News Column

FLEXTRONICS INTERNATIONAL LTD. - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

May 20, 2014

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

OVERVIEW

We are a globally-recognized leading provider of supply chain solutions that span from concept through consumption. We design, build, ship and service a complete packaged electronic product for original equipment manufacturers ("OEMs") in the following business groups: High Reliability Solutions ("HRS"), which is comprised of our medical, automotive, and defense and aerospace businesses; High Velocity Solutions ("HVS"), which includes our mobile devices business, including smart phones; our consumer electronics business, including game consoles and wearable electronics; and our high-volume computing business, including various supply chain solutions for notebook personal computing ("PC"), tablets and printers; Industrial and Emerging Industries ("IEI"), which is comprised of our household appliances, semi-cap equipment, kiosks, energy and emerging industries businesses; and Integrated Network Solutions ("INS"), which includes our telecommunications infrastructure, data networking, connected home, and server and storage businesses.

Our strategy is to provide customers with a full range of cost competitive, vertically-integrated global supply chain solutions through which we can design, build, ship and service a complete packaged product for our OEM customers. This enables our OEM customers to leverage our supply chain solutions to meet their product requirements throughout the entire product life cycle.

During the recent years, we have seen an increased level of diversification by many companies, primarily in the technology sector. Some companies that have historically identified themselves as software providers, internet service providers or e-commerce retailers have started to enter the highly competitive and rapidly evolving hardware markets, such as mobile devices, home entertainment and wearable devices. This trend has resulted in a significant change in the manufacturing and supply chain solutions requirements of such companies. While the products have become more complex, the supply chain solutions required by such companies have become more customized and demanding, and it has changed the manufacturing and supply chain landscape significantly.

We use a portfolio management approach to manage our extensive service offerings. As our OEM customers change in the way they go to market, we reorganize and rebalance our business portfolio in order to align with our customers' needs and requirements and to optimize our operating results. With the acquisition of certain manufacturing operations from Google's Motorola Mobility LLC during the first quarter of fiscal 2014, we have experienced an increase in the percentage of our revenues from the HVS business group, and expect the amount of revenue from our HVS business group, relative to total revenue, to stabilize going forward. The objective of our operating model is to allow us to redeploy and

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reposition our assets and resources to meet specific customer needs across all of the markets we serve, and we have been able to successfully reposition our assets and capacity between various business groups to serve our customers as required, which illustrates the overall flexibility of our model.

During fiscal years 2013 and 2014, we launched multiple programs broadly across our portfolio of services, and, in some instances, we deployed certain new technologies. We expect that these new programs will continue to increase in complexity in order to provide competitive advantages to our customers. We anticipate these programs will continue ramping with an increase in volume production during fiscal year 2015 and beyond. Until we achieve such higher levels of revenue, we expect that our gross margin and operating margin may be negatively impacted as profitability normally lags revenue growth due to incremental start-up costs, operational inefficiencies, under-absorbed overhead costs and lower manufacturing program volumes while in the ramp phase. We expect that our margins for these programs will improve over time as the revenue increases due to increased volumes.

We are one of the world's largest providers of global supply chain solutions, with revenues of $26.1 billion in fiscal year 2014. We have established an extensive network of manufacturing facilities in the world's major electronics markets (Asia, the Americas and Europe) in order to serve the growing outsourcing needs of both multinational and regional OEMs. We design, build, ship, and service electronics products for our customers through a network of facilities in approximately 30 countries across four continents. As of March 31, 2014, our total manufacturing capacity was approximately 26.0 million square feet. In fiscal year 2014, our net sales in Asia, the Americas and Europe represented approximately 53%, 31% and 16%, respectively, of our total net sales, based on the location of the manufacturing site. The following tables set forth net sales and net property and equipment, by country, based on the location of our manufacturing sites and the relative percentages:

Fiscal Year Ended March 31, Net sales: 2014 2013 2012 (In thousands) China $ 10,521,169 40 % $ 8,132,776 35 % $ 11,212,310 38 % Mexico 3,565,803 14 % 3,534,067 15 % 4,005,653 14 % U.S 2,829,807 11 % 2,539,460 11 % 2,971,757 10 % Malaysia 2,142,437 8 % 2,440,902 10 % 2,868,990 10 % Brazil 1,699,209 6 % 1,023,790 4 % 1,269,203 4 % Other 5,350,182 21 % 5,898,480 25 % 7,015,116 24 % $ 26,108,607$ 23,569,475$ 29,343,029 Fiscal Year Ended March 31, Property and equipment, net: 2014 2013 (In thousands) China $ 941,850 41 % $ 855,032 39 % U.S 362,199 16 % 245,590 11 % Mexico 326,287 14 % 286,026 13 % Malaysia 153,194 7 % 152,594 7 % Hungary 103,266 5 % 113,173 5 % Other 401,860 17 % 522,173 25 % $ 2,288,656$ 2,174,588



We believe that the combination of our extensive open innovation platform solutions, design and engineering services, advanced supply chain management solutions and services, significant scale and global presence, and industrial campuses in low-cost geographic areas provide us with a competitive advantage and strong differentiation in the market for designing, manufacturing and servicing

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electronics products for leading multinational and regional OEMs. Specifically, we have launched multiple product innovation centers ("PIC") focused exclusively on offering our OEM customers the ability to simplify their global product development, manufacturing process, and after sales services, and enable them to achieve meaningful time to market and cost savings.

