Summary
Flextronics International Ltd. (FLEX) announced a significant restructuring plan on March 4, 2009, in response to the global economic crisis and a subsequent decline in customer demand. The company's Board of Directors approved actions to rationalize its global manufacturing capacity and infrastructure, aiming to improve operational efficiencies by reducing workforce and excess capacity. This initiative will also involve a shift of manufacturing to locations with higher efficiency and lower costs.
Key Highlights
- 1Flextronics is undertaking a major restructuring due to adverse macroeconomic conditions and declining customer demand.
- 2The restructuring aims to improve operational efficiencies by reducing workforce and manufacturing capacity.
- 3The company anticipates total pre-tax restructuring and impairment costs between $220 million and $250 million over fiscal years 2009 and 2010.
- 4Approximately $190 million to $210 million of these costs are expected to be recognized in fiscal year 2009.
- 5Cash expenditures related to restructuring (excluding asset impairments) are estimated between $130 million and $150 million, primarily in fiscal year 2010.
- 6The company expects annualized cost savings ranging from $230 million to $260 million upon completion of the restructuring.
- 7Non-cash impairment charges for property, plant, and equipment are estimated to be between $90 million and $100 million.
Frequently Asked Questions
The primary driver is the current global macroeconomic conditions and the resulting decline in demand for their customers' products, which has negatively impacted Flextronics' capacity utilization.
Flextronics expects to recognize between $220 million and $250 million in pre-tax restructuring and impairment costs. Of this, approximately $190 million to $210 million is anticipated for the fiscal year ending March 31, 2009.
The company currently expects cash expenditures related to restructuring (excluding asset impairment charges) to be between $130 million and $150 million, with the majority payable during fiscal year 2010.
Upon completion, Flextronics anticipates annualized savings ranging from $230 million to $260 million. These savings are expected to come from lower cost of goods sold (reduced depreciation, employee expenses, operating costs) and reduced selling, general, and administrative expenses.