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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number 000-23354

Flextronics International Ltd.

36 Robinson Road, #18-01

Securities to be registered pursuant to Section 12(b) of the Act:

Securities to be registered pursuant to Section 12(g) of the Act:

      Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      As of April 22, 2002, 513,055,059 shares of the Registrant’s common stock were outstanding. The aggregate market value of the common stock held by shareholders other than our executive officers, directors and 10% or greater shareholders of the Registrant as of April 22, 2002 was approximately $6.8 billion.

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PART I

Item 1.     Business

      Except for historical information contained herein, the matters discussed in this annual report on Form 10-K are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. The words “will,” “may,” “designed to,” “believe,” “should,” “anticipate,” “plan,” “expect,” “intend,” “estimate” and similar expressions identify forward-looking statements, which speak only as of the date of this annual report. These forward-looking statements are contained principally under this Item 1, “Business,” and under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Because these forward-looking statements are subject to certain risks and uncertainties, actual results could differ materially from the expectations expressed in the forward-looking statements. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include those described below in this section under “Certain Factors Affecting Operating Results.” We undertake no obligation to update or revise these forward-looking statements to reflect subsequent events or circumstances.

Overview

      Flextronics International Ltd. (“Flextronics”) is a leading provider of advanced electronics manufacturing services, or EMS, to original equipment manufacturers, or OEMs, primarily in the handheld electronics devices, information technologies infrastructure, communications infrastructure, computer and office automation, and consumer devices industries. We provide a network of design, engineering and manufacturing operations in 28 countries across four continents. Our strategy is to provide customers with end-to-end operational solutions where we take responsibility for engineering, new product introduction and implementation, supply chain management, manufacturing and logistics management, with the goal of delivering a complete packaged product.

      In addition to the assembly of printed circuit boards, or PCBs, and complete systems and products, our manufacturing services include the fabrication and assembly of plastic and metal enclosures, the fabrication of PCBs and backplanes (which are PCBs into which other PCBs or cards may be inserted) and the fabrication and assembly of photonics components. Throughout the production process, we offer design and technology services; logistics services, such as materials procurement, inventory management, vendor management, packaging and distribution; and automation of key components of the supply chain through advanced information technologies. Finally, we offer after-market services such as repair and warranty services and network and communications installation and maintenance. By working closely with our customers and being highly responsive to their requirements throughout the design, manufacturing and distribution process, we believe that we can be an integral part of their operations, accelerate their time-to-market and time-to-volume production, and reduce their production costs.

      We were incorporated in the Republic of Singapore in May 1990. Through a combination of internal growth and acquisitions, we have become one of the world’s largest EMS providers, with revenues of $13.1 billion in fiscal 2002. In addition, we have increased our manufacturing square footage from 1.5 million square feet on April 1, 1997 to over 16.6 million square feet on March 31, 2002. We believe that our size, global presence, broad service offerings and expertise enable us to win large programs from leading multinational OEMs for the manufacture of electronic products.

      Our customers include industry leaders such as Alcatel SA (“Alcatel”), Ericsson Telecom AB (“Ericsson”), Hewlett-Packard Company, Microsoft Corporation, Motorola, Inc., Nokia Corporation, Palm, Inc., Philips Electronics, Siemens AG, Sony Ericsson and Xerox Corporation (“Xerox”). Due to our focus on high growth technology sectors, our prospects are influenced by major trends in the markets for communications and Internet infrastructure and wireless and optical devices. In addition, our growth is affected by the pace at which leading OEMs are continuing to adopt outsourcing as a core business strategy.

      We have established an extensive network of manufacturing facilities in the world’s major electronics markets (the Americas, Asia and Europe) in order to serve the increased outsourcing needs of both

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Industry Overview

      With electronic products growing in technical complexity and experiencing shorter product lifecycles in response to customer requirements, the demand for advanced manufacturing capabilities and related services has grown rapidly. Many OEMs in the electronics industry are increasingly utilizing EMS providers in their business and manufacturing strategies. Outsourcing allows OEMs to take advantage of the manufacturing expertise and capital investments of EMS providers, so that OEMs may concentrate on their core competencies, such as product development, marketing and sales. We believe that by developing strategic relationships with EMS providers, OEMs can enhance their competitive position by:

	•	reducing production costs;
	•	accelerating time-to-market and time-to-volume production;
	•	accessing advanced manufacturing, design and engineering capabilities;
	•	reducing capital investment requirements and fixed overhead costs;
	•	improving inventory management and purchasing power; and
	•	accessing worldwide manufacturing capabilities.

      We believe that the market for electronics manufacturing services will continue to grow, driven largely by the need of OEMs for increasing flexibility to respond to rapidly changing markets, technologies and accelerating product life cycles, as well as for advanced manufacturing and engineering capabilities as a result of the increased complexity and reduced size of electronic products.

