<PAGE> 1
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 September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0-23354
FLEXTRONICS INTERNATIONAL LTD.
(Exact name of Registrant as specified in its Charter)
Singapore Not Applicable
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Blk 514, Chai Chee Lane
#04-13
Singapore 469029
(Address of principal executive offices) (Zip Code)
(65) 449-5255
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities 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 October 31, 1997: 18,801,823
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FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1.
Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets - September 30,
1997 and March 31, 1997 3
Condensed Consolidated Statements of Income-Three
and Six Months Ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flow-Six
Months Ended September 30, 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 8-20
PART II. OTHER INFORMATION
Items 1 through 6 21-22
Signatures 23
</TABLE>
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PART I - FINANCIAL INFORMATION
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
------------- ----------
(Unaudited)
(In thousands)
<S> <C> <C>
ASSETS
Current assets
Cash $ 17,825 $ 23,645
Accounts receivable, net 90,270 69,331
Inventories 112,906 106,583
Other current assets 18,055 10,769
--------- ---------
Total current assets 239,056 210,328
--------- ---------
Property and equipment
At cost 196,147 153,137
Accumulated depreciation (48,540) (42,172)
--------- ---------
Net property and equipment 147,607 110,965
--------- ---------
Other non-current assets 39,637 37,941
--------- ---------
TOTAL ASSETS $ 426,300 $ 359,234
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank borrowings $ 81,500 $ 111,075
Current portion of capital lease and long-term debt 10,727 12,233
Accounts payable 96,683 73,631
Other current liabilities 62,993 38,436
--------- ---------
Total current liabilities 251,903 235,375
--------- ---------
Long term debt, less current portion 66,680 2,165
Other long term payable -- 23,547
Obligations under capital leases and deferred
income taxes 10,750 13,847
Notes payable to shareholders 115 223
Minority interest 485 485
Shareholders' equity
Ordinary shares, S$0.01 par value:
Authorized -- 100,000,000 shares at September 30, 1997 and March 31, 1997
Issued and outstanding -- 13,806,855 shares at September
30, 1997 and 13,676,243 shares at March 31, 1997 89 88
Additional paid-in capital 96,559 95,570
Accumulated deficit (281) (12,066)
--------- ---------
Total shareholders' equity 96,367 83,592
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 426,300 $ 359,234
========= =========
</TABLE>
See notes to condensed consolidated financial statements
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FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $ 210,087 $ 122,470 $ 406,970 $ 240,359
Costs and expenses:
Cost of sales 188,806 108,207 366,018 214,350
Selling, general and
administrative expenses 9,467 6,568 20,016 12,179
Goodwill and intangible
assets amortization 1,006 660 1,748 1,319
Interest expense, net 4,169 1,078 7,116 2,127
Other income, net (803) (40) (1,418) (573)
--------- --------- --------- ---------
202,645 116,473 393,480 229,402
Income before income taxes 7,442 5,997 13,490 10,957
Provision for income taxes 917 859 1,653 1,622
--------- --------- --------- ---------
Net income 6,525 5,138 11,837 9,335
========= ========= ========= =========
Earnings per share:
Net income per share $ 0.43 $ 0.36 $ 0.78 $ 0.65
========= ========= ========= =========
Weighted average ordinary
shares and equivalents 15,152 14,277 15,107 14,372
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
September 30,
1997 1996
--------- ---------
(In thousands)
<S> <C> <C>
Net cash provided by operating activities $ 19,131 $ 17,880
--------- ---------
Investing activities:
Purchases of property and equipment (43,950) (12,511)
Proceeds from sale of property and equipment 177 70
Payment for Astron earnout (6,250) --
Remaining payment to FICO for 40% interest (2,200) --
Other investment (2,000) --
--------- ---------
Net cash used for investing activities (54,223) (12,441)
--------- ---------
Financing activities:
Proceeds from bank borrowings 147,000 3,553
Repayment of bank borrowings (111,075) --
Repayment of capital lease obligations (5,820) (2,518)
Repayment of long-term debt (1,101) (517)
Proceeds from loan to related party 17 1,381
Repayment of notes payable (108) (306)
Net proceeds from issuance of share capital 989 650
--------- ---------
Net cash provided by financing activities 29,902
2,243
--------- ---------
Effect of exchange rate changes on cash (630) --
--------- ---------
Net increase/(decrease) in cash (5,820) 7,682
Cash, beginning of period 23,645 6,546
--------- ---------
Cash, end of period $ 17,825 $ 14,228
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 six month period
ended September 30, 1997 are not necessarily indicative of the results that may
be expected for the year ending March 31, 1998.
