Flextronics Beats Street, Sets Q3 Sales Record

SAN JOSE � Flextronics� third-quarter revenues rose amid a slight loss for the electronics maker, the company said today. The company also announced a change in its executive management, splitting the roles of chairman of and chief executive officer.

Flextronics recorded a quarterly net loss of $6.5 million for the period ended Dec. 31. Still, net sales set a record and exceed the company�s previous guidance.

Net sales rose 15% to $3.85 billion from $3.34 billion sequentially, and 12% from $3.45 billion a year ago. Flextronics had guided for $3.4 billion to $3.6 billion in sales.

Pro forma operating income (excluding intangibles, amortization, and one-time charges) rose to $97.4 million, up from $72.3 million last quarter, though lower than the $117.2 million posted in December 2001. Pro forma net income $66.2 million, up from $40 million sequentially and down from $85 year-on-year.

The GAAP operating loss was $5.3 million. Flextronics posted GAAP operating income of $66.4 million in Q3 and $114.2 in Q4 2001. The GAAP net loss was $6.5 million, a drop from $34.7 million in Q3 and $82 million a year ago.

Flextronics took a net after-tax charge of $67.1 million, $47 million in cash, related to the restructuring of its Multek PCB division, which included the closing of facilities in Irvine, CA and Kumla, Sweden.

As of Dec. 31, Flextronics had $613.6 million in cash and over $1.2 billion in available liquidity. Cash flow from operations during the quarter was $300 million and debt was reduced by $39 million. The cash conversion cycle was 21 days, inventory turns increased to 11.7 from 9.9, and days sales outstanding were 40 days, an improvement of eight days.

�The December quarter operating results exceeded our range of expectations,� said Michael Marks, chief executive, in a statement. �While achieving record sales in a very difficult end market is notable, it is the operating metrics of which I am particularly proud. It has been our long-term objective to reach an SG&A rate of 3% of net sales and inventory turns of 12 times.�

Flextronics reiterated previous guidance for the March quarter, which was for net sales in the range of $3 billion to $3.3 billion and pro forma diluted EPS of 5 to 8 cents.

In other news, Flextronics named Richard Sharp as non-executive chairman. Marks will retain the chief executive officer title. Sharp, a director of Flextronics since 1993, was CEO of Circuit City.

�We want to meet the gold standard in corporate governance, and believe that this move is an important step in that regard,� Marks said.