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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Form 10-K

(Mark One)    

ý

 

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

For the fiscal year ended March 31, 2012

Or

o

 

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

Commission file number 000-23354

FLEXTRONICS INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)

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

2 Changi South Lane,

 

486123
Singapore
(Address of registrant's principal executive offices)
  (Zip Code)

Registrant's telephone number, including area code
(65) 6890 7188

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class   Name of Each Exchange on Which Registered
Ordinary Shares, No Par Value   The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)

Securities registered pursuant to Section 12(g) of the Act—NONE

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý    No o

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o    No ý

         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 ý    No o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o

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

         As of September 30, 2011, the aggregate market value of the Company's ordinary shares held by non-affiliates of the registrant was approximately $4.0 billion based upon the closing sale price as reported on the NASDAQ Stock Market LLC (NASDAQ Global Select Market).

         Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

Class   Outstanding at May 16, 2012
Ordinary Shares, No Par Value   675,246,882

DOCUMENTS INCORPORATED BY REFERENCE

Document   Parts into Which Incorporated
Proxy Statement to be delivered to shareholders in connection with the Registrant's 2012 Annual General Meeting of Shareholders   Part III

   


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TABLE OF CONTENTS

 
   
  Page

PART I

 

Forward-Looking Statements

 
3

Item 1.

 

Business

  4

Item 1A.

 

Risk Factors

  15

Item 1B.

 

Unresolved Staff Comments

  27

Item 2.

 

Properties

  27

Item 3.

 

Legal Proceedings

  27

Item 4.

 

Mine Safety Disclosures

  27

PART II

Item 5.

 

Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

 
28

Item 6.

 

Selected Financial Data

  32

Item 7.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

  34

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

  51

Item 8.

 

Financial Statements and Supplementary Data

  53

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

  99

Item 9A.

 

Controls and Procedures

  99

Item 9B.

 

Other Information

  102

PART III

Item 10.

 

Directors, Executive Officers and Corporate Governance

 
102

Item 11.

 

Executive Compensation

  102

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

  102

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

  102

Item 14.

 

Principal Accountant Fees and Services

  102

PART IV

Item 15.

 

Exhibits and Financial Statement Schedules

 
102

Signatures

 
106

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PART I
FORWARD-LOOKING STATEMENTS

        Unless otherwise specifically stated, references in this report to "Flextronics," "the Company," "we," "us," "our" and similar terms mean Flextronics International Ltd. and its subsidiaries.

        Except for historical information contained herein, certain matters included in this annual report on Form 10-K are, or may be deemed to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. The words "will," "may," "designed to," "believe," "should," "anticipate," "plan," "expect," "intend," "estimate" and similar expressions identify forward-looking statements, which speak only as of the date of this annual report. These forward-looking statements are contained principally under Item 1, "Business," and under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." Because these forward-looking statements are subject to risks and uncertainties, actual results could differ materially from the expectations expressed in the forward-looking statements. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include those described in Item 1A, "Risk Factors" and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." In addition, new risks emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements. We undertake no obligation to update or revise these forward-looking statements to reflect subsequent events or circumstances.

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ITEM 1.    BUSINESS

OVERVIEW

        We are a leading global provider of vertically-integrated advanced design, manufacturing and services to original equipment manufacturers ("OEMs") in the following markets:

        We are a globally-recognized leading provider of end-to-end, vertically-integrated global supply chain services through which we design, build, ship and service a complete packaged electronic product for our customers worldwide. We provide our services through a network of facilities in over 30 countries across four continents. We have established this extensive network of manufacturing facilities in the world's major electronics markets (Asia, the Americas and Europe) in order to serve the outsourcing needs of both multinational and regional OEMs. Our vertically-integrated services increase customer competitiveness by delivering improved product quality, leading manufacturability, improved performance, faster time-to-market and reduced costs. Our OEM customers leverage our services to meet their requirements throughout their products' entire life cycles. For the fiscal year ended March 31, 2012, we had revenue of $29.4 billion and net income of $488.8 million.

        We believe that the combination of our extensive design and engineering services, significant scale and global presence, vertically-integrated end-to-end services, advanced supply chain management, industrial parks in low-cost geographic areas and operational track record provide us with a competitive advantage in the market for designing, manufacturing and servicing electronics products for leading multinational and regional OEMs. Through these services and facilities, we offer our OEM customers the ability to simplify their global product development, their manufacturing process, their after sales services and enable our OEM customers to achieve meaningful reductions to time-to-market and costs.

        Our business has been subject to seasonality primarily due to our mobile devices market and our consumer devices market, which historically exhibit particular strength towards the end of the calendar year in connection with the holiday season.

INDUSTRY OVERVIEW

        The industry in which we operate has experienced significant change and growth as an increasing number of companies elected to outsource some or all of their design, manufacturing, and distribution requirements. We have seen an increase in penetration of global OEM manufacturing requirements since the 2001 - 2002 technology downturn as more and more OEMs pursued the benefits of outsourcing rather than internal manufacturing. Due to the global economic crisis, which began in late calendar year 2007 and continued through the end of our fiscal year 2010, many of our OEM customers reduced their manufacturing and supply chain outsourcing which negatively impacted our business. Beginning in the second half of our fiscal year 2010, we began seeing some positive signs that demand for our OEM customers' end products was improving, and this trend continued through the end of our 2012 fiscal year. We believe the industry is firmly recovering from the last macroeconomic

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downturn and growth of the overall industry for calendar 2011 is estimated to have been greater than 13%.

        We believe the total available market for outsourcing electronics manufacturing services continues to offer opportunities for growth with current penetration rates estimated to be less than 25%. The intensely competitive nature of the electronics industry, the continually increasing complexity and sophistication of electronics products, pressure on OEMs to reduce product costs and shorter product life cycles encourage OEMs to utilize broad manufacturing and service providers as part of their business and manufacturing strategies. Utilizing global manufacturing and service providers allows OEMs to take advantage of the global design, manufacturing and supply chain management expertise of such providers, and enables OEMs to concentrate on product research, development, marketing and sales. We believe that OEMs realize the following benefits through their strategic relationships with manufacturing and service providers:

        We believe that growth in the EMS industry will be driven largely by the needs of OEMs to respond to rapidly changing markets and technologies and to reduce product costs. Additionally, we believe that there are significant opportunities for global manufacturing and service providers to win additional business from OEMs in certain markets or industry segments that have yet to substantially utilize such providers.

SERVICE OFFERINGS

        We offer a broad range of customer-tailored, vertically-integrated services to OEMs. We believe that Flextronics has the broadest worldwide capabilities in the industry, from design resources to end-to-end, vertically-integrated global supply chain services. We believe a key competitive advantage is our ability to provide more value and innovation to our customers because we offer both global economies of scale in procurement, manufacturing and after-market services, as well as market-focused expertise and capabilities in design and engineering. As a result of our focus on specific markets, we believe we are able to better understand complex market dynamics and anticipate trends that impact our OEM customers' businesses, and can help improve our OEM customers' market positioning by effectively adjusting product plans and roadmaps to deliver low-cost, high quality products and meet their time-to-market requirements. Our vertically-integrated services allow us to design, build, ship and service a complete packaged electronics product to our OEM customers. These services include:

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        Component businesses.    The Company offers a variety of component product solutions including:

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        Logistics.    Flextronics Global Services is a provider of aftermarket supply chain logistics services. Our comprehensive suite of services serve customers operating in the computing, consumer digital, infrastructure, industrial, mobile and medical markets. Our expansive global infrastructure consists of 25 sites and more than 12,000 employees strategically located throughout the Americas, Europe and Asia. By leveraging our operational infrastructure, supply chain network, and IT systems, we have the capability of offering globally consistent logistics solutions for our customers' brands. By linking the flow of information from the supply chains, we create supply chain efficiencies delivering value to our customers. We provide multiple logistics solutions including supplier managed inventory, inbound freight management, product postponement, build/configure to order, order fulfillment and distribution, and supply chain network design.

        Reverse Logistics and Repair Services.    We offer a suite of integrated reverse logistics and repair solutions that are operated on globally consistent processes, which help our customers protect their brand loyalty in the marketplace by improving turnaround times and end-customer satisfaction levels. Our objective is to maintain maximum asset value retention of our customers' products throughout their product life cycle while simultaneously minimizing non-value repair inventory levels and handling in the supply chain. With our suite of end-to-end solutions, we can effectively manage our customers' reverse logistics requirements while also providing critical feedback of data to their supply chain constituents and delivering continuous improvement and efficiencies for both existing and new generation products. Our reverse logistics and repair solutions include returns management, exchange programs, complex repair, asset recovery, recycling and e-waste management. We provide repair expertise to multiple product lines such as consumer and midrange products, printers, PDA's, mobile phones, consumer medical devices, notebooks, PC's, set-top boxes, game consoles and highly complex infrastructure products. With our service parts logistics business, we manage all of the logistics and restocking processes essential to the efficient operation of repair and refurbishment services.

STRATEGY

        At our core, we are a world-class global design, manufacturing and services company. Our strategy is to maintain our leadership in these core capabilities and to build on these through extended offerings in high-growth sectors.

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COMPETITIVE STRENGTHS

        We continue to enhance our business through the development and broadening of our product and service offerings. Our focus is to be a flexible organization with repeatable execution that adapts to macroeconomic changes and creates value which increases our customers' competitiveness. We have concentrated our strategy on market-focused expertise, capabilities, services and our vertically-integrated global supply chain services. We believe that the following capabilities differentiate us from our competitors and enable us to better serve our customers' requirements:

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CUSTOMERS

        Our customers include many of the world's leading technology companies. We have focused on establishing long-term relationships with our customers and have been successful in expanding our relationships to incorporate additional product lines and services. In fiscal year 2012, our ten largest customers accounted for approximately 55% of net sales. Our largest customers during fiscal year 2012 were Hewlett-Packard (HP) and Research In Motion (RIM), which each accounted for more than 10% of net sales. No other customer accounted for more than 10% of net sales in fiscal year 2012.

        The following table lists in alphabetical order a sample of our largest customers in fiscal year 2012 and the end products of those customers for which we provide design, manufacturing or after-market services:

Customer
  End Products
Alcatel-Lucent   Business telecommunications systems and core routers and switches
Apple   Smartphones, notebooks and desktop computing, tablets and consumer entertainment devices
Cisco   Core routers and switches, wireless and enterprise telecommunications infrastructure
Ericsson   Radio base stations for Long Term Evolution and GSM infrastructure
Hewlett-Packard   Notebook and netbook computers, inkjet printers and storage devices
Huawei Technologies   Wireless and enterprise telecommunications infrastructure and smartphones
Lenovo   All-in-one desktop, desktop and notebook computers
Microsoft   Computer peripherals and consumer electronics gaming products
Research In Motion   Smartphones and other mobile communication devices
Xerox   Office equipment and components

BACKLOG

        Although we obtain firm purchase orders from our customers, OEM customers typically do not make firm orders for delivery of products more than 30 to 90 days in advance. In addition, OEM customers may reschedule or cancel firm orders based upon contractual arrangements. Therefore, we do not believe that the backlog of expected product sales covered by firm purchase orders is a meaningful measure of future sales.

COMPETITION

        Our market is extremely competitive and includes many companies, several of which have achieved substantial market share. We compete against numerous domestic and foreign manufacturing service providers, as well as our current and prospective customers, who evaluate our capabilities in light of their own capabilities and cost structures. We face particular competition from Asian based competitors, including Taiwanese ODM suppliers who compete in a variety of our end markets and have a substantial share of global information technology hardware production.

        We compete with different companies depending on the type of service we are providing or the geographic area in which an activity takes place. We believe that the principal competitive factors in the

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manufacturing services market are: quality and range of services; design and technological capabilities; cost; location of facilities; responsiveness and flexibility.

SOCIAL RESPONSIBILITY

        Our corporate social responsibility practices focus on global human rights, global environmental conditions, business ethics, and the health and safety of all stakeholders. We do this with controlled business processes, thus ensuring that our business is conducted in a manner that goes beyond compliance alone. We operate programs, including compliance audits and compliance capability building programs, that focus on driving continuous improvements in social, ethical, and environmental compliance throughout all of our global operating units in accordance with our Code of Conduct. As a guide to achieve this end, Flextronics looks at principles, policies, and standards as prescribed by the Electronics Industry Citizenship Coalition ("EICC"), a worldwide association of electronics companies committed to promoting an industry code of conduct for global electronics supply chains to improve working and environmental conditions. Flextronics is a founding member of the EICC coalition.

        Being a good corporate citizen does not mean that we should merely conform to the standards. We extend beyond meeting responsibilities by offering a wide range of programs and initiatives that engage our internal and external communities. At the heart of this endeavor lies our pragmatic goal of creating a difference to the people in the community in which we operate. We intend to continue to invest in these global communities through grant-making, financial contributions, volunteer work, support programs and by donating resources.

EMPLOYEES

        As of March 31, 2012, our global workforce totaled approximately 159,000 employees. In certain international locations, our employees are represented by labor unions and by work councils. We have never experienced a significant work stoppage or strike, and we believe that our employee relations are good.

        Our success depends to a large extent upon the continued services of key managerial and technical employees. The loss of such personnel could seriously harm our business, results of operations and business prospects. To date, we have not experienced significant difficulties in attracting or retaining such personnel.

ENVIRONMENTAL REGULATION

        Our operations are regulated under various federal, state, local and international laws governing the environment, including laws governing the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites. We have compliance processes and procedures in place to ensure that our operations are in compliance with all applicable environmental regulations. We do not believe that costs of compliance with these laws and regulations will have a material adverse effect on our capital expenditures, operating results, or competitive position. In addition, we are responsible for cleanup of contamination at some of our current and former manufacturing facilities and at some third-party sites. We engage environmental consulting firms to assist us in the evaluation of environmental liabilities of our ongoing operations, historical disposal activities and closed sites in order to establish appropriate accruals in our financial statements. We determine the amount of our accruals for environmental matters by analyzing and estimating the probability of occurrence and the reasonable possibility of incurring costs in light of information currently available. The imposition of more stringent standards or requirements under environmental laws or regulations, the results of future testing and analysis undertaken by us at our operating facilities, or a determination that we are potentially responsible for the release of hazardous substances at other sites could result in expenditures in excess of amounts currently estimated to be

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required for such matters. While no material exposures have been identified to date that we are aware of, there can be no assurance that additional environmental matters will not arise in the future or that costs will not be incurred with respect to sites as to which no problem is currently known.

        We are also required to comply with an increasing number of product environmental compliance regulations focused on the restriction of certain hazardous substances. For example, the electronics industry became subject to the European Union's Restrictions on Hazardous Substances ("RoHS"), Waste Electrical and Electronic Equipment ("WEEE") directives, the regulation EC 1907/2006 EU Directive REACH (Registration, Evaluation, Authorization, and restriction of Chemicals), and China RoHS entitled, Management Methods for Controlling Pollution for Electronic Information Products ("EIPs"). Similar legislation has been or may be enacted in other jurisdictions, including in the United States. Our business requires close collaboration with our customers and suppliers to mitigate risk of non-compliance. We have developed rigorous risk mitigating compliance programs designed to meet the needs of our customers as well as the regulations. These programs vary from collecting compliance data from our Flextronics owned suppliers to full laboratory testing, and we require our supply chain to comply. Non-compliance could potentially result in significant costs and/or penalties. RoHS and other similar legislation bans or restricts the use of lead, mercury and certain other specified substances in electronics products and WEEE requires EU importers and/or producers to assume responsibility for the collection, recycling and management of waste electronic products and components. In the case of WEEE, although the compliance responsibility rests primarily with the EU importers and/or producers rather than with EMS companies, OEMs may turn to EMS companies for assistance in meeting their WEEE obligations.

INTELLECTUAL PROPERTY

        We own or license various United States and foreign patents relating to a variety of technologies. For certain of our proprietary processes, we rely on trade secret protection. We also have registered our corporate name and several other trademarks and service marks that we use in our business in the United States and other countries throughout the world. As of March 31, 2012 and 2011, the carrying value of our intellectual property was not material.

        Although we believe that our intellectual property assets and licenses are sufficient for the operation of our business as we currently conduct it, from time to time third parties do assert patent infringement claims against us or our customers. In addition, we are increasingly providing design and engineering services to our customers and designing and making our own products. As a consequence of these activities, our customers are requiring us to take responsibility for intellectual property to a greater extent than in our manufacturing and assembly businesses. If and when third parties make assertions regarding the ownership or right to use intellectual property, we could be required to either enter into licensing arrangements or to resolve the issue through litigation. Such license rights might not be available to us on commercially acceptable terms, if at all, and any such litigation might not be resolved in our favor. Additionally, litigation could be lengthy and costly and could materially harm our financial condition regardless of the outcome. We also could be required to incur substantial costs to redesign a product or re-perform design services.

FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS

        Refer to note 17, "Segment Reporting," to our consolidated financial statements included under Item 8, "Financial Statements and Supplementary Data" for financial information about our geographic areas.

ADDITIONAL INFORMATION

        Our internet address is http://www.flextronics.com. We make available through our Internet website the Company's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on

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Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

        We were incorporated in the Republic of Singapore in May 1990. Our principal corporate office is located at 2 Changi South Lane, Singapore 486123. Our U.S. corporate headquarters is located at 847 Gibraltar Drive, Milpitas, CA, 95035.

ITEM 1A.    RISK FACTORS

We depend on industries that continually produce technologically advanced products with short life cycles and our business would be adversely affected if our customers' products are not successful or if our customers lose market share.

        We derive our revenues from customers in the following markets:

        Factors affecting any of these industries in general or our customers in particular, could adversely impact us. These factors include:

Our customers may cancel their orders, change production quantities or locations, or delay production, and the inherent difficulties involved in responding to these demands could harm our business.

        Cancellations, reductions or delays by a significant customer or by a group of customers have harmed, and may continue to harm, our results of operations by reducing the volumes of products we manufacture and deliver for these customers, by causing a delay in the repayment of our expenditures for inventory in preparation for customer orders and by lowering our asset utilization resulting in lower gross margins. Additionally, current and prospective customers continuously evaluate our capabilities against other providers as well as against the merits of manufacturing products themselves. Our business would be adversely affected if OEMs decide to perform these functions internally or transfer their business to another provider.

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        As a provider of electronics design and manufacturing services and components, we must provide increasingly rapid product turnaround time for our customers. We generally do not obtain firm, long-term purchase commitments from our customers, and we often experience reduced lead times in customer orders which may be less than the lead time we require to procure necessary components and materials.

        The short-term nature of our customers' commitments and the rapid changes in demand for their products reduces our ability to accurately estimate the future requirements of our customers. This makes it difficult to schedule production and maximize utilization of our manufacturing capacity. In that regard, we must make significant decisions, including determining the levels of business that we will seek and accept, setting production schedules, making component procurement commitments, and allocating personnel and other resources, based on our estimates of our customers' requirements.

        On occasion, customers require rapid increases in production or require that manufacturing of their products be transitioned from one facility to another to reduce costs or achieve other objectives. These demands stress our resources and reduce our margins. We may not have sufficient capacity at any given time to meet our customers' demands, and transfers from one facility to another can result in inefficiencies and costs due to excess capacity in one facility and corresponding capacity constraints at another. Due to many of our costs and operating expenses being relatively fixed, customer order fluctuations, deferrals and transfers of demand from one facility to another, as described above, have had a material adverse effect on our operating results in the past and we may experience such effects in the future.

Our industry is extremely competitive; if we are not able to continue to provide competitive services, we may lose business.

        We compete with a number of different companies, depending on the type of service we provide or the location of our operations. For example, we compete with major global EMS providers, other smaller EMS companies that have a regional or product-specific focus, and ODMs with respect to some of the services that we provide. We also compete with our current and prospective customers, who evaluate our capabilities in light of their own capabilities and cost structures. Our industry is extremely competitive, many of our competitors have achieved substantial market share, and some may have lower cost structures or greater design, manufacturing, financial or other resources than we do. We face particular competition from Asian-based competitors, including Taiwanese ODM suppliers who compete in a variety of our end markets and have a substantial share of global information technology hardware production. If we are unable to provide comparable manufacturing services and improved products at lower cost than the other companies in our market, our net sales could decline.

The majority of our sales come from a small number of customers and a decline in sales to any of these customers could adversely affect our business.

        Sales to our ten largest customers represent a significant percentage of our net sales. Our ten largest customers accounted for approximately 55%, 52% and 47% of net sales in fiscal years 2012, 2011 and 2010, respectively. Our largest customers during fiscal 2012 were Hewlett-Packard (HP) and Research In Motion (RIM), which each accounted for more than 10% of net sales. No other customer accounted for more than 10% of net sales in fiscal year 2012. Our largest customer during fiscal year 2011 was Research In Motion, and our largest customer during fiscal year 2010 was Hewlett-Packard, each of which accounted for more than 10% of net sales in the respective fiscal year. No other customer accounted for more than 10% of net sales in fiscal years 2011 or 2010. Our principal customers have varied from year to year. These customers may experience dramatic declines in their market shares or competitive position, due to economic or other forces, that may cause them to reduce their purchases from us or, in some cases, result in the termination of their relationship with us. Significant reductions in sales to any of these customers, or the loss of major customers, would

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materially harm our business. If we are not able to timely replace expired, canceled or reduced contracts with new business, our revenues and profitability could be harmed.

Our components business is dependent on our ability to quickly launch world-class components products, and our investment in the development of our component capabilities, together with the start-up and integration costs necessary to achieve quick launches of world-class components products, may adversely affect our margins and profitability.

        Our components business, which includes rigid and flexible printed circuit board fabrication, power supplies and display and touch design manufacturing, is part of our strategy to improve our competitive position and to grow our future margins, profitability and shareholder returns by expanding our vertical-integration capabilities. The success of our components business is dependent on our ability to design and introduce world-class components that have performance characteristics which are suitable for a broad market and that offer significant price and/or performance advantages over competitive products.

        To create these world class components offerings, we must continue to make substantial investments in the development of our components capabilities, in resources such as research and development, technology licensing, test and tooling equipment, facility expansions and personnel requirements. We may not be able to achieve or maintain market acceptance for any of our components offerings in any of our current or target markets. The success of our components business will also depend upon the level of market acceptance of our customers' end products, which incorporate our components, and over which we have no control.

        In addition, OEMs often require unique configurations or custom designs which must be developed and integrated in the OEM's product well before the product is launched by the OEM. Thus, there is often substantial lead time between the commencement of design efforts for a customized component and the commencement of volume shipments of the component to the OEM. As a result, we may make substantial investments in the development and customization of products for our customers, and no revenue may be generated from these efforts if our customers do not accept the customized component. Even if our customers accept the customized component, if our customers do not purchase anticipated levels of products, we may not realize any profits.

        Our achievement of anticipated levels of profitability in our components business is also dependent on our ability to achieve efficiencies in our manufacturing as well as to manufacture components in commercial quantities to the performance specifications demanded by our OEM customers. As a result of these and other risks, we have been, and in the future may be, unable to achieve anticipated levels of profitability in our components business.

Our exposure to financially troubled customers or suppliers may adversely affect our financial results.

        We provide manufacturing services to companies and industries that have in the past, and may in the future, experience financial difficulty. If our customers experience financial difficulty, we could have difficulty recovering amounts owed to us from these customers, or demand for our products from these customers could decline. Additionally, if our suppliers experience financial difficulty we could have difficulty sourcing supply necessary to fulfil production requirements and meet scheduled shipments. If one or more of our customers were to become insolvent or otherwise were unable to pay for the services provided by us on a timely basis, or at all, our operating results and financial condition could be adversely affected. Such adverse effects could include one or more of the following: an increase in our provision for doubtful accounts, a charge for inventory write-offs, a reduction in revenue, and an increase in our working capital requirements due to higher inventory levels and increases in days our accounts receivable are outstanding.

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We may be adversely affected by shortages of required electronic components.

        From time to time, we have experienced shortages of some of the electronic components that we use. These shortages can result from strong demand for those components or from problems experienced by suppliers, such as shortages of raw materials. These unanticipated component shortages could result in curtailed production or delays in production, which may prevent us from making scheduled shipments to customers. Our inability to make scheduled shipments could cause us to experience a reduction in sales, increase in inventory levels and costs, and could adversely affect relationships with existing and prospective customers. Component shortages may also increase our cost of goods sold because we may be required to pay higher prices for components in short supply and redesign or reconfigure products to accommodate substitute components. As a result, component shortages could adversely affect our operating results. Our performance depends, in part, on our ability to incorporate changes in component costs into the selling prices for our products.

