Solectron Announces Second Quarter Financial Results



    MILPITAS, CALIF., March 29 /CNW/ - Solectron Corporation (NYSE:  SLR), a
leading provider of electronics manufacturing and integrated supply chain
services, today reported sales of $2.90 billion in the second quarter of
fiscal 2007, a decrease of 3 percent over first quarter fiscal 2007 revenues
of $3.00 billion, and an increase of 16 percent over second quarter fiscal
2006 revenues of $2.50 billion.

    As previously announced in an 8-K filed on March 15, 2007, Solectron has
entered into a new Manufacturing and Product Purchase Agreement with one of
our largest customers. As a result of this Agreement, second quarter revenue
was negatively impacted.

    The company reported GAAP profit after tax from continuing operations of
$15.6 million, or $0.02 per share, in the second quarter of fiscal 2007,
compared with a GAAP profit after tax from continuing operations of $6.6
million, or $0.01 per share, in the first quarter of fiscal 2007. In the
second quarter of fiscal 2006, Solectron reported a GAAP profit after tax from
continuing operations of $17.1 million, or $0.02 per share.

    Non-GAAP profit after tax was $41.0 million, or $0.05 per share, in the
second quarter of fiscal 2007, compared with non-GAAP profit after tax of
$47.6 million, or $0.05 per share, for the first quarter of fiscal 2007. In
the second quarter of fiscal 2006, Solectron reported non-GAAP profit after
tax of $29.7 million, or $0.03 per share. Non-GAAP financial results do not
include restructuring costs, impairment charges, amortization of intangibles,
stock-based compensation expenses, or other infrequent or unusual items.
Please refer to "Non-GAAP Information" below for further information.

    "During the second quarter we made progress in our efforts to drive
growth, expand gross margins, and deliver positive free cash flow," said Paul
Tufano, interim chief executive officer of Solectron. "As we begin the second
half of fiscal 2007, I believe we are well positioned to deliver continued
improvement in profitability, working capital management, and cash
generation."

    Restructuring Plan

    Solectron today announced that it is commencing the next phase of its
contemplated restructuring pursuant to its phased approach announced in the
first quarter of fiscal 2007. Restructuring and impairment charges related to
today's announcement are estimated to be in a range of $35 million to $45
million, of which approximately 90 percent will be cash expenditures.

    The company estimates this restructuring will be completed within the
next 12 months. These actions will reduce the workforce by approximately 1,300
to 1,500 employees and will close or consolidate approximately 400,000 square
feet of facilities, primarily in North America, as well as Western Europe.

    Third Quarter 2007 Guidance

    Fiscal third quarter guidance is for sales of $2.90 billion to $3.10
billion, and for non-GAAP EPS from continuing operations in a range of 4 cents
to 6 cents, on a fully diluted basis.

    Non-GAAP Information

    In addition to disclosing results determined in accordance with GAAP,
Solectron also discloses non-GAAP results of operations that exclude certain
items. By disclosing this non-GAAP 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 non-GAAP basis that excludes certain
charges to better assess operating performance. Earnings guidance is provided
only on a non-GAAP basis due to the inherent difficulty in forecasting such
charges.

    Consistent with industry practice, management has historically applied
these non-GAAP measures when discussing earnings or earnings guidance and
intends to continue doing so.

    Non-GAAP 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. Non-GAAP
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. In addition, Solectron's GAAP financial results often reflect one-time
events and adjustments, and therefore a comparison of GAAP results over
different periods can be difficult. See the tables at the end of this press
release for a reconciliation of non-GAAP amounts to amounts reported under
GAAP. A reconciliation from non-GAAP to GAAP results is contained in the
attached financial summary and is available in the Investor Relations section
of our website at www.solectron.com.

    Webcast To Be Held Today

    At 4:30 p.m. ET today, Solectron will hold a conference call to discuss
its second quarter financial results. A live webcast can be accessed at
www.solectron.com. Supplemental financial information related to the
conference call will also be available in the Investor Relations section of
this Web site. Following the live broadcast, the archived webcast will be
available at www.solectron.com/investor/events.htm.

