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| Solectron Meets Second-Quarter Expectations, Revises Guidance for Fiscal Year |
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Solectron (www.solectron.com), the world's leading supply-chain facilitator, provides a full range of manufacturing and supply-chain management services to the world's premier high-tech electronics companies. Solectron's offerings include new-product design and introduction services, materials management, high-tech product manufacturing, and product warrantyand end-of-life support. Solectron, based in Milpitas, Calif., is the first two-time winner of the Malcolm Baldrige National Quality Award for manufacturing. (PRNewsFoto)[AG JL] MILPITAS, CA USA | |||
Second-Quarter Sales Increase 85% From Prior Year
Company Plans Restructuring Actions
MILPITAS, Calif., March 19 /PRNewswire/ -- Solectron Corporation
(NYSE: SLR), the world's leading provider of electronics manufacturing and
supply-chain management services, today reported fiscal second-quarter results
that met its guidance. Sales in the quarter ended March 2 were $5.4 billion,
up 85.5 percent from the same period last year. Diluted cash earnings
per share* were 30 cents, a penny higher than analysts' consensus estimate of
29 cents published by First Call. The company earned diluted cash EPS of
19 cents in the year-ago period.
(Photo: http://www.newscom.com/cgi-bin/prnh/20001201/SLRLOGO )
In the quarter, Solectron earned net income under U.S. Generally Accepted
Accounting Principles (GAAP) of $121.9 million, up 26 percent from the same
period last year. Diluted GAAP EPS** was 18 cents in the quarter, compared
with 16 cents in the year-earlier period. Before one-time charges, diluted
GAAP EPS was 24 cents in the quarter, in line with the company's guidance and
compared with 18 cents in the same period last year.
The company also said today it expects to take a pre-tax restructuring
charge of $300 million to $400 million in the third quarter. The reserve will
cover qualifying costs associated with actions to realign the company's
capacity and capabilities.
Pro Forma Earnings Summary
(US$ in millions)
Q2-01 Q2-01 Q2-01 Q1-01
Total
Total Excluding Adj.
Excluding New Acquisi- for In- In-
Restruc- Acqui- tions/ 13 crease/ crease/
turing & sitions Goodwill Weeks (De- (De-
NEL crease) crease)
Goodwill %
Net Revenue $5,419 $496 $4,923 $5,289 $(366) -6.9%
Operating Income 280 14 266 257 9 3.5%
Cash & Short-Term
Investments 1,819 73 1,746 4,519 (2,773) -61.4%
Accounts
Receivable 3,188 466 2,722 2,688 34 1.3%
Inventory 4,882 440 4,442 4,584 (142) -3.1%
Net Property &
Equipment 1,564 296 1,268 1,240 28 2.3%
"The strength of our organization and the diversity of the markets we
serve combined to generate second-quarter results consistent with our
guidance. Even so, changing economic conditions overall led to a significant
reduction in demand from our customers as we moved through the quarter," said
Koichi Nishimura, Solectron chairman, president and chief executive officer.
"We are acting aggressively to meet the challenges posed by the current
business environment. Unfortunately, with significantly lower customer demand
we are unable to support our recent levels of employment, and we have been
reducing our work force at many sites. In addition, we will implement a plan
to balance our capacity and capabilities as we prepare the organization for a
re-acceleration of growth."
Quarter Summary
Gross margin in the quarter increased to 9 percent from 8.5 percent in the
fiscal first quarter. The improvement reflected the impact of cost-control
measures and continued improvement in the availability of component supplies
in the electronics industry.
Reported inventories of $4.9 billion included $440 million in inventory
added through acquisitions in the second quarter. On a comparable basis,
inventories at the end of the second quarter declined to about $4.4 billion
from $4.6 billion at the end of the first quarter. The company said inventory
trends are improving, but progress has been slowed by reduced customer demand.
During the quarter, Solectron completed three transactions: The
acquisition of NatSteel Electronics, a Singapore-based EMS company; the former
Sony Corporation facilities in Nakaniida, Japan, and Kaohsiung, Taiwan, as
part of an overall cooperative agreement with Sony announced last fall; and
the former IBM product repair facility in Amsterdam, Netherlands, establishing
a significant European hub operation for Solectron's growing Global Services
business.
The company continued to benefit from serving a cross-section of
electronics market segments: Networking, 32 percent; non-mobile
telecommunications, 20 percent; mobile telecommunications, 13 percent;
notebooks/personal computers, 13 percent; computer peripherals, 6 percent;
workstations/servers, 5 percent; semiconductor, test and other instruments,
3 percent; and mainframes, medical equipment, avionics and other, 8 percent.
