01—Abstract
Summary
Summary of the 10-Q filed November 5, 2008. Cited figures are marked; the original filing is the authoritative source.
Flextronics International Ltd. (FLEX) reported significant revenue growth in the second quarter and first half of fiscal year 2009, largely driven by the acquisition of Solectron Corporation.
Total net sales for the three months ended September 26, 2008, reached $8.9 billiona, a 59% increase year-over-year. For the six-month period, net sales were $17.2 billion, up 61% from the prior year. Despite revenue expansion, profitability was impacted by substantial charges.
Gross profit decreased as a percentage of net sales due to a $96.7 millionb write-down of inventory and related contractual obligations for financially distressed customers. Additionally, the company incurred $29.2 million in restructuring charges primarily related to the Solectron integration, impacting cost of sales. Selling, general, and administrative expenses also rose due to acquisition-related costs and provisions for doubtful accounts.
The company ended the period with $1.7 billionc in cash and cash equivalents and $3.4 billion in borrowings. While liquidity appears sufficient for the next twelve months, investors should monitor the company's significant goodwill balance, exposure to troubled customers, and the broader macroeconomic environment's impact on demand and supply chains.
02—Key points
Key Highlights
- Net sales for the second quarter of fiscal year 2009 increased 59% year-over-year to $8.9 billion, driven by the Solectron acquisition and new program wins.
- The company recorded a $96.7 million charge for inventory write-downs and contractual obligations related to financially distressed customers, negatively impacting gross profit margin.
- Restructuring charges of $29.2 million were recognized, primarily related to the integration of Solectron, affecting cost of sales.
- Selling, general, and administrative expenses increased due to acquisition costs, increased stock-based compensation, and provisions for doubtful accounts.
- Goodwill on the balance sheet remains substantial, and the company is monitoring for potential impairment due to market volatility.
- Cash and cash equivalents stood at $1.7 billion, while total debt was $3.4 billion.
- The company continues to utilize securitization programs to manage its accounts receivable and generate liquidity.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2009filed November 5, 2008Financial Statements
| Revenue | $8.86B |
| Cost of Revenue | $8.45B |
| Gross Profit | $417.46M |
| SG&A Expenses | $258.69M |
| Net Income | $27.07M |
| EPS (Basic) | $0.03 |
| EPS (Diluted) | $0.03 |
| Shares Outstanding (Basic) | 828.18M |
| Shares Outstanding (Diluted) | 830.03M |
05—Questions
Frequently Asked Questions
What was the primary driver of the significant revenue increase?
The primary driver of the significant revenue increase was the acquisition of Solectron Corporation, which was completed on October 1, 2007. This acquisition broadened Flextronics' service offerings, increased its scale, and diversified its customer and product mix.
What are the main factors impacting the company's profitability in this quarter?
Profitability was negatively impacted by a substantial $96.7 million charge related to inventory write-downs and contractual obligations for financially distressed customers. Additionally, restructuring charges of $29.2 million for Solectron integration and higher selling, general, and administrative expenses due to acquisition-related costs and provisions for doubtful accounts also affected profitability.
What is the company's current liquidity position and outlook?
As of September 26, 2008, Flextronics had $1.7 billion in cash and cash equivalents and $3.4 billion in borrowings. The company believes its existing cash balances, anticipated cash flows from operations, and available credit facilities will be sufficient to fund operations through at least the next twelve months. However, they are also monitoring the impact of the macroeconomic environment and credit market conditions.
What are the key risks highlighted by the company in this filing?
Key risks highlighted include exposure to financially troubled customers and suppliers, which can lead to difficulties in recovering amounts owed and potential declines in demand. The company also notes the potential for impairment of its substantial goodwill balance due to market volatility and the uncertain conditions of the capital markets that could impact its ability to draw on credit facilities.
06—Continue