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

changes in the macro-economic environment and related changes in consumer demand; the mix of the manufacturing services we are providing, the number and size of new manufacturing programs, the degree to which we utilize our manufacturing capacity, seasonal demand, shortages of components and other factors; the effects on our business when our customers are not successful in marketing their products, or when their products do not gain widespread commercial acceptance; our ability to achieve commercially viable production yields and to manufacture components in commercial quantities to the performance specifications demanded by our OEM customers; the effects on our business due to our customers' products having short product life cycles; our customers' ability to cancel or delay orders or change production quantities; our customers' decision to choose internal manufacturing instead of outsourcing for their product requirements; our exposure to financially troubled customers; integration of acquired businesses and facilities; increased labor costs due to adverse labor conditions in the markets we operate; and changes in tax legislation. We also are subject to other risks as outlined in Item 1A, "Risk Factors."



Net revenues for fiscal year 2014 increased 10.8% or $2.5 billion to $26.1 billion. This increase was primarily attributable to our acquisition of certain manufacturing operations from Google's Motorola Mobility LLC (Motorola), which was partially offset by the disengagement of our assembly activities with Blackberry during fiscal 2013, which contributed revenue in that year of approximately $0.9 billion. Our revenue increased across all of the business groups we serve except for INS. Our fiscal year 2014 gross profit totaled $1.4 billion, representing an increase of $274.0 million, or 23.5%, and our income from continuing operations totaled $365.6 million, representing an increase of $63.1 million, compared to fiscal year 2013. Both gross profit and income from continuing operations increased primarily due to lower restructuring charges incurred during fiscal year 2014 as a result of less cost reduction activities as compared to prior year. Additionally, the increase in income from continuing operations was partially offset by $55.0 million of other charges for a contractual obligation for certain performance provisions as defined in an existing manufacturing agreement with a customer. Additionally, our income from continuing operations in fiscal year 2013 included a gain from the fair value adjustment of $74.4 million relating to warrants to purchase common shares of a supplier. These warrants were exercised and the underlying shares were sold for total proceeds of $67.3 million resulting in a loss of $7.1 million that was recognized during fiscal 2014.

Cash provided by operations increased approximately $101.0 million to $1.2 billion for fiscal year 2014 compared with $1.1 billion for fiscal year 2013 primarily due to increased net income and to a lesser extent due to changes in operating assets and liabilities. Our average net working capital, defined as accounts receivable, including deferred purchase price receivable from our asset-backed securitization programs plus inventory less accounts payable, as a percentage of annual sales was

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approximately 6.8%, 7.8% and 6.2% for the years ended March 31, 2014, 2013 and 2012, respectively. The decrease in the percentage for the year ended March 31, 2014 is primarily attributable to higher revenue from our HVS business which carries significantly higher inventory turns and customers with contractually shorter payment terms resulting in a decrease in our average net working capital in fiscal year 2014. Our free cash flow, which we define as cash from operating activities less net purchases of property and equipment, was $701.5 million for fiscal year 2014 compared to $680.1 million for fiscal year 2013, primarily due to higher cash flows from operations partially offset by higher net capital expenditure. Refer to the Liquidity and Capital Resources section for the free cash flows reconciliation to our most directly comparable GAAP financial measure of cash flows from operations. Cash used in financing activities amounted to $410.8 million during fiscal year 2014 and included repurchases of approximately 60.7 million ordinary shares at an aggregate purchase value of $475.3 million. As of March 31, 2014 and 2013, $5.5 million and $12.0 million was included in accrued expenses for approximately 0.6 million and 1.8 million ordinary shares, respectively, that were not settled by the end of the year.

Additionally, in response to a challenging macroeconomic environment, we initiated certain restructuring activities in fiscal years 2013 and 2014 intended to improve our operational efficiencies by reducing excess workforce and capacity. The restructuring activities are intended to realign our corporate cost structure, and rationalize our global manufacturing capacity and infrastructure which will result in a further shift of manufacturing capacity to locations with higher efficiencies. During the fiscal year ended March 31, 2014, we recognized $75.3 million of pre-tax restructuring charges primarily comprised of $73.4 million of cash charges predominantly related to employee severance costs. During the fiscal year ended March 31, 2013, we recognized $227.4 million of pre-tax restructuring charges comprised of $123.0 million of cash charges primarily related to employee severance costs and $104.4 million of non-cash charges primarily related to asset impairment and other exit charges.

We believe that our business transformation has strategically positioned us very well to take advantage of the long-term, future growth prospects for outsourcing of advanced manufacturing capabilities, design and engineering services and after-market services, which remain strong.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

Revenue Recognition

We recognize manufacturing revenue when we ship goods or the goods are received by our customer, title and risk of ownership have passed, the price to the buyer is fixed or determinable and recoverability is reasonably assured. Generally, there are no formal substantive customer acceptance requirements or further obligations related to manufacturing services. If such requirements or obligations exist, then we recognize the related revenues at the time when such requirements are completed and the obligations are fulfilled. Some of our customer contracts allow us to recover certain costs related to manufacturing services that are over and above the prices we charge for the related products. We determine the amount of costs that are recoverable based on historical experiences and

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agreements with those customers. Also, certain customer contracts may contain certain commitments and obligations that may result in additional expenses or decrease in revenue. We accrue for these commitments and obligations based on facts and circumstances and contractual terms. We also make provisions for estimated sales returns and other adjustments at the time revenue is recognized based upon contractual terms and an analysis of historical returns. Provisions for sales returns and other adjustments were not material to our consolidated financial statements for any of the periods presented.

We provide a comprehensive suite of services for our customers that range from advanced product design to manufacturing and logistics to after-sales services. We recognize service revenue when the services have been performed, and the related costs are expensed as incurred. Our net sales for services were less than 10% of our total sales for all periods presented, and accordingly, are included in net sales in the consolidated statements of operations.

Customer Credit Risk

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

Restructuring Charges

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

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

Refer to note 14 to the consolidated financial statements in Item 8, "Financial Statements and Supplementary Data" for further discussion of our restructuring activities.

