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8-K - FORM 8-K - FLEX LTD. | c91446e8vk.htm |
Exhibit 99.1
One Marina Boulevard, #28-00 Singapore 018989 |
65.6890.7188 Main www.flextronics.com |
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P R E S S R E L E A S E |
Warren Ligan
Senior Vice President, Investor Relations
+1.408.576.7172
investor_relations@flextronics.com
Senior Vice President, Investor Relations
+1.408.576.7172
investor_relations@flextronics.com
Renee Brotherton
Vice President, Corporate Communications
+1.408.576.7189
renee.brotherton@flextronics.com
Vice President, Corporate Communications
+1.408.576.7189
renee.brotherton@flextronics.com
FLEXTRONICS ANNOUNCES SECOND QUARTER RESULTS
Adjusted Operating Margin Expands 100 bps;
$483 Million in Net Debt Reduction;
Record Cash Balance $2 Billion
Adjusted Operating Margin Expands 100 bps;
$483 Million in Net Debt Reduction;
Record Cash Balance $2 Billion
Singapore, October 26, 2009 Flextronics (NASDAQ: FLEX) today announced results for its second
quarter ended October 2, 2009 as follows:
Three Month Periods Ended | ||||||||
October 2, | July 3, | |||||||
(US$ in millions, except EPS) | 2009 | 2009 | ||||||
Net sales |
$ | 5,832 | $ | 5,783 | ||||
GAAP operating income |
$ | 123 | $ | 10 | ||||
Adjusted operating income (1) |
$ | 149 | $ | 90 | ||||
GAAP net income (loss) |
$ | 20 | $ | (154 | ) | |||
Adjusted net income (1) |
$ | 104 | $ | 63 | ||||
GAAP EPS |
$ | 0.02 | $ | (0.19 | ) | |||
Adjusted EPS (1) |
$ | 0.13 | $ | 0.08 |
(1) | A reconciliation of non-GAAP financial measures to GAAP financial measures is presented in Schedule II attached to this press release. |
Second Quarter Results
Net sales for the second quarter ended October 2, 2009 were $5.8 billion, an increase of 1%,
compared to net sales for the first quarter ended July 3, 2009. Adjusted operating income for
the second quarter was $149 million, an increase of 66%, compared to the
first quarter adjusted operating income of $90 million. Adjusted operating
margin for the second quarter was 2.6% compared to 1.6% for the first
quarter. Adjusted net income for the second quarter was
$104 million and adjusted EPS was $0.13 compared to $63 million and $0.08, respectively, for the
prior quarter.
Cash and cash equivalents totaled $2.0 billion at October 2, 2009, an increase of $289 million
from the prior quarter end. During the second quarter, Flextronics
generated $312 million of operating cash flow and $270 million of free cash flow (defined as net
cash provided by operating activities, less purchases of property & equipment, net of
dispositions). Net debt, which is total debt less total cash, was further reduced in the current
quarter by $483 million to $587 million. Net debt has decreased by
approximately $1.1 billion from one year ago. Adjusted ROIC
improved to 22.2% for the quarter.
One Marina Boulevard, #28-00 Singapore 018989 |
65.6890.7188 Main www.flextronics.com |
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P R E S S R E L E A S E |
During the second quarter, Flextronics posted solid financial progress across all aspects of our business,
reflecting our efforts to re-size our business to adapt to current market conditions. We are very pleased with the
healthy expansion of our adjusted gross margin, which rose by 90 basis points sequentially, said Paul Read, chief
financial officer of Flextronics. In addition, we achieved a cash conversion cycle of 15 days, generated free cash
flow of $270 million and our significantly reduced net debt position of $587 million is comparable with the period
prior to our Solectron acquisition.
In connection with its previously announced restructuring plans, during the second quarter, Flextronics recognized
$13 million of pretax restructuring charges comprised of $9 million of cash charges primarily related to employee
severance costs and $4 million of non-cash asset impairment charges. The Company remains confident that it is on
track to realize the expected annualized savings between $230 million and $260 million upon the completion of its
restructuring activities, which will be completed by the end of Fiscal 2010.
