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Flextronics Reports First Quarter Fiscal 2015 Results - Valley News Live - KVLY/KXJB - Fargo/Grand Forks

Flextronics Reports First Quarter Fiscal 2015 Results

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SOURCE Flextronics

· Net sales exceeded guidance, increasing over $850 million or 15% year-over-year

· Adjusted operating profit of $183 million exceeded guidance, up 34% year-over-year

· Adjusted EPS at $0.25 was above guidance and rose 39% year-over-year

SAN JOSE, Calif., July 24, 2014 /PRNewswire/ -- Flextronics (NASDAQ: FLEX), a leading end-to-end supply chain solutions company, today announced results for its first quarter, fiscal 2015 ended June 27, 2014:


(US$ in millions, except WASO and EPS)


Three Month Periods Ended



June 27


March 31


June 28



2014


2014


2013

Net sales

$

6,643

$

6,724

$

5,791

Adjusted operating income

$

183

$

182

$

137

GAAP operating income

$

172

$

137

$

87

Adjusted net  income

$

148

$

146

$

112

GAAP net income

$

174

$

43

$

59

Adjusted EPS

$

0.25

$

0.24

$

0.18

GAAP EPS

$

0.29

$

0.07

$

0.09

WASO (millions)


601


612


640








An explanation and reconciliation of non-GAAP financial measures to GAAP financial measures is presented in Schedule II attached to this press release.

First Quarter Fiscal 2015 Results of Operations

Net sales for the first quarter were $6.6 billion, higher than the Company's previously provided revenue guidance of $6.0 billion to $6.5 billion.  The Company's adjusted earnings per diluted share of $0.25 in the first quarter was also higher than the Company's previously provided guidance of $0.20 to $0.24.

First quarter adjusted operating income was $183 million, increasing 34% year-over-year and exceeding the high end of the guidance range of $150 to $180 million.

Adjusted net income excludes recognition of $55 million of other income due to the reversal of the contractual obligation charge recorded last quarter, as expected.

"We are the most advanced worldwide supply chain solutions provider and continue to make steady improvements across most of our core financial metrics," said Mike McNamara, chief executive officer at Flextronics. "During the June quarter, all four of our business groups exceeded our expectations and both our IEI and our HRS businesses reached record levels for quarterly sales."

"We continue to return value to shareholders through our stock buyback program by repurchasing another 10.5 million shares during the quarter for $106 million," said Chris Collier, chief financial officer at Flextronics.

Guidance

For the second quarter ending September 26, 2014, revenue is expected to be in the range of $6.2 to $6.6 billion and adjusted EPS is expected to be in the range of $0.22 to $0.26 per diluted share.  

GAAP earnings per share is expected to be lower than the guidance provided herein by approximately $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 first quarter ended June 27, 2014.  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 website.  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 $26 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




June 27, 2014


March 31, 2014


June 28, 2013

GAAP:








Net sales

$

6,642,745

$

6,723,934

$

5,791,125


Cost of sales


6,261,960


6,361,790


5,480,090


      Gross profit


380,785


362,144


311,035


Selling, general and administrative expenses


209,277


224,764


223,619


      Operating income


171,508


137,380


87,416


Intangible amortization


6,951


7,397


8,202


Interest and other, net


18,637


16,388


12,573


Other charges (income), net


(44,009)


55,000


7,111


      Income before income taxes


189,929


58,595


59,530


Provision for income taxes


16,042


15,620


273


     Net income

$

173,887

$

42,975

$

59,257









EPS:









Net income:








GAAP

$

0.29

$

0.07

$

0.09


Non-GAAP

$

0.25

$

0.24

$

0.18










Diluted shares used in computing per share amounts


601,300


611,719


639,899










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 (1)

(In thousands, except per share amounts)



Three Month Periods Ended



June 27,
2014


March 31,
2013


June 28,
2013

GAAP gross profit

$

380,785

$

362,144

$

311,035

     Stock-based compensation expense


1,611


1,522


1,352

     Restructuring charges


-


23,522


35,126

Non-GAAP gross profit

$

382,396

$

387,188

$

347,513

GAAP SG&A Expenses

$

209,277

$

224,764

$

223,619

     Stock-based compensation expense


10,071


8,500


7,237

     Restructuring charges


-


11,029


5,634

Non-GAAP SG&A Expenses

$

199,206

$

205,235

$

210,748

GAAP operating income

$

171,508

$

137,380

$

87,416

     Stock-based compensation expense


11,682


10,022


8,589

     Restructuring charges


-


34,551


40,760

Non-GAAP operating income

$

183,190

$

181,953

$

136,765

GAAP provision for income taxes

$

16,042

$

15,620

$

273

     Intangible amortization benefit


167


291


329

     Restructuring charges


-


3,881


4,048

Non-GAAP provision for income taxes

$

16,209

$

19,792

$

4,650

GAAP net income

$

173,887

$

42,975

$

59,257

     Stock-based compensation expense


11,682


10,022


8,589

     Intangible amortization


6,951


7,397


8,202

     Restructuring charges


-


34,551


40,760

     Other charges (income), net (2)(3)


(44,009)


55,000


-

     Adjustments for taxes


(167)


(4,172)


(4,377)

Non-GAAP net income

$

148,344

$

145,773

$

112,431

   EPS:







   Net income:







   GAAP

$

0.29

$

0.07

$

0.09

   Non-GAAP

$

0.25

$

0.24

$

0.18

 

 


SCHEDULE III

FLEXTRONICS INTERNATIONAL LTD.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)













June 27, 2014



March 31, 2014

ASSETS






Current Assets:







Cash and cash equivalents

$

1,347,690


$

1,593,728


Accounts receivable, net


2,894,622



2,697,985


Inventories


3,510,163



3,599,008


Other current assets



1,236,948



1,509,605

Total current assets



8,989,423



9,400,326







Property and equipment, net


2,254,664



2,288,656

Goodwill and other intangible assets, net


389,369



377,218

Other assets



434,368



433,950

Total assets


$

12,067,824


$

12,500,150









LIABILITIES AND SHAREHOLDERS' EQUITY






Current Liabilities:







Bank borrowings and current portion of  long-term debt

$

55,338


$

32,575


Accounts payable


4,742,033



4,747,779


Other current liabilities


2,435,841



2,876,333

Total current liabilities



7,233,212



7,656,687








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



1,067,500



1,067,500


Other long-term debt


6,354



2,520

Other liabilities


459,890



571,764









Total shareholders' equity


2,300,868



2,201,679

Total liabilities and shareholders' equity


$

12,067,824


$

12,500,150

 


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 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, other discrete events as applicable 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.




Other charges (income), net – see notes (2) and (3) below




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.



(2)

In accordance with a manufacturing agreement, the Company recognized a $55.0 million charge for a contractual obligation during the quarter ended March 31, 2014.  During the first quarter of fiscal 2015, an amendment was executed which included the removal of the $55.0 million obligation. Accordingly, the Company reversed this charge with a corresponding credit to other income, included in other charges (income), net with no impact to cash. 



(3)

During the first quarter of fiscal 2015, the Company recognized a loss of $11.0 million in connection with the disposition of a certain European manufacturing facility, which is included in other charges (income), net.

 

 

 

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