##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-Q


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 
|           |  | For the quarterly period ended May 27, 2005                                                 
|           |  | or                                                                                          
|          
|o          |  | 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 1-11098


SOLECTRON CORPORATION


(Exact name of registrant as specified in its charter)


|                                                                    |  |                                            
|------------------------------------------------------------------- |  | -------------------------------------------
|Delaware                                                            |  | 94-2447045                                 
|(State or Other Jurisdiction of
     Incorporation or Organization) |  | (I.R.S. Employer
    Identification Number)

847 Gibraltar Drive


Milpitas, California 95035


(Address of principal executive offices including zip
code)


(408) 957-8500


(Registrants telephone number, including area code)


þ o


þ o














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SOLECTRON CORPORATION


INDEX TO FORM 10-Q


|                                  |  |                                                                                                                                    |    |  |    | 
|--------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------- | -- |  | -- | 
|PART I. FINANCIAL
    INFORMATION
|Item 1.                           |  | Financial Statements                                                                                                               |    |  | 3  | 
|                                  |  | Condensed Consolidated Balance Sheets at
    May 31, 2005 and August 31, 2004                                                      |    |  | 3  | 
|                                  |  | Condensed Consolidated Statements of
    Operations for the three and nine months ended May 31, 2005
    and 2004                  |    |  | 4  | 
|                                  |  | Condensed Consolidated Statements of
    Comprehensive Income (Loss) for the three and nine months ended
    May 31, 2005 and 2004 |    |  | 5  | 
|                                  |  | Condensed Consolidated Statements of Cash
    Flows for the nine months ended May 31, 2005 and 2004                                |    |  | 6  | 
|                                  |  | Notes to Condensed Consolidated Financial
    Statements                                                                           |    |  | 7  | 
|Item 2.                           |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                          |    |  | 24 | 
|Item 3.                           |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                                     |    |  | 44 | 
|Item 4.                           |  | Controls and Procedures                                                                                                            |    |  | 44 | 
|                                 
|PART II. OTHER INFORMATION       
|Item 1.                           |  | Legal Proceedings                                                                                                                  |    |  | 45 | 
|Item 6.                           |  | Exhibits                                                                                                                           |    |  | 45 | 
|Signatures                        |  |                                                                                                                                    | 47 | 
|EXHIBIT 10.1                     
|EXHIBIT 10.2                     
|EXHIBIT 31.1                     
|EXHIBIT 31.2                     
|EXHIBIT 32.1                     
|EXHIBIT 32.2                     



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##### Table of Contents






PART I. FINANCIAL INFORMATION







|        |                     
|------- | --------------------
|Item 1. | Financial Statements

SOLECTRON CORPORATION AND SUBSIDIARIES





CONDENSED CONSOLIDATED BALANCE SHEETS


|                                                 |                                                    |                            |         |          |           |   |         |          |         | 
|------------------------------------------------ | -------------------------------------------------- | -------------------------- | ------- | -------- | --------- | - | ------- | -------- | ------- | 
|                                                 |                                                    | May 31                     |         |          | August 31 |  
|                                                 |                                                    | 2005                       |         |          | 2004      |  
|                                                 |                                                    |                            |         |          |           |  
|                                                 |                                                    | (In millions)              |        
|                                                 |                                                    | (Unaudited)                |        
|ASSETS                                          
|Current assets:                                  |                                                    |                            |         |          |           |   |         |         
|                                                 | Cash, cash equivalents and short-term investments* |                            | $       | 1,586.3  |           |   | $       | 1,430.2  |        
|                                                 | Accounts receivable, net                           |                            |         | 1,290.2  |           |   |         | 1,550.2  |        
|                                                 | Inventories                                        |                            |         | 1,187.0  |           |   |         | 1,455.4  |        
|                                                 | Prepaid expenses and other current assets          |                            |         | 190.1    |           |   |         | 189.5    |        
|                                                 | Current assets of discontinued operations          |                            |         |         |           |   |         | 36.4     |        
|                                                 |                                                    |                            |         |          |           |  
|                                                 |                                                    | Total current assets       |         |          | 4,253.6   |   |         |          | 4,661.7 | 
|Property and equipment, net                      |                                                    |                            | 678.7   |          |           |   | 754.4   |         
|Goodwill                                         |                                                    |                            | 135.8   |          |           |   | 135.8   |         
|Other assets                                     |                                                    |                            | 234.8   |          |           |   | 294.3   |         
|Long-term assets of discontinued operations      |                                                    |                            |        |          |           |   | 11.9    |         
|                                                 |                                                    |                            |         |          |           |  
|Total assets                                     |                                                    | $                          | 5,302.9 |          |           | $ | 5,858.1 |         
|                                                 |                                                    |                            |         |          |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY            
|Current liabilities:                             |                                                    |                            |         |          |           |   |         |         
|                                                 | Short-term debt                                    |                            | $       | 166.0    |           |   | $       | 25.1     |        
|                                                 | Accounts payable                                   |                            |         | 1,363.2  |           |   |         | 1,439.0  |        
|                                                 | Accrued employee compensation                      |                            |         | 186.4    |           |   |         | 173.7    |        
|                                                 | Accrued expenses and other current liabilities     |                            |         | 487.5    |           |   |         | 500.7    |        
|                                                 | Current liabilities of discontinued operations     |                            |         |         |           |   |         | 46.4     |        
|                                                 |                                                    |                            |         |          |           |  
|                                                 |                                                    | Total current liabilities  |         |          | 2,203.1   |   |         |          | 2,184.9 | 
|Long-term debt                                   |                                                    |                            | 540.9   |          |           |   | 1,221.4 |         
|Other long-term liabilities                      |                                                    |                            | 50.1    |          |           |   | 31.1    |         
|Long-term liabilities of discontinued operations |                                                    |                            |        |          |           |   | 1.8     |         
|                                                 |                                                    |                            |         |          |           |  
|                                                 |                                                    | Total liabilities          |         | $        | 2,794.1   |   |         | $        | 3,439.2 | 
|                                                 |                                                    |                            |         |          |           |  
|Commitments and contingencies                    |                                                    |                            |         |          |           |   |         |         
|Stockholders equity:                            |                                                    |                            |         |          |           |   |         |         
|                                                 | Common stock                                       |                            |         | 1.0      |           |   |         | 1.0      |        
|                                                 | Additional paid-in capital                         |                            |         | 7,849.0  |           |   |         | 7,775.9  |        
|                                                 | Accumulated deficit                                |                            |         | (5,218.0 | )         |   |         | (5,209.9 | )      
|                                                 | Accumulated other comprehensive loss               |                            |         | (123.2   | )         |   |         | (148.1   | )      
|                                                 |                                                    |                            |         |          |           |  
|                                                 |                                                    | Total stockholders equity |         |          | 2,508.8   |   |         |          | 2,418.9 | 
|                                                 |                                                    |                            |         |          |           |  
|Total liabilities and stockholders equity       |                                                    | $                          | 5,302.9 |          |           | $ | 5,858.1 |         
|                                                 |                                                    |                            |         |          |           |  






|  |                                                                                                                                                                                                       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Includes $15.2 million and $17.5 million of restricted
    cash balances as of May 31, 2005 and August 31, 2004,
    respectively, and $28.8 million of short-term investments
    as of May 31, 2005.



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SOLECTRON CORPORATION AND SUBSIDIARIES





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                              |                                     |                                      |         |            |              |   |         |       |       |   |         |       |       |   |         |        |        |  
|------------------------------------------------------------- | ----------------------------------- | ------------------------------------ | ------- | ---------- | ------------ | - | ------- | ----- | ----- | - | ------- | ----- | ----- | - | ------- | ------ | ------ | -
|                                                              |                                     | Three Months                         |         |            | Nine Months  |  
|                                                              |                                     | Ended May 31                         |         |            | Ended May 31 |  
|                                                              |                                     |                                      |         |            |              |  
|                                                              |                                     | 2005                                 |         |            | 2004         |   |         | 2005  |       |   | 2004    |      
|                                                              |                                     |                                      |         |            |              |   |         |       |       |   |         |      
|                                                              |                                     | (In millions, except per-share data) |        
|                                                              |                                     | (Unaudited)                          |        
|                                                              |                                     |                                      |         | (Restated) |             
|Net sales                                                     |                                     | $                                    | 2,596.0 |            |              | $ | 3,034.2 |       |       | $ | 8,042.6 |       |       | $ | 8,597.7 |       
|Cost of sales                                                 |                                     |                                      | 2,461.4 |            |              |   | 2,879.0 |       |       |   | 7,594.6 |       |       |   | 8,187.8 |       
|                                                              |                                     |                                      |         |            |              |   |         |       |       |   |         |      
|Gross profit                                                  |                                     |                                      | 134.6   |            |              |   | 155.2   |       |       |   | 448.0   |       |       |   | 409.9   |       
|Operating expenses:                                           |                                     |                                      |         |            |              |   |         |       |       |   |         |       |       |   |         |       
|                                                              | Selling, general and administrative |                                      |         | 109.7      |              |   |         | 103.7 |       |   |         | 310.0 |       |   |         | 331.9  |       
|                                                              | Restructuring and impairment costs  |                                      |         | 40.5       |              |   |         | 4.4   |       |   |         | 84.4  |       |   |         | 109.8  |       
|                                                              |                                     |                                      |         |            |              |   |         |       |       |   |         |      
|                                                              |                                     | Operating (loss) income              |         |            | (15.6        | ) |         |       | 47.1  |   |         |       | 53.6  |   |         |        | (31.8  | )
|Interest income                                               |                                     |                                      | 12.6    |            |              |   | 4.9     |       |       |   | 27.5    |       |       |   | 11.1    |       
|Interest expense                                              |                                     |                                      | (17.3   | )          |              |   | (42.9   | )     |       |   | (50.3   | )     |       |   | (131.2  | )     
|Other expense  net                                           |                                     |                                      | (47.8   | )          |              |   | (74.2   | )     |       |   | (42.0   | )     |       |   | (68.0   | )     
|                                                              |                                     |                                      |         |            |              |   |         |       |       |   |         |      
|Operating loss from continuing operations before income taxes |                                     |                                      | (68.1   | )          |              |   | (65.1   | )     |       |   | (11.2   | )     |       |   | (219.9  | )     
|Income tax (benefit) expense                                  |                                     |                                      | (1.4    | )          |              |   | 0.3     |       |       |   | 11.1    |       |       |   | 2.4     |       
|                                                              |                                     |                                      |         |            |              |   |         |       |       |   |         |      
|                                                              |                                     | Loss from continuing operations      |         | $          | (66.7        | ) |         | $     | (65.4 | ) |         | $     | (22.3 | ) |         | $      | (222.3 | )
|Discontinued operations:                                      |                                     |                                      |         |            |              |   |         |       |       |   |         |       |       |   |         |       
|Income from discontinued operations                           |                                     | $                                    | 2.6     |            |              | $ | 92.9    |       |       | $ | 15.9    |       |       | $ | 53.0    |       
|Income tax expense                                            |                                     |                                      |        |            |              |   | 6.1     |       |       |   | 1.7     |       |       |   | 10.8    |       
|                                                              |                                     |                                      |         |            |              |   |         |       |       |   |         |      
|                                                              | Income from discontinued operations |                                      |         | 2.6        |              |   |         | 86.8  |       |   |         | 14.2  |       |   |         | 42.2   |       
|                                                              | Net (loss) income                   |                                      | $       | (64.1      | )            |   | $       | 21.4  |       |   | $       | (8.1  | )     |   | $       | (180.1 | )     
|                                                              |                                     |                                      |         |            |              |   |         |       |       |   |         |      
|Basic net (loss) income per share                             |                                     |                                      |         |            |              |   |         |       |       |   |         |       |       |   |         |       
|                                                              | Continuing operations               |                                      | $       | (0.07      | )            |   | $       | (0.08 | )     |   | $       | (0.02 | )     |   | $       | (0.26  | )     
|                                                              | Discontinued operations             |                                      |         |           |              |   |         | 0.10  |       |   |         | 0.01  |       |   |         | 0.05   |       
|                                                              |                                     |                                      |         |            |              |   |         |       |       |   |         |      
|                                                              | Basic net (loss) income per share   |                                      | $       | (0.07      | )            |   | $       | 0.02  |       |   | $       | (0.01 | )     |   | $       | (0.21  | )     
|                                                              |                                     |                                      |         |            |              |   |         |       |       |   |         |      
|Diluted net (loss) income per share                           |                                     |                                      |         |            |              |   |         |       |       |   |         |       |       |   |         |       
|                                                              | Continuing operations               |                                      | $       | (0.07      | )            |   | $       | (0.08 | )     |   | $       | (0.02 | )     |   | $       | (0.26  | )     
|                                                              | Discontinued operations             |                                      |         |           |              |   |         | 0.10  |       |   |         | 0.01  |       |   |         | 0.05   |       
|                                                              |                                     |                                      |         |            |              |   |         |       |       |   |         |      
|                                                              | Diluted net (loss) income per share |                                      | $       | (0.07      | )            |   | $       | 0.02  |       |   | $       | (0.01 | )     |   | $       | (0.21  | )     
|                                                              |                                     |                                      |         |            |              |   |         |       |       |   |         |      
|Shares used to compute basic net (loss) income per share      |                                     |                                      | 978.4   |            |              |   | 868.3   |       |       |   | 968.4   |       |       |   | 845.8   |       
|Shares used to compute diluted net (loss) income per share    |                                     |                                      | 978.4   |            |              |   | 868.3   |       |       |   | 968.4   |       |       |   | 845.8   |       



