10-QPeriod: Q3 FY2012

FLEX LTD. Quarterly Report for Q3 Ended Dec 31, 2011

Filed February 2, 2012For Securities:FLEX

Summary

Flex Ltd. reported net sales of $7.5 billion for the three-month period ended December 31, 2011, a decrease of 3.8% compared to the prior year, primarily driven by a $430.6 million decline in the High Velocity Solutions (HVS) market. This decline was largely attributed to the company's exit from its ODM personal computing business, which incurred operating losses of $70 million in the quarter. Despite the quarterly dip, nine-month net sales increased by 6.0% to $23.1 billion, with growth across all segments, particularly in Integrated Network Solutions and High Reliability Solutions. The company continues to manage its business portfolio by divesting underperforming segments, evidenced by the completed exit of the ODM PC business, which is expected to improve future operating results. While gross profit margin saw a slight decrease to 5.1% for the quarter due to unfavorable manufacturing costs related to the exit and right-sizing activities, the company's strategic repositioning aims to redeploy assets and optimize operations. Flex Ltd. also returned capital to shareholders, repurchasing approximately $395.6 million of ordinary shares during the nine-month period.

Financial Statements
Beta

Key Highlights

  • 1Net sales for the quarter decreased by 3.8% to $7.5 billion, primarily due to the exit from the ODM personal computing business and a decline in High Velocity Solutions.
  • 2Nine-month net sales increased by 6.0% to $23.1 billion, showing growth across all market segments.
  • 3The company is actively exiting its ODM personal computing business, which incurred significant operating losses, with completion expected in Q3 fiscal 2012.
  • 4Gross profit margin declined to 5.1% in the quarter, impacted by costs associated with exiting businesses and right-sizing activities.
  • 5Flex Ltd. repurchased approximately $395.6 million of its ordinary shares during the nine-month period, indicating a focus on shareholder returns.
  • 6The company's top ten customers accounted for approximately 56% of net sales in the nine-month period, highlighting customer concentration with Research In Motion and Hewlett-Packard being key accounts.

Frequently Asked Questions

The primary driver for the 3.8% decrease in net sales for the three-month period ended December 31, 2011, was a significant decline in the High Velocity Solutions (HVS) market, largely due to the company's exit from its ODM personal computing business. This exit resulted in $186.6 million in sales for the quarter from those divested operations.

Flex Ltd. is actively phasing out of its ODM personal computing business due to negative operating margins and performance. The company ceased all ODM PC manufacturing and design activities in the current quarter and expects to complete the exit in the third quarter of fiscal year 2012. This strategic move is anticipated to improve future operating results and redeploy assets.

The company employs a portfolio management approach, reorganizing and rebalancing its business segments to optimize operating results. This includes redeploying and repositioning assets and resources across its four defined markets: High Reliability Solutions, High Velocity Solutions, Industrial & Emerging Industries, and Integrated Network Solutions.

Flex Ltd.'s Board of Directors approved share repurchase plans authorizing the repurchase of approximately 73 million shares. During the nine-month period ended December 31, 2011, the company repurchased approximately 67 million shares for about $415.8 million, returning capital to shareholders. As of December 31, 2011, approximately 35 million shares remained available for repurchase under these plans.