During the second quarter the Company received proceeds of $255 million from the sale of a non-core investment
and note receivable and recorded non-cash charges to impair certain other non-core investments and notes receivable
amounting to $92 million. Also during the quarter, the Company
recognized approximately $60 million of non-cash tax benefits as
a result of settlements in various tax jurisdictions.
The improvement of our financial performance this quarter was a real positive and we are seeing signs of
strengthening in the economy and a general improvement in business
conditions, said Mike McNamara, chief executive officer,
Flextronics.
Guidance
For the third
quarter ending December 31, 2009, revenue is expected to be in the range of $6.0 billion to $6.4
billion and adjusted EPS is expected to be in the range of $0.14 to $0.16 per share.
GAAP earnings per share are expected to be lower than the guidance provided herein by
approximately $0.07 per diluted share for estimated restructuring activities, quarterly
intangible amortization, stock-based compensation expense and non-cash interest expense.
2004 Award Plan for New Employees
Flextronics granted restricted stock units representing 20,000 shares on August 31, 2009 from the
2004 Award Plan for New Employees. The restricted stock units will generally vest over a three to
five year period.
Conference Calls and Web Casts
A conference call hosted by Flextronicss management will be held today at 5:00 p.m. EST / 2:00
p.m. PST to discuss the Companys financial results for the
second quarter ended October 2, 2009.
The conference call will be broadcast via the Internet and may be accessed by logging on to the
Companys website at www.flextronics.com. Additional information in the form of a slide
presentation may also be found on the Companys site. A replay of the broadcast will remain
available on the Companys website afterwards.
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.
One Marina Boulevard, #28-00 Singapore 018989 |
65.6890.7188 Main www.flextronics.com |
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P R E S S R E L E A S E |
About Flextronics
Headquartered in Singapore (Singapore Reg. No. 199002645H), Flextronics is a leading Electronics
Manufacturing Services (EMS) provider focused on delivering complete design, engineering and
manufacturing services to automotive, computing, consumer, industrial, infrastructure, medical
and mobile OEMs. Flextronics helps customers design, build, ship, and service electronics
products through a network of facilities in 30 countries on four continents. This global presence
provides design and engineering solutions that are combined with core electronics manufacturing
and logistics services, and vertically integrated with components technologies, to optimize
customer operations by lowering costs and reducing time to market. For more information, please
visit www.flextronics.com.
# # #
This press release contains forward-looking statements within the meaning of U.S. securities
laws, including statements related to future expected revenues and earnings per share. 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
that future revenues and earnings may not be achieved as expected; the risks to our particular
electronics and technology sector of economic instability and a slowdown in consumer spending,
particularly given the current economic conditions; the effects of customer or supplier
bankruptcies or insolvency; the effects that current credit and market conditions could have on
the liquidity and financial condition of customers or suppliers, including any impact on their
ability to meet contractual obligations to us on terms and conditions previously negotiated; the
effects that the current macroeconomic environment could have on our liquidity and ability to
access credit markets; our dependence on industries that continually produce technologically
advanced products with short life cycles; our ability to respond to changes in economic trends,
to fluctuations in demand for customers products and to the short-term nature of customers
commitments; competition in our industry, particularly from ODM suppliers in Asia; our dependence
on a small number of customers for the majority of our sales and our reliance on strategic
relationships with major customers; the challenges of effectively managing our operations,
including our ability to manage manufacturing processes, control costs and manage changes in our
operations; the challenges of integrating acquired companies and assets; not obtaining
anticipated new customer programs, or that if we do obtain them, that they may not contribute to
our revenue or profitability as expected or at all; our ability to utilize available
manufacturing capacity; the risk of future restructuring charges that could be material to our
financial condition and results of operations; our ability to design and quickly introduce
world-class components products that offer significant price and/or performance advantages over
competitive products; the impact on our margins and profitability resulting from substantial
investments and start-up and integration costs in our components, design and ODM businesses;
production difficulties, especially with new products; changes in government regulations and tax
laws, including any effects related to the expiration of tax holidays; our exposure to potential
litigation relating to intellectual property rights, product warranty and product liability; our
dependence on the continued trend of outsourcing by OEMs; supply shortages of required electronic
components; the challenges of international operations, including fluctuations in exchange rates
beyond hedged boundaries leading to unexpected charges; our dependence on our key personnel; and
our ability to comply with environmental laws. Additional information concerning these and other
risks is described under Risk Factors and Managements Discussion and Analysis of Financial
Condition and Results of Operations in our reports on Form 10-K, 10-Q and 8-K that we file with
the U.S. Securities and Exchange Commission. The forward-looking statements in this press
release are based on current expectations and Flextronics assumes no obligation to update these
forward-looking statements.
