UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended July ~~2, 2021~~1, 2022

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

For the transition period from to

Commission file number 0-23354

FLEX LTD.

(Exact name of registrant as specified in its charter)


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


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

(65) 6876-9899

Registrant’s telephone number, including area code

~~(65) 6876-9899~~

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Ordinary Shares, No Par Value

FLEX

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large ~~Accelerated Filer~~accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of shares of the registrant’s ordinary shares outstanding as of July ~~26, 2021~~25, 2022 was ~~488,225,731.~~456,084,675.

Table of Contents

FLEX LTD.

INDEX


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Report of Independent Registered Public Accounting Firm	3
	Condensed Consolidated Balance Sheets (unaudited) — July ~~2, 2021~~1, 2022 and March 31, ~~2021~~2022	4
	Condensed Consolidated Statements of Operations (unaudited) — Three-Month Periods Ended July 1, 2022 and July 2, 2021 ~~and June, 26 2020~~	5
	Condensed Consolidated Statements of Comprehensive Income (unaudited) — Three-Month Periods Ended July 1, 2022 and July 2, 2021 ~~and June 26, 2020~~	6
	Condensed Consolidated Statements of R edeemable N oncontrolling Interest and Shareholders' Equity (unaudited) — Three-Month Periods Ended July 1, 2022 and July 2, 2021 ~~and June 26, 2020~~	7
	Condensed Consolidated Statements of Cash Flows (unaudited) — Three-Month Periods Ended July 2, ~~2021~~2022 and ~~June 26, 2020~~July 1, 2021	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2224
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3133
Item 4.	Controls and Procedures	3133

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3334
Item 1A.	Risk Factors	3334
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3635
Item 3.	Defaults Upon Senior Securities	3736
Item 4.	Mine Safety Disclosures	3736
Item 5.	Other Information	3736
Item 6.	Exhibits	3837
Signatures		3938

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Flex Ltd.

, Singapore

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of Flex Ltd. and its subsidiaries (the “Company”) as of July ~~2, 2021,~~1, 2022, and the related condensed consolidated statements of operations, comprehensive income, ~~shareholders'~~redeemable noncontrolling interest and shareholders’ equity, and cash flows for the three-month periods ended July 1, 2022 and July 2, 2021, ~~and June 26, 2020,~~ and the related notes (collectively referred to as the ~~"interim~~“interim financial ~~information"~~information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of Flex Ltd. and its subsidiaries as of March 31, ~~2021~~2022 and the related consolidated statements of operations, comprehensive income, redeemable noncontrolling interest and shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated May ~~19, 2021,~~20, 2022, 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, ~~2021~~2022 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

The interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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


/s/ DELOITTE & TOUCHE LLP
San Jose, California
July ~~30, 2021~~29, 2022

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS


		As of July 2, 2021		As of March 31, 2021			As of July 1, 2022		As of March 31, 2022
		(In millions, except share amounts) (Unaudited)					(In millions, except share amounts) (Unaudited)

ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	2,693	$	2,637	Cash and cash equivalents	$	2,647	$	2,964
Accounts receivable, net of allowance of $60 and $61, respectively		3,833		4,106
Accounts receivable, net of allowance of $7 and $56, respectively						Accounts receivable, net of allowance of $7 and $56, respectively	3,782		3,371
Contract assets	Contract assets	168		135		Contract assets	510		519
Inventories	Inventories	4,444		3,895		Inventories	7,243		6,580
Other current assets	Other current assets	591		590		Other current assets	965		903
Total current assets	Total current assets	11,729		11,363		Total current assets	15,147		14,337
Property and equipment, net	Property and equipment, net	2,087		2,097		Property and equipment, net	2,135		2,125
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	630		642		Operating lease right-of-use assets, net	611		637
Goodwill	Goodwill	1,094		1,090		Goodwill	1,336		1,342
Other intangible assets, net	Other intangible assets, net	199		213		Other intangible assets, net	372		411
Other assets	Other assets	453		431		Other assets	453		473
Total assets	Total assets	$	16,192	$	15,836	Total assets	$	20,054	$	19,325

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY						LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Bank borrowings and current portion of long-term debt	Bank borrowings and current portion of long-term debt	$	274	$	268	Bank borrowings and current portion of long-term debt	$	946	$	949
Accounts payable	Accounts payable	5,448		5,247		Accounts payable	6,694		6,254
Accrued payroll	Accrued payroll	432		473		Accrued payroll	419		470

Deferred revenue and customer working capital advances						Deferred revenue and customer working capital advances	2,400		2,002
Other current liabilities	Other current liabilities	1,984		1,846		Other current liabilities	1,131		1,036
Total current liabilities	Total current liabilities	8,138		7,834		Total current liabilities	11,590		10,711
Long-term debt, net of current portion	Long-term debt, net of current portion	3,505		3,515		Long-term debt, net of current portion	3,129		3,248
Operating lease liabilities, non-current	Operating lease liabilities, non-current	550		562		Operating lease liabilities, non-current	520		551
Other liabilities	Other liabilities	491		489		Other liabilities	640		608
Total liabilities						Total liabilities	15,879		15,118

Redeemable noncontrolling interest						Redeemable noncontrolling interest	84		78
Shareholders’ equity	Shareholders’ equity					Shareholders’ equity

Ordinary shares, 0 par value; 539,348,399 and 542,807,200 issued, and 489,109,044 and 492,567,845 outstanding, respectively		6,090		6,232
Treasury stock, at cost; 50,239,355 shares as of July 2, 2021 and March 31, 2021		(388)		(388)
Ordinary shares, no par value; 507,782,209 and 510,799,667 issued, and 457,542,854 and 460,560,312 outstanding, respectively						Ordinary shares, no par value; 507,782,209 and 510,799,667 issued, and 457,542,854 and 460,560,312 outstanding, respectively	5,897		6,052
Treasury stock, at cost; 50,239,355 shares as of July 1, 2022 and March 31, 2022						Treasury stock, at cost; 50,239,355 shares as of July 1, 2022 and March 31, 2022	(388)		(388)
Accumulated deficit	Accumulated deficit	(2,083)		(2,289)		Accumulated deficit	(1,164)		(1,353)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(111)		(119)		Accumulated other comprehensive loss	(254)		(182)

Total shareholders’ equity	Total shareholders’ equity	3,508		3,436		Total shareholders’ equity	4,091		4,129
Total liabilities and shareholders’ equity		$	16,192	$	15,836
Total liabilities, redeemable noncontrolling interest, and shareholders' equity						Total liabilities, redeemable noncontrolling interest, and shareholders' equity	$	20,054	$	19,325

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

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


		Three-Month Periods Ended					Three-Month Periods Ended
		July 2, 2021		June 26, 2020					July 1, 2022		July 2, 2021
		(In millions, except per share amounts) (Unaudited)				(In millions, except per share amounts) (Unaudited)
Net sales	Net sales	$	6,342	$	5,153			Net sales	$	7,347	$	6,342
Cost of sales	Cost of sales	5,871		4,849				Cost of sales	6,812		5,871

Gross profit	Gross profit	471		304				Gross profit	535		471
Selling, general and administrative expenses	Selling, general and administrative expenses	201		191				Selling, general and administrative expenses	241		201

Intangible amortization	Intangible amortization	15		15				Intangible amortization	22		15

Operating income								Operating income	272		255
Interest and other, net	Interest and other, net	22		31				Interest and other, net	40		22

Income before income taxes	Income before income taxes	233		67				Income before income taxes	232		233
Provision for income taxes	Provision for income taxes	27		15				Provision for income taxes	37		27
Net income	Net income	$	206	$	52			Net income	195		206
Net income attributable to redeemable noncontrolling interest								Net income attributable to redeemable noncontrolling interest	6		—
Net income attributable to Flex Ltd.								Net income attributable to Flex Ltd.	$	189	$	206

Earnings per share:
Earnings per share attributable to the shareholders of Flex Ltd.:								Earnings per share attributable to the shareholders of Flex Ltd.:
Basic	Basic	$	0.42	$	0.10			Basic	$	0.41	$	0.42
Diluted	Diluted	$	0.41	$	0.10			Diluted	$	0.40	$	0.41
Weighted-average shares used in computing per share amounts:	Weighted-average shares used in computing per share amounts:							Weighted-average shares used in computing per share amounts:
Basic	Basic	491		498				Basic	458		491
Diluted	Diluted	499		502				Diluted	468		499

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

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three-Month Periods Ended
July 2, 2021 June 26, 2020
(In millions)
(Unaudited)
Net income $ 206 $ 52
Other comprehensive income:
Foreign currency translation adjustments, net of 0 tax 5 14
Unrealized gain on derivative instruments and other, net of tax 3 30
Comprehensive income $ 214 $ 96


	Three-Month Periods Ended
	July 1, 2022		July 2, 2021
	(In millions) (Unaudited)
Net income	$	195	$	206
Other comprehensive income (loss):
Foreign currency translation adjustments, net of zero tax	(71)		5
Unrealized gain (loss) on derivative instruments and other, net of tax	(1)		3
Comprehensive income	$	123	$	214
Comprehensive income attributable to redeemable noncontrolling interest	6		—
Comprehensive income attributable to Flex Ltd.	$	117	$	214

