UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended December 31, 2013June 27, 2014
Or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to
Commission file number 0-23354
FLEXTRONICS INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
Singapore |
| Not Applicable |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
2 Changi South Lane, |
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Singapore |
| 486123 |
(Address of registrant’s principal executive offices) |
| (Zip Code) |
Registrant’s telephone number, including area code
(65) 6876-9899
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 x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 x No o
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. (Check one):
Large accelerated filer x |
| Accelerated filer o |
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Non-accelerated filer o |
| Smaller reporting company o |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
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 |
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Ordinary Shares, No Par Value |
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FLEXTRONICS INTERNATIONAL LTD.
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| Notes to Condensed Consolidated Financial Statements (unaudited) | 8 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Flextronics International Ltd.
Singapore
We have reviewed the accompanying condensed consolidated balance sheet of Flextronics International Ltd. and subsidiaries (the “Company”) as of December 31, 2013,June 27, 2014, and the related condensed consolidated statements of operations, and of comprehensive income for the three-month and nine-month periods ended December 31, 2013 and December 31, 2012, and the condensed consolidated statements of cash flows for the nine-monththree-month periods ended December 31, 2013June 27, 2014 and December 31, 2012.June 28, 2013. These interim financial statements are the responsibility of the Company’s management.
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Flextronics International Ltd. and subsidiaries as of March 31, 2013,2014, and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated May 28, 2013,20, 2014, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 20132014 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
January 31,
July 28, 2014
FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
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| As of |
| As of |
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| As of |
| As of |
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| December 31, 2013 |
| March 31, 2013 |
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| June 27, 2014 |
| March 31, 2014 |
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| (In thousands, |
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| except share amounts) |
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| except share amounts) |
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| (Unaudited) |
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| (Unaudited) |
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ASSETS |
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| ASSETS |
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Current assets: |
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Cash and cash equivalents |
| $ | 1,617,245 |
| $ | 1,587,087 |
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| $ | 1,347,690 |
| $ | 1,593,728 |
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Accounts receivable, net of allowance for doubtful accounts of $2,693 and $10,877 as of December 31, 2013 and March 31, 2013, respectively |
| 2,551,030 |
| 2,111,996 |
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Accounts receivable, net of allowance for doubtful accounts of $5,504 and $5,529 as of June 27, 2014 and March 31, 2014, respectively |
| 2,894,622 |
| 2,697,985 |
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Inventories |
| 3,972,127 |
| 2,722,500 |
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| 3,510,163 |
| 3,599,008 |
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Other current assets |
| 1,552,521 |
| 1,349,818 |
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| 1,236,948 |
| 1,509,605 |
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Total current assets |
| 9,692,923 |
| 7,771,401 |
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| 8,989,423 |
| 9,400,326 |
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Property and equipment, net |
| 2,380,711 |
| 2,174,588 |
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| 2,254,664 |
| 2,288,656 |
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Goodwill and other intangible assets, net |
| 381,831 |
| 343,552 |
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| 389,369 |
| 377,218 |
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Other assets |
| 361,572 |
| 302,014 |
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| 434,368 |
| 433,950 |
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Total assets |
| $ | 12,817,037 |
| $ | 10,591,555 |
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| $ | 12,067,824 |
| $ | 12,500,150 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Bank borrowings and current portion of long-term debt |
| $ | 54,951 |
| $ | 416,654 |
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| $ | 55,338 |
| $ | 32,575 |
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Accounts payable |
| 4,968,640 |
| 3,705,297 |
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| 4,742,033 |
| 4,747,779 |
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Accrued payroll |
| 385,640 |
| 351,683 |
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| 377,133 |
| 354,889 |
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Other current liabilities |
| 2,655,261 |
| 1,699,151 |
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| 2,058,708 |
| 2,521,444 |
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Total current liabilities |
| 8,064,492 |
| 6,172,785 |
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| 7,233,212 |
| 7,656,687 |
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Long-term debt, net of current portion |
| 2,000,694 |
| 1,650,973 |
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| 2,073,854 |
| 2,070,020 |
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Other liabilities |
| 497,299 |
| 521,039 |
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| 459,890 |
| 571,764 |
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Commitments and contingencies (Note 14) |
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Commitments and contingencies (Note 12) |
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Shareholders’ equity |
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Flextronics International Ltd. shareholders’ equity |
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Ordinary shares, no par value; 652,468,175 and 689,159,139 issued, and 602,228,820 and 638,919,784 outstanding as of December 31, 2013 and March 31, 2013, respectively |
| 7,709,453 |
| 8,015,142 |
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Treasury shares, at cost; 50,239,355 shares as of December 31, 2013 and March 31, 2013 |
| (388,215 | ) | (388,215 | ) | |||||||||
Ordinary shares, no par value; 639,301,824 and 641,666,347 issued, and 589,062,469 and 591,426,992 outstanding as of June 27, 2014 and March 31, 2014, respectively |
| 7,533,258 |
| 7,614,515 |
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Treasury shares, at cost; 50,239,355 shares as of June 27, 2014 and March 31, 2014 |
| (388,215 | ) | (388,215 | ) | |||||||||
Accumulated deficit |
| (4,980,069 | ) | (5,302,688 | ) |
| (4,763,207 | ) | (4,937,094 | ) | ||||
Accumulated other comprehensive loss |
| (120,422 | ) | (77,481 | ) |
| (119,576 | ) | (126,156 | ) | ||||
Total Flextronics International Ltd. shareholders’ equity |
| 2,220,747 |
| 2,246,758 |
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| 2,262,260 |
| 2,163,050 |
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Noncontrolling interests |
| 33,805 |
| — |
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| 38,608 |
| 38,629 |
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Total shareholders’ equity |
| 2,254,552 |
| 2,246,758 |
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| 2,300,868 |
| 2,201,679 |
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Total liabilities and shareholders’ equity |
| $ | 12,817,037 |
| $ | 10,591,555 |
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| $ | 12,067,824 |
| $ | 12,500,150 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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| Three-Month Periods Ended |
| Nine-Month Periods Ended |
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| Three-Month Periods Ended |
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| December 31, 2013 |
| December 31, 2012 |
| December 31, 2013 |
| December 31, 2012 |
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| June 27, 2014 |
| June 28, 2013 |
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| (In thousands, except per share amounts) |
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| (Unaudited) |
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Net sales |
| $ | 7,183,442 |
| $ | 6,123,321 |
| $ | 19,384,673 |
| $ | 18,274,157 |
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| $ | 6,642,745 |
| $ | 5,791,125 |
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Cost of sales |
| 6,784,823 |
| 5,778,544 |
| 18,271,470 |
| 17,205,251 |
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| 6,261,960 |
| 5,480,090 |
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Restructuring charges |
| — |
| 98,315 |
| 35,126 |
| 98,315 |
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Gross profit |
| 398,619 |
| 246,462 |
| 1,078,077 |
| 970,591 |
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| 380,785 |
| 311,035 |
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Selling, general and administrative expenses |
| 224,576 |
| 207,224 |
| 661,061 |
| 589,751 |
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| 209,277 |
| 223,619 |
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Intangible amortization |
| 5,575 |
| 6,137 |
| 21,495 |
| 21,211 |
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| 6,951 |
| 8,202 |
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Restructuring charges |
| — |
| 4,376 |
| 5,634 |
| 4,376 |
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Interest and other, net |
| 14,743 |
| (17,089 | ) | 48,028 |
| (16,754 | ) |
| 18,637 |
| 12,573 |
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Income from continuing operations before income taxes |
| 153,725 |
| 45,814 |
| 341,859 |
| 372,007 |
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Provision for (benefit from) income taxes |
| 8,568 |
| (8,782 | ) | 19,240 |
| 20,189 |
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Income from continuing operations |
| 145,157 |
| 54,596 |
| 322,619 |
| 351,818 |
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Loss from discontinued operations, net of tax |
| — |
| (7,248 | ) | — |
| (25,451 | ) | |||||||||||
Other charges (income), net |
| (44,009 | ) | 7,111 |
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Income before income taxes |
| 189,929 |
| 59,530 |
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Provision for income taxes |
| 16,042 |
| 273 |
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Net income |
| $ | 145,157 |
| $ | 47,348 |
| $ | 322,619 |
| $ | 326,367 |
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| $ | 173,887 |
| $ | 59,257 |
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Earnings per share: |
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Income from continuing operations: |
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Basic |
| $ | 0.24 |
| $ | 0.08 |
| $ | 0.52 |
| $ | 0.53 |
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Diluted |
| $ | 0.23 |
| $ | 0.08 |
| $ | 0.51 |
| $ | 0.52 |
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Loss from discontinued operations: |
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Basic |
| $ | — |
| $ | (0.01 | ) | $ | — |
| $ | (0.04 | ) | |||||||
Diluted |
| $ | — |
| $ | (0.01 | ) | $ | — |
| $ | (0.04 | ) | |||||||
Net income: |
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Basic |
| $ | 0.24 |
| $ | 0.07 |
| $ | 0.52 |
| $ | 0.49 |
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| $ | 0.30 |
| $ | 0.09 |
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Diluted |
| $ | 0.23 |
| $ | 0.07 |
| $ | 0.51 |
| $ | 0.48 |
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| $ | 0.29 |
| $ | 0.09 |
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Weighted-average shares used in computing per share amounts: |
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Basic |
| 606,724 |
| 658,925 |
| 614,539 |
| 666,852 |
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| 587,233 |
| 626,120 |
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Diluted |
| 618,677 |
| 669,488 |
| 627,399 |
| 678,610 |
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| 601,300 |
| 639,899 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
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| Three-Month Periods Ended |
| Nine-Month Periods Ended |
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| Three-Month Periods Ended |
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| December 31, 2013 |
| December 31, 2012 |
| December 31, 2013 |
| December 31, 2012 |
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| June 27, 2014 |
| June 28, 2013 |
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| (In thousands) |
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| (Unaudited) |
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Net income |
| $ | 145,157 |
| $ | 47,348 |
| $ | 322,619 |
| $ | 326,367 |
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| $ | 173,887 |
| $ | 59,257 |
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Other comprehensive income (loss): |
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Foreign currency translation adjustments, net of zero tax |
| (13,960 | ) | (10,603 | ) | (43,457 | ) | (21,575 | ) |
| (4,145 | ) | (17,509 | ) | ||||||
Unrealized gain (loss) on derivative instruments and other, net of zero tax |
| 1,097 |
| (3,088 | ) | 516 |
| 3,015 |
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| 10,725 |
| (10,134 | ) | ||||||
Comprehensive income |
| $ | 132,294 |
| $ | 33,657 |
| $ | 279,678 |
| $ | 307,807 |
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| $ | 180,467 |
| $ | 31,614 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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| Nine-Month Periods Ended |
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| Three-Month Periods Ended |
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| December 31, 2013 |
| December 31, 2012 |
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| June 27, 2014 |
| June 28, 2013 |
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| (Unaudited) |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
| $ | 322,619 |
| $ | 326,367 |
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| $ | 173,887 |
| $ | 59,257 |
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Depreciation, amortization and other impairment charges |
| 345,044 |
| 430,238 |
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| 121,501 |
| 119,051 |
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Changes in working capital and other |
| 450,644 |
| 249,452 |
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| (376,557 | ) | 20,268 |
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Net cash provided by operating activities |
| 1,118,307 |
| 1,006,057 |
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Net cash provided by (used in) operating activities |
| (81,169 | ) | 198,576 |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchases of property and equipment |
| (526,026 | ) | (377,901 | ) |
| (87,101 | ) | (144,737 | ) | ||||
Proceeds from the disposition of property and equipment |
| 64,873 |
| 49,819 |
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| 14,184 |
| 3,364 |
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Acquisition of businesses, net of cash acquired |
| (238,031 | ) | (183,896 | ) |
| — |
| (187,543 | ) | ||||
Proceeds from divestiture of business, net of cash held in divested business |
| 4,599 |
| 22,585 |
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Proceeds from divesture of business, net of cash held in divested business |
| (5,493 | ) | — |
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Other investing activities, net |
| (12,067 | ) | (93,633 | ) |
| (21,462 | ) | 30,179 |
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Net cash used in investing activities |
| (706,652 | ) | (583,026 | ) |
| (99,872 | ) | (298,737 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from bank borrowings and long-term debt |
| 1,003,294 |
| 171,673 |
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| 26,615 |
| 158 |
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Repayments of bank borrowings, long-term debt and capital lease obligations |
| (518,549 | ) | (290,230 | ) |
| (859 | ) | (9,151 | ) | ||||
Payments for early retirement of long-term debt |
| (544,840 | ) | — |
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Payments for repurchase of ordinary shares |
| (362,693 | ) | (208,208 | ) | |||||||||
Payments for repurchases of ordinary shares |
| (105,568 | ) | (215,210 | ) | |||||||||
Net proceeds from issuance of ordinary shares |
| 21,106 |
| 14,632 |
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| 9,329 |
| 10,909 |
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Other financing activities, net |
| 46,298 |
| 85,590 |
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| 300 |
| 15,652 |
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Net cash used in financing activities |
| (355,384 | ) | (226,543 | ) |
| (70,183 | ) | (197,642 | ) | ||||
Effect of exchange rates on cash and cash equivalents |
| (26,113 | ) | (8,704 | ) |
| 5,186 |
| (9,710 | ) | ||||
Net increase in cash and cash equivalents |
| 30,158 |
| 187,784 |
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Net decrease in cash and cash equivalents |
| (246,038 | ) | (307,513 | ) | |||||||||
Cash and cash equivalents, beginning of period |
| 1,587,087 |
| 1,518,329 |
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| 1,593,728 |
| 1,587,087 |
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Cash and cash equivalents, end of period |
| $ | 1,617,245 |
| $ | 1,706,113 |
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| $ | 1,347,690 |
| $ | 1,279,574 |
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Non-cash investing activity: |
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Accounts payable for fixed assets purchases |
| $ | 57,483 |
| $ | 74,278 |
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| $ | 49,130 |
| $ | 126,231 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION OF THE COMPANY AND BASIS OF PRESENTATION
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 globalprovider of supply chain solutions provider of advanced design, manufacturingthat span from concept through consumption. The Company designs, builds, ships and services toa complete packaged electronic product for original equipment manufacturers (“OEMs”) of a broad range of electronic products serving customers in the following markets:business groups: High Reliability Solutions (“HRS”), which is comprised of our medical, automotive, and defense and aerospace businesses; High Velocity SolutionsConsumer Technology Group (“HVS”CTG”), which includes our mobile devices business, including smart phones, andphones; our consumer electronics business, including game consoles and wearable electronics,electronics; and our high-volume computing business, including various supply chain solutions for notebook personal computing (“PC”), tablets, and printers; Industrial and Emerging Industries (“IEI”), which is comprised of our household appliances, semi-cap equipment, kiosks, energy and our emerging industries businesses; and Integrated Network Solutions (“INS”), which includes our telecommunications infrastructure, data networking, connected home, and server and storage businesses. The Company’s strategy is to provide customers with a full range of cost competitive, vertically integrated global supply chain solutions through which the Company can design, build, ship and service a complete packaged product for its OEM customers. This enables our OEM customers to leverage the Company’s supply chain solutions to meet their product requirements throughout the entire product life cycle.
The Company’s service offerings include a comprehensive range of value-added design and engineering services that are tailored to the various markets and needs of its customers. Other focused service offerings relate to manufacturing (including enclosures, metals, plastic injection molding, precision plastics, machining, and mechanicals), system integration and assembly and test services, materials procurement, inventory management, logistics and after-sales services (including product repair, warranty services, re-manufacturing and maintenance), supply chain management software solutions and component product offerings like(including rigid and flexible printed circuit boards and power adapters and chargers.chargers).
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) for interim financial information and in accordance with the requirements of Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements, and should be read in conjunction with the Company’s audited consolidated financial statements as of and for the fiscal year ended March 31, 20132014 contained in the Company’s Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three-month and nine-month periodsperiod ended December 31, 2013June 27, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2014.
During the fourth quarter of fiscal 2013, the Company recorded certain purchase accounting adjustments in connection with an acquisition of a business that was consummated in the third quarter of fiscal 2013. These purchase accounting adjustments resulted in the release of $22.3 million of valuation allowances for deferred tax assets. In accordance with the accounting guidance applicable to business combinations, the Company re-casted the operating results for the quarter ended December 31, 2012 to reflect the release of the valuation allowance for deferred tax assets.2015.
The first quarterquarters for fiscal year 20142015 and fiscal year 20132014 ended on June 27, 2014 and June 28, 2013, respectively.
The accompanying unaudited condensed consolidated financial statements include the financial position and June 29, 2012, respectively.results of operations of a majority owned subsidiary of the Company. Non-controlling interests are presented as a separate component of total shareholders’ equity in the condensed consolidated balance sheets. The secondoperating results of the subsidiary attributable to the non-controlling interests are immaterial for all of the periods presented, and are included in interest and other, net in the condensed consolidated statements of operations.
Recent Accounting Pronouncements
In April 2014, the Financial Accounting Standards Board (“FASB”) issued guidance which requires an entity to report a disposal of a component of an entity in discontinued operations if the disposal represents a strategic shift that has a major effect on an entity’s operations and financial results when the component of an entity meets certain criteria to be classified as held for sale, or when the component of an entity is disposed of by a sale or disposed of other than by a sale. Further, additional disclosures about discontinued operations should include the following for the periods in which the results of operations of the discontinued operations are presented in the statement of operations: the major classes of line items constituting pretax profit or loss of discontinued operations; total operating and investing cash flows of discontinued operations; depreciation, amortization, capital expenditures, and significant operating and investing noncash items of discontinued operations; pretax profit or loss attributable to the parent if a discontinued
operation includes a non-controlling interest; a reconciliation of major classes of assets, liabilities of the discontinued operation classified as held for sale; and a reconciliation of major classes of line items constituting the pretax profit or loss of the discontinued operation. The Company early adopted this accounting standard update in the first quarter forof fiscal year 2015. During the three-months ended June 27, 2014, the Company disposed of a certain manufacturing facility in western Europe which did not meet the criteria of discontinued operations under this accounting standard, as further discussed in note 6 to the condensed consolidated financial statements.
In May 2014, the FASB issued new guidance related to revenue recognition which requires an entity to recognize revenue relating to contracts with customers that depicts the transfer of promised goods or services to customers in an amount reflecting the consideration to which the entity expects to be entitled in exchange for such goods or services. In order to meet this requirement, the entity must apply the following steps: (i) identify the contracts with the customers; (ii) identify performance obligations in the contracts; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations per the contracts; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Additionally, disclosures required for revenue recognition will include qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments, and assets recognized from costs to obtain or fulfill a contract. This guidance is effective for the Company beginning in the first quarter of fiscal year 2013 ended on September 27, 2013 and September 28, 2012, respectively. The Company’s third fiscal quarter ends on December 31,2018 and the fourth fiscal quarter, and year, endsCompany is in the process of assessing the impact on March 31 of each year.its consolidated financial statements.
2. BALANCE SHEET ITEMS
Inventories
The components of inventories, net of applicable lower of cost or market write-downs, were as follows:
|
| As of |
| As of |
|
| As of |
| As of |
| ||||
|
| December 31, 2013 |
| March 31, 2013 |
|
| June 27, 2014 |
| March 31, 2014 |
| ||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||
Raw materials |
| $ | 2,567,982 |
| $ | 1,683,098 |
|
| $ | 2,265,442 |
| $ | 2,349,278 |
|
Work-in-progress |
| 642,064 |
| 421,706 |
|
| 617,390 |
| 608,284 |
| ||||
Finished goods |
| 762,081 |
| 617,696 |
|
| 627,331 |
| 641,446 |
| ||||
|
| $ | 3,972,127 |
| $ | 2,722,500 |
|
| $ | 3,510,163 |
| $ | 3,599,008 |
|
Goodwill and Other Intangibles
The following table summarizes the activity in the Company’s goodwill account during the nine-monththree-month period ended December 31, 2013:June 27, 2014:
|
| Amount |
| |
|
| (In thousands) |
| |
Balance, beginning of the year |
| $ | 262,005 |
|
Additions (1) |
| 26,384 |
| |
Purchase accounting adjustments (2) |
| 4,034 |
| |
Foreign currency translation adjustments |
| 429 |
| |
Balance, end of the period |
| $ | 292,852 |
|
|
| Amount |
| |
|
| (In thousands) |
| |
Balance, beginning of the year |
| $ | 292,758 |
|
Purchase accounting adjustments (1) |
| 8,272 |
| |
Foreign currency translation adjustments |
| 62 |
| |
Balance, end of the period |
| $ | 301,092 |
|
(1) The goodwill generated fromFair value adjustment made to certain assets acquired in connection with the Company’s business combinations completed during the nine-month period ended December 31, 2013 is primarily related to value placed on the employee workforce, service offerings and capabilities and expected synergies. The goodwill is not deductible for income tax purposes. See note 13 to the condensed consolidated financial statements for additional information.
