flextronics q4fy14 earnings release slides
DESCRIPTION
Flextronics Q3FY14 Earnings Release SlidesTRANSCRIPT
Results for Q4 FY2014 (Quarter Ended March 31, 2014)
Earnings Announcement: April 30, 2014
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This presentation contains forward-looking statements, which are based on current expectations and assumptions that are subject to risks and uncertainties and actual results could materially differ. Such information is subject to change and we undertake no obligation to update these forward-looking statements. For a discussion of the risks and uncertainties, see our most recent filings with the Securities and Exchange Commission, including our current, annual and quarterly reports. If this presentation references non-GAAP financial measures, these measures are located on the “Investor Relations” section of our website, www.flextronics.com along with the required reconciliation to the most comparable GAAP financial measures.
Risks and Non-GAAP Disclosures
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Q4 FY2014 Income Statement Highlights
Please refer to the Investor Relations section of our website which contain the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures
Prior Yr Prior Qtr Current Qtr March 31, December 31, March 31, ($ in millions, except per share amounts) 2013 2013 2014 Net sales $5,295 $7,183 $6,724
Adjusted operating income 106 187 182
Adjusted net income 86 164 146
Adjusted EPS $0.13 $0.26 $0.24
GAAP operating income (loss) (27) 174 137
Restructuring and other charges (125) - (90)
GAAP net income (loss) (49) 145 43
GAAP EPS ($0.08) $0.23 $0.07
Q4 FY2014 Results vs. Guidance:
Net sales of $6,724 exceeded guidance of $5,900 - $6,300
Adjusted Operating Income of $182 exceeded guidance of $140 - $170
Adjusted EPS of $0.24 exceeded guidance of $0.18 - $0.22
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611
665
FY 2013 FY 2014
$0.84
$0.89
FY 2013 FY 2014
23,569
26,109
FY 2013 FY 2014
1,387
1,505
FY 2013 FY 2014
FY 2014 Income Statement Highlights
Please refer to the Investor Relations section of our website which contain the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures
Adjusted Gross Profit ($ in millions)
Revenue ($ in millions)
Adjusted Earnings Per Share (EPS)
Adjusted Operating Income ($ in millions)
+11% +9%
+9% +6%
* Reflects a $0.11 EPS benefit due to the $74M gain from Workday warrants
*
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106 137
159 187 182
2.0%
2.4% 2.5% 2.6% 2.7%
Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
% Revenue
$0.13 $0.18
$0.22 $0.26
$0.24
Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
5,295 5,791
6,410 7,183 6,724
Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
314 348 370 400 387
5.9% 6.0% 5.8% 5.6% 5.8%
Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
% Revenue
Trended Quarterly Income Statement Highlights
Please refer to the Investor Relations section of our website which contain the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures
Adjusted Gross Profit ($ in millions)
Revenue ($ in millions)
Adjusted Earnings Per Share (EPS)
Adjusted Operating Income ($ in millions)
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Other Income Statement Highlights
Adjusted interest & other expense $16.4 million
Adjusted income tax rate 12.0%
Reconciliation between GAAP & adjusted EPS: • Intangible amortization $7.4 million • Stock based compensation $10.0 million • Restructuring charges $34.6 million • Other charge $55.0 million, expected to reverse in Q1’15 • Aggregate impact on EPS is $0.17
Weighted average shares outstanding (WASO): • 612 million shares vs. 619 million shares last quarter • Repurchased 12.4 million shares at an average price per share of $8.98
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Working Capital Management
Inventory ($ in millions)
Cash Conversion Cycle (days)
Net Working Capital ($ in millions)
3,272 3,099 2,723
3,152
3,876
7.1x 7.4x 6.9x 6.9x 6.7x
Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
Inventory Turns
1,542 1,729 1,718
2,083 2,020
7.3% 7.5% 6.7%
7.3% 7.5%
Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
% Annualized Revenue
26 25 24 23
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Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
