FLEX LTD. SAN JOSE, Calif., Jan. 28, 2016 /PRNewswire/ -- Flex (NASDAQ: FLEX), a leading sketch-to-scale(TM) 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(TM) 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(TM), 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, September 25, December 31,
2015 2015 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 560,996 569,655 587,201
amounts
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, September 25, December 31,
2015 2015 2014
---- ---- ----
$452,467 $396,916 $408,657
GAAP gross profit
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, March 31,
2015 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,
2014
December 31,
2015
----
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
