement their GAAP results with non-GAAP financial measures.
The following are explanations of each of the adjustments that we
incorporate into non-GAAP measures, as well as the reasons for excluding
each of these individual items in the reconciliations of these non-GAAP
financial measures:
Stock-based compensation expense consists of non-cash charges for the
estimated fair value of stock options and unvested share bonus awards
granted to employees and assumed in business acquisitions. The Company
believes that the exclusion of these charges provides for more accurate
comparisons of its operating results to peer companies due to the varying
available valuation methodologies, subjective assumptions and the variety
of award types. In addition, the Company believes it is useful to investors
to understand the specific impact the application of SFAS 123R has on its
operating results.
Restructuring charges include severance, impairment, lease termination,
exit costs and other charges primarily related to the closures and
consolidations of various manufacturing facilities. These costs may vary in
size based on the Company's acquisition and restructuring activities, are
not directly related to ongoing or core business results, and do not
reflect expected future operating expenses. These costs are excluded by the
Company's management in assessing current operating performance and
forecasting its earnings trends, and are therefore excluded by the Company
from its non-GAAP measures.
Intangible amortization consists of non-cash charges that can be
impacted by the timing and magnitude of acquisitions. The Company considers
its operating results without these charges when evaluating its ongoing
performance and forecasting its earnings trends, and therefore excludes
such charges when presenting non-GAAP financial measures. The Company
believes that the assessment of its operations excluding these costs is
relevant to its assessment of internal operations and comparisons to the
performance of its competitors.
Other charges or gains consist of various other types of items that are
not directly related to ongoing or core business results, such as
integration costs associated with restructuring activities undertaken in
connection with various business acquisitions, executive separation costs
and cumulative foreign exchange adjustments to the cost basis of
international entities that have been divested or liquidated. We exclude
these items because they are not related to the Company's ongoing
operational performance or do not affect core operations. Excluding these
amounts provide investors with a basis to compare Company performance
against the performance of other companies without this variability.
Adjustment for taxes relates to the tax effects of the various
adjustments that we incorporate into non-GAAP measures in order to provide
a more meaningful measure on non-GAAP net income.
(2) During the three-month period ended June 27, 2008 the Company
recognized charges primarily relating to restructuring and integration
activities initiated by the Company in an effort to consolidate and
integrate the Company's global capacity and infrastructure as a result of
its acquisition of Solectron Corporation. These activities, which included
closing, consolidating and relocating certain manufacturing and
administrative operations, elimination of redundant assets and reducing
excess workforce and capacity, were intended to optimize the company's
operational efficiency post acquisition.
During the three-month period ended June 29, 2007 the Company
recognized restructuring charges for costs related to employee terminations
in Europe.
(3) During the three-month period ended June 29, 2007 the Company
recognized net foreign exchange gains in connection with the divestiture of
a certain international entity.
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