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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

FORM 10-Q
------------------------

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 1997

[ ] 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 Exchange 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 [ ]

Number of Ordinary Shares S$0.01 par value, as of February 2, 1998:
19,337,780

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2

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION

PAGE
-----

Item 1. Financial Statements
Condensed Consolidated Balance Sheets -- December 31, 1997 and March 31,
1997........................................................................ 3
Condensed Consolidated Statements of Income -- Three and Nine Months Ended
December 31, 1997 and 1996.................................................. 4
Condensed Consolidated Statements of Cash Flow -- Nine Months Ended December
31, 1997 and 1996........................................................... 5
Notes to Condensed Consolidated Financial Statements.......................... 6-7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................. 8-18

PART II. OTHER INFORMATION
Items 1 through 6............................................................. 19
Signatures.................................................................... 20

2
3

PART I -- FINANCIAL INFORMATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

DECEMBER
31, MARCH 31,
1997 1997
----------- ---------
(UNAUDITED)

CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 73,333 $ 24,159
Accounts receivable, net........................................... 122,613 87,507
Inventories........................................................ 147,115 124,362
Deferred income taxes and other current assets..................... 35,697 18,368
-------- --------
Total current assets....................................... 378,758 254,396
PROPERTY AND EQUIPMENT, net.......................................... 204,996 149,015
OTHER NON-CURRENT ASSETS............................................. 50,244 42,881
-------- --------
Total assets......................................................... $ 633,998 $ 446,292
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank borrowings and current portion of long-term debt.............. $ 20,278 $ 128,515
Capital lease obligations.......................................... 8,483 8,273
Accounts payable and accrued liabilities........................... 131,663 141,090
Other current liabilities.......................................... 67,710 6,763
-------- --------
Total current liabilities.................................. 228,134 284,641
-------- --------
LONG-TERM DEBT, net of current portion............................... 158,998 9,029
CAPITAL LEASE OBLIGATIONS, net of current portion.................... 18,483 20,099
DEFERRED INCOME TAXES................................................ 4,012 3,710
OTHER NON-CURRENT LIABILITIES........................................ 15,804 28,326
MINORITY INTEREST.................................................... 1,160 1,142
-------- --------
SHAREHOLDERS' EQUITY:
Ordinary Shares, S$0.01 par value; Authorized -- 100,000,000
Shares; issued and outstanding -- 19,292,214 and 16,482,243 as
of December 31, 1997 and March 31, 1997, respectively........... 125 107
Additional paid-in capital......................................... 204,263 106,556
Accumulated deficit................................................ 8,021 (7,020)
Accumulated translation adjustment................................. (5,002) (298)
-------- --------
Total shareholders' equity................................. 207,407 99,345
-------- --------
Total liabilities and shareholders' equity........................... $ 633,998 $ 446,292
======== ========

The accompanying notes are an integral part of these financial statements.

3
4

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------

NET SALES............................................. $295,000 $161,248 $782,013 $467,787
COST OF SALES......................................... 266,192 148,614 705,496 421,931
-------- -------- -------- --------
Gross margin..................................... 28,808 12,634 76,517 45,856
OPERATING EXPENSES:
Selling, general and administrative expenses........ 13,773 9,333 38,143 26,101
Goodwill and intangibles amortization............... 951 749 2,704 2,152
Provision for plant closings........................ -- 2,321 -- 2,321
-------- -------- -------- --------
Income (loss) from operations.................... 14,084 231 35,670 15,282
OTHER INCOME AND EXPENSE:
Merger-related expenses............................. 4,000 -- 4,000 --
Other expense, net.................................. 2,946 173 9,705 2,434
-------- -------- -------- --------
Income before income taxes............................ 7,138 58 21,965 12,848
Provision for income taxes............................ 1,197 281 2,856 2,029
-------- -------- -------- --------
Net income (loss)..................................... $ 5,941 $ (223) $ 19,109 $ 10,819
======== ======== ======== ========
Basic net income (loss) per share..................... $ 0.31 $ (0.01) $ 1.07 $ 0.65
======== ======== ======== ========
Diluted net income (loss) per share................... $ 0.29 $ (0.01) $ 1.03 $ 0.62
======== ======== ======== ========
Weighted average Ordinary Shares and equivalents
outstanding -- basic................................ 19,361 16,792 17,842 16,706
======== ======== ======== ========
Weighted average Ordinary Shares and equivalents
outstanding -- diluted.............................. 20,379 16,792 18,631 17,358
======== ======== ======== ========

The accompanying notes are an integral part of these financial statements.

4
5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

NINE MONTHS ENDED
DECEMBER 31,
---------------------
1997 1996
-------- --------

Net cash and cash equivalents provided by operating activities......... $ 4,435 $ 42,078
-------- --------
Investing activities:
Purchases of property and equipment.................................. (65,944) (24,557)
Proceeds from sale of property and equipment......................... 1,095 1,279
Proceeds from disposal of subsidiary................................. -- 1,341
Payment for Astron earnout........................................... (6,250) --
Payment to FICO for 40% interest..................................... (2,200) (3,000)
Minority investments................................................. (2,756) (87)
Effect of Energipilot and DTM acquisitions........................... 1,504 --
-------- --------
Net cash and cash equivalents used in investing activities............. (74,551) (25,024)
-------- --------
Financing activities:
Repayments of bank borrowings and long-term debt..................... (120,750) (8,693)
Property and equipment refinanced under capital leases............... -- 1,031
Repayment of capital lease obligations............................... (7,298) (5,882)
Borrowings under long-term debt...................................... 3,220 1,524
Repayment of loan from related party................................. -- 1,381
Repayments from (loans to) related party............................. 2,975 (1,938)
Repayment of notes payable........................................... (108) (286)
Net proceeds from exercise of stock options.......................... 1,136 1,205
Net proceeds from issuance of senior subordinated notes.............. 145,687 --
Net proceeds from equity offering.................................... 95,297 --
-------- --------
Net cash and cash equivalents provided by (used in) financing
activities........................................................... 120,159 (11,658)
-------- --------
Effect of exchange rate changes on cash and cash equivalents........... (869) (186)
-------- --------
Net increase in cash and cash equivalents.............................. 49,174 5,210
Cash and cash equivalents, beginning of period......................... 24,159 8,647
-------- --------
Cash and cash equivalents, end of period............................... $ 73,333 $ 13,857
======== ========

The accompanying notes are an integral part of these financial statements.