NOTE B -- INVENTORIES
Inventories consist of the following:
September 30 March 31
1997 1997
--------- --------
(In thousands)
Raw materials $ 90,335 $ 64,213
Work-in-process 20,740 16,561
Finished goods 1,831 25,809
--------- --------
Total $ 112,906 $106,583
========= ========
NOTE C -- SUBSEQUENT EVENTS
On October 8, 1997, the Company completed an equity offering of
2,185,000 Ordinary Shares including 285,000 shares issued upon the exercise of
the underwriters' over-allotment option. The net proceeds from this offering
were approximately $96.0 million.
On October 15, 1997, the Company completed the sale of $150 million in
senior subordinated notes due 2007. The notes bear interest at 8.75% per annum.
On October 20, 1997, the Company entered into an exchange agreement with
Neutronics Electronic Industries Holding AG (Neutronics), an Austrian PCB
assembly company with operations in Austria and Hungary. Under this exchange
agreement, 92% of the outstanding shares of Neutronics were exchanged for
2,806,000 Ordinary Shares of Flextronics International Ltd on October 30, 1997.
The acquisition will be accounted for as a pooling-of-interests. The combined
company will incur
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expenses of approximately $4.0 million during the fiscal quarter ending December
31, 1997 associated with this transaction.
NOTE D -- RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share". SFAS No. 128 establishes a different method of computing net income per
share than is currently required under the provisions of Accounting Principles
Board Opinion No. 15. Under SFAS No. 128, the Company will be required to
present both basic net income per share and diluted net income per share.
The Company plans to adopt SFAS No. 128 in its third fiscal quarter
ending December 31, 1997 and at that time all historical net income per share
data presented will be restated to conform to the provisions of SFAS No. 128.
Under the provisions of SFAS 128, basic net income per share for the three month
periods ended September 30, 1997 and September 30, 1996, would have been $0.47
and $0.39, respectively and basic net income per share for the six month periods
ended September 30, 1997 and September 30, 1996 would have been $0.86 and $0.70,
respectively. The primary net income per share presented herein is equal to the
diluted net income per share calculated in accordance with SFAS No. 128.
In February 1997, FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure", which will be adopted by the Company in the fourth
quarter of 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 E -- NET INCOME PER SHARE
Net income per share for each period is calculated by dividing net
income by the weighted average shares of common stock and common stock
equivalents outstanding during the period using the treasury stock method.
Common stock equivalents consist of shares issuable upon the exercise of
outstanding common stock options and warrants. Fully diluted net income per
share is substantially the same as primary net income per share.
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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" 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. Currently, the Company is engaged in
negotiations to sell nCHIP's semiconductor wafer fabrication facilities to a
third party.
In February 1996, the Company acquired Astron Group Limited 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 is payable
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 "Service 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 under the Service Agreement 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
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the earn-out 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 of Mr. Rees' ongoing obligations under the Services Agreement.
Substantially all of the former shareholders of Astron were affiliates of Mr.
Rees or members of his family. Accordingly, the only remaining obligation of
either party is the Company's unconditional obligation to pay the $14.0 million
fee in June 1998. Of the $14.0 million, $5.0 million must be paid in cash. The
remainder may be paid in either cash or Ordinary Shares at the option of the
Company, and the Company intends to pay such amount in Ordinary Shares.