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

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY

Ordinary Shares Accumulated Other Comprehensive Loss Total
Three Months Ended July 2, 2021 Shares
Outstanding Amount Accumulated
Deficit Unrealized
Gain (Loss) on
Derivative
Instruments
and Other Foreign
Currency
Translation
Adjustments Total
Accumulated
Other
Comprehensive
Loss Shareholders'
Equity
(In millions)
Unaudited
BALANCE AT MARCH 31, 2021 492 $ 5,844 $ (2,289) $ (42) $ (77) $ (119) $ 3,436
Repurchase of Flex Ltd. ordinary shares at cost (9) (162) — — — — (162)
Exercise of stock options 1 — — — — — 0
Issuance of Flex Ltd. vested shares under restricted share unit awards 5 — — — — — —
Net income — — 206 — — — 206
Stock-based compensation — 20 — — — — 20
Total other comprehensive income — — — 3 5 8 8
BALANCE AT JULY 2, 2021 489 $ 5,702 $ (2,083) $ (39) $ (72) $ (111) $ 3,508


	Redeemable Noncontrolling Interest		Ordinary Shares					Accumulated Other Comprehensive Loss						Total
Three Months Ended July 1, 2022	Amount		Shares Outstanding	Amount		Accumulated Deficit		Unrealized Loss on Derivative Instruments and Other		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Loss		Shareholders' Equity
			(In millions) Unaudited
BALANCE AT MARCH 31, 2022	$	78	461	$	5,664	$	(1,353)	$	(66)	$	(116)	$	(182)	$	4,129
Repurchase of Flex Ltd. ordinary shares at cost	—		(11)	(181)		—		—		—		—		(181)

Issuance of Flex Ltd. vested shares under restricted share unit awards	—		8	—		—		—		—		—		��
Net income	6		—	—		189		—		—		—		189
Stock-based compensation	—		—	26		—		—		—		—		26

Total other comprehensive loss	—		—	—		—		(1)		(71)		(72)		(72)
BALANCE AT JULY 1, 2022	$	84	458	$	5,509	$	(1,164)	$	(67)	$	(187)	$	(254)	$	4,091

Ordinary Shares Accumulated Other Comprehensive Loss Total
Three Months Ended June 26, 2020 Shares
Outstanding Amount Accumulated
Deficit Unrealized
Gain (Loss) on
Derivative
Instruments
and Other Foreign
Currency
Translation
Adjustments Total
Accumulated
Other
Comprehensive
Loss Shareholders'
Equity
(In millions)
Unaudited
BALANCE AT MARCH 31, 2020 497 $ 5,948 $ (2,902) $ (82) $ (133) $ (215) $ 2,831
Issuance of Flex Ltd. vested shares under restricted share unit awards 3 — — — — — —
Net income — — 52 — — — 52
Stock-based compensation — 13 — — — — 13
Total other comprehensive income — — — 30 14 44 44
BALANCE AT JUNE 26, 2020 500 $ 5,961 $ (2,850) $ (52) $ (119) $ (171) $ 2,940


	Redeemable Noncontrolling Interest		Ordinary Shares					Accumulated Other Comprehensive Loss						Total
Three Months Ended July 2, 2021	Amount		Shares Outstanding	Amount		Accumulated Deficit		Unrealized Loss on Derivative Instruments and Other		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Loss		Shareholders' Equity
			(In millions) Unaudited
BALANCE AT MARCH 31, 2021	$	—	492	$	5,844	$	(2,289)	$	(42)	$	(77)	$	(119)	$	3,436
Repurchase of Flex Ltd. ordinary shares at cost	—		(9)	(162)		—		—		—		—		(162)
Exercise of stock options	—		1	—		—		—		—		—		—
Issuance of Flex Ltd. vested shares under restricted share unit awards	—		5	—		—		—		—		—		—
Net income	—		—	—		206		—		—		—		206
Stock-based compensation	—		—	20		—		—		—		—		20

Total other comprehensive income	—		—	—		—		3		5		8		8
BALANCE AT JULY 2, 2021	$	—	489	$	5,702	$	(2,083)	$	(39)	$	(72)	$	(111)	$	3,508

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

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


		Three-Month Periods Ended					Three-Month Periods Ended
		July 2, 2021		June 26, 2020			July 1, 2022		July 2, 2021
		(In millions) (Unaudited)					(In millions) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	206	$	52	Net income	$	195	$	206
Depreciation, amortization and other impairment charges	Depreciation, amortization and other impairment charges	118		125		Depreciation, amortization and other impairment charges	124		118
Changes in working capital and other, net	Changes in working capital and other, net	10		(806)		Changes in working capital and other, net	(281)		10
Net cash provided by (used in) operating activities		334		(629)
Net cash provided by operating activities						Net cash provided by operating activities	38		334
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	Purchases of property and equipment	(118)		(110)		Purchases of property and equipment	(107)		(118)
Proceeds from the disposition of property and equipment	Proceeds from the disposition of property and equipment	3		8		Proceeds from the disposition of property and equipment	16		3

Other investing activities, net	Other investing activities, net	2		2		Other investing activities, net	2		2
Net cash used in investing activities	Net cash used in investing activities	(113)		(100)		Net cash used in investing activities	(89)		(113)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings and long-term debt		0		1,248

Repayments of bank borrowings and long-term debt	Repayments of bank borrowings and long-term debt	(1)		(511)		Repayments of bank borrowings and long-term debt	(35)		(1)

Payments for repurchases of ordinary shares	Payments for repurchases of ordinary shares	(162)		0		Payments for repurchases of ordinary shares	(181)		(162)

Other financing activities, net	Other financing activities, net	(3)		4		Other financing activities, net	6		(3)
Net cash provided by (used in) financing activities		(166)		741
Net cash used in financing activities						Net cash used in financing activities	(210)		(166)
Effect of exchange rates on cash and cash equivalents	Effect of exchange rates on cash and cash equivalents	1		0		Effect of exchange rates on cash and cash equivalents	(56)		1
Net increase in cash and cash equivalents		56		12
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	(317)		56
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	2,637		1,923		Cash and cash equivalents, beginning of period	2,964		2,637
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	2,693	$	1,935	Cash and cash equivalents, end of period	$	2,647	$	2,693

Non-cash investing activities:	Non-cash investing activities:					Non-cash investing activities:
Unpaid purchases of property and equipment	Unpaid purchases of property and equipment	$	88	$	35	Unpaid purchases of property and equipment	$	172	$	88
Right-of-use assets obtained in exchange of operating lease liabilities	Right-of-use assets obtained in exchange of operating lease liabilities	12		36		Right-of-use assets obtained in exchange of operating lease liabilities	22		12

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

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION OF THE COMPANY AND BASIS OF PRESENTATION

Organization of the Company

Flex Ltd. ("Flex" or the "Company") ~~was incorporated in~~is the ~~Republic of Singapore in May 1990. The Company's operations have expanded over the years through a combination of organic growth and acquisitions. The Company is the~~diversified manufacturing partner of choice that helps ~~a diverse customer base~~market-leading brands design, build and ~~build~~deliver innovative products that improve the world. Through the collective strength of a global workforce across approximately 30 countries ~~and~~with responsible, sustainable operations, ~~the Company~~Flex delivers ~~technology innovation, supply chain, and~~advanced manufacturing solutions toand operates one of the most trusted global supply chains, supporting the entire product lifecycle with fulfillment, after-market, and circular economy solutions for diverse industries including cloud, communications, enterprise, automotive, industrial, consumer devices, lifestyle, healthcare, and ~~end markets. In order to drive efficiency and productivity the Company is organized around 2 focused and complementary delivery models, which also represent its~~energy. Flex's 3 operating and reportable ~~segments:~~segments are:

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

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

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

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

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

◦Automotive, including next generation mobility, autonomous, connectivity, electrification, and smart technologies;

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

◦Industrial, including capital equipment, industrial devices, ~~renewable including our~~ and renewables and grid edge.

•Nextracker, ~~business, grid edge,~~the leading provider of intelligent, integrated solar tracker and ~~power systems.~~software solutions used in utility-scale and ground-mounted distributed generation solar projects around the world. Nextracker's products enable solar panels to follow the sun’s movement across the sky and optimize plant performance.

The Company's service offerings include a comprehensive range of value-added design and engineering services that are tailored to the various markets and needs of its customers. Other focused service offerings relate to manufacturing (including enclosures, metals, plastic injection molding, precision plastics, machining, and mechanicals), system integration and assembly and test services, materials procurement, inventory management, logistics and after-sales services (including product repair, warranty services, re-manufacturing and maintenance), supply chain management software solutions, and component product offerings (including flexible printed circuit boards and power adapters and chargers). The Company also provides intelligent, integrated solar tracker and software solutions used in utility-scale and ground-mounted distributed generation solar projects around the world.

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, ~~2021~~2022 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~~statement have been included. Operating results for the three-month period ended July ~~2, 2021~~1, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2022. Beginning in the second quarter of fiscal year 2021, the Company began reporting all dollar amounts in millions. In certain circumstances, this change in rounding resulted in line items being removed within prior year disclosures.2023. Certain prior period amounts in the condensed consolidated financial statements, as well as in the Notes thereto, have been reclassified to conform to the current presentation.

The first quarters for fiscal years ~~2022~~2023 and ~~2021~~2022 ended on July 1, 2022, which is comprised of 92 days in the period, and July 2, 2021, which is comprised of 93 ~~days in the period, and June 26, 2020, which is comprised of 87~~ days in the period, respectively.

