10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended October 2, 2009
or
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o |
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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)
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Singapore
(State or other jurisdiction of
incorporation or organization)
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Not Applicable
(I.R.S. Employer
Identification No.) |
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One Marina Boulevard, #28-00
Singapore
(Address of registrants principal executive offices)
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018989
(Zip Code) |
Registrants telephone number, including area code
(65) 6890 7188
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the registrants classes of common stock,
as of the latest practicable date.
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Class
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Outstanding at October 29, 2009 |
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Ordinary Shares, No Par Value
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812,268,139 |
FLEXTRONICS INTERNATIONAL LTD.
INDEX
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Flextronics International Ltd.
Singapore
We have reviewed the accompanying condensed consolidated balance sheet of Flextronics International
Ltd. and subsidiaries (the Company) as of October 2, 2009, and the related condensed consolidated
statement of operations for the three-month and six-month periods ended October 2, 2009 and
September 26, 2008, and of cash flows for the six-month periods ended October 2, 2009 and September
26, 2008. These interim financial statements are the responsibility of the Companys management.
We conducted our reviews in accordance with the standards of the Public Company Accounting
Oversight Board (United States). A review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in accordance with
the standards of the Public Company Accounting Oversight Board (United States), the objective of
which is the expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to such
condensed consolidated interim financial statements for them to be in conformity with accounting
principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheet of Flextronics International Ltd.
and subsidiaries as of March 31, 2009, and the related consolidated statements of operations,
shareholders equity, and cash flows for the year then ended (not presented herein); and in our
report dated May 20, 2009, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of March 31, 2009 is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
November 3, 2009
3
FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
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As of |
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As of |
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October 2, 2009 |
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March 31, 2009 |
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(In thousands, |
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except share amounts) |
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(Unaudited) |
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ASSETS |
Current assets: |
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Cash and cash equivalents |
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$ |
1,966,494 |
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$ |
1,821,886 |
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Accounts receivable, net of allowance for doubtful accounts of $19,620 and
$29,020 as of October 2, 2009 and March 31, 2009, respectively |
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2,323,329 |
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2,316,939 |
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Inventories |
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2,692,077 |
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2,996,785 |
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Other current assets |
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731,838 |
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799,396 |
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Total current assets |
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7,713,738 |
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7,935,006 |
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Property and equipment, net |
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2,180,670 |
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2,333,781 |
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Goodwill and other intangible assets, net |
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277,435 |
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291,491 |
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Other assets |
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381,747 |
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756,662 |
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Total assets |
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$ |
10,553,590 |
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$ |
11,316,940 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities: |
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Bank borrowings, current portion of long-term debt and capital lease obligations |
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$ |
253,272 |
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$ |
208,403 |
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Accounts payable |
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3,993,899 |
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4,049,534 |
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Accrued payroll |
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337,018 |
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336,123 |
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Other current liabilities |
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1,573,074 |
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1,814,711 |
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Total current liabilities |
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6,157,263 |
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6,408,771 |
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Long-term debt and capital lease obligations, net of current portion |
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2,299,598 |
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2,733,680 |
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Other liabilities |
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295,738 |
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313,321 |
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Commitments and contingencies (Note 10) |
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Shareholders equity |
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Ordinary shares, no par value; 841,959,342 and 839,412,939 shares issued, and
812,179,620 and 809,633,217 outstanding as of October 2, 2009 and
March 31, 2009, respectively |
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8,894,298 |
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8,862,008 |
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Treasury stock, at cost; 29,779,722 shares as of October 2, 2009 and March 31,
2009, respectively |
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(260,074 |
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(260,074 |
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Accumulated deficit |
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(6,817,701 |
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(6,683,317 |
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Accumulated other comprehensive loss |
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(15,532 |
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(57,449 |
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Total shareholders equity |
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1,800,991 |
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1,861,168 |
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Total liabilities and shareholders equity |
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$ |
10,553,590 |
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$ |
11,316,940 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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Three-Month Periods Ended |
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Six-Month Periods Ended |
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October 2, |
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September 26, |
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October 2, |
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September 26, |
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2009 |
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2008 |
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2009 |
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2008 |
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(In thousands, except per share amounts) |
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(Unaudited) |
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Net sales |
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$ |
5,831,761 |
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$ |
8,862,516 |
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$ |
11,614,440 |
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$ |
17,212,762 |
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Cost of sales |
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5,519,778 |
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8,445,055 |
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11,026,353 |
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16,312,217 |
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Restructuring charges |
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12,403 |
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64,512 |
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26,317 |
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Gross profit |
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299,580 |
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417,461 |
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523,575 |
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874,228 |
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Selling, general and administrative expenses |
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176,246 |
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258,687 |
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377,938 |
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507,313 |
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Intangible amortization |
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22,710 |
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50,317 |
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46,044 |
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75,563 |
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Restructuring charges |
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187 |
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12,917 |
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2,898 |
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Other charges, net |
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91,999 |
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11,937 |
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199,398 |
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11,937 |
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Interest and other expense, net |
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38,091 |
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59,390 |
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74,977 |
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110,117 |
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Income (loss) before income taxes |
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(29,653 |
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37,130 |
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(187,699 |
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166,400 |
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Provision for (benefit from) income taxes |
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(49,312 |
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10,059 |
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(53,315 |
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20,120 |
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Net income (loss) |
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$ |
19,659 |
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$ |
27,071 |
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$ |
(134,384 |
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$ |
146,280 |
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Earnings per share: |
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Basic |
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$ |
0.02 |
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$ |
0.03 |
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$ |
(0.17 |
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$ |
0.18 |
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Diluted |
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$ |
0.02 |
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$ |
0.03 |
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$ |
(0.17 |
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$ |
0.18 |
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Weighted-average shares used in computing per share amounts: |
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Basic |
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811,364 |
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828,182 |
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810,769 |
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832,337 |
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Diluted |
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817,260 |
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830,030 |
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810,769 |
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835,279 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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Six-Month Periods Ended |
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October 2, |
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September 26, |
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2009 |
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2008 |
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(In thousands) |
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(Unaudited) |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) |
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$ |
(134,384 |
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$ |
146,280 |
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Depreciation, amortization and other impairment charges |
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466,472 |
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276,490 |
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Changes in working capital and other |
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86,316 |
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325,241 |
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Net cash provided by operating activities |
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418,404 |
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748,011 |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchases of property and equipment, net of dispositions |
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(80,163 |
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(300,409 |
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Acquisition of businesses, net of cash acquired |
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(59,055 |
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(182,188 |
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Proceeds from divestitures of operations |
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5,269 |
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Other investments and notes receivable, net |
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255,281 |
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(90,596 |
) |
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Net cash provided by (used in) investing activities |
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116,063 |
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(567,924 |
) |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from bank borrowings and long-term debt |
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786,909 |
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6,767,847 |
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Repayments of bank borrowings, long-term debt and capital lease obligations |
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(992,449 |
) |
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(6,734,388 |
) |
Payments for repurchase of long-term debt |
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(203,183 |
) |
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Payments for repurchase of ordinary shares |
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(260,074 |
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Net proceeds from issuance of ordinary shares |
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3,423 |
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11,893 |
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Net cash used in financing activities |
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(405,300 |
) |
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(214,722 |
) |
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Effect of exchange rates on cash |
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15,441 |
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15,594 |
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Net increase (decrease) in cash and cash equivalents |
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144,608 |
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(19,041 |
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Cash and cash equivalents, beginning of period |
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1,821,886 |
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1,719,948 |
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Cash and cash equivalents, end of period |
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$ |
1,966,494 |
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$ |
1,700,907 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION OF THE COMPANY
Flextronics International Ltd. (Flextronics or the Company) was incorporated in the
Republic of Singapore in May 1990. The Company is a leading provider of advanced design and
electronics manufacturing services (EMS) to original equipment manufacturers (OEMs) of a broad
range of products in the following markets: infrastructure; mobile communication devices;
computing; consumer digital devices; industrial, semiconductor and white goods; automotive, marine
and aerospace; and medical devices. The Companys strategy is to provide customers with a full
range of cost competitive, vertically-integrated global supply chain services through which the
Company designs, builds, ships and services a complete packaged product for its OEM customers. OEM
customers leverage the Companys services to meet their product requirements throughout the entire
product life cycle.
The Companys service offerings include rigid printed circuit board and flexible circuit
fabrication, systems assembly and manufacturing (including enclosures, testing services, materials
procurement and inventory management), logistics, after-sales services (including product repair,
re-manufacturing and maintenance) and multiple component product offerings. Additionally, the
Company provides market-specific design and engineering services ranging from contract design
services (CDM), where the customer purchases services on a time and materials basis, to original
product design and manufacturing services, where the customer purchases a product that was
designed, developed and manufactured by the Company (commonly referred to as original design
manufacturing, or ODM). ODM products are then sold by the Companys OEM customers under the OEMs
brand names. The Companys CDM and ODM services include user interface and industrial design,
mechanical engineering and tooling design, electronic system design and printed circuit board
design.
2. SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in
accordance with accounting principles generally accepted in the United States of America (U.S.
GAAP or GAAP) for interim financial information and in accordance with the requirements of Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes
required by U.S. GAAP for complete financial statements, and should be read in conjunction with the
Companys audited consolidated financial statements as of and for the fiscal year ended March 31,
2009 contained in the Companys 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-month and six-month periods ended
October 2, 2009 are not necessarily indicative of the results that may be expected for the fiscal
year ended March 31, 2010. The Company evaluated subsequent events for disclosure through November
2, 2009.
The Companys third fiscal quarter ends on December 31, and the fourth fiscal quarter and year
ends on March 31 of each year. The first fiscal quarters ended on July 3, 2009 and June 27, 2008,
respectively, and the second fiscal quarters ended on October 2, 2009 and September 26, 2008,
respectively.
Customer Credit Risk
The Company has an established customer credit policy, through which it manages customer
credit exposures through credit evaluations, credit limit setting, monitoring, and enforcement of
credit limits for new and existing customers. The Company performs ongoing credit evaluations of
its customers financial condition and makes provisions for doubtful accounts based on the outcome
of those credit evaluations. The Company evaluates the collectability of its accounts receivable
based on specific customer circumstances, current economic trends, historical experience with
collections and the age of past due receivables. To the extent the Company identifies exposures as
a result of credit or customer evaluations, the Company also reviews other customer related
exposures, including but not limited to inventory and related contractual obligations.
7
During the three-month and six-month periods ended September 26, 2008, the Company recognized
approximately $117.4 million of charges associated with certain customers that were filing for
bankruptcy or were experiencing significant financial and liquidity difficulties. The Company
classified approximately $96.7 million of these charges in cost of sales related to the write-down
of inventory and associated contractual obligations. Additionally, the Company recognized
approximately $20.7 million as selling, general and administrative expenses for provisions for
doubtful accounts.
