SINGAPORE, Oct. 25 /PRNewswire/ -- Flextronics (Nasdaq: FLEX - news), a global provider of operational services focused on delivering design, engineering, manufacturing and logistic solutions to branded technology companies, today announced results for its second quarter ended September 30, 2001.
($ in millions, Second Quarter Ended Six Months Ended except EPS September 30, September 30, data) (A) 2001 2000 2001 2000 Net sales $3,244.9 $3,079.0 $6,355.5 $5,756.0 Cash operating income $103.3 $141.7 $226.2 $253.3 Cash net income $73.0 $104.8 $163.6 $184.3 Diluted cash EPS $0.15 $0.22 $0.32 $0.39
Note A. The above earnings data is presented before amortization and one-time charges.
Net sales for the quarter ended September 30, 2001, reached a record $3.24 billion, up 5% from $3.08 billion a year ago. This also represents an increase of $134 million or 4% over the prior quarter. Before amortization and one-time charges, cash operating income was $103 million, cash net income was $73 million and diluted cash earnings per share was 15 cents.
"The Company has achieved its growth in this difficult market environment through the continuous addition of new customers as well as the addition of new programs with existing customers," stated Michael E. Marks, Chairman and Chief Executive Officer of Flextronics. "I am pleased with the positive results of our continued tight focus on operating metrics," continued Marks. Inventory has declined by $367 million since the beginning of the fiscal year while inventory turns reached 8.2 turns in the quarter ending September 30, 2001. Quarter over quarter, inventory decreased by $105 million while receivables remained flat and revenues increased. Flextronics' balance sheet also remained strong through this period with total debt to total capitalization of 26%.
"While we believe the pipeline of new opportunities remains robust, we continue to plan our operations as though no new business will come our way," said Mr. Marks. As a result, the Company recorded a one-time charge of $399 million to complete integration activities with recent acquisitions as well as to reduce excess capacity in response to the current economic downturn. The Company is eliminating 4 million square feet of manufacturing space, or 20% of the prior quarter's total and reducing headcount by 10,000, or 15% of the global workforce at the end of the prior quarter. As before, the reductions were primarily in high cost locations that Flextronics does not expect to use again as its customers are accelerating their transition of manufacturing requirements to lower cost locations, where Flextronics continues to expand.
Mr. Marks concluded: "We believe all these restructuring charges are behind us. The current plan will allow us to remain profitable and competitive in a very tough market while positioning us for improvement as opportunities arise. We have reached a stage in our Company where we believe we have the correct foot print and service offerings and we intend to emerge from this difficult environment in the strongest possible shape."
A conference call hosted by Flextronics' management will be held today at 2:15 p.m. PDT to further discuss the financial results of the Company and its future outlook. This call will be broadcast via the Internet and may be accessed by logging on to the Company's Web site at www.flextronics.com. Additional information in the form of a slide presentation and Chairman's Letter that summarizes and discusses the quarterly results may also be found on the site.
Minimum requirements to listen to the broadcast are RealPlayer software (free download at http://www.real.com/products/player/index.html) and at least a 14.4 Kbps bandwidth connection to the Internet.
This news release, the Chairman's Letter to the Shareholders and the earnings slide presentation contain forward-looking statements within the meaning of federal securities laws and is subject to the safe harbor under those laws. These forward-looking statements include statements related to expected new business opportunities, transition of manufacturing to lower cost locations, completion of restructuring charges and the effect of our restructuring, anticipated operating results, and our profitability and competitiveness. 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 integrating acquired companies, economic trends and fluctuations in demand for customers' products and changes in customers' product sources, competition in our industry, the difficulties of managing during uncertain economic conditions and the other risks described under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Certain Factors Affecting Future Operating Results" in the most recent Annual Report on Form 10-K and quarterly report on Form 10-Q, filed with the SEC. The forward-looking statements in this news release and Chairman's Letter to the Shareholders are based on current expectations, and Flextronics assumes no obligation to update these forward-looking statements.
