15. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

During fiscal year 2013, Flextronics International Ltd. (“Parent”) issued two tranches of Notes of $500 million each, which mature on February 15, 2020 and February 15, 2023, respectively, in a private offering pursuant to Rule 144A and Regulation S under the Securities Act. These notes are senior unsecured obligations, and are guaranteed, fully and unconditionally, jointly and severally, on an unsecured basis, by certain of the Company’s 100% owned subsidiaries (the “guarantor subsidiaries”). These subsidiary guarantees will terminate upon 1) a sale or other disposition of the guarantor or the sale or disposition of all or substantially all the assets of the guarantor (other than to Flextronics or a subsidiary); 2) such guarantor ceasing to be a guarantor or a borrower under the Company’s Term Loan Agreement and the Revolving Line of Credit; 3) defeasance or discharge of the Notes, as provided in the Notes indenture; or 4) if at any time the notes are rated investment grade.

In lieu of providing separate financial statements for the guarantor subsidiaries, the Company has included the accompanying condensed consolidating financial statements, which are presented using the equity method of accounting. The principal elimination entries relate to investment in subsidiaries and intercompany balances and transactions, including transactions with the Company’s non-guarantor subsidiaries.

Condensed Consolidating Balance Sheets as of June 28, 2013

	Parent		Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	523,012	$	75,344		$	681,218	$	—		$	1,279,574
Accounts receivable	—		988,963			1,491,059		—			2,480,022
Inventories	—		1,241,660			1,910,737		—			3,152,397
Inter company receivable	4,858,212		4,358,710			7,416,890		(16,633,812		)	—
Other current assets	1,716		178,098			1,136,661		—			1,316,475
Total current assets	5,382,940		6,842,775			12,636,565		(16,633,812		)	8,228,468
Property and equipment, net	—		420,297			1,857,969		—			2,278,266
Goodwill and other intangible assets, net	1,000		40,429			307,236		—			348,665
Other assets	2,517,332		100,394			4,522,607		(6,826,808		)	313,525
Investment in subsidiaries	4,120,259		(828,257		)	16,670,729		(19,962,731		)	—
Total assets	$	12,021,531	$	6,575,638		$	35,995,106	$	(43,423,351	)	$	11,168,924

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank borrowings and current portion of long-term debt	$	409,562	$	281		$	17	$	—		$	409,860
Accounts payable	—		1,158,555			3,165,318		—			4,323,873
Accrued payroll	—		99,567			268,024		—			367,591
Inter company payable	5,332,815		6,819,803			4,481,194		(16,633,812		)	—
Other current liabilities	39,505		511,098			1,295,799		—			1,846,402
Total current liabilities	5,781,882		8,589,304			9,210,352		(16,633,812		)	6,947,726
Long term liabilities	4,151,041		2,108,943			2,699,414		(6,826,808		)	2,132,590
Shareholders’ equity	2,088,608		(4,122,609		)	24,085,340		(19,962,731		)	2,088,608
Total liabilities and shareholders’ equity	$	12,021,531	$	6,575,638		$	35,995,106	$	(43,423,351	)	$	11,168,924

Condensed Consolidating Balance Sheets as of March 31, 2013

	Parent		Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	740,515	$	82,900		$	763,672	$	—		$	1,587,087
Accounts receivable	—		458,617			1,653,379		—			2,111,996
Inventories	—		1,063,627			1,658,873		—			2,722,500
Inter company receivable	4,440,955		4,726,673			6,490,274		(15,657,902		)	—
Other current assets	6,182		178,585			1,165,051		—			1,349,818
Total current assets	5,187,652		6,510,402			11,731,249		(15,657,902		)	7,771,401
Property and equipment, net	—		328,621			1,845,967		—			2,174,588
Goodwill and other intangible assets, net	1,075		40,626			301,851		—			343,552
Other assets	2,498,080		105,136			4,902,815		(7,204,017		)	302,014
Investment in subsidiaries	4,127,384		(963,437		)	16,920,679		(20,084,626		)	—
Total assets	$	11,814,191	$	6,021,348		$	35,702,561	$	(42,946,545	)	$	10,591,555