Carrying Value of Long-Lived Assets

We review property and equipment and acquired amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment loss is recognized when the carrying amount of these long-lived assets exceeds their fair value. Recoverability of property and equipment and acquired amortizable intangible assets are measured by comparing their carrying amount to the projected cash flows the assets are expected to generate. If such assets are considered to be impaired, the impairment loss recognized, if any, is the amount by which the carrying amount of the property and equipment and acquired amortizable intangible assets exceeds fair value. Our judgments regarding projected cash flows for an extended period of time and the fair value of assets may be impacted by changes in market conditions, general business environment and other factors. To the extent our estimates relating to cash flows and fair value of assets change adversely we may have to recognize additional impairment charges in the future.

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

Contingent Liabilities

We may be exposed to certain liabilities relating to our business operations, acquisitions of businesses and assets and other activities. We make provisions for such liabilities when it is probable that the settlement of the liability will result in an outflow of economic resources or the impairment of an asset. We make these assessments based on facts and circumstances that may change in the future resulting in additional expenses.

Income Taxes

Our deferred income tax assets represent temporary differences between the carrying amount and the tax basis of existing assets and liabilities which will result in deductible amounts in future years, including net operating loss carry forwards. Based on estimates, the carrying value of our net deferred tax assets assumes that it is more likely than not that we will be able to generate sufficient future taxable income in certain tax jurisdictions to realize these deferred income tax assets. Our judgments regarding future profitability may change due to future market conditions, changes in U.S. or international tax laws and other factors. If these estimates and related assumptions change in the future, we may be required to increase or decrease our valuation allowance against deferred tax assets previously recognized, resulting in additional or lesser income tax expense.

We are regularly subject to tax return audits and examinations by various taxing jurisdictions and around the world, and there can be no assurance that the final determination of any tax examinations will not be materially different than that which is reflected in our income tax provisions and accruals. Should additional taxes be assessed as a result of a current or future examination, there could be a material adverse effect on our tax position, operating results, financial position and cash flows. Refer to note 13 to the consolidated financial statements in Item 8, "Financial Statements and Supplementary Data" for further discussion of our tax position.

Translation of Foreign Currencies

The financial position and results of operations for certain of our subsidiaries are measured using a currency other than the U.S. dollar as their functional currency. Accordingly, all assets and liabilities for these subsidiaries are translated into U.S. dollars at the current exchange rates as of the respective balance sheet dates. Revenue and expense items are translated at the average exchange rates prevailing during the period. Cumulative gains and losses from the translation of these subsidiaries' financial statements are reported as other comprehensive loss, a component of shareholders' equity. Foreign exchange gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved, and re-measurement adjustments for foreign operations where the U.S. dollar is the functional currency, are included in operating results.

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RESULTS OF OPERATIONS

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

Fiscal Year Ended March 31, 2014 2013 2012 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 94.3 94.2 94.8 Restructuring charges 0.2 0.9 - Gross profit 5.5 4.9 5.2 Selling, general and administrative expenses 3.4 3.4 3.0 Intangible amortization 0.1 0.1 0.2 Restructuring charges 0.1 0.1 - Other charges (income), net 0.2 (0.2 ) - Interest and other, net 0.2 0.2 0.1 Income from continuing operations before income taxes 1.5 1.3 1.9 Provision from income taxes 0.1 0.1 0.2 Income from continuing operations 1.4 1.2 1.7 Loss from discontinued operations, net of tax - (0.1 ) (0.1 ) Net income 1.4 % 1.1 % 1.6 % Net sales



Net sales during fiscal year 2014 totaled $26.1 billion, representing an increase of $2.5 billion, or 10.8%, from $23.6 billion during fiscal year 2013. During fiscal year 2014, net sales increased $2.0 billion in Asia and $0.9 billion in the Americas, offset by a decrease of $0.4 billion in Europe.

Net sales during fiscal year 2013 totaled $23.6 billion, representing a decrease of $5.8 billion, or 19.7%, from $29.3 billion during fiscal year 2012. Net sales decreased across all of the geographical regions we serve, consisting of decreases of $3.7 billion in Asia, $1.2 billion in the Americas and $0.9 billion in Europe.

The following table sets forth net sales by business groups and their relative percentages. Historical information has been recast to reflect realignment of customers and/or products between business groups:

Fiscal Year Ended March 31, Business groups: 2014 2013 2012 (In thousands) Integrated Network Solutions $ 10,135,777 39 % $ 10,636,529 45 % $ 11,451,863 39 % High Velocity Solutions 8,909,559 34 % 6,363,337 27 % 11,553,858 39 % Industrial & Emerging Industries 3,805,933 15 % 3,751,867 16 % 3,979,788 14 % High Reliability Solutions 3,257,338 12 % 2,817,742 12 % 2,357,520 8 % $ 26,108,607$ 23,569,475$ 29,343,029 42



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Net sales during fiscal year 2014 increased (i) $2.5 billion or 40.0% in the HVS business group, (ii) $0.4 billion or 15.6% in the HRS business group and (iii) less than $0.1 billion or 1.4% in the IEI business group. The increase in revenues from the HVS business group was primarily as a result of our acquisition of certain manufacturing operations from Google's Motorola Mobility LLC (Motorola) during the first quarter of fiscal 2014, which were partially offset by revenue reductions due to our disengagement with Blackberry during fiscal 2013 which contributed revenues of $0.9 billion in that year. The increase in revenue from our HRS business group was attributable to our acquisition of Saturn Electronics and Engineering Inc. during the last quarter of fiscal 2013 and our continued expansion with existing and new customers. The increase in these business groups was partially offset by a decrease in sales from our INS business group amounting to $0.5 billion or 4.7% primarily attributable to broad softness in our connected home and telecom businesses, and server, storage and networking businesses versus the prior year.

