Fabrinet
Aug 21, 2017

Fabrinet Announces Fourth Quarter and Fiscal-Year 2017 Financial Results

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 its fourth quarter and fiscal year ended June 30, 2017.

Tom Mitchell, Chief Executive Officer of Fabrinet, said, "Our strong fourth quarter performance, with revenue and net income per diluted share that exceeded our guidance ranges, represented an excellent finish to a record year for Fabrinet. The fourth quarter was our 12th consecutive quarter of year-over-year revenue growth, at 34%. This performance was driven by a combination of growth from both existing customers and new customer programs.

"In addition to delivering a strong financial performance, fiscal year 2017 was also significant from a strategic perspective. We substantially increased our manufacturing capacity and further developed our new product introduction capabilities, especially outside the optical communications market, positioning us to generate strong returns from a diversifying customer base. With our expanded capacity and a robust pipeline of opportunities, we are optimistic that our success in fiscal year 2017 will extend into fiscal year 2018."

Fourth Quarter Fiscal-Year 2017 Financial Highlights

GAAP Results

Non-GAAP Results

Fiscal-Year 2017 Financial Highlights

GAAP Results

Non-GAAP Results

Business Outlook

Based on information available as of August 21, 2017, Fabrinet is issuing guidance for the first quarter of fiscal year 2018 ending September 29, 2017, as follows:

Share Repurchase Program Authorized

Fabrinet also announced that its Board of Directors has approved a share repurchase program to permit the Company to repurchase up to $30.0 million worth of its issued and outstanding ordinary shares in the open market in accordance with applicable rules and regulations, at such time and such prices as management may decide.

The repurchased shares will be held as treasury stock.

Conference Call Information

   
What: Fabrinet Fourth Quarter and Fiscal-Year 2017 Financial Results Conference Call
When: Monday, August 21, 2017
Time: 5:00 p.m. ET
Live Call: (888) 357-3694, domestic
(253) 237-1137, international
Passcode: 59923512
Replay: (855) 859-2056, domestic
(404) 537-3406, international
Passcode: 59923512
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, automotive components, medical devices, 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 have a robust pipeline and will extend our success into fiscal year 2018, statements regarding our share repurchase program and the factors that will impact the amount and timing of purchases, if any, thereunder, and 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 2018. 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 May 9, 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, depreciation of fair value uplift, costs resulting from a non-recurring warranty charge, executive separation costs, expenses related to our CEO search, debt administration expenses, amortization of intangibles, business combination expenses, income related to flooding, gain or loss on foreign currency contracts, amortization of debt issuance costs and non-recurring income tax expense. 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
CONSOLIDATED BALANCE SHEETS

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

June 30,
2017

June 24,
2016

Assets
Current assets
Cash and cash equivalents $ 133,825 $ 142,804
Marketable securities 151,450 141,709
Trade accounts receivable, net 264,349 196,145
Inventory, net 238,665 181,499
Deferred tax assets 1,358
Prepaid expenses 6,306 3,114
Other current assets   4,159   6,662
Total current assets   798,754   673,291
Non-current assets
Restricted cash in connection with business acquisition 3,312
Property, plant and equipment, net 216,881 178,410
Intangibles, net 5,840 499
Goodwill 3,806
Deferred tax assets 2,905 1,806
Deferred debt issuance costs on revolving loan and other non-current assets   1,577   1,851
Total non-current assets   234,321   182,566
Total Assets $ 1,033,075 $ 855,857
Liabilities and Shareholders' Equity
Current liabilities
Bank borrowings, net of unamortized debt issuance costs $ 48,402 $ 24,307
Trade accounts payable 215,262 172,052
Fixed assets payable 8,141 20,628
Capital lease liability, current portion 344
Income tax payable 1,976 2,010
Accrued payroll, bonus and related expenses 13,852 12,300
Accrued expenses 9,227 8,072
Other payables 14,068   16,356
Total current liabilities 311,272 255,725
Non-current liabilities
Long-term loan from bank, net of unamortized debt issuance costs 22,701 36,100
Deferred tax liability 1,981 854
Capital lease liability, non-current portion 1,024
Deferred liability in connection with business acquisition 3,312
Severance liabilities 8,488 6,684
Other non-current liabilities 2,723 2,075
Total non-current liabilities 40,229 45,713
Total Liabilities   351,501 301,438
Commitments and contingencies (Note 19)
Shareholders' equity
Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and
outstanding as of June 30, 2017 and June 24, 2016)

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 37,340,496 shares a
36,156,446 shares issued and outstanding as of June 30, 2017 and June 24, 2016, respectively) 373 362
Additional paid-in capital 133,293 102,325
Accumulated other comprehensive (loss) income (348) 591
Retained earnings 548,256 451,141
Total Shareholders' Equity 681,574 554,419
Total Liabilities and Shareholders' Equity $ 1,033,075 $ 855,857
 
