2019 Annual Report
Total Page:16
File Type:pdf, Size:1020Kb
Toppan Merrill - Flex LTD Annual Report Combo Book - FYE 3.31.19 ED | 105212 | 09-Jul-19 16:19 | 19-11297-1.aa | Sequence: 1 CHKSUM Content: 45264 Layout: 60155 Graphics: 0 CLEAN Our Shareholders, Employees, Customers and Partners: In 1969, Joe and Barbara Ann McKenzie started a family business hand soldering electronic parts onto printed circuit boards to help Silicon Valley startups meet their dynamic capacity needs. These “board stuffers,” as they were known back then, decided to name their small company Flextronics. The McKenzies dreamed of revolutionizing the way electronic products were manufactured, not only in Silicon Valley, but all around the world. Fifty years later, we may have shortened the company name from Flextronics to Flex, but our list of achievements and milestones over the past five decades is nothing short of remarkable. Today, we have a broad portfolio of diverse customers, including some of the best-known global brands such as Cisco, Ford, IBM, Johnson & Johnson and Microsoft. From manufacturing early networking equipment and mobile devices for companies like Motorola, Nokia, Juniper and Ericsson to making Palm Pilots, Xboxes, Blackberrys, and HP printers, Flex led the transition from contract manufacturing to value-added Electronic Manufacturing Services (EMS). Our top customers come from more than a dozen different industries, providing us with a unique perspective on many of the fastest growing companies, by industry and by geography. Flex was one of the first American service manufacturers to go offshore by setting up a manufacturing facility in Singapore. The company was one of the first to innovate with full service industrial parks across Asia and eventually other geographies, to bring suppliers closer to the manufacturing line, and to support emerging “just in time” supply chain needs. Corporate ownership shifted from public to private as markets went through the slumps of the late 80s and early 90s. In 1994, Flex returned to the public markets when it was listed on the Nasdaq. Since 2000, we have grown both organically and by acquisition, having acquired more than 75 companies including some of the biggest and best names in contract manufacturing like Solectron and Dii Group. These acquisitions enabled us to expand our global footprint, our technical and design capabilities, and our strategic customer partnerships. In 1994, Flex was the 28th ranked EMS provider with around $100 million in revenue and approximately 3,000 employees. Today, Flex is the third largest EMS provider in the world, when measured by revenue, with $26 billion in revenue and more than 200,000 employees. Operating across 100 sites in 30 countries, our global scale gives us the ability to leverage our diverse footprint for the true benefit of our customers. We have also strengthened our value-added service offerings to offer complete Sketch-to-Scale® manufacturing and supply chain solutions. On February 11, 2019, I had the privilege of being named Flex CEO. While I am new to Flex, I am not new to manufacturing services business, having spent my entire 25-year career in the manufacturing and supply chain industry. I began my career on the factory floor as a plant supervisor, rising to the position of President and Chief Operating Officer for the electrical sector business at Eaton, a power management company with more than $20 billion in sales, 102,000 employees, and a market capitalization of $33 billion. I led our sector to deliver high margins and reduce earnings volatility while growing sales to more than $13 billion in 2018. In my first 100 days at Flex, I have traveled to a dozen of our manufacturing sites and campuses from Guadalajara to Chennai, and from Tczew to Zhuhai, engaging with more than half of our 200,000 strong, global workforce. I have learned so much about our amazing JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889 COLORS: Black, ~note-color 2 GRAPHICS: none V1.5 Toppan Merrill - Flex LTD Annual Report Combo Book - FYE 3.31.19 ED | 105212 | 09-Jul-19 16:19 | 19-11297-1.aa | Sequence: 2 CHKSUM Content: 55023 Layout: 10208 Graphics: 0 CLEAN culture and the more I learn about Flex, the deeper my respect grows. The sheer range and volume of the products we manufacture and deliver to all points of the globe speak to our extensive and highly-differentiated set of capabilities. The core of Flex’s business is fundamentally strong. Our global presence and broad geographic distribution is undoubtedly our biggest competitive advantage, especially in today’s global trade environment. While there are uncertainties surrounding the current economic and geopolitical landscape, we are keenly focused on our opportunities for growth and delivering on our commitments. We must continue to build on our solid core, leverage our deep expertise and do what we do best, and that is manufacture-at-scale in