Net sales during fiscal year 2013 decreased (i) $5.2 billion or 44.9% in the HVS business group, (ii) $0.8 billion or 7.1% in the INS business group and (iii) $0.2 billion or 5.7% in the IEI business group. The decline in sales for our HVS business group was primarily due to our disengagement from our assembly business with Blackberry, which resulted in an approximately $2.2 billion reduction of sales and our exit from the ODM PC business during fiscal 2012, which resulted in an approximately $1.6 billion reduction of sales. The remainder of the decrease across the other business groups was attributable to reduced overall demand during fiscal year 2013. The decrease in these business groups was partially offset by an increase in sales from our HRS business group amounting to $0.5 billion or 19.5%, primarily due to increased demand for our customer products in the automotive market and to a lesser extent from our acquisition of Saturn Electronics and Engineering, Inc. during the last quarter of fiscal 2013.

Our ten largest customers during fiscal years 2014, 2013 and 2012 accounted for approximately 52%, 47% and 55% of net sales, respectively. During fiscal year 2014, only Google (including Motorola) accounted for greater than 10% of net sales. No customer accounted for greater than 10% of our net sales during fiscal year 2013. During fiscal year 2012 Hewlett-Packard (HP) and Blackberry each accounted for greater than 10% of net sales.

Gross profit

Gross profit is affected by a number of factors, including the number and size of new manufacturing programs, product mix, component costs and availability, product life cycles, unit volumes, pricing, competition, new product introductions, capacity utilization and the expansion and consolidation of manufacturing facilities. The flexible design of our manufacturing processes allows us to build a broad range of products in our facilities and better utilize our manufacturing capacity. In the cases of new programs, profitability normally lags revenue growth due to product start-up costs, lower manufacturing program volumes in the start-up phase, operational inefficiencies, and under-absorbed overhead. Gross margin for these programs often improves over time as manufacturing volumes increase, as our utilization rates and overhead absorption improve, and as we increase the level of manufacturing services content. As a result of these various factors, our gross margin varies from period to period.

Gross profit during fiscal year 2014 increased $274.0 million to $1.4 billion from $1.2 billion during fiscal year 2013. Gross margin increased to 5.5% of net sales in fiscal year 2014 as compared with 4.9% of net sales in fiscal year 2013. Gross margins improved 60 basis points in fiscal year 2014 compared to that of fiscal year 2013 primarily due to restructuring charges of $58.6 million, or 20 basis points in fiscal year 2014 as compared to $215.8 million, or 90 basis points, in fiscal year 2013 included in cost of sales.

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Gross profit during fiscal year 2013 decreased $351.7 million to $1.2 billion from $1.5 billion during fiscal year 2012. Gross margin decreased to 4.9% of net sales in fiscal year 2013 as compared with 5.2% of net sales in fiscal year 2012. Gross margins deteriorated 30 basis points in fiscal year 2013 compared to that of fiscal year 2012 primarily due to restructuring charges of $215.8 million, or 90 basis points, included in cost of sales. The impact of the restructuring charges was partially offset by lower sales from our HVS business group which generally carry lower margins than the overall margins in our other business groups. Further our fiscal 2012 operating results included a correction of an accounting error that had an unfavorable impact of $23.9 million on our gross profit in that year.

Restructuring charges

In response to a challenging macroeconomic environment, we initiated certain restructuring activities to improve our operational efficiencies by reducing excess workforce and capacity. The restructuring activities are intended to realign our corporate cost structure, and rationalize our global manufacturing capacity and infrastructure which will further shift manufacturing capacity to locations with higher efficiencies.

During fiscal year 2014, we recognized $75.3 million of pre-tax restructuring charges comprised of $73.4 million of cash charges predominantly related to employee severance costs and $1.9 million of non-cash charges related to asset impairment. The restructuring charges by geographic region amounted to $34.5 million in Asia, $24.9 million in the Americas and $15.9 million in Europe. We classified $58.6 million of the charges incurred in fiscal 2014 as a component of cost of sales and $16.7 million as a component of selling, general and administrative expenses. As of March 31, 2014, all plans have been completed and accrued costs related to restructuring charges incurred were $42.4 million, of which $36.3 million was classified as a current obligation. We expect these restructuring activities will allow for potential savings through reduced employee expenses and lower operating costs and to yield annualized cost reductions of approximately $15 million.

During fiscal year 2013, we recognized $227.4 million of pre-tax restructuring charges comprised of $123.0 million of cash charges predominantly related to employee severance costs and $104.4 million of non-cash charges primarily related to asset impairment and other exit charges. The restructuring charges by geographic region amounted to $108.4 million in Asia, $91.8 million in Europe and $27.2 million in the Americas. We classified $215.8 million of these charges as a component of cost of sales and $11.6 million of these charges as a component of selling, general and administrative expenses during fiscal year 2013.

Refer to note 14 to the consolidated financial statements in Item 8, "Financial Statements and Supplementary Data" for further discussion of our restructuring activities.

Selling, general and administrative expenses

Selling, general and administrative expenses ("SG&A") totaled $874.8 million or 3.4% of net sales, during fiscal year 2014, compared to $805.2 million, or 3.4% of net sales, during fiscal year 2013, increasing by $69.6 million or 8.6%. The increase in SG&A in dollars was primarily attributable to acquisitions, investments in our supply chain solutions, enhancement of our selling and business development activities and incremental corporate infrastructure to support the increasing complexities of our business. While we continue to make investments to support our innovation initiatives and remain focused on our profitable growth in late fiscal year 2014, we have implemented certain cost control measures.