        Our supply chain may also be impacted by other events outside our control, including macroeconomic events, political crises or natural or environmental occurrences. Component shortages impacted our results during the second half of fiscal year 2010, during the first quarter of fiscal year 2011 and during fiscal 2012. The supply constraints were broad based, but the impact was most evident with respect to connectors, capacitors, LCD panels and memory (both DRAM and Flash). These shortages began to abate during the second quarter of fiscal 2011, and supplies had normalized by the end of the third quarter. In addition, the March 2011 earthquake and tsunami in Japan resulted in disruptions to our supply chain, as a large number of our suppliers of semiconductors and other electronic components are located in Japan. These disruptions had a negative impact on our revenue in the first and second quarters of fiscal 2012. We also continue to evaluate the extent of the disruption to our supply chain and the impact on our business caused by the flooding in Thailand during the second half of 2011, which had a negative impact on our revenue in the third quarter of fiscal 2012, as a number of our suppliers of hard disk drives and other electronic components maintain facilities in Thailand.

Our margins and profitability may be adversely affected due to substantial investments, start-up and production ramping costs in our design services.

        As part of our strategy to enhance our vertically-integrated, end-to-end service offerings, we have expanded and continue to expand our design and engineering capabilities. Providing these services can expose us to different or greater potential risks than those we face when providing our manufacturing services.

        Although we enter into contracts with our design services customers, we may design and develop products for these customers prior to receiving a purchase order or other firm commitment from them. We are required to make substantial investments in the resources necessary to design and develop these products, and no revenue may be generated from these efforts if our customers do not approve the designs in a timely manner or at all. Even if our customers accept our designs, if they do not then purchase anticipated levels of products, we may not realize any profits. Our design activities often require that we purchase inventory for initial production runs before we have a purchase commitment from a customer. Even after we have a contract with a customer with respect to a product, these contracts may allow the customer to delay or cancel deliveries and may not obligate the customer to any particular volume of purchases. These contracts can generally be terminated on short notice. In addition, some of the products we design and develop must satisfy safety and regulatory standards and some must receive government certifications. If we fail to obtain these approvals or certifications on a timely basis, we would be unable to sell these products, which would harm our sales, profitability and reputation.

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        Due to the increased risks associated with our design services offerings, we may not be able to achieve a high enough level of sales for this business, and the significant investments in research and development, technology licensing, test and tooling equipment, patent applications, facility expansion and recruitment that it requires, to be profitable. The initial costs of investing in the resources necessary to expand our design and engineering capabilities, and in particular to support our design services offerings, have historically adversely affected our profitability, and may continue to do so as we continue to make investments in these capabilities.

        In addition, we agree to certain product price limitations and cost reduction targets in order to achieve anticipated margins and profitable operations. Inflationary and other increases in the costs of the raw materials and labor required to produce the products have occurred and may recur from time to time. Also, the production ramps for these programs are typically significant and negatively impact our margin in early stages as the manufacturing volumes are lower and result in inefficiencies and unabsorbed manufacturing overhead costs. We may not be able to reduce costs, incorporate changes in costs into the selling prices of our products, or increase operating efficiencies as we ramp production of our products, which would adversely affect our margins and our results of operations.

We may not meet regulatory quality standards applicable to our manufacturing and quality processes for medical devices, which could have an adverse effect on our business, financial condition or results of operations.

        As a medical device manufacturer, we have additional compliance requirements. We are required to register with the U.S. Food and Drug Administration ("FDA") and are subject to periodic inspection by the FDA for compliance with the FDA's Quality System Regulation ("QSR") requirements, which require manufacturers of medical devices to adhere to certain regulations, including testing, quality control and documentation procedures. Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections and product field monitoring by the FDA. If any FDA inspection reveals noncompliance with QSR or other FDA regulations, and the Company does not address the observation adequately to the satisfaction of the FDA, the FDA may take action against us. FDA actions may include issuing a letter of inspectional observations, issuing a warning letter, imposing fines, bringing an action against the Company and its officers, requiring a recall of the products we manufactured for our customers, refusing requests for clearance or approval of new products or withdrawal of clearance or approval previously granted, issuing an import detention on products entering the U.S. from an offshore facility, or shutting down a manufacturing facility. If any of these actions were to occur, it would harm our reputation and cause our business to suffer.

        In the European Union ("EU"), we are required to maintain certain standardized certifications in order to sell our products and must undergo periodic inspections to obtain and maintain these certifications. Continued noncompliance to the EU regulations could stop the flow of products into the EU from us or from our customers. In China, the Safe Food and Drug Administration controls and regulates the manufacture and commerce of healthcare products. We must comply with the regulatory laws applicable to medical device manufactures or our ability to manufacture products in China could be impacted. In Japan, the Pharmaceutical Affairs Laws regulate the manufacture and commerce of healthcare products. These regulations also require that subcontractors manufacturing products intended for sale in Japan register with authorities and submit to regulatory audits. Other Asian countries where we operate have similar laws regarding the regulation of medical device manufacturing.

We conduct operations in a number of countries and are subject to risks of international operations.

        The distances between the Americas, Asia and Europe create a number of logistical and communications challenges for us. These challenges include managing operations across multiple time zones, directing the manufacture and delivery of products across distances, coordinating procurement of

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components and raw materials and their delivery to multiple locations, and coordinating the activities and decisions of the core management team, which is based in a number of different countries. Facilities in several different locations may be involved at different stages of the production of a single product, leading to additional logistical difficulties.

        Because our manufacturing operations are located in a number of countries throughout the Americas, Asia and Europe, we are subject to the risks of changes in economic and political conditions in those countries, including:

        The attractiveness of our services to U.S. customers can be affected by changes in U.S. trade policies, such as most favored nation status and trade preferences for some Asian countries. In addition, some countries in which we operate, such as Brazil, Hungary, India, Mexico, Malaysia and Poland, have experienced periods of slow or negative growth, high inflation, significant currency devaluations or limited availability of foreign exchange. Furthermore, in countries such as China and Mexico, governmental authorities exercise significant influence over many aspects of the economy, and their actions could have a significant effect on us. We could be seriously harmed by inadequate infrastructure, including lack of adequate power and water supplies, transportation, raw materials and parts in countries in which we operate. In addition, we may encounter labor disruptions and rising labor costs, in particular within the lower-cost regions in which we operate. Any increase in labor costs that we are unable to recover in our pricing to our customers could adversely impact our operating results.

        Operations in foreign countries also present risks associated with currency exchange and convertibility, inflation and repatriation of earnings. In some countries, economic and monetary conditions and other factors could affect our ability to convert our cash distributions to U.S. dollars or other freely convertible currencies, or to move funds from our accounts in these countries. Furthermore, the central bank of any of these countries may have the authority to suspend, restrict or otherwise impose conditions on foreign exchange transactions or to approve distributions to foreign investors.

        Another significant legal risk resulting from our international operations is compliance with the U.S. Foreign Corrupt Practices Act or similar local laws of the countries in which we do business, including the UK Anti-Bribery Act, which prohibits covered companies from making payments to foreign government officials to assist in obtaining or retaining business. Our Code of Business Conduct prohibits corrupt payments on a global basis and precludes us from offering or giving anything of value to a government official for the purpose of obtaining or retaining business, to win a business advantage

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or to improperly influence a decision regarding Flextronics. Nevertheless, there can be no assurance that all of our employees and agents will refrain from taking actions in violation of this and our related anti-corruption policies and procedures. Any such violation could have a material adverse effect on our business.

We are subject to the risk of increased income taxes.

        We have structured our operations in a manner designed to maximize income in countries where:

        A number of countries in which we are located allow for tax holidays or provide other tax incentives to attract and retain business. Our taxes could increase if certain tax holidays or incentives are not renewed upon expiration, or if tax rates applicable to us in such jurisdictions are otherwise increased. For example, on March 16, 2007, the Chinese government passed a new unified enterprise income tax law which became effective on January 1, 2008. Among other things, the new law canceled many income tax incentives previously applicable to our subsidiaries in China. Under the new law, the tax rates applicable to the operations of most of our subsidiaries in China have been increased to 25%. The new law provided a transition rule which increased the tax rate to 25% over a 5-year period, which ends in 2012. The new law also increased the standard withholding rate on earnings distributions to between 5% and 10% depending on the residence of the shareholder. The ultimate effect of these and other changes in Chinese tax laws on our overall tax rate will be affected by, among other things, our China income, the manner in which China interprets, implements and applies the new tax provisions, and our ability to qualify for any exceptions or new incentives. Similarly, we recently renewed a Malaysian tax holiday that expired on January 31, 2012 for another ten year period. Our continued ability to qualify for specific tax holiday extensions will depend on, among other things, our anticipated investment and expansion in these countries and the manner in which the local governments interpret the requirements for extensions or new incentives.

        In addition, the Company and its subsidiaries are regularly subject to tax return audits and examinations by various taxing jurisdictions around the world. In determining the adequacy of our provision for income taxes, we regularly assess the likelihood of adverse outcomes resulting from tax examinations. While it is often difficult to predict the final outcome or the timing of the resolution of a tax examination, we believe that our reserves for uncertain tax benefits reflect the outcome of tax positions that are more likely than not to occur. However, we cannot assure you that the final determination of any tax examinations will not be materially different than that which is reflected in our income tax provisions and accruals. Should additional taxes be assessed as a result of a current or future examination, there could be a material adverse effect on our tax provision, operating results, financial position and cash flows in the period or periods for which that determination is made.

If our products or components contain defects, demand for our services may decline and we may be exposed to product liability and product warranty liability.

        Defects in the products we manufacture or design, whether caused by a design, engineering, manufacturing or component failure or deficiencies in our manufacturing processes, could result in product or component failures, which may damage our business reputation and expose us to product liability or product warranty claims.

        Product liability claims may include liability for personal injury or property damage. Product warranty claims may include liability to pay for the recall, repair or replacement of a product or component. Although we generally allocate liability for these claims in our contracts with our customers, increasingly we are unsuccessful in allocating such liability, and even where we have

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allocated liability to our customers, our customers may not have the resources to satisfy claims for costs or liabilities arising from a defective product or component for which they have assumed responsibility.

        If we design, engineer or manufacture a product or component that is found to cause any personal injury or property damage or is otherwise found to be defective, we could spend a significant amount of money to resolve the claim. In addition, product liability and product recall insurance coverage are expensive and may not be available with respect to all of our services offerings on acceptable terms, in sufficient amounts, or at all. A successful product liability or product warranty claim in excess of our insurance coverage or any material claim for which insurance coverage is denied, limited or is not available could have a material adverse effect on our business, results of operations and financial condition.

If we do not effectively manage changes in our operations, our business may be harmed; we have taken substantial restructuring charges in the past and we may need to take material restructuring charges in the future.

        In recent years, we have experienced growth in our business through a combination of internal growth and acquisitions. However, our business also has been negatively impacted by the recent adverse global economic conditions. The expansion of our business, as well as business contractions and other changes in our customers' requirements, have in the past, and may in the future, require that we adjust our business and cost structures, including by incurring restructuring charges. Restructuring activities involve reductions in our workforce at some locations and closure of certain facilities. All of these changes have in the past placed, and may in the future place, considerable strain on our management control systems and resources, including decision support, accounting management, information systems and facilities. If we do not properly manage our financial and management controls, reporting systems and procedures to manage our employees, our business could be harmed.

        In recent years, we have undertaken initiatives to restructure our business operations through a series of restructuring activities, which were intended to realign our global capacity and infrastructure with demand by our OEM customers and thereby improve our operational efficiency. These activities included reducing excess workforce and capacity, transitioning manufacturing to lower-cost locations and eliminating redundant facilities, and consolidating and eliminating certain administrative facilities.

        While we incur severance, asset impairment charges and other facilities charges as a result of changes in our customer mix on an ongoing basis, such individual actions were not considered material to be separately disclosed as restructuring charges in fiscal 2012 and 2011, and are included in either cost of sales or selling, general and administrative expenses, as appropriate. We recognized restructuring charges of approximately $107.5 million in fiscal 2010. We may be required to take additional charges in the future to align our operations and cost structures with global economic conditions, market demands, cost competitiveness, and our geographic footprint as it relates to our customers' production requirements. We may consolidate certain manufacturing facilities or transfer certain of our operations to lower cost geographies. If we are required to take additional restructuring charges in the future, our operating results, financial condition, and cash flows could be adversely impacted. Additionally, there are other potential risks associated with our restructurings that could adversely affect us, such as delays encountered with the finalization and implementation of the restructuring activities, work stoppages, and the failure to achieve targeted cost savings.

The success of certain of our activities depends on our ability to protect our intellectual property rights; intellectual property infringement claims against our customers or us could harm our business.

        We retain certain intellectual property rights to some of the technologies that we develop as part of our engineering, design and manufacturing services and components offerings. The measures we have taken to prevent unauthorized use of our technology may not be successful. If we are unable to

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protect our intellectual property rights, this could reduce or eliminate the competitive advantages of our proprietary technology, which would harm our business.

        Our engineering, design and manufacturing services and components offerings involve the creation and use of intellectual property rights, which subject us to the risk of claims of intellectual property infringement from third parties, as well as claims arising from the allocation of intellectual property rights among us and our customers. In addition, our customers are increasingly requiring us to indemnify them against the risk of intellectual property infringement. If any claims are brought against us or our customers for such infringement, whether or not these have merit, we could be required to expend significant resources in defense of such claims. In the event of such an infringement claim, we may be required to spend a significant amount of money to develop non-infringing alternatives or obtain licenses. We may not be successful in developing such alternatives or obtaining such licenses on reasonable terms or at all.

Fluctuations in foreign currency exchange rates could increase our operating costs.

        Our manufacturing operations and industrial parks are located in lower cost regions of the world, such as Asia, Eastern Europe and Mexico; however, most of our purchase and sale transactions are denominated in United States dollars, Japanese yen or Euros. As a result, we are exposed to fluctuations in the functional currencies of our fixed cost overhead or our supply base relative to the currencies in which we conduct transactions.

        Currency exchange rates fluctuate on a daily basis as a result of a number of factors, including changes in a country's political and economic policies. Volatility in the functional and non-functional currencies of our entities and the United States dollar could seriously harm our business, operating results and financial condition. The primary impact of currency exchange fluctuations is on the cash, receivables, and payables of our operating entities. As part of our currency hedging strategy, we use financial instruments, primarily forward purchase and swap contracts, to hedge our United States dollar and other currency commitments in order to reduce the short-term impact of foreign currency fluctuations on current assets and liabilities. If our hedging activities are not successful or if we change or reduce these hedging activities in the future, we may experience significant unexpected expenses from fluctuations in exchange rates.

        We are also exposed to risks related to the valuation of the Chinese currency relative to other foreign currencies. The Chinese currency is the renminbi ("RMB"). A significant increase in the value of the RMB could adversely affect our financial results and cash flows by increasing both our manufacturing costs and the costs of our local supply base.

We depend on our executive officers and skilled management personnel.

        Our success depends to a large extent upon the continued services of our executive officers. Generally our employees are not bound by employment or non-competition agreements, and we cannot assure you that we will retain our executive officers and other key employees. We could be seriously harmed by the loss of any of our executive officers or other key employees. We will need to recruit and retain skilled management personnel, and if we are not able to do so, our business could be harmed. In addition, in connection with expanding our design services offerings, we must attract and retain experienced design engineers. There is substantial competition in our industry for highly skilled employees. Our failure to recruit and retain experienced design engineers could limit the growth of our design services offerings, which could adversely affect our business.

Our failure to comply with environmental laws could adversely affect our business.

        We are subject to various federal, state, local and foreign environmental laws and regulations, including regulations governing the use, storage, discharge and disposal of hazardous substances used in

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our manufacturing processes. We are also subject to laws and regulations governing the recyclability of products, the materials that may be included in products, and our obligations to dispose of these products after end users have finished with them. Additionally, we may be exposed to liability to our customers relating to the materials that may be included in the components that we procure for our customers' products. Any violation or alleged violation by us of environmental laws could subject us to significant costs, fines or other penalties.

        We are also required to comply with an increasing number of global and local product environmental compliance regulations focused on the restriction of certain hazardous substances. We are subject to the European Union ("EU") directives, including the Restrictions on Hazardous Substances Directive ("RoHS"), the Waste Electrical and Electronic Equipment Directive ("WEEE") as well as the EU's Registration, Evaluation, Authorization, and Restriction of Chemicals ("REACH") regulation. Also of note is China's Management Methods for Controlling Pollution Caused by Electronic Information Products regulation, commonly referred to as "China RoHS", which restricts the importation into and production within China of electrical equipment containing certain hazardous materials. Similar legislation has been or may be enacted in other jurisdictions, including in the United States. RoHS and other similar legislation bans or restricts the use of lead, mercury and certain other specified substances in electronics products and WEEE requires EU importers and/or producers to assume responsibility for the collection, recycling and management of waste electronic products and components. We have developed rigorous risk mitigating compliance programs designed to meet the needs of our customers as well as applicable regulations. These programs may include collecting compliance data from our suppliers, full laboratory testing and public reporting of other environmental metrics such as carbon emissions, electronic waste and water, and we also require our supply chain to comply. Non-compliance could potentially result in significant costs and/or penalties. In the case of WEEE, the compliance responsibility rests primarily with the EU importers and/or producers rather than with EMS companies. However, OEMs may turn to EMS companies for assistance in meeting their obligations under WEEE.

        In addition, we are responsible for cleanup of contamination at some of our current and former manufacturing facilities and at some third party sites. If more stringent compliance or cleanup standards under environmental laws or regulations are imposed, or the results of future testing and analyses at our current or former operating facilities indicate that we are responsible for the release of hazardous substances into the air, ground and/or water, we may be subject to additional liability. Additional environmental matters may arise in the future at sites where no problem is currently known or at sites that we may acquire in the future. Our failure to comply with environmental laws and regulations or adequately address contaminated sites could limit our ability to expand our facilities or could require us to incur significant expenses, which would harm our business.

We may encounter difficulties with acquisitions, which could harm our business.

        We have completed numerous acquisitions of businesses and we may acquire additional businesses in the future. Any future acquisitions may require additional equity financing, which could be dilutive to our existing shareholders, or additional debt financing, which could increase our leverage and potentially affect our credit ratings. Any downgrades in our credit ratings associated with an acquisition could adversely affect our ability to borrow by resulting in more restrictive borrowing terms. As a result of the foregoing, we also may not be able to complete acquisitions or strategic customer transactions in the future to the same extent as in the past, or at all.

        To integrate acquired businesses, we must implement our management information systems, operating systems and internal controls, and assimilate and manage the personnel of the acquired operations. The difficulties of this integration may be further complicated by geographic distances. The integration of acquired businesses may not be successful and could result in disruption to other parts of

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our business. In addition, the integration of acquired businesses may require that we incur significant restructuring charges.

        In addition, acquisitions involve numerous risks and challenges, including:

        These and other factors have harmed, and in the future could harm, our ability to achieve anticipated levels of profitability at acquired operations or realize other anticipated benefits of an acquisition, and could adversely affect our business and operating results.

Our strategic relationships with major customers create risks.

        In the past, we have completed numerous strategic transactions with OEM customers. Under these arrangements, we generally acquire inventory, equipment and other assets from the OEM, and lease or acquire their manufacturing facilities, while simultaneously entering into multi-year supply agreements for the production of their products. We may pursue these OEM divestiture transactions in the future. These arrangements entered into with divesting OEMs typically involve many risks, including the following:

        As a result of these and other risks, we have been, and in the future may be, unable to achieve anticipated levels of profitability under these arrangements. In addition, these strategic arrangements have not, and in the future may not, result in any material revenues or contribute positively to our earnings per share.

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Our business and operations could be adversely impacted by climate change initiatives.

        Concern over climate change has led to international legislative and regulatory initiatives directed at limiting carbon dioxide and other greenhouse gas emissions. Proposed and existing efforts to address climate change by reducing greenhouse gas emissions could directly or indirectly affect our costs of energy, materials, manufacturing, distribution, packaging and other operating costs, which could impact our business and financial results.

Our operating results may fluctuate significantly due to seasonal demand.

        Two of our significant end markets are the mobile devices market and the consumer devices market. These markets exhibit particular strength toward the end of the calendar year in connection with the holiday season. As a result, we have historically experienced stronger revenues in our third fiscal quarter as compared to our other fiscal quarters. Economic or other factors leading to diminished orders in the end of the calendar year could harm our business.

Our debt level may create limitations

        As of March 31, 2012, our total debt was approximately $2.2 billion. This level of indebtedness could limit our flexibility as a result of debt service requirements and restrictive covenants, and may limit our ability to access additional capital or execute our business strategy.

Weak global economic conditions and instability in financial markets may adversely affect our business, results of operations, financial condition and access to capital markets.

        Our revenue and gross margin depend significantly on general economic conditions and the demand for products in the markets in which our customers compete. Recent adverse worldwide economic conditions, including the European sovereign debt crisis, have created challenging conditions in the electronics industry. These conditions have resulted in reduced consumer and business confidence and spending in many countries, a tightening in the credit markets, a low level of liquidity in many financial markets and high volatility in credit, fixed income and equity markets. A continuation or worsening of the European sovereign debt crisis will likely have a negative effect on certain of our European customers and suppliers, which could harm our business. In addition, longer term disruptions in the capital and credit markets could adversely affect our access to liquidity needed for our business. If financial institutions that have extended credit commitments to us are adversely affected by the conditions of the U.S. and international capital markets, they may become unable to fund borrowings under their credit commitments to us, which could have an adverse impact on our financial condition and our ability to borrow additional funds, if needed, for working capital, capital expenditures, acquisitions, research and development and other corporate purposes.

The market price of our ordinary shares is volatile.

        The stock market in recent years has experienced significant price and volume fluctuations that have affected the market prices of companies, including technology companies. These fluctuations have often been unrelated to or disproportionately impacted by the operating performance of these companies. The market for our ordinary shares has been and may in the future be subject to similar volatility. Factors such as fluctuations in our operating results, announcements of technological innovations or events affecting other companies in the electronics industry, currency fluctuations, general market fluctuations, and macro economic conditions may cause the market price of our ordinary shares to decline.

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If our security systems and governance policies are breached, we may incur significant legal and financial exposure.

        We have implemented security systems and governance policies with the intent of maintaining the physical security of our facilities and protecting our customers' and our suppliers' confidential information. Despite such efforts, we are subject to breach of these security systems and governance policies which may result in unauthorized access to our facilities and/or unauthorized use of the information we are trying to protect. If unauthorized parties gain physical access to one of our facilities or electronic access to our information systems or such information is used in an unauthorized manner, misdirected, lost or stolen during transmission or transport, any theft or misuse of such information could result in, among other things, unfavorable publicity, governmental inquiry and oversight, difficulty in marketing our services, allegations by our customers that we have not performed our contractual obligations, litigation by affected parties and possible financial obligations for damages related to the theft or misuse of such information, any of which could have a material adverse effect on our profitability and cash flow.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

        None.

ITEM 2.    PROPERTIES

        Our facilities consist of a global network of industrial parks, regional manufacturing operations, and design, engineering and product introduction centers, providing over 26.7 million square feet of productive capacity as of March 31, 2012. We own facilities with approximately 9.0 million square feet in Asia, 4.5 million square feet in the Americas and 2.7 million square feet in Europe. We lease facilities with approximately 5.7 million square feet in Asia, 2.8 million square feet in the Americas and 2.0 million square feet in Europe.

        Our facilities include large industrial parks, ranging in size from approximately 300,000 to 6.8 million square feet in Brazil, China, Hungary, Israel, Mexico, Romania and Poland. We also have regional manufacturing operations, generally ranging in size from under 100,000 to approximately 1.0 million square feet in Austria, Brazil, Canada, China, Denmark, Germany, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Poland, Romania, Singapore, Slovakia, Sweden, Ukraine and the United States. We also have smaller design and engineering centers and product introduction centers at a number of locations in the world's major electronics markets.

        Our facilities are well maintained and suitable for the operations conducted. The productive capacity of our plants is adequate for current needs.