Strategy

      Our objective is to provide customers with the ability to outsource, on a global basis, a complete product. We intend to achieve this objective by taking responsibility for the engineering, assembly, integration, test, supply chain management and logistics management to accelerate their time-to-market and time-to-volume production. To achieve this objective, we will continue to implement the following strategies:

	Enhance Our Customers’ Product Development and Manufacturing Strategy. We believe we can become an integral part of our customers’ operations by working closely with them throughout the design, manufacturing and distribution process, and by offering flexible, highly responsive services. We believe our customer relationships are strengthened through a management approach which fosters rapid decision-making and a customer service orientation that allows us to respond quickly to frequently changing customer design specifications and production requirements. Our approach allows our customers to focus on their core competencies and thus enables them to accelerate their time-to-market and time-to-volume production.
	Leverage Our Global Presence. We have established an extensive network of design and manufacturing facilities in the world’s major electronics markets (the Americas, Asia and Europe) to

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	serve the increased outsourcing needs of both multinational and regional OEMs. Our global network of manufacturing facilities in 28 countries gives us the flexibility to transition customer projects to any of our locations. This flexibility allows design, prototyping and initial production to be located near the customer’s own research and development centers, so that manufacturing can then be moved to locations closer to their end markets, or transitioned to low-cost regional manufacturing facilities or industrial parks as volumes increase over the product life cycle.
	Expand Our Industrial Parks Strategy. Our industrial parks are self-contained facilities that co-locate our manufacturing and distribution operations with our suppliers in low-cost regions near our customers’ end markets. This approach to production and distribution benefits our customers by reducing logistical barriers and costs, improving communications, increasing flexibility, lowering transportation costs and reducing turnaround times. Our industrial parks enhance our total supply chain management, while providing a low cost solution for our customers. We have strategically established large industrial parks in Brazil, China, Hungary, Mexico and Poland.
	Offer Comprehensive Solutions. We offer a comprehensive range of engineering, assembly, integration, test, supply chain management and logistics management and network services to our customers that simplify the global product development process and provide them meaningful cost savings. Our capabilities help our customers improve product quality and performance, reduce costs and accelerate time-to-market.
	Streamline Business Processes Through Information Technologies. We utilize new information technologies to streamline business processes for our customers. For example, we use innovative Internet supply chain solutions to improve order placement, tracking and fulfillment. We are also able to provide our customers with online access to product design and manufacturing process information. Integrating our information systems with those of our customers allows us to assist our customers in improving their communications and relationships across their supply chain.
	Pursue Strategic Opportunities. We have actively pursued acquisitions and purchases of manufacturing facilities to expand our worldwide operations, broaden our service offerings, diversify and strengthen our customer relationships and enhance our management depth. We will continue to review opportunities and are currently in preliminary discussions to acquire manufacturing operations and enter into business combinations. We cannot assure the terms of, or that we will complete, such transactions. We will continue to selectively pursue strategic transactions that we believe will further our business objectives.

      We cannot assure that our strategies can be successfully implemented, or will reduce the risks associated with our business.

Acquisitions and Strategic Customer Transactions

      We have actively pursued business acquisitions and strategic transactions with customers to expand our global reach, manufacturing capacity and service offerings, in addition to diversifying and strengthening customer relationships. These activities have enabled us to provide more integrated outsourcing technology solutions with time-to-market and lower cost advantages and have expanded our presence in the global electronics marketplace.

      Since the beginning of fiscal 2001, we have completed over 30 acquisitions of other companies, including, among others, The DII Group, Inc., Palo Alto Products International, Lightning Metal Specialties, Chatham Technologies, JIT Holdings, Wave Optics and Instrumentation Engineering. We have also completed several strategic transactions with customers, including Telia, Xerox, Alcatel and Ericsson. Under these arrangements, we generally acquire inventory, equipment and other assets from the OEM, and lease (or in some cases acquire) their manufacturing facilities, while simultaneously entering into multi-year supply agreements for the production of their products.

      By enhancing our capability to provide a wide range of related electronics design and manufacturing services to a global market that is increasingly dependent on outsourcing providers, these acquisitions and transactions have enabled us to enhance our competitive position as a leading provider of comprehensive

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Customers

      Our customers consist of a select group of OEMs primarily in the handheld electronics devices, information technologies infrastructure, communications infrastructure and computer and office automation industries. Within these industries, our strategy is to establish relationships with leading companies that seek to outsource significant production volumes of their products. We have focused on building long-term relationships with these customers and expanding our relationship to include additional product lines and services. In fiscal 2002, our ten largest customers accounted for approximately 64% of our net sales. Our largest customer during fiscal 2002 was Ericsson, accounting for approximately 15% of net sales. No other customer accounted for more than 10% of net sales in fiscal 2002.

      The following table lists in alphabetical order a representative sample of our largest customers in fiscal 2002 and the products of those customers for which we provide manufacturing services:

Sales and Marketing

      We achieve worldwide sales coverage through a direct sales force, which focuses on generating new accounts, and through program managers, who are responsible for managing relationships with existing customers and making follow-on sales. In addition to our sales force, our executive staff plays an integral role in our sales efforts.

Services

      We offer a broad range of integrated services, providing customers with a total design and manufacturing solution that takes a product from its initial design through volume production, test, distribution and into post-sales service and support. Our integrated services include the following:

	Flextronics Design. We offer a comprehensive spectrum of value-added design services for products we manufacture for our customers from product design (hardware, software, mechanical and

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test) to semiconductor design. Products designed by this group range from commercial and military applications, including radio frequency/analog, high-speed digital, multi-chip module and flex circuits to high volume consumer products and small quantity prototypes. We work with our customers to develop product-specific test strategies and can custom design test equipment and software ourselves or use test equipment and software provided by our customers. Additionally, a significant competitive differentiator we possess is our semiconductor design group. We provide application specific integrated circuit, or ASIC, design services to our OEM customers, which include:

	•	Conversion services from field programmable gate arrays to ASICs. These services focus on designs that utilize primarily digital signals, with only a small amount of analog signals.
	•	Design services for mixed-signal ASICs. These services focus on designs that utilize primarily analog signals, with only a small amount of digital signals.
	•	Silicon integration design services. These services utilize silicon design modules that are used to accelerate complex ASIC designs, including system-on-a-chip.