    An audio replay will also be available two hours after the conclusion of
the call. To access the replay, call +1 (800) 642 1687 from within the United
States, or +1 (706) 645 9291 from outside the United States, and specify pass
code 1524164.

    Safe Harbor

    This release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended regarding our financial outlook
for the third quarter of fiscal 2007 and beyond. These forward-looking
statements involve a number of risks and uncertainties, and are based on
current expectations, forecasts and assumptions.

    Actual outcomes and results could differ materially. These risks and
uncertainties include: our ability to continue to win business and satisfy
customers; reliance on major customers; the present and future strength of the
worldwide economy overall, and in the telecommunications and other electronics
technology sectors in particular; our ability to continue to improve our
operating metrics; the accuracy of our projections of cash flows and capital
requirements; incurring more restructuring-related charges than currently
anticipated; our ability to complete our announced restructuring plans within
the stated timeframe; the risk of price fluctuation; 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; business disruptions, exposure to product warranty or liability
claims; our ability to properly manage acquisitions; any unidentified
weaknesses or deficiencies in our internal controls over financial reporting;
interest rate risk; existing and new environmental regulations; market and
segment risk; our ability to retain key personnel; unanticipated tax
liabilities and adverse outcomes resulting from tax examinations; and the
impact of our outstanding litigation and other contingent liabilities.

    For a further list and description of risks and uncertainties, see the
reports filed by Solectron with the Securities and Exchange Commission.
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 Corporation is one of the world's largest providers of complete
product lifecycle services. We offer collaborative design and new product
introduction, supply chain management, Lean manufacturing and aftermarket
services such as product warranty repair and end-of-life support to leading
customers worldwide. Solectron works with the world's premier providers of
networking, telecommunications, computing, storage, consumer, automotive,
industrial, medical, and aerospace and defense products. The company's
industry-leading Lean Six Sigma methodology (Solectron Production System(TM))
provides OEMs with quality, flexibility, innovation and cost benefits that
improve competitive advantage. Based in Milpitas, Calif., Solectron operates
in more than 20 countries on five continents and had sales from continuing
operations of $10.6 billion in fiscal 2006. For more information, visit us at
www.solectron.com.

    Note: SOLECTRON and the Solectron logo are registered trademarks of
Solectron Corporation. The Solectron Production System, SPS, and Solectron
Supply Chain Solutions Suite are also trademarks of Solectron Corporation.
Other names mentioned are trademarks, registered trademarks or service marks
of their respective owners.

    
    Q2'07
    -------------------------------------------------------- -------------
    GAAP to Non-GAAP Reconciliation                          Quarter Ended
    (in millions)                                            March 2, 2007
    -------------------------------------------------------- -------------
    Income on a GAAP Basis                                         $ 15.3
      Discontinued operations                                      $ (0.3)
                                                             -------------
    Income from continuing operations on a GAAP Basis              $ 15.6
      Restructuring and impairment charges                         $ 16.5
      Amortization of intangibles                                  $  1.2
      Stock compensation expense                                   $  7.7
                                                             -------------
    Income from continuing operations on a non-GAAP Basis          $ 41.0
                                                             -------------


    GAAP to Non-GAAP Reconciliation: Earnings Per Share      Quarter Ended
                                                             March 2, 2007
    -------------------------------------------------------- -------------
    Income on a GAAP Basis                                         $ 0.02
      Discontinued Operations                                      $(0.00)
                                                             -------------
    Diluted net income per share from continuing operations
     on a GAAP basis                                               $ 0.02
      Restructuring and impairment charges, amortization of
       intangibles and stock compensation expense                  $ 0.03
                                                             -------------
    Diluted net income per share from continuing operations
     on a non-GAAP basis                                           $ 0.05
                                                             -------------
    Number of shares (millions) used to compute diluted net
     income per share - GAAP and non-GAAP                           899.4
    -------------------------------------------------------- -------------
    