The accompanying unaudited condensed consolidated financial statements include the accounts of Flex and its majority-owned subsidiaries, after elimination of intercompany accounts and transactions. The Company consolidates its majority-owned subsidiaries and investments in entities in which the Company has a controlling interest. For the consolidated majority-owned subsidiaries in which the Company owns less than 100%, the Company recognizes a noncontrolling interest for the ownership of the noncontrolling owners. ~~The~~In all cases other than the redeemable noncontrolling interest in Nextracker, the associated noncontrolling owners' interest in the income or losses of these companies is not material to the Company's results of operations

Table of Contents

for all periods presented, and is classified as a component of ~~interest~~Interest and other, net, in the condensed consolidated statements of operations.

~~Table~~Noncontrolling interest that is redeemable upon the occurrence of ~~Contents~~conditions outside of the control of the Company is reported as temporary equity in the consolidated balance sheets. The amount of consolidated net income attributable to Flex Ltd. and to the redeemable noncontrolling interest is presented in the condensed consolidated statements of operations.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates are used in accounting for, among other things: allowances for doubtful accounts; inventory write-downs; valuation allowances for deferred tax assets; uncertain tax positions; valuation and useful lives of long-lived assets including property, equipment, and intangible assets; valuation of goodwill; valuation of investments in privately-held companies; asset impairments; fair values of financial instruments, notes receivable and derivative instruments; restructuring charges; contingencies; warranty provisions; incremental borrowing rates in determining the present value of lease payments; accruals for potential price adjustments arising from customer contracts; fair values of assets obtained and liabilities assumed in business combinations; and the fair values of stock options and restricted share unit awards granted under the Company's stock-based compensation plans. Due to the COVID-19 pandemic and geopolitical conflicts (including the Russian invasion of Ukraine), there has been and will continue to be uncertainty and disruption in the global economy and financial markets. The Company has made estimates and assumptions taking into consideration certain possible impacts due to ~~COVID-19.~~the COVID-19 pandemic and the Russian invasion of Ukraine. These estimates may change, as new events occur, and additional information is obtained. Actual results may differ from previously estimated amounts, and such differences may be material to the condensed consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.

Recently Adopted Accounting Pronouncement

In ~~October 2020,~~July 2021, the FASB issued ASU ~~2020-10 "Codification Improvements"~~2021-05 "Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments", which ~~improves consistency by amending~~requires a lessor to classify a lease with variable lease payments that don’t depend on an index or a rate as an operating lease on the ~~Codification to include all disclosure~~commencement date of the lease if specified criteria are met. The guidance is effective for the Company beginning in the ~~appropriate disclosure sections and clarifies application~~first quarter of ~~various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology.~~fiscal year 2023 with early adoption permitted. The Company adopted the guidance during the first quarter of fiscal year ~~2022~~2023 with an immaterial impact on its condensed consolidated financial statements.

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

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

2. BALANCE SHEET ITEMS

Inventories

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


		As of July 2, 2021		As of March 31, 2021			As of July 1, 2022		As of March 31, 2022
		(In millions)					(In millions)
Raw materials	Raw materials	$	3,344	$	2,831	Raw materials	$	5,863	$	5,290
Work-in-progress	Work-in-progress	454		459		Work-in-progress	658		602
Finished goods	Finished goods	646		605		Finished goods	722		688
		$	4,444	$	3,895		$	7,243	$	6,580

Goodwill and Other Intangible Assets

During the three-month period ended July ~~2, 2021,~~1, 2022, there was no material activity in the Company's goodwill account for each of its ~~reporting units,~~reportable segments, other than foreign currency translation adjustments of ~~$3.0 million and $1.0~~$6 million, which primarily impacted its ~~Automotive and Health Solutions reporting units, respectively.~~

~~The components of acquired intangible assets are as follows:~~FRS segment.

Table of Contents

As of July 2, 2021 As of March 31, 2021
Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount
(In millions)
Intangible assets:
Customer-related intangibles $ 278 $ (163) $ 115 $ 276 $ (154) $ 122
Licenses and other intangibles 250 (166) 84 250 (159) 91
Total $ 528 $ (329) $ 199 $ 526 $ (313) $ 213
The components of acquired intangible assets are as follows:


	As of July 1, 2022						As of March 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(In millions)
Intangible assets:
Customer-related intangibles	$	370	$	(164)	$	206	$	385	$	(157)	$	228
Licenses and other intangibles	304		(138)		166		319		(136)		183
Total	$	674	$	(302)	$	372	$	704	$	(293)	$	411

The gross carrying amounts of intangible assets are removed when fully amortized.

The estimated future annual amortization expense for intangible assets is as follows:


Fiscal Year Ending March 31,	Fiscal Year Ending March 31,	Amount		Fiscal Year Ending March 31,	Amount
		(In millions)			(In millions)
2022 (1)		$	39
2023		46
2023 (1)				2023 (1)	$	62
2024	2024	45		2024	69
2025	2025	40		2025	62
2026	2026	18		2026	42
2027				2027	35
Thereafter	Thereafter	11		Thereafter	102
Total amortization expense	Total amortization expense	$	199	Total amortization expense	$	372

(1)Represents estimated amortization for the remaining fiscal ~~nine-month~~nine-month period ending March 31, ~~2022.~~2023.

~~Other Current Liabilities~~Customer Working Capital Advances

~~Other current liabilities include customer~~Customer working capital advances ~~of $564.9 million~~were $1.8 billion and ~~$471.5 million, customer-related accruals of $245.4 million and $242.0 million, and current operating lease liabilities of $129.6 million and $127.6 million~~$1.4 billion, as of July ~~2, 2021~~1, 2022 and March 31, ~~2021,~~2022, respectively. The customer working capital advances are not interest-bearing, do not generally have fixed repayment dates and are generally reduced as the underlying working capital is consumed in production.

Other Current Liabilities

Other current liabilities include customer-related accruals of $264 million and $227 million as of July 1, 2022 and March 31, 2022, respectively.

Redeemable Noncontrolling Interest

As a result of the Company's sale of redeemable preferred units (“Series A Preferred Units”), representing a 16.67% interest in its subsidiary Nextracker LLC ("Nextracker"), to TPG Rise Flash, L.P. ("TPG Rise") on February 1, 2022, the Company recognized $6 million of a payable-in-kind dividend due to TPG Rise during the three-month period ended July 1, 2022, based on a dividend rate of 5% per annum.

At TPG Rise’s election, the Company is required to repurchase all of the outstanding Series A Preferred Units at their liquidation preference, which shall include all contributed but unreturned capital plus accrued but unpaid dividends, at the earlier of certain change in control events and February 2, 2028. Additionally, if Nextracker has not completed a qualified initial public offering (a "Qualified Public Offering") prior to February 2, 2027, then TPG Rise may cause the Company to repurchase all of the outstanding Series A Preferred Units at their fair market value. The Company has determined that a Qualified Public Offering is likely and that the change in control is not probable as of July 1, 2022 and as such, it is not probable that the noncontrolling interest will become redeemable.

3. REVENUE

Revenue Recognition

The Company provides a comprehensive suite of services for its customers that range from advanced product design to manufacturing and logistics to after-sales services. The first step in its process for revenue recognition is to identify a contract with a customer. A contract is defined as an agreement between two parties that creates enforceable rights and obligations and

Table of Contents

can be written, verbal, or implied. The Company generally enters into master supply agreements (“MSAs”) with its customers that provide the framework under which business will be conducted. This includes matters such as warranty, indemnification, transfer of title and risk of loss, liability for excess and obsolete inventory, pricing formulas, payment terms, etc., and the level of business under those agreements may not be guaranteed. In those instances, the Company bids on a program-by-program basis and typically receives customer purchase orders for specific quantities and timing of products. As a result, the Company considers its contract with a customer to be the combination of the MSA and the purchase order, or any other similar documents such as a statement of work, product addendum, emails or other communications that embody the commitment by the customer.

In determining the appropriate amount of revenue to recognize, the Company applies the following steps: (i) identifies the contracts with the customers; (ii) identifies performance obligations in the contracts; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations per the contracts; and (v) recognizes revenue when (or as) the Company satisfies a performance obligation. Further, the Company assesses whether control of the products or services promised under the contract is transferred to the customer at a point in time (PIT) or over time (OT). The Company is first required to evaluate whether its contracts meet the criteria for OT recognition. The Company has determined that for a portion of its contracts the Company is manufacturing products for which there is no alternative use (due to the unique nature of the customer-specific product and intellectual property restrictions) and the Company has an enforceable right to payment including a reasonable profit for work-in-progress inventory with respect to these contracts. For certain other contracts, the Company’s performance creates and enhances an asset that the customer controls as the Company performs under the contract. As a result,

~~Table of Contents~~

revenue is recognized under these contracts OT based on the cost-to-cost method as it best depicts the transfer of control to the customer measured based on the ratio of costs incurred to date as compared to the total estimated costs at completion of the performance obligation. For all other contracts that do not meet these criteria, the Company recognizes revenue when it has transferred control of the related manufactured products which generally occurs upon delivery and passage of title to the customer.

