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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended September 25, 1998
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.)
------------------------
SINGAPORE 469029
(65) 449-5255
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MICHAEL E. MARKS
CHIEF EXECUTIVE OFFICER
FLEXTRONICS INTERNATIONAL LTD.
514 CHAI CHEE LANE #04-13
BEDOK INDUSTRIAL ESTATE
SINGAPORE 469029
(65) 449-5255
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
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 { }
At November 2, 1998, there were 20,691,513 S$0.01 par value, Ordinary
Shares outstanding.
<PAGE>
FLEXTRONICS INTERNATIONAL LIMITED
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 25, 1998
and March 31, 1998 ..................................................... 3
Condensed Consolidated Statements of Income - Three Months Ended
September 25, 1998 and September 30, 1997 ............................. 4
Condensed Consolidated Statements of Income - Six Months Ended
September 25, 1998 and September 30, 1997 .............................. 5
Statements of Comprehensive Income - Three Months Ended
September 25, 1998 and September 30, 1997 .............................. 6
Statements of Comprehensive Income - Six Months Ended
September 25, 1998 and September 30, 1997 .............................. 7
Condensed Consolidated Statements of Cash Flow - Six Months Ended
September 25, 1998 and September 30, 1997 .............................. 8
Notes to Condensed Consolidated Financial Statements .................... 9-11
Item 2. Management's Discussion and Analysis of Financial Statements
Condition and Results of Operations ..................................... 12-19
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ....................... 20
Signatures ............................................................... 21
</TABLE>
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
September 25, March 31,
1998 1998
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents .............................. $ 23,920 $ 89,390
Accounts receivable, net ............................... 184,810 155,125
Inventories ............................................ 184,291 157,077
Deferred income taxes and other current assets ......... 53,487 37,942
--------- ---------
Total current assets ........................... 446,508 439,534
Property and equipment, net .............................. 305,798 255,573
Other non-current assets ................................. 47,273 49,016
--------- ---------
Total assets ................................... $ 799,579 $ 744,123
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank borrowings and current portion of long-term debt .. $ 68,646 $ 43,209
Capital lease obligations .............................. 12,106 9,587
Accounts payable and accrued liabilities ............... 213,953 177,084
Other current liabilities .............................. 55,080 85,118
--------- ---------
Total current liabilities ...................... 349,785 314,998
--------- ---------
Long-term debt, net of current portion ................... 167,185 166,497
Capital lease obligations, net of current portion ........ 21,555 23,181
Deferred income taxes .................................... 4,556 4,812
Other long-term liabilities .............................. 8,124 18,832
Minority interest ........................................ 1,484 994
--------- ---------
Total long-term liabilities ................... 202,904 214,316
--------- ---------
Shareholders' Equity:
Ordinary shares ........................................ 135 134
Additional paid-in capital ............................. 218,320 214,466
Retained earnings ...................................... 31,454 6,934
Accumulated other comprehensive loss ................... (3,019) (6,725)
--------- ---------
Total shareholders' equity ..................... 246,890 214,809
--------- ---------
Total liabilities and shareholders' equity ..... $ 799,579 $ 744,123
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three months ended
September 25, September 30,
1998 1997
------------- -------------
Net sales ................................. $422,948 $251,468
Cost of sales ............................. 386,042 226,786
-------- --------
Gross margin ..................... 36,906 24,682
-------- --------
Operating expenses:
Selling, general and administrative ..... 16,555 11,806
Goodwill and intangibles amortization ... 881 1,009
-------- --------
Total operating expenses ......... 17,436 12,815
-------- --------
Income from operations ........... 19,470 11,867
Interest expense and other expense, net ... 4,853 4,333
-------- --------
Income before income taxes ....... 14,617 7,534
Provision for income taxes ................ 1,754 912
-------- --------
Net income ....................... $ 12,863 $ 6,622
======== ========
Earnings per share:
Basic ................................... $ 0.62 $ 0.39
Diluted ................................. $ 0.60 $ 0.37
Shares used in computing per share amounts:
Basic ................................... 20,827 17,042
Diluted ................................. 21,575 17,971
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Six months ended
September 25, September 30,
1998 1997
------------- -------------
Net sales ................................. $799,027 $487,013
Cost of sales ............................. 729,065 439,303
-------- --------
Gross margin ..................... 69,962 47,710
-------- --------
Operating expenses:
Selling, general and administrative ..... 30,910 24,370
Goodwill and intangibles amortization ... 1,761 1,753
-------- --------
Total operating expenses ......... 32,671 26,123
-------- --------
Income from operations ........... 37,291 21,587
Interest expense and other expense, net ... 9,429 6,761
-------- --------
Income before income taxes ....... 27,862 14,826
Provision for income taxes ................ 3,342 1,658
-------- --------
Net income ....................... $ 24,520 $ 13,168
======== ========
Earnings per share:
Basic ................................... $ 1.18 $ 0.77
Diluted ................................. $ 1.13 $ 0.75
Shares used in computing per share amounts:
Basic ................................... 20,765 16,997
Diluted ................................. 21,669 17,663
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
<PAGE>
FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Three months ended
September 25, September 30,
1998 1997
------------- -------------
Net income ................................... $12,863 $ 6,622
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments ... 2,523 (165)
------- -------
Comprehensive income ......................... $15,386 $ 6,457
======= =======
The accompanying notes are an integral part of these
condensed consolidated financial statements.