One Marina Boulevard, #28-00 Singapore 018989 |
65.6890.7188 Main www.flextronics.com |
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P R E S S R E L E A S E |
SCHEDULE I
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Month Periods Ended | ||||||||
October 2, | July 3, | |||||||
2009 | 2009 | |||||||
GAAP: |
||||||||
Net sales |
$ | 5,831,761 | $ | 5,782,679 | ||||
Cost of sales |
5,519,778 | 5,506,575 | ||||||
Restructuring charges |
12,403 | 52,109 | ||||||
Gross profit |
299,580 | 223,995 | ||||||
Selling, general and administrative expenses |
176,246 | 201,692 | ||||||
Restructuring charges |
187 | 12,730 | ||||||
Operating income |
123,147 | 9,573 | ||||||
Intangible amortization |
22,710 | 23,334 | ||||||
Other expense, net |
91,999 | 107,399 | ||||||
Interest and other expense, net |
38,091 | 36,886 | ||||||
Loss before income taxes |
(29,653 | ) | (158,046 | ) | ||||
Provision for (benefit from) income taxes |
(49,312 | ) | (4,003 | ) | ||||
Net income (loss) |
$ | 19,659 | $ | (154,043 | ) | |||
EPS: |
||||||||
GAAP |
$ | 0.02 | $ | (0.19 | ) | |||
Non-GAAP |
$ | 0.13 | $ | 0.08 | ||||
Shares used in computing GAAP per share amounts |
817,260 | 810,174 | ||||||
Diluted Shares used in computing Non-GAAP per share amounts |
817,260 | 814,922 | ||||||
See Schedule II for the reconciliation of GAAP to non-GAAP financial measures.
One Marina Boulevard, #28-00 Singapore 018989 |
65.6890.7188 Main www.flextronics.com |
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P R E S S R E L E A S E |
SCHEDULE II
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)
(In thousands, except per share amounts)
(unaudited)
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)
(In thousands, except per share amounts)
(unaudited)
Three Month Periods Ended | ||||||||||||||||||||
October 2, | July 3, | |||||||||||||||||||
2009 | % of Sales | 2009 | % of Sales | |||||||||||||||||
Net Sales |
$ | 5,831,761 | $ | 5,782,679 | ||||||||||||||||
GAAP gross profit |
$ | 299,580 | 5.1 | % | $ | 223,995 | 3.9 | % | ||||||||||||
Stock-based compensation expense |
2,440 | 2,733 | ||||||||||||||||||
Distressed customer charges |
(2 | ) | | (18,142 | ) | |||||||||||||||
Restructuring and other charges |
(3 | ) | 12,403 | 52,109 | ||||||||||||||||
Non-GAAP gross profit |
$ | 314,423 | 5.4 | % | $ | 260,695 | 4.5 | % | ||||||||||||
GAAP SG&A expenses |
$ | 176,246 | 3.0 | % | $ | 201,692 | 3.5 | % | ||||||||||||
Stock-based compensation expense |
10,962 | 13,052 | ||||||||||||||||||
Distressed customer charges |
(2 | ) | | 18,142 | ||||||||||||||||
Non-GAAP SG&A expenses |
$ | 165,284 | 2.8 | % | $ | 170,498 | 2.9 | % | ||||||||||||
GAAP operating income |
$ | 123,147 | 2.1 | % | $ | 9,573 | 0.2 | % | ||||||||||||
Stock-based compensation expense |
13,402 | 15,785 | ||||||||||||||||||
Restructuring and other charges |
(3 | ) | 12,590 | 64,839 | ||||||||||||||||
Non-GAAP operating income |
$ | 149,139 | 2.6 | % | $ | 90,197 | 1.6 | % | ||||||||||||
GAAP net income (loss) |
$ | 19,659 | 0.3 | % | $ | (154,043 | ) | -2.7 | % | |||||||||||
Stock-based compensation expense |
13,402 | 15,785 | ||||||||||||||||||
Restructuring and other charges |
(3 | ) | 12,590 | 64,798 | ||||||||||||||||
Investment and notes impairment |
