<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): FEBRUARY 2, 1996
FLEXTRONICS INTERNATIONAL LTD.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
SINGAPORE
------------------------------------------------
(State or other jurisdiction of incorporation)
0-23354 NOT APPLICABLE
- ------------------ ----------------------
(Commission (IRS Employer
File Number) Identification No.)
514 CHAI CHEE LANE, #04-13, BEDOK INDUSTRIAL ESTATE, SINGAPORE 469029
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(65) 449-5255
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 7. Financial Statements and Exhibits
On February 2, 1996, Flextronics International Ltd. (the "Company")
acquired (the "Acquisition") all of the issued share capital of Astron Group
Limited, a private company limited by shares and incorporated in Hong Kong
("Astron"). This Form 8-K/A is being filed in response to comments by the SEC
staff in letters dated March 7, 1997, March 14, 1997 and March 24, 1997 and in
connection with the Company's revision of its accounting for the Acquisition.
(a) financial statements of Astron Group Limited and Subsidiaries
<PAGE> 3
ASTRON GROUP LIMITED AND SUBSIDIARIES
Report and Financial Statements
For the three years ended December 31, 1993, 1994 and 1995
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ASTRON GROUP LIMITED AND SUBSIDIARIES
<S> <C>
Auditors' Report...................................................... 1
Consolidated Statements of Income for the years ended
December 31, 1993, 1994 and 1995.................................... 2
Consolidated Balance Sheets as of December 31, 1994 and 1995.......... 3 & 4
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1993, 1994 and 1995........................ 5
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1994 and 1995.................................... 6 & 7
Notes to Consolidated Financial Statements............................ 8 - 23
</TABLE>
<PAGE> 5
[DELOITTE TOUCHE TOHMATSU LETTERHEAD]
AUDITOR'S REPORT
TO THE MEMBERS OF ASTRON GROUP LIMITED
(incorporated in Hong Kong with limited liability)
We have audited the financial statements on pages 2 to 23 which have been
prepared in accordance with accounting principles generally accepted in Hong
Kong.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors are required to prepare financial statements which give a true
and fair view. In preparing financial statements which give a true and fair
view it is fundamental that appropriate accounting policies are selected and
applied consistently.
It is our responsibility to form an independent opinion, based on our audit, on
those statements and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Statements of Auditing Standards
issued by the Hong Kong Society of Accountants. An audit includes examination,
on a test basis, of evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the significant
estimates and judgments made by the directors in the preparation of the
financial statements, and of whether the accounting policies are appropriate to
the Group's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance as to whether the financial
statements are free from material misstatement. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the
financial statements. We believe that our audit provides a reasonable basis for
our opinion.
OPINION
In our opinion the financial statements give a true and fair view of the state
of the Group's affairs as at December 31, 1995 and of its profit and cash flow
for the three years ended December 31, 1995 and have been properly prepared in
accordance with accounting principles generally accepted in Hong Kong.
/s/ DELOITTE TOUCHE TOHMATSU
Hong Kong
March 12, 1997
[DELOITTE TOUCHE TOHMATSU INTERNATIONAL LOGO]
<PAGE> 6
ASTRON GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995
------- ------- -------
HK$ HK$ HK$
<S> <C> <C> <C>
Net sales ..................................................... 88,969 138,849 160,268
Cost of sales.................................................. 62,021 82,790 101,223
------- ------- -------
Gross profit................................................... 26,948 56,059 59,045
------- ------- -------
Selling, general and administrative expenses................... 18,970 40,411 47,718
------- ------- -------
Operating income............................................... 7,978 15,648 11,327
Interest expense............................................... (760) (816) (501)
Other income (note 3).......................................... 2,979 6,567 10,308
Exceptional items (note 4)..................................... (2,793) (2,313) 6,900
------- ------- -------
Income before income taxes..................................... 7,404 19,086 28,034
Income taxes (note 5).......................................... (2,022) (2,572) (3,560)
------- ------- -------
Net income..................................................... 5,382 16,514 24,474
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE> 7
ASTRON GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
------- -------
HK$ HK$
<S> <C> <C>
Current assets:
Cash ............................................ 24,021 10,921
Accounts receivable, net of allowance for
doubtful accounts of HK$NIL in 1994 and
HK$NIL in 1995 ................................ 29,918 27,501
Advances to related parties (note 13) ........... 4,029 16,007
Inventories (note 6) ............................ 9,188 15,884
Prepaid expenses and other current assets ....... 1,836 3,335
------- -------
Total current assets ...................... 68,992 73,648
------- -------
Property, plant and equipment, net (note 7) ....... 25,975 109,770
------- -------
Intangible assets, (note 8) ....................... 459 1,955
------- -------
Other investment (note 9) ......................... 8,740 4,887
------- -------
Long term loan receivable (note 10) ............... 22,500 12,500
------- -------
Total assets ...................................... 126,666 202,760
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
- 3 -
<PAGE> 8
ASTRON GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - continued
(Dollars in thousands except per share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
-------------------------
1994 1995
------- -------
HK$ HK$
<S> <C> <C>
Current liabilities:
Short-term borrowings (note 11)............................... 404 1,714
Current portion of long-term debt (note 12)................... 1,965 499
Accounts payable.............................................. 34,498 55,441
Advances from related parties (note 14)....................... 232 732
Income taxes payable.......................................... 2,929 928
Other accrued liabilities..................................... 2,613 -
------- -------
Total current liabilities................................... 42,641 59,314
------- -------
Deferred income taxes (note 5).................................. 1,445 1,718
------- -------
Long-term debt (note 12)........................................ 25,030 -
------- -------
Minority interests.............................................. 3,750 3,750
------- -------
Commitments and contingencies (note 13)
Shareholders' equity:
Ordinary shares, HK$1 par value, 6,750 shares
authorised, issued and outstanding.......................... 6,750 6,750
Additional paid-in capital................................... - 60,000
Retained earnings............................................. 38,310 62,784
Other reserves................................................ 8,740 8,444
------- -------
53,800 137,978
------- -------
Total liabilities and shareholders' equity...................... 126,666 202,760
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE> 9
ASTRON GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands except share data)
<TABLE>
<CAPTION>
ORDINARY SHARES ADDITIONAL TOTAL
----------------- PAID-IN RETAINED OTHER SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS RESERVES EQUITY
------ ------ ---------- -------- -------- -------------
HK$ HK$ HK$ HK$ HK$
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 ................... 2,000 2,000 - 19,064 9,377 30,441
Surplus arising from revaluation of
investment property .......................... - - - - 15,488 15,488
Issue of ordinary shares ....................... 3,000 3,000 - - - 3,000
Net income ..................................... - - - 5,382 - 5,382
Proposed dividend .............................. - - - (900) - (900)
----- ----- ------ ------ ------- -------
Balance at December 31, 1993 ................... 5,000 5,000 - 23,546 24,865 53,411
Bonus shares issued ............................ 1,750 1,750 - (1,750) - -
Eliminated on disposal of investment
property ..................................... - - - - (21,458) (21,458)
Revaluation of long term investment ............ - - - - 5,333 5,333
Net income ..................................... - - - 16,514 - 16,514
----- ----- ------ ------ ------- -------
Balance at December 31, 1994 ................... 6,750 6,750 - 38,310 8,740 53,800
Capital contribution ........................... - - 60,000 - - 60,000
Revaluation of land ............................ - - - - 3,557 3,557
Revaluation of long-term investment ............ - - - - (3,853) (3,853)
Net income ..................................... - - - 24,474 - 24,474
----- ----- ------ ------ ------- -------
Balance at December 31, 1995 ................... 6,750 6,750 60,000 62,784 8,444 137,978
===== ===== ====== ====== ======= =======
</TABLE>
(Note: Other reserves represent net surplus on revaluation of land and
buildings and other investments)
See accompanying notes to consolidated financial statements.
