EXHIBIT 99.1
SOLECTRON ENDS 2003 WITH HIGHER SEQUENTIAL REVENUES
AND STRONGER BALANCE SHEET
- FOURTH-QUARTER PRO FORMA RESULTS MEET GUIDANCE
AS KEY METRICS IMPROVE -
For Immediate Release: Sept. 25, 2003
MILPITAS, Calif. -- Solectron Corporation (NYSE: SLR), a leading provider of
electronics manufacturing and supply-chain management services, today reported
GAAP fiscal fourth-quarter sales of $2.8 billion. Fourth-quarter total company
sales were $3.0 billion, which is at the upper end of the company's guidance for
sales of $2.6 billion to $3.0 billion. This compares with $2.8 billion in the
third quarter of fiscal 2003 and $3.1 billion in the fourth quarter of fiscal
2002. (Solectron defines total company sales as sales including continuing and
discontinued operations.)
The company reported a net loss in the fourth quarter of $179 million, or 22
cents per diluted share, compared with a GAAP net loss of $2.6 billion, or $3.21
per diluted share, in the year-earlier quarter. Excluding $146 million in
restructuring and impairment charges, Solectron had a pro forma net loss of $34
million, or 4 cents per diluted share, in the fourth quarter of 2003. The
company's guidance was for a pro forma net loss of 6 to 2 cents per share.
"In the fourth quarter, we continued to improve in several important areas,"
said Mike Cannon, president and chief executive officer. "Total company revenue
increased 5 percent from the third quarter, reflecting overall demand
improvement. We secured several important customer wins, and the end-markets we
serve are recovering. During the quarter we improved gross margins, operating
expenses, and inventory turns, in addition to reducing our outstanding debt."
The company also made progress towards selling assets that are not central to
its strategy. As of year-end, certain of these assets had met the criteria
required by Statement of Financial
Accounting Standards No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, and accordingly are reported as discontinued operations in
the GAAP results. Each line item within the GAAP financial statements excludes
amounts related to these operations, and the company has combined these amounts
into "discontinued operations" line items for all periods presented.
FISCAL 2003 SUMMARY
Total company revenues for 2003 were $11.7 billion, compared with $12.3 billion
in fiscal 2002. The company reported a GAAP net loss of $3.5 billion, or $4.18
per diluted share, compared with a GAAP net loss of $3.1 billion, or $3.98 per
diluted share, in fiscal 2002.
FISCAL 2003 HIGHLIGHTS (on a total company basis)
- - Revenue stabilized during the year and increased in the fourth quarter.
- - Operating expenses were reduced nearly 20 percent.
- - Inventories declined 23 percent.
- - The cash-to-cash cycle improved 23 percent.
- - Total debt decreased by approximately $1 billion during the year.
"Solectron enters fiscal 2004 as a much different company than it was a year
ago. Over the last three quarters, we installed a new leadership team, and we
began implementing a business strategy and organization alignment that will
allow us to better serve our customers," Cannon said. "I am pleased with our
progress in a year characterized by major transition, and I expect continued
progress in the coming year, including Solectron's return to profitability."
FIRST-QUARTER GUIDANCE
Fiscal first-quarter guidance is for sales of $2.7 billion to $3.1 billion, and
for pro forma EPS, excluding restructuring and impairment and other unusual
items, to range from a 4-cent loss to a 1-cent loss. This guidance is based on
the current continuing operations of Solectron. If additional assets planned for
divestiture qualify as discontinued operations prior to quarter-end, the
company's GAAP results would change accordingly.
PRO FORMA INFORMATION
In addition to disclosing results determined in accordance with generally
accepted accounting principles (GAAP), Solectron also discloses non-GAAP results
of operations that exclude certain items. By disclosing this pro forma
information, management intends to provide investors with additional information
to further analyze the company's performance, core results and underlying
trends. Management utilizes a measure of net income and earnings per share on a
pro forma basis that excludes certain charges to better assess operating
performance. Each excluded item is considered to be of a non-operational nature
in the applicable period.
Earnings guidance is provided only on a pro forma basis due to the inherent
difficulty in forecasting such charges. For example, Solectron may, from time to
time, retire debt based on market conditions. We are unable to forecast any
gains or losses resulting from these retirements due to the uncertainty related
to the timing and pricing of such transactions. Consistent with industry
practice, management has historically applied these measures when discussing
earnings or earnings guidance and intends to continue doing so.
Pro forma information is not determined using GAAP; therefore, the information
is not necessarily comparable to other companies and should be used to compare
the company's performance over different periods. Pro forma information should
not be viewed as a substitute for or superior to net income or other data
prepared in accordance with GAAP as measures of our profitability or liquidity.
