FLEX LTD. - Quarter Report: 2020 December (Form 10-Q)

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-23354

FLEX LTD.

(Exact name of registrant as specified in its charter)


Singapore						Not Applicable
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)


2 Changi South Lane,
Singapore						486123
(Address of registrant’s principal executive offices)						(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

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 ☐

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 ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s ordinary shares outstanding as of January 25, 2021 was 499,172,368.

Table of Contents

FLEX LTD.

INDEX


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Report of Independent Registered Public Accounting Firm	3
	Condensed Consolidated Balance Sheets (unaudited) — December 31 , 2020 and March 31, 2020	4
	Condensed Consolidated Statements of Operations (unaudited) — Three-Month and Nine-Month Periods Ended December 31, 2020 and December 31, 2019	5
	Condensed Consolidated Statements of Comprehensive Income (unaudited) — Three-Month and Nine-Month Periods Ended December 31, 2020 and December 31, 2019	6
	Condensed Consolidated Statements of Shareholders' Equity (unaudited) — Three-Month and Nine-Month Periods Ended December 31, 2020 and December 31, 2019	7
	Condensed Consolidated Statements of Cash Flows (unaudited) — Nine-Month Periods Ended December 31, 2020 and December 31, 2019	9
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
Signatures		47

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Flex Ltd.

Singapore

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of Flex Ltd. and its subsidiaries (the “Company”) as of December 31, 2020, the related condensed consolidated statements of operations, comprehensive income and shareholders' equity for the three-month and nine-month periods ended December 31, 2020 and December 31, 2019, and the condensed consolidated statements of cash flows for the nine-month periods ended December 31, 2020 and December 31, 2019, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of Flex Ltd. and subsidiaries as of March 31, 2020 and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated May 28, 2020, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding changes in accounting principles. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 2020 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

The interim financial information is the responsibility of the Company’s management. 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 reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


/s/ DELOITTE & TOUCHE LLP
San Jose, California
January 29, 2021

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS


	As of December 31, 2020		As of March 31, 2020
	(In millions, except share amounts) (Unaudited)


ASSETS
Current assets:
Cash and cash equivalents	$	2,611	$	1,923
Accounts receivable, net of allowance of $77 and $96, respectively	4,070		2,436
Contract assets	121		282
Inventories	3,699		3,785
Other current assets	610		660
Total current assets	11,111		9,086
Property and equipment, net	2,097		2,216
Operating lease right-of-use assets, net	609		605
Goodwill	1,109		1,065
Other intangible assets, net	233		262
Other assets	509		456
Total assets	$	15,668	$	13,690

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank borrowings and current portion of long-term debt	$	72	$	149
Accounts payable	5,159		5,108
Accrued payroll	475		364

Other current liabilities	1,813		1,590
Total current liabilities	7,519		7,211
Long-term debt, net of current portion	3,740		2,689
Operating lease liabilities, non-current	544		529
Other liabilities	484		430

Shareholders’ equity

Ordinary shares, no par value; 549,211,158 and 547,665,632 issued, and 498,971,803 and 497,426,277 outstanding, respectively	6,360		6,336
Treasury stock, at cost; 50,239,355 shares as of December 31, 2020 and March 31, 2020	(388)		(388)
Accumulated deficit	(2,529)		(2,902)
Accumulated other comprehensive loss	(62)		(215)


Total shareholders’ equity	3,381		2,831
Total liabilities and shareholders’ equity	$	15,668	$	13,690

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three-Month Periods Ended				Nine-Month Periods Ended
	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
	(In millions, except per share amounts) (Unaudited)
Net sales	$	6,720	$	6,461	$	17,858	$	18,725
Cost of sales	6,212		6,017		16,618		17,578
Restructuring charges	29		14		63		175
Gross profit	479		430		1,177		972
Selling, general and administrative expenses	222		218		606		633
Intangible amortization	16		16		47		49
Restructuring charges	1		1		12		24
Interest and other, net	7		50		58		153

Income before income taxes	233		145		454		113
Provision for income taxes	25		34		81		74
Net income	$	208	$	111	$	373	$	39



Earnings per share:
Basic	$	0.42	$	0.22	$	0.75	$	0.08
Diluted	$	0.41	$	0.22	$	0.74	$	0.08
Weighted-average shares used in computing per share amounts:
Basic	500		507		500		511
Diluted	508		510		505		515

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three-Month Periods Ended				Nine-Month Periods Ended
	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
	(In millions) (Unaudited)
Net income	$	208	$	111	$	373	$	39
Other comprehensive income (loss):
Foreign currency translation adjustments, net of zero tax	42		10		87		(11)
Unrealized gain (loss) on derivative instruments and other, net of zero tax	29		14		66		(3)
Comprehensive income	$	279	$	135	$	526	$	25

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


	Ordinary Shares					Accumulated Other Comprehensive Loss						Total
Three Months Ended December 31, 2020	Shares Outstanding	Amount		Accumulated Deficit		Unrealized Gain (Loss) on Derivative Instruments and Other		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Loss		Shareholders' Equity
	(In millions) Unaudited








BALANCE AT SEPTEMBER 25, 2020	501	$	5,985	$	(2,737)	$	(45)	$	(88)	$	(133)	$	3,115


Repurchase of Flex Ltd. ordinary shares at cost	(2)	(38)		—		—		—		—		(38)

Net income	—	—		208		—		—		—		208
Stock-based compensation	—	25		—		—		—		—		25

Total other comprehensive income	—	—		—		29		42		71		71
BALANCE AT DECEMBER 31, 2020	499	$	5,972	$	(2,529)	$	(16)	$	(46)	$	(62)	$	3,381


	Ordinary Shares					Accumulated Other Comprehensive Loss						Total
Nine Months Ended December 31, 2020	Shares Outstanding	Amount		Accumulated Deficit		Unrealized Gain (Loss) on Derivative Instruments and Other		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Loss		Shareholders' Equity
	(In millions) Unaudited
BALANCE AT MARCH 31, 2020	497	$	5,948	$	(2,902)	$	(82)	$	(133)	$	(215)	$	2,831


Repurchase of Flex Ltd. ordinary shares at cost	(2)	(38)		—		—		—		—		(38)
Issuance of Flex Ltd. vested shares under restricted share unit awards	4	—		—		—		—		—		—
Net Income	—	—		373		—		—		—		373
Stock-based compensation	—	62		—		—		—		—		62