-5-
<PAGE> 10
ASTRON GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
------ ------ ------
HK$ HK$ HK$
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Operating profit before taxation.................................... 7,405 19,086 28,035
Dividend income..................................................... - (108) -
Interest income..................................................... (47) (816) (1,902)
Interest expense.................................................... 563 644 405
Interest on obligations under finance leases and hire purchase
contracts......................................................... 197 172 95
Depreciation and amortization....................................... 7,629 4,426 5,748
Loss (gain) on disposal of fixed assets............................. 178 (18,813) 34
Reinstatement of company loan due to a fellow subsidiary............ - 20,800 -
Decrease (increase) in stocks and work in progress.................. 1,063 (1,807) (6,697)
Decrease (increase) in debtors, deposits and prepayments............ (1,849) (17,401) 921
Decrease (increase) in amount due from holding company.............. (3,004) 207 2,699
Decrease (increase) in amount due from a fellow subsidiary
company........................................................... (4) 4 (13,528)
Decrease (increase) in amounts due from related companies........... (930) 860 51
Increase in amount due from a shareholder........................... - (1,162) (1,201)
Increase in creditors and accrued charges........................... 3,713 22,895 20,943
(Decrease) increase in amount due to a fellow subsidiary
company........................................................... - 99 (99)
Increase in amount due to a related company......................... - - 84
Increase in amount due to a minority shareholder.................... - - 648
(Decrease) increase in amount due to a director..................... (88) 121 (133)
(Decrease) increase in trust receipts............................... 195 999 (2,613)
------ ------ ------
NET CASH INFLOW FROM OPERATING ACTIVITIES........................... 15,021 30,206 33,490
------ ------ ------
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Dividend received................................................... - 108 -
Interest received................................................... 47 816 1,902
Interest paid....................................................... (563) (644) (405)
Interest on obligations under finance leases
and hire purchase contracts....................................... (197) (171) (95)
Dividend paid....................................................... - (900) -
------ ------ ------
NET CASH INFLOW (OUTFLOW) FROM RETURNS
ON INVESTMENT AND SERVICING OF FINANCE............................ (713) (791) 1,402
------ ------ ------
TAXATION
Hong Kong Profits Tax paid.......................................... - (977) (5,290)
------ ------ ------
INVESTING ACTIVITIES
Payments to acquire trademark....................................... - (315) -
Purchase of fixed assets............................................ (522) (10,551) (85,970)
Pre-operating costs................................................. - - (1,582)
Proceeds on disposal of fixed assets................................ 10 333 36
Long-term loan receivable........................................... - - 10,000
------ ------ ------
</TABLE>
- 6 -
<PAGE> 11
ASTRON GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1994 1995
---- ---- ----
HK$ HK$ HK$
<S> <C> <C> <C>
NET CASH OUTFLOW FROM INVESTING
ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . (512) (10,533) (77,516)
------ ------- -------
NET CASH (OUTFLOW) INFLOW BEFORE
FINANCING . . . . . . . . . . . . . . . . . . . . . . . . 13,796 17,905 (47,914)
------ ------- -------
FINANCING (see note 14)
Capital contribution . . . . . . . . . . . . . . . . . . . . - - 60,000
Issue of ordinary shares . . . . . . . . . . . . . . . . . . 3,000 - -
New bank loans obtained . . . . . . . . . . . . . . . . . . 2,892 - -
Repayment of obligations under finance leases
and hire purchase contracts . . . . . . . . . . . . . . . (4,024) - (1,205)
Repayment of bank loans . . . . . . . . . . . . . . . . . . (1,208) (2,032) (4,491)
Repayment of loan from a fellow subsidiary company . . . . . - - (20,800)
Repayment of loan from a shareholder . . . . . . . . . . . . (3,042) - -
------ ------- -------
NET CASH INFLOW (OUTFLOW) FROM
FINANCING . . . . . . . . . . . . . . . . . . . . . . . . (2,382) (2,032) 33,504
------ ------- -------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . 11,414 15,873 (14,410)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF THE YEAR . . . . . . . . . . . . . . . . . . (3,670) 7,744 23,617
------ ------- -------
CASH AND CASH EQUIVALENTS AT END
OF THE YEAR . . . . . . . . . . . . . . . . . . . . . . . 7,744 23,617 9,207
------ ------- -------
ANALYSIS OF THE BALANCES OF CASH AND
CASH EQUIVALENTS
Bank balances and cash . . . . . . . . . . . . . . . . . . . 8,932 24,021 10,921
Bank overdrafts . . . . . . . . . . . . . . . . . . . . . . (1,188) (404) (1,714)
------ ------- -------
7,744 23,617 9,207
====== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
-7-
<PAGE> 12
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
1. ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS
The Company is a private limited company incorporated in Hong Kong. Its
ultimate holding company is Alberton Holdings Limited, also incorporated
in Hong Kong.
The financial statements of the Company have been prepared in accordance
with accounting principles generally accepted in Hong Kong ("H.K.
GAAP"), which differ from in certain material respects from accounting
principles generally accepted in the United States ("U.S. GAAP") see
Note 19.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation -- The consolidated financial statements
include the assets, liabilities, revenues and expenses of all
subsidiaries. All material intercompany transactions and balances have
been eliminated.
