Flextronics-AR2013-Cover-oline2.pdf 1 6/11/13 8:37 AM
To Our Shareholders
Fiscal 2013 was a challenging year. We operated
Over the past year, we closed four strategic
acquisitions, which enhanced our end-to-end
in revenue forecast reductions that created a
capabilities in the areas of automotive, energy,
continuous headwind throughout the year. In
mechanicals, and medical and advanced
addition, we accelerated our disengagement of
capabilities like microelectronics. These acquisitions
manufacturing and assembly services with our
expanded our addressable market for services,
largest smartphone customer, causing a reduction
expanded relationships with existing customers, and
in revenue of more than $2 billion. In the face of
brought in new customers. We continue to focus
our acquisition spend on capabilities supporting our
not perform up to expectations, most notably our
higher margin, longer product life cycle businesses
Multek printed circuit board business.
that we believe will yield lower volatility.
However, we pro-
actively addressed
our most pressing
challenges while
simultaneously gener-
ating over $1.1 billion
operations and $680
million in free cash
While we are acutely
aware of how compet-
itive our environment
is, we are rapidly
evolving into a world-
wide supply chain
solutions company,
built on a massive
physical infrastruc-
ture, a robust suite
the targeted level of $500 million, repurchased
of end-to-end services and all powered by a
52 million shares of our stock, and improved our
differentiating real-time information layer. We
long-term capital structure with a new bond offering.
believe that our investments in building this
Operationally we repositioned our power division
“platform” have helped us reduce cost, improve
growing revenue 17% year-over-year. The success
customers which is attracting new business into
of our turnaround in power has spawned the tem-
Flextronics. We continue to strengthen this core
supply chain velocity, and lower risk for our
plate for Multek’s restructuring plan which is also
Not to be overlooked this past year is the fact that
we achieved record bookings distributed broadly
across a wide range of customers and end-markets.
These bookings came as a result of honing our
differentiated and broad physical infrastructure,
strengthening our end-to-end services and
capabilities, and investing in tying it all together
through real-time information and IT investments.
growth with our existing and new customers.
We go to market on the power of over 200,000
employees spread across more than 30
countries providing end-to-end supply chain
solutions. It is our mission to prove to both our
current and potential customers that not being
on the Flextronics Platform is a competitive
disadvantage.
Physical Infrastructure
However, we’ve discovered that our largest and
most capable customers, in addition to these
Real-Time Information
In conclusion, fiscal 2013 was a challenging year
for our company, but also a defining one. We began
Few companies in the world today have the scale
smaller super-innovative customers, are also fully
The final layer of our platform, and the newest,
to implement our Flextronics Platform approach
of our broad-based physical infrastructure, so our
embracing our PICs in the way we envisioned.
is real-time information. Real-time information
with much success. Our record bookings, strong
ability to add value anywhere in the world, with
any one of a number of our end-to-end services,
to virtually any size company is unmatched. There
are powerful forces driving the regionalization
of manufacturing including the emergence of
a global middle class, shortened product life
cycles, and technology disruptions that are literally
changing how we live. A much written about
component of this regionalization is re-shoring
back to the USA where Flextronics has over 6
million square feet of manufacturing capacity
and world-class capabilities. In addition, we have
regional leadership positions in Eastern Europe,
Southeast Asia, India, Mexico, and Brazil which
is a competitive differentiator and increasingly
important as manufacturing continues to move
closer to consumption.
End-to-End Services
We continue to refine and strengthen our end-to-
end services that complement and run on top of
our powerful physical infrastructure. We have a
clear focus on increasing the value we provide to
our current and prospective customers.
We bolstered our end-to-end services centered on
innovation and, as a result, our product innovation
centers or PICs were born. During fiscal 2013 we
opened several PICs around the world, and they
are being extremely well-received by customers,
with new product innovation introductions more
than doubling this year alone. We originally planned
these PICs for smaller companies that did not
necessarily have broad resources or capabilities to
design and manufacture next generation products.
With regard to our engineering services, we have
focused on improving this very valuable asset.
We have over 3,000 design engineers and we’ve
hired a new chief technology officer to define
technology roadmaps around capabilities that are
required to enable us to serve our most leading
edge customers and take them into the future.
We continue to differentiate our offering through
our logistics services, where we have a global
services offering generating over $1 billion in
sales. We are focused on helping companies
take their logistics services to the next level.
Whether it is forward logistics, reverse logistics,
repair & warranty, spare parts logistics, or
hubbing for vendor managed inventory, we have
a solution that takes advantage of the powerful
Flextronics Platform. Our customers get the
most value from our logistics offerings when they
combine them with our physical manufacturing
infrastructure and other capabilities to generate
breakthrough levels of performance.
Lastly, supply chain services refers to our work
helping customers reconfigure their end-to-end
supply chains. We’re working tirelessly to enable
customers to optimize, rationalize, and regionalize
their supply chains for the future. We are uniquely
positioned to be the partner of choice to enable
global brands to bring their products to market
regionally and to enable local brands to bring their
products to market globally.
creates knowledge and knowledge enables more
cash flow generation, and strategic acquisitions
accurate decisions. In order for our customers to
focused on enhancing our end-to-end capabilities
manage the supply chains of the future and keep
all position us to perform better in fiscal 2014 and
up with the rate of change as product introduction
going forward. We believe we are in possession
cycles shorten, they need information that enables
of an enviable competitive position and we are
improved visibility, better risk management, and
intently focused on the execution of our platform
best-in-class execution. For this reason, we’ve
in order to deliver value for our investors. We will
increased our investment in our information
continue to drive accountability on all levels of our
technology resources to make information real-
organization to further improvement and to achieve
time accessible in the cloud and actionable for
future success.
Our platform has now been built, but we are
importantly, value for our shareholders.
our customers that need to react instantaneously.
Ultimately, we view our real-time information layer
as something that is supported by IT assets inside
Flextronics that are integrated to create solutions
that increase our customers’ competitiveness when
managing supply chains of the future.
not at the end of this journey; we are just at the
beginning. We will continue to improve and invest
in our platform as we focus on the speed of real-
time information, the scope of end-to-end services,
and the differentiated scale of the infrastructure
we’ve spent the past 20 plus years building. We
are also changing our go-to-market approach
to demonstrate the transformational power of
the Flextronics Platform with our customers.
Our platform is positioned to help our customers
run the supply chains of the future, and we take
our role as a leader in world-wide supply chain
solutions very seriously.
We are optimistic about our company’s future and
our ability to provide industry defining supply chain
solutions that fuel profitable growth. Our objective
is to take our differentiated platform and apply
it to create real value. Value for our customers,
value for Flextronics and our employees, and most
Sincerely,
Mike McNamara
Chief Executive Officer
* Free cash flow is a non-GAAP financial measure. A reconciliation of this non-GAAP financial measure to the most comparable GAAP measure
is available on the Summary Financials page of the Investor Relations section of our website at www.flextronics.com.
** Please see “Forward Looking Statements” on the Shareholder Information page of this Annual Report.
Physical Infrastructure
However, we’ve discovered that our largest and
most capable customers, in addition to these
Real-Time Information
In conclusion, fiscal 2013 was a challenging year
for our company, but also a defining one. We began
Few companies in the world today have the scale
smaller super-innovative customers, are also fully
The final layer of our platform, and the newest,
to implement our Flextronics Platform approach
of our broad-based physical infrastructure, so our
embracing our PICs in the way we envisioned.
is real-time information. Real-time information
with much success. Our record bookings, strong
ability to add value anywhere in the world, with
any one of a number of our end-to-end services,
to virtually any size company is unmatched. There
are powerful forces driving the regionalization
of manufacturing including the emergence of
a global middle class, shortened product life
cycles, and technology disruptions that are literally
changing how we live. A much written about
component of this regionalization is re-shoring
back to the USA where Flextronics has over 6
million square feet of manufacturing capacity
and world-class capabilities. In addition, we have
regional leadership positions in Eastern Europe,
Southeast Asia, India, Mexico, and Brazil which
is a competitive differentiator and increasingly
important as manufacturing continues to move
closer to consumption.
End-to-End Services
We continue to refine and strengthen our end-to-
end services that complement and run on top of
our powerful physical infrastructure. We have a
clear focus on increasing the value we provide to
our current and prospective customers.
We bolstered our end-to-end services centered on
innovation and, as a result, our product innovation
centers or PICs were born. During fiscal 2013 we
opened several PICs around the world, and they
are being extremely well-received by customers,
with new product innovation introductions more
than doubling this year alone. We originally planned
these PICs for smaller companies that did not
necessarily have broad resources or capabilities to
design and manufacture next generation products.
With regard to our engineering services, we have
focused on improving this very valuable asset.
We have over 3,000 design engineers and we’ve
hired a new chief technology officer to define
technology roadmaps around capabilities that are
required to enable us to serve our most leading
edge customers and take them into the future.
We continue to differentiate our offering through
our logistics services, where we have a global
services offering generating over $1 billion in
sales. We are focused on helping companies
take their logistics services to the next level.
Whether it is forward logistics, reverse logistics,
repair & warranty, spare parts logistics, or
hubbing for vendor managed inventory, we have
a solution that takes advantage of the powerful
Flextronics Platform. Our customers get the
most value from our logistics offerings when they
combine them with our physical manufacturing
infrastructure and other capabilities to generate
breakthrough levels of performance.
Lastly, supply chain services refers to our work
helping customers reconfigure their end-to-end
supply chains. We’re working tirelessly to enable
customers to optimize, rationalize, and regionalize
their supply chains for the future. We are uniquely
positioned to be the partner of choice to enable
global brands to bring their products to market
regionally and to enable local brands to bring their
products to market globally.
creates knowledge and knowledge enables more
cash flow generation, and strategic acquisitions
accurate decisions. In order for our customers to
focused on enhancing our end-to-end capabilities
manage the supply chains of the future and keep
all position us to perform better in fiscal 2014 and
up with the rate of change as product introduction
going forward. We believe we are in possession
cycles shorten, they need information that enables
of an enviable competitive position and we are
improved visibility, better risk management, and
intently focused on the execution of our platform
best-in-class execution. For this reason, we’ve
in order to deliver value for our investors. We will
increased our investment in our information
continue to drive accountability on all levels of our
technology resources to make information real-
organization to further improvement and to achieve
time accessible in the cloud and actionable for
future success.
our customers that need to react instantaneously.
Ultimately, we view our real-time information layer
as something that is supported by IT assets inside
Flextronics that are integrated to create solutions
that increase our customers’ competitiveness when
managing supply chains of the future.
We are optimistic about our company’s future and
our ability to provide industry defining supply chain
solutions that fuel profitable growth. Our objective
is to take our differentiated platform and apply
it to create real value. Value for our customers,
value for Flextronics and our employees, and most
Our platform has now been built, but we are
importantly, value for our shareholders.
not at the end of this journey; we are just at the
beginning. We will continue to improve and invest
in our platform as we focus on the speed of real-
time information, the scope of end-to-end services,
and the differentiated scale of the infrastructure
we’ve spent the past 20 plus years building. We
are also changing our go-to-market approach
to demonstrate the transformational power of
the Flextronics Platform with our customers.
Our platform is positioned to help our customers
run the supply chains of the future, and we take
our role as a leader in world-wide supply chain
solutions very seriously.
Sincerely,
Mike McNamara
Chief Executive Officer
* Free cash flow is a non-GAAP financial measure. A reconciliation of this non-GAAP financial measure to the most comparable GAAP measure
is available on the Summary Financials page of the Investor Relations section of our website at www.flextronics.com.
** Please see “Forward Looking Statements” on the Shareholder Information page of this Annual Report.
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FLEXTRONICS INTERNATIONAL LTD.
(Incorporated in the Republic of Singapore)
(Company Registration Number 199002645H)
To our Shareholders:
On July 29, 2013, we will hold two general meetings of our shareholders at our U.S. corporate offices
located at 6201 America Center Drive, San Jose, CA 95002, U.S.A. Our 2013 annual general meeting of
shareholders will begin at 9:00 a.m., California time. We will also hold an extraordinary general meeting of
shareholders at 10:00 a.m., California time, or immediately following the conclusion or adjournment of our 2013
annual general meeting.
The matters to be voted upon at each meeting are listed in the notices that follow this letter and are
described in more detail in the accompanying joint proxy statement. We urge you to read the entire joint proxy
statement carefully before returning your proxy cards. Part I of the accompanying joint proxy statement provides
general information about the meetings, Part II describes the proposals to be voted upon at the 2013 annual
general meeting of shareholders and related information, Part III describes the proposal to be voted upon at the
extraordinary general meeting of shareholders, and Part IV provides additional information, including
information about our executive officers and their compensation.
IMPORTANT NOTE REGARDING PROXY CARDS: If you are a registered shareholder, you will
receive at least two proxy cards—one for the 2013 annual general meeting and one for the extraordinary general
meeting. It is very important that you return all proxy cards to ensure that your vote is represented at the relevant
meetings. Whether or not you plan to attend the meetings, please complete, date and sign the enclosed proxy
cards and return them in the enclosed envelope as promptly as possible so that your shares may be represented at
the relevant meetings and voted in accordance with your wishes.
You may revoke your proxies at any time prior to the time they are voted. Shareholders who are present at
the meetings may revoke their proxies and vote in person or, if they prefer, may abstain from voting in person
and allow their proxies to be voted.
Sincerely,
Joanne Chia Hui Min
Company Secretary
Singapore
June 12, 2013
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FLEXTRONICS INTERNATIONAL LTD.
(Incorporated in the Republic of Singapore)
(Company Registration Number 199002645H)
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
To Be Held on July 29, 2013
To our Shareholders:
You are cordially invited to attend, and NOTICE IS HEREBY GIVEN, of the annual general meeting of
shareholders of FLEXTRONICS INTERNATIONAL LTD. (“Flextronics” or the “Company”), which will be
held at our U.S. corporate offices located at 6201 America Center Drive, San Jose, CA 95002, U.S.A, at
9:00 a.m., California time, on July 29, 2013, for the following purposes:
(cid:129)
(cid:129)
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To re-elect the following directors: H. Raymond Bingham and Willy C. Shih (Proposal No. 1);
To re-appoint Lawrence A. Zimmerman as a director of Flextronics (Proposal No. 2);
To approve the re-appointment of Deloitte & Touche LLP as our independent auditors for the 2014
fiscal year and to authorize the Board of Directors, upon the recommendation of the Audit Committee,
to fix their remuneration (Proposal 3);
To approve a general authorization for the Directors of Flextronics to allot and issue ordinary shares
(Proposal 4);
To hold a non-binding, advisory vote on executive compensation (Proposal 5); and
To approve a resolution permitting our non-employee directors to receive compensation in cash or
shares of the Company’s stock, at each director’s election (Proposal 6).
The full text of the resolutions proposed for approval by our shareholders is as follows:
1.
To re-elect each of the following directors, who will retire by rotation pursuant to Article 95 of our
As Ordinary Business
Articles of Association, to the Board of Directors:
(a) Mr. H. Raymond Bingham; and
(b) Dr. Willy C. Shih.
2.
To re-appoint Mr. Lawrence A. Zimmerman, who was appointed as a director by the Board of
Directors pursuant to Article 101 of our Articles of Association effective as of October 31, 2012, and who will
be seeking re-appointment as a director pursuant to Section 153(6) of the Singapore Companies Act, Cap. 50, to
hold office as a director from the date of the 2013 annual general meeting until our next annual general meeting.
3.
To consider and vote upon a proposal to re-appoint Deloitte & Touche LLP as our independent
auditors for the fiscal year ending March 31, 2014, and to authorize our Board of Directors, upon the
recommendation of the Audit Committee of the Board of Directors, to fix their remuneration.
4.
To pass the following resolution as an Ordinary Resolution:
As Special Business
“RESOLVED THAT, pursuant to the provisions of Section 161 of the Singapore Companies Act, Cap. 50,
but subject otherwise to the provisions of the Singapore Companies Act, Cap. 50 and our Articles of Association,
authority be and is hereby given to our Directors to:
(a)
(i)
allot and issue ordinary shares in our capital; and/or
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(ii) make or grant offers, agreements or options that might or would require ordinary shares in
our capital to be allotted and issued, whether after the expiration of this authority or
otherwise (including but not limited to the creation and issuance of warrants, debentures or
other instruments convertible into ordinary shares in our capital),
at any time to and/or with such persons and upon such terms and conditions and for such purposes as our
Directors may in their absolute discretion deem fit, and with such rights or restrictions as our Directors may
think fit to impose and as are set forth in our Articles of Association; and
(b)
(notwithstanding that the authority conferred by this resolution may have ceased to be in force)
allot and issue ordinary shares in our capital in pursuance of any offer, agreement or option made
or granted by our Directors while this resolution was in force,
and that such authority shall continue in force until the conclusion of our next annual general meeting or
the expiration of the period within which our next annual general meeting is required by law to be held,
whichever is the earlier.”
5.
To consider and put to a non-binding, advisory vote the following non-binding, advisory resolution:
“RESOLVED THAT, the shareholders of Flextronics approve, on a non-binding, advisory basis, the
compensation of the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K,
including the Compensation Discussion and Analysis and the compensation tables and related disclosures
contained in the section of the accompanying joint proxy statement captioned ‘Executive Compensation.”
This resolution is being proposed to shareholders as required pursuant to Section 14A of the U.S. Securities
Exchange Act of 1934, as amended. The shareholders’ vote on this resolution is advisory and non-binding in
nature, will have no legal effect and will not be enforceable against Flextronics or its Board of Directors.
6.
To pass the following resolution as an Ordinary Resolution:
“RESOLVED THAT, approval be and is hereby given for Flextronics to change the Company’s structure of
its non-employee director compensation program such that each non-employee Director shall receive his or her
compensation in the form of Company shares, cash, or a combination thereof at the election of each Director.”
7.
To transact any other business which may properly be put before the annual general meeting.
Notes
Singapore Financial Statements. At the 2013 annual general meeting, our shareholders will have the
opportunity to discuss and ask any questions that they may have regarding our Singapore audited accounts for
the fiscal year ended March 31, 2013, together with the reports of the directors and auditors thereon, in
compliance with Singapore law. Shareholder approval of our audited accounts is not being sought by this joint
proxy statement and will not be sought at the 2013 annual general meeting.
Eligibility to Vote at Annual General Meeting; Receipt of Notice. The Board of Directors has fixed the
close of business on June 3, 2013 as the record date for determining those shareholders of the company who will
be entitled to receive copies of this notice and accompanying joint proxy statement. However, all shareholders of
record on July 29, 2013, the date of the 2013 annual general meeting, will be entitled to vote at the 2013 annual
general meeting.
Quorum. Representation of at least 331/3% of all outstanding ordinary shares of the company is required to
constitute a quorum. Accordingly, it is important that your shares be represented at the 2013 annual general
meeting.
Proxies. A shareholder entitled to attend and vote at the 2013 annual general meeting is entitled to appoint
a proxy to attend and vote on his or her behalf. A proxy need not also be a shareholder. Whether or not you
plan to attend the meeting, please complete, date and sign the enclosed proxy card and return it in the
enclosed envelope. A proxy card must be received by Vote Processing, c/o Broadridge, 51 Mercedes Way,
Edgewood, NY 11717 not less than 48 hours before the time appointed for holding the 2013 annual general
meeting. You may revoke your proxy at any time prior to the time it is voted. Shareholders who are present at the
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meeting may revoke their proxies and vote in person or, if they prefer, may abstain from voting in person and
allow their proxies to be voted.
Availability of Proxy Materials on the Internet. We are pleased to take advantage of Securities and
Exchange Commission rules that allow issuers to furnish proxy materials to some or all of their shareholders on
the Internet. In accordance with Singapore law, our registered shareholders (shareholders who own our ordinary
shares in their own name through our transfer agent, Computershare Investor Services, LLC) will not be able to
vote their shares over the Internet, but we will be providing this service to our beneficial holders (shareholders
whose ordinary shares are held by a brokerage firm, a bank or other nominee). We believe these rules will allow
us to provide our shareholders with the information they need, while lowering the costs of delivery and reducing
the environmental impact of our annual general meeting of shareholders.
By order of the Board of Directors,
Joanne Chia Hui Min
Company Secretary
Singapore
June 12, 2013
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FLEXTRONICS INTERNATIONAL LTD.
(Incorporated in the Republic of Singapore)
(Company Registration Number 199002645H)
NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
To Be Held on July 29, 2013
To our Shareholders:
You are cordially invited to attend, and NOTICE IS HEREBY GIVEN, of an extraordinary general meeting
of shareholders of FLEXTRONICS INTERNATIONAL LTD. (“Flextronics” or the “Company”), which will be
held at our U.S. corporate offices located at 6201 America Center Drive, San Jose, CA 95002, U.S.A., on
July 29, 2013 at 10:00 a.m., California time, or immediately following the conclusion or adjournment of our
2013 annual general meeting of shareholders (which is being held at 9:00 a.m., California time on the same day
and at the same place). The extraordinary general meeting of shareholders is being held for the purpose of
approving a renewal of the Share Purchase Mandate permitting Flextronics to purchase or otherwise acquire its
own issued ordinary shares.
We are asking our shareholders to approve this renewal of the Share Purchase Mandate at the extraordinary
general meeting in order to provide the Company with additional flexibility in the number of shares that it may
repurchase pursuant to the Share Purchase Mandate.
In accordance with the provisions of the Singapore Companies Act, Cap. 50, the Share Purchase Mandate
generally permits us to purchase up to an aggregate of 10% of the total number of our issued ordinary shares,
calculated based on the greater of the total number of issued ordinary shares outstanding as of (x) the date of our
last annual general meeting of shareholders and (y) the date on which the Share Purchase Mandate renewal is
approved. All shares purchased by us following the date of our last annual general meeting of shareholders (that
is, the annual general meeting that precedes the meeting at which the mandate is renewed) are subject to this
10% limitation. For example, if we sought approval for the renewal of the Share Purchase Mandate at our 2013
annual general meeting of shareholders, we would have to reduce the number of new shares that we could
repurchase by the number of shares purchased by us at any time after the date of our 2012 annual general
meeting. By holding an extraordinary general meeting after our 2013 annual general meeting for the purpose of
approving the renewal of the Share Purchase Mandate, the applicable date of our last annual general meeting of
shareholders will be the date of the 2013 annual general meeting (rather than the date of the 2012 annual general
meeting) and we will not need to reduce the number of shares that we can repurchase by any shares repurchased
between the 2012 and 2013 annual general meetings. For additional information on this proposal, please refer to
the joint proxy statement accompanying this notice.
The full text of the resolution proposed for approval by our shareholders is as follows:
1.
To pass the following resolution as an Ordinary Resolution:
“RESOLVED THAT:
(a)
for the purposes of Sections 76C and 76E of the Singapore Companies Act, Cap. 50, the exercise
by our Directors of all of our powers to:
(i) purchase or otherwise acquire issued ordinary shares in the capital of the company not
exceeding in aggregate the number of issued ordinary shares representing 10% of the total
number of issued ordinary shares outstanding as of the date of the passing of this Resolution
(excluding any ordinary shares which are held as treasury shares as at that date); or
(ii)
in the event that the Singapore Minister for Finance prescribes by notification such higher
percentage in excess of 10% pursuant to Section 76B(3) of the Singapore Companies Act,
Cap. 50, purchase or otherwise acquire issued ordinary shares in the capital of the company
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not exceeding in aggregate the number of issued ordinary shares representing the percentage
that is equivalent to the higher of:
(1)
(where the Singapore Minister for Finance prescribes by notification a percentage
equivalent to or in excess of 20%), 20%; or
(2) any other percentage that is lower than the percentage specified in sub-paragraph (1)
above (but exceeds 10%) as prescribed by the Singapore Minister for Finance,
of the total number of issued ordinary shares outstanding as of the date of the passing of this
Resolution (excluding any ordinary shares which are held as treasury shares as at that date), at
such price or prices as may be determined by our Directors from time to time up to the maximum
purchase price described in paragraph (c) below, whether by way of:
(i) market purchases on the NASDAQ Global Select Market or any other stock exchange on
which our ordinary shares may for the time being be listed and quoted; and/or
(ii) off-market purchases (if effected other than on the NASDAQ Global Select Market or, as the
case may be, any other stock exchange on which our ordinary shares may for the time being
be listed and quoted) in accordance with any equal access scheme(s) as may be determined
or formulated by our Directors as they consider fit, which scheme(s) shall satisfy all the
conditions prescribed by the Singapore Companies Act, Cap. 50,
and otherwise in accordance with all other laws and regulations and rules of the NASDAQ Global
Select Market or, as the case may be, any other stock exchange on which our ordinary shares may
for the time being be listed and quoted as may for the time being be applicable, be and is hereby
authorized and approved generally and unconditionally;
(b) unless varied or revoked by our shareholders in a general meeting, the authority conferred on our
Directors pursuant to the mandate contained in paragraph (a) above may be exercised by our
Directors at any time and from time to time during the period commencing from the date of the
passing of this resolution and expiring on the earlier of:
(i)
the date on which our next annual general meeting is held; or
(ii)
the date by which our next annual general meeting is required by law to be held;
(c)
the maximum purchase price (excluding brokerage commission, applicable goods and services tax
and other related expenses) which may be paid for an ordinary share purchased or acquired by us
pursuant to the mandate contained in paragraph (a) above, shall not exceed:
(i)
(ii)
in the case of a market purchase of an ordinary share, the highest independent bid or the last
independent transaction price, whichever is higher, of our ordinary shares quoted or reported
on the NASDAQ Global Select Market or, as the case may be, any other stock exchange on
which our ordinary shares may for the time being be listed and quoted, or shall not exceed
any volume weighted average price, or other price determined under any pricing mechanism,
permitted under SEC Rule 10b-18, at the time the purchase is effected; and
in the case of an off-market purchase pursuant to an equal access scheme, 150% of the Prior
Day Close Price, which means the closing price of our ordinary shares as quoted on the
NASDAQ Global Select Market or, as the case may be, any other stock exchange on which
our ordinary shares may for the time being be listed and quoted, on the day immediately
preceding the date on which we announce our intention to make an offer for the purchase or
acquisition of our ordinary shares from holders of our ordinary shares, stating therein the
purchase price (which shall not be more than the maximum purchase price calculated on the
foregoing basis) for each ordinary share and the relevant terms of the equal access scheme
for effecting the off-market purchase; and
(d) our Directors and/or any of them be and are hereby authorized to complete and do all such acts
and things (including executing such documents as may be required) as they and/or he may
consider expedient or necessary to give effect to the transactions contemplated and/or authorized
by this resolution.”
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2.
To transact any other business which may properly be put before the extraordinary general meeting.
Notes
Eligibility to Vote at Extraordinary General Meeting; Receipt of Notice. The Board of Directors has fixed
the close of business on June 3, 2013 as the record date for determining those shareholders of the company who
will be entitled to receive copies of this notice and accompanying joint proxy statement. However, all
shareholders of record on July 29, 2013, the date of the extraordinary general meeting, will be entitled to vote at
the extraordinary general meeting.
Quorum. Representation of at least 331⁄3% of all outstanding ordinary shares of the company is required to
constitute a quorum. Accordingly, it is important that your shares be represented at the extraordinary general
meeting.
Proxies. A shareholder entitled to attend and vote at the extraordinary general meeting is entitled to
appoint a proxy to attend and vote on his or her behalf. A proxy need not also be a shareholder. Whether or not
you plan to attend the meeting, please complete, date and sign the enclosed proxy card and return it in the
enclosed envelope. A proxy card must be received by Vote Processing, c/o Broadridge, 51 Mercedes Way,
Edgewood, NY 11717 not less than 48 hours before the time appointed for holding the extraordinary general
meeting. You may revoke your proxy at any time prior to the time it is voted. Shareholders who are present at the
meeting may revoke their proxies and vote in person or, if they prefer, may abstain from voting in person and
allow their proxies to be voted.
Availability of Proxy Materials on the Internet. We are pleased to take advantage of Securities and
Exchange Commission rules that allow issuers to furnish proxy materials to some or all of their shareholders on
the Internet. In accordance with Singapore law, our registered shareholders (shareholders who own our ordinary
shares in their own name through our transfer agent, Computershare Investor Services, LLC) will not be able to
vote their shares over the Internet, but we will be providing this service to our beneficial holders (shareholders
whose ordinary shares are held by a brokerage firm, a bank or other nominee). We believe these rules will allow
us to provide our shareholders with the information they need, while lowering the costs of delivery and reducing
the environmental impact of our extraordinary general meeting of shareholders.
Disclosure Regarding Share Purchase Mandate Funds. Only funds legally available for purchasing or
acquiring our issued ordinary shares in accordance with our Articles of Association and the applicable laws of
Singapore will be used for the purchase or acquisition by us of our own issued ordinary shares pursuant to the
proposed renewal of the Share Purchase Mandate referred to in this notice. We intend to use our internal sources
of funds and/or borrowed funds to finance the purchase or acquisition of our issued ordinary shares. The amount
of financing required for us to purchase or acquire our issued ordinary shares, and the impact on our financial
position, cannot be ascertained as of the date of this notice, as these will depend on the number of ordinary
shares purchased or acquired and the price at which such ordinary shares are purchased or acquired and whether
the ordinary shares purchased or acquired are held in treasury or cancelled. Our net tangible assets and the
consolidated net tangible assets of the company and its subsidiaries will be reduced by the purchase price of any
ordinary shares purchased or acquired and cancelled. We do not anticipate that the purchase or acquisition of our
ordinary shares in accordance with the Share Purchase Mandate would have a material impact on our financial
condition and cash flows.
By order of the Board of Directors,
Joanne Chia Hui Min
Company Secretary
Singapore
June 12, 2013
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You should read the entire joint proxy statement
carefully prior to returning your proxy cards.
Important Notice Regarding the Availability of Proxy Materials for the 2013 annual general meeting of
Shareholders and the Extraordinary General Meeting of Shareholders to Be Held on July 29, 2013. The
accompanying joint proxy statement and our annual report to shareholders are available on our website
at www.flextronics.com/proxymaterials.
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Table of Contents
Page #
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS..........................................................ii
NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS.......................................v
JOINT PROXY STATEMENT ...............................................................................................................................1
PART I—INFORMATION ABOUT THE MEETINGS.......................................................................................1
VOTING RIGHTS AND SOLICITATION OF PROXIES...................................................................................2
PART II—PROPOSALS TO BE CONSIDERED AT THE 2013 ANNUAL GENERAL
MEETING OF SHAREHOLDERS .......................................................................................................................3
PROPOSAL NOS. 1 AND 2: RE-ELECTION AND RE-APPOINTMENT OF DIRECTORS .......................3
CORPORATE GOVERNANCE .............................................................................................................................7
NON-MANAGEMENT DIRECTORS’ COMPENSATION FOR FISCAL YEAR 2013................................13
PROPOSAL NO. 3: RE-APPOINTMENT OF INDEPENDENT AUDITORS FOR FISCAL
YEAR 2014 AND AUTHORIZATION OF OUR BOARD TO FIX THEIR REMUNERATION ..................17
AUDIT COMMITTEE REPORT.........................................................................................................................18
PROPOSAL NO. 4: ORDINARY RESOLUTION TO AUTHORIZE ORDINARY SHARE
ISSUANCES............................................................................................................................................................20
PROPOSAL NO. 5: NON-BINDING, ADVISORY RESOLUTION ON EXECUTIVE
COMPENSATION .................................................................................................................................................22
PROPOSAL NO. 6: ORDINARY RESOLUTION TO APPROVE CHANGES TO THE METHOD
OF PAYMENT OF COMPENSATION PAYABLE TO OUR NON-EMPLOYEE DIRECTORS .................24
PART III—PROPOSAL TO BE CONSIDERED AT THE EXTRAORDINARY GENERAL
MEETING OF SHAREHOLDERS .....................................................................................................................25
ORDINARY RESOLUTION TO RENEW THE SHARE PURCHASE MANDATE .....................................25
PART IV—ADDITIONAL INFORMATION......................................................................................................30
EXECUTIVE OFFICERS.....................................................................................................................................30
COMPENSATION COMMITTEE REPORT.....................................................................................................31
COMPENSATION DISCUSSION AND ANALYSIS ..........................................................................................31
COMPENSATION RISK ASSESSMENT ...........................................................................................................50
EXECUTIVE COMPENSATION ........................................................................................................................51
EQUITY COMPENSATION PLAN INFORMATION ......................................................................................63
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .....................64
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS ...............................................66
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE ............................................67
SHAREHOLDER PROPOSALS FOR THE 2014 ANNUAL GENERAL MEETING ...................................67
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ..........................................................68
SINGAPORE STATUTORY FINANCIAL STATEMENTS ..............................................................................68
OTHER MATTERS ...............................................................................................................................................68
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ELECTRONIC DELIVERY OF OUR SHAREHOLDER COMMUNICATIONS
We strongly encourage our shareholders to conserve natural resources, as well as significantly reduce our
printing and mailing costs, by signing up to receive your shareholder communications via e-mail. With
electronic delivery, we will notify you when the annual report and the joint proxy statement are available on the
Internet. Electronic delivery can also help reduce the number of bulky documents in your personal files and
eliminate duplicate mailings. To sign up for electronic delivery:
1.
2.
If you are a registered holder (that is, you hold your Flextronics ordinary shares in your own name
through our transfer agent, Computershare Investor Services, LLC), visit:
www.computershare.com/us/ecomms to enroll. Under Option 2, select Flextronics from the drop-down
box of companies, then enter your account number and zip code (or family/last name if outside the
United States).
If you are a beneficial holder (that is, your shares are held by a brokerage firm, a bank or other
nominee), the voting instruction form provided by most banks or brokers will contain instructions for
enrolling in electronic delivery.
Your electronic delivery enrollment will be effective until you cancel it. If you have questions about
electronic delivery, please call our Investor Relations department at (408) 576-7985.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2013
ANNUAL GENERAL MEETING OF SHAREHOLDERS AND THE EXTRAORDINARY GENERAL
MEETING OF SHAREHOLDERS
We have elected to provide access to our proxy materials to (i) our registered shareholders by mailing them
a full set of proxy materials, including a proxy card, unless the shareholder previously consented to electronic
delivery, and (ii) our beneficial holders by notifying them of the availability of our proxy materials on the
Internet. For beneficial holders and registered shareholders who previously consented to electronic delivery,
instructions on how to request a printed copy of our proxy materials may be found in the Notice of Availability
of Proxy Materials on the Internet.
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FLEXTRONICS INTERNATIONAL LTD.
JOINT PROXY STATEMENT
FOR THE 2013 ANNUAL GENERAL MEETING OF
SHAREHOLDERS
To Be Held on July 29, 2013
9:00 a.m. (California Time)
AND AN EXTRAORDINARY GENERAL MEETING OF
SHAREHOLDERS
To Be Held on July 29, 2013
10:00 a.m. (California Time)
(or immediately following the conclusion or adjournment
of the 2013 annual general meeting)
Both meetings to be held at our U.S. corporate offices
6201 America Center Drive,
San Jose, CA 95002, U.S.A.
PART I—INFORMATION ABOUT THE MEETINGS
We are furnishing this joint proxy statement in connection with the solicitation by our Board of Directors of
proxies to be voted at the 2013 annual general meeting of our shareholders and an extraordinary general meeting
of our shareholders, or at any adjournments thereof, for the purposes set forth in the notices of annual general
meeting and extraordinary general meeting that accompany this joint proxy statement. Unless the context
requires otherwise, references in this joint proxy statement to “the company,” “we,” “us,” “our” and similar
terms mean Flextronics International Ltd. and its subsidiaries.
Proxy Mailing. This joint proxy statement and the enclosed proxy cards were first mailed on or about
June 12, 2013 to shareholders of record as of June 3, 2013.
Costs of Solicitation. The entire cost of soliciting proxies will be borne by us. Following the original
mailing of the proxies and other soliciting materials, our directors, officers and employees may also solicit
proxies by mail, telephone, e-mail, fax or in person. These directors, officers and employees will not receive
additional compensation for those activities, but they may be reimbursed for any reasonable out-of-pocket
expenses. Following the original mailing of the proxies and other soliciting materials, we will request that
brokers, custodians, nominees and other record holders of our ordinary shares forward copies of the proxy and
other soliciting materials to persons for whom they hold ordinary shares and request authority for the exercise of
proxies. In these cases, we will reimburse such holders for their reasonable expenses if they ask that we do so.
We have retained Georgeson Inc., an independent proxy solicitation firm, to assist in soliciting proxies at an
estimated fee of $8,000, plus reimbursement of reasonable expenses.
Registered Office. The mailing address of our registered office is No. 2 Changi South Lane, Singapore 486123.
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VOTING RIGHTS AND SOLICITATION OF PROXIES
The close of business on June 3, 2013 is the record date for shareholders entitled to notice of our 2013
annual general meeting and the extraordinary general meeting. All of the ordinary shares issued and outstanding
on July 29, 2013, the date of both the annual general meeting and the extraordinary general meeting, are entitled
to be voted at each of the annual general meeting and the extraordinary general meeting, and shareholders of
record on July 29, 2013 and entitled to vote at each such meeting will, on a poll, have one vote for each ordinary
share so held on the matters to be voted upon. As of June 3, 2013, we had 622,949,476 ordinary shares issued
and outstanding.
Proxies. Ordinary shares represented by proxies in the forms accompanying this joint proxy statement that
are properly executed and returned to us will be voted at the 2013 annual general meeting and the extraordinary
general meeting, as applicable, in accordance with our shareholders’ instructions.
If your ordinary shares are held through a broker, a bank, or other nominee, which is sometimes referred to
as holding shares in “street name”, you have the right to instruct your broker, bank or other nominee on how to
vote the shares in your account. Your broker, bank or other nominee will send you a voting instruction form for
you to use to direct how your shares should be voted.
Quorum and Required Vote. Representation at each of the 2013 annual general meeting and the
extraordinary general meeting of at least 331⁄3% of all of our issued and outstanding ordinary shares is required to
constitute a quorum to transact business at each meeting.
The affirmative vote by a show of hands of at least a majority of the shareholders present and voting, or, if
a poll is demanded by the chair or by holders of at least 10% of the total number of our paid-up shares in
accordance with our Articles of Association, a simple majority of the shares voting, is required (i) at the 2013
annual general meeting, to re-elect the directors nominated pursuant to Proposal No. 1, to re-appoint the director
nominated pursuant to Proposal No. 2, to re-appoint Deloitte & Touche LLP as our independent auditors
pursuant to Proposal No. 3, to approve the ordinary resolution contained in Proposal No. 4, to approve the
non-binding, advisory resolution contained in Proposal No. 5, to approve the ordinary resolution contained in
Proposal No. 6, and (ii) at the extraordinary general meeting, to approve the ordinary resolution to approve the
renewal of the Share Purchase Mandate. Consistent with the company’s historical practice, the chair of each of
the 2013 annual general meeting and the extraordinary general meeting will demand a poll in order to enable the
ordinary shares represented in person or by proxy to be counted for voting purposes.
Under the Singapore Companies Act (Cap. 50), which we refer to as the Singapore Companies Act or the
Companies Act, where there is a contested election, a nominee must oppose a specific Board nominated
nominee for a vacant Board seat, and in such case, only the candidate receiving the greater number of
affirmative votes and which represents a simple majority of affirmative votes of shareholders present and voting
on the matter will be elected.
Abstentions and Broker Non-Votes. Abstentions and “broker non-votes” are considered present and entitled
to vote at each of the 2013 annual general meeting and the extraordinary general meeting for purposes of
determining a quorum. A “broker non-vote” occurs when a broker, a bank or other nominee who holds shares for
a beneficial owner does not vote on a particular proposal because the broker, bank or other nominee has not
received directions from the beneficial owner and does not have discretionary power to vote on that particular
proposal. If a broker, bank or other nominee indicates on the proxy card that it does not have discretionary
authority to vote as to a particular matter, those shares, along with any abstentions, will not be counted in the
tabulation of the votes cast on the proposal being presented to shareholders.
If you are a beneficial owner, your broker, bank or other nominee has authority to vote your shares for or
against the re-appointment of our independent auditors and for or against the approval of the general authorization
for our directors to allot and issue ordinary shares, even if the broker does not receive voting instructions from
you. Your broker, bank or other nominee, however, does not have the discretion to vote your shares on any other
proposals included in this joint proxy statement without receiving voting instructions from you. It is very
important that you instruct your broker, bank or other nominee how to vote on these proposals. If you do
not complete the voting instructions, your shares will not be considered in the election of directors or any other
proposal included in this joint proxy statement other than the re-appointment of our independent auditors and the
approval of the general authorization for our directors to allot and issue ordinary shares.
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If you are a registered shareholder, in the absence of contrary instructions, shares represented by
proxies submitted by you will be voted (i) at the 2013 annual general meeting: “FOR” the Board nominees
in Proposal Nos. 1 and 2 and “FOR” Proposal Nos. 3 through 6; and (ii) at the extraordinary general
meeting: “FOR” the proposal to approve the Share Purchase Mandate. Our management does not know of
any matters to be presented at the 2013 annual general meeting or the extraordinary general meeting other than
those set forth in this joint proxy statement and in the notices accompanying this joint proxy statement. If other
matters should properly be put before either of the meetings, the proxy holders will vote on such matters in
accordance with their best judgment.
Any shareholder of record has the right to revoke his or her proxy at any time prior to voting at the 2013
annual general meeting or the extraordinary general meeting by:
(cid:129) submitting a subsequently dated proxy; or
(cid:129) by attending the meeting and voting in person.
If you are a beneficial holder who holds your ordinary shares through a broker, a bank or other nominee
and you wish to change or revoke your voting instructions, you will need to contact the broker, the bank or other
nominee who holds your shares and follow their instructions. If you are a beneficial holder and not the
shareholder of record, you may not vote your shares in person at the 2013 annual general meeting or
extraordinary general meeting unless you obtain a legal proxy from the record holder giving you the right to vote
the shares.
Singapore Financial Statements; Monetary Amounts. We have prepared, in accordance with Singapore law,
Singapore statutory financial statements, which are included with the annual report which will be delivered to
our shareholders prior to the date of the 2013 annual general meeting. Except as otherwise stated herein, all
monetary amounts in this joint proxy statement have been presented in U.S. dollars.
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PART II—PROPOSALS TO BE CONSIDERED AT THE
2013 ANNUAL GENERAL MEETING OF SHAREHOLDERS
PROPOSAL NOS. 1 AND 2:
RE-ELECTION AND RE-APPOINTMENT OF DIRECTORS
Article 95 of our Articles of Association requires that at each annual general meeting one-third of the
directors (or, if their number is not a multiple of three, then the number nearest to but not more than one-third of
the directors), are required to retire from office. The directors required to retire in each year are those who have
been in office the longest since their last re-election or appointment. As between persons who became or were
last re-elected directors on the same day, those required to retire are (unless they otherwise agree among
themselves) determined by lot. Under Article 91 of our Articles of Association, any director holding office as a
Chief Executive Officer shall not be subject to retirement by rotation, unless the Board of Directors determines
otherwise, or be taken into account in determining the number of directors required to retire by rotation. As a
result, Mr. McNamara, our Chief Executive Officer and one of our directors, is not subject to retirement by
rotation or taken into account in determining the number of directors required to retire by rotation. Under
Article 101 of our Articles of Association, any director appointed by the Board to fill a vacancy or as an
additional director shall not be taken into account in determining the number of directors required to retire by
rotation. As a result, Mr. Lawrence A. Zimmerman, who was appointed as an additional director by our Board in
accordance with Article 101 of our Articles of Association, is not taken into account in determining the number
of directors required to retire by rotation.
Retiring directors are eligible for re-election. Mr. H. Raymond Bingham and Dr. Willy C. Shih are the
members of our Board of Directors who will retire by rotation at our 2013 annual general meeting. Mr. Bingham
and Dr. Shih are eligible for re-election and have been nominated to stand for re-election at the 2013 annual
general meeting. If either Mr. Bingham or Dr. Shih fails to receive the affirmative vote of a majority of the
shares present and voting on the resolution to approve his re-election (that is, if the number of shares voted
“FOR” the director nominee does not exceed the number of votes cast “AGAINST” that nominee), he will not
be re-elected to the Board and the number of incumbent Directors comprising the Board of Directors will be
reduced accordingly. Abstentions, if any, will have no effect.
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On October 31, 2012, Mr. Robert L. Edwards resigned from his position as a director of the company and
Mr. Lawrence A. Zimmerman was appointed as a director by the Board pursuant to Article 101 of our Articles of
Association. In accordance with Article 101 of our Articles of Association, Mr. Zimmerman will cease to hold
office at the 2013 annual general meeting unless re-elected or re-appointed by our shareholders. In addition, we
received notification from Mr. Zimmerman that he has reached the age of 70 years prior to the date of the 2013
annual general meeting. Under Section 153(2) of the Companies Act, the office of a director of a public
company or of a subsidiary of a public company becomes vacant at the conclusion of the next annual general
meeting commencing after such director attains the age of 70 years. Mr. Zimmerman is eligible for re-appointment
and will be seeking re-appointment as a director of the Company at the 2013 annual general meeting pursuant to
Section 153(6) of the Companies Act.
The proxy holders intend to vote all proxies received by them in the accompanying form of proxy card for
the nominees for directors listed below under “Nominees to our Board of Directors.” In the event that any
nominee is unable or declines to serve as a director at the time of the 2013 annual general meeting, the proxies
will be voted for any nominee who shall be designated by the present Board of Directors of the company, in
accordance with Article 100 of our Articles of Association, to fill the vacancy.
As of the date of this joint proxy statement, our Board of Directors is not aware of any nominee who is
unable or will decline to serve as a director.
Qualifications of Directors and Nominees
Headquartered in Singapore, we are a leading global provider of advanced design, manufacturing and
services to original equipment manufacturers (“OEMs”) in the following markets:
(cid:129) High Reliability Solutions (“HRS”), which is comprised of our medical, automotive, defense and
aerospace businesses;
(cid:129) High Velocity Solutions (“HVS”), which includes our mobile devices business, including smart phones,
and consumer electronics, including game consoles, high-volume computing business, including
notebook personal computing (“PC”), tablets and printers;
(cid:129) Industrial and Emerging Industries (“IEI”), which is comprised of our large household appliances,
equipment, and emerging industries businesses; and
(cid:129) Integrated Network Solutions (“INS”), which includes our telecommunications infrastructure, data
networking, connected home, and server and storage businesses.
We are a globally-recognized leading provider of end-to-end, global supply chain services through which
we design, build, ship and service a complete packaged electronic product for our customers worldwide. We
provide our services through a network of facilities in over 30 countries across four continents. We have
established this extensive network of manufacturing facilities in the world’s major electronics markets (Asia, the
Americas and Europe) in order to serve the outsourcing needs of both multinational and regional OEMs. Our
services increase customer competitiveness by delivering improved product quality, leading manufacturability,
improved performance, faster time-to-market and reduced costs. Our OEM customers leverage our services to
meet their requirements throughout their products’ entire life cycles.
Our Nominating and Corporate Governance Committee is responsible for assessing the composition and
performance of the Board of Directors and Committees of the Board of Directors and for recruiting, evaluating
and recommending candidates to be presented for appointment or election to serve as members of the Board of
Directors. In evaluating our Board of Directors, our Nominating and Corporate Governance Committee has
considered that our directors, including our nominees for election as directors, have experience as officers,
directors and private equity investors of large, complex technology companies. In these positions, they have also
gained experience in core management skills that are important to their service on our Board of Directors, such
as international business, supply chain management, strategic and financial planning, compliance, risk
management, intellectual property matters and leadership development. Our directors also have experience
serving on the boards of directors and board committees of other public companies, which provides them with
an understanding of current corporate governance practices and trends and executive compensation matters. Our
Nominating and Corporate Governance Committee also believes that our directors have other key attributes that
are important to an effective board, including the highest professional and personal ethics and values, a broad
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diversity of business experience and expertise, an understanding of our business and industry, a high level of
education, broad-based business acumen, and the ability to think strategically.
In addition to the qualifications described above, the Nominating and Corporate Governance Committee
also considered the specific experience described in the biographical details that follow in determining whether
each individual nominee or director should serve on our Board of Directors.
Nominees to our Board of Directors
H. Raymond Bingham (age 67)—Mr. Bingham has served as our non-executive Chairman of the Board
since January 2008 and as a member of our Board of Directors since October 2005. He is an Advisory Director
of General Atlantic LLC, a global private equity firm, and from 2006 to 2010 was a Managing Director of
General Atlantic. Previously, Mr. Bingham served in various positions with Cadence Design Systems, Inc., a
supplier of electronic design automation software and services, from 1997 through 2005, most recently as its
Executive Chairman from May 2004 to July 2005, director from November 1997 to April 2004, President and
Chief Executive Officer from April 1999 to May 2004, and Executive Vice President and Chief Financial Officer
from April 1993 to April 1999. Mr. Bingham also serves on the boards of Fusion-io, Inc., STMicroelectronics,
Dice Holdings, Inc., Spansion, Inc. and Oracle Corporation. Mr. Bingham was named a 2009 Outstanding
Director by the Outstanding Director Exchange, a division of the Financial Times; and Mr. Bingham also serves
as a director of the Silicon Valley Education Foundation and as a board member of the National Parks
Conservation Association.
Mr. Bingham’s distinguished career and his extensive executive leadership experience, serving as a chief
executive officer, chief financial officer and director of large international corporations, provides the Board with
the critical perspective of someone familiar with all facets of an international enterprise.
Willy C. Shih, Ph.D. (age 61)—Dr. Shih has served as a member of our Board of Directors since
January 2008. Dr. Shih is currently a Professor of Management Practice at the Harvard Business School, a
position he has held since January 2007. Dr. Shih’s broad industry career experience includes significant
accomplishments for globally recognized organizations such as Kodak, IBM, Silicon Graphics and Thomson.
From August 2005 to September 2006, Dr. Shih served as Executive Vice President of Thomson, a provider of
digital video technologies. He was an intellectual property consultant from February to August 2005, and from
1997 to 2005 served as Senior Vice President of Eastman Kodak Company. Dr. Shih holds a Ph.D. in Chemistry
from the University of California, Berkeley and S.B. degrees in Chemistry and Life Sciences from the
Massachusetts Institute of Technology. Dr. Shih also served on the board of directors of Atheros
Communications, Inc.
Dr. Shih’s broad experience in the technology industry and with international corporations, as well as his
current role at a premier educational institution, provide the Board with key perspectives relating to the
company’s operations and ongoing initiatives. In addition, Dr. Shih’s experience in teaching and consulting
provide him with significant insight into strategic alternatives that are available to technology companies.
Lawrence A. Zimmerman (age 70)—Mr. Zimmerman has served as a member of our Board of Directors
since October 2012. Mr. Zimmerman has extensive experience in corporate finance and accounting, having
previously served as vice chairman and chief financial officer from 2009 to 2011 and as executive vice president
and chief financial officer from 2002 to 2009, at Xerox Corporation. Prior to that, he spent 32 years with IBM,
holding various senior finance positions, including corporate controller. Mr. Zimmerman currently serves as a
director of CSC, Brunswick Corporation and Delphi Automotive.
Mr. Zimmerman’s distinguished career and his extensive experience in corporate finance and accounting,
serving as a chief financial officer and corporate controller of large international corporations, provides the
Board with the critical perspective of someone familiar with all facets of corporate finance and accounting.
Directors Not Standing for Re-election
James A. Davidson (age 53)—Mr. Davidson has served as a member of our Board of Directors since
March 2003. He is a Co-Founder, Managing Partner and Managing Director of Silver Lake Partners, a private
equity investment firm. Mr. Davidson also serves on the board of a number of private companies and until
March 9, 2011, served on the board of Avago Technologies Limited, a public company that specializes in analog,
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mixed-signal and optoelectronic components and subsystems. From 1990 to 1998, Mr. Davidson was an
investment banker with Hambrecht & Quist, most recently serving as Managing Director and Head of
Technology Investment Banking. From 1984 to 1990, Mr. Davidson was a corporate and securities lawyer with
Pillsbury, Madison & Sutro.
Mr. Davidson’s depth of experience in financial and investment matters and his familiarity with a broad
range of companies in the technology, technology-enabled, and related growth industries, as well as his legal
background and expertise, enable him to provide invaluable experience to the Board in these areas.
Michael M. McNamara (age 56)—Mr. McNamara has served as a member of our Board of Directors since
October 2005, and as our Chief Executive Officer since January 1, 2006. Prior to his appointment as Chief
Executive Officer, Mr. McNamara served as our Chief Operating Officer from January 2002 until January 2006,
as President, Americas Operations from April 1997 through December 2001, and as Vice President, North
American Operations from April 1994 to April 1997. Mr. McNamara also serves on the board of Workday, Inc.
and is on the Advisory Board of Tsinghua University School of Economics and Management. Mr. McNamara
previously served on the board of Delphi Automotive LLP and MEMC Electronic Materials, Inc.
Mr. McNamara’s long service with the company, extensive leadership and management experience in
international operations and his service on other public company boards provide invaluable perspective to the
Board. In addition, as the only management representative on our Board, Mr. McNamara provides management
perspective in Board discussions about the business and strategic direction of our company.
Daniel H. Schulman (age 55)—Mr. Schulman has served as a member of our Board of Directors since
June 2009. Since August 2010, Mr. Schulman has been the group president of American Express’ Enterprise
Growth Group. Previously, Mr. Schulman served as the President of Sprint’s Prepaid Group from
November 2009 and, from 2001, was Chief Executive Officer and Director for Virgin Mobile USA, a wireless
service provider. Mr. Schulman also served as the President, and then the Chief Executive Officer of
Priceline.com from June 1999 to May 2001. Prior to joining Priceline, Mr. Schulman served more than 18 years
at AT&T. Mr. Schulman is Chairman of the board of directors of Symantec Corporation and a member of its
compensation and nominating and governance committees. Mr. Schulman also serves on the board of governors
of Rutgers University and is a board member of Autism Speaks. He is also a member of the Lead Director
Network, an organization comprised of approximately twenty leading Fortune 1,000 companies that considers
best practices for public company boards of directors.
Mr. Schulman has extensive senior management experience as both a chief executive officer and director,
and he possesses the knowledge and expertise necessary to contribute an important viewpoint on a wide variety
of governance and operational issues. Mr. Schulman’s experience in the wireless and telecommunications sectors
is particularly valuable to us as we continually enhance the competitive positioning of our segment offerings,
such as those in infrastructure and mobile.
Lay Koon Tan (age 54)—Mr. Tan has served as a member of our Board of Directors since March 2012. He
has served as the President and Chief Executive Officer and a member of the Board of Directors of STATS
ChipPAC Ltd. since August 2004 and of its predecessor, ST Assembly Test Services Ltd., since June 2002.
Mr. Tan joined ST Assembly Test Services Ltd. in May 2000 as its Chief Financial Officer, and in August 2004,
he led the formation of STATS ChipPAC Ltd. with the acquisition of ChipPAC, Inc., becoming the combined
company’s founding President and Chief Executive Officer. Prior to joining ST Assembly Test Services Ltd.,
Mr. Tan was an investment banker with Salomon Smith Barney, the global investment banking unit of Citigroup
Inc. Before that, he held various senior positions in government and financial institutions in Singapore. Mr. Tan
graduated with a Bachelor of Engineering (First Class Honors) from the University of Adelaide, Australia as a
Colombo Plan Scholar. He also has a Master of Business Administration (Distinction) from the Wharton School,
University of Pennsylvania where he was elected a Palmer scholar.
Mr. Tan’s extensive background in financial and investment matters provides a critical perspective to the
Board in these areas, and his executive leadership experience, serving as a chief executive officer and chief
financial officer of large international technology-related corporations, enables him to provide the Board with
invaluable operational insight.
William D. Watkins (age 60)—Mr. Watkins has served as a member of our Board of Directors since
April 2009. Mr. Watkins was appointed Chairman of the Board of Bridgelux, Inc., a U.S.-based developer and
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manufacturer of solid state lighting and light-emitting diode (LED) technologies, in February 2013. Mr. Watkins
served as Chief Executive Officer of Bridgelux, Inc. from January 2010 to February 2013. He previously served
as Seagate Technology’s Chief Executive Officer from 2004 through January 2009, and as Seagate’s President
and Chief Operating Officer from 2000 until 2004. During that time, he was responsible for Seagate’s hard disc
drive operations, including recording heads, media and other components, and related R&D and product
development organizations. Mr. Watkins joined Seagate in 1996 with the company’s merger with Conner
Peripherals. Mr. Watkins currently serves on the board of directors of Maxim Integrated Products.
Mr. Watkins’ operational expertise and broad experience in the technology industry and with international
corporations, particularly with product development companies, provides critical insight and perspective relating
to the company’s customer base.
The Board recommends a vote “FOR”
(i) for the re-election of each of Mr. H. Raymond Bingham and Dr. Willy C. Shih and
(ii) for the re-appointment of Mr. Lawrence A. Zimmerman
to our Board of Directors.
CORPORATE GOVERNANCE
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers and
employees (including our principal executive officer, our principal financial officer and our principal accounting
officer). The Code of Business Conduct and Ethics is available on the Corporate Governance page of the
Investor Relations section of our website at www.flextronics.com. In accordance with SEC rules, we intend to
disclose on the Corporate Governance page of our website any amendment (other than technical, administrative
or other non-substantive amendments) to, or any material waiver from, a provision of the Code of Business
Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal
accounting officer, controller or persons performing similar functions.
Director Retirement Age
Under Section 153(2) of the Companies Act, the office of a director of a public company or of a subsidiary
of a public company becomes vacant at the conclusion of the next annual general meeting commencing after
such director attains the age of 70 years. However, under Section 153(6) of the Companies Act, a person 70 years
old or older may by ordinary resolution be appointed or re-appointed as a director of that company, or be
authorized to continue in office as a director of that company, to hold office until the next annual general
meeting of shareholders. Mr. Lawrence A. Zimmerman is seeking re-appointment as a Director of the Company,
pursuant to Section 153(6) of the Companies Act.
Shareholder Communications with our Board of Directors
Our shareholders may communicate with our Board of Directors by sending an e-mail to
Board@flextronics.com. All e-mails received will be sent to the Chairman of the Board and our Chief Financial
Officer and/or Senior Vice President, Finance. The e-mail correspondence is regularly reviewed and summaries
are provided to the full Board.
Board of Directors
Our Articles of Association give our Board of Directors general powers to manage our business. The Board
oversees and provides policy guidance on our strategic and business planning processes, oversees the conduct of
our business by senior management and is principally responsible for the succession planning for our key
executives, including our Chief Executive Officer.
Our Board of Directors held a total of nine meetings during fiscal year 2013. During the period for which
each current director was a director or a committee member, each director attended at least 75% of the aggregate
of the total number of meetings of our Board in fiscal 2013 together with the total number of meetings held by
all committees of our Board on which he served. During fiscal year 2013, our non-employee directors met at
regularly scheduled executive sessions without management participation.
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Our Board has adopted a policy that encourages each director to attend the annual general meeting, but
attendance is not required. Messrs. McNamara, Bingham, and Tan and Dr. Shih attended the company’s 2012
annual general meeting in person, and Messrs. Schulman and Watkins participated by teleconference.
Director Independence
To assist our Board of Directors in determining the independence of our directors, the Board has adopted
Director Independence Guidelines that incorporate the definition of “independence” adopted by The NASDAQ
Stock Market LLC, which we refer to as Nasdaq in this joint proxy statement. Our Board has determined that
each of the company’s directors, other than Mr. McNamara, is an independent director as defined by the
applicable rules of Nasdaq and our Director Independence Guidelines. Under the Nasdaq definition and our
Director Independence Guidelines, a director is independent only if the Board determines that the director does
not have any relationship that would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. In addition, under the Nasdaq definition and our Director Independence Guidelines,
a director will not be independent if the director has certain disqualifying relationships. In evaluating
independence, the Board broadly considers all relevant facts and circumstances. Our Director Independence
Guidelines are included in our Guidelines with Regard to Certain Governance Matters, a copy of which is
available on the Corporate Governance page of our website at www.flextronics.com.
In evaluating the independence of our independent directors, the Board considered certain transactions,
relationships and arrangements between us and various third parties with which certain of our independent
directors are affiliated, and determined that such transactions, relationships and arrangements did not interfere
with such directors’ exercise of independent judgment in carrying out their responsibilities as directors. These
transactions, relationships and arrangements were as follows:
(cid:129) Mr. H. Raymond Bingham, the Chairman of our Board of Directors, is or was during the most recent
fiscal year (i) a non-management director and less than 1% beneficial owner of Spansion Inc., which was
a supplier of our company during the most recent fiscal year and (ii) a non-management director and less
than 1% beneficial owner of each of Oracle Corporation and STMicroelectronics N.V., each of which
was a customer and supplier of our company during the most recent fiscal year. Mr. Bingham is also an
Advisory Director of General Atlantic, a private equity investment firm. In connection with his position
as an Advisory Director of General Atlantic, Mr. Bingham is an indirect beneficial owner of certain
portfolio companies of affiliated funds of General Atlantic, which were customers and/or suppliers of our
company during the most recent fiscal year. Sales to or purchases from each of these organizations were
made in the ordinary course of business, on commercial terms and on an arms’-length basis, and
amounted to less than the greater of $1,000,000 or 2% of the recipient company’s gross revenues during
the most recent fiscal year.
(cid:129) Mr. James A. Davidson, a member of our Board of Directors, is a Co-founder, Managing Partner and
Managing Director of Silver Lake, a private equity investment firm. In connection with his position as
managing partner and managing director of Silver Lake, Mr. Davidson is a non-management director
and/or an indirect beneficial owner of certain portfolio companies of affiliated funds of Silver Lake,
which are customers and/or suppliers of our company. Sales to or purchases from each of these
organizations were made in the ordinary course of business, on commercial terms and on an arms’-length
basis, and amounted to less than the greater of $1,000,000 or 2% of the recipient company’s gross
revenues during the most recent fiscal year.
(cid:129) Mr. Daniel H. Schulman, a member of our Board of Directors, is (i) a Group President and less than 1%
beneficial owner of American Express Company, which was a customer and supplier of our company
during the most recent fiscal year and (ii) a director and less than 1% beneficial owner of Symantec
Corporation, which was a supplier of our company during the most recent fiscal year. Sales to or
purchases from each of these organizations were made in the ordinary course of business, on commercial
terms and on an arms’-length basis, and amounted to less than the greater of $1,000,000 or 2% of the
recipient company’s gross revenues during the most recent fiscal year.
(cid:129) Mr. Lay Koon Tan, a member of our Board of Directors, is a director of STATS Chip Pac Ltd., which was
a customer and supplier of our company during the most recent fiscal year. Sales to and purchases from
this organization were made in the ordinary course of business, on commercial terms and on an
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arms’-length basis, and amounted to less than the greater of $1,000,000 or 2% of the recipient company’s
gross revenues during the most recent fiscal year.
(cid:129) Mr. Lip-Bu Tan, who was a member of our Board of Directors during the most recent fiscal year, is the
CEO and president and a director of Cadence Design Systems, which is one of our customers and
suppliers, and a non-management director of Inphi Corporation and Advanced Micro-Fabrication
Equipment, Inc., which were suppliers of our company during the most recent fiscal year. He is also the
founder and Chairman of Walden International, a venture capital fund. In connection with his position as
Chairman of Walden International, Mr. Tan is a non-management director/observer and/or an indirect
beneficial owner of certain portfolio companies of Walden International, which are customers and/or
suppliers of our company. Sales to or purchases from each of these organizations were made in the
ordinary course of business, on commercial terms and on an arms’-length basis and amounted to less
than the greater of $1,000,000 or 2% of the recipient company’s gross revenues during the most recent
fiscal year.
(cid:129) Mr. William D. Watkins, a member of our Board of Directors, is (i) the Chief Executive Officer of
Bridgelux Inc., which was a customer of our company during the most recent fiscal year and (ii) a
non-management director and less than 1% beneficial owner of Maxim Integrated Products, Inc., which
was a customer and supplier of our company during the most recent fiscal year. Sales to and purchases
from Maxim and sales to Bridgelux were made in the ordinary course of business, on commercial terms
and on an arms’-length basis, and amounted to less than the greater of $1,000,000 or 2% of the recipient
company’s gross revenues during the most recent fiscal year.
Board Leadership Structure and Role in Risk Oversight
Our Board of Directors currently consists of eight directors, each of whom, other than Mr. McNamara, is
independent under the company’s Director Independence Guidelines and the applicable rules of Nasdaq.
Mr. McNamara has served as our Chief Executive Officer, or CEO, since January 1, 2006, and as a member of
our Board of Directors since October 2005. Mr. Bingham, who is an independent director, has served as our
Chairman of the Board since January 2008. The Board has separated the roles of Chairman and CEO since 2003.
Our Board of Directors believes that the most effective Board leadership structure for the company at the
present time is for the roles of CEO and Chairman of the Board to be separated, and for the Chairman of the
Board to be an independent director. Under this structure, our CEO is generally responsible for setting the
strategic direction for the company and for providing the day-to-day leadership over the company’s operations,
while the Chairman of the Board provides guidance to the CEO, sets the agenda for meetings of the Board and
presides over Board meetings. Our Board of Directors believes that having an independent Chairman set the
agenda and establish the priorities and procedures for the work of the Board provides a greater role for the
independent directors in the oversight of the company, and also provides the continuity of Board leadership
necessary for the Board to fulfill its responsibilities. This leadership structure is supplemented by the fact that all
of our directors, other than Mr. McNamara, are independent and all of the committees of the Board are
composed solely of, and chaired by, independent directors. In addition, our non-employee directors meet at
regularly scheduled executive sessions without management participation. The Board retains the authority to
modify this leadership structure as and when appropriate to best address the company’s unique circumstances at
any given time and to serve the best interests of our shareholders.
Our Board of Directors’ role in risk oversight involves both the full Board of Directors and its committees.
The Audit Committee is charged with the primary role in carrying out risk oversight responsibilities on behalf of
the Board. Pursuant to its charter, the Audit Committee reviews the company’s policies and practices with
respect to risk assessment and risk management, including discussing with management the company’s major
risk exposures and the steps that have been taken to monitor and mitigate such exposures. The company’s
enterprise risk management process is designed to identify risks that could affect the company’s achievement of
business goals and strategies, to assess the likelihood and potential impact of significant risks to the company’s
business, and to prioritize risk control and mitigation. Our Chief Financial Officer, our General Counsel and our
Chief Ethics and Compliance Officer periodically report on the Company’s risk management policies and
practices to relevant Board committees and to the full Board. The Audit Committee reviews the company’s
major financial risk exposures as well as major operational, compliance, reputational and strategic risks,
including steps to monitor, manage and mitigate those risks. In addition, each of the other Board committees is
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responsible for oversight of risk management practices for categories of risks relevant to their functions. For
example, the Compensation Committee has oversight responsibility for the company’s overall compensation
structure, including review of its compensation practices, with a view to assessing associated risk. See
“Compensation Risk Assessment.” The Board as a group is regularly updated on specific risks in the course of
its review of corporate strategy, business plans and reports to the Board by its respective committees. The Board
believes that its leadership structure supports its risk oversight function by providing a greater role for the
independent directors in the oversight of the company.
Board Committees
The standing committees of our Board of Directors are the Audit Committee, Compensation Committee
and Nominating and Corporate Governance Committee. The table below provides current membership for each
of these committees.
Nominating and
Audit Compensation Corporate Governance
Name Committee Committee Committee
H. Raymond Bingham . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X*
James A. Davidson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X
Daniel H. Schulman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X* X
Willy C. Shih, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X
Lay Koon Tan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X
William D. Watkins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X
Lawrence A. Zimmerman . . . . . . . . . . . . . . . . . . . . . . . . . . X* X
* Committee Chair
Audit Committee
The Audit Committee of the Board of Directors is currently composed of Messrs. Lay Koon Tan,
William D. Watkins and Lawrence A Zimmerman, each of whom the Board has determined to be independent
and to meet the financial experience requirements under both the rules of the SEC and the listing standards of
the NASDAQ Global Select Market. The Board has also determined that Mr. Zimmerman is an “audit committee
financial expert” within the meaning of the rules of the SEC and is “financially sophisticated” within the
meaning of the rules of Nasdaq. The Audit Committee held nine meetings during fiscal year 2013 and regularly
meets in executive sessions without management present. The committee’s principal functions are to:
(cid:129) monitor and evaluate periodic reviews of the adequacy of the accounting and financial reporting
processes and systems of internal control that are conducted by our financial and senior management,
and our independent auditors;
(cid:129) be directly responsible for the appointment, compensation and oversight of the work of our independent
auditors (including resolution of any disagreements between our management and the auditors regarding
financial reporting); and
(cid:129) facilitate communication among our independent auditors, our financial and senior management and our
Board.
Our Board has adopted an Audit Committee Charter that is available on the Corporate Governance page of
the Investor Relations section of our website at www.flextronics.com.
Compensation Committee
Responsibilities and Meetings
The Compensation Committee of our Board of Directors is responsible for reviewing and approving the
goals and objectives relating to, and recommending to our Board the compensation of, our Chief Executive
Officer and all other executive officers. The committee also oversees management’s decisions concerning the
performance and compensation of other officers, administers the company’s equity compensation plans and
regularly evaluates the effectiveness of our overall executive compensation program. The Compensation
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Committee is currently composed of Messrs. Davidson and Schulman and Dr. Shih, each of whom our Board
has determined to be an independent director under applicable listing standards of Nasdaq. The committee held
five meetings during fiscal year 2013 and regularly meets in executive sessions without management present.
The specific powers and responsibilities of the Compensation Committee are set forth in more detail in the
Compensation Committee Charter, which is available on the Corporate Governance page of the Investor
Relations section of our website at www.flextronics.com.
Delegation of Authority
When appropriate, our Compensation Committee may form, and delegate authority to, subcommittees. In
addition, in accordance with the company’s equity compensation plans, the Compensation Committee’s charter
allows the committee to delegate to our Chief Executive Officer its authority to grant stock options to employees
of the company who are not directors or executive officers.
Compensation Processes and Procedures
The Compensation Committee evaluates our compensation programs and makes recommendations to our
Board regarding compensation to be paid or awarded to our executive officers. As part of its process, the
Compensation Committee meets with our Chief Executive Officer, Chief Financial Officer, and members of our
human resources department to obtain recommendations with respect to the structure of our compensation
programs, as well as an assessment of the performance of individual executives and recommendations on
compensation for individual executives. In addition, the Compensation Committee has the authority to retain and
terminate any third-party compensation consultant and to obtain advice and assistance from internal and external
legal, accounting and other advisors. During our 2013 fiscal year, the Compensation Committee engaged
Radford, an Aon Hewitt Company (referred to in this joint proxy statement as Radford), as its independent
adviser for certain executive compensation matters. Radford was retained by the Compensation Committee to
provide an independent review of the company’s executive compensation programs, including an analysis of
both the competitive market and the design of the programs. More specifically, Radford furnished the
Compensation Committee with reports on peer company practices relating to the following matters: short and
long-term compensation program design; annual share utilization and shareowner dilution levels resulting from
equity plans; and executive stock ownership and retention values. As part of its reports to the Compensation
Committee, Radford evaluated our peer companies, and provided competitive compensation data and analysis
relating to the compensation of our Chief Executive Officer and our other executives and senior officers.
Radford also assisted the Compensation Committee with its risk assessment of our compensation programs.
The Compensation Committee relied on input from Radford in evaluating management’s recommendations
and arriving at the Compensation Committee’s recommendations to the Board with respect to the elements of
compensation discussed below under “Compensation Discussion and Analysis.” The Compensation Committee
expects that it will continue to retain a compensation consultant on future executive compensation matters.
Relationship with Compensation Consultant
In addition to serving as compensation consultant to the Compensation Committee in fiscal year 2013 with
respect to the compensation of our executive officers and non-employee directors, Radford and its affiliates have
provided other services to our management. Radford’s fees in connection with providing consulting services
with respect to the compensation of our executive officers and non-employee directors in fiscal year 2013 were
approximately $103,178.
Radford is a division of Aon Corporation. During our 2013 fiscal year, Aon Corporation and its affiliates,
which we refer to collectively as Aon, were retained by the company to provide services unrelated to executive
and director compensation matters, relating to global employee benefits services, property insurance and risk
services. The decision to engage Aon for these other services was made by management. Although aware of such
other services, our Compensation Committee did not review or approve such other services provided by Aon,
which services were approved by management in the ordinary course of business. The aggregate fees paid for
those other services in fiscal 2013 were approximately $1.38 million.
Our Compensation Committee has determined that the provision by Aon of services unrelated to executive
and director compensation matters in fiscal year 2013 were compatible with maintaining the objectivity of
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Radford in its role as compensation consultant to the committee and that the consulting advice it received from
Radford was not influenced by Aon’s other relationships with the company. The Compensation Committee is
sensitive to the concern that the services provided by Aon, and the related fees, could impair the objectivity and
independence of Radford, and the committee believes that it is important that objectivity be maintained.
However, the committee also recognizes that the services provided by Aon are valuable to the company and that
it could be inefficient and not in the company’s interest to use a separate firm to provide those services at this
time. In addition, the Compensation Committee has confirmed that Radford and Aon maintain appropriate
safeguards to assure that the consulting services provided by Radford are not influenced by the company’s
business relationship with Aon. Specifically, Radford provided to the Compensation Committee an annual
update on Radford and Aon Corporation’s financial relationship with the company and assurances that members
of Radford who perform consulting services for the Compensation Committee have a reporting relationship and
compensation determined separately from Aon Corporation’s other lines of business and from its other work for
the company.
Radford also represented to the Compensation Committee that there are no personal or business
relationships between the Radford account manager and any member of the committee or a named executive
officer beyond the Flextronics relationship. Further, the Radford account manager does not directly own any
Flextronics shares (although some of his investments controlled solely by independent, third-party managers may
own Flextronics shares by way of indexed funds). Based on the above and other factors, including the factors set
forth under Rule 10C-1 of the Exchange Act, the committee assessed the independence of Radford and
concluded that no conflict of interest exists that would prevent Radford from independently representing the
committee.
Compensation Committee Interlocks and Insider Participation
During our 2013 fiscal year, Messrs. Davidson and Schulman and Dr. Shih served as members of the
Compensation Committee. None of our executive officers served on the Compensation Committee during our
2013 fiscal year. None of our directors has interlocking or other relationships with other boards, compensation
committees or our executive officers that require disclosure under Item 407(e)(4) of Regulation S-K.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee currently is currently composed of Messrs. Bingham,
Schulman and Zimmerman, each of whom our Board has determined to be an independent director under the
applicable listing standards of Nasdaq. The Nominating and Corporate Governance Committee held five meetings
during fiscal year 2013 and regularly meets in executive sessions without management present. The committee
recruits, evaluates and recommends candidates for appointment or election as members of our Board. The
committee is also responsible for shaping and overseeing the application of the company’s corporate governance
policies and procedures, including recommending corporate governance guidelines to the Board. In addition, the
committee oversees the Board’s annual self-evaluation process and any Board communications with shareholders.
In addition, the Nominating and Corporate Governance Committee reviews and makes recommendations to our
Board for the compensation of our non-employee directors. Our Board has adopted a Nominating and Corporate
Governance Committee Charter that is available on the Corporate Governance page of the Investor Relations
section of our website at www.flextronics.com.
The goal of the Nominating and Corporate Governance Committee is to ensure that our Board possesses a
variety of perspectives and skills derived from high-quality business and professional experience. Although the
Board does not have a formal policy on diversity, the Nominating and Corporate Governance Committee seeks
to achieve a balance and diversity of knowledge, experience and capability on our Board, while maintaining a
sense of collegiality and cooperation that is conducive to a productive working relationship within the Board and
between the Board and management. In addition, the committee seeks nominees with the highest professional
and personal ethics and values, an understanding of our business and industry, a high level of education,
broad-based business acumen, and the ability to think strategically. Although the committee uses these and other
criteria to evaluate potential nominees, we have no stated minimum criteria for nominees.
The Nominating and Corporate Governance Committee generally recruits, evaluates and recommends
nominees for our Board based upon recommendations by our directors and management. The committee will
also consider recommendations submitted by our shareholders. The committee does not have different standards
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for evaluating nominees depending on whether they are proposed by our directors and management or by our
shareholders. Shareholders can recommend qualified candidates for our Board to the Nominating and Corporate
Governance Committee by submitting recommendations to our corporate secretary at Flextronics International
Ltd., 2 Changi South Lane, Singapore 486123. Submissions that are received and meet the criteria outlined
above will be forwarded to the Nominating and Corporate Governance Committee for review and consideration.
Shareholder recommendations for our 2014 annual general meeting should be made not later than February 12,
2014 to ensure adequate time for meaningful consideration by the Nominating and Corporate Governance
Committee. To date, we have not received any such recommendations from our shareholders.
The Nominating and Corporate Governance Committee also reviews and makes recommendations to our
Board for the compensation of our non-employee directors. To assist the Nominating and Corporate
Governance Committee in its periodic review of director compensation, our management provides director
compensation data compiled from the annual reports and proxy statements of companies in our peer
comparison group. In addition, the Nominating and Corporate Governance Committee has in the past retained
Radford to assist the committee in its review of our non-employee director compensation program. This prior
review was conducted to establish whether the compensation paid to our non-employee directors was
competitive when compared to the practices of our peer group of companies. The Nominating and Corporate
Governance Committee has in the past also reviewed, among other things, the existing cash compensation of
our non-employee directors, the grant date fair value of restricted share unit awards, the total compensation of
our non-employee Chairman of the Board and the aggregate number of our ordinary shares held by each of our
non-employee directors. The Nominating and Corporate Governance Committee, with the assistance of
Radford, has also taken into consideration compensation trends for outside directors and the implementation of
our share ownership guidelines for non-employee directors. Our Board of Directors made no changes in the
compensation payable to our non-employee directors and our Chairman of the Board for fiscal year 2013. The
current compensation payable to our non-employee directors and our Chairman of the Board is discussed in the
section below captioned “Non-Management Directors’ Compensation for Fiscal Year 2013.”
Director Share Ownership Guidelines
At the recommendation of the Compensation Committee, our Board of Directors adopted share ownership
guidelines for our non-employee directors in July 2009 in connection with its review of our non-employee
directors’ compensation. The ownership guidelines encourage our non-employee directors to hold a minimum
number of our ordinary shares equivalent to $340,000 in value. The guidelines encourage our non-employee
directors to reach this goal within five years of the date that the Board approved the guidelines or the date of
their election to our Board of Directors, whichever is later, and to hold at least such minimum value in shares for
as long as he or she serves on our Board. All of our non-employee directors have already met the minimum
requirements of the stock ownership guidelines, except Mr. Lay Koon Tan, who was appointed to the Board on
March 13, 2012, and Mr. Lawrence A. Zimmerman who was appointed to the Board on October 31, 2012,
neither of which has served on the Board for five years and both are working toward making the required
investment.
NON-MANAGEMENT DIRECTORS’ COMPENSATION FOR FISCAL YEAR 2013
The key objective of our non-employee directors’ compensation program is to attract and retain highly
qualified directors with the necessary skills, experience and character to oversee our management. By using a
combination of cash and equity-based compensation, the compensation program is designed to recognize the
time commitment, expertise and potential liability relating to active Board service, while aligning the interests of
our Board of Directors with the long-term interests of our shareholders. In accordance with the policy of our
Board of Directors, we do not pay management directors for Board service in addition to their regular employee
compensation. For a discussion of the compensation paid to our only management director, Mr. McNamara, for
services provided as our CEO, see the sections of this joint proxy statement entitled “Compensation Discussion
and Analysis” and “Executive Compensation.”
In addition to the compensation provided to our non-employee directors, which is detailed below, each
non-employee director is reimbursed for any reasonable out-of-pocket expenses incurred in connection with
attending in-person meetings of the Board of Directors and Board committees, as well for any fees incurred in
attending continuing education courses for directors.
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Fiscal Year 2013 Annual Cash Compensation
Under the Singapore Companies Act, we may only provide cash compensation to our non-employee
directors for services rendered in their capacity as directors with the prior approval of our shareholders at a
general meeting. Our shareholders approved the current cash compensation arrangements for our non-employee
directors at our 2009 and 2011 annual general meetings. The current arrangements include the following
compensation:
(cid:129) annual cash compensation of $85,000, payable quarterly in arrears to each non-employee director for
services rendered as a director;
(cid:129) additional annual cash compensation of $100,000, payable quarterly in arrears to the Chairman of the
Board of Directors for services rendered as Chairman of the Board (in addition to the regular cash
compensation payable to a member of the Board for services rendered as a director and for service on
any Board committee, including service as Chairman of any Board committee);
(cid:129) additional annual cash compensation of $50,000, payable quarterly in arrears to the Chairman of the
Audit Committee of the Board of Directors for services rendered as Chairman of the Audit Committee
and for participation on the committee;
(cid:129) additional annual cash compensation of $15,000, payable quarterly in arrears to each member who is not
the Chairman of the committee who serves on the Audit Committee for participation on the committee;
(cid:129) additional annual cash compensation of $25,000, payable quarterly in arrears to the Chairman of the
Compensation Committee for services rendered as Chairman of the Compensation Committee and for
participation on the committee;
(cid:129) additional annual cash compensation of $10,000, payable quarterly in arrears to each member who is not
the Chairman of the committee who serves on the Compensation Committee for participation on the
committee;
(cid:129) additional annual cash compensation of $15,000, payable quarterly in arrears to the Chairman of the
Nominating and Corporate Governance Committee for services rendered as Chairman of the Nominating
and Corporate Governance Committee and for participation on the committee;
(cid:129) additional annual cash compensation of $8,000, payable quarterly in arrears to each member who is not
the Chairman of the committee who serves on the Nominating and Corporate Governance Committee for
participation on the committee; and
(cid:129) additional annual cash compensation of $5,000 payable quarterly in arrears to each of our non-employee
directors for participation on each standing committee other than the Audit Committee, the
Compensation Committee and the Nominating and Corporate Governance Committee (of which there are
currently none).
Non-employee directors do not receive any non-equity incentive compensation, or participate in any
pension plan or deferred compensation plan.
Fiscal Year 2013 Equity Compensation
Yearly Restricted Share Unit Awards
Under the terms of the discretionary restricted share unit grant provisions of our 2010 Equity Incentive
Plan, which we refer to as the 2010 Plan, each non-employee director is eligible to receive grants of restricted
share unit awards at the discretion of our Board of Directors. In accordance with the compensation program
recommended by the Compensation Committee and approved by the Board, each non-employee director
receives, following each annual general meeting of the company, a yearly restricted share unit award consisting
of such number of shares having an aggregate fair market value of $150,000 on the date of grant. These yearly
restricted share unit awards vest in full on the date immediately prior to the date of the next year’s annual
general meeting. During fiscal year 2013, each non-employee director, other than Mr. Zimmerman, who was not
a director on the grant date, received a restricted share unit award covering 22,727 ordinary shares under this
program.
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Initial Awards
Upon initially becoming a director of the company, each non-employee director receives a pro-rated share
of the yearly restricted share unit award granted to our directors, which is discussed above. The pro-rated award
vests on the date immediately prior to the date of our next annual general meeting and is based on the amount of
time that the director serves on the Board until such date. Mr. Zimmerman received a restricted share unit award
covering 18,746 ordinary shares under this program in fiscal year 2013.
Discretionary Grants
Under the terms of the discretionary option grant provisions of the 2010 Plan, non-employee directors are
eligible to receive stock options granted at the discretion of the Compensation Committee. No director received
stock options pursuant to the discretionary grant program during fiscal year 2013.
Compensation for the Non-Employee Chairman of the Board
Our non-executive Chairman is entitled to receive, following each annual general meeting of the company,
(i) the $100,000 in additional annual cash compensation described above, payable quarterly in arrears, and (ii) an
additional yearly restricted share unit award that consists of such number of shares having an aggregate fair
market value of $100,000 on the date of grant, which vests on the date immediately prior to the date of the next
year’s annual general meeting. Following the 2012 annual general meeting, our non-executive Chairman of the
Board received a restricted share unit award covering 15,152 ordinary shares under the equity portion of this
program. Our Chairman of the Board is also eligible to receive all other compensation payable to our non-employee
directors for his service as a member of the Board.
In addition, following approval by our shareholders at our 2011 annual general meeting held on July 22,
2011, our Chairman of the Board is entitled to receive the regular cash compensation payable to a member of
the Board for service on any Board committees, including service as chairman of any Board committees. Our
non-executive Chairman of the Board currently serves as the Chairman of the Nominating and Corporate
Governance Committee.
While company aircraft are generally used for company business only, our Chairman of the Board may be
permitted to use company aircraft for personal travel, provided that company aircraft are not needed for
business purposes at such time. In such cases, Mr. Bingham is required to reimburse the company for the
incremental costs related to his use of the aircraft. We calculate the incremental cost to the company for use of
the company aircraft by using an hourly rate for each flight hour, which rate is based on the variable
operational costs of each flight.
Director Summary Compensation in Fiscal Year 2013
The following table sets forth the fiscal year 2013 compensation for our non-employee directors.
Fees Earned or
Name Paid in Cash ($)(1) Stock Awards ($)(2) Total ($)
H. Raymond Bingham . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
James A. Davidson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Robert L. Edwards(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daniel H. Schulman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Willy C. Shih, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lay Koon Tan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lip-Bu Tan(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
William D. Watkins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lawrence A. Zimmerman(3) . . . . . . . . . . . . . . . . . . . . . . . . .
$200,000 $250,001 $450,001
$ 95,000 $149,998 $244,998
$ 83,645 $149,998 $233,643
$113,359 $149,998 $263,357
$ 95,000 $149,998 $244,998
$100,000 $149,998 $249,998
$ 38,792 $ — $ 38,792
$100,000 $149,998 $249,998
$ 60,040 $108,164 $168,204
(1) This column represents the amount of cash compensation earned in fiscal year 2013 for Board and
committee service.
(2) This column represents the grant date fair value of restricted share unit awards granted in fiscal year 2013 in
accordance with FASB ASC Topic 718. The grant date fair value of restricted share unit awards is the
closing price of our ordinary shares on the date of grant.
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(3) Mr. Lip-Bu Tan retired from the Board of Directors on August 30, 2012. Mr. Edwards resigned from the
Board of Directors on October 31, 2012. Mr. Lip-Bu Tan did not receive any grants during the fiscal year.
Mr. Edward’s grant was cancelled upon his resignation from the Board. Mr. Zimmerman was appointed to
the Board of Directors on October 31, 2012.
The table below shows the aggregate number of ordinary shares underlying stock options and unvested
restricted share units held by our non-employee directors as of the 2013 fiscal year-end:
Number of Ordinary Shares Number of Ordinary Shares
Underlying Outstanding Underlying Outstanding
Name Stock Options (#)(2) Restricted share units (#)
H. Raymond Bingham . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,500 37,879
James A. Davidson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,500 22,727
Robert L. Edwards(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
Daniel H. Schulman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 22,727
Willy C. Shih, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,500 22,727
Lay Koon Tan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 22,727
Lip-Bu Tan(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
William D. Watkins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 22,727
Lawrence A. Zimmerman(1) . . . . . . . . . . . . . . . . . . . . . . . — 18,746
(1) Mr. Lip-Bu Tan retired from the Board of Directors on August 30, 2012. Mr. Edwards resigned from the
Board of Directors on October 31, 2012. Mr. Zimmerman was appointed to the Board of Directors on
October 31, 2012.
(2) No options were granted to Mr. Lay Koon Tan or Mr. Lawrence A. Zimmerman when they joined the Board
of Directors as the company has moved to granting restricted share units instead of options.
Change of Control and Termination Provisions
Our non-employee directors have outstanding stock options (other than Messrs. Zimmerman and Edwards
and Mr. Lay Koon Tan and Mr. Lip-Bu Tan) that were issued under the terms of our 2001 Equity Incentive Plan,
which we refer to as our 2001 Plan, and outstanding restricted share unit awards granted under the terms of the
2010 Plan. Equity awards to our directors are currently granted under the 2010 Plan, the adoption of which was
approved by our shareholders at our 2010 annual general meeting. Under the terms of the 2001 Plan, if a director
ceases to provide services to the company for any reason other than death, cause (as defined in the 2001 Plan) or
disability (as defined in the 2001 Plan), then the director may exercise any options which have vested by the date
of such termination within three months of the termination date or such other period not exceeding five years or
the term of the option, as determined by the Compensation Committee. If a director ceases to provide services to
the company because of death or disability, then the director may exercise any options which have vested by the
date of such termination within 12 months of the termination date or such other period not exceeding five years
or the term of the option, as determined by the Compensation Committee. All stock options held by a director
who is terminated for cause expire on the termination date, unless otherwise determined by the Compensation
Committee.
In the event of a dissolution or liquidation of the company or if we are acquired by merger or asset sale or
in the event of other change of control events, the treatment of outstanding stock options granted under the 2001
Plan (other than option grants made under the automatic option grant program described below), and of
outstanding restricted share units granted under the 2010 Plan, is as described in the section entitled “Potential
Payments upon Termination or Change in Control.”
For stock option grants made under the automatic option grant program of the 2001 Plan, in the event of a
change of control transaction described above, each outstanding stock option will accelerate so that each such
option shall, prior to the effective date of such transaction at such times and with such conditions as determined
by the Compensation Committee, (i) become fully vested with respect to the total number of shares then subject
to such award and (ii) remain exercisable for a period of three months following the consummation of the change
of control transaction. However, in the event of a hostile take-over of the company pursuant to a tender or
exchange offer, the director has a right to surrender each option, which has been held by him or her for at least
six months, in return for a cash distribution by the company in an amount equal to the excess of (a) the take-over
price per share over (b) the exercise price payable for such share.
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PROPOSAL NO. 3:
RE-APPOINTMENT OF INDEPENDENT AUDITORS FOR FISCAL YEAR 2014 AND
AUTHORIZATION OF OUR BOARD TO FIX THEIR REMUNERATION
Our Audit Committee has approved, subject to shareholder approval, the re-appointment of Deloitte &
Touche LLP as the company’s independent registered public accounting firm to audit our accounts and records
for the fiscal year ending March 31, 2014, and to perform other appropriate services. In addition, pursuant to
Section 205(16) of the Companies Act, our Board of Directors is requesting that the shareholders authorize the
directors, upon the recommendation of the Audit Committee, to fix the auditors’ remuneration for services
rendered through the 2014 annual general meeting. We expect that a representative from Deloitte & Touche LLP
will be present at the 2013 annual general meeting. This representative will have the opportunity to make a
statement if he or she so desires and is expected to be available to respond to appropriate questions.
Principal Accountant Fees and Services
Set forth below are the aggregate fees billed by our principal accounting firm, Deloitte & Touche LLP, a
member firm of Deloitte Touche Tohmatsu, and its respective affiliates for services performed during fiscal years
2012 and 2013. All audit and permissible non-audit services reflected in the fees below were pre-approved by the
Audit Committee in accordance with established procedures.
Fiscal Year
2012 2013
(in millions)
$ 9.2
Audit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit-Related Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.7
Tax Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9 1.8
All Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 —
$7.5
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$9.6
$12.7
Audit Fees consist of fees for professional services rendered by our independent registered public accounting
firm for the audit of our annual consolidated financial statements included in our Annual Report on Form 10-K
(including services incurred with rendering an opinion under Section 404 of the Sarbanes-Oxley Act of 2002) and
the review of our consolidated financial statements included in our Quarterly Reports on Form 10-Q. These fees
include fees for services that are normally incurred in connection with statutory and regulatory filings or
engagements, such as comfort letters, statutory audits, consents and the review of documents filed with the SEC.
Audit-Related Fees consist of fees for assurance and related services by our independent registered public
accounting firm that are reasonably related to the performance of the audit or review of our carve-out financial
statements and not included in Audit Fees. We did not incur fees under this category in fiscal year 2012.