Selling, general and administrative expenses totaled $805.2 million or 3.4% of net sales, during fiscal year 2013, compared to $877.6 million, or 3.0% of net sales, during fiscal year 2012, decreasing by $72.4 million or 8.2%. The decrease in SG&A in dollars was primarily attributable to the elimination of costs relating to our ODM PC business which we fully exited during fiscal year 2012 and a

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$28.0 million provision for doubtful accounts recorded in fiscal 2012 related to a customer concentrated in the solar photovoltaic market. The increase of SG&A expenses as a percentage of net sales is primarily attributable to lower revenues in fiscal 2013.

Intangible amortization

Amortization of intangible assets in fiscal year 2014 decreased by $0.6 million to $28.9 million from $29.5 million in fiscal year 2013. Amortization of intangible assets in fiscal year 2013 decreased by $20.1 million from $49.6 million in fiscal year 2012 primarily due to the use of the accelerated method of amortization for certain customer-related intangibles, which results in decreasing expense over time. Certain high valued intangible assets were fully amortized by the end of fiscal 2012, resulting in lower amortization expense in the subsequent years.

Other charges (income), net

During fiscal year 2014, we recognized other charges of $57.5 million primarily due to a contractual obligation of $55.0 million related to certain performance provisions as defined in an existing manufacturing agreement with a customer. Refer to note 12 to the consolidated financial statements for further discussion. Additionally, we exercised warrants to purchase common shares of a certain supplier and sold the underlying shares for a loss of $7.1 million, as further discussed below, offset by a gain of $4.6 million recognized in connection with the sales of certain investments.

During fiscal year 2013, we recognized other income of $65.2 million primarily due to an unrealized gain from the fair value adjustment of $74.4 million of warrants we held to purchase common shares of a supplier. As discussed above we sold the underlying shares in 2014. The gain was offset by various losses from sale, or direct impairments of certain non-core equity investments and notes receivable, and losses from sales of international entities that are individually immaterial.

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

Interest and other, net

Interest and other, net was $61.9 million during fiscal year 2014, compared to $56.3 million during fiscal year 2013, an increase of $5.6 million that was primarily due to the refinancing of our lower rate floating interest debt with higher rate fixed interest Notes in February of fiscal 2013. Additionally, the gains on foreign currency transactions attributable to our cross-border foreign currency transactions and the revaluation of RMB denominated net asset positions of our U.S. dollar functional currency sites based in China decreased in fiscal year 2014. There can be no assurance that further gains from various arbitrage opportunities related to foreign exchange settlements in China will be available in the future.

Interest and other, net was $56.3 million during fiscal year 2013, compared to $36.0 million during fiscal year 2012, an increase of $20.3 million that was primarily due to a decrease in gains on foreign exchange transactions attributable to our cross-border foreign currency transactions and the revaluation of RMB denominated net asset positions of our U.S. dollar functional currency sites based in China.

Income taxes

Certain of our subsidiaries have, at various times, been granted tax relief in their respective countries, resulting in lower income taxes than would otherwise be the case under ordinary tax rates. The consolidated effective tax rates were 8.7%, 8.0% and 9.4% for the fiscal years 2014, 2013 and 2012, respectively. The effective rate varies from the Singapore statutory rate of 17.0% as a result of recognition of earnings in different jurisdictions, operating loss carry forwards, income tax credits, previously established valuation allowances for deferred tax assets, liabilities for uncertain tax positions,

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as well as because of the effect of certain tax holidays and incentives granted to our subsidiaries primarily in China, Malaysia, Israel, and Singapore. We generate most of our revenues and profits from operations outside of Singapore.

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

We provide a valuation allowance against deferred tax assets that in our estimation are not more likely than not to be realized. During fiscal year 2014, we released valuation allowances totalling $36.9 million related to our operations in Brazil, India and Japan as these amounts were deemed to be more likely than not to be realized.

The Mexican government enacted significant tax reform legislation during the third quarter fiscal 2014, which resulted in a net $4.3 million discrete tax expense. We do not anticipate this tax reform to have a material impact to the ongoing effective tax rate.

See note 13, "Income Taxes," to the consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data" for further discussion.

Discontinued Operations

Consistent with our strategy to evaluate the strategic and financial contributions of each of our operations and to focus on the primary growth objectives in our core manufacturing business activities, we finalized the sale of two of our non-core businesses during fiscal year 2013. These non-core businesses represent separate asset groups and the divestitures qualify for reporting as discontinued operations within the consolidated statements of operations and the consolidated balance sheets for all periods presented, as applicable.

The results from discontinued operations were as follows: Fiscal Year Ended March 31, 2013 2012 (In thousands) Net sales $ 40,593$ 127,258 Cost of sales 42,793 145,403 Gross loss (2,200 ) (18,145 ) Selling, general and administrative expenses 1,930 8,932 Intangibles amortization and impairment 11,000 6,325 Interest and other, net 11,280 (7 ) Loss before income taxes (26,410 ) (33,395 ) Benefit from income taxes (959 ) (1,390 ) Net loss of discontinued operations $ (25,451 )$ (32,005 )



Net sales in fiscal year 2013 decreased $86.7 million as we decelerated operations while evaluating strategic alternatives for the businesses and due to the end of certain product life cycles. We recognized a loss of $12.1 million as a result of the disposition of these non-core businesses in fiscal 2013 which is included in interest and other, net in the results from discontinued operations.

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LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2014, we had cash and cash equivalents of $1.6 billion and bank and other borrowings of $2.1 billion. We have a $1.5 billion revolving credit facility, under which we had no borrowings outstanding as of March 31, 2014.