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 will manufacture, and Ericsson will purchase, 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 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 20, 1997 the Company entered into an exchange agreement with
Neutronics Electronics Industries Holding AG ("Neutronics"), an Austrian PCB
assembly company with operations in Austria and Hungary, and holders of 92% of
its outstanding ordinary shares. Under this exchange agreement, 92% of the
outstanding ordinary shares of Neutronics were exchanged for 2,806,000 Ordinary
Shares of the Company on October 30, 1997. S.L. Hui, Neutronics' majority
shareholder, 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 12 months ended June 30, 1997 were approximately $142.6 million. Neutronics'
largest customer is Philips Electronics which accounted for approximately 60% of
its net sales for the six month period ended June 30, 1997.
The acquisition of Neutronics will be accounted for as a
pooling-of-interests. The combined company will incur expenses of approximately
$4.0 million during the quarter ending December 31, 1997 associated with this
transaction. The ability of the Company to obtain the benefits of the Neutronics
acquisition is subject to a number of risks and uncertainties, including the
Company's ability to successfully integrate the operations of Neutronics and its
ability to maintain, and increase, sales to Neutronics customers. See "--Certain
Factors Affecting Future Operating Results - Acquisitions."
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The Company intends to continue to pursue attractive acquisition
opportunities in the future. The Company has no understandings, commitments or
agreements with respect to any acquisitions. Acquisitions present a number of
risks and there can be no assurance that the Company will complete any future
acquisitions or that any future acquisitions will not materially affect the
Company. See "--Certain Factors Affecting Future Operating Results -
Acquisitions."
The Company has recently consolidated and expanded its manufacturing
facilities, with the goal of concentrating its activities in a smaller number of
larger, strategically located sites. The Company has closed its Richardson,
Texas facility and downsized manufacturing operations at its Singapore facility,
while substantially increasing overall capacity by expanding operations in North
America, Asia and Europe. 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 these new and
expanded facilities.
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RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
statement of operations data expressed as a percentage of net sales.
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
------------------ ----------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 89.9 88.4 89.9 89.2
----- ----- ----- -----
Gross profit 10.1 11.6 10.1 10.8
Selling, general and administrative expenses 4.5 5.4 4.9 5.1
Goodwill and intangible assets amortization 0.5 0.5 0.5 0.5
----- ----- ----- -----
Operating income 5.1 5.7 4.7 5.2
Interest expense, net 2.0 0.8 1.7 0.8
Other income, net (0.4) -- (0.3) (0.2)
----- ----- ----- -----
Income before income taxes 3.5 4.9 3.3 4.6
Provision for income taxes 0.4 0.7 0.4 0.7
----- ----- ----- -----
Net income 3.1 4.2 2.9 3.9
===== ===== ===== =====
</TABLE>
Net Sales
Net sales for the three months ended September 30, 1997 increased 71.5%
to $210.1 million from $122.5 million for the three months ended September 30,
1996. Net sales for the six months ended September 30, 1997 increased 69.3% to
$407.0 million from $240.4 million for the six months ended September 30, 1996.
The increase in sales for the three and six 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 Thermoscan. This increase
was partially offset by reduced sales to certain customers, including Minebea;
Visioneer; 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 six
month periods ending September 30, 1997 were Ericsson and Advanced Fibre
Communications. Net sales to Ericsson for the three and six month periods
accounted for
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approximately 30% of net consolidated sales for both periods while net sales
to Advanced Fibre Communications for the three and six month periods accounted
for approximately 11% of net consolidated sales for both periods. No other
customer accounted for more than 10% of consolidated net sales for the three
month and six month periods ending September 30, 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 decreased to
10.1% for the three months ended September 30, 1997 as compared to 11.6% for the
three months ended September 30, 1996. Gross profit margin decreased to 10.1%
for the six months ended September 30, 1997 as compared to 10.8% for the six
months ended September 30, 1996. The decrease in the gross profit margin for the
three and six months ended September 30, 1997 was mainly due to increased
depreciation and other fixed expenses as the Company commenced volume production
in the new facilities in Doumen, China and Mexico. The decrease in the gross
profit margin was offset slightly by the inclusion of the Sweden facility which
manufactures higher margin products. In addition, the Company has begun
manufacturing several products on a consignment basis. Consignment projects
typically have higher gross profit margin than turnkey projects.