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank borrowings and current portion of long-term debt	$	416,594	$	60		$	—	$	—		$	416,654
Accounts payable	—		1,077,723			2,627,574		—			3,705,297
Accrued payroll	—		86,073			265,610		—			351,683
Inter company payable	4,963,615		6,093,606			4,600,681		(15,657,902		)	—
Other current liabilities	32,440		424,599			1,242,112		—			1,699,151
Total current liabilities	5,412,649		7,682,061			8,735,977		(15,657,902		)	6,172,785
Long term liabilities	4,154,784		2,488,279			2,732,966		(7,204,017		)	2,172,012
Shareholders’ equity	2,246,758		(4,148,992		)	24,233,618		(20,084,626		)	2,246,758
Total liabilities and shareholders’ equity	$	11,814,191	$	6,021,348		$	35,702,561	$	(42,946,545	)	$	10,591,555

Condensed Consolidating Statements of Operations for the Three-Month Period Ended June 28, 2013

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net sales	$	—		$	3,484,434		$	4,595,431		$	(2,288,740	)	$	5,791,125
Cost of sales	—			3,140,642			4,593,062			(2,288,740		)	5,444,964
Restructuring charges	—			195			34,931			—			35,126
Gross profit (loss)	—			343,597			(32,562		)	—			311,035
Selling, general and administrative expenses	—			48,823			169,162			—			217,985
Intangible amortization	75			1,081			7,046			—			8,202
Restructuring charges	800			2,401			2,433			—			5,634
Interest and other expense (income), net	(49,280		)	267,202			(198,238		)	—			19,684
Income (loss) from continuing operations before income taxes	48,405			24,090			(12,965		)	—			59,530
Provision for (benefit from) income taxes	10			1,251			(988		)	—			273
Equity in earnings in subsidiaries	10,862			(12,781		)	2,772			(853		)	—
Net income (loss)	$	59,257		$	10,058		$	(9,205	)	$	(853	)	$	59,257

Condensed Consolidating Statements of Operations for the Three-Month Period Ended June 29, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net sales	$	—		$	3,697,061		$	4,457,530		$	(2,178,596	)	$	5,975,995
Cost of sales	—			3,339,946			4,457,288			(2,178,596		)	5,618,638
Gross profit	—			357,115			242			—			357,357
Selling, general and administrative expenses	—			44,569			145,775			—			190,344
Intangible amortization	75			2,268			5,466						7,809
Interest and other expense (income), net	(14,308		)	62,016			(36,923		)	—			10,785
Income (loss) from continuing operations before income taxes	14,233			248,262			(114,076		)	—			148,419
Provision for income taxes	—			1,427			10,223			—			11,650
Equity in earnings in subsidiaries	114,239			(51,380		)	168,754			(231,613		)	—
Income (loss) from continuing operations	128,472			195,455			44,455			(231,613		)	136,769
Loss from discontinued operations, net of tax	—			—			(8,297		)	—			(8,297		)
Net income (loss)	$	128,472		$	195,455		$	36,158		$	(231,613	)	$	128,472

Condensed Consolidating Statements of Comprehensive Income (Loss) for the Three-Month Period Ended June 28, 2013

	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net income (loss)	$	59,257		$	10,058		$	(9,205	)	$	(853	)	$	59,257
Other comprehensive income (loss):
Foreign currency translation adjustments, net of zero tax	(17,509		)	(4,092		)	(27,281		)	31,373			(17,509		)
Unrealized gain (loss) on derivative instruments and other, net of zero tax	(10,134		)	332			(10,135		)	9,803			(10,134		)
Comprehensive income (loss)	$	31,614		$	6,298		$	(46,621	)	$	40,323		$	31,614

Condensed Consolidating Statements of Comprehensive Income (Loss) for the Three-Month Period Ended June 29, 2012