5
6

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(UNAUDITED)

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 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
only of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended December 31, 1997 are not necessarily indicative of the results that may
be expected for the year ending March 31, 1998.

On October 30, 1997 the Company acquired 92% of the outstanding shares of
Neutronics Electronics Industries Holding AG ("Neutronics"), an Austrian PCB
assembly company with operations in Austria and Hungary, in exchange for
2,806,000 Ordinary Shares of the Company.

This transaction was accounted for as a pooling-of-interests and
accordingly, the accompanying condensed consolidated financial statements have
been restated to reflect the merger as if it occurred at the beginning of the
first period presented. Neutronics' fiscal year ends on December 31. The
condensed consolidated income statements combine Neutronics' results for the
nine months and three months ended December 31, 1997 with Flextronics results
for the nine months and three months ended December 31, 1997. The condensed
balance sheets as of March 31, 1997 and December 31, 1997 include Neutronics'
balance sheets as of December 31, 1996 and 1997, respectively. Neutronics net
loss of $3.2 million for the three months ended March 31, 1997 has been recorded
as an adjustment to retained earnings. A reconciliation of previously reported
results for the three and nine months ended December 31, 1996 to the results in
this form 10-Q is as follows:

THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 DECEMBER 31, 1996
------------------ -----------------

Net sales:
Previously reported..................... $121,525 $ 361,884
Neutronics.............................. 39,723 105,903
-------- --------
As restated............................. $161,248 $ 467,787
======== ========
Net income:
Previously reported..................... $ (309) $ 9,029
Neutronics.............................. 86 1,790
-------- --------
As restated............................. $ (223) $ 10,819
======== ========

NOTE B -- INVENTORIES

Inventories consist of the following:

DECEMBER 31, MARCH 31,
1997 1997
------------ ---------
(IN THOUSANDS)

Raw materials........................................ $118,034 $ 80,010
Work-in-process...................................... 26,524 16,665
Finished goods....................................... 2,557 27,687
-------- --------
Total...................................... $147,115 $ 124,362
======== ========

6
7

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(UNAUDITED)

NOTE C -- RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997, FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure," which will be adopted by the Company in the fiscal
quarter ending March 31, 1998. SFAS No. 129 requires companies to disclose
certain information about their capital structure. The Company does not
anticipate that SFAS No. 129 will have a material impact on its financial
statements.

In July 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which is effective for fiscal years ending after December 15, 1997. The Company
does not anticipate that SFAS No. 130 will have a material effect on its
financial position, results of operations, or cash flows.

In June 1997, FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. The Company does not anticipate that SFAS No.
131 will have a material impact on its financial statements.

NOTE D -- DILUTED NET INCOME PER SHARE

Diluted net income per share for each period is calculated in accordance
with SFAS No. 128 by dividing net income by the weighted average Ordinary Shares
and Ordinary Share equivalents outstanding during the period using the treasury
stock method for diluted net income per share and by the weighted average
Ordinary Shares outstanding for basic net income per share. Ordinary Share
equivalents consist of shares issuable upon the exercise of outstanding Ordinary
Share options and warrants.

7
8

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Except for historical information contained herein, the matters discussed
in this Form 10-Q are forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended. In this Report, the words "expects,"
"anticipates," "believes," "intends," "plans" and similar expressions identify
forward-looking statements, which speak only as of the date hereof. These
forward-looking statements are subject to certain risks and uncertainties,
including, without limitation, those discussed in Item 2, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Certain Factors Affecting Future Operating Results," that could
cause results to differ materially from historical results or those anticipated.
The Company undertakes no obligation to publicly disclose any revisions to these
forward-looking statements to reflect events or circumstances occurring
subsequent to the filing of this Form 10-Q with the Securities and Exchange
Commission. Readers are urged to carefully review and consider the various
disclosures made by the Company in this Report and in the Company's other
reports filed with the Securities and Exchange Commission, including its Form
10-K and its other Forms 10-Q, that attempt to advise interested parties of the
risks and factors that may affect the Company's business.

OVERVIEW

In recent years, the Company has substantially expanded its manufacturing
capacity, technological capabilities and service offerings, through both
acquisitions and internal growth. See "-- Certain Factors Affecting Future
Operating Results -- Management of Expansion and Consolidation."

In January 1995, the Company acquired nCHIP, Inc. ("nCHIP") in exchange for
an aggregate of approximately 2,450,000 Ordinary Shares in a transaction
accounted for as a pooling-of-interests. The Company has sold nCHIP's
semiconductor wafer fabrication facilities to a third party in February 1998.

In February 1996, the Company acquired Astron Group Limited ("Astron") in
exchange for (i) $13.4 million in cash, (ii) $15.0 million in 8% promissory
notes ($10.0 million of which was paid in February 1997 and $5.0 million of
which was paid in February 1998), (iii) 238,684 Ordinary Shares issued at
closing and (iv) Ordinary Shares with a value of $10.0 million to be issued on
June 30, 1998. The Company also paid an earn-out of an additional $6.25 million
in cash in April 1997, based on the pre-tax profit of Astron for the calendar
year ended December 31, 1996. In addition, the Company agreed to pay a $15.0
million consulting fee in June 1998 to an entity affiliated with Stephen Rees, a
former shareholder and the Chairman of Astron, pursuant to a services agreement
among the Company, one of its subsidiaries and the affiliate of Mr. Rees (the
"Services Agreement"). Payment of the fee was conditioned upon, among other
things, Mr. Rees' continuing as Chairman of Astron through June 1998. Mr. Rees
currently also serves as a director and executive officer of the Company.

