Flextronics Reports Fourth Quarter Results

(US$ in millions, except EPS)

Three Month Periods Ended

March 31,

March 31,

Y/Y

2012

2011

Growth

Net sales

$ 6,382

$ 6,789

-6%

Adjusted operating income (1)

$ 190

$ 188

1%

GAAP operating income

$ 180

$ 175

3%

Adjusted net income - continuing operations(1)

$ 197

$ 162

22%

GAAP net income - continuing operations

$ 173

$ 135

28%

Adjusted EPS - continuing operations (1)

$ 0.28

$ 0.21

33%

GAAP EPS - continuing operations

$ 0.25

$ 0.17

47%

Renee Brotherton

Kevin Kessel

Corporate Communications

Investor Relations

(408) 576-7189

(408) 576-7985

renee.brotherton@flextronics.com

kevin.kessel@flextronics.com

SCHEDULE I

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

Three Month Periods Ended

Twelve Month Periods Ended

March 31,

2012

March 31,

2011

March 31,

2012

March 31,

2011

GAAP:

Net sales

$ 6,382,412

$ 6,788,774

$ 29,387,656

$ 28,489,018

Cost of sales

6,019,605

6,409,293

27,866,315

26,903,049

Gross profit

362,807

379,481

1,521,341

1,585,969

Selling, general and administrative expenses

183,189

204,081

852,636

804,890

Operating income

179,618

175,400

668,705

781,079

Intangible amortization

14,122

14,913

55,896

70,913

Interest and other expense, net

(15,331)

7,568

16,048

81,645

Income before income taxes

180,827

152,919

596,761

628,521

Provision for income taxes

7,405

18,232

54,116

22,176

Net income from continuing operations

$ 173,422

$ 134,687

$ 542,645

$ 606,345

Income (loss) from discontinued operations, net of tax

$ (16,689)

$ 648

$ (21,880)

$ (10,126)

Net income

$ 156,733

$ 135,335

$ 520,765

$ 596,219

EPS:

Net income from continuing operations:

GAAP

$ 0.25

$ 0.17

$ 0.75

$ 0.77

Non-GAAP

$ 0.28

$ 0.21

$ 0.89

$ 0.88

Income (loss) from discontinued operations:

GAAP

$ (0.02)

$ 0.00

$ (0.03)

$ (0.01)

Non-GAAP

$ (0.02)

$ 0.00

$ (0.03)

$ (0.01)

Net income:

GAAP

$ 0.22

$ 0.17

$ 0.72

$ 0.75

Non-GAAP

$ 0.26

$ 0.21

$ 0.86

$ 0.87

Diluted Shares used in computing per share amounts

699,462

775,883

727,807

790,192

See Schedule II for the reconciliation of GAAP to non-GAAP financial measures. See the accompanying notes on Schedule IV attached to this press release.

SCHEDULE II

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In thousands, except per share amounts)

(unaudited)

Three Month Periods Ended

Twelve Month Periods Ended

March 31,

2012

March 31,

2011

March 31,

2012

March 31,

2011

GAAP gross profit

$ 362,807

$ 379,481

$ 1,521,341

$ 1,585,969

Stock-based compensation expense

1,119

2,325

7,447

10,312

Non-GAAP gross profit

$ 363,926

$ 381,806

$ 1,528,788

$ 1,596,281

GAAP SG&A Expenses

$ 183,189

$ 204,081

$ 852,636

$ 804,890

Stock-based compensation expense

8,829

10,673

41,008

44,996

Non-GAAP SG&A Expenses

$ 174,360

$ 193,408

$ 811,628

$ 759,894

GAAP operating income

$ 179,618

$ 175,400

$ 668,705

$ 781,079

Stock-based compensation expense

9,948

12,998

48,455

55,308

Non-GAAP operating income

$ 189,566

$ 188,398

$ 717,160

$ 836,387

GAAP provision for income taxes

$ 7,405

$ 18,232

$ 54,116

$ 22,176

Intangible amortization

296

822

1,766

5,348

Settlement of tax contingencies

-

-

-

34,715

Non-GAAP provision for income taxes

$ 7,701

$ 19,054

$ 55,882

$ 62,239

GAAP net income from continuing operations

$ 173,422

$ 134,687

$ 542,645

$ 606,345

Stock-based compensation expense

9,948

12,998

48,455

55,308

Intangible amortization

14,122

14,913

55,896

70,913

Non-cash convertible debt interest expense

-

-

-

5,617

Adjustments for taxes

(296)

