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Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
Form 10-Q
(Mark One)
 
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 25, 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
(656876-9899
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Ordinary Shares, No Par ValueFLEXThe 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 FilerAccelerated filerNon-accelerated filerSmaller 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 October 26, 2020 was 501,157,963.


Table of Contents
FLEX LTD.
 
INDEX
 
  Page
   
 
 
 
 
 
 
   
   
 

2

Table of Contents
PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Shareholders of Flex Ltd.
Singapore

Results of Review of Interim Financial Information
 
We have reviewed the accompanying condensed consolidated balance sheet of Flex Ltd. and its subsidiaries (the “Company”) as of September 25, 2020, the related condensed consolidated statements of operations, comprehensive income (loss) and shareholders' equity for the three-month and six-month periods ended September 25, 2020 and September 27, 2019, and the condensed consolidated statements of cash flows for the six-month periods ended September 25, 2020 and September 27, 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.

/s/ DELOITTE & TOUCHE LLP 
San Jose, California 
October 30, 2020 

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FLEX LTD.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
As of September 25, 2020As of March 31, 2020
(In millions, except share amounts)
(Unaudited)
ASSETS
Current assets:  
Cash and cash equivalents$2,359 $1,923 
Accounts receivable, net of allowance of $78 and $96, respectively
3,804 2,436 
Contract assets181 282 
Inventories3,611 3,785 
Other current assets524 660 
Total current assets10,479 9,086 
Property and equipment, net2,106 2,216 
Operating lease right-of-use assets, net614 605 
Goodwill1,088 1,065 
Other intangible assets, net241 262 
Other assets473 456 
Total assets$15,001 $13,690 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:  
Bank borrowings and current portion of long-term debt$63 $149 
Accounts payable5,046 5,108 
Accrued payroll419 364 
Other current liabilities1,629 1,590 
Total current liabilities7,157 7,211 
Long-term debt, net of current portion3,739 2,689 
Operating lease liabilities, non-current545 529 
Other liabilities445 430 
Shareholders’ equity  
Ordinary shares, no par value; 551,334,253 and 547,665,632 issued, and 501,094,898 and 497,426,277 outstanding, respectively
6,373 6,336 
Treasury stock, at cost; 50,239,355 shares as of September 25, 2020 and March 31, 2020
(388)(388)
Accumulated deficit(2,737)(2,902)
Accumulated other comprehensive loss(133)(215)
Total shareholders’ equity3,115 2,831 
Total liabilities and shareholders’ equity$15,001 $13,690 

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

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FLEX LTD.
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three-Month Periods EndedSix-Month Periods Ended
 September 25, 2020September 27, 2019September 25, 2020September 27, 2019
(In millions, except per share amounts)
(Unaudited)
Net sales$5,985 $6,088 $11,138 $12,264 
Cost of sales5,566 5,785 10,406 11,561 
Restructuring charges24 114 34 161 
Gross profit395 189 698 542 
Selling, general and administrative expenses193 205 384 415 
Intangible amortization16 16 31 33 
Restructuring charges11 14 11 23 
Interest and other, net22 50 51 103 
Income (loss) before income taxes153 (96)221 (32)
Provision for income taxes40 21 56 40 
Net income (loss)$113 $(117)$165 $(72)
Earnings (loss) per share:    
Basic$0.23 $(0.23)$0.33 $(0.14)
Diluted$0.22 $(0.23)$0.33 $(0.14)
Weighted-average shares used in computing per share amounts:    
Basic501 513 499 513 
Diluted504 513 503 513 

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

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FLEX LTD.
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
 Three-Month Periods EndedSix-Month Periods Ended
 September 25, 2020September 27, 2019September 25, 2020September 27, 2019
(In millions)
(Unaudited)
Net income (loss)$113 $(117)$165 $(72)
Other comprehensive income (loss):    
Foreign currency translation adjustments, net of zero tax
31 (26)45 (21)
Unrealized gain (loss) on derivative instruments and other, net of zero tax
7 (12)37 (17)
Comprehensive income (loss)$151 $(155)$247 $(110)

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

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FLEX LTD.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


