EXHIBIT 99.1
SOLECTRON REPORTS STRONG THIRD QUARTER RESULTS
- SEQUENTIAL REVENUES GROW 5.3%, GROSS MARGINS INCREASE FROM 4.5% TO 5.2% AND
CAPITAL STRUCTURE IS STRENGTHENED BY DEBT REDUCTION OF $2 BILLION -
For Immediate Release: June 17, 2004
MILPITAS, Calif. -- Solectron Corporation (NYSE: SLR), a leading provider of
electronics manufacturing and integrated supply chain services, today reported
sales of $3,040 million in the third quarter of fiscal 2004, up 5.3 percent from
$2,887 million in the second quarter and up 29 percent from $2,357 million in
the third quarter of last year.
The company reported a GAAP net loss from continuing operations in the third
quarter of $65 million, or 8 cents per share, compared with a GAAP net loss from
continuing operations of $2,686 million, or $3.24 per share, in the year-earlier
quarter. Excluding $6 million in restructuring and impairment charges and $72
million in expenses related to the early settlement of its Adjustable
Conversion-Rate Equity Security Units (ACES), Solectron had pro forma net income
from continuing operations of $13 million, or 1 cent per share, in the third
quarter of fiscal 2004.
"This was a milestone quarter for Solectron," said Mike Cannon, president and
chief executive officer. "We are pleased to have returned the company to
profitability after an extended period of losses. We improved our performance
across the board and we achieved many of our targets one quarter ahead of our
committed timeline. I am proud of the progress our global team has made and I am
confident our performance will continue to improve."
During the quarter, the company completed the sale of SMART Modular
Technologies, Stream International and Kavlico as part of a previously announced
plan to divest businesses that are not central to its business strategy. In
addition, the company yesterday announced a definitive agreement to sell Force
Computers.
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Solectron also continued to strengthen its balance sheet in the quarter, with
actions that lowered debt by $1,960 million. The company's
debt-to-capitalization ratio at the end of the third quarter was 34 percent,
compared with 71 percent at the end of the second quarter. That improvement was
achieved through the repurchase of $950 million in zero-coupon senior
convertible notes and the early settlement of 94 percent of the company's 7.25
percent ACES.
FOURTH-QUARTER GUIDANCE
Fiscal fourth-quarter guidance is for sales of $3,050 million to $3,200 million,
and for pro forma EPS from continuing operations, excluding restructuring and
impairment and other unusual items, to range from 3 cents to 5 cents.
PRO FORMA INFORMATION
In addition to disclosing results determined in accordance with generally
accepted accounting principles (GAAP), Solectron also discloses non-GAAP results
of operations that exclude certain items. By disclosing this pro forma
information, management intends to provide investors with additional information
to further analyze the company's performance, core results and underlying
trends. Management utilizes a measure of net income and earnings per share on a
pro forma basis that excludes certain charges to better assess operating
performance. Each excluded item is considered to be of a non-operational nature
in the applicable period. Earnings guidance is provided only on a pro forma
basis due to the inherent difficulty in forecasting. Consistent with industry
practice, management has historically applied these measures when discussing
earnings or earnings guidance and intends to continue doing so.
Pro forma information is not determined using GAAP; therefore, the information
is not necessarily comparable to other companies and should not be used to
compare the company's performance over different periods. Pro forma information
should not be viewed as a substitute for, or superior to, net income or other
data prepared in accordance with GAAP as measures of our profitability or
liquidity. Users of this financial information should consider the types of
events and transactions for which adjustments have been made.
