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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0-23354
FLEXTRONICS INTERNATIONAL LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Singapore Not Applicable
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Blk 514, Chai Chee Lane
#04-13
Singapore 469029
(Address of principal executive offices) (Zip Code)
(65) 449-5255
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Ordinary Shares December 31, 1996
----------------- -------------------
S$0.01 par value 13,581,791
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FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
Condensed Consolidated Balance Sheets - December 31,
1996 and March 31, 1996........................... 3
Condensed Consolidated Statements of Income-Three
months ended December 31, 1996 and 1995........... 4
Condensed Consolidated Statements of Income-Nine
months ended December 31, 1996 and 1995........... 5
Condensed Consolidated Statements of Cash Flow-Nine
months ended December 31, 1996 and 1995........... 6
Notes to Condensed Consolidated Financial Statements. 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 9-13
PART II. OTHER INFORMATION
Items 1 through 6................................................. 14
Signatures........................................................ 15
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PART I - FINANCIAL INFORMATION
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, MARCH 31,
1996 1996*
------------------------------
(UNAUDITED)
ASSETS (IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
Current assets
Cash $ 13,578 $ 6,546
Accounts receivable, net 67,194 78,114
Inventories - Note B 45,262 52,637
Other current assets 4,343 4,087
------------ ------------
Total current assets 130,377 141,384
------------ ------------
Property and equipment
At cost 110,716 98,998
Accumulated depreciation (39,715) (37,896)
------------ ------------
Net property and equipment 71,001 61,102
------------ ------------
Other non-current assets 16,556 12,102
------------ ------------
TOTAL ASSETS $ 217,934 $ 214,588
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank borrowings $ 5,710 $ 14,379
Current portion of capital lease and
long-term debt 21,908 20,934
Accounts payable 59,500 64,625
Other current liabilities 17,054 13,770
------------ ------------
Total current liabilities 104,172 113,708
------------ ------------
Long term debt, less current portion 18,985 17,554
Obligations under capital leases and deferred 10,290 11,376
income taxes
Notes payable to shareholders 400 686
Minority Interest 485 485
Shareholders' equity
Ordinary shares, S$0.01 par value:
Authorized - 100,000,000 shares at
March 31, 1996 and December 31, 1996
Issued and outstanding - 13,213,289 shares
at March 31, 1996 and 13,581,791 shares
at December 31, 1996 87 85
Additional paid-in capital 94,652 93,634
Accumulated deficit (11,137) (22,940)
------------ ------------
Total shareholders' equity 83,602 70,779
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 217,934 $ 214,588
============ ============
* The balance sheet at March 31, 1996 has been derived from audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements
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FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31,
------------------------------
1996 1995
------------ ------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
Net sales $ 121,525 $ 131,816
Costs and expenses:
Cost of sales 111,477 119,996
Selling, general and administrative
expenses 6,922 4,989
Goodwill and intangibles amortisation 288 264
Provision for plant closings 2,321 0
Interest expense and other, net 78 354
------------ ------------
121,086 125,603
Income before income taxes 439 6,213
Provision for income taxes 371 1,211
------------ ------------
Net income after income taxes 68 5,002
============ ============
Earnings per share:
Net income per share $ 0.01 $ 0.37
============ ============
Weighted average ordinary
shares and equivalents 14,470 13,702
============ ============
See notes to condensed consolidated financial statements.
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FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
NINE MONTHS ENDED
DECEMBER 31,
------------------------------
1996 1995
------------ ------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
Net sales $ 362,264 $ 322,645
Costs and expenses:
Cost of sales 325,827 293,461
Selling, general and administrative 19,101 13,255
expenses
Goodwill & intangibles amortisation 863 783
Provision for plant closings 2,321 0
Interest expense and other, net 1,450 1,121
------------ ------------
349,562 308,620
Income before income taxes 12,702 14,025
Provision for income taxes 2,166 2,399
------------ ------------
Net income after income taxes 10,536 11,626
============ ============
Earnings per share:
Net income per share $ 0.73 $ 0.89
============ ============
Weighted average ordinary
shares and equivalents 14,377 13,130
============ ============
See notes to condensed consolidated financial statements.