    
    Q1'07
    ----------------------------------------------------------------------
    GAAP to Non-GAAP Reconciliation                        Quarter Ended
    (in millions)                                        November 24, 2006
    ---------------------------------------------------- -----------------
    Income on a GAAP Basis                               $            6.0
       Discontinued operations                           $           (0.6)
                                                         -----------------
    Income from continuing operations on a GAAP Basis    $            6.6
       Restructuring and impairment charges              $           34.6
       Amortization of intangibles                       $            1.1
       Stock compensation expense                        $            6.1
       Other                                             $           (0.8)
                                                         -----------------
    Income from continuing operations on a non-GAAP
     Basis                                               $           47.6
                                                         -----------------


    GAAP to Non-GAAP Reconciliation: Earnings Per Share    Quarter Ended
                                                         November 24, 2006
    ---------------------------------------------------- -----------------
    Income on a GAAP Basis                               $           0.01
       Discontinued operations                           $          (0.00)
                                                         -----------------
    Diluted net income per share from continuing
     operations on a GAAP basis                          $           0.01
       Restructuring and impairment charges,
        amortization of intangibles and stock
        compensation expense                             $           0.04
       Other                                             $          (0.00)
                                                         -----------------
    Diluted net income per share from continuing
     operations on a non-GAAP basis                      $           0.05
                                                         -----------------
    Number of shares (millions) used to compute diluted
     net income per share - GAAP and non-GAAP                       897.4
    ---------------------------------------------------- -----------------
    

    
    Q2'06
    ----------------------------------------------------------------------
    GAAP to Non-GAAP Reconciliation                       Quarter Ended
    (in millions)                                       February 24, 2006
    --------------------------------------------------- ------------------
    Income on a GAAP Basis                                         $ 30.4
      Discontinued operations                                      $(13.3)
                                                        ------------------
    Income from continuing operations on a GAAP Basis              $ 17.1
      Restructuring and impairment charges                         $  5.6
      Amortization of intangibles                                  $  1.6
      Stock compensation expense                                   $  5.4
                                                        ------------------
    Income from continuing operations on a non-GAAP
     Basis                                                         $ 29.7
                                                        ------------------


    GAAP to Non-GAAP Reconciliation: Earnings Per Share   Quarter Ended
                                                        February 24, 2006
    --------------------------------------------------- ------------------
    Income on a GAAP Basis                                         $ 0.03
       Discontinued operations                                     $(0.01)
                                                        ------------------
    Diluted net income per share from continuing
     operations on a GAAP basis                                    $ 0.02
       Restructuring and impairment charges,
        amortization of intangibles and stock
        compensation expense                                       $ 0.01
    --------------------------------------------------- ------------------
    Diluted net income per share from continuing
     operations on a non-GAAP basis                                $ 0.03
                                                        ------------------
    Number of shares (millions) used to compute diluted
     net income per share - GAAP and non-GAAP                       909.7
    --------------------------------------------------- ------------------
    

    
    Supplemental Data
    ----------------------------------------------------------------------
    Sales Percentage by Market Segment
    Computing and Storage                                              34%
    Networking Equipment                                               21%
    Communications                                                     21%
    Consumer                                                           12%
    Industrial                                                          8%
    Automotive                                                          2%
    Other                                                               2%
    ----------------------------------------------------------------------
    

    
                    SOLECTRON CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF OPERATIONS
                     (in millions, except per-share data)
                                 (unaudited)

                               Three Months Ended      Six Months Ended
                             ---------------------- ----------------------
                             March 2,  February 24, March 2,  February 24,
                                2007       2006        2007       2006
                             --------- ------------ --------- ------------

    Net sales                $2,901.9     $2,499.6  $5,901.0     $4,956.0
    Cost of sales             2,749.1      2,370.6   5,598.8      4,701.4
                             --------- ------------ --------- ------------

    Gross profit                152.8        129.0     302.2        254.6

    Operating expenses:
      Selling, general and
       administrative           116.7        104.3     226.5        211.7
      Restructuring and
       impairment costs          16.5          5.6      51.1          6.5
                             --------- ------------ --------- ------------

        Operating income         19.6         19.1      24.6         36.4
    Interest income               7.4         12.3      17.6         24.4
    Interest expense             (5.1)        (6.9)    (12.4)       (13.6)
    Other expense, net           (1.9)        (1.9)     (2.8)           -
                             --------- ------------ --------- ------------