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RECONCILIATION OF GAAP RESULTS TO PRO FORMA RESULTS FOR Q3 - FY 2004
(Dollars in millions, except per-share data)
Q3 - FY04
RESTRUCTURING PRO FORMA
AND IMPAIRMENT RESULTS
COSTS AND (EXCLUDING
Q3 - FY04 OTHER UNUSUAL RESTRUCTURING AND
GAAP RESULTS CHARGES OTHER CHARGES)
------------ -------------- -----------------
NET SALES $ 3,039.9 $ - $ 3,039.9
COST OF SALES $ 2,880.7 $ - $ 2,880.7
GROSS PROFIT $ 159.2 $ - $ 159.2
SG&A AND R&D COSTS $ 103.9 $ - $ 103.9
RESTRUCTURING AND IMPAIRMENT COSTS
AND OTHER UNUSUAL CHARGES $ 5.5 $ 5.5 $ -
OPERATING INCOME $ 49.8 $ (5.5) $ 55.3
INTEREST AND OTHER - NET $ (114.9) $ (72.4) $ (42.5)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE $ (65.1) $ (77.9) $ 12.8
INCOME TAX EXPENSE $ 0.3 $ - $ 0.3
INCOME (LOSS) FROM CONTINUING OPERATIONS $ (65.4) $ (77.9) $ 12.5
GAAP AND PRO FORMA BASIC NET INCOME (LOSS) PER SHARE $ (0.08) $ (0.09) $ 0.01
SHARES USED TO COMPUTE GAAP AND PRO FORMA BASIC NET INCOME (LOSS) PER SHARE 868.3 - 868.3
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EARNINGS PER SHARE SUMMARY
Q3 - FY04 Q2 - FY04 Q3 - FY03
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GAAP BASIC AND DILUTED NET INCOME (LOSS) PER SHARE $0.02 ($0.08) ($3.74)
FROM CONTINUING AND DISCONTINUED OPERATIONS
GAAP BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
FROM CONTINUING OPERATIONS ($0.08) ($0.11) ($3.24)
ANALYTICAL DATA
(Dollars in millions)
Q3 - FY04 Q2 - FY04 Q3 - FY03
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NET SALES $3,039.9 $2,887.4 $2,357.3
SALES PERCENTAGE BY MARKET
Communications 19.3% 18.1% 19.6%
Networking equipment 21.0% 21.8% 23.6%
Computing & Storage 28.9% 30.9% 34.3%
Consumer products 19.8% 20.5% 14.1%
Automotive 2.8% 2.4% 3.0%
Industrial(a) 6.1% 4.7% 3.3%
Other 2.1% 1.6% 2.1%
(a) Formerly named the semiconductor & test market
ANALYTICAL DATA
Q3 - FY04 Q2 - FY04 Q3 - FY03
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10 PERCENT CUSTOMERS
Nortel Networks (b) (b) 12.8%
Cisco Systems 12.8% 13.0% 12.0%
NEC (b) 10.2% (b)
(b) Less than 10%
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ASSET MANAGEMENT METRICS
Q3 - FY04 Q2 - FY04 Q3 - FY03
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INVENTORY TURNS 7.5 7.4 6.2
DAYS SALES OUTSTANDING 47 49 57
CASH-TO-CASH CYCLE (in days) 49 50 66
SELECTED FINANCIAL DATA, PRE-TAX
(Dollars in millions)
Q3 - FY04 Q2 - FY04 Q3 - FY03
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CAPITAL EXPENDITURES $ 32.8 $ 31.7 $ 28.1
DEPRECIATION EXPENSE $ 51.0 $ 54.1 $ 53.5
AMORTIZATION EXPENSE $ 4.7 $ 4.7 $ 5.8
WEBCAST TO BE HELD TODAY
At 4:30 p.m. EST today, Solectron will hold a conference call to discuss this
earnings report. A live Internet broadcast of the call can be joined by going to
www.solectron.com. Supplemental financial information related to the conference
call will also be available at this Web site location. Following the live
broadcast, the archived Webcast will be available at
www.solectron.com/investor/events.htm.
In addition, audio replays of the call will be available from two hours
following the call through June 24. Call (800) 642-1687 from within the United
States or (706) 645-9291 from outside the United States and specify pass code:
7495605.
SAFE HARBOR
This release contains forward-looking statements within the meaning of Section
27A of the Securities Exchange Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Specific forward-looking statements
relate to our financial outlook for the fourth quarter of fiscal 2004 and
beyond; the timing and amount of our planned divestitures; and our expectations
for continued profitability. These forward-looking statements involve a number
of risks and uncertainties, and are based on current expectations, forecasts and
assumptions.
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Actual outcomes and results could differ materially. These risks and
uncertainties include the prospects for recovery of the economy overall and in
the telecommunications and other electronics technology sectors in particular;
our ability to continue to win and satisfy customers; our ability to
successfully implement our initiatives related to gross margin improvement; the
accuracy of our projections of cash flows and capital requirements; whether we
will be able to divest certain assets and operations without undue disruption,
within the targeted timeframe, for the anticipated sales prices, and under the
terms of and conditions presently anticipated; the ability to effectively
implement restructuring and cost reduction plans and the timing of such
implementations; the risk of price fluctuation; reliance on major customers;
fluctuations in operating results; changes in technology; competition;
variations in demand forecasts and orders that may give rise to operational
challenges such as excess plant, equipment, and materials; risks associated with
international sales and operations; interest rate risk; environmental
regulations; market risk; segment risk; the ability to retain key personnel; the
impact of our outstanding litigation and of other contingent liabilities; and
intellectual property rights enforcement.