Cash equivalents -- cash equivalents represent short-term highly liquid
investments which are readily convertible into known amounts of cash and
which were within three months of maturity when acquired; less advances
from banks repayable within three months from the date of the advance.
Depreciation -- Depreciation is provided to write off the cost or
revalued amount of fixed assets over their estimated useful lives using
the straight line method, at the following rates per annum:
Leasehold land and buildings Over the terms of the lease
Office equipment 20%
Furniture and fixtures 20%
Computers 20%
Electrical equipment 10%
Production equipment 10%-20%
Motor vehicles 20%
Assets held under finance leases and hire purchase contracts are
depreciated over their expected useful lives on the same basis as owned
assets.
Surplus arising on the revaluation of leasehold land and buildings is
credited to the property revaluation reserve except that to the extent a
revaluation surplus reverses a revaluation deficit of the same asset
previsouly charged to the profit and loss account, the revaluation
surplus is credited to the profit and loss account.
Deficit arising on the revaluation of the leasehold land and buildings
is charged to the profit and loss account except that to the extent a
revaluation deficit relates to an amount held in the property
revaluation reserve in respect of the same asset, the deficit is charged
directly against the related property revaluation reserve.
Revaluation surplus on the sale of revalued properties are credited to
retained earnings.
-8-
<PAGE> 13
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- continued
(Dollars in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (continued)
Inventories -- Inventories are stated at the lower of cost determined by
the first-in, first-out method, or market. Finished goods inventories
consist of raw materials, direct labor and overhead associated with the
manufacture of printed circuit boards.
Construction in progress is stated at cost which comprised the
manufacturing facilities and the related office building under
construction. The Company did not incur a significant amount of
borrowing costs in connection with the construction of property,
therefore no interest has been capitalized. No depreciation is provided
until the construction is completed.
Intangible assets -- Intangible assets include trademarks which are
capitalized and amortized over a period of ten years using the straight
line method and pre-operating expenses which are amortized over five
years from the date operations commence.
Revenue recognition -- The Company recognized revenue at the time
products are shipped to customers.
Income taxes -- Deferred income taxes are provided at enacted statutory
rates for temporary differences. Temporary differences result primarily
from differences between the book and tax bases for depreciation
expense.
Foreign currency translation -- Assets and liabilities denominated in
foreign currencies are translated at year end exchange rates, while
revenues and expenses are translated at the approximate exchange rates
ruling on the dates of the transactions. Gains or losses from foreign
currency transactions are included in net income.
On consolidation the financial statements of overseas subsidiaries are
translated at the rates ruling on the balance sheet date. All exchange
differences arising on consolidation are dealt with in reserves.
The exchange rates adopted in the translation of Renminbi (the "RMB") to
Hong Kong Dollars are the applicable foreign exchange adjustment centre
rates quoted by the People's Bank of China.
Employee benefits -- The Company does not provide any retirement or
postretirement benefits and postemployment benefits, if any, are not
significant.
Investments -- Other listed investments are carried at market value.
Unrealized gains or losses on long-term investments are recorded as
component of shareholders' equity. Such treatment of long-term
investments is consistent with U.S. Statement of Financial Accounting
Standards No. 115 ("SFAS 115"), Accounting for Certain Investments in
Debt and Equity Securities. Pursuant to SFAS 115 the long-term
investments would be classified as available-for-sale.
<PAGE> 14
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Dollars in thousands)
3. OTHER INCOME
The components of other income are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1994 1995
---- ---- ----
HK$ HK$ HK$
<S> <C> <C> <C>
Exchange gain . . . . . . . . . . . . . . 461 2,000 2,788
Interest income - bank . . . . . . . . . 47 816 2,594
- loan . . . . . . . . . - 1,475 1,041
Gain on disposal of fixed assets . . . . - 325 -
Management fee received . . . . . . . . . 1,041 1,315 857
Compensation from client on
cancellation of orders . . . . . . . . - 3 617
Sale of raw materials (scrap material,
gold solution, laminate/frame) . . . . - 585 863
Others . . . . . . . . . . . . . . . . . 1,430 48 1,548
----- ----- ------
2,979 6,567 10,308
===== ===== ======
</TABLE>
4. EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1994 1995
---- ---- ----
HK$ HK$ HK$
<S> <C> <C> <C>
Exceptional items comprise:
Reinstatement of loan due to a fellow
subsidiary company . . . . . . . . . . - (20,800) -
Gain on dispoal of leasehold and
buildings to a fellow subsidiary
company . . . . . . . . . . . . . . . . - 18,487 -
Gain on waiver of liabilities due to a
shareholder . . . . . . . . . . . . . . - - 6,900
Provision for corporate restructure . . . (2,793) - -
------ ------- -----
(2,793) (2,313) 6,900
====== ======= =====
</TABLE>
-10-
<PAGE> 15
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Dollars in thousands)
5. INCOME TAXES
The components of income before income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995
------- ------- -------
HK$ HK$ HK$
<S> <C> <C> <C>
Hong Kong ................................................ 7,404 10,832 24,011
British Virgin Islands.................................... - 8,254 8,030
The People's Republic of China ("PRC").................... - - (4,007)
------- ------- -------
7,404 19,086 28,034
======= ======= =======
</TABLE>
Hong Kong companies are subject to Hong Kong taxation on their
activities conducted in Hong Kong. Under the current Hong Kong laws,
dividends and capital gains arising from the realization of investments
are not subject to income taxes and no withholding tax is imposed on
payments of dividends by the Hong Kong incorporated subsidiaries to the
Company. The Company is not taxed in the British Virgin Islands where
one of its subsidiaries is incorporated.