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SOLECTRON CORPORATION AND SUBSIDIARIES





CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)


|                                         |  |               |       |            |              |   |       |      |            |   |      |   |  |   |        |  
|---------------------------------------- |  | ------------- | ----- | ---------- | ------------ | - | ----- | ---- | ---------- | - | ---- | - |  | - | ------ | -
|                                         |  | Three Months  |       |            | Nine Months  |  
|                                         |  | Ended May 31  |       |            | Ended May 31 |  
|                                         |  |               |       |            |              |  
|                                         |  | 2005          |       |            | 2004         |   |       | 2005 |            |   | 2004 |  
|                                         |  |               |       |            |              |   |       |      |            |   |      |  
|                                         |  | (In millions) |      
|                                         |  | (Unaudited)   |      
|                                         |  |               |       | (Restated) |              |   |       |      | (Restated) |  
|Net (loss) income                        |  | $             | (64.1 | )          |              | $ | 21.4  |      |            | $ | (8.1 | ) |  | $ | (180.1 | )
|Other comprehensive income (loss):       |  |               |       |            |              |   |       |      |            |   |      |   |  |   |        |  
|Foreign currency translation adjustments |  |               | (0.9  | )          |              |   | (37.4 | )    |            |   | 24.9 |   |  |   | 6.8    |  
|Unrealized gain on investments           |  |               |      |            |              |   | 0.8   |      |            |   |     |   |  |   | 8.6    |  
|                                         |  |               |       |            |              |   |       |      |            |   |      |  
|Comprehensive (loss) income              |  | $             | (65.0 | )          |              | $ | (15.2 | )    |            | $ | 16.8 |   |  | $ | (164.7 | )
|                                         |  |               |       |            |              |   |       |      |            |   |      |  





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SOLECTRON CORPORATION AND SUBSIDIARIES





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                               |                                                                                 |                                                                                    |                                                |            |        |       |         |          |        |        |  
|------------------------------------------------------------------------------ | ------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ---------------------------------------------- | ---------- | ------ | ----- | ------- | -------- | ------ | ------ | -
|                                                                               |                                                                                 | Nine Months                                                                        |                                               
|                                                                               |                                                                                 | Ended May 31                                                                       |                                               
|                                                                               |                                                                                 |                                                                                    |                                               
|                                                                               |                                                                                 | 2005                                                                               |                                                |            | 2004   |      
|                                                                               |                                                                                 |                                                                                    |                                                |            |        |      
|                                                                               |                                                                                 | (In millions)                                                                      |                                               
|                                                                               |                                                                                 | (Unaudited)                                                                        |                                               
|                                                                               |                                                                                 |                                                                                    |                                                | (Restated) |       
|Cash flows from operating activities of continuing operations:                 |                                                                                 |                                                                                    |                                                |            |        |       |         |         
|                                                                               | Net loss from continuing operations                                             |                                                                                    | $                                              | (22.3      | )      |       | $       | (222.3   | )     
|                                                                               | Adjustments to reconcile net loss to net cash used in operating
    activities: |                                                                                    |                                                |            |        |       |         |          |       
|                                                                               |                                                                                 | Depreciation and amortization                                                      |                                                |            | 144.6  |       |         |          | 174.1  |       
|                                                                               |                                                                                 | Amortization of debt issuance costs and accretion of discount on
    notes payable |                                                |            | 3.6    |       |         |          | 47.7   |       
|                                                                               |                                                                                 | Loss on retirement of debt                                                         |                                                |            | 52.3   |       |         |          | 77.7   |       
|                                                                               |                                                                                 | Gain on interest rate swap                                                         |                                                |            | (6.6   | )     |         |          | (5.6   | )     
|                                                                               |                                                                                 | Impairment of property and equipment, goodwill and other
    long-term assets      |                                                |            | 43.9   |       |         |          | 32.3   |       
|                                                                               |                                                                                 | Changes in operating assets and liabilities:                                       |                                                |            |        |       |         |          |        |       
|                                                                               |                                                                                 |                                                                                    | Accounts receivable, net                       |            |        | 259.8 |         |          |        | (210.3 | )
|                                                                               |                                                                                 |                                                                                    | Inventories                                    |            |        | 268.6 |         |          |        | (246.0 | )
|                                                                               |                                                                                 |                                                                                    | Prepaid expenses and other current assets      |            |        | 25.4  |         |          |        | 32.1   |  
|                                                                               |                                                                                 |                                                                                    | Accounts payable                               |            |        | (74.3 | )       |          |        | 264.8  |  
|                                                                               |                                                                                 |                                                                                    | Accrued expenses and other current liabilities |            |        | 7.8   |         |          |        | (81.1  | )
|                                                                               |                                                                                 |                                                                                    |                                                |            |        |      
|                                                                               |                                                                                 | Net cash provided by (used in) operating activities of
    continuing operations   |                                                |            | 702.8  |       |         |          | (136.6 | )     
|                                                                               |                                                                                 |                                                                                    |                                                |            |        |      
|Cash flows from investing activities of continuing operations:                 |                                                                                 |                                                                                    |                                                |            |        |       |         |         
|                                                                               | Change in restricted cash and cash equivalents                                  |                                                                                    |                                                | 2.3        |        |       |         | 22.8     |       
|                                                                               | Sales and maturities of short-term investments                                  |                                                                                    |                                                |           |        |       |         | 28.2     |       
|                                                                               | Purchase of short-term investments                                              |                                                                                    |                                                | (28.8      | )      |       |         |         |       
|                                                                               | Settlement of receivable related to synthetic lease                             |                                                                                    |                                                | 19.9       |        |       |         |         |       
|                                                                               | Proceeds from disposition of business                                           |                                                                                    |                                                | 30.0       |        |       |         | 383.4    |       
|                                                                               | Capital expenditures                                                            |                                                                                    |                                                | (102.0     | )      |       |         | (101.3   | )     
|                                                                               | Proceeds from sale of property and equipment                                    |                                                                                    |                                                | 10.2       |        |       |         | 54.0     |       
|                                                                               | Proceeds from sale of investment                                                |                                                                                    |                                                | 16.0       |        |       |         | 10.4     |       
|                                                                               | Advances to discontinued operations                                             |                                                                                    |                                                | (22.9      | )      |       |         | (5.2     | )     
|                                                                               | Supply agreements and other                                                     |                                                                                    |                                                |           |        |       |         | 0.2      |       
|                                                                               |                                                                                 |                                                                                    |                                                |            |        |      
|                                                                               |                                                                                 | Net cash (used in) provided by investing activities of
    continuing operations   |                                                |            | (75.3  | )     |         |          | 392.5  |       
|                                                                               |                                                                                 |                                                                                    |                                                |            |        |      
|Cash flows from financing activities of continuing operations:                 |                                                                                 |                                                                                    |                                                |            |        |       |         |         
|                                                                               | Net repayment of bank lines of credit and other debt arrangements               |                                                                                    |                                                | (23.3      | )      |       |         | (52.3    | )     
|                                                                               | Common stock repurchase                                                         |                                                                                    |                                                | (1.4       | )      |       |         |         |       
|                                                                               | Net proceeds from issuance of convertible senior notes                          |                                                                                    |                                                |           |        |       |         | 436.5    |       
|                                                                               | Payments made to redeem ACES/ Senior Notes                                      |                                                                                    |                                                | (544.7     | )      |       |         | (1,013.5 | )     
|                                                                               | Net (costs)/proceeds to settle interest rate swaps                              |                                                                                    |                                                | (8.2       | )      |       |         | 6.0      |       
|                                                                               | Proceeds from issuance of common stock                                          |                                                                                    |                                                | 72.5       |        |       |         | 104.9    |       
|                                                                               |                                                                                 |                                                                                    |                                                |            |        |      
|                                                                               |                                                                                 | Net cash used in financing activities of continuing operations                     |                                                |            | (505.1 | )     |         |          | (518.4 | )     
|                                                                               |                                                                                 |                                                                                    |                                                |            |        |      
|Effect of exchange rate changes on cash and cash equivalents                   |                                                                                 |                                                                                    | 7.2                                            |            |        |       | 10.1    |         
|                                                                               |                                                                                 |                                                                                    |                                                |            |        |      
|Net increase (decrease) in cash and cash equivalents                           |                                                                                 |                                                                                    | 129.6                                          |            |        |       | (252.4  | )       
|Cash and cash equivalents at beginning of period 
    continuing operations   |                                                                                 |                                                                                    | 1,412.7                                        |            |        |       | 1,425.3 |         
|                                                                               |                                                                                 |                                                                                    |                                                |            |        |      
|Cash and cash equivalents at end of period 
    continuing operations         |                                                                                 | $                                                                                  | 1,542.3                                        |            |        | $     | 1,172.9 |         
|                                                                               |                                                                                 |                                                                                    |                                                |            |        |      
|Cash and cash equivalents at beginning of period 
    discontinued operations |                                                                                 | $                                                                                  |                                               |            |        | $     | 36.4    |         
|Cash provided by discontinued operations                                       |                                                                                 |                                                                                    |                                               |            |        |       | (25.0   | )       
|                                                                               |                                                                                 |                                                                                    |                                                |            |        |      
|Cash and cash equivalents at end of period 
    discontinued operations       |                                                                                 | $                                                                                  |                                               |            |        | $     | 11.4    |         
|                                                                               |                                                                                 |                                                                                    |                                                |            |        |      



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SOLECTRON CORPORATION AND SUBSIDIARIES





