Flextronics Announces Third Quarter Record Results
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Flextronics Announces Third Quarter Record Results

Record Quarterly Net Sales Up 31% to $5.4 billion; Non-GAAP Operating Profit Up 29% to $161 million; Record GAAP Operating Profit Up 139% to $153 million; Quarterly GAAP EPS Up 186% to $0.20; Record Quarterly Non-GAAP EPS Up 15% to $0.23

    SINGAPORE, Jan. 30 /PRNewswire-FirstCall/ -- Flextronics (NASDAQ: 
FLEX)
today announced results for its third quarter ended December 31, 2006 as
follows:


    (US$ in millions,            Three Months Ended     Nine Months Ended
     except EPS)                    December 31,           December 31,
                                  2006       2005        2006        2005

    Net sales                    $5,415     $4,126     $14,177     $11,757
    GAAP operating income          $153        $64        $300        $206
    Operating income, excluding
     intangible amortization,
     stock-based compensation
     expense, restructuring and
     other charges (1)             $161       $125        $429        $366
    GAAP net income                $119        $42        $388         $98
    Net income, excluding
     intangible amortization,
     stock-based compensation
     expense, restructuring and
     other charges (1)             $136       $118        $356        $319
    Diluted GAAP EPS              $0.20      $0.07       $0.66       $0.16
    Diluted EPS, excluding
     after-tax gains and
     losses on divestitures,
     intangible amortization,
     stock-based compensation
     expense, restructuring
     and other charges (1)        $0.23      $0.20       $0.60       $0.53

    (1) The reconciliation of non-GAAP results to GAAP results is illustrated
        in Schedules I & II attached to this press release.  See the
        accompanying Notes on Schedule IV attached to this press release.


    Quarterly Results

Net sales for the third quarter ended December 31, 2006 were a record high $5.4 billion, which represents an increase of $1.3 billion, or 31%, over the year ago quarter.

Excluding intangible amortization, stock-based compensation expense, restructuring and other charges, net income for the third quarter ended December 31, 2006 increased 15% to a record $136 million, or $0.23 per diluted share, compared to $118 million, or $0.20 per diluted share, in the year ago quarter.

GAAP net income increased 183% to a December quarter record $119 million, or $0.20 per diluted share, compared to $42 million, or $0.07 per diluted share in the year ago quarter.

"Last year we initiated our strategy to accelerate revenue and profit growth in our core EMS business, which is realizing success for our company and our customers. A central part of this strategy is the organization of our resources around a market focused approach, which allows us to better serve our customers," said Mike McNamara, chief executive officer of Flextronics. "We are pleased with the results to date." The December 2006 quarter included the following noteworthy items:

    -- Revenue reached a record high $5.4 billion,
    -- Non-GAAP net income reached a record high $136 million,
    -- Year-over-year revenue increased 31% while non-GAAP operating profit
       increased 29%,
    -- ROIC improved 120 basis points from the year ago quarter and is at the
       highest level in almost six years at 11.5%, which approximates the
       Company's cost of capital,
    -- Cash conversion cycle improved 2 days on a sequential basis to an
       industry leading 12 days,
    -- Debt was repaid by $240 million, resulting in a near record low
       leverage ratio of 20%,
    -- Inventory was reduced by $79 million sequentially despite a sales
       increase of $713 million,
    -- Cash flow from operations amounted to $350 million in the quarter, and
    -- Non-GAAP operating expenses were reduced to a record low 2.4% of sales.

McNamara concluded by stating, "During this high growth quarter, we are executing on the controllable aspects of our business and are extremely pleased with the revenue and profit growth, along with our continued excellence in working capital management, improving return on invested capital, balance sheet strength and cash flow generation."

Guidance

For the fourth quarter ending March 31, 2007, revenue is expected to be approximately $4.8 billion and diluted EPS is expected to be approximately $0.20. This represents year-over-year revenue growth of approximately $1.3 billion, or approximately 36%, and implies an operating profit growth rate of approximately 40%. Management emphasized that there is a range around the March 2007 quarter guidance as demand trends and the economy are dynamic.

GAAP earnings per diluted share are expected to be lower than the guidance provided herein by approximately $0.03 per diluted share per quarter reflecting quarterly intangible amortization and stock-based compensation expense.

2004 Award Plan for New Employees

On January 23, 2007, options to purchase an aggregate of 813,200 ordinary shares were granted from the 2004 Award Plan for New Employees. The options have an exercise price of $11.56 (equal to the closing price of our ordinary shares on the grant date, as quoted on the NASDAQ Global Select Market), and will expire 10 years after the date of grant (or upon termination of employment, if earlier), and generally become exercisable over four years. Also on January 23, 2007, 70,000 share bonus awards were granted from the 2004 Award Plan for New Employees. The share bonus awards will vest in five equal annual installments beginning on February 1, 2008, and any unvested awards will expire upon termination of employment. All options and share bonus awards were granted to new employees.