	Our semiconductor design group utilizes external foundry suppliers for its customers’ silicon manufacturing requirements, thereby using a “fabless” manufacturing approach. This enables us to take advantage of the suppliers’ high volume economies of scale and access to advanced process technology.
	We believe that our semiconductor design expertise provides us with a competitive advantage by enabling us to offer our customers reduced costs through the consolidation of components onto silicon chips. Additionally, by integrating the combined capabilities of design, engineering and semiconductor services, we can compress the time from product concept to market introduction and minimize product development costs.
	To assist customers with initial design, we provide computer-aided engineering and computer-aided design, engineering for manufacturability, printed circuit board layout and test development. At our product introduction centers, we employ hundreds of advanced engineers to provide the engineering expertise in developing new products and preparing them for high volume manufacturing. These centers coordinate and integrate our worldwide design, prototype, test development practices and, in some locations, provide dedicated production lines for prototypes.
	Multek. Multek provides PCB and backplane fabrication services. PCBs and backplanes are platforms which provide interconnection for integrated circuits and other electronic components. Backplanes also provide interconnection for other printed circuit boards. Semiconductor designs are currently so complex that they often require printed circuit boards with many layers of narrow, densely spaced wiring. We manufacture high density, complex multilayer printed circuit boards and backplanes on a low-volume, quick-turn basis, as well as on a high-volume production basis. Our quick-turn prototype service allows us to provide small test quantities to customers’ product development groups in as short as 24 hours. Our range of services enables us to respond to our customers’ demands for an accelerated transition from prototype to volume production. We have PCB and backplane fabrication service capabilities on four major continents (North America, South America, Europe and Asia).
	The manufacture of complex multilayer interconnect products often requires the use of sophisticated circuit interconnections between layers, referred to as vias, and adherence to strict electrical characteristics to maintain consistent circuit transmission speeds. Our production of microvias, by laser ablation and our surface laminar circuit technology, a photo generated microvia capability, provides our customers with proven high volume production capacity in both of the major high density interconnect process solutions.
	Flextronics Systems Assembly. Our assembly and manufacturing operations, which reflect the majority of our revenues, include PCB assembly, assembly of systems, and subsystems that incorporate PCBs and complex electromechanical components. A substantial portion of our net sales is derived from the manufacture and assembly of complete products. We employ just-in-time, ship-to-stock and ship-to-line programs, continuous flow manufacturing, demand flow processes and statistical process controls. As

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	OEMs seek to provide greater functionality in smaller products, they increasingly require more sophisticated manufacturing technologies and processes. Our investment in advanced manufacturing equipment and our experience and expertise in innovative miniaturization, packaging and interconnect technologies, such as chip scale packaging, chip-on-board and ball grid array, enable us to offer a variety of advanced manufacturing solutions. In addition, we have recently developed significant expertise in the manufacture of wireless communications products employing radio frequency technology.
	We offer computer-aided testing of assembled PCBs, systems and subsystems, which contributes significantly to our ability to deliver high-quality products on a consistent basis. Our test capabilities include management defect analysis, in-circuit tests and functional tests. In addition, we also provide environmental stress tests of board or system assemblies.
	We provide materials procurement, information technology solutions and logistics services. Materials procurement and management consist of the planning, purchasing, expediting and warehousing of components and materials used in the manufacturing process. Our inventory management expertise and volume procurement capabilities contribute to cost reductions and reduce total cycle time. Our industrial parks include providers of many of the custom components that we use to reduce material and transportation costs, simplify logistics and facilitate inventory management. We also use sophisticated automated manufacturing resources planning systems and enhanced electronic data interchange capabilities to ensure inventory control and optimization. Through our manufacturing resources planning system, we have real-time visibility on material availability and real-time tracking of work in process. We also utilize electronic data interchange with our customers and suppliers to implement a variety of supply chain management programs. Electronic data interchange allows customers to share demand and product forecasts and deliver purchase orders while also assisting suppliers with just-in-time delivery and supplier-managed inventory.
	We offer our customers flexible, just-in-time delivery programs allowing product shipments to be closely coordinated with customers’ inventory requirements. Increasingly, we ship products directly into customers’ distribution channels or directly to the end-user. We believe that this service can provide our customers with a more comprehensive solution and enable them to be more responsive to market demands.
	We also provide design, industrialization, supply chain management and manufacturing services for the optical component and optical networking industries. We offer a broad range of photonic packaging design and industrialization services to assist in bringing products from schematics to shipment while meeting our customers time-to-market objectives. In addition, we offer advanced process development and volume manufacturing of active and passive photonic devices.
	Flextronics Enclosure Systems. We offer a comprehensive set of custom electronic enclosures and related products and services worldwide. Our services include design, manufacturing and integration of electronics packaging systems from custom enclosure systems, power and thermal subsystems to interconnect subsystems, cabling and cases. In addition to the typical sheet metal and plastic fabrication, we assist in the design of electronic packaging systems that protect sensitive electronics and enhance functionality. Our enclosure design services focus on functionality, manufacturability and testing. These services are integrated with our other services to provide our customers with greater responsiveness, improved logistics and overall improved supply chain management.
	Flextronics Logistics. We provide global logistics services and turnkey supply chain solutions for our customers. Our worldwide logistics services include freight forwarding, warehousing/inventory management and outbound/e-commerce solutions through our global supply chain network. We leverage new technologies such as XML links to factories, extranet-based management, vendor managed inventory and build-to-order programs, to simultaneously connect suppliers, manufacturing operations and OEM customers. By joining these logistics solutions with worldwide manufacturing operations and total supply chain management, we can significantly reduce market costs and can create tightly integrated processes and facilities worldwide. Moreover, the combination of these capabilities allows us to react