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FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
DECEMBER 31,
------------------------------
1996 1995
------------ ------------
(IN THOUSANDS)
Net cash provided by (used for) operating $ 40,097 $ (10,894)
activities
Investing activities:
Purchases of property and equipment (17,857) (18,542)
Proceeds from sale of property and 732 103
equipment
Payment for business acquired, net of 0 (3,116)
cash acquired
Investment (3,000) 0
------------ ------------
Net cash used for investing activities (20,125) (21,555)
============ ============
Financing activities:
Borrowing from (repayment) to banks (8,645) 8,225
Source (repayment) of capital lease (4,851) 3,023
obligations
Source (repayment) of long-term debt 574 1,947
Repayment of loan from related party 1,381 0
Loan made to related party (1,938)
Net proceeds from issuance of share 825 22,929
capital
Repayment of notes payable (286) (23)
------------ ------------
Net cash provided by (used for) financing
activities (12,940) 36,101
============ ============
Net increase in cash 7,032 3,652
Cash, beginning of period 6,546 4,751
------------ ------------
Cash, end of period $ 13,578 $ 8,403
============ ============
See notes to condensed consolidated financial statements.
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FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
DECEMBER 31, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine month period ended December 31,
1996 are not necessarily indicative of the results that may be expected for the
year ended March 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in Flextronics International
Ltd.'s annual report on Form 10-K for the year ended March 31, 1996.
NOTE B - INVENTORIES
The components of inventory consist of the following:
DECEMBER 31 MARCH 31
1996 1996
------------ ------------
(In thousands)
Raw materials $ 40,610 $ 42,202
Work-in-process 9,573 14,049
Finished goods 1,028 962
------------ ------------
$ 51,211 $ 57,213
Less: Allowance for obsolescence (5,949) (4,576)
------------ ------------
$ 45,262 $ 52,637
============ ============
NOTE C: ACQUISITION
On November 25, 1996, the Company acquired Fine Line Printed Circuit
Design, Inc. ("Fine Line"), a circuit board layout and prototype operation
located in San Jose, California. The acquisition was accounted for as a pooling
of interests and the Company has issued 223,321 Ordinary Shares of S$0.01 par
value per share in exchange for all of the outstanding capital stock of Fine
Line. Prior period financial statements were not restated because the financial
results of Fine Line did not have a material impact on the consolidated result.
On December 20, 1996, the Company acquired 40% of FICO Investment Holding
Limited ("FICO") for $5.2 million of which $3 million was paid in December 1996
and the balance payment is due on April 1997. The Company has an option to
purchase the remainder 60% of FICO in 1998 and the consideration for the
remaining 60% is dependent on the financial performance of FICO for period
ending December 31, 1997. FICO produces injection molded plastics for
electronics companies with manufacturing facilities in Shenzhen, China.
In February 1997, the Company expects to enter into a definitive agreement to
acquire from Ericsson Business Networks AB ("Ericsson") 330,000 square feet of
manufacturing facilities in Karlskrona, Sweden and related inventory, equipment
and assets (the "Karlskrona Facilities") for cash. In connection with this
transaction,
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the Company anticipates that it will record a charge to earnings of
approximately $3.0 million in the fourth fiscal quarter of fiscal 1997, relating
to the anticipated costs of separating the Karlskrona Facilities from Ericsson's
management information systems and implementing a new management information
system, as well as transaction costs for the acquisition.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion contains projections and other forward-looking
statements regarding future events and the future financial performance of the
Company that involve a number of risks and uncertainties. While this outlook
represents the Company's current judgment on the future direction of the
business, such risks and uncertainties could cause actual events or results to
differ materially from any future performance suggested herein. Certain of the
factors that could cause actual events or results to differ are highlighted
herein. We also refer you to the documents the Company files from time to time
with the Securities and Exchange Commission, specifically the Company's Annual
Report on Form 10-K filed in June 1996 and fiscal year 1997 Form 10-Qs. This
document, as well as the Company's Form 10-K, Form 10-Qs and Form 8-Ks, contain
and identify important factors that could cause the Company's actual results to
differ materially from those contained in this report on Form 10-Q. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
Net Sales
Net sales for the three months ended December 31, 1996 decreased 7.8% to
$121.5 million from $131.8 million for the three months ended December 31, 1995
primarily due to reduced sales to certain customers, including Visioneer and
Apple Computer. Net sales for the nine months ended December 31, 1996 increased
12.3% to $362.3 million from $322.6 million for the nine months ended December
31, 1995. The increase was primarily due to new customers in the computer and
communications industries, such as Microsoft, U.S. Robotics and Advanced Fibre
Communications and the inclusion of sales of Astron after it was acquired in
February 1996. This increase was partially offset by reduced sales to certain
existing customers, including Apple Computer, Visioneer, and Houston Tracker
Systems. The Company believes that the reduction in sales to these customers in
the three and nine-month period was primarily due to reductions in these
customers' sales to end-users.