ITEM 3.    LEGAL PROCEEDINGS

        From time to time, we are subject to legal proceedings, claims, and litigation arising in the ordinary course of business. We defend ourselves vigorously against any such claims. Although the outcome of these matters is currently not determinable, management expects that any losses that are probable or reasonably possible of being incurred as a result of these matters, which are in excess of amounts already accrued in its consolidated balance sheet would not be material to the financial statements as a whole.

ITEM 4.    MINE SAFETY DISCLOSURES

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

PRICE RANGE OF ORDINARY SHARES

        Our ordinary shares are quoted on the NASDAQ Global Select Market under the symbol "FLEX." The following table sets forth the high and low per share sales prices for our ordinary shares since the beginning of fiscal year 2011 as reported on the NASDAQ Global Select Market.

 
  High   Low  

Fiscal Year Ended March 31, 2012

             

Fourth Quarter

  $ 7.42   $ 5.75  

Third Quarter

    6.75     5.42  

Second Quarter

    7.01     5.10  

First Quarter

    7.51     6.27  

Fiscal Year Ended March 31, 2011

             

Fourth Quarter

  $ 8.44   $ 7.17  

Third Quarter

    7.98     5.97  

Second Quarter

    6.71     4.93  

First Quarter

    8.25     5.52  

        As of May 16, 2012 there were 3,646 holders of record of our ordinary shares and the closing sales price of our ordinary shares as reported on the NASDAQ Global Select Market was $6.62 per share.

DIVIDENDS

        Since inception, we have not declared or paid any cash dividends on our ordinary shares. We presently do not have plans to pay any dividends in the near future.

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STOCK PRICE PERFORMANCE GRAPH

        The following stock price performance graph and accompanying information is not deemed to be "soliciting material" or to be "filed" with the SEC or subject to Regulation 14A under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of any general incorporation language in any such filing.

        The graph below compares the cumulative total shareholder return on our ordinary shares, the Standard & Poor's 500 Stock Index and a peer group comprised of Benchmark Electronics, Inc., Celestica, Inc., Jabil Circuit, Inc., and Sanmina-SCI Corporation.

        The graph below assumes that $100 was invested in our ordinary shares, in the Standard & Poor's 500 Stock Index and in the peer group described above on March 31, 2007 and reflects the annual return through March 31, 2012, assuming dividend reinvestment.

        The comparisons in the graph below are based on historical data and are not indicative of, or intended to forecast, the possible future performances of our ordinary shares.


COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Flextronics International Ltd., the S&P 500 Index and Peer Group

GRAPHIC

*Five year cumulative total return: $100 invested on March 30, 2007 in stock or S&P 500 index, including re-investment of dividends.
Source: Flextronics and Factset Research Systems

 
  3/07   3/08   3/09   3/10   3/11   3/12  

Flextronics International Ltd. 

    100.00     85.83     26.42     71.66     68.28     66.00  

S&P 500

    100.00     94.92     58.77     88.02     101.79     110.48  

Peer Group

    100.00     60.23     31.63     96.46     101.36     110.10  

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Issuer Purchases of Equity Securities

        The following table provides information regarding purchases of our ordinary shares made by us for the period from January 1, 2012 through March 31, 2012.

Period
  Total Number
of Shares
Purchased(1)
  Average Price
Paid per Share
  Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
  Approximate Dollar Value
of Shares that May Yet
Be Purchased Under the
Plans or Programs(2)
 

January 1 - February 3, 2012

    9,838,431   $ 6.04     9,838,431   $ 153,132,831  

February 4 - March 2, 2012

    3,211,646     6.99     3,211,646     154,638,473  

March 3 - March 31, 2012

    1,747,451     6.92     1,747,451     140,992,925  
                       

Total

    14,797,528           14,797,528        
                       

(1)
During the period from January 1, 2012 through March 31, 2012 all purchases were made pursuant to the program discussed below in open market transactions. All purchases were made in accordance with Rule 10b-18 under the Securities Exchange Act of 1934.

(2)
On July 18, 2011, our Board of Directors authorized the repurchase of up to $200.0 million of our outstanding ordinary shares. Repurchases under our share repurchase plans are subject to an aggregate limit of 10% of our ordinary shares outstanding as of our Extraordinary General Meeting held in July 2011. On December 22, 2011, our Board of Directors authorized the repurchase of the remaining balance of ordinary shares outstanding not to exceed the 10% limitation. As of March 31, 2012, we had 20,379,234 shares available to be repurchased under the plans with an approximate dollar value of $141.0 million at an assumed average price of $6.92 per share.

RECENT SALES OF UNREGISTERED SECURITIES

        None.

INCOME TAXATION UNDER SINGAPORE LAW

        Dividends.    Singapore does not impose a withholding tax on dividends. All dividends are tax exempt to shareholders.

        Gains on Disposal.    Under current Singapore tax law there is no tax on capital gains, thus any profits from the disposal of shares are not taxable in Singapore unless the gains arising from the disposal of shares are income in nature and subject to tax, especially if they arise from activities which the Inland Revenue Authority of Singapore regards as the carrying on of a trade or business in Singapore (in which case, the profits on the sale would be taxable as trade profits rather than capital gains).

        Shareholders who apply, or who are required to apply, the Singapore Financial Reporting Standard 39 Financial Instruments—Recognition and Measurement ("FRS 39") for the purposes of Singapore income tax may be required to recognize gains or losses (not being gains or losses in the nature of capital) in accordance with the provisions of FRS 39 (as modified by the applicable provisions of Singapore income tax law) even though no sale or disposal of shares is made.

        Stamp Duty.    There is no stamp duty payable for holding shares, and no duty is payable on the acquisition of newly-issued shares. When existing shares are acquired in Singapore, a stamp duty is payable on the instrument of transfer of the shares at the rate of two Singapore dollars ("S$") for every S$1,000 of the market value of the shares. The stamp duty is borne by the purchaser unless there

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is an agreement to the contrary. If the instrument of transfer is executed outside of Singapore, the stamp duty must be paid only if the instrument of transfer is received in Singapore.

        Estate Taxation.    The estate duty was abolished for deaths occurring on or after February 15, 2008. For deaths prior to February 15, 2008 the following rules apply:

        If an individual who is not domiciled in Singapore dies on or after January 1, 2002, no estate tax is payable in Singapore on any of our shares held by the individual.

        If property passing upon the death of an individual domiciled in Singapore includes our shares, Singapore estate duty is payable to the extent that the value of the shares aggregated with any other assets subject to Singapore estate duty exceeds S$600,000. Unless other exemptions apply to the other assets, for example, the separate exemption limit for residential properties, any excess beyond S$600,000 will be taxed at 5% on the first S$12,000,000 of the individual's chargeable assets and thereafter at 10%.

        An individual shareholder who is a U.S. citizen or resident (for U.S. estate tax purposes) will have the value of the shares included in the individual's gross estate for U.S. estate tax purposes. An individual shareholder generally will be entitled to a tax credit against the shareholder's U.S. estate tax to the extent the individual shareholder actually pays Singapore estate tax on the value of the shares; however, such tax credit is generally limited to the percentage of the U.S. estate tax attributable to the inclusion of the value of the shares included in the shareholder's gross estate for U.S. estate tax purposes, adjusted further by a pro rata apportionment of available exemptions. Individuals who are domiciled in Singapore should consult their own tax advisors regarding the Singapore estate tax consequences of their investment.

        Tax Treaties Regarding Withholding.    There is no reciprocal income tax treaty between the U.S. and Singapore regarding withholding taxes on dividends and capital gains.

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ITEM 6.    SELECTED FINANCIAL DATA

        These historical results are not necessarily indicative of the results to be expected in the future. The following table is qualified by reference to and should be read in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 8, "Financial Statements and Supplementary Data."

 
  Fiscal Year Ended March 31,  
 
  2012(8)(9)   2011(8)   2010(8)   2009(8)   2008(2)  
 
  (In thousands, except per share amounts)
 

CONSOLIDATED STATEMENT OF OPERATIONS DATA(1):

                               

Net sales

  $ 29,387,656   $ 28,489,018   $ 24,009,784   $ 30,844,316   $ 27,445,187  

Cost of sales

    27,870,315     26,903,049     22,705,774     29,423,379     25,882,498  

Restructuring charges(3)

            92,458     155,134     405,151  
                       

Gross profit

    1,517,341     1,585,969     1,211,552     1,265,803     1,157,538  

Selling, general and administrative expenses

    880,636     804,890     755,064     953,622     779,402  

Intangible amortization(4)

    55,896     70,913     89,615     135,872     112,317  

Goodwill impairment charge(5)

                5,949,977      

Restructuring charges(3)

            15,070     24,651     38,743  

Other charges (income), net(6)

    (19,963 )   6,267     206,895     88,890     44,365  

Interest and other expense, net

    36,011     75,378     155,654     230,410     141,735  
                       

Income (loss) from continuing operations before income taxes

    564,761     628,521     (10,746 )   (6,117,619 )   40,976  

Provision for (benefit from) income taxes(7)

    54,116     22,176     (35,748 )   5,550     704,778  
                       

Income (loss) from continuing operations

    510,645     606,345     25,002     (6,123,169 )   (663,802 )

Loss from discontinued operations, net of tax

    (21,880 )   (10,126 )   (6,408 )   (12,349 )   (17,581 )
                       

Net income (loss)

  $ 488,765   $ 596,219   $ 18,594   $ (6,135,518 ) $ (681,383 )
                       

Diluted earnings (loss) per share:

                               

Continuing operations

  $ 0.70   $ 0.77   $ 0.03   $ (7.46 ) $ (0.92 )
                       

Discontinued operations

  $ (0.03 ) $ (0.01 ) $ (0.01 ) $ (0.02 ) $ (0.02 )
                       

Total

  $ 0.67   $ 0.75   $ 0.02   $ (7.47 ) $ (0.95 )
                       

 

 
  As of March 31,  
 
  2012   2011   2010   2009   2008(2)  
 
  (In thousands)
 

CONSOLIDATED BALANCE SHEET DATA(1):

                               

Working capital(9)

  $ 2,246,365   $ 2,225,268   $ 1,642,790   $ 1,526,235   $ 2,911,922  

Total assets(9)

    11,033,804     11,633,152     10,642,552     11,316,940     19,523,008  

Total long-term debt and capital lease obligations, excluding current portion

    2,157,798     2,199,195     1,990,258     2,733,680     3,310,042  

Shareholders' equity(9)

    2,283,979     2,294,696     1,984,567     1,861,168     8,240,832  

(1)
On March 2, 2012, the Company entered into a definitive agreement to sell certain assets of its Vista Point Technologies camera module business. This transaction is expected to close in the first quarter of fiscal 2013 subject to certain closing conditions. The camera modules business represents a separate asset group and the divestiture qualifies as discontinued operations, and accordingly, the Company has

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(2)
On October 1, 2007, the Company completed its acquisition of 100% of the outstanding common stock of Solectron, a provider of value-added electronics manufacturing and supply chain services to OEMs. The results of Solectron's operations were included in the Company's consolidated financial results beginning on the acquisition date.

(3)
Restructuring charges incurred during the 2010 and 2009 fiscal years were primarily intended to rationalize the Company's global manufacturing capacity and infrastructure in response to weakened macroeconomic conditions and decline in demand from our OEM customers. Restructuring charges incurred during the 2008 fiscal year were primarily in connection with the acquisition and integration of Solectron.

(4)
The Company recognized a charge of $30.0 million during fiscal year 2008 for the write-off of certain intangible asset licenses due to technological obsolescence.

(5)
The Company recognized a charge to impair goodwill as a result of a significant decline in its share value driven by weakened macroeconomic conditions that contributed to a decrease in market multiples and estimated discounted cash flows.

(6)
The net other income in the fiscal year 2012, relates to the sale of certain international entities.

During fiscal year 2011, the Company recognized a $13.2 million loss associated with the early redemption of the 6.25% Senior Subordinated Notes and an $11.7 million loss in connection with the divestiture of certain international entities. Additionally, the Company recognized a gain of $18.6 million associated with a sale of an equity investment that was previously fully impaired.

The Company recognized charges of $199.4 million, $111.5 million and $61.1 million in fiscal years 2010, 2009 and 2008, respectively, for the loss on disposition, other-than-temporary impairment and other related charges on its investments in, and notes receivable from, certain non-publicly traded companies. In fiscal year 2009, the Company recognized a net gain of $22.3 million upon the partial extinguishment of debt.

(7)
The Company recognized non-cash tax expense of $661.3 million during fiscal year 2008, as we determined the recoverability of certain deferred tax assets was no longer more likely than not.

(8)
During the fourth quarter of fiscal 2012, the Company identified certain accounting errors in the statutory-to-U.S. GAAP adjustments at one of its foreign sites that originated in prior annual periods. Management conducted additional procedures and concluded that these errors were isolated to that location. These errors, which primarily understated cost of sales, totaled $10.4 million, $8.0 million and $6.5 million for the fiscal years ended March 31, 2011, 2010 and 2009 respectively, and were corrected by the Company as an out-of-period adjustment in the fourth quarter of fiscal 2012. Management believes the impact of this item, to the fiscal year ended March 31, 2012 and to prior fiscal years presented was not material. As a result of recording these adjustments in the fourth quarter of fiscal 2012, net income for the year ended March 31, 2012 was reduced by $24.9 million ($0.03 per share).

(9)
One of the Company's customers in the concentrated solar photovoltaic market is experiencing significant financial and liquidity difficulties and as a result, the Company incurred $32.0 million of charges related to this customer. Of this charge, the Company classified $4.0 million in cost of sales related to the write-down of inventory, and $28.0 million as selling, general and administrative expenses for provisions for doubtful accounts as of March 31, 2012.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        This report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words "expects," "anticipates," "believes," "intends," "plans" and similar expressions identify forward-looking statements. In addition, any statements which refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this Form 10-K with the Securities and Exchange Commission. These forward-looking statements are subject to risks and uncertainties, including, without limitation, those discussed in this section and in Item 1A, "Risk Factors." In addition, new risks emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. Accordingly, our future results may differ materially from historical results or from those discussed or implied by these forward-looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements.

OVERVIEW

        We are a leading global provider of vertically-integrated advanced design, manufacturing and services to original equipment manufacturers ("OEMs") of a broad range of electronics products in the following markets: High Reliability Solutions (HRS), which is comprised of our medical, automotive, and defense and aerospace businesses; High Velocity Solutions (HVS), which includes our mobile/smart phone business, consumer electronics, including game consoles and printers, enterprise PC business and our ODM personal computing business which we exited in the third quarter of fiscal 2012; Industrial and Emerging Industries (IEI), which is comprised of our industrial, semiconductor capital equipment and clean technology businesses; and Integrated Network Solutions (INS), which includes our telecommunications infrastructure, data networking, connected home, and server and storage businesses.

        Historically, our industry experienced significant change and growth as an increasing number of companies elected to outsource some or all of their design and manufacturing requirements. We have seen an increase in the penetration of the global OEM manufacturing requirements since the 2001 - 2002 technology downturn as more and more OEMs pursued the benefits of outsourcing rather than internal manufacturing. In the second half of fiscal 2009, we experienced dramatically deteriorating macroeconomic conditions and demand for our customers' products slowed in all of the industries we serve. This global economic crisis, and related decline in demand for our customers' products, put pressure on certain of our OEM customers' cost structures and caused them to reduce their manufacturing and supply chain outsourcing requirements. Beginning in the second half of fiscal year 2010, we began seeing some positive signs that demand for our OEM customers' end products was improving, and this trend continued through the end of our 2012 fiscal year.

        We use a portfolio management approach to manage our extensive service offering. As our OEM customers change in the way they go to market, we reorganize and rebalance our business portfolio in order to align with our customers and to optimize our operating results. As part of our portfolio management strategy, we expect to decrease the percentage of our revenue from our HVS businesses, which has lower margins, and increase the percentage of our revenue from our more complex and higher margin non-HVS businesses. Our target is to achieve a mix whereby approximately 70% of our revenue is derived from our non-HVS businesses and 30% of our revenue is derived from our HVS businesses. We believe this is an optimal portfolio position for the Company which will result in expanded margins, though resulting in lower overall revenue in the near term as we rebalance. We continue to experience increased revenue in our non-HVS markets through new business opportunities

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and have accelerated the reduction in our HVS market, a trend that we expect to continue in to fiscal 2013. We also expect to fully reposition assets and capacity in the HVS business in our non-HVS businesses. The objective of our operating model is to allow us to redeploy and reposition our assets and resources across all the markets we serve. In May 2011, due to negative operating margins and performance metrics on certain of our larger customer contracts, we announced that we would be phasing out of our ODM personal computing (PC) business. By the end of fiscal year 2012 we ceased all ODM PC manufacturing operations and certain design activities of ODM related businesses. These businesses generated $1.6 billion in sales and sustained operating losses of approximately $113.1 million in fiscal 2012. We have redeployed the majority of the associated manufacturing and design assets into other parts of our business, which will benefit our future cash flows through reduced capital expenditure requirements.

        Additionally, as a result of the challenges faced by our camera modules business, this business has been performing at below optimal levels for the past several years. On March 2, 2012, the Company entered into a definitive agreement with Tessera Technologies, Inc., and DigitalOptics Corporation (DOC), a wholly-owned subsidiary of Tessera Technologies, in which DOC will acquire certain assets of Flextronics' Vista Point Technologies camera module business, including intellectual property and the China-based manufacturing operations. This transaction is expected to close in the first quarter of fiscal 2013 subject to certain closing conditions. The results of operations and financial position of the divested camera modules business are reported as discontinued operations for all periods presented, and include a $17.0 million charge in fiscal 2012 for the impairment of fixed assets to be disposed in the transaction based on the expected proceeds from the sale.

        With respect to our remaining components businesses, our manufacturing efficiencies and production yields continued to improve and during fiscal year 2012 our component product solution services made progress reducing their aggregate operating losses. We are encouraged by the increased demand for these product solutions and the successful achievement of acceptance in the market, and we remain intensely focused on further improving our manufacturing efficiencies and thus our future margins and profitability.

        We are one of the world's largest manufacturing service providers, with revenues of $29.4 billion in fiscal 2012. We design, build, ship, and service electronics products for our customers through a network of facilities in over 30 countries across four continents. We have established an extensive network of manufacturing facilities in the world's major electronics markets (Asia, the Americas and Europe) in order to serve the growing outsourcing needs of both multinational and regional OEMs. As of March 31, 2012, our total manufacturing capacity was approximately 26.7 million square feet. In fiscal 2012, our net sales in Asia, the Americas and Europe represented approximately 52%, 29% and 19%, respectively, of our total net sales, based on the location of the manufacturing site. The following tables set forth net sales and net property and equipment, by country, based on the location of our manufacturing sites:

 
  Fiscal Year Ended March 31,  
Net sales:
  2012   2011   2010  
 
  (In thousands)
 

China

  $ 11,148,475   $ 10,744,768   $ 7,868,517  

Mexico

    4,005,653     4,241,222     3,664,914  

U.S

    3,006,713     2,949,804     3,187,045  

Malaysia

    2,868,990     2,595,174     2,561,913  

Hungary

    2,123,768     2,343,066     1,807,927  

Other

    6,234,057     5,614,984     4,919,468  
               

  $ 29,387,656   $ 28,489,018   $ 24,009,784  
               

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  Fiscal Year Ended March 31,  
Property and equipment, net:
  2012   2011  
 
  (In thousands)
 

China

  $ 847,732   $ 835,011  

Mexico

    309,325     341,719  

Malaysia

    170,990     144,604  

U.S

    132,950     136,081  

Hungary

    130,458     157,643  

Other

    492,693     468,973  
           

  $ 2,084,148   $ 2,084,031  
           

        We believe that the combination of our extensive design and engineering services, significant scale and global presence, vertically-integrated end-to-end services, advanced supply chain management, industrial campuses in low-cost geographic areas and operational track record provide us with a competitive advantage in the market for designing, manufacturing and servicing electronics products for leading multinational and regional OEMs. Through these services and facilities, we offer our OEM customers the ability to simplify their global product development, manufacturing process, and after sales services, and enable them to achieve meaningful time to market and cost savings.

        Our operating results are affected by a number of factors, including the following:

        We also are subject to other risks as outlined in Item 1A, "Risk Factors."

        Net revenues for fiscal 2012 increased 3.2% or $0.9 billion to $29.4 billion as we grew in all the major markets we serve except for HVS, which was impacted by decreased sales of mobile handsets to one of our significant customers as we rebalanced our portfolio and our planned exit of its ODM PC business. However, we believe that we finished the year in a healthy financial and competitive position driven in part by the success in our diversified business model. The overall improvement in the macroeconomic environment during fiscal 2012 and the success in booking new product orders for our array of key customers led to increased demand for our OEM customers' end products. The vast

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majority of our sales growth during the year was organic, as the impact from acquisitions was minimal. Our fiscal 2012 gross profit totaled $1.5 billion, representing a decrease of $68.6 million, or 4.3%, compared to fiscal 2011 driven primarily by an increase in sales of low margin products in the ODM personal computing business that we exited in the third quarter of fiscal 2012. Our income from continuing operations of $510.6 million was lower than the $606.3 million realized in fiscal 2011 primarily reflecting the operating losses sustained from the ODM personal computing business and the $32.0 million we recognized for a financially distressed customer as discussed further below.

        During the fourth quarter of fiscal 2012, the Company identified certain accounting errors in the statutory to US GAAP adjustments at one of its foreign sites that originated in prior interim and annual periods. Management conducted additional procedures and concluded that these errors were isolated to that location. These errors, which primarily understated cost of sales, totaled $0.8 million in the first nine months of fiscal 2012 and $10.4 million and $8.0 million for the fiscal years ended March 31, 2011 and 2010, and were corrected by the Company as an out-of-period adjustment in the fourth quarter of fiscal 2012. This fourth quarter adjustment was partially offset by the correction of an error identified in the fourth quarter fiscal 2012 amounting to $4.2 million related to the provisions for income taxes in the prior fiscal 2012 interim periods. Management believes the impact of these items, both individually and in the aggregate, to the fiscal year ended March 31, 2012 and to prior fiscal and interim periods presented was not material. As a result of recording these adjustments in the fourth quarter, net income for the quarter and year ended March 31, 2012 were reduced by $21.5 million ($0.03 per share) and $24.9 million ($0.03 per share), respectively.

        Subsequent to March 31, 2012, the Company became aware that one of its customers in the concentrated solar photovoltaic market was experiencing significant financial and liquidity difficulties. The Company has been in good faith negotiations with the customer and its primary stakeholders on various out-of-court restructuring alternatives. Based on an evaluation of this customer's specific circumstances through May 25, 2012, including but not limited to, its financing alternatives, business prospects, proposed restructuring alternatives and the possibility of insolvency, the Company determined that its best estimate was that all accounts receivable and inventory related to this customer were unrecoverable and recorded a charge of $32.0 million as of March 31, 2012 related to this customer. Of this charge, the Company classified $4.0 million in cost of sales related to the write-down of inventory and $28.0 million as selling, general and administrative expenses for provisions for doubtful accounts. Based on all information available through March 31, 2012, the Company believed that payment of receivables was reasonably assured at the time of shipment, and accordingly, the Company recorded revenues on sales to the customer.

        Cash provided by operations decreased approximately $53.0 million to $804.3 million for fiscal year 2012 compared with $857.3 million for fiscal year 2011. Working capital increased $250.6 million in fiscal 2012 primarily as a result of a decrease in accounts payable and to a lesser extent from an increase in accounts receivable. Our average net working capital, defined as accounts receivable plus the deferred purchase price receivable from our asset-backed securitization programs plus inventory less accounts payable, as a percentage of annual sales was approximately 6.2%, 4.5% and 5.0% for the years ended March 31, 2012, 2011 and 2010, respectively. The increase in the percentage for the year ended March 31, 2012 is primarily attributable to the change in our overall portfolio as our mix of business shifted to a lesser percentage of HVS, which historically carries significantly higher inventory turns and customers with contractually faster payment terms. Our free cash flow, which we define as cash from operating activities less net purchases of property and equipment, was $416.3 million for fiscal 2012 compared to $463.5 million for fiscal 2011, primarily due to lesser cash flows from operations partially off-set by lower capital expenditures as we continue to reposition assets from the ODM personal computing business we exited in the December quarter. Cash used in financing activities amounted to $522.2 million during fiscal 2012 and included repurchases of approximately 81.7 million ordinary shares at an aggregate purchase price of $509.8 million.