    Operating income from
     continuing operations
      before income taxes        20.0         22.6      27.0         47.2
    Income tax expense            4.4          5.5       4.8          9.9
                             --------- ------------ --------- ------------

         Income from
          continuing
          operations             15.6         17.1      22.2         37.3

    Discontinued operations:
    (Loss) income from
     discontinued operations
     before income taxes         (0.3)        13.3      (0.9)        17.1
    Income tax expense              -            -         -            -
                             --------- ------------ --------- ------------
      (Loss) income from
       discontinued
       operations                (0.3)        13.3      (0.9)        17.1
                             --------- ------------ --------- ------------


      Net income             $   15.3     $   30.4  $   21.3     $   54.4
                             --------- ------------ --------- ------------

    Basic net income per
     share:
      Continuing operations  $   0.02     $   0.02  $   0.02     $   0.04
      Discontinued
       operations               (0.00)        0.01     (0.00)        0.02
                             --------- ------------ --------- ------------
      Basic net income per
       share                 $   0.02     $   0.03  $   0.02     $   0.06
                             --------- ------------ --------- ------------

    Diluted net income per
     share:
      Continuing operations  $   0.02     $   0.02  $   0.02     $   0.04
      Discontinued
       operations               (0.00)        0.01     (0.00)        0.02
                             --------- ------------ --------- ------------
      Diluted net income per
       share                 $   0.02     $   0.03  $   0.02     $   0.06
                             --------- ------------ --------- ------------

    Shares used to compute
     basic net income per
     share                      896.0        908.8     895.3        917.3
    Shares used to compute
     diluted net income per
     share                      899.4        909.7     898.0        918.1
    

    
                    SOLECTRON CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                              (US$ in millions)
                                 (unaudited)


                                            March 2, 2007  August 25, 2006
                                           --------------- ---------------

    ASSETS
    Current assets:
      Cash, cash equivalents and short-term
       investments                         $      1,085.6  $      1,180.5
      Accounts receivable, net                    1,390.6         1,429.3
      Inventories                                 1,799.5         1,516.1
      Prepaid expenses and other current
       assets                                       343.4           225.8
                                           --------------- ---------------

       Total current assets                       4,619.1         4,351.7
    Property and equipment, net                     741.4           673.4
    Goodwill                                        155.9           155.2
    Other assets                                    124.8           193.3
                                           --------------- ---------------

    Total assets                           $      5,641.2  $      5,373.6
                                           --------------- ---------------

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Short-term debt                      $         25.1  $         89.5
      Accounts payable                            1,891.0         1,616.7
      Accrued employee compensation                 145.5           170.4
      Accrued expenses and other current
       liabilities                                  478.7           427.6
                                            --------------  --------------


        Total current liabilities                 2,540.3         2,304.2
    Long-term debt                                  616.0           619.4
    Other long-term liabilities                      36.7            36.3
                                            --------------  --------------


        Total liabilities                  $      3,193.0  $      2,959.9
                                           --------------- ---------------

    Commitments and contingencies

    Stockholders' equity:
      Common stock                                    0.9             1.0
      Additional paid-in capital                  7,593.4         7,585.2
      Accumulated deficit                        (5,052.0)       (5,073.3)
      Accumulated other comprehensive loss          (94.1)          (99.2)
                                           --------------- ---------------

         Total stockholders' equity               2,448.2         2,413.7
                                           --------------- ---------------

    Total liabilities and stockholders'
     equity                                $      5,641.2  $      5,373.6
                                           --------------- ---------------


    Includes $16.8 million and $31.6 million of restricted cash balances
     as of March 2, 2007 and August 25, 2006, respectively, and $0 million
     and $22.9 million of short-term investments as of March 2, 2007 and
     August 25, 2006, respectively.
    




For further information:

For further information: Solectron Corporation Perry G. Hayes,
+1-408-956-7543 (U.S. Analysts) perryhayes@solectron.com Ed Lockwood,
+1-408-956-6959 (U.S. Analysts) edlockwood@solectron.com Corey Olfert,
+1-408-956-7552 (U.S. Media) coreyolfert@solectron.com

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