Cost of sales included research and development costs of approximately
$290,000 and $229,000 in the three months ended September 30, 1997 and 1996,
respectively and $561,000 and $458,000 for the six months ended September 30,
1997 and 1996, respectively.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended
September 30, 1997 increased to $9.5 million from $6.6 million for the three
months ended September 30, 1996 but decreased as a percentage of net sales to
4.5% for the three months ended September 30, 1997 from 5.4% for the three
months ended September 30, 1996. Selling, general and administrative expenses
for the six months ended September 30, 1997 increased to $20.0 million from
$12.2 million for the six months ended September 30, 1996 but decreased as a
percentage of net sales to 4.9% for the six months ended September 30, 1997 from
5.1% for the six months ended September 30, 1996. The increase in selling
expenses were mainly 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 is primarily due to the
inclusion of the operations of the Karlskrona facilities; and the increase in
corporate expenses is primarily due to the growth in infrastructure including
the hiring of additional internal support personnel and increases in related
department expenses.
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 September 30,
1997 increased to $1.0 million from $660,000 for the three months ended
September 30, 1996. Goodwill and intangible amortization for the six months
ended September 30,
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1997, increased to $1.7 million from $1.3 million for the six months ended
September 30, 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 20
years to approximately 10 years. This reduction increased the goodwill and
intangible amortization per quarter by approximately $279,000.
Interest Expense, Net
Interest expense, net increased to $4.2 million for the three months
ended September 30, 1997 from $1.1 million for the three months ended September
30, 1996 and increased to $7.1 million for the six months ended September 30,
1997 from $2.1 million for the six months ended September 30, 1996. The increase
was primarily due to increased bank borrowings to finance the Karlskrona
Acquisition and capital expenditures. See "--Certain Factors Affecting Future
Operating Results - Increased Leverage." The Company anticipates that its
interest expense will increase in future periods as a result of borrowings under
its credit facility and its issuance in October 1997 of $150.0 million principal
amount of Senior Subordinated Notes. See "--Liquidity and Capital Resources."
Other income, net
Other income, net primarily represents foreign exchange gains and the
Company's 40% equity interest in the results of FICO.
Foreign exchange gains increased to $637,000 in the three months ended
September 30, 1997 from $138,000 in the three months ended September 30, 1996
and increased to $944,000 in the six months ended September 30, 1997 from
$218,000 in the six months ended September 30, 1996. The increase in the
exchange gains for the three months and six months ended September 30, 1997 was
mainly due to the strengthening of the U.S. dollar against Asian currencies and
the Swedish kronor.
The Company acquired a 40% interest in FICO in December 1996. According to
the equity method of accounting, the Company recognizes 40% of the net income or
loss of FICO amounting to income of $350,000 in the three months ended September
30, 1997 and income of $650,000 in the six months ended September 30, 1997.
Provision for Income Taxes
The Company is structured as a holding company, conducting its operations
through manufacturing and marketing subsidiaries in China, Malaysia, Mauritius,
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 one
plant in 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 12.3% for both the three
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and six month periods ended September 30, 1997 compared to 14.8% in the six
months ended September 30, 1996. 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 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 generated from operations, bank debt and
lease financing of capital equipment. At September 30, 1997 the Company had cash
balances totaling $17.8 million, outstanding bank borrowings of $147.0 million,
and an aggregate of $9.0 million available for borrowing under the Company's
credit facility.
14
<PAGE> 15
Net cash provided by operating activities was $19.1 million for the six
months ended September 30, 1997 consisting of $58.8 million of cash provided by
net income before depreciation, increases in accounts payable and other sources,
offset by $39.7 million of cash used for increases in inventory and accounts
receivable and other operating activities. Depreciation expense was $9.7
million and $6.5 million for the six months ended September 30, 1997 and
September 30, 1996, respectively. Net cash provided by operating activities was
$17.9 million for the six months ended September 30, 1996, consisting of $30.6
million of cash provided by net income before depreciation and including
decreases in accounts receivable, offset by $12.7 million of cash used for
operating activities, primarily payments of accounts payable.