(822)

(1,766)

(40,063)

Non-GAAP net income from continuing operations

$ 197,196

$ 161,776

$ 645,230

$ 698,120

GAAP net income

$ 156,733

$ 135,335

$ 520,765

$ 596,219

Stock-based compensation expense

9,948

12,998

48,455

55,308

Intangible amortization

14,122

14,913

55,896

70,913

Non-cash convertible debt interest expense

-

-

-

5,617

Adjustments for taxes

(296)

(822)

(1,766)

(40,063)

Non-GAAP net income

$ 180,507

$ 162,424

$ 623,350

$ 687,994

EPS:

Net income from continuing operations:

GAAP

$ 0.25

$ 0.17

$ 0.75

$ 0.77

Non-GAAP

$ 0.28

$ 0.21

$ 0.89

$ 0.88

Income (loss) from discontinued operations:

GAAP

$ (0.02)

$ 0.00

$ (0.03)

$ (0.01)

Non-GAAP

$ (0.02)

$ 0.00

$ (0.03)

$ (0.01)

Net income:

GAAP

$ 0.22

$ 0.17

$ 0.72

$ 0.75

Non-GAAP

$ 0.26

$ 0.21

$ 0.86

$ 0.87

See the accompanying notes on Schedule IV attached to this press release.

SCHEDULE III

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

March 31, 2012

March 31, 2011

ASSETS

Current Assets:

Cash and cash equivalents

$ 1,518,329

$ 1,748,471

Accounts receivable, net

2,630,159

2,571,912

Inventories

3,312,070

3,517,026

Other current assets

1,110,929

1,216,790

Total Current Assets

8,571,487

9,054,199

Property and equipment, net

2,084,148

2,084,031

Goodwill and other intangibles, net

170,924

213,083

Other assets

239,210

281,839

Total assets

$ 11,065,769

$ 11,633,152

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Bank borrowings, current portion of long-term debt and capital

lease obligations

$ 42,467

$ 21,179

Accounts payable

4,305,735

5,003,185

Other current liabilities

1,927,066

1,804,567

Total current liabilities

6,275,268

6,828,931

Long-term debt, net of current portion:

Revolving credit facility

140,000

160,000

Term loans

2,004,755

2,034,095

Other long-term debt and capital lease obligations

13,043

5,100

Other liabilities

316,724

310,330

Total shareholders' equity

2,315,979

2,294,696

Total liabilities and shareholders' equity

$ 11,065,769

$ 11,633,152

See the accompanying notes on Schedule IV attached to this press release. Certain amounts above include assets and liabilities of discontinued operations.

SCHEDULE IV

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO SCHEDULES I, II, & III

(1)

To supplement Flextronics's unaudited selected financial data presented on a basis consistent with Generally Accepted Accounting Principles ("GAAP"), the Company discloses certain non-GAAP financial measures that exclude certain charges, including non-GAAP gross profit, non-GAAP selling, general and administrative expenses, non-GAAP operating income, non-GAAP net income and non-GAAP net income per diluted share. These supplemental measures exclude stock-based compensation expense, intangible amortization, the related tax effects and non-recurring settlements of tax contingencies. These non-GAAP measures are not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Flextronics's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Flextronics's results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of Company performance.

In calculating non-GAAP financial measures, we exclude certain items to facilitate a review of the comparability of the Company's operating performance on a period-to-period basis because such items are not, in our view, related to the Company's ongoing operational performance. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with forecasts and strategic plans, for calculating return on investment, and for benchmarking performance externally against competitors. In addition, management's incentive compensation is determined using certain non-GAAP measures. Also, when evaluating potential acquisitions, we exclude certain of the items described below from consideration of the target's performance and valuation. Since we find these measures to be useful, we believe that investors benefit from seeing results "through the eyes" of management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with the Company's GAAP financials, provide useful information to investors by offering:

• the ability to make more meaningful period-to-period comparisons of the Company's on-going operating results;
• the ability to better identify trends in the Company's underlying business and perform related trend analyses;
• a better understanding of how management plans and measures the Company's underlying business; and
• an easier way to compare the Company's operating results against analyst financial models and operating results of competitors that supplement their GAAP results with non-GAAP financial measures.

