Flextronics announces Q4 and FY - profits rise

- Fiscal Year Revenues and Gross Profit Reach Record Highs;
- Gross Margin Increases for Six Consecutive Quarters;
- Quarterly GAAP Net Income Increases by $58 Million;
- Annual GAAP Net Income Increases by $692 Million

Flextronics (Nasdaq: FLEX) announced results for its fourth quarter and fiscal year ended March 31.

Fourth Quarter and Fiscal 2005 Results
Net sales for the fourth quarter and fiscal year ended March 31, 2005 were $3.6 billion and $15.9 billion, respectively, which represent a quarterly decrease of $155.3 million or 4%, and an annual increase of $1.4 billion or 9%, as compared with the respective prior periods.

Excluding intangibles amortization, restructuring and other charges, net income for the fourth quarter increased 31% to $95.3 million, or $0.16 per diluted share, compared with $72.8 million, or $0.13 per diluted share in the year ago quarter. GAAP net income for the fourth quarter increased by $58.2 million to $74.2 million, or $0.12 per diluted share, as compared to $16.0 million, or $0.03 per diluted share in the year ago quarter.

Excluding intangibles amortization, restructuring and other charges, net income for the fiscal year increased 65% to $388.4 million, or $0.66 per diluted share, compared with $234.8 million, or $0.42 per diluted share in the prior fiscal year. GAAP net income for the fiscal year increased by $692.3 million to $339.9 million, or $0.58 per diluted share, as compared to a loss of $352.4 million, or $0.67 per diluted share in the prior fiscal year.

The quarterly results reflect continued industry-leading working capital management, with a cash conversion cycle of 14.6 days. Return on Invested Tangible Capital ("ROITC") increased to 25% in the March 2005 quarter from 19% in the prior year quarter. Excluding restructuring charges, gross margin increased for the sixth consecutive quarter to 7.3% and gross profit in fiscal 2005 reached an all-time high of $1.08 billion.

"While our quarterly revenue and operating profits were less than expected due to a more than expected decline in handset customer demand, we are extremely pleased that we were able to increase our gross margins for the sixth consecutive quarter. Many of our fourth quarter and fiscal year operating metrics, such as sales, gross profit, GAAP net income, cash conversion cycle, fixed assets to sales, cash and liquidity, and ROITC are at record levels," said Michael E. Marks, Chief Executive Officers of Flextronics. "We continue to believe that we can increase gross margins and operating margins, while reducing SG&A as a percentage of sales. The gross margin improvement over the past several quarters demonstrates that our many initiatives to enhance returns and profitability are working. In addition, as we return to a period of reduced capital expenditures, cash flow should continue to improve. Of course this all translates into higher returns on capital as well," added Marks.

"The new business opportunities for which we have been selected during the quarter further indicate that our major long-term initiatives, including our industrial parks, vertical integration and design activities, continue to win support from customers. These wins together with our robust pipeline of potential opportunities should continue to diversify our exposure to end- market segments and drive revenue and earnings growth. We continue to believe that the combination of our industry-leading working capital management with our low-cost geographic footprint and these diversified opportunities places us in good competitive shape," Marks concluded.

Guidance
The Company provided guidance for quarterly earnings per diluted share (excluding amortization, restructuring and other charges) of $0.15 to $0.17 on revenues of $3.7 billion to $3.9 billion for the June 2005 quarter. The Company also provided guidance for fiscal year earnings per diluted share (excluding amortization, restructuring and other items) of $0.80 to $0.90 on revenues of $17.0 billion to $17.5 billion for fiscal 2006. Quarterly GAAP earnings per diluted share are expected to be lower than the guidance provided herein by approximately $0.02 to $0.03 per diluted share reflecting quarterly amortization expense.

The Company's guidance reflects a reduction in previously expected revenues because of a revised schedule for the final phases of the purchase by Flextronics of substantially all of Nortel's remaining manufacturing operations, including product integration, testing and repair operations. It is now expected that Nortel's remaining operations will transfer to Flextronics in multiple phases during fiscal 2006.

2004 Award Plan for New Employees
Flextronics will grant options to purchase an aggregate of approximately 1 million ordinary shares to employees of recently acquired companies and other new employees. The options will be granted from the Company's 2004 Award Plan for New Employees, will have an exercise price equal to the closing price of Flextronics' ordinary share on the date of grant, will expire 10 years after the date of grant (or following termination of employment, if earlier), and will become exercisable over four years, with the first 25% becoming exercisable on the first anniversary of the date of grant and the remainder becoming exercisable in equal monthly installments thereafter.

Conference Call and Web Cast
A conference call hosted by Flextronics' management was held yesterday at 1:30 p.m. PDT to discuss the Company's financial results and its outlook. This call was broadcast via the Internet. Additional information in the form of a slide presentation and CEO's Letter to Shareholders that summarizes and discusses the quarterly results may also be found on the Company's site. A replay of the broadcast will remain available on the Company's website.

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.