falsedesktopFLEX2020-12-31000086637421000019{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Large Accelerated Filer\t☒\tAccelerated filer\t☐\tNon-accelerated filer\t☐\tSmaller reporting company\t☐\nEmerging growth company\t☐\t\t\t\t\t\t\n", "q10k_tbl_1": "\t\tPage\nPART I. FINANCIAL INFORMATION\t\t\nItem 1.\tFinancial Statements\t3\n\tReport of Independent Registered Public Accounting Firm\t3\n\tCondensed Consolidated Balance Sheets (unaudited) - December 31 2020 and March 31 2020\t4\n\tCondensed Consolidated Statements of Operations (unaudited) - Three-Month and Nine-Month Periods Ended December 31 2020 and December 31 2019\t5\n\tCondensed Consolidated Statements of Comprehensive Income (unaudited) - Three-Month and Nine-Month Periods Ended December 31 2020 and December 31 2019\t6\n\tCondensed Consolidated Statements of Shareholders' Equity (unaudited) - Three-Month and Nine-Month Periods Ended December 31 2020 and December 31 2019\t7\n\tCondensed Consolidated Statements of Cash Flows (unaudited) - Nine-Month Periods Ended December 31 2020 and December 31 2019\t9\n\tNotes to Condensed Consolidated Financial Statements (unaudited)\t10\nItem 2.\tManagement's Discussion and Analysis of Financial Condition and Results of Operations\t29\nItem 3.\tQuantitative and Qualitative Disclosures About Market Risk\t41\nItem 4.\tControls and Procedures\t41\nPART II. OTHER INFORMATION\t\t\nItem 1.\tLegal Proceedings\t42\nItem 1A.\tRisk Factors\t42\nItem 2.\tUnregistered Sales of Equity Securities and Use of Proceeds\t44\nItem 3.\tDefaults Upon Senior Securities\t45\nItem 4.\tMine Safety Disclosures\t45\nItem 5.\tOther Information\t45\nItem 6.\tExhibits\t46\nSignatures\t\t47\n", "q10k_tbl_2": "\tAs of December 31 2020\tAs of March 31 2020\n\t(In millions except share amounts) (Unaudited)\t\nASSETS\t\t\nCurrent assets:\t\t\nCash and cash equivalents\t2611\t1923\nAccounts receivable net of allowance of $77 and $96 respectively\t4070\t2436\nContract assets\t121\t282\nInventories\t3699\t3785\nOther current assets\t610\t660\nTotal current assets\t11111\t9086\nProperty and equipment net\t2097\t2216\nOperating lease right-of-use assets net\t609\t605\nGoodwill\t1109\t1065\nOther intangible assets net\t233\t262\nOther assets\t509\t456\nTotal assets\t15668\t13690\nLIABILITIES AND SHAREHOLDERS' EQUITY\t\t\nCurrent liabilities:\t\t\nBank borrowings and current portion of long-term debt\t72\t149\nAccounts payable\t5159\t5108\nAccrued payroll\t475\t364\nOther current liabilities\t1813\t1590\nTotal current liabilities\t7519\t7211\nLong-term debt net of current portion\t3740\t2689\nOperating lease liabilities non-current\t544\t529\nOther liabilities\t484\t430\nShareholders' equity\t\t\nOrdinary shares no par value; 549211158 and 547665632 issued and 498971803 and 497426277 outstanding respectively\t6360\t6336\nTreasury stock at cost; 50239355 shares as of December 31 2020 and March 31 2020\t(388)\t(388)\nAccumulated deficit\t(2529)\t(2902)\nAccumulated other comprehensive loss\t(62)\t(215)\nTotal shareholders' equity\t3381\t2831\nTotal liabilities and shareholders' equity\t15668\t13690\n", "q10k_tbl_3": "\tThree-Month Periods Ended\t\tNine-Month Periods Ended\t\n\tDecember 31 2020\tDecember 31 2019\tDecember 31 2020\tDecember 31 2019\n\t(In millions except per share amounts) (Unaudited)\t\t\t\nNet sales\t6720\t6461\t17858\t18725\nCost of sales\t6212\t6017\t16618\t17578\nRestructuring charges\t29\t14\t63\t175\nGross profit\t479\t430\t1177\t972\nSelling general and administrative expenses\t222\t218\t606\t633\nIntangible amortization\t16\t16\t47\t49\nRestructuring charges\t1\t1\t12\t24\nInterest and other net\t7\t50\t58\t153\nIncome before income taxes\t233\t145\t454\t113\nProvision for income taxes\t25\t34\t81\t74\nNet income\t208\t111\t373\t39\nEarnings per share:\t\t\t\t\nBasic\t0.42\t0.22\t0.75\t0.08\nDiluted\t0.41\t0.22\t0.74\t0.08\nWeighted-average shares used in computing per share amounts:\t\t\t\t\nBasic\t500\t507\t500\t511\nDiluted\t508\t510\t505\t515\n", "q10k_tbl_4": "\tThree-Month Periods Ended\t\tNine-Month Periods Ended\t\n\tDecember 31 2020\tDecember 31 2019\tDecember 31 2020\tDecember 31 2019\n\t(In millions) (Unaudited)\t\t\t\nNet income\t208\t111\t373\t39\nOther comprehensive income (loss):\t\t\t\t\nForeign currency translation adjustments net of zero tax\t42\t10\t87\t(11)\nUnrealized gain (loss) on derivative instruments and other net of zero tax\t29\t14\t66\t(3)\nComprehensive income\t279\t135\t526\t25\n", "q10k_tbl_5": "\tOrdinary Shares\t\t\tAccumulated Other Comprehensive Loss\t\t\tTotal\nThree Months Ended December 31 2020\tShares Outstanding\tAmount\tAccumulated Deficit\tUnrealized Gain (Loss) on Derivative Instruments and Other\tForeign Currency Translation Adjustments\tTotal Accumulated Other Comprehensive Loss\tShareholders' Equity\n\t(In millions) Unaudited\t\t\t\t\t\t\nBALANCE AT SEPTEMBER 25 2020\t501\t5985\t(2737)\t(45)\t(88)\t(133)\t3115\nRepurchase of Flex Ltd. ordinary shares at cost\t(2)\t(38)\t0\t0\t0\t0\t(38)\nNet income\t0\t0\t208\t0\t0\t0\t208\nStock-based compensation\t0\t25\t0\t0\t0\t0\t25\nTotal other comprehensive income\t0\t0\t0\t29\t42\t71\t71\nBALANCE AT DECEMBER 31 2020\t499\t5972\t(2529)\t(16)\t(46)\t(62)\t3381\n", "q10k_tbl_6": "\tOrdinary