Accounts receivable, net of allowance for doubtful accounts increased to
$90.3 million at September 30, 1997 from $69.3 million at March 31, 1997. The
increase in accounts receivable was primarily due to increased sales in the
second quarter of fiscal 1998. Inventories increased to $112.9 million at
September 30, 1997 from $106.6 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 decreased from
$5.7 million at March 31, 1997 to $5.1 million at September 30, 1997. The
Company's allowance for inventory obsolescence decreased from $6.2 million at
March 31, 1997 to $6.0 million at September 30, 1997. The decreases in the
allowances were due to the write-offs of accounts receivable and inventories
during the six months ended September 30, 1997.
Net cash used for investing activities during the six months ended
September 30, 1997 was $54.2 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 San Jose, California and Karlskrona, Sweden
facilities. Net cash used for investing activities during the six months ended
September 30, 1996 was $12.4 million, consisting primarily of equipment
acquisitions and building construction.
Net cash provided by financing activities was $29.9 million for the six
months ended September 30, 1997 and $2.2 million for the six months ended
September 30, 1996, in each case consisting primarily of proceeds from bank
borrowings offset in part by a reduction in capital lease obligations. Bank
borrowings increased from $18.0 million at September 30, 1996 to $147.0 million
at September 30, 1997 due primarily to bank borrowings to fund the purchase
price for the Karlskrona Facilities.
On March 27, 1997, the Company entered into a new credit facility
consisting of two secured revolving credit and term loan agreements provided by
the Bank of Boston, N.A. as agent (together, the "Credit Facility"). Under the
Credit Facility, 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 $175.0 million. The Credit
Facility includes $105.0 million of revolving credit facilities and a $70.0
million term loan facility. The revolving credit facilities are subject to a
borrowing base equal to 70% of consolidated accounts receivable and 20% of
consolidated inventory. As of September 30, 1997, $77.0 million of revolving
credit loans and $70.0 million of term loans were outstanding, and bore interest
at a variable rate equal, as of September 30, 1997, to approximately 8.4% per
annum. 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
15
<PAGE> 16
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 September 30, 1997.
Subsequent to September 30, 1997, the Company completed an equity
offering (the "Equity Offering") of 2,185,000 Ordinary Shares for net proceeds
of approximately $96.0 million. On October 15, 1997, the Company also completed
the sale of $150.0 million principal amount of senior subordinated notes due
2007 (the "Notes"). The proceeds from both equity and debt offerings were used
to pay off the $70.0 million term loan and the $77.0 million outstanding balance
of the revolving credit facility. The Company intends to continue to borrow
revolving credit loans under the Credit Facility, and anticipates increasing the
aggregate principal amount of revolving credit loans that may be made under the
Credit Facility (although no assurances can be given as to the availability or
amount of any such increase). See "--Certain Factors Affecting Future Operating
Results - Increased Leverage."
The Company's capital expenditures in the second quarter of fiscal 1998
were approximately $16.4 million. The Company anticipates that its aggregate
capital expenditures in fiscal 1998 will be approximately $65 million, primarily
relating to the development of new and expanded facilities in San Jose,
California, Guadalajara, Mexico and Doumen, China. The Company anticipates
expending from $7.0 million to $15.0 million in fiscal 1998 and 1999 to
implement a new management information system. See "--Certain Factors Affecting
Future Operating Results - Management of Expansion and Consolidation." The
Company will also be required to expend cash in fiscal 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 will be required to make a principal payment of $5.0
million in February 1998 pursuant to the terms of a note issued by it 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,
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 1998.