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	quickly to demand signals from our customers worldwide, creating innovative links to suppliers while serving the world market.
	Flextronics Network Services. We offer network and communications installation and maintenance services to OEMs in the data and telecommunications industries. Our services include project planning, documentation, engineering, production, installation and commissioning of equipment. We have expertise in the installation of public and mobile telecommunications systems, exchanges, corporate networks and peripheral equipment. We enhanced our network installation services through our acquisitions of Telcom Global Solutions and Telia’s Orbiant Group in fiscal 2002.

Backlog

      Although we obtain firm purchase orders from our customers, OEM customers typically do not make firm orders for delivery of products more than 30 to 90 days in advance. We do not believe that the backlog of expected product sales covered by firm purchase orders is a meaningful measure of future sales since orders may be rescheduled or canceled.

Competition

      The EMS industry is extremely competitive and includes hundreds of companies, several of whom have achieved substantial market share. We compete with different companies, depending on the type of service or geographic area. We compete against numerous domestic and foreign EMS providers, and current and prospective customers also evaluate our capabilities against the merits of internal production. According to IDC, approximately 60% of the EMS industry’s revenues in calendar 2001 were generated from the top five EMS companies — us, Celestica, Inc., Jabil Circuit, Inc., Sanmina-SCI Corporation and Solectron Corporation. Based on revenues for calendar 2001, we were the largest of these companies.

      Some of our competitors may have greater manufacturing, financial or other resources than us. As competitors increase the scale of their operations, they may increase their ability to realize economies of scale, to reduce their prices and to more effectively meet the needs of large OEMs. We believe that the principal competitive factors in the segments of the EMS industry in which we operate are cost, technological capabilities, responsiveness and flexibility, delivery cycles, location of facilities, product quality and range of services available. Failure to satisfy any of the foregoing requirements could seriously harm our business.

Environmental Regulation

      Our operations are subject to certain federal, state and local regulatory requirements relating to the use, storage, discharge and disposal of hazardous chemicals used during their manufacturing processes. We believe that our operations are currently in compliance in all material respects with applicable regulations and do not believe that costs of compliance with these laws and regulations will have a material effect on our capital expenditures, operating results or competitive position. Currently we have no commitments with environmental authorities regarding any compliance related matters.

      We determine the amount of our accruals for environmental matters by analyzing and estimating the range of possible costs in light of information currently available. The imposition of more stringent standards or requirements under environmental laws or regulations, the results of future testing and analysis undertaken by us at our operating facilities, or a determination that we are potentially responsible for the release of hazardous substances at other sites could result in expenditures in excess of amounts currently estimated to be required for such matters. No assurance can be given that actual costs will not exceed amounts accrued for probable and reasonably estimatible environmental liabilities, which amounted to $8.6 million at March 31, 2002. We do not believe that any of our potential or possible liabilities for environmental matters are material. There can be no assurance that additional environmental matters will not arise in the future or that costs will not be incurred with respect to sites as to which no problem is currently known.

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Employees

      As of March 31, 2002, our global workforce totaled approximately 78,000 employees. We have never experienced a work stoppage or strike and we believe that our employee relations are good.

      Our success depends to a large extent upon the continued services of key managerial and technical employees. The loss of such personnel could seriously harm our business, results of operations, prospects and debt service ability. To date, we have not experienced significant difficulties in attracting or retaining such personnel. Although we are not aware that any of our key personnel currently intend to terminate their employment, we cannot assure you of their future services.

Certain Factors Affecting Operating Results

If we do not manage effectively changes in our operations, our business may be harmed.

      We have grown rapidly in recent periods. Our global workforce has more than doubled in size over the last two years as a result of internal growth and acquisitions while we have reduced our workforce at some locations and closed certain facilities in connection with our fiscal 2002 and fiscal 2001 restructuring activities. These changes are likely to strain considerably our management control systems and resources, including decision support, accounting management, information systems and facilities. If we do not continue to improve our financial and management controls, reporting systems and procedures to manage our employees effectively and to expand our facilities, our business could be harmed.

      We plan to increase our manufacturing capacity in low-cost regions by expanding our facilities and adding new equipment. This expansion involves significant risks, including, but not limited to, the following:

	•	we may not be able to attract and retain the management personnel and skilled employees necessary to support expanded operations;
	•	we may not efficiently and effectively integrate new operations and information systems, expand our existing operations and manage geographically dispersed operations;
	•	we may incur cost overruns;
	•	we may encounter construction delays, equipment delays or shortages, labor shortages and disputes and production start-up problems that could harm our growth and our ability to meet customers’ delivery schedules; and
	•	we may not be able to obtain funds for this expansion, and we may not be able to obtain loans or operating leases with attractive terms.

      In addition, we expect to incur new fixed operating expenses associated with our expansion efforts that will increase our cost of sales, including substantial increases in depreciation expense and rental expense. If our revenues do not increase sufficiently to offset these expenses, our operating results could be seriously harmed. Our expansion, both through internal growth and acquisitions, has contributed to our incurring significant unusual charges. A detailed description of the amount of these unusual charges is included in Note 9, “Unusual Charges,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

We depend on the handheld electronics devices, information technologies infrastructure, communications infrastructure and computer and office automation industries which continually produce technologically advanced products with short life cycles; our inability to continually manufacture such products on a cost-effective basis could harm our business.

