Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

August 15, 2016

 

 

Fabrinet

(Exact name of registrant as specified in its charter)

 

 

 

Cayman Islands   001-34775   Not Applicable

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

c/o Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue

George Town

Grand Cayman

KY1-9005

Cayman Islands

(Address of principal executive offices, including zip code)

+66 2-524-9600

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition.

On August 15, 2016, Fabrinet issued a press release regarding its financial results for the fiscal quarter and year ended June 24, 2016. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 – Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit

No.

  

Description

99.1    Press release dated August 15, 2016


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  FABRINET
By:  

/s/ Toh-Seng Ng

 

Toh-Seng Ng

Executive Vice President, Chief Financial Officer

Date: August 15, 2016


EXHIBIT INDEX

 

Exhibit

No.

  

Description

99.1    Press release dated August 15, 2016
EX-99.1

Exhibit 99.1

Fabrinet Announces Fourth Quarter and Fiscal-Year 2016 Financial Results

BANGKOK, Thailand – August 15, 2016 – Fabrinet (NYSE: FN), a leading provider of advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products, today announced its financial results for its fourth quarter and fiscal year ended June 24, 2016.

Tom Mitchell, Chief Executive Officer of Fabrinet, said, “Strong revenue growth of 34% exceeded our expectations for the fourth quarter. These results capped a year of significant growth for Fabrinet, which was driven by a combination of momentum in the optical industry, growing contributions from new customers, and increasing demand for our advanced packaging and precision assembly capabilities. We believe that we are in a strong position to serve the industry’s growth as we scale our Fabrinet West New Product Introduction facility and complete construction of the first building at our new campus in Thailand. As a result of these factors, we are entering fiscal 2017 with optimism, as reflected in our guidance for the first quarter.”

Fourth Quarter Fiscal-Year 2016 Financial Highlights

GAAP Results

 

    Revenue was $276.4 million for the fourth quarter of fiscal year 2016, an increase of 34% compared to total revenue of $206.5 million for the comparable period in fiscal year 2015.

 

    GAAP net income for the fourth quarter of fiscal year 2016 was $19.7 million, compared to GAAP net income of $13.0 million in the fourth quarter of fiscal year 2015.

 

    GAAP net income per diluted share for the fourth quarter of fiscal year 2016 was $0.53, compared to GAAP net income per diluted share of $0.36 in the fourth quarter of fiscal year 2015.

Non-GAAP Results

 

    Non-GAAP net income in the fourth quarter of fiscal 2016 was $22.4 million, an increase of 54% compared to non-GAAP net income of $14.5 million in the same period a year ago.

 

    Non-GAAP net income per diluted share in the fourth quarter of fiscal 2016 was $0.60, an increase from non-GAAP net income per diluted share of $0.40 in the same period a year ago.

Fiscal-Year 2016 Financial Highlights

GAAP Results

 

    Revenue was $976.7 million for fiscal year 2016, an increase of 26% compared to total revenue of $773.6 million for fiscal year 2015.

 

    GAAP net income for fiscal year 2016 was $61.9 million, compared to GAAP net income of $43.6 million in fiscal year 2015.

 

    GAAP net income per diluted share for fiscal year 2016 was $1.68, compared to GAAP net income per diluted share of $1.21 in fiscal year 2015.

Non-GAAP Results

 

    Non-GAAP net income in fiscal 2016 was $77.7 million, an increase of 38% compared to non-GAAP net income of $56.4 million in fiscal year 2015.

 

    Non-GAAP net income per diluted share in fiscal 2016 was $2.11, an increase from non-GAAP net income per diluted share of $1.57 in fiscal year 2015.

 

1


Business Outlook

Based on information available as of August 15, 2016, Fabrinet is issuing guidance for the first quarter of fiscal 2017 ending September 30, 2016, as follows:

 

    Fabrinet expects first quarter revenue to be in the range of $306 million to $310 million.

 

    GAAP net income per diluted share is expected to be in the range of $0.62 to $0.64, based on approximately 37.6 million fully diluted shares outstanding.

 

    Non-GAAP net income per diluted share is expected to be in the range of $0.70 to $0.72, based on approximately 37.6 million fully diluted shares outstanding.

Conference Call Information

 

What:   

Fabrinet Fourth Quarter and Fiscal-Year 2016 Financial Results Conference Call

When:   

Monday, August 15, 2016

Time:   

5:00 p.m. ET

Live Call:   

(888) 357-3694, domestic

  

(253) 237-1137, international

  

Passcode: 53883033

Replay:   

(855) 859-2056, domestic

  

(404) 537-3406, international

  

Passcode: 53883033

Webcast:   

http://investor.fabrinet.com (live and replay)

This press release and any other information related to the call will also be posted on Fabrinet’s website at http:// investor.fabrinet.com. A recorded version of this webcast will be available approximately two hours after the call and will be archived on Fabrinet’s website for a period of one year.