Shares\t\t\tAccumulated Other Comprehensive Loss\t\t\tTotal\nNine Months Ended December 31 2020\tShares Outstanding\tAmount\tAccumulated Deficit\tUnrealized Gain (Loss) on Derivative Instruments and Other\tForeign Currency Translation Adjustments\tTotal Accumulated Other Comprehensive Loss\tShareholders' Equity\n\t(In millions) Unaudited\t\t\t\t\t\t\nBALANCE AT MARCH 31 2020\t497\t5948\t(2902)\t(82)\t(133)\t(215)\t2831\nRepurchase of Flex Ltd. ordinary shares at cost\t(2)\t(38)\t0\t0\t0\t0\t(38)\nIssuance of Flex Ltd. vested shares under restricted share unit awards\t4\t0\t0\t0\t0\t0\t0\nNet Income\t0\t0\t373\t0\t0\t0\t373\nStock-based compensation\t0\t62\t0\t0\t0\t0\t62\nTotal other comprehensive income\t0\t0\t0\t66\t87\t153\t153\nBALANCE AT DECEMBER 31 2020\t499\t5972\t(2529)\t(16)\t(46)\t(62)\t3381\n", "q10k_tbl_7": "\tOrdinary Shares\t\t\tAccumulated Other Comprehensive Loss\t\t\tTotal\nThree Months Ended December 31 2019\tShares Outstanding\tAmount\tAccumulated Deficit\tUnrealized Gain (Loss) on Derivative Instruments and Other\tForeign Currency Translation Adjustments\tTotal Accumulated Other Comprehensive Loss\tShareholders' Equity\n\t(In millions) Unaudited\t\t\t\t\t\t\nBALANCE AT SEPTEMBER 27 2019\t509\t6058\t(3062)\t(59)\t(131)\t(190)\t2806\nRepurchase of Flex Ltd. ordinary shares at cost\t(5)\t(61)\t0\t0\t0\t0\t(61)\nExercise of stock options\t0\t\t0\t0\t0\t0\t0\nNet income\t0\t0\t111\t0\t0\t0\t111\nStock-based compensation\t0\t19\t0\t0\t0\t0\t19\nTotal other comprehensive income\t0\t0\t0\t14\t10\t24\t24\nBALANCE AT DECEMBER 31 2019\t504\t6016\t(2951)\t(45)\t(121)\t(166)\t2899\n", "q10k_tbl_8": "\tOrdinary Shares\t\t\tAccumulated Other Comprehensive Loss\t\t\tTotal\nNine Months Ended December 31 2019\tShares Outstanding\tAmount\tAccumulated Deficit\tUnrealized Gain (Loss) on Derivative Instruments and Other\tForeign Currency Translation Adjustments\tTotal Accumulated Other Comprehensive Loss\tShareholders' Equity\n\t(In millions) Unaudited\t\t\t\t\t\t\nBALANCE AT MARCH 31 2019\t517\t6136\t(3012)\t(42)\t(110)\t(152)\t2972\nRepurchase of Flex Ltd. ordinary shares at cost\t(16)\t(173)\t0\t0\t0\t0\t(173)\nExercise of stock options\t0\t1\t0\t0\t0\t0\t1\nIssuance of Flex Ltd. vested shares under restricted share unit awards\t3\t0\t0\t0\t0\t0\t0\nNet income\t0\t0\t39\t0\t0\t0\t39\nStock-based compensation\t0\t53\t0\t0\t0\t0\t53\nCumulative effect on opening equity of adopting accounting standards and other\t0\t(1)\t22\t0\t0\t0\t21\nTotal other comprehensive loss\t0\t0\t0\t(3)\t(11)\t(14)\t(14)\nBALANCE AT DECEMBER 31 2019\t504\t6016\t(2951)\t(45)\t(121)\t(166)\t2899\n", "q10k_tbl_9": "\tNine-Month Periods Ended\t\n\tDecember 31 2020\tDecember 31 2019\n\t(In millions) (Unaudited)\t\nCASH FLOWS FROM OPERATING ACTIVITIES:\t\t\nNet income\t373\t39\nDepreciation amortization and other impairment charges\t526\t526\nChanges in working capital and other net\t(916)\t(2264)\nNet cash used in operating activities\t(17)\t(1699)\nCASH FLOWS FROM INVESTING ACTIVITIES:\t\t\nPurchases of property and equipment\t(261)\t(376)\nProceeds from the disposition of property and equipment\t25\t102\nCash collections of deferred purchase price\t0\t2511\nOther investing activities net\t10\t24\nNet cash provided by (used in) investing activities\t(226)\t2261\nCASH FLOWS FROM FINANCING ACTIVITIES:\t\t\nProceeds from bank borrowings and long-term debt\t1944\t1017\nRepayments of bank borrowings and long-term debt\t(1012)\t(1308)\nPayments for repurchases of ordinary shares\t(38)\t(173)\nOther financing activities net\t(1)\t2\nNet cash provided by (used in) financing activities\t893\t(462)\nEffect of exchange rates on cash and cash equivalents\t38\t(8)\nNet increase in cash and cash equivalents\t688\t92\nCash and cash equivalents beginning of period\t1923\t1697\nCash and cash equivalents end of period\t2611\t1789\nNon-cash investing activities:\t\t\nUnpaid purchases of property and equipment\t73\t64\n", "q10k_tbl_10": "\tAs of December 31 2020\tAs of March 31 2020\n\t(In millions)\t\nRaw materials\t2625\t2836\nWork-in-progress\t472\t373\nFinished goods\t602\t576\n\t3699\t3785\n", "q10k_tbl_11": "\tFAS\t\t\tFRS\t\t\t\n\tCommunications Enterprise and Cloud\tLifestyle\tConsumer Devices\tAutomotive\tHealth Solutions\tIndustrial\tTotal\n\t(In millions)\t\t\t\t\t\t\nBalance at April 1 2020\t188\t131\t51\t174\t192\t329\t1065\nForeign currency translation adjustments\t1\t0\t0\t39\t4\t0\t44\nBalance at December 31 2020\t189\t131\t51\t213\t196\t329\t1109\n", "q10k_tbl_12": "\tAs of December 31 2020\t\t\tAs of March 31 2020\t\t\n\tGross Carrying Amount\tAccumulated Amortization\tNet Carrying Amount\tGross Carrying Amount\tAccumulated Amortization\tNet Carrying Amount\n\t(In millions)\t\t\t\t\t\nIntangible assets:\t\t\t\t\t\t\nCustomer-related intangibles\t280\t(149)\t131\t275\t(128)\t147\nLicenses and other intangibles\t258\t(156)\t102\t245\t(130)\t115\nTotal\t538\t(305)\t233\t520\t(258)\t262\n", "q10k_tbl_13": "Fiscal Year Ending March 31\tAmount\n\t(In millions)\n2021 (1)\t16\n2022\t55\n2023\t47\n2024\t45\n2025\t40\nThereafter\t30\nTotal amortization expense\t233\n", "q10k_tbl_14": "\tThree-Month Periods Ended\t\tNine-Month Periods Ended\t\n\tDecember 