Solectron Reduces Debt-to-Capitalization Ratio Following Completion Of Tender Offer

		SOLECTRON LOGO 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

- Company Highlights Capital Structure and Debt Covenants - MILPITAS, Calif., July 29 /PRNewswire-FirstCall/ -- Solectron Corporation (NYSE: SLR), a leading provider of electronics manufacturing and supply-chain management services, said today that it reduced its debt-to-capitalization ratio to 35 percent from 40 percent as a result of its successful tender offer to purchase $919 million of debt on its balance sheet ($1.5 billion principal amount at maturity). As adjusted to consider the effective future conversion into equity of the $1.1 billion of Adjustable Conversion-Rate Equity Securities(TM) (ACES) issued by the company in the second quarter of fiscal 2002, the debt-to-capitalization ratio would be 26 percent. (Photo: http://www.newscom.com/cgi-bin/prnh/20001201/SLRLOGO ) The tender offer, completed last week, lowered the company's total debt by $919 million from $4.9 billion at May 31, 2002, to $4 billion presently. The tender offer, which targeted a portion of the company's 2.75 percent Liquid Yield Option Notes(TM) (LYONs) due 2020 and issued in May 2000, is the latest in a series of capital structure improvements made in fiscal 2002. During this fiscal year, Solectron has: -- Reduced its total debt by $1.4 billion. In addition, the company used the proceeds of $1.1 billion in ACES and $500 million in senior notes due 2009 to repurchase $1.6 billion in outstanding debt. The ACES are effectively convertible into equity in November 2004. These activities reduced the company's total debt and effectively extended the average maturity of the remaining debt obligations. -- Generated $2 billion in cash from operations over the first three quarters of the fiscal year, and consistently maintained a cash balance solidly in excess of $2 billion. The company's cash balance was $3.2 billion at May 31, and on a pro forma basis, adjusted for the completion of the tender offer, was $2.3 billion. -- Lowered its debt-to-capitalization ratio from 51 percent three quarters ago to 35 percent as of May 31, 2002. Adjusting for the expected effective conversion of 100 percent of the ACES debt into equity, the company's adjusted debt-to-capitalization ratio would be 26 percent. The debt-to-capitalization ratio is calculated by dividing total debt by total debt plus stockholders' equity. -- Further improved its liquidity by replacing its $100 million corporate revolving credit facility with $500 million in corporate revolving credit facilities, which are currently not drawn upon. The company has no intention of using them in the foreseeable future. "We have made significant progress this year, despite the overall economic conditions. Our balance sheet is strong, we are winning new business and we believe we are taking the steps necessary for Solectron to generate profitable growth and value for our shareholders," said Koichi Nishimura, Solectron chairman, president and chief executive officer. Kiran Patel, executive vice president and chief financial officer, said: "We understand the concerns among investors and lenders regarding liquidity throughout the electronics industry. We have worked very hard to restructure our balance sheet and ensure that we have the liquidity and flexibility required to meet our business needs, and we believe our capital structure and covenants reflect that." The following table outlines key balance sheet and debt covenant information. Selected Balance Sheet Information Pro Forma Information Reflects the Use of $900 million in Cash To Purchase $919 Million of 2.75 percent Liquid Yield Option Notes (Dollars in millions) Pro Forma May 31, 2002 May 31, 2002 Cash, restricted cash, cash equivalents and short-term investments $3,232 $2,332 2.75% Liquid Yield Option Notes due 2020, putable May 2003 (A) $1,441 $522 Other short-term debt $209 $209 Total short-term debt $1,650 $731 7.375% senior notes due 2006 (A) $150 $150 9.625% senior notes due 2009 (B) $497 $497 3.25% Liquid Yield Option Notes due 2020, putable May 2004 (A) $1,503 $1,503 7.25% subordinated convertible debentures (ACES) due 2006 (C) $1,057 $1,057 Other long-term debt $44 $44 Total long-term debt $3,251 $3,251 Total debt $4,901 $3,982 Total capitalization $12,304 $11,385 Debt-to-capitalization ratio 40% 35% Adjusted debt-to-capitalization ratio (C) 31% 26% Note: The company has $500 million in secured, revolving credit facilities that have not been drawn upon. The company has no plans to draw upon these facilities in the foreseeable future. (D) (A) This debt has no financial covenants. (B) This debt has a fixed-charge coverage ratio incurrence test, but no financial ratio maintenance requirements. (C) Adjustable Conversion-Rate Equity Securities (ACES) issued in the second quarter of fiscal 2002 and fully described in the second-quarter Form 10-Q and original prospectus, are expected to effectively convert to common equity in November 2004. The expected conversion would be at prices between $9.81 and $11.58 per share. The adjusted debt-to-capitalization ratio shows the effect of this conversion as if it had occurred as of May 31, 2002. This debt has no financial covenants. (D) For additional liquidity, the company also has $500 million in revolving credit facilities, which have not been drawn upon. They have the following quarter-end financial maintenance covenants: a) maximum amount of capital expenditures; b) minimum amount of tangible net worth; c) minimum amount of cash interest coverage; d) maximum debt-to-capitalization; and e) minimum liquidity, as described more fully in the documents filed as exhibits to the company's Form 10-Q filings for the second and third quarters of the fiscal year. About Solectron Solectron (http://www.solectron.com) provides a full range of global 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. Safe Harbor This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve a number of risks and uncertainties based on current expectations, forecasts and assumptions that could cause actual outcomes and results to differ materially. Specific forward-looking statements include: our statements regarding new business wins, our ability to achieve profitable growth and shareholder value, the success of our current strategies and our plans with respect to drawing on our $500 million secured line of credit. Potential risks and uncertainties include: the length and severity of the current economic downturn overall and in the telecommunications and other electronics technology sectors; our ability to manage customer demand through the downturn; increasing competition; our ability effectively to integrate recent acquisitions; our ability effectively to implement restructuring plans; the recognition of restructuring-related charges greater than currently anticipated; impairment of intangible assets; fluctuations in operating results; and interest rate risk. 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. Liquid Yield Option is a trademark of Merrill Lynch & Co. Adjustable Conversion-Rate Equity Securities is a trademark of Goldman Sachs & Co. Analyst/Investor Contacts: Thomas Alsborg, Solectron Corporation, 408-956-6614 (U.S.), thomasalsborg@ca.slr.com Tonya Chin, Solectron Corporation, 408-956-6537 (U.S.), tonyachin@ca.slr.com Media Contact: Kevin Whalen, Solectron Corporation, 408-956-6854 (U.S.), kevinwhalen@ca.slr.com