Conference Call and Web Cast

A conference call hosted by Flextronics' management will be held today at 1:30 p.m. PST to discuss the Company's financial results and its outlook. 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 a slide presentation that summarizes the quarterly results may also be found on the Company's site. A replay of the broadcast will remain available on the Company's website after the call.

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 fiscal year 2006 revenues from continuing operations of US$15.3 billion, Flextronics helps customers design, build, ship, and service electronics products through a network of facilities in over 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 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 or at all; 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 our customers' products and to the short-term nature of our 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; the challenges of effectively managing our operations; the challenges of integrating acquired companies or assets; our reliance on strategic relationships with major customers; the impact on our margins and profitability resulting from substantial investments and start-up and integration costs in our components, design and ODM capabilities; that we may not be able to obtain 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 design and quickly introduce world-class components products that offer significant price and/or performance advantages over competitive products; production difficulties, especially with new products; 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; not realizing expected returns from our retained interests in divested businesses; changes in government regulations and tax laws; 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 effects of customer bankruptcies; and the other risks 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 CONSOLIDATED STATEMENTS OF OPERATIONS (1)(2)
                     (In thousands, except per share amounts)

                                         Three Months Ended December 31, 2006
                                           Non-GAAP     Required      GAAP
                                                       Adjustments

    Net sales                              $5,415,460       $-     $5,415,460
    Cost of sales                           5,124,603      1,708    5,126,311
    Restructuring and other charges               -          -            -

          Gross profit                        290,857     (1,708)     289,149

    Selling, general and administrative
     expenses                                 129,538      6,346      135,884
    Restructuring and other charges               -          -            -

          Operating income                    161,319     (8,054)     153,265

    Intangible amortization                       -        7,794        7,794
    Interest and other expense, net            15,261      1,530       16,791
    Loss on divestiture of operations             -          -            -

          Income before income taxes          146,058    (17,378)     128,680

    Provision for (benefit from) income
     taxes                                     10,224       (135)      10,089

          Income from continuing
           operations                         135,834    (17,243)     118,591

    Income from discontinued operations
     (net of tax)                                 -          -            -

          Net income                         $135,834   $(17,243)    $118,591

    Earnings per share:
       Income from continuing operations:
          Basic                                                         $0.20
          Diluted                                                       $0.20

       Income from discontinued
        operations:
          Basic                                                          $-
          Diluted                                                        $-

       Net income:
          Basic                                 $0.23                   $0.20
          Diluted                               $0.23                   $0.20

    Shares used in computing per share
     amounts:
          Basic                               589,414                 589,414
          Diluted                             598,534                 598,534


                                         Three Months Ended December 31, 2005
                                           Non-GAAP    Required      GAAP
                                                      Adjustments

    Net sales                              $4,125,957       $-     $4,125,957
    Cost of sales                           3,889,325        -      3,889,325
    Restructuring and other charges               -       63,115       63,115

          Gross profit                        236,632    (63,115)     173,517

    Selling, general and administrative
     expenses                                 111,198    (15,000)      96,198
    Restructuring and other charges               -       13,147       13,147

          Operating income                    125,434    (61,262)      64,172

    Intangible amortization                       -        8,910        8,910
    Interest and other expense, net            19,560      2,325       21,885
    Loss on divestiture of operations             -        3,126        3,126

          Income before income taxes          105,874    (75,623)      30,251

    Provision for (benefit from) income
     taxes                                     (5,869)    (1,499)      (7,368)

          Income from continuing
           operations                         111,743    (74,124)      37,619

    Income from discontinued operations
     (net of tax)                               6,667     (2,332)       4,335

          Net income                         $118,410   $(76,456)     $41,954

    Earnings per share:
       Income from continuing operations:
          Basic                                                         $0.07
          Diluted                                                       $0.06

       Income from discontinued
        operations:
          Basic                                                         $0.01
          Diluted                                                       $0.01

       Net income:
          Basic                                 $0.21                   $0.07
          Diluted                               $0.20                   $0.07

    Shares used in computing per share
     amounts:
          Basic                               574,635                 574,635
          Diluted                             599,761                 599,761


                                                                   SCHEDULE II

                 FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
              UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (1)(3)
                     (In thousands, except per share amounts)

                                          Nine Months Ended December 31, 2006
                                            Non-GAAP    Required     GAAP
                                                      Adjustments