Ordinary SharesAccumulated Other Comprehensive LossTotal
Three Months Ended September 25, 2020Shares
Outstanding
AmountAccumulated
Deficit
Unrealized
Gain (Loss) on
Derivative
Instruments
and Other
Foreign
Currency
Translation
Adjustments
Total
Accumulated
Other
Comprehensive
Loss
Shareholders'
Equity
(In millions)
Unaudited
BALANCE AT JUNE 26, 2020500 $5,961 $(2,850)$(52)$(119)$(171)$2,940 
Issuance of Flex Ltd. vested shares under restricted share unit awards1 — — — — — — 
Net income— — 113 — — — 113 
Stock-based compensation— 24 — — — — 24 
Total other comprehensive income— — — 7 31 38 38 
BALANCE AT SEPTEMBER 25, 2020501 $5,985 $(2,737)$(45)$(88)$(133)$3,115 

Ordinary SharesAccumulated Other Comprehensive LossTotal
Six Months Ended September 25, 2020Shares
Outstanding
AmountAccumulated
Deficit
Unrealized
Gain (Loss) on
Derivative
Instruments
and Other
Foreign
Currency
Translation
Adjustments
Total
Accumulated
Other
Comprehensive
Loss
Shareholders'
Equity
(In millions)
Unaudited
BALANCE AT MARCH 31, 2020497 $5,948 $(2,902)$(82)$(133)$(215)$2,831 
Issuance of Flex Ltd. vested shares under restricted share unit awards4 — — — — — — 
Net Income— — 165 — — — 165 
Stock-based compensation— 37 — — — — 37 
Total other comprehensive income— — — 37 45 82 82 
BALANCE AT SEPTEMBER 25, 2020501 $5,985 $(2,737)$(45)$(88)$(133)$3,115 
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FLEX LTD.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Continued)

Ordinary SharesAccumulated Other Comprehensive LossTotal
Three Months Ended September 27, 2019Shares
Outstanding
AmountAccumulated
Deficit
Unrealized
Gain (Loss) on
Derivative
Instruments
and Other
Foreign
Currency
Translation
Adjustments
Total
Accumulated
Other
Comprehensive
Loss
Shareholders'
Equity
(In millions)
Unaudited
BALANCE AT JUNE 28, 2019514 $6,099 $(2,945)$(47)$(105)$(152)$3,002 
Repurchase of Flex Ltd. ordinary shares at cost(6)(60)— — — — (60)
Issuance of Flex Ltd. vested shares under restricted share unit awards1 — — — — — — 
Net loss— — (117)— — — (117)
Stock-based compensation— 19 — — — — 19 
Total other comprehensive loss— — — (12)(26)(38)(38)
BALANCE AT SEPTEMBER 27, 2019509 $6,058 $(3,062)$(59)$(131)$(190)$2,806 