Our cash balances are held in numerous locations throughout the world. As of March 31, 2014, over half of our cash and cash equivalents were held by foreign subsidiaries outside of Singapore. Although substantially all of the amounts held outside of Singapore could be repatriated, under current laws, a significant amount could be subject to income tax withholdings. We provide for tax liabilities on these amounts for financial statement purposes, except for certain of our foreign earnings that are considered indefinitely reinvested outside of Singapore (approximately $779.0 million as of March 31, 2014). Repatriation could result in an additional income tax payment, however, our intent is to permanently reinvest these funds outside of Singapore and our current plans do not demonstrate a need to repatriate them to fund our operations in jurisdictions outside of where they are held. Where local restrictions prevent an efficient intercompany transfer of funds, our intent is that cash balances would remain outside of Singapore and we would meet our liquidity needs through ongoing cash flows, external borrowings, or both.

Fiscal Year 2014

Cash provided by operating activities was $1.2 billion during fiscal year 2014, which resulted primarily from $365.6 million of net income for the period plus $450.0 million of non-cash charges such as depreciation, amortization, impairment charges and stock-based compensation expense that are included in the determination of net income. We generated $400.9 million in cash as a result of decreases in net operating assets. Net working capital ("NWC"), defined as net accounts receivable, including deferred purchase price receivables, plus inventory less accounts payable increased by $233.7 million primarily to support the increase in our customers' forecasted business levels. The increases in accounts receivable and inventory are primarily as a result of the increase in sales in our HVS business, which generally carry higher volumes than our other complex business groups. The cash outflows to support NWC were offset by $540.6 million of cash received from certain customers as advances during the period. In certain instances the level of inventory reduction or consumption was lower than expected causing an increase to inventory and usage of cash. In response, we worked with these customers to fund the elevated inventory balances we held on their behalf. We have recorded these advances as other current liabilities in the consolidated balance sheet as of March 31, 2014 and expect these amounts to decrease as we produce or sell the associated inventory in the future.

Cash used in investing activities during fiscal year 2014 was $783.9 million. This resulted primarily from $515.0 million in capital expenditures for equipment, net of proceeds on sales. Our capital expenditures were related to investments to support innovation, expanding design capabilities, and improving our mechanicals and automation capabilities. Additionally, we paid $238.0 million for the acquisition of four businesses during the fiscal year, of which the majority relates to the acquisition of certain manufacturing operations from Google's Motorola Mobility LLC for $178.9 million and the acquisition of all outstanding shares of Riwisa AG for a total cash consideration of $44.0 million, net of cash acquired amounting to $9.4 million. Refer to note 17 to the consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data".

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Cash used in financing activities amounted to $410.8 million during fiscal year 2014, which was primarily attributable to the repurchase of approximately 60.7 million shares for an aggregate purchase value of approximately $475.3 million. Other financing cash inflows of $52.1 million includes $38.6 million received from certain third parties for the non-controlling interest in one of our subsidiaries as further discussed in note 5 to the consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data". Additionally, we entered into a $600 million term loan agreement due August 30, 2018 and used all of the proceeds to repay the outstanding balances of our term loan due October 2014 and the Asia Term Loans in full amounting to $170.3 million and $374.5 million, respectively, and part of the term loan due March 2019.

Fiscal Year 2013

Cash provided by operating activities was $1.1 billion during fiscal year 2013, which resulted primarily from $277.1 million of net income for the period plus $522.5 million of non-cash charges such as depreciation, amortization, impairment charges and stock-based compensation expense that are included in the determination of net income. We generated $315.9 million in cash as a result of decreases in net operating assets. Our changes in operating assets and liabilities, net of acquisitions is primarily due to a decrease of $519.1 million in accounts receivable and a decrease of $596.1 million in inventory, which was partially offset by a decrease in accounts payable of $671.4 million and a decrease in other current and noncurrent liabilities of $189.5 million. The decreases in accounts receivable and inventory are primarily as a result of the decrease in sales in our HVS business, which generally carry higher volumes than our other complex business groups. The decrease in accounts payable is principally related to the decrease in inventory and timing of supplier payments.

Cash used in investing activities during fiscal year 2013 was $697.2 million. This resulted primarily from $435.3 million in capital expenditures for equipment, net of proceeds on sales, and $184.1 million paid for the acquisition of four businesses during the fiscal year. We also spent approximately $115.3 million included in other investing cash flows, offset by the receipt of cash included in other financing activities further discussed below to purchase assets financed by a third party banking institution on behalf of a customer.

Cash used in financing activities amounted to $339.6 million during fiscal year 2013, which was primarily attributable to the repurchase of approximately 49.9 million shares for an aggregate purchase value of approximately $322.0 million and repayment of the outstanding balance under our revolving line of credit of $140.0 million. These cash outflows were offset by the receipt of $101.9 million included in other financing activities to purchase assets financed by a third party banking institution on behalf of a customer.

Fiscal Year 2012

Cash provided by operating activities was $804.3 million during fiscal year 2012, which resulted primarily from $488.8 million of net income for the period plus $566.1 million of non-cash charges such as depreciation, amortization, impairment charges and stock-based compensation expense that are included in the determination of net income. We used $250.6 million in cash as a result of an increase in net operating assets. Our working capital accounts increased primarily due to a decrease of $750.2 million in accounts payable and an increase of $30.2 million in accounts receivable, which was partially offset by a decrease in inventory of $301.1 million principally due to the decline of sales in our HVS business groups, and an increase in deferred revenue and customer working capital advances of $249.8 million. The decrease in accounts payable is principally related to the decrease in inventory and timing of supplier payments.

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Cash used in investing activities during fiscal year 2012 was $481.4 million. This resulted primarily from $388.0 million in capital expenditures for equipment, net of proceeds on sales, and $92.3 million paid for three acquisitions completed during the year.

Cash used in financing activities amounted to $522.2 million during fiscal year 2012, which was primarily attributable to the repurchase of approximately 81.7 million shares for an aggregate purchase value of approximately $509.8 million. During fiscal year 2012 we also repaid $20.0 million of debt outstanding on our $2.0 billion revolving credit facility.