Customer Contracts and Related Obligations

Certain of the Company’s customer agreements include potential price adjustments which may result in variable consideration. These price adjustments include, but are not limited to, sharing of cost savings, committed price reductions, material margins earned over the period that are contractually required to be paid to the customers, rebates, refunds tied to performance metrics such as on-time delivery, and other periodic pricing resets that may be refundable to customers. The Company estimates the variable consideration related to these price adjustments as part of the total transaction price and recognizes revenue in accordance with the pattern applicable to the performance obligation, subject to a constraint. The Company constrains the amount of revenues recognized for these contractual provisions based on its best estimate of the amount which will not result in a significant reversal of revenue in a future period. The Company determines the amounts to be recognized based on the amount of potential refunds required by the contract, historical experience and other surrounding facts and circumstances. Often these obligations are settled with the customer in a period after shipment through various methods which include reduction of prices for future purchases, issuance of a payment to the customer, or issuance of a credit note applied against the customer’s accounts receivable balance. In many instances, the agreement is silent on the settlement mechanism. Any difference between the amount accrued ~~upon shipment~~ for potential refunds and the actual amount agreed to with the customer is recorded as an increase or decrease in revenue. These potential price adjustments are included as part of other current liabilities on the condensed consolidated balance sheet and disclosed as part of customer-related accruals in note 2.

Performance Obligations

The Company derives its revenues primarily from manufacturing services, and to a lesser extent, from innovative design, engineering, and supply chain services and solutions.

A performance obligation is an implicitly or explicitly promised good or service that is material in the context of the contract and is both capable of being distinct (customer can benefit from the good or service on its own or together with other readily available resources) and distinct within the context of the contract (separately identifiable from other promises). The Company considers all activities typically included in its contracts, and identifies those activities representing a promise to transfer goods or services to a customer. These include, but are not limited to, design and engineering services, prototype products, tooling, etc. Each promised good or service with regards to these identified activities is accounted for as a separate performance obligation only if it is distinct - i.e., the customer can benefit from it on its own or together with other resources that are readily available to the customer. Certain activities on the other hand are determined not to constitute a promise to transfer goods or service, and therefore do not represent separate performance obligations for revenue recognition (e.g., procurement of materials and standard workmanship warranty).

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company's contracts have a single performance obligation as the promise to transfer the individual good or service is not separately identifiable from other promises in the contract and is,

Table of Contents

therefore, not distinct. Promised goods or services that are immaterial in the context of the contract are not separately assessed as performance obligations. In the event that more than one performance obligation is identified in a contract, the Company is required to allocate the transaction price between the performance obligations. The allocation would generally be performed on the basis of a relative standalone price for each distinct good or service. This standalone price most often represents the price that the Company would sell similar goods or services separately.

Contract Balances

A contract asset is recognized when the Company has recognized revenue, but not issued an invoice for payment. Contract assets are classified separately on the condensed consolidated balance sheets and transferred to receivables when rights to payment become unconditional.

A contract liability is recognized when the Company receives payments in advance of the satisfaction of ~~performance and is included in other current liabilities on the condensed consolidated balance sheets.~~performance. Contract liabilities, identified as deferred revenue, were ~~$489.9~~$741 million and ~~$435.4~~$704 million as of July ~~2, 2021~~1, 2022 and March 31, ~~2021,~~2022, respectively, of which ~~$425.2~~$645 million and ~~$376.5~~$615 million, respectively, is included in ~~other~~deferred revenue and customer working capital advances under current liabilities.

Disaggregation of Revenue

~~Table of Contents~~

The following table presents the Company’s revenue disaggregated based on timing of transfer, - point in time ~~and~~or over time, - for the three-month periods ended July 1, 2022 and July 2, 2021, respectively. Historical information for the first quarter of fiscal year ended March 31, 2022 has been recast to reflect the new operating and ~~June 26, 2020, respectively.~~reportable segments in the table below.


		Three-Month Periods Ended				Three-Month Periods Ended
		July 2, 2021		June 26, 2020				July 1, 2022		July 2, 2021
Timing of Transfer	Timing of Transfer	(In millions)					Timing of Transfer	(In millions)
FAS	FAS						FAS
Point in time	Point in time	$	3,248	$	2,446		Point in time	$	3,779	$	3,248
Over time	Over time	184		466			Over time	212		184
Total	Total	3,432		2,912			Total	3,991		3,432
FRS	FRS						FRS
Point in time	Point in time	2,403		1,323			Point in time	2,790		2,407
Over time	Over time	507		918			Over time	179		175
Total	Total	2,910		2,241			Total	2,969		2,582
Nextracker							Nextracker
Point in time							Point in time	23		9
Over time							Over time	372		332
Total							Total	395		341
Intersegment eliminations							Intersegment eliminations
Point in time							Point in time	(8)		(13)
Over time							Over time	—		—
Total							Total	(8)		(13)
Flex	Flex						Flex
Point in time	Point in time	5,651		3,769			Point in time	6,584		5,651
Over time	Over time	691		1,384			Over time	763		691
Total	Total	$	6,342	$	5,153		Total	$	7,347	$	6,342

4. SHARE-BASED COMPENSATION

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

Table of Contents

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


		Three-Month Periods Ended				Three-Month Periods Ended
		July 2, 2021		June 26, 2020				July 1, 2022		July 2, 2021
		(In millions)						(In millions)
Cost of sales	Cost of sales	$	5	$	4		Cost of sales	$	7	$	5
Selling, general and administrative expenses	Selling, general and administrative expenses	15		9			Selling, general and administrative expenses	19		15
Total share-based compensation expense	Total share-based compensation expense	$	20	$	13		Total share-based compensation expense	$	26	$	20

Total number of options outstanding and exercisable were immaterial as of July ~~2, 2021.~~1, 2022. All options have been fully expensed as of ~~July2, 2021.~~July 1, 2022.

During the three-month period ended July ~~2, 2021,~~1, 2022, the Company granted ~~5.2~~5.6 million unvested restricted share unit ("RSU") awards. Of this amount, approximately ~~4.4~~4.5 million are plain-vanilla unvested RSU awards that vest over a period of three years, with no performance or market conditions, and with an average grant date price of ~~$18.26~~$16.44 per award. In addition, approximately ~~0.4~~0.5 million unvested shares represent the target amount of grants made to certain key employees whereby vesting is contingent on certain performance conditions, and with an average grant date price of ~~$18.24~~$16.66 per award. The number of shares contingent on performance conditions that ultimately will vest will range from 0 up to a maximum of ~~0.8~~approximately 1.0 million based on a measurement of the Company's adjusted earnings per ~~shares~~share growth over a certain specified ~~period,~~periods, and will cliff vest after a period of three years, to the extent such performance conditions have been met. Further, approximately ~~0.4~~0.5 million unvested shares represent the target amount of grants made to certain key employees whereby vesting is contingent on certain market conditions. The average grant date fair value of these awards contingent on certain market conditions was estimated to be ~~$25.86~~$23.46 per award and was calculated using a Monte Carlo simulation. The number of shares contingent on market conditions that ultimately will vest will range from 0zero up to a maximum of ~~0.8~~approximately 1.0 million based on a measurement of the percentile rank of the Company’s total shareholder return over a certain specified ~~period~~periods against the Company's peer companies, and will cliff vest after a period of three years, to the extent such market conditions have been met.

As of July ~~2, 2021,~~1, 2022, approximately ~~16.4~~15.4 million unvested RSU awards under all plans were outstanding, of which vesting for a targeted amount of ~~3.1~~2.2 million shares is contingent on meeting certain market conditions, and ~~of which~~ vesting for a targeted amount of ~~0.4~~0.9 million shares is contingent on meeting certain performance conditions. The number of shares tied to market ~~condition~~conditions that will ultimately be issued can range from 0zero to ~~6.2~~4.4 million based on the achievement levels. The number of shares tied to performance conditions that will ultimately be issued can range from 0zero to ~~0.8~~1.8 million based on the achievement

~~Table of Contents~~

levels. During the three-month period ended July ~~2, 2021, 0~~1, 2022, 2.4 million shares vested in connection with the awards with market conditions granted in fiscal year ~~2019.~~2020.

As of July ~~2, 2021,~~1, 2022, total unrecognized compensation expense related to unvested RSU awards under all plans was approximately ~~$199.4~~$217 million, and will be recognized over a weighted-average remaining vesting period of ~~2.2~~2.4 years.

In April 2022, Nextracker granted 11.2 million equity-based compensation awards to its employees under the 2022 Nextracker LLC Equity Incentive Plan (the “2022 Nextracker Plan”). Vesting for the awards granted under the 2022 Nextracker Plan is contingent upon continued employee service and certain performance conditions, including a liquidity event such as the occurrence of an initial public offering or the sale of Nextracker. No expense was recognized for equity-based compensation awards granted under the 2022 Nextracker Plan for the three-month period ended July 1, 2022 as there was no occurrence of a liquidity event.