The Company has a subsidiary which was incorporated in PRC in 1994 and
operates in the special economic zone of Zhuhai. This company is
subject to PRC income taxes at the applicable tax rate (currently 15%)
on taxable income based on income tax laws applicable to foreign
investment enterprises. Pursuant to the same income tax laws, the
subsidiary, being a production-oriented enterprise, is entitled to a tax
holiday and therefore is fully exempt from PRC income tax on their
manufacturing operations for two years starting from the first
profit-making year, followed by a 50% exemption for the next three
years.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995
------- ------- -------
HK$ HK$ HK$
<S> <C> <C> <C>
Hong Kong ................................................ 888 3,019 3,287
Deferred taxes (excess of tax allowances
over accounting depreciation)........................... 1,134 (447) 273
------- ------- -------
2,022 2,572 3,560
======= ======= =======
</TABLE>
-11-
<PAGE> 16
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Dollars in thousands)
5. INCOME TAXES - continued
A reconciliation between the provision for income taxes computed by
applying the Hong Kong statutory tax rate to income before taxes and the
actual provision for income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
(In percentage) 1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Statutory tax rate in Hong Kong .......................... 17.5 17.5 16.5
Deferred taxation (excess of tax allowances
over accounting depreciation)........................... 15.32 (2.33) 1.0
Other..................................................... (5.51) (1.69) (4.8)
----- ----- -----
Effective tax rate........................................ 27.31 13.48 12.70
===== ===== =====
</TABLE>
6. INVENTORIES
Inventories by major categories are summarized as follows:
<TABLE>
<CAPTION>
1994 1995
----- -----
HK$ HK$
<S> <C> <C>
Raw materials.............................. 3,711 8,684
Work in progress........................... 4,353 5,582
Finished goods............................. 1,124 1,618
----- ------
9,188 15,884
===== ======
</TABLE>
-12-
<PAGE> 17
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
7. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
LEASEHOLD FURNITURE CONSTRUCTION
LAND AND OFFICE AND ELECTRICAL PRODUCTION MOTOR IN
BUILDINGS EQUIPMENT FIXTURES COMPUTERS EQUIPMENT EQUIPMENT VEHICLES PROCESS TOTAL
--------- --------- --------- ---------- ---------- ---------- -------- ------------ -------
HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COST OR VALUATION
At January 1, 1995 5,741 381 7,991 447 - 38,720 178 7,365 60,223
Additions 7,459 105 876 223 847 29,822 1,020 45,619 85,971
Reclassification 32,964 - - - - - - (32,964) -
Revaluation 3,556 - - - - - - - 3,556
Disposals - (30) (52) - - (337) - - (419)
------ --- ----- --- --- ------ ----- ------- -------
At December 31, 1995 49,720 456 8,215 670 847 68,205 1,198 20,020 149,331
------ --- ----- --- --- ------ ----- ------- -------
Comprising:
At cost 190 456 8,215 670 847 68,205 1,198 20,020 99,801
At valuation 1995 49,530 - - - - - - - 49,530
------ --- ----- --- --- ------ ----- ------- -------
49,720 456 8,215 670 847 68,205 1,198 20,020 149,331
------ --- ----- --- --- ------ ----- ------- -------
DEPRECIATION
At January 1, 1995 25 261 6,523 274 - 27,122 43 - 34,248
Provided for the year 120 41 892 70 20 4,462 57 - 5,662
Eliminated on disposals - (18) (36) - - (295) - - (349)
------ --- ----- --- --- ------ ----- ------- -------
At December 31, 1995 145 284 7,379 344 20 31,289 100 - 39,561
------ --- ----- --- --- ------ ----- ------- -------
NET BOOK VALUES
At December 31, 1995 49,575 172 836 326 827 36,916 1,098 20,020 109,770
------ --- ----- --- --- ------ ----- ------- -------
At December 31, 1994 5,716 120 868 173 - 11,598 135 7,365 25,975
------ --- ----- --- --- ------ ----- ------- -------
</TABLE>
The net book value of leasehold land and buildings shown above comprises:
<TABLE>
<CAPTION>
1994 1995
----- ------
HK$ HK$
<S> <C> <C>
Land and buildings in Hong Kong under a long
term lease 165 152
Land and buildings outside Hong Kong under a
medium term lease 5,550 49,424
----- ------
5,715 49,576
===== ======
</TABLE>
The leasehold land of the Group situated in PRC was revalued at December
31, 1995 by Messrs. Sallmanns, Chartered Surveyors, on an open market
value basis subject to the obtaining of the land use right certificate
and the realty title certificate. The surplus arising on revaluation has
been credited to the property revaluation reserve. The Group is in the
process of obtaining the land use right certificate and the realty title
certificate.
The net book value of fixed assets includes an amount of HK$2,079 (1994:
HK$3,187) in respect of assets held under finance leases and hire
purchase contracts.
- 13 -
<PAGE> 18
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
8. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
Pre-operating
Trademark expenses Total
--------- ------------- -----
HK$ HK$ HK$
<S> <C> <C> <C>
COST
At January 1, 1995 315 144 459
Additions - 1,582 1,582
--- ----- -----
At December 31, 1995 315 1,726 2,041
--- ----- -----
AMORTISATION
At January 1, 1995 - - -
Provided for the year 32 54 86
--- ----- -----
At December 31, 1995 32 54 86
--- ----- -----
NET BOOK VALUES
At December 31, 1995 283 1,672 1,955
--- ----- -----
At December 31, 1994 315 144 459
=== ===== =====
</TABLE>
9. OTHER INVESTMENT
<TABLE>
<CAPTION>
1995 1994
----- -----
HK$ HK$
<S> <C> <C>
Listed shares overseas
At cost - -
Surplus on revaluation 4,887 8,740
----- -----
4,887 8,740
===== =====
</TABLE>
The investment represents 157,500 ordinary shares in Hana Microelectric
Company Limited, a company incorporated in Thailand and listed on the
Securities Exchange of Thailand since January 12, 1994. These shares
were assigned to the Company during 1991 at nil consideration.
10. LONG-TERM LOAN RECEIVABLE
<TABLE>
<CAPTION>
December 31,
------------------
1995 1995
----- -----
HK$ HK$
<S> <C> <C>
Amount due from a fellow subsidiary company 22,500 12,500
====== ======
</TABLE>
The loan outstanding is repayable on February 4, 1999 and bears interest
at 7.15%. The loan is secured by a corporate guarantee from the
Company's ultimate holding company.
-14-
<PAGE> 19
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
11. SHORT-TERM BORROWINGS
Short-term borrowings consist primarily of bank overdrafts. Interest
rates are generally based on the banks' prime lending rates and the
credit lines are normally subject to annual review. The Company has
pledged approximately HK$2,171 of cash to the bank to secure general
banking facilities.
12. LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31,
------------------
1994 1995
------ ----
HK$ HK$
<S> <C> <C>
Long-term debt consists of:
Bank loan bearing interest at 1/2% over
Best Lending Rate ................................ 1,935 -
Bank loan bearing interest at 1 1/2% over
Best Lending Rate ................................ 2,556 -
Capital lease obligations bearing interest
at 7.69% to 9.00% per annum ...................... 1,704 499
Loan payable to a fellow subsidiary
bearing interest at 7.15% ........................ 20,800 -
------ ---
Total .............................................. 26,995 499
Current portion of long-term debt .................. 1,965 499
------ ---
Long-term debt, less current portion ............... 25,030 -
====== ===
</TABLE>
There are no significant covenants or financial restrictions relating to
the Company's long-term debt.
