Fabrinet
May 8, 2017

Fabrinet Announces Third Quarter Fiscal Year 2017 Financial Results

Revenue Exceeds High-End of Guidance Range

BANGKOK--(BUSINESS WIRE)-- 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 the third fiscal quarter ended March 31, 2017.

Tom Mitchell, Chief Executive Officer of Fabrinet, said: "We had a strong third quarter, with revenue that exceeded our guidance range and grew 46% from a year ago. We are benefiting from growth in a variety of existing customer programs that are further supported by new business. Our new facility in Chonburi, Thailand and our new product introduction facilities in Santa Clara, California and the UK are also making important contributions that we expect to expand as we look ahead."

Third Quarter Fiscal-Year 2017 Financial Highlights

GAAP Results

Non-GAAP Results

Business Outlook

Based on information available as of May 8, 2017, Fabrinet is issuing guidance for the fourth quarter of fiscal year 2017 ending June 30, 2017, as follows:

 

Conference Call Information

 

What:

     

Fabrinet Third Quarter Fiscal Year 2017 Financial Results Conference Call

When:

Monday, May 8, 2017

Time:

5:00 p.m. ET

Live Call:

(888) 357-3694, domestic

 

(253) 237-1137, international

 

Passcode: 10614331

Replay:

(855) 859-2056, domestic

 

(404) 537-3406, international

 

Passcode: 10614331

Webcast:

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

 

This press release and any other information related to the call also will 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 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 United States of America, the People's Republic of China and the United Kingdom. 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 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 fourth 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 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 Thailand, the People's Republic of China, the U.S. and the U.K.); 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 February 7, 2017. 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, expenses related to our CEO search, debt administration expenses, income or expense related to flooding, depreciation of fair value uplift, amortization of debt issuance costs, unrealized gain or loss on foreign exchange, business combination expenses, and amortization of intangible assets. 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 making financial and operational decisions. In addition, these non-GAAP financial measures are used to measure company performance for the purposes of determining employee incentive plan compensation.

       

FABRINET

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 
(in thousands of U.S. dollars, except share data)

March 31,
2017

June 24,

2016

Assets
Current assets
Cash and cash equivalents $

136,634

$ 142,804
Marketable securities 152,608 141,709
Trade accounts receivable, net 250,922 196,145
Inventory, net 224,627 181,499
Deferred tax assets 1,358
Prepaid expenses 3,804 3,114
Other current assets   2,983     6,662

Total current assets

  771,578     673,291
Non-current assets
Restricted cash in connection with business acquisition 3,175
Property, plant and equipment, net 216,378 178,410
Intangibles, net 5,857 499
Goodwill 3,649
Deferred tax assets 2,452 1,806
Deferred debt issuance costs on revolving loan and other non-current assets   1,596     1,851
Total non-current assets   233,107     182,566
Total Assets $ 1,004,685   $ 855,857
Liabilities and Shareholders' Equity
Current liabilities
Bank borrowings, net of unamortized debt issuance costs $ 48,658 $ 24,307
Trade accounts payable 210,105 172,052
Fixed assets payable 12,409 20,628
Capital lease liability, current portion 341
Income tax payable 2,209 2,010
Accrued payroll, bonus and related expenses 15,141 12,300
Accrued expenses 13,020 8,072
Other payables 10,931     16,356
Total current liabilities 312,814   255,725
Non-current liabilities
Long-term loan from bank, non-current portion, net of unamortized debt issuance costs 26,059 36,100
Deferred tax liability 1,754 854
Capital lease liability, non-current portion 1,062
Deferred liability in connection with business acquisition 3,175
Severance liabilities 7,896 6,684
Other non-current liabilities 2,822   2,075
Total non-current liabilities 42,768   45,713
Total Liabilities   355,582   301,438
Commitments and contingencies (Note 16)
Shareholders' equity
Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and
outstanding as of March 31, 2017 and June 24, 2016)
Ordinary shares (500,000,000 shares authorized, $0.01 par value; 37,326,596 shares and
36,156,446 shares issued and outstanding as of March 31, 2017 and June 24, 2016, respectively) 373 362
Additional paid-in capital 128,868 102,325
Accumulated other comprehensive (loss) income (993 ) 591
Retained earnings 520,855   451,141
Total Shareholders' Equity 649,103   554,419
Total Liabilities and Shareholders' Equity $ 1,004,685   $ 855,857
 