(4 | ) | 91,999 | 107,440 | ||||||||||||||||
Non-cash convertible debt interest expense |
(5 | ) | 5,488 | 8,049 | ||||||||||||||||
Intangible amortization |
22,710 | 23,334 | ||||||||||||||||||
Adjustment for taxes |
(61,859 | ) | (2,253 | ) | ||||||||||||||||
Non-GAAP net income |
$ | 103,989 | 1.8 | % | $ | 63,110 | 1.1 | % | ||||||||||||
GAAP provision for income taxes |
$ | (49,312 | ) | -0.8 | % | $ | (4,003 | ) | -0.1 | % | ||||||||||
Restructuring and other charges |
351 | 410 | ||||||||||||||||||
Settlement of tax contingencies |
(6 | ) | 59,669 | | ||||||||||||||||
Intangible amortization |
1,839 | 1,843 | ||||||||||||||||||
Non-GAAP provision for income taxes |
$ | 12,547 | 0.2 | % | $ | (1,750 | ) | 0.0 | % | |||||||||||
EPS: |
||||||||||||||||||||
GAAP |
$ | 0.02 | $ | (0.19 | ) | |||||||||||||||
Non-GAAP |
$ | 0.13 | $ | 0.08 | ||||||||||||||||
GAAP net cash flows provided by operating activities |
$ | 311,538 | $ | 106,866 | ||||||||||||||||
Purchase of property & equipment, net of dispositions |
(41,528 | ) | (38,635 | ) | ||||||||||||||||
Non-GAAP free cash flow |
$ | 270,010 | $ | 68,231 | ||||||||||||||||
See the accompanying notes on Schedule IV attached to this press release.
One Marina Boulevard, #28-00 Singapore 018989 |
65.6890.7188 Main www.flextronics.com |
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P R E S S R E L E A S E |
SCHEDULE III
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
UNAUDITED GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
UNAUDITED GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
October 2, | March 31, | |||||||
2009 | 2009 (5) | |||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 1,966,494 | $ | 1,821,886 | ||||
Accounts receivable, net |
2,323,329 | 2,316,939 | ||||||
Inventories |
2,692,077 | 2,996,785 | ||||||
Other current assets |
731,838 | 799,396 | ||||||
7,713,738 | 7,935,006 | |||||||
Property and equipment, net |
2,180,670 | 2,333,781 | ||||||
Goodwill and other intangibles, net |
277,435 | 291,491 | ||||||
Other assets |
381,747 | 756,662 | ||||||
$ | 10,553,590 | $ | 11,316,940 | |||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current Liabilities: |
||||||||
Bank borrowings, current portion of long-term debt and capital
lease obligations |
$ | 27,116 | $ | 19,358 | ||||
Zero Coupon Convertible Junior Subordinated Notes due 2009 |
| 189,045 | ||||||
1%
Convertible Subordinated Notes due 2010 |
226,156 | | ||||||
Accounts payable |
3,993,899 | 4,049,534 | ||||||
Other current liabilities |
1,910,092 | 2,150,834 | ||||||
Total current liabilities |
6,157,263 | 6,408,771 | ||||||
Long-term debt, net of current portion: |
||||||||
Acquisition Term Loan due 2012 and 2014 |
1,683,439 | 1,692,024 | ||||||
6 1/2 % Senior Subordinated Notes due 2013 |
299,806 | 399,622 | ||||||
6 1/4 % Senior Subordinated Notes due 2014 |
302,172 | 402,090 | ||||||
1 % Convertible Subordinated Notes due 2010 |
| 218,391 | ||||||
Other long-term debt and capital lease obligations |
14,181 | 21,553 | ||||||
Other liabilities |
295,738 | 313,321 | ||||||
Total shareholders equity |
1,800,991 | 1,861,168 | ||||||
$ | 10,553,590 | $ | 11,316,940 | |||||
See the accompanying notes on schedule IV attached to this press release.