About Fabrinet

Fabrinet is a leading provider of advanced optical packaging and precision optical, electro-mechanical, and electronic manufacturing services to original equipment manufacturers of complex products, such as optical communication components, modules and subsystems, industrial lasers and sensors. Fabrinet offers a broad range of advanced optical and electro-mechanical capabilities across the entire manufacturing process, including process design and engineering, supply chain management, manufacturing, advanced packaging, integration, final assembly and test. Fabrinet focuses on production of high complexity products in any mix and any volume. Fabrinet maintains engineering and manufacturing resources and facilities in Thailand, the People’s Republic of China and the United States of America. For more information visit: www.fabrinet.com.

Forward-Looking Statements

“Safe Harbor” Statement Under U.S. Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include our expectation that we will complete construction of a new manufacturing building in Thailand in fiscal-year 2017 and continue to achieve profitable growth and scale our business, as well as all of the statements under the “Business Outlook” section regarding our expected revenue and GAAP and non-GAAP net income per share for the first quarter of fiscal-year 2017. These forward-looking statements involve risks and uncertainties, and actual results could vary materially from these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: less customer demand for our products and services than forecasted; less growth in the optical communications, industrial lasers and sensors markets than we forecast; difficulties expanding into additional markets, such as the semiconductor processing, biotechnology, metrology and materials processing markets; increased

 

2


competition in the optical manufacturing services markets; difficulties in delivering products and services that compete effectively from a price and performance perspective; our reliance on a small number of customers and suppliers; difficulties in managing our operating costs; difficulties in managing and operating our business across multiple countries (including the U.S., Thailand and the People’s Republic of China); delays in construction of our new manufacturing building in Thailand; and other important factors as described in reports and documents we file from time to time with the Securities and Exchange Commission (SEC), including the factors described under the section captioned “Risk Factors” in our Quarterly Report on Form 10-Q, filed on May 3, 2016. We disclaim any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.

Use of Non-GAAP Financials

The Company refers to the non-GAAP financial measures cited above in making operating decisions because they provide meaningful supplemental information regarding the Company’s ongoing operational performance. Non-GAAP net income excludes share-based compensation expenses, executive separation costs, investigation costs, income related to flooding, expenses related to reduction in workforce, amortization of debt issuance costs, unrealized gain or loss on foreign currency and one time cost resulting from a non-recurring warranty charge. We have excluded these items in order to enhance investors’ understanding of our underlying operations. The use of these non-GAAP financial measures has material limitations because they should not be used to evaluate our company without reference to their corresponding GAAP financial measures. As such, we compensate for these material limitations by using these non-GAAP financial measures in conjunction with GAAP financial measures.

These non-GAAP financial measures are used to: (1) measure company performance against historical results, (2) facilitate comparisons to our competitors’ operating results, and (3) allow greater transparency with respect to information used by management in financial and operational decision making. In addition, these non-GAAP financial measures are used to measure company performance for the purposes of determining employee incentive plan compensation.

SOURCE: Fabrinet

Investor Contact:

Garo Toomajanian

ir@fabrinet.com

 

3


FABRINET

CONSOLIDATED BALANCE SHEETS

 

(in thousands of U.S. dollars, except share data)    As of
June 24,
2016
     As of
June 26,
2015
 

Assets

     

Current assets

     

Cash and cash equivalents

   $ 142,804       $ 112,978   

Marketable securities

     141,709         142,866   

Trade accounts receivable, net

     196,145         134,952   

Inventory, net

     181,499         130,613   

Deferred tax assets

     1,358         1,662   

Prepaid expenses

     3,114         2,135   

Other current assets

     6,662         1,833   
  

 

 

    

 

 

 

Total current assets

     673,291         527,039   
  

 

 

    

 

 

 

Non-current assets

     

Property, plant and equipment, net

     178,410         140,654   

Intangibles, net

     499         137   

Deferred tax assets

     1,806         2,249   

Deferred debt issuance costs

     2,444         2,424   
  

 

 

    

 

 

 

Total non-current assets

     183,159         145,464   
  

 

 

    

 

 

 

Total assets

   $ 856,450       $ 672,503   
  

 

 

    

 

 

 

Liabilities and Shareholders’ Equity

     

Current liabilities

     

Bank borrowings, including revolving loan and current portion of long-term loans from banks

   $ 24,600       $ 36,000   

Trade accounts payable

     172,052         115,319   

Fixed assets related payable

     20,628         6,026   

Income tax payable

     2,010         1,470   

Accrued payroll, bonus and related expenses

     12,300         9,804   

Accrued expenses

     8,072         6,405   

Other payables

     16,356         6,024   
  

 

