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2 CHANGI SOUTH LANE TEL: +65.6299.8888
PRESS RELEASE
SINGAPORE 486123
Exhibit 99.01
FLEXTRONICS CONTACTS:
Thomas J. Smach
Senior Vice President of Finance
+1.408.576.7722
investor_relations@flextronics.com
Renee Brotherton
Director of Corporate Marketing
+1.408.576.7189
renee.brotherton@flextronics.com
FLEXTRONICS ANNOUNCES RECORD THIRD QUARTER RESULTS
-NET SALES $4.15 BILLION; PROFIT MARGINS INCREASE
-CASH CONVERSION CYCLE IMPROVES TO 14 DAYS
-GUIDANCE INCREASED
SINGAPORE, JANUARY 27, 2004 - Flextronics (NASDAQ: FLEX) today announced results
for the quarter ended December 31, 2003, as follows:
(In millions, except EPS) (1) THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------------------ -------------------------------
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2003 2002 2003 2002
------------ ------------- ------------ ------------ ------------
Net sales $ 4,152.3 $ 3,503.2 $ 3,851.5 $ 10,762.3 $ 10,319.1
Proforma operating income $ 117.8 $ 73.5 $ 97.4 $ 240.0 $ 222.1
GAAP operating income (loss) $ 46.8 $ 13.3 $ 0.8 $ (218.4) $ (82.3)
Proforma net income $ 93.9 $ 47.5 $ 66.2 $ 161.9 $ 136.3
GAAP net income (loss) $ 21.4 $ (100.1) $ (6.5) $ (368.4) $ (103.0)
Diluted proforma EPS $ 0.17 $ 0.09 $ 0.13 $ 0.29 $ 0.26
Diluted GAAP EPS $ 0.04 $ (0.19) $ (0.01) $ (0.70) $ (0.20)
(1) Proforma results exclude intangibles amortization and
restructuring and other charges, as applicable. See Schedules 1 and
2 attached to this press release for a reconciliation of proforma
results to Generally Accepted Accounting Principles ("GAAP")
results.
Net sales in the quarter reached a record of $4.15 billion, which represents a
sequential increase of $649.1 million, or 18.5% over the September quarter, and
a year-over-year increase of $300.8 million, or 7.8% over the December 2002
quarter.
Proforma net income was $93.9 million, or $0.17 per diluted share for the
quarter, which represents a sequential increase of $46.4 million, or 97.6% over
the September quarter, and a year-over-year increase of $27.8 million, or 41.9%
over the December 2002 quarter. Including after-tax amortization expense of $8.6
million, previously announced restructuring costs of $49.5 million, and
litigation settlement costs of $14.4 million, net income in the December quarter
of 2003 was $21.4 million on a GAAP basis, or $0.04 per diluted share, as
compared to a net loss of $6.5 million, or a $0.01 loss per share in the
December quarter of 2002.
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2 CHANGI SOUTH LANE TEL: +65.6299.8888
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The quarterly results reflect a number of financial milestones, including record
inventory turns of 13 times, a cash conversion cycle of 14 days and selling,
general and administrative ("SG&A") expense of 2.9% of sales. In addition,
proforma cash flow from operations was $356 million, which excludes
approximately $68 million of payments for restructuring and other charges.
"As we begin to realize the earnings leverage imbedded in our business, our
financial results will continue to improve. For instance, during the December
2003 quarter, year-over-year revenues increased 8%, while proforma net income
increased 42%. The improved operating results are what we expected to begin to
see as we emerge from the technology downtown. While we are pleased that our
margins, overall profitability, return on invested tangible capital, and many
other financial metrics have improved this quarter, we continue to be completely
focused on driving additional improvements in our operating performance. As
demand trends further improve, we expect utilization rates will improve, pricing
will increase, our higher value-add supply chain services will grow, as will our
ODM services. All of this, combined with further operating leverage, should
result in increasing margins," said Michael E. Marks, Chief Executive Officer of
Flextronics.
Addressing the business outlook, Marks added, "Clearly, business conditions have
improved and we executed well this quarter, which resulted in Flextronics
achieving many financial milestones that we will continue to build on next year.
We believe that next year should show improvement in several areas. Major
restructurings in the industry should be nearly completed, excess equipment
capacity should be substantially reduced, and demand should continue to improve.
With the expected increase in profits from most of our business units, we are
increasingly confident that Flextronics is nicely positioned for growth in
revenue, margins and profits."
Marks concluded, "Last week's announcement regarding our discussions with Nortel
Networks has the potential to be a major transformational event for Flextronics
in many ways. As currently being discussed, it has the potential to be the
largest program award in the history of the EMS industry, with revenues
exceeding $2 billion per year for Flextronics. Not only would this program use
all of our end-to-end supply chain services, it would also have a major and
immediate impact on diversifying our product mix and would make Flextronics the
undisputed leading EMS provider of high-end telecom infrastructure products."