(2)Includes adjustments based on management’s estimates resulting from review and finalizationacquisition of the valuation of assets and liabilities acquired through certain business combinations completed in a period subsequent to the respective acquisition. These adjustments and acquisitions were not individually, nor in the aggregate, significant to the Company.Riwisa AG.
The components of acquired intangible assets are as follows:
|
| As of December 31, 2013 |
| As of March 31, 2013 |
|
| As of June 27, 2014 |
| As of March 31, 2014 |
| ||||||||||||||||||||||||||||
|
| Gross |
|
|
| Net |
| Gross |
|
|
| Net |
|
| Gross |
|
|
| Net |
| Gross |
|
|
| Net |
| ||||||||||||
|
| Carrying |
| Accumulated |
| Carrying |
| Carrying |
| Accumulated |
| Carrying |
|
| Carrying |
| Accumulated |
| Carrying |
| Carrying |
| Accumulated |
| Carrying |
| ||||||||||||
|
| Amount |
| Amortization |
| Amount |
| Amount |
| Amortization |
| Amount |
|
| Amount |
| Amortization |
| Amount |
| Amount |
| Amortization |
| Amount |
| ||||||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||||||||
Intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Customer-related intangibles |
| $ | 200,920 |
| $ | (134,612 | ) | $ | 66,308 |
| $ | 294,310 |
| $ | (224,517 | ) | $ | 69,793 |
|
| $ | 204,249 |
| $ | (146,571 | ) | $ | 57,678 |
| $ | 204,369 |
| $ | (140,713 | ) | $ | 63,656 |
|
Licenses and other intangibles |
| 34,166 |
| (11,495 | ) | 22,671 |
| 21,040 |
| (9,286 | ) | 11,754 |
|
| 43,436 |
| (12,837 | ) | 30,599 |
| 32,564 |
| (11,760 | ) | 20,804 |
| ||||||||||||
Total |
| $ | 235,086 |
| $ | (146,107 | ) | $ | 88,979 |
| $ | 315,350 |
| $ | (233,803 | ) | $ | 81,547 |
|
| $ | 247,685 |
| $ | (159,408 | ) | $ | 88,277 |
| $ | 236,933 |
| $ | (152,473 | ) | $ | 84,460 |
|
The gross carrying amounts of intangible assets are removed when the recorded amounts have been fully amortized. During the three-month period ended December 31, 2013,June 27, 2014, the value of customer-related intangible assets and licenses and other intangible assetsintangibles increased by $12.9$10.0 million and $7.6 million, respectively, as a result of our acquisitionthe purchase of Riwisa AG. The purchase price allocation is preliminary and is subject to change as the Company continues to evaluate the value of assets and liabilities relating to this acquisition. Refer to note 13 to the condensed consolidated financial statements for further discussion of the Riwisa AG acquisition. During the nine-month period ended December 31, 2013, certain customer relationship intangibles were fully amortized, offset by the increase in intangible assets in connection with the aforementioned acquisition.technology rights. The estimated future annual amortization expense for intangible assets is as follows:
Fiscal Year Ending March 31, |
| Amount |
| |
|
| (In thousands) |
| |
2014 (1) |
| $ | 6,951 |
|
2015 |
| 25,968 |
| |
2016 |
| 20,969 |
| |
2017 |
| 13,661 |
| |
2018 |
| 8,605 |
| |
Thereafter |
| 12,825 |
| |
Total amortization expense |
| $ | 88,979 |
|
Fiscal Year Ending March 31, |
| Amount |
| |
|
| (In thousands) |
| |
2015 (1) |
| $ | 22,243 |
|
2016 |
| 24,845 |
| |
2017 |
| 17,420 |
| |
2018 |
| 9,708 |
| |
2019 |
| 4,798 |
| |
Thereafter |
| 9,263 |
| |
Total amortization expense |
| $ | 88,277 |
|
(1) Represents estimated amortization for the remaining three-monthnine-month period ending March 31, 2014.2015.
Other Current Assets / Liabilities
Other current assets include certain assets purchased on behalf of a customer and financed by a third party banking institution of $268.4 million and $267.5 million as of June 27, 2014 and March 31, 2014, respectively, with a corresponding liability recorded to other current liabilities includeof $286.5 million as of both dates.
Other current liabilities also includes customer working capital advances of $934.8$246.2 million and $214.1$754.7 million as of December 31, 2013June 27, 2014 and March 31, 2013,2014, respectively. These amountsThe customer working capital advances are not interest bearing, do not have fixed repayment dates and are generally reduced as the underlying working capital is consumed in production.
3. SHARE-BASED COMPENSATION
During the first quarter of fiscal 2015, the Company granted equity compensation awards under the 2010 Equity Incentive Plan (the “2010 Plan”). The following table summarizes the Company’s share-based compensation expense:
|
| Three-Month Periods Ended |
| Nine-Month Periods Ended |
|
| Three-Month Periods Ended |
| ||||||||||||
|
| December 31, 2013 |
| December 31, 2012 |
| December 31, 2013 |
| December 31, 2012 |
|
| June 27, 2014 |
| June 28, 2013 |
| ||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||
Cost of sales |
| $ | 1,800 |
| $ | 1,530 |
| $ | 5,018 |
| $ | 4,045 |
|
| $ | 1,611 |
| $ | 1,352 |
|
Selling, general and administrative expenses |
| 11,311 |
| 6,986 |
| 25,399 |
| 22,663 |
|
| 10,071 |
| 7,237 |
| ||||||
Total stock-based compensation expense |
| $ | 13,111 |
| $ | 8,516 |
| $ | 30,417 |
| $ | 26,708 |
|
| $ | 11,682 |
| $ | 8,589 |
|
No options were granted under the 2010 Plan during the first quarter of fiscal 2015. Total unrecognized compensation expense related to share options is $0.9$0.4 million, net of estimated forfeitures, and will be recognized over a weighted-average remaining vesting period of 1.20.9 years. As of December 31, 2013,June 27, 2014, the number of options outstanding and exercisable was 27.020.7 million and 26.720.6 million, respectively, at weighted-average exercise prices of $8.92$8.36 and $8.94$8.38 per share, respectively.
During the nine-monththree-month period ended December 31, 2013,June 27, 2014, the Company granted 8.73.1 million unvested share bonus awards at an average grant date price of $8.05$11.20 per share, under its 2010 Equity Incentive Plan. Of this amount, approximately 2.3Additionally, the Company granted share bonus awards to certain key employees of 0.9 million shares, which represents the target amount, of grants made to certain key employees whereby vesting is contingent primarily on certain market conditions. The number ofThese shares that ultimately will vest range from zero and up to a maximum of 200% based on a measurement of the change in the Company’s share price over a certain specified period against the change in both the Standard and Poor’s (“S&P”) 500 Composite Index and an Extended Electronics Manufacturing Services (“EMS”) Group Index over the same period, and will cliff vest after a period of three years, if such market conditions have been met. The number of shares issued can range from zero to 4.6 million. The average grant-date fair value1.8 million based on the achievement levels of these awards was estimated to be $9.34 per share and was calculated using a Monte Carlo simulation.the respective conditions.
As of December 31, 2013,June 27, 2014, approximately 22.718.6 million unvested share bonus awards were outstanding under the 2010 Plan, of which vesting for a targeted amount of 5.2 million is contingent primarily on meeting certain market conditions. The number of shares that will ultimately be issued can range from zero to 9.910.1 million based on the achievement levels of the respective conditions. During the three-month period ended June 27, 2014, 0.3 million shares vested in connection with the remaining number of share bonus awards with market conditions.conditions granted in fiscal 2011, and 0.4 million shares vested in connection with half of the share bonus awards with market conditions granted in fiscal 2012.
As of December 31, 2013,June 27, 2014, total unrecognized compensation expense related to unvested share bonus awards granted under the 2010 Plan is $96.9$92.9 million, net of estimated forfeitures, and will be recognized over a weighted-average remaining vesting period of 2.452.75 years.
Approximately $17.3$25.6 million of the total unrecognized compensation cost, net of estimated forfeitures, is related to awards whereby vesting is contingent on meeting certain market conditions.
4. EARNINGS PER SHARE
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 operationsearnings per share:
|
| Three-Month Periods Ended |
| Nine-Month Periods Ended |
| ||||||||
|
| December 31, 2013 |
| December 31, 2012 |
| December 31, 2013 |
| December 31, 2012 |
| ||||
|
| (In thousands, except per share amounts) |
| ||||||||||
Basic earnings from continuing and discontinued operations per share: |
|
|
|
|
|
|
|
|
| ||||
Income from continuing operations |
| $ | 145,157 |
| $ | 54,596 |
| $ | 322,619 |
| $ | 351,818 |
|
Loss from discontinued operations |
| — |
| (7,248 | ) | — |
| (25,451 | ) | ||||
Net income |
| $ | 145,157 |
| $ | 47,348 |
| $ | 322,619 |
| $ | 326,367 |
|
Shares used in computation: |
|
|
|
|
|
|
|
|
| ||||
Weighted-average ordinary shares outstanding |
| 606,724 |
| 658,925 |
| 614,539 |
| 666,852 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Basic earnings from continuing operations per share |
| $ | 0.24 |
| $ | 0.08 |
| $ | 0.52 |
| $ | 0.53 |
|
Basic loss from discontinued operations per share |
| $ | — |
| $ | (0.01 | ) | $ | — |
| $ | (0.04 | ) |
Basic earnings per share |
| $ | 0.24 |
| $ | 0.07 |
| $ | 0.52 |
| $ | 0.49 |
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted earnings from continuing and discontinued operations per share: |
|
|
|
|
|
|
|
|
| ||||
Income from continuing operations |
| $ | 145,157 |
| $ | 54,596 |
| $ | 322,619 |
| $ | 351,818 |
|
Loss from discontinued operations |
| — |
| (7,248 | ) | — |
| (25,451 | ) | ||||
Net income |
| $ | 145,157 |
| $ | 47,348 |
| $ | 322,619 |
| $ | 326,367 |
|
Shares used in computation: |
|
|
|
|
|
|
|
|
| ||||
Weighted-average ordinary shares outstanding |
| 606,724 |
| 658,925 |
| 614,539 |
| 666,852 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Weighted-average ordinary share equivalents from stock options and awards (1) (2) |
| 11,953 |
| 10,563 |
| 12,860 |
| 11,758 |
| ||||
Weighted-average ordinary shares and ordinary share equivalents outstanding |
| 618,677 |
| 669,488 |
| 627,399 |
| 678,610 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Diluted earnings from continuing operations per share |
| $ | 0.23 |
| $ | 0.08 |
| $ | 0.51 |
| $ | 0.52 |
|
Diluted loss from discontinued operations per share |
| $ | — |
| $ | (0.01 | ) | $ | — |
| $ | (0.04 | ) |
Diluted earnings per share |
| $ | 0.23 |
| $ | 0.07 |
| $ | 0.51 |
| $ | 0.48 |
|
|
| Three-Month Periods Ended |
| ||||
|
| June 27, 2014 |
| June 28, 2013 |
| ||
|
| (In thousands, except per share amounts) |
| ||||
Basic earnings per share: |
|
|
|
|
| ||
Net income |
| $ | 173,887 |
| $ | 59,257 |
|
Shares used in computation: |
|
|
|
|
| ||
Weighted-average ordinary shares outstanding |
| 587,233 |
| 626,120 |
| ||
Basic earnings per share |
| $ | 0.30 |
| $ | 0.09 |
|
|
|
|
|
|
| ||
Diluted earnings per share: |
|
|
|
|
| ||
Net income |
| $ | 173,887 |
| $ | 59,257 |
|
Shares used in computation: |
|
|
|
|
| ||
Weighted-average ordinary shares outstanding |
| 587,233 |
| 626,120 |
| ||
Weighted-average ordinary share equivalents from stock options and awards (1) |
| 14,067 |
| 13,779 |
| ||
Weighted-average ordinary shares and ordinary share equivalents outstanding |
| 601,300 |
| 639,899 |
| ||
Diluted earnings per share |
| $ | 0.29 |
| $ | 0.09 |
|
(1) Options to purchase 16.5ordinary shares of 12.6 million and 19.719.2 million ordinary shares during the three-month periods ended December 31,June 27, 2014 and June 28, 2013, and December 31, 2012, respectively, and 0.2share bonus awards of 0.4 million and 0.92.5 million share bonus awards during the three-month periods ended December 31,June 27, 2014 and June 28, 2013, and December 31, 2012, respectively, were excluded from the computation of diluted earnings per share due to their anti-dilutive impact on the weighted average ordinary share equivalents.
(2)Options to purchase 16.5 million and 21.0 million ordinary shares during the nine-month periods ended December 31, 2013 and December 31, 2012, respectively, and 0.1 million and 0.5 million share bonus awards during the nine-month periods ended December 31, 2013 and December 31, 2012, respectively, were excluded from the computation of diluted earnings per share due to their anti-dilutive impact on the weighted average ordinary share equivalents.
5. NON-CONTROLLING INTERESTSINTEREST AND OTHER, NET
On December 17,During the three-month periods ended June 27, 2014 and June 28, 2013, the Company recognized interest expense of $18.5 million and $20.2 million, respectively, on its debt obligations outstanding during the period. The weighted average interest rates for the Company’s long-term debt were 3.2% and 3.5% for the three-month periods ended June 27, 2014 and June 28, 2013, respectively.
During the three-month periods ended June 27, 2014 and June 28, 2013, the Company recognized interest income of $5.3 million and $3.3 million, respectively.
During the three-month periods ended June 27, 2014 and June 28, 2013, the Company recognized a previously wholly-owned subsidiaryforeign exchange loss of $1.4 million and a gain of $4.7 million, respectively.
6. OTHER CHARGES (INCOME), NET
During the fourth quarter of fiscal year 2014, the Company recognized $55.0 million of other charges for a contractual obligation to reimburse a customer for certain performance provisions as defined in the customer contract. During the first quarter of fiscal 2015, an amendment to this contract was executed which included the removal of the $55.0 million contractual obligation. Accordingly, the Company issuedreversed this charge with a non-controlling equity interestcorresponding credit to other income, included in other charges (income), net in the condensed consolidated statement of operations.
Further, during the three-month period ended June 27, 2014, the Company recognized a third party investorloss of $11.0 million in exchange for $33.8connection with the disposition of a certain manufacturing facility in western Europe. The Company received $11.5 million in cash for an ownership interest less than 20%the sale of $27.2 million in net assets of the outstandingfacility. The loss also includes $4.6 million of estimated transaction costs, partially offset by a credit of $9.3 million for the release of cumulative foreign translation gains triggered by the disposition.
During the three-month period ended June 28, 2013, the Company recognized a loss of $7.1 million relating to the exercise of a warrant to purchase shares in the subsidiary. The Company continues to ownof a majoritycertain supplier and sale of the subsidiary’s outstanding equity and also controls the subsidiary’s boardunderlying shares for total proceeds of directors. Accordingly, the condensed consolidated financial statements include the financial position and results of operations of this subsidiary as of December 31, 2013 and for the three-month and nine-month periods then ended.
The Company has recognized the carrying value of the non-controlling interest as a component of total shareholders’ equity. The operating results of the subsidiary attributable to the non-controlling interest are immaterial for all of the periods presented and are included in interest and other, net.
6. BANK BORROWINGS AND LONG-TERM DEBT
Bank borrowings and long-term debt are as follows:$67.3 million.
|
| As of |
| As of |
| ||
|
| December 31, 2013 |
| March 31, 2013 |
| ||
|
| (In thousands) |
| ||||
|
|
|
|
|
| ||
Term Loan, including current portion, due October 2014 |
| $ | — |
| $ | 170,340 |
|
Term Loan, including current portion, due in installments through October 2016 |
| 436,641 |
| 517,500 |
| ||
Term Loan, including current portion, due in installments through August 2018 |
| 600,000 |
| — |
| ||
4.625% Notes due February 2020 |
| 500,000 |
| 500,000 |
| ||
5.000% Notes due February 2023 |
| 500,000 |
| 500,000 |
| ||
Asia Term Loans |
| — |
| 375,000 |
| ||
Other |
| 19,004 |
| 4,787 |
| ||
|
| 2,055,645 |
| 2,067,627 |
| ||
Current portion |
| (54,951 | ) | (416,654 | ) | ||
Non-current portion |
| $ | 2,000,694 |
| $ | 1,650,973 |
|
The weighted average interest rates for the Company’s long-term debt were 3.2% and 3.5% as of December 31, 2013 and March 31, 2013, respectively.
On August 30, 2013, the Company entered into a $600 million term loan agreement due August 30, 2018 and used part of the proceeds to repay the outstanding balances of the term loan due October 2014 and the Asia Term Loans in full amounting to $170.3 million and $374.5 million, respectively. The remaining $55.2 million was used to repay part of the term loan due October 2016 and upfront bank fees.
Borrowings under the term loan due August 2018 bear interest, at the Company’s option, either at (i) LIBOR plus the applicable margin for LIBOR loans ranging between 1.00% and 2.00%, 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 0.00% and 1.00%, based on the Company’s credit rating.
The term loan due August 2018 is unsecured, and contains customary restrictions on the Company’s and its subsidiaries’ ability to (i) incur certain debt, (ii) make certain investments, (iii) make certain acquisitions of other entities, (iv) incur liens, (v) dispose of assets, (vi) make non-cash distributions to shareholders, and (vii) engage in transactions with affiliates. These covenants are subject to a number of exceptions and limitations. This term loan agreement also requires that the Company maintain a maximum ratio of total indebtedness to EBITDA (earnings before interest expense, taxes, depreciation and amortization), and a minimum interest coverage ratio, as defined therein, during its term. As of December 31, 2013, the Company was in compliance with the covenants under this term loan agreement.
Repayments of the Company’s long term debt outstanding as of December 31, 2013 are as follows:
Fiscal Year Ending March 31, |
| Amount |
| |
|
| (In thousands) |
| |
2014 (1) |
| $ | 23,190 |
|
2015 |
| 44,518 |
| |
2016 |
| 52,018 |
| |
2017 |
| 368,351 |
| |
2018 |
| 15,000 |
| |
Thereafter |
| 1,552,568 |
| |
Total |
| $ | 2,055,645 |
|
(1)Represents scheduled repayments for the remaining three-month period ending March 31, 2014.
7. INTEREST AND OTHER, NET
During the three-month and nine-month periods ended December 31, 2013, the Company recognized interest expense of $19.9 million and $60.4 million, respectively, on its debt obligations outstanding during the period. During the three-month and nine-month periods ended December 31, 2012, the Company recognized interest expense of $15.8 million and $47.1 million, respectively.
During the three-month and nine-month periods ended December 31, 2013, the Company recognized interest income of $4.7 million and $11.9 million, respectively. During the three-month and nine-month periods ended December 31, 2012, the Company recognized interest income of $3.7 million and $15.4 million, respectively.
During the three-month and nine-month periods ended December 31, 2013, the Company recognized gains on foreign exchange transactions of $3.3 million and $11.3 million, respectively. During the three-month and nine-month periods ended December 31, 2012, the Company recognized gains on foreign exchange transactions of $6.3 million and $13.9 million, respectively.
The Company had warrants to purchase common shares of a certain supplier, which were exercised and the underlying shares were sold for total proceeds of $67.3 million resulting in a loss of $7.1 million during the nine-month period ended December 31, 2013. The Company recognized a gain of $64.8 million relating to the change in fair value of these same warrants during the nine-month period ended December 31, 2012.
