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SHARE-BASED COMPENSATION
12 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Abstract]  
SHARE-BASED COMPENSATION SHARE-BASED COMPENSATION
Equity Compensation Plans
The Company's primary plan used for granting equity compensation awards is the Company's 2017 Equity Incentive Plan (the "2017 Plan").
Share-Based Compensation Expense
The following table summarizes the Company's share-based compensation expense for all equity incentive plans:
 
Fiscal Year Ended March 31,
 
2020
 
2019
 
2018
 
(In thousands)
Cost of sales
$
15,174

 
$
19,554

 
$
19,102

Selling, general and administrative expenses
56,372

 
56,478

 
66,142

Total share-based compensation expense
$
71,546

 
$
76,032

 
$
85,244



Cash flows resulting from excess tax benefits (tax benefits related to the excess of proceeds from employee exercises of share options over the share-based compensation cost recognized for those options) are classified as operating cash flows. During fiscal years 2020, 2019 and 2018, the Company did not recognize any excess tax benefits as an operating cash inflow.
As of March 31, 2020, the Company had approximately 10.5 million shares available for grant under the 2017 Plan. Options issued to employees under this plan generally vest over four years and expire ten years from the date of grant. Options granted to non-employee directors generally expire five years from the date of grant.
The exercise price of options granted to employees is determined by the Company's Board of Directors or the Compensation Committee and may not be less than the closing price of the Company's ordinary shares on the date of grant.
As of March 31, 2020, the total unrecognized compensation cost related to unvested share options granted to employees under all plans was not material.
The Company also grants restricted share unit ("RSU") awards under its 2017 Plan. RSU awards are rights to acquire a specified number of ordinary shares for no cash consideration in exchange for continued service with the Company. RSU awards generally vest in installments over a three to four-year period and unvested RSU awards are forfeited upon termination of employment.
Vesting for certain RSU awards is contingent upon both service and market conditions.
As of March 31, 2020, the total unrecognized compensation cost related to unvested RSU awards under all plans was approximately $116.7 million. These costs will be amortized generally on a straight-line basis over a weighted-average period of approximately 2.3 years. Approximately $20.0 million of the total unrecognized compensation cost is related to RSU awards granted to certain key employees whereby vesting is contingent on meeting a certain market condition.
Determining Fair Value - Options and RSU awards
Valuation and Amortization Method—The Company estimates the fair value of share options granted under the 2017 Plan using the Black-Scholes valuation method and a single option award approach. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The fair market value of RSU awards granted, other than those awards with a market condition, is the closing price of the Company's ordinary shares on the date of grant and is generally recognized as compensation expense on a straight-line basis over the respective vesting period.
Expected Term—The Company's expected term used in the Black-Scholes valuation method represents the period that the Company's share options are expected to be outstanding and is determined based on historical experience of similar awards, giving consideration to the contractual terms of the share options, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its share options.
Expected Volatility—The Company's expected volatility used in the Black-Scholes valuation method is derived from a combination of implied volatility related to publicly traded options to purchase Flex ordinary shares and historical variability in the Company's periodic share price.
Expected Dividend—The Company has never paid dividends on its ordinary shares and accordingly the dividend yield percentage is zero for all periods.
Risk-Free Interest Rate—The Company bases the risk-free interest rate used in the Black-Scholes valuation method on the implied yield currently available on U.S. Treasury constant maturities issued with a term equivalent to the expected term of the option.
There were no options granted under the 2017 Plan during fiscal years 2020, 2019, and 2018.
Determining Fair Value - RSU awards with service and market conditions
Valuation and Amortization Method—The Company estimates the fair value of RSU awards granted under the 2017 Plan whereby vesting is contingent on meeting certain market conditions using Monte Carlo simulation. This fair value is then amortized on a straight-line basis over the vesting period, which is the service period.
Expected volatility of Flex—Volatility used in a Monte Carlo simulation is derived from the historical volatility of Flex's stock price over a period equal to the service period of the RSU awards granted. The service period is three years for those RSU awards granted in fiscal years 2020, 2019, and 2018.
Average peer volatility—Volatility used in a Monte Carlo simulation is derived from the historical volatilities of the Standard and Poor's ("S&P") 500 index for the RSU awards granted in fiscal years 2020, 2019, and 2018.
Average Peer Correlation—Correlation coefficients were used to model the movement of Flex's stock price relative to the S&P 500 index for the RSU awards granted in fiscal years 2020, 2019, and 2018.
Expected Dividend and Risk-Free Interest Rate assumptions—Same methodology as discussed above.
The fair value of the Company's RSU awards under the 2017 Plan, whereby vesting is contingent on meeting certain market conditions, for fiscal years 2020, 2019, and 2018 was estimated using the following weighted-average assumptions:
 
Fiscal Year Ended March 31,
 
2020
 
2019
 
2018
Expected volatility
38.8
%
 
27.4
%
 
25.1
%
Average peer volatility
24.9
%
 
25.6
%
 
28.7
%
Average peer correlation
0.5

 
0.5

 
0.6

Expected dividends
%
 
%
 
%
Risk-free interest rate
1.8
%
 
2.7
%
 
1.5
%


Share-Based Awards Activity
Option activity for all plans is immaterial for all periods presented. 
Cash received from option exercises under all plans, which was reflected within other financing activities in the consolidated statement of cash flows, was immaterial for fiscal years 2020 and 2019, and totaled $2.8 million for fiscal year 2018.
The following table summarizes the Company's RSU award activity under all plans ("Price" reflects the weighted-average grant-date fair value):
 
Fiscal Year Ended March 31,
 
2020
 
2019
 
2018
 
Shares
 
Price
 
Shares
 
Price
 
Shares
 
Price
Unvested RSU awards outstanding, beginning of fiscal year
14,903,886


$
13.76


14,619,692


$
14.39


17,242,019

 
$
12.24

Granted (1)
8,259,272


9.81


8,257,502


12.59


6,680,739

 
16.97

Vested (1)
(4,222,524
)

13.33


(5,952,039
)

13.12


(6,945,393
)
 
11.86

Forfeited
(2,889,994
)

12.89


(2,021,269
)

14.51


(2,357,673
)
 
12.20

Unvested RSU awards outstanding, end of fiscal year
16,050,640


$
11.87


14,903,886


$
13.76


14,619,692

 
$
14.39



(1)
Included in the fiscal years 2018 amounts are 0.7 million of RSU awards, representing the number of awards achieved above target levels based on the achievement of certain market conditions, as further described in the table below. These awards were issued and immediately vested in accordance with the terms and conditions of the underlying awards.
Of the 8.3 million unvested RSU awards granted in fiscal year 2020, approximately 6.5 million are plain-vanilla unvested RSU awards with no performance or market conditions with an average grant date price of $9.24 per share. Further, approximately 1.8 million of these unvested RSU awards granted in fiscal year 2020 represents the target amount of grants made to certain key employees whereby vesting is contingent on certain market conditions, with an average grant date fair value estimated to be $11.92 per award calculated using a Monte Carlo simulation. Vesting information for these shares is further detailed in the table below.
Of the 16.1 million unvested RSU awards outstanding under all plans as of the fiscal year ended March 31, 2020, approximately 3.3 million unvested RSU awards represent the target amount of grants made to certain key employees whereby vesting is contingent on meeting certain market conditions summarized as follows:
 
 
Targeted
number of
awards as of
March 31, 2020
(in shares)
 
 
 
Range of shares
that may be issued (1)
 
 
 
 
Average
grant date
fair value
(per share)
 
 
 
 
 
Assessment dates
Year of grant
 
 
Minimum
 
Maximum
 
Fiscal 2020
 
1,721,031

 
$
11.92

 

 
3,442,062

 
June 2022
Fiscal 2019
 
1,103,198

 
$
14.00

 

 
2,206,396

 
June 2021
Fiscal 2018 (2)
 
491,417

 
$
20.25

 

 
982,834

 
June 2020
Totals
 
3,315,646

 
 

 

 
6,631,292

 
 


(1)
Vesting ranges from zero to 200% based on measurement of Flex's total shareholder return against the Standard and Poor's ("S&P") 500 Composite Index.
(2)
As of March 31, 2020, the Company deemed the vesting of RSU awards with market conditions granted in fiscal year 2018 as not probable.
The Company will continue to recognize share-based compensation expense for awards with market conditions regardless of whether such awards will ultimately vest. During fiscal year 2020, no shares vested in connection with the RSU awards with market conditions granted in fiscal year 2017.
The total intrinsic value of RSU awards vested under all the Company's plans was $41.7 million, $80.2 million and $116.4 million during fiscal years 2020, 2019 and 2018, respectively, based on the closing price of the Company's ordinary shares on the date vested.