-15-
<PAGE> 20
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Dollars in thousands)
13. COMMITMENTS AND CONTINGENCIES
At December 31, 1995, the Company and its subsidiaries had capital
commitments for buildings and factories under construction totalling
HK$46,935 which are expected to be disbursed during the year ending
December 31, 1996.
The Company leases premises under various operating leases which do not
contain any renewal or escalation clauses. Rental expense under
operating leases was HK$NIL in 1993, HK$1,647 in 1994 and HK$2,523 in
1995.
As at December 31, 1995, the Company and its subsidiaries were
obligated under capital leases and operating leases requiring minimum
rentals as follows:
<TABLE>
<CAPTION>
Capital Operating
leases leases
------ ------
HK$ HK$
<S> <C> <C>
Year ending December 31,
1996............................................. 508 2,011
1997............................................. - 1,672
1998............................................. - 1,608
1999............................................. - 1,608
Thereafter....................................... - 5,517
--- ------
Total minimum lease payments....................... 508 12,416
------
Less: amount representing interest................. 9
---
Present value of minimum lease payments............ 499
===
</TABLE>
At the balance sheet date, the Group had commitments under non-
cancellable operating leases for land and building as follows:
<TABLE>
<CAPTION>
1994 1995
---- ----
HK$ HK$
<S> <C> <C>
Operating leases which expire:
Within one year.................................... - 35
----- -----
In the second to fifth years inclusive............. 1,608 1,976
----- -----
1,608 2,011
===== =====
</TABLE>
-16-
<PAGE> 21
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Dollars in thousands)
14. RELATED PARTY TRANSACTIONS
The Company rents the Hong Kong office from Mayfield International Ltd.
("Mayfield"), a fellow subsidiary of Alberton Holdings Ltd. Rentals
charged by this party to the Company are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1993 1994 1995
---- ---- ----
HK$ HK$ HK$
<S> <C> <C> <C>
Rent charged by Mayfield ................. - 1,206 1,608
==== ===== =====
</TABLE>
Prior to December 1995, the Company advanced amounts to, and borrowed
amounts from, the holding company, shareholders, directors and companies
under their control. All balances were lent on an interest-free basis
and repayable on demand. The balances are summarized as follows:
Interested directors:
1. Richard David Han
2. Stephen J.L. Rees
3. Janine Rees
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
---- ----
HK$ HK$
<S> <C> <C>
Advances to:
Holding company
Alberton Holdings Ltd .................. 2,797 98
Fellow subsidiary company
Mayfield International Ltd ............. - 13,528
Related companies
Hana Macroelectric Co. Ltd ............. 14 -
Microsil Technology Ltd ................ - 2
HK PIM Co. Ltd ......................... 56 16
Shareholders
OMAC Sales Ltd ......................... 1,162 2,363
----- ------
4,029 16,007
===== ======
</TABLE>
-17-
<PAGE> 22
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Dollars in thousands)
14. RELATED PARTY TRANSACTIONS - continued
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
---- ----
HK$ HK$
<S> <C> <C>
Advances from:
Fellow subsidiary company
Mayfield International Ltd ............. 99 -
Related companies
OMAC (HK) Ltd .......................... - 84
Shareholders
OMAC Sales Limited ..................... - 648
Director
Stephen Rees ........................... 133 -
---- ----
232 732
==== ====
</TABLE>
Details of profit and loss transactions with related parties:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1993 1994 1995
------ ------ ------
HK$ HK$ HK$
<S> <C> <C> <S>
Interested director ...................... - 1 & 2 1 & 2
EXPENSES
Management fee .......................... - 410 445
==== ===== =====
</TABLE>
-18-
<PAGE> 23
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Dollars in thousands)
15. ANALYSIS OF CHANGES IN FINANCING
<TABLE>
<CAPTION>
OBLIGATIONS
UNDER FINANCE LOAN
ORDINARY LEASES AND FROM LOAN
SHARE HIRE PURCHASE BANK CAPITAL A RELATED FROM A
CAPITAL CONTRACTS LOANS CONTRIBUTION COMPANY SHAREHOLDERS
------- ------------ ----- ------------ --------- ------------
HK$ HK$ HK$ HK$ HK$ HK$
<S> <C> <C> <C> <C> <C> <C>
At January 1, 1993........ 2,000 2,865 3,543 - - 3,042
New borrowings obtained... - 4,159 2,892 - - -
Repayment of borrowings... - (4,024) (1,208) - - 3,042
Issue of ordinary share
capital................ 3,000 - - - - -
----- ------ ----- ------ ------- ------
At January 1, 1994....... 5,000 3,000 5,227 - - -
Repayment of borrowings.. - (1,296) (736) - - -
Non-cash bonus issue..... 1,750 - - - - -
----- ------ ----- ------ ------- ------
At January 1, 1995....... 6,750 1,704 4,491 - 20,800 -
Repayment of borrowings.. - (1,205) (4,491) - (20,800) -
Capital contribution..... - - - 60,000 - -
----- ------ ------ ------ ------- ------
At December 31, 1995..... 6,750 499 - 60,000 - -
===== ====== ====== ====== ======= ======
</TABLE>
16. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
In the years ended December 31, 1993, 1994 and 1995, the Company had
sales of printed circuit boards which represent 10% or more of Sales to
the following customers:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
ETA S.A......................... 14.15% 14.85% -
OMAC Sales Limited.............. - - 11.39%
Samsung Semiconductor SDN, BHD.. 12.5% 10.60% 23.83%
Siemens Semiconductor SDN, BHD.. 14.54% 13.49% 15.90%
TMX (Hong Kong) Limited......... 12.11% 17.13% -
</TABLE>
Details of the amounts receivable from the five customers with the
largest receivable balances at December 31, 1993, 1994 and 1995 are as
follows:
<TABLE>
<CAPTION>
Percentage of accounts receivable
December 31,
---------------------------------------
1993 1994 1995
------ ------ ------
HK$ HK$ HK$
<S> <C> <C> <C>
Five largest receivable balances..... 53% 57% 39.73%
</TABLE>
The Company has not experienced any significant difficulty in
collecting its accounts receivable in the past and is not aware of any
financial difficulties being experienced by its major customers.
-19-
<PAGE> 24
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Dollars in thousands)
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated value of financial instruments
is made in accordance with the requirements of U.S. Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments". The estimated fair value amounts have been
determined by the Company, using available market information and
appropriate valuation methodologies. The estimates presented herein are
not necessarily indicative of amounts that the Company could realize in
a current market exercise.