a highly competitive, effective and efficient way. If we can take the strength of our core, align it with real innovation around the design of products and processes, and thoughtfully invest in targeted parts of our portfolio, the outcome will be sustainable growth, better margins, and stronger results. I have met and spoken to many of our customers and partners and they acknowledge our unrelenting commitment to customer success and our culture of always putting customers first. They value our partnership and have touted our strength, our competitive positioning, and the opportunities they see for us in growth markets such as autonomous cars, 5G, digital health, and industrial IoT. We acknowledge that last year was marked by some challenges as the company evolved through organizational and business changes and that our performance did not reflect the true power and potential of Flex. In order to harness this power, we must begin by refocusing on the fundamentals of our business. Moving forward, you will see us drive more consistent, disciplined execution in everything we do. We will communicate realistic expectations and deliver predictable, sustainable results. Let me briefly recap our performance for fiscal 2019. We grew revenues $865 million or 3% to $26.3 billion, increased adjusted operating income dollars by $86 million or 11% to $872 million, expanded adjusted operating margin to 3.3% from 3.1%, and had a 5% increase in adjusted EPS to $1.14 from $1.09. Even with the challenges of last year, there were still several positives which should be highlighted. During fiscal year 2019: • We capitalized on prior year investments, achieving strong bookings in both of our higher margin business groups, HRS and IEI, totaling a combined $4.9 billion. • We revamped our go-to-market strategy in CEC and experienced strength in both Cloud Data Center and Telecom, driven by both 4G and 5G, which helped return this segment to growth. • We began the process of rationalizing our CTG business including stabilizing operations in India and exiting our footwear business in Mexico. • We streamlined our investment portfolio. • We returned to free cash flow generation in the second half of fiscal 2019. Going forward, we will invest only in opportunities with strong business cases for consistent returns, and focus on the core with greater discipline on capital spending. We will continue to focus on Sketch-to-Scale® opportunities where we can create design and engineering led wins which translate into higher margins and lower risk of substitution. JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889 COLORS: Black, ~note-color 2 GRAPHICS: none V1.5 Toppan Merrill - Flex LTD Annual Report Combo Book - FYE 3.31.19 ED | 105212 | 09-Jul-19 16:19 | 19-11297-1.aa | Sequence: 3 CHKSUM Content: 14934 Layout: 16284 Graphics: 19119 CLEAN In Summary Flex has an incredible, rich history in manufacturing and supply chain solutions. For 50 years, we have worked tirelessly to deliver the most value to our customers globally. Despite the uncertainties of the global economic and geopolitical landscape, technology continues to move forward rapidly, allowing us to further build upon our business. Going forward, you can expect four things from us: • First, we will drive consistent disciplined execution around manufacturing performance, margin improvement, and free cash flow generation. • We will manage our mix by selectively investing in our higher margin segments while being judicious in the markets and products categories we focus on. • We will pursue Sketch-to-Scale® opportunities that grow from design-led innovation to deep manufacturing and supply chain relationships. • Finally, we will create value for shareholders with a return to strong, free cash flow generation and disciplined capital allocation. Named one of Fortune’s Most Admired Companies in the past, Flex is a great company with amazing people. In 2019, we won five Manufacturing Leadership Awards for Sustainability Leadership, Supply Chain Leadership, Enterprise Integration & Technology Leadership and Next-Generation Leadership. At Flex, we work with integrity and believe in the importance of doing business ethically and responsibly. With employees in 30 countries around the world, we know that diversity and inclusion are important to creating a stronger company for the future. Making a positive social impact through sustainability has also been an essential element of our company mission from the very beginning. We are committed to protecting and promoting a healthier world and building a more sustainable future, whether that is participating in the world’s largest corporate sustainability initiative through the UN Global Compact (UNGC), or through our Sinctronics venture with HP, which recycles old printers. In the past two years, we’ve reduced our greenhouse gas emissions by 4%, reduced our injury rate by 14%, and cut our water usage by 7%.