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| Solectron Reports Fourth-Quarter Results |
| 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 records $2.7 billion charge to revalue goodwill, intangibles
Key performance metrics improve in fiscal 2002
MILPITAS, Calif., Sept. 26 /PRNewswire-FirstCall/ -- Solectron Corporation
(NYSE: SLR), a leading provider of electronics manufacturing and supply-chain
management services, today reported fiscal fourth-quarter results that were in
line with the company's guidance.
(Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20001201/SLRLOGO )
Sales in the quarter ended Aug. 30 were $3.1 billion, up 3 percent from
the third quarter. Solectron had established sales guidance of $2.8 billion
to $3.1 billion for the quarter. Sales in the fourth quarter of 2001 were
$3.6 billion.
The company reported a net loss of $2.6 billion, or $3.21 per diluted
share, compared with a net loss of $250 million, or 38 cents per diluted
share, in the same quarter of last year. Fourth-quarter 2002 results include
unusual, after-tax charges of $2.6 billion related to goodwill, intangible
assets and inventory revaluations; restructuring charges; and gains related to
debt retirement. Excluding those items, Solectron lost $33 million, or
4 cents per diluted share, in the fourth quarter, an improvement of 6 cents
per share from the year-earlier period. The company's guidance was for a loss
of 3 to 5 cents per diluted share.
Summary of Fourth-Quarter Charges and Gains
-- Goodwill and intangible assets. As a result of its goodwill and
intangible asset impairment tests, the company recorded pre-tax charges of
$2.5 billion to revalue goodwill and $191 million to revalue intangible
assets. The company remains in compliance with its credit facility covenants.
-- Inventory. The company booked a pre-tax charge of $97 million to
reserve for inventory revaluation and write-off. The charge mainly reflects
inventory risk assumed by Solectron's product-oriented Technology Solutions
business unit, as well as obsolete inventory related to a small number of
former customers, including customers no longer in business. Solectron
continues to put back inventory to customers under contractual arrangements.
-- Debt retirement. Solectron recorded a pre-tax gain of $25 million
resulting from the completion in July of a tender offer to repurchase the
company's Liquid Yield Option Notes (LYONs) due May 2020, as well as
subsequent open-market purchases of LYONs due November 2020.
-- Restructuring. Solectron recorded pre-tax restructuring and impairment
charges of $55 million related to the company's previously announced
restructuring program.
The combined impact of these four items reduced fourth-quarter earnings by
$3.17 per diluted share, from a loss of 4 cents per diluted share to a loss of
$3.21 per diluted share.
"These steps reflect our ongoing commitment to take the actions necessary
through the economic downturn to keep Solectron healthy and on track to
deliver long-term value for our shareholders," said Koichi Nishimura,
chairman, president and chief executive officer. "From an operational
standpoint, we are making steady progress in our business performance, with
key metrics improving at year-end. We intend to continue our positive
operating trends in 2003 -- with a broader objective of returning our business
to industry-leading profitability.
"On a personal note, I recently reached age 64, and I have expressed to
the board my desire to retire from CEO duties at age 65. The board has agreed
to move forward with the succession process now to ensure a seamless
transition and continuity of our long-range plans," he said. "I will continue
in my role as chairman of the board, and I will also continue as CEO until my
successor is identified and the transition is completed."
Fiscal 2002 Summary
In fiscal 2002, Solectron reported sales of $12.3 billion, compared with
$18.7 billion in fiscal 2001. The company reported a net loss of
$3.1 billion, or a loss of $3.98 per diluted share, compared with a net loss
of $124 million, or 19 cents per diluted share, in 2001. Excluding
restructuring and other unusual charges, Solectron had a loss of $92 million,
or 12 cents per diluted share, compared with earnings of $287 million, or
44 cents per diluted share, in 2001.
During the year, Solectron improved many of its key business measurements:
-- Solectron generated $2.1 billion of cash from operations during the
year, and ended the year with $2.2 billion in cash and short-term investments.
-- Solectron reduced its LYONs convertible debt by $2.8 billion during the
year. This activity reduced the company's total debt by $1.5 billion and
effectively extended the average maturity of the remaining debt.
-- Inventories declined 42 percent, or more than $1.3 billion in the
fiscal year, while inventory turns improved to 6.1 from 3.7 at the end of
fiscal 2001.
-- Accounts receivable declined nearly 27 percent at year-end, versus the
same point last year. Days sales outstanding at the end of the fourth quarter
was 55, compared with 61 days a year earlier.
-- The company continued to win business from current customers, as well
as new customers and customers in targeted market segments, including high-end
consumer, automotive and industrial controls.
First-Quarter Guidance
Solectron expects first-quarter 2003 sales to range from $2.8 billion to
$3.1 billion, essentially flat with the fourth quarter. Excluding
restructuring charges, the company said it expects first-quarter per-share
results to improve to a range from a 3-cent loss to break-even earnings
performance.