In March 1997, the Company and Mr. Rees' affiliate agreed to remove the
remaining conditions to payment of the fee and to reduce the amount of the fee,
which remains payable in June 1998, to $14.0 million. This reduction was
negotiated in view of (i) a settlement in March 1997 of the amount of the
earnout payable by the Company to the former shareholders of Astron in which the
Company agreed to certain matters, previously in dispute, affecting the amount
of the earn-out payment, and (ii) the elimination of the conditions to payment
and of Mr. Rees' ongoing obligations under the Services Agreement.

On March 27, 1997, the Company acquired from Ericsson Business Networks AB
("Ericsson") two manufacturing facilities (the "Karlskrona Facilities") located
in Karlskrona, Sweden and related inventory, equipment and other assets for
approximately $82.4 million in cash. The acquisition was financed by borrowings
from banks and accounted for under the purchase method. The Karlskrona
Facilities include a 220,000 square foot facility and a 110,000 square foot
facility, each of which is ISO 9002 certified. At the same time, the Company and
Ericsson entered into a multi-year purchase agreement under which the Company
manufactures and Ericsson purchases certain products used in the business
communications systems sold by Ericsson. The Company is currently utilizing the
Karlskrona Facilities to assemble and test printed circuit boards, network
switches, cordless base stations and other components for these systems. The
Company also intends to use the Karlskrona Facilities to offer advanced contract
manufacturing services to

8
9

other European OEMs. Approximately 965 employees are currently based at the
Karlskrona Facilities. See "-- Certain Factors Affecting Future Operating
Results -- Risks of Acquisitions."

On October 30, 1997, the Company acquired 92% of the outstanding shares of
Neutronics Electronics Industries Holding AG ("Neutronics"), an Austrian PCB
assembly company with operations in Austria and Hungary, in exchange for
2,806,000 Ordinary Shares of the Company. Shing Leong Hui, Neutronics' majority
shareholder prior to the acquisition, has been appointed to the Company's board
of directors. Neutronics' subsidiaries have three manufacturing facilities in
Hungary (including a campus in Sarvar) and one manufacturing facility in
Austria. These facilities, which total 718,000 square feet and have a total of
approximately 3,500 employees, are engaged primarily in PCB assembly, as well as
related activities such as engineering and design and injection molded plastics.
Neutronics' net sales in the twelve months ended June 30, 1997 were
approximately $142.6 million. Neutronics' largest customer is Philips
Electronics, which accounted for approximately 57% of its net sales for the nine
month period ended September 30, 1997. The acquisition of Neutronics has been
accounted for as a pooling-of-interests and accordingly, its accompanying
condensed consolidated financial statements have been restated to reflect the
acquisition of Neutronics as if it occurred at the beginning of the earliest
period presented.

On December 1, 1997 the Company acquired DTM Products, Inc. ("DTM"), a
Colorado-based producer of injection molded plastics for North American OEMs, in
exchange for 252,469 Ordinary Shares, and Energipilot AB ("Energipilot"), a
Swedish company principally engaged in providing cables and cable assemblies for
Northern European OEMs, in exchange for 229,990 Ordinary Shares. The
acquisitions of DTM and Energipilot have been accounted for as
poolings-of-interests. The Company did not restate its prior period financial
statements with respect to these acquisitions because they did not have a
material impact on its consolidated results. In January 1998, the Company signed
a definitive agreement to acquire Conexao Informatica Ltda., a leading contract
manufacturer in Brazil. The acquisition will be accounted for as a
pooling-of-interests and is scheduled to close on April 1, 1998. This
acquisition is not expected to have a material impact on the Company's
consolidated results.

The Company incurred expenses of approximately $4.0 million during the
quarter ended December 31, 1997 associated with the acquisitions of Neutronics,
DTM and Energipilot. The ability of the Company to obtain the benefits of these
acquisitions is subject to a number of risks and uncertainties, including the
Company's ability to successfully integrate the acquired operations and its
ability to maintain, and increase, sales to customers of the acquired companies.
There can be no assurance that any mergers or acquisitions will not materially
affect the Company. See "-- Certain Factors Affecting Future Operating
Results -- Acquisitions."

In addition to acquisitions, the Company has also substantially increased
overall capacity by expanding operations in North America, Asia and Europe in
the nine months ended December 31, 1997. In North America, the Company has
recently leased a new 71,000 square foot facility from which the Company offers
a wide range of engineering services, and in July 1997 the Company completed
construction of a new 73,000 square foot facility dedicated to high volume PCB
assembly. These new facilities are located adjacent to the Company's other San
Jose operations. Also in July 1997, the Company completed construction of a
101,000 square foot manufacturing facility on a 32-acre campus site in
Guadalajara, Mexico. In Asia, the Company has expanded its Doumen facilities by
developing an additional 224,000 square feet for miniaturized gold-finished PCB
fabrication and for PCB and full system assembly. The Company completed the
construction of this expanded facility in June 1997 and has commenced production
at the new and expanded facilities. The Company plans to significantly expand
its manufacturing campuses in Shenzhen, China, Sarvar, Hungary, Guadalajara,
Mexico and San Jose, California by adding new facilities and equipment.

9
10

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain
statement of operations data expressed as a percentage of net sales.