       

FABRINET

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

 
Three Months Ended Nine Months Ended
(in thousands of U.S. dollars, except per share amounts) March 31,

2017

   

March 25,
2016

March 31,
2017

   

March 25,
2016

Revenues $ 366,837 $ 250,888 $ 1,050,036 $ 700,359
Cost of revenues   (322,791 )   (219,711 )   (923,336 )   (614,678 )

Gross profit

44,046 31,177 126,700 85,681
Selling, general and administrative expenses (17,086 ) (12,299 ) (50,569 ) (37,914 )
Other income related to flooding, net       900         36  
Operating income 26,960 19,778 76,131 47,803
Interest income 713 213 1,470 1,110
Interest expense (641 ) (335 ) (2,517 ) (1,156 )
Foreign exchange (loss) gain, net (3,702 ) 3,080 (100 ) (1,246 )
Other income   108     57     397     266  
Income before income taxes 23,438 22,793 75,381 46,777
Income tax expense   (1,782 )   (1,971 )   (5,667 )   (4,549 )
Net income   21,656     20,822     69,714     42,228  
Other comprehensive gain (loss), net of tax:
Change in net unrealized gain (loss) on marketable securities 49 292 (491 ) 117
Change in net unrealized (loss) gain on derivative instruments 722 (158 ) 674
Change in foreign currency translation adjustment   227         (935 )    
Total other comprehensive gain (loss), net of tax   276     1,014     (1,584 )   791  
Net comprehensive income $ 21,932   $ 21,836   $ 68,130   $ 43,019  
 
Earnings per share
Basic $ 0.58 $ 0.58 $ 1.89 $ 1.18
Diluted $ 0.57 $ 0.56 $ 1.85 $ 1.15
           
Weighted-average number of ordinary shares outstanding (thousands of shares)
Basic 37,116 35,964 36,792 35,785
Diluted 37,872 37,089 37,750 36,743
 
         

FABRINET

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
Nine Months Ended
(in thousands of U.S. dollars)

March 31,
2017

March 25,
2016

 
Cash flows from operating activities
Net income for the period $ 69,714 $ 42,228
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 16,956 12,793
Loss (gain) on disposal of property, plant and equipment 7 (13 )
Loss from sales and maturities of available-for-sale securities 407 190
Amortization of investment premium 397 605
Amortization of deferred debt issuance costs 1,591 543
Income related to flooding (828 )
Proceeds from insurer in settlement of claim related to flood damage 272
Allowance for doubtful accounts (reversal) 3 (7 )
Unrealized (gain) loss on exchange rate and fair value of derivative instruments (718 ) 2,406
Share-based compensation 21,936 7,782
Deferred income tax 1,008 1,054
Other non-cash expenses 1,775 1,171
Reversal of inventory obsolescence (72 ) (344 )
Loss from written-off inventory due to flood loss 233
Changes in operating assets and liabilities
Trade accounts receivable (50,839 ) (37,015 )
Inventory (39,766 ) (19,258 )
Other current assets and non-current assets 3,921 (3,803 )
Trade accounts payable 32,653 30,731
Income tax payable 166 (114 )
Other current liabilities and non-current liabilities   1,249     2,730  
Net cash provided by operating activities   60,388     41,356  
Cash flows from investing activities
Purchase of marketable securities (100,751 ) (85,644 )
Proceeds from sales of marketable securities 33,812 28,735
Proceeds from maturities of marketable securities 54,745 54,290
Payments in connection with business acquisition, net of cash acquired (9,917 )
Purchase of property, plant and equipment (57,224 ) (33,545 )
Purchase of intangibles (1,910 ) (274 )
Proceeds from disposal of property, plant and equipment 190 62
Proceeds from insurer in settlement of equipment claims related to flood damage       556  
Net cash used in investing activities   (81,055 )   (35,820 )
Cash flows from financing activities
Payment of debt issuance costs (506 )
Proceeds of short-term loans from banks 27,665 18,000
Repayment of long-term loans from bank (14,700 ) (8,500 )
Repayment of capital lease liability (182 )
Proceeds from issuance of ordinary shares under employee share option plans 5,890 3,326
Withholding tax related to net share settlement of restricted share units   (1,272 )   (2,372 )
Net cash provided by financing activities   17,401     9,948  
Net (decrease) increase in cash, cash equivalents and restricted cash   (3,266 )   15,484  
 