One Marina Boulevard, #28-00 Singapore 018989 |
65.6890.7188 Main www.flextronics.com |
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P R E S S R E L E A S E |
SCHEDULE IV
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO SCHEDULES I, II, & III
NOTES TO SCHEDULES I, II, & III
(1) | To supplement Flextronicss unaudited selected financial data presented on a basis consistent with Generally Accepted Accounting Principles (GAAP), the Company discloses certain non-GAAP financial measures that exclude certain charges, including non-GAAP gross profit, non-GAAP selling, general and administrative expenses, non-GAAP operating income, non-GAAP net income and non-GAAP net income per diluted share. These supplemental measures exclude, among other items, stock-based compensation expense, restructuring charges, intangible amortization, financially distressed customer charges, non-cash convertible debt interest expense and certain other items. These non-GAAP measures are not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Flextronicss results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Flextronicss results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of Company performance. | |
In calculating non-GAAP financial measures, we exclude certain items to facilitate a review of the comparability of the Companys operating performance on a period-to-period basis because such items are not, in our view, related to the Companys ongoing operational performance. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with forecasts and strategic plans, for calculating return on investment, and for benchmarking performance externally against competitors. In addition, managements incentive compensation is determined using certain non-GAAP measures. Also, when evaluating potential acquisitions, we exclude certain of the items described below from consideration of the targets performance and valuation. Since we find these measures to be useful, we believe that investors benefit from seeing results through the eyes of management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with the Companys GAAP financials, provide useful information to investors by offering: |
| the ability to make more meaningful period-to-period comparisons of the Companys on-going operating results; |
| the ability to better identify trends in the Companys underlying business and perform related trend analyses; |
| a better understanding of how management plans and measures the Companys underlying business; and |
| an easier way to compare the Companys operating results against analyst financial models and operating results of competitors that supplement their GAAP results with non-GAAP financial measures. |
The following are explanations of each of the adjustments that we incorporate into non-GAAP
measures, as well as the reasons for excluding each of these individual items in the
reconciliations of these non-GAAP financial measures:
Stock-based compensation expense consists of non-cash charges for the estimated fair value of
stock options and unvested share bonus awards granted to employees and assumed in business
acquisitions. The Company believes that the exclusion of these charges provides for more
accurate comparisons of its operating results to peer companies due to the varying available
valuation methodologies, subjective assumptions and the variety of award types. In addition,
the Company believes it is useful to investors to understand the specific impact the
application of SFAS 123R has on its operating results.
Restructuring charges include severance, impairment, lease termination, exit costs and other
charges primarily related to the closures and consolidations of various manufacturing
facilities. These costs may vary in size based on the Companys acquisition and
restructuring activities, are not directly related to ongoing or core business results, and
do not reflect expected future operating expenses. These costs are excluded by the Companys
management in assessing current operating performance and forecasting its earnings trends,
and are therefore excluded by the Company from its non-GAAP measures.
Distressed customer charges are comprised of additional provisions for doubtful accounts
receivable, inventory and related obligations for customers that are experiencing
significant financial difficulties. These costs are excluded by the Companys management in
assessing its current operating performance and forecasting its earnings trends, and
accordingly, are excluded by the Company from its non-GAAP measures.
One Marina Boulevard, #28-00 Singapore 018989 |
65.6890.7188 Main www.flextronics.com |
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P R E S S R E L E A S E |
Intangible amortization consists of non-cash charges that can be impacted by the timing and
magnitude of acquisitions. The Company considers its operating results without these
charges when evaluating its ongoing performance and forecasting its earnings trends, and
therefore excludes such charges when presenting non-GAAP financial measures. The Company
believes that the assessment of its operations excluding these costs is relevant to its
assessment of internal operations and comparisons to the performance of its competitors.