31 2020\tDecember 31 2019\tDecember 31 2020\tDecember 31 2019\nTiming of Transfer\t(In millions)\t\t\t\nFAS\t\t\t\t\nPoint in time\t3544\t3104\t8813\t9060\nOver time\t290\t527\t1250\t2062\nTotal\t3834\t3631\t10063\t11122\nFRS\t\t\t\t\nPoint in time\t2189\t2050\t5292\t5101\nOver time\t697\t780\t2503\t2502\nTotal\t2886\t2830\t7795\t7603\nFlex\t\t\t\t\nPoint in time\t5733\t5154\t14105\t14161\nOver time\t987\t1307\t3753\t4564\nTotal\t6720\t6461\t17858\t18725\n", "q10k_tbl_15": "\tThree-Month Periods Ended\t\tNine-Month Periods Ended\t\n\tDecember 31 2020\tDecember 31 2019\tDecember 31 2020\tDecember 31 2019\n\t(In millions)\t\t\t\nCost of sales\t6\t4\t16\t11\nSelling general and administrative expenses\t19\t15\t46\t42\nTotal share-based compensation expense\t25\t19\t62\t53\n", "q10k_tbl_16": "\tThree-Month Periods Ended\t\tNine-Month Periods Ended\t\n\tDecember 31 2020\tDecember 31 2019\tDecember 31 2020\tDecember 31 2019\n\t(In millions except per share amounts)\t\t\t\nBasic earnings per share:\t\t\t\t\nNet income\t208\t111\t373\t39\nShares used in computation:\t\t\t\t\nWeighted-average ordinary shares outstanding\t500\t507\t500\t511\nBasic earnings per share\t0.42\t0.22\t0.75\t0.08\nDiluted earnings per share:\t\t\t\t\nNet income\t208\t111\t373\t39\nShares used in computation:\t\t\t\t\nWeighted-average ordinary shares outstanding\t500\t507\t500\t511\nWeighted-average ordinary share equivalents from stock options and RSU awards (1) (2)\t8\t3\t5\t4\nWeighted-average ordinary shares and ordinary share equivalents outstanding\t508\t510\t505\t515\nDiluted earnings per share\t0.41\t0.22\t0.74\t0.08\n", "q10k_tbl_17": "\tAs of December 31 2020\tAs of March 31 2020\n\t(In millions)\t\nTerm Loan including current portion due in installments through June 2022\t0\t433\n5.000% Notes due February 2023\t500\t500\nTerm Loan due April 2024 - three-month Yen LIBOR plus 0.500%\t324\t310\n4.750% Notes due June 2025\t598\t597\n3.750% Notes due February 2026\t695\t0\n4.875% Notes due June 2029\t661\t662\n4.875% Notes due May 2030\t696\t0\nIndia Facilities\t136\t138\nOther\t225\t211\nDebt issuance costs\t(23)\t(13)\n\t3812\t2838\nCurrent portion net of debt issuance costs\t(72)\t(149)\nNon-current portion\t3740\t2689\n", "q10k_tbl_18": "Fiscal Year Ending March 31\tAmount\n\t(In millions)\n2021 (1)\t56\n2022\t222\n2023\t531\n2024\t53\n2025\t324\nThereafter\t2649\nTotal\t3835\n", "q10k_tbl_19": "\tThree-Month Periods Ended\t\tNine-Month Periods Ended\t\n\tDecember 31 2020\tDecember 31 2019\tDecember 31 2020\tDecember 31 2019\n\t(In millions)\t\t\t\nInterest expenses on debt obligations (1)\t40\t35\t111\t114\nABS and AR sales programs related expenses\t2\t11\t9\t35\nInterest income\t(4)\t(5)\t(10)\t(15)\nGain on foreign exchange transactions\t(3)\t(3)\t(8)\t(7)\nEquity in (earnings) losses (2)\t(49)\t(1)\t(64)\t5\nInvestment impairment (3)\t20\t16\t21\t23\n", "q10k_tbl_20": "\tForeign Currency Amount\t\tNotional Contract Value in USD\t\nCurrency\tBuy\tSell\tBuy\tSell\n\t(In millions)\t\t\t\nCash Flow Hedges\t\t\t\t\nCNY\t2751\t0\t421\t0\nHUF\t33062\t0\t111\t0\nJPY\t33525\t0\t300\t0\nMXN\t5133\t0\t258\t0\nMYR\t389\t44\t96\t11\nOther\tN/A\tN/A\t219\t67\n\t\t\t1405\t78\nOther Foreign Currency Contracts\t\t\t\t\nBRL\t0\t646\t0\t125\nCAD\t128\t112\t100\t87\nCNY\t3178\t391\t482\t60\nEUR\t2025\t2113\t2473\t2580\nGBP\t55\t78\t74\t105\nHUF\t63519\t63796\t213\t214\nILS\t571\t150\t177\t47\nMXN\t6882\t5519\t346\t277\nMYR\t671\t291\t165\t72\nSEK\t393\t455\t47\t55\nOther\tN/A\tN/A\t219\t143\n\t\t\t4296\t3765\nTotal Notional Contract Value in USD\t\t\t5701\t3843\n", "q10k_tbl_21": "\tFair Values of Derivative Instruments\t\t\t\t\t\n\tAsset Derivatives\t\t\tLiability Derivatives\t\t\n\t\tFair Value\t\t\tFair Value\t\n\tBalance Sheet Location\tDecember 31 2020\tMarch 31 2020\tBalance Sheet Location\tDecember 31 2020\tMarch 31 2020\n\t(In millions)\t\t\t\t\t\nDerivatives designated as hedging instruments\t\t\t\t\t\t\nForeign currency contracts\tOther current assets\t53\t7\tOther current liabilities\t8\t47\nForeign currency contracts\tOther assets\t23\t14\tOther liabilities\t0\t0\nDerivatives not designated as hedging instruments\t\t\t\t\t\t\nForeign currency contracts\tOther current assets\t32\t83\tOther current liabilities\t31\t103\n", "q10k_tbl_22": "\tThree-Month Periods Ended\t\t\t\t\t\n\tDecember 31 2020\t\t\tDecember 31 2019\t\t\n\tUnrealized loss on derivative instruments and other\tForeign currency translation adjustments\tTotal\tUnrealized loss on derivative instruments and other\tForeign currency translation adjustments\tTotal\n\t(In millions)\t\t\t\t\t\nBeginning balance\t(45)\t(88)\t(133)\t(59)\t(131)\t(190)\nOther comprehensive gain before reclassifications\t43\t42\t85\t1\t11\t12\nNet (gains) losses reclassified from accumulated other comprehensive loss\t(14)\t0\t(14)\t13\t(1)\t12\nNet current-period other comprehensive gain\t29\t42\t71\t14\t10\t24\nEnding balance\t(16)\t(46)\t(62)\t(45)\t(121)\t(166)\n", "q10k_tbl_23": "\tNine-Month Periods Ended\t\t\t\t\t\n\tDecember 31 2020\t\t\tDecember 31 2019\t\t\n\tUnrealized loss on derivative instruments and other\tForeign currency translation adjustments\tTotal\tUnrealized loss on derivative instruments and other\tForeign