SAN JOSE, Calif., Jan. 28, 2016 /PRNewswire/ -- Flex (NASDAQ:
FLEX), a leading sketch-to-scale™ solutions company that designs
and builds intelligent products for a connected world, today
announced results for its third quarter ended December 31, 2015:
(US$ in millions,
except EPS)
|
|
Three Month
Periods Ended
|
|
|
|
December
31,
|
|
September
25,
|
|
December
31,
|
|
|
|
2015
|
|
2015
|
|
2014
|
|
Net sales
|
$
|
6,763
|
$
|
6,317
|
$
|
7,025
|
|
Adjusted operating
income
|
$
|
236
|
$
|
196
|
$
|
207
|
|
GAAP operating
income
|
$
|
212
|
$
|
180
|
$
|
193
|
|
Adjusted net
income
|
$
|
196
|
$
|
153
|
$
|
175
|
|
GAAP net
income
|
$
|
149
|
$
|
123
|
$
|
153
|
|
Adjusted
EPS
|
$
|
0.35
|
$
|
0.27
|
$
|
0.30
|
|
GAAP EPS
|
$
|
0.27
|
$
|
0.22
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
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 Fiscal 2016 Results of Operations
Flex's net sales for the third quarter ended December 31, 2015 were approximately $6.8 billion, at the high end of its previously
provided revenue guidance range of $6.2
billion to $6.8 billion. The Company's adjusted earnings per
diluted share of $0.35 was above the
Company's previously provided guidance range of $0.28 to $0.34 and represents the all - time
highest quarterly adjusted EPS for the Company.
Third quarter adjusted operating income increased 20%
sequentially, and 14% year-over-year, to $236 million and was above the guidance range of
$195 to $235 million. Adjusted
operating margin expanded 40 basis points sequentially, and 60
basis points year-over-year, to 3.5%.
"We continue to position our company as a leader in the IoT
space, and our third quarter demonstrated sequential growth across
all four of our business groups, resulting from new programs and an
improving engagement model," said Mike
McNamara, chief executive officer at Flex. "Operating
margins improved both sequentially and year-over-year, a testament
to the stronger value proposition we are delivering to our
customers."
"Our adjusted earnings per diluted share were $0.35 this quarter, representing an all-time high
for the Company, and we generated $278
million in cash flow from operations and $158 million in free cash flow during the
quarter," said Chris Collier, chief
financial officer at Flex. "Our consistent free cash flow
generation reflects our strong discipline and execution and enables
our consistent stock repurchase."
Guidance
For the fourth quarter ending March 31, 2016, revenue is expected to be in the
range of $5.5 to $6.1 billion and
adjusted EPS is expected to be in the range of $0.25 to $0.31 per diluted share.
GAAP earnings per share is expected to be lower than the
adjusted EPS guidance provided herein by approximately $0.07 per diluted share for estimated intangible
amortization and stock-based compensation expense.
Conference Calls and Web Casts
A conference call
hosted by the Flex 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, 2015. 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 Flex
Flextronics International Ltd. (Reg. No.
199002645H) is a leading sketch-to-scale™ solutions company that
designs and builds intelligent products for a connected world. With
approximately 200,000 professionals across 30 countries and a
promise to help the world Live smarter™, the company provides
innovative design, engineering, manufacturing, real-time supply
chain insight and logistics services to companies of all sizes in
various industries and end-markets. 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; 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 Forms 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 Flex
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
|
FLEX
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In thousands,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Three Month
Periods Ended
|
|
|
|
December 31,
2015
|
|
September 25,
2015
|
|
December 31,
2014
|
GAAP:
|
|
|
|
|
|
|
|
Net sales
|
$
|
6,763,177
|
$
|
6,316,762
|
$
|
7,025,054
|
|
Cost of
sales
|
|
6,310,710
|
|
5,919,846
|
|
6,616,397
|
|
Gross
profit
|
|
452,467
|
|
396,916
|
|
408,657
|
|
Selling, general and
administrative expenses
|
|
240,617
|
|
216,796
|
|
215,993
|
|
Operating
income
|
|
211,850
|
|
180,120
|
|
192,664
|
|
Intangible
amortization
|
|
19,319
|
|
16,127
|
|
8,045
|
|
Interest and other,
net
|
|
21,566
|
|
22,035
|
|
9,035
|
|
Other charges
(2)
|
|
44,415
|
|
1,678
|
|
5,067
|
|
Income before income
taxes
|
|
126,550
|
|
140,280
|
|
170,517
|
|
Provision for
(benefit from) income taxes
|
|
(22,360)
|
|
17,303
|
|
17,618
|
|
Net income
|
$
|
148,910
|
$
|
122,977
|
$
|
152,899
|
|
|
|
|
|
|
|
|
EPS:
|
|
|
|
|
|
|
|
|
Net
income:
|
|
|
|
|
|
|
|
GAAP
|
$
|
0.27
|
$
|
0.22
|
$
|
0.26
|
|
Non-GAAP
|
$
|
0.35
|
$
|
0.27
|
$
|
0.30
|
|
|
|
|
|
|
|
|
|
Diluted shares used
in computing per share
amounts
|
|
560,996
|
|
569,655
|
|
587,201
|
|
See Schedule II for
the reconciliation of GAAP to non-GAAP financial measures. See the
accompanying notes on Schedule V attached to this press
release.