The carrying amounts of cash, accounts receivable, accounts payable,
short-term borrowings and long-term debt are reasonable estimates of
their fair value. The interest rates on the Company's short-term
borrowings and long-term debt approximate those which would have been
available at December 31, 1995 for debt of the same remaining
maturities. Long-term loan receivable from a fellow subsidiary bears
interest at 7.15%.
18. INFORMATION ABOUT FOREIGN AND DOMESTIC SALES
All of the Company's sales of printed circuit boards are coordinated
through the parent in Hong Kong and the breakdown by destination is as
follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1993 1994 1995
------ ------- -------
HK$ HK$ HK$
<S> <C> <C> <C>
Net sales:
Hong Kong.................. 22,906 25,106 24,253
Export:
Europe..................... 16,347 32,523 28,329
Other Asian countries...... 38,566 58,125 104,876
North America.............. 11,150 23,095 2,810
------ ------- -------
88,969 138,849 160,268
====== ======= =======
</TABLE>
The Company operates in Hong Kong, PRC and the British Virgin Islands.
The location of the Company's identifiable assets is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1993 1994 1995
------ ------- -------
HK$ HK$ HK$
<S> <C> <C> <C>
Hong Kong................... 79,735 102,153 82,707
PRC......................... - 15,338 112,424
British Virgin Islands...... - 9,175 7,629
------ ------- -------
79,735 126,666 202,760
====== ======= =======
</TABLE>
-20-
<PAGE> 25
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- continued
(Dollars in thousands)
19. SUBSEQUENT EVENT
On February 2, 1996, Flextronics International Limited, a Singapore
based company purchased 100% of the outstanding common stock of the
Company.
20. SUMMARY OF DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
The Company's financial statements are prepared in accordance with H.K.
GAAP, which differ in certain significant respects from U.S. GAAP. The
significant differences relate principally to the following items and
the adjustments necessary to restate net income and shareholders' equity
in accordance with U.S. GAAP are shown in the tables set out below:
(a) Proposed dividends
The Company has included a proposed dividend in 1993 as a
reconciliation item because under H.K. GAAP proposed dividend
declared after the end of the accounting period is recorded as a
liability incurred during such accounting period. Under U.S.
GAAP, dividends are recorded as a liability on the books of the
Company on the date of declaration. Under U.S. GAAP the dividend
would be recorded as an adjustment to retained earnings. The
dividend was declared and paid during 1994.
(b) Exceptional income or loss
Under H.K. GAAP, the amounts shown in note 4 are classified as
exceptional income or loss. U.S. GAAP does not recognize such
items as exceptional.
(c) Waiver of liabilities due to a shareholder
The exceptional items include an amount of waived liabilities
due to a shareholder. Under U.S. GAAP such amount is not treated
as income but as additional paid-in capital. Accordingly, an
adjustment to net income is required to eliminate this
difference.
(d) Revaluation of leasehold land and investment properties
The Company has revalued certain leasehold land and investment
properties based on an independent valuation. This resulted in
an increase on the carrying value of such assets with a
corresponding increase in consolidated shareholders' equity.
Such revaluations are not permitted under U.S. GAAP.
Accordingly, an adjustment to shareholders' equity is required
to eliminate these differences. In addition, the company has
eliminated the related depreciation expense from net income
for the respective years.
-21-
<PAGE> 26
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Dollars in thousands)
20. SUMMARY OF DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES - continued
(e) Pre-operating expenses
The Company has capitalised certain pre-operating expenses
which is not permitted under U.S. GAAP. The amounts capitalised
and the related amortisation expense have been adjusted in net
income for the respective years.
(f) Reinstatement of loan payable
The reinstatement of the loan payable to a related company has
been included in income. Under U.S. GAAP such amount is not
treated as income but as additional paid-in capital.
Accordingly, an adjustment to net income to eliminate this
difference.
(g) Consolidated Statement of Cash Flows
The Consolidated Statement of Cash Flows presented on pages 6
and 7 has been prepared in accordance with generally accepted
accounting principles in Hong Kong ("HK GAAP"). The presentation
of certain items in the Consolidated Statement of Cash Flows
pursuant to HK GAAP differs from the presentation in accordance
with U.S. Statement of Financial Accounting Standards No. 95
"Statement of Cash Flows" ("SFAS95"). The net cash flow from
operating, investing and financing would have been the following
had the Consolidated Statement of Cash Flow been presented in
accordance with SFAS95:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
HK$ HK$ HK$
<S> <C> <C> <C>
Net cash provided by operating activities . . . 18,250 8,301 41,081
------ ------- -------
Net cash used in investing activities . . . . . (4,670) (10,424) (77,517)
------ ------- -------
Net cash (used in) provided by
financing activities . . . . . . . . . . . . (4,830) 17,212 23,336
------ ------- -------
</TABLE>
The following table summarizes the effect on net income of differences
between H.K. GAAP and U.S. GAAP.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1993 1994 1995
---- ---- ----
HK$ HK$ HK$
<S> <C> <C> <C>
Net income as reported under
H.K. GAAP . . . . . . . . . . . . . . . . . 5,382 16,514 24,474
U.S. GAAP material adjustments:
Waiver of liabilities due to a shareholder - - (6,900)
Pre-operating expenses . . . . . . . . . . - (144) (1,582)
Amortisation of pre-operating expenses . . 54
Depreciation relating to the revaluation
of investment properties . . . . . . 715 119 -
Reinstatement of loan payable to a related
company reclassified as capital . . . - 20,800
Tax effects . . . . . . . . . . . . . . . . - - -
----- ------ ------
Net income under U.S. GAAP . . . . . . . . . 6,097 37,289 16,046
===== ====== ======
</TABLE>
-22-
<PAGE> 27
ASTRON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Dollars in thousands)
20. SUMMARY OF DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES - continued
The following table summarizes the effect on shareholders' equity of
the differences between H.K. GAAP and U.S. GAAP.