Other charges or gains consists of various other types of items that are not directly related
to ongoing or core business results, such as impairment charges associated with non-core
investments and notes receivable and gains on the extinguishment of debt. We exclude these
items because they are not related to the Companys ongoing operations performance or do not
affect core operations. Excluding these amounts provide investors with a basis to compare
Company performance against the performance of other companies without this variability.
Non-cash convertible debt interest expense consists of interest expense recorded as a result
of the adoption of FSP APB14-1 Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion. The Company considers its operating results without these
charges when evaluating its ongoing performance and forecasting its earnings trends, and
therefore excludes such charges when presenting non-GAAP financial measures. The Company
believes that the assessment of its operations excluding theses costs is relevant to its
assessment of internal operations and comparisons to the performance of its competitors.
Adjustment for taxes relates to the tax effects of the various adjustments that we
incorporate into non-GAAP measures in order to provide a more meaningful measure on non-GAAP
net income.
(2) | During the three-month period ended July 3, 2009, the Company revised its initial fiscal 2009 prior quarters estimates between charges associated with the write-off of inventory and provisions for doubtful accounts receivable with no net operating income impact. |
(3) | During the three month periods ended October 2, 2009 and July 3, 2009, the Company recognized restructuring charges as a result of the difficult macroeconomic conditions. The global economic crisis and related decline in the Companys customers products across all of the industries it serves, has caused the Companys OEM customers to reduce their manufacturing and supply chain outsourcing negatively impacting the Companys capacity utilization levels. The Companys restructuring activities, which include employee severance, costs related to owned and leased facilities and equipment that are no longer in use and are to be disposed of, and other costs associated with the exit of certain contractual arrangements due to facility closures, are intended to improve its operational efficiencies by reducing excess workforce and capacity. In addition to the cost reductions, these activities will result in further shift of manufacturing capacity to locations with higher efficiencies and, in most instances, lower costs. |
(4) | During the three month periods ended October 2, 2009 and July 3, 2009, the Company impaired its carrying value in a certain non-core investment and notes receivable due to a reduction in estimated recoverability. |
(5) | On April 1, 2009, the Company adopted FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1), which was required to be applied retrospectively. The adoption of FSP APB 14-1 affected the accounting for the Companys 1% Convertible Subordinated Notes and Zero Coupon Convertible Junior Subordinated Notes by requiring the initial proceeds from their sale to be allocated between a liability component and an equity component in a manner that results in interest expense on the debt component at the Companys nonconvertible debt borrowing rate on the date of issuance. Upon adoption of FSP APB 14-1, the Company recorded the change in accounting principle from adopting FSP APB 14-1 as a cumulative effect adjustment to the opening balance of Accumulated deficit as of March 31, 2009 totaling approximately $225 million and a discount to the carrying value of the convertible debt notes of $27.5 million. The corresponding increase in the recorded value of Ordinary shares was approximately $252 million. The adoption of FSP APB 14-1 had no impact on the Companys consolidated cash flows. Below is a summary of the financial statement effects of implementing FSP APB 14-1 on the affected notes and interest expense for the periods presented. |
One Marina Boulevard, #28-00 Singapore 018989 |
65.6890.7188 Main www.flextronics.com |
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P R E S S R E L E A S E |
1% Convertible | Zero Coupon Convertible Junior | |||||||||||||||
Subordinated Notes | Subordinated Notes | |||||||||||||||
October 2, | March 31, | October 2, | March 31, | |||||||||||||
Balance Sheet: | 2009 | 2009 | 2009 | 2009 | ||||||||||||
(In thousands) | ||||||||||||||||
Principal amount of Notes |
$ | 239,993 | $ | 239,993 | $ | | $ | 195,000 | ||||||||
Unamortized discount |
(13,837 | ) | (21,602 | ) | | (5,955 | ) | |||||||||
Net carrying amount of Notes |
$ | 226,156 | $ | 218,391 | $ | | $ | 189,045 | ||||||||
Three-Month Periods Ended | Three-Month Periods Ended | |||||||||||||||
October 2, | July 3, | October 2, | July 3, | |||||||||||||
Income Statement: | 2009 | 2009 | 2009 | 2009 | ||||||||||||
(In thousands) | ||||||||||||||||
Amortization of discount net of
adjustments to deferred financing costs |
$ | 3,829 | $ | 3,732 | $ | 1,659 | $ | 4,317 | ||||||||
The adoption of FSP APB 14-1 had a negative $0.01 impact on basic and diluted GAAP earnings per share in both the three-month periods ended October 2, 2009 and July 3, 2009. | ||
(6) | During the three-month period ended October 2, 2009, the Company recognized non-cash tax benefits as a result of settlements in various tax jurisdictions. |
Free Cash Flow consists of GAAP net cash flows from operating activities less purchase of property
and equipment, net of dispositions. We believe free cash flow is an important liquidity metric
because it measures, during a given period, the amount of cash generated that is available to repay
debt obligations, make investments, fund acquisitions and for certain other activities. Since Free
Cash Flow includes investments in operating assets, we believe this non-GAAP liquidity measure is
useful in addition to the most directly comparable GAAP measure net cash flows provided by
operating activities.