Inventories
The components of inventories, net of applicable lower of cost or market write-downs, were as
follows:
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As of |
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As of |
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October 2, 2009 |
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March 31, 2009 |
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(In thousands) |
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Raw materials |
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$ |
1,649,106 |
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$ |
1,907,584 |
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Work-in-progress |
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|
570,846 |
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|
524,038 |
|
Finished goods |
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472,125 |
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|
565,163 |
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$ |
2,692,077 |
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$ |
2,996,785 |
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|
Property and Equipment
Depreciation expense associated with property and equipment amounted to approximately $91.5
million and $186.0 million for the three-month and six-month periods ended October 2, 2009,
respectively, and $91.8 million and $183.8 million for the three-month and six-month periods ended
September 26, 2008, respectively. Proceeds from the disposition of property and equipment were
$15.7 million and $32.7 million during the six-month periods ended October 2, 2009 and September
26, 2008, respectively, and are presented net with purchases of property and equipment within cash
flows from investing activities in the Condensed Consolidated Statements of Cash Flows.
Goodwill and Other Intangibles
The following table summarizes the activity in the Companys goodwill account during the
six-month period ended October 2, 2009:
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Amount |
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(In thousands) |
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Balance, beginning of the year |
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$ |
36,776 |
|
Purchase accounting adjustments (1) |
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31,382 |
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Balance, end of the quarter |
|
$ |
68,158 |
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(1) |
|
Includes adjustments and reclassifications resulting from
managements review of the valuation of tangible and identifiable
intangible assets and liabilities acquired through certain
business combinations completed in a period subsequent to the
respective acquisition, based on managements estimates. The
amount was attributable to purchase accounting adjustments for
certain historical acquisitions that were not individually, nor in
the aggregate, significant to the Company. |
The components of acquired intangible assets are as follows:
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As of October 2, 2009 |
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|
As of March 31, 2009 |
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Gross |
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Net |
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|
Gross |
|
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Net |
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|
|
Carrying |
|
|
Accumulated |
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|
Carrying |
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Carrying |
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Accumulated |
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Carrying |
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Amount |
|
|
Amortization |
|
|
Amount |
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|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
|
(In thousands) |
|
|
(In thousands) |
|
Intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer-related |
|
$ |
506,861 |
|
|
$ |
(320,143 |
) |
|
$ |
186,718 |
|
|
$ |
506,449 |
|
|
$ |
(280,046 |
) |
|
$ |
226,403 |
|
Licenses and other |
|
|
54,799 |
|
|
|
(32,240 |
) |
|
|
22,559 |
|
|
|
54,559 |
|
|
|
(26,247 |
) |
|
|
28,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
561,660 |
|
|
$ |
(352,383 |
) |
|
$ |
209,277 |
|
|
$ |
561,008 |
|
|
$ |
(306,293 |
) |
|
$ |
254,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
Total intangible amortization expense was $22.7 million and $46.0 million during the
three-month and six-month periods ended October 2, 2009, respectively, and $50.3 million and $75.6
million during the three-month and six-month periods ended September 26, 2008, respectively. The
estimated future annual amortization expense for acquired intangible assets is as follows:
|
|
|
|
|
Fiscal Year Ending March 31, |
|
Amount |
|
|
|
(In thousands) |
|
2010 (1) |
|
$ |
42,600 |
|
2011 |
|
|
63,007 |
|
2012 |
|
|
41,526 |
|
2013 |
|
|
28,103 |
|
2014 |
|
|
18,314 |
|
Thereafter |
|
|
15,727 |
|
|
|
|
|
Total amortization expense |
|
$ |
209,277 |
|
|
|
|
|
|
|
|
(1) |
|
Represents estimated amortization for the six-month period ending March 31, 2010. |
Other Assets
The Company has certain equity investments in, and notes receivable from, non-publicly traded
companies, which are included within other assets in the Companys Condensed Consolidated Balance
Sheets. As of October 2, 2009 and March 31, 2009, the Companys equity investments and notes
receivable from these non-publicly traded companies totaled $30.7 million and $473.6 million
respectively. The Company monitors these investments and notes receivable for impairment and makes
appropriate reductions in carrying values as required.
During the second quarter of fiscal 2010, the Company recognized charges totaling
approximately $92.0 million associated with the impairment of notes receivable from one affiliate
and an equity investment in another affiliate, which are included in Other charges, net in the
Condensed Consolidated Statements of Operations. The notes receivable were partially impaired
during the fourth quarter of fiscal year 2009 based on discussions with a third party for the
potential sale of the notes and the related expected recoverable value. Subsequent deterioration
in the affiliates business prospects, cash flow expectations, and increased liquidity concerns has
resulted in an additional impairment. Similarly, deterioration in the business prospects and
liquidity concerns of the equity investment occurring in the six-month period ended October 2, 2009
has resulted in an impairment of the carrying value to the estimated recoverable value.
In August 2009, the Company sold one of its non-majority owned investments and related note
receivable for approximately $252.5 million, net of closing costs. In conjunction with this
transaction the Company recognized an impairment charge of approximately $107.4 million in the
three-month period ended July 3, 2009. Total impairment charges related to the Companys equity
investments and notes receivable for the six-month period ended October 2, 2009 were approximately
$199.4 million and are included in Other charges, net in the Condensed Consolidated Statements of
Operations.
During the three-month and six-month periods ended September 26, 2008, the Company recognized
$11.9 million in charges for other-than-temporary impairment of certain of the Companys
investments primarily associated with a customer that was experiencing significant financial and
liquidity difficulties.
Provision for income taxes
The Company has tax loss carryforwards attributable to continuing operations for which the
Company has recognized deferred tax assets. The Companys policy is to provide a reserve against
those deferred tax assets that in managements estimate are not more likely than not to be
realized. During the three-month and six-month periods ended October 2, 2009, the provision for
income taxes includes a benefit of approximately $63.3 million and $75.2 million, respectively, for
the net change in the liability for unrecognized tax benefits as a result of settlements in various
tax jurisdictions. During the six-month period ended September 26, 2008, the provision for income
taxes includes a benefit of approximately $38.5 million for the reversal of valuation allowances
and other tax reserves.
9
Recent Accounting Pronouncements
In June 2009, a new accounting standard was issued which removes the concept of a qualifying
special-purpose entity, creates more stringent conditions for reporting a transfer of a portion of
a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial
measurement of a transferors interest in transferred financial assets. This guidance is effective
for fiscal years beginning after November 15, 2009 and is required to be adopted by the Company in
the first quarter of fiscal year 2011. The adoption of this standard will not have any impact on
the Companys consolidated statement of operations and could require that future sales of accounts
receivable be treated as a financing activity in the statement of cash flows and as a liability on
the Companys balance sheet (see Note 8).
In June 2009, a new accounting standard was issued which amends the consolidation guidance
applicable to variable interest entities (VIEs), the approach for determining the primary
beneficiary of a VIE, and disclosure requirements of a Companys involvement with VIEs. This
standard is effective for fiscal years beginning after November 15, 2009 and is required to be
adopted by the Company in the first quarter of fiscal year 2011. The adoption of this standard
will not have any impact on the Companys consolidated statement of operations and could require
that future sales of accounts receivable be treated as a financing activity in the statement of
cash flows and as a liability on the Companys balance sheet (see Note 8).
3. STOCK-BASED COMPENSATION
The Company grants equity compensation awards to acquire the Companys ordinary shares from
four plans, and which collectively are referred to as the Companys equity compensation plans
below. For further discussion of these Plans, refer to Note 2, Summary of Accounting Policies,
of the Notes to Consolidated Financial Statements in the Companys Annual Report on Form 10-K for
the fiscal year ended March 31, 2009.
Compensation expense for the Companys stock options and unvested share bonus awards was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Month Periods Ended |
|
|
Six-Month Periods Ended |
|
|
|
October 2, 2009 |
|
|
September 26, 2008 |
|
|
October 2, 2009 |
|
|
September 26, 2008 |
|
|
|
(In thousands) |
|
|
(In thousands) |
|
Cost of sales |
|
$ |
2,375 |
|
|
$ |
2,148 |
|
|
$ |
5,015 |
|
|
$ |
4,191 |
|
Selling, general
and
administrative
expenses |
|
|
10,620 |
|
|
|
15,348 |
|
|
|
23,183 |
|
|
|
27,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
stock-based
compensation
expense |
|
$ |
12,995 |
|
|
$ |
17,496 |
|
|
$ |
28,198 |
|
|
$ |
31,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On July 14, 2009, the Company launched an exchange offer under which eligible employees had
the opportunity to voluntarily exchange their eligible stock options granted under certain of the
Companys equity compensation plans for a lesser amount of replacement stock options granted under
one of the Companys current equity incentive plans with new exercise prices equal to the closing
price of the Companys ordinary shares on the date of exchange (the Exchange). The Exchange
offer was open to all active U.S. and international employees of the Company, except in those
jurisdictions where the local law, administrative burden or similar considerations made
participation in the program illegal, inadvisable or impractical, and where exclusion otherwise was
consistent with the Companys compensation policies with respect to those jurisdictions. The
Exchange offer was not open to the Companys Board of Directors or its executive officers. To be
eligible for exchange an option must: (i) have had an exercise price of at least $10.00 per share,
(ii) have been outstanding, and (iii) have been granted at least 12 months prior to the
commencement date of the Exchange offer. All replacement option grants were subject to a vesting
schedule of two, three or four years from the date of grant of the replacement options depending on
the remaining vesting period of the option grants surrendered for cancellation in the Exchange.
The number of replacement options an eligible employee received in exchange for an eligible option
grant was determined by an exchange ratio applicable to that option. Stock options with exercise
prices between $10.00 and $11.99 were exchangeable for new options at a rate of 1.5 existing
options per new option grant, and stock options with exercise prices of $12.00 or more were
exchangeable at a rate of 2.4 existing options per new option grant. Outstanding Options covering
approximately 29.8 million shares were eligible to participate in the Exchange.
The Exchange was completed on August 11, 2009. Approximately 27.9 million stock options were
tendered in the Exchange, and approximately 16.9 million replacement options were granted with an
exercise price of $5.57, a weighted average vesting term of 1.58 years, and a contractual life of 7
years. The Exchange was accounted for as a modification of the existing option awards tendered in
the Exchange. As a result of the Exchange, the Company will recognize approximately $1.8 million in
incremental compensation expense over the expected service period of the replacement grants
vesting terms.
10
Excluding options granted in the Exchange, for the three months ended October 2, 2009, the
Company granted 302,900 stock options and 317,229 unvested share bonus awards, at a weighted
average fair value per award of $2.70 and $7.31, respectively. As of October 2, 2009, total
unrecognized compensation expense related to stock options was $75.9 million, net of estimated
forfeitures, and will be recognized over a weighted average vesting period of 2.3 years. Total
unrecognized compensation expense related to unvested share bonus awards was $64.2 million, net of
estimated forfeitures, and will be recognized over a weighted average vesting period of 1.7 years.
Approximately $29.6 million of the unrecognized compensation cost is related to awards where
vesting is contingent upon meeting both a service requirement and achievement of longer-term goals.
As of October 2, 2009, management believes achievement of these goals is not probable, and these
unvested share bonus awards are not expected to vest and the cost is not expected to be recognized.
The number of options outstanding and exercisable as of October 2, 2009 were 64.9 million and
25.2 million, at weighted average exercise prices of $7.10 and $10.50, respectively.