8. FINANCIAL INSTRUMENTS
Foreign Currency Contracts
The Company enters into forward contracts and foreign currency swap contracts to manage the foreign currency risk associated with monetary accounts and anticipated foreign currency denominated transactions. The Company hedges committed exposures and does not engage in speculative transactions. As of December 31, 2013,June 27, 2014, the aggregate notional amount of the Company’s outstanding foreign currency forward and swap contracts was $4.0$4.2 billion as summarized below:
|
| Foreign Currency Amount |
| Notional Contract Value in USD |
|
| Foreign Currency Amount |
| Notional Contract Value in USD |
| ||||||||||||
Currency |
| Buy |
| Sell |
| Buy |
| Sell |
|
| Buy |
| Sell |
| Buy |
| Sell |
| ||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||
Cash Flow Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
CNY |
| 3,301,000 |
| — |
| $ | 544,567 |
| $ | — |
|
| 3,302,000 |
| — |
| $ | 529,650 |
| $ | — |
|
EUR |
| 7,825 |
| 58,593 |
| 10,808 |
| 80,396 |
|
| 15,113 |
| 29,518 |
| 20,598 |
| 40,120 |
| ||||
HUF |
| 11,797,000 |
| — |
| 54,998 |
| — |
|
| 10,532,000 |
| — |
| 46,767 |
| — |
| ||||
ILS |
| 5,300 |
| — |
| 1,524 |
| — |
| |||||||||||||
PLN |
| 83,000 |
| — |
| 27,316 |
| — |
| |||||||||||||
MXN |
| 1,633,300 |
| — |
| 124,935 |
| — |
|
| 1,935,600 |
| — |
| 148,749 |
| — |
| ||||
MYR |
| 282,880 |
| — |
| 85,864 |
| — |
|
| 294,850 |
| — |
| 91,449 |
| — |
| ||||
SGD |
| 33,419 |
| — |
| 26,368 |
| — |
|
| 34,230 |
| — |
| 27,382 |
| — |
| ||||
Other |
| N/A |
| N/A |
| 47,924 |
| 400 |
|
| N/A |
| N/A |
| 31,373 |
| 450 |
| ||||
|
|
|
|
|
| 896,988 |
| 80,796 |
|
|
|
|
|
| 923,284 |
| 40,570 |
| ||||
Other Forward/Swap Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
BRL |
| 80,300 |
| 71,300 |
| 34,015 |
| 30,203 |
|
| — |
| 348,000 |
| — |
| 157,694 |
| ||||
CAD |
| 118,254 |
| 110,482 |
| 111,283 |
| 103,856 |
|
| 138,591 |
| 120,959 |
| 128,472 |
| 112,374 |
| ||||
CNY |
| 886,290 |
| — |
| 145,631 |
| — |
|
| 666,823 |
| — |
| 106,943 |
| — |
| ||||
EUR |
| 446,780 |
| 603,079 |
| 615,804 |
| 830,322 |
|
| 485,286 |
| 654,488 |
| 661,247 |
| 891,706 |
| ||||
GBP |
| 32,540 |
| 56,956 |
| 53,726 |
| 93,910 |
|
| 29,972 |
| 55,750 |
| 50,857 |
| 94,535 |
| ||||
HUF |
| 17,616,300 |
| 19,921,600 |
| 82,127 |
| 92,875 |
|
| 18,963,300 |
| 20,835,600 |
| 84,206 |
| 92,520 |
| ||||
JPY |
| 9,193,270 |
| 6,440,830 |
| 87,561 |
| 61,709 |
|
| 5,490,146 |
| 2,172,817 |
| 53,897 |
| 21,324 |
| ||||
MXN |
| 1,674,690 |
| 1,108,520 |
| 128,101 |
| 84,793 |
|
| 1,217,840 |
| 712,520 |
| 93,590 |
| 54,757 |
| ||||
MYR |
| 233,391 |
| 51,354 |
| 70,843 |
| 15,588 |
|
| 211,344 |
| 21,655 |
| 65,549 |
| 6,716 |
| ||||
SEK |
| 248,048 |
| 407,204 |
| 38,546 |
| 63,257 |
|
| 486,657 |
| 852,268 |
| 72,314 |
| 126,916 |
| ||||
SGD |
| 38,950 |
| 9,629 |
| 30,733 |
| 7,598 |
| |||||||||||||
Other |
| N/A |
| N/A |
| 154,559 |
| 111,177 |
|
| N/A |
| N/A |
| 176,694 |
| 140,468 |
| ||||
|
|
|
|
|
| 1,552,929 |
| 1,495,288 |
|
|
|
|
|
| 1,493,769 |
| 1,699,010 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Notional Contract Value in USD |
|
|
|
|
| $ | 2,449,917 |
| $ | 1,576,084 |
|
|
|
|
|
| $ | 2,417,053 |
| $ | 1,739,580 |
|
As of June 27, 2014, the fair value of the Company’s short-term foreign currency contracts was not material and is included in other current assets or other current liabilities, as applicable, in the condensed consolidated balance sheets. Certain of these contracts are designed to economically hedge the Company’s exposure to monetary assets and liabilities denominated in a non-functional currency and are not accounted for as hedges under the accounting standards. Accordingly, changes in the fair value of these instruments are recognized in earnings during the period of change as a component of interest and other, net
in the condensed consolidated statements of operations. Gains or losses from fair value adjustments for these instruments are designed to offset losses and gains from the Company’s revaluation of monetary assets and liabilities denominated in a non-functional currency. As of December 31, 2013June 27, 2014 and March 31, 2013,2014, the Company also has included net deferred gainslosses in accumulated other comprehensive loss, a component of shareholders’ equity in the condensed consolidated balance sheets, relating to the effective portion of changes in fair value of its foreign currency contracts that are accounted for as cash flow hedges. These deferred gainslosses were not material as of December 31, 2013,June 27, 2014, and are expected to be recognized primarily as a component of cost of sales in the condensed consolidated statements of operations primarily over the next twelve-month period. The gains and losses recognized in earnings due to hedge ineffectiveness were not material for all fiscal periods presented and are included as a component of interest and other, net in the condensed consolidated statements of operations.
The following table presents the fair value of the Company’s derivative instruments located on the condensed consolidated balance sheets utilized for foreign currency risk management purposes:
|
| Fair Values of Derivative Instruments |
|
| Fair Values of Derivative Instruments |
| ||||||||||||||||||||||||||||
|
| Asset Derivatives |
| Liability Derivatives |
|
| Asset Derivatives |
| Liability Derivatives |
| ||||||||||||||||||||||||
|
|
|
| Fair Value |
|
|
| Fair Value |
|
|
|
| Fair Value |
|
|
| Fair Value |
| ||||||||||||||||
|
| Balance Sheet |
| December 31, |
| March 31, |
| Balance Sheet |
| December 31, |
| March 31, |
|
| Balance Sheet |
| June 27, |
| March 31, |
| Balance Sheet |
| June 27, |
| March 31, |
| ||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Foreign currency contracts |
| Other current assets |
| $ | 9,396 |
| $ | 11,032 |
| Other current liabilities |
| $ | 2,718 |
| $ | 3,999 |
|
| Other current assets |
| $ | 6,007 |
| $ | 3,464 |
| Other current liabilities |
| $ | 6,763 |
| $ | 10,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Foreign currency contracts |
| Other current assets |
| $ | 8,591 |
| $ | 16,531 |
| Other current liabilities |
| $ | 14,159 |
| $ | 11,291 |
|
| Other current assets |
| $ | 3,574 |
| $ | 4,722 |
| Other current liabilities |
| $ | 4,077 |
| $ | 6,949 |
|
The Company has financial instruments subject to master netting arrangements, which provides for the net settlement of all contracts with a single counterparty. The Company does not offset fair value amounts for assets and liabilities recognized for derivative instruments under these arrangements, and as such, the asset and liability balances presented in the table above reflect the gross amounts of derivatives in the condensed consolidated balance sheets. The impact of netting derivative assets and liabilities is not material to the Company’s financial position for any of the periodsperiod presented.
9.8. ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in accumulated other comprehensive loss by component, net of tax, during the three-month and nine-month periods ended December 31, 2013 are as follows:
|
| Three-Month Period Ended |
| Nine-Month Period Ended |
|
| Three-Month Period Ended |
| Three-Month Period Ended |
| ||||||||||||||||||||||||||||
|
| December 31, 2013 |
| December 31, 2013 |
|
| June 27, 2014 |
| June 28, 2013 |
| ||||||||||||||||||||||||||||
|
| Unrealized gain (loss) on |
| Foreign currency |
| Total |
| Unrealized gain (loss) on |
| Foreign currency |
| Total |
|
| Unrealized gain (loss) on |
| Foreign currency |
| Total |
| Unrealized gain (loss) on |
| Foreign currency |
| Total |
| ||||||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||||||||
Beginning balance |
| $ | (19,438 | ) | $ | (88,121 | ) | $ | (107,559 | ) | $ | (18,857 | ) | $ | (58,624 | ) | $ | (77,481 | ) |
| $ | (32,849 | ) | $ | (93,307 | ) | $ | (126,156 | ) | $ | (18,857 | ) | $ | (58,624 | ) | $ | (77,481 | ) |
Other comprehensive gain (loss) before reclassifications |
| 471 |
| (13,960 | ) | (13,489 | ) | 163 |
| (43,457 | ) | (43,294 | ) |
| 1,000 |
| 5,107 |
| 6,107 |
| (6,245 | ) | (17,509 | ) | (23,754 | ) | ||||||||||||
Net losses reclassified from accumulated other comprehensive loss |
| 626 |
| — |
| 626 |
| 353 |
| — |
| 353 |
| |||||||||||||||||||||||||
Net (gains) losses reclassified from accumulated other comprehensive loss |
| 9,725 |
| (9,252 | ) | 473 |
| (3,889 | ) | — |
| (3,889 | ) | |||||||||||||||||||||||||
Net current-period other comprehensive gain (loss) |
| 1,097 |
| (13,960 | ) | (12,863 | ) | 516 |
| (43,457 | ) | (42,941 | ) |
| 10,725 |
| (4,145 | ) | 6,580 |
| (10,134 | ) | (17,509 | ) | (27,643 | ) | ||||||||||||
Ending balance |
| $ | (18,341 | ) | $ | (102,081 | ) | $ | (120,422 | ) | $ | (18,341 | ) | $ | (102,081 | ) | $ | (120,422 | ) |
| $ | (22,124 | ) | $ | (97,452 | ) | $ | (119,576 | ) | $ | (28,991 | ) | $ | (76,133 | ) | $ | (105,124 | ) |
Net losses reclassified from accumulated other comprehensive loss during the three-month period ended June 27, 2014 relating to derivative instruments and other includes $5.5 million attributable to the Company’s cash flow hedge instruments which were recognized as a component of cost of sales in the condensed consolidated statement of operations. During the three-month period ended June 27, 2014, the Company recognized a loss of $11.0 million in connection with the disposition of a certain manufacturing facility in western Europe. This loss includes the settlement of unrealized losses of $4.2 million on an insignificant defined benefit plan associated with the disposed facility offset by the release of certain cumulative foreign currency translation gains of $9.3 million, both of which have been reclassified from accumulated other comprehensive loss during the period. The loss on sale is included in other charges (income), net in the condensed consolidated statement of operations.
Substantially all unrealized losses relating to derivative instruments and other, reclassified from accumulated other comprehensive loss for the three-month and nine-month periodsperiod ended December 31,June 28, 2013, was recognized as a component of cost of sales in the condensed consolidated statement of operations, which primarily relate to the Company’s foreign currency contracts accounted for as cash flow hedges.
10.9. TRADE RECEIVABLES SECURITIZATION
The Company sells trade receivables under two asset-backed securitization programs and under 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 sell 100% of the receivables to unaffiliated financial institutions. These programs allow the operating subsidiaries to receive a cash payment and a deferred purchase price receivable for sold receivables. The Company maintains a continuing involvement inFollowing the transfer of the receivables sold as a resultto the special purpose entities, the transferred receivables are isolated from the Company and its affiliates, and upon the sale of the deferred purchase price.receivables from the special purpose entities to the unaffiliated financial institutions effective control of the transferred receivables is passed to the unaffiliated financial institutions, which has the right to pledge or sell the receivables. Although the special purpose entities are consolidated by the Company, they are separate corporate entities and their assets are available first to satisfy the claims of their creditors. The investment limits set by the financial institutions are $500.0 million for the Global Program, of which $400.0 million is committed and $100.0 million is uncommitted, and $300.0 million for the North American Program andProgram. Both programs require a minimum level of deferred purchase price receivable to be retained by the Company in connection with the sales.
The Company services, administers and collects the receivables on behalf of the special purpose entities and receives a servicing fee of 0.5% to 1.00% of serviced receivables per annum. Servicing fees recognized during the three-month and nine-month periods ended December 31,June 27, 2014 and June 28, 2013 and December 31, 2012 were not material and are included in interest and other, net within the condensed consolidated statements of operations. As the Company estimates the fee it receives in return for its obligation to service these receivables is at fair value, no servicing assets and liabilities are recognized.
As of December 31, 2013,June 27, 2014, approximately $1.2 billion of accounts receivable had been sold to the special purpose entities under the ABS Programs for which the Company had received net cash proceeds of $633.9$699.1 million and deferred purchase price receivables of approximately $528.8$463.1 million. As of March 31, 2013,2014, approximately $1.0$1.2 billion of accounts receivable had been sold to the special purpose entities for which the Company had received net cash proceeds of $556.9$729.3 million and deferred purchase price receivables of approximately $412.4$470.9 million. The portion of the purchase price for the receivables which is not paid by the unaffiliated financial institutions in cash is a deferred purchase price receivable, which is paid to the special purpose entity as payments on the receivables are collected from account debtors. The deferred purchase price receivable represents a beneficial interest in the transferred financial assets and is recognized at fair value as part of the sale transaction. The deferred purchase price receivables are included in other current assets as of December 31, 2013June 27, 2014 and March 31, 2013,2014, and were carried at the expected recovery amount of the related receivables. The difference between the carrying amount of the receivables sold under these programs and the sum of the cash and fair value of the deferred purchase price receivables received at time of transfer is recognized as a loss on sale of the related receivables and recorded in interest and other, net in the condensed consolidated statements of operations and were immaterial for all periods presented.
As of December 31, 2013June 27, 2014 and March 31, 2013,2014, the accounts receivable balances that were sold under the ABS Programs were removed from the condensed consolidated balance sheets and the net cash proceeds received by the Company were included as cash provided by operating activities in the condensed consolidated statements of cash flows.
For the nine-monththree-month periods ended December 31,June 27, 2014 and June 28, 2013, and December 31, 2012, cash flows from sales of receivables under the ABS Programs consisted of approximately $3.0$1.1 billion and $2.8$0.9 billion for transfers of receivables, respectively (of which approximately $0.3 billion$42.5 million and $0.5 billion,$141.2 million, respectively, represented new transfers and the remainder proceeds from collections reinvested in revolving-period transfers for both periods)transfers).
The following table summarizes the activity in the deferred purchase price receivables account:
|
| Three-Month Periods Ended |
| Nine-Month Periods Ended |
|
| Three-Month Periods Ended |
| ||||||||||||
|
| December 31, |
| December 31, |
| December 31, |
| December 31, |
|
| June 27, 2014 |
| June 28, 2013 |
| ||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||
Beginning balance |
| $ | 558,311 |
| $ | 458,085 |
| $ | 412,357 |
| $ | 514,895 |
|
| $ | 470,908 |
| $ | 412,357 |
|
Transfers of receivables |
| 1,066,512 |
| 953,620 |
| 2,933,053 |
| 2,669,102 |
|
| 778,860 |
| 882,918 |
| ||||||
Collections |
| (1,095,993 | ) | (949,691 | ) | (2,816,580 | ) | (2,721,983 | ) |
| (786,644 | ) | (874,388 | ) | ||||||
Ending balance |
| $ | 528,830 |
| $ | 462,014 |
| $ | 528,830 |
| $ | 462,014 |
|
| $ | 463,124 |
| $ | 420,887 |
|
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 $517.1$546.0 million and $163.6$341.8 million as of December 31, 2013June 27, 2014 and March 31, 2013,2014, respectively. For the nine-monththree-month periods ended December 31,June 27, 2014 and June 28, 2013, and December 31, 2012, total accounts receivable sold to certain third party banking institutions was approximately $2.7$1.2 billion and $820.7$268.7 million, respectively. The loss on sales of accounts receivables sold was not material for the three-month and nine-month periods ended December 31, 2013 and December 31, 2012 and is recorded in interest and other, net in the condensed consolidated statements of operations. The receivables that were sold were removed from the condensed consolidated balance sheets and were reflected as cash provided by operating activities in the condensed consolidated statements of cash flows.
11.10. 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 amountsAmounts deferred under the plans are invested in hypothetical investments selected by the participant or the participant’s investment manager. The Company’s deferred compensation plan assets are for the most part included in other noncurrent assets on the condensed consolidated balance sheets and primarily include investments in equity securities that are valued using active market prices.
Level 2 - Applies to assets or liabilities for which there are inputs other than quoted prices included within level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets) such as cash and cash equivalents and money market funds; or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
The Company values foreign exchange forward contracts using level 2 observable inputs which primarily consist of an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount.
The Company’s cash equivalents are comprised of bank deposits and money market funds, which are valued using level 2 inputs, such as interest rates and maturity periods. Due to their short-term nature, their carrying amount approximates fair value.
The Company’s deferred compensation plan assets also include money market funds, mutual funds, corporate and government bonds and certain convertible securities that are valued using prices obtained from various pricing sources. These sources price these investments using certain market indices and the performance of these investments in relation to these indices. As a result, the Company has classified these investments as level 2 in the fair value hierarchy.
Level 3 - Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company has accrued for certain contingent consideration in connection with its business acquisitions, which is measured at fair value based on certain internal models and inputs primarily consisting of revenue and certain operating results targets. Changes to these inputs will result in insignificant increases in the fair value of these contingent considerations, or reducing the fair value to zero.inputs. The following table summarizes the activities related to contingent consideration:
|
| Three-Month Periods Ended |
| Nine-Month Periods Ended |
|
| Three-Month Periods Ended |
| ||||||||||||
|
| December 31, |
| December 31, |
| December 31, |
| December 31, |
|
| June 27, 2014 |
| June 28, 2013 |
| ||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||
Beginning balance |
| $ | 16,000 |
| $ | 10,431 |
| $ | 25,000 |
| $ | 1,151 |
|
| $ | 11,300 |
| $ | 25,000 |
|
Additions to accrual |
| — |
| 15,000 |
| — |
| 25,000 |
| |||||||||||
Payments |
| — |
| (230 | ) | — |
| (625 | ) | |||||||||||
Fair value adjustments |
| (3,700 | ) | — |
| (12,700 | ) | (325 | ) |
| — |
| (6,000 | ) | ||||||
Ending balance |
| $ | 12,300 |
| $ | 25,201 |
| $ | 12,300 |
| $ | 25,201 |
|
| $ | 11,300 |
| $ | 19,000 |
|
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 duecreditor. 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. Any change in fair value andestimates, however the impact is insignificant. The interrelationship between these inputs is also insignificant. Refer to
note 109 to the condensed consolidated financial statements for a reconciliation of the change in the deferred purchase price receivable during the three-month and nine-month periods ended December 31, 2013 June 27, 2014 and December 31, 2012.June 28, 2013.
There were no transfers between levels in the fair value hierarchy during the three-month and nine-month periods ended December 31, 2013June 27, 2014 and December 31, 2012.June 28, 2013.
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:
|
| Fair Value Measurements as of December 31, 2013 |
| |||||||||||||||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
|
| Fair Value Measurements as of June 27, 2014 |
| ||||||||||||||
|
| (In thousands) |
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
| (In thousands) |
| ||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Money market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet) |
| $ | — |
| $ | 882,918 |
| $ | — |
| $ | 882,918 |
|
| $ | — |
| $ | 607,202 |
| $ | — |
| $ | 607,202 |
|
Deferred purchase price receivable (Note 10) |
| — |
| — |
| 528,830 |
| 528,830 |
| |||||||||||||||||
Foreign exchange forward contracts (Note 8) |
| — |
| 17,987 |
| — |
| 17,987 |
| |||||||||||||||||
Deferred purchase price receivable (Note 9) |
| — |
| — |
| 463,124 |
| 463,124 |
| |||||||||||||||||
Foreign exchange forward contracts (Note 7) |
| — |
| 9,581 |
| — |
| 9,581 |
| |||||||||||||||||
Deferred compensation plan assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Mutual funds, money market accounts and equity securities |
| 9,372 |
| 42,645 |
| — |
| 52,017 |
|
| 9,526 |
| 38,738 |
| — |
| 48,264 |
| ||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Foreign exchange forward contracts (Note 8) |
| $ | — |
| $ | (16,877 | ) | $ | — |
| $ | (16,877 | ) | |||||||||||||
Foreign exchange forward contracts (Note 7) |
| $ | — |
| $ | (10,840 | ) | $ | — |
| $ | (10,840 | ) | |||||||||||||
Contingent consideration in connection with business acquisitions |
| — |
| — |
| (12,300 | ) | (12,300 | ) |
| — |
| — |
| (11,300 | ) | (11,300 | ) |
|
| Fair Value Measurements as of March 31, 2013 |
| |||||||||||||||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
|
| Fair Value Measurements as of March 31, 2014 |
| ||||||||||||||
|
| (In thousands) |
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
| (In thousands) |
| ||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Money market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet) |
| $ | — |
| $ | 497,390 |
| $ | — |
| $ | 497,390 |
|
| $ | — |
| $ | 552,928 |
| $ | — |
| $ | 552,928 |
|
Deferred purchase price receivable (Note 10) |
| — |
| — |
| 412,357 |
| 412,357 |
| |||||||||||||||||
Foreign exchange forward contracts (Note 8) |
| — |
| 27,563 |
| — |
| 27,563 |
| |||||||||||||||||
Warrants to purchase common shares |
| — |
| — |
| 74,437 |
| 74,437 |
| |||||||||||||||||
Deferred purchase price receivable (Note 9) |
| — |
| — |
| 470,908 |
| 470,908 |
| |||||||||||||||||
Foreign exchange forward contracts (Note 7) |
| — |
| 8,186 |
| — |
| 8,186 |
| |||||||||||||||||
Deferred compensation plan assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Mutual funds, money market accounts and equity securities |
| 6,931 |
| 40,972 |
| — |
| 47,903 |
|
| 9,456 |
| 36,751 |
| — |
| 46,207 |
| ||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Foreign exchange forward contracts (Note 8) |
| $ | — |
| $ | (15,290 | ) | $ | — |
| $ | (15,290 | ) | |||||||||||||
Foreign exchange forward contracts (Note 7) |
| $ | — |
| $ | (17,406 | ) | $ | — |
| $ | (17,406 | ) | |||||||||||||
Contingent consideration in connection with business acquisitions |
| — |
| — |
| (25,000 | ) | (25,000 | ) |
| — |
| — |
| (11,300 | ) | (11,300 | ) |
Assets Measured at Fair Value on a Nonrecurring Basis
The Company has certain long-lived assets that are measured at fair value on a nonrecurring basis, and are as follows:
|
| Fair Value Measurements as of December 31, 2013 |
| ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| ||||
|
| (In thousands) |
| ||||||||||
|
|
|
|
|
|
|
|
|
| ||||
Assets: |
|
|
|
|
|
|
|
|
| ||||
Assets held for sale |
| $ | — |
| $ | 18,882 |
| $ | — |
| $ | 18,882 |
|
|
| Fair Value Measurements as of March 31, 2013 |
| ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| ||||
|
| (In thousands) |
| ||||||||||
|
|
|
|
|
|
|
|
|
| ||||
Assets: |
|
|
|
|
|
|
|
|
| ||||
Assets held for sale |
| $ | — |
| $ | 11,089 |
| $ | — |
| $ | 11,089 |
|
Property and equipment |
| — |
| 25,331 |
| — |
| 25,331 |
| ||||
Assets held for sale
Assets held for sale are recorded at the lesser of the carrying value or fair value, which is based on comparable sales from prevailing market data (level 2 inputs). DuringAs of June 27, 2014 and March 31, 2014, the nine-month period ended December 31, 2013, the Company recognized an
impairment charge of $4.3 million in fair value adjustments and sold $9.1 million of assets held for sale. The assetsthat were no longer in use and held for sale as of December 31, 2013totaled approximately $3.6 million and $43.5 million, respectively. These assets primarily represent manufacturing facilities that have been closed as part of the Company’s historical facility consolidations and that met the related manufacturing assets.
Property and equipment
Property and equipment includescriteria to be classified as held for sale. During the carrying valuethree-month period ended June 27, 2014, the Company sold $39.9 million of certain assets that were impaired during the fiscal year ended March 31, 2013 as a result of the Company’s restructuring activities as further discussed in note 12 to the condensed consolidated financial statements.held for sale.
There were no transfers between levels in the fair value hierarchy for these long-lived assets held-for-sale during the three-month and nine-month periods ended December 31, 2013June 27, 2014 and December 31, 2012.June 28, 2013.
Other financial instruments
The following table presents the Company’s debt not carried at fair value:
|
| As of December 31, 2013 |
| As of March 31, 2013 |
|
|
| ||||||||
|
| Carrying |
| Fair |
| Carrying |
| Fair |
| Fair Value |
| ||||
|
| Amount |
| Value |
| Amount |
| Value |
| Hierarchy |
| ||||
|
| (In thousands) |
|
|
| ||||||||||
Term Loan, including current portion, due October 2014 |
| $ | — |
| $ | — |
| $ | 170,340 |
| $ | 170,496 |
| Level 1 |
|
Term Loan, including current portion, due in installments through October 2016 |
| 436,641 |
| 435,824 |
| 517,500 |
| 518,794 |
| Level 1 |
| ||||
Term Loan, including current portion, due in installments through August 2018 |
| 600,000 |
| 591,000 |
| — |
| — |
| Level 1 |
| ||||
4.625% Notes due February 2020 |
| 500,000 |
| 502,350 |
| 500,000 |
| 507,190 |
| Level 1 |
| ||||
5.000% Notes due February 2023 |
| 500,000 |
| 472,250 |
| 500,000 |
| 500,000 |
| Level 1 |
| ||||
Asia Term Loans |
| — |
| — |
| 375,000 |
| 375,343 |
| Level 2 |
| ||||
Total |
| $ | 2,036,641 |
| $ | 2,001,424 |
| $ | 2,062,840 |
| $ | 2,071,823 |
|
|
|
|
| As of June 27, 2014 |
| As of March 31, 2014 |
|
|
| ||||||||
|
| Carrying |
| Fair |
| Carrying |
| Fair |
| Fair Value |
| ||||
|
| Amount |
| Value |
| Amount |
| Value |
| Hierarchy |
| ||||
|
| (In thousands) |
|
|
| ||||||||||
Term Loan, including current portion, due in installments through August 2018 |
| $ | 600,000 |
| $ | 592,500 |
| $ | 600,000 |
| $ | 591,750 |
| Level 1 |
|
Term Loan, including current portion, due in installments through March 2019 |
| 500,000 |
| 492,500 |
| 500,000 |
| 497,190 |
| Level 1 |
| ||||
4.625% Notes due February 2020 |
| 500,000 |
| 519,000 |
| 500,000 |
| 504,688 |
| Level 1 |
| ||||
5.000% Notes due February 2023 |
| 500,000 |
| 520,000 |
| 500,000 |
| 517,650 |
| Level 1 |
| ||||
Total |
| $ | 2,100,000 |
| $ | 2,124,000 |
| $ | 2,100,000 |
| $ | 2,111,278 |
|
|
|
The term loans and Notes due February 2020 and February 2023 are valued based on broker trading prices in active markets.
The Company’s Asia Term Loans were not traded publicly; however, as the pricing, maturity and other pertinent terms of these loans closely approximated those of the Term Loan Agreements dated October 1, 2007, and October 19, 2011, management estimated the respective trading prices would be approximately the same.
12.11. RESTRUCTURING CHARGES
The Company initiatedcompleted certain restructuring activities during fiscal year 2014 that were intended to improve its operational efficiencies by reducing excess workforce and capacity during fiscal year 2013. These restructuring activities extended throughand realign the first quarter of fiscal 2014. There were no restructuring charges incurred during the three-month period ended December 31, 2013.corporate cost structure. Restructuring charges are recorded based upon employee termination dates, site closure and consolidation plans.
During the nine-monththree-month period ended December 31,June 28, 2013, the Company recognized restructuring charges of approximately $40.8 million, of which $35.1 million were recorded as a component of cost of sales and $5.6 million were recorded as a component of selling, general and administrative expenses. Of the total restructuring charges, $32.2 million was associated with the terminations of 5,106 identified employees. The identified employee terminations by reportable geographic region amounted to approximately 3,947 in Asia, 1,105 and 54 for Asia,in the Americas and Europe, respectively.54 in Europe. The costs associated with these restructuring activities include employee severance, other personnel costs, non-cash impairment charges on equipment no longer in use and to be disposed of, and other exit related costs due to facility closures or rationalizations. Of the total restructuring charges, $1.9 million were non-cash charges related to the impairment of long-lived assets, and were classified as a component of cost of sales.
The components of the restructuring charges by geographic region incurred during the nine-monththree-month period ended December 31,June 28, 2013 were as follows:
|
| Americas |
| Asia |
| Europe |
| Total |
| ||||
|
| (In thousands) |
| ||||||||||
Severance |
| $ | 11,331 |
| $ | 16,205 |
| $ | 4,631 |
| $ | 32,167 |
|
Long-lived asset impairment |
| — |
| 1,900 |
| — |
| 1,900 |
| ||||
Other exit costs |
| 2,248 |
| 3,157 |
| 1,288 |
| 6,693 |
| ||||
Total restructuring charges |
| $ | 13,579 |
| $ | 21,262 |
| $ | 5,919 |
| $ | 40,760 |
|
The majority of severance costs were classified as a component of cost of sales.
During the nine-monththree-month period ended December 31,June 28, 2013, the Company recognized approximately $6.7 million of other exit costs, which was primarily comprised of $3.8 million related to personnel costs and $2.9 million of contractual obligations that resulted from facility closures. The majority of these costs were classified as a component of cost of sales.
The following table summarizesDuring the provisions, respective payments, and remaining accrued balance as of December 31, 2013three-month period ended June 27, 2014, the Company paid approximately $20.9 million for restructuring charges that were primarily incurred in fiscal year 2014 and prior periods:
|
|
|
| Long-Lived |
| Other |
|
|
| ||||
|
| Severance |
| Asset Impairment |
| Exit Costs |
| Total |
| ||||
|
| (In thousands) |
| ||||||||||
Balance as of March 31, 2013 |
| $ | 83,689 |
| $ | — |
| $ | 14,211 |
| $ | 97,900 |
|
Provision for charges incurred in first quarter of fiscal year 2014 |
| 32,167 |
| 1,900 |
| 6,693 |
| 40,760 |
| ||||
Cash payments for charges incurred in fiscal year 2014 and 2013 |
| (21,523 | ) | — |
| (2,872 | ) | (24,395 | ) | ||||
Cash payments for charges incurred in fiscal year 2010 and prior |
| (236 | ) | — |
| (1,164 | ) | (1,400 | ) | ||||
Non-cash charges incurred in first quarter of fiscal year 2014 |
| — |
| (1,900 | ) | — |
| (1,900 | ) | ||||
Balance as of June 28, 2013 |
| 94,097 |
| — |
| 16,868 |
| 110,965 |
| ||||
Cash payments for charges incurred in fiscal year 2014 and 2013 |
| (40,209 | ) | — |
| (4,717 | ) | (44,926 | ) | ||||
Cash payments for charges incurred in fiscal year 2010 and prior |
| (335 | ) | — |
| (277 | ) | (612 | ) | ||||
Balance as of September 27, 2013 |
| 53,553 |
| — |
| 11,874 |
| 65,427 |
| ||||
Cash payments for charges incurred in fiscal year 2014 and 2013 |
| (9,312 | ) | — |
| (3,178 | ) | (12,490 | ) | ||||
Cash payments for charges incurred in fiscal year 2010 and prior |
| (153 | ) | — |
| (194 | ) | (347 | ) | ||||
Balance as of December 31, 2013 |
| 44,088 |
| — |
| 8,502 |
| 52,590 |
| ||||
Less: current portion (classified as other current liabilities) |
| 40,265 |
| — |
| 5,563 |
| 45,828 |
| ||||
Accrued restructuring costs, net of current portion (classified as other liabilities) |
| $ | 3,823 |
| $ | — |
| $ | 2,939 |
| $ | 6,762 |
|
13. BUSINESS AND ASSET ACQUISITIONS
On April 16, 2013, the Company completed the acquisitionprior. Total restructuring charges accrued as of certain manufacturing operations from Google’s Motorola Mobility LLC. The Company also entered into a manufacturing and services agreement with Motorola Mobility LLC for mobile devices in conjunction with this acquisition. This acquisition expanded the Company’s relationship with Google’s Motorola Mobility and its capabilities in the mobile devices market. The results of operations were included in the Company’s condensed consolidated financial results beginning on the date of acquisition. RevenuesJune 27, 2014 were approximately 12.6%$27.3 million, of total revenue for the three-month period ended December 31, 2013 and 10.1% of total revenue for the nine-month period ended December 31, 2013. Income before tax of the acquired operations during the three-month and nine-month periods ended December 31, 2013which $3.5 million was not significant to the condensed consolidated financial results of the Company. Onclassified as a pro forma basis, the estimated increase to our previously reported revenue amounts to reflect the acquisition of this business as of the first day of the prior comparative period is $838.4 million and $2.7 billion for the three-month and nine-month periods ended December 31, 2012, respectively, and operating results for the same periods were immaterial.
The cash consideration for this acquisition amounted to $178.9 million. The allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed was based on their estimated fair values as of the date of acquisition. Management is in the process of determining the fair value amounts for certain assets acquired, including the value of identifiable intangible assets and certain liabilities assumed. The excess of the purchase price over the tangible and identifiable intangible assets acquired and liabilities assumed has been allocated to goodwill.
The following represents the Company’s preliminary allocation of the total purchase price to the acquired assets and liabilities assumed of Google’s Motorola Mobility LLC as of December 31, 2013. There were no changes in the fair value of assets acquired and liabilities assumed during the three-month period ended December 31, 2013.long-term obligation.
|
| Amount |
| |
|
| (In thousands) |
| |
Current assets: |
|
|
| |
Inventory |
| $ | 97,740 |
|
Other current assets |
| 237 |
| |
Total current assets |
| 97,977 |
| |
Property and equipment |
| 45,198 |
| |
Goodwill |
| 2,844 |
| |
Intangible assets — customer relationships |
| 2,948 |
| |
Other assets |
| 31,457 |
| |
Total assets |
| $ | 180,424 |
|
|
|
|
| |
Current liabilities: |
|
|
| |
Other current liabilities |
| $ | 1,519 |
|
Total liabilities |
| 1,519 |
| |
Total aggregate purchase price |
| $ | 178,905 |
|
On November 4, 2013 the Company acquired all of the outstanding shares of Riwisa AG, a company registered in Switzerland for total cash consideration of $44.0 million, net of cash acquired amounting to $9.4 million. This acquisition expanded the Company’s capabilities in the medical devices market, particularly precision plastics. The Company primarily acquired inventory, property and equipment and assumed certain liabilities relating to payables and debt. The results of operations were included in the Company’s condensed consolidated financial results beginning on the date of acquisition. Pro-forma results of operations for this acquisition have not been presented because the effects of the acquisition were not material to the Company’s financial results.
The allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed was based on their estimated fair values as of the date of acquisition. Management is in the process of determining the fair value amounts for certain assets acquired, including the value of identifiable intangible assets and certain liabilities assumed. The excess of the purchase price over the tangible and identifiable intangible assets acquired and liabilities assumed has been allocated to goodwill. The Company recorded $20.5 million as intangible assets and $18.7 million as goodwill based on a preliminary assessment of fair value of assets acquired and liabilities assumed.
Further, during the nine-month period ended December 31, 2013, the Company completed two other acquisitions for total cash consideration of $15.1 million. Neither of these acquisitions was significant to the Company’s consolidated financial position, results of operations and cash flows. These businesses expanded the Company’s capabilities primarily in manufacturing operations for plastic parts, components and molds. The Company acquired primarily property and equipment and inventory and recorded goodwill amounting to $4.9 million in connection with these acquisitions. The results of operations were included in the Company’s condensed consolidated financial results beginning on the date of these acquisitions. Pro-forma results of operations for these acquisitions have not been presented because the effects of the acquisitions were immaterial to the Company’s financial results. Additionally, transaction costs related to all acquisitions completed during the periods presented were immaterial to the Company’s financial results.
The Company continues to evaluate certain assets and liabilities related to business combinations completed during recent periods. Additional information, which existed as of the acquisition date, may become known to the Company during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date. Changes to amounts recorded as assets or liabilities, as a result of such additional information, may result in a corresponding adjustment to goodwill.
14.12. COMMITMENTS AND CONTINGENCIES
Litigation and other legal matters
On December 11, 2013, Xilinx, Inc. (plaintiff) filed a lawsuit in Santa Clara County, California, Superior Court against Flextronics International, Ltd.; Flextronics International USA, Inc.; and Flextronics Corporation (Case No. 113CV257431). The complaint asserts various claims, including fraud, negligent misrepresentation, breach of contract, and unfair competition, based on specific alleged incidents concerning our purchases and sales of Xilinx products. The plaintiff seeks an unspecified amount of compensatory, statutory, punitive, and other forms of damages, injunctive relief, and attorneys’ fees and costs. The plaintiff also seeks a jury trial. On June 25, 2014, we filed motions for Demurrer and to Strike asking the court to dismiss the claims against us. The Companycourt has scheduled a hearing on the motions for August 29, 2014. Although the outcome of this matter is investigating the allegations and is unable to estimate a range ofcurrently not determinable, management expects that any losses that are probable or reasonably possible losses inof being incurred as a result of this matter, at this time.which are in excess of amounts already accrued in the Company’s condensed consolidated balance sheets, would not be material to the financial statements.
TableDuring the first quarter of Contentsfiscal 2015, one of our non-operating Brazilian subsidiaries received an assessment of approximately $100 million related to income and social contribution taxes, interest and penalties. The Company believes there is no legal basis for the assessment and expects that any losses are remote. The Company plans to vigorously defend itself through the administrative and judicial processes.
In addition, from time to time, the Company is subject to legal proceedings, claims, and litigation arising in the ordinary course of business including tax assessments.business. The Company defends itself vigorously against any such claims. Although the outcome of these matters is currently not determinable, management expects that any losses that are probable or reasonably possible of being incurred as a result of these matters, which are in excess of amounts already accrued in itsthe Company’s condensed consolidated balance sheets would not be material to the financial statements as a whole.
15.13. SHARE REPURCHASES
During the three-month and nine-month periods ended December 31, 2013June 27, 2014 the Company repurchased 5.910.5 million shares at an aggregate purchase price of $44.4$102.1 million and 47.1 million shares at an aggregate purchase price of $357.1 million, respectively and retired all these shares.
On September 30, As of June 27, 2014, approximately 26.5 million shares were available to be repurchased under the current plan. Share repurchases by the Company under the repurchase plan, which was approved by the Company’s Board of Directors on July 24, 2013, are subject to an aggregate limit of 10% of the Singapore Companies Act was amended to increase the share repurchase limit for companies incorporated in Singapore, from 10% to 20% of theirCompany’s ordinary shares outstanding as of the date of the most recent shareholder approval date, subject to the requirements under the Singapore Companies Act.Extraordinary General Meeting held on July 29, 2013.
16. DISCONTINUED OPERATIONS
During fiscal year 2013, the Company finalized the sale of two non-core businesses. In accordance with the accounting guidance, these non-core businesses qualified as discontinued operations, and accordingly, the Company reported the results of operations of these businesses in discontinued operations within the condensed consolidated statements of operations for all periods presented as applicable.
The results from discontinued operations for the three-month and nine-month periods ended December 31, 2012 were as follows:
|
| Three-Month |
| Nine-Month |
| ||
|
| December 31, |
| December 31, |
| ||
|
| (In thousands) |
| ||||
Net sales |
| $ | 8,581 |
| $ | 40,593 |
|
Cost of sales |
| 8,487 |
| 42,793 |
| ||
Gross profit (loss) |
| 94 |
| (2,200 | ) | ||
Selling, general and administrative expenses |
| 3 |
| 1,930 |
| ||
Intangibles amortization |
| — |
| 11,000 |
| ||
Interest and other, net |
| 7,333 |
| 11,280 |
| ||
Loss before income taxes |
| (7,242 | ) | (26,410 | ) | ||
Provision for (benefit from) income taxes |
| 6 |
| (959 | ) | ||
Net loss of discontinued operations |
| $ | (7,248 | ) | $ | (25,451 | ) |
Interest and other, net include the loss on sale of the businesses amounting to $4.7 million. The Company did not have any discontinued operations during the nine-month period ended December 31, 2013.
All assets relating to the discontinued operations were sold as of March 31, 2013.
17.14. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Flextronics International Ltd. (“Parent”) has two tranches of Notes of $500 million each outstanding, which mature on February 15, 2020 and February 15, 2023, respectively. These notesNotes are senior unsecured obligations, and are guaranteed, fully and unconditionally, jointly and severally, on an unsecured basis, by certain of the Company’s 100% owned subsidiaries (the “guarantor subsidiaries”). These subsidiary guarantees will terminate upon 1) a sale or other disposition of the guarantor or the sale or disposition of all or substantially all the assets of the guarantor (other than to Flextronicsthe Parent or a subsidiary); 2) such guarantor ceasing to be a guarantor or a borrower under the Company’s Term Loan Agreement and the Revolving Line of Credit; 3) defeasance or discharge of the Notes, as provided in the Notes indenture; or 4) if at any time the notesNotes are rated investment grade.