      We depend on sales to customers in the handheld devices, information technologies infrastructure, communications infrastructure and computer and office automation industries. For the fiscal 2002, we derived approximately 34% of our revenues from customers in the handheld devices industry, which includes cell phones, pagers and personal digital assistants; approximately 17% of our revenues from providers of information technologies infrastructure, which includes servers, workstations, storage systems, mainframes,

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	•	rapid changes in technology, which result in short product life cycles;
	•	the inability of our customers to successfully market their products, and the failure of these products to gain widespread commercial acceptance; and
	•	recessionary periods in our customers’ markets.

Our customers may cancel their orders, change production quantities or delay production.

      Providers of electronics manufacturing services, or EMS, must provide increasingly rapid product turnaround for their customers. We generally do not obtain firm, long-term purchase commitments from our customers and we continue to experience reduced lead-times in customer orders. Customers may cancel their orders, change production quantities or delay production for a number of reasons. Many of our customers’ industries are experiencing a significant decrease in demand for their products and services. The generally uncertain economic condition of several of the industries of our customers has resulted, and may continue to result, in some of our customers delaying the delivery of some of the products we manufacture for them, and placing purchase orders for lower volumes of products than previously anticipated. Cancellations, reductions or delays by a significant customer or by a group of customers would seriously harm our results of operations by reducing the volumes of products manufactured by us for the customers and delivered in that period, as well as causing a delay in the repayment of our expenditures for inventory in preparation for customer orders and lower asset utilization resulting in lower gross margins.

      In addition, we make significant decisions, including determining the levels of business that we will seek and accept, production schedules, component procurement commitments, personnel needs and other resource requirements, based on our estimates of customer requirements. The short-term nature of our customers’ commitments and the possibility of rapid changes in demand for their products reduce our ability to estimate accurately future customer requirements. This makes it difficult to schedule production and maximize utilization of our manufacturing capacity. We often increase staffing, increase capacity and incur other expenses to meet the anticipated demand of our customers, which may cause reductions in our gross margins if customer orders continue to be delayed or cancelled. Anticipated orders may not materialize, and delivery schedules may be deferred as a result of changes in demand for our customers’ products. On occasion, customers may require rapid increases in production, which can stress our resources and reduce margins. Although we have increased our manufacturing capacity, and plan further increases, we may not have sufficient capacity at any given time to meet our customers’ demands. In addition, because many of our costs and operating expenses are relatively fixed, a reduction in customer demand could harm our gross profit and operating income.

Our operating results vary significantly.

      We experience significant fluctuations in our results of operations. Some of the principal factors that contribute to these fluctuations are:

	•	changes in demand for our services;
	•	our effectiveness in managing manufacturing processes and costs in order to decrease manufacturing expenses;

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	•	the mix of the types of manufacturing services we provide, as high-volume and low-complexity manufacturing services typically have lower gross margins than lower volume and more complex services;
	•	changes in the cost and availability of labor and components, which often occur in the electronics manufacturing industry and which affect our margins and our ability to meet delivery schedules;
	•	the degree to which we are able to utilize our available manufacturing capacity;
	•	our ability to manage the timing of our component purchases so that components are available when needed for production, while avoiding the risks of purchasing inventory in excess of immediate production needs; and
	•	local conditions and events that may affect our production volumes, such as labor conditions, political instability and local holidays.

      Two of our significant end-markets are the handheld electronics devices market and the consumer devices market. These markets exhibit particular strength toward the end of the calendar year in connection with the holiday season. As a result, we have historically experienced stronger revenues in our third fiscal quarter as compared to our other fiscal quarters.

      In addition, many of our customers are currently experiencing increased volatility in demand, and in many cases reduced demand, for their products. This increases the difficulty of anticipating the levels and timing of future revenues from these customers, and could lead them to defer delivery schedules for products or reduce their volumes of purchases. This would lead to a delay or reduction in our revenues from these customers. Further, these customers may be unable to pay us or otherwise meet their commitments under their agreements or purchase orders with us. Any failure by our customers to pay us may result in a reduction of our operating income and may lead to excess capacity at affected facilities. Any of these factors or a combination of these factors could seriously harm our business and result in fluctuations in our results of operations.

We may encounter difficulties with acquisitions, which could harm our business.

      Since the beginning of fiscal 2001, we have completed over 30 acquisitions of businesses and we expect to continue to acquire additional businesses in the future. We are currently in preliminary discussions with respect to potential acquisitions and strategic customer transactions, however, we do not have any agreements or commitments to make any material acquisitions or strategic customer transactions. Any future acquisitions may require additional debt or equity financing, or the issuance of shares in the transaction. This could increase our leverage or be dilutive to our existing shareholders. We may not be able to complete acquisitions or strategic customer transactions in the future to the same extent as the past, or at all.

      To integrate acquired businesses and operations, we work to implement our management information systems and operating systems and assimilate and manage the personnel of the acquired operations. The difficulties of this integration may be further complicated by geographic distances. The integration of acquired businesses may not be successful and could result in disruption to other parts of our business.

      In addition, acquisitions involve a number of other risks and challenges, including:

	•	diversion of management’s attention;
	•	potential loss of key employees and customers of the acquired companies;
	•	lack of experience operating in the geographic market or industry sector of the acquired business;
	•	an increase in our expenses and working capital requirements, which reduces our return on invested capital; and
	•	exposure to unanticipated contingent liabilities of acquired companies.