Tax Fees consist of fees for professional services rendered by our independent registered public accounting
firm for tax compliance, tax advice, and tax planning services, including assistance regarding federal, state and
international tax compliance, return preparation, tax audits and customs and duties.
All Other Fees consist of fees for professional services rendered by our independent registered public
accounting firm for permissible non-audit services, if any. The fees incurred under this category during fiscal
year 2012 are primarily related to enterprise risk management consulting services. We did not incur fees under
this category in fiscal year 2013.
Audit Committee Pre-Approval Policy
Our Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by our
independent registered public accounting firm. These services may include audit services, audit-related services,
tax services and other services. Pre-approval is generally provided for up to one year, and any pre-approval is
detailed as to the particular service or category of services. The independent registered public accounting firm and
management are required to periodically report to the Audit Committee regarding the extent of services provided
by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the
services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.
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Our Audit Committee has determined that the provision of non-audit services under appropriate
circumstances may be compatible with maintaining the independence of Deloitte & Touche LLP, and that all such
services provided by Deloitte & Touche LLP to us in the past were compatible with maintaining such
independence. The Audit Committee is sensitive to the concern that some non-audit services, and related fees,
could impair independence and the Audit Committee believes it important that independence be maintained.
However, the Audit Committee also recognizes that in some areas, services that are identified by the relevant
regulations as “tax fees” or “other fees” are sufficiently related to the audit work performed by Deloitte & Touche
LLP that it would be highly inefficient and unnecessarily expensive to use a separate firm to perform those non-
audit services. The Audit Committee intends to evaluate each such circumstance on its own merits, and to approve
the performance of non-audit services where it believes efficiency can be obtained without meaningfully
compromising independence.
The Board recommends a vote “FOR” the re-appointment of Deloitte & Touche LLP
as our independent auditors for fiscal year 2014 and authorization of the Board, upon the
recommendation of the Audit Committee, to fix their remuneration.
AUDIT COMMITTEE REPORT
The information contained under this “Audit Committee Report” shall not be deemed to be “soliciting
material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any filings
under the Securities Act of 1933, as amended, which we refer to as the Securities Act, or under the Securities
Exchange Act of 1934, as amended, which we refer to as the Exchange Act, or be subject to the liabilities of
Section 18 of the Exchange Act, except to the extent that we specifically incorporate this information by reference
into any such filing.
The Audit Committee assists our Board of Directors in overseeing financial accounting and reporting
processes and systems of internal controls. The Audit Committee also evaluates the performance and
independence of our independent registered public accounting firm. The Audit Committee operates under a
written charter, a copy of which is available on the Corporate Governance page of the Investor Relations section
of our website at www.flextronics.com. Under the written charter, the Audit Committee must consist of at least
three directors, all of whom must be “independent” as defined by the Exchange Act and the rules of the SEC and
Nasdaq. The members of the committee during fiscal year 2013 were Messrs. Tan, Edwards, Watkins, and, from
October 31, 2012, Mr. Zimmerman, each of whom is an independent director. The current members of the
committee are Messrs. Lay Koon Tan, William D. Watkins, and Lawrence A. Zimmerman.
Our financial and senior management supervise our systems of internal controls and the financial reporting
process. Our independent auditors perform an independent audit of our consolidated financial statements in
accordance with generally accepted auditing standards and express opinions on these consolidated financial
statements. In addition, our independent auditors express their own opinion on the effectiveness of our internal
control over financial reporting. The Audit Committee monitors these processes.
The Audit Committee has reviewed and discussed with both the management of the company and our
independent auditors our audited consolidated financial statements for the fiscal year ended March 31, 2013, as
well as management’s assessment and our independent auditors’ evaluation of the effectiveness of our internal
control over financial reporting. Our management represented to the Audit Committee that our audited
consolidated financial statements were prepared in accordance with accounting principles generally accepted in
the United States of America.
The Audit Committee also discussed with our independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380),
as adopted by the Public Company Oversight Board in Rule 3800T. The Audit Committee also has discussed with
our independent auditors the firm’s independence from company management and the company, and reviewed the
written disclosures and letter from the independent registered certified public accounting firm required by
applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered
certified public accounting firm’s communications with the Audit Committee concerning independence. The
Audit Committee has also considered whether the provision of non-audit services by our independent auditors is
compatible with maintaining the independence of the auditors. The Audit Committee’s policy is to pre-approve all
audit and permissible non-audit services provided by our independent auditors. All audit and permissible
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non-audit services performed by our independent auditors during fiscal year 2013 and fiscal year 2012 were
pre-approved by the Audit Committee in accordance with established procedures.
Based on the Audit Committee’s discussions with the management of the company and our independent
auditors and based on the Audit Committee’s review of our audited consolidated financial statements together
with the reports of our independent auditors on the consolidated financial statements and the representations of
our management with regard to these consolidated financial statements, the Audit Committee recommended to
the company’s Board of Directors that the audited consolidated financial statements be included in our Annual
Report on Form 10-K for the fiscal year ended March 31, 2013, which was filed with the SEC on May 28, 2013.
Submitted by the Audit Committee of the Board of Directors:
Lawrence A Zimmerman
Lay Koon Tan
William D. Watkins
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PROPOSAL NO. 4:
ORDINARY RESOLUTION TO AUTHORIZE
ORDINARY SHARE ISSUANCES
We are incorporated in the Republic of Singapore. Under Singapore law, our directors may only issue
ordinary shares and make or grant offers, agreements or options that might or would require the issuance of
ordinary shares, with the prior approval from our shareholders. We are submitting this proposal because we are
required to do so under the laws of Singapore before we can issue any ordinary shares in connection with our
equity compensation plans, possible future strategic transactions, or public and private offerings.
If this proposal is approved, the authorization would be effective from the date of the 2013 annual general
meeting until the earlier of (i) the conclusion of the 2014 annual general meeting or (ii) the expiration of the
period within which the 2014 annual general meeting is required by law to be held. The 2014 annual general
meeting is required to be held no later than 15 months after the date of the 2013 annual general meeting and no
later than six months after the date of our 2014 fiscal year end (except that Singapore law allows for a one-time
application for an extension of up to a maximum of two months to be made with the Singapore Accounting and
Corporate Regulatory Authority).
Our Board believes that it is advisable and in the best interests of our shareholders for our shareholders to
authorize our directors to issue ordinary shares and to make or grant offers, agreements or options that might or
would require the issuance of ordinary shares. In the past, the Board has issued shares or made agreements that
would require the issuance of new ordinary shares in the following situations:
(cid:129) in connection with strategic transactions and acquisitions;
(cid:129) pursuant to public and private offerings of our ordinary shares as well as instruments convertible into our
ordinary shares; and
(cid:129) in connection with our equity compensation plans and arrangements.
If this proposal is not approved, we would not be permitted to issue any new ordinary shares, including
shares issuable pursuant to compensatory equity awards (other than shares issuable on exercise or settlement of
outstanding options, restricted share units and other instruments convertible into or exercisable for ordinary
shares, which were previously granted when the previous shareholder approved share issue mandates were in
force). If we are unable to rely upon equity as a component of compensation, we would have to review our
compensation practices, and would likely have to substantially increase cash compensation to retain key
personnel.
Notwithstanding this general authorization to issue our ordinary shares, we will be required to seek
shareholder approval with respect to future issuances of ordinary shares where required under the rules of
Nasdaq, such as where the company proposes to issue ordinary shares that will result in a change in control of the
company or in connection with a private offering involving the issuance of ordinary shares representing 20% or
more of our outstanding ordinary shares at a price less than the greater of book or market value.
Our Board expects that we will continue to issue ordinary shares and grant options and restricted share unit
awards in the future under circumstances similar to those in the past. As of the date of this joint proxy statement,
other than issuances of ordinary shares or agreements that would require the issuance of new ordinary shares in
connection with our equity compensation plans and arrangements, we have no specific plans, agreements or
commitments to issue any ordinary shares for which approval of this proposal is required. Nevertheless, our
Board believes that it is advisable and in the best interests of our shareholders for our shareholders to provide this
general authorization in order to avoid the delay and expense of obtaining shareholder approval at a later date and
to provide us with greater flexibility to pursue strategic transactions and acquisitions and raise additional capital
through public and private offerings of our ordinary shares as well as instruments convertible into our ordinary
shares.
If this proposal is approved, our directors would be authorized to issue, during the period described above,
ordinary shares subject only to applicable Singapore laws and the rules of Nasdaq. The issuance of a large number
of ordinary shares could be dilutive to existing shareholders or reduce the trading price of our ordinary shares on
the NASDAQ Global Select Market.
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We are not submitting this proposal in response to a threatened takeover. In the event of a hostile attempt to
acquire control of the company, we could seek to impede the attempt by issuing ordinary shares, which may dilute
the voting power of our existing shareholders. This could also have the effect of impeding the efforts of our
shareholders to remove an incumbent director and replace him with a new director of their choice. These potential
effects could limit the opportunity for our shareholders to dispose of their ordinary shares at the premium that
may be available in takeover attempts.
The Board recommends a vote “FOR” the resolution
to authorize ordinary share issuances.
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PROPOSAL NO. 5:
NON-BINDING, ADVISORY RESOLUTION
ON EXECUTIVE COMPENSATION
In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are
asking our shareholders to approve, in a non-binding, advisory vote, the compensation of our named executive
officers as reported in this joint proxy statement in the Compensation Discussion and Analysis and in the
compensation tables and accompanying narrative disclosure under “Executive Compensation.” Our named
executive officers are identified in the Compensation Discussion and Analysis and include our chief executive
officer, our chief financial officer and the three other most highly compensated executive officers serving at the
end of our 2013 fiscal year, as well as one other who served as an executive officer during a portion of the fiscal
year and who otherwise would have been included among the three other most highly compensated executive
officers.
As a general matter, the Compensation Committee seeks to allocate a substantial portion of the named
executive officers’ compensation to components that are performance-based and at-risk. The Compensation
Committee also generally seeks to allocate a substantial portion of executive compensation to long-term cash and
equity awards. The Compensation Committee periodically assesses our compensation programs to ensure that
they are appropriately aligned with our business strategy and are achieving their objectives. The Compensation
Committee regularly reviews our compensation programs and peer company data and best practices in the
executive compensation area. In past years, the Compensation Committee has recommended and our Board has
approved changes in our compensation policies and practices in order to align with best practices. Overall, the
Compensation Committee has sought to weight a higher percentage of our executives’ total direct compensation
to performance-based and long-term components. Key features of our compensation programs that align with best
practices in executive compensation are:
(cid:129) we generally target the fixed elements of our compensation, or our base salary, at the 50th percentile of
our peer companies or the market data, and generally target our performance or variable annual and
long-term incentive compensation and total direct compensation at between the 60th and 65th percentiles
of our peer companies or the market data; however, our competitive positioning or benchmarking is
reviewed each year in the context of historical performance and our overall compensation programs,
including prior incentive awards;
(cid:129) long-term equity incentive compensation is comprised 50% of performance-based and 50% service-based
restricted share units;
(cid:129) we use the company’s total shareholder return relative to the Standard and Poor’s 500 Index as the
performance measure for our performance-based restricted share units;
(cid:129) our incentive plans have threshold levels of performance that must be met before any bonuses are paid or
performance-based restricted share units vest;
(cid:129) payout levels are capped under both our short and long-term incentive plans;
(cid:129) we use multiple performance metrics under our incentive plans to mitigate risk, so that executives are not
excessively incentivized by any single metric;
(cid:129) all non-GAAP adjustments under our annual incentive plan are subject to approval by the Compensation
Committee to ensure that the non-GAAP adjustment effects on payout levels appropriately reflect
company performance;
(cid:129) we do not maintain a supplemental executive retirement plan (SERP);
(cid:129) we have adopted stock ownership guidelines for our executives and other senior officers; and
(cid:129) we have adopted an incentive compensation recoupment policy.
Consistent with our pay-for-performance compensation philosophy, the Compensation Committee took the
following key actions with respect to the compensation of the named executive officers:
(cid:129) Maintained Base Salary Levels. Base salaries of the named executive officers were not increased in
fiscal 2013, with the exceptions of Mr. Read whose base salary was increased from $600,000 to
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$620,000, which was slightly below the 50th percentile of the peer group, and Mr. Hoak, whose base
salary was increased from $450,000 to $475,000, which was below the 50th percentile of the peer group.
(cid:129) Significantly Lower Annual Incentive Bonus Payouts. Bonuses under our annual incentive bonus plan are
based upon the achievement of company and business unit (in the cases of business unit executives)
performance goals. Based on fiscal 2013 operating performance, bonus payouts were at 17.6% of target
for Messrs. McNamara, Read, and Hoak, 15.4% of target for Mr. Barbier, 84.9% of target for
Mr. Humphries, and 15.2% of target for Mr. Sykes.
(cid:129) Long-Term Deferred Compensation Plan Award. Annual contributions under our deferred compensation
plan (which cliff vest after four years) only may be made if the company exceeds the threshold annual
performance level under our incentive bonus plan. Based on fiscal 2013 performance, there were no
deferred cash awards made in fiscal 2014 with respect to fiscal 2013 performance.
(cid:129) Total Cash Compensation of Chief Executive Officer. Mr. McNamara’s total cash compensation (the sum
of base salary and annual incentive bonus payout) increased 0.4% from fiscal 2012.
We urge shareholders to read carefully the Compensation Discussion and Analysis section of this joint
proxy statement to review the correlation between the compensation of our named executive officers and our
performance. The Compensation Discussion and Analysis also describes in more detail how our executive
compensation policies and procedures operate and are designed to achieve our compensation objectives. We also
encourage you to read the Summary Compensation Table and the other related compensation tables and narrative
that follow the Compensation Discussion and Analysis, which provide detailed information on the compensation
of our named executive officers.
While the vote on this resolution is advisory and not binding on the company, the Compensation Committee
or the Board, each of the Compensation Committee and the Board value the opinions of our shareholders and will
consider the outcome of the vote on this resolution when making decisions regarding future executive
compensation arrangements. As previously disclosed, we plan to hold the say on pay advisory vote on an annual
basis. The next shareholder advisory vote on executive compensation will occur at the company’s 2014 annual
general meeting of shareholders.
The Board recommends a vote “FOR” the approval of
the non-binding, advisory resolution on executive compensation.
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PROPOSAL NO. 6:
ORDINARY RESOLUTION TO APPROVE CHANGES TO THE METHOD OF PAYMENT OF
COMPENSATION PAYABLE TO OUR NON-EMPLOYEE DIRECTORS
At the 2011 Annual General Meeting, our shareholders approved our current compensation structure, which
consists of payments in cash to our non-employee directors. In 2013, the Nominating and Corporate Governance
Committee of our Board of Directors conducted a review of our non-employee director compensation program.
This review was conducted to establish whether the compensation paid to our non-employee directors was
competitive when compared to the practices of our established peer group of companies. The Nominating and
Corporate Governance Committee reviewed, among other things, non-employee director compensation practices
among our peer group of companies, the existing cash compensation of our non-employee directors, the aggregate
number of our ordinary shares held by each of our non-employee directors, and our share ownership guidelines
for non-employee directors.
Based on this review and analysis, our Nominating and Corporate Governance Committee recommended
and our Board approved, subject to shareholder approval of this Proposal No. 6, a change in the structure of our
non-employee director compensation program that would allow our non-employee directors to receive their
compensation in the form of Company shares, cash, or a combination thereof at the election of each director. The
aggregate value of the compensation provided to our non-employee directors would not change under the current
proposal.
If this Proposal No. 6 is approved by the shareholders, each non-employee director could elect to receive his
or her annual retainer and committee compensation, or any portion thereof, in the form of fully-vested,
unrestricted shares of the Company. A director making such election would receive shares having an aggregate
value equal to the portion of compensation elected to be received in shares, valued at the closing price of our
shares on the date the compensation would otherwise have been paid in cash.
Under the Companies Act, we are required to seek shareholder approval for this change from cash
compensation to a combination of cash and share based compensation. We believe that the authorization being
sought by this proposal will benefit our shareholders by enabling the company to attract and retain qualified
individuals to serve on our Board of Directors and to continue to provide leadership for the company with the
goal of enhancing long-term value for our shareholders.
This Proposal No. 6, if passed by our shareholders, will not affect the validity of the standing authority
previously approved at the annual general meetings held in 2007, 2009 and 2011, except as modified by this
Proposal No. 6 as to the method of payment and satisfaction by Flextronics of such annual cash compensation.
For additional information about the cash and equity compensation paid to our non-employee directors,
including compensation paid for the fiscal year ended March 31, 2013, please see the section entitled
“Non-Management Directors’ Compensation for Fiscal Year 2013.”
The Board recommends a vote “FOR” the resolution to allow our
non-employee directors to elect to be compensated in either cash or shares of the Company.
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PART III—PROPOSAL TO BE CONSIDERED AT
THE EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
ORDINARY RESOLUTION TO RENEW THE SHARE PURCHASE MANDATE
Our purchases or acquisitions of our ordinary shares must be made in accordance with, and in the manner
prescribed by, the Singapore Companies Act, the applicable listing rules of Nasdaq and such other laws and
regulations as may apply from time to time.
Singapore law requires that we obtain shareholder approval of a “general and unconditional share purchase
mandate” given to our directors if we wish to purchase or otherwise acquire our ordinary shares. This general and
unconditional mandate is referred to in this joint proxy statement as the Share Purchase Mandate, and it allows
our directors to exercise all of the company’s powers to purchase or otherwise acquire our issued ordinary shares
on the terms of the Share Purchase Mandate.
Although our shareholders approved a renewal of the Share Purchase Mandate at the extraordinary general
meeting of shareholders held in 2012, the Share Purchase Mandate renewed at the extraordinary general meeting
will expire on the date of the 2013 annual general meeting. Accordingly, we are submitting this proposal to seek
approval from our shareholders at the extraordinary general meeting for another renewal of the Share Purchase
Mandate. Pursuant to the Companies Act, share repurchases under our share repurchase plans are subject to an
aggregate limit of 10% of our issued ordinary shares outstanding as of the date of the extraordinary general
meeting held on August 30, 2012. On September 13, 2012, the Board authorized the repurchase of ordinary
shares of the company not to exceed the 10% limitation. Until the 2013 annual general meeting, any repurchases
would be made under the Share Purchase Mandate renewed at the extraordinary general meeting held in 2012.
Commencing on the date of the 2013 annual general meeting, any repurchases may only be made if the
shareholders approve the renewal of the Share Purchase Mandate at the extraordinary general meeting. The share
purchase program does not obligate the company to repurchase any specific number of shares and may be
suspended or terminated at any time without prior notice.
If renewed by shareholders at the extraordinary general meeting, the authority conferred by the Share
Purchase Mandate will, unless varied or revoked by our shareholders at a general meeting, continue in force until
the earlier of the date of the 2014 annual general meeting or the date by which the 2014 annual general meeting is
required by law to be held.
The authority and limitations placed on our share purchases or acquisitions under the proposed Share
Purchase Mandate, if renewed at the extraordinary general meeting, are summarized below.
Limit on Allowed Purchases
We may only purchase or acquire ordinary shares that are issued and fully paid up. The prevailing limitation
under the Companies Act that is currently in force does not permit us to purchase or acquire more than 10% of
the total number of our issued ordinary shares outstanding at the date of the extraordinary general meeting. Any
of our ordinary shares which are held as treasury shares will be disregarded for purposes of computing this 10%
limitation.
The Companies Act empowers the Singapore Minister for Finance to prescribe by notification a different
percentage as the share repurchase limit, which may be in excess of 10%. In the event that the Minister for
Finance prescribes by notification a higher percentage in excess of 10% pursuant to Section 76B(3) of the
Companies Act, we are seeking approval for our Board of Directors to authorize the purchase or acquisition of
our issued ordinary shares not exceeding in the aggregate either (i) 20% of our total number of issued ordinary
shares outstanding as of the date of the passing of this proposal (excluding any ordinary shares which are held as
treasury shares as at that date); or (ii) such other lower percentage (which nevertheless exceeds 10%) as may be
prescribed by the Minister for Finance. We will at all times fully observe the share repurchase limit that applies
from time to time and will only exceed the current 10% on the condition that any such higher percentage (up to a
maximum of 20%) is approved by the Minister for Finance through a notification issued pursuant to
Section 76B(3) of the Companies Act.
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Purely for illustrative purposes, on the basis of 628,790,395 issued ordinary shares outstanding as of May 1,
2013, and assuming no additional ordinary shares are issued or repurchased on or prior to the date of the
extraordinary general meeting:
(cid:129) based on the prevailing 10% limit, we would be able to purchase not more than 62,897,039, issued
ordinary shares pursuant to the proposed renewal of the Share Purchase Mandate; and
(cid:129) in the event that the Singapore Minister for Finance approves such higher limit up to a maximum of 20%,
we would be able to purchase not more than 125,758,079 issued ordinary shares pursuant to the proposed
renewal of the Share Purchase Mandate.
All ordinary shares purchased by us following the date of our last annual general meeting of shareholders
(that is, the annual general meeting that precedes the meeting at which the mandate is renewed) are subject to the
10% limitation (or such higher limitation not greater than 20% as may be approved by the Minister for Finance).
For example, if we sought approval for the renewal of the Share Purchase Mandate at our 2013 annual general
meeting of shareholders, we would have to reduce the number of new shares that we could repurchase by the
number of shares purchased by us at any time following the date of our 2012 annual general meeting.
We are holding the extraordinary general meeting immediately following our 2013 annual general meeting
so that the applicable date of our last annual general meeting for purposes of the Share Purchase Mandate will be
the date of the 2013 annual general meeting (that is, the same date as the extraordinary general meeting), rather
than the date of the 2012 annual general meeting. We believe that this approach will provide our Board with
greater flexibility in determining the number of shares that the company may repurchase.
In fiscal year 2013, we used $334 million to repurchase 51.7 million of our outstanding ordinary shares
under the Share Purchase Mandate. As of March 31, 2013, we had 638.9 million shares outstanding.
Duration of Share Purchase Mandate
Purchases or acquisitions of ordinary shares may be made, at any time and from time to time, on and from
the date of approval of the Share Purchase Mandate up to the earlier of:
(cid:129) the date on which our next annual general meeting is held or required by law to be held; or
(cid:129) the date on which the authority conferred by the Share Purchase Mandate is revoked or varied by our
shareholders at a general meeting.
Manner of Purchases or Acquisitions of Ordinary Shares
Purchases or acquisitions of ordinary shares may be made by way of:
(cid:129) market purchases on the NASDAQ Global Select Market or any other stock exchange on which our
ordinary shares may for the time being be listed and quoted, through one or more duly licensed dealers
appointed by us for that purpose; and/or
(cid:129) off-market purchases (if effected other than on the NASDAQ Global Select Market or, as the case may
be, any other stock exchange on which our ordinary shares may for the time being be listed and quoted),
in accordance with an equal access scheme as prescribed by the Companies Act.
If we decide to purchase or acquire our ordinary shares in accordance with an equal access scheme, our
directors may impose any terms and conditions as they see fit and as are in our interests, so long as the terms are
consistent with the Share Purchase Mandate, the applicable rules of Nasdaq, the provisions of the Companies Act
and other applicable laws. In addition, an equal access scheme must satisfy all of the following conditions:
(cid:129) offers for the purchase or acquisition of ordinary shares must be made to every person who holds
ordinary shares to purchase or acquire the same percentage of their ordinary shares;
(cid:129) all of those persons must be given a reasonable opportunity to accept the offers made; and
(cid:129) the terms of all of the offers must be the same (except differences in consideration that result from offers
relating to ordinary shares with different accrued dividend entitlements and differences in the offers
solely to ensure that each person is left with a whole number of ordinary shares).
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Purchase Price
The purchase price (excluding brokerage commission, applicable goods and services tax and other related
expenses of the purchase or acquisition) to be paid for each ordinary share will be determined by our directors.
The maximum purchase price to be paid for the ordinary shares as determined by our directors must not exceed:
(cid:129) in the case of a market purchase, the highest independent bid or the last independent transaction price,
whichever is higher, of our ordinary shares quoted or reported on the NASDAQ Global Select Market or,
as the case may be, any other stock exchange on which our ordinary shares may for the time being be
listed and quoted, or shall not exceed any volume weighted average price, or other price determined
under any pricing mechanism, permitted under SEC Rule 10b-18, at the time the purchase is effected; and
(cid:129) in the case of an off-market purchase pursuant to an equal access scheme, 150% of the “Prior Day Close
Price” of our ordinary shares, which means the closing price of an ordinary share as quoted on the
NASDAQ Global Select Market or, as the case may be, any other stock exchange on which our ordinary
shares may for the time being be listed and quoted, on the day immediately preceding the date on which
we announce our intention to make an offer for the purchase or acquisition of our ordinary shares from
holders of our ordinary shares, stating therein the purchase price (which shall not be more than the
maximum purchase price calculated on the foregoing basis) for each ordinary share and the relevant
terms of the equal access scheme for effecting the off-market purchase.
Treasury Shares
Under the Companies Act, ordinary shares purchased or acquired by us may be held as treasury shares.
Some of the provisions on treasury shares under the Companies Act are summarized below.
Maximum Holdings. The number of ordinary shares held as treasury shares may not at any time exceed
10% of the total number of issued ordinary shares.
Voting and Other Rights. We may not exercise any right in respect of treasury shares, including any right to
attend or vote at meetings and, for the purposes of the Companies Act, we shall be treated as having no right to
vote and the treasury shares shall be treated as having no voting rights. In addition, no dividend may be paid, and
no other distribution of our assets may be made, to the company in respect of treasury shares, other than the
allotment of ordinary shares as fully paid bonus shares. A subdivision or consolidation of any treasury share into
treasury shares of a smaller amount is also allowed so long as the total value of the treasury shares after the
subdivision or consolidation is the same as before the subdivision or consolidation, respectively.
Disposal and Cancellation. Where ordinary shares are held as treasury shares, we may at any time:
(cid:129) sell the treasury shares for cash;
(cid:129) transfer the treasury shares for the purposes of or pursuant to an employees’ share scheme;
(cid:129) transfer the treasury shares as consideration for the acquisition of shares in or assets of another company
or assets of a person;
(cid:129) cancel the treasury shares; or
(cid:129) sell, transfer or otherwise use the treasury shares for such other purposes as may be prescribed by the
Minister for Finance of Singapore.
Sources of Funds
Only funds legally available for purchasing or acquiring ordinary shares in accordance with our Articles of
Association and the applicable laws of Singapore shall be used. We intend to use our internal sources of funds
and/or borrowed funds to finance any purchase or acquisition of our ordinary shares. Our directors do not propose
to exercise the Share Purchase Mandate in a manner and to such an extent that would materially affect our
working capital requirements.
The Companies Act permits us to purchase or acquire our ordinary shares out of our capital and/or profits.
Acquisitions or purchases made out of capital are permissible only so long as we are solvent for the purposes of
section 76F(4) of the Companies Act. A company is solvent if (a) it is able to pay its debts in full at the time of the
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payment made in consideration of the purchase or acquisition (or the acquisition of any right with respect to the
purchase or acquisition) of ordinary shares in accordance with the provisions of the Companies Act and will be
able to pay its debts as they fall due in the normal course of business during the 12-month period immediately
following the date of the payment; and (b) the value of the company’s assets is not less than the value of its
liabilities (including contingent liabilities) and will not, after giving effect to the proposed purchase or
acquisition, become less than the value of its liabilities (including contingent liabilities).
Status of Purchased or Acquired Ordinary Shares
Any ordinary share that we purchase or acquire will be deemed cancelled immediately on purchase or
acquisition, and all rights and privileges attached to such ordinary share will expire on cancellation (unless such
ordinary share is held by us as a treasury share). The total number of issued shares will be diminished by the
number of ordinary shares purchased or acquired by us and which are not held by us as treasury shares.
We will cancel and destroy certificates in respect of purchased or acquired ordinary shares as soon as
reasonably practicable following settlement of any purchase or acquisition of such ordinary shares.
Financial Effects
Our net tangible assets and the consolidated net tangible assets of our subsidiaries will be reduced by the
purchase price of any ordinary shares purchased or acquired and cancelled or held as treasury shares. We do not
anticipate that the purchase or acquisition of our ordinary shares in accordance with the Share Purchase Mandate
would have a material impact on our consolidated financial condition and cash flows.
The financial effects on us and our group (including our subsidiaries) arising from purchases or acquisitions
of ordinary shares which may be made pursuant to the Share Purchase Mandate will depend on, among other
things, whether the ordinary shares are purchased or acquired out of our profits and/or capital, the number of
ordinary shares purchased or acquired, the price paid for the ordinary shares and whether the ordinary shares
purchased or acquired are held in treasury or cancelled.
Under the Companies Act, purchases or acquisitions of ordinary shares by us may be made out of profits
and/or our capital so long as the company is solvent.
Our purchases or acquisitions of our ordinary shares may be made out of our profits and/or our capital.
Where the consideration paid by us for the purchase or acquisition of ordinary shares is made out of our profits,
such consideration (excluding brokerage commission, goods and services tax and other related expenses) will
correspondingly reduce the amount available for the distribution of cash dividends by us. Where the consideration
that we pay for the purchase or acquisition of ordinary shares is made out of our capital, the amount available for
the distribution of cash dividends by us will not be reduced. To date, we have not declared any cash dividends on
our ordinary shares and have no current plans to pay cash dividends.
Rationale for the Share Purchase Mandate
We believe that a renewal of the Share Purchase Mandate at the extraordinary general meeting will benefit
our shareholders by providing our directors with appropriate flexibility to repurchase ordinary shares if the
directors believe that such repurchases would be in the best interests of our shareholders. Our decision to
repurchase our ordinary shares from time to time will depend on our continuing assessment of then-current
market conditions, our need to use available cash to finance acquisitions and other strategic transactions, the level
of our debt and the terms and availability of financing.
Take-Over Implications
If, as a result of our purchase or acquisition of our issued ordinary shares, a shareholder’s proportionate
interest in the company’s voting capital increases, such increase will be treated as an acquisition for the purposes
of The Singapore Code on Take-overs and Mergers. If such increase results in a change of effective control, or, as a
result of such increase, a shareholder or a group of shareholders acting in concert obtains or consolidates effective
control of the company, such shareholder or group of shareholders acting in concert could become obliged to make
a take-over offer for the company under Rule 14 of The Singapore Code on Take-overs and Mergers.
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The circumstances under which shareholders (including directors or a group of shareholders acting together)
will incur an obligation to make a take-over offer are set forth in Rule 14 of The Singapore Code on Take-overs
and Mergers, Appendix 2. The effect of Appendix 2 is that, unless exempted, shareholders will incur an obligation
to make a take-over offer under Rule 14 if, as a result of the company purchasing or acquiring our issued ordinary
shares, the voting rights of such shareholders would increase to 30% or more, or if such shareholders hold
between 30% and 50% of our voting rights, the voting rights of such shareholders would increase by more than
1% in any period of six months. Shareholders who are in doubt as to their obligations, if any, to make a
mandatory take-over offer under The Singapore Code on Take-overs and Mergers as a result of any share purchase
by us should consult the Securities Industry Council of Singapore and/or their professional advisers at the earliest
opportunity.
The Board recommends a vote “FOR” the resolution
to approve the proposed renewal of the Share Purchase Mandate.
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PART IV—ADDITIONAL INFORMATION
EXECUTIVE OFFICERS
The names, ages and positions of our executive officers as of May 25, 2013 are as follows:
Name
Age Position
Michael M. McNamara
Francois Barbier
Christopher Collier
Jonathan S. Hoak
Paul Humphries
56 Chief Executive Officer
54 President, Global Operations and Components
45 Chief Financial Officer and Principal Accounting Officer
63 Executive Vice President and General Counsel
58 President, High Reliability Solutions
Michael M. McNamara. Mr. McNamara has served as a member of our Board of Directors since
October 2005, and as our Chief Executive Officer since January 1, 2006. Prior to his appointment as Chief
Executive Officer, Mr. McNamara served as our Chief Operating Officer from January 2002 until January 2006,
as President, Americas Operations from April 1997 through December 2001, and as Vice President, North
American Operations from April 1994 to April 1997. Mr. McNamara also serves on the board of Workday, Inc.
and is on the Advisory Board of Tsinghua University School of Economics and Management. Mr. McNamara
previously served on the board of Delphi Automotive LLP and MEMC Electronic Materials, Inc.
Francois Barbier. Mr. Barbier has served as our President, Global Operations and Components since
February 2012. Prior to holding this position, Mr. Barbier served as our President, Global Operations since
June 2008. Prior to his appointment as President, Global Operations, Mr. Barbier was President of Special
Business Solutions and has held a number of executive management roles in Flextronics Europe. Prior to joining
Flextronics in 2001, Mr. Barbier was Vice President of Alcatel Mobile Phone Division. Mr. Barbier holds an
Engineering degree in Production from Lyceé Couffignal in Strasbourg.
Christopher Collier. Mr. Collier has served as our Chief Financial Officer since May 3, 2013 and as our
Principal Accounting Officer since May 1, 2007. He served as our Senior Vice President, Finance from
December 2004 to May 2013. Prior to his appointment as Senior Vice President, Finance in 2004, Mr. Collier
served as Vice President, Finance and Corporate Controller since he joined us in April 2000. Mr. Collier is a
certified public accountant and he received a B.S. in Accounting from State University of New York at Buffalo.
Jonathan S. Hoak. Mr. Hoak has served as our Executive Vice President and General Counsel since
January 31, 2011. Prior to joining Flextronics, Mr. Hoak was vice president and chief ethics and compliance
officer at Hewlett-Packard Company from October 2006 to January 2011. Prior to his service at HP, Mr. Hoak
was senior vice president and general counsel for NCR Corporation from December 1993 until May 2006.
Mr. Hoak was previously general attorney for AT&T’s Federal Systems Division and was also a partner at the law
firm of Sidley & Austin. Mr. Hoak has a Juris Doctor from Drake University and undergraduate degree from the
University of Colorado.
Paul Humphries. Mr. Humphries has served as our President, High Reliability Solutions since April 2011.
From April 2012 to November 2012 and April 2011 to September 2011, he served as our President, High
Reliability Solutions and as our Executive Vice President of Human Resources. Prior to April 2011,
Mr. Humphries served as our Executive Vice President of Human Resources. Mr. Humphries joined Flextronics
with the acquisition of Chatham Technologies Incorporated in April 2000, where he served as senior vice
president of Global Operations for the Mechanicals Business. Prior to this, Mr. Humphries held senior executive
positions for several well-known global organizations. These roles include managing director of Holts Lloyd
Division (Europe)—the Consumer Products Group of Honeywell Corporation, vice president of Operations for
the Autolite Division at Allied Signal, and senior HR and General Management positions at Borg Warner
Corporation in the UK and the U.S. Mr. Humphries holds a BA (Hons) in Applied Social Studies from Lanchester
Polytechnic (now Coventry University) and post-graduate certification in human resource management from
West Glamorgan Institute of Higher Education. Mr. Humphries serves as Chairman of the board of directors of
the Silicon Valley Education Foundation.
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COMPENSATION COMMITTEE REPORT
The information contained under this “Compensation Committee Report” shall not be deemed to be
“soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into
any filings under the Securities Act or under the Exchange Act, or be subject to the liabilities of Section 18 of the
Exchange Act, except to the extent that we specifically incorporate this information by reference into any such filing.
The Compensation Committee of the Board of Directors of the company has reviewed and discussed with
management the Compensation Discussion and Analysis that follows this report. Based on this review and
discussion, the Compensation Committee recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in the company’s joint proxy statement for the 2013 annual general meeting
of shareholders and extraordinary general meeting of shareholders.
Submitted by the Compensation Committee of the Board of Directors:
Daniel H. Schulman
James A. Davidson
Willy C. Shih, Ph.D.
Executive Summary
COMPENSATION DISCUSSION AND ANALYSIS
Throughout fiscal 2013, we continued to focus on transforming our business. The revenue and profitability
headwinds from disengaging from our largest smart phone OEM customer and exiting the Original Design
Manufacturing (ODM) PC business are now firmly behind us. Nevertheless, to combat the general overall flattish
business environment, we layered on revenues from new markets, new customers, and new programs. Throughout
the year, we focused on providing our customers with transformational outsourcing solutions that improve their
cost structures, increase their supply chain velocity and reduce supply chain risks, through the breadth and depth
of our global service offering. As a result, fiscal 2013 was a good year in terms of bookings as we secured new
business that was broadly distributed across our portfolio of businesses.
We also took important steps to strengthen our business as we emerge from the transition period. In response
to a challenging macroeconomic environment, we initiated certain restructuring activities in fiscal 2013 intended
to improve our operational efficiencies by reducing excess workforce and capacity. The restructuring activities are
targeted at rationalizing our global manufacturing capacity and infrastructure and will result in a further shift of
manufacturing capacity to locations with higher efficiencies. We expect that, upon the completion of these
restructuring activities, we will realize potential annualized savings through reduced expenses and lower
operating costs of more than $150 million.
Despite these challenges, we generated over $1.1 billion in cash flow from operations for the fiscal year. Our
strong cash flow generation allowed us to close the year with $69 million more cash after supporting strategic
acquisitions of $184 million, reducing debt by $121 million and repurchasing $322 million or 8% of our
outstanding shares. In addition, during the year we successfully refinanced $1 billion of our term loan due in
2014 through the issuance of two $500 million tranches of notes due in 2020 and 2023.
Consistent with our pay-for-performance compensation philosophy, the Compensation Committee took the
following key actions with respect to the compensation of the named executive officers:
(cid:129) Maintained Base Salary Levels. Base salaries of the named executive officers were not increased in
fiscal 2013, with the exceptions of Mr. Read whose base salary was increased from $600,000 to
$620,000, which was slightly below the 50th percentile of the peer group, and Mr. Hoak, whose base
salary was increased from $450,000 to $475,000, which was below the 50th percentile of the peer group.
(cid:129) Significantly Lower Annual Incentive Bonus Payouts. Bonuses under our annual incentive bonus plan are
based upon the achievement of company and business unit (in the cases of business unit executives)
performance goals. Based on fiscal 2013 operating performance, bonus payouts were at 17.6% of target
for Messrs. McNamara, Read, Hoak, 15.4% of target for Mr. Barbier, 84.9% of target for Mr. Humphries,
and 15.2% of target for Mr. Sykes.
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(cid:129) Long-Term Deferred Compensation Plan Award. Annual contributions under our deferred compensation
plan (which cliff vest after four years) only may be made if the company exceeds the threshold annual
performance level under our incentive bonus plan. Based on fiscal 2013 performance, there were no
deferred cash awards made in fiscal 2014 with respect to fiscal 2013 performance.
(cid:129) Total Cash Compensation of Chief Executive Officer. Mr. McNamara’s total cash compensation (the sum
of base salary and annual incentive bonus payout) increased 0.4% from fiscal 2012.
In this Compensation Discussion and Analysis section, we discuss the material elements of our
compensation programs and policies, including program objectives and reasons why we pay each element of our
executives’ compensation. Following this discussion, you will find a series of tables containing more specific
details about the compensation earned by, or awarded to, the following individuals, whom we refer to as the
named executive officers or NEOs. This discussion focuses principally on compensation and practices relating to
the named executive officers for our 2013 fiscal year.
Name Position
Michael M. McNamara Chief Executive Officer
Paul Read* Chief Financial Officer
Francois Barbier President, Global Operations and Components
Jonathan Hoak Executive Vice President and General Counsel
Paul Humphries President, High Reliability Solutions
Eslie C. Sykes* President, Industrial and Emerging Industries
* On May 1, 2013, Christopher Collier was appointed as the Chief Financial Officer as Paul Read had decided
to leave the Company. Both transitions were effective as of May 3, 2013. Mr. Read remains available
through July 5, 2013 for any necessary transitional services. In addition, Eslie Sykes left the Company
effective March 31, 2013.
Compensation Philosophy and Objectives
We believe that the quality, skills and dedication of our executive officers are critical factors affecting the
company’s performance and shareholder value. Accordingly, the key objective of our compensation programs is
to attract, retain and motivate superior executive talent by paying for the achievement of meaningful company
objectives, while maintaining an appropriate cost structure. Our compensation programs are designed to link a
substantial component of our executives’ compensation to the achievement of performance goals that directly
correlate to the enhancement of shareholder value. Finally, our compensation programs are designed to have the
right balance of short and long-term compensation elements to ensure an appropriate focus on operational
objectives and the creation of long-term value.
To accomplish these objectives, the Compensation Committee has structured our compensation programs to
include the following key features and compensation elements:
(cid:129) base salaries, which generally are targeted to be at the median of our peer group companies;
(cid:129) cash bonuses, based on pre-established annual and quarterly performance goals related to the company
and business unit (in the cases of business unit executives), with 50% of the payouts based on quarterly
achievement and 50% based on achievement of annual targets;
(cid:129) equity-based compensation, which aligns our executives’ interests with those of our shareholders and
promotes executive retention;
in fiscal 2013, we continued our equity incentive program implemented in fiscal 2011 and granted
performance-based and service-based restricted share units, with payout of the performance-based
awards based on our total shareholder return relative to the S&P 500 Index;
our performance-based restricted share units represented 50% (at target) of the total number of
underlying shares;
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performance-based restricted share units granted in fiscal 2013 provide for vesting based on
performance 100% after three years, thereby promoting the enhancement of long-term shareholder
value and executive retention;
our service-based restricted share units granted in fiscal 2013 provide for vesting over a four year
period with 25% vesting each year;
our equity grant strategy is to target a burn rate at a level consistent with our peer companies, while
considering the need to attract and retain a broader employee base than our peer companies as well as
the effects of our share buybacks; we aggressively manage our net burn rate to achieve a more
competitive comparison to our peer companies; and
(cid:129) performance-based contributions to our deferred compensation plan, which only may be awarded if the
company achieves threshold levels of performance under our incentive bonus plan; these awards are
designed to promote executive retention, as any contributions cliff vest after four years.
As a general matter, the Compensation Committee seeks to allocate a substantial portion of the named
executive officers’ compensation to components that are performance-based and at-risk. The Compensation
Committee also generally seeks to allocate a substantial portion of executive compensation to long-term,
performance-based cash and equity awards. The Compensation Committee does not maintain fixed policies for
allocating among current and long-term compensation or among cash and non-cash compensation. Instead, the
Compensation Committee maintains flexibility and adjusts different elements of compensation based upon its
evaluation of the key compensation goals set forth above. However, the Compensation Committee seeks to
maintain a weighting towards variable cash and equity compensation and longer-term incentive compensation to
mitigate the risk arising from any element of compensation. In addition, to further align our executives’ interests
with our shareholders and mitigate risk relating to our compensation programs, we adopted stock ownership
guidelines and an incentive compensation recoupment policy. See “Executive Stock Ownership Guidelines” and
“Executive Incentive Compensation Recoupment Policy” below.
While compensation levels may differ among NEOs based on competitive factors, performance, job
criticality, experience and the skill set of each specific NEO, there are no material differences in the compensation
philosophies, objectives or policies for our NEOs. We do not maintain a policy regarding internal pay equity.
However, the Compensation Committee reviews the ratio of the CEO’s total direct compensation with that of
other named executive officers as part of its overall review of our compensation programs.
None of the named executive officers serves pursuant to an employment agreement at the present time, and
each serves at the will of the company’s Board of Directors (subject to severance obligations under law). When an
executive officer retires, resigns or is terminated, the Compensation Committee exercises its business judgment in
approving an appropriate separation or severance arrangement in light of all relevant circumstances, including the
individual’s term of employment, severance obligations under applicable law, past accomplishments, internal
severance guidelines and reasons for separation from the company.
Alignment with Compensation Best Practices
The Compensation Committee regularly reviews our compensation programs and peer company data and
best practices in the executive compensation area. In past years, the Compensation Committee has recommended
and our Board has approved changes in our compensation policies and practices in order to align with best
practices. Overall, the Compensation Committee has sought to weight a higher percentage of our executives’ total
direct compensation to performance-based and long-term components. Key features of our compensation
programs that align with best practices in executive compensation are:
(cid:129) we generally target the fixed elements of our compensation, or our base salary, to approach over time the
50th percentile of our peer companies or the market data, and generally target our performance or variable
annual and long-term incentive compensation and total direct compensation to deliver total direct
compensation between the 60th and 65th percentiles of our peer companies or the market data; however,
our competitive positioning or benchmarking is reviewed each year in the context of historical
performance and our overall compensation programs, including prior incentive awards; for fiscal 2013,
Mr. McNamara’s total direct compensation was targeted to the 50th percentile of our peer companies and
the other named executive officers’ total direct compensation generally was targeted to approximate or to
be within a range around the median of our peer companies or the market data;
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(cid:129) long-term equity incentive compensation is comprised 50% of performance-based and 50% service-based
restricted share units;
we use the company’s total shareholder return relative to the Standard and Poor’s 500 Index as the
performance measure for our performance-based restricted share units; some of our service-based
restricted share units provide for back-end loaded vesting of 30% after three years and 40% after
four years; our service-based restricted share units granted in fiscal 2013 provide for vesting over a
four year period with 25% vesting each year;
(cid:129) for fiscal year 2013, 87.0% of Mr. McNamara’s total target direct compensation was either “at-risk” or
long-term, and overall for our other NEOs, 82.4% of total target direct compensation was either “at-risk”
or long-term;
(cid:129) our incentive plans have threshold levels of performance that must be met before any bonuses are paid or
performance-based restricted share units vest;
(cid:129) payout levels are capped under both our short and long-term incentive plans;
(cid:129) we use multiple performance metrics under our incentive plans to mitigate risk, so that executives are not
excessively incentivized by any single metric;
(cid:129) all non-GAAP adjustments under our annual incentive plan are subject to approval by the Compensation
Committee to ensure that the non-GAAP adjustment effects on payout levels appropriately reflect
company performance;
(cid:129) total target direct compensation of our CEO was less than 3 times the average of the other NEOs;
(cid:129) our executives do not have severance agreements, whether or not in connection with a change in control;
our equity awards do not have “single trigger” accelerated vesting upon a change in control;
(cid:129) we do not maintain a supplemental executive retirement plan (SERP);
(cid:129) our 2010 Equity Incentive Plan prohibits “share recycling” and options/SAR repricing (including cash
buyouts); we do not pay dividends or dividend equivalents on our restricted share units;
(cid:129) our net burn rate for fiscal 2013 was 1.38%, slightly below the 50th percentile of our peer companies; our
3-year average net burn rate for fiscal 2011 through fiscal 2013 was 1.21%, below the 60th percentile
of our peer companies; we achieved these rates while repurchasing an aggregate of approximately
198.8 million shares in fiscal 2011, fiscal 2012 and fiscal 2013;
(cid:129) we do not provide excessive executive perquisites;
(cid:129) we have adopted stock ownership guidelines for our executives and other senior officers;
(cid:129) we prohibit executives and senior officers from engaging in pledging or hedging transactions in company
stock or trading options or other derivatives;
(cid:129) we have adopted an incentive compensation recoupment policy; and
(cid:129) we believe that we provide clear and transparent disclosures of our compensation programs and practices,
so that our shareholders can understand the elements of our compensation programs, the reasons why we
pay them, and how compensation is linked to performance, including our annual and long-term
performance targets and their achievement.
Results of the 2012 Say on Pay Advisory Vote
As required by Section 14A of the Exchange Act, we provided shareholders with a “say on pay” advisory
vote on executive compensation at our 2012 Annual General Meeting held on August 30, 2012. The advisory vote
received the support of 90.9% of the votes cast at the Annual General Meeting. As a result the Compensation
Committee continues to evaluate the alignment of our executive compensation with shareholder interests. In
addition, we continue to engage in a dialogue with major institutional shareholders to receive their input and to
communicate our compensation philosophy and pay for performance alignment. As previously disclosed, we plan
to hold the say on pay advisory vote on an annual basis.
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Compensation Committee
The Compensation Committee periodically assesses our compensation programs to ensure that they are
appropriately aligned with our business strategy and are achieving their objectives. The Compensation Committee
also reviews market trends and changes in competitive practices. Based on its review and assessment, the
Compensation Committee from time to time recommends changes in our compensation programs to our Board.
The Compensation Committee is responsible for recommending to our Board the compensation of our Chief
Executive Officer and all other executive officers. The Compensation Committee also oversees management’s
decisions concerning the compensation of other company officers, administers our equity compensation plans,
and evaluates the effectiveness of our overall executive compensation programs.
Independent Consultants and Advisors
The Compensation Committee has the authority to retain and terminate any independent, third-party
compensation consultants and to obtain advice and assistance from internal and external legal, accounting and
other advisors. During our 2013 fiscal year, the Compensation Committee engaged Radford, an Aon Hewitt
Company (referred to in this discussion as Radford), as its independent adviser for certain executive
compensation matters. Radford was retained by the Compensation Committee to provide an independent review
of the company’s executive compensation programs, including an analysis of both the competitive market and the
design of the programs. More specifically, Radford furnished the Compensation Committee with reports on peer
company practices relating to the following matters: short and long-term compensation program design; annual
share utilization and shareowner dilution levels resulting from equity plans; and executive stock ownership and
retention values. As part of its reports to the Compensation Committee, Radford evaluated our selected peer
companies, and provided competitive compensation data and analysis relating to the compensation of our Chief
Executive Officer and our other executives and senior officers. Radford also assisted the Compensation
Committee with its risk assessment of our compensation programs.
Radford is owned by Aon Hewitt Corporation, a multi-national, multi-services insurance and consulting
firm. For a discussion of amounts paid to Radford for executive and director compensation consulting services
and amounts paid to Aon Hewitt Corporation and its affiliates for non-executive and non-director compensation
consulting services, please see “Compensation Committee—Relationship with Compensation Consultant.” The
Compensation Committee has determined that the provision by Aon of services unrelated to executive and
director compensation matters in fiscal year 2013 was compatible with maintaining the objectivity of Radford in
its role as compensation consultant to the Compensation Committee and that the consulting advice it received
from Radford was not influenced by Aon’s other relationships with the company. The Compensation Committee
has retained Radford as its independent compensation consultant for fiscal year 2014 and expects that it will
continue to retain an independent compensation consultant on future executive compensation matters.
Role of Executive Officers in Compensation Decisions
The Compensation Committee makes recommendations to our Board on all compensation actions relating to
our executive officers. As part of its process, the Compensation Committee meets with our Chief Executive
Officer and other executives to obtain recommendations with respect to the structure of our compensation
programs, as well as an assessment of the performance of individual executives and recommendations on
compensation for individual executives. As discussed in greater detail below under “Fiscal Year 2013 Executive
Compensation—Incentive Bonus Plan,” our Chief Executive Officer and other executives develop
recommendations for performance measures and target and payout opportunities under our incentive bonus plan
based on management’s business forecast both at the company and business unit levels, which are reviewed and
approved by our Board.
Competitive Positioning
In arriving at its recommendations to our Board on the amounts and components of compensation for our
Chief Executive Officer and other executive officers, the Compensation Committee considers competitive
compensation data prepared by its independent compensation consultant. The Compensation Committee reviews
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this data in the context of historical performance and our overall compensation programs, including prior
incentive awards. The Compensation Committee considered the following competitive compensation data:
(cid:129) to benchmark compensation for our CEO and CFO, Radford constructed a peer group consisting of
21 peer companies based on the following criteria and market data as of March 2012: (i) global
companies with a technology focus and with significant manufacturing operations; (ii) companies with
revenues generally between $10 billion and $50 billion (approximately .5x to 2x Flextronics’s trailing
12 months revenues); and (iii) companies with a market capitalization generally between $3 billion and
$25 billion. Radford compiled compensation data from such companies’ SEC filings; and
(cid:129) to benchmark compensation for our other executives and senior officers, including our named executives
officers (other than our CEO and CFO), Radford recommended and the Compensation Committee
approved using data from Radford’s published compensation survey for technology companies. Radford
recommended and the Compensation Committee approved using survey data for technology companies
with annual revenues generally between $10 billion and $50 billion and with significant manufacturing
operations in order to align the data more closely to the criteria selected for the CEO/CFO peer group.
Radford recommended and the Compensation Committee approved the use of this survey data because
this survey data provided a better match based upon job responsibility, including revenue responsibility,
and are more reflective of the market for talent for these positions. In addition, the survey data was more
appropriate for the broader executive group, which includes business unit executives, because publicly
available compensation data from peer company SEC filings for matching positions generally was not
available.
Peer companies are recommended by the Compensation Committee’s independent consultant and approved
by the Compensation Committee. In selecting peer companies, the Compensation Committee seeks to select
companies that are comparable to us on the basis of various criteria, including revenues, industry, global scope of
operations, and market capitalization, and that the Compensation Committee believes would compete with us for
executive talent.
The CEO/CFO peer group for fiscal year 2013 compensation decisions consisted of the following companies:
Alcatel-Lucent
Arrow Electronics, Inc.
Danaher Corporation
Eaton Corporation
General Dynamics Corporation
Illinois Tool Works Inc.
Johnson Controls, Inc.
Northrop Grumman Corporation
Royal Philips Electronics
Tyco International Ltd.
Xerox Corporation
Applied Materials, Inc.
Avnet, Inc.
Dell Inc.
Emerson Electric Co.
Honeywell International Inc.
Jabil Circuit, Inc.
Motorola Solutions, Inc.
Raytheon Company
Seagate Technology
Western Digital Corporation
The Compensation Committee has approved the same CEO/CFO peer group for fiscal year 2014, except
that TE Connectivity was added to the peer group because it is a global manufacturing company that fits within
the approved criteria established by the Compensation Committee.
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The companies included in the Radford survey used for fiscal 2013 compensation benchmarking for our
other executives and senior officers are as follows:
Alcatel-Lucent
Arrow Electronics, Inc.
Comcast Corporation
Deere & Company
DIRECTV
EMC Corporation
Intel Corporation
Johnson Controls, Inc.
Lockheed Martin Corporation
Navistar International Corporation
Northrop Grumman Corporation
Qwest Communications International Inc.
Science Applications International Corporation
Sprint Nextel Corporation
Thermo Fisher Scientific Inc.
Western Digital Corporation
AOL Inc.
Cisco Systems, Inc.
Covidien plc
Dell Inc.
E.I. du Pont de Nemours and Company
Honeywell International Inc.
Jabil Circuit, Inc.
L-3 Communications
Motorola Solutions, Inc.
Nokia Corporation
QUALCOMM Incorporated
Research In Motion Limited
Seagate Technology
Texas Instruments Incorporated
Tyco International Ltd.
Xerox Corporation
The Compensation Committee generally seeks to set base salary at the 50th percentile and total target direct
compensation at between the 60th and 65th percentiles of our peer companies or the market data. Total target direct
compensation is the sum of base salary, target annual incentive compensation and target long-term incentive
awards. Our competitive positioning or benchmarking is reviewed by the Compensation Committee each year in
the context of historical performance and our overall compensation programs, including prior incentive awards.
Total target direct compensation, as well as individual components, may vary by executive based on the
executive’s experience, job criticality, level of responsibility and performance, as well as competitive market
conditions.
Fiscal Year 2013 Executive Compensation
Summary of Fiscal Year 2013 Compensation Decisions
In fiscal 2013, management focused on transforming our business after completing the exit of our ODM PC
business in fiscal 2012 and disengaging from our largest smart phone OEM customer in fiscal 2013.
Nevertheless, we continued to operate in a weak macroeconomic environment in fiscal 2013 which broadly
affected the markets that we serve, significantly impacting our operating results. As a result, bonus payouts under
our annual incentive bonus plan were at 17.6% of target for Messrs. McNamara, Read and Hoak, 15.4% for
Mr. Barbier, 84.9% of target for Mr. Humphries, and 15.2% of target for Mr. Sykes.
Based on fiscal 2013 performance, there were no deferred cash awards made in fiscal 2014 with respect to
fiscal 2013 performance.
For fiscal 2013, equity-based compensation comprised 50% of performance- based restricted share units
and 50% of service-based restricted share units. Mr. McNamara’s equity grant was targeted to approximate the
50th percentile of our peer companies and the other NEOs’ equity grants generally were targeted between the
50th and 60th percentiles of our peer companies or the market data.
Mr. McNamara’s total cash compensation (the sum of base salary and annual incentive bonus payout)
increased 0.4% from fiscal 2012 and his total direct compensation (the sum of base salary, annual incentive bonus
payout and long-term equity awards) increased 8.2% from fiscal 2012. 7.8% of this increase in total direct
compensation for Mr. McNamara is the result of an increase in his equity grant levels last year. His equity
compensation was increased to provide Mr. McNamara with equity compensation in line with the median market
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value for our peers. For our other named executive officers, the average increase in total cash compensation was
8.2% and the average total direct compensation remained similar.
Mr. McNamara
Mr. Read
Mr. Barbier
Mr. Humphries
Mr. Sykes
Mr. Hoak
Actual Cash FY13 . . . . . .
Actual Cash FY12 . . . . . .
% increase . . . . . . . . . . . .
1,579,138
1,572,663
0.41%
756,044
729,065
3.7%
706,404
676,875
4.36%
993,073
821,328
20.91%
609,006
585,195
4.07%
541,705
503,166
7.66%
Based on company performance, the Compensation Committee believes that compensation levels for fiscal
year 2013 were appropriate and consistent with the philosophy and objectives of the company’s compensation
programs.
Elements of Compensation
We allocate compensation among the following components for our named executive officers:
(cid:129) base salary;
(cid:129) annual incentive bonus awards;
(cid:129) performance-based and service-based stock incentive awards;
(cid:129) performance-based deferred compensation; and
(cid:129) other benefits.
As discussed above, a key element of our compensation philosophy is that a significant portion of executive
compensation is “performance-based” and therefore “at-risk.” A second key element of our compensation
philosophy is that a significant portion of executive compensation is comprised of long-term elements in order to
align executive compensation with sustained, long-term performance and stock price appreciation. Annual
incentive compensation, performance-based restricted share units and performance-funded contributions under our
deferred compensation plan are compensation that is “at-risk” because their payouts depend entirely upon
performance. Our performance-based and service-based restricted share units and performance- funded deferred
compensation plan contributions are designed to provide significant retention and alignment with long-term
shareholder value enhancement, with these awards predominantly fully vesting after periods of three or four years.
The following charts illustrate the mix of our compensation and show that for our Chief Executive Officer, 87.0%
of total target direct compensation is either “at-risk” or long-term, and, overall for our other NEOs, 82.4% of total
target direct compensation is either “at-risk” or long-term:
FY13 CEO Total Target Direct
Compensation
13.0%
Base Salary
36.7%
19.6%
Annual Incentive Plan
Time Based RSU
Performance Based RSU
30.7%
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FY13 Other NEO Total Target Direct
Compensation
17.6%
Base Salary
32.9%
Annual Incentive Plan
21.9%
Time Based RSU
Performance Based RSU
27.6%
Base Salary
We seek to set our executives’ base salaries at levels which are competitive with our peer companies based
on each individual executive’s role and the scope of his or her responsibilities, also taking into account the
executive’s experience and the base salary levels of other executives within the company. The Compensation
Committee typically reviews base salaries every fiscal year and adjusts base salaries to take into account
competitive market data, individual performance and promotions or changes in responsibilities. The following
changes to base salaries were made for fiscal 2013.
Mr. McNamara’s base salary was maintained at $1,250,000, which approximated the 50th percentile of our
peer companies. Mr. Read’s base salary was increased from $600,000 to $620,000, which was slightly below
the 50th percentile of our peer companies. Mr. Barbier’s base salary was maintained at $600,000, which
approximated the 60th percentile of the peer group. Mr. Hoak’s base salary was increased from $450,000 to
$475,000, which was below the 50th percentile of the peer group. Mr. Humphries’ base salary was maintained at
$525,000, which approximated the 75th percentile of the peer group. Mr. Sykes’s base salary was maintained at
$525,000, which exceeded the 75th percentile of the peer group.
Incentive Bonus Plan
Through our incentive bonus plan, we seek to provide pay for performance by linking incentive awards to
company and business unit performance. In designing the incentive bonus plan, our Chief Executive Officer and
management team develop and recommend performance metrics and targets, which are reviewed and are subject
to adjustment by the Compensation Committee and our Board. Performance metrics and payout levels are
determined based on management’s business forecast both at the company and business unit levels, as reviewed
and approved by the Board. In fiscal 2013, target levels for performance were set at approximately the levels
included in our business forecast. Maximum payout levels were tied to stretch or “home run” levels of
performance. As part of the process of setting performance targets, the Compensation Committee reviewed
analyst consensus estimates for fiscal 2013 and confirmed that target performance measures were appropriately
aligned with such estimates.
For fiscal 2013, our performance measures emphasized profitability and revenue growth at the corporate and
business unit level, and specific business unit goals at the business unit level. In addition, our performance measures
emphasized continued cash flow generation. Performance measures were based on quarterly and annual targets.
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Key features of the bonus plan in fiscal 2013 were as follows:
(cid:129) performance targets were based on key company and business unit financial metrics;
(cid:129) performance targets were measured on an annual and quarterly basis, with total bonus opportunities
based on annual performance; bonuses were paid out quarterly, with 50% of the bonus based on
achievement of quarterly objectives and 50% based on the achievement of annual objectives;
(cid:129) the financial goals varied based on each executive’s responsibilities, with a substantial weighting on
business unit financial metrics for business unit executives;
(cid:129) performance measures under the plan were: annual and quarterly revenue growth, operating profit (as a
percentage of sales), return on invested capital and adjusted earnings per share targets at the company level;
and annual and quarterly operating profit (as a percentage of sales), revenue growth, profit after interest
percentage, inventory turnover, and other business-unit specific targets at the business unit level for certain
executives; annual and fourth quarter performance measures were based on results from continuing operations;
(cid:129) certain performance measures were calculated on a non-GAAP basis and excluded after-tax intangible
amortization and stock-based compensation expense;
all non-GAAP adjustments were subject to approval by the Compensation Committee to ensure that the
non-GAAP adjustment effects on payout levels appropriately reflected company performance;
(cid:129) bonuses were based entirely on achievement of financial performance objectives; there was no individual
performance component;
(cid:129) each executive’s target bonus was set at a percentage of base salary, based on the level of the executive’s
responsibilities;
the CEO’s target bonus was set at 150% of base salary and the CFO’s target bonus was set at 125% of
base salary;
for NEOs other than the CEO and CFO, the target bonus was set at a range of between 80% and 110%
of base salary;
(cid:129) payout opportunities for each bonus component ranged from 50% of target to a maximum of 200% of
target for quarterly bonuses and 300% of target for annual bonuses where payout achievement between
the 200% and 300% levels are cliff vested (not interpolated); and
(cid:129) if the company failed to achieve the threshold level for any performance measure, no payout was awarded
for that measure.
The Compensation Committee recommended and our Board approved different performance metrics for our
Chief Executive Officer, Chief Financial Officer and corporate officers as compared with business unit
executives. In addition, we varied the weightings for certain performance metrics among different executives, in
order to better align individual awards with our business strategy.
The incentive bonus plan award opportunities for each NEO are shown in the Grants of Plan-Based Awards
in Fiscal Year 2013 table. In fiscal 2013, the target incentive bonus awards were set at approximately the
50th percentile of our peer companies for Mr. McNamara; at greater than the 75th percentile of our peer companies
for Mr. Read; at the 60th percentile of the peer group for Mr. Barbier; between the 50th and 60th percentiles of the
peer group for Mr. Hoak; approximately the 60th percentile of the peer group for Mr. Humphries and
approximately the 60th percentile of the peer group for Mr. Sykes.
Non-GAAP Adjustments
We used adjusted non-GAAP performance measures for our incentive bonus plan in fiscal 2013. We use
adjusted measures to eliminate the distorting effect of certain unusual income or expense items. The adjustments
are intended to:
(cid:129) align award payout opportunities with the underlying growth of our business; and
(cid:129) avoid outcomes based on unusual items.
In calculating non-GAAP financial measures, we exclude certain items to facilitate a review of the comparability
of the company’s operating performance on a period-to-period basis because such items are not, in the Compensation
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Committee’s view, related to the company’s ongoing operational performance. The non-GAAP measures are used to
evaluate more accurately the company’s operating performance, for calculating return on investment, and for
benchmarking performance against competitors. For fiscal 2013, non-GAAP adjustments consisted of excluding
after-tax stock-based compensation expense, restructuring charges and intangible amortization. All adjustments are
subject to approval by the Compensation Committee to ensure that payout levels are consistent with performance.
Incentive Awards for the CEO and CFO
Messrs. McNamara and Read were each eligible for a bonus award based on achievement of quarterly and
annual revenue growth, adjusted operating profit percentage, ROIC and adjusted EPS targets. We refer to these
performance measures as the “company performance metric.” The weightings for each of these performance
measures was 30% for all metrics other than ROIC which was 10%. Mr. McNamara’s annual target bonus was
150% of base salary and Mr. Read’s annual target bonus was 125% of base salary. Mr. McNamara’s target
percentage of base salary remained the same as in fiscal 2012 and resulted in total target cash approximating the
60th percentile of our peer companies. Mr. Read’s bonus target as a percentage of base salary also remained the
same as in fiscal 2012 and resulted in total target cash between the 50th and 60th percentiles of our peer companies.
The following table sets forth the payout level opportunities that were available for Messrs. McNamara and
Read as a percentage of the target award for each performance measure based on different levels of performance.
Revenue targets represented year over year growth targets of 5% at the 50% payout level, 7.5% at the 100%
payout level, 10% at the 150% payout level, 12.5% at the 200% payout level and with respect to the annual bonus
only 17.5% at the 300% payout level.
For purposes of the bonus calculations in the tables below, revenue numbers include total revenue minus
certain types of HVS related revenue. Therefore, revenue numbers below are lower than revenue numbers
reported by the company in its financial statements.
Payout levels for each performance measure ranged from 50% to 200% related to quarterly bonus and 300%
of target for the annual bonus based on achievement of the performance measure, with no payout if the threshold
performance level was not achieved. For performance levels between the 50% and 200% levels presented in the
table below, straight line interpolation was used to arrive at the payout level:
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Payout (% Target)
Q1 Revenue (in millions)
Q1 Adjusted OP%
Q1 ROIC
Q1 Adjusted EPS
Q2 Revenue (in millions)
Q2 Adjusted OP%
Q2 ROIC
Q2 Adjusted EPS
Q3 Revenue (in millions)
Q3 Adjusted OP%
Q3 ROIC
Q3 Adjusted EPS
Q4 Revenue (in millions)
Q4 Adjusted OP%
Q4 ROIC
Q4 Adjusted EPS
FY’13 Revenue (in millions)
FY’13 Adjusted OP%
FY’13 ROIC
FY’13 Adjusted EPS
50%
$5,200.2
3.0%
17.5%
$0.22
$5,215.1
3.0%
17.5%
$0.23
$5,043.0
3.0%
17.5%
$0.25
$5,028.0
3.0%
17.5%
$0.25
$20,486.3
3.0%
17.5%
$0.95
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300%
100%
$5,324.0
3.3%
22.5%
$0.24
$5,339.2
3.3%
22.5%
$0.26
$5,163.1
3.3%
22.5%
$0.28
$5,147.7
3.3%
22.5%
$0.27
200%
$5,571.6
3.5%
27.5%
$0.27
$5,587.6
3.5%
27.5%
$0.30
$5,403.3
3.5%
27.5%
$0.32
$5,387.2
3.5%
27.5%
$0.31
$20,974.1
3.3%
22.5%
$1.05
$21,949.6
3.5%
27.5%
$1.20
$22,925.2
3.8%
32.5%
$1.35
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The following table sets forth the actual quarterly and annual performance and the payout levels (as a
percentage of the target award for the quarterly and annual periods) and payout amounts (as a percentage of base
salary for the quarterly and annual periods) for Messrs. McNamara and Read.
CEO
Actual
CFO
Actual
Revenue
(in
Payout Adjusted Payout
Payout Adjusted Payout
Period
millions) Level % OP % Level % ROIC Level % EPS
50% 20.8% 83.32% $0.23
$4,626.4 — 3.0%
50% 20.9% 84.0% $0.26
$4,534.9 — 3.0%
82% $0.22
$4,638.7 — 2.4% — 20.7%
66% $0.13
$4,271.4 — 2.0% — 19.1%
Q1
Q2
Q3
Q4
FY’13
Annual
Component $18,071.5 — 2.6% — 19.1%
FY’13
Total
Payout
66% $0.84
—
6.6% 9.9%
8.3%
17.6% 26.3% 21.9%
Payout % Payout %
(as a % (as a %
Total
of Base
of Base
Payout
Salary)
Level % Level % Salary)
75% 45.83% 68.7% 57.3%
100% 53.4% 80.1% 66.8%
8.2% 12.3% 10.3%
—
8.3%
6.6% 9.9%
—
Overall performance for each quarter was below the target level of performance with payout levels (as a
percentage of target) of 45.8% for the first quarter, 53.4% for the second quarter, 8.2% for the third quarter (paid
in Q4 for administrative reasons) and 6.6% for the fourth quarter. For annual component, the payout level (as a
percentage of target) was 6.6%. The total annual bonus payout was 17.6%, which represents 26.3% for
Mr. McNamara and 21.9% for Mr. Read as a percentage of base salary.
Incentive Awards for NEOs other than the CEO and CFO
Mr. Barbier, President of Flextronics Global Operations and Components, was eligible for a bonus based on
achievement of the quarterly and annual company performance metrics (i.e., the performance measures that
applied to Messrs. McNamara and Read), as well as various business unit performance metrics in Q1. Effective
the second fiscal quarter, Mr. Barbier’s bonus was based exclusively on the annual company performance metric.
Mr. Barbier’s annual target bonus was 110% of base salary. Mr. Barbier’s target percentage of base salary
increased from 90% in fiscal 2012 and resulted in total target cash approximating the 50th percentile of the market
data. Actual payout level opportunities ranged from 50% to 300% of target. For performance levels between the
50% and 200% payout levels, straight line interpolation was used to arrive at the payout level. Mr. Barbier was
only eligible for a 300% payout level for any of the performance measures if the company achieved an annual
maximum level of performance. Certain business unit metrics were calculated on an adjusted non-GAAP basis
consistent with the company performance metric.
Mr. Hoak was eligible for a bonus award based on achievement of the quarterly and annual company
performance metrics, with the same weightings as Messrs. McNamara and Read. The annual target bonus was
80% of base salary. Mr. Hoak’s bonus target as a percentage of base salary increased from 70% in fiscal 2012 and
resulted in total target cash slightly below the 25th percentile of the peer group.
Mr. Humphries, President of High Reliability Solutions, was eligible for a bonus based on achievement of
the quarterly and annual company performance metrics (i.e., the performance measures that applied to
Messrs. McNamara and Read), as well as various business unit performance metrics, including revenue, operating
profit percentage, profit after interest percentage and new business wins for our High Reliability Solutions
business group. Mr. Humphries’ annual target bonus was 105% of base salary. Mr. Humphries’ target percentage
of base salary increased from 90% in fiscal 2012 and resulted in total target cash between the 50th and 60th percentiles
of the market data. Actual payout level opportunities ranged from 50% to 300% of target. The weightings of the
performance metrics for Mr. Humphries were 40% for the company performance metric and 60% for the business
unit metrics. For performance levels between the 50% and 200% payout levels, straight line interpolation was
used to arrive at the payout level. Mr. Humphries only was eligible for a 300% payout level on the annual
component for any of the performance measures if his business unit or the company achieved an annual
maximum level of performance for the metric. Certain business unit metrics were calculated on an adjusted
non-GAAP basis consistent with the company performance metric. We treat the business unit performance
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measures as confidential. We set these measures at levels designed to motivate Mr. Humphries to achieve
operating results at his business unit in alignment with our business strategy with payout opportunities at levels of
difficulty consistent with our company performance metric.
Mr. Sykes, President of President, Industrial and Emerging Industries, was eligible for a bonus based on
achievement of the quarterly and annual company performance metrics (i.e., the performance measures that
applied to Messrs. McNamara and Read), as well as various business unit performance metrics, including
revenue, operating profit percentage and inventory turns for our Industrial and Emerging Industries segment.
Mr. Sykes’ annual target bonus was 105% of base salary. Mr. Sykes’ target percentage of base salary increased
from 90% in fiscal 2012 and resulted in total target cash at approximately the 60th percentile of the peer group.
Actual payout level opportunities ranged from 50% to 300% of target. The weightings of the performance metrics
for Mr. Sykes were 40% for the company performance metric and 60% for the business unit metrics. For
performance levels between the 50% and 200% payout levels, straight line interpolation was used to arrive at the
payout level. Mr. Sykes only was eligible for a 300% payout level for any of the performance measures if his
business unit or the company achieved an annual maximum level of performance for the metric. Certain business
unit metrics were calculated on an adjusted non-GAAP basis consistent with the company performance metric.
We treat the business unit performance measures as confidential. We set these measures at levels designed to
motivate Mr. Sykes to achieve operating results at his business unit in alignment with our business strategy with
payout opportunities at levels of difficulty consistent with our company performance metric.
The following table sets forth the actual quarterly, annual and total payout levels, both as a percentage of
target and of base salary, for Messrs. Barbier, Hoak, Humphries and Sykes:
F. Barbier
Actual
Payout %
(as a % of
F. Barbier
Payout
J. Hoak
Actual
J. Hoak
Payout
Payout % P. Humphries
(as a % of
Payout
P. Humphries
Actual
Payout %
(as a % of
E Sykes
Payout
E Sykes
Actual
Payout %
(as a % of
(% Target) Base Salary)
(% of Target) Base Salary)
(% of Target) Base Salary)
(% of target) Base Salary)
34.4%
53.4%
8.2%
6.6%
37.8%
58.7%
9%
7.3%
45.8%
53.4%
8.2%
6.6%
36.7%
42.7%
6.6%
5.3%
137.3%
98.1%
55.7%
62.6%
144.2%
103.0%
58.5%
65.8%
48.9%
41.86%
8.5%
2.6%
51.3%
53.9%
8.9%
2.8%
6.6%
7.3%
6.6%
5.3%
81.4%
85.5%
2.6%
2.8%
16.1% 17.7%
17.6%
14.0%
84.9%
89.2%
15.2%
16.0%
Period
Q1
Q2
Q3
Q4
FY’13
Annual
Component
FY’13
Total
Payout
The Compensation Committee believes that bonuses awarded under our incentive bonus plan appropriately
reflected the company’s performance and appropriately rewarded the performance of the named executive
officers.
Long-Term Incentive Programs
The Compensation Committee’s general policy is to target long-term incentive compensation (which is
deemed to include target annual performance-based contributions to the deferred compensation plan) at between
the 60th and 65th percentiles of our peer companies and market data, subject to individual variances. As noted
earlier, our competitive positioning for long-term incentive compensation is determined in the context of
historical performance and our overall compensation programs, including prior incentive awards. For fiscal 2013,
Mr. McNamara’s long-term incentive award was targeted to slightly below the 50th percentile of our peer
companies, and the other named executive officers’ long-term incentive awards generally were targeted to be
within a range around the median of our peer companies or the market data.
Long-Term Cash Incentive Awards
In prior years, the Compensation Committee has recommended and the Board has approved long-term cash
incentive awards that allowed for named executive officers and certain other senior officers to earn cash bonuses
based upon the achievement by the company of certain three-year performance targets. In fiscal 2011, the
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company adopted the 2010 Deferred Compensation Plan, which replaces both the prior long-term cash incentive
awards program and our senior executive and senior management deferred compensation plans. Under the new
plan, the company in its discretion may make annual contributions in amounts up to 30% of each participant’s
base salary (subject to offsets for non-U.S. executives’ pension and other benefits), provided that Mr. Read is not
eligible for annual performance-based contributions until past company contributions vest under his prior deferred
compensation accounts. Contributions will be made, subject to Committee approval, based on achievement of the
same performance metrics as under our incentive bonus plan and will cliff vest after four years. The new plan and
the prior deferred compensation plans are discussed further under “Deferred Compensation” below. Based on
fiscal 2013 performance, there were no deferred cash awards made in fiscal 2014. For additional information about
company contributions to the named executive officers deferral accounts made in fiscal year 2013, please see the
section entitled “Executive Compensation—Nonqualified Deferred Compensation in Fiscal Year 2013.”
Stock-Based Compensation
Restricted Share Unit Awards and Stock Options
The Compensation Committee grants performance-based and service-based restricted share unit awards (the
equivalent of restricted stock units) and stock options. Equity incentives are designed to align the interests of the
named executive officers with those of our shareholders and provide each individual with a significant incentive
to manage the company from the perspective of an owner, with an equity stake in the business. These awards are
also intended to promote executive retention, as unvested restricted share unit awards and stock options are
generally forfeited if the executive voluntarily leaves the company. Restricted share unit awards are structured as
either performance-based awards, which vest only if pre-established performance measures are achieved, or
service-based awards, which vest if the executive remains employed through the vesting period. Before the
restricted share unit award vests, the executive has no ownership rights in our ordinary shares. The payouts are
made in shares, so the value of the award goes up or down based on share price performance from the beginning
of the grant, further aligning the interests of the executive with long-term shareholder value creation. Each stock
option allows the executive officer to acquire our ordinary shares at a fixed price per share (the closing market
price on the grant date) generally over a period of seven years, thus providing a return to the officer only if the
market price of the shares appreciates over the option term.
Beginning with fiscal 2011, the Compensation Committee determined that equity awards for executives and
other senior officers generally would be allocated 50% to performance-based restricted share unit awards and 50%
to service-based restricted share unit awards. None of the NEOs has received an option grant since 2009 and no
equity awards were granted to the named executive officers in fiscal 2010. The Compensation Committee believes
that this allocation promotes retention, serves to link long-term compensation to the company’s long-term
performance and limits the dilutive effect of equity awards. Key features of these awards are as follows:
(cid:129) vesting of the performance based restricted share units is tied to the company’s total shareholder return
versus total shareholder return of the S&P 500, with payouts ranging from 0% to 150% in fiscal year
2011 and 2012 and 200% in fiscal year 2013 based on performance; the Compensation Committee
believes that the relative total shareholder return metric used for the performance based awards is a
widely accepted investor benchmark that appropriately aligns compensation with performance;
(cid:129) performance-based restricted share units granted in fiscal 2013 will vest after three years;
(cid:129) service based restricted share units granted prior to fiscal year 2013 vested according to various
schedules including in four installments of 10%, 20%, 30% and 40% on the first, second, third and
fourth anniversaries of the grant date in fiscal year 2012; the back-end loaded vesting schedule resulting
in 70% of the award vesting after periods of three years and four years; in fiscal year 2011, service based
restricted share units granted vested in two installments of 50% on the 3rd anniversary and 50% on the
4th anniversary;
(cid:129) service-based restricted share units granted in fiscal year 2013 vest in four installments of 25% on each
yearly anniversary of the grant date; vesting was changed in fiscal year 2013 to be consistent with typical
market practices for time-based restricted stock units;
(cid:129) we do not pay dividends or dividend equivalents on our restricted share units.
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Vesting of the performance-based awards granted in fiscal 2013 will depend on the company achieving
levels of total shareholder return relative to the average of the Standard & Poor’s 500 Index total shareholder
return for the performance periods, as follows (with vesting for performance between the indicated performance
levels computed on the basis of linear interpolation):
Flextronics TSR as a % of S&P 500 Awards Earned as a %
Index Average TSR of Target Awards
Maximum
Target
Threshold
Above 200% of S&P Average 200%
150% of S&P Average 150%
100% of S&P Average 100%
50% of S&P Average 50%
Below 50% of S&P Average 0%
In addition, in fiscal 2013 the Board approved amendments to the existing performance-based awards to
provide vesting in the event of retirement in certain circumstances. Under the amended terms the awards provide
that in the event of retirement a pro-rata number of vested shares shall be issued upon the vesting of the
performance-based award pursuant to the performance criteria, with the number of shares that vest determined by
multiplying the full number of shares subject to the award by a fraction, which shall be (x) the number of
complete months of continuous service as an employee from the grant date of the award to the date of retirement,
divided by (y) the number of months from the grant date to the vesting/ release date; provided, further, that if
within twelve months of retirement, the executive officer violates the terms of a non-disclosure agreement with,
or other confidentiality obligation owed to, the company or any parent, subsidiary or affiliate, then the award and
all of the company’s obligations and the executive officer’s rights under the award shall terminate. For purposes
of the awards, “Retirement” means the executive officer’s voluntary termination of service after the executive
officer has attained age sixty (60) and completed at least ten (10) years of service as an employee of the company
or any parent, subsidiary or affiliate. At the current time none of the executive officers would satisfy the
retirement criteria.
The size of the restricted share unit award or option grant to each executive officer generally is set at a level
that is intended to create a meaningful opportunity for share ownership based upon the individual’s current
position with the company, but the Compensation Committee and Board also take into account (i) the individual’s
potential for future responsibility and promotion over the term of the award, (ii) the individual’s performance in
recent periods, and (iii) the number of restricted share unit awards and options held by the individual at the time
of grant. In addition, the Compensation Committee and Board consider competitive equity award data, and
determine award size consistent with the Compensation Committee’s and our Board’s objective of setting
long-term incentive compensation at a competitive level in relation to our peer companies and market data,
subject to individual variances. The Compensation Committee and Board also consider annual share usage and
overall shareholder dilution when determining the size of equity awards.
Grants During Fiscal Year 2013
The number of performance-based and service-based restricted share unit awards granted to the named
executive officers in fiscal year 2013, and the grant-date fair value of these awards determined in accordance with
ASC 718-10, are shown in the Grants of Plan-Based Awards in Fiscal Year 2013 table.
As part of the annual compensation review process, the Compensation Committee recommended and the
Board approved the following performance-based and service-based restricted share unit awards to our named
executive officers in fiscal year 2013. The figures represent the sum of the restricted share unit awards granted,
which is split 50-50 between performance-based awards (at target) and service-based awards:
Mr. McNamara—900,000; Mr. Read—324,000; Mr. Barbier—300,000; Mr. Hoak—150,000;
Mr. Humphries—270,000; and Mr. Sykes 270,000. Mr. McNamara’s long-term incentive compensation for fiscal
2013 was set just below the 50th percentile of our peer companies and Mr. Read’s was set between the 60th and the
75th percentile of our peer companies. Messrs. Barbier’s and Hoak’s long-term incentive compensation for fiscal
2013 were set between the 60th and the 75th percentile of the peer group; and Messrs. Humphries’ and Sykes’
long-term incentive compensation were set at the 60th percentile of the peer group. Overall, our executives’ and
senior officers’ long-term incentive awards were set below the 50th percentile of the peer group. For purposes of
benchmarking long-term incentive compensation, the Compensation Committee treats the target cash awards
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under the new deferred compensation plan as long-term incentive compensation. As noted above, Mr. Read is not
eligible for annual performance-based deferred compensation until past deferred cash awards under his deferral
accounts vest, and his fiscal 2013 equity grant was therefore benchmarked without taking into account any target
deferred compensation award.
Administration of Equity Award Grants
The Compensation Committee grants options with exercise prices set at the market price on the date of
grant, based on the closing market price. Our current policy is that options and restricted share unit awards
granted to executive officers are only made during open trading windows. Awards are not timed in relation to the
release of material information. Our current policy provides that grants to non-executive new hires and follow on
grants to non-executives are made on pre-determined dates five times a year.
Hedging Policy
Under our insider trading policy, short-selling, trading in options or other derivatives on our shares or
engaging in hedging transactions are prohibited.
Deferred Compensation
Each of the named executive officers participates in a deferred compensation plan or arrangement. These
plans and arrangements are intended to promote retention by providing a long-term savings opportunity on a
tax-efficient basis. Beginning in fiscal 2011, we replaced our prior senior executive and senior management plans
with our 2010 deferred compensation plan. Under the new plan, participating officers may defer up to 70% of
their base salary and bonus, net of certain statutory and benefit deductions. The company may make a
discretionary matching contribution for these deferrals to reflect limitations on our matching contribution under
our 401(k) plan. Initial company contributions under the plan for new senior executive participants who did not
participate in the prior plans are 50% of base salary and are not tied to company performance. Annual company
contributions are performance-based (using the same performance measures used under the incentive bonus plan)
and may be made in amounts of up to 30% of each participant’s base salary (subject to offsets for non-U.S.
executives’ pension and other benefits), subject to approval by the Compensation Committee. Initial contributions
and any annual contributions, together with earnings, will cliff vest after four years provided that the participant
remains employed by the company. For performance below the threshold payout level under the incentive bonus
plan, there will be no contribution; for performance between the threshold and target payout levels, the
Compensation Committee may award a contribution ranging from 50% to 100% of the target contribution; and
for performance at or above the target payout level, the Compensation Committee may award a contribution of
100% of the target contribution. For purposes of benchmarking compensation, the Compensation Committee
treats target cash awards as long-term incentive compensation. Deferred balances under the plan are deemed to be
invested in hypothetical investments selected by the participant or the participant’s investment manager.
Participants may receive their vested compensation balances upon termination of employment either through a
lump sum payment or in installments over a period of up to ten years. Participants also may elect in-service
distributions through a lump sum payment or in installments over a period of up to five years. The deferred
account balances are unfunded and unsecured obligations of the company, receive no preferential standing, and
are subject to the same risks as any of the company’s other general obligations. We do not pay or guarantee
above-market returns. The appreciation, if any, in the account balances of plan participants is due solely to the
performance of the underlying investments selected by participants.
As discussed above under “Long-Term Incentive Programs—Long-Term Cash Incentive Awards,”
based on fiscal 2013 performance, there were no deferred cash awards made in fiscal 2014. Deferred awards
made under the prior plans are discussed below with respect to certain of the NEOs who participated in prior
plans. Deferred cash awards made under the prior plans will continue to vest in accordance with the provisions of
the prior plans, which will be grandfathered, but no additional contributions will be made under the prior plans.
Mr. McNamara participated in the company’s senior executive deferred compensation plan (referred to as
the senior executive plan). Following his appointment as Chief Financial Officer, Mr. Read also became a
participant in the senior executive plan effective January 1, 2009. Mr. Read participated in the company’s senior
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management deferred compensation plan (referred to as the senior management plan) prior to his appointment as
Chief Financial Officer. Messrs. Barbier, Humphries and Sykes participated in the senior management plan.
Deferred Compensation for Messrs. McNamara and Read. Under the senior executive plan, awards for
deferred long-term incentive bonuses could be awarded in return for services to be performed in the future.
During fiscal year 2006, the Compensation Committee recommended and the Board approved a deferred bonus
for Mr. McNamara of $5,000,000. The deferred bonus (together with earnings) for Mr. McNamara vested as
follows: (i) 10% vested on April 1, 2006; (ii) 15% vested on April 1, 2007; (iii) 20% vested on April 1, 2008;
(iv) 25% vested on April 1, 2009; and (v) 30% vested on April 1, 2010.
During fiscal year 2009, in recognition of his appointment as Chief Financial Officer, the Compensation
Committee recommended and the Board approved an initial one-time funding payment of $2,000,000 for
Mr. Read in the senior executive plan. The deferred bonus (together with earnings) for Mr. Read will vest as
follows: (i) 10% vested on January 1, 2010; (ii) 15% vested on January 1, 2011; (iii) 20% vested on January 1,
2012; (iv) 25% vested on January 1, 2013; and (v) 30% will vest on January 1, 2014. Prior to his appointment as
Chief Financial Officer, Mr. Read was a participant in the senior management plan. As part of the annual
contribution, Mr. Read was eligible to receive a contribution equal to 30% of his base salary. Past contributions
(together with earnings) will vest as follows: (i) one-third vested on July 1, 2012; (ii) one-half of the remaining
balance will vest on July 1, 2013; and (iii) the remaining balance will vest on July 1, 2014.
Any unvested portions of the deferred bonus for Mr. Read (with respect to his senior executive plan account)
will become 100% vested upon a change of control (as defined in the senior executive plan) if he is employed at
that time or if his employment is terminated as a result of death or disability. Other than in cases of death or
disability or a change of control, any unvested amounts will be forfeited if the executive’s employment is
terminated, unless otherwise provided in a separation agreement. With respect to Mr. Read’s senior management
plan account, 100% will become vested in the case of his death and a percentage of the unvested portion of
Mr. Read’s senior management account will become vested in the event of a change of control (as defined in the
senior management plan), in an amount equal to the number of months of completed service from July 1, 2005
through July 1, 2014, divided by 108. Any portion of his senior management plan account that remains unvested
after a change of control shall continue to vest in accordance with the original vesting schedule.
Deferred Compensation for Mr. Barbier. During fiscal year 2005, the Compensation Committee
recommended and the Board approved an initial one-time funding payment of $250,000 for Mr. Barbier in the
senior management plan. As part of the annual contribution, until 2010, Mr. Barbier was eligible to receive a
contribution equal to 30% of his base salary. Past contributions (together with earnings) will vest as follows:
(i) one-third vested on July 1, 2011; (ii) one-half of the remaining balance vested on July 1, 2012; and (iii) the
remaining balance will vest on July 1, 2013.
Deferred Compensation for Mr. Humphries. Beginning with 2005 until 2010, Mr. Humphries received
annual and discretionary deferred contributions under the senior management plan. These contributions (together
with earnings) are fully vested. He also has unvested contributions under the 2010 Plan which are subject to three
year cliff vesting.
Deferred Compensation for Mr. Sykes. Beginning with 2005 until 2010, Mr. Sykes received annual and
discretionary deferred contributions under the senior management plan. These contributions (together with
earnings) are either fully vested or were forfeited upon his termination from the company.
Under the senior management plan, any unvested portions of the deferral account of Mr. Barbier will
become 100% vested if his employment is terminated as a result of death. In the event of a change of control (as
defined in the senior management plan), a portion of the deferral account will vest, calculated as a percentage
equal to the number of service months from July 1, 2005 to July 1, 2013, divided by 96 for Mr. Barbier. Any
portion of his deferral account that remains unvested after a change of control shall continue to vest in accordance
with the original vesting schedule. Other than in cases of death or a change of control, any unvested amounts will
be forfeited if the executive’s employment is terminated, unless otherwise provided in a separation agreement.
For additional information about (i) executive contributions to the named executive officers’ deferral
accounts, (ii) company contributions to the deferral accounts, (iii) earnings on the deferral accounts, and
(iv) deferral account balances as of the end of fiscal year 2013, see the section entitled “Executive
Compensation—Nonqualified Deferred Compensation in Fiscal Year 2013.” The deferral accounts are
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unfunded and unsecured obligations of the company, receive no preferential standing, and are subject to the same
risks as any of the company’s other general obligations.
Benefits
Executive Perquisites
Perquisites represent a small part of the overall compensation program for the named executive officers. In
fiscal year 2013, we paid the premiums on long-term disability insurance for our named executive officers. We
also reimbursed Mr. Barbier for costs associated with his international assignment and Mr. Humphries for his
relocation assignment, which are discussed below. In addition, we reimbursed Mr. Read and Mr. Barbier for FICA
and Medicare taxes due upon the partial vesting of their deferred bonuses during fiscal year 2013. We also
provide a company vehicle allowance for Mr. Barbier. These and certain other benefits are quantified under the
“All Other Compensation” column in the Summary Compensation Table.
As discussed above, we have replaced our prior deferred compensation plans with our 2010 deferred
compensation plan. Under the prior plans, vested amounts were not paid until termination, while the new plan
provides for distribution options, including in-service distributions. For amounts vesting under the prior plans, we
will continue to reimburse the executives for FICA taxes since the executives will continue to be unable to access
vested funds prior to retirement; however, the executives will continue to be responsible for the tax liability
associated with the reimbursement. For amounts vesting under the new plan, the executives will be responsible
for FICA taxes and the company will not reimburse the executives for any taxes due upon vesting.