Notes to Condensed Consolidated Financial Statements


(Unaudited)




|         |                                                           
|-------- | ----------------------------------------------------------
|NOTE 1  | Basis of Presentation and Recent Accounting Pronouncements



| |                      
| | ---------------------
| | Basis of Presentation















| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements





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SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




Share-Based Payment










|         |                                                 
|-------- | ------------------------------------------------
|NOTE 2  | Restatement of Prior Period Financial Statements





8



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)








|         |                         
|-------- | ------------------------
|NOTE 3  | Stock-Based Compensation



|                                                                                                             |                                 |                      |       |            |                      |   |       |      |            |   |       |       |   |   |        |       |  
|------------------------------------------------------------------------------------------------------------ | ------------------------------- | -------------------- | ----- | ---------- | -------------------- | - | ----- | ---- | ---------- | - | ----- | ----- | - | - | ------ | ----- | -
|                                                                                                             |                                 | Three Months         |       |            | Nine Months          |  
|                                                                                                             |                                 | Ended May 31         |       |            | Ended May 31         |  
|                                                                                                             |                                 |                      |       |            |                      |  
|                                                                                                             |                                 | 2005                 |       |            | 2004                 |   |       | 2005 |            |   | 2004  |      
|                                                                                                             |                                 |                      |       |            |                      |   |       |      |            |   |       |      
|                                                                                                             |                                 |                      |       | (Restated) |                      |   |       |      | (Restated) |  
|                                                                                                             |                                 | (In millions, except |       |            | (In millions, except |  
|                                                                                                             |                                 | per share data)      |       |            | per share data)      |  
|Net (loss) income, as reported                                                                               |                                 | $                    | (64.1 | )          |                      | $ | 21.4  |      |            | $ | (8.1  | )     |   | $ | (180.1 | )    
|Stock-based employee compensation expense determined under fair
    value method, net of related tax effects |                                 |                      | (3.1  | )          |                      |   | (12.3 | )    |            |   | (55.4 | )     |   |   | (45.8  | )    
|                                                                                                             |                                 |                      |       |            |                      |   |       |      |            |   |       |      
|Pro forma net (loss) income                                                                                  |                                 | $                    | (67.2 | )          |                      | $ | 9.1   |      |            | $ | (63.5 | )     |   | $ | (225.9 | )    
|                                                                                                             |                                 |                      |       |            |                      |   |       |      |            |   |       |      
|Net (loss) income per share:                                                                                 |                                 |                      |       |            |                      |   |       |      |            |   |       |       |   |   |        |      
|                                                                                                             | Basic and diluted  as reported |                      | $     | (0.07      | )                    |   | $     | 0.02 |            |   | $     | (0.01 | ) |   | $      | (0.21 | )
|                                                                                                             | Basic and diluted  pro forma   |                      | $     | (0.07      | )                    |   | $     | 0.01 |            |   | $     | (0.07 | ) |   | $      | (0.27 | )



9



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|                         |  |              |           |  |              |  |           |      |  |  |           |  |  |  |           | 
|------------------------ |  | ------------ | --------- |  | ------------ |  | --------- | ---- |  |  | --------- |  |  |  | --------- | 
|                         |  | Three Months |           |  | Nine Months  | 
|                         |  | Ended May 31 |           |  | Ended May 31 | 
|                         |  |              |           |  |              | 
|Stock Options            |  | 2005         |           |  | 2004         |  |           | 2005 |  |  | 2004      | 
|                         |  |              |           |  |              |  |           |      |  |  |           | 
|Expected life of options |  |              | 4.4 years |  |              |  | 3.9 years |      |  |  | 4.0 years |  |  |  | 3.9 years | 
|Volatility               |  |              | 66%       |  |              |  | 73%       |      |  |  | 69%       |  |  |  | 76%       | 
|Risk-free interest rate  |  |              | 3.92%     |  |              |  | 2.95%     |      |  |  | 3.59%     |  |  |  | 2.82%     | 
|Dividend yield           |  |              | zero      |  |              |  | zero      |      |  |  | zero      |  |  |  | zero      | 

|                                |  |              |          |  |              |  |          |      |  |  |          |  |  |  |          | 
|------------------------------- |  | ------------ | -------- |  | ------------ |  | -------- | ---- |  |  | -------- |  |  |  | -------- | 
|                                |  | Three Months |          |  | Nine Months  | 
|                                |  | Ended May 31 |          |  | Ended May 31 | 
|                                |  |              |          |  |              | 
|Employee Stock Purchase Plan    |  | 2005         |          |  | 2004         |  |          | 2005 |  |  | 2004     | 
|                                |  |              |          |  |              |  |          |      |  |  |          | 
|Expected life of purchase right |  |              | 6 months |  |              |  | 6 months |      |  |  | 6 months |  |  |  | 6 months | 
|Volatility                      |  |              | 43%      |  |              |  | 73%      |      |  |  | 41%      |  |  |  | 76%      | 
|Risk-free interest rate         |  |              | 3.13%    |  |              |  | 1.15%    |      |  |  | 2.71%    |  |  |  | 1.06%    | 
|Dividend yield                  |  |              | zero     |  |              |  | zero     |      |  |  | zero     |  |  |  | zero     | 









10



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|         |            
|-------- | -----------
|NOTE 4  | Inventories



|                |  |        |         |  |           |   |         | 
|--------------- |  | ------ | ------- |  | --------- | - | ------- | 
|                |  | May 31 |         |  | August 31 |  
|                |  | 2005   |         |  | 2004      |  
|                |  |        |         |  |           |  
|Raw materials   |  | $      | 832.7   |  |           | $ | 992.6   | 
|Work-in-process |  |        | 175.0   |  |           |   | 224.0   | 
|Finished goods  |  |        | 179.3   |  |           |   | 238.8   | 
|                |  |        |         |  |           |  
|Total           |  | $      | 1,187.0 |  |           | $ | 1,455.4 | 
|                |  |        |         |  |           |  



|         |                         
|-------- | ------------------------
|NOTE 5  | Accounts Receivable, Net



|                                      |  |        |         |  |           |   |         | 
|------------------------------------- |  | ------ | ------- |  | --------- | - | ------- | 
|                                      |  | May 31 |         |  | August 31 |  
|                                      |  | 2005   |         |  | 2004      |  
|                                      |  |        |         |  |           |  
|Accounts Receivable                   |  | $      | 1,314.6 |  |           | $ | 1,585.9 | 
|Less: Allowance for doubtful accounts |  |        | 24.4    |  |           |   | 35.7    | 
|                                      |  |        |         |  |           |  
|Accounts Receivable, net              |  | $      | 1,290.2 |  |           | $ | 1,550.2 | 
|                                      |  |        |         |  |           |  



|         |                            
|-------- | ---------------------------
|NOTE 6  | Property and Equipment, Net



|                               |  |        |         |  |           |   |         | 
|------------------------------ |  | ------ | ------- |  | --------- | - | ------- | 
|                               |  | May 31 |         |  | August 31 |  
|                               |  | 2005   |         |  | 2004      |  
|                               |  |        |         |  |           |  
|Original Cost                  |  | $      | 1,882.2 |  |           | $ | 1,877.5 | 
|Less: Accumulated depreciation |  |        | 1,203.5 |  |           |   | 1,123.1 | 
|                               |  |        |         |  |           |  
|Total                          |  | $      | 678.7   |  |           | $ | 754.4   | 
|                               |  |        |         |  |           |  



|         |                              
|-------- | -----------------------------
|NOTE 7  | Commitments and Contingencies



| |                 
| | ----------------
| | Synthetic Leases



11



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)










| |                                 
| | --------------------------------
| | Future Minimum Lease Obligations



|                |  |       |       |  |            |  |      |      |  |  |      |  |  |      |      |  |      |  |      |      |  |  |            |  |  |  |      |  |  |  |      | 
|--------------- |  | ----- | ----- |  | ---------- |  | ---- | ---- |  |  | ---- |  |  | ---- | ---- |  | ---- |  | ---- | ---- |  |  | ---------- |  |  |  | ---- |  |  |  | ---- | 
|                |  | Total |       |  | Short Term |  |      | Q406 |  |  | FY07 |  |  | FY08 |      |  | FY09 |  |      | FY10 |  |  | Thereafter | 
|                |  |       |       |  |            |  |      |      |  |  |      |  |  |      |      |  |      |  |      |      |  |  |            | 
|Operating lease |  | $     | 148.0 |  |            |  | 42.3 |      |  |  | 9.6  |  |  |      | 27.8 |  |      |  | 17.3 |      |  |  | 12.4       |  |  |  | 10.7 |  |  |  | 27.9 | 



| |                  
| | -----------------
| | Legal Proceedings



Lifshitz v. Cannon
et al.


Abrams v. Solectron
Corporation et al.


12



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






|         |                                               
|-------- | ----------------------------------------------
|NOTE 8  | Segment Information and Geographic Information







|                              |  |              |         |            |              |   |         |      |            |   |         |  |  |   |         | 
|----------------------------- |  | ------------ | ------- | ---------- | ------------ | - | ------- | ---- | ---------- | - | ------- |  |  | - | ------- | 
|                              |  | Three Months |         |            | Nine Months  |  
|                              |  | Ended May 31 |         |            | Ended May 31 |  
|                              |  |              |         |            |              |  
|                              |  | 2005         |         |            | 2004         |   |         | 2005 |            |   | 2004    | 
|                              |  |              |         |            |              |   |         |      |            |   |         | 
|                              |  |              |         | (Restated) |              |   |         |      | (Restated) |  
|Geographic net sales:         |  |              |         |            |              |   |         |      |            |   |         |  |  |   |         | 
|United States                 |  | $            | 713.7   |            |              | $ | 801.2   |      |            | $ | 2,328.9 |  |  | $ | 2,322.0 | 
|Other North and Latin America |  |              | 420.8   |            |              |   | 461.5   |      |            |   | 1,342.5 |  |  |   | 1,308.0 | 
|Europe                        |  |              | 354.5   |            |              |   | 412.1   |      |            |   | 1,169.8 |  |  |   | 1,246.3 | 
|Malaysia                      |  |              | 559.4   |            |              |   | 513.1   |      |            |   | 1,510.6 |  |  |   | 1,342.7 | 
|China                         |  |              | 311.3   |            |              |   | 548.9   |      |            |   | 1,000.9 |  |  |   | 1,463.3 | 
|Other Asia Pacific            |  |              | 236.3   |            |              |   | 297.4   |      |            |   | 689.9   |  |  |   | 915.4   | 
|                              |  |              |         |            |              |   |         |      |            |   |         | 
|                              |  | $            | 2,596.0 |            |              | $ | 3,034.2 |      |            | $ | 8,042.6 |  |  | $ | 8,597.7 | 
|                              |  |              |         |            |              |   |         |      |            |   |         | 



|                              |  |        |       |  |           |   |       | 
|----------------------------- |  | ------ | ----- |  | --------- | - | ----- | 
|                              |  | May 31 |       |  | August 31 |  
|                              |  | 2005   |       |  | 2004      |  
|                              |  |        |       |  |           |  
|Long-lived assets:            |  |        |       |  |           |   |       | 
|United States                 |  | $      | 315.9 |  |           | $ | 332.4 | 
|Other North and Latin America |  |        | 168.4 |  |           |   | 182.6 | 
|Europe                        |  |        | 126.1 |  |           |   | 144.7 | 
|Asia Pacific                  |  |        | 280.7 |  |           |   | 330.1 | 
|                              |  |        |       |  |           |  
|                              |  | $      | 891.1 |  |           | $ | 989.8 | 
|                              |  |        |       |  |           |  