|
SCHEDULE
II
|
FLEX
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES (1)
|
(In thousands,
except per share amounts)
|
|
|
|
Three Month
Periods Ended
|
|
|
December 31,
2015
|
|
September 25,
2015
|
|
December 31,
2014
|
GAAP gross
profit
|
$
|
452,467
|
$
|
396,916
|
$
|
408,657
|
Stock-based compensation
expense
|
|
2,407
|
|
2,015
|
|
2,083
|
Non-GAAP gross
profit
|
$
|
454,874
|
$
|
398,931
|
$
|
410,740
|
GAAP SG&A
Expenses
|
$
|
240,617
|
$
|
216,796
|
$
|
215,993
|
Stock-based compensation
expense
|
|
21,826
|
|
14,185
|
|
12,136
|
Non-GAAP SG&A
Expenses
|
$
|
218,791
|
$
|
202,611
|
$
|
203,857
|
GAAP operating
income
|
$
|
211,850
|
$
|
180,120
|
$
|
192,664
|
Stock-based compensation
expense
|
|
24,233
|
|
16,200
|
|
14,219
|
Non-GAAP operating
income
|
$
|
236,083
|
$
|
196,320
|
$
|
206,883
|
GAAP provision for
(benefit from) income taxes
|
$
|
(22,360)
|
$
|
17,303
|
$
|
17,618
|
Intangible amortization
benefit
|
|
1,131
|
|
2,355
|
|
224
|
Tax benefit on intangible
assets (3)
|
|
39,324
|
|
-
|
|
-
|
Non-GAAP provision
for income taxes
|
$
|
18,095
|
$
|
19,658
|
$
|
17,842
|
GAAP net
income
|
$
|
148,910
|
$
|
122,977
|
$
|
152,899
|
Stock-based compensation
expense
|
|
24,233
|
|
16,200
|
|
14,219
|
Intangible
amortization
|
|
19,319
|
|
16,127
|
|
8,045
|
Other charges
(2)
|
|
44,415
|
|
-
|
|
-
|
Adjustments for taxes
(3)
|
|
(40,455)
|
|
(2,355)
|
|
(224)
|
Non-GAAP net
income
|
$
|
196,422
|
$
|
152,949
|
$
|
174,939
|
EPS:
|
|
|
|
|
|
|
Net
income:
|
|
|
|
|
|
|
GAAP
|
$
|
0.27
|
$
|
0.22
|
$
|
0.26
|
Non-GAAP
|
$
|
0.35
|
$
|
0.27
|
$
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SCHEDULE
III
|
FLEX
|
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2015
|
|
|
March
31, 2015
|
ASSETS
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
1,634,194
|
|
$
|
1,628,408
|
|
Accounts receivable,
net
|
|
2,584,909
|
|
|
2,337,515
|
|
Inventories
|
|
3,490,733
|
|
|
3,488,752
|
|
Other current
assets
|
|
|
1,246,768
|
|
|
1,286,225
|
Total current
assets
|
|
|
8,956,604
|
|
|
8,740,900
|
|
|
|
|
|
|
Property and
equipment, net
|
|
2,239,921
|
|
|
2,092,167
|
Goodwill and other
intangible assets, net
|
|
1,317,017
|
|
|
415,175
|
Other
assets
|
|
|
535,976
|
|
|
417,382
|
Total
assets
|
|
$
|
13,049,518
|
|
$
|
11,665,624
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Bank borrowings and
current portion of long-term debt
|
$
|
65,536
|
|
$
|
46,162
|
|
Accounts
payable
|
|
4,802,194
|
|
|
4,561,194
|
|
Other current
liabilities
|
|
2,284,541
|
|
|
2,148,867
|
Total current
liabilities
|
|
|
7,152,271
|
|
|
6,756,223
|
|
|
|
|
|
|
|
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
|
|
4.750% Notes (due
2025)
|
|
|
595,494
|
|
|
-
|
|
Term Loans
|
|
|
1,080,000
|
|
|
1,027,500
|
|
Other long-term
debt
|
|
65,980
|
|
|
10,071
|
Other
liabilities
|
|
577,341
|
|
|
475,580
|
|
|
|
|
|
|
|
|
Total shareholders'
equity
|
|
|
2,578,432
|
|
|
2,396,250
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders' equity
|
|
$
|
13,049,518
|
|
$
|
11,665,624
|
|
|
|
|
|
|
|
|
SCHEDULE
IV
|
FLEX
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
Nine-Month Periods
Ended
|
|
|
December 31,