Movement in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period 142,804 112,978
(Decrease) increase in cash, cash equivalents and restricted cash (3,266 ) 15,484
Effect of exchange rate on cash, cash equivalents and restricted cash   271     (505 )
Cash, cash equivalents and restricted cash at end of period $ 139,809   $ 127,957  
 
Non-cash investing and financing activities
Construction, software-related and equipment-related payables $ 12,409 $ 5,068
 
       

FABRINET

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited
condensed consolidated balance sheets that sum to the total of same amounts shown in the unaudited condensed
consolidated statements of cash flows:

 
(amount in thousands)

As of

March 31,
2017

As of

March 25,
2016

 
Cash and cash equivalents $ 136,634 $ 127,957
Restricted cash in connection with business acquisition (non-current assets)   3,175  
Cash, cash equivalents and restricted cash $ 139,809 $ 127,957
 

 

FABRINET

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 
        Three Months Ended     Nine Months Ended
March 31,     March 31,     March 25,     March 25, March 31,     March 31,     March 25,     March 25,
2017     2017 2016       2016   2017       2017   2016       2016  
Net income     Diluted
EPS
Net income     Diluted
EPS
Net income     Diluted
EPS
Net income     Diluted
EPS
 
GAAP measures 21,656 0.57 20,822 0.56 69,714 1.85 42,228 1.15

Items reconciling GAAP net income & EPS to non-GAAP

net income & EPS:

Related to cost of revenues:
Share-based compensation expenses 1,657 0.04 517 0.01 4,185 0.11 1,594 0.04
Depreciation of fair value uplift 67 0.00 - 0.00 67 0.00 - 0.00
                               
Total related to gross profit 1,724     0.05 517       0.01   4,252       0.11   1,594       0.04  
 
Related to selling, general and administrative expenses:
Share-based compensation expenses 6,071 0.16 1,482 0.04 17,751 0.47 6,188 0.17
Executive separation cost - - 808 0.02 577 0.02 1,360 0.04
Expenses related to CEO search 103 0.00 - - 103 0.00 - -
Debt administration expenses 320 0.01 - - 320 0.01 - -
Amortization of intangibles 179 0.00 - - 408 0.01 - -
Business combination expenses 120 0.00 - - 1,630 0.04 - -
        -                        
Total related to selling, general and administrative expenses 6,793     0.18 2,290       0.06   20,789       0.55   7,548       0.21  
 
Related to other incomes and other expenses:
(Income) expense related to flooding - - (900 ) (0.02 ) - - (36 ) (0.00 )
Loss (gain) on foreign exchange - - (3,183 ) (0.09 ) (1,713 ) (0.05 ) 2,296 0.06
Amortization of debt issuance costs 283 0.01 184 0.00 1,627 0.04 542 0.01
                               
Total related to other incomes and other expenses 283     0.01 (3,899 )     (0.11 ) (86 )     (0.00 ) 2,802       0.08  
 
Related to income tax expense                                
Income tax expense -     0.00 1,119       0.03   -       0.00   1,119       0.03  
 
Total related to net income & EPS 8,800     0.23 27       0.00   24,955       0.66   13,063       0.36  
 
Non-GAAP measures 30,456     0.80 20,849       0.56   94,669       2.50   55,291       1.50  
 
Shares used in computing diluted net income per share
GAAP diluted shares 37,872 37,089 37,750 36,743
Non-GAAP diluted shares 37,872 37,089 37,750 36,743
 

 

   

FABRINET

GUIDANCE FOR QUARTER ENDING JUNE 30, 2017

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 
Diluted
EPS
GAAP net income per diluted share: $0.65 to $0.67
Related to cost of revenues:
Share-based compensation expenses 0.05
Total related to cost of revenues 0.05
 
Related to selling, general and administrative expenses:
Share-based compensation expenses 0.10
Expenses related to CEO search 0.01
Total related to selling, general and administrative expenses 0.11
 
Related to other incomes and other expenses:
Amortization of debt issuance costs 0.01
 
Total related to net income & EPS 0.17
Non-GAAP net income per diluted share $0.82 to $0.84
 

Investor Contact:
Fabrinet
Garo Toomajanian
ir@fabrinet.com

Source: Fabrinet

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