Summary
Flextronics International Ltd. (FLEX) announced on September 18, 2006, that its Board of Directors approved a strategic decision to exit and dispose of certain real estate holdings. This move is aimed at reducing the company's investment in property, plant, and equipment. The company anticipates recognizing pre-tax charges in the range of $90 to $95 million during the second quarter of fiscal year 2007, primarily due to facility lease termination costs and impairment charges. Despite the significant charges, Flextronics expects these exit activities to result in a net positive cash inflow of approximately $10 million. This positive cash flow is projected from the net effect of approximately $40 million in exit expenditures and an estimated $50 million in proceeds from the sale of real estate. The impairment charges alone are estimated to be between $45 to $50 million, written down to fair value, and are not expected to involve material cash outflows.
Key Highlights
- 1Flextronics' Board of Directors approved the disposal and exit of certain real estate assets.
- 2The objective is to reduce the company's investment in property, plant, and equipment.
- 3Expects pre-tax charges of $90-$95 million in Q2 FY2007, including lease termination and impairment costs.
- 4Anticipates a net positive cash flow of approximately $10 million from these activities.
- 5Projected cash expenditures for exit costs are around $40 million.
- 6Estimated proceeds from real estate sales are approximately $50 million.
- 7Material impairment charges on property, plant, and equipment are estimated at $45-$50 million, written down to fair value.