4. EARNINGS PER SHARE
The following table reflects the basic and diluted weighted-average ordinary shares
outstanding used to calculate basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Month Periods Ended |
|
|
Six-Month Periods Ended |
|
|
|
October 2, 2009 |
|
|
September 26, 2008 |
|
|
October 2, 2009 |
|
|
September 26, 2008 |
|
|
|
(In thousands, except per share amounts) |
|
Basic earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
19,659 |
|
|
$ |
27,071 |
|
|
$ |
(134,384 |
) |
|
$ |
146,280 |
|
Shares used in computation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average ordinary shares
outstanding |
|
|
811,364 |
|
|
|
828,182 |
|
|
|
810,769 |
|
|
|
832,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
|
$ |
0.02 |
|
|
$ |
0.03 |
|
|
$ |
(0.17 |
) |
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
19,659 |
|
|
$ |
27,071 |
|
|
$ |
(134,384 |
) |
|
$ |
146,280 |
|
Shares used in computation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average ordinary shares
outstanding |
|
|
811,364 |
|
|
|
828,182 |
|
|
|
810,769 |
|
|
|
832,337 |
|
Weighted-average ordinary share
equivalents from stock options
and awards (1) |
|
|
5,896 |
|
|
|
1,848 |
|
|
|
|
|
|
|
2,942 |
|
Weighted-average ordinary share
equivalents from convertible
notes (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average ordinary shares
and ordinary share equivalents
outstanding |
|
|
817,260 |
|
|
|
830,030 |
|
|
|
810,769 |
|
|
|
835,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share |
|
$ |
0.02 |
|
|
$ |
0.03 |
|
|
$ |
(0.17 |
) |
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As a result of the Companys net loss, ordinary share equivalents
from approximately 5.3 million options and share bonus awards were
excluded from the calculation of diluted earnings (loss) per share
for the six-month period ended October 2, 2009. Ordinary share
equivalents from stock options to purchase approximately 41.1
million and 50.0 million shares outstanding during the three-month
and six-month periods ended October 2, 2009, respectively, and
65.1 million and 54.5 million shares outstanding during the
three-month and six-month periods ended September 26, 2008,
respectively, were excluded from the computation of diluted
earnings per share primarily because the exercise price of these
options was greater than the average market price of the Companys
ordinary shares during the respective periods. |
|
(2) |
|
On July 31, 2009, the principal amount of the Companys Zero
Coupon Convertible Junior Subordinated Notes was settled in cash
upon maturity. These notes carried conversion provisions to issue
shares to settle any conversion spread (excess of the conversion
value over the face value) in stock. The face value was
$10.50 per share. On the maturity date the Companys stock price
was less than the face value, and therefore no shares were
issued. |
|
|
|
During December 2008, the Company purchased an aggregate principal
amount of $260.0 million of its outstanding 1% Convertible
Subordinated Notes, which resulted in a reduction of the ordinary
share equivalents into which such notes were convertible from
approximately 32.2 million to approximately 15.5 million. As the
Company has the positive intent and ability to settle the
principal amount of these notes in cash, all ordinary share
equivalents related to the principal portion of the Notes are
excluded from the computation of diluted earnings per share. The
Company intends to settle any conversion spread (excess of the
conversion value over face value) in stock. The conversion price
is $15.525 per share (subject to certain adjustments). During the
three-month and six-month periods ended October 2, 2009 and
September 26, 2008, the conversion obligation was less than the
principal portion of these notes and accordingly, no additional
shares were included as ordinary share equivalents. |
11
5. OTHER COMPREHENSIVE INCOME
The following table summarizes the components of other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Month Periods Ended |
|
|
Six-Month Periods Ended |
|
|
|
October 2, 2009 |
|
|
September 26, 2008 |
|
|
October 2, 2009 |
|
|
September 26, 2008 |
|
|
|
(In thousands) |
|
|
(In thousands) |
|
Net income (loss) |
|
$ |
19,659 |
|
|
$ |
27,071 |
|
|
$ |
(134,384 |
) |
|
$ |
146,280 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
17,637 |
|
|
|
(20,012 |
) |
|
|
27,929 |
|
|
|
(19,185 |
) |
Unrealized gain (loss) on derivative
instruments, and other income (loss), net of taxes |
|
|
2,558 |
|
|
|
1,640 |
|
|
|
13,988 |
|
|
|
8,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
$ |
39,854 |
|
|
$ |
8,699 |
|
|
$ |
(92,467 |
) |
|
$ |
135,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. BANK BORROWINGS AND LONG-TERM DEBT
Bank borrowings and long-term debt are as follows:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
As of |
|
|
|
October 2, 2009 |
|
|
March 31, 2009 |
|
|
|
(In thousands) |
|
Short term bank borrowings |
|
$ |
1,719 |
|
|
$ |
1,854 |
|
0.00% convertible junior subordinated notes due July 2009 |
|
|
|
|
|
|
189,045 |
|
1.00% convertible subordinated notes due August 2010 |
|
|
226,156 |
|
|
|
218,391 |
|
6.50% senior subordinated notes due May 2013 |
|
|
299,806 |
|
|
|
399,622 |
|
6.25% senior subordinated notes due November 2014 |
|
|
302,172 |
|
|
|
402,090 |
|
Term Loan
Agreement, including current portion, due in installments through October 2014 |
|
|
1,700,445 |
|
|
|
1,709,116 |
|
Other |
|
|
20,028 |
|
|
|
21,416 |
|
|
|
|
|
|
|
|
|
|
|
2,550,326 |
|
|
|
2,941,534 |
|
Current portion |
|
|
(252,591 |
) |
|
|
(207,991 |
) |
|
|
|
|
|
|
|
Non-current portion |
|
$ |
2,297,735 |
|
|
$ |
2,733,543 |
|
|
|
|
|
|
|
|
As of October 2, 2009 and March 31, 2009, there were no borrowings outstanding under the
Companys $2.0 billion credit facility, and the Company was in compliance with the financial
covenants under this credit facility.
On
July 31, 2009, the Company paid $195.0 million to redeem
the Zero Coupon Convertible Junior
Subordinated Notes upon their maturity. These notes carried conversion provisions to issue shares
to settle any conversion spread (excess of the conversion value over the face value) in stock. The face value was $10.50 per share. On the
maturity date, the Companys stock price was less than the face
value, and
therefore no shares were issued.
During June 2009, the Company paid approximately $203.2 million to purchase an aggregate
principal amount of $99.8 million of its outstanding 6 1/2% Senior Subordinated Notes due 2013 (the
6 1/2% Notes) and an aggregate
principal amount of $99.9 million of its outstanding 6 1/4% Senior Subordinated Notes due 2014
(the 6 1/4% Notes and collectively referred to as the Notes) in a cash tender offer (the
Offer). The cash paid included $8.8 million in consent fees (as discussed further below) paid to
holders of the Notes that were tendered but not purchased as well as to holders that consented but
did not tender, which were capitalized and will be recognized as a component of interest expense
over the remaining life of the Notes. The Company recognized an immaterial gain during the
six-month period ended October 2, 2009 associated with the partial extinguishment of the Notes, net
of approximately $5.3 million for transaction costs and the write-down of related debt issuance
costs, which is included in Other charges, net in the Condensed Consolidated Statement of
Operations.
12
In conjunction with the Offer, the Company obtained consents from the holders of Notes
tendered but not purchased, as well as from holders that consented but did not tender, to certain
amendments to the restricted payments covenants and certain related definitions in each of the
indentures (the Indentures) under which the Notes were issued. The amendments permit the Company
greater flexibility to purchase or make other payments in respect of its equity securities and debt
that is subordinated to the Notes and to make certain other restricted payments under each
Indenture.
Adjustments to Beginning Accumulated Deficit and Interest Expense
On April 1, 2009, the Company adopted a new accounting standard related to accounting for
convertible debt instruments that may be settled in cash upon conversion. The adoption of the new
standard affected the accounting for the Companys 1% Convertible Subordinated Notes and Zero
Coupon Convertible Junior Subordinated Notes (collectively referred to as the Convertible Notes)
by requiring the initial proceeds from their sale to be allocated between a liability component and
an equity component in a manner that results in interest expense on the debt component at the
Companys nonconvertible debt borrowing rate on the date of issuance.
The standard required the Company to record the change in accounting principle retrospectively
to all periods presented, which included cumulative effect adjustments as of March 31, 2009 to the
opening balance of Accumulated deficit of approximately $225.0 million, an approximate $27.6
million reduction in the carrying value of the Convertible Notes, an increase in the recorded value
of Ordinary shares of approximately $252.0 million, which represents the carrying amount of the
equity component, and a reduction to deferred financing costs of approximately $525,000, which is
included in Other assets. The adjustment to Accumulated deficit represented imputed interest for
the period from issuance of each convertible note to March 31, 2009, and a $5.8 million reduction
in the gain recognized during the three-month period ended December 31, 2008 for the partial
extinguishment of the 1% Convertible Subordinated Notes. Coupon interest expense and discount
amortization related to the original issuance costs was immaterial for all periods presented.
The estimated fair value of the initial debt components of the Companys 1% Convertible
Subordinated Notes and Zero Coupon Convertible Junior Subordinated Notes were $310.9 million and
$111.3 million, respectively, based on the present value of the contractual cash flows discounted
at an appropriate comparable market nonconvertible debt borrowing rate at the date of issuance.
The Company is amortizing the discounts using the effective interest method over the period the
debt is expected to remain outstanding as additional interest expense. The amortization of the
discount resulted in effective interest rates of 8.21% for the 1% Convertible Subordinated Notes
and 9.23% for the Zero Coupon Convertible Junior Subordinated Notes. The adoption of the new
standard had no impact on the Companys consolidated cash flows. Below is a summary of the
financial statement effects of implementing the new standard on the affected notes and interest
expense.
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zero Coupon Convertible Junior |
|
|
|
1% Convertible Subordinated Notes |
|
|
Subordinated Notes |
|
|
|
October 2, 2009 |
|
|
March 31, 2009 |
|
|
October 2, 2009 |
|
|
March 31, 2009 |
|
|
|
(In thousands) |
|
Balance Sheet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal amount of Notes |
|
$ |
239,993 |
|
|
$ |
239,993 |
|
|
$ |
|
|
|
$ |
195,000 |
|
Unamortized discount |
|
|
(13,837 |
) |
|
|
(21,602 |
) |
|
|
|
|
|
|
(5,955 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount of Notes |
|
$ |
226,156 |
|
|
$ |
218,391 |
|
|
$ |
|
|
|
$ |
189,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Month Periods Ended |
|
|
Three-Month Periods Ended |
|
|
|
October 2, 2009 |
|
|
September 26, 2008 |
|
|
October 2, 2009 |
|
|
September 26, 2008 |
|
|
|
(In thousands) |
|
Income Statement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of discount net of
adjustments to deferred financing costs |
|
$ |
3,829 |
|
|
$ |
7,343 |
|
|
$ |
1,659 |
|
|
$ |
4,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six-Month Periods Ended |
|
|
Six-Month Periods Ended |
|
|
|
October 2, 2009 |
|
|
September 26, 2008 |
|
|
October 2, 2009 |
|
|
September 26, 2008 |
|
|
|
(In thousands) |
|
Amortization of discount net of
adjustments to deferred financing costs |
|
$ |
7,561 |
|
|
$ |
14,500 |
|
|
$ |
5,976 |
|
|
$ |
8,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of the new standard, basic and diluted net income per share decreased by
$0.01 for the three-month period and increased the net loss per share by $0.02 for the six-month
period ended October 2, 2009. Basic and diluted net income per share decreased by $0.01 and $0.03
for the three-month and six-month periods ended September 26, 2008, respectively.