Users of this financial information should consider the types of events and
transactions for which adjustments have been made.
See the tables at the end of this news release for a reconciliation of
historical pro forma amounts to amounts reported under GAAP.
WEBCAST TO BE HELD TODAY
At 5 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
www.solectron.com. Following the live broadcast, the archived Webcast will be
available at www.solectron.com/investor.
In addition, audio replays of the call will be available two hours following the
call through Oct. 2. Call (800) 642-1687 from within the United States or (706)
645-9291 from outside the United States and specify pass code: 2495671.
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. Specific forward-looking statements
relate to our financial outlook for the first quarter of fiscal 2004 and beyond;
the timing and amount of our planned restructuring charges and divestitures; the
expected benefits of our new organizational structure and business strategies;
and our expectations for a return to profitability. These forward-looking
statements involve a number of risks and uncertainties, are based on current
expectations, forecasts and assumptions, and actual outcomes and results could
differ materially. These risks and uncertainties include the prospects for
recovery of the economy overall and in the telecommunications and other
electronics technology sectors in particular; our ability to continue to win and
satisfy customers; the accuracy of our projections of cash flows and capital
requirements; whether we will be able to divest various assets and operations
without undue disruption, within the targeted timeframe, and for the anticipated
sales prices; the ability to effectively implement restructuring and cost
reduction plans and the timing of such implementations; the risk of price
fluctuation; reliance on major customers; fluctuations in operating results;
changes in technology; competition; variations in demand forecasts and orders
that may give rise to operational challenges such as excess plant, equipment,
and materials; risks associated with international sales and operations;
interest rate risk; environmental regulations; market risk; segment risk; the
ability to retain key personnel; the impact of our outstanding litigation; 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-K, 10-Q, S-3, S-4 and S-8. 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 operations and consolidated
balance sheets follow. All monetary amounts are stated in U.S. dollars.
ANALYTICAL DATA
(Dollars in millions)
Q4 - FY03 Q3 - FY03 FY 2003 Q4 - FY02 FY 2002
NET SALES
Continuing operations $ 2,813.9 $ 2,655.4 $ 11,049.9 $ 2,928.1 $ 11,571.2
Discontinued operations $ 152.7 $ 160.1 $ 686.4 $ 188.5 $ 705.0
Total company $ 2,966.6 $ 2,815.5 $ 11,736.3 $ 3,116.6 $ 12,276.2
SALES PERCENTAGE BY REGION*
North America 40.9% 42.1% 42.2% 42.9% 43.5%
Asia/Pacific 33.4% 33.4% 32.3% 31.2% 30.9%
Europe 15.9% 16.7% 16.9% 17.0% 16.8%
Latin America 9.8% 7.8% 8.6% 8.9% 8.8%
SALES PERCENTAGE BY REGION**
North America 38.3% 39.8% 39.7% 40.0% 40.4%
Asia/Pacific 35.2% 35.3% 34.2% 33.1% 32.8%
Europe 16.1% 16.7% 17.0% 17.4% 17.5%
Latin America 10.4% 8.2% 9.1% 9.5% 9.3%
SALES PERCENTAGE BY MARKET SEGMENT*
Communications 18.4% 20.0% 20.2% 24.2% 23.9%
Networking equipment 21.7% 21.4% 21.9% 24.5% 26.2%
Computing(1) 39.0% 36.0% 37.2% 33.6% 33.1%
Consumer products(2) 10.7% 13.0% 11.0% 10.1% 8.8%