Key Liquidity Metrics Free Cash flow



We believe free cash flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to repay debt obligations, make investments, fund acquisitions, repurchase company shares and for certain other activities. Our free cash flow, which is calculated as cash provided by operations less net purchases of property and equipment, was $701.5 million, $680.1 million and $416.3 million for fiscal years 2014, 2013 and 2012, respectively.

Free cash flow is not a measure of liquidity under generally accepted accounting principles in the United States, and may not be defined and calculated by other companies in the same manner. Free cash flow should not be considered in isolation or as an alternative to net cash provided by operating activities. Free cash flows reconcile to the most directly comparable GAAP financial measure of cash flows from operations as follows:

Fiscal Year Ended March 31, 2014 2013 2012 (In thousands)



Net cash provided by operating activities $ 1,216,460$ 1,115,430$ 804,268 Purchases of property and equipment

(609,643 ) (488,993 ) (437,191 ) Proceeds from the disposition of property and equipment 94,640 53,665 49,187 Free cash flow $ 701,457$ 680,102$ 416,264 Cash Conversion Cycle Fiscal Year Ended March 31, 2014 2013 2012 Days in trade accounts receivable 42 days 46 days 45 days Days in inventory 54 days 52 days 52 days Days in accounts payable 70 days 72 days 70 days Cash conversion cycle 26 days 26 days 27 days



Days in trade accounts receivable was calculated as average accounts receivable for the current and prior quarter, adding back the reduction in accounts receivable resulting from non-cash accounts receivable sales, divided by annualized sales for the current quarter by day. During the fiscal year ended March 31, 2014, days in trade accounts receivable decreased by 4 days to 42 days compared to the fiscal year ended March 31, 2013 largely due to a $409.1 million increase in sales of our accounts receivables for cash. Non-cash accounts receivable sales or deferred purchase price receivables included for the purposes of the calculation were $470.9 million, $412.4 million and $514.9 million for the years ended March 31, 2014, 2013 and 2012, respectively. Deferred purchase price receivables were recorded in other current assets in the consolidated balance sheets.

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Days in inventory was calculated as average inventory for the current and prior quarter divided by annualized cost of sales for the current quarter by day. During the fiscal year ended March 31, 2014, days in inventory increased by 2 days to 54 days as compared to the fiscal year ended March 31, 2013. The increase was primarily as a result of the positioning of raw material inventory to support the production ramp of several programs launched in the current fiscal year and also due to increased levels of inventory that we held as of March 31, 2014 on behalf of certain customers, as discussed in the operating cash flow section above.

Days in accounts payable was calculated as average accounts payable for the current and prior quarter divided by annualized cost of sales for the current quarter by day. During the fiscal year ended March 31, 2014, days in accounts payable decreased by 2 days to 70 days compared to the fiscal year ended March 31, 2013 primarily due to timing of supplier payments and the increase in cost of sales in the fourth quarter of fiscal 2014.

Our cash conversion cycle was calculated as days in trade receivables plus days in inventory, minus days in accounts payable and is a measure of how efficient we are at managing our working capital. Our cash conversion cycle remained consistent at 26 days for the fiscal year ended March 31, 2014 compared to that of fiscal 2013 due to the factors affecting each of the components in the calculation discussed above.

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

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

Historically, we have funded operations from cash and cash equivalents generated from operations, proceeds from public offerings of equity and debt securities, bank debt and lease financings. We also sell designated pools of trade receivables under our asset-backed securitization ("ABS") programs and sell certain trade receivables, which are in addition to the trade receivables sold in connection with these securitization agreements. During fiscal years 2014, 2013 and 2012 we received approximately $4.2 billion, $3.5 billion and $4.7 billion, respectively from sales of receivables under our ABS programs, and $3.4 billion, $1.1 billion and $2.0 billion, respectively from other sales of receivables. As of March 31, 2014 and 2013, the outstanding balance on receivables sold for cash was $1.1 billion and $720.5 million, respectively, under all our accounts receivable sales programs, which are removed from accounts receivable balances in our consolidated balance sheets.

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

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borrow as a result of more restrictive borrowing terms. We continue to assess our capital structure and evaluate the merits of redeploying available cash to reduce existing debt or repurchase ordinary shares.

Historically we have been successful in refinancing and extending the maturity dates on our term loans and credit facilities. On March 31, 2014, we extended the maturity date to March 2019 of our $2.0 billion credit facility consisting of a $1.5 billion revolving credit facility and a $500.0 million term loan, which was due to expire in October 2016. Further during fiscal 2013, we issued Notes of $1 billion with fixed interest rates and used such proceeds to repay our term loan that was due to mature in October 2014 that carried floating interest rates.

On July 24, 2013, our Board of Directors authorized the repurchase of up to 10% of our outstanding ordinary shares which was approved by our shareholders at the 2013 Extraordinary General Meeting held on July 29, 2013. Share repurchases by us under the share repurchase plans are subject to an aggregate limit of 10% of our ordinary shares outstanding as of the date of the 2013 Extraordinary General Meeting. During fiscal year 2014, we repurchased approximately 59.5 million shares for an aggregate purchase value of approximately $468.8 million. As of March 31, 2014, approximately 37.0 million shares were available to be repurchased under the current plan.

