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    FLEX   SG9999000020

FLEX LTD.

(FLEX)
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FLEX : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

07/30/2021 | 04:12pm EDT
Unless otherwise specifically stated, references in this report to "Flex," "the
Company," "we," "us," "our" and similar terms mean Flex Ltd., and its
subsidiaries.
This report on Form 10-Q contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended. The words "expects,"
"anticipates," "believes," "intends," "plans" and similar expressions identify
forward-looking statements. In addition, any statements which refer to
expectations, projections or other characterizations of future events or
circumstances are forward-looking statements. We undertake no obligation to
publicly disclose any revisions to these forward-looking statements to reflect
events or circumstances occurring subsequent to filing this Form 10-Q with the
Securities and Exchange Commission. These forward-looking statements are subject
to risks and uncertainties, including, without limitation, those risks and
uncertainties discussed in this section, as well as any risks and uncertainties
discussed in Part II, Item 1A, "Risk Factors" of this report on Form 10-Q, and
in Part I, Item 1A, "Risk Factors" and in Part II, Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
Annual Report on Form 10-K for the fiscal year ended March 31, 2021. 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.
                                       22

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OVERVIEW

We are 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, we deliver technology innovation, supply
chain, and manufacturing solutions to diverse industries and end markets. The
Company reports its financial performance based on two 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 communications infrastructure;
•Lifestyle, including appliances, consumer packaging, floorcare, micro mobility
and audio; and
•Consumer Devices, including mobile and high velocity consumer devices.

•Flex Reliability Solutions ("FRS"), which is comprised of the following end
markets:
•Automotive, including autonomous, connectivity, electrification, and smart
technologies;
•Health Solutions, including medical devices, medical equipment and drug
delivery; and
•Industrial, including capital equipment, industrial devices, renewable
including our Nextracker business, grid edge, and power systems.
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 customers. This
enables our customers to leverage our supply chain solutions to meet their
product requirements throughout the entire product life cycle.
Over the past few 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 entered the highly competitive and
rapidly evolving technology 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 approach to manage our extensive service offerings. As our
customers change the way they go to market, we have the capability to reorganize
and rebalance our business portfolio in order to align with our customers' needs
and requirements in an effort to optimize operating results. The objective of
our business model is to allow us to be flexible and redeploy and reposition our
assets and resources as necessary to meet specific customer's supply chain
solutions needs across all the markets we serve and earn a return on our
invested capital above the weighted average cost of that capital.
We believe that our continued business transformation is strategically
positioning us to take advantage of the long-term, future growth prospects for
outsourcing of advanced manufacturing capabilities, design and engineering
services and after-market services.
Update on the Impact of COVID-19 on our Business
With the second wave of the pandemic including follow-on variants of COVID-19,
we continue to experience plant closures and/or restrictions at certain
manufacturing facilities in Malaysia, Brazil, and India. There have been renewed
disease control measures being taken to limit the spread including movement bans
and shelter-in-place orders. We continue to closely monitor the situation in all
the locations where we operate. Our priority remains the welfare of our
employees. We expect persistent waves of COVID-19 to remain a headwind into the
near future. Refer to "Risk Factors - The ongoing COVID-19 pandemic has
materially and adversely affected our business and results of operations. The
duration and extent to which it will continue to adversely impact our business
and results of operations remains uncertain and could be material," as disclosed
in Part II, "Item 1A. Risk Factors."
We are continuously evaluating our capital structure in response to the current
environment and expect that our current financial condition, including our
liquidity sources are adequate to fund future commitments. See additional
discussion in the Liquidity and Capital Resources section below.
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Other Developments
We are continuing to evaluate alternatives for our Nextracker business. We are
considering options that may include, among others, a full or partial separation
of the business through an initial public offering, sale, spin-off, or other
transaction. On April 28, 2021, we announced that we confidentially submitted a
draft registration statement on Form S-1 with the U.S. Securities and Exchange
Commission relating to the proposed initial public offering of Nextracker's
Class A common stock. The initial public offering and its timing are subject to
market and other conditions and the SEC's review process, and there can be no
assurance that we will proceed with such offering or any alternative
transaction. Refer to "Risk Factors - We are pursuing alternatives for our
Nextracker business, including a full or partial separation of the business,
through an initial public offering of Nextracker or otherwise, which may not be
consummated as or when planned or at all, and may not achieve the intended
benefits." in our Annual Report on Form 10-K for the fiscal year ended March 31,
2021.
This Quarterly Report on Form 10-Q for the fiscal quarter ended July 2, 2021
does not constitute an offer to sell or a solicitation of an offer to buy
securities, and shall not constitute an offer, solicitation or sale in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of that jurisdiction.
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Business Overview
We are one of the world's largest providers of global supply chain solutions,
with revenues of $6.3 billion for the three-month period ended July 2, 2021 and
$24.1 billion in fiscal year 2021. We have established an extensive network of
manufacturing facilities in the world's major consumer and enterprise markets
(Asia, the Americas, and Europe) to serve the growing outsourcing needs of both
multinational and regional customers. We design, build, ship, and service
consumer and enterprise products for our customers through a network of over 100
facilities in approximately 30 countries across four continents. The following
tables set forth the relative percentages and dollar amounts of net sales by
region and by country, and net property and equipment by country, based on the
location of our manufacturing sites (amounts may not sum due to rounding):
                                           Three-Month Periods Ended
                                   July 2, 2021                     June 26, 2020
                                                 (In millions)
Net sales by region:
Americas                $      2,579                 41  %    $      2,104        41  %
Asia                           2,365                 37  %           2,013        39  %
Europe                         1,398                 22  %           1,036        20  %
                        $      6,342                          $      5,153

