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To Our Shareholders:
We are in a new era, a structurally different era. Our world has been transformed by
technological innovation and is becoming more connected every day by the Intelligence of
ThingsTM. In this new world of connectivity and intelligence, cloud technologies and mobility
are creating opportunity and sparking innovation, transforming entire industries overnight,
while eliminating the barriers that once divided them. Flex is perfectly positioned in this new
era providing Sketch-to-ScaleTM solutions for customers that are now faced with the need to
rapidly develop connected, intelligent products that no longer resemble their industries’
traditional offerings. We help our customers thrive in this new environment by igniting
intelligence and optimizing collective innovation, providing core technology building blocks
for design and engineering, identifying and leveraging core technologies across key
industries, and developing and commercializing bold, innovative ideas into successful
products.
Last year we successfully demonstrated the value of our Sketch-to-Scale solutions across
multiple industries, both electronics and non-electronics focused. When we dropped the
“tronics” from our name back in 2015, we did so with a purpose. Gone were the days of
partnering exclusively with companies in the electronics supply chain. With strategic insight
and smart investments, we have solidified our Platform’s value and broadened its appeal, to
the point where our skills, capabilities, and expertise are now positioned to partner with – and
provide value to the world’s leading supply chains, both within and outside of the electronics
industry.
We have done something that is very difficult to do; we have changed the conversation with our
customers, from procurement-focused to strategic. Through our Sketch-to-Scale strategy and
initiatives we have evolved our model and elevated our role with customers to become more
focused on strategic goals such as making products that are smart and connected, creating new
revenue streams, and reinventing global supply chains. This has helped us unlock opportunities
across new industries and open up additional total available market (TAM).
Products Are Transforming into Intelligent Systems
Products in every industry are transforming from simple products into intelligent systems. For
instance, prior to the creation of the smart phone, all mobile phones were simply “feature
phones” providing basic voice and text-based communication. Then the smart phone was
introduced, and it completely transformed the mobile phone industry. The smart phone was
more than a product, it was an intelligent system – and ‘ordinary’ mobile phones were
suddenly no longer sufficient. The same thing is currently happening in the automobile
industry. Major auto manufacturers are racing to transform their offerings from products into
intelligent systems. Autonomous driving and connected cars are imminent, and they will
forever transform the automotive industry. Ultimately, we will see all industries transformed,
as their offerings evolve from simple products into intelligent systems. Flex will help to
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facilitate this transformation by providing the cross-industry capabilities, and smart and
connected features that will enable them to become intelligent systems.
Flex Has Unique Scale and Visibility Across 12 Industries
Few companies can claim to operate at scale across five industries, and even fewer across
10 industries. Flex operates at scale across 12 industries in which we have a billion dollars
or more of revenue. In addition, we have deep customer engagements across all 12 of these
industries, from today’s industry leaders to tomorrow’s disrupters. We are also significantly
diversified within these industries, which further strengthens our visibility into different
strategies and technologies. With our ability to triangulate across geographies, industries and
customers, we have the unique ability to help our customers navigate the convergence of
technologies and the impact of the Age of IntelligenceTM on their business models.
The Flex Platform – Our Company Innovates Across Three
Dimensions
The Flex Platform, first unveiled in 2013, encapsulates the tools, capabilities, resources, and
investment priorities that enable us to compete and win, while providing our customers with
a clear competitive advantage. We have continued to invest into our Platform to further
enhance our competitive strengths and attributes, as the rate of technological change
increases in every one of our customers’ industries.
When we innovate across three different levels, the ‘real-time information’ layer or what we
also call the management system level, is the most important. We stay relevant and agile in
a very disruptive world. Our objective is to digitize all of our systems and processes,
enabling them to become mobile solutions that leverage real-time data, as well as improving
collaboration to drive valuable insights. It’s not about data in isolation, it’s about the
actionable insights that the data can provide.
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Our second level demonstrates how we innovate across our end-to-end services with the
objective to drive faster cycles and enable our customers to achieve faster cycle times when
they develop their products. We innovate at the product and process level and have
established processes that source and cultivate innovation with building blocks that have
cross-industry functionality.
And the third innovation layer is at the operational level, where we have approximately
200,000 people operating in 30 countries around the world. Our use of Industry 4.0 technologies
helps us to ensure we have the most efficient and reliable operations in the world.
Fiscal 2017 Results Underscore Successful Portfolio Evolution
As we reflect on this past year’s performance*, we are proud of our ability to deliver on our
financial commitments. Fiscal 2017 marked another year of strong financial execution as we
delivered multi-year growth in adjusted earnings per share and operating margin, sustained
strong free cash flow, and consistently repurchased shares. Against this backdrop, we also
continued to make investments and evolve our portfolio to longer product life cycles and
higher margin businesses.
Meaningful Evolution. Our distinct actions to evolve our portfolio have been successful, as
we now generate over $9 billion in annual revenue from our higher margin businesses in
Automotive, Medical, Industrial, and Energy. And we also achieved our second consecutive
year of generating over 50% of our adjusted operating profit dollars from these businesses.
Profitable. Every year for the last 5 years, we’ve grown our adjusted gross and operating profit,
and adjusted earnings per share. In fiscal 2017, we achieved a 16-year high of 3.4% adjusted
operating margin, and we established an all-time high of $1.17 adjusted earnings per share.
Resilient. We have also built a business model that generates sustainable free cash flow
year after year. Our fiscal 2017 cash flow from operations totaled over $1.1 billion and we
generated $660 million in free cash flow – reflecting a free cash flow conversion of 100%.
Consistent. Our strong cash flow generation is a hallmark of Flex and provides us the
flexibility to make investments necessary to support our Platform while also supporting our
unwavering commitment to returning 50% or more of free cash flow to shareholders. For the
year, we repurchased nearly 25 million shares for $350 million, greater than 50% of our free
cash flow in fiscal 2017 and consistent with our capital allocation strategy for the past 6 years
that has been driven by returning value to shareholders in the form of stock repurchase.
Investment Thesis Intact
We have consistently articulated our investment thesis for the past few years, which has
been underpinned by four key elements: 1) a structural portfolio evolution towards longer
product life cycles and higher margin businesses, 2) an expansion of our earnings power,
3) strong sustainable cash flow generation, and 4) consistently returning capital to
shareholders. I am pleased that we have delivered on all four key elements again in fiscal
2017 and are positioned to continue to outperform going forward.
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Fiscal 2018 Will Be an Important Investment Year
As we embark upon fiscal 2018, we have many opportunities to drive strong momentum, but
they will all require important investments and execution. We are taking focused efforts to
invest and grow our Sketch-to-ScaleTM led design and engineering activities to elevate its
penetration. Our strategic partnership with Nike is expected to scale up towards the end of
fiscal 2018, and our investments into new growth areas such as digital health, autonomous
driving and connected cars, smart energy, connected living, and digitizing the construction
industry are all well underway. Our Platform continues to appeal to current customers and
potential customers, both inside and outside of the electronics industry more than ever
before.
We Remain Focused on Our 2020 Targets
Ultimately, we are driving our business towards the fiscal 2020 earnings targets we’ve
articulated in the past. To get there, we will continue our portfolio evolution, drive further
penetration of Sketch-to-Scale engagements and we will continue to invest intelligently and
execute with precision. We remain confident in our ability to reach our goals.
As always, we appreciate your interest, support, and investment in us. With a great strategy
and vision, clear objectives, and strong execution, we will drive continued improvement and
create value for all our stakeholders for many years to come!
Sincerely,
Mike McNamara
Chief Executive Officer
* Adjusted gross profit, adjusted operating profit, adjusted EPS, and free cash flow are non-GAAP financial measures. A reconciliation of these
non-GAAP financial measures to the most comparable GAAP measures is available on the Summary Financials page of the Investor
Relations section of our website at www.flex.com.
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FLEX LTD.
(Incorporated in the Republic of Singapore)
(Company Registration Number 199002645H)
To Our Shareholders:
On August 15, 2017, we will hold our 2017 annual general meeting of our shareholders at our offices
located at 6201 America Center Drive, San Jose, CA 95002, U.S.A. Our 2017 annual general meeting
of shareholders will begin at 9:00 a.m., Pacific time.
The matters to be voted upon at the meeting are listed in the notice that follows this letter and are
described in more detail in the accompanying proxy statement. We urge you to read the entire proxy
statement carefully before voting. Part I of the accompanying proxy statement provides general
information about the meeting, Part II describes the proposals to be voted upon at the 2017 annual
general meeting of shareholders and related information, and Part III provides additional information,
including information about our named executive officers and their compensation.
IMPORTANT NOTICE REGARDING ELECTRONIC AVAILABILITY OF PROXY STATEMENT AND
ANNUAL REPORT: We have elected to provide access to our proxy materials to our shareholders by
notifying them of the availability of our proxy materials on the Internet. On or about July 5, 2017, we
will mail to most of our shareholders (including all of our registered shareholders) a Notice of
Availability of Proxy Materials on the Internet (referred to as the Notice) containing instructions on how
to access this proxy statement and our annual report and to submit their proxies via the Internet.
Instructions on how to request a printed copy of our proxy materials may be found in the Notice.
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.
Sincerely,
Tay Hong Chin Regina
Company Secretary
Singapore
July 5, 2017
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FLEX LTD.
(Incorporated in the Republic of Singapore)
(Company Registration Number 199002645H)
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
To Be Held on August 15, 2017
To Our Shareholders:
You are cordially invited to attend, and NOTICE IS HEREBY GIVEN of, the annual general
meeting of shareholders of FLEX LTD. (“Flex” or the “Company”), which will be held at our offices
located at 6201 America Center Drive, San Jose, CA 95002, U.S.A, at 9:00 a.m., Pacific time, on
August 15, 2017, for the following purposes:
•
•
•
•
•
•
•
•
To re-elect the following directors: Michael D. Capellas and Marc A. Onetto (Proposal No. 1);
To approve the re-appointment of Deloitte & Touche LLP as our independent auditors for the
2018 fiscal year and to authorize the Board of Directors, upon the recommendation of the
Audit Committee, to fix their remuneration (Proposal No. 2);
To approve a general authorization for the Directors of Flex to allot and issue ordinary
shares (Proposal No. 3);
To hold a non-binding, advisory vote on executive compensation (Proposal No. 4);
To hold a non-binding, advisory vote on the frequency of the non-binding, advisory vote on
executive compensation (Proposal No. 5);
To approve the adoption of the Flex Ltd. 2017 Equity Incentive Plan (Proposal No. 6);
To approve a renewal of the Share Purchase Mandate permitting Flex to purchase or
otherwise acquire its own issued ordinary shares (Proposal No. 7); and
To approve changes in the cash compensation payable to Flex’s non-employee directors
(Proposal No. 8).
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
Constitution, to the Board of Directors:
(a) Mr. Michael D. Capellas; and
(b) Mr. Marc A. Onetto.
2. To consider and vote upon a proposal to re-appoint Deloitte & Touche LLP as our independent
auditors for the fiscal year ending March 31, 2018, and to authorize our Board of Directors, upon
the recommendation of the Audit Committee of the Board of Directors, to fix their remuneration.
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As Special Business
The full text of the resolutions proposed for approval by our shareholders is as follows:
3. To pass the following resolution as an Ordinary Resolution:
“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
Constitution, authority be and is hereby given to our Directors to:
(a)
(i) allot and issue ordinary shares in our capital; and/or
(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 Constitution; 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.”
4. To consider and put to a non-binding, advisory vote the following non-binding, advisory resolution:
“RESOLVED THAT, the shareholders of Flex approve, on a non-binding, advisory basis, the
compensation of the Company’s named executive officers, as disclosed pursuant to Item 402 of SEC
Regulation S-K, including the Compensation Discussion and Analysis and the compensation tables
and related disclosures contained in the section of the accompanying 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 Flex or its
Board of Directors.”
5. To consider and put to a non-binding, advisory vote the following non-binding, advisory resolution:
“RESOLVED THAT, the shareholders of Flex recommend that a non-binding, advisory vote to approve
the compensation of the Company’s named executive officers be put to shareholders for their
consideration with one of the following three frequencies:
(a) every one year;
(b) every two years; or
(c) every three years.”
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 Flex or its
Board of Directors.”
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6. To pass the following resolution as an Ordinary Resolution:
“RESOLVED THAT, approval be and is hereby given for:
(a)
the adoption of a new equity incentive plan to be known as the “Flex Ltd. 2017 Equity
Incentive Plan”, which we refer to as the 2017 Plan, a summary of which is set out in the
attached proxy statement and the rules of which, for the purpose of identification, have
been subscribed to by the Chairman of the Meeting under which awards of our ordinary
shares in our capital will be granted to selected eligible persons (details of which are set
out in the attached proxy statement) which includes (but is not limited to) our employees
and directors and those of our subsidiaries and affiliates, officers, members of our Board
of Directors (including both employee and non-employee Directors), and consultants of
the Company and our subsidiaries and affiliates; and
(b) our Directors to:
(i) establish and administer the 2017 Plan;
(ii) modify and/or alter the 2017 Plan from time to time, provided that such modification
and/or alteration is effected in accordance with the provisions of the 2017 Plan, and
to do all such acts and to enter into all such transactions, agreements and
arrangements as may be necessary or expedient in order to give full effect to the
2017 Plan; and
(iii) offer and/or grant options, restricted share units, share appreciation rights,
performance shares, performance share units and any other share-based awards
under the 2017 Plan, all in accordance with the provisions of the 2017 Plan and to
allot and issue from time to time such number of ordinary shares in our capital as
may be required to be allotted and issued pursuant to the (1) exercise of options
and/or share appreciation rights; and (2) vesting of restricted share units,
performance shares, performance share units and/or such other share-based
awards under the 2017 Plan, all pursuant to the 2017 Plan.”
7. 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 20%
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:
(A) 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
(B) 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 be applicable, be and is
hereby authorized and approved generally and unconditionally;
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(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.”
8. To pass the following resolution as an Ordinary Resolution:
“RESOLVED THAT, approval be and is hereby given for Flex to:
(a)
(b)
(c)
(d)
increase from $85,000 to $90,000 the annual cash compensation payable to each of
Flex’s non-employee directors for services rendered as a director;
increase from $35,000 to $40,000 the additional annual cash compensation payable to
the Chairman of the Audit Committee for services rendered as Chairman of the Audit
Committee;
increase from $35,000 to $40,000 the additional annual cash compensation payable to
the Chairman of the Compensation Committee for services rendered as Chairman of the
Compensation Committee; and
increase from $17,000 to $15,000 the additional annual cash compensation payable to
the Chairman of the Nominating and Corporate Governance Committee for services
rendered as Chairman of the Nominating and Corporate Governance Committee.”
9. To transact any other business which may properly be put before the annual general meeting.
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Notes
Singapore Financial Statements. At the 2017 annual general meeting, our shareholders will have the
opportunity to discuss and ask any questions that they may have regarding our Singapore audited
financial statements for the fiscal year ended March 31, 2017, together with the directors’ statement
and auditors’ report thereon, in compliance with Singapore law. Shareholder approval of our audited
financial statements is not being sought by this proxy statement and will not be sought at the 2017
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 16, 2017 as the record date for determining those shareholders of the
Company who will be entitled to receive copies of this notice and accompanying proxy statement.
However, all shareholders of record on August 15, 2017, the date of the 2017 annual general meeting,
will be entitled to vote at the 2017 annual general meeting.
Quorum. Representation of at least 33-1/3% of all outstanding ordinary shares of the Company is
required to constitute a quorum to transact business at a general meeting of our shareholders.
Proxies. A shareholder entitled to attend and vote at the 2017 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, we encourage you to vote promptly. You may
vote your shares through one of the methods described in the enclosed proxy statement. A
proxy card submitted by mail 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
2017 annual general meeting. Please review the instructions on the proxy card and Notice of
Availability of Proxy Materials regarding the submission of proxies via the Internet. 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. Our Constitution was amended last year to align with the provisions
under the Singapore Companies Act, Cap. 50, which allow and facilitate the posting of proxy materials
on the internet at our designated website. 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. On or about July 5, 2017, we
will mail to most of our shareholders (including all of our registered shareholders) a Notice of
Availability of Proxy Materials on the Internet containing instructions on how to access this proxy
statement and our annual report and to submit their proxies via the Internet.
Disclosure Regarding Share Purchase Mandate Funds. Only funds legally available for purchasing or
acquiring our issued ordinary shares in accordance with our Constitution 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, among other things, 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 (including any expenses) 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 financial
condition and cash flows.
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Personal Data Privacy. By submitting an instrument appointing a proxy(ies) and/or
representative(s) to attend, speak and vote at the 2017 annual general meeting and/or any
adjournment thereof, a shareholder of the Company (i) consents to the collection, use and disclosure
of the shareholder’s personal data by us (or our agents or service providers) for the purpose of the
processing, administration and analysis by us (or our agents or service providers) of proxies and
representatives appointed for the 2017 annual general meeting (including any adjournment thereof)
and the preparation and compilation of the attendance lists, minutes and other documents relating to
the 2017 annual general meeting (including any adjournment thereof), and in order for us (or our
agents or service providers) to comply with any applicable laws, listing rules, take-over rules,
regulations and/or guidelines (collectively, the “Purposes”), (ii) warrants that where the shareholder
discloses the personal data of the shareholder’s proxy(ies) and/or representative(s) to us (or our
agents or service providers), the shareholder has obtained the prior consent of such proxy(ies) and/or
representative(s) for the collection, use and disclosure by us (or our agents or service providers) of
the personal data of such proxy(ies) and/or representative(s) for the Purposes, and (iii) agrees that
the shareholder will indemnify us in respect of any penalties, liabilities, claims, demands, losses and
damages as a result of the shareholder’s breach of warranty.
By order of the Board of Directors,
Tay Hong Chin Regina
Company Secretary
Singapore
July 5, 2017
You should read the entire proxy statement
carefully prior to returning your proxy card or otherwise submitting your proxy appointment
through electronic communications in the manner set out in this proxy statement.
Important Notice Regarding the Availability of Proxy Materials for the 2017 Annual General
Meeting of Shareholders to Be Held on August 15, 2017. The accompanying proxy statement
and our annual report to shareholders are available on our website at
https://investors.flex.com/financials.
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Table of Contents
Page #
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS ....................................................ii
PROXY STATEMENT SUMMARY .........................................................................................................xii
2017 Annual General Meeting of Shareholders ............................................................................xii
Voting Matters at the Annual General Meeting .............................................................................xii
How to Cast Your Vote.....................................................................................................................xii
Board Nominees..............................................................................................................................xiii
Fiscal Year 2017 Highlights............................................................................................................xiii
Executive Compensation Highlights..............................................................................................xv
PROXY STATEMENT...............................................................................................................................1
PART I—INFORMATION ABOUT THE MEETING..................................................................................1
VOTING RIGHTS AND SOLICITATION OF PROXIES ...........................................................................2
PART II—PROPOSALS TO BE CONSIDERED AT THE 2017 ANNUAL GENERAL
MEETING OF SHAREHOLDERS............................................................................................................4
PROPOSAL NO. 1: RE-ELECTION OF DIRECTORS ............................................................................4
Qualifications of Directors and Nominees ......................................................................................4
Nominees to our Board of Directors................................................................................................5
Directors Not Standing for Re-election............................................................................................6
CORPORATE GOVERNANCE..........................................................................................................10
Code of Business Conduct and Ethics..........................................................................................10
Shareholder Communications with our Board of Directors ........................................................10
Board of Directors............................................................................................................................10
Director Independence ....................................................................................................................10
Board Leadership Structure and Role in Risk Oversight ............................................................11
Board Committees ...........................................................................................................................11
Director Share Ownership Guidelines ...........................................................................................15
NON-MANAGEMENT DIRECTORS’ COMPENSATION FOR FISCAL YEAR 2017 ............................16
Fiscal Year 2017 Annual Cash Compensation ..............................................................................16
Changes to Fiscal Year 2018 Compensation ................................................................................17
Fiscal Year 2017 Equity Compensation .........................................................................................17
Compensation for the Non-Employee Chairman of the Board ...................................................18
Director Summary Compensation in Fiscal Year 2017.................................................................19
Change of Control and Termination Provisions ...........................................................................19
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PROPOSAL NO. 2: RE-APPOINTMENT OF INDEPENDENT AUDITORS
FOR FISCAL YEAR 2018 AND AUTHORIZATION OF OUR BOARD TO FIX THEIR
REMUNERATION ..................................................................................................................................21
Principal Accountant Fees and Services.......................................................................................21
Audit Committee Pre-Approval Policy ...........................................................................................21
AUDIT COMMITTEE REPORT..............................................................................................................23
PROPOSAL NO. 3: ORDINARY RESOLUTION TO AUTHORIZE ORDINARY
SHARE ISSUANCES .............................................................................................................................25
PROPOSAL NO. 4: NON-BINDING, ADVISORY RESOLUTION ON EXECUTIVE
COMPENSATION ..................................................................................................................................27
PROPOSAL NO. 5: NON-BINDING, ADVISORY RESOLUTION ON THE FREQUENCY
OF THE NON-BINDING, ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION .................30
PROPOSAL NO. 6: ORDINARY RESOLUTION TO APPROVE THE ADOPTION OF
THE FLEX LTD. 2017 EQUITY INCENTIVE PLAN...............................................................................31
Key Features of the 2017 Plan........................................................................................................31
Background and Determination of Share Amounts .....................................................................32
Summary of the 2017 Plan ..............................................................................................................34
U.S. Federal Income Tax Consequences ...........................................................................................40
PROPOSAL NO. 7: ORDINARY RESOLUTION TO RENEW THE SHARE
PURCHASE MANDATE.........................................................................................................................43
Limit on Allowed Purchases ...........................................................................................................43
Duration of Share Purchase Mandate ............................................................................................44
Manner of Purchases or Acquisitions of Ordinary Shares..........................................................44
Purchase Price .................................................................................................................................44
Treasury Shares ...............................................................................................................................45
Sources of Funds.............................................................................................................................45
Status of Purchased or Acquired Ordinary Shares......................................................................46
Financial Effects...............................................................................................................................46
Rationale for the Share Purchase Mandate...................................................................................46
Take-Over Implications ....................................................................................................................46
PROPOSAL NO. 8: ORDINARY RESOLUTIONS TO APPROVE CHANGES TO THE CASH
COMPENSATION PAYABLE TO OUR NON-EMPLOYEE DIRECTORS .............................................48
PART III—ADDITIONAL INFORMATION ..............................................................................................50
EXECUTIVE OFFICERS ........................................................................................................................50
COMPENSATION COMMITTEE REPORT............................................................................................52
COMPENSATION DISCUSSION AND ANALYSIS ...............................................................................53
Introduction ......................................................................................................................................53
Executive Summary .........................................................................................................................53
Compensation Philosophy..............................................................................................................58
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Compensation Setting Process and Decisions for Fiscal Year 2017 .........................................60
Fiscal Year 2017 Executive Compensation ...................................................................................62
Benefits .............................................................................................................................................77
Termination and Change of Control Arrangements .....................................................................78
Executive Share Ownership Guidelines ........................................................................................79
Executive Incentive Compensation Recoupment Policy .............................................................79
COMPENSATION RISK ASSESSMENT ...............................................................................................80
EXECUTIVE COMPENSATION .............................................................................................................81
Summary Compensation Table.......................................................................................................81
Grants of Plan-Based Awards in Fiscal Year 2017 .......................................................................83
Outstanding Equity Awards at 2017 Fiscal Year-End...................................................................85
Option Exercises and Shares Vested in Fiscal Year 2017 ...........................................................86
Pension Benefits in Fiscal Year 2017.............................................................................................87
Nonqualified Deferred Compensation in Fiscal Year 2017 ..........................................................87
Nonqualified Deferred Compensation Table .................................................................................88
Potential Payments Upon Termination or Change in Control .....................................................89
Potential Payments Upon Termination or Change in Control as of March 31, 2017.................90
EQUITY COMPENSATION PLAN INFORMATION ...............................................................................92
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ...................94
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS .........................................97
Review of Related Person Transactions........................................................................................97
Transactions with Related Persons ...............................................................................................97
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE ........................................98
SHAREHOLDER PROPOSALS FOR THE 2018 ANNUAL GENERAL MEETING..............................98
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.....................................................99
SINGAPORE STATUTORY FINANCIAL STATEMENTS ......................................................................99
OTHER MATTERS...............................................................................................................................100
Cautionary Note Regarding Forward-Looking Statements........................................................100
ANNEX A: FLEX LTD 2017 EQUITY INCENTIVE PLAN....................................................................A-1
ANNEX B: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES........................................B-1
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ELECTRONIC DELIVERY OF OUR SHAREHOLDER COMMUNICATIONS
We have elected to provide access to our proxy materials to our shareholders by notifying them of the
availability of our proxy materials on the Internet. On or about July 5, 2017, we will mail to most of our
shareholders (including all of our registered shareholders) a Notice of Availability of Proxy Materials
on the Internet (referred to as the Notice) containing instructions on how to access this proxy
statement and our annual report and to submit their proxies via the Internet. If you hold your shares
through a broker, bank or other nominee, rather than directly in your own name, your intermediary will
either forward to you printed copies of the proxy materials or will provide you with instructions on how
you can access the proxy materials electronically. For beneficial holders and registered shareholders
who receive a Notice, instructions on how to request a printed copy of our proxy materials may be
found in the Notice.
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Proxy Statement Summary
PROXY STATEMENT SUMMARY
FLEX LTD.
This summary highlights information contained elsewhere in this proxy statement. This summary does
not contain all of the information that you should consider, and you should read the entire proxy
statement carefully before voting. For more complete information regarding the Company’s 2017 fiscal
year performance, please review the Company’s 2017 Annual Report.
2017 Annual General Meeting of Shareholders
Time and Date: 9:00 a.m. Pacific time, August 15, 2017
Place: 6201 America Center Drive, San Jose, CA 95002, U.S.A.
Record Date: June 16, 2017
Voting: All shareholders as of the meeting date are entitled to vote. Each ordinary share is
entitled to one vote for each director nominee and one vote for each of the other proposals to be
voted on.
Voting Matters at the Annual General Meeting
Board Vote Page
Proposal Number Matter Recommendation Reference
Proposal No. 1
Proposal No. 2
Proposal No. 3
Proposal No. 4
Proposal No. 5
Proposal No. 6
Re-election of the following directors: FOR each 5
Michael D. Capellas and Marc A. Onetto Director
Nominee
Re-appointment of Deloitte & Touche LLP FOR 21
as our independent auditors for the fiscal year
ending March 31, 2018
General authorization to allot and issue FOR 25
ordinary shares
Advisory vote on executive compensation FOR 27
Advisory vote on the frequency of the non-binding, ONE YEAR 30
advisory vote on executive compensation
Adoption of the Flex Ltd. 2017 Equity FOR 31
Incentive Plan
Proposal No. 7
Authorization to repurchase ordinary shares FOR 43
Proposal No. 8
Approval of changes in the cash compensation FOR 48
payable to our non-employee directors
How to Cast Your Vote
Your vote is important. You may vote in person at the meeting or by appointing a proxy in accordance
with your instructions and we encourage you to vote using any of the below methods:
Vote In Person:
You may choose to vote in person at the meeting. If you are a beneficial holder who holds your
shares through a bank, broker or other nominee and you choose to vote in person at the meeting,
you must request a “legal proxy.” To do so, please follow the instructions from your bank, broker or
other nominee at www.proxyvote.com. You may also request a paper copy of the materials, which will
contain the appropriate instructions.
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Vote by Proxy:
Proxy Statement Summary
Submit Your Proxy via the Internet
at www.proxyvote.com
Have the information that is printed in the box marked
by the arrow (located on the Notice) available and
follow the instructions. If you are a beneficial holder
who owns your shares through a bank, broker or
other nominee, the availability of Internet submission
of proxies may depend on the voting process of the
organization that holds your shares.
Board Nominees (page 5)
Submit Proxy by Mail
by returning the signed
proxy card (or, if you do not have a proxy
card, by requesting a paper copy of the
materials).
The following table provides summary information about each Director nominee standing for re-
election to the Board.
Director Independent Committee Other Public
Name Since (Yes/No) Memberships Company Boards
Michael D. Capellas . . . 2014 Yes C, N Cisco Systems, Inc.
and MuleSoft, Inc.
Marc A. Onetto . . . . . . . . 2014 Yes A —
A = Audit Committee
C = Compensation Committee
N = Nominating and Corporate Governance Committee
Fiscal Year 2017 Highlights (page 54)
Business Overview
Headquartered in Singapore, Flex is a globally-recognized, provider of Sketch-to-Scaletm
services—innovative design, engineering, manufacturing, and supply chain services and solutions
from conceptual sketch to full-scale production. We design, build, ship and service complete packaged
consumer and industrial products, from athletic shoes to electronics, for companies of all sizes in
various industries and end-markets, through our activities in the following segments:
Segment Product Categories
Communications & Enterprise
Compute (CEC)
• Telecom business of radio access base stations, remote radio
heads, and small cells for wireless infrastructure;
• Networking business, which includes optical communications,
routing, broadcasting, and switching products for the data and
video networks;
• Server and storage platforms for both enterprise and cloud-
based deployments; next generation storage and security
appliance products; and
• Rack level solutions, converged infrastructure and software-
defined product solutions.
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Consumer Technologies
Group (CTG)
Industrial and Emerging
Industries (IEI)
High Reliability Solutions
(HRS)
Proxy Statement Summary
• Consumer-related businesses in connected living, wearables,
gaming, augmented and virtual reality, fashion and mobile
devices;
• Various supply chain solutions for notebook personal
computers (PC), tablets, and printers; and
• Expanding our business relationships to include supply chain
optimization for non-electronics products such as footwear and
clothing.
• Energy and metering, semiconductor tools and capital
equipment, office solutions, household industrial and lifestyle,
industrial automation and kiosks and lighting.
• Medical business, including consumer health, digital health,
disposables, precision plastics, drug delivery, diagnostics, life
sciences and imaging equipment;
• Automotive business, including vehicle electrification,
connectivity, autonomous vehicles and clean technologies; and
• Defense and aerospace business, focused on commercial
aviation, defense and military.
In fiscal year 2017, we continued our multi-year reorganization and rebalancing of our business
portfolio in order to align with our customers’ needs and requirements as part of an effort to optimize
operating results with a focus on improving profit margins and generating sustainable free cash flow
and strong returns on invested capital. We continued to shift our long-term portfolio towards a mix of
businesses which possess longer product life cycles and higher margins, such as our IEI and HRS
businesses. We also continued to move away from customer solutions that have more short-term
volatility and lower margins. This business transformation positions us to meet specific customers’
supply chain solutions needs across all of the markets we serve, yield margin improvement, and earn a
return on our invested capital above the weighted-average cost of that capital. We are also improving
our ability to take advantage of the long-term, future growth prospects for outsourcing of advanced
manufacturing capabilities, design and engineering services, and after-market services. Another aspect
of our business transformation strategy has been to make targeted investments in technologies and
businesses that are complementary to our core business but that represent high growth opportunities
with attractive profit margins. For example, in fiscal year 2017, we made targeted investments in our
Flex Innovation Labs, Lab IX portfolio companies, our strategic partnership with Nike, and Elementum
business that we believe will yield strong long-term results for Flex. The shift away from certain parts of
our business limited our short-term top-line revenue growth and created negative year-over-year
comparisons on some financial metrics such as revenue, though it places us in a better position to
capitalize on long-term revenue growth and enhanced returns on investment and cash flow.
Performance Highlights For Fiscal Year 2017
We delivered strong fiscal year 2017 operating results and continued to execute our business
transformation and deliver on our commitment to return value to shareholders. We generated total
shareholder returns (TSR) of nearly 40%, which put us in the top 15% of all companies in the
S&P 500. Our 3-year TSR was 82%, which was in the top decile of all firms in the S&P 500. We
achieved these results in a global economic environment that continued to face a high degree of
uncertainty due to macro-economic factors such as ongoing growth challenges in Europe, concerns of
a slowdown in Chinese growth, and political and interest rate uncertainty. Internally, we continued on
our business transformation journey during fiscal year 2017 through which we are reorganizing and
rebalancing our business portfolio. As a result of an improved cost structure and our strategic
business transformation, we delivered solid operating results in fiscal year 2017 and executed on key
strategic priorities, including growing our capabilities such as the Flex Innovation Labs, Lab IX, and
Sketch-to-Scaletm, and our strategic partnerships with Nike and Elementum to expand our innovative
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Proxy Statement Summary
offerings. Areas where we saw year-over-year declines mainly represent intentional strategic shifts as
a result of our business transformation activities. Highlights(1) include:
• We reported net sales of $23.9 billion, a decrease of 2% compared to the prior year.
• Grew adjusted operating profit to $815.2 million, a 3% increase over fiscal year 2016.
• Delivered Adjusted Earnings Per Share (EPS) of $1.17 per share, a 3% increase over the prior
year.
• Adjusted gross profit totaled $1.7 billion, an increase of 4% compared to the prior year.
• Adjusted gross margin increased to 7.0% of net sales in fiscal year 2017, compared with 6.6%
of net sales in fiscal year 2016.
• Generated operating cash flows of $1.1 billion during the year. The strong cash flow generated
from our operations enabled us to return value to shareholders with the repurchase of $349.5
million of our shares paid in fiscal year 2017.
• Increased free cash flow to $660.4 million which was up 3% over the prior year and within our
communicated range of $600 to $700 million annually.
• We had some less favorable year-over-year financial result comparisons due to our ongoing
business transformation, though these actions are positioning the Company for enhanced
future results.
In addition to the above results, our stock price increased by nearly 40% from $12.06 at the end of
fiscal year 2016 to $16.80 at the end of fiscal year 2017. This translates into a 1-year TSR of nearly
40% and Flex’s 3-year TSR is 82%, which has generated significant value for shareholders and
represents results that are in the upper 15% of S&P 500 firms over the same time periods. We believe
that this above market performance is the result of having articulated a value-creating strategy and
delivering against that strategy.
Executive Compensation Highlights (page 55)
Pay and Performance Alignment For Fiscal Year 2017
As noted above, we delivered strong operating results and shareholder returns during fiscal year
2017. However, given Flex’s aggressive operating result goal-setting, our final financial performance
was somewhat below our targeted levels. Our compensation philosophy is to reward above-target
performance when achieved, and pay zero or below target when favorable results are not delivered.
In line with our fiscal year 2017 performance, Flex’s NEOs earned short-term incentive awards that
recognize our strong financial performance, as well as the fact that we did not fully achieve our
targeted performance goals. Highlights include the following:
• Maintained the CEO’s base salary with no increase, positioned approximately at the peer median.
• Provided modest base salary increases of less than 4.0% to other NEOs, though overall salary
positioning continued to be approximately at our peer group median.
• The CEO and most other NEOs earned a below-target short-term incentive payout of 78.8% of
target due to our aggressive internal performance goals.
• Paid out the long-term performance share unit cycle during fiscal year 2017 at 193% of target
in May 2016 based upon TSR results that were above target and exceeded market levels over
the performance cycle from fiscal year 2014 through fiscal year 2017. The Flex three year free
cash flow (FCF) performance share unit cycle paid out at 94.6%, reflecting Flex’s more
aggressive operating targets.
(1) Adjusted operating profit, adjusted earnings per share, adjusted gross profit, adjusted gross
margin and free cash flow are non-GAAP financial measures, and we are including our 2017
results for these measures to show an aspect of our performance. Annex B to this proxy
statement contains reconciliations of these measures to the most directly comparable GAAP
financial measures.
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Proxy Statement Summary
• Funded the NEOs’ deferred compensation plans with a value that averaged 26.4% of our
NEOs’ respective base salaries based on fiscal year 2017 results.
• Continued to use fiscal year 2017 long-term incentive grants that balance relative TSR
performance share units (PSUs) with a long-term incentive plan (LTIP) that measures
cumulative FCF over a multi-year period (from fiscal year 2017 through fiscal year 2019).
• Granted modest Elementum profits interests unit value awards to certain executives who
continue to make significant contributions to our Elementum business.
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Part I—Information About the Meeting
FLEX LTD.
PROXY STATEMENT
FOR THE 2017 ANNUAL GENERAL MEETING OF
SHAREHOLDERS
To Be Held on August 15, 2017
9:00 a.m. (Pacific time)
Annual general meeting to be held at our offices
6201 America Center Drive
San Jose, CA 95002, U.S.A.
PART I—INFORMATION ABOUT THE MEETING
We are furnishing this proxy statement in connection with the solicitation by our Board of Directors of
proxies to be voted at the 2017 annual general meeting of our shareholders, or at any adjournments
thereof, for the purposes set forth in the notice of annual general meeting that accompanies this proxy
statement. Unless the context requires otherwise, references in this proxy statement to “Flex,” “the
Company,” “we,” “us,” “our” and similar terms mean Flex Ltd. and its subsidiaries.
Proxy Mailing. The Notice of Internet Availability of Proxy Materials (which we refer to as the Notice)
or the proxy materials and the enclosed proxy card were first mailed on or about July 5, 2017 to
shareholders of record as of June 16, 2017.
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 D.F. King & Co., an independent
proxy solicitation firm, to assist in soliciting proxies at an estimated fee of $10,000, 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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Part I—Information About the Meeting
VOTING RIGHTS AND SOLICITATION OF PROXIES
The close of business on June 16, 2017 is the record date for shareholders entitled to notice of our
2017 annual general meeting. All of the ordinary shares issued and outstanding on August 15, 2017,
the date of the annual general meeting, are entitled to be voted at the annual general meeting, and
shareholders of record on August 15, 2017 and entitled to vote at 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 16, 2017, we
had 531,607,660 ordinary shares issued and outstanding.
Proxies. Ordinary shares represented by proxies in the form accompanying this proxy statement that
are properly executed and returned to us will be voted at the 2017 annual general meeting 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 the 2017 annual general meeting of at least 33-1/3%
of all of our issued and outstanding ordinary shares is required to constitute a quorum to transact
business at the annual general meeting.
• Consistent with the Company’s historical practice, the chair of the 2017 annual 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.
• The affirmative vote by a simple majority of the votes cast is required at the 2017 annual
general meeting, to re-elect the directors nominated pursuant to Proposal No. 1, to re-appoint
Deloitte & Touche LLP as our independent auditors pursuant to Proposal No. 2, to approve the
ordinary resolution to allot and issue ordinary shares contained in Proposal No. 3, to approve
the non-binding, advisory resolution regarding executive compensation contained in Proposal
No. 4, to approve the adoption of the Flex Ltd. 2017 Equity Incentive Plan contained in
Proposal No. 6, to approve the ordinary resolution to renew the Share Purchase Mandate
contained in Proposal No. 7 and to approve the changes in the cash compensation payable to
our non-employee directors contained in Proposal No. 8. For Proposal No. 5, which is a non-
binding, advisory vote on the frequency of the advisory vote on executive compensation, the
choice that receives the highest number of non-binding affirmative votes will be deemed the
choice of the shareholders.
Under the Companies Act (Chapter 50) of Singapore, which we refer to as the “Singapore Companies
Act” or the “Companies Act,” and our Constitution, the shareholders may by passing an ordinary
resolution requiring the simple majority of affirmative votes of shareholders present and voting at an
annual general meeting, remove an incumbent director and appoint another person as director to
replace the removed director provided that such shareholders have satisfied the procedural
requirements and deadlines set forth in the Companies Act and our Constitution.
Abstentions and Broker Non-Votes. Abstentions and “broker non-votes” are considered present and
entitled to vote at the 2017 annual 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.
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Part I—Information About the Meeting
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, 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 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 proxy statement other
than the re-appointment of our independent auditors.
If you are a registered shareholder, in the absence of contrary instructions, shares represented
by proxies submitted by you will be voted at the 2017 annual general meeting: “FOR” each of
the Board nominees in Proposal No. 1; “FOR” Proposal Nos. 2 through 4 and Nos. 6 through 8
and for “ONE YEAR” for Proposal No. 5 regarding the advisory vote on the frequency of the
advisory vote on executive compensation. Our management does not know of any matters to be
presented at the 2017 annual general meeting other than those set forth in this proxy statement and
in the notice accompanying this proxy statement. If other matters should properly be put before the
meeting, 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
2017 annual general meeting by:
• submitting a subsequently dated proxy; or
• 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
2017 annual 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 posted to our website at
https://investors.flex.com/financials. Except as otherwise stated herein, all monetary amounts in this
proxy statement have been presented in U.S. dollars.
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 1: Re-Election of Directors
PART II—PROPOSALS TO BE CONSIDERED AT THE 2017 ANNUAL GENERAL MEETING OF
SHAREHOLDERS
PROPOSAL NO. 1: RE-ELECTION OF DIRECTORS
Article 94 of our Constitution 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 90 of our Constitution, 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, as our Chief Executive
Officer and also being 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 100 of our
Constitution, 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. No directors
were appointed as additional directors or appointed to fill a vacancy since our 2016 annual general
meeting.
Retiring directors are eligible for re-election. Messrs. Michael D. Capellas and Marc A. Onetto are the
members of our Board of Directors who will retire by rotation at our 2017 annual general meeting.
Messrs. Capellas and Onetto are each eligible for re-election and have been nominated to stand for
re-election at the 2017 annual general meeting. If either nominee 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.
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 2017 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 99 of our Constitution, to fill the vacancy.
As of the date of this 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
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
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 1: Re-Election of Directors
other key attributes that are important to an effective board, including the highest professional and
personal ethics and values, a broad 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.
The following are biographical details for the nominees to our Board of Directors:
Nominees to our Board of Directors
Michael D. Capellas,
Chairman of the Board
Principal, Capellas
Strategic Partners
Director Since: 2014
Age: 62
Board Committees:
Compensation Committee
Nominating & Corporate
Governance Committee (Chair)
Summary: Mr. Capellas has served as our non-executive Chairman
of the Board since June 2017 and as a member of our Board of
Directors since March 2014. He has served as Principal at Capellas
Strategic Partners since June 2013. He served as the Chairman of
the Board of VCE Company, LLC (VCE) from January 2011 until
November 2012 and as VCE’s Chief Executive Officer from
May 2010 to September 2011. VCE is a joint venture between EMC
Corporation and Cisco with investments from VMware, Inc. and Intel
Corporation. Mr. Capellas was the Chairman and Chief Executive
Officer of First Data Corporation from September 2007 to
March 2010. From October 2006 to July 2007, Mr. Capellas served
as a Senior Advisor at Silver Lake Partners. From November 2002
to January 2006, he served as Chief Executive Officer of MCI, Inc.
(MCI), previously WorldCom, Inc. From March 2004 to
January 2006, he also served as that company’s President. From
November 2002 to March 2004, he was also Chairman of the Board
of WorldCom, and he continued to serve as a member of the board
of directors of MCI until January 2006. Mr. Capellas left MCI as
planned in early January 2006 upon its acquisition by Verizon
Communications Inc. Previously, Mr. Capellas was President of
Hewlett-Packard Company from May 2002 to November 2002.
Before the merger of Hewlett-Packard and Compaq Computer
Corporation in May 2002, Mr. Capellas held various positions
including President and Chief Executive Officer of Compaq, a
position he had held since July 1999, and Chairman of the Board of
Compaq, a position he had held since September 2000.
Mr. Capellas held earlier positions as Chief Information Officer and
Chief Operating Officer of Compaq. Mr. Capellas currently serves on
the boards of directors of Cisco Systems, Inc. and MuleSoft, Inc.,
where he is the lead independent director.
Qualifications: Mr. Capellas brings experience in executive roles
and a background of leading global organizations in the technology
industry. Through this experience, he has developed expertise in
several valued areas including strategic product development,
business development, and finance.
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 1: Re-Election of Directors
Marc A. Onetto
Principal, Leadership from
the Mind and the Heart LLC
Director Since: 2014
Age: 66
Board Committees:
Audit Committee
Summary: Mr. Onetto has served as a member of our Board of
Directors since January 2014. Since 2013, Mr. Onetto has provided
executive leadership consulting through his company “Leadership
from the Mind and the Heart LLC.” Mr. Onetto was the Senior Vice
President of Worldwide Operations and Customer Service for
Amazon.com from 2006 to 2013. Previously, Mr. Onetto was
Executive Vice President of Worldwide Operations for Solectron
Corporation, which was acquired by Flex in 2007, from June 2003 to
June 2006. He joined Solectron after a 15-year career with General
Electric where his last position was Vice President of GE
Corporate’s European operations. From 1992 to 2002, Mr. Onetto
held several senior leadership positions at GE Medical Systems as
head of its global supply chain and operations, global quality, and
global Component Division. Prior to GE, Mr. Onetto served 12 years
with Exxon Corporation in supply operations, information systems
and finance. Mr. Onetto currently serves on the board of directors of
Essilor International and on the Business Board of Advisors of the
Tepper School of Business at Carnegie-Mellon University.
Qualifications: Mr. Onetto is a seasoned supply chain expert and
pioneer and has extensive experience as an officer of large,
complex technology companies. This experience and his significant
understanding of the Company’s business and industry enable him
to bring valuable insight to the Board in these areas.
Directors Not Standing for Re-election
The following are the biographical details for our directors not standing for re-election. On June 29,
2017, Mr. Raymond Bingham resigned from his position as director (including his positions as
Chairman of the Board and Chairman of the Nominating and Corporate Governance Committee).
Michael M. McNamara
CEO, Flex Ltd.
Director Since: 2005
Age: 60
Board Committees:
None
Summary: 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 currently serves on the board of directors of
Workday, Inc. and is on the Advisory Board of Tsinghua University
School of Economics and Management and on the Presidential
CEO Advisory Board of Massachusetts Institute of Technology
(MIT). Mr. McNamara previously served on the board of Delphi
Automotive LLP.
Qualifications: 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 the Company.
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 1: Re-Election of Directors
Daniel H. Schulman
President and CEO, PayPal
Holdings, Inc.
Director Since: 2009
Age: 59
Board Committees:
Compensation Committee
(Chair)
Nominating & Corporate
Governance Committee
Willy C. Shih, Ph.D.
Professor of Management
Practice, Harvard Business
School
Director Since: 2008
Age: 66
Board Committees:
Compensation Committee
Summary: Mr. Schulman has served as a member of our Board of
Directors since June 2009. Since September 2014, Mr. Schulman
has served as the President and CEO of PayPal Holdings, Inc.
Previously, Mr. Schulman served as group president of the
Enterprise Growth Group at American Express. Prior to that,
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 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 currently serves as a director of PayPal
Holdings, Inc. and as Chairman of the board of directors of
Symantec Corporation and a member of its compensation and
nominating and governance committees. Mr. Schulman currently is
a board member of Autism Speaks.
Qualifications: Mr. Schulman has extensive senior management
experience as a chief executive officer and governance expertise as
a 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.
Summary: 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 previously served on the board of
directors of Atheros Communications, Inc.
Qualifications: 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.
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 1: Re-Election of Directors
Lay Koon Tan
Former President and Chief
Executive Officer and a
member of the Board of
Directors of STATS ChipPAC
Ltd.
Director Since: 2012
Age: 58
Board Committees:
Audit Committee
William D. Watkins
Former Chief Executive
Officer of Imergy Power
Systems, Inc.
Director Since: 2009
Age: 64
Board Committees:
Audit Committee
Summary: Mr. Tan has served as a member of our Board of
Directors since March 2012. He previously served as the President
and Chief Executive Officer and a member of the Board of Directors
of STATS ChipPAC Ltd. from August 2004 to November 2015 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.
Qualifications: 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.
Summary: Mr. Watkins has served as a member of our Board of
Directors since April 2009. Mr. Watkins was Chief Executive Officer
of Imergy Power Systems, Inc., a leading innovator in cost-effective
energy storage products from September 2013, and appointed
Chairman of the Board in January 2015, until August 2016. He
previously served as Chairman of the Board of Bridgelux, Inc. from
February 2013 to December 2013 and as its Chief Executive Officer
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, Inc.
Qualifications: Mr. Watkins’s 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.
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 1: Re-Election of Directors
Lawrence A. Zimmerman
Former Vice Chairman and
CFO, Xerox Corporation
Director Since: 2012
Age: 74
Board Committees:
Audit Committee (Chair)
Nominating & Corporate
Governance Committee
Summary: 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 at Xerox Corporation as Vice Chairman and Chief Financial
Officer from 2009 to 2011 and as Executive Vice President and
Chief Financial Officer from 2002 to 2009. Prior to that, he spent
32 years with IBM, holding various senior finance positions,
including Corporate Controller. Mr. Zimmerman currently serves on
the board of directors of Delphi Automotive PLC, and previously
served on the boards of Brunswick Corporation from 2006 to 2015
and Computer Sciences Corporation from 2012 to 2014.
Qualifications: 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.
The Board recommends a vote “FOR” the re-election of each of Messrs. Capellas and Onetto to
our Board of Directors.
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Corporate Governance
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.flex.com. In accordance
with the rules of the Securities and Exchange Commission (or SEC), 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.
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 Constitution gives 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 eight meetings during fiscal year 2017. 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 year 2017 together with
the total number of meetings held by all committees of our Board on which he served. During fiscal
year 2017, our non-employee directors met at regularly scheduled executive sessions without
management participation.
Our Board has adopted a policy that encourages each director to attend the annual general meeting,
but attendance is not required. All of our directors attended the Company’s 2016 annual general
meeting.
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 proxy statement. Our Board
has determined that each of the Company’s directors who served in fiscal year 2017, other than
Mr. McNamara, is an independent director as defined by the applicable rules of Nasdaq and our
Director Independence Guidelines (including Mr. Bingham, who resigned in June 2017). 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.flex.com.
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Corporate Governance
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. The Board has separated the roles of
Chairman and CEO since 2003. Mr. Bingham served as Chairman of the Board from 2008 until his
resignation on June 29, 2017. The Board appointed Mr. Capellas, an independent director, as
Chairman of the Board, effective upon Mr. Bingham’s resignation on June 29, 2017.
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 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 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.
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Corporate Governance
Name
Independent
Financial Audit
Expert Committee
Compensation Governance
Committee Committee
Nominating
and Corporate
Michael D. Capellas . . . . . .
Marc A. Onetto . . . . . . . . . .
Daniel H. Schulman . . . . . .
Willy C. Shih, Ph.D. . . . . . .
Lay Koon Tan . . . . . . . . . . .
William D. Watkins . . . . . . .
Lawrence A. Zimmerman .
= Committee Member
= Committee Chair
Audit Committee
The Audit Committee of the Board of Directors is currently composed of Messrs. Marc A. Onetto, 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 Nasdaq. The Board has also determined that each of Messrs. Tan,
Watkins and 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 eight meetings during fiscal year 2017 and regularly meets in executive sessions without
management present. The committee’s principal functions are to:
• 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;
• 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
• 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.flex.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 Committee is currently composed of Messrs. Capellas and Schulman and
Dr. Shih, each of whom our Board has determined to be an independent director under the applicable
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Corporate Governance
listing standards of Nasdaq. The committee held five meetings during fiscal year 2017 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.flex.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 share 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. In connection with our 2017 fiscal year compensation review, the Compensation Committee
engaged Mercer Human Resources Consulting, a wholly-owned subsidiary of Marsh & McLennan
Companies, Inc. (referred to in this proxy statement as Mercer) as its independent adviser for certain
executive compensation matters. Mercer 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, Mercer 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 share ownership and retention values. As part of its
reports to the Compensation Committee, Mercer 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. Mercer also assisted the Compensation
Committee with its risk assessment of our compensation programs.
The Compensation Committee relied on input from Mercer 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” for fiscal year 2017 compensation. The Compensation Committee expects that it will
continue to retain a compensation consultant on future executive compensation matters.
Relationship with Compensation Consultant
During our 2017 fiscal year, Marsh & McLennan Companies, Inc. (the parent company of Mercer) and
its affiliates, which we refer to collectively as Marsh, were retained by the Company to provide
services unrelated to executive and director compensation matters. These services included various
benefits and retirement consulting engagements and data purchases. The decision to engage Marsh
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 Marsh, which
services were approved by management in the ordinary course of business. The aggregate fees paid
for those other services in fiscal year 2017 were approximately $304,000. Mercer’s fees in connection
with providing consulting services with respect to the compensation of our executive officers and non-
employee directors in fiscal year 2017 were approximately $297,000.
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Corporate Governance
Our Compensation Committee has determined that the provision by Marsh of services unrelated to
executive and director compensation matters in fiscal year 2017 was compatible with maintaining the
objectivity of Mercer in its role as compensation consultant to the committee and that the consulting
advice it received from Mercer was not influenced by Marsh’s other relationships with the Company.
The Compensation Committee is sensitive to the concern that the services provided by Marsh, and
the related fees, could impair the objectivity and independence of Mercer, and the committee believes
that it is important that objectivity be maintained. However, the committee also recognizes that the
services provided by Marsh 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 Mercer and Marsh maintain appropriate safeguards to
assure that the consulting services provided by Mercer are not influenced by the Company’s business
relationship with Marsh. Specifically, Mercer provided to the Compensation Committee an annual
update on Mercer’s and Marsh’s financial relationship with the Company and assurances that
members of Mercer who perform consulting services for the Compensation Committee have a
reporting relationship and compensation determined separately from Marsh’s other lines of business
and from its other work for the Company.
Mercer also represented to the Compensation Committee that there are no personal or business
relationships between the Mercer account manager and any member of the committee or a named
executive officer beyond the Flex relationship. Further, the Mercer account manager does not directly
own any Flex shares (although some of his investments controlled solely by independent, third-party
managers may own Flex shares by way of indexed funds). Based on the above and other factors,
including the factors set forth under Rule 10C-1 under the Securities Exchange Act of 1934, as
amended (referred to in this proxy as the Exchange Act), the committee assessed the independence
of Mercer and concluded that no conflict of interest exists that would prevent Mercer from
independently representing the committee.
Compensation Committee Interlocks and Insider Participation
During our 2017 fiscal year, Messrs. Capellas and Schulman and Dr. Shih served as members of the
Compensation Committee. None of our executive officers served on the Compensation Committee
during our 2017 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
SEC Regulation S-K.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee is currently composed of Messrs. Schulman
and Zimmerman, each of whom our Board has determined to be an independent director under the
applicable listing standards of Nasdaq. In addition, Mr. Bingham served as Chairman of the
Nominating and Corporate Governance Committee until his resignation from the Board in June 2017.
Mr. Capellas became Chairman of the Nominating and Corporate Governance Committee following
Mr. Bingham’s resignation. The Nominating and Corporate Governance Committee held five meetings
during fiscal year 2017 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.flex.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
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Corporate Governance
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 or third-
party search firms (which the Company retains from time to time to help identify potential candidates).
The committee will also consider recommendations submitted by our shareholders. The committee
does not have different standards 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 Flex 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 2018 annual general meeting should be made not later than March 7, 2018
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 retained Mercer to assist the committee in its 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 peer group of
companies. The Nominating and Corporate Governance Committee reviewed, among other things, the
existing cash compensation of our non-employee directors, and the grant date fair value of restricted
share unit awards. The Nominating and Corporate Governance Committee, with the assistance of
Mercer, has also taken into consideration compensation trends for outside directors and the
implementation of our share ownership guidelines for non-employee directors. 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 2017.” The
Company is seeking shareholder approval for certain changes to the cash compensation of our non-
employee directors. For additional information, see the section entitled “Proposal No. 8: Ordinary
Resolution to Approve Changes to the Cash Compensation Payable to our Non-Employee Directors”
beginning on page 48 of this proxy statement.
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 share ownership
guidelines or are on target to be in compliance with the requirements of the guidelines by the date of
the annual general meeting. Additionally, in fiscal year 2018, the Board of Directors adopted revised
ownership guidelines encouraging non-employee directors to hold a minimum number of our ordinary
shares equivalent to four times their annual retaines.
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Non-Management Directors’ Compensation for Fiscal Year 2017
NON-MANAGEMENT DIRECTORS’ COMPENSATION FOR FISCAL YEAR 2017
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 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
as for any fees incurred in attending continuing education courses for directors.
Fiscal Year 2017 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, 2011, and 2014 annual general meetings.
The current arrangements include the following compensation:
• annual cash compensation of $85,000, payable quarterly in arrears to each non-employee
director for services rendered as a director;
• 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);
• additional annual cash compensation of $35,000, payable quarterly in arrears to the Chairman
of the Audit Committee for services rendered as Chairman of the Audit Committee;
• additional annual cash compensation of $15,000, payable quarterly in arrears to each member
who serves on the Audit Committee (including the Chairman of the Audit Committee) for
participation on the committee;
• additional annual cash compensation of $35,000, payable quarterly in arrears to the Chairman
of the Compensation Committee for services rendered as Chairman of the Compensation
Committee;
• additional annual cash compensation of $15,000, payable quarterly in arrears to each member
who serves on the Compensation Committee (including the Chairman of the Compensation
Committee) for participation on the committee;
• additional annual cash compensation of $7,000, 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;
• additional annual cash compensation of $8,000, payable quarterly in arrears to each member
who serves on the Nominating and Corporate Governance Committee (including the
Chairman of the Nominating and Corporate Governance Committee) for participation on the
committee; and
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Non-Management Directors’ Compensation for Fiscal Year 2017
• 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.
At our 2013 annual general meeting of shareholders, our shareholders approved a change in the
structure of our non-employee director compensation program that allows 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. Each non-employee director can 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 will 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 be paid in cash.
Changes to Fiscal Year 2018 Compensation
We are currently seeking approval from our shareholders to: (i) increase from $85,000 to $90,000 the
annual cash compensation payable to each of the company’s non-employee directors for services
rendered as a director; (ii) increase from $35,000 to $40,000 the additional annual cash compensation
payable to the Chairman of the Audit Committee for services rendered as Chairman of the Audit
Committee; (iii) increase from $35,000 to $40,000 the additional annual cash compensation payable
to the Chairman of the Compensation Committee for services rendered as Chairman of the
Compensation Committee; and (iv) increase from $7,000 to $15,000 the additional annual cash
compensation payable to the Chairman of the Nominating and Corporate Governance Committee for
services rendered as Chairman of the Nominating and Corporate Governance Committee.
In addition, our Nominating and Corporate Governance Committee recommended and our Board
approved the following changes to the compensation of our non-employee directors, which changes
do not require the approval of our shareholders under Singapore law and for which we are not
seeking shareholder approval: (i) a decrease from $100,000 to $50,000 the additional annual cash
compensation payable to the Chairman of the Board for services rendered as Chairman of the Board
and a decrease from $100,000 to $50,000 in the fair market value of the yearly restricted share unit
award granted to the Chairman of the Board; and (ii) an increase from $175,000 to $185,000 in the
fair market value of the yearly restricted share unit award granted to our non-employee directors.
While the shareholders had previously approved annual additional cash compensation of $100,000 to
the Chairman of the Board, the lower amount of $50,000 in additional cash compensation will be paid
to the Chairman of the Board going forward on an annual basis.
For additional information, see the section entitled “Proposal No. 8: Ordinary Resolution to Approve
Changes to the Cash Compensation Payable to our Non-Employee Directors” beginning on page 48
of this proxy statement.
Fiscal Year 2017 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 Nominating and Corporate Governance 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 $175,000 on the date of grant. These yearly restricted share unit
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Non-Management Directors’ Compensation for Fiscal Year 2017
awards vest in full on the date immediately prior to the date of the next year’s annual general meeting.
During fiscal year 2017, each non-employee director received a restricted share unit award covering
13,597 ordinary shares under this program.
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. No director
received a restricted share unit award under this program in fiscal year 2017.
Discretionary Grants
Under the terms of the discretionary option grant provisions of the 2010 Plan, non-employee directors
are eligible to receive share options granted at the discretion of the Compensation Committee. No
director received share options pursuant to the discretionary grant program during fiscal year 2017.
Compensation for the Non-Employee Chairman of the Board
Our non-executive Chairman was 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
2016 annual general meeting, our non-executive Chairman of the Board received a restricted share
unit award covering 7,770 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, 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.
As described above, while the shareholders had previously approved annual additional cash
compensation of $100,000 to the Chairman of the Board, the Company will be decreasing the
additional annual cash compensation payable to our Chairman of the Board from $100,000 to $50,000
(and this decrease does not require shareholder approval). For additional information about this
proposal, see the section entitled “Proposal No. 8: Ordinary Resolution to Approve Changes to the
Cash Compensation Payable to our Non-Employee Directors” beginning on page 48 of this proxy
statement.
In connection with his appointment as Chairman of the Board and as Chairman and member of the
Nominating and Corporate Governance Committee in June 2017, Mr. Capellas has elected, in lieu of
cash compensation, to receive fully vested ordinary shares of the Company under the director share
election program for those positions. Mr. Capellas previously elected to receive fully vested ordinary
shares of the Company in lieu of his cash compensation for serving as a director and a member of the
Compensation Committee.
While Company aircraft are generally used for Company business only, our Chairman of the Board
may be permitted to use Company aircraft for personal travel, provided that Company aircraft are not
needed for business purposes at such time. In such cases, the Chairman is required to reimburse the
Company for the incremental costs related to his use of the aircraft. We calculate the incremental cost
to the Company for use of the Company aircraft by using an hourly rate for each flight hour, which
rate is based on the variable operational costs of each flight.
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JOB: 17-13971-1 CYCLE#;BL#: 15; 0 TRIM: 8.25" x 10.75" AS: Merrill Denver: 303-572-3889
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Non-Management Directors’ Compensation for Fiscal Year 2017
Director Summary Compensation in Fiscal Year 2017
The following table sets forth the fiscal year 2017 compensation for our non-employee directors.
Fees Earned or
Name Paid in Cash ($)(1) Share Awards ($)(2) Total ($)
H. Raymond Bingham(3) . . . . . . . .
Michael D. Capellas(4) . . . . . . . . . .
Marc A. Onetto . . . . . . . . . . . . . . . .
Daniel H. Schulman . . . . . . . . . . . .
Willy C. Shih, Ph.D. . . . . . . . . . . . .
Lay Koon Tan(4) . . . . . . . . . . . . . . .
William D. Watkins . . . . . . . . . . . . .
Lawrence A. Zimmerman . . . . . . . .
$200,000 $274,993 $474,993
— $274,944 $274,944
$100,000 $174,993 $274,993
$143,000 $174,993 $317,993
$100,000 $174,993 $274,993
— $274,944 $274,944
$100,000 $174,993 $274,993
$143,000 $174,993 $317,993
(1) This column represents the amount of cash compensation earned in fiscal year 2017 for Board
and committee service.
(2) This column represents the grant date fair value of restricted share unit awards granted in fiscal
year 2017 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. 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,
2017, “Share-Based Compensation,” included in our Annual Report on Form 10-K for the fiscal
year ended March 31, 2017. No option awards were granted in fiscal year 2017.
(3) Mr. Bingham resigned from the Board of Directors on June 29, 2017.
(4) In lieu of their cash compensation, Messrs. Capellas and Tan both elected to receive fully vested
ordinary shares of the Company under the director share election program for Board and
Committee fees earned beginning with the date following the 2016 annual general meeting.
During fiscal year 2017, both Messrs. Capellas and Tan each received 7,507 ordinary shares
under the share election program, the value of which is reflected in the table above under “Share
Awards.” Mr. Tan discontinued this election effective January 1, 2017.
The table below shows the aggregate number of ordinary shares underlying share options and
unvested restricted share units held by our non-employee directors as of the 2017 fiscal year-end:
Number of Ordinary Shares Number of Ordinary Shares
Underlying Outstanding Underlying Outstanding
Name Share Options (#) Restricted Share Units (#)
H. Raymond Bingham(1) . . . . . . . . . . . . . . . . . . . . . — 21,367
Michael D. Capellas . . . . . . . . . . . . . . . . . . . . . . . . . — 13,597
Marc A. Onetto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 13,597
Daniel H. Schulman . . . . . . . . . . . . . . . . . . . . . . . . . — 13,597
Willy C. Shih, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 13,597
Lay Koon Tan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 13,597
William D. Watkins . . . . . . . . . . . . . . . . . . . . . . . . . . — 13,597
Lawrence A. Zimmerman . . . . . . . . . . . . . . . . . . . . . — 13,597
(1) Mr. Bingham resigned from the Board of Directors on June 29, 2017.
