Net sales for the third quarter were $4.3 billion, which represents an increase of $124 million, or 3%, over the December 2003 quarter. Excluding amortisation, restructuring and other items, net income for the third quarter increased 24% to $116.3 million, or $0.20 per diluted share, compared with $93.9 million, or $0.17 per diluted share in the year ago quarter.
GAAP net income for the third quarter increased 361% to a quarterly record high of $98.7 million, or $0.17 per diluted share, as compared to $21.4 million, or $0.04 per diluted share in the year ago quarter.
The quarterly results reflect continued industry-leading working capital management, with a record low cash conversion cycle of 12 days that includes inventory turns of 11.3 times. Return on invested tangible capital (ROITC) increased from 21.6% in the December 2003 quarter to an all-time quarterly high of 30.5% in the December 2004 quarter. In addition, Flextronics ended the December 2004 quarter with an all time record high cash balance of $1.09 billion while liquidity increased 51% sequentially to a record high of $2.2 billion, while maintaining leverage at 27%.
"Our operating metrics are better now than they have been in many years. Key metrics such as sales, gross profit, GAAP net income, cash conversion cycle, fixed assets to sales, cash and liquidity, and ROITC, are better now than they have ever been in our history. With a return on tangible invested capital of greater than 30%, we are now generating a very good return for our shareholders," said Michael E. Marks, Chief Executive Officer of Flextronics. "We continue to believe that we can increase gross margins and operating profit, while reducing SG&A as a percentage of sales. The operating margin improvement over past several quarters demonstrates that our improvement initiatives are working and suggests that our long-term operating margin target of 5% is realistic. In addition, as we again move into a mode of reduced capital expenditures, cash flow should continue to improve.
"Of course this all translates into higher returns on capital as well," added Marks.
"Competitively, we are in solid shape. Our major long-term initiatives, including our industrial parks, vertical integration and design activities, continue to work well. Our pipeline of potential opportunities continues to be quite robust. We are optimistic that a number of these opportunities will be realised over the next several quarters, and believe that we have solid growth in both sales and profits ahead of us," Marks concluded.
Guidance
The company reaffirmed its previous guidance for quarterly earnings per diluted share (excluding amortisation, restructuring and other items) of $0.15 to $0.18 on revenues of $3.8 billion to $4.2 billion for the March 2005 quarter. The company also provided guidance for quarterly earnings per diluted share (excluding amortization, restructuring and other items) of $0.17 to $0.20 on revenues of $4.1 billion to $4.5 billion for the June 2005 quarter. 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 amortisation expense.
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Headquartered in Singapore (Singapore Registration No. 199002645H), Flextronics is the leading electronics manufacturing services (EMS) provider focused on delivering operational services to technology companies. With fiscal year 2004 revenues of US$14.5 billion, Flextronics is a major global operating company with design, engineering, manufacturing and logistics operations in 32 countries on five continents. This global presence allows for manufacturing excellence through a network of facilities situated in key markets and geographies that provide its customers with the resources, technology and capacity to optimise their operations. Flextronics` ability to provide end-to-end operational services that include innovative product design, test solutions, manufacturing, IT expertise, network services and logistics has established the company as the leading EMS provider. For more information, please visit www.flextronics.com. #
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