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Our Shareholders, Employees, Customers and Partners:
In 1969, Joe and Barbara Ann McKenzie started a family business hand soldering electronic
parts onto printed circuit boards to help Silicon Valley startups meet their dynamic capacity
needs. These “board stuffers,” as they were known back then, decided to name their small
company Flextronics. The McKenzies dreamed of revolutionizing the way electronic products
were manufactured, not only in Silicon Valley, but all around the world.
Fifty years later, we may have shortened the company name from Flextronics to Flex, but our
list of achievements and milestones over the past five decades is nothing short of remarkable.
Today, we have a broad portfolio of diverse customers, including some of the best-known
global brands such as Cisco, Ford, IBM, Johnson & Johnson and Microsoft. From
manufacturing early networking equipment and mobile devices for companies like Motorola,
Nokia, Juniper and Ericsson to making Palm Pilots, Xboxes, Blackberrys, and HP printers,
Flex led the transition from contract manufacturing to value-added Electronic Manufacturing
Services (EMS). Our top customers come from more than a dozen different industries,
providing us with a unique perspective on many of the fastest growing companies, by
industry and by geography.
Flex was one of the first American service manufacturers to go offshore by setting up a
manufacturing facility in Singapore. The company was one of the first to innovate with full
service industrial parks across Asia and eventually other geographies, to bring suppliers
closer to the manufacturing line, and to support emerging “just in time” supply chain needs.
Corporate ownership shifted from public to private as markets went through the slumps of
the late 80s and early 90s. In 1994, Flex returned to the public markets when it was listed on
the Nasdaq. Since 2000, we have grown both organically and by acquisition, having
acquired more than 75 companies including some of the biggest and best names in contract
manufacturing like Solectron and Dii Group. These acquisitions enabled us to expand our
global footprint, our technical and design capabilities, and our strategic customer
partnerships.
In 1994, Flex was the 28th ranked EMS provider with around $100 million in revenue and
approximately 3,000 employees. Today, Flex is the third largest EMS provider in the world,
when measured by revenue, with $26 billion in revenue and more than 200,000 employees.
Operating across 100 sites in 30 countries, our global scale gives us the ability to leverage
our diverse footprint for the true benefit of our customers. We have also strengthened our
value-added service offerings to offer complete Sketch-to-Scale® manufacturing and supply
chain solutions.
On February 11, 2019, I had the privilege of being named Flex CEO. While I am new to Flex,
I am not new to manufacturing services business, having spent my entire 25-year career in
the manufacturing and supply chain industry. I began my career on the factory floor as a plant
supervisor, rising to the position of President and Chief Operating Officer for the electrical
sector business at Eaton, a power management company with more than $20 billion in sales,
102,000 employees, and a market capitalization of $33 billion. I led our sector to deliver high
margins and reduce earnings volatility while growing sales to more than $13 billion in 2018.
In my first 100 days at Flex, I have traveled to a dozen of our manufacturing sites and
campuses from Guadalajara to Chennai, and from Tczew to Zhuhai, engaging with more
than half of our 200,000 strong, global workforce. I have learned so much about our amazing
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culture and the more I learn about Flex, the deeper my respect grows. The sheer range and
volume of the products we manufacture and deliver to all points of the globe speak to our
extensive and highly-differentiated set of capabilities.
The core of Flex’s business is fundamentally strong. Our global presence and broad
geographic distribution is undoubtedly our biggest competitive advantage, especially in
today’s global trade environment. While there are uncertainties surrounding the current
economic and geopolitical landscape, we are keenly focused on our opportunities for growth
and delivering on our commitments. We must continue to build on our solid core, leverage
our deep expertise and do what we do best, and that is manufacture-at-scale in a highly
competitive, effective and efficient way. If we can take the strength of our core, align it with
real innovation around the design of products and processes, and thoughtfully invest in
targeted parts of our portfolio, the outcome will be sustainable growth, better margins, and
stronger results.
I have met and spoken to many of our customers and partners and they acknowledge our
unrelenting commitment to customer success and our culture of always putting customers
first. They value our partnership and have touted our strength, our competitive positioning,
and the opportunities they see for us in growth markets such as autonomous cars, 5G,
digital health, and industrial IoT.
We acknowledge that last year was marked by some challenges as the company evolved
through organizational and business changes and that our performance did not reflect the
true power and potential of Flex. In order to harness this power, we must begin by refocusing
on the fundamentals of our business. Moving forward, you will see us drive more consistent,
disciplined execution in everything we do. We will communicate realistic expectations and
deliver predictable, sustainable results.
Let me briefly recap our performance for fiscal 2019. We grew revenues $865 million or 3% to
$26.3 billion, increased adjusted operating income dollars by $86 million or 11% to $872 million,
expanded adjusted operating margin to 3.3% from 3.1%, and had a 5% increase in adjusted
EPS to $1.14 from $1.09.
Even with the challenges of last year, there were still several positives which should be
highlighted. During fiscal year 2019:
• We capitalized on prior year investments, achieving strong bookings in both of our
higher margin business groups, HRS and IEI, totaling a combined $4.9 billion.
• We revamped our go-to-market strategy in CEC and experienced strength in both Cloud
Data Center and Telecom, driven by both 4G and 5G, which helped return this segment
to growth.
• We began the process of rationalizing our CTG business including stabilizing operations
in India and exiting our footwear business in Mexico.
• We streamlined our investment portfolio.
• We returned to free cash flow generation in the second half of fiscal 2019.
Going forward, we will invest only in opportunities with strong business cases for consistent
returns, and focus on the core with greater discipline on capital spending. We will continue to
focus on Sketch-to-Scale® opportunities where we can create design and engineering led
wins which translate into higher margins and lower risk of substitution.
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In Summary
Flex has an incredible, rich history in manufacturing and supply chain solutions. For 50 years,
we have worked tirelessly to deliver the most value to our customers globally. Despite the
uncertainties of the global economic and geopolitical landscape, technology continues to
move forward rapidly, allowing us to further build upon our business.
Going forward, you can expect four things from us:
• First, we will drive consistent disciplined execution around manufacturing performance,
margin improvement, and free cash flow generation.
• We will manage our mix by selectively investing in our higher margin segments while
being judicious in the markets and products categories we focus on.
• We will pursue Sketch-to-Scale® opportunities that grow from design-led innovation to
deep manufacturing and supply chain relationships.
• Finally, we will create value for shareholders with a return to strong, free cash flow
generation and disciplined capital allocation.
Named one of Fortune’s Most Admired Companies in the past, Flex is a great company with
amazing people. In 2019, we won five Manufacturing Leadership Awards for Sustainability
Leadership, Supply Chain Leadership, Enterprise Integration & Technology Leadership and
Next-Generation Leadership. At Flex, we work with integrity and believe in the importance of
doing business ethically and responsibly. With employees in 30 countries around the world, we
know that diversity and inclusion are important to creating a stronger company for the future.
Making a positive social impact through sustainability has also been an essential element of
our company mission from the very beginning. We are committed to protecting and
promoting a healthier world and building a more sustainable future, whether that is
participating in the world’s largest corporate sustainability initiative through the UN Global
Compact (UNGC), or through our Sinctronics venture with HP, which recycles old printers. In
the past two years, we’ve reduced our greenhouse gas emissions by 4%, reduced our injury
rate by 14%, and cut our water usage by 7%.
As for the McKenzies, who in 1969 dreamed of revolutionizing the way electronic products
are manufactured all around the world, we would like to simply say, “Thanks to your dream,
look at all that we’ve accomplished.” To our 200,000-plus employees, we thank you for your
dedication and support for our customers each and every day.
I am honored and energized to share the next chapter of this great company with all of you –
our shareholders, customers, employees, and partners.
Sincerely,
Revathi Advaithi
Chief Executive Officer
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FLEX LTD.
(Incorporated in the Republic of Singapore)
(Company Registration Number 199002645H)
To Our Shareholders:
On August 20, 2019, we will hold two general meetings of our shareholders at our offices located at
6201 America Center Drive, San Jose, CA 95002, U.S.A. We will hold an extraordinary general
meeting of shareholders at 9:00 a.m., Pacific time and our 2019 annual general meeting of
shareholders will begin at 9:15 a.m., Pacific time, or immediately following the conclusion or
adjournment of the extraordinary general meeting.
The matters to be voted upon at each meeting are listed in the notices that follow this letter and are
described in more detail in the accompanying joint proxy statement. We urge you to read the entire
joint proxy statement carefully before voting. Part I of the accompanying joint proxy statement provides
general information about the meetings, Part II describes the proposals to be voted upon at the
extraordinary general meeting of shareholders, Part III describes the matters to be voted upon at the
2019 annual general meeting of shareholders and related information, and Part IV provides additional
information, including information about our named executive officers and their compensation.
IMPORTANT NOTICE REGARDING ELECTRONIC AVAILABILITY OF JOINT 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 9, 2019, we will mail to 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 joint 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.
IMPORTANT NOTICE REGARDING PROXIES: There are two forms of proxy cards included in our
proxy materials—one for the extraordinary general meeting and one for the 2019 annual general
meeting. It is very important that shareholders return or complete both proxy cards or provide voting
instructions for both proxy cards to ensure that their votes are represented at the relevant meetings.
You may revoke your proxies at any time prior to the time they are voted. Registered shareholders
who are present at the meetings may revoke their proxies and vote in person or, if they prefer, may
abstain from voting in person and allow their proxies to be voted.
Sincerely,
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Tay Hong Chin Regina
Company Secretary
Singapore
July 9, 2019
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FLEX LTD.
(Incorporated in the Republic of Singapore)
(Company Registration Number 199002645H)
NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
To Be Held on August 20, 2019
To Our Shareholders:
You are cordially invited to attend, and NOTICE IS HEREBY GIVEN of, an extraordinary 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 20, 2019, for the purpose of approving amendments to the current Constitution of the
Company (the “2016 Constitution”).
We are asking shareholders to approve amendments to the 2016 Constitution at the extraordinary
general meeting in order to, as described in more detail in the accompanying joint proxy statement, to:
1. Remove the requirement that the Company’s directors retire by rotation and effect related
changes to the 2016 Constitution to account for the removal of the rotational nature of
director elections (such amendment is referred to in the joint proxy statement as the
“Declassification Amendment”) (EGM Proposal No. 1);
2.
Increase the maximum size of the Board of Directors to twelve members (EGM Proposal
No. 2); and
3. Revise the 2016 Constitution to account for changes in Singapore law (EGM Proposal
No. 3).
If the Declassification Amendment is approved, the Declassification Amendment will be effective
immediately upon approval and shareholders will have the ability to vote on the re-election of all of the
Company’s directors at the 2019 annual general meeting of shareholders that will immediately follow
the extraordinary general meeting.
Depending on the context, references in this notice and the joint proxy statement to the Company’s
“Constitution” shall mean the 2016 Constitution or, if shareholders approve any or all of the proposed
amendments to the 2016 Constitution at the extraordinary general meeting, the Constitution as so
amended.
The full text of the resolution proposed for approval by our shareholders is as follows:
1.
To pass the following resolution which will be proposed as a Special Resolution:
“RESOLVED THAT, Articles 58(c), 90, 94, 95, 97 and 100 of the Constitution of the Company
be altered in the manner set out in Annex A-1 as attached hereto.”
2.
To pass the following resolution which will be proposed as a Special Resolution:
“RESOLVED THAT, Article 82 of the Constitution of the Company be altered in the manner
set out in Annex A-2 as attached hereto.”
3.
To pass the following resolution which will be proposed as a Special Resolution:
“RESOLVED THAT, Articles 54 and 116 of the Constitution of the Company be altered in the
manner set out in Annex A-3 as attached hereto.”
4.
To transact any other business which may properly be put before the extraordinary general
meeting.
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2019 Proxy Statement
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Notes
Eligibility to Vote at Extraordinary General Meeting; Receipt of Notice. The Board of Directors has
fixed the close of business on June 14, 2019 as the record date for determining those shareholders of
the Company who will be entitled to receive copies of this notice and accompanying joint proxy
statement. However, all shareholders of record on August 20, 2019, the date of the extraordinary
general meeting, will be entitled to vote at the extraordinary 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 extraordinary general meeting is entitled to
appoint a proxy to attend and vote on his or her behalf. A proxy need not also be a shareholder.
Whether or not you plan to attend the meeting, we encourage you to vote promptly. You may
vote your shares through one of the methods described in the enclosed joint 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 extraordinary 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. Registered 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. The Constitution was amended in 2016 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 extraordinary general meeting of shareholders. On or about July 9, 2019,
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 joint proxy
statement and our annual report and to submit their proxies via the Internet.
Personal Data Privacy. By submitting an instrument appointing a proxy(ies) and/or representative(s)
to attend, speak and vote at the extraordinary 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 extraordinary general meeting (including any adjournment thereof) and the
preparation and compilation of the attendance lists, minutes and other documents relating to the
extraordinary 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 9, 2019
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You should read the entire joint 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 joint proxy statement.
Important Notice Regarding the Availability of Proxy Materials for the Extraordinary General
Meeting of Shareholders and the 2019 Annual General Meeting of Shareholders to Be Held on
August 20, 2019. This notice of the extraordinary general meeting and the accompanying joint
proxy statement and our annual report to shareholders are available on our website at
https://investors.flex.com/financials.
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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 20, 2019
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 9:15 a.m., Pacific time or immediately following
the conclusion or adjournment of the extraordinary general meeting to be held on the same day,
August 20, 2019, for the following purposes:
•
•
•
•
•
•
In the event that the Declassification Amendment is approved by the shareholders at the
extraordinary general meeting, to re-elect all of the directors of the Company (AGM Proposal
No. 1);
In the event that the Declassification Amendment is not approved by the shareholders at the
extraordinary general meeting, to re-elect the following directors: Revathi Advaithi, Jill A.
Greenthal, Charles K. Stevens, III, Willy C. Shih, and William D. Watkins (AGM Proposal
No. 2);
To approve the re-appointment of Deloitte & Touche LLP as our independent auditors for the
2020 fiscal year and to authorize the Board of Directors, upon the recommendation of the
Audit Committee, to fix their remuneration (AGM Proposal No. 3);
To approve a general authorization for the directors of Flex to allot and issue ordinary shares
(AGM Proposal No. 4);
To hold a non-binding, advisory vote on executive compensation (AGM Proposal No. 5); and
To approve a renewal of the Share Purchase Mandate permitting Flex to purchase or
otherwise acquire its own issued ordinary shares (AGM Proposal No. 6).
The full text of the resolutions proposed for approval by our shareholders is as follows:
As Ordinary Business
1. Subject to and contingent upon the passing of Proposal No. 1 set forth in the Notice of
Extraordinary General Meeting dated July 9, 2019 as a Special Resolution to amend the
Constitution of the Company to remove the requirement that the Company’s directors retire by
rotation (the “Declassification Amendment”), to re-elect each of the following directors, who will
retire pursuant to Article 94 of our amended Constitution, to the Board of Directors:
(a) Revathi Advaithi;
(b) Michael D. Capellas;
(c) Jill A. Greenthal;
(d) Jennifer Li;
(e) Marc A. Onetto;
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(f) Willy C. Shih;
(g) Charles K. Stevens, III;
(h) Lay Koon Tan;
(i) William D. Watkins; and
(j)
Lawrence A. Zimmerman.
2.
In the event that Proposal No. 1 set forth in the Notice of Extraordinary General Meeting dated
July 9, 2019 is not passed as a Special Resolution by the shareholders, to re-elect:
each of the following directors, who will retire by rotation pursuant to Article 94 of the 2016
Constitution, to the Board of Directors:
a. Willy C. Shih;
b. William D. Watkins; and
each of the following directors, who will cease to hold office pursuant to Article 100 of the 2016
Constitution, to the Board of Directors:
c. Revathi Advaithi, who was appointed as a director by the Board of Directors effective as of
February 11, 2019;
d.
Jill A. Greenthal, who was appointed as a director by the Board of Directors effective as of
November 14, 2018; and
e. Charles K. Stevens, III, who was appointed as a director by the Board of Directors effective
as of November 14, 2018.
3. To consider and vote upon a proposal to re-appoint Deloitte & Touche LLP as our independent
auditors for the fiscal year ending March 31, 2020, and to authorize our Board of Directors, upon
the recommendation of the Audit Committee of the Board of Directors, to fix their remuneration.
As Special Business
The full text of the resolutions proposed for approval by our shareholders is as follows:
4. 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 (“Ordinary Shares”); and/or
(ii) make or grant offers, agreements, options, performance share units or restricted share
units that might or would require Ordinary Shares 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),
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 the Constitution of the
Company; and
(b)
(notwithstanding that the authority conferred by this resolution may have ceased to be in
force) allot and issue Ordinary Shares in pursuance of any offer, agreement, option,
performance share unit or restricted share unit made or granted by our Directors while this
resolution was in force,
and unless revoked or varied by the Company in general meeting, that such authority shall
continue in force until (i) the conclusion of our next annual general meeting or (ii) the expiration of
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the period within which our next annual general meeting is required by law to be held, whichever
is the earlier.”
5. To consider and put to a non-binding, advisory vote the following non-binding, advisory resolution:
“RESOLVED THAT, the shareholders of 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 joint proxy statement captioned
‘Executive Compensation’.”
This resolution is being proposed to shareholders as required pursuant to Section 14A of the U.S.
Securities Exchange Act of 1934, as amended. The shareholders’ vote on this resolution is advisory
and non-binding in nature, will have no legal effect and will not be enforceable against Flex or its
Board of Directors.
6. 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;
(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)
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
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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
(ii)
in the case of an off-market purchase pursuant to an equal access scheme, at a
premium of up to but not greater than 5 percent above the average of the closing
price per Ordinary Share over the five trading days before the day on which the
purchases are made; 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 or she may consider expedient or necessary to give effect to the transactions
contemplated and/or authorized by this resolution.”
Notes
Singapore Financial Statements. At the 2019 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, 2019, 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 joint proxy statement and will not be sought at the
2019 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 14, 2019 as the record date for determining those shareholders of the
Company who will be entitled to receive copies of this notice and accompanying joint proxy statement.
However, all shareholders of record on August 20, 2019, the date of the 2019 annual general meeting,
will be entitled to vote at the 2019 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 2019 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 joint 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 2019 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,
which provide, among other things, for the transmission of voting instructions up until
11:59 p.m. Eastern Time the day before the meetings. You may revoke your proxy at any time prior
to the time it is voted. Registered 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. The Constitution was amended in 2016 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 9, 2019, we
will mail to 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 joint proxy statement and
our annual report and to submit their proxies via the Internet.
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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.
Personal Data Privacy. By submitting an instrument appointing a proxy(ies) and/or representative(s)
to attend, speak and vote at the 2019 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 2019 annual general meeting (including any adjournment thereof) and the
preparation and compilation of the attendance lists, minutes and other documents relating to the 2019
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 9, 2019
You should read the entire joint 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 joint proxy statement.
Important Notice Regarding the Availability of Proxy Materials for the Extraordinary General
Meeting of Shareholders and the 2019 Annual General Meeting of Shareholders to Be Held on
August 20, 2019. This notice of the annual general meeting and 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 Number
NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS .....................................i
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS ....................................................v
SUMMARY INFORMATION ABOUT THE MEETINGS ...........................................................................1
Extraordinary General Meeting of Shareholders ............................................................................1
Voting Matters at the Extraordinary General Meeting ....................................................................1
2019 Annual General Meeting of Shareholders ..............................................................................2
Voting Matters at the Annual General Meeting ...............................................................................2
How to Cast Your Vote.......................................................................................................................3
Board Nominees.................................................................................................................................3
BUSINESS SUMMARY............................................................................................................................5
CORPORATE GOVERNANCE AND SUSTAINABILITY HIGHLIGHTS .................................................9
JOINT PROXY STATEMENT.................................................................................................................12
PART I—INFORMATION ABOUT THE MEETINGS .............................................................................12
VOTING RIGHTS AND SOLICITATION OF PROXIES .........................................................................12
PART II—PROPOSALS TO BE CONSIDERED AT THE EXTRAORDINARY
GENERAL MEETING OF SHAREHOLDERS .......................................................................................15
EGM Proposal No. 1—The Declassification Amendment ............................................................15
EGM Proposal No. 2—Amendment to Increase the Maximum Number of Directors
on the Board .....................................................................................................................................17
EGM Proposal No. 3—Amendments to Conform to Changes to the Companies Act...............17
PART III—PROPOSALS TO BE CONSIDERED AT THE 2019 ANNUAL GENERAL
MEETING OF SHAREHOLDERS..........................................................................................................18
AGM PROPOSAL NO. 1: RE-ELECTION OF ALL DIRECTORS (IF THE
DECLASSIFICATION AMENDMENT IS APPROVED AT THE EXTRAORDINARY
GENERAL MEETING) ...........................................................................................................................18
Qualifications of Directors and Nominees ....................................................................................18
Nominees to our Board of Directors..............................................................................................19
AGM PROPOSAL NO. 2: RE-ELECTION OF DIRECTORS (IF THE
DECLASSIFICATION AMENDMENT IS NOT APPROVED AT THE EXTRAORDINARY
GENERAL MEETING) ...........................................................................................................................28
CORPORATE GOVERNANCE ..............................................................................................................30
Code of Business Conduct and Ethics..........................................................................................30
Shareholder Communications with our Board of Directors ........................................................30
Board of Directors............................................................................................................................30
Director Independence ....................................................................................................................30
Proposal to Approve the Declassification Amendment ...............................................................31
Board Leadership Structure and Role in Risk Oversight ............................................................31
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Succession Planning .......................................................................................................................32
Board Committees ...........................................................................................................................32
Director Share Ownership Guidelines ...........................................................................................36
CORPORATE SUSTAINABILITY ..........................................................................................................37
NON-MANAGEMENT DIRECTORS’ COMPENSATION FOR FISCAL YEAR 2019 ............................40
Fiscal Year 2019 Annual Cash Compensation ..............................................................................40
Fiscal Year 2019 Equity Compensation .........................................................................................41
Compensation for the Non-Employee Chairman of the Board ...................................................41
Director Summary Compensation in Fiscal Year 2019.................................................................42
Change of Control and Termination Provisions ...........................................................................43
AGM PROPOSAL NO. 3: RE-APPOINTMENT OF INDEPENDENT AUDITORS
FOR FISCAL YEAR 2020 AND AUTHORIZATION OF OUR BOARD TO FIX THEIR
REMUNERATION ..................................................................................................................................44
Principal Accountant Fees and Services.......................................................................................44
Audit Committee Pre-Approval Policy ...........................................................................................45
AUDIT COMMITTEE REPORT..............................................................................................................46
AGM PROPOSAL NO. 4: ORDINARY RESOLUTION TO AUTHORIZE ORDINARY
SHARE ISSUANCES .............................................................................................................................47
AGM PROPOSAL NO. 5: NON-BINDING, ADVISORY RESOLUTION ON EXECUTIVE
COMPENSATION ..................................................................................................................................49
AGM PROPOSAL NO. 6: ORDINARY RESOLUTION TO RENEW THE SHARE
PURCHASE MANDATE.........................................................................................................................52
PART IV—ADDITIONAL INFORMATION..............................................................................................57
EXECUTIVE OFFICERS ........................................................................................................................57
COMPENSATION COMMITTEE REPORT............................................................................................59
COMPENSATION DISCUSSION AND ANALYSIS ...............................................................................60
COMPENSATION RISK ASSESSMENT ...............................................................................................93
EXECUTIVE COMPENSATION .............................................................................................................94
CEO PAY RATIO ..................................................................................................................................110
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..................114
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS .......................................116
Review of Related Person Transactions ......................................................................................116
Transactions with Related Persons..............................................................................................116
SHAREHOLDER PROPOSALS FOR THE 2020 ANNUAL GENERAL MEETING ............................118
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ...................................................119
SINGAPORE STATUTORY FINANCIAL STATEMENTS.....................................................................119
OTHER MATTERS...............................................................................................................................120
ANNEX A: PROPOSED AMENDMENTS TO THE 2016 CONSTITUTION.........................................A-1
ANNEX B: RECONCILIATION OF GAAP TO 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 9, 2019, we will mail to 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 joint 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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Joint Proxy Statement Summary
SUMMARY INFORMATION ABOUT THE MEETINGS
FLEX LTD.
This summary highlights information contained elsewhere in this joint proxy statement. This summary
does not contain all of the information that you should consider, and you should read the entire joint
proxy statement carefully before voting. For more complete information regarding the Company’s
2019 fiscal year performance, please review the Company’s 2019 Annual Report.
Extraordinary General Meeting of Shareholders
Time and Date: 9:00 a.m. Pacific time, August 20, 2019
Place: 6201 America Center Drive, San Jose, CA 95002, U.S.A.
Record Date: June 14, 2019
Voting: All shareholders as of the meeting date are entitled to vote. Each Ordinary Share is
entitled to one vote for each of the proposals to be voted on.
Voting Matters at the Extraordinary General Meeting
Board Vote Page
Proposal Number Matter Recommendation Reference
EGM Proposal
No. 1
EGM Proposal
No. 2
EGM Proposal
No. 3
Approval of amendments to the 2016 Constitution to FOR 15
remove the requirement that the Company’s directors
retire by rotation (effectively declassifying the
Company’s Board) and effect related changes (also
referred to as the “Declassification Amendment”)
Approval of amendments to the 2016 Constitution to FOR 17
increase the maximum number of directors on the
Board from eleven to twelve
Approval of amendments to the 2016 Constitution to FOR 17
conform to simplified statutory requirements under the
Companies Act regarding the timing of annual general
meetings and to conform to changes to the Companies
Act (Chapter 50) of Singapore that removed the
requirement that companies have common seals
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Joint Proxy Statement Summary
2019 Annual General Meeting of Shareholders
Time and Date: 9:15 a.m. Pacific time, August 20, 2019, or immediately following the
extraordinary general meeting of shareholders
Place: 6201 America Center Drive, San Jose, CA 95002, U.S.A.
Record Date: June 14, 2019
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
AGM Proposal
No. 1
AGM Proposal
No. 2
AGM Proposal
No. 3
If shareholders approve the Declassification FOR each 18
Amendment at the extraordinary general meeting, Director
re-election of all of the directors of the Company Nominee
If the Declassification Amendment is not so approved FOR each 28
by the shareholders at the extraordinary general Director
meeting, re-election as directors of Flex: each of the Nominee
following directors who are retiring by rotation pursuant
to the 2016 Constitution and, being eligible, are
standing for re-election:
Willy C. Shih
William D. Watkins
and each of the following directors who will cease to
hold office pursuant to the 2016 Constitution and,
being eligible, are standing for re-election:
Revathi Advaithi
Jill A. Greenthal
Charles K. Stevens, III
Re-appointment of Deloitte & Touche LLP as our FOR 44
independent auditors for the fiscal year ending
March 31, 2020
AGM Proposal
No. 4
General authorization to allot and issue FOR 47
Ordinary Shares
AGM Proposal
No. 5
AGM Proposal
No. 6
Advisory vote on executive compensation FOR 49
Authorization to repurchase Ordinary Shares FOR 52
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Joint Proxy Statement Summary
How to Cast Your Vote
Your vote is important. You may vote in person at the meetings 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 meetings. 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 meetings,
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.
Vote by Proxy:
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 19)
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).
At the extraordinary general meeting immediately preceding Flex’s 2019 annual general meeting, we
are asking shareholders to approve the Declassification Amendment, which will provide for all
directors of the Company for the time being to retire at each annual general meeting and be eligible
for re-election.
If the Declassification Amendment is approved by the shareholders at the extraordinary general
meeting, all of our directors will retire and will be nominees for reelection at the annual general
meeting. The following table provides summary information about each of the Company’s directors:
Director Independent Committee Other Public
Name Since (Yes/No) Memberships Company Boards
Revathi Advaithi . . . . . . . . 2019 No None None
Michael D. Capellas . . . . . 2014 Yes Nominating and Corporate Cisco Systems, Inc.
Governance (Chair)
Jill A. Greenthal . . . . . . . . . 2018 Yes None Akamai Technologies, Inc.
Cars.com Inc.
Houghton Mifflin Harcourt
Company
Jennifer Li . . . . . . . . . . . . . 2018 Yes Compensation Philip Morris International
Inc.
ABB Ltd.
Marc Onetto . . . . . . . . . . . 2014 Yes Audit None
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Joint Proxy Statement Summary
Director Independent Committee Other Public
Name Since (Yes/No) Memberships Company Boards
Willy C. Shih . . . . . . . . . . . 2008 Yes Compensation None
Charles K. Stevens, III . . . 2018 Yes Audit Masco Corporation
Lay Koon Tan . . . . . . . . . . 2012 Yes Compensation None
William D. Watkins . . . . . . 2009 Yes Compensation (Chair) Maxim Integrated
Nominating and Products, Inc.
Corporate Governance Avaya Holdings Corp.
Lawrence A. Zimmerman . . 2012 Yes Audit (Chair) Nominating Aptiv PLC
and Corporate
Governance
If the Declassification Amendment is not approved by our shareholders at the extraordinary general
meeting to be held immediately prior to the 2019 annual general meeting, the Company’s directors will
continue retire by rotation at the 2019 annual general meeting in accordance with the Constitution,
and consequently, AGM Proposal No. 1 will be withdrawn and will not be voted upon at the 2019
annual general meeting; instead, AGM Proposal No. 2 will be voted upon, relating to the re-election of
the following directors of the Company:
Revathi Advaithi
Jill A. Greenthal
Charles K. Stevens, III
Willy C. Shih
William D. Watkins
-4-
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BUSINESS SUMMARY
Who We Are and What We Do
We are a globally-recognized provider of Sketch-to-Scale® services—innovative design, engineering,
manufacturing, and supply chain services and solutions—from conceptual sketch to full-scale
production. We design, build, deliver and manage complete packaged consumer and enterprise
products, from medical devices and connected automotive systems to sustainable lighting and cloud
data center infrastructures, for companies of all sizes in various industries and end-markets, through
our activities in the following segments:
Segment Business Includes:
High Reliability
Solutions (HRS)
Industrial and Emerging
Industries (IEI)
Communications & Enterprise
Compute (CEC)
Consumer Technologies
Group (CTG)
Flex Strategy
• Health solutions business, including surgical equipment, drug
delivery, diagnostics, telemedicine, disposable devices,
imaging and monitoring, patient mobility and ophthalmology.
• Automotive business, including vehicle electrification,
connectivity, autonomous, and smart technologies.
• Energy, including advanced metering infrastructure, energy
storage, smart lighting, smart solar energy.
• Industrial, including semiconductor and capital equipment,
office solutions, household industrial and lifestyle, industrial
automation and kiosks.
• Telecom business of radio access base stations, remote radio
heads and small cells for wireless infrastructure.
• Networking business, which includes optical, routing, and
switching products for 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-related businesses in IoT enabled devices, audio
and consumer power electronics, mobile devices.
• Various supply chain solutions for consumer, computing and
printing devices.
Over the past several years, Flex has been engaged in a long-term strategy focused on portfolio
evolution and driving higher value-added services that align with our customers’ needs and
requirements in order to improve operating and financial results, including improving profit margins,
capitalizing on prior investments, streamlining our investment portfolio and returning to strong free
cash flow generation.
As we have continued to evolve our portfolio and Sketch-to-Scale® strategy, we remain focused on
customer experience, investing in our higher margin segments while being selective in the markets
and products categories we focus on, pursuing opportunities that lead to full manufacturing and supply
chain relationships, and creating shareholder value.
During the past several years, we have evolved our long-term portfolio towards a mix of businesses
which possess longer product life cycles and higher segment operating margins such as reflected in
our IEI and HRS businesses. We have expanded our design and engineering relationships through
our product innovation centers and global design centers. In fiscal year 2019, the Company continued
to take targeted actions to optimize our business, most notably within our CTG segment, where we
are executing on our long-term strategy by actively managing under-performing accounts and are
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focused on partnering with well-funded, leading multi-national brands that control multiple categories
of products and have regional demand requirements.
The Company is focused on disciplined sustainable execution on our core business processes as well
as selective and disciplined growth in areas that can drive margin improvement and provide value for
the Company and its customers. We believe that our continued business transformation is
strategically positioning 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.
Fiscal Year 2019 Highlights (page 61)
CEO Transition
In February 2019, Revathi Advaithi became our Chief Executive Officer, or CEO, following the
retirement of our former CEO, Michael McNamara in December 2018. Ms. Advaithi brings a depth and
breadth of capabilities from engineering to manufacturing to advanced supply chain management, as
well as exceptional leadership skills, to the CEO position. Prior to joining Flex, Ms. Advaithi was
president and chief operating officer for the Electrical Sector business for Eaton, a power
management company. Ms. Advaithi was appointed following an extensive and thorough search led by
the Board.
Performance and Company Highlights For Fiscal Year 2019
During fiscal year 2019, we achieved positive results on several fronts, improving the quality of our
sales mix, expanding margins, returning to positive free cash flow generation, and streamlining our
investment portfolio. Our CEC segment delivered year over year revenue growth of 8% and our IEI
segment delivered year over year revenue growth of 4%. Key financial highlights from the fiscal year
include(1):
• We achieved net sales of $26.3 billion, an increase of 3% compared to the prior year.
• Adjusted operating income was: $872 million, an 11% increase as compared with fiscal 2018.
Adjusted net income followed a similar path and was $603 million, a 3% increase over the
previous year.
• We delivered adjusted EPS of $1.14 per share, a 4.6% increase compared with the prior year.
• We delivered on our commitment to return over 50% of free cash flow to shareholders, with
$189 million of shares repurchased in fiscal year 2019.
Financial Results Below Expectations and Performance Improvement Actions
While we achieved the positive results described above, fiscal year 2019 was also a challenging year
for our business and our shareholders, marked by some financial results below expectations (and
shareholder value declined relative to where Flex finished fiscal year 2018) and a CEO transition. In
the face of these challenges, the Board of Directors and the Company’s management have taken, and
will continue to take, significant actions to achieve short-term and long-term financial results
positioning the Company for future gains in shareholder value, as summarized below.
• Flex’s Chairman of the Board and management team engaged in a business review to identify
performance improvement opportunities.
• Flex’s Chairman of the Board and management engaged actively with shareholders to solicit
input on key concerns and outline Flex’s plans for improving performance going forward.
(1) See Annex B to this joint proxy statement for a reconciliation of non-GAAP and GAAP financial
measures.
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Executive Compensation Highlights (page 62)
Pay and Performance Alignment For Fiscal Year 2019
Our compensation philosophy is to reward above-target performance when achieved, and below
target (including paying zero) when targeted results are not delivered. We also seek to deliver a
significant portion of executive pay in the form of equity awards, which are directly aligned with value
delivered to shareholders.
With fiscal year 2019 performance results below our targeted levels, pay outcomes and expectations
for Flex’s NEOs were negatively impacted accordingly. Highlights include:
• We maintained all NEOs’ base salaries with no increase, other than Mr. Offer, who received a
10% increase in the fourth quarter of fiscal year 2019 based upon exceptional contributions in a
period of significant transition and assumption of additional duties. Base salaries were
positioned in the aggregate at approximately the peer group median.
• In light of financial performance, the Board, upon the recommendation of the Compensation
Committee, reduced PSU and service-based RSU awards granted to the NEOs on June 19,
2018 by 15%.
• Based on overall financial results that were below targeted performance levels, fiscal year 2019
bonuses paid out at approximately 66% of target for corporate level NEOs, with two business
unit leaders (Messrs. Humphries and Britt) exceeding total corporate results with payouts at
104.4% and 130.1% of target, respectively, based on strong business unit results.
• We paid out the long-term relative total shareholder return (TSR) PSU cycle that closed during
fiscal year 2019 at 100% of target in June 2018 based upon TSR results that were at the 50th
percentile over the three-year performance cycle that began in June 2015.
• The Flex fiscal year 2017—2019 FCF PSU and long-term cash incentive cycle did not provide
any payout as cumulative FCF results over the three-year period were below the threshold
levels.
• Based on Flex’s closing share price as of March 29, 2019, the relative TSR award cycles as of
the end of fiscal year 2019 (2016—2019, 2017—2020 and 2018—2021) are projected to have
no payout unless Flex experiences significant share price improvement going forward.
• In an effort to further align executive compensation with shareholder value delivered, we shifted
away from a previous long term incentive plan (LTIP) structure that measured both cumulative
FCF over a multi-year period as well as relative TSR. For fiscal year 2019, we granted only
relative TSR PSUs.
• We funded the performance-based portion of our then-current NEOs’ deferred compensation
plans in fiscal year 2019 with a value that averaged 28.6% of our then-current NEOs’
respective base salaries, which was below target.
• We provided a responsible CEO retirement package to Mr. McNamara in connection with his
retirement that limited exit payments primarily to required plan-based awards.
• To ensure leadership continuity during the CEO transition, we provided retention equity awards
to the other NEOs that consist of a combination or performance- and time-based awards. In
addition, we implemented a formal, market-aligned, executive severance plan to provide clarity
on the treatment of terminations in the event of various forms of departure from the Company.
• We established a compensation approach for our new CEO with a high degree of market
alignment and included transition awards that were limited to make-whole values from her
previous role. Key elements of the go-forward CEO compensation program include:
— Base salary of $1,150,000, somewhat below market median.
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— Target annual bonus of 150% of salary (a pro-rata portion will be paid at target for her short
time in the CEO role during fiscal year 2019).
— A fiscal year 2020 equity grant of $7.5 million which will be aligned with the overall Flex
executive compensation program and will have 50% of the grant date value in the form of
relative TSR PSUs.
— Resulting target total annual compensation is below the median of Flex’s peers.
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CORPORATE GOVERNANCE AND SUSTAINABILITY HIGHLIGHTS
Flex strives for excellence in corporate governance practices, which the Company recognizes as
being fundamental to securing the trust of investors and key stakeholders. Flex’s management,
together with our Board of Directors, continually evaluates processes and implements procedures
designed to maintain strong governance and operations standards. Below are some of the highlights
of the Company’s corporate governance practices.
Our Board of Directors
DIRECTOR
INDEPENDENCE
1
9
Independent
Management
DIRECTOR EXPERIENCE AND SKILLS
I
E
C
N
E
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E
P
X
E
Supply Chain
Public Company Director Experience
Gender, Ethnic, or National Diversity
Global Business
M&A
Technology
Leadership
Financial
2
2
7
7
8
6
6
4
# OF DIRECTORS
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Other Director Independence and Governance Practices
Separate Chairman and CEO: The Chairman of the Board is independent, and the Board has
separated the roles of Chairman and CEO since 2003.
Executive Sessions of Independent Directors: Our independent directors regularly meet in
private executive sessions without management present.
Completely Independent Committee Membership: All committees of the Board are
comprised exclusively of independent directors.
Board and Committee Accountability: The Board of Directors and its committees conduct
annual self-evaluations and the Board and its committees routinely evaluate the experiences,
qualifications, skills, and attributes of the Board/committee members.
Director Share Ownership Requirements: In 2009, the Board of Directors adopted share
ownership guidelines for our non-employee directors. The share ownership guidelines
encourage our non-employee directors to hold a minimum number of our Ordinary Shares
equivalent to four (4) times the annual cash retainer provided to non-employee directors. 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.
Board Oversight of Risk Management: The Board is responsible for overseeing the
Company’s risk management. As part of this oversight, the Board 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. Each Board committee is responsible for
oversight of risk management practices for categories of risks relevant to its functions.
No Hedging or Pledging: We do not allow hedging or short sales of Company equity, nor do
we permit pledging of Company equity as collateral for loans.
Shareholder Rights and Engagement
Proposal to De-Classify the Board: At the extraordinary general meeting, which is to be held
immediately preceding our 2019 annual general meeting, we are proposing—and the Board is
recommending that shareholders vote in favor of the proposal—to amend Flex’s 2016
Constitution to remove the requirement that directors retire by rotation and, instead, have
directors elected by shareholders on an annual basis.
If this proposal is approved, such amendments to the 2016 Constitution will be effective
immediately upon approval and shareholders will vote on the re-election of all of the Company’s
directors at the 2019 annual general meeting of shareholders that will immediately follow the
extraordinary general meeting.
Majority Vote Standard: The Company has a majority voting standard for the election of
directors.
Shareholder Engagement: The Company is committed to ongoing shareholder engagement.
During fiscal year 2019, we interacted with holders of approximately 64% of our share voting
power.
Annual Say-on-Pay Vote: We also provided shareholders with a “say-on-pay” advisory vote on
executive compensation at our 2018 annual general meeting held on August 16, 2018.
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Flex Sustainability Achievements
Sustainability remains central to who we are and how we operate. Our sustainability governance
principles form a core part of our business operations. Through innovation and smart technologies,
our sustainable solutions positively impact people and the environment. Our commitment helps
customers, partners, and other businesses increase their own efforts to build a more sustainable
future.
The Audit Committee of our Board of Directors has oversight of the Corporate Sustainability Program.
Sustainability updates are delivered regularly to our executive management team.
We focus our commitments, policies, management system, multiyear goals, programs, and initiatives
on five cornerstones that drive sustainability across the Company and our value chain: people,
community, environment, innovation, and integrity.
Innovation
Since 2016, have
manufactured
solar PV modules
and solar trackers
to power 3.2M
homes
Management
System
Goal: Audit 100%
of manufacturing
sites by 2020
Community
+200,000 hours
volunteered
globally since
2014
Environment
Goal: Reduce CO2e
emissions by at least 10%
normalized to revenue
(base year 2016).
Our renewable energy
capacity increased by
+30% since 2016
Supply Chain:
97% of our new
suppliers have
been screened on
social and
environmental
criteria
People
Incident rate: 0.43.
14% reduction vs.
prior year
Integrity
97% of employees
have completed
Code of Business
Conduct and Ethics
training
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Part I—Information About the Meetings
FLEX LTD.
JOINT PROXY STATEMENT
FOR THE EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
To Be Held on August 20, 2019
9:00 a.m. (Pacific time)
AND THE 2019 ANNUAL GENERAL MEETING OF
SHAREHOLDERS
To Be Held on August 20, 2019
9:15 a.m. (Pacific time)
(or immediately following the conclusion or adjournment of the extraordinary general meeting)
Meetings to be held at our offices
6201 America Center Drive
San Jose, CA 95002, U.S.A.
PART I—INFORMATION ABOUT THE MEETINGS
We are furnishing this joint proxy statement in connection with the solicitation by our Board of
Directors of proxies to be voted at the extraordinary general meeting of shareholders and the 2019
annual general meeting of our shareholders, or at any adjournments thereof, for the purposes set
forth in the notices of the extraordinary general meeting and annual general meeting that accompany
this joint proxy statement. Unless the context requires otherwise, references in this joint 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 cards were first mailed on or about July 9, 2019 to
shareholders of record as of June 14, 2019.
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 proxies 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 and Principal Executive Office. The mailing address of our registered office, which also
constitutes our principal executive office, is No. 2 Changi South Lane, Singapore 486123.
VOTING RIGHTS AND SOLICITATION OF PROXIES
The close of business on June 14, 2019 is the record date for shareholders entitled to notice of the
extraordinary general meeting and 2019 annual general meeting. All of the Ordinary Shares issued
and outstanding on August 20, 2019, the date of both the extraordinary general meeting and the
annual general meeting, are entitled to be voted at each of the extraordinary general meeting and
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annual general meeting, and shareholders of record on August 20, 2019 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 14, 2019, we had 513,926,093 Ordinary Shares issued and outstanding.
Proxies. Ordinary shares represented by proxies in the forms made available in connection with this
joint proxy statement that are properly executed and returned to us will be voted at the extraordinary
general meeting and the 2019 annual general meeting, as applicable, in accordance with our
shareholders’ instructions.
If your Ordinary Shares are held through a broker, a bank, or other nominee, which is sometimes
referred to as holding shares in “street name,” you have the right to instruct your broker, bank or other
nominee on how to vote the shares in your account. Your broker, bank or other nominee will send you
a voting instruction form for you to use to direct how your shares should be voted.
Quorum and Required Vote. Representation at each of the extraordinary general meeting and the
2019 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 each of the extraordinary general meeting
and 2019 annual general meeting.
• Consistent with the Company’s historical practice, the chair of the extraordinary general
meeting and the 2019 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 at least three-fourths of the shares voting at the extraordinary general
meeting, is required at the extraordinary general meeting, to approve each of the proposed
amendments to the 2016 Constitution (set forth in EGM Proposal Nos. 1, 2 and 3 for the
extraordinary general meeting).
• The affirmative vote by a simple majority of the votes cast is required at the 2019 annual
general meeting, to re-elect the directors nominated pursuant to AGM Proposal No. 1 or 2, to
re-appoint Deloitte & Touche LLP as our independent auditors pursuant to AGM Proposal
No. 3, to approve the ordinary resolution to allot and issue Ordinary Shares contained in AGM
Proposal No. 4, to approve the non-binding, advisory resolution regarding executive
compensation contained in AGM Proposal No. 5, and to approve the ordinary resolution to
renew the Share Purchase Mandate contained in AGM Proposal No. 6.
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 each of the extraordinary general meeting and the 2019 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.
If you are a beneficial owner, your broker, bank or other nominee has authority to vote your shares for
or against EGM Proposal No. 2 regarding the amendments to the 2016 Constitution to increase the
maximum number of directors on the Board, EGM Proposal No. 3 regarding amendments to the 2016
Constitution to conform to simplified statutory requirements under the Companies Act and AGM
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Part I—Information About the Meetings
Proposal No. 3 regarding 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 joint proxy statement without
receiving voting instructions from you. It is very important that you instruct your broker, bank or
other nominee how to vote on these proposals. If you do not complete the voting instructions, your
shares will not be considered in the election of directors or any other proposal included in this joint
proxy statement other than EGM Proposal No. 2 regarding the amendments to the 2016 Constitution
to increase the maximum number of directors on the Board, EGM Proposal No. 3 regarding
amendments to the 2016 Constitution to conform to simplified statutory requirements under the
Companies Act and AGM Proposal No. 3 regarding 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 extraordinary general meeting “FOR” EGM
Proposal Nos. 1, 2 and 3 to approve the specified amendments to the 2016 Constitution at the
extraordinary general meeting.
If you are a registered shareholder, in the absence of contrary instructions, shares represented
by proxies submitted by you will be voted at the 2019 annual general meeting: “FOR” each of
the Board nominees in AGM Proposal No. 1 or 2, as applicable; and “FOR” AGM Proposal Nos. 3
through 6 at the 2019 annual general meeting.
Our management does not know of any matters to be presented at the extraordinary general meeting
or the 2019 annual general meeting other than those set forth in this joint proxy statement and in the
notices accompanying this joint proxy statement. If other matters should properly be put before either
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
extraordinary general meeting and/or the 2019 annual general meeting by:
• submitting a subsequently dated proxy; or
• by attending the meetings 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
extraordinary general meeting or the 2019 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
joint proxy statement have been presented in U.S. dollars.
-14-
2019 Proxy Statement
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Part II—EGM Proposal Nos. 1, 2 and 3 to be Considered at the Extraordinary General Meeting
of Shareholders
PART II—PROPOSALS TO BE CONSIDERED AT THE EXTRAORDINARY GENERAL MEETING
OF SHAREHOLDERS
The Company is seeking shareholder approval of amendments to the 2016 Constitution to (i) remove
the requirement that directors retire by rotation (in other words, to remove the provisions under the
2016 Constitution that effectively classify the Board); (ii) increase the maximum number of directors
on the Board from eleven to twelve; and (iii) effect certain other changes to conform to recent changes
to the Companies Act.
The Board of Directors has unanimously approved and declared advisable, and recommends that our
shareholders approve, the following proposals to approve these amendments to the 2016
Constitution.
Approval of any of EGM Proposal No. 1, No. 2 or No. 3 is not conditioned upon the approval of the
other proposals.
EGM Proposal No. 1—The Declassification Amendment
The proposed amendments to the 2016 Constitution relating to removing the requirement that the
Company’s directors retire by rotation are as follows:
• Modification of Article 58(c) to remove the words “whether by rotation or otherwise” with respect
to appointing or re-appointing directors to fill vacancies arising at annual general meetings on
retirement;
• Modification of Article 90 to provide that a Chief Executive Officer who is a director shall also be
subject to the same provisions as to retirement as the other directors, and that a Chief
Executive Officer who is also a director shall not automatically cease as Chief Executive Officer
if he or she ceases from any cause to be a director, unless the contract or resolution under
which he or she holds office shall expressly state otherwise, in which event such determination
shall be subject to the provisions of any contract between him or her and the Company;
• Modification of Article 94 to remove the requirement that one-third of directors shall retire from
office by rotation and instead require that all directors shall retire and be subject to re-election
at each annual general meeting;
• Deletion of the language in Article 95 that specifies the manner to determine the directors
retiring by rotation;
• Modification of Article 97 to remove a provision specifying how to determine the retirement by
rotation timing for directors appointed as replacements for removed directors; and
• Modification of Article 100 to remove the provision that directors who have been appointed by
the Board of Director to fill a casual vacancy or as an additional director must stand for re-
election at the next annual general meeting following their appointment and the provision on
how to account for the number of directors eligible to retire by rotation at annual general
meetings when directors have been appointed by the Board of Director to fill a casual vacancy
or as an additional director; such appointed directors shall, pursuant to modified Article 94,
retire and be subject to re-election at the next annual general meeting.
The foregoing description of the proposed amendments is qualified by reference to the text of the
proposed amendments to the 2016 Constitution, which is shown in Annex A-1 to this proxy statement.
You are urged to read the text of Annex A-1 in its entirety.
Purpose and Effect of the Proposed Declassification Amendment
Current Board Structure. The Company’s 2016 Constitution currently provides for director retirement
by rotation, that is, at each annual general meeting, one-third of the Company’s directors (or, if the
number of directors is not a multiple of three, the number nearest to but not more than one-third)
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2019 Proxy Statement
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Part II—EGM Proposal Nos. 1, 2 and 3 to be Considered at the Extraordinary General Meeting
of Shareholders
retires by rotation and the directors subject to such retirement by rotation are eligible for re-election at
such annual general meeting.
Proposed Changes to Board Structure. The Board is recommending that our shareholders approve
the Declassification Amendment, which would have the effect of declassifying our Board in order to
allow our shareholders to vote on the election of our directors on an annual basis, rather than on a
rotational basis.
Reasons for and Effect of Amendments related to Board Structure.
recommend that our shareholders approve the Declassification Amendment, our Board considered a
number of factors, including the advantages and disadvantages of our current Board structure, views
expressed to the Company during engagement with shareholders, and general corporate governance
trends.
In making the determination to
The Company has historically maintained its current, retirement by rotation board structure to promote
continuity of experience and oversight at the Board level and provide negotiating leverage and encourage
a person seeking control of the Company to initiate arm’s length discussions with management and the
Board, which help the Board focus on the creation of long-term shareholder value.
In reaching its determination to propose the declassification of our Board, our Board concluded that
the benefits of a classified structure were outweighed by the following considerations (among others):
• Providing our shareholders with the opportunity to annually elect directors creates an avenue
for shareholders to more frequently express their views both on individual directors and on the
performance of the Board as a whole;
• Annual director elections also provide shareholders with the means to influence corporate
governance policies in a more timely manner;
• Annual director elections further the Company’s goals of ensuring that our corporate
governance policies conform to best practices and maximize director accountability to our
shareholders; and
• The growing sentiment among the investment community in favor of the annual election of all
directors.
If our shareholders approve the Declassification Amendment, all of our directors will be subject to
annual elections, effective immediately, beginning at the 2019 annual general meeting, which will be
held immediately following the extraordinary general meeting. Consequently, all of the Company’s
directors will be up for re-election by our shareholders at the 2019 annual general meeting pursuant to
AGM Proposal No. 1 for such meeting. In that case, AGM Proposal No. 2 for the 2019 annual general
meeting (relating to the reelection of directors under the existing provisions of the 2016 Constitution)
will be withdrawn and will not be voted upon at the 2019 annual general meeting.
If the Declassification Amendment is not approved by our shareholders, the Company’s directors will
continue to retire by rotation in accordance with the 2016 Constitution and consequently, AGM
Proposal No. 1 for the 2019 annual general meeting, which relates to the re-election of all directors of
the Company for the time being, will be withdrawn and not be voted upon at the 2019 annual general
meeting; AGM Proposal No. 2 for the 2019 annual general meeting relating to the re-election of the
following directors of the Company will, instead, be voted upon at the 2019 annual general meeting:
• Willy C. Shih
• William D. Watkins
• Jill A. Greenthal
• Charles K. Stevens, III
• Revathi Advaithi
-16-
2019 Proxy Statement
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Part II—EGM Proposal Nos. 1, 2 and 3 to be Considered at the Extraordinary General Meeting
of Shareholders
EGM Proposal No. 2—Amendment to Increase the Maximum Number of Directors on the Board
The proposed amendment to the 2016 Constitution to increase the maximum number of directors on
the Board from eleven to twelve directors is as follows:
• Modification of Article 82 of the 2016 Constitution to provide that the number of directors shall,
unless otherwise determined by the Company at a general meeting, not be more than twelve.
The foregoing description of the proposed amendment is qualified by reference to the text of the
proposed amendments to the 2016 Constitution, which is shown in Annex A-2 to this proxy statement.
You are urged to read the text of Annex A-2 in its entirety.
Purpose and Effect of the Proposed Amendment
Size of Board. The Company’s 2016 Constitution currently limits the size of the Board to not more
than eleven directors.
Proposed Change and Reasons. The Board is recommending that our shareholders approve the
amendment to increase the maximum size of the Board to twelve directors in order to give the Board
flexibility in considering and appointing additional directors to the Board.
If this amendment is not approved by our shareholders, the size of the Board will remain capped at
eleven members unless the Board separately sets forth a proposal to increase the size of the Board
by way of an ordinary resolution, for shareholders’ approval.
EGM Proposal No. 3—Amendments to Conform to Changes to the Companies Act
The proposed amendments to the 2016 Constitution to conform to recent changes to the Companies
Act are as follows:
• Modification of Article 54 of the 2016 Constitution to provide generally that the Company shall
hold its annual general meeting in accordance with the provisions of the Companies Act; and
• Modification of Article 116 to provide for the custody and use of the common seal of the
Company, where the Company has such seal.
The foregoing description of the proposed amendments is qualified by reference to the text of the
proposed amendments to the 2016 Constitution, which is shown in Annex A-3 to this proxy statement.
You are urged to read the text of Annex A-3 in its entirety.
Purpose and Effect of the Proposed Amendments
The Board is recommending that our shareholders approve amendments to the 2016 Constitution to
reflect changes to the Companies Act. The Companies Act previously required that annual general
meetings be held the earlier of: (a) fifteen months from the prior annual general meeting; or (b) six months
from the company’s financial year end. The 2016 Constitution provided that no more than fifteen months
should elapse between the date of one annual general meeting and the next. Effective August 31, 2018,
the Companies Act requires only that companies hold their annual general meetings six months from their
financial year end. We are proposing an amendment to the 2016 Constitution to provide generally that the
Company shall hold its annual general meeting in accordance with the provisions of the Companies Act.
This amendment will provide the Company with the flexibility to hold annual meetings in accordance with
the Companies Act’s requirements as such requirements may be amended or modified.
Effective March 31, 2017, the Companies Act was amended such that it was no longer mandatory that
companies maintain common seals. We are proposing an amendment to the 2016 Constitution to
provide for the custody and use of the common seal of the Company, where the Company has such
seal. This change is intended to clarify that the relevant article of the amended Constitution only
applies where the Company has such a seal.
The Board recommends a vote “FOR” the approval of the amendments to the 2016 Constitution
as set forth in EGM Proposal Nos. 1, 2 and 3.
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2019 Proxy Statement
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal Nos. 1 and 2: Re-Election of Directors
PART III—PROPOSALS TO BE CONSIDERED AT THE 2019 ANNUAL GENERAL MEETING OF
SHAREHOLDERS
AGM PROPOSAL NO. 1: RE-ELECTION OF ALL DIRECTORS (IF THE DECLASSIFICATION
AMENDMENT IS APPROVED AT THE EXTRAORDINARY GENERAL MEETING)
At the extraordinary general meeting of shareholders immediately preceding the 2019 annual general
meeting of shareholders, we are asking shareholders to approve the Declassification Amendment.
The approval of the Declassification Amendment will provide for the removal of the requirement that
the Company’s directors retire by rotation and instead provide for the annual election of all directors,
commencing immediately with the 2019 annual general meeting of shareholders that will follow
immediately after the extraordinary general meeting.
If our shareholders approve the Declassification Amendment, all of the Company’s directors will be up
for reelection by our shareholders at the 2019 annual general meeting for a term to expire at the 2020
annual general meeting of the Company, pursuant to AGM Proposal No. 1.
If the shareholders approve the Declassification Amendment, AGM Proposal No. 2 (described below)
will be withdrawn and will not be voted upon at the 2019 annual general meeting.
If any nominee under AGM Proposal No. 1 fails to receive the affirmative vote of a majority of the
shares present and voting on the resolution to approve his or her 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 or she 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 Companies Act requires that we must have at all times at least one director ordinarily resident in
Singapore. As Mr. Tan is only member of our Board of Directors who is ordinarily resident in
Singapore, any purported vacation of Mr. Tan’s office at the 2019 annual general meeting shall be
deemed to be invalid absent a prior appointment of another director to the Board who is ordinarily
resident in Singapore.
The proxy holders intend to vote all proxies received by them in the accompanying form of proxy card
for the nominees for directors under AGM Proposal No. 1 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 2019 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 joint proxy statement, our Board of Directors is not aware of any nominee who is
unable or will decline to serve as a director.
Qualifications of Directors and Nominees
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
-18-
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal Nos. 1 and 2: Re-Election of Directors
matters. Our Nominating and Corporate Governance Committee also believes that our directors have
other key attributes that are important to an effective board, including the highest professional and
personal ethics and values, an understanding of the Company’s business and industry, a high level of
education, broad-based business acumen, the ability to think strategically, and diversity. The Company
and the Nominating and Corporate Governance Committee are committed to actively seeking highly-
qualified diverse candidates (including diversity of experience, expertise, gender, race, and ethnicity)
for consideration when the Board undertakes director searches.