Fair Values
As of October 2, 2009, the approximate fair values of the Companys 6.5% Senior Subordinated
Notes, 6.25% Senior Subordinated Notes, 1% Convertible Subordinated Notes and debt outstanding
under its Term Loan Agreement were 97.0%, 96.0%, 97.1% and 91.3% of the face values of the debt
obligations, respectively, based on broker trading prices.
Interest Expense
During the three-month and six-month periods ended October 2, 2009, the Company recognized
interest expense of $39.3 million and $85.5 million (including $5.5 million and $13.5 million for
the application of the new accounting standard discussed above, respectively, on its debt
obligations outstanding during the period. During the three-month and six-month periods ended
September 26, 2008, the Company recognized interest expense of $64.8 million and $134.1 million
(including $11.4 million and $22.5 million for the retrospective application of the new accounting
standard), respectively, on its debt obligations.
14
7. FINANCIAL INSTRUMENTS
Foreign Currency Contracts
As of October 2, 2009, the aggregate notional amount of the Companys outstanding foreign
currency forward and swap contracts was $1.7 billion as summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|
Notional |
|
|
|
|
|
|
|
Currency |
|
|
Contract Value |
|
Currency |
|
Buy/Sell |
|
|
Amount |
|
|
in USD |
|
|
|
|
|
|
|
(In thousands) |
|
Cash Flow Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
EUR |
|
Sell |
|
|
19,312 |
|
|
$ |
26,380 |
|
JPY |
|
Buy |
|
|
3,522,050 |
|
|
|
35,848 |
|
MXN |
|
Buy |
|
|
428,000 |
|
|
|
30,214 |
|
Other |
|
Buy |
|
|
N/A |
|
|
|
27,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Forward/Swap Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
BRL |
|
Buy |
|
|
117,665 |
|
|
|
57,000 |
|
BRL |
|
Sell |
|
|
125,923 |
|
|
|
53,896 |
|
CAD |
|
Buy |
|
|
58,165 |
|
|
|
46,830 |
|
CAD |
|
Sell |
|
|
125,431 |
|
|
|
99,276 |
|
EUR |
|
Buy |
|
|
166,012 |
|
|
|
221,374 |
|
EUR |
|
Sell |
|
|
361,724 |
|
|
|
485,089 |
|
GBP |
|
Sell |
|
|
30,784 |
|
|
|
44,222 |
|
HUF |
|
Buy |
|
|
9,152,200 |
|
|
|
41,067 |
|
MYR |
|
Buy |
|
|
190,746 |
|
|
|
52,623 |
|
SEK |
|
Buy |
|
|
1,121,118 |
|
|
|
138,638 |
|
Other |
|
Buy |
|
|
N/A |
|
|
|
206,428 |
|
Other |
|
Sell |
|
|
N/A |
|
|
|
134,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,580,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Notional Contract Value in USD |
|
|
|
|
|
|
|
|
|
$ |
1,700,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 2, 2009 and March 31, 2009, the fair value of the Companys short-term
foreign currency contracts was not material and is included in Other current assets or Other
current liabilities, as applicable, in the Condensed Consolidated Balance Sheet. Certain of these
contracts are designed to economically hedge the Companys exposure to monetary assets and
liabilities denominated in a non-functional currency and are not accounted for as a hedging
activity. Accordingly, changes in fair value of these instruments are recognized in earnings
during the period of change as a component of Interest and other expense, net in the Condensed
Consolidated Statement of Operations. As of October 2, 2009 and March 31, 2009, the Company also
has included net deferred gains and losses, respectively, in other comprehensive income, a
component of shareholders equity in the Condensed Consolidated Balance Sheet, relating to changes
in fair value of its foreign currency contracts that are accounted for as cash flow hedges. These
deferred gains and losses were not material, and the deferred gains as of October 2, 2009 are
expected to be recognized as a component of cost of sales in the Condensed Consolidated Statement
of Operations over the next twelve month period. The gains and losses recognized in earnings due to
hedge ineffectiveness were not material for all fiscal periods presented and are included as a
component of Interest and other expense, net in the Condensed Consolidated Statement of Operations.
15
Interest Rate Swap Agreements
The Company is also exposed to variability in cash flows associated with changes in short-term
interest rates primarily on borrowings under its revolving credit facility and term loan agreement.
During fiscal years 2009 and 2008, the Company entered into interest rate swap agreements to
mitigate the exposure to interest rate risk resulting from unfavorable changes in interest rates
resulting from the term loan agreement, as summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amount |
|
|
Fixed Interest |
|
|
Interest Payment |
|
|
|
|
|
|
|
(in millions) |
|
Rate Payable |
|
|
Received |
|
|
Term |
|
|
Expiration Date |
|
Fiscal 2009
Contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$100.0 |
|
|
|
1.94 |
% |
|
1-Month Libor |
|
12 month |
|
January 2010 |
$100.0 |
|
|
|
2.45 |
% |
|
3-Month Libor |
|
12 month |
|
January 2010 |
$100.0 |
|
|
|
1.00 |
% |
|
1-Month Libor |
|
12 month |
|
March 2010 |
$100.0 |
|
|
|
1.00 |
% |
|
1-Month Libor |
|
12 month |
|
April 2010 |
Fiscal 2008
Contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$250.0 |
|
|
|
3.61 |
% |
|
1-Month Libor |
|
34 months |
|
October 2010 |
$250.0 |
|
|
|
3.61 |
% |
|
1-Month Libor |
|
34 months |
|
October 2010 |
$175.0 |
|
|
|
3.60 |
% |
|
3-Month Libor |
|
36 months |
|
January 2011 |
$72.0 |
|
|
|
3.57 |
% |
|
3-Month Libor |
|
36 months |
|
January 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,147.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These contracts provide for the receipt of interest payments at rates equal to the terms
of the various tranches of the underlying borrowings outstanding under the term loan arrangement
(excluding the applicable margin), other than the two $250.0 million swaps, expiring October 2010,
and the $100 million swap expiring January 2010, which provide for the receipt of interest at
one-month Libor while the underlying borrowings are based on three-month Libor.
All of the Companys interest rate swap agreements are accounted for as cash flow hedges, and
there was no charge for ineffectiveness during the three-month and six-month periods ended October
2, 2009 and September 26, 2008. For the three-month and six-month periods ended October 2, 2009 and
September 26, 2008 the net amount
recorded as interest expense from these swaps was not material. As of October 2, 2009 and
March 31, 2009 the fair value of the Companys interest rate swaps was not material and is included
in Other current liabilities in the Condensed Consolidated Balance Sheets, with a corresponding
decrease in other comprehensive income. The deferred losses included in other comprehensive income
will effectively be released through earnings as the Company makes fixed, and receives variable,
interest payments over the remaining term of the swaps through January 2011.
8. TRADE RECEIVABLES SECURITIZATION
The Company continuously sells designated pools of trade receivables under two asset backed
securitization programs.
Global Asset-Backed Securitization Agreement
The Company continuously sells a designated pool of trade receivables to a third-party
qualified special purpose entity, which in turn sells an undivided ownership interest to two
commercial paper conduits, administered by an unaffiliated financial institution. In addition to
these commercial paper conduits, the Company participates in the securitization agreement as an
investor in the conduit. The securitization agreement allows the operating subsidiaries
participating in the securitization program to receive a cash payment for sold receivables, less a
deferred purchase price receivable. The Company continues to service, administer and collect the
receivables on behalf of the special purpose entity and receives a servicing fee of 1.00% of
serviced receivables per annum. Servicing fees recognized during the three-month and six-month
periods ended October 2, 2009 and September 26, 2008 were not material and are included in Interest
and other expense, net within the Condensed Consolidated Statements of Operations. As the Company
estimates that the fee it receives in return for its obligation to service these receivables is at
fair value, no servicing assets or liabilities are recognized.
During October 2009, the agreement was amended such that the Obligor Specific Tranche (OST)
in the amount of $100.0 million was removed, and the maximum investment limit of the two commercial
paper conduits was increased to $500.0 million exclusive of the OST. Additionally, the Company now
pays commitment and program fees totaling 1.5% per annum under the facility to the extent funded
through the issuance of commercial paper.
16
The third-party special purpose entity is a qualifying special purpose entity, and
accordingly, the Company does not consolidate this entity. As of October 2, 2009 and March 31,
2009, approximately $462.1 million and $422.0 million of the Companys accounts receivable,
respectively, had been sold to this third-party qualified special purpose entity. The amounts
represent the face amount of the total outstanding trade receivables on all designated customer
accounts on those dates. The accounts receivable balances that were sold under this agreement were
removed from the Condensed Consolidated Balance Sheets and are reflected as cash provided by
operating activities in the Condensed Consolidated Statements of Cash Flows. The Company received
net cash proceeds of approximately $299.4 million and $298.1 million from the commercial paper
conduits for the sale of these receivables as of October 2, 2009 and March 31, 2009, respectively.
The difference between the amount sold to the commercial paper conduits (net of the Companys
investment participation) and net cash proceeds received from the commercial paper conduits is
recognized as a loss on sale of the receivables and recorded in Interest and other expense, net in
the Condensed Consolidated Statements of Operations. The Company has a recourse obligation that is
limited to the deferred purchase price receivable. The deferred purchase price receivable, which
approximates 5% of the total sold receivables, and the Companys own investment participation, the
aggregate total of which was approximately $162.7 million and $123.8 million as of October 2, 2009
and March 31, 2009, respectively, is recorded in Other current assets in the Condensed Consolidated
Balance Sheets as of October 2, 2009 and March 31, 2009. The amount of the Companys own
investment participation varies depending on certain criteria, mainly the collection performance on
the sold receivables. As the recoverability of the trade receivables underlying the Companys own
investment participation is determined in conjunction with the Companys accounting policies for
determining provisions for doubtful accounts prior to sale into the third party qualified special
purpose entity, the fair value of the Companys own investment participation reflects the estimated
recoverability of the underlying trade receivables.
North American Asset-Backed Securitization Agreement
The Company continuously sells a designated pool of trade receivables to an affiliated special
purpose vehicle, which in turn sells an undivided ownership interest to an agent on behalf of two
commercial paper conduits administered by unaffiliated financial institutions. The Company
continues to service, administer and collect the receivables on behalf of the special purpose
entity and receives a servicing fee of 0.50% per annum on the outstanding balance of the serviced
receivables. Servicing fees recognized during the three-month and six month periods ended October
2, 2009 were not material and are included in Interest and other expense, net within the Condensed
Consolidated Statements of Operations. As the Company estimates that the fee it receives in return
for its obligation to service these receivables is at fair value, no servicing assets or
liabilities are recognized.
The maximum investment limit of the two commercial paper conduits is $300.0 million. During
September 2009, the agreement was amended such that the Company pays commitment fees of 0.80% per
annum on the aggregate amount of the liquidity commitments of the financial institutions under the
facility (which approximates the maximum investment limit) and program fees of 0.70% on the
aggregate amounts invested under the facility by the conduits to the extent funded through the
issuance of commercial paper.