currency translation adjustments\tTotal\n\t(In millions)\t\t\t\t\t\nBeginning balance\t(82)\t(133)\t(215)\t(42)\t(110)\t(152)\nOther comprehensive gain (loss) before reclassifications\t73\t87\t160\t(8)\t(10)\t(18)\nNet (gains) losses reclassified from accumulated other comprehensive loss\t(7)\t0\t(7)\t5\t(1)\t4\nNet current-period other comprehensive gain (loss)\t66\t87\t153\t(3)\t(11)\t(14)\nEnding balance\t(16)\t(46)\t(62)\t(45)\t(121)\t(166)\n", "q10k_tbl_24": "\tFair Value Measurements as of December 31 2020\t\t\t\n\tLevel 1\tLevel 2\tLevel 3\tTotal\n\t(In millions)\t\t\t\nAssets:\t\t\t\t\nMoney market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet)\t0\t1755\t0\t1755\nForeign currency contracts (Note 8)\t0\t108\t0\t108\nDeferred compensation plan assets:\t\t\t\t0\nMutual funds money market accounts and equity securities\t0\t50\t0\t50\nLiabilities:\t\t\t\t\nForeign currency contracts (Note 8)\t0\t(39)\t0\t(39)\n\tFair Value Measurements as of March 31 2020\t\t\t\n\tLevel 1\tLevel 2\tLevel 3\tTotal\n\t(In millions)\t\t\t\nAssets:\t\t\t\t\nMoney market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet)\t0\t404\t0\t404\nForeign currency contracts (Note 8)\t0\t104\t0\t104\nDeferred compensation plan assets:\t\t\t\t0\nMutual funds money market accounts and equity securities\t0\t49\t0\t49\nLiabilities:\t\t\t\t0\nForeign currency contracts (Note 8)\t0\t(149)\t0\t(149)\n", "q10k_tbl_25": "\tAs of December 31 2020\t\tAs of March 31 2020\t\t\n\tCarrying Amount\tFair Value\tCarrying Amount\tFair Value\tFair Value Hierarchy\n\t(In millions)\t\t\t\t\nTerm Loan including current portion due in installments through June 2022\t0\t0\t433\t414\tLevel 1\n5.000% Notes due February 2023\t500\t541\t500\t500\tLevel 1\nTerm Loan due April 2024 - three-month Yen LIBOR plus 0.500%\t324\t324\t310\t310\tLevel 2\n4.750% Notes due June 2025\t598\t680\t597\t613\tLevel 1\n3.750% Notes due February 2026\t695\t771\t0\t0\tLevel 1\n4.875% Notes due June 2029\t661\t786\t662\t628\tLevel 1\n4.875% Notes due May 2030\t696\t826\t0\t0\tLevel 1\nEuro Term Loans\t175\t175\t208\t208\tLevel 2\nIndia Facilities\t136\t136\t138\t138\tLevel 2\n", "q10k_tbl_26": "\tThree-Month Periods Ended\t\tNine-Month Periods Ended\t\n\tDecember 31 2020\tDecember 31 2019\tDecember 31 2020\tDecember 31 2019\n\t(In millions)\t\t\t\nNet sales:\t\t\t\t\nFlex Agility Solutions\t3834\t3631\t10063\t11122\nFlex Reliability Solutions\t2886\t2830\t7795\t7603\n\t6720\t6461\t17858\t18725\nSegment income and reconciliation of income before tax:\t\t\t\t\nFlex Agility Solutions\t153\t98\t313\t301\nFlex Reliability Solutions\t178\t186\t472\t475\nCorporate and Other\t(20)\t(28)\t(64)\t(85)\nTotal segment income\t311\t256\t721\t691\nReconciling items:\t\t\t\t\nIntangible amortization\t16\t16\t47\t49\nStock-based compensation\t25\t19\t62\t53\nCustomer related asset impairments (recoveries) (1)\t0\t4\t(3)\t95\nRestructuring charges (Note 15)\t30\t15\t75\t199\nLegal and other (2)\t0\t7\t28\t29\nInterest and other net\t7\t50\t58\t153\nIncome before income taxes\t233\t145\t454\t113\n", "q10k_tbl_27": "\tSeverance\tLong-Lived Asset Impairment\tOther Exit Costs\tTotal\n\t(In millions)\t\t\t\nBalance as of March 31 2020\t20\t0\t4\t24\nProvision for charges incurred during the nine-month period ended December 31 2020\t68\t3\t4\t75\nCash payments for charges incurred in the fiscal year 2020 and prior\t(13)\t0\t(1)\t(14)\nCash payments for charges incurred during the nine-month period ended December 31 2020\t(35)\t0\t(1)\t(36)\nNon-cash charges incurred during the nine-month period ended December 31 2020\t0\t(3)\t1\t(2)\nBalance as of December 31 2020\t40\t0\t7\t47\nLess: Current portion (classified as other current liabilities)\t39\t0\t7\t46\nAccrued restructuring costs net of current portion (classified as other liabilities)\t1\t0\t0\t1\n", "q10k_tbl_28": "\tThree-Month Periods Ended\t\t\t\tNine-Month Periods Ended\t\t\t\n\tDecember 31 2020\t\tDecember 31 2019\t\tDecember 31 2020\t\tDecember 31 2019\t\n\t(In millions)\t\t\t\t\t\t\t\nNet sales by region:\t\t\t\t\t\t\t\t\nAmericas\t2562\t38%\t2630\t41%\t7119\t40%\t7661\t41%\nAsia\t2695\t40%\t2563\t40%\t6985\t39%\t7510\t40%\nEurope\t1463\t22%\t1268\t19%\t3754\t21%\t3554\t19%\n\t6720\t\t6461\t\t17858\t\t18725\t\nNet sales by country:\t\t\t\t\t\t\t\t\nChina\t1721\t26%\t1638\t25%\t4631\t26%\t4535\t24%\nMexico\t1177\t18%\t1171\t18%\t3237\t18%\t3408\t18%\nU.S.\t964\t14%\t966\t15%\t2728\t15%\t2677\t14%\nMalaysia\t459\t7%\t398\t6%\t1191\t7%\t1233\t7%\nBrazil\t405\t6%\t480\t7%\t1116\t6%\t1524\t8%\nHungary\t385\t6%\t352\t5%\t942\t5%\t994\t5%\nIndia\t316\t5%\t298\t5%\t599\t3%\t1091\t6%\nOther\t1293\t18%\t1158\t19%\t3414\t20%\t3263\t18%\n\t6720\t\t6461\t\t17858\t\t18725\t\n", "q10k_tbl_29": "\tAs of\t\tAs of\t\nProperty and equipment net:\tDecember 31 2020\t\tMarch 31 2020\t\n\t(In millions)\t\t\t\nMexico\t540\t26%\t555\t25%\nU.S.