Gross Profit
Gross profit varies from period and is affected by, among other things,
product mix, component costs, product life cycles, unit volumes, startup,
expansion and consolidated of manufacturing facilities, pricing, competition and
new product introductions. Gross profit margin decreased to 8.3% for the three
months ended December 31, 1996 as compared to 9.0% for the three months ended
December 31, 1995. The decrease in the gross profit margin for the three months
ended December 31, 1996 was primarily due to a $0.9 million inventory write down
relating to the closure of the Texas and nChip facilities. See "--Provision for
Plant Closings." Gross profit margin increased to 10.0% for the nine months
ended December 31, 1996 as compared to 9.0% for the nine months ended December
31, 1995. The increase was mainly due to higher sales in the first two quarters
of the year resulting in better labor and overhead absorption, and the inclusion
of Astron's printed circuit board business which has historically had a
relatively higher gross profit margin than the Company. This benefit was
partially offset by underutilization of the nCHIP semiconductor fabrication
facility, and of the Company's Texas facility, which is being closed. See "--
Provision for Plant Closings." Gross margins may be adversely effected in the
short term as the Company commences production in new facilities, including the
Karlskrona Facilities, and may also be adversely affected by the relatively high
cost of manufacturing in Sweden.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended
December 31, 1996 increased to $6.9 million from $5.0 million for the three
months ended December 31, 1995 and increased as a percentage of net sales to
5.7% for the three months ended December 31, 1996 from 3.8% for the three months
ended December 31, 1995. Selling, general and administrative expenses for the
nine months ended December 31, 1996 increased to $19.1 million from $13.3
million in the nine months ended December 31, 1995 and increased as a percentage
of net sales from 4.1% to 5.3%. The increases, both in dollars and as a
percentage of sales, were principally due to the inclusion of Astron's selling,
general and administrative expenses after its acquisition in February 1996;
increases in staffing
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levels, corporate salaries and bonuses; increased sales and marketing expenses;
and travel and legal expenses related to recent acquisitions.
Goodwill and Intangible Assets Amortization
Goodwill and intangible assets are amortized on a straight line basis.
Goodwill and intangible amortization for the nine months ended December 31, 1996
increased to $863,000 from $783,000 for the nine months ended December 31, 1995,
primarily due to the Company's acquisitions of A&A and Astron.
Provision for Plant Closings
As the Company has implemented its facilities consolidation strategy, it
has incurred expenses for plant closings in fiscal 1996 and the nine months
ended December 31, 1996. In the three months ended December 31, 1996, the
Company incurred plant closing expense of $2.3 million in connection with the
closing of its Texas facility and the write-off of obsolete equipment at the
nCHIP semiconductor fabrication facility. The Texas facility had been primarily
dedicated to production for Global Village Communications and Apple Computer, to
whom the Company does not anticipate making substantial sales in future periods.
In addition, during this period, the Company began negotiations to sell the
nCHIP semiconductor fabrication facility to a third party. In the fourth quarter
of fiscal 1997, the Company expects to incur expenses of approximately $2.0
million in connection with its planned shift of manufacturing operations from
Singapore to lower cost manufacturing locations.
In the fourth quarter of fiscal 1996, the Company recorded charges
totaling $2.5 million for costs associated with the closing of one of the
Company's Malaysian plants and its Shekou, China operations. Production from the
Shekou facility was moved to the Company's plant in Xixiang, China.