The following are explanations of each of the adjustments that we incorporate into non-GAAP measures, as well as the reasons for excluding each of these individual items in the reconciliations of these non-GAAP financial measures:

Stock-based compensation expense consists of non-cash charges for the estimated fair value of stock options and unvested restricted share unit awards granted to employees and assumed in business acquisitions. The Company believes that the exclusion of these charges provides for more accurate comparisons of its operating results to peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, the Company believes it is useful to investors to understand the specific impact stock-based compensation expense has on its operating results.

Intangible amortization consists of non-cash charges that can be impacted by the timing and magnitude of acquisitions. The Company considers its operating results without these charges when evaluating its ongoing performance and forecasting its earnings trends, and therefore excludes such charges when presenting non-GAAP financial measures. The Company believes that the assessment of its operations excluding these costs is relevant to its assessment of internal operations and comparisons to the performance of its competitors.

Adjustment for taxes relates to the tax effects of the various adjustments that we incorporate into non-GAAP measures in order to provide a more meaningful measure on non-GAAP net income and certain adjustments related to non-recurring settlements of tax contingencies.

Free Cash Flow of $80 million for the fourth quarter ended March 31, 2012 consists of GAAP net cash flows from operating activities of $138 million less purchases of property and equipment net of dispositions of $58 million. For the twelve-month period ended March 31, 2012, Free Cash Flow was $416 million consisting of GAAP net cash flows from operating activities of $804 million less purchases of property and equipment net of dispositions of $388 million. We believe Free Cash Flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to repay debt obligations, make investments, fund acquisitions and for certain other activities. Since Free Cash Flow includes investments in operating assets, we believe this non-GAAP liquidity measure is useful in addition to the most directly comparable GAAP measure - "net cash flows provided by operating activities."

(2)

During the fourth quarter of fiscal 2012, the Company identified certain accounting errors in the statutory to US GAAP adjustments isolated to one of its foreign sites that originated in prior interim and annual periods. These errors, which primarily understated cost of sales, totaled $0.8 million in the first nine months of fiscal 2012 and $10.4 million and $8.0 million for the fiscal years ended March 31, 2011 and 2010, and were corrected by the Company as an out-of-period adjustment in the fourth quarter of fiscal 2012.This fourth quarter adjustment was partially offset by the correction of an error identified in the fourth quarter of $4.2 million related to the provisions for income taxes in the prior fiscal 2012 interim periods. Management believes the impact of these items, both individually and in the aggregate, to the fiscal year ended March 31, 2012 and to prior fiscal and interim periods presented was not material. As a result of recording these adjustments in the fourth quarter, net income for the quarter and year ended March 31, 2012 were reduced by $21.5 million and $24.9 million, respectively.

(3)

On March 2, 2012 the Company entered into a definitive agreement to sell certain assets of Flextronics' Vista Point Technologies ("VPT") camera module business including intellectual property and the China-based manufacturing operations. This transaction is expected to close in the first quarter of fiscal 2013 subject to certain closing conditions.

The divestiture of the VPT business qualifies as discontinued operations, and accordingly, the Company has recast prior period results from continuing operations and reported the results of operations and financial position of this business in discontinued operations within the statements of operations and the balance sheets for all periods presented.

The results from discontinued operations were as follows:

Fiscal Year Ended March 31,

2012

2011

(In thousands, except per share amounts)

Net sales

$ 82,632

$ 190,907

Cost of sales

100,167

191,950

Gross profit (loss)

(17,535)

(1,043)

Selling, general and administrative expenses

5,859

11,459

Interest and other income, net

32

422

Loss before income taxes

(23,426)

(12,924)

Benefit from income taxes

(1,546)

(2,798)

Net loss of discontinued operations

$ (21,880)

$ (10,126)

The current and non-current assets and liabilities of discontinued operations were as follows:

As of March 31,

2012

2011

(In thousands)

Account receivable, net

$ 892

$ 57,720

Inventories

3,723

33,260

Other current assets

471

5,921

Total current assets of discontinued operations

$ 5,086

$ 96,901

Property and equipment, net

$ 22,671

$ 57,032

Total non-current assets of discontinued operations

$ 22,671

$ 57,032

Accounts payable

$ 3,593

$ 78,713

Other current liabilities

4,651

8,566

Total current liabilities of discontinued operations

$ 8,244

$ 87,279