The affiliated special purpose vehicle is not a qualifying special purpose entity, since the
Company, by design of the transaction, absorbs the majority of expected losses from transfers of
trade receivables into the special purpose vehicle and, as such, is deemed the primary beneficiary
of this entity. Accordingly, the Company consolidates the special purpose vehicle. As of October
2, 2009 and March 31, 2009, the Company transferred approximately $426.4 million and $448.7
million, respectively, of receivables into the special purpose vehicle described above. The
Company sold approximately $180.2 million of the $426.4 million of receivables as of October 2,
2009, and $173.8 million of the $448.7 million of receivables as of March 31, 2009 to the two
commercial paper conduits and received approximately $179.5 million and $173.1 million as of
October 2, 2009 and March 31, 2009, respectively, in net cash proceeds for the sales. The accounts
receivable balances that were sold to the two commercial paper conduits under this agreement were
removed from the Condensed Consolidated Balance Sheets and are reflected as cash provided by
operating activities in the Condensed Consolidated Statements of Cash Flows, and the difference
between the amount sold and net cash proceeds received was recognized as a loss on sale of the
receivables, and is recorded in Interest and other expense, net in the Condensed Consolidated
Statements of Operations. The remaining trade receivables transferred into the special purpose
vehicle and not sold to the two commercial paper conduits comprise the primary assets of that
entity, and are included in trade accounts receivable, net in the Condensed Consolidated Balance
Sheets of the Company. The recoverability of these trade receivables, both those included in the
Condensed Consolidated Balance Sheets and those sold but uncollected by the commercial paper
conduits, is determined in conjunction with the Companys accounting policies for determining
provisions for doubtful accounts. Although the special purpose vehicle is fully consolidated by
the Company, it is a separate corporate entity and its assets are available first to satisfy the
claims of its creditors.
17
The Company also sold accounts receivables to certain third-party banking institutions with
limited recourse, which management believes is nominal. The outstanding balance of receivables sold
and not yet collected was approximately $90.7 million and $171.6 million as of October 2, 2009 and
March 31, 2009, respectively. These receivables were removed from the Condensed Consolidated
Balance Sheets and are reflected as cash provided by operating activities in the Condensed
Consolidated Statements of Cash Flows.
9. RESTRUCTURING CHARGES
The Company recognized restructuring charges of approximately $12.6 million and $77.4 million
during the three-month and six-month periods ended October 2, 2009 as part of its restructuring
plans previously announced in March 2009 in order to rationalize the Companys global manufacturing
capacity and infrastructure in response to macroeconomic conditions. The costs associated with
these restructuring activities include employee severance, costs related to owned and leased
facilities and equipment that is no longer in use and is to be disposed of, and other costs
associated with the exit of certain contractual arrangements due to facility closures. The
restructuring charges by reportable geographic region for the six-month period amounted to
approximately $36.0 million, $16.6 million and $24.8 million for Asia, the Americas and Europe,
respectively. The Company classified approximately $12.4 million and $64.5 million of these charges
as a component of cost of sales during the three-month and six-month periods ended October 2, 2009,
respectively.
During the six-month period ended October 2, 2009 the Company recognized approximately $26.5
million of employee termination costs associated with the involuntary terminations of 3,046
identified employees. The involuntary employee terminations by reportable geographic region
amounted to approximately 607, 1,635 and 804 for Asia, the Americas and Europe respectively.
Approximately $23.0 million of these charges were classified as a component of cost of sales.
During the six-month period ended October 2, 2009, the Company recognized approximately $35.5
million for the write-down of property and equipment, which is no longer in use, to managements
estimate of fair value. Approximately $25.8 million of these charges were classified as a component
of cost of sales. The restructuring charges recognized during the six-month period ended October
2, 2009 also included approximately $15.4 million for other exit costs, all of which was primarily
classified as a component of cost of sales. Other exit costs were primarily comprised of
contractual obligations associated with facility and equipment lease terminations and facility
abandonment and refurbishment costs.
18
The following table summarizes the provisions, respective payments, and remaining accrued
balance as of October 2, 2009 for charges incurred in fiscal year 2010 and prior periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Lived |
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset |
|
|
Other |
|
|
|
|
|
|
Severance |
|
|
Impairment |
|
|
Exit Costs |
|
|
Total |
|
|
|
(In thousands) |
|
Balance as of March 31, 2009 |
|
$ |
101,213 |
|
|
$ |
|
|
|
$ |
60,254 |
|
|
$ |
161,467 |
|
Activities during the first quarter: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions incurred in fiscal year 2010 |
|
|
19,369 |
|
|
|
31,791 |
|
|
|
13,679 |
|
|
|
64,839 |
|
Cash payments for charges incurred in
fiscal year 2010 |
|
|
(7,325 |
) |
|
|
|
|
|
|
(6,243 |
) |
|
|
(13,568 |
) |
Cash payments for charges incurred in
fiscal year 2009 |
|
|
(41,533 |
) |
|
|
|
|
|
|
(1,015 |
) |
|
|
(42,548 |
) |
Cash payments for charges incurred in
fiscal year 2008 and prior |
|
|
(9,211 |
) |
|
|
|
|
|
|
(11,549 |
) |
|
|
(20,760 |
) |
Non-cash charges incurred during the year |
|
|
|
|
|
|
(31,791 |
) |
|
|
(27 |
) |
|
|
(31,818 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of July 3, 2009 |
|
|
62,513 |
|
|
|
|
|
|
|
55,099 |
|
|
|
117,612 |
|
Activities during the second quarter: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions incurred in fiscal year 2010 |
|
|
7,139 |
|
|
|
3,712 |
|
|
|
1,740 |
|
|
|
12,591 |
|
Cash payments for charges incurred in
fiscal year 2010 |
|
|
(10,994 |
) |
|
|
|
|
|
|
(5,104 |
) |
|
|
(16,098 |
) |
Cash payments for charges incurred in
fiscal year 2009 |
|
|
(13,286 |
) |
|
|
|
|
|
|
(1,690 |
) |
|
|
(14,976 |
) |
Cash payments for charges incurred in
fiscal year 2008 and prior |
|
|
(4,196 |
) |
|
|
|
|
|
|
(2,071 |
) |
|
|
(6,267 |
) |
Non-cash charges incurred during the year |
|
|
|
|
|
|
(3,712 |
) |
|
|
|
|
|
|
(3,712 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of October 2, 2009 |
|
|
41,176 |
|
|
|
|
|
|
|
47,974 |
|
|
|
89,150 |
|
Less: current portion (classified as other
current liabilities) |
|
|
(39,139 |
) |
|
|
|
|
|
|
(22,969 |
) |
|
|
(62,108 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued restructuring costs, net of current
portion (classified as other liabilities) |
|
$ |
2,037 |
|
|
$ |
|
|
|
$ |
25,005 |
|
|
$ |
27,042 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 2, 2009, accrued costs related to restructuring charges incurred during
fiscal year 2010 were approximately $12.2 million, which was all classified as a current
obligation.
As of October 2, 2009 and March 31, 2009, accrued restructuring costs for charges incurred
during fiscal year 2009 were approximately $21.5 million and $79.0 million, respectively, of which
approximately $3.4 million and $4.8 million, respectively, were classified as long-term
obligations. As of October 2, 2009 and March 31, 2009, accrued restructuring costs for charges
incurred during fiscal years 2008 and prior were approximately $55.4 million and $82.4 million,
respectively, of which approximately $23.7 million and $29.0 million, respectively, were classified
as long-term obligations.
The Company recognized restructuring charges of approximately $29.2 million during the
six-month period ended September 26, 2008 primarily for employee termination costs associated with
the involuntary terminations of 1,667 identified employees. The activities associated with these
charges were substantially completed within one year of the commitment dates of the respective
activities. The Company classified approximately $26.3 million of these charges as a component of
cost of sales during the six-month period ended September 28, 2008.
As of October 2, 2009 and March 31, 2009, assets that were no longer in use and held for sale
totaled approximately $60.5 million and $46.8 million, respectively, primarily representing
manufacturing facilities that have been closed as part of the Companys historical facility
consolidations. For assets held for sale, depreciation ceases and an impairment loss is recognized
if the carrying amount of the asset exceeds its fair value less cost to sell. Assets held for sale
are included in Other current assets in the Condensed Consolidated Balance Sheets.
For further discussion of the Companys historical restructuring activities, refer to Note 9
Restructuring Charges to the Consolidated Financial Statements in the Companys Annual Report on
Form 10-K for the fiscal year ended March 31, 2009.
10. COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings, claims, and litigation arising in the ordinary
course of business. The Company defends itself vigorously against any such claims. Although the
outcome of these matters is currently not determinable, management does not expect that the
ultimate costs to resolve these matters will have a material adverse effect on its condensed
consolidated financial position, results of operations, or cash flows.
19
11. BUSINESS AND ASSET ACQUISITIONS
During the six-month period ended October 2, 2009, the Company paid approximately $59.1
million relating to the contingent consideration or deferred purchase price payments related to
four historical acquisitions. The purchase price for certain historical acquisitions is subject to
adjustments for contingent consideration. Generally, the contingent consideration has not been
recorded as part of the purchase price, pending the outcome of the contingency.
During the six-month period ended September 26, 2008, the Company completed six acquisitions
that were not individually, or in the aggregate, significant to the Companys consolidated results
of operations and financial position. The acquired businesses complement the Companys design and
manufacturing capabilities for the computing, infrastructure, industrial and consumer digital
market segments, and expanded the Companys power supply capabilities. The aggregate cash paid for
these acquisitions totaled approximately $179.8 million, net of cash acquired. The purchase prices
for these acquisitions have been allocated on the basis of the estimated fair value of assets
acquired and liabilities assumed. The Company also paid approximately $2.4 million relating to a
contingent purchase price adjustment from a certain historical acquisition.
20
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise specifically stated, references in this report to Flextronics, the
Company, we, us, our and similar terms mean Flextronics International Ltd. and its
subsidiaries.
This report on Form 10-Q contains 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. In addition, any statements which refer to
expectations, projections or other characterizations of future events or circumstances are
forward-looking statements. We undertake 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. These forward-looking statements are subject
to risks and uncertainties, including, without limitation, those discussed in this section, as well
as in Part II, Item 1A, Risk Factors of this report on Form 10-Q, and in Part I, Item 1A, Risk
Factors and in Part II, Item 7, Managements Discussion and Analysis of Financial Condition and
Results of Operations in our Annual Report on Form 10-K for the year ended March 31, 2009. In
addition, new risks emerge from time to time and it is not possible for management to predict all
such risk factors or to assess the impact of such risk factors on our business. Accordingly, our
future results may differ materially from historical results or from those discussed or implied by
these forward-looking statements. Given these risks and uncertainties, the reader should not place
undue reliance on these forward-looking statements.
