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

Flextronics International Ltd. (“Parent”) has two tranches of Notes of $500 million each outstanding, which mature on February 15, 2020 and February 15, 2023, respectively. 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 September 27, 2013

	Parent		Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	263,505	$	70,484		$	793,077	$	—		$	1,127,066
Accounts receivable	—		955,168			1,440,821		—			2,395,989
Inventories	—		1,508,576			2,367,494		—			3,876,070
Inter company receivable	4,595,738		4,587,105			7,905,316		(17,088,159		)	—
Other current assets	920		214,369			1,328,482		—			1,543,771
Total current assets	4,860,163		7,335,702			13,835,190		(17,088,159		)	8,942,896
Property and equipment, net	—		459,989			1,917,560		—			2,377,549
Goodwill and other intangible assets, net	925		41,256			302,835		—			345,016
Other assets	2,568,779		105,514			4,544,377		(6,879,646		)	339,024
Investment in subsidiaries	4,066,578		(680,710		)	17,282,847		(20,668,715		)	—
Total assets	$	11,496,445	$	7,261,751		$	37,882,809	$	(44,636,520	)	$	12,004,485

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank borrowings and current portion of long-term debt	$	43,187	$	60		$	180	$	—		$	43,427
Accounts payable	—		1,324,720			3,787,533		—			5,112,253
Accrued payroll	—		92,114			315,573		—			407,687
Inter company payable	4,752,227		7,301,675			5,034,257		(17,088,159		)	—
Other current liabilities	25,160		549,748			1,239,069		—			1,813,977
Total current liabilities	4,820,574		9,268,317			10,376,612		(17,088,159		)	7,377,344
Long term liabilities	4,557,406		2,076,029			2,754,887		(6,879,646		)	2,508,676
Shareholders’ equity	2,118,465		(4,082,595		)	24,751,310		(20,668,715		)	2,118,465
Total liabilities and shareholders’ equity	$	11,496,445	$	7,261,751		$	37,882,809	$	(44,636,520	)	$	12,004,485

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		(939,264		)	16,920,679		(20,108,799		)	—
Total assets	$	11,814,191	$	6,045,521		$	35,702,561	$	(42,970,718	)	$	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		(4,124,819		)	24,233,618		(20,108,799		)	2,246,758
Total liabilities and shareholders’ equity	$	11,814,191	$	6,045,521		$	35,702,561	$	(42,970,718	)	$	10,591,555

Condensed Consolidating Statements of Operations for the Three-Month Period Ended September 27, 2013

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net sales	$	—		$	4,027,991		$	5,519,678		$	(3,137,563	)	$	6,410,106
Cost of sales	—			3,678,986			5,500,260			(3,137,563		)	6,041,683
Gross profit	—			349,005			19,418			—			368,423
Selling, general and administrative expenses	—			51,435			167,065			—			218,500
Intangible amortization	75			955			6,688			—			7,718
Interest and other, net	(163,869		)	283,748			(106,278		)	—			13,601
Income (loss) from continuing operations before income taxes	163,794			12,867			(48,057		)	—			128,604
Provision for income taxes	—			935			9,464			—			10,399
Equity in earnings in subsidiaries	(45,589		)	(71,312		)	39,068			77,833			—
Net income (loss)	$	118,205		$	(59,380	)	$	(18,453	)	$	77,833		$	118,205

Condensed Consolidating Statements of Operations for the Three-Month Period Ended September 28, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net sales	$	—		$	4,022,666		$	4,616,079		$	(2,463,904	)	$	6,174,841
Cost of sales	—			3,606,757			4,665,216			(2,463,904		)	5,808,069
Gross profit (loss)	—			415,909			(49,137		)	—			366,772
Selling, general and administrative expenses	—			49,313			142,870			—			192,183
Intangible amortization	75			2,268			4,922						7,265
Interest and other, net	(415,209		)	268,833			135,926			—			(10,450		)
Income (loss) from continuing operations before income taxes	415,134			95,495			(332,855		)	—			177,774
Provision for income taxes	—			1,550			15,771			—			17,321
Equity in earnings in subsidiaries	(264,587		)	(79,365		)	68,123			275,829			—
Income (loss) from continuing operations	150,547			14,580			(280,503		)	275,829			160,453
Loss from discontinued operations, net of tax	—			—			(9,906		)	—			(9,906		)
Net income (loss)	$	150,547		$	14,580		$	(290,409	)	$	275,829		$	150,547