Schedule 1 FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH INCOME BEFORE AMORTIZATION AND ONE-TIME CHARGES (In thousands, except per share amounts) (Unaudited) Three months ended Six months ended September 30, September 30, 2001 2000 2001 2000 Net sales $3,244,918 $3,078,998 $6,355,516 $5,755,972 Cost of sales 3,036,169 2,829,406 5,914,972 5,299,814 Gross profit before one-time charges 208,749 249,592 440,544 456,158 Selling, general and administrative expenses 105,488 107,931 214,304 202,849 Cash operating income before amortization and one-time charges 103,261 141,661 226,240 253,309 Interest expense and other, net 22,184 22,359 44,550 40,591 Cash income before income taxes, amortization and one-time charges 81,077 119,302 181,690 212,718 Provision for income taxes 8,100 14,475 18,129 28,410 Cash net income before amortization and one-time charges $72,977 $104,827 $163,561 $184,308 Diluted cash earnings per share $0.15 $0.22 $0.32 $0.39 Weighted average ordinary shares and equivalents 501,296 480,801 503,798 468,526 Schedule 1a FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES SUPPLEMENTAL DATA (In thousands, except per share amounts) (Unaudited) Three months ended Six months ended September 30, September 30, 2001 2000 2001 2000 Cash net income before amortization and one-time charges $72,977 $104,827 $163,561 $184,308 Goodwill and intangibles amortization, net of tax 3,802 12,505 6,058 21,875 Merger related costs and other one-time charges, net of tax (A) 398,980 42,395 398,980 483,068 Net income (loss) after amortization and one-time charges $(329,805) $49,927 $(241,477) $(320,635) Earnings per share: Basic $(0.69) $0.11 $(0.50) $(0.75) Diluted $(0.69) $0.10 $(0.50) $(0.75) Shares used in computing per share amounts: Basic 481,381 436,376 480,208 429,476 Diluted 481,381 480,801 480,208 429,476 (A) The Company recorded one-time after-tax charges of $399.0 million during the quarter ended September 30, 2001, which were primarily related to facility closures and integration costs of several of its facilities. Approximately 15% of the Company's headcount and 20% of its square footage were eliminated by these actions. Additionally, the Company recorded one-time after-tax charges of $483.1 million in the six month period ended September 30, 2000. Of this amount, $440.7 million was recorded in the first quarter and was comprised of (i) $286.5 million related to the issuance of an equity instrument to Motorola (which was repurchased in the quarter ended June 30, 2001) and (ii) $176.6 million related to the Dii Group and Palo Alto Products International mergers which were completed in April 2000, offset by (iii) a gain of $22.4 million on the sale of marketable equity securities. One-time after-tax charges of $42.4 million were recorded in the second quarter for the Chatham Technologies and Lightning Metal Specialties mergers, which were completed in August 2000. Schedule 2 FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) (Audited) September 30, March 31, 2001 2001 ASSETS CURRENT ASSETS: Cash and cash equivalents $400,286 $631,588 Accounts receivable, net 1,706,196 1,651,252 Inventories, net 1,420,254 1,787,055 Other current assets 765,951 386,152 Total current assets 4,292,687 4,456,047 Property, plant and equipment, net 2,035,303 1,828,441 Other non-current assets 1,550,727 1,287,167 Total assets $7,878,717 $7,571,655 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Bank borrowings & current portion of long-term debt $421,134 $298,052 Current portion of capital lease obligations 20,123 27,602 Accounts payable 1,727,871 1,480,468 Other current liabilities 933,034 735,184 Total current liabilities 3,102,162 2,541,306 Long-term debt and capital lease obligations, net of current portion 903,612 917,313 Other liabilities 83,673 82,675 Shareholders' equity 3,789,270 4,030,361 Total liabilities and shareholders' equity $7,878,717 $7,571,655