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Flextronics International Ltd. (FLEX)

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Flextronics International Ltd. (FLEX)

F4Q 2011 Earnings Conference Call

April 27, 2011 17:00 PM ET

Executives

Kevin Kessel – Vice President, Investor Relations

Mike McNamara – Chief Executive Officer

Paul Read – Chief Financial Officer

Analysts

Sherri Scribner – Deutsche Bank

Matt Sheerin – Stifel Nicolaus

Steve O'Brien – JPMC

Jim Suva – Citi

Lou Miscioscia – Collins Stewart

Amitabh Passi – UBS

Brian Alexander

Craig Hettenbach – Goldman Sachs

Wamsi Mohan – Bank of America Merrill Lynch

Shawn Harrison – Longbow Research

Presentation

Operator

Good afternoon, and welcome to the Flextronics International Fourth Quarter Fiscal Year 2011 Earnings Conference Call. Today’s call is being recorded, and all lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Kevin Kessel, Flextronics’ Vice President of Investor Relations. Sir, you may begin.

Kevin Kessel – Vice President, Investor Relations

Thank you, Victor. And welcome to Flextronics’ conference call to discuss the results of our fiscal 2011 fourth quarter ended March 31, 2011. Joining me on the call today is our Chief Executive Officer, Mike McNamara, and our Chief Financial Officer, Paul Read. The presentation that corresponds to our comments today is posted on the Investors section of our website under Conference Calls and Presentations and it can also be accessed directly from our home page.

Our agenda for today’s call will begin with Paul Read reviewing the financial highlights from the fourth quarter of fiscal 2011 and from the yearend for fiscal 2011 and Mike McNamara will follow-up with some insights on our current business trends, how our business performed during fiscal 2011 and he will conclude with our guidance for the first quarter of fiscal 2012 ending in June. Following that, we will take your questions.

Please turn to Slide two, for review of the risks and non-GAAP disclosures. This presentation contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially from those set forth in this presentation. Such information is subject to change, and we undertake no duty or obligation to revise, update or inform you of any changes to forward-looking statements. For a discussion of the risks and uncertainties, you should review our filings with the Securities and Exchange Commission, specifically our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments thereto.

This presentation references both GAAP and non-GAAP financial measures. Please refer to the schedules to the earnings press release and the GAAP versus non-GAAP reconciliation in the “Investors” section of our website, which contain the reconciliation of the adjusted financial measures to the most directly comparable GAAP measures.

I will now turn the call over to our Chief Financial Officer, Paul Read. Paul?

Paul Read – Chief Financial Officer

Thank you, Kevin. And welcome, everyone to our call. Please turn to Slide three. We finished the year in our strongest financial and competitive position ever driven on the success of our diversified business model, which delivered $4.6 billion of organic growth and to the 19% year-over-year increase.

Our fourth quarter sales, however, proved more challenging on revenues in our guidance anticipated. Revenue of $6.9 billion was $241 million, or 3% below the low end of our guidance range of $7.1 billion, 7.4 billion. While our revenue was below our expectations for the quarter, we don’t believe the underlying reasons for this weakness require us to revise our overall revenue growth expectations for the next fiscal year. Mike will discuss this in detail, when he will review the market segments and guidance.

Our fiscal 2011 fourth quarter adjusted operating income was $189 million, up $19 million, or 11% year-over-year. GAAP operating income was $176 million for our fiscal 2011 fourth quarter up $41 million or 30% versus the prior year level of $135 million. Adjusted net income for the fourth quarter was $162 million increasing 25% from a year ago levels. Our GAAP net income for the fourth quarter was $135 million expanding 125% from last year’s result.

Reported adjusted earnings per diluted share for the March quarter was $0.21 which is within our EPS guidance of $0.21 to $0.23 and grew 31% from the $0.16 we earned last year. Our GAAP EPS for the fourth quarter was $0.17, more than twice the $0.07 we earned in the year ago period. Our weighted average diluted shares outstanding ended the quarter at 776 million slightly below the 777 million of last quarter and 67 million below the 827 million of a year ago.

Additionally, our weighted average diluted shares outstanding were reduced by 31 million shares or 4% to 790 million for our fiscal 2011 from 821 million in fiscal 2010. These reductions were driven by our share buyback program. During the quarter we completed our second $200 million share buyback program as we repurchased 4.5 million shares for $32 million at an average cost of share of $7.25.

Overall, since our recent buybacks began in June of last year we repurchased $400 million of our outstanding shares or 65.4 million shares with an average cost of $6.12. In addition, we just announced today that our Board of Directors authorized a new $200 million stock buyback program.

Turning to the full fiscal year, I would like to focus on something you forget or overlook when it comes to our growth. Let me how far we’ve gone in just the past year and what we believe fiscal 2011 signals about our future. Our 6.9 billion in sales rose more than 15% from March quarter levels of a year ago. Our fiscal 2011 sales of $20.7 billion grew $4.6 billion on 19% above our fiscal 2010 of $24.1 billion.

Our $4.6 billion in organic growth was generated by broad based year-over-year growth across all our market segments with all recording year-over-year growth. Every segment grew double-digits industrial, medical, auto, and other up 31%, consumer digital up 27%, mobile up 23%, infrastructure up 11%, and computing up 10%. Our components businesses also grew nearly 50% year-on-year in aggregate. Our growth continues to be organically driven by newer sales in programs with both new and existing customers, our market share gains, which we anticipate continuing into fiscal 2012.

Read the rest of this transcript for free on seekingalpha.com