6
<PAGE>
FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Six months ended
September 25, September 30,
1998 1997
------------- -------------
Net income ................................... $ 24,520 $ 13,168
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments ... 3,261 (1,611)
-------- --------
Comprehensive income ......................... $ 27,781 $ 11,557
======== ========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
7
<PAGE>
FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
September 25, September 30,
1998 1997
--------- ---------
<S> <C> <C>
Net cash provided by operating activities .................. $ 2,206 $ 23,463
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment ...................... (64,504) (49,154)
Proceeds from sale of property and equipment ............. 1,389 522
Remaining payment for 40% interest in FICO ............... -- (2,200)
Other investments ........................................ (2,085) (2,000)
Payment of earnout and remaining purchase price related to
the acquisition of Astron ............................... (24,000) (6,250)
--------- ---------
Net cash used in investing activities ...................... (89,200) (59,082)
--------- ---------
Cash flows from financing activities:
Bank borrowings and proceeds from long-term debt ......... 42,436 148,522
Repayment of bank borrowings and long-term debt .......... (17,919) (112,267)
Repayment of capital lease obligations ................... (5,236) (5,820)
Proceeds from exercise of stock options .................. 3,856 989
--------- ---------
Net cash provided by financing activities .................. 23,137 31,424
--------- ---------
Effect of exchange rate changes on cash .................... (1,613) (722)
--------- ---------
Net decrease in cash and cash equivalents .................. (65,470) (4,917)
Cash and cash equivalents at beginning of period ........... 89,390 24,159
--------- ---------
Cash and cash equivalents at end of period ................. $ 23,920 $ 19,242
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
8
<PAGE>
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 25, 1998
(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, and should be read in conjunction with the annual audited
consolidated statements as of and for the year ended March 31, 1998 contained in
the Company's 1998 annual report on Form 10-K. 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
three and six month period ended September 25, 1998 are not necessarily
indicative of the results that may be expected for the year ending March 31,
1999.
Note B - Inventories
Inventories consist of the following: (in thousands)
September 25, March 31,
1998 1998
------- --------
Raw materials................................... $133,452 $130,868
Work-in-process................................. 27,323 21,536
Finished goods.................................. 23,516 4,673
------- --------
$184,291 $157,077
======= ========
Note C - Acquisitions
On October 30, 1997, the Company acquired 92% of the outstanding common
stock of Neutronics Holdings A.G. ("Neutronics"), an electronic manufacturing
services provider with operations located in Austria and Hungary. The
acquisition was accounted for as a pooling-of-interests and, accordingly, all
financial statements presented have been retroactively restated to include the
results of Neutronics.
A reconciliation of the financial statements for the three months and six
months ended September 30, 1997, to previously reported information is as
follows (in thousands):
Three months ended Six months ended
September 30, 1997 September 30, 1997
------------------ ------------------
Net sales:
Previously reported $210,087 $406,970
Neutronics 41,381 80,043
-------- --------
As restated $251,468 $487,013
======== ========
Net income:
Previously reported $ 6,525 $ 11,837
Neutronics 97 1,331
-------- --------
As restated $ 6,622 $ 13,168
======== ========
Note D - EARNINGS PER SHARE
In the third quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." Under SFAS
No. 128, the Company presents two earnings per share (EPS) amounts. Basic EPS is
computed using the weighted average number of Ordinary Shares outstanding during
the applicable periods. Diluted EPS is computed using the weighted average
number of Ordinary Shares and dilutive Ordinary Share equivalents outstanding
during the applicable periods. Ordinary Share equivalents include dilutive
Ordinary Shares issuable upon the exercise of stock options and are computed
using the treasury stock method.
Reconciliation between basic and diluted earnings per share is as follows
for the three and six month period ended September 25, 1998 and September 30,
1997 (in thousands, except per share data):
9
<PAGE>
<TABLE>
<CAPTION>
Three months ended Six months ended
September 25, September 30, September 25, September 30,
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Shares issued and outstanding (1) ...... 20,827 16,582 20,765 16,537
Shares due to Astron (2) ............... -- 460 -- 460
------- ------- ------- -------
Weighted Average Ordinary Shares - basic 20,827 17,042 20,765 16,997
Common stock equivalent
stock options (3) .................... 748 929 904 666
------- ------- ------- -------
Weighted Average Ordinary Shares
and equivalents - diluted ............ 21,575 17,971 21,669 17,663
======= ======= ======= =======
Net income ............................. $12,863 $ 6,622 $24,520 $13,168
======= ======= ======= =======
Basic earnings per share: .............. $ 0.62 $ 0.39 $ 1.18 $ 0.77
======= ======= ======= =======
Diluted Earnings per share: ............ $ 0.60 $ 0.37 $ 1.13 $ 0.75
======= ======= ======= =======
</TABLE>
(1) Ordinary Shares issued and outstanding based on the weighted average
method.
(2) Ordinary Shares to be issued as purchase price due to Astron's former
shareholders in June 1998.
(3) Stock options of the Company calculated based on the treasury method using
average market price for the period, if dilutive.
Note E - COMPREHENSIVE INCOME
The Company adopted SFAS No. 130, "Comprehensive Income" in the first
quarter of fiscal 1999. SFAS No. 130 requires companies to report an additional
measure of income on the income statement referred to as "comprehensive income"
or to create a separate financial statement that reflects comprehensive income.
The Company's comprehensive income includes net income and foreign currency
translation adjustments.