Total other comprehensive income	—	—		—		66		87		153		153
BALANCE AT DECEMBER 31, 2020	499	$	5,972	$	(2,529)	$	(16)	$	(46)	$	(62)	$	3,381

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Continued)


	Ordinary Shares					Accumulated Other Comprehensive Loss						Total
Three Months Ended December 31, 2019	Shares Outstanding	Amount		Accumulated Deficit		Unrealized Gain (Loss) on Derivative Instruments and Other		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Loss		Shareholders' Equity
	(In millions) Unaudited








BALANCE AT SEPTEMBER 27, 2019	509	$	6,058	$	(3,062)	$	(59)	$	(131)	$	(190)	$	2,806
Repurchase of Flex Ltd. ordinary shares at cost	(5)	(61)		—		—		—		—		(61)
Exercise of stock options	—			—		—		—		—		—

Net income	—	—		111		—		—		—		111
Stock-based compensation	—	19		—		—		—		—		19

Total other comprehensive income	—	—		—		14		10		24		24
BALANCE AT DECEMBER 31, 2019	504	$	6,016	$	(2,951)	$	(45)	$	(121)	$	(166)	$	2,899


	Ordinary Shares					Accumulated Other Comprehensive Loss						Total
Nine Months Ended December 31, 2019	Shares Outstanding	Amount		Accumulated Deficit		Unrealized Gain (Loss) on Derivative Instruments and Other		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Loss		Shareholders' Equity
	(In millions) Unaudited
BALANCE AT MARCH 31, 2019	517	$	6,136	$	(3,012)	$	(42)	$	(110)	$	(152)	$	2,972
Repurchase of Flex Ltd. ordinary shares at cost	(16)	(173)		—		—		—		—		(173)
Exercise of stock options	—	1		—		—		—		—		1
Issuance of Flex Ltd. vested shares under restricted share unit awards	3	—		—		—		—		—		—
Net income	—	—		39		—		—		—		39
Stock-based compensation	—	53		—		—		—		—		53
Cumulative effect on opening equity of adopting accounting standards and other	—	(1)		22		—		—		—		21
Total other comprehensive loss	—	—		—		(3)		(11)		(14)		(14)
BALANCE AT DECEMBER 31, 2019	504	$	6,016	$	(2,951)	$	(45)	$	(121)	$	(166)	$	2,899

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine-Month Periods Ended
	December 31, 2020		December 31, 2019
	(In millions) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	373	$	39
Depreciation, amortization and other impairment charges	526		526
Changes in working capital and other, net	(916)		(2,264)
Net cash used in operating activities	(17)		(1,699)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(261)		(376)
Proceeds from the disposition of property and equipment	25		102


Cash collections of deferred purchase price	—		2,511
Other investing activities, net	10		24
Net cash provided by (used in) investing activities	(226)		2,261
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings and long-term debt	1,944		1,017
Repayments of bank borrowings and long-term debt	(1,012)		(1,308)

Payments for repurchases of ordinary shares	(38)		(173)

Other financing activities, net	(1)		2
Net cash provided by (used in) financing activities	893		(462)
Effect of exchange rates on cash and cash equivalents	38		(8)
Net increase in cash and cash equivalents	688		92
Cash and cash equivalents, beginning of period	1,923		1,697
Cash and cash equivalents, end of period	$	2,611	$	1,789

Non-cash investing activities:
Unpaid purchases of property and equipment	$	73	$	64

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION OF THE COMPANY AND BASIS OF PRESENTATION

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 the manufacturing partner of choice that helps a diverse customer base design and build products that improve the world. Through the collective strength of a global workforce across approximately 30 countries and responsible, sustainable operations, the Company delivers technology innovation, supply chain, and manufacturing solutions to diverse industries and end markets. In the first quarter of fiscal year 2021, the Company made certain changes in its organizational structure as part of its strategy to further drive growth and productivity with two focused delivery models. As a result, beginning in the first quarter of fiscal year 2021, the Company reports its financial performance based on two operating and reportable segments:

•Flex Agility Solutions ("FAS"), which is comprised of the following end markets:

◦Communications, Enterprise and Cloud ("CEC"), including data infrastructure, edge infrastructure and communication infrastructure;

◦Lifestyle, including appliances, consumer packaging, floorcare, micro mobility and audio; and

◦Consumer Devices, including mobile and high velocity consumer devices.

•Flex Reliability Solutions ("FRS"), which is comprised of the following end markets:

◦Automotive, including autonomous, connectivity, electrification, and smart technologies;

◦Health Solutions, including medical devices, medical equipment and drug delivery; and

◦Industrial, including capital equipment, industrial devices, renewable and grid edge, and power systems.

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), supply chain management software solutions, and component product offerings (including flexible printed circuit boards and power adapters and chargers).

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) for interim financial information and in accordance with the requirements of Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements, and should be read in conjunction with the Company’s audited consolidated financial statements as of and for the fiscal year ended March 31, 2020 contained in the Company’s Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine-month periods ended December 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2021. Beginning in the second quarter of fiscal year 2021, the Company began reporting all dollar amounts in millions. In certain circumstances, this change in rounding resulted in line items being removed within prior year disclosures. Certain prior period amounts in the condensed consolidated financial statements, as well as in the Notes thereto, have been reclassified to conform to the current presentation.

The first quarters for fiscal years 2021 and 2020 ended on June 26, 2020, which is comprised of 87 days in the period, and June 28, 2019, which is comprised of 89 days in the period, respectively. The second quarters for fiscal years 2021 and 2020 ended on September 25, 2020 and September 27, 2019, which are comprised of 91 days in both periods. The Company's third quarters for fiscal years 2021 and 2020 ended on December 31 of each year, which are comprised of 97 days and 95 days, respectively.

The accompanying unaudited condensed consolidated financial statements include the accounts of Flex and its majority-owned subsidiaries, after elimination of intercompany accounts and transactions. 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

Table of Contents

of the noncontrolling owners. The associated noncontrolling owners' interest in the income or losses of these companies is not 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 condensed consolidated statements of operations.