Table of Contents

5. EARNINGS PER SHARE

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


		Three-Month Periods Ended				Three-Month Periods Ended
		July 2, 2021		June 26, 2020				July 1, 2022		July 2, 2021
		(In millions, except per share amounts)						(In millions, except per share amounts)
Basic earnings per share:
Basic earnings per share attributable to the shareholders of Flex Ltd.							Basic earnings per share attributable to the shareholders of Flex Ltd.
Net income	Net income	$	206	$	52		Net income	$	195	$	206
Net income attributable to redeemable noncontrolling interest							Net income attributable to redeemable noncontrolling interest	6		—
Net income attributable to Flex Ltd.							Net income attributable to Flex Ltd.	$	189	$	206
Shares used in computation:	Shares used in computation:						Shares used in computation:
Weighted-average ordinary shares outstanding	Weighted-average ordinary shares outstanding	491		498			Weighted-average ordinary shares outstanding	458		491
Basic earnings per share	Basic earnings per share	$	0.42	$	0.10		Basic earnings per share	$	0.41	$	0.42

Diluted earnings per share:
Diluted earnings per share attributable to the shareholders of Flex Ltd.							Diluted earnings per share attributable to the shareholders of Flex Ltd.
Net income	Net income	$	206	$	52		Net income	$	195	$	206
Net income attributable to redeemable noncontrolling interest							Net income attributable to redeemable noncontrolling interest	6		—
Net income attributable to Flex Ltd.							Net income attributable to Flex Ltd.	$	189	$	206
Shares used in computation:	Shares used in computation:						Shares used in computation:
Weighted-average ordinary shares outstanding	Weighted-average ordinary shares outstanding	491		498			Weighted-average ordinary shares outstanding	458		491
Weighted-average ordinary share equivalents from RSU awards (1)	Weighted-average ordinary share equivalents from RSU awards (1)	8		4			Weighted-average ordinary share equivalents from RSU awards (1)	10		8
Weighted-average ordinary shares and ordinary share equivalents outstanding	Weighted-average ordinary shares and ordinary share equivalents outstanding	499		502			Weighted-average ordinary shares and ordinary share equivalents outstanding	468		499
Diluted earnings per share	Diluted earnings per share	$	0.41	$	0.10		Diluted earnings per share	$	0.40	$	0.41

(1)~~1.1~~5.2 million and ~~3.2~~1.1 million RSU awards for the three-month periods ended July 1, 2022 and July 2, 2021, ~~and June 26, 2020,~~ respectively, were excluded from the computation of diluted earnings per share due to their anti-dilutive impact on the weighted-average ordinary share equivalents.

6. BANK BORROWINGS AND LONG-TERM DEBT

Bank borrowings and long-term debt as of July 1, 2022 are as follows:


	As of July 1, 2022		As of March 31, 2022
	(In millions)
5.000% Notes due February 2023	$	500	$	500
Term Loan due April 2024 - three-month TIBOR plus 0.430%	245		273
4.750% Notes due June 2025	598		598
3.750% Notes due February 2026	689		690
4.875% Notes due June 2029	659		659
4.875% Notes due May 2030	689		690
Euro Term Loans	367		389
3.600% HUF Bonds due December 2031	266		301
India Facilities	79		84
Other	—		31
Debt issuance costs	(17)		(18)
	4,075		4,197
Current portion, net of debt issuance costs	(946)		(949)
Non-current portion	$	3,129	$	3,248

The weighted-average interest rate for the Company's long-term debt was 4.1% and 4.0% as of July 1, 2022 and March 31, 2022.

Table of Contents

Scheduled repayments of the Company's bank borrowings and long-term debt as of July 1, 2022 are as follows:


Fiscal Year Ending March 31,	Amount
	(In millions)
2023 (1)	$	893
2024	53
2025	245
2026	1,288
2027	—
Thereafter	1,613
Total	$	4,092

(1)Represents estimated repayments for the remaining fiscal nine-month period ending March 31, 2023.

6.7. INTEREST AND OTHER, NET

Interest and other, net for the three-month periods ended July 1, 2022 and July 2, 2021 ~~and June 26, 2020~~ are primarily composed of the following:

Three-Month Periods Ended
July 2, 2021 June 26, 2020
(In millions)
Interest expenses on debt obligations $ 39 $ 33
Interest income (4) (3)


	Three-Month Periods Ended
	July 1, 2022		July 2, 2021
	(In millions)
Interest expenses on debt obligations	$	43	$	39

7.8. FINANCIAL INSTRUMENTS

Foreign Currency Contracts

The Company enters into short-term and long-term foreign currency derivatives contracts, including forward, swap, and options contracts to hedge only those currency exposures associated with certain assets and liabilities, primarily accounts receivable, ~~and~~ accounts payable, debt, and cash flows denominated in non-functional currencies. Gains and losses on the Company's derivative contracts are designed to offset losses and gains on the assets, liabilities and transactions hedged, and accordingly, generally do not subject the Company to risk of significant accounting losses. The Company hedges committed exposures and does not engage in speculative transactions. The credit risk of these derivative contracts is minimized since the contracts are with large financial institutions and accordingly, fair value adjustments related to the credit risk of the counterparty financial institution were not material.

1416

Table of Contents

As of July ~~2, 2021,~~1, 2022, the aggregate notional amount of the Company’s outstanding foreign currency derivative contracts was ~~$9.1~~$11.8 billion as summarized below:


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

CNY	CNY	3,886	0	$	601	$	0	CNY	3,038	—	$	454	$	—
EUR		34	60	41		71

HUF	HUF	36,601	0	124		0		HUF	138,710	—	415		—

ILS								ILS	352	—	102		—
JPY	JPY	33,525	0	300		0		JPY	33,525	—	300		—
MXN	MXN	6,191	0	311		0		MXN	6,829	—	339		—
MYR	MYR	428	102	103		24		MYR	540	94	123		21

Other	Other	N/A	N/A	176		37		Other	N/A	N/A	176		120
				1,656		132					1,909		141
Other Foreign Currency Contracts	Other Foreign Currency Contracts							Other Foreign Currency Contracts
BRL	BRL	16	496	3		99		BRL	9	867	2		166
CAD	CAD	110	65	89		52		CAD	115	68	89		53

CNY	CNY	4,236	706	655		109		CNY	4,598	688	688		102
EUR	EUR	1,675	1,812	1,989		2,158		EUR	3,003	2,838	3,165		2,984
GBP	GBP	55	77	76		106		GBP	165	201	201		244
HUF	HUF	59,137	54,761	200		185		HUF	78,890	67,113	209		178
ILS	ILS	473	0	145		0		ILS	376	166	109		48

INR								INR	10,003	—	126		—

MXN	MXN	6,470	5,032	325		253		MXN	8,137	5,983	404		297
MYR	MYR	738	277	177		66		MYR	1,003	343	228		78

SEK		497	584	59		68

SGD	SGD	91	49	68		37		SGD	102	55	73		39
Other	Other	N/A	N/A	233		111		Other	N/A	N/A	149		146
				4,019		3,244					5,443		4,335

Total Notional Contract Value in USD	Total Notional Contract Value in USD			$	5,675	$	3,376	Total Notional Contract Value in USD			$	7,352	$	4,476

As of July ~~2, 2021,~~1, 2022, the fair value of the Company’s short-term foreign currency contracts was included in other current assets or other current liabilities, as applicable, in the condensed consolidated balance sheets. Certain of these contracts are designed to economically hedge the Company’s exposure to monetary assets and liabilities denominated in a non-functional currency and are not accounted for as hedges under the accounting standards. Accordingly, changes in the fair value of these instruments are recognized in earnings during the period of change as a component of interest and other, net in the condensed consolidated statements of operations. As of July ~~2, 2021~~1, 2022 and March 31, ~~2021,~~2022, the Company also has included net deferred gains and losses in accumulated other comprehensive loss, a component of shareholders’ equity in the condensed consolidated balance sheets, relating to changes in fair value of its foreign currency contracts that are accounted for as cash flow hedges. Deferred ~~gains were immaterial~~loss was $45 million as of July ~~2, 2021,~~1, 2022, and ~~are~~is expected to be recognized primarily as a component of cost of sales in the condensed consolidated statements of operations primarily over the next twelve-month period, except for the USD JPY cross currency swap, and the USD HUF cross currency swaps, which isare further discussed below.

The Company entered into a USD JPY cross currency swap in April 2019 to hedge the foreign currency risk on the JPY term loan due April 2024, and the fair value of the cross currency swap was included in other ~~assets~~current liabilities and other liabilities as of July ~~2, 2021.~~1, 2022. Additionally, the Company entered into USD HUF cross currency swaps in December 2021 to hedge the foreign currency risk on the HUF bonds due December 2031, and the fair value of the cross currency swaps was included in other current liabilities and other liabilities as of July 1, 2022. The changes in fair value of both the USD JPY cross currency swap and the USD HUF cross currency swaps are reported in accumulated other comprehensive ~~loss, with the impact of the excluded component reported in interest and other, net.~~loss. In addition, a corresponding ~~amount is~~amounts are reclassified out of accumulated other comprehensive loss to interest and other, net to offset the remeasurement of the underlying JPY loan principal and HUF bond principal, which also ~~impacts~~impact the same line.

1517

Table of Contents

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


		Fair Values of Derivative Instruments											Fair Values of Derivative Instruments
		Asset Derivatives					Liability Derivatives						Asset Derivatives					Liability Derivatives
			Fair Value					Fair Value						Fair Value					Fair Value
		Balance Sheet Location	July 2, 2021		March 31, 2021		Balance Sheet Location	July 2, 2021		March 31, 2021			Balance Sheet Location	July 1, 2022		March 31, 2022		Balance Sheet Location	July 1, 2022		March 31, 2022
		(In millions)											(In millions)
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments											Derivatives designated as hedging instruments
Foreign currency contracts	Foreign currency contracts	Other current assets	$	23	$	23	Other current liabilities	$	12	$	16	Foreign currency contracts	Other current assets	$	18	$	22	Other current liabilities	$	49	$	35
Foreign currency contracts	Foreign currency contracts	Other assets	$	1	$	5	Other liabilities	$	0	$	0	Foreign currency contracts	Other assets	$	—	$	—	Other liabilities	$	116	$	61

Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments											Derivatives not designated as hedging instruments
Foreign currency contracts	Foreign currency contracts	Other current assets	$	28	$	31	Other current liabilities	$	30	$	32	Foreign currency contracts	Other current assets	$	26	$	21	Other current liabilities	$	41	$	26

The Company has financial instruments subject to master netting arrangements, which provide for the net settlement of all contracts with a single counterparty. The Company does not offset fair value amounts for assets and liabilities recognized for derivative instruments under these arrangements, and as such, the asset and liability balances presented in the table above reflect the gross amounts of derivatives in the condensed consolidated balance sheets. The impact of netting derivative assets and liabilities is not material to the Company’s financial position for any of the periods presented.