\t364\t17%\t378\t17%\nChina\t337\t16%\t396\t18%\nIndia\t174\t8%\t207\t9%\nHungary\t104\t5%\t100\t5%\nMalaysia\t102\t5%\t111\t4%\nOther\t476\t23%\t469\t22%\n\t2097\t\t2216\t\n", "q10k_tbl_30": "\tThree-Month Periods Ended\t\tNine-Month Periods Ended\t\n\tDecember 31 2020\tDecember 31 2019\tDecember 31 2020\tDecember 31 2019\nNet sales\t100.0%\t100.0%\t100.0%\t100.0%\nCost of sales\t92.4\t93.1\t93.1\t93.9\nRestructuring charges\t0.4\t0.2\t0.4\t0.9\nGross profit\t7.2\t6.7\t6.5\t5.2\nSelling general and administrative expenses\t3.3\t3.4\t3.4\t3.4\nIntangible amortization\t0.2\t0.2\t0.3\t0.3\nRestructuring charges\t0.0\t0.0\t0.1\t0.1\nInterest and other net\t0.1\t0.8\t0.3\t0.8\nIncome before income taxes\t3.6\t2.3\t2.4\t0.6\nProvision for income taxes\t0.4\t0.5\t0.5\t0.4\nNet income\t3.2%\t1.8%\t1.9%\t0.2%\n", "q10k_tbl_31": "\tThree-Month Periods Ended\t\t\t\tNine-Month Periods Ended\t\t\t\n\tDecember 31 2020\t\tDecember 31 2019\t\tDecember 31 2020\t\tDecember 31 2019\t\n\t(In millions)\t\t\t\t\t\t\t\nNet sales:\t\t\t\t\t\t\t\t\nFlex Agility Solutions\t3834\t57%\t3631\t56%\t10063\t56%\t11122\t59%\nFlex Reliability Solutions\t2886\t43%\t2830\t44%\t7795\t44%\t7603\t41%\n\t6720\t\t6461\t\t17858\t\t18725\t\n", "q10k_tbl_32": "\tThree-Month Periods Ended\t\t\t\tNine-Month Periods Ended\t\t\t\n\tDecember 31 2020\t\tDecember 31 2019\t\tDecember 31 2020\t\tDecember 31 2019\t\n\t(In millions)\t\t\t\t\t\t\t\nSegment income:\t\t\t\t\t\t\t\t\nFlex Agility Solutions\t153\t4.0%\t98\t2.7%\t313\t3.1%\t301\t2.7%\nFlex Reliability Solutions\t178\t6.2%\t186\t6.6%\t472\t6.1%\t475\t6.2%\n", "q10k_tbl_33": "\tThree-Month Periods Ended\t\t\t\t\t\t\t\tFiscal Year Ended\t\n\tJune 28 2019\t\tSeptember 27 2019\t\tDecember 31 2019\t\tMarch 31 2020\t\tMarch 31 2020\t\n\t(In millions)\t\t\t\t\t\t\t\t\t\n\t(Unaudited)\t\t\t\t\t\t\t\t\t\nNet sales:\t\t\t\t\t\t\t\t\t\t\nFlex Agility Solutions\t3908\t63%\t3583\t59%\t3631\t56%\t2931\t53%\t14053\t58%\nFlex Reliability Solutions\t2268\t37%\t2505\t41%\t2830\t44%\t2554\t47%\t10157\t42%\n\t6176\t\t6088\t\t6461\t\t5484\t\t24210\t\nSegment income:\t\t\t\t\t\t\t\t\t\t\nFlex Agility Solutions\t109\t2.8%\t94\t2.6%\t98\t2.7%\t68\t2.3%\t369\t2.6%\nFlex Reliability Solutions\t130\t5.7%\t159\t6.3%\t186\t6.6%\t167\t6.5%\t642\t6.3%\n", "q10k_tbl_34": "\tNine-Month Periods Ended\t\n\tDecember 31 2020\tDecember 31 2019\n\t(In millions)\t\nNet cash used in operating activities\t(17)\t(1699)\nReduction in ABS levels\t796\t0\nCash collection of deferred purchase price and other\t(1)\t2511\nPurchases of property and equipment\t(261)\t(376)\nProceeds from the disposition of property and equipment\t25\t102\nAdjusted free cash flow\t542\t538\n", "q10k_tbl_35": "Period (2)\tTotal Number of Shares Purchased (1)\tAverage Price Paid per Share\tTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs\tApproximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs\nSeptember 26 2020 - October 30 2020\t0\t0\t0\t500000000\nOctober 31 2020 - November 27 2020\t1849898\t15.53\t1849898\t471270466\nNovember 28 2020 - December 31 2020\t546159\t16.39\t546159\t462318284\nTotal\t2396057\t\t2396057\t\n", "q10k_tbl_36": "\t\t\tIncorporated by Reference\t\t\t\nExhibit No.\tExhibit\tForm\tFile No.\tFiling Date\tExhibit No.\tFiled Herewith\n10.01\tExecutive Transition Agreement dated November 17 2020 between Flex Ltd. and Paul Humphries.\t\t\t\t\tX\n10.02\tForm of Addendum Award Agreement under the 2010 Deferred Compensation Plan (FY21).\t\t\t\t\tX\n15.01\tLetter in lieu of consent of Deloitte & Touche LLP.\t\t\t\t\tX\n31.01\tCertification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.\t\t\t\t\tX\n31.02\tCertification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.\t\t\t\t\tX\n32.01\tCertification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*\t\t\t\t\tX\n101.INS\tXBRL Instance Document\t\t\t\t\tX\n101.SCH\tXBRL Taxonomy Extension Schema Document\t\t\t\t\tX\n101.CAL\tXBRL Taxonomy Extension Calculation Linkbase Document\t\t\t\t\tX\n101.DEF\tXBRL Taxonomy Extension Definition Linkbase Document\t\t\t\t\tX\n101.LAB\tXBRL Taxonomy Extension Label Linkbase Document\t\t\t\t\tX\n101.PRE\tXBRL Taxonomy Extension Presentation Linkbase Document\t\t\t\t\tX\n104\tCover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)\t\t\t\t\t\n"}{"bs": "q10k_tbl_2", "is": "q10k_tbl_3", "cf": "q10k_tbl_9"}None
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2020
Or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-23354
FLEX LTD.
(Exact name of registrant as specified in its charter)
Singapore
Not Applicable
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
2 Changi South Lane,
Singapore
486123
(Address of registrant’s principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code
(65) 6876-9899
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Ordinary Shares, No Par Value
FLEX
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.:
Large Accelerated Filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of the registrant’s ordinary shares outstanding as of January 25, 2021 was 499,172,368.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Flex Ltd.
Singapore
Results of Review of Interim Financial Information