Restructuring Activities
In the second quarter, Solectron recorded a restructuring charge of
$25.2 million to consolidate recently acquired NatSteel Electronics sites in
Guadalajara, Mexico, and Budapest, Hungary, into existing Solectron sites.
In addition, the company expects to record a charge of $300 million to
$400 million in the third quarter to, over the next 12 months, restructure
additional facilities, relocate certain capabilities and change the strategic
focus of a number of sites, based on anticipated future customer requirements.
The expected restructuring charge will cover employee severance, facilities,
equipment and applicable facility and equipment lease termination costs, and
the write-off of goodwill, if any, associated with affected facilities.
In connection with the anticipated restructuring, the company expects to
reduce its work force by about 8,200. Many of those reductions have taken
place in the last two weeks. The company said it will, as always, continue to
adjust staffing to meet changes in customer demand. At the end of the second
quarter, Solectron had about 79,000 employees worldwide.
"While these actions are needed to prepare us to take full advantage of a
re-acceleration in demand, we do this with a heavy heart and only after
careful analysis, since it will have an impact on our people," Nishimura said.
"These steps are necessary to help ensure our long-term competitiveness and
position as the EMS leader. Even so, the effect of these actions on people is
the hardest part of this, and in meeting this business challenge we will do
our best to treat people with dignity, integrity and respect."
Forward-Looking Guidance
The company targets third-quarter sales of $4.1 billion to $4.5 billion,
diluted cash EPS of 12 cents to 16 cents, and GAAP EPS of 2 cents to 6 cents.
All targets for the quarter, which ends June 1, are before non-recurring
charges.
Third Quarter Fiscal Year 2001 Outlook
(All percentages relate to Net Sales)
Q2 - FY01 Q3 - FY01 Delta
Net Sales $5.4B $4.1B - $4.5B ($1.3B - $0.9B)
Operating Margin
before Goodwill
and Intangible
Amortization,
Acquisition and
Restructuring Costs 5.55% 2.38% - 3.8% (3.05% - 1.85%)
Net Interest
Expense 0.19% 0.49% - 0.61% 0.30% - 0.42%
Cash Operating
Margin 5.36% 1.89% - 3.19% (3.47%) - (2.17%)
Diluted Cash EPS* 30 cents 12 - 16 cents (18) - (14) cents
Goodwill and
Intangibles
Amortization 0.99% 1.57% - 1.72% 0.58% - 0.73%
Profit before
Acquisition &
Restructuring 4.37% 0.32% - 1.47% (4.05%) - (2.9%)
GAAP EPS Before
Acquisition &
Restructuring 24 cents 2 - 6 cents (22) - (18) cents
Acquisition
& Restructuring 1.01% 6.67% - 9.76% 5.66% - 8.75%
Net Profit
Before Tax 3.36% (6.35%) - (8.29%) (9.71%) - (11.65%)
Net Profit
After Tax 2.25% (4.25%) - (5.55%) (6.5%) - (7.8%)
Diluted GAAP EPS 18 cents (24) - (39) cents (42) - (57) cents
* Diluted Cash EPS is calculated by adjusting diluted GAAP EPS to exclude
tax-effected amortization of goodwill and other intangible items, which
amounted to approximately $45.9 million and $4.9 million (after tax) in the
second fiscal quarters of 2001 and 2000, respectively. It is also before
one-time charges.
** Diluted GAAP EPS is the per-share calculation of net income as defined
nder U.S. Generally Accepted Accounting Principles.
The company said that, given the currently uncertain picture of customer
demand, it will not provide detailed guidance for the fourth quarter and full
year.
Six-Month Summary
For the first six months of fiscal 2001, Solectron reported sales of
$11.1 billion, compared with $5.8 billion in the year-earlier period.
U.S. GAAP net income increased to $312.5 million from $206.5 million a year
ago. Diluted cash EPS was 60 cents, up from 38 cents a year ago.
GAAP EPS was 48 cents, compared with 33 cents in the same period of fiscal
2000.
Safe Harbor
This news release contains forward-looking statements regarding our
expected third-quarter sales and earnings results and restructuring charges
based on current expectations, forecasts and assumptions involving risks and
uncertainties that could cause actual outcomes and results to differ
materially. These risks and uncertainties include component availability, the
ability to effectively integrate the NatSteel Electronics business, the
ability to integrate the assets acquired from Sony Corporation and from IBM,
risk of price fluctuation, reliance on major customers, the length and
severity of the current economic slowdown in the technology sector,
fluctuations in operating results, changes in technology, competition, the
ability to manage rapid growth, the ability to manage rapid declines in
customer demand, the ability to manage business integration, risks associated
with international sales and operations, interest rate risk, environmental
regulations, market risk, segment risk, the ability to retain key personnel
and intellectual property rights enforcement. For a further list and
description of risks and uncertainties, see the reports filed by Solectron
with the Securities and Exchange Commission, specifically forms 8-K, 10-Q, S-
3, S-4 and 10-K. Solectron disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
All monetary amounts are stated in U.S. dollars.