The following table sets forth the components of other comprehensive income
(loss) net of income tax as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Three months ended
September 25, 1998 September 30, 1997
------------------------------ -------------------------------
Tax Tax
Pre-tax (Expense) Net-of-Tax Pre-tax (Expense) Net-of-Tax
Amount or Benefit Amount Amount or Benefit Amount
-------- --------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Foreign currency translation
adjustments $ 2,867 $ (344) $ 2,523 $ (188) $ 23 $ (165)
-------- --------- --------- -------- ---------- ---------
Other comprehensive income (loss) $ 2,867 $ (344) $ 2,523 $ (188) $ 23 $ (165)
======== ========= ========= ======== ========== =========
<CAPTION>
Six months ended Six months ended
September 25, 1998 September 30, 1997
------------------------------ -------------------------------
Tax Tax
Pre-tax (Expense) Net-of-Tax Pre-tax (Expense) Net-of-Tax
Amount or Benefit Amount Amount or Benefit Amount
-------- --------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Foreign currency translation
adjustments $ 3,706 $ (445) $ 3,261 $ (1,814) $ 203 $ (1,611)
-------- --------- --------- -------- ---------- ---------
Other comprehensive income (loss) $ 3,706 $ (445) $ 3,261 $ (1,814) $ 203 $ (1,611)
======== ========= ========= ======== ========== =========
</TABLE>
10
<PAGE>
Note G - NEW ACCOUNTING STANDARDS
In 1998, the Company adopted SFAS No. 129, "Disclosure of information about
capital structure." SFAS No. 129 requires companies to disclose certain
information about their capital structure . SFAS No. 129 did not have a material
impact on the Company's consolidated financial statement disclosures.
In 1998, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," which will be adopted by the Company in its
1999 annual consolidated financial statements. SFAS No. 131 requires companies
to report financial and descriptive information about its reportable operating
segments, including segment profit or loss, certain specific revenue and expense
items, and segment assets, as well as information about the revenues derived
from the Company's products and services, the countries in which the Company
earns revenues and hold assets, and major customers.
11
<PAGE>
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. The words "expects," "anticipates,"
"believes," "intends," "plans" and similar expressions identify forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to publicly disclose any revisions to these forward-looking
statements to reflect events or circumstances occurring subsequent to filing
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 Form 10-Qs, that
attempt to advise interested parties of the risks and factors that may affect
the Company's business. 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 future results to differ materially from historical results or those
anticipated results.
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."
On March 31, 1998, the Company acquired Conexao Informatica Ltda., a
Brazil-based electronics manufacturing service provider, in exchange for a total
of 421,593 Ordinary Shares, of which 118,305 Ordinary Shares are to be issued
upon resolution of certain general and specific contingencies. On March 31,
1998, the Company also acquired Altatron, Inc., an electronics manufacturing
service provider with facilities in California, Texas, and Scotland (together
with a related real estate company) in exchange for 788,650 Ordinary Shares, of
which 157,730 Ordinary Shares are to be issued upon resolution of certain
general and specific contingencies. The acquisitions of Conexao and Altatron
have been accounted for as poolings-of-interests. The Company did not restate
its prior period financial statements with respect to these acquisitions because
such acquisitions did not have a material impact on its consolidated financial
statements. Accordingly, the balance sheets of Conexao and Altatron as of March
31, 1998 were included in the Company's consolidated balance sheet as of March
31, 1998 and the results of operations for Conexao and Altatron have been
included in the Company's results of operations from March 31, 1998 onward.
On December 1, 1997, the Company acquired DTM Products, Inc., a
Colorado-based producer of injection molded plastics for North American OEMs, in
exchange for 252,469 Ordinary Shares, and acquired Energipilot AB, a Swedish
company principally engaged in providing cables and engineering services to
Northern European OEMs, in exchange for 229,990 Ordinary Shares. The
acquisitions of DTM and Energipilot have been accounted for as
poolings-of-interests. The Company did not restate its prior period financial
statements with respect to these acquisitions because they did not have a
material impact on its consolidated financial statements. Accordingly, the
results of operations for DTM and Energipilot from December 1, 1997 onward are
included in the Company's consolidated statements of operations.
On October 30, 1997, the Company acquired 92% of the outstanding shares of
Neutronics, an Austrian electronics manufacturing service provider with
operations in Austria and Hungary for 2,806,000 Ordinary Shares of the Company.
The acquisition was accounted for as a pooling-of-interests and accordingly, the
Company has restated its prior period financial statements to give effect to
this acquisition.
The ability of the Company to obtain the benefits of these acquisitions is
subject to a number of risks and uncertainties, including the Company's ability
to successfully integrate the acquired operations and its ability to maintain,
and increase, sales to customers of the acquired companies. There can be no
assurance that any acquisitions will not adversely affect the Company. See
"-Certain Factors Affecting Future Operating Results - Risks of Acquisitions."
In addition to acquisitions, the Company has also substantially increased
overall capacity by expanding operations in North America, Asia and Europe. In
June 1997, the Company leased a new 71,000 square foot facility in North America
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 in
North America dedicated to high volume PCB assembly. These new facilities are
located adjacent to the Company's other California 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, China facilities by developing an additional 224,000
square feet of capacity used for miniaturized gold-finished PCB fabrication and
for PCB and full system assembly. In Europe, in fiscal 1999 the Company
completed a 90,000 square foot expansion to a facility in Hungary. The Company
has commenced production at these new or
12
<PAGE>
expanded facilities. The Company is also expanding its facilities in Brazil,
China, Hungary, Mexico and the United States.