	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net income (loss)	$	128,472		$	195,455		$	36,158		$	(231,613	)	$	128,472
Other comprehensive income (loss):
Foreign currency translation adjustments, net of zero tax	(32,107		)	(10,748		)	8,620			2,128			(32,107		)
Unrealized gain (loss) on derivative instruments and other, net of zero tax	(16,115		)	(6,758		)	(16,115		)	22,873			(16,115		)
Comprehensive income (loss)	$	80,250		$	177,949		$	28,663		$	(206,612	)	$	80,250

Condensed Consolidating Statements of Cash Flows for the Three-Month Period Ended June 28, 2013

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Net cash provided by (used in) operating activities	$	51,963		$	(568,028	)	$	713,609		$	1,032		198,576
Cash flows from investing activities:
Purchases of property and equipment, net of proceeds from disposal	—			(105,657		)	(35,165		)	(551		)	(141,373		)
Acquisition of businesses, net of cash acquired	—			(1,026		)	(186,517		)	—			(187,543		)
Investing cash flows from (to) affiliates	(438,186		)	354,871			(589,921		)	673,236			—
Other investing activities	—			890			29,289			—			30,179
Net cash provided by (used in) investing activities	(438,186		)	249,078			(782,314		)	672,685			(298,737		)
Cash flows from financing activities:
Proceeds from bank borrowings and long-term debt	—			133			25			—			158
Repayments of bank borrowings and long-term debt	(8,636		)	(414		)	(101		)	—			(9,151		)
Payments for repurchases of ordinary shares	(215,210		)	—			—			—			(215,210		)
Proceeds from exercise of stock options	10,909			—			—			—			10,909
Financing cash flows from (to) affiliates	371,446			311,306			(9,035		)	(673,717		)	—
Other financing activities	—			—			15,652			—			15,652
Net cash provided by (used in) financing activities	158,509			311,025			6,541			(673,717		)	(197,642		)
Effect of exchange rates on cash	10,211			369			(20,290		)	—			(9,710		)
Net change in cash and cash equivalents	(217,503		)	(7,556		)	(82,454		)	—			(307,513		)
Cash and cash equivalents, beginning of year	740,515			82,900			763,672			—			1,587,087
Cash and cash equivalents, end of year	$	523,012		$	75,344		$	681,218		$	—		$	1,279,574

Condensed Consolidating Statements of Cash Flows for the Three-Month Period Ended June 29, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)

Net cash provided by (used in) operating activities	$	(21,836	)	$	180,111		$	(120,766	)	$	8,089		$	45,598
Cash flows from investing activities:
Purchases of property and equipment, net of proceeds from disposal	—			(3,633		)	(100,750		)	(204		)	(104,587		)
Acquisition of businesses, net of cash acquired	—			(21,183		)	40,018			—			18,835
Proceeds from divestitures of operations, net	—			—			16,472			—			16,472
Investing cash flows from (to) affiliates	470,351			802,459			384,358			(1,657,168		)	—
Other investing activities	—			12			(11,846		)	—			(11,834		)
Net cash provided by (used in) investing activities	470,351			777,655			328,252			(1,657,372		)	(81,114		)
Cash flows from financing activities:
Proceeds from bank borrowings and long-term debt	110,000			—			18			—			110,018
Repayments of bank borrowings and long-term debt	(119,085		)	(1,289		)	(405		)	—			(120,779		)
Payments for repurchases of ordinary shares	(134,014		)	—			—			—			(134,014		)
Proceeds from exercise of stock options	5,776			—			—			—			5,776
Financing cash flows from (to) affiliates	(265,347		)	(954,109		)	(429,827		)	1,649,283			—
Other financing activities	—			—			(38,480		)	—			(38,480		)
Net cash provided by (used in) financing activities	(402,670		)	(955,398		)	(468,694		)	1,649,283			(177,479		)
Effect of exchange rates on cash	(43,379		)	(2,991		)	26,089			—			(20,281		)
Net change in cash and cash equivalents	2,466			(623		)	(235,119		)	—			(233,276		)
Cash and cash equivalents, beginning of year	649,252			47,865			821,212			—			1,518,329
Cash and cash equivalents, end of year	$	651,718		$	47,242		$	586,093		$	—		$	1,285,053