While company aircraft are generally used for company business only, our Chief Executive Officer and
Chief Financial Officer and their spouses and guests may be permitted to use company aircraft for personal travel,
provided that company aircraft are not needed for business purposes at such time. We calculate the incremental
cost to the company for use of the company aircraft by using an hourly rate for each flight hour. The hourly rate is
based on the variable operational costs of each flight, including but not necessarily limited to the following: fuel,
maintenance, flight crew travel expense, catering, communications, and fees which include flight planning,
ground handling and landing permits. To the extent any travel on company aircraft resulted in imputed income to
the executive officer prior to August 30 in fiscal year 2013, the company provided gross-up payments to cover the
executive officer’s personal income tax due on such imputed income. On August 30, 2012, the Compensation
Committee eliminated the gross-up provided under this policy. These benefits are quantified under the “All Other
Compensation” column in the Summary Compensation Table.
Relocation Assignments
In connection with Mr. Barbier’s relocation assignment to the company’s Milpitas facility, originally
effective August 30, 2010 and amended to provide a continuation of certain benefits as of March 5, 2013, we
agreed to reimburse Mr. Barbier for certain relocation expenses incurred by Mr. Barbier, including a housing
allowance of $6,000 per month and an auto allowance of up to $1,200 per month. These benefits are quantified
under the “All Other Compensation” column in the Summary Compensation Table.
In connection with Mr. Humphries’ relocation assignment to the company’s Milpitas facility, effective
August 30, 2010, we agreed to reimburse Mr. Humphries for certain relocation expenses incurred by
Mr. Humphries, including a housing allowance of $3,500 per month and an auto allowance of $1,200 per month.
Both of these benefits ended during the 2013 fiscal year. These benefits are quantified under the “All Other
Compensation” column in the Summary Compensation Table.
401(k) Plan; French Defined Contribution Pension Plan
Under our 401(k) Plan, all of our employees are eligible to receive matching contributions. Effective fiscal
year 2011, we also instituted a new annual discretionary matching contribution. The amount of any discretionary
annual contribution will be based on company performance and other economic factors as determined at the end
of the following corporate fiscal year. For fiscal year 2013, we elected not to make a discretionary contribution.
We do not provide an excess 401(k) plan for our executive officers. Our named executive officers participated in
the program in fiscal year 2013.
Mr. Barbier participates in defined contribution pension schemes mandated under French law. For fiscal
2013, the company made required contributions aggregating approximately $74,874.
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Other Benefits
Executive officers are eligible to participate in all of the company’s employee benefit plans, such as
medical, dental, vision, group life, disability, and accidental death and dismemberment insurance, in each case on
the same basis as other employees, subject to applicable law.
Termination and Change of Control Arrangements
The named executive officers are entitled to certain termination and change of control benefits under their
deferred compensation plans and under certain of their equity awards. These benefits are described and quantified
under the section entitled “Executive Compensation—Potential Payments Upon Termination or Change of
Control.” As described in that section, if there is a change of control of the company, the entire unvested portion
of the deferred compensation account of Mr. Read under the senior executive plan will accelerate, and a
percentage of the unvested portion of Messrs. Read’s and Barbier’s deferred compensation accounts under the
senior management plan will accelerate based on their respective periods of service. As of April 2010,
Messrs. McNamara, Humphries and Sykes were fully vested under the senior executive plan. Under our 2010
Deferred Compensation Plan, vesting of initial and annual awards will accelerate in cases of a change in control.
In the case of a change in control, vesting only will accelerate if employment is terminated without cause or for
good reason within two years of the change in control. The Compensation Committee determined that a single
trigger for acceleration of the executives’ deferred compensation accounts was appropriate under the senior
executive and senior management plans in order to provide certainty of vesting for benefits that represent the
executives’ primary source of retirement benefits. However, under our 2010 Deferred Compensation Plan, vesting
only will accelerate following a change in control if employment is terminated, as described above, which is a
double trigger. Under the terms of certain of our equity incentive plans and the form of restricted share unit award
agreement used for certain of our grants of restricted share unit awards to our employees (including our
executives), in the event of a change of control, each outstanding stock option and each unvested restricted share
unit award with such a provision shall automatically accelerate, provided that vesting shall not so accelerate if,
and to the extent, such award is either to be assumed or replaced. The Compensation Committee believes that
these provisions provide our Board with appropriate flexibility to address the treatment of options and restricted
share unit awards in a merger or similar transaction that is approved by our Board, while providing appropriate
protections to our executives and other employees in transactions which are not approved by our Board. Under the
terms of certain of our equity plans, the Compensation Committee has the discretion to provide that certain
awards may automatically accelerate upon an involuntary termination of service within a designated time period
following a change of control, even if such awards are assumed or replaced.
Severance Agreement with Mr. Sykes
Mr. Sykes resigned from the company effective as of March 31, 2013. In connection with such resignation
Mr. Sykes entered into a Severance Agreement with the company in November of 2012. Pursuant to the terms of
the Severance Agreement, Mr. Sykes was entitled to receive salary and incentive bonus amounts for the full fiscal
year 2013. These amounts are disclosed above. In addition to the amounts disclosed above, he received a severance
payment in the gross amount of $393,750 in December of 2012. He is also entitled to receive two more severance
payments each in the gross amount of $196,875 on September 30, 2013 and March 31, 2014. Under the agreement
he has a right to quarterly bonus payments for the first three quarters of fiscal year 2014 based on his bonus targets
prior to the date of separation. In addition, payments were made to him for unpaid vacation, COBRA and attorney
fees. He has the right to a payment in the amount of $816,981 for vested deferred compensation amounts under the
senior management plan. He is entitled to certain expense reimbursements for relocation costs and closing costs for
the sale of his home. Vesting on his equity grants ceased as a result of his separation of service in compliance with
the terms of the 2010 Equity Incentive Plan. In exchange for these benefits, Mr. Sykes agreed to act as a special
consultant to the company for the twelve months following his separation from the company. He also agreed to a
release of claims against the company, the non-solicitation of company employees, non-disparagement of the
company, and the non-disclosure of company confidential information.
Executive Stock Ownership Guidelines
In fiscal 2011, to more closely align the interests of our management with those of our shareholders, our
Board of Directors, upon the recommendation of the Compensation Committee, adopted stock ownership
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guidelines for all of our executive officers and direct reports of the chief executive officer. The ownership
guidelines provide for our executive officers to own a minimum number of our ordinary shares, which (i) for our
CEO, is the number of shares having a value equal to at least four times his annual base salary, (ii) for our CFO, is
the number of shares having a value equal to at least two and one-half times his annual base salary and (iii) for all
of our other executive officers and CEO direct reports, is the number of shares having a value equal to at least one
and one-half times his or her annual base salary. All ordinary shares held by our executives, as well as the value of
fully-vested stock options (net of the value of taxes), count toward these goals. The guidelines provide for our
executives to reach these goals within five years of the date that the Board approved the guidelines or the date
they joined the company, whichever is later, and to hold such a minimum number of shares for as long as he or
she is an officer. The company has determined that the named executive officers are in compliance with the
current requirements under the guidelines.
Executive Incentive Compensation Recoupment Policy
In May 2010, the Compensation Committee recommended and our Board adopted an Executive Incentive
Compensation Recoupment Policy. The policy covers our executive officers and direct reports of our chief
executive officer, and applies to bonuses or awards under the company’s short and long-term incentive bonus
plans, awards under our equity incentive plans, and contributions under our deferred compensation plans where
the contributions are based on the achievement of financial results. In the event of a material restatement of
financial results where a covered officer engaged in fraud or misconduct that caused the need for the restatement,
the Board will have discretion to recoup incentive compensation of any covered officer if and to the extent the
amount of compensation which was paid or which vested would have been lower if the financial results had been
properly reported. In the case of equity awards that vested based on the achievement of financial results that were
subsequently reduced, the Board also may seek to recover gains from the sale or disposition of vested shares
(including shares purchased upon the exercise of options that vested based on the achievement of financial
results). In addition, the Board will have discretion to cancel outstanding equity awards where the financial
results which were later restated were considered in granting such awards. The Board only may seek recoupment
in cases where the restatement shall have occurred within 36 months of the publication of the audited financial
statements that have been restated.
COMPENSATION RISK ASSESSMENT
With the assistance of Radford, the Compensation Committee reviewed our compensation policies and
practices and determined that our compensation programs do not encourage excessive or inappropriate risk-taking.
The Compensation Committee believes that the design and mix of our compensation programs appropriately
encourage our executive and senior officers to focus on the creation of long-term shareholder value. In its review,
the Compensation Committee noted the following features:
(cid:129) our executive compensation programs appropriately balance short and long-term incentives, with
short-term incentives representing approximately 6% of total direct compensation and long-term
incentives representing approximately 75% of total direct compensation, thereby focusing executives on
enhancing long-term shareholder value;
(cid:129) our incentive bonus plan uses several performance measures at the corporate level, as well as different
performance measures for our business unit executives;
(cid:129) payout levels are capped under our incentive bonus plan and payout opportunities may be achieved on a
straight line interpolation basis between threshold and target levels, and generally between the target and
maximum levels;
(cid:129) non-GAAP adjustments are made to align achievement of performance measures with our business
strategy; all non-GAAP adjustments are subject to Compensation Committee approval to ensure that
actual payout levels appropriately reflect company and business unit performance; and
(cid:129) annual non-management bonus plans allocate a lower percentage of variable cash compensation than for
management with bonus awards and sales commission plans capped at multiples of target achievement.
In addition to the design and mix of our compensation programs, to further align executives’ and senior officers’
interests with our shareholders and mitigate risk relating to our compensation programs, in fiscal 2011 the company
adopted stock ownership guidelines and an incentive compensation recoupment policy, which are discussed above.
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EXECUTIVE COMPENSATION
The following table sets forth the fiscal year 2011, 2012 and 2013 compensation for:
(cid:129) Michael M. McNamara, our chief executive officer;
(cid:129) Paul Read, our chief financial officer during the fiscal year; and
(cid:129) Francois Barbier, Paul Humphries, Jonathan S. Hoak and Eslie C. Sykes.
The executive officers included in the Summary Compensation Table are referred to in this joint proxy
statement as our named executive officers. A detailed description of the plans and programs under which our
named executive officers received the following compensation can be found in the section entitled
“Compensation Discussion and Analysis” of this joint proxy statement. Additional information about these
plans and programs is included in the additional tables and discussions which follow the Summary
Compensation Table.
Summary Compensation Table
Name and Principal
Position(1)
Year
Salary
($)(2)
Non-Equity
Incentive
Stock Plan
Bonus Awards Compensation
($)(3) ($)(4) ($)(5)
Change in
Pension
Value and
Nonqualified
Deferred
Compensation All Other
Earnings Compensation
($)(6) ($)(7) Total ($)
Chief Financial Officer
Chief Executive Officer
Michael M. McNamara . . . . . . . 2013 $1,250,000
2012 $1,250,000
2011 $1,250,000
— $6,462,000 $ 329,138 $1,940,410 $ 31,178 $10,012,726
— $ 39,338 $ 7,474,001
— $5,862,000 $ 322,663
— $5,692,000 $2,714,063 $ 815,350 $ 66,225 $10,537,638
Paul Read . . . . . . . . . . . . . . . . . . 2013 $ 620,000 $1,114,552 $2,326,320 $ 136,044 $ 175,593 $ 64,218 $ 4,436,727
— $ 55,630 $ 3,663,367
— $ 48,385 $ 4,058,957
5,297 $336,752 $ 3,467,779
— $270,359 $ 3,109,022
— $395,801 $ 2,612,536
— $ 10,203 $ 1,628,908
885,128
— $ 14,546 $
Francois P. Barbier . . . . . . . . . . . 2013 $ 600,000 $ 270,127 $2,154,000 $ 101,603 $
President, Global Operations 2012 $ 600,000 $ 256,638 $1,905,150 $ 76,875
— $1,067,250 $ 553,247
and Components
— $1,077,000 $ 66,705
— $ 366,375 $ 54,207
2011 $ 596,238
Jonathan S. Hoak . . . . . . . . . . . . 2013 $ 475,000
2012 $ 450,000
2012 $ 600,000 $ 497,234 $2,381,438 $ 129,065
2011 $ 600,000 $ 368,322 $1,956,625 $1,085,625
Executive Vice President
and General Counsel
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Paul Humphries . . . . . . . . . . . . . 2013 $ 525,000
— $1,938,600 $ 468,073 $
2012 $ 525,000 $ 359,759 $1,318,950 $ 296,328 $
41,465 $ 34,242 $ 3,007,380
72,374 $265,373 $ 2,837,784
President, High Reliability
Solutions and Executive Vice
President, Human Resources
Eslie C. Sykes . . . . . . . . . . . . . . 2013 $ 525,000
— $1,938,600 $ 84,006
— $459,566 $ 3,007,172
President Industrial and
Emerging Industries
(1) Information for fiscal year 2011 is not included for Messrs. Humphries or Hoak who were appointed as
executive officers during fiscal year 2012, or for Mr. Sykes who was not a named executive officer in fiscal
years 2011 and 2012.
(2) Each of Messrs. McNamara, Read, Barbier, Hoak and Humphries contributed a portion of his fiscal year
2013 salary to his 401(k) savings plan account. All amounts contributed are included under this column.
(3) For fiscal year 2013, this column shows the unvested portion of Mr. Read’s deferred compensation accounts
that vested on July 1, 2012 and January 1, 2013 and unvested portions of Mr. Barbier’s deferred
compensation accounts that vested on July 1, 2012. For additional information about the company’s
deferred compensation arrangements, see the section entitled “Compensation Discussion and
Analysis—Deferred Compensation” of this joint proxy statement and the discussion under the section
entitled “Nonqualified Deferred Compensation in Fiscal Year 2013” of this joint proxy statement.
(4) Stock awards consist of service-based and performance-based restricted share unit awards. The amounts in
this column do not reflect compensation actually received by the named executive officers nor do they
reflect the actual value that will be recognized by the named executive officers. Instead, the amounts reflect
the grant date fair value for grants made by us in fiscal years 2011, 2012 and 2013, calculated in accordance
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with FASB ASC Topic 718. For additional information regarding the assumptions made in calculating the
amounts reflected in this column, see Note 3 to our audited consolidated financial statements for the fiscal
year ended March 31, 2013, “Share-Based Compensation,” included in our Annual Report on Form 10-K
for the fiscal year ended March 31, 2013.
(5) The amounts in this column represent incentive cash bonuses earned in fiscal year 2013. For additional
information, see the section entitled “Compensation Discussion and Analysis—Fiscal Year 2013 Executive
Compensation—Incentive Bonus Plan” of this joint proxy statement.
(6) The amount in this column for fiscal year 2013 represents the above- market earnings on the vested portions
of Messrs. McNamara, Read, Barbier and Humphries’ nonqualified deferred compensation accounts in
fiscal year 2013. None of our other named executive officers received above-market earnings on the vested
portions of their deferred compensation accounts in fiscal year 2013 and none of our named executive
officers participates in any defined benefit or actuarial pension plans. Above-market earnings represent the
difference between market interest rates determined pursuant to SEC rules and earnings credited to the
vested portion of the named executive officers’ deferred compensation accounts. See the Nonqualified
Deferred Compensation in Fiscal Year 2013 table of this joint proxy statement for additional information.
(7) The following table provides a breakdown of the compensation included in the “All Other Compensation”
column for fiscal year 2013:
Pension/
Savings
Plan
Company
Match
Medical/
Expenses/ Enhanced
Relocation/
Expatriate
Personal
Long-Term Aircraft Assignment
Usage
Disability
($)(3)
($)(2)
Expenses
($)(4)
— $21,178
— $18,107
—
—
— $86,988
— $11,175
—
—
— $ 8,188
$46,254
—
—
—
Name
Michael M. McNamara . . . .
Paul Read . . . . . . . . . . . . . . .
Francois P. Barbier . . . . . . . .
Paul Humphries . . . . . . . . . .
Jonathan S. Hoak . . . . . . . . .
Eslie C. Sykes . . . . . . . . . . .
Social
Security
($)(1)
$10,000
$10,333
$74,874
$10,000
$10,203
$ 9,125
Tax
Reimbursements
($)(5)
—
$ 35,777
$128,636
$ 13,067
—
7,175
$
Severance
($)(6)
Total ($)
— $ 31,178
— $ 64,218
— $336,752
— $ 34,242
— $ 10,203
$435,078 $459,566
(1) The amounts in this column represent company matching contributions to the 401(k) saving plan accounts
for Messrs. McNamara, Read, Sykes, Hoak and Humphries. In the case of Mr. Barbier, it represents
company contributions to the mandatory social security programs under applicable French law. Amounts for
Mr. Barbier have been converted into dollars from the Euro based on the prevailing exchange rate at the end
of the 2013 fiscal year.
(2) The amounts in this column represent the company’s contribution to the executive long-term disability
program which provides additional benefits beyond the basic employee long-term disability program.
(3) The amounts in this column represent the aggregate incremental costs resulting from the personal use of the
company aircraft. Costs include a portion of ongoing maintenance and repairs, aircraft fuel, satellite
communications and travel expenses for the flight crew. It excludes non-variable costs which would have
been incurred regardless of whether there was any personal use of aircraft.
(4) These amounts represent (i) the costs associated with Mr. Barbier’s relocation to the company’s Milpitas
facility for housing allowances of $72,000 and vehicle allowances of $14,400 and relocation fees of $588;
(ii) and for Mr. Humphries, $10,800 for a vehicle allowance and $375 for a relocation fee; and (iii) for
Mr. Sykes, $8,000 for a vehicle allowance and $188 for a relocation fee.
(5) For Mr. Read, the amount includes $9,724 for the payment of taxes due as a result of the personal use of the
company aircraft, and $26,054 for the payment of taxes on his behalf with respect to Medicare, due to the
vesting of his deferred compensation in January 2012. For Mr. Barbier, the amount includes reimbursement
of $125,254 for the incremental taxes due as a result of his relocation to the company’s Milpitas facility and
the payment of $3,382 of taxes on his behalf with respect to Medicare, due to the vesting of his deferred
compensation in July 2012. For Mr. Humphries, this amount represents $13,067 due to for the incremental
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taxes due as a result of his relocation to the company’s Milpitas facility. For Mr. Sykes, this amount
represents the payment of $7,175 taxes due to incremental taxes as a result of his relocation to the
company’s Milpitas facility.
(6) This amount represents a severance payment in the amount of $393,750 received by Mr. Sykes in fiscal year
2013 under his separation agreement and $7,000 to reimburse the legal expenses of Mr. Sykes incurred in
connection with the separation agreement and $34,328 in accrued vacation paid out under the separation
agreement. This amount does not include an additional $393,750 in severance payments that are payable in
fiscal year 2014 subject to Mr. Sykes’s compliance with the terms and conditions of his separation
agreement. The amount also does not include the estimated value of continued health care coverage,
including COBRA premiums, the value of bonus payments for fiscal year 2014 (which have not yet been
determined) or the amount Mr. Sykes may receive under his separation agreement for relocation expenses or
closing costs for the sale of the executive’s home. For additional information, see the sections entitled
“Executive Compensation—Potential Payments Upon Termination or Change of Control—Severance
Agreement with Mr. Sykes” and “—Potential Payments upon Termination or Change of Control” of this
joint proxy statement.
Grants of Plan-Based Awards in Fiscal Year 2013
The following table presents information about non-equity incentive plan awards and restricted share unit
awards that we granted in our 2013 fiscal year to our named executive officers. We did not grant any stock
options to our named executive officers during our 2013 fiscal year.
Name
Michael M. McNamara . . . .
Grant
Date
Paul Read . . . . . . . . . . . . . . .
Francois P. Barbier . . . . . . . .
Jonathan S. Hoak . . . . . . . . .
Paul Humphries . . . . . . . . . .
Eslie C. Sykes . . . . . . . . . . .
All Other
Stock Grant
Awards: Date
Estimated Future Payouts Under Estimated Future Payouts Under Number of Fair
Non-Equity Incentive Plan Awards (1) Equity Incentive Plan Awards (2) Shares of Value of
Stock or Stock
Target Maximum Threshold Target Maximum Units Awards
Threshold
(#) (#)(3) ($)(4)
($)
($) ($) (#) (#)
— $937,500
—
—
— $387,500
—
—
— $330,000
—
—
— $190,000
— $275,625
—
—
$275,625
—
—
05/17/2012
05/17/2012
05/17/2012
05/17/2012
05/17/2012
05/17/2012
05/17/2012
05/17/2012
05/17/2012
05/17/2012
05/17/2012
05/17/2012
—
—
—
—
$1,875,000 $4,687,500 —
—
— 225,000 450,000
—
— —
—
$ 775,000 $1,937,500 —
— 81,000 162,000
—
— —
—
$ 660,000 $1,650,000 —
— 75,000 150,000
—
— —
—
$ 380,000 $ 950,000 —
75,000
37,500
—
—
—
$ 551,250 $1,378,125 —
— 67,500 135,000
—
— —
$ 551,250 $1,378,125
—
—
—
—
—
—
— 67,500 135,000
—
— —
—
900,000
—
—
— $3,514,500
$2,947,500
— 450,000
—
—
—
— $1,265,220
324,000
$1,061,100
— 162,000
—
—
—
— $1,171,500
300,000
$ 982,500
— 150,000
—
—
—
— $ 585,750
150,000
$ 491,250
—
75,000
—
—
—
— $1,054,350
270,000
$ 884,250
— 135,000
270,000
— 135,000
— $1,054,350
$ 884,250
(1) These amounts show the range of possible payouts under our incentive cash bonus program for fiscal year
2013. The maximum payment, represents 250% of the target payment. The threshold payment for each
named executive officer represents 50% of target payout levels. Amounts actually earned in fiscal year 2013
are reported as Non-Equity Incentive Plan Compensation in the Summary Compensation Table. For
additional information, see the section entitled “Compensation Discussion and Analysis—Fiscal Year 2013
Executive Compensation—Incentive Bonus Plan” of this joint proxy statement.
(2) These columns show the range of estimated future vesting of performance-based restricted share unit awards
granted in fiscal year 2013 under our 2010 Equity Incentive Plan. One hundred percent of the restricted
share unit awards cliff vest after three years. Vesting of the performance-based awards are subject to the
company achieving levels of total shareholder return relative to the average of the Standard & Poor’s 500
Index total shareholder return for the performance periods. The maximum payment for each executive
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officer represents 200% of the target payment. The threshold payment for each named executive officer
represents 50% of target payout levels. For additional information, see the section entitled “Compensation
Discussion and Analysis—Long-Term Incentive Programs—Stock-Based Compensation—Grants During
Fiscal Year 2013” of this joint proxy statement.
(3) This column shows the number of service-based restricted share units granted in fiscal year 2013 under our
2010 Equity Incentive Plan. For each named executive officer, the restricted share units vest in four annual
installments at a rate of 25% per year, provided that the executive continues to remain employed on the
vesting dates. For additional information, see the section entitled “Compensation Discussion and
Analysis—Long-Term Incentive Programs—Stock-Based Compensation—Grants During Fiscal Year
2013” of this joint proxy statement.
(4) This column shows the grant-date fair value of service-based and performance-based restricted share unit
awards under FASB ASC Topic 718-10 granted to our named executive officers in fiscal year 2013. The
grant-date fair value is the amount that we will expense in our financial statements over the award’s vesting
schedule. Expense will be reversed for awards that do not vest as a result of the named executive officers not
meeting the requisite service requirement; however expense will not be reversed for awards that do not vest as
a result of not achieving the performance requirement. For restricted share unit awards with service-based
vesting, fair value is the closing price of our ordinary shares on the grant date. For restricted share unit
awards where vesting is contingent on meeting a market condition, the grant-date fair value was calculated
using a monte carlo simulation. Additional information on the valuation assumptions is included in Note 3 of
our audited consolidated financial statements for the fiscal year ended March 31, 2013, “Share-Based
Compensation,” included in our Annual Report on Form 10-K for the fiscal year needed March 31, 2013.
These amounts reflect our accounting expense, and do not correspond to the actual value that will be
recognized by the named executive officers.
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Outstanding Equity Awards at 2013 Fiscal Year-End
The following table presents information about outstanding options and stock awards held by our named
executive officers as of March 31, 2013. The table shows information about:
(cid:129) stock options,
(cid:129) service-based restricted share units, and
(cid:129) performance-based restricted share units.
The market value of the stock awards is based on the closing price of our ordinary shares as of March 28,
2013, which was $6.76. Market values shown assume all performance criteria are met and the threshold value is
paid. For additional information on our equity incentive programs, see the section entitled “Compensation
Discussion and Analysis—Long-Term Incentive Programs—Stock-Based Compensation” of this joint proxy
statement.
Option Awards Stock Awards
Equity
Equity Incentive
Incentive Plan
Plan Awards:
Awards: Market
Number or Payout
Number of Value of
of Unearned Unearned
Shares Market Shares, Shares,
or Value of Units or Units or
Units of Shares or Other Other
Stock Units of Rights Rights
That Stock That That That
Option Have Not Have Not Have Not Have Not
Expiration Vested Vested Vested Vested
Date (#) ($) (#)(1) ($)
08/23/2014 — — — —
05/13/2015 — — — —
04/17/2016 — — — —
06/02/2015 — — — —
06/02/2015 — — — —
12/05/2015 — — — —
03/02/2016 — — — —
— 1,210,000(3) $8,179,600 1,250,000(7) $8,450,000
07/01/2013 — — — —
01/09/2014 — — — —
09/28/2014 — — — —
10/29/2014 — — — —
06/02/2015 — — — —
06/02/2015 — — — —
12/05/2015 — — — —
— 445,750(4) $3,013,270 462,000(8) $3,123,120
12/05/2015 — — — —
08/11/2016 — — — —
08/11/2016 — — — —
08/11/2016 — — — —
08/11/2016 — — — —
08/11/2016 — — — —
08/11/2016 — — — —
342,000(5) $2,311,920 355,000(9) $2,399,800
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
—
—
—
—
2,000,000(2)
—
—
—
—
—
—
—
700,000(2)
—
—
—
—
—
—
—
—
—
—
Option
Exercise
Price
($)
$11.53
$12.37
$11.23
$10.59
$10.59
$ 2.26
$ 1.94
—
$10.34
$16.57
$13.18
$12.05
$10.59
$10.59
$ 2.26
—
$ 2.26
$ 5.57
$ 5.57
$ 5.57
$ 5.57
$ 5.57
$ 5.57
Number of
Securities
Underlying
Unexercised
Options
(#)
Number of
Securities
Underlying
Unexercised
Options
(#)
Name
Exercisable Unexercisable
Michael M.
McNamara . . .
Paul Read . . . . . .
Francois P.
Barbier . . . . . .
200,000
3,000,000
700,000
2,000,000
—
2,000,000
2,000,000
—
20,000
80,000
50,000
125,000
—
700,000
1,200,000
—
150,000
3,125
20,833
250,000
868
911
3,125
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Jonathan S.
Hoak . . . . . . .
78,124
71,876(11)
—
$ 8.09
02/28/2018
122,500(12) $ 828,100 100,000(13) $ 676,000
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Option Awards Stock Awards
Number of
Securities
Underlying
Unexercised
Options
(#)
Number of
Securities
Underlying
Unexercised
Options
(#)
Name
Exercisable Unexercisable
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Paul Humphries . .
Eslie C. Sykes . .
275,000
585
392
2,752
213,889
872
12,500
2,539
19,960
50,000
—
128,750
2,083
4
987
443
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Equity
Equity Incentive
Incentive Plan
Plan Awards:
Awards: Market
Number or Payout
Number of Value of
of Unearned Unearned
Shares Market Shares, Shares,
or Value of Units or Units or
Units of Shares or Other Other
Stock Units of Rights Rights
That Stock That That That
Option Have Not Have Not Have Not Have Not
Expiration Vested Vested Vested Vested
Date (#) ($) (#)(1) ($)
12/05/2015 — — — —
08/11/2016 — — — —
08/11/2016 — — — —
08/11/2016
08/11/2016
08/11/2016
08/11/2016 — — — —
08/11/2016 — — — —
08/11/2016 — — — —
08/11/2016 — — — —
— 271,0000(6) $1,831,960 280,000(10) $1,892,800
06/30/2013 — — — —
06/30/2013 — — — —
06/30/2013 — — — —
06/30/2013 — — — —
06/30/2013 — — — —
Option
Exercise
Price
($)
$ 2.26
$ 5.57
$ 5.57
$ 5.57
$ 5.57
$ 5.57
$ 5.57
$ 5.57
$ 5.57
$ 5.57
—
$ 2.26
$ 5.57
$ 5.57
$ 5.57
$ 5.57
(1) This column includes performance-based restricted share unit awards granted in fiscal year 2011 under our
2001 Equity Incentive Plan and fiscal year 2012 and fiscal year 2013 under our 2010 Equity Incentive Plan.
For grants made in fiscal year 2011 and fiscal year 2012, fifty percent of the restricted share unit awards
vest after three years and fifty percent vest after four years. For grants made in fiscal year 2013, 100% of
the restricted share unit awards vest after three years. Vesting of the performance-based awards will depend
on the company achieving levels of total shareholder return relative to the average of the Standard & Poor’s
500 Index total shareholder return for the respective three and four-year performance periods.
(2) These options have vested but may only be exercised if the trading price of our ordinary shares is at least
$12.50 per share.
(3) 200,000 shares vest annually on each of June 15, 2013 and 2014; 360,000 shares vest annually at a rate of
80,000, 120,000, and 160,000 shares, with first vesting date of June 3, 2013. 450,000 shares vest annually at
a rate of 25% per year for four years, with first vesting date of May 17, 2013.
(4) 68,750 shares vest annually on each of June 15, 2013 and 2014; 146,250 shares vest annually at a rate of
32,500, 48,750, and 65,000 shares, with first vesting date of June 3, 2013. 162,000 shares vest annually at a
rate of 25% per year for four years, with first vesting date of May 17, 2013.
(5) 37,500 shares vest annually on each of June 15, 2013 and 2014; 117,000 vest annually at a rate of 26,000,
39,000, and 52,000 shares, with first vesting date of June 3, 2013. 150,000 shares vest annually at a rate of
25% per year for four years, with first vesting date of May 17, 2013.
(6) 27,500 shares vest annually on each of June 15, 2013 and 2014; 81,000 vest annually at a rate of 18,000,
27,000, and 36,000, with first vesting date of June 3, 2013. 135,000 shares vest annually at a rate of 25%
per year for four years, with first vesting date of May 17, 2013.
(7) 200,000 performance-based shares vest annually on June 15, 2013 and June 2014, 200,000 vest annually
on June 3, 2014 and June 3, 2015, and 450,000 vest on May 17, 2015 provided that the performance
criteria are met.
(8) 68,750 performance-based shares vest annually on June 15, 2013 and June 2014, 81,250 vest annually on June 3,
2014 and June 3, 2015, and 162,000 vest on May 17, 2015 provided that the performance criteria are met.
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(9) 37,500 performance-based shares vest annually on June 15, 2013 and June 2014, 65,000 vest annually on June 3,
2014 and June 3, 2015, and 150,000 vest on May 17, 2015 provided that the performance criteria are met.
(10) 27,500 performance-based shares vest annually on June 15, 2013 and June 2014, 45,000 vest annually on
June 3, 2014 and June 3, 2015, and 135,000 vest on May 17, 2015 provided that the performance criteria
are met.
(11) 71,876 stock options vest monthly from April 30, 2013 to February 28, 2015.
(12) 12,500 shares vest annually on each of February 28, 2014, and 2015; 22,500 shares vest annually at a rate of
5,000, 7,500, and 10,000 shares, the first vesting date of June 3, 2013; 75,000 shares vest annually at a rate
of 25% per year for four years, with first vesting date of May 17, 2013.
(13) 12,500 performance-based shares vest annually on June 3, 2013 and June 2014, and 75,000 vest on May 17,
2015 provided that the performance criteria are met.
Option Exercises and Stock Vested in Fiscal Year 2013
The following table presents information, for each of our named executive officers, on (1) stock option
exercises during fiscal year 2013, including the number of shares acquired upon exercise and the value realized
and (2) the number of shares acquired upon the vesting of stock awards in the form of restricted share units
during fiscal year 2013 and the value realized, in each case before payment of any applicable withholding tax
and broker commissions.
Option Awards Stock Awards
Number of Shares Number of Shares
Acquired on Value Realized Acquired on Value Realized
Exercise on Exercise Vesting on Vesting
Name (#) ($)(1) (#) ($)(2)
Michael M. McNamara . . . . . . . . . . . . . . . . — — 40,000 $249,200
Paul Read . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 $1,319,066 16,250 $101,238
Francois Barbier . . . . . . . . . . . . . . . . . . . . . . — — 13,000 $ 80,990
Jonathan S. Hoak . . . . . . . . . . . . . . . . . . . . . — — 15,000 $ 98,700
Paul Humphries . . . . . . . . . . . . . . . . . . . . . . — — 9,000 $ 56,070
Eslie C. Sykes . . . . . . . . . . . . . . . . . . . . . . . 146,058 $ 186,955 9,000 $ 56,070
(1) The amounts in this column reflect the aggregate dollar amount realized upon exercise of the options
determined by the difference between the market price of the underlying shares at exercise and the exercise
price of the options.
(2) The amounts in this column reflect the aggregate dollar amount realized upon the vesting of restricted share
unit awards determined by multiplying the number of ordinary shares underlying such awards by the market
value of the underlying shares on the vesting date.
Our named executive officers do not receive any compensation in the form of pension benefits.
Pension Benefits in Fiscal Year 2013
Nonqualified Deferred Compensation in Fiscal Year 2013
Each of our named executive officers participates in our 2010 deferred compensation plan, except for
Mr. Read. Our deferred compensation program is intended to promote retention by providing a long-term
savings opportunity on a tax-efficient basis. Beginning in fiscal 2011, we replaced our existing deferred
compensation plans with the 2010 deferred compensation plan. Under the new plan, participating officers may
defer up to 70% of their base salary and bonus, net of certain statutory and benefit deductions. The company
may make a discretionary matching contribution for these deferrals to reflect limitations on our matching
contribution under our 401(k) plan. Under this plan, we may make performance-based annual contributions,
subject to the company meeting pre-established business performance criteria, in amounts up to 30% of each
participant’s base salary (subject to offsets for non-U.S. executives’ pension and other benefits), which will cliff
vest after four years. Amounts credited to the deferral accounts are deemed to be invested in hypothetical
investments selected by a participant or an investment manager on behalf of each participant. Participants in the
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2010 deferred compensation plan may receive their vested deferred compensation balances upon termination of
employment at such time as is specified in their deferral agreements, which may include a lump sum payment or
installment payments made over a period of years. Participants also may elect in-service distributions through a
lump sum payment or in installments over a period of up to five years.
Prior to fiscal year 2011, Messrs. McNamara and Read participated in our Senior Executive Deferred
Compensation Plan, which we refer to as the senior executive plan. Participants in the senior executive plan
received long-term deferred bonuses, which were subject to vesting requirements. In addition, a participant was
able to defer up to 80% of his salary and up to 100% of his cash bonuses. The deferred compensation was
credited to a deferral account established under the senior executive plan for recordkeeping purposes. Amounts
credited to the deferral accounts are deemed to be invested in hypothetical investments selected by an investment
manager on behalf of each participant. Participants in the senior executive plan may receive their vested deferred
compensation balances upon termination of employment either through a lump sum payment or in installments
over a period of up to 10 years.
Prior to fiscal year 2011, Messrs. Barbier, Sykes and Humphries participated in the company’s Senior
Management Deferred Compensation Plan (referred to as the senior management plan). In addition, Mr. Read
participated in the senior management plan until December 1, 2008, when our Board approved his participation
in the senior executive plan. Under the senior management plan, participants received deferred discretionary
contributions, which were subject to vesting requirements. Deferred balances under the senior management plan
are deemed to be invested in hypothetical investments selected by the participant or the participant’s investment
manager. Participants in the senior management plan will receive their vested deferred compensation balances
upon termination of employment through a lump sum payment on the later of January 15th of the year following
termination and six months following termination. In addition, any unvested portions of the deferral accounts
will become 100% vested if the executive’s employment is terminated as a result of his or her death.
Under each of the deferred compensation plans, we entered into trust agreements providing for the
establishment of irrevocable trusts into which we are required to deposit cash or other assets as specified in the
applicable deferral agreement, equal to the aggregate amount required to be credited to the participant’s deferral
account, less any applicable taxes to be withheld. The deferred account balances of the participants in deferred
compensation plans are unfunded and unsecured obligations of the company, receive no preferential standing,
and are subject to the same risks as any of our other general obligations.
For a discussion of the contributions and deferred bonuses granted to each of the named executive officers
and their vesting terms, including vesting upon the executive’s termination or a change in control of the company,
see the sections entitled “Compensation Discussion and Analysis—Deferred Compensation” of this joint proxy
statement and “Executive Compensation—Potential Payments Upon Termination or Change of Control” below.
The following table presents information for fiscal year 2013 about: (i) contributions to the named executive
officers’ deferred compensation plan accounts by the executive; (ii) company contributions to the named executive
officers’ deferred compensation plan accounts; (iii) aggregate earnings (or losses) on the deferred compensation
plan accounts; and (iv) the deferred compensation plan account balances as of the end of the fiscal year.
Name
Michael M. McNamara . . .
Paul Read . . . . . . . . . . . . . .
Francois P. Barbier . . . . . . .
Jonathan S. Hoak . . . . . . . .
Paul Humphries . . . . . . . . .
Eslie C. Sykes . . . . . . . . . . .
Executive Contributions Registrant Contributions (Loss) in Last Aggregate Balance
in Last Fiscal Year Fiscal Year at Fiscal Year-End
($)(2) ($)(3) ($)(4)
in Last Fiscal year
($)(1)
Aggregate Earnings
—
—
—
$990
—
—
— $2,635,208 $13,232,790
— $ 553,046 $ 4,093,972
— $ 40,884 $ 1,058,585
— $ 10 $ 1,000
— $ 97,157 $ 1,463,476
— $ (24,916) $ 1,153,313
(1) Reflects the salary payments deferred by our named executive officers during the fiscal year. These amounts
are included in the Summary Compensation Table under the “Salary” column.
(2) These amounts represent contributions under the 2010 deferred compensation plan. These awards cliff vest
after four years. None of these awards have vested under this plan as of March 31, 2013. These amounts,
including any earnings or losses thereon, will be reported under the “Bonus” column of the Summary
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Compensation Table upon vesting in future years if the executive continues to be a named executive officer.
For additional information on these contributions and their vesting terms, including vesting upon the
executive’s termination or a change in control of the company, see the sections entitled “Compensation
Discussion and Analysis—Deferred Compensation” of this joint proxy statement and “Executive
Compensation—Potential Payments Upon Termination or Change of Control.”
(3) Reflects earnings (or losses) for each named executive officer on both the vested and unvested portions of
the executive’s deferred compensation account(s). The above-market portion of the earnings on the vested
portion of the executive’s deferred compensation account(s) is included under the “Change in Pension Value
and Nonqualified Deferred Compensation Earnings” column in the Summary Compensation Table. Any
earnings that vest in a given year are reported in the “Bonus” column in the Summary Compensation Table.
(4) The amounts in this column have previously been reported in the Summary Compensation Table for this and
prior fiscal years, except for the following amounts: Paul Read—$1,695,457; Francois Barbier—$526,523;
and Paul Humphries—$989,878; and EC Sykes—$1,153,313. The amounts in this column include the
following unvested balances for the named executive officers: Michael McNamara—$1,100,517; Paul
Read—$1,649,338; Francois Barbier—$518,330; Paul Humphries—$330,120 and Eslie C. Sykes—$322,630.
For Mr. Read, the amount includes a $886,721 unvested balance in his senior executive plan account and a
$762,617 unvested balance held in his senior management plan account. For Mr. Barbier, the amount includes
$278,313 unvested in his international senior management plan account and a $240,017 unvested balance in
his 2010 deferred compensation plan account. For Mr. McNamara, the amount includes a $1,100,517
unvested balance in his 2010 deferred compensation plan account. For Mr. Humphries, the amount includes
$330,120 unvested balance in his 2010 deferred compensation plan account. For Mr. Sykes, the amount
includes $322,630 unvested balance in his 2010 deferred compensation plan account.
Potential Payments Upon Termination or Change in Control
As described in the section entitled “Compensation Discussion and Analysis” of this joint proxy
statement, our named executive officers do not have employment or severance agreements with us (other than
the severance agreement for Mr. Sykes, which was entered into in connection with his separation from the
company). However, our named executive officers (other than Mr. Sykes) are entitled to certain termination and
change in control benefits under each executive’s deferred compensation plan and under certain equity awards.
As noted above, Messrs. Read and Sykes left the company after the end of the fiscal year. For a discussion
of Mr. Sykes severance benefits, see the section entitled “Executive Compensation—Potential Payments Upon
Termination or Change of Control—Severance Agreement with Mr. Sykes” of this joint proxy statement.
Acceleration of Vesting of Deferred Compensation
(cid:129) 2010 deferred compensation plan. If the employment of any participant in the 2010 deferred
compensation plan is involuntarily terminated by the company without cause or is terminated by the
executive with good reason within two years following a change in control (as defined in the 2010
deferred compensation plan), the entire unvested portion of the deferred compensation account of the
named executive officer will vest.
(cid:129) Senior executive plan. Mr. McNamara’s senior executive plan deferred compensation account was fully
vested as of March 31, 2011. Under the senior executive plan, if the employment of Mr. Read was
terminated as a result of his death or disability or if there was a change of control (as defined in the senior
executive plan), the entire unvested portion of his deferred compensation account would have vested.
(cid:129) Senior management plan. Under the senior management plan, any unvested portions of the deferral
account of Mr. Barbier will become 100% vested if his employment is terminated as a result of death and
any unvested portions of the deferral account of Mr. Read would have become 100% vested if his
employment was terminated as a result of death. In the event of a change of control (as defined in the
senior management plan), a portion of Mr. Barbier’s deferral account will vest and a portion of
Mr. Read’s deferral account would have vested, calculated as a percentage equal to the number of months
from July 1, 2005 to July 1, 2013, divided by 96 for Mr. Barbier; and the number of service months from
July 1, 2005 to July 1, 2014, divided by 108 for Mr. Read. Any portion of the deferral accounts that
remains unvested after a change of control would continue to vest in accordance with the original vesting
schedule.
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Acceleration of Vesting of Equity Awards
The number of unvested equity awards held by each named executive officer as of March 31, 2013 is listed
above in the Outstanding Equity Awards at 2013 Fiscal Year-End table. All unvested outstanding equity awards
held by our named executive officers at the end of fiscal year 2013 were granted under the 2001 Plan, the 2002
Interim Incentive Plan, which we refer to as our 2002 Plan, or the 2010 Plan, which provide certain benefits to
plan participants in the event of the termination of such participant’s employment or a change in control of the
company. The terms of these benefits are described below.
Exercise of Stock Options Upon Termination
Under the terms of the 2001 Plan and the 2002 Plan and the form of award agreement for options granted
under the 2010 Plan, if a plan participant ceases to provide services to the company for any reason other than
death, cause (as defined in the plan) or disability (as defined in the plan), then the participant may exercise any
options which have vested by the date of such termination within three months of the termination date or such
other period not exceeding five years (with respect to the 2001 Plan and the 2002 Plan) or the term of the
option, as determined by the Compensation Committee. If a participant ceases to provide services to the
company because of death or disability, then the participant may exercise any options which have vested by the
date of such termination within 12 months of the termination date or such other period not exceeding five years
(with respect to the 2001 Plan and the 2002 Plan) or the term of the option, as determined by the Compensation
Committee. All stock options held by a plan participant who is terminated for cause expire on the termination
date, unless otherwise determined by the Compensation Committee. In addition, subject to any waiver by the
Compensation Committee, all unvested restricted share unit awards and unvested stock options held by a plan
participant will be forfeited if the participant ceases to provide services to the company for any reason. However,
certain award agreements for performance-based restricted share unit awards granted under our 2001 Plan and
our 2010 Plan provide that if a plan participant ceases to provide services to the company due to a retirement
(meaning a voluntary termination of service after the participant has attained the age of sixty (60) years and
completed at least ten (10) years of service as an employee of the company), then the award will not terminate
and a pro-rata number of shares subject to the award shall be issued to the participant upon the vesting of the
award agreement pursuant to the original performance criteria. None of our named executive officers is currently
eligible for this retirement benefit.
Acceleration of Vesting Upon a Change in Control
Our equity incentive plans are “double trigger” plans, meaning that unvested stock options and unvested
restricted share unit awards vest immediately only if (i) there is a change in control of the company and
(ii)(x) such options or awards are not converted, assumed or replaced by the successor or survivor corporation or
(y) if provided by the Compensation Committee as described below, the service of the award recipient is
involuntarily terminated within a designated period following the effective date of such change in control.
Except for grants to our non-employee directors made under the automatic option grant program of the
2001 Plan, under the terms of the 2001 Plan and the 2002 Plan and the form of restricted share unit award
agreement used under these two plans for certain of our grants of restricted share unit awards to our employees
(including our executives), in the event of a dissolution or liquidation of the company or if we are acquired by
merger or asset sale or in the event of other change of control events, each outstanding stock option issued under
the 2001 Plan or the 2002 Plan and each unvested restricted share unit award with such a provision shall
automatically accelerate so that each such award shall, immediately prior to the effective date of such
transaction, become fully vested with respect to the total number of shares then subject to such award. However,
subject to the specific terms of a given award, vesting shall not so accelerate if, and to the extent, such award is
either to be assumed or replaced with a comparable right covering shares of the capital stock of the successor
corporation or parent thereof or is replaced with a cash incentive program of the successor corporation which
preserves the inherent value existing at the time of such transaction.
Under the terms of our 2010 Plan, unless otherwise provided in the applicable award agreement or other
agreement between the company and the participant, in the event of a change of control of the company (as
defined in the 2010 Plan) in which the participant’s awards are not converted, assumed, or replaced by a successor
or survivor corporation, or a parent or subsidiary thereof, then such awards will become fully exercisable and all
forfeiture restrictions on such awards will lapse immediately prior to the change of control and, following the
consummation of such a change of control, all such awards will terminate and cease to be outstanding.
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Where awards under the 2010 Plan are assumed or continued after a change in control, the Compensation
Committee may provide that one or more awards will automatically accelerate upon an involuntary termination
of service within a designated period (not to exceed eighteen (18) months) following the effective date of such
change in control. If the Compensation Committee so determines, any such award will, immediately upon an
involuntary termination of service following a change of control, become fully exercisable and all forfeiture
restrictions on such award will lapse.
All of our named executive officer’s stock options with exercise prices less than $6.76 per share, the
closing price of our ordinary shares on the last business day of our 2013 fiscal year, were granted under and are
subject to the change in control provisions of one of the plans described above. In addition, 2,460,000 of
Mr. McNamara’s unvested restricted share unit awards, 907,750 of Mr. Read’s unvested restricted share unit
awards, 697,000 of Mr. Barbier’s unvested restricted share unit awards, 222,500 of Mr. Hoak’s unvested
restricted share unit awards, and 551,000 of Mr. Humphries’ unvested restricted share unit awards provide that
the awards include such a change in control provision.
Potential Payments Upon Termination or Change in Control
as of March 31, 2013
The following table and accompanying notes show the estimated payments and benefits that would have
been provided to each named executive officer as a result of (i) the accelerated vesting of deferred compensation
in the case of his death, disability, a termination following a change of control or a change of control with a
termination and (ii) the accelerated vesting of unvested equity awards in the event of a change of control if such
awards are not assumed by the successor company in connection with the change of control.
Calculations for this table assume that the triggering event took place on March 28, 2013, the last business
day of our 2013 fiscal year, and are based on the price per share of our ordinary shares on such date, which was
$6.76. The following table does not include potential payouts under our named executive officers’ nonqualified
deferred compensation plans relating to vested benefits.
Change in
Change in Control:
Control: Accelerated
Accelerated Vesting of
Vesting of Restricted
Deferred Share
Compensation Unit Awards
Name (1) (2) Total
Michael M. McNamara . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $16,629,600 $16,629,600
Paul Read(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,545,773 $ 6,136,390 $ 7,682,163
Francois P. Barbier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 270,582 $ 4,711,720 $ 4,982,302
Jonathan S. Hoak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $ 1,504,100 $ 1,504,100
Paul Humphries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $ 3,724,760 $ 3,724,760
Eslie C. Sykes(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —
(1) The amount shown for each executive represents the portion of the unvested balance of his deferred
compensation account that would vest in the event of a change in control of the company (without a
termination following such change in control). An additional $1,100,517 for Mr. McNamara, $240,017 for
Mr. Barbier, and $330,120 for Mr. Humphries would vest if the executive is terminated without cause or
resigns for good reason following a change of control. $322,630 would have vested for Mr. Sykes if the
executive was terminated without cause or resigned for good reason following a change of control. No
additional amount will vest for Mr. Hoak, or would have vested for Mr. Read, if the executive was terminated
without cause or resigned for good reason following a change of control. The portion of the unvested balance
of the executive’s deferred compensation account that would vest in the event of Mr. Barbier’s death is
$278,313 and the portion of the unvested balance of the executive’s deferred compensation account that
would have vested in the event of Mr. Read’s death would have been $1,649,338. No unvested amounts
would vest in the event of the death of any other named executive officer. The portion of Mr. Read’s deferred
compensation account that would have vested in the event of his disability was $886,721; no other executive’s
account would vest in the event of his disability.
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(2) The amounts shown represent the estimated value of the accelerated vesting of restricted share unit awards
following a change of control under the terms of our equity incentive plans, which assumes that such
restricted share unit awards are not assumed or replaced by the successor corporation or its parent. If such
awards are assumed or replaced in a change of control transaction, the vesting of such awards will not
accelerate; provided, that the Compensation Committee may determine that awards under the 2010 Plan may
be accelerated if the executive is terminated within a certain period (not to exceed 18 months) following a
change of control. All amounts shown in this column represent the intrinsic value of the awards based on the
closing price of our ordinary shares on March 28, 2013, the assumed date of the triggering event.
(3) Mr. Sykes left the company effective as of March 31, 2013 and Mr. Read left the company effective as of
May 3, 2013.
The following table and accompanying notes show the following benefits provided to Mr. Sykes under his
Termination Payments for Mr. Sykes
separation agreement:
(cid:129) severance payments;
(cid:129) estimated value of continued health care coverage, including COBRA premiums; and
(cid:129) reimbursement of legal expenses incurred in connection with the separation agreement.
In exchange for these benefits, Mr. Sykes agreed to a release of claims against the company, the non-
solicitation of company employees, non-disparagement of the company and the non-disclosure of company
confidential information. The following table does not include:
(cid:129) the value of bonus payments for fiscal year 2014, which are not estimable at this time; or
(cid:129) the amount of reimbursement the executive may receive for relocation expenses (not to exceed $78,000
for Mr. Sykes) and closing costs for the sale of the executive’s home, which are not estimable at this
time; or
(cid:129) payouts under our named executive officers’ nonqualified deferred compensation plans relating to vested
benefits in the amount of $830,683 for Mr. Sykes.
Estimated
Value of
Continued Reimbursement
Severance Health Care of Legal
Payments Coverage Expenses
Name (1) (2) (3) Total
Eslie C. Sykes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $787,500 $54,117 $7,000 $848,617
(1) Amounts shown include the aggregate amount of all severance payments made or to be made under his
separation agreement.
(2) The amount shown represents the estimated value of medical, dental and vision coverage to be provided
based on the current level of coverage as adjusted for estimated annual premium increases, including
$54,117 in lieu of COBRA premiums.
(3) The amount shown represents the maximum amount for which the executive is entitled to reimbursement for
legal expenses incurred in connection with the negotiation of his separation agreement.
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EQUITY COMPENSATION PLAN INFORMATION
As of March 31, 2013, we maintained only our 2010 Plan, which replaced (i) the 2001 Plan, (ii) the 2002
Plan, (iii) our 2004 Award Plan for New Employees, and (iv) the Solectron Corporation 2002 Stock Plan, which
we refer to collectively as the Prior Plans. The following table provides information about equity awards
outstanding under these plans as of March 31, 2013.
Number of
Ordinary Shares
Number of Remaining
Ordinary Shares Available for
to be Issued Future Issuance
Upon Exercise of Under Equity
Outstanding Compensation
Options and Weighted-Average Plans (Excluding
Vesting of Exercise Price of Ordinary Shares
Restricted Share Outstanding Reflected in
Unit Awards Options(1) Column (a))
Plan Category (a) (b) (c)
Equity compensation plans approved by shareholders . . . 50,454,727(2) $8.14 43,355,611(3)
Equity compensation plans not approved by
shareholders(4)(5)(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,757,906(7) $9.29 —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,212,633 $8.29 43,355,611(3)
(1) The weighted-average exercise price does not take into account ordinary shares issuable upon the vesting of
outstanding restricted share unit awards, which have no exercise price.
(2) Includes 20,511,469 ordinary shares issuable upon the vesting of restricted share unit awards. The remaining
balance consists of ordinary shares issuable upon the exercise of outstanding stock options. For awards
subject to market performance criteria, the amount reported reflects the number of shares to be issued if the
target level is achieved. An additional 2,996,500 shares would be issued if the maximum market
performance level is achieved.
(3) Consists of ordinary shares available for grant under the 2010 Plan. The 2010 Plan provides for grants of up
to 10.0 million ordinary shares, plus ordinary shares available for grant as a result of the forfeiture,
expiration or termination of options and restricted share unit awards granted under such Prior Plans (if such
ordinary shares are issued under such other stock options or restricted share unit awards, they will not
become available under the 2010 Plan) and shares that were available for grant under the Prior Plans at the
time of the consolidation of such plans into the 2010 Plan. Each ordinary share that is subject to a stock
option is counted against this limit as one share. Each share that is subject to a restricted share unit award is
counted against this limit as one and seventy-one hundredths (1.71) shares.
(4) The 2004 Plan was established in October 2004 and consolidated into the 2010 Plan in 2010. Options
granted under the 2004 Plan generally vest over four years and generally expire seven or ten years from the
date of grant. Unvested options are forfeited upon termination of employment. Restricted share unit awards
generally vest in installments over a three- to five-year period and unvested restricted share unit awards are
also forfeited upon termination of employment.
(5) Our 2002 Plan was adopted by our Board of Directors in May 2002 and consolidated into the 2010 Plan in
2010. Options granted under the 2002 Plan generally have an exercise price of not less than the fair market
value of the underlying ordinary shares on the date of grant. Options granted under the 2002 Plan generally
vest over four years and generally expire either seven or ten years from the date of grant. Unvested options
are forfeited upon termination of employment. Restricted share unit awards generally vest in installments
over a three- to five-year period and unvested restricted share unit awards are also forfeited upon
termination of employment.
(6) In connection with the acquisition of Solectron Corporation on October 1, 2007, we assumed the Solectron
Plan, including all outstanding options to purchase Solectron Corporation common stock with exercise prices
equal to, or less than, $5.00 per share. Each assumed option was converted into an option to acquire our
ordinary shares at the applicable exchange rate of 0.345. As a result, we assumed approximately 7.4 million
vested and unvested options with exercise prices ranging from between $5.45 and $14.41 per ordinary share.
The SLR Plan was consolidated into the 2010 Plan in 2010. Options granted under the SLR Plan generally
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have an exercise price of not less than the fair value of the underlying ordinary shares on the date of grant.
Such options generally vest over four years and generally expire either seven or ten years from the date of
grant. Unvested options are forfeited upon termination of employment.
(7) Includes 1,295,600 ordinary shares issuable upon the vesting of restricted share unit awards granted under the
2002 Plan. The remaining balance consists of ordinary shares issuable upon the exercise of outstanding stock
options.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of May 1, 2013, except as otherwise indicated, regarding the
beneficial ownership of our ordinary shares by:
(cid:129) each shareholder known to us to be the beneficial owner of more than 5% of our outstanding ordinary
shares;
(cid:129) each of our named executive officers;
(cid:129) each director; and
(cid:129) all executive officers and directors as a group.
Unless otherwise indicated, the address of each of the individuals named below is: c/o Flextronics
International Ltd., No. 2 Changi South Lane, Singapore 486123.
Information in this table as to our directors, named executive officers and all directors and executive
officers as a group is based upon information supplied by these individuals. Information in this table as to our
greater than 5% shareholders is based solely upon the Schedules 13G filed by these shareholders with the SEC.
Where information regarding shareholders is based on Schedules 13G, the number of shares owned is as of the
date for which information was provided in such schedules.
Beneficial ownership is determined in accordance with the rules of the SEC that deem shares to be
beneficially owned by any person who has or shares voting or investment power with respect to such shares.
Ordinary shares subject to options that are currently exercisable or are exercisable within 60 days of May 1,
2013, and ordinary shares subject to restricted share unit awards that vest within 60 days of May 1, 2013 are
deemed to be outstanding and to be beneficially owned by the person holding such awards for the purpose of
computing the percentage ownership of such person, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person. Unless otherwise indicated below, the persons and
entities named in the table have sole voting and sole investment power with respect to all the shares beneficially
owned, subject to community property laws where applicable.
For each individual and group included in the table below, percentage ownership is calculated by dividing
the number of shares beneficially owned by such person or group by the sum of the 628,790,395 shares of
common stock outstanding on May 1, 2013 plus the number of shares of common stock that such person or
group had the right to acquire on or within 60 days after May 1, 2013.
Shares Beneficially
Owned
Number of
Name and Address of Beneficial Owner Shares Percent
5% Shareholders:
Franklin Resources, Inc.(1)
One Franklin Parkway, San Mateo, CA 94403 . . . . . . . . . . . . . . . . . . . . . . . . 70,586,606 11.22%
Glenview Capital Management, LLC(2)
767 Fifth Avenue, 44th Floor, New York, NY 10153 . . . . . . . . . . . . . . . . . . . . 49,271,638 7.83%
PRIMECAP Management Company(3)
225 South Lake Ave., #400, Pasadena, CA 91101 . . . . . . . . . . . . . . . . . . . . . 44,552,833 7.08%
Prudential Financial, Inc.(4)
751 Broad Street, Newark, NJ 07102 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,294,241 6.09%
Jennison Associates LLC(5)
466 Lexington Avenue, New York, NY 10017 . . . . . . . . . . . . . . . . . . . . . . . . 38,292,199 6.09%
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Shares Beneficially
Owned
Number of
Name and Address of Beneficial Owner Shares Percent
Named Executive Officers and Directors:
Michael M. McNamara(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,806,970 1.69%
Paul Read(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,316,750 *
Paul Humphries(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640,135 *
Francois Barbier(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538,632 *
H. Raymond Bingham(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,762 *
James A. Davidson(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173.161 *
Lip-Bu Tan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,827 *
Willy C. Shih(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,942 *
Robert L. Edwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,218 *
William D. Watkins(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,318 *
Daniel H. Schulman(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,318 *
Lay Koon Tan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,557 *
Lawrence A. Zimmerman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — *
Jonathan S. Hoak(16) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,486 *
Eslie C. Sykes(15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328,065 *
All executive officers and directors as a group (15 persons)(17) . . . . . . . . . . . . 15,595,141 2.43%
* Less than 1%.
(1) Based on information supplied by Franklin Resources, Inc. in an amended Schedule 13G filed with the
SEC on February 11, 2013. Templeton Global Advisors Limited is deemed to have sole voting power for
38,964,935 of these shares, sole dispositive power for 39,750,755 of these shares, shared voting power for
214,840 of these shares and shared dispositive power for 1,326,280 of these shares. Templeton Investment
Counsel, LLC is deemed to have sole voting power for 21,163,041 of these shares, sole dispositive power
for 21,671,820 of these shares and shared dispositive power for 89,320 of these shares. Franklin Templeton
Investments Corp. is deemed to have sole voting and dispositive power for 5,076,197 of these shares.
Franklin Templeton Investments Australia Limited is deemed to have sole voting power for 296,300 of these
shares, sole dispositive power for 190,350 of these shares and shared dispositive power for 105,950 of these
shares. Franklin Templeton Portfolio Advisors, Inc. is deemed to have sole voting and dispositive power for
592,671 of these shares. Franklin Templeton Investments (Asia) Ltd. is deemed to have sole voting and
dispositive power for 103,260 of these shares. Franklin Templeton Investment Management Limited is
deemed to have sole voting power for 0 of shares and sole dispositive power for 89,670 of shares. Templeton
Asset Management Ltd. is deemed to have sole voting power for 0 of these shares, sole dispositive power for
802,170 of these shares and shared voting and dispositive power for 185,050 of these shares. Franklin
Advisors, Inc. is deemed to have sole voting power over 603,113 of these shares and sole dispositive power
over 603,113 of these shares. The securities are beneficially owned by investment management clients of
investment managers that are direct and indirect subsidiaries of Franklin Resources, Inc., including the
investment management subsidiaries listed above.
(2) Based on information supplied by Glenview Capital Management LLC (or Glenview) in an amended
Schedule 13G filed with the SEC on February 14, 2013. As a result of Glenview serving as an investment
manager to various investment companies, and Mr. Robbins serving as the Chief Executive Officer of Glenview,
Glenview and Mr. Robbins may be deemed to share voting and dispositive power over all of these shares.
(3) Based on information supplied by PRIMECAP Management Company in an amended Schedule 13G filed
with the SEC on February 14, 2013. PRIMECAP Management Company has sole voting power over
21,343,133 of these shares and sole dispositive power over 44,552,833 of these shares.
(4) Based on information supplied by Prudential Financial, Inc. in an amended Schedule 13G filed with the
SEC on February 11, 2013. Prudential Financial, Inc., which indirectly owns Jennison Associates LLC, has
sole voting and dispositive power over 3,027,015 of these shares, shared voting power over 34,380,713 of
these shares and shared dispositive power over 35,267,226 of these shares.
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(5) Based on information supplied by Jennison Associates LLC in an amended Schedule 13G filed with the
SEC on February 12, 2013. Jennison Associates LLC, which is indirectly owned 100% by Prudential
Financial, Inc., has the sole voting power over 37,470,939 of these shares and shares dispositive power over
38,292,199 of these shares. Ordinary shares reported by Jennison Associates LLC may be included in the
shares report by Prudential Financial, Inc.
(6) Includes 9,900,000 shares subject to options presently exercisable and options exercisable within 60 days of
May 1, 2013. Also includes 392,500 shares subject to restricted share unit awards that vest within 60 days of
May 1, 2013.
(7) Includes 2,175,000 shares subject to options presently exercisable and options exercisable within 60 days of
May 1, 2013. Also includes 141,750 shares subject to restricted share unit awards that vest within 60 days of
May 1, 2013.
(8) Includes 553,489 shares subject to options presently exercisable and options exercisable within 60 days of
May 1, 2013. Also includes 79,250 shares subject to restricted share unit awards that vest within 60 days of
May 1, 2013.
(9) Includes 428,862 shares subject to options presently exercisable and options exercisable within 60 days of
May 1, 2013. Also includes 101,000 shares subject to restricted share unit awards that vest within 60 days of
May 1, 2013.
(10) Includes 12,500 shares subject to options presently exercisable and options exercisable within 60 days of
May 1, 2013.
(11) Includes 45,740 shares held by the Davidson Living Trust of which Mr. Davidson is a trustee. Also includes
51,807 shares held by Silver Lake Technology Management, L.L.C. of which Mr. Davidson is Managing
Director. Mr. Davidson disclaims beneficial ownership in the shares owned by Silver Lake Technology
Management, L.L.C. except to the extent of his pecuniary interest arising from his interest therein. Also
includes 85,747 shares held directly by Mr. Davidson, 94 shares held by the John Alexander Davidson 2000
Irrevocable Trust of which Mr. Davidson is a trustee and 12,500 shares subject to options presently
exercisable and options exercisable within 60 days of May 1, 2013. Mr. Davidson received these options in
connection with his service as a member of our Board of Directors. Under Mr. Davidson’s arrangements
with respect to director compensation, these 15,500 shares issuable upon exercise of options are expected to
be assigned by Mr. Davidson to Silver Lake Technology Management, L.L.C.
(12) Includes 37,500 shares subject to options presently exercisable and options exercisable within 60 days of
May 1, 2013.
(13) Includes 25,000 shares subject to options presently exercisable and options exercisable within 60 days of
May 1, 2013.
(14) Includes 25,000 shares subject to options presently exercisable and options exercisable within 60 days of
May 1, 2013.
(15) Includes 204,594 shares subject to options presently exercisable and options exercisable within 60 days of
May 1, 2013.
(16) Includes 87,499 shares subject to options presently exercisable and options exercisable within 60 days of
May 1, 2013 also includes 23,750 shares subject to restricted share unit awards that vest within 60 days of
May 1, 2013.
(17) Includes 13,461,944 shares subject to options presently exercisable and options exercisable within 60 days
of May 1, 2013. Also includes 738,250 shares subject to restricted share unit awards that vest within 60 days
of May 1, 2013.
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Review of Related Person Transactions
Our Code of Business Conduct and Ethics provides guidance for addressing actual or potential conflicts of
interests, including those that may arise from transactions and relationships between us and our executive
officers or directors. In addition, in order to formalize our policies and procedures for the review, approval or
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ratification, and disclosure of related person transactions, our Board of Directors adopted a Statement of Policy
with Respect to Related Person Transactions. The policy generally provides that the Nominating and Corporate
Governance Committee (or another committee comprised solely of independent directors) will review, approve in
advance or ratify, all related person transactions between us and any director, any nominee for director, any
executive officer, any beneficial owners of more than 5% of our ordinary shares or any immediate family
member of any of the foregoing individuals. Under the policy, some ordinary course transactions or relationships
are not required to be reviewed, approved or ratified by the applicable Board committee, including, among other
things, the following transactions:
(cid:129) transactions involving less than $25,000 for any individual related person;
(cid:129) compensation arrangements with directors and executive officers resulting solely from their service on
the Board or as executive officers, so long as such arrangements are disclosed in our filings with the SEC
or, if not required to be disclosed, are approved by our Compensation Committee; and
(cid:129) indirect interests arising solely from a related person’s service as a director and/or owning, together with
all other related persons, directly or indirectly, less than a 10% beneficial ownership interest in a third
party (other than a partnership) which has entered into or proposes to enter into a transaction with us.
We have various procedures in place to identify potential related person transactions, and the Nominating
and Corporate Governance Committee works with our management and our Office of General Counsel in
reviewing and considering whether any identified transactions or relationships are covered by the policy. Our
Statement of Policy with Respect to Related Person Transactions is included in our Guidelines with Regard to
Certain Governance Matters, a copy of which is available along with a copy of the company’s Code of Business
Conduct and Ethics on the Corporate Governance page of our website at www.flextronics.com.
Transactions with Related Persons
Other than compensation agreements and other arrangements described under the sections entitled
“Executive Compensation” of this joint proxy statement and “Non-Management Directors’ Compensation for
Fiscal Year 2013” of this joint proxy statement, during fiscal year 2013, there was not, nor is there currently
proposed, any transaction or series of similar transactions to which we are or will be a party:
(cid:129) in which the amount involved exceeded or will exceed $120,000; and
(cid:129) in which any director, nominee, executive officer, holder of more than 5% of our ordinary shares or any
member of their immediate family had or will have a direct or indirect material interest.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more
than 10% of our ordinary shares to file initial reports of ownership and reports of changes in ownership with the
SEC. Such persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms that they
file. Based solely on our review of the copies of such forms furnished to us and written representations from our
executive officers and directors, we believe that all Section 16(a) filing requirements for the fiscal year ended
March 31, 2013 were met.
SHAREHOLDER PROPOSALS FOR THE 2014 ANNUAL GENERAL MEETING
Shareholder proposals submitted under SEC Rule 14a-8 and intended for inclusion in the proxy statement
for our 2014 annual general meeting of shareholders must be received by us no later than February 12, 2014.
Any such shareholder proposals must be mailed to us at 847 Gibraltar Drive, Milpitas, California, 95035, U.S.A.,
Attention: Chief Executive Officer. Any such shareholder proposals may be included in our proxy statement for
the 2014 annual general meeting so long as they are provided to us on a timely basis and satisfy the other
conditions set forth in applicable rules and regulations promulgated by the SEC. Shareholder proposals
submitted outside the processes of SEC Rule 14a-8 are subject to the requirements of the Companies Act, as
described in the following paragraph, and applicable rules and regulations promulgated by the SEC. The proxy
designated by us will have discretionary authority to vote on any matter properly presented by a shareholder for
consideration at the 2014 annual general meeting of shareholders unless notice of such proposal is received by
the applicable deadlines prescribed by the Singapore Companies Act.
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Under Section 183 of the Companies Act, registered shareholders representing at least 5% of the total
outstanding voting rights or registered shareholders representing not fewer than 100 registered shareholders
having an average paid up sum of at least S$500 each may, at their expense, requisition that we include and give
notice of their proposal for the 2014 annual general meeting. Any such requisition must satisfy the requirements
of Section 183 of the Singapore Companies Act, be signed by all the requisitionists and be deposited at our
registered office in Singapore, No. 2 Changi South Lane, Singapore 486123, at least six weeks prior to the date
of the 2014 annual general meeting in the case of a requisition requiring notice of a resolution, or at least one
week prior to the date of the 2014 annual general meeting in the case of any other requisition.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Flextronics incorporates by reference the following sections of our Annual Report on Form 10-K for the
fiscal year ended March 31, 2013:
(cid:129) Item 8, “Financial Statements and Supplementary Data”;
(cid:129) Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; and
(cid:129) Item 7A, “Quantitative and Qualitative Disclosures About Market Risk.”
SINGAPORE STATUTORY FINANCIAL STATEMENTS
Our Annual Report on Form 10-K for the fiscal year ended March 31, 2013, which was filed with the SEC
on May 28, 2013, includes our audited consolidated financial statements, prepared in conformity with
accounting principles generally accepted in the United States of America, or U.S. GAAP, together with the
Independent Registered Public Accounting Firm’s Report of Deloitte & Touche LLP, our independent auditors
for the fiscal year ended March 31, 2013. We publish our U.S. GAAP financial statements in U.S. dollars, which
is the principal currency in which we conduct our business.
Our Singapore statutory financial statements, prepared in conformity with the provisions of the Companies
Act will be included with the annual report which will be delivered to our shareholders prior to the date of the
2013 annual general meeting, as required under Singapore law.
Our Singapore statutory financial statements include:
(cid:129) our consolidated financial statements (which are identical to those included in the Annual Report on
Form 10-K, described above);
(cid:129) supplementary financial statements (which reflect solely the company’s standalone financial results, with
our subsidiaries accounted for under the equity method rather than consolidated);
(cid:129) a Directors’ Report; and
(cid:129) the Independent Auditors’ Report of Deloitte & Touche LLP, our Singapore statutory auditors for the
fiscal year ended March 31, 2013.
OTHER MATTERS
Our management does not know of any matters to be presented at either the 2013 annual general meeting
or the extraordinary general meeting other than those set forth herein and in the notices accompanying this joint
proxy statement. If any other matters are properly presented for a vote at either the 2013 annual general meeting
or the extraordinary general meeting, the applicable enclosed proxy confers discretionary authority to the
individuals named as proxies to vote the shares represented by proxy, as to those matters.
It is important that your shares be represented at the 2013 annual general meeting and the extraordinary
general meeting, regardless of the number of shares which you hold. We urge you to promptly execute and
return the accompanying proxy cards in the envelope which has been enclosed for your convenience.
Shareholders who are present at each of the 2013 annual general meeting and the extraordinary general
meeting may revoke their proxies and vote in person or, if they prefer, may abstain from voting in person and
allow their proxies to be voted.
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We incorporate by reference information from Note 3 to our audited consolidated financial statements for
the fiscal year ended March 31, 2013, “Share-Based Compensation,” included in our Annual Report on
Form 10-K and the sections entitled “Financial Statements and Supplementary Data,” “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative
Disclosures About Market Risk.” Upon request, we will furnish without charge by first class mail or other
equally prompt means within one business day of receipt of such request, to each person to whom a proxy
statement is delivered a copy of our Annual Report on Form 10-K (not including exhibits). You may request a
copy of such information, at no cost, by writing or telephoning us at:
Flextronics International Ltd.
6201 America Center Drive
San Jose, California 95002 U.S.A.
Telephone: (408) 576-7985
By order of the Board of Directors,
Joanne Chia Hui Min
Company Secretary
June 12, 2013
Singapore
Upon request, we will furnish without charge to each person to whom this joint proxy statement is delivered
a copy of any exhibit listed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013.
You may request a copy of this information at no cost, by writing or telephoning us at:
Flextronics International Ltd.
6201 America Center Drive
San Jose, California 95002 U.S.A.
Telephone: (408) 576-7985
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
⌧ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
Form 10-K
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2013
Or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-23354
FLEXTRONICS INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
Singapore
(State or other jurisdiction of
incorporation or organization)
2 Changi South Lane,
Singapore
(Address of registrant’s principal executive offices)
Not Applicable
(I.R.S. Employer
Identification No.)
486123
(Zip Code)
Registrant’s telephone number, including area code
(65) 6890 7188
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Ordinary Shares, No Par Value The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act—NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ⌧ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No ⌧
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ⌧ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ⌧ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ⌧
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ⌧
Accelerated filer o
Non-accelerated filer o
(Do not check if a
smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ⌧
As of September 28, 2012, the aggregate market value of the Company’s ordinary shares held by non-affiliates of the registrant was
approximately $4.0 billion based upon the closing sale price as reported on the NASDAQ Stock Market LLC (NASDAQ Global Select Market).
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Class Outstanding at May 16, 2013
Ordinary Shares, No Par Value 625,659,713
Document Parts into Which Incorporated
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement to be delivered to shareholders in Part III
connection with the Registrant’s 2013 Annual General
Meeting of Shareholders
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Page
TABLE OF CONTENTS
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 5.
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer
PART II
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . 43
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
PART III
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . 97
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Item 15.
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
PART IV
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PART I
FORWARD-LOOKING STATEMENTS
Unless otherwise specifically stated, references in this report to “Flextronics,” “the Company,” “we,” “us,”
“our” and similar terms mean Flextronics International Ltd. and its subsidiaries.
Except for historical information contained herein, certain matters included in this annual report on
Form 10-K are, or may be deemed to be forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. The words “will,” “may,”
“designed to,” “believe,” “should,” “anticipate,” “plan,” “expect,” “intend,” “estimate” and similar expressions
identify forward-looking statements, which speak only as of the date of this annual report. These forward-
looking statements are contained principally under Item 1, “Business,” and under Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” Because these forward-looking
statements are subject to risks and uncertainties, actual results could differ materially from the expectations
expressed in the forward-looking statements. Important factors that could cause actual results to differ materially
from the expectations reflected in the forward-looking statements include those described in Item 1A, “Risk
Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
In addition, new risks emerge from time to time and it is not possible for management to predict all such risk
factors or to assess the impact of such risk factors on our business. Given these risks and uncertainties, the
reader should not place undue reliance on these forward-looking statements. We undertake no obligation to
update or revise these forward-looking statements to reflect subsequent events or circumstances.
ITEM 1. BUSINESS
OVERVIEW
We are a globally-recognized leading provider of end-to-end, global supply chain solutions through which
we design, build, ship and service a complete packaged electronic product to original equipment manufacturers
(“OEMs”) in the following markets:
(cid:129) High Reliability Solutions (“HRS”), which is comprised of our medical, automotive, defense and
aerospace businesses;
(cid:129) High Velocity Solutions (“HVS”), which includes our mobile devices business, including smart phones,
and consumer electronics, including game consoles, high-volume computing business, including
notebook personal computing (“PC”), tablets and printers;
(cid:129) Industrial and Emerging Industries (“IEI”), which is comprised of our large household appliances,
equipment, and emerging industries businesses; and
(cid:129) Integrated Network Solutions (“INS”), which includes our telecommunications infrastructure, data
networking, connected home, and server and storage businesses.
We provide our advanced design, manufacturing and services through a network of facilities in over
30 countries across four continents. We have established this extensive network of manufacturing facilities in the
world’s major electronics markets (Asia, the Americas and Europe) in order to serve the outsourcing needs of
both multinational and regional OEMs. Our services increase customer competitiveness by delivering improved
product quality, leading manufacturability, improved performance, faster time-to-market and reduced costs. Our
OEM customers leverage our services to meet their requirements throughout their products’ entire life cycles.
For the fiscal year ended March 31, 2013, we had revenue of $23.6 billion and net income of $277.1 million.
We believe that the combination of our extensive design and engineering services, significant scale and
global presence, end-to-end services, advanced supply chain management, industrial parks in low-cost geographic
areas and operational track record provide us with a competitive advantage in the market for designing,
manufacturing and servicing electronics products for leading multinational and regional OEMs. Through these
services and facilities, we offer our OEM customers the ability to simplify their global product development,
their manufacturing process, their after sales services and enable our OEM customers to achieve meaningful
reductions to time-to-market and costs.
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Our business has been subject to seasonality primarily due to our mobile devices market and our consumer
devices market, which historically exhibit particular strength in the two quarters leading up to the end of the
calendar year in connection with the holiday season.
INDUSTRY OVERVIEW
Our expertise is in the design, manufacturing and services for a broad range of products, and as such, the
closest definition of our industry is the outsourcing Electronics Manufacturing Services (“EMS”) industry.
EMS has experienced significant change and growth as an increasing number of companies elected to outsource
some or all of their design, manufacturing, and distribution requirements. We have seen an increase in global
OEM manufacturing demand since the 2001-2002 technology downturn as more and more OEMs pursued the
benefits of outsourcing rather than internal manufacturing. Due to the global economic crisis, which began in
late calendar year 2007 and continued through the end of our fiscal year 2010, many of our OEM customers
reduced their manufacturing and supply chain outsourcing which negatively impacted our business. In fiscal year
2011, we began seeing some positive signs that demand for our OEM customers’ end products was improving,
and this trend continued through the end of our 2012 fiscal year. However our revenue in fiscal year 2013
declined compared to that of the prior year, primarily due to our exit from the high volume and low margin
Original Design and Manufacturing (“ODM”) PC business last year. The EMS industry has not fully recovered
from the last macro-economic downturn and as a result, during fiscal 2013 the Company initiated certain
restructuring activities intended to improve operational efficiencies. The growth of the overall industry for
calendar 2012 is estimated to have been greater than 4%.
We believe the total available market for outsourcing EMS continues to offer opportunities for growth with
current penetration rates estimated to be less than 23%. The intensely competitive nature of the electronics
industry, the continually increasing complexity and sophistication of electronics products, pressure on OEMs to
reduce product costs and shorter product life cycles encourage OEMs to utilize broad manufacturing and service
providers as part of their business and manufacturing strategies. Utilizing global manufacturing and service
providers allows OEMs to take advantage of the global design, manufacturing and supply chain management
expertise of such providers, and enables OEMs to concentrate on product research, development, marketing and
sales. We believe that OEMs realize the following benefits through their strategic relationships with
manufacturing and service providers:
(cid:129) Reduced production costs;
(cid:129) Reduced design and development costs and lead time;
(cid:129) Accelerated time-to-market and time-to-volume production;
(cid:129) Reduced capital investment requirements and fixed costs;
(cid:129) Improved inventory management and purchasing power;
(cid:129) Access to worldwide design, engineering, manufacturing, and after-market service capabilities; and
(cid:129) Ability to focus on core branding and R&D initiatives.
We believe that growth in the EMS industry will be driven largely by the needs of OEMs to respond to
rapidly changing markets and technologies and to reduce product costs. Additionally, we believe that there are
significant opportunities for global manufacturing and service providers to win additional business from OEMs
in certain markets or industry segments that have yet to substantially utilize such providers.
SERVICE OFFERINGS
We offer a broad range of customer-tailored services to OEMs. We believe that Flextronics has the broadest
worldwide capabilities in the industry, from design resources to end-to-end global supply chain services. We
believe a key competitive advantage is our ability to provide more value and innovation to our customers because
we offer both global economies of scale in procurement, manufacturing and after-market services, as well as
market-focused expertise and capabilities in design and engineering. As a result of our focus on specific
markets, we believe we are able to better understand complex market dynamics and anticipate trends that impact
our OEM customers’ businesses, and can help improve our OEM customers’ market positioning by effectively
adjusting product plans and roadmaps to deliver low-cost, high quality products and meet their time-to-market
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requirements. Our services allow us to design, build, ship and service a complete packaged electronics product
for our OEM customers. These services include:
Design and Engineering Services. We offer a comprehensive range of value- added design and
engineering services that are tailored to the various markets and needs of our customers. These services can
be delivered by three primary business models:
(cid:129) Contract Design Services, where the customer purchases engineering and development services on a
time and materials basis;
(cid:129) Joint Development Manufacturing services, where Flextronics’ engineering and development teams
work jointly with our customers’ teams to ensure product development integrity, seamless
manufacturing handoffs, and faster time to market; and
(cid:129) Original Design and Manufacturing services, where the customer purchases a product that we design,
develop and manufacture. ODM products are then sold by our OEM customers under the OEMs’
brand names. We have provided ODM services in various markets including Industrial, Automotive,
Medical, and Infrastructure and Power Supplies.
Our design and engineering services are provided by our global, market-based engineering teams and cover
a broad range of technical competencies:
(cid:129) System Architecture, User Interface and Industrial Design. We help our customers design and develop
innovative and cost-effective products that address the needs of the user and the market. These services
include product definition, analysis and optimization of performance and functional requirements,
2-D sketch level drawings, 3-D mock-ups and proofs of concept, interaction and interface models,
detailed hard models and product packaging.
(cid:129) Mechanical Engineering, Technology, Enclosure Systems, Thermal and Tooling Design. We offer detailed
mechanical, structural, and thermal design solutions for enclosures that encompass a wide range of
plastic, metal and other material technologies. These capabilities and technologies are increasingly
important to our customers’ product differentiation goals and are increasingly required to be successful in
today’s competitive marketplace. Additionally, we provide design and development services for prototype
and production tooling equipment used in manufacturing.
(cid:129) Electronic System Design. We provide complete electrical and hardware design for products ranging in
size from small handheld consumer devices to large high-speed, carrier-grade, telecommunications
equipment, which includes embedded microprocessor, memory, digital signal processing design,
high-speed digital interfaces, analog circuit design, power management solutions, wired and wireless
communication protocols, display imaging, audio/video, and radio frequency system and antenna design.
(cid:129) Reliability and Failure Analysis. We provide comprehensive design for manufacturing, test and reliability
services using robust tools and databases that have been developed internally. These services are
important in achieving our customers’ time to revenue goals and leverage our core manufacturing
competencies.
(cid:129) Component Level Development Engineering. We have developed substantial engineering competencies
for product development and lifecycle management in support of various component technologies. These
components also form a key part of our strategy and currently include power supplies and power
solutions, and Printed Circuit Board and Interconnection Technologies, both rigid and flexible.
We are exposed to different or greater potential liabilities from our various design services than those we
face in our core assembly and manufacturing services. See “Risk Factors—The success of certain of our
activities depends on our ability to protect our intellectual property rights; intellectual property infringement
claims against our customers or us could harm our business.”
Systems Assembly and Manufacturing. Our assembly and manufacturing operations, which generate the
majority of our revenues, include printed circuit board assembly and assembly of systems and subsystems
that incorporate printed circuit boards and complex electromechanical components. We often assemble
electronics products with our proprietary printed circuit boards and custom electronic enclosures on either a
build-to-order or configure-to-order basis. In these operations, we employ just-in-time, ship-to-stock and
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ship-to-line programs, continuous flow manufacturing, demand flow processes, and statistical process
controls. As OEMs seek to provide greater functionality in smaller products, they increasingly require more
sophisticated manufacturing technologies and processes. Our investment in advanced manufacturing
equipment and our experience and expertise in innovative miniaturization, packaging and interconnect
technologies, enables us to offer a variety of advanced manufacturing solutions. We support a wide range of
product demand profiles, from low—volume, high-complexity programs to high-volume production.
Continuous focus on lean manufacturing, a systematic approach to identifying and eliminating waste
(non-value-added activities) through continuous improvement based on customer demand, allows us to
increase our efficiency and flexibility to meet our customers’ dynamic requirements. Our systems assembly
and manufacturing expertise includes the following:
(cid:129) Enclosures. We offer a comprehensive set of custom electronics enclosures and related products and
services worldwide. Our services include the design, manufacture and integration of electronics
packaging systems, including custom enclosure systems, power and thermal subsystems, interconnect
subsystems, cabling and cases. In addition to standard sheet metal and plastic fabrication services, we
assist in the design of electronics packaging systems that protect sensitive electronics and enhance
functionality. Our enclosure design services focus on functionality, manufacturability and testing. These
services are integrated with our other assembly and manufacturing services to provide our customers
with overall improved supply chain management.
(cid:129) Testing Services. We also offer computer-aided testing services for assembled printed circuit boards,
systems and subsystems. These services significantly improve our ability to deliver high-quality products
on a consistent basis. Our test services include management defect analysis, in-circuit testing and
functional testing as well as environmental stress tests of board and system assemblies. We offer design
for test, design for manufacturing and design for environment services to our customers to jointly
improve customer product design and manufacturing.
(cid:129) Materials Procurement and Inventory Management. Our manufacturing and assembly operations
capitalize on our materials inventory management expertise and volume procurement capabilities. As a
result, we believe that we are able to achieve highly competitive cost reductions and reduce total
manufacturing cycle time for our OEM customers. Materials procurement and management consist of the
planning, purchasing, expediting and warehousing of components and materials used in the
manufacturing process. In addition, our strategy includes having third-party suppliers of custom
components located in our industrial parks to reduce material and transportation costs, simplify logistics
and facilitate inventory management. We also use a sophisticated automated manufacturing resource
planning system and enhanced electronic data interchange capabilities to ensure inventory control and
optimization. Through our manufacturing resources planning system, we have real-time visibility of
material availability and are able to track the work in process. We utilize electronic data interchange with
our customers and suppliers to implement a variety of supply chain management programs. Electronic
data interchange allows customers to share demand and product forecasts and deliver purchase orders and
assists suppliers with satisfying just-in-time delivery and supplier-managed inventory requirements. This
also enables us to implement vendor managed inventory solutions to increase flexibility and reduce
overall capital allocation in the supply chain. We procure a wide assortment of materials, including
electronic components, plastics and metals. There are a number of sources for these materials, including
from customers for whom we are providing systems assembly and manufacturing services. On some
occasions, there have been shortages in certain electronic components, most recently with regard to
connectors, capacitors, LCD panels and memory (both DRAM and Flash). However, such shortages have
not had a material impact on our operating results for any periods presented. See “Risk Factors—We may
be adversely affected by shortages of required electronic components.”
Component businesses. The Company offers the following component product solutions:
(cid:129) Rigid and Flexible Printed Circuit Board (“PCB”) Fabrication. Printed circuit boards are platforms
composed of laminated materials that provide the interconnection for integrated circuits, passive and
other electronic components and thus are at the heart of almost every electrical system. They are formed
out of multi-layered epoxy resin and glass cloth systems with very fine traces and spaces and plated
holes (called vias), which interconnect the different layers to an extremely dense circuitry network that
carries the integrated circuits and electrical signals. As semiconductor designs become more and more
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complex and signal speeds increase, there is an increasing demand on printed circuit board integration
density requiring higher layer counts, finer lines and spacings, smaller vias (microvias) and base
materials with electrically very low loss characteristics. The manufacturing of these complex multilayer
interconnect products often requires the use of sophisticated circuit interconnections between layers, and
adherence to strict electrical characteristics to maintain consistent circuit transmission speeds and
impedances. The global demand for wireless devices and the complexity of wireless products are driving
the demand for more flexible printed circuits. Flexible circuit boards facilitate a reduction in the weight
of a finished electronic product and allow the designer to use the third dimension in designing new
products or product features. Flexible circuits have become a very attractive design alternative for many
new and emerging application spaces such as automotive rear LED lightning, tablet computers, and
miniaturized radio frequency identification tags or smart cards. We are an industry leader in high-density
interconnect with the Every Layer Inter Connect (“ELIC”) technology, which is used in smart phone
designs, and multilayer constructions which are used in advanced routers and switches, telecom
equipment, servers, storage, and flexible printed circuit boards and flexible printed circuit board
assemblies. Our PCB business (Multek) manufactures printed circuit boards on a low-volume, quick-turn
basis, as well as on a high-volume production basis. We provide quick-turn prototype services that allow
us to provide small test quantities to meet the needs of customers’ product development groups in as little
as 48 hours. Our extensive range of services enables us to respond to our customers’ demands for an
accelerated transition from prototype to volume production. Multek offers a one stop solution from design
to manufacturing of PCB, flexible circuits and rigid flex circuits and sub-assemblies. We have printed circuit
board service capabilities in North America, South America, Europe and Asia, and flexible circuit
fabrication service capabilities in North America and Asia. During fiscal year 2013 we began consolidating
Multek’s footprint and rationalizing its operations and expect to fully complete the closing of our Multek
factories in Germany and Brazil during fiscal year 2014. We believe this will drive operational
efficiencies, and result in an optimization of our system, which will lower the revenue level required to
achieve better margins. Going forward our capabilities will be centered in Asia and North America.
(cid:129) Power Supplies. We have a full service power supply business (“Flex Power”) that specializes in high
efficiency and high density switching power supplies ranging from 1 to 3,000 watts. The product
portfolio includes chargers for the mobile phones and the fast-growing tablet markets, adapters for
notebooks and printers and boxed power supplies for the desktop markets along with networking, server
and storage markets. We pride ourselves in our ability to service the needs of industry leaders in these
markets through collaborative development and efficient program management execution. Our products
are fully compliant with environmental and Energy Star industry requirements that drive efficiency
specifications in the industry. Customers who engage with Flex Power get the advantage of our
technological innovations in such areas as digital control or smart power, while still managing to offer
competitive pricing. Our unique platform development approach enables our customers to get to their
markets faster.
Logistics. Flextronics Global Services is a provider of after-market supply chain logistics services.
Our comprehensive suite of services serve customers operating in the computing, consumer digital,
infrastructure, industrial, mobile and medical markets. Our expansive global infrastructure consists of
25 sites and more than 12,000 employees strategically located throughout the Americas, Europe and Asia.
By leveraging our operational infrastructure, supply chain network, and IT systems, we have the capability
of offering globally consistent logistics solutions for our customers’ brands. By linking the flow of
information from the supply chains, we create supply chain efficiencies delivering value to our customers.
We provide multiple logistics solutions including supplier managed inventory, inbound freight management,
product postponement, build/configure to order, order fulfillment and distribution, and supply chain
network design.
Reverse Logistics and Repair Services. We offer a suite of integrated reverse logistics and repair
solutions that are operated on globally consistent processes, which help our customers protect their brand
loyalty in the marketplace by improving turnaround times and end-customer satisfaction levels. Our
objective is to maintain maximum asset value retention of our customers’ products throughout their product
life cycle while simultaneously minimizing non-value repair inventory levels and handling in the supply
chain. With our suite of end-to-end solutions, we can effectively manage our customers’ reverse logistics
requirements while also providing critical feedback of data to their supply chain constituents and delivering
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continuous improvement and efficiencies for both existing and next generation products. Our reverse
logistics and repair solutions include returns management, exchange programs, complex repair, asset
recovery, recycling and e-waste management. We provide repair expertise to multiple product lines such as
consumer and midrange products, printers, PDA’s, mobile phones, consumer medical devices, notebooks,
PC’s, set-top boxes, game consoles and highly complex infrastructure products. With our service parts
logistics business, we manage all of the logistics and restocking processes essential to the efficient
operation of repair and refurbishment services.
STRATEGY
Our company’s goal is to empower talented employees to develop global supply chain solutions that
transforms industries and companies. At our core, we are a world-class global design, manufacturing and
services company. Our strategy is to maintain our leadership in these core capabilities and to build on these
through extended offerings in high-growth sectors.