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        Fiscal 2012 was a transformational year and one in which we took further steps to achieve a more diversified portfolio, as evidenced by our exit of the ODM PC business. We continue our focus on diversifying our product portfolio from the high volume low margin HVS market to other markets with a view to improving profitability and we expect these actions to take further effect over the course of fiscal 2013. We believe that this diversified portfolio provides our investors with a more stable and predictable portfolio with longer product lifecycles. We believe that the long-term, future growth prospects for outsourcing of advanced manufacturing capabilities, design and engineering services and after-market services are and will remain strong.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP" or "GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates and assumptions.

        We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. For further discussion of our significant accounting policies, refer to note 2, "Summary of Accounting Policies," of the notes to consolidated financial statements in Item 8, "Financial Statements and Supplementary Data."

        We recognize manufacturing revenue when we ship goods or the goods are received by our customer, title and risk of ownership have passed, the price to the buyer is fixed or determinable and recoverability is reasonably assured. Generally, there are no formal customer acceptance requirements or further obligations related to manufacturing services. If such requirements or obligations exist, then we recognize the related revenues at the time when such requirements are completed and the obligations are fulfilled. We make provisions for estimated sales returns and other adjustments at the time revenue is recognized based upon contractual terms and an analysis of historical returns. These provisions were not material to our consolidated financial statements for the 2012, 2011 and 2010 fiscal years.

        We provide a comprehensive suite of services for our customers that range from contract design services to manufacturing and logistics to repair services. We recognize service revenue when the services have been performed, and the related costs are expensed as incurred. Our net sales for services were less than 10% of our total sales during the 2012, 2011 and 2010 fiscal years, and accordingly, are included in net sales in the consolidated statements of operations.

        We have an established customer credit policy through which we manage customer credit exposures through credit evaluations, credit limit setting, monitoring, and enforcement of credit limits for new and existing customers. We perform ongoing credit evaluations of our customers' financial condition and make provisions for doubtful accounts based on the outcome of those credit evaluations. We evaluate the collectability of accounts receivable based on specific customer circumstances, current economic trends, and the age of past due receivables. To the extent we identify exposures as a result of credit or customer evaluations, we also review other customer related exposures, including but not limited to inventory and related contractual obligations.

        Subsequent to March 31, 2012, the Company became aware that one of its customers in the concentrated solar photovoltaic market was experiencing significant financial and liquidity difficulties.

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The Company recognized a charge of $32 million in relation to write-off of bad debt and write-down of inventory in connection with this distressed customer. Refer to the overview section for further detail.

        We recognize restructuring charges related to our plans to close or consolidate duplicate manufacturing and administrative facilities. In connection with these activities, we recognize restructuring charges for employee termination costs, long-lived asset impairment and other restructuring-related costs.

        The recognition of these restructuring charges require that we make certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned exit activity. To the extent our actual results in exiting these facilities differ from our estimates and assumptions, we may be required to revise the estimates of future liabilities, requiring the recognition of additional restructuring charges or the reduction of liabilities already recognized. At the end of each reporting period, we evaluate the remaining accrued balances to ensure that no excess accruals are retained and the utilization of the provisions are for their intended purpose in accordance with developed exit plans.

        Refer to note 12, "Restructuring Charges," of the notes to consolidated financial statements in Item 8, "Financial Statements and Supplementary Data" for further discussion of our restructuring activities.

        We review property and equipment and acquired amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment loss is recognized when the carrying amount of these long-lived assets exceeds their fair value. Recoverability of property and equipment and acquired amortizable intangible assets are measured by comparing their carrying amount to the projected cash flows the assets are expected to generate. If such assets are considered to be impaired, the impairment loss recognized, if any, is the amount by which the carrying amount of the property and equipment and acquired amortizable intangible assets exceeds fair value.

        Our inventories are stated at the lower of cost (on a first-in, first-out basis) or market value. Our industry is characterized by rapid technological change, short-term customer commitments and rapid changes in demand. We purchase our inventory based on forecasted demand, and we estimate write downs for excess and obsolete inventory based on our regular reviews of inventory quantities on hand, and the latest forecasts of product demand and production requirements from our customers. If actual market conditions or our customers' product demands are less favorable than those projected, additional provisions may be required. In addition, unanticipated changes in the liquidity or financial position of our customers and/or changes in economic conditions may require additional write downs for inventories due to our customers' inability to fulfill their contractual obligations with regard to inventory procured to fulfill customer demand.

        Our deferred income tax assets represent temporary differences between the carrying amount and the tax basis of existing assets and liabilities which will result in deductible amounts in future years, including net operating loss carry forwards. Based on estimates, the carrying value of our net deferred tax assets assumes that it is more likely than not that we will be able to generate sufficient future taxable income in certain tax jurisdictions to realize these deferred income tax assets. Our judgments regarding future profitability may change due to future market conditions, changes in U.S. or

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international tax laws and other factors. If these estimates and related assumptions change in the future, we may be required to increase or decrease our valuation allowance against deferred tax assets previously recognized, resulting in additional or lesser income tax expense.

        We are regularly subject to tax return audits and examinations by various taxing jurisdictions and around the world, and there can be no assurance that the final determination of any tax examinations will not be materially different than that which is reflected in our income tax provisions and accruals. Should additional taxes be assessed as a result of a current or future examination, there could be a material adverse effect on our tax position, operating results, financial position and cash flows. Refer to note 11 "Income Taxes" of the notes to consolidated financial statements in Item 8, "Financial Statements and Supplementary Data" for further discussion of our tax position.

RESULTS OF OPERATIONS

        The following table sets forth, for the periods indicated, certain statements of operations data expressed as a percentage of net sales. The financial information and the discussion below should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8, "Financial Statements and Supplementary Data." The data below, and discussion that follows, represents our results from operations.

        On March 2, 2012, the Company entered into a definitive agreement to sell certain assets of its Vista Point Technologies camera module business. This transaction is expected to close in the first quarter of fiscal 2013 subject to certain closing conditions. The camera modules business represents a separate asset group and the divestiture qualifies as discontinued operations, and accordingly, the Company has reported the results of operations and financial position of this business in discontinued operations within the statements of operations and the balance sheets for all periods presented.

 
  Fiscal Year Ended March 31,  
 
  2012   2011   2010  

Net sales

    100.0 %   100.0 %   100.0 %

Cost of sales

    94.8     94.4     94.6  

Restructuring charges

            0.4  
               

Gross profit

    5.2     5.6     5.0  

Selling, general and administrative expenses

    3.0     2.8     3.1  

Intangible amortization

    0.2     0.2     0.4  

Restructuring charges

            0.1  

Other charges (income), net

    (0.1 )       0.9  

Interest and other expense, net

    0.1     0.3     0.6  
               

Income (loss) from continuing operations before income taxes

    2.0     2.3     0.0  

Provision for (benefit from) income taxes

    0.2     0.1     (0.1 )
               

Income from continuing operations

    1.8     2.2     0.1  

Discontinued operations:

                   

Loss from discontinued operations, net of tax

    (0.1 )        
               

Net income

    1.7 %   2.2 %   0.1 %
               

        Net sales during fiscal year 2012 totaled $29.4 billion, representing an increase of $0.9 billion, or 3.2%, from $28.5 billion during fiscal year 2011. Sales during fiscal year 2012 increased across all of the markets we serve except for HVS consisting of increases of: (i) $0.8 billion or 7.7% in the INS market,

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(ii) $0.5 billion or 28.5% in the HRS market, and (iii) $0.1 billion or 1.7% in the IEI market. The increase in sales for our INS market were driven by new program wins with existing customers with products in enterprise data networking and telecommunications infrastructure markets, offset by declining demand from certain customer programs in the server market that were reducing due to the end of the product life cycles or which transitioned to another supplier. The increase in sales for our HRS market were driven primarily from new wins and programs with our larger customers in the automotive, medical equipment and drug delivery markets. The increase in sales for our IEI market was due to new customer wins and new programs with existing customers across this business group primarily with customers serving the clean tech markets offset by reduced demand from our customers serving the capital equipment markets. The increase in net sales for these markets were offset by a $0.5 billion or 4.2% decrease in sales in the HVS market due to a decrease in sales of mobile handsets to one of our significant customers as we rebalance our portfolio, partially offset by an increase in sales through the first nine months of fiscal 2012 to another significant customer in the ODM personal computing business which we exited in the third quarter of fiscal 2012. Net sales increased across all of the geographical regions we serve, consisting of increases of $0.8 billion in Asia, $0.1 billion in the Americas and an insignificant increase in Europe.

        Net sales during fiscal year 2011 totaled $28.5 billion, representing an increase of $4.5 billion, or 18.7%, from $24.0 billion during fiscal year 2010, primarily due to an improved macroeconomic environment that led to increased demand for our OEM customers ends products. Sales during fiscal year 2011 increased across all of the markets we serve, consisting of increases of: (i) $2.4 billion or 24.3% in the HVS market, (ii) $0.9 billion or 30.1% in the IEI market, (iii) $0.7 billion or 7.2% in the INS market and (iv) $0.5 billion or 34.8% in the HRS market. These increases were driven by increased sales from almost all of our major customers combined with new customer wins and new program wins with existing customers. Net sales increased across all of the geographical regions we serve, consisting of increases of $3.1 billion in Asia, $0.8 billion in Europe and $0.6 billion in the Americas.

        The following table sets forth net sales by market:

 
  Fiscal Year Ended March 31,  
Market:
  2012   2011   2010  
 
  (In thousands)
 

High Velocity Solutions

  $ 11,645,211   $ 12,156,933   $ 9,777,024  

Integrated Network Solutions

    11,358,401     10,547,049     9,835,871  

Industrial & Emerging Industries

    3,989,717     3,921,226     3,014,573  

High Reliability Solutions

    2,394,327     1,863,810     1,382,316  
               

  $ 29,387,656   $ 28,489,018   $ 24,009,784  
               

        Our ten largest customers during fiscal years 2012, 2011, and 2010 accounted for approximately 55%, 52% and 47% of net sales, respectively, with Hewlett-Packard (HP) and Research In Motion (RIM) each accounting for greater than 10% of our net sales during fiscal 2012. During fiscal year 2011 RIM accounted for greater than 10% of net sales and during fiscal year 2010 HP accounted for greater than 10% of net sales.

        Gross profit is affected by a number of factors, including the number and size of new manufacturing programs, product mix, component costs and availability, product life cycles, unit volumes, pricing, competition, new product introductions, capacity utilization and the expansion and consolidation of manufacturing facilities. The flexible design of our manufacturing processes allows us to build a broad range of products in our facilities, which allows us to better utilize our manufacturing

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capacity. In the cases of new programs, profitability normally lags revenue growth due to product start-up costs, lower manufacturing program volumes in the start-up phase, operational inefficiencies, and under-absorbed overhead. Gross margin often improves over time as manufacturing program volumes increase, as our utilization rates and overhead absorption improves, and as we increase the level of vertically-integrated manufacturing services content. As a result of these various factors, our gross margin varies from period to period.

        Gross profit during fiscal year 2012 decreased $68.6 million to $1.5 billion from $1.6 billion during fiscal year 2011. Gross margin decreased to 5.2% of net sales in fiscal year 2012 as compared with 5.6% of net sales in fiscal 2011. The decreases in gross profit and gross margin were primarily attributable to a higher mix of low-margin products principally associated with the increase in sales of products in the ODM personal computing business during the first nine months of fiscal 2012, which are included in the HVS market which we exited in the third quarter of fiscal 2012. These businesses sustained gross losses of approximately $38.2 million in fiscal 2012. Fiscal 2012 cost of sales also includes the impact of adjustments made to correct certain accounting errors identified and recorded as out of period adjustments during the fourth quarter of fiscal 2012 as discussed in the Overview section. These out-of period adjustments amounted to approximately $23.9 million and resulted in increased cost of sales in the fourth quarter of fiscal 2012. In addition, gross margins were negatively impacted by unfavorable manufacturing costs associated with the exit of our ODM related businesses and costs incurred for right-sizing activities at various locations.

        Gross profit during fiscal year 2011 increased $374.4 million to $1.6 billion from $1.2 billion during fiscal year 2010. Gross margin increased to 5.6% of net sales in fiscal year 2011 as compared with 5.0% of net sales in fiscal 2010. The 60 basis point year over year increase in gross margin was primarily attributable to increased net sales resulting in better utilization of our capacity and absorption of our fixed costs, and in part, due to cost reduction and operational efficiency benefits related to prior years' restructuring activities. We did not incur restructuring charges during fiscal year 2011 compared to restructuring costs of $92.4 million in fiscal 2010.

        We have essentially completed all activities associated with previously announced plans and the remaining restructuring accrual as at March 31, 2012 was not significant. Additionally, there were no changes to any of the previously announced plans during fiscal 2012. While we incur severance, asset impairment charges and other facilities charges as a result of changes in our customer mix on an ongoing basis, such individual actions were not considered material to be separately disclosed as restructuring charges, and are included in either cost of sales or selling, general and administrative expenses, as appropriate. The amount of accrued liabilities related to these actions at March 31, 2012 was not significant.

        We recognized restructuring charges of approximately $107.5 million during fiscal year 2010 as part of our restructuring plans previously announced in March 2009 in order to rationalize our global manufacturing capacity and infrastructure in response to weakened macroeconomic conditions. The costs associated with these restructuring activities included employee severance, costs related to owned and leased facilities and equipment that is no longer in use and is to be disposed of, and other costs associated with the exit of certain contractual arrangements due to facility closures. We classified approximately $92.4 million of these charges as cost of sales and approximately $15.1 million of these charges as selling, general and administrative expenses during fiscal year 2010. The charges recognized by reportable geographic region amounted to $45.1 million, $37.3 million and $25.1 million for Asia, Europe and the Americas, respectively. Approximately $43.1 million of these restructuring charges were non-cash. As of March 31, 2012, accrued severance and facility closure costs related to restructuring charges incurred during fiscal year 2010 and prior were approximately $12.7 million, of which $9.2 million was classified as current.

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        Refer to note 12, "Restructuring Charges," of the notes to consolidated financial statements in Item 8, "Financial Statements and Supplementary Data" for further discussion of our restructuring activities.

        Selling, general and administrative expenses, or SG&A, totaled $880.6 million or 3.0% of net sales, during fiscal year 2012, compared to $804.9 million, or 2.8% of net sales, during fiscal year 2011. The increases in SG&A in dollars and as a percentage of net sales were primarily attributable to the $28.0 million in bad debt expense we recognized in connection with the financial distress currently experienced by one of our customers, and severance costs and other asset impairment costs associated with the exit of our ODM related businesses during the December quarter.

        Selling, general and administrative expenses, or SG&A, totaled $804.9 million or 2.8% of net sales, during fiscal year 2011, compared to $755.1 million, or 3.1% of net sales, during fiscal year 2010. The increase in absolute dollars was primarily the result of increased compensation expense due to increased headcount in various corporate support activities, such as information technology and supply chain management, necessary to support the growth of our operations. Further, we realized increased costs associated with research, development and engineering activities as we continued to make investments to meet the needs of our customers. The overall decrease in SG&A as a percentage of sales during fiscal year 2011 was primarily due to our significant increase in sales as we were able to leverage our SG&A percentage down.

        Amortization of intangible assets in fiscal year 2012 decreased by $15.0 million to $55.9 million from $70.9 million in fiscal year 2011. The reduction in expense was primarily due to certain assets becoming fully amortized and the use of the accelerated method of amortization for certain customer related intangibles, which results in decreasing expense over time.

        Amortization of intangible assets in fiscal year 2011 decreased by $18.7 million to $70.9 million from $89.6 million in fiscal year 2010. The reduction in expense was primarily due to certain assets becoming fully amortized and the use of the accelerated method of amortization for certain customer related intangibles, which results in decreasing expense over time, and was partially offset by purchase accounting adjustments.

        During fiscal 2012, the Company recognized a net gain of $20.0 million, in connection with the sale of certain international entities.

        During fiscal 2011, we recognized charges totaling $6.3 million, consisting of a $13.2 million loss associated with the early redemption of our 6.25% Senior Subordinated Notes, and an $11.7 million loss in connection with the divestiture of certain international entities, offset by a gain of $18.6 million associated with the sale of an equity investment that was previously fully impaired.

        During fiscal 2010, we sold our entire interest in one of our non-majority owned investments and related note receivable for cash of approximately $252.5 million, and recognized an impairment charge associated with this sale amounting to $107.4 million in the first quarter of fiscal 2010. We also recognized charges totaling approximately $92.0 million during the second quarter of fiscal 2010 associated with the other-than-temporary impairment of our notes receivable from one affiliate and an equity investment in another affiliate. Deterioration in the business prospects, cash flow expectations, and increased liability concerns of the affiliate and the equity investment resulted in the impairment of the carrying value to the estimated recoverable value.

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        Interest and other expense, net was $36.0 million during fiscal 2012, compared to $75.4 million during fiscal 2011, a decrease of $39.4 million. The decrease in net expense was primarily due to a $39.2 million reduction in net interest expense principally from the expiration of interest rate swaps in January 2011, which had fixed rates greater than the floating rates underlying our borrowing arrangements and to a lesser extent to the refinancing of $542.1 million of certain subordinated notes during fiscal 2011 with our lower rate revolving credit facility and Asia term loans. Gains on foreign exchange transactions increased $6.5 million during fiscal year 2012 as we continue to benefit from certain cross-border foreign currency transactions and the revaluation of RMB denominated net asset positions for our U.S. functional currency sites based in China. There can be no assurance that further gains from cross-border foreign exchange settlements in China will be available.

        Interest and other expense, net was $75.4 million during fiscal 2011, compared to $155.7 million during fiscal 2010, a decrease of $80.3 million. The decrease in expense was the result of reduced debt levels as we redeemed $542.1 million of certain subordinated notes during the fiscal year. Further reduction in interest expense was due to lower interest rates as a result of $847.0 million in fixed rate debt. This decrease in interest expense was partially offset by interest expense on $160.0 million borrowed under our revolving lines of credit and $379.0 million borrowed under our Asia term loans. In addition, we recognized approximately $9.2 million of income during fiscal 2011 from foreign exchange gains.

        Certain of our subsidiaries have, at various times, been granted tax relief in their respective countries, resulting in lower income taxes than would otherwise be the case under ordinary tax rates. The consolidated effective tax rates were 9.6%, 3.5% and 332.7% for the fiscal years 2012, 2011 and 2010. The effective rate varies from the Singapore statutory rate of 17.0% as a result of recognition of earnings in different jurisdictions, operating loss carry forwards, income tax credits, previously established valuation allowances for deferred tax assets, liabilities for uncertain tax positions, as well as because of the effect of certain tax holidays and incentives granted to our subsidiaries primarily in China, Malaysia, Israel, and Singapore. We generate most of our revenues and profits from operations outside of Singapore. The effective tax rate for fiscal year 2012 varies from the effective rates for fiscal years 2011 and 2010 primarily as a result of changes in valuation allowances and liabilities for uncertain tax positions which are recorded on a discrete, quarterly basis.

        We are regularly subject to tax return audits and examinations by various taxing jurisdictions and around the world, and there can be no assurance that the final determination of any tax examinations will not be materially different than that which is reflected in our income tax provisions and accruals. Should additional taxes be assessed as a result of a current or future examination, there could be a material adverse effect on our tax position, operating results, financial position and cash flows.

        See note 11, "Income Taxes," of the notes to consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data" for further discussion.

        Consistent with our strategy to evaluate the strategic and financial contributions of each of our operations and to focus on the primary growth objectives in the Company's core vertically-integrated manufacturing business activities, on March 2, 2012, we entered into a definitive agreement with Tessera Technologies, Inc., and DigitalOptics Corporation (DOC), a wholly-owned subsidiary of Tessera Technologies. Under the terms of the definitive agreement, DOC will acquire certain assets of Flextronics' Vista Point Technologies camera module business, including intellectual property and the China-based manufacturing operations for a total estimated consideration of $23.0 million, subject to

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certain working capital adjustments. This transaction is expected to close in the first quarter of fiscal 2013 subject to certain closing conditions.

        The divestiture of the camera modules business qualifies as a discontinued operation, and accordingly, we have reported the results of operations and financial position of this business in discontinued operations within the statements of operations and the balance sheets for all periods presented.

        The results from discontinued operations were as follows:

 
  Fiscal Year Ended March 31,  
 
  2012   2011   2010  
 
  (In thousands)
 

Net sales

  $ 82,632   $ 190,907   $ 100,949  

Cost of sales

    100,167     191,950     94,959  

Restructuring charges

            33  
               

Gross profit (loss)

    (17,535 )   (1,043 )   5,957  

Selling, general and administrative expenses

    5,859     11,459     12,037  

Interest and other expense (income), net

    32     422     (51 )
               

Loss before income taxes

    (23,426 )   (12,924 )   (6,029 )

Provision for (benefit from) income taxes

    (1,546 )   (2,798 )   379  
               

Net loss of discontinued operations

  $ (21,880 ) $ (10,126 ) $ (6,408 )
               

        Net sales in fiscal 2012 decreased as we decelerated operations while evaluating strategic alternatives for the business and due to the end of certain product life cycles. The increase in net loss during fiscal 2012 is primarily attributable to a $17.0 million charge for impairment of fixed assets that will be sold in the transaction based on expected proceeds from the sale. The impairment charge is included in cost of sales.

        Net sales in fiscal 2011 increased primarily due to an increase in demand for camera modules sub-assemblies from one of our more significant customers. The sudden and significant increase in volume resulted in manufacturing inefficiencies and poor production yields resulting in a $1.0 million gross loss during fiscal year 2011, which further translated into a $3.7 million increase in net losses primarily due to the fixed nature of certain SG&A expenses that remained consistent with prior year, as compared with fiscal year 2010 after the benefit from income taxes.

LIQUIDITY AND CAPITAL RESOURCES

        As of March 31, 2012, the Company had cash and cash equivalents of $1.5 billion and bank and other borrowings of $2.2 billion. The Company has a $1.5 billion revolving credit facility, under which we had $140.0 million in borrowings outstanding as of March 31, 2012, which is included in the $2.2 billion of borrowings above.

        Our cash balances are held in numerous locations throughout the world. As of March 31, 2012, substantially all of our cash and cash equivalents were held by foreign subsidiaries outside of Singapore. Although substantially all of the amounts held outside of Singapore could be repatriated, under current laws, a significant amount could be subject to income tax withholdings. We provide for tax liabilities on these amounts for financial statement purposes, except for certain of our foreign earnings that are considered indefinitely reinvested outside of Singapore (approximately $570.0 million as of March 31, 2012). Repatriation could result in an additional income tax payment, however, our intent is to permanently reinvest these funds outside of Singapore and our current plans do not demonstrate a need to repatriate them to fund our operations. Where local restrictions prevent an efficient

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intercompany transfer of funds, our intent is that cash balances would remain outside of Singapore and we would meet our liquidity needs through ongoing cash flows, external borrowings, or both.

        Cash provided by operating activities was $804.3 million during fiscal year 2012, which resulted primarily from $488.8 million of net income for the period and $539.1 million of non-cash earnings adjustment items such as depreciation, amortization, impairment charges and stock-based compensation expense. Offsetting these cash generating activities was $250.7 million of increased working capital. Our working capital accounts increased primarily due to a decrease of $750.2 million in accounts payable and a $97.9 million increase in accounts receivable, which was partially offset by a decrease in inventory of $301.1 million principally due to the deceleration of sales in our HVS market, and an increase in deferred revenues of $260.0 million. The decrease in accounts payable is principally related to the decrease in inventory and timing of supplier payments.

        Cash used in investing activities during fiscal year 2012 was $481.4 million. This resulted primarily from $388.0 million in capital expenditures for equipment, net of proceeds on sales, and $92.3 million paid for three acquisitions completed during the year together with contingent consideration and deferred purchase price payments related to prior period acquisitions.

