Flextronics International's CEO Discusses F1Q13 Results - Earnings Call Transcript

Flextronics International Ltd. (FLEX)

F1Q13 (Qtr End 06/29/2012) Earnings Call

July 25, 2012 5:00 pm ET


Kevin Kessel - VP, IR

Paul Read - CFO

Mike McNamara - CEO


Sherri Scribner - Deutsche Bank

Shawn Harrison - Longbow Research

Wamsi Mohan - Merrill Lynch

Matt Sheerin - Stifel Nicolaus

Brian Alexander - Raymond James

Amitabh Passi - UBS

Osten Bernardez - Cross Research

Jim Suva - Citi

Craig Hettenbach - Goldman Sachs

Sean Hannan - Needham & Company

Amit Daryanani - RBC Capital Market



Good afternoon, and welcome to the Flextronics International first quarter fiscal year 2013 earnings conference call. (Operator Instructions) 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.

Kevin Kessel

Thanks for joining Flextronics' conference call to discuss the results of our fiscal 2013 first quarter ended June 29, 2012. The slides for today's discussion are posted on the Investors Section of the Flextronics' website and can also be accessed from a direct link on our home page.

Joining me on the call today is our Chief Financial Officer, Paul Read, who will be reviewing the quarterly results; followed by our Chief Executive Officer, Mike McNamara, who will discuss the business environment and conclude with September quarter guidance. 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 the related GAAP measures in accordance with the 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, 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 the factors discussed in today's earnings press release, in comments made during this conference call and in the risk factor section of our Form 10-K, Forms 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?

Paul Read

Thank you, Kevin. Good afternoon. Slide 3, we generated $6 billion in revenue for our fiscal 2013 first quarter ending June 29, 2012, which was within our guidance range of $5.9 billion to $6.3 billion. Revenue declined $1.5 billion or 20% year-over-year, driven almost entirely by the transformation of our business model mix to include significantly less High Velocity Solutions business.

Our first quarter adjusted operating income was $177 million and our GAAP operating income was $167 million. Adjusted net income for the first quarter was $156 million and our GAAP net income for the first quarter was $137 million.

We reported adjusted earnings per diluted share for the first quarter of $0.23, this was up 10% year-over-year, and was within our adjusted EPS guidance of $0.20 to $0.24. Our GAAP EPS for the first quarter was $0.20, which is up 11% year-over-year.

Our GAAP EPS was a new first-quarter record for the company and speaks to our quality of earnings, resulting from the improvement in our business mix.

Our diluted weighted average shares outstanding or WASO for the quarter was 688 million. This was a reduction of 9% or 72 million shares compared with the 760 million shares reported a year ago. This decline reflects the result of our share buyback programs. During the quarter we repurchased approximately 20 million shares.

Please turn to Slide 4. Our Integrated Network Solutions business group totaled 46% of our sales during the quarter, up from 44% last quarter. Revenue was $2.8 billion in the quarter, reflecting a slight decline of 2% both year-over-year and sequentially.

This quarterly revenue performance was slightly below our expectations of stable revenue, as continued strength from several of our new outsourcing wins was offset by some softening across most of our top customers in the last month of the quarter. On a positive note, INS had an extremely strong bookings quarter, which Mike will discuss shortly.

Industrial & Emerging Industries sales grew 7% sequentially to $1 billion. The group comprised 17% of total sales, up from 15% last quarter. We are in line with our expectations of high-single digit revenue growth, which is filled by solid growth in our Capital Equipment business, coupled with several new customer program ramps.

Our High Reliability Solutions group is comprised of our medical, automotive, and defense and aerospace businesses. In the first quarter the group comprised 11% of total sales, up from last quarter's 10%.

Quarterly revenue totaled $671 million, growing 4% sequentially and a healthy 20% year-over-year, marking yet another quarterly revenue record. This performance is in line with our June quarter expectations of low-single digit growth, as we saw revenue expansion balanced across the customer in industries will be served.

This marked the tenth consecutive quarter sequential and year-over-year revenue growth for our medical business, as it grew healthy high-single digits sequentially driven by strength in drug delivery and medical equipment business. Additionally, we continued to see great traction with both new and existing customers, and our sales pipeline is holding strong in over $1 billion across the broad areas of medical industries that we serve.

Our automotive business continues to be a strong performer and it grew several new customer programs, and had solid bookings during the quarter. Our ability to continue to penetrate top-tiered OEMs across the broad portfolio of products will propel this business beyond $1 billion revenue level this fiscal year.

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