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
16
<PAGE> 17
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. At September 30,
1997, on a pro forma basis after giving effect to the sale of the Notes and the
Equity Offering and the application of the net proceeds therefrom to reduce
indebtedness outstanding under the Credit Facility, the Company had consolidated
indebtedness of approximately $169.6 million (including bank borrowings,
long-term debt and capitalized lease obligations, and excluding $9.0 million of
liabilities relating to the Astron acquisition that the Company intends to repay
in the Company's Ordinary Shares) compared to $52.6 million as at September 30,
1996. The Company's indebtedness at September 30, 1997 included $111.0 million
borrowed on March 27, 1997, and an additional $36.0 million borrowed during the
six months ended September 30, 1997 which substantially increased the Company's
leverage. The Company anticipates increasing the aggregate principal amount of
revolving credit loans that may be made under the Credit Facility (although no
assurances can be given as to the availability or amount of any such increase),
and these loans would increase the Company's leverage. The Company's ratio of
indebtedness to shareholders' equity increased from approximately 62.9% at
September 30, 1996 to 172.9% at September 30, 1997. 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
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 $80.7
million in fiscal 1992 to $490.6 million in fiscal 1997 and $407.0 million in
the first six 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 expense that
will increase the Company's cost of sales. There can be no assurances that the
Company will utilize a sufficient portion of the capacity of these facilities to
offset the impact of these expenses on its gross margins and operating income.
17
<PAGE> 18
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 18 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.
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 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 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 between the Company and Ericsson (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 customer in the three
months ended September 30, 1997 was Ericsson, with net sales to Ericsson
accounting for approximately 30% of its total net sales. Net sales to Advanced
Fibre
18
<PAGE> 19
Communications were approximately 11% and 3% for the three months ending
September 30, 1997 and September 30, 1996 respectively. Net sales to the
Company's top five customers during the three months ended September 30, 1997
accounted for approximately 61% of consolidated sales compared to 51% during the
three months ended September 30, 1996. Net sales to the Company's top five
customers during the six months ended September 30, 1997 accounted for
approximately 63% of consolidated sales compared to 46.5% during the six months
ended September 30, 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.
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.
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, Guadalajara,
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
19
<PAGE> 20
particular, the Company's operations and assets are subject to significant
political, economic, legal and other uncertainties in China 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.
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 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
Transaction, a significant portion of the Company's business has been, and the
Company expects will continue to be, conducted in Swedish kronor. 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. The Company has historically not actively engaged in substantial
exchange rate hedging activities and unless such activities are successfully
implemented, the Company will be subject to significantly greater exchange rate
fluctuation risk following the Ericsson Transaction. There can be no assurance
that the Company will implement any hedging techniques or that if it does so,
that such techniques will be successful.
20
<PAGE> 21
PART II - OTHER INFORMATION
Items 1 through 3. Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual General Meeting of shareholders on October
14, 1997, at which the following matters were acted upon :
<TABLE>
<S> <C> <C>
a) Re-election of Tsui Sung Lam to the board of For : 11,299,609
directors. Against : 27,628
b) Adoption of the Directors' report, auditors' For : 11,321,866
report and audited accounts for the fiscal Against : 1,656
year ended March 31, 1997. Abstain : 3,715
c) Appointment of Arthur Andersen LLP as the For : 11,306,425
Company's independent auditors for the fiscal Against : 17,686
year ending March 31, 1998 in place of the Abstain : 3,126
retiring auditors, Ernst & Young, and
to authorize the Company's board of directors
to fix its remuneration.
d) Approval of an amendment to the Company's 1993 For : 8,458,587
Share Option Plan relating to the increase in Against : 2,658,181
the maximum number of shares authorized for Abstain : 38,851
issuance to 2,600,000 Ordinary Shares.
e) Approval of an ordinary resolution to adopt For : 11,022,319
the 1997 Employee Share Purchase Plan. Against : 102,390
Abstain : 30,910
f) Approval of an ordinary resolution relating to For : 10,886,696
Ordinary Shares issuance. Against : 189,342
Abstain : 78,281
</TABLE>
Item 5. Not applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
(11.1) Statement re: computation of earnings per share.
(11.2) Statement re: computation of earnings per share.