Automotive 3.3% 3.3% 3.2% 1.4% 1.8%
Semiconductors & test 3.2% 4.0% 3.1% 1.7% 1.5%
Other 3.7% 2.3% 3.4% 4.5% 4.7%
SALES PERCENTAGE BY MARKET SEGMENT**
Communications 19.5% 19.2% 21.4% 25.8% 24.7%
Networking equipment 21.8% 21.7% 22.3% 24.8% 27.3%
Computing(1) 39.9% 36.7% 37.9% 34.2% 33.7%
Consumer products(2) 11.2% 13.7% 11.6% 10.7% 9.2%
Automotive 2.8% 3.0% 2.9% 1.5% 2.0%
Semiconductors & test 3.4% 4.3% 3.3% 1.8% 1.5%
Other 1.4% 1.4% 0.6% 1.2% 1.6%
ANALYTICAL DATA (CONTINUED)
(Dollars in millions)
Q4 - FY03 Q3 - FY03 FY 2003 Q4 - FY02 FY 2002
10 PERCENT CUSTOMERS*
Hewlett-Packard/Compaq 14.0% 13.2% 12.7% 10.4% 11.2%
Nortel Networks 11.9% 10.9% 11.2% 11.8% 13.6%
Cisco Systems 12.3% 10.8% 10.7% 11.0% 10.9%
10 PERCENT CUSTOMERS**
Hewlett-Packard/Compaq 13.8% 12.7% 12.3% 10.0% 11.0%
Nortel Networks 12.5% 11.5% 11.9% 12.5% 14.5%
Cisco Systems 13.0% 11.5% 11.4% 11.7% 11.6%
RECONCILIATION OF GAAP RESULTS TO PRO FORMA RESULTS FOR Q4 - FY 2003
(Dollars in millions, except per-share data)
RESTRUCTURING
AND Q4 - FY03
IMPAIRMENT PRO FORMA
Q4 - FY03 COSTS AND RESULTS
GAAP DISCONTINUED TOTAL OTHER UNUSUAL (TOTAL
RESULTS OPERATIONS COMPANY CHARGES COMPANY)
NET SALES $ 2,813.9 $ 152.7 $ 2,966.6 $ - $ 2,966.6
COST OF SALES $ 2,658.1 $ 120.7 $ 2,778.8 $ - $ 2,778.8
GROSS PROFIT $ 155.8 $ 32.0 $ 187.8 $ - $ 187.8
OPERATING EXPENSES $ 300.5 $ 31.9 $ 332.4 $ (146.0) $ 186.4
OPERATING INCOME (LOSS) $ (144.7) $ 0.1 $ (144.6) $ 146.0 $ 1.4
INTEREST AND OTHER - NET $ (33.2) $ (1.3) $ (34.5) $ (1.1) $ (35.6)
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE $ (177.9) $ (1.2) $ (179.1) $ 144.9 $ (34.2)
INCOME TAX EXPENSE (BENEFIT) $ (2.6) $ 2.6 $ - $ - $ -
LOSS FROM CONTINUING OPERATIONS $ (175.3) $ (3.8) $ (179.1) $ 144.9 $ (34.2)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX $ (3.8) $ 3.8 $ - $ - $ -
NET LOSS $ (179.1) $ - $ (179.1) $ 144.9 $ (34.2)
BASIC AND DILUTED NET LOSS PER SHARE $ (0.22) $ (0.04)
SHARES USED TO COMPUTE BASIC AND DILUTED NET LOSS PER SHARE 829.6 829.6
EARNINGS PER SHARE SUMMARY
Q4 - FY03 Q3 - FY03 FY 2003 Q4 - FY02 FY 2002
GAAP DILUTED NET LOSS PER SHARE $ (0.22) $ (3.74) $(4.18) $ (3.21) $ (3.98)
ASSET MANAGEMENT METRICS*
Q4 - FY03 Q3 - FY03 FY 2003 Q4 - FY02 FY 2002
INVENTORY TURNS 7.4 6.6 6.6 6.1 4.6
DAYS SALES OUTSTANDING 50 53 53 55 62
CASH-TO-CASH CYCLE (In days) 54 60 59 70 90
ASSET MANAGEMENT METRICS**
Q4 - FY03 Q3 - FY03 FY 2003 Q4 - FY02 FY 2002
INVENTORY TURNS 7.3 6.5 6.5 6.0 4.4
DAYS SALES OUTSTANDING 49 52 53 55 63
CASH-TO-CASH CYCLE (In days) 54 59 59 70 93
SELECTED FINANCIAL DATA, PRE-TAX
(Dollars in millions)
Q4 - FY03 Q3 - FY03 FY 2003 Q4 - FY02 FY 2002
CAPITAL EXPENDITURES
CONTINUING OPERATIONS $ 37.5 $ 29.9 $ 136.5 $ 49.4 $ 216.1
DISCONTINUED OPERATIONS $ 3.5 $ 4.5 $ 16.9 $ 1.8 $ 25.7
TOTAL COMPANY $ 41.0 $ 34.4 $ 153.4 $ 51.2 $ 241.8
DEPRECIATION EXPENSE
CONTINUING OPERATIONS $ 53.0 $ 57.8 $ 239.6 $ 60.4 $ 295.1
DISCONTINUED OPERATIONS $ 2.3 $ 5.4 $ 18.3 $ 5.7 $ 16.9
TOTAL COMPANY $ 55.3 $ 63.2 $ 257.9 $ 66.1 $ 312.0
* Amounts reflect total company results which include both continuing and
discontinued operations.
** Amounts reflect continuing operations results only.
(1) Computing and PC's/Notebooks segments have been combined for all periods.
(2) Mobile handsets have been moved from the communications segment to the
consumer segment for all periods.
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. The company is based in Milpitas, Calif.