        Cash used in financing activities amounted to $522.2 million during fiscal year 2012, which was primarily attributable to the repurchase of approximately 81.7 million shares for an aggregate purchase price of approximately $509.8 million. During fiscal year 2012 we also repaid $20.0 million of debt outstanding on the Company's $2.0 billion revolving credit facility. As discussed further below, on October 19, 2011, the Company entered into a five-year $2.0 billion credit facility, which replaced the Company's $2.0 billion revolving credit facility, and refinanced one tranche of the Company's $1.7 billion Term Loan Agreement dated October 1, 2007. We paid $9.4 million of debt issuance costs associated with this new facility, which are reflected as financing outflows and will be amortized as a component of interest expense through October 2016.

        Cash provided by operating activities was $857.3 million during fiscal year 2011, which resulted primarily from $596.2 million of net income for the period and $475.7 million of non-cash earnings adjustment items such as depreciation, amortization, impairment charges, and stock-based compensation expense. Offsetting these cash generating activities was $221.5 million of increased working capital. Our working capital accounts increased primarily due to an increase of $664.7 million in inventories as a result of our increased production and anticipated growth, and an increase of $390.4 million in other current assets primarily attributable to $324.6 million in our deferred purchase price receivable associated with our receivables sales, which were partially offset by increases in accounts payable of $609.9 million and other current liabilities of $155.2 million, primarily driven by the timing of purchases and cash payments.

        Cash used in investing activities during fiscal year 2011 was $413.2 million. This resulted primarily from $393.9 million in capital expenditures for equipment, net of proceeds on sales, and $17.0 million, net of cash acquired, for contingent consideration and deferred purchase price payments related to four acquisitions, and payments related to two completed acquisitions. Cash used was partially offset by proceeds related to the sale of an equity investment for $18.6 million.

        Cash used in financing activities amounted to $641.7 million during fiscal year 2011. On each of May 26, 2010, August 12, 2010 and March 23, 2011, our Board of Directors authorized the repurchase of up to $200.0 million, for a combined total of $600.0 million, of our outstanding shares. During the 2011 fiscal year, we repurchased approximately 65.4 million shares at an aggregate purchase price of $400.4 million, including accrued expenses. In August 2010, we paid $240.0 million to redeem the entire

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principal amount of the 1% Convertible Subordinated Notes at par plus accrued interest. In December 2010, we paid approximately $308.5 million to redeem the aggregate principal balance and redemption premium of our 6.25% Senior Subordinated Notes ("6.25% Notes") plus accrued interest. In addition, we made repayments of approximately $217.1 million related to our Global Asset-Backed Securitization program effective with the adoption of new accounting standards on April 1, 2010.

        The cash used in financing activities was partially offset by $379.0 million of additional borrowings under new Asia term loan agreements and $160.0 million of borrowings under our revolving line of credit. During September 2010, we entered into two new three-year term loan agreements with certain financial institutions based in Asia and borrowed $180.0 million in the aggregate. During February 2011, we entered into a new three-year term loan agreement with a financial institution based in Asia and borrowed $200.0 million in the aggregate.

        Cash provided by operating activities was $798.9 million during fiscal year 2010. This resulted primarily from $18.6 million of net income for the period before adjustments to include approximately $736.4 million of non-cash items such as depreciation, amortization, impairment charges, non-cash interest income, and stock-based compensation expense. Our working capital accounts increased $169.5 million on a net basis, primarily as a result of increased business volume as both accounts receivable and accounts payable increased. The reduction in other current and noncurrent liabilities was primarily due to lower continued payout of prior obligations and accrued obligations related to acquisitions, restructuring charges and financing charges.

        Cash provided by investing activities during fiscal year 2010 was $7.8 million. This resulted primarily from proceeds related to the sale of an equity investment and note receivable for $259.8 million, net of closing costs, and was partially offset by approximately $176.5 million in capital expenditures for equipment, net of proceeds on sales and $75.9 million of deferred purchase price payments related to certain historical acquisitions and for three acquisitions completed during the fiscal year 2010.

        Cash used in financing activities amounted to $713.3 million during fiscal year 2010. During June 2009, we used $203.2 million to repurchase an aggregate principal amount of $99.8 million of our 6.5% Senior Subordinated Notes due 2013 ("6.5% Notes") and an aggregate principal amount of $99.9 million of the 6.25% Notes due 2014 in a cash tender offer. On July 31, 2009, we paid $195.0 million to redeem the 0% Convertible Junior Subordinated Notes upon their maturity. On March 19, 2010, we used $306.3 million to redeem all of the remaining principle balance of $299.8 million of the 6.5% Notes.

        We believe free cash flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to repay debt obligations, make investments, fund acquisitions, repurchase company shares and for certain other activities. Our free cash flow, which is calculated as cash provided by operations less net purchases of property and equipment, was $416.3 million, $463.5 million and $622.5 million for fiscal years 2012, 2011 and 2010, respectively.

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  Fiscal Year Ended March 31,
 
  2012   2011   2010

Days in trade accounts receivable

  45 days   42 days   40 days

Days in inventory

  52 days   50 days   46 days

Days in accounts payable

  70 days   73 days   72 days

Cash conversion cycle

  27 days   19 days   14 days

        Days in trade accounts receivable was calculated as the average accounts receivable for the current and prior quarter, excluding the reduction in accounts receivable resulting from non-cash accounts receivable sales, divided by annualized sales for the current quarter by day. During the fiscal year ended March 31, 2012, days in trade accounts receivable increased by 3 days to 45 days compared to the fiscal year ended March 31, 2011 primarily as a result of the decline in sales in the HVS market that contained lower payment terms. Non-cash accounts receivable sales or deferred purchase price receivables included in trade receivables were $514.9 million, $460.0 million and $135.4 million for the years ended March 31, 2012, 2011 and 2010, respectively. Deferred purchase price receivables were recorded in other current assets in the consolidated balance sheets.

        Days in inventory was calculated as the average inventory for the current and prior quarter divided by annualized cost of sales for the current quarter by day. During the fiscal year ended March 31, 2012, days in inventory increased 2 days compared to the fiscal year ended March 31, 2011 directly due to a decrease in inventory turns. Our inventory turns were negatively impacted by the decline in sales in the HVS market which carry significantly higher inventory turns than our corporate average inventory turns.

        Days in accounts payable was calculated as the average accounts payable for the current and prior quarter divided by annualized cost of sales for the current quarter by day. During the fiscal year ended March 31, 2012, days in accounts payable decreased 3 days to 70 days compared to the fiscal year ended March 31, 2011 primarily due to the reduction of inventory in our fourth quarter and timing of supplier payments.

        Our cash conversion cycle was calculated as days in trade receivables plus days in inventory, minus days in accounts payable and is a measure of how efficient we are at managing our working capital. For the fiscal year ended March 31, 2012, our cash conversion cycle increased 8 days to 27 days as compared with the fiscal year ended March 31, 2011 due to the factors affecting each of the components in the calculation discussed above.

        Liquidity is affected by many factors, some of which are based on normal ongoing operations of the business and some of which arise from fluctuations related to global economics and markets. Cash balances are generated and held in many locations throughout the world. Local government regulations may restrict our ability to move cash balances to meet cash needs under certain circumstances. We do not currently expect such regulations and restrictions to impact our ability to pay vendors and conduct operations throughout the global organization. We believe that our existing cash balances, together with anticipated cash flows from operations and borrowings available under our credit facilities, will be sufficient to fund our operations through at least the next twelve months.

        Future liquidity needs will depend on fluctuations in levels of inventory, accounts receivable and accounts payable, the timing of capital expenditures for new equipment, the extent to which we utilize operating leases for new facilities and equipment, and the levels of shipments and changes in the volumes of customer orders.

        Historically, we have funded operations from cash and cash equivalents generated from operations, proceeds from public offerings of equity and debt securities, bank debt and lease financings. We also

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sell designated pools of trade receivables under asset-backed securitization ("ABS") programs and sell certain trade receivables, which are in addition to the trade receivables sold in connection with these securitization agreements. During fiscal years 2012, 2011 and 2010 we received approximately $4.7 billion, $2.4 billion and $2.8 billion, respectively from sales of receivables under our ABS programs, and $2.0 billion, $2.5 billion and $1.2 billion, respectively from other sales of receivables. As of March 31, 2012 and 2011, we sold receivables for cash totaling $667.3 million and $654.7 million, respectively, under all our accounts receivable sales programs, which are not included in our consolidated balance sheets.

        We anticipate that we will enter into debt and equity financings, sales of accounts receivable and lease transactions to fund acquisitions and anticipated growth. The sale or issuance of equity or convertible debt securities could result in dilution to current shareholders. Further, we may issue debt securities that have rights and privileges senior to those of holders of ordinary shares, and the terms of this debt could impose restrictions on operations and could increase debt service obligations. This increased indebtedness could limit our flexibility as a result of debt service requirements and restrictive covenants, potentially affect our credit ratings, and may limit our ability to access additional capital or execute our business strategy. Any downgrades in credit ratings could adversely affect our ability to borrow as a result of more restrictive borrowing terms. We continue to asses our capital structure and evaluate the merits of redeploying available cash to reduce existing debt or repurchase ordinary shares.

        On July 22, 2011, our shareholders approved the repurchase of up to 10% of our ordinary shares outstanding on the date of our 2011 Extraordinary General Meeting, which repurchases are subject to Board of Directors approval. Our Board of Directors approved share repurchase plans in July 2011 and December 2011, pursuant to which we are authorized to repurchase approximately 73 million shares until our next Extraordinary General Meeting to be held during 2012. During the 2012 fiscal year, the Company repurchased approximately 81.7 million shares for an aggregate purchase price of approximately $509.8 million. Of the 81.7 million shares, approximately 29.0 million shares were repurchased under the prior shareholder purchase mandate. As of March 31, 2012, approximately 20.4 million shares were available to be repurchased under the plans.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

        On October 19, 2011, the Company entered into a five-year $2.0 billion credit facility ("New Credit Facility") consisting of a $1.5 billion revolving credit facility ("New Revolving Credit Facility") and a $500 million term loan ("New Term Loan"), which expires in October 2016. The New Revolving Credit Facility replaced the Company's previous $2.0 billion revolving credit facility, which was due to mature in May 2012. The New Term Loan refinanced one tranche of the Company's $1.7 billion Term Loan dated October 1, 2007.

        As of March 31, 2012, there was $140.0 million of borrowings outstanding under the New Revolving Credit Facility. The New Credit Facility requires that we maintain a maximum ratio of total indebtedness to EBITDA (earnings before interest expense, taxes, depreciation and amortization), and a minimum interest coverage ratio, as defined. As of March 31, 2012, we were in compliance with the covenants under the credit facility.

        We and certain of our subsidiaries also have various uncommitted revolving credit facilities, lines of credit and other loans in the amount of $290.6 million in the aggregate under which there were approximately $4.6 million of borrowings outstanding as of March 31, 2012.

        We have approximately $1.7 billion of borrowings outstanding under our term loan facilities as of March 31, 2012, including the New Term Loan discussed above. Of these amounts, approximately $1.2 billion matures in October 2014, and the remainder matures in October 2016. The portion of the term loan facility that matures in October 2014 amortizes in quarterly installments in an amount equal to 1% per annum. The New Term Loan which matures in October 2016 is repayable in quarterly

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installments of $6.3 million through September 2013 and $9.4 million per quarter thereafter. Both of these term loan facilities require that we maintain a maximum ratio of total indebtedness to EBITDA, and as of March 31, 2012, we were in compliance with these covenants.

        We have approximately $377.0 million of borrowings outstanding under the Asia term loans as of March 31, 2012. These term loans mature in September 2013 and February 2014. Borrowings under the Asia term loans bear interest at LIBOR plus margins ranging between 2.15% and 2.30% and we paid non-refundable fees of $2.4 million at the inception of the loans.

        Refer to the discussion in note 6, "Bank Borrowings and Long-Term Debt" of the notes to consolidated financial statements for further details of the Company's debt obligations.

        We have purchase obligations that arise in the normal course of business, primarily consisting of binding purchase orders for inventory related items and capital expenditures. Additionally, we have leased certain of our property and equipment under capital lease commitments, and certain of our facilities and equipment under operating lease commitments.

        Future payments due under our purchase obligations, debt including capital leases and related interest obligations and operating lease contracts are as follows:

 
  Total   Less Than
1 Year
  1 - 3 Years   4 - 5 Years   Greater Than
5 Years
 
 
  (In thousands)
 

Contractual Obligations:

                               

Purchase obligations

  $ 2,609,992   $ 2,609,992   $   $   $  

Long-term debt and capital lease obligations

    2,200,265     42,696     1,616,086     536,905     4,578  

Interest on long-term debt obligations

    145,334     54,505     76,100     14,271     458  

Operating leases, net of subleases

    554,407     142,912     185,996     105,868     119,631  
                       

Total contractual obligations

  $ 5,509,998   $ 2,850,105   $ 1,878,182   $ 657,044   $ 124,667  
                       

        Interest on the $1.2 billion outstanding under our term loan facility that matures in October 2014 is based at our option on either (i) the base rate (the greater of the agent's prime rate or the federal funds rate plus 0.50%) plus a margin of 1.25%; or (ii) LIBOR plus a margin of 2.25%. Interest on the New Credit Facility, under which, as of March 31, 2012, we had $487.5 million outstanding under our New Term Loan and $140.0 million outstanding under the New Revolving Credit Facility is based at our option on, either at (i) LIBOR plus the applicable margin for LIBOR loans ranging between 1.25% and 2.25%, based on the Company's credit ratings or (ii) the base rate (the greatest of the agent's prime rate, the federal funds rate plus 0.50% and LIBOR for a one-month interest period plus 1.00%) plus an applicable margin ranging between 0.25% and 1.25%, based on the Company's credit rating. Interest on the $377.0 million outstanding under our Asia term loans accrues at LIBOR plus 2.15% to 2.30%. Finally, our variable rate debt also includes demand notes and certain variable lines of credit. These credit lines are located throughout the world and variable interest is generally based on a spread over that country's inter-bank offering rate. Interest expense in the table above is estimated based on LIBOR as of March 31, 2012.

        We have excluded $166.4 million of liabilities for unrecognized tax benefits from the contractual obligations table as we cannot make a reasonably reliable estimate of the periodic cash settlements with the respective taxing authorities. See note 11, "Income Taxes" of the notes to consolidated financial statements for further details.

        Our purchase obligations can fluctuate significantly from period-to-period and can materially impact our future operating asset and liability balances, and our future working capital requirements. We intend to use our existing cash balances, together with anticipated cash flows from operations to fund our existing and future contractual obligations.

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OFF-BALANCE SHEET ARRANGEMENTS

        We sell designated pools of trade receivables to unaffiliated financial institutions under our ABS programs, and in addition to cash, we receive a deferred purchase price receivable for each pool of the receivables sold. Each of these deferred purchase price receivables serves as additional credit support to the financial institutions and is recorded at its estimated fair value. The fair value of our deferred purchase price receivable was approximately $514.9 million as of March 31, 2012. For further information see note 8 of our notes to the consolidated financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

        Refer to note 2, "Summary of Accounting Policies" of the notes to the consolidated financial statements for recent accounting pronouncements.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

        A portion of our exposure to market risk for changes in interest rates relates to our investment portfolio, which consists of highly liquid investments with maturities of three months or less from original dates of purchase. We do not use derivative financial instruments in our investment portfolio. We place cash and cash equivalents with various major financial institutions and limit the amount of credit exposure to 20% of the issuer's or fund's total assets measured at the time of purchase or $10.0 million, whichever is greater. We protect our invested principal by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in investment grade securities and by constantly positioning the portfolio to respond appropriately to a reduction in credit rating of any investment issuer, guarantor or depository to levels below the credit ratings dictated by our investment policy. The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity. Maturities of short-term investments are timed, whenever possible, to correspond with debt payments and capital investments. As of March 31, 2012, the outstanding amount in the investment portfolio was $0.3 billion, comprised mainly of money market funds with an average return of 3.13%. A hypothetical 10% change in interest rates would not be expected to have a material effect on our financial position, results of operations and cash flows over the next fiscal year.

        We had variable rate debt outstanding of approximately $2.2 billion as of March 31, 2012. Variable rate debt obligations primarily consisted of borrowings under our term loan and revolving credit facilities. Interest on the $1.2 billion outstanding under our term loan facility that matures in October 2014 is based at our option on either (i) the base rate (the greater of the agent's prime rate or the federal funds rate plus 0.50%) plus a margin of 1.25%; or (ii) LIBOR plus a margin of 2.25%. Interest on the New Credit Facility, under which we had as of March 31, 2012 $487.5 million outstanding under our New Term Loan and $140.0 million outstanding under the New Revolving Credit Facility is based at our option on either (i) LIBOR plus the applicable margin for LIBOR loans ranging between 1.25% and 2.25%, based on the Company's credit ratings or (ii) the base rate (the greatest of the agent's prime rate, the federal funds rate plus 0.50% and LIBOR for a one-month interest period plus 1.00%) plus an applicable margin ranging between 0.25% and 1.25%, based on the Company's credit rating. Interest on the $377.0 million outstanding under our Asia term loans accrues at LIBOR plus 2.15% to 2.30%. Finally, our variable rate debt also includes demand notes and certain variable lines of credit. These credit lines are located throughout the world and variable interest is generally based on a spread over that country's inter-bank offering rate.

        Our variable rate debt instruments create exposures for us related to interest rate risk. Primarily due to the current low interest rates a hypothetical 10% change in interest rates would not be expected to have a material effect on our financial position, results of operations and cash flows over the next fiscal year.

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        As of March 31, 2012, the approximate fair value of our debt outstanding under our term loan facility that matures in October 2014 was 99.4%, of the face value of the debt obligation, and the fair value of debt outstanding under our New Term Loan was 99.0% of the face value of the debt obligation, based on broker trading prices. Our Asia term loans are not traded publicly; however, as the pricing, maturity and other pertinent terms of these loans closely approximate those of the term loan facilities described above, we estimate the respective fair values would be approximately the same as the respective term loan facilities.

FOREIGN CURRENCY EXCHANGE RISK

        We transact business in various foreign countries and are, therefore, subject to risk of foreign currency exchange rate fluctuations. We have established a foreign currency risk management policy to manage this risk. To the extent possible, we manage our foreign currency exposure by evaluating and using non-financial techniques, such as currency of invoice, leading and lagging payments and receivables management. In addition, we borrow in various foreign currencies and enter into short-term foreign currency forward and swap contracts to hedge only those currency exposures associated with certain assets and liabilities, mainly accounts receivable and accounts payable, and cash flows denominated in non-functional currencies.

        We endeavor to maintain a partial or fully hedged position for certain transaction exposures. These exposures are primarily, but not limited to, revenues, customer and vendor payments and inter-company balances in currencies other than the functional currency unit of the operating entity. The credit risk of our foreign currency forward and swap contracts is minimized since all contracts are with large financial institutions and accordingly, fair value adjustments related to the credit risk of the counter-party financial institution were not material. The gains and losses on forward and swap contracts generally offset the losses and gains on the assets, liabilities and transactions hedged. The fair value of currency forward and swap contracts is reported on the balance sheet. The aggregate notional amount of outstanding contracts as of March 31, 2012 amounted to $2.7 billion and the recorded fair values of the associated asset and/or liability were not material. The majority of these foreign exchange contracts expire in less than three months and all expire within one year. They will settle primarily in Brazilian real, British pound, Canadian dollar, China renminbi, Danish kroner, Euro, Hungarian forint, Israeli shekel, Japanese yen, Malaysian ringgit, Mexican peso, Singapore dollar, and U.S. dollar.

        Based on our overall currency rate exposures as of March 31, 2012, including the derivative financial instruments intended to hedge the nonfunctional currency-denominated monetary assets, liabilities and cash flows, a near-term 10% appreciation or depreciation of the U.S. dollar from its cross-functional rates would not be expected to have a material effect on our financial position, results of operations and cash flows over the next fiscal year.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Flextronics International Ltd.
Singapore

        We have audited the accompanying consolidated balance sheets of Flextronics International Ltd. and subsidiaries (the "Company") as of March 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ended March 31, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Flextronics International Ltd. and subsidiaries as of March 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2012, in conformity with accounting principles generally accepted in the United States of America.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of March 31, 2012, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated May 25, 2012 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

San Jose, California
May 25, 2012

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FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED BALANCE SHEETS

 
  As of March 31,  
 
  2012   2011  
 
  (In thousands, except share amounts)
 

ASSETS

 

Current assets:

             

Cash and cash equivalents

  $ 1,518,329   $ 1,748,471  

Accounts receivable, net of allowance for doubtful accounts of $39,279 and $13,388 as of March 31, 2012 and 2011, respectively

    2,602,159     2,571,912  

Inventories

    3,308,070     3,517,026  

Current assets of discontinued operations

    5,086     96,901  

Other current assets

    1,100,906     1,119,889  
           

Total current assets

    8,534,550     9,054,199  

Property and equipment, net

    2,084,148     2,084,031  

Goodwill and other intangible assets, net

    170,924     213,083  

Long-term assets of discontinued operations

    22,671     57,032  

Other assets

    221,511     224,807  
           

Total assets

  $ 11,033,804   $ 11,633,152  
           

LIABILITIES AND SHAREHOLDERS' EQUITY

 

Current liabilities:

             

Bank borrowings, current portion of long-term debt and capital lease obligations

  $ 42,467   $ 21,179  

Accounts payable

    4,305,735     5,003,185  

Accrued payroll

    347,144     376,693  

Current liabilities of discontinued operations

    8,244     87,279  

Other current liabilities

    1,584,595     1,340,595  
           

Total current liabilities

    6,288,185     6,828,931  

Long-term debt and capital lease obligations, net of current portion

    2,157,798     2,199,195  

Other liabilities

    303,842     310,330  

Commitments and contingencies (Note 10)

             

Shareholders' equity

             

Ordinary shares, no par value; 733,979,527 and 830,745,010 issued, and 683,740,173 and 756,993,938 outstanding as of March 31, 2012 and 2011, respectively

    8,292,370     8,865,556  

Treasury stock, at cost; 50,239,355 and 73,751,072 shares as of March 31, 2012 and 2011, respectively

    (388,215 )   (523,110 )

Accumulated deficit

    (5,579,739 )   (6,068,504 )

Accumulated other comprehensive income (loss)

    (40,437 )   20,754  
           

Total shareholders' equity

    2,283,979     2,294,696  
           

Total liabilities and shareholders' equity

  $ 11,033,804   $ 11,633,152  
           

   

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

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FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

 
  Fiscal Year Ended March 31,  
 
  2012   2011   2010  
 
  (In thousands, except per share amounts)
 

Net sales

  $ 29,387,656   $ 28,489,018   $ 24,009,784  

Cost of sales

    27,870,315     26,903,049     22,705,774  

Restructuring charges

            92,458  
               

Gross profit

    1,517,341     1,585,969     1,211,552  

Selling, general and administrative expenses

    880,636     804,890     755,064  

Intangible amortization

    55,896     70,913     89,615  

Restructuring charges

            15,070  

Other charges (income), net

    (19,963 )   6,267     206,895  

Interest and other expense, net

    36,011     75,378     155,654  
               

Income (loss) from continuing operations before income taxes

    564,761     628,521     (10,746 )

Provision for (benefit from) income taxes

    54,116     22,176     (35,748 )
               

Income from continuing operations

    510,645     606,345     25,002  

Loss from discontinued operations, net of tax

    (21,880 )   (10,126 )   (6,408 )
               

Net income

  $ 488,765   $ 596,219   $ 18,594  
               

Earnings per share:

                   

Income from continuing operations:

                   

Basic

  $ 0.71   $ 0.78   $ 0.03  
               

Diluted

  $ 0.70   $ 0.77   $ 0.03  
               

Loss from discontinued operations:

                   

Basic

  $ (0.03 ) $ (0.01 ) $ (0.01 )
               

Diluted

  $ (0.03 ) $ (0.01 ) $ (0.01 )
               

Net income:

                   

Basic

  $ 0.68   $ 0.77   $ 0.02  
               

Diluted

  $ 0.67   $ 0.75   $ 0.02  
               

Weighted-average shares used in computing per share amounts:

                   

Basic

    716,247     777,315     811,677  
               

Diluted

    727,807     790,192     821,112  
               

   

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

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FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 
  Fiscal Year Ended March 31,  
 
  2012   2011   2010  
 
  (In thousands)
 