Return on
Invested Capital (ROIC) is calculated by annualizing the Companys current quarter
after-tax non-GAAP operating income and dividing that by a two quarter average net invested capital
asset base. After-tax non-GAAP operating income excludes charges for financially distressed
customers, stock-based compensation expense, restructuring and other charges. Net invested capital
is defined as total assets less current liabilities and other long-term liabilities further
adjusted for non-operating assets and liabilities. Non-operating assets and liabilities are not
included in the net invested capital asset base because they do not
affect non-GAAP operating
income. Non-operating assets and liabilities include, but are not limited to, cash and cash
equivalents, short-term investments, notes receivable, restructuring liabilities, accrued interest,
short-term bank borrowings and current and non-current debt. We believe ROIC is a useful measure in
providing investors with information regarding our performance. ROIC is a widely accepted measure
of earnings efficiency in relation to total capital employed. We believe that increasing the
return on total capital employed, as measured by ROIC, is an effective method to sustain and
increase shareholder value. ROIC is not a measure of financial performance under generally
accepted accounting principles in the U.S., and may not be defined and calculated by other
companies in the same manner. ROIC should not be considered in isolation or as an alternative to
net income or loss as an indicator of performance. The following table reconciles ROIC as
calculated using after-tax non-GAAP operating income to the same performance measure calculated
using the nearest GAAP measure, which is GAAP operating income adjusted for taxes:
ROIC | Q2 FY 2010 | |||
GAAP ROIC |
18.0 | % | ||
Adjustments noted above |
4.2 | % | ||
Non-GAAP ROIC |
22.2 | % | ||
One Marina Boulevard, #28-00 Singapore 018989 |
65.6890.7188 Main www.flextronics.com |
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P R E S S R E L E A S E |
We define
our Cash Conversion Cycle (CCC) as the sum of non-GAAP inventory turns in days and days
sales outstanding in accounts receivable less non-GAAP days payable outstanding in accounts
payable. We calculate non-GAAP inventory turns as annualized non-GAAP cost of sales (before
adjustments for financially distressed customers, stock-based compensation expense, restructuring
and other charges) divided by average inventory for the quarter. We calculate our days sales
outstanding as annualized revenues divided by average accounts receivable for the quarter. We
calculate non-GAAP days payable outstanding as annualized non-GAAP cost of sales (before
adjustments for financially distressed customers, stock-based compensation expense, restructuring
and other charges) divided by average accounts payable.
We believe the Cash Conversion Cycle is a useful measure in providing investors with information
regarding our cash management performance and is a widely accepted measure of working capital
management efficiency. These are measures of financial performance under generally accepted
accounting principles in the U.S. when calculated using GAAP operating measures, but may not be
defined and calculated by other companies in the same manner. These should not be considered in
isolation or as an alternative to other GAAP metrics as an indicator of performance. For the
Quarter ended October 2, 2009, Cash Conversion Cycle of
15 days calculated using the non-GAAP
measures described above was the same as that calculated using cost of sales in accordance with
GAAP.