    Net sales                              $14,176,936      $-    $14,176,936
    Cost of sales                           13,374,177     3,560   13,377,737
    Restructuring and other charges                -      95,683       95,683

          Gross profit                         802,759   (99,243)     703,516

    Selling, general and administrative
     expenses                                  373,989    29,377      403,366
    Restructuring and other charges                -         565          565

          Operating income                     428,770  (129,185)     299,585

    Intangible amortization                        -      23,520       23,520
    Interest and other expense, net             71,335     5,728       77,063
    Gain on divestiture of operations              -         -            -

          Income before income taxes           357,435  (158,433)     199,002

    Provision for (benefit from) income
     taxes                                      22,129   (23,353)      (1,224)

          Income from continuing
           operations                          335,306  (135,080)     200,226

    Income from discontinued operations
     (net of tax)                               20,941   166,797      187,738

          Net income                          $356,247   $31,717     $387,964

    Earnings per share:
       Income from continuing operations:
          Basic                                                         $0.34
          Diluted                                                       $0.34

       Income from discontinued
        operations:
          Basic                                                         $0.32
          Diluted                                                       $0.32

       Net income:
          Basic                                  $0.61                  $0.67
          Diluted                                $0.60                  $0.66

    Shares used in computing per share
     amounts:
          Basic                                582,353                582,353
          Diluted                              590,658                590,658


                                          Nine Months Ended December 31, 2005
                                           Non-GAAP    Required      GAAP
                                                      Adjustments

    Net sales                             $11,757,087       $-    $11,757,087
    Cost of sales                          11,036,913        -     11,036,913
    Restructuring and other charges               -      129,150      129,150

          Gross profit                        720,174   (129,150)     591,024

    Selling, general and administrative
     expenses                                 354,587        -        354,587
    Restructuring and other charges               -       30,147       30,147

          Operating income                    365,587   (159,297)     206,290

    Intangible amortization                       -       28,890       28,890
    Interest and other expense, net            65,367      2,325       67,692
    Gain on divestiture of operations             -      (23,819)     (23,819)

          Income before income taxes          300,220   (166,693)     133,527

    Provision for (benefit from) income
     taxes                                      2,059     57,853       59,912

          Income from continuing
           operations                         298,161   (224,546)      73,615

    Income from discontinued operations
     (net of tax)                              21,213      3,386       24,599

          Net income                         $319,374  $(221,160)     $98,214

    Earnings per share:
       Income from continuing operations:
          Basic                                                         $0.13
          Diluted                                                       $0.12

       Income from discontinued
        operations:
          Basic                                                         $0.04
          Diluted                                                       $0.04

       Net income:
          Basic                                 $0.56                   $0.17
          Diluted                               $0.53                   $0.16

    Shares used in computing per share
     amounts:
          Basic                               572,112                 572,112
          Diluted                             600,068                 600,068


                                                                 SCHEDULE III

                 FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

                                            December 31, 2006   March 31, 2006
    ASSETS

    Current Assets:
        Cash and cash equivalents                 $909,195          $942,859
        Accounts receivable, net                 1,907,123         1,496,520
        Inventories                              2,535,151         1,738,310
        Deferred income taxes                       13,095             9,643
        Current assets of discontinued
         operations                                    -              89,509
        Other current assets                       622,176           620,095
                                                 5,986,740         4,896,936
                                                 1,922,660         1,586,486
    Property and equipment, net
    Deferred income taxes                          656,576           646,431
    Goodwill and other intangibles, net          3,259,658         2,791,791
    Non-current assets of discontinued
     operations                                        -             574,384
    Other assets                                   862,258           462,379
                                               $12,687,892       $10,958,407

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current Liabilities:
        Bank borrowings, current portion
         of long-term debt and capital
         lease obligations                          $8,224          $106,099
        Accounts payable                         3,747,138         2,758,019
        Current liabilities of
         discontinued operations                       -              57,213
        Other current liabilities                1,156,415         1,036,973
        Total current liabilities                4,911,777         3,958,304

    Long-term debt, net of current
     portion:
        Zero Coupon Convertible Junior
         Subordinated Notes due 2009               195,000           195,000
        1 % Convertible Subordinated
         Notes due 2010                            500,000           500,000
        6 1/2 % Senior Subordinated Notes
         due 2013                                  399,650           399,650
        6 1/4 % Senior Subordinated Notes
         due 2014                                  387,677           384,879
        Other long-term debt and capital
         lease obligations                          10,172             9,446
    Non-current liabilities of
     discontinued operations                           -              30,578
    Other liabilities                              160,192           125,903

    Total shareholders' equity                   6,123,424         5,354,647
                                               $12,687,892       $10,958,407


                                                                  SCHEDULE IV

               FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
    NOTES TO PRESS RELEASE AND UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
                                  STATEMENTS
                                (In thousands)

     (1) The non-GAAP financial measures disclosed in this press release
     exclude certain amounts that are included in the most directly comparable
     measures under Generally Accepted Accounting Principles ("GAAP").  Non-
     GAAP results exclude after-tax gains and losses on divestitures,
     intangible amortization, stock-based compensation expense, restructuring
     and other charges.

