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Technology Stocks : Flextronics International (FLEX) -- Ignore unavailable to you. Want to Upgrade?

To: patroller who wrote (1022)	1/22/1999 2:49:00 AM
From: kolo55	Respond to of 1422

Notes from the conference call. Marks went through a rehash of the numbers on the earnings release. If anyone hasn't seen the release, its available on the Flextronics home page, along with the presentation slides for the earnings presentation the analysts listened to. The following info is out of the sequence discussed in the call, but grouped with related information. Disclaimer- these are my notes and interpretations, and may not reflect what was said in the call accurately. The revenues grew sharply up almost 77 million (18%) sequentially from the 423M last Q to the 499M this Q. This growth was internally generated (not due to acquisitions). Revenues came in fairly evenly throughout the quarter. Diluted EPS was 34 cents. SG&A declined as a percentage of sales, from 3.9% last Q to 3.5% this Q, leading to a higher Operating margin, but Net Income didn't improve as much due to higher interest costs and forex losses. The earnings were reduced when they had a $2.3M pre-tax foreign exchange loss due to Brazil and Central European currencies. This clipped about 4 cents per share off the earnings. The most recent fall in the Brazilian real won't hurt because they had hedged against the currency by then. The loss on the Central European currency declines, should be made up in future quarters ahead due to clauses in their customer/supplier contracts. Normally they would expect to see less than +/- $500k in forex. They have $200M in cash and spent $40M on CapEx in the latest Q, and expect to spend another $40M next Q (note: earlier in the year, they were projecting only $98M in CapEx for the year... so far they have spent $106M and with $40M next Q, will spend $146M). In response to a question on CapEx, they indicated that they need to keep spending capital to keep up with new customer programs, and still keep some capacity available for new business, and this has driven the rapid growth over the last year. They expect and hope for this to continue. They have reduced their leverage from 50% to 9% due to the equity offering completed in the DecQ, and now have "one of the strongest balance sheets in the industry". (What a change from two years ago!! I expect they will use their $200M in cash to go acquiring.) They generated free cash flow of $29M in the DecQ as well. They have acquired the land and are beginning construction on a second industrial park in Hungary. China has a new building to expand PCB/PCBA/plastics operations. A sheet metal provider and a packager have located on the Guadalajara site, and a precision metal supplier is also locating there, while Flextronics is expanding their plastics operation there. In Brazil they are completing their plans for a the new industrial park, and plan to break ground in the June Q. In San Jose, they are finishing their 11th building there. The ABB acquisition should close this Q, and will add about $100M in revenues. The plant was acquired at book value. They also are acquiring another 50% ownership in FICO plastics, bringing their ownership to 90%. This unit has performed well since the initial stake was acquired, and is being expanded. They will be starting up programs for seven new customers in San Jose this quarter (these customers were announced last Q). The startup costs could reduce margins somewhat. They expect the MarQ to see a seasonal decline in revenues of about $20-30M from DecQ, offset by some revenues from new programs. Overall they expect both the revenues and EPS to decline slightly from the reported DecQ results. (This appears to be conservative based on the unlikely recurrence of the forex losses, but even when questioned by analysts, they stuck to this guidance. They do hope to meet or exceed analyst expectations though.) Astron was profitable this Q after losing money last Q, and was substantially profitable by the end of the Q due to improving product mix. This added a 'penny or two' to earnings (last Q Astron lost several cents). They are shifting the mix toward higher value added work, particularly cellphone boards. Flex assembles less than 20% of these boards inhouse, with the bulk going to Japanese customers. They expect to run Astron at capacity by the end of March, so they are expanding capacity. Astron was only 3% of revenues in the DecQ. They are acquiring some PCB assets in Hong Kong, primarily to pick up technological capability (engineering capability???). The assets they are acquiring will contribute less than $25M to revenues initially, but expect the acquisition to help Astron grow. They expect to be active in the coming Q's, with both OEM plant acquisitions, and company acquisitions. "Outsourcing is gaining momentum... and we should be able to grow much more rapidly than the industry. The outlook for the next several years is exceptional." In response to a question regarding new outsourcing business from Lucent, Nortel, or Motorola- they said some of these companies have publicly commented on outsourcing plans, but that the telecom companies are very reluctant for their suppliers to talk about plans, so would not comment on whether they are working on getting programs from these customers. (There have been a lot of rumors on this.) Well, that's all for now. Paul

To: patroller who wrote (1022)	1/22/1999 11:00:00 AM
From: rich evans	Read Replies (1) \| Respond to of 1422

Yes, I agree a blow out performance. With all the expansion planned at the 3 campuses plus ABB acquisition plus they indicated they were looking again for other acquisitions- probably OEM plants at book value they indicated- and with improved SGA- they want 3% but don't expect during all these acquisitons- and reduced net interest and no FOREX loss This company should do over $2.00 I would think in 2000. Am I too optimistic? If so the present price of 42 is not that high. The only pause for concern is the market which rises and lowers all boats. Rich

To: patroller who wrote (1022)	1/22/1999 9:40:00 PM
From: rich evans	Read Replies (1) \| Respond to of 1422

The trouble with you Patroller is that you are having a menage a trois with JBL and FLEX. You can't talk about one without the other.I am going to have to write" Dear Abby" about you . Seriously though while you were floating on fluff I was listening to FLEX and can't believe the price drop the last two days. I was thinking of lightening in the high forties which I thought was a gimme after the results and CC but... Now I think it is a blessing in disguise as this stock could double from here. ( Maybe I should become a Moslem and just say "God Wills".) Anyway keep on floating and think of us poor souls at Snoqualamie Pass skiing in the rain. Rich