Net Working Capital = Total A/R and Inventory less A/P (excludes customer advances) Cash Conversion Cycle and Net Working Capital: excludes non-cash reductions to AR from our AR sales programs for all periods and excludes customer advances
Please refer to the Investor Relations section of our website which contain the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures
3,972 3,599
* Q3FY14 (Dec-13) reflects approximately $700M of incremental customer advances, of which $500M remains in Q4FY14 (Mar-14)
* *
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Three Months Twelve Months Ended Ended
($ in millions) Mar-14 Mar-14 GAAP net income $43 $366
Depreciation and amortization 118 454
Change in working capital and other (63) 396
Net cash provided by operating activities 98 1,216
Purchases of property & equipment, net of dispositions (54) (515)
Free Cash Flow 44 701
Payments for repurchase of ordinary shares (113) (475)
Payments for acquired businesses, net of cash acquired - (238)
Proceeds/(Repayments) of bank borrowings, net 44 (16)
Other net change in cash 2 35
Net change in cash and cash equivalents ($23) $7
Summary Statement of Cash Flows
Please refer to the Investor Relations section of our website which contain the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures
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$1,594
$1,500
$600 $500 $500 $500
Liquidity 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Solid Capital Structure
Significant Debt Maturities as presented in the chart above exclude $3M of other debt with varied maturities
Please refer to the Investor Relations section of our website which contain the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures
Significant Debt Maturities (Calendar Year) ($ millions)
Term Loans
($ in millions) Dec-13 Mar-14
Cash $1,617 $1,594 Total Debt 2,056 2,103 Debt / EBITDA (LTM) 2.0x 1.9x
Cash
Revolver
Total Liquidity $3,094
4.625% Notes 5% Notes
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Consistent Return of Value
Strategic Investments in the Business
Strong Sustainable Cash Flow
Executed Components Business Turnaround
Fiscal Year 2014 Highlights
Made meaningful investments to further expand our capabilities and extend our lead in supply chain solutions
Above target annual operating cash flow of $1.2 billion and free cash flow of $700 million
Meaningfully grew revenue, adjusted operating profit dollars, adjusted operating margin, and adjusted EPS
Exited fiscal 2014 with components profitable and operating margins above our corporate average
Repurchased 60 million shares for $475 million in fiscal 2014 and 258 million shares for $1.7 billion over the past four fiscal years, reducing shares outstanding by 27%
Continuous Improvement
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Mar-14 Jun-14E Business Group $ Q/Q % Y/Y % Outlook (Q/Q)
Integrated Network Solutions $2,418 -7% -1% Stable
Industrial & Emerging Industries 1,027 10% 16% Up High Single Digits
High Reliability Solutions 843 2% 9% Stable
High Velocity Solutions 2,436 -14% 107% Decline ~20 to 25%
Total Revenue $6,724 -6% 27%
Revenue by Business Group
Certain prior quarter amounts have been recast to conform to current year presentation
($ in millions) Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Business Group $ % Total $ % Total $ % Total $ % Total $ % Total
Integrated Network Solutions $2,454 46% $2,532 44% $2,588 40% $2,598 36% $2,418 36%
Industrial & Emerging Industries 886 17% 906 16% 940 15% 933 13% 1,027 15%
High Reliability Solutions 776 15% 806 14% 785 12% 823 12% 843 13%
High Velocity Solutions 1,179 22% 1,547 26% 2,097 33% 2,829 39% 2,436 36%
Total Revenue $5,295 $5,791 $6,410 $7,183 $6,724
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Q1 FY2015 Guidance
Other Information: Adjusted SG&A Expense ~$200 - $205 million
Interest & Other Expense ~$20 million
Adjusted Income Tax Rate 8% - 10%
GAAP EPS* $0.26 - $0.30
WASO ~605 million shares
Revenue ($ mil) $6,000 - $6,500
$150 - $180 Adjusted Operating Income ($ mil)
$0.20 - $0.24 Adjusted EPS
* GAAP EPS reflects approximately $0.09 per diluted share benefit of expected reversal of the Q4 other charge (see slide 6)
THANK YOU
For more information: investors.flextronics.com