Interest Expense and Other, Net
Interest expense and other, net decreased to $78,000 for the three
months ended December 31, 1996 from $354,000 for the three months ended
December 31, 1995, due to successful insurance claim, offset in part by an
increase in indebtedness to finance the Astron acquisition. Interest expense
and other, net increased to $1.5 million for the nine months ended December 31,
1996 from $1.1 million for the nine months ended December 31, 1995, mainly due
to indebtedness incurred in order to finance the Astron acquisition, offset in
part by a successful insurance claim. The Company expects its interest expense
to increase substantially as a result of the indebtedness which it expects to
incur to finance a portion of the purchase price of the Karlskrona Facilities.
Provision for Income Taxes
The Company is structured as a holding company, conducting its operations
through manufacturing and marketing subsidiaries in Singapore, Malaysia, Hong
Kong. Mauritius, China, the United Kingdom, the United States and the
Netherlands. Each of these subsidiaries is subject to taxation in the country in
which it has been formed. The Company's Asian manufacturing subsidiaries have at
various times been granted certain tax relief in each of these countries,
resulting in lower taxes than would otherwise be the case under ordinary tax
rates.
The Company's consolidated effective tax rate for any given period is
calculated by dividing the aggregate taxes incurred by each of the operating
subsidiaries and the holding company by the Company's consolidated pre-tax
income. Losses incurred by any subsidiary or by the holding company are not
deductible by the entities incorporated in other countries in the calculation of
their respective local taxes. For example, the charge for the closing of one
plant in Malaysia in fiscal 1996 was incurred by a Malaysian subsidiary that did
not have income against which this
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charge could be offset. The ordinary corporate tax rates for calendar 1996 were
26%, 16.5% and 15% in Singapore, Hong Kong and China, respectively, and 30% on
manufacturing operations in Malaysia. In addition, the tax rate is de minimis in
Labuan, Malaysia and Mauritius where the Company's offshore marketing and
distribution subsidiaries are located.
The Company's consolidated effective tax rate was 84.5 % for the three
months ended December 31, 1996, and 17.1% for the nine months ended December 31,
1996. The increase in the effective tax rate for the three month period was due
to the plant closing charges of $2.3 million, which was incurred by a subsidiary
that did not have income against which this charge could be offset. If the
provision for plant closings is excluded, the Company's consolidated effective
tax rate for the three month period would have been 13.4%.
The Company has structured its operations in Asia in a manner designed to
maximize income in countries where tax incentives have been extended to
encourage foreign investment or where income tax rates are low. The Company's
Singapore subsidiary was granted an investment allowance incentive in respect of
approved fixed capital expenditures subject to certain conditions. These
allowances have been utilized to reduce its taxable income since fiscal 1991,
and were fully utilized at the end of fiscal 1996. If the Singapore subsidiary
sells, leases or disposes of assets in respect of which investment allowances
have been granted before July 31, 1997, the amount of income previously exempted
from Singapore tax will then become taxable at the standard corporate tax rate
of 26.0%. The Company's investments in its plants in Xixiang and Doumen, China
fall under the "Foreign Investment Scheme" that entitles the Company to apply
for a five year tax incentive. The Company obtained the incentive for the Doumen
plant in December 1995 and the Xixiang plant in October 1996. With the approval,
the Company's tax rates on income from these facilities during the incentive
period will be 0% in years 1 and 2 and 7.5% in years 3 through 5, commencing in
the first profitable year. In fiscal 1993, the Company transferred its offshore
marketing and distribution functions to a newly formed marketing subsidiary
located in Labuan, Malaysia, where the tax rate is de minimus. In February 1996,
the Company transferred Astron's sales and marketing business to a newly formed
subsidiary in Mauritius, where the tax rate is 0%. The Company's Malaysian
manufacturing subsidiary has obtained a five-year pioneer certificate from the
relevant authority that provides a tax exemption on manufacturing income from
certain products in Johore, Malaysia. To date, this incentive has had a limited
impact on the Company due to the relatively short history of its Malaysian
operations and its tax allowances and losses carry forward. The Company's
facility in Shekou, China, which was closed in fiscal 1996, was located in a
"Special Economic Zone" and was an approved "Product Export Enterprise" that
qualified for a special corporate income tax rate of 10.0%.