13



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|                |  |              |      |            |              |  |      |      |            |  |      |   |  |  |      |  
|--------------- |  | ------------ | ---- | ---------- | ------------ |  | ---- | ---- | ---------- |  | ---- | - |  |  | ---- | -
|                |  | Three Months |      |            | Nine Months  | 
|                |  | Ended May 31 |      |            | Ended May 31 | 
|                |  |              |      |            |              | 
|                |  | 2005         |      |            | 2004         |  |      | 2005 |            |  | 2004 |  
|                |  |              |      |            |              |  |      |      |            |  |      |  
|                |  |              |      | (Restated) |              |  |      |      | (Restated) | 
|Cisco Systems   |  |              | 13.8 | %          |              |  | 12.7 | %    |            |  | 15.0 | % |  |  | 12.2 | %
|Nortel Networks |  |              | 11.3 | %          |              |  | ***  |      |            |  | 10.8 | % |  |  | ***  |  






|    |              
|--- | -------------
|*** | Less than 10%





|         |               
|-------- | --------------
|NOTE 9  | Long-Term Debt



| |                    
| | -------------------
| | 9.625% Senior Notes







| |                                       
| | --------------------------------------
| | 0.5% Convertible Senior Notes due 2034







14



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)








| |                    
| | -------------------
| | 7.375% Senior Notes





| |                                                    
| | ---------------------------------------------------
| | Adjustable Conversion-Rate Equity Securities (ACES)









| |                                  
| | ---------------------------------
| | Liquid Yield Option Notes (LYONs)





|          |                       
|--------- | ----------------------
|NOTE 10  | Derivative Instruments



| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments



15



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




| |            
| | -----------
| | Derivatives













|          |                  
|--------- | -----------------
|NOTE 11  | Intangible Assets





|                         |  |            |       |   |                       |   |       |       |  |   |       |   |  |   |        |  
|------------------------ |  | ---------- | ----- | - | --------------------- | - | ----- | ----- |  | - | ----- | - |  | - | ------ | -
|                         |  | Supply     |       |   | Intellectual Property |   |       |       |  |  
|                         |  | Agreements |       |   | Agreements            |   |       | Other |  |   | Total |  
|                         |  |            |       |   |                       |   |       |       |  |   |       |  
|May 31, 2005:            |  |            |       |   |                       |   |       |       |  |   |       |   |  |   |        |  
|Gross amount             |  | $          | 87.7  |   |                       | $ | 61.0  |       |  | $ | 92.3  |   |  | $ | 241.0  |  
|Accumulated amortization |  |            | (86.5 | ) |                       |   | (55.8 | )     |  |   | (82.6 | ) |  |   | (224.9 | )
|                         |  |            |       |   |                       |   |       |       |  |   |       |  
|Carrying value           |  | $          | 1.2   |   |                       | $ | 5.2   |       |  | $ | 9.7   |   |  | $ | 16.1   |  
|                         |  |            |       |   |                       |   |       |       |  |   |       |  

16



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)


|                         |  |            |       |   |                       |   |       |       |  |   |       |   |  |   |        |  
|------------------------ |  | ---------- | ----- | - | --------------------- | - | ----- | ----- |  | - | ----- | - |  | - | ------ | -
|                         |  | Supply     |       |   | Intellectual Property |   |       |       |  |  
|                         |  | Agreements |       |   | Agreements            |   |       | Other |  |   | Total |  
|                         |  |            |       |   |                       |   |       |       |  |   |       |  
|August 31, 2004:         |  |            |       |   |                       |   |       |       |  |   |       |   |  |   |        |  
|Gross amount             |  | $          | 87.7  |   |                       | $ | 108.5 |       |  | $ | 92.3  |   |  | $ | 288.5  |  
|Accumulated amortization |  |            | (86.1 | ) |                       |   | (54.5 | )     |  |   | (77.5 | ) |  |   | (218.1 | )
|Impairment               |  |            |      |   |                       |   | (47.5 | )     |  |   |      |   |  |   | (47.5  | )
|                         |  |            |       |   |                       |   |       |       |  |   |       |  
|Carrying value           |  | $          | 1.6   |   |                       | $ | 6.5   |       |  | $ | 14.8  |   |  | $ | 22.9   |  
|                         |  |            |       |   |                       |   |       |       |  |   |       |  





|          |                        
|--------- | -----------------------
|NOTE 12  | Discontinued Operations





|                             |                                   |                                                 |     |            |              |   |       |       |            |   |      |       |      |   |         |       |      | 
|---------------------------- | --------------------------------- | ----------------------------------------------- | --- | ---------- | ------------ | - | ----- | ----- | ---------- | - | ---- | ----- | ---- | - | ------- | ----- | ---- | 
|                             |                                   | Three Months                                    |     |            | Nine Months  |  
|                             |                                   | Ended May 31                                    |     |            | Ended May 31 |  
|                             |                                   |                                                 |     |            |              |  
|                             |                                   | 2005                                            |     |            | 2004         |   |       | 2005  |            |   | 2004 |      
|                             |                                   |                                                 |     |            |              |   |       |       |            |   |      |      
|                             |                                   |                                                 |     | (Restated) |              |   |       |       | (Restated) |  
|Net sales                    |                                   | $                                               |    |            |              | $ | 325.8 |       |            | $ | 15.2 |       |      | $ | 1,273.0 |      
|Cost of sales                |                                   |                                                 |    |            |              |   | 274.4 |       |            |   | 14.1 |       |      |   | 1,090.3 |      
|                             |                                   |                                                 |     |            |              |   |       |       |            |   |      |      
|Gross profit                 |                                   |                                                 |    |            |              |   | 51.4  |       |            |   | 1.1  |       |      |   | 182.7   |      
|                             | Operating (income) expenses  net |                                                 |     | (2.6       | )            |   |       | (44.1 | )          |   |      | (13.9 | )    |   |         | 126.6 |     
|                             |                                   |                                                 |     |            |              |   |       |       |            |   |      |      
|                             |                                   | Operating income                                |     |            | 2.6          |   |       |       | 95.5       |   |      |       | 15.0 |   |         |       | 56.1 | 
|Interest income  net        |                                   |                                                 |    |            |              |   | 0.4   |       |            |   |     |       |      |   | 1.2     |      
|Other income (expense)  net |                                   |                                                 |    |            |              |   | (3.0  | )     |            |   | 0.9  |       |      |   | (4.3    | )    
|                             |                                   |                                                 |     |            |              |   |       |       |            |   |      |      
|Income before income taxes   |                                   |                                                 | 2.6 |            |              |   | 92.9  |       |            |   | 15.9 |       |      |   | 53.0    |      
|Income tax expense           |                                   |                                                 |    |            |              |   | 6.1   |       |            |   | 1.7  |       |      |   | 10.8    |      
|                             |                                   |                                                 |     |            |              |   |       |       |            |   |      |      
|                             |                                   | Income from discontinued operations, net of tax |     | $          | 2.6          |   |       | $     | 86.8       |   |      | $     | 14.2 |   |         | $     | 42.2 | 
|                             |                                   |                                                 |     |            |              |   |       |       |            |   |      |      





17



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SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)








|                              |                                                          |        |   |           |  |   |      |      | 
|----------------------------- | -------------------------------------------------------- | ------ | - | --------- |  | - | ---- | ---- | 
|                              |                                                          | May 31 |   | August 31 | 
|                              |                                                          | 2005   |   | 2004      | 
|                              |                                                          |        |   |           | 
|Accounts receivable, net      |                                                          | $      |  |           |  | $ | 18.3 |     
|Inventories                   |                                                          |        |  |           |  |   | 18.1 |     
|                              |                                                          |        |   |           |  |  
|                              | Total current assets of discontinued operations          |        | $ |          |  |   | $    | 36.4 | 
|                              |                                                          |        |   |           |  |  
|Net property and equipment    |                                                          | $      |  |           |  | $ | 10.1 |     
|Other assets                  |                                                          |        |  |           |  |   | 1.8  |     
|                              |                                                          |        |   |           |  |  
|                              | Total non-current assets of discontinued operations      |        | $ |          |  |   | $    | 11.9 | 
|                              |                                                          |        |   |           |  |  
|Short-term debt               |                                                          | $      |  |           |  | $ | 8.9  |     
|Accounts payable              |                                                          |        |  |           |  |   | 26.0 |     
|Accrued employee compensation |                                                          |        |  |           |  |   | 7.2  |     
|Accrued expenses              |                                                          |        |  |           |  |   | 4.3  |     
|                              |                                                          |        |   |           |  |  
|                              | Total current liabilities of discontinued operations     |        | $ |          |  |   | $    | 46.4 | 
|                              |                                                          |        |   |           |  |  
|                              | Total non-current liabilities of discontinued operations |        | $ |          |  |   | $    | 1.8  | 
|                              |                                                          |        |   |           |  |  



|          |                             
|--------- | ----------------------------
|NOTE 13  | Restructuring and Impairment



18



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






| |                                                      
| | -----------------------------------------------------
| | Three and nine months ended May 31, 2005 and
    2004











19



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SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|                                                                           |  |              |      |            |              |   |      |      |            |   |      |   |  |        |       |  |  |  |          | 
|-------------------------------------------------------------------------- |  | ------------ | ---- | ---------- | ------------ | - | ---- | ---- | ---------- | - | ---- | - |  | ------ | ----- |  |  |  | -------- | 
|                                                                           |  | Three Months |      |            | Nine Months  |   |      |     
|                                                                           |  | Ended May 31 |      |            | Ended May 31 |   |      |     
|                                                                           |  |              |      |            |              |   |      |     
|                                                                           |  | 2005         |      |            | 2004         |   |      | 2005 |            |   | 2004 |   |  | Nature |      
|                                                                           |  |              |      |            |              |   |      |      |            |   |      |   |  |        |      
|                                                                           |  |              |      | (Restated) |              |   |      |      | (Restated) |   |      |  
|Impairment of equipment and facilities, net of loss/(gain) on
    disposal |  | $            | 2.7  |            |              | $ | 7.8  |      |            | $ | 42.4 |   |  | $      | 26.2  |  |  |  | non-cash | 
|Severance and benefit costs                                                |  |              | 40.2 |            |              |   | 0.2  |      |            |   | 43.5 |   |  |        | 14.9  |  |  |  | cash     | 
|Net adjustment to equipment lease loss accrual                             |  |              | (0.1 | )          |              |   | (3.2 | )    |            |   | (0.2 | ) |  |        | 1.5   |  |  |  | cash     | 
|Net adjustment to facility lease loss accrual                              |  |              | (2.4 | )          |              |   | (3.1 | )    |            |   | (1.5 | ) |  |        | 32.2  |  |  |  | cash     | 
|Other exit costs                                                           |  |              | 0.1  |            |              |   | 2.7  |      |            |   | 0.2  |   |  |        | 35.0  |  |  |  | cash     | 
|                                                                           |  |              |      |            |              |   |      |      |            |   |      |   |  |        |      
|Total                                                                      |  | $            | 40.5 |            |              | $ | 4.4  |      |            | $ | 84.4 |   |  | $      | 109.8 |  |  |  |          | 
|                                                                           |  |              |      |            |              |   |      |      |            |   |      |   |  |        |      