Talent. To maintain our competitiveness and world-class capabilities, we are renewing our focus on
hiring and retaining the world’s best talent. We have taken steps to attract the best functional and
operational leaders and accelerated efforts at developing the future leaders of the company.
Customer-Focus. We believe that serving aspiring leaders in dynamic industries pushes the
development of our core skills and results in superior growth and profitability. Our customers come first,
and we have a relentless focus on delivering distinctive products and services in a cost-effective manner
with fast time-to-market.
Market-Focus. We apply a rigorous approach to managing our portfolio of opportunities by focusing
on companies and industries that value our superior capabilities in design, manufacturing and service and
that are leaders in their industry. We are focusing our energy and efforts on high-growth markets where we
have distinctive competence and a compelling value proposition. Examples include our investments in
clean-tech, healthcare, infrastructure, automotive, services and investments in a number of enabling
components technologies. Our market focused approach to managing our business increases our customers’
competitiveness by leveraging our global resources and responsiveness to changes in market dynamics.
Global Operations Capabilities. We continue to invest in maintaining the leadership of our
world-class manufacturing and services capabilities. We constantly push the state of the art in
manufacturing technology, process development and operations management. We believe these skills
represent a significant competitive advantage. We continue to capitalize on our industrial park concept,
where we co-locate our manufacturing, design, and service resources in low cost regions, to provide a
competitive advantage by minimizing logistics, manufacturing costs and cycle times while increasing
flexibility and responsiveness. Our ability to cost effectively manage a massive worldwide system, is itself
a major competitive advantage.
Extended Value Propositions. We continue to extend our distinctiveness in manufacturing into new
value propositions that leverage our core capabilities. We opportunistically invest in new capabilities and
services to provide our customers with a broader value added suite of services and solutions to meet their
product and market requirements. We continue to develop manufacturing process technologies that reduce
cost and improve product performance.
COMPETITIVE STRENGTHS
We continue to enhance our business through the development and broadening of our product and service
offerings. Our focus is to be a flexible organization with repeatable execution that adapts to macro-economic
changes and creates value which increases our customers’ competitiveness. We have concentrated our strategy on
market-focused expertise, capabilities, services and our global supply chain services. We believe that the following
capabilities differentiate us from our competitors and enable us to better serve our customers’ requirements:
Significant Scale and Global Integrated System. We believe that scale is a significant competitive
advantage, as our customers’ solutions increasingly require cost structures and capabilities that can only be
achieved through size and global reach. We are a leader in global procurement, purchasing approximately
$21.5 billion of materials during our fiscal year ended March 31, 2013. As a result, we are able to use our
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worldwide supplier relationships to achieve advantageous pricing and supply chain flexibility for our
OEM customers.
We have established an extensive, integrated network of design, manufacturing and logistics facilities
in the world’s major electronics markets to serve the outsourcing needs of both multinational and regional
OEMs. Our extensive global network of facilities in over 30 countries with approximately 149,000 employees
gives us the ability to increase the competitiveness of our customers by simplifying their global product
development processes while also delivering improved product quality with improved performance and
accelerated time to market. Operating and executing this complex worldwide solutions system is a
competitive advantage.
End-to-End Solution. We offer a comprehensive range of worldwide supply chain services that
simplify and improve the global product development process and provide meaningful time and cost
savings to our OEM customers. Our broad based, end-to-end services enable us to cost effectively design,
build, ship and service a complete packaged product. We believe that our capabilities also help our
customers improve product quality, manufacturability and performance, and reduce costs. We have
expanded and enhanced our service offering by adding capabilities in machining, flexible printed circuit
boards, and power supplies, as well as by introducing new capabilities in areas such as solar equipment,
large format stamping and chargers.
Long-Standing Customer Relationships. We believe that maintaining our long-term relationships with
key customers is a critical requirement for maintaining our market position, growth and profitability. We
believe that our ability to maintain and grow these customer relationships results from our ability to
continuously create value that increases our customers’ competitiveness. We achieve this through our broad
range of service offerings and solutions, and our market-focused approach, which allows us to provide
innovative thinking to all of the manufacturing and related services that we provide to our customers. We
continue to receive numerous service and quality awards that further validate the success of these programs.
Extensive Design and Engineering Capabilities. We have an industry leading global design service
offering with extensive product design engineering resources that provide global design services, products,
and solutions to satisfy a wide array of customer requirements across all of our key markets. We combine
our design and manufacturing services to provide end-to-end customized solutions that include services
from design layout, through product industrialization and product development, including the manufacture
of components and complete products (such as smart phones), which are then sold by our OEM customers
under the OEMs’ brand names.
Geographic, Customer and End Market Diversification. We believe that we have created a
well-diversified and balanced company. We have diversified our business across multiple end markets,
significantly expanding our available market. The world is undergoing change and macro-economic
disruptions that has led to demand shifts and realignments. We believe that we are well positioned through
our market diversification to grow in excess of the industry average and successfully navigate through
difficult economic climates. Our broad geographic footprint and experience with multiple types and
complexity levels of products provide us a significant competitive advantage. We continually look for new
ways to diversify our offering within each market segment.
Industrial Parks; Low-Cost Manufacturing Services. We have developed self-contained campuses that
co-locate our manufacturing and logistics operations with our suppliers at a single, low-cost location. These
industrial parks enhance our total supply chain management, while providing a low-cost, multi-technology
solution for our customers. This approach increases the competitiveness of our customers by reducing
logistical barriers and costs, improving communications, increasing flexibility, lowering transportation costs
and reducing turnaround times. We have strategically established our large industrial parks in Brazil, China,
Hungary, Indonesia, Malaysia, Mexico, and Romania.
We have certain of our manufacturing operations situated in low-cost regions of the world to provide
our customers with a wide array of manufacturing solutions and low manufacturing costs. As of March 31,
2013, approximately 76% of our manufacturing capacity was located in low-cost locations, such as Brazil,
China, Hungary, India, Indonesia, Malaysia, Mexico, Romania, Singapore, and Ukraine. We believe we are
a global industry leader in low-cost production capabilities.
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CUSTOMERS
Our customers include many of the world’s leading technology companies. We have focused on establishing
long-term relationships with our customers and have been successful in expanding our relationships to
incorporate additional product lines and services. In fiscal year 2013, our ten largest customers accounted for
approximately 47% of net sales. No customer accounted for greater than 10% of the Company’s net sales in
fiscal 2013.
The following table lists in alphabetical order a sample of our largest customers in fiscal year 2013 and the
end products of those customers for which we provide design, manufacturing or after-market services:
Customer End Products
Alcatel-Lucent . . . . . . . . . . . . . . Business telecommunications systems and core routers and switches
Apple . . . . . . . . . . . . . . . . . . . . . Smartphones, notebooks and desktop computing, tablets and consumer
Cisco . . . . . . . . . . . . . . . . . . . . . Core routers and switches, wireless and enterprise telecommunications
entertainment devices
infrastructure
Ericsson . . . . . . . . . . . . . . . . . . . Radio base stations for Long Term Evolution and GSM infrastructure
Ford Motor Company . . . . . . . . SYNC Modules, Lighting Products, Solenoids and Motion Control Electronics
Hewlett-Packard . . . . . . . . . . . . Notebook and netbook computers, inkjet printers and storage devices
Huawei Technologies . . . . . . . . Wireless and enterprise telecommunications infrastructure and smartphones
Lenovo . . . . . . . . . . . . . . . . . . . . All-in-one desktop, desktop and notebook computers
Microsoft . . . . . . . . . . . . . . . . . . Computer peripherals and consumer electronics products
Research In Motion . . . . . . . . . . Smartphones and other mobile communication devices
BACKLOG
Although we obtain firm purchase orders from our customers, OEM customers typically do not make firm
orders for delivery of products more than 30 to 90 days in advance. In addition, OEM customers may reschedule
or cancel firm orders based upon contractual arrangements. Therefore, we do not believe that the backlog of
expected product sales covered by firm purchase orders is a meaningful measure of future sales.
COMPETITION
Our market is extremely competitive and includes many companies, several of which have achieved
substantial market share. We compete against numerous domestic and foreign manufacturing service providers,
as well as our current and prospective customers, who evaluate our capabilities in light of their own capabilities
and cost structures. We face particular competition from Asian based competitors, including Taiwanese ODM
suppliers who compete in a variety of our end markets and have a substantial share of global information
technology hardware production.
We compete with different companies depending on the type of service we are providing or the geographic
area in which an activity takes place. We believe that the principal competitive factors in the manufacturing
services market are: quality and range of services; design and technological capabilities; cost; location of
facilities; responsiveness and flexibility.
SOCIAL RESPONSIBILITY
Our corporate social responsibility practices focus on global human rights, global environmental
conditions, business ethics, and the health and safety of all stakeholders. We do this with controlled business
processes, thus ensuring that our business is conducted in a manner that goes beyond compliance alone. We
operate programs, including compliance audits and compliance capability building programs that focus on
driving continuous improvements in social, ethical, and environmental compliance throughout all of our global
operating units in accordance with our Code of Conduct. As a guide to achieve this end, Flextronics looks at
principles, policies, and standards as prescribed by the Electronics Industry Citizenship Coalition (“EICC”), a
worldwide association of electronics companies committed to promoting an industry code of conduct for global
electronics supply chains to improve working and environmental conditions. Flextronics is a founding member
of the EICC coalition.
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Being a good corporate citizen does not mean that we should merely conform to the standards. We extend
beyond meeting responsibilities by offering a wide range of programs and initiatives that engage our internal and
external communities. At the heart of this endeavor lies our pragmatic goal of creating a difference to the people
in the community in which we operate. We intend to continue to invest in these global communities through
grant-making, financial contributions, volunteer work, support programs and by donating resources.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”),
Section 1502 introduces reporting requirements related to the verification of whether Flextronics directly (or
indirectly through suppliers of materials) is purchasing the minerals or metals gold, columbite-tantalite.
cassiterite, wolframite and their derivatives: tin, tungsten, and tantalum that are being provided by sources in the
conflict region of the Democratic Republic of Congo (DRC) and the surrounding neighbor countries. Flextronics
is working directly with suppliers, industry groups, and customers to comply with the due diligence reporting
requirements necessary to comply with the new law. See “Risk Factor—Compliance with government
regulations regarding the use of “conflict minerals” may result in increased costs and risks to us.”
ENVIRONMENTAL REGULATION
Our operations are regulated under various federal, state, local and international laws governing the
environment, including laws governing the discharge of pollutants into the air and water, the management and
disposal of hazardous substances and wastes and the cleanup of contaminated sites. We have fully implemented
processes and procedures to ensure that our operations are in compliance with all applicable environmental
regulations. We do not believe that costs of compliance with these laws and regulations will have a material
adverse effect on our capital expenditures, operating results, or competitive position. In addition, we are
responsible for cleanup of contamination at some of our current and former manufacturing facilities and at some
third-party sites. We engage environmental consulting firms to assist us in the evaluation of environmental
liabilities of our ongoing operations, historical disposal activities and closed sites in order to establish
appropriate accruals in our financial statements. We determine the amount of our accruals for environmental
matters by analyzing and estimating the probability of occurrence and the reasonable possibility of incurring
costs in light of information currently available. The imposition of more stringent standards or requirements
under environmental laws or regulations, the results of future testing and analysis undertaken by us at our
operating facilities, or a determination that we are potentially responsible for the release of hazardous substances
at other sites could result in expenditures in excess of amounts currently estimated to be required for such
matters. While no material exposures have been identified to date that we are aware of, there can be no
assurance that additional environmental matters will not arise in the future or that costs will not be incurred with
respect to sites as to which no problem is currently known.
We are also required to comply with an increasing number of product environmental compliance
regulations focused on the restriction of certain hazardous substances. For example, the electronics industry is
subject to the European Union’s (“EU”) Restrictions on Hazardous Substances (“RoHS”) 2011/65/EU, Waste
Electrical and Electronic Equipment (“WEEE”) 2012/19/EU directives, the regulation EC 1907/2006 EU
Directive REACH (“Registration, Evaluation, Authorization, and Restriction of Chemicals”), and China RoHS
entitled, Management Methods for Controlling Pollution for Electronic Information Products (“EIPs”). Similar
legislation has been or may be enacted in other jurisdictions, including in the United States. Our business
requires close collaboration with our customers and suppliers to mitigate risk of non-compliance. We have
developed rigorous risk mitigating compliance programs designed to meet the needs of our customers as well as
the regulations. These programs vary from collecting compliance or material data from our Flextronics owned
suppliers to full laboratory testing, and we require our supply chain to comply. Non-compliance could potentially
result in significant costs and/or penalties. RoHS and other similar legislation bans or restricts the use of lead,
mercury and certain other specified substances in electronics products and WEEE requires EU importers and/or
producers to assume responsibility for the collection, recycling and management of waste electronic products
and components. In the case of WEEE, although the compliance responsibility rests primarily with the EU
importers and/or producers rather than with EMS companies, OEMs may turn to EMS companies for assistance
in meeting their WEEE obligations. New technical classifications of e-Waste being discussed in the Basel
Convention technical working group could affect both Flextronics and Flextronics’ customers abilities and
obligations in electronics repair and refurbishment. Flextronics continues to monitor these discussions and is
working with our customers and other technical organizations to minimize the impact to legal and responsibly
managed repair operations.
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EMPLOYEES
As of March 31, 2013, our global workforce totaled approximately 149,000 employees. In certain
international locations, our employees are represented by labor unions and by work councils. We have never
experienced a significant work stoppage or strike, and we believe that our employee relations are good.
Our success depends to a large extent upon the continued services of key managerial and technical
employees. The loss of such personnel could seriously harm our business, results of operations and business
prospects. To date, we have not experienced significant difficulties in attracting or retaining such personnel.
INTELLECTUAL PROPERTY
We own or license various United States and foreign patents relating to a variety of technologies. For
certain of our proprietary processes, we rely on trade secret protection. We also have registered our corporate
name and several other trademarks and service marks that we use in our business in the United States and other
countries throughout the world. As of March 31, 2013 and 2012, the carrying value of our intellectual property
was not material.
Although we believe that our intellectual property assets and licenses are sufficient for the operation of our
business as we currently conduct it, from time to time third parties do assert patent infringement claims against
us or our customers. In addition, we provide design and engineering services to our customers and designing
and making our own products. As a consequence of these activities, our customers are requiring us to take
responsibility for intellectual property to a greater extent than in our manufacturing and assembly businesses. If
and when third parties make assertions regarding the ownership or right to use intellectual property, we could be
required to either enter into licensing arrangements or to resolve the issue through litigation. Such license rights
might not be available to us on commercially acceptable terms, if at all, and any such litigation might not be
resolved in our favor. Additionally, litigation could be lengthy and costly and could materially harm our financial
condition regardless of the outcome. We also could be required to incur substantial costs to redesign a product or
re-perform design services.
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
Refer to note 17 to our consolidated financial statements included under Item 8 for financial information
about our geographic areas.
ADDITIONAL INFORMATION
Our internet address is http://www.flextronics.com. We make available through our Internet website the
Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934
as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities
and Exchange Commission.
We were incorporated in the Republic of Singapore in May 1990. Our principal corporate office is located
at 2 Changi South Lane, Singapore 486123. Our U.S. corporate headquarters is located at 6201 America Center
Drive, San Jose, CA, 95002.
ITEM 1A. RISK FACTORS
We depend on industries that continually produce technologically advanced products with short life cycles and
our business would be adversely affected if our customers’ products are not successful or if our customers
lose market share.
We derive our revenues from customers in the following markets:
(cid:129) HRS, which is comprised of our medical, automotive, defense and aerospace businesses;
(cid:129) HVS, which includes our mobile devices business, including smart phones, and consumer electronics,
including game consoles, high-volume computing business, including notebook personal computing
(“PC”), tablets and printers;
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(cid:129) IEI, which is comprised of our large household appliances, equipment, and emerging industries
businesses; and
(cid:129) INS, which includes our telecommunications infrastructure, data networking, connected home, and server
and storage businesses.
Factors affecting any of these industries in general or our customers in particular, could adversely impact us.
These factors include:
(cid:129) rapid changes in technology, evolving industry standards and requirements for continuous improvement
in products and services result in short product life cycles;
(cid:129) demand for our customers’ products may be seasonal;
(cid:129) our customers may fail to successfully market their products, and our customers’ products may fail to
gain widespread commercial acceptance;
(cid:129) our customers may experience dramatic market share shifts in demand which may cause them to exit the
business; and
(cid:129) there may be recessionary periods in our customers’ markets, such as the recent global economic downturn.
Our customers may cancel their orders, change production quantities or locations, or delay production, and
the inherent difficulties involved in responding to these demands could harm our business.
Cancellations, reductions or delays by a significant customer or by a group of customers have harmed, and
may continue to harm, our results of operations by reducing the volumes of products we manufacture and deliver
for these customers, by causing a delay in the repayment of our expenditures for inventory in preparation for
customer orders and by lowering our asset utilization resulting in lower gross margins. Additionally, current and
prospective customers continuously evaluate our capabilities against other providers as well as against the merits
of manufacturing products themselves. Our business would be adversely affected if OEMs decide to perform
these functions internally or transfer their business to another provider.
As a provider of electronics design and manufacturing services and components, we must provide
increasingly rapid product turnaround time for our customers. We generally do not obtain firm, long-term
purchase commitments from our customers, and we often experience reduced lead times in customer orders
which may be less than the lead time we require to procure necessary components and materials.
The short-term nature of our customers’ commitments and the rapid changes in demand for their products
reduces our ability to accurately estimate the future requirements of our customers. This makes it difficult to
schedule production and maximize utilization of our manufacturing capacity. In that regard, we must make
significant decisions, including determining the levels of business that we will seek and accept, setting
production schedules, making component procurement commitments, and allocating personnel and other
resources, based on our estimates of our customers’ requirements.
On occasion, customers require rapid increases in production or require that manufacturing of their
products be transitioned from one facility to another to reduce costs or achieve other objectives. These demands
stress our resources and reduce our margins. We may not have sufficient capacity at any given time to meet our
customers’ demands, and transfers from one facility to another can result in inefficiencies and costs due to
excess capacity in one facility and corresponding capacity constraints at another. Due to many of our costs and
operating expenses being relatively fixed, customer order fluctuations, deferrals and transfers of demand from
one facility to another, as described above, have had a material adverse effect on our operating results in the past
and we may experience such effects in the future.
Our industry is extremely competitive; if we are not able to continue to provide competitive services, we may
lose business.
We compete with a number of different companies, depending on the type of service we provide or the
location of our operations. For example, we compete with major global EMS providers, other smaller EMS
companies that have a regional or product-specific focus and ODMs with respect to some of the services that we
provide. We also compete with our current and prospective customers, who evaluate our capabilities in light of
their own capabilities and cost structures. Our industry is extremely competitive, many of our competitors have
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achieved substantial market share, and some may have lower cost structures or greater design, manufacturing,
financial or other resources than we do. We face particular competition from Asian-based competitors, including
Taiwanese ODM suppliers who compete in a variety of our end markets and have a substantial share of global
information technology hardware production. If we are unable to provide comparable manufacturing services
and improved products at lower cost than the other companies in our market, our net sales could decline.
The majority of our sales come from a small number of customers and a decline in sales to any of these
customers could adversely affect our business.
Sales to our ten largest customers represent a significant percentage of our net sales. Our ten largest
customers accounted for approximately 47%, 55% and 52% of net sales in fiscal years 2013, 2012 and 2011,
respectively. No customer accounted for greater than 10% of the Company’s net sales in fiscal 2013. Our largest
customers during fiscal year 2012 were Hewlett-Packard (HP) and Research In Motion (RIM), which each
accounted for more than 10% of net sales. No other customer accounted for more than 10% of net sales in fiscal
year 2012. Our largest customer during fiscal year 2011 was Research In Motion which accounted for more
than 10% of net sales in 2011. No other customer accounted for more than 10% of net sales in fiscal year 2011.
Our principal customers have varied from year to year. These customers may experience dramatic declines in
their market shares or competitive position, due to economic or other forces, that may cause them to reduce their
purchases from us or, in some cases, result in the termination of their relationship with us. Significant reductions
in sales to any of these customers, or the loss of major customers, would materially harm our business. If we are
not able to timely replace expired, canceled or reduced contracts with new business, our revenues and
profitability could be harmed.
Our components business is dependent on our ability to quickly launch world-class components products, and
our investment in the development of our component capabilities, together with the start-up and integration
costs necessary to achieve quick launches of world-class components products, may adversely affect our
margins and profitability.
Our components business, which includes rigid and flexible printed circuit board fabrication, and power
supplies manufacturing, is part of our strategy to improve our competitive position and to grow our future
margins, profitability and shareholder returns by expanding our capabilities. The success of our components
business is dependent on our ability to design and introduce world-class components that have performance
characteristics which are suitable for a broad market and that offer significant price and/or performance
advantages over competitive products.
To create these world class components offerings, we must continue to make substantial investments in the
development of our components capabilities, in resources such as research and development, technology
licensing, test and tooling equipment, facility expansions and personnel requirements. We may not be able to
achieve or maintain market acceptance for any of our components offerings in any of our current or target
markets. The success of our components business will also depend upon the level of market acceptance of our
customers’ end products, which incorporate our components, and over which we have no control.
In addition, OEMs often require unique configurations or custom designs which must be developed and
integrated in the OEM’s product well before the product is launched by the OEM. Thus, there is often substantial
lead time between the commencement of design efforts for a customized component and the commencement of
volume shipments of the component to the OEM. As a result, we may make substantial investments in the
development and customization of products for our customers, and no revenue may be generated from these
efforts if our customers do not accept the customized component. Even if our customers accept the customized
component, if our customers do not purchase anticipated levels of products, we may not realize any profits.
Our achievement of anticipated levels of profitability in our components business is also dependent on our
ability to achieve efficiencies in our manufacturing as well as to manufacture components in commercial
quantities to the performance specifications demanded by our OEM customers. As a result of these and other
risks, we have been, and in the future may be, unable to achieve anticipated levels of profitability in our
components business.
Our exposure to financially troubled customers or suppliers may adversely affect our financial results.
We provide manufacturing services to companies and industries that have in the past, and may in the future,
experience financial difficulty. If our customers experience financial difficulty, we could have difficulty
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recovering amounts owed to us from these customers, or demand for our products from these customers could
decline. Additionally, if our suppliers experience financial difficulty we could have difficulty sourcing supply
necessary to fulfil production requirements and meet scheduled shipments. If one or more of our customers were
to become insolvent or otherwise were unable to pay for the services provided by us on a timely basis, or at all,
our operating results and financial condition could be adversely affected. Such adverse effects could include one
or more of the following: an increase in our provision for doubtful accounts, a charge for inventory write-offs, a
reduction in revenue, and an increase in our working capital requirements due to higher inventory levels and
increases in days our accounts receivable are outstanding.
We may be adversely affected by shortages of required electronic components.
From time to time, we have experienced shortages of some of the electronic components that we use. These
shortages can result from strong demand for those components or from problems experienced by suppliers, such
as shortages of raw materials. These unanticipated component shortages could result in curtailed production or
delays in production, which may prevent us from making scheduled shipments to customers. Our inability to
make scheduled shipments could cause us to experience a reduction in sales, increase in inventory levels and
costs, and could adversely affect relationships with existing and prospective customers. Component shortages
may also increase our cost of goods sold because we may be required to pay higher prices for components in
short supply and redesign or reconfigure products to accommodate substitute components. As a result,
component shortages could adversely affect our operating results. Our performance depends, in part, on our
ability to incorporate changes in component costs into the selling prices for our products.
Our supply chain may also be impacted by other events outside our control, including macro-economic
events, political crises or natural or environmental occurrences. Component shortages impacted our results
during the second half of fiscal year 2010, during the first quarter of fiscal year 2011 and during fiscal year
2012. The supply constraints were broad based, but the impact was most evident with respect to connectors,
capacitors, LCD panels and memory (both DRAM and Flash). These shortages began to abate during the
second quarter of fiscal year 2011, and supplies had normalized by the end of the third quarter. In addition, the
March 2011 earthquake and tsunami in Japan resulted in disruptions to our supply chain, as a large number of
our suppliers of semiconductors and other electronic components are located in Japan. These disruptions had a
negative impact on our revenue in the first and second quarters of fiscal year 2012. We also continue to evaluate
the extent of the disruption to our supply chain and the impact on our business caused by the flooding in
Thailand during the second half of 2011, which had a negative impact on our revenue in the third quarter of
fiscal year 2012, as a number of our suppliers of hard disk drives and other electronic components maintain
facilities in Thailand.
Our margins and profitability may be adversely affected due to substantial investments, start-up and
production ramping costs in our design services.
As part of our strategy to enhance our end-to-end service offerings, we have expanded and continue to
expand our design and engineering capabilities. Providing these services can expose us to different or greater
potential risks than those we face when providing our manufacturing services.
Although we enter into contracts with our design services customers, we may design and develop products
for these customers prior to receiving a purchase order or other firm commitment from them. We are required to
make substantial investments in the resources necessary to design and develop these products, and no revenue
may be generated from these efforts if our customers do not approve the designs in a timely manner or at all.
Even if our customers accept our designs, if they do not then purchase anticipated levels of products, we may not
realize any profits. Our design activities often require that we purchase inventory for initial production runs
before we have a purchase commitment from a customer. Even after we have a contract with a customer with
respect to a product, these contracts may allow the customer to delay or cancel deliveries and may not obligate
the customer to any particular volume of purchases. These contracts can generally be terminated on short notice.
In addition, some of the products we design and develop must satisfy safety and regulatory standards and some
must receive government certifications. If we fail to obtain these approvals or certifications on a timely basis, we
would be unable to sell these products, which would harm our sales, profitability and reputation.
Due to the increased risks associated with our design services offerings, we may not be able to achieve a
high enough level of sales for this business, and the significant investments in research and development,
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technology licensing, test and tooling equipment, patent applications, facility expansion and recruitment that it
requires, to be profitable. The initial costs of investing in the resources necessary to expand our design and
engineering capabilities, and in particular to support our design services offerings, have historically adversely
affected our profitability, and may continue to do so as we continue to make investments in these capabilities.
In addition, we agree to certain product price limitations and cost reduction targets in connection with these
services. Inflationary and other increases in the costs of the raw materials and labor required to produce the
products have occurred and may recur from time to time. Also, the production ramps for these programs are
typically significant and negatively impact our margin in early stages as the manufacturing volumes are lower
and result in inefficiencies and unabsorbed manufacturing overhead costs. We may not be able to reduce costs,
incorporate changes in costs into the selling prices of our products, or increase operating efficiencies as we ramp
production of our products, which would adversely affect our margins and our results of operations.
We may not meet regulatory quality standards applicable to our manufacturing and quality processes for
medical devices, which could have an adverse effect on our business, financial condition or results of
operations.
As a medical device manufacturer, we have additional compliance requirements. We are required to register
with the U.S. Food and Drug Administration (“FDA”) and are subject to periodic inspection by the FDA for
compliance with the FDA’s Quality System Regulation (“QSR”) requirements, which require manufacturers of
medical devices to adhere to certain regulations, including testing, quality control and documentation
procedures. Compliance with applicable regulatory requirements is subject to continual review and is rigorously
monitored through periodic inspections and product field monitoring by the FDA. If any FDA inspection reveals
noncompliance with QSR or other FDA regulations, and the Company does not address the observation
adequately to the satisfaction of the FDA, the FDA may take action against us. FDA actions may include issuing
a letter of inspectional observations, issuing a warning letter, imposing fines, bringing an action against the
Company and its officers, requiring a recall of the products we manufactured for our customers, refusing
requests for clearance or approval of new products or withdrawal of clearance or approval previously granted,
issuing an import detention on products entering the U.S. from an offshore facility, or shutting down a
manufacturing facility. If any of these actions were to occur, it would harm our reputation and cause our business
to suffer.
In the European Union (“EU”), we are required to maintain certain standardized certifications in order to
sell our products and must undergo periodic inspections to obtain and maintain these certifications. Continued
noncompliance to the EU regulations could stop the flow of products into the EU from us or from our
customers. In China, the Safe Food and Drug Administration controls and regulates the manufacture and
commerce of healthcare products. We must comply with the regulatory laws applicable to medical device
manufactures or our ability to manufacture products in China could be impacted. In Japan, the Pharmaceutical
Affairs Laws regulate the manufacture and commerce of healthcare products. These regulations also require that
subcontractors manufacturing products intended for sale in Japan register with authorities and submit to
regulatory audits. Other Asian countries where we operate have similar laws regarding the regulation of medical
device manufacturing.
We conduct operations in a number of countries and are subject to risks of international operations.
The distances between the Americas, Asia and Europe create a number of logistical and communications
challenges for us. These challenges include managing operations across multiple time zones, directing the
manufacture and delivery of products across distances, coordinating procurement of components and raw
materials and their delivery to multiple locations, and coordinating the activities and decisions of the core
management team, which is based in a number of different countries. Facilities in several different locations may
be involved at different stages of the production of a single product, leading to additional logistical difficulties.
Because our manufacturing operations are located in a number of countries throughout the Americas, Asia
and Europe, we are subject to the risks of changes in economic and political conditions in those countries,
including:
(cid:129) fluctuations in the value of local currencies;
(cid:129) labor unrest, difficulties in staffing and geographic labor shortages;
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(cid:129) longer payment cycles;
(cid:129) cultural differences;
(cid:129) increases in duties and taxation levied on our products;
(cid:129) imposition of restrictions on currency conversion or the transfer of funds;
(cid:129) limitations on imports or exports of components or assembled products, or other travel restrictions;
(cid:129) expropriation of private enterprises;
(cid:129) exposure to infectious disease and epidemics; and
(cid:129) a potential reversal of current favorable policies encouraging foreign investment or foreign trade by our
host countries.
The attractiveness of our services to U.S. customers can be affected by changes in U.S. trade policies, such
as most favored nation status and trade preferences for some Asian countries. In addition, some countries in
which we operate, such as Brazil, Hungary, India, Mexico, Malaysia and Poland, have experienced periods of
slow or negative growth, high inflation, significant currency devaluations or limited availability of foreign
exchange. Furthermore, in countries such as China and Mexico, governmental authorities exercise significant
influence over many aspects of the economy, and their actions could have a significant effect on us. We could be
seriously harmed by inadequate infrastructure, including lack of adequate power and water supplies,
transportation, raw materials and parts in countries in which we operate. In addition, we may encounter labor
disruptions and rising labor costs, in particular within the lower-cost regions in which we operate. Any increase
in labor costs that we are unable to recover in our pricing to our customers could adversely impact our operating
results.
Operations in foreign countries also present risks associated with currency exchange and convertibility,
inflation and repatriation of earnings. In some countries, economic and monetary conditions and other factors
could affect our ability to convert our cash distributions to U.S. dollars or other freely convertible currencies, or
to move funds from our accounts in these countries. Furthermore, the central bank of any of these countries may
have the authority to suspend, restrict or otherwise impose conditions on foreign exchange transactions or to
approve distributions to foreign investors.
Another significant legal risk resulting from our international operations is compliance with the U.S.
Foreign Corrupt Practices Act or similar local laws of the countries in which we do business, including the UK
Anti-Bribery Act, which prohibits covered companies from making payments to foreign government officials to
assist in obtaining or retaining business. Our Code of Business Conduct prohibits corrupt payments on a global
basis and precludes us from offering or giving anything of value to a government official for the purpose of
obtaining or retaining business, to win a business advantage or to improperly influence a decision regarding
Flextronics. Nevertheless, there can be no assurance that all of our employees and agents will refrain from taking
actions in violation of this and our related anti-corruption policies and procedures. Any such violation could
have a material adverse effect on our business.
If our security systems and governance policies are breached, we may incur significant legal and financial
exposure.
We have implemented security systems and governance policies with the intent of maintaining the physical
security of our facilities and inventory and protecting our customers’ and our suppliers’ confidential
information. Despite such efforts, we are subject to, and at times have suffered from, breach of these security
systems and governance policies which have in the past and may in the future result in unauthorized access to
our facilities and/or unauthorized use or theft of the inventory or information we are trying to protect. If
unauthorized parties gain physical access to our inventory or if they gain electronic access to our information
systems or if such information or inventory is used in an unauthorized manner, misdirected, lost or stolen during
transmission or transport, any theft or misuse of such information or inventory could result in, among other
things, unfavorable publicity, governmental inquiry and oversight, difficulty in marketing our services,
allegations by our customers that we have not performed our contractual obligations, litigation by affected
parties including our customers and possible financial obligations for damages related to the theft or misuse of
such information or inventory, any of which could have a material adverse effect on our profitability and cash
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flow. We believe that we have adopted appropriate measures to mitigate potential risks to our technology and our
operations from the breach of our security systems.
Compliance with government regulations regarding the use of “conflict minerals” may result in increased
costs and risks to us.
As part of the Dodd-Frank Act, the SEC has promulgated disclosure requirements regarding the use of
certain minerals, which are mined from the Democratic Republic of Congo and adjoining countries, known as
conflict minerals. The disclosure rules will take effect for the Company in May 2014. We may have to publicly
disclose whether the products we sell contain conflict minerals and could incur significant costs related to
implementing a process that will meet the mandates of the Act. Additionally, customers rely on us to provide
critical data regarding the products they purchase and will likely request conflict mineral information. Our
materials sourcing is broad-based and multi-tiered, and we may not be able to easily verify the origins of the
minerals used in the products we sell. We have many suppliers and each may provide conflict mineral
information in a different manner, if at all. Accordingly, because the supply chain is complex, our reputation may
suffer if we are unable to sufficiently verify the origins of conflict minerals, if any, used in its products.
Additionally, customers may demand that the products they purchase be free of conflict minerals. The
implementation of this requirement could affect the sourcing and availability of products we purchase from our
suppliers. This may reduce the number of suppliers that may be able to provide conflict free products and may
affect our ability to obtain products in sufficient quantities to meet customer demand or at competitive prices.
We are subject to the risk of increased income taxes.
The Company is subject to taxes in numerous jurisdictions. The Company’s future effective tax rates could
be affected by changes in the mix of earnings in countries with differing statutory rates and changes in tax laws
or their interpretation including changes related to tax holidays or tax incentives. Our taxes could increase if
certain tax holidays or incentives are not renewed upon expiration, or if tax rates applicable to us in such
jurisdictions are otherwise increased. For example, on March 16, 2007, the Chinese government passed a new
unified enterprise income tax law which became effective on January 1, 2008. Among other things, the new law
canceled many income tax incentives previously applicable to our subsidiaries in China. Under the new law, the
tax rates applicable to the operations of most of our subsidiaries in China have been increased to 25%. The new
law provided a transition rule which increased the tax rate to 25% over a 5-year period, which ended in 2012.
The new law also increased the standard withholding rate on earnings distributions to between 5% and 10%
depending on the residence of the shareholder. The ultimate effect of these and other changes in Chinese tax
laws on our overall tax rate will be affected by, among other things, our China income, the manner in which
China interprets, implements and applies the new tax provisions, and our ability to qualify for any exceptions or
new incentives. Similarly, we recently renewed a Malaysian tax holiday that expired on January 31, 2012 for
another ten year period. Our continued ability to qualify for specific tax holiday extensions will depend on,
among other things, our anticipated investment and expansion in these countries and the manner in which the
local governments interpret the requirements for extensions or new incentives.
In addition, the Company and its subsidiaries are regularly subject to tax return audits and examinations by
various taxing jurisdictions around the world. In determining the adequacy of our provision for income taxes, we
regularly assess the likelihood of adverse outcomes resulting from tax examinations. While it is often difficult to
predict the final outcome or the timing of the resolution of a tax examination, we believe that our reserves for
uncertain tax benefits reflect the outcome of tax positions that are more likely than not to occur. However, we
cannot assure you that the final determination of any tax examinations will not be materially different than that
which is reflected in our income tax provisions and accruals. Should additional taxes be assessed as a result of a
current or future examination, there could be a material adverse effect on our tax provision, operating results,
financial position and cash flows in the period or periods for which that determination is made.
If our products or components contain defects, demand for our services may decline and we may be exposed
to product liability and product warranty liability.
Defects in the products we manufacture or design, whether caused by a design, engineering, manufacturing
or component failure or deficiencies in our manufacturing processes, could result in product or component
failures, which may damage our business reputation and expose us to product liability or product warranty
claims.
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Product liability claims may include liability for personal injury or property damage. Product warranty
claims may include liability to pay for the recall, repair or replacement of a product or component. Although we
generally allocate liability for these claims in our contracts with our customers, increasingly we are unsuccessful
in allocating such liability, and even where we have allocated liability to our customers, our customers may not
have the resources to satisfy claims for costs or liabilities arising from a defective product or component for
which they have assumed responsibility.
If we design, engineer or manufacture a product or component that is found to cause any personal injury or
property damage or is otherwise found to be defective, we could spend a significant amount of money to resolve
the claim. In addition, product liability and product recall insurance coverage are expensive and may not be
available with respect to all of our services offerings on acceptable terms, in sufficient amounts, or at all. A
successful product liability or product warranty claim in excess of our insurance coverage or any material claim
for which insurance coverage is denied, limited or is not available could have a material adverse effect on our
business, results of operations and financial condition.
If we do not effectively manage changes in our operations, our business may be harmed; we have taken
substantial restructuring charges in the past and we may need to take material restructuring charges in the
future.
In recent years, we have experienced growth in our business through a combination of internal growth and
acquisitions. However, our business also has been negatively impacted by the recent adverse global economic
conditions. The expansion of our business, as well as business contractions and other changes in our customers’
requirements, have in the past, and may in the future, require that we adjust our business and cost structures by
incurring restructuring charges. Restructuring activities involve reductions in our workforce at some locations
and closure of certain facilities. All of these changes have in the past placed, and may in the future place,
considerable strain on our management control systems and resources, including decision support, accounting
management, information systems and facilities. If we do not properly manage our financial and management
controls, reporting systems and procedures to manage our employees, our business could be harmed.
In recent years, including during fiscal 2013, we undertook initiatives to restructure our business operations
through a series of restructuring activities, which were intended to realign our global capacity and infrastructure
with demand by our OEM customers and thereby improve our operational efficiency. These activities included
reducing excess workforce and capacity, transitioning manufacturing to lower-cost locations and eliminating
redundant facilities, and consolidating and eliminating certain administrative facilities.
While we incur severance, asset impairment charges and other facilities charges as a result of changes in
our customer mix on an ongoing basis, such individual actions were not considered material to be separately
disclosed as restructuring charges in fiscal year 2012 and 2011, and are included in either cost of sales or
selling, general and administrative expenses, as appropriate. Our restructuring activities undertaken during fiscal
2013 have been disclosed separately on our statement of operations due to the significant nature of such
activities. We may be required to take additional charges in the future to align our operations and cost structures
with global economic conditions, market demands, cost competitiveness, and our geographic footprint as it
relates to our customers’ production requirements. We may consolidate certain manufacturing facilities or
transfer certain of our operations to lower cost geographies. If we are required to take additional restructuring
charges in the future, our operating results, financial condition, and cash flows could be adversely impacted.
Additionally, there are other potential risks associated with our restructurings that could adversely affect us, such
as delays encountered with the finalization and implementation of the restructuring activities, work stoppages,
and the failure to achieve targeted cost savings.
The success of certain of our activities depends on our ability to protect our intellectual property rights;
intellectual property infringement claims against our customers or us could harm our business.
We retain certain intellectual property rights to some of the technologies that we develop as part of our
engineering, design and manufacturing services and components offerings. The measures we have taken to
prevent unauthorized use of our technology may not be successful. If we are unable to protect our intellectual
property rights, this could reduce or eliminate the competitive advantages of our proprietary technology, which
would harm our business.
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Our engineering, design and manufacturing services and components offerings involve the creation and use
of intellectual property rights, which subject us to the risk of claims of intellectual property infringement from
third parties, as well as claims arising from the allocation of intellectual property rights among us and our
customers. In addition, our customers are increasingly requiring us to indemnify them against the risk of
intellectual property infringement. If any claims are brought against us or our customers for such infringement,
whether or not these have merit, we could be required to expend significant resources in defense of such claims.
In the event of such an infringement claim, we may be required to spend a significant amount of money to
develop non-infringing alternatives or obtain licenses. We may not be successful in developing such alternatives
or obtaining such licenses on reasonable terms or at all.
Fluctuations in foreign currency exchange rates could increase our operating costs.
Our manufacturing operations and industrial parks are located in lower cost regions of the world, such as
Asia, Eastern Europe and Mexico; however, most of our purchase and sale transactions are denominated in
United States dollars, Japanese yen or Euros. As a result, we are exposed to fluctuations in the functional
currencies of our fixed cost overhead or our supply base relative to the currencies in which we conduct
transactions.
Currency exchange rates fluctuate on a daily basis as a result of a number of factors, including changes in a
country’s political and economic policies. Volatility in the functional and non-functional currencies of our
entities and the United States dollar could seriously harm our business, operating results and financial condition.
The primary impact of currency exchange fluctuations is on the cash, receivables, and payables of our operating
entities. As part of our currency hedging strategy, we use financial instruments, primarily forward exchange and
swap contracts, to hedge our United States dollar and other currency commitments in order to reduce the
short-term impact of foreign currency fluctuations on current assets and liabilities. If our hedging activities are
not successful or if we change or reduce these hedging activities in the future, we may experience significant
unexpected expenses from fluctuations in exchange rates.
We are also exposed to risks related to the valuation of the Chinese currency relative to other foreign
currencies. The Chinese currency is the renminbi (“RMB”). A significant increase in the value of the RMB
could adversely affect our financial results and cash flows by increasing both our manufacturing costs and the
costs of our local supply base.
We depend on our executive officers and skilled management personnel.
Our success depends to a large extent upon the continued services of our executive officers. Generally our
employees are not bound by employment or non-competition agreements, and we cannot assure you that we will
retain our executive officers and other key employees. We could be seriously harmed by the loss of any of our
executive officers or other key employees. We will need to recruit and retain skilled management personnel, and
if we are not able to do so, our business could be harmed. In addition, in connection with expanding our design
services offerings, we must attract and retain experienced design engineers. There is substantial competition in
our industry for highly skilled employees. Our failure to recruit and retain experienced design engineers could
limit the growth of our design services offerings, which could adversely affect our business.
Our failure to comply with environmental laws could adversely affect our business.
We are subject to various federal, state, local and foreign environmental laws and regulations, including
regulations governing the use, storage, discharge and disposal of hazardous substances used in our
manufacturing processes. We are also subject to laws and regulations governing the recyclability of products, the
materials that may be included in products, and our obligations to dispose of these products after end users have
finished with them. Additionally, we may be exposed to liability to our customers relating to the materials that
may be included in the components that we procure for our customers’ products. Any violation or alleged
violation by us of environmental laws could subject us to significant costs, fines or other penalties.
We are also required to comply with an increasing number of global and local product environmental
compliance regulations focused on the restriction of certain hazardous substances. We are subject to the EU
directives, including the Restrictions on RoHS, the WEEE as well as the EU’s REACH regulation. In addition,
new technical classifications of e-Waste being discussed in the Basel Convention technical working group could
affect both our customers abilities and obligations in electronics repair and refurbishment. Also of note is
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China’s Management Methods for Controlling Pollution Caused by EIPs regulation, commonly referred to as
“China RoHS”, which restricts the importation into and production within China of electrical equipment
containing certain hazardous materials. Similar legislation has been or may be enacted in other jurisdictions,
including in the United States. RoHS and other similar legislation bans or restricts the use of lead, mercury and
certain other specified substances in electronics products and WEEE requires EU importers and/or producers to
assume responsibility for the collection, recycling and management of waste electronic products and
components. We have developed rigorous risk mitigating compliance programs designed to meet the needs of
our customers as well as applicable regulations. These programs may include collecting compliance data from
our suppliers, full laboratory testing and public reporting of other environmental metrics such as carbon
emissions, electronic waste and water, and we also require our supply chain to comply. Non-compliance could
potentially result in significant costs and/or penalties. In the case of WEEE, the compliance responsibility rests
primarily with the EU importers and/or producers rather than with EMS companies. However, OEMs may turn
to EMS companies for assistance in meeting their obligations under WEEE.
In addition, we are responsible for cleanup of contamination at some of our current and former
manufacturing facilities and at some third party sites. If more stringent compliance or cleanup standards under
environmental laws or regulations are imposed, or the results of future testing and analyses at our current or
former operating facilities indicate that we are responsible for the release of hazardous substances into the air,
ground and/or water, we may be subject to additional liability. Additional environmental matters may arise in the
future at sites where no problem is currently known or at sites that we may acquire in the future. Our failure to
comply with environmental laws and regulations or adequately address contaminated sites could limit our ability
to expand our facilities or could require us to incur significant expenses, which would harm our business.
We may encounter difficulties with acquisitions, which could harm our business.
We have completed numerous acquisitions of businesses and we may acquire additional businesses in the
future. Any future acquisitions may require additional equity financing, which could be dilutive to our existing
shareholders, or additional debt financing, which could increase our leverage and potentially affect our credit
ratings. Any downgrades in our credit ratings associated with an acquisition could adversely affect our ability to
borrow by resulting in more restrictive borrowing terms. As a result of the foregoing, we also may not be able to
complete acquisitions or strategic customer transactions in the future to the same extent as in the past, or at all.
To integrate acquired businesses, we must implement our management information systems, operating
systems and internal controls, and assimilate and manage the personnel of the acquired operations. The
difficulties of this integration may be further complicated by geographic distances. The integration of acquired
businesses may not be successful and could result in disruption to other parts of our business. In addition, the
integration of acquired businesses may require that we incur significant restructuring charges.
In addition, acquisitions involve numerous risks and challenges, including:
(cid:129) diversion of management’s attention from the normal operation of our business;
(cid:129) potential loss of key employees and customers of the acquired companies;
(cid:129) difficulties managing and integrating operations in geographically dispersed locations;
(cid:129) the potential for deficiencies in internal controls at acquired companies;
(cid:129) increases in our expenses and working capital requirements, which reduce our return on invested capital;
(cid:129) lack of experience operating in the geographic market or industry sector of the acquired business; and
(cid:129) exposure to unanticipated liabilities of acquired companies.
These and other factors have harmed, and in the future could harm, our ability to achieve anticipated levels
of profitability at acquired operations or realize other anticipated benefits of an acquisition, and could adversely
affect our business and operating results.
Our strategic relationships with major customers create risks.
In the past, we have completed numerous strategic transactions with OEM customers. Under these
arrangements, we generally acquire inventory, equipment and other assets from the OEM, and lease or acquire
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their manufacturing facilities, while simultaneously entering into multi-year manufacturing and supply
agreements for the production of their products. We may pursue these OEM divestiture transactions in the future.
These arrangements entered into with divesting OEMs typically involve many risks, including the following:
(cid:129) we may need to pay a purchase price to the divesting OEMs that exceeds the value we ultimately may
realize from the future business of the OEM;
(cid:129) the integration of the acquired assets and facilities into our business may be time-consuming and costly,
including the incurrence of restructuring charges;
(cid:129) we, rather than the divesting OEM, bear the risk of excess capacity at the facility;
(cid:129) we may not achieve anticipated cost reductions and efficiencies at the facility;
(cid:129) we may be unable to meet the expectations of the OEM as to volume, product quality, timeliness and cost
reductions;
(cid:129) our supply agreements with the OEMs generally do not require any minimum volumes of purchase by
the OEMs, and the actual volume of purchases may be less than anticipated; and
(cid:129) if demand for the OEMs’ 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.
As a result of these and other risks, we have been, and in the future may be, unable to achieve anticipated
levels of profitability under these arrangements. In addition, these strategic arrangements have not, and in the
future may not, result in any material revenues or contribute positively to our earnings per share.
Our business and operations could be adversely impacted by climate change initiatives.
Concern over climate change has led to international legislative and regulatory initiatives directed at
limiting carbon dioxide and other greenhouse gas emissions. Proposed and existing efforts to address climate
change by reducing greenhouse gas emissions could directly or indirectly affect our costs of energy, materials,
manufacturing, distribution, packaging and other operating costs, which could impact our business and financial
results.
Our operating results may fluctuate significantly due to seasonal demand.
Two of our significant end markets are the mobile devices market and the consumer devices market. These
markets exhibit particular strength in the two quarters leading up to the end of the calendar year in connection
with the holiday season. As a result, we have historically experienced stronger revenues in our second and third
fiscal quarters as compared to our other fiscal quarters. Economic or other factors leading to diminished orders
in the end of the calendar year could harm our business.
Our debt level may create limitations.
As of March 31, 2013, our total debt was approximately $2.1 billion. This level of indebtedness could limit
our flexibility as a result of debt service requirements and restrictive covenants, and may limit our ability to
access additional capital or execute our business strategy.
Changes in our credit rating may make it more expensive for us to raise additional capital or to borrow
additional funds.
Our credit is rated by credit rating agencies. Our 4.625% Notes and our 5.000% Notes are currently rated
BB+ by Standard and Poor’s (“S&P”) and Ba1 by Moody’s, and are considered to be below “investment grade”
debt by Moody’s and S&P. Any further decline in our credit rating may make it more expensive for us to raise
additional capital in the future on terms that are acceptable to us, if at all; negatively impact the price of our
common stock; increase our interest payments under some of our existing debt agreements; and have other
negative implications on our business, many of which are beyond our control. In addition, the interest rate
payable on some of our credit facilities is subject to adjustment from time to time if our credit ratings change.
Thus, any potential future negative change in our credit rating may increase the interest rate payable on these
credit facilities.
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Weak global economic conditions and instability in financial markets may adversely affect our business,
results of operations, financial condition and access to capital markets.
Our revenue and gross margin depend significantly on general economic conditions and the demand for
products in the markets in which our customers compete. Recent adverse worldwide economic conditions,
including the European sovereign debt crisis, have created challenging conditions in the electronics industry.
These conditions have resulted in reduced consumer and business confidence and spending in many countries, a
tightening in the credit markets, a low level of liquidity in many financial markets and high volatility in credit,
fixed income and equity markets. A continuation or worsening of the European sovereign debt crisis will likely
have a negative effect on certain of our European customers and suppliers, which could harm our business. In
addition, longer term disruptions in the capital and credit markets could adversely affect our access to liquidity
needed for our business. If financial institutions that have extended credit commitments to us are adversely
affected by the conditions of the U.S. and international capital markets, they may become unable to fund
borrowings under their credit commitments to us, which could have an adverse impact on our financial condition
and our ability to borrow additional funds, if needed, for working capital, capital expenditures, acquisitions,
research and development and other corporate purposes.
The market price of our ordinary shares is volatile.
The stock market in recent years has experienced significant price and volume fluctuations that have
affected the market prices of companies, including technology companies. These fluctuations have often been
unrelated to or disproportionately impacted by the operating performance of these companies. The market for
our ordinary shares has been and may in the future be subject to similar volatility. Factors such as fluctuations in
our operating results, announcements of technological innovations or events affecting other companies in the
electronics industry, currency fluctuations, general market fluctuations, and macro-economic conditions may
cause the market price of our ordinary shares to decline.
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The Company’s goodwill and identifiable intangible assets could become impaired, which could reduce the
value of its assets and reduce its net income in the year in which the write-off occurs.
Goodwill represents the excess of the cost of an acquisition over the fair value of the assets acquired. The
Company also ascribes value to certain identifiable intangible assets, which consist primarily of customer
relationships and trade names, among others, as a result of acquisitions. The Company may incur impairment
charges on goodwill or identifiable intangible assets if it determines that the fair values of goodwill or
identifiable intangible assets are less than their current carrying values. The Company evaluates, on a regular
basis, whether events or circumstances have occurred that indicate all, or a portion, of the carrying amount of
goodwill may no longer be recoverable, in which case an impairment charge to earnings would become
necessary.
Refer to Notes 1 and 2 of the notes to the consolidated financial statements and ‘critical accounting
policies’ in management’s discussion and analysis of financial condition and results of operations for further
discussion of the impairment testing of goodwill and identifiable intangible assets.
A decline in general economic conditions or global equity valuations could impact the judgments and
assumptions about the fair value of the Company’s businesses and the Company could be required to record
impairment charges on its goodwill or other identifiable intangible assets in the future, which could impact the
Company’s consolidated balance sheet, as well as the Company’s consolidated statement of operations. If the
Company was required to recognize an impairment charge in the future, the charge would not impact the
Company’s consolidated cash flows, current liquidity, capital resources, and covenants under its existing credit
facilities, asset securitization program, and other outstanding borrowings.
Failure to comply with domestic or international employment and related laws could result in the payment of
significant damages, which would reduce our net income.
We are subject to a variety of domestic and foreign employment laws, including those related to safety,
wages and overtime, discrimination, whistle-blowing, classification of employees and severance payments.
Enforcement activity relating to these laws, particularly outside of the United States, can increase as a result of
increased media attention due to violations by other companies, changes in law, political and other factors. There
can be no assurance that we won’t be found to have violated such laws in the future, due to a more aggressive
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enforcement posture by governmental authorities or for any other reason. Any such violations could lead to the
assessment of fines against us by federal, state or foreign regulatory authorities or damages payable to
employees, which fines could be substantial and which would reduce our net income.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our facilities consist of a global network of industrial parks, regional manufacturing operations, and design,
engineering and product introduction centers, providing over 27.6 million square feet of productive capacity as
of March 31, 2013. We own facilities with approximately 8.7 million square feet in Asia, 4.4 million square feet
in the Americas and 2.4 million square feet in Europe. We lease facilities with approximately 6.6 million square
feet in Asia, 3.3 million square feet in the Americas and 2.2 million square feet in Europe.
Our facilities include large industrial parks, ranging in size from under 100,000 to 4.1 million square feet in
Brazil, China, Hungary, Indonesia, Israel, Malaysia, Mexico, Poland, Romania, Slovakia, and Ukraine. We also have
regional manufacturing operations, generally ranging in size from under 100,000 to approximately 2.7 million
square feet in Austria, Brazil, Canada, China, Denmark, France, Germany, Hong Kong, Hungary, India, Ireland,
Italy, Japan, Malaysia, Mexico, Norway, Singapore, Sweden, Ukraine and the United States. We also have smaller
design and engineering centers and product introduction centers at a number of locations in the world’s major
electronics markets.
Our facilities are well maintained and suitable for the operations conducted. The productive capacity of our
plants is adequate for current needs.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are subject to legal proceedings, claims, and litigation arising in the ordinary course
of business. We defend ourselves vigorously against any such claims. Although the outcome of these matters is
currently not determinable, management expects that any losses that are probable or reasonably possible of being
incurred as a result of these matters, which are in excess of amounts already accrued in its consolidated balance
sheets would not be material to the financial statements as a whole.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
PRICE RANGE OF ORDINARY SHARES
Our ordinary shares are quoted on the NASDAQ Global Select Market under the symbol “FLEX.” The
following table sets forth the high and low per share sales prices for our ordinary shares since the beginning of
fiscal year 2012 as reported on the NASDAQ Global Select Market.
High
Low
Fiscal Year Ended March 31, 2013
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal Year Ended March 31, 2012
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6.93
6.31
6.81
7.30
$7.42
6.75
7.01
7.51
$6.18
5.54
5.96
6.11
$5.75
5.42
5.10
6.27
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As of May 16, 2013 there were 3,528 holders of record of our ordinary shares and the closing sales price of
our ordinary shares as reported on the NASDAQ Global Select Market was $7.22 per share.
DIVIDENDS
Since inception, we have not declared or paid any cash dividends on our ordinary shares. We presently do
not have plans to pay any dividends in the near future.
STOCK PRICE PERFORMANCE GRAPH
The following stock price performance graph and accompanying information is not deemed to be
“soliciting material” or to be “filed” with the SEC or subject to Regulation 14A under the Securities Exchange
Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and will not be deemed to
be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, regardless of any general incorporation language in any such filing.
The graph below compares the cumulative total shareholder return on our ordinary shares, the Standard &
Poor’s 500 Stock Index and a peer group comprised of Benchmark Electronics, Inc., Celestica, Inc., Jabil
Circuit, Inc., and Sanmina-SCI Corporation.
The graph below assumes that $100 was invested in our ordinary shares, in the Standard & Poor’s 500
Stock Index and in the peer group described above on March 31, 2008 and reflects the annual return through
March 31, 2013, assuming dividend reinvestment.
The comparisons in the graph below are based on historical data and are not indicative of, or intended to
forecast, the possible future performances of our ordinary shares.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Flextronics, the S&P 500 Index, and Peer Group
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200.00
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160.00
140.00
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80.00
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40.00
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2008
2009
Flextronics
2010
2011
S&P 500
2012
Peer Group
2013
3/08
3/09
3/10
3/11
3/12
3/13
Flextronics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Peer Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83.49
71.99
100.00 30.78
100.00 61.91
92.72 107.23 116.39 132.64
100.00 52.62 160.36 168.61 183.13 151.96
79.55
76.89
Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2013
Index Data: Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved.
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Issuer Purchases of Equity Securities
The following table provides information regarding purchases of our ordinary shares made by us for the
period from January 1, 2013 through March 31, 2013.
Period
Total Number
of Shares
Purchased(1)
Average Price
Paid per Share
Total Number of Shares Approximate Dollar Value
of Shares that May Yet
Be Purchased Under the
Plans or Programs(2)
Purchased as Part of
Publicly Announced
Plans or Programs
January 1 - January 25, 2013 . . . .
January 26 - February 22, 2013 . .
February 23 - March 31, 2013 . . .
— $
5,064,392
13,720,700
—
6.62
6.72
Total . . . . . . . . . . . . . . . . . . . . . . . .
18,785,092
— $
5,064,392
13,720,700
18,785,092
319,306,175
324,771,920
237,553,032
(1) During the period from January 1, 2013 through March 31, 2013 all purchases were made pursuant to the
program discussed below in open market transactions. All purchases were made in accordance with
Rule 10b-18 under the Securities Exchange Act of 1934.
(2) On September 13, 2012, our Board of Directors authorized the repurchase of up to 10% of our outstanding
ordinary shares, which was approved by the Company’s shareholders at the 2012 Extraordinary General
Meeting held on August 30, 2012. As of March 31, 2013, we had 35.3 million shares available to be
repurchased under the plan with an approximate dollar value of $237.6 million at an assumed average price
of $6.72 per share.
RECENT SALES OF UNREGISTERED SECURITIES
None.
INCOME TAXATION UNDER SINGAPORE LAW
Dividends. Singapore does not impose a withholding tax on dividends. All dividends are tax exempt to
shareholders.
Gains on Disposal. Under current Singapore tax law there is no tax on capital gains, thus any profits from
the disposal of shares are not taxable in Singapore unless the gains arising from the disposal of shares are
income in nature and subject to tax, especially if they arise from activities which the Inland Revenue Authority
of Singapore regards as the carrying on of a trade or business in Singapore (in which case, the profits on the sale
would be taxable as trade profits rather than capital gains).
Shareholders who apply, or who are required to apply, the Singapore Financial Reporting Standard 39 Financial
Instruments—Recognition and Measurement (“FRS 39”) for the purposes of Singapore income tax may be
required to recognize gains or losses (not being gains or losses in the nature of capital) in accordance with the
provisions of FRS 39 (as modified by the applicable provisions of Singapore income tax law) even though no
sale or disposal of shares is made.
Stamp Duty. There is no stamp duty payable for holding shares, and no duty is payable on the acquisition
of newly-issued shares. When existing shares are acquired in Singapore, a stamp duty is payable on the
instrument of transfer of the shares at the rate of two Singapore dollars (“S$”) for every S$1,000 of the market
value of the shares. The stamp duty is borne by the purchaser unless there is an agreement to the contrary. If the
instrument of transfer is executed outside of Singapore, the stamp duty must be paid only if the instrument of
transfer is received in Singapore.
Estate Taxation. The estate duty was abolished for deaths occurring on or after February 15, 2008. For
deaths prior to February 15, 2008 the following rules apply:
If an individual who is not domiciled in Singapore dies on or after January 1, 2002, no estate tax is payable
in Singapore on any of our shares held by the individual.
If property passing upon the death of an individual domiciled in Singapore includes our shares, Singapore
estate duty is payable to the extent that the value of the shares aggregated with any other assets subject to
Singapore estate duty exceeds S$600,000. Unless other exemptions apply to the other assets, for example, the
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separate exemption limit for residential properties, any excess beyond S$600,000 will be taxed at 5% on the first
S$12,000,000 of the individual’s chargeable assets and thereafter at 10%.
An individual shareholder who is a U.S. citizen or resident (for U.S. estate tax purposes) will have the value
of the shares included in the individual’s gross estate for U.S. estate tax purposes. An individual shareholder
generally will be entitled to a tax credit against the shareholder’s U.S. estate tax to the extent the individual
shareholder actually pays Singapore estate tax on the value of the shares; however, such tax credit is generally
limited to the percentage of the U.S. estate tax attributable to the inclusion of the value of the shares included in
the shareholder’s gross estate for U.S. estate tax purposes, adjusted further by a pro rata apportionment of
available exemptions. Individuals who are domiciled in Singapore should consult their own tax advisors
regarding the Singapore estate tax consequences of their investment.
Tax Treaties Regarding Withholding. There is no reciprocal income tax treaty between the U.S. and
Singapore regarding withholding taxes on dividends and capital gains.
ITEM 6. SELECTED FINANCIAL DATA
These historical results are not necessarily indicative of the results to be expected in the future. The
following selected consolidated financial data set forth below was derived from our historical audited
consolidated financial statements and is qualified by reference to and should be read in conjunction with Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8,
“Financial Statements and Supplementary Data.”
Fiscal Year Ended March 31,
2013 2012(5) 2011(5) 2010(5) 2009(5)
(In thousands, except per share amounts)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA(1):
A
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u
a
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p
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t
Net sales . . . . . . . . . . . . . . . . . . . . . . . $23,569,475
$30,795,367
Cost of sales . . . . . . . . . . . . . . . . . . . . 22,187,393 27,825,079 26,859,288 22,668,077 29,378,653
Restructuring charges(2) . . . . . . . . . . . 215,834 — — 87,442 153,398
$29,343,029 $28,442,633
$23,962,135
Gross profit . . . . . . . . . . . . . . . . . . . 1,166,248 1,517,950 1,583,345 1,206,616 1,263,316
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . 805,235 877,564 801,772 750,213 939,534
Intangible amortization . . . . . . . . . . . . 29,529 49,572 66,188 84,890 129,997
Goodwill impairment charge(3) . . . . . — — — — 5,771,766
Restructuring charges(2) . . . . . . . . . . . 11,600 — — 14,572 24,651
Other charges (income), net(4) . . . . . . (65,190) (19,935) 6,127 206,604 90,767
Interest and other expense, net . . . . . . 56,259 36,019 74,948 155,498 230,446
Income (loss) from continuing
operations before income taxes . . 328,815 574,730 634,310 (5,161) (5,923,845)
Provision for (benefit from) income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . 26,313 53,960 22,049 (37,059) 5,364
Income (loss) from continuing
operations . . . . . . . . . . . . . . . . . . 302,502 520,770 612,261 31,898 (5,929,209)
Loss from discontinued operations,
net of tax . . . . . . . . . . . . . . . . . . . . . (25,451) (32,005) (16,042) (13,304) (206,309)
Net income (loss) . . . . . . . . . . . . . . $ 277,051
$ 488,765 $ 596,219
$ 18,594
$ (6,135,518)
Diluted earnings (loss) per share:
Continuing operations . . . . . . . . . . . $ 0.45
$ 0.72 $ 0.77 $ 0.04
$ (7.22)
Discontinued operations . . . . . . . . . $ (0.04) $ (0.04) $ (0.02) $ (0.02) $ (0.25)
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.41
$ 0.67 $ 0.75
$ 0.02
$ (7.47)
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As of March 31,
2013 2012 2011 2010 2009
(In thousands)
CONSOLIDATED BALANCE SHEET
DATA(1):
$ 1,526,235
Working capital . . . . . . . . . . . . . . . . . . $ 1,598,616
Total assets . . . . . . . . . . . . . . . . . . . . . 10,591,555 11,033,804 11,633,152 10,642,552 11,316,940
Total long-term debt, excluding
$ 2,246,365 $ 2,225,268
$ 1,642,790
current portion . . . . . . . . . . . . . . . . . 1,650,973 2,149,333 2,198,942 1,988,876 2,733,543
Shareholders’ equity . . . . . . . . . . . . . . 2,246,758 2,283,979 2,294,696 1,984,567 1,861,168
(1) In fiscal year 2013, the Company finalized the sales of two non-core businesses. These non-core businesses
represent separate asset groups and the divestitures qualify as discontinued operations, and accordingly, the
Company has reported the results of operations and financial position of these businesses in discontinued
operations within the consolidated statements of operations and the consolidated balance sheets for all
periods presented.
(2) Restructuring charges incurred during fiscal years 2013, 2010 and 2009 were primarily intended to rationalize
the Company’s global manufacturing capacity and infrastructure in response to weakened macro-economic
conditions and decline in demand from our OEM customers.
(3) The Company recognized a charge to impair goodwill as a result of a significant decline in its share value
driven by weakened macro-economic conditions that contributed to a decrease in market multiples and
estimated discounted cash flows. Total goodwill impairment charges was $5.9 billion, of which $0.1 billion
is included in loss from discontinued operations.
(4) The net other income in the fiscal year 2013 includes the fair value change in warrants to purchase common
shares of a certain supplier and loss on sale of two investments.
The net other income in the fiscal year 2012, relates to the gain on sale of certain international entities.
During fiscal year 2011, the Company recognized a $13.2 million loss associated with the early redemption
of the 6.25% Senior Subordinated Notes and an $11.7 million loss in connection with the divestiture of
certain international entities. Additionally, the Company recognized a gain of $18.6 million associated with
a sale of an equity investment that was previously fully impaired.
The Company recognized charges of $199.4 million and $111.5 million in fiscal years 2010 and 2009,
respectively, for the loss on disposition, other-than-temporary impairment and other related charges on its
investments in, and notes receivable from, certain non-publicly traded companies. In fiscal year 2009, the
Company recognized a net gain of $22.3 million upon the partial extinguishment of debt.
(5) During the fourth quarter of fiscal year 2012, the Company identified certain accounting errors in the
statutory-to-U.S. GAAP adjustments at one of its foreign sites that originated in prior annual periods.
Management conducted additional procedures and concluded that these errors were isolated to that location.
These errors, which primarily understated cost of sales, totaled $10.4 million, $8.0 million and $6.5 million
for the fiscal years ended March 31, 2011, 2010 and 2009 respectively, and were corrected by the Company
as an out-of-period adjustment in the fourth quarter of fiscal year 2012. Management believes the impact of
this item, to the fiscal year ended March 31, 2012 and to prior fiscal years presented was not material. As a
result of recording these adjustments in the fourth quarter of fiscal year 2012, net income for the year ended
March 31, 2012 was reduced by $24.9 million ($0.03 per share).
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The
words “expects,” “anticipates,” “believes,” “intends,” “plans” and similar expressions identify forward-looking
statements. In addition, any statements which refer to expectations, projections or other characterizations of
future events or circumstances are forward-looking statements. We undertake no obligation to publicly disclose
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any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to
filing this Form 10-K with the Securities and Exchange Commission. These forward-looking statements are
subject to risks and uncertainties, including, without limitation, those discussed in this section and in Item 1A,
“Risk Factors.” In addition, new risks emerge from time to time and it is not possible for management to predict
all such risk factors or to assess the impact of such risk factors on our business. Accordingly, our future results may
differ materially from historical results or from those discussed or implied by these forward-looking statements.
Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements.
OVERVIEW
We are a leading global supply chain solutions provider, offering advanced design, manufacturing and
logistics and after-sales services to OEMs of a broad range of electronics products in the following markets:
High Reliability Solutions (“HRS”), which is comprised of our medical, automotive, and defense and aerospace
businesses; High Velocity Solutions (“HVS”), which includes our mobile devices business, including smart
phones, and consumer electronics, including game consoles, high-volume computing business, including
notebook personal computing (“PC”), tablets and printers; Industrial and Emerging Industries (“IEI”), which is
comprised of large household appliances, equipment, and our emerging industries businesses; and Integrated
Network Solutions (“INS”), which includes our telecommunications infrastructure, data networking, connected
home, and server and storage businesses.
Our strategy is to provide customers with a full range of cost competitive, vertically-integrated global
supply chain services through which the we can design, build, ship and service a complete packaged product for
our OEM customers. This enables our OEM customers to leverage our services to meet their product
requirements throughout the entire product life cycle.
Historically, our industry experienced significant change and growth as an increasing number of companies
elected to outsource some or all of their design and manufacturing requirements. We have seen an increase in the
penetration of the global OEM manufacturing requirements since the 2001-2002 technology downturn as more
and more OEMs pursued the benefits of outsourcing rather than internal manufacturing. Due to the global
economic crisis, which began in late calendar year 2007 and continued through the end of our fiscal year 2010,
many of our OEM customers reduced their manufacturing and supply chain outsourcing which negatively
impacted our business. During our fiscal year 2011, we began seeing some positive signs that demand for our
OEM customers’ end products was improving, and this trend continued through the end of our 2013 fiscal year.
However, our revenues in fiscal 2013 declined primarily as a result of our exit from the high volume and low
margin (“ODM”) PC business, which we fully exited by the end of fiscal 2012, and from a reduction of
concentration of business with a well known smart phone OEM.
We use a portfolio management approach to manage our extensive service offerings. As our OEM
customers change in the way they go to market, we reorganize and rebalance our business portfolio in order to
align with our customers’ needs and requirements and to optimize our operating results. As part of our portfolio
management strategy, we have decreased the percentage of our revenue from our lower margin HVS businesses
by exiting our ODM PC business in fiscal 2012 and assembly disengagement with a well known smart phone
OEM in fiscal 2013. Over the past few years, we have experienced increased revenue in our more complex and
higher margin business groups (HRS, IEI, and INS) together with new business opportunities. Although our
recent acquisition of certain manufacturing operations from Google’s Motorola Mobility LLC is expected to
increase the percentage of our revenues from the HVS market in fiscal year 2014 and beyond, we do not expect
the percentage of revenues from our HVS business to approach the concentration experienced in fiscal year 2011
and prior. The objective of our operating model is to allow us to redeploy and reposition our assets and resources
to meet specific customer needs across all of the markets we serve, and we have been able to successfully
reposition HVS assets and capacity to serve our customers in other business groups as required which illustrates
the overall flexibility of our model.
We are one of the world’s largest manufacturing service providers, with revenues of $23.6 billion in fiscal
year 2013. We have established an extensive network of manufacturing facilities in the world’s major electronics
markets (Asia, the Americas and Europe) in order to serve the growing outsourcing needs of both multinational
and regional OEMs. We design, build, ship, and service electronics products for our customers through a
network of facilities in over 30 countries across four continents. As of March 31, 2013, our total manufacturing
capacity was approximately 27.6 million square feet. In fiscal year 2013, our net sales in Asia, the Americas and
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Europe represented approximately 50%, 31% and 19%, respectively, of our total net sales, based on the location
of the manufacturing site. The following tables set forth net sales and net property and equipment, by country,
based on the location of our manufacturing sites and the relative percentages:
Fiscal Year Ended March 31,
Net sales: 2013 2012 2011
(In thousands)
China . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,132,776 35% $11,212,310 38% $10,754,250 38%
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . 3,534,067 15% 4,005,653 14% 4,241,222 15%
U.S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,539,460 11% 2,971,757 10% 2,903,419 10%
9%
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . 2,440,902 10% 2,868,990 10% 2,595,174
Hungary . . . . . . . . . . . . . . . . . . . . . . . . . 1,312,159
8%
7% 2,343,066
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,610,111 23% 6,160,551 21% 5,605,502 20%
6% 2,123,768
$23,569,475
$29,343,029 $28,442,633
Fiscal Year Ended March 31,
Property and equipment, net: 2013 2012
(In thousands)
$ 855,032
China . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . 286,026
U.S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245,590
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . 152,594
Hungary . . . . . . . . . . . . . . . . . . . . . . . . . 113,173
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 522,173
39% $ 840,032 40%
13% 309,325 15%
6%
11% 132,944
8%
7% 170,990
6%
5% 130,458
25% 492,693 25%
$2,174,588 $2,076,442
We believe that the combination of our extensive design and engineering services, significant scale and
global presence, end-to-end services, advanced supply chain management, industrial campuses in low-cost
geographic areas and operational track record provide us with a competitive advantage in the market for
designing, manufacturing and servicing electronics products for leading multinational and regional
OEMs. Through these services and facilities, we offer our OEM customers the ability to simplify their global
product development, manufacturing process, and after sales services, and enable them to achieve meaningful
time to market and cost savings.
Our operating results are affected by a number of factors, including the following:
(cid:129) changes in the macro-economic environment and related changes in consumer demand;
(cid:129) the mix of the manufacturing services we are providing, the number and size of new manufacturing
programs, the degree to which we utilize our manufacturing capacity, seasonal demand, shortages of
components and other factors;
(cid:129) the effects on our business when our customers are not successful in marketing their products, or when
their products do not gain widespread commercial acceptance;
(cid:129) our ability to achieve commercially viable production yields and to manufacture components in
commercial quantities to the performance specifications demanded by our OEM customers;
(cid:129) the effects on our business due to our customers’ products having short product life cycles;
(cid:129) our customers’ ability to cancel or delay orders or change production quantities;
(cid:129) our customers’ decision to choose internal manufacturing instead of outsourcing for their product
requirements;
(cid:129) our exposure to financially troubled customers; and
(cid:129) integration of acquired businesses and facilities.
We also are subject to other risks as outlined in Item 1A, “Risk Factors.”
Net revenues for fiscal year 2013 decreased 19.7% or $5.8 billion to $23.6 billion. This decline was
primarily attributable to the disengagement of our assembly activities with a well known smart phone OEM and
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the exit of our ODM PC business, which resulted in decreases of approximately $2.2 billion and $1.6 billion,
respectively. Our revenue deteriorated in all the major markets we serve except for HRS. By the end of fiscal year
2013, we continued to strive to maintain a competitive position driven in part by the success in our diversified
business model. Our fiscal year 2013 gross profit totaled $1.2 billion, representing a decrease of $351.7 million,
or 23.2%, compared to fiscal year 2012 primarily due to restructuring charges amounting to $215.8 million
included in cost of sales in fiscal year 2013. Our income from continuing operations of $302.5 million was lower
than the $520.8 million realized in fiscal year 2012 primarily due to restructuring charges incurred in fiscal 2013.
Cash provided by operations increased approximately $311.2 million to $1.1 billion for fiscal year 2013
compared with $804.3 million for fiscal year 2012 primarily due to changes in operating assets and liabilities,
net of acquisitions which decreased $315.9 million in fiscal year 2013 primarily as a result of a decrease in
accounts receivable and inventory, offset by a decrease in accounts payable and other current and noncurrent
liabilities. Our average net working capital, defined as accounts receivable plus the deferred purchase price
receivable from our asset-backed securitization programs plus inventory less accounts payable, as a percentage
of annual sales was approximately 7.8%, 6.2% and 4.5% for the years ended March 31, 2013, 2012 and 2011,
respectively. The increase in the percentage for the year ended March 31, 2013 is primarily attributable to lower
revenue from our HVS business as a result of our exit of our ODM PC business, which historically carries
significantly higher inventory turns and customers with contractually faster payment terms, offset by lower
accounts receivable, deferred purchase price receivables and inventories in fiscal year 2013. Our free cash flow,
which we define as cash from operating activities less net purchases of property and equipment, was $680.1 million
for fiscal year 2013 compared to $416.3 million for fiscal year 2012, primarily due to higher cash flows from
operations partially off-set by higher capital expenditures. Refer to the Liquidity and Capital Resources section
for the free cash flows reconciliation to our most direct comparable GAAP financial measure of cash flows from
operations. Cash used in financing activities amounted to $339.6 million during fiscal year 2013 and included
repurchases of approximately 49.9 million ordinary shares at an aggregate purchase value of $322.0 million. As
of March 31, 2013, $12.0 million was included in accrued expenses for approximately 1.8 million ordinary
shares that were not settled in fiscal year 2013.
Throughout fiscal year 2013, we continued to further transform our business as we exited certain non-core
businesses and executed certain restructuring activities to consolidate and rationalize our global manufacturing
capacity and infrastructure. During fiscal year 2013, we finalized the sale of two of our non-core businesses and
received proceeds from these sales amounting to $22.6 million, net of $1.0 million of cash sold. The results of
operations and financial position of the divested businesses are reported as discontinued operations for all
periods presented and include a $17.0 million charge in fiscal 2012 for the impairment of fixed assets and
$10.0 million charge for impairment of customer-related intangible assets in fiscal 2013.
Additionally, in response to a challenging macroeconomic environment, we initiated certain restructuring
activities in fiscal 2013 intended to improve our operational efficiencies by reducing excess workforce and
capacity. The restructuring activities are intended to rationalize our global manufacturing capacity and
infrastructure and will result in a further shift of manufacturing capacity to locations with higher efficiencies.
During the year ended March 31, 2013, we recognized $227.4 million of pre-tax restructuring charges comprised
of $123.0 million of cash charges predominantly related to employee severance costs and $104.4 million of
non-cash charges primarily related to asset impairment and other exit charges. We expect to recognize an
additional $40.0 million in pre-tax restructuring charges in our first quarter of fiscal 2014, comprised primarily
of cash charges associated with employee termination costs to be classified as a component of cost of sales.
We believe that our business transformation has strategically positioned us very well to take advantage of
the long-term, future growth prospects for outsourcing of advanced manufacturing capabilities, design and
engineering services and after-market services, which remain strong.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America (“U.S. GAAP” or “GAAP”) requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates and assumptions.
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We believe the following critical accounting policies affect our more significant judgments and estimates
used in the preparation of our consolidated financial statements. For further discussion of our significant
accounting policies, refer to note 2 of the notes to consolidated financial statements in Item 8, “Financial
Statements and Supplementary Data.”
Revenue Recognition
We recognize manufacturing revenue when we ship goods or the goods are received by our customer, title
and risk of ownership have passed, the price to the buyer is fixed or determinable and recoverability is
reasonably assured. Generally, there are no substantive customer acceptance requirements or further obligations
related to manufacturing services. If such requirements or obligations exist, then we recognize the related
revenues at the time when such requirements are completed and the obligations are fulfilled. We make provisions
for estimated sales returns and other adjustments at the time revenue is recognized based upon contractual terms
and an analysis of historical returns. These provisions were not material to our consolidated financial statements
for any of the periods presented.
We provide a comprehensive suite of services for our customers that range from contract design services to
manufacturing and logistics to repair services. We recognize service revenue when the services have been
performed, and the related costs are expensed as incurred. Our net sales for services were less than 10% of our
total sales for all periods presented, and accordingly, are included in net sales in the consolidated statements of
operations.
Customer Credit Risk
We have an established customer credit policy through which we manage customer credit exposures
through credit evaluations, credit limit setting, monitoring, and enforcement of credit limits for new and existing
customers. We perform ongoing credit evaluations of our customers’ financial condition and make provisions for
doubtful accounts based on the outcome of those credit evaluations. We evaluate the collectability of accounts
receivable based on specific customer circumstances, current economic trends, and the age of past due
receivables. To the extent we identify exposures as a result of credit or customer evaluations, we also review
other customer related exposures, including but not limited to inventory and related contractual obligations. For
example, subsequent to fiscal year 2012 and prior to issuance of our financial statements, the Company became
aware that one of its customers in the concentrated solar photovoltaic market was experiencing significant
financial and liquidity difficulties. Based on an evaluation of this customer’s specific circumstances, the
Company determined that its best estimate was that all accounts receivable and inventory related to this customer
were unrecoverable and recorded a charge of $32.0 million as of March 31, 2012.
Restructuring Charges
We recognize restructuring charges related to our plans to close or consolidate duplicate manufacturing and
administrative facilities. In connection with these activities, we recognize restructuring charges for employee
termination costs, long-lived asset impairment and other exit-related costs.
The recognition of these restructuring charges requires that we make certain judgments and estimates
regarding the nature, timing and amount of costs associated with the planned exit activity. To the extent our
actual results in exiting these facilities differ from our estimates and assumptions, we may be required to revise
the estimates of future liabilities, requiring the recognition of additional restructuring charges or the reduction of
liabilities already recognized. At the end of each reporting period, we evaluate the remaining accrued balances to
ensure that no excess accruals are retained and the utilization of the provisions are for their intended purpose in
accordance with developed exit plans.
Refer to note 12 of the notes to consolidated financial statements in Item 8, “Financial Statements and
Supplementary Data” for further discussion of our restructuring activities.
Carrying Value of Long-Lived Assets
We review property and equipment and acquired amortizable intangible assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An
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impairment loss is recognized when the carrying amount of these long-lived assets exceeds their fair value.
Recoverability of property and equipment and acquired amortizable intangible assets are measured by comparing
their carrying amount to the projected cash flows the assets are expected to generate. If such assets are
considered to be impaired, the impairment loss recognized, if any, is the amount by which the carrying amount of
the property and equipment and acquired amortizable intangible assets exceeds fair value.
Goodwill is tested for impairment on an annual basis, and whenever events or changes in circumstances
indicate that the carrying amount of goodwill may not be recoverable. Recoverability of goodwill is measured at
the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value
of the reporting unit, which is measured based upon, among other factors, market multiples for comparable
companies as well as a discounted cash flow analysis. We have one reporting unit: EMS. If the recorded value of
the assets, including goodwill, and liabilities (“net book value”) of the reporting unit exceeds its fair value, an
impairment loss may be required to be recognized. Further, to the extent the net book value of the Company as a
whole is greater than its fair value in the aggregate, all, or a significant portion of its goodwill may be
considered impaired.
Inventory Valuation
Our inventories are stated at the lower of cost (on a first-in, first-out basis) or market value. Our industry is
characterized by rapid technological change, short-term customer commitments and rapid changes in demand.
We purchase our inventory based on forecasted demand, and we estimate write downs for excess and obsolete
inventory based on our regular reviews of inventory quantities on hand, and the latest forecasts of product
demand and production requirements from our customers. If actual market conditions or our customers’ product
demands are less favorable than those projected, additional provisions may be required. In addition,
unanticipated changes in the liquidity or financial position of our customers and/or changes in economic
conditions may require additional write downs for inventories due to our customers’ inability to fulfill their
contractual obligations with regard to inventory procured to fulfill customer demand.
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Income Taxes
Our deferred income tax assets represent temporary differences between the carrying amount and the tax
basis of existing assets and liabilities which will result in deductible amounts in future years, including net
operating loss carry forwards. Based on estimates, the carrying value of our net deferred tax assets assumes that
it is more likely than not that we will be able to generate sufficient future taxable income in certain tax
jurisdictions to realize these deferred income tax assets. Our judgments regarding future profitability may
change due to future market conditions, changes in U.S. or international tax laws and other factors. If these
estimates and related assumptions change in the future, we may be required to increase or decrease our valuation
allowance against deferred tax assets previously recognized, resulting in additional or lesser income tax expense.
We are regularly subject to tax return audits and examinations by various taxing jurisdictions and around
the world, and there can be no assurance that the final determination of any tax examinations will not be
materially different than that which is reflected in our income tax provisions and accruals. Should additional
taxes be assessed as a result of a current or future examination, there could be a material adverse effect on our
tax position, operating results, financial position and cash flows. Refer to note 11 of the notes to consolidated
financial statements in Item 8, “Financial Statements and Supplementary Data” for further discussion of our tax
position.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain statements of operations data expressed as a
percentage of net sales. The financial information and the discussion below should be read in conjunction with
the consolidated financial statements and notes thereto included in Item 8, “Financial Statements and
Supplementary Data.” The data below, and discussion that follows, represents our results from operations.
During fiscal year 2013, the Company finalized the sale of two of its non-core businesses. Total proceeds
received from these sales amounted to $22.6 million, net of $1.0 million of cash sold. The Company recognized
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a loss on sale of $12.1 million, which is included in interest and other expenses (income), net within the results
from discontinued operations.
Fiscal Year Ended March 31,
2013 2012 2011
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0%
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94.2 94.8 94.4
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.9 — —
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9 5.2 5.6
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . 3.4 3.0 2.8
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 0.2 0.2
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 — —
Other charges (income), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.2) — 0.1
Interest and other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 0.1 0.3
Income from continuing operations before income taxes . . . . . . 1.3 1.9 2.2
Provision from income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 0.2 0.1
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . 1.2 1.7 2.1
Loss from discontinued operations, net of tax . . . . . . . . . . . . . . . . . (0.1) (0.1) (0.1)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1% 1.6% 2.0%
Net sales
Net sales during fiscal year 2013 totaled $23.6 billion, representing a decrease of $5.8 billion, or 19.7%,
from $29.3 billion during fiscal year 2012. Sales during fiscal year 2013 decreased across all of the markets we
serve except for HRS consisting of decreases of: (i) $5.3 billion or 46.2% in the HVS market, (ii) $0.7 billion or
6.5% in the INS market and (iii) $0.2 billion or 3.9% in the IEI market. The decline in sales was primarily due to
a decrease in the HVS market as a result of reduction in revenues due to our disengagement from our assembly
business with a well known smart phone OEM customers, which resulted in an approximately $2.2 billion
reduction of sales and our exit from the ODM PC business during fiscal 2012, which resulted in an
approximately $1.6 billion reduction of sales. The remainder of the decrease across the other markets was
attributable to reduced demand during fiscal year 2013. The decrease in these markets was partially offset by
increase in sales from our HRS market group amounting to $0.5 billion or 19.5%, primarily due to increased
demand for our customer products in the automotive market and to a lesser extent from our acquisition of Saturn
Electronics and Engineering, Inc. in December 2012. Net sales decreased across all of the geographical regions
we serve, consisting of decreases of $3.7 billion in Asia, $1.2 billion in the Americas and $0.9 billion in Europe.
Net sales during fiscal year 2012 totaled $29.3 billion, representing an increase of $0.9 billion, or 3.2%,
from $28.4 billion during fiscal year 2011. Sales during fiscal year 2012 increased across all of the markets we
serve except for HVS, consisting of increases of: (i) $0.7 billion or 6.2% in the INS market, (ii) $0.5 billion or
24.2% in the HRS market, and (iii) $0.1 billion or 3.3% in the IEI market. The increase in sales for our INS
market was driven by new program wins with existing customers with products in enterprise data networking
and telecommunications infrastructure markets, offset by declining demand from certain customer programs in
the server market due to the end of the product life cycles or which transitioned to another supplier. The increase
in sales for our HRS market was driven primarily from new wins and programs with our larger customers in the
automotive, medical equipment and drug delivery markets. The increase in sales for our IEI market was due to
new customer wins and new programs with existing customers across this business group, primarily with
customers serving the clean tech markets, offset by reduced demand from our customers serving the capital
equipment markets. The increase in net sales for these markets was offset by a $0.4 billion or 3.0% decrease in
sales in the HVS market due to a decrease in sales of mobile handsets to one of our significant customers,
partially offset by an increase in sales through the first nine months of fiscal year 2012 to another significant
customer in the ODM personal computing business which we exited in the third quarter of fiscal year 2012. Net
sales increased across all of the geographical regions we serve, consisting of increases of $0.8 billion in Asia,
$0.1 billion in the Americas and an insignificant increase in Europe.
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The following table sets forth net sales by market and their relative percentages:
Fiscal Year Ended March 31,
Market: 2013 2012 2011
(In thousands)
$10,706,431 45% $11,451,863 39% $10,781,846 38%
Integrated Network Solutions . . . . . . . .
High Velocity Solutions . . . . . . . . . . . . . 6,222,024 26% 11,553,858 39% 11,908,971 42%
Industrial & Emerging Industries . . . . . 3,823,278 16% 3,979,788 14% 3,852,990 14%
6%
High Reliability Solutions . . . . . . . . . . . 2,817,742 13% 2,357,520
8% 1,898,826
$23,569,475
$29,343,029 $28,442,633
Our ten largest customers during fiscal years 2013, 2012 and 2011 accounted for approximately 47%, 55%
and 52% of net sales, respectively. No customer accounted for greater than 10% of our net sales during fiscal
year 2013. During fiscal year 2012 Hewlett-Packard (HP) and Research In Motion (RIM) each accounted for
greater than 10% of net sales and during fiscal year 2011, RIM accounted for greater than 10% of net sales.
Gross profit
Gross profit is affected by a number of factors, including the number and size of new manufacturing
programs, product mix, component costs and availability, product life cycles, unit volumes, pricing, competition,
new product introductions, capacity utilization and the expansion and consolidation of manufacturing facilities.
The flexible design of our manufacturing processes allows us to build a broad range of products in our facilities
and better utilize our manufacturing capacity. In the cases of new programs, profitability normally lags revenue
growth due to product start-up costs, lower manufacturing program volumes in the start-up phase, operational
inefficiencies, and under-absorbed overhead. Gross margin for these programs often improves over time as
manufacturing volumes increase, as our utilization rates and overhead absorption improve, and as we increase
the level of manufacturing services content. As a result of these various factors, our gross margin varies from
period to period.
Gross profit during fiscal year 2013 decreased $351.7 million to $1.2 billion from $1.5 billion during fiscal
year 2012. Gross margin decreased to 4.9% of net sales in fiscal year 2013 as compared with 5.2% of net sales
in fiscal year 2012. Gross margins deteriorated 30 basis points in fiscal year 2013 compared to that of fiscal year
2012 primarily due to restructuring charges amounting to $215.8 million, or 90 basis points, included in cost
of sales. The impact of the restructuring charges was partially offset by lower sales from our HVS market
which generally carry lower margins than the overall margins on our other complex business groups, and the
$23.9 million accounting correction recognized in fiscal 2012 as discussed below.
Gross profit during fiscal year 2012 decreased $65.4 million to $1.5 billion from $1.6 billion during fiscal
year 2011. Gross margin decreased to 5.2% of net sales in fiscal year 2012 as compared with 5.6% of net sales
in fiscal year 2011. The decreases in gross profit and gross margin were primarily attributable to a higher mix of
low-margin products principally associated with the increase in sales of products in the ODM personal computing
business during the first nine months of fiscal year 2012, which are included in the HVS market which we exited
in the third quarter of fiscal year 2012. These businesses sustained gross losses of approximately $38.2 million in
fiscal year 2012. Fiscal year 2012 cost of sales also includes the impact of adjustments made to correct certain
accounting errors identified and recorded as out of period adjustments during the fourth quarter of fiscal year.
These out-of period adjustments amounted to approximately $23.9 million and resulted in increased cost of sales
in the fourth quarter of fiscal year 2012. In addition, gross margins were negatively impacted by unfavorable
manufacturing costs associated with the exit of our ODM related businesses and costs incurred for right-sizing
activities at various locations.
Restructuring charges
In response to a challenging macroeconomic environment, we initiated certain restructuring activities to
improve our operational efficiencies by reducing excess workforce and capacity. The restructuring activities are
intended to rationalize our global manufacturing capacity and infrastructure and further shift manufacturing
capacity to locations with higher efficiencies. During fiscal year 2013, we recognized $227.4 million of pre-tax
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restructuring charges comprised of $123.0 million of cash charges predominantly related to employee severance
costs and $104.4 million of non-cash charges primarily related asset impairment and other exit charges. The
restructuring charges by geographic region amounted to $108.4 million in Asia, $91.8 million in Europe and
$27.2 million in the Americas. We classified $215.8 million of these charges as a component of cost of sales and
$11.6 million of these charges as a component of selling, general and administrative expenses during fiscal year
2013. As of March 31, 2013, accrued costs related to restructuring charges incurred were $97.9 million, of
which $87.8 million was classified as a current obligation. We do not anticipate a significant change to our
previously announced restructuring plan and expect to recognize an additional $40.0 million in pre-tax
restructuring charges in our first quarter of fiscal 2014, comprised primarily of cash charges associated with
employee termination costs to be classified as a component of cost of sales. We expect these restructuring
activities will allow for potential savings through reduced employee expenses and lower operating costs and to
yield annualized cost reductions of approximately $150.0 million.