Net income

  $ 488,765   $ 596,219   $ 18,594  

Other comprehensive income (loss):

                   

Foreign currency translation adjustments, net of zero tax

    (53,616 )   12,883     16,409  

Unrealized gain (loss) on derivative instruments and other, net of zero tax

    (7,575 )   23,276     25,635  
               

Comprehensive income

  $ 427,574   $ 632,378   $ 60,638  
               

   

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

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FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

 
  Ordinary Shares    
   
   
 
 
   
  Accumulated
Other
Comprehensive
Income (Loss)
   
 
 
  Shares
Outstanding
  Amount   Retained Earnings
(Deficit)
  Total
Shareholders'
Equity
 
 
  (In thousands)
 

BALANCE AT MARCH 31, 2009

    809,633   $ 8,601,934   $ (6,683,317 ) $ (57,449 ) $ 1,861,168  

Exercise of stock options

    2,497     6,026             6,026  

Issuance of vested shares under share bonus awards

    1,299                  

Net income

            18,594         18,594  

Stock-based compensation, net of tax

        56,735             56,735  

Unrealized gain on derivative instruments and other, net of taxes

                25,635     25,635  

Foreign currency translation

                16,409     16,409  
                       

BALANCE AT MARCH 31, 2010

    813,429     8,664,695     (6,664,723 )   (15,405 )   1,984,567  

Repurchase of ordinary shares at cost

    (65,411 )   (400,400 )           (400,400 )

Exercise of stock options

    6,217     23,299             23,299  

Issuance of vested shares under share bonus awards

    2,759                  

Net income

            596,219         596,219  

Stock-based compensation, net of tax

        54,852             54,852  

Unrealized gain on derivative instruments and other, net of tax

                23,276     23,276  

Foreign currency translation

                12,883     12,883  
                       

BALANCE AT MARCH 31, 2011

    756,994     8,342,446     (6,068,504 )   20,754     2,294,696  

Repurchase of ordinary shares at cost

    (81,688 )   (509,800 )           (509,800 )

Exercise of stock options

    5,879     23,055             23,055  

Issuance of vested shares under share bonus awards

    2,555                  

Net income

            488,765         488,765  

Stock-based compensation, net of tax

        48,454             48,454  

Unrealized loss on derivative instruments and other, net of tax

                (7,575 )   (7,575 )

Foreign currency translation

                (53,616 )   (53,616 )
                       

BALANCE AT MARCH 31, 2012

    683,740   $ 7,904,155   $ (5,579,739 ) $ (40,437 ) $ 2,283,979  
                       

   

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

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FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
  Fiscal Year Ended March 31,  
 
  2012   2011   2010  
 
  (In thousands)
 

Cash flows from operating activities:

                   

Net income

  $ 488,765   $ 596,219   $ 18,594  

Adjustments to reconcile net income to net cash provided by operating activities:

                   

Depreciation, amortization and other impairment charges

    521,923     471,668     707,530  

Provision for doubtful accounts

    30,330     4,043     44,066  

Non-cash other income and expenses

    (33,563 )   2,831     36,583  

Stock-based compensation

    48,454     55,237     56,474  

Deferred income taxes and other non-cash income taxes

    (1,022 )   (51,198 )   (108,272 )

Changes in operating assets and liabilities, net of acquisitions:

                   

Accounts receivable

    (30,249 )   26,519     (121,194 )

Inventories

    301,053     (664,738 )   141,754  

Other current and noncurrent assets

    29,683     (337,057 )   19,189  

Accounts payable

    (750,169 )   609,868     413,053  

Other current and noncurrent liabilities

    199,063     143,952     (408,861 )
               

Net cash provided by operating activities

    804,268     857,344     798,916  
               

Cash flows from investing activities:

                   

Purchases of property and equipment

    (437,191 )   (470,702 )   (234,517 )

Proceeds from the disposition of property and equipment

    49,187     76,833     58,054  

Acquisition of businesses, net of cash acquired

    (92,257 )   (16,966 )   (75,901 )

Proceeds from divestitures of operations, net

    1,398     625      

Other investments and notes receivable, net

    (2,501 )   (3,031 )   260,188  
               

Net cash provided by (used in) investing activities

    (481,364 )   (413,241 )   7,824  
               

Cash flows from financing activities:

                   

Proceeds from bank borrowings and long-term debt

    2,833,704     3,471,494     792,856  

Repayments of bank borrowings and long-term debt

    (2,389,121 )   (3,420,594 )   (1,002,668 )

Payments for early repurchase of long-term debt

    (480,000 )   (315,495 )   (509,486 )

Payments for repurchases of ordinary shares

    (509,800 )   (400,400 )    

Proceeds from exercise of stock options

    23,055     23,299     6,026  
               

Net cash used in financing activities

    (522,162 )   (641,696 )   (713,272 )
               

Effect of exchange rates on cash

    (30,884 )   18,508     12,202  
               

Net change in cash and cash equivalents

    (230,142 )   (179,085 )   105,670  

Cash and cash equivalents, beginning of year

    1,748,471     1,927,556     1,821,886  
               

Cash and cash equivalents, end of year

  $ 1,518,329   $ 1,748,471   $ 1,927,556  
               

   

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

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FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION OF THE COMPANY

        Flextronics International Ltd. ("Flextronics" or the "Company") was incorporated in the Republic of Singapore in May 1990. The Company's operations have expanded over the years through a combination of organic growth and acquisitions. The Company is a globally-recognized leading provider of advanced design and manufacturing services to original equipment manufacturers ("OEMs") of a broad range of products in the following businesses: data networking, telecom; mobile communication devices; Electronics Manufacturing computing; consumer electronics; industrial, semiconductor capital equipment, clean technology, aerospace and defense, white goods; automotive, and medical devices. The Company's strategy is to provide customers with a full range of cost competitive, vertically-integrated global supply chain services through which the Company can design, build, ship and service a complete packaged product for its OEM customers. OEM customers leverage the Company's services to meet their product requirements throughout the entire product life cycle.

        The Company's service offerings include rigid and flexible printed circuit board fabrication, systems assembly and manufacturing (including enclosures, testing services, materials procurement and inventory management), logistics, after-sales services (including product repair, warranty services, re-manufacturing and maintenance) and multiple component product offerings. Additionally, the Company provides a comprehensive range of value-added design and engineering services that are tailored to the various markets and needs of its customers.

2. SUMMARY OF ACCOUNTING POLICIES

        The Company's third fiscal quarter ends on December 31, and the fourth fiscal quarter and year ends on March 31 of each year. The first fiscal quarter ended on July 1, 2011, July 2, 2010 and July 3, 2009, respectively and the second fiscal quarter ended on September 30, 2011, October 1, 2010 and October 2, 2009, respectively. Amounts included in the consolidated financial statements are expressed in U.S. dollars unless otherwise designated.

        The accompanying consolidated financial statements include the accounts of Flextronics and its majority-owned subsidiaries, after elimination of intercompany accounts and transactions. The Company consolidates all majority-owned subsidiaries and investments in entities in which the Company has a controlling interest. For consolidated majority-owned subsidiaries in which the Company owns less than 100%, the Company recognizes a noncontrolling interest for the ownership of the noncontrolling owners. As of March 31, 2012 and 2011, the noncontrolling interest was not material. The associated noncontrolling owners' interest in the income or losses of these companies has not been material to the Company's results of operations for any of the periods presented, and has been classified within interest and other expense, net, in the consolidated statements of operations.

        On March 2, 2012, the Company entered into a definitive agreement with Tessera Technologies, Inc., and DigitalOptics Corporation (DOC), a wholly-owned subsidiary of Tessera Technologies. Under the terms of the definitive agreement DOC will acquire certain assets of Flextronics' Vista Point Technologies camera module business, including intellectual property and the China-based manufacturing operations. In accordance with the accounting guidance, the camera modules business represent a separate asset group and the divestiture qualifies as discontinued operations, and accordingly, the Company has reported the results of operations and financial position of this business in discontinued operations within the statements of operations and the balance sheets for all periods presented.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF ACCOUNTING POLICIES (Continued)

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP" or "GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates are used in accounting for, among other things: allowances for doubtful accounts; inventory write-downs; valuation allowances for deferred tax assets; uncertain tax positions; valuation and useful lives of long-lived assets including property, equipment, intangible assets and goodwill; asset impairments; fair values of financial instruments including investments, notes receivable and derivative instruments; restructuring charges; contingencies; fair values of assets and liabilities obtained in business combinations and the fair values of stock options and share bonus awards granted under the Company's stock-based compensation plans. Actual results may differ from previously estimated amounts, and such differences may be material to the consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.

        The financial position and results of operations for certain of the Company's subsidiaries are measured using a currency other than the U.S. dollar as their functional currency. Accordingly, all assets and liabilities for these subsidiaries are translated into U.S. dollars at the current exchange rates as of the respective balance sheet dates. Revenue and expense items are translated at the average exchange rates prevailing during the period. Cumulative gains and losses from the translation of these subsidiaries' financial statements are reported as a separate component of shareholders' equity. Foreign exchange gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved, and re-measurement adjustments for foreign operations where the U.S. dollar is the functional currency, are included in operating results. Non-functional currency transaction gains and losses, and re-measurement adjustments were not material to the Company's consolidated results of operations for any of the periods presented, and have been classified as a component of interest and other expense, net in the consolidated statements of operations.

        The Company recognizes manufacturing revenue when it ships goods or the goods are received by its customer, title and risk of ownership have passed, the price to the buyer is fixed or determinable and recoverability is reasonably assured. Generally, there are no formal substantive customer acceptance requirements or further obligations related to manufacturing services. If such requirements or obligations exist, then the Company recognizes the related revenues at the time when such requirements are completed and the obligations are fulfilled. The Company makes provisions for estimated sales returns and other adjustments at the time revenue is recognized based upon contractual terms and an analysis of historical returns. These provisions were not material to the consolidated financial statements for any of the periods presented.

        The Company provides services for its customers that range from contract design to original product design to repair services. For contract design services the customer purchases engineering and development services on a time and materials basis. For original product design services the Company

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF ACCOUNTING POLICIES (Continued)

develops products to be offered for sale by OEM customers under the OEM's brand name. The Company recognizes service revenue when the services have been performed, and the related costs are expensed as incurred. Net sales for services were less than 10% of the Company's total sales in the 2012, 2011 and 2010 fiscal years, and accordingly, are included in net sales in the consolidated statements of operations. The Company recognized research and development costs related to its Original Design Manufacturing ("ODM ") personal computing business of $78.9 million, $46.5 million and $13.3 million for the years ended March 31, 2012, 2011 and 2010, respectively. Research and development activities related to ODM personal computing had ceased by the end of fiscal year 2012.

        The Company has an established customer credit policy, through which it manages customer credit exposures through credit evaluations, credit limit setting, monitoring, and enforcement of credit limits for new and existing customers. The Company performs ongoing credit evaluations of its customers' financial condition and makes provisions for doubtful accounts based on the outcome of those credit evaluations. The Company evaluates the collectability of its accounts receivable based on specific customer circumstances, current economic trends, historical experience with collections and the age of past due receivables. To the extent the Company identifies exposures as a result of credit or customer evaluations, the Company also reviews other customer related exposures, including but not limited to inventory and related contractual obligations. Subsequent to March 31, 2012 the Company became aware that one of its customers in the concentrated solar photovoltaic market was experiencing significant financial and liquidity difficulties. As a result, the Company recorded certain charges related to bad debt expenses and write-down of inventory as of March 31, 2012. Refer to note 19 "Subsequent Event", for further details.

        Financial instruments, which potentially subject the Company to concentrations of credit risk, are primarily accounts receivable, cash and cash equivalents, investments, and derivative instruments.

        The following table summarizes the activity in the Company's allowance for doubtful accounts during fiscal years 2012, 2011 and 2010:

 
  Balance at
Beginning
of Year
  Charged to
Costs and
Expenses
  Deductions/
Write-Offs
  Balance at
End of
Year
 
 
  (In thousands)
 

Allowance for doubtful accounts:

                         

Year ended March 31, 2010

  $ 29,020   $ 44,066   $ (59,923 ) $ 13,163  

Year ended March 31, 2011

  $ 13,163   $ 4,043   $ (3,818 ) $ 13,388  

Year ended March 31, 2012(1)(2)

  $ 13,388   $ 30,330   $ (4,439 ) $ 39,279  

(1)
Deductions/write-offs amount for fiscal year 2012 includes $3.9 million, which was previously reserved and the underlying accounts receivable balance was reclassified to non-current assets in fiscal year 2012, which is carried net of its specific reserve.

(2)
Included in amounts charged to costs and expenses in fiscal 2012 is an amount of $28.0 million related to a distressed customer. Refer to note 19 "Subsequent Event" for further details.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF ACCOUNTING POLICIES (Continued)

        Two customers accounted for approximately 11% and 10%, respectively of the Company's net sales in fiscal 2012. One of these customers accounted for approximately 11% of the Company's net sales in fiscal years 2011 and the other customer accounted for 10% of net sales of the Company in fiscal year 2010. The Company's ten largest customers accounted for approximately 55%, 52% and 47% of its net sales, in fiscal years 2012, 2011 and 2010, respectively. As of March 31, 2012 and 2011, no single customer accounted for greater than 10% of the Company's total accounts receivable.

        The Company maintains cash and cash equivalents with various financial institutions that management believes to be of high credit quality. These financial institutions are located in many different locations throughout the world. The Company's cash equivalents are primarily comprised of cash deposited in checking and money market accounts. The Company's investment policy limits the amount of credit exposure to 20% of the issuer's or the fund's total assets measured at the time of purchase or $10.0 million, whichever is greater.

        The amount subject to credit risk related to derivative instruments is generally limited to the amount, if any, by which a counterparty's obligations exceed the obligations of the Company with that counterparty. To manage counterparty risk, the Company limits its derivative transactions to those with recognized financial institutions. See additional discussion of derivatives at note 7 to the consolidated financial statements.

        All highly liquid investments with maturities of three months or less from original dates of purchase are carried at cost, which approximates fair market value, and are considered to be cash equivalents. Cash and cash equivalents consist of cash deposited in checking accounts, money market funds and time deposits.

        Cash and cash equivalents consisted of the following:

 
  As of March 31,  
 
  2012   2011  
 
  (In thousands)
 

Cash and bank balances

  $ 1,174,423   $ 1,372,711  

Money market funds and time deposits

    343,906     375,760  
           

  $ 1,518,329   $ 1,748,471  
           

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF ACCOUNTING POLICIES (Continued)

        Inventories are stated at the lower of cost (on a first-in, first-out basis) or market value. The stated cost is comprised of direct materials, labor and overhead. The components of inventories, net of applicable lower of cost or market write-downs, were as follows:

 
  As of March 31,  
 
  2012   2011  
 
  (In thousands)
 

Raw materials

  $ 1,950,181   $ 2,260,262  

Work-in-progress

    537,240     574,728  

Finished goods

    820,649     682,036  
           

  $ 3,308,070   $ 3,517,026  
           

        Property and equipment are stated at cost. Depreciation and amortization is recognized on a straight-line basis over the estimated useful lives of the related assets, with the exception of building leasehold improvements, which are amortized over the term of the lease, if shorter. Repairs and maintenance costs are expensed as incurred. Property and equipment was comprised of the following:

 
   
  As of March 31,  
 
  Depreciable
Life
(In Years)
 
 
  2012   2011  
 
   
  (In thousands)
 

Machinery and equipment

    3-10   $ 2,673,941   $ 2,445,969  

Buildings

    30     1,027,050     1,019,970  

Leasehold improvements

    up to 30     291,635     279,888  

Furniture, fixtures, computer equipment and software

    3-7     374,472     372,282  

Land

        126,314     134,187  

Construction-in-progress

        87,727     102,016  
                 

          4,581,139     4,354,312  

Accumulated depreciation and amortization

          (2,496,991 )   (2,270,281 )
                 

Property and equipment, net

        $ 2,084,148   $ 2,084,031  
                 

        Total depreciation expense associated with property and equipment amounted to approximately $412.2 million, $389.4 million and $372.6 million in fiscal years 2012, 2011 and 2010, respectively. Property and equipment excludes assets no longer in use and held for sale as a result of restructuring activities, as discussed in note 9 or divested operations as discussed in note 18 to the consolidated financial statements.

        The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of property and equipment is measured by comparing its carrying amount to the projected undiscounted

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF ACCOUNTING POLICIES (Continued)

cash flows the property and equipment are expected to generate. An impairment loss is recognized when the carrying amount of a long-lived asset exceeds its fair value. Refer to note 12, "Restructuring Charges" for a discussion of impairment charges recorded in fiscal year 2010 and note 18, "Discontinued Operations" for a discussion of impairment charges recorded in fiscal year 2012.

        The Company provides for income taxes in accordance with the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized for the tax consequences of temporary differences between the carrying amount and the tax basis of existing assets and liabilities by applying the applicable statutory tax rate to such differences.

        The Company has actively pursued business and asset acquisitions, which are accounted for using the acquisition method of accounting. The fair value of the net assets acquired and the results of the acquired businesses are included in the Company's consolidated financial statements from the acquisition dates forward. The Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and results of operations during the reporting period. Estimates are used in accounting for, among other things, the fair value of acquired net operating assets, property and equipment, intangible assets and related deferred tax liabilities, useful lives of plant and equipment and amortizable lives for acquired intangible assets. Any excess of the purchase consideration over the identified fair value of the assets and liabilities acquired is recognized as goodwill.

        The Company estimates the preliminary fair value of acquired assets and liabilities as of the date of acquisition based on information available at that time. Contingent consideration is recorded at fair value as of the date of the acquisition with subsequent adjustments recorded in earnings. Changes to valuation allowances on acquired deferred tax assets are recognized in the provision for, or benefit from, income taxes. The valuation of these tangible and identifiable intangible assets and liabilities is subject to further management review and may change materially between the preliminary allocation and end of the purchase price allocation period. Any changes in these estimates may have a material effect on the Company's consolidated operating results or financial position.

        Goodwill is tested for impairment on an annual basis, and whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. Recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit's carrying amount, including goodwill, to the fair value of the reporting unit, which is measured based upon, among other factors, market multiples for comparable companies as well as a discounted cash flow analysis. The Company has one reporting unit: EMS. If the recorded value of the assets, including goodwill, and liabilities ("net book value") of the reporting unit exceeds its fair value, an impairment loss may be required to be recognized. Further, to the extent the net book value of the Company as a whole is greater than its market capitalization, all, or a significant portion of its goodwill may be considered impaired. The Company completed its annual impairment test during its fourth quarter of fiscal year

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF ACCOUNTING POLICIES (Continued)

2012 and determined that no impairment existed as of the date of the impairment test. The fair value of the reporting unit exceeded the carrying value.

        The following table summarizes the activity in the Company's goodwill account during fiscal years 2012 and 2011:

 
  As of March 31,  
 
  2012   2011  
 
  (In thousands)
 

Balance, beginning of the year, net of accumulated impairment of $5,949,977

  $ 93,207   $ 84,360  

Additions(1)

    8,607     7,119  

Purchase accounting adjustments and reclassification to other intangibles(2)

    601     1,170  

Foreign currency translation adjustments

    (745 )   558  
           

Balance, end of period, net of accumulated impairment of $5,949,977

  $ 101,670   $ 93,207  
           

(1)
For fiscal years 2012 and 2011, additions were attributable to certain acquisitions that were not individually, nor in the aggregate, significant to the Company. Refer to the discussion of the Company's acquisitions in note 15, "Business and Asset Acquisitions and Divestitures."

(2)
Includes adjustments and reclassifications resulting from management's review and finalization of the valuation of assets and liabilities acquired through certain business combinations completed in a period subsequent to the respective acquisition, based on management's estimates and were not individually, nor in the aggregate, significant to the Company.

        The Company's acquired intangible assets are subject to amortization over their estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. An impairment loss is recognized when the carrying amount of an intangible asset exceeds its fair value. The Company reviewed the carrying value of its intangible assets as of the year ended March 31, 2012 and concluded that such amounts continued to be recoverable.

        Intangible assets are comprised of customer-related intangible assets, which primarily include contractual agreements and customer relationships; and licenses and other intangible assets, which is primarily comprised of licenses and also includes patents and trademarks, and developed technologies. Generally customer-related intangible assets are amortized on an accelerated method based on expected cash flows, generally over a period of up to eight years, and licenses and other intangible assets generally over a period of up to seven years. No residual value is estimated for any intangible assets. During fiscal years 2012 and 2011, the Company did not have any material additions to intangible assets. The fair value of the Company's intangible assets purchased through business

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF ACCOUNTING POLICIES (Continued)

combinations is principally determined based on management's estimates of cash flow and recoverability. The components of acquired intangible assets are as follows:

 
  As of March 31, 2012   As of March 31, 2011  
 
  Gross
Carrying
Amount
  Accumulated
Amortization
  Net
Carrying
Amount
  Gross
Carrying
Amount
  Accumulated
Amortization
  Net
Carrying
Amount
 
 
  (In thousands)
  (In thousands)
 

Intangible assets:

                                     

Customer-related intangibles

  $ 276,681   $ (221,238 ) $ 55,443   $ 378,412   $ (283,732 ) $ 94,680  

Licenses and other intangibles

    22,740     (8,929 )   13,811     44,915     (19,719 )   25,196  
                           

Total

  $ 299,421   $ (230,167 ) $ 69,254   $ 423,327   $ (303,451 ) $ 119,876  
                           

        The gross carrying amounts of intangible assets are removed when the recorded amounts have been fully amortized, which is the primary reason for the periodic decrease in the gross carrying amount and accumulated amortization of intangible assets. Total intangible asset amortization expense recognized during fiscal years 2012, 2011 and 2010 was $55.9 million, $70.9 million and $89.6 million, respectively. As of March 31, 2012, the weighted-average remaining useful lives of the Company's intangible assets were approximately 1.8 years and 3.0 years for customer-related intangibles, and licenses and other intangible assets, respectively. The estimated future annual amortization expense for acquired intangible assets is as follows:

Fiscal Year Ending March 31,
  Amount  
 
  (In thousands)
 

2013

  $ 30,785  

2014

    20,155  

2015

    10,144  

2016

    4,809  

2017

    1,961  

Thereafter

    1,400  
       

Total amortization expense

  $ 69,254  
       

        All derivative instruments are recognized on the consolidated balance sheets at fair value. If the derivative instrument is designated as a cash flow hedge, effectiveness is tested monthly using a regression analysis of the change in the spot currency rates and the change in the present value of the spot currency rates. The spot currency rates are discounted to present value using functional currency LIBOR rates over the maximum length of the hedge period. The effective portion of changes in the fair value of the derivative instrument (excluding time value) is recognized in shareholders' equity as a separate component of accumulated other comprehensive income (loss), and recognized in the consolidated statements of operations when the hedged item affects earnings. Ineffective and excluded portions of changes in the fair value of cash flow hedges are recognized in earnings immediately. If the derivative instrument is designated as a fair value hedge, the changes in the fair value of the derivative instrument and of the hedged item attributable to the hedged risk are recognized in earnings in the current period. Additional information is included in note 7 to the consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF ACCOUNTING POLICIES (Continued)

        Other current assets includes approximately $514.9 million and $460.0 million as of March 31, 2012 and 2011, respectively for the deferred purchase price receivable from our Global and North American Asset-Backed Securitization programs. See note 8 for additional information regarding the Company's participation in its trade receivables securitization programs.

        The Company has certain equity investments in, and notes receivable from, non-publicly traded companies and an equity investment in a publicly traded company, which are included within other assets in the Company's consolidated balance sheets. Non-majority-owned investments are accounted for using the equity method when the Company has an ownership percentage equal to or greater than 20% but less than 50%, or has the ability to significantly influence the operating decisions of the issuer; otherwise the cost method is used. The Company monitors these investments for impairment indicators and makes appropriate reductions in carrying values as required. Fair values of these investments, when required, are estimated using unobservable inputs, primarily discounted cash flow projections.

        As of March 31, 2012 and 2011, the Company's equity investments in non-majority owned companies totaled $38.6 million and $34.0 million, respectively. The equity in the earnings or losses of the Company's equity method investments were not material to the consolidated results of operations for any period presented in these consolidated financial statements.