| |                     
| | --------------------
| | Fiscal 2004 and 2003



|                                                               |  |             |       |   |      |   |       |        |  |  |          | 
|-------------------------------------------------------------- |  | ----------- | ----- | - | ---- | - | ----- | ------ |  |  | -------- | 
|                                                               |  | Years Ended |       |   |     
|                                                               |  | August 31   |       |   |     
|                                                               |  |             |       |   |     
|                                                               |  | 2004        |       |   | 2003 |   |       | Nature | 
|                                                               |  |             |       |   |      |   |       |        | 
|Loss on disposal of and impairment of equipment and facilities |  | $           | 38.5  |   |      | $ | 153.6 |        |  |  | non-cash | 
|Severance and benefit costs                                    |  |             | 25.9  |   |      |   | 221.8 |        |  |  | cash     | 
|Net adjustment to equipment lease loss accrual                 |  |             | (2.2  | ) |      |   | 2.2   |        |  |  | cash     | 
|Net adjustment to facility lease loss accrual                  |  |             | 42.5  |   |      |   | 22.9  |        |  |  | cash     | 
|Other exit costs                                               |  |             | 25.7  |   |      |   | 32.6  |        |  |  | cash     | 
|                                                               |  |             |       |   |      |   |       |        | 
|Total                                                          |  | $           | 130.4 |   |      | $ | 433.1 |        |  |  |          | 
|                                                               |  |             |       |   |      |   |       |        | 



| |     
| | ----
| | 2004







20



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)








| |     
| | ----
| | 2003









| |                      
| | ---------------------
| | Restructuring Accrual



|                                        |  |              |      |   |               |   |      |               |  |   |            |   |  |       |      |   |  |   |       |  
|--------------------------------------- |  | ------------ | ---- | - | ------------- | - | ---- | ------------- |  | - | ---------- | - |  | ----- | ---- | - |  | - | ----- | -
|                                        |  | Severance    |      |   | Lease Accrual |   |      | Lease Accrual |  |   | Other Exit |   |  |      
|                                        |  | and Benefits |      |   | on Facilities |   |      | on Equipment  |  |   | Costs      |   |  | Total |     
|                                        |  |              |      |   |               |   |      |               |  |   |            |   |  |       |     
|Balance of accrual at August 31, 2004   |  | $            | 28.9 |   |               | $ | 57.5 |               |  | $ | 4.9        |   |  | $     | 1.3  |   |  | $ | 92.6  |  
|Q1-FY05 Provision                       |  |              | 0.4  |   |               |   | (1.0 | )             |  |   | 0.1        |   |  |       |     |   |  |   | (0.5  | )
|Q1-FY05 Cash payments                   |  |              | (9.8 | ) |               |   | (9.9 | )             |  |   | (1.7       | ) |  |       | (0.3 | ) |  |   | (21.7 | )
|                                        |  |              |      |   |               |   |      |               |  |   |            |   |  |       |     
|Balance of accrual at November 30, 2004 |  |              | 19.5 |   |               |   | 46.6 |               |  |   | 3.3        |   |  |       | 1.0  |   |  |   | 70.4  |  
|Q2-FY05 Provision                       |  |              | 3.5  |   |               |   | 2.3  |               |  |   |           |   |  |       | 0.1  |   |  |   | 5.9   |  
|Q2-FY05 Provision adjustment            |  |              | (0.6 | ) |               |   | (0.4 | )             |  |   | (0.2       | ) |  |       |     |   |  |   | (1.2  | )
|Q2-FY05 Cash payments                   |  |              | (4.2 | ) |               |   | (4.8 | )             |  |   | (0.4       | ) |  |       | (0.8 | ) |  |   | (10.2 | )
|                                        |  |              |      |   |               |   |      |               |  |   |            |   |  |       |     
|Balance of accrual at February 28, 2005 |  |              | 18.2 |   |               |   | 43.7 |               |  |   | 2.7        |   |  |       | 0.3  |   |  |   | 64.9  |  
|Q3-FY05 Provision                       |  |              | 46.9 |   |               |   | 0.3  |               |  |   | 0.1        |   |  |       | 0.1  |   |  |   | 47.4  |  
|Q3-FY05 Provision adjustment            |  |              | (6.7 | ) |               |   | (2.7 | )             |  |   | (0.2       | ) |  |       |     |   |  |   | (9.6  | )
|Q3-FY05 Cash Payments                   |  |              | (9.9 | ) |               |   | (5.6 | )             |  |   | (0.5       | ) |  |       | (0.3 | ) |  |   | (16.3 | )
|                                        |  |              |      |   |               |   |      |               |  |   |            |   |  |       |     
|Balance of accrual at May 31, 2005      |  | $            | 48.5 |   |               | $ | 35.7 |               |  | $ | 2.1        |   |  | $     | 0.1  |   |  | $ | 86.4  |  
|                                        |  |              |      |   |               |   |      |               |  |   |            |   |  |       |     

21



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






|          |                           
|--------- | --------------------------
|NOTE 14  | Loss Per Share Calculation







|                                      |                             |                                      |   |       |               |   |   |            |       |   |      |       |       |   |   |        |       |  
|------------------------------------- | --------------------------- | ------------------------------------ | - | ----- | ------------- | - | - | ---------- | ----- | - | ---- | ----- | ----- | - | - | ------ | ----- | -
|                                      |                             | Three Months                         |   |       | Nine Months   |  
|                                      |                             | Ended May 31,                        |   |       | Ended May 31, |  
|                                      |                             |                                      |   |       |               |  
|                                      |                             | 2005                                 |   |       | 2004          |   |   | 2005       |       |   | 2004 |      
|                                      |                             |                                      |   |       |               |   |   |            |       |   |      |      
|                                      |                             |                                      |   |       |               |   |   | (Restated) |      
|Basic and diluted net loss per share: |                             |                                      |   |       |               |   |   |            |       |   |      |       |       |   |   |       
|                                      | Net loss                    |                                      | $ | (66.7 | )             |   | $ | (65.4      | )     |   | $    | (22.3 | )     |   | $ | (222.3 | )    
|                                      | Shares used in computation: |                                      |   |       |               |   |   |            |       |   |      |       |       |   |   |        |      
|                                      |                             | Weighted average shares outstanding  |   |       | 978.4         |   |   |            | 868.3 |   |      |       | 968.4 |   |   |        | 845.8 |  
|                                      |                             |                                      |   |       |               |   |   |            |       |   |      |      
|                                      |                             | Basic and diluted net loss per share |   | $     | (0.07         | ) |   | $          | (0.08 | ) |      | $     | (0.02 | ) |   | $      | (0.26 | )
|                                      |                             |                                      |   |       |               |   |   |            |       |   |      |      



|                     |                                               |                            |  |      |               |  |  |      |       |  |      |      |      |  |  |      |      | 
|-------------------- | --------------------------------------------- | -------------------------- |  | ---- | ------------- |  |  | ---- | ----- |  | ---- | ---- | ---- |  |  | ---- | ---- | 
|                     |                                               | Three Months               |  |      | Nine Months   | 
|                     |                                               | Ended May 31,              |  |      | Ended May 31, | 
|                     |                                               |                            |  |      |               | 
|                     |                                               | 2005                       |  |      | 2004          |  |  | 2005 |       |  | 2004 |     
|                     |                                               |                            |  |      |               |  |  |      |       |  |      |     
|Dilutive securities: |                                               |                            |  |      |               |  |  |      |       |  |      |      |      |  |  |     
|                     | Employee stock options                        |                            |  | 40.3 |               |  |  | 44.3 |       |  |      | 37.5 |      |  |  | 43.2 |     
|                     | Shares issuable upon conversion of LYONs      |                            |  | 0.2  |               |  |  | 17.7 |       |  |      | 0.2  |      |  |  | 18.8 |     
|                     | Shares issuable upon conversion of ACES       |                            |  |     |               |  |  | 1.7  |       |  |      | 1.9  |      |  |  | 0.6  |     
|                     | Shares issuable upon conversion of 0.5% notes |                            |  | 0.3  |               |  |  | 46.6 |       |  |      | 0.3  |      |  |  | 17.2 |     
|                     |                                               |                            |  |      |               |  |  |      |       |  |      |     
|                     |                                               | Total anti-dilutive shares |  |      | 40.8          |  |  |      | 110.3 |  |      |      | 39.9 |  |  |      | 79.8 | 
|                     |                                               |                            |  |      |               |  |  |      |       |  |      |     



|          |             
|--------- | ------------
|NOTE 15  | Income Taxes



22



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)














|          |                  
|--------- | -----------------
|NOTE 16  | Subsequent Events









23



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Statements


With the exception of historical facts, the statements
contained in this quarterly report are forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (the Exchange
Act), and are subject to the safe harbor provisions set
forth in the Exchange Act. These forward-looking statements
relate to matters including, but not limited to:




| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | future sales and operating results;                                                                                                                                                                         
|
| |  | our anticipation of the timing and amounts of our future
    obligations and commitments;                                                                                                                   
|
| |  | our expectations regarding charges relating to future tax
    audits;                                                                                                                                       
|
| |  | our belief that our cash and cash equivalents, lines of
    credit and cash to be generated from continuing operations will
    be sufficient for us to meet our obligations for the next twelve
    months;
|
| |  | the capabilities and capacities of our business
    operations;                                                                                                                                             
|
| |  | the adequacy of our restructuring provisions and timing of
    our restructuring actions;                                                                                                                   
|
| |  | the anticipated financial impact of recent and future
    acquisitions and divestitures and the adequacy of our provisions
    for indemnification obligations pursuant to such
    transactions;           
|
| |  | the consummation of pending transactions;                                                                                                                                                                   
|
| |  | our ability to comply with certain requirements of the
    Sarbanes-Oxley Act of 2002;                                                                                                                      
|
| |  | our exposure to foreign currency exchange rate
    fluctuations;                                                                                                                                            
|
| |  | our belief that our current environmental liability exposure
    related to our facilities will not be material to our business,
    financial condition or results of operations; and                      
|
| |  | various other forward-looking statements contained in
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations.                                                      

We intend that our forward-looking statements be subject to
the safe harbors created by the Exchange Act. The
forward-looking statements are generally accompanied by words
such as intend, anticipate,
believe, estimate, expect
and other similar words and statements and variations or
negatives of these words. Our forward-looking statements are
based on current expectations, forecasts and assumptions and are
subject to risks, uncertainties and changes in condition,
significance, value and effect, including those discussed under
the heading Risk Factors in this report and in our
reports filed with the Securities and Exchange Commission on
Forms 10-K/ A, 10-Q/ A, 10-Q, 8-K, S-3 and S-4. Such
risks, uncertainties and changes in condition, significance,
value and effect could cause our actual results to differ
materially from our anticipated outcomes. Although we believe
that the assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate.
Therefore, we can give no assurance that the results implied by
these forward-looking statements will be realized. The inclusion
of forward-looking information should not be regarded as a
representation by our company or any other person that the
future events, plans or expectations contemplated by Solectron
will be achieved. Furthermore, past performance in operations
and share price is not necessarily indicative of future
performance. We disclaim any intention or obligation to update
or revise any forward-looking statements contained in the
documents incorporated by reference herein, whether as a result
of new information, future events or otherwise.