(11.3) Financial data schedule
(b) Reports on Form 8-K:
Form 8-K filed on August 11, 1997 reporting the change of the
Registrant's independent auditors from Ernst & Young to Arthur
Andersen LLP to take effect at the Registrant's Annual General
Meeting to be held on September 26, 1997 pursuant to Item 4 of the
Form 8-K. No financial statement was filed.
21
<PAGE> 22
Form 8-K/A filed on August 18, 1997 amending the Registrant's Form
8-K filed on August 11, 1997 to submit a letter from Ernst & Young,
the Registrant's independent accountant, stating that it concurs with
the statements made by the Registrant in Item 4 of the Form 8-K/A. No
financial statement was filed.
Form 8-K/A filed on August 27, 1997 responding to comments by the SEC
staff in letters dated March 7, 1997, March 14, 1997 and March 24,
1997 and including revised financial statements of the Registrant's
acquisition of Astron Group Limited pursuant to Item 7 of the Form
8-K/A.
Form 8-K/A filed September 29, 1997 reporting the change of the
Registrant's independent auditors from Ernst & Young to Arthur
Andersen LLP to take effect at the Registrant's Annual General
Meeting to be held on October 14, 1997 pursuant to Item 4 of Form
8-K. No financial statement was filed.
22
<PAGE> 23
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 November 13, 1997 /s/ Michael E. Marks
-----------------------------------------
Michael E. Marks, Chief Executive Officer
Date November 13, 1997 /s/ Robert B. Dykes
-----------------------------------------
Robert B. Dykes, Senior Vice President,
Finance and Administration; Chief
Financial Officer
23
<PAGE> 24
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
11.1 Statement re: computation of earnings per share
11.2 Statement re: computation of earnings per share
11.3 Financial data schedule
<PAGE> 1
EXHIBIT 11.1
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30,
------------------
1997 1996
------- -------
(In thousands, except
per share amounts)
<S> <C> <C>
Shares issued and outstanding (1) 13,776 13,314
Shares due to Astron (2) 447 447
Common stock equivalent 929 516
Stock options (3)
------- -------
15,152 14,277
======= =======
Net income $ 6,525 $ 5,138
======= =======
Earnings per share: $ 0.43 $ 0.36
======= =======
</TABLE>
(1) Shares issued and outstanding - based on the weighted average method.
(2) Shares due to Astron in June 1998.
(3) Stock options - based on the treasury stock method using average market
price for the three month period ending September 30, 1997 and 1996.
24
<PAGE> 1
EXHIBIT 11.2
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
September 30,
------------------
1997 1996
------- -------
(In thousands, except
per share amounts)
<S> <C> <C>
Shares issued and outstanding (1) 13,731 13,292
Shares due to Astron (2) 447 447
Common stock equivalent 929 633
stock options (3)
------- -------
15,107 14,372
======= =======
Net income $11,837 $ 9,335
======= =======
Earnings per share: $ 0.78 $ 0.65
======= =======
</TABLE>
(1) Shares issued and outstanding - based on the weighted average method.
(2) Shares due to Astron in June 1998.
(3) Stock options - based on the treasury stock method using average market
price for the six month period ending September 30, 1997 and 1996.
25
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTH PERIOD ENDING SEPTEMBER 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> JUN-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 17,825
<SECURITIES> 0
<RECEIVABLES> 95,409
<ALLOWANCES> 5,139
<INVENTORY> 112,906
<CURRENT-ASSETS> 239,056
<PP&E> 196,147
<DEPRECIATION> 48,540
<TOTAL-ASSETS> 426,300
<CURRENT-LIABILITIES> 251,903
<BONDS> 0
0
0
<COMMON> 89
<OTHER-SE> 96,278
<TOTAL-LIABILITY-AND-EQUITY> 426,300
<SALES> 210,087
<TOTAL-REVENUES> 210,087
<CGS> 188,806
<TOTAL-COSTS> 198,273
<OTHER-EXPENSES> (803)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,169
<INCOME-PRETAX> 7,442
<INCOME-TAX> 917
<INCOME-CONTINUING> 6,525
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,525
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
