EX-99.1 2 d64742exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
         
(FLEXTRONICS LOGO)
  One Marina Boulevard, #28-00
Singapore 018989 		  65.6890.7188 Main
www.flextronics.com
 
        
PRESS RELEASE
        
 
Warren Ligan
Senior Vice President, Investor Relations
+1.408.576.7172
investor_relations@flextronics.com
Renee Brotherton
Vice President, Corporate Communications
+1.408.576.7189
renee.brotherton@flextronics.com
FLEXTRONICS ANNOUNCES RECORD SECOND QUARTER RESULTS
Record second quarter net sales increased 59% to $8.9 billion
Record second quarter adjusted EPS increased 17% to $0.28
Company repurchased approximately 30 million shares
Singapore, October 23, 2008 – Flextronics (NASDAQ: FLEX) today announced results for its second quarter ended September 26, 2008 as follows:
                                 
(US$ in millions, except EPS)   Three Month Periods Ended   Six Month Periods Ended
    September 26,   September 28,   September 26,   September 28,
    2008   2007   2008   2007
Net sales
   $ 8,863     $ 5,557     $ 17,213     $ 10,714  
GAAP operating income
   $ 159     $ 161     $ 364     $ 295  
Adjusted operating income (1)
   $ 295     $ 172     $ 575     $ 325  
GAAP net income
   $ 38     $ 121     $ 169     $ 228  
Adjusted net income (1)
   $ 230     $ 146     $ 457     $ 280  
GAAP EPS
   $ 0.05     $ 0.20     $ 0.20     $ 0.37  
Adjusted EPS (1)
   $ 0.28     $ 0.24     $ 0.55     $ 0.46  
 
(1)   A reconciliation of non-GAAP financial measures to GAAP financial measures is presented in Schedule II attached to this press release.
Second Quarter Results
Net sales for the second quarter ended September 26, 2008 increased 59% to $8.9 billion, which represents an increase of $3.3 billion over the year ago quarter. Adjusted operating profit for the second quarter ended September 26, 2008 increased 72% over the year ago quarter to $295 million, while adjusted operating margin improved 20 basis points to 3.3%. Adjusted net income for the second quarter ended September 26, 2008 increased 57% over the year ago quarter to $230 million, while adjusted EPS increased 17% to $0.28.
“We are pleased with our execution this past quarter, especially given the challenging economic environment,” said Mike McNamara, chief executive officer of Flextronics. “Highlights of the quarter included revenue growth in all of our market segments, new product and customer wins, increased diversification in our customer base, improved SG&A and operating efficiencies, and the repurchase of 30 million, or approximately four percent, of our outstanding shares.”

 

 

         
(FLEXTRONICS LOGO)
  One Marina Boulevard, #28-00
Singapore 018989 		  65.6890.7188 Main
www.flextronics.com
 
        
PRESS RELEASE
        
During the second quarter ended September 26, 2008, Flextronics repurchased approximately 30 million ordinary shares. Flextronics’ shareholders reauthorized the repurchase of up to 10% of outstanding shares at the Company’s annual general meeting on September 30, 2008. As of September 26, 2008, there were approximately 809 million shares outstanding.
During the second quarter ended September 26, 2008, the Company recognized $129 million in charges primarily for provisions for doubtful accounts receivable, the write-down of inventory and recognition of associated contractual obligations for some customers that have become distressed due to the worsening global credit market conditions.
Guidance
For the third quarter ending December 31, 2008, revenue is expected to be in the range of $8.0 billion to $9.0 billion and adjusted EPS is expected to be in the range of $0.21 – $0.27 per share.
GAAP earnings per share are expected to be lower than the guidance provided herein by approximately $0.06 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 2:30 p.m. PDT to discuss the Company’s financial results for the second quarter ended September 26, 2008. Additionally, Flextronics will host its annual analyst and investor meeting on Tuesday, November 18, 2008 in New York City.
Both events 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 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 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. These risks include that future revenues and earnings may not be achieved as expected; potential impairment of our intangible assets, including goodwill; the risks to our particular electronics and technology sector of economic instability and a slowdown in consumer spending, particularly given the current economic slowdown; the effects of customer or supplier bankruptcies or insolvency; 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; 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, 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

 

 

         
(FLEXTRONICS LOGO)
  One Marina Boulevard, #28-00
Singapore 018989 		  65.6890.7188 Main
www.flextronics.com
 
        
PRESS RELEASE
        
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, including any effects related to the expiration of tax holidays; 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; our dependence on the continued trend of outsourcing by OEMs; 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.