Overview




24



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##### Table of Contents







| |                             
| | ----------------------------
| | Restatement of Prior Periods







| |                                                  
| | -------------------------------------------------
| | Summary of Results and Key Performance Indicators



|                                            |  |              |         |   |              |   |         |            |  |   |         |   |  |   |         |  
|------------------------------------------- |  | ------------ | ------- | - | ------------ | - | ------- | ---------- |  | - | ------- | - |  | - | ------- | -
|                                            |  | Three Months |         |   | Nine Months  |  
|                                            |  | Ended May 31 |         |   | Ended May 31 |  
|                                            |  |              |         |   |              |  
|                                            |  | 2005         |         |   | 2004         |   |         | 2005       |  |   | 2004    |  
|                                            |  |              |         |   |              |   |         |            |  |   |         |  
|                                            |  |              |         |   |              |   |         | (Restated) | 
|Net sales                                   |  | $            | 2,596.0 |   |              | $ | 3,034.2 |            |  | $ | 8,042.6 |   |  | $ | 8,597.7 |  
|Gross profit                                |  |              | 134.6   |   |              |   | 155.2   |            |  |   | 448.0   |   |  |   | 409.9   |  
|Selling, general and administrative expense |  |              | 109.7   |   |              |   | 103.7   |            |  |   | 310.0   |   |  |   | 331.9   |  
|Loss from continuing operations             |  |              | (66.7   | ) |              |   | (65.4   | )          |  |   | (22.3   | ) |  |   | (222.3  | )



|                                   |  |                    |           |  |              |  |           |              |  |  |            |  |  |         |           |  |  |  |           | 
|---------------------------------- |  | ------------------ | --------- |  | ------------ |  | --------- | ------------ |  |  | ---------- |  |  | ------- | --------- |  |  |  | --------- | 
|                                   |  | Three Months Ended |          
|                                   |  |                    |          
|                                   |  | May 31,            |           |  | February 28, |  |           | November 30, |  |  | August 31, |  |  | May 31, |          
|                                   |  | 2005               |           |  | 2005         |  |           | 2004         |  |  | 2004       |  |  | 2004    |          
|                                   |  |                    |           |  |              |  |           |              |  |  |            |  |  |         |          
|Inventory turns                    |  |                    | 8.1 turns |  |              |  | 7.9 turns |              |  |  | 7.1 turns  |  |  |         | 7.6 turns |  |  |  | 7.5 turns | 
|Days sales outstanding (DSO)       |  |                    | 46 days   |  |              |  | 46 days   |              |  |  | 50 days    |  |  |         | 47 days   |  |  |  | 47 days   | 
|Days payable outstanding (DPO)     |  |                    | 50 days   |  |              |  | 48 days   |              |  |  | 50 days    |  |  |         | 47 days   |  |  |  | 47 days   | 
|Cash-to-cash cycle (C2C)           |  |                    | 41 days   |  |              |  | 44 days   |              |  |  | 51 days    |  |  |         | 48 days   |  |  |  | 48 days   | 
|Capital expenditures (in millions) |  |                    | $35.9     |  |              |  | $34.1     |              |  |  | $32.0      |  |  |         | $48.3     |  |  |  | $32.8     | 



25



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##### Table of Contents





Critical Accounting Policies






| |                    
| | -------------------
| | Inventory Valuation





| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts





| |         
| | --------
| | Goodwill



26



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##### Table of Contents







| |                  
| | -----------------
| | Intangible Assets





| |                                           
| | ------------------------------------------
| | Restructuring and Related Impairment Costs





| |             
| | ------------
| | Income Taxes



27



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##### Table of Contents









| |                   
| | ------------------
| | Loss Contingencies



Results of Operations




|                                                              |                                     |                                 |       |      |              |    |       |            |      |    |       |      |      |    |       |      |      |   
|------------------------------------------------------------- | ----------------------------------- | ------------------------------- | ----- | ---- | ------------ | -- | ----- | ---------- | ---- | -- | ----- | ---- | ---- | -- | ----- | ---- | ---- | --
|                                                              |                                     | Three Months                    |       |      | Nine Months  |   
|                                                              |                                     | Ended May 31                    |       |      | Ended May 31 |   
|                                                              |                                     |                                 |       |      |              |   
|                                                              |                                     | 2005                            |       |      | 2004         |    |       | 2005       |      |    | 2004  |     
|                                                              |                                     |                                 |       |      |              |    |       |            |      |    |       |     
|                                                              |                                     |                                 |       |      |              |    |       | (Restated) |     
|Net sales                                                     |                                     |                                 | 100.0 | %    |              |    | 100.0 | %          |      |    | 100.0 | %    |      |    | 100.0 | %   
|Cost of sales                                                 |                                     |                                 | 94.8  |      |              |    | 94.9  |            |      |    | 94.4  |      |      |    | 95.2  |     
|                                                              |                                     |                                 |       |      |              |    |       |            |      |    |       |     
|Gross profit                                                  |                                     |                                 | 5.2   |      |              |    | 5.1   |            |      |    | 5.6   |      |      |    | 4.8   |     
|Operating expenses:                                           |                                     |                                 |       |      |              |    |       |            |      |    |       |      |      |    |       |     
|                                                              | Selling, general and administrative |                                 |       | 4.2  |              |    |       | 3.4        |      |    |       | 3.9  |      |    |       | 3.9  |     
|                                                              | Restructuring and impairment costs  |                                 |       | 1.6  |              |    |       | 0.1        |      |    |       | 1.0  |      |    |       | 1.3  |     
|                                                              |                                     |                                 |       |      |              |    |       |            |      |    |       |     
|                                                              |                                     | Operating (loss) income         |       |      | (0.6         | )  |       |            | 1.6  |    |       |      | 0.7  |    |       |      | (0.4 | ) 
|Interest income                                               |                                     |                                 | 0.5   |      |              |    | 0.2   |            |      |    | 0.3   |      |      |    | 0.1   |     
|Interest expense                                              |                                     |                                 | (0.7  | )    |              |    | (1.4  | )          |      |    | (0.6  | )    |      |    | (1.5  | )   
|Other expense  net                                           |                                     |                                 | (1.8  | )    |              |    | (2.5  | )          |      |    | (0.6  | )    |      |    | (0.8  | )   
|                                                              |                                     |                                 |       |      |              |    |       |            |      |    |       |     
|Operating loss from continuing operations before income taxes |                                     |                                 | (2.6  | )    |              |    | (2.1  | )          |      |    | (0.2  | )    |      |    | (2.6  | )   
|Income tax (benefit) expense                                  |                                     |                                 |      |      |              |    | 0.1   |            |      |    | 0.1   |      |      |    |      |     
|                                                              |                                     |                                 |       |      |              |    |       |            |      |    |       |     
|                                                              |                                     | Loss from continuing operations |       |      | (2.6         | )% |       |            | (2.2 | )% |       |      | (0.3 | )% |       |      | (2.6 | )%
|Discontinued operations:                                      |                                     |                                 |       |      |              |    |       |            |      |    |       |      |      |    |       |     
|Income from discontinued operations                           |                                     |                                 | 0.1   |      |              |    | 3.1   |            |      |    | 0.2   |      |      |    | 0.6   |     
|Income tax expense                                            |                                     |                                 |      |      |              |    | 0.2   |            |      |    |      |      |      |    | 0.1   |     
|                                                              |                                     |                                 |       |      |              |    |       |            |      |    |       |     
|                                                              | Income from discontinued operations |                                 |       | 0.1  |              |    |       | 2.9        |      |    |       | 0.2  |      |    |       | 0.5  |     
|                                                              | Net (loss) income                   |                                 |       | (2.5 | )%           |    |       | 0.7        | %    |    |       | (0.1 | )%   |    |       | (2.1 | )%  
|                                                              |                                     |                                 |       |      |              |    |       |            |      |    |       |     

28



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##### Table of Contents



Net Sales  Continuing Operations








|                    |  |              |       |            |              |  |       |      |            |  |       |   |  |  |       |  
|------------------- |  | ------------ | ----- | ---------- | ------------ |  | ----- | ---- | ---------- |  | ----- | - |  |  | ----- | -
|                    |  | Three Months |       |            | Nine Months  | 
|                    |  | Ended May 31 |       |            | Ended May 31 | 
|                    |  |              |       |            |              | 
|                    |  | 2005         |       |            | 2004         |  |       | 2005 |            |  | 2004  |  
|                    |  |              |       |            |              |  |       |      |            |  |       |  
|                    |  |              |       | (Restated) |              |  |       |      | (Restated) | 
|Computing & Storage |  |              | 31.6  | %          |              |  | 28.7  | %    |            |  | 29.7  | % |  |  | 32.0  | %
|Consumer            |  |              | 12.9  | %          |              |  | 20.1  | %    |            |  | 15.4  | % |  |  | 18.9  | %
|Communications      |  |              | 21.0  | %          |              |  | 19.3  | %    |            |  | 20.2  | % |  |  | 18.5  | %
|Networking          |  |              | 23.5  | %          |              |  | 20.9  | %    |            |  | 24.2  | % |  |  | 21.1  | %
|Industrial          |  |              | 6.0   | %          |              |  | 6.1   | %    |            |  | 5.5   | % |  |  | 5.0   | %
|Automotive          |  |              | 3.4   | %          |              |  | 2.8   | %    |            |  | 3.2   | % |  |  | 2.7   | %
|Other               |  |              | 1.6   | %          |              |  | 2.1   | %    |            |  | 1.8   | % |  |  | 1.8   | %
|                    |  |              |       |            |              |  |       |      |            |  |       |  
|Total               |  |              | 100.0 | %          |              |  | 100.0 | %    |            |  | 100.0 | % |  |  | 100.0 | %
|                    |  |              |       |            |              |  |       |      |            |  |       |  

International Sales  Continuing Operations




Major Customers  Continuing Operations




|                |  |              |      |            |              |  |      |      |            |  |      |   |  |  |      |  
|--------------- |  | ------------ | ---- | ---------- | ------------ |  | ---- | ---- | ---------- |  | ---- | - |  |  | ---- | -
|                |  | Three Months |      |            | Nine Months  | 
|                |  | Ended May 31 |      |            | Ended May 31 | 
|                |  |              |      |            |              | 
|                |  | 2005         |      |            | 2004         |  |      | 2005 |            |  | 2004 |  
|                |  |              |      |            |              |  |      |      |            |  |      |  
|                |  |              |      | (Restated) |              |  |      |      | (Restated) | 
|Cisco Systems   |  |              | 13.8 | %          |              |  | 12.7 | %    |            |  | 15.0 | % |  |  | 12.2 | %
|Nortel Networks |  |              | 11.3 | %          |              |  | ***  |      |            |  | 10.8 | % |  |  | ***  |  






|    |              
|--- | -------------
|*** | Less than 10%





29



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##### Table of Contents





Gross Profit  Continuing Operations










Selling, General and Administrative (SG&A)
Expenses  Continuing Operations




Restructuring and Impairment  Continuing
Operations








30



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##### Table of Contents







Interest Income  Continuing Operations




Interest Expense  Continuing Operations




Other Expense  net  Continuing
Operations






|                                     |  |              |       |              |      |   |      |  |  |      |       |   |  |   |   | 
|------------------------------------ |  | ------------ | ----- | ------------ | ---- | - | ---- |  |  | ---- | ----- | - |  | - | - | 
|                                     |  | Three Months |       | Nine Months 
|                                     |  | Ended May 31 |       | Ended May 31
|                                     |  |              |       |             
|9.625% Senior Notes Redemption       |  | 2005         |       |              | 2004 |   | 2005 |  |  | 2004
|                                     |  |              |       |              |      |   |      |  |  |     
|Principal amount at maturity         |  | $            | 500.0 |              |      | $ |     |  |  | $    | 500.0 |   |  | $ |  | 
|                                     |  |              |       |              |      |   |      |  |  |      |       |  
|Carrying value                       |  | $            | 500.0 |              |      | $ |     |  |  | $    | 500.0 |   |  | $ |  | 
|Cash paid                            |  |              | 544.7 |              |      |   |     |  |  |      | 544.7 |   |  |   |  | 
|Debt issuance cost write-off         |  |              | 7.6   |              |      |   |     |  |  |      | 7.6   |   |  |   |  | 
|                                     |  |              |       |              |      |   |      |  |  |      |       |  
|Loss included in other expense  net |  | $            | (52.3 | )            |      | $ |     |  |  | $    | (52.3 | ) |  | $ |  | 
|                                     |  |              |       |              |      |   |      |  |  |      |       |  

