EXHIBIT 99.1
SOLECTRON REPORTS FOURTH-QUARTER RESULTS
- COMPANY RECORDS $2.7 BILLION CHARGE TO REVALUE GOODWILL, INTANGIBLES -
- KEY PERFORMANCE METRICS IMPROVE IN FISCAL 2002 -
For Immediate Release: Sept. 26, 2002
MILPITAS, Calif. -- 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.
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 by 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 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 - FY02 Q3 - FY02 FY 2002 Q4 - FY01 FY 2001
---------- ---------- ---------- ---------- ----------
NET SALES $ 3,116.6 $ 3,032.8 $12,276.2 $3,594.9 $18,692.3
SALES BY BUSINESS UNIT
Technology Solutions $ 260.6 $ 257.8 $ 860.3 $ 186.4 $ 1,201.1
Global Operations $ 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 $ 236.4 $ 221.4 $ 822.7 $ 87.8 $ 309.6
MicroSystems $ 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 - FY02 Q3 - FY02 FY 2002 Q4 - FY01 FY 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 - FY02 Q3 - FY02 FY 2002 Q4 - FY01 FY 2001
--------- --------- --------- --------- ---------
NET LOSS $(2,647.3) $ (284.4) $(3,110.2) $ (250.3) $ (123.5)
ACQUISITION, RESTRUCTURING $ 2,569.8 $ 254.5 $ 3,004.6 $ 138.7 $ 366.5
AND IMPAIRMENT COSTS,
NET OF TAX
INVENTORY WRITE-OFFS, $ 60.6 -- $ 60.6 -- --
NET OF TAX
GAIN ON LYONS PURCHASES, $ (15.7) $ (2.6) $ (47.4) -- --
NET OF TAX
CREDIT RESERVE AND OTHER -- -- -- $ 44.2 $ 44.2
ONE-TIME COSTS, NET OF TAX
NET INCOME (LOSS) BEFORE $ (32.6) $ (32.5) $ (92.4) $ (67.4) $ 287.2
THESE CHARGES
WEIGHTED AVERAGE NUMBER 824.6 823.2 782.1 657.3 656.6
OF SHARES
EARNINGS (LOSS) PER SHARE $ (0.04) $ (0.04) $ (0.12) $ (0.10) $ 0.44
BEFORE THESE CHARGES
SELECTED CHARGES AND NON-CASH EXPENSES, NET OF TAX
(Dollars in millions)
Q4 - FY02 Q3 - FY02 FY 2002 Q4 - FY01 FY 2001
--------- --------- --------- --------- ---------
RESTRUCTURING AND $ 50.8 $ 254.5 $ 485.6 $ 138.7 $ 366.5
IMPAIRMENT COSTS
GOODWILL AND INTANGIBLE $ 2,519.0 -- $ 2,519.0 -- --
IMPAIRMENT
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
EXPENSES $ 208.1 $ 217.6 $ 226.9 $ 205.5
ABOUT SOLECTRON
Solectron (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.
Analysts 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, Solecton Corporation, (408) 956-6854 (U.S.),
kevinwhalen@ca.slr.com
EXHIBIT 99.1
SOLECTRON CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS
(US$ IN MILLIONS, EXCEPT PER-SHARE DATA)
THREE MONTHS ENDED TWELVE MONTHS ENDED
----------------------------- -------------------------------
AUGUST 30, AUGUST 31, AUGUST 30, AUGUST 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
EXHIBIT 99.1
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