 

    

 

 

 

Total current liabilities

     256,018         181,048   
  

 

 

    

 

 

 

Non-current liabilities

     

Long-term loan from bank, non-current portion

     36,400         4,500   

Deferred tax liability

     854         737   

Severance liabilities

     6,684         5,477   

Other non-current liabilities

     2,075         1,797   
  

 

 

    

 

 

 

Total non-current liabilities

     46,013         12,511   
  

 

 

    

 

 

 

Total liabilities

     302,031         193,559   
  

 

 

    

 

 

 

Commitments and contingencies (Note 17)

     

Shareholders’ equity

     

Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of June 24, 2016 and June 26, 2015)

     —           —     

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 36,156,446 share and 35,437,654 shares issued and outstanding as of June 24, 2016 and June 26, 2015, respectively)

     362         354   

Additional paid-in capital

     102,325         89,390   

Accumulated other comprehensive income (loss)

     591         (44

Retained earnings

     451,141         389,244   
  

 

 

    

 

 

 

Total shareholders’ equity

     554,419         478,944   
  

 

 

    

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 856,450       $ 672,503   
  

 

 

    

 

 

 

 

4


FABRINET

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

 

     Three Months Ended     Twelve Months Ended  
     June 24,     June 26,     June 24,     June 26,  
(in thousands of U.S. dollars)    2016     2015     2016     2015  

Revenues

   $ 276,388      $ 206,456      $ 976,747      $ 773,587   

Cost of revenues

     (242,546     (181,907     (857,224     (685,814
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     33,842        24,549        119,523        87,773   

Selling, general and administrative expenses

     (11,839     (10,739     (49,753     (39,460

Income related to flooding

     —          —          36        —     

Expenses related to reduction in workforce

     —          —          —          (1,153

Operating income

     22,003        13,810        69,806        47,160   

Interest income

     425        297        1,535        1,253   

Interest expense

     (413     (241     (1,569     (616

Foreign exchange (loss) gain, net

     (670     91        (1,916     (19

Other income

     110        (46     376        (152
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     21,455        13,911        68,232        47,626   

Income taxes

     (1,786     (876     (6,335     (3,984
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     19,669        13,035        61,897        43,642   

Other comprehensive (loss) income

     (156     (70     635        (44
  

 

 

   

 

 

   

 

 

   

 

 

 

Net other comprehensive income

   $ 19,513      $ 12,965      $ 62,532      $ 43,598   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share

        

Basic

   $ 0.55      $ 0.37      $ 1.73      $ 1.23   

Diluted

   $ 0.53      $ 0.36      $ 1.68      $ 1.21   

Weighted average number of ordinary shares outstanding (thousands of shares)

        

Basic

     36,075        35,431        35,857        35,354   

Diluted

     37,259        36,320        36,872        35,984   

 

5


FABRINET

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     Twelve Months Ended  
(in thousands of U. S. dollars)    June 24,
2016
    June 26,
2015
 

Cash flows from operating activities

    

Net income for the year

   $ 61,897      $ 43,642   

Adjustments to reconcile net income to net cash provided by operating activities

    

Depreciation and amortization

     17,357        12,947   

Gain on disposal of property, plant and equipment

     (73     (42

Loss from sales and maturities of marketable securities

     194        120   

Amortization of investment premium

     798        985   

Amortization of deferred debt issuance costs

     758        527   

Income related to flooding

     (828     —     

Proceeds from insurers in settlement of claim related to flood damage

     272        —     

(Reversal of) allowance for doubtful accounts

     (17     13   

Unrealized loss on exchange rate and fair value of derivative

     1,905        671   

Share-based compensation

     9,927        8,027   

Deferred income tax

     864        (878

Other non-cash expenses

     1,744        1,722   

Reversal of uncertain tax positions

     —          —     

(Reversal of) inventory obsolescence

     (521     397   

Loss from written-off inventory due to flood loss

     233        —     

Changes in operating assets and liabilities

    

Trade accounts receivable

     (61,013     (33,797

Inventory

     (50,598     (6,440

Other current assets and non-current assets

     (5,901     (283

Trade accounts payable

     56,308        20,466   

Income tax payable

     573        446   

Other current liabilities and non-current liabilities

     13,209        4,106   

Liabilities to third parties due to flood losses

     —          —     
  

 

 

   

 

 

 

Net cash provided by operating activities

     47,088        52,629   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Purchase of marketable securities

     (108,341     (203,407

Proceeds from sales of marketable securities

     41,836        29,036   

Proceeds from maturities of marketable securities

     67,113        30,356   

Purchase of property, plant and equipment

     (40,616     (51,398

Gain on cash settlement of hedged forward contracts

     34        —     

Proceeds from disposal of property, plant and equipment

     194        48   

Purchase of intangibles

     (379     (134

Proceeds from insurers in settlement of claims related to flood damage

     556        —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (39,603     (195,499
  