FABRINET
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
                 
Three Months Ended Twelve Months Ended

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

June 30,
2017

June 24,
2016

June 30,
2017

June 24,
2016

 
Revenues $ 370,454 $ 276,388 $ 1,420,490 $ 976,747
Cost of revenues (325,694) (242,546) (1,249,030) (857,224)
Gross profit 44,760 33,842 171,460 119,523
Selling, general and administrative expenses (15,057) (11,839) (65,626) (49,753)
Other income relating to flooding - - - 36
Operating income 29,703 22,003 105,834 69,806
Interest income 507 425 1,977 1,535
Interest expense (804) (413) (3,321) (1,569)
Foreign exchange loss, net (1,042) (670) (1,142) (1,916)
Other income 112 110 509 376
Income before income taxes 28,476 21,455 103,857 68,232
Income tax expense (1,075) (1,786) (6,742) (6,335)
Net income 27,401 19,669 97,115 61,897
Other comprehensive income (loss), net of tax adjustment 645 (156) (939) 635
Net comprehensive income $ 28,046 $ 19,513 $ 96,176 $ 62,532
 
Earnings per share
Basic $ 0.73 $ 0.55 $ 2.63 $ 1.73
Diluted $ 0.72 $ 0.53 $ 2.57 $ 1.68
Weighted average number of ordinary shares outstanding (thousands of shares)
Basic 37,334 36,075 36,927 35,858
Diluted 38,118 37,259 37,852 36,872
 

FABRINET
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                 

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

Ordinary Share

Additional
Paid-in

Accumulated
Other
Comprehensive

Retained
  Shares   Amount Capital Income (Loss) Earnings Total
 
Balances at June 27, 2014 35,152,772 352 80,882 345,602 426,836
Net income 43,642 43,642
Other comprehensive loss (44) (44)
Share-based compensation expense 8,027 8,027
Issuance of ordinary shares 284,882 2 833 835
Tax withholdings related to net share settlement of restricted share units (352) (352)
 
Balances at June 26, 2015 35,437,654 354 89,390 (44) 389,244 478,944
Net income 61,897 61,897
Other comprehensive income 635 635
Share-based compensation expense 9,927

 

 

9,927
Issuance of ordinary shares 718,792 8 5,471 5,479
Tax withholdings related to net share settlement of restricted share units — — (2,463) (2,463)
 
Balances at June 24, 2016 36,156,446 362 102,325 591 451,141 554,419
Net income 97,115 97,115
Other comprehensive loss (939) (939)
Share-based compensation expense

 

26,507

 

26,507
Issuance of ordinary shares 1,184,050 11 5,886 5,897
Tax withholdings related to net share settlement of restricted share units (1,425) (1,425)
 
Balances at June 30, 2017 37,340,496 373 133,293 (348) 548,256 681,574
 

FABRINET
CONSOLIDATED STATEMENTS OF CASH FLOWS

 
(in thousands of U. S. dollars)    

June 30,
2017

   

June 24,
2016

 
Cash flows from operating activities
Net income for the year $ 97,115 $ 61,897
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 23,793 17,357
Gain on disposal of property, plant and equipment (30) (73)
Loss from sales and maturities of marketable securities 822 194
Amortization of investment (discount) premium (193) 798
Amortization of deferred debt issuance costs 1,396 758
Income related to flooding (828)
Proceeds from insurers in settlement of claim related to flood damage 272
(Reversal of) allowance for doubtful accounts (1) (17)
Unrealized loss on exchange rate and fair value of derivative 1,884 1,905
Share-based compensation 26,507 9,927
Deferred income tax 754 864
Other non-cash expenses 2,173 1,744
Inventory obsolescence (reversal of) 42 (521)
Loss from written-off inventory due to flood loss 233
Changes in operating assets and liabilities
Trade accounts receivable (64,142) (61,013)
Inventory (53,802) (50,598)
Other current assets and non-current assets (2,231) (5,901)
Trade accounts payable 38,293 56,308
Income tax payable (67) 573
Other current liabilities and non-current liabilities   (1,379)   13,209
Net cash provided by operating activities   70,934   47,088
 
Cash flows from investing activities
Purchase of marketable securities (122,778) (108,341)
Proceeds from sales of marketable securities 39,578 41,836
Proceeds from maturities of marketable securities 72,361 67,113
Payments in connection with business acquisition, net of cash acquired (9,917)
Purchase of property, plant and equipment (68,262) (40,616)
Gain on cash settlement of hedged forward contracts 34
Proceeds from disposal of property, plant and equipment 230 194
Purchase of intangibles (1,768) (379)
Proceeds from insurers in settlement of claims related to flood damage     556
Net cash used in investing activities   (90,556)   (39,603)
 