In lieu of providing separate financial statements for the guarantor subsidiaries, the Company has included the accompanying condensed consolidating financial statements, which are presented using the equity method of accounting. The principal elimination entries relate to investment in subsidiaries and intercompany balances and transactions, including transactions with the Company’s non-guarantor subsidiaries.
Condensed Consolidating Balance Sheets as of December 31, 2013June 27, 2014
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
|
| (in thousands) |
| |||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
| |||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 604,128 |
| $ | 45,962 |
| $ | 967,155 |
| $ | — |
| $ | 1,617,245 |
|
Accounts receivable |
| — |
| 899,441 |
| 1,651,589 |
| — |
| 2,551,030 |
| |||||
Inventories |
| — |
| 1,628,470 |
| 2,343,657 |
| — |
| 3,972,127 |
| |||||
Inter company receivable |
| 4,927,410 |
| 4,989,090 |
| 8,757,994 |
| (18,674,494 | ) | — |
| |||||
Other current assets |
| 518 |
| 243,060 |
| 1,308,943 |
| — |
| 1,552,521 |
| |||||
Total current assets |
| 5,532,056 |
| 7,806,023 |
| 15,029,338 |
| (18,674,494 | ) | 9,692,923 |
| |||||
Property and equipment, net |
| — |
| 437,412 |
| 1,943,299 |
| — |
| 2,380,711 |
| |||||
Goodwill and other intangible assets, net |
| 850 |
| 40,144 |
| 340,837 |
| — |
| 381,831 |
| |||||
Other assets |
| 2,595,312 |
| 104,605 |
| 4,569,256 |
| (6,907,601 | ) | 361,572 |
| |||||
Investment in subsidiaries |
| 3,962,146 |
| (549,678 | ) | 17,305,339 |
| (20,717,807 | ) | — |
| |||||
Total assets |
| $ | 12,090,364 |
| $ | 7,838,506 |
| $ | 39,188,069 |
| $ | (46,299,902 | ) | $ | 12,817,037 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
| |||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Bank borrowings and current portion of long-term debt |
| $ | 40,768 |
| $ | 420 |
| $ | 13,763 |
| $ | — |
| $ | 54,951 |
|
Accounts payable |
| — |
| 1,221,335 |
| 3,747,305 |
| — |
| 4,968,640 |
| |||||
Accrued payroll |
| — |
| 91,227 |
| 294,413 |
| — |
| 385,640 |
| |||||
Inter company payable |
| 5,239,573 |
| 7,985,067 |
| 5,449,854 |
| (18,674,494 | ) | — |
| |||||
Other current liabilities |
| 44,065 |
| 633,231 |
| 1,977,965 |
| — |
| 2,655,261 |
| |||||
Total current liabilities |
| 5,324,406 |
| 9,931,280 |
| 11,483,300 |
| (18,674,494 | ) | 8,064,492 |
| |||||
Long term liabilities |
| 4,545,211 |
| 2,067,962 |
| 2,792,421 |
| (6,907,601 | ) | 2,497,993 |
| |||||
Flextronics International Ltd. shareholders’ equity |
| 2,220,747 |
| (4,160,736 | ) | 24,912,348 |
| (20,751,612 | ) | 2,220,747 |
| |||||
Noncontrolling interests |
| — |
| — |
| — |
| 33,805 |
| 33,805 |
| |||||
Total shareholders’ equity |
| 2,220,747 |
| (4,160,736 | ) | 24,912,348 |
| (20,717,807 | ) | 2,254,552 |
| |||||
Total liabilities and shareholders’ equity |
| $ | 12,090,364 |
| $ | 7,838,506 |
| $ | 39,188,069 |
| $ | (46,299,902 | ) | $ | 12,817,037 |
|
Condensed Consolidating Balance Sheets as of March 31, 2013
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| ||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Cash and cash equivalents |
| $ | 740,515 |
| $ | 82,900 |
| $ | 763,672 |
| $ | — |
| $ | 1,587,087 |
|
| $ | 265,273 |
| $ | 25,164 |
| $ | 1,057,253 |
| $ | — |
| $ | 1,347,690 |
|
Accounts receivable |
| — |
| 458,617 |
| 1,653,379 |
| — |
| 2,111,996 |
|
| — |
| 806,735 |
| 2,087,887 |
| — |
| 2,894,622 |
| ||||||||||
Inventories |
| — |
| 1,063,627 |
| 1,658,873 |
| — |
| 2,722,500 |
|
| — |
| 1,238,539 |
| 2,271,624 |
| — |
| 3,510,163 |
| ||||||||||
Inter company receivable |
| 4,440,955 |
| 4,726,673 |
| 6,490,274 |
| (15,657,902 | ) | — |
|
| 10,127,115 |
| 7,656,660 |
| 9,710,239 |
| (27,494,014 | ) | — |
| ||||||||||
Other current assets |
| 6,182 |
| 178,585 |
| 1,165,051 |
| — |
| 1,349,818 |
|
| 389 |
| 145,098 |
| 1,091,461 |
| — |
| 1,236,948 |
| ||||||||||
Total current assets |
| 5,187,652 |
| 6,510,402 |
| 11,731,249 |
| (15,657,902 | ) | 7,771,401 |
|
| 10,392,777 |
| 9,872,196 |
| 16,218,464 |
| (27,494,014 | ) | 8,989,423 |
| ||||||||||
Property and equipment, net |
| — |
| 328,621 |
| 1,845,967 |
| — |
| 2,174,588 |
|
| — |
| 438,870 |
| 1,815,794 |
| — |
| 2,254,664 |
| ||||||||||
Goodwill and other intangible assets, net |
| 1,075 |
| 40,626 |
| 301,851 |
| — |
| 343,552 |
|
| 700 |
| 38,451 |
| 350,218 |
| — |
| 389,369 |
| ||||||||||
Other assets |
| 2,498,080 |
| 105,136 |
| 4,902,815 |
| (7,204,017 | ) | 302,014 |
|
| 2,573,176 |
| 98,214 |
| 2,126,471 |
| (4,363,493 | ) | 434,368 |
| ||||||||||
Investment in subsidiaries |
| 4,127,384 |
| (954,619 | ) | 16,920,679 |
| (20,093,444 | ) | — |
|
| 1,013,070 |
| 858,751 |
| 16,602,017 |
| (18,473,838 | ) | — |
| ||||||||||
Total assets |
| $ | 11,814,191 |
| $ | 6,030,166 |
| $ | 35,702,561 |
| $ | (42,955,363 | ) | $ | 10,591,555 |
|
| $ | 13,979,723 |
| $ | 11,306,482 |
| $ | 37,112,964 |
| $ | (50,331,345 | ) | $ | 12,067,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Bank borrowings and current portion of long-term debt |
| $ | 416,594 |
| $ | 60 |
| $ | — |
| $ | — |
| $ | 416,654 |
|
| $ | 36,250 |
| $ | 45 |
| $ | 19,043 |
| $ | — |
| $ | 55,338 |
|
Accounts payable |
| — |
| 1,077,723 |
| 2,627,574 |
| — |
| 3,705,297 |
|
| — |
| 1,265,284 |
| 3,476,749 |
| — |
| 4,742,033 |
| ||||||||||
Accrued payroll |
| — |
| 86,073 |
| 265,610 |
| — |
| 351,683 |
|
| — |
| 95,635 |
| 281,498 |
| — |
| 377,133 |
| ||||||||||
Inter company payable |
| 4,963,615 |
| 6,093,606 |
| 4,600,681 |
| (15,657,902 | ) | — |
|
| 9,539,121 |
| 9,978,361 |
| 7,976,532 |
| (27,494,014 | ) | — |
| ||||||||||
Other current liabilities |
| 32,440 |
| 424,599 |
| 1,242,112 |
| — |
| 1,699,151 |
|
| 38,491 |
| 696,874 |
| 1,323,343 |
| — |
| 2,058,708 |
| ||||||||||
Total current liabilities |
| 5,412,649 |
| 7,682,061 |
| 8,735,977 |
| (15,657,902 | ) | 6,172,785 |
|
| 9,613,862 |
| 12,036,199 |
| 13,077,165 |
| (27,494,014 | ) | 7,233,212 |
| ||||||||||
Long term liabilities |
| 4,154,784 |
| 2,488,279 |
| 2,732,966 |
| (7,204,017 | ) | 2,172,012 |
|
| 2,103,601 |
| 2,007,345 |
| 2,786,291 |
| (4,363,493 | ) | 2,533,744 |
| ||||||||||
Shareholders’ equity |
| 2,246,758 |
| (4,140,174 | ) | 24,233,618 |
| (20,093,444 | ) | 2,246,758 |
| |||||||||||||||||||||
Flextronics International Ltd. shareholders’ equity |
| 2,262,260 |
| (2,737,062 | ) | 21,210,900 |
| (18,473,838 | ) | 2,262,260 |
| |||||||||||||||||||||
Noncontrolling interests |
| — |
| — |
| 38,608 |
| — |
| 38,608 |
| |||||||||||||||||||||
Total shareholders’ equity |
| 2,262,260 |
| (2,737,062 | ) | 21,249,508 |
| (18,473,838 | ) | 2,300,868 |
| |||||||||||||||||||||
Total liabilities and shareholders’ equity |
| $ | 11,814,191 |
| $ | 6,030,166 |
| $ | 35,702,561 |
| $ | (42,955,363 | ) | $ | 10,591,555 |
|
| $ | 13,979,723 |
| $ | 11,306,482 |
| $ | 37,112,964 |
| $ | (50,331,345 | ) | $ | 12,067,824 |
|
Condensed Consolidating StatementsBalance Sheets as of Operations for the Three-Month Period Ended DecemberMarch 31, 20132014
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
|
| (in thousands) |
| |||||||||||||
Net sales |
| $ | — |
| $ | 4,641,981 |
| $ | 7,054,467 |
| $ | (4,513,006 | ) | $ | 7,183,442 |
|
Cost of sales |
| — |
| 4,290,813 |
| 7,007,016 |
| (4,513,006 | ) | 6,784,823 |
| |||||
Gross profit |
| — |
| 351,168 |
| 47,451 |
| — |
| 398,619 |
| |||||
Selling, general and administrative expenses |
| — |
| 46,081 |
| 178,495 |
| — |
| 224,576 |
| |||||
Intangible amortization |
| 75 |
| 1,018 |
| 4,482 |
| — |
| 5,575 |
| |||||
Interest and other, net |
| (277,297 | ) | 353,089 |
| (61,049 | ) | — |
| 14,743 |
| |||||
Income (loss) from continuing operations before income taxes |
| 277,222 |
| (49,020 | ) | (74,477 | ) | — |
| 153,725 |
| |||||
Provision for income taxes |
| 26 |
| 1,834 |
| 6,708 |
| — |
| 8,568 |
| |||||
Equity in earnings in subsidiaries |
| (132,039 | ) | 20,020 |
| 49,314 |
| 62,705 |
| — |
| |||||
Net income (loss) |
| $ | 145,157 |
| $ | (30,834 | ) | $ | (31,871 | ) | $ | 62,705 |
| $ | 145,157 |
|
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
|
| (in thousands) |
| |||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
| |||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 638,714 |
| $ | 30,500 |
| $ | 924,514 |
| $ | — |
| $ | 1,593,728 |
|
Accounts receivable |
| — |
| 766,110 |
| 1,931,875 |
| — |
| 2,697,985 |
| |||||
Inventories |
| — |
| 1,387,510 |
| 2,211,498 |
| — |
| 3,599,008 |
| |||||
Inter company receivable |
| 8,867,520 |
| 6,968,138 |
| 9,149,244 |
| (24,984,902 | ) | — |
| |||||
Other current assets |
| 246 |
| 277,035 |
| 1,232,324 |
| — |
| 1,509,605 |
| |||||
Total current assets |
| 9,506,480 |
| 9,429,293 |
| 15,449,455 |
| (24,984,902 | ) | 9,400,326 |
| |||||
Property and equipment, net |
| — |
| 427,390 |
| 1,861,266 |
| — |
| 2,288,656 |
| |||||
Goodwill and other intangible assets, net |
| 775 |
| 39,074 |
| 337,369 |
| — |
| 377,218 |
| |||||
Other assets |
| 2,585,169 |
| 103,335 |
| 4,628,970 |
| (6,883,524 | ) | 433,950 |
| |||||
Investment in subsidiaries |
| 3,350,690 |
| 522,489 |
| 16,392,541 |
| (20,265,720 | ) | — |
| |||||
Total assets |
| $ | 15,443,114 |
| $ | 10,521,581 |
| $ | 38,669,601 |
| $ | (52,134,146 | ) | $ | 12,500,150 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
| |||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Bank borrowings and current portion of long-term debt |
| $ | 32,500 |
| $ | 60 |
| $ | 15 |
| $ | — |
| $ | 32,575 |
|
Accounts payable |
| — |
| 1,256,204 |
| 3,491,575 |
| — |
| 4,747,779 |
| |||||
Accrued payroll |
| — |
| 83,288 |
| 271,601 |
| — |
| 354,889 |
| |||||
Inter company payable |
| 8,607,486 |
| 9,422,179 |
| 6,955,237 |
| (24,984,902 | ) | — |
| |||||
Other current liabilities |
| 24,868 |
| 626,550 |
| 1,870,026 |
| — |
| 2,521,444 |
| |||||
Total current liabilities |
| 8,664,854 |
| 11,388,281 |
| 12,588,454 |
| (24,984,902 | ) | 7,656,687 |
| |||||
Long term liabilities |
| 4,615,210 |
| 2,050,460 |
| 2,859,638 |
| (6,883,524 | ) | 2,641,784 |
| |||||
Flextronics International Ltd. shareholders’ equity |
| 2,163,050 |
| (2,917,160 | ) | 23,182,880 |
| (20,265,720 | ) | 2,163,050 |
| |||||
Noncontrolling interest |
| — |
| — |
| 38,629 |
| — |
| 38,629 |
| |||||
Total shareholders’ equity |
| 2,163,050 |
| (2,917,160 | ) | 23,221,509 |
| (20,265,720 | ) | 2,201,679 |
| |||||
Total liabilities and shareholders’ equity |
| $ | 15,443,114 |
| $ | 10,521,581 |
| $ | 38,669,601 |
| $ | (52,134,146 | ) | $ | 12,500,150 |
|
Condensed Consolidating Statements of Operations for the Three-Month Period Ended December 31, 2012June 27, 2014
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| ||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||
Net sales |
| $ | — |
| $ | 3,687,858 |
| $ | 4,734,165 |
| $ | (2,298,702 | ) | $ | 6,123,321 |
|
| $ | — |
| $ | 3,915,326 |
| $ | 5,312,077 |
| $ | (2,584,658 | ) | $ | 6,642,745 |
|
Cost of sales |
| — |
| 3,369,715 |
| 4,707,531 |
| (2,298,702 | ) | 5,778,544 |
|
| — |
| 3,580,578 |
| 5,266,040 |
| (2,584,658 | ) | 6,261,960 |
| ||||||||||
Restructuring charges |
| — |
| 4,360 |
| 93,955 |
| — |
| 98,315 |
| |||||||||||||||||||||
Gross profit (loss) |
| — |
| 313,783 |
| (67,321 | ) | — |
| 246,462 |
| |||||||||||||||||||||
Gross profit |
| — |
| 334,748 |
| 46,037 |
| — |
| 380,785 |
| |||||||||||||||||||||
Selling, general and administrative expenses |
| — |
| 47,150 |
| 160,074 |
| — |
| 207,224 |
|
| — |
| 44,626 |
| 164,651 |
| — |
| 209,277 |
| ||||||||||
Intangible amortization |
| 75 |
| 1,859 |
| 4,203 |
| — |
| 6,137 |
|
| 75 |
| 623 |
| 6,253 |
| — |
| 6,951 |
| ||||||||||
Restructuring charges |
| — |
| 173 |
| 4,203 |
| — |
| 4,376 |
| |||||||||||||||||||||
Interest and other, net |
| (151,320 | ) | 335,509 |
| (201,278 | ) | — |
| (17,089 | ) |
| 16,531 |
| 259,748 |
| (301,651 | ) | — |
| (25,372 | ) | ||||||||||
Income (loss) from continuing operations before income taxes |
| 151,245 |
| (70,908 | ) | (34,523 | ) | — |
| 45,814 |
|
| (16,606 | ) | 29,751 |
| 176,784 |
| — |
| 189,929 |
| ||||||||||
Provision for (benefit from) income taxes |
| 833 |
| 2,446 |
| (12,061 | ) | — |
| (8,782 | ) | |||||||||||||||||||||
Provision for income taxes |
| — |
| 1,482 |
| 14,560 |
| — |
| 16,042 |
| |||||||||||||||||||||
Equity in earnings in subsidiaries |
| (103,064 | ) | (30,044 | ) | 48,389 |
| 84,719 |
| — |
|
| 190,493 |
| 67,301 |
| 33,179 |
| (290,973 | ) | — |
| ||||||||||
Income (loss) from continuing operations |
| 47,348 |
| (103,398 | ) | 25,927 |
| 84,719 |
| 54,596 |
| |||||||||||||||||||||
Loss from discontinued operations, net of tax |
| — |
| — |
| (7,248 | ) | — |
| (7,248 | ) | |||||||||||||||||||||
Net income (loss) |
| $ | 47,348 |
| $ | (103,398 | ) | $ | 18,679 |
| $ | 84,719 |
| $ | 47,348 |
|
| $ | 173,887 |
| $ | 95,570 |
| $ | 195,403 |
| $ | (290,973 | ) | $ | 173,887 |
|
Condensed Consolidating Statements of Operations for the Nine-MonthThree-Month Period Ended December 31,June 28, 2013
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| ||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||
Net sales |
| $ | — |
| $ | 12,154,405 |
| $ | 17,173,465 |
| $ | (9,943,197 | ) | $ | 19,384,673 |
|
| $ | — |
| $ | 3,484,434 |
| $ | 4,595,431 |
| $ | (2,288,740 | ) | $ | 5,791,125 |
|
Cost of sales |
| — |
| 11,109,343 |
| 17,105,324 |
| (9,943,197 | ) | 18,271,470 |
|
| — |
| 3,140,837 |
| 4,627,993 |
| (2,288,740 | ) | 5,480,090 |
| ||||||||||
Restructuring charges |
| — |
| 1,293 |
| 33,833 |
| — |
| 35,126 |
| |||||||||||||||||||||
Gross profit |
| — |
| 1,043,769 |
| 34,308 |
| — |
| 1,078,077 |
| |||||||||||||||||||||
Gross profit (loss) |
| — |
| 343,597 |
| (32,562 | ) | — |
| 311,035 |
| |||||||||||||||||||||
Selling, general and administrative expenses |
| — |
| 146,339 |
| 514,722 |
| — |
| 661,061 |
|
| 800 |
| 51,224 |
| 171,595 |
| — |
| 223,619 |
| ||||||||||
Intangible amortization |
| 225 |
| 3,055 |
| 18,215 |
| — |
| 21,495 |
|
| 75 |
| 1,081 |
| 7,046 |
| — |
| 8,202 |
| ||||||||||
Restructuring charges |
| 800 |
| 2,401 |
| 2,433 |
| — |
| 5,634 |
| |||||||||||||||||||||
Interest and other, net |
| (489,834 | ) | 904,039 |
| (366,177 | ) | — |
| 48,028 |
|
| (49,280 | ) | 267,202 |
| (198,238 | ) | — |
| 19,684 |
| ||||||||||
Income (loss) from continuing operations before income taxes |
| 488,809 |
| (12,065 | ) | (134,885 | ) | — |
| 341,859 |
|
| 48,405 |
| 24,090 |
| (12,965 | ) | — |
| 59,530 |
| ||||||||||
Provision for income taxes |
| 37 |
| 4,019 |
| 15,184 |
| — |
| 19,240 |
| |||||||||||||||||||||
Provision for (benefit from) income taxes |
| 10 |
| 1,251 |
| (988 | ) | — |
| 273 |
| |||||||||||||||||||||
Equity in earnings in subsidiaries |
| (166,153 | ) | (59,167 | ) | 90,540 |
| 134,780 |
| — |
|
| 10,862 |
| (11,551 | ) | 2,772 |
| (2,083 | ) | — |
| ||||||||||
Net income (loss) |
| $ | 322,619 |
| $ | (75,251 | ) | $ | (59,529 | ) | $ | 134,780 |
| $ | 322,619 |
|
| $ | 59,257 |
| $ | 11,288 |
| $ | (9,205 | ) | $ | (2,083 | ) | $ | 59,257 |
|
Condensed Consolidating Statements of OperationsComprehensive Income (Loss) for the Nine-MonthThree-Month Period Ended December 31, 2012June 27, 2014
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
|
| (in thousands) |
| |||||||||||||
Net sales |
| $ | — |
| $ | 11,407,584 |
| $ | 13,807,774 |
| $ | (6,941,201 | ) | $ | 18,274,157 |
|
Cost of sales |
| $ | — |
| $ | 10,316,417 |
| $ | 13,830,035 |
| $ | (6,941,201 | ) | 17,205,251 |
| |
Restructuring charges |
| — |
| 4,360 |
| 93,955 |
| — |
| 98,315 |
| |||||
Gross profit (loss) |
| — |
| 1,086,807 |
| (116,216 | ) | — |
| 970,591 |
| |||||
Selling, general and administrative expenses |
| — |
| 141,033 |
| 448,718 |
| — |
| 589,751 |
| |||||
Intangible amortization |
| 225 |
| 6,395 |
| 14,591 |
| — |
| 21,211 |
| |||||
Restructuring charges |
| — |
| 173 |
| 4,203 |
| — |
| 4,376 |
| |||||
Interest and other, net |
| (581,990 | ) | 666,887 |
| (101,651 | ) | — |
| (16,754 | ) | |||||
Income (loss) from continuing operations before income taxes |
| 581,765 |
| 272,319 |
| (482,077 | ) | — |
| 372,007 |
| |||||
Provision for income taxes |
| 833 |
| 4,894 |
| 14,462 |
| — |
| 20,189 |
| |||||
Equity in earnings in subsidiaries |
| (254,565 | ) | (160,692 | ) | 286,587 |
| 128,670 |
| — |
| |||||
Income (loss) from continuing operations |
| 326,367 |
| 106,733 |
| (209,952 | ) | 128,670 |
| 351,818 |
| |||||
Loss from discontinued operations, net of tax |
| — |
| — |
| (25,451 | ) | — |
| (25,451 | ) | |||||
Net income (loss) |
| $ | 326,367 |
| $ | 106,733 |
| $ | (235,403 | ) | $ | 128,670 |
| $ | 326,367 |
|
|
| Parent |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
| |||||
|
| (in thousands) |
| |||||||||||||
Net income (loss) |
| $ | 173,887 |
| $ | 95,570 |
| $ | 195,403 |
| $ | (290,973 | ) | $ | 173,887 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