31



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|                                     |  |              |   |      |              |   |         |   |      |   |   |  |  |   |         |  
|------------------------------------ |  | ------------ | - | ---- | ------------ | - | ------- | - | ---- | - | - |  |  | - | ------- | -
|                                     |  | Three Months |   |      | Nine Months  |  
|                                     |  | Ended May 31 |   |      | Ended May 31 |  
|                                     |  |              |   |      |              |  
|7.25% ACES Early Settlement          |  | 2005         |   | 2004 |              |   | 2005    |   | 2004 |  
|                                     |  |              |   |      |              |   |         |   |      |  
|Principal amount at maturity         |  | $            |  |      |              | $ | 1,012.5 |   |      | $ |  |  |  | $ | 1,012.5 |  
|                                     |  |              |   |      |              |   |         |   |      |   |   | 
|Carrying value                       |  | $            |  |      |              | $ | 1,007.5 |   |      | $ |  |  |  | $ | 1,007.5 |  
|Common stock issued                  |  |              |  |      |              |   | 1,006.4 |   |      |   |  |  |  |   | 1,006.4 |  
|Cash paid                            |  |              |  |      |              |   | 63.3    |   |      |   |  |  |  |   | 63.3    |  
|Debt issuance cost write-off         |  |              |  |      |              |   | 15.5    |   |      |   |  |  |  |   | 15.5    |  
|                                     |  |              |   |      |              |   |         |   |      |   |   | 
|Loss included in other expense  net |  | $            |  |      |              | $ | (77.7   | ) |      | $ |  |  |  | $ | (77.7   | )
|                                     |  |              |   |      |              |   |         |   |      |   |   | 

|                                     |  |              |   |      |              |   |         |  |      |   |   |  |  |   |         | 
|------------------------------------ |  | ------------ | - | ---- | ------------ | - | ------- |  | ---- | - | - |  |  | - | ------- | 
|                                     |  | Three Months |   |      | Nine Months  |  
|                                     |  | Ended May 31 |   |      | Ended May 31 |  
|                                     |  |              |   |      |              |  
|LYONs Retirement                     |  | 2005         |   | 2004 |              |   | 2005    |  | 2004 |  
|                                     |  |              |   |      |              |   |         |  |      |  
|Principal amount at maturity         |  | $            |  |      |              | $ | 1,617.5 |  |      | $ |  |  |  | $ | 1,617.5 | 
|                                     |  |              |   |      |              |   |         |  |      |   |   | 
|Carrying value                       |  | $            |  |      |              | $ | 950.2   |  |      | $ |  |  |  | $ | 950.2   | 
|Cash paid                            |  |              |  |      |              |   | 950.2   |  |      |   |  |  |  |   | 950.2   | 
|                                     |  |              |   |      |              |   |         |  |      |   |   | 
|Gain included in other expense  net |  | $            |  |      |              | $ |        |  |      | $ |  |  |  | $ |        | 
|                                     |  |              |   |      |              |   |         |  |      |   |   | 

Income Taxes  Continuing Operations














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Liquidity and Capital Resources  Continuing
Operations




|                                                                                 |  |              |        |            |      |   |        |  
|-------------------------------------------------------------------------------- |  | ------------ | ------ | ---------- | ---- | - | ------ | -
|                                                                                 |  | Nine Months  |       
|                                                                                 |  | Ended May 31 |       
|                                                                                 |  |              |       
|                                                                                 |  | 2005         |        |            | 2004 |  
|                                                                                 |  |              |        |            |      |  
|                                                                                 |  |              |        | (Restated) |     
|Net cash provided by (used in) operating activities of
    continuing operations |  | $            | 702.8  |            |      | $ | (136.6 | )
|Net cash (used in) provided by investing activities of
    continuing operations |  | $            | (75.3  | )          |      | $ | 392.5  |  
|Net cash used in financing activities of continuing operations                   |  | $            | (505.1 | )          |      | $ | (518.4 | )







1 2










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|                                                           |  |       |       |  |            |   |       |      |  |   |      |  |  |      |       |  |      |   |      |      |  |   |            |  |  |   |      |  |  |   |       | 
|---------------------------------------------------------- |  | ----- | ----- |  | ---------- | - | ----- | ---- |  | - | ---- |  |  | ---- | ----- |  | ---- | - | ---- | ---- |  | - | ---------- |  |  | - | ---- |  |  | - | ----- | 
|                                                           |  | Total |       |  | Short Term |   |       | Q406 |  |   | FY07 |  |  | FY08 |       |  | FY09 |   |      | FY10 |  |   | Thereafter | 
|                                                           |  |       |       |  |            |   |       |      |  |   |      |  |  |      |       |  |      |   |      |      |  |   |            | 
|Long term debt                                             |  | $     | 547.2 |  |            | $ |      |      |  | $ | 14.4 |  |  | $    | 68.0  |  |      | $ | 0.1  |      |  | $ | 1.2        |  |  | $ | 13.5 |  |  | $ | 450.0 | 
|Operating lease                                            |  |       | 148.0 |  |            |   | 42.3  |      |  |   | 9.6  |  |  |      | 27.8  |  |      |   | 17.3 |      |  |   | 12.4       |  |  |   | 10.7 |  |  |   | 27.9  | 
|Operating leases for restructured facilities and equipment |  |       | 42.9  |  |            |   | 13.6  |      |  |   | 3.1  |  |  |      | 11.5  |  |      |   | 6.4  |      |  |   | 3.4        |  |  |   | 2.8  |  |  |   | 2.1   | 
|Other(1)                                                   |  |       | 128.1 |  |            |   | 127.4 |      |  |   |     |  |  |      | 0.1   |  |      |   | 0.2  |      |  |   | 0.2        |  |  |   | 0.2  |  |  |   |      | 
|                                                           |  |       |       |  |            |   |       |      |  |   |      |  |  |      |       |  |      |   |      |      |  |   |            | 
|                                                           |  | $     | 866.2 |  |            | $ | 183.3 |      |  | $ | 27.1 |  |  | $    | 107.4 |  |      | $ | 24.0 |      |  | $ | 17.2       |  |  | $ | 27.2 |  |  | $ | 480.0 | 
|                                                           |  |       |       |  |            |   |       |      |  |   |      |  |  |      |       |  |      |   |      |      |  |   |            | 






|    |                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We have guaranteed various purchase commitments for materials,
    supplies and services incurred during the normal course of
    business.

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Off-Balance Sheet Arrangements and Contractual Obligations






Discontinued Operations






|                             |                                   |                                                 |     |            |              |   |       |       |            |   |      |       |      |   |         |       |      | 
|---------------------------- | --------------------------------- | ----------------------------------------------- | --- | ---------- | ------------ | - | ----- | ----- | ---------- | - | ---- | ----- | ---- | - | ------- | ----- | ---- | 
|                             |                                   | Three Months                                    |     |            | Nine Months  |  
|                             |                                   | Ended May 31                                    |     |            | Ended May 31 |  
|                             |                                   |                                                 |     |            |              |  
|                             |                                   | 2005                                            |     |            | 2004         |   |       | 2005  |            |   | 2004 |      
|                             |                                   |                                                 |     |            |              |   |       |       |            |   |      |      
|                             |                                   |                                                 |     | (Restated) |              |   |       |       | (Restated) |  
|Net sales                    |                                   | $                                               |    |            |              | $ | 325.8 |       |            | $ | 15.2 |       |      | $ | 1,273.0 |      
|Cost of sales                |                                   |                                                 |    |            |              |   | 274.4 |       |            |   | 14.1 |       |      |   | 1,090.3 |      
|                             |                                   |                                                 |     |            |              |   |       |       |            |   |      |      
|Gross profit                 |                                   |                                                 |    |            |              |   | 51.4  |       |            |   | 1.1  |       |      |   | 182.7   |      
|                             | Operating (income) expenses  net |                                                 |     | (2.6       | )            |   |       | (44.1 | )          |   |      | (13.9 | )    |   |         | 126.6 |     
|                             |                                   |                                                 |     |            |              |   |       |       |            |   |      |      
|                             |                                   | Operating income                                |     |            | 2.6          |   |       |       | 95.5       |   |      |       | 15.0 |   |         |       | 56.1 | 
|Interest income  net        |                                   |                                                 |    |            |              |   | 0.4   |       |            |   |     |       |      |   | 1.2     |      
|Other income (expense)  net |                                   |                                                 |    |            |              |   | (3.0  | )     |            |   | 0.9  |       |      |   | (4.3    | )    
|                             |                                   |                                                 |     |            |              |   |       |       |            |   |      |      
|Income before income taxes   |                                   |                                                 | 2.6 |            |              |   | 92.9  |       |            |   | 15.9 |       |      |   | 53.0    |      
|Income tax expense           |                                   |                                                 |    |            |              |   | 6.1   |       |            |   | 1.7  |       |      |   | 10.8    |      
|                             |                                   |                                                 |     |            |              |   |       |       |            |   |      |      
|                             |                                   | Income from discontinued operations, net of tax |     | $          | 2.6          |   |       | $     | 86.8       |   |      | $     | 14.2 |   |         | $     | 42.2 | 
|                             |                                   |                                                 |     |            |              |   |       |       |            |   |      |      





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RISK FACTORS




| |                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------
| | Most of our net sales come from a small number of
    customers; if we lose any of these customers, our net sales
    could decline significantly.







| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | Our customers may cancel their orders, change production
    quantities or locations, or delay production.





| |                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may not be able to sell excess or obsolete inventory to
    customers or third parties, which could have a material adverse
    impact on our consolidated financial condition.





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| |                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | Our non-U.S. locations represent a significant
    portion of our net sales; we are exposed to risks associated
    with operating internationally.





| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | adverse movement of foreign currencies against the
    U.S. dollar in which our results are reported;           
|
| |  | import and export duties, and value added taxes;                                                                
|
| |  | import and export regulation changes that could erode our profit
    margins or restrict exports and/or imports;
|
| |  | potential restrictions on the transfer of funds;                                                                
|
| |  | government and license requirements governing the transfer of
    technology and products abroad;               
|
| |  | disruption of local labor supply and/or transportation services;                                                
|
| |  | inflexible employee contracts in the event of business downturns;                                               
|
| |  | the burden and cost of compliance with import and export
    regulations and foreign laws;                      
|
| |  | economic and political risks in emerging or developing
    economies; and                                       
|
| |  | risks of conflict and terrorism that could disrupt our or our
    customers and suppliers businesses.         