THREE MONTHS NINE MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
--------------- ---------------
1997 1996 1997 1996
----- ----- ----- -----

Net sales................................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................... 90.2 92.2 90.2 90.2
----- ----- ----- -----
Gross profit.............................................. 9.8 7.8 9.8 9.8
Selling, general and administrative expenses................ 4.7 5.8 4.9 5.6
Goodwill and intangible assets amortization................. 0.3 0.5 0.4 0.4
Provision for plant closings................................ -- 1.4 -- 0.5
----- ----- ----- -----
Operating income.......................................... 4.8 0.1 4.5 3.3
Merger-related expenses..................................... 1.4 -- 0.5 --
Other income and expense net................................ 1.0 0.1 1.2 0.6
----- ----- ----- -----
Income before income taxes................................ 2.4 -- 2.8 2.7
Provision for income taxes.................................. 0.4 0.1 0.4 0.4
----- ----- ----- -----
Net income/(loss)......................................... 2.0 (0.1) 2.4 2.3
===== ===== ===== =====

Net Sales

Net sales for the three months ended December 31, 1997 increased 83% to
$295.0 million from $161.2 million for the three months ended December 31, 1996.
Net sales for the nine months ended December 31, 1997 increased 67% to $782.0
million from $467.8 million for the nine months ended December 31, 1996. The
increase in sales for the three and nine months was primarily due to (i) sales
to Ericsson following the March 27, 1997 acquisition of the Karlskrona
Facilities, and (ii) an increase in sales to certain existing customers
including Advanced Fibre Communications, Microsoft and Braun/Thermoscan. This
increase was partially offset by reduced sales to certain customers, including
Minebea, Visioneer, 3Com/US Robotics and Global Village. See "-- Certain Factors
Affecting Future Operating Results -- Customer Concentration; Dependence on
Electronics Industry" and "-- Certain Factors Affecting Future Operating
Results -- Risks of Karlskrona Acquisition."

The Company's largest customers during both the three month and nine month
periods ended December 31, 1997 were Ericsson and Philips Electronics. Net sales
to Ericsson for the three and nine month periods accounted for approximately 30%
and 28%, respectively, of net consolidated sales while net sales to Philips
Electronics for the three and nine month periods accounted for approximately 12%
and 11%, respectively, of net consolidated sales. No other customer accounted
for more than 10% of consolidated net sales for the three month and nine month
periods ended December 31, 1997.

Gross Profit

Gross profit varies from period to period and is affected by, among other
things, product mix, component costs, product life cycles, unit volumes,
startup, expansion and consolidation of manufacturing facilities, pricing,
competition and new product introductions. Gross profit margin increased to 9.8%
for the three months ended December 31, 1997 compared to 7.8% for the three
months ended December 31, 1996. The increase in gross profit margin was
primarily attributable to the additional costs in the quarter ended December 31,
1996 associated with the closing of manufacturing operations at the Company's
Richardson, Texas facility and the closure of the Company's nChip fabrication
facility. These costs primarily represented the write-off of materials
associated with the discontinuation of production for certain customers. Gross
profit margin remained at 9.8% for both the nine months ended December 31, 1997
and December 31, 1996. The gross profit margin for the three and nine months
ended December 31, 1997 was unfavorably impacted by

10
11

increased depreciation, rent and other fixed expenses as the Company commenced
volume production in the new facilities in Doumen, China and Guadalajara,
Mexico. These expenses are expected to continue to increase in fiscal 1999. See
" -- Certain Factors Affecting Future Operating Results -- Management of
Consolidation and Expansion." The effect of these expenses on the Company's
gross profit margin was partially offset by the Company's manufacturing several
products on a consignment basis, which typically have higher gross profit
margins than turnkey projects. The Company anticipates that consignment
activities will decline as a percentage of its net sales in future periods.
Prices paid to the Company by its significant customers can vary significantly
based on the customer's order level, with per unit prices typically declining as
volumes increase. These changes in price and volume can materially affect the
Company's gross profit margin.

Cost of sales included research and development costs of approximately
$299,000 and $229,000 in the three months ended December 31, 1997 and 1996,
respectively, and $860,000 and $687,000 for the nine months ended December 31,
1997 and 1996, respectively. These costs are associated with research and
development expenditures in the Company's Astron facility in Doumen, China.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended
December 31, 1997 increased to $13.8 million from $9.3 million for the three
months ended December 31, 1996 but decreased as a percentage of net sales to
4.7% for the three months ended December 31, 1997 from 5.8% for the three months
ended December 31, 1996. Selling, general and administrative expenses for the
nine months ended December 31, 1997 increased to $38.1 million from $26.1
million for the nine months ended December 31, 1996 but decreased as a
percentage of net sales to 4.9% for the nine months ended December 31, 1997 from
5.6% for the nine months ended December 31, 1996. The increase in selling
expenses was primarily due to the addition of new sales personnel in the United
States and Europe and the inclusion of Fine Line's selling expenses; the
increase in general and administrative expenses was primarily due to the
inclusion of the operations of the Karlskrona facilities; and the increase in
corporate expenses is primarily due to growth in infrastructure and the hiring
of additional internal support personnel.

Goodwill and Intangible Assets Amortization

Goodwill and intangible assets are amortized on a straight line basis.
Goodwill and intangible amortization for the three months ended December 31,
1997 increased to $951,000 from $749,000 for the three months ended December 31,
1996. Goodwill and intangible asset amortization for the nine months ended
December 31, 1997 increased to $2.7 million from $2.2 million for the nine
months ended December 31, 1996. The goodwill and intangible asset amortization
is primarily due to the Company's acquisition of Astron. In the second fiscal
quarter of 1998, the Company reduced its estimate of the useful lives of the
goodwill and intangible assets arising from the Astron acquisition from
approximately twenty years to approximately ten years. This reduction increased
the goodwill and intangible amortization assets per quarter by approximately
$279,000.

Merger Expenses

In the quarter ended December 31, 1997, the Company recorded a one-time
non-operating charge of approximately $4.0 million related to merger expenses
associated with the acquisitions of Neutronics, EnergiPilot AB, and DTM
Products, Inc. Until it was acquired by the Company, Neutonics had planned an
initial public offering and approximately $1.9 million of these merger expenses
represented the costs paid to the underwriters upon the cancellation of this
offering.

Other income and expense

Other expense, net for the three and nine months ended December 31, 1997
increased to $2.9 million and $9.7 million, respectively, from $173,000 and $2.4
million for the three and nine months ended December 31, 1996, respectively. The
increase was primarily due to increased bank borrowings to finance the
acquisition of the Karlskrona Facilities, capital expenditures, and the issuance
of $150.0 million principal amount of 8.75%

11
12

senior subordinated notes in October 1997. The Company anticipates that its
interest expense will increase in future periods as a result of borrowings under
its credit facility. See "-- Liquidity and Capital Resources."

THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------- -------------------
1997 1996 1997 1996
------- ------- ------- -------

Interest expense.................................... 4,331 1,359 13,183 4,513
Interest income..................................... (1,444) (179) (2,040) (437)
Foreign exchange gain (loss)........................ (62) (392) (1,201) 17
Income (loss) from associated company............... (590) 63 (1,162) 137
Gain on sale of subsidiary.......................... -- -- -- (1,027)
Other, net.......................................... 555 (708) 645 (950)
Minority interest................................... 156 30 280 181
------- ------ ------- -------
$ 2,946 $ 173 $ 9,705 $ 2,434
======= ====== ======= =======

Provision for Income Taxes

The Company is structured as a holding company, conducting its operations
through manufacturing and marketing subsidiaries in Austria, China, Hungary,
Malaysia, Mauritius, Mexico, the Netherlands, Singapore, Sweden, the United
Kingdom and the United States. Each of these subsidiaries is subject to taxation
in the country in which it has been formed. 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 manufacturing operations at the Company's facility in
Richardson, Texas in fiscal 1997 was incurred by a United States subsidiary that
did not have income against which this charge could be offset.

The Company's consolidated effective tax rate was 17% and 13% for the three
and nine month periods ended December 31, 1997, respectively, compared to 484%
and 16% for the three and nine months ended December 31, 1996, respectively. The
Company reduced the effective tax rate on certain of its subsidiaries that had
certain profitable operations by applying net loss carry forwards. In addition,
the Company has reduced the effective tax rate by shifting some of its
manufacturing operations from Singapore, which has an ordinary corporate tax
rate of 26%, to low cost manufacturing operations located in countries with
lower tax rates. 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
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. 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. 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, the short-term nature of most customers' purchase commitments, volume of
orders relative to the Company's capacity, customers' announcements,
introduction and market acceptance of new products or new generations of
products, evolution in the life cycles of customers' 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, timing of acquisitions and related expenses
and changes or anticipated changes in economic conditions. In addition, the
Company's revenues are adversely

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13

affected by the observance of local holidays during the fourth fiscal quarter in
Malaysia and China, reduced production levels in Sweden in July, and the
reduction in orders by certain customers in the fourth quarter reflecting a
seasonal slow-down following the Christmas holiday. 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 the proceeds of public offerings
of equity securities, cash and cash equivalents generated from operations, bank
debt and lease financing of capital equipment. At December 31, 1997, the Company
had cash and cash equivalents balances totaling $73.3 million, outstanding bank
borrowings of $14.5 million and an aggregate of $105.0 million available for
borrowing under its credit facility subject to compliance with certain financial
ratios.

Net cash and cash equivalents provided by operating activities for the nine
months ended December 31, 1997 decreased to $4.4 million from $42.1 million for
the nine months ended December 31, 1996. The decrease in cash and cash
equivalents from operating activities was primarily due to increases in accounts
receivables and inventories of $73.7 million partially offset by a $40.4
increase in accounts payable. Depreciation and amortization expense was $22.0
million and $13.4 million for the nine months ended December 31, 1997 and
December 31, 1996, respectively.

Accounts receivable, net of allowance for doubtful accounts increased to
$122.6 million at December 31, 1997 from $87.5 million at March 31, 1997. The
increase in accounts receivable was primarily due to a 67% increase in sales for
the nine months ended December 31, 1997. Inventories increased to $147.1 million
at December 31, 1997 from $124.4 million at March 31, 1997. The increase in
inventories was mainly a result of increased purchases of material to support
the growing sales. The Company's allowance for doubtful accounts increased from
$6.1 million at March 31, 1997 to $7.1 million at December 31, 1997. The
Company's allowance for inventory obsolescence increased from $6.2 million at
March 31, 1997 to $7.1 million at December 31, 1997.

Net cash and cash equivalents used in investing activities during the nine
months ended December 31, 1997 was $74.6 million, consisting primarily of
expenditures for new and expanded facilities, including the construction of new
facilities in Doumen, China, Guadalajara, Mexico and San Jose, California and
the acquisition of machinery and equipment in the facility in San Jose,
California and the Karlskrona Facilities. Net cash and cash equivalents used in
investing activities during the nine months ended December 31, 1996 was $25.0
million, consisting primarily of acquisitions of equipment and building
construction.

Net cash and cash equivalents provided by financing activities was $120.2
million for the nine months ended December 31, 1997 compared to net cash and
cash equivalents used by financing activities of $11.7 million for the nine
months ended December 31, 1996. Net cash and cash equivalents provided by
financing activities for the nine months ended December 31, 1997 resulted
primarily from the issuance of $150.0 million principal amount of senior
subordinated notes with net proceeds of $145.7 million and an equity offering of
2,185,000 Ordinary Shares with net proceeds of $95.3 million.

During the quarter ended March 31, 1997, the Company obtained a commitment
for a new $100.0 million credit facility for which it paid commitment fees of
$750,000. Ultimately, however, the Company required a larger credit facility in
order to fund the acquisition of the Karlskrona Facilities. As a result, the
$100.0 million credit facility was never consummated and expired during the
quarter unused. Instead of consummating this $100.0 million credit facility and
borrowing under this commitment, the Company entered into a $175.0 million
credit facility ("Credit Facility") in March 1997 to provide funding for the
acquisition of

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14

the Karlskrona Facilities, for capital expenditures and for general working
capital. The Company paid a separate $2.2 million fee for the Credit Facility
which, together with other direct costs of the Credit Facility, was capitalized
and is being amortized over the term of the Credit Facility.