The changes to the Company’s organizational structure noted above had no impact on the condensed consolidated financial statements. For comparability purposes, segment reporting for prior periods have been restated to conform to the current presentation. Refer to note 14, “Segment Reporting,” for additional information on the changes in operating and reportable segments.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates are used in accounting for, among other things: allowances for doubtful accounts; inventory write-downs; valuation allowances for deferred tax assets; uncertain tax positions; valuation and useful lives of long-lived assets including property, equipment, and intangible assets; valuation of 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; incremental borrowing rates in determining the present value of lease payments; 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. Due to the COVID-19 pandemic, there has been and will continue to be uncertainty and disruption in the global economy and financial markets. The Company has made estimates and assumptions taking into consideration certain possible impacts due to COVID-19. These estimates may change, as new events occur, and additional information is obtained. Actual results may differ from previously estimated amounts, and such differences may be material to the condensed consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.

Recently Adopted Accounting Pronouncement

In March 2020, the FASB issued ASU 2020-04 "Facilitation of the Effects of Reference Rate Reform on Financial Reporting", which temporarily simplifies the accounting for contract modifications, including hedging relationships, due to the transition from LIBOR and other interbank offered rates to alternative reference interest rates. For example, entities can elect not to remeasure the contracts at the modification date or reassess a previous accounting determination if certain conditions are met. Additionally, entities can elect to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain conditions are met. The Company adopted the guidance during the first quarter of fiscal year 2021 with an immaterial impact on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, and ASU 2019-11, which replace the existing incurred loss impairment model with an expected credit loss model and require a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The Company adopted the guidance during the first quarter of fiscal year 2021 with an immaterial impact on its consolidated financial statements.

Recently Issued Accounting Pronouncements

In October 2020, the FASB issued ASU 2020-10 "Codification Improvements", which improves consistency by amending the Codification to include all disclosure guidance in the appropriate disclosure sections and clarifies application of various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology. The guidance is effective for the Company beginning in the first quarter of fiscal year 2022 with early adoption permitted. The Company expects the new guidance will have an immaterial impact on its consolidated financial statements, and intends to adopt the guidance when it becomes effective in the first quarter of fiscal year 2022.

In October 2020, the FASB issued ASU 2020-09 "Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762." which amends and supersedes SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Release No. 33-10762 related to financial disclosure requirements for subsidiary issuers and guarantors of registered debt securities and affiliates whose securities are pledged as collateral for registered securities. The guidance is effective for the Company beginning in the fourth 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 intends to adopt the guidance when it becomes effective in the fourth quarter of fiscal year 2021.

Table of Contents

In January 2020, the FASB issued ASU 2020-01 "Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815 — a consensus of the FASB Emerging Issues Task Force," which makes improvements related to the following two topics: (1) accounting for certain equity securities when the equity method of accounting is applied or discontinued, and (2) scope considerations related to forward contracts and purchased options on certain securities. The guidance is effective for the Company beginning in the first quarter of fiscal year 2022 with early adoption permitted. The Company expects the new guidance will have an immaterial impact on its consolidated financial statements, and intends to adopt the guidance when it becomes effective in the first quarter of fiscal year 2022.

In December 2019, the FASB issued ASU 2019-12 "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," which removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The guidance is effective for the Company beginning in the first quarter of fiscal year 2022 with early adoption permitted. The Company expects the new guidance will have an immaterial impact on its consolidated financial statements, and intends to adopt the guidance when it becomes effective in the first quarter of fiscal year 2022.

2. BALANCE SHEET ITEMS

Inventories

The components of inventories, net of applicable lower of cost and net realizable value write-downs, were as follows:


	As of December 31, 2020		As of March 31, 2020
	(In millions)
Raw materials	$	2,625	$	2,836
Work-in-progress	472		373
Finished goods	602		576
	$	3,699	$	3,785

Goodwill and Other Intangible Assets

In accordance with accounting guidance on goodwill and other intangible assets, the Company evaluates goodwill for impairment at the reporting unit level annually, and in certain circumstances such as a change in reporting units or whenever there are indications that goodwill might be impaired. As described in note 1, the Company made certain changes in its organizational structure during the first quarter of fiscal year 2021 as part of its strategy to further drive growth and productivity through two separate delivery models that represent reportable segments, FAS and FRS. With these changes, the Company also revised its reporting units. Accordingly, the Company completed an interim test as of April 1, 2020. 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 the Company's 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 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.

Based on the latest assessment of its goodwill as of April 1, 2020, the Company determined that no impairment existed as of the date of the impairment test, because the fair value of each one of its reporting units exceeds its respective carrying value. In addition, goodwill was reallocated among each of the Company's six reporting units based on each reporting unit’s relative fair value as of April 1, 2020. The Company considered whether an interim impairment test should be performed as of December 31, 2020 and concluded that there were no events or changes in circumstances that indicated the carrying amount of goodwill may not be recoverable. It will perform its next annual impairment test with a valuation date of January 1, 2021 to be completed in the period ending March 31, 2021. The following table summarizes the goodwill allocation as of April 1, 2020 and the activity during the nine-month period ended December 31, 2020:

Table of Contents


	FAS						FRS
	Communications, Enterprise and Cloud		Lifestyle		Consumer Devices		Automotive		Health Solutions		Industrial		Total
	(In millions)
Balance at April 1, 2020	$	188	$	131	$	51	$	174	$	192	$	329	$	1,065



Foreign currency translation adjustments	1		—		—		39		4		—		44
Balance at December 31, 2020	$	189	$	131	$	51	$	213	$	196	$	329	$	1,109

The components of acquired intangible assets are as follows:


	As of December 31, 2020						As of March 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(In millions)
Intangible assets:
Customer-related intangibles	$	280	$	(149)	$	131	$	275	$	(128)	$	147
Licenses and other intangibles	258		(156)		102		245		(130)		115
Total	$	538	$	(305)	$	233	$	520	$	(258)	$	262

The gross carrying amounts of intangible assets are removed when fully amortized. The estimated future annual amortization expense for intangible assets is as follows:


Fiscal Year Ending March 31,	Amount
	(In millions)
2021 (1)	$	16
2022	55
2023	47
2024	45
2025	40
Thereafter	30
Total amortization expense	$	233

____________________________________________________________

(1)Represents estimated amortization for the remaining fiscal three-month period ending March 31, 2021.

Other Current Liabilities

Other current liabilities include customer working capital advances of $371.3 million and $264.2 million, customer-related accruals of $242.7 million and $195.1 million, and current operating lease liabilities of $125.2 million and $114.1 million as of December 31, 2020 and March 31, 2020, 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.