Change of Control and Termination Provisions
Dr. Shih has outstanding share options that were issued under the terms of our 2001 Equity Incentive
Plan, which we refer to as our 2001 Plan, and all of our non-employee directors have 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
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Non-Management Directors’ Compensation for Fiscal Year 2017
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 share 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 restricted share
units granted under the 2010 Plan is as described in the section entitled “Potential Payments upon
Termination or Change in Control.”
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 2: Re-Appointment of Independent Auditors for Fiscal Year 2018
PROPOSAL NO. 2: RE-APPOINTMENT OF INDEPENDENT AUDITORS FOR FISCAL YEAR 2018
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 financial
statements and records for the fiscal year ending March 31, 2018, 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 2018 annual general
meeting. We expect that a representative from Deloitte & Touche LLP will be present at the 2017
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 2017 and 2016. 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
2017 2016
(in millions)
Audit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9.0
Audit-Related Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 0.2
Tax Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 1.0
All Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 —
$ 9.3
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10.9
$10.2
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 and not included in
Audit Fees.
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, primarily related to acquisition-related due diligence.
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
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 2: Re-Appointment of Independent Auditors for Fiscal Year 2018
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.
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 2018 and authorization of the Board, upon the
recommendation of the Audit Committee, to fix their remuneration.
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Audit Committee Report
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.flex.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 Audit Committee during fiscal year 2017
were Messrs. Tan, Watkins, Zimmerman and Onetto, each of whom is an independent director.
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 an opinion 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,
2017, as well as management’s assessment and our independent auditors’ evaluation of the
effectiveness of our internal control over financial reporting as of March 31, 2017. 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 our independent registered public accounting firm with the Audit Committee under the
rules adopted by the Public Company Accounting Oversight Board. 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 public
accounting firm required by applicable requirements of the Public Company Accounting Oversight
Board regarding the independent registered 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 non-audit services performed
by our independent auditors during fiscal years 2017 and 2016 were pre-approved by the Audit
Committee in accordance with established procedures.
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Audit Committee Report
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, 2017, which was filed with the SEC on May 16, 2017.
Submitted by the Audit Committee of the Board of Directors:
Lawrence A. Zimmerman
Marc A. Onetto
Lay Koon Tan
William D. Watkins
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 3: Ordinary Resolution to Authorize Ordinary Share Issuances
PROPOSAL NO. 3: 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 2017 annual
general meeting until the earlier of (i) the conclusion of the 2018 annual general meeting or (ii) the
expiration of the period within which the 2018 annual general meeting is required by law to be held.
The 2018 annual general meeting is required to be held 15 months after the date of the 2017 annual
general meeting or six months after the date of our 2018 fiscal year end, whichever is earlier (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:
• in connection with strategic transactions and acquisitions;
• pursuant to public and private offerings of our ordinary shares as well as instruments
convertible into our ordinary shares; and
• 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 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.
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 3: Ordinary Resolution to Authorize Ordinary Share Issuances
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 Nasdaq.
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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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 4: Non-Binding, Advisory Resolution on Executive Compensation
PROPOSAL NO. 4: 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 (NEOs) as reported in this 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.
As a general matter, our Compensation Committee continually seeks to have a compensation
philosophy that emphasizes paying for performance. Key aspects of the philosophy are to:
• Emphasize at-risk compensation;
• Establish market-based, responsible target pay;
• Balance performance-based metrics and measurement time frames; and
• Place emphasis on long-term performance.
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.
Performance Highlights For Fiscal Year 2017
We delivered strong fiscal year 2017 operating results and continued to execute our business
transformation and deliver on our commitment to return value to shareholders. We generated TSR of
nearly 40%, which put us in the top 15% of all companies in the S&P 500. Our 3-year TSR was 82%,
which was in the top decile of all firms in the S&P 500. We achieved these results in a global economic
environment that continued to face a high degree of uncertainty due to macro-economic factors such
as ongoing growth challenges in Europe, concerns of a slowdown in Chinese growth, and political and
interest rate uncertainty. Internally, we continued on our business transformation journey during fiscal
year 2017 through which we are reorganizing and rebalancing our business portfolio. As a result of an
improved cost structure and our strategic business transformation, we delivered solid operating results
in fiscal year 2017 and executed on key strategic priorities, including growing our capabilities such as
the Flex Innovation Labs, Lab IX, and Sketch-to-Scaletm, and our strategic partnerships with Nike and
Elementum to expand our innovative offerings. Areas where we saw year-over-year declines mainly
represent intentional strategic shifts as a result of our business transformation activities.
Highlights(2) include:
• We reported net sales of $23.9 billion, a decrease of 2% compared to the prior year.
• Grew adjusted operating profit to $815.2 million, a 3% increase over fiscal year 2016.
• Delivered Adjusted Earnings Per Share (EPS) of $1.17 per share, a 3% increase over the prior
year.
• Adjusted gross profit totaled $1.7 billion, an increase of 4% compared to the prior year.
(2) See Annex B to this proxy statement for a reconciliation of non-GAAP and GAAP financial measures.
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JOB: 17-13971-1 CYCLE#;BL#: 15; 0 TRIM: 8.25" x 10.75" AS: Merrill Denver: 303-572-3889
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 4: Non-Binding, Advisory Resolution on Executive Compensation
• Adjusted gross margin increased to 7.0% of net sales in fiscal year 2017, compared with 6.6%
of net sales in fiscal year 2016.
• Generated operating cash flows of $1.1 billion during the year. The strong cash flow
generated from our operations enabled us to return value to shareholders with the repurchase
of $349.5 million of our shares paid in fiscal year 2017.
• Increased free cash flow to $660.4 million which was up 3% over the prior year and within our
communicated range of $600 to $700 million annually.
• We had some less favorable year-over-year financial result comparisons due to our ongoing
business transformation, though these actions are positioning the Company for enhanced
future results.
In addition to the above results, our stock price increased by nearly 40% from $12.06 at the end of
fiscal year 2016 to $16.80 at the end of fiscal year 2017. This translates into a 1-year TSR of nearly
40% and Flex’s 3-year TSR is 82%, which has generated significant value for shareholders and
represents results that are in the upper 15% of S&P 500 firms over the same time periods. We believe
that this above market result is the result of having articulated a value-creating strategy and delivering
against that strategy.
Pay and Performance Alignment For Fiscal Year 2017
As noted above, we delivered strong operating results and shareholder returns during fiscal year 2017.
However, given Flex’s aggressive operating result goal-setting, our final financial performance was
somewhat below our targeted levels. Our compensation philosophy is to reward above-target
performance when achieved, and pay zero or below target when favorable results are not delivered. In
line with our fiscal year 2017 performance, Flex’s NEOs earned short-term incentive awards that
recognize our strong financial performance, as well as the fact that we did not fully achieve our
targeted performance goals. Highlights include the following:
• Maintained the CEO’s base salary with no increase, positioned approximately at the peer
median.
• Provided modest base salary increases of less than 4.0% to other NEOs, though overall salary
positioning continued to be approximately at our peer group median.
• The CEO and most other NEOs earned a below-target short-term incentive payout of 78.8% of
target due to our aggressive internal performance goals.
• Paid out the long-term performance share unit cycle during fiscal year 2017 at 193% of target
in May 2016 based upon TSR results that were above target and exceeded market levels over
the performance cycle from fiscal year 2014 through fiscal year 2017. The Flex three year free
cash flow (FCF) performance share unit cycle paid out at 94.6%, reflecting Flex’s more
aggressive operating targets.
• Funded the NEOs’ deferred compensation plans with a value that averaged 26.4% of our
NEOs’ respective base salaries based on fiscal year 2017 results.
• Continued to use fiscal year 2017 long-term incentive grants that balance relative TSR
performance share units (PSUs) with a long-term incentive plan (LTIP) that measures
cumulative FCF over a multi-year period (from fiscal year 2017 through fiscal year 2019).
• Granted modest Elementum profits interests unit value awards to certain executives who
continue to make significant contributions to our Elementum business.
Prior Say on Pay Advisory Vote Results and Shareholder Engagement
In the normal course of Flex’s business, we have communications with shareholders about both our
business and our executive compensation programs. During fiscal year 2017, we interacted with
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 4: Non-Binding, Advisory Resolution on Executive Compensation
holders of approximately over 70% of our share voting power. We also provided shareholders with a
“say on pay” advisory vote on executive compensation at our 2016 annual general meeting held on
August 24, 2016. The advisory vote received the support of approximately 79% of the votes cast at the
annual general meeting. In the two prior years, Flex had received say on pay votes that exceeded 90%
support for the compensation approach. The decline in the 2016 say on pay vote was driven primarily
by an “against” vote by a single major shareholder. Based on our direct discussions with this
shareholder, we continue to believe that the underlying structure and implementation of our executive
compensation program is sound and provides proper pay for performance alignment. We have been
asked to more tightly manage our overall share grant levels relative to performance delivered, which
we have been and will continue to do (see Responsible Share Usage section in the Compensation
Discussion and Analysis, below). Outside of the points noted above, we believe the level of support at
our 2016 annual general meeting reflects ongoing institutional shareholder outreach efforts and the
continuing efforts to align our executive compensation with shareholder interests. Based on the
favorable prior say on pay results, shareholder feedback on existing programs, and our review of the
alignment of the pay program design with business results, we continued the structure of our fiscal
year 2016 compensation programs in fiscal year 2017.
We urge shareholders to carefully read the Compensation Discussion and Analysis section of this
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, each of the
Compensation Committee and the Board values the opinions of our shareholders and will consider the
outcome of the vote on this resolution when making decisions regarding future executive compensation
arrangements. We have held a say on pay advisory vote on an annual basis since 2011. As detailed in
Proposal No. 5, we are also seeking an advisory shareholder vote regarding the frequency of advisory
shareholder votes to approve executive compensation.
The Board recommends a vote “FOR” the approval of the non-binding, advisory resolution on
executive compensation.
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 5: Non-Binding, Advisory Resolution on the Frequency of the Non-Binding,
Advisory Resolution on Executive Compensation
PROPOSAL NO. 5: NON-BINDING ADVISORY RESOLUTION ON THE FREQUENCY OF THE
NON-BINDING, ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION
In accordance with Section 14A of the Exchange Act, we are seeking a non-binding, advisory vote
regarding the frequency with which shareholders would have an advisory vote to approve the
executive compensation of the nature reflected in Proposal No. 5 every one year, every two years or
every three years.
The Board of Directors, upon the recommendation of our Nominating and Corporate Governance
Committee, has determined that continuing to hold an advisory vote on executive compensation every
one year is the most appropriate policy for the company at this time. Therefore, our Board
recommends that shareholders vote for future advisory votes on executive compensation to occur
every one year. We believe that this approach is consistent with our policy of maintaining an open and
transparent dialogue with our shareholders. In addition, although our executive compensation
programs are designed to promote a long-term connection between compensation and performance,
executive compensation is set and disclosed on an annual basis. However, we would like to advise our
shareholders that because the advisory vote on executive compensation occurs after compensation
decisions are determined and awards are made with respect to a particular fiscal year, it may not
always be appropriate or feasible to change our compensation programs in consideration of any one
year’s advisory vote on executive compensation by the time of the following year’s annual general
meeting.
While this advisory resolution is not binding on the company, each of the Nominating and Corporate
Governance Committee and the Board will carefully consider the voting results in recommending and
determining the frequency of any future advisory votes o executive compensation. The frequency
which receives the highest number of non-binding, affirmative votes will be deemed the choice of the
shareholders. Shareholders are able to abstain from this proposal or to specify that a vote should be
held every year, every two years or every three years. Shareholders are not being asked to approve or
disapprove of the Board’s recommendation. In addition, notwithstanding the Board’s recommendation
and the outcome of the shareholder vote, the Board may in the future decide to propose for
consideration non-binding, advisory resolutions on executive compensation on a more or less frequent
basis as it deems appropriate to best address the company’s unique circumstances at any given time
and to serve the best interests of our shareholders.
The Board recommends a vote to conduct future non-binding, advisory resolutions on
executive compensation every “ONE YEAR”.
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 6: Ordinary Resolution to Approve the Adoption of the Flex Ltd. 2017 Equity
Incentive Plan
PROPOSAL NO. 6: ORDINARY RESOLUTION TO APPROVE THE ADOPTION OF THE FLEX LTD.
2017 EQUITY INCENTIVE PLAN
We are asking shareholders to approve the Flex Ltd. 2017 Equity Incentive Plan (which we refer to as
the 2017 Plan), which was approved by the Board on June 29, 2017, upon the recommendation of the
Compensation Committee, and is subject to the approval of our shareholders.
The 2017 Plan is intended to replace our 2010 Plan with respect to future grants of equity awards. As
of June 29, 2017, there were 10,442,897 ordinary shares remaining available for the grant of equity
awards under the 2010 Plan, which will not be transferred to the 2017 Plan’s share reserve and,
further, if the holders of a majority of the ordinary shares present and voting on this proposal vote for
the adoption of the 2017 Plan, it will immediately become effective and no further grants will be made
under the 2010 Plan. If our shareholders do not approve the 2017 Plan, such plan will not become
effective and the 2010 Plan, as it presently exists, will continue in effect. Flex has made additional
grants of awards under the 2010 Plan in fiscal year 2018 which will not be reflected in the table on
information about equity awards outstanding under the equity compensation plans as of March 31,
2017, set forth on page 92 under “Equity Compensation Plan Information”. In order to provide a current
reconciliation of shares outstanding following these fiscal year 2018 grants, we have included a table
containing updated information as of June 29, 2017 in the “Background and Determination of Share
Amounts” section below. The results of the vote will not affect any awards outstanding under the 2010
Plan at the time of the annual general meeting.
Key Features of the 2017 Plan
The 2017 Plan includes a number of provisions designed to serve shareholders’ interests:
• Limitation on Individual Grants. The 2017 Plan limits the number of shares subject to an award
(or awards) granted to a single participant in one year to 10,000,000 where intended to comply
with Section 162(m) of the Internal Revenue Code (or, for cash settled awards, an amount
equal to 10,000,000 multiplied by the average daily trading price of the Company’s shares
during the preceding calendar year).
• No “Evergreen” Provision. Shares authorized for issuance under the 2017 Plan cannot be
automatically replenished.
• No Single Trigger Accelerated Vesting upon a Change in Control. The 2017 Plan does not
provide for a single trigger accelerated vesting of equity awards upon a change in control.
• Limitation on Term of Stock Options. The maximum term of each stock option is 10 years for
employees (other than employees of certain “Affiliates” (as defined in the 2017 Plan), who are
subject to a five year maximum term for stock options) and five years for non-employee
directors, consultants and employees of certain Affiliates.
• No Fungible Share Reserve. The 2017 Plan does not contain a “fungible share reserve;”
instead, all shares subject to awards are counted against the 2017 Plan’s share limit as 1 share
for every 1 share granted or subject to grant for any award.
• Limitation on Awards to Non-Employee Directors. The aggregate value of cash compensation
and grant date fair market value of shares that may be paid or granted during any calendar
year to a non-employee director is limited to $800,000.
• No Dividends Paid on Unvested Awards. No dividends may be paid with respect to an award
prior to the vesting of such award.
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JOB: 17-13971-1 CYCLE#;BL#: 15; 0 TRIM: 8.25" x 10.75" AS: Merrill Denver: 303-572-3889
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 6: Ordinary Resolution to Approve the Adoption of the Flex Ltd. 2017 Equity
Incentive Plan
• No Repricing or Regranting of Awards. The 2017 Plan does not permit, without shareholder
approval, the repricing or regranting of any previously granted award, through cancellation or
by lowering the exercise price for such award.
• No Liberal Share Recycling. Only shares subject to awards (including any previous
outstanding grants made under any Prior Plan (as defined below) that are terminated, forfeited,
canceled, expired, lapsed or settled in cash are permitted to be added back to the 2017 Plan’s
share reserve. Unissued shares which are withheld to satisfy the exercise price or withholding
taxes related to an award will not become available for issuance for future awards under the
2017 Plan.
• One-Year Minimum Vesting Period. The 2017 Plan imposes a one-year minimum vesting
period on all awards granted under the plan, except that share-based awards that do not
satisfy this one-year minimum vesting requirement may be granted in an aggregate amount
that does not exceed 5% of the total shares reserved and available for grant and issuance
under the 2017 Plan.
The 2017 Plan adopts a number of updated practices from the Company’s 2010 Plan, including the
removal of the fungible share counting method, the limitation on awards to non-employee directors, the
prohibition on the payment of dividends on awards prior to the vesting of such awards, and the
application of the one-year minimum vesting period to all types of awards under the 2017 Plan.
Background and Determination of Share Amounts
Subject to approval by our shareholders, our Board of Directors, upon the recommendation of the
Compensation Committee, adopted the 2017 Plan with a reserve of 22,000,000 ordinary shares. We
believe that the number of shares requested to be reserved for issuance under the 2017 Plan is in the
best interests of the Company because of the continuing need to provide equity awards that are
competitive in the market for talent that is capable of delivering innovative technology solutions with
world class manufacturing and supply chain expertise, and to give recognition to the contributions
made or to be made by non-employee directors to the success of the Company.
As of June 29, 2017, we had 532,648,795 ordinary shares issued and outstanding.
In determining the appropriate share amount for inclusion in the 2017 Plan, the Compensation
Committee reviewed an analysis, which took into account burn rate, dilution and overhang metrics, as
well as peer group market practices and trends, and the cost of the 2017 Plan. The analysis, which is
based on generally accepted evaluation methodologies used by proxy advisory firms, concluded that
the number of shares under the 2017 Plan is within generally accepted standards as measured by an
analysis of the plan cost relative to industry standards.
The below table sets forth the number of shares that would have been available as of June 29, 2017 if
the 2017 Plan had been approved by shareholders and in effect as of such date, and the number of
shares that would be available for issuance under the 2010 Plan if the 2017 Plan is not approved by
shareholders:
Number of Ordinary Shares Number of Ordinary Shares
Available for Issuance Available for Issuance if
Plan upon Approval of 2017 Plan 2017 Plan Not Adopted
2017 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000,000 0
2010 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 10,504,800
If approved, the 2017 Plan will replace the 2010 Plan.
The following table sets forth information about shares that may be issued under (i) our existing 2010
Plan as of June 29, 2017 (which plan replaced (a) the 2001 Plan, (b) the 2002 Interim Incentive Plan,
(c) the 2004 Award Plan for New Employees, and (d) the Solectron Corporation 2002 Stock Plan,
which we refer to collectively as the Prior Plans) and (ii) the NEXTracker, Inc. 2014 Equity Incentive
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 6: Ordinary Resolution to Approve the Adoption of the Flex Ltd. 2017 Equity
Incentive Plan
Plan and the BrightBox Technologies, Inc. 2013 Stock Incentive Plan (as amended), which we
assumed as part of acquisitions during fiscal years 2016 and 2017, respectively. The following table
provides information about equity awards outstanding under these plans as of June 29, 2017.
Weighted-Average
Exercise Price of
Outstanding
As of June 29, 2017 Awards(1)
Award Type:
Shares outstanding from equity compensation plans approved
by shareholders
Performance RSUs outstanding(2) . . . . . . . . . . . . . . . . . . . . . 2,773,565 —
Time based RSUs outstanding . . . . . . . . . . . . . . . . . . . . . . . . 12,364,218 —
$8.80
Options outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,327
Total awards under 2010 Plan outstanding . . . . . . . . . . . . . . . . . 15,265,110 —
Shares available for issuance under 2010 Plan(3) . . . . . . . . . . . 10,504,800 —
Shares outstanding from equity compensation plans not
approved by shareholders(4)
Time based RSUs outstanding under the NEXTracker, Inc.
2014 Equity Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,528,727 —
Options outstanding under the NEXTracker, Inc. 2014 Equity
Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,545,483
Options outstanding under the BrightBox Technologies, Inc.
2013 Stock Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,509
$0.51
$3.52
Total awards under equity compensation plans not approved by
shareholders outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,204,719 —
Total awards under 2010 Plan and equity compensation plans
not approved by shareholders outstanding . . . . . . . . . . . . . . . . . 18,469,829
$3.66
(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) Represents performance RSUs outstanding at the target amount.
(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
the 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) As described on page 92, we maintained the NEXTracker, Inc. 2014 Equity Incentive Plan and the
BrightBox Technologies, Inc. 2013 Stock Incentive Plan (as amended), which we assumed as part
of acquisitions during fiscal years 2016 and 2017, respectively. The approval of the 2017 Plan will
not impact the NEXTracker, Inc. 2014 Equity Incentive Plan and the BrightBox Technologies, Inc.
2013 Stock Incentive Plan (as amended), under which no further awards may be made.
The Company is committed to maintaining a responsible share burn rate. For Flex to be successful in
its business, we need to provide equity awards that are competitive in the market for talent that is
capable of delivering innovative technology solutions with world class manufacturing and supply chain
expertise, and to give recognition to the contributions made or to be made by non-employee directors
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
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Incentive Plan
to the success of the Company. This competitive need is balanced by the Compensation Committee’s
and Board’s careful management of the equity awards and share usage under our equity plans
through: (i) targeting a broad-based equity strategy that generally aligns with the median of market
(executives are positioned at approximately the market 65th percentile); (ii) conducting regular market
analyses, to ensure alignment with market participation and award opportunity values; (iii) using an
equity grant strategy that ensures that awards are focused on high performers and those that make a
meaningful impact on Flex’s business results; (iv) providing equity grants only in geographies and at
employee levels in which it is a common market practice; (v) including direct performance metrics on
more senior level participants, and providing longer-term shareholder alignment for all equity
participants with multi-year vesting schedules on restricted share unit grants; and (vi) analyzing overall
equity spending levels relative to peers and the broader market to ensure that total Company grant
levels are appropriate from a market perspective.
Summary of the 2017 Plan
The principal provisions of the 2017 Plan are summarized below. This summary is not a complete
description of the 2017 Plan’s provisions and is qualified in its entirety by reference to the 2017 Plan,
which is attached to this proxy statement as Annex A.
Term of the 2017 Plan. Unless terminated earlier, the 2017 Plan will continue until June 29, 2027,
10 years after the date the 2017 Plan was adopted by our Board.
Eligibility. All of our employees and directors and those of our subsidiaries and affiliates, including
officers, members of our Board of Directors (including both employee and non-employee directors),
and consultants of the Company and our subsidiaries and affiliates, are eligible to be selected as
award recipients under the 2017 Plan. By approving the adoption of the 2017 Plan, shareholders are
approving the potential grant of awards to the aforesaid categories of eligible persons, in accordance
with the rules of the 2017 Plan and subject to the applicable limits therein. Where intended to comply
with Section 162(m) of the Code, any one participant in the 2017 Plan may not receive awards for
more than 10,000,000 ordinary shares (or if denominated in cash, an amount equal to 10,000,000
multiplied by the average daily trading price of the Company’s ordinary shares during the preceding
calendar year) in the aggregate per calendar year under the 2017 Plan. Awards under the 2017 Plan
will generally be exercisable or payable only while the participant is an employee or director, as
applicable. However, the Compensation Committee may, in its discretion and subject to the
requirements of Section 162(m) of the Code, provide that an award may be paid or exercised following
termination of service, a change of control event, or the retirement, death or disability of the participant.
As of the record date of June 16, 2017, approximately 1,600 employees and 8 non-employee directors
would be eligible to participate in the 2017 Plan. Flex uses consultants from time to time, but cannot
reasonably determine the number of consultants, if any, that would be eligible to participate in the 2017
Plan.
Administration. The 2017 Plan is administered by the Compensation Committee of our Board. The
Compensation Committee has complete discretion, subject to the provisions of the 2017 Plan, to select
each eligible individual to whom awards will be granted and to determine the type and amount of
awards to be granted, the timing of such awards, and the other terms and conditions of awards granted
under the 2017 Plan. Under the terms of the 2017 Plan, the Compensation Committee may delegate
its authority under the 2017 Plan to a committee of the Board or to one or more officers of the
Company, except for awards granted to officers or directors of the Company. The Compensation
Committee also has the power to interpret the 2017 Plan and award agreements, to establish rules and
regulations relating to the 2017 Plan, and to make all other determinations necessary or advisable for
administering the 2017 Plan.
Available Awards. The 2017 Plan authorizes the Company to provide equity-based compensation in
the form of: (i) stock options, including incentive stock options entitling the option holder to favorable
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 6: Ordinary Resolution to Approve the Adoption of the Flex Ltd. 2017 Equity
Incentive Plan
tax treatment under Section 422 of the Code; (ii) restricted share units; (iii) share appreciation rights;
(iv) performance share awards and performance share units; and (v) other share-based awards that
are not inconsistent with the 2017 Plan. Each type of award is described below under the section
captioned “Types of Awards Authorized Under the 2017 Plan.” Each award granted under the 2017
Plan will be evidenced by an award agreement that sets forth the terms, conditions and limitations
applicable to such award as determined by the Compensation Committee in its discretion.
Minimum One-Year Vesting Period. All awards shall have a minimum vesting period of one year,
except that awards that do not satisfy this minimum vesting period requirement may be granted in an
aggregate amount that does not exceed 5% of the total shares reserved for grant and issuance under
the 2017 Plan (as determined under “Shares Available for Awards” and “Share Counting” below).
Shares Available for Awards. Subject to approval by our shareholders, our Board of Directors, upon
the recommendation of the Compensation Committee, adopted the 2017 Plan with a reserve of
22,000,000 ordinary shares. As of June 29, 2017, there were 10,442,897 ordinary shares remaining
available for the grant of equity awards under the 2010 Plan, which will not be transferred to the 2017
Plan’s share reserve. Furthermore, upon the shareholders’ approval of the 2017 Plan, no further grants
will be made under the 2010 Plan.
Valuation. The fair market value of our ordinary shares on any relevant date under the 2017 Plan is
the closing sales price per share on that date on the NASDAQ Global Select Market. As of June 29,
2017, the closing price of our ordinary shares on the NASDAQ Global Select Market was $16.34 per
share.
Share Counting. Under the 2017 Plan, each ordinary share that is subject to any award will count
against the aggregate 2017 Plan limit as one ordinary share. To the extent that an award terminates,
expires, lapses for any reason, or is settled in cash, any ordinary shares subject to the award will again
be available for the grant of an award pursuant to the 2017 Plan. Ordinary shares that are withheld (if
and to the extent permitted by applicable law) to satisfy the grant or exercise price or tax withholding
obligations will be treated as issued under the 2017 Plan and will be deducted from the number of
shares that may be issued under the 2017 Plan. Further, any ordinary shares that are acquired by the
Company (if and to the extent permitted by applicable law) to satisfy the grant or exercise price or tax
withholding obligations pursuant to any award under the 2017 Plan will not be added back to the
aggregate number of shares that may be issued pursuant to the plan.
Limitation on Non-Employee Director Compensation. The aggregate value of cash compensation and
grant date fair market value of shares that may be paid or granted during any calendar year of the
Company to any non-employee director shall not exceed $800,000. By approving the 2017 Plan,
shareholders would be approving the grant of awards under the 2017 Plan (which may be amended
from time to time) to current non-employee directors and such other persons each of whom may be
appointed as a non-employee director of the Company from time to time.
Repricing Prohibited Without Shareholder Approval. The repricing, replacement or regranting of any
previously granted award, through cancellation or by lowering the exercise price or purchase price of
such award, will be prohibited unless the shareholders of the Company first approve such repricing,
replacement or regranting. Similarly, no “underwater” option or share appreciation right may be
cancelled in exchange for cash unless otherwise approved by the shareholders.
Types of Awards Authorized Under the 2017 Plan:
• Stock Options. Stock options may be granted that entitle the option holder to purchase
ordinary shares at a price set forth in the applicable award agreement. Stock options may be
granted as non-qualified stock options or as incentive stock options, or in any combination of
the two. The exercise price of any stock option may not be less than the fair market value of an
ordinary share on the date of grant, and the maximum term for any stock option is 10 years
(5 years, in the case of grants to any non-employee member of our Board of Directors,
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
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Incentive Plan
consultant or employee of any of our “Affiliates” (as defined in the 2017 Plan) that are not
“related corporations” (as defined under the Companies Act)). The Compensation Committee
will determine the methods by which the exercise price of a stock option may be paid, which
may include: (i) a payment in cash or by check; (ii) the withholding of shares (if and to the
extent permitted by applicable law) otherwise deliverable upon exercise of the option, whereby
the participant shall be (x) deemed to have waived his right to delivery of the full number of
shares in respect of which the option is exercised; and (y) deemed to have agreed to receive
the number of shares (after deducting the number of shares which have a fair market value on
the date of exercise equal to the aggregate exercise price of the shares as to which the option
shall be exercised) as calculated by the Compensation Committee in its absolute discretion;
(iii) a “same day sale” commitment from the participant and a broker-dealer whereby the option
holder irrevocably elects to exercise the stock option and to sell a portion of the ordinary shares
so purchased to pay the exercise price, and whereby the broker-dealer irrevocably commits
upon receipt of such ordinary shares to forward the exercise price directly to the Company;
(iv) delivery of other property acceptable to the Compensation Committee; or (v) any
combination of the foregoing methods of payment. Incentive stock options may be granted only
to our employees and those of our subsidiaries. In addition, in the case of any incentive stock
options granted to any individual who owns, as of the date of grant, shares possessing more
than 10 percent of the total combined voting power of all classes of our shares, the incentive
stock option must have an exercise price that is not less than 110% of the fair market value of
an ordinary share on the date of grant and the maximum term of any such incentive stock
option is 5 years. The aggregate fair market value (determined as of the time the option is
granted) of all shares with respect to which incentive stock options are first exercisable by a
grantee in any calendar year may not exceed $100,000 or such other limitation as imposed by
Section 422(d) of the Code.
• Share Appreciation Rights. A share appreciation right is a right, exercisable by the surrender of
all or a portion of the share appreciation right, to receive a payment equal to the product of:
(i) the excess of (A) the fair market value of an ordinary share on the date the share
appreciation right is exercised over (B) the grant price of the share appreciation right; and
(ii) the number of ordinary shares with respect to which the share appreciation right is
exercised. No share appreciation right may be exercisable more than 7 years from the date of
grant. A share appreciation right may be paid in cash, in ordinary shares (based on the fair
market value of such ordinary shares on the date the share appreciation right is exercised) or
in a combination of cash and ordinary shares, as determined by the Compensation Committee.
• Restricted Share Units. A restricted share unit is a type of contingent share award that
generally entitles the participant to receive a number of our ordinary shares, or the value of
such shares, in connection with the satisfaction of vesting conditions determined by the
Compensation Committee, as specified in the award agreement for the restricted share units.
Restricted share units may be denominated in unit equivalents of ordinary shares and/or units
of value including the dollar value of shares. At the time of grant of the restricted share unit
award, the Compensation Committee will specify the date or dates on which the award will
become vested and non-forfeitable, and may specify any other terms and conditions. In
addition, the Compensation Committee will specify the settlement date applicable to each
restricted share unit, which may not be earlier than the vesting date or dates of the award.
Settlement of restricted share units may be made in ordinary shares or in cash (in an amount
reflecting the fair market value of the ordinary shares that would have been issued) or any
combination of cash and shares, as determined by the Compensation Committee in its sole
discretion.
• Performance Shares and Performance Share Units. Performance shares represent the right to
receive ordinary shares of the Company, the payment of which is contingent upon achieving
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 6: Ordinary Resolution to Approve the Adoption of the Flex Ltd. 2017 Equity
Incentive Plan
certain performance criteria established by the Compensation Committee. Performance share
units represent a right to receive ordinary shares, or the value of such shares, the payment of
which is contingent upon achieving certain performance criteria established by the
Compensation Committee. Performance share unit awards may be denominated in unit
equivalents of ordinary shares and/or units of value including the dollar value of shares.
Performance share awards and performance share units may be linked to any one or more of
the performance criteria specified in the 2017 Plan (and as further discussed under
“Performance Measures” below), or for awards that are not intended to be qualified
performance-based compensation under Section 162(m) of the Internal Revenue Code, other
specific performance criteria determined appropriate by the Compensation Committee, in each
case on a specified date or dates or over any performance period determined by the
Compensation Committee. In addition, the Compensation Committee will specify the settlement
date applicable to each performance share award or performance share unit award, which may
not be earlier than the vesting date or dates of the award. Settlement of a performance share
or a performance share unit may be made in ordinary shares or in cash (in an amount
reflecting the fair market value of the ordinary shares that would have been issued) or in any
combination of cash and shares, as determined by the Compensation Committee in its sole
discretion.
• Other Share-Based Awards.
In addition to restricted share units, performance share awards
and performance share unit awards, the Compensation Committee is authorized under the
2017 Plan to make any other award to an eligible individual that is not inconsistent with the
provisions of the 2017 Plan and that by its terms involves or might involve the issuance of:
(i) ordinary shares; (ii) a right with an exercise or conversion privilege related to the passage of
time, the occurrence of one or more events, or the satisfaction of performance criteria specified
in the 2017 Plan or other conditions; or (iii) any other security with the value derived from the
value of our ordinary shares.
Singapore law currently prohibits us from issuing restricted shares or restricted share awards
(i.e., awards involving the immediate transfer by the Company to a participant of ownership of a
specified number of ordinary shares of the Company, which are subject to restrictions on transfer and
may be forfeited prior to vesting) and we do not intend to issue any such awards at this time. However,
if there is a change in Singapore law or other development that would permit us to grant restricted
share awards, the 2017 Plan would provide us with the flexibility to do so.
Section 162(m) of the Code. The 2017 Plan is designed to allow the Compensation Committee to
grant awards that satisfy the requirements for the performance-based compensation exclusion from the
deduction limitations under Section 162(m) of the Code. Section 162(m) of the Code generally limits
the deductibility for federal income tax purposes of annual compensation paid to a Company’s Chief
Executive Officer and the three most highly compensated executive officers other than the Chief
Executive Officer and the Chief Financial Officer, which officers we refer to as covered executives, to
$1 million per covered executive in a taxable year. However, qualified performance-based
compensation does not count towards the $1 million limit.
The Board and the Compensation Committee believe that it is in our interests and the interests of our
shareholders to maintain an equity compensation plan under which certain compensation awards
made to our covered executives can qualify for deductibility for federal income tax purposes.
Accordingly, the 2017 Plan has been structured in a manner such that certain awards under it can
satisfy the requirements for the performance-based compensation exclusion from the deduction
limitations under Section 162(m) of the Code. In order to allow for certain awards to satisfy such
requirements, the 2017 Plan specifies performance measures and other material terms that must be
approved by our shareholders. Approval of the 2017 Plan by the required vote of our shareholders, as
described above, is intended to constitute such approval.
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Incentive Plan
Grants of certain performance-based compensation will be subject to the attainment of one or more
specified performance goals over a specified period of time of not less than one year. We refer to this
time period as a performance period. The performance goals will be based upon certain performance
criteria selected by the Compensation Committee, as described below under the section captioned
“Performance Measures.”
To the extent necessary to comply with the applicable provisions of Section 162(m)(4)(C) of the Code,
when granting awards intended to qualify as performance-based compensation, the Compensation
Committee will, in writing: (i) designate one or more covered executives to whom such awards may be
made; (ii) select the performance criteria applicable to the performance period; (iii) establish the
performance goals, and amount of such awards, as applicable, which may be earned for the
performance period; and (iv) specify the relationship between the performance criteria and the
performance goals and the amounts of such awards that may be earned by each covered executive for
the performance period. To the extent required by Section 162(m)(4)(C) of the Code, the
Compensation Committee shall establish the performance criteria and performance goals no later than
90 days following the commencement of any performance period in question or any other designated
performance period (or such other time as may be required or permitted by Section 162(m) of the
Code). Following the completion of the performance period, the Compensation Committee will certify in
writing the extent to which the applicable performance goals have been achieved for the performance
period. In determining the amount earned by a covered executive, the Compensation Committee will
have the right to reduce or eliminate (but not to increase) the amount payable at a given level of
performance to take into account additional factors that it may deem relevant to the assessment of
individual or corporate performance for the performance period. Furthermore, a participant shall be
eligible to receive payment pursuant to a performance-based award for a performance period only if
the performance goals for such period are achieved.
In granting awards that are contingent upon the achievement of certain
Performance Measures.
performance goals and are intended to qualify as qualified performance-based compensation under
Section 162(m) of the Code, the Compensation Committee will base a performance goal on one or
more of the following performance criteria, which may be applied to the performance of the Company
or any of its affiliates, or any business unit of the Company or any of its affiliates:
• net revenue and/or net revenue growth;
• earnings before income taxes and amortization and/or earnings before income taxes and
amortization growth;
• operating income and/or operating income growth;
• net income and/or net income growth;
• cash flow, operating income, or net income margins
• earnings per share and/or earnings per share growth;
• total shareholder return and/or total shareholder return growth;
• return on equity;
• operating or free cash flow;
• economic value added;
• return on invested capital; and
• individual confidential business objectives.
The Compensation Committee, in its discretion, may, to the extent consistent with, and within the time
prescribed by, Section 162(m) of the Code, provide for the appropriate adjustments or modifications of
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 6: Ordinary Resolution to Approve the Adoption of the Flex Ltd. 2017 Equity
Incentive Plan
the performance goals for a performance period to reflect any objectively determinable component of a
performance goal, including foreign exchange gains and losses, asset write downs, acquisitions and
divestitures, change in fiscal year, unbudgeted capital expenditures, special charges such as
restructuring or impairment charges, debt refinancing costs, extraordinary or noncash items, unusual,
infrequently occurring, nonrecurring or one-time events affecting the Company or its financial
statements or changes in law or accounting principles.
Amendment and Termination. The Compensation Committee may at any time amend or modify the
2017 Plan in any or all respects, except that (i) any such amendment or modification may not adversely
affect the rights of any holder of an award previously granted under the 2017 Plan unless such holder
consents and (ii) grants to non-employee directors may not be amended at intervals more frequently
than once every six months, other than to the extent necessary to comply with applicable U.S. income
tax laws and regulations. The Compensation Committee may terminate the 2017 Plan at any time.
However, without the approval of our shareholders and except as described below under
“Adjustments”, the Compensation Committee may not:
• amend the 2017 Plan to materially increase the maximum number of ordinary shares issuable
under the 2017 Plan or the maximum number of ordinary shares for which any plan participant
may be granted awards;
• materially modify the eligibility requirements for participation in the 2017 Plan; or
• materially increase the benefits accruing to participants in the 2017 Plan.
Further, the Compensation Committee may not amend the 2017 Plan in any manner that requires
shareholder approval under Nasdaq or other stock exchange listing requirements applicable to the
Company.
Dividends. No dividends may be paid to a plan participant with respect to an award prior to the vesting
of such award. An award may provide for dividends or dividend equivalents to accrue on behalf of a
participant as of each dividend payment date during the period between the date the award is granted
and the date the award is exercised, vested, expired, credited or paid, and to be converted to vested
cash or shares at the same time and subject to the same vesting conditions that apply to the shares to
which such dividends or dividend equivalents relate.
Adjustments. The Compensation Committee shall make certain adjustments to the 2017 Plan and to
the outstanding awards under the 2017 Plan in the event of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, spin-off, extraordinary cash dividend or
other change affecting the outstanding ordinary shares as a class without the Company’s receipt of
consideration. In the event of such a change, appropriate adjustments will be made to:
• the maximum number and/or class of securities issuable under the 2017 Plan;
• the maximum number and/or class of securities for which any participant may be granted
awards under the terms of the 2017 Plan or that may be granted generally under the terms of
the 2017 Plan; and
• the number and/or class of securities and price per ordinary share in effect under each
outstanding award.
Any such adjustments to the outstanding awards will generally be effected in a manner as to preclude
the enlargement or dilution of rights and benefits under such awards. However, in no event will
fractions of an ordinary share be issued and the Committee shall determine, in its discretion, whether
cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by
rounding down as appropriate.
Acceleration. 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
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Proposal No. 6: Ordinary Resolution to Approve the Adoption of the Flex Ltd. 2017 Equity
Incentive Plan
defined in the 2017 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
automatically vest and 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.
Where awards are assumed or continued after a change of control, the Compensation Committee may
provide that one or more awards will automatically accelerate upon an involuntary termination of
service (as defined in the 2017 Plan, which includes termination of service for good reason) within a
designated period (not to exceed eighteen (18) months) following the effective date of such change of
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.
Compliance with Section 409A of the Internal Revenue Code. To the extent applicable, it is intended
that the 2017 Plan and any grants made under the 2017 Plan will comply with or be exempt from the
provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of
the Code do not apply to the participants. The 2017 Plan and any grants made under the 2017 Plan will
be administered and interpreted in a manner consistent with this intent.
In general, awards granted under the 2017 Plan may not be transferred in any manner other than by
will or by the laws of descent and distribution. Awards may be transferred to family members through a
gift or domestic relations order. Subject to applicable laws, certain option holders who reside outside of
the United States and Singapore may assign their awards to financial institutions located outside of the
United States and Singapore.
Withholding Taxes. The Company or any affiliate of the Company, as appropriate, may deduct or
withhold, or require a participant to remit to the Company, an amount sufficient to satisfy U.S. federal,
state and local taxes and any taxes imposed by jurisdictions outside of the United States (including
income tax, social insurance contributions, payment on account and any other taxes that may be due)
required by law to be withheld with respect to any taxable event concerning a participant arising as a
result of the 2017 Plan. In addition, the Company or any affiliate of the Company may take any action
as may be necessary in its opinion to satisfy withholding obligations for the payment of taxes by any
means authorized by the Compensation Committee. No ordinary shares will be delivered under the
2017 Plan to any participant or other person until the participant or such other person has made
arrangements acceptable to the Compensation Committee for the satisfaction of applicable tax
obligations arising as a result of awards made under the 2017 Plan.
U.S. Federal Income Tax Consequences
The following is a general summary as of the date of this proxy statement of the United States federal
income tax consequences to the Company and the directors, officers and employees participating in
the 2017 Plan. Tax laws may change and the federal, state and local tax consequences for any
participating employee will depend upon his or her individual circumstances. In addition, the following
discussion does not purport to describe state or local income tax consequences in the United States,
nor tax consequences for participants who are subject to tax in other countries. The following general
description does not constitute tax advice and should not be relied upon as such. Each participating
employee has been and is encouraged to seek the advice of a qualified tax adviser regarding the tax
consequences of participation in the 2017 Plan.
• Nonqualified Stock Options. A participant will generally not recognize any taxable income upon
the grant of a nonqualified stock option and the Company will not receive a deduction at the
time of such grant. Upon exercise of a nonqualified stock option, the participant generally will
realize ordinary income in an amount equal to the excess of the fair market value of the
ordinary shares on the date of exercise over the exercise price, and the Company will generally
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 6: Ordinary Resolution to Approve the Adoption of the Flex Ltd. 2017 Equity
Incentive Plan
be allowed a deduction equal to the amount recognized by the participant as ordinary income.
The participant’s tax basis in the shares received will be equal to the exercise price plus the
amount recognized as ordinary income. Upon a subsequent sale of such shares, the participant
will recognize capital gain or loss.
• Incentive Stock Options. No taxable income is recognized by a participant at the time of grant
of an incentive stock option, and no taxable income is generally recognized at the time the
option is exercised. (However, the excess of the fair market value of the ordinary shares
received upon exercise over the option exercise price is an item of tax preference income
which may be subject to the alternative minimum tax.) Instead, the participant will recognize
taxable income in the year in which the acquired shares are sold or otherwise disposed of. If
the sale or other disposition is made after the participant has held the shares for more than two
years after the option grant date and more than one year after the date on which the shares
are transferred to the participant (referred to as a “qualifying disposition”) pursuant to the
option’s exercise, any gain or loss, generally measured by the difference between the amount
realized on the sale of shares and the option exercise price, will be treated as long-term capital
gain or loss. However, if either of these two holding period requirements is not satisfied
(referred to as a “disqualifying disposition”), then upon the disqualifying disposition, the
participant generally recognizes ordinary income in the amount of the lesser of (i) the difference
between the fair market value of the shares at the time of the option’s exercise and the option’s
exercise price, or (ii) the difference between the amount realized on the sale and the option’s
exercise price. Any ordinary income recognized is added to the participant’s basis for purposes
of determining any additional gain on the sale and any such additional gain will be capital gain.
If the participant makes a disqualifying disposition of the acquired shares, we may be entitled to
a deduction from our U.S. taxable income for the taxable year in which such disposition occurs,
equal to the amount of ordinary income the participant recognizes. In no other instance will we
be allowed a deduction with respect to the participant’s disposition of the acquired shares.
• Share Appreciation Rights. The grant of a share appreciation right will generally not create any
tax consequences for the participant or the Company. Upon the exercise of a share
appreciation right, the participant will recognize ordinary income in an amount equal to the cash
or fair market value of the ordinary shares received from the exercise. The participant’s tax
basis in any ordinary shares received upon the exercise of the share appreciation right will be
equal to the ordinary income recognized with respect to the shares. Upon disposition of the
shares, the participant will recognize capital gain or loss equal to the difference between the
amount realized and his or her basis in the shares. Upon the exercise of a share appreciation
right, the Company generally will be entitled to a deduction in the amount of the compensation
income recognized by the participant.
In general,
• Restricted Share Units, Performance Share Units and Performance Share Awards.
a participant will not recognize income with respect to restricted share unit awards,
performance share unit awards or performance share awards until there is a settlement of the
award. On that date, the participant will recognize ordinary income in an amount equal to the
cash or fair market value of the ordinary shares received. The participant’s tax basis in any
shares received is the amount included in his or her income, and the participant’s holding
period in the shares commences on the day after receipt of the shares. Upon disposition of the
shares, the participant will recognize capital gain or loss equal to the difference between the
amount realized and his or her basis in the shares. The Company will generally be entitled to a
deduction equal to the amount included in the participant’s ordinary income in the year in which
such amount is recognized by the participant, except to the extent the deduction is limited by
Section 162(m) of the Code.
Section 162(m). Any United States income tax deductions that would otherwise be available to us may
be subject to a number of restrictions under the Code, including Section 162(m), which, under
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 6: Ordinary Resolution to Approve the Adoption of the Flex Ltd. 2017 Equity
Incentive Plan
guidance issued by the Internal Revenue Service, can limit the deduction for compensation paid to our
Chief Executive Officer and our three most highly compensated executive officers other than our Chief
Executive Officer and our Principal Financial Officer.
2017 Plan New Benefits. The number of shares to be issued under the 2017 Plan to participants in the
plan, including eligible employees, executive officers and non-employee directors of the Company, and
the net values to be realized upon such issuances, are discretionary, and therefore, not determinable.
The Board recommends a vote “FOR” the resolution to approve the adoption of the Flex Ltd.
2017 Equity Incentive Plan.
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 7: Ordinary Resolution to Renew the Share Purchase Mandate
PROPOSAL NO. 7: 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 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 annual general
meeting of shareholders held in 2016, the Share Purchase Mandate renewed at the annual general
meeting will expire on the date of the 2017 annual general meeting. Accordingly, we are submitting this
proposal to seek approval from our shareholders at the annual general meeting for another renewal of
the Share Purchase Mandate. Pursuant to the Singapore Companies Act, share repurchases under our
share repurchase plans were subject to an aggregate limit of 20% of our issued ordinary shares
outstanding as of the date of the annual general meeting held on August 24, 2016. On August 24,
2016, the Board authorized the repurchase of up to an aggregate of $500 million of ordinary shares of
the Company. Until the 2017 annual general meeting, any repurchases would be made under the
Share Purchase Mandate renewed at the annual general meeting held in 2016. Commencing on the
date of the 2017 annual general meeting, any repurchases may only be made if the shareholders
approve the renewal of the Share Purchase Mandate at the annual 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 annual 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 2018 annual general meeting or the date by which the 2018
annual general meeting is required by law to be held. The 2018 annual general meeting is required to
be held 15 months after the date of the 2017 annual general meeting or six months after the date of
our 2018 fiscal year end, whichever is earlier (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).
The authority and limitations placed on our share purchases or acquisitions under the proposed Share
Purchase Mandate, if renewed at the annual 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 Singapore Companies Act that is currently in force does not permit us to purchase
or acquire more than 20% of the total number of our issued ordinary shares outstanding at the date of
the annual general meeting. Any of our ordinary shares which are held as treasury shares will be
disregarded for purposes of computing this 20% limitation.
We are seeking approval for our Board of Directors to authorize the purchase or acquisition of our
issued ordinary shares not exceeding 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).
Purely for illustrative purposes, on the basis of 531,607,660 issued ordinary shares outstanding as of
June 16, 2017, and assuming no additional ordinary shares are issued or repurchased on or prior to
the date of the annual general meeting, based on the prevailing 20% limit, we would be able to
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 7: Ordinary Resolution to Renew the Share Purchase Mandate
purchase not more than 106,321,532 issued ordinary shares pursuant to the proposed renewal of the
Share Purchase Mandate.
During fiscal year 2017, we repurchased approximately 25 million shares for an aggregate purchase
value of approximately $346 million under the Share Purchase Mandate and retired all of these shares.
As of June 16, 2017, we had 531,607,660 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:
• the date on which our next annual general meeting is held or required by law to be held; or
• 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:
• market purchases on Nasdaq 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
• off-market purchases (if effected other than on Nasdaq 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 Singapore 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 Singapore Companies Act and other applicable laws. In addition, an equal access
scheme must satisfy all of the following conditions:
• 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;
• all of those persons must be given a reasonable opportunity to accept the offers made; and
• 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).
Purchase Price
The maximum 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:
• 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 Nasdaq 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
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 7: Ordinary Resolution to Renew the Share Purchase Mandate
• 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 Nasdaq 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 Singapore Companies Act, ordinary shares purchased or acquired by us may be held as
treasury shares. Some of the provisions on treasury shares under the Singapore 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 Singapore 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 greater or 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:
• sell the treasury shares for cash;
• transfer the treasury shares for the purposes of or pursuant to any share scheme, whether for
employees, directors or other persons;
• transfer the treasury shares as consideration for the acquisition of shares in or assets of
another company or assets of a person;
• cancel the treasury shares; or
• 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
Constitution 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 Singapore 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 Singapore Companies Act. A company is solvent if, at the date of
the payment made in consideration of the purchase or acquisition (which shall include any
expenses—including brokerage or commission) the following conditions are satisfied: (a) there is no
ground on which the company could be found unable to pay its debts; (b) if it is not intended to commence
winding up of the company, the company will be able to pay its debts as they fall due during the period of
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 7: Ordinary Resolution to Renew the Share Purchase Mandate
12 months immediately after the date of the payment; and (c) the value of the company’s assets is not
less than the value of its liabilities (including contingent liabilities) and will not, after 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.
Where such ordinary shares are purchased or acquired and held by us as treasury shares, we will
cancel and issue new certificates in respect thereof.
Financial Effects
Our net tangible assets and the consolidated net tangible assets of our subsidiaries will be reduced by
the purchase price (including any expenses) 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 Singapore 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 (including any expenses) paid by us for the purchase or acquisition of
ordinary shares is made out of our profits, such consideration (including any expenses such as
brokerage or commission) 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.
Rationale for the Share Purchase Mandate
We believe that a renewal of the Share Purchase Mandate at the annual 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
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 7: Ordinary Resolution to Renew the Share Purchase Mandate
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 with a director could become obliged to make a
take-over offer for the Company under Rule 14 of The Singapore Code on Take-overs and Mergers.
The circumstances under which shareholders (including directors and persons acting in concert with
them respectively) 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 II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 8: Ordinary Resolution to Approve Changes to the Cash Compensation Payable
to our Non-Employee Directors
PROPOSAL NO. 8: ORDINARY RESOLUTION TO APPROVE CHANGES TO THE CASH
COMPENSATION PAYABLE TO OUR NON-EMPLOYEE DIRECTORS
In 2017, assisted by Mercer, 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, which is discussed in the
section below captioned “Compensation Discussion and Analysis.” The Nominating and Corporate
Governance Committee 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-executive 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 Mercer, also took into consideration compensation trends for outside 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. 8, an
increase in the annual retainer for Board service and increases in the additional annual retainers for
the chairmen of each of the Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee. Under the Companies Act, we may only provide cash
compensation to our directors for services rendered in their capacity as directors with the prior
approval from the Company’s shareholders at a general meeting. We believe that it is advisable and in
the best interests of our shareholders for our shareholders to authorize the Company to:
• increase from $85,000 to $90,000 the annual cash compensation payable to each of Flex’s
non-employee directors for services rendered as a director;
• increase from $35,000 to $40,000 the additional annual cash compensation payable to the
Chairman of the Audit Committee for services rendered as Chairman of the Audit Committee;
• increase from $35,000 to $40,000 the additional annual cash compensation payable to the
Chairman of the Compensation Committee for services rendered as Chairman of the
Compensation Committee; and
• increase from $7,000 to $15,000 the additional annual cash compensation payable to the
Chairman of the Nominating and Corporate Governance Committee for services rendered as
Chairman of the Nominating and Corporate Governance Committee.
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
as the Chairman of the Board and to continue to provide leadership for the Company with the goal of
enhancing long-term value for our shareholders. The current cash compensation arrangements for our
non-employee directors were previously approved by our shareholders at our 2009, 2011 and 2014
annual general meetings.
In addition, our Nominating and Corporate Governance Committee recommended and our Board
approved the following changes to the compensation of our non-employee directors, which changes do
not require the approval of our shareholders under Singapore law and for which we are not seeking
shareholder approval pursuant to this Proposal No. 8:
• decrease from $100,000 to $50,000 the additional annual cash compensation payable to the
Chairman of the Board for services rendered as Chairman of the Board. While the shareholders
had previously approved annual additional cash compensation of $100,000 to the Chairman of
the Board, the lower amount of $50,000 in additional cash compensation will be paid to the
Chairman of the Board going forward on an annual basis. Additionally, a decrease from
$100,000 to $50,000 in the fair market value of the yearly restricted share unit award granted to
the Chairman of the Board was also approved; and
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Part II—Proposals to be Considered at the 2017 Annual General Meeting of Shareholders
Proposal No. 8: Ordinary Resolution to Approve Changes to the Cash Compensation Payable
to our Non-Employee Directors
• an increase from $175,000 to $185,000 in the fair market value of the yearly restricted share
unit award granted to our non-employee directors.
The yearly restricted share unit awards granted to our non-employee directors (including the Chairman
of the Board) are provided in recognition of the contributions made by the non-employee directors to
the company.
This proposal, if passed, is without prejudice to the standing authority approved by our shareholders on
July 29, 2013 which allows each non-employee Directors to elect whether to receive his fees in either
cash, shares or a combination thereof.
In addition, this proposal, if passed, is without prejudice to the cash compensation payable to directors
(including each committee chairman) for participation on committees previously approved by our
shareholders.
For additional information about the cash and equity compensation paid to our non-employee directors
and our Chairman of the Board of Directors, including compensation paid for the fiscal year ended
March 31, 2017, please see the section entitled “Non-Management Directors’ Compensation for Fiscal
Year 2017” on page 16.
The Board recommends a vote “FOR” the resolution to approve the changes to the cash
compensation payable to our non-employee directors.
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Part III—Additional Information
Executive Officers
EXECUTIVE OFFICERS
PART III—ADDITIONAL INFORMATION
The names, ages and positions of our executive officers as of June 16, 2017 are as follows:
Name
Age Position
Michael M. McNamara
Christopher E. Collier
Francois P. Barbier
Scott Offer
Paul J. Humphries
David P. Bennett
60 Chief Executive Officer
49 Chief Financial Officer
58 President, Global Operations and Components
52 Executive Vice President and General Counsel
62 President, High Reliability Solutions
47 Chief Accounting Officer
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 currently
serves on the board of directors of Workday, Inc. and is on the Advisory Board of Tsinghua University
School of Economics and Management and on the Presidential CEO Advisory Board of Massachusetts
Institute of Technology (MIT). Mr. McNamara previously served on the board of Delphi Automotive LLP.
Christopher E. Collier. Mr. Collier has served as our Chief Financial Officer since May 2013. He served
as our Senior Vice President, Finance from December 2004 to May 2013 and our Principal Accounting
Officer from May 2007 to July 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 in connection with the acquisition of The Dii Group. Mr. Collier is a certified public
accountant and he received a B.S. in Accounting from State University of New York at Buffalo.
Francois P. 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 Flex
Europe. Prior to joining Flex in 2001, Mr. Barbier was Vice President of Alcatel Mobile Phone Division.
Mr. Barbier holds an Engineering degree in Production from Couffignal School in Strasbourg.
Scott Offer. Mr. Offer has served as our Executive Vice President and General Counsel since
September 2016. Previously, he served as Senior Vice President and General Counsel at Lenovo from
January 2016 until August 2016 and had served as Chief Counsel for the Lenovo Mobile Business
Group since October 2014. Prior to that, he served as Senior Vice President and General Counsel,
Motorola Mobility, a Google company, from August 2010 and Senior Vice President and General
Counsel, Motorola Mobility, Inc. from July 2010. Prior to that, he held several senior positions at
Motorola. Prior to joining Motorola, he worked for the law firm of Boodle Hatfield. He received his law
degree from the London School of Economics and Political Science and is qualified as a lawyer in the
United Kingdom and United States.
Paul J. Humphries. Mr. Humphries has served as our President, High Reliability Solutions since
April 2011. From April 2006 to April 2011, Mr. Humphries served as our Executive Vice President of
Human Resources. Prior to that Mr. Humphries served as SVP Global Operations for our mechanicals
business unit from April 2000 to April 2006. He 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 also serves as a
director of Superior Industries International, Inc. and Chairman of the board of directors of the Silicon
Valley Education Foundation.
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Part III—Additional Information
Executive Officers
David P. Bennett. Mr. Bennett has served as our Principal Accounting Officer since July 2013.
Mr. Bennett served as Vice President, Finance from 2009 to 2014, Corporate Controller from 2011 to
2013 and Senior Vice President, Finance from 2014. Prior to joining us in 2005, he was a Senior
Manager at Deloitte and Touche LLP. Mr. Bennett is a certified public accountant and earned a B.S. in
Business and Administration with an emphasis in Accounting and Finance from the University of
Colorado Boulder.
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Part III—Additional Information
Compensation Committee Report
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 proxy statement for the 2017
annual general meeting of shareholders.
Submitted by the Compensation Committee of the Board of Directors:
Daniel H. Schulman
Michael D. Capellas
Willy C. Shih, Ph.D.
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Part III—Additional Information
Compensation Discussion and Analysis
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
In this Compensation Discussion and Analysis (CD&A) section, we discuss the material elements of
our compensation programs and policies, including our overall compensation philosophy, program
objectives and how and why the Compensation Committee of our Board arrived at specific
compensation policies and decisions involving our Named Executive Officers (NEOs). The fiscal year
2017 compensation of our NEOs is provided in the Summary Compensation Table and other
compensation tables in this Proxy Statement. These officers and their titles as of the end of fiscal year
2017 are:
Name Position
Michael M. McNamara Chief Executive Officer
Christopher Collier Chief Financial Officer
Francois P. Barbier President, Global Operations and Components
Paul Humphries President, High Reliability Solutions
Scott Offer(1) Executive Vice President and General Counsel
(1) Mr. Offer became Executive Vice President and General Counsel in September 2016.
This CD&A is organized into the following key sections:
• Executive Summary;
• Compensation Philosophy;
• Compensation Setting Process and Decisions for Fiscal Year 2017; and
• Fiscal Year 2017 Executive Compensation
Executive Summary
Business Overview
We are a globally-recognized, leading provider of Sketch-to-Scaletm services—innovative design,
engineering, manufacturing and supply chain services and solutions—from conceptual sketch to full-
scale production. We design, build, ship and service complete packaged consumer and industrial
products, from athletic shoes to electronics, for companies of all sizes in various industries and end-
markets, through our activities in the following segments:
Segment Product Categories
Communications & Enterprise
Compute (CEC)
• Telecom business of radio access base stations, remote radio
heads, and small cells for wireless infrastructure;
• Networking business, which includes optical communications,
routing, broadcasting, and switching products for the data and
video networks;
• Server and storage platforms for both enterprise and cloud-
based deployments; next generation storage and security
appliance products; and
• Rack level solutions, converged infrastructure and software-
defined product solutions.
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Segment Product Categories
Part III—Additional Information
Compensation Discussion and Analysis
Consumer Technologies
Group (CTG)
Industrial and Emerging
Industries (IEI)
High Reliability Solutions
(HRS)
• Consumer-related businesses in connected living, wearables,
gaming, augmented and virtual reality, fashion and mobile
devices;
• Various supply chain solutions for notebook personal
computers (“PC”), tablets, and printers; and
• Expanding our business relationships to include supply chain
optimization for non-electronics products such as footwear and
clothing.
• Energy and metering, semiconductor tools and capital
equipment, office solutions, household industrial and lifestyle,
industrial automation and kiosks and lighting.
• Medical business, including consumer health, digital health,
disposables, precision plastics, drug delivery, diagnostics, life
sciences and imaging equipment;
• Automotive business, including vehicle electrification,
connectivity, autonomous vehicles and clean technologies; and
• Defense and aerospace business, focused on commercial
aviation, defense and military.
In fiscal year 2017, we continued our multi-year reorganization and rebalancing of our business
portfolio in order to align with our customers’ needs and requirements as part of an effort to optimize
operating results with a focus on improving profit margins and generating sustainable free cash flow
and strong returns on invested capital. We continued to shift our long-term portfolio towards a mix of
businesses which possess longer product life cycles and higher margins, such as our IEI and HRS
businesses. We also continued to move away from customer solutions that have more short-term
volatility and lower margins. This business transformation positions us to meet specific customers’
supply chain solutions needs across all of the markets we serve, yield margin improvement, and earn a
return on our invested capital above the weighted-average cost of that capital. We are also improving
our ability to take advantage of the long-term, future growth prospects for outsourcing of advanced
manufacturing capabilities, design and engineering services, and after-market services. Another aspect
of our business transformation strategy has been to make targeted investments in technologies and
businesses that are complementary to our core business but that represent high growth opportunities
with attractive profit margins. For example, in fiscal year 2017, we made targeted investments in our
Flex Innovation Labs, Lab IX portfolio companies, our strategic partnership with Nike, and Elementum
business that we believe will yield strong long-term results for Flex. The shift away from certain parts of
our business limited our short-term top-line revenue growth and created negative year-over-year
comparisons on some financial metrics such as revenue, though it places us in a better position to
capitalize on long-term revenue growth and enhanced returns on investment and cash flow.
Performance Highlights For Fiscal Year 2017
We delivered strong fiscal year 2017 operating results and continued to execute our business
transformation and deliver on our commitment to return value to shareholders. We generated TSR of
nearly 40%, which put us in the top 15% of all companies in the S&P 500. Our 3-year TSR was 82%,
which was in the top decile of all firms in the S&P 500. We achieved these results in a global economic
environment that continued to face a high degree of uncertainty due to macro-economic factors such
as ongoing growth challenges in Europe, concerns of a slowdown in Chinese growth, and political and
interest rate uncertainty. Internally, we continued on our business transformation journey during fiscal
year 2017 through which we are reorganizing and rebalancing our business portfolio. As a result of an
improved cost structure and our strategic business transformation, we delivered solid operating results
in fiscal year 2017 and executed on key strategic priorities, including growing our capabilities such as
the Flex Innovation Labs, Lab IX, and Sketch-to-Scaletm, and our strategic partnerships with Nike and
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Part III—Additional Information
Compensation Discussion and Analysis
Elementum, to expand our innovative offerings. Areas where we saw year-over-year declines mainly
represent intentional strategic shifts as a result of our business transformation activities.
Highlights(3) include:
• We reported net sales of $23.9 billion, a decrease of 2% compared to the prior year.
• Grew adjusted operating profit to $815.2 million, a 3% increase over fiscal year 2016.
