Solectron announces Q3 - sales down

Solectron Corporation (NYSE:SLR) reported sales of $2.60 billion in the third quarter of fiscal 2005.  Sales in the third quarter of fiscal 2004 were $3.03 billion, and sales in the second quarter of fiscal 2005 were $2.76 billion.

The company reported a GAAP loss from continuing operations in the third quarter of $67 million, or 7 cents per share, compared with a GAAP loss from continuing operations of $65 million, or 8 cents per share, in the third quarter of last year.

The company had non-GAAP net income from continuing operations of $36 million, or 4 cents per share, excluding $103 million of charges. The company recorded a restructuring charge of $41 million and a charge of $45 million related to the redemption of $500 million of senior notes, which was completed on May 20. In addition, the company recorded a charge of $17 million principally related to ongoing tax audits of its Brazilian operation.

The company reported sequentially lower revenues as strength in computing and storage, communications, industrial and automotive was offset by weaker demand in the networking and consumer markets.

"We are pleased that in a lower revenue environment we delivered profitability within our guidance and achieved strong cash flow generation again this quarter," said Mike Cannon, president and chief executive officer. "Recent business wins demonstrate the robustness of our growing pipeline of revenue opportunities. As these wins ramp in future quarters, Solectron is well positioned for a stronger fiscal 2006."

Quarterly Highlights
The company made further improvements in working capital during the quarter. Days sales outstanding were 46 days and days payables outstanding improved to 50 days. Inventory turns improved to 8.1 and the company's cash conversion cycle was 41 days, an improvement of three days from the prior period. Capital expenditures were $36 million and depreciation and amortization was $45 million.

Fourth-Quarter 2005 Guidance
Fiscal fourth-quarter guidance is for sales of $2.4 billion to $2.6 billion, and for non-GAAP EPS from continuing operations to range from 3 cents to 5 cents, on a fully diluted basis.

On April 29, 2005, the company announced a restructuring plan with associated charges estimated to range between $100-115 million (including the $41 million charge noted above) and an expected completion date in the third quarter of fiscal 2006. A portion of the estimated charges for this restructuring plan will be recorded in the fourth quarter of fiscal 2005 and is excluded in calculating non-GAAP EPS.