FLEX LTD. 
By SAN JOSE, Calif., Jan. 29, 2014 /PRNewswire/ -- Flextronics (NASDAQ: FLEX), a leading end-to-end supply chain solutions company, today announced results for its third quarter ended December 31, 2013:
(US$ in millions, except WASO and EPS) Three Month Periods Ended
December 31, September 27, December 31,
Continuing Operations: 2013 2013 2012
---------------------- ---- ---- ----
Net sales $7,183 $6,410 $6,123
Adjusted operating income $187 $159 $146
GAAP operating income $174 $150 $35
Adjusted income from continuing operations $164 $134 $148
GAAP income from continuing operations $145 $118 $55
Adjusted EPS $0.26 $0.22 $0.22
GAAP EPS $0.23 $0.19 $0.08
WASO 619 624 669
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 of Operations
Net sales for the third quarter ended December 31, 2013 were $7.2 billion, higher than the Company's previously provided revenue guidance of $6.5 billion to $6.9 billion. The Company's adjusted earnings per diluted share of $0.26 in the third quarter ended December 31, 2013 was also higher than the Company's previously provided guidance of $0.21 to $0.25.
Flextronics adjusted operating income increased $28 million or 18% sequentially to $187 million. GAAP operating income of $174 million increased $24 million from $150 million in the prior quarter.
"We continue to generate strong free cash flow. During the quarter, we generated over $760 million of cash from operations which drove $614 million in free cash flow," said Chris Collier, chief financial officer of Flextronics. "We repurchased nearly six million shares during the quarter, bringing our year-to-date stock repurchases to $363 million."
"We delivered strong sequential growth in revenue, operating profit dollars, net income, free cash flow, and EPS, and we remain focused on building the most powerful end-to-end supply chain solutions company in the world for the industries we serve," said Mike McNamara, chief executive officer of Flextronics.
Guidance
For the fourth quarter ending March 31, 2014, revenue is expected to be in the range of $5.9 billion to $6.3 billion and adjusted EPS is expected to be in the range of $0.18 to $0.22 per diluted share.
During the fourth quarter of fiscal 2014 the Company plans to reduce its workforce and initiate other cost reduction activities. As a result, the Company expects to recognize approximately $30 million to $35 million in pre-tax cash charges comprised primarily of employee severance and benefit costs. These cost reduction activities will yield potential annualized savings of approximately $60 million principally to selling, general and administrative expenses through reduced employee expenses and lower operating costs.
GAAP earnings per share is expected to be lower than the guidance provided herein by approximately $0.05 to $0.06 per diluted share for the costs associated with SG&A reductions, and $0.03 per diluted share for intangible amortization and stock-based compensation expense.
Conference Calls and Web Casts
A conference call hosted by Flextronics's management team 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, 2013. 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.
About Flextronics
Flextronics International Ltd. (Reg. No. 199002645H) is a leading end-to-end supply chain solutions company that delivers design, engineering, manufacturing and logistics services to a range of industries and end-markets, including data networking, telecom, enterprise computing and storage, industrial, capital equipment, appliances, automation, medical, automotive, aerospace and defense, energy, mobile, computing and other electronic product categories. Flextronics is an industry leader with $24 billion in sales, generated from helping customers design, build, ship, and service their products through an unparalleled network of facilities in approximately 30 countries and across four continents. Flextronics service offerings and vertically integrated component technologies optimize customer supply chains by lowering costs, increasing flexibility, and reducing time-to-market. For more information, visit www.flextronics.com or follow us on Twitter @flextronics.
This press release contains forward-looking statements within the meaning of U.S. securities law including statements related to the 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; the challenges of effectively managing our operations, including our ability to control costs and manage changes in our operations; compliance with legal and regulatory requirements; the possibility that benefits of the Company's restructuring actions may not materialize as expected; that the expected revenue and margins from recently launched programs may not be realized; that recently proposed changes in tax laws in certain jurisdictions where we operate may materially impact our tax expense, and the effects that the current macroeconomic environment could have on our business and demand for our products as well as the effects that current credit and market conditions could have on the liquidity and financial condition of our customers and suppliers, including any impact on their ability to meet their contractual obligations. 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. Our share repurchase program does not obligate the Company to repurchase a specific number of shares and may be suspended or terminated at any time without prior notice.