        During fiscal 2011, the Company recognized a gain of approximately $18.6 million, associated with the sale of an equity investment that was previously fully impaired, which is included in other charges (income), net in the consolidated statements of operations.

        During fiscal 2010, the Company recognized impairment charges related to the Company's equity investments and notes receivable amounting to approximately $199.4 million, which are included in other charges (income), net in the consolidated statements of operations.

        Other current liabilities includes deferred revenue amounting to $329.6 million and $110.1 million and customer working capital advances amounting to $326.6 million and $296.3 million as of March 31, 2012 and 2011, respectively.

        The Company recognizes restructuring charges related to its plans to close or consolidate excess manufacturing and administrative facilities. In connection with these activities, the Company records restructuring charges for employee termination costs, long-lived asset impairment and other exit-related costs.

        The recognition of restructuring charges requires the Company to make certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned exit activity. To the extent the Company's actual results differ from its estimates and assumptions, the Company may be required to revise the estimates of future liabilities, requiring the recognition of additional restructuring charges or the reduction of liabilities already recognized. Such changes to previously estimated amounts may be material to the consolidated financial statements. At the end of each reporting period, the Company evaluates the remaining accrued balances to ensure that no excess accruals are retained and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF ACCOUNTING POLICIES (Continued)

the utilization of the provisions are for their intended purpose in accordance with developed exit plans. See note 12 for additional information regarding restructuring charges.

        In December 2011, the FASB issued guidance which requires an entity to disclose information about offsetting and related arrangements to enable financial statement users to evaluate the effect or potential effect of netting arrangements, including rights of setoff associated with the entity's recognized financial assets and liabilities, on the entity's financial position. The new disclosures will enable financial statement users to compare balance sheets prepared under U.S. GAAP and International Financial Reporting Standards (IFRS), which are subject to different offsetting models. The disclosures will be limited to financial instruments (and derivatives) subject to enforceable master netting arrangements or similar agreements. Similar agreements include derivative clearing agreements, global master repurchase agreements, and global master securities lending agreements. Financial instruments and transactions that will be subject to the disclosure requirements may include derivatives, repurchase and reverse repurchase agreements, and securities lending and borrowing arrangements. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The guidance is effective for the Company beginning in fiscal 2014. The Company is currently evaluating the potential impact, if any, of the adoption of this guidance on its consolidated financial statements.

        In September 2011, the FASB revised guidance for testing goodwill for impairment. Under the revised guidance, entities testing goodwill for impairment have the option of performing a qualitative assessment before calculating the fair value of a reporting unit in step one of the goodwill impairment test. If entities determine, on the basis of qualitative factors, that the fair value of a reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. Otherwise, further testing would not be needed. The guidance is effective for the Company beginning in the first quarter of fiscal 2013.

        In June 2011, the FASB issued a new accounting standard which revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in ASC 220 and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. For the Company, this new guidance is effective as of April 1, 2012.

        In May 2011, the FASB amended fair value measurement and disclosure guidance to achieve convergence with IFRS. The amended guidance modifies the measurement of fair value, clarifies verbiage, and changes disclosure or other requirements in US GAAP and IFRS. The guidance was effective for the Company as of January 1, 2012 and did not have a material impact on the Company's consolidated balance sheets, statements of operations, cash flows and shareholders' equity.

        In October 2009, the FASB issued amendments to the accounting and disclosure requirements for revenue recognition. These amendments modify the criteria for recognizing revenue in multiple element arrangements. The Company adopted the provisions of this guidance prospectively to new or materially modified arrangements beginning April 1, 2011. The adoption of this new guidance did not have a material impact on the Company's consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. SHARE-BASED COMPENSATION

        During fiscal year 2012, the Company granted equity compensation awards under the 2010 Equity Incentive Plan (the "2010 Plan"). As of March 31, 2012, the Company had approximately 51.7 million shares available for grants under the 2010 Plan. Options issued to employees under the 2010 Plan generally vest over four years and expire seven years from the date of grant. Options granted to non-employee directors expire five years from the date of grant.

        The exercise price of options granted to employees is determined by the Company's Board of Directors or the Compensation Committee and may not be less than the closing price of the Company's ordinary shares on the date of grant.

        The Company also grants share bonus awards under its equity compensation plan. Share bonus awards are rights to acquire a specified number of ordinary shares for no cash consideration in exchange for continued service with the Company. Share bonus awards generally vest in installments over a three to five year period and unvested share bonus awards are forfeited upon termination of employment. Vesting for certain share bonus awards is contingent upon both service and market conditions.

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

 
  Fiscal Year Ended March 31,  
 
  2012   2011   2010  
 
  (In thousands)
 

Cost of sales

  $ 7,446   $ 10,249   $ 10,847  

Selling, general and administrative expenses

    41,008     44,988     45,627  
               

Total share-based compensation expense

  $ 48,454   $ 55,237   $ 56,474  
               

        As required by the authoritative guidance for stock-based compensation, management made an estimate of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest. When estimating forfeitures, the Company considers voluntary termination behavior as well as an analysis of actual forfeitures. Total share-based compensation capitalized as part of inventory during the fiscal years ended March 31, 2012 and 2011 was not material.

        As of March 31, 2012, the total unrecognized compensation cost related to unvested share options granted to employees under the Company's equity compensation plans was approximately $6.7 million, net of estimated forfeitures. This cost will be amortized on a straight-line basis over a weighted-average period of approximately 0.7 years and will be adjusted for estimated forfeitures. As of March 31, 2012, the total unrecognized compensation cost related to unvested share bonus awards granted to employees was approximately $63.7 million, net of estimated forfeitures. This cost will be amortized generally on a straight-line basis over a weighted-average period of approximately 2.6 years and will be adjusted for estimated forfeitures. Approximately $10.7 million of the unrecognized compensation cost, net of forfeitures, is related to share bonus awards granted to certain key employees whereby vesting is contingent on meeting a certain market condition.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. SHARE-BASED COMPENSATION (Continued)

        Cash flows resulting from excess tax benefits (tax benefits related to the excess of proceeds from employee exercises of share options over the share-based compensation cost recognized for those options) are classified as financing cash flows. During fiscal years 2012, 2011 and 2010, the Company did not recognize any excess tax benefits as a financing cash inflow.

        Valuation and Amortization Method—The Company estimates the fair value of share options granted using the Black-Scholes valuation method and a single option award approach. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The fair market value of share bonus awards granted, other than those awards with a market condition, is the closing price of the Company's ordinary shares on the date of grant and is generally recognized as compensation expense on a straight-line basis over the respective vesting period. For share bonus awards whereby vesting is contingent on meeting certain market conditions, the fair value is determined using a Monte Carlo simulation.

        Expected Term—The Company's expected term used in the Black-Scholes valuation method represents the period that the Company's share options are expected to be outstanding and is determined based on historical experience of similar awards, giving consideration to the contractual terms of the share options, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its share options.

        Expected Volatility—The Company's expected volatility used in the Black-Scholes valuation method is derived from a combination of implied volatility related to publicly traded options to purchase Flextronics ordinary shares and historical variability in the Company's periodic share price.

        Expected Dividend—The Company has never paid dividends on its ordinary shares and currently does not intend to do so in the near term, and accordingly, the dividend yield percentage is zero for all periods.

        Risk-Free Interest Rate—The Company bases the risk-free interest rate used in the Black-Scholes valuation method on the implied yield currently available on U.S. Treasury constant maturities issued with a term equivalent to the expected term of the option.

        The fair value of the Company's share options granted to employees for fiscal years 2012, 2011 and 2010, other than those granted in connection with the option exchange in fiscal year 2010 and those with market criteria discussed below, was estimated using the following weighted-average assumptions:

 
  Fiscal Year Ended March 31,  
 
  2012   2011   2010  

Expected term

  4.1 years   4.1 years   4.5 years  

Expected volatility

  46.9 % 46.9 % 53.8 %

Expected dividends

  0.0 % 0.0 % 0.0 %

Risk-free interest rate

  1.1 % 1.6 % 1.3 %

Weighted-average fair value

  $2.57   $2.80   $2.75  

        Options granted during the 2012, 2011 and 2010 fiscal years had contractual lives of seven years.

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FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. SHARE-BASED COMPENSATION (Continued)

        The following is a summary of option activity for the Company's equity compensation plans, ("Price" reflects the weighted-average exercise price):

 
  Fiscal Year Ended March 31,  
 
  2012   2011   2010  
 
  Options   Price   Options   Price   Options   Price  

Outstanding, beginning of fiscal year

    53,942,458   $ 7.61     62,868,569   $ 7.16     81,927,879   $ 9.13  

Granted

    599,800     6.80     2,063,748     7.21     869,600     6.17  

Granted under option exchange program

                    16,867,452     5.57  

Exercised

    (5,879,405 )   3.92     (6,215,867 )   7.44     (2,496,254 )   6.54  

Forfeited

    (4,729,193 )   10.45     (4,773,992 )   6.55     (6,376,879 )   9.50  

Cancelled under option exchange program

                    (27,923,229 )   11.85  
                                 

Outstanding, end of fiscal year

    43,933,660   $ 7.78     53,942,458   $ 7.61     62,868,569   $ 7.16  
                                 

Options exercisable, end of fiscal year

    37,021,049   $ 8.44     34,237,404   $ 9.23     24,989,665   $ 10.71  
                                 

        On August 11, 2009, the Company granted approximately 16.9 million replacement options with an exercise price of $5.57 and a contractual life of 7 years in exchange for approximately 27.9 million existing share options at an exchange ratio commensurate to the surrendered option's exercise price. The weighted average vesting period of the replacement options was approximately 1.6 years. The exchange was accounted for as a modification of the existing option awards tendered in the exchange. The resulting expense was insignificant and recognized primarily through fiscal year 2011.

        The aggregate intrinsic value of options exercised (calculated as the difference between the exercise price of the underlying award and the price of the Company's ordinary shares determined as of the time of option exercise for options exercised in-the-money) under the Company's equity compensation plans was $17.1 million, $22.9 million and $10.3 million during fiscal years 2012, 2011 and 2010, respectively.

        Cash received from option exercises was $23.1 million, $23.3 million and $6.0 million for fiscal years 2012, 2011 and 2010, respectively.

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FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. SHARE-BASED COMPENSATION (Continued)

        The following table presents the composition of options outstanding and exercisable as of March 31, 2012:

 
  Options Outstanding    
   
 
 
   
  Weighted
Average
Remaining
Contractual
Life
(In Years)
   
  Options Exercisable  
Range of Exercise Prices
  Number of
Shares
Outstanding
  Weighted
Average
Exercise
Price
  Number of
Shares
Exercisable
  Weighted
Average
Exercise
Price
 

$  1.94 - $  2.26

    10,670,434     3.72   $ 2.19     6,645,256   $ 2.18  

$  3.39 - $  5.75

    9,504,083     4.34     5.55     8,454,974     5.56  

$  5.87 - $  7.07

    1,141,567     3.21     6.27     721,828     6.16  

$  7.08 - $10.59

    11,701,167     2.64     9.60     10,282,582     9.75  

$10.67 - $11.41

    1,255,412     3.81     11.20     1,255,412     11.20  

$11.53 - $13.98

    6,979,385     2.87     12.24     6,979,385     12.24  

$14.34 - $23.02

    2,681,612     1.94     17.43     2,681,612     17.43  
                             

$  1.94 - $23.02

    43,933,660     3.31   $ 7.78     37,021,049   $ 8.44  
                             

Options vested and expected to vest

    43,668,229     3.30   $ 7.79              
                               

        As of March 31, 2012, the aggregate intrinsic value for options outstanding, options vested and expected to vest (which includes adjustments for expected forfeitures), and options exercisable were $70.7 million, $70.2 million and $48.3 million, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company's ordinary shares as of March 31, 2012 for the approximately 21.6 million options that were in-the-money at March 31, 2012. As of March 31, 2012, the weighted average remaining contractual life for options exercisable was 3.14 years.

        The following table summarizes the Company's share bonus award activity ("Price" reflects the weighted-average grant-date fair value):

 
  Fiscal Year Ended March 31,  
 
  2012   2011   2010  
 
  Shares   Price   Shares   Price   Shares   Price  

Unvested share bonus awards outstanding, beginning of fiscal year

    13,801,942   $ 8.04     8,801,609   $ 10.31     10,456,905   $ 10.31  

Granted

    9,213,456     6.78     9,739,375     7.01     523,229     7.08  

Vested

    (2,555,165 )   9.34     (2,758,593 )   10.37     (1,299,357 )   8.98  

Forfeited

    (4,494,965 )   8.60     (1,980,449 )   9.74     (879,168 )   10.40  
                                 

Unvested share bonus awards outstanding, end of fiscal year

    15,965,268   $ 6.91     13,801,942   $ 8.04     8,801,609   $ 10.31  
                                 

        Of the 16.0 million unvested share bonus awards outstanding as of the year ended March 31, 2012, approximately 2.3 million represents the target amount of grants made to certain key employees whereby vesting is contingent on meeting a certain market condition. The number of shares that ultimately will vest are based on a measurement of Flextronics' total shareholder return against the

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FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. SHARE-BASED COMPENSATION (Continued)

Standard and Poor's ("S&P") 500 Composite Index and will vest over a period of four years. Of the 2.3 million awards that were outstanding as of the year ended March 31, 2012, 1.3 million were granted in fiscal 2012 at an estimated average grant-date fair value of $7.78 per share and 1.0 million were granted in fiscal 2011 at an average grant-date fair value of $7.32 per share. The actual number of shares to be issued for the 2012 grants can range from zero to 1.9 million and zero to 1.5 million for the 2011 grants.

        The total intrinsic value of share bonus awards vested under the Company's equity compensation plans was $17.7 million, $19.6 million and $7.0 million during fiscal years 2012, 2011and 2010, respectively, based on the closing price of the Company's ordinary shares on the date vested.

4. EARNINGS PER SHARE

        Basic earnings per share for both continuing and discontinued operations exclude dilution and are computed by dividing net income by the weighted-average number of ordinary shares outstanding during the applicable periods.

        Diluted earnings per share for both continuing and discontinued operations reflect the potential dilution from stock options, share bonus awards and convertible securities. The potential dilution from stock options exercisable into ordinary share equivalents and share bonus awards was computed using the treasury stock method based on the average fair market value of the Company's ordinary shares for the period. The potential dilution from the conversion spread (excess of conversion value over face value) of the Subordinated Notes convertible into ordinary share equivalents was calculated as the quotient of the conversion spread and the average fair market value of the Company's ordinary shares for the period.

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FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. EARNINGS PER SHARE (Continued)

        The following table reflects the basic weighted-average ordinary shares outstanding and diluted weighted-average ordinary share equivalents used to calculate basic and diluted income from continuing and discontinued operations per share:

 
  Fiscal Year Ended March 31,  
 
  2012   2011   2010  
 
  (In thousands, except per share amounts)
 

Basic earnings from continuing and discontinued operations per share:

                   

Income from continuing operations

  $ 510,645   $ 606,345   $ 25,002  

Loss from discontinued operations

    (21,880 )   (10,126 )   (6,408 )

Shares used in computation:

                   

Weighted-average ordinary shares outstanding

    716,247     777,315     811,677  
               

Basic earnings from continuing operations per share

  $ 0.71   $ 0.78   $ 0.03  

Basic loss from discontinued operations per share

  $ (0.03 ) $ (0.01 ) $ (0.01 )

Diluted earnings from continuing operations per share:

                   

Income from continuing operations

  $ 510,645   $ 606,345   $ 25,002  

Loss from discontinued operations

    (21,880 )   (10,126 )   (6,408 )

Shares used in computation:

                   

Weighted-average ordinary shares outstanding

    716,247     777,315     811,677  

Weighted-average ordinary share equivalents from stock options and awards(1)

    11,560     12,877     9,435  

Weighted-average ordinary shares and ordinary share equivalents outstanding(2)

    727,807     790,192     821,112  
               

Diluted earnings from continuing operations per share

  $ 0.70   $ 0.77   $ 0.03  
               

Diluted loss from discontinued operations per share

  $ (0.03 ) $ (0.01 ) $ (0.01 )
               

(1)
Ordinary share equivalents of approximately 24.2 million, 25.5 million and 38.1 million shares to purchase stock options during fiscal years 2012, 2011 and 2010, respectively, were excluded from the computation of diluted earnings per share primarily because the exercise price of these options was greater than the average market price of the Company's ordinary shares during the respective periods.

(2)
On August 2, 2010 the Company paid approximately $240.0 million to redeem its 1% Convertible Subordinated Notes upon maturity. The notes carried conversion provisions to issue shares to settle any conversion spread (excess of the conversion value over the conversion price) in stock. The conversion price was $15.525 per share (subject to certain adjustments). On the maturity date, the Company's stock price was less than the conversion spread, and therefore no shares were issued. For the year ended March 31, 2011, the conversion obligation was less than the principal portion of these notes and accordingly, no additional shares were included as ordinary share equivalents.

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FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. SUPPLEMENTAL CASH FLOW DISCLOSURES

        The following table represents supplemental cash flow disclosures and non-cash investing and financing activities:

 
  Fiscal Year Ended March 31,  
 
  2012   2011   2010  
 
  (In thousands)
 

Net cash paid for:

                   

Interest

  $ 42,067   $ 83,133   $ 126,327  

Income taxes

  $ 66,013   $ 77,690   $ 89,973  

Non-cash investing activity:

                   

Accounts payable for fixed assets purchases

  $ 63,671   $ 73,036   $ 67,876  

        For the year ended March 31, 2011, approximately $266.1 million of proceeds from bank borrowings and repayment of bank borrowings, related to certain short-term facilities, were previously reflected on a gross basis in the consolidated statements of cash flows. These amounts should have been reflected on a net basis in "Repayment of bank borrowings and long-term debt" and have been corrected in the accompanying consolidated statement of cash flows. The correction had no net impact on total cash used in financing activities.

6. BANK BORROWINGS AND LONG-TERM DEBT

        Bank borrowings and long-term debt are as follows:

 
  As of March 31,  
 
  2012   2011  
 
  (In thousands)
 

Term Loan, including current portion, due in installments through October 2014

  $ 1,179,595   $ 1,674,435  

New Term Loan, including current portion, due in installments through October 2016

    487,500      

Asia Term Loans

    377,000     379,000  

Outstanding under revolving line of credit

    140,000     160,000  

Other

    4,578     6,437  
           

    2,188,673     2,219,872  

Current portion

    (39,340 )   (20,930 )
           

Non-current portion

  $ 2,149,333   $ 2,198,942  
           

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FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. BANK BORROWINGS AND LONG-TERM DEBT (Continued)

        Maturities for the Company's long-term debt are as follows:

Fiscal Year Ending March 31,
  Amount  
 
  (In thousands)
 

2013

  $ 39,340  

2014

    418,590  

2015

    1,192,415  

2016

    37,500  

2017

    496,250  

Thereafter

    4,578  
       

Total

  $ 2,188,673  
       

        Capital lease obligations of $11.6 million and $0.5 million, consisting of short-term obligations of $3.1 million and $0.2 million and long term obligations of $8.5 million and $0.3 million are included in current and non-current liabilities on the Company's balance sheets as of March 31, 2012 and 2011, respectively.

        The Company entered into a $1.8 billion term loan facility, dated as of October 1, 2007, and subsequently amended as of December 28, 2007 (the "Term Loan Agreement").

        During fiscal year ended March 31, 2008, the Company borrowed $1.7 billion under the Term Loan Agreement. Of this amount, $500.0 million was scheduled to mature in October 2012 and the remainder is scheduled to mature in October 2014. The loan amortizes in quarterly installments in an amount equal to 1% per annum with the balance due at the end of the fifth or seventh year, as applicable. The Company may prepay the loans at any time at 100% of par plus accrued and unpaid interest and reimbursement of the lender's redeployment costs. On October 19, 2011, the Company repaid $480 million which was the outstanding portion of the $500.0 million due to mature in October 2012. Borrowings under the Term Loan Agreement bear interest, at the Company's option, either at (i) the base rate (the greater of the agent's prime rate or the federal funds rate plus 0.50%) plus a margin of 1.25%; or (ii) LIBOR plus a margin of 2.25%.

        The Term Loan Agreement is unsecured, and contains customary restrictions on the ability of the Company and its subsidiaries to, among other things, (i) incur certain debt, (ii) make certain investments, (iii) make certain acquisitions of other entities, (iv) incur liens, (v) dispose of assets, (vi) make non-cash distributions to shareholders, and (vii) engage in transactions with affiliates. These covenants are subject to a number of exceptions and limitations. The Term Loan Agreement also requires that the Company maintain a maximum ratio of total indebtedness to EBITDA, during the term of the Term Loan Agreement. Borrowings under the Term Loan Agreement are guaranteed by the Company and certain of its subsidiaries. As of March 31, 2012, the Company was in compliance with the covenants under the Term Loan Agreement.

        On October 19, 2011, the Company entered into a five-year $2.0 billion credit facility ("New Credit Facility") consisting of a $1.5 billion revolving credit facility ("New Revolving Credit Facility") and a $500 million term loan ("New Term Loan"), which expires in October 2016. The New Revolving

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. BANK BORROWINGS AND LONG-TERM DEBT (Continued)

Credit Facility replaced the Company's previous $2.0 billion revolving credit facility, which was due to mature in May 2012. The New Term Loan refinanced the outstanding amount of the $500.0 million tranche of the Company's $1.7 billion Term Loan. Borrowings under the New Credit Facility bear interest, at the Company's option, either at (i) LIBOR plus the applicable margin for LIBOR loans ranging between 1.25% and 2.25%, based on the Company's credit ratings or (ii) the base rate (the greatest of the agent's prime rate, the federal funds rate plus 0.50% and LIBOR for a one-month interest period plus 1.00%) plus an applicable margin ranging between 0.25% and 1.25%, based on the Company's credit rating. The Company is required to pay a quarterly commitment fee ranging between 0.20% and 0.45% per annum on the daily unused amount of the New Revolving Credit Facility based on the Company's credit rating.

        The New Credit Facility is unsecured, and contains customary restrictions on the Company's and its subsidiaries' ability to (i) incur certain debt, (ii) make certain investments, (iii) make certain acquisitions of other entities, (iv) incur liens, (v) dispose of assets, (vi) make non-cash distributions to shareholders, and (vii) engage in transactions with affiliates. These covenants are subject to a number of exceptions and limitations. The New Credit Facility also requires that the Company maintain a maximum ratio of total indebtedness to EBITDA (earnings before interest expense, taxes, depreciation and amortization), and a minimum interest coverage ratio, as defined therein, during its term. As of March 31, 2012, the Company was in compliance with the covenants under the New Credit Facility.

        On September 27, 2010, the Company entered into a $50.0 million term loan agreement with a bank based in Asia, which matures on September 27, 2013. Borrowings under the term loan bear interest at LIBOR plus 2.30%. The Company, at its election, may convert the loan (in whole or in part) to bear interest at the higher of the Federal Funds rate plus 0.50% or the prime rate plus, in each case 1.00%. Principal payments of $500,000 are due quarterly with the balance due on the maturity date. The Company has the right to prepay any part of the loan without penalty. Borrowings under the term loan agreement are guaranteed by certain subsidiaries of the Company.

        On September 28, 2010, the Company entered into a $130.0 million term loan facility with a bank in Asia, which matures on September 28, 2013. Borrowings under the facility bear interest at LIBOR plus a margin of 2.15%, and the Company paid a non-refundable fee of $1.4 million at the inception of the loan. The Company has the right to prepay any part of the loan without penalty.

        On February 17, 2011, the Company entered into a $200.0 million term loan facility with a bank in Asia, which matures on February 17, 2014. Borrowings under the facility bear interest at LIBOR plus a margin of 2.28%, and the Company paid a non-refundable fee of $1.0 million at the inception of the loan. The Company has the right to prepay any part of the loan without penalty.

        The Asia Term Loans are unsecured, and contain customary restrictions on the ability of the Company and its subsidiaries to, among other things, (i) incur certain debt, (ii) make certain investments, (iii) make certain acquisitions of other entities, (iv) incur liens, (v) dispose of assets, (vi) make non-cash distributions to shareholders, and (vii) engage in transactions with affiliates. These covenants are subject to a number of exceptions and limitations. The Asia Term Loans also require the Company maintain a maximum ratio of total indebtedness to EBITDA during the terms of the agreements. As of March 31, 2012, the Company was in compliance with the covenants under these facilities.