| |||||
Foreign currency translation adjustments, net of zero tax |
| (4,145 | ) | (77,152 | ) | (271,529 | ) | 348,681 |
| (4,145 | ) | |||||
Unrealized gain (loss) on derivative instruments and other, net of zero tax |
| 10,725 |
| (21,989 | ) | (22,124 | ) | 44,113 |
| 10,725 |
| |||||
Comprehensive income (loss) |
| $ | 180,467 |
| $ | (3,571 | ) | $ | (98,250 | ) | $ | 101,821 |
| $ | 180,467 |
|
Condensed Consolidating Statements of Comprehensive Income (Loss) for the Three-Month Period Ended December 31,June 28, 2013
|
| Parent |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
| |||||
|
| (in thousands) |
| |||||||||||||
Net income (loss) |
| $ | 145,157 |
| $ | (30,834 | ) | $ | (31,871 | ) | $ | 62,705 |
| $ | 145,157 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
| |||||
Foreign currency translation adjustments, net of zero tax |
| (13,960 | ) | (3,369 | ) | (28,137 | ) | 31,506 |
| (13,960 | ) | |||||
Unrealized gain (loss) on derivative instruments and other, net of zero tax |
| 1,097 |
| (4 | ) | 1,097 |
| (1,093 | ) | 1,097 |
| |||||
Comprehensive income (loss) |
| $ | 132,294 |
| $ | (34,207 | ) | $ | (58,911 | ) | $ | 93,118 |
| $ | 132,294 |
|
Condensed Consolidating Statements of Comprehensive Income (Loss) for the Three-Month Period Ended December 31, 2012
|
| Parent |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
| |||||
|
| (in thousands) |
| |||||||||||||
Net income (loss) |
| $ | 47,348 |
| $ | (103,398 | ) | $ | 18,679 |
| $ | 84,719 |
| $ | 47,348 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
| |||||
Foreign currency translation adjustments, net of zero tax |
| (10,603 | ) | (6,075 | ) | (30,706 | ) | 36,781 |
| (10,603 | ) | |||||
Unrealized gain (loss) on derivative instruments and other, net of zero tax |
| (3,088 | ) | 1,822 |
| (3,088 | ) | 1,266 |
| (3,088 | ) | |||||
Comprehensive income (loss) |
| $ | 33,657 |
| $ | (107,651 | ) | $ | (15,115 | ) | $ | 122,766 |
| $ | 33,657 |
|
Condensed Consolidating Statements of Comprehensive Income (Loss) for the Nine-Month Period Ended December 31, 2013
|
| Parent |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
| |||||
|
| (in thousands) |
| |||||||||||||
Net income (loss) |
| $ | 322,619 |
| $ | (75,251 | ) | $ | (59,529 | ) | $ | 134,780 |
| $ | 322,619 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
| |||||
Foreign currency translation adjustments, net of zero tax |
| (43,457 | ) | (15,794 | ) | (94,550 | ) | 110,344 |
| (43,457 | ) | |||||
Unrealized gain (loss) on derivative instruments and other, net of zero tax |
| 516 |
| 3,944 |
| 515 |
| (4,459 | ) | 516 |
| |||||
Comprehensive income (loss) |
| $ | 279,678 |
| $ | (87,101 | ) | $ | (153,564 | ) | $ | 240,665 |
| $ | 279,678 |
|
Condensed Consolidating Statements of Comprehensive Income (Loss) for the Nine-Month Period Ended December 31, 2012
|
| Parent |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
|
| Parent |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
| ||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||
Net income (loss) |
| $ | 326,367 |
| $ | 106,733 |
| $ | (235,403 | ) | $ | 128,670 |
| $ | 326,367 |
|
| $ | 59,257 |
| $ | 11,288 |
| $ | (9,205 | ) | $ | (2,083 | ) | $ | 59,257 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Foreign currency translation adjustments, net of zero tax |
| (21,575 | ) | 1,271 |
| (23,143 | ) | 21,872 |
| (21,575 | ) |
| (17,509 | ) | (13,644 | ) | (27,281 | ) | 40,925 |
| (17,509 | ) | ||||||||||
Unrealized gain (loss) on derivative instruments and other, net of zero tax |
| 3,015 |
| (1,192 | ) | 3,015 |
| (1,823 | ) | 3,015 |
|
| (10,134 | ) | 2 |
| (10,135 | ) | 10,133 |
| (10,134 | ) | ||||||||||
Comprehensive income (loss) |
| $ | 307,807 |
| $ | 106,812 |
| $ | (255,531 | ) | $ | 148,719 |
| $ | 307,807 |
|
| $ | 31,614 |
| $ | (2,354 | ) | $ | (46,621 | ) | $ | 48,975 |
| $ | 31,614 |
|
Condensed Consolidating Statements of Cash Flows for the Nine-MonthThree-Month Period Ended December 31,June 27, 2014
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
|
| (In thousands) |
| |||||||||||||
Net cash provided by (used in) operating activities |
| $ | (13,025 | ) | $ | 248,848 |
| $ | (316,992 | ) | $ | — |
| (81,169 | ) | |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Purchases of property and equipment, net of proceeds from disposal |
| — |
| (35,401 | ) | (37,516 | ) | — |
| (72,917 | ) | |||||
Proceeds from divesture of business, net of cash held in divested business |
| — |
| — |
| (5,493 | ) | — |
| (5,493 | ) | |||||
Investing cash flows from (to) affiliates |
| (1,185,671 | ) | (538,017 | ) | 572,278 |
| 1,151,410 |
| — |
| |||||
Other investing activities, net |
| — |
| (959 | ) | (20,503 | ) | — |
| (21,462 | ) | |||||
Net cash provided by (used in) investing activities |
| (1,185,671 | ) | (574,377 | ) | 508,766 |
| 1,151,410 |
| (99,872 | ) | |||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Proceeds from bank borrowings and long-term debt |
| — |
| — |
| 26,615 |
| — |
| 26,615 |
| |||||
Repayments of bank borrowings, long-term debt and capital lease obligations |
| — |
| (393 | ) | (466 | ) | — |
| (859 | ) | |||||
Payments for repurchases of ordinary shares |
| (105,568 | ) | — |
| — |
| — |
| (105,568 | ) | |||||
Net proceeds from issuance of ordinary shares |
| 9,329 |
| — |
| — |
| — |
| 9,329 |
| |||||
Financing cash flows from (to) affiliates |
| 931,635 |
| 321,342 |
| (101,567 | ) | (1,151,410 | ) | — |
| |||||
Other financing activities, net |
| — |
| — |
| 300 |
| — |
| 300 |
| |||||
Net cash provided by (used in) financing activities |
| 835,396 |
| 320,949 |
| (75,118 | ) | (1,151,410 | ) | (70,183 | ) | |||||
Effect of exchange rates on cash and cash equivalents |
| (10,141 | ) | (756 | ) | 16,083 |
| — |
| 5,186 |
| |||||
Net increase (decrease) in cash and cash equivalents |
| (373,441 | ) | (5,336 | ) | 132,739 |
| — |
| (246,038 | ) | |||||
Cash and cash equivalents, beginning of period |
| 638,714 |
| 30,500 |
| 924,514 |
| — |
| 1,593,728 |
| |||||
Cash and cash equivalents, end of period |
| $ | 265,273 |
| $ | 25,164 |
| $ | 1,057,253 |
| $ | — |
| $ | 1,347,690 |
|
Condensed Consolidating Statements of Cash Flows for the Three-Month Period Ended June 28, 2013
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||||||||||||||||||
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
|
| (In thousands) |
| ||||||||||||||||||
|
| (In thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Net cash provided by (used in) operating activities |
| $ | 477,036 |
| $ | (944,464 | ) | $ | 1,585,742 |
| $ | (7 | ) | 1,118,307 |
|
| $ | 51,963 |
| $ | (568,028 | ) | $ | 713,609 |
| $ | 1,032 |
| $ | 198,576 |
| |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Purchases of property and equipment, net of proceeds from disposal |
| — |
| (168,525 | ) | (292,628 | ) | — |
| (461,153 | ) |
| — |
| (105,657 | ) | (35,165 | ) | (551 | ) | (141,373 | ) | ||||||||||
Acquisition of businesses, net of cash acquired |
| — |
| (2,949 | ) | (235,082 | ) | — |
| (238,031 | ) |
| — |
| (1,026 | ) | (186,517 | ) | — |
| (187,543 | ) | ||||||||||
Proceeds from divestiture of business, net of cash held in divested business |
| — |
| — |
| 4,599 |
| — |
| 4,599 |
| |||||||||||||||||||||
Investing cash flows from (to) affiliates |
| (306,254 | ) | (308,144 | ) | (3,506,916 | ) | 4,121,314 |
| — |
|
| (438,186 | ) | 354,871 |
| (589,921 | ) | 673,236 |
| — |
| ||||||||||
Other investing activities, net |
| — |
| (832 | ) | (11,235 | ) | — |
| (12,067 | ) |
| — |
| 890 |
| 29,289 |
| — |
| 30,179 |
| ||||||||||
Net cash provided by (used in) investing activities |
| (306,254 | ) | (480,450 | ) | (4,041,262 | ) | 4,121,314 |
| (706,652 | ) |
| (438,186 | ) | 249,078 |
| (782,314 | ) | 672,685 |
| (298,737 | ) | ||||||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Proceeds from bank borrowings and long-term debt |
| 1,003,000 |
| 277 |
| 17 |
| — |
| 1,003,294 |
|
| — |
| 133 |
| 25 |
| — |
| 158 |
| ||||||||||
Repayments of bank borrowings, long-term debt and capital lease obligations |
| (489,365 | ) | (1,068 | ) | (28,116 | ) | — |
| (518,549 | ) |
| (8,636 | ) | (414 | ) | (101 | ) | — |
| (9,151 | ) | ||||||||||
Payments for early retirement of long-term debt |
| (503,423 | ) | (41,417 | ) | — |
| — |
| (544,840 | ) | |||||||||||||||||||||
Payments for repurchases of ordinary shares |
| (362,693 | ) | — |
| — |
| — |
| (362,693 | ) |
| (215,210 | ) | — |
| — |
| — |
| (215,210 | ) | ||||||||||
Net proceeds from issuance of ordinary shares |
| 21,106 |
| — |
| — |
| — |
| 21,106 |
|
| 10,909 |
| — |
| — |
| — |
| 10,909 |
| ||||||||||
Financing cash flows from (to) affiliates |
| (29,135 | ) | 1,427,288 |
| 2,723,154 |
| (4,121,307 | ) | — |
|
| 371,446 |
| 311,306 |
| (9,035 | ) | (673,717 | ) | — |
| ||||||||||
Other financing activities, net |
| — |
| — |
| 46,298 |
| — |
| 46,298 |
|
| — |
| — |
| 15,652 |
| — |
| 15,652 |
| ||||||||||
Net cash provided by (used in) financing activities |
| (360,510 | ) | 1,385,080 |
| 2,741,353 |
| (4,121,307 | ) | (355,384 | ) |
| 158,509 |
| 311,025 |
| 6,541 |
| (673,717 | ) | (197,642 | ) | ||||||||||
Effect of exchange rates on cash and cash equivalents |
| 53,341 |
| 2,896 |
| (82,350 | ) | — |
| (26,113 | ) |
| 10,211 |
| 369 |
| (20,290 | ) | — |
| (9,710 | ) | ||||||||||
Net (decrease) increase in cash and cash equivalents |
| (136,387 | ) | (36,938 | ) | 203,483 |
| — |
| 30,158 |
| |||||||||||||||||||||
Net decrease in cash and cash equivalents |
| (217,503 | ) | (7,556 | ) | (82,454 | ) | — |
| (307,513 | ) | |||||||||||||||||||||
Cash and cash equivalents, beginning of period |
| 740,515 |
| 82,900 |
| 763,672 |
| — |
| 1,587,087 |
|
| 740,515 |
| 82,900 |
| 763,672 |
| — |
| 1,587,087 |
| ||||||||||
Cash and cash equivalents, end of period |
| $ | 604,128 |
| $ | 45,962 |
| $ | 967,155 |
| $ | — |
| $ | 1,617,245 |
|
| $ | 523,012 |
| $ | 75,344 |
| $ | 681,218 |
| $ | — |
| $ | 1,279,574 |
|
Condensed Consolidating Statements of Cash Flows for the Nine-Month Period Ended December 31, 2012
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
|
| (In thousands) |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net cash provided by (used in) operating activities |
| $ | 546,758 |
| $ | 186,359 |
| $ | 272,922 |
| $ | 18 |
| $ | 1,006,057 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Purchases of property and equipment, net of proceeds from disposal |
| — |
| (68,797 | ) | (259,079 | ) | (206 | ) | (328,082 | ) | |||||
Acquisition of businesses, net of cash acquired |
| — |
| — |
| (183,896 | ) | — |
| (183,896 | ) | |||||
Proceeds from divestiture of business, net of cash held in divested business |
| — |
| — |
| 22,585 |
| — |
| 22,585 |
| |||||
Investing cash flows from (to) affiliates |
| (244,256 | ) | (99,604 | ) | 1,113,580 |
| (769,720 | ) | — |
| |||||
Other investing activities, net |
| — |
| 6,413 |
| (100,046 | ) | — |
| (93,633 | ) | |||||
Net cash provided by (used in) investing activities |
| (244,256 | ) | (161,988 | ) | 593,144 |
| (769,926 | ) | (583,026 | ) | |||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Proceeds from bank borrowings and long-term debt |
| 160,001 |
| 151 |
| 11,521 |
| — |
| 171,673 |
| |||||
Repayments of bank borrowings, long-term debt and capital lease obligations |
| (278,632 | ) | (3,461 | ) | (8,137 | ) | — |
| (290,230 | ) | |||||
Payments for repurchases of ordinary shares |
| (208,208 | ) | — |
| — |
| — |
| (208,208 | ) | |||||
Net proceeds from issuance of ordinary shares |
| 14,632 |
| — |
| — |
| — |
| 14,632 |
| |||||
Financing cash flows from (to) affiliates |
| 122,739 |
| 82,403 |
| (975,050 | ) | 769,908 |
| — |
| |||||
Other financing activities, net |
| — |
| — |
| 85,590 |
| — |
| 85,590 |
| |||||
Net cash provided by (used in) financing activities |
| (189,468 | ) | 79,093 |
| (886,076 | ) | 769,908 |
| (226,543 | ) | |||||
Effect of exchange rates on cash and cash equivalents |
| (110 | ) | 2,164 |
| (10,758 | ) | — |
| (8,704 | ) | |||||
Net (decrease) increase in cash and cash equivalents |
| 112,924 |
| 105,628 |
| (30,768 | ) | — |
| 187,784 |
| |||||
Cash and cash equivalents, beginning of period |
| 649,252 |
| 47,865 |
| 821,212 |
| — |
| 1,518,329 |
| |||||
Cash and cash equivalents, end of period |
| $ | 762,176 |
| $ | 153,493 |
| $ | 790,444 |
| $ | — |
| $ | 1,706,113 |
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
This report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words “expects,” “anticipates,” “believes,” “intends,” “plans” and similar expressions identify forward-looking statements. In addition, any statements which refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this Form 10-Q with the Securities and Exchange Commission. These forward-looking statements are subject to risks and uncertainties, including, without limitation, those risks and uncertainties discussed in this section, as well as any risks and uncertainties discussed in Part II, Item 1A, “Risk Factors” of this report on Form 10-Q, and in Part I, Item 1A, “Risk Factors” and in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended March 31, 2013.2014. In addition, new risks emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. Accordingly, our future results may differ materially from historical results or from those discussed or implied by these forward-looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements.
OVERVIEW
We are a globally-recognized leading globalprovider of supply chain solutions provider, offering advancedthat span from concept through consumption. We design, manufacturingbuild, ship and logistics and after-sales services to OEMs ofservice a broad range of electronics productscomplete packaged electronic product for customersoriginal equipment manufacturers (“OEMs”) in the following markets:business groups: High Reliability Solutions (“HRS”), which is comprised of our medical, automotive, and defense and aerospace businesses; High Velocity SolutionsConsumer Technology Group (“HVS”CTG”), which includes our mobile devices business, including smart phones,phones; our consumer electronics business, including game consoles and wearable electronics,electronics; and our high-volume computing business, including various supply chain solutions for notebook personal computing (“PC”), tablets, and printers; Industrial and Emerging Industries (“IEI”), which is comprised of our household appliances, semi-cap equipment, kiosks, energy and our emerging industries businesses; and Integrated Network Solutions (“INS”), which includes our telecommunications infrastructure, data networking, connected home, and server and storage businesses.
Our strategy is to provide customers with a full range of cost competitive, vertically-integratedvertically integrated global supply chain solutions through which we can design, build, ship and service a complete packaged product for our OEM customers. This enables our OEM customers to leverage our supply chain solutions to meet their product requirements throughout the entire product life cycle.
During the recent years, we have seen an increased level of diversification by many companies, primarily in the technology sector. Some companies that have historically identified themselves as software providers, internet service providers or e-commerce retailers have started to enter the highly competitive and rapidly evolving hardware markets, such as mobile devices, home entertainment and wearable devices. This trend has resulted in a significant change in the manufacturing and supply chain solutions requirements of such companies. While the products have become more complex, the supply chain solutions required by such companies have become more customized and demanding, and it has changed the manufacturing and supply chain landscape significantly.
We use a portfolio management approach to manage our extensive service offerings. As our OEM customers change in the way they go to market, we reorganize and rebalance our business portfolio in order to align with our customers’ needs and requirements and to optimize our operating results. With the acquisition of certain manufacturing operations from Google’s Motorola Mobility LLC during the first quarter of fiscal 2014, we have experienced an increase in the percentage of our revenues from the HVSCTG business group, and expect the amount of revenue from our HVSCTG business group, relative to total revenue, to stabilize around concentrations in the range of 30% to 40% going forward. The objective of our operating model is to allow us to redeploy and reposition our assets and resources to meet specific customer needs across all of the markets we serve, and we have been able to successfully reposition our assets and capacity between the various business groups to serve our customers as required, which illustrates the overall flexibility of our model.