Cash flows from financing activities
Payment of debt issuance costs (654)
Proceeds of short-term loan from bank 27,500 18,000
Repayment of short-term loan from bank (157) (41,500)
Proceeds of long-term loan from bank 50,000
Repayment of long-term loan from bank (18,100) (6,000)
Proceeds from issuance of ordinary shares under employee share option plan 5,890 5,479
Repayment of capital lease liability (276)
Withholding tax related to net share settlement of restricted share units   (1,425)   (2,463)
Net cash provided by financing activities   13,432   22,862
 

Net (decrease) increase in cash, cash equivalents and restricted cash

$ (6,190) $ 30,347
                             
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 (6,190) 30,347
Effect of exchange rate on cash, cash equivalents and restricted cash   523   (521)
Cash, cash equivalents and restricted cash at end of period $ 137,137 $ 142,804
       

FABRINET
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

 
(in thousands of U. S. dollars)

June 30,
2017

 

June 24,
2016

 
 
Supplemental disclosures
Cash paid for
Interest $ 1,924 $ 1,091
Taxes $ 5,218 $ 5,473
Cash received for interest $ 1,753 $ 1,049
 
Non-cash investing and financing activities
Construction, software related and equipment related payables $ 8,434 $ 20,628

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

 
(in thousands of U. S. dollars)    

June 30,
2017

   

June 24,
2016

 
Cash and cash equivalents

$

133,825

$ 142,804
Restricted cash in connection with business acquisition (non-current assets)  

3,312

 

Cash, cash equivalents and restricted cash

$

137,137

$ 142,804
   

FABRINET
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

      Three Months Ended     Twelve Months Ended
  June 30, 2017     June 24, 2016 June 30, 2017     June 24, 2016

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

 

Net
income

   

Diluted
EPS

Net
income

   

Diluted
EPS

Net
income

 

 

Diluted
EPS

Net
income

   

Diluted
EPS

           
GAAP measures 27,401 0.72 19,669 0.53 97,115 2.57 61,897 1.68
Items reconciling GAAP net (loss) income & EPS to non-GAAP net income & EPS:
Related to cost of revenues:
Share-based compensation expenses 1,133 0.03 385 0.01 5,318 0.14 1,979 0.05
Depreciation of fair value uplift 80 0.00 - - 147 0.00 - -
Cost resulting from a non-recurring warranty charge -     - 1,000     0.03 -     - 1,000     0.03
Total related to gross profit 1,213     0.03 1,385     0.04 5,465     0.14 2,979     0.08
 
Related to selling, general and administrative expenses:
Share-based compensation expenses 3,438 0.09 1,760 0.05 21,190 0.56 7,948 0.22
Executive separation costs - - - - 577 0.02 1,360 0.04
Expenses related to CEO search 100 0.00 - - 203 0.01 - -
Debt administration expenses - - - - 320 0.01 - -
Amortization of intangibles 199 0.01 - - 607 0.02 - -
Business combination expenses 160     0.00 -     - 1,790     0.05 -     -
Total related to selling, general and administrative expenses 3,897     0.10 1,760     0.05 24,687     0.65 9,308     0.25
 
Related to other incomes and other expenses:
Income related to flooding - - - - - - (36) (0.00)
Loss (gain) on foreign currency contracts - - (581) (0.02) (1,713) (0.05) 1,715 0.05
Amortization of debt issuance costs 257     0.01 203     0.01 1,884     0.05 745     0.02
Total related to other incomes and other expenses 257     0.01 (378)     (0.01) 171     0.00 2,424     0.07
 
Related to income tax expense
Non-recurring income tax expense -     - -     - -     - 1,119     -
Total related to income tax expense -     - -     - -     - 1,119     0.03
 
Total related to net income & EPS 5,367     0.14 2,767     0.07 30,323     0.80 15,830     0.43
 
Non-GAAP measures 32,768     0.86 22,436     0.60 127,438     3.37 77,727     2.11
 
Shares used in computing diluted net income per share
GAAP diluted shares 38,118 37,258 37,852 36,872
Non-GAAP diluted shares 38,118 37,258 37,852 36,872
 

FABRINET
GUIDANCE FOR QUARTER ENDING SEPTEMBER 29, 2017
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 
Diluted
EPS
GAAP net income per diluted share: $0.60 to $0.62
Related to cost of revenues:
Share-based compensation expenses 0.04
Total related to gross profit 0.04
 
Related to selling, general and administrative expenses:
Share-based compensation expenses 0.12
Amortization of intangibles 0.01
Total related to selling, general and administrative expenses 0.13
 
Related to other incomes and other expenses:
Amortization of debt issuance costs 0.01
 
Total related to net income & EPS 0.18
Non-GAAP net income per diluted share $0.78 to $0.80

Investor Contact:
Fabrinet
Garo Toomajanian
ir@fabrinet.com

Source: Fabrinet

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