2015
|
|
|
December 31,
2014
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net income
|
$
|
382,737
|
|
$
|
465,689
|
|
Depreciation,
amortization and other impairment charges
|
|
381,949
|
|
|
404,260
|
|
Changes in working
capital and other
|
|
175,086
|
|
|
(200,525)
|
|
Net cash provided by operating activities
|
|
939,772
|
|
|
669,424
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
Purchases of property
and equipment
|
|
(418,561)
|
|
|
(254,970)
|
|
Proceeds from the
disposition of property and equipment
|
|
4,627
|
|
|
90,576
|
|
Acquisition and
divestiture of businesses, net of cash acquired and cash held in
divested business
|
|
(900,242)
|
|
|
(58,132)
|
|
Other investing
activities, net
|
|
1,397
|
|
|
(11,517)
|
|
Net cash used in investing activities
|
|
(1,312,779)
|
|
|
(234,043)
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Proceeds from bank
borrowings and long-term debt
|
|
755,684
|
|
|
234,523
|
|
Repayments of bank
borrowings and long-term debt
|
|
(40,706)
|
|
|
(251,337)
|
|
Payments for
repurchases of ordinary shares
|
|
(331,690)
|
|
|
(290,752)
|
|
Net proceeds from
issuance of ordinary shares
|
|
52,950
|
|
|
12,341
|
|
Other financing
activities, net
|
|
(49,742)
|
|
|
(29,135)
|
|
Net cash provided by (used in) financing activities
|
|
386,496
|
|
|
(324,360)
|
Effect of exchange
rates on cash and cash equivalents
|
|
(7,703)
|
|
|
2,472
|
|
Net increase in cash
and cash equivalents
|
|
5,786
|
|
|
113,493
|
|
Cash and cash
equivalents, beginning of period
|
|
1,628,408
|
|
|
1,593,728
|
|
Cash and cash
equivalents, end of period
|
$
|
1,634,194
|
|
$
|
1,707,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SCHEDULE
V
|
FLEX AND
SUBSIDIARIES
|
NOTES TO SCHEDULES
I, II, & III
|
|
|
(1)
|
To supplement Flex'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
net income and non-GAAP net income per diluted share. These
supplemental measures exclude stock-based compensation expense,
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 Flex's results of
operations as determined in accordance with GAAP and that these
measures should only be used to evaluate Flex'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.
|
|
|
|
|
Intangible
amortization consists primarily of non-cash charges that can be
impacted by, among other things, 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.
|
|
|
|
For the third quarter
ended December 31, 2015, Free Cash Flow was $158 million consisting
of GAAP net cash flows from operating activities of $278 million
less purchases of property and equipment, net of proceeds from
dispositions, of $120 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)
|
Includes $25 million
of non-cash foreign currency translation loss attributable to a
non-strategic Western European manufacturing facility we sold
during the quarter and $22 million impairment of a non-core
investment.
|
|
|
(3)
|
Includes a $39
million benefit for the release of valuation allowances on certain
of our deferred tax assets resulting from our acquisition of the
NEXTracker business during the current quarter.
|
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SOURCE Flex