8.9. ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in accumulated other comprehensive loss by component, net of tax, are as follows:


		Three-Month Periods Ended													Three-Month Periods Ended
		July 2, 2021						June 26, 2020							July 1, 2022						July 2, 2021
		Unrealized loss on derivative instruments and other		Foreign currency translation adjustments		Total		Unrealized loss on derivative instruments and other		Foreign currency translation adjustments		Total			Unrealized loss on derivative instruments and other		Foreign currency translation adjustments		Total		Unrealized loss on derivative instruments and other		Foreign currency translation adjustments		Total
		(In millions)													(In millions)
Beginning balance	Beginning balance	$	(42)	$	(77)	$	(119)	$	(82)	$	(133)	$	(215)	Beginning balance	$	(66)	$	(116)	$	(182)	$	(42)	$	(77)	$	(119)
Other comprehensive gain before reclassifications		12		6		18		18		14		32
Other comprehensive gain (loss) before reclassifications														Other comprehensive gain (loss) before reclassifications	(79)		(68)		(147)		12		6		18
Net (gains) losses reclassified from accumulated other comprehensive loss	Net (gains) losses reclassified from accumulated other comprehensive loss	(9)		(1)		(10)		12		0		12		Net (gains) losses reclassified from accumulated other comprehensive loss	78		(3)		75		(9)		(1)		(10)
Net current-period other comprehensive gain		3		5		8		30		14		44
Net current-period other comprehensive gain (loss)														Net current-period other comprehensive gain (loss)	(1)		(71)		(72)		3		5		8
Ending balance	Ending balance	$	(39)	$	(72)	$	(111)	$	(52)	$	(119)	$	(171)	Ending balance	$	(67)	$	(187)	$	(254)	$	(39)	$	(72)	$	(111)

Substantially all unrealized losses and gains relating to derivative instruments and other, reclassified from accumulated other comprehensive loss for the three-month period ended July ~~2, 2021were~~1, 2022 were recognized as a component of cost of sales in the condensed consolidated statement of operations, which primarily relate to the Company’s foreign currency contracts accounted for as cash flow hedges.

9.10. TRADE RECEIVABLES SECURITIZATION

The Company sells trade receivables under 2 asset-backed securitization programs and an accounts receivable factoring program.

Asset-Backed Securitization Programs

~~Table of Contents~~

The Company sells designated pools of trade receivables under its ~~Global Asset-Backed Securitization Agreement~~asset-backed securitization programs (the ~~“Global Program”) and its North American Asset-Backed Securitization Agreement (the “North American Program,” and together with the Global Program, the~~ “ABS Programs”) to affiliated special purpose entities, each of which may in turn ~~sells~~sell a fraction of the receivables to unaffiliated

Table of Contents

financial institutions, based on the Company's requirements. Under these programs, the entire purchase price of sold receivables ~~are~~is paid in cash. The ABS Programs contain guarantees of payment by the special purpose entities, in amounts equal to approximately the net cash proceeds under the programs, and are collateralized by certain receivables held by the special purpose entities. The ~~fair value of the guarantee obligation was immaterial as of July 2, 2021 and March 31, 2020, respectively. The~~ accounts receivable balances sold under the ABS Programs ~~were~~are removed from the condensed consolidated balance sheets and the cash proceeds received by the Company ~~were~~are included as cash provided by operating activities in the condensed consolidated statements of cash flows.

Following the transfer of the receivables to the special purpose entities, the transferred receivables are legally isolated from the Company and its affiliates, and upon the sale of the receivables from the special purpose entities to the unaffiliated financial institutions, effective control of the transferred receivables is passed to the unaffiliated financial institutions, which have the right to pledge or sell the receivables. Although the special purpose entities are consolidated by the Company, they are separate corporate entities and their assets are available first to satisfy the claims of their creditors. The investment limits set by the financial institutions are uncommitted and amount to $500 million for the Global Program and $250 million for the North American Program.

The Company services, administers and collects the receivables on behalf of the special purpose entities and receives a servicing fee of 0.1% to 0.5% of serviced receivables per annum. Servicing fees recognized duringDuring the three-month periods ended July ~~2, 2021~~1, 2022 and June 26, 2020 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, 0 servicing assets or liabilities are recognized.

~~As of~~ July 2, ~~2021 and March 31,~~ 2021, no accounts receivable ~~had been~~were sold under the ABS ~~programs.~~

For the three-month period ended June 26, 2020, cash flows from sales of receivables from the special purpose entities to unaffiliated financial institutions, consisted of approximately $0.5 billion for transfer of receivables. The Company's cash flows from transfers of receivables in fiscal year 2021 consisted primarily of proceeds from collections reinvested in revolving-period transfers. Cash flows from new transfers were not significant for all periods presented. Programs.

Trade Accounts Receivable Sale Programs

The Company also ~~sold~~sells accounts receivables to certain third-party banking institutions. The outstanding balance of receivables sold and not yet collected on accounts where the Company has continuing involvement was approximately ~~$0.2~~$0.7 billion and $0.6 billion as of July ~~2, 2021~~1, 2022 and March 31, ~~2021.~~2022, respectively. For the three-month periods ended July 1, 2022 and July 2, 2021, ~~and June 26, 2020,~~ total accounts receivable sold to certain third-party banking institutions was approximately ~~$0.2~~$0.8 billion and ~~$0.3~~$0.2 billion, respectively. The receivables that were sold were removed from the condensed consolidated balance sheets and the cash received was included as cash provided by operating activities in the condensed consolidated statements of cash flows.

~~10.~~11. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

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

Level 1 - Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. There were no balances classified as level 1 in the fair value hierarchy as of July ~~2, 2021~~1, 2022 and March 31, ~~2021.~~2022.

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.

~~Table of Contents~~

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

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

The Company has deferred compensation plans for its officers and certain other employees. Amounts deferred under the plans are invested in hypothetical investments selected by the participant or the participant's investment manager. The Company's deferred compensation plan assets are included in other noncurrent assets on the consolidated balance sheets and include money market funds, mutual funds, corporate and government bonds and certain convertible securities that are valued using prices obtained from various pricing sources. These sources price these investments using certain market indices and the performance of these investments in relation to these indices. As a result, the Company has classified these investments as level 2 in the fair value hierarchy.

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

The Company has accrued for contingent consideration in connection with its business acquisitions as applicable, which is measured at fair value based on certain internal models and unobservable inputs. There were no contingent consideration liabilities outstanding as of July ~~2, 2021~~1, 2022 and March 31, ~~2021.~~2022.

There were no transfers between levels in the fair value hierarchy during the three-month periods ended July 1, 2022 and July 2, ~~2021 and June 26, 2020.~~ 2021.

Table of Contents

Financial Instruments Measured at Fair Value on a Recurring Basis

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of July ~~2, 2021~~1, 2022 and March 31, ~~2021:~~2022:


		Fair Value Measurements as of July 2, 2021									Fair Value Measurements as of July 1, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(In millions)									(In millions)
Assets:	Assets:									Assets:
Money market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet)	Money market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet)	$	0	$	1,759	$	0	$	1,759	Money market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet)	$	—	$	2,142	$	—	$	2,142

Foreign currency contracts (Note 7)		0		52		0		52
Foreign currency contracts (Note 8)										Foreign currency contracts (Note 8)	—		44		—		44

Deferred compensation plan assets:	Deferred compensation plan assets:							0		Deferred compensation plan assets:							0
Mutual funds, money market accounts and equity securities	Mutual funds, money market accounts and equity securities	0		48		0		48		Mutual funds, money market accounts and equity securities	—		35		—		35
Liabilities:	Liabilities:									Liabilities:
Foreign currency contracts (Note 7)		$	0	$	(42)	$	0	$	(42)
Foreign currency contracts (Note 8)										Foreign currency contracts (Note 8)	$	—	$	(206)	$	—	$	(206)

		Fair Value Measurements as of March 31, 2021									Fair Value Measurements as of March 31, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(In millions)									(In millions)
Assets:	Assets:									Assets:
Money market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet)	Money market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet)	$	0	$	1,507	$	0	$	1,507	Money market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet)	$	—	$	2,285	$	—	$	2,285

Foreign currency contracts (Note 7)		0		59		0		59
Foreign currency contracts (Note 8)										Foreign currency contracts (Note 8)	—		43		—		43
Deferred compensation plan assets:	Deferred compensation plan assets:							0		Deferred compensation plan assets:							0
Mutual funds, money market accounts and equity securities	Mutual funds, money market accounts and equity securities	0		48		0		48		Mutual funds, money market accounts and equity securities	—		39		—		39
Liabilities:	Liabilities:							0		Liabilities:							0
Foreign currency contracts (Note 7)		$	0	$	(48)	$	0	$	(48)
Foreign currency contracts (Note 8)										Foreign currency contracts (Note 8)	$	—	$	(122)	$	—	$	(122)