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 25, September 30, September 25, September 30,
------------- ------------- ------------ -------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales..................................... 100.0 100.0 100.0 100.0
Cost of sales................................. 91.3 90.2 91.2 90.2
----- ----- ----- -----
Gross margin................................ 8.7 9.8 8.8 9.8
Selling, general and administrative........... 3.9 4.7 3.9 5.0
Goodwill and intangibles amortization......... 0.2 0.4 0.2 0.4
----- ----- ----- -----
Income from operations...................... 4.6 4.7 4.7 4.4
Interest expense and other expense, net....... 1.2 1.7 1.2 1.4
----- ----- ----- -----
Income before income taxes.................. 3.4 3.0 3.5 3.0
Provision for income taxes.................... 0.4 0.4 0.4 0.3
----- ----- ----- -----
Net income.................................. 3.0 2.6 3.1 2.7
===== ===== ===== =====
</TABLE>
Net Sales
Substantially all of the Company's net sales have been derived from the
manufacture and assembly of products for OEM customers. Net sales for the second
quarter of fiscal 1999 increased 68.2% to $422.9 million from $251.5 million for
the second quarter of fiscal 1998. Net sales for the six months ended September
25, 1998 increased 64.1% to $799.0 million from $487.0 million for the same
period of fiscal 1998. The increase in net sales was primarily due to increased
sales to certain existing customers and, to a lesser extent, from sales to new
customers. The Company's five largest customers in the second quarter of fiscal
1999 accounted for approximately 65% of consolidated net sales, with no single
customer exceeding 20% of consolidated net sales. During the second quarter of
fiscal 1998, the Company's five largest customers accounted for approximately
58% of consolidated net sales, with one customer exceeding 20% of consolidated
net sales. See "-Certain Factors Affecting Operating Results -- Customer
Concentration; Dependence on Electronics Industry."
Gross Profit
Gross profit varies from period to period and is affected by, among other
things, product mix, component costs, customer's product life cycles, unit
volumes, expansion and consolidation of manufacturing facilities, pricing,
competition and new product introductions. Gross profit margin decreased to 8.7%
for the second quarter of fiscal 1999 from 9.8% for the same period of fiscal
1998. Gross profit margin decreased to 8.8% for the first six months of the
current fiscal year from 9.8% for the first six months of fiscal 1998. The gross
profit margin for the three and six month period ended September 25, 1998 was
adversely affected by several factors including changes in customer and product
mix, costs associated with expanding facilities in Mexico and Hungary, and
weakness in the China facility's printed circuit board business. Prices paid to
the Company by its significant customers can vary based on the customer's order
level, with per unit prices typically declining as volumes increase. These
changes in price and volume can materially affect the Company's gross profit
margin. See "-Certain Factors Affecting Operating Results --Risks of Expansion
of Operations."
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") for the second
quarter of fiscal 1999 increased to $16.6 million from $11.8 million in the
second quarter of fiscal 1998 but decreased as a percentage of net sales to 3.9%
for the second quarter of fiscal 1999 from 4.7% for the second quarter of fiscal
1998. SG&A increased from $24.4 million in the first six months of fiscal 1998
to $30.9 million in the first six months of fiscal 1999 but decreased as a
percentage of net sales to 3.9% in fiscal 1999 from 5.0% in fiscal 1998. The
dollar increase in SG&A was mainly due to the inclusion of the SG&A from Conexao
and Altatron after the acquisition of these facilities on March 31, 1998,
increased staffing and related administrative expenses, and increased expenses
associated with the implementation of the Company's new information system in
the areas of maintenance, staffing and training. SG&A expenses decreased as a
percentage of net sales due to the increase in
13
<PAGE>
the Company's net sales. The Company anticipates its SG&A expenses will continue
to increase in absolute terms in the future. However, to the extent that net
sales continue to grow faster than SG&A expenses, the Company expects SG&A
expenses may continue to decline as a percentage of net sales.
Goodwill and Intangibles Amortization
Goodwill and intangible assets are amortized on a straight-line basis over
the estimated life of the benefits received, which ranges from three to
twenty-five years. Goodwill and intangible asset amortization for the second
quarter of fiscal 1999 decreased to $881,000 from $1.0 million for the same
period of fiscal 1998. Goodwill and intangible assets amortization was $1.8
million for both the first six months of fiscal 1999 and for the same period of
fiscal 1998. The decrease in goodwill and intangible assets amortization in the
second quarter of fiscal 1999 was primarily due to the following factors. The
second quarter of fiscal 1998 included a year to date reduction of its estimated
useful lives of goodwill and intangible assets related to the Astron acquisition
resulting in a higher goodwill and intangible assets amortization expenses. The
second quarter of fiscal 1998 also included goodwill amortization of the Wales
facility which was written off in March 1998 as a result of the closure of the
Wales facility.
Interest Expense and Other Expense, Net
Net interest expense was $4.8 million for both the second quarter of fiscal
1999 and the second quarter of fiscal 1998. Net interest expenses increased
slightly to $8.8 million for the first six months of fiscal 1999 from $8.3
million of the first six months of fiscal 1998. The slight increase in net
interest expenses for the six month period was primarily attributable to the
Company's issuance of $150.0 million principal amount of 8.75% senior
subordinated notes in October 1997 partially offset by interest income.
Other expense, net increased to a loss of $48,000 for the second quarter of
fiscal 1999 compared to $487,000 gain for the second quarter of fiscal 1998.
Other expense, net increased to a loss of $636,000 in the first six months of
fiscal 1999 compared to $1.5 million gain in the first six months of fiscal
1998. The increase in other expense for the first six months of fiscal 1999 was
primarily due to foreign exchange losses. The $1.5 million gain in the first six
months of fiscal 1998 was primarily due to foreign exchange gains and income
from an associated company.