<TABLE>
<CAPTION>
As of December 31,
-----------------------
1993 1994 1995
---- ---- ----
HK$ HK$ HK$
<S> <C> <C> <C>
Shareholders' equity as reported
under H.K. GAAP...................... 53,411 53,800 137,978
Approximate U.S. GAAP adjustments:
Proposed dividend.................... 900 (900) -
Revaluation of leasehold land........ - - (3,557)
Revaluation of investment properties. (21,458) - -
Reverse waiver of loan payable....... (20,800) - -
Eliminate revaluation of investment
property sold........................ - 21,458 -
Reclassification of liabilities waived
by a shareholder to additional paid
in capital.......................... - - 6,900
U.S. GAAP net income adjustments..... 715 20,775 (8,428)
Cumulative U.S. GAAP adjustments
to shareholders' equity............. - (40,643) 690
------- ------ -------
Approximate shareholders' equity
under U.S. GAAP...................... 12,768 54,490 133,583
------- ------ -------
</TABLE>
- ----------------------------------------------------------------------------
- 23 -
<PAGE> 28
(b) Pro forma Financial Information
FLEXTRONICS INTERNATIONAL LTD. AND ASTRON GROUP LIMITED
PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
(unaudited)
On February 2, 1996, Flextronics International Ltd. (the "Company") acquired
(the "Acquisition") all of the issued capital of Astron Group Limited, a private
company limited by shares and incorporated in Hong Kong ("Astron"). The
following unaudited pro forma condensed consolidated financial information
reflects this business combination which will be accounted for under the
purchase method of accounting. The pro forma condensed consolidated statements
of operations assumes the acquisition had taken place at the beginning of the
fiscal year ended March 31, 1995, whereas the pro forma condensed consolidated
balance sheet assumes the acquisition took place on December 31, 1995.
The pro forma information is based on historical statements of the Company and
Astron for the fiscal periods indicated, based on the Company's results of
operations for the fiscal year ended March 31, 1995 (audited) and for the nine
months ended December 31, 1995 (unaudited) and Astron's results of operations
for the year ended December 31, 1994 (audited) and for the nine months ended
December 31, 1995 (unaudited). As the fiscal year ends of the two companies are
not co-terminuus, different fiscal periods were used for the preparation of the
pro forma financial statements. In addition, for purposes of the pro forma
condensed financial statements, the financial statements of Astron Group
Limited translated from Hong Kong dollars into U.S. dollars in accordance with
Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation". Accordingly all of Astron's assets and liabilities have been
translated at the exchange rate prevailing at the balance sheet date and all
income and expenditure items have been translated at the average rates for each
of the years. As the exchange rate between the Hong Kong dollar and the U.S.
dollar has been fixed, an exchange rate of HK$7.73 to $1.00, being the
approximate rate of exchange from commercial banks throughout the relevant
periods, has been used and no exchange differences arise on translation.
The unaudited pro forma financial information does not purport to represent
what the results of operations and the financial position of the Company would
have actually been if the acquisition described above had in fact occurred on
such date or the beginning of such period. Neither do they purport to project
the results of operation and the financial position of the Company for any
future date or period.
The pro forma condensed financial statements should be read in conjunction with
the accompanying notes to the pro forma condensed financial statements included
elsewhere herein.
<PAGE> 29
FLEXTRONICS INTERNATIONAL LIMITED AND ASTRON GROUP LIMITED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)(UNAUDITED)
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
December 31, December 31,
1995 1995
------------- ------------ Pro forma
Flextronics Astron Group adjustment Pro forma
International Limited (see Note 1) Combined
------------- ------------ ------------ ----------
<S> <C> <C> <C>
Net Sales $322,645 $15,450 $ $338,095
Cost of sales 293,461 10,655 304,116
-------- ------- ------- --------
Gross profit 29,184 4,795 0 33,979
Selling, general and administrative
expenses 13,255 4,740 17,995
Goodwill amortization 542 0 199(3) 741
Intangible assets amortization 241 0 999(3) 1,240
In-process research and development 29,000(4) 29,000
--------- ------- -------- --------
Operating income 15,146 55 (30,198) (14,997)
Interest Income (expense) and other, (1,121) 131 (300)(8) (1,290)
net
-------- ------- ------- --------
Income (loss) before income taxes 14,025 186 (30,498) (16,287)
Provision (Benefit) for income taxes 2,399 292 (260)(5) 2,431
-------- ------- -------- --------
Net income $ 11,626 $ (106) $(30,238) $(18,718)
======== ======= ======== ========
Net income per share $ 0.89 $ (1.34)
======== ========
Weighted average outstanding
Ordinary shares and equivalents 13,130 14,016
======== ========
</TABLE>
<PAGE> 30
FLEXTRONICS INTERNATIONAL LIMITED AND ASTRON GROUP LIMITED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<TABLE>
<CAPTION>
Year ended
Year ended December 31,
March 31, 1995 1994 Pro forma
Flextronics Astron Group adjustment Pro forma
International Limited (see Note 1&2) Combined
------------- ------- ------------- --------
<S> <C> <C> <C> <C>
Net Sales $237,386 $17,962 $ $255,348
Cost of sales 214,865 10,713 225,578
-------- ------- --------- --------
Gross profit 22,521 7,249 0 29,770
Selling, general and administrative
expenses 11,468 5,228 16,696
Goodwill amortization 510 0 238(3) 748
Intangible assets amortization 245 0 1,332(3) 1,577
In-process rResearch and development 91 0 29,000(4) 29,091
-------- ------- --------- ---------
Operating income (loss) 10,207 2,021 (30,570) (18,342)
Interest income (expense) and other, net (1,043) 3,136 (363)(8) 1,730
Merger expenses (816) 0 (816)
Income (loss) from joint venture (729) 0 (729)
-------- ------- --------- ---------
Income (loss) before income taxes 7,619 5,157 (30,933) (18,157)
Provision for income taxes 1,463 333 (346)(5) 1,450
-------- ------- --------- ---------
Net income (loss) $ 6,156 $ 4,824 $(30,587) $(19,607)
======== ======= ========= =========
Net income/(loss) per share $ 0.51 $ (1.51)
======== =========
Weighted average outstanding
Ordinary shares and equivalents 12,103 12,989
======== =========
</TABLE>
<PAGE> 31
FLEXTRONICS INTERNATIONAL LIMITED AND ASTRON GROUP LIMITED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
Flextronics Astron Group Pro Forma
International Limited Adjustment Pro Forma
December 31, 1995 December 31, 1995 (See Note 1 & 2) Combined
----------------- ----------------- ---------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 8,403 $ 1,413 $ (8,703) $ 1,113
Accounts Receivable, net 79,229 3,558 82,787
Other current assets 7,276 2,502 9,778
Inventories, net 48,572 2,055 (141) 50,486
-------- ------- -------- --------