During fiscal years 2013 andyear 2014, we launched multiple programs broadly across our portfolio of services, and, in some instances, we deployed certain new technologies. We expect that these new programs will continue to increase in complexity in order to provide competitive advantages to our customers. We anticipate these programs will continue ramping with an increase in volume production during fiscal year 2015 and beyond. Until we achieve such higher levels of revenue, we expect that our gross margin and operating margin may be negatively impacted as profitability normally lags revenue growth due to incremental start-up costs, operational inefficiencies, under-absorbed overhead costs and lower manufacturing program volumes while in the ramp phase. We expect that our
margins for these programs will improve over time as the revenue increases due to increased volumes.
During the fourth quarter of fiscal 2014, we will reduce our workforcevolumes and take othercertain cost reduction activities. We expect to recognize approximately $30 million to $35 million in pre-tax cash charges comprised primarily of employee severance and benefit costs. We expect these cost reduction activities will yield potential annualized savings of approximately $60 million principally to selling, general and administrative expenses through reduced employee expenses and lower operating costs.
Table of Contentscontrol measures.
We are one of the world’s largest providers of global supply chain solutions, with revenues of $19.4$6.6 billion for the nine-monththree-month period ended December 31, 2013June 27, 2014 and $23.6$26.1 billion in fiscal year 2013. As2014. We have established an extensive network of December 31, 2013, our total manufacturing capacity was approximately 29.0 million square feet.facilities in the world’s major electronics markets (Asia, the Americas and Europe) in order to serve the growing outsourcing needs of both multinational and regional OEMs. We design, build, ship and service electronics products for our customers through a network of facilities in approximately 30 countries across four continents. As of June 27, 2014, our total manufacturing capacity was approximately 25.6 million square feet. The following tables set forth the relative percentages and dollar amounts of net sales and net property and equipment, by country, based on the location of our manufacturing sites:
|
| Three-Month Periods Ended |
| Nine-Month Periods Ended |
|
| Three-Month Periods Ended |
| ||||||||||||||||||||||||
Net sales: |
| December 31, 2013 |
| December 31, 2012 |
| December 31, 2013 |
| December 31, 2012 |
|
| June 27, 2014 |
| June 28, 2013 |
| ||||||||||||||||||
|
| (In thousands) |
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||
China |
| $ | 3,130,580 |
| 44 | % | $ | 2,281,133 |
| 37 | % | $ | 7,779,161 |
| 40 | % | $ | 6,320,074 |
| 35 | % |
| $ | 2,550,230 |
| 38 | % | $ | 2,135,041 |
| 37 | % |
Mexico |
| 914,283 |
| 13 | % | 854,847 |
| 15 | % | 2,691,508 |
| 14 | % | 2,664,847 |
| 15 | % |
| 849,598 |
| 13 | % | 877,473 |
| 15 | % | ||||||
U.S |
| 773,772 |
| 11 | % | 632,151 |
| 10 | % | 2,120,904 |
| 11 | % | 1,927,923 |
| 11 | % |
| 754,720 |
| 11 | % | 640,786 |
| 11 | % | ||||||
Brazil |
| 596,647 |
| 9 | % | 330,594 |
| 6 | % | |||||||||||||||||||||||
Malaysia |
| 542,877 |
| 8 | % | 575,522 |
| 9 | % | 1,640,567 |
| 8 | % | 1,919,945 |
| 11 | % |
| 541,113 |
| 8 | % | 535,620 |
| 9 | % | ||||||
Brazil |
| 460,736 |
| 6 | % | 291,861 |
| 5 | % | 1,180,285 |
| 6 | % | 820,519 |
| 4 | % | |||||||||||||||
Hungary |
| 240,469 |
| 4 | % | 248,301 |
| 4 | % | |||||||||||||||||||||||
Other |
| 1,361,194 |
| 18 | % | 1,487,807 |
| 24 | % | 3,972,248 |
| 21 | % | 4,620,849 |
| 24 | % |
| 1,109,968 |
| 17 | % | 1,023,310 |
| 18 | % | ||||||
|
| $ | 7,183,442 |
|
|
| $ | 6,123,321 |
|
|
| $ | 19,384,673 |
|
|
| $ | 18,274,157 |
|
|
|
| $ | 6,642,745 |
|
|
| $ | 5,791,125 |
|
|
|
|
| As of |
| As of |
|
| As of |
| As of |
| ||||||||||||
Property and equipment, net: |
| December 31, 2013 |
| March 31, 2013 |
|
| June 27, 2014 |
| March 31, 2014 |
| ||||||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||
China |
| $ | 1,024,211 |
| 43 | % | $ | 855,032 |
| 39 | % |
| $ | 895,657 |
| 40 | % | $ | 941,850 |
| 41 | % |
U.S |
| 375,567 |
| 16 | % | 245,590 |
| 11 | % |
| 362,608 |
| 16 | % | 362,199 |
| 16 | % | ||||
Mexico |
| 288,069 |
| 12 | % | 286,026 |
| 13 | % |
| 286,789 |
| 13 | % | 326,287 |
| 14 | % | ||||
Malaysia |
| 145,908 |
| 6 | % | 152,594 |
| 7 | % |
| 154,497 |
| 7 | % | 153,194 |
| 7 | % | ||||
Hungary |
| 107,372 |
| 4 | % | 113,173 |
| 5 | % |
| 101,269 |
| 4 | % | 103,266 |
| 5 | % | ||||
Brazil |
| 89,702 |
| 4 | % | 88,867 |
| 4 | % | |||||||||||||
Other |
| 439,584 |
| 19 | % | 522,173 |
| 25 | % |
| 364,142 |
| 16 | % | 312,993 |
| 13 | % | ||||
|
| $ | 2,380,711 |
|
|
| $ | 2,174,588 |
|
|
|
| $ | 2,254,664 |
|
|
| $ | 2,288,656 |
|
|
|
We believe that the combination of our extensive open innovation platform solutions, design and engineering services, advanced supply chain management solutions and services, significant scale and global presence, end-to-end services, advanced supply chain management, and industrial campuses in low-cost geographic areas provide us with a competitive advantage and strong differentiation in the market for designing, manufacturing and servicing electronics products for leading multinational and regional OEMs. Specifically, we have launched multiple product innovation centers (PICs)(“PIC”) focused exclusively on offering our OEM customers the ability to simplify their global product development, manufacturing process, and after sales services, and enable them to achieve meaningfulmeaningfully accelerate their time to market and cost savings.
Our operating results are affected by a number of factors, including the following:
· changes in the macro-economic environment and related changes in consumer demand;
· the mix of the manufacturing services we are providing, the number and size of new manufacturing programs, the degree to which we utilize our manufacturing capacity, seasonal demand, shortages of components and other factors;
· the effects on our business when our customers are not successful in marketing their products, or when their products do not gain widespread commercial acceptance;
· our ability to achieve commercially viable production yields and to manufacture components in commercial quantities to the performance specifications demanded by our OEM customers;
· the effects on our business due to our customers’ products having short product life cycles;
· our customers’ ability to cancel or delay orders or change production quantities;
· our customers’ decision to choose internal manufacturing instead of outsourcing for their product requirements;
· our exposure to financially troubled customers;
· integration of acquired businesses and facilities;
· increased labor costs due to adverse labor conditions in the markets we operate; and
· changes in tax legislation.
Our business has been subject to seasonality primarily due to our HVS business group, which includes our mobile and consumer devices businesses which historically exhibit particular strength during our second and third fiscal quarters in connection with the holiday season.
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. GAAPGAAP” 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.
Refer to the accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013,2014, where we discuss our more significant judgments and estimates used in the preparation of the condensed consolidated financial statements.
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 condensed consolidated financial statements and notes thereto included in this document. In addition, reference should be made to our audited consolidated financial statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 20132014 Annual Report on Form 10-K.
|
| Three-Month Periods Ended |
| Nine-Month Periods Ended |
|
| Three-Month Periods Ended |
| ||||||
|
| December 31, |
| December 31, |
| December 31, |
| December 31, |
|
| June 27, |
| June 28, 2013 |
|
Net sales |
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
| 100.0 | % | 100.0 | % |
Cost of sales |
| 94.5 |
| 94.4 |
| 94.3 |
| 94.2 |
|
| 94.3 |
| 94.6 |
|
Restructuring charges |
| — |
| 1.6 |
| 0.2 |
| 0.5 |
| |||||
Gross profit |
| 5.5 |
| 4.0 |
| 5.5 |
| 5.3 |
|
| 5.7 |
| 5.4 |
|
Selling, general and administrative expenses |
| 3.1 |
| 3.4 |
| 3.4 |
| 3.2 |
|
| 3.2 |
| 3.9 |
|
Intangible amortization |
| 0.1 |
| 0.1 |
| 0.1 |
| 0.1 |
|
| 0.1 |
| 0.1 |
|
Restructuring charges |
| — |
| 0.1 |
| — |
| — |
| |||||
Interest and other, net |
| 0.2 |
| (0.3 | ) | 0.2 |
| (0.1 | ) |
| 0.3 |
| 0.2 |
|
Income from continuing operations before income taxes |
| 2.1 |
| 0.7 |
| 1.8 |
| 2.1 |
| |||||
Provision for (benefit from) income taxes |
| 0.1 |
| (0.1 | ) | 0.1 |
| 0.1 |
| |||||
Income from continuing operations |
| 2.0 |
| 0.8 |
| 1.7 |
| 2.0 |
| |||||
Loss from discontinued operations, net of tax |
| — |
| (0.1 | ) | — |
| (0.1 | ) | |||||
Other charges (income), net |
| (0.7 | ) | 0.1 |
| |||||||||
Income before income taxes |
| 2.8 |
| 1.1 |
| |||||||||
Provision for income taxes |
| 0.2 |
| — |
| |||||||||
Net income |
| 2.0 | % | 0.7 | % | 1.7 | % | 1.9 | % |
| 2.6 | % | 1.1 | % |
Net sales
The following table sets forth our net sales by business group.group and their relative percentages. Historical information has been recast to reflect realignment of customers and/or products between business groups to ensure comparability:
|
| Three-Month Periods Ended |
| Nine-Month Periods Ended |
|
| Three-Month Periods Ended |
| ||||||||||||||||||||||||||
Business groups: |
| December 31, 2013 |
| December 31, 2012 |
| December 31, 2013 |
| December 31, 2012 |
|
| June 27, 2014 |
| June 28, 2013 |
| ||||||||||||||||||||
|
| (In thousands) |
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||
High Velocity Solutions |
| $ | 2,829,520 |
| 39 | % | $ | 1,801,653 |
| 29 | % | $ | 6,473,499 |
| 33 | % | $ | 5,184,291 |
| 28 | % | |||||||||||||
Integrated Network Solutions |
| 2,597,727 |
| 36 | % | 2,694,248 |
| 44 | % | 7,717,400 |
| 40 | % | 8,182,881 |
| 45 | % |
| $ | 2,502,495 |
| 38 | % | $ | 2,532,146 |
| 44 | % | ||||||
Consumer Technology Group |
| 2,160,134 |
| 33 | % | 1,546,483 |
| 27 | % | |||||||||||||||||||||||||
Industrial & Emerging Industries |
| 933,020 |
| 13 | % | 913,262 |
| 15 | % | 2,779,226 |
| 14 | % | 2,865,769 |
| 16 | % |
| 1,134,179 |
| 17 | % | 906,227 |
| 16 | % | ||||||||
High Reliability Solutions |
| 823,175 |
| 12 | % | 714,158 |
| 12 | % | 2,414,548 |
| 13 | % | 2,041,216 |
| 11 | % |
| 845,937 |
| 12 | % | 806,269 |
| 13 | % | ||||||||
|
| $ | 7,183,442 |
|
|
| $ | 6,123,321 |
|
|
| $ | 19,384,673 |
|
|
| $ | 18,274,157 |
|
|
|
| $ | 6,642,745 |
|
|
| $ | 5,791,125 |
|
|
|
Net sales during the three-month period ended June 27, 2014 totaled $6.6 billion. Sales increased by approximately $0.8 billion, or 14.7%, from $5.8 billion during the three-month period ended June 28, 2013. Revenue increased across all of our business groups,
Net sales during the three-monthexcept for INS, which experienced a marginal decrease year over year. Revenue from our CTG and nine-month periods ended December 31, 2013 totaled $7.2IEI business groups increased by $0.6 billion and $19.4$0.2 billion, respectively. Sales increased by approximately $1.1 billion, or 17.3% and 6.1%, from $6.1 billion and $18.3 billion during the three-month and nine-month periods ended December 31, 2012, respectively. The increase during the three-month period ended December 31, 2013 is primarily due to higher revenue from our HVS business group amounting to $1.0 billion. The increase during the nine-month period ended December 31, 2013 is due to higher revenue from our HVS and HRS business groups amounting to $1.3 billion and $0.4 billion, respectively, partially offset by lower revenue from our INS business group amounting to $0.5 billion. The increased revenue from our HVSCTG business group is primarily as a result of our acquisition of certain manufacturing operations from Google’s Motorola Mobility LLC (Motorola) during the first quarter of fiscal 2014 which were partially offset by revenue reductions dueand the business ramping up during the mid to our disengagement from a certain smart phone OEM duringlatter part of fiscal 2013 that contributed revenues amounting to $114.5 million and $818.3 million for the three-month and nine-month periods ended December 31, 2012, respectively.2014. The increase in revenue from our HRSIEI business group is primarily attributable to our acquisition of Saturn Electronics and Engineering Inc. during the fourth quarter of fiscal 2013. The decrease in revenue from our INS business group during the nine-month period ended December 31, 2013 is primarily attributable to broad softnessan increase broadly across product categories, most notably in our telecomsemiconductor capital equipment and connected homeour household appliances businesses versus the prior year.year period. For the three-month and nine-month periodsperiod ended December 31, 2013,June 27, 2014, net sales increased $0.8 billion and $1.1$0.4 billion in Asia, $0.4 billion and $0.6$0.3 billion in the Americas offset by decreases ofand $0.1 billion and $0.5 billion in Europe, respectively.Europe.
Our ten largest customers during the three-month period ended June 27, 2014 and nine-month periods ended December 31,June 28, 2013 accounted for approximately 54.2%53% and 51.6%49% of net sales, respectively. Google (including Motorola) accounted for more than 10% of net sales during the three-month and nine-month periodsperiod ended December 31, 2013. Our ten largest customers during the three-month and nine-month periods ended December 31, 2012 accounted for approximately 48.6% and 48.1% of net sales, respectively.June 27, 2014. No single customer accounted for greater than 10% of our net sales during the three-month and nine-month periodsperiod ended December 31, 2012.June 28, 2013.
Gross profit
Gross profit is affected by a number of factors, including the number and size of new manufacturing programs, product mix, component costs and availability, product life cycles, unit volumes, pricing, competition, new product introductions, capacity utilization and the expansion and consolidation of manufacturing facilities. The flexible design of our manufacturing processes allows us to build a broad range of products in our facilities and better utilize our manufacturing capacity. WhenIn the cases of new programs, are launched, profitability normally lags revenue growth due to product start-up costs, lower manufacturing program volumes in the start-up phase, operational inefficiencies, and under-absorbed overhead. Gross margin for these programs often improves over time as manufacturing volumes increase, as our utilization rates and overhead absorption improve, and as we increase the level of manufacturing services content. As a result of these various factors, our gross margin varies from period to period.
Gross profit during the three-month period ended December 31, 2013June 27, 2014 increased $152.2$69.8 million to $398.6$380.8 million, or 5.5%5.7% of net sales from $246.5$311.0 million, or 4.0%5.4% of net sales, during the three-month period ended December 31, 2012. Gross profit during the nine-month period ended December 31, 2013 increased $107.5 million to $1.1 billion, or 5.5% of net sales from $970.6 million, or 5.3% of net sales, during the nine-month period ended December 31, 2012.June 28, 2013. Gross margins improved 15030 basis points in the three-month period ended December 31, 2013June 28, 2014 compared to that of the three-month period ended December 31, 2012June 28, 2013 primarily due to theas a result of restructuring charges amounting to $98.3of $35.1 million or 1.6%0.6% of net sales, included inas a component of cost of sales, in the third quarter of fiscal year 2013 and the realization of the associated reduced operating costs from the restructuring activities during the current period. Gross margins improved 20 basis points in the nine-month period ended December 31, 2013 compared to that of the nine-month period ended December 31, 2012 primarily due to the restructuring charges amounting to $35.1 million, or 0.2% of net sales, included in cost of sales in the first quarter of fiscal year 2014 compared to $98.3 million or 0.5% of net sales included in the nine-month period ended December 31, 2012, and the realization of the associated reduced operating costs from the restructuring activities during the current period.
Restructuring charges
In response to a challenging macroeconomic environment, we initiated certain restructuring activities during fiscal 2013 intended to improve our operational efficiencies by reducing excess workforce and capacity. The restructuring activities were targeted at rationalizing our global manufacturing capacity and infrastructure and will continue to result in a further shift of manufacturing capacity to locations with higher efficiencies. During the three-month period ended June 28, 2013, we recognized $40.8 million of pre-tax restructuring charges, of which $1.9 million were non-cash charges related to asset impairment charges. There were no restructuring charges incurred since2013. Gross profit for the first quarter of fiscal 2014. The restructuring charges by geographic region amounted to approximately $21.3 million in Asia, $13.6 million2015 reflects an increase in the Americas and $5.9 million in Europe. We expect these restructuring activities will allow for potential savings through reduced employee expenses andrelative percentage of revenue from our CTG business group, which generally yields lower operating costs. As of December 31, 2013, accrued costs related to restructuring charges incurred but not paid were approximately $52.6 million, of which $45.8 million was classified as a current obligation.
Refer to note 12 to the condensed consolidated financial statements for further discussion ofmargins than our restructuring activities.other business groups.
Selling, general and administrative expenses
Selling, general and administrative expenses (“SG&A”) amounted to $224.6$209.3 million, or 3.1%3.2% of net sales, during the three-month period ended December 31, 2013, increasing $17.4June 27, 2014, decreasing $14.3 million from $207.2$223.6 million, or 3.4%3.9% of net sales, during the three-month period ended December 31, 2012. SG&A was $661.1 million, or 3.4% of net sales, during the nine-month period ended December 31, 2013, increasing $71.3 million from $589.8 million, or 3.2% of net sales, during the nine-month period ended December 31, 2012.June 28, 2013. Our SG&A expenses increasedin dollar and percentage of revenue terms decreased in the current year period primarily as a result of acquisitions, investmentscertain cost reduction and rationalization measures that we undertook in our supply chain solutions, enhancementthe prior fiscal year.
Intangible amortization
Amortization of our selling and business development activities and incremental corporate infrastructure to support the increasing complexities of our business. SG&A expenses as a percentage of net salesintangible assets decreased by $1.3 million during the three-month period ended December 31, 2013 comparedJune 27, 2014 to $6.9 million from $8.2 million for the three-month period ended December 31, 2012June 28, 2013 primarily due to the combinationuse of higher quarterly revenues and the fixed natureaccelerated method of some of our SG&A expenses that are not directly driven by revenue generating activities.amortization for certain customer-related intangibles, which results in decreasing expense over time. Certain high value intangible assets were fully amortized during fiscal 2014, resulting in lower amortization expense during the three-month period ended June 27, 2014.
Interest and other, net
Interest and other, net was $14.7$18.6 million of expense during the three-month period ended December 31, 2013June 27, 2014 compared to $17.1$12.6 million of income during the three-month period ended December 31, 2012.June 28, 2013. The increase in interest and other, net expense of $31.8$6.0 million was primarily as a resultdue to losses in the current period on the revaluation of a gainthe renminbi (“RMB”) denominated net asset positions of $41.8our U.S. dollar functional currency sites based in China due to the strengthening of the U.S. dollar against the RMB.
Refer to note 5 to the condensed consolidated financial statements for further discussion of our interest and other, net activities.
Other charges (income), net
Other charges (income), net was $44.0 million recognizedof other income, net during the three-month period ended December 31, 2012June 27, 2014 principally as a result of the reversal of a contractual obligation with a certain customer recognized during the fourth quarter of fiscal 2014 in the amount of $55.0 million. We executed an amendment to the customer contract during the current fiscal quarter which removed the
commitment. This was partially offset by an $11.0 million loss in connection with the fair value adjustment of warrants to purchase common sharesdisposition of a supplier, which was partially offset by impairment charges on investments and a loss from the sale of an investment recognized duringcertain manufacturing facility in western Europe.
During the three-month period ended December 31, 2012.