Provision for Income Taxes
The Company's consolidated effective tax rate was 12.0% for the six months
ended September 25, 1998 compared to 11.2% for the six months ended September
30, 1997. The increase was primarily due to increased expansion of operations in
jurisdictions with higher tax rates.
The Company is structured as a holding company, conducting its operations
through manufacturing and marketing subsidiaries in Austria, Brazil, China,
Hungary, Malaysia, Mauritius, Mexico, Singapore, Sweden, the United Kingdom, and
the United States. These subsidiaries are subject to taxation in the country in
which they have been formed. The Company's Asian and Hungarian manufacturing
subsidiaries have, at various times, been granted certain tax relief in each of
these countries, resulting in lower than would otherwise be the case under
ordinary tax rates. The Company's United States subsidiaries have benefited from
net operating loss carry-forwards. See "- Certain Factors Affecting Operating
Results -- Risk of Increased Taxes."
Liquidity and Capital Resources
The Company has funded its operations from the proceeds of public offerings
of equity and debt securities, cash and cash equivalents generated from
operations, bank debt and lease financing of capital equipment. At September 25,
1998, the Company had cash and cash equivalents balances totaling $23.9 million,
total bank and other debts totaling $269.5 million and $80.5 million available
for borrowing under its credit facility subject to compliance with certain
financial covenants.
Cash provided by operating activities was $2.2 million and $23.5 million
for the first six months of fiscal 1999 and fiscal 1998, respectively. Cash
provided by operating activities decreased primarily due to the increase in
accounts receivable resulting from increased sales and the increase in
inventories in response to growth in customer orders. Depreciation and
amortization was $23.0 million in the first six months of fiscal 1999 and $14.0
million in the first six months of fiscal 1998.
Cash used in investing activities was $89.2 million and $59.1 million for
the first six months of fiscal 1999 and fiscal 1998, respectively. Cash used in
investing activities for the first six months of fiscal 1999 was primarily
related to capital expenditures of $64.5 million to purchase equipment in China,
Mexico, Sweden and Hungary and payment of $24.0 million to the former
shareholders of Astron for the remaining purchase price payable in connection
14
<PAGE>
with the Company's acquisition of Astron. Cash used in investing activities for
the first six months of fiscal 1998 consisted primarily of expenditures for new
and expanded facilities including plant construction at the Company's industrial
parks in Doumen, China and Guadalajara, Mexico.
Cash provided by financing activities was $23.1 million and $31.4 million
for the first six months of fiscal 1999 and fiscal 1998, respectively. Cash
provided by financing activities for the first six months of fiscal 1999
resulted primarily from net proceeds from short-term borrowings under the credit
facilities partially offset by repayments of capital leases. Cash provided by
financing activities for the first six months of fiscal 1998 consisted primarily
of bank borrowings.
The Company anticipates expending an aggregate of $15.0 million, of which
$9.5 million has already been expended, to implement a new management
information system, and anticipates funding these expenditures with cash from
operations and borrowings under its credit facility. See "- Certain Factors
Affecting Operating Results - Replacement of Management Information Systems;
Year 2000 Compliance."
The Company anticipates that its working capital requirements will increase
in order to support anticipated increases in its business. In addition, the
Company anticipates incurring significant capital expenditures in order to
support the anticipated expansions of its facilities in Brazil, China, Hungary
and Mexico. Future liquidity needs will depend on fluctuations in inventory
levels, the timing of expenditures by the Company on new equipment, the extent
to which the Company utilizes leases to finance new facilities and equipment,
levels of shipments by the Company and changes in volumes of customer orders.
The Company believes that its existing cash balances, together with anticipated
cash flows from operations and amounts available under its credit facilities,
will be sufficient to fund its operations at its current level of business.
However, to the extent that the Company's operations continue to expand or the
level of business increases, the Company may be required to obtain additional
debt or equity financing. To the extent the Company finances its working capital
and capital expenditures through increased borrowings, its interest expense may
increase. From time to time, the Company may consider alternative financing
opportunities, including certain off-balance sheet transactions such as sale
leasebacks or receivable financings. See "- Certain Factors Affecting Operating
Results -- Risks of Expansion of Operations."
Qualitative and Quantitative Disclosures About Market Risk
There were no material changes during the three or six months ended
September 25, 1998 to the Company's exposure to market risk for changes in
interest rates. There were no material changes during the three or six months
ended September 25, 1998 to the Company's foreign currency hedging programs.
Year 2000 Compliance
The Company is aware of the issues associated with programming code in
existing computer systems as the Year 2000 approaches. The Year 2000 computer
issue refers to a condition in computer software where a two digit field rather
than a four digit field is used to distinguish a calendar year. Unless
corrected, some computer programs could be unable to function on January 1, 2000
(and thereafter until corrected), as they will be unable to distinguish the
correct date. Such an uncorrected condition could significantly interfere with
the conduct of the Company's business, could result in disruption of its
operations, and could subject it to potentially significant legal liabilities.
The Company is primarily addressing the Year 2000 issues by replacing its
management information system with a new enterprise management information
system that is designed to provide enhanced functionality. We have been advised
that our new enterprise management information system is Year 2000 compliant.
However, there can be no assurance that the new system will be Year 2000
compliant or that it will be implemented by January 1, 2000. The new system will
significantly affect many aspects of our business, including our manufacturing,
sales and marketing and accounting functions. In addition, the successful
implementation of this system will be important to our future growth. The
Company currently has implemented this new information system in certain
facilities in Europe and North America and anticipates that the installation of
the new system will be completed in the second quarter of fiscal 1999.
The Year 2000 issue also could affect the Company's infrastructure and
production lines. The possibility also exists that the Company could
inadvertently fail to correct a Year 2000 problem with a mechanical equipment
microcontroller. The Company believes the impact of such an occurrence would be
minor, as substantial Year 2000 compliant equipment additions and upgrades have
occurred in recent years. However, sufficient testing to date has not been
completed to fully validate the readiness of its microprocessors. Additional
testing is planned during fiscal 1999 to reasonably
15
<PAGE>
ensure their Year 2000 readiness.
The Company has sent a Year 2000 Readiness Questionaire to most of its
critical and significant suppliers and the Company is in the process of
identifying and devoting resources to ensure Year 2000 compliance of these
suppliers. The Company may need to find alternative suppliers based on the
results of the questionaires. Their can be no assurance that the Company will be
able to find suitable alternative suppliers and contract with them on reasonable
prices and terms, and such inability could have a material and adverse impact on
the Company's business and results of operations. The Company is currently
working with many of its major customers to ensure year 2000 compliance and is
currently being audited by many of its customers. The Company intends to review
its contracts with customers and suppliers with respect to responsibility for
Year 2000 issues and to seek to address such issues in future agreements with
customers and suppliers.
The Company has currently incurred in excess of $10 million in total
hardware, software, and system related costs in connection with remediation of
Year 2000 issues. These costs are primarily costs associated with the
implementation of the Company's new information system. The Company anticipates
expending an additional $5 to $7 million before January 1, 2000 to complete the
implementation of the new information system and address any Year 2000
compliance issues. There can be no assurances that the cost estimates associated
with the Company's Year 2000 issues will prove to be accurate or that the actual
costs will not have a material adverse effect on the Company's results of
operations and financial condition.
The Company currently anticipates the installation of the new system will
be completed in the second quarter of fiscal 2000, but it could be delayed until
later. Implementation of the new system could cause significant disruption in
operations. In the event the new information system is not implemented by the
second quarter of fiscal 2000, the Company has a contingency plan. The existing
information system currently in use by a majority of the Company's operations
can be upgraded to a new revision which the Company has been advised is Year
2000 compliant. The Company estimates the cost to upgrade the existing
information system to be approximately $500,000. There can be no assurance that
such measures will prevent the occurrence of Year 2000 problems, which can have
a material adverse effect upon the Company's business, operating results and
financial condition.
Certain Factors Affecting Operating Results
You should carefully consider the following factors as well as the other
information contained or incorporated by reference in this filing before
deciding to invest in the Ordinary Shares of Flextronics. These factors could
cause our future results to differ materially from those expressed or implied in
forward-looking statements made by us.
Risks of Expansion of Operations
We have grown rapidly in recent periods, and this growth may not continue.
A significant amount of our past growth was due to our completion of a number of
acquisitions. We have reduced our focus on growth through acquisitions, and have
not completed any acquisitions in fiscal 1999. As a result, our future growth
will depend on internal expansion to a greater extent than has our past growth.
Internal growth will require us to:
o develop new customer relationships and expand existing ones,
o improve our operational and information systems, and
o further expand our manufacturing capacity.
We plan to further expand our manufacturing capacity by expanding our
facilities and by adding new equipment. This will require substantial new
capital expenditures and operating lease commitments. Funds may not be available
for this expansion, and we may not be able to obtain loans or operating leases
with attractive terms. The expansion of our manufacturing facilities involves
significant risks, including cost overruns, construction delays, equipment
delays or shortages, labor shortages and disputes and production start-up
problems. Delays in the expansion of our facilities could adversely affect our
growth and our ability to meet customers' delivery schedules. We may experience
inefficiencies as we integrate new operations, expand existing ones and manage
geographically dispersed operations. We may not succeed in managing expansion
effectively, and a failure to do so could have a material adverse effect on us.
In addition, we expect our expansion to result in new fixed operating expenses,
including substantial increases in depreciation expense and rental expense, that
will increase our cost of sales. If our sales levels do not increase
sufficiently to offset these expenses, our operating results would be adversely
affected. Our expansion, both through acquisitions and internal growth, has
contributed to our incurring significant accounting charges and experiencing
volatility in our operating results. We may continue to experience volatility in
operating results in connection with future expansion efforts.
16
<PAGE>
Risks of Acquisitions
Our acquisitions during the last two fiscal years represented a significant
expansion of our operations. Acquisitions involve a number of risks and
challenges, including: diversion of management's attention, the need to
integrate acquired operations, and potential loss of key employees and customers
of the acquired companies. In order to integrate acquired operations, we must
implement our management information systems and our operating systems, and
assimilate and manage the personnel of the acquired operations. The difficulties
of this integration may be further complicated by geographic distances. The
integration of acquired businesses may not be successful, and could result in
disruption in other parts of our business. In the event we are unsuccessful in
integrating acquired operations, we would be materially adversely affected. We
may not have had any experience operating in the geographic market of the
acquired business. For example, prior to the acquisitions of the Karlskrona
facilities, Neutronics and Conexao, we had no experience operating in Sweden,
Central Europe or Brazil. In addition, acquisitions increase our expenses and
working capital requirements. As a result of these and other factors, we may not
achieve anticipated levels of profitability at acquired operations or realize
other anticipated benefits of an acquisition. Furthermore, any future
acquisitions may require debt or equity financing, which could increase our
leverage or be dilutive to our existing shareholders. No assurance can be given
that we will consummate any acquisitions in the future.
Variability of Customer Requirements and Operating Results
Electronics manufacturing service providers must provide increasingly rapid
product turnaround for their customers. We generally do not obtain firm
long-term purchase commitments from our customers, and over the past few years
we have experienced reduced lead-times in customer orders. Customers may cancel
their orders, change production quantities or delay production for a number of
reasons. Cancellations, reductions or delays by a significant customer or by a
group of customers would adversely affect our results of operations. In addition
to the variability resulting from the short-term nature of our customers'
commitments, other factors may contribute to significant fluctuations in our
results of operations. These factors include:
o the timing of customer orders,
o the volume of these orders relative to our capacity,
o customers' introductions and market acceptance of new products,
o changes in demand for customers' products,
o the timing of our expenditures in anticipation of future orders,
o our effectiveness in managing manufacturing processes,
o changes in cost and availability of labor and components,
o changes in our product mix,
o changes in economic conditions,
o local factors and events that may affect our production volume (such as
local holidays), and
o seasonality in customers' product requirements.
We make significant decisions, including the levels of business that we
will seek and accept, production schedules, component procurement commitments,
personnel needs and other resource requirements, based on our estimates of
customer requirements. Our ability to estimate future customer requirements is
reduced by the short-term nature of our customers' commitments and the
possibility of rapid changes in demand for their products. On occasion,
customers may require rapid increases in production, which can stress our
resources and reduce margins. Although we have increased our manufacturing
capacity, and plan further increases, there can be no assurance that we will
have sufficient capacity at any given time to meet our customers' demands. In
addition, as many of our costs and operating expenses are relatively fixed, a
reduction in customer demand can have material adverse effect on our gross
margins and operating income.
Customer Concentration; Dependence on Electronics Industry
Sale to our five largest customers had represented a majority of our net
sales in recent periods. The identity of our significant customers has varied
from year to year, and our significant customers may not continue to purchase
services from us at current levels, if at all. Significant reductions in sales
to any of these customers, or the loss of major customers, would have a material
adverse effect on us. We cannot assure the timely replacement of expired,
canceled, or reduced contracts with new business. See "--Variability of Customer
Requirements and Operating Results." Factors affecting the electronics industry
in general could have a material adverse effect on our customers, and as a
result on us. Our customers' markets are characterized by rapidly changing
technology and evolving industry standards. This frequently results in short
product life cycles. Our success will depend to a significant extent on the
success achieved by our customers in developing and marketing their products,
some of which are new and untested. If customers' products become obsolete or
fail to gain widespread commercial acceptance, our business may be materially
adversely affected. Our customer's markets are also subject to economic cycles
and are likely in the
17
<PAGE>
future to experience recessionary periods in the future. A recession in the
industries we serve could have a material adverse effect on us.
Replacement of Management Information Systems; Year 2000 Compliance
We are in the process of replacing our management information system with a
new enterprise management information system that is designed to provide
enhanced functionality. The new system will significantly affect many aspects of
our business, including our manufacturing, sales and marketing and accounting
functions. In addition, the successful implementation of this system will be
important to our future growth. We currently anticipate that the installation of
the new system will be completed in the second quarter of fiscal 1999, but it
could be delayed until later. Implementation of the new system could cause
significant disruption in operations. Difficulties or delays in the
implementation of the new system could adversely affect our ability to meet
customers' production schedules and our ability to access timely financial and
operating information. We have been advised that our new enterprise management
information system is Year 2000 compliant. However, there can be no assurance
that the new system will be Year 2000 compliant or that it will be implemented
by January 1, 2000. If the new system is not Year 2000 compliant or is not
implemented by Year 2000 we could be materially adversely effected. In addition,
we could be adversely affected if our customers and suppliers do not have
information systems that are Year 2000 compliant.
Risk of Increased Taxes
We have structured our operations 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. Our taxes could increase if these
tax incentives are not renewed upon expiration, or tax rates applicable to us
are increased. Substantially all of the products manufactured by our Asian
subsidiaries are sold to customers based in North America and Europe. We believe
that profits from our Asian operations are not sufficiently connected to
jurisdictions in North America or Europe to give rise to income taxation there.
However, tax authorities in jurisdictions in North America and Europe could
challenge the manner in which profits are allocated among our subsidiaries, and
we may not prevail in any such challenge. If our Asian profits became subject to
income taxes in such other jurisdictions, our worldwide effective tax rate could
increase.
Significant Leverage
Our level of indebtedness presents risks to investors, including the
possibility that we may be unable to generate cash sufficient to pay the
principal of and interest on the indebtedness when due. Additionally, our
leverage may make us more vulnerable to economic downturns, may limit our
ability to pursue new business opportunities and may reduce our flexibility in
responding to changing business and economic conditions.
Risks of 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 our capabilities
against the merits of internal production. Certain of our competitors, including
Solectron Corporation and SCI Systems, have substantially greater market shares
than us, and substantially greater manufacturing, financial, research and
development and marketing resources. In recent years many participants in the
industry, including us, have substantially expanded their manufacturing
capacity. If overall demand for contract manufacturing services should decrease,
this increased capacity could result in substantial pricing pressures, which
could adversely affect our operating results.
Risks of International Operations
The geographical distances between Asia, the United States, Mexico and
Europe create a number of logistical and communications challenges. Our
manufacturing operations are located in a number of countries including Austria,
Brazil, China, Hungary, Malaysia, Mexico, Sweden, the United Kingdom and the
United States. As a result, we are affected by economic and political conditions
in those countries, including:
o fluctuations in the value of currency,
o changes in labor conditions,
o longer payment cycles,
o greater difficulty in collecting accounts receivable,
o burdens and costs of compliance with a variety of foreign laws, and
o in some countries, political instability.
Increases in duties and taxation, the imposition of restrictions on
currency conversion or the transfer of funds, limitations on imports or exports
or the expropriation of private enterprises could also have a material adverse
effect on us. We could also be adversely affected if the current
18
<PAGE>
policies encouraging foreign investment or foreign trade by our host countries
were to be reversed. In addition, the attractiveness of our services to our U.S.
customers can be affected by changes in U.S. trade policies, such as "most
favored nation" status and trade preferences for certain Asian nations. For
example, trade preferences extended by the United States to Malaysia in recent
years were not renewed in 1997. Finally, we could be adversely affected by
inadequate infrastructure or the lack of adequate power and water supplies,
transportation, raw materials and parts in countries in which we operate.
Currency Fluctuations
With the acquisitions of the Karlskrona facilities, Neutronics and Conexao,
a significant portion of our business is conducted in the Swedish kronor,
Austrian schilling and Brazilian real. In addition, some of our costs, such as
payroll and rent, are denominated in currencies such as the Singapore dollar,
the Hong Kong dollar, the Malaysian ringgit, the Hungarian forint, the Mexican
peso, and the British pound, as well as the kronor, the schilling and the real.
In recent years, the Hungarian forint, Brazilian real and Mexican peso have
experienced significant devaluations. Changes in exchange rate between these and
other currencies and the U.S. dollar will affect our cost of sales and operating
margins. The impact of future exchange rate fluctuations cannot be predicted.
Our European and Latin American operations use financial instruments, primarily
forward purchase contracts, to hedge certain fixed Japanese yen, German
deutschmark, U.S. dollar, and other foreign currency commitments arising from
trade accounts payable and fixed purchase obligations. Because we hedge only
fixed obligations, we do not expect that these hedging activities will have a
material effect on our results of operations or cash flows. However, our hedging
activities may be unsuccessful, and we may change or reduce our hedging
activities in the future.
19
<PAGE>
PART II - OTHER INFORMATION
Item 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 September
18, 1998, at which the following matters were acted upon :
<TABLE>
<S> <C> <C>
1a) Re-election of Mr. Michael J. Moritz to the board of directors. For : 16,676,659
Against : 22,040
1b) Re-election of Mr. Richard L. Sharp to the board of directors. For : 16,676,659
Against : 22,040
2a) Re-election of Mr. Patrick Foley to the board of directors. For : 16,689,844
Against : 5,626
Abstain : 3,229
2b) Re-election of Mr. Chuen Fah Alain Ahkong to the board of For : 16,689,844
directors. Against : 5,626
Abstain : 3,229
2c) Re-election of Mr. Hui Shing Leong to the board of directors. For : 16,689,844
Against : 5,626
Abstain : 3,229
3) Adoption of the Directors' report, auditors' report and For : 16,695,943
audited accounts for the fiscal year ended March 31, 1998. Against : 434
Abstain : 2,322
4) Appointment of Arthur Andersen LLP as the Company's independent For : 16,689,562
auditors for the fiscal year ending March 31, 1999 and at a Against : 6,218
remuneration to be determined by the Board of Directors. Abstain : 2,919
5) Approval of an amendment to the Company's 1993 Share Option Plan For : 10,972,667
relating to the increase in the maximum number of shares Against : 3,532,202
authorized for issuance to 3,600,000 Ordinary Shares. Abstain : 9,507
6) Approval of an ordinary resolution relating to Ordinary Shares For : 13,832,736
issuance. Against : 683,162
Abstain : 14,312
7) Approval of grant to the Board of Directors of authority to declare For : 14,442,668
bonus issue of one ordinary share for every one existing Against : 77,745
ordinary share held by shareholders of the company. Abstain : 9,797
</TABLE>
Item 5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
(27) Financial data schedule as of September 25, 1998 and for the six
months ended September 25, 1998.
20
<PAGE>
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 9, 1998 /s/ MICHAEL E.MARKS
----------------------------
Michael E. Marks
Chief Executive Officer
Date : November 9, 1998 /s/ ROBERT R.B. DYKES
----------------------------
Robert R.B. Dykes
Senior Vice president of Finance
and Administration and Chief
Financial Officer (principal
Financial and accounting
officer)
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF SEPTEMBER 25, 1998 (UNAUDITED) AND THE STATEMENTS OF
INCOME FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 25, 1998 (UNAUDITED) AND IS
QUALIFIED IN ITS ENTIRETY BY REFERNCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-25-1998
<CASH> 23,920
<SECURITIES> 0
<RECEIVABLES> 193,132
<ALLOWANCES> 8,322
<INVENTORY> 184,291
<CURRENT-ASSETS> 446,508
<PP&E> 400,390
<DEPRECIATION> 94,592
<TOTAL-ASSETS> 799,579
<CURRENT-LIABILITIES> 349,785
<BONDS> 0
0
0
<COMMON> 135
<OTHER-SE> 246,755
<TOTAL-LIABILITY-AND-EQUITY> 799,579
<SALES> 799,027
<TOTAL-REVENUES> 799,027
<CGS> 729,065
<TOTAL-COSTS> 729,065
<OTHER-EXPENSES> 636
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,793
<INCOME-PRETAX> 27,862
<INCOME-TAX> 3,342
<INCOME-CONTINUING> 24,520
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,520
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.13
</TABLE>
