8-KLeadership Changes

FLEX LTD. 8-K Report, Executive Changes (Jul 2, 2014)

Filed July 2, 2014For Securities:FLEX

Summary

This Form 8-K filing from Flextronics International Ltd. (FLEX) on July 2, 2014, details the approval of executive compensation plans for Fiscal Year 2015, effective June 26, 2014. The company's Board of Directors has implemented an Annual Incentive Bonus Plan and a Performance Long Term Cash Incentive Plan designed to incentivize key executive officers based on predefined financial and operational targets. The Annual Incentive Bonus Plan for FY2015 focuses on a mix of quarterly and annual performance metrics, including revenue growth, earnings per share, operating profit, and return on invested capital, with varying target percentages of base salary for different executive roles. The Performance Long Term Cash Incentive Plan, which replaces a portion of performance-based restricted stock units for executives (excluding the CEO), is solely based on achieving cumulative three-year free cash flow growth targets, with payouts occurring three years post-grant.

Key Highlights

  • 1Flextronics approved its Annual Incentive Bonus Plan for Fiscal Year 2015 on June 26, 2014.
  • 2The FY2015 Annual Incentive Bonus Plan ties executive bonuses to a combination of quarterly (50%) and annual (50%) performance goals.
  • 3Key performance metrics for the annual bonus include revenue growth, EPS, operating profit, and return on invested capital at the company level, and business-unit specific targets.
  • 4Target bonus opportunities for the CEO are 150% of base salary, 110% for the CFO, and 80-110% for other officers.
  • 5The company also approved a Performance Long Term Cash Incentive Plan for FY2015 for executives (excluding the CEO).
  • 6This long-term plan is based on cumulative three-year free cash flow growth, with payouts on the third anniversary of the grant.
  • 7Both plans utilize adjusted, non-GAAP measures for performance evaluation.

Frequently Asked Questions

Flextronics approved two main executive compensation plans: the Annual Incentive Bonus Plan for Fiscal Year 2015 and the Performance Long Term Cash Incentive Plan for Fiscal Year 2015. The annual plan offers cash bonuses based on quarterly and annual performance metrics, while the long-term plan provides cash bonuses based on cumulative three-year free cash flow growth.

Bonuses under the annual plan are determined by achieving pre-established performance goals. Fifty percent of the bonus is based on quarterly objectives, and the other fifty percent is based on annual objectives. The performance goals include company-level metrics like revenue growth, earnings per share, operating profit, and return on invested capital, as well as business unit-specific targets.

The Performance Long Term Cash Incentive Plan is designed to incentivize executive officers (excluding the Chief Executive Officer) with long-term cash bonuses. These bonuses are solely based on achieving cumulative three-year free cash flow growth targets. Payouts occur three years after the initial grant date if performance targets are met or exceeded. This plan replaces up to 50% of the performance-based restricted stock units previously granted to certain executives.

The filings indicate that both the Annual Incentive Bonus Plan and the Performance Long Term Cash Incentive Plan use adjusted, non-GAAP measures for determining the achievement of award opportunities and performance goals. For free cash flow, the company defines it as net cash flows from operating activities less purchases of property and equipment, net of dispositions.