01—Abstract
Summary
Summary of the 10-Q filed July 30, 2012. Cited figures are marked; the original filing is the authoritative source.
Flextronics International Ltd. reported a decrease in net sales for the quarter ended June 29, 2012, down 20.2% year-over-year to $6.0 billiona.
This decline was primarily driven by a strategic portfolio rebalancing aimed at shifting revenue mix towards higher-margin non-High Velocity Solutions (non-HVS) businesses. While overall revenue decreased, the gross margin improved to 6.0%b from 5.3% in the prior year's comparable quarter, reflecting this strategic shift away from lower-margin HVS products. The company also continued its share repurchase program, buying back approximately 20.4 million shares during the quarter.
02—Key points
Key Highlights
- Net sales decreased by 20.2% to $6.0 billion for the three months ended June 29, 2012, compared to $7.5 billion in the prior year period.
- Gross margin improved to 6.0% from 5.3% year-over-year, driven by a strategic shift towards higher-margin non-HVS businesses.
- Selling, general, and administrative expenses decreased by $21.7 million due to exiting the ODM PC business.
- The company repurchased approximately 20.4 million ordinary shares for $134.0 million during the quarter.
- Cash and cash equivalents decreased to $1.3 billion from $1.5 billion.
- Loss from discontinued operations, net of tax, was $9.0 million, primarily related to the sale of the camera modules business.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2013, Flex Ltd. kept $0.02.
- Revenue$5.98B100.0%
- Cost of revenue−$5.62B94.0%
- Gross profit$357.4M6.0%
- Operating costs−$220.6M3.7%
- Operating income$136.8M2.3%
- Interest, other & tax−$8.3M0.1%
- Net income$128.5M2.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2013filed July 30, 2012Financial Statements
| Revenue | $5.98B |
| Cost of Revenue | $5.62B |
| Gross Profit | $357.36M |
| SG&A Expenses | $190.34M |
| Operating Income | $136.77M |
| Interest Expense | $15.80M |
| Net Income | $128.47M |
| EPS (Basic) | $0.19 |
| EPS (Diluted) | $0.19 |
| Shares Outstanding (Basic) | 675.37M |
| Shares Outstanding (Diluted) | 688.26M |
05—Questions
Frequently Asked Questions
What is the primary reason for the significant decrease in net sales?
The primary reason for the decrease in net sales is Flextronics' strategic decision to rebalance its business portfolio. The company is intentionally reducing its reliance on the High Velocity Solutions (HVS) market, which generally has lower profit margins, to increase the proportion of revenue from higher-margin non-HVS businesses. This shift, while reducing overall revenue, is expected to improve overall margins.
How did the company's gross margin perform despite lower sales?
Despite lower net sales, Flextronics' gross margin improved to 6.0% in the current quarter compared to 5.3% in the prior year's comparable quarter. This improvement is attributed to the company's strategic shift towards higher-margin non-HVS business segments, as sales from the lower-margin HVS segment decreased significantly as a percentage of total revenue.
What is the company's outlook regarding its business portfolio rebalancing?
Flextronics aims for a portfolio mix where approximately 70% of revenue is derived from non-HVS businesses and 30% from HVS businesses. The company expects to continue increasing revenue in its non-HVS markets and accelerate the reduction in its HVS market, repositioning assets and capacity accordingly, which may result in lower overall revenue in the near term but expanded margins.
What happened with the company's share repurchase program?
During the quarter, Flextronics repurchased approximately 20.4 million ordinary shares for a total of $134.0 million. The company utilized its authorized share repurchase program and reached its limit by the end of the quarter. Further repurchases will require shareholder approval at an upcoming meeting.
06—Continue