Renee Brotherton Kevin Kessel
Corporate Communications Investor Relations
(408) 576-7189 (408) 576-7985
renee.brotherton@flextronics.com kevin.kessel@flextronics.com
SCHEDULE I
FLEXTRONICS INTERNATIONAL LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Month Periods Ended
-------------------------
December 31, September 27, December 31,
2013 2013
2012
----
GAAP:
Net sales $7,183,442 $6,410,106 $6,123,321
Cost of sales 6,784,823 6,041,683 5,778,544
Restructuring charges - - 98,315
--- --- ------
Gross profit 398,619 368,423 246,462
Selling, general and administrative expenses 224,576 218,500 207,224
Restructuring charges - - 4,376
--- --- -----
Operating income 174,043 149,923 34,862
Intangible amortization 5,575 7,718 6,137
Interest and other, net 14,743 13,601 (17,089)
------ ------ -------
Income from continuing operations before income taxes 153,725 128,604 45,814
Provision for (benefit from) income taxes 8,568 10,399 (8,782)
Income from continuing operations 145,157 118,205 54,596
------- ------- ------
Loss from discontinued operations, net of tax - - (7,248)
Net income $145,157 $118,205 $47,348
EPS:
Income from continuing operations:
GAAP $0.23 $0.19 $0.08
Non-GAAP $0.26 $0.22 $0.22
Loss from discontinued operations:
GAAP $ - $ - $(0.01)
=== ===
Non-GAAP $ - $ - $(0.01)
=== ===
Net income:
GAAP $0.23 $0.19 $0.07
Non-GAAP $0.26 $0.22 $0.21
Weighted-average diluted shares used in computing per 618,677 623,620 669,488
share amounts
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.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
Three Month Periods Ended
-------------------------
December 31, September 27, December 31,
2013 2013 2012
---- ---- ----
GAAP gross profit $398,619 $368,423 $246,462
Stock-based compensation expense 1,800 1,866 1,530
Restructuring charges - - 98,315
Non-GAAP gross profit $400,419 $370,289 $346,307
GAAP SG&A Expenses $224,576 $218,500 $207,224
Stock-based compensation expense 11,311 6,851 6,986
Non-GAAP SG&A Expenses $213,265 $211,649 $200,238
GAAP operating income $174,043 $149,923 $34,862
Stock-based compensation expense 13,111 8,717 8,516
Restructuring charges - - 102,691
Non-GAAP operating income $187,154 $158,640 $146,069
GAAP provision for (benefit from) income taxes $8,568 $10,399 $(8,782)
Intangible amortization benefit (2): - 329 22,507
Restructuring charges - - 1,280
Non-GAAP provision for income taxes $8,568 $10,728 $15,005
GAAP income from continuing operations $145,157 $118,205 $54,596
Stock-based compensation expense 13,111 8,717 8,516
Intangible amortization 5,575 7,718 6,137
Restructuring charges - - 102,691
Adjustments for taxes - (329) (23,787)
Non-GAAP income from continuing operations $163,843 $134,311 $148,153
GAAP net income $145,157 $118,205 $47,348
Stock-based compensation expense 13,111 8,717 8,516
Intangible amortization 5,575 7,718 6,137
Restructuring charges - - 102,691
Adjustments for taxes - (329) (23,787)
Non-GAAP net income $163,843 $134,311 $140,905
EPS:
Income from continuing operations:
GAAP $0.23 $0.19 $0.08
Non-GAAP $0.26 $0.22 $0.22
Loss from discontinued operations:
GAAP $ - $ - $(0.01)
=== ===
Non-GAAP $ - $ - $(0.01)
=== ===
Net income:
GAAP $0.23 $0.19 $0.07
Non-GAAP $0.26 $0.22 $0.21
See the accompanying notes on
Schedule IV attached to this
press release.
SCHEDULE III
FLEXTRONICS INTERNATIONAL LTD.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, 2013 March 31, 2013
----------------- --------------
ASSETS
Current Assets:
Cash and cash equivalents $1,617,245 $1,587,087
Accounts receivable, net 2,551,030 2,111,996
Inventories 3,972,127 2,722,500
Other current assets 1,552,521 1,349,818
--------- ---------
Total current assets 9,692,923 7,771,401
Property and equipment, net 2,380,711 2,174,588
Goodwill and other intangible assets, net 381,831 343,552
Other assets 361,572 302,014
Total assets $12,817,037 $10,591,555
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank borrowings and current portion of long-term debt $54,951 $416,654
Accounts payable 4,968,640 3,705,297
Other current liabilities 3,040,901 2,050,834
--------- ---------
Total current liabilities 8,064,492 6,172,785
Long-term debt, net of current portion:
Revolving credit facility - -
4.625% Notes (due 2020) 500,000 500,000
5.000% Notes (due 2023) 500,000 500,000
Term Loans (due 2014 & 2016) 399,623 646,135
Term Loans (due 2018) 596,250 -
Other long-term debt 4,821 4,838
Other liabilities 497,299 521,039
Total shareholders' equity 2,254,552 2,246,758
Total liabilities and shareholders' equity $12,817,037 $10,591,555
=========== ===========
SCHEDULE IV
FLEXTRONICS INTERNATIONAL
LTD. AND SUBSIDIARIES
NOTES TO SCHEDULES I, II, &
III
(1) To supplement
Flextronics's
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
income from
continuing
operations, non-
GAAP net income
and non-GAAP net
income per diluted
share. These
supplemental
measures exclude
stock-based
compensation
expense,
restructuring
charges,
intangible
amortization and
the related tax
effects. 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 the
Company's
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
restricted share unit 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 stock-based compensation
expense has on its operating results.
Restructuring charges include severance, asset
impairment, lease termination, contract and
product 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 restructuring
activities, and 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.
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 and certain adjustments
related to non-recurring settlements of tax
contingencies.
Free Cash Flow of
$614 million for
the third quarter
ended December 31,
2013 consists of
GAAP net cash
flows from
operating
activities of $764
million less
purchases of
property and
equipment net of
dispositions of
$150 million. For
the nine-month
period ended
December 31, 2013,
Free Cash Flow was
$657 million
consisting of GAAP
net cash flows
from operating
activities of $1.1
billion less
purchases of
property and
equipment net of
dispositions of
$461 million. We
believe Free Cash
Flow is an
important
liquidity metric
because it
measures, during a
given period, the
amount of cash
generated that is
available to repay
debt obligations,
make investments,
fund acquisitions
and for certain
other activities.
Since Free Cash
Flow includes
investments in
operating assets,
we believe this
non-GAAP
liquidity measure
is useful in
addition to the
most directly
comparable GAAP
measure - "net
cash flows
provided by
operating
activities."
(2) During the quarter
ended March 31,
2013, our US GAAP
benefit for taxes
included
approximately
$22.3 million of
non-cash benefit
recognized in
connection with
our finalization
of the intangible
asset valuation
for one of our
acquisitions
closed in the
third quarter of
fiscal 2013. The
Company has re-
casted its US GAAP
tax benefit for
the quarter ended
December 31, 2012
to reflect this
release of a
valuation
allowance for
deferred tax
assets.
SOURCE Flextronics