Refer to note 12 of the notes to consolidated financial statements in Item 8, “Financial Statements and
Supplementary Data” for further discussion of our restructuring activities.
Selling, general and administrative expenses
Selling, general and administrative expenses (“SG&A”) totaled $805.2 million or 3.4% of net sales, during
fiscal year 2013, compared to $877.6 million, or 3.0% of net sales, during fiscal year 2012. The decrease in
SG&A in dollars was primarily attributable to the elimination of costs relating to our ODM PC business which
we fully exited during fiscal year 2012 and a $28 million provision for doubtful accounts recorded in fiscal 2012
related to a customer concentrated in the solar photovoltaic market that incurred significant financial and
liquidity difficulties, The increase of SG&A expenses as a percentage of net sales is primarily attributable to
lower revenues.
Selling, general and administrative expenses, or SG&A, totaled $877.6 million or 3.0% of net sales, during
fiscal year 2012, compared to $801.8 million, or 2.8% of net sales, during fiscal year 2011. The increases in SG&A
in dollars and as a percentage of net sales were primarily attributable to the $28.0 million provision for doubtful
accounts we recognized in connection with the financially distressed customer discussed above and certain other
costs associated with the exit of our ODM related businesses during the third quarter of fiscal year 2012.
Intangible amortization
Amortization of intangible assets in fiscal year 2013 decreased by $20.1 million to $29.5 million from
$49.6 million in fiscal year 2012 and decreased by $16.6 million in fiscal 2012 from $66.2 million in fiscal
2011. The decrease for both periods was primarily due to the use of the accelerated method of amortization for
certain customer-related intangibles, which results in decreasing expense over time.
Other charges (income), net
During fiscal year 2013, we recognized other income of $65.2 million primarily due to a gain from the fair
value adjustment of $74.4 million of our warrants to purchase common shares of a supplier. These fully-vested
warrants, which are derivative instruments, are to be fair valued at each reporting date with gains or losses from
changes in fair value recognized in the statements of operations. The gain is offset by various losses from sale, or
direct impairments of certain non-core equity investments and notes receivable, and losses from sales of
international entities that are individually immaterial.
During fiscal year 2012, we recognized a net gain of $20.0 million, in connection with the sale of certain
international entities.
During fiscal year 2011, we recognized charges totaling $6.3 million, consisting of a $13.2 million loss
associated with the early redemption of our 6.25% Senior Subordinated Notes, and an $11.7 million loss in
connection with the divestiture of certain international entities, offset by a gain of $18.6 million associated with
the sale of an equity investment that was previously fully impaired.
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Interest and other expense, net
Interest and other expense, net was $56.3 million during fiscal year 2013, compared to $36.0 million during
fiscal year 2012, an increase of $20.3 million that was primarily due to a decrease in gains on foreign exchange
transactions. The decrease in gains on foreign exchange transactions is attributable to our cross-border foreign
currency transactions and the revaluation of RMB denominated net asset positions of our U.S. dollar functional
currency sites based in China. There can be no assurance that further gains from various arbitrage opportunities
related to foreign exchange settlements in China will be available in the future.
Interest and other expense, net was $36.0 million during fiscal year 2012, compared to $74.9 million during
fiscal year 2011, a decrease of $38.9 million. The decrease in net expense was primarily due to a $39.2 million
reduction in net interest expense principally from the expiration of interest rate swaps in January 2011, which
had fixed rates greater than the floating rates underlying our borrowing arrangements and to a lesser extent to
the refinancing of $542.1 million of certain subordinated notes during fiscal year 2011 with our lower rate
revolving credit facility and Asia term loans. Gains on foreign exchange transactions increased $6.6 million
during fiscal year 2012 as we continue to benefit from certain arbitrage opportunities related to foreign currency
transactions and the revaluation of RMB denominated net asset positions for our U.S. functional currency sites
based in China.
We expect interest expense to increase during fiscal year 2014 as a result of our $1.0 billion of fixed rate
debt issued in February 2013, which comprises $500 million of 4.625% notes and $500 million of 5.000% notes.
Although these interest rates are fixed, such interest rates are higher than the interest rate of the variable rate
debt that was repaid in February 2013, which bore a base rate plus a margin of 1.25% or LIBOR plus a margin
of 2.25%.
Income taxes
Certain of our subsidiaries have, at various times, been granted tax relief in their respective countries,
resulting in lower income taxes than would otherwise be the case under ordinary tax rates. The consolidated
effective tax rates were 8.0%, 9.4% and 3.5% for the fiscal years 2013, 2012 and 2011. The effective rate varies
from the Singapore statutory rate of 17.0% as a result of recognition of earnings in different jurisdictions,
operating loss carry forwards, income tax credits, previously established valuation allowances for deferred tax
assets, liabilities for uncertain tax positions, as well as because of the effect of certain tax holidays and
incentives granted to our subsidiaries primarily in China, Malaysia, Israel, and Singapore. We generate most of
our revenues and profits from operations outside of Singapore. The effective tax rate for fiscal year 2013 varies
from the effective rates for fiscal years 2012 and 2011 primarily as a result of changes in valuation allowances
and liabilities for uncertain tax positions.
We are regularly subject to tax return audits and examinations by various taxing jurisdictions and around
the world, and there can be no assurance that the final determination of any tax examinations will not be
materially different than that which is reflected in our income tax provisions and accruals. Should additional
taxes be assessed as a result of a current or future examination, there could be a material adverse effect on our
tax position, operating results, financial position and cash flows.
See note 11, “Income Taxes,” of the notes to consolidated financial statements included in Item 8,
“Financial Statements and Supplementary Data” for further discussion.
Discontinued Operations
Consistent with our strategy to evaluate the strategic and financial contributions of each of our operations
and to focus on the primary growth objectives in our core manufacturing business activities, in fiscal year 2013,
we finalized the sale of two of our non-core businesses. These non-core businesses represent separate asset
groups and the divestitures qualify as discontinued operations, and accordingly, we have reported the results of
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operations and financial position of these businesses in discontinued operations within the consolidated
statements of operations and the consolidated balance sheets for all periods presented.
The results from discontinued operations were as follows:
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$237,292
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,793 145,403 235,710
$127,258
$ 40,593
Gross profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,200) (18,145) 1,582
Selling, general and administrative expenses . . . . . . . . . . . . . 1,930 8,932 14,577
Intangibles amortization and impairment . . . . . . . . . . . . . . . . 11,000 6,325 4,725
Interest and other expense (income), net . . . . . . . . . . . . . . . . 11,280 (7) 992
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . (26,410) (33,395) (18,712)
Benefit from income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . (959) (1,390) (2,670)
Net loss of discontinued operations . . . . . . . . . . . . . . . . . .
$(25,451)
$ (32,005)
$ (16,042)
Net sales in fiscal year 2013 and fiscal year 2012 decreased $86.7 million and $110.0 million, respectively,
as we decelerated operations while evaluating strategic alternatives for the businesses and due to the end of
certain product life cycles. The increase in net loss during fiscal year 2012 is primarily attributable to a $17.0
million charge for impairment of fixed assets that were sold in the transaction. The impairment charge is
included in cost of sales in the results of discontinued operations. We recognized a loss of $12.1 million as a
result of the disposition of these non-core businesses in fiscal 2013 which is included in interest and other
expense (income), net in the results from discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2013, we had cash and cash equivalents of $1.6 billion and bank and other borrowings of
$2.1 billion. We have a $1.5 billion revolving credit facility, under which we had no borrowings outstanding as
of March 31, 2013 and $140 million outstanding as of March 31, 2012.
Our cash balances are held in numerous locations throughout the world. As of March 31, 2013, approximately
half of our cash and cash equivalents were held by foreign subsidiaries outside of Singapore. Although
substantially all of the amounts held outside of Singapore could be repatriated, under current laws, a significant
amount could be subject to income tax withholdings. We provide for tax liabilities on these amounts for
financial statement purposes, except for certain of our foreign earnings that are considered indefinitely
reinvested outside of Singapore (approximately $457.7 million as of March 31, 2013). Repatriation could result
in an additional income tax payment, however, our intent is to permanently reinvest these funds outside of
Singapore and our current plans do not demonstrate a need to repatriate them to fund our operations in
jurisdictions outside of where they are held. Where local restrictions prevent an efficient intercompany transfer
of funds, our intent is that cash balances would remain outside of Singapore and we would meet our liquidity
needs through ongoing cash flows, external borrowings, or both.
Fiscal Year 2013
Cash provided by operating activities was $1.1 billion during fiscal year 2013, which resulted primarily
from $277.1 million of net income for the period and $522.5 million of non-cash earnings adjustment items
such as depreciation, amortization, impairment charges and stock-based compensation expense. We generated
$315.9 million in cash as a result of decreases in operating assets and liabilities, net of acquisitions. Our changes
in operating assets and liabilities, net of acquisitions is primarily due to a decrease of $519.1 million in accounts
receivable and decrease of $596.1 million in inventory, which was partially offset by a decrease in accounts
payable of $671.4 million and a decrease in other current and noncurrent liabilities of $189.5 million. The
decreases in accounts receivable and inventory are primarily as a result of the decrease in sales in our HVS
business, which generally carry higher volumes than our other complex business groups. The decrease in
accounts payable is principally related to the decrease in inventory and timing of supplier payments.
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Cash used in investing activities during fiscal year 2013 was $697.2 million. This resulted primarily from
$435.3 million in capital expenditures for equipment, net of proceeds on sales, and $184.1 million paid for the
acquisition of four businesses during the fiscal year. We also spent approximately $115.3 million included in
other investing cash flows, offset by the receipt of cash included in other financing activities further discussed
below to purchase assets financed by a third party banking institution on behalf of a customer.
Cash used in financing activities amounted to $339.6 million during fiscal year 2013, which was primarily
attributable to the repurchase of approximately 49.9 million shares for an aggregate purchase value of
approximately $322.0 million and repayment of the outstanding balance under our revolving line of credit of
$140.0 million. These cash outflows were offset by the receipt of $101.9 million included in other financing
activities to purchase assets financed by a third party banking institution on behalf of a customer.
Fiscal Year 2012
Cash provided by operating activities was $804.3 million during fiscal year 2012, which resulted primarily
from $488.8 million of net income for the period and $566.1 million of non-cash earnings adjustment items such as
depreciation, amortization, impairment charges and stock-based compensation expense. We used $250.6 million in
cash as a result of an increase in operating assets and liabilities, net of acquisitions. Our working capital accounts
increased primarily due to a decrease of $750.2 million in accounts payable and an increase of $30.2 million in
accounts receivable, which was partially offset by a decrease in inventory of $301.1 million principally due to the
deceleration of sales in our HVS market, and an increase in deferred revenue and customer working capital
advances of $249.8 million. The decrease in accounts payable is principally related to the decrease in inventory and
timing of supplier payments.
Cash used in investing activities during fiscal year 2012 was $481.4 million. This resulted primarily from
$388.0 million in capital expenditures for equipment, net of proceeds on sales, and $92.3 million paid for
three acquisitions completed during the year.
Cash used in financing activities amounted to $522.2 million during fiscal year 2012, which was primarily
attributable to the repurchase of approximately 81.7 million shares for an aggregate purchase value of
approximately $509.8 million. During fiscal year 2012 we also repaid $20.0 million of debt outstanding on our
$2.0 billion revolving credit facility.
Fiscal Year 2011
Cash provided by operating activities was $857.3 million during fiscal year 2011, which resulted primarily
from $596.2 million of net income for the period and $482.6 million of non-cash earnings adjustment items such as
depreciation, amortization, impairment charges, and stock-based compensation expense. We used $221.5 million
in cash as a result of an increase in operating assets and liabilities, net of acquisitions. Our working capital
accounts increased primarily due to an increase of $664.7 million in inventories as a result of our increased
production and anticipated growth, and an increase of $337.1 million in other current and non-current assets
primarily attributable to $324.6 million in our deferred purchase price receivable associated with our receivables
sales, which were partially offset by increases in accounts payable of $609.9 million and other current liabilities
of $144.0 million, primarily driven by the timing of purchases and cash payments.
Cash used in investing activities during fiscal year 2011 was $413.2 million. This resulted primarily from
$393.9 million in capital expenditures for equipment, net of proceeds on sales, and $17.0 million, net of cash
acquired, for contingent consideration and deferred purchase price payments related to four acquisitions, and
payments related to two completed acquisitions. Cash used was partially offset by proceeds related to the sale of
an equity investment for $18.6 million.
Cash used in financing activities amounted to $641.7 million during fiscal year 2011. During the 2011
fiscal year, we repurchased approximately 65.4 million shares at an aggregate purchase value of $400.4 million,
including accrued expenses. In August 2010, we paid $240.0 million to redeem the entire principal amount of
the 1% Convertible Subordinated Notes at par plus accrued interest. In December 2010, we paid approximately
$308.5 million to redeem the aggregate principal balance and redemption premium of our 6.25% Senior
Subordinated Notes (“6.25% Notes”) plus accrued interest. In addition, we made repayments of approximately
$217.1 million related to our Global Asset-Backed Securitization program effective with the adoption of new
accounting standards on April 1, 2010.
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The cash used in financing activities was partially offset by $379.0 million of additional borrowings under
new Asia term loan agreements and $160.0 million of borrowings under our revolving line of credit. During
September 2010, we entered into two new three-year term loan agreements with certain financial institutions
based in Asia and borrowed $180.0 million in the aggregate. During February 2011, we entered into a new
three-year term loan agreement with a financial institution based in Asia and borrowed $200.0 million in the
aggregate.
Key Liquidity Metrics
Free Cash flow
We believe free cash flow is an important liquidity metric because it measures, during a given period, the
amount of cash generated that is available to repay debt obligations, make investments, fund acquisitions,
repurchase company shares and for certain other activities. Our free cash flow, which is calculated as cash
provided by operations less net purchases of property and equipment, was $680.1 million, $416.3 million and
$463.5 million for fiscal years 2013, 2012 and 2011, respectively. Free cash flow is not a measure of liquidity
under generally accepted accounting principles in the United States, and may not be defined and calculated by
other companies in the same manner. Free cash flow should not be considered in isolation or as an alternative to
net cash provided by operating activities. Free cash flows reconcile to the most directly comparable GAAP
financial measure of cash flows from operations as follows:
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands)
Net cash provided by operating activities . . . . . .
$ 804,268 $ 857,344
Purchases of property and equipment . . . . . . . . . (488,993) (437,191) (470,702)
Proceeds from the disposition of property and
$1,115,430
equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,665 49,187 76,833
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 680,102
$ 416,264 $ 463,475
Cash Conversion Cycle
Fiscal Year Ended March 31,
2013 2012 2011
Days in trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . 46 days 45 days 42 days
Days in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 days 52 days 50 days
Days in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 days 70 days 72 days
Cash conversion cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 days 27 days 20 days
Days in trade accounts receivable was calculated as the average accounts receivable for the current and prior
quarter, excluding the reduction in accounts receivable resulting from non-cash accounts receivable sales, divided by
annualized sales for the current quarter by day. During the fiscal year ended March 31, 2013, days in trade accounts
receivable increased by 1 day to 46 days compared to the fiscal year ended March 31, 2012 primarily as a result of
the decline in sales in the HVS market that contained shorter payment terms. Non-cash accounts receivable sales or
deferred purchase price receivables included for the purposes of the calculation were $412.4 million, $514.9 million
and $460.0 million for the years ended March 31, 2013, 2012 and 2011, respectively. Deferred purchase price
receivables were recorded in other current assets in the consolidated balance sheets.
Days in inventory was calculated as the average inventory for the current and prior quarter divided by
annualized cost of sales for the current quarter by day. During the fiscal year ended March 31, 2013, days in
inventory remained consistent at 52 days as compared to the fiscal year ended March 31, 2012. Our inventory
turns were over the past two years negatively impacted by the decline in sales in the HVS market which carry
significantly higher inventory turns than our corporate average inventory turns.
Days in accounts payable was calculated as the average accounts payable for the current and prior quarter
divided by annualized cost of sales for the current quarter by day. During the fiscal year ended March 31, 2013,
days in accounts payable improved 2 days to 72 days compared to the fiscal year ended March 31, 2012
primarily due to timing of supplier payments.
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Our cash conversion cycle was calculated as days in trade receivables plus days in inventory, minus days in
accounts payable and is a measure of how efficient we are at managing our working capital. For the fiscal year
ended March 31, 2013, our cash conversion cycle improved 1 day to 26 days as compared with the fiscal year
ended March 31, 2012 due to the factors affecting each of the components in the calculation discussed above.
Liquidity is affected by many factors, some of which are based on normal ongoing operations of the
business and some of which arise from fluctuations related to global economics and markets. Cash balances are
generated and held in many locations throughout the world. Local government regulations may restrict our
ability to move cash balances to meet cash needs under certain circumstances; however, any current restrictions
are not material. We do not currently expect such regulations and restrictions to impact our ability to pay vendors
and conduct operations throughout the global organization. We believe that our existing cash balances, together
with anticipated cash flows from operations and borrowings available under our credit facilities, will be
sufficient to fund our operations through at least the next twelve months.
Future liquidity needs will depend on fluctuations in levels of inventory, accounts receivable and accounts
payable, the timing of capital expenditures for new equipment, the extent to which we utilize operating leases for
new facilities and equipment, and the levels of shipments and changes in the volumes of customer orders.
Historically, we have funded operations from cash and cash equivalents generated from operations, proceeds
from public offerings of equity and debt securities, bank debt and lease financings. We also sell designated pools
of trade receivables under asset-backed securitization (“ABS”) programs and sell certain trade receivables, which
are in addition to the trade receivables sold in connection with these securitization agreements. During fiscal
years 2013, 2012 and 2011 we received approximately $3.5 billion, $4.7 billion and $2.4 billion, respectively
from sales of receivables under our ABS programs, and $1.1 billion, $2.0 billion and $2.5 billion, respectively
from other sales of receivables. As of March 31, 2013 and 2012, the outstanding balance on receivables sold for
cash was $720.5 million and $667.3 million, respectively, under all our accounts receivable sales programs,
which are not included in our consolidated balance sheets.
On February 20, 2013, the Company issued $500.0 million of 4.625% Notes due February 15, 2020 and
$500.0 million of 5.000% Notes due February 15, 2023 (collectively the “Notes”) in a private offering pursuant
to Rule 144A and Regulation S under the Securities Act. The Company received net proceeds of approximately
$990.6 million from the issuance and used those proceeds together with $9.4 million of cash on hand, to repay
$1.0 billion of outstanding borrowings under its 2007 term loan facility. This refinancing extended the maturity
and effectively converted $1.0 billion of the Company’s floating rate debt to a fixed rate.
We anticipate that we will enter into debt and equity financings, sales of accounts receivable and lease
transactions to fund acquisitions and anticipated growth. The sale or issuance of equity or convertible debt
securities could result in dilution to current shareholders. Further, we may issue debt securities that have rights
and privileges senior to those of holders of ordinary shares, and the terms of this debt could impose restrictions
on operations and could increase debt service obligations. This increased indebtedness could limit our flexibility
as a result of debt service requirements and restrictive covenants, potentially affect our credit ratings, and may
limit our ability to access additional capital or execute our business strategy. Any downgrades in credit ratings
could adversely affect our ability to borrow as a result of more restrictive borrowing terms. We continue to
assess our capital structure and evaluate the merits of redeploying available cash to reduce existing debt or
repurchase ordinary shares.
On September 13, 2012, our Board of Directors authorized the repurchase of up to 10% of our outstanding
ordinary shares which was approved by our shareholders at the 2012 Extraordinary General Meeting held on
August 30, 2012. Share repurchases by us under the share repurchase plans are subject to an aggregate limit of
10% of our ordinary shares outstanding as of the date of the 2012 Extraordinary General Meeting. During fiscal
year 2013, we repurchased approximately 31.3 million shares for an aggregate purchase value of approximately
$200.0 million under this plan, including accrued expenses, and retired all of these shares. During the first fiscal
quarter of 2013, we repurchased the entire remaining amount under the plan that was approved by our Board of
Directors on December 7, 2011, or approximately 20.4 million shares for an aggregate purchase value of
approximately $134.0 million, and retired all of these shares.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
As discussed above, during fiscal 2013, the Company issued an aggregate amount of $1.0 billion in Notes
which are senior unsecured obligations of the Company, rank equally with all of the Company’s other existing
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and future senior and unsecured debt obligations, and are guaranteed, jointly and severally, fully and unconditionally
on an unsecured basis, by each of the Company’s 100% owned subsidiaries that guarantees indebtedness under,
or is a borrower under, the Company’s Term Loan Agreement and Revolving Line of Credit. These notes carry
registration rights and we have an obligation to register these securities by November 17, 2013. As of March 31,
2013, we were in compliance with the covenants under these credit facilities. Interest on the Notes is payable
semi-annually, commencing on August 15, 2013.
The Company also has a five-year $2.0 billion credit facility consisting of a $1.5 billion revolving credit
facility and a $500 million term loan, which expires in October 2016. As of March 31, 2013, there were no
borrowings outstanding under the revolving credit facility. The credit facility requires that we maintain a
maximum ratio of total indebtedness to EBITDA (earnings before interest expense, taxes, depreciation and
amortization), and a minimum interest coverage ratio, as defined. As of March 31, 2013, we were in compliance
with the covenants under the credit facility.
We have approximately $687.8 million of borrowings outstanding under two term loan facilities as of
March 31, 2013, including the Term Loan discussed above. Of these amounts, approximately $170.3 million
matures in October 2014, and the remainder matures in October 2016. We do not need to make any payments on
the term loan facility that matures in October 2014 and any payments thereafter through maturity are not
significant. The term loan which matures in October 2016 is repayable in quarterly installments of $6.9 million
through September 2013 and $10.3 million per quarter thereafter, with the remaining amount due at maturity.
Both of these term loan facilities require that we maintain a maximum ratio of total indebtedness to EBITDA,
and as of March 31, 2013, we were in compliance with the covenant.
We also have approximately $375 million of borrowings outstanding under our Asia term loans as of
March 31, 2013 which mature in September 2013 and February 2014. Quarterly repayments for these loans are
not significant. These loans also require the Company maintain a maximum ratio of total indebtedness to
EBITDA during the terms of the agreements. As of March 31, 2013, the Company was in compliance with the
covenant.
We and certain of our subsidiaries also have various uncommitted revolving credit facilities, lines of credit
and other loans in the amount of $274.2 million in the aggregate under which there were no borrowings
outstanding as of March 31, 2013.
Refer to the discussion in note 6, “Bank Borrowings and Long-Term Debt” of the notes to consolidated
financial statements for further details of the Company’s debt obligations.
We have purchase obligations that arise in the normal course of business, primarily consisting of binding
purchase orders for inventory related items and capital expenditures. Additionally, we have leased certain of our
property and equipment under capital lease commitments, and certain of our facilities and equipment under
operating lease commitments.
Future payments due under our purchase obligations, debt including capital leases and related interest
obligations and operating lease contracts are as follows:
Less Than
Greater Than
Total 1 Year 1 - 3 Years 4 - 5 Years 5 Years
(In thousands)
Contractual Obligations:
Purchase obligations . . . . . . . . . . . . . . . .
Long-term debt and capital lease
$2,219,657
$2,219,657 $ — $ — $ —
obligations
Long-term debt . . . . . . . . . . . . . . . . . .
Capital lease . . . . . . . . . . . . . . . . . . . .
Interest on long-term debt obligations . .
Operating leases, net of subleases . . . . .
Restructuring costs . . . . . . . . . . . . . . . . .
Total contractual obligations . . . . . . . .
2,067,627 416,654 252,386 393,750 1,004,837
9,092 3,215 4,412 1,465 —
502,079 72,992 143,999 118,969 166,119
556,957 140,599 189,311 113,154 113,893
97,900 87,836 10,064 — —
$627,338 $1,284,849
$2,940,953 $600,172
$5,453,312
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Interest on the credit facility that matures in October 2016, under which, as of March 31, 2013, we had
$517.5 million outstanding under our term loan and no borrowings outstanding under the revolving credit
facility, is based at our option on, either at (i) LIBOR plus the applicable margin for LIBOR loans ranging
between 1.25% and 2.25%, based on the Company’s credit ratings or (ii) the base rate (the greatest of the
agent’s prime rate, the federal funds rate plus 0.50% and LIBOR for a one-month interest period plus 1.00%)
plus an applicable margin ranging between 0.25% and 1.25%, based on the Company’s credit rating. Interest on
the $375 million outstanding under our Asia term loans accrues at LIBOR plus 2.15% to 2.30%. Interest on the
$170.3 million outstanding under our term loan facility that matures in October 2014 is based at our option on
either (i) the base rate (the greater of the agent’s prime rate or the federal funds rate plus 0.50%) plus a margin
of 1.25%; or (ii) LIBOR plus a margin of 2.25%. Finally, our variable rate debt also includes demand notes and
certain variable lines of credit. These credit lines are located throughout the world and variable interest is
generally based on a spread over that country’s inter-bank offering rate. Interest expense in the table above is
estimated based on LIBOR for the applicable tenor as of March 31, 2013.
We have excluded $230.0 million of liabilities for unrecognized tax benefits from the contractual obligations
table as we cannot make a reasonably reliable estimate of the periodic settlements with the respective taxing
authorities. See note 11, “Income Taxes” of the notes to consolidated financial statements for further details.
Our purchase obligations can fluctuate significantly from period-to-period and can materially impact our
future operating asset and liability balances, and our future working capital requirements. We intend to use our
existing cash balances, together with anticipated cash flows from operations to fund our existing and future
contractual obligations.
OFF-BALANCE SHEET ARRANGEMENTS
We sell designated pools of trade receivables to unaffiliated financial institutions under our ABS programs,
and in addition to cash, we receive a deferred purchase price receivable for each pool of the receivables sold.
Each of these deferred purchase price receivables serves as additional credit support to the financial institutions
and is recorded at its estimated fair value. As of March 31, 2013 and 2012, the fair value of our deferred
purchase price receivable was approximately $412.4 million and $514.9 million, respectively. As of March 31,
2013 and 2012, the outstanding balance on receivables sold for cash was $720.5 million and $667.3 million,
respectively, under all our accounts receivable sales programs, which are not included in our consolidated
balance sheets. For further information see note 8 of our notes to the consolidated financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
Refer to note 2 of the notes to the consolidated financial statements for recent accounting pronouncements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have warrants to purchase common shares of a certain supplier, which create exposures for us related
to market price volatility. We value these warrants using the Black-Scholes option-valuation model. For the
three-months ended March 31, 2013, we used the following assumptions to value these warrants:
As of March 31, 2013
Remaining life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58%
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0%
Risk-free rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.80%
These warrants were exercised and the underlying shares were sold subsequent to year end for total proceeds
of $67.3 million resulting in a $7.1 million realized loss from the recorded value of $74.4 million as of March 31,
2013, that will be recognized during the Company’s fiscal quarter ending June 28, 2013.
INTEREST RATE RISK
A portion of our exposure to market risk for changes in interest rates relates to our investment portfolio,
which consists of highly liquid investments with maturities of three months or less from original dates of
purchase. We do not use derivative financial instruments in our investment portfolio. We place cash and cash
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equivalents with various major financial institutions and limit the amount of credit exposure to 20% of the
issuer’s or fund’s total assets measured at the time of purchase or $10.0 million, whichever is greater. We protect
our invested principal by limiting default risk, market risk and reinvestment risk. We mitigate default risk by
investing in investment grade securities and by constantly positioning the portfolio to respond appropriately to a
reduction in credit rating of any investment issuer, guarantor or depository to levels below the credit ratings
dictated by our investment policy. The portfolio includes only marketable securities with active secondary or
resale markets to ensure portfolio liquidity. Maturities of short-term investments are timed, whenever possible, to
correspond with debt payments and capital investments. As of March 31, 2013, the outstanding amount in the
investment portfolio was $0.5 billion, comprised mainly of money market funds with an average return of 3.1%.
A hypothetical 10% change in interest rates would not be expected to have a material effect on our financial
position, results of operations and cash flows over the next fiscal year.
We had variable rate debt outstanding of approximately $1.1 billion as of March 31, 2013. Variable rate
debt obligations consisted of borrowings under our term loan. Interest on these obligations is discussed above.
Our variable rate debt instruments create exposures for us related to interest rate risk. Primarily due to the
current low interest rates a hypothetical 10% change in interest rates would not be expected to have a material
effect on our financial position, results of operations and cash flows over the next fiscal year primarily due to the
current low interest rates.
As of March 31, 2013, the approximate fair value of our debt outstanding under our term loan facility that
matures in October 2014 was 100.1% of the face value of the debt obligation, and the fair value of debt outstanding
under our term loan that matures in October 2016 was 100.3% of the face value of the debt obligation, based on
broker trading prices. Our Asia term loans are not traded publicly; however, as the pricing, maturity and other
pertinent terms of these loans closely approximate those of the term loan facilities described above, we estimate
the respective fair values would be approximately the same as the carrying values of the respective term loan
facilities.
FOREIGN CURRENCY EXCHANGE RISK
We transact business in various foreign countries and are, therefore, subject to risk of foreign currency
exchange rate fluctuations. We have established a foreign currency risk management policy to manage this risk.
To the extent possible, we manage our foreign currency exposure by evaluating and using non-financial
techniques, such as currency of invoice, leading and lagging payments and receivables management. In addition,
we borrow in various foreign currencies and enter into short-term foreign currency forward and swap contracts
to hedge only those currency exposures associated with certain assets and liabilities, mainly accounts receivable
and accounts payable, and cash flows denominated in non-functional currencies.
We endeavor to maintain a partial or fully hedged position for certain transaction exposures. These
exposures are primarily, but not limited to, revenues, customer and vendor payments and inter-company balances
in currencies other than the functional currency unit of the operating entity. The credit risk of our foreign
currency forward and swap contracts is minimized since all contracts are with large financial institutions and
accordingly, fair value adjustments related to the credit risk of the counter-party financial institution were not
material. The gains and losses on forward and swap contracts generally offset the losses and gains on the assets,
liabilities and transactions hedged. The fair value of currency forward and swap contracts is reported on the
balance sheet. The aggregate notional amount of outstanding contracts as of March 31, 2013 amounted to
$4.8 billion and the recorded fair values of the associated asset and/or liability were not material. The majority of
these foreign exchange contracts expire in less than three months and all expire within one year. They will settle
primarily in Brazilian real, British pound, Canadian dollar, China renminbi, Danish kroner, Euro, Hungarian
forint, Israeli shekel, Japanese yen, Malaysian ringgit, Mexican peso, Singapore dollar, and U.S. dollar.
Based on our overall currency rate exposures as of March 31, 2013, including the derivative financial
instruments intended to hedge the nonfunctional currency-denominated monetary assets, liabilities and cash
flows, a near-term 10% appreciation or depreciation of the U.S. dollar from its cross-functional rates would not
be expected to have a material effect on our financial position, results of operations and cash flows over the next
fiscal year.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Flextronics International Ltd.
Singapore
We have audited the accompanying consolidated balance sheets of Flextronics International Ltd. and
subsidiaries (the “Company”) as of March 31, 2013 and 2012, and the related consolidated statements of
operations, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period
ended March 31, 2013. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial
position of Flextronics International Ltd. and subsidiaries as of March 31, 2013 and 2012, and the results of their
operations and their cash flows for each of the three years in the period ended March 31, 2013, in conformity with
accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting as of March 31, 2013, based on the
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated May 28, 2013 expressed an unqualified opinion
on the Company’s internal control over financial reporting.
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FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED BALANCE SHEETS
As of March 31,
2013 2012
(In thousands, except share
amounts)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,587,087 $ 1,518,329
Accounts receivable, net of allowance for doubtful accounts of $10,877
and $38,905 as of March 31, 2013 and 2012, respectively . . . . . . . . . . . . . . . 2,111,996 2,593,829
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,722,500 3,300,791
Current assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 21,642
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,349,818 1,099,959
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,771,401 8,534,550
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,174,588 2,076,442
Goodwill and other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343,552 159,924
Long-term assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 41,417
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302,014 221,471
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,591,555
$11,033,804
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank borrowings and current portion of long-term debt . . . . . . . . . . . . . . . . . . . $ 416,654 $ 39,340
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,705,297 4,294,873
Accrued payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351,683 345,337
Current liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . — 24,854
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,699,151 1,583,781
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,172,785 6,288,185
Long-term debt, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,650,973 2,149,333
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521,039 312,307
Commitments and contingencies (Note 10)
Shareholders’ equity
Ordinary shares, no par value; 689,159,139 and 733,979,527 issued, and
638,919,784 and 683,740,173 outstanding as of March 31, 2013 and
2012, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,015,142 8,292,370
Treasury stock, at cost; 50,239,355 shares as of March 31, 2013 and 2012 . . . . (388,215) (388,215)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,302,688) (5,579,739)
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (77,481) (40,437)
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,246,758 2,283,979
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,591,555
$11,033,804
The accompanying notes are an integral part of these consolidated financial statements.
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FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands, except per share amounts)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$28,442,633
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,187,393 27,825,079 26,859,288
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,834 — —
$29,343,029
$23,569,475
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,166,248 1,517,950 1,583,345
Selling, general and administrative expenses . . . . . . . . . . . . . 805,235 877,564 801,772
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,529 49,572 66,188
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,600 — —
Other charges (income), net . . . . . . . . . . . . . . . . . . . . . . . . . . (65,190) (19,935) 6,127
Interest and other expense, net . . . . . . . . . . . . . . . . . . . . . . . . 56,259 36,019 74,948
Income from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328,815 574,730 634,310
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,313 53,960 22,049
Income from continuing operations . . . . . . . . . . . . . . . . . . 302,502 520,770 612,261
Loss from discontinued operations, net of tax . . . . . . . . . . . . (25,451) (32,005) (16,042)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 277,051
$ 488,765
$ 596,219
Earnings per share:
Income from continuing operations:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.46
$ 0.73
$ 0.79
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.45
$ 0.72
$ 0.77
Loss from discontinued operations:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.04) $ (0.04) $ (0.02)
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.04) $ (0.04) $ (0.02)
Net income:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.42
$ 0.68
$ 0.77
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.41
$ 0.67
$ 0.75
Weighted-average shares used in computing per share
amounts:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662,874 716,247 777,315
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675,033 727,807 790,192
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The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
$488,765
$277,051
$596,219
Foreign currency translation adjustments, net of zero tax . . . (16,289) (53,616) 12,883
Unrealized gain (loss) on derivative instruments and other,
net of zero tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,755) (7,575) 23,276
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$240,007
$427,574
$632,378
The accompanying notes are an integral part of these consolidated financial statements.
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FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Accumulated Other
Comprehensive Income (Loss)
Unrealized
Gain (Loss) Foreign
Retained on Derivative Currency
Ordinary Shares
Total
Accumulated
Other
Total
Shares
Outstanding
Earnings Instruments Translation Comprehensive Shareholders’
Amount (Deficit) and Other Adjustments
Income (Loss) Equity
(In thousands)
BALANCE AT
MARCH 31, 2010 . . . . .
813,429
$8,664,695 $(6,664,723) $(13,803) $ (1,602) $(15,405) $1,984,567
Repurchase of
ordinary shares
at cost . . . . . . . . . . . . . . .
Exercise of stock
(65,411)
(400,400)
— — — — (400,400)
options . . . . . . . . . . . . . .
6,217
23,299
— — — — 23,299
Issuance of vested shares
under share bonus
awards . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . .
Stock-based compensation,
net of tax . . . . . . . . . . . . .
Total other comprehensive
income . . . . . . . . . . . . . .
BALANCE AT
2,759
—
—
—
—
—
— — — — —
596,219 — — — 596,219
54,852
— — — — 54,852
—
— 23,276 12,883 36,159 36,159
MARCH 31, 2011 . . . . .
756,994
8,342,446
(6,068,504) 9,473 11,281 20,754 2,294,696
Repurchase of ordinary
shares at cost . . . . . . . . . .
Exercise of stock options . . .
Issuance of vested shares
under share bonus
awards . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . .
Stock-based compensation,
net of tax . . . . . . . . . . . . .
Total other comprehensive
loss . . . . . . . . . . . . . . . . .
BALANCE AT
(81,688)
5,879
(509,800)
23,055
— — — — (509,800)
— — — — 23,055
2,555
—
—
—
—
—
— — — — —
488,765 — — — 488,765
48,454
— — — — 48,454
—
— (7,575) (53,616) (61,191) (61,191)
MARCH 31, 2012 . . . . .
683,740
7,904,155
(5,579,739) 1,898 (42,335) (40,437) 2,283,979
Repurchase of ordinary
shares at cost . . . . . . . . . .
Exercise of stock options . . .
Issuance of vested shares
under share bonus
awards . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . .
Stock-based compensation,
net of tax . . . . . . . . . . . . .
Total other comprehensive
loss . . . . . . . . . . . . . . . . .
BALANCE AT
(51,725)
5,398
(334,014)
22,257
— — — — (334,014)
— — — — 22,257
1,507
—
—
—
—
—
— — — — —
277,051 — — — 277,051
34,529
— — — — 34,529
—
— (20,755) (16,289) (37,044) (37,044)
MARCH 31, 2013 . . . . .
638,920
$7,626,927 $(5,302,688) $(18,857) $(58,624) $(77,481) $2,246,758
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The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands)
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 277,051
Adjustments to reconcile net income to net cash provided by
$ 488,765
$ 596,219
operating activities:
Depreciation, amortization and other impairment charges . . 566,357 521,923 471,668
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . 6,643 30,330 4,043
Non-cash other expense (income) . . . . . . . . . . . . . . . . . . . . . (52,408) (33,563) 2,831
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,529 48,454 55,237
Deferred income taxes and other non-cash income taxes . . . (32,647) (1,022) (51,198)
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519,140 (30,249) 26,519
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596,131 301,053 (664,738)
Other current and noncurrent assets . . . . . . . . . . . . . . . . 61,567 29,683 (337,057)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (671,424) (750,169) 609,868
Other current and noncurrent liabilities . . . . . . . . . . . . . (189,509) 199,063 143,952
Net cash provided by operating activities . . . . . . . . . . 1,115,430 804,268 857,344
Cash flows from investing activities:
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . (488,993) (437,191) (470,702)
Proceeds from the disposition of property and
equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,665 49,187 76,833
Acquisition of businesses, net of cash acquired . . . . . . . . . . . (184,097) (92,257) (16,966)
Proceeds from divestitures of operations, net . . . . . . . . . . . . . 22,585 1,398 625
Other investing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . (100,359) (2,501) (3,031)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . (697,199) (481,364) (413,241)
Cash flows from financing activities:
Proceeds from bank borrowings and long-term debt . . . . . . . 1,250,213 2,833,704 3,471,494
Repayments of bank borrowings and long-term debt . . . . . . . (391,859) (2,389,121) (3,420,594)
Payments for early repurchase of long-term debt . . . . . . . . . . (1,000,000) (480,000) (315,495)
Payments for repurchases of ordinary shares . . . . . . . . . . . . . (322,040) (509,800) (400,400)
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . 22,257 23,055 23,299
Other financing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . 101,851 — —
Net cash used in financing activities . . . . . . . . . . . . . . . . . (339,578) (522,162) (641,696)
Effect of exchange rates on cash . . . . . . . . . . . . . . . . . . . . . . . . (9,895) (30,884) 18,508
Net change in cash and cash equivalents . . . . . . . . . . . . . . . . 68,758 (230,142) (179,085)
Cash and cash equivalents, beginning of year . . . . . . . . . . . . 1,518,329 1,748,471 1,927,556
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . $ 1,587,087
$ 1,518,329
$ 1,748,471
The accompanying notes are an integral part of these consolidated financial statements.
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION OF THE COMPANY
Flextronics International Ltd. (“Flextronics” or the “Company”) was incorporated in the Republic of
Singapore in May 1990. The Company’s operations have expanded over the years through a combination of
organic growth and acquisitions. The Company is a leading global provider of advanced design, manufacturing
and services to original equipment manufacturers (“OEMs”) of a broad range of electronic products in the
following markets: High Reliability Solutions (“HRS”), which is comprised of our medical, automotive, and
defense and aerospace businesses; High Velocity Solutions (“HVS”), which includes our mobile devices business,
including smart phones, and consumer electronics, including game consoles, high-volume computing business,
including notebook personal computing (“PC”), tablets, and printers; Industrial and Emerging Industries (“IEI”),
which is comprised of large household appliances, equipment, and our emerging industries businesses; and
Integrated Network Solutions (“INS”), which includes our telecommunications infrastructure, data networking,
connected home, and server and storage businesses. The Company’s strategy is to provide customers with a full
range of cost competitive, global supply chain services through which the Company can design, build, ship and
service a complete packaged product for its OEM customers. OEM customers leverage the Company’s services
to meet their product requirements throughout the entire product life cycle.
The Company’s service offerings include rigid and flexible printed circuit board fabrication, systems
assembly and manufacturing (including enclosures, testing services, materials procurement and inventory
management), logistics, after-sales services (including product repair, warranty services, re-manufacturing and
maintenance), supply chain management software solutions and component product offerings. Additionally, the
Company provides a comprehensive range of value-added design and engineering services that are tailored to the
various markets and needs of its customers.
2. SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The Company’s third fiscal quarter ends on December 31, and the fourth fiscal quarter and year ends on
March 31 of each year. The first fiscal quarter ended on June 29, 2012, July 1, 2011 and July 2, 2010,
respectively, and the second fiscal quarter ended on September 28, 2012, September 30, 2011 and October 1,
2010, respectively. Amounts included in the consolidated financial statements are expressed in U.S. dollars unless
otherwise designated.
The accompanying consolidated financial statements include the accounts of Flextronics and its majority-
owned subsidiaries, after elimination of intercompany accounts and transactions. The Company consolidates all
majority-owned subsidiaries and investments in entities in which the Company has a controlling interest. For
consolidated majority-owned subsidiaries in which the Company owns less than 100%, the Company recognizes a
noncontrolling interest for the ownership of the noncontrolling owners. As of March 31, 2013 and 2012, the
noncontrolling interest was not material. The associated noncontrolling owners’ interest in the income or losses of
these companies has not been material to the Company’s results of operations for any of the periods presented,
and has been classified within interest and other expense, net, in the consolidated statements of operations.
In fiscal year 2013, the Company finalized the sale of certain assets of a non-core business, including
intellectual property. In addition, the Company completed the sale of another non-core business during fiscal year
2013. In accordance with the accounting guidance, these non-core businesses represent separate asset groups and
the divestitures qualify as discontinued operations, and accordingly, the Company has reported the results of
operations and financial position of these businesses in discontinued operations within the consolidated
statements of operation and consolidated balance sheets for all periods presented as applicable.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America (“U.S. GAAP” or “GAAP”) requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
Estimates are used in accounting for, among other things: allowances for doubtful accounts; inventory write-downs;
valuation allowances for deferred tax assets; uncertain tax positions; valuation and useful lives of long-lived
assets including property, equipment, intangible assets and goodwill; asset impairments; fair values of financial
instruments including investments, notes receivable and derivative instruments; restructuring charges;
contingencies; fair values of assets and liabilities obtained in business combinations and the fair values of stock
options and share bonus awards granted under the Company’s stock-based compensation plans. Actual results
may differ from previously estimated amounts, and such differences may be material to the consolidated financial
statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the
period they occur.
Translation of Foreign Currencies
The financial position and results of operations for certain of the Company’s subsidiaries are measured
using a currency other than the U.S. dollar as their functional currency. Accordingly, all assets and liabilities for
these subsidiaries are translated into U.S. dollars at the current exchange rates as of the respective balance sheet
dates. Revenue and expense items are translated at the average exchange rates prevailing during the period.
Cumulative gains and losses from the translation of these subsidiaries’ financial statements are reported as a
separate component of shareholders’ equity. Foreign exchange gains and losses arising from transactions
denominated in a currency other than the functional currency of the entity involved, and re-measurement
adjustments for foreign operations where the U.S. dollar is the functional currency, are included in operating
results. Non-functional currency transaction gains and losses, and re-measurement adjustments were not material
to the Company’s consolidated results of operations for any of the periods presented, and have been classified as
a component of interest and other expense, net in the consolidated statements of operations.
Revenue Recognition
The Company recognizes manufacturing revenue when it ships goods or the goods are received by its
customer, title and risk of ownership have passed, the price to the buyer is fixed or determinable and
recoverability is reasonably assured. Generally, there are no formal substantive customer acceptance requirements
or further obligations related to manufacturing services. If such requirements or obligations exist, then the
Company recognizes the related revenues at the time when such requirements are completed and the obligations
are fulfilled. The Company makes provisions for estimated sales returns and other adjustments at the time
revenue is recognized based upon contractual terms and an analysis of historical returns. These provisions were
not material to the consolidated financial statements for any of the periods presented.
The Company provides services for its customers that range from contract design to manufacturing and
logistics to repair services. For contract design services the customer purchases engineering and development
services on a time and materials basis. For original product design services the Company develops products to be
offered for sale by OEM customers under the OEM’s brand name. The Company recognizes service revenue
when the services have been performed, and the related costs are expensed as incurred. Net sales for services
were less than 10% of the Company’s total sales for all periods presented, and accordingly, are included in net
sales in the consolidated statements of operations. The Company recognized research and development costs
related to its ODM personal computing business of $78.9 million and $46.5 million for the fiscal years ended
March 31, 2012 and 2011, respectively. Research and development activities related to ODM personal computing
had ceased by the end of fiscal year 2012.
Customer Credit Risk
The Company has an established customer credit policy, through which it manages customer credit
exposures through credit evaluations, credit limit setting, monitoring, and enforcement of credit limits for new
and existing customers. The Company performs ongoing credit evaluations of its customers’ financial condition
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
and makes provisions for doubtful accounts based on the outcome of those credit evaluations. The Company
evaluates the collectability of its accounts receivable based on specific customer circumstances, current economic
trends, historical experience with collections and the age of past due receivables. To the extent the Company
identifies exposures as a result of credit or customer evaluations, the Company also reviews other customer
related exposures, including but not limited to inventory and related contractual obligations.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk are primarily
accounts receivable, cash and cash equivalents, and derivative instruments.
The following table summarizes the activity in the Company’s allowance for doubtful accounts during fiscal
years 2013, 2012 and 2011:
Balance at Charged to Balance at
Beginning Costs and Deductions/ End of
of Year Expenses Write-Offs Year
(In thousands)
Allowance for doubtful accounts:
Year ended March 31, 2011(4) . . . . . . . . . . . . . . . . . . . . . . . . . . $13,163 $ 3,877 $ (3,818) $13,222
Year ended March 31, 2012(1)(2)(4) . . . . . . . . . . . . . . . . . . . . . $13,222 $30,122 $ (4,439) $38,905
Year ended March 31, 2013(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . $38,905 $ 6,643 $(34,671) $10,877
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(1) Deductions/write-offs amount for fiscal year 2012 includes $3.9 million, which was previously reserved and
the underlying accounts receivable balance was reclassified to non-current assets in fiscal year 2012, and
carried net of its specific reserve.
(2) Included in amounts charged to costs and expenses in fiscal year 2012 is $28.0 million related to a
distressed customer, which was written off in fiscal year 2013.
(3) Deductions/write-offs amount for fiscal year 2013 also includes $5.8 million, which was previously reserved
and the underlying accounts receivable balance was reclassified to non-current assets in fiscal year 2013 and
is carried net of its specific reserve.
(4) Included in amounts charged to costs and expense in fiscal year 2012 and fiscal year 2011 is $0.2 million,
respectively, related to discontinued operations.
No customer accounted for greater than 10% of the Company’s net sales in fiscal 2013. Two customers
accounted for approximately 11% and 10%, respectively of the Company’s net sales in fiscal 2012. One of these
customers accounted for approximately 11% of the Company’s net sales in fiscal years 2011. The Company’s ten
largest customers accounted for approximately 47%, 55% and 52% of its net sales, in fiscal years 2013, 2012 and
2011, respectively. As of March 31, 2013 and 2012, no single customer accounted for greater than 10% of the
Company’s total accounts receivable.
The Company maintains cash and cash equivalents with various financial institutions that management
believes to be of high credit quality. These financial institutions are located in many different locations throughout
the world. The Company’s cash equivalents are primarily comprised of cash deposited in checking and money
market accounts. The Company’s investment policy limits the amount of credit exposure to 20% of the issuer’s or
the fund’s total assets measured at the time of purchase or $10.0 million, whichever is greater.
The amount subject to credit risk related to derivative instruments is generally limited to the amount, if any,
by which a counterparty’s obligations exceed the obligations of the Company with that counterparty. To manage
counterparty risk, the Company limits its derivative transactions to those with recognized financial institutions.
See additional discussion of derivatives at note 7 to the consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
All highly liquid investments with maturities of three months or less from original dates of purchase are
carried at cost, which approximates fair market value, and are considered to be cash equivalents. Cash and cash
equivalents consist of cash deposited in checking accounts, money market funds and time deposits.
Cash and cash equivalents consisted of the following:
As of March 31,
2013 2012
(In thousands)
Cash and bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,174,423
Money market funds and time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497,390 343,906
$1,089,697
$1,587,087
$1,518,329
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out basis) or market value. The stated cost is
comprised of direct materials, labor and overhead. The components of inventories, net of applicable lower of cost
or market write-downs, were as follows:
As of March 31,
2013 2012
(In thousands)
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,952,358
Work-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421,706 537,753
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617,696 810,680
$1,683,098
$2,722,500
$3,300,791
Property and Equipment, Net
Property and equipment are stated at cost. Depreciation and amortization is recognized on a straight-line
basis over the estimated useful lives of the related assets, with the exception of building leasehold improvements,
which are amortized over the term of the lease, if shorter. Repairs and maintenance costs are expensed as
incurred. Property and equipment was comprised of the following:
Depreciable
Life As of March 31,
(In Years) 2013 2012
(In thousands)
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures, computer equipment and software . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 - 10 $ 2,668,996 $ 2,677,387
30 1,032,595 1,024,247
up to 30 384,519 283,340
3 - 7 399,368 373,174
— 127,241 126,314
— 139,032 87,461
Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . .
4,751,751 4,571,923
(2,577,163) (2,495,481)
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,174,588 $ 2,076,442
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
Total depreciation expense associated with property and equipment amounted to approximately $412.3 million,
$407.5 million and $384.3 million in fiscal years 2013, 2012 and 2011, respectively. Property and equipment
excludes assets no longer in use and held for sale as a result of restructuring activities, as discussed in note 9 and
discontinued operations as discussed in note 18 to the consolidated financial statements.
The Company reviews property and equipment for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of property and equipment is
measured by comparing its carrying amount to the projected undiscounted cash flows the property and equipment
are expected to generate. An impairment loss is recognized when the carrying amount of a long-lived asset
exceeds its fair value. Refer to note 12 for a discussion of impairment charges recorded in fiscal year 2013.
Deferred Income Taxes
The Company provides for income taxes in accordance with the asset and liability method of accounting for
income taxes. Under this method, deferred income taxes are recognized for the tax consequences of temporary
differences between the carrying amount and the tax basis of existing assets and liabilities by applying the
applicable statutory tax rate to such differences.
Accounting for Business and Asset Acquisitions
The Company has actively pursued business and asset acquisitions, which are accounted for using the
acquisition method of accounting. The fair value of the net assets acquired and the results of the acquired
businesses are included in the Company’s consolidated financial statements from the acquisition dates forward.
The Company is required to make estimates and assumptions that affect the reported amounts of assets and
liabilities and results of operations during the reporting period. Estimates are used in accounting for, among other
things, the fair value of acquired net operating assets, property and equipment, intangible assets and related
deferred tax liabilities, useful lives of plant and equipment and amortizable lives for acquired intangible assets.
Any excess of the purchase consideration over the identified fair value of the assets and liabilities acquired is
recognized as goodwill.
The Company estimates the preliminary fair value of acquired assets and liabilities as of the date of
acquisition based on information available at that time. Contingent consideration is recorded at fair value as of the
date of the acquisition with subsequent adjustments recorded in earnings. Changes to valuation allowances on
acquired deferred tax assets are recognized in the provision for, or benefit from, income taxes. The valuation of
these tangible and identifiable intangible assets and liabilities is subject to further management review and may
change materially between the preliminary allocation and end of the purchase price allocation period. Any
changes in these estimates may have a material effect on the Company’s consolidated operating results or
financial position.
Goodwill and Other Intangible Assets
Goodwill is tested for impairment on an annual basis and whenever events or changes in circumstances
indicate that the carrying amount of goodwill may not be recoverable. Recoverability of goodwill is measured at
the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value
of the reporting unit, which is measured based upon, among other factors, market multiples for comparable
companies as well as a discounted cash flow analysis. The Company has one reporting unit: Electronics
Manufacturing Services (“EMS”). If the recorded value of the assets, including goodwill, and liabilities (“net
book value”) of the reporting unit exceeds its fair value, an impairment loss may be required to be recognized.
Further, to the extent the net book value of the Company as a whole is greater than its fair value in the aggregate,
all, or a significant portion of its goodwill may be considered impaired. The Company performed its goodwill
impairment assessment on January 31, 2013 and did not elect to perform the qualitative “Step Zero” assessment.
Instead the Company performed a quantitative assessment of its goodwill at the afore-mentioned date. Based on
this assessment the Company determined that no impairment existed as of the date of the impairment test. The
fair value of the reporting unit exceeded the carrying value.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
The following table summarizes the activity in the Company’s goodwill account during fiscal years 2013
and 2012:
As of March 31,
2013 2012
(In thousands)
Balance, beginning of the year, net of accumulated impairment
of $5,949,977 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $101,670 $ 93,207
Additions(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,609 8,607
Purchase accounting adjustments and reclassification to other
intangibles(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 601
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . (274) (745)
Balance, end of period, net of accumulated impairment of $5,949,977 . . $262,005 $101,670
(1) For fiscal year 2013, additions to goodwill were primarily related to $98.7 million added from the acquisition
of Saturn Electronics and Engineering, Inc (“Saturn”). The remainder of the additions were attributable to
certain acquisitions that were not individually, nor in the aggregate, significant to the Company. For fiscal
year 2012, additions were attributable to certain acquisitions that were not individually, nor in the aggregate,
significant to the Company. Refer to the discussion of the Company’s acquisitions in note 15.
(2) Includes adjustments and reclassifications based on management’s estimates resulting from their review and
finalization of the valuation of assets and liabilities acquired through certain business combinations
completed in a period subsequent to the respective acquisition. These adjustments, reclassifications and
acquisitions were not individually, nor in the aggregate, significant to the Company.
The Company’s acquired intangible assets are subject to amortization over their estimated useful lives and
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an
intangible asset may not be recoverable. An impairment loss is recognized when the carrying amount of an
intangible asset exceeds its fair value. The Company reviewed the carrying value of its intangible assets as of the
year ended March 31, 2013 and concluded that such amounts continued to be recoverable.
Intangible assets are comprised of customer-related intangible assets, which primarily include contractual
agreements and customer relationships; and licenses and other intangible assets, which is primarily comprised of
licenses and also includes patents and trademarks, and developed technologies. Other intangible assets as of
March 31, 2013 were primarily comprised of $10.3 million of developed technology related to the acquisition of
Saturn Electronics and Engineering, Inc (“Saturn”). Generally customer-related intangible assets are amortized on
an accelerated method based on expected cash flows, primarily over a period of up to eight years. Licenses and
other intangible assets are generally amortized on a straight line basis over a period of up to seven years. No
residual value is estimated for any intangible assets. During fiscal year 2013, the gross carrying amount of
customer-related intangibles increased by $50.7 million in connection with business acquisitions as described in
detail at note 15 to the consolidated financial statements. The fair value of the Company’s intangible assets
purchased through business combinations is principally determined based on management’s estimates of cash
flow and recoverability. The components of acquired intangible assets are as follows:
As of March 31, 2013 As of March 31, 2012
Gross
Carrying
Amount
Net Gross Net
Accumulated Carrying Carrying Accumulated Carrying
Amortization Amount Amount Amortization Amount
(In thousands)
Intangible assets:
Customer-related intangibles . . .
Licenses and other intangibles . .
$294,310
21,040
$(224,517) $69,793 $243,681 $(199,238) $44,443
(9,286) 11,754 22,740 (8,929) 13,811
Total . . . . . . . . . . . . . . . . . . . .
$315,350
$(233,803) $81,547 $266,421 $(208,167) $58,254
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
The gross carrying amounts of intangible assets are removed when the recorded amounts have been fully
amortized. During the year ended March 31, 2013, the Company sold certain patents with a net carrying amount
of $8.6 million. The Company also recognized a charge for impairment of customer-related intangible assets with
a net carrying amount of $10.0 million, which is included in the results from discontinued operations, in
connection with the sale of a non-core business based on the carrying value of net assets and the sale proceeds.
Total intangible asset amortization expense recognized in continuing operations during fiscal years 2013, 2012
and 2011 was $29.5 million, $49.6 million and $66.2 million, respectively. As of March 31, 2013, the weighted-average
remaining useful lives of the Company’s intangible assets were approximately 2.3 years and 3.3 years for
customer-related intangibles, and licenses and other intangible assets, respectively. The estimated future annual
amortization expense for acquired intangible assets is as follows:
Fiscal Year Ending March 31, Amount
(In thousands)
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$26,383
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,436
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,778
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,069
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,179
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,702
Total amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$81,547
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Derivative Instruments and Hedging Activities
All derivative instruments are recognized on the consolidated balance sheets at fair value. If the derivative
instrument is designated as a cash flow hedge, effectiveness is tested monthly using a regression analysis of the
change in the spot currency rates and the change in the present value of the spot currency rates. The spot currency
rates are discounted to present value using functional currency LIBOR rates over the maximum length of the
hedge period. The effective portion of changes in the fair value of the derivative instrument (excluding time
value) is recognized in shareholders’ equity as a separate component of accumulated other comprehensive income
(loss), and recognized in the consolidated statements of operations when the hedged item affects earnings.
Ineffective and excluded portions of changes in the fair value of cash flow hedges are recognized in earnings
immediately. If the derivative instrument is designated as a fair value hedge, the changes in the fair value of the
derivative instrument and of the hedged item attributable to the hedged risk are recognized in earnings in the
current period. Additional information is included in note 7 to the consolidated financial statements.
Other Current Assets / Other Assets
Other current assets includes approximately $412.4 million and $514.9 million as of March 31, 2013 and
2012, respectively for the deferred purchase price receivable from our Global and North American Asset-Backed
Securitization programs. See note 8 to the consolidated financial statements for additional information regarding
the Company’s participation in its trade receivables securitization programs. Additionally, the balance as of
March 31, 2013 includes $74.4 million relating to the fair value of certain fully vested warrants to purchase
common stock of a supplier. These warrants were exercised and the underlying shares were sold subsequent to
year end for total proceeds of $67.3 million resulting in a $7.1 million realized loss that will be recognized during
the Company’s fiscal quarter ending June 28, 2013. Also included in other current assets as of March 31, 2013 is
an amount of $251.3 million relating to certain assets purchased on behalf of a customer and financed by a third
party banking institution as further described in note 15 to the consolidated financial statements.
The Company has certain equity investments in, and notes receivable from, non-publicly traded companies
and an equity investment in a publicly traded company, which are included within other assets in the Company’s
consolidated balance sheets. Non-majority-owned investments are accounted for using the equity method when
the Company has an ownership percentage equal to or greater than 20% but less than 50%, or has the ability to
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
significantly influence the operating decisions of the issuer; otherwise the cost method is used. The Company
monitors these investments for impairment indicators and makes appropriate reductions in carrying values as
required. Fair values of these investments, when required, are estimated using unobservable inputs, primarily
discounted cash flow projections.
As of March 31, 2013 and 2012, the Company’s equity investments in non-majority owned companies
totaled $26.8 million and $38.6 million, respectively. The equity in the earnings or losses of the Company’s
equity method investments was not material to the consolidated results of operations for any period presented in
these consolidated financial statements.
Other Current Liabilities
Other current liabilities includes deferred revenue amounting to $227.0 million and $329.6 million and
customer working capital advances amounting to $214.1 million and $326.6 million as of March 31, 2013 and
2012, respectively. Also included in other current liabilities as of March 31, 2013 is an amount of $272.8 million
relating to amounts financed by a third party banking institution for the purchase of assets on behalf of a
customer as further described in note 15 to the consolidated financial statements.
Restructuring Charges
The Company recognizes restructuring charges related to its plans to close or consolidate excess
manufacturing and administrative facilities. In connection with these activities, the Company records
restructuring charges for employee termination costs, long-lived asset impairment and other exit-related costs.
The recognition of restructuring charges requires the Company to make certain judgments and estimates
regarding the nature, timing and amount of costs associated with the planned exit activity. To the extent the
Company’s actual results differ from its estimates and assumptions, the Company may be required to revise the
estimates of future liabilities, requiring the recognition of additional restructuring charges or the reduction of
liabilities already recognized. Such changes to previously estimated amounts may be material to the consolidated
financial statements. At the end of each reporting period, the Company evaluates the remaining accrued balances
to ensure that no excess accruals are retained and the utilization of the provisions are for their intended purpose in
accordance with developed exit plans. See note 12 to the consolidated financial statements for additional
information regarding restructuring charges.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (“FASB”) issued guidance which requires an
entity to measure obligations resulting from joint and several liability arrangements, including the amount the
reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the
reporting entity expects to pay on behalf of its co-obligors, as well as discussion of the nature of such obligations.
In February 2013, the FASB issued guidance which requires an entity to disclose amounts reclassified out of
accumulated other comprehensive income by component for each period an income statement is presented to
present, either on the face of the statement where net income is presented or in the notes, significant amounts
reclassified out of accumulated other comprehensive income by the respective line items of net income. This
disclosure is effective for the Company beginning in fiscal year 2014.
In December 2011, the FASB issued guidance which requires an entity to disclose information about
offsetting and related arrangements to enable financial statement users to evaluate the effect or potential effect of
netting arrangements, including rights of setoff associated with the entity’s recognized financial assets and
liabilities, on the entity’s financial position. The new disclosures will enable financial statement users to compare
balance sheets prepared under U.S. GAAP and International Financial Reporting Standards (IFRS), which are
subject to different offsetting models. The disclosures will be limited to financial instruments (and derivatives)
subject to enforceable master netting arrangements or similar agreements. Similar agreements include derivative
clearing agreements, global master repurchase agreements, and global master securities lending agreements.
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
Financial instruments and transactions that will be subject to the disclosure requirements may include derivatives,
repurchase and reverse repurchase agreements, and securities lending and borrowing arrangements. An entity
should provide the disclosures required by those amendments retrospectively for all comparative periods
presented. The guidance is effective for the Company beginning in fiscal year 2014. The adoption of this
guidance will not have a significant impact to the Company’s consolidated financial statements.
3. SHARE-BASED COMPENSATION
Equity Compensation Plans
During fiscal year 2013, the Company granted equity compensation awards under the 2010 Equity Incentive Plan
(the “2010 Plan”). As of March 31, 2013, the Company had approximately 43.4 million shares available for grants
under the 2010 Plan. Options issued to employees under the 2010 Plan generally vest over four years and expire seven
years from the date of grant. Options granted to non-employee directors expire five years from the date of grant.
The exercise price of options granted to employees is determined by the Company’s Board of Directors or
the Compensation Committee and may not be less than the closing price of the Company’s ordinary shares on the
date of grant.
The Company also grants share bonus awards under its equity compensation plan. Share bonus awards are
rights to acquire a specified number of ordinary shares for no cash consideration in exchange for continued
service with the Company. Share bonus awards generally vest in installments over a three to five year period and
unvested share bonus awards are forfeited upon termination of employment. Vesting for certain share bonus
awards is contingent upon both service and market conditions.
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Share-Based Compensation Expense
The following table summarizes the Company’s share-based compensation expense:
Fiscal Year Ended March 31,
(In thousands)
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . .
$ 5,163 $ 7,446 $10,249
29,366 41,008 44,988
Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . .
$34,529 $48,454 $55,237
2013 2012 2011
As required by the authoritative guidance for stock-based compensation, management made an estimate
of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest.
When estimating forfeitures, the Company considers voluntary termination behavior as well as an analysis of
actual forfeitures.
As of March 31, 2013, the total unrecognized compensation cost related to unvested share options granted to
employees under the Company’s equity compensation plans was approximately $1.9 million, net of estimated
forfeitures. This cost will be amortized on a straight-line basis over a weighted-average period of approximately
1.9 years and will be adjusted for estimated forfeitures. As of March 31, 2013, the total unrecognized
compensation cost related to unvested share bonus awards granted to employees was approximately $71.4 million,
net of estimated forfeitures. This cost will be amortized generally on a straight-line basis over a weighted-average
period of approximately 2.5 years and will be adjusted for estimated forfeitures. Approximately $8.0 million of
the unrecognized compensation cost, net of forfeitures, is related to share bonus awards granted to certain key
employees whereby vesting is contingent on meeting a certain market condition.
Cash flows resulting from excess tax benefits (tax benefits related to the excess of proceeds from employee
exercises of share options over the share-based compensation cost recognized for those options) are classified as
financing cash flows. During fiscal years 2013, 2012 and 2011, the Company did not recognize any excess tax
benefits as a financing cash inflow.
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. SHARE-BASED COMPENSATION (Continued)
Determining Fair Value
Valuation and Amortization Method—The Company estimates the fair value of share options granted using
the Black-Scholes valuation method and a single option award approach. This fair value is then amortized on a
straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The fair
market value of share bonus awards granted, other than those awards with a market condition, is the closing price
of the Company’s ordinary shares on the date of grant and is generally recognized as compensation expense on a
straight-line basis over the respective vesting period. For share bonus awards whereby vesting is contingent on
meeting certain market conditions, the fair value is determined using a Monte Carlo simulation.
Expected Term—The Company’s expected term used in the Black-Scholes valuation method represents the
period that the Company’s share options are expected to be outstanding and is determined based on historical
experience of similar awards, giving consideration to the contractual terms of the share options, vesting schedules
and expectations of future employee behavior as influenced by changes to the terms of its share options.
Expected Volatility—The Company’s expected volatility used in the Black-Scholes valuation method is
derived from a combination of implied volatility related to publicly traded options to purchase Flextronics
ordinary shares and historical variability in the Company’s periodic share price.
Expected Dividend—The Company has never paid dividends on its ordinary shares and currently does not
intend to do so in the near term, and accordingly, the dividend yield percentage is zero for all periods.
Risk-Free Interest Rate—The Company bases the risk-free interest rate used in the Black-Scholes valuation
method on the implied yield currently available on U.S. Treasury constant maturities issued with a term equivalent
to the expected term of the option.
The fair value of the Company’s share options granted to employees for fiscal years 2013, 2012 and 2011 other
than those with market criteria discussed below, was estimated using the following weighted-average assumptions:
Fiscal Year Ended March 31,
2013 2012 2011
Expected term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 years 4.1 years 4.1 years
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46.9% 46.9% 46.9%
0.0% 0.0% 0.0%
0.9% 1.1% 1.6%
$2.48 $2.57 $2.80
Options granted during the 2013, 2012 and 2011 fiscal years had contractual lives of seven years.
Share-Based Awards Activity
The following is a summary of option activity for the Company’s equity compensation plans, (“Price”
reflects the weighted-average exercise price):
Fiscal Year Ended March 31,
2013 2012 2011
Options
Price Options Price Options Price
Outstanding, beginning of fiscal year . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . .
43,933,660
19,000
(5,398,331)
(4,148,765)
$7.78 53,942,458 $ 7.61 62,868,569 $7.16
6.57 599,800 6.80 2,063,748 7.21
4.12 (5,879,405) 3.92 (6,215,867) 7.44
8.32 (4,729,193) 10.45 (4,773,992) 6.55
Outstanding, end of fiscal year . . . . . . . . . . .
34,405,564
$8.29 43,933,660 $ 7.78 53,942,458 $7.61
Options exercisable, end of fiscal year . . . . .
33,662,480
$8.31 37,021,049 $ 8.44 34,237,404 $9.23
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. SHARE-BASED COMPENSATION (Continued)
The aggregate intrinsic value of options exercised (calculated as the difference between the exercise price
of the underlying award and the price of the Company’s ordinary shares determined as of the time of option
exercise for options exercised in-the-money) under the Company’s equity compensation plans was $13.0 million,
$17.1 million and $22.9 million during fiscal years 2013, 2012 and 2011, respectively.
Cash received from option exercises was $22.3 million, $23.1 million and $23.3 million for fiscal years
2013, 2012 and 2011, respectively.
The following table presents the composition of options outstanding and exercisable as of March 31, 2013:
Options Outstanding Options Exercisable
Weighted
Average
Remaining Weighted Weighted
Number of Contractual Average Number of Average
Shares Life Exercise Shares Exercise
Range of Exercise Prices Outstanding (In Years) Price Exercisable Price
$1.94 - $2.26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,271,934 2.74
$ 2.18
$3.39 - $5.75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,736,382 3.35 5.55 6,670,480 5.55
$5.87 - $7.07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 552,685 4.27 6.53 350,536 6.58
$7.08 - $10.59 . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,041,703 2.50 10.10 7,566,670 10.25
$10.67 - $11.41 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,171,246 3.02 11.21 1,171,246 11.21
$11.53 - $13.98 . . . . . . . . . . . . . . . . . . . . . . . . . . 6,965,166 1.87 12.24 6,965,166 12.24
$14.34 - $23.02 . . . . . . . . . . . . . . . . . . . . . . . . . . 2,666,448 0.94 17.44 2,666,448 17.44
$ 2.18 8,271,934
$1.94 - $23.02 . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,405,564 2.52
$ 8.29 33,662,480
$ 8.31
Options vested and expected to vest . . . . . . . . . . 34,350,265 2.53
$ 8.31
As of March 31, 2013, the aggregate intrinsic value for options outstanding, options vested and expected
to vest (which includes adjustments for expected forfeitures), and options exercisable were $46.2 million,
$46.2 million and $46.1 million, respectively. The aggregate intrinsic value is calculated as the difference
between the exercise price of the underlying awards and the quoted price of the Company’s ordinary shares as of
March 31, 2013 for the approximately 15.2 million options that were in-the-money at March 31, 2013. As of
March 31, 2013, the weighted average remaining contractual life for options exercisable was 2.47 years.
The following table summarizes the Company’s share bonus award activity (“Price” reflects the weighted-
average grant-date fair value):
Fiscal Year Ended March 31,
2013 2012 2011
Shares
Price Shares Price Shares Price
Unvested share bonus awards outstanding,
beginning of fiscal year . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,965,268
9,582,867
(1,506,234)
(2,234,832)
$6.91 13,801,942 $8.04 8,801,609 $10.31
6.74 9,213,456 6.78 9,739,375 7.01
7.51 (2,555,165) 9.34 (2,758,593) 10.37
6.86 (4,494,965) 8.60 (1,980,449) 9.74
Unvested share bonus awards outstanding,
end of fiscal year . . . . . . . . . . . . . . . . . . . .
21,807,069
$6.80 15,965,268 $6.91 13,801,942 $ 8.04
Of the 21.8 million unvested share bonus awards outstanding as of the year ended March 31, 2013,
approximately 3.9 million represents the target amount of grants made to certain key employees whereby vesting
is contingent on meeting a certain market condition. The number of shares that ultimately will vest are based on
a measurement of Flextronics’ total shareholder return against the Standard and Poor’s (“S&P”) 500 Composite
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. SHARE-BASED COMPENSATION (Continued)
Index and will vest over a period of three years. Of the 3.9 million awards that were outstanding as of the year
ended March 31, 2013, 2.1 million were granted in fiscal year 2013 at an estimated average grant-date fair value
of $7.63 per share, 1.0 million were granted in fiscal year 2012 at an average grant-date fair value of $7.78 per
share, and 0.8 million were granted in fiscal year 2011 at an average grant-date fair value of $7.32 per share. In
accordance with accounting guidance, the Company will continue to recognize share-based compensation
expense for these awards with market conditions regardless of whether such awards will ultimately vest. The
actual number of shares to be issued can range from zero to 4.1 million for the 2013 grants, zero to 1.6 million
for the 2012 grants, and zero to 1.2 million for the 2011 grants. The awards granted during fiscal year 2011 will
expire in June 2013, and are not expected to vest.
The total intrinsic value of share bonus awards vested under the Company’s equity compensation plans was
$9.7 million, $17.7 million and $19.6 million during fiscal years 2013, 2012 and 2011, respectively, based on the
closing price of the Company’s ordinary shares on the date vested.
4. EARNINGS PER SHARE
Basic earnings per share for both continuing and discontinued operations exclude dilution and are computed by
dividing net income by the weighted-average number of ordinary shares outstanding during the applicable periods.
Diluted earnings per share for both continuing and discontinued operations reflect the potential dilution
from stock options, share bonus awards and convertible securities. The potential dilution from stock options
exercisable into ordinary share equivalents and share bonus awards was computed using the treasury stock
method based on the average fair market value of the Company’s ordinary shares for the period. The potential
dilution from the conversion spread (excess of conversion value over face value) of the Subordinated Notes
convertible into ordinary share equivalents was calculated as the quotient of the conversion spread and the
average fair market value of the Company’s ordinary shares for the period.
The following table reflects the basic weighted-average ordinary shares outstanding and diluted
weighted-average ordinary share equivalents used to calculate basic and diluted income from continuing and
discontinued operations per share:
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands, except per share amounts)
Basic earnings from continuing and discontinued operations per share:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$302,502 $520,770 $612,261
$ (25,451) $ (32,005) $ (16,042)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$277,051 $488,765 $596,219
Shares used in computation:
Weighted-average ordinary shares outstanding . . . . . . . . . . . . . . . . . .
662,874 716,247 777,315
Basic earnings from continuing operations per share . . . . . . . . . . . . .
Basic loss from discontinued operations per share . . . . . . . . . . . . . . .
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
0.46 $ 0.73 $ 0.79
(0.04) $ (0.04) $ (0.02)
0.42 $ 0.68 $ 0.77
Diluted earnings from continuing and discontinued operations per share:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$302,502 $520,770 $612,261
$ (25,451) $ (32,005) $ (16,042)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$277,051 $488,765 $596,219
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. EARNINGS PER SHARE (Continued)
Fiscal Year Ended March 31,
(In thousands, except per share amounts)
2013 2012 2011
Shares used in computation:
Weighted-average ordinary shares outstanding . . . . . . . . . . . . . . . . . .
Weighted-average ordinary share equivalents from stock
662,874 716,247 777,315
options and awards(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,159 11,560 12,877
Weighted-average ordinary shares and ordinary share
equivalents outstanding(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
675,033 727,807 790,192
Diluted earnings from continuing operations per share . . . . . . . . . . .
Diluted loss from discontinued operations per share . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
0.45 $ 0.72 $ 0.77
(0.04) $ (0.04) $ (0.02)
0.41 $ 0.67 $ 0.75
(1) Options to purchase ordinary shares of 20.6 million, 24.2 million and 25.5 million during fiscal years 2013,
2012 and 2011, respectively, were excluded from the computation of diluted earnings per share primarily
because the exercise price of these options was greater than the average market price of the Company’s
ordinary shares during the respective periods.
(2) On August 2, 2010 the Company paid approximately $240.0 million to redeem its 1% Convertible Subordinated
Notes upon maturity. The notes carried conversion provisions to issue shares to settle any conversion spread
(excess of the conversion value over the conversion price) in stock. The conversion price was $15.525 per share
(subject to certain adjustments). On the maturity date, the Company’s stock price was less than the conversion
spread, and therefore no shares were issued. For the year ended March 31, 2011, the conversion obligation was
less than the principal portion of these notes and accordingly, no additional shares were included as ordinary
share equivalents.
5. SUPPLEMENTAL CASH FLOW DISCLOSURES
The following table represents supplemental cash flow disclosures and non-cash investing and financing
activities:
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands)
Net cash paid for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$66,071 $42,067 $83,133
$52,306 $66,013 $77,690
Non-cash investing activity:
Accounts payable for fixed assets purchases . . . . . . . . . . . . . . . .
$89,718 $63,671 $73,036
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. BANK BORROWINGS AND LONG-TERM DEBT
Bank borrowings and long-term debt are as follows:
As of March 31,
2013 2012
(In thousands)
4.625% Notes due February 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
5.000% Notes due February 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 —
Term Loan, including current portion, due in October 2014 . . . . . . . . . . . . 170,340 1,179,595
Term Loan, including current portion, due in installments through
$ 500,000
October 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 517,500 487,500
Asia Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375,000 377,000
Outstanding under revolving line of credit . . . . . . . . . . . . . . . . . . . . . . . . . — 140,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,787 4,578
2,067,627 2,188,673
Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (416,654) (39,340)
Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,650,973
$2,149,333
The weighted average interest rate for the Company’s long-term debt was 3.5% as of March 31, 2013.
Repayments of the Company’s long-term debt are as follows:
Fiscal Year Ending March 31, Amount
(In thousands)
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 416,654
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211,136
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,250
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393,750
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,004,837
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,067,627
Capital lease obligations of $9.1 million and $11.6 million, consisting of short-term obligations of $2.8
million and $3.1 million and long term obligations of $6.3 million and $8.5 million are included in current and
non-current liabilities on the Company’s balance sheets as of March 31, 2013 and 2012, respectively.
Notes due February 2020 and February 2023
On February 20, 2013, the Company issued $500.0 million of 4.625% Notes due February 15, 2020 and
$500.0 million of 5.000% Notes due February 15, 2023 (collectively the “Notes”) in a private offering pursuant to
Rule 144A and Regulation S under the Securities Act . The Company received net proceeds of approximately
$990.6 million from the issuance and used those proceeds, together with $9.4 million of cash on hand, to repay
$1.0 billion of outstanding borrowings under its 2007 term loan facility.
Interest on the Notes is payable semi-annually, commencing on August 15, 2013. The Notes are senior
unsecured obligations of the Company, rank equally with all of the Company’s other existing and future senior
and unsecured debt obligations, and are guaranteed, jointly and severally, fully and unconditionally on an
unsecured basis, by each of the Company’s 100% owned subsidiaries that guarantees indebtedness under, or is a
borrower under, the Company’s Term Loan Agreement and Revolving Line of Credit.
At any time prior to maturity, the Company may redeem some or all of the Notes at a redemption price equal
to 100% of the principal amount of the Notes redeemed, plus an applicable premium and accrued and unpaid
interest, if any, to the applicable redemption date. Upon the occurrence of a change of control repurchase event
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
(as defined in the Notes indenture), the Company must offer to repurchase the Notes at a repurchase price equal
to 101% of the principal amount of the Notes repurchased, plus accrued and unpaid interest, if any, to the
applicable repurchase date.
The indenture governing the Notes contains covenants that, among other things, restrict the ability of the
Company and certain of the Company’s subsidiaries to create liens; enter into sale-leaseback transactions; create,
incur, issue, assume or guarantee any funded debt; and consolidate or merge with, or convey, transfer or lease all
or substantially all of the Company’s assets to, another person. These covenants are subject to a number of
significant limitations and exceptions set forth in the indenture. The indenture also provides for customary events
of default, including, but not limited to, cross defaults to certain specified other debt of the Company and its
subsidiaries. In the case of an event of default arising from specified events of bankruptcy or insolvency, all
outstanding Notes will become due and payable immediately without further action or notice. If any other event
of default under the agreement occurs or is continuing, the applicable trustee or holders of at least 25% in
aggregate principal amount of the then outstanding Notes may declare all of the Notes to be due and payable
immediately. As of March 31, 2013, the Company was in compliance with the covenants in the indenture
governing the Notes.
In connection with the issuance of the Notes, the Company entered into a registration rights agreement
under which it has agreed to consummate an offer registered with the Securities and Exchange Commission to
issue new notes having terms substantially identical to the Notes (except that the new notes will not be subject to
restrictions on transfer) in exchange for outstanding Notes. In some circumstances, the Company may be required
to file a shelf registration statement to cover resales of the Notes. If the Company fails to satisfy these obligations,
the Company may be required to pay additional interest to holders of the Notes under certain circumstances.
Term Loan Agreement and Revolving Line of Credit
On October 19, 2011, the Company entered into a five-year $2.0 billion Credit Facility consisting of a $1.5
billion Revolving Credit Facility and a $500.0 million term loan, which expires in October 2016. The Revolving
Credit Facility due 2016 replaced the Company’s $2.0 billion revolving credit facility, which was due to mature in
May 2012 and the $500.0 million term loan refinanced the outstanding amount of its $500.0 million tranche
under the Company’s $1.7 billion term loan, which was due to mature in October 2012. During fiscal year 2013,
the Company increased the limit on the term loan by $50 million and borrowed the entire incremental amount.
Additionally, the Company repaid a total principal amount of $20 million on the term loan during fiscal year
2013. Borrowings under the Credit Facility bear interest, at the Company’s option, either at (i) LIBOR plus the
applicable margin for LIBOR loans ranging between 1.25% and 2.25%, based on the Company’s credit ratings or
(ii) the base rate (the greatest of the agent’s prime rate, the federal funds rate plus 0.50% and LIBOR for a
one-month interest period plus 1.00%) plus an applicable margin ranging between 0.25% and 1.25%, based on
the Company’s credit rating. The Company is required to pay a quarterly commitment fee ranging between 0.20%
and 0.45% per annum on the daily unused amount of the $1.5 billion Revolving Credit Facility based on the
Company’s credit rating.
This Credit Facility is unsecured, and contains customary restrictions on the Company’s and its subsidiaries’
ability to (i) incur certain debt, (ii) make certain investments, (iii) make certain acquisitions of other entities,
(iv) incur liens, (v) dispose of assets, (vi) make non-cash distributions to shareholders, and (vii) engage in
transactions with affiliates. These covenants are subject to a number of exceptions and limitations. This Credit
Facility also requires that the Company maintain a maximum ratio of total indebtedness to EBITDA (earnings
before interest expense, taxes, depreciation and amortization), and a minimum interest coverage ratio, as defined
therein, during its term. As of March 31, 2013, the Company was in compliance with the covenants under this
Credit Facility.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
Term Loan Agreement
The Company entered into a $1.8 billion term loan facility, dated as of October 1, 2007, and subsequently
amended as of December 28, 2007.
During the fiscal year ended March 31, 2008, the Company borrowed $1.7 billion under this term loan
agreement. Of this amount, $500.0 million was scheduled to mature in October 2012 and the remainder was
scheduled to mature in October 2014. The Company may prepay the loans at any time at 100% of par plus
accrued and unpaid interest and reimbursement of the lender’s redeployment costs. On October 19, 2011, the
Company repaid $480 million, which was the outstanding portion of the $500.0 million due to mature in
October 2012. On February 20, 2013, the Company repaid $1.0 billion of the $1.2 billion outstanding that is
scheduled to mature in October 2014.
Borrowings under this term loan agreement bear interest, at the Company’s option, either at (i) the base rate
(the greater of the agent’s prime rate or the federal funds rate plus 0.50%) plus a margin of 1.25%; or (ii) LIBOR
plus a margin of 2.25%.
This term loan agreement is unsecured, and contains customary restrictions on the ability of the Company
and its subsidiaries to, among other things, (i) incur certain debt, (ii) make certain investments, (iii) make certain
acquisitions of other entities, (iv) incur liens, (v) dispose of assets, (vi) make non-cash distributions to
shareholders, and (vii) engage in transactions with affiliates. These covenants are subject to a number of
exceptions and limitations. This term loan agreement also requires that the Company maintain a maximum ratio
of total indebtedness to EBITDA (as defined by the loan agreement), during the term of the agreement.
Borrowings under this term loan agreement are guaranteed by the Company and certain of its subsidiaries. As of
March 31, 2013, the Company was in compliance with the covenants under this term loan agreement.
Asia Term Loans
On September 27, 2010, the Company entered into a $50.0 million term loan agreement with a bank based in
Asia, which matures on September 27, 2013. Borrowings under the term loan bear interest at LIBOR plus 2.30%.
The Company, at its election, may convert the loan (in whole or in part) to bear interest at the higher of the Federal
Funds rate plus 0.50% or the prime rate plus, in each case 1.00%. Principal payments of $500,000 are due quarterly
with the balance due on the maturity date. The Company has the right to prepay any part of the loan without
penalty. Borrowings under the term loan agreement are guaranteed by certain subsidiaries of the Company.
On September 28, 2010, the Company entered into a $130.0 million term loan facility with a bank in Asia,
which matures on September 28, 2013. Borrowings under the facility bear interest at LIBOR plus a margin of
2.15%, and the Company paid a non-refundable fee of $1.4 million at the inception of the loan. The Company has
the right to prepay any part of the loan without penalty.
On February 17, 2011, the Company entered into a $200.0 million term loan facility with a bank in Asia,
which matures on February 17, 2014. Borrowings under the facility bear interest at LIBOR plus a margin of
2.28%, and the Company paid a non-refundable fee of $1.0 million at the inception of the loan. The Company has
the right to prepay any part of the loan without penalty.
The Asia Term Loans are unsecured, and contain customary restrictions on the ability of the Company and
its subsidiaries to, among other things, (i) incur certain debt, (ii) make certain investments, (iii) make certain
acquisitions of other entities, (iv) incur liens, (v) dispose of assets, (vi) make non-cash distributions to
shareholders, and (vii) engage in transactions with affiliates. These covenants are subject to a number of
exceptions and limitations. The Asia Term Loans also require the Company maintain a maximum ratio of total
indebtedness to EBITDA (as defined by the loan agreement) during the terms of the agreements. As of March 31,
2013, the Company was in compliance with the covenants under these facilities.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
Other Credit Lines
The Company and certain of its subsidiaries also have various uncommitted revolving credit facilities, lines
of credit and other loans in the amount of $274.2 million in the aggregate. There were no borrowings outstanding
under these facilities as of March 31, 2013 and 2012. These facilities, lines of credit and other loans bear annual
interest at the respective country’s inter-bank offering rate, plus an applicable margin, and generally have
maturities that expire on various dates in future fiscal years. The credit facilities are unsecured and the lines of
credit and other loans are primarily secured by accounts receivable.
Redemption of 1% Convertible Subordinated Notes
During August 2010, the Company paid $240.0 million to redeem its 1% Convertible Subordinated Notes at
par upon maturity plus accrued interest. These notes carried conversion provisions to issue shares to settle any
conversion spread (excess of conversion value over the conversion price) in stock. On the maturity date, the
Company’s stock price was less than the conversion price, and therefore no ordinary shares were issued.
Tender and Redemption of 6.25% Senior Subordinated Notes
During December 2010, the Company paid approximately $308.5 million to redeem the remaining aggregate
principal balance of $302.2 million of these notes at a redemption price of 102.083% of the principal amount.
The Company recognized a loss associated with the early redemption of the notes of approximately $13.2 million
during the fiscal year ended March 31, 2011, consisting of the redemption price premium of approximately
$6.3 million, and approximately $6.9 million primarily for the write-off of the unamortized debt issuance costs.
The loss is recorded in other charges (income), net in the consolidated statement of operations.
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7. FINANCIAL INSTRUMENTS
Foreign Currency Contracts
The Company transacts business in various foreign countries and is therefore, exposed to foreign currency
exchange rate risk inherent in forecasted sales, cost of sales, and monetary assets and liabilities denominated in
non-functional currencies. The Company has established risk management programs to protect against volatility
in the value of non-functional currency denominated monetary assets and liabilities, and of future cash flows
caused by changes in foreign currency exchange rates. The Company tries to maintain a partial or fully hedged
position for certain transaction exposures, which are primarily, but not limited to, revenues, customer and vendor
payments and inter-company balances in currencies other than the functional currency unit of the operating entity.
The Company enters into short-term foreign currency forward and swap contracts to hedge only those currency
exposures associated with certain assets and liabilities, primarily accounts receivable and accounts payable, and
cash flows denominated in non-functional currencies. Gains and losses on the Company’s forward and swap
contracts are designed to offset losses and gains on the assets, liabilities and transactions hedged, and accordingly,
generally do not subject the Company to risk of significant accounting losses. The Company hedges committed
exposures and does not engage in speculative transactions. The credit risk of these forward and swap contracts is
minimized since the contracts are with large financial institutions and accordingly, fair value adjustments related
to the credit risk of the counter-party financial institution were not material.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. FINANCIAL INSTRUMENTS (Continued)
As of March 31, 2013, the aggregate notional amount of the Company’s outstanding foreign currency
forward and swap contracts was $4.8 billion as summarized below:
Notional Contract Value
Foreign Currency Amount in USD
Currency Buy Sell Buy Sell
(In thousands)
Cash Flow Hedges
CNY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,150 — $ 482,766 $ —
HUF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,088,000 — 50,873 —
MXN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,336,500 — 108,211 —
MYR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336,600 — 108,633 —
SGD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,400 — 41,392 —
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A N/A 74,656 19,274
866,531 19,274
Other Forward/Swap Contracts
BRL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246,600 357,600 122,461 177,584
CAD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,882 110,148 95,217 108,227
CNY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,859,783 2,761,232 457,942 444,296
EUR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429,846 507,592 552,066 651,993
GBP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,697 53,424 57,085 80,774
HUF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,445,300 15,731,600 65,003 66,208
JPY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,228,849 6,257,347 97,870 66,686
MXN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,474,585 1,193,310 119,391 96,617
MYR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,093 23,037 54,250 7,435
SEK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,186,018 1,285,135 181,993 197,289
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A N/A 176,996 77,142
1,980,274 1,974,251
Total Notional Contract Value in USD . . . . . .
$2,846,805 $1,993,525
As of March 31, 2013 and 2012, the fair value of the Company’s short-term foreign currency contracts was
not material and included in other current assets or other current liabilities, as applicable, in the consolidated
balance sheets. Certain of these contracts are designed to economically hedge the Company’s exposure to
monetary assets and liabilities denominated in non-functional currencies and are not accounted for as hedges
under the accounting standards. Accordingly, changes in fair value of these instruments are recognized in
earnings during the period of change as a component of interest and other expense, net in the consolidated
statements of operations. As of March 31, 2013 and 2012, the Company also has included net deferred gains and
losses, respectively, in accumulated other comprehensive income (loss), a component of shareholders’ equity in
the consolidated balance sheets, relating to changes in fair value of its foreign currency contracts that are
accounted for as cash flow hedges. These deferred gains and losses were not material, and any deferred losses as
of March 31, 2013 are expected to be recognized as a component of cost of sales in the consolidated statement of
operations primarily over the next twelve month period. The gains and losses recognized in earnings due to hedge
ineffectiveness were not material for all fiscal years presented and are included as a component of interest and
other expense, net in the consolidated statements of operations.
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. FINANCIAL INSTRUMENTS (Continued)
The following table presents the fair value of the Company’s derivative instruments located on the
consolidated balance sheets utilized for foreign currency risk management purposes at March 31, 2013 and 2012:
Fair Values of Derivative Instruments
Asset Derivatives
Liability Derivatives
Fair Value
Fair Value
Balance Sheet March 31, March 31, Balance Sheet March 31, March 31,
Location 2013 2012 Location 2013 2012
(In thousands)
Derivatives designated as
hedging instruments
Foreign currency contracts . . . . . . . Other current
Other current
assets
$11,032
$10,075
liabilities $ 3,999 $1,905
Derivatives not designated as
hedging instruments
Foreign currency contracts . . . . . . . Other current
Other current
assets
$16,531
$10,894
liabilities $11,291 $6,200
8. TRADE RECEIVABLES SECURITIZATION
The Company sells trade receivables under two asset-backed securitization programs and an accounts
receivable factoring program.
