3. SHARE-BASED COMPENSATION

Equity Compensation Plans

During fiscal year 2013, the Company granted equity compensation awards under the 2010 Equity Incentive Plan (the "2010 Plan"). As of March 31, 2013, the Company had approximately 43.4 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,

	2013		2012		2011
	(In thousands)
Cost of sales	$	5,163	$	7,446	$	10,249
Selling, general and administrative expenses		29,366		41,008		44,988

Total share-based compensation expense	$	34,529	$	48,454	$	55,237

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.

As of March 31, 2013, the total unrecognized compensation cost related to unvested share options granted to employees under the Company's equity compensation plans was approximately $1.9 million, net of estimated forfeitures. This cost will be amortized on a straight-line basis over a weighted-average period of approximately 1.9 years and will be adjusted for estimated forfeitures. As of March 31, 2013, the total unrecognized compensation cost related to unvested share bonus awards granted to employees was approximately $71.4 million, net of estimated forfeitures. This cost will be amortized generally on a straight-line basis over a weighted-average period of approximately 2.5 years and will be adjusted for estimated forfeitures. Approximately $8.0 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 2013, 2012 and 2011, 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 2013, 2012 and 2011 other than those with market criteria discussed below, was estimated using the following weighted-average assumptions:

	Fiscal Year Ended March 31,

	2013			2012			2011
Expected term		4.1 years			4.1 years			4.1 years
Expected volatility		46.9	%		46.9	%		46.9	%
Expected dividends		0.0	%		0.0	%		0.0	%
Risk-free interest rate		0.9	%		1.1	%		1.6	%
Weighted-average fair value	$	2.48		$	2.57		$	2.80

Options granted during the 2013, 2012 and 2011 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,

	2013					2012					2011
	Options			Price		Options			Price		Options			Price
Outstanding, beginning of fiscal year		43,933,660		$	7.78		53,942,458		$	7.61		62,868,569		$	7.16
Granted		19,000			6.57		599,800			6.80		2,063,748			7.21
Exercised		(5,398,331	)		4.12		(5,879,405	)		3.92		(6,215,867	)		7.44
Forfeited		(4,148,765	)		8.32		(4,729,193	)		10.45		(4,773,992	)		6.55

Outstanding, end of fiscal year		34,405,564		$	8.29		43,933,660		$	7.78		53,942,458		$	7.61

Options exercisable, end of fiscal year		33,662,480		$	8.31		37,021,049		$	8.44		34,237,404		$	9.23

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 $13.0 million, $17.1 million and $22.9 million during fiscal years 2013, 2012 and 2011, respectively.

Cash received from option exercises was $22.3 million, $23.1 million and $23.3 million for fiscal years 2013, 2012 and 2011, respectively.

The following table presents the composition of options outstanding and exercisable as of March 31, 2013:

	Options Outstanding						Options Exercisable

Range of Exercise Prices	Number of Shares Outstanding		Weighted Average Remaining Contractual Life (In Years)		Weighted Average Exercise Price		Number of Shares Exercisable		Weighted Average Exercise Price
$1.94 - $2.26		8,271,934		2.74	$	2.18		8,271,934	$	2.18
$3.39 - $5.75		6,736,382		3.35		5.55		6,670,480		5.55
$5.87 - $7.07		552,685		4.27		6.53		350,536		6.58
$7.08 - $10.59		8,041,703		2.50		10.10		7,566,670		10.25
$10.67 - $11.41		1,171,246		3.02		11.21		1,171,246		11.21
$11.53 - $13.98		6,965,166		1.87		12.24		6,965,166		12.24
$14.34 - $23.02		2,666,448		0.94		17.44		2,666,448		17.44

$1.94 - $23.02		34,405,564		2.52	$	8.29		33,662,480	$	8.31

Options vested and expected to vest		34,350,265		2.53	$	8.31

As of March 31, 2013, the aggregate intrinsic value for options outstanding, options vested and expected to vest (which includes adjustments for expected forfeitures), and options exercisable were $46.2 million, $46.2 million and $46.1 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, 2013 for the approximately 15.2 million options that were in-the-money at March 31, 2013. As of March 31, 2013, the weighted average remaining contractual life for options exercisable was 2.47 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,

	2013					2012					2011
	Shares			Price		Shares			Price		Shares			Price
Unvested share bonus awards outstanding, beginning of fiscal year		15,965,268		$	6.91		13,801,942		$	8.04		8,801,609		$	10.31
Granted		9,582,867			6.74		9,213,456			6.78		9,739,375			7.01
Vested		(1,506,234	)		7.51		(2,555,165	)		9.34		(2,758,593	)		10.37
Forfeited		(2,234,832	)		6.86		(4,494,965	)		8.60		(1,980,449	)		9.74

Unvested share bonus awards outstanding, end of fiscal year		21,807,069		$	6.80		15,965,268		$	6.91		13,801,942		$	8.04

Of the 21.8 million unvested share bonus awards outstanding as of the year ended March 31, 2013, approximately 3.9 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' total shareholder return against the Standard and Poor's ("S&P") 500 Composite Index and will vest over a period of three years. Of the 3.9 million awards that were outstanding as of the year ended March 31, 2013, 2.1 million were granted in fiscal year 2013 at an estimated average grant-date fair value of $7.63 per share, 1.0 million were granted in fiscal year 2012 at an average grant-date fair value of $7.78 per share, and 0.8 million were granted in fiscal year 2011 at an average grant-date fair value of $7.32 per share. In accordance with accounting guidance, the Company will continue to recognize share-based compensation expense for these awards with market conditions regardless of whether such awards will ultimately vest. The actual number of shares to be issued can range from zero to 4.1 million for the 2013 grants, zero to 1.6 million for the 2012 grants, and zero to 1.2 million for the 2011 grants. The awards granted during fiscal year 2011 will expire in June 2013, and are not expected to vest.

The total intrinsic value of share bonus awards vested under the Company's equity compensation plans was $9.7 million, $17.7 million and $19.6 million during fiscal years 2013, 2012 and 2011, respectively, based on the closing price of the Company's ordinary shares on the date vested.