FLEX LTD. - 10-K filing on 2019-05-21

SUMMARY OF ACCOUNTING POLICIES (Tables)

12 Months Ended

Mar. 31, 2019

Schedule of financial statement impact due to ASC 606

The cumulative effect of change made to the Company's April 1, 2018 condensed consolidated balance sheet for the adoption of ASC 606 was as follows:



Condensed Consolidated Balance Sheet
	Impact of Adopting ASC 606
	Balance at March 31, 2018			Adjustments			Balance at April 1, 2018
	(In thousands)
ASSETS
Contract assets	$	—		$	451,287		$	451,287
Inventories	3,799,829			(447,752		)	3,352,077
Other current assets	1,380,466			(51,479		)	1,328,987

LIABILITIES AND SHAREHOLDERS’ EQUITY
Other current liabilities	1,719,418			(87,897		)	1,631,521
Other liabilities	531,587			2,098			533,685

Accumulated deficit	$	(3,144,114	)	$	37,855		$	(3,106,259	)

The adoption of ASC 606 resulted in the establishment of contract asset and contract liability balance sheet accounts and in the reclassification to these new accounts from certain asset and liability accounts, primarily inventories. The decrease in accumulated deficit in the table above reflects $37.9 million of net adjustments to the balance sheet as of April 1, 2018, resulting from the adoption of ASC 606 primarily related to certain customer contracts requiring an over-time method of revenue recognition. The declines in inventories and other current assets reflect reclassifications to contract assets due to the earlier recognition of certain costs of products sold for over-time contracts. The decline in other current liabilities is primarily due to the reclassification of payments from customers in advance of work performed to contract assets to reflect the net position of the related over-time contracts.

The following tables summarize the impacts of ASC 606 adoption on the Company’s consolidated balance sheets and consolidated statements of operations:



Condensed Consolidated Balance Sheet
As of March 31, 2019
	Impact of Adopting ASC 606
	As Reported			Adjustments			Balance without ASC 606 Adoption
	(In thousands)
ASSETS
Contract assets	$	216,202		$	(216,202	)	$	—
Inventories	3,722,854			252,844			3,975,698
Other current assets	854,790			8,865			863,655

LIABILITIES AND SHAREHOLDERS’ EQUITY
Other current liabilities	1,426,075			65,705			1,491,780

Accumulated deficit	$	(3,012,012	)	$	(35,114	)	$	(3,047,126	)



Condensed Consolidated Statement of Operations
	Fiscal Year Ended March 31, 2019
	Impact of Adopting ASC 606
	As Reported		Adjustments			Balance without ASC 606 Adoption
	(In thousands)
Net sales	$	26,210,511	$	(25,665	)	$	26,184,846
Cost of sales (including restructuring charges)	24,692,736		(28,406		)	24,664,330
Gross profit	$	1,517,775	$	2,741		$	1,520,516

Summary of the activity in the Company's allowance for doubtful accounts

The following table summarizes the activity in the Company's allowance for doubtful accounts during fiscal years 2019, 2018 and 2017:



	Balance at Beginning of Year		Charged to Costs and Expenses			Deductions/ Write-Offs			Balance at End of Year
	(In thousands)
Allowance for doubtful accounts:
Year ended March 31, 2017	$	64,608	$	(184	)	$	(7,122	)	$	57,302
Year ended March 31, 2018	57,302		8,225			(5,476		)	60,051
Year ended March 31, 2019 (1)	60,051		41,977			(10,632		)	91,396


(1)	Charges incurred during fiscal year 2019 are primarily for costs and expenses related to various distressed customers.

Schedule of cash and cash equivalents

Cash and cash equivalents consisted of the following:



	As of March 31,
	2019		2018
	(In thousands)
Cash and bank balances	$	1,222,737	$	1,019,802
Money market funds and time deposits	473,888		452,622
	$	1,696,625	$	1,472,424

Schedule of components of inventories

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



	As of March 31,
	2019		2018
	(In thousands)
Raw materials	$	2,922,101	$	2,760,410
Work-in-progress	366,135		450,569
Finished goods	434,618		588,850
	$	3,722,854	$	3,799,829

Schedule of property and equipment, net

Property and equipment was comprised of the following:



	Depreciable Life (In Years)	As of March 31,
	Depreciable Life (In Years)	2019			2018
		(In thousands)
Machinery and equipment	3 - 10	$	3,305,335		$	3,004,707
Buildings	30	1,111,708			1,154,881
Leasehold improvements	up to 30	453,119			414,917
Furniture, fixtures, computer equipment and software	3 - 7	501,994			482,248
Land	—	121,976			152,992
Construction-in-progress	—	291,458			287,724
		5,785,590			5,497,469
Accumulated depreciation and amortization		(3,449,377		)	(3,257,963		)
Property and equipment, net		$	2,336,213		$	2,239,506

Schedule of goodwill

The following table summarizes the activity in the Company's goodwill during fiscal years 2019 and 2018 (in thousands):



	HRS			IEI			CEC			CTG			Total
Balance, as of March 31, 2017	$	420,935		$	337,707		$	115,002		$	111,223		$	984,867
Additions (1)	75,280			—			9,730			—			85,010
Divestitures (2)	—			—			—			(3,475		)	(3,475		)
Foreign currency translation adjustments (3)	54,768			—			—			—			54,768
Balance, as of March 31, 2018	550,983			337,707			124,732			107,748			1,121,170
Additions (1)	—			—			10,984			—			10,984
Divestitures (2)	(5,303		)	(4,450		)	(6,391		)	(4,484		)	(20,628		)
Foreign currency translation adjustments (3)	(38,471		)	—			—			—			(38,471		)
Balance, as of March 31, 2019	$	507,209		$	333,257		$	129,325		$	103,264		$	1,073,055

_______________________________________________________________________________

(1)

The goodwill generated from the Company's business combinations completed during the fiscal years 2019 and 2018 are primarily related to value placed on the employee workforce, service offerings, capabilities and expected synergies. The goodwill is not deductible for income tax purposes. Refer to the discussion of the Company's business acquisitions in note 17. Also included in fiscal year 2018 were adjustments based on management's estimates resulting from its review and finalization of the valuation of assets and liabilities acquired through certain business combinations completed in a period subsequent to the respective acquisition. These adjustments were not individually, nor in the aggregate, significant to the Company during the fiscal year ended March 31, 2018.


(2)	During the fiscal year ended March 31, 2019, the Company divested its China-based Multek operations along with another non-strategic immaterial business, and as a result, recorded an aggregate reduction of goodwill of $20.6 million. During the fiscal year ended March 31, 2018, the Company disposed of Wink Labs Inc. ("Wink"), a business within the CTG segment.


(3)	During the fiscal years ended March 31, 2019 and 2018, the Company recorded $38.5 million and $54.8 million, respectively, of foreign currency translation adjustments primarily related to historical acquisitions, as the U.S. Dollar fluctuated against foreign currencies.

Schedule of components of acquired intangible assets

The components of acquired intangible assets are as follows:



	As of March 31, 2019							As of March 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In thousands)
Intangible assets:
Customer-related intangibles	$	297,306	$	(113,627	)	$	183,679	$	306,943	$	(79,051	)	$	227,892
Licenses and other intangibles	274,604		(127,288		)	147,316		304,007		(107,466		)	196,541
Total	$	571,910	$	(240,915	)	$	330,995	$	610,950	$	(186,517	)	$	424,433

Schedule of estimated future annual amortization expense for intangible assets

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



Fiscal Year Ending March 31,	Amount
	(In thousands)
2020	$	64,917
2021	60,604
2022	52,099
2023	44,390
2024	42,830
Thereafter	66,155
Total amortization expense	$	330,995