Asset-Backed Securitization Programs
The Company continuously sells designated pools of trade receivables under its Global Asset-Backed
Securitization Agreement (the “Global Program”) and its North American Asset-Backed Securitization
Agreement (the “North American Program,” collectively, the “ABS Programs”) to affiliated special purpose
entities, each of which in turn sells 100% of the receivables to unaffiliated financial institutions. These programs
allow the operating subsidiaries to receive a cash payment and a deferred purchase price receivable for sold
receivables. Following the transfer of the receivables to the special purpose entities, the transferred receivables are
isolated from the Company and its affiliates, and upon the sale of the receivables from the special purpose entity
to the unaffiliated financial institutions effective control of the transferred receivables is passed to the unaffiliated
financial institutions, which has the right to pledge or sell the receivables. Although the special purpose entities
are consolidated by the Company, they are separate corporate entities and their assets are available first to satisfy
the claims of their creditors. The investment limits by the financial institutions are $500.0 million for the Global
Program and $300.0 million for the North American Program and require a minimum level of deferred purchase
price receivable to be retained by the Company in connection with the sales.
The Company services, administers and collects the receivables on behalf of the special purpose entities and
receives a servicing fee of 0.5% to 1.00% of serviced receivables per annum. Servicing fees recognized during
the fiscal years ended March 31, 2013, 2012 and 2011 were not material and are included in interest and other
expense, net within the consolidated statements of operations. As the Company estimates the fee it receives in
return for its obligation to service these receivables is at fair value, no servicing assets and liabilities are
recognized.
Effective April 1, 2010, the Company adopted two new accounting standards, the first of which removed the
concept of a qualifying special purpose entity and created more stringent conditions for reporting the transfer of a
financial asset as a sale. The second standard amended the consolidation guidance for determining the primary
beneficiary of a variable interest entity. As a result of the adoption of the second standard, the Company was
deemed to be the primary beneficiary of the special purpose entity to which the pool of trade receivables was sold
under the Global Program and, as such, was required to consolidate the special purpose entity; the Company had
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. TRADE RECEIVABLES SECURITIZATION (Continued)
previously been consolidating the special purpose entity under the North American Program. The North American
Program was amended effective April 1, 2010 and the Global Program was amended effective September 29,
2010 in each case to provide for the sale by the special purpose entities of 100% of the eligible receivables to the
unaffiliated financial institutions; previously the special purpose entities had retained a partial interest in the sold
receivables. Upon adoption of these standards, the balance of receivables sold for cash under the Global Program
as of April 1, 2010, totaling $217.1 million, was recorded as accounts receivable and short-term bank borrowings
in the opening balance sheet of fiscal year 2011. Upon collection of these receivables the Company recorded cash
from operations offset by repayments of bank borrowings from financing activities in the consolidated statements
of cash flows during the year ended March 31, 2011. As of March 31, 2013 and 2012, the accounts receivable
balances that were sold under the ABS Programs were removed from the consolidated balance sheets and the net
cash proceeds received by the Company were included as cash provided by operating activities in the consolidated
statements of cash flows.
Although the Company still consolidates the special purpose entities, as a result of the amendments to the
North American Program effective April 1, 2010 and the Global Program on September 29, 2010, all of the
receivables sold to the unaffiliated financial institutions for cash are removed from the consolidated balance sheet
and the cash received is no longer accounted for as a secured borrowing. The portion of the purchase price for the
receivables which is not paid by the unaffiliated financial institutions in cash is a deferred purchase price
receivable, which is paid to the special purpose entity as payments on the receivables are collected from account
debtors. The deferred purchase price receivable represents a beneficial interest in the transferred financial assets
and is recognized at fair value as part of the sale transaction.
As of March 31, 2013, approximately $1.0 billion of accounts receivable had been sold to the special purpose
entities under the ABS Programs for which the Company had received net cash proceeds of $556.9 million and
deferred purchase price receivables of $412.4 million. As of March 31, 2012, approximately $1.1 billion of
accounts receivable had been sold to the special purpose entities for which the Company had received net cash
proceeds of $556.8 million and deferred purchase price receivables of $514.9 million. The deferred purchase price
receivables are included in other current assets as of March 31, 2013 and 2012, and were carried at the expected
recovery amount of the related receivables. The difference between the carrying amount of the receivables sold
under these programs and the sum of the cash and fair value of the deferred purchase price receivables received at
time of transfer is recognized as a loss on sale of the related receivables and recorded in interest and other expense,
net in the consolidated statements of operations; such amounts were $7.2 million, $10.9 million and $8.0 million
for the fiscal years ended March 31, 2013, 2012 and 2011, respectively.
For the fiscal years ended March 31, 2013, 2012 and 2011, cash flows from sales of receivables under the
ABS Programs consisted of approximately $3.5 billion, $4.7 billion and $2.4 billion, respectively for transfers of
receivables (of which approximately $0.7 billion, $0.6 billion and $0.6 billion, respectively represented new
transfers and the remainder proceeds from collections reinvested in revolving-period transfers).
The following table summarizes the activity in the deferred purchase price receivables account during the
fiscal years ended March 31, 2013 and 2012:
As of March 31,
2013 2012
(In thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 459,994
Transfers of receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,896,495 4,922,541
Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,999,033) (4,867,640)
$ 514,895
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 412,357
$ 514,895
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. TRADE RECEIVABLES SECURITIZATION (Continued)
Trade Accounts Receivable Sale Programs
The Company also sold accounts receivables to certain third-party banking institutions. The outstanding
balance of receivables sold and not yet collected was approximately $163.6 million and $110.5 million as of
March 31, 2013 and 2012, respectively. For the years ended March 31, 2013, 2012 and 2011, total accounts
receivables sold to certain third party banking institutions was approximately $1.1 billion, $2.0 billion and
$2.5 billion, respectively. The receivables that were sold were removed from the consolidated balance sheets and
were reflected as cash provided by operating activities in the consolidated statements of cash flows.
9. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. When determining the fair value
measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers
the principal or most advantageous market in which it would transact, and it considers assumptions that market
participants would use when pricing the asset or liability. The accounting guidance for fair value establishes a fair
value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair
value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. The fair value hierarchy is as follows:
Level 1—Applies to assets or liabilities for which there are quoted prices in active markets for identical
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assets or liabilities.
The Company has deferred compensation plans for its officers and certain other employees. Deferred
amounts under the plans are invested in hypothetical investments selected by the participant or the participant’s
investment manager. The Company’s deferred compensation plan assets are included in other noncurrent assets
on the consolidated balance sheets and include investments in equity securities and mutual funds that are valued
using active market prices.
The Company values available for sale investments using level 1 inputs which are active market trading prices.
Level 2—Applies to assets or liabilities for which there are inputs other than quoted prices included within
level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active
markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent
transactions (less active markets) such as cash and cash equivalent and money market funds; or model-derived
valuations in which significant inputs are observable or can be derived principally from, or corroborated by,
observable market data.
The Company values foreign exchange forward contracts using level 2 observable inputs which primarily
consist of an income approach based on the present value of the forward rate less the contract rate multiplied by
the notional amount.
The Company’s cash equivalents are comprised of bank deposits and money market funds, which are valued
using level 2 inputs, such as interest rates and maturity periods. Due to their short-term nature, their carrying
amount approximates fair value.
The Company’s deferred compensation plan assets also include money market funds, mutual funds,
corporate and government bonds and certain convertible securities that are valued using prices obtained from
various pricing sources. These sources price these investments using certain market indices and the performance
of these investments in relation to these indices. As a result, the Company has classified these investments as
level 2 in the fair value hierarchy.
Level 3—Applies to assets or liabilities for which there are unobservable inputs to the valuation
methodology that are significant to the measurement of the fair value of the assets or liabilities.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES (Continued)
The Company has accrued for contingent consideration in connection with its business acquisitions, which
is measured at fair value based on certain internal models and inputs. The following table summarizes the
activities related to contingent consideration:
As of March 31,
2013 2012
(In thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,293
Additions to accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 513
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,151) (655)
$ 1,151
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$25,000
$1,151
The Company values deferred purchase price receivables relating to its Asset-Backed Securitization
Program based on a discounted cash flow analysis using unobservable inputs (i.e. level 3 inputs), which are
primarily risk free interest rates adjusted for the credit quality of the underlying creditor Due to its high credit
quality and short term maturity, their fair value approximates carrying value. Significant increases in either of the
significant unobservable inputs (credit spread or risk free interest rate) in isolation would result in lower fair value
estimates, however is insignificant. The interrelationship between these inputs is also insignificant. Refer to
note 8 to the notes of consolidated financial statements for a reconciliation of the change in the deferred purchase
price receivable.
The Company has warrants to purchase up to 1.35 million shares of the common stock of a certain supplier
at a weighted-average price of $7.33 per share. The warrants expire on May 18, 2018. These fully vested warrants,
which are derivative instruments, are fair valued at each reporting date with gains or losses from changes in fair
value recognized in the consolidated statements of operations. The Company values these warrants based on the
Black-Scholes option-valuation model using unobservable inputs classified as level 3 in the fair value hierarchy.
Significant changes in any of the significant unobservable inputs in isolation would result in a change in the fair
value estimate, but in each case, the amount would be insignificant. The interrelationship between these inputs is
also insignificant. As of March 31, 2013, the Company used the following assumptions to fair value these
warrants:
As of March 31, 2013
Remaining life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58%
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0%
Risk-free rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.80%
The following table summarizes the changes in the fair value adjustment of these warrants:
Amount
(In thousands)
Balance, March 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
Fair value adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,437
Balance, March 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$74,437
There were no transfers between levels in the fair value hierarchy during fiscal years 2013 and 2012.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES (Continued)
Financial Instruments Measured at Fair Value on a Recurring Basis
The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis
as of March 31, 2013 and 2012:
Fair Value Measurements as of March 31, 2013
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
$ — $497,390
Money market funds and time deposits (Note 2) . . . . . . . . . . .
Deferred purchase price receivable (Note 8) . . . . . . . . . . . . . . . — — 412,357 412,357
Foreign exchange forward contracts (Note 7) . . . . . . . . . . . . . . — 27,563 — 27,563
Warrants to purchase common shares (Note 2) . . . . . . . . . . . . . — — 74,437 74,437
Deferred compensation plan assets:
$ — $497,390
Mutual funds, money market accounts and equity securities . . 6,931 40,972 — 47,903
Liabilities:
$ — $ (15,290) $ — $ (15,290)
Foreign exchange forward contracts (Note 7) . . . . . . . . . . . . . .
Contingent consideration in connection with acquistions . . . . . — — (25,000) (25,000)
Fair Value Measurements as of March 31, 2012
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Money market funds and time deposits (Note 2) . . . . . . . . . . .
$ — $343,906
Deferred purchase price receivable (Note 8) . . . . . . . . . . . . . . . — — 514,895 514,895
Foreign exchange forward contracts (Note 7) . . . . . . . . . . . . . . — 20,969 — 20,969
Available for sale investments (Note 2) . . . . . . . . . . . . . . . . . . . 5,994 — — 5,994
Deferred compensation plan assets:
$ — $343,906
Mutual funds, money market accounts and equity securities . . 3,411 54,241 — 57,652
Liabilities:
Foreign exchange forward contracts (Note 7) . . . . . . . . . . . . . .
$ — $ (8,105) $ — $ (8,105)
Contingent consideration in connection with acquistions . . . . . — — (1,151) (1,151)
Assets Measured at Fair Value on a Nonrecurring Basis
The Company has certain long-lived assets that are measured at fair value on a nonrecurring basis, and are
as follows:
Fair Value Measurements as of March 31, 2013
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$— $11,089
— 25,331
$— $11,089
— 25,331
Fair Value Measurements as of March 31, 2012
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$— $16,701
$— $16,701
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES (Continued)
Assets held for sale
Assets held for sale are recorded at the lesser of the carrying value or fair value, which is based on
comparable sales from prevailing market data (level 2 inputs). As of March 31, 2013 and March 31, 2012, no
impairment charges were recorded for assets that were no longer in use and held for sale which exclude those
assets that have been identified as relating to discontinued operations as discussed further in note 18 to the
consolidated financial statements. The assets held for sale primarily represent manufacturing facilities that have
been closed as part of the Company’s historical facility consolidations.
Property and equipment
During the fiscal year 2013, the Company recognized impairment charges relating to certain long-lived
assets classified as ‘held-for-use’ since the carrying value of such assets exceeded the fair value, based on the
sales of comparable assets, as a result of its restructuring activities as further discussed in note 12 to the
consolidated financial statements.
There were no material fair value adjustments or other transfers between levels in the fair value hierarchy for
these long-lived assets during the fiscal years 2013 and 2012.
Other financial instruments
The following table presents the Company’s liabilities not carried at fair value as at March 31, 2013 and 2012:
Revolving credit facility . . . . . . . . . . . . . . . . .
Term loan dated October 1, 2007 . . . . . . . . . .
Term loan dated October 19, 2011 . . . . . . . . .
4.625% Notes dated February 20, 2013
As of March 31, 2013 As of March 31, 2012
Carrying Fair Carrying Fair Fair Value
Amount Value Amount Value Hierarchy
(In thousands) (In thousands)
$
— $ — $ 140,000 $ 140,000 Level 2
170,340 170,496 1,179,595 1,171,959 Level 1
517,500 518,794 487,500 482,625 Level 1
(due 2020) . . . . . . . . . . . . . . . . . . . . . . . . . .
500,000 507,190 — — Level 1
5.000% Notes dated February 20, 2013
(due 2023) . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia term loans . . . . . . . . . . . . . . . . . . . . . . . .
500,000 500,000 — — Level 1
375,000 375,343 377,000 374,394 Level 2
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,062,840 $2,071,823 $2,184,095 $2,168,978
Revolving credit facility—The carrying amount approximates fair value due to the short term nature of the
interest rates underlying any borrowings under this facility, though the facility itself is available to the Company
on a long term basis.
Term loans dated October 1, 2007 and October 19, 2011—The term loans are valued based on broker
trading prices in active markets.
Notes dated February 20, 2013—The notes are valued based on broker trading prices in active markets.
Asia term loans—The Company’s Asia Term Loans are not traded publicly; however, as the pricing, maturity
and other pertinent terms of these loans closely approximate those of the Term Loan Agreements dated October 1,
2007, and October 19, 2011, management estimates the respective trading prices would be approximately the same.
10. COMMITMENTS AND CONTINGENCIES
Commitments
As of March 31, 2013 and 2012, the gross carrying amount and associated accumulated depreciation of the
Company’s property and equipment financed under capital leases, and the related obligations was not material.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. COMMITMENTS AND CONTINGENCIES (Continued)
The Company also leases certain of its facilities and equipment under non-cancelable operating leases. These
operating leases expire in various years through 2028 and require the following minimum lease payments:
Operating
Fiscal Year Ending March 31, Lease
(In thousands)
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$140,599
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,084
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,227
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,807
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,347
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,893
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$556,957
Total rent expense amounted to $138.8 million, $160.5 million and $153.2 million in fiscal years 2013,
2012 and 2011, respectively.
Litigation and other legal matters
From time to time, we are subject to legal proceedings, claims, and litigation arising in the ordinary course
of business. We defend ourselves vigorously against any such claims. Although the outcome of these matters is
currently not determinable, management expects that any losses that are probable or reasonably possible of being
incurred as a result of these matters, which are in excess of amounts already accrued in its consolidated balance
sheet, would not be material to the financial statements as a whole.
11. INCOME TAXES
The domestic (Singapore) and foreign components of income from continuing operations before income
taxes were comprised of the following:
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$186,855 $231,209
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158,744 387,875 403,101
$170,071
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$328,815
$574,730 $634,310
The provision for income taxes consisted of the following:
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands)
Current:
$ 303 $ (972)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,466 56,100 26,671
$ 680
61,146 56,403 25,699
Deferred:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,187) 386 (319)
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,646) (2,829) (3,331)
(34,833) (2,443) (3,650)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . .
$ 26,313
$53,960 $22,049
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
The domestic statutory income tax rate was approximately 17.0% in fiscal years 2013, 2012 and 2011. The
reconciliation of the income tax expense expected based on domestic statutory income tax rates to the expense
for income taxes included in the consolidated statements of operations is as follows:
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands)
Income taxes based on domestic statutory rates . . . . . . .
$ 95,858 $106,725
Effect of tax rate differential . . . . . . . . . . . . . . . . . . . . . . (120,785) (177,540) 26,459
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 4,881 9,502 12,055
Change in liability for uncertain tax positions . . . . . . . . 15,268 34,517 (29,205)
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . 68,596 93,336 (90,033)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,454 (1,713) (3,952)
$ 55,899
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . .
$ 26,313
$ 53,960 $ 22,049
A number of countries in which the Company is located allow for tax holidays or provide other tax
incentives to attract and retain business. In general, these holidays were secured based on the nature, size and
location of the Company’s operations. The aggregate dollar effect on the Company’s income resulting from tax
holidays and tax incentives to attract and retain business for the fiscal years ended March 31, 2013, 2012 and
2011 was $22.6 million, $41.8 million and $66.5 million, respectively. For the fiscal year ended March 31, 2013,
the effect on basic and diluted earnings per share was $0.03 and $0.03, respectively, and the effect on basic and
diluted earnings per share during fiscal years 2012 and 2011 were $0.06 and $0.06, and $0.09 and $0.08,
respectively. Unless extended or otherwise renegotiated, the Company’s existing holidays will expire in the fiscal
years ending March 31, 2014 through fiscal year 2022.
Under its territorial tax system, Singapore generally does not tax foreign sourced income until repatriated to
Singapore. The Company has included the effects of Singapore’s territorial tax system in the rate differential line
above. The tax effect of foreign income not repatriated to Singapore for the fiscal years ended March 31, 2013,
2012 and 2011 were $26.7 million, $17.7 million and $32.6 million, respectively.
The components of deferred income taxes are as follows:
As of March 31,
2013 2012
(In thousands)
Deferred tax liabilities:
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (30,159)
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61,621) (30,032)
$ (36,542)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (98,163) (60,191)
Deferred tax assets:
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,959 73,588
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,327 178,910
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,341 11,088
Inventory valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,514 12,265
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,807 3,340
Net operating loss and other carryforwards . . . . . . . . . . . . . . . . . . . . . 2,600,895 2,753,940
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,085 176,547
2,983,928 3,209,678
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,825,579) (3,099,561)
Net deferred tax assets, net of valuation allowance . . . . . . . . . . . . . . . 158,349 110,117
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 60,186
$ 49,926
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
As of March 31,
2013 2012
(In thousands)
The net deferred tax asset is classified as follows:
Current asset (classified as other current assets) . . . . . . . . . . . . . . . . .
$ 815
Long-term asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,305 49,111
$ 7,881
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 60,186
$ 49,926
Utilization of the Company’s deferred tax assets is limited by the future earnings of the Company in the tax
jurisdictions in which such deferred assets arose. As a result, management is uncertain as to when or whether
these operations will generate sufficient profit to realize any benefit from the deferred tax assets. The valuation
allowance provides a reserve against deferred tax assets that are not more likely than not to be realized by the
Company. However, management has determined that it is more likely than not that the Company will realize
certain of these benefits and, accordingly, has recognized a deferred tax asset from these benefits. The change in
valuation allowance is net of certain increases and decreases to prior year losses and other carryforwards that have
no current impact on the tax provision. Approximately $34.0 million of the valuation allowance relates to income
tax benefits arising from the exercise of stock options, which if realized will be credited directly to shareholders’
equity and will not be available to benefit the income tax provision in any future period.
The Company has recorded a deferred tax asset of approximately $43.7 million associated with its tax loss
and tax credit carryforwards. Approximately $21.1 million of this deferred tax asset is of indefinite duration. The
amount of the remaining deferred tax asset expires over the period from 2014 to 2032, of which the amount
expiring in 2014 is insignificant.
The amount of deferred tax assets considered realizable, however, could be reduced or increased in the near-
term if facts, including the amount of taxable income or the mix of taxable income between subsidiaries, differ
from management’s estimates.
The Company does not provide for income taxes on approximately $457.7 million of undistributed earnings
of its foreign subsidiaries, as such earnings are not intended by management to be repatriated in the foreseeable
future. Determination of the amount of the unrecognized deferred tax liability on these undistributed earnings is
not practicable.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Fiscal Year Ended
March 31,
2013 2012
(In thousands)
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$134,627
Additions based on tax position related to the current year . . . . . 22,185 25,113
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . 62,610 25,719
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . (15,001) (18,257)
Reductions related to lapse of applicable statute of limitations . . (5,444) (788)
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,220) (1,386)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 456 1,404
$166,432
Balance, end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$230,018
$166,432
The Company’s unrecognized tax benefits are subject to change over the next twelve months primarily as a
result of the expiration of certain statutes of limitations and as audits are settled. During the first quarter of fiscal
year 2014, the liability for unrecognized tax benefits will decrease by approximately $13.2 million due to the
settlement of a tax audit subsequent to the balance sheet date. The Company also believes it is reasonably possible
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
that the total amount of unrecognized tax benefits could decrease by an estimated range of $18.0 to $30.8 million
within the next twelve months primarily due to potential settlements of various audits and the expiration of certain
statutes of limitations.
The Company and its subsidiaries file federal, state, and local income tax returns in multiple jurisdictions
around the world. With few exceptions, the Company is no longer subject to income tax examinations by tax
authorities for years before 2001.
Of the $230 million of unrecognized tax benefits at March 31, 2013, $172.8 million will affect the annual
effective tax rate if the benefits are eventually recognized. The amount that does not impact the effective tax rate
relates to positions that would be settled with a tax loss carryforward previously subject to a valuation allowance.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits within the
Company’s tax expense. During the fiscal years ended March 31, 2013 and 2012, the Company recognized
interest of approximately $5.1 million and $5.4 million, respectively, and no penalties. The Company had
approximately $11.9 million and $10.6 million accrued for the payment of interest as of the fiscal years ended
March 31, 2013 and 2012, respectively. The Company has not accrued for the payment of penalties for the fiscal
years ended March 31, 2013 and 2012, respectively.
12. RESTRUCTURING CHARGES
During fiscal year 2013 the Company initiated certain restructuring activities intended to improve its
operational efficiencies by reducing excess workforce and capacity. Restructuring charges are recorded based
upon employee termination dates, site closure and consolidation plans.
During the fiscal year ended March 31, 2013, the Company recognized restructuring charges of
approximately $227.4 million, of which $110.1 million was associated with the terminations of 9,138 identified
employees in connection with the charges described above. The identified employee terminations by reportable
geographic region amounted to approximately 4,467, 2,282, and 2,389 for Asia, the Americas and Europe,
respectively. The costs associated with these restructuring activities include employee severance, other personnel
costs, non-cash impairment charges on facilities and equipment that are not recoverable through future cash flows
or are no longer in use and are to be disposed of, and other exit related costs due to facility closures or
rationalizations. Pre-tax restructuring charges comprised of $123.0 million of cash charges predominantly related
to employee severance costs and $104.4 million of non-cash charges primarily related asset impairment and other
exit charges. The Company classified approximately $215.8 million of these charges as a component of cost of
sales and approximately $11.6 million of these charges as a component of selling, general and administrative
expenses during the fiscal year ended March 31, 2013.
The components of the restructuring charges by geographic region incurred during fiscal year 2013:
Third Fourth
Quarter Quarter Total
(In thousands)
Americas:
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-lived asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other exit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
863 $ 13,156 $ 14,019
— 6,302 6,302
322 6,533 6,855
Total restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,185 25,991 27,176
Asia:
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-lived asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other exit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,572 18,076 26,648
46,250 5,268 51,518
28,818 1,443 30,261
Total restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83,640 24,787 108,427
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. RESTRUCTURING CHARGES (Continued)
Third Fourth
Quarter Quarter Total
Europe:
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,142 $ 63,301 $ 69,443
9,851 1,782 11,633
Long-lived asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,873 8,882 10,755
Other exit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,866 73,965 91,831
Total
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-lived asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other exit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,577 94,533 110,110
56,101 13,352 69,453
31,013 16,858 47,871
Total restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $102,691 $124,743 $227,434
During the fiscal year ended March 31, 2013 the Company recognized approximately $110.1 million of
severance costs related to employee terminations. Approximately $98.5 million of this was classified as a
component of cost of sales.
During the fiscal year ended March 31, 2013 the Company recognized approximately $69.5 million for the
write-down of property and equipment and other manufacturing assets, which are continuing to be held and used
by the Company. The majority of this amount was classified as a component of cost of sales.
During the fiscal year ended March 31, 2013, the Company recognized approximately $47.9 million of other
exit costs, which primarily comprised of $22.8 million for the write-down of certain customer specific assets that
were determined to be unrecoverable based on a specific product exit and resulting declining customer volumes.
Additionally, other exit costs include $24.7 million of customer disengagement costs primarily related to
inventory that resulted from a product exit as well as contractual obligations from facility closures and $0.4
million of other miscellaneous items.
The following table summarizes the provisions, respective payments, and remaining accrued balance as of
March 31, 2013 for charges incurred in fiscal year 2013 and prior periods:
Long-Lived
Asset Other
Severance Impairment Exit Costs Total
(In thousands)
Balance as of March 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,596 $ — $ 21,726 $ 29,322
Activities during the fiscal year 2012:
Cash payments for charges incurred in fiscal year 2010
and prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,976) — (13,659) (16,635)
Balance as of March 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . 4,620 — 8,067 12,687
Provision for charges incurred in fiscal year 2013 . . . . . . . . 110,110 69,453 47,871 227,434
Cash payments for charges incurred in fiscal year 2013 . . . (28,586) — (3,832) (32,418)
Cash payments for charges incurred in fiscal year 2010
and prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,455) — (2,902) (5,357)
Non-cash charges incurred in fiscal year 2013 . . . . . . . . . . . — (69,453) (34,993) (104,446)
Balance as of March 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 83,689 — 14,211 97,900
Less: Current portion (classified as other current liabilities) . . 80,439 — 7,397 87,836
Accrued restructuring costs, net of current portion
(classified as other liabilities) . . . . . . . . . . . . . . . . . . . . . . . . $ 3,250 $ — $ 6,814 $ 10,064
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. OTHER CHARGES (INCOME), NET
During fiscal year 2013, the Company recognized a net gain of $74.4 million for the fair value adjustment
of the Company’s warrants to purchase common shares of a certain supplier. The fair value adjustment gain was
partially off-set by a loss on the sales of two investments of $1.3 million.
During fiscal year 2012, the Company recognized a net gain of $20.0 million in connection with the sale of
certain international entities.
During fiscal year 2011, the Company recognized charges totaling $6.3 million, consisting of the $13.2 million
loss associated with the early redemption of the 6.25% Senior Subordinated Notes and an $11.7 million loss in
connection with the divestiture of certain international entities. Refer to note 6 and note 15, respectively, for further
discussion. These charges were partially offset by a gain of $18.6 million associated with the sale of an equity
investment that was previously fully impaired.
14. INTEREST AND OTHER EXPENSE, NET
For the fiscal years ended March 31, 2013, 2012 and 2011, the Company recognized interest income of
$20.0 million, $21.7 million and $14.0 million.
For the fiscal years ended March 31, 2013, 2012 and 2011, the Company recognized interest expense of
$68.9 million, $67.8 million and $88.7 million, respectively, on its debt obligations outstanding during the
period.
For the fiscal years ended March 31, 2013, 2012 and 2011, the Company recognized gains on foreign
exchange transactions of $19.9 million, $39.7 million and $33.1 million, respectively.
15. BUSINESS AND ASSET ACQUISITIONS
Business Acquisitions
The business and asset acquisitions described below were accounted for using the purchase method of
accounting, and accordingly, the fair value of the net assets acquired and the results of the acquired businesses
were included in the Company’s consolidated financial statements from the acquisition dates forward. The
Company has not finalized the allocation of the consideration for certain of its recently completed acquisitions
and expects to complete these allocations within one year of the respective acquisition dates.
Fiscal 2013 business acquisitions
Acquisition of Saturn Electronics and Engineering Inc.
During fiscal year 2013, the Company completed its acquisition of all outstanding common stock of Saturn
Electronics and Engineering, Inc. (“Saturn”), a supplier of electronics manufacturing services, solenoids and
wiring for the automotive, appliance, consumer, energy and industrial markets. The acquisition of Saturn
broadened the Company’s service offering and strengthened its capabilities in the automotive and consumer
electronics businesses. The results of operations were included in the Company’s consolidated financial results
beginning on the date of acquisition which amounted to approximately $100.9 million in revenue for the year
ended March 31, 2013. Net income during fiscal year ended March 31, 2013 was not significant to the
consolidated operating results of the Company.
The initial cash consideration for this acquisition amounted to $193.7 million with up to an additional
$15.0 million of estimated potential contingent consideration, for a total purchase consideration of $208.7 million.
The allocation of the purchase price to Saturn’s tangible and identifiable intangible assets acquired and
liabilities assumed was based on their estimated fair values as of the date of acquisition. Management
determined the value of acquired intangible assets with the assistance of a third-party appraisal firm.
Management is in the process of determining the fair value amounts for certain other assets and liabilities that
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. BUSINESS AND ASSET ACQUISITIONS (Continued)
were acquired. The excess of the purchase price over the tangible and identifiable intangible assets acquired and
liabilities assumed has been allocated to goodwill.
The following represents the Company’s allocation of the total purchase price to the acquired assets and
liabilities assumed of Saturn (in thousands):
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,191
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,879
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,350
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 619
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,039
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,227
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,746
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,200
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 925
$271,137
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 29,616
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,429
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,045
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,401
$208,691
Total aggregate purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Intangible assets of $57.2 million in connection with the Saturn acquisition is comprised of customer-related
intangible assets of $46.4 million and other intangible assets consisting of developed technology amounting to
$10.8 million. Customer relationships are amortized over an estimated useful life of 5 years and developed
technology is amortized over an estimated useful life of 7 years.
The above purchase price allocation includes certain purchase accounting adjustments recorded in the
fourth quarter of fiscal 2013, which resulted in a net decrease of $7.5 million to goodwill with corresponding
increases to intangible assets amounting to $32.5 million and other liabilities amounting to $23.0 million. The
increase in intangible assets was as a result of the finalization of the valuation for acquired intangible assets and
the increase to other liabilities is primarily as a result of deferred tax liabilities recorded relating to intangible
assets. As a result of this deferred tax liability, the Company released an amount of $22.3 million relating to
valuation allowances for deferred tax assets in the fourth quarter of fiscal 2013, and this amount is included in
the provision for income taxes for the year ended March 31, 2013. In accordance with the accounting guidance
applicable to business combinations, the Company has re-casted the operating results for the quarter ended
December 31, 2012 to reflect the release of the valuation allowance for deferred tax assets. Refer to note 20 to
the consolidated financial statements for further details.
Other business acquisitions
Additionally, during the fiscal year ended March 31, 2013, the Company completed three other acquisitions
that were not individually, nor in the aggregate, significant to the Company’s consolidated financial position,
results of operations and cash flows. The total consideration, which was paid in cash for these acquisitions, and
earn outs related to certain prior period acquisitions amounted to $72.7 million. The total amount of cash
acquired from these acquisitions amounted to $80.1 million, resulting in net cash of $7.4 million acquired for
these acquisitions during the fiscal year ended 2013. One of the acquired businesses expanded the Company’s
capabilities primarily in the medical and defense markets; another acquired business will support the hardware
product manufacturing needs of an existing customer in the technology industry; and the other acquired business
will expand the Company’s capabilities primarily in the LED design and manufacturing market. The Company
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. BUSINESS AND ASSET ACQUISITIONS (Continued)
primarily acquired cash, inventory and certain other manufacturing assets, and recorded goodwill of
$61.9 million in connection with these acquisitions. The potential amount of future payments which the
Company could be required to make under contingent consideration arrangements relating to these acquisitions
is not material. The aggregate results of operations for these acquisitions were included in the Company’s
consolidated financial results beginning on the date of acquisition which amounted to approximately
$231.3 million in revenue for the year ended March 31, 2013. Net income during fiscal year ended March 31,
2013 was not significant, individually or in the aggregate, to the consolidated operating results of the Company.
In connection with one of the acquisitions, the Company acquired certain manufacturing assets that were
purchased by the acquired company on behalf of an existing customer and will be continued to be used
exclusively for the benefit of this customer. These assets are financed by a third party banking institution acting
as an agent of the customer under an agreement, the terms of which reset annually. While the Company has the
option to settle this obligation in cash, the Company can also settle the obligation related to these assets by
returning the respective assets to the customer and cannot be required to pay cash by either the customer or the
third party banking institution to settle the obligation. Accordingly, these assets amounting to $251.3 million and
the liability amounting to $272.8 million have been included in other current assets and other current liabilities,
respectively as of March 31, 2013. The cash flows relating to the purchase of assets by the Company on behalf
of the customer amounting to $115.3 million have been included in other investing cash flows for the fiscal year
ended March 31, 2013. Net cash inflows amounting to $101.9 million relating to the funding of these assets by
the financial institution on behalf of the customer have been included in cash flows from other financing
activities during the fiscal year ended March 31, 2013. In conjunction with this acquisition, the Company
amended its existing manufacturing agreement with the customer. As part of this agreement, the Company is
obligated to reimburse the customer for any shortfall in production if the manufacturing contract is terminated
prior to the delivery of a minimum volume of units to be manufactured over the term of the contract. The total
commitment under this arrangement amounted to $88.0 million and declines over time as the Company
continues to manufacture and deliver products under the arrangement. Payment of this guarantee is not probable
as of March 31, 2013.
The Company continues to evaluate certain assets and liabilities related to business combinations completed
during the recent periods. Additional information, which existed as of the acquisition date, may become known to
the Company during the remainder of the measurement period, a period not to exceed 12 months from the
acquisition date. Changes to amounts recorded as assets or liabilities may result in a corresponding adjustment to
goodwill.
The goodwill generated from the Company’s business combinations completed during the fiscal year ended
March 31, 2013 is primarily related to value placed on the employee workforce, service offerings and
capabilities, and expected synergies. The goodwill is not deductible for income tax purposes.
Fiscal 2012 business acquisitions
During fiscal year 2012, the Company completed three acquisitions that were not individually, nor in the
aggregate significant to the Company’s financial position, results of operations and cash flows. The aggregate
cash paid for these acquisitions together with cash paid for contingent consideration related to certain prior period
acquisitions during the year ended March 31, 2012 totaled approximately $92.3 million, net of cash acquired. The
acquired businesses expanded the Company’s capabilities in the communications market. The Company primarily
acquired inventory and certain other manufacturing assets and recorded goodwill of $8.6 million and customer
contract intangibles of $3.9 million in connection with the acquisitions.
Fiscal 2011 business acquisitions
During fiscal year 2011, the Company completed four acquisitions that were not individually, nor in the
aggregate significant to the Company’s financial position, results of operations and cash flows. The aggregate
cash paid for these acquisitions together with cash paid for contingent consideration relating to certain prior
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15. BUSINESS AND ASSET ACQUISITIONS (Continued)
period acquisitions during the year ended March 31, 2011 totaled approximately $17.0 million, net of cash
acquired. The acquired businesses expanded the Company’s capabilities in the medical and infrastructure
business groups.
The consolidated financial statements include the operating results of each business combination from the
date of acquisition and the related transaction costs incurred which are not material. Pro forma results of
operations for the acquisitions completed have not been presented because the effects of the acquisitions,
individually and in the aggregate, were not material to the Company’s financial results.
On April 16, 2013, the Company completed its acquisition of certain manufacturing operations from
Google’s Motorola Mobility LLC, including a manufacturing and services agreement with mobile devices. The
total purchase consideration for this acquisition amounted to $170.6 million. The Company primarily acquired
inventory and fixed assets in connection with this acquisition. The financial results of this acquisition are not
included in the consolidated financial statements for any period presented. A preliminary purchase price
allocation is not yet available for this acquisition.
16. SHARE REPURCHASE PLAN
During fiscal year 2013, the Company repurchased approximately 51.7 million shares for an aggregate
purchase value of approximately $334.0 million.
The Company’s Board of Directors, on September 13, 2012, authorized the repurchase of up to 10% of the
Company’s outstanding ordinary shares which was approved by the Company’s shareholders at the 2012
Extraordinary General Meeting held on August 30, 2012. Share repurchases by the Company under the share
repurchase plans are subject to an aggregate limit of 10% of the Company’s ordinary shares outstanding as of
the date of the 2012 Extraordinary General Meeting. During fiscal year 2013, the Company repurchased
approximately 31.3 million shares for an aggregate purchase value of approximately $200.0 million under this
plan, including accrued expenses, and retired all of these shares. As of March 31, 2013, approximately
35.3 million shares were available to be repurchased under this plan.
During the first quarter of fiscal 2013, the Company repurchased the entire remaining amount under a prior
share repurchase plan that was approved by the Company’s Board of Directors on December 7, 2011 and the
Company’s shareholders at the 2011 Extraordinary General Meeting held on July 22, 2011, or approximately
20.4 million shares for an aggregate purchase value of approximately $134.0 million, and retired all of these shares.
17. SEGMENT REPORTING
Operating segments are defined as components of an enterprise for which separate financial information is
available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding
how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its
Chief Executive Officer. As of March 31, 2013, the Company operates and internally manages a single operating
segment, EMS.
Geographic information is as follows:
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands)
Net sales:
$15,408,872 $14,620,097
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,193,063 8,390,521 8,291,784
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,633,272 5,543,636 5,530,752
$11,743,140
$23,569,475
$29,343,029 $28,442,633
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. SEGMENT REPORTING (Continued)
As of March 31,
2013 2012
(In thousands)
Long-lived assets:
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,144,451 $1,126,552
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659,289 554,653
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370,848 395,237
$2,174,588 $2,076,442
Revenues are attributable to the country in which the product is manufactured or service is provided.
For purposes of the preceding tables, “Asia” includes China, India, Indonesia, Japan, Labuan, Malaysia,
Mauritius, Singapore, and Taiwan; “Americas” includes Brazil, Canada, Mexico, and the United States;
“Europe” includes Austria, the Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Israel,
Italy, the Netherlands, Poland, Romania, Slovakia, Sweden, Turkey, Ukraine, and the United Kingdom. During
fiscal years 2013 and 2012 there were no revenues attributable to Finland.
During fiscal years 2013, 2012 and 2011, net sales generated from Singapore, the principal country of
domicile, were approximately $551.7 million, $663.1 million and $578.2 million, respectively.
As of March 31, 2013 and 2012, long-lived assets held in Singapore were approximately $15.9 million and
$15.3 million, respectively.
During fiscal year 2013, China, Mexico, United States and Malaysia accounted for approximately 34%,
15%, 11% and 10% of consolidated net sales, respectively. No other country accounted for more than 10% of net
sales in fiscal year 2013. As of March 31, 2013, China, Mexico, and the United States accounted for
approximately 38%, 13% and 11%, respectively, of consolidated long-lived assets. No other country accounted
for more than 10% of long-lived assets as of March 31, 2013.
During fiscal year 2012, China, Mexico, United States and Malaysia accounted for approximately 38%,
14%, 10% and 10% of consolidated net sales, respectively. No other country accounted for more than 10% of net
sales in fiscal year 2012. As of March 31, 2012, China and Mexico accounted for approximately 40% and 15%,
respectively, of consolidated long-lived assets. No other country accounted for more than 10% of long-lived
assets as of March 31, 2012.
During fiscal year 2011, China, Mexico and the United States accounted for approximately 38%, 15% and
10% of consolidated net sales, respectively. No other country accounted for more than 10% of net sales in fiscal
year 2011.
18. DISCONTINUED OPERATIONS
During fiscal year 2013, the Company finalized the sale of two of its non-core businesses. Total proceeds
received from these sales amounted to $22.6 million, net of $1.0 million of cash sold. The Company recognized
an aggregate loss of $12.1 million on the sales, which is included in the results from discontinued operations.
In accordance with the accounting guidance, these non-core businesses qualify as discontinued operations,
and accordingly, the Company has reported the results of operations and financial position of these businesses in
discontinued operations within the consolidated statements of operations and the consolidated balance sheets for
all periods presented as applicable.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. DISCONTINUED OPERATIONS (Continued)
The results from discontinued operations were as follows:
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$127,258 $237,292
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,793 145,403 235,710
$ 40,593
Gross profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,200) (18,145) 1,582
Selling, general and administrative expenses . . . . . . . . . . . . . . . 1,930 8,932 14,577
Intangibles amortization and impairment . . . . . . . . . . . . . . . . . . 11,000 6,325 4,725
Interest and other expense (income), net . . . . . . . . . . . . . . . . . . . 11,280 (7) 992
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,410) (33,395) (18,712)
Benefit from income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (959) (1,390) (2,670)
Net loss of discontinued operations
$(25,451)
$ (32,005) $ (16,042)
Interest and other expense (income), net for fiscal year 2013 include the loss on sale of the businesses
discussed above.
The current and non-current assets and liabilities of discontinued operations were as follows:
As of March 31, 2012
(In thousands)
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,222
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,002
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,418
Total current assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$21,642
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$30,377
Goodwill and other intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Total non-current assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . .
$41,417
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14,455
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,399
Total current liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . .
$24,854
As of March 31, 2013, there were no assets or liabilities attributable to discontinued operations.
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS
On February 20, 2013, the Company issued two tranches of Notes of $500 million each, which mature on
February 15, 2020 and February 15, 2023, respectively, in a private offering pursuant to Rule 144A and Regulation S
under the Securities Act. These notes are senior unsecured obligations and were issued by Flextronics International
Limited (“Parent”), and are guaranteed, fully and unconditionally, jointly and severally, on an unsecured basis, by
certain of the Company’s 100% owned subsidiaries (the “guarantor subsidiaries”). These subsidiary guarantees will
terminate upon 1) a sale or other disposition of the guarantor or the sale or disposition of all or substantially all the
assets of the guarantor (other than to Flextronics or a subsidiary); 2) such guarantor ceasing to be a guarantor or a
borrower under the Company’s Term Loan Agreement and the Revolving Line of Credit; 3) defeasance or discharge
of the Notes, as provided in the Notes indenture; or 4) if at any time the notes are rated investment grade.
In lieu of providing separate financial statements for the Guarantors, the Company has included the
accompanying condensed consolidated financial statements, which are presented using the equity method of
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
accounting. The principal elimination entries relate to investment in subsidiaries and intercompany balances and
transactions, including transactions with the Company’s non-guarantor subsidiaries.
Condensed Consolidating Balance Sheets as of March 31, 2013
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents . . . . .
Accounts receivable . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . .
Inter company receivable . . . . . .
Other current assets . . . . . . . . . .
$
740,515 $ 82,900 $ 763,672 $ — $ 1,587,087
— 458,617 1,653,379 — 2,111,996
— 1,063,627 1,658,873 — 2,722,500
4,440,955 4,726,673 6,490,274 (15,657,902) —
6,182 178,585 1,165,051 — 1,349,818
Total current assets . . . . . . . . .
Property and equipment, net . . . . .
Goodwill and other intangible
assets, net . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . .
5,187,652 6,510,402 11,731,249 (15,657,902) 7,771,401
— 328,621 1,845,967 — 2,174,588
1,075 40,626 301,851 — 343,552
2,498,080 105,136 4,902,815 (7,204,017) 302,014
4,127,384 (1,956,014) 16,994,616 (19,165,986) —
Total assets . . . . . . . . . . . . . . .
$11,814,191 $ 5,028,771 $35,776,498 $(42,027,905) $10,591,555
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Current liabilities:
Bank borrowings and current
portion of long-term debt . . . .
Accounts payable . . . . . . . . . . . .
Accrued payroll . . . . . . . . . . . . .
Inter company payable . . . . . . . .
Other current liabilities . . . . . . .
$
416,594 $ 60 $ — $ — $ 416,654
— 1,077,723 2,627,574 — 3,705,297
— 86,073 265,610 — 351,683
4,963,615 6,093,606 4,600,681 (15,657,902) —
32,440 424,599 1,242,112 — 1,699,151
Total current liabilities . . . . . .
Long term liabilities . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . .
5,412,649 7,682,061 8,735,977 (15,657,902) 6,172,785
4,154,784 2,488,279 2,732,966 (7,204,017) 2,172,012
2,246,758 (5,141,569) 24,307,555 (19,165,986) 2,246,758
Total liabilities and
shareholders’ equity . . . . . .
$11,814,191 $ 5,028,771 $35,776,498 $(42,027,905) $10,591,555
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Balance Sheets as of March 31, 2012
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents . . . . .
Accounts receivable . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . .
Inter company receivable . . . . . .
Current assets of discontinued
operations . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . .
Total current assets . . . . . . . . .
Property and equipment, net . . . . .
Goodwill and other intangible
assets, net . . . . . . . . . . . . . . . . . .
Long-term assets of discontinued
operations . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . .
$
649,252 $ 47,865 $ 821,212 $ — $ 1,518,329
— 899,146 1,694,683 — 2,593,829
— 1,384,193 1,916,598 — 3,300,791
3,304,798 4,260,557 6,120,995 (13,686,350) —
— — 21,642 — 21,642
861 167,969 931,129 — 1,099,959
3,954,911 6,759,730 11,506,259 (13,686,350) 8,534,550
— 250,179 1,826,263 — 2,076,442
1,375 28,880 129,669 — 159,924
— — 41,417 — 41,417
2,751,324 123,028 4,905,592 (7,558,473) 221,471
4,311,902 (2,422,600) 12,355,622 (14,244,924) —
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$11,019,512 $ 4,739,217 $30,764,822 $(35,489,747) $11,033,804
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Current liabilities:
Bank borrowings and current
portion of long-term debt . . . .
Accounts payable . . . . . . . . . . . .
Accrued payroll . . . . . . . . . . . . .
Current liabilities of
discontinued operations . . . . .
Inter company payable . . . . . . . .
Other current liabilities . . . . . . .
$
36,340 $ 3,000 $ — $ — $ 39,340
— 1,334,745 2,960,128 — 4,294,873
— 84,510 260,827 — 345,337
— — 24,854 — 24,854
4,177,361 5,543,119 3,965,870 (13,686,350) —
22,137 638,982 922,662 — 1,583,781
Total current liabilities . . . . . .
Long term liabilities . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . .
4,235,838 7,604,356 8,134,341 (13,686,350) 6,288,185
4,499,695 2,693,242 2,827,176 (7,558,473) 2,461,640
2,283,979 (5,558,381) 19,803,305 (14,244,924) 2,283,979
Total liabilities and
shareholders’ equity . . . . . .
$11,019,512 $ 4,739,217 $30,764,822 $(35,489,747) $11,033,804
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Statements of Operations for Fiscal Year Ended March 31, 2013
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
(In thousands)
Net sales . . . . . . . . . . . . . . . . . . . . . .
$
Cost of sales . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . .
— $14,630,979 $17,768,884 $(8,830,388) $23,569,475
— 13,162,397 17,855,384 (8,830,388) 22,187,393
— 20,366 195,468 — 215,834
Gross profit (loss) . . . . . . . . . . . . .
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . .
Intangible amortization . . . . . . . . . .
Restructuring charges . . . . . . . . . . . .
Interest and other expense
— 1,448,216 (281,968) — 1,166,248
— 199,934 605,301 — 805,235
300 7,840 21,389 — 29,529
— 1,556 10,044 — 11,600
(income), net . . . . . . . . . . . . . . . . .
(1,179,545) 699,459 471,155 — (8,931)
Income (loss) from continuing
operations before income taxes .
Provision for income taxes . . . . . . . .
Equity in earnings in subsidiaries . .
Income from continuing
operations . . . . . . . . . . . . . . . . .
Loss from discontinued operations,
net of tax . . . . . . . . . . . . . . . . . . . .
1,179,245 539,427 (1,389,857) — 328,815
— 1,708 24,605 — 26,313
(902,194) (371,682) 586,084 687,792 —
277,051 166,037 (828,378) 687,792 302,502
— — (25,451) — (25,451)
Net income (loss) . . . . . . . . . . . . .
$
277,051 $ 166,037 $ (853,829) $ 687,792 $ 277,051
Condensed Consolidating Statements of Operations for Fiscal Year Ended March 31, 2012
(In thousands)
Net sales . . . . . . . . . . . . . . . . . . . . . . .
$
Cost of sales . . . . . . . . . . . . . . . . . . . .
— $18,852,902 $22,012,300 $(11,522,173) $29,343,029
— 17,395,532 21,951,720 (11,522,173) 27,825,079
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
Gross profit . . . . . . . . . . . . . . . . . .
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . .
Intangible amortization . . . . . . . . . . .
Interest and other expense
— 1,457,370 60,580 — 1,517,950
— 203,673 673,891 — 877,564
2,550 11,559 35,463 — 49,572
(income), net . . . . . . . . . . . . . . . . .
(442,563) 1,079,398 (620,751) — 16,084
Income (loss) from continuing
operations before income taxes .
Provision for income taxes . . . . . . . . .
Equity in earnings in subsidiaries . . .
Income from continuing
440,013 162,740 (28,023) — 574,730
— 1,633 52,327 — 53,960
48,752 13,171 360,673 (422,596) —
operations . . . . . . . . . . . . . . . . . .
488,765 174,278 280,323 (422,596) 520,770
Loss from discontinued operations,
net of tax . . . . . . . . . . . . . . . . . . . . .
— — (32,005) — (32,005)
Net income (loss) . . . . . . . . . . . . . .
$ 488,765 $ 174,278 $ 248,318 $ (422,596) $ 488,765
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Statements of Operations for Fiscal Year Ended March 31, 2011
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
(In thousands)
Net sales . . . . . . . . . . . . . . . . . . . . . . .
$
Cost of sales . . . . . . . . . . . . . . . . . . . .
— $18,257,141 $20,757,338 $(10,571,846) $28,442,633
— 16,869,570 20,561,564 (10,571,846) 26,859,288
Gross profit . . . . . . . . . . . . . . . . . . .
— 1,387,571 195,774 — 1,583,345
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . .
Intangible amortization . . . . . . . . . . . .
Interest and other expense
— 206,314 595,458 — 801,772
2,500 19,218 44,470 — 66,188
(income), net . . . . . . . . . . . . . . . . . .
(40,425) 974,117 (852,617) — 81,075
Income from continuing
operations before income taxes . .
Provision for income taxes . . . . . . . . .
Equity in earnings in subsidiaries . . . .
37,925 187,922 408,463 — 634,310
— 4,638 17,411 — 22,049
558,294 (56,348) 352,163 (854,109) —
Income from continuing
operations . . . . . . . . . . . . . . . . . . .
596,219 126,936 743,215 (854,109) 612,261
Loss from discontinued operations,
net of tax . . . . . . . . . . . . . . . . . . . . .
— — (16,042) — (16,042)
Net income (loss) . . . . . . . . . . . . . . .
$596,219 $ 126,936 $ 727,173 $ (854,109) $ 596,219
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Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
(In thousands)
Net income (loss) . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
$277,051 $166,037 $(853,829) $687,792 $277,051
Foreign currency translation
adjustments, net of zero tax . . . . . . . .
Unrealized loss on derivative instruments
and other, net of zero tax . . . . . . . . . .
(16,289) 6,866 10,377 (17,243) (16,289)
(20,755) (21,084) (20,755) 41,839 (20,755)
Comprehensive income (loss) . . . . . . . . . .
$240,007 $151,819 $(864,207) $712,388 $240,007
Condensed Consolidating Statements of Comprehensive Income for Fiscal Year Ended March 31, 2012
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
(In thousands)
Net income (loss) . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
$488,765 $174,278 $248,318 $(422,596) $488,765
Foreign currency translation
adjustments, net of zero tax . . . . . . . .
Unrealized loss on derivative instruments
and other, net of zero tax . . . . . . . . . .
(53,616) 41,913 755 (42,668) (53,616)
(7,575) (943) (7,575) 8,518 (7,575)
Comprehensive income (loss) . . . . . . . . . .
$427,574 $215,248 $241,498 $(456,746) $427,574
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Statements of Comprehensive Income for Fiscal Year Ended March 31, 2011
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
(In thousands)
Net income (loss) . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
$596,219 $126,936 $727,173 $(854,109) $596,219
Foreign currency translation adjustments,
net of zero tax . . . . . . . . . . . . . . . . . . .
Unrealized gain on derivative instruments
and other, net of zero tax . . . . . . . . . .
12,883 22,367 (26,035) 3,668 12,883
23,276 7,632 13,075 (20,707) 23,276
Comprehensive income (loss) . . . . . . . . . .
$632,378 $156,935 $714,213 $(871,148) $632,378
Condensed Consolidating Statements of Cash Flows for Fiscal Year Ended March 31, 2013
(In thousands)
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . . . . $ 1,136,875 $ 588,299 $ (608,973) $ (771) $ 1,115,430
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
Cash flows from investing activities:
Purchases of property and equipment,
net of proceeds from disposal . . . . . .
Acquisition of businesses, net of
— (134,819) (300,750) 241 (435,328)
cash acquired . . . . . . . . . . . . . . . . . . .
— (20,150) (163,947) — (184,097)
Proceeds from divestitures of
operations, net . . . . . . . . . . . . . . . . . .
Investing cash flows from (to) affiliates .
Other investing activities . . . . . . . . . . . .
— — 22,585 — 22,585
(1,528,819) (134,715) 3,468,696 (1,805,162) —
— 6,412 (106,771) — (100,359)
Net cash provided by (used in)
investing activities . . . . . . . . . . . . .
(1,528,819) (283,272) 2,919,813 (1,804,921) (697,199)
Cash flows from financing activities:
Proceeds from bank borrowings and
long-term debt . . . . . . . . . . . . . . . . . .
1,250,000 151 62 — 1,250,213
Repayments of bank borrowings and
long-term debt . . . . . . . . . . . . . . . . . .
(379,399) (3,876) (8,584) — (391,859)
Payments for early repurchase of
long-term debt . . . . . . . . . . . . . . . . . .
(756,855) (243,145) — (1,000,000)
Payments for repurchases of
ordinary shares . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options .
Financing cash flows from (to) affiliates .
Other financing activities . . . . . . . . . . .
Net cash provided by (used in)
(322,040) — — — (322,040)
22,257 — — — 22,257
693,185 (18,006) (2,480,871) 1,805,692 —
— — 101,851 — 101,851
financing activities . . . . . . . . . . . . .
507,148 (264,876) (2,387,542) 1,805,692 (339,578)
Effect of exchange rates on cash . . . . . . . .
(23,941) (5,116) 19,162 — (9,895)
Net change in cash and cash equivalents .
91,263 35,035 (57,540) — 68,758
Cash and cash equivalents, beginning
of year . . . . . . . . . . . . . . . . . . . . . . . .
649,252 47,865 821,212 — 1,518,329
Cash and cash equivalents, end of year . $
740,515 $ 82,900 $ 763,672 $ — $ 1,587,087
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Statements of Cash Flows for Fiscal Year Ended March 31, 2012
(In thousands)
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . . . . $
412,529 $(190,136) $ 594,251 $ (12,376) $ 804,268
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
Cash flows from investing activities:
Purchases of property and equipment,
net of proceeds from disposal . . . . . .
— (67,425) (320,300) (279) (388,004)
Acquisition of businesses, net of
cash acquired . . . . . . . . . . . . . . . . . . .
— (70,831) (21,426) — (92,257)
Proceeds from divestitures of
operations, net . . . . . . . . . . . . . . . . . .
Investing cash flows from (to) affiliates .
Other investing activities . . . . . . . . . . . .
Net cash provided by (used in)
— — 1,398 — 1,398
363,716 294,368 1,029,464 (1,687,548) —
(1,500) 4,626 (5,627) — (2,501)
investing activities . . . . . . . . . . . . .
362,216 160,738 683,509 (1,687,827) (481,364)
Cash flows from financing activities:
Proceeds from bank borrowings and
long-term debt . . . . . . . . . . . . . . . . . .
2,827,875 — 5,829 — 2,833,704
Repayments of bank borrowings and
long-term debt . . . . . . . . . . . . . . . . . .
(2,383,596) (3,503) (2,022) — (2,389,121)
Payments for early repurchase of
long-term debt . . . . . . . . . . . . . . . . . .
(480,000) — — — (480,000)
Payments for repurchases of
ordinary shares . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options .
Financing cash flows from (to) affiliates .
(509,800) — — — (509,800)
23,055 — — — 23,055
(112,398) 16,789 (1,604,594) 1,700,203 —
Net cash provided by (used in)
financing activities . . . . . . . . . . . . .
(634,864) 13,286 (1,600,787) 1,700,203 (522,162)
Effect of exchange rates on cash . . . . . . . .
(55,416) (2,877) 27,409 — (30,884)
Net change in cash and cash equivalents .
84,465 (18,989) (295,618) — (230,142)
Cash and cash equivalents, beginning
of year . . . . . . . . . . . . . . . . . . . . . . . .
564,787 66,854 1,116,830 — 1,748,471
Cash and cash equivalents, end of year . $
649,252 $ 47,865 $ 821,212 $ — $ 1,518,329
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Statements of Cash Flows for Fiscal Year Ended March 31, 2011
(In thousands)
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . . . . $
106,672 $ 19,730 $ 721,985 $ 8,957 $ 857,344
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
Cash flows from investing activities:
Purchases of property and equipment,
net of proceeds from disposal . . . . . .
— (46,358) (347,421) (90) (393,869)
Acquisition of businesses, net of
cash acquired . . . . . . . . . . . . . . . . . . .
— — (16,966) — (16,966)
Proceeds from divestitures of
operations, net . . . . . . . . . . . . . . . . . .
Investing cash flows from (to) affiliates .
Other investing activities . . . . . . . . . . . .
Net cash provided by (used in)
— — 625 — 625
734,710 (18,151) (4,191,785) 3,475,226 —
— (1,877) (1,154) — (3,031)
investing activities . . . . . . . . . . . . .
734,710 (66,386) (4,556,701) 3,475,136 (413,241)
Cash flows from financing activities:
Proceeds from bank borrowings and
long-term debt . . . . . . . . . . . . . . . . . .
3,471,370 — 124 — 3,471,494
Repayments of bank borrowings and
long-term debt . . . . . . . . . . . . . . . . . .
(3,196,937) (3,571) (220,086) — (3,420,594)
Payments for early repurchase of
long-term debt . . . . . . . . . . . . . . . . . .
(308,466) — (7,029) — (315,495)
Payments for repurchases of
ordinary shares . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options .
Financing cash flows from (to) affiliates .
(400,400) — — — (400,400)
23,299 — — — 23,299
(472,891) (123,929) 4,080,913 (3,484,093) —
Net cash provided by (used in)
financing activities . . . . . . . . . . . . .
(884,025) (127,500) 3,853,922 (3,484,093) (641,696)
Effect of exchange rates on cash . . . . . . . .
32,358 3,381 (17,231) — 18,508
Net change in cash and cash equivalents .
(10,285) (170,775) 1,975 — (179,085)
Cash and cash equivalents, beginning
of year . . . . . . . . . . . . . . . . . . . . . . . .
575,072 237,629 1,114,855 — 1,927,556
Cash and cash equivalents, end of year . $
564,787 $ 66,854 $ 1,116,830 $ — $ 1,748,471
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
20. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table contains unaudited quarterly financial data for fiscal years 2013 and 2012. Earnings
per share are computed independently for each quarter presented; therefore, the sum of the quarterly earnings
per share may not equal the total earnings per share amounts for the fiscal year.
Fiscal Year Ended March 31, 2013 Fiscal Year Ended March 31, 2012
First
Second
Third Fourth First Second
Third Fourth
(In thousands, except per share amounts)
Net sales(1) . . . . . . . . $5,975,995 $6,174,841 $6,123,321 $5,295,318 $7,495,288 $8,008,428 $7,469,347 $6,369,966
195,657 400,776 372,518 385,747 358,909
Gross profit(1) . . . . .
Income (loss) from
246,462
357,357
366,772
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operations, net
of taxes . . . . . . . . .
Loss from
discontinued
operations,
net of taxes . . . . . .
136,769
160,453
54,596
(49,316) 137,305 133,949 106,206 143,310
(8,297)
(9,906)
(7,248)
— (5,330) (4,069) (4,029) (18,577)
Net income (loss) . . .
128,472
150,547
47,348
(49,316) 131,975 129,880 102,177 124,733
Earnings (loss)
per share:
Income (loss) from
continuing
operations:
Basic . . . . . . . . . $
Diluted . . . . . . . $
Loss from
discontinued
operations:
Basic . . . . . . . . . $
0.20 $
0.20 $
0.24 $
0.08 $
(0.07) $ 0.18 $ 0.19 $ 0.15 $ 0.21
0.24 $
0.08 $
(0.07) $ 0.18 $ 0.18 $ 0.15 $ 0.20
(0.01) $
(0.01) $
(0.01) $
— $ (0.01) $ (0.01) $ (0.01) $ (0.03)
Diluted . . . . . . . $
(0.01) $
(0.01) $
(0.01) $
— $ (0.01) $ (0.01) $ (0.01) $ (0.03)
Net income (loss):
Basic . . . . . . . . . $
Diluted . . . . . . . $
0.19 $
0.19 $
0.23 $
0.07 $
(0.07) $ 0.18 $ 0.18 $ 0.14 $ 0.18
0.22 $
0.07 $
(0.07) $ 0.17 $ 0.18 $ 0.14 $ 0.18
(1) As discussed in note 18 to the financial statements, “Discontinued Operations”, during fiscal 2013 the
Company finalized the sale of two of its non-core businesses, and is reporting the operating results of these
non-core businesses as discontinued operations. Accordingly net sales and gross profit data above have been
adjusted to exclude net revenue and gross profit (loss) pertaining to these non-core businesses.
The Company recorded restructuring charges during the third and fourth quarters of fiscal year 2013. The
Company classified approximately $98.3 million and $117.5 million of these charges as a component of cost of
sales during the third and fourth quarters of fiscal year 2013, respectively, and approximately $4.4 million and
$7.2 million of these charges as a component of selling, general and administrative expenses during the third and
fourth quarters of fiscal year 2013, respectively.
The Company recognized a $23.0 million gain as a component of other charges (income), net in the
three-month period ended September 28, 2012 for the cumulative fair value adjustment of the Company’s
warrants to purchase common shares of a supplier. These fully-vested warrants, which are derivative instruments,
are to be fair valued at each reporting date with gains or losses from changes in fair value recognized in the
statements of operations. The gain from changes in fair value recognized in the three-month period ended
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
20. QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued)
September 28, 2012 includes an out-of-period adjustment of $12.8 million and for the year ended March 31,
2013 includes an out-of-period adjustment of $5.7 million. Management believes the impact of the error is not
material to current or prior fiscal periods.
During the fourth quarter of fiscal 2013, the Company recorded certain purchase accounting adjustments as
further discussed in note 15 to the consolidated financial statements which resulted in the release of $22.3
million related to the valuation allowances for deferred tax assets in the fourth quarter of fiscal 2013. In
accordance with the accounting guidance applicable to business combinations, the Company has re-casted the
operating results for the quarter ended December 31, 2012 in the table above to reflect the release of the
valuation allowance for deferred tax assets.
During the fourth quarter of fiscal 2013, the Company recognized an income tax benefit of $9.3 million
that related to prior fiscal years, of which $6.1 million related to the fiscal year ended March 31, 2012 and
$3.2 million related to years prior to fiscal 2012. Management believes the impact of this error is not material to
current or prior fiscal periods.
During the fourth quarter of fiscal 2012, the Company identified certain accounting errors in the statutory
to US GAAP adjustments at one of its foreign sites that originated in prior interim and annual periods.
Management conducted additional procedures and concluded that these errors were isolated to that location.
These errors, which primarily understated cost of sales, totaled $0.8 million in the first nine months of fiscal
2012 and $10.4 million and $8.0 million for the fiscal years ended March 31, 2011 and 2010, and were
corrected by the Company as an out-of-period adjustment in the fourth quarter of fiscal 2012. This fourth
quarter adjustment was partially offset by the correction of an error identified in the fourth quarter of fiscal 2012
amounting to $4.2 million related to the provisions for income taxes in the prior fiscal 2012 interim periods.
Management believes the impact of these items, both individually and in the aggregate, to the fiscal year ended
March 31, 2012 and to prior fiscal and interim periods presented was not material. As a result of recording these
adjustments in the fourth quarter, net income for the quarter and year ended March 31, 2012 were reduced by
$21.5 million ($0.03 per share) and $24.9 million ($0.03 per share), respectively.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of the Company’s management, including the Company’s
Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the
Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of
March 31, 2013. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer
concluded that, as of March 31, 2013, such disclosure controls and procedures were effective in ensuring that
information required to be disclosed by the Company in reports that it files or submits under the Securities
Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated
to our management, including our principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. As
of March 31, 2013, under the supervision and with the participation of management, including the Company’s
Chief Executive Officer and Chief Financial Officer, an evaluation was conducted of the effectiveness of the
Company’s internal control over financial reporting based on the framework in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Based on that evaluation, management concluded that the Company’s internal control over financial reporting
was adequately designed and operating effectively as of March 31, 2013.
Because of its inherent limitations, a system of internal control over financial reporting can provide only
reasonable assurance and may not prevent or detect misstatements or prevent or detect instances of fraud. These
inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls may be circumvented by the individual acts
of some persons, by collusion of two or more people, or by management override of the control. The projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Management’s annual assessment of the effectiveness of our internal control over financial reporting as of
March 31, 2013 excluded the internal control over financial reporting of Saturn , which constitutes, in aggregate,
9.4% and 2.6% of net and total assets, respectively, and 0.4% of net sales and 0.4% of direct cost of sales of the
consolidated financial statements as of and for the fiscal year ended March 31, 2013.
(c) Attestation Report of the Registered Public Accounting Firm
The effectiveness of the Company’s internal control over financial reporting as of March 31, 2013 has been
audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report
which appears in this Item under the heading “Report of Independent Registered Public Accounting Firm.”
(d) Changes in Internal Control Over Financial Reporting
On December 3, 2012, we completed the acquisition of Saturn, at which time Saturn became a subsidiary
of the Company. See note 15 to the consolidated financial statements for additional information. Other than
these business acquisitions, there were no changes in the Company’s internal controls over financial reporting
that occurred during the year ended March 31, 2013 that have materially affected, or are reasonably likely to
materially affect, its internal controls over financial reporting.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Flextronics International Ltd.
Singapore
We have audited the internal control over financial reporting of Flextronics International Ltd. and
subsidiaries (the “Company”) as of March 31, 2013, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in
Management’s Annual Report on Internal Control over Financial Reporting, management excluded from its
assessment the internal control over financial reporting at Saturn Electronics and Engineering Inc., which was
acquired on December 3, 2012 and whose financial statements constitute 9.4% and 2.6% of net and total assets,
respectively, 0.4% of net sales and 0.4% of direct cost of sales of the consolidated financial statement amounts
as of and for the year ended March 31, 2013. Accordingly, our audit did not include the internal control over
financial reporting at Saturn Electronics and Engineering Inc. The Company’s management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s Annual Report on
Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of,
the company’s principal executive and principal financial officers, or persons performing similar functions, and
effected by the company’s board of directors, management, and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of
collusion or improper management override of controls, material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal
control over financial reporting to future periods are subject to the risk that the controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of March 31, 2013, based on the criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements as of and for the year ended March 31, 2013 of the
Company and our report dated May 28, 2013 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
May 28, 2013
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ITEM 9B. OTHER INFORMATION
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information with respect to this item may be found in our definitive proxy statement to be delivered to
shareholders in connection with our 2013 Annual General Meeting of Shareholders. Such information is
incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item may be found in our definitive proxy statement to be delivered to
shareholders in connection with our 2013 Annual General Meeting of Shareholders. Such information is
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS
Information with respect to this item may be found in our definitive proxy statement to be delivered to
shareholders in connection with our 2013 Annual General Meeting of Shareholders. Such information is
incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Information with respect to this item may be found in our definitive proxy statement to be delivered to
shareholders in connection with our 2013 Annual General Meeting of Shareholders. Such information is
incorporated by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to this item may be found in our definitive proxy statement to be delivered to
shareholders in connection with our 2013 Annual General Meeting of Shareholders. Such information is
incorporated by reference.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this annual report on Form 10-K:
PART IV
1.
Financial Statements. See Item 8, “Financial Statements and Supplementary Data.”
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Financial Statement Schedules.
2.
in the financial statements, see Concentration of Credit Risk in Note 2, “Summary of Accounting
Policies” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and
Supplementary Data.”
“Schedule II—Valuation and Qualifying Accounts” is included
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3.
Exhibits. The following exhibits are filed with this annual report on Form 10-K:
Incorporated by
Reference
Exhibit
No.
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
3.01 Memorandum of Association, as amended
10-K 000-23354
05-29-07
8-K 000-23354
10-11-06
3.01
3.01
8-K 000-23354
10-24-11
10.01
8-K 000-23354
10-05-07
10.1
10-Q 000-23354
02-08-08
10.01
10-Q 000-23354
02-08-08
10.02
10-Q 000-23354
10-26-12
4.01
10-Q 000-23354
10-26-12
4.02
3.02
4.01
4.02
4.03
4.04
4.05
4.06
Amended and Restated Articles of Association
of Flextronics International Ltd.
Credit Agreement, dated as of October 19,
2011, by and among Flextronics International
Ltd. and certain of its subsidiaries as
borrowers, Bank of America, N.A., as
Administrative Agent and Swing Line Lender,
and the other Lenders party thereto.
Term Loan Agreement, dated as of October 1,
2007, among Flextronics International Ltd., as
a Borrower, Flextronics International USA,
Inc., as U.S. Borrower, Citicorp North America,
Inc., as Administrative Agent, Citigroup Global
Markets Inc., as Sole Lead Arranger,
Bookrunner and Syndication Agent and the
Lenders from time to time party thereto.
Amendment No. 1 dated October 22, 2007 to
Term Loan Agreement, dated as of October 1,
2007, among Flextronics International Ltd., as a
Borrower, Flextronics International USA, Inc.,
as U.S. Borrower, Citicorp North America, Inc.,
as Administrative Agent, and the Lenders party
thereto
Amendment No. 2 dated December 28, 2007 to
Term Loan Agreement, dated as of October 1,
2007, among Flextronics International Ltd., as a
Borrower, Flextronics International USA, Inc.,
as U.S. Borrower, Citicorp North America, Inc.,
as Administrative Agent, and the Lenders party
thereto
Amendment No. 1 dated September 10, 2012 to
Credit Agreement, dated as of October 19,
2011, by and among Flextronics International
Ltd. and certain of its subsidiaries as borrowers,
Bank of America, N.A., as Administrative
Agent and Swing Line Lender, and the other
Lenders party thereto.
Amendment No. 2 dated September 28, 2012 to
Credit Agreement, dated as of October 19,
2011, by and among Flextronics International
Ltd. and certain of its subsidiaries as borrowers,
Bank of America, N.A., as Administrative
Agent and Swing Line Lender, and the other
Lenders party thereto.
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4.03
4.04
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Incorporated by
Reference
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Indenture, dated as of February 20, 2013, by
and between the Company, the Guarantors
party thereto and U.S. Bank National
Association, as Trustee.
8-K 000-23354
02-22-13
4.01
Form of 4.625% Note due 2020
8-K 000-23354
02-22-13
Form of 5.000% Note due 2023
8-K 000-23354
02-22-13
8-K 000-23354
02-22-13
Exhibit
No.
4.07
4.08
4.09
4.10
4.11
10.01
10.02
Registration Rights Agreement, dated as of
February 20, 2013, by and between the
Company, the Guarantors named therein, and
Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Citigroup Global Markets Inc. and
J.P. Morgan Securities LLC, as representatives
of the initial purchasers named therein
First Supplemental Indenture, dated as of
March 28, 2013, among the Company, the
Guarantor party thereto and U.S. Bank National
Association, as Trustee, to the Indenture, dated
as of February 20, 2013, by and between the
Company, the Guarantors party thereto and
U.S. Bank National Association, as Trustee,
related to the Company’s 4.625% Notes due
2020 and 5.000% Notes due 2023
Form of Indemnification Agreement between the
Registrant and its Directors and certain officers.†
Form of Indemnification Agreement between
Flextronics Corporation and Directors and
certain officers of the Registrant.†
10-K
000-23354
05-20-09
10.1
10-K 000-23354
05-20-09
10.2
10.03
Registrant’s 1993 Share Option Plan, as
amended.†
8-K 000-23354
07-14-09
10.04
10.04
Registrant’s 1998 Interim Stock Plan.†
S-8
333-71049
01-22-99
10.05
Registrant’s 1999 Interim Stock Plan.†
S-8
333-71049
01-22-99
4.5
4.6
10.06
10.07
10.08
10.09
10.10
10.11
Flextronics International Ltd. 2001 Equity
Incentive Plan, as amended.†
Registrant’s 2002 Interim Incentive Plan, as
amended.†
Flextronics International USA, Inc. 401(k)
Plan.†
Registrant’s 2004 Award Plan for New
Employees, as amended.†
Flextronics International Ltd. 2010 Equity
Incentive Plan.†
10-Q 000-23354
11-03-09
10.01
8-K 000-23354
07-14-09
10.02
S-1
33-74622
01-31-94
10.52
8-K
000-23354
07-14-09
10.09
8-K
000-23354
07-28-10
10.01
Form of Share Option Award Agreement under
2010 Equity Incentive Plan†
10-Q
000-23354
08-05-10
10.02
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CLEAN
Incorporated by
Reference
Exhibit
No.
10.12
10.13
10.14
10.15
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Form of Restricted Share Unit Award
Agreement under 2010 Equity Incentive Plan†
Form of Share Bonus Award Agreement under
2001 Equity Incentive Plan†
Flextronics International USA, Inc. Third
Amended and Restated 2005 Senior
Management Deferred Compensation Plan†
Flextronics International USA, Inc. Third
Amended and Restated Senior Executive
Deferred Compensation Plan†
10-Q
000-23354
08-05-10
10.03
10-Q
000-23354
08-05-10
10.04
10-Q 000-23354
02-05-09
10.02
10-Q
000-23354
02-05-09
10.01
10.16
Summary of Directors’ Compensation†
10-Q
000-23354
07-30-12
10.06
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
Solectron Corporation 2002 Stock Plan, as
amended.†
Award Agreement for Paul Read under Senior
Management Deferred Compensation Plan,
dated June 30, 2005.†
Award Agreement for Paul Read under Senior
Executive Deferred Compensation Plan.†
Award Agreement for Michael J. Clarke under
Senior Management Deferred Compensation
Plan, dated July 31, 2007.†
Award Agreement for Francois Barbier under
Senior Management Deferred Compensation
Plan, dated July 22, 2005.†
Award Agreement for Werner Widmann
Deferred Compensation Plan, dated as of
July 22, 2005.†
Addendum to Award Agreement for Werner
Widmann Deferred Compensation Plan, dated
as of June 30, 2006.†
Description of Annual Incentive Bonus Plan
for Fiscal 2014†
Executive Incentive Compensation
Recoupment Policy†
10-Q
000-23354
11-03-09
10.02
10-Q
000-23354
08-05-08
10.03
10-Q
000-23354
02-05-09
10.03
10-K
000-23354
05-20-09
10.23
10-Q
000-23354
08-05-10
10.08
8-K
000-23354
07-07-06
10.01
8-K
000-23354
07-07-06
10.02
10-Q
000-23354
08-05-10
10.06
Francois Barbier Offer Letter, dated as of July 1,
2010†
8-K
000-23354
09-03-10
10.01
Francois Barbier Relocation Expenses
Addendum, dated as of March 5, 2013†
Francois Barbier Confirmation Date Letter,
dated as of August 30, 2010†
2010 Flextronics International USA, Inc.
Deferred Compensation Plan†
8-K
000-23354
09-03-10
10.03
10-Q
000-23354
11-03-10
10.04
X
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CLEAN
Incorporated by
Reference
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Exhibit
No.
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
Form of Restricted Stock Unit Award Under
2010 Equity Incentive Plan†
Form of Amendment to certain senior
executive Share Bonus Award Agreements
under the 2001 Equity Incentive Plan†
Form of Amendment to certain senior
executive Restricted Share Unit Agreements
under the 2010 Equity Incentive Plan†
Form of Restricted Share Unit Award
Agreement under the 2010 Equity Incentive
Plan for certain performance based awards†
Form of Award Agreement under 2010
Deferred Compensation Plan†
Compensation Arrangements of Certain
Executive Officers of Flextronics International
Ltd.†
Award Agreement for Christopher Collier
under Senior Management Deferred
Compensation Plan dated June 30, 2005†
Award Agreement for Paul Humphries under
Senior Management Deferred Compensation
Plan dated June 30, 2005†
Jonathan Hoak Offer Letter dated December 8,
2010†
Separation Agreement between Flextronics
International USA, Inc. and Eslie C. Sykes
dated November 26, 2012†
10-Q 000-23354
08-09-11
10.01
10-Q 000-23354
02-04-13
10.01
10-Q 000-23354
02-04-13
10.02
10-Q 000-23354
02-04-13
10.03
10-Q 000-23354
07-30-12
10.01
10-Q 000-23354
08-08-07
10.02
10-Q 000-23354
07-30-12
10.04
10-Q 000-23354
07-30-12
10.05
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X
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21.01
Subsidiaries of Registrant.
23.01
Consent of Deloitte & Touche LLP.
24.01
31.01
31.02
32.01*
32.02*
Power of Attorney (included on the signature
page to this Form 10-K)
Certification of Chief Executive Officer
pursuant to Rule 13a-14(a) of the Exchange Act
Certification of Chief Financial Officer
pursuant to Rule 13a-14(a) of the Exchange Act
Certification of the Chief Executive Officer
pursuant to Rule 13a-14(b) of the Exchange
Act and 18 U.S.C. Section 1350
Certification of the Chief Financial Officer
pursuant to Rule 13a-14(b) of the Exchange
Act and 18 U.S.C. Section 1350
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CLEAN
Incorporated by
Reference
Exhibit
No.
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
101.INS
XBRL Instance Document
101.SCH
101.CAL
XBRL Taxonomy Extension Scheme
Document
XBRL Taxonomy Extension Calculation
Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition
Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase
Document
101.PRE
XBRL Taxonomy Extension Presentation
Linkbase Document
X
X
X
X
X
X
* This exhibit is furnished with this Annual Report on Form 10-K, is not deemed filed with the Securities and
Exchange Commission, and is not incorporated by reference into any filing of Flextronics International Ltd.
under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether
made before or after the date hereof and irrespective of any general incorporation language contained in
such filing.
† Management contract, compensatory plan or arrangement.
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CLEAN
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Flextronics International Ltd.
Michael M. McNamara
Chief Executive Officer
By: /s/ MICHAEL M. MCNAMARA
Date: May 28, 2013
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints jointly and severally, Michael M. McNamara and Christopher Collier and each one of
them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any and
all amendments to this Report, and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
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/S/ MICHAEL M. MCNAMARA
(Principal Executive Officer) May 28, 2013
Michael M. McNamara
Chief Executive Officer and Director
/S/ CHRISTOPHER COLLIER
(Principal Financial and Accounting Officer) May 28, 2013
Christopher Collier
Chief Financial Officer
/S/ H. RAYMOND BINGHAM
Chairman of the Board May 28, 2013
H. Raymond Bingham
/S/ JAMES A. DAVIDSON
Director May 28, 2013
James A. Davidson
/S/ DANIEL H. SCHULMAN
Director May 28, 2013
Daniel H. Schulman
/S/ WILLY SHIH, PH.D.
Director May 28, 2013
Willy Shih, Ph.D.
/S/ WILLIAM D. WATKINS
Director May 28, 2013
William D. Watkins
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Signature Title Date
/S/ LAY KOON TAN
Director May 28, 2013
Lay Koon Tan
/S/ LAWRENCE A. ZIMMERMAN
Director May 28, 2013
Lawrence A. Zimmerman
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EXHIBIT INDEX
Incorporated by
Reference
Exhibit
No.
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
3.01 Memorandum of Association, as amended
10-K 000-23354
05-29-07
8-K 000-23354
10-11-06
3.01
3.01
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8-K 000-23354
10-24-11
10.01
8-K 000-23354
10-05-07
10.1
10-Q 000-23354
02-08-08
10.01
10-Q
000-23354
02-08-08
10.02
10-Q
000-23354
10-26-12
4.01
10-Q
000-23354
10-26-12
4.02
3.02
4.01
4.02
4.03
4.04
4.05
4.06
Amended and Restated Articles of Association
of Flextronics International Ltd.
Credit Agreement, dated as of October 19,
2011, by and among Flextronics International
Ltd. and certain of its subsidiaries as
borrowers, Bank of America, N.A., as
Administrative Agent and Swing Line Lender,
and the other Lenders party thereto.
Term Loan Agreement, dated as of October 1,
2007, among Flextronics International Ltd., as
a Borrower, Flextronics International USA,
Inc., as U.S. Borrower, Citicorp North America,
Inc., as Administrative Agent, Citigroup Global
Markets Inc., as Sole Lead Arranger,
Bookrunner and Syndication Agent and the
Lenders from time to time party thereto.
Amendment No. 1 dated October 22, 2007 to
Term Loan Agreement, dated as of October 1,
2007, among Flextronics International Ltd., as
a Borrower, Flextronics International USA,
Inc., as U.S. Borrower, Citicorp North
America, Inc., as Administrative Agent, and
the Lenders party thereto
Amendment No. 2 dated December 28, 2007
to Term Loan Agreement, dated as of October
1, 2007, among Flextronics International Ltd.,
as a Borrower, Flextronics International USA,
Inc., as U.S. Borrower, Citicorp North
America, Inc., as Administrative Agent, and
the Lenders party thereto
Amendment No. 1 dated September 10, 2012
to Credit Agreement, dated as of October 19,
2011, by and among Flextronics International
Ltd. and certain of its subsidiaries as
borrowers, Bank of America, N.A., as
Administrative Agent and Swing Line Lender,
and the other Lenders party thereto.
Amendment No. 2 dated September 28, 2012
to Credit Agreement, dated as of October 19,
2011, by and among Flextronics International
Ltd. and certain of its subsidiaries as
borrowers, Bank of America, N.A., as
Administrative Agent and Swing Line Lender,
and the other Lenders party thereto.
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Incorporated by
Reference
Exhibit
No.
4.07
4.08
4.09
4.10
4.11
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Indenture, dated as of February 20, 2013, by
and between the Company, the Guarantors
party thereto and U.S. Bank National
Association, as Trustee.
8-K
000-23354
02-22-13
4.01
Form of 4.625% Note due 2020
8-K
000-23354
02-22-13
Form of 5.000% Note due 2023
8-K
000-23354
02-22-13
8-K
000-23354
02-22-13
Registration Rights Agreement, dated as of
February 20, 2013, by and between the
Company, the Guarantors named therein, and
Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Citigroup Global Markets Inc. and
J.P. Morgan Securities LLC, as representatives
of the initial purchasers named therein
First Supplemental Indenture, dated as of
March 28, 2013, among the Company, the
Guarantor party thereto and U.S. Bank
National Association, as Trustee, to the
Indenture, dated as of February 20, 2013, by
and between the Company, the Guarantors
party thereto and U.S. Bank National
Association, as Trustee, related to the
Company’s 4.625% Notes due 2020 and
5.000% Notes due 2023
4.02
4.03
4.04
X
10.01
10.02
Form of Indemnification Agreement between
the Registrant and its Directors and certain
officers.†
Form of Indemnification Agreement between
Flextronics Corporation and Directors and
certain officers of the Registrant.†
10.03
Registrant’s 1993 Share Option Plan, as
amended.†
10-K 000-23354
05-20-09
10.1
10-K
000-23354
05-20-09
10.2
8-K
000-23354
07-14-09
10.04
10.04
Registrant’s 1998 Interim Stock Plan.†
S-8
333-71049
01-22-99
10.05
Registrant’s 1999 Interim Stock Plan.†
S-8
333-71049
01-22-99
4.5
4.6
10.06
10.07
10.08
10.09
10.10
Flextronics International Ltd. 2001 Equity
Incentive Plan, as amended.†
Registrant’s 2002 Interim Incentive Plan, as
amended.†
Flextronics International USA, Inc. 401(k)
Plan.†
Registrant’s 2004 Award Plan for New
Employees, as amended.†
Flextronics International Ltd. 2010 Equity
Incentive Plan.†
10-Q
000-23354
11-03-09
10.01
8-K
000-23354
07-14-09
10.02
S-1
33-74622
01-31-94
10.52
8-K
000-23354
07-14-09
10.09
8-K
000-23354
07-28-10
10.01
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Incorporated by
Reference
Exhibit
No.
10.11
10.12
10.13
10.14
10.15
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Form of Share Option Award Agreement under
2010 Equity Incentive Plan†
Form of Restricted Share Unit Award
Agreement under 2010 Equity Incentive Plan†
Form of Share Bonus Award Agreement under
2001 Equity Incentive Plan†
Flextronics International USA, Inc. Third
Amended and Restated 2005 Senior
Management Deferred Compensation Plan†
Flextronics International USA, Inc. Third
Amended and Restated Senior Executive
Deferred Compensation Plan†
10-Q
000-23354
08-05-10
10.02
10-Q
000-23354
08-05-10
10.03
10-Q
000-23354
08-05-10
10.04
10-Q
000-23354
02-05-09
10.02
10-Q
000-23354
02-05-09
10.01
10.16
Summary of Directors’ Compensation†
10-Q
000-23354
07-30-12
10.06
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
Solectron Corporation 2002 Stock Plan, as
amended.†
Award Agreement for Paul Read under Senior
Management Deferred Compensation Plan,
dated June 30, 2005.†
Award Agreement for Paul Read under Senior
Executive Deferred Compensation Plan.†
Award Agreement for Michael J. Clarke under
Senior Management Deferred Compensation
Plan, dated July 31, 2007.†
Award Agreement for Francois Barbier under
Senior Management Deferred Compensation
Plan, dated July 22, 2005.†
Award Agreement for Werner Widmann
Deferred Compensation Plan, dated as of
July 22, 2005.†
Addendum to Award Agreement for Werner
Widmann Deferred Compensation Plan, dated
as of June 30, 2006.†
Description of Annual Incentive Bonus Plan
for Fiscal 2014†
Executive Incentive Compensation
Recoupment Policy†
10-Q 000-23354
11-03-09
10.02
10-Q
000-23354
08-05-08
10.03
10-Q
000-23354
02-05-09
10.03
10-K
000-23354
05-20-09
10.23
10-Q
000-23354
08-05-10
10.08
8-K
000-23354
07-07-06
10.01
8-K
000-23354
07-07-06
10.02
10-Q
000-23354
08-05-10
10.06
Francois Barbier Offer Letter, dated as of July 1,
2010†
8-K
000-23354
09-03-10
10.01
Francois Barbier Relocation Expenses
Addendum, dated as of March 5, 2013†
Francois Barbier Confirmation Date Letter,
dated as of August 30, 2010†
8-K 000-23354
09-03-10
10.03
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Incorporated by
Reference
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Exhibit
No.
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
2010 Flextronics International USA, Inc.
Deferred Compensation Plan†
Form of Restricted Stock Unit Award Under
2010 Equity Incentive Plan†
Form of Amendment to certain senior
executive Share Bonus Award Agreements
under the 2001 Equity Incentive Plan†
Form of Amendment to certain senior
executive Restricted Share Unit Agreements
under the 2010 Equity Incentive Plan†
Form of Restricted Share Unit Award
Agreement under the 2010 Equity Incentive
Plan for certain performance based awards†
Form of Award Agreement under 2010
Deferred Compensation Plan†
Compensation Arrangements of Certain
Executive Officers of Flextronics International
Ltd.†
Award Agreement for Christopher Collier
under Senior Management Deferred
Compensation Plan dated June 30, 2005†
Award Agreement for Paul Humphries under
Senior Management Deferred Compensation
Plan dated June 30, 2005†
Jonathan Hoak Offer Letter dated December 8,
2010†
Separation Agreement between Flextronics
International USA, Inc. and Eslie C. Sykes
dated November 26, 2012†
10-Q 000-23354
11-03-10
10.04
10-Q
000-23354
08-09-11
10.01
10-Q
000-23354
02-04-13
10.01
10-Q
000-23354
02-04-13
10.02
10-Q
000-23354
02-04-13
10.03
10-Q
000-23354
07-30-12
10.01
10-Q
000-23354
08-08-07
10.02
10-Q
000-23354
07-30-12
10.04
10-Q
000-23354
07-30-12
10.05
X
X
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X
X
X
X
X
21.01
Subsidiaries of Registrant.
23.01
Consent of Deloitte & Touche LLP.
24.01
31.01
31.02
32.01*
Power of Attorney (included on the signature
page to this Form 10-K)
Certification of Chief Executive Officer
pursuant to Rule 13a-14(a) of the Exchange Act
Certification of Chief Financial Officer
pursuant to Rule 13a-14(a) of the Exchange Act
Certification of the Chief Executive Officer
pursuant to Rule 13a-14(b) of the Exchange
Act and 18 U.S.C. Section 1350
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Incorporated by
Reference
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Exhibit
No.
32.02*
Certification of the Chief Financial Officer
pursuant to Rule 13a-14(b) of the Exchange
Act and 18 U.S.C. Section 1350
101.INS
XBRL Instance Document
101.SCH
101.CAL
XBRL Taxonomy Extension Scheme
Document
XBRL Taxonomy Extension Calculation
Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition
Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase
Document
101.PRE
XBRL Taxonomy Extension Presentation
Linkbase Document
* This exhibit is furnished with this Annual Report on Form 10-K, is not deemed filed with the Securities and
Exchange Commission, and is not incorporated by reference into any filing of Flextronics International Ltd.
under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether
made before or after the date hereof and irrespective of any general incorporation language contained in
such filing.
† Management contract, compensatory plan or arrangement.
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FLEXTRONICS INTERNATIONAL LTD.
AND SUBSIDIARIES
(Company Registration Number 199002645H)
SINGAPORE STATUTORY
FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2013
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SINGAPORE STATUTORY FINANCIAL STATEMENTS
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
(Incorporated in the Republic of Singapore)
(Company Registration Number 199002645H)
INDEX
Page
Report of the Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Statement of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Independent Auditors’ Report to the Members of Flextronics International Ltd. . . . . . . . . . . . . . . . . . . . . S-6
Consolidated Financial Statements of Flextronics International Ltd. and its Subsidiaries . . . . . . . . . . . . . S-8
Supplementary Financial Statements of Flextronics International Ltd. (Parent company) . . . . . . . . . . . . . S-55
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FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
Co. Rg. No. 199002645H
REPORT OF THE DIRECTORS
MARCH 31, 2013
(U.S. dollars in thousands unless otherwise designated as Singapore dollars, S$)
The directors present their report together with the audited financial statements of Flextronics International
Ltd. (the “Parent”) and the consolidated financial statements of Flextronics International Ltd. and its subsidiaries
(the “Company”) for the financial year ended March 31, 2013.
Directors
The directors of Flextronics International Ltd. in office at the date of this report are:
H. Raymond Bingham
James A. Davidson
Michael M. McNamara
Daniel H. Schulman
Willy Chao-Wei Shih, Ph.D.
William D. Watkins
Lay Koon Tan
Lawrence A. Zimmerman
Arrangements to Enable Directors to Acquire Benefits by Means of the Acquisition of Shares and
Debentures
Neither at the end of the financial year nor at any time during the financial year did there subsist any
arrangement whose object is to enable the directors of the Parent to acquire benefits by means of the acquisition
of shares or debentures in the Parent or any other body corporate except for the options mentioned below.