Webcast To Be Held Today
At 4:30 p.m. EDT today, Solectron will hold a conference call to discuss
this earnings report. A live Internet broadcast of the call can be joined by
going to http://www.firstcallevents.com/service/ajwz365293378gf12.html .
Following the live broadcast, replays of the call will be available at
http://www.solectron.com.
In addition, audio replays of the call will be available immediately
following the call through Oct. 3. Call 800-642-1687 from within the
United States or 706-645-9291 from outside the United States and specify pass
code: 5530151.
Safe Harbor
This release contains forward-looking statements within the meaning of
Section 27A of the Securities Exchange 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 our
ability to remain in compliance with our debt covenants; our ability to put
back inventory to customers; our financial outlook for the first quarter of
fiscal 2003; our new business wins; our continuation of positive operating
trends; and our ability to return to profitability. These 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; the
ability to effectively integrate recent acquisitions; the ability to
effectively implement restructuring plans; the risk of price fluctuation;
reliance on major customers; fluctuations in operating results; changes in
technology; competition; 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.
Supplemental information, consolidated statements of income and
consolidated balance sheets follow. All monetary amounts are stated in U.S.
dollars.
Analytical Data
(Dollars in millions)
Q4 - Q3 - FY Q4 - FY
FY02 FY02 2002 FY01 2001
Net Sales $3,116.6 $3,032.8 $12,276.2 $3,594.9 $18,692.3
Sales by Business Unit
Technology Solutions
business unit $260.6 $257.8 $860.3 $186.4 $1,201.1
Global Operations
business unit $2,521.1 $2,447.5 $10,287.4 $3,320.7 $17,181.6
Printed circuit
board assembly 62.6% 60.9% 64.6% 70.8% 76.2%
Systems 37.4% 39.1% 35.4% 29.2% 23.8%
Global Services
business unit $236.4 $221.4 $822.7 $87.8 $309.6
MicroSystems business
unit $98.5 $106.1 $305.8 -- --
Sales % by Market Segment
Networking equipment 24.5 27.3 26.2 20.4 26.2
Mobile communications 10.8 9.5 10.4 13.2 12.9
Telecommunications 19.7 18.7 18.9 18.3 21.0
PCs/notebooks 15.9 16.4 17.7 22.8 14.6
Computer peripherals 7.8 5.8 5.7 4.5 5.7
Mainframe and servers 4.9 5.6 4.9 3.9 4.3
Workstations 5.0 4.8 4.8 5.7 6.1
High-end consumer
products 3.8 3.0 3.4 2.6 1.0
Semiconductor and test 1.7 1.6 1.5 1.6 3.0
Other 5.9 7.3 6.5 7.0 5.2
Earnings (Loss) Per Share Summary
(Dollars in millions, except per-share data)
Q4 - Q3 - FY Q4 - FY
FY02 FY02 2002 FY01 2001
Diluted earnings
(loss) per share $(3.21) $(0.35) $(3.98) $(0.38) $(0.19)
Diluted earnings
(loss) per share
before acquisition,
restructuring,
impairment and
unusual items $(0.04) $(0.04) $(0.12) $(0.10) $0.44
Calculation of diluted earnings (loss) per share before acquisition,
restructuring and impairment costs, inventory write-offs, gains on retirement
of debt and credit reserves and other:
Q4 - Q3 - FY Q4 - FY
FY02 FY02 2002 FY01 2001
Net loss $(2,647.3) $(284.4) $(3,110.2) $(250.3) $(123.5)
Acquisition,
restructuring
and impairment
costs, net of
tax $2,569.8 $254.5 $3,004.6 $138.7 $366.5
Inventory
write-offs,
net of tax $60.6 -- $60.6 -- --
Gain on LYONS
purchases, net of
tax $(15.7) $(2.6) $(47.4) -- --
Credit reserve and
other one-time costs,
net of tax -- -- -- $44.2 $44.2
Net income (loss) before
these charges $(32.6) $(32.5) $(92.4) $(67.4) $287.2
Weighted average number
of shares $824.6 $823.2 $782.1 $657.3 $656.6
Earnings (loss) per
share before these
charges $(0.04) $(0.04) $(0.12) $(0.10) $0.44
Selected Charges and Non-Cash Expenses, Net of Tax
(Dollars in millions)
Q4 - Q3 - FY Q4 - FY
FY02 FY02 2002 FY01 2001
Restructuring and
impairment costs $50.8 $254.5 $485.6 $138.7 $366.5
Goodwill and intangible
impairment $2,519.0 -- $2,519.0 -- --
Gain on retirement of
debt $(15.7) $(2.6) $(47.4) -- --
Goodwill amortization -- -- -- $49.0 $127.0
Intangible asset
amortization $7.7 $8.4 $45.5 $13.3 $54.9
Non-cash interest
expense $19.4 $22.2 $85.7 $23.7 $88.1
Asset Management Metrics
Q4 - FY02 Q3 - FY02 Q2 - FY02 Q1 - FY02
Inventory turns 6.1 5.1 4.4 4.0
Days sales
outstanding 55 63 64 64
10 Percent Customers
The following customers represented at least 10 percent of sales during the
quarter
Q4 - FY02 Q3 - FY02 Q2 - FY02 Q1 - FY02
Nortel Networks 11.8% 13.3% 15.9% 13.7%
Cisco Systems 11.0% 10.8% 10.9% 11.1%
Hewlett-Packard 10.4% * * *
*Less than 10 percent of total sales during the quarter
Selected Fiscal Year 2002 Financial Data, Pre-Tax
(Dollars in millions)
Q4 - FY02 Q3 - FY02 Q2- FY02 Q1- FY02
Capital expenditures $51.2 $71.4 $54.9 $62.7
Depreciation expense $66.1 $78.8 $85.0 $82.1
Selling, general, and
administrative expenses,
excluding other income
and expense $208.1 $217.6 $226.9 $205.5
About Solectron
Solectron (http://www.solectron.com) provides a full range of global
manufacturing and supply-chain management services to the world's premier
high-tech electronics companies. Solectron's offerings include new-product
design and introduction services, materials management, high-tech product
manufacturing, and product warranty and end-of-life support. Solectron, based
in Milpitas, Calif., is the first two-time winner of the Malcolm Baldrige
National Quality Award.