####
SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS IN MILLIONS)
UNAUDITED
AUGUST 31 AUGUST 31
2003 2002
----------- -----------
ASSETS
Current assets:
Cash, cash equivalents and short-term investments * $ 1,519.1 $ 2,217.6
Accounts receivable, net 1,570.0 1,670.2
Inventories 1,414.9 1,822.1
Prepaid expenses and other current assets 281.4 728.6
Current assets of discontinued operations 168.4 221.5
----------- -----------
Total current assets 4,953.8 6,660.0
Net property and equipment 829.0 1,081.3
Goodwill 185.9 1,806.8
Other assets 386.8 931.1
Long-term assets of discontinued operations 174.0 534.8
----------- -----------
Total assets $ 6,529.5 $ 11,014.0
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 977.9 $ 636.8
Accounts payable 1,404.9 1,471.3
Accrued employee compensation 178.9 196.9
Accrued expenses 346.5 475.9
Other current liabilities 200.3 98.8
Current liabilities of discontinued operations 126.4 125.5
----------- -----------
Total current liabilities 3,234.9 3,005.2
Long-term debt 1,817.6 3,181.2
Other long-term liabilities 40.4 45.1
Long-term liabilities of discontinued operations 14.6 9.8
----------- -----------
Total liabilities 5,107.5 6,241.3
----------- -----------
Stockholders' equity:
Common stock 0.8 0.8
Additional paid-in capital 6,658.2 6,635.9
Accumulated deficit (5,040.6) (1,578.6)
Accumulated other comprehensive losses (196.4) (285.4)
----------- -----------
Total stockholders' equity 1,422.0 4,772.7
----------- -----------
Total liabilities and stockholders' equity $ 6,529.5 $ 11,014.0
=========== ===========
* This caption includes $65.5 million and $235.4 million of restricted
balances as of August 31, 2003 and 2002, respectively.
SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(U.S. DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
UNAUDITED
THREE MONTHS ENDED TWELVE MONTHS ENDED
AUGUST 31 AUGUST 31
-------------------------- ----------------------------
2003 2002 2003 2002
----------- ----------- ------------ ------------
Net sales $ 2,813.9 $ 2,928.1 $ 11,049.9 $ 11,571.2
Cost of sales 2,658.1 2,876.6 10,467.9 11,014.7
----------- ----------- ------------ ------------
Gross profit 155.8 51.5 582.0 556.5
Operating expenses:
Selling, general and administrative 145.1 185.2 631.5 744.9
Research and development 16.8 11.3 69.1 59.7
Restructuring and impairment costs 123.9 245.7 348.8 807.1
Goodwill impairment 14.7 2,500.0 1,931.7 2,500.0
----------- ----------- ------------ ------------
Operating loss (144.7) (2,890.7) (2,399.1) (3,555.2)
Interest income 6.0 14.4 31.2 69.3
Interest expense (47.2) (66.4) (210.3) (241.6)
Other expense-net 8.0 27.1 54.3 106.4
----------- ----------- ------------ ------------
Operating loss from continuing
operations before income taxes (177.9) (2,915.6) (2,523.9) (3,621.1)
Income tax expense (benefit) (2.6) (258.9) 581.0 (483.0)
----------- ----------- ------------ ------------
Net loss from continuing operations $ (175.3) $ (2,656.7) $ (3,104.9) $ (3,138.1)
Discontinued operations:
Income (loss) from discontinued operations (1.2) 14.5 (293.8) 43.7
Income tax expense 2.6 5.1 63.3 15.8
----------- ----------- ------------ ------------
Income (loss) on discontinued operations (3.8) 9.4 (357.1) 27.9
----------- ----------- ------------ ------------
Net loss $ (179.1) $ (2,647.3) $ (3,462.0) $ (3,110.2)
=========== =========== ============ ============
Basic and diluted net loss per share:
Continuing operations $ (0.21) $ (3.22) $ (3.75) $ (4.02)
Discontinued operations (0.01) 0.01 (0.43) 0.04
----------- ----------- ------------ ------------
Basic and diluted net loss per share $ (0.22) $ (3.21) $ (4.18) $ (3.98)
=========== =========== ============ ============
Shares used to compute basic and diluted
net loss per share 829.6 824.6 827.7 780.9
Note: In fiscal 2003, the company began reclassifying "other expense - net" from
"selling, general and administrative" expense to a separate line below
operating loss. Gains and losses from retirement of debt have been
reclassified from extraordinary to "other expense - net" in accordance
with SFAS No. 145 since the fourth quarter of fiscal 2002. In addition,
$11.7 million and $11.5 million of amortization were reclassified from
"selling, general and administrative" expense to "cost of sales" in the
first and second quarters of fiscal 2002, respectively.
ANALYST CONTACTS:
Perry Hayes, Solectron Corporation, (408) 956-7543 (U.S.), perryhayes@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