Directors’ Interests in Shares and Debentures
The interest of the directors who held office at the end of the fiscal year ended March 31, 2013 (including
those held by their spouses and infant children) in the share capital or debentures of the Parent and related
corporations were as follows:
DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES
Interest Held
As of March 31, As of March 31,
Ordinary Shares, no Par Value, in Flextronics International Ltd. 2012 2013
H. Raymond Bingham(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,599 178,262
James A. Davidson(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,263 160,661
Robert L. Edwards(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,920 —
Michael M. McNamara(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514,470 514,470
Daniel H. Schulman(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,920 71,318
Willy Chao-Wei Shih, Ph.D.(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,044 85,442
Lay Koon Tan(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606 9,557
Lip-Bu Tan(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,429 —
William D. Watkins(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,920 71,318
Lawrence A. Zimmerman(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
(1) As of March 31, 2012 and 2013, Mr. Bingham also held an interest in 35,663 and 37,879 contingent share
bonus awards, respectively. Messrs. Davidson, Shih, Schulman and Watkins each held interests in 21,398
contingent share bonus awards as of March 31, 2012. Messrs. Davidson, Shih, Schulman, Watkins, and
Lay Koon Tan each held interests in 22,727 contingent share bonus awards as of March 31, 2013. The
contingent shares bonus awards for each year vest on the date immediately prior to the date of the Parent’s
2012 and 2013 annual general meetings, respectively.
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(2) As of March 31, 2012 and 2013, Mr. McNamara also held interests in 800,000 and 1,210,000 contingent
share bonus awards, respectively, which are not included in the totals above. These share bonus awards
comprise ordinary shares of the Parent to be allotted and issued pursuant to the 2010 Equity Incentive Plan
and the 2001 Equity Incentive Plan upon satisfaction of the terms and conditions set by the committee
administering the plans upon the grant of such contingent share bonus awards.
(3) As of March 31, 2012 and 2013, Mr. McNamara also held interests in 800,000 and 1,250,000 share bonus
awards where vesting is contingent upon meeting certain market criteria.
(4) Mr. Zimmerman was appointed to the Board of Directors on October 31, 2012 and at the time of his
appointment as well as at the end of the fiscal year 2013, his interest held in the Parent was zero.
Mr. Zimmerman also held an interest in 18,746 contingent share bonus awards which vest on the date
immediately prior to the date of the Parent’s 2013 annual general meeting.
(5) Messrs. Edwards and Lip Bu Tan were directors of the Company as of March 31, 2012 and had resigned
from the Board as of March 31, 2013. They each held interests in 21,398 contingent share bonus awards as
of March 31, 2012.
Options to acquire ordinary shares, no par value, in Flextronics International Ltd.
As of March 31, As of March 31,
Name 2012 2013 Exercise Price Exercisable Period
H. Raymond Bingham . . . . . . . . . . . . 12,500 —
12,500 12,500
James A. Davidson . . . . . . . . . . . . . . . 12,500 —
12,500 12,500
Robert L. Edwards(2) . . . . . . . . . . . . . 25,000 —
Michael M. McNamara . . . . . . . . . . . . 2,000,000 —
600,000 —
200,000 200,000
3,000,000 3,000,000
700,000 700,000
2,000,000 2,000,000
2,000,000 2,000,000
2,000,000 2,000,000
2,000,000 2,000,000
Daniel H. Schulman . . . . . . . . . . . . . . 25,000 25,000
Willy Shih, Ph.D. . . . . . . . . . . . . . . . . 25,000 25,000
12,500 12,500
Lip-Bu Tan(2) . . . . . . . . . . . . . . . . . . . 12,500 —
12,500 —
William D. Watkins . . . . . . . . . . . . . . . 25,000 25,000
$11.40 09.27.07 to 09.27.12
$ 7.08 09.30.08 to 09.30.13
$11.40 09.27.07 to 09.27.12
$ 7.08 09.30.08 to 09.30.13
$ 5.28 10.13.08 to 10.13.13
$ 7.90 07.01.02 to 07.01.12
$ 8.84 09.03.02 to 09.03.12
$11.53 08.23.04 to 08.23.14
$12.37 05.13.05 to 05.13.15
$11.23 04.17.06 to 04.17.16
$10.59 06.02.08 to 06.02.15
$10.59(1) 06.02.08 to 06.02.15
$ 2.26 12.05.08 to 12.05.15
$ 1.94 03.02.09 to 03.02.16
$ 4.24 06.18.09 to 06.18.14
$11.00 01.10.08 to 01.10.18
$ 7.08 09.30.08 to 09.30.13
$11.40 09.27.07 to 09.27.12
$ 7.08 09.30.08 to 09.30.13
$ 3.39 04.14.09 to 04.14.14
(1) This option grant to Michael M. McNamara is not exercisable unless it is both vested and the stock price is
equal to or greater than $12.50 on the exercise date.
(2) Messrs. Edwards and Lip Bu Tan had resigned from the Board of Directors as of March 31, 2013 and as a
result their interests in the Company’s options are reflected as of March 31, 2012.
Other than as disclosed above, no other directors of the Parent had an interest in any shares, debentures or
share options of the Parent or related corporations either at the beginning or the end of the financial year as
recorded in the register of directors’ shareholdings kept by the Parent under section 164 of the Singapore
Companies Act Chapter 50.
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Directors’ Receipt and Entitlement to Contractual Benefits
Other than as disclosed above, since the end of the previous financial year, no director has received or
become entitled to receive a benefit which is required to be disclosed under Section 201(8) of the Singapore
Companies Act, Chapter 50, by reason of a contract made by the Parent or a related corporation with the director
or with a firm of which he is a member, or with a company in which he has a substantial financial interest
except the benefit included in the aggregate amount of emoluments received or due and receivable under their
employment contracts.
Share Option and Award Plans (Schemes)
2010 Equity Incentive Plan
During the financial year ended March 31, 2011, the Company began granting equity compensation awards
under the 2010 Equity Incentive Plan (the “2010 Plan”). During the financial year ended March 31, 2013, options
for a total of 19,000 ordinary shares in the Parent were granted under the 2010 Plan with an exercise price ranging
from $6.42 to $6.65 and a weighted-average exercise price of $6.57.
During the financial year ended March 31, 2013, share bonus awards for a total of 9,582,867 ordinary
shares in the Parent were granted under the 2010 Plan at market values equal to the closing price of the Parent’s
ordinary shares on the date of grant ranging from $5.77 to $7.81, a weighted-average grant-date market value of
$6.74. Upon the satisfaction of prescribed time-based and/or market-based vesting conditions, ordinary shares in
the Parent will be issued, free of payment, to the participants. There is no exercise price payable.
During the financial year ended March 31, 2013, a total of 5,398,331 ordinary shares in the Parent were
issued by virtue of the exercise of options. As of March 31, 2013, the number and class of unissued shares
underlying options was 34,405,564 ordinary shares, net of cancellation of options for 4,148,765 ordinary shares
during the financial year 2013.
During the financial year ended March 31, 2013, a total of 1,506,234 ordinary shares in the Parent were
issued by virtue of the vesting of share bonus awards granted under the 2010 Plan. As of March 31, 2013, the
number and class of unissued shares comprised in share bonus awards granted under the 2010 Plan was
21,807,069 ordinary shares, net of cancellation of share bonus awards for 2,234,832 ordinary shares during the
financial year 2013.
The expiration dates range from April 2013 to February 2020.
Holders of options granted under the 2010 Equity Incentive Plan have no rights to participate, by virtue of
such options, in any share issuances of any other company.
Auditors
The auditors, Deloitte & Touche LLP, have expressed their willingness to accept re-appointment.
On Behalf of the Board of Directors
/s/ H. RAYMOND BINGHAM
/s/ MICHAEL M. MCNAMARA
Director
Singapore
May 28, 2013
Director
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Statement of Directors
In the opinion of the directors, the accompanying supplementary financial statements of Flextronics
International Ltd. (the “Parent”) and consolidated financial statements of Flextronics International Ltd. and its
subsidiaries (the “Company”), as set out on pages S-52 to S-63 and pages S-8 through S-51, respectively, are
drawn up so as to give a true and fair view of the state of affairs of the Parent and of the Company as of
March 31, 2013, and of the results, changes in equity and cash flows of the Company for the financial year then
ended and at the date of this statement, there are reasonable grounds to believe that the Parent will be able to pay
its debts when they fall due.
On Behalf of the Board of Directors
/s/ H. RAYMOND BINGHAM
/s/ MICHAEL M. MCNAMARA
Director
Singapore
May 28, 2013
Director
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Independent Auditors’ Report to the Members of Flextronics International Ltd.
Report on the Financial Statements
We have audited the accompanying Consolidated Financial Statements of Flextronics International Ltd. and
its subsidiaries (the “Company”) and the Supplementary Financial Statements of Flextronics International Ltd.
(the “Parent”) which comprise the balance sheets of the Parent as at March 31, 2013, and a summary of significant
accounting policies and other explanatory notes, as set out on pages S-8 to S-63.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation of financial statements that give a true and fair view in
accordance with the provisions of Singapore Companies Act (the “Act”) and accounting principles generally
accepted in the United States of America and for devising and maintaining a system of internal accounting
controls sufficient to provide reasonable assurance that assets are safeguarded against loss from unauthorized use
or disposition; and transactions are properly authorized and that they are recorded as necessary to permit the
preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted
our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the
risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that
give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.
Basis for Qualified Opinion
The Parent accounted for investments in subsidiaries using the equity method. Under this method, the
Parent’s investments in subsidiaries are reported as a separate line in the Parent’s balance sheet. Accounting
principles generally accepted in the United States of America require that these investments be consolidated
rather than reported using the equity method.
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Qualified Opinion
Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion
the Consolidated Financial Statements of the Company and the balance sheet of the Parent are properly drawn up
in accordance with the provisions of the Act and accounting principles generally accepted in the United States of
America (the use of which is approved by the Accounting and Corporate Regulatory Authority of Singapore) so
as to give a true and fair view of the state of affairs of the Company and of the Parent as at March 31, 2013 and
of the results, changes in equity and cash flows of the Company for the year ended on that date.
Other Matters
The accompanying Consolidated Financial Statements of the Company as at March 31, 2013, and for the
year then ended, have been included in the Annual Report for the financial year ended March 31, 2013 filed with
the United States Securities and Exchange Commission. Together with the Supplementary Financial Statements
of the Parent, these Consolidated Financial Statements have been reproduced for the purpose of filing with the
Accounting and Corporate Regulatory Authority of Singapore.
Report on Other Legal and Regulatory Requirements
In our opinion, the accounting and other records required by the Act to be kept by the Company and by
those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance
with the provisions of the Act.
Public Accountants and
Certified Public Accountants
Singapore
May 28, 2013
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JOB: 13-8094-1 CYCLE#;BL#: 9; 0 TRIM: 8.25" x 10.75"
COLORS: Black, ~note-color 2 GRAPHICS: Singapore Tabs txt pgs.eps V1.5
COMPOSITE
Merrill Corp - Flextronics International Ltd. 10-K Combo_ ED type for Printed Book ED ED | 105175 | 09-Jun-13 00:18 | 13-8094-1.hc | Sequence: 1
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED BALANCE SHEETS
As of March 31,
2013 2012
(In thousands, except share
amounts)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,587,087 $ 1,518,329
Accounts receivable, net of allowance for doubtful accounts of $10,877
and $38,905 as of March 31, 2013 and 2012, respectively . . . . . . . . . . . . . . . 2,111,996 2,593,829
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,722,500 3,300,791
Current assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 21,642
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,349,818 1,099,959
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,771,401 8,534,550
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,174,588 2,076,442
Goodwill and other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343,552 159,924
Long-term assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 41,417
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302,014 221,471
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,591,555
$11,033,804
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank borrowings and current portion of long-term debt . . . . . . . . . . . . . . . . . . . $ 416,654 $ 39,340
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,705,297 4,294,873
Accrued payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351,683 345,337
Current liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . — 24,854
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,699,151 1,583,781
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,172,785 6,288,185
Long-term debt, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,650,973 2,149,333
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521,039 312,307
Commitments and contingencies (Note 10)
Shareholders’ equity
Ordinary shares, no par value; 689,159,139 and 733,979,527 issued, and
638,919,784 and 683,740,173 outstanding as of March 31, 2013
and 2012, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,015,142 8,292,370
Treasury stock, at cost; 50,239,355 shares as of March 31, 2013 and 2012 . . . . (388,215) (388,215)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,302,688) (5,579,739)
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (77,481) (40,437)
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,246,758 2,283,979
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,591,555
$11,033,804
The accompanying notes are an integral part of these consolidated financial statements.
S-8
JOB: 13-8094-1 CYCLE#;BL#: 9; 0 TRIM: 8.25" x 10.75"
COLORS: Black, ~note-color 2 GRAPHICS: Singapore Tabs txt pgs.eps V1.5
COMPOSITE
Merrill Corp - Flextronics International Ltd. 10-K Combo_ ED type for Printed Book ED ED | 105175 | 09-Jun-13 00:18 | 13-8094-1.hc | Sequence: 2
CHKSUM Content: 37397 Layout: 40070 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands, except per share amounts)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$28,442,633
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,187,393 27,825,079 26,859,288
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,834 — —
$23,569,475
$29,343,029
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,166,248 1,517,950 1,583,345
Selling, general and administrative expenses . . . . . . . . . . . . . 805,235 877,564 801,772
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,529 49,572 66,188
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,600 — —
Other charges (income), net . . . . . . . . . . . . . . . . . . . . . . . . . . (65,190) (19,935) 6,127
Interest and other expense, net . . . . . . . . . . . . . . . . . . . . . . . . 56,259 36,019 74,948
Income from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328,815 574,730 634,310
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,313 53,960 22,049
Income from continuing operations . . . . . . . . . . . . . . . . . . 302,502 520,770 612,261
Loss from discontinued operations, net of tax . . . . . . . . . . . . (25,451) (32,005) (16,042)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 277,051
$ 488,765
$ 596,219
Earnings per share:
Income from continuing operations:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.46
$ 0.73
$ 0.79
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.45
$ 0.72
$ 0.77
Loss from discontinued operations:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.04) $ (0.04) $ (0.02)
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.04) $ (0.04) $ (0.02)
Net income:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.42
$ 0.68
$ 0.77
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.41
$ 0.67
$ 0.75
Weighted-average shares used in computing per share
amounts:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662,874 716,247 777,315
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675,033 727,807 790,192
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The accompanying notes are an integral part of these consolidated financial statements.
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JOB: 13-8094-1 CYCLE#;BL#: 9; 0 TRIM: 8.25" x 10.75"
COLORS: Black, ~note-color 2 GRAPHICS: Singapore Tabs txt pgs.eps V1.5
COMPOSITE
Merrill Corp - Flextronics International Ltd. 10-K Combo_ ED type for Printed Book ED ED | 105175 | 09-Jun-13 00:18 | 13-8094-1.hc | Sequence: 3
CHKSUM Content: 39814 Layout: 59377 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
$488,765
$277,051
$596,219
Foreign currency translation adjustments, net of zero tax . . . (16,289) (53,616) 12,883
Unrealized gain (loss) on derivative instruments and other,
net of zero tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,755) (7,575) 23,276
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$240,007
$427,574
$632,378
The accompanying notes are an integral part of these consolidated financial statements.
S-10
JOB: 13-8094-1 CYCLE#;BL#: 9; 0 TRIM: 8.25" x 10.75"
COLORS: Black, ~note-color 2 GRAPHICS: Singapore Tabs txt pgs.eps V1.5
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CHKSUM Content: 43624 Layout: 52 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Accumulated Other
Comprehensive Income (Loss)
Unrealized
Gain (Loss) Foreign
Retained on Derivative Currency
Ordinary Shares
Total
Accumulated
Other
Total
Shares
Outstanding
Earnings Instruments Translation Comprehensive Shareholders’
Amount (Deficit) and Other Adjustments
Income (Loss) Equity
(In thousands)
BALANCE AT
MARCH 31, 2010 . . . . .
813,429
$8,664,695 $(6,664,723) $(13,803) $ (1,602) $(15,405) $1,984,567
Repurchase of
ordinary shares
at cost . . . . . . . . . . . . . . .
Exercise of stock
(65,411)
(400,400)
— — — — (400,400)
options . . . . . . . . . . . . . .
6,217
23,299
— — — — 23,299
Issuance of vested shares
under share bonus
awards . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . .
Stock-based compensation,
net of tax . . . . . . . . . . . . .
Total other comprehensive
income . . . . . . . . . . . . . .
BALANCE AT
2,759
—
—
—
—
—
— — — — —
596,219 — — — 596,219
54,852
— — — — 54,852
—
— 23,276 12,883 36,159 36,159
MARCH 31, 2011 . . . . .
756,994
8,342,446
(6,068,504) 9,473 11,281 20,754 2,294,696
Repurchase of ordinary
shares at cost . . . . . . . . . .
Exercise of stock options . . .
Issuance of vested shares
under share bonus
awards . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . .
Stock-based compensation,
net of tax . . . . . . . . . . . . .
Total other comprehensive
loss . . . . . . . . . . . . . . . . .
BALANCE AT
(81,688)
5,879
(509,800)
23,055
— — — — (509,800)
— — — — 23,055
2,555
—
—
—
—
—
— — — — —
488,765 — — — 488,765
48,454
— — — — 48,454
—
— (7,575) (53,616) (61,191) (61,191)
MARCH 31, 2012 . . . . .
683,740
7,904,155
(5,579,739) 1,898 (42,335) (40,437) 2,283,979
Repurchase of ordinary
shares at cost . . . . . . . . . .
Exercise of stock options . . .
Issuance of vested shares
under share bonus
awards . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . .
Stock-based compensation,
net of tax . . . . . . . . . . . . .
Total other comprehensive
loss . . . . . . . . . . . . . . . . .
BALANCE AT
(51,725)
5,398
(334,014)
22,257
— — — — (334,014)
— — — — 22,257
1,507
—
—
—
—
—
— — — — —
277,051 — — — 277,051
34,529
— — — — 34,529
—
— (20,755) (16,289) (37,044) (37,044)
MARCH 31, 2013 . . . . .
638,920
$7,626,927 $(5,302,688) $(18,857) $(58,624) $(77,481) $2,246,758
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The accompanying notes are an integral part of these consolidated financial statements.
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JOB: 13-8094-1 CYCLE#;BL#: 9; 0 TRIM: 8.25" x 10.75"
COLORS: Black, ~note-color 2 GRAPHICS: Singapore Tabs txt pgs.eps V1.5
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Merrill Corp - Flextronics International Ltd. 10-K Combo_ ED type for Printed Book ED ED | 105175 | 09-Jun-13 00:18 | 13-8094-1.hc | Sequence: 5
CHKSUM Content: 30338 Layout: 57123 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ended March 31,
2013 2012 2011
(In thousands)
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 277,051
Adjustments to reconcile net income to net cash provided by
$ 488,765
$ 596,219
operating activities:
Depreciation, amortization and other impairment charges . . 566,357 521,923 471,668
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . 6,643 30,330 4,043
Non-cash other expense (income) . . . . . . . . . . . . . . . . . . . . . (52,408) (33,563) 2,831
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,529 48,454 55,237
Deferred income taxes and other non-cash income taxes . . . (32,647) (1,022) (51,198)
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519,140 (30,249) 26,519
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596,131 301,053 (664,738)
Other current and noncurrent assets . . . . . . . . . . . . . . . . 61,567 29,683 (337,057)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (671,424) (750,169) 609,868
Other current and noncurrent liabilities . . . . . . . . . . . . . (189,509) 199,063 143,952
Net cash provided by operating activities . . . . . . . . . . 1,115,430 804,268 857,344
Cash flows from investing activities:
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . (488,993) (437,191) (470,702)
Proceeds from the disposition of property and
equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,665 49,187 76,833
Acquisition of businesses, net of cash acquired . . . . . . . . . . . (184,097) (92,257) (16,966)
Proceeds from divestitures of operations, net . . . . . . . . . . . . . 22,585 1,398 625
Other investing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . (100,359) (2,501) (3,031)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . (697,199) (481,364) (413,241)
Cash flows from financing activities:
Proceeds from bank borrowings and long-term debt . . . . . . . 1,250,213 2,833,704 3,471,494
Repayments of bank borrowings and long-term debt . . . . . . . (391,859) (2,389,121) (3,420,594)
Payments for early repurchase of long-term debt . . . . . . . . . . (1,000,000) (480,000) (315,495)
Payments for repurchases of ordinary shares . . . . . . . . . . . . . (322,040) (509,800) (400,400)
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . 22,257 23,055 23,299
Other financing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . 101,851 — —
Net cash used in financing activities . . . . . . . . . . . . . . . . . (339,578) (522,162) (641,696)
Effect of exchange rates on cash . . . . . . . . . . . . . . . . . . . . . . . . (9,895) (30,884) 18,508
Net change in cash and cash equivalents . . . . . . . . . . . . . . . . 68,758 (230,142) (179,085)
Cash and cash equivalents, beginning of year . . . . . . . . . . . . 1,518,329 1,748,471 1,927,556
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . $ 1,587,087
$ 1,518,329
$ 1,748,471
The accompanying notes are an integral part of these consolidated financial statements.
S-12
JOB: 13-8094-1 CYCLE#;BL#: 9; 0 TRIM: 8.25" x 10.75"
COLORS: Black, ~note-color 2 GRAPHICS: Singapore Tabs txt pgs.eps V1.5
COMPOSITE
Merrill Corp - Flextronics International Ltd. 10-K Combo_ ED type for Printed Book ED ED | 105175 | 09-Jun-13 00:18 | 13-8094-1.he | Sequence: 1
CHKSUM Content: 60690 Layout: 25046 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION OF THE COMPANY
Flextronics International Ltd. (“Flextronics” or the “Company”) was incorporated in the Republic of
Singapore in May 1990. The Company’s operations have expanded over the years through a combination of
organic growth and acquisitions. The Company is a leading global provider of advanced design, manufacturing
and services to original equipment manufacturers (“OEMs”) of a broad range of electronic products in the
following markets: High Reliability Solutions (“HRS”), which is comprised of our medical, automotive, and
defense and aerospace businesses; High Velocity Solutions (“HVS”), which includes our mobile devices business,
including smart phones, and consumer electronics, including game consoles, high-volume computing business,
including notebook personal computing (“PC”), tablets, and printers; Industrial and Emerging Industries (“IEI”),
which is comprised of large household appliances, equipment, and our emerging industries businesses; and
Integrated Network Solutions (“INS”), which includes our telecommunications infrastructure, data networking,
connected home, and server and storage businesses. The Company’s strategy is to provide customers with a full
range of cost competitive, global supply chain services through which the Company can design, build, ship and
service a complete packaged product for its OEM customers. OEM customers leverage the Company’s services to
meet their product requirements throughout the entire product life cycle.
The Company’s service offerings include rigid and flexible printed circuit board fabrication, systems
assembly and manufacturing (including enclosures, testing services, materials procurement and inventory
management), logistics, after-sales services (including product repair, warranty services, re-manufacturing and
maintenance), supply chain management software solutions and component product offerings. Additionally, the
Company provides a comprehensive range of value-added design and engineering services that are tailored to the
various markets and needs of its customers.
2. SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The Company’s third fiscal quarter ends on December 31, and the fourth fiscal quarter and year ends on
March 31 of each year. The first fiscal quarter ended on June 29, 2012, July 1, 2011 and July 2, 2010,
respectively, and the second fiscal quarter ended on September 28, 2012, September 30, 2011 and October 1,
2010, respectively. Amounts included in the consolidated financial statements are expressed in U.S. dollars unless
otherwise designated.
The accompanying consolidated financial statements include the accounts of Flextronics and its
majority-owned subsidiaries, after elimination of intercompany accounts and transactions. The Company
consolidates all majority-owned subsidiaries and investments in entities in which the Company has a controlling
interest. For consolidated majority-owned subsidiaries in which the Company owns less than 100%, the Company
recognizes a noncontrolling interest for the ownership of the noncontrolling owners. As of March 31, 2013 and
2012, the noncontrolling interest was not material. The associated noncontrolling owners’ interest in the income
or losses of these companies has not been material to the Company’s results of operations for any of the periods
presented, and has been classified within interest and other expense, net, in the consolidated statements of
operations.
In fiscal year 2013, the Company finalized the sale of certain assets of a non-core business, including
intellectual property. In addition, the Company completed the sale of another non-core business during fiscal year
2013. In accordance with the accounting guidance, these non-core businesses represent separate asset groups and
the divestitures qualify as discontinued operations, and accordingly, the Company has reported the results of
operations and financial position of these businesses in discontinued operations within the consolidated
statements of operation and consolidated balance sheets for all periods presented as applicable.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America (“U.S. GAAP” or “GAAP”) requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
S-13
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COMPOSITE
Merrill Corp - Flextronics International Ltd. 10-K Combo_ ED type for Printed Book ED ED | 105175 | 09-Jun-13 00:18 | 13-8094-1.he | Sequence: 2
CHKSUM Content: 43855 Layout: 8592 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
Estimates are used in accounting for, among other things: allowances for doubtful accounts; inventory write-downs;
valuation allowances for deferred tax assets; uncertain tax positions; valuation and useful lives of long-lived assets
including property, equipment, intangible assets and goodwill; asset impairments; fair values of financial
instruments including investments, notes receivable and derivative instruments; restructuring charges;
contingencies; fair values of assets and liabilities obtained in business combinations and the fair values of stock
options and share bonus awards granted under the Company’s stock-based compensation plans. Actual results
may differ from previously estimated amounts, and such differences may be material to the consolidated financial
statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the
period they occur.
Translation of Foreign Currencies
The financial position and results of operations for certain of the Company’s subsidiaries are measured using
a currency other than the U.S. dollar as their functional currency. Accordingly, all assets and liabilities for these
subsidiaries are translated into U.S. dollars at the current exchange rates as of the respective balance sheet dates.
Revenue and expense items are translated at the average exchange rates prevailing during the period. Cumulative
gains and losses from the translation of these subsidiaries’ financial statements are reported as a separate
component of shareholders’ equity. Foreign exchange gains and losses arising from transactions denominated in a
currency other than the functional currency of the entity involved, and re-measurement adjustments for foreign
operations where the U.S. dollar is the functional currency, are included in operating results. Non-functional
currency transaction gains and losses, and re-measurement adjustments were not material to the Company’s
consolidated results of operations for any of the periods presented, and have been classified as a component of
interest and other expense, net in the consolidated statements of operations.
Revenue Recognition
The Company recognizes manufacturing revenue when it ships goods or the goods are received by its
customer, title and risk of ownership have passed, the price to the buyer is fixed or determinable and
recoverability is reasonably assured. Generally, there are no formal substantive customer acceptance requirements
or further obligations related to manufacturing services. If such requirements or obligations exist, then the
Company recognizes the related revenues at the time when such requirements are completed and the obligations
are fulfilled. The Company makes provisions for estimated sales returns and other adjustments at the time
revenue is recognized based upon contractual terms and an analysis of historical returns. These provisions were
not material to the consolidated financial statements for any of the periods presented.
The Company provides services for its customers that range from contract design to manufacturing and
logistics to repair services. For contract design services the customer purchases engineering and development
services on a time and materials basis. For original product design services the Company develops products to be
offered for sale by OEM customers under the OEM’s brand name. The Company recognizes service revenue when
the services have been performed, and the related costs are expensed as incurred. Net sales for services were less
than 10% of the Company’s total sales for all periods presented, and accordingly, are included in net sales in the
consolidated statements of operations. The Company recognized research and development costs related to its
ODM personal computing business of $78.9 million and $46.5 million for the fiscal years ended March 31, 2012
and 2011, respectively. Research and development activities related to ODM personal computing had ceased by
the end of fiscal year 2012.
Customer Credit Risk
The Company has an established customer credit policy, through which it manages customer credit
exposures through credit evaluations, credit limit setting, monitoring, and enforcement of credit limits for new
and existing customers. The Company performs ongoing credit evaluations of its customers’ financial condition
and makes provisions for doubtful accounts based on the outcome of those credit evaluations. The Company
evaluates the collectability of its accounts receivable based on specific customer circumstances, current economic
trends, historical experience with collections and the age of past due receivables. To the extent the Company
identifies exposures as a result of credit or customer evaluations, the Company also reviews other customer
related exposures, including but not limited to inventory and related contractual obligations.
S-14
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk are primarily
accounts receivable, cash and cash equivalents, and derivative instruments.
The following table summarizes the activity in the Company’s allowance for doubtful accounts during fiscal
years 2013, 2012 and 2011:
Balance at Charged to
Beginning
of Year
Costs and Deductions/
Expenses Write-Offs
Balance at
End of
Year
(In thousands)
Allowance for doubtful accounts:
Year ended March 31, 2011(4) . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended March 31, 2012(1)(2)(4) . . . . . . . . . . . . . . . . . . . . .
Year ended March 31, 2013(2)(3) . . . . . . . . . . . . . . . . . . . . . . . .
$13,163
$13,222
$38,905
$ 3,877
$30,122
$ 6,643
$ (3,818) $13,222
$ (4,439) $38,905
$(34,671) $10,877
(1) Deductions/write-offs amount for fiscal year 2012 includes $3.9 million, which was previously reserved and
the underlying accounts receivable balance was reclassified to non-current assets in fiscal year 2012, and
carried net of its specific reserve.
(2) Included in amounts charged to costs and expenses in fiscal year 2012 is $28.0 million related to a
distressed customer, which was written off in fiscal year 2013.
(3) Deductions/write-offs amount for fiscal year 2013 also includes $5.8 million, which was previously reserved
and the underlying accounts receivable balance was reclassified to non-current assets in fiscal year 2013 and
is carried net of its specific reserve.
(4) Included in amounts charged to costs and expense in fiscal year 2012 and fiscal year 2011 is $0.2 million,
respectively, related to discontinued operations.
No customer accounted for greater than 10% of the Company’s net sales in fiscal 2013. Two customers
accounted for approximately 11% and 10%, respectively of the Company’s net sales in fiscal 2012. One of these
customers accounted for approximately 11% of the Company’s net sales in fiscal years 2011. The Company’s ten
largest customers accounted for approximately 47%, 55% and 52% of its net sales, in fiscal years 2013, 2012 and
2011, respectively. As of March 31, 2013 and 2012, no single customer accounted for greater than 10% of the
Company’s total accounts receivable.
The Company maintains cash and cash equivalents with various financial institutions that management
believes to be of high credit quality. These financial institutions are located in many different locations
throughout the world. The Company’s cash equivalents are primarily comprised of cash deposited in checking and
money market accounts. The Company’s investment policy limits the amount of credit exposure to 20% of the
issuer’s or the fund’s total assets measured at the time of purchase or $10.0 million, whichever is greater.
The amount subject to credit risk related to derivative instruments is generally limited to the amount, if any,
by which a counterparty’s obligations exceed the obligations of the Company with that counterparty. To manage
counterparty risk, the Company limits its derivative transactions to those with recognized financial institutions.
See additional discussion of derivatives at note 7 to the consolidated financial statements.
Cash and Cash Equivalents
All highly liquid investments with maturities of three months or less from original dates of purchase are
carried at cost, which approximates fair market value, and are considered to be cash equivalents. Cash and cash
equivalents consist of cash deposited in checking accounts, money market funds and time deposits.
Cash and cash equivalents consisted of the following:
Cash and bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money market funds and time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,089,697
497,390
$1,174,423
343,906
$1,587,087
$1,518,329
S-15
As of March 31,
2013
2012
(In thousands)
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COMPOSITE
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out basis) or market value. The stated cost is
comprised of direct materials, labor and overhead. The components of inventories, net of applicable lower of cost
or market write-downs, were as follows:
As of March 31,
2013
2012
(In thousands)
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,683,098
421,706
617,696
$1,952,358
537,753
810,680
$2,722,500
$3,300,791
Property and Equipment, Net
Property and equipment are stated at cost. Depreciation and amortization is recognized on a straight-line
basis over the estimated useful lives of the related assets, with the exception of building leasehold improvements,
which are amortized over the term of the lease, if shorter. Repairs and maintenance costs are expensed as
incurred. Property and equipment was comprised of the following:
Depreciable
Life
(In Years)
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures, computer equipment and software . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 - 10
30
up to 30
3 - 7
—
—
Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . .
As of March 31,
2013
2012
(In thousands)
$ 2,668,996
1,032,595
384,519
399,368
127,241
139,032
$ 2,677,387
1,024,247
283,340
373,174
126,314
87,461
4,751,751
(2,577,163)
4,571,923
(2,495,481)
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,174,588
$ 2,076,442
Total depreciation expense associated with property and equipment amounted to approximately $412.3 million,
$407.5 million and $384.3 million in fiscal years 2013, 2012 and 2011, respectively. Property and equipment
excludes assets no longer in use and held for sale as a result of restructuring activities, as discussed in note 9 and
discontinued operations as discussed in note 18 to the consolidated financial statements.
The Company reviews property and equipment for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of property and equipment is
measured by comparing its carrying amount to the projected undiscounted cash flows the property and equipment
are expected to generate. An impairment loss is recognized when the carrying amount of a long-lived asset
exceeds its fair value. Refer to note 12 for a discussion of impairment charges recorded in fiscal year 2013.
Deferred Income Taxes
The Company provides for income taxes in accordance with the asset and liability method of accounting for
income taxes. Under this method, deferred income taxes are recognized for the tax consequences of temporary
differences between the carrying amount and the tax basis of existing assets and liabilities by applying the
applicable statutory tax rate to such differences.
S-16
JOB: 13-8094-1 CYCLE#;BL#: 9; 0 TRIM: 8.25" x 10.75"
COLORS: Black, ~note-color 2 GRAPHICS: Singapore Tabs txt pgs.eps V1.5
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
Accounting for Business and Asset Acquisitions
The Company has actively pursued business and asset acquisitions, which are accounted for using the
acquisition method of accounting. The fair value of the net assets acquired and the results of the acquired businesses
are included in the Company’s consolidated financial statements from the acquisition dates forward. The Company is
required to make estimates and assumptions that affect the reported amounts of assets and liabilities and results of
operations during the reporting period. Estimates are used in accounting for, among other things, the fair value of
acquired net operating assets, property and equipment, intangible assets and related deferred tax liabilities, useful
lives of plant and equipment and amortizable lives for acquired intangible assets. Any excess of the purchase
consideration over the identified fair value of the assets and liabilities acquired is recognized as goodwill.
The Company estimates the preliminary fair value of acquired assets and liabilities as of the date of
acquisition based on information available at that time. Contingent consideration is recorded at fair value as of the
date of the acquisition with subsequent adjustments recorded in earnings. Changes to valuation allowances on
acquired deferred tax assets are recognized in the provision for, or benefit from, income taxes. The valuation of
these tangible and identifiable intangible assets and liabilities is subject to further management review and may
change materially between the preliminary allocation and end of the purchase price allocation period. Any changes
in these estimates may have a material effect on the Company’s consolidated operating results or financial position.
Goodwill and Other Intangible Assets
Goodwill is tested for impairment on an annual basis and whenever events or changes in circumstances
indicate that the carrying amount of goodwill may not be recoverable. Recoverability of goodwill is measured at
the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of
the reporting unit, which is measured based upon, among other factors, market multiples for comparable
companies as well as a discounted cash flow analysis. The Company has one reporting unit: Electronics
Manufacturing Services (“EMS”). If the recorded value of the assets, including goodwill, and liabilities (“net
book value”) of the reporting unit exceeds its fair value, an impairment loss may be required to be recognized.
Further, to the extent the net book value of the Company as a whole is greater than its fair value in the aggregate,
all, or a significant portion of its goodwill may be considered impaired. The Company performed its goodwill
impairment assessment on January 31, 2013 and did not elect to perform the qualitative “Step Zero” assessment.
Instead the Company performed a quantitative assessment of its goodwill at the afore-mentioned date. Based on
this assessment the Company determined that no impairment existed as of the date of the impairment test. The
fair value of the reporting unit exceeded the carrying value.
The following table summarizes the activity in the Company’s goodwill account during fiscal years 2013
and 2012:
As of March 31,
2013
2012
(In thousands)
Balance, beginning of the year, net of accumulated impairment
of $5,949,977 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase accounting adjustments and reclassification to other
intangibles(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . .
$101,670 $ 93,207
8,607
160,609
—
(274)
601
(745)
Balance, end of period, net of accumulated impairment of $5,949,977 . .
$262,005 $101,670
(1) For fiscal year 2013, additions to goodwill were primarily related to $98.7 million added from the acquisition
of Saturn Electronics and Engineering, Inc (“Saturn”). The remainder of the additions were attributable to
certain acquisitions that were not individually, nor in the aggregate, significant to the Company. For fiscal
year 2012, additions were attributable to certain acquisitions that were not individually, nor in the aggregate,
significant to the Company. Refer to the discussion of the Company’s acquisitions in note 15.
(2) Includes adjustments and reclassifications based on management’s estimates resulting from their review and
finalization of the valuation of assets and liabilities acquired through certain business combinations
completed in a period subsequent to the respective acquisition. These adjustments, reclassifications and
acquisitions were not individually, nor in the aggregate, significant to the Company.
S-17
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
The Company’s acquired intangible assets are subject to amortization over their estimated useful lives and
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an
intangible asset may not be recoverable. An impairment loss is recognized when the carrying amount of an
intangible asset exceeds its fair value. The Company reviewed the carrying value of its intangible assets as of the
year ended March 31, 2013 and concluded that such amounts continued to be recoverable.
Intangible assets are comprised of customer-related intangible assets, which primarily include contractual
agreements and customer relationships; and licenses and other intangible assets, which is primarily comprised of
licenses and also includes patents and trademarks, and developed technologies. Other intangible assets as of
March 31, 2013 were primarily comprised of $10.3 million of developed technology related to the acquisition of
Saturn Electronics and Engineering, Inc (“Saturn”). Generally customer-related intangible assets are amortized on
an accelerated method based on expected cash flows, primarily over a period of up to eight years. Licenses and
other intangible assets are generally amortized on a straight line basis over a period of up to seven years. No
residual value is estimated for any intangible assets. During fiscal year 2013, the gross carrying amount of
customer-related intangibles increased by $50.7 million in connection with business acquisitions as described in
detail at note 15 to the consolidated financial statements. The fair value of the Company’s intangible assets
purchased through business combinations is principally determined based on management’s estimates of cash
flow and recoverability. The components of acquired intangible assets are as follows:
As of March 31, 2013
As of March 31, 2012
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
(In thousands)
Accumulated
Amortization
Net
Carrying
Amount
Intangible assets:
Customer-related intangibles . . .
Licenses and other intangibles .
$294,310
21,040
$(224,517)
(9,286)
$69,793
11,754
$243,681
22,740
$(199,238)
(8,929)
$44,443
13,811
Total . . . . . . . . . . . . . . . . . . .
$315,350
$(233,803)
$81,547
$266,421
$(208,167)
$58,254
The gross carrying amounts of intangible assets are removed when the recorded amounts have been fully
amortized. During the year ended March 31, 2013, the Company sold certain patents with a net carrying amount
of $8.6 million. The Company also recognized a charge for impairment of customer-related intangible assets with
a net carrying amount of $10.0 million, which is included in the results from discontinued operations, in
connection with the sale of a non-core business based on the carrying value of net assets and the sale proceeds.
Total intangible asset amortization expense recognized in continuing operations during fiscal years 2013, 2012
and 2011 was $29.5 million, $49.6 million and $66.2 million, respectively. As of March 31, 2013, the
weighted-average remaining useful lives of the Company’s intangible assets were approximately 2.3 years and
3.3 years for customer-related intangibles, and licenses and other intangible assets, respectively. The estimated
future annual amortization expense for acquired intangible assets is as follows:
Fiscal Year Ending March 31,
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
(In thousands)
$26,383
21,436
16,778
10,069
5,179
1,702
Total amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$81,547
Derivative Instruments and Hedging Activities
All derivative instruments are recognized on the consolidated balance sheets at fair value. If the derivative
instrument is designated as a cash flow hedge, effectiveness is tested monthly using a regression analysis of the
change in the spot currency rates and the change in the present value of the spot currency rates. The spot currency
rates are discounted to present value using functional currency LIBOR rates over the maximum length
S-18
JOB: 13-8094-1 CYCLE#;BL#: 9; 0 TRIM: 8.25" x 10.75"
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
of the hedge period. The effective portion of changes in the fair value of the derivative instrument (excluding time
value) is recognized in shareholders’ equity as a separate component of accumulated other comprehensive income
(loss), and recognized in the consolidated statements of operations when the hedged item affects earnings.
Ineffective and excluded portions of changes in the fair value of cash flow hedges are recognized in earnings
immediately. If the derivative instrument is designated as a fair value hedge, the changes in the fair value of the
derivative instrument and of the hedged item attributable to the hedged risk are recognized in earnings in the
current period. Additional information is included in note 7 to the consolidated financial statements.
Other Current Assets / Other Assets
Other current assets includes approximately $412.4 million and $514.9 million as of March 31, 2013 and
2012, respectively for the deferred purchase price receivable from our Global and North American Asset-Backed
Securitization programs. See note 8 to the consolidated financial statements for additional information regarding
the Company’s participation in its trade receivables securitization programs. Additionally, the balance as of
March 31, 2013 includes $74.4 million relating to the fair value of certain fully vested warrants to purchase
common stock of a supplier. These warrants were exercised and the underlying shares were sold subsequent to
year end for total proceeds of $67.3 million resulting in a $7.1 million realized loss that will be recognized during
the Company’s fiscal quarter ending June 28, 2013. Also included in other current assets as of March 31, 2013 is
an amount of $251.3 million relating to certain assets purchased on behalf of a customer and financed by a third
party banking institution as further described in note 15 to the consolidated financial statements.
The Company has certain equity investments in, and notes receivable from, non-publicly traded companies
and an equity investment in a publicly traded company, which are included within other assets in the Company’s
consolidated balance sheets. Non-majority-owned investments are accounted for using the equity method when
the Company has an ownership percentage equal to or greater than 20% but less than 50%, or has the ability to
significantly influence the operating decisions of the issuer; otherwise the cost method is used. The Company
monitors these investments for impairment indicators and makes appropriate reductions in carrying values as
required. Fair values of these investments, when required, are estimated using unobservable inputs, primarily
discounted cash flow projections.
As of March 31, 2013 and 2012, the Company’s equity investments in non-majority owned companies
totaled $26.8 million and $38.6 million, respectively. The equity in the earnings or losses of the Company’s equity
method investments was not material to the consolidated results of operations for any period presented in these
consolidated financial statements.
Other Current Liabilities
Other current liabilities includes deferred revenue amounting to $227.0 million and $329.6 million and
customer working capital advances amounting to $214.1 million and $326.6 million as of March 31, 2013 and
2012, respectively. Also included in other current liabilities as of March 31, 2013 is an amount of $272.8 million
relating to amounts financed by a third party banking institution for the purchase of assets on behalf of a
customer as further described in note 15 to the consolidated financial statements.
Restructuring Charges
The Company recognizes restructuring charges related to its plans to close or consolidate excess
manufacturing and administrative facilities. In connection with these activities, the Company records
restructuring charges for employee termination costs, long-lived asset impairment and other exit-related costs.
The recognition of restructuring charges requires the Company to make certain judgments and estimates
regarding the nature, timing and amount of costs associated with the planned exit activity. To the extent the
Company’s actual results differ from its estimates and assumptions, the Company may be required to revise the
estimates of future liabilities, requiring the recognition of additional restructuring charges or the reduction of
liabilities already recognized. Such changes to previously estimated amounts may be material to the consolidated
financial statements. At the end of each reporting period, the Company evaluates the remaining accrued balances
to ensure that no excess accruals are retained and the utilization of the provisions are for their
S-19
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COMPOSITE
Merrill Corp - Flextronics International Ltd. 10-K Combo_ ED type for Printed Book ED ED | 105175 | 09-Jun-13 00:18 | 13-8094-1.he | Sequence: 8
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
intended purpose in accordance with developed exit plans. See note 12 to the consolidated financial statements
for additional information regarding restructuring charges.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (“FASB”) issued guidance which requires an
entity to measure obligations resulting from joint and several liability arrangements, including the amount the
reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount
the reporting entity expects to pay on behalf of its co-obligors, as well as discussion of the nature of such
obligations.
In February 2013, the FASB issued guidance which requires an entity to disclose amounts reclassified out of
accumulated other comprehensive income by component for each period an income statement is presented to
present, either on the face of the statement where net income is presented or in the notes, significant amounts
reclassified out of accumulated other comprehensive income by the respective line items of net income. This
disclosure is effective for the Company beginning in fiscal year 2014.
In December 2011, the FASB issued guidance which requires an entity to disclose information about
offsetting and related arrangements to enable financial statement users to evaluate the effect or potential effect of
netting arrangements, including rights of setoff associated with the entity’s recognized financial assets and
liabilities, on the entity’s financial position. The new disclosures will enable financial statement users to compare
balance sheets prepared under U.S. GAAP and International Financial Reporting Standards (IFRS), which are
subject to different offsetting models. The disclosures will be limited to financial instruments (and derivatives)
subject to enforceable master netting arrangements or similar agreements. Similar agreements include derivative
clearing agreements, global master repurchase agreements, and global master securities lending agreements.
Financial instruments and transactions that will be subject to the disclosure requirements may include derivatives,
repurchase and reverse repurchase agreements, and securities lending and borrowing arrangements. An entity
should provide the disclosures required by those amendments retrospectively for all comparative periods
presented. The guidance is effective for the Company beginning in fiscal year 2014. The adoption of this
guidance will not have a significant impact to the Company’s consolidated financial statements.
3. SHARE-BASED COMPENSATION
Equity Compensation Plans
During fiscal year 2013, the Company granted equity compensation awards under the 2010 Equity Incentive
Plan (the “2010 Plan”). As of March 31, 2013, the Company had approximately 43.4 million shares available for
grants under the 2010 Plan. Options issued to employees under the 2010 Plan generally vest over four years and
expire seven years from the date of grant. Options granted to non-employee directors expire five years from the
date of grant.
The exercise price of options granted to employees is determined by the Company’s Board of Directors or
the Compensation Committee and may not be less than the closing price of the Company’s ordinary shares on the
date of grant.
The Company also grants share bonus awards under its equity compensation plan. Share bonus awards are
rights to acquire a specified number of ordinary shares for no cash consideration in exchange for continued
service with the Company. Share bonus awards generally vest in installments over a three to five year period and
unvested share bonus awards are forfeited upon termination of employment. Vesting for certain share bonus
awards is contingent upon both service and market conditions.
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. SHARE-BASED COMPENSATION (Continued)
Share-Based Compensation Expense
The following table summarizes the Company’s share-based compensation expense:
Fiscal Year Ended March 31,
2013
2012
2011
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . .
$ 5,163
29,366
(In thousands)
$ 7,446
41,008
$10,249
44,988
Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . .
$34,529
$48,454
$55,237
As required by the authoritative guidance for stock-based compensation, management made an estimate of
expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest. When
estimating forfeitures, the Company considers voluntary termination behavior as well as an analysis of actual
forfeitures.
As of March 31, 2013, the total unrecognized compensation cost related to unvested share options granted to
employees under the Company’s equity compensation plans was approximately $1.9 million, net of estimated
forfeitures. This cost will be amortized on a straight-line basis over a weighted-average period of approximately
1.9 years and will be adjusted for estimated forfeitures. As of March 31, 2013, the total unrecognized
compensation cost related to unvested share bonus awards granted to employees was approximately $71.4 million,
net of estimated forfeitures. This cost will be amortized generally on a straight-line basis over a weighted-average
period of approximately 2.5 years and will be adjusted for estimated forfeitures. Approximately $8.0 million of
the unrecognized compensation cost, net of forfeitures, is related to share bonus awards granted to certain key
employees whereby vesting is contingent on meeting a certain market condition.
Cash flows resulting from excess tax benefits (tax benefits related to the excess of proceeds from employee
exercises of share options over the share-based compensation cost recognized for those options) are classified as
financing cash flows. During fiscal years 2013, 2012 and 2011, the Company did not recognize any excess tax
benefits as a financing cash inflow.
Determining Fair Value
Valuation and Amortization Method—The Company estimates the fair value of share options granted using
the Black-Scholes valuation method and a single option award approach. This fair value is then amortized on a
straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The fair
market value of share bonus awards granted, other than those awards with a market condition, is the closing price
of the Company’s ordinary shares on the date of grant and is generally recognized as compensation expense on a
straight-line basis over the respective vesting period. For share bonus awards whereby vesting is contingent on
meeting certain market conditions, the fair value is determined using a Monte Carlo simulation.
Expected Term—The Company’s expected term used in the Black-Scholes valuation method represents the
period that the Company’s share options are expected to be outstanding and is determined based on historical
experience of similar awards, giving consideration to the contractual terms of the share options, vesting schedules
and expectations of future employee behavior as influenced by changes to the terms of its share options.
Expected Volatility—The Company’s expected volatility used in the Black-Scholes valuation method is
derived from a combination of implied volatility related to publicly traded options to purchase Flextronics
ordinary shares and historical variability in the Company’s periodic share price.
Expected Dividend—The Company has never paid dividends on its ordinary shares and currently does not
intend to do so in the near term, and accordingly, the dividend yield percentage is zero for all periods.
Risk-Free Interest Rate—The Company bases the risk-free interest rate used in the Black-Scholes valuation
method on the implied yield currently available on U.S. Treasury constant maturities issued with a term
equivalent to the expected term of the option.
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. SHARE-BASED COMPENSATION (Continued)
The fair value of the Company’s share options granted to employees for fiscal years 2013, 2012 and 2011
other than those with market criteria discussed below, was estimated using the following weighted-average
assumptions:
Fiscal Year Ended March 31,
Expected term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 years
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46.9%
0.0%
0.9%
$2.48
2013
2012
4.1 years
2011
4.1 years
46.9%
0.0%
1.1%
$2.57
46.9%
0.0%
1.6%
$2.80
Options granted during the 2013, 2012 and 2011 fiscal years had contractual lives of seven years.
Share-Based Awards Activity
The following is a summary of option activity for the Company’s equity compensation plans, (“Price”
reflects the weighted-average exercise price):
Outstanding, beginning of fiscal year . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding, end of fiscal year . . . . . . . . . . .
Fiscal Year Ended March 31,
2013
Options
43,933,660
19,000
(5,398,331)
(4,148,765)
34,405,564
Price
$7.78
6.57
4.12
8.32
$8.29
2012
2011
Options
Price
Options
53,942,458
599,800
(5,879,405)
(4,729,193)
43,933,660
$ 7.61
6.80
3.92
10.45
$ 7.78
62,868,569
2,063,748
(6,215,867)
(4,773,992)
53,942,458
Price
$7.16
7.21
7.44
6.55
$7.61
Options exercisable, end of fiscal year . . . . .
33,662,480
$8.31
37,021,049
$ 8.44
34,237,404
$9.23
The aggregate intrinsic value of options exercised (calculated as the difference between the exercise price of
the underlying award and the price of the Company’s ordinary shares determined as of the time of option exercise
for options exercised in-the-money) under the Company’s equity compensation plans was $13.0 million,
$17.1 million and $22.9 million during fiscal years 2013, 2012 and 2011, respectively.
Cash received from option exercises was $22.3 million, $23.1 million and $23.3 million for fiscal years
2013, 2012 and 2011, respectively.
The following table presents the composition of options outstanding and exercisable as of March 31, 2013:
Options Outstanding
Options Exercisable
Range of Exercise Prices
$ 1.94 - $ 2.26 . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3.39 - $ 5.75 . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5.87 - $ 7.07 . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 7.08 - $10.59 . . . . . . . . . . . . . . . . . . . . . . . . . .
$10.67 - $11.41 . . . . . . . . . . . . . . . . . . . . . . . . . .
$11.53 - $13.98 . . . . . . . . . . . . . . . . . . . . . . . . . .
$14.34 - $23.02 . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1.94 - $23.02 . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Shares
Outstanding
8,271,934
6,736,382
552,685
8,041,703
1,171,246
6,965,166
2,666,448
34,405,564
Options vested and expected to vest . . . . . . . . . .
34,350,265
Weighted
Average
Remaining Weighted
Average
Contractual
Exercise
Life
Price
(In Years)
2.74
3.35
4.27
2.50
3.02
1.87
0.94
2.52
2.53
$ 2.18
5.55
6.53
10.10
11.21
12.24
17.44
$ 8.29
$ 8.31
Number of
Shares
Exercisable
8,271,934
6,670,480
350,536
7,566,670
1,171,246
6,965,166
2,666,448
33,662,480
Weighted
Average
Exercise
Price
$ 2.18
5.55
6.58
10.25
11.21
12.24
17.44
$ 8.31
As of March 31, 2013, the aggregate intrinsic value for options outstanding, options vested and expected to
vest (which includes adjustments for expected forfeitures), and options exercisable were $46.2 million, $46.2 million
and $46.1 million, respectively. The aggregate intrinsic value is calculated as the difference between the exercise
price of the underlying awards and the quoted price of the Company’s ordinary shares as of March 31, 2013
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. SHARE-BASED COMPENSATION (Continued)
for the approximately 15.2 million options that were in-the-money at March 31, 2013. As of March 31, 2013, the
weighted average remaining contractual life for options exercisable was 2.47 years.
The following table summarizes the Company’s share bonus award activity (“Price” reflects the
weighted-average grant-date fair value):
Fiscal Year Ended March 31,
2013
2012
2011
Shares
Price
Shares
Price
Shares
Price
Unvested share bonus awards outstanding,
beginning of fiscal year . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,965,268
9,582,867
(1,506,234)
(2,234,832)
$6.91
6.74
7.51
6.86
13,801,942
9,213,456
(2,555,165)
(4,494,965)
$8.04
6.78
9.34
8.60
8,801,609
9,739,375
(2,758,593)
(1,980,449)
$10.31
7.01
10.37
9.74
Unvested share bonus awards outstanding,
end of fiscal year . . . . . . . . . . . . . . . . . . . .
21,807,069
$6.80
15,965,268
$6.91
13,801,942
$ 8.04
Of the 21.8 million unvested share bonus awards outstanding as of the year ended March 31, 2013,
approximately 3.9 million represents the target amount of grants made to certain key employees whereby vesting
is contingent on meeting a certain market condition. The number of shares that ultimately will vest are based on a
measurement of Flextronics’ total shareholder return against the Standard and Poor’s (“S&P”) 500 Composite
Index and will vest over a period of three years. Of the 3.9 million awards that were outstanding as of the year
ended March 31, 2013, 2.1 million were granted in fiscal year 2013 at an estimated average grant-date fair value
of $7.63 per share, 1.0 million were granted in fiscal year 2012 at an average grant-date fair value of $7.78 per
share, and 0.8 million were granted in fiscal year 2011 at an average grant-date fair value of $7.32 per share. In
accordance with accounting guidance, the Company will continue to recognize share-based compensation
expense for these awards with market conditions regardless of whether such awards will ultimately vest. The
actual number of shares to be issued can range from zero to 4.1 million for the 2013 grants, zero to 1.6 million for
the 2012 grants, and zero to 1.2 million for the 2011 grants. The awards granted during fiscal year 2011 will
expire in June 2013, and are not expected to vest.
The total intrinsic value of share bonus awards vested under the Company’s equity compensation plans was
$9.7 million, $17.7 million and $19.6 million during fiscal years 2013, 2012 and 2011, respectively, based on the
closing price of the Company’s ordinary shares on the date vested.
4. EARNINGS PER SHARE
Basic earnings per share for both continuing and discontinued operations exclude dilution and are computed
by dividing net income by the weighted-average number of ordinary shares outstanding during the applicable
periods.
Diluted earnings per share for both continuing and discontinued operations reflect the potential dilution
from stock options, share bonus awards and convertible securities. The potential dilution from stock options
exercisable into ordinary share equivalents and share bonus awards was computed using the treasury stock
method based on the average fair market value of the Company’s ordinary shares for the period. The potential
dilution from the conversion spread (excess of conversion value over face value) of the Subordinated Notes
convertible into ordinary share equivalents was calculated as the quotient of the conversion spread and the
average fair market value of the Company’s ordinary shares for the period.
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. EARNINGS PER SHARE (Continued)
The following table reflects the basic weighted-average ordinary shares outstanding and diluted
weighted-average ordinary share equivalents used to calculate basic and diluted income from continuing and
discontinued operations per share:
Basic earnings from continuing and discontinued operations per share:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares used in computation:
Weighted-average ordinary shares outstanding . . . . . . . . . . . . . . . . .
Basic earnings from continuing operations per share . . . . . . . . . . . .
Basic loss from discontinued operations per share . . . . . . . . . . . . . . .
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings from continuing and discontinued operations per share:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares used in computation:
Weighted-average ordinary shares outstanding . . . . . . . . . . . . . . . . .
Weighted-average ordinary share equivalents from stock options
and awards(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal Year Ended March 31,
2013
2012
2011
(In thousands, except per share amounts)
$302,502
$ (25,451)
$277,051
$520,770
$ (32,005)
$488,765
$612,261
$ (16,042)
$596,219
662,874
0.46
(0.04)
0.42
$
$
$
716,247
0.73
(0.04)
0.68
$
$
$
777,315
0.79
(0.02)
0.77
$
$
$
$302,502
$ (25,451)
$277,051
$520,770
$ (32,005)
$488,765
$612,261
$ (16,042)
$596,219
662,874
716,247
777,315
12,159
11,560
12,877
Weighted-average ordinary shares and ordinary share equivalents
outstanding(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings from continuing operations per share . . . . . . . . . . .
Diluted loss from discontinued operations per share . . . . . . . . . . . . .
675,033
0.45
(0.04)
$
$
727,807
0.72
(0.04)
$
$
790,192
0.77
(0.02)
$
$
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
0.41
$
0.67
$
0.75
(1) Options to purchase ordinary shares of 20.6 million, 24.2 million and 25.5 million during fiscal years 2013,
2012 and 2011, respectively, were excluded from the computation of diluted earnings per share primarily
because the exercise price of these options was greater than the average market price of the Company’s
ordinary shares during the respective periods.
(2) On August 2, 2010 the Company paid approximately $240.0 million to redeem its 1% Convertible
Subordinated Notes upon maturity. The notes carried conversion provisions to issue shares to settle any
conversion spread (excess of the conversion value over the conversion price) in stock. The conversion price
was $15.525 per share (subject to certain adjustments). On the maturity date, the Company’s stock price was
less than the conversion spread, and therefore no shares were issued. For the year ended March 31, 2011, the
conversion obligation was less than the principal portion of these notes and accordingly, no additional shares
were included as ordinary share equivalents.
5. SUPPLEMENTAL CASH FLOW DISCLOSURES
The following table represents supplemental cash flow disclosures and non-cash investing and financing
activities:
Fiscal Year Ended March 31,
2013
2012
2011
(In thousands)
Net cash paid for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$66,071
$52,306
$42,067
$66,013
$83,133
$77,690
Non-cash investing activity:
Accounts payable for fixed assets purchases . . . . . . . . . . . . . . . .
$89,718
$63,671
$73,036
S-24
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. BANK BORROWINGS AND LONG-TERM DEBT
Bank borrowings and long-term debt are as follows:
4.625% Notes due February 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.000% Notes due February 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan, including current portion, due in October 2014 . . . . . . . . . . . .
Term Loan, including current portion, due in installments through
October 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding under revolving line of credit . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31,
2013
2012
(In thousands)
$ 500,000
500,000
170,340
$
—
—
1,179,595
517,500
375,000
—
4,787
487,500
377,000
140,000
4,578
2,067,627
(416,654)
2,188,673
(39,340)
Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,650,973
$2,149,333
The weighted average interest rate for the Company’s long-term debt was 3.5% as of March 31, 2013.
Repayments of the Company’s long-term debt are as follows:
Fiscal Year Ending March 31,
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
(In thousands)
$ 416,654
211,136
41,250
393,750
—
1,004,837
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,067,627
Capital lease obligations of $9.1 million and $11.6 million, consisting of short-term obligations of $2.8 million
and $3.1 million and long term obligations of $6.3 million and $8.5 million are included in current and non-current
liabilities on the Company’s balance sheets as of March 31, 2013 and 2012, respectively.
Notes due February 2020 and February 2023
On February 20, 2013, the Company issued $500.0 million of 4.625% Notes due February 15, 2020 and
$500.0 million of 5.000% Notes due February 15, 2023 (collectively the “Notes”) in a private offering pursuant to
Rule 144A and Regulation S under the Securities Act . The Company received net proceeds of approximately
$990.6 million from the issuance and used those proceeds, together with $9.4 million of cash on hand, to repay
$1.0 billion of outstanding borrowings under its 2007 term loan facility.
Interest on the Notes is payable semi-annually, commencing on August 15, 2013. The Notes are senior
unsecured obligations of the Company, rank equally with all of the Company’s other existing and future senior
and unsecured debt obligations, and are guaranteed, jointly and severally, fully and unconditionally on an
unsecured basis, by each of the Company’s 100% owned subsidiaries that guarantees indebtedness under, or is a
borrower under, the Company’s Term Loan Agreement and Revolving Line of Credit.
At any time prior to maturity, the Company may redeem some or all of the Notes at a redemption price equal to
100% of the principal amount of the Notes redeemed, plus an applicable premium and accrued and unpaid interest, if
any, to the applicable redemption date. Upon the occurrence of a change of control repurchase event (as defined in the
Notes indenture), the Company must offer to repurchase the Notes at a repurchase price equal to 101% of the
principal amount of the Notes repurchased, plus accrued and unpaid interest, if any, to the applicable repurchase date.
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
The indenture governing the Notes contains covenants that, among other things, restrict the ability of the
Company and certain of the Company’s subsidiaries to create liens; enter into sale-leaseback transactions; create,
incur, issue, assume or guarantee any funded debt; and consolidate or merge with, or convey, transfer or lease all
or substantially all of the Company’s assets to, another person. These covenants are subject to a number of
significant limitations and exceptions set forth in the indenture. The indenture also provides for customary events
of default, including, but not limited to, cross defaults to certain specified other debt of the Company and its
subsidiaries. In the case of an event of default arising from specified events of bankruptcy or insolvency, all
outstanding Notes will become due and payable immediately without further action or notice. If any other event
of default under the agreement occurs or is continuing, the applicable trustee or holders of at least 25% in
aggregate principal amount of the then outstanding Notes may declare all of the Notes to be due and payable
immediately. As of March 31, 2013, the Company was in compliance with the covenants in the indenture
governing the Notes.
In connection with the issuance of the Notes, the Company entered into a registration rights agreement
under which it has agreed to consummate an offer registered with the Securities and Exchange Commission to
issue new notes having terms substantially identical to the Notes (except that the new notes will not be subject to
restrictions on transfer) in exchange for outstanding Notes. In some circumstances, the Company may be required
to file a shelf registration statement to cover resales of the Notes. If the Company fails to satisfy these obligations,
the Company may be required to pay additional interest to holders of the Notes under certain circumstances.
Term Loan Agreement and Revolving Line of Credit
On October 19, 2011, the Company entered into a five-year $2.0 billion Credit Facility consisting of a
$1.5 billion Revolving Credit Facility and a $500.0 million term loan, which expires in October 2016. The
Revolving Credit Facility due 2016 replaced the Company’s $2.0 billion revolving credit facility, which was due
to mature in May 2012 and the $500.0 million term loan refinanced the outstanding amount of its $500.0 million
tranche under the Company’s $1.7 billion term loan, which was due to mature in October 2012. During fiscal year
2013, the Company increased the limit on the term loan by $50 million and borrowed the entire incremental
amount. Additionally, the Company repaid a total principal amount of $20 million on the term loan during fiscal
year 2013. Borrowings under the Credit Facility bear interest, at the Company’s option, either at (i) LIBOR plus
the applicable margin for LIBOR loans ranging between 1.25% and 2.25%, based on the Company’s credit ratings
or (ii) the base rate (the greatest of the agent’s prime rate, the federal funds rate plus 0.50% and LIBOR for a
one-month interest period plus 1.00%) plus an applicable margin ranging between 0.25% and 1.25%, based on
the Company’s credit rating. The Company is required to pay a quarterly commitment fee ranging between 0.20%
and 0.45% per annum on the daily unused amount of the $1.5 billion Revolving Credit Facility based on the
Company’s credit rating.
This Credit Facility is unsecured, and contains customary restrictions on the Company’s and its subsidiaries’
ability to (i) incur certain debt, (ii) make certain investments, (iii) make certain acquisitions of other entities,
(iv) incur liens, (v) dispose of assets, (vi) make non-cash distributions to shareholders, and (vii) engage in
transactions with affiliates. These covenants are subject to a number of exceptions and limitations. This Credit
Facility also requires that the Company maintain a maximum ratio of total indebtedness to EBITDA (earnings
before interest expense, taxes, depreciation and amortization), and a minimum interest coverage ratio, as defined
therein, during its term. As of March 31, 2013, the Company was in compliance with the covenants under this
Credit Facility.
Term Loan Agreement
The Company entered into a $1.8 billion term loan facility, dated as of October 1, 2007, and subsequently
amended as of December 28, 2007.
During the fiscal year ended March 31, 2008, the Company borrowed $1.7 billion under this term loan
agreement. Of this amount, $500.0 million was scheduled to mature in October 2012 and the remainder was
scheduled to mature in October 2014. The Company may prepay the loans at any time at 100% of par plus
accrued and unpaid interest and reimbursement of the lender’s redeployment costs. On October 19, 2011, the
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
Company repaid $480 million, which was the outstanding portion of the $500.0 million due to mature in
October 2012. On February 20, 2013, the Company repaid $1.0 billion of the $1.2 billion outstanding that is
scheduled to mature in October 2014.
Borrowings under this term loan agreement bear interest, at the Company’s option, either at (i) the base rate
(the greater of the agent’s prime rate or the federal funds rate plus 0.50%) plus a margin of 1.25%; or (ii) LIBOR
plus a margin of 2.25%.
This term loan agreement is unsecured, and contains customary restrictions on the ability of the Company
and its subsidiaries to, among other things, (i) incur certain debt, (ii) make certain investments, (iii) make certain
acquisitions of other entities, (iv) incur liens, (v) dispose of assets, (vi) make non-cash distributions to
shareholders, and (vii) engage in transactions with affiliates. These covenants are subject to a number of
exceptions and limitations. This term loan agreement also requires that the Company maintain a maximum ratio
of total indebtedness to EBITDA (as defined by the loan agreement), during the term of the agreement.
Borrowings under this term loan agreement are guaranteed by the Company and certain of its subsidiaries. As of
March 31, 2013, the Company was in compliance with the covenants under this term loan agreement.
Asia Term Loans
On September 27, 2010, the Company entered into a $50.0 million term loan agreement with a bank based
in Asia, which matures on September 27, 2013. Borrowings under the term loan bear interest at LIBOR plus
2.30%. The Company, at its election, may convert the loan (in whole or in part) to bear interest at the higher of the
Federal Funds rate plus 0.50% or the prime rate plus, in each case 1.00%. Principal payments of $500,000 are due
quarterly with the balance due on the maturity date. The Company has the right to prepay any part of the loan
without penalty. Borrowings under the term loan agreement are guaranteed by certain subsidiaries of the
Company.
On September 28, 2010, the Company entered into a $130.0 million term loan facility with a bank in Asia,
which matures on September 28, 2013. Borrowings under the facility bear interest at LIBOR plus a margin of
2.15%, and the Company paid a non-refundable fee of $1.4 million at the inception of the loan. The Company has
the right to prepay any part of the loan without penalty.
On February 17, 2011, the Company entered into a $200.0 million term loan facility with a bank in Asia,
which matures on February 17, 2014. Borrowings under the facility bear interest at LIBOR plus a margin of
2.28%, and the Company paid a non-refundable fee of $1.0 million at the inception of the loan. The Company has
the right to prepay any part of the loan without penalty.
The Asia Term Loans are unsecured, and contain customary restrictions on the ability of the Company and
its subsidiaries to, among other things, (i) incur certain debt, (ii) make certain investments, (iii) make certain
acquisitions of other entities, (iv) incur liens, (v) dispose of assets, (vi) make non-cash distributions to
shareholders, and (vii) engage in transactions with affiliates. These covenants are subject to a number of
exceptions and limitations. The Asia Term Loans also require the Company maintain a maximum ratio of total
indebtedness to EBITDA (as defined by the loan agreement) during the terms of the agreements. As of March 31,
2013, the Company was in compliance with the covenants under these facilities.
Other Credit Lines
The Company and certain of its subsidiaries also have various uncommitted revolving credit facilities, lines
of credit and other loans in the amount of $274.2 million in the aggregate. There were no borrowings outstanding
under these facilities as of March 31, 2013 and 2012. These facilities, lines of credit and other loans bear annual
interest at the respective country’s inter-bank offering rate, plus an applicable margin, and generally have
maturities that expire on various dates in future fiscal years. The credit facilities are unsecured and the lines of
credit and other loans are primarily secured by accounts receivable.
Redemption of 1% Convertible Subordinated Notes
During August 2010, the Company paid $240.0 million to redeem its 1% Convertible Subordinated Notes at
par upon maturity plus accrued interest. These notes carried conversion provisions to issue shares to settle any
conversion spread (excess of conversion value over the conversion price) in stock. On the maturity date, the
Company’s stock price was less than the conversion price, and therefore no ordinary shares were issued.
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
Tender and Redemption of 6.25% Senior Subordinated Notes
During December 2010, the Company paid approximately $308.5 million to redeem the remaining aggregate
principal balance of $302.2 million of these notes at a redemption price of 102.083% of the principal amount. The
Company recognized a loss associated with the early redemption of the notes of approximately $13.2 million
during the fiscal year ended March 31, 2011, consisting of the redemption price premium of approximately
$6.3 million, and approximately $6.9 million primarily for the write-off of the unamortized debt issuance costs.
The loss is recorded in other charges (income), net in the consolidated statement of operations.
7. FINANCIAL INSTRUMENTS
Foreign Currency Contracts
The Company transacts business in various foreign countries and is therefore, exposed to foreign currency
exchange rate risk inherent in forecasted sales, cost of sales, and monetary assets and liabilities denominated in
non-functional currencies. The Company has established risk management programs to protect against volatility
in the value of non-functional currency denominated monetary assets and liabilities, and of future cash flows
caused by changes in foreign currency exchange rates. The Company tries to maintain a partial or fully hedged
position for certain transaction exposures, which are primarily, but not limited to, revenues, customer and vendor
payments and inter-company balances in currencies other than the functional currency unit of the operating entity.
The Company enters into short-term foreign currency forward and swap contracts to hedge only those currency
exposures associated with certain assets and liabilities, primarily accounts receivable and accounts payable, and
cash flows denominated in non-functional currencies. Gains and losses on the Company’s forward and swap
contracts are designed to offset losses and gains on the assets, liabilities and transactions hedged, and accordingly,
generally do not subject the Company to risk of significant accounting losses. The Company hedges committed
exposures and does not engage in speculative transactions. The credit risk of these forward and swap contracts is
minimized since the contracts are with large financial institutions and accordingly, fair value adjustments related
to the credit risk of the counter-party financial institution were not material.
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. FINANCIAL INSTRUMENTS (Continued)
As of March 31, 2013, the aggregate notional amount of the Company’s outstanding foreign currency
forward and swap contracts was $4.8 billion as summarized below:
Currency
Foreign Currency Amount
Notional Contract Value
in USD
Buy
Sell
Buy
Sell
Cash Flow Hedges
CNY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HUF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MXN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MYR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SGD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Forward/Swap Contracts
BRL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CAD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CNY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EUR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GBP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HUF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JPY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MXN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MYR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SEK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,000,150
12,088,000
1,336,500
336,600
51,400
N/A
246,600
96,882
2,859,783
429,846
37,697
15,445,300
9,228,849
1,474,585
168,093
1,186,018
N/A
Total Notional Contract Value in USD . . . . . .
(In thousands)
$
— $ 482,766
50,873
—
108,211
—
108,633
—
41,392
—
74,656
N/A
866,531
122,461
95,217
457,942
552,066
57,085
65,003
97,870
119,391
54,250
181,993
176,996
357,600
110,148
2,761,232
507,592
53,424
15,731,600
6,257,347
1,193,310
23,037
1,285,135
N/A
—
—
—
—
—
19,274
19,274
177,584
108,227
444,296
651,993
80,774
66,208
66,686
96,617
7,435
197,289
77,142
1,980,274
1,974,251
$2,846,805
$1,993,525
As of March 31, 2013 and 2012, the fair value of the Company’s short-term foreign currency contracts was
not material and included in other current assets or other current liabilities, as applicable, in the consolidated
balance sheets. Certain of these contracts are designed to economically hedge the Company’s exposure to
monetary assets and liabilities denominated in non-functional currencies and are not accounted for as hedges
under the accounting standards. Accordingly, changes in fair value of these instruments are recognized in
earnings during the period of change as a component of interest and other expense, net in the consolidated
statements of operations. As of March 31, 2013 and 2012, the Company also has included net deferred gains and
losses, respectively, in accumulated other comprehensive income (loss), a component of shareholders’ equity in
the consolidated balance sheets, relating to changes in fair value of its foreign currency contracts that are
accounted for as cash flow hedges. These deferred gains and losses were not material, and any deferred losses as
of March 31, 2013 are expected to be recognized as a component of cost of sales in the consolidated statement of
operations primarily over the next twelve month period. The gains and losses recognized in earnings due to hedge
ineffectiveness were not material for all fiscal years presented and are included as a component of interest and
other expense, net in the consolidated statements of operations.
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. FINANCIAL INSTRUMENTS (Continued)
The following table presents the fair value of the Company’s derivative instruments located on the
consolidated balance sheets utilized for foreign currency risk management purposes at March 31, 2013 and 2012:
Fair Values of Derivative Instruments
Asset Derivatives
Liability Derivatives
Fair Value
Fair Value
Balance Sheet March 31, March 31,
Balance Sheet March 31, March 31,
Location
2013
2012
Location
2013
2012
(In thousands)
Derivatives designated as
hedging instruments
Foreign currency contracts . . . . . . . Other current
assets
$11,032
$10,075
Other current
liabilities
$ 3,999
$1,905
Derivatives not designated as
hedging instruments
Foreign currency contracts . . . . . . . Other current
assets
$16,531
$10,894
Other current
liabilities
$11,291
$6,200
8. TRADE RECEIVABLES SECURITIZATION
The Company sells trade receivables under two asset-backed securitization programs and an accounts
receivable factoring program.
Asset-Backed Securitization Programs
The Company continuously sells designated pools of trade receivables under its Global Asset-Backed
Securitization Agreement (the “Global Program”) and its North American Asset-Backed Securitization
Agreement (the “North American Program,” collectively, the “ABS Programs”) to affiliated special purpose
entities, each of which in turn sells 100% of the receivables to unaffiliated financial institutions. These programs
allow the operating subsidiaries to receive a cash payment and a deferred purchase price receivable for sold
receivables. Following the transfer of the receivables to the special purpose entities, the transferred receivables are
isolated from the Company and its affiliates, and upon the sale of the receivables from the special purpose entity
to the unaffiliated financial institutions effective control of the transferred receivables is passed to the unaffiliated
financial institutions, which has the right to pledge or sell the receivables. Although the special purpose entities
are consolidated by the Company, they are separate corporate entities and their assets are available first to satisfy
the claims of their creditors. The investment limits by the financial institutions are $500.0 million for the Global
Program and $300.0 million for the North American Program and require a minimum level of deferred purchase
price receivable to be retained by the Company in connection with the sales.
The Company services, administers and collects the receivables on behalf of the special purpose entities and
receives a servicing fee of 0.5% to 1.00% of serviced receivables per annum. Servicing fees recognized during the
fiscal years ended March 31, 2013, 2012 and 2011 were not material and are included in interest and other expense,
net within the consolidated statements of operations. As the Company estimates the fee it receives in return for its
obligation to service these receivables is at fair value, no servicing assets and liabilities are recognized.
Effective April 1, 2010, the Company adopted two new accounting standards, the first of which removed the
concept of a qualifying special purpose entity and created more stringent conditions for reporting the transfer of a
financial asset as a sale. The second standard amended the consolidation guidance for determining the primary
beneficiary of a variable interest entity. As a result of the adoption of the second standard, the Company was
deemed to be the primary beneficiary of the special purpose entity to which the pool of trade receivables was sold
under the Global Program and, as such, was required to consolidate the special purpose entity; the Company had
previously been consolidating the special purpose entity under the North American Program. The North American
Program was amended effective April 1, 2010 and the Global Program was amended effective September 29,
2010 in each case to provide for the sale by the special purpose entities of 100% of the eligible receivables to the
unaffiliated financial institutions; previously the special purpose entities had retained a partial interest in the sold
receivables. Upon adoption of these standards, the balance of receivables sold for cash under the Global Program
as of April 1, 2010, totaling $217.1 million, was recorded as accounts receivable and short-term bank borrowings
in the opening balance sheet of fiscal year 2011. Upon collection of these receivables the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. TRADE RECEIVABLES SECURITIZATION (Continued)
Company recorded cash from operations offset by repayments of bank borrowings from financing activities in the
consolidated statements of cash flows during the year ended March 31, 2011. As of March 31, 2013 and 2012, the
accounts receivable balances that were sold under the ABS Programs were removed from the consolidated
balance sheets and the net cash proceeds received by the Company were included as cash provided by operating
activities in the consolidated statements of cash flows.
Although the Company still consolidates the special purpose entities, as a result of the amendments to the
North American Program effective April 1, 2010 and the Global Program on September 29, 2010, all of the
receivables sold to the unaffiliated financial institutions for cash are removed from the consolidated balance sheet
and the cash received is no longer accounted for as a secured borrowing. The portion of the purchase price for the
receivables which is not paid by the unaffiliated financial institutions in cash is a deferred purchase price
receivable, which is paid to the special purpose entity as payments on the receivables are collected from account
debtors. The deferred purchase price receivable represents a beneficial interest in the transferred financial assets
and is recognized at fair value as part of the sale transaction.
As of March 31, 2013, approximately $1.0 billion of accounts receivable had been sold to the special purpose
entities under the ABS Programs for which the Company had received net cash proceeds of $556.9 million and
deferred purchase price receivables of $412.4 million. As of March 31, 2012, approximately $1.1 billion of
accounts receivable had been sold to the special purpose entities for which the Company had received net cash
proceeds of $556.8 million and deferred purchase price receivables of $514.9 million. The deferred purchase price
receivables are included in other current assets as of March 31, 2013 and 2012, and were carried at the expected
recovery amount of the related receivables. The difference between the carrying amount of the receivables sold
under these programs and the sum of the cash and fair value of the deferred purchase price receivables received at
time of transfer is recognized as a loss on sale of the related receivables and recorded in interest and other expense,
net in the consolidated statements of operations; such amounts were $7.2 million, $10.9 million and $8.0 million
for the fiscal years ended March 31, 2013, 2012 and 2011, respectively.
For the fiscal years ended March 31, 2013, 2012 and 2011, cash flows from sales of receivables under the
ABS Programs consisted of approximately $3.5 billion, $4.7 billion and $2.4 billion, respectively for transfers of
receivables (of which approximately $0.7 billion, $0.6 billion and $0.6 billion, respectively represented new
transfers and the remainder proceeds from collections reinvested in revolving-period transfers).
The following table summarizes the activity in the deferred purchase price receivables account during the
fiscal years ended March 31, 2013 and 2012:
As of March 31,
2013
2012
(In thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers of receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
514,895
3,896,495
(3,999,033)
$
459,994
4,922,541
(4,867,640)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
412,357
$
514,895
Trade Accounts Receivable Sale Programs
The Company also sold accounts receivables to certain third-party banking institutions. The outstanding
balance of receivables sold and not yet collected was approximately $163.6 million and $110.5 million as of
March 31, 2013 and 2012, respectively. For the years ended March 31, 2013, 2012 and 2011, total accounts
receivables sold to certain third party banking institutions was approximately $1.1 billion, $2.0 billion and
$2.5 billion, respectively. The receivables that were sold were removed from the consolidated balance sheets and
were reflected as cash provided by operating activities in the consolidated statements of cash flows.
S-31
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JOB: 13-8094-1 CYCLE#;BL#: 9; 0 TRIM: 8.25" x 10.75"
COLORS: Black, ~note-color 2 GRAPHICS: Singapore Tabs txt pgs.eps V1.5
COMPOSITE
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. When determining the fair value
measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers
the principal or most advantageous market in which it would transact, and it considers assumptions that market
participants would use when pricing the asset or liability. The accounting guidance for fair value establishes a fair
value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair
value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. The fair value hierarchy is as follows:
Level 1—Applies to assets or liabilities for which there are quoted prices in active markets for identical
assets or liabilities.
The Company has deferred compensation plans for its officers and certain other employees. Deferred
amounts under the plans are invested in hypothetical investments selected by the participant or the participant’s
investment manager. The Company’s deferred compensation plan assets are included in other noncurrent assets on
the consolidated balance sheets and include investments in equity securities and mutual funds that are valued
using active market prices.
The Company values available for sale investments using level 1 inputs which are active market trading
prices.
Level 2—Applies to assets or liabilities for which there are inputs other than quoted prices included within
level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active
markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent
transactions (less active markets) such as cash and cash equivalent and money market funds; or model-derived
valuations in which significant inputs are observable or can be derived principally from, or corroborated by,
observable market data.
The Company values foreign exchange forward contracts using level 2 observable inputs which primarily
consist of an income approach based on the present value of the forward rate less the contract rate multiplied by
the notional amount.
The Company’s cash equivalents are comprised of bank deposits and money market funds, which are valued
using level 2 inputs, such as interest rates and maturity periods. Due to their short-term nature, their carrying
amount approximates fair value.
The Company’s deferred compensation plan assets also include money market funds, mutual funds,
corporate and government bonds and certain convertible securities that are valued using prices obtained from
various pricing sources. These sources price these investments using certain market indices and the performance
of these investments in relation to these indices. As a result, the Company has classified these investments as
level 2 in the fair value hierarchy.
Level 3—Applies to assets or liabilities for which there are unobservable inputs to the valuation
methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company has accrued for contingent consideration in connection with its business acquisitions, which
is measured at fair value based on certain internal models and inputs. The following table summarizes the
activities related to contingent consideration:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,151
25,000
(1,151)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$25,000
$1,293
513
(655)
$1,151
S-32
As of March 31,
2013
2012
(In thousands)
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES (Continued)
The Company values deferred purchase price receivables relating to its Asset-Backed Securitization
Program based on a discounted cash flow analysis using unobservable inputs (i.e. level 3 inputs), which are
primarily risk free interest rates adjusted for the credit quality of the underlying creditor Due to its high credit
quality and short term maturity, their fair value approximates carrying value. Significant increases in either of the
significant unobservable inputs (credit spread or risk free interest rate) in isolation would result in lower fair value
estimates, however is insignificant. The interrelationship between these inputs is also insignificant. Refer to note 8
to the notes of consolidated financial statements for a reconciliation of the change in the deferred purchase price
receivable.
The Company has warrants to purchase up to 1.35 million shares of the common stock of a certain supplier
at a weighted-average price of $7.33 per share. The warrants expire on May 18, 2018. These fully vested warrants,
which are derivative instruments, are fair valued at each reporting date with gains or losses from changes in fair
value recognized in the consolidated statements of operations. The Company values these warrants based on the
Black-Scholes option-valuation model using unobservable inputs classified as level 3 in the fair value hierarchy.
Significant changes in any of the significant unobservable inputs in isolation would result in a change in the fair
value estimate, but in each case, the amount would be insignificant. The interrelationship between these inputs is
also insignificant. As of March 31, 2013, the Company used the following assumptions to fair value these
warrants:
Remaining life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The following table summarizes the changes in the fair value adjustment of these warrants:
Balance, March 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of
March 31, 2013
5 years
58%
0%
0.80%
Amount
(In thousands)
$ —
74,437
Balance, March 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$74,437
There were no transfers between levels in the fair value hierarchy during fiscal years 2013 and 2012.
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES (Continued)
Financial Instruments Measured at Fair Value on a Recurring Basis
The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis
as of March 31, 2013 and 2012:
Fair Value Measurements as of March 31, 2013
Level 1
Level 2
Level 3
Total
(In thousands)
Assets:
Money market funds and time deposits (Note 2) . . . . . . . . . . . .
Deferred purchase price receivable (Note 8) . . . . . . . . . . . . . . .
Foreign exchange forward contracts (Note 7) . . . . . . . . . . . . . .
Warrants to purchase common shares (Note 2) . . . . . . . . . . . . .
Deferred compensation plan assets:
$ — $497,390
$
—
—
—
— 412,357
—
74,437
27,563
—
— $497,390
412,357
27,563
74,437
Mutual funds, money market accounts and equity securities . .
6,931
40,972
—
47,903
Liabilities:
Foreign exchange forward contracts (Note 7) . . . . . . . . . . . . . .
Contingent consideration in connection with acquistions . . . . .
Assets:
Money market funds and time deposits (Note 2) . . . . . . . . . . . .
Deferred purchase price receivable (Note 8) . . . . . . . . . . . . . . .
Foreign exchange forward contracts (Note 7) . . . . . . . . . . . . . .
Available for sale investments (Note 2) . . . . . . . . . . . . . . . . . . .
Deferred compensation plan assets:
$ — $ (15,290) $
— (25,000)
— $ (15,290)
(25,000)
—
Fair Value Measurements as of March 31, 2012
Level 1
Level 2
Level 3
Total
(In thousands)
$ — $343,906
$
— 514,895
—
—
20,969
—
— $343,906
514,895
20,969
5,994
—
—
5,994
Mutual funds, money market accounts and equity securities . .
3,411
54,241
—
57,652
Liabilities:
Foreign exchange forward contracts (Note 7) . . . . . . . . . . . . . .
Contingent consideration in connection with acquistions . . . . .
$ — $ (8,105) $
—
—
— $ (8,105)
(1,151)
(1,151)
Assets Measured at Fair Value on a Nonrecurring Basis
The Company has certain long-lived assets that are measured at fair value on a nonrecurring basis, and are
as follows:
Assets:
Fair Value Measurements as of March 31, 2013
Level 1
Level 2
Level 3
Total
(In thousands)
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$—
—
$11,089
25,331
$—
—
$11,089
25,331
Fair Value Measurements as of March 31, 2012
Level 1
Level 2
Level 3
Total
(In thousands)
Assets:
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$—
$16,701
$—
$16,701
Assets held for sale
Assets held for sale are recorded at the lesser of the carrying value or fair value, which is based on
comparable sales from prevailing market data (level 2 inputs). As of March 31, 2013 and March 31, 2012, no
impairment charges were recorded for assets that were no longer in use and held for sale which exclude those
assets that have been identified as relating to discontinued operations as discussed further in note 18 to the
consolidated financial statements. The assets held for sale primarily represent manufacturing facilities that have
been closed as part of the Company’s historical facility consolidations.
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES (Continued)
Property and equipment
During the fiscal year 2013, the Company recognized impairment charges relating to certain long-lived
assets classified as ‘held-for-use’ since the carrying value of such assets exceeded the fair value, based on the
sales of comparable assets, as a result of its restructuring activities as further discussed in note 12 to the
consolidated financial statements.
There were no material fair value adjustments or other transfers between levels in the fair value hierarchy for
these long-lived assets during the fiscal years 2013 and 2012.
Other financial instruments
The following table presents the Company’s liabilities not carried at fair value as at March 31, 2013 and 2012:
As of March 31, 2013
As of March 31, 2012
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Fair Value
Hierarchy
Revolving credit facility . . . . . . . . . . . . . . . . . . . . . $
Term loan dated October 1, 2007 . . . . . . . . . . . . .
Term loan dated October 19, 2011 . . . . . . . . . . . .
4.625% Notes dated February 20, 2013 (due 2020) .
5.000% Notes dated February 20, 2013 (due 2023) .
Asia term loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
170,340
517,500
500,000
500,000
375,000
— $ 140,000 $ 140,000 Level 2
1,171,959 Level 1
482,625 Level 1
— Level 1
— Level 1
374,394 Level 2
1,179,595
487,500
—
—
377,000
170,496
518,794
507,190
500,000
375,343
(In thousands)
— $
(In thousands)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,062,840 $2,071,823 $2,184,095 $2,168,978
Revolving credit facility—The carrying amount approximates fair value due to the short term nature of the
interest rates underlying any borrowings under this facility, though the facility itself is available to the Company
on a long term basis.
Term loans dated October 1, 2007 and October 19, 2011—The term loans are valued based on broker
trading prices in active markets.
Notes dated February 20, 2013—The notes are valued based on broker trading prices in active markets.
Asia term loans—The Company’s Asia Term Loans are not traded publicly; however, as the pricing, maturity and
other pertinent terms of these loans closely approximate those of the Term Loan Agreements dated October 1, 2007,
and October 19, 2011, management estimates the respective trading prices would be approximately the same.
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10. COMMITMENTS AND CONTINGENCIES
Commitments
As of March 31, 2013 and 2012, the gross carrying amount and associated accumulated depreciation of the
Company’s property and equipment financed under capital leases, and the related obligations was not material.
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. COMMITMENTS AND CONTINGENCIES (Continued)
The Company also leases certain of its facilities and equipment under non-cancelable operating leases. These
operating leases expire in various years through 2028 and require the following minimum lease payments:
Fiscal Year Ending March 31,
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating
Lease
(In thousands)
$140,599
106,084
83,227
65,807
47,347
113,893
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$556,957
Total rent expense amounted to $138.8 million, $160.5 million and $153.2 million in fiscal years 2013, 2012
and 2011, respectively.
Litigation and other legal matters
From time to time, we are subject to legal proceedings, claims, and litigation arising in the ordinary course
of business. We defend ourselves vigorously against any such claims. Although the outcome of these matters is
currently not determinable, management expects that any losses that are probable or reasonably possible of being
incurred as a result of these matters, which are in excess of amounts already accrued in its consolidated balance
sheet, would not be material to the financial statements as a whole.
11. INCOME TAXES
The domestic (Singapore) and foreign components of income from continuing operations before income
taxes were comprised of the following:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$170,071
158,744
(In thousands)
$186,855
387,875
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$328,815
$574,730
$231,209
403,101
$634,310
Fiscal Year Ended March 31,
2013
2012
2011
The provision for income taxes consisted of the following:
Fiscal Year Ended March 31,
2013
2012
2011
(In thousands)
Current:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
680
60,466
303
$
56,100
$ (972)
26,671
Deferred:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61,146
56,403
25,699
(1,187)
(33,646)
(34,833)
386
(2,829)
(2,443)
(319)
(3,331)
(3,650)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . .
$ 26,313
$53,960
$22,049
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
The domestic statutory income tax rate was approximately 17.0% in fiscal years 2013, 2012 and 2011. The
reconciliation of the income tax expense expected based on domestic statutory income tax rates to the expense for
income taxes included in the consolidated statements of operations is as follows:
Fiscal Year Ended March 31,
2013
2012
2011
Income taxes based on domestic statutory rates . . . . . . .
Effect of tax rate differential . . . . . . . . . . . . . . . . . . . . . .
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in liability for uncertain tax positions . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . .
$ 55,899
(120,785)
4,881
15,268
68,596
2,454
$ 26,313
(In thousands)
$ 95,858
(177,540)
9,502
34,517
93,336
(1,713)
$ 53,960
$106,725
26,459
12,055
(29,205)
(90,033)
(3,952)
$ 22,049
A number of countries in which the Company is located allow for tax holidays or provide other tax incentives to
attract and retain business. In general, these holidays were secured based on the nature, size and location of the
Company’s operations. The aggregate dollar effect on the Company’s income resulting from tax holidays and tax
incentives to attract and retain business for the fiscal years ended March 31, 2013, 2012 and 2011 was $22.6 million,
$41.8 million and $66.5 million, respectively. For the fiscal year ended March 31, 2013, the effect on basic and diluted
earnings per share was $0.03 and $0.03, respectively, and the effect on basic and diluted earnings per share during fiscal
years 2012 and 2011 were $0.06 and $0.06, and $0.09 and $0.08, respectively. Unless extended or otherwise renegotiated,
the Company’s existing holidays will expire in the fiscal years ending March 31, 2014 through fiscal year 2022.