     (2) The Company recognized pre-tax restructuring charges of $68.6
     million, which were primarily related to the closures and consolidations
     of various manufacturing facilities, and an additional $7.7 million in
     executive separation costs during the quarter ended December, 31, 2005.
     The Company recorded pre-tax intangible amortization expense of $9.3
     million and $14.0 million (including $2.8 million attributable to
     discontinued operations) during the quarters ended December 31, 2006 and
     2005, respectively.  The Company recognized $8.1 million of stock-based
     compensation expense during the quarter ended December 31, 2006 as a
     result of its adoption of SFAS 123( R ) beginning on April 1, 2006.
     During the quarter ended December 31, 2005, the Company reversed a $15.0
     million bad debt provision previously recognized in the quarter ended
     September 30, 2005 associated with accounts receivable with Delphi, as
     the receivables were subsequently collected.  Final sales price
     adjustments related to the divestiture of the Network Services division
     resulted in a pre-tax loss of $3.1 million for the quarter ended December
     31, 2005.  The tax impacts related to all of these items amounted to a
     tax benefit of $0.1 million and $2.0 million in the quarters ended
     December 31, 2006 and 2005, respectively.

     (3) The divestiture of the Company's Software Development and Solutions
     business resulted in a pre-tax gain of $181.2 million during the nine
     months ended December 31, 2006, which is included in discontinued
     operations.  The divestiture of the Semiconductor and Network Services
     divisions resulted in a pre-tax gain of $67.6 million for the nine months
     ended December 31, 2005 (including $43.8 million attributable to
     discontinued operations).  The Company recorded pre-tax charges of $105.9
     million during the nine months ended December 31, 2006 related to
     impairment, lease termination, exit costs and other charges related
     primarily to the disposal and exit of certain real estate owned and
     leased by the Company in order to reduce its investment in property,
     plant and equipment.  The Company also recognized pre-tax restructuring
     charges of $151.7 million during the nine months ended December 31, 2005,
     which were primarily related to the closures and consolidations of
     various manufacturing facilities.  The Company recorded pre-tax
     intangible amortization expense of $34.4 million (including $5.2 million
     attributable to discontinued operations) and $43.3 million (including
     $12.1 million attributable to discontinued operations) during the nine
     months ended December 31, 2006 and 2005, respectively.  The Company
     recognized $23.9 million (including $0.6 million attributable to
     discontinued operations) of stock-based compensation expense during the
     nine months ended December 31, 2006.  The Company recognized $7.7 million
     in executive separation costs during the nine months ended December, 31,
     2005.  The tax impacts related to all of these items amounted to a tax
     benefit of $14.7 million and a tax provision of $86.2 million in the nine
     months ended December 31, 2006 and 2005, respectively.

     (4) Return on invested capital ("ROIC") divides after-tax operating
     income by a quarterly average of net invested capital. After-tax
     operating income includes after-tax operating income from divested
     businesses, and excludes intangible amortization, stock-based
     compensation expense, restructuring and other charges.  Net invested
     capital is defined as total assets less current liabilities and non-
     operating assets.  Non-operating assets include cash and cash
     equivalents, short-term investments, notes receivable, deferred income
     tax assets, net hedging assets, and other non-operating assets.

     We believe ROIC is a useful measure in providing investors with
     information regarding our performance.  ROIC is a widely accepted measure
     of earnings efficiency in relation to total capital employed.  We believe
     that increasing the return on total capital employed, as measured by
     ROIC, is an effective method to sustain and increase shareholder value.
     ROIC is not a measure of financial performance under generally accepted
     accounting principles in the U.S., and may not be defined and calculated
     by other companies in the same manner.  ROIC should not be considered in
     isolation or as an alternative to net earnings as an indicator of
     performance.

     The following table reconciles ROIC as calculated using non-GAAP after-
     tax operating income to the same performance measure calculated using the
     nearest GAAP measure, which is operating income from continuing
     operations:

                                                        Three Months Ended
                                                           December 31,
    ROIC                                             2006              2005

    Non-GAAP                                         11.5%             10.3%
    Restructuring and other charges                  -0.6%             -4.7%
    Discontinued operations                           0.0%             -0.7%
    GAAP                                             10.9%              4.9%

Web site: http://www.flextronics.com/