• Delivered Adjusted Earnings Per Share (EPS) of $1.17 per share, a 3% increase over the prior
year.
• Adjusted gross profit totaled $1.7 billion, an increase of 4% compared to the prior year.
• Adjusted gross margin increased to 7.0% of net sales in fiscal year 2017, compared with 6.6%
of net sales in fiscal year 2016.
• Generated operating cash flows of $1.1 billion during the year. The strong cash flow generated
from our operations enabled us to return value to shareholders with the repurchase of
$349.5 million of our shares paid in fiscal year 2017.
• Increased free cash flow to $660.4 million which was up 3% over the prior year and within our
communicated range of $600 to $700 million annually.
• We had some less favorable year-over-year financial result comparisons due to our ongoing
business transformation, though these actions are positioning the Company for enhanced
future results.
In addition to the above results, our stock price increased by nearly 40% from $12.06 at the end of
fiscal year 2016 to $16.80 at the end of fiscal year 2017. This translates into a 1-year TSR of nearly
40% and Flex’s 3-year TSR is 82%, which has generated significant value for shareholders and
represents results that are in the upper 15% of S&P 500 firms over the same time periods. We believe
this above market performance is the result of having articulated a value-creating strategy and
delivering against that strategy.
Pay and Performance Alignment For Fiscal Year 2017
As noted above, we delivered strong operating results and shareholder returns during fiscal year 2017.
However, given Flex’s aggressive operating result goal-setting, our final financial performance was
somewhat below our targeted levels. Our compensation philosophy is to reward above-target
performance when achieved, and pay zero or below target when favorable results are not delivered. In
line with our fiscal year 2017 performance, Flex’s NEOs earned short-term incentive awards that
recognize our strong financial performance, as well as the fact that we did not fully achieve our
targeted performance goals. Highlights include the following:
• Maintained the CEO’s base salary with no increase, positioned approximately at the peer
median.
• Provided modest base salary increases of less than 4.0% to other NEOs, though overall salary
positioning continued to be approximately at our peer group median.
• The CEO and most other NEOs earned a below-target short-term incentive payout of 78.8% of
target due to our aggressive internal performance goals.
• Paid out the long-term performance share unit cycle during fiscal year 2017 at 193% of target
in May 2016 based upon TSR results that were above target and exceeded market levels over
the performance cycle from fiscal year 2014 through fiscal year 2017. The Flex three year free
cash flow (FCF) performance share unit cycle paid out at 94.6%, reflecting Flex’s more
aggressive operating targets.
• Funded the NEOs’ deferred compensation plans with a value that averaged 26.4% of our
NEOs’ respective base salaries based on fiscal year 2017 results.
(3) See Annex B to this proxy statement for a reconciliation of non-GAAP and GAAP financial
measures.
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Part III—Additional Information
Compensation Discussion and Analysis
• Continued to use fiscal year 2017 long-term incentive grants that balance relative TSR
performance share units (PSUs) with a long-term incentive plan (LTIP) that measures
cumulative FCF over a multi-year period (from fiscal year 2017 through fiscal year 2019).
• Granted modest Elementum profits interests unit value awards to certain executives who
continue to make significant contributions to our Elementum business (see details in the Fiscal
Year 2017 Compensation section below).
Prior Say on Pay Advisory Vote Results and Shareholder Engagement
In the normal course of Flex’s business, we have communications with shareholders about both our
business and our executive compensation programs. During fiscal year 2017, we interacted with
holders of over approximately 70% of our share voting power. We also provided shareholders with a
“say on pay” advisory vote on executive compensation at our 2016 Annual General Meeting held on
August 24, 2016. The advisory vote received the support of approximately 79% of the votes cast at the
General Meeting. In the two prior years, Flex had received say on pay votes that exceeded 90%
support for the compensation approach. The decline in the 2016 say on pay vote was driven primarily
by an “against” vote by a single major shareholder. Based on our direct discussions with this
shareholder, we continue to believe that theunderlying structure and implementation of our executive
compensation program is sound and provides proper pay for performance alignment. We have been
asked to more tightly manage our overall share grant levels relative to performance delivered, which
we have been and will continue to do (see Responsible Share Usage section below). Outside of the
points noted above, we believe the level of support at our 2016 Annual General Meeting reflects
ongoing institutional shareholder outreach efforts and the continuing efforts to align our executive
compensation with shareholder interests. As detailed elsewhere in this proxy statement, we are also
seeking an advisory shareholder vote regarding the frequency of advisory shareholder votes to
approve executive compensation and our Board is recommending a vote in favor of continuing to
conduct annual shareholder votes to approve executive compensation. Based on the favorable prior
say on pay results, shareholder feedback on existing programs, and our review of the alignment of the
pay program design with business results, we continued the structure of our fiscal year 2016
compensation programs in fiscal year 2017.
Impact of Business Performance on Fiscal Year 2017 Executive Compensation
As noted above, for fiscal year 2017, we delivered strong operating results, though we also set
aggressive internal performance objectives, resulting in payment of our NEOs’ at-risk short-term
incentive compensation below target levels. With our strong multi-year shareholder returns, our fiscal
year 2014—2017 performance share plan paid out near maximum at 193% of target, while Flex’s FCF
performance share unit cycle paid out at 94.6%, reflecting Flex’s more aggressive operating targets.
The Committee believes that the actual compensation earned by our NEOs is appropriate and
consistent with our pay-for-performance philosophy. The table below describes the key elements of our
executive compensation program and the key actions taken by the Compensation Committee with
respect to the compensation of the NEOs for fiscal year 2017:
Pay
Component Description Fiscal Year 2017 Considerations
Base Salary
• Annual fixed cash component based on
individual performance, level of experience
and expected future performance and
contributions to the Company.
• Maintained the CEO’s base
salary with no increase, which
approximates peer median.
• Provided modest increases
of less than 4.0% for other
NEOs, where overall salary
positioning continued to
approximate peer median.
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Pay
Component Description Fiscal Year 2017 Considerations
Part III—Additional Information
Compensation Discussion and Analysis
Short-Term
Cash
Incentives
Long-Term
Incentive
Programs
• Variable cash awards based on
achievement of annual objectives based on
pre-established financial performance goals
related to the Company and business unit
with 50% of the payouts based on
achievement of quarterly targets and 50%
based on achievement of annual targets.
• CEO payout earned, and that
of most other NEOs, was
78.8% of target, reflecting
operating performance that
did not fully meet objectives.
• Performance-based restricted share units
• The fiscal year 2017 long-
which represent 25% (at target) of the total
long-term incentive award are measured
based upon the Company’s total
shareholder return versus that of the
S&P 500.
• Performance-based cash incentives (and, in
the case of the CEO only, performance-
based RSUs) which represent another 25%
(at target) of the total long-term incentive
award are measured based upon the
Company’s performance against a pre-
established three-year FCF target.
• Service-based restricted share units
represent 50% of the total long-term
incentive award and provide for vesting over
a four-year period with 25% vesting each
year.
• Profits interests unit awards in the
Elementum business that require a sale or
IPO of the business at a level above the
grant date valuation in order to generate
value.
• Long-term cash incentives under our
Deferred Compensation Plan.
term incentive grants provide
a balance of performance-
based awards and long-term
shareholder alignment.
• The relative TSR PSUs
create strong pay-for-
performance alignment by
measuring direct shareholder
outcomes, while the FCF
long-term incentive plan
(LTIP) incents management
to deliver stable free cash
flow in order to enhance
shareholder value.
• Paid out the FY14-FY17 PSU
awards that vested in
May 2016 at 193% of target
based on:
• Flex TSR performance of
67% as compared to the
S&P 500 since the grant
date
• Flex’s TSR at the 71st
percentile ranking as
compared to the
Extended EMS Group
since the grant date
• Paid out FCF performance
share unit cycle at 94.6%,
reflecting Flex’s more
aggressive operating targets.
• Granted Elementum units with
per-person values of $220,000
or less, with the grant date
value to be deducted from the
fiscal year 2018 equity grants
for all participants.
• Funded our Deferred
Compensation Plan with a
value that averaged about
26% of our NEOs’ respective
base salaries based on fiscal
year 2016 results.
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Part III—Additional Information
Compensation Discussion and Analysis
Compensation Philosophy
Flex’s compensation philosophy is pay-for-performance. Our pay programs are designed to align
executives’ compensation with performance against the Company’s short-term and long-term
performance objectives and the creation of shareholder value. A key objective of our compensation
programs is to attract, retain and motivate superior executive talent who are key to the Company’s long-
term success by paying for the achievement of meaningful Company objectives, balancing achievement
incentives with the need to avoid excessive or inappropriate risk-taking, and maintaining an appropriate
cost structure. We actively manage our pay-for-performance philosophy through the following elements:
Element Overview
Substantial Emphasis on At-
Risk Compensation
Market-Based, Responsible
Target Pay
Balanced Performance
Metrics and Measurement
Time Frames
• Programs are designed to link a substantial component of our
executives’ compensation to the achievement of pre-
determined performance goals that directly correlate to the
enhancement of shareholder value.
• 91% of our CEO’s target total direct compensation is either at
risk or long-term, and an average of 84% of our other
NEOs’(4) target total direct compensation is either at risk or
long-term.
• 100% of at risk or performance-based compensation is based
on achievement of core financial metrics or is subject to
market risk based on stock price performance, and is not
based on individual performance.
• We regularly benchmark pay against a set of industry peers.
• Base salaries are generally positioned at approximately the
market median for our NEOs to manage fixed costs and
emphasize paying for performance.
• Overall target total direct compensation was positioned at
approximately the 60th percentile for our NEOs in fiscal year
2017.
• With the rapid pace and dynamic nature of our business, it is
necessary to actively measure short-term results across a
range of metrics, though with progressively greater emphasis
on long-term results for senior leaders.
• We measure both quarterly and annual results for revenue,
adjusted operating profit (OP), return on invested capital
(ROIC), and adjusted earnings per share (EPS) because we
believe these reinforce the need to achieve strong top line
results, deliver profitability, and manage capital efficiently.
• For our long-term incentive plans, we also measure multi-year
free cash flow and TSR relative to the S&P 500.
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Element Overview
Part III—Additional Information
Compensation Discussion and Analysis
Majority Focus on Long-Term
Performance
• While measurement of short-term results maintains day-to-day
focus, we believe that shareholder value is built over the long-
term.
• As such, senior leaders are compensated through
progressively greater emphasis on performance-based long-
term incentives.
• 74% of our CEO’s fiscal year 2017 target total direct
compensation was through long-term incentives, of which 53%
is linked to achievement of long-term operating and TSR
performance goals.
• 66% of our other NEOs’ (excluding Mr. Offer, who joined the
company in fiscal year 2017) target total pay is in long-term
incentives, of which 54% is linked to achievement of long-term
operating and TSR performance goals.
• We maintain share ownership guidelines to enforce alignment
with shareholder results, and have recoupment policies in place.
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Part III—Additional Information
Compensation Discussion and Analysis
Compensation Setting Process and Decisions for Fiscal Year 2017
Fiscal Year 2017 Corporate Governance Highlights
The Compensation Committee regularly reviews our compensation programs, peer company data and
corporate governance best practices in the executive compensation area. We have adopted corporate
governance and compensation practices and policies that our Board believes help to advance our
compensation goals and philosophy, including the following:
HIGHLIGHTS OF EXECUTIVE COMPENSATION PRACTICES
What We Do What We Don’t Do
✓
✓
✓
✓
✓
✓
✓
✓
Maintain a Compensation Committee
comprised of completely independent
members with a robust and independent
review process.
Use a pay-for-performance executive
compensation model that focuses primarily
on corporate performance with a significant
portion of executive compensation at-risk
and/or long-term.
Target fixed compensation at our peer
median and allow for greater levels of actual
total direct compensation based on
performance.
Maintain a reasonable share burn rate.
During fiscal year 2017, we granted option
equivalents, based on the Company’s
fungible share ratio of 1.71:1, of
approximately 2.1% of shares outstanding.
Maintain a clawback policy to recoup
compensation paid to an executive officer 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.
Retain an independent compensation
advisor.
Consider shareholder advisory votes and
views in determining executive
compensation strategies.
Maintain equity ownership guidelines for
senior officers and Board Directors.
✗
✗
We do not provide employment agreements.
None of our NEOs has an employment
agreement.
We do not allow hedging or short sales of
Company equity, nor do we permit pledging
of Company equity as collateral for loans.
✗
We do not provide excessive or non-
customary executive perquisites.
✗
✗
✗
✗
✗
We do not maintain a severance plan for our
NEOs, whether or not in connection with a
change in control.
We do not have single trigger accelerated
vesting of equity awards upon a change in
control.
We do not maintain a supplemental
executive retirement plan (SERP).
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 unvested restricted share
units.
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
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Part III—Additional Information
Compensation Discussion and Analysis
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. Our committee also reviews the
Company’s talent assessment and succession planning.
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. For fiscal year 2017, the Compensation Committee engaged Mercer, a
wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (referred to in this discussion as Mercer)
in connection with its fiscal year 2017 compensation review, as its independent advisers for certain
executive compensation matters. Mercer 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, Mercer 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 share ownership and retention values. As part of its reports to
the Compensation Committee, Mercer recommends our selected peer companies, and provides
competitive compensation data and analysis relating to the compensation of our Chief Executive Officer
and our other executives and senior officers. Mercer also assisted the Compensation Committee with its
risk assessment of our compensation programs during fiscal year 2017.
Mercer is owned by Marsh & McLennan Companies, Inc., a multi-services global professional services
firm providing advice and solutions in risk, strategy and human capital. For a discussion of amounts
paid to Mercer for executive and director compensation consulting services and amounts paid to
Marsh & McLennan Companies, Inc. and its affiliates for non-executive and non-director compensation
consulting services, please see, “Board Committees—Compensation Committee—Relationship with
Compensation Consultants.” The Compensation Committee has determined that the provision by
Marsh & McLennan Companies, Inc. of services unrelated to executive and director compensation
matters in fiscal year 2017 was compatible with maintaining the objectivity of Mercer in its role as
compensation consultant to the Compensation Committee and that the consulting advice it received
from Mercer was not influenced by Marsh & McLennan Companies, Inc.’s other relationships with the
Company. The Compensation Committee has retained Mercer as its independent compensation
consultant for fiscal year 2018 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 2017 Executive Compensation—Incentive Bonus Plan,” our Chief Executive Officer
and other executives develop recommendations for performance measures and target 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 Mercer. The Compensation Committee reviews this data
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Part III—Additional Information
Compensation Discussion and Analysis
in the context of historical performance and our overall compensation programs and objectives. The
Compensation Committee considered the following competitive compensation data for our NEOs:
• Mercer constructed a peer group consisting of 18 companies based on targeting firms with a
high degree of complexity in business scale and scope, as well as similar revenues, numbers
of employees, and returns on invested capital.
• The Compensation Committee also takes into account Mercer’s review of standardized surveys
to check the Company’s compensation programs against other large high technology and
durable goods manufacturing firms to gain an understanding of general compensation
practices.
Each year, the peer companies are recommended by the Compensation Committee’s independent
consultant and approved by the Compensation Committee. For the fiscal year 2017 peer group, one
peer company, Motorola Solutions, Inc., was removed from the fiscal year 2016 peer group due to a
significant divestiture which placed the firm outside of our targeted complexity scope. The peer group
for fiscal year 2017 compensation decisions consisted of the following companies:
Arrow Electronics, Inc.
Avnet, Inc.
Eaton Corporation
General Dynamics Corporation
Illinois Tool Works Inc.
Johnson Controls, Inc.
Raytheon Company
TE Connectivity
Western Digital Corporation
Fiscal Year 2017 Executive Compensation
Total Direct Compensation
Applied Materials, Inc.
Danaher Corporation
Emerson Electric Co.
Honeywell International Inc.
Jabil Circuit, Inc.
Northrop Grumman Corporation
Seagate Technology
Tyco International Ltd
Xerox Corporation
Total direct compensation is the sum of base salary, annual incentive bonus payouts and long-term
incentive awards, but excludes performance-based contributions to our deferred compensation plan.
For the table below, the actual total direct compensation represents the actual bonus earned in each
fiscal year plus the grant date fair value of the long-term incentive awards provided in each year (where
realized long-term incentive values are subject to future performance conditions and share price
movement). For fiscal year 2017, the actual total direct compensation for all NEOs is generally up over
fiscal 2016. For the CEO, the fiscal year 2017 increase is 14.3%, driven primarily by increases in the
target short-and long-term incentive awards as a result of alignment with our target pay strategy and in
recognition of his continued leadership contributions and driving the development and execution of our
business transformation. For Messrs. Collier, Barbier, and Humphries, the pay was up between 1.9%
and 7.2%. These increases reflect the modest salary increases received, as well as some variation in
bonus payouts and long-term incentive grant values. This change reflects our alignment of pay and
performance, where the fiscal year 2017 financial performance was solid in the context of market
conditions, though it fell short of internal expectations.
Actual Total Direct
Compensation FY 2016 . . .
$11,988,961
$3,926,554
$3,908,316
$4,212,442
Mr. McNamara
Mr. Collier
Mr. Barbier
Mr. Humphries
Actual Total Direct
Compensation FY 2017 . . .
Percent change . . . . . . . . . . .
$13,704,137
14.3%
$4,020,092
2.4%
$3,981,047
1.9%
$4,513,921
7.2%
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Part III—Additional Information
Compensation Discussion and Analysis
Elements of Compensation
We allocate compensation among the following components for our NEOs:
• base salary;
• annual incentive bonus awards;
• long-term performance-based and service-based share incentive awards;
• long-term performance-based cash incentive awards;
• performance-based and service-based deferred compensation; and
• 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 components in order to align executive compensation with sustained, long-term performance and
share price appreciation. Annual incentive compensation, performance-based restricted share units,
performance-based cash-based incentives, 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 compensation elements coupled with service-based restricted
share units and our service-based deferred compensation plan contributions are designed to provide
significant retention and alignment with long-term shareholder value enhancement, where our long-
term incentive awards fully vest after periods of three or four years.
The following charts illustrate the mix of our compensation and show that for our Chief Executive
Officer, 91% of total target direct compensation is either at-risk or long-term(1), and, overall for our other
NEOs(2), 84% of total target direct compensation is either at-risk or long-term(2):
2017 Target Total Direct Compensation
CEO Pay Mix
Base
Salary
9%
At Risk
91%
Time Based LTI
35%
Annual Cash
Incentive
17%
Performance
Based LTI
39%
Performance Based
56%
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Part III—Additional Information
Compensation Discussion and Analysis
2017 Target Total Direct Compensation
Average NEO Pay Mix (non-CEO)
At Risk
84%
Base Salary
16%
Time Based LTI
31%
Annual Cash
Incentive
18%
Performance
Based LTI
35%
Performance Based
53%
(1) Performance-based LTI evaluated using Monte Carlo methodology
(2) Scott Offer is excluded from the non-CEO pay mix chart due to his joining Flex in FY17
Base Salary Levels
The following table sets forth the base salaries of our NEOs in fiscal years 2016 and 2017, as well as
the percentage increase (if any) from the prior year:
Name and Title
Michael M. McNamara
Chief Executive Officer
Christopher Collier
Chief Financial Officer
Francois P. Barbier
President, Global Operations
and Components
Paul Humphries
President, High Reliability
Solutions
Scott Offer
Executive Vice President and
General Counsel
Base Salary for Base Salary for Percentage
Fiscal Year 2016 Fiscal Year 2017
Increase Approximation
Peer Group
Percentile
$1,250,000
$1,250,000
0%
50th
$675,000
$700,000
3.7%
25th – 50th
$695,000
$710,000
2.2%
25th – 50th
$695,000
$710,000
2.2%
25th – 60th
$—
$550,000
N/A%
25th – 50th
For fiscal year 2017, we 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. Adjustments were modest, reflecting the fact that no individual changed roles significantly or
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Part III—Additional Information
Compensation Discussion and Analysis
was fundamentally misaligned with market. 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. Overall salaries for our NEOs in fiscal year
2017 positioned our aggregate pay at approximately the median of our peer companies.
Incentive Bonus Plan
Our quarterly and annual incentive payouts are based entirely on achievement of financial performance
objectives and are linked to achievements of the following performance metrics:
• revenue growth targets;
• adjusted operating profit targets;
• return on invested capital targets; and
• adjusted earnings per share targets.
For fiscal year 2017, the Company’s performance level with respect to the above performance metrics
exceeded targeted amounts for some metrics and fell below targeted amounts against others (see
table below). The overall corporate business results ended up below our aggressive performance
objectives for the year, so payouts were also below target. For Mr. Humphries, performance results
included outcomes from the High Reliability Solutions business which he manages, where performance
levels exceeded targeted amounts for all metrics and delivered above-target payout levels. The payout
levels are as follows:
Fiscal Year 2017 Annual Fiscal Year 2017 Annual
Incentive Bonus as a Incentive Bonus Target
Percentage of Target (Potential Bonus as a Fiscal Year 2017 Annual
Name Bonus percentage of Base Salary) Incentive Actual Bonus
Mr. McNamara
Mr. Collier
Mr. Barbier
Mr. Humphries
Mr. Offer
78.8% 200% $1,969,700
78.8% 110% $606,668
78.8% 110% $615,334
144.7% 110% $1,130,264
55.5% 80% $244,077
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
year 2017, target levels for performance were set at approximately the levels included in our
business forecast. Maximum payout levels were tied to “stretch” levels of performance. As part of the
process of setting performance targets, the Compensation Committee reviewed analyst consensus
estimates for fiscal year 2017 and confirmed that target performance measures were appropriately
aligned with such estimates. Performance measures were based on quarterly and annual targets.
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The following table summarizes the key features of our fiscal year 2017 incentive bonus plan:
Feature Component Objectives
Part III—Additional Information
Compensation Discussion and Analysis
• Aligns executive incentives with
Company and business unit
performance
• Rewards achievement of objectives
over course of the year by splitting
incentives over quarterly and annual
performance objectives
• Takes into account executive’s
responsibility, experience, and
expected contributions
• Focused on achievement of business
performance metrics that directly
correlate to business and
shareholder value creation
• Emphasizes pay for performance by
linking individual compensation to
Company and/or business unit
performance
• Promotes accountability by tying
payout to achievement of minimum
performance threshold
Performance
Targets
• Based on key Company and
business unit financial metrics
Performance
Measures
Bonus
Payments
• Measured on annual and quarterly
basis
— 50% based on achievement of
quarterly objectives
— 50% based on achievement of
annual objectives
• Revenue growth at the Company
and business unit level
• Adjusted operating profit at the
Company and business unit level
• Return on invested capital and
adjusted earnings per share targets
at the Company level
• Measurement level is based on each
executive’s respective
responsibilities, with substantial
weighting on business unit financial
metrics for business unit executives
• For Mr. Humphries, additional
business unit performance measures
were profit after interest percentage
and new business wins
• Based entirely on achievement of
financial performance objectives
• No individual performance component
• Target bonus opportunities set at
percentage of base salary, based on
executive’s level of responsibility
— Mr. McNamara’s target bonus
set at 200% of base salary
— Mr. Collier’s target bonus set at
110% of base salary
— Target bonus for other NEOs
set at a range between 80%
and 110% of base salary
• Quarterly bonuses range from 0% of
target to maximum of 200% of target
• Annual bonuses range from 50% of
target to maximum of 300% of target
• No payout awarded for any measure
where Company or business unit
failed to achieve threshold level for
such 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.
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Part III—Additional Information
Compensation Discussion and Analysis
The incentive bonus plan award opportunities for each NEO are shown in the Grants of Plan-Based
Awards in Fiscal Year 2017 table in “Executive Compensation”. In fiscal year 2017, the target incentive
bonus awards were set at approximately the 60th percentile of our peer group for Mr. McNamara; at
approximately the 75th percentile of our peer group for Mr. Collier; at between the 60th and 75th
percentile of our peer group for Mr. Barbier; between the 25th and 50th percentiles of our peer group for
Mr. Offer; and at approximately the 75th percentile of our peer group for Mr. Humphries.
Non-GAAP Adjustments
We used adjusted non-GAAP performance measures for our incentive bonus plan in fiscal year 2017.
We used adjusted measures to eliminate the distorting effect of certain unusual income or expense
items. The adjustments were intended to:
• align award payout opportunities with the underlying growth of our business; and
• avoid outcomes based on unusual items.
In calculating non-GAAP financial measures, we excluded 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 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 year 2017, non-GAAP adjustments consisted of excluding after-tax
stock-based compensation expense, intangible amortization, charges related to the bankruptcy of
SunEdison and restructuring charges. 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 Collier were each eligible for a bonus award based on achievement of
quarterly and annual revenue growth, adjusted operating profit, ROIC and adjusted EPS targets. We
refer to these performance measures as the “Company performance metrics.” The weightings for each
of these performance measures was 25%. Mr. McNamara’s annual target bonus was 200% of base
salary. Mr. McNamara’s target percentage of base salary represented a 33% increase relative to fiscal
year 2016. This change was made to recognize that our CEO has not received a salary increase in
several years, and the move aligns with our goal of having greater emphasis on at-risk pay. The new
bonus target provides total target cash at approximately the 60th percentile of our peer companies.
Mr. Collier’s bonus target as a percentage of base salary was set at 110% 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 Collier as a percentage of the target award for each performance measure based on different
levels of performance. Revenue targets represented year over year annual growth targets of (-5.8)% at
the 50% payout level, (-1.7)% at the 100% payout level, 4.4% at the 200% payout level, and 8.5% at
the 300% payout level.
No payout is made if the threshold performance level is not achieved. Targets at the 300% level with
respect to the annual bonus reflect sustained performance over the year that is considered to provide
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2017 Proxy Statement
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Part III—Additional Information
Compensation Discussion and Analysis
stretch targets. For performance levels between 50% and 300% presented in the table below, straight
line interpolation was used to arrive at the payout level:
Payout (% Target)
50%
100%
200%
300%(1)
Payout (% Target)
Q1 Revenue (in millions)
Q1 Adjusted OP (in millions)
Q1 ROIC
Q1 Adjusted EPS
Q2 Revenue (in millions)
Q2 Adjusted OP (in millions)
Q2 ROIC
Q2 Adjusted EPS
Q3 Revenue (in millions)
Q3 Adjusted OP (in millions)
Q3 ROIC
Q3 Adjusted EPS
Q4 Revenue (in millions)
Q4 Adjusted OP (in millions)
Q4 ROIC
Q4 Adjusted EPS
$5,438.1
$176.1
20%
$0.24
$5,733.9
$192.2
20%
$0.27
$6,006.4
$218.5
20%
$0.34
$5,821.6
$203.2
20%
$0.29
$5,674.5
$185.0
21%
$0.26
$5,983.2
$202.0
21%
$0.29
$6,267.5
$229.6
21%
$0.34
$6,074.7
$213.5
21%
$0.31
$6,029.2
$200.6
22%
$0.28
$6,357.1
$219.0
22%
$0.32
$6,659.3
$248.9
22%
$0.37
$6,454.4
$231.5
22%
$0.33
$6,653.6
$212.9
23%
$0.30
$6,506.4
$232.4
23%
$0.34
$6,765.4
$264.1
23%
$0.39
$6,574.5
$245.6
23%
$0.37
FY’17 Revenue (in millions)
FY’17 Adjusted OP (in millions)
FY’17 ROIC
FY’17 Adjusted EPS
$23,000.0
$790.0
20%
$1.14
$24,000.0
$830.0
21%
$1.20
$25,500.0
$900.0
22%
$1.30
$26,500.0
$955.0
23%
$1.40
(1) The values shown at the 300% level in the above table on a quarterly basis are for illustrative
purposes only; the 300% level only applies to the annual component. The actual quarterly component
only scales from 0% to 200%.
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 Collier.
CEO
Actual
CFO
Actual
Revenue
(in
Adjusted
Payout
OP (in Payout
Period
millions) Level % millions) Level % ROIC Level % EPS
Payout Adjusted Payout Payout
Payout % Payout %
(as a %
(as a % of
of Base
Base
Salary)
Level % Level % Salary)
Total
$5,877 157.0% $190 133.4% 21.6% 160.0% $0.27 150.0% 150.1% 300.2% 165.1%
74.2% 20.5% 74.0% $0.28
$6,009 106.8% $197
75.0% 50.0% 100.0% 55.0%
70.8% 20.0% 51.0% $0.34 100.0% 73.1% 146.3% 80.5%
$6,115 70.8% $223
50.0% 54.8% 109.7% 60.3%
58.8% 20.0% 52.0% $0.29
$5,863 58.1% $205
Q1
Q2
Q3
Q4
FY’17
Annual
Component $23,863 93.1% $815
FY’17
Total
Payout
n/a
n/a
n/a
81.6% 20.0% 52.0% $1.17
75.0% 75.6% 151.1% 83.1%
n/a
n/a
n/a
n/a
n/a
78.8% 157.6% 86.7%
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Part III—Additional Information
Compensation Discussion and Analysis
Consistent with the Company’s pay for performance approach, the Company recognized the
performance against its operating plan in fiscal year 2017 and consequently the short-term incentive
compensation total payout levels of our executives decreased this year over the prior year.
Payout levels (as a percentage of target) were in line with operational performance at 150.1% for the
first quarter, 50.0% for the second quarter, 73.1% for the third quarter and 54.8% for the fourth quarter.
For the annual component, the payout level (as a percentage of target) was 75.6%. The total annual
bonus payout was 78.8% as a percentage of target, which represents 157.6% for Mr. McNamara and
86.7% for Mr. Collier as a percentage of base salary. Comparatively, in fiscal year 2016, incentive
award payouts as a percentage of target were 81.3% of target for Messrs. McNamara and Collier.
Incentive Awards for NEOs other than the CEO and CFO
Mr. Barbier 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 Collier.
Mr. Barbier’s annual target bonus was 110% of base salary and resulted in total target cash
approximately between the 50th and 60th percentiles of our peer group.
Mr. Offer 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 Collier. The annual target
bonus was 80% of base salary and resulted in total target cash between the 25th and 50th percentiles of
our peer group. Mr. Offer joined Flex on September 6, 2016 and was eligible a pro-rated bonus
payment for the second quarter, as well as bonus payments for the third and fourth quarters, and an
annual bonus payout.
Mr. Humphries 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 Collier),
as well as the business unit performance metrics of revenue, adjusted operating profit, profit after
interest percentage and new business wins for our High Reliability Solutions business group.
Mr. Humphries’ annual target bonus was 110% of base salary and resulted in total target cash between
the 60th and 75th percentiles of our peer group. Actual payout level opportunities ranged from 50% to
200% of target with respect to quarterly metrics and 50% to 300% of target for annual metrics. The
weightings of the performance metrics for Mr. Humphries were 20% for the Company performance
metrics and 80% for the business unit metrics. Certain business unit metrics were calculated on an
adjusted non-GAAP basis consistent with the Company performance metrics. We treat the business
unit performance 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 metrics.
The following table sets forth the actual quarterly, annual and total payout levels, both as a percentage
of target and of eligible base salary, for Messrs. Barbier and Humphries:
F. Barbier
F. Barbier
P. Humphries P. Humphries
S. Offer
S. Offer
Payout
Actual
Payout %
(as a % of
Period
(% Target) Base Salary)
Payout
(% of Target)
Actual
Payout %
(as a % of
Base Salary)
Actual
Payout %
(as a % of
Payout
(% of
Target) Base Salary)
Q1
Q2
Q3
Q4
FY’17 Annual Component
FY’17 Total Payout
150.1%
50.0%
73.1%
54.8%
75.6%
78.8%
165.1%
55.0%
80.5%
60.3%
83.1%
86.7%
178.4%
138.7%
114.6%
98.4%
156.9%
144.7%
196.3%
152.6%
126.1%
108.2%
172.6%
159.2%
0.0%
13.6%
73.1%
54.8%
75.6%
55.5%
0.0%
10.9%
58.5%
43.9%
60.4%
44.4%
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2017 Proxy Statement
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Part III—Additional Information
Compensation Discussion and Analysis
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 year 2017
operating performance, bonus payouts were at 55.5% of target for Mr. Offer, 78.8% of target for
Mr. Barbier, and 144.7% of target for Mr. Humphries. Comparatively, in fiscal year 2016, bonus payouts
as a percentage of target were 81.3% of target for Mr. Barbier, and 121.1% of target for Mr. Humphries.
The Compensation Committee believes that bonuses awarded under our incentive bonus plan
appropriately reflected the achievement in the Company’s performance targets and appropriately
rewarded the performance of the named executive officers.
Long-Term Share-and Cash-Based Incentive Compensation
Restricted Share Unit Awards
The Compensation Committee grants share-and cash-based long-term incentives to its senior
executives as an incentive to maximize the Company’s long-term performance and shareholder value
creation. These long-term 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 a direct stake in the business. These awards are also
intended to promote executive retention, as unvested long-term share and cash incentives 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.
Free Cash Flow Long-Term Incentive Plan
In fiscal year 2017, the Compensation Committee determined that long-term incentive awards for
executives and other senior officers generally would be allocated 50% to service-based restricted
share unit awards, 25% to PSU awards that are earned based upon relative TSR performance versus
the S&P 500, and 25% to a long-term incentive plan that measures Flex’s cumulative free cash flow
(FCF LTIP) over a three-year period from fiscal year 2017 to fiscal year 2019. The actual grant value
mix may deviate somewhat from this due to fluctuations in the Monte Carlo valuations for the TSR-
based performance shares. For the FCF LTIP, the awards are payable in shares for the CEO, so 50%
of his long-term compensation is in the form of performance-based equity grants. For the other NEOs,
the FCF LTIP is payable in cash. 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. In addition, the Committee believes that the balance of two different
metrics in its long-term incentive plan, coupled with four different metrics within the annual incentive
plan provides a beneficial balance of a focus on multiple metrics which contribute to shareholder value
creation, and over different time periods. Key features of our long-term incentive awards are as follows:
• Performance-Based RSUs (PSUs): The awards granted in fiscal year 2017 are earned based
upon Flex’s percentile rank of TSR over a 3-year period against the S&P 500 constituents. The
Compensation Committee believes that the relative total shareholder return metric used in the
performance based awards is a widely accepted investor benchmark that appropriately aligns
compensation with performance. The Committee’s expectation is also that if Flex demonstrates
strong performance in the four metrics measured in the short-term incentive plan plus the FCF
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metric in the long-term plan, then TSR results should also be strong (and vice versa). The number
of shares earned is dependent on the percentile rank achieved based on the table below:
Part III—Additional Information
Compensation Discussion and Analysis
S&P 500 TSR Percentile Rank
>75th Percentile
50th – 75th Percentile
50th Percentile
30th – 50th Percentile
30th Percentile
<30th Percentile
Shares Earned
200% of target
Interpolate
100% of target
Interpolate
25% of target
0% of target
• Free Cash Flow LTIP: The 2017 grants are earned based on Flex’s performance against pre-
established cumulative Free Cash Flow goals over the period from fiscal year 2017 through
fiscal year 2019. The Compensation Committee believes the three-year Free Cash Flow target
is an important liquidity metric because it measures the amount of cash generated that is
available to repay debt obligations, make investments, fund acquisitions, repurchase Company
shares and to use for certain other activities. The Compensation Committee will assess goal
achievement for the 2017 grant cycle and approve awards for the NEOs at the end of the
performance cycle following the close of fiscal year 2019. Awards will be measured on a
straight line sliding scale as follows:
% of Goal Achieved
% of Target Paid
<79%
0%
79%
50%
100%
100%
152% and above
200%
• Service-Vested RSUs: Awards granted in fiscal year 2017 vest in four installments of 25% on
each yearly anniversary of the grant date.
The performance-based 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 equal to (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 subsidiary or affiliate, then the award and all of
the Company’s obligations and the executive officer’s rights under the award 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 subsidiary or affiliate. At the current time, Messrs. McNamara and
Humphries are the only NEOs that satisfy the retirement criteria.
The size of the total long-term incentive award 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, 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.
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Part III—Additional Information
Compensation Discussion and Analysis
Elementum Profits Interests Units
We own substantially all of the equity in Elementum Holding Ltd (“Holdco”), which in turn is a significant
shareholder of Elementum SCM (Cayman) Ltd (“Elementum”), along with other investors not affiliated
with us. Elementum is a privately-held software development company founded in 2012 by Flex and
some of our former employees to address the enormous challenges facing global supply chains.
Elementum develops SaaS-based supply chain management, or SCM, solutions to help companies
deal with supply chain complexities through tools designed to control business processes, execute
value chain transactions, and manage supplier relationships. Elementum is a separate organization
from Flex with approximately 150 employees, though we currently indirectly hold a majority ownership
interest. Flex’s CEO, Mike McNamara, is the Chairman of the Board of Elementum, and he and
Christopher Collier, Flex’s Chief Financial Officer, and François Barbier, Flex’s President, Global
Operations and Components provide active contributions to Elementum. Prior to 2015,
Messrs. McNamara, Collier and Barbier had not received any direct financial interest in Elementum or
Holdco in connection with their service to Elementum and Holdco. At its founding, we reserved 3.8% of
Flex’s interest in Holdco as “profits interests,” which are rights to receive a specified percentage of the
appreciation that Flex realizes from its holdings in Holdco.
We believe that our investment in Elementum represents a significant value creation opportunity for
shareholders. Profits interests unit grants are intended to provide incentives for Flex recipients to drive
Elementum’s success. Because the growth and success of Elementum could have positive implications
for Flex as a whole, we believe that it is important to leverage the experience and expertise of our own
officers to support Elementum’s success. We also believe that our overall compensation plans provide a
strong incentive to maximize overall Flex results across the breadth of our business lines and
geographies. In recognition of ongoing contributions to Elementum’s business, on March 23, 2017,
Mr. McNamara received an additional grant of 0.78% profits interests in Holdco at a grant date value of
$213,720, and Mr. Barbier received an award of 0.10% of Holdco at a grant date value of $27,400. Each
award will vest 25% at the end of each year for four years, with the value only recognized upon an
Elementum liquidity event. The Elementum profits interests grants made on March 23, 2017 were
discretionary grants and the value of these grants will be deducted from the Flex equity grant that would
otherwise have been issued to the recipient for the next fiscal year. The primary purpose of the profits
interests grants in Holdco is to provide the executives with a highly-focused compensation tool that is
directly aligned with the goal of creating value within Elementum, and therefore, we believe, for Flex
shareholders overall. Various features of the incentive program are structured to provide alignment with
Flex shareholders and have the appropriate governance controls, including:
• Recipients can only realize value from the profits interests if Flex also realizes value from our
Elementum investment after the award of the profits interests.
• If the recipient leaves Flex, he or she will only be eligible to realize value from the vested
portion of the grant.
• The awards are non-voting.
• The Flex Board’s Nominating and Corporate Governance Committee oversees a process to
monitor and mitigate any potential conflicts of interest.
Grants During Fiscal Year 2017
The number of performance-based and service-based restricted share unit awards as well as, in the
case of Mr. McNamara, the FCF LTIP awards granted to him in fiscal year 2017, and the grant-date fair
value of the restricted share unit awards, are shown in the Grants of Plan-Based Awards in Fiscal Year
2017 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 2017. The figures represent the sum of the restricted share
unit awards granted. The award is an intended 50-50 split between performance-based awards (at
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Part III—Additional Information
Compensation Discussion and Analysis
target) and service-based awards for Mr. McNamara, who received 366,615 time-vested RSUs and
366,615 performance-based RSUs. As noted below, the share-based awards for Messrs. Collier, Barbier
and Humphries are split 33-67 between performance-based awards (at target) and service-based
awards. Mr. Collier received 145,284 RSUs and a target FCF LTIP award of $620,850; Mr. Barbier
received 140,727 RSUs and a target FCF LTIP award of $601,375, Mr. Humphries received 143,155
RSUs and a target FCF LTIP award of $611,750. Mr. Offer received 230,000 RSUs as part of his
agreement to join Flex, where the award was largely intended to cover the value of equity holdings
forfeited from his prior employer.
Long Term Incentive Awards
Performance-Based
Executive Officer
TSR-Based
PSUs
(Shares)
FCF-Based FCF Cash
PSUs LTIP
(Shares) (Target Value)
Elementum Time-Based
(Grant Date RSUs
Value) (Shares)
Michael M. McNamara . . . . .
Christopher Collier . . . . . . . .
Francois P. Barbier . . . . . . .
Paul Humphries . . . . . . . . . .
Scott Offer . . . . . . . . . . . . . .
183,307
48,428
46,909
47,718
—
183,308
—
—
—
—
— $213,720 366,615
$620,850 — 96,856
$601,375 $27,400 93,818
$611,750 — 95,437
— — 230,000(1)
(1) Mr. Offer’s RSU grant was intended to compensate for the value of equity value forfeited at his
prior employer.
Taking these programs into account, Mr. McNamara’s intended total target direct compensation for
fiscal year 2017 was set at approximately the 60th percentile of our peer companies, and the
aggregate total target direct compensation for our remaining NEOs was set at approximately the 55th
percentile of our peer companies. The actual disclosed value of the TSR-based equity awards in the
Summary Compensation Table (SCT) deviated somewhat from the intended value due to fluctuations
in the Monte Carlo valuations. In fiscal 2017, Flex’s strong stock price performance increased the
overall disclosed value of awards relative to the intended grant date value (where such value is
calculated as the target number of shares x the price at grant). The actual value to be earned will be
dependent on Flex’ multi-year TSR performance versus the S&P 500.
Reconciliation of Intended versus Disclosed Summary Compensation Table Value
TSR-Based PSUs
Grant Value Total Long-term Incentives Total Direct Compensation
Executive Officer
Intended
SCT
Disclosed
SCT SCT
Intended Disclosed Intended Disclosed
Michael M. McNamara . $2,349,996 $3,220,704 $9,613,729 $10,484,437 $12,833,429 $13,704,137
Christopher Collier . . . . $ 620,847 $ 850,880 $2,483,391 $ 2,713,424 $ 3,790,059 $ 4,020,092
Francois P. Barbier . . . . $ 601,373 $ 824,191 $2,432,895 $ 2,655,713 $ 3,758,229 $ 3,981,047
Paul Humphries . . . . . . $ 611,745 $ 838,405 $2,446,997 $ 2,673,657 $ 4,287,261 $ 4,513,921
Payouts of Prior Performance Award Grants
During fiscal year 2017, the performance share unit awards completed the applicable performance
cycle and were eligible for payouts. The fiscal year 2014 PSU grant measured our TSR versus the
S&P 500 (60% of the target shares) and the percentile ranking of our performance versus the
Extended EMS Group (40% of the target shares). Based on the following for the period between the
grant date in May 2013 and the performance period end in May 2016, the fiscal year 2014 PSU award
was paid out at 193% of target:
• Our TSR performance of 67% as compared to the S&P 500
• Our TSR percentile at the 71st percentile ranking versus the Extended EMS Group
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2017 Proxy Statement
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Additionally, Flex’s FCF performance share unit cycle paid at 94.6%, reflecting Flex’s more aggressive
operating targets.
Responsible Share Granting Approach
Flex is committed to maintaining a responsible share burn rate. From our direct conversations with
shareholders, we know that this is a critical factor for them and has a direct impact on the value
creation that they can participate in. From a talent perspective, Flex is a technology-driven firm that
needs employees that can meet the complex and rapidly evolving demands of its customers. As such,
Flex needs to provide equity awards that are competitive in the market for talent that is capable of
delivering innovative technology solutions with world class manufacturing and supply chain expertise.
In order to ensure responsible equity usage, we:
• Target a broad-based equity strategy that generally aligns with the median of market.
• Conduct regular market analyses, including a detailed all-employee analysis for fiscal year
2017 grant strategy, to ensure alignment with market participation and award opportunity
values.
• Use an equity grant strategy that ensures that awards are focused on high performers and
those that make a meaningful impact on Flex’s business results.
• Provide equity grants only in geographies and at employee levels in which it is a common
market practice.
• Include direct performance metrics on more senior level participants, and provide longer-term
shareholder alignment for all equity participants with multi-year vesting schedules on restricted
stock unit grants.
• Analyze overall equity spend levels relative to peers and the broader market to ensure that
total Company grant levels are appropriate from a market perspective.
Through these mechanisms, we continually balance the need to provide competitive equity awards
with a strong commitment to limit dilution to shareholders. During fiscal year 2017, we granted non-
adjusted shares of 1.2% of our average common shares outstanding. When considering this grant rate
from an option equivalent perspective, based on the Company’s fungible share ratio of 1.71:1, Flex
granted 2.1% of shares outstanding. This represents a decrease of 0.15% of average common shares
outstanding and 0.2% if looking at the fungible ratio adjusted shares relative to fiscal year 2016. Details
of Flex’s grant history are outlined in more detail below:
Service-Based Share Summary for Fiscal Year Ended March 31,
2017 2016 2015
Shares
Price Shares Price Shares Price
Service-based Service-based Service-based
Unvested share bonus awards
outstanding, beginning of fiscal year 13,167,776 $10.41 14,108,169 $ 8.74 16,456,620 $ 6.98
12.92 6,495,706 11.89 5,989,442 11.26
Granted . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . .
9.45 (6,522,628) 7.99 (6,594,344) 6.91
(913,657) 11.00 (913,471) 9.42 (1,743,549) 7.61
Forfeited . . . . . . . . . . . . . . . . . . . . .
5,666,020
(5,097,196)
Unvested share bonus awards
outstanding, end of fiscal year . . . . 12,822,943 $11.84 13,167,776 $10.41 14,108,169 $ 8.74
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Performance-Based Share Summary for Fiscal Year Ended March 31,
2017 2016 2015
Shares
Price Shares Price Shares Price
Performance-based Performance-based Performance-based
Unvested share bonus awards
outstanding, beginning of fiscal year
Granted . . . . . . . . . . . . . . . . . . . . . .
Vested / Earned . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . .
3,832,300 $11.99 4,885,083 $ 9.76 5,391,500 $ 8.33
912,346 16.60 1,124,016 13.97 973,683 14.81
9.39 (2,006,750) 7.77 (651,712) 7.60
(43,257) 15.38 (170,049) 11.01 (828,388) 7.84
(1,825,750)
Unvested share bonus awards
outstanding, end of fiscal year . . . .
2,875,639 $15.05 3,832,300 $11.99 4,885,083 $ 9.77
Weighted-average ordinary shares
outstanding . . . . . . . . . . . . . . . . . 540,503,000
557,667,000 579,981,000
Gross Shares Granted . . . . . . . . . .
Gross Burn Rate . . . . . . . . . . . . . . .
Fungible Ratio . . . . . . . . . . . . . . . . .
Fungible Option Equivalents
6,578,366
1.22%
1.71
7,619,722 6,963,125
1.37% 1.20%
1.71 1.71
Granted . . . . . . . . . . . . . . . . . . . .
11,249,006
13,029,725 11,906,944
Fungible Option Equivalent
Burn Rate . . . . . . . . . . . . . . . . . .
2.08%
2.34% 2.05%
The “Gross Shares Granted” noted above reflect the number of awards intended to be granted as long-
term incentives to be earned over future service and performance periods. Our discussions with
shareholders also indicate that some may include the impact of shares released from actual awards
earned from prior performance share grants. If this perspective is to be considered, our point of view is
that it is also relevant to consider the impact of shares that have been forfeited over time in order to
provide a more complete view of overall shareholder dilution rates (e.g., shares granted plus/minus
actual performance awards earned minus equity awards forfeited). The table below has been furnished
to provide a more complete view of net shares granted/earned in recent years.
Service-Based Share Summary for Fiscal Year Ended March 31,
2017 2016 2015
Shares
Price Shares Price Shares Price
Service-based Service-based Service-based
Granted . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . .
5,666,020 $12.92 6,495,706 $11.89 5,989,442 $11.26
(913,657) 11.00 (913,471) 9.42 (1,743,549) 7.61
Net Change in Service-Based
Shares . . . . . . . . . . . . . . . . . . . . . . .
4,752,363 $11.84 5,582,235 $10.41 4,245,893 $ 8.74
Performance-Based Share Summary for Fiscal Year Ended March 31,
2017 2016 2015
Shares
Price Shares Price Shares Price
Performance-based Performance-based Performance-based
Actual Vested / Earned Performance
Based Awards . . . . . . . . . . . . . . . . .
1,825,750 $ 9.39 2,006,750 $ 7.77 651,712 $ 7.60
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Part III—Additional Information
Compensation Discussion and Analysis
Net Service- and Performance-Based Share Burn
Summary for Fiscal Year Ended March 31,
2017 2016 2015
Shares
Price Shares Price Shares Price
Service-based Service-based Service-based
Total Net Shares Granted or
Released . . . . . . . . . . . . . . . . . . . . .
6,578,113
7,588,985 4,897,605
Weighted-average ordinary shares
outstanding . . . . . . . . . . . . . . . . . . . 540,503,000
557,667,000 579,981,000
Total Net Shares Granted or
Released Burn Rate . . . . . . . . . . .
Fungible Ratio . . . . . . . . . . . . . . . . . .
Net Fungible Option Equivalents
1.22%
1.71
1.36% 0.84%
1.71 1.71
Granted or Released . . . . . . . . . . .
11,248,573
12,977,164 8,374,905
Net Fungible Option Equivalent
Burn Rate . . . . . . . . . . . . . . . . . . . .
2.08%
2.33% 1.44%
We believe that the equity grant philosophies and governance mechanisms in place allow us to
balance the need to be competitive for overall talent while ensuring that shareholders experience a
responsible level of dilution.
Administration of Equity Award Grants
Equity awards are not timed in relation to the release of material information. Our current policy
provides that equity grants to non-executive new hires and follow on equity grants to non-executives
are made on pre-determined dates five times a year.
Hedging and Pledging Policy
Under our insider trading policy, short-selling, trading in options or other derivatives on our shares or
engaging in hedging transactions are prohibited. Our insider trading policy also prohibits using our
shares as collateral for margin accounts.
Long-Term Deferred Compensation Awards
Each of the NEOs 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. The Compensation Committee’s general policy is to target long-term incentive
compensation (which is deemed to include share-and cash-based compensation and target annual
performance-based contributions to the deferred compensation plan, discussed below) at between the
60th and 65th percentiles of our peer companies, subject to individual variances. 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 year 2017,
Mr. McNamara’s long-term incentive award was targeted at approximately the 60th 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 60th percentile of our peer companies as well.
Under the Company’s 2010 Deferred Compensation Plan, which replaced both the prior long-term
cash incentive awards program and our Senior Executive and Senior Management Deferred
Compensation Plans, the Company in its discretion may make annual contributions in targeted
amounts of up to an aggregate of 37.5% of each participant’s base salary (subject to offsets for non-
U.S. executives’ pension and other benefits) to a non-qualified deferred compensation account, subject
to approval by the Compensation Committee. The contributions are funded 50% based on a percent of
base salary and 50% based on performance, using the same performance measures used under the
incentive bonus plan. For performance below the threshold payout level under the incentive bonus
plan, there will be no performance-based contribution; for performance between the threshold and
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Part III—Additional Information
Compensation Discussion and Analysis
target payout levels, the Compensation Committee may award a contribution ranging from 50% to
100% of the target performance-based contribution; and for performance above the target payout level,
the Compensation Committee may award a contribution of up to 150% for the performance-based
portion of the award. 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 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 elect
to 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.
In addition, initial Company contributions under the 2010 Deferred Compensation 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. Thereafter, Company contributions are limited to 37.5%, as described above, of
each participant’s base salary (subject to offsets for non-U.S. executives’ pension and other benefits).
For fiscal year 2017, Messrs. Collier, Humphries and McNamara each received deferred cash awards
with a value that averaged about 26.4% of their 2016 respective base salaries and Mr. Barbier and
Mr. Offer received no deferred cash award.
Voluntary Contributions
Under the 2010 Deferred Compensation Plan, participating officers may defer up to 70% of their base
salary and bonus, net of certain statutory and benefit deductions.
Additional Company Contributions
The Company may make a discretionary matching contribution in connection with voluntary deferrals to
reflect limitations on our matching contributions under our 401(k) plan.
Additional Information
For additional information about (i) executive contributions to the NEOs’ deferral accounts, (ii) Company
contributions to the deferral accounts, (iii) earnings on the deferral accounts, (iv) withdrawals under the
deferral accounts, and (v) deferral account balances as of the end of fiscal year 2017, see the section
entitled “Executive Compensation—Nonqualified Deferred Compensation in Fiscal Year 2017.”
Benefits
Executive Perquisites
Perquisites represent a small part of the overall compensation program for the named executive officers. In
fiscal year 2017, 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, which are
discussed below. In addition, we reimbursed Mr. Barbier for FICA and Medicare taxes due upon the partial
vesting of his deferred bonuses during fiscal year 2017. 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
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Part III—Additional Information
Compensation Discussion and Analysis
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. On
August 30, 2012, the Compensation Committee eliminated the gross-up that was previously 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 San Jose facility, originally
effective August 30, 2010 and amended to provide a continuation of certain benefits as of July 1, 2016,
we agreed to reimburse Mr. Barbier for certain relocation expenses incurred by Mr. Barbier, including a
housing allowance of $6,600 per month and an auto allowance of up to $1,200 per month until
June 30, 2019. These benefits are quantified under the “All Other Compensation” column in the
Summary Compensation Table. For Mr. Barbier, the amount includes reimbursement of $237,186 for
the incremental taxes due as a result of his relocation to the Company’s San Jose facility.
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 fiscal year. For fiscal year 2017, we elected not to make a
discretionary contribution. We do not provide an excess 401(k) plan for our executive officers.
Mr. Barbier participates in defined contribution pension schemes mandated under French law. For
fiscal year 2017, the Company made required contributions aggregating approximately $72,403.
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.” The Compensation Committee had determined that a single
trigger for acceleration of the executives’ deferred compensation accounts was appropriate under the
Senior Executive Deferred Compensation Plan and the Senior Management Deferred Compensation
Plan in order to provide certainty of vesting for benefits that represent the executives’ primary source of
retirement benefits. No NEOs have unvested awards under the Senior Executive Deferred
Compensation Plan or the Senior Management Deferred Compensation Plan.
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Part III—Additional Information
Compensation Discussion and Analysis
Under our 2010 Deferred Compensation Plan, vesting of initial and annual awards will accelerate in
cases of a change in control only if employment is terminated without cause or by the executive for
good reason within two years of the change in control, i.e., “double trigger” accelerated vesting. 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 will automatically accelerate, unless and to the extent
such award is either to be assumed or replaced. 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. 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.
Executive Share Ownership Guidelines
In fiscal year 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 share ownership 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 though Mr. McNamara currently holds nearly 20 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 and vested restricted share units 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 remains an officer. The Company has determined
that the named executive officers either are in compliance or are on target to be in compliance with the
requirements under the guidelines by the applicable deadline.
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 occurs within
36 months of the publication of the audited financial statements that are restated.
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Part III—Additional Information
Compensation Risk Assessment
COMPENSATION RISK ASSESSMENT
With the assistance of Mercer, the Compensation Committee reviewed our compensation policies and
practices during fiscal year 2017 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:
• The Company’s pay levels are generally aligned with market pay levels (i.e., not so low that
management would pursue extreme risk to achieve significantly higher pay, nor too high to
have excessive incentives to meet or exceed target payouts).
• The Company’s compensation programs utilize best practices designed to mitigate risk,
including, but not limited to:
a balanced mix of short-term cash and long-term equity pay;
an incentive programs fund based on a mix of performance metrics and over varying time
frames (not just short-term revenue or net income);
a long-term incentive program that includes time and performance-vested awards, where the
performance awards require favorable long-term shareholder results to deliver value;
incentive programs that have payout caps and reasonable leverage;
share ownership guidelines and anti-hedging/pledging policies that encourage long-term
equity ownership;
our Committee having the ability to exercise discretion over goals; and
a Board-adopted, incentive compensation recoupment policy.
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Part III—Additional Information
Executive Compensation
EXECUTIVE COMPENSATION
The following table sets forth the fiscal year 2015, 2016 and 2017 compensation for:
• Michael M. McNamara, our chief executive officer;
• Christopher Collier, our chief financial officer; and
• Francois P. Barbier, Paul Humphries and Scott Offer.
The executive officers included in the Summary Compensation Table are referred to in this proxy
statement as our named executive officers or NEOs. 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 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
Year
Salary
($)(1)
Non-Equity
Incentive
Share Plan
Bonus Awards Compensation
($)(2) ($)(3) ($)(4)
Change in
Pension
Value and
Nonqualified
Deferred
Compensation All Other
Earnings Compensation
($)(5) ($)(6) Total ($)
Michael M. McNamara . . . . . 2017 $1,250,000 $
Chief Executive Officer
Christopher Collier . . . . . . . . 2017 $ 700,000 $
Chief Financial Officer
— $10,484,437 $1,969,700 $1,045,591 $ 43,877 $14,793,605
2016 $1,250,000 $481,055 $ 9,432,393 $1,524,874 $
— $ 55,782 $12,525,799
2015 $1,250,000 $528,965 $ 9,004,569 $3,179,160 $ 252,445 $ 89,901 $14,305,040
— $ 2,092,574 $1,228,901 $ 147,039 $ 44,683 $ 4,213,196
— $ 46,115 $ 3,474,359
38,559 $ 66,453 $ 4,808,322
46,979 $470,267 $ 4,467,298
— $350,526 $ 3,711,334
— $451,071 $ 4,543,076
2016 $ 675,000 $126,690 $ 2,039,304 $ 603,850 $
2015 $ 650,000 $556,593 $ 2,284,397 $1,212,320 $
— $ 2,054,338 $1,185,715 $
2016 $ 695,000 $ 64,242 $ 2,020,574 $ 621,742 $
2015 $ 675,000 $ 64,011 $ 2,094,046 $1,258,948 $
Francois P. Barbier . . . . . . . . 2017 $ 710,000 $
President, Global
Operations and
Components
President, High
Reliability Solutions
Paul Humphries . . . . . . . . . . 2017 $ 710,000 $
2016 $ 695,000 $167,550 $ 1,979,824 $ 925,868 $
2015 $ 675,000 $163,949 $ 2,094,046 $1,560,686 $
Scott Offer* . . . . . . . . . . . . . 2017 $ 316,955 $625,000 $ 3,275,200 $ 244,077 $
— $ — $
— $ — $
— $ 2,061,907 $1,700,645 $ 128,118 $ 22,351 $ 4,623,021
— $ 23,636 $ 3,791,878
19,403 $ 22,901 $ 4,535,985
6,193 $ 4,467,424
—
—
Executive Vice President
and General Counsel
— $
— $
— $
2016 $
2015 $
— $
— $
— $
— $
— $
— $
* Mr. Offer was appointed Executive Vice President and General Counsel effective September 6, 2016.
(1) Each of the above mentioned named executive officers, except Mr. Barbier, contributed a portion
of his fiscal year 2017 salary to his 401(k) savings plan account. All amounts contributed are
included under this column.
(2) For fiscal years 2016 and 2015, this column shows (except with respect to Mr. Offer) the unvested
portion of deferred compensation accounts that vested during these respective fiscal years. No
deferred compensation amounts vested during fiscal year 2017. For additional information about
the Company’s deferred compensation arrangements, see the section entitled “Compensation
Discussion and Analysis—Deferred Compensation” of this proxy statement and the discussion
under the section entitled “Nonqualified Deferred Compensation in Fiscal Year 2017” of this proxy
statement. For Mr. Offer, this amount is related to a sign on bonus upon commencement of
employment with Flex.
(3) Share awards consist of service-based, performance-based restricted share unit awards, and
Elementum profits interests 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
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Part III—Additional Information
Executive Compensation
recognized by the named executive officers. Instead, the amounts reflect the grant date fair value
for grants made by us in fiscal years 2015, 2016 and 2017, calculated in accordance with FASB
ASC Topic 718. The performance-based restricted share unit awards included in this column are
at the target number of shares as follows for fiscal year 2017: 366,615 performance-based
restricted share unit awards, or $5,570,713 for Mr. McNamara; 48,428 performance-based
restricted share unit awards, or $850,880 for Mr. Collier; 46,909 performance-based restricted
share unit awards, or $824,191 for Mr. Barbier; and 47,718 performance-based restricted share
unit awards, or $838,405 for Mr. Humphries. If the maximum payout is earned, the value of the
performance-based restricted share unit awards would be 200% of those amounts as follows:
$11,141,426 for Mr. McNamara; $1,701,760 for Mr. Collier; $1,648,382 for Mr. Barbier; and
$1,676,810 for Mr. Humphries.
For additional information regarding the assumptions made in calculating the amounts reflected in this
column, see Note 3 to our audited consolidated financial statements, “Share-Based Compensation,”
included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2017.
(4) The amounts in this column represent incentive cash bonuses earned in fiscal year 2017,
including the following amounts paid out under the FCF LTIP: $622,233 for Mr. Collier; $570,381
for Mr. Barbier; and $570,381 for Mr. Humphries. For additional information, see the section
entitled “Compensation Discussion and Analysis—Fiscal Year 2017 Executive
Compensation—Incentive Bonus Plan” of this proxy statement.
(5) The amount in this column for fiscal year 2017 represents the above-market earnings on the
vested portions of the nonqualified deferred compensation accounts of Messrs. McNamara,
Collier, Barbier and Humphries in fiscal year 2017. None of our NEOs participated in any defined
benefit or actuarial pension plans in fiscal year 2017. Above-market earnings represent the
difference between market interest rates determined pursuant to SEC rules and earnings credited
to the vested portion of the named executive officers’ deferred compensation accounts. See the
Nonqualified Deferred Compensation in Fiscal Year 2017 table of this proxy statement for
additional information.
(6) The following table provides a breakdown of compensation included in the “All Other
Compensation” column for fiscal year 2017:
Pension/
Savings
Plan
Company
Match
Expenses/
Social
Security
($)(1)
$10,600
$10,850
$72,403
$10,750
$ 6,193
Name
Michael M. McNamara . .
Christopher Collier . . . . .
Francois P. Barbier . . . . .
Paul Humphries . . . . . . .
Scott Offer . . . . . . . . . . .
Medical/
Enhanced
Long-Term
Disability
($)(2)
$14,399
$ 2,479
$37,947
$11,601
—
$
Personal
Aircraft
Usage
($)(3)
$18,878
$31,354
—
$
—
$
—
$
Relocation/
Expatriate
Assignment
Expenses
($)(4)
—
$
$
—
$109,828
—
$
—
$
Tax
Reimbursements
($)(5)
—
$
$
—
$250,089
—
$
—
$
Total ($)
$ 43,877
$ 44,683
$470,267
$ 22,351
6,193
$
(1) The amounts in this column represent the Company’s regular employer matching contributions to
the 401(k) saving plan accounts for Messrs. McNamara, Collier 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 Euros
based on the average exchange rate for the 2017 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. An amount equal to $30,910 paid to Mr. Barbier was converted into dollars
from Euros based on the average exchange rate for the 2017 fiscal year.
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(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 the costs associated with Mr. Barbier’s relocation to the Company’s San
Jose facility for housing allowances of $78,000, vehicle allowances of $14,400, relocation fees of
$1,000 and Home Leave Airfare of $16,428.
(5) For Mr. Barbier, the amount includes reimbursement of $237,186 for the incremental taxes due as
a result of his relocation to the Company’s San Jose facility and $12,903 for the payment of Basic
Social Security (which such amount was converted into dollars from Euros based on the average
exchange rate for the 2017 fiscal year). See the section entitled “Compensation Discussion and
Analysis—Benefits—Executive Perquisites” of this proxy statement.
Grants of Plan-Based Awards in Fiscal Year 2017
The following table presents information about non-equity incentive plan awards and restricted share
unit awards that we granted in our 2017 fiscal year to our named executive officers. We did not grant
any stock options to our named executive officers during our 2017 fiscal year.
All Other
Share Grant
Awards: Date
Estimated Future Payouts Under Estimated Future Payouts Under Number of Fair
Non-Equity Incentive Plan Awards (1) Equity Incentive Plan Awards (2) Shares of Value of
Stock or Share
Threshold
Target Maximum Threshold Target Maximum Units Awards
($)
($) ($) (#) (#)
(#) (#) ($)(6)
45,826 183,307 366,614
91,654 183,308 366,616
Name
Grant
Date
Michael M. McNamara . 06/14/2016
06/14/2016
06/14/2016
03/23/2017
$3,220,704
$2,350,009
366,615(3)$4,700,004
780,000(4)$ 213,720
$ 850,880
96,856(3)$1,241,694
$ 824,191
93,818(3)$1,202,747
27,400
100,000(4)$
Christopher Collier . . 06/14/2016
06/14/2016
12,107 48,428
96,856
— $1,250,000 $2,500,000 $6,250,000
— $ 385,000 $ 770,000 $1,925,000
— $ 310,425 $ 620,850 $1,241,700
Francois P. Barbier . 06/14/2016
06/14/2016
03/23/2017
11,727 46,909
93,818
— $ 390,500 $ 781,000 $1,952,500
— $ 300,688 $ 601,375 $1,202,750
Paul Humphries . . . . 06/14/2016
06/14/2016
11,929 47,718
95,436
$ 838,405
95,437(3)$1,223,502
— $ 390,500 $ 781,000 $1,952,500
— $ 305,875 $ 611,750 $1,223,500
Scott Offer . . . . . . . . 11/30/2016
11/30/2016
180,000(5) $2,563,200
50,000(5) $ 712,000
— $ 220,000 $ 440,000 $1,100,000
—
— $
— $
— $
(1) These amounts show the range of possible payouts under our cash incentive programs for fiscal
year 2017. For Mr. McNamara, the amounts correspond to the range of possible payouts under the
incentive bonus plan. The maximum payment represents 250% of the target payment. The threshold
payment represents 50% of target payout levels. For Messrs. Collier, Barbier and Humphries, the
amounts reflect the range of payouts possible under the incentive bonus plan and the Free Cash
Flow LTIP awarded on April 1, 2016. The maximum payment represents 250% and 200% of the
target payment for our incentive cash bonus program and FCF LTIP, respectively. The threshold
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Executive Compensation
payment represents 50% of target payout levels. For the annual incentive bonus plan, the amounts
actually earned in fiscal year 2017 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 2017 Executive Compensation—Incentive Bonus Plan” and
“Compensation Discussion and Analysis—Fiscal Year 2017 Executive Compensation—Long-Term
Share- and Cash-Based Incentive Compensation” of this proxy statement.
(2) These columns show the range of estimated future vesting of performance-based restricted share
unit awards granted in fiscal year 2017 under our 2010 Equity Incentive Plan. The restricted share
unit awards cliff vest after three years, with vesting being based on percentile rank of the
Company’s TSR in the constituents of the S&P 500 Index. The maximum payment for each
executive officer represents 200% of the target payment. The threshold payment for each named
executive officer represents 25% of target payout levels. In addition, under our FCF LTIP,
Mr. McNamara was granted 183,308 performance-based restricted share unit awards which cliff
vest after three years, with vesting based on the cumulative three-year increase of free cash flow
from operations of the Company. The maximum payment for Mr. McNamara represents 200% of
the target payment. The threshold payment for Mr. McNamara represents 50% of target payout
levels. For additional information, see the section entitled “Compensation Discussion and
Analysis—Fiscal Year 2017 Executive Compensation—Long-Term Share- and Cash-Based
Incentive Compensation” of this proxy statement.
(3) These amounts show the number of service-based restricted share units granted in fiscal year
2017 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 Share-and-Cash Based Incentive
Compensation—Grants During Fiscal Year 2017” of this proxy statement.
(4) These amounts show the number of profits interests shares of Elementum granted in fiscal year
2017 under the Elementum plan. For each of Messrs. McNamara and Barbier, the shares vest in
four annual installments at a rate of 25% per year, provided that the executive continues to remain
employed on the vesting dates, and the values are only recognized upon an Elementum liquidity
event.
(5) These amounts show the number of service-based restricted share units granted in fiscal year
2017 under our 2010 Equity Incentive Plan for Mr. Offer. For additional information, see the
section entitled “Compensation Discussion and Analysis—Long-Term Share-and-Cash Based
Incentive Compensation—Grants During Fiscal Year 2017” of this proxy statement. These
amounts show the number of service-based restricted share units granted in fiscal year 2017
under our 2010 Equity Incentive Plan in connection with the hiring of Mr. Offer. With respect to
each grant, 180,000 restricted share units vest in in four annual installments at a rate of 25% per
year, and 50,000 restricted share units cliff vest three years after the date of grant, provided that
Mr. Offer continues to remain employed on the vesting dates.
(6) This column shows the grant date fair value of service-based and performance-based restricted
share unit awards, at the target level, under FASB ASC Topic 718 granted to our named executive
officers in fiscal year 2017. 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, the grant date 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,
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Part III—Additional Information
Executive Compensation
“Share-Based Compensation,” included in our Annual Report on Form 10-K for the fiscal year
ended March 31, 2017. These amounts reflect our accounting expense, and do not correspond to
the actual compensation that will be received by the named executive officers.
Outstanding Equity Awards at 2017 Fiscal Year-End
The following table presents information about outstanding share awards (including Elementum profits
interests) held by our named executive officers as of March 31, 2017. The table shows information
about: (i) service-based restricted share units; (ii) performance-based restricted share units; and
(iii) Elementum profits interests.
The market value of the share awards, other than Elementum profits interests, is based on the closing
price of our ordinary shares as of March 31, 2017, which was $16.80. The market value of Elementum
profits interests is based on a valuation of such interests at $0.274 per unit. For performance-based
restricted share units, the number of unearned shares and the market values shown assume all
performance criteria are met at the maximum payout level. For additional information on our equity
incentive programs, see the section entitled “Compensation Discussion and Analysis—Long-Term
Incentive Programs—Share-Based Compensation” of this proxy statement.
Share Awards
Equity
Equity Incentive
Incentive Plan
Plan Awards:
Awards: Market
Number or Payout
of Value of
Unearned Unearned
Shares, Shares,
Units or Units or
Other Other
Rights Rights
That That
Have Not Have Not
Vested Vested
(#)(1) ($)
Market
Number of Value of
Shares or Shares or
Units of Units of
Stock That Stock That
Have Not Have Not
Vested Vested
(#) ($)
Name
Michael M. McNamara . . . . . . . . . . . . . . 2,182,832(2) $45,626,532 2,182,832(3) $36,671,578
336,904(4) $ 5,659,987 320,296(5) $ 5,380,973
Christopher Collier . . . . . . . . . . . . . . . . .
555,968(6) $ 9,340,262 305,058(7) $ 5,124,974
Francois P. Barbier . . . . . . . . . . . . . . . . .
345,922(8) $ 5,811,490 306,676(9) $ 5,152,157
Paul Humphries . . . . . . . . . . . . . . . . . . .
230,000(10) $ 3,864,000 — $ —
Scott Offer . . . . . . . . . . . . . . . . . . . . . . . .
(1) This column includes performance-based restricted share unit awards granted in fiscal years
2015, 2016 and 2017 under our 2010 Equity Incentive Plan based on a 200% payout. For grants
made in fiscal year 2015, 2016 and 2017, 100% of the restricted share unit awards vest after
three years, if the performance criteria are met. Vesting of the performance-based awards for
2015, 2016 and 2017 will depend on the Company’s total shareholder return versus total
shareholder return of the constituents of the S&P 500.
(2) 112,500 shares vest on May 21, 2017; 182,649 shares vest at a rate of 91,324 shares per year for
two years, with the first vesting date on June 26, 2017; 269,628 shares vest at a rate of 89,876
shares per year for three years, with the first vesting date on June 10, 2017; 1,004,473
Elementum profit interest shares vest at a rate of 334,824 shares per year for three years, with
the first vesting date on October 15, 2017; 366,615 shares vest at a rate of 91,654 shares per
year for four years, with the first vesting date on June 14, 2017; and 780,000 Elementum profit
interest shares vest at a rate of 195,000 shares per year for four years, with the first vesting date
on March 23, 2018.
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(3) 730,594 shares vest on June 26, 2017 assuming a maximum payout of 200%; 719,008 shares
vest on June 10, 2018 assuming a maximum payout of 200%; and 733,230 shares vest on
June 14, 2019 assuming a maximum payout of 200%.
(4) 27,500 shares vest on May 21, 2017; 60,069 shares vest at a rate of 30,034 shares per year for
two years, with the first vesting date on June 26, 2017; 77,479 shares vest at a rate of 25,826
shares per year for three years, with the first vesting date on June 10, 2017; 75,000 Elementum
profit interest shares vest at a rate of 25,000 shares per year for three years, with the first vesting
date on October 15, 2017; and 96,856 shares vest at a rate of 24,214 shares per year for
four years, with the first vesting date on June 14, 2017.
(5) 120,136 shares vest on June 26, 2017 assuming a maximum payout of 200%; 103,304 shares
vest on June 10, 2018 assuming a maximum payout of 200%; and 96,856 shares vest on
June 14, 2019 assuming a maximum payout of 200%.
(6) 43,750 shares vest on May 21, 2017; 55,063 shares vest at a rate of 27,531 shares per year for
two years, with the first vesting date on June 26, 2017; 75,837 shares vest at a rate of 25,279
shares per year for three years, with the first vesting date on June 10, 2017; 187,500 Elementum
profit interest shares vest at a rate of 62,500 shares per year for three years with the first vesting
date on October 15, 2017; 93,818 shares vest at a rate of 24,214 shares per year for four years,
with the first vesting date on June 14, 2017 and 100,000 Elementum profit interest shares vest at
a rate of 25,000 shares per year for four years, with the first vesting date on March 23, 2018.
(7) 110,126 shares vest on June 26, 2017 assuming a maximum payout of 200%; 101,114 shares
vest on June 10, 2018 assuming a maximum payout of 200%; and 93,818 shares vest on
June 14, 2019 assuming a maximum payout of 200%.
(8) 43,750 shares vest on May 21, 2017; 55,063 shares vest at a rate of 27,531 shares per year for
two years, with the first vesting date on June 26, 2017; 75,837 shares vest at a rate of 25,279
shares per year for three years, with the first vesting date on June 10, 2017; 75,835 Elementum
profit interest shares vest at a rate of 25,279 shares per year for three years with the first vesting
date on October 15, 2017; and 95,437 shares vest at a rate of 23,859 shares per year for four
years, with the first vesting date on June 14, 2017.
(9) 110,126 shares vest on June 26, 2017 assuming a maximum payout of 200%; 101,114 shares
vest on June 10, 2018 assuming a maximum payout of 200%; and 95,436 shares vest on
June 14, 2019 assuming a maximum payout of 200%.
(10)180,000 shares vest at a rate of 45,000 shares per year for four years, with the first vesting date
on November 30, 2017; and 50,000 shares vest on November 30, 2019.
(11)18,750 shares vest on May 21, 2017; 12,514 shares vest on June 26, 2017; and 13,430 shares
vest on June 10, 2017.
(12)50,058 shares vest on June 26, 2017 assuming a maximum payout of 200%.
Option Exercises and Shares Vested in Fiscal Year 2017
The following table presents information for each of our named executive officers on (1) stock option
exercises during fiscal year 2017, including the number of shares acquired upon exercise and the
value realized and (2) the number of shares acquired upon the vesting of share awards in the form of
restricted share units during fiscal year 2017 and the value realized, in each case before payment of
any applicable withholding tax and broker commissions.
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Executive Compensation
Option Awards Share 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 . . . . . . . . . . . . . — $ — 1,274,700 $15,814,018
Christopher Collier . . . . . . . . . . . . . . . . . — $ — 308,160 $ 3,821,771
Francois P. Barbier . . . . . . . . . . . . . . . . — $ — 471,810 $ 5,856,121
Paul Humphries . . . . . . . . . . . . . . . . . . . 303,489 $2,248,359 468,060 $ 5,810,258
Scott Offer . . . . . . . . . . . . . . . . . . . . . . . — $ — — $ —
(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 2017
Nonqualified Deferred Compensation in Fiscal Year 2017
Each of our named executive officers participates in our 2010 Deferred Compensation Plan, except
for Mr. Barbier, who no longer participates in this plan. Our deferred compensation program is
intended to promote retention by providing a long-term savings opportunity on a tax-efficient basis.
Beginning in fiscal year 2011, we replaced our existing deferred compensation plans with the 2010
Deferred Compensation Plan. Under the 2010 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. During fiscal year 2015, the Compensation Committee approved a
change to the funding of the deferred compensation program whereby 50% of the funding would be
paid as a percent of base salary and 50% would be performance-based. This aligns to the distribution
of performance and time-based elements in our other long-term compensation programs. Under this
plan, we may make annual contributions, in amounts up to 37.5% 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 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, Mr. McNamara 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.
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Part III—Additional Information
Executive Compensation
Prior to fiscal year 2011, Messrs. Barbier, Collier and Humphries participated in the Company’s senior
management deferred compensation plan (referred to as the senior management 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 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—Long-Term Deferred Compensation
Awards” of this proxy statement and “Executive Compensation—Potential Payments Upon
Termination or Change of Control” below.
The following table presents information for fiscal year 2017 about: (i) contributions to the named
executive officers’ deferred compensation plan accounts by the executive; (ii) contributions to the
NEOs’ deferred compensation plan accounts by the Company; (iii) aggregate earnings (or losses) on
the deferred compensation plan accounts; (iv) aggregate withdrawals and distributions from the
deferred compensation plan accounts; and (v) the deferred compensation plan account balances as of
the end of the fiscal year. For fiscal year 2017, Messrs. McNamara, Collier and Humphries each
received deferred compensation awards that averaged approximately 26.4% of their 2016 respective
base salaries.
Nonqualified Deferred Compensation Table
Executive
Contributions
in Last
Fiscal Year
($)(1)
Aggregate
Registrant Earnings
Contributions (Losses)
in Last in Last
Fiscal Year Fiscal Year
($)(2) ($)(3)
Aggregate
Aggregate Balance
Withdrawals/ at Fiscal
Distributions Year-End
($)(4) ($)(5)
Name
Michael M. McNamara . . . . . $
—
Christopher Collier . . . . . . . . $146,052
Francois P. Barbier(6) . . . . . $
—
Paul Humphries . . . . . . . . . . $ 29,583
—
Scott Offer . . . . . . . . . . . . . . $
$329,794
$178,089
$
$183,365
$
— $
— $
$1,696,247 $ — $18,452,742
$ 276,046 $ — $ 2,701,421
74,944 $ — $ 912,234
$ 245,887 $95,703 $ 2,362,688
— $ — $ —
(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, 2017. These amounts, including any earnings or losses thereon, will be reported under
the “Bonus” column of the Summary 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 change
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Part III—Additional Information
Executive Compensation
in control of the Company, see the sections entitled “Compensation Discussion and
Analysis—Long-Term Deferred Compensation Awards” of this 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 amount in this column reflects distributions made to Mr. Humphries during the fiscal year 2017.
(5) The amounts in this column have previously been reported in the Summary Compensation Table
for this and prior fiscal years as follows: Michael M. McNamara—$18,452,742; Christopher
Collier—$1,746,890; Francois P. Barbier—$1,040,409; and Paul Humphries—$1,015,232. The
amounts in this column include the following unvested balances related to the respective 2010
deferred compensation plan account of the named executive officers: Michael M.
McNamara—$1,749,859; Christopher Collier—$699,451; and Paul Humphries—$666,724.
(6) Mr. Barbier no longer participates in the 2010 Deferred Compensation Plan; the information in the
table reflects earnings on the account balance of this senior management plan account.
Potential Payments Upon Termination or Change in Control
As described in the section entitled “Compensation Discussion and Analysis” of this proxy statement,
our named executive officers do not have employment or severance agreements with us. However,
our named executive officers are entitled to certain termination and change in control benefits under
each executive’s deferred compensation plan and under certain equity awards.
Acceleration of Vesting of Deferred Compensation
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.
Acceleration of Vesting of Equity Awards
The number of unvested equity awards held by each named executive officer as of March 31, 2017 is
listed above in the Outstanding Equity Awards at 2017 Fiscal Year-End table. All unvested outstanding
equity awards held by our named executive officers at the end of fiscal year 2017 were granted under
the 2010 Plan and the Elementum 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.
Treatment of Certain Awards Upon Retirement
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 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. At the current time, Messrs. McNamara and
Humphries are the only NEOs that satisfy the retirement criteria.
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Part III—Additional Information
Executive Compensation
Acceleration of Vesting Upon a Change in Control
Our equity incentive plans are “double trigger” plans, meaning that unvested restricted share unit
awards vest immediately only if (i) there is a change in control of the Company and (ii)(x) such 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.
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 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.
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,
immediately upon an involuntary termination of service following a change of control all forfeiture
restrictions on such award will lapse.
Among our named executive officers, 2,022,808 of Mr. McNamara’s unvested restricted share unit
awards, 422,052 of Mr. Collier’s unvested restricted share unit awards, 420,997 of Mr. Barbier’s unvested
restricted share unit awards, 423,425 of Mr. Humphries’ unvested restricted share unit awards, and 230,000
of Mr. Offer’s unvested restricted share unit awards include the change in control provision above.
Potential Payments Upon Termination or Change in Control
as of March 31, 2017
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 a change of control with a termination of employment and
(ii) the accelerated vesting of unvested stock options and restricted share unit 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, or (iii) retirement.
Calculations for this table assume that the triggering event took place on March 31, 2017, the last
business day of our 2017 fiscal year, and are based on the price per share of our ordinary shares on
such date, which was $16.80. 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 and No
Control with Assumption
Termination: of Award:
Accelerated Accelerated
Vesting of Vesting of
Deferred Restricted
Compensation Share Unit
(1) Awards(2)
Retirement
Eligible: Pro
Rata Vesting
Total of
in Event of Performance
Change Share Units
in Control (3)
Name
Michael M. McNamara . . . . . . . . . . . . . . $1,749,859
Christopher Collier . . . . . . . . . . . . . . . . . $ 699,451
Francois P. Barbier . . . . . . . . . . . . . . . . $
Paul Humphries . . . . . . . . . . . . . . . . . . . $ 666,724
Scott Offer . . . . . . . . . . . . . . . . . . . . . . . $
$33,983,174 $35,733,033 $10,908,072
$ 7,090,474 $ 7,789,925 $ —
— $ 7,072,750 $ 7,072,750 $ —
$ 7,113,540 $ 7,780,264 $ 1,573,958
— $ 3,864,000 $ 3,864,000 $ —
(1) The amount shown for each executive represents the portion of the unvested balance of the
executive’s deferred compensation account that would vest in the event the executive is
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Part III—Additional Information
Executive Compensation
terminated by the Company without cause or resigns with good reason following a change in
control of the Company (as defined in the 2010 deferred compensation plan). No executive’s
deferred compensation account will vest upon a change of control (without any termination
following such change in control) or upon the executive’s death.
(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.
Performance-based shares may be accelerated on a pro-rata basis 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 31, 2017, the assumed date of the triggering event.
(3) For termination of service due to retirement, then (i) the performance award will not terminate and
(ii) a pro-rata number of vested shares shall be issued to the upon the vesting of the award
pursuant to achieving the performance criteria.
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Part III—Additional Information
Equity Compensation Plan Information
EQUITY COMPENSATION PLAN INFORMATION
As of March 31, 2017, we maintained only our 2010 Plan, which replaced (i) the 2001 Plan, (ii) the
2002 Interim Incentive Plan, (iii) the 2004 Award Plan for New Employees, and (iv) the Solectron
Corporation 2002 Stock Plan, which we refer to collectively as the Prior Plans. In addition, we
maintained the NEXTracker, Inc. 2014 Equity Incentive Plan and the BrightBox Technologies, Inc.
2013 Stock Incentive Plan (as amended), which we assumed as part of acquisitions during fiscal
years 2016 and 2017, respectively. The following table provides information about equity awards
outstanding under these plans as of March 31, 2017. The below does not reflect the effect of our
fiscal 2018 grants under the 2010 Plan and the vesting of awards in fiscal 2018. See page 32 for
certain updated information as of June 29, 2017.
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(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 15,840,909 $8.97 18,124,973(3)
Equity compensation plans not approved by
shareholders(4)(5) . . . . . . . . . . . . . . . . . . . . . . . . 3,338,510(6) $3.34 —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,179,419(7) $3.75 18,124,973(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) 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 Solectron Plan was consolidated into the
2010 Plan in 2010. Options granted under the Solectron Plan generally 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.
(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
the 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) In connection with the acquisition of NEXTracker, Inc. on September 28, 2015, we assumed the
NEXTracker, Inc. 2014 Equity Incentive Plan, including all outstanding options to purchase
NEXTracker, Inc. common stock with exercise prices equal to, or less than, $7.34 per share. Each
assumed option was converted into an option to acquire our ordinary shares at the applicable
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Part III—Additional Information
Equity Compensation Plan Information
exchange rate of 1.4033. As a result, we assumed approximately 5.6 million unvested restricted
stock units and unvested options with exercise prices ranging from between $0.08 and $10.65 per
ordinary share. Options granted under this plan generally have an exercise price less than the fair
value of the underlying ordinary shares on the date of grant. The shares generally vest over
four years, and options generally expire ten years from the date of grant. Unvested shares are
forfeited upon termination of employment.
(5) In connection with the acquisition of BrightBox Technologies, Inc. on May 16, 2016, we assumed
the BrightBox Technologies, Inc. 2013 Stock Incentive Plan (as amended), including all
outstanding options to purchase BrightBox Technologies, Inc.’ common stock with exercise prices
equal to, or less than, $0.08 per share. Each assumed option was converted into an option to
acquire our ordinary shares at the applicable exchange rate of 6.4959. As a result, we assumed
approximately 0.2 million unvested options with exercise prices ranging from between $0.45 and
$0.52 per ordinary share. Options granted under this plan generally have an exercise price less
than the fair value of the underlying ordinary shares on the date of grant. The shares generally
vest over four years, and options generally expire ten years from the date of grant. Unvested
shares are forfeited upon termination of employment.
(6) Consists of ordinary shares issuable upon the exercise of outstanding stock options.
(7) Includes 17,242,019 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 2,662,544 shares
would be issued if the maximum market performance level is achieved.
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Part III—Additional Information
Security Ownership of Certain Beneficial Owners and Management
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 16, 2017, except as otherwise indicated,
regarding the beneficial ownership of our ordinary shares by:
• each shareholder known to us to be the beneficial owner of more than 5% of our outstanding
ordinary shares;
• each of our named executive officers;
• each director; and
• all executive officers and directors as a group.
Unless otherwise indicated, the address of each of the individuals named below is: c/o Flex 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 and Forms 3, 4, and 5
filed with the SEC. 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 June 16, 2017, and ordinary shares subject to restricted share unit awards that vest within
60 days of June 16, 2017 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.
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Part III—Additional Information
Security Ownership of Certain Beneficial Owners and Management
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
531,607,660 ordinary shares outstanding on June 16, 2017 plus the number of ordinary shares that
such person or group had the right to acquire on or within 60 days after June 16, 2017.
Shares Beneficially
Owned
Number of
Name and Address of Beneficial Owner Shares Percent
5% Shareholders:
Capital Research Global Investors(1)
333 South Hope Street, Los Angeles, CA 90071 . . . . . . . . . . . . . . . . 53,844,422 10.13%
Boston Partners(2)
One Beacon Street, 30th Floor, Boston, MA 02108 . . . . . . . . . . . . . . . 53,313,920 10.03%
PRIMECAP Management Company(3)
177 E. Colorado Blvd., 11th Floor, Pasadena, CA 91105 . . . . . . . . . . . 51,632,805 9.71%
Glenview Capital Management, LLC(4)
767 Fifth Avenue, 44th Floor, New York, NY 10153 . . . . . . . . . . . . . . . 36,428,016 6.85%
Janus Capital Management LLC(5)
151 Detroit Street, Denver, CO 80206 . . . . . . . . . . . . . . . . . . . . . . . . 28,222,092 5.31%
Shares Beneficially
Owned
Number of
Name of Beneficial Owner Shares Percent
Named Executive Officers and Directors:
Michael McNamara(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,559,511 *
Christopher Collier(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568,766 *
Paul Humphries(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397,077 *
Francois Barbier(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,594 *
Scott Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 *
Willy Shih(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206,895 *
William Watkins(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,226 *
Daniel Schulman(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,271 *
Lay Koon Tan(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,122 *
Lawrence Zimmerman(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,972 *
Michael Capellas(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,951 *
Marc Onetto(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,925 *
All executive officers and directors as a group (13 persons)(12) . . . . . . 4,449,310 0.83%
* Less than 1%.
(1) Based on information supplied by Capital Research Global Investors in an amended Schedule
13G filed with the SEC on February 13, 2017. Capital Research Global Investors has sole voting
power and dispositive power over all of these shares.
(2) Based on information supplied by Boston Partners in an amended Schedule 13G filed with the
SEC on June 8, 2017. Boston Partners is deemed to have sole voting power for 41,799,795 of
these shares, shared voting power of 73,733 of these shares and sole dispositive power for all of
these shares.
(3) Based on information supplied by PRIMECAP Management Company in an amended Schedule
13G filed with the SEC on February 9, 2017. PRIMECAP Management Company has sole voting
power over 19,653,626 of these shares and sole dispositive power over all of these shares.
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Part III—Additional Information
Security Ownership of Certain Beneficial Owners and Management
(4) Based on information supplied by Glenview Capital Management, LLC (or Glenview) in an
amended Schedule 13G filed with the SEC on January 5, 2017. As a result of Glenview serving
as an investment manager to various investment companies, and Mr. Lawrence M. 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.
(5) Based on information supplied by Janus Capital Management LLC (or Janus) in a Schedule 13G
filed with the SEC on February 13, 2017. Janus has sole voting and dispositive power over
27,156,792 of these shares and shared voting and shared dispositive power over 1,065,300
shares.
(6) Includes 456,621 shares issuable upon settlement of restricted share unit awards that vest within
60 days of June 16, 2017.
(7) Includes 90,102 shares issuable upon settlement of restricted share unit awards that vest within
60 days of June 16, 2017.
(8) Includes 82,594 shares issuable upon settlement of restricted share unit awards that vest within
60 days June 16, 2017.
(9) Includes 82,594 shares issuable upon settlement of restricted share unit awards that vest within
60 days of June 16, 2017.
(10)Includes 13,597 shares issuable upon settlement of restricted share unit awards that vest within
60 days of June 16, 2017.
(11)Includes 13,597 shares issuable upon settlement of restricted share unit awards that vest within
60 days of June 16, 2017. Also includes 40,328 shares held indirectly by a living trust, of which
Mr. Onetto is a trustee.
(12)Includes 832,090 shares issuable upon settlement of restricted share unit awards that vest within
60 days of June 16, 2017.
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Part III—Additional Information
Certain Relationships and Related Person Transactions
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 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:
• transactions involving less than $25,000 for any individual related person;
• 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
• 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.flex.com.
Transactions with Related Persons
Mr. McNamara, the Company’s CEO and a director, has a daughter-in-law, Lacey Ellis, who was
employed by the Company in fiscal year 2017 (and presently). Ms. Ellis was employed as an attorney
and earned approximately $249,000 in salary, bonus, share awards, and benefits during fiscal year
2017. The employment and compensation of this family member was approved and established by
the Company in accordance the Statement of Policy with Respect to Related Person Transactions as
described above and this family member’s employment and compensation is in accordance with the
Company’s employment and compensation practices applicable to employees with equivalent
qualifications and responsibilities and holding similar positions.
Other than the foregoing and the compensation agreements and other arrangements described under
the sections entitled “Executive Compensation” of this proxy statement and “Non-Management
Directors’ Compensation for Fiscal Year 2017” of this proxy statement, during fiscal year 2017, there
was not, nor is there currently proposed, any transaction or series of similar transactions to which we
are or will be a party:
• in which the amount involved exceeded or will exceed $120,000; and
• 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.
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Part III—Additional Information
Section 16(a) Beneficial Ownership Reporting Compliance &
Shareholder Proposals for the 2018 Annual General Meeting
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, 2017 were met, except with
respect to a late Form 4 filing concerning a gift of shares to a family trust by Mr. Bingham and a late
Form 4 filing concerning a gift of shares to a family trust by Mr. Onetto.
SHAREHOLDER PROPOSALS FOR THE 2018 ANNUAL GENERAL MEETING
Shareholder proposals submitted under SEC Rule 14a-8 and intended for inclusion in the proxy
statement for our 2018 annual general meeting of shareholders must be received by us no later than
March 7, 2018. Any such shareholder proposals must be mailed to us at 6201 America Center Drive,
San Jose, California, 95002, U.S.A., Attention: Chief Executive Officer. Any such shareholder
proposals may be included in our proxy statement for the 2018 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 2018 annual general meeting of shareholders unless notice of such proposal is
received by the applicable deadlines prescribed by the Singapore Companies Act.
Under Section 183 of the Companies Act, registered shareholders representing (i) at least 5% of the
total voting rights of all registered shareholders having at the date of the requisition, the right to vote
at the meeting to which the requisition relates, or (ii) not fewer than 100 registered shareholders
holding shares in the Company on which there has been paid up an average sum of at least $500 per
shareholder may, at their expense (unless the Company resolves otherwise), requisition that we
include and give notice of their proposal for the 2018 annual general meeting. Any such requisition
must satisfy the requirements of Section 183 of the Singapore Companies Act, and must 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 2018 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 2018
annual general meeting in the case of any other requisition.
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Part III—Additional Information
Incorporation of Certain Documents by Reference &
Singapore Statutory Financial Statements
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Flex incorporates by reference the following sections of our Annual Report on Form 10-K for the fiscal
year ended March 31, 2017:
• Item 8, “Financial Statements and Supplementary Data;”
• Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations;” and
• 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, 2017, which was filed with the
SEC on May 16, 2017, 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, 2017. 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 made available to our shareholders on our website at
https://investors.flex.com/financials prior to the date of the 2017 annual general meeting, as required
under Singapore law.
Our Singapore statutory financial statements include:
• our consolidated financial statements (which are identical to those included in the Annual
Report on Form 10-K, described above);
• supplementary financial statements (which reflect solely the Company’s standalone financial
results, with our subsidiaries accounted for under the equity method rather than consolidated);
• a Directors’ Statement; and
• the Independent Auditors’ Report of Deloitte & Touche LLP, our Singapore statutory auditors for
the fiscal year ended March 31, 2017.
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Part III—Additional Information
Other Matters
OTHER MATTERS
Our management does not know of any matters to be presented at the 2017 annual general meeting
other than those set forth herein and in the notice accompanying this proxy statement. If any other
matters are properly presented for a vote at the 2017 annual general meeting, the 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 2017 annual general meeting, regardless of the
number of shares which you hold. We urge you to promptly execute and return the
accompanying proxy card in the envelope which has been enclosed for your convenience, or
to vote or give voting instructions in accordance with the proxy card or Notice.
Shareholders who are present at the 2017 annual 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.
Some banks, brokers and other nominee record holders may be participating in the practice of
“householding” proxy statements and annual reports for our beneficial shareholders. This means that
only one copy of our proxy materials and our Annual Report on Form 10-K may have been sent to
multiple shareholders in your household, unless your bank, broker or nominee received contrary
instructions from one or more shareholders in your household. If you want to receive separate copies
of our proxy materials or annual reports in the future, or if you are receiving multiple copies and would
like to receive only one copy for your household, you should contact your bank, broker or other
nominee record holder. We will promptly deliver a separate copy of either document to you if you
request one by writing or calling us at the contact information listed later on this page.
We incorporate by reference information from Note 3 to our audited consolidated financial statements
for the fiscal year ended March 31, 2017, “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:
Flex Ltd.
6201 America Center Drive
San Jose, California 95002 U.S.A.
Telephone: (408) 576-7985
Cautionary Note Regarding Forward-Looking Statements: This document contains forward-looking
statements within the meaning of U.S. securities law. These forward-looking statements involve risks
and uncertainties that could cause the actual results to differ materially from those anticipated by
these forward-looking statements. Readers are cautioned not to place undue reliance on these
forward-looking statements. These risks include: that future revenues and earnings may not be
achieved as expected; the challenges of effectively managing our operations, including our ability to
control costs and manage changes in our operations; our dependence on a small number of
customers and on customers with short product life cycles; compliance with legal and regulatory
requirements; that we may encounter difficulties with acquisitions and divestitures; that the expected
revenue and margins from recently launched programs may not be realized; geopolitical risk
increased tax expense; and the effects that the current macroeconomic environment could have on
our business and demand for our products as well as the effects that current credit and market
conditions could have on the liquidity and financial condition of our customers and suppliers, including
any impact on their ability to meet their contractual obligations. Additional information concerning
these and other risks is described under “Risk Factors” and “Management’s Discussion and Analysis
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Part III—Additional Information
Other Matters
of Financial Condition and Results of Operations” in our reports on Forms 10-K and 10-Q that we file
with the U.S. Securities and Exchange Commission. The forward-looking statements in this document
are based on current expectations and Flex assumes no obligation to update these forward-looking
statements.
By order of the Board of Directors,
Tay Hong Chin Regina
Company Secretary
July 5, 2017
Singapore
Upon request, we will furnish without charge to each person to whom this 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, 2017. You may request a copy of this information at no cost, by writing or
telephoning us at:
Flex Ltd.
6201 America Center Drive
San Jose, California 95002 U.S.A.
Telephone: (408) 576-7985
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ANNEX A
FLEX LTD.
2017 EQUITY INCENTIVE PLAN
ARTICLE 1.
PURPOSES OF THE PLAN.
The purposes of the Flex Ltd. 2017 Equity Incentive Plan (the “Plan”) are to attract and retain the
best available personnel, to provide additional incentives to Employees, Directors and Consultants, to
give recognition to the contributions made or to be made by Outside Directors to the success of the
Company and to promote the success of the Company’s business by linking the personal interests of
Employees, Directors and Consultants to those of the Company’s shareholders and by providing such
individuals with an incentive for outstanding performance to generate superior returns to the
Company’s shareholders.
ARTICLE 2.
DEFINITIONS.
Wherever the following terms are used in the Plan they shall have the meanings specified below,
unless the context clearly indicates otherwise. The singular pronouns shall include the plural where
the context so indicates.
2.1
“Affiliate” means any corporation or other entity (including but not limited to partnerships
and joint ventures) which is, directly or indirectly through one or more intermediary entities controlled
by, or under common control with, the Company.
2.2
“Award” means an award of an Option, SAR, Performance Share, Performance Share Unit,
Restricted Share Unit, or any other right or benefit, including any other Share-Based Award under
Article 8, granted to a Participant pursuant to the Plan.
2.3
“Award Agreement” means any written agreement, contract, or other instrument or
document evidencing the terms and conditions of an Award, including through electronic medium.
2.4
2.5
“Board” means the Board of Directors of the Company.
“Change of Control” shall mean the occurrence of any of the following events:
(a) A transaction or series of transactions (other than an offering of the Shares to the
general public through a registration statement filed with the Securities and Exchange
Commission (“SEC”)) whereby any “person” or related “group” of “persons” (as such
terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the
Company, any of its Subsidiaries, an employee benefit plan maintained by the
Company or any of its Subsidiaries or a “person” that, prior to such transaction,
directly or indirectly controls, is controlled by, or is under common control with, the
Company) directly or indirectly acquires beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act) of securities of the Company possessing more
than 50% of the total combined voting power of the Company’s securities outstanding
immediately after such acquisition; or
(b) During any one-year period, individuals who, at the beginning of such period,
constitute the Board together with any new Director(s) (other than any one or more
Directors designated by any person who shall have entered into an agreement with
the Company in connection with any transaction described in Section 2.5(a) or
Section 2.5(c) hereof) whose election or appointment by the Board or nomination for
election by the Company’s shareholders was approved by a vote of at least a majority
of the Directors then still in office who either were Directors at the beginning of the
one-year period (other than vacant seats) or whose election or appointment or
nomination for election was previously so approved, cease for any reason to
constitute a majority of the Board pursuant to a transaction or other mechanism
A-1
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outside of the normal election process of Directors under the Companies Act and/or
the Company’s Constitution; or
(c) The consummation by the Company (whether directly involving the Company or
indirectly involving the Company through one or more intermediaries) of (x) a merger,
consolidation, reorganization, or business combination or (y) a sale or other
disposition of all or substantially all of the Company’s assets in any single transaction
or series of related transactions or (z) the acquisition of assets or shares of another
entity, in each case other than a transaction:
(i) Which results in the Company’s voting securities outstanding immediately before
the transaction continuing to represent (either by remaining outstanding or by
being converted into voting securities of the Company or the person that, as a
result of the transaction, controls, directly or indirectly, the Company or owns,
directly or indirectly, all or substantially all of the Company’s assets or otherwise
succeeds to the business of the Company (the Company or such person, the
“Successor Entity”)) directly or indirectly, at least a majority of the combined
voting power of the Successor Entity’s outstanding voting securities immediately
after the transaction, and
(ii) After which no person or group, beneficially owns voting securities representing
50% or more of the combined voting power of the Successor Entity; provided,
however, that no person or group shall be treated for purposes of this
Section 2.5(c)(ii) as beneficially owning 50% or more of combined voting power
of the Successor Entity solely as a result of the voting power held in the
Company prior to the consummation of the transaction; or
(d) The Company’s shareholders approve a liquidation or dissolution of the Company.
A transaction will not constitute a Change of Control or other consolidating event if effected for
the purpose of changing the place of incorporation or form of organization of the ultimate parent entity
(including where the Company is succeeded by an issuer incorporated under the laws of another
state, country or foreign government for such purpose and whether or not the Company remains in
existence following such transaction) where all or substantially all of the persons or group that
beneficially own all or substantially all of the combined voting power of the Company’s voting
securities immediately prior to the transaction beneficially own all or substantially all of the combined
voting power of the Company in substantially the same proportions of their ownership after the
transaction. The Committee shall have full and final authority, which shall be exercised in its
discretion, to determine conclusively whether a Change of Control of the Company has occurred
pursuant to the above definition, and the date of the occurrence of such Change of Control and any
incidental matters relating thereto.
2.6
2.7
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“Committee” means the Compensation Committee of the Board, or such other committee
appointed by the Board to administer the Plan.
2.8
“Companies Act” means the Companies Act (Cap 50) of Singapore, as amended.
2.9
corporation.
“Company” means Flex Ltd., a company incorporated in Singapore, or any successor
2.10 “Consultant” means an individual consultant or independent contractor who provides
services to the Company or any Parent, Subsidiary or Affiliate.
2.11 “Covered Employee” means an Employee who is, or could be, a “covered employee” within
the meaning of Section 162(m) of the Code.
2.12 “Director” means a member of the Board, or as applicable, a member of the board of
directors of a Parent, Subsidiary or Affiliate qualified under Section 146 of the Companies Act (where
applicable in the case of a Singapore incorporated company).
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2.13 “Disability” means that a Participant is unable to carry out the responsibilities and functions
of the position held by the Participant by reason of any medically determined physical or mental
impairment for a period of not less than ninety (90) consecutive days. A Participant shall not be
considered to have incurred a Disability unless he or she furnishes proof of such impairment, such as
a treating physician’s written certification, sufficient to satisfy the Committee in its discretion.
Notwithstanding the foregoing, for purposes of Incentive Stock Options granted under this Plan,
“Disability” means that the Participant is disabled within the meaning of Section 22(e)(3) of the Code.
2.14 “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
2.15 “Effective Date” shall have the meaning set forth in Section 13.1 hereof.
2.16 “Eligible Individual” means any person who is an Employee, Director or Consultant, as
determined by the Committee.
2.17 “Employee” means a full time or part time employee of the Company or any Parent,
Subsidiary or Affiliate, including an officer or Director, who is treated as an employee in the personnel
records of the Company or any Parent, Subsidiary or Affiliate for the relevant period, but shall exclude
individuals who are classified by the Company or any Parent, Subsidiary or Affiliate as (a) leased from
or otherwise employed by a third party, (b) independent contractors or (c) intermittent or temporary,
even if any such classification is changed retroactively as a result of an audit, litigation or otherwise. A
Participant shall not cease to be an Employee in the case of (i) any vacation or sick time or otherwise
approved paid time off in accordance with the Company or a Parent, Subsidiary or Affiliate’s policy or
(ii) transfers between locations of the Company or between the Company and/or any Parent,
Subsidiary or Affiliate. Neither services as a Director nor payment of a director’s fee by the Company
or Parent, Subsidiary or Affiliate shall be sufficient to constitute “employment” by the Company or any
Parent, Subsidiary or Affiliate.
2.18 “Fair Market Value” means, as of any given date, (a) if Shares are traded on any
established stock exchange, the closing price of a Share as quoted on the principal exchange on
which the Shares are listed, as reported in the Wall Street Journal (or such other source as the
Committee may deem reliable for such purposes) for such date, or if no sale occurred on such date,
the first trading date immediately prior to such date during which a sale occurred; or (b) if Shares are
not traded on an exchange but are regularly quoted on a national market or other quotation system,
the closing sales price on such date as quoted on such market or system, or if no sales occurred on
such date, then on the date immediately prior to such date on which sales prices are reported; or
(c) in the absence of an established market for the Shares of the type described in (a) or (b) of this
Section 2.18, the fair market value established by the Committee acting in good faith. For purposes of
a “net exercise” procedure for Options, the Committee may apply a different method for calculating
Fair Market Value.
2.19 “Full-Value Award” means any Award other than an Option, SAR or other Award for which
the Participant pays a minimum of the Fair Market Value of the Shares, as determined as of the date
of grant.
2.20 “Incentive Stock Option” means an Option that is intended to meet the requirements of
Section 422 of the Code or any successor provision thereto.
2.21 “Insider” means an officer or Director of the Company or any other person whose
transactions in the Company’s Shares are subject to Section 16 of the Exchange Act.
2.22 “Non-Qualified Stock Option” means an Option that is not intended to be an Incentive Stock
Option.
2.23 “Option” means a right granted to a Participant pursuant to Article 5 to purchase a specified
number of Shares at a specified price during specified time periods. An Option may either be an
Incentive Stock Option or a Non-Qualified Stock Option.
2.24 “Ordinary Shares” means ordinary shares or “Shares” of in the capital of the Company for
delivery under this Plan, and any successor security.
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2.25 “Outside Director” means a member of the Board who is not an Employee.
2.26 “Parent” means any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company if each of such corporations other than the Company owns
Shares possessing more than 50% of the total combined voting power of all classes of Shares in one
of the other corporations in such chain or a “parent corporation” within the meaning of Section 424(e)
of the Code.
2.27 “Participant” means any Eligible Individual who, as a Director, Employee or Consultant, has
been granted an Award pursuant to the Plan.
2.28 “Performance-Based Award” means an Award granted pursuant to Article 9.
2.29 “Performance Criteria” means such factors as may be selected by the Committee, in its
sole discretion, to determine whether the performance goals established by the Committee and
applicable to Awards have been satisfied. In the case of an Award that is intended to qualify as
Qualified Performance-Based Compensation, such factors shall be limited to one or any combination
of the following measures:
(a) Net revenue and/or net revenue growth;
(b) Earnings before income taxes and amortization and/or earnings before income taxes
and amortization growth;
(c) Operating income and/or operating income growth;
(d) Net income and/or net income growth;
(e) Cash flow, operating income, or net income margins;
(f)
Earnings per share and/or earnings per share growth;
(g) Total shareholder return and/or total shareholder return growth;
(h) Return on equity;
(i) Operating or free cash flow;
(j)
Economic value added;
(k) Return on invested capital; and
(l)
Individual confidential business objectives.
2.30 “Performance Goals” means, for a Performance Period, the goals established in writing by
the Committee for the Performance Period based upon the Performance Criteria. Depending on the
Performance Criteria used to establish such Performance Goals, the Performance Goals may be
expressed in terms of overall Company performance, the performance of a Parent, Subsidiary or
Affiliate, the performance of a division or a business unit of the Company or a Parent, Subsidiary or
Affiliate, or the performance of an Eligible Individual. The Committee, in its discretion, may, to the
extent consistent with, and within the time prescribed by, Section 162(m) of the Code, provide for the
appropriate adjustment or modification of the Performance Goals for such Performance Period to
reflect any Extraordinary Events. “Extraordinary Events” means any objectively determinable
component of a Performance Goal, including without limitation foreign exchange gains and losses,
asset write downs, acquisitions and divestitures, change in fiscal year, unbudgeted capital
expenditures, special charges such as restructuring or impairment charges, debt refinancing costs,
extraordinary or noncash items, unusual, infrequently occurring, nonrecurring or one-time events
affecting the Company or its financial statements or changes in law or accounting principles.
2.31 “Performance Period” means the one or more periods of time, which may be of varying and
overlapping durations, as the Committee may select but not less than one (1) year in duration, over
which the attainment of one or more Performance Goals will be measured for the purpose of
determining a Participant’s right to, and the payment of, a Performance-Based Award.
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2.32 “Performance Share” means a right granted to a Participant pursuant to Section 8.2 hereof,
to receive Shares, the payment of which is contingent upon achieving certain Performance Goals or
other performance-based targets established by the Committee, and shall be evidenced by a
bookkeeping entry representing the equivalent of one Share.
2.33 “Performance Share Unit” means a right granted to a Participant pursuant to Section 8.3
hereof, to receive Shares, the payment of which is contingent upon achieving certain Performance
Goals or other performance-based targets established by the Committee, and shall be evidenced by a
bookkeeping entry representing the equivalent of one Share.
2.34 “Plan” means this Flex Ltd. 2017 Equity Incentive Plan, as it may be amended from time to
time.
2.35 “Prior Plan(s)” means the Company’s 2001 Equity Incentive Plan, the Company’s 2002
Interim Incentive Plan, the Solectron Corporation 2002 Stock Plan, the Company’s 2004 Award Plan
for New Employees and/or the Company’s 2010 Equity Incentive Plan.
2.36 “Qualified Performance-Based Compensation” means any compensation that is intended to
qualify as “qualified performance-based compensation” as described in Section 162(m)(4)(C) of the
Code.
2.37 “Restricted Share Unit” means an Award granted pursuant to Section 8.4 hereof and shall
be evidenced by a bookkeeping entry representing the equivalent of one Share.
2.38 “Securities Act” shall mean the U.S. Securities Act of 1933, as amended.
2.39 “Share-Based Award” means any Award settled in Shares granted under Article 8 of this
Plan.
2.40 “Share Appreciation Right” or “SAR” means a right granted pursuant to Article 7 to receive
a payment equal to the excess of the Fair Market Value of a specified number of Shares on the date
the SAR is exercised over the grant price on the date the SAR was granted as set forth in the
applicable Award Agreement.
2.41 “Subsidiary” means any “subsidiary corporation” as defined in Section 424(f) of the Code
and any applicable regulations promulgated thereunder, any other entity of which a majority of the
outstanding voting shares or voting power is beneficially owned directly or indirectly by the Company.
For purposes of granting Options or any other “stock rights” within the meaning of Section 409A of the
Code, an entity shall not be considered a Subsidiary if granting such stock right would result in the
stock right becoming subject to Section 409A of the Code.
2.42 “Termination of Service” means, for purposes of this Plan with respect to a Participant, that
the Participant has for any reason ceased to provide services as an Employee, Director or Consultant.
An Employee will not be deemed to have ceased to provide services in the case of (i) sick leave,
(ii) vacation leave (iii) military leave, (iv) transfers of employment between the Company and any
Parent, Subsidiary or Affiliate; or (iv) any other leave of absence approved by the Committee, provided,
that such leave is for a period of not more than 90 days, unless reemployment upon the expiration of
such leave is guaranteed by contract or statute or unless provided otherwise pursuant to formal policy
adopted from time to time by the Company and issued and promulgated to Employees in writing. In the
case of any Employee on an approved leave of absence, the Committee may make such provisions
respecting suspension of vesting of the Award while on leave from the employ of the Company or a
Parent, Subsidiary or Affiliate as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the applicable Award Agreement. The Committee
will have sole discretion to determine whether a Participant has ceased to provide services and the
effective date on which the Participant ceased to provide services (the “Termination Date”).
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ARTICLE 3.
SHARES SUBJECT TO THE PLAN AND LIMITATIONS.
3.1 Number of Shares Available.
(a) Subject to Section 3.3 and Article 11, the total number of Shares reserved and
available for grant and issuance pursuant to this Plan (including upon the exercise of
an Incentive Stock Option) will be 22,000,0000 Shares. The Shares authorized for
delivery to Participants under this Plan of up to 22,000,000 Shares may be used to
grant Incentive Stock Options (“ISOs”) during the term of this Plan. Any Shares that
are subject to an Award shall be counted against this limit as one (1) Share for every
one (1) Share granted or subject to grant for any such Award.
To the extent that an Award, including any previous outstanding grants made under any Prior
Plan, terminates, is forfeited, is canceled, expires, lapses for any reason, or is settled in cash, any
Shares subject to the Award shall again be available for the grant of an Award pursuant to the Plan.
(b) Any Shares withheld to satisfy the grant or Exercise Price or tax withholding obligation
pursuant to any Award or Exercise Price or tax withholding obligation pursuant to any
Award, whereby the Participant shall be (i) deemed to have waived his right to
delivery of the full number of Shares in respect of which the Option is exercised; and
(ii) deemed to have agreed to receive the number of Shares (after deducting the
number of Shares withheld) as calculated by the Committee in its absolute discretion
and shall be deducted from the aggregate number of shares which may be issued
under Section 3.1(a). For the avoidance of doubt, the gross number of shares subject
to a Share Appreciation Right shall be deducted from the aggregate number of shares
which may be issued under Section 3.1(a), regardless of the number of Shares
delivered to the applicable Participant. Further, any Shares acquired by the Company
to satisfy the grant or Exercise Price or tax withholding obligations (if and to the extent
permitted by applicable law) pursuant to any Award shall not be added to the
aggregate number of Shares which may be issued under Section 3.1(a). To the extent
permitted by applicable law or any exchange rule, Shares issued in assumption of, or
in substitution for, any outstanding awards of any entity acquired in any form of
combination by the Company or any Subsidiary or Affiliate shall not be counted
against Shares available for grant pursuant to this Plan.
3.2 Shares Distributed. Any Shares distributed pursuant to an Award may consist in whole or in
part, of Shares allotted and issued and/or transferred to the Participant (which may in the case of a
transfer of Shares and to the extent permitted by law, include Shares held by the Company as
treasury Shares).
3.3
Limitation on Number of Shares Subject to Awards. Notwithstanding any provision in the
Plan to the contrary, and subject to Article 11, where it is intended to comply with Section 162(m) of
the Code, the maximum number of Shares that are subject to or covered or measured by one or
more Awards that may be granted to any one Participant during any calendar year shall be
10,000,000 Shares. Further, where it is intended to comply with Section 162(m) of the Code, the
maximum amount that may be paid in cash during any calendar year with respect to any Award shall
be an amount equal to the preceding share limitation multiplied by the average daily trading price of
the Shares during the preceding calendar year. To the extent required by Section 162(m) of the Code,
in applying the foregoing limitation with respect to a Participant, if any Award is canceled, the
canceled Award shall continue to count against the maximum number of Shares with respect to which
an Award may be granted to a given Participant.
3.4
Limit on Non-Employee Director Compensation. The aggregate value of cash
compensation and grant date Fair Market Value of Shares that may be paid or granted during any
calendar year of the Company to any Outside Director shall not exceed $800,000.
3.5 Minimum Vesting Requirements. No Award granted under the Plan shall become
exercisable or vested prior to the one-year anniversary of the date of grant; provided, however, that,
such restriction shall not apply to Awards granted under this Plan with respect to the number of
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Shares which, in the aggregate, does not exceed five percent (5%) of the total number of Shares
initially available for Awards under this Plan. This Section 3.1 shall not restrict the right of the
Committee to accelerate or continue the vesting or exercisability of an Award upon or after a Change
of Control or termination of employment or otherwise pursuant to Section 12.1 of the Plan.
ARTICLE 4.
ELIGIBILITY AND PARTICIPATION.
4.1 Eligibility. Awards may be granted to Eligible Individuals; however, ISOs shall only be
awarded to “employees” of the Company, or a Parent or Subsidiary within the meaning of Section 422
of the Code. A person may be granted more than one Award under this Plan.
4.2 Participation. Subject to the provisions of the Plan, the Committee may, from time to time,
select from among all Eligible Individuals, those to whom Awards shall be granted and shall determine
the nature and amount of each Award. No Eligible Individual shall have any right by virtue of this Plan
to receive an Award pursuant to this Plan.
ARTICLE 5.
OPTIONS.
5.1 General. The Committee is authorized to grant Options to Eligible Individuals on the
following terms and conditions:
(a) Exercise Price. The exercise price per Share (“Exercise Price”) subject to an Option
shall be determined by the Committee and set forth in the Award Agreement; provided
that: (i) the Exercise Price shall not be less than 100% of the Fair Market Value of a
Share on the date of grant and the Exercise Price of any ISO granted to a Ten
Percent Shareholder (as set forth in Section 5.2(c) below) will not be less than 110%
of the Fair Market Value of the Shares on the date of grant.
(b) Time and Conditions of Exercise. The Committee shall determine the time or times at
which an Option may be exercised in whole or in part; provided that the term of any
Option granted under the Plan shall not exceed (i) ten (10) years from the date of
grant thereof for Employees (other than Employees of Affiliates which are not
related corporations (as defined under the Companies Act) of the Company); and
(ii) five (5) years from the date of grant thereof for Outside Directors, Consultants and
Employees of Affiliates which are not related corporations (as defined under the
Companies Act) of the Company. The Committee shall also determine the
performance goals or other conditions, if any, that must be satisfied before all or part
of an Option may be exercised.
(c) Payment. The Committee shall determine the methods by which the Exercise Price of
an Option may be paid, the form of payment, including, without limitation: (i) cash or
check, (ii) through the withholding of Shares otherwise deliverable upon exercise of
the Award, whereby the Participant shall be (1) deemed to have waived his right to
delivery of the full number of Shares in respect of which the Option is exercised; and
(2) deemed to have agreed to receive the number of Shares (after deducting the
number of Shares which have a Fair Market Value on the date of exercise equal to
the aggregate Exercise Price of the Shares as to which the Award shall be exercised)
as calculated by the Committee in its absolute discretion, (iii) through a “same day
sale” commitment from the Participant and a broker-dealer that is a member of the
Financial Industry Regulatory Authority (a “FINRA” dealer) whereby the Participant
irrevocably elects to exercise the Option and to sell a portion of the Shares so
purchased to pay the Exercise Price, and whereby the FINRA dealer irrevocably
commits upon receipt of such Shares, to remit such amounts to the Company
provided that treasury shares shall be utilized for delivery in this connection, (iv) other
property acceptable to the Committee (including through the delivery of a notice that
the Participant has placed a market sell order with a broker with respect to Shares
then issuable upon exercise of the Option, and that the broker has been directed to
pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction
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of the Exercise Price where treasury shares shall be utilized for delivery in this
connection; provided that payment of such proceeds is then made to the Company
upon settlement of such sale, or (v) any combination of the foregoing methods of
payment. The Committee shall also determine the methods by which Shares shall be
delivered or deemed to be delivered to Participants. Notwithstanding any other
provision of the Plan to the contrary, no Participant who is a Director of the Company
(as defined under the Companies Act from time to time) or an “executive officer” of
the Company within the meaning of Section 13(k) of the Exchange Act shall be
permitted to pay the Exercise Price of an Option, or continue any extension of credit
with respect to the Exercise Price of an Option with a loan from the Company or a
loan arranged by the Company in violation of Section 13(k) of the Exchange Act
and/or Section 162 of the Companies Act.
(d) Evidence of Grant. All Options shall be evidenced by an Award Agreement between
the Company and the Participant. The Award Agreement shall include such additional
provisions as may be specified by the Committee.
5.2
Incentive Stock Options. ISOs shall be granted only to “employees” of the Company, or a
Parent or Subsidiary within the meaning of Section 422 of the Code, and the terms of any ISOs
granted pursuant to the Plan, in addition to the requirements of Section 5.1 hereof, must comply with
the provisions of this Section 5.2.
(a) Expiration. Subject to Section 5.2(c) hereof, an ISO shall expire and may not be
exercised to any extent by anyone after the first to occur of the following events:
(i)
Ten (10) years from the date it is granted unless an earlier time is set in the
Award Agreement;
(ii)
Three months after the Participant’s Termination of Service; and
(iii) One year after the date of the Participant’s Termination of Service on account of
Disability or death. Upon the Participant’s Disability or death, any ISOs
exercisable at the Participant’s Disability or death may be exercised by the
Participant’s legal representative or representatives, by the person or persons
entitled to do so pursuant to the Participant’s last will and testament, or, if the
Participant fails to make testamentary disposition of such ISO or dies intestate,
by the person or persons entitled to receive the ISO pursuant to the applicable
laws of descent and distribution.
(b) Dollar Limitation. The aggregate Fair Market Value (determined as of the time the
Option is granted) of all Shares with respect to which ISOs are first exercisable by a
Participant in any calendar year may not exceed $100,000 or such other limitation as
imposed by Section 422(d) of the Code, or any successor provision. To the extent that
ISOs are first exercisable by a Participant in excess of such limitation, the excess
shall be considered Non-Qualified Stock Options.
(c) Ten Percent Shareholder. An ISO shall be granted to any individual who, at the date
of grant, owns shares possessing more than ten percent of the total combined voting
power of all classes of Shares of the Company (a “Ten Percent Shareholder”) only if
such Option is granted at a price that is not less than 110% of Fair Market Value on
the date of grant and the Option is exercisable for no more than five years from the
date of grant.
(d) Notice of Disposition. The Participant shall give the Company prompt notice of any
disposition of Shares acquired by exercise of an ISO within (i) two years from the date
of grant of such Incentive Stock Option or (ii) one year after the transfer of such
Shares to the Participant.
(e) Right to Exercise. During a Participant’s lifetime, an ISO may be exercised only by the
Participant.
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(f)
Failure to Meet Requirements. Any Option (or portion thereof) purported to be an ISO,
which, for any reason, fails to meet the requirements of Section 422 of the Code shall
be considered a Non-Qualified Stock Option.
5.3 Exemption from Section 409A. It is intended that all Options granted under this Plan will be
exempt from Section 409A of the Code.
5.4 Substitution of SARs. The Committee may provide in the Award Agreement evidencing the
grant of an Option that the Committee, in its sole discretion, shall have to right to substitute a SAR for
such Option at any time prior to or upon exercise of such Option; provided, that such SAR shall be
exercisable with respect to the same number of Shares for which such substituted Option would have
been exercisable.
ARTICLE 6.
GRANTS TO OUTSIDE DIRECTORS.
6.1
Types of Options and Shares. Options granted under this Plan and subject to this Article 6
shall be Non-Qualified Stock Options.
6.2 Eligibility. Options subject to this Article 6 shall be granted only to Outside Directors. In no
event, however, may any Outside Director be granted any Options under this Article 6 if such grant is
prohibited, or (b) restricted (either absolutely or subject to various securities requirements, whether
legal or administrative, being complied with), in the jurisdiction in which such Outside Director is
resident under the relevant securities laws of that jurisdiction.
6.3 Vesting and Exercisability. The date an Outside Director is granted an Option is referred to in
this Plan as the “Start Date” for such Option. Each Option will vest and become exercisable according
to the terms set forth by the Committee in the applicable Award Agreement as long as the Outside
Director continuously remains a Director or a Consultant on each applicable vesting date.
Notwithstanding anything to the contrary in Article 5, no Options granted to an Outside Director will be
exercisable after the expiration of five (5) years from the date the Option is granted to such Outside
Director. If the Outside Director is Terminated, the Outside Director may exercise his or her Options
only to the extent that such Options would have been exercisable upon the Termination Date for such
period as set forth in the Award Agreement. Notwithstanding any provision to the contrary, in the event
of a Change of Control, the Committee may accelerate the vesting of all Options granted to Outside
Directors in its discretion and such Options will become exercisable in full prior to the consummation of
such Change of Control at such times and on such conditions as the Committee determines, and must
be exercised, if at all, within three (3) months of the consummation of said Change of Control event.
6.4 Exercise Price. The Exercise Price of an Option granted under this Article 6 shall be not
less than 100% of the Fair Market Value of a Share on the Start Date.
ARTICLE 7.
SHARE APPRECIATION RIGHTS.
7.1 Grant of SARs.
(a) A SAR shall be subject to such terms and conditions not inconsistent with the Plan as
the Committee shall impose and shall be evidenced by an Award Agreement, provided
that the term of any SAR shall not exceed seven years.
(b) A SAR shall entitle the Participant (or other person entitled to exercise the SAR
pursuant to the Plan) to exercise all or a specified portion of the SAR (to the extent
then exercisable pursuant to its terms) and to receive from the Company an amount
equal to the product of (i) the excess of (A) the Fair Market Value of the Shares on
the date the SAR is exercised over (B) the grant price of the SAR and (ii) the number
of Shares with respect to which the SAR is exercised, subject to any limitations the
Committee may impose.
7.2 Grant Price. The grant price per Share subject to a SAR shall be determined by the
Committee and set forth in the Award Agreement; provided that the per Share grant price for any SAR
shall not be less than 100% of the Fair Market Value of a Share on the date of grant.
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7.3 Payment and Limitations on Exercise.
(a) Subject to Section 7.3(b) hereof, payment of the amounts determined under
Section 7.1(b) hereof shall be in cash, in Shares (based on its Fair Market Value as of
the date the SAR is exercised) or a combination of both, as determined by the
Committee.
(b) To the extent any payment under Section 7.1(b) hereof is effected in Shares, it shall
be made subject to satisfaction of all provisions of Article 5 pertaining to Options.
ARTICLE 8.
OTHER TYPES OF SHARE-BASED AWARDS.
8.1 General Restrictions on Share-Based Awards. Share-Based Awards granted under this
Article 8 may be based on a completion of a specified number of years of service with the Company
or a Parent, Subsidiary, or Affiliate of the Company or upon the completion of Performance Goals as
set by the Committee.
8.2 Performance Share Awards. Performance Share Awards shall be denominated in a number
of Shares and may be linked to any one or more of the Performance Criteria or other specific
performance criteria determined appropriate by the Committee, in each case on a specified date or
dates or over any Performance Period or Periods determined by the Committee.
8.3 Performance Share Units. Performance Share Unit awards shall be denominated in unit
equivalents of Shares and/or units of value including the dollar value of Shares and which may be
linked to any one or more of the Performance Criteria or other specific performance criteria
determined appropriate by the Committee, in each case on a specified date or dates or over any
Performance Period or Periods determined by the Committee. On the vesting date, the Company
shall, subject to Section 10.7, transfer to the Participant one unrestricted, fully transferable Share for
each Performance Share Unit scheduled to be paid out on such date and not previously forfeited.
Alternatively, settlement of a Performance Share Unit may be made in cash (in an amount reflecting
the Fair Market Value of Shares that would have been issued) or any combination of cash and
Shares, as determined by the Committee in its sole discretion, at the time of grant of the Performance
Share Units.
8.4 Restricted Share Units. Restricted Share Units represent an unfunded and unsecured
obligation of the Company, subject to the terms and conditions of the applicable Award Agreement
evidencing the grant of the Restricted Share Units. Restricted Share Unit Awards shall be
denominated in unit equivalents of Shares and/or units of value including dollar value of Shares in
such amounts and subject to such terms and conditions as determined by the Committee. At the time
of grant, the Committee shall specify the date or dates on which the Restricted Share Units shall
become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems
appropriate. At the time of grant, the Committee shall specify the settlement date applicable to each
grant of Restricted Share Units which shall be no earlier than the vesting date or dates of the Award
and may be determined at the election of the grantee. On the maturity date, the Company shall,
subject to Section 10.7, transfer to the Participant one unrestricted, fully transferable Share for each
Restricted Share Unit scheduled to be paid out on such date and not previously forfeited. Alternatively,
settlement of a Restricted Share Units may be made in cash or any combination of cash and Shares,
as determined by the Committee, in its sole discretion, at the time of grant of the Restricted Share
Units.
8.5 Other Share-Based Awards. The Committee is authorized under the Plan to make any
other Award to an Eligible Individual that is not inconsistent with the provisions of the Plan and that by
its terms involves or might involve the issuance of (i) Shares, (ii) a right with an exercise or conversion
privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of
Performance Criteria or other conditions, or (iii) any other security with the value derived from the
value of the Shares. The Committee may establish one or more separate programs under the Plan for
the purpose of issuing particular forms of Awards to one or more classes of Participants on such
terms and conditions as determined by the Committee from time to time.
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8.6
Term. Except as otherwise provided herein, the term of any Award of Performance Shares,
Performance Share Units, Restricted Share Units and any other Share-Based Award granted pursuant
to this Article 8 shall be set by the Committee in its discretion.
8.7
Form of Payment. Payments with respect to any Awards granted under this Article 8 shall
be made in cash, in Shares or a combination of both, as determined by the Committee, at the time of
grant of the Awards.
8.8
Timing of Settlement. At the time of grant, the Committee shall specify the settlement date
applicable to an Award of Performance Shares, Performance Share Units, Restricted Share Units or
any other Share-Based Award granted pursuant to this Article 8, which shall be no earlier than the
vesting date(s) applicable to the relevant Award and may be later than the vesting date(s) to the
extent and under the terms determined by the Committee.
ARTICLE 9.
PERFORMANCE-BASED AWARDS.
9.1 Purpose. The purpose of this Article 9 is to provide the Committee the ability to qualify
Awards, other than Options and SARs, and that are granted pursuant to Article 8 as Qualified
Performance-Based Compensation. If the Committee, in its discretion, decides to grant a
Performance- Based Award to a Covered Employee, the provisions of this Article 9 shall control over
any contrary provision contained in Article 8; provided, however, that the Committee may in its
discretion grant Awards to Covered Employees that are based on Performance Criteria or
Performance Goals but that do not satisfy the requirements of this Article 9.
9.2 Applicability. This Article 9 shall apply only to those Covered Employees selected by the
Committee to receive Performance-Based Awards that are intended to qualify as Qualified
Performance-Based Compensation. The designation of a Covered Employee as a Participant for a
Performance Period shall not in any manner entitle the Participant to receive an Award for the period.
Moreover, designation of a Covered Employee as a Participant for a particular Performance Period
shall not require designation of such Covered Employee as a Participant in any subsequent
Performance Period and designation of one Covered Employee as a Participant shall not require
designation of any other Covered Employees as a Participant in such period or in any other period.
9.3 Procedures with Respect to Performance-Based Awards. To the extent necessary to
comply with the Qualified Performance-Based Compensation requirements of Section 162(m)(4)(C) of
the Code, with respect to any Award granted under Article 8 which may be granted to one or more
Covered Employees, no later than ninety (90) days following the commencement of any fiscal year in
question or any other designated fiscal period or period of service (or such other time as may be
required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (a) designate
one or more Covered Employees, (b) select the Performance Criteria applicable to the Performance
Period, (c) establish the Performance Goals, and amounts of such Awards, as applicable, which may
be earned for such Performance Period, and (d) specify the relationship between Performance
Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by
each Covered Employee for such Performance Period. Following the completion of each Performance
Period, the Committee shall certify in writing whether the applicable Performance Goals have been
achieved for such Performance Period. In determining the amount earned by a Covered Employee,
the Committee shall have the right to reduce or eliminate (but not to increase) the amount payable at
a given level of performance to take into account additional factors that the Committee may deem
relevant to the assessment of individual or corporate performance for the Performance Period.
9.4 Payment of Performance-Based Awards. Unless otherwise provided in the applicable Award
Agreement, a Participant must be employed by the Company, or a Parent, Subsidiary or Affiliate on the
day a Performance-Based Award for the appropriate Performance Period is paid to the Participant.
Furthermore, a Participant shall be eligible to receive payment pursuant to a Performance-Based Award
for a Performance Period only if the Performance Goals for such period are achieved. In determining
the amount earned under a Performance-Based Award, the Committee may reduce or eliminate the
amount of the Performance-Based Award earned for the Performance Period, if in its sole and absolute
discretion, such reduction or elimination is appropriate.
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9.5 Additional Limitations. Notwithstanding any other provision of the Plan, any Award which is
granted to a Covered Employee and is intended to constitute Qualified Performance-Based
Compensation shall be subject to any additional limitations set forth in Section 162(m) of the Code
(including any amendment to Section 162(m) of the Code) or any regulations or rulings issued
thereunder that are requirements for qualification as qualified performance-based compensation as
described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent
necessary to conform to such requirements.
ARTICLE 10.
PROVISIONS APPLICABLE TO AWARDS.
10.1 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the
discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other
Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards
may be granted either at the same time as or at a different time from the grant of such other Awards.
10.2 Award Agreement. Awards under the Plan shall be evidenced by Award Agreements that
set forth the terms, conditions and limitations for each Award which may include the term of an Award,
the provisions applicable in the event of a Participant’s Termination of Service, and the Company’s
authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.
10.3 Limits on Transfer. No right or interest of a Participant in any Award may be pledged,
encumbered, or hypothecated to or in favor of any party, or shall be subject to any lien, obligation, or
liability of such Participant to any other party other than to or in the favor of the Company or a Parent,
Subsidiary or Affiliate to the extent permitted by and in accordance with the provisions of the
Companies Act. Except as otherwise provided herein, no Award shall be assigned, transferred, or
otherwise disposed of by a Participant other than by will or the laws of descent and distribution or
pursuant to beneficiary designation procedures approved from time to time by the Committee (or the
Board in the case of Awards granted to Outside Directors). The Committee by express provision in the
Award Agreement or an amendment thereto may, subject to applicable laws, permit an Award (other
than an ISO) to be transferred to, exercised by and paid to members of the Participant’s family,
charitable institutions, or trusts or other entities whose beneficiaries or beneficial owners are members
of the Participant’s family and/or charitable institutions, pursuant to such conditions and procedures as
the Committee may establish. Any permitted transfer shall be subject to the condition that the
Committee receive evidence satisfactory to it that the transfer is being made for estate and/or tax
planning purposes (or to a “blind trust” in connection with the Participant’s Termination of Service or
employment with the Company or a Parent, Subsidiary or Affiliate to assume a position with a
governmental, charitable, educational or similar non-profit institution) and on a basis consistent with
the Company’s lawful issue of securities.
10.4 Termination of Service. Any Award granted under this Plan shall only be exercisable or
payable while the Participant is an Employee or Director, as applicable; provided, however, that the
Committee in its sole and absolute discretion may provide that any Award may be exercised or paid
subsequent to a Termination of Service, as applicable, or following a Change of Control, or because of
the Participant’s retirement, death or disability, or otherwise; provided, however, that any such
provision with respect to Performance Shares or Performance Share Units shall be subject to the
requirements of Section 162(m) of the Code that apply to Qualified Performance-Based
Compensation.
10.5 Beneficiaries. Notwithstanding Section 10.3 hereof, a Participant may, if permitted by the
Committee and any applicable local laws, designate a beneficiary to exercise the rights of the
Participant and to receive any distribution with respect to any Award upon the Participant’s death. A
beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the
Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any
additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married
and resides in a community property state, a designation of a person other than the Participant’s
spouse as his or her beneficiary with respect to more than 50% of the Participant’s interest in the
Award shall not be effective without the prior written consent of the Participant’s spouse. If no
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beneficiary has been designated or survives the Participant, payment shall be made to either the
person’s estate or legal representative or the person entitled thereto pursuant to the Participant’s will
or the laws of descent and distribution (or equivalent laws outside the U.S.). Subject to the foregoing,
a beneficiary designation may be changed or revoked by a Participant at any time provided the
change or revocation is filed with the Committee.
10.6 Share Certificates. Notwithstanding anything herein to the contrary, the Company shall not
be required to issue or deliver any certificates evidencing Shares pursuant to the exercise or vesting
of any Award, unless and until the Committee has determined, with advice of counsel, that the
issuance and delivery of such certificates is in compliance with all applicable laws, regulations of
governmental authorities and, if applicable, the requirements of any exchange on which the Shares
are listed or traded. All certificates evidencing Shares delivered pursuant to the Plan are subject to
any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to
comply with federal, state local, securities or other laws, including laws of jurisdictions outside of
Singapore and the United States, rules and regulations and the rules of any national securities
exchange or automated quotation system on which the Shares are listed, quoted, or traded. The
Committee may place legends on any certificate evidencing Shares to reference restrictions
applicable to the Shares. In addition to the terms and conditions provided herein, the Committee may
require that a Participant make such reasonable covenants, agreements, and representations as the
Committee, in its discretion, deems advisable in order to comply with any such laws, regulations, or
requirements. The Committee shall have the right to require any Participant to comply with any timing
or other restrictions with respect to the settlement or exercise of any Award, including a window-period
limitation, as may be imposed in the discretion of the Committee.
10.7 Accelerated Vesting and Deferral Limitations. The Committee shall not have the
discretionary authority to accelerate or delay issuance of Shares under an Award that constitutes a
deferral of compensation within the meaning of Section 409A of the Code, except to the extent that
such acceleration or delay may, in the discretion of the Committee, be effected in a manner that will
not cause any person to incur taxes, interest or penalties under Section 409A of the Code.
10.8 Dividends and Dividend Equivalents. No dividends may be paid to a Participant with
respect to an Award prior to the vesting of such Award. An Award may provide for dividends or
dividend equivalents to accrue on behalf of a Participant as of each dividend payment date during the
period between the date the Award is granted and the date the Award is exercised, vested, expired,
credited or paid, and to be converted to vested cash or Shares at the same time and subject to the
same vesting conditions that apply to the Shares to which such dividends or dividend equivalents
relate.
ARTICLE 11.
CHANGES IN CAPITAL STRUCTURE.
11.1 Adjustments. Should any change be made to the Shares issuable under the Plan by
reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares,
spin-off, extraordinary cash dividend or other change affecting the outstanding Shares as a class
without the Company’s receipt of consideration, then appropriate adjustments shall be made to (i) the
maximum number and/or class of securities issuable under the Plan, (ii) the maximum number and/or
class of securities for which any Participant may be granted Awards under the terms of the Plan or
that may be granted generally under the terms of the Plan, and (iii) the number and/or class of
securities and price per Share in effect under each Award outstanding under Articles 5 through 8.
Such adjustments to the outstanding Awards are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such Awards Notwithstanding anything herein to
the contrary, an adjustment to an Award under this Section 11.1 may not be made in a manner that
would result in the grant of a new Option or SAR under Code Section 409A. The adjustments
determined by the Committee shall be final, binding and conclusive.
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11.2 Change of Control.
(a) Notwithstanding Section 11.1 hereof, and except as may otherwise be provided in any
applicable Award Agreement or other written agreement entered into between the
Company and a Participant, if a Change of Control occurs and a Participant’s Full-
Value Awards are not converted, assumed, or replaced by a comparable award by a
successor or survivor corporation, or a parent or subsidiary thereof, such Full-Value
Awards shall automatically vest and become fully exercisable and all forfeiture
restrictions on such Awards shall lapse immediately prior to the Change of Control
and following the consummation of such Change in Control, the Award shall terminate
and cease to be outstanding. Further, if a Change of Control occurs and a
Participant’s Options or SARs are not converted, assumed or replaced by a
comparable award by a successor or survivor corporation, or a parent or subsidiary
therefore, such Options or SARs outstanding at the time of the Change of Control,
shall automatically vest and become fully exercisable immediately prior to the Change
of Control and thereafter shall automatically terminate. In the event that the terms of
any agreement (other than the Award Agreement) between the Company or any
Subsidiary or Affiliate and a Participant contains provisions that conflict with and are
more restrictive than the provisions of this Section 11.2(a), this Section 11.2(a) shall
prevail and control and the more restrictive terms of such agreement (and only such
terms) shall be of no force or effect. The determination of comparability in this
Section 11.2(a) shall be made by the Committee, and its determination shall be final,
binding and conclusive.
(b) Where Awards are assumed or continued after a Change of Control, the 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 of Control. If the Committee
so determines, any such Award shall accordingly, immediately prior to the effective
date of such Change of Control or upon an involuntary Termination of Service
following a Change of Control (at the Committee’s discretion), become fully
exercisable and all forfeiture restrictions on such Awards shall lapse.
(c) The portion of any Incentive Stock Option accelerated in connection with a Change in
Control shall remain exercisable as an Incentive Stock Option only to the extent the
applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded. To
the extent such dollar limitation is exceeded, the accelerated portion of such Option
shall be exercisable as a Non-Statutory Option under the U.S. federal tax laws.
11.3 No Other Rights. Except as expressly provided in the Plan, no Participant shall have any
rights by reason of any subdivision or consolidation of Shares of any class, the payment of any
dividend, any increase or decrease in the number of Shares of any class or any dissolution,
liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly
provided in the Plan or pursuant to action of the Committee under the Plan, no issuance by the
Company of Shares of any class, or securities convertible into Shares of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to, the number of Shares subject to an
Award or the grant or the Exercise Price of any Award.
ARTICLE 12.
ADMINISTRATION.
12.1 Authority of Committee. This Plan will be administered by the Committee or by the Board
acting as the Committee. Subject to the general purposes, terms and conditions of this Plan, and to
the direction of the Board, the Committee will have full power to implement and carry out this Plan.
The Committee will have the authority to:
(a)
construe and interpret this Plan, any Award Agreement and any other agreement or
document executed pursuant to this Plan;
(b)
prescribe, amend and rescind rules and regulations relating to this Plan or any Award;
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(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
designate Eligible Individuals to receive Awards;
determine the form and terms of Awards;
determine the number of Awards to be granted and the number of Shares or other
consideration subject to Awards;
determine whether Awards will be granted singly, in combination with, in tandem with,
in replacement of, or as alternatives to, other Awards under this Plan or any other
incentive or compensation plan of the Company or any Parent, Subsidiary or Affiliate
of the Company;
grant waivers of Plan or Award conditions;
determine the terms and conditions of any Award granted pursuant to the Plan,
including, but not limited to, the Exercise Price or Grant Price, any restrictions or
limitations on the Award, any schedule for the lapse of forfeiture restrictions or
restrictions on the exercisability of an Award, vesting, and accelerations or waivers
thereof, any provisions related to non-competition and recapture of gain on an Award,
based in each case on such considerations as the Committee in its sole discretion
determines; provided, however, that the Committee shall not have the authority to
accelerate the vesting or waive the forfeiture of any Performance-Based Awards
intended to qualify as Qualified Performance Based-Compensation, except as
permitted under Section 162(m) of the Code;
correct any defect, supply any omission or reconcile any inconsistency in this Plan,
any Award or any Award Agreement;
determine whether the Performance Goals under any Performance-Based Award
have been met;
determine whether, to what extent, and pursuant to what circumstances an Award
may be settled in cash, Shares, other Awards, or other property, or an Award may be
canceled, forfeited, or surrendered;
determine the methods that may be used to pay the Exercise Price or Grant Price of
an Award;
(m) establish, adopt, or revise any rules and regulations including adopting sub-plans to
the Plan as the Committee may deem necessary or advisable under local law;
(n)
suspend or terminate the Plan at any time provided that such suspension or
termination does not impair the rights and obligations under any outstanding Award
without written consent of the affected Participant;
(o)
determine the Fair Market Value of the Shares for any purpose; and
(p) make all other decisions and determinations that may be required pursuant to the
Plan or as the Committee deems necessary or advisable to administer the Plan.
12.2 Committee Discretion. Any determination made by the Committee with respect to any
Award will be made in its sole discretion at the time of grant of the Award or, unless in contravention
of any express term of this Plan or Award, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Award under this Plan.
12.3 Delegation of Authority. To the extent permitted by applicable law, the Committee may from
time to time delegate to a committee of one or more members of the Board or one or more officers of
the Company the authority to grant or amend Awards to Participants other than Insiders to whom
authority to grant or amend Awards has been delegated hereunder. For the avoidance of doubt,
provided it meets the limitation in the preceding sentence, this delegation shall include the right to
modify Awards as necessary to accommodate changes in the laws or regulations, including in
jurisdictions outside the United States. Any delegation hereunder shall be subject to the restrictions
and limits that the Committee specifies at the time of such delegation, and the Committee may at any
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time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee
appointed under this Section 12.3 shall serve in such capacity at the pleasure of the Committee.
ARTICLE 13.
EFFECTIVE AND EXPIRATION DATE.
13.1 Effective Date. The Plan is effective as of the date the Plan is adopted by the Board (the
“Effective Date”). This Plan shall be approved by the Company’s shareholders within twelve months
(12) months after the date the Plan is adopted by the Board. The Plan will be deemed to be approved
by the shareholders if it is approved by a majority of the votes cast at a duly held shareholders’
meeting at which a quorum representing a majority of outstanding voting shares is, either in person or
by proxy, present and voting on the Plan.
13.3 Expiration Date. The Plan will expire on, and no Award may be granted pursuant to the
Plan after the tenth anniversary of the Effective Date, except that no Incentive Stock Options may be
granted under the Plan after the earlier of the tenth anniversary of (a) the date the Plan is approved
by the Board or (b) the Effective Date. Any Awards that are outstanding on the tenth anniversary of
the Effective Date shall remain in force according to the terms of the Plan and the applicable Award
Agreement.
ARTICLE 14.
AMENDMENT, MODIFICATION, AND TERMINATION.
14.1 Amendment, Modification, and Termination. The Committee has complete and exclusive
power and authority to amend or modify the Plan (or any component thereof) in any or all respects
whatsoever. However, (i) no such amendment or modification shall materially and adversely affect
rights and obligations with respect to Awards at the time outstanding under the Plan, unless the
Participant consents to such amendment, and (ii) the grants to Outside Directors pursuant to Article 6
may not be amended at intervals more frequently than once every six (6) months, other than to the
extent necessary to comply with applicable U.S. income tax laws and regulations. In addition, the
Committee may not, without the approval of the Company’s shareholders, amend the Plan to
(i) materially increase the maximum number of Shares issuable under the Plan or the maximum
number of Shares for which any one individual participating in the Plan may be granted Awards,
(ii) materially modify the eligibility requirements for Plan participation or (iii) materially increase the
benefits accruing to Participants. Further, the repricing, replacement or regranting of any previously
granted Award, through cancellation or by lowering the Exercise Price of such Award, shall be
prohibited unless the shareholders of the Company first approve such repricing, replacement or
regranting. No underwater Option or SAR may be cancelled in exchange for, or in connection with the
payment of a cash amount without shareholder approval. The Committee may at any time terminate
or amend this Plan in any respect, including without limitation amendment of any form of Award
Agreement or instrument to be executed pursuant to this Plan; provided, however, that the Committee
will not, without the approval of the shareholders of the Company, amend this Plan in any manner that
requires such shareholder approval under Nasdaq or other stock exchange listing requirements then
applicable to the Company.
14.2 Awards Previously Granted. Except with respect to amendments made pursuant to
Section 15.13 hereof, no termination, amendment, or modification of the Plan shall adversely affect in
any material way any Award previously granted pursuant to the Plan without the prior written consent
of the Participant; provided, however, that an amendment or modification that may cause an Incentive
Stock Option to become a Non-Qualified Stock Option shall not be treated as adversely affecting the
rights of the Participant.
ARTICLE 15.
GENERAL PROVISIONS.
15.1 No Rights to Awards. No Eligible Individual or other person shall have any claim to be
granted any Award pursuant to the Plan, and neither the Company nor the Committee is obligated to
treat Eligible Individuals, Participants or any other persons uniformly.
15.2 No Shareholders Rights. Except as otherwise provided herein, a Participant shall have
none of the rights of a shareholder with respect to Shares covered by any Award, including the right to
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vote or receive dividends, until the Participant becomes the owner of such Shares, notwithstanding
the exercise or vesting of an Option or other Award.
15.3 Withholding. The Company or any Subsidiary or Affiliate, as appropriate, shall have the
authority and the right to deduct or withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy U.S. federal, state, or local taxes and any taxes imposed by jurisdictions
outside of the United States (including income tax, social insurance contributions, payment on account
and any other taxes that may be due) required by law to be withheld with respect to any taxable event
concerning a Participant arising as a result of this Plan or to take such other action as may be
necessary in the opinion of the Company or a Parent, Subsidiary or Affiliate, as appropriate, to satisfy
withholding obligations for the payment of taxes by any means authorized by the Committee. No
Shares shall be delivered hereunder to any Participant or other person until the Participant or such
other person has made arrangements acceptable to the Committee for the satisfaction of these tax
obligations with respect to any taxable event concerning the Participant or such other person arising
as a result of Awards made under this Plan.
15.4 No Right to Employment or Services. Nothing in the Plan or any Award Agreement shall
interfere with or limit in any way the right of the Company or any Parent, Subsidiary or Affiliate to
terminate any Participant’s employment or services at any time, nor confer upon any Participant any
right to continue in the employ or service of the Company or any Parent, Subsidiary or Affiliate.
15.5 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive
compensation. With respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are
greater than those of a general creditor of the Company or any Subsidiary or Affiliate.
15.6 Relationship to other Benefits. No payment pursuant to the Plan shall be taken into account
in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group
insurance, termination programs and/or indemnities or severance payments, welfare or other benefit
plan of the Company or any Parent, Subsidiary or Affiliate except to the extent otherwise expressly
provided in writing in such other plan or an agreement thereunder, or as expressly provided by
applicable law.
15.7 Expenses. The expenses of administering the Plan shall be borne by the Company and/or
its Subsidiaries and/or Affiliates.
15.8 Titles and Headings. The titles and headings of the Sections in the Plan are for
convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such
titles or headings, shall control.
15.9 Fractional Shares. No fractional Shares shall be issued and the Committee shall determine,
in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional
shares shall be eliminated by rounding down as appropriate.
15.10 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the
Plan, the Plan, and any Award granted or awarded to any Participant who is then subject to
Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to
Rule 16b-3 under the Exchange Act) that are requirements for the application of such exemptive rule.
To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall
be deemed amended to the extent necessary to conform to such applicable exemptive rule.
15.11 Government and Other Regulations. The obligation of the Company to make payment of
awards in Shares or otherwise shall be subject to all applicable laws, rules, and regulations of
Singapore and the United States and jurisdictions outside of Singapore and United States, and to
such approvals by government agencies, including government agencies in jurisdictions outside of
Singapore and the United States, in each case as may be required or as the Company deems
necessary or advisable. Without limiting the foregoing, the Company shall have no obligation to issue
or deliver evidence of title for Shares subject to Awards granted hereunder prior to: (i) obtaining any
approvals from governmental agencies that the Company determines are necessary or advisable, and
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(ii) completion of any registration or other qualification with respect to the Shares under any applicable
law in Singapore or the United States or in a jurisdiction outside of Singapore or the United States or
ruling of any governmental body that the Company determines to be necessary or advisable or at a
time when any such registration or qualification is not current, has been suspended or otherwise has
ceased to be effective. The inability or impracticability of the Company to obtain or maintain authority
from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained. The Company shall be under no obligation to register Shares issued or
paid pursuant to the Plan under the Securities Act. If the Shares paid pursuant to the Plan may in
certain circumstances be exempt from registration pursuant to the Securities Act the Company may
restrict the transfer of such Shares in such manner as it deems advisable to ensure the availability of
any such exemption.
15.12 Governing Law. The Plan and all Award Agreements, and all controversies thereunder or
related thereto, shall be construed in accordance with and governed by the laws of the State of
California, without regard to principles of conflict of laws.
15.13 Section 409A. Except as provided in Section 15.14 hereof, to the extent that the Committee
determines that any Award granted under the Plan is subject to Section 409A of the Code, the Award
Agreement evidencing such Award shall incorporate the terms and conditions required by
Section 409A of the Code. To the extent applicable, the Plan and Award Agreements shall be
interpreted in accordance with Section 409A of the Code and U.S. Department of Treasury regulations
and other interpretive guidance issued thereunder, including without limitation any such regulations or
other guidance that may be issued after the Effective Date. Notwithstanding any provision of the Plan
to the contrary, in the event that following the Effective Date the Committee determines that any
Award may be subject to Section 409A of the Code and related U.S. Department of Treasury
guidance (including such U.S. Department of Treasury guidance as may be issued after the Effective
Date), the Committee may adopt such amendments to the Plan and the applicable Award Agreement
or adopt other policies and procedures (including amendments, policies and procedures with
retroactive effect), or take any other actions, that the Committee determines are necessary or
appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax
treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of
Section 409A of the Code and related U.S. Department of Treasury guidance and thereby avoid the
application of any penalty taxes under such Section.
15.14 No Representations or Covenants with respect to Tax Qualification. Although the Company
may endeavor to (1) qualify an Award for favorable tax treatment under the laws of the United States
or jurisdictions outside of the United States (e.g., Incentive Stock Options) or (2) avoid adverse tax
treatment (e.g., under Section 409A of the Code), the Company makes no representation to that effect
and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment,
anything to the contrary in this Plan, including Section 15.13 hereof, notwithstanding. The Company
shall be unconstrained in its corporate activities without regard to the potential negative tax impact on
holders of Awards under the Plan.
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ANNEX B
FLEX LTD.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
Twelve-Month Periods
Ended
March 31, 2017
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GAAP gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$23,862,934
$ 1,520,945
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,023
SunEdison bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,915
Restructuring and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,527
Non-GAAP gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,677,410
Adjusted gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.0%
GAAP income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 370,848
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,266
Restructuring and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,099
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,396
Interest and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,532
Other charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,193
SunEdison bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,915
Non-GAAP operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 815,249
GAAP net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 319,564
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,266
Restructuring and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,099
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,396
SunEdison bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,915
Other charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,388
Adjustments for taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,826)
Non-GAAP net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 639,802
Weighted-average shares used in computing per share amounts (Diluted): . . . . 546,220
GAAP Earnings per share (Diluted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.59
Non-GAAP (adjusted earnings per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1.17
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,149,909
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (525,111)
Proceeds from the disposition of property and equipment . . . . . . . . . . . . . . . . 35,606
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 660,404
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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
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2017
Or
Commission file number 000-23354
FLEX 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) 6876-9899
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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ⌧
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 30, 2016, the aggregate market value of the Company’s ordinary shares held by non-affiliates of the registrant was
approximately $7.4 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 10, 2017
Ordinary Shares, No Par Value 529,913,600
Document Parts into Which Incorporated
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement to be delivered to shareholders in Part III
connection with the Registrant’s 2017 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . 48
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
PART III
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . 106
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Item 15.
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
PART IV
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PART I
FORWARD-LOOKING STATEMENTS
Unless otherwise specifically stated, references in this report to “Flex,” “the Company,” “we,” “us,” “our”
and similar terms mean Flex 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, provider of Sketch-to-Scaletm services—innovative design, engineering,
manufacturing, and supply chain services and solutions—from conceptual sketch to full-scale production. We
design, build, ship and service complete packaged consumer and industrial products, from athletic shoes to
electronics, for companies of all sizes in various industries and end-markets, through our activities in the
following segments:
(cid:129) Communications & Enterprise Compute (“ CEC “), which includes our telecom business of radio access
base stations, remote radio heads, and small cells for wireless infrastructure; our networking business,
which includes optical communications, routing, broadcasting, and switching products for the data and
video networks; our server and storage platforms for both enterprise and cloud-based deployments; next
generation storage and security appliance products; and rack level solutions, converged infrastructure and
software-defined product solutions;
(cid:129) Consumer Technologies Group (“CTG”), which includes our consumer-related businesses in connected
living, wearables, gaming, augmented and virtual reality, fashion, and mobile devices; and including
various supply chain solutions for notebook personal computers (“PC”), tablets, and printers; in addition,
CTG is expanding its business relationships to include supply chain optimization for non-electronics
products such as footwear and clothing;
(cid:129) Industrial and Emerging Industries (“IEI”), which is comprised of energy and metering, semiconductor
tools and capital equipment, office solutions, household industrial and lifestyle, industrial automation and
kiosks, and lighting; and
(cid:129) High Reliability Solutions (“HRS”), which is comprised of our medical business, including consumer
health, digital health, disposables, precision plastics, drug delivery, diagnostics, life sciences and imaging
equipment; our automotive business, including vehicle electrification, connectivity, autonomous vehicles,
and clean technologies; and our defense and aerospace businesses, focused on commercial aviation,
defense and military.
We provide our advanced design, manufacturing and supply chain services through a network of over
100 facilities in approximately 30 countries across four continents. We have established this extensive network of
design and manufacturing facilities in the world’s major consumer electronics and industrial products markets
(Asia, the Americas, and Europe) in order to serve the outsourcing needs of both multinational and regional
companies. Our services provide our customers with a competitive advantage by delivering improved product
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quality, increased flexibility, leading-edge manufacturability, improved performance, faster time-to-market, and
competitive costs. Our customers leverage our services to meet their requirements throughout their products’
entire life cycles. For the fiscal year ended March 31, 2017, we had revenue of $23.9 billion and net income of
$319.6 million.
Over the past several years, we have evolved beyond a traditional Electronics Manufacturing Services
(“EMS”) company, and now consider Flex to be a provider of a full range of Sketch-to-Scaletm services—beyond
electronics manufacturing services—including strategic product development planning and design-phase
innovation, supported by a talented team of design engineers. Our innovation strategy is focused on three levels:
products, systems, and manufacturing technologies and processes.
We believe that the combination of our extensive open innovation platform solutions, design and
engineering services, advanced supply chain management solutions and services, significant scale and global
presence, and industrial campuses in low-cost geographies provide us with a competitive advantage and strong
differentiation in the market for designing, manufacturing, and servicing consumer electronics, and industrial
and consumer products for leading multinational and regional companies. Through these services and facilities,
we offer our customers accelerated design, increased flexibility and responsiveness, improved time to market,
and supply chain predictability and real time visibility, which enable them to accelerate product launches, enter
new markets, mitigate risks, and improve free cash flow.
We recognized research and development costs primarily related to our design and innovations businesses
of $65.6 million, $61.0 million, and $26.3 million for the fiscal years ended March 31, 2017, 2016 and 2015,
respectively.
INDUSTRY OVERVIEW
Our expertise is Sketch-to-Scaletm services: design, manufacture, and supply services for a broad range of
products, from electronics to athletic shoes. Although Flex has evolved beyond traditional EMS, the majority of
our customers are electronics original equipment manufacturers (“OEMs”); as such, the closest broad definition
of our industry remains the outsourced EMS industry.
EMS has experienced significant change and growth as an increasing number of companies elect to
outsource some or all of their design, manufacturing, and after-market services requirements. In recent years, we
have seen an increased level of diversification by many companies, primarily in the technology sector. Companies
that have historically identified themselves as software providers, internet service providers, or e-commerce
retailers are entering the highly competitive and rapidly evolving hardware markets, with products including
mobile devices, home entertainment and wearable devices. This trend has resulted in significant changes to the
hardware manufacturing and supply chain solutions requirements of such companies. Increasingly complex
products require highly customized supply chain solutions, in turn resulting in significant changes to the overall
manufacturing and supply chain landscape. The growth of the overall industry for calendar year 2016 is
estimated to have been around 4%.
We believe the total available market for the EMS industry is poised for continued growth, with current
penetration rates estimated to be about 30%. The intensely competitive nature of the electronics industry, the
increasing complexity and sophistication of electronics products, and pressure on OEMs to reduce product costs
and shorten product life cycles are all factors that encourage OEMs to utilize supply chain 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 a number of important benefits through their strategic relationships with EMS providers,
including:
(cid:129) Improved efficiency and 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;
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(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 largely driven by the need for OEMs to respond to
rapidly changing markets and technologies, the increasing complexity of supply chains and the continued
pressure to be cost competitive. Additionally, we believe that there are significant opportunities for global EMS
providers to win additional business from OEMs in markets or industry segments that have yet to substantially
utilize such providers.
SERVICE OFFERINGS
We offer a broad range of customizable services to our customers. We believe that Flex has the broadest
worldwide end-to-end supply chain solution capabilities in the industry, from concept design resources to
aftermarket services. We believe a key competitive advantage is the Flex Platform, which is our system for
improving customer competitiveness by providing superior speed, scope, and scale:
(cid:129) Speed: Our sophisticated supply chain management tools and expertise allow us to provide customers
with access to real-time information that increases visibility throughout the entire product lifecycle,
reducing risk while accelerating execution.
(cid:129) Scope: Our end-to-end services, from Sketch-to-Scaletm, include design and innovation services,
engineering, logistics, and supply chain management. Our deep industry knowledge and multi-domain
expertise accelerates the entire process of producing increasingly complex products for increasingly
interconnected industries.
(cid:129) Scale: Our physical infrastructure includes over 100 facilities in approximately 30 countries, staffed by
approximately 200,000 employees, providing our customers with truly global scale and strategic
geographic distribution capabilities.
We offer 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 extensive experience in
specific markets, we have developed deep understanding of complex market dynamics, giving us the ability to
anticipate trends that impact our customers’ businesses. Our expertise can help improve our customers’ market
positioning by effectively adjusting product plans and roadmaps to efficiently and cost-effectively deliver high
quality products that meet their time-to-market requirements.
Our services include all processes necessary to design, build, ship and service complete packaged consumer
electronics and industrial products for our customers. These services include:
Innovation Services. This area of our business has seen increased investment and focus over the past
five years. We provide a comprehensive set of services that enable companies, from startups to
multinationals, to successfully innovate, create new products and solutions, and gain access to new markets.
These services span the entire product introduction and solution lifecycle by providing access to new
technologies, accelerating product development from early concepts to final production-ready design, and
providing advanced manufacturing and testing for new product introduction and market access to grow our
customers’ offerings. We launched the Silicon Valley Open Innovation Initiative to create an ecosystem of
customers, suppliers and design tool makers to drive new product innovation technologies that improve
productivity, cost and time-to-market. As part of this initiative, we founded the Silicon Valley Open
Innovation Summit.
In fiscal year 2017, we continued to expand our Innovation Centers worldwide and further enhanced our
flagship Customer Innovation Center in Silicon Valley. Our innovation services include:
(cid:129) Innovations Labs. Innovation Labs is a design and engineering organization that specializes in
supporting customer design and product development services from early concept stages, with the ability
to accommodate highly ambiguous requirements. Customers gain access to our design and engineering
facilities, technical subject matter expertise, and rapid prototyping resources such as metal and plastic 3D
printers and soft tooling capabilities.
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(cid:129) Collective Innovation Platform. The Collective Innovation Platform is an ecosystem of qualified
technology solutions that helps customers reduce time-to-market and enhance product functionality by
leveraging technology building blocks that have been qualified by Flex as part our technology Centers of
Excellence. By joining the Flex Collective Innovation Program, technology providers can monetize their
investments and gain access to our large, global customer base. Program members include technology
suppliers, startups, software/application providers, research labs/institutes and universities.
(cid:129) Lab IX. A startup accelerator program that invests in the next generation of disruptive technologies,
giving startups a competitive advantage by providing them the necessary resources and connections to
grow their business. By bringing together startups, OEMs and technology partners, we provide Lab IX
portfolio companies with access to our global end-to-end supply chain solutions, our wealth of
experience in hardware design, our manufacturing services and logistics across a wide range of markets,
and additional benefits from our specialized partners.
(cid:129) Centers of Excellence. Centers of Excellence provide strategic technology capabilities developed by Flex
in critical solutions areas which are leveraged across multiple industries, for integration into our
customers’ products. Centers of Excellence include Human Machine Interface, Wireless and
Connectivity, Semiconductors, Sensors and Actuators, Power and Battery Management, Smart Software,
Flexible Technology, Computing, and Mechanicals and Plastics.
(cid:129) Interconnect Technology Center. The Interconnect Technology Center provides expertise in both rigid and
flexible circuits for next generation printed circuits technology, testing methods, and designs. The
Center’s state-of-the-art labs are specifically designed for printed circuit innovation, with a focus on
embedded components, integration and transfer, wearable and stretchable design, thermal management,
system integration and simulation.
(cid:129) CloudLabs. The CloudLabs initiative provides cloud infrastructure companies with engineering and
design services to optimize rack-level solutions, especially in the case of multi-vendor equipment
integration. CloudLabs enables customers to accelerate a spectrum of cloud, converged infrastructure,
and datacenter strategies.
Design and Engineering Services. We offer a comprehensive range of value-added design and
engineering services, tailored to the specific markets and needs of our customers. These services can be
delivered by one of two primary business models:
(cid:129) Contract Design Services, where customers purchase engineering and development services on a time
and materials basis; or
(cid:129) Joint Development Manufacturing Services, where our engineering and development teams work jointly
with our customers’ teams to ensure product development integrity, seamless manufacturing handoffs,
and faster time to market.
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, including embedded microprocessors, memory, digital signal processing design, high-speed
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digital interfaces, analog circuit design, power management solutions, wired and wireless communication
protocols, display imaging, audio/video, and radio frequency systems and antenna design.
(cid:129) Reliability and Failure Analysis. We provide comprehensive design for manufacturing, test, and
reliability services leveraging robust, internally-developed tools and databases. These services leverage
our core manufacturing competencies to help our customers achieve their time-to-revenue goals.
(cid:129) Component Level Development Engineering. We have developed substantial engineering competencies
for product development and lifecycle management of various component technologies, such as 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 ship-to-line programs, continuous flow manufacturing, demand flow processes, and
statistical process controls. As our customers seek to provide greater functionality in physically smaller
products, they increasingly require more sophisticated manufacturing technologies and processes. Our
investment in advanced manufacturing equipment and our 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, and 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 dynamic customer 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. 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 improved overall supply
chain management.
(cid:129) Testing Services. We 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 also offer design for test,
manufacturing, and environmental services 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 work in process. We utilize electronic data interchange with our
customers and suppliers to implement a variety of supply chain management programs. Electronic data
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interchange allows customers to share demand and product forecasts, 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 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. We offer the following components product solutions:
(cid:129) Rigid and Flexible Printed Circuit Board (“PCB”) Fabrication. Printed circuit boards are 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, spaces, and plated holes (called
vias) which interconnect the different layers into an extremely dense circuit network that carries the
electrical signals between components. As semiconductor designs become more complex and signal
speeds increase, there is an increasing demand for higher density integration on printed circuit boards,
requiring higher layer counts, finer lines and spacings, smaller vias (microvias) and base materials with
very low electrical 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 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 light-emitting diode (“LED”) lighting, tablet computers, and miniaturized
radio frequency identification tags or smart cards. We are an industry leader in high-density interconnect
with Every Layer Inter Connect (“ELIC”) technology, which is widely 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 quickly 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 and flexible circuit fabrication service capabilities in North America and Asia. Our PCB capabilities
are centered in Asia and North America.
(cid:129) Power Supplies. We have a full service power supply business (“Flex Power”) that is a key player in the
mobile revolution, with expertise in high efficiency and high density switching power supplies ranging
from 1 to 3,000 watts. Our product portfolio includes chargers for smartphones and tablets, adapters for
notebooks and gaming, and power supplies for server, storage, and networking markets. We pride
ourselves on our ability to service the needs of industry leaders in these markets through valuable
technology, design expertise, collaborative development, and efficient execution. Our products are fully
compliant with the environmental and Energy Star requirements that drive efficiency specifications in
our industry. Customers who engage with Flex Power gain access to compelling innovations and
intellectual property in digital control and smart power.
Logistics. Our Flex Global Services business is a provider of after-market supply chain logistics
services. Our comprehensive suite of services is tailored to customers operating in the computing,
consumer digital, infrastructure, industrial, mobile and medical markets. Our expansive global
infrastructure includes 27 sites and approximately 11,000 employees strategically located throughout the
Americas, Europe, and Asia. By leveraging our operational infrastructure, supply chain network, and IT
systems, we are able to offer our customers globally consistent logistics solutions. By linking the flow of
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information from these supply chains, we create supply chain insight for 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 use globally consistent processes, which help increase our customers’ brand loyalty by
improving turnaround times and raising end-customer satisfaction levels. Our objective is to maximize asset
value retention for our customers’ products throughout their product life cycle while simultaneously
minimizing non-value added 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
providing critical feedback to their supply chain constituents, delivering 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, smart 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
We build intelligent products for a connected world. We do this by providing our customers with end-to-end
product development services, from innovation, design, and engineering, to manufacturing, logistics, and supply
chain solutions. We strive to help create a smarter, more connected world, enabling simpler, richer lives through
technology. Our strategy is to enable and scale innovation for our customers, maintain our leadership in our core
capabilities, and build extended offerings in high-growth sectors.
Talent. To maintain our competitiveness and world-class capabilities, we focus on hiring and retaining
the world’s best talent. We empower talented employees to develop global supply chain solutions that
transform industries and companies. We have taken steps to attract the best functional and operational
leaders and have accelerated efforts to develop the future leaders of the company.
Customer-Focus. We believe that serving aspiring leaders in dynamic industries fosters 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 that are leaders in their industry and value our superior capabilities in design, manufacturing,
supply chain and aftermarket services. We focus our energy and efforts on high-growth markets where we
have distinctive competence and compelling value propositions. Examples include our investments in
energy, healthcare, automotive, industrial markets, and a number of enabling components technologies. Our
market-focused approach to managing our business increases our customers’ competitiveness by leveraging
our deep industry expertise, as well as global scale and sensitivity and rapid response 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, IP, and assets
contribute to our 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 such 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.
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COMPETITIVE STRENGTHS
We continue to enhance our business through the development and expansion of our product and service
offerings. We strive to maintain the efficiency and flexibility of our organization, with repeatable execution that
adapts to macro-economic changes providing clear value to our customers, while increasing their
competitiveness. We have a focused strategy on delivering scale, scope and speed to our customers through
world-class operations, innovation and design services, supply chain solutions, and industry and market
expertise. We provide real-time supply chain applications that enable improved supply chain visibility, allowing
customers to better monitor and mitigate risks. We believe the following capabilities further 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
$22.8 billion of materials during our fiscal year ended March 31, 2017. As a result, we are able to use our
worldwide supplier relationships to achieve advantageous pricing and supply chain flexibility for our
customers.
We have established an extensive, integrated network of design, manufacturing and logistics facilities
in the world’s major consumer electronics and industrial markets to serve the outsourcing needs of both
multinational and regional companies. Our extensive global network of over 100 facilities in approximately
30 countries with approximately 200,000 employees, helps increase our customers’ competitiveness by
simplifying their global product development processes while delivering improved product quality with
improved performance and accelerated time to market.
End-to-End Solutions. We offer a comprehensive range of worldwide supply chain services that
simplify and improve global product development processes, providing meaningful time and cost savings to
our 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 help our customers improve product
quality, manufacturability and performance, while reducing costs. We have expanded and enhanced our
service offering by adding capabilities in 3D printing, automation, innovation labs, real-time supply chain
software, plastics, machining, and mobile charging, and 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 history and
reputation of creating value for our customers while increasing their own competitiveness. We achieve this
through our market-focused approach, our broad range of service offerings and solutions, and our deep
industry expertise, which allow us to provide innovative solutions to all of the manufacturing and related
service needs of our customers. We continue to receive numerous service and quality awards that further
validate the strength of our customer relationships.
Extensive Design and Engineering Capabilities. We have an industry-leading global design service
offering, with extensive product design engineering resources, that provides design services, product
developments, 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 Sketch-to-Scaletm customized solutions that
include services from design concept, through product industrialization and product development, including
the manufacture of components and complete products (such as smart phones), which are then sold by our
customers under their brand names.
Geographic, Customer and End Market Diversification. We believe we have created a well-diversified
and balanced company. Our business spans multiple end markets, significantly expanding our total
available market. The world is experiencing rapid changes, and macro-economic disruptions have led to
demand shifts and realignments. We believe that we are well-positioned through our market diversification
to grow faster than the industry average and successfully navigate through difficult economic times. Our
broad geographic footprint and experiences with multiple product types and complexity levels create a
significant competitive advantage. We continually look for new ways to diversify our offering within each
market segment.
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Customer and Product Innovation Centers. We have established state-of-the art innovation centers in
the Americas, Asia and Europe, with differentiated offerings and specialized services and focus. Some of
these offerings include the most advanced 3D plastic printing, 3D metal printing, surface mount technology
(SMT), and X-ray and test equipment to support major industries in bringing innovative products to market
rapidly. We also have a reliability and failure analysis lab and an automation applications team. Another key
feature is our focus on confidentiality and security as we offer dedicated customer-confidential work spaces
that provide increased security and restricted access to protect our customers’ intellectual property (“IP”)
and the confidentiality of new products being launched into the marketplace. These innovation centers offer
our customers a geographically-focused version of our Sketch-to-Scaletm services, taking their product from
concept to volume production and go-to-market in a rapid, cost effective and low risk manner.
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 supply chain management efficiency, 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 industrial parks in
Brazil, China, Malaysia, Mexico and Poland.
We have selected 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,
2017, approximately 80% of our manufacturing capacity was located in low-cost locations, such as Brazil,
China, Hungary, India, Indonesia, Malaysia, Mexico, Poland, Romania, and the Ukraine. We believe we are
a global industry leader in low-cost production capabilities.
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.
As our business spans multiple end markets, we believe that we are well-positioned through our market
diversification to grow faster than the industry average and successfully navigate through difficult economic
times. As an example, we serve the following key customers across our diverse business groups including
i) medical customers Abbott and Johnson & Johnson and auto customers Ford and Nexteer in our HRS segment,
ii) Teradyne, Applied Materials and Xerox in our IEI segment, iii) Cisco, Nokia Solutions and Huawei in our
CEC segment and iv) Motorola Lenovo, Nike and Bose out of our CTG segment. We continually look for new
ways to diversify our offering within each market segment.
In fiscal year 2017, our ten largest customers accounted for approximately 43% of net sales. No customers
accounted for greater than 10% of the Company’s net sales in fiscal year 2017.
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 depending on 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 Original
Design Manufacturing (“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
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services market are quality and range of services, design and technological capabilities; cost; location of facilities;
responsiveness and flexibility. We believe we are extremely competitive with regard to all of these factors.
SOCIAL RESPONSIBILITY
Our Corporate Social and Environmental Responsibility (“CSER”) management system has several
elements, including environmental, health and safety compliance, labor and human rights, ethics, governance,
and community engagement. Flex’s CSER framework is based upon the principles, policies, and standards
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, health and safety conditions as well as other relevant international standards
(e.g., ISO 14001). Flex is a founding member of the EICC. Social responsibility is also an area of increasing
regulation, with specific regulations such as the California Transparency in Supply Chains Act, the U.S. Federal
Acquisition Regulation on Human Trafficking and the U.K. Modern Slavery Act of 2015, all creating new
compliance and disclosure obligations for the Company and for our customers. We operate a number of
programs, including compliance audits, data collection, training and leadership programs that focus upon driving
continuous improvements in social, ethical, and environmental performance throughout all of our global
operating units, all in accordance with our Code of Business Conduct and Ethics. Being a good corporate citizen
does not mean we should merely conform to standards. We go beyond required responsibilities by offering a
wide range of programs and initiatives to engage both our internal and external communities. At the heart of this
endeavor lies our pragmatic goal of positively influencing the lives of people in the communities in which we
operate. We intend to continue investing in these global communities through grant-making, financial
contributions, volunteer work, direct engagement and donation of resources.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”),
Section 1502, introduced reporting requirements related to the verification of whether we are directly (or
indirectly through suppliers of materials) purchasing the following minerals: columbite-tantalite, also known as
coltan (the metal ore from which tantalum is extracted); cassiterite (the metal ore from which tin is extracted);
gold; wolframite (the metal ore from which tungsten is extracted); or their derivatives, which are limited to
tantalum, tin and tungsten; or any other mineral or its derivatives as determined by the Secretary of State
associated with financing conflicts in the Democratic Republic of the Congo or an adjoining country. We are
working directly with suppliers, industry groups, and customers to comply with the reporting requirements
necessary to comply with this law. See “Risk Factors—Compliance with government regulations regarding the
use of ‘conflict minerals’ may result in increased costs and risks to us.” We have filed the required reports on
Form SD with the Securities and Exchange Commission (SEC) in accordance with the Dodd-Frank Act.
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 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 associated with 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. Additionally, we could be required to alter our operations in order to comply with any new
standards or requirements under environmental laws or regulations. 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 issue is currently known.
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We are also required to comply with an increasing number of product environmental compliance
regulations focused upon 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 the United States. Our business requires
close collaboration with our customers and suppliers to mitigate risks of non-compliance. We have developed
rigorous compliance programs designed to meet the needs and specifications of our customers as well as the
regulations. These programs vary from collecting compliance or material data from our Flex controlled or
managed suppliers to full laboratory testing, and we include compliance requirements in our standard supplier
contracts. 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. Flex
continues to monitor developments related to product environmental compliance and is working with our
customers and other technical organizations to anticipate and minimize any impacts to our operations.
EMPLOYEES
As of March 31, 2017, our global workforce totaled approximately 200,000 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, 2017 and 2016, 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 also design
and make 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 SEGMENTS AND GEOGRAPHIC AREAS
Refer to note 19 to our consolidated financial statements included under Item 8 for financial information
about our business segments and geographic areas.
ADDITIONAL INFORMATION
Our Internet address is https://www.flex.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
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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 product 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 business groups:
(cid:129) CEC, which includes our telecom business of radio access base stations, remote radio heads, and small
cells for wireless infrastructure; our networking business, which includes optical, routing, broadcasting,
and switching products for the data and video networks; our server and storage platforms for both
enterprise and cloud-based deployments; next generation storage and security appliance products; and
rack level solutions, converged infrastructure and software-defined product solutions;
(cid:129) CTG, which includes our consumer-related businesses in connected living, wearables, gaming,
augmented and virtual reality, fashion, and mobile devices; and including various supply chain solutions
for notebook personal computers (“PC”), tablets, and printers; in addition, CTG is expanding its business
relationships to include supply chain optimization for non-electronics products such as footwear and
clothing;
(cid:129) IEI, which is comprised of energy and metering, semiconductor and capital equipment, office solutions,
household industrial and lifestyle, industrial automation and kiosks, and lighting; and
(cid:129) HRS, which is comprised of our medical business, including consumer health, digital health, disposables,
precision plastics, drug delivery, diagnostics, life sciences and imaging equipment; our automotive
business, including vehicle electrification, connectivity, autonomous vehicles, and clean technologies;
and our defense and aerospace businesses, focused on commercial aviation, defense and military.
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 that 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’ products may have supply chain issues;
(cid:129) our customers may experience dramatic market share shifts in demand which may cause them to lose
market share or exit businesses; and
(cid:129) there may be recessionary periods in our customers’ markets.
Our customers may cancel their orders, change production quantities or locations, or delay production, and
our current and potential customers may decide to manufacture some or all of their products internally, which
could harm our business.
Cancellations, reductions, or delays by a significant customer or by a group of customers have harmed, and
may in the future 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
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merits of manufacturing products themselves. Our business would be adversely affected if customers decide to
perform these functions internally or transfer their business to another provider. In addition, we face competition
from the manufacturing operations of some of our current and potential customers, who are continually
evaluating the merits of manufacturing products internally against the advantages of outsourcing. In the past,
some of our customers moved a portion of their manufacturing from us in order to more fully utilize their excess
internal manufacturing capacity. Any of these developments could cause a decline in our sales, loss of market
acceptance of our products or services, decreases of our profits or loss of our market share.
As a provider of design and manufacturing services and components for electronics, 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, can cause supply chain management issues, 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. Many of our costs and operating expenses are relatively fixed, thus 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
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.
A significant percentage 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 43%, 46% and 50% of net sales in fiscal years 2017, 2016 and
2015, respectively. No customer accounted for more than 10% of net sales in fiscal year 2017 and only
Lenovo/Motorola, which is reflected in our CTG segment, accounted for more than 10% of net sales in fiscal
year 2016 and 2015. 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. Additionally, mergers, acquisitions, consolidations or other
significant transactions involving our key customers generally entail risks to our business. If a significant
transaction involving any of our key customers results in the loss of or reduction in purchases by the largest
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customers, it could have a materially adverse effect on our business, results of operations, financial condition
and prospects.
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
supply 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, customers often require unique configurations or custom designs, which must be developed and
integrated in the customer’s product well before the customer launches the product. 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 customer. 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 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 some of our customers experience financial difficulty, we could have difficulty
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 supplies
necessary to fulfill 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. On April 21, 2016, SunEdison, Inc. and
certain of its subsidiaries (“SunEdison”) filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
For the fiscal year ended March 31, 2016, we recognized a bad debt reserve charge of $61.0 million associated
with our outstanding SunEdison receivables and accepted return of previously shipped inventory of approximately
$90 million. During the second quarter of fiscal year 2017, prices for solar panel modules declined significantly.
We determined that certain solar panel inventory previously designated for SunEdison on hand at the end of the
second quarter of fiscal year 2017 was not fully recoverable and recorded a charge of $60.0 million to reduce the
carrying costs to market during fiscal year 2017. In addition we recognized a $16.0 million impairment charge
for solar module equipment and incurred $16.9 million of incremental costs primarily related to negative margin
sales and other associated solar panel direct costs. The estimates underlying our recorded provisions, as well as
consideration of other potential customer bankruptcy-related contingencies associated with the SunEdison
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bankruptcy proceedings, are based on the facts currently known to us. No preference claims have been asserted
against the Company and consideration has been given to the related contingencies based on the facts currently
known to us. We are unable to reasonably estimate a loss or any range of possible loss. Further, we believe that
we continue to have a number of affirmative and direct defenses to any potential claims for recovery and intend
to vigorously defend any such claim, if asserted. An unfavorable resolution of this matter could be material to
our results of operations, financial condition, or cash flows.
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.
Our margins and profitability may be adversely affected due to substantial investments, start-up and
production ramp costs in our design services.
As part of our strategy to enhance our end-to-end service offerings, we 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.
Our design services offerings require significant investments in research and development, technology
licensing, test and tooling equipment, patent applications, facility expansion and recruitment. We may not be
able to achieve a high enough level of sales for this business 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 to grow 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.
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We conduct operations in a number of countries and are subject to the risks inherent in international
operations.
The geographic 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 process 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 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;
(cid:129) longer payment cycles;
(cid:129) cultural differences;
(cid:129) increases in duties, tariffs, and taxation levied on our products;
(cid:129) increased scrutiny by the media and other third parties of labor practices within our industry (including
but not limited to working conditions) which may result in allegations of violations, more stringent and
burdensome labor laws and regulations and inconsistency in the enforcement and interpretation of such
laws and regulations, higher labor costs, and/or loss of revenues if our customers become dissatisfied
with our labor practices and diminish or terminate their relationship with us;
(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) ineffective legal protection of our intellectual property rights in certain countries;
(cid:129) natural disasters;
(cid:129) exposure to infectious disease and epidemics;
(cid:129) inability of international customers and suppliers to obtain financing resulting from tightening of credit
in international financial markets;
(cid:129) political unrest; 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, Brazil 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
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have the authority to suspend, restrict or otherwise impose conditions on foreign exchange transactions or to
approve distributions to foreign investors.
Fluctuations in foreign currency exchange rates could increase our operating costs.
We have manufacturing operations and industrial parks that are located in lower cost regions of the world,
such as Asia, Eastern Europe and Mexico. A portion of our purchases and our sale transactions are denominated
in currencies other than the United States dollar. As a result, we are exposed to fluctuations in these currencies
impacting 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, payables and expenses of our
operating entities. As part of our currency hedging strategy, we use financial instruments such as forward
exchange, swap contracts, and options to hedge our foreign currency exposure in order to reduce the short-term
impact of foreign currency rate fluctuations on our operating results. If our hedging activities are not successful
or if we change or reduce these hedging activities in the future, we may experience significant unexpected
fluctuations in our operating results as a result of changes in exchange rates.
We are also exposed to risks related to the valuation of the Chinese currency relative to the U.S. dollar. 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.
If our IT or physical security systems are breached, we may incur significant legal and financial exposure.
We regularly face attempts by others to gain unauthorized access through the Internet or to introduce
malicious software to our information systems. We are also a target of malicious attackers who attempt to gain
access to our network or data centers or those of our customers or end users; steal proprietary information
related to our business, products, employees, and customers; or interrupt our systems and services or those of
our customers or others. We believe such attempts are increasing in number and in technical sophistication. In
some instances, we, our customers, and the users of our products and services might be unaware of an incident
or its magnitude and effects. We have implemented security systems with the intent of maintaining the physical
security of our facilities and inventory and protecting our customers’ and our suppliers’ confidential information.
In addition, while we seek to detect and investigate all unauthorized attempts and attacks against our network,
products, and services, and to prevent their recurrence where practicable through changes to our internal
processes and tools, we are subject to, and at times have suffered from, breach of these security systems 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 flow.
Our strategic relationships with major customers create risks.
In the past, we have completed numerous strategic transactions with customers. Under these arrangements,
we generally acquire inventory, equipment and other assets from the customers, and lease or acquire their
manufacturing facilities, while simultaneously entering into multi-year manufacturing and supply agreements for
the production of their products. We may pursue these customer divestiture transactions in the future. These
arrangements entered into with divesting customers typically involve many risks, including the following:
(cid:129) we may need to pay a purchase price to the divesting customers that exceeds the value we ultimately may
realize from the future business of the customer;
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(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 customer, 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 customer as to volume, product quality, timeliness and
cost reductions;
(cid:129) our supply agreements with the customers generally do not require any minimum volumes of purchase by
the customers, and the actual volume of purchases may be less than anticipated; and
(cid:129) if demand for the customers’ products declines, the customer 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 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 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.
If our compliance policies are breached, we may incur significant legal and financial exposure.
We have implemented local and global compliance policies to ensure compliance with our legal obligations
across our operations. A 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
Flex. 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.
We are subject to the risk of increased income taxes.
We are subject to taxes in numerous jurisdictions. Our 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. The international tax environment
continues to change as a result of both coordinated efforts by governments and unilateral measures designed by
individual countries, both intended to tackle concerns over perceived international tax avoidance techniques,
which could ultimately have an adverse effect on the taxation of international businesses. For example,
legislative changes may result from the Organization for Economic Co-operation and Development’s Base
Erosion and Profit Shifting Project or any U.S. tax reform, which has been stated to be a priority for the new
U.S. presidential administration and U.S. Congress. Any such changes, if adopted, could adversely impact our
effective tax rate. Our taxes could also 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. 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
modifications, 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.
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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.
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 financial and 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 year 2017, we undertook initiatives to restructure our business
operations through a series of restructuring activities, which were intended to accelerate our ability to support
more Sketch-to-Scaletm efforts across the Company and reposition away from historical legacy programs and
structures through rationalizing our current footprint at existing sites and at corporate SG&A functions. These
activities were primarily for employee termination costs.
While we incur severance, asset impairment charges and other charges as a result of changes in our
customer mix on an ongoing basis, such individual actions were not considered material and did not qualify as
restructuring charges per accounting principles generally accepted in the United States to be separately disclosed
as restructuring charges in fiscal years 2016 and 2015, and are included in either cost of sales or selling, general
and administrative expenses, as appropriate. Our restructuring activities undertaken during fiscal year 2017 have
been disclosed separately on our statement of operations. 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.
Changes in financial accounting standards or policies have affected, and in the future may affect, our
reported financial condition or results of operations.
We prepare our financial statements in conformity with U.S. GAAP. These principles are subject to
interpretation by the Financial Accounting Standards Board (FASB), the American Institute of Certified Public
Accountants (AICPA), the SEC and various bodies formed to interpret and create accounting policies. For
example, significant changes to revenue recognition rules have been enacted and will begin to apply to us in
fiscal year 2019 as the FASB has proposed. Changes to accounting rules or challenges to our interpretation or
application of the rules by regulators may have a material adverse effect on our reported financial results or on
the way we conduct business.
We may encounter difficulties with acquisitions and divestitures, 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.
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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;
(cid:129) cybersecurity and compliance related issues;
(cid:129) initial dependence on unfamiliar supply chain or relatively small supply chain partners; and
(cid:129) exposure to unanticipated liabilities of acquired companies.
In addition, divestitures involve significant risks, including without limitation, difficulty finding financially
sufficient buyers or selling on acceptable terms in a timely manner, and the agreed-upon terms could be
renegotiated due to changes in business or market conditions. Divestitures could adversely affect our
profitability and, under certain circumstances, require us to record impairment charges or a loss as a result of the
transaction. In addition, completing divestitures requires expenses and management attention and could leave us
with certain continuing liabilities.
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 or divestiture, and
could adversely affect our business and operating results.
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.
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 or to resolve the issue through litigation. We may not be
successful in developing such alternatives or obtaining such licenses on reasonable terms or 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 outcome.
We are subject to risks relating to litigation, which may have a material adverse effect on our business.
From time to time, we are involved in various claims, suits, investigations and legal proceedings. Additional
legal claims or regulatory matters may arise in the future and could involve matters relating to commercial
disputes, government regulatory and compliance, intellectual property, antitrust, tax, employment or shareholder
issues, product liability claims and other issues on a global basis. If we receive an adverse judgment in any
litigation, we could be required to pay substantial damages and cease certain practices or activities. Regardless of
the merits of the claims, litigation may be both time- consuming and disruptive to our business. The defense and
ultimate outcome of any lawsuits or other legal proceedings may result in higher operating expenses and a
decrease in operating margin, which could have a material adverse effect on our business, financial condition, or
results of operations.
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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 and Latin America where we operate have similar laws regarding the
regulation of medical device manufacturing.
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.
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 for some or 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.
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 generally 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.
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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 and other key
employees. 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
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, customers may
turn to EMS companies for assistance in meeting their obligations under WEEE.
In addition, we are responsible for the 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. Additionally, we
could be required to alter our manufacturing and operations and incur substantial expense in order to comply
with environmental regulations. 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.
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
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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
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.
Our business could be impacted as a result of actions by activist shareholders or others.
We may be subject, from time to time, to legal and business challenges in the operation of our company
due to actions instituted by activist shareholders or others. Responding to such actions could be costly and
time-consuming, may not align with our business strategies and could divert the attention of our Board of
Directors and senior management from the pursuit of our business strategies. Perceived uncertainties as to our
future direction as a result of shareholder activism may lead to the perception of a change in the direction of the
business or other instability and may make it more difficult to attract and retain qualified personnel and business
partners and may affect our relationships with vendors, customers and other third parties.
Our debt level may create limitations.
As of March 31, 2017, our total debt was approximately $3.0 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. We may also be exposed to interest rate fluctuations on our outstanding borrowings and
investments.
Our credit is rated by credit rating agencies. Our 4.625% Notes, our 5.000% Notes and our 4.750% Notes
are currently rated BBB- by Standard and Poor’s (“S&P”) which is considered to be “investment grade” by
S&P, rated Baa3 by Moody’s which is considered to be “investment grade” by Moody’s, and rated BBB- by Fitch
which is considered to be “investment grade” by Fitch. Any 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 ordinary shares, 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.
In addition, we are exposed to interest rate risk under our variable rate terms loans, bilateral facilities and
revolving credit facility for indebtedness we have incurred or may incur under such borrowings. The interest
rates under these borrowings are based on either (i) a margin over LIBOR 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, in each case depending on our credit rating. Refer to the discussion in note 7, “Bank
Borrowings and Long-Term Debt” to the consolidated financial statements for further details of our debt
obligations. We are also exposed to interest rate risk on our invested cash balances, our securitization facilities
and our factoring activities.
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. Adverse worldwide economic conditions may create
challenging conditions in the electronics industry. For example, these conditions may be adversely impacted by
the pending withdrawal of the United Kingdom from the EU following its referendum on EU membership and
the position that the U.S. will take with respect to certain treaty and trade relationships with other countries.
These conditions may result in reduced consumer and business confidence and spending in many countries, a
tightening in the credit markets, a reduced level of liquidity in many financial markets, high volatility in credit,
fixed income and equity markets, currency exchange rate fluctuations, and global economic uncertainty. 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
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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.
Catastrophic events could have a material adverse effect on our operations and financial results.
Our operations or systems could be disrupted by natural disasters, terrorist activity, public health issues,
cyber security incidents, interruptions of service from utilities, transportation or telecommunications providers,
or other catastrophic events. Such events could make it difficult or impossible to manufacture or deliver products
to our customers, receive production materials from our suppliers, or perform critical functions, which could
adversely affect our revenue and require significant recovery time and expenditures to resume operations. While
we maintain business recovery plans that are intended to allow us to recover from natural disasters or other
events that can be disruptive to our business, some of our systems are not fully redundant and we cannot be sure
that our plans will fully protect us from all such disruptions.
We maintain a program of insurance coverage for a variety of property, casualty, and other risks. We place
our insurance coverage with multiple carriers in numerous jurisdictions. However, one or more of our insurance
providers may be unable or unwilling to pay a claim. The types and amounts of insurance we obtain vary
depending on availability, cost, and decisions with respect to risk retention. The policies have deductibles and
exclusions that result in us retaining a level of self-insurance. Losses not covered by insurance may be large,
which could harm our results of operations and financial condition.
Our business could be adversely affected by any delays, or increased costs, resulting from issues that our
common carriers are dealing with in transporting our materials, our products, or both.
We rely on a variety of common carriers to transport our materials from our suppliers to us, and to
transport our products from us to our customers. Problems suffered by any of these common carriers, whether
due to a natural disaster, labor problem, increased energy prices, criminal activity or some other issue, could
result in shipping delays, increased costs, or other supply chain disruptions, and could therefore have a material
adverse effect on our operations.
We are subject to risks associated with investments.
We invest in private funds and companies for strategic reasons and may not realize a return on our
investments. We make investments in private funds and companies to further our strategic objectives, support key
business initiatives and develop business relationships with related portfolio companies. Many of the instruments
in which we invest are non-marketable at the time of our initial investment. If any of the funds or companies in
which we invest fail, we could lose all or part of our investment. If we need to determine that an other-than-
temporary decline in the fair value exists for an investment, we would need to write down the investment to its
fair value and recognize a loss.
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 (“Minerals”), which may have originated in the Democratic Republic of the Congo or adjoining
countries. In May 2016, we filed our report on Form SD for the year ended December 31, 2015 to report that,
based on our diligence review, we were unable to determine whether Minerals contained in our products
originated in the Democratic Republic of the Congo or adjoining countries or whether the mining or trade of
such Minerals directly or indirectly financed or otherwise benefited armed groups in those countries. We expect
to undertake further reviews of our supply chain in 2017 and beyond as necessary to comply with the SEC’s
disclosure requirements. Additionally, customers rely on us to provide critical data regarding the products they
purchase and request information on such Minerals. 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 the required 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 the
Minerals, if any, used in our products. Additionally, customers may demand that the products they purchase be
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free of any Minerals originating in the specified countries. 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 products and may affect our ability to obtain products in sufficient
quantities to meet customer demand or at competitive prices.
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 goodwill and identifiable intangible assets could become impaired, which could reduce the value of our
assets and reduce our 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 net assets acquired.
We also ascribe value to certain identifiable intangible assets, which consist primarily of customer relationships,
developed technology and trade names, among others, as a result of acquisitions. We may incur impairment
charges on goodwill or identifiable intangible assets if we determine that the fair values of goodwill or
identifiable intangible assets are less than their current carrying values. We evaluate, 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 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 our businesses and we could be required to record impairment charges on
our goodwill or other identifiable intangible assets in the future, which could impact our consolidated balance
sheet, as well as our consolidated statement of operations. If we are required to recognize an impairment charge
in the future, the charge would not impact our consolidated cash flows, liquidity, capital resources, and covenants
under our existing credit facilities, asset securitization program, and other outstanding borrowings.
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.
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 approximately 27 million square feet of productive
capacity as of March 31, 2017.
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The composition of the square footage of our facilities, by region, is as follows:
Americas Asia Europe Total
(in million square feet)
Manufacturing Square Footage Space
Manufacturing - Leased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6 6.4 1.3 11.3
Manufacturing - Owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9 7.7 2.9 15.5
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5 14.1 4.2 26.8
Total Square Footage Space
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5 14.1 4.2 26.8
Non-manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3 9.0 4.9 23.2
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.8 23.1 9.1 50.0
Our facilities include large industrial parks, ranging in size from 0.6 million to 4.9 million square feet in
Brazil, China, Malaysia, Mexico and Poland. We also have regional manufacturing operations, generally ranging
in size from under 100,000 to approximately 1.6 million square feet in Austria, Brazil, Canada, China, Czech
Republic, Denmark, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, The
Netherlands, Poland, Romania, Singapore, Spain, Switzerland, the Ukraine and the United States. We also have
smaller design and engineering centers, innovation centers and product introduction centers at a number of
locations in the world’s major industrial and 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
For a description of our material legal proceedings, see note 12 “Commitments and Contingencies” to the
consolidated financial statements included under Item 8, which is incorporated herein by reference.
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 2016 as reported on the NASDAQ Global Select Market.
High
Low
Fiscal Year Ended March 31, 2017
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal Year Ended March 31, 2016
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16.88
14.84
13.69
13.19
$12.06
11.79
11.56
12.84
$14.33
13.54
11.66
11.69
$ 9.10
10.27
9.90
11.53
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As of May 10, 2017 there were 3,197 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 $15.43 per share.
DIVIDENDS
Since inception, we have not declared or paid any cash dividends on our ordinary shares. We currently do
not have plans to pay any dividends in fiscal year 2018.
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, 2012 and reflects the annual return through
March 31, 2017, 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
Flex, the S&P 500 Index, and Peer Group
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200
150
100
50
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2012
2013
2014
2015
2016
2017
Period Ending
Flex Ltd.
S&P 500 Index
Peer Group
3/12
3/13
3/14
3/15
3/16
3/17
Flex Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Peer Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.00
93.63 127.98 175.62 167.04 232.69
100.00 113.96 138.87 156.55 159.34 186.71
97.08 119.77 108.64 164.51
100.00
82.98
Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2017
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, 2017 through March 31, 2017.
Period(2)
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
Purchased as Part of
Publicly Announced
Plans or Programs
January 1 - February 3, 2017 . . . .
February 4 - March 3, 2017 . . . . .
March 4 - March 31, 2017 . . . . . .
$
2,166,612
1,860,843
1,647,223
14.84
16.30
16.63
Total . . . . . . . . . . . . . . . . . . . . . . . .
5,674,678
$
2,166,612
1,860,843
1,647,223
5,674,678
343,043,322
312,710,616
285,322,239
(1) During the period from January 1, 2017 through March 31, 2017 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 August 24, 2016, our Board of Directors authorized the repurchase of our outstanding ordinary shares
for up to $500 million. This is in accordance with the share purchase mandate whereby our shareholders
approved a repurchase limit of 20% of our issued ordinary shares outstanding at the Annual General
Meeting held on the same date as the Board authorization. As of March 31, 2017, shares in the aggregate
amount of $285.3 million were available to be repurchased under the current plan.
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 issue of new
shares. When existing shares are acquired in Singapore, a stamp duty of 0.2% is payable on the instrument of
transfer of the shares at market value. 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
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%.
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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,
2017 2016 2015 2014 2013
(In thousands, except per share amounts)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales . . . . . . . . . . . . . . . . . . . . . . . $23,862,934
$23,569,475
Cost of sales . . . . . . . . . . . . . . . . . . . . 22,303,231 22,810,824 24,602,576 24,609,738 22,187,393
Restructuring charges(3) . . . . . . . . . . . 38,758 — — 58,648 215,834
$24,418,885 $26,147,916
$26,108,607
Gross profit . . . . . . . . . . . . . . . . . . . 1,520,945 1,608,061 1,545,340 1,440,221 1,166,248
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . 937,339 954,890 844,473 874,796 805,235
Intangible amortization . . . . . . . . . . . . 81,396 65,965 32,035 28,892 29,529
Restructuring charges(3) . . . . . . . . . . . 10,637 — — 16,663 11,600
Other charges (income), net(1) . . . . . . 21,193 47,738 (53,233) 57,512 (65,190)
Interest and other, net . . . . . . . . . . . . . 99,532 84,793 51,410 61,904 56,259
Income before income taxes . . . . . . 370,848 454,675 670,655 400,454 328,815
Provision for income taxes . . . . . . . . . 51,284 10,594 69,854 34,860 26,313
Income from continuing
operations . . . . . . . . . . . . . . . . . . 319,564 444,081 600,801 365,594 302,502
Loss from discontinued operations,
net of tax . . . . . . . . . . . . . . . . . . . . . — — — — (25,451)
Net income . . . . . . . . . . . . . . . . . . . $ 319,564
$ 444,081 $ 600,801
$ 365,594
$ 277,051
Diluted earnings (loss) per share:
Continuing operations . . . . . . . . . . . $ 0.59
$ 0.79 $ 1.02 $ 0.59
$ 0.45
Discontinued operations . . . . . . . . . $ — $ — $ — $ — $ (0.04)
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.59
$ 0.79 $ 1.02
$ 0.59
$ 0.41
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As of March 31,
2017 2016 2015 2014 2013
(In thousands)
CONSOLIDATED BALANCE
SHEET DATA:
$ 1,599,671
Working capital(2) . . . . . . . . . . . . . . . $ 1,883,149
Total assets . . . . . . . . . . . . . . . . . . . . . 12,593,363 12,384,981 11,652,891 12,485,035 10,579,107
Total long-term debt, excluding
$ 1,742,921 $ 1,985,809
$ 1,744,967
current portion . . . . . . . . . . . . . . . . . 2,890,609 2,709,389 2,025,970 2,056,233 1,639,580
Shareholders’ equity . . . . . . . . . . . . . . 2,678,276 2,605,530 2,396,250 2,201,679 2,246,758
(1) For fiscal years 2017, 2016 and 2015, refer to note 15 to the consolidated financial statements for further
discussion.
Other charges, net in the fiscal year 2014 includes $55.0 million of other charges for the contractual
obligation to reimburse a customer for certain performance provisions. Additionally, the Company exercised
warrants to purchase common shares of a certain supplier and sold the underlying shares for total proceeds
of $67.3 million resulting in a loss of $7.1 million.
Other income, net in the fiscal year 2013 includes the fair value change in warrants to purchase common
shares of a certain supplier of $74.4 million and loss on sale of two investments.
(2) Working capital is defined as current assets less current liabilities.
(3) The Company initiated restructuring plans during fiscal years 2017, 2014 and 2013. For the restructuring
plan initiated during fiscal year 2017, please refer to note 14 to the consolidated financial statements for
further discussion.
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
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 globally-recognized, provider of Sketch-to-Scaletm services—innovative design, engineering,
manufacturing, and supply chain services and solutions—from conceptual sketch to full-scale production. We
design, build, ship and service complete packaged consumer and industrial products, from athletic shoes to
electronics, for companies of all sizes in various industries and end-markets, through our activities in the
following segments: Communications & Enterprise Compute (“CEC”), which includes our telecom business of
radio access base stations, remote radio heads, and small cells for wireless infrastructure; our networking
business which includes optical, routing, broadcasting, and switching products for the data and video networks;
our server and storage platforms for both enterprise and cloud-based deployments; next generation storage and
security appliance products; and rack level solutions, converged infrastructure and software-defined product
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solutions; Consumer Technologies Group (“CTG”), which includes our consumer-related businesses in
connected living, wearables, gaming, augmented and virtual reality, fashion, and mobile devices; and including
various supply chain solutions for notebook personal computers (“PC”), tablets, and printers; in addition, CTG is
expanding its business relationships to include supply chain optimization for non-electronics products such as
footwear and clothing; Industrial and Emerging Industries (“IEI”), which is comprised of energy and metering,
semiconductor and capital equipment, office solutions, household industrial and lifestyle, industrial automation
and kiosks, and lighting; and High Reliability Solutions (“HRS”), which is comprised of our medical business,
including consumer health, digital health, disposables, precision plastics, drug delivery, diagnostics, life sciences
and imaging equipment; our automotive business, including vehicle electrification, connectivity, autonomous
vehicles, and clean technologies; and our defense and aerospace businesses, focused on commercial aviation,
defense and military.
Our strategy is to provide customers with a full range of cost competitive, vertically-integrated global
supply chain solutions through which we can design, build, ship and service a complete packaged product for
our customers. This enables our customers to leverage our supply chain solutions to meet their product
requirements throughout the entire product life cycle.
Over the past few years, we have seen an increased level of diversification by many companies, primarily in
the technology sector. Some companies that have historically identified themselves as software providers,
Internet service providers or e-commerce retailers have entered the highly competitive and rapidly evolving
technology hardware markets, such as mobile devices, home entertainment and wearable devices. This trend has
resulted in a significant change in the manufacturing and supply chain solutions requirements of such
companies. While the products have become more complex, the supply chain solutions required by such
companies have become more customized and demanding, and it has changed the manufacturing and supply
chain landscape significantly.
We use a portfolio approach to manage our extensive service offerings. As our customers change the way
they go to market, we are able to reorganize and rebalance our business portfolio in order to align with our
customers’ needs and requirements in an effort to optimize operating results. The objective of our business
model is to allow us to be flexible and redeploy and reposition our assets and resources as necessary to meet
specific customer’s supply chain solutions needs across all of the markets we serve and earn a return on our
invested capital above the weighted average cost of that capital.
During the past few years, we have made significant efforts to evolve our long-term portfolio towards a
higher mix of businesses which possess longer product life cycles and higher segment operating margins such as
reflected in our IEI and HRS businesses. During the last two fiscal years, we launched several programs broadly
across our portfolio of services and in some instances we deployed certain new technologies. Some of these
programs have started to yield better results, as demonstrated by our segment operating margin improvement
while our sales decreased compared to the prior year. We continue to invest in innovation and we have expanded
our design and engineering relationships through our product innovation centers.
We believe that our business transformation has strategically positioned us 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.
We are one of the world’s largest providers of global supply chain solutions, with revenues of $23.9 billion
in fiscal year 2017. We have established an extensive network of manufacturing facilities in the world’s major
consumer electronics and industrial markets (Asia, the Americas, and Europe) in order to serve the growing
outsourcing needs of both multinational and regional customers. We design, build, ship, and service consumer
electronics and industrial products for our customers through a network of over 100 facilities in approximately
30 countries across four continents. As of March 31, 2017, our total manufacturing capacity was approximately
27 million square feet. In fiscal year 2017, our net sales in Asia, the Americas and Europe represented
approximately 46%, 36% and 18%, respectively, of our total net sales, based on the location of the
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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: 2017 2016 2015
(In thousands)
China . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 7,213,614 30% $ 8,471,036 35% $ 9,550,837 37%
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . 4,075,616 17% 3,645,432 15% 3,512,767 13%
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,560,300 11% 2,767,641 11% 2,876,359 11%
9%
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . 2,267,578 10% 2,241,645
Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,907,591
9%
8% 1,839,395
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,838,235 24% 5,453,736 22% 5,433,083 21%
9% 2,300,579
8% 2,474,291
$23,862,934
$24,418,885 $26,147,916
Fiscal Year Ended March 31,
Property and equipment, net: 2017 2016
(In thousands)
China . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 719,972
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . 525,282
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290,463
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . 173,410
Hungary . . . . . . . . . . . . . . . . . . . . . . . . . 132,527
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 475,372
31% $ 789,571 35%
23% 429,989 19%
13% 330,778 15%
7%
5%
21% 425,559 19%
7% 159,787
6% 107,492
$2,317,026 $2,243,176
We believe that the combination of our extensive open innovation platform solutions, design and
engineering services, advanced supply chain management solutions and services, significant scale and global
presence, and industrial campuses in low-cost geographic areas provide us with a competitive advantage and
strong differentiation in the market for designing, manufacturing and servicing consumer electronics and
industrial products for leading multinational and regional customers. Specifically, we have launched multiple
product innovation centers (“PIC”) focused exclusively on offering our customers the ability to simplify their
global product development, manufacturing process, and after sales services, and enable them to meaningfully
accelerate their 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 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’ decisions to choose internal manufacturing instead of outsourcing for their product
requirements;
(cid:129) our exposure to financially troubled customers;
(cid:129) integration of acquired businesses and facilities;
(cid:129) increased labor costs due to adverse labor conditions in the markets we operate;
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(cid:129) changes in tax legislation; and
(cid:129) changes in trade regulations and treaties.
We also are subject to other risks as outlined in Item 1A, “Risk Factors”.
Net sales for fiscal year 2017 declined from the prior year, decreasing by 2.3% or $0.6 billion to $23.9 billion.
The decrease was primarily due to a $0.6 billion decrease in our CTG segment as well as a $0.5 billion
decrease in our CEC segment, partially offset by a $0.3 billion increase in our IEI segment, and a $0.2 billion
increase in our HRS segment. Our fiscal year 2017 gross profit totaled $1.5 billion, representing a decrease of
$87.1 million, or 5.4%, from the prior year, which is primarily driven by a $92.9 million charge following the
significant decline in prices for solar modules coupled with the restructuring charges of $49.4 million, of which
$38.8 million impacted gross margin, incurred during fiscal year 2017 in a plan to accelerate our ability to
support more Sketch-to-Scaletm efforts across the Company and reposition away from historical legacy programs
and structures. Our net income totaled $319.6 million, representing a decrease of $124.5 million, or 28.0%,
compared to fiscal year 2016. The decrease in net income during fiscal year 2017 is primarily due to the same
factors explained above.
Cash provided by operations remained consistent at $1.1 billion for the fiscal years 2017 and 2016. Cash
used in investing activities decreased by approximately $0.7 billion to a total amount of $0.7 billion for fiscal
year 2017 compared with $1.4 billion for fiscal year 2016 primarily due to a decrease in the amount of cash paid
for acquired businesses during fiscal year 2017. Our average net working capital, defined as accounts receivable,
including deferred purchase price receivable from our asset-backed securitization programs plus inventory less
accounts payable, as a percentage of annualized sales decreased by 0.8% to 6.9%. Our free cash flow, which we
define as cash from operating activities less net purchases of property and equipment, was $660.4 million for
fiscal year 2017 compared to $639.5 million for fiscal year 2016. The increase in free cash flow is primarily due
to higher cash flows from operations. Refer to the Liquidity and Capital Resources section for the free cash
flows reconciliation to our most directly comparable GAAP financial measure of cash flows from operations.
Cash used in financing activities amounted to $242.1 million during fiscal year 2017, which changed $491.7 million
from a cash inflow of $249.6 million in the prior year primarily due to lower net proceeds from bank borrowings
and long-term debt.
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.
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 to the 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 formal 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. Some of our
customer contracts allow us to recover certain costs related to manufacturing services that are over and above the
prices we charge for the related products. We determine the amount of costs that are recoverable based on
historical experiences and agreements with those customers. Also, certain customer contracts may contain
certain commitments and obligations that may result in additional expenses or decrease in revenue. We accrue
for these commitments and obligations based on facts and circumstances and contractual terms. We also make
provisions for estimated sales returns and other adjustments at the time revenue is recognized based upon
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contractual terms and an analysis of historical returns. Provisions for sales returns and other adjustments were
not material to our consolidated financial statements for any of the periods presented.
We also recognize revenue in accordance with multiple-element arrangements accounting codified under
U.S. GAAP for arrangements that contain multiple deliverables. We determined that our multiple-element
arrangements are generally comprised of arrangements where multiple product components are sold together as
part of a complete system. Depending on the contractual provisions of the respective contracts, we have
concluded that the units of accounting for such arrangements are, in most cases, comprised of an aggregation of
product components, however, may also be established at the product component level. For multiple-element
arrangements, revenue is allocated to each unit of accounting based on their relative selling prices. Relative
selling prices are based first on vendor specific objective evidence of fair value (“VSOE”), then on third-party
evidence of selling price (“TPE”) when VSOE does not exist, and then on management’s best estimate of the
selling price (“BESP”) when VSOE and TPE do not exist. We base the allocation of revenue on BESP, because
we do not have either VSOE or TPE for the respective deliverables.
We provide a comprehensive suite of services for our customers that range from advanced product design
to manufacturing and logistics to after-sales 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, historical experience with
collections 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.
On April 21, 2016, SunEdison, Inc. (together with certain of its subsidiaries, “SunEdison”), filed a petition
for reorganization under bankruptcy law. During the fiscal year ended March 31, 2016, we recognized a bad debt
reserve charge of $61.0 million associated with our outstanding SunEdison receivables and accepted return of
previously shipped inventory of approximately $90.0 million. During the second quarter of fiscal year 2017,
prices for solar panel modules declined significantly. We determined that certain solar panel inventory previously
designated for SunEdison on hand at the end of the second quarter of fiscal year 2017 was not fully recoverable
and recorded a charge of $60.0 million to reduce the carrying costs to market during fiscal year 2017. In addition,
we recognized a $16.0 million impairment charge for solar module equipment and incurred $16.9 million of
incremental costs primarily related to negative margin sales and other associated solar panel direct costs. The
total charge of $92.9 million is included in cost of sales for fiscal year 2017.
Restructuring Charges
We recognize restructuring charges related to our plans to close or consolidate excess manufacturing
facilities and rationalize administrative functions and to realign our corporate cost structure. 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 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. Such changes to previously estimated amounts may be material to the consolidated financial
statements. 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.
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Refer to note 14 to the consolidated financial statements in Item 8, “Financial Statements and
Supplementary Data” for further discussion of our restructuring activities.
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 write downs 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.
Carrying Value of Long-Lived Assets
We review property and equipment and acquired amortizable intangible assets for impairment at least
annually and whenever events or changes in circumstances indicate that the carrying amount of the asset may not
be recoverable. An 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 determined 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.
Our judgments regarding projected cash flows for an extended period of time and the fair value of assets may be
impacted by changes in market conditions, general business environment and other factors. To the extent our
estimates relating to cash flows and fair value of assets change adversely we may have to recognize additional
impairment charges in the future.
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 performed its goodwill impairment
assessment on January 1, 2017 and determined that no impairment existed as of the date of the impairment test
because the fair value of each reporting unit exceeded its carrying value.
Contingent Liabilities
We may be exposed to certain liabilities relating to our business operations, acquisitions of businesses and
assets and other activities. We make provisions for such liabilities when it is probable that the settlement of the
liability will result in an outflow of economic resources or the impairment of an asset. We make these
assessments based on facts and circumstances that may change in the future resulting in additional expenses.
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.
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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 13 to the consolidated financial
statements in Item 8, “Financial Statements and Supplementary Data” for further discussion of our tax position.
Translation of Foreign Currencies
The financial position and results of operations for certain of our 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 other comprehensive loss, a 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.
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.
Fiscal Year Ended March 31,
2017 2016 2015
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0%
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93.5 93.4 94.1
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 — —
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 6.6 5.9
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . 3.9 3.9 3.2
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3 0.3 0.1
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —
Other charges (income), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 0.2 (0.2)
Interest and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4 0.3 0.2
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6 1.9 2.6
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 — 0.3
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4% 1.9% 2.3%
Net sales
Net sales during fiscal year 2017 totaled $23.9 billion, representing a decrease of $0.6 billion, or 2.3%,
from $24.4 billion during fiscal year 2016, largely attributable to the closure of our Lenovo/Motorola dedicated
China operations. During fiscal year 2017, net sales decreased $0.8 billion in Asia, while increasing $0.2 billion
in the Americas, and $35.6 million in Europe.
Net sales during fiscal year 2016 totaled $24.4 billion, representing a decrease of $1.7 billion, or 6.6%,
from $26.1 billion during fiscal year 2015. During fiscal year 2016, net sales decreased $1.2 billion in Asia,
$0.6 billion in the Americas, and $14.7 million in Europe.
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The following table sets forth net sales by segments and their relative percentages. Historical information
has been recast to reflect realignment of customers and/or products between segments:
Fiscal Year Ended March 31,
Segments: 2017 2016 2015
(In thousands)
Communications & Enterprise Compute . .
$ 8,383,420 35% $ 8,841,642 36% $ 9,191,211 35%
Consumer Technologies Group . . . . . . . 6,362,338 27% 6,997,526 29% 8,940,043 34%
Industrial & Emerging Industries . . . . . 4,967,738 21% 4,680,718 19% 4,459,351 17%
High Reliability Solutions . . . . . . . . . . . 4,149,438 17% 3,898,999 16% 3,557,311 14%
$23,862,934
$24,418,885 $26,147,916
Net sales during fiscal year 2017 decreased $0.6 billion or 9% in the CTG segment and $0.5 billion or 5%
in the CEC segment. The decline in sales for CTG was primarily due to a decline in demand from our largest
smartphone customer Lenovo/Motorola in connection with our exit of a China operation dedicated to them,
partially offset by revenues from our Bose acquisition as well as ramping of a broad mix of customers. The
decrease in CEC is largely attributable to lower sales within our legacy server and storage business. These
decreases were partially offset by a $287.0 million or 6% increase in sales from our IEI segment driven by
contribution from our NEXTracker Inc. (“NEXTracker”) acquisition and expansion within our capital equipment
business, and by a $250.4 million or 6% increase in sales from our HRS segment primarily driven by automotive
business.
Net sales during fiscal year 2016 decreased $1.9 billion or 22% in the CTG segment and $349.6 million or
4% in the CEC segment. The drop in CTG was due to a decline in demand from our largest customer in our
mobile business offset by expansion across wearables, connected home and gaming markets. The decrease in
CEC is primarily attributable to lower sales within our server and storage business. These decreases were
partially offset by a $341.7 million or 10% increase in sales from our HRS segment, and by a $221.4 million or
5% increase in sales from our IEI segment. These increases in HRS and IEI were attributable to an increase
across multiple product categories and customers, most notably in our household, energy, automotive, and
medical businesses primarily as a result of our strategic acquisitions in both segments referred to below.
Our ten largest customers during fiscal years 2017, 2016 and 2015 accounted for approximately 43%, 46%
and 50% of net sales, respectively. We have made substantial efforts toward the diversification of our portfolio
which allow us to operate at scale in so many different industries, as a result no customer accounted for greater
than 10% of net sales in fiscal year 2017. During fiscal years 2016 and 2015, only Lenovo/Motorola (including
net sales from its former parent, Google, up to the point in time when Motorola Mobility was acquired by
Lenovo and including net sales from Lenovo thereafter), which is reflected in our CTG segment, accounted
for greater than 10% of net sales. Going forward, we do not expect Motorola Mobility to account for greater
than 10% of our 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 across our diverse geographic footprint. 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 2017 decreased $87.1 million to $1.5 billion from $1.6 billion during fiscal
year 2016 primarily as a result of the $92.9 million, or 40 basis points, of charges recognized related to the
significant decline in prices for solar modules and the slowdown in demand as previously discussed under our
customer credit risk section, coupled with the restructuring charges incurred during fiscal year 2017, to
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accelerate our ability to support more Sketch-to-Scaletm efforts across the Company. A portion of this decrease
was offset by our strategic evolution and structural mix shift to higher margin end markets in our IEI and HRS
segments while also providing greater levels of innovation, design and engineering services. Gross margin
decreased 30 basis points, to 6.3% of net sales in fiscal year 2017, from 6.6% of net sales in fiscal year 2016,
mainly attributable to the same factors previously described.
Gross profit during fiscal year 2016 increased $62.7 million to $1.6 billion from $1.5 billion during fiscal
year 2015 reflecting a richer mix of business and improved operational execution while ramping new customers
and programs during fiscal year 2016. Gross margin increased to 6.6% of net sales in fiscal year 2016 as
compared with 5.9% of net sales in fiscal year 2015. Gross margins improved 70 basis points in fiscal year 2016
compared to that of fiscal year 2015 due to proportionate increased share of our total revenue attributable to our
HRS and IEI segments coupled with their increased profitability primarily driven by our acquisitions of Mirror
Controls International (“MCi”) and NEXTracker.
Segment income
An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment
income. Segment income is defined as net sales less cost of sales, and segment selling, general and
administrative expenses, and does not include amortization of intangibles, stock-based compensation,
restructuring charges and other, distressed customer charges, other charges (income), net and interest and other,
net. A portion of depreciation is allocated to the respective segment together with other general corporate
research and development and administrative expenses.
The following table sets forth segment income and margins:
Fiscal Year Ended March 31,
2017 2016 2015
(In thousands)
Segment income & margin:
CEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 229,332 2.7% $265,076 3.0% $257,323 2.8%
CTG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,910 2.8% 163,677 2.3% 218,251 2.4%
IEI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,749 3.6% 157,588 3.4% 131,956 3.0%
HRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334,108 8.1% 294,635 7.6% 227,595 6.4%
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . (107,850)
(83,988)
(89,219)
Total segment income . . . . . . . . . . . . . . . . . . 815,249 3.4% 791,757 3.2% 751,137 2.9%
Reconciling items:
Intangible amortization . . . . . . . . . . . . . . . . . . . 81,396
Stock-based compensation . . . . . . . . . . . . . . . . . 82,266
SunEdison bankruptcy related (Note 2) . . . . . . . 92,915
Restructuring and other(1) . . . . . . . . . . . . . . . . . 67,099
Other charges (income), net . . . . . . . . . . . . . . . . 21,193
Interest and other, net . . . . . . . . . . . . . . . . . . . . . 99,532
65,965
77,580
61,006
—
47,738
84,793
32,035
50,270
—
—
(53,233)
51,410
Income before income taxes . . . . . . . . . . . . . $ 370,848
$454,675 $670,655
Corporate and other primarily includes corporate services costs that are not included in the CODM’s
assessment of the performance of each of the identified reporting segments.
(1) During the fiscal year ended March 31, 2017, we initiated a restructuring plan to accelerate its ability to
support more Sketch-to-Scaletm efforts across the Company and reposition away from historical legacy
programs and structures through rationalizing its current footprint at existing sites and at corporate SG&A
functions. This charge is primarily for employee terminations costs, as described in note 14 to the
consolidated financial statements, as well as other asset impairments, and is split between cost of sales and
selling, general and administration expenses on our consolidated statement of operations. This charge is
excluded from the measurement of our operating segment’s performance.
CEC segment margin decreased 30 basis points to 2.7%, for fiscal year 2017, from 3.0% during fiscal year
2016. The decrease was driven by lower capacity utilization causing reduced overhead absorption, pricing
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pressures coupled with incremental costs for proactive repositioning of certain programs and actions to better
align CEC’s operating structure. CEC segment margin increased 20 basis points, for fiscal year 2016, from 2.8%
during fiscal year 2015. The improvements were driven by a favorable product mix changes from new program
offerings, higher utilization levels and strong operational execution across multiple customers and facilities,
offset by incremental engineering spend as we continue to invest in expanding our capabilities in converged
infrastructure.
CTG segment margin increased 50 basis points to 2.8% for fiscal year 2017, from 2.3% during fiscal year
2016, primarily driven by a portfolio shift within the CTG product mix with a greater concentration of higher
margin products where we provide greater levels of design and engineering value-added content, as well as
exiting of lower margin businesses and the benefit from a better-than-expected execution on certain products
which were going end of life. CTG segment margin slightly decreased 10 basis points for fiscal year 2016, from
2.4% during fiscal year 2015, due primarily to the soft macro economy, notably in Brazil, which impacted
consumer business, partially offset by a portfolio shift within the CTG product mix focusing on higher margin
consumer electronics products.
IEI segment margin increased 20 basis points to 3.6% for fiscal year 2017, from 3.4% during fiscal year
2016. This is primarily driven by new program ramps and demand increase in capital equipment and household
industrial and lifestyle, partially offset by underperformance from the loss of SunEdison, which was formerly
our largest IEI customer and relatedly, from sales of solar panel inventory acquired from SunEdison in 2016. IEI
segment margin increased 40 basis points to 3.4% for fiscal year 2016, from 3.0% during fiscal year 2015. This
is primarily due to strong operational execution and higher utilization levels coupled with additional margin
enhancement from our NEXTracker acquisition that contributed higher margins for the second half of fiscal
year 2016.
HRS segment margin increased 50 basis points to 8.1% for fiscal year 2017, from 7.6% during fiscal year
2016. The improvements are primarily the result of new program launches and richer mix with greater value-added
business engagements as a result of greater design and engineering solutions as part of our Sketch-to-Scaletm
offering. HRS segment margin increased 120 basis points to 7.6% for fiscal year 2016, from 6.4% for fiscal year
2015 primarily due to additional flow through from the increase in revenue from new programs and contribution
from our MCi acquisition starting in our second quarter of fiscal year 2016. Additional margin was related to
greater value-added business engagements resulting from an increase in design and engineering solutions as part
of our Sketch-to-Scaletm offering.
Restructuring charges
During fiscal year 2017, we initiated a restructuring plan to accelerate our ability to support more
Sketch-to-Scaletm efforts across the Company and reposition away from historical legacy programs and structures
through rationalizing our current footprint at existing sites including certain corporate SG&A functions. We
recognized $49.4 million of pre-tax restructuring charges predominantly for employee termination costs. The
restructuring charges by geographic region were $28.5 million in the Americas, $15.1 million in Asia and
$5.8 million in Europe. We classified $38.8 million of these charges as a component of cost of sales and
$10.6 million as a component of selling, general and administrative expenses. There were no material
restructuring activities during fiscal years 2016 and 2015.
As of March 31, 2017 the plan had been completed and the accrued costs relating to the restructuring
charges were $23.5 million of which $23.5 million was classified as a current obligation.
Refer to note 14 to the 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 $937.3 million or 3.9% of net sales, during
fiscal year 2017, compared to $954.9 million, or 3.9% of net sales, during fiscal year 2016, decreasing by
$17.6 million or 2%. The decrease in SG&A in dollars is primarily the result of the nonrecurring $61.0 million
bad debt reserve charge recognized in the prior year as explained below, offset by further investments in design
and engineering resources by us to support our increased Sketch-to-Scaletm initiatives. We also incurred
incremental costs associated with our targeted acquisitions and restructuring activities in fiscal year 2017.
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SG&A totaled $954.9 million or 3.9% of net sales, during fiscal year 2016, compared to $844.5 million, or
3.2% of net sales, during fiscal year 2015, increasing by $110.4 million or 13%. The increase in SG&A in
dollars and as a percentage of net sales is primarily the result of an increase in costs associated with research,
development and design activities, as we continued to deploy resources to meet the needs of our customers and
explore new product innovations, increases in stock-based compensation expense, incremental costs associated
with our acquisitions of MCi and NEXTracker both of which drive a higher proportional SG&A level, and a bad
debt reserve charge associated with our outstanding SunEdison receivables of $61.0 million as a result of
SunEdison’s bankruptcy filing.
Intangible amortization
Amortization of intangible assets in fiscal year 2017 increased by $15.4 million to $81.4 million from
$66.0 million in fiscal year 2016, primarily as a result of incremental amortization expense on intangibles assets
relating to our acquisitions completed during fiscal year 2017 as well as those completed in the second half of
fiscal year 2016.
Amortization of intangible assets in fiscal year 2016 increased by $33.9 million to $66.0 million from
$32.0 million in fiscal year 2015, primarily as a result of incremental amortization expense on intangibles assets
relating to our acquisitions completed during the fiscal year 2016.
Other charges (income), net
The fiscal year ended March 31, 2017 includes a $7.4 million loss attributable to a non-strategic facility
sold during the second quarter of fiscal year 2017. No other components of other charges and income, net
incurred during fiscal year 2017 were material.
During fiscal year 2016, we recognized other charges of $47.7 million primarily due to a $26.8 million loss
on the disposition of a non-strategic Western European manufacturing facility which included a non cash foreign
currency translation loss of $25.3 million, and $21.8 million from the impairment of a non-core investment.
These were offset by a non-cash foreign currency translation gain of $4.2 million.
During fiscal year 2015, we recognized other income of $53.2 million principally as a result of the reversal
of a contractual obligation with a certain customer recognized during the fiscal year 2014 in the amount of
$55.0 million. We executed an amendment to the customer contract during fiscal year 2015 which relieved us of
the performance commitment as was defined in an existing customer manufacturing agreement. We also
recognized an $11.0 million loss in connection with the disposition of a manufacturing facility in Western
Europe. Further, we recognized a net gain for the sale of a certain investment, which primarily comprises the
balance for other income in fiscal year 2015 net of the above items.
Interest and other, net
Interest and other, net was $99.5 million during fiscal year 2017 compared to $84.8 million during fiscal
year 2016. The increase in interest and other, net of $14.7 million was primarily due to a $10.0 million increase
of interest expense from the 4.750% Note due June 15, 2025 and the Term Loan due November 2021, as further
discussed in note 7 to the consolidated financial statements, and a $7.9 million decrease in foreign exchange
gains, offset by $8.0 million of acquisition-related costs incurred during fiscal year 2016 as described below.
Interest and other, net was $84.8 million during fiscal year 2016 compared to $51.4 million during fiscal
year 2015. The increase in interest and other, net of $33.4 million was primarily due to a $23.5 million increase
of interest expense from the 4.750% Notes issued during the fiscal year 2016 as further discussed in note 7 to
the consolidated financial statements, as well as $8.0 million of acquisition-related costs incurred during fiscal
year 2016, primarily for our acquisition of MCi.
Interest and other, net was $51.4 million during fiscal year 2015 compared to $61.9 million during fiscal
year 2014. The decrease in interest and other, net was primarily due to a gain associated with minority interest
from an investment, an increase in foreign currency gains relating to the Chinese RMB, and a decrease in
interest expense as a result of refinancing of certain debt facilities during the latter part of fiscal year 2014.
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Income taxes
The Company works to ensure it accrues and pays the appropriate amount of income taxes according to the
laws and regulations of each jurisdiction in which it operates. 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 13.8%, 2.3% and 10.4% for the fiscal
years 2017, 2016 and 2015, respectively. The effective rate varies from the Singapore statutory rate of 17.0% in
each year as a result of the following items:
Fiscal Year Ended March 31,
2017 2016 2015
Income taxes based on domestic statutory rates . . . . . . . . . . . . . . . 17.0% 17.0% 17.0%
Effect of tax rate differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23.0) (13.7) (11.3)
Change in liability for uncertain tax positions . . . . . . . . . . . . . . . . . 0.2 (3.0) 4.4
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.2 0.2 0.4
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.6) 1.8 (0.1)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.8% 2.3% 10.4%
The variation in our effective tax rate each year is primarily a result of recognition of earnings in foreign
jurisdictions which are taxed at rates lower than the Singapore statutory rate including the effect of tax holidays
and tax incentives we received primarily for our subsidiaries in China, Malaysia and Israel of $15.5 million,
$6.6 million and $9.8 million in fiscal years 2017, 2016 and 2015, respectively. Additionally, our effective tax
rate is impacted by changes in our liabilities for uncertain tax positions of $0.7 million, $(13.7) million, and
$29.7 million and changes in our valuation allowances on deferred tax assets of $78.7 million, $1.0 million and
$2.5 million in fiscal years 2017, 2016 and 2015, respectively. We generate most of our revenues and profits
from operations outside of Singapore.
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 examinations, there could be a material adverse effect on our
tax position, operating results, financial position and cash flows.
We provide a valuation allowance against deferred tax assets that in our estimation are not more likely than
not to be realized. During fiscal year 2017, we released valuation allowances totaling $39.6 million primarily
related to our operations in Austria, China, Ireland and Canada as these amounts were deemed to be more likely
than not to be realized due to the sustained profitability during the past three fiscal years as well as continued
forecasted profitability of those subsidiaries. However, these valuation allowance eliminations were offset by
other current period valuation allowance movements primarily related to current period valuation allowance
additions due to increased deferred tax assets related to current period losses in legal entities with existing full
valuation allowance positions. In addition, due to increased negative evidence during the fiscal year ended
March 31, 2017, the Company added a valuation allowance of $14.4 million for a Chinese subsidiary which did
not previously have a valuation allowance recorded.
See note 13, “Income Taxes,” to the consolidated financial statements included in Item 8, “Financial
Statements and Supplementary Data” for further discussion.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2017, we had cash and cash equivalents of $1.8 billion and bank and other borrowings of
$3.0 billion. We have a $1.5 billion revolving credit facility, under which we had no borrowings outstanding as
of March 31, 2017.
Our cash balances are held in numerous locations throughout the world. As of March 31, 2017, over 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 $1.2 billion as of March 31, 2017). Repatriation could result in an additional income
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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 2017
Cash provided by operating activities was $1.1 billion during fiscal year 2017. This resulted primarily from
$319.6 million of net income for the period plus $673.6 million of non-cash charges such as depreciation,
amortization, other impairment charges, provision for doubtful accounts and stock-based compensation expense
that are included in the determination of net income. Depreciation expense comprised $432.2 million of those
non-cash charges, which was relatively consistent with our normal annual run rate of approximately $425 million.
We generated $156.7 million in cash as a result of changes in our operating assets and liabilities, driven
primarily by a $268.7 million increase in accounts payable, offset by a $184.0 million increase in accounts
receivable. Net working capital (“NWC”), defined as net accounts receivable, including deferred purchase price
receivables, plus inventory less accounts payable decreased by $189.5 million primarily due to an increase in
accounts payables and reduction in our inventory.
Cash used in investing activities was $0.7 billion during fiscal year 2017. This resulted primarily from
$489.5 million of net capital expenditures for property and equipment to expand capability and capacity in
support of our automotive and medical businesses and further investments in both automation and expanding
technologies to support our innovation services. We also paid $189.1 million for the acquisition of four
businesses, net of cash acquired, including $161.7 million, net of $18.0 million of cash acquired related to the
acquisition of manufacturing facilities from Bose. Further, $60.0 million was paid for a non-controlling interest
in a joint venture with RIB Software AG as our partner. Offsetting this was proceeds from various other
investing activities of $63.5 million, most notably the receipt of $36.7 million for the sale of two non-strategic
businesses.
Cash used in financing activities was $242.1 million during fiscal year 2017. This was primarily for the
repurchase of ordinary shares in the amount $349.5 million, and $31.4 million of cash paid to a third party
banking institution for certain assets that were financed by the third party banking institution on behalf of a
customer, which is included in other financing activities, as further discussed in note 2 to the consolidated
financial statements. These cash outflows were partially offset by $171.0 million of net proceeds from bank
borrowings and long-term debt, of which $130.0 million is the incremental amount borrowed extending the
maturity date of one of our loan agreements from August 30, 2018 to November 30, 2021, and $107.4 million is
the amount of proceeds from the €100 million term loan, discussed further in note 7 to the consolidated
financial statements.
Fiscal Year 2016
Cash provided by operating activities was $1.1 billion during fiscal year 2016. This resulted primarily from
$444.1 million of net income for the period plus $625.4 million of non-cash charges such as depreciation,
amortization, other impairment charges, provision for doubtful accounts and stock-based compensation expense
that are included in the determination of net income. Depreciation expense comprised $425.7 million of those
non-cash charges, which was relatively consistent with our normal annual run rate of approximately $425.0 million.
We generated $66.9 million in cash as a result of changes in our operating assets and liabilities, driven primarily
by a $423.6 million reduction in accounts receivable due to improved collection efforts and lower business
levels, offset by a $365.1 million reduction in accounts payable. Net working capital, defined as net accounts
receivable, including deferred purchase price receivables, plus inventory less accounts payable decreased by
$37.7 million primarily due to lower business levels during the fourth quarter of fiscal year 2016 as compared to
the same quarter of fiscal year 2015, which resulted in slightly lower levels of investments in NWC.
Cash used in investing activities was $1.4 billion during fiscal year 2016. This resulted primarily from
$916.5 million for the acquisition of eleven businesses completed during fiscal year 2016, including
approximately $555.2 million, net of cash acquired, related to the acquisition of MCi, $240.8 million, net of cash
acquired, related to the acquisition of NEXTracker, and approximately $67.5 million to acquire an optical
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transport facility from Alcatel-Lucent. We also paid $510.6 million in gross capital expenditures for property and
equipment to support certain programs, offset by $13.7 million of proceeds from the sale of certain buildings
and machinery and equipment. Other investing activities also includes $44.7 million paid for the purchase of
certain investments, offset by $54.3 million of proceeds from the sale of certain assets that were purchased on
behalf of a customer and financed by a third party banking institution, as further discussed in note 17 to the
consolidated financial statements.
Cash provided by financing activities was $249.6 million during fiscal year 2016, which was primarily the
result of net proceeds from bank borrowings and long-term debt of $694.5 million mainly resulting from our
new debt issuance discussed further in note 7 to the consolidated financial statements, and $61.3 million from
the issuance of our shares for option exercises. These cash inflows were partially offset by $420.3 million of cash
paid for the repurchase of our ordinary shares, and $75.8 million of cash paid to a third party banking institution
for certain assets that were financed by the third party banking institution on behalf of a customer, which is
included in other financing activities.
Fiscal Year 2015
Cash provided by operating activities was $794.0 million during fiscal year 2015. This resulted primarily
from $600.8 million of net income for the period plus $510.9 million of non-cash charges such as depreciation,
amortization, other impairment charges and stock-based compensation expense that are included in the
determination of net income. Depreciation expense comprised $496.8 million of those non-cash charges, which
was higher than our normal annual run rate of approximately $425.0 million due to accelerated depreciation
recognized for fixed assets directly associated with certain product exits during the year. These were offset by
$317.6 million from changes in our operating assets and liabilities, driven primarily by a $565.1 million
reduction in customer deposits that were received in prior periods to support increased working capital
requirements in those periods. NWC decreased by $212.5 million primarily due to lower business levels during
the fourth quarter of fiscal year 2015 as compared to the same quarter of fiscal year 2014, which resulted in
lower levels of investments in NWC.
Cash used in investing activities amounted to $242.2 million during fiscal year 2015. This resulted
primarily from $347.4 million in gross capital expenditures for property and equipment to support certain
programs, offset by $107.7 million of proceeds from the sale of certain buildings and machinery and equipment.
We also paid $52.7 million for the acquisition of four businesses completed during fiscal year 2015. Other
investing activities also includes $79.7 million of proceeds from the sale of manufacturing equipment originally
purchased on behalf of a customer and financed by a third party banking institution, partially offset by $15.7 million
paid for the purchase of certain technology rights.
Cash used in financing activities was $516.0 million during fiscal year 2015, which was primarily the result
of cash paid for the repurchase of our ordinary shares in the amount of $415.9 million and net repayment of debt
in the amount of $24.6 million. Included in other financing activities is $88.8 million of cash paid to a third
party banking institution for certain manufacturing equipment that was financed by the third party banking
institution on behalf of a customer and $11.3 million of cash paid for contingent consideration related to our
acquisition of Saturn Electronics and Engineering Inc. The aforementioned cash outflows were partially offset by
proceeds from the issuance of our shares for option exercises amounting to $23.5 million.
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 repurchase company shares, fund acquisitions, make investments,
repay debt obligations, 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 $660.4 million, $639.5 million and
$554.3 million for fiscal years 2017, 2016 and 2015, 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
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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,
2017 2016 2015
(In thousands)
Net cash provided by operating activities . . . . . .
$1,136,445 $ 794,034
Purchases of property and equipment . . . . . . . . . (525,111) (510,634) (347,413)
Proceeds from the disposition of property and
$1,149,909
equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,606 13,676 107,689
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 660,404
$ 639,487 $ 554,310
Cash Conversion Cycle
Fiscal Year Ended March 31,
2017 2016 2015
Days in trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . 43 days 45 days 46 days
Days in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 days 59 days 58 days
Days in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 days 77 days 77 days
Cash conversion cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 days 27 days 27 days
Days in trade accounts receivable was calculated as average accounts receivable for the current and prior
quarter, adding back the reduction in accounts receivable for the deferred purchase price received in exchange
for sales of accounts receivable under our global asset backed securitization programs, divided by annualized
sales for the current quarter by day. During the fiscal year ended March 31, 2017, days in trade accounts
receivable decreased by 2 days to 43 days compared to the fiscal year ended March 31, 2016 primarily due to
better experience in collections. Deferred purchase price receivables included for the purposes of the calculation
were $506.5 million, $501.1 million and $600.7 million for the years ended March 31, 2017, 2016 and 2015,
respectively, and are recorded in other current assets in the consolidated balance sheets.
Days in inventory was calculated as 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, 2017, days in
inventory decreased by 1 day to 58 days as compared to the fiscal year ended March 31, 2016. The decrease was
primarily the result of improved inventory management.
Days in accounts payable was calculated as 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, 2017,
days in accounts payable remained consistent at 77 days compared to the fiscal year ended March 31, 2016.
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. Our cash conversion
cycle decreased by 3 days for the fiscal year ended March 31, 2017 compared to that of fiscal year 2016 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. We are
also consciously elevating the levels of spend to support our new business models and investing across all
aspects of our platform as we continue our shift to a Sketch-to-Scaletm portfolio.
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In April 2017, the Company completed the acquisition of AGM Automotive for approximately $220 million,
which expanded its capabilities in the automotive market, and is included within the HRS segment.
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 a
designated pool 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 2017, 2016 and 2015 we received approximately $5.7 billion, $5.2 billion and
$4.3 billion, respectively from sales of receivables under our ABS programs, and $1.3 billion, $2.3 billion and
$4.2 billion, respectively from other sales of receivables. As of March 31, 2017 and 2016, the outstanding
balance on receivables sold for cash was $1.2 billion, for each year, under all our accounts receivable sales
programs, which are removed from accounts receivable balances in our consolidated balance sheets.
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.
Historically we have been successful in refinancing and extending the maturity dates on our term loans and
credit facilities. In November 2016, we entered into a new arrangement to extend the maturity date of a term
loan agreement from August 2018 to November 2021, and borrowed an incremental amount of $130 million
under the term loan, thereby increasing the total amount under the term loan to $700 million. In January 2017,
we borrowed €100 million (approximately $107.4 million as of March 31, 2017), under a 5-year, term-loan
agreement due January 2022. Refer to our Contractual Obligations and Commitments section for further
description on these arrangements.
Under our current share repurchase program, our Board of Directors authorized repurchases of our
outstanding ordinary shares for up to $500 million in accordance with the share repurchase mandate approved by
our shareholders at the date of the most recent Annual General Meeting which was held on August 24, 2016.
During fiscal year 2017, we paid $349.5 million to repurchase shares (under the current and prior repurchase
plans) at an average price of $13.74 per share. As of March 31, 2017, shares in the aggregate amount of
$285.3 million were available to be repurchased under the current plan.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
Bank borrowings and long-term debt are as follows:
As of March 31,
2017 2016
(In thousands)
Term Loan, including current portion, due in installments through
March 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 502,500 $ 547,500
4.625% Notes due February 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 500,000
Term Loan, including current portion, due in installments through
November 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700,000 577,500
5.000% Notes due February 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 500,000
4.750% Notes due June 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595,979 595,589
Other credit lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,671 71,317
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,007) (17,351)
2,952,143 2,774,555
Current portion, net of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . (61,534) (65,166)
Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,890,609 $2,709,389
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Refer to the discussion in note 7, “Bank Borrowings and Long-Term Debt” to the consolidated financial
statements for further details of our 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:
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
$2,598,059
$2,598,059 $ — $ — $ —
obligations
Long-term debt . . . . . . . . . . . . . . . . .
Capital lease . . . . . . . . . . . . . . . . . . .
Interest on long-term debt obligations .
Operating leases, net of subleases . . . .
Restructuring costs . . . . . . . . . . . . . . . .
Total contractual obligations . . . . . .
2,968,150 63,887 992,684 811,652 1,099,927
19,135 4,715 10,327 4,093 —
700,386 110,196 233,586 238,979 117,625
553,148 117,217 167,437 94,525 173,969
23,501 23,501 — — —
$1,149,249 $1,391,521
$2,917,575 $1,404,034
$6,862,379
We have excluded $203.3 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 13, “Income Taxes” to the 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, 2017 and 2016, the fair value of our deferred
purchase price receivable was approximately $506.5 million and $501.1 million, respectively. As of March 31,
2017 and 2016, the outstanding balance on receivables sold for cash was $1.2 billion for each period, under all
our accounts receivable sales programs, which were removed from accounts receivable balances in our
consolidated balance sheets. For further information, see note 10 to the consolidated financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
Refer to note 2 to the consolidated financial statements for recent accounting pronouncements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 or bank deposits with maturities of three months or less from
original dates of purchase and are classified as cash equivalents on our consolidated balance sheet. We do not
use derivative financial instruments in our investment portfolio. We place cash and cash equivalents with various
major financial institutions and highly rated money market accounts. Our investment policy has strict guidelines
focusing on preservation of capital. The portfolio is comprised of various instruments including term deposits
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with banks, marketable securities and money market accounts. Our cash is principally invested in the U.S. dollar
and China RMB serving as a natural hedge of our RMB denominated costs. As of March 31, 2017, the
outstanding amount in the investment portfolio was $1.1 billion, the largest components of which were USD and
RMB denominated money market accounts with an average return of 1.74%. 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 $1.4 billion as of March 31, 2017. Variable rate
debt obligations consisted of borrowings under our term loans. 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.
As of March 31, 2017, the approximate average fair value of our debt outstanding under our term loan
facilities that matures in March 2019 and November 2021, and Notes due February 2020, February 2023 and
June 2025 was 103.4% of the face value of the debt obligations based on broker trading prices.
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 may borrow in various foreign currencies and enter into short-term foreign currency forward, swap, and
option 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, 2017 amounted to
$4.1 billion and the recorded fair values of the associated assets and liabilities 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, China renminbi, Danish krone, the Euro, Hungarian forint, Israeli
shekel, Malaysian ringgit, Mexican peso, Singapore dollar, Indian rupee, Swiss franc and the U.S. dollar.
Based on our overall currency rate exposures as of March 31, 2017, 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
Flex Ltd.
Singapore
We have audited the accompanying consolidated balance sheets of Flex Ltd. and subsidiaries (the
“Company”) as of March 31, 2017 and 2016, 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, 2017. 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 Flex Ltd. and subsidiaries as of March 31, 2017 and 2016, and the results of their operations and
their cash flows for each of the three years in the period ended March 31, 2017, 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, 2017, based on the
criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated May 16, 2017 expressed an unqualified opinion
on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
May 16, 2017
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FLEX LTD.
CONSOLIDATED BALANCE SHEETS
As of March 31,
2017 2016
(In thousands, except share
amounts)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,830,675 $ 1,607,570
Accounts receivable, net of allowance for doubtful accounts (Note 2) . . . . . . . . 2,192,704 2,044,757
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,396,462 3,491,656
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 967,935 1,171,143
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,387,776 8,315,126
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,317,026 2,257,633
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 984,867 942,066
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362,181 403,754
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541,513 466,402
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,593,363
$12,384,981
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank borrowings and current portion of long-term debt . . . . . . . . . . . . . . . . . . . $ 61,534 $ 65,166
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,484,908 4,248,292
Accrued payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344,245 353,547
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,613,940 1,905,200
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,504,627 6,572,205
Long-term debt, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,890,609 2,709,389
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519,851 497,857
Commitments and contingencies (Note 12)
Shareholders’ equity
Flex Ltd. Shareholders’ equity
Ordinary shares, no par value; 581,534,129 and 595,062,966 issued, and
531,294,774 and 544,823,611 outstanding as of March 31, 2017 and
2016, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,733,539 6,987,214
Treasury stock, at cost; 50,239,355 shares as of March 31, 2017 and 2016,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (388,215) (388,215)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,572,648) (3,892,212)
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (128,143) (135,915)
Total Flex Ltd. shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,644,533 2,570,872
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,743 34,658
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,678,276 2,605,530
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,593,363
$12,384,981
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The accompanying notes are an integral part of these consolidated financial statements.
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FLEX LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Year Ended March 31,
2017 2016 2015
(In thousands, except per share amounts)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$26,147,916
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,303,231 22,810,824 24,602,576
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,758 — —
$24,418,885
$23,862,934
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,520,945 1,608,061 1,545,340
Selling, general and administrative expenses . . . . . . . . . . . . . 937,339 954,890 844,473
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,396 65,965 32,035
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,637 — —
Other charges (income), net . . . . . . . . . . . . . . . . . . . . . . . . . . 21,193 47,738 (53,233)
Interest and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,532 84,793 51,410
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . 370,848 454,675 670,655
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,284 10,594 69,854
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 319,564
$ 444,081
$ 600,801
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.59
$ 0.80
$ 1.04
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.59
$ 0.79
$ 1.02
Weighted-average shares used in computing per share
amounts:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540,503 557,667 579,981
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 546,220 564,869 591,556
The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FLEX LTD.
Fiscal Year Ended March 31,
2017 2016 2015
(In thousands)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
$319,564
$444,081
$600,801
Foreign currency translation adjustments, net of zero tax . . . (1,324) 17,846 (18,932)
Unrealized gain (loss) on derivative instruments and other,
net of zero tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,096 26,744 (35,417)
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$327,336
$488,671
$546,452
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The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FLEX LTD.
Accumulated Other
Comprehensive Loss
Unrealized
Gain
(loss) on Foreign
Currency
Derivative
Ordinary Shares
Total
Accumulated
Other
Total
Flex Ltd.
Total
Shares Accumulated Instruments Translation Comprehensive Shareholders’ Noncontrolling Shareholders’
Outstanding Amount Deficit and Other Adjustments
Loss
Equity Interests
Equity
(In thousands)
BALANCE AT
MARCH 31, 2014 . . . . . . . . . .
591,427
$7,226,300 $(4,937,094) $(32,849)
$ (93,307)
$(126,156) $2,163,050
$38,629 $2,201,679
Repurchase of
Flex Ltd. ordinary shares
at cost . . . . . . . . . . . . . . . . . . . .
(38,951)
(421,687)
— — — — (421,687) — (421,687)
Exercise of stock options . . . . . . . .
3,601
23,497
— — — — 23,497 11 23,508
Issuance of Flex Ltd.
vested shares under share
bonus awards . . . . . . . . . . . . . .
7,246
Issuance of subsidiary shares . . . . .
Net income . . . . . . . . . . . . . . . . . . .
Stock-based compensation,
net of tax . . . . . . . . . . . . . . . . .
Total other comprehensive loss . . .
BALANCE AT
—
—
—
—
—
—
—
49,502
—
— — — — — — —
— — — — — 300 300
600,801 — — — 600,801 (4,272) 596,529
— — — — 49,502 768 50,270
— (35,417) (18,932) (54,349) (54,349) — (54,349)
MARCH 31, 2015 . . . . . . . . . .
563,323
6,877,612
(4,336,293) (68,266) (112,239) (180,505) 2,360,814 35,436 2,396,250
Repurchase of
Flex Ltd. ordinary shares
at cost . . . . . . . . . . . . . . . . . . . .
(37,314)
(412,819)
— — — — (412,819) — (412,819)
Exercise of stock options . . . . . . . .
10,244
61,278
— — — — 61,278 486 61,764
Issuance of Flex Ltd.
vested shares under share
bonus awards . . . . . . . . . . . . . .
8,570
Premium on acquired equity plan . .
Net income . . . . . . . . . . . . . . . . . . .
Stock-based compensation,
net of tax . . . . . . . . . . . . . . . . .
Total other comprehensive income . .
BALANCE AT
—
—
—
—
—
799
—
72,129
—
— — — — — — —
— — — — 799 — 799
444,081 — — — 444,081 (6,715) 437,366
— — — — 72,129 5,451 77,580
— 26,744 17,846 44,590 44,590 — 44,590
MARCH 31, 2016 . . . . . . . . . .
544,823
6,598,999
(3,892,212) (41,522) (94,393) (135,915) 2,570,872 34,658 2,605,530
Repurchase of
Flex Ltd. ordinary shares
at cost . . . . . . . . . . . . . . . . . . . .
(25,125)
(345,782)
— — — — (345,782) — (345,782)
Exercise of stock options . . . . . . . .
2,283
12,438
— — — — 12,438 610 13,048
Issuance of Flex Ltd.
vested shares under share
bonus awards . . . . . . . . . . . . . .
9,313
Issuance of subsidiary shares . . . . .
Net income . . . . . . . . . . . . . . . . . . .
Stock-based compensation,
net of tax . . . . . . . . . . . . . . . . .
Total other comprehensive income . .
BALANCE AT
—
—
—
—
—
—
—
79,669
—
— — — — — — —
— — — — — 9,306 9,306
319,564 — — — 319,564 (8,492) 311,072
— — — — 79,669 (2,339) 77,330
— 9,096 (1,324) 7,772 7,772 — 7,772
MARCH 31, 2017 . . . . . . . . . .
531,294
$6,345,324 $(3,572,648) $(32,426)
$ (95,717) $(128,143) $2,644,533 $33,743 $2,678,276
The accompanying notes are an integral part of these consolidated financial statements.
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FLEX LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ended March 31,
2017 2016 2015
(In thousands)
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by
$ 444,081
$ 319,564
$ 600,801
operating activities:
Depreciation, amortization and other impairment charges . . . 609,660 515,367 540,490
Provision (reversal) for doubtful accounts (Note 2) . . . . . . . . (184) 72,295 650
Non-cash other loss (income) . . . . . . . . . . . . . . . . . . . . . . . . . 6,858 24,521 (21,278)
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,330 77,580 50,270
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,041) (64,346) (59,261)
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (164,239) 317,946 316,773
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,047 84,790 72,660
Other current and noncurrent assets . . . . . . . . . . . . . . . . . 84,949 (2,704) 125,218
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268,686 (365,051) (176,941)
Other current and noncurrent liabilities . . . . . . . . . . . . . . (117,721) 31,966 (655,348)
Net cash provided by operating activities . . . . . . . . . . . 1,149,909 1,136,445 794,034
Cash flows from investing activities:
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . (525,111) (510,634) (347,413)
Proceeds from the disposition of property and equipment . . . 35,606 13,676 107,689
Acquisition of businesses, net of cash acquired . . . . . . . . . . . (189,084) (916,527) (66,854)
Proceeds from divestitures of businesses, net of cash
held in divested businesses . . . . . . . . . . . . . . . . . . . . . . . . . 36,731 5,740 —
Other investing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . (60,329) 11,369 64,362
Net cash used in investing activities . . . . . . . . . . . . . . . . . . (702,187) (1,396,376) (242,216)
Cash flows from financing activities:
Proceeds from bank borrowings and long-term debt . . . . . . . 312,741 884,702 319,542
Repayments of bank borrowings and long-term debt . . . . . . . (141,730) (190,221) (344,156)
Payments for repurchases of ordinary shares . . . . . . . . . . . . . (349,532) (420,317) (415,945)
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . 12,438 61,278 23,508
Other financing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . (76,024) (85,800) (98,966)
Net cash provided by (used in) financing activities . . . . . . (242,107) 249,642 (516,017)
Effect of exchange rates on cash . . . . . . . . . . . . . . . . . . . . . . . . . 17,490 (10,549) (1,121)
Net change in cash and cash equivalents . . . . . . . . . . . . . . . . 223,105 (20,838) 34,680
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . 1,607,570 1,628,408 1,593,728
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . .
$1,830,675
$ 1,607,570
$1,628,408
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The accompanying notes are an integral part of these consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FLEX LTD.
1. ORGANIZATION OF THE COMPANY
Flex Ltd., formerly Flextronics International Ltd., (“Flex” 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 globally-recognized, provider of Sketch-to-
Scaletm services—innovative design, engineering, manufacturing, and supply chain services and solutions—from
conceptual sketch to full-scale production. The Company designs, builds, ships and services complete packaged
consumer and industrial products, from athletic shoes to electronics, for companies of all sizes in various
industries and end-markets, through its activities in the following segments: Communications & Enterprise
Compute (“CEC”), which includes telecom business of radio access base stations, remote radio heads, and small
cells for wireless infrastructure; networking business which includes optical, routing, broadcasting, and switching
products for the data and video networks; server and storage platforms for both enterprise and cloud-based
deployments; next generation storage and security appliance products; and rack level solutions, converged
infrastructure and software-defined product solutions; Consumer Technologies Group (“CTG”), which includes
consumer-related businesses in connected living, wearables, gaming, augmented and virtual reality, fashion, and
mobile devices; and including various supply chain solutions for notebook personal computers (“PC”), tablets,
and printers; in addition, CTG is expanding its business relationships to include supply chain optimization for
non-electronics products such as footwear and clothing; Industrial and Emerging Industries (“IEI”), which is
comprised of energy and metering, semiconductor and capital equipment, office solutions, household industrial
and lifestyle, industrial automation and kiosks, and lighting; and High Reliability Solutions (“HRS”), which is
comprised of medical business, including consumer health, digital health, disposables, precision plastics, drug
delivery, diagnostics, life sciences and imaging equipment; automotive business, including vehicle electrification,
connectivity, autonomous vehicles, and clean technologies; and defense and aerospace businesses, focused on
commercial aviation, defense and military.
The Company’s service offerings include a comprehensive range of value-added design and engineering
services that are tailored to the various markets and needs of its customers. Other focused service offerings relate
to manufacturing (including enclosures, metals, plastic injection molding, precision plastics, machining, and
mechanicals), system integration and assembly and test services, materials procurement, inventory management,
logistics and after-sales services (including product repair, warranty services, re-manufacturing and maintenance)
and supply chain management software solutions and component product offerings (including rigid and flexible
printed circuit boards and power adapters and chargers).
2. SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Flex and its majority-owned
subsidiaries, after elimination of intercompany accounts and transactions. Amounts included in these consolidated
financial statements are expressed in U.S. dollars unless otherwise designated. The Company consolidates its
majority-owned subsidiaries and investments in entities in which the Company has a controlling interest. For the
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, 2017, the noncontrolling
interest has been included on the consolidated balance sheets as a component of total shareholders’ equity. The
associated noncontrolling owners’ interest in the income or losses of these companies is classified as a component
of interest and other, net, in the consolidated statements of operations.
The Company has certain non-majority-owned equity investments in non-publicly traded companies that are
accounted for using the equity method of accounting. The equity method of accounting is used when the
Company has the ability to significantly influence the operating decisions of the issuer, or if the Company has an
ownership percentage of a corporation equal to or generally greater than 20% but less than 50%, and for non-
majority-owned investments in partnerships when generally greater than 5%. The equity in earnings (losses) of
equity method investees are immaterial for all of the periods presented, and are included in interest and other, net
in the condensed consolidated statements of operations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
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.
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; warranty provisions; fair values of assets obtained and liabilities assumed 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 other
comprehensive loss, a 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, 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. Some of the Company’s customer contracts allow the recovery of certain costs related to
manufacturing services that are over and above the prices charged for the related products. The Company
determines the amount of costs that are recoverable based on historical experiences and agreements with those
customers. Also, certain customer contracts may contain certain commitments and obligations that may result in
additional expenses or decrease in revenue. The Company accrues for these commitments and obligations based
on facts and circumstances and contractual terms. The Company also 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. Provisions for sales returns and other adjustments were not material to the consolidated financial
statements for any of the periods presented.
The Company also recognizes revenue in accordance with multiple-element arrangements accounting
codified under U.S. GAAP for arrangements that contain multiple deliverables. The Company determined that its
multiple-element arrangements are generally comprised of arrangements where multiple product components are
sold together as part of a complete system. Depending on the contractual provisions of the respective contracts,
the Company has concluded that the units of accounting for such arrangements are, in most cases, comprised of
an aggregation of product components, however, may also be established at the product component level. For
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
multiple-element arrangements, revenue is allocated to each unit of accounting based on their relative selling
prices. Relative selling prices are based first on vendor specific objective evidence of fair value (“VSOE”), then
on third-party evidence of selling price (“TPE”) when VSOE does not exist, and then on management’s best
estimate of the selling price (“BESP”) when VSOE and TPE do not exist. The Company bases the allocation of
revenue on BESP, because the Company does not have either VSOE or TPE for the respective deliverables.
The Company provides a comprehensive suite of services for its customers that range from advanced
product design to manufacturing and logistics to after-sales services. The Company recognizes service revenue
when the services have been performed, and the related costs are expensed as incurred. 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 primarily
related to its design and innovations businesses of $65.6 million, $61.0 million, and $26.3 million for the fiscal
years ended March 31, 2017, 2016 and 2015, respectively. Research and development costs for prior years have
been recast to conform to fiscal year 2017 presentation.
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.
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.
On April 21, 2016, SunEdison, Inc. (together with certain of its subsidiaries, “SunEdison”), filed a petition
for reorganization under bankruptcy law. During the fiscal year ended March 31, 2016, the Company recognized
a bad debt reserve charge of $61.0 million associated with its outstanding SunEdison receivables and accepted
return of previously shipped inventory of approximately $90.0 million. During the second quarter of fiscal year
2017, prices for solar panel modules declined significantly. The Company determined that certain solar panel
inventory previously designated for SunEdison on hand at the end of the second quarter of fiscal year 2017 was
not fully recoverable and recorded a charge of $60.0 million to reduce the carrying costs to market during fiscal
year 2017. In addition, the Company recognized a $16.0 million impairment charge for solar module equipment
and incurred $16.9 million of incremental costs primarily related to negative margin sales and other associated
solar panel direct costs. The total charge for fiscal year 2017 of $92.9 million is included in cost of sales
The following table summarizes the activity in the Company’s allowance for doubtful accounts during fiscal
years 2017, 2016 and 2015:
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, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,529 $ 650 $ (1,645) $ 4,534
Year ended March 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,534 $72,295 $(12,221) $64,608
Year ended March 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $64,608 $ (184) $ (7,122) $57,302
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
For the fiscal year ended March 31, 2016, the Company recognized a bad debt charge of $61.0 million
associated with its outstanding SunEdison receivables as explained above, and another charge of $10.5 million
relating to a separate distressed customer which was also written-off during the year.
One customer (including net sales from its current and former parent companies, through the dates of their
respective ownership), which is within the Company’s CTG segment, accounted for approximately 11% and 17%
of the Company’s net sales in fiscal years 2016 and 2015, respectively, and approximately 17% and 11% of the
Company’s total accounts receivable balances in fiscal years 2017 and 2016, respectively. Another customer
included in the Company’s CEC segment, accounted for approximately 11% of the Company’s total accounts
receivable balance in fiscal years 2016.
The Company’s ten largest customers accounted for approximately 43%, 46% and 50%, of its net sales in
fiscal years 2017, 2016 and 2015, respectively.
Derivative Instruments
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 in note 8.
Cash and Cash Equivalents
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 investment portfolio, which consists of short-term bank deposits and money market
accounts, is classified as cash equivalents on the consolidated balance sheets.
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,
2017 2016
(In thousands)
$ 533,438
Cash and bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money market funds and time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,066,841 1,074,132
$ 763,834
$1,830,675
$1,607,570
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 lower of cost or market
write-downs, were as follows:
As of March 31,
2017 2016
(In thousands)
$2,234,512
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279,493 561,282
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579,346 695,862
$2,537,623
$3,396,462
$3,491,656
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
Property and Equipment, Net
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and
amortization are 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) 2017 2016
(In thousands)
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures, computer equipment and software . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 - 10 $ 3,233,392 $ 3,187,590
30 1,237,739 1,144,798
up to 30 395,663 397,340
3 - 7 502,223 477,203
— 145,663 127,927
— 212,326 178,851
Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . .
5,727,006 5,513,709
(3,409,980) (3,256,076)
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,317,026 $ 2,257,633
Total depreciation expense associated with property and equipment amounted to approximately
$432.2 million, $425.7 million and $496.8 million in fiscal years 2017, 2016 and 2015, respectively.
The Company reviews property and equipment for impairment at least annually and whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of
property and equipment is determined by comparing its carrying amount to the lowest level of identifiable
projected undiscounted cash flows the property and equipment are expected to generate. An impairment loss is
recognized when the carrying amount of property and equipment exceeds its fair value.
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. Additionally, the Company assesses whether each income tax
position is “more likely than not” of being sustained on audit, including resolution of related appeals or litigation,
if any. For each income tax position that meets the “more likely than not” recognition threshold, the Company
would then assess the largest amount of tax benefit that is greater than 50% likely of being realized upon effective
settlement with the tax authority.
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 fair value of the identified assets and liabilities acquired is
recognized as goodwill.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
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
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. If the recorded value of the assets, including goodwill, and
liabilities (“net book value”) of each 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 has four reporting units, which correspond to its four reportable operating segments: HRS,
CTG, IEI and CEC. The Company concluded that there was no change to its reporting units in fiscal year 2017 and
performed its goodwill impairment assessment on January 1, 2017. In lieu of the qualitative “Step Zero” assessment,
the Company performed a quantitative assessment of its goodwill and determined that no impairment existed as of
the date of the impairment test because the fair value of each reporting unit exceeded its carrying value.
The following table summarizes the activity in the Company’s goodwill during fiscal years 2017 and 2016
(in thousands):
HRS
CTG
IEI
CEC Total
Balance, as of March 31, 2016 . . . . . . . . . . .
Balance, as of March 31, 2015 . . . . . . . . . . . $ 93,138 $ 68,234 $ 64,221 $108,038 $333,631
Additions(1) . . . . . . . . . . . . . . . . . . . . . . . . 340,610 — 258,582 3,655 602,847
Purchase accounting adjustments(3) . . . . . 125 — — — 125
Foreign currency translation adjustments(4) . 5,463 — — — 5,463
111,693 942,066
439,336
Additions(1) . . . . . . . . . . . . . . . . . . . . . . . . — 42,989 17,544 3,309 63,842
Divestitures(2) . . . . . . . . . . . . . . . . . . . . . . (1,787) — (2,640) — (4,427)
Purchase accounting adjustments(3) . . . . . 794 — — — 794
Foreign currency translation adjustments(4) . (17,408) — — — (17,408)
Balance, as of March 31, 2017 . . . . . . . . . . . $420,935 $111,223 $337,707 $115,002 $984,867
68,234 322,803
(1) The goodwill generated from the Company’s business combinations completed during the fiscal years 2017 and 2016
are 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. Refer to the discussion of the Company’s business
acquisitions in note 17.
(2) During the fiscal year ended March 31, 2017, the Company disposed of two non-strategic businesses within the IEI and
(3)
HRS segments, and recorded an aggregate reduction of goodwill of $4.4 million accordingly, which is included in the
loss on sale recorded in other charges, net on the consolidated statement of operations.
Includes adjustments 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 were not individually, nor in the aggregate, significant to the Company.
(4) During the fiscal years ended March 31, 2017 and 2016, the Company recorded $17.4 million and $5.5 million,
respectively, of foreign currency translation adjustments primarily related to the goodwill associated with the acquisition
of Mirror Controls International (“MCi”) in fiscal year 2016, as the U.S. Dollar fluctuated against the Euro.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
Other Intangible Assets
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
March 31, 2017 and concluded that such amounts continued to be recoverable.
Intangible assets are comprised of customer-related intangible assets, that include contractual agreements
and customer relationships; and licenses and other intangible assets, that are primarily comprised of licenses and
also includes patents and trademarks, and developed technologies. Generally, both customer-related intangible
assets and licenses and other intangible assets are amortized on a straight line basis, over a period of up to ten
years. No residual value is estimated for any intangible assets. The fair value of the Company’s intangible assets
purchased through business combinations is determined based on management’s estimates of cash flow and
recoverability. The components of acquired intangible assets are as follows:
As of March 31, 2017 As of March 31, 2016
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 . .
Total . . . . . . . . . . . . . . . . . . . .
$260,704
283,897
$544,601
$(105,912) $154,792 $223,046 $ (66,473) $156,573
(76,508) 207,389 285,053 (37,872) 247,181
$(182,420) $362,181 $508,099 $(104,345) $403,754
The gross carrying amounts of intangible assets are removed when fully amortized. During fiscal year 2017,
the gross carrying amounts of fully amortized intangible assets totaled $14.2 million. During fiscal year 2017, the
gross carrying amount of intangible assets increased primarily in connection with the Company’s acquisitions
during the year. Total intangible asset amortization expense recognized in operations during fiscal years 2017,
2016 and 2015 was $81.4 million, $66.0 million and $32.0 million, respectively. As of March 31, 2017, the
weighted-average remaining useful lives of the Company’s intangible assets were approximately 6.6 years for both
customer-related intangibles and licenses and other intangible assets. The estimated future annual amortization
expense for acquired intangible assets is as follows:
Fiscal Year Ending March 31, Amount
(In thousands)
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 68,472
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,582
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,439
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,266
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,714
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,708
Total amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$362,181
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 spot currency rates and the change in present value of the spot currency rates. The spot currency rates
are discounted to present value using functional currency Inter-bank Offering Rates over the maximum length of
the hedge period. The effective portion of changes in the fair value of the derivative instrument (excluding time
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FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
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 8.
Other Current Assets
Other current assets include approximately $506.5 million and $501.1 million as of March 31, 2017 and
2016, respectively for the deferred purchase price receivable from the Company’s Global and North American
Asset-Backed Securitization programs. See note 10 for additional information.
In connection with a prior acquisition, the Company entered into an agreement with a customer and a third
party banking institution to procure certain manufacturing equipment that was financed by the third party
banking institution, acting as an agent of the customer. The manufacturing equipment was used exclusively for the
benefit of this customer. During fiscal year 2015, the Company ceased manufacturing of the product related to
the financed equipment. As a result, pursuant to an agreement with the customer the Company as an agent on
behalf of the customer dispositioned the equipment via sales to third parties and used the proceeds to reduce the
obligation to the third party banking institution. Accordingly, the residual value due from the customer related to
the equipment financed by the third party banking institution was $83.6 million as of March 31, 2016, and was
included in other current assets. During fiscal year 2017, the Company entered into an agreement with the third
party banking institution and the customer granted a waiver of any amounts owed under the financing
arrangement which allowed for a net settlement of the related asset and liability.
Investments
The Company has certain equity investments in, and notes receivable from, non-publicly traded companies
which are included within other assets. The equity method of accounting is used when the Company has the
ability to significantly influence the operating decisions of the issuer; otherwise the cost method is used. Non-
majority-owned investments in corporations are accounted for using the equity method when the Company has an
ownership percentage equal to or generally greater than 20% but less than 50%, and for non-majority-owned
investments in partnerships when generally greater than 5%. 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 comparable company multiples
and discounted cash flow projections.
As of March 31, 2017 and 2016, the Company’s equity investments in non-majority owned companies
totaled $200.1 million and $122.9 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 and
is included in interest and other, net.
During fiscal year 2017, the Company formed a joint venture with RIB Software AG, a provider of
technology for the construction industry. This joint venture will offer a fully integrated enterprise software
platform for building and housing projects. The Company contributed $60.0 million for a non-controlling interest
in this joint venture. This contribution, net of the Company’s equity in losses, which is immaterial, is included in
other assets on the condensed consolidated balance sheet. The cash outflows to pay for this investment have been
included in cash flows from other investing activities during the fiscal year ended March 31, 2017.
Other Current Liabilities
Other current liabilities include customer working capital advances of $231.3 million and $253.7 million,
customer-related accruals of $501.9 million and $479.5 million, and deferred revenue of $280.7 million and
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FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
$332.3 million as of March 31, 2017 and 2016, respectively. The customer working capital advances are not
interest bearing, do not have fixed repayment dates and are generally reduced as the underlying working capital is
consumed in production.
As of March 31, 2016, other current liabilities also included the outstanding balances due to the third party
banking institution related to the financed equipment discussed above of $122.0 million. As discussed above,
during fiscal year 2017, the Company entered into an agreement with the third party banking institution and the
customer granted a waiver of any amounts owed under the financing arrangement which provided for a net
settlement of the outstanding balance of approximately $90.6 million with the related asset.
Restructuring Charges
The Company recognizes restructuring charges related to its plans to close or consolidate excess
manufacturing facilities and rationalize administrative functions. 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 14 for additional information regarding restructuring charges.
Recently Adopted Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance intended to
reduce the cost and complexity of the accounting for share-based payments. The new guidance simplifies various
aspects of the accounting for share-based payments including income tax effects, withholding requirements and
forfeitures. The Company elected to early adopt this new guidance beginning in the first quarter of fiscal year
2017. The guidance eliminates additional paid in capital (“APIC”) pools and requires companies to recognize all
excess tax benefits and tax deficiencies in the income statement when the awards vest or are settled. It also
addresses the presentation of excess tax benefits and employee taxes paid on the statement of cash flows. Prior to
adoption, the Company elected to not deduct tax benefits for stock-based compensation awards on its tax returns,
and accordingly, did not have any excess tax benefits or tax deficiencies upon adoption. The Company therefore
determined that adoption of the new guidance had no impact on the condensed consolidated statement of
operations and the condensed consolidated statement of cash flows. Further, the new guidance eliminates the
requirement to estimate forfeitures and reduce stock compensation expense during the vesting period. Instead,
companies can elect to account for actual forfeitures as they occur and record any previously unrecognized
compensation expense for estimated forfeitures up to the period of adoption as a retrospective adjustment to
beginning retained earnings. The Company has made the election to account for actual forfeitures as they occur
starting in fiscal year 2017. After assessment, it was determined that the cumulative effect adjustment required
under the new guidance was immaterial and therefore the Company did not record a retrospective adjustment. The
Company finally determined that the adoption of this guidance did not have a significant impact on the
consolidated financial position, results of operations and cash flows of the Company.
Recently Issued Accounting Pronouncements
In January 2017, the FASB issued new guidance to simplify the subsequent measurement of goodwill by
eliminating step 2 from the goodwill impairment test. This guidance requires that the change be applied on a
prospective basis, and it is effective for the Company beginning in the first quarter of fiscal year 2021, with early
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
application permitted. The Company is currently assessing the impact of the new guidance and the timing of
adoption.
In January 2017, the FASB issued new guidance that changes the definition of a business to assist entities
with evaluating when a set of transferred assets and activities is a business. This guidance requires that the
amendments be applied on a prospective basis, and it is effective for the Company beginning in the first quarter
of fiscal year 2019, with early application permitted. The guidance may result in more asset acquisitions being
accounted for as purchases of assets in lieu of business combinations. The Company intends to adopt the
guidance when it becomes effective in the first quarter of fiscal year 2019.
In October 2016, the FASB issued new guidance to amend the consolidation guidance on how a reporting
entity that is the single decision maker of a variable interest entity (“VIE”) should treat indirect interests in the
entity held through related parties that are under common control with the reporting entity when determining
whether it is the primary beneficiary of that VIE. This guidance requires that the amendments be applied on a
retrospective or modified retrospective basis, and it is effective for the Company beginning in the first quarter of
fiscal year 2018, with early adoption permitted. The Company expects the new guidance will have an immaterial
impact on its consolidated financial statements, and it intends to adopt the guidance when it becomes effective in
the first quarter of fiscal year 2018.
In August 2016, the FASB issued new guidance intended to address specific cash flow issues with the
objective of reducing the existing diversity in practice. This guidance is effective for the Company beginning in
the first quarter of fiscal year 2019, with early application permitted. The new guidance allows for two transition
methods in application—(i) retrospective to each period presented, or (ii) if it is impracticable to apply the
amendments retrospectively for some of the issues, then the amendments for those issues would be applied
prospective as of the earliest date practicable. The Company expects an immaterial impact on its consolidated
financial statements. The Company is currently assessing the timing of adoption.
In February 2016, the FASB issued new guidance intended to improve financial reporting on leasing
transactions. The new lease guidance will require entities that lease assets to recognize on the balance sheet the
assets and liabilities for the rights and obligations created by those leases with lease terms of more than
12 months. The guidance will also enhance existing disclosure requirements relating to those leases. The
Company will be required to adopt the new lease guidance beginning with the first quarter of fiscal year 2020
using a modified retrospective approach, with early adoption permitted. Upon initial evaluation, the Company
believes the new guidance will have a material impact on its consolidated balance sheets when adopted. The
Company is currently assessing the timing of adoption.
In July 2015, the FASB issued new guidance to simplify the measurement of inventory, by requiring that
inventory be measured at the lower of cost and net realizable value. Prior to the issuance of the new guidance,
inventory was measured at the lower of cost or market. This guidance is effective for the Company beginning in
the first quarter of fiscal year 2018, and should be applied prospectively with early application permitted as of the
beginning of an interim or annual reporting period. The Company is currently assessing the impact of this update
and the timing of adoption.
In May 2014, the FASB issued new guidance which requires an entity to recognize revenue relating to
contracts with customers that depicts the transfer of promised goods or services to customers in an amount
reflecting the consideration to which the entity expects to be entitled in exchange for such goods or services. In
order to meet this requirement, the entity must apply the following steps: (i) identify the contracts with the
customers; (ii) identify performance obligations in the contracts; (iii) determine the transaction price; (iv) allocate
the transaction price to the performance obligations per the contracts; and (v) recognize revenue when (or as) the
entity satisfies a performance obligation. Additionally, disclosures required for revenue recognition will include
qualitative and quantitative information about contracts with customers, significant judgments and changes in
judgments, and assets recognized from costs to obtain or fulfill a contract. The guidance is effective for the
Company beginning in the first quarter of fiscal year 2019. The Company has assessed that the impact of the new
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
guidance will result in a change of the Company’s revenue recognition model for electronics manufacturing
services from “point in time” upon physical delivery to an “over time” model and believes this transition will
have a material impact on the Company’s consolidated financial statements upon adoption primarily as it
recognizes an increase in contract assets for unbilled receivables with a corresponding reduction in finished goods
and work-in-progress inventory. The Company has commenced implementation in accordance with the planned
effective date. The new guidance allows for two transition methods in application—(i) retrospective to each prior
reporting period presented, or (ii) prospective with the cumulative effect of adoption recognized on April 1, 2018,
the first day of the Company’s fiscal year 2019. The Company has not yet concluded upon its selection of the
transition method.
3. SHARE-BASED COMPENSATION
Equity Compensation Plans
The Company’s primary plan used for granting equity compensation awards is the 2010 Equity Incentive
Plan (the “2010 Plan”).
During fiscal year 2016, in conjunction with the acquisition of NEXTracker, the Company assumed all of
the outstanding, unvested share bonus awards and outstanding, unvested options to purchase shares of common
stock of NEXTracker, and converted all these shares into Flex awards. As a result, the Company now offers the
2014 NEXTracker Equity Incentive Plan (the “NEXTracker Plan”).
Additionally, during fiscal year 2017, in conjunction with an immaterial acquisition, the Company assumed
all of the outstanding, unvested options to purchase shares of common stock of the acquiree, and converted all of
these shares into Flex awards. As a result, the Company now offers an additional equity compensation plan, the
BrightBox Technologies 2013 Plan (the “BrightBox Plan”).
Further, during fiscal year 2017, the Company granted equity compensation awards under a fourth plan, the
2013 Elementum Plan (the “Elementum Plan”), which is administered by Elementum SCM (Cayman) Limited
(“Elementum”), a majority owned subsidiary of the Company.
Share-Based Compensation Expense
The Company early adopted new guidance intended to reduce cost and complexity of the accounting for
share-based payments, as discussed further in note 2.
The following table summarizes the Company’s share-based compensation expense for all Equity Incentive
Plans:
Fiscal Year Ended March 31,
(In thousands)
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . .
$10,023 $ 8,986 $ 7,503
72,243 68,594 42,767
Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . .
$82,266 $77,580 $50,270
2017 2016 2015
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
operating cash flows. During fiscal years 2017, 2016 and 2015, the Company did not recognize any excess tax
benefits as an operating cash inflow.
The 2010 Equity Incentive Plan
As of March 31, 2017, the Company had approximately 18.1 million shares available for grant 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.
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FLEX LTD.
3. SHARE-BASED COMPENSATION (Continued)
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.
As of March 31, 2017, the total unrecognized compensation cost related to unvested share options granted to
employees under the 2010 Plan was not significant and will be amortized on a straight-line basis over a weighted-
average period of approximately 1.5 years.
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. Further,
vesting for certain share bonus awards granted to certain executive officers is contingent upon meeting certain
free cash flow targets.
As of March 31, 2017, the total unrecognized compensation cost related to unvested share bonus awards
granted to employees was approximately $130.0 million under the 2010 Plan. These costs will be amortized
generally on a straight-line basis over a weighted-average period of approximately 2.5 years. Approximately
$14.4 million of the unrecognized compensation cost related to the 2010 Plan is related to share bonus awards
granted to certain key employees whereby vesting is contingent on meeting a certain market condition.
Determining Fair Value—Options and share bonus awards
Valuation and Amortization Method—The Company estimates the fair value of share options granted under
the 2010 Plan 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.
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 Flex 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 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.
There were no options granted under the 2010 Plan during fiscal years 2017 and 2016. The fair value of the
Company’s share options granted to employees for fiscal year 2015 was estimated using the following weighted-
average assumptions:
Fiscal Year Ended
March 31, 2015
Expected term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 years
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46.9%
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0%
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3%
Weighted-average fair value $4.85
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
3. SHARE-BASED COMPENSATION (Continued)
Determining Fair Value—Share bonus awards with service and market conditions
Valuation and Amortization Method—The Company estimates the fair value of share bonus awards granted
under the 2010 Plan whereby vesting is contingent on meeting certain market conditions using Monte Carlo
simulation. This fair value is then amortized on a straight-line basis over the vesting period, which is the service
period.
Expected volatility of Flex—Volatility used in a Monte Carlo simulation is derived from the historical
volatility of Flex’s stock price over a period equal to the service period of the share bonus awards granted. The
service period is three years for those share bonus awards granted in fiscal years 2017, 2016 and 2015.
Average peer volatility—Volatility used in a Monte Carlo simulation is derived from the historical
volatilities of both the Standard and Poor’s (“S&P”) 500 index and components of an extended Electronics
Manufacturing Services (“EMS”) group, comprised of global competitors of the Company within the same
industry, for the share bonus awards granted in fiscal years 2017, 2016 and 2015.
Average Peer Correlation—Correlation coefficients were used to model the movement of Flex’s stock price
relative to both the S&P 500 index and peers in the extended EMS group for the share bonus awards granted in
fiscal years 2017, 2016 and 2015.
Expected Dividend and Risk-Free Interest Rate assumptions—Same methodology as discussed above.
The fair value of the Company’s share-bonus awards under the 2010 Plan, whereby vesting is contingent on
meeting certain market conditions, for fiscal years 2017, 2016 and 2015 was estimated using the following
weighted-average assumptions:
Fiscal Year Ended March 31,
2017 2016 2015
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average peer volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average peer correlation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25.8% 26.0% 29.4%
25.1% 23.0% 25.9%
0.6 0.6 0.6
0.0% 0.0% 0.0%
0.9% 1.2% 0.9%
Share-Based Awards Activity
The following is a summary of option activity for the Company’s 2010 Plan (“Price” reflects the weighted-
average exercise price):
Fiscal Year Ended March 31,
2017 2016 2015
Options
Price Options Price Options Price
Outstanding, beginning of fiscal year . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . .
2,369,636 $ 8.31 15,992,894 $ 7.81 23,612,872 $ 8.57
— — — 15,000 11.11
6.89 (10,006,774) 6.10 (3,600,900) 6.53
12.39 (3,616,484) 12.23 (4,034,078) 13.17
—
(1,573,356)
(653,953)
Outstanding, end of fiscal year . . . . . . . . .
142,327 $ 8.97 2,369,636 $ 8.31 15,992,894 $ 7.81
Options exercisable, end of fiscal year . . .
138,950 $ 8.93 2,359,527 $ 8.30 15,959,173 $ 7.81
The aggregate intrinsic value of options exercised under the Company’s 2010 Plan (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) was $9.3 million, $55.3 million
and $16.3 million during fiscal years 2017, 2016 and 2015, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
3. SHARE-BASED COMPENSATION (Continued)
Cash received from option exercises under the 2010 Plan was $10.9 million, $61.1 million and $23.5 million
for fiscal years 2017, 2016 and 2015, respectively.
The following table presents the composition of options outstanding and exercisable under the 2010 Plan as
of March 31, 2017:
Options Outstanding Options Exercisable
Weighted
Average
Remaining Weighted
Number of Contractual Average Number of
Shares Life Exercise Shares
Range of Exercise Prices Outstanding (In Years) Price Exercisable
Weighted
Average
Remaining Weighted
Contractual Average
Life Exercise
(In Years) Price
$3.39 - $5.75 . . . . . . . . . . . . . . . . . . . 15,759 0.42
$ 5.03 15,759
$5.87 - $7.07 . . . . . . . . . . . . . . . . . . . 11,003 1.43 6.63 11,003
$7.08 - $10.59 . . . . . . . . . . . . . . . . . . 62,564 0.97 8.16 62,564
$10.67 - $11.41 . . . . . . . . . . . . . . . . . 45,501 1.14 11.16 42,124
$11.53 - $13.98 . . . . . . . . . . . . . . . . . 7,500 0.61 12.47 7,500
0.42
$ 5.03
1.43 6.63
0.97 8.16
0.91 11.16
0.61 12.47
$3.39 - $13.98 . . . . . . . . . . . . . . . . . . 142,327 0.99
$ 8.97 138,950
0.91
$ 8.93
Options vested and expected to vest . 142,014 0.98
$ 8.97
As of March 31, 2017 the aggregate intrinsic value for options outstanding, options vested and expected to
vest, and options exercisable under the Company’s 2010 Plan, was $1.2 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, 2017 for the approximately 0.2 million options that were
in-the-money at March 31, 2017.
The following table summarizes the Company’s share bonus award activity under the 2010 Plan (“Price”
reflects the weighted-average grant-date fair value):
Fiscal Year Ended March 31,
2017 2016 2015
Shares
Price Shares Price Shares Price
Unvested share bonus awards outstanding,
beginning of fiscal year . . . . . . . . . . . . . .
Granted(1) . . . . . . . . . . . . . . . . . . . . . . . . .
Vested(1) . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . .
17,000,076 $10.77 18,993,252 $ 9.01 21,848,120 $ 7.32
13.46 7,619,722 12.23 6,963,125 11.75
6,578,366
9.44 (8,529,378) 7.93 (7,246,056) 6.97
(6,922,946)
11.20 (1,083,520) 9.67 (2,571,937) 7.70
(956,914)
Unvested share bonus awards outstanding,
end of fiscal year . . . . . . . . . . . . . . . . . . .
15,698,582 $12.44 17,000,076 $10.77 18,993,252 $ 9.01
(1) Excluded from the fiscal year 2017 amounts are 1.7 million of share bonus awards representing the number of awards
achieved above target levels based on the achievement of certain market conditions, as further described in the table below.
These awards were issued and immediately vested in accordance with the terms and conditions of the underlying awards.
Of the 6.6 million unvested share bonus awards granted under the 2010 Plan in fiscal year 2017,
approximately 5.7 million unvested share bonus awards have an average grant date price of $13.09 per share.
Further, approximately 0.2 million of these unvested share bonus awards have an average grant date price of
$12.82 per share and represents the target amount of grants made to certain executive officers whereby vesting is
contingent on meeting certain free cash flow targets. These awards cliff vest after three years and will ultimately
pay out over a range from zero up to a maximum of 0.4 million of the target payment based on a measurement of
cumulative three-year increase of free cash flow from operations of the Company.
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JOB: 17-13971-1 CYCLE#;BL#: 15; 0 TRIM: 8.25" x 10.75" AS: Merrill Denver: 303-572-3889
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
3. SHARE-BASED COMPENSATION (Continued)
Further, 0.7 million of these unvested share bonus awards granted in fiscal year 2017 represents the target
amount of grants made to certain key employees whereby vesting is contingent on certain market conditions. The
average grant date fair value of these awards contingent on certain market conditions was estimated to be
$17.57 per award and was calculated using a Monte Carlo simulation. Vesting information of these shares are
further detailed in the table below.
Of the 15.7 million unvested share bonus awards outstanding under the 2010 Plan as of the fiscal year ended
2017, approximately 2.1 million of unvested share bonus awards under the 2010 Plan represents the target amount
of grants made to certain key employees whereby vesting is contingent on meeting certain market conditions
summarized as follows:
Targeted number
of awards as of
March 31, 2017 fair value
Average
grant date
Range of shares that
may be issued
(in shares) (per share) Market condition Minimum Maximum Assessment dates
$17.57 Vesting ranges from zero to 200% — 1,444,426
722,213
May 2019
Year of grant
Fiscal 2017 . .
based on measurement of Flex’s
total shareholder return against both
the Standard and Poor’s (“S&P”) 500
Composite Index and an Extended
Electronics Manufacturing
Services (“EMS”) Group Index.
Fiscal 2016 . .
based on measurement of Flex’s
total shareholder return against
both the S&P 500 Composite Index
and an EMS Group Index.
Fiscal 2015 . .
based on measurement of Flex’s
total shareholder return against
both the S&P 500 Composite Index
and an EMS Group Index.
Totals . . . . . .
2,121,710
686,520
712,977
$14.96 Vesting ranges from zero to 200% — 1,425,954
$14.77 Vesting ranges from zero to 200% — 1,373,040
May 2018
May 2017
4,243,420
The Company will recognize share-based compensation expense for awards with market conditions
regardless of whether such awards will ultimately vest. During fiscal year 2017, 3.5 million shares vested in
connection with the share bonus awards with market conditions granted in fiscal year 2014.
The total intrinsic value of share bonus awards vested under the Company’s 2010 Plan was $109.5 million,
$103.2 million and $79.0 million during fiscal years 2017, 2016 and 2015, respectively, based on the closing
price of the Company’s ordinary shares on the date vested.
The 2014 NEXTracker Equity Incentive Plan
All shares previously granted under the NEXTracker plan are the result of the Company’s conversion of all
outstanding, unvested shares of NEXTracker into unvested shares of the Company, as part of the acquisition.
Therefore, no additional share options or share bonus awards were granted by the Company during fiscal year
2017.
Options issued to employees under the NEXTracker Plan generally have a vesting period of two to four
years from vesting commencement date and expire ten years from the date of grant.
The exercise price of options granted to employees was determined by the Company based on a conversion
rate agreed upon in the purchase agreement of NEXTracker.
As of March 31, 2017, the total unrecognized compensation cost related to unvested share options granted to
employees under the NEXTracker Plan was $8.7 million and will be amortized on a straight-line basis over a
weighted-average period of approximately 1.8 years.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
3. SHARE-BASED COMPENSATION (Continued)
Share bonus awards issued to employees under the NEXTracker Plan vest in installments over a three to
five-year period from vesting commencement date, and unvested share bonus awards are forfeited upon
termination of employment. Vesting for certain of these share bonus awards is contingent on meeting certain
performance targets over a three-year period commencing October 1, 2015.
As of March 31, 2017, the total unrecognized compensation cost related to unvested share bonus awards
granted to employees under the NEXTracker Plan was approximately $11.0 million and will be amortized
generally on a straight-line basis over a weighted-average period of approximately 1.5 years.
Determining Fair Value
As noted above, there were no options granted under the NEXTracker Plan during fiscal year 2017. The fair
value of the Company’s share options granted to employees under the NEXTracker Plan for fiscal year 2016 was
estimated using the following weighted-average assumptions:
Fiscal Year Ended
March 31, 2016
Expected term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9 years
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.8%
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0%
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.9%
Weighted-average fair value $7.76
Share-Based Awards Activity
The following is a summary of option activity for the NEXTracker Plan (“Price” reflects the weighted-
average exercise price):
Fiscal Year Ended March 31,
2017 2016
Options
Price
Options Price
Outstanding, beginning of fiscal year . . . . . . . . . . . . . . . 2,741,854 $3.44 —
$ —
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 3,205,806 3.28
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (709,845) 2.24 (237,380) 0.99
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (395,993) 4.64 (226,572) 3.75
Outstanding, end of fiscal year . . . . . . . . . . . . . . . . . . . . 1,636,016 $3.61 2,741,854 $3.44
Options exercisable, end of fiscal year . . . . . . . . . . . . . . 369,015 $5.00 223,869 $4.95
The aggregate intrinsic value of options exercised under the NEXTracker plan (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) was $8.0 million and $2.3 million as of
March 31, 2017 and 2016, respectively.
Cash received from option exercises under the NEXTracker Plan was $1.6 million and $0.2 million for fiscal
year 2017 and 2016, respectively.
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JOB: 17-13971-1 CYCLE#;BL#: 15; 0 TRIM: 8.25" x 10.75" AS: Merrill Denver: 303-572-3889
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
3. SHARE-BASED COMPENSATION (Continued)
The following table presents the composition of options outstanding and exercisable under the NEXTracker
Plan as of March 31, 2017:
Options Outstanding Options Exercisable
Weighted
Average
Remaining Weighted
Number of Contractual Average Number of
Shares Life Exercise Shares
Range of Exercise Prices Outstanding (In Years) Price Exercisable
Weighted
Average
Remaining Weighted
Contractual Average
Life Exercise
(In Years) Price
$ 1.30 229,584
$0.08 - $5.24 . . . . . . . . . . . . . . . . . . . 1,223,059 8.50
$5.25 - $10.65 . . . . . . . . . . . . . . . . . . 412,957 8.50 10.65 139,431
$ 1.70
8.50
8.50 10.65
$0.08 - $10.65 . . . . . . . . . . . . . . . . . . 1,636,016 8.50
$ 3.61 369,015
8.50
$ 5.00
Options vested and expected to vest . 1,636,016 8.50
$ 3.61
As of March 31, 2017 the aggregate intrinsic value for options outstanding, options vested and expected to
vest, and options exercisable under the Company’s NEXTracker Plan, were $22.2 million, $22.2 million, and
$4.5 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, 2017 for the
approximately 1.6 million options under the NEXTracker Plan that were in-the-money at March 31, 2017.
The following table summarizes the Company’s share bonus award activity under the NEXTracker Plan
(“Price” reflects the weighted-average grant-date fair value):
Fiscal Year Ended March 31,
2017 2016
Shares
Price
Shares Price
Unvested share bonus awards outstanding, beginning
of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,309,096 $10.27 — $ —
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 2,393,195 10.27
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (705,738) 10.19 (31,925) 10.27
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (59,921) 10.27 (52,174) 10.27
Unvested share bonus awards outstanding, end of
fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,543,437 $10.23 2,309,096
$10.27
The total intrinsic value of share bonus awards vested under the Company’s NEXTracker Plan was $9.6 million
during fiscal year 2017, based on the closing price of the Company’s ordinary shares on the date vested.
The BrightBox Technologies 2013 Plan
During fiscal year 2017, the Company granted 0.2 million share options under the BrightBox Plan, at an
average grant date fair value price of $ 11.99 per share, and with a vesting period of three years from the vesting
commencement date. All shares granted under the BrightBox plan are the result of the Company’s conversion of
all outstanding, unvested shares of BrightBox into unvested shares of the Company, as part of the acquisition. No
additional grants will be made out of this plan in the future.
As of March 31, 2017, total unrecognized compensation expense related to share options under the
BrightBox Plan is $ 1.4 million, and will be recognized over a weighted-average remaining vesting period of
2.1 years. As of March 31, 2017, the number of options outstanding was 0.2 million, at a weighted-average
exercise price of $0.51 per share. No options under this plan were exercisable as of March 31, 2017.
The 2013 Equity Incentive Plan of Elementum SCM (Cayman) Ltd.
As of March 31, 2017 Elementum had approximately 0.1 million shares available for future grants under the
2013 Elementum Plan. Options to purchase shares in Elementum issued to employees under the Elementum Plan
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
3. SHARE-BASED COMPENSATION (Continued)
have a vesting period of two to four years and expire ten years from the grant date. As of March 31, 2017 there
were 33.6 million of options outstanding at a weighted average exercise price of $0.39 per option. Cash received
from option exercises under the Elementum Plan was $0.6 million for fiscal year 2017. Total unrecognized
compensation expenses relating to stock options granted to certain employees under the Elementum Plan as of
March 31, 2017 is $5.7 million, and will be recognized over a weighted average period of 2.6 years.
4. EARNINGS PER SHARE
Basic earnings per share excludes dilution and is computed by dividing net income by the weighted-average
number of ordinary shares outstanding during the applicable periods.
Diluted earnings per share reflects the potential dilution from stock options and share bonus awards. 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 following table reflects the basic weighted-average ordinary shares outstanding and diluted weighted-
average ordinary share equivalents used to calculate basic and diluted income per share:
Fiscal Year Ended March 31,
(In thousands, except per share amounts)
2017 2016 2015
Basic earnings per share:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares used in computation:
$319,564 $444,081 $600,801
Weighted-average ordinary shares outstanding . . . . . . . . . . . . . . . . . .
540,503 557,667 579,981
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
0.59 $ 0.80 $ 1.04
Diluted earnings per share:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares used in computation:
Weighted-average ordinary shares outstanding . . . . . . . . . . . . . . . . . .
Weighted-average ordinary share equivalents from stock options
$319,564 $444,081 $600,801
540,503 557,667 579,981
and awards(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,717 7,202 11,575
Weighted-average ordinary shares and ordinary share equivalents
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
546,220 564,869 591,556
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
0.59 $ 0.79 $ 1.02
(1) Options to purchase ordinary shares of 0.5 million, 2.0 million and 6.2 million during fiscal years 2017, 2016 and
2015, respectively, and share bonus awards of less than 0.1 million during fiscal year 2017 and 2015, respectively,
were excluded from the computation of diluted earnings per share due to their anti-dilutive impact on the
weighted average ordinary shares equivalents. There were no anti-dilutive share bonus awards in fiscal year 2016.
5. NONCONTROLLING INTERESTS
During fiscal year 2014, a previously wholly-owned subsidiary of the Company issued a noncontrolling
equity interest to certain third party investors for an ownership interest of less than 20% of the outstanding shares
in the subsidiary. During fiscal year 2017, this subsidiary received $9.3 million in exchange for an additional
noncontrolling equity interest from certain third party investors. The outstanding shares held by the third party
investors in this subsidiary remained below 20%. The Company continues to own a majority of the subsidiary’s
outstanding equity and controls its board of directors. Accordingly, the consolidated financial statements include
the financial position and results of operations of this subsidiary as of March 31, 2017 and for the year then ended.
73
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
5. NONCONTROLLING INTERESTS (Continued)
The Company has recognized the carrying value of the noncontrolling interest as a component of total
shareholders’ equity. The noncontrolling interest in the operating losses of the subsidiary were $8.5 million,
$6.7 million, and $4.3 million for fiscal years 2017, 2016 and 2015, respectively, and were classified as a
component of interest and other, net, in the Company’s consolidated statements of operations.
6. SUPPLEMENTAL CASH FLOW DISCLOSURES
The following table represents supplemental cash flow disclosures and non-cash investing and financing
activities:
Fiscal Year Ended March 31,
2017 2016 2015
(In thousands)
Net cash paid for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$127,346 $114,578 $ 87,179
$ 86,651 $105,453 $ 70,621
Non-cash investing and financing activity:
Unpaid purchases of property and equipment . . . . . . . . . . . . .
$ 84,375 $ 93,310 $115,757
Customer-related third party banking institution equipment
financing net settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 90,576 $ — $ —
7. BANK BORROWINGS AND LONG-TERM DEBT
Bank borrowings and long-term debt are as follows:
As of March 31,
2017 2016
(In thousands)
Term Loan, including current portion, due in installments through
March 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 547,500
4.625% Notes due February 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 500,000
Term Loan, including current portion, due in installments through
$ 502,500
November 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700,000 577,500
5.000% Notes due February 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 500,000
4.750% Notes due June 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595,979 595,589
Other credit lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,671 71,317
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,007) (17,351)
2,952,143 2,774,555
Current portion, net of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . (61,534) (65,166)
Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,890,609
$2,709,389
The weighted-average interest rates for the Company’s long-term debt were 3.5% as of March 31, 2017 and 2016.
Repayments of the Company’s long-term debt are as follows:
Fiscal Year Ending March 31, Amount
(In thousands)
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 63,887
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475,092
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 517,592
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,232
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 746,420
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,099,927
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,968,150
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
7. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
Term Loan due November 2021
In August 2013, the Company entered into a $600 million term loan agreement due August 2018. In
November 2016, the Company entered into a new arrangement to extend the maturity date of the agreement from
August 30, 2018 to November 30, 2021, and borrowed an incremental amount of $130 million under this term
loan, thereby increasing the total amount under the term loan to $700 million. This loan is repayable in quarterly
installments of $4.1 million, which will commence October 31, 2017 and continue through September 30, 2021,
with the remaining amount due at maturity.
Borrowings under this term loan bear interest, at the Company’s option, either at (i) LIBOR plus the
applicable margin for LIBOR loans ranging between 1.125% and 2.125%, based on the Company’s credit ratings
or (ii) the base rate (the greatest of the prime rate in effect on each day as published in The Wall Street Journal,
the federal funds rate plus 0.5% and LIBOR for a one-month interest period plus 1.00%) plus an applicable
margin ranging between 0.125% and 1.125%, based on the Company’s credit rating.
This term loan 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 term loan
agreement 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; provided that the requirement to maintain the minimum interest coverage ratio may be
suspended in certain circumstances. As of March 31, 2017, the Company was in compliance with the covenants
under this term loan agreement.
Term Loan Agreement due March 2019 and Revolving Line of Credit
As of March 31, 2017, the Company has a $2.1 billion credit facility (“Credit Facility”) consisting of a
$1.5 billion revolving credit facility and a $600.0 million term loan, which is due to expire in March 2019.
Quarterly repayments of principal under this term loan are $11.3 million with the remainder due upon maturity.
Borrowings under this facility bear interest, at the Company’s option, either at (i) LIBOR plus the applicable
margin for LIBOR loans ranging between 1.125% and 2.125%, 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 0.125% and 1.125%, based on the
Company’s credit rating. The Company is required to pay a quarterly commitment fee ranging between 0.15% and
0.40% 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, 2017, the Company was in compliance with the covenants under this
loan agreement.
Notes due February 2020 and February 2023
In February 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. In July 2013, the Company exchanged these notes for new
notes with substantially similar terms and completed the registration of these notes with the Securities and
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JOB: 17-13971-1 CYCLE#;BL#: 15; 0 TRIM: 8.25" x 10.75" AS: Merrill Denver: 303-572-3889
COLORS: Black, ~note-color 2 GRAPHICS: ann_report_k_tab.eps V1.5
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
7. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
Exchange Commission. 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 previous term loan that was due October 2014.
Interest on the Notes is payable semi-annually, which commenced 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 Credit Facility or the Company’s Term Loan due 2018.
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 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.
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 indenture 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, 2017, the Company was in compliance with the covenants in the indenture
governing the Notes.
Notes due June 2025
In June 2015, the Company issued $600 million of 4.750% Notes (“2025 Notes”) due June 15, 2025 in a
private offering pursuant to Rule 144A and Regulation S under the Securities Act, at 99.213% of face value, and
an effective yield of approximately 4.850%. The Company received net proceeds of approximately $595.3 million
from the issuance which was used for general corporate purposes. During January 2016, the Company exchanged
these notes for new notes with substantially similar terms and completed the registration of these notes with the
Securities and Exchange Commission.
The Company incurred approximately $7.9 million of costs in conjunction with the issuance of the 2025
Notes. The issuance costs were capitalized and presented on the balance sheet as a direct deduction from the
carrying amount of the Notes.
Interest on the 2025 Notes is payable semi-annually, commencing on December 15, 2015. The 2025 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 March 15, 2025, the Company may redeem some or all of the 2025 Notes at a
redemption price equal to 100% of the principal amount of the 2025 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 2025 Notes indenture), the Company must offer to repurchase the
2025 Notes at a repurchase price equal to 101% of the principal amount of the 2025 Notes repurchased, plus
accrued and unpaid interest, if any, to the applicable repurchase date.
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JOB: 17-13971-1 CYCLE#;BL#: 15; 0 TRIM: 8.25" x 10.75" AS: Merrill Denver: 303-572-3889
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CLEAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
7. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
The indenture governing the 2025 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, or permit any other person to consolidate,
merge, combine or amalgamate with or into the Company. 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 2025
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 2025 Notes may declare all of the 2025 Notes to be due and payable
immediately, but upon certain conditions such declaration and its consequences may be rescinded and annulled by
the holders of a majority in principal amount of the 2025 Notes. As of March 31, 2017, the Company was in
compliance with the covenants in the indenture governing the 2025 Notes.
Other Credit Lines
In January 2017, the Company borrowed €100 million (approximately $107.4 million as of March 31,
2017), under a 5-year, term-loan agreement due January 2, 2022. Borrowings under this term loan bear interest at
EURIBOR plus the applicable margin ranging between 0.40% and 1.35%, based on the Company’s credit ratings.
The loan is repayable upon maturity.
In October 2015, the Company borrowed €50 million (approximately $53.7 million as of March 31, 2017),
under a 5-year, term-loan agreement due September 30, 2020. Borrowings under this term loan bear interest at
EURIBOR plus the applicable margin ranging between 0.80% and 2.00%, based on the Company’s credit ratings.
The loan is repayable beginning December 30, 2016 in quarterly payments of €312,500 through June 30, 2020
with the remainder due upon maturity.
These term loans are unsecured, and are guaranteed by the Company. These term loan agreements contain
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. These term loan agreements also require 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 their terms. As of March 31,
2017, the Company was in compliance with the covenants under these term loan agreements.
As of March 31, 2017, the Company and certain of its subsidiaries had various uncommitted revolving
credit facilities, lines of credit and other credit facilities in the amount of $162.6 million in the aggregate. There
were no borrowings outstanding under these facilities as of March 31, 2017 and 2016. These unsecured credit
facilities, and lines of credit and other credit facilities 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.
8. 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
8. FINANCIAL INSTRUMENTS (Continued)
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 counterparty financial institution were not material.
As of March 31, 2017, the aggregate notional amount of the Company’s outstanding foreign currency
forward and swap contracts was $4.1 billion as summarized below:
Notional Contract Value
Foreign Currency Amount in USD
Currency Buy Sell Buy Sell
(In thousands)
Cash Flow Hedges
CNY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,309,000 — $ 189,974 $ —
EUR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,830 64,132 29,915 71,796
HUF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,800,000 — 47,935 —
ILS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,481 — 19,438 —
INR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,389,587 — 20,300 —
MXN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,133,500 — 113,198 —
MYR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,000 11,300 37,791 2,557
RON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,780 — 27,083 —
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A N/A 32,735 8,915
518,369 83,268
Other Forward/Swap Contracts
BRL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 543,000 — 174,078
CHF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,446 33,920 9,472 34,015
CNY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,877,296 — 271,571 —
DKK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,400 157,200 25,917 22,710
EUR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 909,291 1,058,540 976,028 1,136,862
GBP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,129 65,154 44,835 80,808
HUF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,026,924 15,105,152 62,617 52,468
ILS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,100 91,660 28,985 25,279
INR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,200,000 19,528 80,160 300
MXN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,166,702 686,447 114,930 36,421
MYR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331,628 44,500 75,046 10,070
PLN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,139 62,613 30,044 15,923
RON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,252 61,526 17,284 14,517
SEK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,766 190,198 17,929 21,402
SGD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,147 3,019 30,206 2,164
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A N/A 30,361 39,390
1,815,385 1,666,407
Total Notional Contract Value in USD . . .
$2,333,754 $1,749,675
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CLEAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
8. FINANCIAL INSTRUMENTS (Continued)
As of March 31, 2017 and 2016, the fair value of the Company’s short-term foreign currency contracts was
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, net in the consolidated statements of operations. As of March 31,
2017 and 2016, the Company also has included net deferred gains and losses, in accumulated other
comprehensive 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. Deferred gains totaled
$10.6 million as of March 31, 2017, and are expected to be recognized primarily as a component of cost of sales
in the consolidated statement of operations 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, net in the consolidated statements of operations.
The following table presents the fair value of the Company’s derivative instruments utilized for foreign
currency risk management purposes at March 31, 2017 and 2016:
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 2017 2016 Location 2017 2016
(In thousands)
Derivatives designated as
hedging instruments
Foreign currency contracts . . . . . . . Other current
Other current
assets
$11,936
$ 5,510
liabilities $1,814 $ 2,446
Derivatives not designated as
hedging instruments
Foreign currency contracts . . . . . . . Other current
Other current
assets
$10,086
$17,138
liabilities $9,928 $18,645
The Company has financial instruments subject to master netting arrangements, which provides for the net
settlement of all contracts with the counterparty upon maturity. The Company does not offset fair value amounts
for assets and liabilities recognized for derivative instruments under these arrangements, and as such, the asset
and liability balances presented in the table above reflect the gross amounts of derivatives in the consolidated
balance sheets. The impact of netting derivative assets and liabilities is not material to the Company’s financial
position for any of the periods presented.
9. ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in accumulated other comprehensive loss by component, net of tax, during fiscal years ended
March 31, 2017, 2016 and 2015 are as follows:
Fiscal Year Ended March 31, 2017
Unrealized loss on Foreign currency
derivative instruments translation
and other adjustments Total
(In thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive gain (loss) before reclassifications .
Net (gains) losses reclassified from accumulated other
$(41,522) $(94,393) $(135,915)
6,925 (1,198) 5,727
comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,171 (126) 2,045
Net current-period other comprehensive (gain) loss . . . . . . .
9,096 (1,324) 7,772
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(32,426) $(95,717) $(128,143)
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CLEAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
9. ACCUMULATED OTHER COMPREHENSIVE LOSS (Continued)
Fiscal Year Ended March 31, 2016
Unrealized loss on Foreign currency
derivative instruments translation
and other adjustments Total
(In thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss before reclassifications . . . . . .
Net losses reclassified from accumulated other
$(68,266) $(112,239) $(180,505)
(2,199) (3,145) (5,344)
comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,943 20,991 49,934
Net current-period other comprehensive gain . . . . . . . . . . . .
26,744 17,846 44,590
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(41,522) $ (94,393) $(135,915)
Fiscal Year Ended March 31, 2015
Unrealized loss on Foreign currency
derivative instruments translation
and other adjustments Total
(In thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss before reclassifications . . . . . .
Net (gains) losses reclassified from accumulated other
$(32,849) $ (93,307) $(126,156)
(76,470) (9,318) (85,788)
comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41,053 (9,614) 31,439
Net current-period other comprehensive loss . . . . . . . . . . . .
(35,417) (18,932) (54,349)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(68,266) $(112,239) $(180,505)
Net (gains) losses reclassified from accumulated other comprehensive loss were immaterial during fiscal
year 2017.
During fiscal year 2016, the Company recognized a loss of $26.8 million in connection with the disposition
of a non-strategic Western European manufacturing facility, which included a $25.3 million cumulative foreign
currency translation loss. This loss was offset by the release of certain cumulative foreign currency translation
gains of $4.2 million, which has been reclassified from accumulated other comprehensive loss during the period
and is included in other charges (income), net in consolidated statement of operations.
During fiscal year 2015, the Company recognized a loss of $11.0 million in connection with the disposition
of a manufacturing facility in Western Europe. This loss includes the settlement of unrealized losses of
$4.2 million on an insignificant defined benefit plan associated with the disposed facility offset by the release of
cumulative foreign currency translation gains of $9.3 million, both of which have been reclassified from
accumulated other comprehensive loss during the period. The loss on sale is included in other charges (income),
net in the consolidated statement of operations.
10. 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
10. TRADE RECEIVABLES SECURITIZATION (Continued)
isolated from the Company and its affiliates, and upon the sale of the receivables from the special purpose entities
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 set by the financial institutions are $850.0 million for the
Global Program, of which $750.0 million is committed and $100.0 million is uncommitted, and $250.0 million
for the North American Program, of which $210.0 million is committed and $40.0 million is uncommitted. Both
programs 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 0.1% to 0.5% of serviced receivables per annum. Servicing fees recognized during the
fiscal years ended March 31, 2017, 2016 and 2015 were not material and are included in interest and other, 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 or liabilities are recognized.
As of March 31, 2017 and 2016, 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 during
fiscal years ended March 31, 2017, 2016 and 2015 were included as cash provided by operating activities in the
consolidated statements of cash flows.
As of March 31, 2017, approximately $1.5 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 $1.0 billion
and deferred purchase price receivables of $506.5 million. As of March 31, 2016, approximately $1.4 billion of
accounts receivable had been sold to the special purpose entities for which the Company had received net cash
proceeds of $880.8 million and deferred purchase price receivables of $501.1 million. 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. The deferred purchase price receivables are
included in other current assets as of March 31, 2017 and 2016, 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, net in the
consolidated statements of operations. Refer to note 16 for more details.
For the fiscal years ended March 31, 2017, 2016 and 2015, cash flows from sales of receivables under the
ABS Programs consisted of approximately $5.7 billion, $5.2 billion and $4.3 billion, respectively, for transfers of
receivables (of which approximately $0.4 billion for both fiscal years 2017 and 2016, and $0.3 billion for fiscal
year 2015, 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, 2017 and 2016:
As of March 31,
2017 2016
(In thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 600,672
Transfers of receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,254,849 3,475,400
Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,249,424) (3,574,975)
$ 501,097
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 506,522
$ 501,097
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
10. 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 $225.2 million and $339.4 million as of
March 31, 2017 and 2016, respectively. For the years ended March 31, 2017, 2016 and 2015, total accounts
receivables sold to certain third party banking institutions was approximately $1.3 billion, $2.3 billion and
$4.2 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.
11. 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. Amounts
deferred 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 that are valued using active
market 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 equivalents 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 as
applicable, which is measured at fair value based on certain internal models and unobservable inputs.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
11. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES (Continued)
During fiscal year 2016, the Company accrued $84.3 million of contingent consideration, of which
$81.0 million related to the acquisition of NEXTracker on the date of acquisition. The Company reduced the
accrual by $19.0 million for a contractual release from the obligation executed subsequent to the acquisition
during fiscal year 2016. Upon achievement of targets established in the NEXTracker purchase agreement, the
Company paid $40.6 million of the total contingent consideration during fiscal year 2017. This payment is
included in other financing activities, net, in the condensed consolidated statements of cash flows.
The fair value of the liability was estimated using a simulation-based measurement technique with
significant inputs that are not observable in the market and thus represents a level 3 fair value measurement. The
significant inputs in the fair value measurement not supported by market activity included the Company’s
probability assessments of expected future revenue during the earn-out period and associated volatility,
appropriately discounted considering the uncertainties associated with the obligation, and calculated in
accordance with the terms of the merger agreement. Significant decreases in expected revenue during the earn-
out period, or significant increases in the discount rate or volatility in isolation would result in lower fair value
estimates. The interrelationship between these inputs is not considered significant.
The following table summarizes the activities related to contingent consideration:
As of March 31,
2017 2016
(In thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,500
Additions to accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 84,261
Payments and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (44,912) (19,008)
Fair value adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,085) 3,670
$ 73,423
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 22,426
$ 73,423
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 the impact is insignificant. The interrelationship between these inputs is also
insignificant. Refer to note 10 for a reconciliation of the change in the deferred purchase price receivable.
There were no transfers between levels in the fair value hierarchy during fiscal years 2017 and 2016.
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, 2017 and 2016:
Fair Value Measurements as of March 31, 2017
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Money market funds and time deposits (Note 2) . . . . . . . . . . .
$ — $1,066,841 $ — $1,066,841
Deferred purchase price receivable (Note 10) . . . . . . . . . . . . . . — — 506,522 506,522
Foreign exchange forward contracts (Note 8) . . . . . . . . . . . . . . — 22,022 — 22,022
Deferred compensation plan assets:
Mutual funds, money market accounts and equity securities . . 7,062 52,680 — 59,742
Liabilities:
Foreign exchange forward contracts (Note 8) . . . . . . . . . . . . . .
$ — $ (11,742) $ — $ (11,742)
Contingent consideration in connection with acquisitions . . . . — — (22,426) (22,426)
83
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
11. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES (Continued)
Fair Value Measurements as of March 31, 2016
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Money market funds and time deposits (Note 2) . . . . . . . . . . .
$ — $1,074,132 $ — $1,074,132
Deferred purchase price receivable (Note 10) . . . . . . . . . . . . . . — — 501,097 501,097
Foreign exchange forward contracts (Note 8) . . . . . . . . . . . . . . — 22,648 — 22,648
Deferred compensation plan assets:
Mutual funds, money market accounts and equity securities . . 9,228 40,556 — 49,784
Liabilities:
Foreign exchange forward contracts (Note 8) . . . . . . . . . . . . . .
$ — $ (21,091) $ — $ (21,091)
Contingent consideration in connection with acquisitions . . . . — — (73,423) (73,423)
Other financial instruments
The following table presents the Company’s liabilities not carried at fair value as of March 31, 2017 and
2016:
Term Loan, including current portion,
due in installments through March 2019 . . . . . . .
4.625% Notes due February 2020 . . . . . . . . . . . . . .
Term Loan, including current portion,
due in installments through November 2021 . . .
5.000% Notes due February 2023 . . . . . . . . . . . . . .
4.750% Notes due June 2025 . . . . . . . . . . . . . . . . .
As of March 31, 2017 As of March 31, 2016
Carrying Fair Carrying Fair Fair Value
Amount Value Amount Value Hierarchy
(In thousands) (In thousands)
$ 502,500 $ 503,756 $ 547,500 $ 542,709 Level 1
500,000 526,255 500,000 524,735 Level 1
700,000 699,566 577,500 573,533 Level 1
500,000 534,820 500,000 507,500 Level 1
595,979 633,114 595,589 604,926 Level 1
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,798,479 $2,897,511 $2,720,589 $2,753,403
All Term Loans and Notes presented in the table above are valued based on broker trading prices in active
markets.
The Company values its outstanding €100 million and €49.4 million (approximately $107.4 million and
$53.0 million as of March 31, 2017), 5-year, unsecured, term-loans due January 2, 2022 and September 30,
2020, respectively, based on the current market rate, and as of March 31, 2017, the carrying amounts for each
loan approximate fair value.
12. COMMITMENTS AND CONTINGENCIES
Commitments
Capital lease obligations of $19.1 million and $25.0 million, consisting of short-term obligations of
$4.7 million and $6.6 million and long term obligations of $14.4 million and $18.4 million are included in
current and non-current liabilities on the Company’s balance sheets as of March 31, 2017 and 2016, respectively.
As of March 31, 2017 and 2016, 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)
FLEX LTD.
12. 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 2035 and require the following minimum lease payments:
Operating
Fiscal Year Ending March 31, Lease
(In thousands)
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$117,217
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,542
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,895
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,493
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,032
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,969
$553,148
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total rent expense amounted to $124.7 million, $124.2 million and $133.1 million in fiscal years 2017,
2016 and 2015, respectively.
Litigation and other legal matters
As discussed in note 2, on April 21, 2016, SunEdison, Inc. filed for protection under Chapter 11 of the U.S.
Bankruptcy Code, no preference claims have been asserted against the Company and consideration has been
given to the related contingencies based on the facts currently known to the Company. The Company is unable to
reasonably estimate a loss or any range of possible loss. Further, the Company believes that it continues to have
a number of affirmative and direct defenses to any potential claims for recovery and intends to vigorously
defend any such claim, if asserted. An unfavorable resolution of this matter could be material to the Company’s
results of operations, financial condition, or cash flows.
One of the Company’s Brazilian subsidiaries has received related assessments for certain sales and import
taxes. The first two tax assessments were received in fiscal year 2014 and fiscal year 2016 relating to calendar
year 2010 for an alleged total amount of 109 million Brazilian reals (approximately USD $35 million based on
the exchange rate as of March 31, 2017). These two assessments are in various stages of the review process at
the administrative level. During the third quarter of fiscal year 2017, the same Brazilian subsidiary received a
third assessment related to calendar year 2011 taxes of an additional 181 million Brazilian reals (approximately
USD $58 million based on the exchange rate as of March 31, 2017). The Company plans to continue to
vigorously oppose all of these assessments, as well as any future assessments. The Company believes there is no
legal basis for the alleged liabilities; however, due to the complexities and uncertainty surrounding the
administrative review and judicial processes in Brazil and the nature of the claims, an adverse determination is
reasonably possible. Due to the same considerations, it is not possible to estimate a loss or range of loss for these
assessments or any future assessments that are reasonably possible. The Company does not expect final judicial
determination on any of these claims for several years.
During fiscal year 2015, one of the Company’s non-operating Brazilian subsidiaries received an assessment
of approximately USD $100 million related to income and social contribution taxes, interest and penalties.
During the first quarter of fiscal year 2017, the Company received a final favorable judgment in the judicial
process reversing the assessment and the case is now closed. As the Company had previously determined there
was no legal basis for the assessment, no adjustment was required to be recorded during fiscal year 2017.
In addition, from time to time, the Company is subject to legal proceedings, claims, and litigation arising in
the ordinary course of business. The Company 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 the Company’s consolidated balance sheets, would not be material to the financial statements as a
whole.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
13. INCOME TAXES
The domestic (Singapore) and foreign components of income before income taxes were comprised of the
following:
Fiscal Year Ended March 31,
2017 2016 2015
(In thousands)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$199,283 $ 67,482
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,861) 255,392 603,173
$435,709
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$370,848
$454,675 $670,655
The provision for income taxes consisted of the following:
Fiscal Year Ended March 31,
2017 2016 2015
(In thousands)
Current:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 56 $ 87
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,773 74,706 129,863
$ 1,037
72,810 74,762 129,950
Deferred:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 3,779 (4,734)
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,876) (67,947) (55,362)
(21,526) (64,168) (60,096)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . .
$ 51,284
$ 10,594 $ 69,854
The domestic statutory income tax rate was approximately 17.0% in fiscal years 2017, 2016 and 2015. 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,
2017 2016 2015
(In thousands)
Income taxes based on domestic statutory rates . . . . . . .
$ 77,295 $114,011
Effect of tax rate differential . . . . . . . . . . . . . . . . . . . . . . (85,132) (62,072) (75,699)
Change in liability for uncertain tax positions . . . . . . . . 684 (13,724) 29,729
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . 78,728 1,049 2,495
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,040) 8,046 (682)
$ 63,044
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . .
$ 51,284
$ 10,594 $ 69,854
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, 2017, 2016 and
2015 was $15.5 million, $6.6 million and $9.8 million, respectively. For fiscal year ended March 31, 2017, 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 were $0.01 and $0.01 during fiscal year 2016, and $0.02 and $0.02 during fiscal year
2015, respectively. Unless extended or otherwise renegotiated, the Company’s existing holidays will expire in the
fiscal year ending March 31, 2018 through fiscal year 2022.
For fiscal years ended March 31, 2017, 2016 and 2015, the Company released valuation allowances totaling
$39.6 million, $63.3 million and $55.0 million, respectively. For the fiscal year ended March 31, 2017, these
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
13. INCOME TAXES (Continued)
valuation allowance releases were primarily related to our operations in Austria, China, Ireland and Canada that
were deemed to be more likely than not to realize the respective deferred tax assets due to sustained profitability
during the prior three fiscal years as well as continued forecasted profitability of those subsidiaries. However,
these valuation allowance eliminations were offset by other current period valuation allowance movements
primarily related to current period valuation allowance additions due to increased deferred tax assets related to
current period losses in legal entities with existing full valuation allowance positions. In addition, due to
increased negative evidence during the fiscal year ended March 31, 2017, the Company added a valuation
allowance of $14.4 million for a Chinese subsidiary which did not previously have a valuation allowance
recorded. For fiscal years ended March 31, 2017, 2016 and 2015, the offsetting amounts totaled $103.9 million,
$64.3 million and $57.5 million, respectively.
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 2017, 2016 and 2015
were $67.9 million, $36.6 million and $0.0 million, respectively.
The components of deferred income taxes are as follows:
As of March 31,
2017 2016
(In thousands)
Deferred tax liabilities:
$ (74,316)
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (76,432) (88,760)
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,702) (29,472)
$ (40,324)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (137,458) (192,548)
Deferred tax assets:
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,869 65,004
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,153 3,795
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,335 15,892
Inventory valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,489 10,124
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,911 1,300
Net operating loss and other carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . 2,369,405 2,332,894
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266,367 271,272
2,727,529 2,700,281
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,442,105) (2,385,489)
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285,424 314,792
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 147,966
$ 122,244
The net deferred tax asset is classified as follows:
Current asset (classified as other current assets) . . . . . . . . . . . . . . . . . . . . .
$ — $ —
Long-term asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223,285 222,772
Long-term liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (75,319) (100,528)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 147,966
$ 122,244
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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
13. INCOME TAXES (Continued)
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.
The Company has recorded deferred tax assets of approximately $2.4 billion related to tax losses and other
carryforwards against which the Company has recorded a valuation allowance for all but $128.5 million of the
deferred tax assets. These tax losses and other carryforwards will expire at various dates as follows:
Expiration dates of
deferred tax assets
related to
operating losses
and other
carryforwards
(In thousands)
$ 682,705
2018 - 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 - 2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 925,092
2030 and post . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378,047
Indefinite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404,763
$2,390,607
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 $1.2 billion of undistributed earnings of
its subsidiaries which are considered to be indefinitely reinvested outside of Singapore as management has plans
for the use of such earnings to fund certain activities outside of Singapore. Determination of the amount of the
unrecognized deferred tax liability on these undistributed earnings is not practicable. As of March 31, 2017, we
have provided for applicable foreign withholding taxes on $70.6 million of undistributed foreign earnings related
to certain Chinese subsidiaries whose earnings are not intended to be permanently reinvested, and recorded an
associate deferred tax liability of approximately $7.1 million.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Fiscal Year Ended
March 31,
2017 2016
(In thousands)
Balance, beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$222,373
Additions based on tax position related to the current year . . . . . . . . . 29,007 21,273
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . 9,728 20,453
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . (22,065) (9,578)
Reductions related to lapse of applicable statute of limitations . . . . . . (13,390) (22,312)
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,684) (12,797)
Impact from foreign exchange rates fluctuation . . . . . . . . . . . . . . . . . (8,599) (7,086)
$212,326
Balance, end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$212,326
$203,323
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. The Company believes it is
reasonably possible that the total amount of unrecognized tax benefits could decrease by an estimated range of
an additional $9 million to $12 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 world. With few exceptions, the Company is no longer subject to income tax examinations by tax
authorities for years before 2007.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
13. INCOME TAXES (Continued)
Of the $203.3 million of unrecognized tax benefits at March 31, 2017, $185.4 million will affect the annual
effective tax rate (“ETR”) if the benefits are eventually recognized. The amount that doesn’t impact the ETR
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, 2017, 2016 and 2015, the Company recognized
interest and penalties of approximately ($1.6) million and ($2.4) million and $2.5 million, respectively. The
Company had approximately $12.9 million, $14.6 million and $17.0 million accrued for the payment of interest
and penalties as of the fiscal years ended March 31, 2017, 2016 and 2015, respectively.
14. RESTRUCTURING CHARGES
During fiscal year 2017, the Company initiated a restructuring plan to accelerate its ability to support more
Sketch-to-Scaletm efforts across the Company and reposition away from historical legacy programs and structures
through rationalizing its current footprint at existing sites and at corporate SG&A functions. There were no
material restructuring activities during fiscal years 2016 and 2015. Restructuring charges are recorded based
upon employee termination dates, site closure and consolidation plans generally in conjunction with an overall
corporate initiative to drive cost reduction and realign the Company’s global footprint.
During the fiscal year ended March 31, 2017, the Company recognized restructuring charges of
approximately $49.4 million primarily for employee termination costs under the above plan. Of these total
charges, approximately $38.8 million was recognized in cost of sales. Employee severance costs were associated
with the terminations of 4,311 identified employees. The identified employee terminations by reportable
geographic region amounted to approximately 2,229, 1,988 and 94 for Asia, the Americas and Europe,
respectively. All fiscal year 2017 restructuring activities were completed as of March 31, 2017.
The components of the restructuring charges by geographic region incurred in fiscal year 2017 are as
follows:
Second
Quarter
Third Fourth
Quarter Quarter Total
(In thousands)
Americas:
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractual obligations . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,822
—
$ 6,263 $ 7,623 $24,708
489 3,353 3,842
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,822
6,752 10,976 28,550
Asia:
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractual obligations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe:
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractual obligations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractual obligations . . . . . . . . . . . . . . . . . . . . . . . . . . .
263
—
263
454
—
454
9,701 5,110 15,074
— — —
9,701 5,110 15,074
968 1,049 2,471
— 3,300 3,300
968 4,349 5,771
11,539
—
16,932 13,782 42,253
489 6,653 7,142
Total restructuring charges . . . . . . . . . . . . . . . . . . . . . . . .
$11,539
$17,421 $20,435 $49,395
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
14. RESTRUCTURING CHARGES (Continued)
Of the $49.4 million total restructuring charges incurred in fiscal year 2017, $15.2 million was associated
with CEC, $8.1 million was associated with CTG, $5.4 million was associated with IEI, $16.1 million was
associated with HRS, and the remaining $4.6 million was associated with general corporate activities.
Restructuring charges are not included in segment income, as disclosed further in note 19.
The following table summarizes the provisions, respective payments, and remaining accrued balance as of
March 31, 2017 for charges incurred in fiscal years 2017, 2016 and 2015 and prior periods:
Other
Severance Exit Costs Total
Balance as of March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,493 $ 5,903 $ 42,396
Cash payments for charges incurred in fiscal year 2014 and prior . . . . . . . (23,130) (4,209) (27,339)
Balance as of March 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,363 1,694 15,057
Cash payments for charges incurred in fiscal year 2014 and prior . . . . . . . (1,458) (359) (1,817)
Balance as of March 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,905 1,335 13,240
Provision for charges incurred in fiscal year 2017 . . . . . . . . . . . . . . . . . . . . 42,253 7,142 49,395
Cash payments for charges incurred in fiscal year 2017 . . . . . . . . . . . . . . . (25,894) — (25,894)
Cash payments for charges incurred in fiscal year 2014 and prior . . . . . . . (11,905) (1,335) (13,240)
Balance as of March 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,359 7,142 23,501
Less: Current portion (classified as other current liabilities) . . . . . . . . . . . . . . 16,359 7,142 23,501
Accrued restructuring costs, net of current portion
(classified as other liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ —
15. OTHER CHARGES (INCOME), NET
The fiscal year ended March 31, 2017 includes a $7.4 million loss attributable to a non-strategic facility
sold during the second quarter of fiscal year 2017. No other components of other charges and income, net
incurred during fiscal year 2017 were material.
During fiscal year 2016, the Company incurred net losses of $47.7 million primarily due to $26.8 million
loss on disposition of a non-strategic Western European manufacturing facility, which included a non-cash
foreign currency translation loss of $25.3 million, and $21.8 million from the impairment of a non-core
investment. These were offset by currency translation gains of $4.2 million.
During fiscal year 2015, an amendment to a customer contract to reimburse a customer for certain
performance provisions was executed which included the removal of a $55.0 million contractual obligation
recognized during fiscal year 2014. Accordingly, the Company reversed this charge with a corresponding credit
to other charges (income), net in the consolidated statement of operations. Additionally, during fiscal year 2015,
the Company recognized a loss of $11.0 million in connection with the disposition of a manufacturing facility in
Western Europe. The Company received $11.5 million in cash for the sale of $27.2 million in net assets of the
facility. The loss also includes $4.6 million of estimated transaction costs, partially offset by a gain of
$9.3 million for the release of cumulative foreign currency translation gains triggered by the disposition.
16. INTEREST AND OTHER, NET
For the fiscal years ended March 31, 2017, 2016 and 2015, the Company recognized interest income of
$12.1 million, $12.3 million and $18.7 million.
For the fiscal years ended March 31, 2017, 2016 and 2015, the Company recognized interest expense of
$108.0 million, $98.0 million and $76.4 million, respectively, on its debt obligations outstanding during the
period.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
16. INTEREST AND OTHER, NET (Continued)
For the fiscal years ended March 31, 2017, 2016 and 2015, the Company recognized gains on foreign
exchange transactions of $16.5 million, $24.4 million and $19.7 million, respectively.
For the fiscal years ended March 31, 2017, 2016 and 2015, the Company recognized $15.3 million,
$11.0 million and $9.9 million of expense related to its ABS and AR Sales Programs.
17. BUSINESS AND ASSET ACQUISITIONS & DIVESTITURES
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 completes these allocations in less than one year of the respective acquisition dates.
Fiscal year 2017 business acquisitions and divestitures
Acquisitions
During the fiscal year ended March 31, 2017, the Company completed four acquisitions that were not
individually, nor in the aggregate, significant to the consolidated financial position, results of operations and
cash flows of the Company. Most notable is the Company’s acquisition of two manufacturing and development
facilities from Bose Corporation (“Bose”), a global leader in audio systems. The acquisition expanded the
Company’s capabilities in the audio market and is included in the CTG segment. The other acquired businesses
strengthen the Company’s capabilities in the communications market and energy market within the CEC and IEI
segment, respectively. At the acquisition dates, the Company paid a total of $189.1 million, net of cash acquired,
of which $161.7 million, net of $18.0 million of cash acquired is related to the Bose acquisition which is
included in cash from investing activities in the consolidated statements of cash flows. The Company acquired
primarily $73.1 million of inventory, $60.8 million of property and equipment, and recorded goodwill of
$63.8 million and intangible assets of $47.4 million substantially related to Bose. The intangibles will amortize
over a weighted-average estimated useful life of 6.5 years. In connection with these acquisitions, the Company
assumed $63.3 million in other liabilities including additional consideration of $28.0 million which was paid in
the fourth quarter of fiscal year 2017 and included in other financing activities in the consolidated statements of
cash flows. Further, the equity incentive plan of one of the acquirees was assumed as part of the acquisition.
The results of operations for each of the acquisitions completed in fiscal year 2017, including the Bose
acquisition, were included in the Company’s consolidated financial results beginning on the date of each
acquisition, and the total amount of net income and revenue of the acquisitions, collectively, were immaterial to
the Company’s consolidated financial results for the fiscal year ended March 31, 2017. Pro-forma results of
operations for the acquisitions completed in fiscal year 2017 have not been presented because the effects,
individually and in the aggregate, were not material to the Company’s consolidated financial results for all
periods presented.
In April 2017, the Company completed the acquisition of AGM Automotive for approximately $220 million,
which expanded its capabilities in the automotive market, and is included within the HRS segment. The initial
purchase price allocation for this acquisition is not yet complete.
Divestitures
During the fiscal year ended March 31, 2017, the Company disposed of two non-strategic businesses within
the HRS and IEI segments. The Company received $30.7 million of proceeds, net of an immaterial amount of
cash held in one of the divested businesses. The property and equipment and various other assets sold, and
liabilities transferred were not material to the Company’s consolidated financial results. The loss on disposition
was not material to the Company’s consolidated financial results, and is included in other charges, net in the
condensed consolidated statements of operations for the fiscal year.
91
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
17. BUSINESS AND ASSET ACQUISITIONS & DIVESTITURES (Continued)
Fiscal year 2016 business acquisitions
Acquisition of Mirror Controls International
In June 2015, the Company completed its acquisition of 100% of the outstanding share capital of MCi, and
paid approximately $555.2 million, net of $27.7 million of cash acquired. This acquisition expanded the
Company’s capabilities in the automotive market, and was included in the HRS segment. The allocation of the
purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed was based on
their estimated fair values as of the date of acquisition. 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 of MCi (in thousands):
Current assets:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 41,559
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,897
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,856
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,312
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,832
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,463
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236,800
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323,357
$665,764
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities & other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 28,002
21,113
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,115
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,492
$555,157
Total aggregate purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The intangible assets of $236.8 million is comprised of customer relationships of $75.5 million and licenses
and other intangible assets of $161.3 million. Customer relationships and licenses and other intangibles are each
amortized over a weighted-average estimated useful life of 10 years. In addition to net working capital, the
Company acquired $38.8 million of machinery and equipment and assumed $61.5 million of other liabilities
primarily comprised of deferred tax liabilities. The Company incurred $6.6 million in acquisition-related costs
related to the acquisition of MCi during fiscal year 2016.
Acquisition of a facility from Alcatel-Lucent
In July 2015, the Company acquired an optical transport facility from Alcatel-Lucent for approximately
$67.5 million, which expanded its capabilities in the telecom market and was included in the CEC segment. The
Company acquired primarily $55.1 million of inventory, $10.0 million of property and equipment primarily
comprised of a building and land, and recorded goodwill and intangible assets for a customer relationship of
$3.6 million and $2.1 million, respectively, and assumed $3.3 million in other net liabilities in connection with
this acquisition. The customer relationship intangible will amortize over a weighted-average estimated useful life
of 5 years.
Acquisition of Nextracker
In September 2015, the Company acquired 100% of the outstanding share capital of NEXTracker, a
provider of smart solar tracking solutions. The initial cash consideration was approximately $240.8 million, net
of $13.2 million of cash acquired, with an additional $81.0 million of estimated potential contingent
consideration, for a total purchase consideration of $321.8 million. At the date of the acquisition, the maximum
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FLEX LTD.
17. BUSINESS AND ASSET ACQUISITIONS & DIVESTITURES (Continued)
possible consideration under the agreement was $97.2 million upon achievement of future revenue performance
targets. The Company also acquired NEXTracker’s equity incentive plan. The financial results of NEXTracker
were included in the IEI segment. The allocation of the purchase price to the tangible and identifiable intangible
assets acquired and liabilities assumed was based on their estimated fair values as of the date of acquisition. 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 preliminary allocation of the total purchase price to the acquired
assets and liabilities of NEXTracker (in thousands):
Current assets:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 60,298
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,235
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,272
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,805
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,382
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,700
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,601
$448,558
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 17,226
63,870
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,096
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,712
$321,750
Total aggregate purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The intangible assets of $108.7 million is comprised of customer-related intangibles of $47.3 million and
licenses and other intangible assets of $61.4 million. Customer-related intangibles are amortized over a
weighted-average estimated useful life of 4 years while licenses and other intangibles are amortized over a
weighted-average estimated useful life of 6 years.
Other business acquisitions
Additionally, during fiscal year 2016, the Company completed eight acquisitions that were not individually,
nor in the aggregate, significant to the consolidated financial position, results of operations and cash flows of the
Company. Four of the acquired businesses expanded the Company’s capabilities in the medical devices market,
particularly precision plastics and molding within the HRS segment, two of them strengthened capabilities in the
consumer electronics market within the CTG segment, one strengthened the capabilities in the communications
market within the CEC segment, and the last one strengthened capabilities in the household industrial and
lifestyle market within the IEI segment. The Company paid $53.3 million, net of $3.7 million of cash held by the
targets. The Company acquired $14.4 million of property and equipment, assumed liabilities of $17.7 million
and recorded goodwill and intangibles of $57.4 million. These intangibles will amortize over a weighted-average
estimated useful life of 4 years.
The results of operations for all of the acquisitions completed in fiscal year 2016 were included in the
Company’s consolidated financial results beginning on the date of each acquisition. The total amount of net
income for all of the acquisitions completed in fiscal year 2016, collectively, was $41.4 million. The total
amount of revenue of these acquisitions, collectively, was not material to the Company’s consolidated financial
results for the fiscal year 2016.
On a pro-forma basis, and assuming the fiscal year 2016 acquisitions occurred on the first day of the prior
period, or April 1, 2014, the Company’s net income would have been estimated to be $410.1 million and
$586.4 million for the fiscal years 2016 and 2015, respectively. The estimated pro-forma net income for both
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
17. BUSINESS AND ASSET ACQUISITIONS & DIVESTITURES (Continued)
years does not include the $43.0 million tax benefit for the release of the valuation allowance on deferred tax
assets primarily relating to the NEXTracker acquisition, recognized in fiscal year 2016, to promote comparability.
Pro-forma revenue for the acquisitions in fiscal years 2016 and 2015 have not been presented because the effect,
collectively, was not material to the Company’s consolidated revenues for fiscal years 2016 and 2015.
Fiscal year 2015 business acquisitions
During the fiscal year 2015, the Company completed four acquisitions that were not individually, nor in the
aggregate, significant to the consolidated financial position, results of operations and cash flows of the
Company. All of the acquired businesses expanded the Company’s capabilities in the medical devices market,
particularly precision plastics, within the HRS segment. The Company paid $52.7 million net of $5.9 million of
cash held by the acquired businesses, and recorded an accrual of $4.5 million for contingent consideration
relating to one of the acquisitions. The Company primarily acquired $29.4 million of current assets, $9.0 million
of property and equipment, recorded goodwill of $35.8 million and intangibles of $16.1 million, and assumed
certain liabilities relating to payables and debt in connection with these acquisitions. The results of operations
were included in the Company’s consolidated financial results beginning on the date of these acquisitions. Pro-
forma results of operations for these acquisitions have not been presented because the effects of the acquisitions
were immaterial to the Company’s consolidated financial results for all periods presented. The Company also
paid $7.5 million as a deposit to acquire a certain business that closed in fiscal year 2016 and that strengthened
capabilities in the household industrial market within the IEI segment. This deposit was included in other assets
during fiscal year 2015.
The Company continues to evaluate certain assets and liabilities related to business combinations
completed during 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, as a result of such additional
information, may result in a corresponding adjustment to goodwill.
18. SHARE REPURCHASE PLAN
During fiscal year 2017, the Company repurchased approximately 25.1 million shares for an aggregate
purchase value of approximately $345.8 million under two separate repurchase plans as further discussed below.
During the first and second quarters of fiscal year 2017, the Company repurchased the entire remaining
amount under a share repurchase plan that was approved by the Company’s Board of Directors on August 20,
2015 and the Company’s shareholders at the 2015 Extraordinary General Meeting. The Company repurchased
approximately 10.4 million shares for an aggregate purchase value of approximately $131.1 million, and retired
all of these shares.
Under the Company’s current share repurchase program, the Board of Directors authorized repurchases of
its outstanding ordinary shares for up to $500 million in accordance with the share repurchase mandate approved
by the Company’s shareholders at the date of the most recent Annual General Meeting held on August 24, 2016.
During fiscal year 2017, the Company repurchased approximately 14.7 million shares for an aggregate purchase
value of approximately $214.7 million under this plan, and retired all of these shares. As of March 31, 2017,
shares in the aggregate amount of $285.3 million were available to be repurchased under the current plan.
19. 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 (“CODM”), or a decision making
group, in deciding how to allocate resources and in assessing performance. Resource allocation decisions and the
Company’s performance are assessed by its Chief Executive Officer (“CEO”), with support from his direct staff
who oversee certain operations of the business, collectively identified as the CODM or the decision making
group.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
19. SEGMENT REPORTING (Continued)
The Company has four reportable segments: HRS, CTG, IEI, and CEC. These segments represent
components of the Company for which separate financial information is available that is utilized on a regular
basis by the CODM. These segments are determined based on several factors, including the nature of products
and services, the nature of production processes, customer base, delivery channels and similar economic
characteristics. Refer to note 1 to the financial statements for a description of the various product categories
manufactured under each of these segments.
An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment
income. Segment income is defined as net sales less cost of sales, and segment selling, general and
administrative expenses, and does not include amortization of intangibles, stock-based compensation,
restructuring charges and other, distressed customer charges, other charges (income), net and interest and other,
net.
Selected financial information by segment is as follows:
Fiscal Year Ended March 31,
2017 2016 2015
(In thousands)
Net sales:
Communications & Enterprise Compute . . . . . . .
$ 8,841,642 $ 9,191,211
Consumer Technologies Group . . . . . . . . . . . . . . 6,362,338 6,997,526 8,940,043
Industrial & Emerging Industries . . . . . . . . . . . . . 4,967,738 4,680,718 4,459,351
High Reliability Solutions . . . . . . . . . . . . . . . . . . 4,149,438 3,898,999 3,557,311
$ 8,383,420
$23,862,934
$24,418,885 $26,147,916
Segment income and reconciliation of income before tax:
$ 265,076 $ 257,323
Communications & Enterprise Compute . . . . . . .
Consumer Technologies Group . . . . . . . . . . . . . . 179,910 163,677 218,251
Industrial & Emerging Industries . . . . . . . . . . . . . 179,749 157,588 131,956
High Reliability Solutions . . . . . . . . . . . . . . . . . . 334,108 294,635 227,595
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . (107,850) (89,219) (83,988)
$ 229,332
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . 815,249 791,757 751,137
Reconciling items:
Intangible amortization . . . . . . . . . . . . . . . . . . . . 81,396 65,965 32,035
Stock-based compensation . . . . . . . . . . . . . . . . . . 82,266 77,580 50,270
SunEdison bankruptcy related (Note 2) . . . . . . . . 92,915 61,006 —
Restructuring and other(1) . . . . . . . . . . . . . . . . . . 67,099 — —
Other charges (income), net . . . . . . . . . . . . . . . . . 21,193 47,738 (53,233)
Interest and other, net . . . . . . . . . . . . . . . . . . . . . . 99,532 84,793 51,410
Income before income taxes . . . . . . . . . . . . . . .
$ 370,848
$ 454,675 $ 670,655
Corporate and other primarily includes corporate services costs that are not included in the CODM’s
assessment of the performance of each of the identified reporting segments.
(1) During the fiscal year ended March 31, 2017, the Company initiated a restructuring plan to accelerate its
ability to support more Sketch-to-Scaletm efforts across the Company and reposition away from historical
legacy programs and structures through rationalizing its current footprint at existing sites and at corporate
SG&A functions. This charge is primarily for employee terminations costs, as described in note 14, as well
as other asset impairments, and is split between cost of sales and selling, general and administration
expenses on the Company’s consolidated statement of operations. This charge is excluded from the
measurement of the Company’s operating segment’s performance.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
19. SEGMENT REPORTING (Continued)
Property and equipment on a segment basis is not disclosed as it is not separately identified and is not
internally reported by segment to the Company’s CODM. During fiscal year 2017, 2016 and 2015, depreciation
expense included in the segment’s measure of operating performance above is as follows:
Fiscal Year Ended March 31,
2017 2016 2015
(In thousands)
Depreciation expense
$117,710 $130,311
Communications & Enterprise Compute . . . . . . .
Consumer Technologies Group . . . . . . . . . . . . . . 110,379 123,139 203,808
Industrial & Emerging Industries . . . . . . . . . . . . . 70,814 72,415 64,541
High Reliability Solutions . . . . . . . . . . . . . . . . . . 88,604 80,935 62,831
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . 29,384 31,530 35,334
$133,057
Total depreciation expense . . . . . . . . . . . . . .
$432,238
$425,729 $496,825
Geographic information is as follows:
Fiscal Year Ended March 31,
2017 2016 2015
(In thousands)
Net sales:
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,962,075 46% $11,788,992 48% $12,953,004 50%
Americas . . . . . . . . . . . . . . . . . . . . . . . . 8,582,849 36% 8,347,514 34% 8,897,868 34%
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . 4,318,010 18% 4,282,379 18% 4,297,044 16%
$23,862,934
$24,418,885 $26,147,916
Revenues are attributable to the country in which the product is manufactured or service is provided.
During fiscal years 2017, 2016 and 2015, net sales generated from Singapore, the principal country of
domicile, were approximately $595.3 million, $519.1 million and $553.4 million, respectively.
During fiscal year 2017, China, Mexico, the United States and Malaysia accounted for approximately 30%,
17%, 11% and 10% of consolidated net sales, respectively. No other country accounted for more than 10% of net
sales in fiscal year 2017.
During fiscal year 2016, China, Mexico, and the United States accounted for approximately 35%, 15%, and
11% of consolidated net sales, respectively. No other country accounted for more than 10% of net sales in fiscal
year 2016.
During fiscal year 2015, China, Mexico, and the United States accounted for approximately 37%, 13% and
11% of consolidated net sales, respectively. No other country accounted for more than 10% of net sales in fiscal
year 2015.
As of March 31,
2017 2016
(In thousands)
Property and equipment, net:
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 960,290
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 939,888
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416,848
41% $1,013,317 45%
41% 886,305 39%
18% 358,011 16%
$2,317,026 $2,257,633
As of March 31, 2017 and 2016, property and equipment, net held in Singapore were approximately
$13.2 million and $13.4 million, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
19. SEGMENT REPORTING (Continued)
As of March 31, 2017, China, Mexico and the United States accounted for approximately 31%, 23% and
13%, respectively, of property and equipment, net. No other country accounted for more than 10% of property
and equipment, net as of March 31, 2017.
As of March 31, 2016, China, Mexico and the United States accounted for approximately 35%, 19% and
15%, respectively, of property and equipment, net. No other country accounted for more than 10% of property
and equipment, net as of March 31, 2016.
20. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS
Flex Ltd. (“Parent”) has three tranches of Notes of $500 million, $500 million and $600 million,
respectively, each outstanding, which mature on February 15, 2020, February 15, 2023 and June 15, 2025,
respectively. These notes are senior unsecured obligations, 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 the Parent 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, provided that each rating agency confirms
that the Notes will continue to be rated investment grade after the Note Guaranties are terminated.
In lieu of providing separate financial statements for the guarantor subsidiaries, the Company has included
the accompanying condensed consolidating 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, 2017
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
561,555 $ 169,083 $ 1,100,037 $ — $ 1,830,675
— 875,842 1,316,862 — 2,192,704
— 1,523,578 1,872,884 — 3,396,462
10,951,993 7,527,058 14,575,412 (33,054,463) —
683 181,602 785,650 — 967,935
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangible assets, net . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,514,231 10,277,163 19,650,845 (33,054,463) 8,387,776
— 601,918 1,715,108 — 2,317,026
1,214 119,255 1,226,579 — 1,347,048
2,218,599 228,343 2,041,373 (3,946,802) 541,513
3,071,296 3,543,990 16,029,346 (22,644,632) —
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16,805,340 $14,770,669 $40,663,251 $(59,645,897) $12,593,363
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
56,177 $ 977 $ 4,380 $ — $ 61,534
— 1,758,660 2,726,248 — 4,484,908
— 101,206 243,039 — 344,245
11,282,477 9,882,088 11,889,898 (33,054,463) —
23,851 776,280 813,809 — 1,613,940
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Flex Ltd. shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,362,505 12,519,211 15,677,374 (33,054,463) 6,504,627
2,798,302 2,156,994 2,401,966 (3,946,802) 3,410,460
2,644,533 94,464 22,550,168 (22,644,632) 2,644,533
— — 33,743 — 33,743
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,644,533 94,464 22,583,911 (22,644,632) 2,678,276
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . .
$16,805,340 $14,770,669 $40,663,251 $(59,645,897) $12,593,363
97
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COLORS: Black, ~note-color 2 GRAPHICS: ann_report_k_tab.eps V1.5
COMPOSITE
Merrill Corp - Flex LTD Annual Report FYE 03-31-2017 ED | 105043 | 05-Jul-17 09:50 | 17-13971-1.de | Sequence: 43
CHKSUM Content: 30735 Layout: 37255 Graphics: 904
CLEAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
20. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Balance Sheets as of March 31, 2016
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
734,869 $ 148,201 $ 724,500 $ — $ 1,607,570
— 729,331 1,315,426 — 2,044,757
— 1,482,410 2,009,246 — 3,491,656
9,105,728 5,568,392 12,404,722 (27,078,842) —
2,951 180,842 987,350 — 1,171,143
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangible assets, net . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,843,548 8,109,176 17,441,244 (27,078,842) 8,315,126
— 553,072 1,704,561 — 2,257,633
175 60,895 1,284,750 — 1,345,820
2,249,145 267,034 2,004,437 (4,054,214) 466,402
2,815,426 2,987,909 18,175,348 (23,978,683) —
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14,908,294 $11,978,086 $40,610,340 $(55,111,739) $12,384,981
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
58,836 $ 946 $ 5,384 $ — $ 65,166
— 1,401,835 2,846,457 — 4,248,292
— 114,509 239,038 — 353,547
9,562,405 7,999,335 9,517,102 (27,078,842) —
33,008 869,470 1,002,722 — 1,905,200
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Flex Ltd. shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,654,249 10,386,095 13,610,703 (27,078,842) 6,572,205
2,683,173 2,063,988 2,514,299 (4,054,214) 3,207,246
2,570,872 (471,997) 24,450,680 (23,978,683) 2,570,872
— — 34,658 — 34,658
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,570,872 (471,997) 24,485,338 (23,978,683) 2,605,530
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . .
$14,908,294 $11,978,086 $40,610,340 $(55,111,739) $12,384,981
Condensed Consolidating Statements of Operations for Fiscal Year Ended March 31, 2017
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
(In thousands)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $15,909,037 $17,841,003 $(9,887,106) $23,862,934
— 14,375,249 17,815,088 (9,887,106) 22,303,231
— 16,908 21,850 — 38,758
$
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . .
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— 1,516,880 4,065 — 1,520,945
— 282,821 654,518 — 937,339
175 5,967 75,254 — 81,396
— 8,716 1,921 — 10,637
(195,848) 1,102,341 (785,768) — 120,725
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
195,673 117,035 58,140 — 370,848
11 23,629 27,644 — 51,284
123,902 (244,696) 233,325 (112,531) —
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 319,564 $ (151,290) $ 263,821 $ (112,531) $ 319,564
Condensed Consolidating Statements of Operations for Fiscal Year Ended March 31, 2016
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
(In thousands)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $16,841,405 $19,286,221 $(11,708,741) $24,418,885
— 15,278,265 19,241,300 (11,708,741) 22,810,824
$
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . .
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— 1,563,140 44,921 — 1,608,061
— 330,194 624,696 — 954,890
300 3,598 62,067 — 65,965
(191,859) 1,016,302 (691,912) — 132,531
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
191,559 213,046 50,070 — 454,675
26 (41,584) 52,152 — 10,594
252,548 (173,846) 397,831 (476,533) —
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$444,081 $ 80,784 $ 395,749 $ (476,533) $ 444,081
98
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COMPOSITE
Merrill Corp - Flex LTD Annual Report FYE 03-31-2017 ED | 105043 | 05-Jul-17 09:50 | 17-13971-1.de | Sequence: 44
CHKSUM Content: 35478 Layout: 17028 Graphics: 904
CLEAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
20. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Statements of Operations for Fiscal Year Ended March 31, 2015
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
(In thousands)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $19,016,750 $19,543,163 $(12,411,997) $26,147,916
— 17,502,863 19,511,710 (12,411,997) 24,602,576
$
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . .
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— 1,513,887 31,453 — 1,545,340
— 258,212 586,261 — 844,473
300 3,808 27,927 — 32,035
10,086 901,059 (912,968) — (1,823)
Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,386) 350,808 330,233 — 670,655
— 14,143 55,711 — 69,854
611,187 564,105 471,575 (1,646,867) —
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 600,801 $ 900,770 $ 746,097 $ (1,646,867) $ 600,801
Condensed Consolidating Statements of Comprehensive Income for Fiscal Year Ended March 31, 2017
(In thousands)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
$319,564 $(151,290) $263,821 $(112,531) $319,564
Foreign currency translation adjustments, net of zero tax . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on derivative instruments and other, net of zero tax . . . . . . . . . . . . . . .
(1,324) 103,335 44,421 (147,756) (1,324)
9,096 4,819 9,096 (13,915) 9,096
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$327,336 $ (43,136) $317,338 $(274,202) $327,336
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
Condensed Consolidating Statements of Comprehensive Income for Fiscal Year Ended March 31, 2016
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
(In thousands)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
$444,081 $ 80,784 $395,749 $(476,533) $444,081
Foreign currency translation adjustments, net of zero tax . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on derivative instruments and other, net of zero tax . . . . . . . . . . . . . .
17,846 (21,972) (15,735) 37,707 17,846
26,744 15,188 26,744 (41,932) 26,744
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$488,671 $ 74,000 $406,758 $(480,758) $488,671
Condensed Consolidating Statements of Comprehensive Income for Fiscal Year Ended March 31, 2015
(In thousands)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss:
$600,801 $ 900,770 $746,097 $(1,646,867) $600,801
Foreign currency translation adjustments, net of zero tax . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on derivative instruments and other, net of zero tax . . . . . . . . . . . . . . .
(18,932) 177,046 221,418 (398,464) (18,932)
(35,417) (33,769) (35,417) 69,186 (35,417)
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$546,452 $1,044,047 $932,098 $(1,976,145) $546,452
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
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COMPOSITE
Merrill Corp - Flex LTD Annual Report FYE 03-31-2017 ED | 105043 | 05-Jul-17 09:50 | 17-13971-1.de | Sequence: 45
CHKSUM Content: 53105 Layout: 1706 Graphics: 904
CLEAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
20. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Statements of Cash Flows for Fiscal Year Ended March 31, 2017
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
(In thousands)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
144,580 $ 47,905 $ 957,424 $ — $1,149,909
$
Cash flows from investing activities:
Purchases of property and equipment, net of proceeds from disposal . . . . . . . . . . . . . .
Acquisition of businesses, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from divestitures of business, net of cash held in divested business . . . . . . .
Investing cash flows from (to) affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— (182,132) (307,388) 15 (489,505)
— (69,998) (119,086) — (189,084)
— 30,655 6,076 — 36,731
(1,142,988) (3,440,099) 159,426 4,423,661 —
(61,212) (12,429) 13,312 — (60,329)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,204,200) (3,674,003) (247,660) 4,423,676 (702,187)
Cash flows from financing activities:
Proceeds from bank borrowings and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of bank borrowings and long-term debt and capital lease obligations . . .
Payments for repurchases of ordinary shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing cash flows from (to) affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
204,879 107,502 360 — 312,741
(128,967) (6,695) (6,068) — (141,730)
(349,532) — — — (349,532)
12,438 — — — 12,438
1,164,543 3,606,993 (347,860) (4,423,676) —
30,000 (51,902) (54,122) — (76,024)
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
933,361 3,655,898 (407,690) (4,423,676) (242,107)
Effect of exchange rates on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(47,055) (8,918) 73,463 — 17,490
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
(173,314) 20,882 375,537 — 223,105
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
734,869 148,201 724,500 — 1,607,570
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
561,555 $ 169,083 $1,100,037 $ — $1,830,675
100
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COMPOSITE
Merrill Corp - Flex LTD Annual Report FYE 03-31-2017 ED | 105043 | 05-Jul-17 09:50 | 17-13971-1.de | Sequence: 46
CHKSUM Content: 58168 Layout: 1221 Graphics: 904
CLEAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
20. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Statements of Cash Flows for Fiscal Year Ended March 31, 2016
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
(In thousands)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
162,275 $ 426,639 $ 547,531 $ — $ 1,136,445
$
Cash flows from investing activities:
Purchases of property and equipment, net of proceeds from disposal . . . . . . . . . . . . . .
Acquisition of businesses, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from divestitures of business, net of cash held in divested business . . . . . . .
Investing cash flows to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— (151,383) (345,584) 9 (496,958)
— (809,272) (107,255) — (916,527)
— — 5,740 — 5,740
(1,596,210) (1,587,365) (1,509,352) 4,692,927 —
(500) (31,011) 42,880 — 11,369
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,596,710) (2,579,031) (1,913,571) 4,692,936 (1,396,376)
Cash flows from financing activities:
Proceeds from bank borrowings and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of bank borrowings and long-term debt and capital lease obligations . . .
Payments for repurchases of ordinary shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing cash flows from affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
824,618 — 60,084 — 884,702
(179,920) (3,059) (7,242) — (190,221)
(420,317) — — — (420,317)
61,278 — — — 61,278
1,240,145 2,143,568 1,309,223 (4,692,936) —
— (8,800) (77,000) — (85,800)
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,525,804 2,131,709 1,285,065 (4,692,936) 249,642
Effect of exchange rates on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,529 612 (45,690) — (10,549)
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
125,898 (20,071) (126,665) — (20,838)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
608,971 168,272 851,165 — 1,628,408
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
734,869 $ 148,201 $ 724,500 $ — $ 1,607,570
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
20. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Consolidating Statements of Cash Flows for Fiscal Year Ended March 31, 2015
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
(In thousands)
Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(73,356) $ 75,775 $ 791,615 $ — $ 794,034
$
Cash flows from investing activities:
Purchases of property and equipment, net of proceeds from disposal . . . . . . . . . . . . . .
Acquisition and divestiture of businesses, net of cash acquired and cash held
in divested business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing cash flows from (to) affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— (85,876) (153,833) (15) (239,724)
— (20,589) (46,265) — (66,854)
(1,703,983) (1,900,810) 796,493 2,808,300 —
(1,500) (13,821) 79,683 — 64,362
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,705,483) (2,021,096) 676,078 2,808,285 (242,216)
Cash flows from financing activities:
Proceeds from bank borrowings and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of bank borrowings and long-term debt and capital lease obligations . . .
Payments for early repurchase of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for repurchases of ordinary shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing cash flows from (to) affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
303,000 4,737 11,805 — 319,542
(335,500) (3,127) (5,529) — (344,156)
— — — — —
(415,945) — — — (415,945)
23,497 — 11 — 23,508
2,420,952 1,904,164 (1,516,831) (2,808,285) —
— — (98,966) — (98,966)
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . .
1,996,004 1,905,774 (1,609,510) (2,808,285) (516,017)
Effect of exchange rates on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(246,908) (2,643) 248,430 — (1,121)
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
(29,743) (42,190) 106,613 — 34,680
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
638,714 210,462 744,552 — 1,593,728
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
608,971 $ 168,272 $ 851,165 $ — $1,628,408
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
21. QUARTERLY FINANCIAL DATA (UNAUDITED)
The Company’s third fiscal quarter ends on December 31, which are comprised of 92 days and 97 days for
fiscal years 2017 and 2016, respectively. The fourth fiscal quarter and year ends on March 31 of each year,
which is comprised of 90 days and 91 days for fiscal years 2017 and 2016, respectively. The first fiscal quarter
ended on July 1, 2016, which is comprised of 92 days in the period, and June 26, 2015, which is comprised of 87
days in the period, respectively. The second fiscal quarter ended on September 30, 2016 and September 25,
2015, which are comprised of 91 days in both periods, respectively.
The following table contains unaudited quarterly financial data for fiscal years 2017 and 2016.
Fiscal Year Ended March 31, 2017 Fiscal Year Ended March 31, 2016
First
Second
Third Fourth First Second
Third Fourth
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,876,813 $6,008,525 $6,114,999 $5,862,597 $5,566,248 $6,316,762 $6,763,177 $5,772,698
384,804 352,341 396,916 452,467 406,337
Gross profit(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
405,995
416,455
313,691
Net income (loss)(2) . . . . . . . . . . . . . . . . . . . . . . . . . .
105,729
(2,508)
129,469
86,874 110,850 122,977 148,910 61,344
Earnings per share(3):
Net income:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.19 $
0.00 $
0.24 $
0.16 $ 0.20 $ 0.22 $ 0.27 $ 0.11
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.19 $
0.00 $
0.24 $
0.16 $ 0.19 $ 0.22 $ 0.27 $ 0.11
(1) Gross profit for the second quarter of fiscal year 2017 was affected by $92.9 million of SunEdison
bankruptcy related charges, as further described in Note 2.
(2) Net income for the second quarter of fiscal year 2017 was affected by $92.9 million of SunEdison
bankruptcy related charges, as further described in Note 2. Net income for the fourth quarter of fiscal year
2016 was affected by $61.0 million of bad debt reserve charges, also related to the SunEdison bankruptcy.
(3) 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.
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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
The Company’s management, with the participation of the Chief Executive Officer and Chief Financial
Officer 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, 2017. Based on that evaluation, the Company’s Chief
Executive Officer and Chief Financial Officer concluded that, as of March 31, 2017, the Company’s 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, 2017, 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 (2013) 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 effective as of March 31, 2017.
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, 2017 excluded the internal control over financial reporting of three of our acquisitions that were
completed during the year ended March 31, 2017, which constitute, in the aggregate, 1% of total assets and 2%
of net sales of the consolidated financial statements amount as of, and for the fiscal year ended March 31, 2017.
(c) Attestation Report of the Registered Public Accounting Firm
The effectiveness of the Company’s internal control over financial reporting as of March 31, 2017 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
There were no changes in the Company’s internal controls over financial reporting that occurred during the
fourth quarter ended March 31, 2017 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
Flex Ltd.
Singapore
We have audited the internal control over financial reporting of Flex Ltd. and subsidiaries (the “Company”)
as of March 31, 2017, based on criteria established in Internal Control—Integrated Framework (2013) 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 of four acquisitions that were completed during the year ended
March 31, 2017, which constitute, in aggregate, 1% of total assets and 2% of net sales of the consolidated
financial statement amounts as of and for the fiscal year ended March 31, 2017. Accordingly, our audit did not
include the internal control over financial reporting of four acquisitions. 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, 2017, based on the criteria established in Internal Control—Integrated Framework(2013)
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, 2017 of the
Company and our report dated May 16, 2017 expressed an unqualified opinion on those financial statements.
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/s/ DELOITTE & TOUCHE LLP
San Jose, California
May 16, 2017
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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 2017 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 2017 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 2017 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 2017 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 2017 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.”
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
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Constitution of the Registrant
10-Q 000-23354
10-31-16
Indenture, dated as of February 20, 2013, by
and between the Registrant, the Guarantors
party thereto and U.S. Bank National
Association, as Trustee, related to the
Registrant’s 4.625% Notes due 2020 and
5.000% Notes due 2023
8-K 000-23354
02-22-13
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
10-K 000-23354
05-28-13
3.01
4.01
4.02
4.03
4.11
Exhibit
No.
3.01
4.01
4.02
4.03
4.04
4.05
4.06
4.07
4.08
4.09
First Supplemental Indenture, dated as of
March 28, 2013, among the Registrant, 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 Registrant, the Guarantors
party thereto and U.S. Bank National
Association, as Trustee, related to the
Registrant’s 4.625% Notes due 2020 and
5.000% Notes due 2023
Second Supplemental Indenture, dated as of
August 25, 2014, among the Registrant, 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 Registrant, the Guarantors
party thereto and U.S. Bank National
Association, as Trustee, related to the
Registrant’s 4.625% Notes due 2020 and
5.000% Notes due 2023
Third Supplemental Indenture, dated as of
September 11, 2015, among the Registrant, the
Guarantor party thereto and U.S. Bank
National Association, as Trustee, related to the
Registrant’s 4.625% Notes due 2020 and
5.000% Notes due 2023
Indenture, dated as of June 8, 2015, by and
between the Registrant, the Guarantors party
thereto and U.S. Bank National Association, as
Trustee
10-Q 000-23354
10-30-14
4.01
S-4
333-207067
09-22-15
4.11
8-K 000-23354
06-08-15
4.1
Form of 4.750% Note due 2025
8-K 000-23354
06-08-15
4.2
S-4
333-207067
09-22-15
4.04
First Supplemental Indenture, dated as of
September 11, 2015, among the Registrant, the
Guarantor party thereto and U.S. Bank
National Association, as Trustee, related to the
Registrant’s 4.750% Notes due 2025
107
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Incorporated by
Reference
Exhibit
No.
4.10
4.11
4.12
10.01
10.02
10.03
10.04
10.05
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Credit Agreement, dated as of March 31, 2014,
among Flex 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. 1, dated as of September 30,
2015, to Credit Agreement, dated as of
March 31, 2014, among Flex 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
November 30, 2016, among Flex Ltd., as
borrower, The Bank of Tokyo-Mitsubishi UFJ,
Ltd., as Administrative Agent, and the other
Lenders party thereto
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.†
Flex Ltd. 2001 Equity Incentive Plan, as
amended.†
Registrant’s 2002 Interim Incentive Plan, as
amended.†
Registrant’s 2004 Award Plan for New
Employees, as amended.†
8-K 000-23354
04-01-14
10.01
10-Q 000-23354
02-01-16
4.01
8-K 000-23354
12-01-16
10.01
10-K 000-23354
05-20-09
10.10
10-K 000-23354
05-20-09
10.20
10-Q 000-23354
11-03-09
10.01
8-K 000-23354
07-14-09
10.02
8-K 000-23354
07-14-09
10.09
10.06
Flex Ltd. 2010 Equity Incentive Plan.†
8-K 000-23354
07-28-10
10.01
10.07
10.08
10.09
10.10
Form of Share Option Award Agreement under
2010 Equity Incentive Plan†
Form of Restricted Share Unit Award
Agreement under 2010 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
02-05-09
10.02
10-Q 000-23354
02-05-09
10.01
10.11
Summary of Directors’ Compensation†
10-K 000-23354
05-21-15
10.16
10.12
10.13
Solectron Corporation 2002 Stock Plan, as
amended.†
Executive Incentive Compensation
Recoupment Policy†
10-Q 000-23354
11-03-09
10.02
10-Q
000-23354
08-05-10
10.06
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CLEAN
Incorporated by
Reference
Exhibit
No.
10.14
10.15
10.16
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
10.30
10.31
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Francois Barbier Offer Letter, dated as of
July 1, 2010†
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†
Form of Restricted Stock Unit Award Under
2010 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†
Summary of Compensation Arrangements of
Certain Executive Officers of Flex Ltd.†
Form of Restricted Share Unit Award
Agreement under the 2010 Equity Incentive
Plan for time-based vesting awards†
Form of Performance-Based Restricted Stock
Unit Award (S&P500/Extended EMS Group)†
Form of 2010 Deferred Compensation Plan
Award Agreement (performance targets, cliff
vesting)†
Form of 2010 Deferred Compensation Plan
Award Agreement (non-performance, periodic
vesting, continuing Participant)†
Award Agreement under the 2010 Deferred
Compensation Plan†
Form of Restricted Share Unit Award
Agreement under the 2010 Equity Incentive
Plan for certain executive fiscal year 2015
performance-based awards†
Form of Restricted Share Unit Award
Agreement under the 2010 Equity Incentive
Plan for CEO FY15 performance-based award†
Description of Annual Incentive Bonus Plan
for Fiscal 2017†
Description of Performance Long Term
Incentive Plan for Fiscal 2017†
109
8-K 000-23354
09-03-10
10.01
10-K 000-23354
05-28-13
10.27
8-K 000-23354
09-03-10
10.03
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
10.02
10-Q 000-23354
02-04-13
10.03
10-Q 000-23354
07-30-12
10.01
10-Q 000-23354
11-01-13
10.02
10-Q 000-23354
08-02-13
10.01
10-Q 000-23354
08-02-13
10.02
10-Q 000-23354
08-02-13
10.03
10-Q 000-23354
07-28-14
10.01
10-Q 000-23354
10-30-14
10.01
10-Q 000-23354
10-30-14
10.01
10-Q 000-23354
07-27-16
10.02
10-Q
000-23354
07-27-16
10.03
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CLEAN
Incorporated by
Reference
Exhibit
No.
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
10.32
NEXTracker Inc. 2014 Equity Incentive Plan†
S-8
333-207325
10-07-15
99.01
10-Q 000-23354
10-26-15
10.02
S-8
333-212267
06-27-16
99.01
10-Q 000-23354
07-27-16
10.04
10.33
10.34
Form of Elementum Holding Ltd. Restricted
Share Purchase Agreement†
BrightBox Technologies, Inc. 2013 Stock
Incentive Plan†
10.35 Mutual Separation Agreement and Release of
Claims dated June 20, 2016, by and between
Flextronics International USA, Inc. and Jon
Hoak†
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 Chief Executive Officer and
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
XBRL Taxonomy Extension Scheme Document
101.CAL
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
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* 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 Flex 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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ITEM 16. FORM 10-K SUMMARY
None
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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
Flex Ltd.
Michael M. McNamara
Chief Executive Officer
By: /s/ MICHAEL M. MCNAMARA
Date: May 16, 2017
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
/S/ MICHAEL M. MCNAMARA
(Principal Executive Officer) May 16, 2017
Michael M. McNamara
Chief Executive Officer and Director
/S/ CHRISTOPHER COLLIER
(Principal Financial Officer) May 16, 2017
Christopher Collier
Chief Financial Officer
/S/ DAVID BENNETT
(Principal Accounting Officer) May 16, 2017
David Bennett
Senior Vice President and Chief Accounting Officer
/S/ H. RAYMOND BINGHAM
Chairman of the Board May 16, 2017
H. Raymond Bingham
/S/ MICHAEL D. CAPELLAS
Director May 16, 2017
Michael D. Capellas
/S/ MARC A. ONETTO
Director May 16, 2017
Marc A. Onetto
/S/ DANIEL H. SCHULMAN
Director May 16, 2017
Daniel H. Schulman
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Signature Title Date
/S/ WILLY SHIH, PH.D.
Director May 16, 2017
Willy Shih, Ph.D.
/S/ LAY KOON TAN
Director May 16, 2017
Lay Koon Tan
/S/ WILLIAM D. WATKINS
Director May 16, 2017
William D. Watkins
/S/ LAWRENCE A. ZIMMERMAN
Director May 16, 2017
Lawrence A. Zimmerman
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CLEAN
Incorporated by
Reference
EXHIBIT INDEX
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Constitution of the Registrant
10-Q 000-23354
10-31-16
Indenture, dated as of February 20, 2013, by
and between the Registrant, the Guarantors
party thereto and U.S. Bank National
Association, as Trustee, related to the
Registrant’s 4.625% Notes due 2020 and
5.000% Notes due 2023
8-K 000-23354
02-22-13
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
10-K 000-23354
05-28-13
3.01
4.01
4.02
4.03
4.11
Exhibit
No.
3.01
4.01
4.02
4.03
4.04
4.05
4.06
4.07
4.08
4.09
First Supplemental Indenture, dated as of
March 28, 2013, among the Registrant, 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 Registrant, the Guarantors
party thereto and U.S. Bank National
Association, as Trustee, related to the
Registrant’s 4.625% Notes due 2020 and
5.000% Notes due 2023
Second Supplemental Indenture, dated as of
August 25, 2014, among the Registrant, 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 Registrant, the Guarantors
party thereto and U.S. Bank National
Association, as Trustee, related to the
Registrant’s 4.625% Notes due 2020 and
5.000% Notes due 2023
Third Supplemental Indenture, dated as of
September 11, 2015, among the Registrant, the
Guarantor party thereto and U.S. Bank
National Association, as Trustee, related to the
Registrant’s 4.625% Notes due 2020 and
5.000% Notes due 2023
Indenture, dated as of June 8, 2015, by and
between the Registrant, the Guarantors party
thereto and U.S. Bank National Association, as
Trustee
10-Q 000-23354
10-30-14
4.01
S-4
333-207067
09-22-15
4.11
8-K
000-23354
06-08-15
4.1
Form of 4.750% Note due 2025
8-K
000-23354
06-08-15
4.2
S-4
333-207067
09-22-15
4.04
First Supplemental Indenture, dated as of
September 11, 2015, among the Registrant, the
Guarantor party thereto and U.S. Bank
National Association, as Trustee, related to the
Registrant’s 4.750% Notes due 2025
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CLEAN
Incorporated by
Reference
Exhibit
No.
4.10
4.11
4.12
10.01
10.02
10.03
10.04
10.05
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Credit Agreement, dated as of March 31, 2014,
among Flex 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. 1, dated as of September 30,
2015, to Credit Agreement, dated as of
March 31, 2014, among Flex 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
November 30, 2016, among Flex Ltd., as
borrower, The Bank of Tokyo-Mitsubishi UFJ,
Ltd., as Administrative Agent, and the other
Lenders party thereto
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.†
Flex Ltd. 2001 Equity Incentive Plan, as
amended.†
Registrant’s 2002 Interim Incentive Plan, as
amended.†
Registrant’s 2004 Award Plan for New
Employees, as amended.†
8-K 000-23354
04-01-14
10.01
10-Q 000-23354
02-01-16
4.01
8-K 000-23354
12-01-16
10.01
10-K 000-23354
05-20-09
10.10
10-K 000-23354
05-20-09
10.20
10-Q 000-23354
11-03-09
10.01
8-K 000-23354
07-14-09
10.02
8-K
000-23354
07-14-09
10.09
10.06
Flex Ltd. 2010 Equity Incentive Plan.†
8-K
000-23354
07-28-10
10.01
10.07
10.08
10.09
10.10
Form of Share Option Award Agreement under
2010 Equity Incentive Plan†
Form of Restricted Share Unit Award
Agreement under 2010 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
02-05-09
10.02
10-Q
000-23354
02-05-09
10.01
10.11
Summary of Directors’ Compensation†
10-K
000.23354
05-21-15
10.16
10.12
10.13
Solectron Corporation 2002 Stock Plan, as
amended.†
Executive Incentive Compensation
Recoupment Policy†
10-Q 000-23354
11-03-09
10.02
10-Q 000-23354
08-05-10
10.06
115
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CHKSUM Content: 57702 Layout: 35135 Graphics: 904
CLEAN
Incorporated by
Reference
Exhibit
No.
10.14
10.15
10.16
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
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Francois Barbier Offer Letter, dated as of
July 1, 2010†
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†
Form of Restricted Stock Unit Award Under
2010 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†
Summary of Compensation Arrangements of
Certain Executive Officers of Flex Ltd.†
Form of Restricted Share Unit Award
Agreement under the 2010 Equity Incentive
Plan for time-based vesting awards†
Form of Performance-Based Restricted Stock
Unit Award (S&P500/Extended EMS Group)†
Form of 2010 Deferred Compensation Plan
Award Agreement (performance targets, cliff
vesting)†
Form of 2010 Deferred Compensation Plan
Award Agreement (non-performance, periodic
vesting, continuing Participant)†
Award Agreement under the 2010 Deferred
Compensation Plan†
Form of Restricted Share Unit Award
Agreement under the 2010 Equity Incentive
Plan for certain executive fiscal year 2015
performance-based awards†
Form of Restricted Share Unit Award
Agreement under the 2010 Equity Incentive
Plan for CEO FY15 performance-based award†
8-K 000-23354
09-03-10
10.01
10-K 000-23354
05-28-13
10.27
8-K 000-23354
09-03-10
10.03
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
10.02
10-Q 000-23354
02-04-13
10.03
10-Q 000-23354
07-30-12
10.01
10-Q 000-23354
11-01-13
10.02
10-Q 000-23354
08-02-13
10.01
10-Q
000-23354
08-02-13
10.02
10-Q
000-23354
08-02-13
10.03
10-Q
000-23354
07-28-14
10.01
10-Q
000-23354
10-30-14
10.01
10-Q 000-23354
10-30-14
10.01
X
10.30
Description of Annual Incentive Bonus Plan
for Fiscal 2017†
10-Q 000-23354
07-27-16
10.02
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CHKSUM Content: 24376 Layout: 1691 Graphics: 904
CLEAN
Incorporated by
Reference
Exhibit
No.
10.31
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Description of Performance Long Term
Incentive Plan for Fiscal 2017†
10-Q
000-23354
07-27-16
10.03
10.32
NEXTracker Inc. 2014 Equity Incentive Plan†
S-8
333-207325
10-07-15
99.01
10-Q
000-23354
10-26-15
10.02
S-8
333-212267
06-27-16
99.01
10-Q
000-23354
07-27-16
10.04
10.33
10.34
10.35
Form of Elementum Holding Ltd. Restricted
Share Purchase Agreement†
BrightBox Technologies, Inc. 2013 Stock
Incentive Plan†
Mutual Separation Agreement and Release of
Claims dated June 20, 2016, by and between
Flextronics International USA, Inc. and Jon
Hoak†
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 Chief Executive Officer and
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
XBRL Taxonomy Extension Scheme Document
101.CAL
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
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 Flex 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
EXECUTIVE OFFICERS
Michael M. McNamara—Chief Executive Officer
Christopher Collier—Chief Financial Officer
François Barbier—President, Global Operations and Components
David Bennett—Chief Accounting Officer
Paul Humphries—President, High Reliability Solutions
Scott Offer—Executive Vice President and General Counsel
DIRECTORS
Michael D. Capellas—Principal, Capellas Strategic Partners,
a strategic advisory firm
Michael M. McNamara—Chief Executive Officer, Flex Ltd.
Marc A. Onetto—Former Senior Vice President of Worldwide
Operations and Customer Service, Amazon.com Inc.
Daniel H. Schulman—President and CEO of Paypal Holdings, Inc.
Dr. Willy C. Shih—Professor of Management Practice at the
Harvard Business School
Lay Koon Tan—Former President, Chief Executive Officer
and Director, STATS ChipPAC Ltd.
William D. Watkins—Former Chairman and Chief Executive
Officer, Imergy Power Systems, 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 and Section 27A of the Securities Act of 1933. 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 “will,”
“may,” “designed to,” “believe,” “should,” “anticipate,”
“plan,” “expect,” “intend,” “estimate” 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 its 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 headings “Risk Factors” in
Part I, Item 1A and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” in Part II,
Item 7, in the accompanying Annual Report on Form 10-K for
the fiscal year ended March 31, 2017.
Shareholder Information
CORPORATE HEADQUARTERS
2 Changi South Lane
Singapore 486123
Tel: +65.6876.9899
ANNUAL GENERAL MEETING
The Annual General Meeting of Shareholders will be held at
9:00 A.M. Pacific time on August 15, 2017. The meeting will
be held at:
Flex Ltd.
6201 America Center Drive
San Jose, CA 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.flex.com
INVESTOR RELATIONS
For shareholder or investor related inquiries, contact:
Flex Ltd.
Investor Relations
6201 America Center Drive
San Jose, CA 95002
Tel: +1.408.576.7985
Fax: +1.408.576.7106
investors.flex.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, 2017. 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
First Class, Registered and Certified Mail
Computershare
P.O. Box 505000
Louisville, KY 40233
Shareholder Contact Center: 1.877.373.6374
Overnight Courier
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
Tel: 1.781.575.2879
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Information in this document is subject to change without notice. FLEX and Flextronics are trademarks of Flex Ltd. All other trademarks are
the properties of their respective owners.
© Copyright Flex Ltd. 2017. All rights reserved. Reproduction, adaptation, or translation without prior written permission is prohibited except
as allowed under the copyright laws.
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Merrill Corp - Flex LTD Annual Report FYE 03-31-2017 ED | 105043 | 05-Jul-17 09:51 | 17-13971-1.je | Sequence: 2
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CLEAN
Flex Ltd.
2017 Annual General Meeting of Shareholders
Directions and Parking Information
August 15, 2017
9:00 A.M. Pacific time
The Annual General Meeting of Shareholders will be held at 6201 America Center Dr., San Jose, CA 95002 at
9:00 A.M. Pacific time.
Directions from San Francisco International Airport
(cid:129) Head North on International Terminal Departures
(cid:129) Take the ramp to US-101 S
(cid:129) Keep left at the fork and merge onto US-101 S and continue on US-101 S to Milpitas
(cid:129) Take the exit onto CA-237 E toward Alviso/Milpitas
(cid:129) Take the exit toward Lafayette Street
(cid:129) Turn left onto Great America Parkway
(cid:129) At the traffic circle, continue straight to stay on America Center Drive
(cid:129) Destination will be on the left
Directions from Mineta San Jose International Airport
(cid:129) Head Northwest on Airport Blvd toward Airport Pkwy
(cid:129) Slight right onto Airport Pkwy
(cid:129) Turn right onto Matrix Blvd. and then a sharp left onto N. 1st Street
(cid:129) Slight right to merge onto US-101 N
(cid:129) Take the Great America Pkwy exit toward Bowers Avenue
(cid:129) Turn right onto Great America Pkwy and continue onto America Center Drive
(cid:129) At the traffic circle, continue straight to stay on America Center Drive
(cid:129) Destination will be on the left
Directions from Oakland International Airport
(cid:129) Head Southeast the slight left toward Airport Drive
(cid:129) Continue onto Airport Drive
(cid:129) Continue onto Bessie Coleman Drive
(cid:129) Continue onto 98th Avenue then slight right onto I-880 S ramp to San Jose
(cid:129) Continue onto I-880 S
(cid:129) Take the CA-237 W exit toward Mountain View and merge onto CA-237 W
(cid:129) Take the Great America Pkwy exit toward Lafayette Street
(cid:129) Turn right onto Great America Pkwy and continue onto America Center Drive
(cid:129) At the traffic circle, continue straight to stay on America Center Drive
(cid:129) Destination will be on the left
Parking
Flex has reserved parking spaces for shareholders attending the meeting. These spaces will be designated as
“Reserved for Flex Shareholders’ Meeting.”
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710800cvr.indd 1