 

 

         
(FLEXTRONICS LOGO)
  One Marina Boulevard, #28-00
Singapore 018989 		  65.6890.7188 Main
www.flextronics.com
 
        
P R E S S   R E L E A S E
        
SCHEDULE I
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
                                 
    Three Month Periods Ended     Six Month Periods Ended  
    September 26,     September 28,     September 26,     September 28,  
    2008     2007     2008     2007  
GAAP:
                                
Net sales
   $ 8,862,516     $ 5,557,099     $ 17,212,762     $ 10,714,125  
Cost of sales
     8,445,055       5,243,318       16,312,217       10,109,772  
Restructuring charges
     —       —       26,317       9,753  
 
                        
 
                                
Gross profit
     417,461       313,781       874,228       594,600  
 
                                
Selling, general and administrative expenses
     258,687       152,551       507,313       299,139  
Restructuring charges
     —       —       2,898       921  
 
                        
 
                                
Operating income
     158,774       161,230       364,017       294,540  
 
                                
Intangible amortization
     50,317       13,711       75,563       30,386  
Interest and other expense, net
     59,926       16,169       99,550       22,428  
 
                        
 
                                
Income before income taxes
     48,531       131,350       188,904       241,726  
 
                                
Provision for income taxes
     10,059       10,412       20,120       13,841  
 
                        
Net income
   $ 38,472     $ 120,938     $ 168,784     $ 227,885  
 
                        
 
                                
EPS:
                                
GAAP
   $ 0.05     $ 0.20     $ 0.20     $ 0.37  
 
                        
Non-GAAP
   $ 0.28     $ 0.24     $ 0.55     $ 0.46  
 
                        
 
                                
Diluted shares used in computing per share amounts
     830,030       616,416       835,279       615,979  
 
                        
See Schedule II for the reconciliation of GAAP to non-GAAP financial measures.

 

 

         
(FLEXTRONICS LOGO)
  One Marina Boulevard, #28-00
Singapore 018989 		  65.6890.7188 Main
www.flextronics.com
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     Six Month Periods Ended  
            September 26,     % of     September 28,     % of     September 26,     % of     September 28,     % of  
            2008     Sales     2007     Sales     2008     Sales     2007     Sales  
                 
GAAP gross profit
           $ 417,461       4.7 %   $ 313,781       5.6 %   $ 874,228       5.1 %   $ 594,600       5.5 %
Stock-based compensation expense
             2,290               1,470               4,589               2,469          
Distressed customer charges
     (2 )     96,700               —               96,700               —          
Restructuring and other charges
     (3 )     —               —               47,821               9,753          
 
                                                                
Non-GAAP gross profit
           $ 516,451       5.8 %   $ 315,251       5.7 %   $ 1,023,338       5.9 %   $ 606,822       5.7 %
 
                                                                
 
                                                                        
GAAP SG&A expenses
           $ 258,687       2.9 %   $ 152,551       2.7 %   $ 507,313       2.9 %   $ 299,139       2.8 %
Stock-based compensation expense
             16,340               9,128               29,401               16,854          
Distressed customer charges
     (2 )     20,686               —               20,686               —          
Restructuring and other charges
     (3 )     —               —               8,700               —          
 
                                                                
Non-GAAP SG&A expenses
           $ 221,661       2.5 %   $ 143,423       2.6 %   $ 448,526       2.6 %   $ 282,285       2.6 %
 
                                                                
 
                                                                        
GAAP operating income
           $ 158,774       1.8 %   $ 161,230       2.9 %   $ 364,017       2.1 %   $ 294,540       2.7 %
Stock-based compensation expense
             18,630               10,598               33,990               19,323          
Distressed customer charges
     (2 )     117,386               —               117,386               —          
Restructuring and other charges
     (3 )     —               —               59,419               10,674          
 
                                                                
Non-GAAP operating income
           $ 294,790       3.3 %   $ 171,828       3.1 %   $ 574,812       3.3 %   $ 324,537       3.0 %
 
                                                                
 
                                                                        
GAAP net income
           $ 38,472       0.4 %   $ 120,938       2.2 %   $ 168,784       1.0 %   $ 227,885       2.1 %
Stock-based compensation expense
             18,630               10,598               33,990               19,323          
Distressed customer charges
     (2 )     129,323               —               129,323               —          
Restructuring and other charges
     (3 )     —               —               63,097               10,674          
Intangible amortization
             50,317               15,139               75,563               33,344          
Other
     (4 )     —               —               —               (9,309 )        
Adjustment for taxes
             (7,217 )             (584 )             (14,241 )             (1,545 )        
 