On September 30, 2013, the Singapore Companies Act was amended to increase the share repurchase limit for companies incorporated in Singapore, from 10% to 20% of their shares outstanding as of the most recent shareholder approval date, subject to the requirements under the Singapore Companies Act.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

We have a $2.0 billion credit facility consisting of a $1.5 billion revolving credit facility and a $500 million term loan facility due to mature in March 2019. As of March 31, 2014, there were no borrowings outstanding under the revolving credit facility. Quarterly repayments of principal under this term loan will commence on June 30, 2014 in the amount of $6.3 million up to March 31, 2016 and will increase to $9.4 million thereafter with the remainder due upon maturity. The credit facility requires that we maintain a maximum ratio of total indebtedness to earnings before interest expense, taxes, depreciation and amortization ("EBITDA"), and a minimum interest coverage ratio, as defined therein, during its term. As of March 31, 2014, we were in compliance with these covenants. Borrowings under this credit facility bear interest, at the Company's option, either at (i) LIBOR plus the applicable margin for LIBOR loans ranging between 1.125% and 2.125%, based on the Company's credit ratings or (ii) the base rate (the greatest of the agent's prime rate, the federal funds rate plus 0.50% and LIBOR for a one-month interest period plus 1.00%) plus an applicable margin ranging between 0.125% and 1.125%, based on the Company's credit rating. The Company is required to pay a quarterly commitment fee ranging between 0.15% and 0.40% per annum on the daily unused amount of the $1.5 billion Revolving Credit Facility based on the Company's credit rating.

In addition, we have a $600 million term loan agreement which matures in August 2018. This loan is repayable in quarterly installments of $3.75 million, which will commence in December 2014 through June 2018, with the remaining amount due at maturity. This term loan agreement also requires that we maintain a maximum ratio of total indebtedness to EBITDA, and a minimum interest coverage ratio, as defined therein, during its term. As of March 31, 2014, we were in compliance with the covenants under this term loan agreement. Borrowings under this term loan bear interest, at the Company's option, either at (i) LIBOR plus the applicable margin for LIBOR loans ranging between 1.00% and 2.00%, based on the Company's credit ratings or (ii) the base rate (the greatest of the agent's prime rate, the federal funds rate plus 0.50% and LIBOR for a one-month interest period plus 1.00%) plus an applicable margin ranging between 0.00% and 1.00%, based on the Company's credit rating.

Further, during fiscal 2013, we issued an aggregate amount of $1.0 billion in Notes which are senior unsecured obligations, rank equally with all of our other existing and future senior and

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unsecured debt obligations, and are guaranteed, jointly and severally, fully and unconditionally on an unsecured basis, by each of our 100% owned subsidiaries that guarantees indebtedness under, or is a borrower under, our $2.0 billion credit facility. In July 2013, the Company exchanged these notes for new notes with substantially similar terms and completed the registration of these notes with the Securities and Exchange Commission. As of March 31, 2014, we were in compliance with the covenants under these credit facilities. Interest on the Notes is payable semi-annually, which commenced on August 15, 2013.

As of March 31, 2014, we and certain of our subsidiaries had various uncommitted revolving credit facilities, lines of credit and other loans in the amount of $267.7 million in the aggregate under which there were no borrowings outstanding as of that date.

Refer to the discussion in note 7, "Bank Borrowings and Long-Term Debt" to the consolidated financial statements for further details of our debt obligations.

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

Future payments due under our purchase obligations, debt including capital leases and related interest obligations and operating lease contracts are as follows: Less Than Greater Than Total 1 Year 1 - 3 Years 4 - 5 Years 5 Years (In thousands) Contractual Obligations: Purchase obligations $ 2,952,983$ 2,952,983 $ - $ - $ - Long-term debt and capital lease obligations Long-term debt 2,102,595 32,575 92,500 975,000 1,002,520 Capital lease 8,883 4,218 4,592 73 - Interest on long-term debt obligations 484,156 68,749 158,340 136,907 120,160 Operating leases, net of subleases 555,121 137,274 190,946 120,888 106,013 Restructuring costs 42,396 36,317 6,079 - - Customer contractual obligation 55,000 - 55,000 - - Total contractual

obligations $ 6,201,134$ 3,232,116$ 507,457$ 1,232,868$ 1,228,693



We have excluded $243.9 million of liabilities for unrecognized tax benefits from the contractual obligations table as we cannot make a reasonably reliable estimate of the periodic settlements with the respective taxing authorities. See note 13, "Income Taxes" to the consolidated financial statements for further details.

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

As part of an existing manufacturing agreement with a customer, we are obligated to reimburse the customer for certain performance provisions as defined in the contract. Also defined in the contract are certain provisions that would allow us to recover these losses in future periods. The maximum commitment under this arrangement was initially $88.0 million and declines as we manufacture and deliver products under the arrangement, which expires in August 2016. As of March 31, 2014, per the terms of the agreement and in conjunction with negotiations with the customer during the fourth

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quarter of fiscal 2014, the contractual obligation for reimbursement was determined to be probable and accordingly we recorded $55.0 million to other charges (income), net in the consolidated statements of operations. Reimbursement is not payable until August 2016 or upon contract termination and as a result is included in other liabilities. We are finalizing an amendment to this agreement with the customer that includes a waiver of the $55.0 million contractual obligation. Upon the execution of the amendment, if the contractual obligation is waived, we will reverse this charge with a corresponding credit to other income in the period the amendment is executed.

OFF-BALANCE SHEET ARRANGEMENTS

We sell designated pools of trade receivables to unaffiliated financial institutions under our ABS programs, and in addition to cash, we receive a deferred purchase price receivable for each pool of the receivables sold. Each of these deferred purchase price receivables serves as additional credit support to the financial institutions and is recorded at its estimated fair value. As of March 31, 2014 and 2013, the fair value of our deferred purchase price receivable was approximately $470.9 million and $412.4 million, respectively. As of March 31, 2014 and 2013, the outstanding balance on receivables sold for cash was $1.1 billion and $720.5 million, respectively, under all our accounts receivable sales programs, which were removed from accounts receivable balances in our consolidated balance sheets. For further information see note 10 to the consolidated financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

Refer to note 2 to the consolidated financial statements for recent accounting pronouncements.


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