We have reviewed the accompanying condensed consolidated balance sheet of Flex Ltd. and its subsidiaries (the “Company”) as of December 31, 2020, the related condensed consolidated statements of operations, comprehensive income and shareholders' equity for the three-month and nine-month periods ended December 31, 2020 and December 31, 2019, and the condensed consolidated statements of cash flows for the nine-month periods ended December 31, 2020 and December 31, 2019, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of Flex Ltd. and subsidiaries as of March 31, 2020 and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated May 28, 2020, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding changes in accounting principles. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 2020 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
The interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION OF THE COMPANY AND BASIS OF PRESENTATION
Organization of the Company
Flex Ltd. ("Flex" or the "Company") was incorporated in the Republic of Singapore in May 1990. The Company's operations have expanded over the years through a combination of organic growth and acquisitions. The Company is the manufacturing partner of choice that helps a diverse customer base design and build products that improve the world. Through the collective strength of a global workforce across approximately 30 countries and responsible, sustainable operations, the Company delivers technology innovation, supply chain, and manufacturing solutions to diverse industries and end markets. In the first quarter of fiscal year 2021, the Company made certain changes in its organizational structure as part of its strategy to further drive growth and productivity with two focused delivery models. As a result, beginning in the first quarter of fiscal year 2021, the Company reports its financial performance based on two operating and reportable segments:
•Flex Agility Solutions ("FAS"), which is comprised of the following end markets:
◦Communications, Enterprise and Cloud ("CEC"), including data infrastructure, edge infrastructure and communication infrastructure;
◦Lifestyle, including appliances, consumer packaging, floorcare, micro mobility and audio; and
◦Consumer Devices, including mobile and high velocity consumer devices.
•Flex Reliability Solutions ("FRS"), which is comprised of the following end markets:
◦Automotive, including autonomous, connectivity, electrification, and smart technologies;
◦Health Solutions, including medical devices, medical equipment and drug delivery; and
◦Industrial, including capital equipment, industrial devices, renewable and grid edge, and power systems.
The Company's service offerings include a comprehensive range of value-added design and engineering services that are tailored to the various markets and needs of its customers. Other focused service offerings relate to manufacturing (including enclosures, metals, plastic injection molding, precision plastics, machining, and mechanicals), system integration and assembly and test services, materials procurement, inventory management, logistics and after-sales services (including product repair, warranty services, re-manufacturing and maintenance), supply chain management software solutions, and component product offerings (including flexible printed circuit boards and power adapters and chargers).
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) for interim financial information and in accordance with the requirements of Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements, and should be read in conjunction with the Company’s audited consolidated financial statements as of and for the fiscal year ended March 31, 2020 contained in the Company’s Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine-month periods ended December 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2021. Beginning in the second quarter of fiscal year 2021, the Company began reporting all dollar amounts in millions. In certain circumstances, this change in rounding resulted in line items being removed within prior year disclosures. Certain prior period amounts in the condensed consolidated financial statements, as well as in the Notes thereto, have been reclassified to conform to the current presentation.
The first quarters for fiscal years 2021 and 2020 ended on June 26, 2020, which is comprised of 87 days in the period, and June 28, 2019, which is comprised of 89 days in the period, respectively. The second quarters for fiscal years 2021 and 2020 ended on September 25, 2020 and September 27, 2019, which are comprised of 91 days in both periods. The Company's third quarters for fiscal years 2021 and 2020 ended on December 31 of each year, which are comprised of 97 days and 95 days, respectively.
The accompanying unaudited condensed consolidated financial statements include the accounts of Flex and its majority-owned subsidiaries, after elimination of intercompany accounts and transactions. The Company consolidates its majority-owned subsidiaries and investments in entities in which the Company has a controlling interest. For the consolidated majority-owned subsidiaries in which the Company owns less than 100%, the Company recognizes a noncontrolling interest for the ownership
of the noncontrolling owners. The associated noncontrolling owners' interest in the income or losses of these companies is not material to the Company's results of operations for all periods presented, and is classified as a component of interest and other, net, in the condensed consolidated statements of operations.