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 under AGM Proposal
No. 1:
Nominees to our Board of Directors
Ms. Advaithi has served as a member of the Board of Directors and
as CEO since February 11, 2019. Prior to joining the Company,
Ms. Advaithi was President and Chief Operating Officer, Electrical
Sector, of Eaton Corporation plc, a power management company, a
position she had held since September 1, 2015. Prior to that, she
served as President of Electrical Sector, Americas of Eaton from
April 1, 2012 through August 31, 2015. She joined Eaton in 1995
and led the Electrical Sector in the Americas and Asia-Pacific, with a
three-year assignment in Shanghai. Between 2002 and 2008,
Ms. Advaithi worked at Honeywell, where she held several senior
roles within the sourcing and supply chain functions of the
aerospace sector before being named vice president and general
manager of Honeywell’s Field Solutions business in 2006.
Ms. Advaithi returned to Eaton in 2008 as vice president and
general manager of the Electrical Components Division. Ms. Advaithi
currently serves as a non-executive director for the BAE Systems
board. She has a bachelor’s degree in mechanical engineering from
the Birla Institute of Technology and Science in Pilani, India, and an
MBA in international business from Thunderbird-Garvin School of
International Business in Glendale, Arizona.
Revathi Advaithi
CEO, Flex Ltd.
Director Since: 2019
Age: 51
Board Committee:
None
Other Public Company
Boards:
None
Key Qualifications and
Expertise:
• Electrical industry leader
• Deep and highly relevant
experience across
engineering, operations,
supply chain, material
procurement, distribution,
logistics and international
management
• Experience and capabilities
ranging from engineering to
manufacturing to advanced
supply chain management
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal Nos. 1 and 2: Re-Election of Directors
Michael D. Capellas,
Chairman of the Board
Principal, Capellas
Strategic Partners
Director Since: 2014
Age: 64
Board Committee:
Nominating and Corporate
Governance Committee (Chair)
Other Public Company
Boards:
Cisco Systems, Inc.
Key Qualifications and
Expertise:
• Experience in executive roles
• A background of leading global
organizations in the
technology industry
• Expertise in several valued
areas including strategic
product development,
business development, and
finance
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 board of directors of Cisco Systems, Inc. and previously served
as lead independent director of MuleSoft, Inc.
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal Nos. 1 and 2: Re-Election of Directors
Ms. Greenthal has served as a member of our Board of Directors
since November 2018. Ms. Greenthal has served as a Senior
Advisor in Private Equity of The Blackstone Group since
September 2007. Prior to September 2007, she was a Partner and
Senior Managing Director in the Advisory Group at Blackstone.
Before joining Blackstone in 2003, she was a member of the
Executive Board of Investment Banking at Credit Suisse First
Boston. She was the Co-Head of the Boston office at Donaldson,
Lufkin and Jenrette before its acquisition by CFSB. Prior to joining
DLJ, she was the head of the Media Group at Lehman Brothers.
Ms. Greenthal currently serves on the boards of Akamai
Technologies, Inc., Cars.com Inc. and Houghton Mifflin Harcourt
Company and previously served on the boards of TEGNA Inc. from
2015 to 2017, Orbitz Worldwide from 2007 to 2013 and Michaels
Stores from 2011 to 2015. Ms. Greenthal is also a trustee of the
Dana-Farber Cancer Institute, the James Beard Foundation and is
an Overseer of the Museum of Fine Arts in Boston, Massachusetts.
She is a graduate of Simmons College and received an MBA from
Harvard Business School.
Jill A. Greenthal
Senior Advisor in Private
Equity of the Blackstone
Group
Director Since: 2018
Age: 62
Board Committee:
None
Other Public Company
Boards:
Akamai Technologies, Inc.
Cars.com Inc.
Houghton Mifflin Harcourt
Company
Key Qualifications and
Expertise:
• Extensive experience as an
investment banker, which has
given her a deep
understanding of corporate
finance, capital markets and
mergers and acquisitions
• Deep experience in working
with companies as they have
grown their business
• Strong public company board
experience
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal Nos. 1 and 2: Re-Election of Directors
Ms. Li has served as a member of our Board of Directors since
January 2018. Ms. Li currently serves as General Partner of
Chengcheng Investment Partners. Previously, she served as Chief
Executive Officer and General Managing Director of Baidu Capital,
the investment arm of Baidu, Inc. Ms. Li joined Baidu, Inc., the
largest Internet search engine in China and the third-largest
independent search engine in the world, in 2008, as Chief Financial
Officer, responsible for a wide range of corporate functions,
including Finance, Human Resources, International Operations,
Marketing, Communications and Purchasing. From 1994 to 2008,
she held a number of senior finance positions at various General
Motors companies in China, Singapore, the United States, and
Canada, rising to Chief Financial Officer of GM China and Financial
Controller of the North American Operations of GMAC. Ms. Li
currently serves on the boards of directors of ABB Ltd., Philip Morris
International Inc. and The Hongkong and Shanghai Banking
Corporation Limited.
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 Business Board of Advisors of
the Tepper School of Business at Carnegie-Mellon University.
Jennifer Li
General Partner, Chengcheng
Investment Partners
Director Since: 2018
Age: 51
Board Committee:
Compensation Committee
Other Public Company
Boards:
ABB Ltd.
Philip Morris International Inc.
Key Qualifications and
Expertise:
• A seasoned, global
international executive with
extensive experience in China,
automotive, and multiple
technology sectors
• World-class financial,
operational, and technology
industry experience both
internationally and, particularly
in China
Marc A. Onetto
Principal, Leadership from
the Mind and the Heart LLC
Director Since: 2014
Age: 68
Board Committee:
Audit Committee
Other Public Company
Boards:
None
Key Qualifications and
Expertise:
• A seasoned supply chain
expert and pioneer
• Extensive experience as an
officer of large, complex
technology companies
• Significant understanding of
the Company’s business and
industry
-22-
2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal Nos. 1 and 2: Re-Election of Directors
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.
Willy C. Shih, Ph.D.
Professor of Management
Practice, Harvard Business
School
Director Since: 2008
Age: 68
Board Committees:
Compensation Committee
Other Public Company
Boards:
None
Key Qualifications and
Expertise:
• 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
• Experience in teaching and
consulting provide him with
significant insight into strategic
alternatives that are available
to technology companies
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2019 Proxy Statement
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal Nos. 1 and 2: Re-Election of Directors
Charles K. Stevens, III
Former Chief Financial
Officer of General Motors
Director Since: 2018
Age: 59
Board Committee:
Audit Committee
Other Public Company
Boards:
Masco Corporation
Key Qualifications and
Expertise:
• Strong financial expertise as
well as extensive experience
in the automotive industry,
which are invaluable to Flex’s
automotive business
• Significant leadership
experience in financial and
accounting operations
Mr. Stevens has served as a member of our Board of Directors
since November 2018. Most recently, Mr. Stevens served as an
Advisor of General Motors Company between September 2018 and
March 2019. Prior to that, Mr. Stevens was the Chief Financial
Officer and Executive Vice President of General Motors Company
from January 15, 2014 until September, 2018. Mr. Stevens was
responsible for leading the financial and accounting operations on a
global basis. He served as Chief Financial Officer for North America
at General Motors North America, Inc. from January 2010 until
2014. He led GM’s financial operations for U.S. Sales, Service and
Marketing, GM Canada from 2006 to 2008, GM Mexico from 2008
to 2010, North America Manufacturing, Customer Care and
Aftersales and Global Connected Consumer. He also served as
Interim Chief Financial Officer of GM South America from
December 2011 to January 2013. He previously held leadership
positions at GM in China, Singapore, Indonesia and Thailand. He
began his career at Buick Motor Division in 1978. Mr. Stevens
currently serves on the board of directors of Masco Corp. He
received his Bachelor of Industrial Administration from General
Motors Institute (now Kettering University) and MBA from the
University of Michigan, Flint.
-24-
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal Nos. 1 and 2: Re-Election of Directors
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.
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: 60
Board Committee:
Compensation Committee
Other Public Company
Boards:
None
Key Qualifications and
Expertise:
• Extensive background in
financial and investment
matters provides a critical
perspective to the Board in
these areas
• Executive leadership
experience, serving as a chief
executive officer and chief
financial officer of large
international technology-
related corporations
• Invaluable operational insight
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal Nos. 1 and 2: Re-Election of Directors
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. and Avaya Holdings Corp.
William D. Watkins
Former Chief Executive
Officer of Imergy Power
Systems, Inc.
Director Since: 2009
Age: 66
Board Committees:
Compensation Committee
(Chair)
Nominating and Corporate
Governance Committee
Other Public Company
Boards:
Maxim Integrated Products, Inc.
Avaya Holdings Corp.
Key Qualifications and
Expertise:
• 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
-26-
2019 Proxy Statement
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal Nos. 1 and 2: Re-Election of Directors
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 Aptiv PLC, and previously served on the boards of
Brunswick Corporation from 2006 to 2015 and Computer Sciences
Corporation from 2012 to 2014.
Lawrence A. Zimmerman
Former Vice Chairman and
CFO, Xerox Corporation
Director Since: 2012
Age: 76
Board Committees:
Audit Committee (Chair)
Nominating and Corporate
Governance Committee
Other Public Company
Boards:
Aptiv PLC
Key Qualifications and
Expertise:
• 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 the members of our Board of
Directors described above (which will be voted upon if the shareholders approve the
Declassification Amendment).
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal Nos. 1 and 2: Re-Election of Directors
AGM PROPOSAL NO. 2: RE-ELECTION OF DIRECTORS (IF THE DECLASSIFICATION
AMENDMENT IS NOT APPROVED AT THE EXTRAORDINARY GENERAL MEETING)
In the event our shareholders do not approve the Declassification Amendment at the extraordinary
general meeting immediately preceding the 2019 annual general meeting, AGM Proposal No. 1, which
relates to the re-election of all of the directors of the Company for the time being, will be withdrawn
and not be voted upon at the 2019 annual general meeting; AGM Proposal No. 2 relating to the re-
election of the following directors of the Company (whose biographical information is set forth under
AGM Proposal No. 1) will, instead, be voted upon at the 2019 annual general meeting:
• Willy C. Shih
• William D. Watkins
• Jill A. Greenthal
• Charles K. Stevens, III
• Revathi Advaithi
In particular, if the Declassification Amendment is not approved at the extraordinary general meeting,
the provisions of the 2016 Constitution regarding the retirement of directors by rotation will remain in
force and effect, as follows:
• Article 94 of the 2016 Constitution, which 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, will remain in
effect.
• Under Article 95 of the 2016 Constitution, the directors to retire in each year pursuant to
Article 94 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 would be (unless they otherwise agree among themselves)
determined by lot.
• Additionally, under Article 90 of the 2016 Constitution (which will remain in effect if the
Declassification Amendment is not approved), 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, Ms. Advaithi, as our Chief Executive Officer and also being one of our
directors, would not be subject to retirement by rotation or taken into account in determining the
number of directors required to retire by rotation.
• Furthermore, under Article 100 of the 2016 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. Accordingly, Ms. Jill Greenthal and
Mr. Charles Stevens would not be taken into account in determining the number of directors
required to retire by rotation.
Under the 2016 Constitution, retiring directors are eligible for re-election. Messrs. Shih and Watkins
are the members of our Board of Directors who will retire by rotation at our 2019 annual general
meeting if the Declassification Amendment is not approved by shareholders. Messrs. Shih and
Watkins are eligible for re-election and have been nominated to stand for re-election at the 2019
annual general meeting in the event the Declassification Amendment is not approved by shareholders.
Additionally, Article 100 of the 2016 Constitution provides that any person appointed as a director by
the Board shall hold office only until the next annual general meeting and then shall be eligible for re-
election. As a result, Mses. Advaithi and Greenthal and Mr. Stevens, who were appointed as
additional directors by our Board in November 2018 and February 2019, in accordance with
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal Nos. 1 and 2: Re-Election of Directors
Article 100 of the 2016 Constitution, are eligible for re-election and have been nominated for re-
election at the 2019 annual general meeting in the event the Declassification Amendment is not
approved by shareholders.
If any nominee under AGM Proposal No. 2 (if the shareholders do not approve the Declassification
Amendment) fails to receive the affirmative vote of a majority of the shares present and voting on the
resolution to approve his or her 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 or she 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 under AGM Proposal No. 2 identified above (if the shareholders do not
approve the Declassification Amendment). In the event that any nominee is unable or declines to
serve as a director at the time of the 2019 annual general meeting, the proxies will be voted for any
nominee who is recommended by the present Board of Directors of the Company to stand for election
as a director at the 2019 annual general meeting.
For information about the qualifications of nominees for reelection under AGM Proposal No. 2 (which
only will be voted upon if the shareholders do not approve the Declassification Amendment), please
see the information under AGM Proposal No. 1 above.
The Board recommends a vote “FOR” the re-election of each of the members of our Board of
Directors described above (which only will be voted upon if the shareholders do not approve
the Declassification Amendment).
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Part III—Proposals to be Considered at the 2019 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@flex.com. Communications submitted to this e-mail address are regularly reviewed by the
Company’s CEO, CFO and/or General Counsel and submitted to the Chairman of the Board, the
Board of Directors or the requisite individual members of the Board of Directors, as appropriate,
depending on the facts and circumstances outlined in the communication. Certain items that are
unrelated to the duties and responsibilities of the Board of Directors are generally not furnished to the
Board of Directors and are instead redirected or excluded, as appropriate.
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 13 meetings during fiscal year 2019. During the period for which
such director was a director or a committee member, Messrs. Capellas, Onetto, Shih, Tan, Watkins
and Zimmerman and Ms. Greenthal attended at least 75% of the aggregate of the total number of
meetings of our Board in fiscal year 2019 together with the total number of meetings held by all
committees of our Board on which he or she served. Ms. Li and Mr. Stevens attended fewer than 75%
of the aggregate of the total number of meetings of our Board in fiscal year 2019 together with the
total number of meetings held by all committees of our Board on which he or she served, in the case
of Ms. Li, due to unavoidable scheduling conflicts and, in the case of Mr. Stevens, as a result of
scheduling conflicts during the five months he served as a director during fiscal year 2019. In fiscal
year 2020, the Board has taken additional action to ensure attendance by Board members of at least
75% of all Board and committee meetings. In addition, the Board is reviewing Board attendance
throughout the year to ensure attendance compliance.
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 at the time of the 2018 annual general meeting
attended the Company’s 2018 annual general meeting.
During fiscal year 2019, our non-employee directors met at regularly scheduled executive sessions
without management participation.
Director Independence
To assist our Board of Directors in determining the independence of our directors, the Board has
adopted Director Independence Guidelines that incorporate the definition of “independence” adopted
by The Nasdaq Stock Market LLC, which we refer to as Nasdaq in this joint proxy statement. Our
Board has determined that each of the Company’s directors, other than Ms. Advaithi, is an
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
Corporate Governance
independent director as defined by the applicable rules of Nasdaq and our Director Independence
Guidelines. Under the Nasdaq definition and our Director Independence Guidelines, a director is
independent only if the Board determines that the director does not have any relationship that would
interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In
addition, under the Nasdaq definition and our Director Independence Guidelines, a director will not be
independent if the director has certain disqualifying relationships. In evaluating independence, the
Board broadly considers all relevant facts and circumstances. In particular, in making its determination
that Mr. Stevens is an independent director, the Board considered that Mr. Stevens was previously the
Chief Financial Officer and Executive Vice President of General Motors Company (a customer of the
Company) and was, at the time of his appointment an advisor of General Motors (until March 2019).
The Board concluded that such relationship would not impair the independence of Mr. Stevens. 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 the Investor Relations
section of our website at www.flex.com.
Proposal to Approve the Declassification Amendment
At the extraordinary general meeting of shareholders immediately preceding the 2019 annual general
meeting, we are asking that our shareholders approve the Declassification Amendment to remove the
provisions from the 2016 Constitution providing for director retirement by rotation (also referred to as a
“classified” board). In the event that the Company’s shareholders approve the Declassification
Amendment, the full Board will be subject to annual elections by shareholders.
Board Leadership Structure and Role in Risk Oversight
Our Board of Directors currently consists of ten directors, each of whom, other than Ms. Advaithi, is
independent under the Company’s Director Independence Guidelines and the applicable rules of
Nasdaq. Ms. Advaithi has served as our Chief Executive Officer, or CEO, and as a member of our
Board of Directors, since February 11, 2019. The Board has separated the roles of Chairman and
CEO since 2003. The Board appointed Mr. Capellas, an independent director, as Chairman of the
Board, in 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 Ms. Advaithi, 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
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2019 Proxy Statement
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
Corporate Governance
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,
cybersecurity 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.
Succession Planning
On at least an annual basis, the Board reviews and assesses succession plans for the Chief
Executive Officer position as well as other executive officers in order to ensure that the Company has
the talent needed to successfully pursue the Company’s strategy and execution of that strategy. This
review includes a broader discussion on developing and retaining executive talent. Directors become
familiar with potential successors for key executive positions through various means, including regular
organization and talent reviews, presentations to the board, and informal meetings.
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.
Name
Independent
Financial Audit
Expert Committee
Governance Compensation
Committee Committee
Nominating
and Corporate
Michael D. Capellas . . . . . .
Jill A. Greenthal . . . . . . . . .
Jennifer Li . . . . . . . . . . . . .
Marc A. Onetto . . . . . . . . . .
Willy C. Shih, Ph.D. . . . . . .
Charles K. Stevens, III . . . .
Lay Koon Tan . . . . . . . . . . .
William D. Watkins . . . . . . .
Lawrence A. Zimmerman .
= Committee Member
= Committee Chair
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Corporate Governance
Audit Committee
The Audit Committee of the Board of Directors is currently composed of Messrs. Onetto, Stevens and
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.
Additionally, while not currently on the Audit Committee, Mr. Watkins and Ms. Li served on the Audit
Committee for a portion of fiscal year 2019. The Board has also determined that each of
Messrs. Stevens 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 14 meetings during fiscal year 2019 and regularly meets in executive sessions
without management present.
The Audit 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 Compensation 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. Tan and Watkins, Dr. Shih and Ms. Li, each of whom our Board has determined to be an
independent director under the applicable listing standards of Nasdaq. The Compensation Committee
held 9 meetings during fiscal year 2019 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 Compensation Committee to delegate to our Chief Executive Officer its
authority to grant equity awards to employees of the Company who are not directors, executive officers
or other senior level employees who report directly to the Chief Executive Officer.
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,
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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 2019 fiscal year compensation review, the Compensation Committee
engaged Mercer Human Resources Consulting (referred to in this joint proxy statement as Mercer), a
wholly-owned subsidiary of Marsh & McLennan Companies, Inc. 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, and advising on the methodology
used for our 2019 CEO pay ratio disclosure.
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 2019 compensation. The Compensation Committee expects that it will
continue to retain a compensation consultant on future executive compensation matters.
Relationship with Compensation Consultant
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 2019 were approximately $461,000.
Additionally, during our 2019 fiscal year, Marsh & McLennan Companies, Inc. (the parent company of
Mercer) and its affiliates, which we refer to collectively as MMC, were retained by the Company to
provide other services unrelated to executive and director compensation matters. These services
included various consulting and business services, and our Compensation Committee did not review
or approve such other services provided by MMC, as those services were approved by management
in the ordinary course of business. The aggregate fees paid for those other services in fiscal year
2019 were approximately $920,000.
Our Compensation Committee has determined that the provision by MMC of services unrelated to
executive and director compensation matters in fiscal year 2019 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 MMC’s other relationships with
the Company. The Compensation Committee is sensitive to the concern that the services provided by
MMC, and the related fees, could impair the objectivity and independence of Mercer, and the
Compensation Committee believes that it is important that objectivity be maintained. However, the
Compensation Committee also recognizes that the services provided by MMC 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 MMC maintain appropriate safeguards to assure that the consulting services provided by
Mercer are not influenced by the Company’s business relationship with MMC. Specifically, Mercer
provided to the Compensation Committee an annual update on Mercer’s and MMC’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 MMC’s other lines of business and from its other work for the Company.
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Corporate Governance
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 Compensation 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 joint proxy statement as the Exchange Act), the Compensation
Committee assessed the independence of Mercer and concluded that no conflict of interest exists that
would prevent Mercer from independently representing the Compensation Committee.
Compensation Committee Interlocks and Insider Participation
During our 2019 fiscal year, Messrs. Tan, Watkins and Dr. Shih served as members of the
Compensation Committee (and Ms. Li is also currently a member of the Compensation Committee)
and Daniel H. Schulman (who did not stand for reelection at the 2018 annual general meeting) also
served as members of the Compensation Committee prior to the 2018 annual general meeting. None
of our executive officers served on the Compensation Committee during our 2019 fiscal year. None of
our directors (or Mr. Schulman) 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. Capellas,
Watkins and Zimmerman, each of whom our Board has determined to be an independent director
under the applicable listing standards of Nasdaq. Additionally, Mr. Schulman served as a member of
the Nominating and Corporate Governance Committee until his retirement from the Board at the
conclusion of the 2018 annual general meeting. The Nominating and Corporate Governance
Committee held 6 meetings during fiscal year 2019 and regularly meets in executive sessions without
management present. The Nominating and Corporate Governance Committee recruits, evaluates and
recommends candidates for appointment or election as members of our Board. The Nominating and
Corporate Governance 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 Nominating and Corporate Governance
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. In connection with this goal, the Nominating and Corporate Governance Committee
engages in Board succession planning by assessing the need to expand the size or expertise of the
Board and the likelihood that a prospective nominee would possess the relevant skills and experience.
Although the Board does not have a formal policy on diversity, the Nominating and Corporate
Governance Committee seeks to achieve a balance and diversity of knowledge, experience and
capability on our Board, while maintaining a sense of collegiality and cooperation that is conducive to
a productive working relationship within the Board and between the Board and management. Further,
the Company and the Nominating and Corporate Governance Committee are committed to actively
seek highly-qualified diverse candidates (including diversity of experience, expertise, gender, race,
and ethnicity) for consideration when the Board undertakes director searches. In addition, the
Nominating and Corporate Governance Committee seeks nominees with the highest professional and
personal ethics and values, an understanding of our business and industry, a high level of education,
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broad-based business acumen, and the ability to think strategically. Although the Nominating and
Corporate Governance 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).
During fiscal year 2019, the Nominating and Corporate Governance Committee received
recommendations from the Board and engaged a third-party search firm to assist it in identifying and
assessing potential director candidates. Ms. Greenthal and Mr. Stevens were identified as potential
directors by such third-party search firm. The Nominating and Corporate Governance Committee will
also consider recommendations submitted by our shareholders. The Nominating and Corporate
Governance 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 2020 annual general meeting should be made not later than
March 12, 2020 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 for the 2019 annual
general meeting.
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 Nominating and Corporate Governance 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 2019.”
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, which our Board amended in 2017.
The share ownership guidelines encourage our non-employee directors to hold a minimum number of
our Ordinary Shares equivalent to four (4) times the annual cash retainer provided to non-employee
directors. The guidelines encourage our non-employee directors to reach this goal within five years
from the date of their election to our Board of Directors 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.
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JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
Corporate Governance
CORPORATE SUSTAINABILITY
Sustainability remains central to who we are and how we operate. Our sustainability governance
principles form a core part of our business operations. Through innovation and smart technologies,
our sustainable solutions positively impact people and the environment. Our commitment helps
customers, partners, and other businesses increase their own efforts to build a more sustainable
future.
Sustainability Governance
The Audit Committee of our Board of Directors has oversight of the Corporate Sustainability Program.
Sustainability updates are delivered regularly to our executive management team. The Corporate
Sustainability Leadership Committee, a multidisciplinary group comprised by global directors and
managers (including operations, customer facing, supply chain, regulatory compliance, metrics and
communications managers), meets semi-annually to share information with individuals across various
organizations who are directly responsible for implementing sustainability initiatives.
Sustainability Strategy
We focus our commitments, policies, management system, multiyear goals, programs, and initiatives
on five cornerstones that drive sustainability across the Company and our value chain: people,
community, environment, innovation, and integrity.
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Corporate Governance
People Community Environment Innovation Integrity
Our sustainable
solutions positively
impact people and
the environment.
We provide decent
work for all Flex
employees,
respecting their
dignity and striving
to advance human
rights around the
world.
We work with
nonprofits,
community leaders,
and governments to
promote inclusive
and sustainable
economic growth,
employment, and
decent work for all.
We apply
appropriate
management
practices and
technology
measures to
protect the
environment,
conserve energy
and natural
resources, and
prevent pollution.
Our strategy and global efforts, expressed through these sustainability cornerstones and our multi-year
Flex 20 by 2020 Goals, are aligned with the principles set forth in the United Nations Global Compact
(UNGC), and the 2030 Sustainable Development Goals (“SDGs”). While our global efforts contribute to
most of our progress on the SDGs, we have prioritized our efforts and focused on decent work, quality
education, clean energy and responsible consumption and production in calendar year 2018.
Our corporate
compliance
program integrates
our obligations and
commitment to
integrity into our
day-to-day
business practices.
Social and Environmental Management System
We are achieving social and environmental compliance through a robust management system that
consolidates several management systems into one, and incorporates current environmental, labor,
human rights, health, safety, ethics, and Responsible Business Alliance requirements.
Supply Chain
We are committed to monitoring and complying continuously with social and environmental
requirements across the supply chain. We require our suppliers to have a management system in
place to ensure compliance and to mitigate potential risks.
Our Sustainable Solutions
Flex has been improving healthcare for both patients and providers for the last 20 years, by designing,
developing and connecting smarter healthcare devices and solutions. NEXTracker, a Flex company, is
helping fuel the renewable energy transformation by designing and building some of the most
advanced solar trackers and energy storage systems in the industry. Since 2012, Sintronics, a Flex
founded company, transforms various waste streams into raw material that can be used to
manufacture new products. This restorative and regenerative methodology is one of the key examples
of a new economic sector, known as the Circular Economy.
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2019 Proxy Statement
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Corporate Governance
Key Achievements in Calendar Year 2018
People
• We achieved an incident rate equal to 0.43, an annual
reduction of 14% with respect to the previous year.
Community
• Since 2014, we have volunteered more than 200,000 hours
Environment
Innovation
Integrity
Management System
globally.
• We provided financial and emergency response relief to four
locations around the globe affected by natural disasters.
• In six years, as part of our saving energy program, we have
manufactured and installed over 113,000 LED light fixtures,
reducing 61,000 CO2e per year.
• We have supported the mitigation of over 69,000 CO2e
through certified emission reductions (CERs) of projects in
Brazil, China and India.
• Since 2016, our renewable energy capacity increased by more
than 30%.
• Since 2016, we have manufactured enough solar PV modules
and solar trackers to power the equivalent of 3.2 million homes.
• 97% of our employees completed the Code of Business
Conduct and Ethics online training.
• We have deployed our social and environmental management
system across all our sites and 49% of our sites have been
audited. Our goal is to audit 100% of our manufacturing sites
by 2020.
Supply Chain
• 97% of our new suppliers have been screened on social and
environmental criteria.
Further information can be found in our annual sustainability executive and GRI reports, as well as the
Flex 20 by 2020 bi-annual report posted in flex.com/about/sustainability.
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Non-Management Directors’ Compensation for Fiscal Year 2019
NON-MANAGEMENT DIRECTORS’ COMPENSATION FOR FISCAL YEAR 2019
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 management directors, Mr. McNamara and Ms. Advaithi, for services
provided as our CEO, see the sections of this joint proxy statement entitled “Compensation
Discussion and Analysis” and “Executive Compensation.”
In addition to the compensation provided to our non-employee directors, which is detailed below, each
non-employee director is reimbursed for any reasonable out-of-pocket expenses incurred in
connection with attending in-person meetings of the Board of Directors and Board committees, as well
as for any fees incurred in attending continuing education courses for directors.
Fiscal Year 2019 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, 2014, and 2017 annual general
meetings. The current arrangements include the following compensation:
• annual cash compensation of $90,000, payable quarterly in arrears to each non-employee
director for services rendered as a director;
• additional annual cash compensation of $50,000, 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 $40,000, 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 Audit Committee;
• additional annual cash compensation of $40,000, 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 Compensation Committee;
• additional annual cash compensation of $15,000, payable quarterly in arrears to the Chairman
of the Nominating and Corporate Governance Committee for services rendered as Chairman of
the Nominating and Corporate Governance Committee;
• 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 Nominating
and Corporate Governance Committee; and
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2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
COLORS: Black, ~note-color 2 GRAPHICS: notice_proxy_k_tab.eps V1.5
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
Non-Management Directors’ Compensation for Fiscal Year 2019
• 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).
The cash compensation of non-employee directors who serve less than a full quarter is pro-rated for
the number of days actually served. 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.
Fiscal Year 2019 Equity Compensation
Yearly Restricted Share Unit Awards
Under the terms of the discretionary restricted share unit grant provisions of our 2017 Equity Incentive
Plan, which we refer to as the 2017 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 $185,000 on the date of grant. These yearly restricted share unit
awards vest in full on the date immediately prior to the date of the next year’s annual general meeting.
During fiscal year 2019, each non-employee director (other than Ms. Greenthal and Mr. Stevens, who
received Initial Awards, as described below) received a restricted share unit award covering 13,868
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. During fiscal
year 2019, each of Ms. Greenthal and Mr. Stevens received a restricted share unit award covering
17,557 Ordinary Shares under this program.
Discretionary Grants
Under the terms of the discretionary option grant provisions of the 2017 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 2019.
Compensation for the Non-Employee Chairman of the Board
Our non-executive Chairman is entitled to receive, following each annual general meeting of the
Company, (i) the $50,000 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 $50,000 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 2018 annual
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2019 Proxy Statement
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JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
COLORS: Black, ~note-color 2 GRAPHICS: notice_proxy_k_tab.eps V1.5
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
Non-Management Directors’ Compensation for Fiscal Year 2019
general meeting, our non-executive Chairman of the Board received a restricted share unit award
covering 3,748 Ordinary Shares under the equity portion of this program. Additionally, in
December 2018, the Chairman received 47,776 restricted share units in recognition of Mr. Capellas’s
assistance in the CEO transition and onboarding.
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.
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 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.
Director Summary Compensation in Fiscal Year 2019
The following table sets forth the fiscal year 2019 compensation for our non-employee directors.
Fees Earned or
Name Paid in Cash ($)(1) Share Awards ($)(2) Total ($)
Michael D. Capellas(3) . . . . . . . . . .
Jill A. Greenthal(4) . . . . . . . . . . . . .
Jennifer Li(5) . . . . . . . . . . . . . . . . .
Marc A. Onetto . . . . . . . . . . . . . . . .
Daniel H. Schulman(6) . . . . . . . . . .
Willy C. Shih, Ph.D. . . . . . . . . . . . .
Charles K. Stevens, III(4) . . . . . . . .
Lay Koon Tan(7) . . . . . . . . . . . . . . .
William D. Watkins . . . . . . . . . . . . .
Lawrence A. Zimmerman . . . . . . . .
— $799,767 $799,767
$ 45,000 $139,754 $184,754
$ 59,573 $211,244 $270,817
$105,000 $184,999 $289,999
$ 76,500 — $ 76,500
$105,000 $184,999 $289,999
$ 52,500 $139,754 $192,254
$ — $289,973 $289,973
$141,000 $184,999 $325,999
$153,000 $184,999 $337,999
(1) This column represents the amount of cash compensation earned in fiscal year 2019 for Board
and committee service.
(2) This column represents the grant date fair value of restricted share unit awards granted in fiscal
year 2019 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 4 to our audited consolidated financial statements for the fiscal year ended March 31,
2019, “Share-Based Compensation,” included in our Annual Report on Form 10-K for the fiscal
year ended March 31, 2019. No option awards were granted in fiscal year 2019.
(3) In lieu of his cash compensation, Mr. Capellas elected to receive fully vested Ordinary Shares of
the Company under the director share election program for his Board and Committee service.
During fiscal year 2019, Mr. Capellas received 13,693 restricted shares units under the share
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2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
COLORS: Black, ~note-color 2 GRAPHICS: notice_proxy_k_tab.eps V1.5
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CLEAN
Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
Non-Management Directors’ Compensation for Fiscal Year 2019
election program, the value of which is reflected in the table above under “Share Awards.” The
“Share Awards” amount for Mr. Capellas reflects the award of 47,776 restricted share units made
to Mr. Capellas in December of 2018 in recognition of Mr. Capellas’s assistance in the CEO
transition.
(4) Ms. Greenthal and Mr. Stevens were appointed to the Board of Directors on November 14, 2018.
(5) In lieu of half of her cash compensation, Ms. Li elected to receive fully vested Ordinary Shares of
the Company under the director share election program for her Board and Committee service,
earned beginning with the date following the 2018 annual general meeting. During fiscal year
2019, Ms. Li received 2,753 restricted shares units under the share election program, the value of
which is reflected in the table above under “Share Awards.”
(6) Mr. Schulman retired from the Board of Directors effective as of the conclusion of the 2018 annual
general meeting.
(7) In lieu of his cash compensation, Mr. Tan elected to receive fully vested Ordinary Shares of the
Company under the director share election program for his Board and Committee service. During
fiscal year 2019, Mr. Tan received 8,820 restricted shares units under the share election program,
the value of which is reflected in the table above under “Share Awards.”
The table below shows the aggregate number of Ordinary Shares underlying unvested restricted
share units held by our non-employee directors as of the 2019 fiscal year-end:
Number of Ordinary Shares
Underlying Outstanding
Name Restricted Share Units (#)
Michael D. Capellas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,392
Jill A. Greenthal(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,557
Jennifer Li . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,868
Marc A. Onetto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,868
Willy C. Shih, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,868
Charles K. Stevens, III(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,557
Lay Koon Tan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,868
William D. Watkins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,868
Lawrence A. Zimmerman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,868
(1) Ms. Greenthal and Mr. Stevens were appointed to the Board of Directors on November 14, 2018.
The directors do not hold any share options.
Change of Control and Termination Provisions
All of our non-employee directors have outstanding restricted share unit awards granted under the
terms of the 2017 Plan. Equity awards to our directors are currently granted under the 2017 Plan, the
adoption of which was approved by our shareholders at our 2017 annual general meeting. 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 2017 Plan is as described in the section entitled “Potential Payments upon
Termination or Change in Control.”
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2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
COLORS: Black, ~note-color 2 GRAPHICS: notice_proxy_k_tab.eps V1.5
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CLEAN
Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal No. 3: Re-Appointment of Independent Auditors for Fiscal Year 2020
AGM PROPOSAL NO. 3: RE-APPOINTMENT OF INDEPENDENT AUDITORS FOR FISCAL YEAR
2020 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, which has been the Company’s independent registered public accounting firm since
2002, as the Company’s independent registered public accounting firm to audit our financial
statements and records for the fiscal year ending March 31, 2020, 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 2020 annual general
meeting. We expect that a representative from Deloitte & Touche LLP will be present at the 2019
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.
The Company has been advised by Deloitte & Touche LLP that neither it nor any of its associates has
any direct or material indirect financial interest in the Company.
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 2019 and 2018. 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
2019 2018
(in millions)
Audit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10.6
Audit-Related Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 0.7
Tax Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 0.9
All Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0 0.1
$12.3
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12.5
$11.1
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 and, for fiscal year 2018, also
include fees incurred in connection with the independent investigation conducted by the Audit
Committee.
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. For fiscal year 2018, these fees include, among other items, fees associated with the
implementation of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with
Customers.
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.
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2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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CLEAN
Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal No. 3: Re-Appointment of Independent Auditors for Fiscal Year 2020
Audit Committee Pre-Approval Policy
Our Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided
by our independent registered public accounting firm. These services may include audit services,
audit-related services, tax services and other services. Pre-approval is generally provided for up to
one year, and any pre-approval is detailed as to the particular service or category of services. The
independent registered public accounting firm and management are required to periodically report to
the Audit Committee regarding the extent of services provided by the independent registered public
accounting firm in accordance with this pre-approval, and the fees for the services performed to date.
The Audit Committee may also pre-approve particular services on a case-by-case basis.
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 2020 and authorization of the Board, upon the
recommendation of the Audit Committee, to fix their remuneration.
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2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
COLORS: Black, ~note-color 2 GRAPHICS: notice_proxy_k_tab.eps V1.5
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Part III—Proposals to be Considered at the 2019 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 2019 were Messrs. Onetto,
Stevens, Watkins, and Zimmerman and Ms. Li, 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,
2019, 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, 2019. 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 the applicable rules of the Public Company Accounting Oversight Board and the SEC.
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 2019 and 2018 were
pre-approved by the Audit Committee in accordance with established procedures.
Based on the Audit Committee’s discussions with the management of the Company and our
independent auditors and based on the Audit Committee’s review of our audited consolidated financial
statements together with the reports of our independent auditors on the consolidated financial
statements and the representations of our management with regard to these consolidated financial
statements, the Audit Committee recommended to the Company’s Board of Directors that the audited
consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year
ended March 31, 2019, which was filed with the SEC on May 21, 2019.
Submitted by the Audit Committee of the Board of Directors:
Lawrence A. Zimmerman
Marc A. Onetto
Charles K. Stevens, III
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2019 Proxy Statement
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CLEAN
Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal No. 4: Ordinary Resolution to Authorize Ordinary Share Issuances
AGM PROPOSAL NO. 4: ORDINARY RESOLUTION TO AUTHORIZE ORDINARY SHARE ISSUANCES
We are incorporated in the Republic of Singapore. Under Singapore law, our directors may only issue
Ordinary Shares and make or grant offers, agreements, options or performance share units or
restricted share units 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, and unless revoked or varied by the Company in general meeting, the
authorization would be effective from the date of the 2019 annual general meeting until the earlier of
(i) the conclusion of the 2020 annual general meeting or (ii) the expiration of the period within which the
2020 annual general meeting is required by law to be held. Under the Companies Act, the 2020 annual
general meeting is required to be held within six months after the date of our 2020 fiscal year end,
(except that Singapore law allows for a one-time application for an extension of up to a maximum of
two months to be made with the Singapore Accounting and Corporate Regulatory Authority). Please
see the proposal set forth for our extraordinary general meeting of shareholders to be held immediately
preceding our 2019 annual general meeting for details on proposed changes to the 2016 Constitution
regarding the timing of annual general meetings.
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, options or performance share units or restricted share units 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, performance share units, 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
lower of the closing price or the five-day average closing price of our Ordinary Shares.
Our Board expects that we will continue to issue Ordinary Shares and grant options, performance
share unit awards and restricted share unit awards in the future under circumstances similar to those in
the past. As of the date of this joint proxy statement, other than issuances of Ordinary Shares or
agreements that would require the issuance of new Ordinary Shares in connection with our equity
compensation plans and arrangements, we have no specific plans, agreements or commitments to
issue any Ordinary Shares for which approval of this proposal is required. Nevertheless, our Board
believes that it is advisable and in the best interests of our shareholders for our shareholders to provide
this general authorization in order to avoid the delay and expense of obtaining shareholder approval at
a later date and to provide us with greater flexibility to pursue strategic transactions and acquisitions
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2019 Proxy Statement
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal No. 4: Ordinary Resolution to Authorize Ordinary Share Issuances
and raise additional capital through public and private offerings of our Ordinary Shares as well as
instruments convertible into our Ordinary Shares.
If this proposal is approved, our directors would be authorized to issue, during the period described
above, Ordinary Shares subject only to applicable Singapore laws and the rules of Nasdaq. The
issuance of a large number of Ordinary Shares could be dilutive to existing shareholders or reduce the
trading price of our Ordinary Shares on 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.
-48-
2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal No. 5: Non-Binding, Advisory Resolution on Executive Compensation
AGM PROPOSAL NO. 5: NON-BINDING, ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION
In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance,
we are asking our shareholders to approve, in a non-binding, advisory vote, the compensation of our
named executive officers (NEOs) as reported in this joint proxy statement in the Compensation
Discussion and Analysis and in the compensation tables and accompanying narrative disclosure under
“Executive Compensation.” Our named executive officers are identified in the Compensation
Discussion and Analysis.
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 2019
During fiscal year 2019, we achieved positive results on several fronts, improving the quality of our
sales mix, expanding margins, returning to positive free cash flow generation, and streamlining our
investment portfolio. Our CEC segment delivered year over year revenue growth of 8% and our IEI
segment delivered year over year revenue growth of 4%. Key financial highlights from the fiscal year
include(2):
• We achieved net sales of $26.2 billion, an increase of 3% compared to the prior year.
• Adjusted operating income was: $872 million, an 11% increase as compared with fiscal 2018.
Adjusted net income followed a similar path and was $603 million, a 3% increase over the
previous year.
• We delivered adjusted EPS of $1.14 per share, a 4.6% increase compared with the prior year.
• We delivered on our commitment to return over 50% of free cash flow to shareholders, with
$189 million of shares repurchased in fiscal year 2019.
Pay and Performance Alignment For Fiscal Year 2019
Our compensation philosophy is to reward above-target performance when achieved, and below target
(including paying zero) when targeted results are not delivered. We also seek to deliver a significant
portion of executive pay in the form of equity awards, which are directly aligned with value delivered to
shareholders.
(2) See Annex B to this joint proxy statement for a reconciliation of non-GAAP and GAAP financial
measures.
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2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal No. 5: Non-Binding, Advisory Resolution on Executive Compensation
With fiscal year 2019 performance results below our targeted levels, pay outcomes and expectations
for Flex’s NEOs were negatively impacted accordingly. Highlights include:
• We maintained all NEOs’ base salaries with no increase, other than Mr. Offer, who received a
10% increase in the fourth quarter of fiscal year 2019 based upon exceptional contributions in a
period of significant transition and assumption of additional duties. Base salaries were
positioned in the aggregate at approximately the peer group median.
• In light of financial performance, the Board, upon the recommendation of the Compensation
Committee, reduced PSU and service-based RSU awards granted to the NEOs on June 19, 2018
by 15%.
• Based on overall financial results that were below targeted performance levels, fiscal year 2019
bonuses paid out at approximately 66% of target for corporate level NEOs, with two business
unit leaders (Messrs. Humphries and Britt) exceeding total corporate results with payouts at
104.4% and 130.1% of target, respectively, based on strong business unit results.
• We paid out the long-term relative total shareholder return (TSR) PSU cycle that closed
during fiscal year 2019 at 100% of target in June 2018 based upon TSR results that were at
the 50th percentile over the three-year performance cycle that began in June 2015.
• The Flex fiscal year 2017 – 2019 FCF PSU and long-term cash incentive cycle did not provide
any payout as cumulative FCF results over the three-year period were below the threshold
levels.
• Based on Flex’s closing share price as of March 29, 2019, the relative TSR award cycles as of
the end of fiscal year 2019 (2016 – 2019, 2017 – 2020, and 2018 – 2021) are projected to
have no payout unless Flex experiences significant share price improvement going forward.
• In an effort to further align executive compensation with shareholder value delivered, we shifted
away from a previous long term incentive plan (LTIP) structure that measured both cumulative
FCF over a multi-year period as well as relative TSR. For fiscal year 2019, we granted only
relative TSR PSUs.
• We funded the performance-based portion of our then-current NEOs’ deferred compensation
plans in fiscal year 2019 with a value that averaged 28.6% of our then-current NEOs’
respective base salaries, which was below target.
• We provided a responsible CEO retirement package to Mr. McNamara in connection with his
retirement that limited exit payments primarily to required plan-based awards.
• To ensure leadership continuity during the CEO transition, we provided retention equity awards
to the other NEOs that consist of a combination or performance- and time-based awards. In
addition, we implemented a formal, market-aligned, executive severance plan to provide clarity
on the treatment of terminations in the event of various forms of departure from the Company.
• We established a compensation approach for our new CEO with a high degree of market
alignment and included transition awards that were limited to make-whole values from her
previous role. Key elements of the go-forward CEO compensation program include:
— Base salary of $1,150,000, somewhat below market median.
— Target annual bonus of 150% of salary (a pro-rata portion will be paid at target for her short
time in the CEO role during fiscal year 2019).
— A fiscal year 2020 equity grant of $7.5 million which will be aligned with the overall Flex
executive compensation program and will have 50% of the grant date value in the form of
relative TSR PSUs.
— Resulting target total annual compensation is below the median of Flex’s peers.
-50-
2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal No. 5: Non-Binding, Advisory Resolution on Executive Compensation
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. Flex initiated an elevated level of shareholder
outreach in fiscal year 2019. During fiscal year 2019, we interacted with holders of approximately 64% of
our share voting power. We proposed a “say-on-pay” advisory vote on executive compensation at our
2018 annual general meeting held on August 16, 2018. The advisory vote received the support of
approximately 85% of the votes cast at the 2018 annual general meeting. Based on both the outcome of
the “say-on-pay advisory vote” and our discussions with shareholders, 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 are focused on tightly managing our overall share grant levels
relative to performance delivered, which we have done and will continue to do (see the section entitled
“Responsible Share Granting Approach” below). We took pro-active steps to reduce fiscal year 2019
equity grant levels for NEOs based various factors, and our pay programs continue to align pay and
performance as demonstrated by our performance-based long-term incentive programs projecting no
payouts for current in-process award cycles. Based on our favorable prior “say-on-pay” results,
shareholder feedback on existing programs, and our review of the alignment of our pay program design
with our financial results, we continued the structure of our fiscal year 2018 compensation programs in
fiscal year 2019. The most significant change made was to improve alignment with shareholders, where
100% of our performance-based long-term incentive awards now measure relative TSR versus the
S&P 500. Going forward, we will continue to evaluate our alignment between our compensation strategy
and our business objectives and financial results, with a strong focus on ensuring that the pay programs
reinforce the need to achieve strong performance levels and shareholder value growth.
We urge shareholders to carefully read the Compensation Discussion and Analysis section of this joint
proxy statement to review the correlation between the compensation of our named executive officers
and our performance. The Compensation Discussion and Analysis also describes in more detail how
our executive compensation policies and procedures operate and are designed to achieve our
compensation objectives. We also encourage you to read the Summary Compensation Table and the
other related compensation tables and narrative that follow the Compensation Discussion and
Analysis, which provide detailed information on the compensation of our named executive officers.
While the vote on this resolution is advisory and not binding on the Company, 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.
The Board recommends a vote “FOR” the approval of the non-binding, advisory resolution on
executive compensation.
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2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal No. 6: Ordinary Resolution to Renew the Share Purchase Mandate
AGM PROPOSAL NO. 6: ORDINARY RESOLUTION TO RENEW THE SHARE PURCHASE MANDATE
Our purchases or acquisitions of our Ordinary Shares must be made in accordance with, and in the
manner prescribed by, the Singapore Companies Act, the applicable listing rules of Nasdaq and such
other laws and regulations as may apply from time to time.
Singapore law requires that we obtain shareholder approval of a “general and unconditional share
purchase mandate” given to our directors if we wish to purchase or otherwise acquire our Ordinary
Shares. This general and unconditional mandate is referred to in this joint proxy statement as the Share
Purchase Mandate, and it allows our directors to exercise all of the Company’s powers to purchase or
otherwise acquire our issued Ordinary Shares on the terms of the Share Purchase Mandate.
Although our shareholders approved a renewal of the Share Purchase Mandate at the annual general
meeting of shareholders held in 2018, the Share Purchase Mandate renewed at the annual general
meeting will expire on the date of the 2019 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 16, 2018. On August 16,
2018, the Board authorized the repurchase of up to an aggregate of $500 million of Ordinary Shares of
the Company. Until the 2019 annual general meeting, any repurchases would be made under the
Share Purchase Mandate renewed at the annual general meeting held in 2018. Commencing on the
date of the 2019 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. On May 14, 2019,
subject to the approval of this Share Repurchase Mandate by the shareholders at the 2019 annual
general meeting, the Board authorized a repurchase of up to $500 million of Ordinary Shares of the
Company. 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 2020 annual general meeting or the date by which the 2020
annual general meeting is required by law to be held. The 2020 annual general meeting is required to
be held under the Companies Act within six months after the date of our 2020 fiscal year end (except
that Singapore law allows for a one-time application for an extension of up to a maximum of two
months to be made with the Singapore Accounting and Corporate Regulatory Authority). Please see
the proposal set forth for our extraordinary general meeting of shareholders to be held immediately
preceding our 2019 annual general meeting for details on proposed changes to the 2016 Constitution
(the Company’s existing Constitution) regarding the timing of annual general meetings.
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 that 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 that are held as treasury
shares as at that date).
-52-
2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal No. 6: Ordinary Resolution to Renew the Share Purchase Mandate
Purely for illustrative purposes, on the basis of 513,926,093 issued Ordinary Shares outstanding as of
June 14, 2019, 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
purchase not more than 102,785,219 issued Ordinary Shares pursuant to the proposed renewal of the
Share Purchase Mandate.
During fiscal year 2019, we repurchased approximately 17.7 million shares for an approximate
aggregate purchase value of $189 million under the Share Purchase Mandate and retired all of these
shares. As of June 14, 2019, we had 513,926,093 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
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2019 Proxy Statement
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal No. 6: Ordinary Resolution to Renew the Share Purchase Mandate
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, 105 percent of the
average of the closing price per ordinary share over the five consecutive trading days on which
our ordinary shares are traded 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, immediately preceding the date on which we effect 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 12 months immediately after the date of the payment; and (c) the value of the company’s
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2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal No. 6: Ordinary Resolution to Renew the Share Purchase Mandate
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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2019 Proxy Statement
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Part III—Proposals to be Considered at the 2019 Annual General Meeting of Shareholders
AGM Proposal No. 6: 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 IV—Additional Information
Executive Officers
EXECUTIVE OFFICERS
PART IV—ADDITIONAL INFORMATION
The names, ages and positions of our executive officers as of June 14, 2019 are as follows:
Name
Age Position
Revathi Advaithi
Christopher E. Collier
Francois P. Barbier
Scott Offer
Paul J. Humphries
Douglas M. Britt
David P. Bennett
51 Chief Executive Officer
51 Chief Financial Officer
60 President, Global Operations and Components
54 Executive Vice President and General Counsel
64 President, High Reliability Solutions
54 President, Flex Integrated Solutions
49 Chief Accounting Officer
Revathi Advaithi. Ms. Advaithi has served as our Chief Executive Officer since February 11, 2019.
Prior to joining the Company, Ms. Advaithi was President and Chief Operating Officer, Electrical Sector,
of Eaton Corporation plc, a power management company, a position she had held since September 1,
2015. Prior to that, she served as President of Electrical Sector, Americas of Eaton from April 1, 2012
through August 31, 2015. She joined Eaton in 1995 and led the Electrical Sector in the Americas and
Asia-Pacific, with a three-year assignment in Shanghai. Between 2002 and 2008, Ms. Advaithi worked
at Honeywell, where she held several senior roles within the sourcing and supply chain functions of the
aerospace sector before being named vice president and general manager of Honeywell’s Field
Solutions business in 2006. Ms. Advaithi returned to Eaton in 2008 as vice president and general
manager of the Electrical Components Division. Ms. Advaithi currently serves as a non-executive
director for the BAE Systems board. She has a bachelor’s degree in mechanical engineering from the
Birla Institute of Technology and Science in Pilani, India, and an MBA in international business from
Thunderbird-Garvin School of International Business in Glendale, Arizona.
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.
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JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part IV—Additional Information
Executive Officers
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 of the Silicon Valley Education Foundation.
Douglas M. Britt. Mr. Britt has served as President, Flex Integrated Solutions (FIS) since April 2018.
FIS is a combination of three business groups including: Industrial and Emerging Industries (IEI),
Communications & Enterprise Compute (CEC), and Consumer Technologies Group (CTG). Prior to
that, from February 2012, he served as our President of IEI. From May 2009 to November 2012,
Mr. Britt served as Corporate Vice President and Managing Director of Americas for Future Electronics,
and from November 2007 to May 2009, he was Senior Vice President of Worldwide Sales, Marketing,
and Operations for Silicon Graphics. From January 2000 to October 2007, Mr. Britt held positions of
increasing responsibility at Solectron Corporation, culminating his career there as Executive Vice
President, and was responsible for Solectron’s customer business segments including sales, marketing
and account and program management functions. Mr. Britt also serves as a director of Sun Hydraulics
Corporation, doing business as Helios Technologies. Mr. Britt earned a bachelor’s degree in business
administration from California State University, Chico, and attended executive education programs
throughout Europe, including at the University of London.
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 IV—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 joint proxy statement for the
extraordinary general meeting of shareholders and 2019 annual general meeting of shareholders.
Submitted by the Compensation Committee of the Board of Directors:
William D. Watkins
Jennifer Li
Lay Koon Tan
Willy C. Shih, Ph.D.
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JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part IV—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
2019 compensation of our NEOs is provided in the Summary Compensation Table and other
compensation tables in this joint proxy statement. Our NEOs for fiscal year 2019 are:
Name Position
Revathi Advaithi Chief Executive Officer(1)
Michael M. McNamara Former Chief Executive Officer(2)
Christopher Collier Chief Financial Officer
Francois P. Barbier President, Global Operations and Components
Douglas Britt President, Flex Integrated Solutions
Paul Humphries President, High Reliability Solutions
Scott Offer Executive Vice President and General Counsel
and Former Acting Chief Executive Officer(3)
(1) Ms. Advaithi was appointed as Chief Executive Officer effective February 11, 2019.
(2) Mr. McNamara retired from his position of Chief Executive Officer effective December 31, 2018.
(3) Mr. Offer served as Acting Chief Executive Officer from February 5, 2019 until February 11, 2019.
This CD&A is organized into the following key sections:
• Executive Summary;
• Compensation Philosophy;
• Compensation Setting Process and Decisions for Fiscal Year 2019; and
• Fiscal Year 2019 Executive Compensation
Executive Summary
Business Overview
We are a globally-recognized provider of Sketch-to-Scale® services—innovative design, engineering,
manufacturing, and supply chain services and solutions—from conceptual sketch to full-scale
production. We design, build, deliver and manage complete packaged consumer and enterprise
products, from medical devices and connected automotive systems to sustainable lighting and cloud
data center infrastructures, for companies of all sizes in various industries and end-markets, through
our activities in the following segments:
Segment Business Includes:
High Reliability Solutions
(HRS)
• Health solutions business, including surgical equipment, drug
delivery, diagnostics, telemedicine, disposable devices,
imaging and monitoring, patient mobility and ophthalmology.
• Automotive business, including vehicle electrification,
connectivity, autonomous, and smart technologies.
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Segment Business Includes:
Part IV—Additional Information
Compensation Discussion and Analysis
Industrial and Emerging
Industries (IEI)
Communications &
Enterprise Compute (CEC)
Consumer Technologies
Group (CTG)
Flex Strategy
• Energy, including advanced metering infrastructure, energy
storage, smart lighting, smart solar energy.
• Industrial, including semiconductor and capital equipment,
office solutions, household industrial and lifestyle, industrial
automation and kiosks.
• Telecom business of radio access base stations, remote radio
heads and small cells for wireless infrastructure.
• Networking business, which includes optical, routing, and
switching products for 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-related businesses in IoT enabled devices, audio
and consumer power electronics, mobile devices.
• Various supply chain solutions for consumer, computing and
printing devices.
Over the past several years, Flex has been engaged in a long-term strategy focused on portfolio
evolution and driving higher value-added services that align with our customers’ needs and
requirements in order to improve operating and financial results, including improving profit margins,
capitalizing on prior investments, streamlining our investment portfolio and returning to strong free cash
flow generation.
As we have continued to evolve our portfolio and Sketch-to-Scale® strategy, we remain focused on
customer experience, investing in our higher margin segments while being selective in the markets and
products categories we focus on, pursuing opportunities that lead to full manufacturing and supply
chain relationships, and creating shareholder value.
During the past several years, we have evolved our long-term portfolio towards a mix of businesses
which possess longer product life cycles and higher segment operating margins such as reflected in
our IEI and HRS businesses. We have expanded our design and engineering relationships through our
product innovation centers and global design centers. In fiscal year 2019, the Company continued to
take targeted actions to optimize our business, most notably within our CTG segment, where we are
executing on our long-term strategy by actively managing under-performing accounts and are focused
on partnering with well-funded, leading multi-national brands that control multiple categories of
products and have regional demand requirements.
The Company is focused on disciplined sustainable execution on our core business processes as well
as selective and disciplined growth in areas that can drive margin improvement and provide value for
the Company and its customers. We believe that our continued business transformation is strategically
positioning 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.
Performance and Company Highlights For Fiscal Year 2019
During fiscal year 2019, we achieved positive results on several fronts, improving the quality of our
sales mix, expanding margins, returning to positive free cash flow generation, and streamlining our
investment portfolio. Our CEC segment delivered year over year revenue growth of 8% and our IEI
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Part IV—Additional Information
Compensation Discussion and Analysis
segment delivered year over year revenue growth of 4%. Key financial highlights from the fiscal year
include(3):
• We achieved net sales of $26.2 billion, an increase of 3% compared to the prior year.
• Adjusted operating income was: $872 million, an 11% increase as compared with fiscal 2018.
Adjusted net income followed a similar path and was $603 million, a 3% increase over the
previous year.
• We delivered adjusted EPS of $1.14 per share, a 4.6% increase compared with the prior year.
• We delivered on our commitment to return over 50% of free cash flow to shareholders, with
$189 million of shares repurchased in fiscal year 2019.
Financial Results Below Expectations and Performance Improvement Actions
While we achieved the positive results described above, fiscal year 2019 was also a challenging year
for our business and our shareholders, marked by some financial results below expectations (and
shareholder value declined relative to where Flex finished fiscal year 2018) and a CEO transition. In
the face of these challenges, the Board of Directors and the Company’s management have taken, and
will continue to take, significant actions to achieve short-term and long-term financial results positioning
the Company for future gains in shareholder value, as summarized below.
• Flex’s Chairman of the Board and management team engaged in a business review to identify
performance improvement opportunities.
• Flex’s Chairman of the Board and management engaged actively with shareholders to solicit
input on key concerns and outline Flex’s plans for improving performance going forward.
Pay and Performance Alignment For Fiscal Year 2019
Our compensation philosophy is to reward above-target performance when achieved, and below target
(including paying zero) when targeted results are not delivered. We also seek to deliver a significant
portion of executive pay in the form of equity awards, which are directly aligned with value delivered to
shareholders.
With fiscal year 2019 performance results below our targeted levels, pay outcomes and expectations
for Flex’s NEOs were negatively impacted accordingly. Highlights include:
• We maintained all NEOs’ base salaries with no increase, other than Mr. Offer, who received a
10% increase in the fourth quarter of fiscal year 2019 based upon exceptional contributions in a
period of significant transition and assumption of additional duties. Base salaries were
positioned in the aggregate at approximately the peer group median.
• In light of financial performance, the Board, upon the recommendation of the Compensation
Committee, reduced PSU and service-based RSU awards granted to the NEOs on June 19,
2018 by 15%.
• Based on overall financial results that were below targeted performance levels, fiscal year 2019
bonuses paid out at approximately 66% of target for corporate level NEOs, with two business
unit leaders (Messrs. Humphries and Britt) exceeding total corporate results with payouts at
104.4% and 130.1% of target, respectively, based on strong business unit results.
• We paid out the long-term relative total shareholder return (TSR) PSU cycle that closed during
fiscal year 2019 at 100% of target in June 2018 based upon TSR results that were at the
50th percentile over the three-year performance cycle that began in June 2015.
(3) See Annex B to this joint proxy statement for a reconciliation of non-GAAP and GAAP financial
measures.
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Part IV—Additional Information
Compensation Discussion and Analysis
• The Flex fiscal year 2017 – 2019 FCF PSU and long-term cash incentive cycle did not provide
any payout as cumulative FCF results over the three-year period were below the threshold
levels.
• Based on Flex’s closing share price as of March 29, 2019, the relative TSR award cycles as of
the end of fiscal year 2019 (2016 – 2019, 2017 – 2020, and 2018 – 2021) are projected to
have no payout unless Flex experiences significant share price improvement going forward.
• In an effort to further align executive compensation with shareholder value delivered, we shifted
away from a previous long term incentive plan (LTIP) structure that measured both cumulative
FCF over a multi-year period as well as relative TSR. For fiscal year 2019, we granted only
relative TSR PSUs.
• We funded the performance-based portion of our then-current NEOs’ deferred compensation
plans in fiscal year 2019 with a value that averaged 28.6% of our then-current NEOs’
respective base salaries, which was below target.
• We provided a responsible CEO retirement package to Mr. McNamara in connection with his
retirement that limited exit payments primarily to required plan-based awards.
• To ensure leadership continuity during the CEO transition, we provided retention equity awards
to the other NEOs that consist of a combination or performance- and time-based awards. In
addition, we implemented a formal, market-aligned, executive severance plan to provide clarity
on the treatment of terminations in the event of various forms of departure from the Company.
• We established a compensation approach for our new CEO with a high degree of market
alignment and included transition awards that were limited to make-whole values from her
previous role. Key elements of the go-forward CEO compensation program include:
— Base salary of $1,150,000, somewhat below market median.
— Target annual bonus of 150% of salary (a pro-rata portion will be paid at target for her short
time in the CEO role during fiscal year 2019).
— A fiscal year 2020 equity grant of $7.5 million which will be aligned with the overall Flex
executive compensation program and will have 50% of the grant date value in the form of
relative TSR PSUs.
— Resulting target total annual compensation is below the median of Flex’s peers.
Our long-term incentive plans underscore our pay-for-performance alignment. For example, based on
Flex’s closing share price as of March 29, 2019, in-process PSU cycles from prior fiscal years
(2016 – 2019, 2017 – 2020 and 2018 – 2021) are currently projected to have no payout unless Flex
experiences significant share price improvement going forward. In addition, the value of shares held by
NEOs have decreased, commensurate with Company share price movement over the course of the
fiscal year. On average, realizable compensation values from all target compensation provided to our
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fiscal year 2019 NEOs (including our former CEO but excluding our new CEO), are at only
approximately 54% of the original targeted value over the last three years:
Average Annualized FY17-FY19 Target Pay vs. Estimated Realizable Pay
Part IV—Additional Information
Compensation Discussion and Analysis
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
$6,485
$200
$221
$4,267
$1,049
$748
Actual estimated realizable pay:
53.7% of target
$3,484
$200
$221
$1,494
$821
$748
Annualized Average
FY17-FY19 Target
Annualized Average
FY17-FY19 Actual
Base Salary
Bonus
Total LTI
Change in Pension Value & NQDC
All Other Comp
The analysis above represents average annualized target total compensation for each of fiscal years
2017 – 2019 for Messrs. McNamara, Collier, Barbier, Britt, Humphries, and Offer, relative to the
estimated realizable value as of March 29, 2019, which includes salaries, actual bonus payouts, target
versus actual vested deferred compensation payouts, and actual or estimated equity awards from
grants in the same period(4). In-progress relative TSR and FCF PSUs are currently projected to have no
payout (as described above) and outstanding RSU shares are valued at a fiscal year 2019 end-date
price of $10.00. With these assumptions, only 53.7% of target compensation for these executives is
estimated to be realizable, demonstrating the effectiveness of Flex’s pay-for-performance approach.
Ms. Advaithi has been excluded from the above charts as her compensation program was focused on
transition awards for a small portion of fiscal year 2019 due to her February 2019 hire date.
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. Flex initiated an elevated level of shareholder
outreach in fiscal year 2019. During fiscal year 2019, we interacted with holders of approximately 64%
of our share voting power.
We proposed a “say-on-pay” advisory vote on executive compensation at our 2018 annual general meeting
held on August 16, 2018. The advisory vote received the support of approximately 85% of the votes cast at
the 2018 annual general meeting. Based on both the outcome of the “say-on-pay advisory vote” and our
discussions with shareholders, 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 are
focused on tightly managing our overall share grant levels relative to performance delivered, which we have
(4) Analysis does not include the value of performance- and time-based retention awards granted to
NEOs other than Mr. McNamara during the fiscal year 2019 CEO transition and excludes the
compensation program for the new CEO, Ms. Advaithi.
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Part IV—Additional Information
Compensation Discussion and Analysis
done and will continue to do (see the section entitled “Responsible Share Granting Approach” below). We
took pro-active steps to reduce fiscal year 2019 equity grant levels for NEOs and our pay programs continue
to align pay and performance as demonstrated by our performance-based long-term incentive programs
projecting no payouts for current in-process award cycles (2016 – 2019, 2017 – 2020 and 2018 – 2021)
unless Flex experiences significant share price improvement going forward.
Based on our favorable prior “say-on-pay” results, shareholder feedback on existing programs, and our
review of the alignment of our pay program design with our financial results, we continued the structure
of our fiscal year 2018 compensation programs in fiscal year 2019. The most significant change made
was to improve alignment with shareholders, where 100% of our performance-based long-term
incentive awards now measure relative TSR versus the S&P 500. This change was made based on an
ongoing effort to provide enhanced alignment with shareholder outcomes.
Going forward, we will continue to evaluate our alignment between our compensation strategy and our
business objectives and financial results, with a strong focus on ensuring that the pay programs
reinforce the need to achieve strong performance levels and shareholder value growth.
Fiscal Year 2019 Executive Compensation Summary
Our executive compensation program has been, and continued to be, structured to be competitive to
allow us to attract and retain a high caliber leadership team. Further, it is intended to provide direct
alignment between pay and performance. This alignment is shown where many elements of the pay
program have experienced value declines as a result of below-target performance in fiscal year 2019.
The illustration below describes the key elements of our core executive compensation program for
fiscal year 2019:
Compensation Element
LONG-TERM INCENTIVE
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Relative TSR PSUs
(50%)
Service-Based RSUs
(50%)
SHORT-TERM INCENTIVE
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Corporate NEOs
Revenue
(25%)
Business Unit NEOs
Corporate
(20%)
OP Growth
(25%)
ROIC %
(25%)
EPS
(25%)
Total Sales
(30%)
Controllable OP
(30%)
N.B. / FIS Payout
(20%)
ANNUAL BASE SALARY
Description
•
•
50% is a PSU that measures Flex’s TSR versus that of
the S&P 500 over a 3-year period.
50% are RSUs that vest equally over a four-year
period.
• Flex also provides long-term cash incentives under our
Deferred Compensation Plan, with a target value equal
to 30% of salary for each NEO with 50% of actual
funding linked to bonus payout results.
• To promote leadership continuity and stability during
Flex’s CEO transition, Flex granted both performance-
and time-based equity awards to non-CEO NEOs
during the leadership transition.
• Corporate executives are measured entirely on Flex
financial objectives. For fiscal year 2019, 50% of the
award opportunity was measured against quarterly
results and 50% against annual outcomes.
– Fiscal year funding was 67% of target.
• Business Unit NEOs are measured primarily on direct
business unit results across three related metrics (Total
Sales, Controllable Operating Profit (OP), and either
New Business (N.B.) Wins or FIS segment results
(FIS Payout).
– Fiscal year results for Mr. Humphries were 104%
of target and 130% of target for Mr. Britt.
• Flex positions salaries at approximate median versus
market.
•
In fiscal year 2019, only one NEO received a salary
increase based on benchmarking and increased
responsibilities.
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2019 Proxy Statement
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Part IV—Additional Information
Compensation Discussion and Analysis
Fiscal Year 2020 Compensation Plan Changes
For fiscal year 2020, our most significant changes to our executive compensation programs are in the
design of the short-term incentive program, including:
• Annual Measurement Only: For our named executive officers and other top executives,
performance will be measured against annual results only.
• Refined Metrics and Weighting: To align with input provided by shareholders, we will
measure four key metrics with revised weighting in fiscal year 2020:
• Revenue: 20% weighting (down from 25% in fiscal year 2019 to provide greater emphasis
on profitability).
• Operating Profit: 30% weighting (up from 25% to emphasize profitability).
• EPS: 25% weighting (consistent with fiscal year 2019).
• Free Cash Flow (FCF): 25% weighting (replaces ROIC, as FCF was considered to be a key
strategic metric for value creation based on shareholder engagement).
• Single Funding Pool for Top Executives: The fiscal year 2020 annual incentive program will
use a single funding pool for all named executive officers and top executives, which is intended
to ensure that overall Company results are achieved before individual bonuses are paid.
In addition, Flex provided a target pay program for its new CEO that places 89% of pay at risk, with a
majority of pay requiring direct financial and/or shareholder performance hurdle achievement to deliver
payouts. For the non-CEO named executives, target equity values were kept at the same level as the
target fiscal year 2019 core awards.
Compensation Philosophy
Flex’s compensation philosophy is to 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 the
achievement of 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
• 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 Mr. McNamara’s fiscal year 2019 target total direct
compensation was either at-risk or long-term, and, overall for
our other non-CEO NEOs, 79%-82% of the 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.
• The Board, or the Compensation Committee if so delegated by
the Board, maintains the authority to reduce annual incentive
bonus payouts upon evaluation in the context of the
Company’s overall performance.
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Element Overview
Part IV—Additional Information
Compensation Discussion and Analysis
Market-Based Target Pay
Balanced Performance
Metrics and Measurement
Time Frames
Majority Focus on Long-Term
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 45th percentile for our NEOs in fiscal year
2019.
• With the rapid pace and dynamic nature of our business, it is
necessary to actively measure results at varying time frames
across a range of metrics, though with progressively greater
emphasis on long-term performance for senior leaders.
• In fiscal year 2019, we measured both quarterly and annual
results for revenue, adjusted operating profit (OP), return on
invested capital (ROIC), and adjusted EPS because we
believe these reinforce the need to achieve strong top line
results, deliver profitability, and manage capital efficiently. For
fiscal year 2020, all of our NEOs will be measured against an
annual incentive plan.
• For our long-term incentive plan, we measure TSR relative to
the S&P 500.
• 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.
• 72% of Mr. McNamara’s fiscal year 2019 target total direct
compensation was through long-term incentives, of which
approximately 50% was linked to achievement of long-term
TSR performance versus the S&P 500.
• 58%-64% of our other non-CEO NEOs’ target total pay was
through long-term incentives, of which approximately 50% was
linked to achievement of long-term TSR performance versus
the S&P 500.
• We maintain share ownership guidelines (for the CEO – 4X
annual base salary, for the CFO – 2 1/2X annual base salary,
and for all other NEOS – 1 1/2X base salary) to enforce
alignment with shareholder results, and have recoupment
policies in place.
Additionally, performance- and time-based retention awards were granted to NEOs, other than
Mr. McNamara, during the CEO transition period in fiscal year 2019 as part of the broader business
review at Flex and determination that senior executive departures could have a significantly negative
impact on business results.
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2019 Proxy Statement
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Part IV—Additional Information
Compensation Discussion and Analysis
Compensation Setting Process and Decisions for Fiscal Year 2019
Alignment with Compensation and Corporate Governance Best Practices
The Compensation Committee regularly reviews our compensation programs, peer company data and
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 approximately
our peer group median and allow for greater
levels of actual total direct compensation
based on performance.
Maintain a reasonable share burn rate.
During fiscal year 2019, we granted share-
based awards representing approximately
1.57% 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 share ownership guidelines for
NEOs 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 have single trigger accelerated
vesting of equity awards upon a change in
control.
✗
We do not maintain a supplemental
executive retirement plan (SERP).
✗
✗
✗
Our 2017 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.
We do not provide excise tax gross-ups in
change of control events.
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 pay practices.
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Part IV—Additional Information
Compensation Discussion and Analysis
Based on its review and assessment, the Compensation Committee from time to time recommends
changes in our compensation programs to our Board. The Compensation Committee is responsible for
recommending to our Board the compensation of our Chief Executive Officer and all other executive
officers. The Compensation Committee also oversees management’s decisions concerning the
compensation of other Company officers, administers our equity compensation plans, and evaluates
the effectiveness of our overall executive compensation programs. Our Compensation 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 2019, the Compensation Committee engaged Mercer, a
wholly-owned subsidiary of Marsh & McLennan Companies, Inc. in connection with its fiscal year 2019
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 2019 and advised on the methodology used for our 2019
CEO pay ratio disclosure.
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 MMC
(which includes 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 MMC of services unrelated to executive and director compensation
matters in fiscal year 2019 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 MMC’s other relationships with the Company. The Compensation
Committee has retained Mercer as its independent compensation consultant for fiscal year 2020 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 2019 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.
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2019 Proxy Statement
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Part IV—Additional Information
Compensation Discussion and Analysis
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
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 17 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 uses Mercer’s review of standardized surveys to check the
Company’s compensation programs against other large high technology and 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 the peer companies are annually reviewed and approved by the Compensation
Committee. The peer group for fiscal year 2019 compensation decisions (which was the same as the
peer group used for fiscal year 2018 compensation decisions) consisted of the following companies:
Arrow Electronics, Inc.
Avnet, Inc.
Eaton Corporation plc
General Dynamics Corporation
Illinois Tool Works Inc.
Johnson Controls International plc
Raytheon Company
TE Connectivity Ltd.
Xerox Corporation
Fiscal Year 2019 Executive Compensation
Total Direct Compensation
Applied Materials, Inc.
Danaher Corporation
Emerson Electric Co.
Honeywell International Inc.
Jabil, Inc.
Northrop Grumman Corporation
Seagate Technology Public Limited Company
Western Digital Corporation
Total direct compensation is the sum of base salary, annual incentive bonus payouts and long-term
incentive awards, including target deferred compensation values, though excluding the retention
awards provided during the CEO transition period in fiscal year 2019. The bar graph below illustrates
the aggregate target total direct compensation provided to our named executive officers in place at the
beginning of fiscal year 2019 (i.e., excluding Ms. Advaithi) relative to comparable target pay elements
for Flex’s peer group and survey comparators. Flex’s fiscal year 2019 target pay levels were positioned
below the median of market comparators, and actual payouts are expected to be below target levels as
noted above, demonstrating the alignment of pay and performance that is built into Flex’s pay program.
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2019 Proxy Statement
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Part IV—Additional Information
Compensation Discussion and Analysis
FY19 NEO Total Target Compensation
Positioning vs. Market
100%
75%
50%
25%
Market
Flex’s Target
FY19 NEO Total
Compensation
was positioned at
market 45th
percentile
The above graph reflects the 15% reduction of PSU and service-based RSU awards granted to the
NEOs in June 2018.
Elements of Compensation
We allocate compensation among the following components for our NEOs:
• base salary;
• annual incentive bonus awards;
• long-term PSU and service-based RSU 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, PSUs, 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 RSUs and deferred compensation plan contributions are designed to provide significant
retention and alignment with long-term shareholder value enhancement, as our long-term incentive
awards fully vest after periods of three or four years (with the exception of certain performance-based
retention awards granted to select NEOs in December 2018, which vest over a two-year period).
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Part IV—Additional Information
Compensation Discussion and Analysis
The following charts illustrate the mix of our core target compensation and show that for
Mr. McNamara, our Chief Executive Officer at the beginning of fiscal year 2019, 91% of total target
direct compensation is either at-risk or long-term(1), and, overall for our other non-CEOs NEOs,
79% – 82% of total target direct compensation is either at-risk or long-term(1). Compensation for
Ms. Advaithi has been excluded from these charts as her compensation program was focused on
transition awards for a small portion of fiscal year 2019 due to her February 2019 hire date. She will
become a full participant in Flex’s core compensation program in fiscal year 2020. For more
information regarding Ms. Advaithi’s compensation, see page 87.
FY2019 Target
Total Direct Compensation
(Mr. McNamara)
Base
Salary
9%
At Risk
91%
Time Based
LTI
36%
Annual Cash
Incentive
19%
Performance
Based LTI
36%
Performance Based
55%
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Part IV—Additional Information
Compensation Discussion and Analysis
FY2019 Target
Total Direct Compensation
(Other non-CEO NEOs)
At Risk
81%
Time Based
LTI
30%
Base Salary
19%
Annual Cash
Incentive
20%
Performance
Based LTI
31%
Performance Based
51%
(1) Performance-based long-term incentives evaluated using Monte Carlo methodology.
(2) The above charts do not include the retention awards granted to NEOs other than Mr. McNamara
during the fiscal year 2019 CEO transition.
Base Salary Levels
The following table sets forth the base salaries of our NEOs as of the end of fiscal years 2018 and
2019, as well as the percentage increase (if any) from the prior year:
Name and Title
Revathi Advaithi
Chief Executive Officer
Michael M. McNamara
Former Chief Executive Officer
Christopher Collier
Chief Financial Officer
Francois P. Barbier
President, Global Operations
and Components
Douglas Britt
President, Flex Integrated Solutions
Paul Humphries,
President, High Reliability Solutions
Annualized Base Annualized Base
Salary for
Fiscal Year 2018
Salary for
Fiscal Year 2019
Percentage
Increase
—
$1,150,000
—
$1,250,000
$1,250,000
$700,000
$700,000
$710,000
$710,000
$710,000
$710,000
$710,000
$710,000
0%
0%
0%
0%
0%
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Part IV—Additional Information
Compensation Discussion and Analysis
Annualized Base Annualized Base
Salary for
Fiscal Year 2018
Salary for
Fiscal Year 2019
Percentage
Increase
$550,000
$605,000
10%
Name and Title
Scott Offer
Executive Vice President and General
Counsel and Former Acting Chief
Executive Officer
For fiscal year 2019, we maintained our executives’ base salaries with no increases with one
exception. In recognition of his significant contributions before and during the period of CEO transition
as well as increasing responsibilities in providing oversight of our marketing and communications
function, Mr. Offer’s salary increased by 10% effective February 2019. Additionally, the base salary of
our prior CEO, Mr. McNamara, had remained the same from 2008 until his retirement in 2018.
We seek to position salaries at levels that are competitive at approximate median levels with our peer
companies. Our executives’ base salaries are based on each individual executive’s role and the scope
of his or her responsibilities, also taking into account the executive’s experience and the base salary
levels of other executives within the Company. The Compensation Committee typically reviews base
salaries every fiscal year and adjusts or maintains 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 2019 positioned our aggregate base salaries 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 corporate results 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 2019, the Company’s performance levels with respect to the above-described
performance metrics were below the targeted amounts for all of these metrics (see table below), so
payouts were also below target. For Messrs. Britt and Humphries, performance results were heavily
weighted to outcomes from the FIS and HRS business segments that they manage, respectively.
Performance levels for these segments exceeded targeted amounts for all metrics and, accordingly,
Messrs. Britt and Humphries achieved above-target payout levels. Mr. Offer’s target bonus percentage
was increased by 10% to 100% in February 2019 in recognition of his significant contributions before
and during the CEO transition and due to his additional responsibilities in providing oversight of our
marketing and communications function. The payout levels are as follows:
Fiscal Year 2019 Actual
Annual Fiscal Year 2019 Annual
Incentive Bonus as a Incentive Bonus Target
Percentage of Target (Potential Bonus as a Fiscal Year 2019 Annual
Name Bonus percentage of Base Salary) Incentive Actual Bonus
Mr. McNamara
Mr. Collier
Mr. Barbier
Mr. Britt
Mr. Humphries
Mr. Offer
9.3% 200% $231,250
66.6% 110% $512,849
66.6% 110% $520,176
130.1% 110% $1,016,384
104.4% 110% $815,264
65.8% 100%(1) $370,803
(1) Mr. Offer’s potential bonus as a percentage of base salary was 90% for the first three quarters of
fiscal year 2019 and 100% for the fourth quarter of fiscal year 2019.
-74-
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Part IV—Additional Information
Compensation Discussion and Analysis
As an inducement for Ms. Advaithi to join the Company, she was eligible to receive a pro-rata bonus
payout at target for the time during which she was with the Company in fiscal year 2019.
Mr. McNamara was not eligible to receive any annual bonus for fiscal year 2019 given his retirement
date of December 31, 2018, though he received quarterly payouts for the quarters during which he was
an active employee and plan participant.
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 2019, 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 2019 and confirmed that target performance measures were appropriately aligned with such
estimates. Performance measures were based on quarterly and annual targets.
The following table summarizes the key features of our fiscal year 2019 incentive bonus plan:
Feature Component Objectives
Performance
Targets
• Based on key Company and
business unit financial metrics
• Measured on annual and quarterly
basis
— 50% based on achievement of
quarterly objectives
— 50% based on achievement of
annual objectives
• Aligns executive incentives with
Company and business unit
performance
• Rewards achievement of objectives
over the course of the year by
splitting incentives over quarterly and
annual performance objectives
Performance
Measures
• Revenue growth at the Company
and business unit level
• Adjusted operating profit at the
• Takes into account executive’s
responsibility, experience, and
expected contributions
Company and business unit level
• Focused on achievement of business
• 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
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
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2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Feature Component Objectives
Part IV—Additional Information
Compensation Discussion and Analysis
• Reflects the Company’s emphasis on
pay-for-performance by linking
individual compensation to financial
performance
• Similar to other components of the
Company’s incentive program, by
conditioning bonus payments to the
achievement of minimum
performance threshold, encourages
accountability
Bonus
Payments
• 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
— Ms. Advaithi’s target bonus was
set at 150% of base salary
— Target bonus for other NEOs
set at a range between 90%
and 110% of base salary
• Quarterly bonuses range from 0% of
target to maximum of 200% of target
• Annual bonuses range from 0% 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 Board, or the Compensation
Committee if so delegated by the
Board, maintains the authority to
reduce bonus payouts upon
evaluation in the context of the
Company’s overall performance
The Compensation Committee recommended, and our Board approved, different performance metrics
for Mr. McNamara, our Chief Financial Officer and other corporate officers as compared with business
unit executives, where business unit executives have a significant emphasis on the performance of
their particular business unit.
The incentive bonus plan award opportunities for each NEO are shown in the Grants of Plan-Based
Awards in Fiscal Year 2019 table in “Executive Compensation.”
Non-GAAP Adjustments
We used adjusted non-GAAP performance measures for our incentive bonus plan in fiscal year 2019.
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 mis-alignment in 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 2019, non-GAAP adjustments consisted of excluding after-tax
stock-based compensation expense, amortization of intangible, customer related assets impairments,
restructuring charges, the new revenue standard adoption impact, contingencies and other, interest
-76-
2019 Proxy Statement
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CLEAN
Part IV—Additional Information
Compensation Discussion and Analysis
and other, net and other charges (income), net. All adjustments are subject to approval by the
Compensation Committee to ensure that payout levels are consistent with performance.
Incentive Awards for Corporate Executives
Our corporate executives who were employed at the beginning of fiscal year 2019 were each eligible
for a bonus award based on achievement of quarterly and annual revenue growth, adjusted operating
profit, ROIC and adjusted EPS targets. Ms. Advaithi’s fiscal year 2019 bonus was agreed to be paid at
target for her time in the role given her hire date in February of 2019. We refer to these performance
measures as the “Company performance metrics.” The weightings for each of these performance
measures were 25%. Bonus targets for each named executive officer are outlined in the table below:
Name and Title
Revathi Advaithi
Chief Executive Officer
Michael M. McNamara
Former Chief Executive Officer
Christopher Collier
Chief Financial Officer
Francois P. Barbier
President, Global Operations and
Components
Douglas Britt
President, Flex Integrated Solutions
Paul Humphries,
President, HRS
Scott Offer
Executive Vice President and
General Counsel and
Former Acting Chief Executive Officer
FY18 Target
Bonus
(% of Salary)
FY19 Target
Bonus
(% of Salary)
Percentage
Change
—
200%
110%
110%
100%
110%
150%
200%
110%
110%
110%
110%
—
0%
0%
0%
10%
0%
90% 100%(1)
10%
(1) Mr. Offer’s potential bonus as a percentage of base salary was 90% for the first three quarters of
fiscal year 2019 and 100% for the fourth quarter of fiscal year 2019.
Flex made no increases to target bonus opportunities in fiscal year 2019, other than for Messrs. Britt
and Offer to provide recognition for strong ongoing contributions, additional responsibilities and
alignment with other senior business unit leaders.
The following table sets forth the payout level opportunities that were available for Messrs. McNamara,
Collier, Barbier and Offer 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 -0.1% at the 50% payout level, 4.2% at the 100% payout level, 12.1% at the 200% payout level, and
16.0% at the 300% payout level.
No payout is made if the threshold performance level is not achieved. Achievement of payouts at the
300% level for the annual bonus would require sustained strong performance over the course of a full
year and are considered to represent significant stretch targets. For performance levels between 50%
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2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part IV—Additional Information
Compensation Discussion and Analysis
and 200% for quarterly bonuses and between 50% and 300% for the annual bonus presented in the
table below, straight line interpolation is used to arrive at the payout level:
Weight
0%
)
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Q
2
Q
3
Q
4
Q
9
1
Y
F
Revenue ($000s)
Adjusted OP ($000s)
ROIC
Adjusted EPS
Revenue ($000s)
Adjusted OP ($000s)
ROIC
Adjusted EPS
Revenue ($000s)
Adjusted OP ($000s)
ROIC
Adjusted EPS
Revenue ($000s)
Adjusted OP ($000s)
ROIC
Adjusted EPS
Revenue ($000s)
Adjusted OP ($000s)
ROIC
Adjusted EPS
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
FY19 Short-Term Incentive Plan
Payout (% of Target)
50%
$6,160
$177
17%
$0.24
$6,415
$212
17%
$0.27
$6,563
$230
17%
$0.30
$6,272
$211
17%
$0.28
$25,410
$831
17%
$1.09
100%
$6,281
$188
18%
$0.24
$6,575
$226
18%
$0.30
$6,927
$266
18%
$0.36
$6,727
$260
18%
$0.36
$26,510
$940
18%
$1.25
150%
$6,431
$195
19%
$0.25
$6,825
$239
19%
$0.32
$7,277
$283
19%
$0.39
$6,977
$273
19%
$0.38
$27,510
$990
19%
$1.33
300%
200%
$6,681
$201
20%
$0.26
$7,075
$245
20%
$0.33
$7,527
$289
20%
$0.40
$7,227
$279
20%
$0.39
$28,510
$1,015
20%
$1.37
Key
$29,510
$1,060
22%
$1.45
Actual Payout as a Percent of Target
(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 (after applying a weighting of 25%) and annual
periods) for Messrs. McNamara, Collier, Barbier, and Offer.
Period
Q1
Q2
Q3
Q4
FY’19 Annual
Component
FY’19 Total
Payout
Revenue
(in
Payout
Adjusted
OP (in
Payout
millions) Level % millions) Level % ROIC
Payout Adjusted Payout
EPS
Level %
Total
Payout
Level % Level %
$6,424 36.9% $188
$6,711 31.8% $224
$6,945 25.6% $256
0% $204
$6,226
0% $0.24
25.0% 15.9%
22.6% 16.2%
0% $0.29
21.8% 17.0% 16.3% $0.34
0% $0.27
0% 17.2%
12.5% 74.4%
20.8% 75.3%
20.8% 84.6%
0%
0%
$26,306 22.7% $872
17.2% 17.2% 18.5% $1.14 16.4% 74.8%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
66.6%
Consistent with the Company’s pay-for-performance approach, overall Flex results were below target
performance levels and the resulting payouts reflected below-target payouts.
Incentive Awards for NEOs Leading Business Units (Messrs. Britt and Humphries)
Messrs. Britt and Humphries were eligible for bonuses based on achievement of the quarterly and
annual Company performance metrics, as well as the business unit performance metrics of total sales,
operating profit, new business wins for our HRS business group and FIS business group. Actual payout
-78-
2019 Proxy Statement
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CLEAN
Part IV—Additional Information
Compensation Discussion and Analysis
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 Messrs. Britt and
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 Messrs. Britt and Humphries to achieve operating
results at their business units in alignment with our business strategy with payout opportunities at
levels of difficulty consistent with our Company performance metrics.
In fiscal year 2019, the FIS and HRS businesses which Messrs. Britt and Humphries lead, respectively,
both exceeded their performance objectives though the total Company results were below targeted
objectives. With the greater emphasis on business unit results, fiscal year 2019 payouts for both were
above target in alignment with their results versus plan objectives. Accordingly, the payout for Mr. Britt
was 130.1% of target and Mr. Humphries’ was 104.4% of target. 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. Britt and Humphries:
Period
Q1
Q2
Q3
Q4
FY’19 Annual Component
FY’19 Total Payout
D. Britt
D. Britt
P. Humphries P. Humphries
Payout
Actual
Payout %
(as a % of
Payout
Actual
Payout %
(as a % of
(% of Target) Base Salary)
(% of Target) Base Salary)
112.8%
156.3%
167.4%
60.0%
136.1%
130.1%
124.1%
171.9%
184.2%
66.0%
149.8%
143.2%
162.9%
118.0%
86.9%
0%
116.8%
104.4%
179.2%
129.8%
95.6%
0%
128.5%
114.8%
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-Based Incentive Compensation
In fiscal year 2019, the Compensation Committee granted share-based long-term incentives to our
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 incentives are
generally forfeited if the executive voluntarily leaves the Company.
Restricted Share Unit Awards (RSUs)
Fifty percent of the target grant date value of the share-based long-term incentives are in the form of
restricted share unit awards. These time-based RSUs only vest if the executive remains employed
through the vesting period subject to any acceleration as described in the section entitled “Potential
Payments Upon Termination or Change in Control.” 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.
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2019 Proxy Statement
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Part IV—Additional Information
Compensation Discussion and Analysis
Performance Share Units (PSUs)
In fiscal year 2019, the Compensation Committee determined that long-term incentive awards for
executives and other senior officers generally would be allocated 50% to PSUs that are earned based
upon relative TSR performance versus the S&P 500 over a three-year period beginning in fiscal year 2019
and ending in fiscal year 2021. The actual grant value mix may deviate somewhat from this due to
fluctuations in the Monte Carlo valuations for the TSR-based PSUs. The Compensation Committee
believes that this allocation between RSUs and PSUs 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 Compensation Committee believes that the metric in its PSUs, 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 shorter and longer time periods. Prior to fiscal 2019,
25% of the long-term incentive plan measured Flex’s cumulative free cash flow (FCF LTIP). Starting in
fiscal 2019, the Compensation Committee determined to replace the FCF portion of the LTIP with PSU
awards based 100% on relative TSR performance to provide enhanced alignment with shareholder
outcomes. This change to focusing exclusively on our 3-year relative TSR results versus the S&P 500 was
made based on an ongoing effort to provide enhanced alignment with shareholder outcomes.
A summary of the 2019 grant approach is outlined below:
Fiscal Year 2019 Equity Grant Approach
Vehicle & Weight
Description
Relative TSR
Performance
RSUs
(50%)
• Measured as a rank of performance vs. the
S&P 500 at the end of year 3
• Payout can range from 0% to 200% of the
target number of shares
• All grants in shares
Time Vesting
RSUs
(50%)
• Awards vest 25% annually at the end of years
1 through 4
Key features of our long-term incentive awards are as follows:
• PSUs: The awards granted in fiscal year 2019 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 PSUs is a widely accepted
investor benchmark that appropriately aligns compensation with performance. The number of
shares earned is dependent on the percentile rank achieved based on the table below:
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
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Part IV—Additional Information
Compensation Discussion and Analysis
• Time-based RSUs: Awards granted in fiscal year 2019 vest in four installments of 25% on each
of the first through fourth anniversary of the grant date, with the exception of the sign-on award
to Ms. Advaithi in connection with her appointment as CEO, which vests in three equal
installments, due to the intent to cover values foregone at her prior employer with this award.
The PSUs provide that in the event of a qualifying retirement, a pro-rata number of vested shares shall be
issued upon the vesting of the PSU 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. Barbier and Humphries are the only NEOs that satisfy the retirement criteria.
The size of the total long-term equity 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, though 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
and performance 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.
Forfeiture of Elementum Profits Interests Units
We own substantially all of the equity in Elementum Holding Ltd (“Holdco”), which in turn was a
significant shareholder of Elementum SCM (Cayman) Ltd (“Elementum”), a privately-held software
development company founded in 2012 by Flex and some of our former employees. 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. During fiscal year 2019,
Flex significantly reduced its ownership in Elementum and, as of March 31, 2019, it held only a minority
position and Holdco no longer owned any equity in Elementum. In addition, NEOs who had previously
been awarded profits interests in Elementum forfeited such profits interests (excluding Mr. McNamara,
who retained his vested Elementum profits interests but forfeited any unvested Elemental profits
interests as of December 31, 2018). No Elementum profits interests were granted in fiscal year 2019
and no profits interests in this entity will be awarded to Flex’s NEOs going forward.
Grants During Fiscal Year 2019
The number of time-based RSUs, the threshold, target and maximum opportunities for TSR PSUs, and
the grant-date fair value of these equity awards for the NEOs granted in fiscal year 2019 are shown in
the Grants of Plan-Based Awards in Fiscal Year 2019 table.
As part of the fiscal year 2019 compensation review process, Mr. McNamara provided the Compensation
Committee with recommended grant levels for all NEOs excluding himself. Upon consideration, the
Compensation Committee recommended and the Board approved awards that represented a 15%
discount relative to the proposed awards based upon the negative share price impact experienced by
shareholders. The award is an intended 50-50 split between PSUs (at target) and time-based RSUs for
the NEOs. In connection with her appointment as Chief Executive Officer in February 2019, Ms. Advaithi
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2019 Proxy Statement
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Part IV—Additional Information
Compensation Discussion and Analysis
received a sign-on award of $2 million in time-based RSUs that vest annually over a 3-year period. This
award was intended to make up for a forfeiture of unvested equity with her prior employer. Ms. Advaithi
will participate in the Company’s standard executive equity program beginning in fiscal year 2020 (see
Compensation Arrangements for Ms. Advaithi on page 87 for further details).
CEO Transition Retention Grants
In order to promote continuity and stability during the Company’s CEO transition, on December 7, 2018,
the Company’s Board of Directors, upon recommendation of its Compensation Committee, approved
retention grants of performance-based RSUs to the named executive officers, excluding Mr. McNamara.
In each case, the RSUs had a grant date fair market value of $500,000 as reported in the Summary
Compensation Table and will vest and be payable, subject to the executive officer’s continued
employment with the Company through the applicable measurement date and upon achievement of
performance conditions as follows: (i) 50% of the RSUs will vest if the closing trading price of the Ordinary
Shares exceeds $12.00 (the “Hurdle Price”) for any 20 consecutive trading days during the period
between the first and second anniversaries of the date of grant, and (ii) 50% of the RSUs will vest if the
closing trading price of the Ordinary Shares exceeds the Hurdle Price for any 20 consecutive trading days
during the period between the second and third anniversaries of the date of grant; provided that if the
RSUs do not vest under (i), 100% of the RSUs will vest if the conditions in (ii) are satisfied. The RSUs
have accelerated vesting in the event of a termination of employment by the Company without cause or
by the executive officer for good reason prior to the third anniversary of the date of grant.
As part of the CEO transition described above and throughout this joint proxy statement, the
Compensation Committee and Flex’s new CEO placed a high priority on ensuring stability in the senior
leadership team. This objective was defined in light of the considerable experience, knowledge of
Flex’s business, and relationships with internal teams and customers possessed by the senior
leadership team, as well as a highly competitive external executive talent market. In a time of CEO
transition and broader business review at Flex, the Compensation Committee determined that senior
executive departures could have a significantly negative impact on business results and determined
that consideration of additional retention grants was warranted. Following such consideration, on
March 5, 2019, the Company’s Board of Directors, upon the recommendation of its Compensation
Committee, approved retention grants of RSUs to certain executive officers, including the Chief
Financial Officer and other named executive officers. The RSU grants to the Chief Financial Officer and
each of the other named executive officers (other than Mr. Britt) have grant date fair values of
$2,500,000 (Mr. Britt’s grant has a grant date fair value of $4,000,000) and will vest and be payable,
subject to the executive officer’s continued employment with the Company, on the second anniversary
of the grant date. The RSUs have accelerated vesting in the event of a termination of employment by
the Company without cause or by the executive officer for good reason prior to the second anniversary
of the date of grant.
The table below summarizes the approved PSUs and time-based RSUs awards granted to our named
executive officers in fiscal year 2019.
Long-Term Incentive Awards
Executive Officer
Stock
TSR-Based Price-Based
PSUs PSUs
(Shares) (Shares)
Service-based
RSUs
(Shares)
Revathi Advaithi . . . . . . . . . . . . . . . . . . . . . . . . . . .
Michael M. McNamara . . . . . . . . . . . . . . . . . . . . . .
Christopher Collier . . . . . . . . . . . . . . . . . . . . . . . . .
Francois P. Barbier . . . . . . . . . . . . . . . . . . . . . . . . .
Douglas Britt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paul Humphries . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scott Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
329,225
82,306
76,899
76,899
76,899
52,376
— 195,312
— 329,225
59,453 325,024
59,453 319,617
59,453 465,248
59,453 319,617
59,453 295,094
-82-
2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part IV—Additional Information
Compensation Discussion and Analysis
The actual disclosed value of the TSR-based equity awards in the Summary Compensation Table
(SCT) was somewhat above the intended value (approximately 1% of the grant date value) due to
fluctuations in the Monte Carlo valuation. The intended grant date value was calculated as the target
number of shares multiplied by the share price at grant. The actual value to be earned will be
dependent on Flex’s multi-year TSR performance versus the S&P 500.
Payouts of Prior PSUs and FCF LTIP
During fiscal year 2019, the TSR-based PSU granted in fiscal year 2016 completed its applicable
performance cycle and was eligible for payouts. The fiscal year 2016 relative TSR PSU grants
measured our TSR versus the constituents of the S&P 500 from June 10, 2015 (the grant date of the
fiscal year 2016 awards) through June 10, 2018 (the performance period end), where the
measurement calculation includes a trailing 90-day average trading price for both the beginning and
end of the performance periods. The performance and payout scale for these awards is as follows:
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
Our TSR achievement of 27.6% over the period as compared to the S&P 500 median through the
performance period equates to a 50th percentile level versus the S&P 500, resulting in a payout of
100% of target based on the performance scale.
Additionally, Flex’s FCF PSU and long-term cash incentive awards granted in fiscal year 2017, whose
performance cycle ran from April 1, 2016 through March 31, 2019 was completed based on performance
ending in fiscal year 2019. Flex’s cumulative FCF over the performance period was $900 million, which
was below the threshold performance level and therefore translates to a payment of 0% of target.
Fiscal Year 2017 — 2019 FCF Performance Scale
>= $2.806 billion
$1.806 billion – $2.806 billion
$1.806 billion
$1.406 billion – $1.806 billion
$1.406 billion
< $1.406 billion
Shares Earned
200% of target
Interpolate
100% of target
Interpolate
50% of target
0% of target
As discussed elsewhere in this joint proxy statement, starting in fiscal year 2019, we elected to remove
the FCF measure from our performance-based long-term incentive plan, which had previously
represented 25% of the total long-term incentive opportunity and 50% of the performance-based target
awards. For fiscal year 2019 grants, our performance-based target awards instead focused exclusively
on our 3-year relative TSR results versus the S&P 500. This change was made based on an ongoing
effort to provide enhanced alignment with shareholder outcomes.
Ms. Advaithi was appointed as CEO of the Company effective February 11, 2019 and, accordingly, was
in that role for only a small portion of fiscal year 2019. As part of the Company’s fiscal year 2020 equity
incentive grants, Ms. Advaithi was granted, in June 2019, an award comprised of 50% performance
share units (PSUs) and 50% restricted share units (RSUs) having an aggregate target value of
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Part IV—Additional Information
Compensation Discussion and Analysis
$7,500,000. The RSUs will vest in four equal annual installments, subject to continued employment
through the vesting dates. The PSUs will vest based on achievement of performance goals over a
three-year period (with the number of shares that vest dependent on the level of achievement), subject
to continued employment through the vesting date. This target compensation package was structured
to be positioned somewhat below peer median pay levels given that it represents Ms. Advaithi’s first
role as Chief Executive Officer.
Responsible Share Granting Approach
Flex is committed to maintaining a responsible share burn rate. From our discussions 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 2019
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
share unit and performance share 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 2019, we granted
non-adjusted share-based awards of 1.57% of our average common shares outstanding. Details of
Flex’s grant history are outlined in more detail below:
Service-Based RSU Summary for Fiscal Year Ended March 31,
2019 2018 2017
Shares
Price Shares Price Shares Price
Unvested service-based RSUs
outstanding, beginning of fiscal year . . 12,071,609 $14.04 12,822,943 $11.84 13,167,776 $10.41
6,507,208
Granted . . . . . . . . . . . . . . . . . . . . . .
12.57 4,511,910 16.56 5,666,020 12.92
(4,832,105) 13.33 (4,247,681) 11.18 (5,097,196) 9.45
Vested . . . . . . . . . . . . . . . . . . . . . . .
(1,858,603) 14.43 (1,015,563) 13.01 (913,657) 11.00
Forfeited . . . . . . . . . . . . . . . . . . . . . .
Unvested service-based RSUs
outstanding, end of fiscal year . . . . . 11,888,109 $13.42 12,071,609 $14.04 12,822,943 $11.84
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Part IV—Additional Information
Compensation Discussion and Analysis
PSU Summary for Fiscal Year Ended March 31,
2019 2018 2017
Shares
Price Shares Price Shares Price
Unvested PSUs outstanding,
beginning of fiscal year . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . .
Vested / Earned . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . .
1,820,433 $16.74 2,875,639 $15.05 3,832,300 $11.99
1,750,294 12.67 816,397 19.43 912,346 16.60
(781,765) 14.39 (1,549,225) 15.30 (1,825,750) 9.39
(160,252) 17.80 (322,378) 15.68 (43,257) 15.38
Unvested PSUs outstanding,
end of fiscal year . . . . . . . . . . . . . .
2,628,710 $15.15 1,820,433 $16.74 2,875,639 $15.05
Weighted-average Ordinary Shares
outstanding . . . . . . . . . . . . . . . . . 526,519,000
529,782,000 540,503,000
Gross Shares Granted . . . . . . . . . . . .
Gross Burn Rate(1) . . . . . . . . . . . . .
8,257,502
1.57%
5,328,307 6,578,366
1.01% 1.22%
(1) For fiscal year 2017, the fungible ratio was 1.71.
The “Gross Shares Granted” noted above reflect the number of target awards 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
PSUs. 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 PSUs 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 RSU Summary for Fiscal Year Ended March 31,
2019 2018 2017
Shares Price Shares Price Shares Price
Granted . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . .
6,507,208 $12.57 4,511,910 $16.56 5,666,020 $12.92
(1,858,603) 14.43 (1,015,563) 13.01 (913,657) 11.00
Net Change in Service-based RSUs . .
4,648,605 $15.15 3,496,347 $14.04 4,752,363 $11.84
PSU Summary for Fiscal Year Ended March 31,
2018 2018 2017
Shares Price Shares Price Shares Price
Actual Vested / Earned PSUs . . . . . .
781,765 $14.39 1,549,225 $15.30 1,825,750 $ 9.39
Net Service-Based RSU and
PSU Burn Summary for Fiscal Year Ended March 31,
2019 2018 2017
Shares Shares Shares
Total Net Shares Granted or Released . . . . . . . . . . .
Weighted-average Ordinary Shares outstanding . . .
5,430,370 5,045,572 6,578,113
526,519,000 529,782,000 540,503,000
Total Net Shares Granted or Released
Burn Rate(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.03% 0.95% 1.22%
(1) For fiscal year 2017, the fungible ratio was 1.71.
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.
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2019 Proxy Statement
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Part IV—Additional Information
Compensation Discussion and Analysis
Administration of Equity Award Grants
As a matter of good corporate governance, 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 or pledging our shares as collateral for loans.
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.
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 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 2019, Messrs. Britt, Collier, Humphries, McNamara and Offer each received deferred
cash awards with a value that averaged about 28.6% of their 2018 respective base salaries and neither
Mr. Barbier nor Ms. Advaithi received a deferred cash award in fiscal year 2019. In connection with her
appointment as CEO, Ms. Advaithi was credited with a one-time funding payment of $2,000,000 under
the 2010 Deferred Compensation Plan, which will cliff vest on the third anniversary of the employment
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commencement date, provided that Ms. Advaithi remains employed by the Company. This amount is
intended to cover values that she relinquished when departing from her previous employer to join the
Company. This award is not reflected in the Nonqualified Deferred Compensation Table on page 103
as the actual grant will not be made until July 2019 with the annual deferred compensation contribution
cycle and the award will not vest and be disclosable until fiscal year 2022.
In connection with Mr. McNamara’s retirement, his vested deferred compensation account will be paid
to him in accordance with its terms and any unvested deferred compensation was forfeited effective
December 31, 2018.
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 2019, see the section entitled “Executive Compensation—Nonqualified Deferred Compensation in
Fiscal Year 2019.”
Compensation Arrangements for Ms. Advaithi
In connection with Ms. Advaithi’s appointment as Chief Executive Officer, we entered into an offer letter
with Ms. Advaithi on February 7, 2019. Under the terms of the offer letter, Ms. Advaithi’s annual base
salary is $1,150,000. Beginning with the Company’s fiscal year 2020, Ms. Advaithi will be eligible for a
bonus under the Company’s Annual Incentive Bonus Plan, with a target award opportunity of 150% of
base salary and a maximum award opportunity of 375% of base salary (versus the prior CEO
maximum of 500% of base salary), based upon the achievement of pre-established performance
measures. For fiscal year 2019, Ms. Advaithi was paid a pro rata bonus at target for her period of
employment in fiscal year 2019. Ms. Advaithi will also be eligible to participate in the Company’s
Deferred Compensation Plan under which beginning in fiscal 2020 she may receive a Company
contribution, based on Company performance, of up to 30% of base salary. Additionally, Ms. Advaithi
will be credited with a one-time funding payment of $2,000,000 under the Deferred Compensation Plan
in order to compensate for loss of value from her retirement plan at her prior employer, which will cliff
vest on the third anniversary of the employment commencement date, provided that Ms. Advaithi
remains employed by the Company. As part of the Company’s fiscal year 2020 equity incentive grants,
Ms. Advaithi was granted, in June 2019, an award comprised of 50% performance share units (PSUs)
and 50% restricted share units (RSUs) having an aggregate target value of $7,500,000. The RSUs will
vest in four equal annual installments, subject to continued employment through the vesting dates. The
PSUs will vest based on achievement of performance goals over a three-year period (with the number
of shares that vest dependent on the level of achievement), subject to continued employment through
the vesting date. The compensation package was structured to provide annual target compensation
positioned somewhat below peer median pay levels given that it represents Ms. Advaithi’s first role as
Chief Executive Officer. This pay program will place 89% of Ms. Advaithi’s fiscal year 2020 pay at risk,
with 53% contingent on achievement of financial and relative TSR performance.
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Part IV—Additional Information
Compensation Discussion and Analysis
FY2020 Target
Total Direct Compensation
(Ms. Advaithi)
At Risk
89%
Time Based
LTI
37%
Base Salary
11%
Annual Cash
Incentive
16%
Performance
Based LTI
37%
Performance Based
53%
Ms. Advaithi received a sign-on grant of RSUs having a grant date fair value of $2,000,000 that will
vest in three equal annual installments, subject to continued employment through the vesting dates.
Ms. Advaithi also received a sign-on cash bonus of $3,000,000, which she is required to repay if, within
18 months of the employment commencement date, either she voluntarily terminates her employment
with us (other than for good reason as defined in our Executive Severance Plan) or we terminate her
employment for cause (as defined in our Executive Severance Plan). The sign-on grant and bonus
were intended to replace amounts forfeited at Ms. Advaithi’s former employer and provide further
inducement for Ms. Advaithi to join the Company. We will also reimburse Ms. Advaithi for her
documented and reasonable expenses that she incurs in her relocation to the San Francisco Bay Area.
Ms. Advaithi’s employment may be terminated by Ms. Advaithi or the Company at any time, with or
without cause. In the event that Ms. Advaithi terminates her employment for good reason (a material
diminution in position, authority, duties or responsibilities; assignment of any duties materially
inconsistent with status as an officer; failure by the Company to obtain the written assumption of the
executive severance plan by a successor to the Company; a material reduction in target base salary
and target bonus opportunity; or mandatory relocation of 50 miles or more), Ms. Advaithi would be
entitled to receive (i) subject to execution and non-revocation of a standard release of claims,
accelerated vesting and payment of her sign-on compensation, and (ii) (a) two years’ continued
payment of base salary and two years of her target annual bonus amount, (b) two years’ continued
vesting of outstanding equity awards and deferred compensation, and (c) two years’ continued benefits
coverage.
Benefits
Executive Perquisites
Perquisites represent a small part of the overall compensation program for the named executive
officers. In fiscal year 2019, we paid the premiums on long-term disability insurance for our named
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Compensation Discussion and Analysis
executive officers. We also reimbursed Mr. Barbier for costs associated with his international
assignment and provided use of the Company plane for Ms. Advaithi during her relocation period to
facilitate rapid on-boarding and Company performance improvement, 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 2019. These and certain other benefits are quantified under the “All
Other Compensation” column in the Summary Compensation Table.
As discussed above, we currently maintain only the 2010 Deferred Compensation Plan. For amounts
vesting under this 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. As
noted above, we also provided Ms. Advaithi with access to the Company plane for her travel between
the location of her prior employer and Flex’s headquarters during her transition period into the role of
Flex’s new CEO. While this decision was made in order to facilitate rapid on-boarding and accelerate the
pace of performance improvement for the Company, IRS and SEC tax and disclosure rules require that
we report these as additional benefits provided to Ms. Advaithi. 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. No gross-ups are provided. 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 $185,910 for
the incremental taxes due as a result of his relocation to the Company’s San Jose facility.
As noted above, the Company will also reimburse Ms. Advaithi for her documented and reasonable
expenses that she incurs in her relocation to the San Francisco Bay Area. See the “All Other
Compensation” column in the Summary Compensation Table.
401(k) Plan; French Defined Contribution Pension Plan
Under our 401(k) Plan, all of our employees are eligible to receive matching contributions. Effective
fiscal year 2011, we also instituted a new annual discretionary matching contribution. The amount of
any discretionary annual contribution will be based on Company performance and other economic
factors as determined at the end of the fiscal year. For fiscal year 2019, 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 2019, the Company made required contributions aggregating approximately $80,199 (this amount
been converted into dollars from Euros based on the average exchange rate for the 2019 fiscal year).
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.
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2019 Proxy Statement
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Part IV—Additional Information
Compensation Discussion and Analysis
Termination and Change of Control Arrangements
The named executive officers are entitled to certain termination and change of control benefits. These
benefits are described and quantified under the section entitled “Executive Compensation—Potential
Payments Upon Termination or Change of Control.”
On January 17, 2019, the Compensation Committee adopted the Flex Ltd. Executive Severance Plan
(the “Severance Plan”). The Severance Plan covers senior level employees of the Company, including
the Company’s Chief Financial Officer and other named executive officers, but not including the
Company’s Chief Executive Officer. Under the Severance Plan, in the event of a termination of
employment by the Company without “cause” or by a participant for “good reason” (each such term as
defined in the Severance Plan), the participant will receive the following benefits, subject to the
participant entering into and complying with a transition and release agreement in a form provided by
the Company (“Transition Agreement”):
• continuation of base salary and benefits coverage for 12 months during the transition period
provided in the Transition Agreement (12 months or longer);
• continued vesting of restricted stock units, performance-based restricted share units,
performance share units, long-term free cash flow awards and deferred compensation awards
during the transition period;
• payment of the quarterly bonus for any full quarter completed prior to the commencement of
the transition period, and a pro-rated portion of the participant’s annual bonus based on the
quarters for which the participant received a quarterly bonus, calculated and determined per
plan rules and Company policies; and
• following the transition period, subject to the participant signing an additional release of claims
and reaffirming compliance of the participant’s obligations under the Transition Agreement,
accelerated vesting of restricted share units and deferred compensation awards that would
have vested during the one-year period following the transition period.
During the transition period, the participant will be required to discharge his or her transition duties and
comply with other terms and conditions to be set forth in the Transition Agreement, including customary
non-competition, non-solicitation, non-disclosure, non-disparagement and cooperation provisions. Any
violation of such obligations may result in cessation of benefits and clawback rights of the Company.
For a discussion of severance arrangements for our Chief Executive Officer, please see the discussion
under “Compensation Arrangements for Ms. Advaithi” above.
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 our 2010 and 2017 equity incentive plans, in the event of a change of control, each
unvested restricted share unit award will automatically accelerate, unless and to the extent such award
is either to be assumed or replaced. Under the terms of these 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 (not to exceed eighteen months)
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 that are not approved by our Board.
On December 24, 2018, the Company entered into a Separation Agreement and Release of Claims
(the “Separation Agreement”) with Mr. McNamara, which provided for Mr. McNamara’s retirement from
his position as Chief Executive Officer on December 31, 2018 (the “Separation Date”) and his
resignation from the Company’s Board of Directors and the boards of directors of any Company
subsidiaries and affiliates as of the Separation Date. Under the terms of the Separation Agreement, in
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2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part IV—Additional Information
Compensation Discussion and Analysis
consideration for a general release, Mr. McNamara was eligible to receive the following payments and
benefits: (i) a lump sum amount equal to twelve (12) months of his base salary in effect as of
immediately prior to the Separation Date, amounting to $1,250,000, payable within five (5) business
days following the effective date of the Separation Agreement, which shall be the day following the
applicable seven (7)-day revocation period for the Separation Agreement; (ii) acceleration of
Mr. McNamara’s time-vesting RSUs that would have vested during calendar year 2019 had
Mr. McNamara remained continuously employed by the Company through June of 2019, amounting to
347,985 shares; and (iii) for the period commencing January 1, 2019 through the date that
Mr. McNamara attains age 65, the Company will make available to Mr. McNamara group health
insurance plan coverage through the Flex Executive Retiree PPO Plan at the Company’s expense. The
payments and benefits set forth in the preceding clauses (i) and (ii) are subject to a clawback on the
part of the Company if the Company determines in good faith that Mr. McNamara has breached the
Separation Agreement, including customary non-disclosure, non-disparagement and cooperation
provisions. In accordance with the terms of Mr. McNamara’s previously awarded PSUs,
Mr. McNamara’s separation from service is a qualifying retirement, and a pro rata number of shares will
be issued upon the vesting of the PSUs pursuant to the applicable performance criteria, subject to
clawback rights of the Company. Mr. McNamara retained his vested Elementum profits interests but
forfeited any unvested Elementum profits interests as of the Separation Date. All other equity
compensation awards ceased to vest as of the Separation Date and were forfeited. In addition,
Mr. McNamara was not eligible to receive any quarterly bonus for the quarter ended December 31,
2018 or any annual bonus for fiscal year 2019. The Separation Agreement further provides that
Mr. McNamara’s vested deferred compensation account will be paid in accordance with its terms and
any unvested deferred compensation will be forfeited.
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 NEOs to own a minimum number of our
Ordinary Shares, as set forth below:
Title
CEO:
CFO:
Expected to hold a number of shares having a value equal to at least:
4 times annual base salary
2 1/2 times annual base salary
All other NEOs: 1 1/2 times 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, with the exception of Doug Britt, who
became a named executive officer in fiscal year 2019 and is anticipated to be in compliance in fiscal
year 2020.
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
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Part IV—Additional Information
Compensation Discussion and Analysis
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 that 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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2019 Proxy Statement
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Part IV—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 2019 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 service-based RSUs and PSUs, 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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2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part IV—Additional Information
Executive Compensation
EXECUTIVE COMPENSATION
The following table sets forth the fiscal years 2017, 2018 and 2019 compensation for:
• Revathi Advaithi, our chief executive officer;
• Michael M. McNamara, our former chief executive officer;
• Christopher Collier, our chief financial officer; and
• Francois P. Barbier, Douglas Britt, Paul Humphries and Scott Offer.
The executive officers included in the Summary Compensation Table are referred to in this joint 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 joint proxy statement. Additional
information about these plans and programs is included in the additional tables and discussions that
follow the Summary Compensation Table.
Summary Compensation Table
Non-Equity
Incentive
Share Plan
Bonus Awards Compensation
($)(6) ($)(7) ($)(8)
Change in
Pension
Value and
Nonqualified
Deferred
Compensation All Other
Earnings Compensation
($)(9) ($)(10) Total ($)
Name and Principal
Position
Year
Salary
($)(5)
Revathi Advaithi . . . . . . . . 2019 $ 165,865 $3,000,000 $ 1,999,995 $ 234,792
— $ 118,113 $ 5,518,765
Chief Executive Officer(1)
Christopher Collier . . . . . . 2019 $ 700,000 $ 279,966 $ 5,368,426 $ 512,849 $
Former Chief Executive 2018 $1,250,000 $
2017 $1,250,000 $
Officer(2)
Michael M. McNamara . . . 2019 $ 937,500 $ 529,066 $ 9,396,082 $ 231,250 $ 369,081 $1,291,530 $12,754,509
48,688 $16,170,232
43,877 $14,793,605
79,222 $ 7,030,664
55,083 $ 4,347,119
44,683 $ 4,213,196
23,717 $ 422,750 $ 6,890,754
26,032 $ 451,681 $ 4,395,713
— $11,658,039 $2,232,217 $ 981,288 $
— $10,484,437 $1,969,700 $1,045,591 $
90,201 $
— $ 2,226,994 $1,149,454 $ 215,588 $
— $ 2,092,574 $1,228,901 $ 147,039 $
— $ 5,214,111 $ 520,176 $
— $ 2,058,517 $1,149,483 $
2018 $ 700,000 $
2017 $ 700,000 $
Francois P. Barbier . . . . . . 2019 $ 710,000 $
2018 $ 710,000 $
Chief Financial Officer
— $ 2,054,338 $1,185,715 $
Douglas Britt . . . . . . . . . . . 2019 $ 682,500 $ 216,981 $ 6,725,761 $1,016,384 $
2017 $ 710,000 $
46,979 $ 470,267 $ 4,467,298
12,498 $ 8,654,124
— $
President, Global
Operations and
Components
President, Flex Integrated
Solutions(3)
Paul Humphries . . . . . . . . . 2019 $ 710,000 $ 288,532 $ 5,214,111 $ 815,264 $
President, High
Reliability Solutions
2018 $ 710,000 $
2017 $ 710,000 $
Scott Offer . . . . . . . . . . . . . 2019 $ 559,116 $
Executive Vice President, 2018 $ 550,000 $
General Counsel and
former Acting Chief
Executive Officer(4)
66,465 $
— $ 2,080,695 $1,695,865 $ 170,307 $
— $ 2,061,907 $1,700,645 $ 128,118 $
— $
— $ 4,514,224 $ 370,803 $
— $
— $ 1,417,165 $ 441,979 $
— $
2017 $ 316,955 $ 625,000 $ 3,275,200 $ 244,077 $
13,476 $ 7,107,848
21,583 $ 4,678,450
22,351 $ 4,623,021
14,115 $ 5,458,258
12,215 $ 2,421,359
6,193 $ 4,467,424
(1) Ms. Advaithi was appointed Chief Executive Officer effective February 11, 2019.
(2) Mr. McNamara retired from his position of Chief Executive Officer effective December 31, 2018.
(3) Mr. Britt became a named executive officer of the Company in fiscal year 2019.
(4) Mr. Offer served as Acting Chief Executive Officer from February 5, 2019 until February 11, 2019.
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Part IV—Additional Information
Executive Compensation
(5) Each of the above mentioned named executive officers, except Ms. Advaithi and Mr. Barbier,
contributed a portion of their fiscal year 2019 salary to their 401(k) savings plan account. All
amounts contributed are included under this column.
(6) This column shows (except with respect to Ms. Advaithi and Mr. Offer) the unvested portion of
deferred compensation accounts that vested during these respective fiscal years. No deferred
compensation amounts vested during fiscal years 2017 or 2018. For additional information about
the Company’s deferred compensation arrangements, see the section entitled “Compensation
Discussion and Analysis—Long-Term Deferred Compensation Awards” of this joint proxy
statement and the discussion under the section entitled “Nonqualified Deferred Compensation in
Fiscal Year 2019” of this joint proxy statement. The amount shown for Ms. Advaithi for fiscal year
2019 is a sign-on bonus paid upon commencement of employment with Flex, which she is
required to repay if, within 18 months of her employment commencement date, either she
voluntarily terminates her employment with us (other than for good reason as defined in our
Executive Severance Plan) or we terminate her employment for cause (as defined in our
Executive Severance Plan). The amount shown for Mr. Offer for fiscal year 2017 is for a sign-on
bonus paid upon commencement of employment with Flex.
(7) Share awards consist of service-based RSUs, PSUs and, for fiscal year 2017, 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 recognized by the
named executive officers. Instead, the amounts reflect the grant date fair value for grants made by
us in fiscal years 2017, 2018 and 2019, calculated in accordance with FASB ASC Topic 718. The
TSR PSUs included in this column are at the target number of shares as follows for fiscal year
2019: 329,225 PSUs, or $4,721,087 for Mr. McNamara; 82,306 PSUs, or $1,180,268 for
Mr. Collier; 76,899 PSUs, or $1,102,732 for Mr. Barbier; 76,899 PSUs, or $1,102,732 for Mr. Britt;
76,899 PSUs, or $1,102,732 for Mr. Humphries; and 52,376 PSUs, or $751,072 for Mr. Offer. For
information about the treatment of Mr. McNamara’s RSUs and PSUs upon his retirement, see the
section entitled “Compensation Discussion and Analysis—Termination and Change of Control
Arrangements.”
For additional information regarding the assumptions made in calculating the amounts reflected in
this column, see Note 4 to our audited consolidated financial statements, “Share-Based
Compensation,” included in our Annual Report on Form 10-K for the fiscal year ended March 31,
2019.
(8) The amounts in this column represent incentive cash bonuses earned in fiscal year 2019, For
additional information, see the section entitled “Compensation Discussion and Analysis—Fiscal
Year 2019 Executive Compensation—Incentive Bonus Plan” of this joint proxy statement.
(9) The amount in this column for fiscal year 2019 represents the above-market earnings on the
vested portions of the nonqualified deferred compensation accounts of Messrs. McNamara,
Collier, Barbier and Humphries in fiscal year 2019. None of our NEOs participated in any defined
benefit or actuarial pension plans in fiscal year 2019. Above-market earnings represent the
difference between market interest rates determined pursuant to SEC rules and earnings credited
to the vested portion of the named executive officers’ deferred compensation accounts. See the
Nonqualified Deferred Compensation in Fiscal Year 2019 table of this joint proxy statement for
additional information.
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(10)The following table provides a breakdown of compensation included in the “All Other
Compensation” column for fiscal year 2019:
Part IV—Additional Information
Executive Compensation
Pension/
Savings
Plan
Company
Match
Medical/
Expenses/ Enhanced Personal
Long-Term Aircraft
Usage
Disability
($)(3)
($)(2)
Social
Security
($)(1)
Name
Relocation/
Expatriate
Assignment Tax
Expenses Reimbursements
($)(4) ($)(5)
Other
($)(6)
Total ($)
Revathi Advaithi . . . . . . .
Michael M. McNamara . .
Christopher Collier . . . . .
Francois P. Barbier . . . .
Douglas Britt . . . . . . . . .
Paul Humphries . . . . . . .
Scott Offer . . . . . . . . . . .
$
—
$ 1,625
$11,000
$80,199
$10,088
$11,000
$11,150
$
247
$ 8,038
$ 2,087
$36,415
$ 2,410
$ 2,476
$ 2,965
$71,355
$31,822
$66,135
—
$
—
$
—
$
—
$
$ 46,511
—
$
—
$
$106,940
—
$
—
$
—
$
— $ — $ 118,113
$
$1,291,530
— $1,250,000
$
79,222
— $ — $
$
$199,196 $ — $ 422,750
12,498
$
13,476
$
14,115
$
— $ —
— $ — $
— $ — $
(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, Britt, Humphries and Offer. 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 2019 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. Mr. McNamara’s amount includes $2,136 for executive long-term disability and
$5,947 for executive retiree medical. An amount equal to $33,884 paid to Mr. Barbier was
converted into dollars from Euros based on the average exchange rate for the 2019 fiscal year.
(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 that would have been incurred regardless of whether there was any personal use of aircraft.
(4) These amounts represent the costs associated with Ms. Advaithi’s and Mr. Barbier’s respective
relocation and commuting to the Company’s San Jose facility. The relocation and commuting
amounts for Ms. Advaithi represent housing expenses of $39,797 and transportation expenses of
$6,714. The relocation amounts for Mr. Barbier represent housing allowances of $79,200, vehicle
allowances of $14,400, relocation fees of $1,053 and Home Leave Airfare of $12,287.
(5) For Mr. Barbier, the amount includes reimbursement of $185,910 for the incremental taxes due as
a result of his relocation to the Company’s San Jose facility, $500 for taxes dues on tax
preparation fees and $12,786 for the payment of Basic Social Security (which amount was
converted into dollars from Euros based on the average exchange rate for the 2019 fiscal year).
See the section entitled “Compensation Discussion and Analysis—Benefits—Executive
Perquisites” of this joint proxy statement.
(6) For Mr. McNamara, the amount represents a $1,250,000 severance payment made by the
Company upon his retirement during fiscal year 2019.
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2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part IV—Additional Information
Executive Compensation
Grants of Plan-Based Awards in Fiscal Year 2019
The following table presents information about non-equity incentive plan awards and restricted share
and performance share unit awards that we granted in our 2019 fiscal year to our named executive
officers. We did not grant any stock options to our named executive officers during our 2019 fiscal
year.
All Other
Share Grant
Awards: Date
Name
Grant
Date
Revathi Advaithi . . . . 2/13/2019
Michael M. McNamara . . 6/19/2018
6/19/2018
Christopher Collier . . 6/19/2018
6/19/2018
12/7/2018
3/5/2019
Francois P. Barbier . . 6/19/2018
6/19/2018
12/7/2018
3/5/2019
Doug M. Britt . . . . . . 6/19/2018
6/19/2018
12/7/2018
3/5/2019
Paul Humphries . . . . 6/19/2018
6/19/2018
12/7/2018
3/5/2019
Scott Offer . . . . . . . . 6/19/2018
6/19/2018
12/7/2018
3/5/2019
Estimated Future Payouts Under Estimated Future Payouts Under Number of Fair Value
Non-Equity Incentive Plan Awards (1) Equity Incentive Plan Awards) Shares of of
Threshold
($)
Stock or Share
Target Maximum Threshold Target Maximum Units Awards
($) ($) (#) (#)
(#) (#)(4) ($)(5)
$1,250,000
(2)
195,312
$ 234,792
82,306 329,225
$1,999,995
$4,721,087
$4,674,995
$2,500,000 $6,250,000
$1,180,268
$1,168,745
$ 500,000
$2,519,413
59,453
20,576 82,306
329,225
242,718
658,450
164,612
82,306
$ 385,000
$ 770,000 $1,925,000
$ 390,500
$ 390,500
76,899
153,798
242,718
19,224 76,899
19,224 76,899
59,453
$1,102,732
$1,091,966
$ 500,000
$2,519,413
$ 781,000 $1,952,500
$1,102,732
$1,091,966
$ 500,000
$4,031,063
$ 781,000 $1,952,500
$1,102,732
$1,091,966
$ 500,000
$2,519,413
59,453
59,453
19,224 76,899
153,798
388,349
242,718
153,798
76,899
76,899
(2)
(3)
(2)
(3)
(2)
(3)
(2)
(3)
$ 390,500
$ 781,000 $1,952,500
(2)
(3)
13,094 52,376
104,752
59,453
52,376
242,718
$ 751,072
$ 743,739
$ 500,000
$2,519,413
$ 281,875
$ 563,750 $1,409,375
(1) These amounts show the range of possible payouts under our cash incentive programs for fiscal
year 2019. 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 the annual incentive bonus plan, the amounts actually
earned for fiscal year 2019 are reported as Non-Equity Incentive Plan Compensation in the
Summary Compensation Table. Ms. Advaithi received a pro-rated bonus at target due to her
limited time as CEO in fiscal year 2019. For additional information, see the section entitled
“Compensation Discussion and Analysis—Fiscal Year 2019 Executive Compensation—Incentive
Bonus Plan” and “Compensation Discussion and Analysis—Fiscal Year 2019 Executive
Compensation—Long-Term Share-Based Incentive Compensation” of this joint proxy statement.
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2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part IV—Additional Information
Executive Compensation
(2) These rows show the range of estimated future vesting of TSR PSUs granted in fiscal year 2019
under our 2017 Equity Incentive Plan. The TSR PSUs cliff vest after three years, with vesting
based on the percentile rank of the Company’s TSR in the constituents of the S&P 500 Index. The
maximum payout for each executive officer represents 200% of the target payout. The threshold
payout for each named executive officer represents 25% of target payout levels. For additional
information, see the section entitled “Compensation Discussion and Analysis—Fiscal Year 2019
Executive Compensation—Long-Term Share-and Cash-Based Incentive Compensation” of this
joint proxy statement.
(3) Shows the number of Stock-Price Based PSUs granted on December 7, 2018 as special retention
grants. The shares will vest provided that each named executive officer’s continued employment
through the applicable measurement date and upon the achievement of the performance
conditions as follows: (i) 50% of the PSU will vest if the closing trading price of the Ordinary
Shares exceeds $12.00 (the “Hurdle Price”) for any 20 consecutive trading days during the period
between the first and second anniversaries of the date of grant, and (ii) 50% of the PSUs will vest
if the closing trading price of the Ordinary Shares exceeds the Hurdle Price for any 20
consecutive trading days during the period between the second and the third anniversaries of the
date of grant; provided that if the PSUs do not vest under (i), 100% of the PSUs will vest if the
conditions in (ii) are satisfied.
(4) Shows the number of service-based RSUs granted June 19, 2018 under our 2017 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 Ms. Advaithi, shows her sign-on service-based RSU award, which vests
in three annual installments at a rate of 1/3 per year, subject to continued employment through the
vesting dates. Also shows retention grants of RSUs made on March 5, 2019 which will vest,
subject to the executive officer’s continued employment with the Company, on the second
anniversary of the grant date. For additional information, see the section entitled “Compensation
Discussion and Analysis—Long-Term Share-Based Incentive Compensation—Grants During
Fiscal Year 2019” of this joint proxy statement.
(5) This column shows the grant date fair value of service-based RSUs and PSUs, at the target level,
under FASB ASC Topic 718 granted to our named executive officers in fiscal year 2019. The grant
date fair value is the amount that we will expense in our financial statements over the awards’
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 service-based RSUs and Stock Price-Based PSUs, the grant date fair value is the closing
price of our Ordinary Shares on the grant date. For TSR PSUs 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 4 of our
audited consolidated financial statements, “Share-Based Compensation,” included in our Annual
Report on Form 10-K for the fiscal year ended March 31, 2019. These amounts reflect our
accounting expense, and do not correspond to the actual compensation that will be received by
the named executive officers.
-98-
2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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CLEAN
Part IV—Additional Information
Executive Compensation
Outstanding Equity Awards at 2019 Fiscal Year-End
The following table presents information about outstanding share awards held by our named
executive officers as of March 31, 2019. The table shows information about: (i) service-based RSUs
and (ii) PSUs.
The market value of the share awards is based on the closing price of our Ordinary Shares as of
March 29, 2019, which was $10.00. For PSUs, the number of unearned shares and the market values
shown assume all performance criteria are met at the maximum payout level. For additional
information on our equity incentive programs, see the section entitled “Compensation Discussion and
Analysis—Long-Term Share-Based Incentive Compensation” of this joint proxy statement.
Share Awards
Equity
Equity Incentive
Incentive Plan
Plan Awards:
Awards: Market
Number or Payout
of Value of
Unearned Unearned
Shares, Shares,
Units or Units or
Other Other
Rights Rights
That That
Have Not Have Not
Vested Vested
(#)(1) ($)(2)
Market
Number of Value of
Shares or Shares or
Units of Units of
Stock That Stock That
Have Not Have Not
Vested Vested
(#) ($)
—
195,312(2)
$1,953,120 — $ —
$
— 2,064,874(3) $20,648,740
$4,623,910 405,069(5) $ 4,050,690
462,391(4)
$4,501,430 384,851(7) $ 3,848,510
450,143(6)
$5,754,010 358,573(9) $ 3,585,730
575,401(8)
451,581(10) $4,515,810 387,307(11) $ 3,873,070
475,256(12) $4,752,560 217,753(13) $ 2,177,530
Name
Revathi Advaithi . . . . . . . . . . . . . . . . . . .
Michael M. McNamara . . . . . . . . . . . . . .
Christopher Collier . . . . . . . . . . . . . . . . .
Francois P. Barbier . . . . . . . . . . . . . . . . .
Doug Britt . . . . . . . . . . . . . . . . . . . . . . . .
Paul Humphries . . . . . . . . . . . . . . . . . . .
Scott Offer . . . . . . . . . . . . . . . . . . . . . . . .
(1) This column includes TSR PSUs granted in fiscal years 2017, 2018 and 2019 under our 2010
Equity Incentive Plan (the 2010 Plan) and 2017 Plan based on a 200% payout, and also stock
price-based PSUs. For grants made in fiscal year 2017, 2018 and 2019, 100% of the TSR PSUs
vest after three years, if the performance criteria are met. Vesting of the TSR PSUs for 2017,
2018 and 2019 will depend on the Company’s total shareholder return versus total shareholder
return of the constituents of the S&P 500 or, in the case of FCF PSUs, based on cumulative free
cash flow. Vesting for the stock-priced PSUs will depend on achieving certain stock price
conditioned.
(2) TSR PSUs for the 2016-2019 cycle had no payout and the relative TSR cycles as of the end of
fiscal 2019 (2017-2020 and 2018-2021) are projected to have no payout unless Flex experienced
significant share price improvement going forward.
(3) 195,312 shares vest at a rate of 65,104 shares per year for three years with the first vesting date
of February 11, 2020.
(4) 733,230 shares vest on June 14, 2019 assuming a maximum payout of 200% (due to the current
share price and the free-cash flow below threshold levels, the actual payout resulted in 0% of
target); 673,194 shares vest on June 29, 2020 assuming a maximum payout of 200%; and
658,450 shares vest on June 19, 2021 assuming a maximum payout of 200%. In accordance with
the terms of Mr. McNamara’s previously awarded PSUs, Mr. McNamara’s separation from service
was a qualifying retirement, and a pro rata number of shares will be issued upon the vesting of the
PSUs pursuant to the applicable performance criteria, subject to clawback rights of the Company.
-99-
2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part IV—Additional Information
Executive Compensation
(5) 25,827 shares vest on June 10, 2019; 48,428 shares vest at a rate of 24,214 shares per year for
two years, with the first vesting date on June 14, 2019; 63,112 shares vest at a rate of 21,037 shares
per year for three years, with the first vesting date on June 29, 2019; 82,306 shares vest at a rate
of 20,576 per year for four years, with the first vesting date on June 19, 2019; and 242,718 shares
will vest in full on March 5, 2021.
(6) 96,856 shares vest on June 14, 2019 assuming a maximum payout of 200% (due to the current
share price, the actual payout resulted in 0% of target); 84,148 shares vest on June 29, 2020
assuming a maximum payout of 200%, 164,612 shares vest on June 19, 2021 assuming a
maximum payout of 200%; and 59,453 shares vest by December 7, 2021 assuming certain stock
price conditions are met.
(7) 25,279 shares vest on June 10, 2019; 46,909 shares vesting at a rate of 23,454 shares per year
over two years with the first vesting date on June 14, 2019; 58,338 shares vesting at a rate of
19,446 per year over three years with the first vesting date on June 29, 2019; 76,899 shares vest
at a rate of 19,224 per year over four years with the first vesting date on June 19, 2019; and
242,718 shares will vest in full on March 5, 2021.
(8) 93,818 shares vest on June 14, 2019 assuming a maximum payout of 200% (due to the current
share price, the actual payout resulted in 0% of target); 77,782 shares vest on June 29, 2020
assuming a maximum payout of 200%; 153,798 shares vest on June 19, 2021 assuming a
maximum payout of 200%; and 59,453 shares to vest by December 7, 2021 assuming certain
stock price conditions are met.
(9) 20,661 shares vest on June 10, 2019; 39,002 shares vest at a rate of 19,501 shares per year for
two years, with the first vesting on June 14, 2019; 50,490 shares vest at a rate of 16,830 shares
per year for three years, with the first vesting date on June 29, 2019; 76,899 shares vest at a rate
of 19,224 shares per year for four years, with the first vesting date on June 19, 2019; and
388,349 shares will vest in full on March 5, 2021.
(10)78,004 shares vest on June 14, 2019, assuming a maximum payout of 200% (due to the current
share price, the actual payout resulted in 0% of target), 67,318 shares vest on June 29, 2020,
assuming a maximum payout of 200%; 153,798 shares vest on June 19, 2021, assuming a
maximum pay out of 200%; and 59,453 shares to vest by December 7, 2021 assuming certain
stock price conditions are met.
(11)25,279 share vest on June 10, 2019; 47,719 shares vest at a rate of 23,859 shares per year for
two years, with the first vesting date on June 14, 2019; 58,966 shares vest at a rate of 19,655
shares per year for three years, with the first vesting date on June 29, 2019;76,899 shares vest at
a rate of 19,224 shares per year for four years, with the first vesting date of June 19, 2019; and
242,718 shares will vest in full on March 5, 2021.
(12)95,436 shares vest on June 14, 2019 assuming a maximum payout of 200% (due to the current
share price, the actual payout resulted in 0% of target); 78,620 shares vest on June 29, 2020
assuming a maximum payout of 200%; 153,798 shares vest on June 19, 2021 assuming a
maximum payout of 200%; and 59,453 shares to vest by December 7, 2021 assuming certain
stock price conditions are met.
(13)90,000 shares vest at a rate of 45,000 shares per year for two years with the first vesting date on
November 30, 2019; 50,000 shares vest on November 30, 2019; 40,162 shares vest at a rate of
13,387 shares per year for three years with the first vesting on June 29, 2019; 52,376 shares vest
at a rate of 13,094 shares per year for four years with the first vesting date on June 19, 2019; and
242,718 shares will vest in full on March 5, 2021.
-100-
2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part IV—Additional Information
Executive Compensation
(14)53,548 shares vest on June 29, 2020 assuming a maximum payout of 200% (due to the current
share price, the actual payout resulted in 0% of target); 104,752 shares vest on June 19, 2021
assuming a maximum payout of 200%; and 59,453 shares vest on December 7, 2021 assuming
certain stock price conditions are met.
Option Exercises and Shares Vested in Fiscal Year 2019
The following table presents information for each of our named executive officers regarding the
number of shares acquired upon the vesting of share awards in the form of restricted share units
during fiscal year 2019 and the value realized, in each case before payment of any applicable
withholding tax and broker commissions. There were no option exercises by our NEOs in 2019 and
the NEOs do not hold any unexercised options.
Share Awards
Number of Shares Value
Acquired on Realized on
Vesting Vesting
Name (#) ($)(1)
Revathi Advaithi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $ —
Michael M. McNamara . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,017,577 $12,759,209
Christopher Collier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,764 $ 2,163,734
Francois P. Barbier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,268 $ 2,071,553
Doug Britt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,582 $ 1,621,775
Paul Humphries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,882 $ 2,080,176
Scott Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,387 $ 582,641
(1) 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 2019
Nonqualified Deferred Compensation in Fiscal Year 2019
Each of our named executive officers participates in our 2010 Deferred Compensation Plan, except
for Mr. Barbier, who no longer participates in this plan, and Mr. McNamara (who, in connection with
his retirement, will be paid his vested deferred compensation in accordance with its terms and
forfeited his unvested deferred compensation as of December 31, 2018). 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. 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. For these annual contributions, 50%
of the funding is paid as a percent of base salary and the remaining 50% is performance-based, up to
a maximum of 150%. This aligns to the distribution of performance and time-based elements in our
other long-term compensation programs. 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
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2019 Proxy Statement
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Part IV—Additional Information
Executive Compensation
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.
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—Fiscal Year 2019 Executive
Compensation—Long-Term Deferred Compensation Awards” of this joint proxy statement and
“Executive Compensation—Potential Payments Upon Termination or Change of Control” below.
The following table presents information for fiscal year 2019 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 2019, Messrs. McNamara, Britt, Collier, Humphries and Offer
each received deferred compensation awards that averaged approximately 28.6% of their 2018
respective base salaries.
-102-
2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part IV—Additional Information
Executive Compensation
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)
Name
—
Revathi Advaithi . . . . . . . . . . $
Michael M. McNamara(5) . . $
—
Christopher Collier . . . . . . . . $207,412
—
Francois P. Barbier(6) . . . . . $
—
Douglas Britt . . . . . . . . . . . . $
Paul Humphries . . . . . . . . . . $946,652
Scott Offer . . . . . . . . . . . . . . $ 84,604
—
$
$357,994
$200,477
$
—
$171,837
$203,340
$157,517
— $ — $ —
$
$ 381,682 $ — $19,660,437
$ 265,408 $ — $ 4,224,876
$ 23,717 $ — $ 993,510
$ 26,541 $232,905 $ 763,731
$ 261,328 $297,848 $ 5,009,527
$ (90,091) $ — $ 307,895
(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” and “Bonus”
columns, as applicable.
(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, 2019. 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
in control of the Company, see the sections entitled “Compensation Discussion and
Analysis—Fiscal Year 2019 Executive Compensation—Long-Term Deferred Compensation
Awards” of this joint proxy statement and “Executive Compensation—Potential Payments Upon
Termination or Change of Control.”
(3) Reflects earnings (or losses) for each named executive officer on both the vested and unvested
portions of the executive’s deferred compensation account(s). The above-market portion of the
earnings on the vested portion of the executive’s deferred compensation account(s) is included
under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column
in the Summary Compensation Table. Any earnings that vest in a given year are reported in the
“Bonus” column in the Summary Compensation Table.
(4) The amounts in this column have previously been reported in the Summary Compensation Table
for this and prior fiscal years as follows: Michael M. McNamara—$19,660,437; Christopher
Collier—$2,052,679; Francois P. Barbier—$1,090,158; and Paul Humphries—$1,252,004. The
amounts in this column include the following unvested balances related to the respective 2010
deferred compensation plan account of the named executive officers: Christopher Collier—
$1,166,978; Douglas Britt—$597,456; Paul Humphries—$832,418; and Scott Offer—$210,916.
(5) In connection with Mr. McNamara’s retirement, his vested deferred compensation account will be
paid to him in accordance with its terms and any unvested deferred compensation was forfeited
effective December 31, 2018, and excluded from the table above.
(6) Mr. Barbier no longer participates in the 2010 Deferred Compensation Plan. The information in the
table reflects earnings on the account balance of his senior management plan account.
Potential Payments Upon Termination or Change in Control
As described in the section entitled “Compensation Discussion and Analysis” of this joint proxy
statement, our named executive officers do not have employment 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.
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CLEAN
Part IV—Additional Information
Executive Compensation
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, 2019 is
listed above in the Outstanding Equity Awards at 2019 Fiscal Year-End table. All unvested outstanding
equity awards held by our named executive officers at the end of fiscal year 2019 were granted under
the 2010 Plan and 2017 Plan which provides 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 PSUs granted under
our 2010 Plan and 2017 Plan provide that if a plan participant ceases to provide services to the
Company due to a qualifying 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. Barbier and Humphries are
the only NEOs that satisfy the retirement criteria.
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 the 2010 Plan and the 2017 Plan (together, the “Plans”), 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 Plans) 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 Plans 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, 195,312 of Ms. Advaithi’s unvested restricted share unit awards,
694,652 of Mr. Collier’s unvested restricted and performance share unit awards, 672,295 of
Mr. Barbier’s unvested restricted and performance share unit awards, 784,414 of Mr. Britt’s unvested
restricted and performance share unit awards, 674,961 of Mr. Humphries’ unvested restricted and
performance share unit awards, and 613,859 of Mr. Offer’s unvested restricted and performance
share unit awards are subject to the above-described change in control provision.
-104-
2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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CLEAN
Part IV—Additional Information
Executive Compensation
2019 Severance Plan
On January 17, 2019, the Compensation Committee adopted the Flex Ltd. Executive Severance Plan
(the “Severance Plan”). The Severance Plan covers senior level employees of the Company, including
the Company’s Chief Financial Officer and other named executive officers, but not including the
Company’s Chief Executive Officer. Under the Plan, in the event of a termination of employment by
the Company without “cause” or by a participant for “good reason” (each such term as defined in the
Plan), the participant will receive the following benefits, subject to the participant entering into and
complying with a transition and release agreement in a form provided by the Company (“Transition
Agreement”):
• continuation of base salary and benefits coverage for 12 months during the transition period
provided in the Transition Agreement (12 months or longer) and payment of quarterly bonus
earned for full quarters completed prior to the termination and pro rata annual bonus;
• continued vesting of restricted share units, performance share units, long-term free cash flow
awards and deferred compensation awards during the transition period; and
• following the transition period, subject to the participant signing an additional release of claims
and reaffirming compliance of the participant’s obligations under the Transition Agreement,
accelerated vesting of restricted share units and deferred compensation awards that would
have vested during the one-year period following the transition period.
During the transition period, the participant will be required to discharge his or her transition duties
and comply with other terms and conditions to be set forth in the Transition Agreement, including
customary non-competition, non-solicitation, non-disclosure, non-disparagement and cooperation
provisions. Any violation of such obligations may result in cessation of benefits and clawback rights of
the Company.
There are no tax gross-ups in the severance plan.
Separation Agreement
On December 24, 2018, the Company entered into a Separation Agreement and Release of Claims
(the “Separation Agreement”) with Mr. McNamara, which provided for Mr. McNamara’s retirement from
his position as Chief Executive Officer on December 31, 2018 (the “Separation Date”) and his
resignation from the Company’s Board of Directors and the boards of directors of any Company
subsidiaries and affiliates as of the Separation Date. Under the terms of the Separation Agreement, in
consideration for a general release, Mr. McNamara was eligible to receive the following payments and
benefits: (i) a lump sum amount equal to twelve (12) months of his base salary in effect as of
immediately prior to the Separation Date, amounting to $1,250,000, payable within five (5) business
days following the effective date of the Separation Agreement, which shall be the day following the
applicable seven (7)-day revocation period for the Separation Agreement; (ii) acceleration of
Mr. McNamara’s time-vesting RSUs that would have vested during calendar year 2019 had
Mr. McNamara remained continuously employed by the Company through June of 2019, amounting to
347,985 shares; and (iii) for the period commencing January 1, 2019 through the date that
Mr. McNamara attains age 65, the Company will make available to Mr. McNamara group health
insurance plan coverage through the Flex Executive Retiree PPO Plan at the Company’s expense.
The payments and benefits set forth in the preceding clauses (i) and (ii) are subject to a clawback on
the part of the Company if the Company determines in good faith that Mr. McNamara has breached
the Separation Agreement, including customary non-disclosure, non-disparagement and cooperation
provisions. In accordance with the terms of Mr. McNamara’s previously awarded PSUs,
Mr. McNamara’s separation from service is a qualifying retirement, and a pro rata number of shares
will be issued upon the vesting of the PSUs pursuant to the applicable performance criteria, subject to
clawback rights of the Company. Mr. McNamara retained his vested Elementum profits interests but
forfeited any unvested Elementum profits interests as of the Separation Date. All other equity
compensation awards ceased to vest as of the Separation Date and were forfeited. In addition,
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Part IV—Additional Information
Executive Compensation
Mr. McNamara was not eligible to receive any quarterly bonus for the quarter ended December 31,
2018 or any annual bonus for fiscal year 2019. The Separation Agreement further provides that
Mr. McNamara’s vested deferred compensation account will be paid in accordance with its terms and
any unvested deferred compensation will be forfeited.
Potential Payments Upon Termination or Change in Control
as of March 31, 2019
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 restricted and performance 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, (iii) involuntary termination without cause or voluntary termination for good reason under
the Company’s Severance Plan or (iv) retirement.
Calculations for this table assume that the triggering event took place on March 29, 2019, the last
business day of our 2019 fiscal year, and are based on the price per share of our Ordinary Shares on
such date, which was $10.00. The following table does not include potential payouts under our named
executive officers’ nonqualified deferred compensation plans relating to vested benefits.
Change in
Control and
Change in No
Control with Assumption
Termination of Award (1)
Involuntary
Termination
without
Cause or
Voluntary
Termination
for Good
Reason (2) Retirement (3)
Name
Revathi Advaithi
Base Salary Payment
(Continuation)(4) . . . . . . . . . . . . . . $2,300,000
Benefits(4) . . . . . . . . . . . . . . . . . . . . $
41,336
Bonus Payments(4) . . . . . . . . . . . . . $3,450,000
Accelerated Vesting of Deferred
$
$
$
— $2,300,000 $ —
— $ 41,336 $ —
— $3,450,000 $ —
Compensation(4)(5) . . . . . . . . . . . . $
— $
— $ — $ —
Accelerated Vesting of Service-
based RSUs(4) . . . . . . . . . . . . . . . $1,953,120
Pro Rata Vesting of PSUs . . . . . . . . $
$1,953,120 $1,953,120 $ —
— $ — $ —
— $
Total . . . . . . . . . . . . . . . . . . . . . . . . . $7,744,456 $1,953,120 $7,744,456 $ —
Michael McNamara(6)
Base Salary Payment . . . . . . . . . . . $
Benefits . . . . . . . . . . . . . . . . . . . . . . $
Vested Deferred Compensation . . . . $
Accelerated Vesting of Service-
— $
— $
— $
— $ — $ 1,250,000
— $ — $ 23,788
— $ — $19,660,437
based RSUs . . . . . . . . . . . . . . . . . . $
— $
— $ — $ 3,278,019
Accelerated Vesting of
Performance-based RSUs . . . . . . . $
Pro Rata Vesting of PSUs . . . . . . . . $
— $2,231,803(10) $ — $ —
— $
— $ — $ 2,231,803(10)
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ — $2,231,803 $ — $26,444,047
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2019 Proxy Statement
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CLEAN
Part IV—Additional Information
Executive Compensation
Involuntary
Termination
without
Cause or
Voluntary
Termination
for Good
Reason (2) Retirement (3)
Change in
Control and
Change in No
Control with Assumption
Termination of Award (1)
Name
Christopher Collier
Base Salary Payment
(Continuation)(7) . . . . . . . . . . . . . . $ 700,000
Benefits(7) . . . . . . . . . . . . . . . . . . . . $
19,926
Bonus Payments(8) . . . . . . . . . . . . . $ 512,849
Accelerated Vesting of Deferred
Compensation(5) . . . . . . . . . . . . . . $ 545,502
$
$
$
$
Accelerated Vesting of Service-
— $ 700,000 $ —
— $ 19,926 $ —
— $ 512,849 $ 512,849
— $ 545,502 $ —
based RSUs . . . . . . . . . . . . . . . . . . $4,368,730(9) $4,623,910 $4,368,730(9) $ —
Accelerated Vesting of
Performance-based RSUs . . . . . . . $ 594,530(9) $2,322,610 $ 594,530(9) $ —
— $ — $ —
Pro Rata Vesting of PSUs . . . . . . . . $
— $
Total . . . . . . . . . . . . . . . . . . . . . . . . . $6,741,537 $6,946,520 $6,741,537 $ 512,849
Francois P. Barbier
Base Salary Payment
(Continuation)(7) . . . . . . . . . . . . . . $ 710,000
Benefits(7) . . . . . . . . . . . . . . . . . . . . $ 130,172
Bonus Payments(8) . . . . . . . . . . . . . $ 520,175
Accelerated Vesting of Deferred
$
$
$
— $ 710,000 $ —
— $ 130,172 $ —
— $ 520,175 $ 520,175
Compensation(5) . . . . . . . . . . . . . . $
— $
— $ — $ —
Accelerated Vesting of Service-
based RSUs . . . . . . . . . . . . . . . . . . $4,206,830(9) $4,501,430 $4,206,830(9) $ —
Accelerated Vesting of Performance-
based RSUs . . . . . . . . . . . . . . . . . . $ 594,530(9) $2,221,520 $ 594,530(9) $ —
Pro Rata Vesting of PSUs . . . . . . . . $
— $
— $ — $ 426,670(10)
Total . . . . . . . . . . . . . . . . . . . . . . . . . $6,161,707 $6,722,950 $6,161,707 $ 946,845
Douglas Britt
Base Salary Payment
(Continuation)(7) . . . . . . . . . . . . . . $ 710,000
Benefits(7) . . . . . . . . . . . . . . . . . . . . $
19,958
Bonus Payments(8) . . . . . . . . . . . . . $1,016,384
Accelerated Vesting of Deferred
Compensation(5) . . . . . . . . . . . . . . $ 428,322
$
$
$
$
Accelerated Vesting of Service-
— $ 710,000 $ —
— $ 19,958 $ —
— $1,016,384 $ 1,016,384
— $ 428,322 $ —
based RSUs . . . . . . . . . . . . . . . . . . $5,485,570(9) $5,754,010 $5,485,570(9) $ —
Accelerated Vesting of Performance-
based RSUs . . . . . . . . . . . . . . . . . . $ 594,530(9) $2,090,130 $ 594,530(9) $ —
— $ — $ —
Pro Rata Vesting of PSUs . . . . . . . . $
— $
Total . . . . . . . . . . . . . . . . . . . . . . . . . $8,254,764 $7,844,140 $8,254,764 $ 1,016,384
-107-
2019 Proxy Statement
JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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Part IV—Additional Information
Executive Compensation
Involuntary
Termination
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Voluntary
Termination
for Good
Reason (2) Retirement (3)
Change in
Control and
Change in No
Control with Assumption
Termination of Award (1)
Name
Paul Humphries
Base Salary Payment
(Continuation)(7) . . . . . . . . . . . . . . $ 710,000
Benefits(7) . . . . . . . . . . . . . . . . . . . . $
14,764
Bonus Payments(8) . . . . . . . . . . . . . $ 815,264
Accelerated Vesting of Deferred
Compensation(5) . . . . . . . . . . . . . . . $ 548,756
Accelerated Vesting of Service-
$
$
$
$
— $ 710,000 $ —
— $ 14,764 $ —
— $ 815,264 $ 815,264
— $ 548,756 $ —
based RSUs . . . . . . . . . . . . . . . . . . $ 4,219,110(9) $4,515,810 $4,219,110(9) $ —
Accelerated Vesting of
Performance-based RSUs . . . . . . . $ 594,530(9) $2,233,800 $ 594,530(9) $ —
Pro Rata Vesting of PSUs . . . . . . . . $
— $
— $ — $ 429,110(10)
Total . . . . . . . . . . . . . . . . . . . . . . . . . $6,902,424 $6,749,610 $6,902,424 $ 1,244,374
Scott Offer
Base Salary Payment
(Continuation)(7) . . . . . . . . . . . . . . $ 605,000
19,482
Benefits(7) . . . . . . . . . . . . . . . . . . . . $
Bonus Payments(8) . . . . . . . . . . . . . $ 370,803
Accelerated Vesting of Deferred
$
$
$
— $ 605,000 $ —
— $ 19,482 $ —
— $ 370,803 $ 370,803
Compensation(5) . . . . . . . . . . . . . . $
— $
— $ — $ —
Accelerated Vesting of Service-
based RSUs . . . . . . . . . . . . . . . . . . $4,134,660(9) $4,752,560 $4,134,660(9) $ —
Accelerated Vesting of
Performance-based RSUs . . . . . . . $ 594,530(9) $1,386,030 $ 594,530(9) $ —
— $ — $ —
Pro Rata Vesting of PSUs . . . . . . . . $
— $
Total . . . . . . . . . . . . . . . . . . . . . . . . . $5,724,475 $6,138,590 $5,724,475 $ 370,803
(1) The amounts shown represent the estimated value of the accelerated vesting of restricted and
performance share unit awards (at target) 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 Plans may be accelerated if the
executive is terminated within a certain period (not to exceed 18 months) following a change of
control. PSUs 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 29, 2019, the assumed date of the triggering event.
(2) The amounts shown represent, except for Ms. Advaithi, the estimated value of amounts payable
under the Company’s Severance Plan, subject to the participant entering into and complying with
a Transition Agreement.
(3) For termination of service due to retirement, then (i) the PSUs will not terminate and (ii) a pro-rata
number of vested shares shall be issued to the executive upon the vesting of the award pursuant
to achieving the performance criteria. The amounts reported assume vesting at 100% of target
shares.
-108-
2019 Proxy Statement
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CLEAN
Part IV—Additional Information
Executive Compensation
(4) Represents two years’ continued payment of base salary and two years of target annual bonus
amount, two years’ continued vesting of outstanding equity awards and deferred compensation,
and two years’ continued benefits coverage.
(5) The amount shown represents the portion of the unvested balance of the executive’s deferred
compensation account that would vest in the event the executive is 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 retirement.
(6) Mr. McNamara retired on December 31, 2018 and the amounts set forth under the “Retirement”
reflect the actual amounts paid to Mr. McNamara in connection with his retirement. The amount
reported for pro rata vesting of PSUs reflects the estimated payouts at target for his TSR and free
cash flow PSUs. Value shown for benefits represents an annual value of company-paid retiree
executive medical.
(7) Represents the continuation of base salary and estimated benefits for 12 months during the
transition period provided in the Transition Agreement (which may be 12 months or longer).
(8) Represents payment of a pro-rated portion of the participant’s annual bonus based on the
quarters for which the participant received a quarterly bonus, calculated and determined per plan
rules and Company policies (calculated using annual target bonus amounts).
(9) Includes acceleration of retention awards granted on December 7, 2018 (stock price-based) and
March 5, 2019 (service-based). These awards The RSUs have accelerated vesting in the event of
a termination of employment by the Company without cause or by the executive officer for good
reason prior to the vest date.
(10)The amounts shown do not include the TSR-based PSU (and the free cash flow based PSU for
Mr. McNamara only) that would have vested on June 14, 2019. Due to the current share price and
free-cash flow below threshold levels, the actual payout resulted in 0% of target.
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Part IV—Additional Information
CEO Pay Ratio
CEO PAY RATIO
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act
and Item 402(u) of Regulation S-K, we are providing the following disclosure about the median annual
total compensation of our employees in relation to the annual total compensation of our Chief
Executive Officer.
We are a globally-recognized provider of Sketch-to-Scale® services—innovative design, engineering,
manufacturing, and supply chain services and solutions—from conceptual sketch to full-scale
production. We have established an extensive network of design and manufacturing facilities in the
world’s major consumer electronics and enterprise products markets (Asia, the Americas, and Europe)
in order to serve the outsourcing needs of both multinational and regional companies. Our global
services provide our customers with a competitive advantage by delivering improved product quality,
increased flexibility, leading-edge manufacturability, improved performance, faster time-to-market, and
competitive costs. We have 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, 2019, 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.
For the fiscal year ended March 31, 2019, we had revenues of $26.2 billion. Approximately 88% of our
revenues are generated outside of the U.S. With this large scale, global manufacturing-intensive
business model, we have approximately 200,000 employees globally, including our contractor
workforce, of whom approximately 97% are outside of the U.S. and approximately 91% are located in
emerging markets. To better understand the following pay ratio disclosure, it is important to recognize
that our compensation programs are designed to reflect local market practices across our global
operations. We offer market-based competitive wages and benefits in all geographies in which we
operate. Our CEO’s compensation is structured to align pay with performance, with pay levels set in
line with our peers that are companies of similar size, scale, and complexity.
CEO Transition
Because we had a CEO transition in February 2019, in accordance with SEC rules, we have elected
to annualize Ms. Advaithi’s compensation for the period she has served as our CEO in order to
determine her annual total compensation.
Fiscal Year 2019 Pay Ratio
We experienced a CEO transition during the fiscal year 2019 and we have elected to use the
compensation of Ms. Revathi Advaithi, who joined Flex on February 11, 2019 and was in the role of
CEO of Flex on March 31, 2019, in the calculation of this year’s pay ratio. Because Ms. Advaithi was
not employed by Flex for the entire fiscal year, we have annualized her compensation relative to the
values disclosed in the Summary Compensation Table (SCT), as follows:
Element
SCT Value
Annualized Value
Considerations
Base Salary
$165,865
$1,150,000
Annualized to represent full year
Non-Equity Incentives
$234,792
$1,725,000
Annualized to represent full year
Sign-On Bonus
$3,000,000
$3,000,000
No annualization applied
Sign-On Equity
$1,999,995
$1,999,995
No annualization applied
All Other Compensation
$118,113
$850,414
Annualized to represent full year;
primarily represents re-location
costs and travel
Total Compensation
$5,518,765
$8,725,409
--
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Part IV—Additional Information
CEO Pay Ratio
• As shown above, our CEO’s total annualized compensation for fiscal year 2019 was
$8,725,409.
• The annual total compensation of our median employee among all non-contractor employees
(excluding the CEO) was $6,471.
• Our CEO’s annual total compensation, as reported in the Summary Compensation Table, was
$5,518,765.
Based on this information, the ratio of the annual total compensation of our CEO relative to the annual
total compensation of our median employee was 1,348 to 1.
The pay ratio disclosed above is a reasonable estimate, calculated in a manner consistent with the
SEC rules based on our payroll and employment records and the methodologies described below.
The SEC rules for identifying the median compensated employee and calculating the pay ratio allow
companies to use different methodologies, to apply certain exclusions, and to make reasonable
estimates and assumptions that reflect their compensation practices. As such, the pay ratio disclosed
by other companies may not be comparable to the pay ratio disclosed above, as other companies
may have different employment and compensation practices and may utilize different methodologies,
exclusions, estimates, and assumptions in calculating their own pay ratios. Moreover, there are a
number of factors that make a meaningful comparison of pay ratios difficult, such as industry-specific
pay differentials, the geographic location of employee populations, and the nature of a company’s
manufacturing operations.
Identification of the Median Employee
For purposes of identifying our median employee in 2019, we considered target total annual cash
compensation multiplied by the FTE % factor as reflected in our global human resources information
system, such that those that only work part-time were included at the part-time pay rate and not
converted to a full-time equivalent pay level. We selected this compensation approach because it
captures both base salary as well as bonuses and other cash payments that may be provided to
employees in our varying work geographies. We measured compensation for purposes of measuring
the median employee using the 12-month period ending March 31, 2019. No cost-of-living
adjustments were made.
We selected March 31, 2019 as the date on which to determine our median employee. As of that
date, we had 171,171 employees (not including our contractors), 164,254 of whom were located
outside of the United States and approximately 154,136 of whom were located in emerging markets.
This employee count excludes approximately 33,000 individuals who are classified as contractors for
this analysis and therefore not included in the CEO pay ratio calculations. Additionally, this employee
count reflects our utilization of the de minimis exemption to eliminate countries representing no more
than 5% of our global population in the aggregate. The countries excluded were Ukraine and
Indonesia, with 3,536 and 2,087 employees, respectively, in the aggregate representing approximately
3.3% of our global population. With these countries excluded, we had 165,548 employees with
158,631 located outside of the United States.
Using this methodology, we determined that our median employee was a full-time, salaried employee
working in Mexico. The employee’s annual total compensation in 2019 was approximately $6,471. For
purposes of this disclosure, we converted the employee’s total compensation from Mexican Pesos to
U.S. dollars using the exchange rate (19.3580 MXN to 1 USD) as of March 27, 2019.
Calculation of Median Employee’s Compensation and CEO’s Annualized Compensation
In determining the annual total compensation in 2019 of approximately $6,471 for our median
employee, as required by SEC rules, we calculated the employee’s compensation in accordance with
Item 402(c)(2)(x) of Regulation S-K, consistent with how we determine our CEO’s total compensation
for fiscal year 2019 in the Summary Compensation Table.
As a result of annualizing Ms. Advaithi’s annual total compensation for purposes of the CEO pay ratio
calculation, her annual total compensation is $8,725,409, which differs from the amount reflected as
her total compensation set forth in the Summary Compensation Table of $5,518,765.
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2019 Proxy Statement
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Part IV—Additional Information
Equity Compensation Plan Information
EQUITY COMPENSATION PLAN INFORMATION
As of March 31, 2019, we maintained our 2010 Plan and our 2017 Plan, which replaced our 2010
Plan with respect to further grants of equity awards. 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, 2019. The below does not reflect the effect of our fiscal 2020 grants under the 2017 Plan
and the vesting of awards in fiscal 2020.
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) . . . . . . . . . . . . . . . . . . . . . . . . . . 14,521,320 $10.79 16,066,786(2)
Equity compensation plans not approved by
shareholders(3)(4) . . . . . . . . . . . . . . . . . . . . . . . . 1,255,796(5) $ 3.90 —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,777,116(6) $ 3.93 16,066,786(2)
(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) Consists of Ordinary Shares available for grant under the 2017 Plan. The 2017 Plan provides for
grants of up to 22.0 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 2010 Plan (if such Ordinary Shares are issued under such other stock options or
restricted share unit awards, they will not become available under the 2017 Plan).
(3) 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
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 not less than the
fair value of the underlying Ordinary Shares on the date of grant. The awards generally vest over
four years, and options generally expire ten years from the date of grant. Unvested awards are
forfeited upon termination of employment.
(4) 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.’s 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 not
less than the fair value of the underlying Ordinary Shares on the date of grant. The options
generally vest over four years, and options generally expire ten years from the date of grant.
Unvested options are forfeited upon termination of employment.
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2019 Proxy Statement
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Part IV—Additional Information
Equity Compensation Plan Information
(5) Consists of Ordinary Shares issuable upon the exercise of outstanding stock options.
(6) Includes 14,903,886 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 3,030,165 shares
would be issued if the maximum market performance level is achieved.
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Part IV—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 14, 2019, 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 14, 2019, and Ordinary Shares subject to restricted share unit awards that vest within
60 days of June 14, 2019 are deemed to be outstanding and to be beneficially owned by the person
holding such awards for the purpose of computing the percentage ownership of such person, but are
not treated as outstanding for the purpose of computing the percentage ownership of any other
person. Unless otherwise indicated below, the persons and entities named in the table have sole
voting and sole investment power with respect to all the shares beneficially owned, subject to
community property laws where applicable.
For each individual and group included in the table below, percentage ownership is calculated by
dividing the number of shares beneficially owned by such person or group by the sum of the
513,926,093 Ordinary Shares outstanding on June 14, 2019 plus the number of Ordinary Shares that
such person or group had the right to acquire on or within 60 days after June 14, 2019.
Shares Beneficially
Owned
Number of
Name and Address of Beneficial Owner Shares Percent
5% Shareholders:
PRIMECAP Management Company(1)
177 E. Colorado Blvd., 11th Floor, Pasadena, CA 91105 . . . . . . . . . 77,367,919 15.05%
Wellington Management Group LLP(2)
280 Congress Street, Boston, MA 02210 . . . . . . . . . . . . . . . . . . . . . 48,334,433 9.40%
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Part IV—Additional Information
Security Ownership of Certain Beneficial Owners and Management
Shares Beneficially
Owned
Number of
Name of Beneficial Owner Shares Percent
Named Executive Officers and Directors:
Revathi Advaithi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — *
Francois Barbier(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,124 *
Doug Britt(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,576 *
Christopher Collier(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 687,981 *
Paul Humphries(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399,575 *
Scott Offer(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,108 *
Michael Capellas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,080 *
Jill A. Greenthal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — *
Jennifer Li . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,364 *
Marc Onetto(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,929 *
Willy Shih . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,802 *
Charles K. Stevens, III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — *
Lay Koon Tan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,418 *
William Watkins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,730 *
Lawrence Zimmerman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,476 *
All executive officers and directors as a group (16 persons)(9) . . . . . . . 2,153,736 0.42%
* Less than 1%.
(1) Based on information supplied by PRIMECAP Management Company in an amended
Schedule 13G filed with the SEC on February 8, 2019. PRIMECAP Management Company has
sole voting power over 41,174,546 shares and sole dispositive power over 77,367,919 shares.
(2) Based on information supplied by Wellington Management Group LLP in an amended
Schedule 13G filed with the SEC on February 12, 2019. Wellington Management Group LLP,
Wellington Group Holdings LLP and Wellington Investment Advisors Holdings LLP have shared
voting power over 34,648,220 of these shares and shared dispositive power over
48,334,433 shares. Wellington Management Company LLP has shared voting power over
22,373,214 shares and shared dispositive power over 29,389,444 shares.
(3) Includes 38,670 shares issuable upon settlement of restricted share unit awards that vest within
60 days of June 14, 2019.
(4) Includes 36,054 shares issuable upon settlement of restricted share unit awards that vest within
60 days of June 14, 2019. Includes 5,007 shares owned by Mr. Britt’s spouse.
(5) Includes 41,613 shares issuable upon settlement of restricted share unit awards that vest within
60 days of June 14, 2019.
(6) Includes 38,879 shares issuable upon settlement of restricted share unit awards that vest within
60 days of June 14, 2019.
(7) Includes 26,481 shares issuable upon settlement of restricted share unit awards that vest within
60 days of June 14, 2019.
(8) All shares held indirectly by a living trust, of which Mr. Onetto is a trustee.
(9) Includes 189,263 shares issuable upon settlement of restricted share unit awards that vest within
60 days of June 14, 2019.
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Part IV—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 the Investor Relations section of our website at www.flex.com.
Transactions with Related Persons
The wife of Mr. Britt, the President, Flex Integrated Solutions of the Company, was employed by the
Company in fiscal year 2019 (and presently). Kelly Britt was employed as Senior Director Business
Development for CEC and earned approximately $245,000 in salary, share awards and benefits
during fiscal year 2019.
Mr. McNamara, the Company’s former CEO and former director, has a daughter-in-law, Lacey Ellis,
who was employed by the Company in fiscal year 2019 (and presently). Ms. Ellis was employed as an
attorney and earned approximately $182,000 in salary, bonus and benefits during fiscal year 2019.
The employment and compensation of the family members described above was approved and
established by the Company in accordance the Statement of Policy with Respect to Related Person
Transactions as described above and each 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.
Prior to joining the Company, our CEO, Ms. Advaithi, was President and Chief Operating Officer,
Electrical Sector, of Eaton Corporation plc. Eaton Corporation plc and its subsidiaries (collectively,
“Eaton”) are suppliers to the Company. The Company made payments of $0.5 million to Eaton in the
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Part IV—Additional Information
Certain Relationships and Related Person Transactions
Company’s fiscal year 2019 and Eaton continues to be a supplier to the Company. These supply
arrangements were made in the ordinary course and on arms-length terms and such ordinary course
supply arrangements were made prior to discussions between the Company and Ms. Advaithi
concerning her appointment.
Subsequent to Mr. McNamara’s retirement from the Company, he became a general partner in a
venture capital firm where the Company had an investment in three of its limited partnership
investment vehicles. After Mr. McNamara’s retirement, the Company sold its limited partnership
interest to the limited partnership for an aggregate consideration of $31.6 million. The transaction was
negotiated on arm’s-length terms and without regard to Mr. McNamara’s prior positions as CEO and a
director of Flex.
Other than the foregoing and the compensation agreements and other arrangements described under
the sections entitled “Executive Compensation” of this joint proxy statement and “Non-Management
Directors’ Compensation for Fiscal Year 2019” of this joint proxy statement, during fiscal year 2019,
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 IV—Additional Information
Shareholder Proposals for the 2020 Annual General Meeting
SHAREHOLDER PROPOSALS FOR THE 2020 ANNUAL GENERAL MEETING
Shareholder proposals submitted under SEC Rule 14a-8 and intended for inclusion in the proxy
statement for our 2020 annual general meeting of shareholders must be received by us no later than
March 12, 2020 in order to be deemed timely submissions. 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
2020 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 2020 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 2020 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 2020 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 2020
annual general meeting in the case of any other requisition.
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Part IV—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, 2019:
• 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, 2019, which was filed with the
SEC on May 21, 2019, 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, 2019. 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 2019 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, 2019.
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Part IV—Additional Information
Other Matters
OTHER MATTERS
Our management does not know of any matters to be presented at the extraordinary general meeting
of shareholders or the 2019 annual general meeting other than those set forth herein and in the
notices accompanying this joint proxy statement. If any other matters are properly presented for a
vote at the extraordinary general meeting or the 2019 annual general meeting, the enclosed proxies
confer discretionary authority to the individuals named as proxies to vote the shares represented by
such proxy, as to those matters.
It is important that your shares be represented at the extraordinary general meeting and 2019 annual
general meeting, regardless of the number of shares you hold. We urge you to promptly execute
and return the accompanying proxy cards in the envelope that has been enclosed for your
convenience, or to vote or give voting instructions in accordance with the proxy cards or
Notices.
Registered shareholders who are present at the extraordinary general meeting and 2019 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 4 to our audited consolidated financial statements
for the fiscal year ended March 31, 2019, “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
Web links throughout this joint proxy statement are provided for convenience only, and the content on
the referenced websites does not constitute part of this joint proxy statement.
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 the expectations expressed in the 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; litigation and
regulatory investigations and proceedings compliance with legal and regulatory requirements; the
possibility that benefits of the Company’s restructuring actions may not materialize as expected; that
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Part IV—Additional Information
Other Matters
the expected revenue and margins from recently launched programs may not be realized; our
dependence on a small number of customers; the impact of component shortages, including its impact
on our revenues; geopolitical risk, including the termination and renegotiation of international trade
agreements and trade policies, including the impact of tariffs and related regulatory actions; that
recently proposed changes or future changes in tax laws in certain jurisdictions where we operate
could materially impact our tax expense; the effects that the current macroeconomic environment
could have on our business and demand for our products; and 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 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 9, 2019
Singapore
Upon request, we will furnish without charge to each person to whom this joint proxy
statement is delivered a copy of any exhibit listed in our Annual Report on Form 10-K for the
fiscal year ended March 31, 2019. 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
ANNEX A: PROPOSED AMENDMENTS TO THE 2016 CONSTITUTION
FLEX LTD.
Annex A-1
The alterations which are proposed to be made to the 2016 Constitution of Flex Ltd. pursuant to EGM
Proposal No. 1 set forth in the Notice of Extraordinary General Meeting dated July 9, 2019 are set out
below. For ease of reference, the full text of the Articles proposed to be altered has been reproduced
and the alterations highlighted. Proposed additions are indicated by double underlining and proposed
deletions are indicated by strike-outs.
1.
Proposed Amendment to Article 58 of the 2016 Constitution
58. Routine business shall mean and include only business transacted Routine business.
at an Annual General Meeting of the following classes:
(a) Declaring dividends;
(b) Reading, considering and laying the financial statements, the
Directors’ statement and Auditor’s report, and other documents
required to be attached to the financial statements;
(c) Appointing or re-appointing Directors to fill vacancies arising at
the meeting on retirement whether by rotation or otherwise; and
(d) Appointing or re-appointing the Auditor and fixing the
remuneration of the Auditor or determining the manner in which
such remuneration is to be fixed.
2.
Proposed Amendment to Article 90 of the 2016 Constitution
90. A Chief Executive Officer (or a person holding an equivalent position) Resignation,
who is a Director shall not, while he continues to hold that office, be subject retirement and
to retirement as the other Directors and, by rotation unless the Board of removal of the Chief
Directors determines otherwise at its sole discretion, at any time, and he Executive Officer.
shall not be taken into account in determining the number of Directors to
retire by rotation but he shall, subject to the provisions of any contract
between him and the Company, be subject to the same provisions as to
resignation and removal as the other Directors of the Company and if he
ceases to hold the office of Director from any cause he shall ipso facto and
immediately cease to be a Chief Executive Officer (or hold such equivalent
position). A Chief Executive Officer who is also a Director shall not
automatically cease as Chief Executive Officer if he ceases from any cause
to be a Director, unless the contract or resolution under which he holds office
shall expressly state otherwise, in which event such determination shall be
subject to the provisions of any contract between him and the Company.
3.
Proposed Amendment to Article 94 of the 2016 Constitution
94. At each Annual General Meeting one-thirdall of the Directors for the Retirement of
time being (or, if their number is not a multiple of three, the number nearest Directors by rotation.
to but not more than one-third) shall retire from office by rotation. Provided,
however, that no Director holding office as Chief Executive Officer (or an
equivalent position) shall be subject to retirement by rotation unless
otherwise determined in accordance with article 90 or be taken into account
in determining the number of Directors to retire.
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ANNEX A
4.
Proposed Amendment to Article 95 of the 2016 Constitution
95. The Directors to retire in every year shall be those subject to Selection of
retirement by rotation who have been longest in office since their last Directors to
re-election or appointment. As between persons who became or were last retire.Retiring
re-elected Directors on the same day, those to retire shall (unless they Director eligible for
otherwise agree among themselves) be determined by lot. A retiring Director re-election.
shall be eligible for re-election.
5.
Proposed Amendment to Article 97 of the 2016 Constitution
97. In accordance with the provisions of Section 152 of the Act, the Removal of
Company may by Ordinary Resolution of which special notice has been Directors.
given remove any Director before the expiration of his period of office,
notwithstanding anything in this Constitution or in any agreement between
the Company and such Director but without prejudice to any claim he may
have for damages for breach of any such agreement. The Company in
General Meeting may appoint another person in place of a Director so
removed from office and any person so appointed shall be treated for the
purpose of determining the time at which he or any other Director is to
retire by rotation as if he had become a Director on the day on which the
Director in whose place he is appointed was last elected a Director. In
default of such appointment, the vacancy so arising may be filled by the
Directors as a casual vacancy.
6.
Proposed Amendment to Article 100 of the 2016 Constitution
100. The Directors shall have power at any time and from time to time Directors’ power to
to appoint any person to be a Director either to fill a casual vacancy or as fill casual vacancies
an additional Director but so that the total number of Directors shall not at and to appoint
any time exceed the maximum number fixed by or in accordance with this additional Director.
Constitution. Any person so appointed by the Directors shall hold office only
until the next Annual General Meeting and shall then be eligible for
re-election, but shall not be taken into account in determining the number
of Directors who are to retire by rotation at such Meeting.
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ANNEX A
Annex A-2
The alterations which are proposed to be made to the 2016 Constitution of Flex Ltd. pursuant to EGM
Proposal No. 2 set forth in the Notice of Extraordinary General Meeting dated July 9, 2019 are set out
below. For ease of reference, the full text of the Articles proposed to be altered has been reproduced
and the alterations highlighted. Proposed additions are indicated by double underlining and proposed
deletions are indicated by strike-outs.
Proposed Amendment to Article 82 of the 2016 Constitution
82. Subject to the other provisions of Section 145 of the Act, the Number of Directors.
number of the Directors, all of whom shall be natural persons, shall not be
less than two nor, unless otherwise determined by the Company in General
Meeting, more than eleven twelve.
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ANNEX A
Annex A-3
The alterations which are proposed to be made to the 2016 Constitution of Flex Ltd. pursuant to EGM
Proposal No. 3 set forth in the Notice of Extraordinary General Meeting dated July 9, 2019 are set out
below. For ease of reference, the full text of the Articles proposed to be altered has been reproduced
and the alterations highlighted. Proposed additions are indicated by double underlining and proposed
deletions are indicated by strike-outs.
1.
Proposed Amendment to Article 54 of the 2016 Constitution
54. (A) Subject to the provisions of the Act the Company shall in each Annual General
year hold an Annual General Meeting in accordance with the provisions of Meeting.
the Act in addition to any other meetings in that year and not more than
fifteen months shall elapse between the date of one Annual General Meeting
of the Company and that of the next. Provided that so long as the Company
holds its First Annual General Meeting within eighteen months of its
incorporation, it need not hold it in the year of its incorporation or in the
following year.
(B) All General Meetings other than Annual General Meetings shall
be called Extraordinary General Meetings.
(C) The time and place of any General Meeting shall be determined
by the Directors.
2.
Proposed Amendment to Article 116 of the 2016 Constitution
116. (A) Where the Company has a Seal, the The Directors shall provide Seal.
for the safe custody of the Seal and the official seal for use abroad, which
shall only be used by the authority of the Directors or a committee of
Directors authorised by the Directors in that behalf.
(B) Where the Company has a Seal, every Every instrument to Affixing Seal.
which the Seal shall be affixed shall (subject to the provisions of this
Constitution as to certificates for shares) be signed by a Director and shall
be countersigned by the Secretary or by a second Director or by some
other person appointed by the Directors in place of the Secretary for
the purpose.
(C) Where the Company has a Seal, the The Company may Official seal.
exercise the powers conferred by the Act with regard to having an official
seal for use abroad, and such powers shall be vested in the Directors. For
the avoidance of doubt, the affixation of the official seal need not comply
with the signature requirements prescribed by article 116(B), and need only
comply with the execution formalities prescribed under the Act.
(D) Where the Company has a Seal, the The Company may have Share Seal.
a duplicate Seal as referred to in Section 124 of the Act which shall be a
facsimile of the Seal with the addition on its face of the words “Share Seal”.
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ANNEX B
ANNEX B: RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
FLEX LTD
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
Twelve-Month Periods Ended
March 31, 2019 March 31, 2018
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GAAP gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . .
Customer related asset impairments(1) . . . . . . . . . . . . . . . . . . . .
Restructuring charges(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New revenue standard adoption impact(3) . . . . . . . . . . . . . . . . .
Contingencies and other(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 26,210,511
$ 1,517,775
$25,441,131
$ 1,595,882
19,554 19,102
46,684 —
99,005 66,845
9,291 —
15,123 26,631
Non-GAAP gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,707,432
$ 1,708,460
Adjusted gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.5% 6.7%
GAAP income before income taxes . . . . . . . . . . . . . . . . . . . . . .
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . .
Customer related asset impairments(1) . . . . . . . . . . . . . . . . . . . .
Restructuring charges(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New revenue standard adoption impact(3) . . . . . . . . . . . . . . . . .
Contingencies and other(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other charges (income), net(5) . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 182,126
$ 520,893
74,396 78,640
76,032 85,244
87,093 6,251
113,313 90,691
9,291 —
35,644 51,631
183,454 122,823
110,414 (169,719)
Non-GAAP operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 871,763
$ 786,454
GAAP net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer related asset impairments(1) . . . . . . . . . . . . . . . . . . . .
New revenue standard adoption impact(3) . . . . . . . . . . . . . . . . .
Contingencies and other(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment and other, net(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments for taxes(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 93,399
$ 428,534
74,396 78,640
76,032 85,244
113,313 90,691
87,093 6,251
9,291 —
35,644 51,631
109,980 (166,357)
3,978 10,217
Non-GAAP net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 603,126
$ 584,851
Weighted-average shares used in computing per share
amounts (Diluted): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
530,070 536,598
GAAP earnings per share (Diluted): . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.18
$ 0.80
Non-GAAP (adjusted earnings per share) . . . . . . . . . . . . . . . . .
$
1.14
$ 1.09
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . .
Cash collection of deferred purchase price and other . . . . . . . . .
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . .
Proceeds from the disposition of property and equipment . . . . .
$ (2,971,024)
$ (3,866,335)
3,605,299 4,619,933
(725,606) (561,997)
94,219 44,780
Free Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,888
$ 236,381
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ANNEX B
(1) Customer related asset impairments for fiscal years ended March 31, 2019 and March 31, 2018
primarily relate to additional provisions for doubtful accounts receivable, inventory and impairment
of property and equipment for certain customers experiencing significant financial difficulties and
/or we are disengaging from.
(2) Throughout fiscal years 2018 and 2019, the Company incurred certain restructuring charges
primarily related to severance for rationalization at certain existing operating sites and corporate
functions.
We completed the wind-down of our Nike operations in Mexico in Q3 fiscal year 2019 and
recognized in total $66 million for the fiscal year. The charge primarily consisted of non-cash asset
impairments.
(3) During the first quarter of fiscal year 2019, the Company amended certain non-substantive terms
of its existing contracts for its smaller customers. The amendments removed the consideration
regarding over-time recognition under ASC 606. Accordingly, these customer contracts are now
accounted for consistent with prior accounting and revenue is recognized upon shipment of
product.
(4) Contingencies and other during fiscal year 2019 primarily consist of costs incurred relating to the
independent investigation undertaken by the Audit Committee of the Company’s Board of
Directors which was completed in June 2018. In addition, it also includes certain charges of the
China based Multek operation that was divested in the second quarter of fiscal year 2019.
During fiscal year 2018, the Company incurred charges in connection with certain legal matters
where it believed losses were probable and estimable. The Company incurred various other
charges predominately related to damages incurred from a typhoon that impacted a China facility.
Additionally, certain asset impairments were recorded during fiscal year 2018.
(5) As further described in the Company’s fiscal 2018 Annual Report on Form 10-K, the Company
deconsolidated Elementum and recognized a non-cash gain of $151.6 million. The Company also
completed a sale of its Wink business in fiscal year 2018 and recognized a gain on sale of
$38.7 million. During the last half of fiscal 2019, the Company reassessed its strategy with respect
to its entire investment portfolio. As a result, the Company recognized an aggregate net charge
related to investment impairments and dispositions of approximately $119 million and $193 million
for the three- and twelve-month periods ended March 31, 2019, respectively. The aggregate
charge was primarily driven by write-downs of our investment positions in a non-core cost method
investment and Elementum that were recognized in the third and fourth quarter of fiscal 2019,
respectively. The Company also incurred other investment impairments that were individually
immaterial as a result of our strategy shift and due to market valuation changes. We continue to
assess our strategy with respect to the remaining investment portfolio and have not identified any
additional impairment indicators with respect to these investments as of March 31, 2019.
During the first quarter of fiscal year 2019, the Company transferred employees and equipment
along with certain related software and IP, into Bright Machines which later received additional
equity funding from third party investors and changed the composition of the Board of directors
removing Flex’s control. As such, we deconsolidated the entity and recognized a gain of
approximately $87 million in other income, net for the year ended March 31, 2019.
(6) During the fourth quarter of fiscal year 2019, the Company incurred an expense of $15 million
pertaining to initial implementation of advanced pricing arrangements finalized with the Mexican
tax authorities during the fiscal year.
The remaining balance is primarily related to adjustment for exchange rate fluctuation on income
tax receivable position of an operating subsidiary recognized in a prior period and tax effects of
the various adjustments that we incorporate into Non-GAAP measures.
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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, 2019
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 Trading Symbol(s) Name of each exchange on which registered
Ordinary Shares, No Par Value FLEX The Nasdaq Stock Market LLC
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 every Interactive Data File required to be submitted
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 such files). Yes ⌧ No 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 28, 2018, the aggregate market value of the Company’s ordinary shares held by non-affiliates of the registrant
was approximately $6.9 billion based upon the closing sale price as reported on the 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 13, 2019
Ordinary Shares, No Par Value 514,029,702
Document Parts into Which Incorporated
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement to be delivered to shareholders in Part III
connection with the Registrant’s 2019 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
PART II
Item 5.
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer
Item 6.
Item 7.
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . 56
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial
Item 9.
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Item 9A.
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . 118
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Certain Relationships and Related Transactions, and Director Independence . . . . 118
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
PART IV
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Item 15.
Item 16.
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
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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-Scale® services—innovative design,
engineering, manufacturing, and supply chain services and solutions—from conceptual sketch
to full-scale production. We design, build, ship and manage complete packaged consumer and
enterprise products, from medical devices and connected automotive systems to sustainable lighting
and cloud and data center solutions, for companies of all sizes in various industries and end-markets,
through our activities in the following segments:
• High Reliability Solutions (“HRS”), which is comprised of our health solutions business,
including surgical equipment, drug delivery, diagnostics, telemedicine, disposable devices,
imaging and monitoring, patient mobility and ophthalmology; and our automotive business,
including vehicle electrification, connectivity, autonomous, and smart technologies;
• Industrial and Emerging Industries (“IEI”), which is comprised of energy including advanced
metering infrastructure, energy storage, smart lighting, smart solar energy; and industrial,
including semiconductor and capital equipment, office solutions, household industrial and
lifestyle, industrial automation and kiosks;
• 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, and switching products for 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; and
• Consumer Technologies Group (“CTG”), which includes our consumer-related businesses in
IoT enabled devices, audio and consumer power electronics, mobile devices; and various
supply chain solutions for consumer, computing and printing devices.
These segments represent components of the Company for which separate financial information
is available that is utilized on a regular basis by the Chief Operating Decision Maker (“CODM”).
Our 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
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characteristics. Refer to note 19 to the consolidated financial statements in Item 8, “Financial
Statements and Supplementary Data” for additional information on our operating segments.
We provide design, manufacturing and supply chain services through a network of
over 100 locations in approximately 35 countries across five continents. We have established global
scale through an extensive network of innovation labs, design centers, manufacturing and services
sites in the world’s major consumer and enterprise products markets (Asia, the Americas, and Europe)
in order to serve the supply chain needs of both multinational and regional companies. Our services
provide customers with a competitive advantage by delivering improved product quality, increased
flexibility, leading-edge manufacturability, improved performance, faster time-to-market, and value. Our
customers leverage our services to meet their requirements throughout their products’ entire life
cycles. For the fiscal year ended March 31, 2019, we had revenue of $26.2 billion and net income of
$93 million.
Over the past several years, we have evolved beyond a traditional Electronics Manufacturing
Services (“EMS”) company, and now consider ourselves to be a provider of a full range of Sketch-to-
Scale® services—beyond electronics manufacturing services—including strategic product development
planning and design-phase innovation, supported by teams of talented 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 innovative solutions, design and engineering
services, advanced supply chain management solutions and services, significant global scale and
regional presence, and manufacturing sites in key geographies provide us with a competitive
advantage and strong differentiation in the market for designing, building, and servicing consumer and
enterprise products for leading multinational and regional companies. Through these services, centers
and sites, we offer our customers improved product design, increased flexibility and responsiveness.
We also enable faster time to market, product safety and regulatory compliance and supply chain
predictability with real-time visibility, all of which accelerate product launches, access to new markets,
and mitigate of risks.
We recognized research and development costs primarily related to our product design and
innovations service offerings of $66 million, $78 million, and $66 million for the fiscal years ended
March 31, 2019, 2018 and 2017, respectively.
INDUSTRY OVERVIEW
Our expertise is Sketch-to-Scale® services: design, manufacture, and supply chain services for a
broad range of products, from medical devices, connected automotive systems and smart home
appliances to sustainable lighting and cloud data center infrastructures. 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, in the technology,
automotive and healthcare industries along with the convergence of many industries being transformed
by technology advancements. 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 that include mobile devices, home entertainment
products, 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
2018 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 31%. 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
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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:
• Improved inventory management and purchasing power;
• Access to worldwide design, engineering, manufacturing, and after-market service capabilities;
• Ability to focus on core branding and R&D initiatives;
• Accelerated time-to-market and time-to-volume production;
• Improved efficiency and optimized production costs;
• Improved product quality through advanced design and production at scale; and
• Reduced capital investment requirements and fixed costs;
We believe that growth in the EMS industry will be largely driven by the need for OEMs to
respond to rapidly changing industries, markets and technologies, the increasing complexity of supply
chains and the continued pressure to be innovative and 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 product development lifecycle capabilities in the industry, from concept design to
manufacturing to aftermarket services. We believe a key competitive advantage is our people,
processes and capabilities for making products, systems and solutions for our customers:
• 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.
• Scope: Our full range of services, from Sketch-to-Scale®, include innovation and design,
engineering, manufacturing, forward and reverse logistics, and circular economy supply chain
management. Our deep industry and cross-industry knowledge and multi-domain expertise
accelerate the production of increasingly complex products for increasingly interconnected
industries.
• Scale: Our physical infrastructure includes over 100 facilities in approximately 35 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 advanced materials and technology sourcing,
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 a wide range of
products for our customers. These services include:
Innovation Services. We provide a comprehensive set of services that enable companies to
successfully ideate, 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
cross-industry and technology platforms and building block technologies, accelerating innovation
and 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
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customers’ offerings. This area of our business has seen increased investment and focus over
the past few years.
Beyond our flagship Customer Engagement Center in Silicon Valley, we have established a
global network of Design and Engagement Centers. Our innovation and design services include:
• Innovation and Design Centers. Our Innovation and Design Centers specialize in supporting
customer design and product development. 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.
• Cross-industry Technologies. Along with our portfolio of building block technologies in
electrical/electronics, electromechanical, and software, we also have deep technical expertise
in cross-industry technologies. Our Cross-industry technologies are a combination of building
block technologies expertly applied to products and solutions for use within numerous
industries. These technologies include: Human Machine Interface (HMI), Audio and Video,
System in Package (SIP), Miniaturization, IoT Platforms and Asset Tracking.
• Centers of Excellence/Competence. Our Centers of Excellence/Competence provide strategic
technology capabilities developed by Flex in critical solutions areas which leverage our
expertise across multiple industries, for integration into our customers’ products and next
generation industry requirements. Centers of Excellence/Competence have specialized
capabilities in connectivity, sensors and actuators, power, battery, interconnects and PMATX,
smart software, optical, and “soft” Systems.
• Systems Integration Services. Through systems integration, we design and integrate advanced
data center servers, storage and networking equipment and data center appliances, providing
engineering and design services with an emphasis on multivendor integration and open
technologies that promote interoperability at a lower cost. Our CloudLabs provide a staging lab
for customers to deploy the latest technologies, allowing for performance testing of workloads
and enabling faster diffusion of technologies in a controlled environment.
Design and Engineering Services. We offer a comprehensive range of value-added design
and engineering services, tailored to specific industries and markets, and the needs of our
customers. These services can be delivered using one of two primary business models:
• Design Services, where customers purchase engineering and development services on a time
and materials basis; or
• Joint Design and 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:
• 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 CAD drawings,
proofs of concept, product prototypes, interaction and interface models, detailed hard models,
and product packaging.
• Hardware Design. We offer design for printed-circuit board assemblies (PCBA); identification
and selection of key components, Subsystem design and full-product design including
electrical and mechanical design. We provide complete electrical and hardware design for
products ranging from small handheld consumer devices to large, high-speed, carrier-grade,
telecommunications equipment, incorporating embedded microprocessors, memory, digital
signal processing, high-speed digital interfaces, analog circuit design, power management
solutions, wired and wireless communication protocols, display imaging, audio/video, and radio
frequency systems and antenna design. In addition, we offer detailed mechanical, structural,
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and thermal design solutions for enclosures that utilize a wide range of plastic, metal and other
material technologies. These capabilities and technologies are increasingly important to our
customers’ product differentiation goals.
• Software Design. We offer cloud integration design services which include developing and
embedding a cloud agent onto a device, firmware and applications services including
developing and embedding software of functionality and user-specific tasks and features.
• Design for Excellence. We provide comprehensive design for manufacturing, testing, 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.
We are exposed to different or greater potential liabilities from our various design services than
those we typically 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;
claims of infringement or misuse of intellectual property and/or breach of license agreement provisions
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 assemble electronics products with 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 leading-
edge manufacturing solutions. We support a wide range of product demand profiles, from low-
volume, high-complexity programs, to high-volume production. A 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:
• Enclosures. We offer a comprehensive set of custom electronics enclosures and related
products and services. Our services include the design, manufacture, integration and
deployment 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.
• 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.
• 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 shorten total manufacturing cycle times our OEM customers. Materials
procurement and management consists of the planning, purchasing, expediting, and
warehousing of components and materials used in the manufacturing process. In addition, our
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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 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 of certain electronic components, most recently this has
been 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 supply chain issues, including shortages
of required electronic components.”
Components Business. We offer a full-service power supply business that provides a range
of solutions from custom to highly scalable system solutions. Flex has 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 systems, and
power supplies for the server, storage, and networking markets. Our Power Modules business
designs and manufactures a wide range of isolated DC/DC converters and non-isolated Point of
Load (PoL) converters intended primarily, although not exclusively, for the Information and
Communications Technology market, including Servers and High-Performance Computing
applications. We also offer specialized power module solutions suitable for other 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 gain access to
compelling innovations and design expertise in digital control and smart power.
Logistics. Our Flex Global Services business is a provider of services including after-market
and forward supply chain logistics services. Our comprehensive suite of services is tailored to
customers operating in the computing, consumer digital, infrastructure, industrial, mobile,
automotive and medical industries. 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
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,
asset tracking, 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
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provide repair expertise to multiple product lines such as consumer and midrange products,
printers, smart phones, consumer medical devices, notebook personal computers, 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 help our customers responsibly build products for a connected world. We do this by providing
our customers with product development lifecycle services, from innovation, design, and engineering,
to manufacturing, logistics, and supply chain solutions. Our strategy is to enable and scale innovation
for our customers, maintain our leadership in our capabilities, and build extended offerings in high-
growth industries and markets.
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 innovative solutions
that transform industries and companies. We have taken steps to attract the best engineering,
functional and operational leaders and have accelerated efforts to develop the future leaders of
the company.
Customer Focus. We believe that serving 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 aim to 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, and supply chain services. We focus our energy and efforts
on high-growth industries and markets where we have distinctive competence and compelling
value propositions. Examples include our investments in specific technologies and industries
including healthcare, automotive, industrial markets, and energy. Our market-focused approach to
managing our business increases our customers’ competitiveness by leveraging our deep vertical
industry and cross-industry expertise, as well as global scale, regional presence and agility to
respond to changes in market dynamics.
Global Operations Capabilities. We continue to invest in maintaining the leadership
of our world-class manufacturing and services capabilities including automation, new
product introduction and large-scale manufacturing. We constantly push the state of the art
in manufacturing technology, process development and operations management. We continue to
capitalize on our industrial park concept, where we co-locate our design, manufacturing, and
service resources globally in lower-cost regions, to provide a competitive advantage by minimizing
logistics, manufacturing costs, and cycle times while increasing flexibility and responsiveness. We
believe our global scale, breadth of services, IP, and assets contribute to our significant
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
technologies, capabilities and services to provide our customers with a broader value-added suite
of innovative services and solutions to meet their product and market requirements.
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 to provide 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 innovation and design services, operations, supply chain
solutions, and industry and market expertise. We provide active tracking and real-time data analytics
(Flex Pulse® ) that enable improved supply chain visibility, allowing customers to better monitor and
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mitigate risks. We believe the following capabilities further differentiate us from our competitors and
better serve our customers’ requirements:
Significant Scope and Global Scale. We believe that scale is a significant competitive
advantage, as our customers’ solutions increasingly require capabilities and competitive solutions
that can only be achieved through capabilities scope and global scale.
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 35 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.
Additionally, we are a leader in global procurement, purchasing approximately $27 billion of
electrical and mechanical materials during our fiscal year ended March 31, 2019. This scale
provides us with an ability to use our worldwide supplier relationships to achieve leading-edge
technologies, access, supply chain flexibility and advantageous pricing for our customers.
Digitized Supply Chain 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, full cycle 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
optimizing costs. We have expanded and enhanced our service offerings by adding capabilities in
innovation and design centers, modern manufacturing including additive manufacturing,
automation, robotics, real-time supply chain software, end-to-end supply chain modeling and
simulation, precision plastics, and machining.
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 vertical industry and cross-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 industries and markets. We combine our design and manufacturing services
to provide Sketch-to-Scale® customized solutions that include services from design concept,
through product industrialization and development, including the manufacture of components and
complete products across the industries and market that we serve, 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 Hubs. We have established state-of-the art innovation
hubs in the Americas, Asia and Europe, with differentiated offerings and specialized services and
focus. With subject matter expertise in connectivity, sensors and actuators, batteries, power,
interconnects, human machine interfaces, smart textiles, optical technologies, software & security
and advanced manufacturing, our technology leaders collaborate with customers to co-develop
their next generation of products. We offer concepting and quick-turn prototyping utilizing the most
advanced 3D plastic printing, 3D metal printing, surface mount technology (SMT), AI, Machine
Learning and advanced collaborative software to support major industries in bringing innovative
products to market rapidly. We are dedicated to providing quality and reliable solutions to meet the
customers’ requirements. We ensure confidentiality offering dedicated customer-confidential work
spaces that provide increased security and restricted access to protect our customers’ intellectual
property and the confidentiality of new products being launched into the marketplace. These
innovation hubs offer our customers a geographically-focused version of our Sketch-to-Scale®
services, taking their product from concept to volume production and go-to-market in a rapid, cost
effective and low risk manner.
Industrial Parks; Cost-Efficient Manufacturing Services. We have developed self-contained
campuses that co-locate our manufacturing and logistics operations with our suppliers in
various cost-efficient locations. These sites enhance our supply chain management efficiency,
while providing multi-technology solution value 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, India, and Mexico.
We have selected manufacturing operations situated in regions around the world to provide
our customers with a wide array of manufacturing solutions where our customers and/or their
customers are located. As of March 31, 2019, approximately 80% of our manufacturing capacity
was located in emerging markets, including Brazil, China, Hungary, India, Indonesia, Malaysia,
Mexico, Poland, Romania, and the Ukraine.
Sustainability. We believe in the power of technology to connect people, products and
services to create a smarter, more sustainable future. It’s not just good business, but it’s good for
the environment, for people and the communities in which we live and work. This belief forms the
cornerstone of our sustainability commitments and actions.
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: health solutions customers Abbott and Johnson & Johnson and auto customers Ford
and Nexteer in our HRS segment; Teradyne, Applied Materials and Xerox in our IEI segment; Cisco,
Nokia Solutions and Ericsson in our CEC segment; and Lenovo/Motorola, HP and Bose in our CTG
segment.
In fiscal year 2019, our ten largest customers accounted for approximately 43% of net sales. No
customer accounted for greater than 10% of the Company’s net sales in fiscal year 2019.
BACKLOG
Although we obtain firm purchase orders from our customers, OEM customers typically do not
place 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.
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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 services market are: quality and range of services; design and technological
capabilities; cost; location of sites; and responsiveness and flexibility. We believe we are extremely
competitive with regard to all of these factors.
CORPORATE SOCIAL RESPSONSIBLITY
Sustainability remains central to who we are and how we operate. Our sustainability governance
principles are a core part of our business operations. Through innovation and smart technologies, our
sustainable solutions positively impact people and the environment.
Since February 2018, we have been participants of the United Nations Global Compact
(“UNGC”), the world’s largest corporate sustainability initiative, to showcase our commitment to
integrate sustainability throughout our company and across our entire supply chain. Our commitment
aims to help customers, partners and other businesses increase their own efforts to build a more
sustainable future.
Our strategy and global efforts, through our sustainability programs and multi-year “Flex 20 by
2020 goals,” are aligned with the principles set forth in the UNGC, and the 2030 Sustainable
Development Goals (“SDGs”). While our global efforts contribute to most of the SDGs, we have
prioritized them and focus on decent work, quality education, clean energy and responsible
consumption and production.
We achieve social and environmental compliance through a robust integrated management
system that consolidates several management systems into one. Our Corporate Social and
Environmental Responsibility management system has several elements, including environmental,
health and safety compliance, labor and human rights and ethics. The Flex Social and Environmental
framework is based upon the principles, policies, and standards prescribed by the Responsible
Business Alliance (“RBA”), 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, United
Nations Guiding Principles on Business and Human Rights). Flex is a founding member of the RBA.
Social responsibility is also an area of increasing concern, 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
improvement in social, ethical, and environmental performance throughout all of our global operating
units, all in accordance with our Code of Business Conduct and Ethics (“CoBCE”). We also go beyond
compliance by offering a wide range of programs and initiatives to engage both our internal and
external stakeholders.
We are committed to providing decent work for Flex employees, respecting their dignity and
striving to advance human rights around the world. Our philosophy, strategies, and policies in human
rights, health and safety, diversity and inclusion, support the inclusion of all people in our working
environment. Some of the cornerstone specific goals through which we measure our performance
include increasing employee development, social and environmental management system audits,
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human rights policy training completion, RBA compliance for rest day requirements and decreasing
incident rates.
We work with nonprofits, community leaders and governments to promote inclusive and
sustainable economic growth, employment and decent work for all. We help protect the environment,
support resource conservation and provide disaster relief. We accomplish this through grants from the
Flex Foundation, corporate and employee donations and volunteerism. Our multi-year goals in this
area cover increasing volunteer hours and the percentage of sites with community activities as well as
implementing the worker empowerment training program and Flex Foundation community grants.
We take necessary measures to protect the environment, conserve energy and natural
resources, and prevent pollution by applying appropriate management practices and technology. We
take actions to protect the environment, including but not limited to strict compliance with material
requirements, reduction of greenhouse gas emissions, waste, water and energy consumption, and
circular economy implementation, among others. Our multi-year goals for environment cover
increasing our use of renewable energy, water recycling, waste diversion rate and number of powered
homes equivalents and decreasing water consumption, CO2 emissions, and cost of electricity to the
grid vs. fossil fuels.
Our corporate compliance program integrates our obligations and commitment to integrity into
our day-to-day business practices. We expect our employees and business partners to follow the
highest ethical standards. The CoBCE serves as the foundation of our Ethics and Compliance
program. We conduct regular internal audits, and we maintain metrics around compliance to
continuously benchmark and improve. Implementing in-person training on CoBCE for direct labor
employees and increasing CoBCE training for annual completion for indirect labor employees are our
integrity multi-year goals targeted for 2020.
We are committed to continuously monitoring and complying with social and environmental
requirements across the supply chain. We require our suppliers to have a management system in
place to ensure compliance and mitigate potential risks. We also have sustainability supply chain
programs in place like on-site sustainability training for suppliers, working hours improvement and
labor agent programs which help us to develop our supplier’s competencies for them to comply with
the applicable requirements. We measure our progress through two goals, namely increasing out
sustainability supplier training and supplier screening on social and environmental criteria.
All of these activities are the subject of our annual sustainability reporting, done in accordance
with the Global Reporting Initiative’s (“GRI”) standards, and further information can be found in our
annual sustainability executive and GRI reports, as well as the Flex 20 by 2020 bi-annual report
posted on our website.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (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 (“Conflict 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 U.S. Secretary of State to be associated with financing conflicts in
the Democratic Republic of the Congo or an adjoining country. We work 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.
In addition, we are a founding member and active participant in the RBA’s Responsible Minerals
Initiative (“RMI”). RMI promotes the goal of understanding and mitigating social and environmental
impacts of extraction and processing of raw materials in supply chains. As an active member of RMI,
we leverage direct and indirect partnerships and use international standards, e.g.. Organization for
Economic Co-operation and Development (“OECD”) Guidelines for Multinational Enterprises, and the
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United Nations (UN) Guiding Principles on Business and Human Rights, as our guides. We are
committed to responsibly sourcing minerals, in accordance with our Responsible Sourcing Policy, and
follow the RMI’s Conflict Minerals data reporting format.
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.
We are also required to comply with an increasing number of product environmental compliance
regulations focused upon the restriction of certain hazardous substances. The electronics industry is
subject to various regulations based on region or country. For example:
• 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”)
• 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
result in significant costs and/or penalties.
RoHS and other similar legislation ban or restrict 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.
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EMPLOYEES
Our policies, philosophy and strategies support the inclusion of all people in our working
environment. We’re committed to respecting the human rights of our employees and improving their
quality of life. We encourage our people to engage in lifelong learning and growth. And we give them
opportunities to perform to the best of their abilities.
As of March 31, 2019, our global workforce totaled approximately 200,000 employees including
our contractor workforce. 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, inventions, and works of authorship, we rely on trade secret
or copyright protection. We also maintain trademark rights (including registrations) for 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. We have implemented appropriate policies and
procedures (including both technological means and training programs for our employees) to identify
and protect our intellectual property, as well as that of our customers and suppliers. As of March 31,
2019 and 2018, 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 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 sometimes 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.
From time to time, we enter into intellectual property licenses (e.g., patent licenses and software
licenses) with third parties which obligate us to report covered behavior to the licensor and pay license
fees to the licensor for certain activities or products, or that enable our use of third-party technologies.
We may also decline to enter into licenses for intellectual property that we do not think is useful for or
used in our operations, or for which our customers or suppliers have licenses or have assumed
responsibility. Given the diverse and varied nature of our business and the location of our business
around the world, certain activities we perform, such as providing assembly services in China and
India, may fall outside the scope of those licenses or may not be subject to the applicable intellectual
property rights. Our licensors may disagree and claim royalties are owed for such activities. In
addition, the basis (e.g. base price) for any royalty amounts owed are audited by licensors and may
be challenged. Some of these disagreements may lead to claims and litigation that 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.
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.
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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 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:
• HRS, which is comprised of our health solutions business, including surgical equipment, drug
delivery, diagnostics, telemedicine, disposable devices, imaging and monitoring, patient mobility
and ophthalmology; and our automotive business, including vehicle electrification, connectivity,
autonomous, and smart technologies;
• IEI, which is comprised of energy including advanced metering infrastructure, energy storage,
smart lighting, smart solar energy; and industrial, including semiconductor and capital
equipment, office solutions, household industrial and lifestyle, industrial automation and kiosks;
• 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, and switching products for 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; and
• CTG, which includes our consumer-related businesses in IoT enabled devices, audio and
consumer power electronics, mobile devices; and various supply chain solutions for consumer,
computing and printing devices.
Factors affecting any of these industries in general or our customers in particular, could adversely
impact us. These factors include:
• rapid changes in technology, evolving industry standards, and requirements for continuous
improvement in products and services that result in short product life cycles;
• demand for our customers’ products may be seasonal;
• our customers may fail to successfully market their products, and our customers’ products may
fail to gain widespread commercial acceptance;
• our customers’ products may have supply chain issues;
• our customers may experience dramatic market share shifts in demand which may cause them
to lose market share or exit businesses; and
• 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
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manufacture and deliver for those customers, by causing a delay in the repayment of our expenditures
for inventory in preparation for customer orders and for an impairment loss for inventory, and by
lowering our asset utilization and overhead absorption resulting in lower gross margins and earnings.
Additionally, current and prospective customers continuously evaluate our capabilities against other
providers as well as against the merits of manufacturing products themselves. Our business would be
adversely affected if 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 times 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, and 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%, 41% and 43% of net sales in fiscal years 2019,
2018 and 2017, respectively. No customer accounted for more than 10% of net sales in fiscal year
2019, 2018 and 2017. 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
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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 any of our largest 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
component 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 component products, may adversely affect our margins and profitability.
Our components business, which include 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.
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 receivables 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 bankruptcy proceedings, are based on the facts currently
known to us; no preference claims have been asserted against the Company. SunEdison stated in
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schedules filed with the Bankruptcy Court that, within the 90 days preceding SunEdison’s bankruptcy
filing, the Company received approximately $98.6 million of inventory and cash transfers of $69.2 million,
which in aggregate represents the Company’s estimate of the maximum reasonably possible contingent
loss. On April 15, 2018, a subsidiary of the Company together with its subsidiaries and affiliates, entered
into a tolling agreement with the trustee of the SunEdison Litigation Trust to toll any applicable statute of
limitations or other time-related defense that might exist in regards to any potential claims that either
party might be able to assert against the other for a period that will end at the earlier to occur of:
(a) 60 days after a party provides written notice of termination; (b) six years from the effective date of
April 15, 2018; or (c) such other date as the parties may agree in writing. 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 supply chain issues, including 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, trade restrictions, 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. In addition, we may make investments in designing products
and not be able to design viable manufacturable products, in which cases we may not be able to
recover our investments. Even if we are successful in designing manufacturable products and our
customers accept our designs, if our customers 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 building and 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
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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 often agree to certain product price limitations and cost reduction targets in
connection with these services. Inflationary and other increases in the costs of the raw materials
and labor required to produce the products have occurred and may recur from time to time. Also, the
production ramps for these programs are typically significant and negatively impact our margin in
early stages as the manufacturing volumes are lower and result in inefficiencies and unabsorbed
manufacturing overhead costs. We may not be able to reduce costs, incorporate changes in costs
into the selling prices of our products, or increase operating efficiencies as we ramp production of our
products, which would adversely affect our margins and our results of operations.
We 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:
• fluctuations in the value of local currencies;
• labor unrest, difficulties in staffing and geographic labor shortages;
• longer payment cycles;
• cultural differences;
• increases in duties, tariffs, and taxation levied on our products including anti-dumping and
countervailing duties;
• trade restrictions including limitations on imports or exports of components or assembled
products, unilaterally or bilaterally;
• trade sanctions and related regulatory enforcement actions and other proceedings;
• potential trade wars;
• 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;
• imposition of restrictions on currency conversion or the transfer of funds;
• expropriation of private enterprises;
• ineffective legal protection of our intellectual property rights in certain countries;
• natural disasters;
• exposure to infectious disease and epidemics;
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• inability of international customers and suppliers to obtain financing resulting from tightening of
credit in international financial markets;
• political unrest; and
• a potential reversal of current favorable policies encouraging foreign investment or foreign trade
by our host countries.
The attractiveness of our services to customers and our ability to conduct business with certain
customers can be affected by changes in U.S. and other countries’ trade policies. In 2018, the U.S.
imposed tariffs on a large variety of products of Chinese origin. The U.S. government has also
indicated a readiness to further expand the scope of the tariffs on Chinese goods if negotiations are
not successful, and most recently, effective May 10, 2019, increased tariffs on $200 billion of Chinese
goods to 25%. Further, on May 15, 2019, President Trump issued an executive order designed to
secure the information and communications technology and services supply chain, which would
restrict the acquisition or use in the United States of information and communications technology or
services designed, developed, manufactured, or supplied by persons owned by, controlled by, or
subject to the jurisdiction or direction of foreign adversaries. The executive order is subject to
implementation by the Secretary of Commerce and applies to contracts entered into prior to the
effective date of the order. In addition, the U.S. Commerce Department has implemented additional
restrictions and may implement further restrictions that would affect conducting business with certain
Chinese companies. Depending upon their duration and implementation, as well as our ability to
mitigate their impact, these tariffs, the executive order and its implementation and other regulatory
actions could materially affect our business, including in the form of increased cost of goods sold,
decreased margins, increased pricing for customers, and reduced sales.
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, India and Mexico, governmental authorities exercise significant influence over many aspects of
the economy, and their actions could have a significant effect on us. We could be seriously harmed by
inadequate infrastructure, including lack of adequate power and water supplies, transportation, raw
materials and parts in countries in which we operate. In addition, we may encounter labor disruptions
and rising labor costs, in particular within the lower-cost regions in which we operate. Any increase in
labor costs that we are unable to recover in our pricing to our customers could adversely impact our
operating results.
Operations in foreign countries also present risks associated with currency exchange and
convertibility, inflation and repatriation of earnings. In some countries, economic and monetary conditions
and other factors could affect our ability to convert our cash distributions to U.S. dollars or other freely
convertible currencies, or to move funds from our accounts in these countries. Furthermore, the central
bank of any of these countries may have the authority to suspend, restrict or otherwise impose
conditions on foreign exchange transactions or to approve distributions to foreign investors.
The success of certain of our activities depends on our ability to protect our intellectual
property rights; claims of infringement or misuse of intellectual property and/or breach of
license agreement provisions 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 infringement or
misuse of intellectual property from third parties and/or breach of our agreements with third parties, as
well as claims arising from the allocation of intellectual property risk among us and our customers.
From time to time, we enter into intellectual property licenses (e.g., patent licenses and software
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licenses) with third parties which obligate us to report covered behavior to the licensor and pay license
fees to the licensor for certain activities or products, or that enable our use of third party technologies.
We may also decline to enter into licenses for intellectual property that we do not think is useful for or
used in our operations, or for which our customers or suppliers have licenses or have assumed
responsibility. Given the diverse and varied nature of our business and the location of our business
around the world, certain activities we perform, such as providing assembly services in China and
India, may fall outside the scope of those licenses or may not be subject to the applicable intellectual
property rights. Our licensors may disagree and claim royalties are owed for such activities. In
addition, the basis (e.g. base price) for any royalty amounts owed are audited by licensors and may
be challenged. Our customers are increasingly requiring us to indemnify them against the risk of
intellectual property-related claims and licensors are claiming that activities we perform are covered
by licenses to which we are a party. In March 2018, we received an inquiry from a licensor referencing
a patent license agreement, and requesting information relating royalties for products that we
assemble for a customer in China. If any of these inquiries result in a claim, the Company intends to
contest any such claim vigorously. If a claim is asserted and we are unsuccessful in its defense, a
material loss is reasonably possible. We cannot predict or estimate an amount or reasonable range of
outcomes with respect to the matter.
If any claims of infringement or misuse of intellectual property from third parties and/or breach of
our agreements with third parties, as well as claims arising from the allocation of intellectual property
risk among us and our customers, are brought against us or our customers, whether or not these
have merit, we could be required to expend significant resources in defense of such claims. In the
event of such a claim, we may be required to spend a significant amount of money to develop
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, in which cases we may be required to curtail certain of our
services and offerings. 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 and regulatory investigations and proceedings,
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 such matter, we could be required to pay substantial damages
and cease certain practices or activities. Regardless of the merits of the claims, litigation and other
proceedings 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.
On May 8, 2018, a putative class action was filed in the Northern District of California against the
Company and certain officers alleging violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, and Rule 10b-5, promulgated thereunder, alleging misstatements and/or
omissions in certain of the Company’s financial results, press releases and SEC filings made during
the putative class period of January 26, 2017 through April 26, 2018. On October 1, 2018, the Court
appointed lead plaintiff and lead plaintiff’s counsel in the case. On November 28, 2018, lead plaintiff
filed an amended complaint alleging misstatements and/or omissions in certain of the Company’s SEC
filings, press releases, earnings calls, and analyst and investor conferences and expanding the
putative class period through October 25, 2018. On April 3, 2019, the Court vacated its prior order
appointing lead plaintiff and lead plaintiff’s counsel and reopened the lead plaintiff appointment
process. Motions for appointment as lead plaintiff are due June 4, 2019. Defendants’ deadline to
move to dismiss is vacated until after the lead plaintiff appointment process is complete and an
operative complaint is designated. In addition, the Court has set a case management conference for
July 17, 2019. Any existing or future lawsuits could be time-consuming, result in significant expense
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and divert the attention and resources of our management and other key employees, as well as harm
our reputation, business, financial condition or results of operations.
On February 14, 2019, we submitted an initial notification of voluntary disclosure to the
U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) regarding possible
noncompliance with U.S. economic sanctions requirements among certain non-U.S. Flex-affiliated
operations. We have initiated an internal investigation regarding this matter. The matter is at a very
preliminary stage and we cannot predict the total costs to be incurred in response to any steps taken
by OFAC, the potential impact on our personnel or to what extent we could be subject to penalties,
which could be material. Nor can we predict how long it will take to complete our investigation and for
a disposition by OFAC.
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 fiscal years 2019, 2018 and 2017, we initiated targeted restructuring
activities focused on optimizing our portfolio, in particular customers and products in our CTG
business, optimizing our cost structure in lower growth areas and, more importantly, streamlining
certain corporate and segment functions as well as exited our NIKE operations in Mexico.
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.
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.
A breach of our IT or physical security systems, or violation of data privacy laws, may cause
us to incur significant legal and financial exposure.
We rely on our information systems to process, transmit and store electronic information (including
sensitive data such as confidential business information and personally identifiable data relating to
employees, customers, and other business partners), and to manage or support a variety of critical
business processes and activities. 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
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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, or 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. In addition, new data privacy laws and regulations, including the new European Union General
Data Protection Regulation (“GDPR”) effective May 2018, pose increasingly complex compliance
challenges, which may increase compliance costs, and any failure to comply with data privacy laws and
regulations could result in significant penalties. Additionally, California recently enacted legislation, the
California Consumer Privacy Act (“CCPA”), which will become effective January 1, 2020. The CCPA
will, among other requirements, require covered companies to provide new disclosures to California
consumers, and allow such consumers new abilities to opt-out of certain sales of personal information.
The effects of the CCPA may be significant, and may require us to modify our data processing
practices and policies and to incur substantial costs and expenses in an effort to comply.
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:
• 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;
• the integration of the acquired assets and facilities into our business may be time-consuming
and costly, including the incurrence of restructuring charges;
• we, rather than the divesting customer, bear the risk of excess capacity at the facility;
• we may not achieve anticipated cost reductions and efficiencies at the facility;
• we may be unable to meet the expectations of the customer as to volume, product quality,
timeliness and cost reductions;
• 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
• 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
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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. In addition, legislative changes may result from the Organization for
Economic Co-operation and Development’s Base Erosion and Profit Shifting Project. 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.
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 applied to us in fiscal year 2019 per Accounting Standard Update (“ASU”) 2014-09 “Revenue
from Contracts with Customers (Topic 606)”. 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. Refer to “Recently Adopted Accounting
Pronouncements” within note 2 of Item 8, Financial Statements and Supplementary Data.
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
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an acquisition could adversely affect our ability to borrow by resulting in more restrictive borrowing
terms. As a result of the foregoing, we also may not be able to complete acquisitions or strategic
customer transactions in the future to the same extent as in the past, or at all.
To integrate acquired businesses, we must implement our management information systems,
operating systems and internal controls, and assimilate and manage the personnel of the acquired
operations. The difficulties of this integration may be further complicated by geographic distances. The
integration of acquired businesses may not be successful and could result in disruption to other parts
of our business. In addition, the integration of acquired businesses may require that we incur
significant restructuring charges.
In addition, acquisitions involve numerous risks and challenges, including:
• diversion of management’s attention from the normal operation of our business;
• potential loss of key employees and customers of the acquired companies;
• difficulties managing and integrating operations in geographically dispersed locations;
• the potential for deficiencies in internal controls at acquired companies;
• increases in our expenses and working capital requirements, which reduce our return on
invested capital;
• lack of experience operating in the geographic market or industry sector of the acquired
business;
• cybersecurity and compliance related issues;
• initial dependence on unfamiliar supply chain or relatively small supply chain partners; and
• 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.
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.
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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.
Fluctuations in foreign currency exchange rates could increase our operating costs.
We have manufacturing operations and industrial parks that are located in various part of the
world, including Asia, Eastern Europe, Mexico and Brazil. 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
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could adversely affect our financial results and cash flows by increasing both our manufacturing costs
and the costs of our local supply base.
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.
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
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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 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.
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. During the last half of fiscal year 2019, we reassessed our strategy with respect to our
investment portfolio. We focused on streamlining our investment portfolio and disposed of some of our
investments and recognized certain charges. If any of the funds or companies in which we invest fail,
we could lose all or part of our investment. From time-to-time we have identified observable price
changes, or impairments in investments, and we have written down certain investments fair values
and recognized a loss.
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, 2019, our total debt was approximately $3.1 billion. This level of indebtedness
could limit our flexibility as a result of debt service requirements and restrictive covenants, and may
limit our ability to access additional capital or execute our business strategy.
Changes in our credit rating may make it more expensive for us to raise additional capital
or to borrow additional funds. 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
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“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.
In addition, the U. K.’s Financial Conduct Authority, which regulates LIBOR, announced that it
intends to phase out LIBOR by the end of 2021. The U.S. Federal Reserve has begun publishing a
Secured Overnight Funding Rate (“SOFR”), which is intended to replace U.S. dollar LIBOR. Plans for
alternative reference rates for other currencies have also been announced. At this time, we cannot
predict how markets will respond to these proposed alternative rates or the effect of any changes
to LIBOR or the discontinuation of LIBOR. If LIBOR is no longer available or if our lenders have
increased costs due to changes in LIBOR, we may experience potential increases in interest rates on
our variable rate debt, which could adversely impact our interest expense, results of operations and
cash flows.
Weak global economic conditions, geopolitical uncertainty 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 and geopolitical uncertainty 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, which is scheduled to take place on October 31, 2019, following its referendum
on EU membership and the actions that the U.S. has taken or may 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
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
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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.
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 note 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
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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.
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”) that may have originated in the Democratic Republic of the Congo
or adjoining countries. In our most recent report on Form SD, we reported 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 as necessary to comply with the SEC’s
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 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.
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, 2019. We do not identify or allocate assets by operating
segment, as they are interchangeable in nature and used by multiple operating segments.
The composition of the square footage of our facilities, by region, is as follows:
Leased Owned Total Non-
(Manufacturing) (Manufacturing) (Manufacturing) manufacturing Total
(in million square feet)
Americas . . . . . . . . . . . . . . . . . . . 3.4 5.4 8.8 8.9 17.7
Asia . . . . . . . . . . . . . . . . . . . . . . . 7.8 5.9 13.7 7.6 21.3
Europe . . . . . . . . . . . . . . . . . . . . . 1.9 2.6 4.5 5.1 9.6
Total . . . . . . . . . . . . . . . . . . . . . . 13.1 13.9 27.0 21.6 48.6
Our facilities include large industrial parks, ranging in size from approximately 100,000 to
5.7 million square feet in Brazil, China, India, and Mexico. We also have regional manufacturing
operations, generally ranging in size from under 100,000 to approximately 2.7 million square feet in
Austria, Brazil, Canada, China, Denmark, 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.
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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
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
PART II
MARKET AND SHAREHOLDER INFORMATION
Our ordinary shares are quoted on the Nasdaq Global Select Market under the symbol “FLEX.”
As of May 13, 2019 there were 3,053 holders of record of our ordinary shares. This does not
include persons whose stock is in nominee or “street name” accounts through brokers.
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 2020.
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 Inc., and Sanmina 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, 2014 and reflects the
annual return through March 31, 2019, 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.
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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Flex, the S&P 500 Index, and Peer Group
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100
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2014
2015
2016
2017
2018
2019
Period Ending
Flex Ltd.
S&P 500 Index
Peer Group
3/14
3/15
3/16
3/17
3/18
3/19
Flex Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Peer Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.00 137.23 130.52 181.82 176.73 108.23
100.00 112.73 114.74 134.45 153.26 167.81
100.00 123.37 111.90 169.45 144.64 136.56
Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved.
Copyright 1980-2019
Index Data: Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved.
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, 2019 through March 31, 2019.
Period(2)
Total Number
of Shares
Average Price
Purchased(1) Paid per Share
Purchased as Part of
Publicly Announced
Plans or Programs
of Shares that May Yet
Be Purchased Under the
Plans or Programs
Total Number of Shares Approximate Dollar Value
January 1 - January 25, 2019 . .
January 26 - March 1, 2019 . . .
March 2 - March 31, 2019 . . . .
1,058,740 $
2,245,925
3,270,091
8.03
10.24
10.24
Total . . . . . . . . . . . . . . . . . . . . .
6,574,756
1,058,740 $
2,245,925
3,270,091
6,574,756
381,021,766
358,017,848
324,522,119
(1) During the period from January 1, 2019 through March 31, 2019 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 16, 2018, our Board of Directors authorized repurchases 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, 2019,
shares in the aggregate amount of $324,522,119 were available to be repurchased under the
current plan.
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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, and 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%.
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
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of Operations” and Item 8, “Financial Statements and Supplementary Data.” On April 1, 2018, we
adopted the new revenue standard and as a result we recognized the cumulative effect of initially
applying the new revenue standard as an adjustment to the opening balance of retained earnings, as
further described in note 2 to the consolidated financial statements included under Item 8. The
comparative information has not been restated and continues to be reported under the accounting
standards in effect at the time.
Fiscal Year Ended March 31,
2019 2018 2017 2016 2015
(In millions, except per share amounts)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$26,211 $25,441 $23,863 $24,419 $26,148
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,594 23,778 22,303 22,811 24,603
Restructuring charges(3) . . . . . . . . . . . . . . . . . . 99 67 39 — —
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,518 1,596 1,521 1,608 1,545
Selling, general and administrative expenses . . 953 1,019 937 955 844
Intangible amortization . . . . . . . . . . . . . . . . . . . . 74 79 81 66 32
Restructuring charges(3) . . . . . . . . . . . . . . . . . . 14 24 11 — —
Interest and other, net . . . . . . . . . . . . . . . . . . . . 183 123 100 84 51
Other charges (income), net(1) . . . . . . . . . . . . . 110 (170) 21 48 (53)
Income before income taxes . . . . . . . . . . . . . . 182 521 371 455 671
Provision for income taxes . . . . . . . . . . . . . . . . . 89 92 51 11 70
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 93 $ 429 $ 320 $ 444 $ 601
Diluted earnings per share:
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.18 $ 0.80 $ 0.59 $ 0.79 $ 1.02
As of March 31,
2019 2018 2017 2016 2015
(In millions)
CONSOLIDATED BALANCE SHEET DATA:
Working capital(2) . . . . . . . . . . . . . . . . . . . . . . .
$ 1,506 $ 1,902 $ 1,883 $ 1,743 $ 1,986
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,499 13,716 12,593 12,385 11,653
Total long-term debt, excluding current portion . 2,422 2,898 2,891 2,709 2,026
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . 2,972 3,019 2,678 2,606 2,396
(1) For fiscal years 2019, 2018 and 2017, refer to note 15 to the consolidated financial statements in
Item 8, “Financial Statements and Supplementary Data” for further discussion.
During fiscal year 2016, the Company incurred non-cash losses 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 a $21.8 million
loss from the impairment of a non-core investment offset by immaterial currency translation gains.
During fiscal year 2015, an amendment to a customer contract to reimburse a customer for
certain performance provisions was executed which included the derecognition of a $55 million
contractual obligation previously 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 million in connection with the disposition of a manufacturing facility in
Western Europe.
(2) Working capital is defined as current assets, less current liabilities.
(3) The Company initiated restructuring plans during fiscal years 2019, 2018 and 2017, refer to
note 14 to the consolidated financial statements in Item 8, “Financial Statements and
Supplementary Data” for further discussion.
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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-Scale® services—innovative design,
engineering, manufacturing, and supply chain services and solutions—from conceptual sketch to full-
scale production. We design, build, deliver and manage complete packaged consumer and enterprise
products, from medical devices and connected automotive systems to sustainable lighting and cloud
data center infrastructures, for companies of all sizes in various industries and end-markets, through
our activities in the following segments:
• High Reliability Solutions (“HRS”), which is comprised of our health solutions business,
including surgical equipment, drug delivery, diagnostics, telemedicine, disposable devices,
imaging and monitoring, patient mobility and ophthalmology; and our automotive business,
including vehicle electrification, connectivity, autonomous, and smart technologies;
• Industrial and Emerging Industries (“IEI”), which is comprised of energy including advanced
metering infrastructure, energy storage, smart lighting, smart solar energy; and industrial,
including semiconductor and capital equipment, office solutions, household industrial and
lifestyle, industrial automation and kiosks;
• 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, and switching products for 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; and
• Consumer Technologies Group (“CTG”), which includes our consumer-related businesses in
IoT enabled devices, audio and consumer power electronics, mobile devices; and various
supply chain solutions for consumer, computing and printing devices.
These segments represent components of the Company for which separate financial information
is available that is utilized on a regular basis by the Chief Operating Decision Maker (“CODM”). Our
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.
During the fourth quarter of fiscal year 2019, we announced that Revathi Advaithi was appointed
CEO of the Company effective February 11, 2019. As part of her new role and responsibilities, the
CEO along with certain direct reports that oversee operations of the business, are now considered the
CODM. There is a possibility that the CODM will request changes in the information that is regularly
reviewed in determining how to allocate resources and in assessing performance, which could
eventually result in changes to our reportable segments.
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Refer to note 19 to the consolidated financial statements in Item 8, “Financial Statements and
Supplementary Data” for additional information on our operating segments.
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 have the capability 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 the markets we serve and earn a return on our invested capital above the weighted average cost of
that capital.
During the past several years, we have evolved our long-term portfolio towards a mix of
businesses which possess longer product life cycles and higher segment operating margins such as
reflected in our IEI and HRS businesses. We have expanded our design and engineering relationships
through our product innovation centers and global design centers.
During fiscal year 2019, we took action to revise our go-to-market strategy within our CTG
business, where we are actively managing under-performing accounts and are focused on partnering
with well-funded, leading multi-national brands that control multiple categories of products and have
regional demand requirements. We expect this transition to continue in fiscal year 2020 which will
continue to put downward pressure on the segment operating margins until fully transitioned. During
the fiscal year 2019, we also completed the wind down of our NIKE operations in Mexico and
concurrently streamlined our third-party investments. In addition, we developed a measured and
sustainable operating plan for India and as of March 31, 2019, we have completed the majority of our
regional build-out. We continue to invest in the capital expenditures necessary to support underlying
higher margin, long-term programs in our IEI and HRS businesses.
We believe that our continued business transformation is strategically positioning 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.
We are one of the world’s largest providers of global supply chain solutions, with revenues of
$26.2 billion in fiscal year 2019. We have established an extensive network of manufacturing facilities in
the world’s major consumer and enterprise markets (Asia, the Americas, and Europe) to serve the
growing outsourcing needs of both multinational and regional customers. We design, build, ship, and
service consumer and enterprise products for our customers through a network of over 100 facilities in
approximately 35 countries across four continents. As of March 31, 2019, our total manufacturing
capacity was approximately 27 million square feet. In fiscal year 2019, our net sales in Asia, the
Americas and Europe represented approximately 44%, 38% and 18%, respectively, of our total net
sales, based on the location of the manufacturing site. On April 1, 2018, we adopted a new revenue
standard and as a result we recognized a cumulative effect of adoption as an adjustment to the opening
balance of retained earnings, as further described in note 2 to the consolidated financial statements
included under Item 8. The comparative information has not been restated and continues to be reported
under the accounting standards in effect at the time. The following tables set forth the relative
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percentages and dollar amounts of net sales and net property and equipment, by country, based on the
location of our manufacturing sites:
Fiscal Year Ended March 31,
Net sales: 2019 2018 2017
(In millions)
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,649 25% $ 7,450 29% $ 7,214 30%
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,539 17% 4,362 17% 4,076 17%
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,106 12% 2,860 11% 2,560 11%
Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,181 8% 2,578 10% 1,908 8%
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,996 8% 2,005 8% 2,267 10%
India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,805 7% 609 2% 511 2%
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,935 23% 5,577 23% 5,327 22%
$26,211
$25,441 $23,863
Amounts may not sum due to rounding.
Fiscal Year Ended March 31,
Property and equipment, net: 2019 2018
(In millions)
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 537 23% $ 587 26%
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523 22% 492 22%
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 15% 305 14%
India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 9% 78 3%
Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 4% 150 7%
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 6% 153 7%
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454 21% 475 21%
$2,336
$2,240
Amounts may not sum due to rounding.
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 manufacturing campuses in low-cost geographic areas provide us with a
competitive advantage and strong differentiation in the market for designing, manufacturing and
servicing consumer and enterprise 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:
• changes in the macro-economic environment and related changes in consumer demand;
• the mix of the manufacturing services we are providing, the number, size, and complexity of
new manufacturing programs, the degree to which we utilize our manufacturing capacity,
seasonal demand, shortages of components and other factors;
• 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;
• our ability to achieve commercially viable production yields and to manufacture components in
commercial quantities to the performance specifications demanded by our customers;
• the effects on our business due to certain customers’ products having short product life cycles;
• our customers’ ability to cancel or delay orders or change production quantities;
• our customers’ decisions to choose internal manufacturing instead of outsourcing for their
product requirements;
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• our exposure to financially troubled customers;
• integration of acquired businesses and facilities;
• increased labor costs due to adverse labor conditions in the markets we operate;
• the impacts on our business due to component shortages or other supply chain related
constraints;
• changes in tax legislation; and
• changes in trade regulations and treaties.
The attractiveness of our services to customers and our ability to conduct business with certain
customers can be affected by changes in U.S. and other countries’ trade policies. In 2018, the U.S.
imposed tariffs on a large variety of products of Chinese origin. The U.S. government has also
indicated a readiness to further expand the scope of the tariffs on Chinese goods if negotiations are
not successful, and most recently, effective May 10, 2019, increased tariffs on $200 billion of Chinese
goods to 25%. Further, on May 15, 2019, President Trump issued an executive order designed to
secure the information and communications technology and services supply chain, which would
restrict the acquisition or use in the United States of information and communications technology or
services designed, developed, manufactured, or supplied by persons owned by, controlled by, or
subject to the jurisdiction or direction of foreign adversaries. The executive order is subject to
implementation by the Secretary of Commerce and applies to contracts entered into prior to the
effective date of the order. In addition, the U.S. Commerce Department has implemented additional
restrictions and may implement further restrictions that would affect conducting business with certain
Chinese companies. Depending upon their duration and implementation, as well as our ability to
mitigate their impact, these tariffs, the executive order and its implementation and other regulatory
actions could materially affect our business, including in the form of increased cost of goods sold,
decreased margins, increased pricing for customers, and reduced sales.
We also are subject to other risks as outlined in Item 1A, “Risk Factors”.
Net sales for fiscal year 2019 increased 3% or $0.8 billion to $26.2 billion from the prior year. The
increase was primarily due to a $0.6 billion increase in our CEC segment and a $0.2 billion increase
in our IEI segment. Our fiscal year 2019 gross profit totaled $1.5 billion, representing a decrease of
$78 million, or 5%, from the prior year, which is primarily driven by an incremental increase of
$32 million of restructuring charges, coupled with approximately $47 million of additional charges
related to distressed customers that were included in cost of sales in fiscal year 2019. These
incremental charges were part of our targeted actions to optimize our business portfolio, most notably
within CTG, as we eliminated certain non-core activities and repositioned ourselves to align with
go-forward strategies. The decline in gross margin is also due to the mix of revenues included in
our portfolio most notably a decline in revenues from our automotive products and services within
HRS which carry higher gross profit margins. Increased revenues from our ramping businesses in
India further impacted the decline in gross profit margin from the prior year as the new programs
were pressured below our average margins during the ramp. Our net income totaled $93 million,
representing a decrease of $335 million, or 78%, compared to fiscal year 2018. The decrease in net
income during fiscal year 2019 is primarily due to the same factors explained above in addition to the
recognition of $193 million of charges primarily for the impairment of certain of our investments,
including our investment in Elementum SCM (Cayman) Ltd (“Elementum”), offset by an $87 million
gain from the deconsolidation of Bright Machines (formerly known as AutoLab AI). We also
recognized a $152 million gain from the deconsolidation of Elementum in fiscal year 2018, which
contributed further to the decrease in net income from fiscal year 2018 to 2019. Refer to note 2 to
the consolidated financial statements in Item 8, “Financial Statements and Supplementary Data” for
details of the investment impairments and the deconsolidation of Bright Machines, respectively.
Cash used in operations decreased by approximately $0.9 billion to $3.0 billion for fiscal year
2019 compared with $3.9 billion for fiscal year 2018 primarily due to a lower level of cash collections
on deferred purchase price being reclassed to investing activities offset by elevated levels of
investment required to support the business growth and operating through a more constrained
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inventory marketplace in fiscal year 2019. Our net working capital, defined as accounts receivable, net
of allowance for doubtful accounts, adding back the reduction in accounts receivable resulting from
non-cash accounts receivable sales, plus inventories, less accounts payable, was redefined upon the
adoption of ASC 606 (as further described in note 2 to the consolidated financial statements in Item 8,
“Financial Statements and Supplementary Data”), to include contract assets on a going forward basis.
Our net working capital as a percentage of annualized sales for fiscal year 2019 increased by 0.3% to
6.7% from the prior year. Upon adoption of Accounting Standard Update (ASU) 2016-15 during the
first quarter of fiscal year 2019, cash collections on deferred purchase price from our ABS programs
that were previously classified as operating cash inflows are now classified as cash flows from
investing activities. Refer to note 2 to the consolidated financial statements in Item 8, “Financial
Statements and Supplementary Data” for further description on the ASU.
As a result, we redefined our free cash flow as cash from operating activities, plus cash
collections of deferred purchase price, less net purchases of property and equipment in order to
present free cash flows on a consistent basis for investor transparency. We also excluded the
reduction to operating cash flows related to certain vendor programs from the free cash flow
calculation. Free cash flow was $3 million for fiscal year 2019 compared to $236 million for fiscal
year 2018. The decrease in free cash flow is primarily due to increased capital expenditures in fiscal
year 2019 as we built out our regional capacity in India and continued to expand our capacity and
capability in support of our expanding IEI and HRS businesses, as well as increased inventory levels
due to a more constrained inventory marketplace and higher business levels. 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 provided by investing activities
decreased by approximately $458 million to $3.3 billion for fiscal year 2019, compared with $3.7 billion
for fiscal year 2018, primarily due lower cash collection on deferred purchase price and higher capital
expenditures as described above. Cash used in financing activities totaled $30 million during fiscal
year 2019, which decreased by approximately $158 million from $188 million in the prior year,
primarily due to higher net proceeds from bank borrowings and long-term debt in fiscal year 2019.
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
In determining the appropriate amount of revenue to recognize, we 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) we satisfy a performance obligation.
Further, we assess whether control of the product or services promised under the contract is
transferred to the customer at a point in time (PIT) or over time (OT). We are first required to evaluate
whether our contracts meet the criteria for OT recognition. We have determined that for a portion of
our contracts, we are manufacturing products for which there is no alternative use (due to the unique
nature of the customer-specific product and IP restrictions) and we have an enforceable right to
payment including a reasonable profit for work-in-progress inventory with respect to these contracts.
As a result, revenue is recognized under these contracts OT based on the cost-to-cost method as it
best depicts the transfer of control to the customer measured based on the ratio of costs incurred to
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date as compared to the total estimated costs at completion of the performance obligation. For all
other contracts that do not meet these criteria, we recognize revenue when we have transferred
control of the related manufactured products which generally occurs upon delivery and passage of title
to the customer. Refer to notes 2 and 3 to the consolidated financial statements in Item 8, “Financial
Statements and Supplementary Data” for further details.
Customer Contracts and Related Obligations
Certain of our customer agreements include potential price adjustments which may result in
variable consideration. These price adjustments include, but are not limited to, sharing of cost
savings, committed price reductions, material margins earned over the period that are contractually
required to be paid to the customers, rebates, refunds tied to performance metrics such as on-time
delivery, and other periodic pricing resets that may be refundable to customers. We estimate the
variable consideration related to these price adjustments as part of the total transaction price and
recognize revenue in accordance with the pattern applicable to the performance obligation, subject
to a constraint. We constrain the amount of revenues recognized for these contractual provisions
based on our best estimate of the amount which will not result in a significant reversal of revenue in
a future period. We determine the amounts to be recognized based on the amount of potential refunds
required by the contract, historical experience and other surrounding facts and circumstances. Refer
to note 2 to the consolidated financial statements in Item 8, “Financial Statements and Supplementary
Data” for further details.
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 customer credit issues, we also review
other customer related exposures, including but not limited to inventory and related contractual
obligations.
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 restructuring
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.
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 net realizable value.
Our industry is characterized by rapid technological change, short-term customer commitments and
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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 regards to
inventory procured to fulfill customer demand.
Valuation of Private Company Investments
We assess our investments for impairment whenever events or changes in circumstances
indicate that the assets may be impaired. The factors we consider in our evaluation of potential
impairment of our investments, include, but are not limited to a significant deterioration in the earnings
performance or business prospects of the investee, or factors that raise significant concerns about the
investee’s ability to continue as a going concern, such as negative cash flows from operation or
working capital deficiencies. The carrying value of certain of our investments are individually material,
thus there is the potential for material charges in future periods if we determine that those investments
are impaired.
During the last half of fiscal year 2019, the Company reassessed its strategy with respect to its
investment portfolio. As a result of the change in the Company’s strategy and due to market valuation
changes, the Company recognized an aggregate net charge related to investment impairments and
dispositions of approximately $193 million for the fiscal year ended March 31, 2019, which is recorded
in other charges (income), net on the consolidated statement of operations. The aggregate charge
was primarily driven by write-downs of the Company’s investment positions in a non-core cost method
investment and Elementum as well as other investment impairments that were individually immaterial.
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.
These approaches use significant unobservable inputs, or Level 3 inputs, as defined by the fair
value hierarchy and require us to make various judgmental assumptions about sales, operating
margins, growth rates and discount rates which consider our budgets, business plans and economic
projections, and are believed to reflect market participant views. Some of the inherent estimates
and assumptions used in determining fair value of the reporting units are outside the control of
management, including interest rates, cost of capital, tax rates, market EBITDA comparables and
credit ratings. While we believe we have made reasonable estimates and assumptions to calculate the
fair value of the reporting units, it is possible a material change could occur. If our actual results are
not consistent with our estimates and assumptions used to calculate fair value, it could result in
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material impairments of our goodwill. During fiscal year 2019, we adopted ASU 2017-04 “Simplifying
the Test for Goodwill Impairment”, which simplifies the subsequent measurement of goodwill by
eliminating step 2 from the goodwill impairment test. The ASU did not have a material impact to Flex’s
financial position during the period (Refer to note 2 to the consolidated financial statements in Item 8,
“Financial Statements and Supplementary Data” for further detail).
We performed our goodwill impairment assessment on January 1, 2019 and determined that no
impairment existed as of the date of the impairment test because the fair value of each one of our
reporting units exceeded its respective carrying value. As of the date of the impairment test, all
reporting units’ fair values were 25% or more, over their respective carrying values, with the exception
of the CTG reporting unit which was 22% in excess of its carrying value. The estimated future results
for CTG used in the impairment analysis reflect our revised strategy including the wind down of our
NIKE operations in Mexico, further restrictions on capital expenditures related to our expansion into
India and our focus on partnering with well-funded, leading multi-national brands that control multiple
categories of products and have regional demand requirements. If we are not successful in driving
improved results in our CTG segment it is reasonably possible that material goodwill impairment
charges could be recorded in future periods.
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.
Refer to note 12 to the consolidated financial statements in Item 8, “Financial Statements and
Supplementary Data” for further discussion of our contingent liabilities.
Income Taxes
Our deferred income tax assets represent temporary differences between the carrying amount
and the tax basis of existing assets and liabilities, which will result in deductible amounts in future
years, including net operating loss carry forwards. Based on estimates, the carrying value of our net
deferred tax assets assumes that it is more likely than not that we will be able to generate sufficient
future taxable income in certain tax jurisdictions to realize these deferred income tax assets. Our
judgments regarding future profitability may change due to future market conditions, changes in U.S.
or international tax laws and other factors. If these estimates and related assumptions change in the
future, we may be required to increase or decrease our valuation allowance against deferred tax
assets previously recognized, resulting in additional or lesser income tax expense.
We are regularly subject to tax return audits and examinations by various taxing jurisdictions and
around the world, and there can be no assurance that the final determination of any tax examinations
will not be materially different than that which is reflected in our income tax provisions and accruals.
Should additional taxes be assessed as a result of a current or future examination, there could be a
material adverse effect on our tax position, operating results, financial position and cash flows.
Refer to note 13 to the consolidated financial statements in Item 8, “Financial Statements and
Supplementary Data” for further discussion of our tax position.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain statements of operations data
expressed as a percentage of net sales. The financial information and the discussion below should be
read in conjunction with the consolidated financial statements and notes thereto included in Item 8,
“Financial Statements and Supplementary Data.” The data below, and discussion that follows,
represents our results from operations. On April 1, 2018, we adopted the new revenue standard and
as a result we recognized the cumulative effect of initially applying the new revenue standard as an
adjustment to the opening balance of retained earnings, as further described in note 2 to the
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consolidated financial statements included under Item 8. The comparative information has not been
restated and continues to be reported under the accounting standards in effect at the time.
Fiscal Year Ended March 31,
2019 2018 2017
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0%
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93.8 93.5 93.5
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4 0.3 0.2
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8 6.2 6.3
Selling, general and administrative expenses . . . . . . . . . . . . 3.6 4.0 3.9
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3 0.3 0.3
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 0.1 —
Interest and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.7 0.5 0.4
Other charges (income), net . . . . . . . . . . . . . . . . . . . . . . . . . 0.4 (0.7) 0.1
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . 0.7 2.0 1.6
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3 0.4 0.2
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4% 1.6% 1.4%
Net sales
Net sales during fiscal year 2019 totaled $26.2 billion, representing an increase of $0.8 billion, or 3%,
from $25.4 billion during fiscal year 2018. The overall increase in sales was driven by increases in three
of our segments offset by a decline in sales in our CTG segment. Net sales was higher across all our
regions during fiscal year 2019, with increases of $0.5 billion in Europe, $0.3 billion in Asia, and to a
lesser extent, $12 million in the Americas.
Net sales during fiscal year 2018 totaled $25.4 billion, representing an increase of $1.5 billion, or
7%, from $23.9 billion during fiscal year 2017. During fiscal year 2018, the increase in net sales was
primarily driven by an increase of $1.3 billion in the Americas and to a lesser extent, $0.2 billion in
Asia with Europe remaining relatively consistent from the prior year.
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: 2019 2018 2017
(In millions)
High Reliability Solutions . . . . . . . . . . . . . . . . .
$ 4,829 18% $ 4,770 19% $ 4,149 17%
Industrial & Emerging Industries . . . . . . . . . . . 6,183 24% 5,972 24% 4,968 21%
Communications & Enterprise Compute . . . . . 8,336 32% 7,729 30% 8,384 35%
Consumer Technologies Group . . . . . . . . . . . . 6,863 26% 6,970 27% 6,362 27%
$26,211
$25,441 $23,863
Net sales during fiscal year 2019 increased $0.6 billion or 8% in our CEC segment driven by
momentum from our cloud and data center business as well as the expansion of network
infrastructure programs to support 4G and 5G technology, offset by declines in our data networking
business due to weakness with some legacy product lines. Our IEI segment increased $0.2 billion or
4%, which was mainly driven by new programs and customer launches within our industrial, home
and lifestyle businesses, offset by declines in our capital equipment and energy businesses. Our HRS
segment increased $59 million or 1% from higher sales in our health solutions business as we
benefited from prior year investments in design, engineering and automation that have strengthened
and improved our capabilities and competitive positioning that more than offset year over year
declines from our automotive customers primarily in Asia. These segment increases were partially
offset by a decrease of $107 million or 1.5% in our CTG segment, primarily within the legacy
consumer sectors of the segment and as a result of actively repositioning the portfolio of customers
and rationalizing underperforming customers and eliminating certain product categories.
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Net sales during fiscal year 2018 increased $1.0 billion or 20% in our IEI segment, which was
mainly driven by our industrial, home and lifestyle businesses in addition to growth in our solar energy
business. Our CTG segment increased $0.6 billion or 10% largely attributable to stronger sales in our
connected living and mobile devices businesses, offset by a decrease in gaming. Our HRS segment
increased $0.6 billion or 15% from higher sales in our automotive business. These increases were
partially offset by a decrease of $0.7 billion or 8% in our CEC segment, largely attributable to lower
sales within our telecom and networking businesses, offset by increased sales in our cloud and data
center business.
Our ten largest customers during fiscal years 2019, 2018 and 2017 accounted for approximately
43%, 41% and 43% of net sales, respectively. We have made substantial efforts to diversify of our
portfolio which allows us to operate at scale in many different industries, and, as a result, no customer
accounted for greater than 10% of net sales in fiscal year 2019, 2018 or 2017.
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 or
consolidation of manufacturing facilities including specific restructuring activities from time to time. The
flexible design of our manufacturing processes allows us to manufacture a broad range of products in
our facilities and better utilize our manufacturing capacity across our diverse geographic footprint and
service customers from all segments. 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 decreased $0.1 billion to $1.5 billion from $1.6 billion from fiscal year 2018 to fiscal
year 2019. Gross margin decreased 40 basis points, to 5.8% of net sales in fiscal year 2019, from
6.2% of net sales in fiscal year 2018. The decrease is primarily due to an additional $32 million, or
10 basis points, of restructuring charges coupled with approximately $47 million of additional charges
related to distressed customers incurred during fiscal year 2019 versus fiscal year 2018. As noted
above, during the year we completed the wind down of our NIKE Mexico operations and incurred a
total of $66 million of charges primarily for non-cash asset impairments in the second and third
quarters of fiscal year 2019. Additional gross profit and gross margin declines were due to revenue
reductions in some of our higher margin businesses, such as automotive and semi-cap equipment
and further due to the Multek China divestiture. Also negatively pressuring the gross profit margin was
the significant revenues from ramping new programs in India which had pressured margins below our
average margins during the ramp in fiscal year 2019.
Gross profit during fiscal year 2018 increased $75 million to $1.6 billion from $1.5 billion during
fiscal year 2017, primarily as a result of the increase in revenue offset by $67 million, or 30 basis
points, of restructuring charges incurred during fiscal year 2018. Gross margin decreased 10 basis
points, to 6.2% of net sales in fiscal year 2018, from 6.3% of net sales in fiscal year 2017, mainly
attributable to the same factors previously described, coupled with elevated levels of investments in
ramping new operations for our strategic footwear customer.
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, customer related asset impairments, restructuring charges, the new revenue standard
adoption impact, contingencies and other, interest and other, net and other charges (income), net. A
portion of depreciation is allocated to the respective segment together with other general corporate
research and development and administrative expenses.
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The following table sets forth segment income and margins. Historical information has been
recast to reflect realignment of customers and/or products between segments:
Fiscal Year Ended March 31,
2019 2018 2017
(In millions)
Segment income & margin:
High Reliability Solutions . . . . . . . . . . . . . .
$ 381 8.0% $ 334 8.1%
Industrial & Emerging Industries . . . . . . . . . 269 4.4% 235 3.9% 180 3.6%
Communications & Enterprise Compute . . 215 2.6% 186 2.4% 229 2.7%
Consumer Technologies Group . . . . . . . . . 121 1.8% 112 1.6% 180 2.8%
Corporate and Other . . . . . . . . . . . . . . . . . . (104)
(128)
(108)
$ 371 7.7%
Total segment income . . . . . . . . . . . . . . . 872 3.3% 786 3.1% 815 3.4%
Reconciling items:
Intangible amortization . . . . . . . . . . . . . . . . 74
Stock-based compensation . . . . . . . . . . . . 76
Customer related asset impairments(1) . . . 87
Restructuring charges (Note 14) . . . . . . . . 113
New revenue standard adoption impact
(Note 2 & Note 3) . . . . . . . . . . . . . . . . . . 9
Contingencies and other(2) . . . . . . . . . . . . 35
Interest and other, net . . . . . . . . . . . . . . . . . 183
Other charges (income), net (Note 15) . . . . 110
79
85
6
91
81
82
93
49
—
52
123
(170)
—
18
100
21
Income before income taxes . . . . . . . . . .
$ 182
$ 521 $ 371
Amounts may not sum due to rounding.
(1) Customer related asset impairments for fiscal year 2019, relate to provision for doubtful accounts
receivable, inventory and impairment of other assets for certain customers experiencing significant
financial difficulties and/or the Company is disengaging from.
During fiscal year 2017, prices for solar panel modules declined significantly. We determined that
certain solar panel inventory on hand at the end of the fiscal year 2017 was not fully recoverable
and recorded a charge of $60 million to reduce the carrying costs to market in fiscal year 2017.
We also recognized a $16 million impairment charge for solar module equipment and $17 million
primarily related to negative margin sales and other associated direct costs. The total charge of
$93 million is included in cost of sales for fiscal year 2017 but is excluded from segment results
above.
(2) Contingencies and other during fiscal year 2019, primarily consists of costs incurred relating to the
independent investigation undertaken by the Audit Committee of the Company’s Board of
Directors which was completed in June 2018. In addition, Contingencies and other also includes
certain charges of the China based Multek operations that was divested in the second quarter of
fiscal year 2019.
During fiscal year 2018, we incurred charges in connection with certain legal matters, for loss
contingencies where it believed that losses were probable and estimable. Additionally, we incurred
various other charges predominately related to damages incurred from a typhoon that impacted a
China facility as well as certain assets impairments during fiscal year 2018.
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.
HRS segment margin decreased 30 basis point to 7.7% for fiscal year 2019, from 8.0% during
fiscal year 2018, primarily due to reduced revenues from our automotive products and services, which
carry higher gross margins partially offset by greater contribution from our growing health solutions
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business. HRS segment margin decreased 10 basis points to 8.0% for fiscal year 2018, from 8.1%
during fiscal year 2017. The slight decrease reflects investments in expanding the segment’s design
and engineering capabilities, coupled with ramping up new customers and programs.
IEI segment margin increased 50 basis points to 4.4% for fiscal year 2019, from 3.9% during
fiscal year 2018, as a result of improved overhead absorption benefits from the increased revenues
and greater levels of design led programs which have higher gross margins, offset by reduced
demand in capital equipment and energy. IEI segment margin increased 30 basis points to 3.9% for
fiscal year 2018, from 3.6% during fiscal year 2017. This is primarily driven by strong revenue
expansion led by several new customer programs and improving overall demand across its diverse
market that has provided to overhead absorption benefits.
CEC segment margin increased 20 basis points to 2.6% for fiscal year 2019, from 2.4% during
fiscal year 2018. The increase was driven by operational efficiencies and improved absorption of
overhead as a result of the 8% increase in revenues. CEC segment margin decreased 30 basis points
to 2.4% for fiscal year 2018, from 2.7% during fiscal year 2017. The decrease was driven by lower
revenues which negatively impacted profitability with under-absorbed overhead and higher investment
costs.
CTG segment margin increased 20 basis points to 1.8% for fiscal year 2019, from 1.6% during
fiscal year 2018, as a result of lower losses from our NIKE operations in Mexico, which we exited in
the third quarter of fiscal year 2019, partially offset by under-performance of certain accounts. CTG
segment margin decreased 120 basis points to 1.6% for fiscal year 2018, from 2.8% during fiscal year
2017, primarily driven by negatively impacted profits due to a lower contribution, and continued losses
from our NIKE operations in Mexico.
Restructuring charges
During fiscal year 2019, we took targeted actions to optimize our portfolio, most notably within
CTG. We recognized restructuring charges of approximately $113 million during the fiscal year ended
March 31, 2019, of which $73.2 million were non-cash charges primarily for asset impairments. A
significant component of our charges were associated with the wind down of our NIKE operations in
Mexico in the third quarter of fiscal year 2019 where we recognized charges of $66 million primarily
for non-cash asset impairments. In addition, we executed targeted head-count reductions at existing
operating and design sites and corporate functions and exited certain immaterial businesses. Of these
total charges, approximately $99 million was recognized as a component of cost of sales during the
fiscal year ended March 31, 2019.
During fiscal year 2018, we initiated targeted restructuring activities, focused on optimizing our
cost structure in lower growth areas and, more importantly, streamlining certain corporate and
segment functions. The objective of the plan is to make Flex a faster, more responsive and agile
company, better positioned to react to marketplace opportunities. We recognized $79 million of pre-tax
cash charges, predominantly related to employee severance costs, and $12 million of pre-tax non-
cash charges for asset impairment and other exit charges. We classified $67 million of these charges
as a component of cost of sales and $24 million as a component of selling, general and administrative
expenses during fiscal year 2018.
During fiscal year 2017, we initiated a restructuring plan to accelerate our ability to support more
Sketch-to-Scale® 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 million of pre-tax restructuring charges predominantly for employee
termination costs. We classified $39 million of these charges as a component of cost of sales and
$10 million as a component of selling, general and administrative expenses.
Refer to note 14 to the consolidated financial statements in Item 8, “Financial Statements and
Supplementary Data” for further discussion of our restructuring activities.
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Selling, general and administrative expenses
Selling, general and administrative expenses (“SG&A”) totaled $953 million or 3.6% of net sales,
during fiscal year 2019, compared to $1.0 billion, or 4.0% of net sales, during fiscal year 2018,
decreasing by $66 million or 7%, due to strong cost discipline focused on driving further productivity
improvements and a refined cost structure benefiting from prior restructuring initiatives.
SG&A totaled $1.0 billion or 4.0% of net sales, during fiscal year 2018, compared to $937 million,
or 3.9% of net sales, during fiscal year 2017, increasing by $82 million or 9%. This increase in SG&A
was due to incremental costs associated with our continued expansion of our design and engineering
resources and innovation system but also, due to the recognition of certain contingencies that are
probable and estimable of payout. We also incurred incremental costs from our acquisitions in fiscal
year 2018.
Intangible amortization
Amortization of intangible assets in fiscal year 2019 decreased by $5 million to $74 million from
$79 million in fiscal year 2018, primarily as a result of certain intangible assets being fully amortized
during fiscal year 2019.
Amortization of intangible assets in fiscal year 2018 decreased by $2 million to $79 million from
$81 million in fiscal year 2017, primarily as a result of certain intangible assets being fully amortized
during fiscal year 2018.
Other charges (income), net
During the last half of fiscal year 2019, we reassessed our strategy with respect to our entire
investment portfolio. As a result, we recognized an aggregate net charge related to investment
impairments and dispositions of approximately $193 million for the year ended March 31, 2019. The
aggregate charge was primarily driven by write-downs of our investment positions in a non-core cost
method investment and Elementum that were recognized in the third and fourth quarters of fiscal
2019, respectively. We also incurred other investment impairments that were individually immaterial as
a result of our strategy shift and due to market valuation changes. Offsetting these charges was an
$87 million non-cash gain from the deconsolidation of Bright Machines (formally known as AutoLab
AI). Refer to note 2 to the consolidated financial statements in Item 8, “Financial Statements and
Supplementary Data” for details on the investment impairments and the deconsolidation of Bright
Machines.
During fiscal year 2018, we recognized $152 million of gain from the deconsolidation of Elementum,
and $39 million of gain from the sale of Wink. We also recorded $22 million related to the impairment of
certain non-core investments during fiscal year 2018. No other components of other charges and
income, net incurred during fiscal year 2018 were material.
The fiscal year ended March 31, 2017 includes a $7 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.
Interest and other, net
Interest and other, net was $183 million during fiscal year 2019, compared to $123 million during
fiscal year 2018, increasing $60 million due to a $23 million increase of interest expense primarily
from higher weighted average interest rates and a higher average borrowing level, as well as a
$21 million increase in interest expense from our accounts receivable sales program, coupled with
a $14 million decrease in foreign exchange gains as compared to the prior year.
Interest and other, net was $123 million during fiscal year 2018, compared to $100 million
during fiscal year 2017. The increase in interest and other, net of $23 million was primarily due to a
$15 million increase of interest expense from higher weighted average interest rates and a higher
borrowing level.
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Income taxes
We work to ensure that we accrue and pay the appropriate amount of income taxes according to
the laws and regulations of each jurisdiction in which we operate. 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
48.7%, 17.7% and 13.8% for the fiscal years 2019, 2018 and 2017, 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,
2019 2018 2017
Income taxes based on domestic statutory rates . . . . . . . . . 17.0% 17.0% 17.0%
Effect of tax rate differential . . . . . . . . . . . . . . . . . . . . . . . . . . (74.1) (46.9) (23.0)
Change in liability for uncertain tax positions . . . . . . . . . . . . (8.4) 4.3 0.2
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . 105.4 57.1 21.2
Recognition of prior year taxes recoverable . . . . . . . . . . . . . 3.0 (10.3) —
Expiration of tax attributes . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 — —
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 (3.5) (1.6)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 48.7% 17.7% 13.8%
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,
Costa Rica, India, Netherlands and Israel of $24 million, $22 million and $16 million in fiscal years
2019, 2018 and 2017, respectively. Additionally, our effective tax rate is impacted by changes in our
liabilities for uncertain tax positions of ($15) million, $22 million, and $1 million and changes in our
valuation allowances on deferred tax assets of $192 million, $279 million and $79 million in fiscal
years 2019, 2018 and 2017, 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 2019, we released valuation allowance of $3 million
related to our operations in Poland as this amount was 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 this subsidiary. Various other valuation allowance positions were also
reduced due to varying factors such as recognition of uncertain tax positions impacting deferred tax
assets, one-time income recognition in loss entities, and foreign exchange impacts on deferred tax
balances. Lastly, these valuation allowance reductions and eliminations were offset by current period
valuation allowance additions due to increased deferred tax assets as a result of current period losses
in legal entities with existing full valuation allowance positions.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2019, we had cash and cash equivalents of $1.7 billion and bank and other
borrowings of $3.1 billion. We have a $1.75 billion revolving credit facility that is due to mature in
June 2022, under which we had no borrowings outstanding as of March 31, 2019. We have also
entered into two credit facilities in India during fiscal year 2019, (i) a $200 million term loan facility
entered in July 2018, under which there were $79 million in borrowings outstanding as of the end of
fiscal year 2019, and (ii) a $100 million uncommitted credit import advance facility in India, under
which there were $91 million in advances outstanding as of March 31, 2019, which we anticipate
repaying in fiscal year 2020. Refer to note 7 to the consolidated financial statement in Item 8,
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“Financial Statements and Supplementary Data” for additional details. As of March 31, 2019, we were
in compliance with the covenants under all of our credit facilities and indentures. In April 2019, we
entered into an additional $300 million term loan facility as further explained below.
Our cash balances are held in numerous locations throughout the world. As of March 31, 2019,
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 $1.6 billion as of March 31,
2019). Repatriation could result in an additional income tax payment; however, our intent is to
permanently reinvest these funds outside of Singapore and our current plans do not demonstrate a
need to repatriate them to fund our operations in jurisdictions outside of where they are held. Where
local restrictions prevent an efficient intercompany transfer of funds, our intent is that cash balances
would remain outside of Singapore and we would meet our liquidity needs through ongoing cash
flows, external borrowings, or both.
Fiscal Year 2019
Cash used in operating activities was $3.0 billion during fiscal year 2019. As further discussed
below, cash collections on the deferred purchase price from our ABS sales program of $3.6 billion are
now included in cash from investing activities instead of cash from operating activities in accordance
with new accounting guidance. The total cash used in operating activities resulted primarily from
$93 million of net income for the period plus $804 million of non-cash charges such as depreciation,
amortization, restructuring and impairment charges, provision for doubtful accounts, and stock-based
compensation, net of a gain of $87 million from the deconsolidation of Bright Machines which are
included in the determination of net income. Depreciation expense was $433 million and relatively
consistent with prior years. These additions were more than offset by a net change in our operating
assets and liabilities of $3.9 billion. In accordance with the new accounting guidance adopted in fiscal
2019 (and further described in note 2 to the consolidated financial statements in Item 8 “Financial
Statements and Supplementary Data”), cash collections on deferred purchase price from our ABS
programs are now classified as cash flows from investing activities and no longer included in cash
receipts related to accounts receivable. As a result, while accounts receivable only increased by
approximately $95 million from fiscal year 2018 to fiscal year 2019, the impact to operating cash flows
is an outflow of $3.6 billion further described below. Year over year increases in inventory and contract
assets also added to the net change in our operating assets and liabilities reflected on our cash flow
from operations.
We believe net working capital (“NWC”), and net working capital as a percentage of annualized
sales are key metrics that measure our liquidity. NWC was previously calculated as current quarter
accounts receivable, net of allowance for doubtful accounts, adding back the reduction in accounts
receivable resulting from non-cash accounts receivable sales, plus inventories, less accounts payable.
As part of the adoption of ASC 606, we expanded NWC, to include contract assets. We also included
certain other current liabilities related to vendor financing programs, which are immaterial for the fiscal
year, in the NWC calculation. NWC increased by $32 million to $1.7 billion as of March 31, 2019, from
$1.6 billion as of March 31, 2018. This increase is primarily driven by (i) an increase of $216 million in
contract assets upon adoption of ASC 606, (ii) a $58 million decrease in accounts receivable adding
back reductions from non-cash accounts receivable sales, and (iii) a $77 million decrease in our
inventory levels from March 31, 2018, offset by an approximately $25 million increase in accounts
payable. Our net working capital as a percentage of annualized net sales as of March 31, 2019
increased slightly to 6.7% as compared to 6.4% of annualized net sales as of March 31, 2018.
Cash provided by investing activities totaled $3.3 billion during fiscal year 2019. This was
primarily driven by the impact of our adoption of ASU 2016-15 during the current fiscal year referred
to above, which requires us to classify cash collections on deferred purchase price from our ABS
programs that were previously classified as operating cash inflows as cash flows from investing
activities. Refer to note 2 to the consolidated financial statements in Item 8, “Financial Statements and
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Supplementary Data”, for further description of the ASU. In addition, we received $267 million of
proceeds, net of cash held, in connection with the divestitures of our China-based Multek operations
as further described in note 17 to the consolidated financial statements in Item 8, “Financial
Statements and Supplementary Data”. We also invested $631 million of net capital expenditures for
property and equipment to expand capabilities and capacity in support of our expanding IEI and HRS
businesses as well as building out capacity in India.
Cash used in financing activities was $30 million during fiscal year 2019. This was primarily the
result of repurchases of ordinary shares in the amount of $189 million, offset by $170 million received
from the drawdown of India Facilities as further described in note 7 to the consolidated financial
statements in Item 8, “Financial Statements and Supplementary Data”.
Fiscal Year 2018
Cash provided by operating activities was $0.8 billion during fiscal year 2018. This resulted
primarily from $429 million of net income for the period plus $478 million of non-cash charges such
as depreciation, amortization and stock-based compensation, net of a gain from the deconsolidation
of Elementum that are included in the determination of net income. Depreciation expense was
$434 million of those non-cash charges. These were partially offset by a net change in our operating
assets and liabilities of $153 million, driven primarily by a $354 million increase in inventories, an
$88 million increase in other current and noncurrent assets, and a $347 million increase in accounts
receivable, including the change in sales of accounts receivable, offset by a $623 million increase in
accounts payable.
Cash used in investing activities totaled $0.9 billion during fiscal year 2018. This resulted
primarily from $214 million paid for the acquisition of AGM Automotive (“AGM”) for our HRS segment,
net of cash acquired, and $55 million paid for a power module business for our CEC segment, net
of cash acquired. Further, we invested $517 million of net capital expenditures for property and
equipment to expand capabilities and capacity in support of our automotive, medical, footwear and IEI
businesses. In addition, other investing activities includes $73 million of cash derecognized as of the
date of the Elementum deconsolidation, and $46 million of payments for non-core investments, net of
cash received.
Cash used in financing activities was $188 million during fiscal year 2018. This was primarily
the result of repurchases of ordinary shares in the amount of $180 million, and the repayment of
$55 million of debt, partially offset by $65 million received from third party investors in fiscal year 2018
in exchange for an additional noncontrolling equity interest in Elementum prior to the deconsolidation
described above.
Fiscal Year 2017
Cash provided by operating activities was $1.1 billion during fiscal year 2017. This resulted
primarily from $320 million of net income for the period plus $674 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
was $432 million of those non-cash charges. We generated $157 million in cash as a result of
changes in our operating assets and liabilities, driven primarily by a $268 million increase in accounts
payable, offset by a $184 million increase in accounts receivable, including the change in sales of
accounts receivable.
Cash used in investing activities was $0.7 billion during fiscal year 2017. This resulted primarily
from $490 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 million
for the acquisition of four businesses, net of cash acquired, including $162 million, net of $18 million
of cash acquired related to the acquisition of manufacturing facilities from Bose. Further, $60 million
was paid for a non-controlling interest in a joint venture with RIB Software AG as our partner.
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Offsetting this were proceeds from various other investing activities of $64 million, most notably the
receipt of $38 million for the sale of two non-strategic businesses.
Cash used in financing activities was $242 million during fiscal year 2017. This was primarily the
result of repurchases of ordinary shares in the amount $350 million, and $31 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. These cash outflows were
partially offset by $171 million of net proceeds from bank borrowings and long-term debt, of which
$130 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 million is the amount of proceeds
from the €100 million term loan, discussed further in note 7 to the consolidated financial statements in
Item 8, “Financial Statements and Supplementary Data”.
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. Upon adoption
of ASU 2016-15 effective for fiscal year 2019, our free cash flow was redefined as cash from
operations, plus cash collections of deferred purchase price, less net purchases of property and
equipment to present cash flows on a consistent basis for investor transparency. We also exclude the
reduction to operating cash flows related to certain vendor programs that is required for US GAAP
presentation. Our free cash flow was $3 million, $236 million and $660 million for fiscal years 2019,
2018 and 2017, respectively. Free cash flow is not a measure of liquidity under generally accepted
accounting principles in the United States, and may not be defined and calculated by other companies
in the same manner. Free cash flow should not be considered in isolation or as an alternative to net
cash provided by operating activities. Free cash flows reconcile to the most directly comparable GAAP
financial measure of cash flows from operations as follows:
Fiscal Year Ended March 31,
2019 2018 2017
(In millions)
Net cash used in operating activities . . . . . . . . . . . . . . . . .
$(3,866) $(3,822)
Cash collection of deferred purchase price and other . . . . 3,605 4,620 4,971
Purchases of property and equipment . . . . . . . . . . . . . . . . (725) (562) (525)
Proceeds from the disposition of property and equipment . . 94 44 36
$(2,971)
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3
$ 236 $ 660
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 maintain global paying services agreements with several financial institutions. Under these
agreements, the financial institutions act as our paying agents with respect to accounts payable due
to our suppliers who elect to participate in the program. The agreements allow our suppliers to sell
their receivables to one of the participating financial institutions at the discretion of both parties on
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terms that are negotiated between the supplier and the respective financial institution. Our obligations
to our suppliers, including the amounts due and scheduled payment dates, are not impacted by our
suppliers’ decisions to sell their receivables under this program. At March 31, 2019 and 2018, the
cumulative payments due to suppliers participating to the programs amounted to approximately
$0.5 billion and $0.3 billion, respectively. Pursuant to their agreement with one of the financial
institutions, certain suppliers may elect to be paid early at their discretion. We are not always notified
when our suppliers sell receivables under these programs. The available capacity under these
programs can vary based on the number of investors and/or financial institutions participating in these
programs at any point in time.
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 2019, 2018 and 2017, we received approximately $6.8 billion, $8.0 billion
and $7.6 billion, respectively from transfers of receivables under our ABS programs, and $2.7 billion,
$1.5 billion and $1.3 billion, respectively from other sales of receivables. As of March 31, 2019,
and 2018, the outstanding balance on receivables sold for cash was $1.3 billion, for both years,
respectively, 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 June 2017, we entered into a five-year credit facility consisting of a
$1.75 billion revolving credit facility and a $503 million term loan, which is due to mature on June 30,
2022 (the “2022 Credit Facility”). This 2022 Credit Facility replaced our $2.1 billion credit facility, which
was due to mature in March 2019. The outstanding principal of the term loan portion of the 2022
Credit Facility is repayable in quarterly installments of approximately $6 million from September 30,
2017 through June 30, 2020 and approximately $13 million from September 30, 2020 through
March 31, 2022 with the remainder due upon maturity. As of March 31, 2019, one of our $500 million
Notes due February 2020 has been included in current liabilities on the consolidated balance sheet.
In April 2019, we entered into a JPY 33.5 billion term loan agreement (approximately $300 million)
due April 2024, which was then swapped to U.S. dollars. The term loan will be used to fund general
operations and refinance certain other outstanding debt. Borrowings under this term loan bear interest,
at LIBOR plus the applicable margin of 1.21%
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 purchase
mandate approved by our shareholders at the date of the most recent Annual General Meeting which
was held on August 16, 2018. During fiscal year 2019, we paid $189 million to repurchase shares
(under the current and prior repurchase plans) at an average price of $10.66 per share. As of
March 31, 2019, shares in the aggregate amount of $325 million were available to be repurchased
under the current plan.
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CONTRACTUAL OBLIGATIONS AND COMMITMENTS
Bank borrowings and long-term debt are as follows:
As of March 31,
2019 2018
(In millions)
4.625% Notes due February 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 500 $ 500
Term Loan, including current portion, due in installments through
November 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672 688
Term Loan, including current portion, due in installments through
June 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459 484
5.000% Notes due February 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . 500 500
4.750% Notes due June 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 597 596
India Facilities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 —
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 187
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) (14)
3,055 2,941
Current portion, net of debt issuance costs . . . . . . . . . . . . . . . . . . . (633) (43)
Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,422 $2,898
(1) India Facilities as of March 31, 2019 include an approximately $91.4 million drawdown of short-
term bank borrowings under a facility entered in February 2019 and a $78.8 million drawdown
from the $200 million term loan facility entered in July 2018.
Refer to the discussion in note 7 to the consolidated financial statements in Item 8, “Financial
Statements and Supplementary Data” 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 leases are as follows:
Less Than Greater Than
Total 1 Year 1 - 3 Years 4 - 5 Years 5 Years
(In millions)
Contractual Obligations:
Purchase obligations . . . . . . . . . . . . . .
Long-term debt and capital lease
$3,299 $ —
$3,299
$ — $ —
obligations:
Long-term debt . . . . . . . . . . . . . . . .
Capital leases . . . . . . . . . . . . . . . . .
Interest on long-term debt obligations . .
Operating leases, net of subleases . .
Restructuring costs . . . . . . . . . . . . . . .
Total contractual obligations . . . . . .
3,065 634 913 918 600
45 19 19 7 —
512 140 253 83 36
683 155 207 149 172
32 32 — — —
$1,157 $808
$4,279 $1,392
$7,636
We have excluded $252 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
in Item 8, “Financial Statements and Supplementary Data” 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.
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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, 2019
and 2018, the fair value of our deferred purchase price receivable was approximately $293 million and
$445 million, respectively. As of March 31, 2019 and 2018, the outstanding balance on receivables
sold for cash was $1.3 billion for both periods, respectively, 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 in Item 8,
“Financial Statements and Supplementary Data”.
RECENT ACCOUNTING PRONOUNCEMENTS
Refer to note 2 to the consolidated financial statements in Item 8, “Financial Statements and
Supplementary Data” 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 highly liquid
investment portfolio, 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 highly liquid 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 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, 2019, the outstanding amount in the highly liquid investment
portfolio was $0.5 billion, the largest components of which were Brazilian real, China renminbi and
Indian rupee denominated money market accounts with an average return of 2.18%. 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 $1.5 billion as of March 31, 2019.
Variable rate debt obligations consisted of borrowings under our term loans. Interest on these
obligations is discussed in note 7 to the consolidated financial statements in Item 8, “Financial
Statements and Supplementary Data”.
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, 2019, the approximate average fair value of our debt outstanding under our
term loan facilities that mature in November 2021 and June 2022, and Notes due February 2020,
February 2023 and June 2025 was 99.9% 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
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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 derivative contracts, including 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 derivative 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 foreign currency
derivative contracts generally offset the losses and gains on the assets, liabilities and transactions
hedged. The fair value of currency derivative contracts is reported on the balance sheet. The
aggregate notional amount of outstanding contracts as of March 31, 2019 amounted to $7.8 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 the Brazilian real, British pound, China renminbi, Euro, Hungarian forint, Indian
rupee, Malaysian ringgit, Mexican peso, Singapore dollar, and U.S. dollar.
Based on our overall currency rate exposures as of March 31, 2019, including the derivative
financial instruments intended to hedge the nonfunctional currency-denominated monetary assets,
liabilities and cash flows, and other factors a 10% appreciation or depreciation of the U.S. dollar from
its cross-functional rates would not be expected, in the aggregate, to have a material effect on our
financial position, results of operations and cash flows in the near-term.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Flex Ltd.,
Singapore
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Flex Ltd. and subsidiaries
(the “Company”) as of March 31, 2019 and 2018, 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, 2019 and the related notes. In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of Flex Ltd. and subsidiaries as
of March 31, 2019 and 2018, and the results of their operations and their cash flows for each of the
three years in the period ended March 31, 2019, 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,
2019, 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 20,
2019, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Change in Accounting Principles
As discussed in Note 2 to the financial statements, the Company changed its method of accounting
for revenue from contracts with customers in fiscal year 2019 due to the adoption of Accounting
Standards Update No. 2014-09, Revenue from Contracts with Customers, using the modified
retrospective approach. As also discussed in Note 2 to the financial statements, the Company changed its
method of accounting for cash receipts on the deferred purchase price from asset-backed securitization
programs in fiscal year 2019 due to the adoption of ASU 2016-15, Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments using the retrospective approach.
Basis of Opinion
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 are a
public accounting firm registered with the PCAOB and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedure
included examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our audits also included 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.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
May 20, 2019
We have served as the Company’s auditors since 2002.
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FLEX LTD.
CONSOLIDATED BALANCE SHEETS
As of March 31,
2019 2018
(In thousands, except share
amounts)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,696,625 $ 1,472,424
Accounts receivable, net of allowance for doubtful accounts
(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,612,961 2,517,695
Contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216,202 —
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,722,854 3,799,829
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 854,790 1,380,466
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,103,432 9,170,414
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,336,213 2,239,506
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,073,055 1,121,170
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330,995 424,433
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 655,672 760,332
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13,499,367
$13,715,855
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank borrowings and current portion of long-term debt . . . . . . . . . . . $ 632,611 $ 43,011
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,147,236 5,122,303
Accrued payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391,591 383,332
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,426,075 1,719,418
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,597,513 7,268,064
Long-term debt, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . 2,421,904 2,897,631
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507,590 531,587
Commitments and contingencies (Note 12)
Shareholders’ equity
Flex Ltd. Shareholders’ equity
Ordinary shares, no par value; 566,787,620 and 578,317,848
issued, and 516,548,265 and 528,078,493 outstanding as of
March 31, 2019 and 2018, respectively . . . . . . . . . . . . . . . . . . . . . . 6,523,750 6,636,747
Treasury stock, at cost; 50,239,355 shares as of March 31,
2019 and 2018, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (388,215) (388,215)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,012,012) (3,144,114)
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . (151,163) (85,845)
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,972,360 3,018,573
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . .
$13,499,367
$13,715,855
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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,
2019 2018 2017
(In thousands, except per share amounts)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$23,862,934
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,593,731 23,778,404 22,303,231
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . 99,005 66,845 38,758
$25,441,131
$26,210,511
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,517,775 1,595,882 1,520,945
Selling, general and administrative expenses . . . . . 953,077 1,019,399 937,339
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . 74,396 78,640 81,396
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . 14,308 23,846 10,637
Interest and other, net . . . . . . . . . . . . . . . . . . . . . . . 183,454 122,823 99,532
Other charges (income), net . . . . . . . . . . . . . . . . . . 110,414 (169,719) 21,193
Income before income taxes . . . . . . . . . . . . . . . . 182,126 520,893 370,848
Provision for income taxes . . . . . . . . . . . . . . . . . . . 88,727 92,359 51,284
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 93,399
$ 428,534
$ 319,564
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.18
$ 0.81
$ 0.59
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.18
$ 0.80
$ 0.59
Weighted-average shares used in computing
per share amounts:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526,519 529,782 540,503
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 530,070 536,598 546,220
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,
2019 2018 2017
(In thousands)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
$428,534
$ 93,399
$319,564
Foreign currency translation adjustments, net of zero tax . . (59,508) 45,618 (1,324)
Unrealized gain (loss) on derivative instruments and
other, net of zero tax . . . . . . . . . . . . . . . . . . . . . . . . . . (5,810) (3,320) 9,096
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 28,081
$470,832
$327,336
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
Derivative Currency
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, 2016 . . .
Repurchase of
Flex Ltd. ordinary
shares at cost . . . . . .
Exercise of stock options . .
Issuance of Flex Ltd.
vested shares under
restricted share
unit awards . . . . . . . .
Issuance of subsidiary
shares . . . . . . . . . . . .
Net income . . . . . . . . . . .
Stock-based compensation,
net of tax . . . . . . . . . .
Total other comprehensive
income . . . . . . . . . . . .
BALANCE AT
544,823
$6,598,999 $(3,892,212) $(41,522) $ (94,393)
$(135,915) $2,570,872
$ 34,658 $2,605,530
(25,125)
2,283
(345,782)
12,438
— — — — (345,782) — (345,782)
— — — — 12,438 610 13,048
9,313
—
—
—
—
—
—
—
— — — — — — —
— — — — — 9,306 9,306
319,564 — — — 319,564 (8,492) 311,072
79,669
— — — — 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
Repurchase of
Flex Ltd. ordinary
shares at cost . . . . . .
Exercise of stock options . .
Issuance of Flex Ltd.
vested shares under
restricted share
unit awards . . . . . . . .
Issuance of subsidiary
shares, net . . . . . . . . .
Net income . . . . . . . . . . .
Stock-based compensation,
net of tax . . . . . . . . . .
Deconsolidation of
subsidiary entity . . . .
Total other comprehensive
income . . . . . . . . . . . .
BALANCE AT
(10,829)
667
(180,050)
2,774
— — — — (180,050) — (180,050)
— — — — 2,774 256 3,030
6,946
—
—
—
—
—
—
—
—
— — — — — — —
— — — — — 63,363 63,363
428,534 — — — 428,534 (7,573) 420,961
80,484
— — — — 80,484 849 81,333
—
—
— — — — — (90,638) (90,638)
— (3,320) 45,618 42,298 42,298 — 42,298
MARCH 31, 2018 . . .
528,078
6,248,532
(3,144,114) (35,746) (50,099) (85,845) 3,018,573 — 3,018,573
Repurchase of
Flex Ltd. ordinary
shares at cost . . . . . .
Exercise of stock options . .
Issuance of Flex Ltd.
vested shares under
restricted share
unit awards . . . . . . . .
Net income . . . . . . . . . . .
Stock-based compensation,
net of tax . . . . . . . . . .
Cumulative effect on opening
equity of adopting
accounting standards
and other . . . . . . . . . .
Total other comprehensive
loss . . . . . . . . . . . . . .
BALANCE AT
(17,726)
244
(188,978)
245
— — — — (188,978) — (188,978)
— — — — 245 — 245
5,952
—
—
—
— — — — — — —
93,399 — — — 93,399 — 93,399
—
76,032
— — — — 76,032 — 76,032
—
—
(296)
38,703 — — — 38,407 — 38,407
—
— (5,810) (59,508) (65,318) (65,318) — (65,318)
MARCH 31, 2019 . . .
516,548
$6,135,535 $(3,012,012) $(41,556) $(109,607)
$(151,163) $2,972,360
$ — $2,972,360
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,
2019 2018 2017
(In thousands)
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 93,399 $ 428,534 $ 319,564
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433,413 434,432 432,238
Amortization and other impairment charges . . . . . . . . 331,539 120,932 177,422
Provision for doubtful accounts (Note 2) . . . . . . . . . . . 41,977 8,225 (184)
Non-cash other loss (income) . . . . . . . . . . . . . . . . . . . 12,655 (58,223) 6,858
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . 76,032 81,346 77,330
Gain from deconsolidation of subsidiary entity (Note 2) . (86,614) (151,574) —
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . (13,856) 43,187 (20,041)
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . (3,628,129) (4,916,843) (5,136,256)
Contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,877 — —
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (360,152) (354,319) 85,047
Other current and noncurrent assets . . . . . . . . . . (7,541) (138,184) 84,949
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . 68,070 623,148 268,686
Other current and noncurrent liabilities . . . . . . . . . (147,694) 13,004 (117,721)
Net cash used in operating activities . . . . . . . . . (2,971,024) (3,866,335) (3,822,108)
Cash flows from investing activities:
Purchases of property and equipment . . . . . . . . . . . . (725,606) (561,997) (525,111)
Proceeds from the disposition of property and equipment . . 94,219 44,780 35,606
Acquisitions of businesses, net of cash acquired . . . . (12,796) (268,377) (189,084)
Divestitures of businesses, net of cash held in divested
businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267,147 (2,949) 36,731
Cash collections of deferred purchase price . . . . . . . . 3,585,901 4,619,933 4,972,017
Other investing activities, net . . . . . . . . . . . . . . . . . . . . 44,032 (120,442) (60,329)
Net cash provided by investing activities . . . . . . . . . 3,252,897 3,710,948 4,269,830
Cash flows from financing activities:
Proceeds from bank borrowings and long-term debt . 3,199,460 1,366,000 312,741
Repayments of bank borrowings and long-term debt . (3,059,828) (1,420,977) (141,730)
Payments for repurchases of ordinary shares . . . . . . . (188,979) (180,050) (349,532)
Proceeds from exercise of stock options . . . . . . . . . . . 245 2,774 12,438
Other financing activities, net . . . . . . . . . . . . . . . . . . . 19,398 44,468 (76,024)
Net cash used in financing activities . . . . . . . . . . . . (29,704) (187,785) (242,107)
Effect of exchange rates on cash . . . . . . . . . . . . . . . . . . (27,968) (15,079) 17,490
Net change in cash and cash equivalents . . . . . . . . . . 224,201 (358,251) 223,105
Cash and cash equivalents, beginning of year . . . . . . 1,472,424 1,830,675 1,607,570
Cash and cash equivalents, end of year . . . . . . . . . . . $ 1,696,625 $ 1,472,424 $ 1,830,675
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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. (“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-Scale® services—
innovative design, engineering, manufacturing, and supply chain services and solutions—from
conceptual sketch to full-scale production. The Company designs, builds, ships and manages complete
packaged consumer and enterprise products, from medical devices and connected automotive
systems to sustainable lighting and cloud and data center solutions for companies of all sizes in
various industries and end-markets, through its activities in the following segments:
• High Reliability Solutions (“HRS”), which is comprised of our health solutions business,
including surgical equipment, drug delivery, diagnostics, telemedicine, disposable devices,
imaging and monitoring, patient mobility and ophthalmology; and our automotive business,
including vehicle electrification, connectivity, autonomous, and smart technologies;
• Industrial and Emerging Industries (“IEI”), which is comprised of energy including advanced
metering infrastructure, energy storage, smart lighting, smart solar energy; and industrial,
including semiconductor and capital equipment, office solutions, household industrial and
lifestyle, industrial automation and kiosks;
• 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, and switching products for 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; and
• Consumer Technologies Group (“CTG”), which includes our consumer-related businesses in
IoT enabled devices, audio and consumer power electronics, mobile devices; and various
supply chain solutions for consumer, computing and printing devices.
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 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, 2019, the noncontrolling interest was not material as a
result of the deconsolidation of one of the Company’s subsidiaries. In prior years, the noncontrolling
interest was 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 not
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
material to the Company’s results of operations for all periods presented, and is classified as a
component of interest and other, net, in the consolidated statements of operations.
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; valuation of investments in privately held companies; asset
impairments; fair values of financial instruments including highly liquid investments, notes receivable
and derivative instruments; restructuring charges; contingencies; warranty provisions; accruals for
potential price adjustments arising from customer contracts; fair values of assets obtained and
liabilities assumed in business combinations and the fair values of stock options and restricted share
unit 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 all periods presented, and have been
classified as a component of interest and other, net in the consolidated statements of operations.
Revenue Recognition
In determining the appropriate amount of revenue to recognize, Flex applies 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 Company satisfies a performance
obligation. Further, the Company assesses whether control of the product or services promised under
the contract is transferred to the customer at a point in time (PIT) or over time (OT). Flex is first
required to evaluate whether its contracts meet the criteria for OT recognition. The Company has
determined that for a portion of its contracts, it is manufacturing products for which there is no
alternative use (due to the unique nature of the customer-specific product and IP restrictions) and Flex
has an enforceable right to payment including a reasonable profit for work-in-progress inventory with
respect to these contracts. As a result, revenue is recognized under these contracts OT based on the
cost-to-cost method as it best depicts the transfer of control to the customer measured based on the
ratio of costs incurred to date as compared to the total estimated costs at completion of the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
performance obligation. For all other contracts that do not meet these criteria, the Company recognizes
revenue when it has transferred control of the related manufactured products which generally occurs
upon delivery and passage of title to the customer. Refer to note 3 “Revenue Recognition” for further
details.
On April 1, 2018, the Company adopted the Accounting Standard Codification 606 (“ASC 606”)
using the modified retrospective approach by applying the guidance to all open contracts at the
adoption date and has implemented revised accounting policies, new operational and financial
reporting processes, enhanced systems capabilities and relevant internal controls.
As part of adopting ASC 606, revenue for certain customer contracts where the Company is
manufacturing products for which there is no alternative use and the Company has an enforceable
right to payment including a reasonable profit for work-in-progress, revenue is recognized over time
(i.e., as the Company manufactures the product) instead of upon shipment of products. In addition to
the following disclosures, note 3 “Revenue Recognition” provides further disclosures required by the
new standard.
The cumulative effect of change made to the Company’s April 1, 2018 condensed consolidated
balance sheet for the adoption of ASC 606 was as follows:
Condensed Consolidated Balance Sheet
Impact of Adopting ASC 606
Balance at Balance at
March 31, April 1,
2018 Adjustments 2018
(In thousands)
ASSETS
Contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 451,287 $ 451,287
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,799,829 (447,752) 3,352,077
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,380,466 (51,479) 1,328,987
LIABILITIES AND SHAREHOLDERS’ EQUITY
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,719,418 (87,897) 1,631,521
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531,587 2,098 533,685
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(3,144,114) $ 37,855 $(3,106,259)
The adoption of ASC 606 resulted in the establishment of contract asset and contract liability
balance sheet accounts and in the reclassification to these new accounts from certain asset and
liability accounts, primarily inventories. The decrease in accumulated deficit in the table above reflects
$37.9 million of net adjustments to the balance sheet as of April 1, 2018, resulting from the adoption of
ASC 606 primarily related to certain customer contracts requiring an over-time method of revenue
recognition. The declines in inventories and other current assets reflect reclassifications to contract
assets due to the earlier recognition of certain costs of products sold for over-time contracts. The
decline in other current liabilities is primarily due to the reclassification of payments from customers in
advance of work performed to contract assets to reflect the net position of the related over-time
contracts.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
The following tables summarize the impacts of ASC 606 adoption on the Company’s consolidated
balance sheets and consolidated statements of operations:
Condensed Consolidated Balance Sheet
As of March 31, 2019
Impact of Adopting ASC 606
Balance without
As Reported Adjustments ASC 606 Adoption
(In thousands)
ASSETS
Contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 216,202 $(216,202) $ —
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,722,854 252,844 3,975,698
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 854,790 8,865 863,655
LIABILITIES AND SHAREHOLDERS’ EQUITY
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 1,426,075 65,705 1,491,780
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . $(3,012,012) $ (35,114) $(3,047,126)
Condensed Consolidated Statement of Operations
Fiscal Year Ended March 31, 2019
Impact of Adopting ASC 606
Balance without
As Reported Adjustments ASC 606 Adoption
(In thousands)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $26,210,511 $(25,665) $26,184,846
Cost of sales (including restructuring charges) . . . . . . . . . 24,692,736 (28,406) 24,664,330
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,517,775 $ 2,741 $ 1,520,516
In the first quarter of fiscal year 2019, to align contractual terms across the vast majority of
customers to allow the Company to efficiently and accurately manage its contracts the Company
waived certain contractual rights to bill profit for work in progress in the event of a contract termination,
which is expected to be infrequent. These modifications resulted in revenue from these customers
being recognized upon shipment of products, rather than over time (i.e., as the Company manufactures
products) as further explained in note 3. The result of the modifications for the fiscal year 2019 reduced
revenue and gross profit by approximately $132.7 million and $9.3 million, respectively, compared to
amounts that would have been reported both (i) under ASC 606 had the Company not amended the
contracts, and (ii) had the Company not adopted ASC 606.
The impacts to revenue and gross profit as a result of the adoption of ASC 606 are driven by a
number of factors including the timing of inventory levels for over time (“OT”) customers at the end of
each reporting period and the mix of customer profitability.
For the fiscal year ended March 31, 2019 the as reported revenue was approximately
$25.7 million higher and the gross profit approximately $2.7 million lower than it would have been
without the adoption of ASC 606. Additional revenue of $158.4 million was reported under ASC 606
due to the accelerated timing of recognition of revenue for contracts which meet the criteria for
over-time recognition and revenue recognized for certain contracts that no longer qualify for net
revenue treatment. Approximately $6.5 million of additional gross profit was recognized on the
customers qualifying for accelerated revenue recognition. These increases were offset by reductions of
$132.7 million of revenue and $9.3 million of gross profit respectively, as a result of the waiver of
contract rights noted above. There was no material tax impact for the fiscal year ended March 31, 2019
from the adoption of ASC 606.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
The Company applies the following practical expedients:
• The Company elected to not disclose information about remaining performance obligations as
its performance obligations generally have an expected duration of one year or less.
• In accordance with ASC 606-10-25-18B the Company will account for certain shipping and
handling as activities to fulfill the promise to transfer the good, instead of a promised service to
its customer.
• In accordance with ASC 606-10-32-18 the Company elected to not adjust the promised amount
of consideration for the effects of a significant financing component as the Company expects,
at contract inception, that the period between when the entity transfers a promised good or
service to a customer and when the customer pays for that good or service will generally be
one year or less.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk are
primarily accounts receivable, derivative instruments, and cash and cash equivalents.
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.
The following table summarizes the activity in the Company’s allowance for doubtful accounts
during fiscal years 2019, 2018 and 2017:
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, 2017 . . . . . . . . . . . . . . . . . . . . . $64,608 $ (184) $ (7,122) $57,302
Year ended March 31, 2018 . . . . . . . . . . . . . . . . . . . . . 57,302 8,225 (5,476) 60,051
Year ended March 31, 2019(1) . . . . . . . . . . . . . . . . . . . 60,051 41,977 (10,632) 91,396
(1) Charges incurred during fiscal year 2019 are primarily for costs and expenses related to various
distressed customers.
No customer accounted for greater than 10% of the Company’s net sales in fiscal years 2019,
2018 and 2017. One customer within the Company’s CTG segment accounted for approximately 11%
of the Company’s total balance of accounts receivable, net in fiscal year 2019. One customer within the
Company’s CTG segment accounted for approximately 17% of the Company’s total balances of
accounts receivable, net in fiscal years 2018 and 2017, respectively.
The Company’s ten largest customers accounted for approximately 43%, 41% and 43%, of its net
sales in fiscal years 2019, 2018 and 2017, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
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,
2019 2018
(In thousands)
Cash and bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,019,802
Money market funds and time deposits . . . . . . . . . . . . . . . . . . . . . . 473,888 452,622
$1,222,737
$1,696,625
$1,472,424
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out basis) or net realizable value. The
stated cost is comprised of direct materials, labor and overhead. The components of inventories, net
of applicable lower of cost or net realizable value write-downs, were as follows:
As of March 31,
2019 2018
(In thousands)
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,760,410
Work-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366,135 450,569
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434,618 588,850
$2,922,101
$3,722,854
$3,799,829
Due to the adoption of ASC 606, amounts that would have been reported as inventory under prior
guidance are now included in contract assets or liabilities, depending on the net position of the
contract, as disclosed above. As a result of this accounting change, work-in-progress and finished
goods as of March 31, 2019 are $252.8 million less than they would have been, had the Company not
adopted ASC 606. The comparative information as of March 31, 2018, has not been restated and
continues to be reported under the accounting standards in effect at that time.
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 depreciated over
69
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FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
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) 2019 2018
(In thousands)
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures, computer equipment and software . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 - 10 $ 3,305,335 $ 3,004,707
30 1,111,708 1,154,881
up to 30 453,119 414,917
3 - 7 501,994 482,248
— 121,976 152,992
— 291,458 287,724
Accumulated depreciation and amortization . . . . . . . . . . .
5,785,590 5,497,469
(3,449,377) (3,257,963)
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . .
$ 2,336,213 $ 2,239,506
Total depreciation expense associated with property and equipment was approximately
$433.4 million, $434.4 million and $432.2 million in fiscal years 2019, 2018 and 2017, 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 strategically pursued business and asset acquisitions, which are accounted for
using the acquisition method of accounting. During fiscal year 2019, the Company adopted the
Accounting Standard Update (ASU) No. 2017-01 “Clarifying the Definition of a Business” which did not
have a material impact to its financial position as there were no material acquisitions during the period
(Refer to “Recently Adopted Accounting Pronouncement” below for more details on the ASU). 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 typically is measured based upon,
among other factors, market multiples for comparable companies as well as a discounted cash flow
analysis. These approaches use significant unobservable inputs, or Level 3 inputs, as defined by the
fair value hierarchy and require management to make various judgmental assumptions about sales,
operating margins, growth rates and discount rates which consider its budgets, business plans and
economic projections, and are believed to reflect market participant views. Some of the inherent
estimates and assumptions used in determining fair value of the reporting units are outside the control
of management, including interest rates, cost of capital, tax rates, market EBITDA comparable and
credit ratings. While the Company believes it has made reasonable estimates and assumptions to
calculate the fair value of the reporting units, it is possible a material change could occur. If the actual
results are not consistent with management’s estimates and assumptions used to calculate fair value, it
could result in material impairments of the Company’s goodwill. During fiscal year 2019, the Company
adopted ASU 2017-04 “Simplifying the Test for Goodwill Impairment”, which simplifies the subsequent
measurement of goodwill by eliminating step 2 from the goodwill impairment test. The ASU did not
have a material impact to Flex’s financial position during the period as there were no identified
impairments during the period. (Refer to “Recently Adopted Accounting Pronouncement” below for
more details on the ASU).
If the recorded value of the assets, including goodwill, and liabilities (“net book value”) of any
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, IEI, CEC and CTG. The Company concluded that there was no change to its reporting
units in fiscal year 2019 and performed its goodwill impairment assessment on January 1, 2019. 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 one of its reporting units
exceeded its respective carrying value. As of the date of the impairment test, all reporting units’ fair
values were 25% or more, over their respective carrying values, with the exception of the CTG
reporting unit which was 22% in excess of its carrying value. The estimated future results for CTG used
in the impairment analysis reflect the Company’s revised strategy including the wind down of the
Company’s NIKE operations in Mexico, further restrictions on capital expenditures related to the
Company’s expansion into India and the Company’s focus on partnering with well-funded, leading
multi-national brands that control multiple categories of products and have regional demand
requirements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
The following table summarizes the activity in the Company’s goodwill during fiscal years 2019
and 2018 (in thousands):
HRS
IEI
CEC CTG Total
Balance, as of March 31, 2017 . . . $420,935 $337,707 $ 115,002 $111,223 $ 984,867
Additions(1) . . . . . . . . . . . . . . . . . 75,280 — 9,730 — 85,010
Divestitures(2) . . . . . . . . . . . . . . . — — — (3,475) (3,475)
Foreign currency translation
Balance, as of March 31, 2018 . . .
adjustments(3) . . . . . . . . . . . . . 54,768 — — — 54,768
107,748 1,121,170
Additions(1) . . . . . . . . . . . . . . . . . — — 10,984 — 10,984
Divestitures(2) . . . . . . . . . . . . . . . (5,303) (4,450) (6,391) (4,484) (20,628)
Foreign currency translation
337,707 124,732
550,983
adjustments(3) . . . . . . . . . . . . . (38,471) — — — (38,471)
Balance, as of March 31, 2019 . . . $507,209 $333,257 $129,325 $103,264 $1,073,055
(1) The goodwill generated from the Company’s business combinations completed during the fiscal years 2019
and 2018 are primarily related to value placed on the employee workforce, service offerings, 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. Also included in fiscal year 2018 were adjustments based on
management’s estimates resulting from its 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 during
the fiscal year ended March 31, 2018.
(2) During the fiscal year ended March 31, 2019, the Company divested its China-based Multek operations
along with another non-strategic immaterial business, and as a result, recorded an aggregate reduction of
goodwill of $20.6 million. During the fiscal year ended March 31, 2018, the Company disposed of Wink Labs
Inc. (“Wink”), a business within the CTG segment.
(3) During the fiscal years ended March 31, 2019 and 2018, the Company recorded $38.5 million and
$54.8 million, respectively, of foreign currency translation adjustments primarily related to historical
acquisitions, as the U.S. Dollar fluctuated against foreign currencies.
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, 2019 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 include 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
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, 2019 As of March 31, 2018
Gross
Carrying
Amount
Net Gross Net
Accumulated Carrying Carrying Accumulated Carrying
Amortization Amount Amount Amortization Amount
(In thousands)
Intangible assets:
Customer-related
intangibles . . . . . . . . . . . $297,306 $ (113,627) $183,679 $306,943 $ (79,051) $227,892
Licenses and other
intangibles . . . . . . . . . . .
(127,288) 147,316 304,007 (107,466) 196,541
Total . . . . . . . . . . . . . . . . $571,910 $(240,915) $330,995 $610,950 $(186,517) $424,433
274,604
Total intangible asset amortization expense recognized in operations during fiscal years 2019,
2018 and 2017 was $74.4 million, $78.6 million and $81.4 million, respectively. The gross carrying
amounts of intangible assets are removed when fully amortized. During fiscal year 2019, the gross
carrying amounts of fully amortized intangible assets totaled $9.4 million. The Company also recorded
$21.0 million foreign currency translation adjustments during fiscal year 2019, as the U.S. Dollar
fluctuated against foreign currencies for certain intangibles. As of March 31, 2019, the weighted-
average remaining useful lives of the Company’s intangible assets were approximately 6.3 years for
customer-related intangibles and approximately 5.5 years for 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)
$ 64,917
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,604
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,099
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,390
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,830
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,155
Total amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$330,995
The Company owns or licenses various United States and foreign patents relating to a variety of
technologies. For certain of the Company’s proprietary processes, inventions, and works of authorship,
the Company relies on trade secret or copyright protection. The Company also maintains trademark
rights (including registrations) for the Company’s corporate name and several other trademarks and
service marks that the Company uses in the Company’s business in the United States and other
countries throughout the world. The Company has implemented appropriate policies and procedures
(including both technological means and training programs for the Company’s employees) to identify
and protect the Company’s intellectual property, as well as that of the Company’s customers and
suppliers. As of March 31, 2019 and 2018, the carrying value of the Company’s intellectual property
was not material.
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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
the fair value of the derivative instrument (excluding time value) is recognized in shareholders’ equity
as a separate component of accumulated other comprehensive income (loss), and recognized in the
consolidated statements of operations when the hedged item affects earnings. Ineffective and
excluded portions of changes in the fair value of cash flow hedges are recognized in earnings
immediately. If the derivative instrument is designated as a fair value hedge, the changes in the fair
value of the derivative instrument and of the hedged item attributable to the hedged risk are recognized
in earnings in the current period. Additional information is included in note 8.
Other Current Assets
Other current assets include approximately $292.5 million and $445.4 million as of March 31,
2019 and 2018, respectively for the deferred purchase price receivable from the Company’s Asset-
Backed Securitization programs. See note 10 for additional information. Assets held for sale related to
the China-based Multek operations previously recorded in other current assets have been removed
from the consolidated balance sheet as of March 31, 2019, following the execution of the divestiture
during the Company’s second quarter of fiscal year 2019. See note 17 for additional information.
Investments
The Company has an investment portfolio that consists of strategic investments in privately held
companies, and certain venture capital funds which are included within other assets. These privately
held companies range from startups to more mature companies with established revenue streams and
business models. As of March 31, 2019, and March 31, 2018, the Company’s investments in non-
consolidated companies totaled $294.1 million and $411.1 million, respectively. During the last half of
fiscal year 2019, the Company reassessed its strategy with respect to its investment portfolio. As a
result of the change in the Company’s strategy and due to market valuation changes, the Company
recognized an aggregate net charge related to investment impairments and dispositions of
approximately $193 million for the fiscal year ended March 31, 2019, which is recorded in other
charges (income), net on the consolidated statement of operations. The aggregate charge was
primarily driven by write-downs of the Company’s investment positions in a non-core cost method
investment and Elementum as well as other investment impairments that were individually immaterial.
Non-consolidated investments in entities are accounted for using the equity method when the
Company has an investment in common stock or in-substance common stock, and either (a) has the
ability to significantly influence the operating decisions of the issuer, or (b) if the Company has a voting
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 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. Cost method is used for investments
which the Company does not have the ability to significantly influence the operating decisions of the
investee, or if the Company’s investment is in securities other than common stock or in-substance
common stock.
The Company monitors these investments for impairment indicators and makes appropriate
reductions in carrying values as required whenever events or changes in circumstances indicate that
the assets may be impaired. The factors the Company considers in its evaluation of potential
impairment of its investments include, but are not limited to, a significant deterioration in the earnings
performance or business prospects of the investee, or factors that raise significant concerns about the
investee’s ability to continue as a going concern, such as negative cash flows from operation or
working capital deficiencies. Fair values of these investments, when required, are estimated using
unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy, and require management
to make various judgmental assumptions about primarily comparable company multiples and
discounted cash flow projections. Some of the inherent estimates and assumptions used in
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FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
determining fair value of the investments are outside the control of management. While the Company
believes it has made reasonable estimates and assumptions to calculate the fair value of the
investments, it is possible a material change could occur. If the actual results are not consistent with
management’s estimates and assumptions used to calculate fair value, it could result in material
impairments of investments.
For investments accounted for under cost method that do not have readily determinable fair
values, the Company has elected, per ASU 2016-01 and commencing on April 1, 2018, to measure
them at cost minus impairment, if any, plus or minus changes resulting from observable price changes
in orderly transactions for the identical or a similar investment of the same issuer.
Investment in Elementum SCM (Cayman) Ltd (“Elementum)
Starting in fiscal year 2014, the Company had a majority owned subsidiary, Elementum, which
qualified as a variable interest entity for accounting purposes. The Company owned a majority of
Elementum’ s outstanding equity (consisting primarily of preferred stock) and as of March 31, 2017,
controlled its board of directors, which gave the Company the power to direct the activities of
Elementum that most significantly impact its economic performance. Accordingly, the Company
recognized the carrying value of the noncontrolling interest as a component of total shareholders’
equity, and the consolidated financial statements included the financial position and results of
operations of Elementum as of and for the period ended March 31, 2017.
During the second quarter of fiscal year 2018, the Company and other minority shareholders of
Elementum amended certain agreements resulting in joint control of the board of directors between
the Company and other non-controlling interest holders. As a result, the Company concluded it is no
longer the primary beneficiary of Elementum and accordingly, deconsolidated the entity and
recognized a gain on deconsolidation of approximately $151.6 million with no related tax impact,
which is included in other charges (income), net on the consolidated statement of operations for the
year ended March 31, 2018. Further, the Company derecognized approximately $72.6 million of cash
of Elementum as of the date of deconsolidation, which was reflected as an outflow from investing
activities within other investing activities, net in the consolidated statement of cash flows for the year
ended March 31, 2018. The Company no longer recognizes the carrying value of the noncontrolling
interest as a component of total shareholder’s equity. As of March 31, 2018, the carrying value of the
Company’s variable interest in Elementum was approximately $125 million included in other assets on
the consolidated balance sheet.
During the fourth quarter of fiscal year 2019, the Company and Elementum executed agreements
that provided for, among other things, the termination of certain commercial agreements between the
Company and Elementum, the repurchase of certain shares of Elementum held by the Company and
the removal of certain rights associated with such shares, including the Company’s right to elect
certain members of Elementum’s board of directors. Management initiated a valuation of the
Company’s remaining investment using the public guideline company approach which relied on inputs
such as comparable company multiples that would be considered Level 3 inputs in the fair value
hierarchy. The latest valuation of the remaining investment resulted in a total charge of approximately
$84 million, which is included in other charges (income), net on the consolidated statement of
operations for the year ended March 31, 2019. The Company’s remaining investment in Elementum is
accounted for as a cost method investment, and is included in other assets on the consolidated
balance sheet.
Joint Venture with RIB Software AG
During fiscal year 2017, the Company formed a joint venture with RIB Software AG, a provider of
technology for the construction industry. The Company contributed $60.0 million for a non-controlling
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
interest in this joint venture which was included in cash flows from other investing activities net in the
consolidated statement of cash flows for the year ended March 31, 2017.
During the third quarter of fiscal year 2019, the Company sold its non-controlling interest in the
joint venture with RIB Software AG, a provider of technology for the construction industry, to its former
joint venture partner, for a total consideration of approximately $48.4 million. The Company
recognized an immaterial gain on sale, which is recorded in other charges (income), net on the
consolidated statement of operations for the fiscal year ended March 31, 2019. The cash inflows
received as consideration have been included in cash flows from other investing activities during the
same period.
Investment in Unrelated Third-party Company
During the third quarter of fiscal year 2019, the Company noted, as part of the evaluation of its
investment portfolio, a significant deterioration in a certain investee’s performance and near-term
projections. Additionally, the Company identified certain risks around that investee’s capability to
acquire additional funding to support its operation in the near term. The Company considered these
facts as triggering events for impairment evaluations, and as a result recognized a $76 million
impairment charge during the fiscal year ended March 31, 2019, which is included in other charges
(income), net on the consolidated statement of operations. The remaining carrying value of this
investment at March 31, 2019 was immaterial, and was determined using a discounted cash flow
approach which relied on inputs that would be considered Level 3 inputs in the fair value hierarchy.
Bright Machines (formerly known as AutoLab AI)
During the first quarter of fiscal year 2019, the Company transferred existing employees and
equipment with a net book value of approximately $35 million along with certain related software and
Intellectual Property (“IP”), into the newly created Bright Machines, in exchange for shares of
preferred stock and a controlling financial interest in Bright Machines. Bright Machines is a privately
held software-as-a service (SaaS) and hardware company focused on developing and deploying an
automation solution worldwide. The Company has concluded that Bright Machines does not qualify as
a variable interest entity for purposes of evaluating whether it has a controlling financial interest.
Subsequent to the initial formation and prior to June 29, 2018, Bright Machines received equity
funding from third party investors and expanded the board of directors, resulting in dilution of the
Company’s voting interest to below 50%. As a result, the Company concluded it no longer held a
controlling financial interest in Bright Machines and accordingly, deconsolidated the entity.
The fair value of the Company’s non-controlling interest in Bright Machines upon deconsolidation
was approximately $127.6 million as of the date of deconsolidation. The Company accounts for its
investment in Bright Machines under the equity method, with the carrying amount included in other
assets on the consolidated balance sheet. The value of the Company’s interest on the date of
deconsolidation was based on management’s estimate of the fair value of Bright Machines at that
time. Management relied on a multi-stage process which involved calculating the enterprise and
equity value of Bright Machines, then allocating the equity value of the entity to the Company’s
securities. The enterprise value of Bright Machines was estimated based on the value implied by the
equity funding Bright Machines received from third parties in the same period (i.e., level 2 inputs). The
Company recognized a gain on deconsolidation of approximately $87 million with no material tax
impact, which is included in other charges (income), net on the consolidated statement of operations.
Concurrently with the deconsolidation, the Company engaged Bright Machines as a strategic
partner to develop and deploy automation solutions for Flex and entered into a 5-year subscription
agreement for use of fixed assets along with other automation services. The subscription agreement
provides the Company with the use of the assets previously contributed to Bright Machines and
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
accordingly is accounted for as a capital lease. As a result, the Company has recognized a capital
lease asset and obligation with balances of $30.3 million and $34.8 million as of March 31, 2019,
respectively, in the consolidated balance sheets.
Pro-forma financials have not been presented because the effects were not material to the
Company’s consolidated financial position and results of operation for all periods presented. Bright
Machines became a related party to the Company starting on the date of deconsolidation.
Subscription fees under the Bright Machines agreement were immaterial for the fiscal year ended
March 31, 2019.
Other Current Liabilities
Other current liabilities include customer working capital advances of $266.3 million and
$153.6 million, customer-related accruals of $260.1 million and $439.0 million, and deferred revenue
of $271.8 million and $329.0 million as of March 31, 2019 and 2018, 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. Liabilities held for sale
related to the China-based Multek operations of approximately $144 million as of March 31, 2018,
previously included in other current liabilities have been removed from the consolidated balance sheet
as of March 31, 2019, following the execution of the divestiture. See note 17 for additional information.
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 restructuring plans. See note 14 for additional information regarding restructuring
charges.
Recently Adopted Accounting Pronouncements
In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard
Update (ASU) No. 2017-01 “Business Combinations (Topic 805): Clarifying the Definition of a
Business” to clarify the definition of a business with the objective of adding guidance to assist entities
with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets
or businesses. The Company adopted the guidance on a prospective basis during the first quarter of
fiscal year 2019, which did not have a material impact to its financial position as there were no
material acquisitions during the period of adoption.
In January 2017, the FASB issued ASU 2017-04 “Intangibles—Goodwill and Other (Topic 350):
Simplifying the Test for Goodwill Impairment” 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 application permitted. The Company adopted the guidance during fiscal
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
year 2019 without a material impact to its financial position as there were no identified impairments
during the period.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues
Task Force).” The ASU is intended to address specific cash flow issues with the objective of reducing
the existing diversity in practice and provide guidance on how certain cash receipts and payments are
presented and classified in the statement of cash flows. The majority of the guidance in ASU 2016-15
was consistent with the Company’s current cash flow classification. However, cash receipts on the
deferred purchase price from the Company’s asset-backed securitization programs described in note 10
are now classified as cash flows from investing activities instead of the Company’s former
presentation as cash flows from operations. The Company adopted the guidance during the first
quarter of fiscal year 2019 and retrospectively adjusted cash flows from operating and investing
activities for fiscal year 2018. The Company recorded $3.6 billion of cash receipts on the deferred
purchase price from the Company’s asset-backed securitization programs for the fiscal year ended
March 31, 2019 and reclassified $4.6 billion and $5.0 billion of cash receipts on the deferred purchase
price for the fiscal years ended March 31, 2018 and 2017, from cash flows from operating activities to
cash flows from investing activities, respectively.
In January 2016, the FASB issued ASU 2016-01 “Financial Instruments—Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities.” This guidance generally
requires equity investments, except those accounted for under the equity method of accounting or
those that result in consolidation of the investee, to be measured at fair value with changes in fair
value recognized in net income. This guidance also requires the separate presentation of financial
assets and financial liabilities by measurement category and form of financial asset on the balance
sheet or in the accompanying notes to the financial statements. The Company adopted this guidance
on April 1, 2018 with an immaterial impact on the Company’s financial position, results of operations
and cash flows.
In February 2018, the FASB issued ASU 2018-03 “Technical Corrections and Improvements to
Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets
and Financial Liabilities.” This standard comes as an addition to ASU 2016-01 which the Company
adopted in the first quarter of fiscal year 2019. This update includes amendments to clarify certain
aspects of the guidance issued in Update 2016-01. The Company adopted this guidance during the
second quarter of fiscal year 2019 with an immaterial impact on its consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)”
(also referred to as Accounting Standard Codification 606 (“ASC 606”)). As noted above, the
Company adopted the standard on April 1, 2018 using the modified retrospective approach by
applying the guidance to all open contracts at the adoption date and has implemented revised
accounting policies, new operational and financial reporting processes, enhanced systems capabilities
and relevant internal controls. Details of the impact of adopting ASC 606 has been described in the
Revenue Recognition section above.
Recently Issued Accounting Pronouncements
In November 2018, the FASB issued ASU 2018-19 “Codification Improvements to Topic 326:
Financial Instruments—Credit Losses” to introduce an expected credit loss methodology for the
impairment of financial assets measured at amortized cost basis. That methodology replaces the
probable, incurred loss model for those assets. The guidance is effective for the Company beginning
in the first quarter of fiscal year 2021 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 2021.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
In October 2018, the FASB issued ASU 2018-17 “Consolidation (Topic 810): Targeted
Improvements to Related Party Guidance for Variable Interest Entities” to provide a new private
company variable interest entity exemption and changes how decision makers apply the variable
interest criteria. The guidance is effective for the Company beginning in the first quarter of fiscal year
2021 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 2021.
In August 2018, the FASB issued ASU 2018-15 “Intangibles—Goodwill and Other—Internal—Use
Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud
Computing Arrangement That Is a Service Contract” to provide guidance on a customer’s accounting
for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is
hosted by the vendor, i.e., a service contract. Under the new guidance, customers will apply the same
criteria for capitalizing implementation costs as they would for an arrangement that has a software
license. The new guidance also prescribes the balance sheet, income statement, and cash flow
classification of the capitalized implementation costs and related amortization expense, as well as
requires additional quantitative and qualitative disclosures. The guidance is effective for the Company
beginning in the first quarter of fiscal year 2021 with early adoption permitted. The Company is still
evaluating the impact on its consolidated financial statements, and it intends to adopt the guidance
when it becomes effective in the first quarter of fiscal year 2021.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure
Framework—Changes to the Disclosure Requirements for Fair Value Measurement”, which amends
ASC 820 to add, remove, and modify fair value measurement disclosure requirements. The guidance
is effective for the Company beginning in the first quarter of fiscal year 2020 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 2020.
In June 2018, the FASB issued ASU 2018-07 “Compensation—Stock Compensation (Topic 718):
Improvement to Nonemployee Share-Based Payment Accounting” with the objective of simplifying
several aspects of the accounting for nonemployee share-based payment transactions in current
GAAP. The guidance is effective for the Company beginning in the first quarter of fiscal year 2020 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 2020.
In August 2017, the FASB issued ASU 2017-12 “Derivatives and Hedging (Topic 815): Targeted
Improvements to Accounting for Hedging Activities” with the objective of improving the financial
reporting of hedging relationships and simplifying the application of the hedge accounting guidance in
current GAAP. The guidance is effective for the Company beginning in the first quarter of fiscal year
2020 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 2020.
In February 2016, the FASB issued ASU No. 2016-02, Leases with subsequent updates through
2018 (together “ASC 842”). The new standard is intended to improve financial reporting of lease
transactions by requiring lease assets and liability to be recorded on the balance sheet for the rights
and obligations created by leases that extend more than twelve months. ASC 842 also requires
additional disclosures for the amount, timing, and uncertainty of cash flows arising from leases.
ASC 842 is effective for financial statements issued for annual and interim periods beginning after
December 15, 2018 for public business entities. The Company adopted the new standard on its
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
2. SUMMARY OF ACCOUNTING POLICIES (Continued)
effective date of April 1, 2019, using the effective date method. Under this method, the initial
recognition of lease assets and liabilities as required by ASC 842 will occur on April 1, 2019, and
financial information for comparative periods prior to that date will not be updated. ASC 842 provides
a number of optional practical expedients impacting transition to the new standard. Management
elected the package of practical expedients which, among other things, allows the Company to carry
forward historical lease classification in place prior to April 1, 2019.
ASC 842 also provides practical expedients for an entity’s accounting after transition.
Management has elected the short-term lease recognition exemption for all leases that qualify, as well
as the practical expedient to not separate lease and non-lease components, Both of these expedients
were elected for all classes of underlying leased assets.
As a balance sheet impact upon adoption, the Company expects to recognize right-of-use assets
and operating lease liabilities, respectively, in the range of approximately $550 million to $750 million.
The Company is continuing to assess the impact of adopting the new standard on its consolidated
financial statements but does not expect a material impact on its consolidated statement of operations
or its consolidated statement of cash flows. The Company is also continuing to adjust its accounting
policies, operational and financial reporting processes, systems capabilities and relevant internal
controls.
In December 2017, the Securities and Exchange Commission (“SEC”) staff issued Staff
Accounting Bulletin No. 118 (SAB 118), Income Tax Accounting Implications of the Tax Cuts and Jobs
Act (“Tax Act”), which allowed the Company to record provisional amounts during a measurement
period not to extend beyond one year of the enactment date. As of March 31, 2019, the Company has
finalized all provisional amounts related to the Tax Act. Finalizing provisional adjustments related to
the Tax Act did not have a material impact on the Company’s consolidated financial statements as of
March 31, 2019. The Company expects further guidance may be forthcoming from the FASB and the
SEC, as well as regulations, interpretations and rulings from federal and state tax agencies, which
could result in additional impacts.
3. REVENUE
Revenue Recognition
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 first step in its
process for revenue recognition is to identify a contract with a customer. A contract is defined as an
agreement between two parties that create enforceable rights and obligations and can be written,
verbal, or implied. The Company generally enters into master supply agreements (“MSA”) with its
customers that provide the framework under which business will be conducted. This includes matters
such as warranty, indemnification, transfer of title and risk of loss, liability for excess and obsolete
inventory, pricing formulas, payment terms, etc., and the level of business under those agreements
may not be guaranteed. In those instances, the Company bids on a program-by-program basis and
typically receives customer purchase orders for specific quantities and timing of products. As a result,
the Company considers its contract with a customer to be the combination of the MSA and the
purchase order, or any other similar documents such as a statement of work, product addenda, emails
or other communications that embody the commitment by the customer.
In determining the appropriate amount of revenue to recognize, the Company applies 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 Company satisfies a performance
obligation. Further, the Company assesses whether control of the product or services promised under
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
3. REVENUE (Continued)
the contract is transferred to the customer at a point in time (PIT) or over time (OT). The Company is
first required to evaluate whether its contracts meet the criteria for OT recognition. The Company has
determined that for a portion of its contracts the Company is manufacturing products for which there is
no alternative use (due to the unique nature of the customer-specific product and IP restrictions) and
the Company has an enforceable right to payment including a reasonable profit for work-in-progress
inventory with respect to these contracts. As a result, revenue is recognized under these contracts OT
based on the cost-to-cost method as it best depicts the transfer of control to the customer measured
based on the ratio of costs incurred to date as compared to the total estimated costs at completion of
the performance obligation. For all other contracts that do not meet these criteria, the Company
recognizes revenue when it has transferred control of the related manufactured products which
generally occurs upon delivery and passage of title to the customer.
Customer Contracts and Related Obligations
Certain of the Company’s customer agreements include potential price adjustments which may
result in variable consideration. These price adjustments include, but are not limited to, sharing of cost
savings, committed price reductions, material margins earned over the period that are contractually
required to be paid to the customers, rebates, refunds tied to performance metrics such as on-time
delivery, and other periodic pricing resets that may be refundable to customers. The Company
estimates the variable consideration related to these price adjustments as part of the total transaction
price and recognizes revenue in accordance with the pattern applicable to the performance obligation,
subject to a constraint. The Company constrains the amount of revenues recognized for these
contractual provisions based on its best estimate of the amount which will not result in a significant
reversal of revenue in a future period. The Company determines the amounts to be recognized based
on the amount of potential refunds required by the contract, historical experience and other
surrounding facts and circumstances. Often these obligations are settled with the customer in a period
after shipment through various methods which include reduction of prices for future purchases,
issuance of a payment to the customer, or issuance of a credit note applied against the customer’s
accounts receivable balance. In many instances, the agreement is silent on the settlement mechanism.
Any difference between the amount accrued upon shipment for potential refunds and the actual
amount agreed to with the customer is recorded as an increase or decrease in revenue. These
potential price adjustments are included as part of other current liabilities on the consolidated balance
sheet and disclosed as part of customer related accruals in note 2.
Performance Obligations
The Company derives its revenues primarily from manufacturing services, and to a lesser extent,
from innovative design, engineering, and supply chain services and solutions.
A performance obligation is an implicitly or explicitly promised good or service that is material in
the context of the contract and is both capable of being distinct (customer can benefit from the good
or service on its own or together with other readily available resources) and distinct within the context
of the contract (separately identifiable from other promises). The Company considers all activities
typically included in its contracts, and identifies those activities representing a promise to transfer
goods or services to a customer. These include, but are not limited to, design and engineering
services, prototype products, tooling, etc. Each promised good or service with regards to these
identified activities is accounted for as a separate performance obligation only if it is distinct—i.e., the
customer can benefit from it on its own or together with other resources that are readily available to
the customer. Certain activities on the other hand are determined not to constitute a promise to
transfer goods or service, and therefore do not represent separate performance obligations for
revenue recognition (e.g., procurement of materials and standard workmanship warranty).
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
3. REVENUE (Continued)
A contract’s transaction price is allocated to each distinct performance obligation and recognized
as revenue when, or as, the performance obligation is satisfied. The majority of the Company’s
contracts have a single performance obligation as the promise to transfer the individual good or
service is not separately identifiable from other promises in the contract and is, therefore, not distinct.
Promised goods or services that are immaterial in the context of the contract are not separately
assessed as performance obligations. In the event that more than one performance obligation is
identified in a contract, the Company is required to allocate the transaction price between the
performance obligations. The allocation would generally be performed on the basis of a relative
standalone price for each distinct good or service. This standalone price most often represents the
price that the Company would sell similar goods or services separately.
Contract Balances
A contract asset is recognized when the Company has recognized revenue, but not issued an
invoice for payment. Contract assets are classified separately on the consolidated balance sheets and
transferred to receivables when rights to payment become unconditional. The following table
summarizes the activity in the Company’s contract assets during the fiscal year ended March 31, 2019
(in thousands):
Contract Assets
Beginning balance, April 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
Cumulative effect adjustment at April 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451,287
Revenue recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,169,638
Amounts collected or invoiced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,404,723)
Ending balance, March 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 216,202
A contract liability, or deferred revenue is recognized when the Company receives payments in
advance of the satisfaction of performance and is included in other current liabilities on the
consolidated balance sheets. Contract liabilities were $271.8 million and $265.3 million as of March 31,
2019 and April 1, 2018, respectively.
Disaggregation of Revenue
The following table presents the Company’s revenue disaggregated based on timing of transfer—
point in time and over time for the fiscal year ended March 31, 2019:
Fiscal Year Ended March 31, 2019
HRS
CEC
IEI
CTG Total
(In thousands)
Timing of Transfer
Point in time . . . . . . . . . . . . . . . . $3,773,735 $4,395,773 $6,126,454 $4,744,911 $19,040,873
Over time . . . . . . . . . . . . . . . . . . .
2,117,683 7,169,638
Total segment . . . . . . . . . . . . . . . $4,828,950 $6,182,637 $8,336,330 $6,862,594 $26,210,511
1,055,215 1,786,864 2,209,876
4. SHARE-BASED COMPENSATION
Equity Compensation Plans
The Company’s primary plan used for granting equity compensation awards is the 2017 Equity
Incentive Plan (the “2017 Plan”), which was approved by the Company’s shareholders at the 2017
Annual General Meeting of Shareholders, to replace the former 2010 Equity Incentive Plan.
The Company assumed all of the outstanding and unvested restricted shares and options
associated with a couple acquisitions and converted all of these shares into Flex awards. As a result,
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
4. SHARE-BASED COMPENSATION (Continued)
the Company maintains two additional equity compensation plans that are immaterial to the Company
for all periods presented. No share options or restricted share unit awards were granted under these
plans during fiscal year 2019, nor were there any shares available for grant under these plans as of
March 31, 2019.
Share-Based Compensation Expense
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 . . . . . . . . . . . . .
$19,554 $19,102 $10,023
56,478 66,142 72,243
Total share-based compensation expense . . . . . . . . . . . . . . .
$76,032 $85,244 $82,266
2019 2018 2017
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 2019, 2018 and 2017, the Company
did not recognize any excess tax benefits as an operating cash inflow.
As of March 31, 2019, the Company had approximately 16.1 million shares available for grant
under the 2017 Plan. Options issued to employees under this plan generally vest over four years and
expire ten years from the date of grant. Options granted to non-employee directors generally expire
five years from the date of grant.
The exercise price of options granted to employees is determined by the Company’s Board of
Directors or the Compensation Committee and may not be less than the closing price of the
Company’s ordinary shares on the date of grant.
As of March 31, 2019, the total unrecognized compensation cost related to unvested share
options granted to employees under all plans was not material and will be amortized on a straight-line
basis over a weighted-average period of approximately 1.8 years.
The Company also grants restricted share unit awards under its 2017 Plan. Restricted share unit
awards are rights to acquire a specified number of ordinary shares for no cash consideration in
exchange for continued service with the Company. Restricted share unit awards generally vest in
installments over a three to five-year period and unvested restricted share unit awards are forfeited
upon termination of employment.
Vesting for certain restricted share unit awards is contingent upon both service and market
conditions. Further, vesting for certain restricted share unit awards granted to certain executive
officers is contingent upon meeting certain free cash flow targets.
As of March 31, 2019, the total unrecognized compensation cost related to unvested restricted
share unit awards under all plans was approximately $132.9 million. These costs will be amortized
generally on a straight-line basis over a weighted-average period of approximately 2.4 years.
Approximately $14.2 million of the total unrecognized compensation cost is related to restricted share
unit awards granted to certain key employees whereby vesting is contingent on meeting a certain
market condition.
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CLEAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
4. SHARE-BASED COMPENSATION (Continued)
Determining Fair Value—Options and restricted share unit awards
Valuation and Amortization Method—The Company estimates the fair value of share options
granted under the 2017 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 restricted share unit
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 2017 Plan during fiscal years 2019, 2018, and 2017.
Determining Fair Value—Restricted share unit awards with service and market conditions
Valuation and Amortization Method—The Company estimates the fair value of restricted share
unit awards granted under the 2017 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 restricted share
unit awards granted. The service period is three years for those restricted share unit awards granted
in fiscal years 2019, 2018, and 2017.
Average peer volatility—Volatility used in a Monte Carlo simulation is derived from the historical
volatilities of the Standard and Poor’s (“S&P”) 500 index for the restricted share unit awards granted in
fiscal years 2019, 2018, and 2017.
Average Peer Correlation—Correlation coefficients were used to model the movement of Flex’s
stock price relative to the S&P 500 index for the restricted share unit awards granted in fiscal years
2019, 2018, and 2017.
Expected Dividend and Risk-Free Interest Rate assumptions—Same methodology as discussed
above.
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CLEAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
4. SHARE-BASED COMPENSATION (Continued)
The fair value of the Company’s restricted share unit awards under the 2017 Plan, whereby
vesting is contingent on meeting certain market conditions, for fiscal years 2019, 2018, and 2017 was
estimated using the following weighted-average assumptions:
Fiscal Year Ended March 31,
2019 2018 2017
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.4% 25.1% 25.8%
Average peer volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.6% 28.7% 25.1%
Average peer correlation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.5 0.6 0.6
0.0% 0.0% 0.0%
2.7% 1.5% 0.9%
Share-Based Awards Activity
The following is a summary of option activity for all plans (“Price” reflects the weighted-average
exercise price):
Fiscal Year Ended March 31,
2019 2018 2017
Options
Price Options Price Options Price
Outstanding, beginning of
fiscal year . . . . . . . . . . . . . . . . . . . . . . . . 1,189,550 $3.28 1,937,400 $3.75 5,111,490 $5.70
— 288,386 0.54 159,057 0.51
Granted . . . . . . . . . . . . . . . . . . . . . . . . .
(244,393) 1.00 (667,184) 4.15 (2,283,201) 5.44
Exercised . . . . . . . . . . . . . . . . . . . . . . . .
(71,927) 3.37 (369,052) 5.75 (1,049,946) 9.47
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . .
—
Outstanding, end of fiscal year . . . . . . . . .
873,230 $3.93 1,189,550 $3.28 1,937,400 $3.75
Options exercisable, end of fiscal year . . .
546,339 $5.34 373,950 $4.99 507,965 $6.08
The aggregate intrinsic value of options exercised under all plans (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 $2.4 million,
$8.9 million and $17.3 million during fiscal years 2019, 2018 and 2017, respectively.
Cash received from option exercises under all plans was immaterial for fiscal year 2019. Cash
received from option exercises under all plans was $2.8 million and $12.4 million for fiscal years 2018
and 2017, respectively.
As of March 31, 2019 the aggregate intrinsic value for options outstanding, options vested and
expected to vest, and options exercisable under all plans were immaterial. 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, 2019 for the immaterial amount of
options that were in-the-money at March 31, 2019.
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JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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CLEAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
4. SHARE-BASED COMPENSATION (Continued)
The following table summarizes the Company’s restricted share unit award activity under all plans
(“Price” reflects the weighted-average grant-date fair value):
Fiscal Year Ended March 31,
2019 2018 2017
Shares
Price Shares Price Shares Price
Unvested restricted share unit awards
outstanding, beginning
of fiscal year . . . . . . . . . . . . . . . . . . 14,619,692 $14.39 17,242,019 $12.24 19,309,172 $10.71
Granted(1) . . . . . . . . . . . . . . . . . . . .
12.59 6,680,739 16.97 8,261,666 13.46
8,257,502
(5,952,039) 13.12 (6,945,393) 11.86 (9,311,984) 9.50
Vested(1) . . . . . . . . . . . . . . . . . . . . .
(2,021,269) 14.51 (2,357,673) 12.20 (1,016,835) 11.15
Forfeited . . . . . . . . . . . . . . . . . . . . .
Unvested restricted share unit awards
outstanding, end of fiscal year . . . . 14,903,886 $13.76 14,619,692 $14.39 17,242,019 $12.24
(1)
Included in the fiscal years 2018 and 2017 amounts are 0.7 million and 1.7 million of restricted share unit
awards, respectively, 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 8.3 million unvested restricted share unit awards granted in fiscal year 2019, approximately
6.5 million are plain-vanilla unvested restricted share unit awards with no performance or market
conditions with an average grant date price of $12.57 per share. Further, approximately 1.3 million of
these unvested restricted share unit awards granted in fiscal year 2019 represents the target amount of
grants made to certain key employees whereby vesting is contingent on certain market conditions, with
an average grant date fair value estimated to be $14.00 per award calculated using a Monte Carlo
simulation. Vesting information for these shares is further detailed in the table below.
Of the 14.9 million unvested restricted share unit awards outstanding under all plans as of the
fiscal year ended March 31, 2019, approximately 2.5 million unvested restricted share unit awards
represent the target amount of grants made to certain key employees whereby vesting is contingent
on meeting certain market conditions summarized as follows:
Targeted number Average Range of shares
of awards as of grant date
March 31, 2019 fair value
that may be issued(1)
Year of grant
(in shares) (per share) Minimum Maximum Assessment dates
Fiscal 2019 . . . . . . . . .
Fiscal 2018 . . . . . . . . .
Fiscal 2017 . . . . . . . . .
Totals . . . . . . . . . . . . .
1,316,279
586,077
619,574
2,521,930
$14.00 — 2,632,558
$20.25 — 1,172,154
$17.57 — 1,239,148
— 5,043,860
June 2021
June 2020
June 2019
(1) Vesting ranges from zero to 200% based on measurement of Flex’s total shareholder return against the
Standard and Poor’s (“S&P”) 500 Composite Index.
The Company will continue to recognize share-based compensation expense for awards with
market conditions regardless of whether such awards will ultimately vest. During fiscal year 2019,
0.6 million shares vested in connection with the restricted share unit awards with market conditions
granted in fiscal year 2016.
The total intrinsic value of restricted share unit awards vested under all the Company’s plans was
$80.2 million, $116.4 million and $119.1 million during fiscal years 2019, 2018 and 2017, respectively,
based on the closing price of the Company’s ordinary shares on the date vested.
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JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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CLEAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
5. 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 restricted share
unit awards. The potential dilution from stock options exercisable into ordinary share equivalents and
restricted share unit 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,
2019 2018 2017
(In thousands, except per share amounts)
Basic earnings per share:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 93,399 $428,534 $319,564
Shares used in computation:
Weighted-average ordinary shares outstanding . . . . . . . . . .
526,519 529,782 540,503
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.18 $ 0.81 $ 0.59
Diluted earnings per share:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 93,399 $428,534 $319,564
Shares used in computation:
Weighted-average ordinary shares outstanding . . . . . . . . . .
Weighted-average ordinary share equivalents from stock
526,519 529,782 540,503
options and restricted share unit awards(1)(2) . . . . . . . . .
3,551 6,816 5,717
Weighted-average ordinary shares and ordinary share
equivalents outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . .
530,070 536,598 546,220
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.18 $ 0.80 $ 0.59
(1) An immaterial amount of options to purchase ordinary shares during fiscal years 2019 and 2018
were excluded from the computation of diluted earnings per share due to their anti-dilutive impact
on the weighted average ordinary shares equivalents. Options to purchase ordinary shares of
0.5 million during fiscal year 2017 were excluded from the computation of diluted earnings per share.
(2) Restricted share unit awards of 6.8 million during fiscal year 2019 were excluded from the
computation of diluted earnings per share due to their anti-dilutive impact on the weighted
average ordinary shares equivalents. Less than 0.1 million of anti-dilutive restricted share unit
awards were excluded from the computation of diluted earnings per share during fiscal years
2018 and 2017, respectively.
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JOB: 19-11297-1 CYCLE#;BL#: 19; 1-19 TRIM: 8.250 x 10.750 AS: Denver: 303-572-3889
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CLEAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
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,
2019 2018 2017
(In thousands)
Net cash paid for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $190,204 $152,750 $127,346
134,178 91,846 86,651
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash investing and financing activity:
Unpaid purchases of property and equipment . . . . . . .
111,989 128,044 84,375
Customer-related third party banking institution
equipment financing net settlement . . . . . . . . . . . . .
— — 90,576
Non-cash investment in Elementum (Note 2) . . . . . . .
— 132,679 —
Non-cash proceeds from sales of Wink (Note 2) . . . . .
— 59,000 —
Non-cash investment in Bright Machines (Note 2) . . . .
127,641 — —
Capital lease for Bright Machines assets (Note 2) . . . .
34,828 — —
7. BANK BORROWINGS AND LONG-TERM DEBT
Bank borrowings and long-term debt are as follows:
As of March 31,
2019 2018
(In thousands)
4.625% Notes due February 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 500,000
Term Loan, including current portion, due in installments through
$ 500,000
November 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 671,563 687,813
Term Loan, including current portion, due in installments through
June 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458,531 483,656
5.000% Notes due February 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 500,000
4.750% Notes due June 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596,815 596,387
India Facilities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,206 —
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,039 186,601
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,639) (13,815)
3,054,515 2,940,642
Current portion, net of debt issuance costs . . . . . . . . . . . . . . . . . . . (632,611) (43,011)
Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,421,904
$2,897,631
(1) India Facilities as of March 31, 2019 include approximately $91.4 million drawdown of short-term
bank borrowings facility entered in February 2019 and $78.8 million drawdown from the
$200 million term loan facility entered in July 2018.
The weighted-average interest rates for the Company’s long-term debt were 4.2% and 3.9% as of
March 31, 2019 and 2018, respectively.
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CLEAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
7. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
Scheduled repayments of the Company’s long-term debt are as follows:
Fiscal Year Ending March 31, Amount
(In thousands)
$ 634,321
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,558
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 801,836
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 857,571
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,423
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599,445
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,065,154
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 commenced 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 ability of the Company
and its subsidiaries 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, 2019, the Company was in compliance with the covenants under this
term loan agreement.
Term Loan Agreement due June 2022 and Revolving Line of Credit
In June 2017, the Company entered into a five-year credit facility consisting of a $1.75 billion
revolving credit facility and a $502.5 million term loan, which is due to mature on June 30, 2022 (the
“2022 Credit Facility”). This 2022 Credit Facility replaced the Company’s $2.1 billion credit facility,
which was due to mature in March 2019. The outstanding principal of the term loan portion of the 2022
Credit Facility is repayable in quarterly installments of approximately $6.3 million from September 30,
2017 through June 30, 2020 and approximately $12.6 million from September 30, 2020 through
March 31, 2022 with the remainder due upon maturity. The Company determined that effectively
extending the maturity date of the revolving credit and repaying the term loan due March 2019 qualified
as a debt modification and consequently all unamortized debt issuance costs related to the $2.1 billion
credit facility are capitalized and will be amortized over the term of the 2022 Credit Facility.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
7. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
Borrowings under the 2022 Credit Facility bear interest, at the Company’s option, either at (i) the
Base Rate, which is defined as the greatest of (a) the Administrative Agent’s prime rate, (b) the federal
funds effective rate, plus 0.50% and (c) the LIBOR (the London Interbank Offered Rate) rate that would
be calculated as of each day in respect of a proposed LIBOR loan with a one-month interest period,
plus 1.0%; plus, in the case of each of clauses (a) through (c), an applicable margin ranging from
0.125% to 0.875% per annum, based on the Company’s credit ratings (as determined by Standard &
Poor’s Financial Services LLC, Moody’s Investors Service, Inc. and Fitch Ratings Inc.) or (ii) LIBOR
plus the applicable margin for LIBOR loans ranging between 1.125% and 1.875% per annum, based
on the Company’s credit ratings.
The 2022 Credit Facility is unsecured and contains customary restrictions on the ability of the
Company and its subsidiaries 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 significant exceptions and limitations. The 2022 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 during the term of the 2022
Credit Facility. As of March 31, 2019, the Company was in compliance with the covenants under the
2022 Credit Facility agreement.
Notes due February 2020 and February 2023
In February 2013, the Company issued $500 million of 4.625% Notes due February 15, 2020 and
$500 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 Exchange Commission.
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 up until June 30, 2017 were guaranteed, jointly
and severally, fully and unconditionally on an unsecured basis, by certain of the Company’s 100%
owned subsidiaries (the “guarantor subsidiaries”). The Company replaced its $2.1 billion credit facility,
which was due to expire in March 2019 and was guaranteed by the guarantor subsidiaries, with the
2022 Credit Facility, which is not guaranteed by the guarantor subsidiaries. Effective upon the
replacement, all guarantor subsidiaries were released from their guarantees under each indenture for
the Notes.
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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
7. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
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, 2019, the note due February 2020 has been included in current
liabilities on the consolidated balance sheet, and the Company was in compliance with the covenants
in the indenture governing the Notes as of March 31, 2019.
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 2025 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 up until June 30, 2017 were
guaranteed, jointly and severally, fully and unconditionally on an unsecured basis, by each of the
Company’s 100% owned subsidiaries (the “guarantor subsidiaries”). The Company replaced its
$2.1 billion credit facility, which was due to expire in March 2019 and was guaranteed by the guarantor
subsidiaries, with the 2022 Credit Facilities, which is not guaranteed by the guarantor subsidiaries.
Effective upon the replacement, all guarantor subsidiaries were released from their guarantees under
the indenture for the 2025 Notes.
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.
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
91
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
7. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
may be rescinded and annulled by the holders of a majority in principal amount of the 2025 Notes. As
of March 31, 2019, the Company was in compliance with the covenants in the indenture governing the
2025 Notes.
Other Credit Lines
In February 2019, a subsidiary of the Company entered into a $100 million uncommitted credit
import advance facility (the “Advance Facility”), under which there was $91.4 million advances
outstanding as of March 31, 2019. The Advance Facility will be used to assist the Company in the
import of goods into India. Advances under this facility are repayable at any time, and bear interest at
LIBOR plus a margin of 0.70%. The Company anticipates repaying the facility in fiscal year 2020.
In July 2018, a subsidiary of the Company entered into a $200 million term loan facility (the
“Facility”), under which there was $78.8 million in borrowings outstanding as of March 31, 2019. The
Facility will be used to fund capital expenditure to support the Company’s expansion plan for India. The
availability period during which drawdowns can be made will be from the date of the agreement to and
including June 30, 2019. The maximum maturity of each drawdown will be 5 years from the funded
Capex shipment date. As a result, the longest maturity date of any future drawdown under the Facility
will be June 30, 2024. Borrowings under this term loan bear interest at LIBOR plus a margin of 0.90%
to 1.15% depending on loan duration.
In January 2017, the Company borrowed €100 million (approximately $112.5 million as of
March 31, 2019), under a 5-year, term-loan agreement due January 2, 2022. Borrowings under this
term loan bear interest at EURIBOR minus 0.1% 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 $56.3 million as of March 31,
2019), under a 5-year, term-loan agreement due September 30, 2020. Borrowings under this term loan
bear interest at EURIBOR plus the applicaeble 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, 2019, the
Company was in compliance with the covenants under these term loan agreements.
As of March 31, 2019, the Company and certain of its subsidiaries had various uncommitted
revolving credit facilities, lines of credit and other credit facilities in the amount of $332.2 million in the
aggregate. There were no borrowings outstanding under these facilities as of March 31, 2019 and 2018.
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.
Term Loan due April 26, 2024
In April 2019, the Company entered into a JPY 33.525 billion term loan agreement (approximately
$300 million) due April 2024, which was then swapped to U.S. dollars. The term loan will be used to
fund general operations and refinance certain other outstanding debt. Borrowings under this term loan
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
7. BANK BORROWINGS AND LONG-TERM DEBT (Continued)
bear interest, at LIBOR plus the applicable margin of 1.21%. This term loan is unsecured, and contains
customary restrictions on the ability of the Company and its subsidiaries 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.
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 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 derivatives contracts, including forward, swap, and options
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 derivative 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 derivative 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, 2019, the aggregate notional amount of the Company’s outstanding foreign
currency derivative contracts was $7.8 billion as summarized below:
Notional Contract Value
Foreign Currency Amount in USD
Currency Buy Sell Buy Sell
(In thousands)
Cash Flow Hedges
CNY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,207,000 — $ 328,349 $ —
EUR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,763 700 55,445 788
HUF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,401,000 — 120,981 —
ILS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,000 — 49,833 —
MXN . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,123,000 — 212,987 —
MYR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286,100 30,200 70,276 7,418
PLN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144,500 — 37,841 —
RON . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247,000 — 58,365 —
SGD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,500 — 31,354 —
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A N/A 17,853 7,089
983,284 15,295
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
8. FINANCIAL INSTRUMENTS (Continued)
Notional Contract Value
Foreign Currency Amount in USD
Currency Buy Sell Buy Sell
(In thousands)
Other Foreign Currency Contracts
BRL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 972,000 $ — $ 246,092
CAD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,484 132,895 55,511 99,042
CNY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,132,409 458,795 466,085 68,230
EUR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,793,103 2,043,034 2,019,883 2,303,762
GBP . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,047 30,869 51,590 40,857
HUF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,526,969 54,425,127 184,727 191,402
ILS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,775 77,600 44,265 21,365
INR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,921,500 10,356,508 56,930 150,312
MXN . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,969,832 2,078,128 153,416 107,352
MYR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455,920 255,210 111,989 62,688
SEK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706,435 755,275 76,470 81,479
SGD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,800 50,280 61,822 37,093
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A N/A 77,860 57,612
3,360,548 3,467,286
Total Notional Contract Value in USD . .
$4,343,832 $3,482,581
As of March 31, 2019 and 2018, 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, 2019 and 2018, 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 losses
totaled $0.2 million as of March 31, 2019, 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, 2019 and 2018:
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 2019 2018 Location 2019 2018
(In thousands)
Derivatives designated as
hedging instruments
Foreign currency contracts . . . . Other current
Other current
assets
$10,503 $19,422
liabilities $10,282 $ 7,065
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
8. FINANCIAL INSTRUMENTS (Continued)
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 2019 2018 Location 2019 2018
(In thousands)
Derivatives not designated as
hedging instruments
Foreign currency contracts . . . . Other current
Other current
assets
$16,774 $23,912
liabilities $17,144 $18,246
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, 2019, 2018 and 2017 are as follows:
Unrealized loss on Foreign currency
derivative instruments translation
and other adjustments Total
(In thousands)
Beginning balance on April 1, 2016 . . . . . . . . . . .
$(41,522) $ (94,393) $(135,915)
Other comprehensive gain (loss) before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (gains) losses reclassified from accumulated
other comprehensive loss . . . . . . . . . . . . . . . . .
6,925 (1,198) 5,727
2,171 (126) 2,045
Net current-period other comprehensive gain (loss) .
9,096 (1,324) 7,772
Ending balance on March 31, 2017 . . . . . . . . . . . .
$(32,426) $ (95,717) $(128,143)
Other comprehensive gain before reclassifications .
Net gains reclassified from accumulated other
15,667 46,022 61,689
comprehensive loss . . . . . . . . . . . . . . . . . . . . . .
(18,987) (404) (19,391)
Net current-period other comprehensive gain (loss) .
(3,320) 45,618 42,298
Ending balance on March 31, 2018 . . . . . . . . . . . .
$(35,746) $ (50,099) $ (85,845)
Other comprehensive loss before reclassifications .
Net losses reclassified from accumulated other
(48,302) (59,508) (107,810)
comprehensive loss . . . . . . . . . . . . . . . . . . . . . .
42,492 — 42,492
Net current-period other comprehensive loss . . . . . .
(5,810) (59,508) (65,318)
Ending balance on March 31, 2019 . . . . . . . . . . . .
$(41,556) $(109,607) $(151,163)
Net losses reclassified from accumulated other comprehensive loss during fiscal year 2019
relating to derivative instruments and other includes $40.6 million attributable to the Company’s cash
flow hedge instruments which were recognized as a component of cost of sales in the consolidated
statement of operations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
9. ACCUMULATED OTHER COMPREHENSIVE LOSS (Continued)
Net gains reclassified from accumulated other comprehensive loss during fiscal year 2018 relating
to derivative instruments and other includes $20.8 million attributable to the Company’s cash flow
hedge instruments which were recognized as a component of cost of sales in the consolidated
statement of operations.
Net (gains) losses reclassified from accumulated other comprehensive loss were immaterial
during fiscal year 2017.
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. 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, which are included in other current assets as of March 31, 2019 and
March 31, 2018, 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 and were immaterial for all periods presented.
Following the transfer of the receivables to the special purpose entities, the transferred receivables
are isolated from the Company and its affiliates, and upon the sale of the receivables from the special
purpose 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 $900 million for the Global Program, of which $725 million is
committed and $175 million is uncommitted, and $250 million for the North American Program, of which
$210 million is committed and $40 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, 2019, 2018 and 2017 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.
The Company’s deferred purchase price receivables relating to its asset-backed securitization
program are recorded initially at fair value 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
10. TRADE RECEIVABLES SECURITIZATION (Continued)
credit quality of the underlying creditor. Due to its high credit quality and short term maturity, the fair
value approximates carrying value. Significant increases in either of the major unobservable inputs
(credit spread, risk free interest rate) in isolation would result in lower fair value estimates, however the
impact is not material. The interrelationship between these inputs is also insignificant.
As of March 31, 2019 and 2018, 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, 2019, 2018 and 2017 were included as cash
provided by operating activities in the consolidated statements of cash flows. The Company recognizes
these proceeds net of the deferred purchase price, consisting of a receivable from the purchasers that
entitles the Company to certain collections on the receivable. The Company recognizes the collection
of the deferred purchase price in net cash provided by investing activities in the consolidated
statements of cash flows separately as cash collections of deferred purchase price.
As of March 31, 2019, approximately $1.2 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 $0.9 billion and deferred purchase price receivables of $0.3 billion. As of March 31, 2018,
approximately $1.5 billion of accounts receivable had been sold to the special purpose entities for
which the Company had received net cash proceeds of $1.1 billion and deferred purchase price
receivables of $0.4 billion. The deferred purchase price balances as of March 31, 2019 and March 31,
2018, also represent the non-cash beneficial interest obtained in exchange for securitized receivables.
For the fiscal years ended March 31, 2019, 2018 and 2017, cash flows from sales of receivables
under the ABS Programs consisted of approximately $6.8 billion, $8.0 billion and $7.6 billion,
respectively, for transfers of receivables, and approximately $3.6 billion, $4.6 billion and $5.0 billion,
respectively, for collections on deferred purchase price receivables. The Company’s cash flows from
transfer of receivables consist primarily of proceeds from collections reinvested in revolving-period
transfers. Cash flows from new transfers were not significant for all periods presented.
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 on accounts where the Company has
continuing involvement was approximately $0.5 billion and $0.3 billion as of March 31, 2019 and 2018,
respectively. For the years ended March 31, 2019, 2018 and 2017, total accounts receivables sold to
certain third party banking institutions was approximately $2.7 billion, $1.5 billion and $1.3 billion,
respectively. The receivables that were sold were removed from the consolidated balance sheets and
the cash received is 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
11. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES (Continued)
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. There were no contingent consideration liabilities outstanding as of March 31,
2019 and 2018.
There were no transfers between levels in the fair value hierarchy during fiscal years 2019 and
2018.
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, 2019 and 2018:
Fair Value Measurements as of March 31, 2019
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Money market funds and time deposits (Note 2) . . . . . . . $ — $473,888
$— $473,888
Foreign exchange forward contracts (Note 8) . . . . . . . . . — 27,277 — 27,277
Deferred compensation plan assets:
Mutual funds, money market accounts and equity
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,845 76,852 — 79,697
Liabilities:
Foreign exchange forward contracts (Note 8) . . . . . . . . . $ — $ (27,426)
$— $ (27,426)
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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, 2018
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Money market funds and time deposits (Note 2) . . . . . . . $ — $452,622
$— $452,622
Foreign exchange forward contracts (Note 8) . . . . . . . . . — 43,334 — 43,334
Deferred compensation plan assets:
Mutual funds, money market accounts and equity
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,196 67,532 — 74,728
Liabilities:
Foreign exchange forward contracts (Note 8) . . . . . . . . . $ — $ (25,311)
$— $ (25,311)
Other financial instruments
The following table presents the Company’s liabilities not carried at fair value as of March 31, 2019
and 2018:
4.625% Notes due February 2020 . . . . . . . . . . . . .
Term Loan, including current portion, due in
As of March 31, 2019 As of March 31, 2018
Carrying Fair Carrying Fair Fair Value
Amount Value Amount Value Hierarchy
(In thousands) (In thousands)
$ 500,000 $ 499,950 $ 500,000 $ 513,596 Level 1
installments through November 2021 . . . . . . . . .
671,563 670,724 687,813 689,966 Level 1
Term Loan, including current portion, due in
installments through June 2022 . . . . . . . . . . . . .
5.000% Notes due February 2023 . . . . . . . . . . . . .
4.750% Notes due June 2025 . . . . . . . . . . . . . . . .
Euro Term Loan due September 2020 . . . . . . . . . .
Euro Term Loan due January 2022 . . . . . . . . . . . .
India Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
458,531 457,958 483,656 485,470 Level 1
500,000 499,950 500,000 525,292 Level 1
596,815 599,940 596,387 627,407 Level 1
52,746 52,746 59,443 59,443 Level 2
112,524 112,524 123,518 123,518 Level 2
170,206 170,206 — — Level 2
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,062,385 $3,063,998 $2,950,817 $3,024,692
The Term Loans due November 2021 and June 2022, and the Notes due February 2020,
February 2023 and June 2025 are valued based on broker trading prices in active markets.
The Company values its Euro Term Loans due September 2020 and January 2022, and India
Facilities based on the current market rate, and as of March 31, 2019, the carrying amounts
approximate fair values.
12. COMMITMENTS AND CONTINGENCIES
Commitments
As of March 31, 2019 and 2018, 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. The Company also leases certain of its facilities and equipment under
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
12. COMMITMENTS AND CONTINGENCIES (Continued)
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)
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$155,391
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,245
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,777
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,335
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,341
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171,828
$682,917
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total rent expense amounted to $176.8 million, $140.3 million and $124.7 million in fiscal years
2019, 2018 and 2017, respectively.
Litigation and other legal matters
In connection with the matters described below, the Company has accrued for loss contingencies
where it believes that losses are probable and estimable. The amounts accrued are not material.
Although it is reasonably possible that actual losses could be in excess of the Company’s accrual, the
Company is unable to estimate a reasonably possible loss or range of loss in excess of its accrual,
except as discussed below, due to various reasons, including, among others, that: (i) the proceedings
are in early stages or no claims has been asserted, (ii) specific damages have not been sought in all of
these matters, (iii) damages, if asserted, are considered unsupported and/or exaggerated, (iv) there is
uncertainty as to the outcome of pending appeals, motions, or settlements, (v) there are significant
factual issues to be resolved, and/or (vi) there are novel legal issues or unsettled legal theories
presented. Any such excess loss could have a material adverse effect on the Company’s results of
operations or cash flows for a particular period or on the Company’s financial condition.
In addition, the Company provides design and engineering services to its customers and also
designs and makes its own products. As a consequence of these activities, its customers are requiring
the Company to take responsibility for intellectual property to a greater extent than in its manufacturing
and assembly businesses. Although the Company believes that its intellectual property assets and
licenses are sufficient for the operation of its business as it currently conducts it, from time to time
third parties do assert patent infringement claims against the Company or its customers. If and when
third parties make assertions regarding the ownership or right to use intellectual property, the Company
could be required to either enter into licensing arrangements or to resolve the issue through litigation.
Such license rights might not be available to the Company on commercially acceptable terms, if at all,
and any such litigation might not be resolved in its favor. Additionally, litigation could be lengthy and
costly and could materially harm the Company’s financial condition regardless of the outcome. The
Company also could be required to incur substantial costs to redesign a product or re-perform design
services.
From time to time, the Company enters into IP licenses (e.g., patent licenses and software
licenses) with third parties which obligate the Company to report covered behavior to the licensor and
pay license fees to the licensor for certain activities or products, or that enable the Company’s use of
third party technologies. The Company may also decline to enter into licenses for intellectual property
that it does not think is useful for or used in its operations, or for which its customers or suppliers have
licenses or have assumed responsibility. Given the diverse and varied nature of its business and the
location of its business around the world, certain activities the Company performs, such as providing
assembly services in China and India, may fall outside the scope of those licenses or may not be
subject to the applicable intellectual property rights. The Company’s licensors may disagree and claim
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
12. COMMITMENTS AND CONTINGENCIES (Continued)
royalties are owed for such activities. In addition, the basis (e.g. base price) for any royalty amounts
owed are audited by licensors and may be challenged. Some of these disagreements, may lead to
claims and litigation that might not be resolved in the Company’s favor. Additionally, litigation could be
lengthy and costly and could materially harm the Company’s financial condition regardless of the
outcome. In March 2018, the Company received an inquiry from a licensor referencing its patent
license agreement with the Company, and requesting information relating to royalties for products that
the Company assembles for a customer in China. The Company and licensor have had subsequent
discussions, during which the licensor claimed that the Company owes a material amount under the
patent license agreement, which the Company disputes and would contest vigorously. While the
Company cannot predict the outcome with respect to this claim or estimate an amount or reasonable
range of loss, a material loss is reasonably possible.
On May 8, 2018, a putative class action was filed in the Northern District of California against the
Company and certain officers alleging violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, and Rule 10b-5, promulgated thereunder, alleging misstatements and/or
omissions in certain of the Company’s financial results, press releases and SEC filings made during
the putative class period of January 26, 2017 through April 26, 2018. On October 1, 2018, the Court
appointed lead plaintiff and lead plaintiff’s counsel in the case. On November 28, 2018, lead plaintiff
filed an amended complaint alleging misstatements and/or omissions in certain of the Company’s SEC
filings, press releases, earnings calls, and analyst and investor conferences and expanding the
putative class period through October 25, 2018. On April 3, 2019, the Court vacated its prior order
appointing lead plaintiff and lead plaintiff’s counsel and reopened the lead plaintiff appointment
process. Motions for appointment as lead plaintiff are due June 4, 2019. Defendants’ deadline to move
to dismiss is vacated until after the lead plaintiff appointment process is complete and an operative
complaint is designated. In addition, the Court has set a case management conference for July 17,
2019. The Company believes that the claims are without merit and intends to vigorously defend this
case.
On April 21, 2016, SunEdison, Inc. (together with certain of its subsidiaries, “SunEdison”) filed for
protection under Chapter 11 of the U.S. Bankruptcy Code. 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. SunEdison stated in schedules filed with the Bankruptcy Court that, within
the 90 days preceding SunEdison’s bankruptcy filing, the Company received approximately
$98.6 million of inventory and cash transfers of $69.2 million, which in aggregate represents the
Company’s estimate of the maximum reasonably possible contingent loss. On April 15, 2018, a
subsidiary of the Company together with its subsidiaries and affiliates, entered into a tolling agreement
with the trustee of the SunEdison Litigation Trust to toll any applicable statute of limitations or other
time-related defense that might exist in regards to any potential claims that either party might be able
to assert against the other for a period that will end at the earlier to occur of: (a) 60 days after a party
provides written notice of termination; (b) six years from the effective date of April 15, 2018; or (c) such
other date as the parties may agree in writing. No preference claims have been asserted against the
Company and consideration has been given to the related contingencies based on the facts currently
known. The Company has a number of affirmative and direct defenses to any potential claims for
recovery and intends to vigorously defend any such claim, if asserted.
One of the Company’s Brazilian subsidiaries has received related assessments for certain sales
and import taxes. There are six tax assessments totaling 359.9 million Brazilian reals (approximately
USD $91.1 million based on the exchange rate as of March 31, 2019). The assessments are in various
stages of the review process at the administrative level and no tax proceeding has been finalized yet.
The Company believes there is no legal basis for these assessments and has meritorious defenses
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
12. COMMITMENTS AND CONTINGENCIES (Continued)
and will continue to vigorously oppose all of these assessments, as well as any future assessments.
The Company does not expect final judicial determination on any of these claims for several years.
On February 14, 2019, the Company submitted an initial notification of voluntary disclosure to the
U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) regarding possible
noncompliance with U.S. economic sanctions requirements among certain non-U.S. Flex-affiliated
operations. The Company has initiated an internal investigation regarding this matter. The matter is at a
very preliminary stage. The Company cannot predict how long it will take to complete the investigation
or to what extent the Company could be subject to penalties.
In addition to the matters discussed above, 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.
13. INCOME TAXES
The domestic (Singapore) and foreign components of income before income taxes were
comprised of the following:
Fiscal Year Ended March 31,
2019 2018 2017
(In thousands)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$323,522 $435,709
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192,624 197,371 (64,861)
$ (10,498)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$182,126
$520,893 $370,848
The provision for income taxes consisted of the following:
Fiscal Year Ended March 31,
2019 2018 2017
(In thousands)
Current:
$ 2,894 $ 1,037
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,517
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,894 50,889 71,773
101,411 53,783 72,810
Deferred:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40) 422 350
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,644) 38,154 (21,876)
(12,684) 38,576 (21,526)
Provision for income taxes . . . . . . . . . . . . . . . . . $ 88,727
$92,359 $ 51,284
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
13. INCOME TAXES (Continued)
The domestic statutory income tax rate was approximately 17.0% in fiscal years 2019, 2018 and
2017. 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,
2019 2018 2017
(In thousands)
$ 88,552 $ 63,044
Income taxes based on domestic statutory rates . . $ 30,961
Effect of tax rate differential . . . . . . . . . . . . . . . . . . (135,033) (244,128) (85,132)
Change in liability for uncertain tax positions . . . . . (15,381) 22,180 684
Change in valuation allowance . . . . . . . . . . . . . . . . 191,896 297,330 78,728
Recognition of prior year taxes recoverable . . . . . . 5,439 (53,757) —
Expiration of tax attributes . . . . . . . . . . . . . . . . . . . 4,277 — —
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,568 (17,818) (6,040)
Provision for income taxes . . . . . . . . . . . . . . . . . . $ 88,727
$ 92,359 $ 51,284
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, 2019, 2018 and 2017 was $24.4 million, $21.7 million and $15.5 million,
respectively. For the fiscal year ended March 31, 2019, the effect on basic and diluted earnings per
share was $0.05 and $0.05, respectively, and the effect on basic and diluted earnings per share
during fiscal years 2018 and 2017 were $0.04 and $0.04, and $0.03 and $0.03, respectively. Unless
extended or otherwise renegotiated, the Company’s existing holidays will expire in various years
through the end of fiscal year 2028.
The Company provides a valuation allowance against deferred tax assets that in the Company’s
estimation are not more likely than not to be realized. During fiscal year 2019, 2018 and 2017, the
Company released valuation allowances totaling $2.8 million, $1.3 million and $39.6 million,
respectively. For fiscal year 2019, this valuation allowance release was related to the Company’s
operations in Poland as this amount was 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
that subsidiary. Various other valuation allowance positions were also reduced due to varying factors
such as recognition of uncertain tax positions impacting deferred tax assets, one-time income
recognition in loss entities, and foreign exchange impacts on deferred tax balances. Lastly, these
valuation allowance reductions and eliminations were offset by current period valuation allowance
additions due to increased deferred tax assets as a result of current period losses in legal entities with
existing full valuation allowance positions. For fiscal years ended March 31, 2019, 2018 and 2017, the
offsetting amounts totaled $194.8 million, ($65.9) million and $103.9 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 ended March 31, 2019, 2018 and 2017 were $7.5 million, $65.8 million and $67.9 million,
respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
13. INCOME TAXES (Continued)
The components of deferred income taxes are as follows:
As of March 31,
2019 2018
(In thousands)
Deferred tax liabilities:
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (33,056)
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (57,939) (80,565)
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,879) (12,544)
$ (39,376)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (112,194) (126,165)
Deferred tax assets:
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,980 65,155
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,442 11,237
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,864 13,475
Inventory valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,082 6,952
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 4,797 3,073
Net operating loss and other carryforwards . . . . . . . . . . . . . . . . . 1,944,782 2,133,097
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243,016 236,916
Total deferred tax assets 2,292,963 2,469,905
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,083,082) (2,259,956)
Total deferred tax assets, net of valuation allowances 209,881 209,949
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 97,687
$ 83,784
The net deferred tax asset is classified as follows:
Long-term asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 165,319
Long-term liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (66,924) (81,535)
$ 164,611
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 97,687
$ 83,784
Utilization of the Company’s deferred tax assets is limited by the future earnings of the Company
in the tax jurisdictions in which such deferred assets arose. As a result, management is uncertain as
to when or whether these operations will generate sufficient profit to realize any benefit from the
deferred tax assets. The valuation allowance provides a reserve against deferred tax assets that are
not more likely than not to be realized by the Company. However, management has determined that it
is more likely than not that the Company will realize certain of these benefits and, accordingly, has
recognized a deferred tax asset from these benefits. The change in valuation allowance is net of
certain increases and decreases to prior year losses and other carryforwards that have no current
impact on the tax provision.
The Company has recorded deferred tax assets of approximately $2.0 billion related to tax losses
and other carryforwards against which the Company has recorded a valuation allowance for all but
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FLEX LTD.
13. INCOME TAXES (Continued)
$54.7 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)
2020 - 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 606,378
2026 - 2031 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444,040
2032 and post . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295,361
Indefinite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 691,313
$2,037,092
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 $1.6 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.
The estimated amount of the unrecognized deferred tax liability on these undistributed earnings is
approximately $150 million. As of March 31, 2019, the Company has provided for earnings in foreign
subsidiaries that are not considered to be indefinitely reinvested and therefore subject to withholding
taxes on $32.8 million of undistributed foreign earnings, recording a deferred tax liability of
approximately $2.0 million thereon.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Fiscal Year Ended
March 31,
2019 2018
(In thousands)
Balance, beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$203,323
Additions based on tax position related to the current year . . . . . . . 82,966 24,415
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . 5,575 5,926
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . (15,432) (11,936)
Reductions related to lapse of applicable statute of limitations . . . . . (14,786) (9,029)
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,174) —
Impact from foreign exchange rates fluctuation . . . . . . . . . . . . . . . . . (12,017) 14,891
$227,590
Balance, end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$227,590
$251,722
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 approximately $20 million within the next twelve months primarily due to potential
settlements of various audits and the expiration of certain statutes of limitations.
The Company and its subsidiaries file federal, state, and local income tax returns in multiple
jurisdictions around the world. With few exceptions, the Company is no longer subject to income tax
examinations by tax authorities for years before 2008.
Of the $251.7 million of unrecognized tax benefits at March 31, 2019, $166.8 million will affect
the annual effective tax rate (ETR) if the benefits are eventually recognized. The amount that doesn’t
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
13. INCOME TAXES (Continued)
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, 2019, 2018 and 2017, the Company
recognized interest and penalty of approximately ($2.9) million and ($3.3) million and ($1.6) million,
respectively. The Company had approximately $13.3 million, $16.2 million and $12.9 million accrued for
the payment of interest and penalties as of the fiscal years ended March 31, 2019, 2018 and 2017,
respectively.
14. RESTRUCTURING CHARGES
Fiscal Year 2019
During fiscal year 2019, the Company took targeted actions to optimize its portfolio, most notably
within CTG. The Company recognized restructuring charges of approximately $113.3 million during
the fiscal year ended March 31, 2019, of which $73.2 million were non-cash charges primarily for
asset impairments. A significant component of its charges were associated with the wind down of its
NIKE operations in Mexico in the third quarter of fiscal year 2019 where it recognized charges of
$66 million primarily for non-cash asset impairments.
In addition, the Company executed targeted head-count reductions at existing operating and
design sites and corporate functions and exited certain immaterial businesses. Of these total
restructuring charges, approximately $99.0 million was recognized as a component of cost of sales
during the fiscal year ended March 31, 2019.
Restructuring charges are not included in segment income, as disclosed further in note 19.
Fiscal Year 2018
During fiscal year 2018, the Company initiated targeted restructuring activities focused on
optimizing the Company’s cost structure in lower growth areas and, more importantly, streamlining
certain corporate and segment functions. 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. The Company
recognized approximately $78.6 million of cash charges predominantly related to employee severance
costs and $12.1 million of non-cash charges for asset impairment and other exit charges under the
above plan. Of these total charges, approximately $66.8 million was recognized in cost of sales. A
majority of the fiscal year 2018 restructuring activities were completed as of March 31, 2018.
Fiscal Year 2017
During fiscal year 2017, the Company initiated a restructuring plan to accelerate its ability to
support more Sketch-to-Scale® 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. 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. All fiscal year 2017 restructuring activities were
completed as of March 31, 2017.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
14. RESTRUCTURING CHARGES (Continued)
The following table summarizes the provisions, respective payments, and remaining accrued
balance as of March 31, 2019 for charges incurred in fiscal years 2019, 2018 and 2017 and prior
periods:
Long-Lived
Asset Other
Severance Impairment Exit Costs Total
(In thousands)
Balance as of March 31, 2016 . . . . . . . . . . . . . . . . . . . .
Provision for charges incurred in fiscal year 2017 . . . .
Cash payments for charges incurred in
$ 11,905 $ — $ 1,335 $ 13,240
42,253 — 7,142 49,395
fiscal year 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(25,894) — — (25,894)
Cash payments for charges incurred in
fiscal year 2016 and prior . . . . . . . . . . . . . . . . . . . . .
(11,905) — (1,335) (13,240)
Balance as of March 31, 2017 . . . . . . . . . . . . . . . . . . . .
Provision for charges incurred in fiscal year 2018 . . . .
Cash payments for charges incurred in
16,359 — 7,142 23,501
69,439 9,417 11,835 90,691
fiscal year 2017 and prior . . . . . . . . . . . . . . . . . . . . .
(13,237) — (3,671) (16,908)
Cash payments for charges incurred in
fiscal year 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash charges incurred in fiscal year 2018 . . . . . .
(24,555) — — (24,555)
— (9,417) (1,968) (11,385)
Balance as of March 31, 2018 . . . . . . . . . . . . . . . . . . . .
Provision for charges incurred in fiscal year 2019 . . . .
Cash payments for charges incurred in
48,006 — 13,338 61,344
38,634 46,365 28,314 113,313
fiscal year 2018 and prior . . . . . . . . . . . . . . . . . . . . .
(40,623) — (4,293) (44,916)
Cash payments for charges incurred in
fiscal year 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash charges incurred in fiscal year 2019 . . . . . .
(22,783) — (1,330) (24,113)
— (46,365) (26,829) (73,194)
Balance as of March 31, 2019 . . . . . . . . . . . . . . . . . . . .
Less: Current portion (classified as other current
23,234 — 9,200 32,434
liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,234 — 9,200 32,434
Accrued restructuring costs, net of current portion
(classified as other liabilities) . . . . . . . . . . . . . . . . . . . .
$
— $ — $ — $ —
15. OTHER CHARGES (INCOME), NET
Other charges (income), net for the fiscal years ended March 31, 2019, 2018 and 2017 are
primarily composed of the following:
Fiscal Year Ended March 31
(In thousands)
Gain on deconsolidation of subsidiary(1) . . . . . . . . . . . . . . . . . $ (87,348) $(151,574) $ —
(Gain) loss on sale of non-strategic business(2) . . . . . . . . . . . .
— (38,689) 7,400
193,063 21,895 —
Investment impairments and dispositions(3) . . . . . . . . . . . . . . .
2019 2018 2017
(1) During fiscal year ended March 31, 2019 the Company recognized other income of approximately
$87 million from the deconsolidation of Bright Machines (formally known as AutoLab AI). The fiscal
year ended March 31, 2018 includes a $151.6 million gain from the deconsolidation of
Elementum. See note 2 for additional information on the deconsolidation of Bright Machines and
Elementum.
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FLEX LTD.
15. OTHER CHARGES (INCOME), NET (Continued)
(2) The Company recognized other income of $38.7 million from the sale of Wink during fiscal year
2018. See note 2 for additional information on the sale of Wink. Fiscal year 2017 includes a
$7.4 million loss attributable to a non-strategic facility sold during the second quarter of that year.
(3) During fiscal year ended March 31, 2019 the Company recognized investment impairments of
$193.1 million, under other charges, which is primarily driven by an $84 million impairment in its
investment in Elementum, coupled with a $76 million loss for the portion of its investment in an
unrelated third-party venture backed company, also determined to be impaired. See note 2 for
additional information on the impairments. The Company recognized $21.9 million of impairment
during fiscal year 2018 for certain non-core investments.
16. INTEREST AND OTHER, NET
Interest and other, net for the fiscal years ended March 31, 2019, 2018 and 2017 are primarily
composed of the following:
Fiscal Year Ended March 31
(In thousands)
Interest expenses on debt obligations . . . . . . . . . . . . . . . . . $145,658 $123,098 $107,978
46,344 25,002 15,252
ABS and AR sales programs related expenses . . . . . . . . . .
(19,496) (18,840) (12,084)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,175) (15,222) (16,528)
Gain on foreign exchange transactions . . . . . . . . . . . . . . . .
2019 2018 2017
17. BUSINESS AND ASSET ACQUISITIONS & DIVESTITURES
Fiscal 2019 Business acquisition
In October 2018, the Company completed the acquisition of a business that was not significant to
the consolidated financial position, result of operations and cash flows of the Company. The acquired
business expanded the Company’s design capabilities in the telecom market within the CEC segment.
The assets acquired and liabilities assumed were not material to the Company’s consolidated financial
results. Results of operations were included in the Company’s consolidated financial results beginning
on the date of acquisition, and were not material to the Company’s consolidated financial results for all
periods presented.
Fiscal 2019 Divestitures
During the third quarter of fiscal year 2019, the Company disposed of an immaterial non-strategic
business in Brazil that operated across all of its segments. The net loss on disposition was not material
to the Company’s consolidated financial results, and was included in other charges (income), net in the
consolidated statement of operation for the fiscal year 2019.
During the second quarter of fiscal year 2019, the Company divested its China-based Multek
operations, for proceeds of approximately $267.1 million, net of cash. The Company transferred
approximately $231.4 million of net assets, primarily property and equipment, accounts receivable, and
accounts payable. Further, the Company incurred various selling costs as part of this divestiture and
allocated approximately $19.0 million of goodwill to the divested business. This transaction resulted in
the recognition of an immaterial loss which is included in other charges (income), net in the
consolidated statements of operations for the fiscal year 2019.
Pro-forma results of operations for these divestitures have not been presented because the
effects were not individually, nor in the aggregate, material to the Company’s consolidated financial
results for all periods presented.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
17. BUSINESS AND ASSET ACQUISITIONS & DIVESTITURES (Continued)
Fiscal 2018 Business and asset acquisitions
During the fiscal year ended March 31, 2018, the Company completed two acquisitions that were
not individually, nor in the aggregate, significant to the consolidated financial position, results of
operation and cash flows of the Company.
In April 2017, the Company completed its acquisition of AGM, which expanded its capabilities in
the automotive market, and is included within the HRS segment. The Company paid $213.7 million, net
of cash acquired.
Additionally, in September 2017, the Company acquired a power modules business, which
expanded its capabilities within the CEC segment. The Company paid $54.7 million, net of cash
acquired.
A summary of the allocation of the total purchase consideration is presented as follows (in
thousands):
Purchase Net Tangible Assets Purchased Intangible
Consideration Acquired Assets Goodwill
AGM . . . . . . . . . . . . . . . . . . . . . . . . . . .
Power Modules Business . . . . . . . . . .
$213,718 $56,438 $82,000 $75,280
54,659 11,615 33,300 9,744
The intangibles of AGM comprised solely of customer relationships, will amortize over a
weighted-average estimated useful life of 10 years. The intangibles of the power modules business,
comprised of $16.0 million of customer relationships and $17.3 million of licenses and other
intangibles, will amortize over a weighted-average estimated useful life of 10 years and 8 years,
respectively.
The results of operations of the acquisitions were included in the Company’s consolidated
financial results beginning on the respective acquisition dates, and the total amount of net income and
revenue, collectively, were immaterial to the Company’s consolidated financial results for the fiscal
year ended March 31, 2018. Pro-forma results of operations for the acquisitions completed in fiscal
year 2018 have not been presented because the effects, individually and in aggregate, were not
material to the Company’s consolidated financial results for all periods presented.
Fiscal 2017 Business and asset 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 segments, 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 principally related to the Bose acquisition. 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
17. BUSINESS AND ASSET ACQUISITIONS & DIVESTITURES (Continued)
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 were not
presented because the effects, individually and in the aggregate, were not material to the Company’s
consolidated financial results for all periods presented.
Fiscal 2017 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 was included in other charges, net in the consolidated statements of operations for the
fiscal year 2017.
18. SHARE REPURCHASE PLAN
During fiscal year 2019, the Company repurchased approximately 17.7 million shares for an
aggregate purchase value of approximately $189.0 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 16, 2018. As of March 31, 2019, shares in the aggregate amount of
$324.5 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 certain direct staff who oversee operations of the business,
collectively identified as the CODM or the decision making group.
During the fourth quarter of fiscal year 2019, the Company announced that Revathi Advaithi was
appointed CEO of the Company effective February 11, 2019. As part of her new role and
responsibilities, the CEO along with certain direct report that oversee operations of the business, are
now considered the CODM. There is a possibility that the CODM will request some changes in the
information that it regularly reviews in determining how to allocate resources and in assessing
performance, which could eventually result in changes to the Company’s reportable segments.
The Company has four reportable segments: HRS, IEI, CEC and CTG. 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 for a description of the various product categories
manufactured under each of these segments.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
19. SEGMENT REPORTING (Continued)
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, customer related assets impairments, restructuring charges, the new revenue standard
adoption impact, contingencies and other, interest and other, net and other charges (income), net.
Selected financial information by segment is in the table below. For fiscal year 2019, the
Company recognized the cumulative effect of initially applying the new revenue standard as an
adjustment to the opening balance of retained earnings, as further described in note 2 to the
consolidated financial statements. The comparative information for the fiscal years 2018 and 2017 has
not been restated and continues to be reported under the accounting standards in effect at the time:
Fiscal Year Ended March 31,
2019 2018 2017
(In thousands)
Net sales:
High Reliability Solutions . . . . . . . . . . . . . . $ 4,828,950 $ 4,769,464 $ 4,149,438
Industrial & Emerging Industries . . . . . . . . . 6,182,637 5,972,496 4,967,738
Communications & Enterprise Compute . .
8,336,330 7,729,350 8,383,420
Consumer Technologies Group . . . . . . . . . 6,862,594 6,969,821 6,362,338
$26,210,511 $25,441,131 $23,862,934
Segment income and reconciliation of income before tax:
High Reliability Solutions . . . . . . . . . . . . . . $ 371,003 $ 380,878 $ 334,108
Industrial & Emerging Industries . . . . . . . . . 269,172 235,422 179,749
Communications & Enterprise Compute . . 214,723 186,335 229,332
Consumer Technologies Group . . . . . . . . . 121,336 111,629 179,910
Corporate and Other . . . . . . . . . . . . . . . . . . (104,471) (127,810) (107,850)
Total income . . . . . . . . . . . . . . . . . . . . . . 871,763 786,454 815,249
Reconciling items:
Intangible amortization . . . . . . . . . . . . . . . . 74,396 78,640 81,396
Stock-based compensation . . . . . . . . . . . . 76,032 85,244 82,266
Customer related asset impairments(1) . . . 87,093 6,251 92,915
Restructuring charges (Note 14) . . . . . . . . 113,313 90,691 49,395
New revenue standard adoption
impact (Note 2 & Note 3) . . . . . . . . . . . . . . 9,291 — —
Contingencies and other(2) . . . . . . . . . . . . 35,644 51,631 17,704
Interest and other, net . . . . . . . . . . . . . . . . . 183,454 122,823 99,532
Other charges (income), net (Note 15) . . . . 110,414 (169,719) 21,193
Income before income taxes . . . . . . . . . . $ 182,126 $ 520,893 $ 370,848
(1) Customer related asset impairments for fiscal year 2019, relate to provision for doubtful accounts
receivable, inventory and impairment of other assets for certain customers experiencing significant
financial difficulties and/or the Company is disengaging.
During fiscal year 2017, prices for solar panel modules declined significantly. The Company
determined that certain solar panel inventory on hand at the end of the fiscal year 2017 was not
fully recoverable and recorded a charge of $60 million to reduce the carrying costs to market in
fiscal year 2017. The Company also recognized a $16 million impairment charge for solar module
equipment and $17 million primarily related to negative margin sales and other associated direct
costs. The total charge of $93 million is included in cost of sales for fiscal year 2017 but is
excluded from segment results above.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
19. SEGMENT REPORTING (Continued)
(2) Contingencies and other during fiscal year 2019, primarily consists of costs incurred relating to the
independent investigation undertaken by the Audit Committee of the Company’s Board of
Directors which was completed in June 2018. In addition, Contingencies and other also includes
certain charges of the China based Multek operations that was divested in the second quarter of
fiscal year 2019.
During fiscal year 2018, the Company incurred charges in connection with certain legal matters,
for loss contingencies where it believed that losses were probable and estimable. Additionally, the
Company incurred various other charges predominately related to damages incurred from a
typhoon that impacted a China facility, as well as certain assets impairments during fiscal year
2018.
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.
The Company provides an overall platform of assets and services, which the segments utilize for
the benefit of their various customers. The shared assets and services are contained within the
Company’s global manufacturing and design operations and include manufacturing and design
facilities. Most of the underlying manufacturing and design assets are co-mingled in the operating
campuses and are compatible to operate across segments and highly interchangeable throughout the
platform. Given the highly interchangeable nature of the assets, they are not separately identified by
segments nor reported by segment to the Company’s CODM.
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 as described above. During fiscal year
2019, 2018 and 2017, depreciation expense included in the segments’ measure of operating
performance above is as follows. Historical information has been recast to reflect realignment of
customers and/or products between segments:
Fiscal Year Ended March 31,
2019 2018 2017
(In thousands)
Depreciation expense
High Reliability Solutions . . . . . . . . . . . . . . .
$ 97,114 $ 88,604
Industrial & Emerging Industries . . . . . . . . . 92,606 75,366 70,814
Communication & Enterprise Compute . . . . 103,162 118,150 133,057
Consumer Technologies Group . . . . . . . . . . 104,298 110,276 110,379
Corporate and Other . . . . . . . . . . . . . . . . . . . 36,493 33,526 29,384
$ 96,854
Total depreciation expense . . . . . . . . . .
$433,413
$434,432 $432,238
Geographic information of net sales is as follows:
Fiscal Year Ended March 31,
2019 2018 2017
(In thousands)
Net sales:
Asia . . . . . . . . . . . . . . . . . . . . . . . $11,469,617 44% $ 11,210,793 44% $10,962,075 46%
Americas . . . . . . . . . . . . . . . . . . . 9,893,072 38% 9,880,626 39% 8,582,849 36%
Europe . . . . . . . . . . . . . . . . . . . . . 4,847,822 18% 4,349,712 17% 4,318,010 18%
$26,210,511
$25,441,131 $23,862,934
Revenues are attributable to the country in which the product is manufactured, or service is
provided.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
19. SEGMENT REPORTING (Continued)
During fiscal years 2019, 2018 and 2017, net sales generated from Singapore, the principal
country of domicile, were approximately $642.7 million, $686.9 million and $595.3 million, respectively.
The following table summarized the countries that accounted for more than 10% of net sales in
fiscal year 2019, 2018, and 2017.
Fiscal Year Ended March 31,
Net sales: 2019 2018 2017
(In thousands)
China . . . . . . . . . . . . . . . . . . . . . . . $6,648,549 25% $7,449,591 29% $7,213,614 30%
Mexico . . . . . . . . . . . . . . . . . . . . . . 4,538,720 17% 4,361,814 17% 4,075,616 17%
U.S. . . . . . . . . . . . . . . . . . . . . . . . . 3,106,222 12% 2,860,242 11% 2,560,300 11%
Brazil . . . . . . . . . . . . . . . . . . . . . . . 2,181,025 8% 2,578,466 10% 1,907,591 8%
Malaysia . . . . . . . . . . . . . . . . . . . . . 1,996,152 8% 2,005,119 8% 2,267,478 10%
No other country accounted for more than 10% of net sales for the fiscal periods presented in the
table above.
Geographic information of property and equipment, net is as follows:
As of March 31,
2019 2018
(In thousands)
Property and equipment, net:
$ 903,288 39% $ 747,314 33%
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,003,708 43% 1,012,188 45%
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429,217 18% 480,004 22%
$2,336,213 $2,239,506
As of March 31, 2019 and 2018, property and equipment, net held in Singapore were
approximately $12.3 million and $12.6 million, respectively.
The following table summarized the countries that accounted for more than 10% of property and
equipment, net in fiscal year 2019 and 2018.
Fiscal Year Ended March 31,
Property and equipment, net: 2019 2018
(In thousands)
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$537,396 23% $586,594 26%
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523,124 22% 491,664 22%
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361,098 15% 305,222 14%
No other country accounted for more than 10% of property and equipment, net for the fiscal
periods presented in the table above.
20. QUARTERLY FINANCIAL DATA (UNAUDITED)
The Company’s third fiscal quarter ends on December 31, and the fourth fiscal quarter and fiscal
year ends on March 31 of each year. The first fiscal quarters of 2019 and 2018 ended on June 29,
2018 and June 30, 2017, respectively, and the second fiscal quarters of 2019 and 2018, ended on
September 28, 2018 and September 29, 2017, respectively.
The following table contains unaudited quarterly financial data for fiscal years 2019 and 2018. For
fiscal year 2019, the Company recognized the cumulative effect of initially applying the new revenue
standard as an adjustment to the opening balance of retained earnings, as further described in note 2
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLEX LTD.
20. QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued)
to the consolidated financial statements. The comparative information for the fiscal year 2018 has not
been restated and continues to be reported under the accounting standards in effect at the time.
Fiscal Year Ended March 31, 2019 Fiscal Year Ended March 31, 2018
First
Second
Third Fourth First Second
Third Fourth
Net sales(1) . . . . . . . . . . . . . . . . . . . . . . . . $6,398,956 $6,662,604 $6,922,827 $6,226,124 $6,008,272 $6,270,420 $6,751,552 $6,410,887
380,295 406,932 393,325 446,328 349,297
Gross profit(2) . . . . . . . . . . . . . . . . . . . . . .
377,854
402,301
357,325
Net income (loss)(3) . . . . . . . . . . . . . . . . .
116,035
86,885
(45,169)
(64,352) 124,710 205,086 118,333 (19,595)
Earnings (losses) per share(4):
Net income:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . $
0.22 $
0.16 $
(0.09) $
(0.12) $ 0.24 $ 0.39 $ 0.22 $ (0.04)
Diluted . . . . . . . . . . . . . . . . . . . . . . . $
0.22 $
0.16 $
(0.09) $
(0.12) $ 0.23 $ 0.38 $ 0.22 $ (0.04)
(1) The Company has made certain immaterial corrections to net sales previously reported for the
first three quarters of fiscal 2019 primarily to reflect revenue from certain contracts with customers
on a net basis. As a result, the amounts presented above for net sales are $25 million, $48 million
and $22 million lower than those previously reported for the first, second and third quarters of
fiscal year 2019, respectively. These corrections had no impact on gross profit or net income for
any period presented, as they were fully offset by corrections to cost of sales. The Company
evaluated these corrections, considering both qualitative and quantitative factors, and concluded
they are immaterial to previously issued financial statements and will make corrections
prospectively in subsequent quarterly filings.
(2) The Company recorded a total of $65.8 million restructuring charges during the third quarter of
fiscal year 2019. The Company classified $60.4 million of these charges as a component of cost
of sales and approximately $5.4 million as a component of selling, general and administrative
expenses. Refer to note 14 for additional information on these charges. The Company recorded
$82.7 million restructuring charges during the fourth quarter of fiscal year 2018. The Company
classified approximately $58.9 million of these charges as a component of cost of sales and
approximately $23.8 million of these charges as a component of selling, general and
administrative expenses.
(3) Net income for the fourth quarter of fiscal year 2019 was primarily affected by an $84 million
charge for the impairment of the Company’s investment in Elementum. Net income for the third
quarter of fiscal year 2019 was primarily affected by a $70 million charge for the impairment of the
Company’s investment in an unrelated third-party company. Net income for the first quarter of
fiscal year 2019 was affected by a $91.8 million gain on the deconsolidation of Bright Machines.
Refer to note 2 for further details on the investments impairment charges and the gain on
deconsolidation. Net income for the first quarter of fiscal year 2018 was affected by a $38.7 million
gain recognized for the disposition of Wink. Net income for the second quarter of fiscal year 2018
was affected by $151.6 million non-cash gain as a result of the deconsolidation of the Company’s
investment in Elementum.
(4) Earnings per share are computed independently for each quarter presented and basic shares are
used in the quarters with losses; 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, 2019. Based on
that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as
of March 31, 2019, 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. Internal control over financial reporting consists of 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) are designed and operated to provide
reasonable assurance regarding the reliability of the Company’s financial reporting and the
Company’s process for the preparation of financial statements for external purposes 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 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.
As of March 31, 2019, 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, 2019.
(c) Attestation Report of the Registered Public Accounting Firm
The effectiveness of the Company’s internal control over financial reporting as of March 31, 2019
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.”
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(d) Changes in Internal Control Over Financial Reporting
Throughout fiscal year 2019, we implemented enhanced and additional procedures to remediate
the control deficiencies that aggregated to material weaknesses in our internal control over financial
reporting relating to the accounting for customer contractual obligations and aspects of our control
environment and monitoring activities as disclosed in Item 9A on Form 10-K for the fiscal year ended
March 31, 2018.
Management, with the oversight of the Audit Committee, took the following steps as part of our
remediation efforts during fiscal 2019:
• Designed and implemented additional site level controls related to accounting for customer
contractual obligations including establishing criteria for effective contract reviews and
approvals with enhanced documentation to evidence judgements and estimates.
• Designed and implemented a centralized Contract Management Office responsible for the
determination of the appropriate accounting on material contracts including maintaining proper
evidence of review.
• Designed and implemented centralized oversight controls that provide enhanced visibility to the
accounting for customer contracts to ensure improved monitoring and detection of material
errors related to certain decentralized activities.
• Enhanced the quality and the frequency of training across all levels to improve awareness of
Company policies and knowledge of the expected standards of conduct.
Given the remediation efforts noted above, testing of applicable controls completed during the
fourth quarter and the determination that controls are designed and operating effectively, management
has concluded that the material weaknesses previously identified have been remediated as of
March 31, 2019.
Other than the changes described above there have not been any changes in our internal control
over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) as of March 31, 2019
that materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Flex Ltd.,
Singapore
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Flex Ltd. and subsidiaries (the
“Company”) as of March 31, 2019, based on criteria established in Internal Control—Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission(COSO). In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of March 31, 2019, based on the criteria established in
Internal Control—Integrated Framework (2013) issued by COSO.
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, 2019 of the Company and our report dated May 20, 2019, expressed an unqualified opinion
on those financial statements and included an explanatory paragraph related to the Company’s change
in method of accounting for revenue from contracts with customers in fiscal year 2019 due to the
adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers and
the Company’s change in method of accounting for cash receipts on the deferred purchase price from
asset-backed securitization programs in fiscal year 2019 due to the adoption of ASU 2016-15
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.
Basis for Opinion
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 are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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, internal control over financial reporting, may not prevent or
detect misstatements. Also, projections of any evaluation of the effectiveness 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.
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/s/ DELOITTE & TOUCHE LLP
San Jose, California
May 20, 2019
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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 the Company’s definitive proxy statement to
be delivered to shareholders in connection with the Company’s 2019 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 the Company’s definitive proxy statement to
be delivered to shareholders in connection with the Company’s 2019 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 the Company’s definitive proxy statement to
be delivered to shareholders in connection with the Company’s 2019 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 the Company’s definitive proxy statement to
be delivered to shareholders in connection with the Company’s 2019 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 the Company’s definitive proxy statement to
be delivered to shareholders in connection with the Company’s 2019 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.
“Schedule II—Valuation and Qualifying Accounts” is
included 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.”
3. Exhibits. Reference is made to Item 15(b) below.
(b) Exhibits. The Exhibit Index, which immediately precedes the signature page to this annual
report on Form 10-K, is incorporated by reference into this annual report on Form 10-K.
(c) Financial Statement Schedules. Reference is made to Item 15(a)(2) above.
ITEM 16. FORM 10-K SUMMARY
None
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Incorporated by
Reference
EXHIBIT INDEX
Exhibit
No.
3.01
4.01
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Constitution of the Registrant
10-Q
000-23354
10-31-16
3.01
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
4.1
4.02
Form of 4.625% Note due 2020
8-K
000-23354
02-22-13
4.03
Form of 5.000% Note due 2023
8-K
000-23354
02-22-13
4.1
4.1
4.04
4.05
4.06
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
4.07
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-K
000-23354
05-28-13
4.11
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
4.08
Form of 4.750% Note due 2025
8-K
000-23354
06-08-15
4.1
S-4
333-207067
09-22-15
4.04
4.09
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
119
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Incorporated by
Reference
Exhibit
No.
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
4.10
Description of Registrant’s Securities
X
10.01
10.02
10.03
10.04
10.05
Credit Agreement, dated as of June 30,
2017, among Flex Ltd. and certain of its
subsidiaries, from time to time party thereto,
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
Amendment No. 1, dated as of July 25,
2017, to 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†
8-K
000-23354
06-30-17
10.01
8-K
000-23354
12-01-16
10.01
10-Q
000-23354
10-30-17
10.01
10-K
000-23354
05-20-09
10.01
10-K
000-23354
05-20-09
10.02
10.06
Flex Ltd. 2010 Equity Incentive Plan†
8-K
000-23354
07-28-10
10.01
10.07
Form of Share Option Award Agreement
under 2010 Equity Incentive Plan†
10.08
Flex Ltd. 2017 Equity Incentive Plan†
10.09
10.10
10.11
10.12
Form of Restricted Share Unit Award
Agreement under the 2017 Equity Incentive
Plan for time-based vesting awards†
Form of Restricted Share Unit Award
Agreement under the 2017 Equity
Incentive Plan for performance-based
vesting awards†
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
000-23354
07-05-17
DEF
14A
Annex
A
10-Q
000-23354
10-30-17
10.05
10-Q
000-23354
10-30-17
10.06
10-Q
000-23354
02-06-09
10.02
10-Q
000-23354
02-06-09
10.01
10.13
Summary of Directors’ Compensation†
10-Q
000.23354
10-30-17
10.02
10.14
Executive Incentive Compensation
Recoupment Policy†
10-Q
000-23354
08-05-10
10.06
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CLEAN
Incorporated by
Reference
Exhibit
No.
10.15
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
2010 Flextronics International USA, Inc.
Deferred Compensation Plan†
10-Q
000-23354
11-03-10
10.04
10.16
Form of Award Agreement under 2010
Deferred Compensation Plan†
10.17
Summary of Compensation Arrangements
of Certain Executive Officers of Flex Ltd.†
10.18
10.19
10.20
Form of Restricted Share Unit Award
Agreement under the 2010 Equity Incentive
Plan for time-based vesting awards†
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)†
10.21
Award Agreement under the 2010
Deferred Compensation Plan†
10.22
10.23
Form of Restricted Share Unit Award
Agreement under the 2017 Equity
Incentive Plan for retention performance-
based vesting awards†
Form of Restricted Share Unit Award
Agreement under the 2017 Equity
Incentive Plan for retention service-based
vesting awards†
10.24
Description of Annual Incentive Bonus
Plan for Fiscal 2019†
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
10.02
10-Q
000-23354
08-02-13
10.03
10-Q
000-23354
07-28-14
10.01
10-Q
000-23354
02-06-19
10.01
10-Q
000-23354
08-02-18
10.01
10.25
NEXTracker Inc. 2014 Equity Incentive Plan†
S-8
333-207325
10-07-15
99.01
S-8
333-212267
06-27-16
99.01
10-Q
000-23354
02-06-19
10.02
10.26
BrightBox Technologies, Inc. 2013 Stock
Incentive Plan†
10.27
Flex Ltd. Executive Severance Plan†
10.28
Separation and Release of Claims dated
December 24, 2018 between Flex Ltd.
and Michael M. McNamara†
10.29
Revathi Advaithi Offer Letter, dated
February 7, 2019
21.01
Subsidiaries of Registrant
23.01
Consent of Deloitte & Touche LLP
24.01
Power of Attorney (included on the
signature page to this Form 10-K)
31.01
Certification of Chief Executive Officer
pursuant to Rule 13a-14(a) of the
Exchange Act
121
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CLEAN
Incorporated by
Reference
Filing Exhibit Filed
Exhibit Form File No. Date No. Herewith
Exhibit
No.
31.02
32.01
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
* 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
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.
Revathi Advaithi
Chief Executive Officer
By: /s/ REVATHI ADVAITHI
Date: May 20, 2019
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints jointly and severally, Revathi Advaithi and Christopher E. Collier and
each one of them, her or his attorneys-in-fact, each with the power of substitution, for her or 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 her 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/ REVATHI ADVAITHI
(Principal Executive Officer) May 20, 2019
Revathi Advaithi
Chief Executive Officer and Director
/S/ CHRISTOPHER E. COLLIER
(Principal Financial Officer) May 20, 2019
Christopher E. Collier
Chief Financial Officer
/S/ DAVID P. BENNETT
Officer (Principal Accounting Officer) May 20, 2019
David P. Bennett
Senior Vice President and Chief Accounting
/S/ MICHAEL D. CAPELLAS
Chairman of the Board May 20, 2019
Michael D. Capellas
/S/ JILL A. GREENTHAL
Director May 20, 2019
Jill A. Greenthal
/S/ JENNIFER LI
Director May 20, 2019
Jennifer Li
/S/ MARC A. ONETTO
Director May 20, 2019
Marc A. Onetto
123
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Signature Title Date
/S/ WILLY C. SHIH, PH.D.
Director May 20, 2019
Willy C. Shih, Ph.D.
/S/ CHARLES K. STEVENS, III
Director May 20, 2019
Charles K. Stevens, III
/S/ LAY KOON TAN
Director May 20, 2019
Lay Koon Tan
/S/ WILLIAM D. WATKINS
Director May 20, 2019
William D. Watkins
/S/ LAWRENCE A. ZIMMERMAN
Director May 20, 2019
Lawrence A. Zimmerman
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CLEAN
Shareholder Information
CORPORATE HEADQUARTERS
2 Changi South Lane
Singapore 486123
Tel: +65.6876.9899
EXTRAORDINARY AND 2019 ANNUAL GENERAL
MEETINGS
The Extraordinary and 2019 Annual General Meetings of
Shareholders will be held beginning at 9:00 A.M. Pacific
time on August 20, 2019. The meetings 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: +1.408.957.8728
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, 2019. 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
EXECUTIVE OFFICERS
Revathi Advaithi—Chief Executive Officer
Christopher E. Collier—Chief Financial Officer
François P. Barbier—Group President, Global
Operations and Components
David P. Bennett—Chief Accounting Officer
Douglas M. Britt—President, Flex Integrated Solutions
Paul J. Humphries—Group President, High Reliability
Solutions
Scott Offer—Executive Vice President and General
Counsel
DIRECTORS
Revathi Advaithi—Chief Executive Officer, Flex Ltd.
Michael D. Capellas—Principal, Capellas Strategic
Partners
Jill A. Greenthal—Senior Advisor in Private Equity of
The Blackstone Group
Jennifer Li—General Partner, Changcheng Investment
Partners
Marc A. Onetto—Principal, Leadership from the Mind
and the Heart LLC
Dr. Willy C. Shih—Professor of Management Practice at
the Harvard Business School
Charles K. Stevens, III—Former Chief Financial Officer
of General Motors
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
the
letter
including
FORWARD LOOKING STATEMENTS
This annual report,
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, 2019.
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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. 2019. All rights reserved. Reproduction, adaptation, or translation without prior written permission is
prohibited except as allowed under the copyright laws.
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CLEAN
Flex Ltd.
Extraordinary and 2019 Annual General Meetings of Shareholders
Directions and Parking Information
August 20, 2019
9:00 A.M. Pacific time
The Extraordinary and 2019 Annual General Meetings of Shareholders will be held at 6201
America Center Dr., San Jose, CA 95002 at beginning 9:00 A.M. Pacific time.
Directions from San Francisco International Airport
• Head North on International Terminal Departures
• Take the ramp to US-101 S
• Keep left at the fork and merge onto US-101 S and continue on US-101 S to Milpitas
• Take the exit onto CA-237 E toward Alviso/Milpitas
• Take the exit toward Lafayette Street
• Turn left onto Great America Parkway
• At the traffic circle, continue straight to stay on America Center Drive
• Destination will be on the left
Directions from Mineta San Jose International Airport
• Head Northwest on Airport Blvd toward Airport Pkwy
• Slight right onto Airport Pkwy
• Turn right onto Matrix Blvd. and then a sharp left onto N. 1st Street
• Slight right to merge onto US-101 N
• Take the Great America Pkwy exit toward Bowers Avenue
• Turn right onto Great America Pkwy and continue onto America Center Drive
• At the traffic circle, continue straight to stay on America Center Drive
• Destination will be on the left
Directions from Oakland International Airport
• Head Southeast the slight left toward Airport Drive
• Continue onto Airport Drive
• Continue onto Bessie Coleman Drive
• Continue onto 98th Avenue then slight right onto I-880 S ramp to San Jose
• Continue onto I-880 S
• Take the CA-237 W exit toward Mountain View and merge onto CA-237 W
• Take the Great America Pkwy exit toward Lafayette Street
• Turn right onto Great America Pkwy and continue onto America Center Drive
• At the traffic circle, continue straight to stay on America Center Drive
• 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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