01—Abstract
Summary
Summary of the 10-Q filed January 31, 2014. Cited figures are marked; the original filing is the authoritative source.
Flextronics International Ltd. (FLEX) reported strong revenue growth in the third quarter ended December 31, 2013, with net sales increasing by 17.3% year-over-year to $7.2 billiona.
This growth was primarily driven by acquisitions, particularly the integration of certain manufacturing operations from Google's Motorola Mobility LLC, which significantly boosted the High Velocity Solutions (HVS) segment. The company's gross profit also saw a substantial improvement, rising to 5.5%b of net sales from 4.0% in the prior year's comparable quarter, benefiting from increased volumes and favorable pricing, as well as the positive impact of prior restructuring efforts. Despite an increase in selling, general, and administrative expenses driven by acquisition-related investments and corporate infrastructure expansion, Flextronics demonstrated solid operational execution.
The company maintained healthy operating cash flows, generating $1.1 billionc for the nine months ended December 31, 2013, and ended the quarter with a strong cash position of $1.6 billion. The balance sheet reflects growth in assets, including inventories and accounts receivable, supported by customer advances and robust sales, while debt levels were managed through refinancing and opportunistic share repurchases. Overall, the report indicates a company experiencing significant top-line expansion driven by strategic acquisitions and operational improvements.
02—Key points
Key Highlights
- Net sales increased by 17.3% to $7.2 billion in the third quarter ended December 31, 2013, driven by acquisitions and strong performance in the High Velocity Solutions segment.
- Gross profit margin improved to 5.5% from 4.0% in the prior year's quarter, benefiting from increased volumes and prior restructuring efforts.
- The company generated $1.1 billion in cash from operating activities for the nine months ended December 31, 2013.
- Cash and cash equivalents stood at $1.6 billion as of December 31, 2013.
- Significant acquisitions, including those from Google's Motorola Mobility, contributed to the revenue growth.
- Selling, general, and administrative expenses increased due to investments related to acquisitions and business growth.
- The company maintained compliance with debt covenants and managed its debt structure, including a new $600 million term loan.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2014, Flex Ltd. kept $0.02.
- Revenue$7.18B100.0%
- Cost of revenue−$6.78B94.5%
- Gross profit$398.6M5.5%
- Operating costs−$253.5M3.5%
- Operating income$145.2M2.0%
- Interest, other & tax$-00.0%
- Net income$145.2M2.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2014filed January 31, 2014Financial Statements
Q3 FY2014 against Q3 FY2013
| Line item | Q3 FY2014Q3 FY2013 | Change |
|---|---|---|
| Revenue | $7.18B$6.12B | +17.3% |
| Cost of Revenue | $6.78B$5.78B | +17.4% |
| Gross Profit | $398.62M$246.46M | +61.7% |
| SG&A Expenses | $224.58M$207.22M | +8.4% |
| Operating Income | $145.16M$54.60M | +165.9% |
| Interest Expense | $19.90M$15.80M | +25.9% |
| Net Income | $145.16M$47.35M | +206.6% |
| EPS (Basic) | $0.24$0.07 | +242.9% |
| EPS (Diluted) | $0.23$0.07 | +228.6% |
| Shares Outstanding (Basic) | 606.72M658.92M | −7.9% |
| Shares Outstanding (Diluted) | 618.68M669.49M | −7.6% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in the quarter?
Revenue growth was primarily driven by acquisitions, notably the integration of manufacturing operations from Google's Motorola Mobility LLC, which boosted the High Velocity Solutions (HVS) segment. Increased sales in the High Reliability Solutions (HRS) segment also contributed, while the Integrated Network Solutions (INS) segment saw a decrease.
How did the company's profitability change?
Gross profit margin improved significantly to 5.5% in the quarter ended December 31, 2013, compared to 4.0% in the prior year's quarter. This improvement was attributed to higher manufacturing volumes, favorable pricing, and the realization of cost savings from previous restructuring activities. Despite increased SG&A expenses due to acquisitions, overall profitability showed a positive trend.
What is the company's cash position and how is it managing liquidity?
Flextronics ended the quarter with a strong cash and cash equivalents balance of $1.6 billion. The company generated $1.1 billion in operating cash flow for the nine-month period, indicating healthy liquidity. They also have access to a $1.5 billion revolving credit facility and are managing debt levels through refinancing and share repurchases.
Were there any significant acquisitions or divestitures during the period?
Yes, significant acquisitions were completed, including manufacturing operations from Google's Motorola Mobility LLC and Riwisa AG, which expanded capabilities in the mobile and medical device markets, respectively. The company also finalized the sale of two non-core businesses previously reported as discontinued operations.
06—Continue