The changes to the Company’s organizational structure noted above had no impact on the condensed consolidated financial statements. For comparability purposes, segment reporting for prior periods have been restated to conform to the current presentation. Refer to note 14, “Segment Reporting,” for additional information on the changes in operating and reportable segments.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates are used in accounting for, among other things: allowances for doubtful accounts; inventory write-downs; valuation allowances for deferred tax assets; uncertain tax positions; valuation and useful lives of long-lived assets including property, equipment, and intangible assets; valuation of goodwill; valuation of investments in privately-held companies; asset impairments; fair values of financial instruments, including highly liquid investments, notes receivable and derivative instruments; restructuring charges; contingencies; warranty provisions; incremental borrowing rates in determining the present value of lease payments; accruals for potential price adjustments arising from customer contracts; fair values of assets obtained and liabilities assumed in business combinations; and the fair values of stock options and restricted share unit awards granted under the Company's stock-based compensation plans. Due to the COVID-19 pandemic, there has been and will continue to be uncertainty and disruption in the global economy and financial markets. The Company has made estimates and assumptions taking into consideration certain possible impacts due to COVID-19. These estimates may change, as new events occur, and additional information is obtained. Actual results may differ from previously estimated amounts, and such differences may be material to the condensed consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.
Recently Adopted Accounting Pronouncement
In March 2020, the FASB issued ASU 2020-04 "Facilitation of the Effects of Reference Rate Reform on Financial Reporting", which temporarily simplifies the accounting for contract modifications, including hedging relationships, due to the transition from LIBOR and other interbank offered rates to alternative reference interest rates. For example, entities can elect not to remeasure the contracts at the modification date or reassess a previous accounting determination if certain conditions are met. Additionally, entities can elect to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain conditions are met. The Company adopted the guidance during the first quarter of fiscal year 2021 with an immaterial impact on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, and ASU 2019-11, which replace the existing incurred loss impairment model with an expected credit loss model and require a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The Company adopted the guidance during the first quarter of fiscal year 2021 with an immaterial impact on its consolidated financial statements.
Recently Issued Accounting Pronouncements
In October 2020, the FASB issued ASU 2020-10 "Codification Improvements", which improves consistency by amending the Codification to include all disclosure guidance in the appropriate disclosure sections and clarifies application of various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology. The guidance is effective for the Company beginning in the first quarter of fiscal year 2022 with early adoption permitted. The Company expects the new guidance will have an immaterial impact on its consolidated financial statements, and intends to adopt the guidance when it becomes effective in the first quarter of fiscal year 2022.
In October 2020, the FASB issued ASU 2020-09 "Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762." which amends and supersedes SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Release No. 33-10762 related to financial disclosure requirements for subsidiary issuers and guarantors of registered debt securities and affiliates whose securities are pledged as collateral for registered securities. The guidance is effective for the Company beginning in the fourth quarter of fiscal year 2021 with early adoption permitted. The Company expects the new guidance will have an immaterial impact on its consolidated financial statements, and intends to adopt the guidance when it becomes effective in the fourth quarter of fiscal year 2021.
In January 2020, the FASB issued ASU 2020-01 "Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815 — a consensus of the FASB Emerging Issues Task Force," which makes improvements related to the following two topics: (1) accounting for certain equity securities when the equity method of accounting is applied or discontinued, and (2) scope considerations related to forward contracts and purchased options on certain securities. The guidance is effective for the Company beginning in the first quarter of fiscal year 2022 with early adoption permitted. The Company expects the new guidance will have an immaterial impact on its consolidated financial statements, and intends to adopt the guidance when it becomes effective in the first quarter of fiscal year 2022.
In December 2019, the FASB issued ASU 2019-12 "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," which removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The guidance is effective for the Company beginning in the first quarter of fiscal year 2022 with early adoption permitted. The Company expects the new guidance will have an immaterial impact on its consolidated financial statements, and intends to adopt the guidance when it becomes effective in the first quarter of fiscal year 2022.
2. BALANCE SHEET ITEMS
Inventories
The components of inventories, net of applicable lower of cost and net realizable value write-downs, were as follows:
As of December 31, 2020
As of March 31, 2020
(In millions)
Raw materials
$
2,625
$
2,836
Work-in-progress
472
373
Finished goods
602
576
$
3,699
$
3,785
Goodwill and Other Intangible Assets
In accordance with accounting guidance on goodwill and other intangible assets, the Company evaluates goodwill for impairment at the reporting unit level annually, and in certain circumstances such as a change in reporting units or whenever there are indications that goodwill might be impaired. As described in note 1, the Company made certain changes in its organizational structure during the first quarter of fiscal year 2021 as part of its strategy to further drive growth and productivity through two separate delivery models that represent reportable segments, FAS and FRS. With these changes, the Company also revised its reporting units. Accordingly, the Company completed an interim test as of April 1, 2020. Recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit's carrying amount, including goodwill, to the fair value of the reporting unit, which typically is measured based upon, among other factors, market multiples for comparable companies as well as a discounted cash flow analysis. These approaches use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy and require management to make various judgmental assumptions about sales, operating margins, growth rates and discount rates which consider the Company's budgets, business plans and economic projections, and are believed to reflect market participant views. Some of the inherent estimates and assumptions used in determining fair value of the reporting units are outside the control of management, including interest rates, cost of capital, tax rates, market EBITDA comparables and credit ratings. While the Company believes it has made reasonable estimates and assumptions to calculate the fair value of the reporting units, it is possible a material change could occur. If the actual results are not consistent with management's estimates and assumptions used to calculate fair value, it could result in material impairments of the Company's goodwill.
Based on the latest assessment of its goodwill as of April 1, 2020, the Company determined that no impairment existed as of the date of the impairment test, because the fair value of each one of its reporting units exceeds its respective carrying value. In addition, goodwill was reallocated among each of the Company's six reporting units based on each reporting unit’s relative fair value as of April 1, 2020. The Company considered whether an interim impairment test should be performed as of December 31, 2020 and concluded that there were no events or changes in circumstances that indicated the carrying amount of goodwill may not be recoverable. It will perform its next annual impairment test with a valuation date of January 1, 2021 to be completed in the period ending March 31, 2021. The following table summarizes the goodwill allocation as of April 1, 2020 and the activity during the nine-month period ended December 31, 2020:
The components of acquired intangible assets are as follows:
As of December 31, 2020
As of March 31, 2020
Gross Carrying Amount
Accumulated Amortization
Net Carrying Amount
Gross Carrying Amount
Accumulated Amortization
Net Carrying Amount
(In millions)
Intangible assets:
Customer-related intangibles
$
280
$
(149)
$
131
$
275
$
(128)
$
147
Licenses and other intangibles
258
(156)
102
245
(130)
115
Total
$
538
$
(305)
$
233
$
520
$
(258)
$
262
The gross carrying amounts of intangible assets are removed when fully amortized. The estimated future annual amortization expense for intangible assets is as follows:
(1)Represents estimated amortization for the remaining fiscal three-month period ending March 31, 2021.