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 creates enforceable rights and obligations and can be written, verbal, or implied. The Company generally enters into master supply agreements (“MSA”) with its customers

Table of Contents

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 addendum, 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) identifies the contracts with the customers; (ii) identifies performance obligations in the contracts; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations per the contracts; and (v) recognizes 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). 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).

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

Table of Contents

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 condensed consolidated balance sheets and transferred to receivables when rights to payment become unconditional.

A contract liability is recognized when the Company receives payments in advance of the satisfaction of performance and is included in other current liabilities on the condensed consolidated balance sheets. Contract liabilities, identified as deferred revenue, were $483.4 million and $361.5 million as of December 31, 2020 and March 31, 2020, 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 three and nine-month periods ended December 31, 2020 and December 31, 2019, respectively.


	Three-Month Periods Ended				Nine-Month Periods Ended
	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
Timing of Transfer	(In millions)
FAS
Point in time	$	3,544	$	3,104	$	8,813	$	9,060
Over time	290		527		1,250		2,062
Total	3,834		3,631		10,063		11,122
FRS
Point in time	2,189		2,050		5,292		5,101
Over time	697		780		2,503		2,502
Total	2,886		2,830		7,795		7,603
Flex
Point in time	5,733		5,154		14,105		14,161
Over time	987		1,307		3,753		4,564
Total	$	6,720	$	6,461	$	17,858	$	18,725

4. SHARE-BASED COMPENSATION

The Company's primary plan used for granting equity compensation awards is the 2017 Equity Incentive Plan (the "2017 Plan").

The following table summarizes the Company’s share-based compensation expense:


	Three-Month Periods Ended				Nine-Month Periods Ended
	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
	(In millions)
Cost of sales	$	6	$	4	$	16	$	11
Selling, general and administrative expenses	19		15		46		42
Total share-based compensation expense	$	25	$	19	$	62	$	53

Total unrecognized compensation expense related to share options under all plans as well as the number of options outstanding and exercisable were immaterial as of December 31, 2020.

During the nine-month period ended December 31, 2020, the Company granted 11.0 million unvested restricted share unit ("RSU") awards. Of this amount, approximately 9.4 million are plain-vanilla unvested RSU awards that vest over a period of two to four years, with no performance or market conditions, and with an average grant date price of $10.34 per award. Further, approximately 1.6 million unvested shares represent the target amount of grants made to certain key employees whereby vesting is contingent on certain market conditions. The average grant date fair value of these awards contingent on certain market conditions was estimated to be $15.03 per award and was calculated using a Monte Carlo simulation. The number of

Table of Contents

shares contingent on market conditions that ultimately will vest will range from zero up to a maximum of 3.2 million based on a measurement of the percentile rank of the Company’s total shareholder return over a certain specified period against the Standard and Poor’s (“S&P”) 500 Composite Index, and will cliff vest after a period of three years, to the extent such market conditions have been met.

As of December 31, 2020, approximately 20.4 million unvested RSU awards under all plans were outstanding, of which vesting for a targeted amount of 3.7 million awards is contingent primarily on meeting certain market conditions. The number of shares that will ultimately be issued can range from zero to 7.4 million based on the achievement levels of the respective conditions. During the nine-month period ended December 31, 2020, no shares vested in connection with the awards with market conditions granted in fiscal year 2018.

As of December 31, 2020, total unrecognized compensation expense related to unvested RSU awards under all plans was approximately $153.6 million, and will be recognized over a weighted-average remaining vesting period of 2.1 years.

Table of Contents

5. EARNINGS PER SHARE

The following table reflects basic weighted-average ordinary shares outstanding and diluted weighted-average ordinary share equivalents used to calculate basic and diluted earnings per share attributable to the shareholders of Flex:


	Three-Month Periods Ended				Nine-Month Periods Ended
	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
	(In millions, except per share amounts)
Basic earnings per share:
Net income	$	208	$	111	$	373	$	39
Shares used in computation:
Weighted-average ordinary shares outstanding	500		507		500		511
Basic earnings per share	$	0.42	$	0.22	$	0.75	$	0.08

Diluted earnings per share:
Net income	$	208	$	111	$	373	$	39
Shares used in computation:
Weighted-average ordinary shares outstanding	500		507		500		511
Weighted-average ordinary share equivalents from stock options and RSU awards (1) (2)	8		3		5		4
Weighted-average ordinary shares and ordinary share equivalents outstanding	508		510		505		515
Diluted earnings per share	$	0.41	$	0.22	$	0.74	$	0.08

____________________________________________________________

(1)An immaterial number of options to purchase ordinary shares were excluded from the computation of diluted earnings per share during the three and nine-month periods ended December 31, 2020 and December 31, 2019, respectively, due to their anti-dilutive impact on the weighted-average ordinary share equivalents.

(2)An immaterial number of RSU awards and 2.9 million RSU awards for the three and nine-month periods ended December 31, 2020, respectively, were excluded from the computation of diluted earnings per share due to their anti-dilutive impact on the weighted-average ordinary share equivalents. RSU awards of 3.7 million and 4.0 million for the three and nine-month periods ended December 31, 2019, respectively, were excluded from the computation of diluted earnings per share.

Table of Contents

6. BANK BORROWINGS AND LONG-TERM DEBT

Bank borrowings and long-term debt as of December 31, 2020 are as follows:


	As of December 31, 2020		As of March 31, 2020
	(In millions)
Term Loan, including current portion, due in installments through June 2022	$	—	$	433
5.000% Notes due February 2023	500		500
Term Loan due April 2024 - three-month Yen LIBOR plus 0.500%	324		310
4.750% Notes due June 2025	598		597
3.750% Notes due February 2026	695		—
4.875% Notes due June 2029	661		662
4.875% Notes due May 2030	696		—
India Facilities	136		138
Other	225		211
Debt issuance costs	(23)		(13)
	3,812		2,838
Current portion, net of debt issuance costs	(72)		(149)
Non-current portion	$	3,740	$	2,689

The weighted-average interest rate for the Company's long-term debt was 4.0% as of December 31, 2020 and March 31, 2020, respectively.

Scheduled repayments of the Company's bank borrowings and long-term debt as of December 31, 2020 are as follows:


Fiscal Year Ending March 31,	Amount
	(In millions)
2021 (1)	$	56
2022	222
2023	531
2024	53
2025	324
Thereafter	2,649
Total	$	3,835

(1)Represents estimated repayments for the remaining fiscal three-month period ending March 31, 2021.