Consolidated statements of income and balance sheets.
SOLECTRON CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS
(US$ in millions, except per-share data)
Three Months Ended Twelve Months Ended
Aug. 30, Aug. 31, Aug. 30, Aug. 31,
2002 2001 2002 2001
Net sales $3,116.6 $3,594.9 $12,276.2 $18,692.3
Cost of sales 3,023.6 3,387.4 11,570.2 17,206.2
Gross profit 93.0 207.5 706.0 1,486.1
Operating expenses:
Selling,
general and
administrative 200.9 245.4 803.7 827.9
Gain on
retirement
of debt (25.1) -- (75.7) --
Research and
development 20.7 14.1 74.8 69.9
Goodwill
amortization
expense -- 53.8 -- 139.9
Acquisition,
restructuring and
impairment costs 2,745.7 207.2 3,306.7 547.0
Operating loss (2,849.2) (313.0) (3,403.5) (98.6)
Interest income 14.8 21.0 70.1 116.9
Interest expense (66.7) (48.0) (244.1) (176.0)
Loss before
income taxes (2,901.1) (340.0) (3,577.5) (157.7)
Income tax
benefit (253.8) (89.7) (467.3) (34.2)
Net loss $(2,647.3) $(250.3) $(3,110.2) $(123.5)
Basic net loss
per share $(3.21) $(0.38) $(3.98) $(0.19)
Diluted net loss
per share $(3.21) $(0.38) $(3.98) $(0.19)
Shares used in
per-share
calculation:
Basic 824.6 657.3 782.1 641.8
Diluted 824.6 657.3 782.1 641.8
SOLECTRON CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(US$ in millions)
August 30, August 31,
2002 2001
(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and
short-term investments $2,014.4 $2,790.1
Restricted cash* 235.4 --
Accounts receivable, net 1,788.2 2,443.6
Inventories 1,870.0 3,209.9
Prepaid expenses and
other current assets 693.0 410.0
Total current assets 6,601.0 8,853.6
Net property and equipment 1,232.0 1,304.7
Goodwill 2,163.9 1,987.2
Other assets 1,017.1 934.4
Total assets $11,014.0 $13,079.9
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $643.0 $306.2
Accounts payable 1,509.5 1,786.1
Accrued employee compensation 218.5 166.5
Accrued expenses 527.3 363.7
Other current liabilities 106.9 216.3
Total current liabilities 3,005.2 2,838.8
Long-term debt 3,183.9 5,027.5
Other long-term liabilities 52.2 62.9
Total liabilities 6,241.3 7,929.2
Stockholders' equity:
Common stock 0.8 0.7
Additional paid-in capital 6,635.9 3,877.6
Retained earnings
(accumulated deficit) (1,578.6) 1,531.6
Accumulated other
comprehensive losses (285.4) (259.2)
Total stockholders' equity 4,772.7 5,150.7
Total liabilities and
stockholders' equity $11,014.0 $13,079.9
* Includes cash, cash equivalents and short-term investments
CONTACT: analysts, Thomas Alsborg, +1-408-956-6614 (U.S.), or
thomasalsborg@ca.slr.com, or Tonya Chin, +1-408-956-6537 (U.S.), or
tonyachin@ca.slr.com, or media, Kevin Whalen, +1-408-956-6854 (U.S.), or
kevinwhalen@ca.slr.com, all of Solectron Corporation.
SOURCE Solectron Corporation
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CONTACT:
analysts, Thomas Alsborg, +1-408-956-6614
(U.S.), or thomasalsborg@ca.slr.com, or Tonya Chin,
+1-408-956-6537 (U.S.), or tonyachin@ca.slr.com, or media, Kevin
Whalen, +1-408-956-6854 (U.S.), or kevinwhalen@ca.slr.com, all of
Solectron Corporation