OVERVIEW
We are a leading provider of advanced design and electronics manufacturing services (EMS) to
original equipment manufacturers (OEMs) of a broad range of products in the following markets:
infrastructure; mobile communication devices; computing; consumer digital devices; industrial,
semiconductor and white goods; automotive, marine and aerospace; and medical devices. We provide a
full range of vertically-integrated global supply chain services through which we design, build,
ship and service a complete packaged product for our customers. Customers leverage our services to
meet their product requirements throughout the entire product life cycle. Our vertically-integrated
service offerings include: design services; rigid printed circuit board and flexible circuit
fabrication; systems assembly and manufacturing; logistics; after-sales services; and multiple
component product offerings.
We are one of the worlds largest EMS providers, with revenues of $5.8 billion and $11.6
billion during the three-month and six-month periods ended October 2, 2009, and $30.9 billion in
fiscal year 2009. As of March 31, 2009, our total manufacturing capacity was approximately 27.2
million square feet. We help customers design, build, ship and service electronics products through
a network of facilities in 30 countries across four continents. The following tables set forth net
sales and net property and equipment, by country, based on the location of our manufacturing site
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six-Month Periods Ended |
|
Net sales: |
|
October 2, 2009 |
|
|
September 26, 2008 |
|
China |
|
$ |
3,903,051 |
|
|
$ |
5,457,113 |
|
Mexico |
|
|
1,710,089 |
|
|
|
1,744,761 |
|
U.S |
|
|
1,730,836 |
|
|
|
2,556,196 |
|
Malaysia |
|
|
1,088,084 |
|
|
|
2,584,433 |
|
Hungary |
|
|
717,271 |
|
|
|
726,932 |
|
Other |
|
|
2,465,109 |
|
|
|
4,143,327 |
|
|
|
|
|
|
|
|
|
|
$ |
11,614,440 |
|
|
$ |
17,212,762 |
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
As of |
|
Property and equipment, net: |
|
October 2, 2009 |
|
|
March 31, 2009 |
|
China |
|
$ |
918,782 |
|
|
$ |
1,001,832 |
|
Mexico |
|
|
348,653 |
|
|
|
342,662 |
|
U.S |
|
|
182,969 |
|
|
|
187,108 |
|
Hungary |
|
|
163,644 |
|
|
|
178,251 |
|
Malaysia |
|
|
106,510 |
|
|
|
127,927 |
|
Other |
|
|
460,112 |
|
|
|
496,001 |
|
|
|
|
|
|
|
|
|
|
$ |
2,180,670 |
|
|
$ |
2,333,781 |
|
|
|
|
|
|
|
|
We believe that the combination of our extensive design and engineering services, significant
scale and global presence, vertically-integrated end-to-end services, advanced supply chain
management, industrial campuses in low-cost geographic areas and operational track record provide
us with a competitive advantage in the market for designing, manufacturing and servicing
electronics products for leading multinational OEMs. Through these services and facilities, we
simplify the global product development and manufacturing process and provide meaningful time to
market and cost savings for our OEM customers.
Our operating results are affected by a number of factors, including the following:
|
|
|
changes in the macroeconomic environment and related changes in consumer demand; |
|
|
|
|
our exposure to financially troubled customers; |
|
|
|
|
the effects on our business when our customers are not successful in marketing their
products, when their products do not gain widespread commercial acceptance, as well as the
effects on our business due to our customers products having short product life cycles; |
|
|
|
|
our customers ability to cancel or delay orders or change production quantities; |
|
|
|
|
integration of acquired businesses and facilities; |
|
|
|
|
the mix of the manufacturing services we are providing, the number and size of new
manufacturing programs, the degree to which we utilize our manufacturing capacity, seasonal
demand, shortages of components and other factors; |
|
|
|
|
our increased design services and components offerings, which at times has reduced our
profitability as we are required to make substantial investments in the resources necessary
to design and develop these products without cost recovery and margin generation; and |
|
|
|
|
our ability to achieve commercially viable production yields and to manufacture
components in commercial quantities to the performance specifications demanded by our OEM
customers. |
Historically, the EMS industry experienced significant change and growth as an increasing
number of companies elected to outsource some or all of their design, manufacturing, and
distribution requirements. Following the 2001 2002 technology downturn, and until the current
macroeconomic downturn, we saw an overall increase in penetration of global OEM manufacturing
requirements as more and more OEMs pursued the benefits of outsourcing rather than internal
manufacturing. As a result of recent macroeconomic conditions, the global economic crisis and
related decline in demand for our customers products, many of our OEM customers have reduced their
manufacturing and supply chain outsourcing, which has negatively impacted our capacity utilization
levels and thus the overall profitability of the Company. In response, we announced in March 2009
restructuring plans intended to rationalize our global manufacturing capacity and infrastructure
with the intent to improve our operational efficiencies by reducing excess workforce and capacity.
We have recognized approximately $228.0 million of associated charges since the announcement, with
approximately $12.6 million and $77.4 million recognized during the three-month and six-month
periods ended October 2, 2009. We estimate approximately $22.0
million of restructuring related charges associated with these actions remain.
22
We are focused on managing the controllable aspects of business during this economic downturn;
and have and will continue to seek ways to control and reduce costs to minimize the macroeconomic
impact on our profitability, while continuing to attract new customer business.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We believe the accounting policies discussed under Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for
the fiscal year ended March 31, 2009, affect our more significant judgments and estimates used in
the preparation of the Condensed Consolidated Financial Statements.
Recent Accounting Pronouncements
Information regarding recent accounting pronouncements is provided in Note 2, Summary of
Accounting Policies of the Notes to Condensed Consolidated Financial Statements.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain statements of operations
data expressed as a percentage of net sales. The financial information and the discussion below
should be read in conjunction with the Condensed Consolidated Financial Statements and notes
thereto included in this document. In addition, reference should be made to our audited
Consolidated Financial Statements and notes thereto and related Managements Discussion and
Analysis of Financial Condition and Results of Operations included in our 2009 Annual Report on
Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Month Periods Ended |
|
|
Six-Month Periods Ended |
|
|
|
October 2, |
|
|
September 26, |
|
|
October 2, |
|
|
September 26, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Net sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of sales |
|
|
94.7 |
|
|
|
95.3 |
|
|
|
94.9 |
|
|
|
94.7 |
|
Restructuring charges |
|
|
0.2 |
|
|
|
|
|
|
|
0.6 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
5.1 |
|
|
|
4.7 |
|
|
|
4.5 |
|
|
|
5.1 |
|
Selling, general and administrative
expenses |
|
|
3.0 |
|
|
|
2.9 |
|
|
|
3.3 |
|
|
|
2.9 |
|
Intangible amortization |
|
|
0.4 |
|
|
|
0.6 |
|
|
|
0.4 |
|
|
|
0.4 |
|
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
|
|
|
Other charges, net |
|
|
1.6 |
|
|
|
0.1 |
|
|
|
1.7 |
|
|
|
0.1 |
|
Interest and other expense, net |
|
|
0.6 |
|
|
|
0.7 |
|
|
|
0.6 |
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(0.5 |
) |
|
|
0.4 |
|
|
|
(1.6 |
) |
|
|
1.0 |
|
Provision for (benefit from) income taxes |
|
|
(0.8 |
) |
|
|
0.1 |
|
|
|
(0.4 |
) |
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
0.3 |
% |
|
|
0.3 |
% |
|
|
(1.2 |
)% |
|
|
0.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
Net sales during the three-month period ended October 2, 2009 totaled $5.8 billion,
representing a decrease of $3.1 billion, or 35%, from $8.9 billion during the three-month period
ended September 26, 2008, primarily due to reduced customer demand as a result of the weakened
macroeconomic environment. Sales decreased across all of the markets we serve, consisting of: (i)
$1.2 billion in the infrastructure market, (ii) $738.3 million in the mobile communications market,
(iii) $504.9 million in the consumer digital market, (iv) $330.4 million in the computing market
and (v) $300.8 million in the industrial, medical, automotive and other markets. Net sales also
decreased across all of the geographic regions we serve including $1.7 billion in Asia, $950.1
million in the Americas, and $401.5 million in Europe.
Net sales during the six-month period ended October 2, 2009 totaled $11.6 billion,
representing a decrease of $5.6 billion, or 33%, from $17.2 billion during the six-month period
ended September 26, 2008, primarily due to reduced
customer demand as a result of the weakened macroeconomic environment. Sales decreased across
all of the markets we serve, consisting of: (i) $2.2 billion in the infrastructure market, (ii)
$1.1 billion in the mobile communications market, (iii) $824.7 million in the industrial, medical,
automotive and other markets, (iv) $755.4
million in the consumer digital market, and (v) $656.7
million in the computing market. Net sales during the six-month period ended October 2, 2009
decreased across all of the geographic regions we serve including $3.3 billion in Asia, $1.8
billion in the Americas, and $540.2 million in Europe.
23
Our ten largest customers during the three-month and six-month periods ended October 2, 2009
accounted for approximately 47% of net sales in each period, respectively, with no customer
accounting for greater than 10% of our net sales during either period. Our ten largest customers
during the three-month and six-month periods ended September 26, 2008 accounted for approximately
53% and 54% of net sales, respectively, with Sony-Ericsson accounting for greater than 10% of our
net sales for both periods.
Gross profit
Gross profit is affected by a number of factors, including the number and size of new
manufacturing programs, product mix, component costs and availability, product life cycles, unit
volumes, pricing, competition, new product introductions, capacity utilization and the expansion
and consolidation of manufacturing facilities. Gross profit during the three-month period ended
October 2, 2009 decreased $117.9 million to $299.6 million, or 5.1% of net sales, from $417.5
million, or 4.7% of net sales, during the three-month period ended September 26, 2008. The 40 basis
point period-over-period increase in gross margin was primarily attributable to a $96.7 million
charge recognized in the fiscal 2009 second quarter for the write-down of inventory and related
contractual obligations associated with customers that were experiencing significant financial
difficulty, partially offset by lower capacity utilization as a result of recent macroeconomic
conditions and related decline in customer demand, net of cost reduction benefits from our recent
restructuring activities.
Gross profit during the six-month period ended October 2, 2009 decreased $350.6 million to
$523.6 million, or 4.5% of net sales, from $874.2 million, or 5.1% of net sales, during the
six-month period ended September 26, 2008. The 60 basis point period-over-period decrease in gross
margin was primarily the result of lower capacity utilization in the current period as a result of
current macroeconomic conditions and related decline in customer demand. In addition, we
recognized an approximate 40 basis point increase in restructuring charges in the current period as
compared with the year ago period. The factors contributing to the decrease in gross margin during
fiscal 2010 were offset by a $96.7 million, or approximately 60 basis point, charge in the fiscal
2009 period for the write-down of inventory and related contractual obligations associated with
customers that were experiencing significant financial difficulty.