 

 

   

 

 

 

Cash flows from financing activities

    

Payment of debt issuance costs

     (654     (1,946

Proceeds of short-term loan from bank

     18,000        30,000   

Repayment of short-term loan from bank

     (41,500     —     

Proceed of long-term loan from bank

     50,000        —     

Repayment of long-term loan from bank

     (6,000     (6,000

Proceeds from issuance of ordinary shares under employee share option plan

     5,479        835   

Withholding tax related to net share settlement of restricted share units

     (2,463     (352
  

 

 

   

 

 

 

Net cash provided by financing activities

     22,862        22,537   
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

   $ 30,347      $ (120,333
  

 

 

   

 

 

 

Movement in cash and cash equivalents

    

Cash and cash equivalents at beginning of period

   $ 112,978      $ 233,477   

Increase (decrease) in cash and cash equivalents

     30,347        (120,333

Effect of exchange rate on cash and cash equivalents

     (521     (166
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 142,804      $ 112,978   
  

 

 

   

 

 

 

 

6


Fabrinet

Reconciliation of GAAP measures to non-GAAP measures

 

(in thousands of U.S. dollars, except per share data)    Three Months Ended     Twelve Months Ended  
   June 24, 2016     June 26, 2015     June 24, 2016     June 26, 2015  
   Net
income
    Diluted
EPS
    Net
income
    Diluted
EPS
    Net
income
    Diluted
EPS
    Net
income
    Diluted
EPS
 

GAAP measures

     19,669        0.53        13,035        0.36        61,897        1.68        43,642        1.21   

Items reconciling GAAP net income & EPS to non-GAAP net income & EPS:

                

Related to cost of revenues:

                

Share-based compensation expenses

     385        0.01        344        0.01        1,979        0.05        1,451        0.04   

Cost resulting from a non-recurring warranty charge

     1,000        0.03        —          —          1,000        0.03        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total related to gross profit

     1,385        0.04        344        0.01        2,979        0.08        1,451        0.04   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Related to selling, general and administrative expenses:

                

Share-based compensation expenses

     1,760        0.05        1,878        0.05        7,948        0.21        6,577        0.18   

Executive separation cost

     —          —          —          —          1,360        0.04        —          —     

Investigation cost

     —          —          (858     (0.02     —          —          3,242        0.09   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total related to selling, general and administrative expenses

     1,760        0.05        1,020        0.03        9,308        0.25        9,819        0.27   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Related to other incomes and other expenses:

                

Income related to flooding

     —          —          —          —          (36     (0.00     —          —     

Expenses related to reduction in workforce

     —          —          —          —          —          —          1,153        0.03   

Amortization of debt issuance costs

     203        0.01        150        0.00        745        0.02        527        0.02   

(Gain) loss on foreign currency

     (581     (0.02     —          —          1,715        0.05        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total related to other incomes and other expenses

     (378     (0.01     150        0.00        2,424        0.07        1,680        0.05   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Related to income tax expense (benefit):

                

Income tax expense (benefit)

     —          —          —          —          1,119        0.03        (187     (0.01
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total related to income tax expense (benefit)

     —          —          —          —          1,119        0.03        (187     (0.01
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total related to net income & EPS

     2,767        0.07        1,514        0.04        15,830        0.43        12,763        0.35   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP measures

     22,436        0.60        14,549        0.40        77,727        2.11        56,405        1.57   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in computing diluted net income per share

                

GAAP diluted shares

       37,258          36,320          36,872          35,984   

Non-GAAP diluted shares

       37,258          36,320          36,872          35,984   

 

7


Fabrinet Guidance for Quarter Ending September 30, 2016

Items reconciling GAAP EPS to non-GAAP EPS:

 

     Diluted
EPS
 

GAAP net income per diluted share:

   $ 0.62 to $0.64   

Related to cost of revenues:

  

Share-based compensation expenses

     0.03   
  

 

 

 

Related to selling, general and administrative expenses:

  

Expenses related to M&A activities

     0.00   

Executive separation cost

     0.02   

Share-based compensation expenses

     0.07   
  

 

 

 
     0.09   
  

 

 

 

Related to other incomes and other expenses:

  

Amortization of debt issuance costs

     0.01   

(Gain)/loss on foreign currency

     (0.05)   
  

 

 

 

Total related to other incomes and other expenses

     (0.04)   
  

 

 

 

Total related to net income & EPS

     0.08   
  

 

 

 

Non-GAAP net income per diluted share

   $ 0.70 to $0.72   
  

 

 

 

 

8