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      Any of these and other factors could harm our ability to achieve anticipated levels of profitability at acquired operations or realize other anticipated benefits of an acquisition.

Our strategic relationships with major customers create risks.

      Since the beginning of fiscal 2001, we have completed several strategic transactions with OEM customers, including, among others, Telia, Xerox, Alcatel and Ericsson. Under these arrangements, we generally acquire inventory, equipment and other assets from the OEM, and lease (or in some cases acquire) their manufacturing facilities, while simultaneously entering into multi-year supply agreements for the production of their products. We intend to continue to pursue these OEM divestiture transactions in the future. There is frequently competition among EMS companies for these transactions, and this competition may increase. These transactions have contributed to a significant portion of our revenue growth, and if we fail to complete similar transactions in the future, our revenue growth could be harmed. As part of these arrangements, we typically enter into manufacturing services agreements with these OEMs. These agreements generally do not require any minimum volumes of purchases by the OEM, and the actual volume of purchases may be less than anticipated. The arrangements entered into with divesting OEMs typically involve many risks, including the following:

	•	we may need to pay a purchase price to the divesting OEMs that exceeds the value we may realize from the future business of the OEM;
	•	the integration into our business of the acquired assets and facilities may be time-consuming and costly;
	•	we, rather than the divesting OEM, bear the risk of excess capacity at the facility;
	•	we may not achieve anticipated cost reductions and efficiencies at the facility;
	•	we may be unable to meet the expectations of the OEM as to volume, product quality, timeliness and cost reductions; and
	•	if demand for the OEM’s products declines, the OEM may reduce its volume of purchases, and we may not be able to sufficiently reduce the expenses of operating the facility or use the facility to provide services to other OEMs.

      As a result of these and other risks, we may be unable to achieve anticipated levels of profitability under these arrangements, and they may not result in any material revenues or contribute positively to our net income per share. Due to our relationships with Ericsson and Xerox, other OEMs may not wish to obtain logistics or operations management services from us.

We depend on the continuing trend of outsourcing by OEMs.

      Future growth in our revenue depends on new outsourcing opportunities in which we assume additional manufacturing and supply chain management responsibilities from OEMs. To the extent that these opportunities are not available, either because OEMs decide to perform these functions internally or because they use other providers of these services, our future growth would be limited.

The majority of our sales come from a small number of customers; if we lose any of these customers, our sales could decline significantly.

      Sales to our ten largest customers have represented a significant percentage of our net sales in recent periods. Our ten largest customers in fiscal 2002 and fiscal 2001 accounted for approximately 64% and 59%, respectively, of net sales in those periods. Our largest customer during fiscal 2002 was Ericsson, accounting for approximately 15% of net sales. No other customer accounted for more than 10% of net sales in fiscal 2002, and no customer accounted for more than 10% of net sales in fiscal 2001.

      The identity of our principal customers have varied from year to year, and our principal customers may not continue to purchase services from us at current levels, if at all. Significant reductions in sales to any of

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Our industry is extremely competitive.

      The EMS industry is extremely competitive and includes hundreds of companies, several of which have achieved substantial market share. Current and prospective customers also evaluate our capabilities against the merits of internal production. Some of our competitors have substantially greater market share and manufacturing, financial and marketing resources than us.

      In recent years, many participants in the industry, including us, have substantially expanded their manufacturing capacity. If overall demand for electronics manufacturing services should decrease, this increased capacity could result in substantial pricing pressures, which could seriously harm our operating results. Certain sectors of the EMS industry are currently experiencing increased price competition, and if this increased level of competition should continue, our revenues and gross margin may be adversely affected.

We may be adversely affected by shortages of required electronic components.

      At various times, there have been shortages of some of the electronic components that we use, and suppliers of some components have lacked sufficient capacity to meet the demand for these components. In some cases, supply shortages and delays in deliveries of particular components have resulted in curtailed production, or delays in production, of assemblies using that component, which has contributed to an increase in our inventory levels. If we are unable to obtain sufficient components on a timely basis, we may experience manufacturing and shipping delays, which could harm our relationships with current or prospective customers and reduce our sales.

Our customers may be adversely affected by rapid technological change.

      Our customers compete in markets that are characterized by rapidly changing technology, evolving industry standards and continuous improvement in products and services. These conditions frequently result in short product life cycles. Our success will depend largely on the success achieved by our customers in developing and marketing their products. If technologies or standards supported by our customers products become obsolete or fail to gain widespread commercial acceptance, our business could be adversely affected.

We are subject to the risk of increased income taxes.

      We have structured our operations in a manner designed to maximize income in countries where:

	•	tax incentives have been extended to encourage foreign investment; or
	•	income tax rates are low.

      We base our tax position upon the anticipated nature and conduct of our business and upon our understanding of the tax laws of the various countries in which we have assets or conduct activities. However, our tax position is subject to review and possible challenge by taxing authorities and to possible changes in law, which may have retroactive effect. We cannot determine in advance the extent to which some jurisdictions may require us to pay taxes or make payments in lieu of taxes.

      Several countries in which we are located allow for tax holidays or provide other tax incentives to attract and retain business. These tax incentives expire over various periods from 2002 to 2010 and are subject to certain conditions with which we expect to comply. We have obtained tax holidays or other incentives where available, primarily in China, Malaysia and Hungary. In these three countries, we generated an aggregate of approximately $4.4 billion of our total revenues for the fiscal year ended March 31, 2002. Our taxes could increase if certain tax holidays or incentives are not renewed upon expiration, or tax rates applicable to us in such jurisdictions are otherwise increased. In addition, further acquisitions of businesses may cause our effective tax rate to increase.

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We conduct operations in a number of countries and are subject to risks of international operations.

      The geographical distances between the Americas, Asia and Europe create a number of logistical and communications challenges. These challenges include managing operations across multiple time zones, directing the manufacture and delivery of products across distances, coordinating procurement of components and raw materials and their delivery to multiple locations, and coordinating the activities and decisions of the core management team, which is based in a number of different countries. Facilities in several different locations may be involved at different stages of the production of a single product, leading to additional logistical difficulties.

      Because our manufacturing operations are located in a number of countries throughout Asia, the Americas and Europe, we are subject to the risks of changes in economic and political conditions in those countries, including:

	•	fluctuations in the value of local currencies;
	•	labor unrest and difficulties in staffing;
	•	longer payment cycles;
	•	increases in duties and taxation levied on our products;
	•	imposition of restrictions on currency conversion or the transfer of funds;
	•	limitations on imports or exports of components or assembled products, or other travel restrictions;
	•	expropriation of private enterprises; and
	•	a potential reversal of current favorable policies encouraging foreign investment or foreign trade by our host countries.

      The attractiveness of our services to our U.S. customers can be affected by changes in U.S. trade policies, such as most favored nation status and trade preferences for some Asian countries. In addition, some countries in which we operate, such as Brazil, the Czech Republic, Hungary, Mexico, Malaysia and Poland, have experienced periods of slow or negative growth, high inflation, significant currency devaluations or limited availability of foreign exchange. Furthermore, in countries such as China and Mexico, governmental authorities exercise significant influence over many aspects of the economy, and their actions could have a significant effect on us. Finally, we could be seriously harmed by inadequate infrastructure, including lack of adequate power and water supplies, transportation, raw materials and parts in countries in which we operate.

We depend on our executive officers.

      Our success depends to a large extent upon the continued services of our executive officers. Generally our employees are not bound by employment or non-competition agreements, and we cannot assure that we will retain our executive officers and other key employees. We could be seriously harmed by the loss of any of our executive officers. In addition, in order to manage our growth, we will need to recruit and retain additional skilled management personnel and if we are not able to do so, our business and our ability to continue to grow could be harmed.

We are subject to environmental compliance risks.

      We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, storage, discharge and disposal of hazardous substances in the ordinary course of our manufacturing process. In addition, we are responsible for cleanup of contamination at some of our current and former manufacturing facilities and at some third party sites. If more stringent compliance or cleanup standards under environmental laws or regulations are imposed, or the results of future testing and analyses at our current or former operating facilities indicate that we are responsible for the release of hazardous substances, we may be subject to additional remediation liability. Further, additional environmental matters may arise in the future at sites where no problem is currently known or at sites that we may acquire in the

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The market price of our ordinary shares is volatile.

      The stock market in recent years has experienced significant price and volume fluctuations that have affected the market prices of technology companies. These fluctuations have often been unrelated to or disproportionately impacted by the operating performance of these companies. The market for our ordinary shares may be subject to similar fluctuations. Factors such as fluctuations in our operating results, announcements of technological innovations or events affecting other companies in the electronics industry, currency fluctuations and general market conditions may cause the market price of our ordinary shares to decline.

Item 2.     Properties

      Our facilities consist of a global network of industrial parks, regional manufacturing operations, design and engineering and product introduction centers, providing over 16.6 million square feet of capacity as of March 31, 2002 (excluding facilities we have identified for closure, as described in Note 9, “Unusual Charges” in the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data”). We own facilities with approximately 1.1 million square feet in the Americas, 2.8 million square feet in Asia and 4.2 million square feet in Europe. We lease facilities with approximately 3.7 million square feet in the Americas, 1.3 million square feet in Asia and 3.5 million square feet in Europe.

      Our facilities include large industrial parks, ranging in size from approximately 300,000 to 1.5 million square feet, in Brazil, China, Hungary, Mexico and Poland, and we have recently commenced construction on an additional industrial park in China. We also have regional manufacturing operations, ranging in size from approximately 50,000 to 500,000 square feet, in Austria, Brazil, Canada, China, the Czech Republic, Denmark, Finland, France, Germany, Hungry, India, Indonesia, Israel, Italy, Malaysia, Mexico, Netherlands, Norway, Scotland, Singapore, Sweden and various states throughout the United States. We also have smaller design and engineering centers and product introduction centers at a number of locations in the world’s major electronics markets.

      Our facilities are well maintained and suitable for the operations conducted. The productive capacity of our plants is adequate for current needs.

Item 3.     Legal Proceedings

      We are subject to legal proceedings, claims, and litigation arising in the ordinary course of business. We defend ourselves vigorously against any such claims. While the outcome of these matters is currently not determinable, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

Item 4.     Submission of Matters to a Vote of Security Holders

      None.

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PART II

Price Range of Ordinary Shares

      Our ordinary shares are quoted on the Nasdaq National Market under the symbol “FLEX”. The following table sets forth the high and low per share sales prices for our ordinary shares since the beginning of fiscal 2001 as reported on the Nasdaq National Market.

      All share prices have been adjusted to give effect to the two-for-one stock splits effected as bonus issues (the Singapore equivalent of a stock dividend), distributed to our shareholders on October 16, 2000, December 22, 1999 and January 11, 1999.

      As of April 22, 2002, there were 3,386 holders of record of our ordinary shares and the closing sale price of the ordinary shares as reported on the Nasdaq National Market was $15.33 per share.

Dividends

      Since inception, we have not declared or paid any cash dividends on our ordinary shares (exclusive of dividends paid by pooled entities prior to acquisition), and our bank credit facility prohibits the payment of cash dividends without the lenders’ prior consent. The terms of our outstanding senior subordinated notes also restrict our ability to pay cash dividends. For more information, please see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” We anticipate that all earnings in the foreseeable future will be retained to finance the continuing development of our business.

Taxation

      This summary of Singapore and U.S. tax considerations is based on current law and is provided for general information. The discussion does not purport to deal with all aspects of taxation that may be relevant to particular shareholders in light of their investment or tax circumstances, or to certain types of shareholders (including insurance companies, tax-exempt organizations, regulated investment companies, financial institutions or broker-dealers, and shareholders that are not U.S. shareholders subject to special treatment under the U.S. federal income tax laws). Such shareholders should consult their own tax advisors regarding the particular tax consequences to such shareholders of any investment in our ordinary shares.

     Income Taxation Under Singapore Law

      Under current provisions of the Income Tax Act, Chapter 134 of Singapore, corporate profits are taxed at a rate equal to 24.5%. Under Singapore’s taxation system, the tax paid by a company is deemed paid by its shareholders. Thus, the shareholders receive dividends net of the tax paid by Flextronics. Dividends received by either a resident or a nonresident of Singapore are not subject to withholding tax. Shareholders are taxed on the gross amount of dividends (meaning the cash amount of the dividend plus the amount of corporate tax

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      Under current Singapore tax law there is no tax on capital gains, and, thus, any profits from the disposal of shares are not taxable in Singapore unless the vendor is regarded as carrying on a trade in shares in Singapore (in which case, the disposal profits would be taxable as trade profits rather than capital gains).

      There is no stamp duty payable in respect of the holding and disposition of shares. No duty is payable on the acquisition of new shares. Where existing shares are acquired in Singapore, stamp duty is payable on the instrument of transfer of the shares at the rate of S$2 for every S$1,000 of the market value of the shares. The stamp duty is borne by the purchaser unless there is an agreement to the contrary. Where the instrument of transfer is executed outside of Singapore, stamp duty must be paid if the instrument of transfer is received in Singapore. Under Article 22 (iii) of our Articles of Association, our directors are authorized to refuse to register a transfer unless the instrument of transfer has been duly stamped.

     Income Taxation Under United States Law

      Individual shareholders that are U.S. citizens or resident aliens (as defined in Section 7701(b) of the Internal Revenue Code of 1986), corporations or partnerships or other entities created or organized under the laws of the United States, or any political subdivision thereof, an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust which is subject to the supervision of a court within the United States and the control of section 7701(b)(30) of the Internal Revenue Code will, upon the sale or exchange of a share, recognize gain or loss for U.S. income tax purposes in an amount equal to the difference between the amount realized and the U.S. shareholder’s tax basis in such a share. If paid in currency other than U.S. dollars, certain currency translation rules will apply to determine the U.S. dollar amount realized. Such gain or loss will be capital gain or loss if the share was a capital asset in the hands of the U.S. shareholder and generally will be short-term capital gain or loss if the share has been held for less than one year, and long-term capital gain or loss if the share has been held for one year or longer. If a U.S. shareholder receives any currency other than U.S. dollars on the sale of a share, such U.S. shareholder may recognize ordinary income or loss as a result of currency fluctuations between the date of such sale and the date such sale proceeds are converted into U.S. dollars.

      U.S. shareholders will be required to report as income for U.S. income tax purposes the amount of any dividend received from us to the extent paid out of our current or accumulated earnings and profits, as determined under current U.S. income tax principles. If over 50% of our stock (by vote or value) were owned by U.S. shareholders who individually held 10% or more of our voting stock, such U.S. shareholders potentially would be required to include in income a portion or all of their pro rata share of our and our non-U.S. subsidiaries’ earnings and profits. Certain attribution rules apply in this regard. If 50% or more of our assets during a taxable year produced or were held for the production of passive income, as defined in section 1297(b) of the Code (e.g., certain forms of dividends, interest and royalties), or 75% or more of our gross income for a taxable year was passive income, adverse U.S. tax consequences could result to U.S. shareholders. As of March 31, 2002, we were not aware of any U.S. shareholder who individually held 10% or more of our voting stock.

      Shareholders that are not U.S. shareholders will not be required to report for U.S. federal income tax purposes the amount of any dividend received from us. Non-U.S. shareholders, upon the sale or exchange of a share, would not be required to recognize gain or loss for U.S. federal income tax purposes.

     Estate Taxation

      In the case of an individual who is not domiciled in Singapore, a Singapore estate tax is imposed on the value of all movable and immovable properties situated in Singapore. Our shares are considered to be situated in Singapore. Thus, an individual shareholder who is not domiciled in Singapore at the time of his or her death will be subject to Singapore estate tax on the value of any such shares held by the individual upon the individual’s death. Such a shareholder will be required to pay Singapore estate tax to the extent that the value

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      These historical results are not necessarily indicative of the results to be expected in the future. The following table is qualified by reference to and should be read in conjunction with the consolidated financial statements, related notes thereto and other financial data included elsewhere herein.