The Credit Facility consists of two loan agreements. Under the Credit
Facility the Company borrowed a $70.0 million term loan on March 27, 1997 and,
subject to compliance with certain financial ratios and the satisfaction of
customary borrowing conditions, the Company and its United States subsidiary may
borrow up to an aggregate of $105.0 million of revolving credit loans. The
revolving credit loans are subject to a borrowing base equal to 70% of
consolidated accounts receivable and 20% of consolidated inventory. As of
December 31, 1997, no balances were outstanding on the revolving credit loans
and the $70.0 million term loan was repaid in October 1997. Loans under the
revolving credit facility will mature in March 2000. Loans to the Company are
guaranteed by certain of its subsidiaries and loans to the Company's United
States subsidiary are guaranteed by the Company and by certain of the Company's
subsidiaries. The Credit Facility is secured by a lien on substantially all
accounts receivable and inventory of the Company and its subsidiaries, as well
as a pledge of the Company's shares in certain of its subsidiaries. The Credit
Facility contains a number of operating and financial covenants and provisions.
The Company was in compliance with all financial covenants and provisions as of
December 31, 1997.

Proceeds from both the Company's October 1997 equity and senior
subordinated notes offerings were used to repay the $70.0 million term loan and
the $77.0 million outstanding balance of the Credit Facility. The Company
intends to continue to borrow revolving credit loans under the Credit Facility.
See "-- Certain Factors Affecting Future Operating Results -- Increased
Leverage."

The Company is in the process of substantially expanding its manufacturing
capacity at many of its facilities, and plans to significantly expand its
manufacturing campuses in Shenzhen, China, Sarvar, Hungary, Guadalajara, Mexico
and San Jose, California by adding new facilities and equipment. The Company's
capital expenditures for the nine months ended December 31, 1997 were
approximately $65.9 million, excluding new facilities and equipment utilized
under operating leases. The Company anticipates incurring significant capital
expenditures, and entering into substantial operating lease commitments, in
fiscal 1999, primarily relating to this expansion. The Company also anticipates
expending from $7.0 million to $15.0 million in the fourth quarter of fiscal
1998 and in fiscal 1999 to implement a new management information system. While
the actual amount of the Company's capital expenditures and lease commitments
will depend on a number of factors, including variations in construction
schedules, changes in actual and anticipated levels of customer orders and
decisions whether to lease or purchase new assets, the Company anticipates that
its aggregate capital lease expenditures and new operating lease commitments
will increase in fiscal 1999 from fiscal 1998 levels. The Company intends to
increase its use of operating leases for new equipment and facilities, and
accordingly anticipates that its operating lease commitments will increase
substantially in fiscal 1999. See "-- Certain Factors Affecting Future Operating
Results -- Management of Expansion and Consolidation." The Company will also be
required to expend cash in the fourth fiscal quarter of 1998 pursuant to the
terms of the Astron acquisition. The Company paid an earn-out of $6.25 million
in cash in April 1997, and made a principal payment of $5.0 million in February
1998 pursuant to the terms of a note issued by the Company in connection with
the Astron acquisition. The Company is also required to settle a $14.0 million
obligation to an entity affiliated with Stephen Rees in June 1998. Of this
amount, $5.0 million is payable in cash and $9.0 million is payable in cash or,
at the option of the Company, in Ordinary Shares, and the Company intends to pay
the $9.0 million portion in Ordinary Shares. The Company also anticipates that
its working capital requirements will increase in order to support anticipated
volumes of business. Future liquidity needs will depend on, among other factors,
the timing of expenditures by the Company on new equipment and facilities, the
extent to which the Company utilizes operating leases rather than capital
expenditures, levels of shipments by the Company and changes in volumes of
customer orders. The Company believes that the existing cash balances, together
with anticipated cash from operations and amounts available under the Credit
Facility, will be sufficient to fund its operations through fiscal 1999.

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15

CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS

The Company's future operating results will depend upon conditions in its
market that may affect demand for its services. The following factors, among
others, have in some cases affected, and in the future could affect, the
Company's actual results and could cause such results to differ materially from
those expressed in forward-looking statements made by the Company.

Increased Leverage

The Company has significant amounts of outstanding indebtedness and
interest cost. The Company's level of indebtedness presents risks, including the
possibility that the Company may be unable to generate cash sufficient to pay
the principal of and interest on the indebtedness when due. The Company's
indebtedness at December 31, 1997 included $150.0 million principal amount of
8.75% senior subordinated notes due 2007, $14.5 million in bank borrowings,
$27.0 million in capital lease obligations and $14.7 million of other debt
instruments. See "-- Liquidity and Capital Resources." The degree to which the
Company is leveraged could have important consequences to the Company and its
shareholders, including the following: (i) the Company's ability to obtain
additional financing may be impaired; (ii) the Company's operating flexibility
is limited by covenants that among other things, limit its ability to incur
additional indebtedness, grant liens, make capital expenditures and enter into
sale and leaseback transactions; and (iii) the Company's degree of leverage may
make it more vulnerable to economic downturns, may limit its ability to pursue
other business opportunities and may reduce its flexibility in responding to
changing business and economic conditions.

Management of Expansion and Consolidation

The Company is currently experiencing a period of rapid expansion through
both internal growth and acquisitions, with net sales increasing from $81.0
million in fiscal 1992 to $640.0 million in fiscal 1997 and $782.0 million in
the first nine months of fiscal 1998. There can be no assurance that the
Company's historical growth will continue or that the Company will successfully
manage the integration of the acquired operations. Expansion has caused, and is
expected to continue to cause, strain on the Company's infrastructure, including
its managerial, technical, financial and other resources. To manage further
growth, the Company must continue to enhance financial controls and hire
additional engineering and sales personnel. There can be no assurance that the
Company will be able to manage its expansion effectively, and a failure to do so
could have a material adverse effect on the Company's results of operations.

Expansion through acquisitions and internal growth has contributed to the
Company's incurring significant accounting charges and experiencing volatility
in its operating results. There can be no assurance that the Company will not
continue to experience volatility in its operating results or incur write-offs
in connection with its expansion efforts. See "-- Overview" and
"-- Acquisitions." In addition, the Company has recently completed the
construction of significant new facilities in Guadalajara, Mexico, Doumen, China
and San Jose, California, resulting in new fixed costs and other operating
expenses, including substantial increases in depreciation and rent expense that
will increase the Company's cost of sales. The Company anticipates significant
expenditures on new equipment and facilities in the fourth quarter of fiscal
1998, and in fiscal 1999, which will result in future substantial increases in
these expenses. There can be no assurance that the Company will utilize a
sufficient portion of the capacity of these new and expanded facilities to
offset the impact of these expenses on its gross margins and operating income.

