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Flextronics International (FLEX)
Q2 2013 Earnings Call
October 18, 2012 5:00 pm ET
Kevin Kessel - Vice President of Investor Relations
Paul Read - Chief Financial Officer
Michael M. McNamara - Chief Executive Officer and Director
Warren Ligan - Senior Vice President of Investor Relations
Craig Hettenbach - Goldman Sachs Group Inc., Research Division
Sherri Scribner - Deutsche Bank AG, Research Division
Shawn M. Harrison - Longbow Research LLC
Amit Daryanani - RBC Capital Markets, LLC, Research Division
Osten Bernardez - Cross Research LLC
Chelsea Shi - UBS Investment Bank, Research Division
Brian G. Alexander - Raymond James & Associates, Inc., Research Division
Wamsi Mohan - BofA Merrill Lynch, Research Division
Sean K.F. Hannan - Needham & Company, LLC, Research Division
Jim Suva - Citigroup Inc, Research Division
Previous Statements by FLEX
» Flextronics International's CEO Discusses F1Q13 Results - Earnings Call Transcript
» Flextronics' CEO Hosts 2012 Investor and Analyst Meeting Conference (Transcript)
» Flextronics International Management Presents at 2012 Bank of America Merrill Lynch Technology Conference (Transcript)
Thank you, Sarah, and thanks for joining Flextronics' conference call to discuss the results of our fiscal 2013 second quarter ended September 28, 2012. We have published slides for today's discussion that can be found on the Investor Section of our website. With me today on our call is our Chief Financial Officer, Paul Read, who will lead us off with the review of our quarterly results, followed by Chief Executive Officer, Mike McNamara, who will conclude with the discussion of the current business environment and our guidance for the December quarter.
Today's call is being webcast live and recorded. Our presentation includes certain non-GAAP financial measures in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to their related GAAP measures in accordance with SEC rules. You will find reconciliation charts on our website and in the Form 8-K submitted to the SEC.
During this call, we will be making forward-looking statements, which are predictions, projections and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release, in comments made during this conference call and in the Risk Factors section of our Form 10-K, Form 10-Q and other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statement.
I will now turn the call over to our Chief Financial Officer, Paul Read. Paul?
Thank you, Kevin. Good afternoon. Please turn to Slide 3. We generated $6.2 billion in revenue for our fiscal 2013 second quarter ending September 28, 2012, which was above the midpoint of our guidance range of $596.3 billion. Revenue declined $1.8 billion or 23% year-over-year, driven almost entirely by the transformation of our business model, reflecting a mix of that is significantly less High Velocity Solutions business, largely as a result of our ODM personal computing business in FY '12, which had contributed $743 million of revenue in our year-ago quarter.
Initially, in early FY '13, we took actions to wind down our assembly business with our largest mobile handset customer, furthering our portfolio transformation. Our second quarter adjusted operating income was $183 million, growing 4% year-over-year, and our GAAP operating income was $175 million, which improved 8% year-over-year.
Adjusted net income for the second quarter was $176 million and our GAAP net income for the second quarter was $160 million. Our second quarter results included gains of approximately $22 million net of tax or $0.03 a share benefit from a fair value adjustment related to warrants received to purchase common stock of Workday.
Our adjusted earnings per diluted share for the second quarter of $0.26 includes $0.03 gain -- includes a $0.03 gain and is up 18% year-over-year. Our GAAP EPS for the second quarter was $0.24, which is up 33% year-over-year.
Our diluted weighted average shares outstanding or WASO for the quarter was 678 million. This is a reduction of 7% or 53 million shares compared with the 731 million shares reported 1 year ago, reflecting the results of our share buyback programs. In September, we announced that our Board of Directors issued a new authorization permitting the repurchase of up to the current maximum limit of 10% of our outstanding shares.
Please turn to Slide 4. Our Integrated Network Solutions or INS business group totaled 44% of our sales during the quarter, declining from 46% last quarter. Revenue was $2.7 billion in the quarter, reflecting a slight decline of 2% sequentially and declining 9% year-over-year. This quarterly revenue performance is slightly below our expectations of stable revenue, as the weak demand trend we had identified for the June quarter continued this quarter for most of our larger telecom customers.
Breaking down our performance within INS on a sequential basis, we saw our telecom segment decline 11%, with broad-based weakness across most of our telecom customers. Weakness existed in both wireless and wireline infrastructure, but our wireless business was the weaker of the 2. Only partially offsetting this weakness was mid-single-digit growth from our data networking and high single-digit growth from our service storage customers. Our growth in data networking and server storage was due to products supporting video demand as well as data center and cloud deployments.
Year-over-year, we saw weakness across all our INS business segments, mostly due to a more challenging macroenvironment.