Condensed Consolidating Statements of Operations for the Six-Month Period Ended September 27, 2013

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net sales	$	—		$	7,512,424		$	10,115,109		$	(5,426,302	)	$	12,201,231
Cost of sales	—			6,819,628			10,093,321			(5,426,302		)	11,486,647
Restructuring charges	—			195			34,931			—			35,126
Gross profit (loss)	—			692,601			(13,143		)	—			679,458
Selling, general and administrative expenses	—			100,258			336,227			—			436,485
Intangible amortization	150			2,037			13,733			—			15,920
Restructuring charges	800			2,401			2,433			—			5,634
Interest and other, net	(213,203		)	550,951			(304,463		)	—			33,285
Income (loss) from continuing operations before income taxes	212,253			36,954			(61,073		)	—			188,134
Provision for income taxes	10			2,186			8,476			—			10,672
Equity in earnings in subsidiaries	(34,781		)	(79,962		)	41,893			72,850			—
Net income (loss)	$	177,462		$	(45,194	)	$	(27,656	)	$	72,850		$	177,462

Condensed Consolidating Statements of Operations for the Six-Month Period Ended September 28, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net sales	$	—		$	7,719,727		$	9,073,609		$	(4,642,500	)	$	12,150,836
Cost of sales	—			6,946,703			9,122,504			(4,642,500		)	11,426,707
Gross profit	—			773,024			(48,895		)	—			724,129
Selling, general and administrative expenses	—			93,453			289,074			—			382,527
Intangible amortization	150			4,536			10,388						15,074
Interest and other, net	(429,517		)	331,379			98,473			—			335
Income (loss) from continuing operations before income taxes	429,367			343,656			(446,830		)	—			326,193
Provision for income taxes	—			2,877			26,094			—			28,971
Equity in earnings in subsidiaries	(150,348		)	(131,087		)	237,025			44,410			—
Income (loss) from continuing operations	279,019			209,692			(235,899		)	44,410			297,222
Loss from discontinued operations, net of tax	—			—			(18,203		)	—			(18,203		)
Net income (loss)	$	279,019		$	209,692		$	(254,102	)	$	44,410		$	279,019

Condensed Consolidating Statements of Comprehensive Income (Loss) for the Three-Month Period Ended September 27, 2013

	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net income (loss)	$	118,205		$	(59,380	)	$	(18,453	)	$	77,833		$	118,205
Other comprehensive income (loss):
Foreign currency translation adjustments, net of zero tax	(11,988		)	(8,333		)	(39,132		)	47,465			(11,988		)
Unrealized gain (loss) on derivative instruments and other, net of zero tax	9,553			3,616			9,554			(13,170		)	9,553
Comprehensive income (loss)	$	115,770		$	(64,097	)	$	(48,031	)	$	112,128		$	115,770

Condensed Consolidating Statements of Comprehensive Income (Loss) for the Three-Month Period Ended September 28, 2012

	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net income (loss)	$	150,547	$	14,580	$	(290,409	)	$	275,829		$	150,547
Other comprehensive income (loss):
Foreign currency translation adjustments, net of zero tax	21,135		18,094		(1,058		)	(17,036		)	21,135
Unrealized gain (loss) on derivative instruments and other, net of zero tax	22,218		3,744		22,219			(25,963		)	22,218
Comprehensive income (loss)	$	193,900	$	36,418	$	(269,248	)	$	232,830		$	193,900

Condensed Consolidating Statements of Comprehensive Income (Loss) for the Six-Month Period Ended September 27, 2013

	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net income (loss)	$	177,462		$	(45,194	)	$	(27,656	)	$	72,850		$	177,462
Other comprehensive income (loss):
Foreign currency translation adjustments, net of zero tax	(29,497		)	(12,425		)	(66,413		)	78,838			(29,497		)
Unrealized gain (loss) on derivative instruments and other, net of zero tax	(581		)	3,948			(581		)	(3,367		)	(581		)
Comprehensive income (loss)	$	147,384		$	(53,671	)	$	(94,650	)	$	148,321		$	147,384

Condensed Consolidating Statements of Comprehensive Income (Loss) for the Six-Month Period Ended September 28, 2012

	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net income (loss)	$	279,019		$	209,692		$	(254,102	)	$	44,410		$	279,019
Other comprehensive income (loss):
Foreign currency translation adjustments, net of zero tax	(10,972		)	7,346			7,562			(14,908		)	(10,972		)
Unrealized gain (loss) on derivative instruments and other, net of zero tax	6,103			(3,014		)	6,104			(3,090		)	6,103
Comprehensive income (loss)	$	274,150		$	214,024		$	(240,436	)	$	26,412		$	274,150

Condensed Consolidating Statements of Cash Flows for the Six-Month Period Ended September 27, 2013

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Net cash provided by (used in) operating activities	$	199,101		$	(700,539	)	$	855,057		$	139		353,758
Cash flows from investing activities:
Purchases of property and equipment, net of proceeds from disposal	—			(160,789		)	(150,192		)	—			(310,981		)
Acquisition of businesses, net of cash acquired	—			(2,949		)	(184,594		)	—			(187,543		)
Proceeds from divestiture of business, net of cash held in divested business	—			—			1,000			—			1,000
Investing cash flows from (to) affiliates	(345,190		)	106,468			(2,103,664		)	2,342,386			—
Other investing activities, net	—			1,165			6,271			—			7,436
Net cash provided by (used in) investing activities	(345,190		)	(56,105		)	(2,431,179		)	2,342,386			(490,088		)
Cash flows from financing activities:
Proceeds from bank borrowings and long-term debt	933,000			278			169			—			933,447
Repayments of bank borrowings, long-term debt and capital lease obligations	(403,821		)	(979		)	(1		)	—			(404,801		)
Payments for early retirement of long-term debt	(503,422		)	(41,418		)	—			—			(544,840		)
Payments for repurchases of ordinary shares	(324,594		)	—			—			—			(324,594		)
Net proceeds from issuance of ordinary shares	19,637			—			—			—			19,637
Financing cash flows from (to) affiliates	(90,262		)	783,225			1,649,562			(2,342,525		)	—
Other financing activities, net	—			—			14,743			—			14,743
Net cash provided by (used in) financing activities	(369,462		)	741,106			1,664,473			(2,342,525		)	(306,408		)
Effect of exchange rates on cash and cash equivalents	38,541			3,122			(58,946		)	—			(17,283		)
Net (decrease) increase in cash and cash equivalents	(477,010		)	(12,416		)	29,405			—			(460,021		)
Cash and cash equivalents, beginning of period	740,515			82,900			763,672			—			1,587,087
Cash and cash equivalents, end of period	$	263,505		$	70,484		$	793,077		$	—		$	1,127,066

Condensed Consolidating Statements of Cash Flows for the Six-Month Period Ended September 28, 2012

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

Net cash provided by (used in) operating activities	$	406,111		$	307,399		$	(185,727	)	$	62		$	527,845
Cash flows from investing activities:
Purchases of property and equipment, net of proceeds from disposal	—			(30,162		)	(214,828		)	(206		)	(245,196		)
Acquisition of businesses, net of cash acquired	—			—			7,834			—			7,834
Proceeds from divestiture of business, net of cash held in divested business	—			—			16,472			—			16,472
Investing cash flows from (to) affiliates	(107,484		)	188,447			(87,348		)	6,385			—
Other investing activities, net	—			1,011			(59,088		)	—			(58,077		)
Net cash provided by (used in) investing activities	(107,484		)	159,296			(336,958		)	6,179			(278,967		)
Cash flows from financing activities:
Proceeds from bank borrowings and long-term debt	160,000			151			34			—			160,185
Repayments of bank borrowings, long-term debt and capital lease obligations	(262,046		)	(2,303		)	(7,862		)	—			(272,211		)
Payments for repurchases of ordinary shares	(134,014		)	—			—			—			(134,014		)
Net proceeds from issuance of ordinary shares	10,636			—			—			—			10,636
Financing cash flows from (to) affiliates	93,320			(357,100		)	270,021			(6,241		)	—
Other financing activities, net	—			—			31,273			—			31,273
Net cash provided by (used in) financing activities	(132,104		)	(359,252		)	293,466			(6,241		)	(204,131		)
Effect of exchange rates on cash and cash equivalents	(20,900		)	(822		)	20,215			—			(1,507		)
Net (decrease) increase in cash and cash equivalents	145,623			106,621			(209,004		)	—			43,240
Cash and cash equivalents, beginning of period	649,252			47,865			821,212			—			1,518,329
Cash and cash equivalents, end of period	$	794,875		$	154,486		$	612,208		$	—		$	1,561,569