The Company provided guidance that excludes the Nortel discussions, as it does
not forecast the contribution of new programs until definitive agreements are in
place. The Company has increased its expectations for the March 2004 quarter by
10% for sales and 20% for proforma earnings per share to a range of $3.4 to $3.6
billion and $0.09 to $0.11, respectively. In addition, the Company indicated
that both revenues and proforma earnings per share for the June, September, and
December 2004 quarters are expected to exceed the existing First Call consensus
estimates by approximately 10%. GAAP earnings are expected to be lower than
proforma earnings by approximately $0.02 per diluted share reflecting quarterly
amortization expense, as well as the completion of previously announced
restructuring plans, which are expected to result in a charge in the March 2004
quarter of approximately $35 million, or approximately $0.06 per diluted share.
A conference call hosted by Flextronics' management will be held today at 1:30
p.m. PST to discuss the Company's financial results and its outlook. This call
will be broadcast via the
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2 CHANGI SOUTH LANE TEL: +65.6299.8888
PRESS RELEASE
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Internet and may be accessed by logging on to the Company's website at
www.flextronics.com. Additional information in the form of a slide presentation
and CEO's Letter to Shareholders that summarizes and discusses the quarterly
results may also be found on the site. A replay of the broadcast will remain
available on the Company's website after the call.
Minimum requirements to listen to the broadcast are Microsoft Windows Media
Player software (free download at
http://www.microsoft.com/windows/windowsmedia/download/default.asp) and at least
a 28.8 Kbps bandwidth connection to the Internet.
ABOUT FLEXTRONICS
Headquartered in Singapore, Flextronics is the leading Electronics Manufacturing
Services (EMS) provider focused on delivering operational services to technology
companies. With fiscal year 2003 revenues of $13.4 billion, Flextronics is a
major global operating company with design, engineering, manufacturing and
logistics operations in 29 countries and five continents. This global presence
allows for manufacturing excellence through a network of facilities situated in
key markets and geographies that provide its customers with the resources,
technology and capacity to optimize their operations. Flextronics' ability to
provide end-to-end operational services that include innovative product design,
test solutions, manufacturing, IT expertise, network services, and logistics has
established the Company as the leading EMS provider. For more information,
please visit www.flextronics.com.
# # #
This news release, the CEO's Letter to the Shareholders and the earnings slide
presentation contain forward-looking statements within the meaning of federal
securities laws and are subject to the safe harbor under those laws. These
forward-looking statements include statements related to trends in our industry
and end markets, including changes in customer demand, future growth, increased
utilization rates, improved pricing, new customer activities, improved general
economic conditions, seasonality, ODM activity, industry capacity, anticipated
revenues, earnings leverage, operating margins and results, cash flow,
profitability, benefits and level of future restructuring charges, and the
expected impact of potential new programs on our anticipated revenues and
earnings. These forward-looking statements involve risks and uncertainties that
could cause the actual results to differ materially from those anticipated by
these forward-looking statements. These risks include the challenges of
effectively managing our operations, particularly during uncertain economic
conditions, the risk that we may not obtain anticipated new customer programs,
including the program under discussion with Nortel, or that if we do, they may
be delayed, and may not contribute to our revenue or profitability as expected,
or at all, the need for future restructurings, integrating acquired companies,
responding to changes in economic trends and to fluctuations in demand for
customers' products and changes in customers' orders, our dependence on a small
number of large customers, our dependence on industries affected by rapid
technological change, competition in our industry and the other risks described
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Risk Factors " in our most recent Annual Report on Form 10-K and
quarterly reports on Form 10-Q and current reports on Form 8-K, filed with the
SEC. The forward-looking statements in this news release, the CEO's Letter to
the Shareholders and the earnings slide presentation, are based on current
expectations, and Flextronics assumes no obligation to update these
forward-looking statements.
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2 CHANGI SOUTH LANE TEL: +65.6299.8888
PRESS RELEASE
SINGAPORE 486123
SCHEDULE 1
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THIRD QUARTER ENDED DECEMBER 31, 2003 THIRD QUARTER ENDED DECEMBER 31, 2002
--------------------------------------- -----------------------------------------
PROFORMA PROFORMA
PROFORMA(1) ADJUSTMENTS GAAP PROFORMA(1) ADJUSTMENTS GAAP
----------- ----------- ----------- ----------- ----------- -----------
Net sales $ 4,152,344 $ 4,152,344 $ 3,851,494 $ 3,851,494
Cost of sales 3,912,912 3,912,912 3,638,559 3,638,559
Restructuring and other charges -- 50,553 50,553 -- 86,892 86,892
----------- ----------- ----------- ----------- ----------- -----------
Gross profit 239,432 (50,553) 188,879 212,935 (86,892) 126,043
Selling, general and administrative expenses 121,597 121,597 115,502 115,502
Restructuring and other charges -- 20,466 20,466 -- 9,696 9,696
----------- ----------- ----------- ----------- ----------- -----------
Operating income 117,835 (71,019) 46,816 97,433 (96,588) 845
Intangibles amortization -- 9,553 9,553 -- 6,147 6,147
Interest and other expense, net 13,453 13,453 23,901 23,901
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes 104,382 (80,572) 23,810 73,532 (102,735) (29,203)
Provision for (benefit from) income taxes 10,438 (8,057) 2,381 7,349 (30,075) (22,726)
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) $ 93,944 $ (72,515) $ 21,429 $ 66,183 $ (72,660) $ (6,477)
=========== =========== =========== =========== =========== ===========
Earnings (loss) per share:
Basic $ 0.18 $ 0.04 $ 0.13 $ (0.01)
=========== =========== =========== ===========
Diluted $ 0.17 $ 0.04 $ 0.13 $ (0.01)
=========== =========== =========== ===========
Shares used in computing per share amounts:
Basic 527,321 527,321 517,810 517,810
=========== =========== =========== ===========
Diluted 561,438 561,438 526,441 517,810
=========== =========== =========== ===========
(1) Proforma results exclude intangibles amortization, restructuring
charges and the Beckman Coulter legal settlement, as applicable.