Other financial instruments

~~Table of Contents~~

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


		As of July 2, 2021				As of March 31, 2021						As of July 1, 2022				As of March 31, 2022
		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Hierarchy		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Hierarchy
		(In millions)										(In millions)
5.000% Notes due February 2023	5.000% Notes due February 2023	$	500	$	534	$	500	$	537	Level 1	5.000% Notes due February 2023	$	500	$	504	$	500	$	511	Level 1
Term Loan due April 2024 - three-month Yen LIBOR plus 0.500%		302		302		305		305		Level 2
Term Loan due April 2024 - three-month TIBOR plus 0.430%											Term Loan due April 2024 - three-month TIBOR plus 0.430%	245		245		273		273		Level 2
4.750% Notes due June 2025	4.750% Notes due June 2025	598		669		598		670		Level 1	4.750% Notes due June 2025	598		601		598		615		Level 1
3.750% Notes due February 2026	3.750% Notes due February 2026	693		758		694		756		Level 1	3.750% Notes due February 2026	689		659		690		690		Level 1
4.875% Notes due June 2029	4.875% Notes due June 2029	660		764		661		756		Level 1	4.875% Notes due June 2029	659		636		659		687		Level 1
4.875% Notes due May 2030	4.875% Notes due May 2030	693		806		694		800		Level 1	4.875% Notes due May 2030	689		659		690		713		Level 1
Euro Term Loans	Euro Term Loans	170		170		168		168		Level 2	Euro Term Loans	367		367		389		389		Level 2
3.600% HUF Bonds due December 2031											3.600% HUF Bonds due December 2031	266		266		301		301		Level 2
India Facilities	India Facilities	133		133		133		133		Level 2	India Facilities	79		79		84		84		Level 2

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

The Company values its Term Loan due April 2024, India Facilities, ~~and~~ Euro Term Loans, and HUF Bonds based on the current market rate, and as of July ~~2, 2021,~~1, 2022, the carrying amounts approximate fair values.

~~11.~~Table of Contents

12. COMMITMENTS AND CONTINGENCIES

Litigation and other legal matters

In connection with the matters described below, the Company has accrued for loss contingencies where it believes that losses are probable and estimable. ~~The amounts accrued for any individual matter are not material.~~ Although it is reasonably possible that actual losses could be in excess of the Company’s accrual, the Company is unable to estimate a reasonably possible loss or range of loss in excess of its accrual, due to various reasons, including, among others, that: (i) the proceedings are in early stages or no claims have been asserted, (ii) specific damages have not been sought in all of these matters, (iii) damages, if asserted, are considered unsupported and/or exaggerated, (iv) there is uncertainty as to the outcome of pending appeals, motions, or settlements, (v) there are significant factual issues to be resolved, and/or (vi) there are novel legal issues or unsettled legal theories presented. Any such excess loss could have a material ~~adverse~~ effect on the Company’s results of operations or cash flows for a particular period or on the Company’s financial condition.

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

From time to time, the Company enters into IPintellectual property licenses (e.g., patent licenses and software licenses) with third-parties which obligate the Company to report covered behavior to the licensor and pay license fees to the licensor for certain activities or products, or that enable the Company's use of third-party technologies. The Company may also decline to enter into licenses for intellectual property that it does not think is useful for or used in its operations, or for which its customers or suppliers have licenses or have assumed responsibility. Given the diverse and varied nature of its business and the location of its business around the world, certain activities the Company performs, such as providing assembly services in China and India, may fall outside the scope of those licenses or may not be subject to the applicable intellectual property rights. The Company's licensors may disagree and claim royalties are owed for such activities. In addition, the basis (e.g., base price) for any royalty amounts owed are audited by licensors and may be challenged. Some of these disagreements may lead to claims and litigation that might not be resolved in the Company's favor. Additionally, litigation could be lengthy and costly and could materially harm the Company's financial condition regardless of the outcome.

~~Table of Contents~~

On May 8, 2018, a putative class action was filed in the Northern District of California against the Company and certain officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, promulgated thereunder, alleging misstatements and/or omissions in certain of the Company’s financial results, press releases and SEC filings made during the putative class period of January 26, 2017 through April 26, 2018. On October 1, 2018, the Court appointed lead plaintiff and lead plaintiff’s counsel in the case. On November 28, 2018, lead plaintiff filed an amended complaint alleging misstatements and/or omissions in certain of the Company’s SEC filings, press releases, earnings calls, and analyst and investor conferences and expanding the putative class period through October 25, 2018. On April 3, 2019, the Court vacated its prior order appointing lead plaintiff and lead plaintiff’s counsel and reopened the lead plaintiff appointment process. On September 26, 2019, the Court appointed a new lead plaintiff and lead plaintiff’s counsel in the case. On November 8, 2019, lead plaintiff filed a further amended complaint. On December 4, 2019, defendants filed a motion to dismiss the amended complaint. On May 29, 2020, the Court granted defendants’ motion to dismiss without prejudice and gave lead plaintiff 30 days to amend. On June 29, 2020, lead plaintiff filed a further amended complaint. On July 27, 2020, defendants filed a motion to dismiss the amended complaint. On December 10, 2020, the Court granted defendants’ motion to dismiss with prejudice and entered judgment in favor of defendants. On January 7, 2021, lead plaintiff filed a notice of appeal to the Ninth Circuit Court of Appeals. On May 19, 2021, lead plaintiff filed its opening appeal brief, and on July 19, 2021, defendants filed their answering brief. Lead plaintiff’s reply brief is due September 8, 2021. The Company believes that the claims are without merit and intends to vigorously defend this case.

On April 21, 2016, SunEdison, Inc. (together with certain of its subsidiaries, "SunEdison") filed for protection under Chapter 11 of the U.S. Bankruptcy Code. During the fiscal year ended March 31, 2016, the Company recognized a bad debt reserve charge of $61.0 million associated with its outstanding SunEdison receivables and accepted return of previously shipped inventory of approximately $90.0 million. SunEdison stated in schedules filed with the Bankruptcy Court that, within the 90 days preceding SunEdison's bankruptcy filing, the Company received approximately $98.6 million of inventory and cash transfers of $69.2 million, which in aggregate represents the Company's estimate of the maximum reasonably possible contingent loss. On April 15, 2018, a subsidiary of the Company together with its subsidiaries and affiliates, entered into a tolling agreement with the trustee of the SunEdison Litigation Trust to toll any applicable statute of limitations or other time-related defense that might exist in regards to any potential claims that either party might be able to assert against the other for a period that will end at the earlier to occur of: (a) 60 days after a party provides written notice of termination; (b) six years from the effective date of April 15, 2018; or (c) such other date as the parties may agree in writing. No preference claims have been asserted against the Company and consideration has been given to the related contingencies based on the facts currently known. The Company has a number of affirmative and direct defenses to any potential claims for recovery and intends to vigorously defend any such claim, if asserted.

One of the Company's Brazilian subsidiaries has received assessments for certain sales and import taxes. There were originally 6 tax assessments totaling the updated amount of ~~387.5~~374 million Brazilian reals (approximately USD ~~$77.2~~$72 million based on the exchange rate as of July ~~2, 2021)~~1, 2022). Five of the assessments are in various stages of the review process at the administrative level; the Company successfully defeated one of the ~~six~~6 assessments in September 2019 (totaling approximately the updated amount of ~~61.7~~61 million Brazilian reals or USD ~~$12.3~~$12 million); that assessment remains subject to appeal and no tax proceeding has been finalized yet. The Company was unsuccessful at the administrative level for one of the assessments and filed an annulment action in federal court in Brasilia, Brazil on March 23, 2020; the updated value of that assessment is ~~37.6~~34 million Brazilian reals (approximately USD ~~$7.5~~$7 million). The Company believes there is no legal basis for any of these assessments and that isit has meritorious defenses. The Company will continue to vigorously oppose all of these assessments, as well as any future assessments. The Company does not expect final judicial determination on any of these claims in the next four years.

On February 14, 2019, the Company submitted an initial notification of voluntary disclosure to the U.S. Department of the Treasury, Office of Foreign Assets Control ("OFAC") regarding possible noncompliance with U.S. economic sanctions requirements among certain non-U.S. Flex-affiliated operations. On September 28, 2020, the Company made a submission to OFAC that completed the Company’s voluntary disclosure based on the results of an internal investigation regarding the matter. On June 11, 2021, the Company notified OFAC that it had identified possible additional relevant transactions at one non-U.S. Flex-affiliated operation. The Company ~~is currently reviewing those transactions and expects to submit~~submitted an update to OFAC on November 16, 2021 reporting on the results of its ~~submission to OFAC once that~~ review ~~is complete.~~of those transactions. The Company intends to continue to cooperate fully with OFAC in this matter going forward. Nonetheless, it is reasonably possible that the Company could be subject to penalties that could have a material adverse effect on the Company’s financial position, results of operations or cash flows.

A foreign Tax Authority (“Tax Authority”) has assessed a cumulative total of approximately ~~$163.9~~$167 million in taxes owed for multiple Flex legal entities within its jurisdiction for various fiscal years ranging from fiscal year 2010 through fiscal year 2018.