Restructuring charges
We recognized restructuring charges of approximately $12.6 million and $77.4 million during
the three-month and six-month periods ended October 2, 2009. Restructuring charges incurred during
the three-month and six-month periods ended October 2, 2009 were primarily related to rationalizing
the Companys global manufacturing capacity and infrastructure as a result of the current
macroeconomic conditions. This global recession and related decline in demand for our customers
products across all of the industries the Company serves, has caused our OEM customers to reduce
their manufacturing and supply chain outsourcing and has negatively impacted the Companys capacity
utilization levels. Our restructuring activities are intended to improve the Companys operational
efficiencies by reducing excess workforce and capacity. The costs associated with these
restructuring activities included employee severance, costs related to owned and leased facilities
and equipment that is no longer in use and is to be disposed of, and other costs associated with
the exit of certain contractual arrangements due to facility closures. We classified approximately
$12.4 million and $64.5 million of the charges as a component of cost of sales during the
three-month and six-month periods ended October 2, 2009. The charges recognized by reportable
geographic region during the six-month period ended October 2, 2009 amounted to $36.0 million,
$16.6 million and $24.8 million for Asia, the Americas and Europe, respectively. Approximately
$35.5 million of the charges were non-cash, for the write-down of property and equipment, which is
no longer in use, to managements estimate of fair value, for the six-month period ended October 2,
2009. As of October 2, 2009, accrued costs related to restructuring charges incurred during the
six-month period ended October 2, 2009 were approximately $12.2 million, all of which were
classified as a short-term obligation.
We recognized $29.2 million of restructuring charges during the six-month period ended
September 26, 2008. Restructuring charges were due to the Company realigning workforce and
capacity.
24
Refer to Note 9, Restructuring Charges, of the Notes to Condensed Consolidated Financial
Statements for further discussion of our restructuring activities.
Selling, general and administrative expenses
Selling, general and administrative expenses, or SG&A, amounted to $176.2 million, or 3.0% of
net sales, during the three-month period ended October 2, 2009, compared to $258.7 million, or 2.9%
of net sales, during the three-month period ended September 26, 2008. The decrease in SG&A expense
during the three-month period ended October 2, 2009 was primarily the result of our restructuring
activities and discretionary cost reduction actions. The increase in SG&A as a percentage of net
sales during the three-month period ended October 2, 2009, was primarily attributable to the rapid
and significant decline in sales, which exceeded our ability to reduce costs in the short-term.
Selling, general and administrative expenses, or SG&A, amounted to $377.9 million, or 3.3% of
net sales, during the six-month period ended October 2, 2009, compared to $507.3 million, or 2.9%
of net sales, during the six-month period ended September 26, 2008. The decrease in SG&A expense
during the six-month period ended October 2, 2009 was primarily the result of our restructuring
activities and discretionary cost reduction actions. The increase in SG&A as a percentage of net
sales during the six-month period ended October 2, 2009, was primarily attributable to the rapid
and significant decline in sales, which exceeded our ability to reduce costs in the short-term.
Intangible amortization
Amortization of intangible assets during the three-month period ended October 2, 2009
decreased by $27.6 million to $22.7 million from $50.3 million during the three-month period ended
September 26, 2008, primarily due to the Companys use of the accelerated method of amortization
for certain customer related intangibles, which results in decreasing expense over time.
Amortization of intangible assets during the six-month period ended October 2, 2009 decreased
by $29.6 million to $46.0 million from $75.6 million during the six-month period ended September
26, 2008. The reduction in expense during the six-month period ended October 2, 2009 was primarily
due to the use of the accelerated method of amortization for certain customer related intangibles,
which results in decreasing expense over time.
Other charges, net
During the second quarter of fiscal year 2010, we recognized charges totaling approximately
$92.0 million associated with the impairment of notes receivable from one affiliate and an equity
investment in another affiliate. The notes receivable were partially
impaired during the fourth quarter of fiscal year 2009 based on
discussions with a third party for the potential sale of the notes
and the related expected recoverable value. Subsequent deterioration
in the affiliates business prospects, cash flow expectations,
and increased liquidity concerns has resulted in an additional impairment.
Similarly, deterioration in the business prospects and liquidity
concerns of the equity investment occurring in the six-month period
ended October 2, 2009 has resulted in an impairment of the
carrying value to the estimated recoverable value.
In
August 2009, we sold one of our non-majority owned investments and
related note receivable for approximately $252.5 million, net of
closing costs. In conjunction with this transaction we recognized an
impairment charge of approximately $107.4 million in the three-month
period ended July 3, 2009. Total impairment charges related to
our equity investments and notes receivable for the six-month period
ended October 2, 2009 were approximately $199.4 million.
During
the three-month and six-month periods ended September 26, 2008,
we recognized
$11.9 million in charges for other-than-temporary impairment of
certain of our
investments primarily associated with a customer that was experiencing significant financial and
liquidity difficulties.
Interest and other expense, net
On April 1, 2009, the Company adopted a new accounting standard related to accounting for
convertible debt instruments that may be settled in cash upon conversion. The adoption of the new
standard affected the accounting for the Companys 1% Convertible Subordinated Notes and Zero
Coupon Convertible Junior Subordinated Notes (collectively referred to as the Convertible Notes)
by requiring the initial proceeds from their sale to be allocated between a liability component and
an equity component in a manner that results in interest expense on the debt component at the
Companys nonconvertible debt borrowing rate on the date of issuance. The standard required the
Company to record the change in accounting principle retrospectively to all periods presented.
As a result of the adoption of this standard, we recognized approximately $5.5 million and $13.5
million in incremental non-cash interest expense during the three-month and six-month periods ended
October 2, 2009. In addition, we
retrospectively adjusted interest and other expense, net for the
three-month and six-month periods ended September 26, 2008 to include $11.4 million and $22.5
million of incremental non-cash interest expense.
25
Interest and other expense, net was $38.1 million during the three-month period ended October
2, 2009 compared to $59.4 million (as restated for the retrospective application of the new
accounting standard) during the three-month period ended September 26, 2008, a decrease of $21.3
million. The decrease in expense is primarily the result of less debt outstanding during the period
including the approximate $200.0 million aggregate principal reduction in the 6 1/2% Senior
Subordinated Notes and the 6 1/4% Senior Subordinated Notes. Further reduction in interest expense
was due to, lower interest rates on our variable rate debt and a decrease in non-cash interest
expense due to our repurchase of $260.0 million of principal value of our 1% Convertible
Subordinated Notes in December 2008 and redemption of our Zero Coupon Convertible Junior
Subordinated Notes in July 2009, partially offset by less interest income resulting from the
reduction in other notes receivable that were sold during the second quarter of fiscal year 2010.
Interest and other expense, net was $75.0 million during the six-month period ended October 2,
2009 compared to $110.1 million (as restated for the retrospective application of the new
accounting standard) during the six-month period ended September 26, 2008, a decrease of $35.1
million. The decrease in expense is primarily the result of less debt outstanding during the period
including the approximate $200.0 million aggregate principal reduction in the 6 1/2% Senior
Subordinated Notes and the 6 1/4% Senior Subordinated Notes. Further reduction in interest expense
was due to lower interest rates on our variable rate debt and a decrease in non-cash interest
expense due to our repurchase of $260.0 million of principal value of our 1% Convertible
Subordinated Notes in December 2008 and redemption of our Zero Coupon Convertible Junior
Subordinated Notes in July 2009, partially offset by less interest income resulting from the
reduction in other notes receivable that were sold during the second quarter of fiscal year 2010.
Income taxes
Certain of our subsidiaries have, at various times, been granted tax relief in their
respective countries, resulting in lower income taxes than would otherwise be the case under
ordinary tax rates. Refer to Note 8, Income Taxes, of the Notes to the Consolidated Financial
Statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2009 for further
discussion.
The Company has tax loss carryforwards attributable to continuing operations for which we have
recognized deferred tax assets. Our policy is to provide a reserve against those deferred tax
assets that in managements estimate are not more likely than not to be realized. During the
six-month period ended October 2, 2009, the provision for income taxes includes a benefit of
approximately $75.2 million for the net change in the liability for unrecognized tax benefits as a
result of settlements in various tax jurisdictions. During the six-month period ended September
26, 2008, the provision for income taxes includes a benefit of approximately $38.5 million for the
reversal of a valuation allowance.
The consolidated effective tax rate for a particular period varies depending on the amount of
earnings from different jurisdictions, operating loss carryforwards, income tax credits, changes in
previously established valuation allowances for deferred tax assets based upon our current analysis
of the realizability of these deferred tax assets, as well as certain tax holidays and incentives
granted to our subsidiaries primarily in China, Malaysia, Israel, Poland and Singapore.
LIQUIDITY AND CAPITAL RESOURCES
As of October 2, 2009, we had cash and cash equivalents of approximately $2.0 billion and bank
and other borrowings of approximately $2.6 billion. We also had a $2.0 billion credit facility,
under which we had no borrowings outstanding as of October 2, 2009. As of October 2, 2009, we were
in compliance with the covenants under the Companys indentures and credit facilities.
Cash provided by operating activities amounted to $418.4 million during the six-month period
ended October 2, 2009. The Companys $134.4 million net loss for the period included approximately
$466.5 million of non-cash expenses for depreciation, amortization, and impairment charges. The
remaining increase of approximately $86.3
million in cash from operations was driven from
fluctuations in net working capital and primarily driven by a reduction in inventory.
26
Cash provided by investing activities amounted to $116.1 million. This resulted primarily
from proceeds related to the sale of an equity investment and note receivable for $255.3 million,
net of closing costs, and was partially offset by approximately $80.2 million in capital
expenditures for equipment, net of proceeds on sales and $59.1 million for deferred purchase price
payments related to certain historical acquisitions.
Cash used in financing activities amounted to $405.3 million during the six-month period ended
October 2, 2009. During June 2009, we used $203.2 million to repurchase an aggregate principal
amount of $99.8 million of the 6 1/2% Senior Subordinated Notes due 2013 (6 1/2% Notes) and an
aggregate principal amount of $99.9 million of the 6 1/4% Senior Subordinated Notes due 2014 (6 1/4%
Notes) in a cash tender offer. On July 31, 2009, we paid $195.0 million to redeem the 0%
Convertible Junior Subordinated Notes upon their maturity.
As of October 2, 2009, quarterly maturities of our bank borrowings, long-term debt and capital
lease obligations were as follows:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
|
|
|
Fiscal Year |
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Total |
|
|
|
(In thousands) |
|
2010 |
|
|
|
|
|
|
|
|
|
$ |
6,330 |
|
|
$ |
5,151 |
|
|
$ |
11,481 |
|
2011 |
|
$ |
4,829 |
|
|
$ |
236,962 |
|
|
|
4,127 |
|
|
|
4,209 |
|
|
|
250,127 |
|
2012 |
|
|
4,209 |
|
|
|
4,209 |
|
|
|
4,167 |
|
|
|
4,167 |
|
|
|
16,752 |
|
2013 |
|
|
4,167 |
|
|
|
479,661 |
|
|
|
2,937 |
|
|
|
2,937 |
|
|
|
489,702 |
|
2014 |
|
|
302,743 |
|
|
|
2,937 |
|
|
|
2,907 |
|
|
|
2,907 |
|
|
|
311,494 |
|
2015 |
|
|
2,907 |
|
|
|
1,154,761 |
|
|
|
302,172 |
|
|
|
|
|
|
|
1,459,840 |
|
Thereafter (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,552,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents cumulative maturities for years subsequent to March 31, 2015. |
We continue to assess our capital structure, and evaluate the merits of redeploying available
cash to reduce existing debt or repurchase shares. In connection with the June 2009 purchase of
our outstanding 6 1/2% Notes and 6 1/4% Notes, we paid $8.8 million in fees for the consents to certain
amendments to the restricted payments covenants and certain related definitions in each of the
indentures under which these notes were issued. The amendments permit us greater flexibility to
purchase or make other payments in respect of our equity securities and debt that is subordinated
to each of the notes and to make other restricted payments under each of the indentures. The next
significant debt maturity is the 1.00% Convertible Subordinated Notes due August 2010 for an amount
of $240.0 million.