Interest and other, net was $48.0June 28, 2013, we recognized a loss of $7.1 million of expense during the nine-month period ended December 31, 2013 compared to $16.8 million of income during the nine-month period ended December 31, 2012. The increase of $64.8 million was due to the gain recognized during the nine-month period ended December 31, 2012 relating to the fair value adjustmentexercise of warrants described above.a warrant to purchase shares of a certain supplier and sale of the underlying shares for total proceeds of $67.3 million.
Income taxes
Certain of our subsidiaries have, at various times, been granted tax relief in their respective countries, resulting in lower income taxes than would otherwise be the case under ordinary tax rates. Refer to note 11,13, “Income Taxes,” of the notes to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 20132014 for further discussion.
Our policy is to provide a valuation allowance against deferred tax assets that in our estimation are not more likely than not to be realized. During the three-month period ended December 31, 2013, we released $14.1 million of such valuation allowance related to deferred tax assets in our Brazilian operations as this amount was deemed to be more likely than not to be realized.
The consolidated effective tax rate remained relatively consistent at 5.6%was 8.4% and 5.4%0.5% for nine-monththree-month periods ended December 31,June 27, 2014 and June 28, 2013, and December 31, 2012, respectively, and varies from the Singapore statutory rate of 17.0% as a result of the amountrecognition of earnings fromin different jurisdictions, operating loss carryforwards, income tax credits, changes in previously established valuation allowances for deferred tax assets, based upon our current analysis of the realizability of these deferred tax assets, changes in liabilities for uncertain tax positions, as well as the effect of certain tax holidays and incentives granted to our subsidiaries primarily in China, Malaysia Israel, and Singapore.Israel. We generate most of our revenues and profits from operations outside of Singapore. We currently do not anticipate a significant impact to our fiscal year 20142015 effective rate as a result of changes to the mix in revenues and operating profits between taxing jurisdictions. The effective tax rate for the three-month period ended June 27, 2014 is higher than the effective tax rate for the three-month period ended June 28, 2013 since the current quarter includes $55.0 million of other income from the reversal of the contractual obligation discussed above with no associated tax expense, and the three-month period ended June 28, 2013 included a net decrease of $8.6 million in liabilities for uncertain tax positions.
The Mexican government enacted significant tax reform legislation during the third quarter of fiscal 2014, which resulted in a net $4.3 million discrete tax expense for the period. The Company does not anticipate this tax reform to have a material impact to the ongoing effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2013,June 27, 2014, we had cash and cash equivalents of approximately $1.6$1.3 billion and bank and other borrowings of approximately $2.1 billion. We also have a $1.5 billion revolving credit facility that expires in October 2016March 2019, under which there were no borrowings outstanding as of the end of the quarter. As of December 31, 2013,June 27, 2014, we were in compliance with the covenants under each of our existing credit facilities and indenture.indentures.
Cash provided byused in operating activities was $1.1 billion$81.2 million during the nine-monththree-month period ended December 31, 2013.June 27, 2014. This resulted primarily from $322.6$173.9 million of net income for the period adjusted to exclude approximately $345.0plus $121.5 million of net non-cash
expenses for charges such as depreciation, amortization, and other impairment charges, and $450.6offset by $376.6 million from changes in our operating assets and liabilities. Netliabilities, which was predominantly related to reductions in customer deposits that were received in prior periods to support increased working capital (“NWC”), defined as net accounts receivable plus inventory less accounts payable increased by $260.9 million primarily to support the increaserequirements in our customers’ forecasted business levels. The cash outflows to support NWC were offset by approximately $700.0 million of cash received from certain customers as advances during the period. In certain instances the level of inventory reduction or consumption was lower than expected causing an increase to inventory. In response, we worked with these customers to fund the elevated inventory balances we held on their behalf. We have recorded these advances as other current liabilities in the condensed consolidated balance sheet as of December 31, 2013 and expect these amounts to decrease as we produce or sell the associated inventory in the future. This will have a neutral impact on cash flows.those periods.
For the quarterly periods indicated, certain key liquidity metrics were as follows:
|
| Three-Month Periods Ended |
| ||||||||
|
| June 27, | March 31, 2014 | December |
| September |
| June 28, |
| ||
|
| ||||||||||
Days in trade accounts receivable | 45 days | 42 days |
| 38 days |
| 42 days |
| 43 days |
| ||
| 52 days |
|
| ||||||||
|
| 53 days |
| 53 days |
| 49 days |
| ||||
| 69 days |
|
| ||||||||
|
| 68 days |
| 71 days |
| 67 days |
| ||||
| 28 days |
|
| ||||||||
|
| 23 days |
| 24 days |
| 25 |
|
|
|
Days in trade accounts receivable was calculated as average accounts receivable for the current and prior quarters, adding back the reduction in accounts receivable resulting from non-cash accounts receivable sales, divided by annualized sales for the current quarter by day. During the three-month period ended December 31, 2013,June 27, 2014, days in trade accounts receivable decreasedincreased by 42 days to 3845 days compared to the three-month periods ended September 27,June 28, 2013 and December 31, 2012 largely due to the increase in salestiming of our accounts receivable balances combined with increase in sales in our HVS business group that generally carry shorter payment terms thaninvoicing customers during the Company average.current period. Non-cash accounts receivable sales or deferred purchase price receivables which are added back to accounts receivable inincluded for the purposes of the calculation of days in trade receivables were $463.1 million, $470.9 million, $528.8 million, $558.3 million $420.9 million, $412.4 million, and $462.0$420.9 million for the quarters ended June 27, 2014, March 31, 2014, December 31, 2013, September 27, 2013 and June 28, 2013, March 31, 2013, and December 31, 2012, respectively. Deferred purchase price receivables are recorded in other
current assets in the condensed consolidated balance sheets. For further information regarding deferred purchase price receivables see note 109 to the condensed consolidated financial statements.
Days in inventory was calculated as the average inventory for the current and prior quarters divided by annualized cost of sales for the respective quarter by day. Days in inventory remained consistent at 53increased by 3 days to 52 days during the three-month period December 31, 2013 and SeptemberJune 27, 2013, and increased by 6 days to 53 days,2014, compared to the three-month period ended December 31, 2012.June 28, 2013. The increase was primarily as a result of the positioning of raw material inventory to support the production ramp ofincreased operations driven from several programs launched in the currentlatter part of last fiscal year and also due to increased levels of inventory that we held as of December 31, 2013 on behalf of certain customers, as discussed in the operating cash flow section above.year.
Days in accounts payable was calculated as the average accounts payable for the current and prior quarters divided by annualized cost of sales for the respective quarter by day. During the three-month period ended December 31, 2013,June 27, 2014, days in accounts payable decreasedincreased by 32 days to 6869 days compared to the three-month period ended September 27,June 28, 2013 primarily due to timing of payments and the increase in cost of sales associated with our current quarter. During the three-month period ended December 31, 2013, days in accounts payable increased by 3 days to 68 days compared to the three-month period ended December 31, 2012 primarily due to timing of payments and the increase in inventory purchases as explained above.
Our cash conversion cycle was calculated as the sum of days of inventory and days of accounts receivables outstanding less days payable outstanding in accounts payable.outstanding. During the three-month period ended December 31, 2013,June 27, 2014, our cash conversion cycle decreasedincreased by 1 day3 days to 2328 days compared to the three-month period ended December 31, 2012,June 28, 2013, due to the factors for each of the components in the calculation discussed above.
Cash used by investing activities amounted to $706.7$99.9 million during the nine-monththree-month period ended December 31, 2013.June 27, 2014. This resulted primarily from $461.2$72.9 million in net capital expenditures for property and equipment to support certain programs and the paymentpurchase of $238.0 million towards the acquisition of four businesses completed during the nine-month period ended December 31, 2013.rights to use certain injection molding technologies amounting to $10.0 million.
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 byfrom operations less net purchases of property and equipment,equipment. Our free cash flows for the three-month period ended June 27, 2014 was
Table a utilization of Contents
$657.2$154.1 million compared to positive free cash flows of $57.2 million for the nine-monththree-month period ended December 31, 2013 compared to $678.0 million for the nine-month period ended December 31, 2012.June 28, 2013. Free cash flow is not a measure of liquidity under generally accepted accounting principles in the United States,U.S. GAAP, and may not be defined and calculated by other companies in the same manner. Free cash flow should not be considered in isolation or as an alternative to net cash provided by operating activities. Free cash flows reconcile to the most directly comparable GAAP financial measure of cash flows from operations as follows:
|
| Nine-Month Periods Ended |
|
| Three-Month Periods Ended |
| ||||||||
|
| December 31, |
| December 31, |
|
| June 27, 2014 |
| June 28, 2013 |
| ||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||
Net cash provided by operating activities |
| $ | 1,118,307 |
| $ | 1,006,057 |
| |||||||
Net cash provided by (used in) operating activities |
| $ | (81,169 | ) | $ | 198,576 |
| |||||||
Purchases of property and equipment |
| (526,026 | ) | (377,901 | ) |
| (87,101 | ) | (144,737 | ) | ||||
Proceeds from the disposition of property and equipment |
| 64,873 |
| 49,819 |
|
| 14,184 |
| 3,364 |
| ||||
Free cash flow |
| $ | 657,154 |
| $ | 677,975 |
|
| $ | (154,086 | ) | $ | 57,203 |
|
Cash used in financing activities was $355.4$70.2 million during the nine-monththree-month period ended December 31, 2013,June 27, 2014, which was primarily the result of cash paid of $362.7 million related tofor the repurchase of our ordinary shares and net repaymentsin the amount of debt of $60.1$105.6 million partially offset by net proceeds from bank borrowings of $25.8 million and proceeds from the issuance of Companyour shares for optionsoption exercises amounting to $21.1 million and cash inflows from other financing activities amounting to $46.3$9.3 million. Included in other financing activities is an amount of $33.8 million received from a third party for the non-controlling interest in one of our subsidiaries as further discussed in note 5 to the condensed consolidated financial statements. During the nine-month period ended December 31, 2013, we entered in to a new Term Loan agreement under which we borrowed $600.0 million and used the entire proceeds to repay our Asia term loans, our term loan due in October 2014 and part of the term loan due in October 2016.
Our cash balances are held in numerous locations throughout the world. 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. Local government regulations may restrict our ability to move cash balances to meet cash needs under certain circumstances; however, any current restrictions are not material. We do not currently expect such regulations and restrictions to impact our ability to pay vendors and conduct operations throughout the global organization. We believe that our existing cash balances, together with anticipated cash flows from operations and borrowings available under our credit facilities, will be sufficient to fund our operations through at least the next twelve months. As of December 31, 2013June 27, 2014 and March 31, 2013, a significant amount2014, over half of our cash and cash equivalents was held by foreign subsidiaries outside of Singapore. Although substantially all of the amounts held outside of Singapore could be repatriated, under current laws, a significant amount could be subject to income tax withholdings. We provide for tax liabilities on these amounts for financial statement purposes, except for certain of our foreign earnings that are considered indefinitely reinvested outside of Singapore (approximately $457.7$779.0 million as of March 31, 2013)2014). 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.operations in jurisdictions outside of where they are held. Where local restrictions prevent an efficient
intercompany transfer of funds, our intent is that cash balances would remain outside of Singapore and we would meet our liquidity needs through ongoing cash flows, external borrowings, or both.
Future liquidity needs will depend on fluctuations in levels of inventory, accounts receivable and accounts payable, the timing of capital expenditures for new equipment, the extent to which we utilize operating leases for new facilities and equipment, and the levels of shipments and changes in the volumes of customer orders.
Historically, we have funded operations from cash and cash equivalents generated from operations, proceeds from public offerings of equity and debt securities, bank debt and lease financings. We also sell a designated pool of trade receivables under asset-backed securitization programs and sell certain trade receivables, which are in addition to the trade receivables sold in connection with these securitization agreements.
We anticipate that we will enter into debt and equity financings, sales of accounts receivable and lease transactions to fund acquisitions and growth.
The sale or issuance of equity or convertible debt securities could result in dilution to current shareholders. Further, we may issue debt securities that have rights and privileges senior to those of holders of ordinary shares, and the terms of this debt could impose restrictions on operations and could increase debt service obligations. This increased indebtedness could limit our flexibility as a result of debt service requirements and restrictive covenants, potentially affect our credit ratings, and may limit our ability to access additional capital or execute our business strategy. Any downgrades in credit ratings could adversely affect our ability to borrow as a result of more restrictive borrowing terms. We continue to assess our capital structure and evaluate the merits of redeploying available cash to reduce existing debt or repurchase ordinary shares.
The Company’sOur current share repurchase program was approved by the Board of Directors, on July 24, 2013, authorized theand allows us to repurchase of up to 10% of the Company’s outstanding ordinary shares which was subsequently approved byas of the Company’s shareholders atdate of the most recent the Extraordinary General Meeting held on July 29, 2013. Subsequently, the Singapore Companies Act was amended on September 30, 2013, to authorize companies incorporated in Singapore to repurchase up to 20% of their shares outstanding as of the most recent shareholder approval date, subject to the
requirements of the Singapore Companies Act. During the nine-monththree-month period ended December 31, 2013,June 27, 2014, the Company paid $362.7$105.6 million to repurchase shares at an average price of $7.70$9.69 per share. As of June 27, 2014, we have approximately 26.5 million shares available to be repurchased under this plan. We will request shareholder approval for the new program to repurchase our shares at our upcoming Extraordinary General Meeting to be held on August 28, 2014.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
Information regarding our long-term debt payments, operating lease payments, capital lease payments and other commitments is provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on our Form 10-K for the fiscal year ended March 31, 2013.2014. There have been no material changes in our contractual obligations and commitments since March 31, 20132014, except for the following changes to our debt obligations.
On August 30, 2013, we entered intoreversal of a $600contractual obligation during the three-month period ended June 27, 2014 with a certain customer that was recognized during the fourth quarter of fiscal 2014 in the amount of $55.0 million new term loan agreement maturingdiscussed in August 2018. Refer to note 6 ofto the notes to our condensed consolidated financial statements for additional details on this term loan.statements.
Future payments due under our long-term debt and interest on long-term debt obligations changed from those described in the Contractual Obligations and Commitments table contained within our Annual Report on our Form 10-K for the fiscal year ended March 31, 2013 and accordingly these two items have been updated as follows:
|
|
|
| Less Than |
|
|
|
|
| Greater Than |
| |||||
|
| Total |
| 1 Year |
| 1 - 3 Years |
| 4 - 5 Years |
| 5 Years |
| |||||
|
| (In thousands) | ||||||||||||||
Long-Term Debt Obligations: |
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt |
| $ | 2,067,627 |
| $ | 90,063 |
| $ | 96,535 |
| $ | 328,692 |
| $ | 1,552,337 |
|
Interest on long-term debt obligations |
| 482,257 |
| 65,285 |
| 136,065 |
| 114,788 |
| 166,119 |
| |||||
Total long-term debt obligations |
| $ | 2,549,884 |
| $ | 155,348 |
| $ | 232,600 |
| $ | 443,480 |
| $ | 1,718,456 |
|
OFF-BALANCE SHEET ARRANGEMENTS
We sell designated pools of trade receivables to unaffiliated financial institutions under our ABS programs, and in addition to cash, we receive a deferred purchase price receivable for each pool of the receivables sold. Each of these deferred purchase price receivables serves as additional credit support to the financial institutions and is recorded at its estimated fair value. As of December 31, 2013June 27, 2014 and March 31, 2013,2014, the fair valuevalues of our deferred purchase price receivable waswere approximately $528.8$463.1 million and $412.4$470.9 million, respectively. As of December 31, 2013June 27, 2014 and March 31, 2013,2014, the outstanding balancebalances on receivables sold for cash waswere $1.2 billion and $720.5 million,$1.1 billion, respectively, under all our accounts receivable sales programs, which are not included in our condensed consolidated balance sheets. For further information see note 109 of our notes to the condensed consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no material changes in our exposure to market risks for changes in interest and foreign currency exchange rates for the nine-monththree-month period ended December 31, 2013June 27, 2014 as compared to the fiscal year ended March 31, 2013.2014.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of December 31, 2013,June 27, 2014, the end of the quarterly fiscal period covered by this quarterly report. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that, as of December 31, 2013,June 27, 2014, such disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during our thirdfirst quarter of fiscal year 20142015 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
For a description of our material legal proceedings, see note 1412 “Commitments and Contingencies” in the Notesnotes to the condensed consolidated financial statements, which is incorporated herein by reference.
In addition to the other information set forth in this report, you should carefully consider the risks and uncertainties discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2013,2014, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be not material also may materially and adversely affect our business, financial condition and/or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table provides information regarding purchases of our ordinary shares made by us for the period from September 28, 2013April 1, 2014 through December 31, 2013:June 27, 2014:
|
|
|
|
|
| Total Number of Shares |
| Approximate Dollar Value |
| ||
|
| Total Number |
| Average Price |
| Purchased as Part of |
| of Shares that May Yet |
| ||
|
| of Shares |
| Paid per |
| Publicly Announced |
| Be Purchased Under the |
| ||
Period |
| Purchased (1) (2) |
| Share (2) |
| Plans or Programs (2) |
| Plans or Programs (2) |
| ||
September 28 - November 1, 2013 |
| — |
| $ | — |
| — |
| $ | 504,208,634 |
|
November 2 - November 29, 2013 |
| 1,233,400 |
| $ | 7.65 |
| 1,233,400 |
| $ | 413,702,475 |
|
November 30 - December 31, 2013 |
| 4,642,818 |
| $ | 7.54 |
| 4,642,818 |
| $ | 372,673,494 |
|
Total |
| 5,876,218 |
|
|
| 5,876,218 |
|
|
|
|
|
|
|
|
| Total Number of Shares |
| Approximate Dollar Value |
| ||
|
| Total Number |
| Average Price |
| Purchased as Part of |
| of Shares that May Yet |
| ||
|
| of Shares |
| Paid per |
| Publicly Announced |
| Be Purchased Under the |
| ||
Period |
| Purchased (1) (2) |
| Share (2) |
| Plans or Programs (2) |
| Plans or Programs (2) |
| ||
April 1 - May 2, 2014 |
| 3,971,294 |
| $ | 9.31 |
| 3,971,294 |
| $ | 307,446,674 |
|
May 3 - May 30, 2014 |
| 5,049,806 |
| $ | 9.60 |
| 5,049,806 |
| $ | 268,546,395 |
|
May 31 - June 27, 2014 |
| 1,506,243 |
| $ | 11.02 |
| 1,506,243 |
| $ | 291,630,964 |
|
Total |
| 10,527,343 |
|
|
| 10,527,343 |
|
|
|
(1) During the period from September 28, 2013April 1, 2014 through December 31, 2013,June 27, 2014, 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 24, 2013, our Board of Directors authorized the repurchase of up to 10% of our outstanding ordinary shares which was subsequently approved by our shareholders at the Extraordinary General Meeting held on July 29, 2013. During the three-month period ended December 31, 2013As of June 27, 2014, we repurchased 5.9had 26.5 million shares for an aggregate purchase price of $44.4 million.
On September 30, 2013, the Singapore Companies Act was amended to authorize companies incorporated in Singapore to repurchase up to 20% of their shares outstanding as of the most recent shareholder approval date, subject to requirements of the Singapore Companies Act. The amount available to be repurchased under the plan with an approximate dollar value of $291.6 million at an assumed average price of $11.02 per the table above does not reflect this incremental 10%, which was approved by the Company’s shareholders but has not been approved by the Company’s Boardshare.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
None
Exhibits — See Index to Exhibits below.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| FLEXTRONICS INTERNATIONAL LTD. |
| (Registrant) |
|
|
|
|
| /s/ Michael M. McNamara |
| Michael M. McNamara |
| Chief Executive Officer |
| (Principal Executive Officer) |
|
|
Date: |
|
| /s/ Christopher Collier |
| Christopher Collier |
| Chief Financial Officer |
| (Principal Financial Officer) |
|
|
Date: |
|
Exhibit No. |
| Exhibit |
4.01 |
| Amendment No. 1 dated May 21, 2014 to the Term Loan Agreement, dated as of August 30, 2013, among Flextronics International Ltd., as Borrower, The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Administrative Agent, Lead Arranger and Bookrunner, and the other Lenders party thereto |
10.01 | Award Agreement under the 2010 Deferred Compensation Plan | |
15.01 |
| Letter in lieu of consent of Deloitte & Touche LLP. |
31.01 |
| Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.02 |
| Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.01 |
| Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
32.02 |
| Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
101.INS |
| XBRL Instance Document |
101.SCH |
| XBRL Taxonomy Extension Schema Document |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
* This exhibit is furnished with this Quarterly Report on Form 10-Q, is not deemed filed with the Securities and Exchange Commission, and is not incorporated by reference into any filing of Flextronics International Ltd. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing.