01—Abstract
Summary
Summary of the 10-K filed May 24, 2010. Cited figures are marked; the original filing is the authoritative source.
Flextronics International Ltd. (FLEX) reported net sales of $24.1 billiona for fiscal year 2010.
The company experienced a significant decline in net sales, down 22%b from the previous year, largely attributed to the global economic downturn impacting customer demand and a key customer's restructuring. Despite the sales decrease, Flex improved its gross margin to 5.0% from 4.1% in fiscal year 2009, driven by cost-reduction efforts and improved capacity utilization, although component shortages posed a challenge. The company's strategy focuses on leveraging its global manufacturing capabilities and vertically integrated end-to-end service offerings to enhance customer competitiveness.
Flex serves a diverse range of markets, including infrastructure, mobile communications, computing, and medical devices, with a broad customer base that includes major technology leaders. The company's competitive strengths lie in its geographic diversification, significant scale, extensive design and engineering capabilities, and its industrial park concept in low-cost regions. Financially, Flex actively managed its debt, repurchasing significant portions of its outstanding notes.
The company's liquidity position remained stable, with substantial cash reserves and an undrawn revolving credit facility. Looking ahead, Flex aims to continue growing its business and profitability by focusing on market-specific expertise and its integrated service model.
02—Key points
Key Highlights
- Net sales for fiscal year 2010 were $24.1 billion, a 22% decrease from fiscal year 2009 due to weakened macroeconomic conditions and customer-specific issues.
- Gross margin improved to 5.0% in fiscal year 2010, up from 4.1% in fiscal year 2009, driven by cost reductions and better capacity utilization.
- The company experienced a significant goodwill impairment charge of $5.9 billion in fiscal year 2009.
- Flex actively managed its debt, repurchasing substantial amounts of its senior subordinated and convertible notes.
- The company's revenue is significantly dependent on its top ten customers, who accounted for 47% of net sales in fiscal year 2010.
- Flex operates a global network of facilities in 30 countries across four continents, with 76% of its manufacturing capacity located in low-cost regions as of March 31, 2010.
- The company is focused on expanding its vertically integrated service offerings, including design and engineering services, to provide end-to-end solutions for its OEM customers.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Flex Ltd. kept $0.00.
- Revenue$24.11B100.0%
- Cost of revenue−$22.90B95.0%
- Gross profit$1.21B5.0%
- Operating costs−$1.19B4.9%
- Operating income$25.0M0.1%
- Interest, other & tax−$6.4M0.0%
- Net income$18.6M0.1%
Where FY2010 revenue went
$24.11B- Cost of revenue: $22.80B, 95% of revenue
- Net income: $18.6M, 0.1% of revenue
- R&D: $13.3M, 0.1% of revenue
- SG&A: $755.1M, 3.1% of revenue
- Other operating costs: $516.6M, 2.1% of revenue
Kept 0.1% as net incomeNet income $18.6M · 0.1%R&D $13.3M · 0.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed May 24, 2010Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $24.11B$30.95B | −22.1% |
| Cost of Revenue | $22.80B$29.51B | −22.7% |
| Gross Profit | $1.21B$1.28B | −5.4% |
| R&D Expenses | $13.30M— | — |
| SG&A Expenses | $755.06M$979.06M | −22.9% |
| Operating Income | $25.00M— | — |
| Interest Expense | $158.10M$245.50M | −35.6% |
| Net Income | $18.59M-$6.14B | +100.3% |
| EPS (Basic) | $0.02$-7.47 | +100.3% |
| EPS (Diluted) | $0.02$-7.47 | +100.3% |
| Shares Outstanding (Basic) | 811.68M820.96M | −1.1% |
| Shares Outstanding (Diluted) | 821.11M820.96M | 0.0% |
05—Questions
Frequently Asked Questions
What was Flextronics' financial performance in fiscal year 2010?
In fiscal year 2010, Flextronics reported net sales of $24.1 billion, a decrease of 22% compared to fiscal year 2009. This decline was attributed to the weak macroeconomic environment affecting customer demand and issues with specific major customers. Despite the revenue drop, the company improved its gross margin to 5.0% due to cost-reduction initiatives and better capacity utilization.
What are Flextronics' key competitive strengths?
Flextronics' competitive strengths include its broad geographic diversification with facilities in 30 countries, significant scale of operations, extensive design and engineering capabilities, and a vertically integrated end-to-end service offering. The company also leverages its 'industrial park' concept in low-cost regions to enhance supply chain efficiency and cost competitiveness.
How has Flextronics managed its debt and financial position?
Flextronics has been actively managing its debt. In fiscal year 2010, the company redeemed significant portions of its 6.5% Senior Subordinated Notes and made progress on its 1% Convertible Subordinated Notes. The company maintained a stable liquidity position, with $1.9 billion in cash and cash equivalents and an undrawn $2.0 billion revolving credit facility as of March 31, 2010.
What are the main risks facing Flextronics, as outlined in the filing?
Key risks include dependence on a few large customers whose success is not guaranteed, the competitive nature of the EMS industry, fluctuations in customer demand due to short product life cycles, potential cancellations or changes in customer orders, and risks associated with international operations such as currency fluctuations and geopolitical instability. The company also faces risks related to component shortages and the need to manage its significant restructuring activities.
06—Continue