15
16

constructing and equipping the new manufacturing facilities, and there can be no
assurance as to when it will complete construction. Any such difficulties or
delays could have a material adverse effect on the Company's business, financial
condition and results of operations. The development and construction of the new
facilities are subject to significant risks and uncertainties, including cost
estimation errors and overruns, construction delays, weather problems, equipment
delays or shortages, labor shortages and disputes, production start-up problems
and other factors. As many of such factors are beyond the Company's control, the
Company cannot predict the length of any such delays, which could be substantial
and could result in substantial cost overruns. Such delays would adversely
affect the Company's sales growth and the Company's ability to timely meet
delivery schedules. Furthermore, the Company's development and construction of
the new facilities will result in new fixed and operating expenses, including
substantial increases in depreciation expense and rental expense that will
increase the Company's cost of sales. If revenue levels do not increase
sufficiently to offset these new expenses, the Company's operating results could
be materially adversely affected.

Replacement of Management Information Systems; Year 2000 Compliance

The Company is beginning the process of replacing its management
information systems. The new systems will significantly affect many aspects of
the Company's business, including its manufacturing, sales and marketing, and
accounting functions, and the Company's ability to integrate the Karlskrona
Facilities, which must be converted to the new system. In addition, the
successful implementation of these systems will be important to facilitate
future growth. The Company currently anticipates that the complete installation
of its new management information systems will take at least eighteen months,
and implementation of the new systems could cause significant disruption in
operations. If the Company is not successful in implementing its new systems or
if the Company experiences difficulties in such implementation, the Company
could experience problems with the delivery of its products or an adverse impact
on its ability to access timely and accurate financial and operating
information.

The Company is in the process of identifying operating issues related to
the ability of its information systems to process dates beginning with the year
2000 ("Year 2000 compliance"). The new management information systems are
designed to be Year 2000 compliant. However, there can be no assurance that the
management information systems will be year 2000 compliant or that such systems
will be implemented by Year 2000, and any failure to be year 2000 compliant or
to effectively implement the new management information systems by Year 2000
could have a material adverse effect on the Company's business and results of
operations. There can be no assurance that the Company's customers and suppliers
have, or will have, management information systems that are Year 2000 compliant.
However, the Company does not anticipate that any Year 2000 compliance problems
facing its customers or suppliers would have a material adverse effect on the
Company's business and results of operations.

Acquisitions

Acquisitions have represented a significant portion of the Company's growth
strategy, and the Company intends to continue to pursue attractive acquisition
opportunities. Acquisitions involve a number of risks in addition to those
described under "-- Management of Expansion and Consolidation" that could
adversely affect the Company, including the diversion of management's attention,
the integration and assimilation of the operations and personnel of the acquired
companies, the amortization of acquired intangible assets and the potential loss
of key employees of the acquired companies.

The March 27, 1997 acquisition of the Karlskrona Facilities and the
execution of a multi-year purchase agreement (the "Purchase Agreement") between
the Company and Ericsson (together the "Karlskrona Acquisition") and the October
30, 1997 acquisition of Neutronics each represent a significant expansion of the
Company's operations, and entail a number of risks. The acquired operations are
now being integrated into the Company's ongoing manufacturing operations. This
requires optimizing production lines, implementing new management information
systems, implementing the Company's operating systems, and assimilating and
managing existing personnel. The difficulties of this integration may be further
complicated by the geographical distance of the Karlskrona Facilities and
Neutronics' operations from the Company's current operations in Asia and the
United States. In addition, these acquisitions have increased and will continue
to

16
17

increase the Company's expenses and working capital requirements, and place
burdens on the Company's management resources. In the event the Company is
unsuccessful in integrating these operations, the Company would be materially
adversely affected.

The Purchase Agreement contains cost reduction targets and price
limitations and imposes on the Company certain manufacturing quality
requirements, and there can be no assurance that the Company can achieve
acceptable levels of profitability under the Purchase Agreement or reduce costs
and prices to Ericsson over time as contemplated by the Purchase Agreement.

Customer Concentration; Dependence on Electronics Industry

A small number of customers are currently responsible for a significant
portion of the Company's net sales. The Company's largest customers in the nine
months ended December 31, 1997 was Ericsson and Philips Electronics, with net
sales to Ericsson and Philips Electronics accounting for approximately 28% and
11% of its total net sales, respectively. Net sales to the Company's top five
customers during the nine months ended December 31, 1997 accounted for
approximately 59% of consolidated sales compared to approximately 49% during the
nine months ended December 31, 1996.

The composition of the group comprising the Company's largest customers has
varied from year to year, and there can be no assurance that the Company's
principal customers will continue to purchase products and services from the
Company at current levels, if at all. Significant reductions in sales to any of
these customers, or the loss of one or more major customers, would have a
material adverse effect on the Company. The Company generally does not obtain
firm long-term volume purchase commitments from its customers, and over the past
few years has experienced reduced lead-times in customer orders. In addition,
customer contracts can be canceled and volume levels can be changed or delayed
and such cancellations and delays could affect the ability of the Company to
forecast purchase commitments accurately. The timely replacement of canceled,
delayed, or reduced contracts with new business cannot be assured.

The factors affecting the electronics industry in general, or any of the
Company's major customers in particular, could have a material adverse effect on
the Company. The markets in which the Company's customers compete are
characterized by rapidly changing technology, evolving industry standards and
continuous improvements in products and services. These conditions frequently
result in short product life cycles. The Company's success will depend to a
significant extent on the success achieved by its customers in developing and
marketing their products, some of which are new and untested. If technologies or
standards supported by customers' products become obsolete or fail to gain
widespread commercial acceptance, the Company's business may be materially
adversely affected.