Table of Contents

The assessed amounts related to the denial of certain deductible intercompany payments. The Company disagrees with the Tax Authority’s assessments and is actively contesting the assessments through the administrative and judicial processes.

~~Table of Contents~~

A different foreign Tax Authority had issued a letter against one of the Company’s legal entities asserting that the entity did not meet the qualification criteria for tax holiday status for fiscal year 2006 through fiscal year 2013. The asserted additional tax and penalty is approximately $80.0 million. The Company disagreed with the Tax Authority’s assertion but agreed with the Tax Authority to settle the issue for an immaterial amount. This immaterial amount was accrued for during the fourth quarter of fiscal year 2021 and is expected to be paid during the first half of fiscal year 2022.

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

In November 2019, the Company received a favorable ruling from the Brazilian Supreme Court in a case against the Brazilian tax authorities regarding the right to exclude the value of a state tax referred to as ICMS from the calculation of a federal operational tax basis referred to as PIS/COFINS. The ruling allowed the Company the right to recover amounts unduly paid from February 2003 to December 2019. As a result, the Company recorded an immaterial gain in fiscal year 2020 for the recovery of taxes. The Receita Federal, a tax authority in Brazil, filed a Motion of Clarification on a leading case with the Brazilian Supreme Court previously in 2017 and in May 2021, the Brazilian Supreme Court ruled in favor of the taxpayers and specifically clarified that the ICMS taxes to be excluded from the PIS/COFINS tax basis are to be based on the amount stated on the sales invoice irrespective of any further discounts received from the state. As a result of this ruling, which further reinforced the favorable ruling received in November 2019, the Company initiated the request for Credit Habilitation with the tax authorities in June 2021 to request additional PIS/COFINS credit recovery in the amount of 776.7 million Brazilian reals (approximately USD $154.8 million based on the exchange rate as of July 2, 2021). However, the nature of our credits requested for Habilitation were not specifically addressed by the May 2021 ruling, and accordingly there remains uncertainty regarding the Company’s ability to recover these credits. The Company considers the recovery of these credits to be a contingent gain in accordance with ASC 450, Contingencies, and has not recorded a gain for the recovery in the three-month period ended July 2, 2021 as it has not resolved all contingencies to conclude a realized or realizable amount. The amount and timing of recognition of the gain recovery is dependent upon the decision from the relevant tax authorities in regards to our application for Credit Habilitation and may have a material impact to our consolidated financial statements. We expect that this contingency could be resolved as early as the second quarter of fiscal year 2022. Additional taxes may also result from the credit recovery we receive subsequently.

In addition to the matters discussed above, from time to time, the Company is subject to legal proceedings, claims, and litigation arising in the ordinary course of business. The Company defends itself vigorously against any such claims. Although the outcome of these matters is currently not determinable, management expects that any losses that are probable or reasonably possible of being incurred as a result of these matters, which are in excess of amounts already accrued in the Company’s consolidated balance sheets, would not be material to the financial statements as a whole.

~~12.~~13. SHARE REPURCHASES

During the three-month period ended July ~~2, 2021,~~1, 2022, the Company repurchased ~~9.0~~11.3 million shares at an aggregate purchase price of ~~$162.2~~$181 million, and retired all of these shares.

Under the Company’s current share repurchase program, the Board of Directors authorized repurchases of its outstanding ordinary shares for up to ~~$500.0 million~~$1.0 billion in accordance with the share repurchase mandate approved by the Company’s shareholders at the date of the most recent Annual General Meeting held on August ~~7, 2020.~~4, 2021. As of July ~~2, 2021,~~1, 2022, shares in the aggregate amount of ~~$154.3~~$314 million were available to be repurchased under the current plan.

~~13.~~14. SEGMENT REPORTING

The Company reports its financial performance based on 23 operating and reportable segments, Flex Agility Solutions, ~~(“FAS”) and~~ Flex Reliability Solutions ~~(“FRS”)~~ and Nextracker and analyzes operating income as the measure of segment profitability. The determination of these segments is based on several factors, including the nature of products and services, the nature of production processes, customer base, delivery channels and similar economic characteristics.

An operating segment's performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include intangible amortization, ~~of intangibles,~~ stock-based compensation, ~~customer related asset impairment (recoveries),~~and legal and ~~other, and interest and other, net.~~other. A portion of depreciation is allocated to the respective ~~segment,~~segments, together with other general corporate research and development and administrative expenses.

2122

Table of Contents

Selected financial information by segment is in the table below. Historical information for the first quarter of fiscal year ended March 31, 2022 has been recast to reflect the new operating and reportable segments in the table below and in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations."


		Three-Month Periods Ended				Three-Month Periods Ended
		July 2, 2021		June 26, 2020				July 1, 2022		July 2, 2021
		(In millions)						(In millions)
Net sales:	Net sales:						Net sales:
Flex Agility Solutions	Flex Agility Solutions	$	3,432	$	2,912		Flex Agility Solutions	$	3,991	$	3,432
Flex Reliability Solutions	Flex Reliability Solutions	2,910		2,241			Flex Reliability Solutions	2,969		2,582
Nextracker							Nextracker	395		341
Intersegment eliminations							Intersegment eliminations	(8)		(13)
		$	6,342	$	5,153			$	7,347	$	6,342
Segment income and reconciliation of income before tax:
Segment income and reconciliation of operating income:							Segment income and reconciliation of operating income:
Flex Agility Solutions	Flex Agility Solutions	$	137	$	72		Flex Agility Solutions	$	171	$	137
Flex Reliability Solutions	Flex Reliability Solutions	170		115			Flex Reliability Solutions	147		144
Nextracker							Nextracker	30		25
Corporate and Other	Corporate and Other	(17)		(24)			Corporate and Other	(18)		(16)
Total segment income	Total segment income	290		163			Total segment income	330		290
Reconciling items:	Reconciling items:						Reconciling items:
Intangible amortization	Intangible amortization	15		15			Intangible amortization	22		15
Stock-based compensation	Stock-based compensation	20		13			Stock-based compensation	26		20

Restructuring charges		0		10

Legal and other (1)	Legal and other (1)	0		27			Legal and other (1)	10		—
Interest and other, net		22		31

Income before income taxes		$	233	$	67
Operating income							Operating income	$	272	$	255

(1)Legal and other consists of costs not directly related to core business results and may include matters relating to commercial disputes, government regulatory and compliance, intellectual property, antitrust, tax, employment or shareholder issues, product liability claims and other issues on a global basis as well as acquisition related costs and customer related asset ~~recoveries~~.recoveries. During the first quarter of fiscal year ~~2021,~~2023, the Company accrued for certain loss contingencies where losses are considered probable and estimable.

Corporate and other primarily includes corporate services costs that are not included in the ~~CODM's~~chief operating decision maker's ("CODM") assessment of the performance of each of the identified ~~reporting~~reportable segments.

The Company provides an overall platform of assets and services, which the segments utilize for the benefit of their various customers. The shared assets and services are contained within the Company's global manufacturing and design operations and include manufacturing and design facilities. Most of the underlying manufacturing and design assets are co-mingled in the operating campuses and are compatible to operate across segments and highly interchangeable throughout the platform. Given the highly interchangeable nature of the assets, they are not separately identified by segment nor reported by segment to the Company's CODM.

15. SUBSEQUENT EVENTS

On July 19, 2022, the Company entered into a new $2.5 billion credit agreement (the "New Credit Facility") which matures in July 2027 and consists of a $2.5 billion revolving credit facility with a sub-limit of $360 million available for swing line loans and a sub-limit of $175 million available for the issuance of letters of credit. The New Credit Facility replaced the previous $2.0 billion credit facility. Under the New Credit Facility, the interest rate margins, commitment fee and letter of credit usage fee are subject to upward or downward adjustments if the Company achieves, or fails to achieve, certain specified sustainability targets with respect to workplace safety and greenhouse gas emissions. Such upward or downward sustainability adjustments may be up to 0.05% per annum in the case of the interest rate margins and letter of credit usage fee and up to 0.01% per annum in the case of the commitment fee.

Table of Contents

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

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

This report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words “expects,” “anticipates,” “believes,” “intends,” “plans” and similar expressions identify forward-looking statements. In addition, any statements which refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this Form 10-Q with the Securities and Exchange ~~Commission.~~Commission (the "SEC"). These forward-looking statements are subject to risks and uncertainties, including, without limitation, those risks and uncertainties discussed in this section, as well as any risks and uncertainties discussed ~~in Part II, Item 1A, “Risk Factors” of this report on Form 10-Q, and~~ in Part I, Item 1A, “Risk Factors” and in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2021.~~2022. In addition, new risks emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. Accordingly, our future results may differ materially from historical results or from those discussed or implied by these forward-looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements.

~~Table of Contents~~

OVERVIEW

We are the diversified manufacturing partner of choice that helps ~~a diverse customer base~~market-leading brands design, build and ~~build~~deliver innovative products that improve the world. Through the collective strength of a global workforce across approximately 30 countries ~~and~~with responsible, sustainable operations, we deliver ~~technology innovation, supply chain, and~~advanced manufacturing solutions toand operate one of the most trusted global supply chains, supporting the entire product lifecycle with fulfillment, after-market, and circular economy solutions for diverse industries including cloud, communications, enterprise, automotive, industrial, consumer devices, lifestyle, healthcare, and ~~end markets. The Company reports its financial performance based on two~~energy. Our three operating and reportable ~~segments:~~segments are: