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Flextronics Announces Third Quarter Record Results
January 30, 2007 | PR NewswireEstimated reading time: 4 minutes
Flextronics (NASDAQ:FLEX) today announced results for its third quarter ended December 31, 2006 as follows:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
(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 <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />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.
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/ .