If tax incentives are not renewed upon expiration, if the tax rates
applicable to the Company are rescinded or changed, or if tax authorities
challenge successfully the manner in which profits are recognized among the
Company's subsidiaries, the Company's worldwide effective tax rate would
increase and its results of operations and cash flow would be adversely
affected. Substantially all of the products manufactured by the Company's Asian
subsidiaries are sold to U.S.-based customers. While the Company believes that
profits from its Asian operations are not sufficiently connected to the U.S. to
give rise to U.S. federal or state income taxation, there can be no assurance
that U.S. tax authorities will not challenge the Company's position or, if such
challenge is made, that the Company will prevail in any such dispute. If the
Company's Asian profits became subject to U.S. income taxes, the Company's
worldwide effective tax rate would increase and its results of operations and
cash flow would be adversely affected. In addition, the expansion by the Company
of its operations in North America and Northern Europe may increase its
worldwide effective tax rate.
Variability of Results
The Company has experienced, and expects to continue to experience,
significant periodic and quarterly fluctuations in results of operations due to
a variety of factors. These factors include, among other things, timing of
orders, volume of orders relative to the Company's capacity, customers'
announcements and introduction, and market acceptance, of new products or new
generations of products, evolution in the life cycles of customer's products,
timing of expenditures in anticipation of future orders, effectiveness in
managing manufacturing processes, changes in cost and availability of labor and
components, mix of orders filled, and changes or anticipated changes in
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economic conditions. In addition, the Company's operating results are adversely
affected by seasonality (principally in Malaysia and China during each fourth
fiscal quarter due to local holiday seasons). The market segments served by the
Company are also subject to economic cycles and have in the past experienced,
and are likely in the future to experience, recessionary periods. A recessionary
period affecting the industry segments served by the Company could have a
material adverse effect on the Company's results of operations. Results of
operations in any period should not be considered indicative of the results to
be expected for any future period, and fluctuations in operating results may
also result in fluctuations in the price of the Company's Ordinary Shares. In
future periods, the Company's revenue or results of operations may be below the
expectations of public market analysts and investors. In such event, the price
of the Company's Ordinary Shares would likely be materially adversely affected.
Liquidity and Capital Resources
The Company has funded its operations from cash generated from operations,
bank debt, lease financing of capital equipment and the proceeds of public
offerings of equity securities. At December 31, 1996, the Company had cash
balances totaling $13.6 million, outstanding bank borrowings of $5.7 million,
and an aggregate of $42.3 million available for borrowing under its credit
facilities.
Net cash provided by operating activities was $40.1 million for the nine
months ended December 31, 1996, comprised primarily of net income, depreciation,
provision for plant closings and decreases in accounts receivable. Net cash used
for operating activities was $10.9 million for the nine months ended December
31, 1995, primarily due to increases in inventory and decreases in accounts
payable.
Accounts receivable, net of allowance for doubtful accounts, decreased to
$67.2 million at December 31, 1996 from $78.1 million at March 31, 1996. The
decrease in accounts receivable was mainly due to improved collection of
accounts receivable during the nine months ended December 31, 1996. Inventories
decreased to $45.3 million at December 31, 1996 from $52.6 million at March 31,
1996. The Company's allowance for doubtful accounts increased to $4.3 million at
December 31, 1996 from $3.6 million at March 31, 1996. The Company's allowance
for inventory obsolescence increased to $5.9 million at December 31, 1996 from
$4.6 million at March 31, 1996. The increases in the allowances for both
doubtful accounts and inventory obsolescence were due to the increase in sales
in the nine month period.
Net cash used for investing activities during the nine months ended
December 31, 1996 was $20.1 million which consisted primarily of expenditures
for the construction in progress at the new campus in Doumen, China; purchases
of machinery and equipment in the San Jose, California and Xixiang, China
facilities; the purchases of land in Guadalajara, Mexico and San Jose,
California; and the investment in FICO. Net cash used for investing activities
during the nine months ended December 31, 1995 was $21.6 million which consisted
primarily of purchases of machinery and equipment in the Company's manufacturing
facilities located in Texas, California and Xixiang, China.