Notes due February 2026 and May 2030

In May 2020, the Company issued $425 million aggregate principal amount of 3.750% Notes due February 2026 (the "Existing 2026 Notes"), at 99.617% of face value and $325 million aggregate principal amount of 4.875% Notes due May 2030 (the "Existing 2030 Notes" and, together with the Existing 2026 Notes, the "Existing Notes"), at 99.562% of face value. In August 2020, as a further issuance of the Existing Notes, the Company issued under the same terms (other than the initial interest accrual date and first interest payment date for the additional 2026 Notes, and the initial offering price and the issue date for the additional 2026 and 2030 Notes), an additional $250 million of 3.750% Notes due February 2026 (together with the Existing 2026 Notes, the "2026 Notes"), at 109.294% of face value, and $325 million of 4.875% Notes due May 2030 (together with the Existing 2030 Notes, the "2030 Notes"), at 114.863% of face value. Immediately after the issuance of the additional notes issued in August 2020, the Company has $675 million aggregate principal amount of 3.750% Notes due 2026 outstanding and $650 million aggregate principal amount of 4.875% Notes due 2030 outstanding. The Company received in aggregate, proceeds of approximately $1.4 billion, net of discounts and after premiums, from the issuances, which have been used for working capital and other general corporate purposes, in addition to repaying the term loan due June 2022. The Company incurred and capitalized as a direct reduction to the carrying amount of the Notes presented on the balance sheet approximately $12.8 million of costs in conjunction with the issuance of the Notes.

Interest on the 2026 Notes and the 2030 Notes is payable semi-annually, commencing on August 1, 2020 and November 12, 2020, respectively, except that interest on the additional 2026 Notes is payable commencing February 1, 2021. The Notes are senior unsecured obligations of the Company and rank equally with all of the Company's other existing and future senior and unsecured debt obligations.

Table of Contents

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; 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 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 trustee or holders of at least 25% in aggregate principal amount of the then outstanding 2026 Notes or 2030 Notes may declare all of such series of Notes to be due and payable immediately, but upon certain conditions such declaration and its consequences may be rescinded and annulled by the holders of a majority in principal amount of such series of Notes. As of December 31, 2020, the Company was in compliance with the covenants in the indenture governing the Notes.

7. INTEREST AND OTHER, NET

Interest and other, net for the three and nine-month periods ended December 31, 2020 and December 31, 2019 are primarily composed of the following:


	Three-Month Periods Ended				Nine-Month Periods Ended
	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
	(In millions)
Interest expenses on debt obligations (1)	$	40	$	35	$	111	$	114
ABS and AR sales programs related expenses	2		11		9		35
Interest income	(4)		(5)		(10)		(15)
Gain on foreign exchange transactions	(3)		(3)		(8)		(7)
Equity in (earnings) losses (2)	(49)		(1)		(64)		5
Investment impairment (3)	20		16		21		23

(1)Interest expense on debt obligations for the three and nine-month periods ended December 31, 2019 include debt extinguishment costs of $0.8 million and $7.2 million, respectively, related to the full repayments of the Notes due February 2020 and the Term Loan due November 2021. There were immaterial debt extinguishment costs incurred during fiscal year 2021 from the repayment of the term loan due June 2022.

(2)Represents (gains) losses on strategic investments in privately held companies accounted under equity method. During the three and nine-month periods ended December 31, 2020, the Company recognized equity in earnings of $49.0 million and $63.6 million, respectively, driven by unrealized gains of $44.0 million and $55.2 million, respectively, from the value increase in certain investment funds.

(3)During the three-month periods ended December 31, 2020, and December 31, 2019, the Company incurred impairment charges of $20.1 million and $15.8 million, respectively, related to a certain investment as a result of the Company’s ongoing assessment of its investment portfolio strategy and conclusion that the carrying amount of its investment was other than temporarily impaired.

8. FINANCIAL INSTRUMENTS

Foreign Currency Contracts

The Company enters into short-term and long-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 December 31, 2020, the aggregate notional amount of the Company’s outstanding foreign currency derivative contracts was $9.5 billion as summarized below:

Table of Contents


	Foreign Currency Amount		Notional Contract Value in USD
Currency	Buy	Sell	Buy		Sell
	(In millions)
Cash Flow Hedges

CNY	2,751	—	$	421	$	—

HUF	33,062	—	111		—


JPY	33,525	—	300		—
MXN	5,133	—	258		—
MYR	389	44	96		11



Other	N/A	N/A	219		67
			1,405		78
Other Foreign Currency Contracts
BRL	—	646	—		125
CAD	128	112	100		87

CNY	3,178	391	482		60
EUR	2,025	2,113	2,473		2,580
GBP	55	78	74		105
HUF	63,519	63,796	213		214
ILS	571	150	177		47


MXN	6,882	5,519	346		277
MYR	671	291	165		72

SEK	393	455	47		55

Other	N/A	N/A	219		143
			4,296		3,765

Total Notional Contract Value in USD			$	5,701	$	3,843

As of December 31, 2020, 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 condensed consolidated balance sheets. Certain of these contracts are designed to economically hedge the Company’s exposure to monetary assets and liabilities denominated in a non-functional currency and are not accounted for as hedges under the accounting standards. Accordingly, changes in the fair value of these instruments are recognized in earnings during the period of change as a component of interest and other, net in the condensed consolidated statements of operations. As of December 31, 2020 and March 31, 2020, the Company also has included net deferred gains and losses in accumulated other comprehensive loss, a component of shareholders’ equity in the condensed consolidated balance sheets, relating to changes in fair value of its foreign currency contracts that are accounted for as cash flow hedges. Deferred gains were $39.0 million as of December 31, 2020, and are expected to be recognized primarily as a component of cost of sales in the condensed consolidated statements of operations primarily over the next twelve-month period, except for the USD JPY cross currency swap, which is further discussed below.

The Company entered into a USD JPY cross currency swap to hedge the foreign currency risk on the JPY term loan due April 2024, and the fair value of the cross currency swap was included in other assets as of December 31, 2020. The changes in fair value of the USD JPY cross currency swap are reported in accumulated other comprehensive loss, with the impact of the excluded component reported in interest and other, net. In addition, a corresponding amount is reclassified out of accumulated other comprehensive loss to interest and other, net to offset the remeasurement of the underlying JPY loan principal which also impacts the same line.