Net sales by country:
China                   $      1,531                 24  %    $      1,417        27  %
Mexico                         1,221                 19  %             907        18  %
U.S.                             876                 14  %             869        17  %
Brazil                           464                  7  %             322         6  %
Malaysia                         411                  6  %             299         6  %
Hungary                          352                  6  %             250         5  %
Other                          1,487                 24  %           1,089        21  %
                        $      6,342                          $      5,153


                                                 As of                        As of
         Property and equipment, net:         July 2, 2021                March 31, 2021
                                                            (In millions)
         Mexico                         $       555        27  %    $         553        26  %
         U.S.                                   360        17  %              361        17  %
         China                                  323        15  %              331        16  %
         India                                  155         7  %              166         8  %
         Hungary                                109         5  %              105         5  %
         Malaysia                               105         5  %              106         5  %
         Other                                  480        24  %              475        23  %
                                        $     2,087                 $       2,097


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 manufacturing
campuses in low-cost geographic areas provide us with a competitive advantage
and strong differentiation in the market for designing, manufacturing and
servicing consumer and enterprise products for leading multinational and
regional customers. Specifically, we offer our customers the ability to simplify
their global product development, manufacturing process, and after sales
services, and enable them to meaningfully accelerate their time to market and
cost savings.
Our operating results are affected by a number of factors, including the
following:

•the impacts on our business due to component shortages, disruptions in transportation or other supply chain related constraints including as a result of the COVID-19 pandemic;

•the effects of the COVID-19 pandemic on our business and results of operations;

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•changes in the macro-economic environment and related changes in consumer
demand;

•the mix of the manufacturing services we are providing, the number, size, and
complexity of new manufacturing programs, the degree to which we utilize our
manufacturing capacity, seasonal demand, 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 customers;

•the effects that current credit and market conditions (including as a result of
the COVID-19 pandemic) could have on the liquidity and financial condition of
our customers and suppliers, including any impact on their ability to meet their
contractual obligations;

•the effects on our business due to certain customers' products having short product life cycles;

•our customers' ability to cancel or delay orders or change production quantities;

•our customers' decisions to choose internal manufacturing instead of outsourcing for their product requirements;

•integration of acquired businesses and facilities;

•increased labor costs due to adverse labor conditions in the markets we operate;

•changes in tax legislation; and


•changes in trade regulations and treaties.
We are also subject to other risks as outlined in Part I, Item 1A of our Annual
Report on Form 10-K for the fiscal year ended March 31, 2021 and in Part II,
Item 1A of this Quarterly Report on Form 10-Q.
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. Due to the COVID-19 pandemic,
there has been and will continue to be uncertainty and disruption in the global
economy and financial markets. We have 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 those estimates and assumptions.
Refer to the accounting policies under Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our Annual Report
on Form 10-K for the fiscal year ended March 31, 2021, where we discuss our more
significant judgments and estimates used in the preparation of the condensed
consolidated financial statements.

RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain statements of
operations data expressed as a percentage of net sales (amounts may not sum due
to rounding). The financial information and the discussion below should be read
together with the condensed consolidated financial statements and notes thereto
included in this document. In addition, reference should be made to our audited
consolidated financial statements and notes thereto and related Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in our Annual Report on Form 10-K for the fiscal year ended March 31,
2021.
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                                                                                        Three-Month Periods Ended
                                                                                  July 2, 2021                      June 26, 2020
Net sales                                                                                         100.0  %                  100.0  %
Cost of sales                                                                                      92.6                      94.1

Gross profit                                                                                        7.4                       5.9
Selling, general and administrative expenses                                                        3.2                       3.7
Intangible amortization                                                                             0.2                       0.3

Interest and other, net                                                                             0.3                       0.6

Income before income taxes                                                                          3.7                       1.3
Provision for income taxes                                                                          0.4                       0.3
Net income                                                                                          3.3  %                    1.0  %


Net sales
The following table sets forth our net sales by segment, and their relative
percentages:
                                                Three-Month Periods Ended
                                        July 2, 2021                     June 26, 2020
                                                      (In millions)
Net sales:
Flex Agility Solutions       $      3,432                 54  %    $      2,912        57  %
Flex Reliability Solutions          2,910                 46  %           2,241        43  %
                             $      6,342                          $      5,153



Net sales during the three-month period ended July 2, 2021 totaled $6.3 billion,
representing an increase of approximately $1.1 billion, or 21% from $5.2 billion
during the three-month period ended June 26, 2020. Net sales for our FAS segment
increased $0.5 billion, or 18%, driven by increases across all of its end
markets, led by an over 40% increase in sales by our Consumer Devices business
from $0.5 billion during the three-month period ended June 26, 2020 to
$0.7 billion during the three-month period ended July 2, 2021, and an over 25%
increase in sales by our Lifestyle business from $0.8 billion during the
three-month period ended June 26, 2020 to $1.0 billion during the three-month
period ended July 2, 2021. The increases were due to a lesser impact from
COVID-19 production pressure during the current quarter, coupled with new ramps,
customer expansions and continued recoveries in consumer spending. Net sales for
our FRS segment increased approximately $0.7 billion, or 30%, primarily due to
an increase of approximately 100% in sales by our Automotive business from
approximately $0.4 billion during the three-month period ended June 26, 2020 to
$0.7 billion during the three-month period ended July 2, 2021, as our automotive
facilities were closed for nearly half of the prior year quarter due to
shutdowns by our automotive customers. The increase in our Automotive business
was partially constrained by component shortages during the three-month period
ended July 2, 2021. In addition, our Industrial business increased approximately
23% from $1.3 billion during the three-month period ended June 26, 2020 to
$1.6 billion during the three-month period ended July 2, 2021 as a result of
customer ramps and strong demand in core industrial and renewables. Net sales
increased across all regions with a $0.5 billion increase to $2.6 billion in the
Americas, a $0.4 billion increase to $1.4 billion in Europe, and a $0.4 billion
increase to $2.4 billion in Asia.
Our ten largest customers during the three-month periods ended July 2, 2021 and
June 26, 2020 accounted for approximately 35% and 39% of net sales,
respectively. No customer accounted for more than 10% of net sales during the
three-month periods ended July 2, 2021 or June 26, 2020.
Cost of sales
Cost of sales is affected by a number of factors, including the number and size
of new manufacturing programs, product mix, labor cost fluctuations by region,
component costs and availability and capacity utilization.
Cost of sales during the three-month period ended July 2, 2021 totaled $5.9
billion, representing an increase of approximately $1.1 billion, or 23% from
$4.8 billion during the three-month period ended June 26, 2020. The increase in
cost of sales for the three-month period ended July 2, 2021 was primarily driven
by the increased consolidated sales of over $1.1 billion. Cost of sales in FAS
for the three-month period ended July 2, 2021 increased 16%, or $0.4 billion
from the three-month period ended June 26, 2020, which is in line with the
overall 18% increase in FAS revenue during the same period primarily as a result
of higher revenue in our Consumer Devices and Lifestyle businesses coupled with
better fixed cost absorption, disciplined cost management as well as our
continued push for new business wins and renewals at accretive margins. Cost of
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sales in FRS for the three-month period ended July 2, 2021 increased 29%, or
$0.6 billion from the three-month period ended June 26, 2020, which is in line
with the overall 30% increase in FRS revenue during the same period as our
Automotive and Industrial businesses benefited from stronger demand and lesser
COVID-19 pressures during the current period, as discussed above.
Gross profit
Gross profit is affected by a fluctuation in cost of sales elements as outlined
above and further by a number of factors, including product life cycles, unit
volumes, pricing, competition, new product introductions, and the expansion or
consolidation of manufacturing facilities, as well as specific restructuring
activities initiated from time to time. The flexible design of our manufacturing
processes allows us to manufacture a broad range of products in our facilities
and better utilize our manufacturing capacity across our diverse geographic
footprint and service customers from both segments. 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 the three-month period ended July 2, 2021 increased $0.2
billion to $0.5 billion, or 7.4% of net sales, from $0.3 billion, or 5.9% of net
sales, during the three-month period ended June 26, 2020. Gross margin improved
150 basis points during the same period despite certain COVID-19 disruptions,
industry-wide component shortages and cost pressures on logistics in the
three-month period ended July 2, 2021. The increase in gross profit and gross
margin during the current period resulted primarily from the overall stronger
demand across all of our end markets which allowed for improved fixed cost
absorption, coupled with continued improvement in the mix of our business and
less direct and incremental unfavorable impact from COVID-19 compared to the
prior year period.
Segment income
An operating segment's performance is evaluated based on its pre-tax operating
contribution, or segment income. Segment income is defined as net sales less
cost of sales, and segment selling, general and administrative expenses, and
does not include amortization of intangibles, stock-based compensation, customer
related asset impairment (recoveries), legal and other, and interest and other,
net. A portion of depreciation is allocated to the respective segments, together
with other general corporate research and development and administrative
expenses.
The following table sets forth segment income and margins:
                                                                                        Three-Month Periods Ended
                                                                            July 2, 2021                                June 26, 2020
                                                                                              (In millions)
Segment income:
Flex Agility Solutions                                      $         137                          4.0  %       $        72             2.5  %
Flex Reliability Solutions                                            170                          5.8  %               115             5.1  %


FAS segment margin increased 150 basis points, to 4.0% for the three-month
period ended July 2, 2021, from 2.5% for the three-month period ended June 26,
2020. The margin increase was driven by an increase in demand across all of its
end markets, more notably in our Consumer Devices and Lifestyle end markets due
to new business wins and renewals at accretive margins, strong demand recovery
from COVID-19, disciplined cost management and improved efficiencies as noted
above, partially offset by the elevated costs due to component shortages and
logistics constraints we faced during the three-month period ended July 2, 2021.
FRS segment margin increased 70 basis points, to 5.8% for the three-month period
ended July 2, 2021, from 5.1% for the three-month period ended June 26, 2020.
The margin increase in FRS was driven by strong demand across all of its end
markets coupled with better fixed cost absorption partially offset by increased
costs due to components constraints and logistics challenges in the three-month
period ended July 2, 2021.
Selling, general and administrative expenses
Selling, general and administrative expenses ("SG&A") was $0.2 billion, or 3.2%
of net sales, during the three-month period ended July 2, 2021, increasing $10
million from $0.2 billion, or 3.7% of net sales, during the three-month period
ended June 26, 2020, which reflects our enhanced cost control efforts to support
higher revenue growth while keeping our SG&A expenses relatively flat.
Intangible amortization
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Amortization of intangible assets remains consistent at $15 million during the
three-month periods ended July 2, 2021 and June 26, 2020.
Interest and other, net
Interest and other, net was $22 million during the three-month period ended
July 2, 2021 compared to $31 million during the three-month period ended
June 26, 2020, primarily driven by $4 million of lower expenses from our
asset-backed securitization programs as we reduced outstanding balances for
these programs coupled with a $4 million gain in net foreign exchanges during
the first quarter of fiscal year 2022.
Income taxes
Certain of our subsidiaries, at various times, have been granted tax relief in
their respective countries, resulting in lower income taxes than would otherwise
be the case under ordinary tax rates. Refer to note 14, "Income Taxes" of the
notes to the consolidated financial statements in our Annual Report on Form 10-K
for the fiscal year ended March 31, 2021 for further discussion.
The consolidated effective tax rate was 12% and 23% for the three-month periods
ended July 2, 2021 and June 26, 2020, respectively. The effective rate varies
from the Singapore statutory rate of 17% as a result of recognition of earnings
in different jurisdictions (we generate most of our revenues and profits from
operations outside of Singapore), operating loss carryforwards, income tax
credits, release of previously established valuation allowances for deferred tax
assets, liabilities for uncertain tax positions, as well as the effect of
certain tax holidays and incentives granted to our subsidiaries primarily in
China, Malaysia, Costa Rica, the Netherlands and Israel. The effective tax rate
for the three-month period ended July 2, 2021 is lower than the effective tax
rate for the three-month periods ended June 26, 2020, primarily due to a
changing jurisdictional mix of incomes and a significant amount of restructuring
charges for the three-month period ended June 26, 2020 which resulted in very
minimal tax benefit.

LIQUIDITY AND CAPITAL RESOURCES
In response to the recent challenging environment following the COVID-19
pandemic, we continuously evaluate our ability to meet our obligations over the
next 12 months and have proactively reset our capital structure during these
times to improve maturities and liquidity. As a result, we expect that our
current financial condition, including our liquidity sources are adequate to
fund current and future commitments. As of July 2, 2021, we had cash and cash
equivalents of approximately $2.7 billion and bank and other borrowings of
approximately $3.8 billion. We have a $2.0 billion revolving credit facility
that is due to mature in January 2026 (the "2026 Credit Facility"), under which
we had no borrowings outstanding as of July 2, 2021. As of July 2, 2021, we were
in compliance with the covenants under all of our credit facilities and
indentures.
Cash provided by operating activities was $0.3 billion during the three-month
period ended July 2, 2021, primarily driven by $0.2 billion of net income for
the period plus $0.2 billion of non-cash charges such as depreciation,
amortization, restructuring and impairment charges, and stock-based
compensation.
We believe net working capital ("NWC") and net working capital as a percentage
of annualized net sales are key metrics that measure our liquidity. Net working
capital is calculated as current quarter accounts receivable, net of allowance
for doubtful accounts, plus inventories and contract assets, less accounts
payable. Net working capital increased $0.1 billion to $3.0 billion as of
July 2, 2021, from $2.9 billion as of March 31, 2021. This increase is primarily
driven by a $0.5 billion increase in inventories due to component shortages and
logistics constraints driving up buffer stock and inventory pricing, partially
offset by a $0.3 billion decrease in net receivables and a $0.2 billion increase
in accounts payable. Our current quarter net working capital as a percentage of
annualized net sales for the quarter ended July 2, 2021, increased to 11.8% from
11.5% of annualized net sales for the quarter ended March 31, 2021. We expect to
operate in this range going forward. We continue to see component shortages in
the supply chain, and although we are actively managing these impacts, we expect
continued working capital pressure in the near future. We expect it will take
additional time to adequately drive down our inventory levels to align with the
current demand environment. We are proactively working with our partners to
rebalance safety and buffer stock requirements and we have an established
enterprise-wide cross-functional initiative resetting our load planning.
Component shortages and significantly increased logistic costs are also expected
to persist at least in the near future as we are continuing to see increasing
supply constraints and costs. We are working diligently with our partners to
secure needed parts and fulfill demand.
Cash used in investing activities was $0.1 billion during the three-month period
ended July 2, 2021. This was primarily driven by $0.1 billion of net capital
expenditures for property and equipment to continue expanding capabilities and
capacity in support of our expanding Health Solutions and Industrial businesses.
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We believe adjusted 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 adjusted free cash flow is
defined as cash from operations, less net purchases of property and equipment to
present adjusted cash flows on a consistent basis for investor transparency.
During fiscal year 2021, we proactively and strategically reduced the
outstanding balance of our ABS programs. As this decrease in cash flow reflected
the change of our capital strategy, we added this back for our adjusted free
cash flow calculation and also excluded the impact to cash flows related to
certain vendor programs that is required for US GAAP presentation for fiscal
year 2021. Refer to Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" (Adjusted Free Cash Flow subsection) of our
Annual Report on our Form 10-K for the fiscal year ended March 31, 2021 for
further discussion. Our adjusted free cash flows for the three-month period
ended July 2, 2021 was an inflow of $0.2 billion compared to an outflow of $74
million for the three-month period ended June 26, 2020. Adjusted free cash flow
is not a measure of liquidity under U.S. GAAP, and may not be defined and
calculated by other companies in the same manner. Adjusted free cash flow should
not be considered in isolation or as an alternative to net cash provided by
operating activities. Adjusted free cash flows reconcile to the most directly
comparable GAAP financial measure of cash flows from operations as follows:
                                                                       Three-Month Periods Ended
                                                                 July 2, 2021            June 26, 2020
                                                                             (In millions)
Net cash used in operating activities                         $           334          $          (629)
Reduction in ABS levels and other                                           -                      657

Purchases of property and equipment                                      (118)                    (110)
Proceeds from the disposition of property and equipment                     3                        8
Adjusted free cash flow                                       $           219          $           (74)


Cash used in financing activities was $0.2 billion during the three-month period
ended July 2, 2021, which was primarily driven by $0.2 billion of cash paid for
the repurchase of our ordinary shares.
Our cash balances are generated and held in numerous locations throughout the
world. Liquidity is affected by many factors, some of which are based on normal
ongoing operations of the business and some of which arise from fluctuations
related to global economics and markets. Local government regulations may
restrict our ability to move cash balances to meet cash needs under certain
circumstances; however, any current restrictions are not material. We do not
currently expect such regulations and restrictions to impact our ability to pay
vendors and conduct operations throughout the global organization. We believe
that our existing cash balances, together with anticipated cash flows from
operations and borrowings available under our credit facilities, will be
sufficient to fund our operations through at least the next twelve months. As of
July 2, 2021, and March 31, 2021, approximately 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
$1.5 billion as of March 31, 2021). Repatriation could result in an additional
income tax payment; however, for the majority of our foreign entities, 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.
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.
We maintain global paying services agreements with several financial
institutions. Under these agreements, the financial institutions act as our
paying agents with respect to accounts payable due to our suppliers who elect to
participate in the program. The agreements allow our suppliers to sell their
receivables to one of the participating financial institutions at the discretion
of both parties on terms that are negotiated between the supplier and the
respective financial institution. Our obligations to our suppliers, including
the amounts due and scheduled payment dates, are not impacted by our suppliers'
decisions to sell their receivables under this program. The cumulative payments
due to suppliers participating in the programs amounted to approximately $0.3
billion and $0.2 billion for the three-month periods ended July 2, 2021 and
June 26, 2020, respectively. Pursuant to their agreement with one of the
financial institutions, certain suppliers may elect to be paid early at their
discretion. We are not always notified when our suppliers sell receivables under
these programs. The available capacity under these programs can vary based on
the number of investors and/or financial institutions participating in these
programs at any point in time.
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In addition, we maintain various uncommitted short-term financing facilities
including but not limited to commercial paper program, and revolving sale and
repurchase of subordinated note established under the securitization facility,
under which there were no borrowings outstanding as of July 2, 2021.
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 have the ability to sell a designated
pool of trade receivables under 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. We may enter into debt
and equity financings, sales of accounts receivable and lease transactions to
fund acquisitions and anticipated growth as needed.
The sale or issuance of equity or convertible debt securities could result in
dilution to current shareholders. Further, we may issue debt securities that
have rights and privileges senior to those of holders of ordinary shares, and
the terms of this debt could impose restrictions on operations and could
increase debt service obligations. This increased indebtedness could limit our
flexibility as a result of debt service requirements and restrictive covenants,
potentially affect our credit ratings, and may limit our ability to access
additional capital or execute our business strategy. Any downgrades in credit
ratings could adversely affect our ability to borrow as a result of more
restrictive borrowing terms. We continue to assess our capital structure and
evaluate the merits of redeploying available cash to reduce existing debt or
repurchase ordinary shares.
Under our current share repurchase program, our Board of Directors authorized
repurchases of our outstanding ordinary shares for up to $0.5 billion in
accordance with the share purchase mandate approved by our shareholders at the
date of the most recent Annual General Meeting which was held on August 7,
2020. During the three-month period ended July 2, 2021, we paid $0.2 billion to
repurchase shares under the current repurchase plans at an average price of
$17.97 per share. As of July 2, 2021, shares in the aggregate amount of $0.2
billion were available to be repurchased under the current plan.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS
Information regarding our long-term debt payments, operating lease payments,
capital lease payments and other commitments is provided in Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of our Annual Report on our Form 10-K for the fiscal year ended
March 31, 2021.
There were no material changes in our contractual obligations and commitments
since March 31, 2021.

OFF-BALANCE SHEET ARRANGEMENTS
As of July 2, 2021, and March 31, 2021, the outstanding balance on receivables
sold for cash was $0.2 billion, respectively, under our accounts receivable
factoring program, which were removed from accounts receivable balances in our
condensed consolidated balance sheets. There were no outstanding balance of
receivables sold under our ABS programs as of each of the period presented. For
further information, see note 9 to the condensed consolidated financial
statements.

© Edgar Online, source Glimpses

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