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FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. BANK BORROWINGS AND LONG-TERM DEBT (Continued)

        The Company and certain of its subsidiaries also have various uncommitted revolving credit facilities, lines of credit and other loans in the amount of $290.6 million in the aggregate. While there were no borrowings outstanding under these facilities as of March 31, 2012 approximately $1.6 million of borrowings were outstanding as of March 31, 2011 under these facilities. These facilities, lines of credit and other loans bear annual interest at the respective country's inter-bank offering rate, plus an applicable margin, and generally have maturities that expired on various dates throughout fiscal year 2012. The credit facilities are unsecured and the lines of credit and other loans are primarily secured by accounts receivable.

        During August 2010, the Company paid $240.0 million to redeem its 1% Convertible Subordinated Notes at par upon maturity plus accrued interest. These notes carried conversion provisions to issue shares to settle any conversion spread (excess of conversion value over the conversion price) in stock. On the maturity date, the Company's stock price was less than the conversion price, and therefore no ordinary shares were issued.

        During June 2009, the Company paid approximately $101.8 million to purchase an aggregate principal amount of $99.8 million of these Notes in a cash tender offer. The cash paid included $2.3 million in consent fees paid to holders of the Notes that were tendered but not purchased as well as to holders that consented but did not tender, which were capitalized and were being recognized as a component of interest expense over the remaining life of the Notes until the redemption noted below. The Company recognized a $2.3 million loss during fiscal year 2010 associated with the partial extinguishment of the Notes, which included approximately $2.6 million for transaction costs and the write-down of related debt issuance costs. In conjunction with the tender offer, the Company obtained consents to certain amendments to the restricted payments covenants and certain related definitions in the indenture under which the Notes were issued. The amendments permitted the Company greater flexibility to purchase or make other payments in respect of its equity securities and debt that was subordinated to the Notes and to make certain other restricted payments under the indenture.

        On March 19, 2010, the Company paid approximately $306.3 million to redeem the remaining aggregate principal balance of $299.8 million of these notes at a redemption price of 102.167% of the principal amount. The Company recognized a loss associated with the early redemption of the notes of approximately $10.5 million during the fiscal year ended March 31, 2010, consisting of the redemption price premium of approximately $6.5 million, and approximately $4.0 million for transaction costs and the write-off of unamortized debt costs. The loss is recorded in other charges (income), net in the consolidated statements of operations.

        During June 2009, the Company paid approximately $101.3 million to purchase an aggregate principal amount of $99.9 million of these Notes in a cash tender offer. The cash paid included $6.5 million in consent fees paid to holders of the Notes that were tendered but not purchased as well as to holders that consented but did not tender, which were capitalized and are being recognized as a

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FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. BANK BORROWINGS AND LONG-TERM DEBT (Continued)

component of interest expense over the remaining life of the Notes. The Company recognized a $2.3 million gain during fiscal year 2010 associated with the partial extinguishment of the Notes, net of approximately $2.7 million for transaction costs and the write-down of related debt issuance costs.

        During December 2010, the Company paid approximately $308.5 million to redeem the remaining aggregate principal balance of $302.2 million of these notes at a redemption price of 102.083% of the principal amount. The Company recognized a loss associated with the early redemption of the notes of approximately $13.2 million during the fiscal year ended March 31, 2011, consisting of the redemption price premium of approximately $6.3 million, and approximately $6.9 million primarily for the write-off of the unamortized debt issuance costs. The loss is recorded in other charges (income), net in the consolidated statement of operations.

7. FINANCIAL INSTRUMENTS

        The Company transacts business in various foreign countries and is therefore, exposed to foreign currency exchange rate risk inherent in forecasted sales, cost of sales, and monetary assets and liabilities denominated in non-functional currencies. The Company has established risk management programs to protect against volatility in the value of non-functional currency denominated monetary assets and liabilities, and of future cash flows caused by changes in foreign currency exchange rates. The Company tries to maintain a partial or fully hedged position for certain transaction exposures, which are primarily, but not limited to, revenues, customer and vendor payments and inter-company balances in currencies other than the functional currency unit of the operating entity. The Company enters into short-term foreign currency forward and swap contracts to hedge only those currency exposures associated with certain assets and liabilities, primarily accounts receivable and accounts payable, and cash flows denominated in non-functional currencies. Gains and losses on the Company's forward and swap contracts are designed to offset losses and gains on the assets, liabilities and transactions hedged, and accordingly, generally do not subject the Company to risk of significant accounting losses. The Company hedges committed exposures and does not engage in speculative transactions. The credit risk of these forward and swap contracts is minimized since the contracts are with large financial institutions and accordingly, fair value adjustments related to the credit risk of the counter-party financial institution were not material.

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FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. FINANCIAL INSTRUMENTS (Continued)

        As of March 31, 2012, the aggregate notional amount of the Company's outstanding foreign currency forward and swap contracts was $2.7 billion as summarized below:

 
  Foreign Currency Amount   Notional Contract Value
in USD
 
Currency
  Buy   Sell   Buy   Sell  
 
  (In thousands)
   
   
 

Cash Flow Hedges

                         

CNY

    1,967,800       $ 312,067   $  

EUR

    17,279     14,740     22,923     19,562  

HUF

    15,333,000         69,239      

ILS

    158,600         42,497      

MXN

    1,213,400         94,665      

MYR

    320,600         104,515      

SGD

    41,500         32,973      

Other

    N/A     N/A     58,002     780  
                       

                736,881     20,342  

Other Forward/Swap Contracts

                         

BRL

    83,700     132,800     45,863     72,767  

CAD

    41,726     126,289     42,060     127,291  

EUR

    278,567     172,574     369,351     228,768  

GBP

    13,821     36,476     21,859     57,909  

HKD

    217,372     7,270     27,995     936  

HUF

    11,828,500     11,063,300     53,414     49,958  

JPY

    5,616,969     3,665,958     68,302     45,315  

MXN

    660,665     181,150     51,543     14,133  

MYR

    180,091     10,740     58,709     3,501  

SEK

    2,380,931     569,235     357,353     85,283  

Other

    N/A     N/A     95,940     55,689  
                       

                1,192,389     741,550  
                       

Total Notional Contract Value in USD

              $ 1,929,270   $ 761,892  
                       

        As of March 31, 2012 and 2011, the fair value of the Company's short-term foreign currency contracts was not material and included in other current assets or other current liabilities, as applicable, in the consolidated balance sheets. Certain of these contracts are designed to economically hedge the Company's exposure to monetary assets and liabilities denominated in non-functional currencies and are not accounted for as hedges under the accounting standards. Accordingly, changes in fair value of these instruments are recognized in earnings during the period of change as a component of interest and other expense, net in the consolidated statements of operations. As of March 31, 2012 and 2011, the Company also has included net deferred gains and losses, respectively, in other comprehensive income (loss), a component of shareholders' equity in the consolidated balance sheets, relating to changes in fair value of its foreign currency contracts that are accounted for as cash flow hedges. These deferred gains and losses were not material, and the deferred losses as of March 31, 2012 are expected to be recognized as a component of cost of sales in the consolidated statement of operations primarily over the next twelve month period. The gains and losses recognized in earnings due to hedge

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7. FINANCIAL INSTRUMENTS (Continued)

ineffectiveness were not material for all fiscal years presented and are included as a component of interest and other expense, net in the consolidated statements of operations.

        The following table presents the fair value of the Company's derivative instruments located on the consolidated balance sheets utilized for foreign currency risk management purposes at March 31, 2012 and 2011:

 
  Fair Values of Derivative Instruments  
 
  Asset Derivatives   Liability Derivatives  
 
   
  Fair Value    
  Fair Value  
 
  Balance Sheet
Location
  March 31,
2012
  March 31,
2011
  Balance Sheet
Location
  March 31,
2012
  March 31,
2011
 
 
  (In thousands)
 

Derivatives designated as hedging instruments

                                 

Foreign currency contracts

  Other current
assets
  $ 10,105   $ 19,579   Other current
liabilities
  $ 1,905   $ 778  

Derivatives not designated as hedging instruments

                                 

Foreign currency contracts

  Other current
assets
  $ 10,894   $ 4,492   Other current
liabilities
  $ 6,200   $ 6,122  

8. TRADE RECEIVABLES SECURITIZATION

        The Company sells trade receivables under two asset-backed securitization programs and an accounts receivable factoring program.

Asset-Backed Securitization Programs

        The Company continuously sells designated pools of trade receivables under its Global Asset-Backed Securitization Agreement (the "Global Program") and its North American Asset-Backed Securitization Agreement (the "North American Program," collectively, the "ABS Programs") to affiliated special purpose entities, each of which in turn sells 100% of the receivables to unaffiliated financial institutions. These programs allow the operating subsidiaries to receive a cash payment and a deferred purchase price receivable for sold receivables. Following the transfer of the receivables to the special purpose entities, the transferred receivables are isolated from the Company and its affiliates, and upon the sale of the receivables from the special purpose entity to the unaffiliated financial institutions effective control of the transferred receivables is passed to the unaffiliated financial institutions, which has the right to pledge or sell the receivables. Although the special purpose entities are consolidated by the Company, they are separate corporate entities and their assets are available first to satisfy the claims of their creditors. The investment limits by the financial institutions are $500.0 million for the Global Program and $300.0 million for the North American Program and require a minimum level of deferred purchase price receivable to be retained by the Company in connection with the sales.

        The Company services, administers and collects the receivables on behalf of the special purpose entities and receives a servicing fee of 0.5% to 1.00% of serviced receivables per annum. Servicing fees recognized during the fiscal years ended March 31, 2012, 2011 and 2010 were not material and are

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8. TRADE RECEIVABLES SECURITIZATION (Continued)

included in interest and other expense, net within the consolidated statements of operations. As the Company estimates the fee it receives in return for its obligation to service these receivables is at fair value, no servicing assets and liabilities are recognized.

        Effective April 1, 2010, the Company adopted two new accounting standards, the first of which removed the concept of a qualifying special purpose entity and created more stringent conditions for reporting the transfer of a financial asset as a sale. The second standard amended the consolidation guidance for determining the primary beneficiary of a variable interest entity. As a result of the adoption of the second standard, the Company was deemed to be the primary beneficiary of the special purpose entity to which the pool of trade receivables was sold under the Global Program and, as such, was required to consolidate the special purpose entity; the Company had previously been consolidating the special purpose entity under the North American Program. The North American Program was amended effective April 1, 2010 and the Global Program was amended effective September 29, 2010 in each case to provide for the sale by the special purpose entities of 100% of the eligible receivables to the unaffiliated financial institutions; previously the special purpose entities had retained a partial interest in the sold receivables. Upon adoption of these standards, the balance of receivables sold for cash under the Global Program as of April 1, 2010, totaling $217.1 million, was recorded as accounts receivable and short-term bank borrowings in the opening balance sheet of fiscal 2011. Upon collection of these receivables the Company recorded cash from operations offset by repayments of bank borrowings from financing activities in the consolidated statements of cash flows during the year ended March 31, 2011. As of March 31, 2012 and 2011, the accounts receivable balances that were sold under the ABS Programs were removed from the consolidated balance sheets and the net cash proceeds received by the Company were included as cash provided by operating activities in the consolidated statements of cash flows.

        Although the Company still consolidates the special purpose entities, as a result of the amendments to the North American Program effective April 1, 2010 and the Global Program on September 29, 2010, all of the receivables sold to the unaffiliated financial institutions for cash are removed from the consolidated balance sheet and the cash received is no longer accounted for as a secured borrowing. The portion of the purchase price for the receivables which is not paid by the unaffiliated financial institutions in cash is a deferred purchase price receivable, which is paid to the special purpose entity as payments on the receivables are collected from account debtors. The deferred purchase price receivable represents a beneficial interest in the transferred financial assets and is recognized at fair value as part of the sale transaction.

        As of March 31, 2012, approximately $1.1 billion of accounts receivable had been sold to the special purpose entities under the ABS Programs for which the Company had received net cash proceeds of $556.8 million and deferred purchase price receivables of approximately $514.9 million. As of March 31, 2011, approximately $1.0 billion of accounts receivable had been sold to the special purpose entities for which the Company had received net cash proceeds of $545.0 million and deferred purchase price receivables of approximately $460.0 million. The deferred purchase price receivables are included in other current assets as of March 31, 2012 and 2011, and were carried at the expected recovery amount of the related receivables. The difference between the carrying amount of the receivables sold under these programs and the sum of the cash and fair value of the deferred purchase price receivables received at time of transfer is recognized as a loss on sale of the related receivables and recorded in interest and other expense, net in the consolidated statements of operations; such

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8. TRADE RECEIVABLES SECURITIZATION (Continued)

amounts were $10.9 million, $8.0 million and $7.8 million for the fiscal years ended March 31, 2012, 2011 and 2010, respectively.

        For the fiscal years ended March 31, 2012, 2011 and 2010, cash flows from sales of receivables under the ABS Programs consisted of approximately $4.7 billion, $2.4 billion and $2.8 billion, respectively for transfers of receivables (of which approximately $0.6 billion, $0.6 billion and $1.0 billion, respectively represented new transfers and the remainder proceeds from collections reinvested in revolving-period transfers).

        The following table summarizes the activity in the deferred purchase price receivables account during the fiscal years ended March 31, 2012 and 2011:

 
  As of March 31,  
 
  2012   2011  
 
  (In thousands)
 

Beginning balance

  $ 459,994   $ 135,401  

Transfers of receivables

    4,922,541     3,107,510  

Collections

    (4,867,640 )   (2,782,917 )
           

Ending balance

  $ 514,895   $ 459,994  
           

Trade Accounts Receivable Sale Programs

        The Company also sold accounts receivables to certain third-party banking institutions. The outstanding balance of receivables sold and not yet collected was approximately $110.5 million and $109.7 million as of March 31, 2012 and 2011, respectively. For the years ended March 31, 2012, 2011 and 2010, total accounts receivables sold to certain third party banking institutions was approximately $2.0 billion, $2.5 billion and $1.2 billion, respectively. The receivables that were sold were removed from the consolidated balance sheets and were reflected as cash provided by operating activities in the consolidated statements of cash flows.

9. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

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

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

        The Company has deferred compensation plans for its officers and certain other employees. Deferred amounts under the plans are invested in hypothetical investments selected by the participant

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9. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES (Continued)

or the participant's investment manager. The Company's deferred compensation plan assets are included in other noncurrent assets on the consolidated balance sheets and include investments in equity securities and mutual funds that are valued using active market prices.

        The Company values available for sale investments using level 1 inputs which are active market trading prices.

        Level 2—Applies to assets or liabilities for which there are inputs other than quoted prices included within level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

        The Company values foreign exchange forward contracts using level 2 observable inputs which primarily consist of an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount.

        The Company's cash equivalents are comprised of bank deposits and money market funds, which are valued using level 2 inputs, such as interest rates and maturity periods. Due to their short-term nature, their carrying amount approximates fair value.

        The Company's deferred compensation plan assets also include money market funds, mutual funds, corporate and government bonds and certain convertible securities that are valued using prices obtained from various pricing sources. These sources price these investments using certain market indices and the performance of these investments in relation to these indices. As a result, the Company has classified these investments as level 2 in the fair value hierarchy.

        Level 3—Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

        The Company values deferred purchase price receivables relating to its Asset-Backed Securitization Program based on a discounted cash flow analysis using unobservable inputs (i.e. level 3 inputs), which are primarily risk free interest rates adjusted for the credit quality of the underlying creditor and due to its high credit quality and short term maturity their fair value approximates carrying value. Significant increases in either of the significant unobservable inputs (credit spread, risk free interest rate) in isolation would result in lower fair value estimates but is insignificant. The interrelationship between these inputs is insignificant.

        There were no transfers between levels in the fair value hierarchy during the fiscal years 2012 and 2011.

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9. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES (Continued)

Financial Instruments Measured at Fair Value on a Recurring Basis

        The following table presents the Company's assets and liabilities measured at fair value on a recurring basis as of March 31, 2012 and 2011:

 
  Fair Value Measurements as of March 31, 2012  
 
  Level 1   Level 2   Level 3   Total  
 
  (In thousands)
 

Assets:

                         

Money market funds and time deposits (Note 2)

  $   $ 343,906   $   $ 343,906  

Deferred purchase price receivable (Note 8)

            514,895     514,895  

Foreign exchange forward contracts (Note 7)

        20,999         20,999  

Available for sale investments (Note 2)

    5,994             5,994  

Deferred compensation plan assets:

                         

Mutual funds, money market accounts and equity securities

    3,411     54,241         57,652  

Liabilities:

                         

Foreign exchange forward contracts (Note 7)

  $   $ (8,105 ) $   $ (8,105 )

 

 
  Fair Value Measurements as of March 31, 2011  
 
  Level 1   Level 2   Level 3   Total  
 
  (In thousands)
 

Assets:

                         

Money market funds and time deposits (Note 2)

  $   $ 375,760   $   $ 375,760  

Deferred purchase price receivable (Note 8)

            459,994     459,994  

Foreign exchange forward contracts (Note 7)

        24,071         24,071  

Deferred compensation plan assets:

                         

Mutual funds, money market accounts and equity securities

    2,816     53,847         56,663  

Liabilities:

                         

Foreign exchange forward contracts (Note 7)

  $   $ (6,900 ) $   $ (6,900 )

        There were no transfers between levels in the fair value hierarchy during the twelve month periods ended March 31, 2012 and 2011. Refer to note 8, "Trade Receivable Securitization", for a reconciliation of the changes in the deferred purchase price receivable.

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9. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES (Continued)

Other financial instruments

        The following table presents the Company's liabilities not carried at fair value as at March 31, 2012 and 2011:

 
  As of March 31, 2012   As of March 31, 2011    
 
  Carrying
Amount
  Fair
Value
  Carrying
Amount
  Fair
Value
  Fair Value
Hierarchy
 
  (In thousands)
  (In thousands)
   

Revolving credit facility

  $ 140,000   $ 140,000   $ 160,000   $ 160,000   Level 2

Term loan dated October 1, 2007

    1,179,595     1,171,959     1,674,435     1,662,714   Level 1

Term loan dated October 19, 2011

    487,500     482,625           Level 1

Asia term loans

    377,000     374,394     379,000     376,347   Level 2
                     

Total

  $ 2,184,095   $ 2,168,978   $ 2,213,435   $ 2,199,061    
                     

        Revolving credit facility—The carrying amount approximates fair value due to the short term nature of the interest rates underlying any borrowings under this facility, though the facility itself is available to the Company on a long term basis.

        Term loans dated October 1, 2007 and October 19, 2011—The term loans are valued based on broker trading prices in active markets.

        Asia term loans—The Company's Asia Term Loans are not traded publicly; however, as the pricing, maturity and other pertinent terms of these loans closely approximate those of the Term Loan Agreements dated October 1, 2007, and October 19, 2011, management estimates the respective trading prices would be approximately the same.

Assets held for sale

        As of March 31, 2012 and 2011, assets that were no longer in use and held for sale totaled approximately $16.7 million and $27.1 million, respectively, excluding assets that have been identified as relating to discontinued operations discussed further in note 18. The assets held for sale primarily represent manufacturing facilities that have been closed as part of the Company's historical facility consolidations. These assets are recorded at the lesser of carrying value or fair value, which is based on comparable sales from prevailing market data (level two inputs). There were no material fair value adjustments during fiscal years 2012 and 2011. There were no transfers between levels in the fair value hierarchy for these assets during the fiscal years 2012 and 2011.

10. COMMITMENTS AND CONTINGENCIES

Commitments

        As of March 31, 2012 and 2011, the gross carrying amount and associated accumulated depreciation of the Company's property and equipment financed under capital leases, and the related obligations was not material. The Company also leases certain of its facilities and equipment under

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10. COMMITMENTS AND CONTINGENCIES (Continued)

non-cancelable operating leases. These operating leases expire in various years through 2028 and require the following minimum lease payments:

Fiscal Year Ending March 31,
  Operating
Lease
 
 
  (In thousands)
 

2013

  $ 142,912  

2014

    112,680  

2015

    73,316  

2016

    56,862  

2017

    49,006  

Thereafter

    119,631  
       

Total minimum lease payments

  $ 554,407  
       

        Total rent expense amounted to $160.5 million, $153.2 million, and $143.2 million in fiscal years 2012, 2011 and 2010, respectively.

Litigation and other legal matters

        From time to time, we are subject to legal proceedings, claims, and litigation arising in the ordinary course of business. We defend ourselves vigorously against any such claims. Although the outcome of these matters is currently not determinable, management expects that any losses that are probable or reasonably possible of being incurred as a result of these matters, which are in excess of amounts already accrued in its consolidated balance sheet, would not be material to the financial statements as a whole.

11. INCOME TAXES

        The domestic (Singapore) and foreign components of income before income taxes were comprised of the following:

 
  Fiscal Year Ended March 31,  
 
  2012   2011   2010  
 
  (In thousands)
 

Domestic

  $ 186,855   $ 231,209   $ 86,411  

Foreign

    377,906     397,312     (97,157 )
               

Total

  $ 564,761   $ 628,521   $ (10,746 )
               

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11. INCOME TAXES (Continued)

        The provision for (benefit from) income taxes consisted of the following:

 
  Fiscal Year Ended March 31,  
 
  2012   2011   2010  
 
  (In thousands)
 

Current:

                   

Domestic

  $ 303   $ (972 ) $ 50  

Foreign

    56,256     26,798     (18,908 )
               

    56,559     25,826     (18,858 )

Deferred:

                   

Domestic

    386     (319 )   1,077  

Foreign

    (2,829 )   (3,331 )   (17,967 )
               

    (2,443 )   (3,650 )   (16,890 )
               

Provision for (benefit from) income taxes

  $ 54,116   $ 22,176   $ (35,748 )
               

        The domestic statutory income tax rate was approximately 17.0% in fiscal years 2012, 2011 and 2010. The reconciliation of the income tax expense (benefit) expected based on domestic statutory income tax rates to the expense (benefit) for income taxes included in the consolidated statements of operations is as follows:

 
  Fiscal Year Ended March 31,  
 
  2012   2011   2010  
 
  (In thousands)
 

Income taxes based on domestic statutory rates

  $ 96,014   $ 106,852   $ (1,852 )

Effect of tax rate differential

    (177,540 )   26,459     (42,106 )

Intangible amortization

    9,502     12,055     15,279  

Change in liability for uncertain tax positions

    34,517     (29,205 )   (80,175 )

Change in valuation allowance

    93,336     (90,033 )   69,076  

Other

    (1,713 )   (3,952 )   4,030  
               

Provision for income taxes

  $ 54,116   $ 22,176   $ (35,748 )
               

        A number of countries in which the Company is located allow for tax holidays or provide other tax incentives to attract and retain business. In general, these holidays were secured based on the nature, size and location of the Company's operations. The aggregate dollar effect on the Company's income resulting from tax holidays and tax incentives to attract and retain business for the fiscal years ended March 31, 2012, 2011 and 2010 were $41.8 million, $66.5 million and $65.4 million, respectively. For the fiscal year ended March 31, 2012, the effect on basic and diluted earnings per share was $0.06 and $0.06, respectively, and the effect on basic and diluted earnings per share during fiscal years 2011 and 2010 were $0.09 and $0.08, and $0.08 and $0.08, respectively. Unless extended or otherwise renegotiated, the Company's existing holidays will expire in the fiscal years ending March 31, 2013 through fiscal 2018.

        Under its territorial tax system, Singapore generally does not tax foreign sourced income until repatriated to Singapore. The Company has included the effects of Singapore's territorial tax system in the rate differential line above. The tax effect of foreign income not repatriated to Singapore for the

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11. INCOME TAXES (Continued)

fiscal years ended March 31, 2012, 2011 and 2010 were $17.7 million, $32.6 million and $20.0 million, respectively.

        The components of deferred income taxes are as follows:

 
  As of March 31,  
 
  2012   2011  
 
  (In thousands)
 

Deferred tax liabilities:

             

Fixed assets

  $ (30,159 ) $ (28,695 )

Others

    (30,032 )   (229,891 )
           

Total deferred tax liabilities

    (60,191 )   (258,586 )
           

Deferred tax assets: