10-QPeriod: Q2 FY2012

FLEX LTD. Quarterly Report for Q2 Ended Jul 1, 2011

Filed August 9, 2011For Securities:FLEX

Summary

Flextronics International Ltd. (FLEX) reported solid revenue growth for the first quarter of fiscal year 2012, with net sales reaching $7.5 billion, a 15% increase compared to the prior year period. This growth was driven by a broad-based demand across all its key market segments, including High Velocity Solutions and Integrated Network Solutions. The company demonstrated improved profitability with net income rising to $131.975 million from $118.178 million in the comparable period last year, translating to diluted EPS of $0.17. While the company's gross margin saw a slight decrease due to a higher mix of lower-margin products, this was partially offset by improved operating expense management, with SG&A expenses as a percentage of sales decreasing. Cash flow from operations remained robust, though the company utilized cash for share repurchases and capital expenditures. Flextronics continues to manage its global operations efficiently, with a significant portion of its cash held by foreign subsidiaries. The company also announced a new $200 million share repurchase authorization, indicating confidence in its financial position and commitment to shareholder returns.

Financial Highlights

51 data points
Beta

Revenue

$7.50B

5.3% Gross Margin

Net Income

$131.97M

1.8% Net Margin

EPS (Diluted)

$0.17

Total Assets

$12.54B

Cash & Equivalents

$1.60B

Free Cash Flow

$13.16M

Financial Statements
Beta
Revenue$7.50B
Cost of Revenue$7.64B
Gross Profit$400.78M
SG&A Expenses$210.38M
Operating Income$137.31M
Interest Expense$16.60M
Net Income$131.97M
EPS (Basic)$0.18
EPS (Diluted)$0.17
Shares Outstanding (Basic)722.21M
Shares Outstanding (Diluted)731.05M

Key Highlights

  • 1Net sales increased by 15% year-over-year to $7.5 billion for the quarter ended July 1, 2011.
  • 2Net income rose to $131.975 million, resulting in diluted earnings per share of $0.17.
  • 3Gross profit increased in absolute terms to $400.2 million, although gross margin slightly decreased to 5.3%.
  • 4Selling, general, and administrative (SG&A) expenses decreased as a percentage of sales to 2.8%, showcasing improved operational leverage.
  • 5Cash provided by operating activities was $136.4 million, demonstrating strong cash generation capabilities.
  • 6The company held $1.56 billion in cash and cash equivalents at the end of the quarter.
  • 7A new share repurchase program of up to $200 million was authorized.

Frequently Asked Questions

Revenue growth was primarily driven by an improved macroeconomic environment leading to increased demand for the company's OEM customers' end products. Sales saw significant increases across all four of Flextronics' redefined market segments: High Reliability Solutions, High Velocity Solutions, Industrial & Emerging Industries, and Integrated Network Solutions.

Profitability improved, with net income increasing to $131.975 million from $118.178 million in the same period last year. Diluted earnings per share also rose to $0.17 from $0.14. While the gross margin saw a slight decrease due to product mix, the company managed its operating expenses more efficiently, contributing to the overall increase in net income.

Flextronics announced its decision to exit the ODM personal computing business due to declining operating margins and performance. The company expects to be fully exited by the end of fiscal year 2012 and anticipates operating losses of approximately $20.0 million for each of the next two quarters from this segment.

Flextronics maintained a strong liquidity position with $1.56 billion in cash and cash equivalents. Cash from operations was robust at $136.4 million. The company has access to a $2.0 billion credit facility and continues to manage its working capital effectively. The company also demonstrated its commitment to returning value to shareholders by authorizing a $200 million share repurchase program.