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| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are exposed to general economic conditions, which could
    have a material adverse impact on our business, operating
    results and consolidated financial condition.





| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | Possible fluctuation of operating results from quarter to
    quarter and factors out of our control could affect the market
    price of our securities.





| |   |                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | differences in the profitability of the types of manufacturing
    services we provide. For example, high velocity and low
    complexity printed circuit boards and systems assembly services
    have lower gross profit than low volume/complex printed circuit
    boards and systems assembly services;
|
| |  | our ability to maximize the hours of use of our equipment and
    facilities is dependent on the duration of the production run
    time for each job and customer;                                                                                                                                         
|
| |  | the amount of automation that we can use in the manufacturing
    process for cost reduction varies, depending upon the complexity
    of the product being made;                                                                                                                                           
|
| |  | our customers demand for our products and their ability to
    take delivery of our products and to make timely payments for
    delivered products;                                                                                                                                                       
|
| |  | our ability to optimize the ordering of inventory as to timing
    and amount to avoid holding inventory in excess of immediate
    production needs;                                                                                                                                                       
|
| |  | our ability to offer technologically advanced, cost-effective,
    quick response, manufacturing services;                                                                                                                                                                                                  
|
| |  | fluctuations in the availability and pricing of components;                                                                                                                                                                                                                                                 
|
| |  | timing of expenditures in anticipation of increased sales;                                                                                                                                                                                                                                                  
|
| |  | cyclicality in our target markets;                                                                                                                                                                                                                                                                          
|
| |  | fluctuations in our market share;                                                                                                                                                                                                                                                                           
|
| |  | expenses and disruptions associated with acquisitions and
    divestitures;                                                                                                                                                                                                                                 
|
| |  | announcements of operating results and business conditions by
    our customers;                                                                                                                                                                                                                            
|
| |  | announcements by our competitors relating to new customers or
    technological innovation or new services;                                                                                                                                                                                                 
|
| |  | economic developments in the electronics industry as a whole;                                                                                                                                                                                                                                               
|
| |  | credit rating and stock analyst downgrades;                                                                                                                                                                                                                                                                 
|
| |  | our ability to successfully integrate changes to our ERP system;                                                                                                                                                                                                                                            
|
| |  | political and economic developments in countries in which we
    have operations; and                                                                                                                                                                                                                       
|
| |  | general market conditions.                                                                                                                                                                                                                                                                                  

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| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we incur more restructuring-related charges than
    currently anticipated, our consolidated financial condition and
    results of operations may suffer.





| |                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on limited or sole source suppliers for critical
    components. The inability to obtain sufficient components as
    required, and under favorable purchase terms, would cause harm
    to our business.





| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | We potentially bear the risk of price increases associated
    with shortages in electronics components.





| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | Our net sales could decline if our competitors provide
    comparable manufacturing services and improved products at a
    lower cost.



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| |                                                            
| | -----------------------------------------------------------
| | We depend on the continuing trend of OEMs to
    outsource.





| |                                                                   
| | ------------------------------------------------------------------
| | Our strategic relationships with major customers create
    risks.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we may pay a purchase price to the divesting OEMs that exceeds
    the value we are ultimately able to realize from the future
    business of the OEM;                                                                                                                                                                                                                                                                                                 
|
| |  | the integration into our business of the acquired assets and
    facilities may be time-consuming and costly;                                                                                                                                                                                                                                                                                                                                           
|
| |  | we, rather than the divesting OEM, would bear the risk of excess
    capacity;                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | we may not achieve anticipated cost reductions and efficiencies;                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | we may be unable to meet the expectations of the OEM as to
    volume, product quality, timeliness and cost reductions; and                                                                                                                                                                                                                                                                                                                             
|
| |  | if demand for the OEMs products declines, the OEM may
    reduce its volume of purchases, and we may not be able to
    sufficiently reduce the expenses of operating the facility or
    use the facility to provide services to other OEMs, and we might
    find it appropriate to close, rather than continue to operate,
    the facility, and any such actions would require us to incur
    significant restructuring and/or impairment charges.





| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to manage future acquisitions, and
    cost-effectively run our operations, our profitability could be
    adversely affected.



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| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Notwithstanding our recent divestiture of certain
    businesses, we will remain subject to certain indemnification
    obligations for a period of time after completion of the
    divestitures.





| |                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | With regards to our internal controls over financial
    reporting, our success in satisfying the requirements of
    Section 404 of the Sarbanes-Oxley Act of 2002) in a timely
    manner is dependent upon our ability to remediate identified
    deficiencies and implement new or improved controls.





| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | We are exposed to fluctuations in foreign currency
    exchange rates and interest rate fluctuations.







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| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Failure to attract and retain key personnel and skilled
    associates could hurt our operations.





| |                                                                              
| | -----------------------------------------------------------------------------
| | Failure to comply with environmental regulations could
    harm our business.









| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may not be able to adequately protect or enforce our
    intellectual property rights and could become involved in
    intellectual property disputes.





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| |                                                                         
| | ------------------------------------------------------------------------
| | Our rating downgrades make it more expensive for us to
    borrow money.








|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures about Market
    Risk








|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures



| |                                                  
| | -------------------------------------------------
| | Evaluation of disclosure controls and procedures.







| |   |                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Reconciled and analyzed its financial statement accounts as of
    the end of the fiscal quarter ended May 31, 2005.                                                                                                                                                                                                                   
|
| |  | Instituted enhanced monitoring activities in the form of
    (1) an expanded Financial Close Checklist which addresses
    the various account analysis and reconciliation issues which
    gave rise to the material weakness and (2) additional
    levels of review by regional and corporate management regarding
    these issues.
|
| |  | Migrated tax account roll-forwards to a centralized automated
    system.                                                                                                                                                                                                                                                              
|
| |  | Undertaken a review of its legal entity structure to eliminate a
    number of legal entities and, thus, reduce the related financial
    and accounting complexity.                                                                                                                                                                   
|
| |  | Improved training, education and accounting reviews designed to
    ensure that all relevant personnel involved in foreign tax
    reporting understand and apply tax accounting in compliance with
    SFAS 109.                                                                                                                      



44



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##### Table of Contents






PART II. OTHER INFORMATION







|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings



Lifshitz v. Cannon
et al.


Abrams v. Solectron
Corporation et al.







|        |         
|------- | --------
|Item 6. | Exhibits



|        |    |                     |  |                                                                                                                                                                                         
|------- | -- | ------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|No.     |    | Exhibit Description
|        |    |                    
|        | 3  | .1*                 |  | Certificate of Incorporation of the Company, as amended                                                                                                                                 
|       
|        | 3  | .2**                |  | Amended and Restated Bylaws of the Company                                                                                                                                              
|       
|        | 3  | .3***               |  | Certificate of Designation Rights, Preferences and Privileges of
    Series A Participating Preferred Stock of the Company                                                              
|       
|        | 10 | .1                  |  | Amendment to Employment Agreement dated as of April 6, 2005
    by and between the Company and Michael Cannon                                                                           
|       
|        | 10 | .2                  |  | Amendment to Employment Agreement dated as of April 6, 2005
    by and between the Company and Marc Onetto                                                                              
|       
|        | 10 | .3****              |  | Second Amendment to Credit Agreement dated June 15, 2005
    among Solectron Corporation, the lending institutions party
    thereto, and Bank of America, N.A., as Administrative Agent

45



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|        |    |                     |  |                                                                                                                                                          
|------- | -- | ------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|No.     |    | Exhibit Description
|        |    |                    
|        | 31 | .1                  |  | Certification of Chief Executive Officer Pursuant to
    Section 302(a) of the Sarbanes-Oxley Act of 2002                                                
|       
|        | 31 | .2                  |  | Certification of Chief Financial Officer Pursuant to
    Section 302(a) of the Sarbanes-Oxley Act of 2002                                                
|       
|        | 32 | .1                  |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002 
|       
|        | 32 | .2                  |  | Certification of Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002






| |   |                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Incorporated by reference from Exhibit 3.1 filed with
    Solectrons Form 10-Q for the quarter ended
    February 28, 2001, Exhibit 3.1 filed with
    Solectrons Form 10-Q for the quarter ended
    February 25, 2000, and Exhibit 3.1 filed with
    Solectrons Form 10-Q for the quarter ended
    February 26, 1999.



| |    |                                                                                                                            
| | -- | ---------------------------------------------------------------------------------------------------------------------------
| | ** | Incorporated by reference for Exhibit 3.2 filed with
    Solectrons Form 10-Q for the quarter ended
    November 28, 2003.



|    |                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------
|*** | Incorporated by reference from Exhibit 3.3 filed with
    Solectrons Annual Report on Form 10-K for the fiscal
    year ended August 31, 2001.



|     |                                                                                                                                               
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------
|**** | Incorporated by reference from Exhibit 10.1 of
    Registrants Form 8-K, filed with the Commission on
    June 17, 2005 (File No. 001-11098).

46



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##### Table of Contents



SOLECTRON CORPORATION





SIGNATURE






| |                      
| | ---------------------
| | SOLECTRON CORPORATION
| | (Registrant)         



| |    |                
| | -- | ---------------
| | By | /s/ KIRAN PATEL

| |                                                  
| | -------------------------------------------------
| |                                                  
| | Kiran Patel                                      
| | Executive Vice President, Chief Financial Officer
| | (Principal Financial Officer)                    



| |    |                 
| | -- | ----------------
| | By | /s/ WARREN LIGAN

| |                                                   
| | --------------------------------------------------
| |                                                   
| | Warren Ligan                                      
| | Senior Vice President and Chief Accounting Officer
| | (Principal Accounting Officer)                    



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INDEX TO EXHIBITS


|        |    |                     |  |                                                                                                                                                                                         
|------- | -- | ------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|No.     |    | Exhibit Description
|        |    |                    
|        | 3  | .1*                 |  | Certificate of Incorporation of the Company, as amended                                                                                                                                 
|       
|        | 3  | .2**                |  | Amended and Restated Bylaws of the Company                                                                                                                                              
|       
|        | 3  | .3***               |  | Certificate of Designation Rights, Preferences and Privileges of
    Series A Participating Preferred Stock of the Company                                                              
|       
|        | 10 | .1                  |  | Amendment to Employment Agreement dated as of April 6, 2005
    by and between the Company and Michael Cannon                                                                           
|       
|        | 10 | .2                  |  | Amendment to Employment Agreement dated as of April 6, 2005
    by and between the Company and Marc Onetto                                                                              
|       
|        | 10 | .3****              |  | Second Amendment to Credit Agreement dated June 15, 2005
    among Solectron Corporation, the lending institutions party
    thereto, and Bank of America, N.A., as Administrative Agent
|       
|        | 31 | .1                  |  | Certification of Chief Executive Officer Pursuant to
    Section 302(a) of the Sarbanes-Oxley Act of 2002                                                                               
|       
|        | 31 | .2                  |  | Certification of Chief Financial Officer Pursuant to
    Section 302(a) of the Sarbanes-Oxley Act of 2002                                                                               
|       
|        | 32 | .1                  |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                                
|       
|        | 32 | .2                  |  | Certification of Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                               






| |   |                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Incorporated by reference from Exhibit 3.1 filed with
    Solectrons Form 10-Q for the quarter ended
    February 28, 2001, Exhibit 3.1 filed with
    Solectrons Form 10-Q for the quarter ended
    February 25, 2000, and Exhibit 3.1 filed with
    Solectrons Form 10-Q for the quarter ended
    February 26, 1999.



| |    |                                                                                                                            
| | -- | ---------------------------------------------------------------------------------------------------------------------------
| | ** | Incorporated by reference for Exhibit 3.2 filed with
    Solectrons Form 10-Q for the quarter ended
    November 28, 2003.



|    |                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------
|*** | Incorporated by reference from Exhibit 3.3 filed with
    Solectrons Annual Report on Form 10-K for the fiscal
    year ended August 31, 2001.



|     |                                                                                                                                               
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------
|**** | Incorporated by reference from Exhibit 10.1 of
    Registrants Form 8-K, filed with the Commission on
    June 17, 2005 (File No. 001-11098).

48