Other Current Liabilities
Other current liabilities include customer working capital advances of $371.3 million and $264.2 million, customer-related accruals of $242.7 million and $195.1 million, and current operating lease liabilities of $125.2 million and $114.1 million as of December 31, 2020 and March 31, 2020, respectively. The customer working capital advances are not interest-bearing, do not have fixed repayment dates and are generally reduced as the underlying working capital is consumed in production.
3. REVENUE
Revenue Recognition
The Company provides a comprehensive suite of services for its customers that range from advanced product design to manufacturing and logistics to after-sales services. The first step in its process for revenue recognition is to identify a contract with a customer. A contract is defined as an agreement between two parties that creates enforceable rights and obligations and can be written, verbal, or implied. The Company generally enters into master supply agreements (“MSA”) with its customers
that provide the framework under which business will be conducted. This includes matters such as warranty, indemnification, transfer of title and risk of loss, liability for excess and obsolete inventory, pricing formulas, payment terms, etc., and the level of business under those agreements may not be guaranteed. In those instances, the Company bids on a program-by-program basis and typically receives customer purchase orders for specific quantities and timing of products. As a result, the Company considers its contract with a customer to be the combination of the MSA and the purchase order, or any other similar documents such as a statement of work, product addendum, emails or other communications that embody the commitment by the customer.
In determining the appropriate amount of revenue to recognize, the Company applies the following steps: (i) identifies the contracts with the customers; (ii) identifies performance obligations in the contracts; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations per the contracts; and (v) recognizes revenue when (or as) the Company satisfies a performance obligation. Further, the Company assesses whether control of the product or services promised under the contract is transferred to the customer at a point in time (PIT) or over time (OT). The Company is first required to evaluate whether its contracts meet the criteria for OT recognition. The Company has determined that for a portion of its contracts the Company is manufacturing products for which there is no alternative use (due to the unique nature of the customer-specific product and IP restrictions) and the Company has an enforceable right to payment including a reasonable profit for work-in-progress inventory with respect to these contracts. As a result, revenue is recognized under these contracts OT based on the cost-to-cost method as it best depicts the transfer of control to the customer measured based on the ratio of costs incurred to date as compared to the total estimated costs at completion of the performance obligation. For all other contracts that do not meet these criteria, the Company recognizes revenue when it has transferred control of the related manufactured products which generally occurs upon delivery and passage of title to the customer.
Customer Contracts and Related Obligations
Certain of the Company’s customer agreements include potential price adjustments which may result in variable consideration. These price adjustments include, but are not limited to, sharing of cost savings, committed price reductions, material margins earned over the period that are contractually required to be paid to the customers, rebates, refunds tied to performance metrics such as on-time delivery, and other periodic pricing resets that may be refundable to customers. The Company estimates the variable consideration related to these price adjustments as part of the total transaction price and recognizes revenue in accordance with the pattern applicable to the performance obligation, subject to a constraint. The Company constrains the amount of revenues recognized for these contractual provisions based on its best estimate of the amount which will not result in a significant reversal of revenue in a future period. The Company determines the amounts to be recognized based on the amount of potential refunds required by the contract, historical experience and other surrounding facts and circumstances. Often these obligations are settled with the customer in a period after shipment through various methods which include reduction of prices for future purchases, issuance of a payment to the customer, or issuance of a credit note applied against the customer’s accounts receivable balance. In many instances, the agreement is silent on the settlement mechanism. Any difference between the amount accrued upon shipment for potential refunds and the actual amount agreed to with the customer is recorded as an increase or decrease in revenue. These potential price adjustments are included as part of other current liabilities on the consolidated balance sheet and disclosed as part of customer-related accruals in note 2.
Performance Obligations
The Company derives its revenues primarily from manufacturing services, and to a lesser extent, from innovative design, engineering, and supply chain services and solutions.
A performance obligation is an implicitly or explicitly promised good or service that is material in the context of the contract and is both capable of being distinct (customer can benefit from the good or service on its own or together with other readily available resources) and distinct within the context of the contract (separately identifiable from other promises). The Company considers all activities typically included in its contracts, and identifies those activities representing a promise to transfer goods or services to a customer. These include, but are not limited to, design and engineering services, prototype products, tooling, etc. Each promised good or service with regards to these identified activities is accounted for as a separate performance obligation only if it is distinct - i.e., the customer can benefit from it on its own or together with other resources that are readily available to the customer. Certain activities on the other hand are determined not to constitute a promise to transfer goods or service, and therefore do not represent separate performance obligations for revenue recognition (e.g., procurement of materials and standard workmanship warranty).
A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company's contracts have a single performance obligation as the promise to transfer the individual good or service is not separately identifiable from other promises in the contract and is, therefore, not distinct. Promised goods or services that are immaterial in the context of the contract are not separately assessed as performance obligations. In the event that more than one performance obligation is identified in a contract, the Company is required to allocate the transaction price between the performance obligations. The allocation would generally be performed on
the basis of a relative standalone price for each distinct good or service. This standalone price most often represents the price that the Company would sell similar goods or services separately.
Contract Balances
A contract asset is recognized when the Company has recognized revenue, but not issued an invoice for payment. Contract assets are classified separately on the condensed consolidated balance sheets and transferred to receivables when rights to payment become unconditional.
A contract liability is recognized when the Company receives payments in advance of the satisfaction of performance and is included in other current liabilities on the condensed consolidated balance sheets. Contract liabilities, identified as deferred revenue, were $483.4 million and $361.5 million as of December 31, 2020 and March 31, 2020, respectively.
Disaggregation of Revenue
The following table presents the Company’s revenue disaggregated based on timing of transfer - point in time and over time - for the three and nine-month periods ended December 31, 2020 and December 31, 2019, respectively.