Table of Contents

The following table presents the fair value of the Company’s derivative instruments utilized for foreign currency risk management purposes:


	Fair Values of Derivative Instruments
	Asset Derivatives					Liability Derivatives
		Fair Value					Fair Value
	Balance Sheet Location	December 31, 2020		March 31, 2020		Balance Sheet Location	December 31, 2020		March 31, 2020
	(In millions)
Derivatives designated as hedging instruments
Foreign currency contracts	Other current assets	$	53	$	7	Other current liabilities	$	8	$	47
Foreign currency contracts	Other assets	$	23	$	14	Other liabilities	$	—	$	—

Derivatives not designated as hedging instruments
Foreign currency contracts	Other current assets	$	32	$	83	Other current liabilities	$	31	$	103

The Company has financial instruments subject to master netting arrangements, which provide for the net settlement of all contracts with a single counterparty. 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 condensed 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, are as follows:


	Three-Month Periods Ended
	December 31, 2020						December 31, 2019
	Unrealized loss on derivative instruments and other		Foreign currency translation adjustments		Total		Unrealized loss on derivative instruments and other		Foreign currency translation adjustments		Total
	(In millions)
Beginning balance	$	(45)	$	(88)	$	(133)	$	(59)	$	(131)	$	(190)
Other comprehensive gain before reclassifications	43		42		85		1		11		12
Net (gains) losses reclassified from accumulated other comprehensive loss	(14)		—		(14)		13		(1)		12
Net current-period other comprehensive gain	29		42		71		14		10		24
Ending balance	$	(16)	$	(46)	$	(62)	$	(45)	$	(121)	$	(166)

Table of Contents


	Nine-Month Periods Ended
	December 31, 2020						December 31, 2019
	Unrealized loss on derivative instruments and other		Foreign currency translation adjustments		Total		Unrealized loss on derivative instruments and other		Foreign currency translation adjustments		Total
	(In millions)
Beginning balance	$	(82)	$	(133)	$	(215)	$	(42)	$	(110)	$	(152)
Other comprehensive gain (loss) before reclassifications	73		87		160		(8)		(10)		(18)
Net (gains) losses reclassified from accumulated other comprehensive loss	(7)		—		(7)		5		(1)		4
Net current-period other comprehensive gain (loss)	66		87		153		(3)		(11)		(14)
Ending balance	$	(16)	$	(46)	$	(62)	$	(45)	$	(121)	$	(166)

Substantially all unrealized losses and gains relating to derivative instruments and other, reclassified from accumulated other comprehensive loss for the three and nine-month periods ended December 31, 2020, respectively, were recognized as a component of cost of sales in the condensed consolidated statement of operations, which primarily relate to the Company’s foreign currency contracts accounted for as cash flow hedges.

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,” and together with the Global Program, the “ABS Programs”) to affiliated special purpose entities, each of which in turn sells a fraction of the receivables to unaffiliated financial institutions, based on the Company's requirements. Under these programs, the entire purchase price of sold receivables are paid in cash. The ABS Programs contain guarantees of payment by the special purpose entities, in amounts equal to approximately the net cash proceeds under the programs, and are collateralized by certain receivables held by the special purpose entities. The fair value of the guarantee obligation was immaterial as of December 31, 2020 and March 31, 2020, respectively. The accounts receivable balances sold under the ABS Programs were removed from the condensed consolidated balance sheets and the cash proceeds received by the Company were included as cash provided by operating activities in the condensed consolidated statements of cash flows.

Following the transfer of the receivables to the special purpose entities, the transferred receivables are legally 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 have 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 $790 million for the Global Program, of which $615 million is committed and $175 million is uncommitted, and $285 million for the North American Program, of which $210 million is committed and $75 million is uncommitted.

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 three and nine-month periods ended December 31, 2020 and December 31, 2019 were not material and are included in interest and other, net within the condensed consolidated statements of operations. As the Company estimates the fee it receives in return for its obligation to service these receivables is at fair value, no servicing assets or liabilities are recognized.

As of March 31, 2020, approximately $0.8 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 for the same amount. As of December 31, 2020 an immaterial amount of accounts receivables had been sold under the ABS programs.

For the nine-month period ended December 31, 2020, collections from sales of receivables to the special purpose entities under the ABS Programs consisted of approximately $6.6 billion for transfers of receivables. Further, cash flows from sales of

Table of Contents

receivables from the special purpose entities to unaffiliated financial institutions, during the same period, consisted of approximately $0.6 billion for transfer of receivables. For the nine-month period ended December 31, 2019 cash flows from sales of receivables under the previous ABS Programs consisted of approximately $3.7 billion, for transfers of receivables and approximately $2.2 billion for collections on deferred purchase price receivables (effective November 2019, the Company no longer holds a deferred purchase price receivables balance). The Company's cash flows from transfers 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 $0.1 billion and $0.4 billion as of December 31, 2020 and March 31, 2020, respectively. For the nine-month periods ended December 31, 2020 and December 31, 2019, total accounts receivable sold to certain third-party banking institutions was approximately $0.6 billion and $1.2 billion, respectively. The receivables that were sold were removed from the condensed consolidated balance sheets and the cash received were included as cash provided by operating activities in the condensed consolidated statements of cash flows.

11. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability. The accounting guidance for fair value establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

Level 1 - Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

The Company has deferred compensation plans for its officers and certain other employees. Amounts deferred under the plans are invested in hypothetical investments selected by the participant or the participant’s investment manager. The Company’s deferred compensation plan assets are included in other noncurrent assets on the condensed consolidated balance sheets and include investments in equity securities that are valued using active market prices. There were no investments classified as level 1 in the fair value hierarchy as of December 31, 2020 and March 31, 2020.

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 time 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 December 31, 2020 and March 31, 2020.

Table of Contents

There were no transfers between levels in the fair value hierarchy during the nine-month periods ended December 31, 2020 and December 31, 2019.