About Solectron
Solectron (http://www.solectron.com), the world's leading supply-chain
facilitator, provides a full range of manufacturing and supply-chain
management services to the world's premier high-tech electronics companies.
Solectron's offerings include new-product design and introduction services,
materials management, high-tech product manufacturing, and product warranty
and end-of-life support. Solectron, based in Milpitas, Calif., is the first
two-time winner of the Malcolm Baldrige National Quality Award for
manufacturing.
Consolidated statements of income and balance sheets follow.
SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
US$ in millions, except per share data)
Three Months Ended Six Months Ended
March February March February
2, 25, 2, 25,
2001 2000 2001 2000
Net sales $5,418.5 $2,921.7 $11,114.0 $5,756.3
Cost of sales 4,930.3 2,641.8 10,141.1 5,199.4
Gross profit 488.2 279.9 972.9 556.9
Operating expenses:
Selling, general and
administrative 189.1 102.4 377.7 208.1
Research and development 18.3 14.3 36.3 29.0
Goodwill amortization expense 33.8 1.3 35.5 2.6
Acquisition and restructuring
costs 54.5 26.2 54.5 26.2
Operating income 192.5 135.7 468.9 291.0
Interest income 36.6 20.4 73.2 43.4
Interest expense (47.1) (12.3) (79.8) (23.9)
Income before income taxes and
cumulative effect of change 182.0 143.8 462.3 310.5
in accounting principle
Income taxes 60.1 47.1 149.8 100.5
Income before cumulative effect
of change in accounting
principle 121.9 96.7 312.5 210.0
Cumulative effect of change in
accounting principle for start-up
costs, net of income tax benefit -- -- -- (3.5)
Net income $121.9 $96.7 $312.5 $206.5
Basic net income per share:
Income before cumulative
effect of change in
accounting principle $0.19 $0.16 $0.50 $0.35
Cumulative effect of change in
accounting principle -- -- -- (0.01)
Net income per share $0.19 $0.16 $0.50 $0.34
Diluted net income per share:
Income before cumulative effect
of change in accounting
principle $0.18 $0.16 $0.48 $0.34
Cumulative effect of change in
accounting principle -- -- -- 0.01)
Net income per share $0.18 $0.16 $0.48 $0.33
Weighted average number of
shares:
Basic 648.4 597.5 628.6 596.1
Diluted 664.3 623.5 722.0 622.4
SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(US$ in millions)
March 2, August 25,
2001 2000
ASSETS
Current assets:
Cash, cash equivalents and short-term investments $1,819.1 $2,434.1
Accounts receivable, net 3,187.8 2,146.3
Inventories 4,882.5 3,787.3
Prepaid expenses and other current assets 306.2 260.5
Total current assets 10,195.6 8,628.2
Net property and equipment 1,564.0 1,080.4
Other assets 934.0 627.4
Goodwill 1,911.4 39.6
Total assets $14,605.0 $10,375.6
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $355.1 $69.2
Accounts payable 2,675.1 2,694.1
Accrued employee compensation 173.4 179.8
Accrued expenses 275.2 262.5
Other current liabilities 519.3 11.2
Total current liabilities 3,998.1 3,216.8
Long-term debt 4,949.1 3,319.5
Other long-term liabilities 68.7 37.2
Total liabilities 9,015.9 6,573.5
Stockholders' equity:
Common stock 0.7 0.6
Additional paid-in capital 3,769.1 2,259.1
Retained earnings 1,967.7 1,656.8
Accumulated other comprehensive losses (148.4) (114.4)
Total stockholders' equity 5,589.1 3,802.1
Total liabilities and stockholders' equity $14,605.0 $10,375.6
CONTACT: media, Kevin Whalen, 408-956-6854, or kevinwhalen@ca.slr.com, or
analysts, Thomas Alsborg, 408-956-6614, or thomasalsborg@ca.slr.com, both of
Solectron Corporation.
SOURCE Solectron Corporation
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CONTACT:
media, Kevin Whalen, 408-956-6854, or
kevinwhalen@ca.slr.com, or analysts, Thomas Alsborg,
408-956-6614, or thomasalsborg@ca.slr.com, both of Solectron
Corporation