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2 CHANGI SOUTH LANE TEL: +65.6299.8888
PRESS RELEASE
SINGAPORE 486123
SCHEDULE 2
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
NINE MONTHS ENDED DECEMBER 31, 2003 NINE MONTHS ENDED DECEMBER 31, 2002
--------------------------------------- ---------------------------------------
PROFORMA PROFORMA
PROFORMA(1) ADJUSTMENTS GAAP PROFORMA(1) ADJUSTMENTS GAAP
----------- ----------- ----------- ----------- ----------- -----------
Net sales $10,762,263 $10,762,263 $10,319,134 $10,319,134
Cost of sales 10,175,320 10,175,320 9,756,875 9,756,875
Restructuring and other charges -- 401,750 401,750 -- 266,244 266,244
----------- ----------- ----------- ----------- ----------- -----------
Gross profit 586,943 (401,750) 185,193 562,259 (266,244) 296,015
Selling, general and administrative expenses 346,952 346,952 340,112 340,112
Restructuring and other charges -- 56,629 56,629 -- 38,167 38,167
----------- ----------- ----------- ----------- ----------- -----------
Operating income (loss) 239,991 (458,379) (218,388) 222,147 (304,411) (82,264)
Intangibles amortization -- 26,943 26,943 -- 15,314 15,314
Interest and other expense, net 60,067 60,067 70,756 70,756
Loss on early extinguishment of debt -- 103,909 103,909 -- --
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes 179,924 (589,231) (409,307) 151,391 (319,725) (168,334)
Provision for (benefit from) income taxes 17,992 (58,923) (40,931) 15,139 (80,494) (65,355)
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) $ 161,932 $ (530,308) $ (368,376) $ 136,252 $ (239,231) $ (102,979)
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Earnings (loss) per share:
Basic $ 0.31 $ (0.70) $ 0.26 $ (0.20)
=========== =========== =========== ===========
Diluted $ 0.29 $ (0.70) $ 0.26 $ (0.20)
=========== =========== =========== ===========
Shares used in computing per share amounts:
Basic 523,983 523,983 516,508 516,508
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Diluted 556,054 523,983 525,278 516,508
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(1) Proforma results exclude intangibles amortization, costs associated
with the early extinguishment of debt, restructuring charges and the
Beckman Coulter legal settlement, as applicable.
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2 CHANGI SOUTH LANE TEL: +65.6299.8888
PRESS RELEASE
SINGAPORE 486123
SCHEDULE 3
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
AS OF AS OF
DECEMBER 31, 2003 MARCH 31, 2003
----------------- -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 830,213 $ 424,020
Accounts receivable, net 1,792,759 1,417,086
Inventories 1,204,398 1,141,559
Deferred income taxes 36,681 29,153
Other current assets 680,801 466,942
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Total current assets 4,544,852 3,478,760
Property, plant and equipment, net 1,641,723 1,965,729
Deferred income taxes 470,723 415,041
Goodwill and other intangibles, net 2,352,896 2,192,910
Other assets 500,288 341,664
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Total assets $ 9,510,482 $ 8,394,104
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank borrowings and current portion of long-term debt $ 70,707 $ 52,484
Current portion of capital lease obligations 8,903 7,622
Accounts payable 2,395,340 1,601,923
Other current liabilities 1,025,049 918,990
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Total current liabilities 3,499,999 2,581,019
Long-term debt, net of current portion:
Capital lease obligations 17,184 7,909
8 3/4% Senior Subordinated Notes due 2007 -- 150,000
Zero Coupon Convertible Junior Subordinated Notes due 2008 200,000 200,000
9 7/8% Senior Subordinated Notes due 2010, net of discount 7,337 497,172
9 3/4% Euro Senior Subordinated Notes due 2010 186,637 160,192
1% Convertible Senior Subordinated Notes due 2010 500,000 --
6 1/2% Senior Subordinated Notes due 2013 400,000 --
Other 108,780 34,580
Other liabilities 217,770 221,212
Total shareholders' equity 4,372,775 4,542,020
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Total liabilities and shareholders' equity $ 9,510,482 $ 8,394,104
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