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 December 31, 2020 and March 31, 2020:


	Fair Value Measurements as of December 31, 2020
	Level 1		Level 2		Level 3		Total
	(In millions)
Assets:
Money market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet)	$	—	$	1,755	$	—	$	1,755

Foreign currency contracts (Note 8)	—		108		—		108

Deferred compensation plan assets:							0
Mutual funds, money market accounts and equity securities	—		50		—		50
Liabilities:
Foreign currency contracts (Note 8)	$	—	$	(39)	$	—	$	(39)



	Fair Value Measurements as of March 31, 2020
	Level 1		Level 2		Level 3		Total
	(In millions)
Assets:
Money market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet)	$	—	$	404	$	—	$	404

Foreign currency contracts (Note 8)	—		104		—		104
Deferred compensation plan assets:							0
Mutual funds, money market accounts and equity securities	—		49		—		49
Liabilities:							0
Foreign currency contracts (Note 8)	$	—	$	(149)	$	—	$	(149)

Other financial instruments

The following table presents the Company’s major debts not carried at fair value:


	As of December 31, 2020				As of March 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Hierarchy
	(In millions)
Term Loan, including current portion, due in installments through June 2022	$	—	$	—	$	433	$	414	Level 1
5.000% Notes due February 2023	500		541		500		500		Level 1
Term Loan due April 2024 - three-month Yen LIBOR plus 0.500%	324		324		310		310		Level 2
4.750% Notes due June 2025	598		680		597		613		Level 1
3.750% Notes due February 2026	695		771		—		—		Level 1
4.875% Notes due June 2029	661		786		662		628		Level 1
4.875% Notes due May 2030	696		826		—		—		Level 1
Euro Term Loans	175		175		208		208		Level 2
India Facilities	136		136		138		138		Level 2

The Term Loan due June 2022, and the Notes due February 2023, June 2025, February 2026, June 2029 and May 2030 are valued based on broker trading prices in active markets.

The Company values its Term Loan due April 2024, India Facilities, and Euro Term Loans due March 2021 and January 2022 based on the current market rate, and as of December 31, 2020, the carrying amounts approximate fair values.

Table of Contents

12. COMMITMENTS AND CONTINGENCIES

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 for any individual matter 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, due to various reasons, including, among others, that: (i) the proceedings are in early stages or no claims have 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 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 agreed to an immaterial settlement.

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. On September 26, 2019, the Court appointed a new lead plaintiff and lead plaintiff’s counsel in the case. On November 8, 2019, lead plaintiff filed a further amended complaint. On December 4, 2019, defendants filed a motion to dismiss the amended complaint. On May 29, 2020, the Court granted defendants’ motion to dismiss without prejudice and gave lead plaintiff 30 days to amend. On June 29, 2020, lead plaintiff filed a further amended complaint. On July 27, 2020, defendants filed a motion to dismiss the amended complaint. On December 10, 2020, the Court granted defendants’ motion to dismiss with prejudice and entered judgment in favor of defendants. On January 7, 2021, lead plaintiff filed a notice of appeal to the Ninth Circuit Court of Appeals. Lead plaintiff’s opening appeal brief is due April 19, 2021, and defendants’ answering brief is due May 19, 2021. 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

Table of Contents

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 assessments for certain sales and import taxes. There were originally six tax assessments totaling 373.7 million Brazilian reals (approximately USD $72.0 million based on the exchange rate as of December 31, 2020). Four of the assessments are in various stages of the review process at the administrative level; the Company successfully defeated one of the six assessments in September 2019 (totaling approximately 60.5 million Brazilian reals or USD $11.7 million); that assessment remains subject to appeal and no tax proceeding has been finalized yet. The Company was unsuccessful at the administrative level for one of the assessments and filed an annulment action in federal court in Sao Paolo, Brazil on March 23, 2020; the value of that assessment is 33.9 million Brazilian reals (approximately USD $6.5 million). The Company believes there is no legal basis for any of these assessments and that it has meritorious defenses. The Company 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. On September 28, 2020, the Company made a submission to OFAC that completed the Company’s voluntary disclosure based on the results of an internal investigation regarding the matter. The Company intends to continue to cooperate fully with OFAC in this matter going forward. Nonetheless, it is reasonably possible that the Company could be subject to penalties that could have a material adverse effect on the Company’s financial position, results of operations or cash flows.

A foreign Tax Authority (“Tax Authority”) has assessed a cumulative total of approximately $162.5 million in taxes owed for multiple Flex legal entities within its jurisdiction for various fiscal years ranging from fiscal year 2010 through fiscal year 2018. The assessed amounts related to the denial of certain deductible intercompany payments. The Company disagrees with the Tax Authority’s assessments and is actively contesting the assessments through the administrative and judicial processes.

A different foreign Tax Authority has issued a letter against one of the Company’s legal entities asserting that the entity did not meet the qualification criteria for tax holiday status for the periods fiscal year 2006 through fiscal year 2013. The asserted additional tax and penalty is approximately $80.0 million. The Company disagrees with the Tax Authority’s assertion and is actively contesting through administrative processes and will defend through judicial processes if necessary.

As the final resolutions of the above tax items remain uncertain, the Company continues to provide for the uncertain tax positions based on the more likely than not standard. While the resolution of the issues may result in tax liabilities, interest and penalties, which may be significantly higher than the amounts accrued for these matters, management currently believes that the resolution will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

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. SHARE REPURCHASES

During the three-month and nine-month periods ended December 31, 2020, the Company repurchased 2.4 million shares at an aggregate purchase price of $37.7 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 $500.0 million in accordance with the share repurchase mandate approved by the Company’s shareholders at the date of Annual General Meeting held on August 7, 2020. As of December 31, 2020, shares in the aggregate amount of $462.3 million were available to be repurchased under the current plan.

Table of Contents

14. SEGMENT REPORTING

In March 2020, the Company announced a change in organizational structure as part of its strategy to further drive efficiency and productivity with two focused delivery models. The Company’s chief operating decision maker ("CODM") changed from the CEO and certain direct staff who oversee operations of the business, to the CEO herself. As a result, beginning in fiscal year 2021, the Company now reports its financial performance based on two operating and reportable segments, Flex Agility Solutions (“FAS”) and Flex Reliability Solutions (“FRS”) and analyzes operating income as the measure of segment profitability.

The FAS segment is optimized for speed to market at any volume based on a highly flexible supply and manufacturing system. The Company realigned the majority of the customers under the former Communications & Enterprise Compute ("CEC") and Consumer Technologies Group ("CTG") segments under the new FAS segment. Certain customers that were in the former Industrial and Emerging Industries ("IEI") segment that meet the above delivery model were also consolidated into the FAS segment. FAS is now comprised of the following end markets that represent reportable units:

•Communications, Enterprise and Cloud ("CEC"), including data infrastructure, edge infrastructure and communication infrastructure;

•Lifestyle, including appliances, consumer packaging, floorcare, micro mobility and audio; and

•Consumer Devices, including mobile and high velocity consumer devices.