Total current assets 143,480 9,528 (8,844) 144,164
Property and equipment, net 41,054 13,848 54,902
Investments and other non-current
assets 835 2,034 2,869
Intangible assets 585 253 10,911 11,749
Goodwill net of amortization 8,828 0 4,559 13,387
-------- ------- -------- --------
Total assets $194,782 $25,663 $ 6,626 $227,071
======== ======= ======== ========
</TABLE>
<PAGE> 32
FLEXTRONICS INTERNATIONAL LIMITED AND ASTRON GROUP LIMITED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS) (UNAUDITED)
LIABILITIES AND SHAREHOLDERS'
EQUITY
<TABLE>
<CAPTION>
Flextronics Astron Group Pro Forma
International Limited Adjustment Pro Forma
December 31, 1995 December 31, 1995 (See Note 1 & 2) Combined
----------------- ----------------- ---------------- ---------
<S> <C> <C> <C> <C>
Current liabilities:
Bank borrowings $ 10,330 $ 222 $ $ 10,552
Current portion of capital lease 5,242 0 5,242
Current portion of long term debt 1,003 65 10,000(2) 11,068
Accounts payable 60,424 7,173 67,597
Other current liabilities 8,848 95 700(2) 9,643
Income tax payable 3,089 120 3,209
-------- ------- ---------- ---------
Total current liabilities 88,936 7,675 10,700 107,311
Non-current liabilities:
Bank borrowings -- -- 5,037(7) 5,037
Capital lease, less current portion 8,579 0 8,579
Long term debt, less current
portion 2,817 0 5,000(2) 7,817
Notes Payable to shareholders 679 0 679
Other payable 24,124(6) 24,124
Deferred income tax 561 222 2,777 3,560
-------- ------- ---------- ---------
Total liabilities 101,572 7,897 47,638 157,107
-------- ------- ---------- ---------
Minority Interest 0 485 485
Shareholders equity:
Ordinary shares 82 873 (871) 84
Additional paid-in capital 86,740 8,655 (2,150) 93,245
Retained earnings 6,388 7,121 (37,359) (23,830)
Reserves 0 632 (632) 0
-------- ------- ---------- ---------
Total shareholders' equity 93,210 17,281 (41,012) 69,479
-------- ------- ---------- ---------
Total liabilities and shareholders' $194,782 $25,663 $ 6,626 $ 227,071
equity ======== ======= ========== =========
</TABLE>
<PAGE> 33
FLEXTRONICS INTERNATIONAL LTD. AND ASTRON GROUP LIMITED
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(unaudited)
1. The accounts of the Astron Group Limited are presented in accordance
with U.S. GAAP. Balance sheet accounts are translated into the U.S.
dollar at the spot or historical rate as appropriate. Profit and loss
accounts are translated at the average rate.
2. On February 2, 1996, the Company acquired Astron Group limited. The pro
forma condensed consolidated balance sheet reflects the acquisition of
Astron Group Limited by way of $13,440,605 in cash; issuance of 238,684
Ordinary Shares (these shares were valued based on the Company's
average market share price during the 21 trading days immediately
preceding the acquisition resulting in a value of $6,507,000); issuance
of a $10 million promissory note due one year after acquisition date
and issuance of a $5 million promissory note due two years after
acquisition date. The promissory notes shall bear interest at the rate
of 8% per annum. Additionally, the Company will issue $10 million of
Ordinary Shares and pay approximately $14 million under the service
agreement described below on June 30, 1998. Management has assessed the
fair market value of Astron's identifiable assets and liabilities of
$17.2 million and has recorded $11.9 million as identified intangible
assets and $4.8 million as goodwill. Total costs to be incurred by the
Company in connection with the acquisition are estimated at US$700,000.
In connection with the Astron agreement, the Company has entered into a
service agreement with the Chairman of Astron and an affiliated entity,
which includes confidentiality provisions and a covenant not to
compete. The agreement provides for a payment of approximately $14
million to be made on June 30, 1998. Of the $14 million, $5 million
must be paid in cash. The remainder may be paid in either cash or
Ordinary Shares at the discretion of the Company. The $14.0 million
payment has been included in the calculation of Astron's purchase
price.
In addition, the Company will pay an earnout of up to $12.5 million
contingent upon Astron Group Limited meeting certain pre-tax profit
targets for calendar year 1996. The first $5 million of the earnout
shall be paid in cash and the balance will be paid in cash or through
the issuance of Ordinary Shares, at the discretion of the Company. In
accordance with U.S. GAAP, the contingency will be recorded as purchase
price when resolved.
3. Represents amortization of goodwill and identified intangible assets.
In connection with the acquisition of Astron, and as if the acquisition
was effected at the beginning of the period presented, the Company
recorded $11.9 million of identified intangible assets and $4.8 of
goodwill, and is amortizing these assets over their estimated useful
lives of 7 to 25 years.
4. The Company engaged an independent valuation firm to aid in determining
the fair market value of Astron Group Limited's research and
development in process. ("In-Process R&D"). Based on this valuation and
other factors, the Company determined that the fair value of the
In-process R&D was $29 million. Accordingly, the Company wrote off $29
million of In-process R&D in fiscal 1996 and this amount was considered
in the pro forma condensed income statement.
5. Reflects amortization of a deferred tax liability recognized by the
Company in connection with the acquisition.
6. Other payable consists of $10.0 million in shares due to the former
shareholders of Astron due June 30, 1998, and an accrued payment due to
an affiliate of Stephen Rees, the Chairman and a former shareholder of
Astron, of approximately $14 million, consisting of approximately $5.0
million in cash and $9.0 million payable in cash or the Company's
Ordinary Shares, which the Company intends to pay in Ordinary Shares
and has classified as a liability.
7. The proforma adjustments include additional bank borrowings of
$5,037,000 assumed to be required to fund the acquisition.
8. Represents cash paid for interest on bank borrowings assumed to be
required to fund the acquisition. See note 7.
<PAGE> 34
(c) Exhibits
99.1 Letter dated August 18, 1997 of Deloitte Touche Tohmatsu
<PAGE> 35
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this amendment to its report on Form 8-K to be
signed on its behalf by the undersigned thereunto duly authorized.
FLEXTRONICS INTERNATIONAL LTD.
Date: August 26, 1997 By: /s/ Michael E. Marks
------------------------------------
Michael E. Marks
Chairman and Chief Executive Officer
<PAGE> 1
EXHIBIT 99.1
[DELOITTE TOUCHE TOHMATSU LETTERHEAD]
August 18, 1997
Flextronics International Ltd.
514 Chai Chee Lane #04-13
Singapore 469029
Dear Sirs,
Our audit report dated March 12, 1997 states that the audit of Astron Group
Limited for the year ended December 31, 1995 was performed in accordance with
generally accepted auditing standards in Hong Kong. Those standards do not
differ from generally accepted auditing standards in the United States of
America.
Yours faithfully,
/s/ DELOITTE TOUCHE TOHMATSU
Deloitte Touche Tohmatsu
Hong Kong