Ordinary SharesAccumulated Other Comprehensive LossTotal
Six Months Ended September 27, 2019Shares
Outstanding
AmountAccumulated
Deficit
Unrealized
Gain (Loss) on
Derivative
Instruments
and Other
Foreign
Currency
Translation
Adjustments
Total
Accumulated
Other
Comprehensive
Loss
Shareholders'
Equity
(In millions)
Unaudited
BALANCE AT MARCH 31, 2019517 $6,136 $(3,012)$(42)$(110)$(152)$2,972 
Repurchase of Flex Ltd. ordinary shares at cost(11)(112)— — — — (112)
Exercise of stock options— — — — — — — 
Issuance of Flex Ltd. vested shares under restricted share unit awards3 — — — — — — 
Net loss— — (72)— — — (72)
Stock-based compensation— 34 — — — — 34 
Cumulative effect on opening equity of adopting accounting standards and other— — 22 — — — 22 
Total other comprehensive loss— — — (17)(21)(38)(38)
BALANCE AT SEPTEMBER 27, 2019509 $6,058 $(3,062)$(59)$(131)$(190)$2,806 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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FLEX LTD.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Six-Month Periods Ended
 September 25, 2020September 27, 2019
(In millions)
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income (loss)$165 $(72)
Depreciation, amortization and other impairment charges346 357 
Changes in working capital and other, net(876)(1,933)
Net cash used in operating activities(365)(1,648)
CASH FLOWS FROM INVESTING ACTIVITIES:  
Purchases of property and equipment(185)(272)
Proceeds from the disposition of property and equipment14 53 
Cash collections of deferred purchase price 1,840 
Other investing activities, net13 23 
Net cash (used in) provided by investing activities(158)1,644 
CASH FLOWS FROM FINANCING ACTIVITIES:  
Proceeds from bank borrowings and long-term debt1,943 780 
Repayments of bank borrowings and long-term debt(1,005)(864)
Payments for repurchases of ordinary shares (112)
Other financing activities, net2 328 
Net cash provided by financing activities940 132 
Effect of exchange rates on cash and cash equivalents19 (9)
Net increase in cash and cash equivalents436 119 
Cash and cash equivalents, beginning of period1,923 1,697 
Cash and cash equivalents, end of period$2,359 $1,816 
Non-cash investing activities:  
Unpaid purchases of property and equipment$54 $71 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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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 six-month periods ended September 25, 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 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
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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 replaces the existing incurred loss impairment model with an expected credit loss model and requires 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 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.
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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 September 25, 2020As of March 31, 2020
 (In millions)
Raw materials$2,662 $2,836 
Work-in-progress433 373 
Finished goods516 576 
 $3,611 $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 September 25, 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 on January 1, 2021. The following table summarizes the goodwill allocation as of April 1, 2020 and the activity during the six-month period ended September 25, 2020: 
FASFRS
 Communications,
Enterprise
and Cloud
LifestyleConsumer DevicesAutomotiveHealth SolutionsIndustrialTotal
 (In millions)
Balance at April 1, 2020$188 $131 $51 $174 $192 $329 $1,065 
Foreign currency translation adjustments   21 2  23 
Balance at September 25, 2020$188 $131 $51 $195 $194 $329 $1,088 

The components of acquired intangible assets are as follows:
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 As of September 25, 2020As 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$282 $(146)$136 $275 $(128)$147 
Licenses and other intangibles255 (150)105 245 (130)115 
Total$537 $(296)$241 $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:
Fiscal Year Ending March 31,Amount
 (In millions)
2021 (1)$31 
202253 
202345 
202444 
202539 
Thereafter29 
Total amortization expense$241 
____________________________________________________________
(1)Represents estimated amortization for the remaining fiscal six-month period ending March 31, 2021. 
Other Current Liabilities
Other current liabilities include customer working capital advances of $356.1 million and $264.2 million, customer-related accruals of $203.3 million and $195.1 million, and current operating lease liabilities of $119.0 million and $114.1 million as of September 25, 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
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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 $354.9 million and $361.5 million as of September 25, 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 six-month periods ended September 25, 2020 and September 27, 2019, respectively.
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Three-Month Periods EndedSix-Month Periods Ended
September 25, 2020September 27, 2019September 25, 2020September 27, 2019
Timing of Transfer(In millions)
FAS
Point in time$2,823 $2,987 $5,269 $5,956 
Over time495 596 961 1,535 
Total 3,318 3,583 6,230 7,491 
FRS
Point in time1,779 1,597 3,103 3,050 
Over time888 908 1,805 1,723 
Total 2,667 2,505 4,908 4,773 
Flex
Point in time4,602 4,584 8,372 9,006 
Over time1,383 1,504 2,766 3,258 
Total $5,985 $6,088 $11,138 $12,264 

4.  SHARE-BASED COMPENSATION
The Company's primary plan used for granting equity compensation awards is the 2017 Equity Incentive Plan (the "2017 Plan").
The following table summarizes the Company’s share-based compensation expense:
 Three-Month Periods EndedSix-Month Periods Ended
 September 25, 2020September 27, 2019September 25, 2020September 27, 2019
 (In millions)
Cost of sales$6 $4 $10 $7 
Selling, general and administrative expenses18 15 27 27 
Total share-based compensation expense$24 $19 $37 $34 
Total unrecognized compensation expense related to share options under all plans as well as the number of options outstanding and exercisable were immaterial as of September 25, 2020.
During the six-month period ended September 25, 2020, the Company granted 10.9 million unvested restricted share unit ("RSU") awards. Of this amount, approximately 9.3 million are plain-vanilla unvested RSU awards that vest over a period of two to four years, with no performance or market conditions, and with an average grant date price of $10.31 per award. Further, approximately 1.6 million unvested shares represent the target amount of grants made to certain key employees whereby vesting is contingent on certain market conditions. The average grant date fair value of these awards contingent on certain market conditions was estimated to be $15.03 per award and was calculated using a Monte Carlo simulation. The number of shares contingent on market conditions that ultimately will vest will range from zero up to a maximum of 3.2 million based on a measurement of the percentile rank of the Company’s total shareholder return over a certain specified period against the Standard and Poor’s (“S&P”) 500 Composite Index, and will cliff vest after a period of three years, to the extent such market conditions have been met.  
As of September 25, 2020, approximately 20.9 million unvested RSU awards under all plans were outstanding, of which vesting for a targeted amount of 3.8 million awards is contingent primarily on meeting certain market conditions. The number of shares that will ultimately be issued can range from zero to 7.6 million based on the achievement levels of the respective conditions. During the six-month period ended September 25, 2020, no shares vested in connection with the awards with market conditions granted in fiscal year 2018.
As of September 25, 2020, total unrecognized compensation expense related to unvested RSU awards under all plans was approximately $182.5 million, and will be recognized over a weighted-average remaining vesting period of 2.3 years.

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5.  EARNINGS (LOSS) PER SHARE 
The following table reflects basic weighted-average ordinary shares outstanding and diluted weighted-average ordinary share equivalents used to calculate basic and diluted earnings per share attributable to the shareholders of Flex: 
 Three-Month Periods EndedSix-Month Periods Ended
 September 25, 2020September 27, 2019September 25, 2020September 27, 2019
 (In millions, except per share amounts)
Basic earnings (loss) per share:
Net income (loss)$113 $(117)$165 $(72)
Shares used in computation:  
Weighted-average ordinary shares outstanding501 513 499 513 
Basic earnings (loss) per share$0.23 $(0.23)$0.33 $(0.14)
Diluted earnings (loss) per share:    
Net income (loss)$113 $(117)$165 $(72)
Shares used in computation:    
Weighted-average ordinary shares outstanding501 513 499 513 
Weighted-average ordinary share equivalents from stock options and RSU awards (1) (2) (3)3  4  
Weighted-average ordinary shares and ordinary share equivalents outstanding504 513 503 513 
Diluted earnings (loss) per share$0.22 $(0.23)$0.33 $(0.14)
____________________________________________________________
(1)An immaterial number of options to purchase ordinary shares were excluded from the computation of diluted earnings per share during the three and six-month periods ended September 25, 2020 and September 27, 2019, respectively, due to their anti-dilutive impact on the weighted-average ordinary share equivalents.

(2)RSU awards of 3.5 million and 3.6 million for the three and six-month periods ended September 25, 2020, respectively, were excluded from the computation of diluted earnings per share due to their anti-dilutive impact on the weighted-average ordinary share equivalents. RSU awards of 5.9 million and 5.5 million for the three and six-month periods ended September 27, 2019, respectively, were excluded from the computation of diluted earnings per share.

(3)As a result of the Company's net loss, ordinary shares equivalent from stock options and RSU awards of approximately 2.6 million for the three-month period ended September 27, 2019, and 3.3 million for the six-month period ended September 27, 2019, were excluded from the calculation of diluted earnings (loss) per share, due to their anti-dilutive impact on the weighted-average ordinary share equivalents.

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6.  BANK BORROWINGS AND LONG-TERM DEBT
Bank borrowings and long-term debt as of September 25, 2020 are as follows:
 As of September 25, 2020As of March 31, 2020
(In millions)
Term Loan, including current portion, due in installments through June 2022 433 
5.000% Notes due February 2023
500 500 
Term Loan due April 2024 - three-month Yen LIBOR plus 0.500%
318 310 
4.750% Notes due June 2025
597 597 
3.750% Notes due February 2026
696  
4.875% Notes due June 2029
661 662 
4.875% Notes due May 2030
696  
India Facilities 138 138 
Other220 211 
Debt issuance costs(24)(13)
3,802 2,838 
Current portion, net of debt issuance costs(63)(149)
Non-current portion$3,739 $2,689 
The weighted-average interest rate for the Company's long-term debt was 4.1% and 4.0% as of September 25, 2020 and March 31, 2020, respectively.
Scheduled repayments of the Company's bank borrowings and long-term debt as of September 25, 2020 are as follows:
Fiscal Year Ending March 31,Amount
(In millions)
2021 (1)$56 
2022216 
2023531 
202453 
2025318 
Thereafter2,652 
Total$3,826 
(1)Represents estimated repayments for the remaining fiscal six-month period ending March 31, 2021.
Notes due February 2026 and May 2030
In May 2020, the Company issued $425 million aggregate principal amount of 3.750% Notes due February 2026 (the "Existing 2026 Notes"), at 99.617% of face value and $325 million aggregate principal amount of 4.875% Notes due May 2030 (the "Existing 2030 Notes" and, together with the Existing 2026 Notes, the "Existing Notes"), at 99.562% of face value. In August 2020, as a further issuance of the Existing Notes, the Company issued under the same terms (other than the initial interest accrual date and first interest payment date for the additional 2026 Notes, and the initial offering price and the issue date for the additional 2026 and 2030 Notes), an additional $250 million of 3.750% Notes due February 2026 (together with the "Existing 2026 Notes" above, the "2026 Notes"), at 109.294% of face value, and $325 million of 4.875% Notes due May 2030 (together with the "Existing 2030 Notes" above, the "2030 Notes"), at 114.863% of face value. Immediately after the issuance of the additional notes issued in August 2020, the Company has $675 million aggregate principal amount of 3.750% Notes due 2026 outstanding and $650 million aggregate principal amount of 4.875% Notes due 2030 outstanding. The Company received in aggregate, proceeds of approximately $1.4 billion, net of discounts and after premiums, from the issuances, which have been used for working capital and other general corporate purposes, in addition to repaying the term loan due June 2022. The Company incurred and capitalized as a direct reduction to the carrying amount of the Notes presented on the balance sheet approximately $12.8 million of costs in conjunction with the issuance of the Notes.
Interest on the 2026 Notes and the 2030 Notes is payable semi-annually, commencing on August 1, 2020 and November 12, 2020, respectively, except that interest on the additional 2026 Notes is payable commencing February 1, 2021. The Notes are senior unsecured obligations of the Company and rank equally with all of the Company's other existing and future senior and unsecured debt obligations.
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The indenture governing the Notes contains covenants that, among other things, restrict the ability of the Company and certain of the Company's subsidiaries to create liens; enter into sale-leaseback transactions; and consolidate or merge with, or convey, transfer or lease all or substantially all of the Company's assets to, another person, or permit any other person to consolidate, merge, combine or amalgamate with or into the Company. These covenants are subject to a number of significant limitations and exceptions set forth in the indenture. The indenture also provides for customary events of default, including, but not limited to, cross defaults to certain specified other debt of the Company and its subsidiaries. In the case of an event of default arising from specified events of bankruptcy or insolvency, all outstanding Notes will become due and payable immediately without further action or notice. If any other event of default under the indenture occurs or is continuing, the trustee or holders of at least 25% in aggregate principal amount of the then outstanding 2026 Notes or 2030 Notes may declare all of such series of Notes to be due and payable immediately, but upon certain conditions such declaration and its consequences may be rescinded and annulled by the holders of a majority in principal amount of such series of Notes. As of September 25, 2020, the Company was in compliance with the covenants in the indenture governing the Notes.

7.  INTEREST AND OTHER, NET 
Interest and other, net for the three and six-month periods ended September 25, 2020 and September 27, 2019 are primarily composed of the following:
 Three-Month Periods EndedSix-Month Periods Ended
 September 25, 2020September 27, 2019September 25, 2020September 27, 2019
 (In millions)