The FRS segment is optimized for longer product lifecycles requiring complex ramps at any volume with specialized production models and critical environments. The Company consolidated the majority of its customers under the former High Reliability Solutions ("HRS") and IEI segments into the new FRS segment. FRS is now comprised of the following end markets that represent reportable units:

•Automotive, including autonomous, connectivity, electrification, and smart technologies;

•Health Solutions, including medical devices, medical equipment and drug delivery; and

•Industrial, including capital equipment, industrial devices, renewable and grid edge, and power systems.

The determination of the FAS and FRS segments is based on several factors, including the nature of products and services, the nature of production processes, customer base, delivery channels and similar economic characteristics.

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 impairment charges, restructuring charges, legal and other, and interest and other, net. A portion of depreciation is allocated to the respective segment, together with other general corporate research and development and administrative expenses.

Table of Contents

Selected financial information by segment is in the table below. Fiscal year 2020 historical information has been recast to reflect the new operating and reportable segments, in the table below and in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations."


	Three-Month Periods Ended				Nine-Month Periods Ended
	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
	(In millions)
Net sales:
Flex Agility Solutions	$	3,834	$	3,631	$	10,063	$	11,122
Flex Reliability Solutions	2,886		2,830		7,795		7,603
	$	6,720	$	6,461	$	17,858	$	18,725
Segment income and reconciliation of income before tax:
Flex Agility Solutions	$	153	$	98	$	313	$	301
Flex Reliability Solutions	178		186		472		475
Corporate and Other	(20)		(28)		(64)		(85)
Total segment income	311		256		721		691
Reconciling items:
Intangible amortization	16		16		47		49
Stock-based compensation	25		19		62		53
Customer related asset impairments (recoveries) (1)	—		4		(3)		95
Restructuring charges (Note 15)	30		15		75		199


Legal and other (2)	—		7		28		29
Interest and other, net	7		50		58		153

Income before income taxes	$	233	$	145	$	454	$	113

(1)Customer related asset impairments for the three-month and nine-month periods ended December 31, 2020 were not material and for the three-month and nine-month periods ended December 31, 2019 primarily relate to additional provision for doubtful accounts receivable, and reserves for excess and obsolete inventory for certain customers experiencing financial difficulties and/or related to inventory that will not be recovered due to significant reductions in future customer demand.

(2)Legal and other consists of costs not directly related to core business results and may include 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. During the first quarter of fiscal year 2021, the Company accrued for certain loss contingencies where losses are considered probable and estimable.

Legal and other during the three-month and nine-month periods ended December 31, 2019 primarily consists of direct and incremental costs associated with certain wind-down activities related to the disengagement of a certain customer primarily in China and India.

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 on the operating campuses and are compatible 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.

15. RESTRUCTURING CHARGES

In order to support the Company’s strategy and build a sustainable organization, and after considering that the economic recovery from the pandemic will be slower than anticipated, the Company has identified and is engaging in certain structural changes. These restructuring actions will eliminate non-core activities primarily within the Company’s corporate function, align the Company’s cost structure with its reorganizing and optimizing of its operations model along its two reporting segments, and further sharpen its focus to winning business in end markets where it has competitive advantages and deep domain expertise.

Table of Contents

During the three-month and nine-month periods ended December 31, 2020, the Company recognized approximately $30.0 million and $75.0 million of restructuring charges, respectively, most of which related to employee severance.

During the first half of fiscal year 2020 in connection with geopolitical developments and uncertainties at the time, primarily impacting one customer in China, the Company experienced a reduction in demand for products assembled for that customer. As a result, the Company accelerated its strategic decision to reduce its exposure to certain high-volatility products in both China and India. The Company also initiated targeted activities to restructure its business to further reduce and streamline its cost structure. During the three-month and nine-month periods ended December 31, 2019, the Company recognized $14.6 million and $199.1 million of restructuring charges, respectively. The Company incurred cash charges of approximately $14.9 million and $142.7 million, respectively, that were predominantly for employee severance, and non-cash charges of an immaterial amount and $56.4 million, respectively, primarily related to asset impairments during the three and nine-month periods ended December 31, 2019.

The following table summarizes the provisions, respective payments, and remaining accrued balance as of December 31, 2020 for charges incurred during the nine-month period ended December 31, 2020:


	Severance		Long-Lived Asset Impairment		Other Exit Costs		Total
	(In millions)
Balance as of March 31, 2020	$	20	$	—	$	4	$	24
Provision for charges incurred during the nine-month period ended December 31, 2020	68		3		4		75
Cash payments for charges incurred in the fiscal year 2020 and prior	(13)		—		(1)		(14)
Cash payments for charges incurred during the nine-month period ended December 31, 2020	(35)		—		(1)		(36)
Non-cash charges incurred during the nine-month period ended December 31, 2020	—		(3)		1		(2)

Balance as of December 31, 2020	40		—		7		47
Less: Current portion (classified as other current liabilities)	39		—		7		46
Accrued restructuring costs, net of current portion (classified as other liabilities)	$	1	$	—	$	—	$	1

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise specifically stated, references in this report to “Flex,” “the Company,” “we,” “us,” “our” and similar terms mean Flex Ltd., and its subsidiaries.

This report on Form 10-Q 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-Q with the Securities and Exchange Commission. These forward-looking statements are subject to risks and uncertainties, including, without limitation, those risks and uncertainties discussed in this section, as well as any risks and uncertainties discussed in Part II, Item 1A, “Risk Factors” of this report on Form 10-Q, and in Part I, Item 1A, “Risk Factors” and in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020. 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.

Table of Contents

OVERVIEW

We are the manufacturing partner of choice that helps a diverse customer base design and build products that improve the world. Through the collective strength of a global workforce across approximately 30 countries and responsible, sustainable operations, the Company delivers technology innovation, supply chain, and manufacturing solutions to diverse industries and end markets. In the first quarter of fiscal year 2021, the Company made certain changes in its organization structure as part of its strategy to further drive efficiency and productivity with two focused delivery models. As a result, the Company now reports its financial performance based on two reportable segments: