3. SHARE-BASED COMPENSATION

Equity Compensation Plans

During fiscal year 2012, the Company granted equity compensation awards under the 2010 Equity Incentive Plan (the "2010 Plan"). As of March 31, 2012, the Company had approximately 51.7 million shares available for grants under the 2010 Plan. Options issued to employees under the 2010 Plan generally vest over four years and expire seven years from the date of grant. Options granted to non-employee directors 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.

The Company also grants share bonus awards under its equity compensation plan. Share bonus awards are rights to acquire a specified number of ordinary shares for no cash consideration in exchange for continued service with the Company. Share bonus awards generally vest in installments over a three to five year period and unvested share bonus awards are forfeited upon termination of employment. Vesting for certain share bonus awards is contingent upon both service and market conditions.

Share-Based Compensation Expense

The following table summarizes the Company's share-based compensation expense:


	Fiscal Year Ended March 31,
	2012		2011		2010
	(In thousands)
Cost of sales	$	7,446	$	10,249	$	10,847
Selling, general and administrative expenses		41,008		44,988		45,627
Total share-based compensation expense	$	48,454	$	55,237	$	56,474

As required by the authoritative guidance for stock-based compensation, management made an estimate of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest. When estimating forfeitures, the Company considers voluntary termination behavior as well as an analysis of actual forfeitures. Total share-based compensation capitalized as part of inventory during the fiscal years ended March 31, 2012 and 2011 was not material.

As of March 31, 2012, the total unrecognized compensation cost related to unvested share options granted to employees under the Company's equity compensation plans was approximately $6.7 million, net of estimated forfeitures. This cost will be amortized on a straight-line basis over a weighted-average period of approximately 0.7 years and will be adjusted for estimated forfeitures. As of March 31, 2012, the total unrecognized compensation cost related to unvested share bonus awards granted to employees was approximately $63.7 million, net of estimated forfeitures. This cost will be amortized generally on a straight-line basis over a weighted-average period of approximately 2.6 years and will be adjusted for estimated forfeitures. Approximately $10.7 million of the unrecognized compensation cost, net of forfeitures, is related to share bonus awards granted to certain key employees whereby vesting is contingent on meeting a certain market condition.

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 financing cash flows. During fiscal years 2012, 2011 and 2010, the Company did not recognize any excess tax benefits as a financing cash inflow.

Determining Fair Value

Valuation and Amortization Method — The Company estimates the fair value of share options granted 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 share bonus 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. For share bonus awards whereby vesting is contingent on meeting certain market conditions, the fair value is determined using a Monte Carlo simulation.

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 Flextronics 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 currently does not intend to do so in the near term, 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.

The fair value of the Company's share options granted to employees for fiscal years 2012, 2011 and 2010, other than those granted in connection with the option exchange in fiscal year 2010 and those with market criteria discussed below, was estimated using the following weighted-average assumptions:


	Fiscal Year Ended March 31,
	2012			2011			2010
Expected term		4.1 years			4.1 years			4.5 years
Expected volatility		46.9	%		46.9	%		53.8	%
Expected dividends		0.0	%		0.0	%		0.0	%
Risk-free interest rate		1.1	%		1.6	%		1.3	%
Weighted-average fair value	$	2.57		$	2.80		$	2.75

Options granted during the 2012, 2011 and 2010 fiscal years had contractual lives of seven years.

Share-Based Awards Activity

The following is a summary of option activity for the Company's equity compensation plans, ("Price" reflects the weighted-average exercise price):


	Fiscal Year Ended March 31,
	2012				2011				2010
	Options		Price		Options		Price		Options		Price
Outstanding, beginningof fiscal year	53,942,458		$	7.61	62,868,569		$	7.16	81,927,879		$	9.13
Granted	599,800			6.80	2,063,748			7.21	869,600			6.17
Grantedunderoption exchange program	-			-	-			-	16,867,452			5.57
Exercised	(5,879,405	)		3.92	(6,215,867	)		7.44	(2,496,254	)		6.54
Forfeited	(4,729,193	)		10.45	(4,773,992	)		6.55	(6,376,879	)		9.50
Cancelled under optionexchange program	-			-	-			-	(27,923,229	)		11.85
Outstanding, end of fiscal year	43,933,660		$	7.78	53,942,458		$	7.61	62,868,569		$	7.16
Options exercisable, endof fiscal year	37,021,049		$	8.44	34,237,404		$	9.23	24,989,665		$	10.71

On August 11, 2009, the Company granted approximately 16.9 million replacement options with an exercise price of $5.57 and a contractual life of 7 years in exchange for approximately 27.9 million existing share options at an exchange ratio commensurate to the surrendered option's exercise price. The weighted average vesting period of the replacement options was approximately 1.6 years. The exchange was accounted for as a modification of the existing option awards tendered in the exchange. The resulting expense was insignificant and recognized primarily through fiscal year 2011.

The aggregate intrinsic value of options exercised (calculated as the difference between the exercise price of the underlying award and the price of the Company's ordinary shares determined as of the time of option exercise for options exercised in-the-money) under the Company's equity compensation plans was $17.1 million, $22.9 million and $10.3 million during fiscal years 2012, 2011 and 2010, respectively.

Cash received from option exercises was $23.1 million, $23.3 million and $6.0 million for fiscal years 2012, 2011 and 2010, respectively.

The following table presents the composition of options outstanding and exercisable as of March 31, 2012:


		Options Outstanding				Options Exercisable
			Weighted
			Average
			Remaining	Weighted			Weighted
		Number of	Contractual	Average		Number of	Average
		Shares	Life	Exercise		Shares	Exercise
	Range of Exercise Prices	Outstanding	(In Years)	Price		Exercisable	Price
$	1.94– $2.26	10,670,434	3.72	$	2.19	6,645,256	$	2.18
$	3.39– $5.75	9,504,083	4.34		5.55	8,454,974		5.56
$	5.87– $7.07	1,141,567	3.21		6.27	721,828		6.16
$	7.08– $10.59	11,701,167	2.64		9.60	10,282,582		9.75
$	10.67– $11.41	1,255,412	3.81		11.20	1,255,412		11.20
$	11.53– $13.98	6,979,385	2.87		12.24	6,979,385		12.24
$	14.34– $23.02	2,681,612	1.94		17.43	2,681,612		17.43
$	1.94– $23.02	43,933,660	3.31	$	7.78	37,021,049	$	8.44

	Options vested and expected to vest	43,668,229	3.30	$	7.79

As of March 31, 2012, the aggregate intrinsic value for options outstanding, options vested and expected to vest (which includes adjustments for expected forfeitures), and options exercisable were $70.7 million, $70.2 million and $48.3 million, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company's ordinary shares as of March 31, 2012 for the approximately 21.6 million options that were in-the-money at March 31, 2012. As of March 31, 2012, the weighted average remaining contractual life for options exercisable was 3.14 years.

The following table summarizes the Company's share bonus award activity ("Price" reflects the weighted-average grant-date fair value):


	Fiscal Year Ended March 31,
	2012				2011				2010
	Shares		Price		Shares		Price		Shares		Price
Unvested share bonus awards outstanding,
beginning of fiscal year	13,801,942		$	8.04	8,801,609		$	10.31	10,456,905		$	10.31
Granted	9,213,456			6.78	9,739,375			7.01	523,229			7.08
Vested	(2,555,165	)		9.34	(2,758,593	)		10.37	(1,299,357	)		8.98
Forfeited	(4,494,965	)		8.60	(1,980,449	)		9.74	(879,168	)		10.40
Unvested share bonus awards outstanding,
end of fiscal year	15,965,268		$	6.91	13,801,942		$	8.04	8,801,609		$	10.31

Of the 16.0 million unvested share bonus awards outstanding as of the year ended March 31, 2012, approximately 2.3 million represents the target amount of grants made to certain key employees whereby vesting is contingent on meeting a certain market condition. The number of shares that ultimately will vest are based on a measurement of Flextronics's total shareholder return against the Standard and Poor's ("S&P") 500 Composite Index and will vest over a period of four years. Of the 2.3 million awards that were outstanding as of the year ended March 31, 2012, 1.3 million were granted in fiscal 2012 at an estimated average grant-date fair value of $7.78 per share and 1.0 million were granted in fiscal 2011 at an average grant-date fair value of $7.32 per share. The actual number of shares to be issued for the 2012 grants can range from zero to 1.9 million and zero to 1.5 million for the 2011 grants.

The total intrinsic value of share bonus awards vested under the Company's equity compensation plans was $17.7 million, $19.6 million and $7.0 million during fiscal years 2012, 2011and 2010, respectively, based on the closing price of the Company's ordinary shares on the date vested.