Under its territorial tax system, Singapore generally does not tax foreign sourced income until repatriated to
Singapore. The Company has included the effects of Singapore’s territorial tax system in the rate differential line
above. The tax effect of foreign income not repatriated to Singapore for the fiscal years ended March 31, 2013,
2012 and 2011 were $26.7 million, $17.7 million and $32.6 million, respectively.
The components of deferred income taxes are as follows:
As of March 31,
2013
2012
(In thousands)
Deferred tax liabilities:
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(36,542)
(61,621)
(98,163)
$
(30,159)
(30,032)
(60,191)
Deferred tax assets:
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss and other carryforwards . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets, net of valuation allowance . . . . . . . . . . . . . . .
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The net deferred tax asset is classified as follows:
Current asset (classified as other current assets) . . . . . . . . . . . . . . . . .
Long-term asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66,959
112,327
10,341
12,514
13,807
2,600,895
167,085
2,983,928
(2,825,579)
158,349
60,186
7,881
52,305
60,186
$
$
$
73,588
178,910
11,088
12,265
3,340
2,753,940
176,547
3,209,678
(3,099,561)
110,117
49,926
815
49,111
49,926
$
$
$
Utilization of the Company’s deferred tax assets is limited by the future earnings of the Company in the tax
jurisdictions in which such deferred assets arose. As a result, management is uncertain as to when or whether
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JOB: 13-8094-1 CYCLE#;BL#: 9; 0 TRIM: 8.25" x 10.75"
COLORS: Black, ~note-color 2 GRAPHICS: Singapore Tabs txt pgs.eps V1.5
COMPOSITE
Merrill Corp - Flextronics International Ltd. 10-K Combo_ ED type for Printed Book ED ED | 105175 | 09-Jun-13 00:18 | 13-8094-1.he | Sequence: 26
CHKSUM Content: 17240 Layout: 18833 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
these operations will generate sufficient profit to realize any benefit from the deferred tax assets. The valuation
allowance provides a reserve against deferred tax assets that are not more likely than not to be realized by the
Company. However, management has determined that it is more likely than not that the Company will realize
certain of these benefits and, accordingly, has recognized a deferred tax asset from these benefits. The change in
valuation allowance is net of certain increases and decreases to prior year losses and other carryforwards that
have no current impact on the tax provision. Approximately $34.0 million of the valuation allowance relates to
income tax benefits arising from the exercise of stock options, which if realized will be credited directly to
shareholders’ equity and will not be available to benefit the income tax provision in any future period.
The Company has recorded a deferred tax asset of approximately $43.7 million associated with its tax loss
and tax credit carryforwards. Approximately $21.1 million of this deferred tax asset is of indefinite duration. The
amount of the remaining deferred tax asset expires over the period from 2014 to 2032, of which the amount
expiring in 2014 is insignificant.
The amount of deferred tax assets considered realizable, however, could be reduced or increased in the
near-term if facts, including the amount of taxable income or the mix of taxable income between subsidiaries,
differ from management’s estimates.
The Company does not provide for income taxes on approximately $457.7 million of undistributed earnings
of its foreign subsidiaries, as such earnings are not intended by management to be repatriated in the foreseeable
future. Determination of the amount of the unrecognized deferred tax liability on these undistributed earnings is
not practicable.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Balance, beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax position related to the current year . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . .
Reductions related to lapse of applicable statute of limitations . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal Year Ended
March 31,
2013
2012
(In thousands)
$166,432
22,185
62,610
(15,001)
(5,444)
(1,220)
456
$134,627
25,113
25,719
(18,257)
(788)
(1,386)
1,404
Balance, end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$230,018
$166,432
The Company’s unrecognized tax benefits are subject to change over the next twelve months primarily as a
result of the expiration of certain statutes of limitations and as audits are settled. During the first quarter of fiscal
year 2014, the liability for unrecognized tax benefits will decrease by approximately $13.2 million due to the
settlement of a tax audit subsequent to the balance sheet date. The Company also believes it is reasonably possible
that the total amount of unrecognized tax benefits could decrease by an estimated range of $18.0 to $30.8 million
within the next twelve months primarily due to potential settlements of various audits and the expiration of
certain statutes of limitations.
The Company and its subsidiaries file federal, state, and local income tax returns in multiple jurisdictions
around the world. With few exceptions, the Company is no longer subject to income tax examinations by tax
authorities for years before 2001.
Of the $230 million of unrecognized tax benefits at March 31, 2013, $172.8 million will affect the annual
effective tax rate if the benefits are eventually recognized. The amount that does not impact the effective tax rate
relates to positions that would be settled with a tax loss carryforward previously subject to a valuation allowance.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits within the
Company’s tax expense. During the fiscal years ended March 31, 2013 and 2012, the Company recognized
interest of approximately $5.1 million and $5.4 million, respectively, and no penalties. The Company had
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CHKSUM Content: 1157 Layout: 38368 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
approximately $11.9 million and $10.6 million accrued for the payment of interest as of the fiscal years ended
March 31, 2013 and 2012, respectively. The Company has not accrued for the payment of penalties for the fiscal
years ended March 31, 2013 and 2012, respectively.
12. RESTRUCTURING CHARGES
During fiscal year 2013 the Company initiated certain restructuring activities intended to improve its
operational efficiencies by reducing excess workforce and capacity. Restructuring charges are recorded based
upon employee termination dates, site closure and consolidation plans.
During the fiscal year ended March 31, 2013, the Company recognized restructuring charges of
approximately $227.4 million, of which $110.1 million was associated with the terminations of 9,138 identified
employees in connection with the charges described above. The identified employee terminations by reportable
geographic region amounted to approximately 4,467, 2,282, and 2,389 for Asia, the Americas and Europe,
respectively. The costs associated with these restructuring activities include employee severance, other personnel
costs, non-cash impairment charges on facilities and equipment that are not recoverable through future cash flows
or are no longer in use and are to be disposed of, and other exit related costs due to facility closures or
rationalizations. Pre-tax restructuring charges comprised of $123.0 million of cash charges predominantly related
to employee severance costs and $104.4 million of non-cash charges primarily related asset impairment and other
exit charges. The Company classified approximately $215.8 million of these charges as a component of cost of
sales and approximately $11.6 million of these charges as a component of selling, general and administrative
expenses during the fiscal year ended March 31, 2013.
The components of the restructuring charges by geographic region incurred during fiscal year 2013:
Third
Quarter
Fourth
Quarter
Total
(In thousands)
Americas:
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-lived asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other exit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
863
—
322
$ 13,156
6,302
6,533
$ 14,019
6,302
6,855
Total restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,185
25,991
27,176
Asia:
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-lived asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other exit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe:
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-lived asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other exit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,572
46,250
28,818
83,640
6,142
9,851
1,873
Total restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,866
Total
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-lived asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other exit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,577
56,101
31,013
18,076
5,268
1,443
24,787
63,301
1,782
8,882
73,965
94,533
13,352
16,858
26,648
51,518
30,261
108,427
69,443
11,633
10,755
91,831
110,110
69,453
47,871
Total restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$102,691
$124,743
$227,434
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JOB: 13-8094-1 CYCLE#;BL#: 9; 0 TRIM: 8.25" x 10.75"
COLORS: Black, ~note-color 2 GRAPHICS: Singapore Tabs txt pgs.eps V1.5
COMPOSITE
Merrill Corp - Flextronics International Ltd. 10-K Combo_ ED type for Printed Book ED ED | 105175 | 09-Jun-13 00:18 | 13-8094-1.he | Sequence: 28
CHKSUM Content: 25214 Layout: 49880 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. RESTRUCTURING CHARGES (Continued)
During the fiscal year ended March 31, 2013 the Company recognized approximately $110.1 million of
severance costs related to employee terminations. Approximately $98.5 million of this was classified as a
component of cost of sales.
During the fiscal year ended March 31, 2013 the Company recognized approximately $69.5 million for the
write-down of property and equipment and other manufacturing assets, which are continuing to be held and used
by the Company. The majority of this amount was classified as a component of cost of sales.
During the fiscal year ended March 31, 2013, the Company recognized approximately $47.9 million of other
exit costs, which primarily comprised of $22.8 million for the write-down of certain customer specific assets that
were determined to be unrecoverable based on a specific product exit and resulting declining customer volumes.
Additionally, other exit costs include $24.7 million of customer disengagement costs primarily related to inventory
that resulted from a product exit as well as contractual obligations from facility closures and $0.4 million of other
miscellaneous items.
The following table summarizes the provisions, respective payments, and remaining accrued balance as of
March 31, 2013 for charges incurred in fiscal year 2013 and prior periods:
Balance as of March 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Activities during the fiscal year 2012:
Cash payments for charges incurred in fiscal year 2010
Long-Lived
Asset
Other
Severance
Impairment Exit Costs
Total
$
7,596 $
— $ 21,726 $ 29,322
(In thousands)
and prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,976)
— (13,659)
(16,635)
Balance as of March 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for charges incurred in fiscal year 2013 . . . . . . . . . .
Cash payments for charges incurred in fiscal year 2013 . . . . .
Cash payments for charges incurred in fiscal year 2010
and prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash charges incurred in fiscal year 2013 . . . . . . . . . . . .
4,620
110,110
(28,586)
—
69,453
8,067
47,871
— (3,832)
12,687
227,434
(32,418)
(2,455)
— (69,453)
— (2,902)
(34,993)
(5,357)
(104,446)
Balance as of March 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Current portion (classified as other current liabilities) . . .
83,689
80,439
— 14,211
7,397
—
97,900
87,836
Accrued restructuring costs, net of current portion
(classified as other liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,250 $
— $ 6,814 $ 10,064
13. OTHER CHARGES (INCOME), NET
During fiscal year 2013, the Company recognized a net gain of $74.4 million for the fair value adjustment of
the Company’s warrants to purchase common shares of a certain supplier. The fair value adjustment gain was
partially off-set by a loss on the sales of two investments of $1.3 million.
During fiscal year 2012, the Company recognized a net gain of $20.0 million in connection with the sale of
certain international entities.
During fiscal year 2011, the Company recognized charges totaling $6.3 million, consisting of the $13.2 million
loss associated with the early redemption of the 6.25% Senior Subordinated Notes and an $11.7 million loss in
connection with the divestiture of certain international entities. Refer to note 6 and note 15, respectively, for
further discussion. These charges were partially offset by a gain of $18.6 million associated with the sale of an
equity investment that was previously fully impaired.
14. INTEREST AND OTHER EXPENSE, NET
For the fiscal years ended March 31, 2013, 2012 and 2011, the Company recognized interest income of
$20.0 million, $21.7 million and $14.0 million.
For the fiscal years ended March 31, 2013, 2012 and 2011, the Company recognized interest expense of
$68.9 million, $67.8 million and $88.7 million, respectively, on its debt obligations outstanding during the period.
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CHKSUM Content: 42536 Layout: 29489 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. INTEREST AND OTHER EXPENSE, NET (Continued)
For the fiscal years ended March 31, 2013, 2012 and 2011, the Company recognized gains on foreign
exchange transactions of $19.9 million, $39.7 million and $33.1 million, respectively.
15. BUSINESS AND ASSET ACQUISITIONS
Business Acquisitions
The business and asset acquisitions described below were accounted for using the purchase method of
accounting, and accordingly, the fair value of the net assets acquired and the results of the acquired businesses
were included in the Company’s consolidated financial statements from the acquisition dates forward. The
Company has not finalized the allocation of the consideration for certain of its recently completed acquisitions
and expects to complete these allocations within one year of the respective acquisition dates.
Fiscal 2013 business acquisitions
Acquisition of Saturn Electronics and Engineering Inc.
During fiscal year 2013, the Company completed its acquisition of all outstanding common stock of Saturn
Electronics and Engineering, Inc. (“Saturn”), a supplier of electronics manufacturing services, solenoids and
wiring for the automotive, appliance, consumer, energy and industrial markets. The acquisition of Saturn
broadened the Company’s service offering and strengthened its capabilities in the automotive and consumer
electronics businesses. The results of operations were included in the Company’s consolidated financial results
beginning on the date of acquisition which amounted to approximately $100.9 million in revenue for the year
ended March 31, 2013. Net income during fiscal year ended March 31, 2013 was not significant to the
consolidated operating results of the Company.
The initial cash consideration for this acquisition amounted to $193.7 million with up to an additional
$15.0 million of estimated potential contingent consideration, for a total purchase consideration of $208.7 million.
The allocation of the purchase price to Saturn’s tangible and identifiable intangible assets acquired and
liabilities assumed was based on their estimated fair values as of the date of acquisition. Management determined
the value of acquired intangible assets with the assistance of a third-party appraisal firm. Management is in the
process of determining the fair value amounts for certain other assets and liabilities that were acquired. The
excess of the purchase price over the tangible and identifiable intangible assets acquired and liabilities assumed
has been allocated to goodwill.
The following represents the Company’s allocation of the total purchase price to the acquired assets and
liabilities assumed of Saturn (in thousands):
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,191
44,879
23,350
619
71,039
43,227
98,746
57,200
925
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$271,137
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 29,616
9,429
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39,045
23,401
Total aggregate purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$208,691
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JOB: 13-8094-1 CYCLE#;BL#: 9; 0 TRIM: 8.25" x 10.75"
COLORS: Black, ~note-color 2 GRAPHICS: Singapore Tabs txt pgs.eps V1.5
COMPOSITE
Merrill Corp - Flextronics International Ltd. 10-K Combo_ ED type for Printed Book ED ED | 105175 | 09-Jun-13 00:18 | 13-8094-1.he | Sequence: 30
CHKSUM Content: 13839 Layout: 55105 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. BUSINESS AND ASSET ACQUISITIONS (Continued)
Intangible assets of $57.2 million in connection with the Saturn acquisition is comprised of customer-related
intangible assets of $46.4 million and other intangible assets consisting of developed technology amounting to
$10.8 million. Customer relationships are amortized over an estimated useful life of 5 years and developed
technology is amortized over an estimated useful life of 7 years.
The above purchase price allocation includes certain purchase accounting adjustments recorded in the fourth
quarter of fiscal 2013, which resulted in a net decrease of $7.5 million to goodwill with corresponding increases
to intangible assets amounting to $32.5 million and other liabilities amounting to $23.0 million. The increase in
intangible assets was as a result of the finalization of the valuation for acquired intangible assets and the increase
to other liabilities is primarily as a result of deferred tax liabilities recorded relating to intangible assets. As a
result of this deferred tax liability, the Company released an amount of $22.3 million relating to valuation
allowances for deferred tax assets in the fourth quarter of fiscal 2013, and this amount is included in the provision
for income taxes for the year ended March 31, 2013. In accordance with the accounting guidance applicable to
business combinations, the Company has re-casted the operating results for the quarter ended December 31, 2012
to reflect the release of the valuation allowance for deferred tax assets. Refer to note 20 to the consolidated
financial statements for further details.
Other business acquisitions
Additionally, during the fiscal year ended March 31, 2013, the Company completed three other acquisitions
that were not individually, nor in the aggregate, significant to the Company’s consolidated financial position,
results of operations and cash flows. The total consideration, which was paid in cash for these acquisitions, and
earn outs related to certain prior period acquisitions amounted to $72.7 million. The total amount of cash
acquired from these acquisitions amounted to $80.1 million, resulting in net cash of $7.4 million acquired for
these acquisitions during the fiscal year ended 2013. One of the acquired businesses expanded the Company’s
capabilities primarily in the medical and defense markets; another acquired business will support the hardware
product manufacturing needs of an existing customer in the technology industry; and the other acquired business
will expand the Company’s capabilities primarily in the LED design and manufacturing market. The Company
primarily acquired cash, inventory and certain other manufacturing assets, and recorded goodwill of $61.9 million
in connection with these acquisitions. The potential amount of future payments which the Company could be
required to make under contingent consideration arrangements relating to these acquisitions is not material. The
aggregate results of operations for these acquisitions were included in the Company’s consolidated financial
results beginning on the date of acquisition which amounted to approximately $231.3 million in revenue for the
year ended March 31, 2013. Net income during fiscal year ended March 31, 2013 was not significant,
individually or in the aggregate, to the consolidated operating results of the Company.
In connection with one of the acquisitions, the Company acquired certain manufacturing assets that were
purchased by the acquired company on behalf of an existing customer and will be continued to be used exclusively
for the benefit of this customer. These assets are financed by a third party banking institution acting as an agent of
the customer under an agreement, the terms of which reset annually. While the Company has the option to settle
this obligation in cash, the Company can also settle the obligation related to these assets by returning the respective
assets to the customer and cannot be required to pay cash by either the customer or the third party banking
institution to settle the obligation. Accordingly, these assets amounting to $251.3 million and the liability
amounting to $272.8 million have been included in other current assets and other current liabilities, respectively as
of March 31, 2013. The cash flows relating to the purchase of assets by the Company on behalf of the customer
amounting to $115.3 million have been included in other investing cash flows for the fiscal year ended March 31,
2013. Net cash inflows amounting to $101.9 million relating to the funding of these assets by the financial
institution on behalf of the customer have been included in cash flows from other financing activities during the
fiscal year ended March 31, 2013. In conjunction with this acquisition, the Company amended its existing
manufacturing agreement with the customer. As part of this agreement, the Company is obligated to reimburse the
customer for any shortfall in production if the manufacturing contract is terminated prior to the delivery of a
minimum volume of units to be manufactured over the term of the contract. The total commitment under this
arrangement amounted to $88.0 million and declines over time as the Company continues to manufacture and
deliver products under the arrangement. Payment of this guarantee is not probable as of March 31, 2013.
The Company continues to evaluate certain assets and liabilities related to business combinations completed
during the recent periods. Additional information, which existed as of the acquisition date, may become known
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. BUSINESS AND ASSET ACQUISITIONS (Continued)
to the Company during the remainder of the measurement period, a period not to exceed 12 months from the
acquisition date. Changes to amounts recorded as assets or liabilities may result in a corresponding adjustment to
goodwill.
The goodwill generated from the Company’s business combinations completed during the fiscal year ended
March 31, 2013 is primarily related to value placed on the employee workforce, service offerings and capabilities,
and expected synergies. The goodwill is not deductible for income tax purposes.
Fiscal 2012 business acquisitions
During fiscal year 2012, the Company completed three acquisitions that were not individually, nor in the
aggregate significant to the Company’s financial position, results of operations and cash flows. The aggregate
cash paid for these acquisitions together with cash paid for contingent consideration related to certain prior period
acquisitions during the year ended March 31, 2012 totaled approximately $92.3 million, net of cash acquired. The
acquired businesses expanded the Company’s capabilities in the communications market. The Company primarily
acquired inventory and certain other manufacturing assets and recorded goodwill of $8.6 million and customer
contract intangibles of $3.9 million in connection with the acquisitions.
Fiscal 2011 business acquisitions
During fiscal year 2011, the Company completed four acquisitions that were not individually, nor in the
aggregate significant to the Company’s financial position, results of operations and cash flows. The aggregate cash
paid for these acquisitions together with cash paid for contingent consideration relating to certain prior period
acquisitions during the year ended March 31, 2011 totaled approximately $17.0 million, net of cash acquired. The
acquired businesses expanded the Company’s capabilities in the medical and infrastructure business groups.
The consolidated financial statements include the operating results of each business combination from the
date of acquisition and the related transaction costs incurred which are not material. Pro forma results of
operations for the acquisitions completed have not been presented because the effects of the acquisitions,
individually and in the aggregate, were not material to the Company’s financial results.
On April 16, 2013, the Company completed its acquisition of certain manufacturing operations from
Google’s Motorola Mobility LLC, including a manufacturing and services agreement with mobile devices. The
total purchase consideration for this acquisition amounted to $170.6 million. The Company primarily acquired
inventory and fixed assets in connection with this acquisition. The financial results of this acquisition are not
included in the consolidated financial statements for any period presented. A preliminary purchase price
allocation is not yet available for this acquisition.
16. SHARE REPURCHASE PLAN
During fiscal year 2013, the Company repurchased approximately 51.7 million shares for an aggregate
purchase value of approximately $334.0 million.
The Company’s Board of Directors, on September 13, 2012, authorized the repurchase of up to 10% of the
Company’s outstanding ordinary shares which was approved by the Company’s shareholders at the 2012
Extraordinary General Meeting held on August 30, 2012. Share repurchases by the Company under the share
repurchase plans are subject to an aggregate limit of 10% of the Company’s ordinary shares outstanding as of the
date of the 2012 Extraordinary General Meeting. During fiscal year 2013, the Company repurchased approximately
31.3 million shares for an aggregate purchase value of approximately $200.0 million under this plan, including
accrued expenses, and retired all of these shares. As of March 31, 2013, approximately 35.3 million shares were
available to be repurchased under this plan.
During the first quarter of fiscal 2013, the Company repurchased the entire remaining amount under a prior
share repurchase plan that was approved by the Company’s Board of Directors on December 7, 2011 and the
Company’s shareholders at the 2011 Extraordinary General Meeting held on July 22, 2011, or approximately
20.4 million shares for an aggregate purchase value of approximately $134.0 million, and retired all of these shares.
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. SEGMENT REPORTING
Operating segments are defined as components of an enterprise for which separate financial information is
available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding
how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its
Chief Executive Officer. As of March 31, 2013, the Company operates and internally manages a single operating
segment, EMS.
Geographic information is as follows:
Fiscal Year Ended March 31,
2013
2012
2011
(In thousands)
Net sales:
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,743,140
7,193,063
4,633,272
$15,408,872
8,390,521
5,543,636
$14,620,097
8,291,784
5,530,752
$23,569,475
$29,343,029
$28,442,633
As of March 31,
2013
2012
(In thousands)
Long-lived assets:
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,144,451
659,289
370,848
$1,126,552
554,653
395,237
$2,174,588
$2,076,442
Revenues are attributable to the country in which the product is manufactured or service is provided.
For purposes of the preceding tables, “Asia” includes China, India, Indonesia, Japan, Labuan, Malaysia,
Mauritius, Singapore, and Taiwan; “Americas” includes Brazil, Canada, Mexico, and the United States; “Europe”
includes Austria, the Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Israel, Italy, the
Netherlands, Poland, Romania, Slovakia, Sweden, Turkey, Ukraine, and the United Kingdom. During fiscal years
2013 and 2012 there were no revenues attributable to Finland.
During fiscal years 2013, 2012 and 2011, net sales generated from Singapore, the principal country of
domicile, were approximately $551.7 million, $663.1 million and $578.2 million, respectively.
As of March 31, 2013 and 2012, long-lived assets held in Singapore were approximately $15.9 million and
$15.3 million, respectively.
During fiscal year 2013, China, Mexico, United States and Malaysia accounted for approximately 34%,
15%, 11% and 10% of consolidated net sales, respectively. No other country accounted for more than 10% of net
sales in fiscal year 2013. As of March 31, 2013, China, Mexico, and the United States accounted for
approximately 38%, 13% and 11%, respectively, of consolidated long-lived assets. No other country accounted
for more than 10% of long-lived assets as of March 31, 2013.
During fiscal year 2012, China, Mexico, United States and Malaysia accounted for approximately 38%,
14%, 10% and 10% of consolidated net sales, respectively. No other country accounted for more than 10% of net
sales in fiscal year 2012. As of March 31, 2012, China and Mexico accounted for approximately 40% and 15%,
respectively, of consolidated long-lived assets. No other country accounted for more than 10% of long-lived
assets as of March 31, 2012.
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. SEGMENT REPORTING (Continued)
During fiscal year 2011, China, Mexico and the United States accounted for approximately 38%, 15% and
10% of consolidated net sales, respectively. No other country accounted for more than 10% of net sales in fiscal
year 2011.
18. DISCONTINUED OPERATIONS
During fiscal year 2013, the Company finalized the sale of two of its non-core businesses. Total proceeds
received from these sales amounted to $22.6 million, net of $1.0 million of cash sold. The Company recognized
an aggregate loss of $12.1 million on the sales, which is included in the results from discontinued operations.
In accordance with the accounting guidance, these non-core businesses qualify as discontinued operations,
and accordingly, the Company has reported the results of operations and financial position of these businesses in
discontinued operations within the consolidated statements of operations and the consolidated balance sheets for
all periods presented as applicable.
The results from discontinued operations were as follows:
Fiscal Year Ended March 31,
2013
2012
2011
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 40,593
42,793
Gross profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . .
Intangibles amortization and impairment . . . . . . . . . . . . . . . . . . .
Interest and other expense (income), net . . . . . . . . . . . . . . . . . . .
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit from income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,200)
1,930
11,000
11,280
(26,410)
(959)
(In thousands)
$127,258
145,403
(18,145)
8,932
6,325
(7)
(33,395)
(1,390)
$237,292
235,710
1,582
14,577
4,725
992
(18,712)
(2,670)
Net loss of discontinued operations
$(25,451)
$ (32,005)
$ (16,042)
Interest and other expense (income), net for fiscal year 2013 include the loss on sale of the businesses
discussed above.
The current and non-current assets and liabilities of discontinued operations were as follows:
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets of discontinued operations
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-current assets of discontinued operations
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities of discontinued operations
As of
March 31, 2012
(In thousands)
$ 9,222
11,002
1,418
$21,642
$30,377
11,000
40
$41,417
$14,455
10,399
$24,854
As of March 31, 2013, there were no assets or liabilities attributable to discontinued operations.
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS
On February 20, 2013, the Company issued two tranches of Notes of $500 million each, which mature
on February 15, 2020 and February 15, 2023, respectively, in a private offering pursuant to Rule 144A and
Regulation S under the Securities Act. These notes are senior unsecured obligations and were issued by
Flextronics International Limited (“Parent”), and are guaranteed, fully and unconditionally, jointly and
severally, on an unsecured basis, by certain of the Company’s 100% owned subsidiaries (the “guarantor
subsidiaries”). These subsidiary guarantees will terminate upon 1) a sale or other disposition of the guarantor
or the sale or disposition of all or substantially all the assets of the guarantor (other than to Flextronics or a
subsidiary); 2) such guarantor ceasing to be a guarantor or a borrower under the Company’s Term Loan
Agreement and the Revolving Line of Credit; 3) defeasance or discharge of the Notes, as provided in the
Notes indenture; or 4) if at any time the notes are rated investment grade.
In lieu of providing separate financial statements for the Guarantors, the Company has included the
accompanying condensed consolidated financial statements, which are presented using the equity method of
accounting. The principal elimination entries relate to investment in subsidiaries and intercompany balances and
transactions, including transactions with the Company’s non-guarantor subsidiaries.
Condensed Consolidating Balance Sheets as of March 31, 2013
Parent
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . .
Accounts receivable . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . .
Inter company receivable . . . . . . . .
Other current assets . . . . . . . . . . . .
$
82,900
740,515 $
—
458,617
— 1,063,627
4,726,673
178,585
4,440,955
6,182
$
763,672 $
1,653,379
1,658,873
6,490,274
1,165,051
— $ 1,587,087
— 2,111,996
— 2,722,500
—
— 1,349,818
(15,657,902)
Total current assets . . . . . . . . . . .
Property and equipment, net . . . . . . .
Goodwill and other intangible
assets, net . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . .
5,187,652
—
6,510,402
328,621
11,731,249
1,845,967
(15,657,902)
7,771,401
— 2,174,588
1,075
2,498,080
4,127,384
40,626
105,136
(1,956,014)
301,851
4,902,815
16,994,616
—
(7,204,017)
(19,165,986)
343,552
302,014
—
Total assets . . . . . . . . . . . . . . . . .
$11,814,191 $ 5,028,771
$35,776,498 $(42,027,905) $10,591,555
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank borrowings and current
portion of long-term debt . . . . . .
Accounts payable . . . . . . . . . . . . . .
Accrued payroll . . . . . . . . . . . . . . .
Inter company payable . . . . . . . . . .
Other current liabilities . . . . . . . . .
$
416,594 $
60
— 1,077,723
86,073
—
6,093,606
4,963,615
424,599
32,440
$
— $
2,627,574
265,610
4,600,681
1,242,112
— $
416,654
— 3,705,297
351,683
—
—
(15,657,902)
— 1,699,151
Total current liabilities . . . . . . . .
Long term liabilities . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . .
5,412,649
4,154,784
2,246,758
7,682,061
2,488,279
(5,141,569)
8,735,977
2,732,966
24,307,555
(15,657,902)
(7,204,017)
(19,165,986)
6,172,785
2,172,012
2,246,758
Total liabilities and shareholders’
equity . . . . . . . . . . . . . . . . . . . .
$11,814,191 $ 5,028,771
$35,776,498
$(42,027,905) $10,591,555
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Balance Sheets as of March 31, 2012
ASSETS
Current assets:
Cash and cash equivalents . . . . . . .
Accounts receivable . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . .
Inter company receivable . . . . . . . .
Current assets of discontinued
operations . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . .
Total current assets . . . . . . . . . . .
Property and equipment, net . . . . . . .
Goodwill and other intangible
Parent
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
(in thousands)
$
47,865
649,252 $
—
899,146
— 1,384,193
4,260,557
3,304,798
$
821,212 $
1,694,683
1,916,598
6,120,995
— $ 1,518,329
— 2,593,829
— 3,300,791
—
(13,686,350)
—
861
—
167,969
21,642
931,129
21,642
—
— 1,099,959
3,954,911
—
6,759,730
250,179
11,506,259
1,826,263
(13,686,350)
8,534,550
— 2,076,442
assets, net . . . . . . . . . . . . . . . . . . . .
1,375
28,880
129,669
—
159,924
Long-term assets of discontinued
operations . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . .
—
2,751,324
4,311,902
—
123,028
(2,422,600)
41,417
4,905,592
12,355,622
—
(7,558,473)
(14,244,924)
41,417
221,471
—
Total assets . . . . . . . . . . . . . . . . .
$11,019,512 $ 4,739,217
$30,764,822 $(35,489,747) $11,033,804
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank borrowings and current
portion of long-term debt . . . . . .
Accounts payable . . . . . . . . . . . . . .
Accrued payroll . . . . . . . . . . . . . . .
Current liabilities of discontinued
operations . . . . . . . . . . . . . . . . . .
Inter company payable . . . . . . . . . .
Other current liabilities . . . . . . . . .
Total current liabilities . . . . . . . .
Long term liabilities . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . .
Total liabilities and shareholders’
equity . . . . . . . . . . . . . . . . . . . .
$
36,340 $
3,000
— 1,334,745
84,510
—
$
— $
2,960,128
260,827
— $
39,340
— 4,294,873
345,337
—
—
4,177,361
22,137
4,235,838
4,499,695
2,283,979
—
5,543,119
638,982
24,854
3,965,870
922,662
—
(13,686,350)
24,854
—
— 1,583,781
7,604,356
2,693,242
(5,558,381)
8,134,341
2,827,176
19,803,305
(13,686,350)
(7,558,473)
(14,244,924)
6,288,185
2,461,640
2,283,979
$11,019,512 $ 4,739,217
$30,764,822
$(35,489,747) $11,033,804
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CHKSUM Content: 8883 Layout: 36711 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Statements of Operations for Fiscal Year Ended March 31, 2013
Parent
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
Net sales . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . .
$
— $14,630,979
— 13,162,397
20,366
—
(In thousands)
$17,768,884
17,855,384
195,468
$(8,830,388) $23,569,475
22,187,393
215,834
(8,830,388)
—
Gross profit (loss) . . . . . . . . . . . . .
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . .
Intangible amortization . . . . . . . . . .
Restructuring charges . . . . . . . . . . . .
Interest and other expense
—
1,448,216
(281,968)
—
300
—
199,934
7,840
1,556
605,301
21,389
10,044
(income), net . . . . . . . . . . . . . . . . .
(1,179,545)
699,459
471,155
—
—
—
—
—
Income (loss) from continuing
operations before income taxes .
Provision for income taxes . . . . . . . .
Equity in earnings in subsidiaries . .
Income from continuing
operations . . . . . . . . . . . . . . . . .
Loss from discontinued operations,
net of tax . . . . . . . . . . . . . . . . . . . .
1,179,245
—
(902,194)
539,427
1,708
(371,682)
(1,389,857)
24,605
586,084
—
—
687,792
277,051
166,037
(828,378)
687,792
302,502
—
—
(25,451)
—
(25,451)
1,166,248
805,235
29,529
11,600
(8,931)
328,815
26,313
—
Net income (loss) . . . . . . . . . . . . .
$
277,051
$
166,037
$ (853,829) $
687,792
$
277,051
Condensed Consolidating Statements of Operations for Fiscal Year Ended March 31, 2012
Net sales . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . .
$
— $18,852,902
— 17,395,532
$22,012,300
21,951,720
$(11,522,173) $29,343,029
27,825,079
(11,522,173)
Parent
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
(In thousands)
Gross profit . . . . . . . . . . . . . . . . . .
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . .
Intangible amortization . . . . . . . . . . .
Interest and other expense
—
1,457,370
60,580
—
2,550
203,673
11,559
673,891
35,463
(income), net . . . . . . . . . . . . . . . . .
(442,563)
1,079,398
(620,751)
—
—
—
—
Income (loss) from continuing
operations before income taxes . .
Provision for income taxes . . . . . . . . .
Equity in earnings in subsidiaries . . .
Income from continuing
440,013
—
48,752
162,740
1,633
13,171
(28,023)
52,327
360,673
—
—
(422,596)
1,517,950
877,564
49,572
16,084
574,730
53,960
—
operations . . . . . . . . . . . . . . . . . .
488,765
174,278
280,323
(422,596)
520,770
Loss from discontinued operations,
net of tax . . . . . . . . . . . . . . . . . . . . .
—
—
(32,005)
—
(32,005)
Net income (loss) . . . . . . . . . . . . . .
$ 488,765
$
174,278
$
248,318
$
(422,596) $
488,765
S-48
JOB: 13-8094-1 CYCLE#;BL#: 9; 0 TRIM: 8.25" x 10.75"
COLORS: Black, ~note-color 2 GRAPHICS: Singapore Tabs txt pgs.eps V1.5
COMPOSITE
Merrill Corp - Flextronics International Ltd. 10-K Combo_ ED type for Printed Book ED ED | 105175 | 09-Jun-13 00:18 | 13-8094-1.he | Sequence: 37
CHKSUM Content: 34079 Layout: 24822 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Statements of Operations for Fiscal Year Ended March 31, 2011
Parent
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
(In thousands)
Net sales . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . .
$
— $18,257,141
— 16,869,570
$20,757,338
20,561,564
$(10,571,846) $28,442,633
26,859,288
(10,571,846)
Gross profit . . . . . . . . . . . . . . . . . . .
—
1,387,571
195,774
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . .
Intangible amortization . . . . . . . . . . . .
Interest and other expense
—
2,500
206,314
19,218
595,458
44,470
(income), net . . . . . . . . . . . . . . . . . .
(40,425)
974,117
(852,617)
—
—
—
—
Income from continuing
operations before income taxes . .
Provision for income taxes . . . . . . . . .
Equity in earnings in subsidiaries . . . .
37,925
—
558,294
187,922
4,638
(56,348)
408,463
17,411
352,163
—
—
(854,109)
1,583,345
801,772
66,188
81,075
634,310
22,049
—
Income from continuing
operations . . . . . . . . . . . . . . . . . . .
596,219
126,936
743,215
(854,109)
612,261
Loss from discontinued operations,
net of tax . . . . . . . . . . . . . . . . . . . . .
—
—
(16,042)
—
(16,042)
Net income (loss) . . . . . . . . . . . . . . .
$596,219
$
126,936
$
727,173
$
(854,109) $
596,219
Condensed Consolidating Statements of Comprehensive Income for Fiscal Year Ended March 31, 2013
Net income (loss) . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
Foreign currency translation
adjustments, net of zero tax . . . . . . . .
Unrealized loss on derivative instruments
and other, net of zero tax . . . . . . . . . .
Parent
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations Consolidated
$277,051
$166,037
(In thousands)
$(853,829)
$687,792
$277,051
(16,289)
6,866
10,377
(17,243)
(16,289)
(20,755)
(21,084)
(20,755)
41,839
(20,755)
Comprehensive income (loss) . . . . . . . . . .
$240,007
$151,819
$(864,207)
$712,388
$240,007
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Condensed Consolidating Statements of Comprehensive Income for Fiscal Year Ended March 31, 2012
Net income (loss) . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
Foreign currency translation
adjustments, net of zero tax . . . . . . . .
Unrealized loss on derivative instruments
and other, net of zero tax . . . . . . . . . .
Parent
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations Consolidated
$488,765
$174,278
(In thousands)
$248,318
$(422,596)
$488,765
(53,616)
41,913
755
(42,668)
(53,616)
(7,575)
(943)
(7,575)
8,518
(7,575)
Comprehensive income (loss) . . . . . . . . . .
$427,574
$215,248
$241,498
$(456,746)
$427,574
S-49
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Merrill Corp - Flextronics International Ltd. 10-K Combo_ ED type for Printed Book ED ED | 105175 | 09-Jun-13 00:18 | 13-8094-1.he | Sequence: 38
CHKSUM Content: 58980 Layout: 9834 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Statements of Comprehensive Income for Fiscal Year Ended March 31, 2011
Net income (loss) . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
Foreign currency translation
adjustments, net of zero tax . . . . . . . . .
Unrealized gain on derivative instruments
and other, net of zero tax . . . . . . . . . .
Parent
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations Consolidated
$596,219
$126,936
(In thousands)
$727,173
$(854,109)
$596,219
12,883
22,367
(26,035)
3,668
12,883
23,276
7,632
13,075
(20,707)
23,276
Comprehensive income (loss) . . . . . . . . . .
$632,378
$156,935
$714,213
$(871,148)
$632,378
Condensed Consolidating Statements of Cash Flows for Fiscal Year Ended March 31, 2013
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . . . . $ 1,136,875 $ 588,299
$ (608,973) $
(771) $ 1,115,430
Parent
Guarantor Non-Guarantor
Subsidiaries
Subsidiaries
Eliminations Consolidated
(In thousands)
Cash flows from investing activities:
Purchases of property and equipment,
net of proceeds from disposal . . . . . .
Acquisition of businesses, net of
— (134,819)
(300,750)
241
(435,328)
cash acquired . . . . . . . . . . . . . . . . . . .
— (20,150)
(163,947)
—
(184,097)
Proceeds from divestitures of
operations, net . . . . . . . . . . . . . . . . . .
Investing cash flows from (to) affiliates .
Other investing activities . . . . . . . . . . . .
—
(1,528,819)
—
—
(134,715)
6,412
22,585
3,468,696
(106,771)
—
(1,805,162)
—
22,585
—
(100,359)
Net cash provided by (used in)
investing activities . . . . . . . . . . . . .
(1,528,819)
(283,272)
2,919,813
(1,804,921)
(697,199)
Cash flows from financing activities:
Proceeds from bank borrowings and
long-term debt . . . . . . . . . . . . . . . . . .
1,250,000
151
62
— 1,250,213
Repayments of bank borrowings and
long-term debt . . . . . . . . . . . . . . . . . .
(379,399)
(3,876)
(8,584)
—
(391,859)
Payments for early repurchase of
long-term debt . . . . . . . . . . . . . . . . . .
(756,855)
(243,145)
—
(1,000,000)
Payments for repurchases of
ordinary shares . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options .
Financing cash flows from (to) affiliates .
Other financing activities . . . . . . . . . . .
Net cash provided by (used in)
(322,040)
22,257
693,185
—
—
—
(18,006)
—
—
—
(2,480,871)
101,851
—
—
1,805,692
—
(322,040)
22,257
—
101,851
financing activities . . . . . . . . . . . . .
507,148
(264,876)
(2,387,542)
1,805,692
(339,578)
Effect of exchange rates on cash . . . . . . . .
(23,941)
(5,116)
Net change in cash and cash equivalents .
91,263
35,035
19,162
(57,540)
—
—
(9,895)
68,758
Cash and cash equivalents, beginning
of year . . . . . . . . . . . . . . . . . . . . . . . .
649,252
47,865
821,212
— 1,518,329
Cash and cash equivalents, end of year . . $
740,515 $ 82,900
$
763,672
$
— $ 1,587,087
S-50
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COLORS: Black, ~note-color 2 GRAPHICS: Singapore Tabs txt pgs.eps V1.5
COMPOSITE
Merrill Corp - Flextronics International Ltd. 10-K Combo_ ED type for Printed Book ED ED | 105175 | 09-Jun-13 00:18 | 13-8094-1.he | Sequence: 39
CHKSUM Content: 12029 Layout: 51376 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Statements of Cash Flows for Fiscal Year Ended March 31, 2012
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . . . . $
412,529 $(190,136) $
594,251
$
(12,376) $
804,268
Parent
Guarantor Non-Guarantor
Subsidiaries
Subsidiaries
Eliminations Consolidated
(In thousands)
Cash flows from investing activities:
Purchases of property and equipment,
net of proceeds from disposal . . . . . .
— (67,425)
(320,300)
(279)
(388,004)
Acquisition of businesses, net of
cash acquired . . . . . . . . . . . . . . . . . . .
— (70,831)
(21,426)
—
(92,257)
Proceeds from divestitures of
operations, net . . . . . . . . . . . . . . . . . .
Investing cash flows from (to) affiliates .
Other investing activities . . . . . . . . . . . .
Net cash provided by (used in)
—
363,716
(1,500)
—
294,368
4,626
1,398
1,029,464
(5,627)
—
(1,687,548)
—
1,398
—
(2,501)
investing activities . . . . . . . . . . . . .
362,216
160,738
683,509
(1,687,827)
(481,364)
Cash flows from financing activities:
Proceeds from bank borrowings and
long-term debt . . . . . . . . . . . . . . . . . .
2,827,875
—
5,829
— 2,833,704
Repayments of bank borrowings and
long-term debt . . . . . . . . . . . . . . . . . .
(2,383,596)
(3,503)
(2,022)
— (2,389,121)
Payments for early repurchase of
long-term debt . . . . . . . . . . . . . . . . . .
(480,000)
—
—
—
(480,000)
Payments for repurchases of
ordinary shares . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options .
Financing cash flows from (to) affiliates .
(509,800)
23,055
(112,398)
—
—
16,789
—
—
(1,604,594)
—
—
1,700,203
(509,800)
23,055
—
Net cash provided by (used in)
financing activities . . . . . . . . . . . . .
(634,864)
13,286
(1,600,787)
1,700,203
(522,162)
Effect of exchange rates on cash . . . . . . . .
(55,416)
(2,877)
27,409
Net change in cash and cash equivalents .
84,465
(18,989)
(295,618)
—
—
(30,884)
(230,142)
Cash and cash equivalents, beginning
of year . . . . . . . . . . . . . . . . . . . . . . . .
564,787
66,854
1,116,830
— 1,748,471
Cash and cash equivalents, end of year . $
649,252 $ 47,865
$
821,212
$
— $ 1,518,329
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Merrill Corp - Flextronics International Ltd. 10-K Combo_ ED type for Printed Book ED ED | 105175 | 09-Jun-13 00:18 | 13-8094-1.he | Sequence: 40
CHKSUM Content: 61744 Layout: 56374 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Statements of Cash Flows for Fiscal Year Ended March 31, 2011
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . . . . $
106,672 $ 19,730
$
721,985
$
8,957 $
857,344
Parent
Guarantor Non-Guarantor
Subsidiaries
Subsidiaries
Eliminations Consolidated
(In thousands)
Cash flows from investing activities:
Purchases of property and equipment,
net of proceeds from disposal . . . . . .
— (46,358)
(347,421)
(90)
(393,869)
Acquisition of businesses, net of
cash acquired . . . . . . . . . . . . . . . . . . .
—
—
(16,966)
—
(16,966)
Proceeds from divestitures of
operations, net . . . . . . . . . . . . . . . . . .
Investing cash flows from (to) affiliates .
Other investing activities . . . . . . . . . . . .
Net cash provided by (used in)
—
734,710
—
—
(18,151)
(1,877)
625
(4,191,785)
(1,154)
—
3,475,226
—
625
—
(3,031)
investing activities . . . . . . . . . . . . .
734,710
(66,386)
(4,556,701)
3,475,136
(413,241)
Cash flows from financing activities:
Proceeds from bank borrowings and
long-term debt . . . . . . . . . . . . . . . . . .
3,471,370
—
124
— 3,471,494
Repayments of bank borrowings and
long-term debt . . . . . . . . . . . . . . . . . .
(3,196,937)
(3,571)
(220,086)
— (3,420,594)
Payments for early repurchase of
long-term debt . . . . . . . . . . . . . . . . . .
(308,466)
—
(7,029)
—
(315,495)
Payments for repurchases of
ordinary shares . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options .
Financing cash flows from (to) affiliates .
(400,400)
23,299
(472,891)
—
—
(123,929)
—
—
4,080,913
—
—
(3,484,093)
(400,400)
23,299
—
Net cash provided by (used in)
financing activities . . . . . . . . . . . . .
(884,025)
(127,500)
3,853,922
(3,484,093)
(641,696)
Effect of exchange rates on cash . . . . . . . .
32,358
3,381
(17,231)
Net change in cash and cash equivalents .
(10,285)
(170,775)
1,975
—
—
18,508
(179,085)
Cash and cash equivalents, beginning
of year . . . . . . . . . . . . . . . . . . . . . . . .
575,072
237,629
1,114,855
— 1,927,556
Cash and cash equivalents, end of year . $
564,787 $ 66,854
$ 1,116,830
$
— $ 1,748,471
S-52
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CHKSUM Content: 6304 Layout: 39645 Graphics: 12667
CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
20. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table contains unaudited quarterly financial data for fiscal years 2013 and 2012. Earnings
per share are computed independently for each quarter presented; therefore, the sum of the quarterly earnings
per share may not equal the total earnings per share amounts for the fiscal year.
Fiscal Year Ended March 31, 2013
Fiscal Year Ended March 31, 2012
First
Second
Third
Fourth
First
Second
Third
Fourth
(In thousands, except per share amounts)
Net sales(1) . . . . . . . . $5,975,995 $6,174,841 $6,123,321 $5,295,318 $7,495,288 $8,008,428 $7,469,347 $6,369,966
358,909
Gross profit(1) . . . . .
Income (loss) from
385,747
372,518
366,772
246,462
357,357
195,657
400,776
continuing
operations, net
of taxes . . . . . . . . .
Loss from
discontinued
operations,
net of taxes . . . . . .
136,769
160,453
54,596
(49,316)
137,305
133,949
106,206
143,310
(8,297)
(9,906)
(7,248)
—
(5,330)
(4,069)
(4,029)
(18,577)
Net income (loss) . . .
128,472
150,547
47,348
(49,316)
131,975
129,880
102,177
124,733
Earnings (loss)
per share:
Income (loss) from
continuing
operations:
Basic . . . . . . . . . $
Diluted . . . . . . . $
Loss from
discontinued
operations:
Basic . . . . . . . . . $
0.20 $
0.20 $
0.24 $
0.08 $
(0.07) $
0.18 $
0.24 $
0.08 $
(0.07) $
0.18 $
0.19 $
0.18 $
0.15 $
0.15 $
0.21
0.20
(0.01) $
(0.01) $
(0.01) $
Diluted . . . . . . . $
(0.01) $
(0.01) $
(0.01) $
— $
— $
(0.01) $
(0.01) $
(0.01) $
(0.01) $
(0.01) $
(0.01) $
(0.03)
(0.03)
Net income (loss):
Basic . . . . . . . . . $
Diluted . . . . . . . $
0.19 $
0.19 $
0.23 $
0.07 $
(0.07) $
0.18 $
0.22 $
0.07 $
(0.07) $
0.17 $
0.18 $
0.18 $
0.14 $
0.14 $
0.18
0.18
(1) As discussed in note 18 to the financial statements, “Discontinued Operations”, during fiscal 2013 the
Company finalized the sale of two of its non-core businesses, and is reporting the operating results of these
non-core businesses as discontinued operations. Accordingly net sales and gross profit data above have been
adjusted to exclude net revenue and gross profit (loss) pertaining to these non-core businesses.
The Company recorded restructuring charges during the third and fourth quarters of fiscal year 2013. The
Company classified approximately $98.3 million and $117.5 million of these charges as a component of cost of
sales during the third and fourth quarters of fiscal year 2013, respectively, and approximately $4.4 million and
$7.2 million of these charges as a component of selling, general and administrative expenses during the third and
fourth quarters of fiscal year 2013, respectively.
The Company recognized a $23.0 million gain as a component of other charges (income), net in the
three-month period ended September 28, 2012 for the cumulative fair value adjustment of the Company’s
warrants to purchase common shares of a supplier. These fully-vested warrants, which are derivative instruments,
are to be fair valued at each reporting date with gains or losses from changes in fair value recognized in the
statements of operations. The gain from changes in fair value recognized in the three-month period ended
S-53
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
20. QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued)
September 28, 2012 includes an out-of-period adjustment of $12.8 million and for the year ended March 31,
2013 includes an out-of-period adjustment of $5.7 million. Management believes the impact of the error is not
material to current or prior fiscal periods.
During the fourth quarter of fiscal 2013, the Company recorded certain purchase accounting adjustments as
further discussed in note 15 to the consolidated financial statements which resulted in the release of $22.3 million
related to the valuation allowances for deferred tax assets in the fourth quarter of fiscal 2013. In accordance with
the accounting guidance applicable to business combinations, the Company has re-casted the operating results
for the quarter ended December 31, 2012 in the table above to reflect the release of the valuation allowance for
deferred tax assets.
During the fourth quarter of fiscal 2013, the Company recognized an income tax benefit of $9.3 million
that related to prior fiscal years, of which $6.1 million related to the fiscal year ended March 31, 2012 and
$3.2 million related to years prior to fiscal 2012. Management believes the impact of this error is not material to
current or prior fiscal periods.
During the fourth quarter of fiscal 2012, the Company identified certain accounting errors in the statutory
to US GAAP adjustments at one of its foreign sites that originated in prior interim and annual periods.
Management conducted additional procedures and concluded that these errors were isolated to that location.
These errors, which primarily understated cost of sales, totaled $0.8 million in the first nine months of fiscal
2012 and $10.4 million and $8.0 million for the fiscal years ended March 31, 2011 and 2010, and were
corrected by the Company as an out-of-period adjustment in the fourth quarter of fiscal 2012. This fourth
quarter adjustment was partially offset by the correction of an error identified in the fourth quarter of fiscal 2012
amounting to $4.2 million related to the provisions for income taxes in the prior fiscal 2012 interim periods.
Management believes the impact of these items, both individually and in the aggregate, to the fiscal year ended
March 31, 2012 and to prior fiscal and interim periods presented was not material. As a result of recording these
adjustments in the fourth quarter, net income for the quarter and year ended March 31, 2012 were reduced by
$21.5 million ($0.03 per share) and $24.9 million ($0.03 per share), respectively.
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SUPPLEMENTARY FINANCIAL STATEMENTS OF
FLEXTRONICS INTERNATIONAL LTD. (PARENT COMPANY)
BALANCE SHEETS
As of March 31,
2013
2012
2011
As Restated
(In thousands, except share amounts)
As Restated
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
740,515
4,440,955
6,182
5,187,652
4,127,384
2,470,179
28,976
$
649,252
3,304,798
861
3,954,911
4,311,902
2,721,915
30,784
$
564,787
3,703,284
617
4,268,688
4,015,166
2,866,013
29,668
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,814,191
$11,019,512
$11,179,535
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . .
Due to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, net of current portion . . . . . . . . . . . . . . . . . . . . . .
Due to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (Note 8)
Shareholders’ equity:
Ordinary shares, no par value; 689,159,139, 733,979,527 and
830,745,010 issued, and 638,919,784, 683,740,173 and
756,993,938 outstanding as of March 31, 2013, 2012 and
2011, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost; 50,239,355, 50,239,355 and 73,751,072
shares as of March 31, 2013, 2012 and 2011, respectively . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss) . . . . . . . . . . . .
416,594
4,963,615
32,440
5,412,649
1,604,829
2,520,568
29,387
$
36,340
4,177,361
22,137
4,235,838
1,860,943
2,613,638
25,114
$
16,340
4,283,643
32,311
4,332,294
1,907,283
2,619,754
25,508
8,015,142
8,292,370
8,865,556
(388,215)
(5,302,688)
(77,481)
(388,215)
(5,579,739)
(40,437)
(523,110)
(6,068,504)
20,754
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,246,758
2,283,979
2,294,696
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . .
$11,814,191
$11,019,512
$11,179,535
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The accompanying notes are an integral part of these supplementary financial statements.
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO SUPPLEMENTARY FINANCIAL STATEMENTS
1. ORGANIZATION OF THE COMPANY
Flextronics International Ltd. (the “Parent”), Registration Number 199002645H, was incorporated in the
Republic of Singapore in May 1990. It is principally engaged in investment holding. The address of the Parent’s
registered office is 2 Changi South Lane, Singapore 486123. The Parent, together with its wholly-owned
subsidiaries (collectively the “Company”), leading global provider of advanced design, manufacturing and
services to original equipment manufacturers (“OEMs”) of a broad range of electronic products in the following
markets: High Reliability Solutions (“HRS”), which is comprised of our medical, automotive, and defense and
aerospace businesses; High Velocity Solutions (“HVS”), which includes our mobile devices business, including
smart phones, consumer electronics, including game consoles, high-volume computing business, including
notebook personal computing (“PC”), tablets, and printers; Industrial and Emerging Industries (“IEI”), which is
comprised of large household appliances, equipment, and our emerging industries businesses; and Integrated
Network Solutions (“INS”), which includes our telecommunications infrastructure, data networking, connected
home, and server and storage businesses.
2. SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation
Amounts included in the financial statements are expressed in U.S. dollars unless otherwise designated.
The accompanying supplementary balance sheets comprise solely the standalone accounts of Flextronics
International Ltd., the Parent company. These balance sheets are prepared in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”), other than as noted in the
paragraph entitled “Investment in and Due from/Due to Subsidiaries.”
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the
reporting period. Estimates are used in accounting for, among other things: allowances for doubtful accounts;
inventory write-downs; valuation allowances for deferred tax assets; valuation and useful lives of long-lived assets
including property, equipment, intangible assets and goodwill; asset impairments; fair values of financial instruments
including investments, notes receivable and derivative instruments; restructuring charges; contingencies; and the fair
values of options granted under the Parent’s stock-based compensation plans. Actual results may differ from
previously estimated amounts, and such differences may be material to the financial statements. Estimates and
assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.
Translation of Foreign Currencies
The functional currency of the Parent is the U.S. dollar, with the exception of its Cayman branch, which is
measured in Euros. Accordingly, the financial position and results of operations of the Cayman branch are measured
using the Euro as the functional currency, after which all assets and liabilities of the Cayman branch are then
translated into U.S. dollars at current exchange rates as of the applicable balance sheet date. Income and expense
items are translated at the average exchange rates prevailing during the period. Cumulative gains and losses from the
translation of the branch’s financial statements are reported as a separate component of shareholders’ equity.
Additionally, the Parent’s Hong Kong and Bermuda branches enter into certain transactions with related
companies, including short-term contractual obligations and long-term loans. Certain of these obligations and
loans are denominated in a non-functional currency, primarily the Euro, Japanese yen and Swedish krona.
Short-term contractual obligations are translated into U.S. dollars at current exchange rates as of the applicable
balance sheet date and the resulting foreign exchange gains and losses arising from the revaluation are recognized
in the statement of operations. Long-term loans are translated into U.S. dollars at current exchange rates as of the
applicable balance sheet date, and the resulting translation gains and losses from the revaluation are reported as a
separate component of shareholders’ equity.
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO SUPPLEMENTARY FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
All highly liquid investments with maturities of three months or less from original dates of purchase are
carried at cost, which approximates fair market value, and are considered to be cash equivalents. Cash and cash
equivalents consist of cash deposited in bank accounts.
Investment in and Due from/Due to Subsidiaries
Investment in subsidiaries is accounted for using the equity method when the Parent has an ownership
percentage equal to or greater than 50%. Under this method, the Parent’s investment in subsidiaries is reported as
a separate line on the Parent’s balance sheet. U.S. GAAP requires that these investments be consolidated rather
than reported using the equity method.
The Parent also has amounts due from and to subsidiaries that are unsecured, and certain obligations have
interest rates ranging from 0.21% to 8.5% per annum. The Parent uses the investment in subsidiaries and due
from/due to subsidiaries accounts to manage liquidity and capital resources for the Company in a tax effective
manner.
Concentration of Credit Risk
Financial instruments, which potentially subject the Parent to concentrations of credit risk, are primarily
cash and cash equivalents, investments and derivative instruments.
The Parent maintains cash and cash equivalents with various financial institutions that management believes
to be of high credit quality. These financial institutions are located in many different locations throughout the
world. The Parent’s cash equivalents consist primarily of cash deposited in checking and money market accounts.
The Parent’s investment policy limits the amount of credit exposure to 20% of the total investment portfolio in
any single issuer.
The amount subject to credit risk related to derivative instruments is generally limited to the amount, if any,
by which a counterparty’s obligations exceed the obligations of the Parent with that counterparty. To manage
counterparty risk, the Parent limits its derivative transactions to those with recognized financial institutions.
Derivative Instruments and Hedging Activities
All derivative instruments are recognized on the balance sheets at fair value. If the derivative instrument is
designated as a cash flow hedge, effectiveness is tested monthly using a regression analysis of the change in the
spot currency rates and the change in the present value of the spot currency rates. The spot currency rates are
discounted to present value using functional currency LIBOR rates over the maximum length of the hedge period.
The effective portion of changes in the fair value of the derivative instrument (excluding time value) is recognized
in shareholders’ equity as a separate component of accumulated other comprehensive income (loss), and
recognized in the statements of operations when the hedged item affects earnings. Ineffective and excluded
portions of changes in the fair value of cash flow hedges are recognized in earnings immediately. If the derivative
instrument is designated as a fair value hedge, the changes in the fair value of the derivative instrument and of the
hedged item attributable to the hedged risk are recognized in earnings in the current period.
3. CORRECTION OF ERROR IN PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Subsequent to the issuance of the standalone financial statements for the year ended March 31, 2012, the
Parent identified certain errors in the presentation of intercompany balances in the previously issued financial
statements. In previous years, these balances were aggregated based on individual Flextronics sites, whereas they
should have been aggregated based on legal entities. As a result, historically reported intercompany balances have
been restated to reflect this correction. Additionally, immaterial reclassifications were made to certain other
balance sheet amounts.
As of March 31, 2012 and March 31, 2011, short-term due from and due to subsidiaries were overstated by
$6.5 billion and $4.8 billion, respectively, long-term due from and due to subsidiaries were overstated
S-57
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO SUPPLEMENTARY FINANCIAL STATEMENTS (Continued)
3. CORRECTION OF ERROR IN PREVIOUSLY ISSUED FINANCIAL STATEMENTS (Continued)
by $6.8 million and $8.6 million, respectively, investment in subsidiaries were overstated by $15.6 million and
$16.7 million, respectively, other assets were understated by $1.4 million and $2.4 million, respectively, and other
current liabilities were overstated by $0.6 million and $0.6 million, respectively, which have been corrected in the
accompanying balance sheets. These corrections had no impact on recorded profit or loss in any period, or to
retained earnings of the balance sheets as of March 31, 2012 and March 31, 2011.
4. SHARE-BASED COMPENSATION
Equity Compensation Plans
During fiscal year 2013, the Parent granted equity compensation awards under the 2010 Equity Incentive
Plan (the “2010 Plan”). As of March 31, 2013, the Parent had approximately 43.4 million shares available for
grants under the 2010 Plan. Options issued to employees under the 2010 Plan generally vest over four years and
expire seven years from the date of grant. Options granted to non-employee directors expire five years from the
date of grant.
The exercise price of options granted to employees is determined by the Parent’s Board of Directors or the
Compensation Committee and may not be less than the closing price of the Parent’s ordinary shares on the date of
grant.
The Parent also grants share bonus awards under its equity compensation plan. Share bonus awards are
rights to acquire a specified number of ordinary shares for no cash consideration in exchange for continued
service with the Parent. Share bonus awards generally vest in installments over a three to five year period and
unvested share bonus awards are forfeited upon termination of employment. Vesting for certain share bonus
awards is contingent upon both service and market conditions.
Determining Fair Value
Valuation and Amortization Method—The Parent estimates the fair value of share options granted using the
Black-Scholes valuation method and a single option award approach. This fair value is then amortized on a
straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The fair
market value of share bonus awards granted, other than those awards with a market condition, is the closing price
of the Parent’s ordinary shares on the date of grant and is generally recognized as compensation expense on a
straight-line basis over the respective vesting period. For share bonus awards whereby vesting is contingent on
meeting certain market conditions, the fair value is determined using a Monte Carlo simulation.
Expected Term—The Parent’s expected term used in the Black-Scholes valuation method represents the
period that the Parent’s share options are expected to be outstanding and is determined based on historical
experience of similar awards, giving consideration to the contractual terms of the share options, vesting schedules
and expectations of future employee behavior as influenced by changes to the terms of its share options.
Expected Volatility—The Parent’s expected volatility used in the Black-Scholes valuation method is derived
from a combination of implied volatility related to publicly traded options to purchase Flextronics ordinary shares
and historical variability in the Parent’s periodic share price.
Expected Dividend—The Parent has never paid dividends on its ordinary shares and currently does not
intend to do so in the near term, and accordingly, the dividend yield percentage is zero for all periods.
Risk-Free Interest Rate—The Parent bases the risk-free interest rate used in the Black-Scholes valuation
method on the implied yield currently available on U.S. Treasury constant maturities issued with a term
equivalent to the expected term of the option.
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO SUPPLEMENTARY FINANCIAL STATEMENTS (Continued)
4. SHARE-BASED COMPENSATION (Continued)
The fair value of the Parent’s stock options granted to employees for fiscal years 2013 and 2012 was
estimated using the following weighted-average assumptions:
Fiscal Year Ended March 31,
Expected term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 years
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46.9%
—%
0.9%
$2.48
2013
2012
4.1 years
46.9%
—%
1.1%
$2.57
Options issued during the 2013 and 2012 fiscal years had contractual lives of seven years.
Stock-Based Awards Activity
The following is a summary of option activity for the Parent’s equity compensation plans, (“Price” reflects
the weighted-average exercise price):
Fiscal Year Ended March 31,
2013
2012
Outstanding, beginning of fiscal year . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding, end of fiscal year . . . . . . . . . . . . . . . . .
Options
43,933,660
19,000
(5,398,331)
(4,148,765)
34,405,564
Options exercisable, end of fiscal year . . . . . . . . . . .
33,662,480
Price
$7.78
6.57
4.12
8.32
$8.29
$8.31
Options
53,942,458
599,800
(5,879,405)
(4,729,193)
43,933,660
37,021,049
Price
$ 7.61
6.80
3.92
10.45
$ 7.78
$ 8.44
The aggregate intrinsic value of options exercised (calculated as the difference between the exercise price of
the underlying award and the price of the Parent’s ordinary shares determined as of the time of option exercise for
options exercised in-the-money) under the Parent’s equity compensation plans was $13.0 million and $17.1 million
during fiscal years 2013 and 2012, respectively.
Cash received from option exercises was $22.3 million and $23.1 million for fiscal years 2013 and 2012,
respectively.
The following table presents the composition of options outstanding and exercisable as of March 31, 2013:
Options Exercisable
Options Outstanding
Range of Exercise Prices
$ 1.94 - $ 2.26 . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3.39 - $ 5.75 . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5.87 - $ 7.07 . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 7.08 - $10.59 . . . . . . . . . . . . . . . . . . . . . . . . . .
$10.67 - $11.41 . . . . . . . . . . . . . . . . . . . . . . . . . .
$11.53 - $13.98 . . . . . . . . . . . . . . . . . . . . . . . . . .
$14.34 - $23.02 . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1.94 - $23.02 . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted
Average
Remaining Weighted
Average
Contractual
Exercise
Life
Price
(In Years)
$ 2.18
2.74
5.55
3.35
4.27
6.53
10.10
2.50
11.21
3.02
12.24
1.87
17.44
0.94
$ 8.29
2.52
Number of
Shares
Outstanding
8,271,934
6,736,382
552,685
8,041,703
1,171,246
6,965,166
2,666,448
34,405,564
Number of
Shares
Exercisable
8,271,934
6,670,480
350,536
7,566,670
1,171,246
6,965,166
2,666,448
33,662,480
Weighted
Average
Exercise
Price
$ 2.18
5.55
6.58
10.25
11.21
12.24
17.44
$ 8.31
Options vested and expected to vest . . . . . . . . . .
34,350,265
2.53
$ 8.31
As of March 31, 2013, the aggregate intrinsic value for options outstanding, options vested and expected to
vest (which includes adjustments for expected forfeitures), and options exercisable were $46.2 million, $46.2 million
and $46.1 million, respectively. The aggregate intrinsic value is calculated as the difference between the exercise
price of the underlying awards and the quoted price of the Parent’s ordinary shares as of March 31, 2013 for the
approximately 15.2 million options that were in-the-money at March 31, 2013. As of March 31, 2013, the weighted
average remaining contractual life for options exercisable was 2.47 years.
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO SUPPLEMENTARY FINANCIAL STATEMENTS (Continued)
4. SHARE-BASED COMPENSATION (Continued)
The following table summarizes the Parent’s share bonus award activity (“Price” reflects the weighted-average
grant-date fair value):
Unvested share bonus awards outstanding, beginning of
fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested share bonus awards outstanding, end of
Fiscal Year Ended March 31,
2013
2012
Shares
Price
Shares
Price
15,965,268
9,582,867
(1,506,234)
(2,234,832)
$6.91
6.74
7.51
6.86
13,801,942
9,213,456
(2,555,165)
(4,494,965)
$8.04
6.78
9.34
8.60
fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,807,069
$6.80
15,965,268
$6.91
Of the 21.8 million unvested share bonus awards outstanding as of the year ended March 31, 2013,
approximately 3.9 million represents the target amount of grants made to certain key employees whereby vesting is
contingent on meeting a certain market condition. The number of shares that ultimately will vest are based on a
measurement of Flextronics’ total shareholder return against the Standard and Poor’s (“S&P”) 500 Composite
Index and will vest over a period of three years. Of the 3.9 million awards that were outstanding as of the year
ended March 31, 2013, 2.1 million were granted in fiscal year 2013 at an estimated average grant-date fair value of
$7.63 per share and 1.0 million were granted in fiscal year 2012 at an average grant-date fair value of $7.78 per
share. In accordance with accounting guidance, the Parent will continue to recognize share-based compensation
expense for these awards with market conditions regardless of whether such awards will ultimately vest. The actual
number of shares to be issued can range from zero to 4.1 million for the 2013 grants and zero to 1.6 million for the
2012 grants. The awards granted during fiscal year 2011 will expire in June 2013, and are not expected to vest.
The total intrinsic value of share bonus awards vested under the Parent’s equity compensation plans was
$9.7 million and $17.7 million during fiscal years 2013 and 2012, respectively, based on the closing price of the
Parent’s ordinary shares on the date vested.
5. BANK BORROWINGS AND LONG-TERM DEBT
Bank borrowings and long-term debt are as follows:
4.625% Notes due February 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.000% Notes due February 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan Agreement, including current portion, due in installments
through October 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Term Loan Agreement, including current portion, due in
installments through October 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding under revolving lines of credit . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31,
2013
2012
(In thousands)
$ 500,000
500,000
$
—
—
128,923
892,783
517,500
375,000
—
2,021,423
(416,594)
$1,604,829
487,500
377,000
140,000
1,897,283
(36,340)
$1,860,943
The weighted average interest rate for the Parent’s long-term debt was 3.5% as of March 31, 2013.
Repayments of the Parent’s long-term debt are as follows:
Fiscal Year Ending March 31,
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
(In thousands)
$ 416,594
169,829
41,250
393,750
—
1,000,000
$2,021,423
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO SUPPLEMENTARY FINANCIAL STATEMENTS (Continued)
5. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
Notes due February 2020 and February 2023
On February 20, 2013, the Parent issued $500.0 million of 4.625% Notes due February 15, 2020 and
$500.0 million of 5.000% Notes due February 15, 2023 (collectively the “Notes”) in a private offering pursuant
to Rule 144A and Regulation S under the Securities Act . The Parent received net proceeds of approximately
$990.6 million from the issuance and used those proceeds to repay $756.9 million of outstanding borrowings
under its 2007 term loan facility.
Interest on the Notes is payable semi-annually, commencing on August 15, 2013. The Notes are senior
unsecured obligations of the Parent, rank equally with all of the Parent’s other existing and future senior and
unsecured debt obligations, and are guaranteed, jointly and severally, fully and unconditionally on an unsecured
basis, by each of the Parent’s 100% owned subsidiaries that guarantees indebtedness under, or is a borrower
under, the Parent’s Term Loan Agreement and Revolving Line of Credit.
At any time prior to maturity, the Parent may redeem some or all of the Notes at a redemption price equal to
100% of the principal amount of the Notes redeemed, plus an applicable premium and accrued and unpaid
interest, if any, to the applicable redemption date. Upon the occurrence of a change of control repurchase event
(as defined in the Notes indenture), the Parent must offer to repurchase the Notes at a repurchase price equal to
101% of the principal amount of the Notes repurchased, plus accrued and unpaid interest, if any, to the applicable
repurchase date.
The indenture governing the Notes contains covenants that, among other things, restrict the ability of the
Parent and certain of the Parent’s subsidiaries to create liens; enter into sale-leaseback transactions; create, incur,
issue, assume or guarantee any funded debt; and consolidate or merge with, or convey, transfer or lease all or
substantially all of the Parent’s assets to, another person. These covenants are subject to a number of significant
limitations and exceptions set forth in the indenture. The indenture also provides for customary events of default,
including, but not limited to, cross defaults to certain specified other debt of the Parent and its subsidiaries. In the
case of an event of default arising from specified events of bankruptcy or insolvency, all outstanding Notes will
become due and payable immediately without further action or notice. If any other event of default under the
agreement occurs or is continuing, the applicable trustee or holders of at least 25% in aggregate principal amount
of the then outstanding Notes may declare all of the Notes to be due and payable immediately. As of March 31,
2013, the Parent was in compliance with the covenants in the indenture governing the Notes.
In connection with the issuance of the Notes, the Parent entered into a registration rights agreement under
which it has agreed to consummate an offer registered with the Securities and Exchange Commission to issue
new notes having terms substantially identical to the Notes (except that the new notes will not be subject to
restrictions on transfer) in exchange for outstanding Notes. In some circumstances, the Parent may be required to
file a shelf registration statement to cover resales of the Notes. If the Parent fails to satisfy these obligations, the
Parent may be required to pay additional interest to holders of the Notes under certain circumstances.
Term Loan Agreement and Revolving Line of Credit
On October 19, 2011, the Parent entered into a five-year $2.0 billion Credit Facility consisting of a $1.5 billion
Revolving Credit Facility and a $500.0 million term loan, which expires in October 2016. The Revolving Credit
Facility due 2016 replaced the Parent’s $2.0 billion revolving credit facility, which was due to mature in
May 2012 and the $500.0 million term loan refinanced the outstanding amount of its $500.0 million tranche
under the Parent’s $1.7 billion term loan, which was due to mature in October 2012. During fiscal year 2013, the
Parent increased the limit on the term loan by $50 million and borrowed the entire incremental amount.
Additionally, the Parent repaid a total principal amount of $20 million on the term loan during fiscal year 2013.
Borrowings under the Credit Facility bear interest, at the Parent’s option, either at (i) LIBOR plus the applicable
margin for LIBOR loans ranging between 1.25% and 2.25%, based on the Parent’s credit ratings or (ii) the base
rate (the greatest of the agent’s prime rate, the federal funds rate plus 0.50% and LIBOR for a one-month interest
period plus 1.00%) plus an applicable margin ranging between 0.25% and 1.25%, based on the Parent’s credit
rating. The Parent is required to pay a quarterly commitment fee ranging between 0.20% and 0.45% per annum on
the daily unused amount of the $1.5 billion Revolving Credit Facility based on the Parent’s credit rating.
This Credit Facility is unsecured, and contains customary restrictions on the Parent’s and its subsidiaries’
ability to (i) incur certain debt, (ii) make certain investments, (iii) make certain acquisitions of other entities,
(iv) incur liens, (v) dispose of assets, (vi) make non-cash distributions to shareholders, and (vii) engage in
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO SUPPLEMENTARY FINANCIAL STATEMENTS (Continued)
5. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
transactions with affiliates. These covenants are subject to a number of exceptions and limitations. This Credit
Facility also requires that the Parent maintain a maximum ratio of total indebtedness to EBITDA (earnings before
interest expense, taxes, depreciation and amortization), and a minimum interest coverage ratio, as defined therein,
during its term. As of March 31, 2013, the Parent was in compliance with the covenants under this Credit Facility.
Term Loan Agreement
The Parent entered into a $1.8 billion term loan facility, dated as of October 1, 2007, and subsequently
amended as of December 28, 2007.
During the fiscal year ended March 31, 2008, the Parent borrowed $1.7 billion under this term loan
agreement. Of this amount, $500.0 million was scheduled to mature in October 2012 and the remainder was
scheduled to mature in October 2014. The Parent may prepay the loans at any time at 100% of par plus accrued
and unpaid interest and reimbursement of the lender’s redeployment costs. On October 19, 2011, the Parent repaid
$480 million, which was the outstanding portion of the $500.0 million due to mature in October 2012. On
February 20, 2013, the Parent repaid $756.9 million of the $1.2 billion outstanding that is scheduled to mature in
October 2014.
Borrowings under this term loan agreement bear interest, at the Parent’s option, either at (i) the base rate
(the greater of the agent’s prime rate or the federal funds rate plus 0.50%) plus a margin of 1.25%; or (ii) LIBOR
plus a margin of 2.25%.
This term loan agreement is unsecured, and contains customary restrictions on the ability of the Parent and
its subsidiaries to, among other things, (i) incur certain debt, (ii) make certain investments, (iii) make certain
acquisitions of other entities, (iv) incur liens, (v) dispose of assets, (vi) make non-cash distributions to
shareholders, and (vii) engage in transactions with affiliates. These covenants are subject to a number of
exceptions and limitations. This term loan agreement also requires that the Parent maintain a maximum ratio of
total indebtedness to EBITDA (as defined by the loan agreement), during the term of the agreement. Borrowings
under this term loan agreement are guaranteed by the Parent and certain of its subsidiaries. As of March 31, 2013,
the Parent was in compliance with the covenants under this term loan agreement.
Asia Term Loans
On September 27, 2010, the Parent entered into a $50.0 million term loan agreement with a bank based in
Asia, which matures on September 27, 2013. Borrowings under the term loan bear interest at LIBOR plus 2.30%.
The Parent, at its election, may convert the loan (in whole or in part) to bear interest at the higher of the Federal
Funds rate plus 0.50% or the prime rate plus, in each case 1.00%. Principal payments of $500,000 are due
quarterly with the balance due on the maturity date. The Parent has the right to prepay any part of the loan
without penalty. Borrowings under the term loan agreement are guaranteed by certain subsidiaries of the Parent.
On September 28, 2010, the Parent entered into a $130.0 million term loan facility with a bank in Asia,
which matures on September 28, 2013. Borrowings under the facility bear interest at LIBOR plus a margin of
2.15%, and the Parent paid a non-refundable fee of $1.4 million at the inception of the loan. The Parent has the
right to prepay any part of the loan without penalty.
On February 17, 2011, the Parent entered into a $200.0 million term loan facility with a bank in Asia, which
matures on February 17, 2014. Borrowings under the facility bear interest at LIBOR plus a margin of 2.28%, and
the Parent paid a non-refundable fee of $1.0 million at the inception of the loan. The Parent has the right to prepay
any part of the loan without penalty.
The Asia Term Loans are unsecured, and contain customary restrictions on the ability of the Parent and its
subsidiaries to, among other things, (i) incur certain debt, (ii) make certain investments, (iii) make certain
acquisitions of other entities, (iv) incur liens, (v) dispose of assets, (vi) make non-cash distributions to
shareholders, and (vii) engage in transactions with affiliates. These covenants are subject to a number of
exceptions and limitations. The Asia Term Loans also require the Parent maintain a maximum ratio of total
indebtedness to EBITDA (as defined by the loan agreement) during the terms of the agreements. As of March 31,
2013, the Parent was in compliance with the covenants under these facilities.
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CLEAN
FLEXTRONICS INTERNATIONAL LTD.
NOTES TO SUPPLEMENTARY FINANCIAL STATEMENTS (Continued)
5. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
Other Credit Lines
The Parent also has uncommitted bilateral facilities in the amount of $25 million and $25 million in the
aggregate, under which there were no amounts outstanding as of March 31, 2013 and 2012, respectively.
6. FINANCIAL INSTRUMENTS
Foreign Currency Contracts
The Parent transacts business in various foreign countries and is therefore, exposed to foreign currency
exchange rate risk inherent in forecasted sales, cost of sales, and monetary assets and liabilities denominated in
non-functional currencies. The Parent has established risk management programs to protect against reductions in
value and volatility of future cash flows caused by changes in foreign currency exchange rates. The Parent tries to
maintain a partial or fully hedged position for certain transaction exposures, which are primarily, but not limited
to, revenues, customer and vendor payments and intercompany balances in currencies other than the functional
currency unit of the operating entity. The Parent enters into short-term foreign currency forward and swap
contracts to hedge only those currency exposures associated with certain assets and liabilities, primarily accounts
receivable and accounts payable, and cash flows denominated in non-functional currencies. Gains and losses on
the Parent’s forward and swap contracts are designed to offset losses and gains on the assets, liabilities and
transactions hedged, and accordingly, generally do not subject the Parent to risk of significant accounting losses.
The Parent hedges committed exposures and does not engage in speculative transactions. The credit risk of these
forward and swap contracts is minimized since the contracts are with large financial institutions and accordingly,
fair value adjustments related to the credit risk of the counter-party financial institution were not material. The
aggregate notional amount of outstanding contracts was $592.5 million as of March 31, 2013. These foreign
exchange contracts, which expire in approximately one month, settle primarily in Euro and Swedish krona.
7. FAIR VALUE MEASURMENT OF ASSETS AND LIABILITIES
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. When determining the fair value
measurements for assets and liabilities required or permitted to be recorded at fair value, the Parent considers the
principal or most advantageous market in which it would transact, and it considers assumptions that market
participants would use when pricing the asset or liability. The accounting guidance for fair value establishes a fair
value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair
value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. The fair value hierarchy is as follows:
Level 1—Applies to assets or liabilities for which there are quoted prices in active markets for identical
assets or liabilities.
The Parent has deferred compensation plans for its officers and certain other employees. Deferred amounts
under the plans are invested in hypothetical investments selected by the participant or the participant’s investment
manager. The Parent’s deferred compensation plan assets are included in other noncurrent assets on the
consolidated balance sheets and include investments in equity securities and mutual funds that are valued using
active market prices.
The Parent does not have any assets or liabilities valued using Level 1 observable inputs.
Level 2—Applies to assets or liabilities for which there are inputs other than quoted prices included within
level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active
markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data.
The Parent values foreign exchange forward contracts using level 2 observable inputs which primarily
include foreign currency and interest spot and forward rates quoted by banks or foreign currency dealers.
Level 3—Applies to assets or liabilities for which there are unobservable inputs to the valuation
methodology that are significant to the measurement of the fair value of the assets or liabilities.
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO SUPPLEMENTARY FINANCIAL STATEMENTS (Continued)
7. FAIR VALUE MEASURMENT OF ASSETS AND LIABILITIES (Continued)
The Parent does not have any assets or liabilities valued using unobservable inputs.
There were no transfers between levels in the fair value hierarchy during the fiscal years 2013 and 2012.
Financial Instruments Measured at Fair Value on a Recurring Basis
The following table presents the Parent’s assets and liabilities measured at fair value on a recurring basis as
at March 31, 2013 and 2012:
Assets:
Deferred compensation plan assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange forward contracts (Note 6) . . . . . . . . . . . . . . . .
Fair Value Measurements as of March 31, 2013
Level 1
Level 2
Level 3
Total
(In thousands)
$—
—
—
$ 762
8,546
5,115
$—
—
—
$ 762
8,546
5,115
Fair Value Measurements as of March 31, 2012
Level 1
Level 2
Level 3
Total
(In thousands)
Assets:
Deferred compensation plan assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$—
—
$1,535
9,768
$—
—
$1,535
9,768
Liabilities:
Foreign exchange forward contracts (Note 6) . . . . . . . . . . . . . . . .
—
(296)
—
(296)
Other financial instruments
The following table presents the Parent’s liabilities not carried at fair value as at March 31, 2013 and 2012:
Revolving credit facility . . . . . . . . . . . . . . . .
Term loan dated October 1, 2007 . . . . . . . . .
Term loan dated October 19, 2011 . . . . . . . .
4.625% Notes dated February 20, 2013
As of March 31, 2013
As of March 31, 2012
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Fair Value
Hierarchy
(In thousands)
$
— $
128,923
517,500
— $ 140,000
892,783
487,500
129,109
518,794
$ 140,000
887,003
482,625
Level 2
Level 1
Level 1
(due 2020) . . . . . . . . . . . . . . . . . . . . . . . . .
500,000
507,190
—
— Level 1
5.000% Notes dated February 20, 2013
(due 2023) . . . . . . . . . . . . . . . . . . . . . . . . .
Asia term loans . . . . . . . . . . . . . . . . . . . . . . .
500,000
375,000
500,000
375,343
—
377,000
— Level 1
Level 2
374,394
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,021,423
$2,030,436
$1,897,283
$1,884,022
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO SUPPLEMENTARY FINANCIAL STATEMENTS (Continued)
7. FAIR VALUE MEASURMENT OF ASSETS AND LIABILITIES (Continued)
Revolving credit facility—The carrying amount approximates fair value due to the short term nature of the
borrowings under this facility, though the facility itself is available to the Parent on a long term basis.
Term loans dated October 1, 2007 and October 19, 2011—The term loans are valued based on broker
trading prices in active markets.
Notes dated February 20, 2013—The notes are valued based on broker trading prices in active markets.
Asia term loans—The Parent’s Asia Term Loans are not traded publicly; however, as the pricing, maturity
and other pertinent terms of these loans closely approximate those of the Term Loan Agreements dated October 1,
2007, and October 19, 2011, management estimates the respective trading prices would be approximately the same.
8. COMMITMENTS AND CONTINGENCIES
Litigation and other legal matters
From time to time, the Parent is subject to legal proceedings, claims, and litigation arising in the ordinary
course of business. The Parent defends itself vigorously against any such claims. Although the outcome of these
matters is currently not determinable, management expects that any losses that are probable or reasonably
possible of being incurred as a result of these matters, which are in excess of amounts already accrued in its
consolidated balance sheets would not be material to the financial statements as a whole.
Guarantees
As of March 31, 2013, the Parent issued approximately $2.4 billion in bank guarantees in connection with
bank credit extensions of certain of its subsidiaries. The Parent also issued other guarantees in connection with
supplier arrangements and guarantees associated with certain operating leases that were entered into by its
subsidiaries.
9. INCOME TAXES
The Parent is a Singapore corporation and is a non-resident for Singapore tax purposes. Non-Singapore
resident taxpayers, subject to certain exceptions, are subject to income tax on (1) income that is accrued in or
derived from Singapore and (2) foreign income received in Singapore.
Since the Parent did not derive income from or receive foreign income in Singapore, it is not subject to
Singapore income tax. To the extent that the Parent continues to meet the above-mentioned requirements as
determined by current law, no Singapore income tax will be imposed on the Parent. In addition, the Parent has no
material taxable income in other jurisdictions. Accordingly, the Parent records minimal current income tax
expense and does not record any deferred income taxes.
10. SHARE REPURCHASE PLAN
During fiscal year 2013, the Parent repurchased approximately 51.7 million shares for an aggregate
purchase value of approximately $334.0 million.
The Parent’s Board of Directors, on September 13, 2012, authorized the repurchase of up to 10% of the
Company’s outstanding ordinary shares which was approved by the Parent’s shareholders at the 2012
Extraordinary General Meeting held on August 30, 2012. Share repurchases by the Parent under the share
repurchase plans are subject to an aggregate limit of 10% of the Parent’s ordinary shares outstanding as of the
date of the 2012 Extraordinary General Meeting. During fiscal year 2013, the Parent repurchased approximately
31.3 million shares for an aggregate purchase value of approximately $200.0 million under this plan, including
accrued expenses, and retired all of these shares. As of March 31, 2013, approximately 35.3 million shares were
available to be repurchased under this plan.
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FLEXTRONICS INTERNATIONAL LTD.
NOTES TO SUPPLEMENTARY FINANCIAL STATEMENTS (Continued)
10. SHARE REPURCHASE PLAN (Continued)
During the first quarter of fiscal 2013, the Parent repurchased the entire remaining amount under a prior
share repurchase plan that was approved by the Parent’s Board of Directors on December 7, 2011 and the Parent’s
shareholders at the 2011 Extraordinary General Meeting held on July 22, 2011, or approximately 20.4 million
shares for an aggregate purchase value of approximately $134.0 million, and retired all of these shares.
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EXECUTIVE OFFICERS
Michael M. McNamara—Chief Executive Officer
Christopher Collier—Chief Financial Officer and Principal
Accounting Officer
François Barbier—President, Global Operations and
Components
Paul Humphries—President, High Reliability Solutions
Jonathan S. Hoak—Executive Vice President and General
Counsel
DIRECTORS
H. Raymond Bingham—Advisory Director, General Atlantic
LLC, a global private equity firm
James A. Davidson—Co-Founder, Managing Partner and
Managing Director of Silver Lake Partners, a private equity
investment firm
Michael M. McNamara—Chief Executive Officer, Flextronics
International Ltd.
Daniel H. Schulman—Group President, American Express’
Enterprise Growth Group
Dr. Willy C. Shih—Professor of Management Practice at the
Harvard Business School
Lay Koon Tan—President, Chief Executive Officer and
Director, STATS ChipPAC Ltd.
William D. Watkins—Chairman of the Board, Bridgelux, Inc.
Lawrence A. Zimmerman—Former Vice Chairman and Chief
Financial Officer, Xerox Corporation
FORWARD LOOKING STATEMENTS
This annual report, including the letter to our shareholders,
may contain “forward-looking statements” within the meaning
of Section 21E of the Securities Exchange Act of 1934. Any
statements contained herein that are not statements of
historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words
“believes,” “anticipates,” “plans,” “expects,” “seeks,”
“estimates” and similar expressions are intended to identify
forward-looking statements. While the company may elect to
update forward-looking statements in the future, it specifically
disclaims any obligation to do so, even if the company’s
estimates change. A number of factors could cause the results
of the company to differ materially from those indicated by
such forward-looking statements, including those detailed
under the heading “Risk Factors” in Part I, Item 1A, in the
accompanying Annual Report on Form 10-K for the fiscal year
ended March 31, 2013.
Shareholder Information
CORPORATE HEADQUARTERS
2 Changi South Lane
Singapore 486123
Tel: +65.6876.9899
ANNUAL & EXTRAORDINARY GENERAL MEETINGS
The Annual General Meeting of Shareholders will be held at
9:00 A.M. California time on July 29, 2013 and the
Extraordinary General Meeting of Shareholders will held at
10:00 A.M. California time or immediately following the
Annual General Meeting. Both meetings will be held at:
Flextronics International Ltd.
6201 America Center Drive
San Jose, California 95002
Tel: +1.408.576.7000
STOCK LISTING
The Company’s ordinary shares are traded on the NASDAQ
Global Select Market under the symbol FLEX.
WEBSITE
www.flextronics.com
INVESTOR RELATIONS
For shareholder or investor related inquiries, contact:
Flextronics International Ltd.
Investor Relations
6201 America Center Drive
San Jose, CA 95002
Tel: +1.408.576.7985
Fax: +1.408.576.7106
Email: investor_relations@flextronics.com
In order to help reduce costs, please report any duplicate
mailings of shareholder materials by contacting Investor
Relations.
SEC FILINGS
The Company makes available through its Internet website,
annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, Section 16 reports and
amendments to those reports filed or furnished pursuant to
Section 13(a) of the Securities Exchange Act of 1934 as soon as
reasonably practicable after electronically filing such material
with, or furnishing it to, the Securities and Exchange Commission.
Upon request, we will furnish without charge to each person
to whom this report is delivered a copy of any exhibit listed
in our Annual Report on Form 10-K for the fiscal year
ended March 31, 2013. You may request a copy of this
information at no cost, by writing or telephoning us at our
principal U.S. offices at the investor relations contact above.
TRANSFER AGENT AND REGISTRAR
For questions regarding misplaced share certificates, changes
of address or the consolidation of accounts, please contact the
Company’s transfer agent:
Computershare Trust Company NA
P.O. Box 43078
Providence, Rhode Island 02940-3078
Tel. 1.877.373.6374/+1.781.575.2879
www.computershare.com
Information in this document is subject to change without notice. Flextronics is a trademark of Flextronics International Ltd. All other
trademarks are the properties of their respective owners.
© Copyright Flextronics International Ltd. 2013. All rights reserved. Reproduction, adaptation, or translation without prior written permission
is prohibited except as allowed under the copyright laws.
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Flextronics International Ltd.
2013 Annual General Meeting and Extraordinary General Meeting of Shareholders
Directions and Parking Information
July 29, 2013
9:00 A.M. California time and 10:00 A.M. California time
The Annual General Meeting and the Extraordinary General Meeting of Shareholders will be held at the Company’s
principal U.S. Corporate Headquarters located at 6201 America Center Drive, San Jose, California 95002. The
Annual General Meeting will be held at 9:00 A.M. California time. The Extraordinary General Meeting will be held
at 10:00 A.M. California time, or immediately following the close of the Annual General Meeting.
Directions from Highway 101 (Northbound)
(cid:129) Take Exit 393 toward Great America Parkway
(cid:129) Turn Left onto Bowers Avenue
(cid:129) Continue on Great America Parkway
(cid:129) Continue on America Center Drive
(cid:129) At the traffic circle, continue straight to stay on America Center Drive
(cid:129) Turn Left to 6201 America Center Drive (on right)
Directions from Highway 101 (Southbound)
(cid:129) Take Exit 396B to merge onto CA-237 E toward Alviso/Milpitas
(cid:129) Take Exit 6 toward Lafayette Street
(cid:129) Turn Left onto Great America Parkway
(cid:129) Continue on America Center Drive
(cid:129) At the traffic circle, continue straight to stay on America Center Drive
(cid:129) Turn Left to 6201 America Center Drive (on right)
Directions from Highway 680 (Northbound and Southbound)
(cid:129) Take Exit 8 to merge onto CA-237 W/E Calaveras Blvd toward Central Milpitas
(cid:129) Continue to follow W/E Calaveras Blvd to CA-237 W
(cid:129) Merge onto CA-237 W via the ramp on the left to Mountain View
(cid:129) Take Exit 6 for Great America Parkway toward Lafayette Street
(cid:129) Turn Right onto Great America Parkway
(cid:129) Continue on America Center Drive
(cid:129) At the traffic circle, continue straight to stay on America Center Drive
(cid:129) Turn Left to 6201 America Center Drive (on right)
Parking
Flextronics has reserved parking spaces for shareholders attending the meeting. These spaces will be designated
as “Reserved for Flextronics Shareholders’ Meeting.”
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