Variability of Customer Requirements

Contract manufacturers must provide increasingly rapid product turnaround
and respond to ever-shorter lead times. The Company generally does not obtain
long-term purchase orders but instead works with its customers to anticipate the
volume of future orders. In certain cases, the Company will procure components
without a customer commitment to pay for them, and the Company must continually
make other significant decisions for which it is responsible, including the
levels of business that it will seek and accept, production schedules, personnel
needs and other resource requirements, based on estimate of future customer
requirements that are subject to significant change. A variety of conditions,
both specific to the individual customer and generally affecting the industry,
may cause customers to cancel, reduce or delay orders. Cancellations, reductions
or delays by a significant customer or by a group of customers would adversely
affect the Company, its results of operations, prospects of debt service
ability. On occasion, customers may require rapid increases in production, which
can stress the Company's resources and reduce margins. Although the Company has
increased its manufacturing capacity, there can be no assurance that the Company
will have sufficient capacity at any given time to meet its customers' demands
if such demands exceed anticipated levels.

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Competition

The electronics contract manufacturing industry is extremely competitive
and includes hundreds of companies, several of whom have achieved substantial
market share. Current and prospective customers also evaluate the Company's
capabilities against the merits of internal production. In addition, in recent
years the electronics contract manufacturing industry has attracted a
significant number of new entrants, including large OEMs with excess
manufacturing capacity, and many existing participants, including the Company,
have substantially expanded their manufacturing capacity by expanding their
existing facilities and adding new facilities. In the event of a decrease in
overall demand for contract manufacturing services, this increased capacity
could result in substantial pricing pressures, which could adversely affect the
Company's operating results. Certain of the Company's competitors, including
Solectron Corporation and SCI Systems, have substantially greater manufacturing,
financial, research and development and marketing resources than the Company.

Risks of International Operations

The geographical distances between Asia, the United States, Mexico and
Europe create a number of logistical and communications challenges. Because of
the location of manufacturing facilities in a number of countries, the Company
is affected by economic and political conditions in those countries. In
particular, the Company's operations and assets are subject to significant
political, economic, legal and other uncertainties in China, Hungary and Mexico,
where the Company is substantially expanding its operations, as well as in Hong
Kong, where the Company maintains certain administrative and procurement
operations. Changes in policies by the U.S. or foreign governments resulting in,
among other things, increased duties, higher taxation, currency conversion
limitations, restrictions on the transfer of funds, limitations on imports or
exports, or the expropriation of private enterprises could also have a material
adverse effect on the Company.

The Company does not believe that a material portion of its products are
sold by its customers to end users in Asian markets. As a result, the Company's
results of operations have not been significantly affected by recent adverse
economic conditions in East and Southeast Asian markets. However, continued
declined in such markets could have a material adverse affect on the Company's
results of operations.

Currency Fluctuations

While Flextronics transacts business predominantly in U.S. dollars and most
of its revenues are collected in U.S. dollars, a portion of Flextronics' costs
such as payroll, rent and indirect operation costs, are denominated in other
currencies such as Singapore dollars, Swedish kronor, Hong Kong dollars,
Malaysian ringgit, British pounds sterling, Austrian schillings, Hungarian
forints, and Chinese renminbis. Historically, fluctuations in foreign currency
exchange rates have not resulted in significant exchange losses to the Company.
Following the consummation of the Ericsson and Neutronics transactions, a
significant portion of the Company's business has been, and the Company expects
will continue to be, conducted in Swedish kronor, Austrian schilling, and
Hungarian forint. Changes in the relation of these and other currencies to the
U.S. dollar will affect the Company's cost of goods sold and operating margins
and could result in exchange losses.

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PART II -- OTHER INFORMATION

ITEMS 1 THROUGH 3.

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The information required by this item is incorporated by reference from
Item 4, Submission of Matters to a Vote of Security Holders contained in the
Company's Forms 10-Q for the quarterly period ended September 30, 1997.

ITEM 5.

Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) EXHIBITS:

EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------------------------

(10.1) Amended and Restated Revolving Credit Agreement dated as of January 14, 1998
among Flextronics International USA, Inc., BankBoston, N.A. and the lending
institutions listed on Schedule 1 attached thereto and BankBoston, N.A. as
agent with BancBoston Securities Inc. as arranger. The Company agrees to
furnish a copy of the omitted schedules to the Commission upon request.
(10.2) Amended and Restated Revolving Credit Agreement dated as of January 14, 1998
among Flextronics International Ltd., BankBoston, N.A. and the lending
institutions listed on Schedule 1 attached thereto and BankBoston, N.A. as
agent with BancBoston Securities Inc. as arranger. The Company agrees to
furnish a copy of the omitted schedules to the Commission upon request.
(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:

Form 8-K filed on November 10, 1997 reporting the acquisition of Neutronics
Electronics Industries Holding A.G. No financial statement was filed.

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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 thereunto duly authorized.

FLEXTRONICS INTERNATIONAL LTD.
(Registrant)

Date February 17, 1998 /s/ MICHAEL E. MARKS
-----------------------------------------------
Michael E. Marks
Chief Executive Officer

Date February 17, 1998 /s/ ROBERT R.B. DYKES
-----------------------------------------------
Robert R.B. Dykes
Senior Vice President, Finance and
Administration
and Chief Financial Officer

20
21

INDEX TO EXHIBITS

SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------- ------------

10.1 Amended and Restated Revolving Credit Agreement dated as of January 14,
1998 among Flextronics International USA, Inc., BankBoston, N.A. and the
lending institutions listed on Schedule 1 thereto and BankBoston, N.A. as
agent with BancBoston Securities Inc. as arranger. The Company agrees to
furnish a copy of the omitted schedules to the Commission upon
request..................................................................
10.2 Amended and Restated Revolving Credit Agreement dated as of January 14,
1998 among Flextronics International Ltd., BankBoston, N.A. and the
lending institutions listed on Schedule 1 thereto and BankBoston, N.A. as
agent with BancBoston Securities Inc. as arranger. The Company agrees to
furnish a copy of the omitted schedules to the Commission upon
request..................................................................
11.1 Statement re: computation of earnings per share..........................
11.2 Statement re: computation of earnings per share..........................
27.1 Financial data schedule..................................................