Net cash used for financing activities was $12.9 million for the nine
months ended December 31, 1996 and consisted primarily of repayment of bank
loans and capital lease obligations. Net cash provided by financing activities
was $36.1 million for the nine months ended December 31, 1995 and consisted
primarily of borrowings from banks and net proceeds from the issuance of share
capital. Bank borrowings decreased from $14.4 million at March 31, 1996 to $5.7
million at December 31, 1996 as the Company repaid bank loans using cash
provided by the operating activities.
The Company presently anticipates that its capital expenditures in the
fourth quarter of fiscal 1997 will be approximately $5.0 million to $7.0 million
(excluding the purchase price for the Karlskrona Facilities) and anticipate that
its capital expenditures in fiscal 1998 will be approximately $20 million to $35
million, primarily relating to the development of new and expanded facilities in
San Jose, California, Guadalajara, Mexico, and Doumen, China. In addition, the
Company will be required to expend cash in the fourth quarter of fiscal 1997 and
in fiscal 1998 pursuant to the terms of the Astron acquisition. The Company will
be required to make principal payments of $10 million and $5 million in February
1997 and February 1998, respectively, pursuant to the terms of promissory notes
issued by it in connection with the Astron acquisition, and will be required to
pay an earnout of up to an additional $12.5 million in cash and Ordinary Shares
on or about March 31, 1997, based on the pre-tax profit of Astron for the year
ended December 31, 1996. The Company is also required to make a $15.0 million
payment to Stephen J.L.
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Rees on June 30, 1998, conditioned upon his remaining employed as Chairman via
cash and Ordinary Shares, of Astron through that time. The Company believes that
existing cash balances, together with anticipated cash flow from operations and
amounts available under its existing and anticipated credit facilities, will be
sufficient to fund its operations (other than the planned acquisition of the
Karlskrona Facilities) through fiscal 1998.
To finance the planned acquisition of the Karlskrona Facilities, the
Company intends to use a combination of equity financing and anticipated
long-term and short-term financing arrangements, and is engaged in discussions
with financial institutions regarding such financing arrangement. No assurance
can be given as to the availability or terms of any such financing arrangements.
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PART II - OTHER INFORMATION
Items 1 through 5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: (10.1) Lease dated November 19, 1996 between
John and Susan Sobrato 1979 Revocable Trust and
Flextronics International USA, Inc.
(10.2) Sale and Purchase Agreement dated November 29,
1996 between FICO Forest Industrial Co. Limited
and the Company. Certain Schedules to the Sale
and Purchase Agreement have been omitted. The
Company agrees to furnish supplementally a copy
of any omitted Schedule to the Commission upon
request.
(10.3) Promissory Note & Security Agreement dated
December 19, 1996 in the amount of $650,000
payable by Mr. Richard Davis to the Company.
(10.4) Promissory note dated October 22, 1996 in the
amount of $135,900 payable by Mr. Michael McNamara
to the Company.
(11.1) Statement re: computation of earnings per share.
(11.2) Statement re: computation of earnings per share.
(27.1) Financial Data Schedule.
(b) Reports on Form 8-K: Current Report on Form 8-K filed on November 19, 1996
in connection with the Company's press announcing the letter of intent to
acquire the Karlskrona Facility and the acquisition of Fine Line.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
FLEXTRONICS INTERNATIONAL LTD.
(Registrant)
Date February 12, 1997
----------------------------- --------------------------------------
Michael E. Marks, Chief Executive
Officer
Date February 12, 1997
----------------------------- --------------------------------------
Goh Chan Peng, Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Document Description
- ---------- ---------------------
10.1 Lease dated November 19, 1996 between John and Susan
Sobrato 1979 Revocable Trust and Flextronics International USA,
Inc.
10.2 Sale and Purchase Agreement dated November 29, 1996 between FICO
Forest Industrial Co. Limited and the Company. Certain Schedules to
the Sale and Purchase Agreement have been omitted. The Company
agrees to furnish supplementally a copy of any omitted Schedule to
the Commission upon request.
10.3 Promissory Note & Security Agreement dated December 19, 1996 in the
amount of $650,000 payable by Mr. Richard Davis to the Company.
10.4 Promissory note dated October 22, 1996 in the amount of $135,900
payable by Mr. Michael McNamara to the Company.
11.1 Statement re: computation of earnings per share.
11.2 Statement re: computation of earnings per share.
27.1 Financial Data Schedule.
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