                                                                
Non-GAAP net income
           $ 229,525       2.6 %   $ 146,091       2.6 %   $ 456,516       2.7 %   $ 280,372       2.6 %
 
                                                                
 
                                                                        
GAAP provision for income taxes
           $ 10,059       0.1 %   $ 10,412       0.2 %   $ 20,120       0.1 %   $ 13,841       0.1 %
Restructuring and other charges
             —               —               4,676               —          
Intangible amortization
             7,217               584               9,565               1,545          
 
                                                                
Non-GAAP provision for income taxes
           $ 17,276       0.2 %   $ 10,996       0.2 %   $ 34,361       0.2 %   $ 15,386       0.1 %
 
                                                                
 
                                                                        
EPS:
                                                                        
GAAP
           $ 0.05             $ 0.20             $ 0.20             $ 0.37          
 
                                                                
Non-GAAP
           $ 0.28             $ 0.24             $ 0.55             $ 0.46          
 
                                                                
See the accompanying notes on Schedule IV attached to this press release.

 

         
(FLEXTRONICS LOGO)
  One Marina Boulevard, #28-00
Singapore 018989 		  65.6890.7188 Main
www.flextronics.com
 
        
PRESS RELEASE
        
SCHEDULE III
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
UNAUDITED GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
                 
    September 26, 2008     March 31, 2008  
ASSETS
                
 
                
Current Assets:
                
Cash and cash equivalents
   $ 1,700,907     $ 1,719,948  
Accounts receivable, net
     3,338,376       3,550,942  
Inventories
     4,534,524       4,118,550  
Other current assets
     1,091,766       923,497  
 
            
 
     10,665,573       10,312,937  
 
                
Property and equipment, net
     2,587,801       2,465,656  
Goodwill and other intangibles, net
     6,276,537       5,876,741  
Other assets
     747,095       869,581  
 
            
 
   $ 20,277,006     $ 19,524,915  
 
            
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
 
                
Current Liabilities:
                
Bank borrowings, current portion of long-term debt and capital lease obligations
   $ 18,328     $ 28,591  
Zero Coupon Convertible Junior Subordinated Notes due 2009(5)
     195,000       —  
Accounts payable
     6,017,160       5,311,337  
Other current liabilities
     2,071,453       2,061,087  
 
            
Total current liabilities
     8,301,941       7,401,015  
 
                
Long-term debt, net of current portion:
                
Acquisition Term Loan due 2012 and 2014
     1,704,943       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
     499,998       500,000  
Zero Coupon Convertible Junior Subordinated Notes due 2009(5)
     —       195,000  
Other long-term debt and capital lease obligations
     222,798       182,369  
Other liabilities
     638,534       571,119  
 
                
Total shareholders’ equity
     8,107,080       8,164,444  
 
            
 
   $ 20,277,006     $ 19,524,915  
 
            

 

 

         
(FLEXTRONICS LOGO)
  One Marina Boulevard, #28-00
Singapore 018989 		  65.6890.7188 Main
www.flextronics.com
 
        
PRESS RELEASE
        
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 items, stock-based compensation expense, restructuring charges, intangible amortization, gains or losses on divestitures, financially distressed customer charges 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.
 
      Distressed customer charges are comprised of additional provisions for doubtful accounts receivable, inventory and related obligations for customers that are experiencing significant financial difficulties. These costs are not expected to be related to ongoing business results and do not reflect expected future operating expenses. These costs are excluded by the Company’s management in assessing its current operating performance and forecasting its earnings trends, and accordingly, are excluded by the Company from its non-GAAP measures.

 

 

         
(FLEXTRONICS LOGO)
  One Marina Boulevard, #28-00
Singapore 018989 		  65.6890.7188 Main
www.flextronics.com
 
        
PRESS RELEASE
        
      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 and six-month periods ended September 26, 2008, the Company recognized charges primarily for provisions for doubtful accounts receivable, the write-down of inventory and recognition of associated contractual obligations associated with certain customers that are currently experiencing significant financial and liquidity difficulties. The Company also recognized charges primarily for the write-down of an investment in one of these customers, which is included in interest and other expense, net for the same periods.
(3)   During the six-month period ended September 26, 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 six-month period ended September 28, 2007 the Company recognized restructuring charges for costs related to employee termination costs in Europe.
(4)   During the six-month period ended September 28, 2007 the Company recognized net foreign exchange gains in connection with the divestiture of a certain international entity.
(5)   As of September 26, 2008 the Company’s Zero Coupon Convertible Junior Subordinated Notes due July 2009 are classified as a current obligation.