Liquidity is affected by many factors, some of which are based on normal ongoing operations of
our business and some of which arise from fluctuations related to global economics and markets.
Cash balances are generated and held in many locations throughout the world. Local government
regulations may restrict our ability to move cash balances to meet cash needs under certain
circumstances. We do not currently expect such regulations and restrictions to impact our ability
to pay vendors and conduct operations throughout our global organization. We believe that our
existing cash balances, together with anticipated cash flows from operations and borrowings
available under our credit facilities, will be sufficient to fund our operations through at least
the next twelve months.
Future liquidity needs will depend on fluctuations in levels of our working capital, the
timing of capital expenditures for new equipment, the extent to which we utilize operating leases
for new facilities and equipment, the extent of cash charges associated with any future
restructuring activities, timing of cash outlays associated with historical restructuring and
integration activities, and levels of shipments and changes in volumes of customer orders.
27
Historically, we have funded our operations from existing cash and cash equivalents, cash
generated from operations, proceeds from public offerings of equity and debt securities, bank debt
and lease financings. We also continuously sell a designated pool of trade receivables under asset
backed securitization programs, and sell certain trade receivables, which are in addition to the
trade receivables sold in connection with these securitization agreements, to certain third-party
banking institutions with limited recourse. As of October 2, 2009 and March 31, 2009 we sold
receivables totaling $570.4 million and $643.6 million, respectively, net of our participation
through asset-backed security and other financing arrangements, which are not included in our
Condensed Consolidated Balance Sheets. Our asset backed securitization programs include certain
limits on customer default rates. Given the current macroeconomic environment, it is possible that
we will experience default rates in excess of those limits, which, if not waived by the
counterparty, could impair our ability to sell receivables under these arrangements in the future.
We may enter into debt and equity financings, sales of accounts receivable and lease
transactions to fund acquisitions and future growth. The sale or issuance of equity or convertible
debt securities could result in dilution to current shareholders. Additionally, we may issue debt
securities that have rights and privileges senior to those of holders of ordinary shares, and the
terms of this debt could impose restrictions on operations and could increase debt service
obligations. This increased indebtedness could limit our flexibility as a result of debt service
requirements and restrictive covenants, potentially affect our credit ratings, and may limit our
ability to access additional capital or execute our business strategy. Any downgrades in credit
ratings could adversely affect our ability to borrow by resulting in more restrictive borrowing
terms.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
Information regarding our long-term debt payments, operating lease payments, capital lease
payments and other commitments is provided in Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations of our Annual Report on our Form 10-K for the fiscal
year ended March 31, 2009. Aside from the foregoing, there have been no material changes in our
contractual obligations since March 31, 2009.
OFF-BALANCE SHEET ARRANGEMENTS
We continuously sell a designated pool of trade receivables to a third-party qualified special
purpose entity, which in turn sells an undivided ownership interest to an investment conduit
administered by an unaffiliated financial institution. In addition to this financial institution,
we participate in the securitization agreement as an investor in the conduit. The fair value of our
investment participation, together with our recourse obligation that approximates 5% of the total
receivables sold, was approximately $162.7 million and $123.8 million as of October 2, 2009 and
March 31, 2009, respectively. Refer to Note 8, Trade Receivables Securitization of the Notes to
Condensed Consolidated Financial Statements for further discussion.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no material changes in our exposure to market risk for changes in interest and
foreign currency exchange rates for the six-month period ended October 2, 2009 as compared to the
fiscal year ended March 31, 2009.
28
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of October
2, 2009, the end of the quarterly fiscal period covered by this quarterly report. Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of October
2, 2009, such disclosure controls and procedures were effective in ensuring that information
required to be disclosed by us in reports that we file or submit under the Securities Exchange Act
of 1934, as amended, is (i) recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange
Commissions rules and forms and (ii) accumulated and communicated to our management,
including our principal executive officer and principal financial officer, as appropriate to allow
timely decisions regarding required disclosure.
(b) Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during
our second quarter of fiscal year 2010 that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.
29
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject to legal proceedings, claims, and litigation arising in the ordinary course of
business. We defend ourselves vigorously against any such claims. Although the outcome of these
matters is currently not determinable, management does not expect that the ultimate costs to
resolve these matters will have a material adverse effect on our consolidated financial position,
results of operations, or cash flows.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider
the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the
year ended March 31, 2009, which could materially affect our business, financial condition or
future results. The risks described in our Annual Report on Form 10-K are not the only risks facing
our Company. Additional risks and uncertainties not currently known to us or that we currently deem
to be not material also may materially adversely affect our business, financial condition and/or
operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our Annual General Meeting of Shareholders on September 22, 2009 at 847 Gibralter
Drive, Milpitas, California, 95035, U.S.A. at which the following matters were acted upon:
|
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|
|
|
|
|
|
|
1a. |
|
|
Re-election of Mr. James A. Davidson as a director to our Board of
Directors.
|
|
For:
Against:
Abstain:
|
|
625,200,969
107,071,520
853,516 |
|
|
|
|
|
|
|
|
|
|
1b. |
|
|
Re-election of Mr. Lip-Bu Tan as a director to our Board of Directors.
|
|
For:
Against:
Abstain:
|
|
700,600,954
31,683,637
841,415 |
|
|
|
|
|
|
|
|
|
|
2a. |
|
|
Re-election of Mr. Robert L. Edwards as a director to our Board of
Directors.
|
|
For:
Against:
Abstain:
|
|
717,986,650
14,333,289
806,067 |
|
|
|
|
|
|
|
|
|
|
2b. |
|
|
Re-election of Mr. Daniel H. Schulman as a director to our Board of
Directors.
|
|
For:
Against:
Abstain:
|
|
663,823,591
68,523,864
778,551 |
|
|
|
|
|
|
|
|
|
|
2c. |
|
|
Re-election of Mr. William D. Watkins as a director to our Board of
Directors.
|
|
For:
Against:
Abstain:
|
|
700,705,995
31,611,006
809,005 |
|
|
|
|
|
|
|
|
|
|
3. |
|
|
Re-appointment of Deloitte & Touche LLP as our independent
auditors for the fiscal year ending March 31, 2010 and authorization
of our Board of Directors to fix their remuneration.
|
|
For:
Against:
Abstain:
|
|
729,786,147
2,738,030
601,829 |
|
|
|
|
|
|
|
|
|
|
4. |
|
|
Approval of the general authorization for our Directors to allot and
issue ordinary shares.
|
|
For:
Against:
Abstain:
Broker Non Votes:
|
|
613,867,384
34,603,559
324,199
84,330,864 |
|
|
|
|
|
|
|
|
|
|
5. |
|
|
Approval of the proposed renewal of the share repurchase mandate
relating to acquisitions by us of our issued ordinary shares.
|
|
For:
Against:
Abstain:
Broker Non Votes:
|
|
646,418,704
1,100,568
1,275,871
84,330,863 |
|
|
|
|
|
|
|
|
|
|
6. |
|
|
Approval to provide US$75,000 of annual cash compensation
to each of our non-employee directors, an additional US$100,000 of
annual cash compensation to the non-employee Chairman of the
Board in lieu of one-half of the annual share bonus award, and
an additional US$10,000 of annual cash compensation for each
non-employee director who serves on the Compensation Committee
(other than the Chairman of the Compensation Committee).
|
|
For:
Against:
Abstain:
|
|
719,142,907
11,475,452
2,507,419 |
30
At the meeting, Messrs. James A. Davidson, Lip-Bu Tan, Robert L. Edwards, Daniel H. Schulman
and William D. Watkins were re-elected to the Board of Directors. Messrs. H. Raymond Bingham,
Willy C. Shih, Ph.D. and Michael M. McNamara continued their terms of office as directors following
the meeting.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
|
|
|
Exhibit No. |
|
Exhibit |
10.01
|
|
Flextronics International Ltd. 2001 Equity Incentive Plan, as amended. |
|
|
|
10.02
|
|
Solectron Corporation 2002 Stock plan, as amended. |
|
|
|
10.03
|
|
Summary of Directors Compensation. |
|
|
|
15.01
|
|
Letter in lieu of consent of Deloitte & Touche LLP. |
|
|
|
31.01
|
|
Certification of Principal Executive Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.02
|
|
Certification of Principal Financial Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.01
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(b)
under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.* |
|
|
|
32.02
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(b)
under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.* |
|
|
|
101
|
|
The following materials from Flextronics International Ltd.s
Quarterly Report on Form 10-Q for the quarter ended October 2, 2009,
formatted in XBRL (Extensible Business Reporting Language): (i) the
Condensed Balance Sheets, (ii) the Condensed Consolidated Statements
of Operations, (iii) the Condensed Consolidated Statements of Cash
Flows, and (iv) Notes to Condensed Consolidated Financial Statements,
tagged as blocks of text. |
|
|
|
* |
|
This exhibit is furnished with this Quarterly Report on Form 10-Q, is
not deemed filed with the Securities and Exchange Commission, and is
not incorporated by reference into any filing of Flextronics
International Ltd. under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, whether made before
or after the date hereof and irrespective of any general incorporation
language contained in such filing. |
31
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)
|
|
|
/s/ Michael M. McNamara
|
|
|
Michael M. McNamara |
|
|
Chief Executive Officer
(Principal Executive Officer) |
|
Date: November 3, 2009
|
|
|
|
|
|
/s/ Paul Read
|
|
|
Paul Read |
|
|
Chief Financial Officer
(Principal Financial Officer) |
|
Date: November 3, 2009
32
EXHIBIT INDEX
|
|
|
Exhibit No. |
|
Exhibit |
10.01
|
|
Flextronics International Ltd. 2001 Equity Incentive Plan, as amended. |
|
|
|
10.02
|
|
Solectron Corporation 2002 Stock plan, as amended. |
|
|
|
10.03
|
|
Summary of Directors Compensation. |
|
|
|
15.01
|
|
Letter in lieu of consent of Deloitte & Touche LLP. |
|
|
|
31.01
|
|
Certification of Principal Executive Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.02
|
|
Certification of Principal Financial Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.01
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(b)
under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.* |
|
|
|
32.02
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(b)
under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.* |
|
|
|
101
|
|
The following materials from Flextronics International Ltd.s
Quarterly Report on Form 10-Q for the quarter ended October 2, 2009,
formatted in XBRL (Extensible Business Reporting Language): (i) the
Condensed Consolidated Balance Sheets, (ii) the Condensed
Consolidated Statements of Operations, (iii) the Condensed
Consolidated Statements of Cash Flows, and (iv) Notes to Condensed
Consolidated Financial Statements, tagged as blocks of text. |
|
|
|
* |
|
This exhibit is furnished with this Quarterly Report on Form 10-Q, is
not deemed filed with the Securities and Exchange Commission, and is
not incorporated by reference into any filing of Flextronics
International Ltd. under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, whether made before
or after the date hereof and irrespective of any general incorporation
language contained in such filing. |
33