For a further list and description of risks and uncertainties, see the reports
filed by Solectron with the Securities and Exchange Commission, specifically
Forms 8-K, 10-K, 10-Q and S-3. Solectron disclaims any intention or obligation
to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Supplemental information, condensed
consolidated balance sheets and statements of operations follow. All monetary
amounts are stated in U.S. dollars.
ABOUT SOLECTRON
Solectron (www.solectron.com) provides a full range of global manufacturing and
integrated supply chain management services to the world's premier high-tech
electronics companies. Solectron's offerings include new-product design and
introduction services, materials management, product manufacturing, and product
repair and end-of-life support. The company is based in Milpitas, Calif., and
had sales from continuing operations of $9.8 billion in fiscal 2003.
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ANALYST CONTACTS:
Perry Hayes, Solectron Corporation, (408) 956-7543 (U.S.), perryhayes@ca.slr.com
Tonya Chin, Solectron Corporation, (408) 956-6537 (U.S.), tonyachin@ca.slr.com
MEDIA CONTACT:
Kevin Whalen, Solectron Corporation, (408) 956-6854 (U.S.),
kevinwhalen@ca.slr.com
SOLECTRON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS IN MILLIONS)
UNAUDITED
MAY 31 AUGUST 31
2004 2003
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ASSETS
Current assets:
Cash, cash equivalents and short-term investments * $ 1,212.1 $ 1,515.0
Accounts receivable, net 1,616.4 1,389.1
Inventories 1,577.2 1,327.3
Prepaid expenses and other current assets 143.2 270.3
Current assets of discontinued operations 138.6 452.1
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Total current assets 4,687.5 4,953.8
Net property and equipment 734.6 781.9
Goodwill 134.6 134.6
Other assets 357.3 396.3
Long-term assets of discontinued operations 50.9 262.9
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Total assets $ 5,964.9 $ 6,529.5
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 10.5 $ 973.8
Accounts payable 1,532.3 1,266.6
Accrued employee compensation 156.7 161.0
Accrued expenses 287.8 334.9
Other current liabilities 213.0 164.7
Current liabilities of discontinued operations 107.6 333.9
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Total current liabilities 2,307.9 3,234.9
Long-term debt 1,242.5 1,817.6
Other long-term liabilities 25.7 32.4
Long-term liabilities of discontinued operations 6.1 22.6
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Total liabilities 3,582.2 5,107.5
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Stockholders' equity:
Common stock 0.9 0.8
Additional paid-in capital 7,763.3 6,658.2
Accumulated deficit (5,207.1) (5,040.6)
Accumulated other comprehensive losses (174.4) (196.4)
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Total stockholders' equity 2,382.7 1,422.0
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Total liabilities and stockholders' equity $ 5,964.9 $ 6,529.5
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* This caption includes $39.2 million and $62.0 million of restricted balances
as of May 31, 2004, and August 31, 2003, respectively.
SOLECTRON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
UNAUDITED
Three Months Ended May 31 Nine Months Ended May 31
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2004 2003 2004 2003
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Net sales $ 3,039.9 $ 2,357.3 $ 8,624.1 $ 7,385.0
Cost of sales 2,880.7 2,258.1 8,206.3 7,060.4
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Gross profit 159.2 99.2 417.8 324.6
Operating expenses:
Selling, general and administrative 103.9 138.1 327.8 436.4
Restructuring and impairment costs 5.5 1,981.2 106.1 2,121.6
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Operating income (loss) 49.8 (2,020.1) (16.1) (2,233.4)
Interest income 4.8 6.8 10.8 21.6
Interest expense (41.8) (51.4) (130.1) (160.4)
Other income (expense)-net (77.9) (5.4) (68.6) 46.1
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Loss from continuing operations before income
taxes (65.1) (2,070.1) (204.0) (2,326.1)
Income tax expense 0.3 615.8 3.3 531.0
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Net loss from continuing operations $ (65.4) $ (2,685.9) $ (207.3) $ (2,857.1)
Discontinued operations:
Income (loss) from discontinued operations $ 92.8 $ (310.3) $ 50.8 $ (312.5)
Income tax expense 6.1 105.0 10.0 113.3
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Income (loss) on discontinued operations 86.7 (415.3) 40.8 (425.8)
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Net income (loss) $ 21.3 $ (3,101.2) $ (166.5) $ (3,282.9)
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Basic and diluted net income (loss) per share:
Continuing operations $ (0.08) $ (3.24) $ (0.25) $ (3.45)
Discontinued operations 0.10 (0.50) 0.05 (0.52)
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Basic and diluted net income (loss) per share $ 0.02 $ (3.74) $ (0.20) $ (3.97)
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Shares used to compute basic and diluted
net income (loss) per share 868.3 828.8 845.8 827.1