Fabrinet
Fabrinet (Form: 8-K, Received: 05/08/2017 16:27:01)

 

 

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)

May 8, 2017

 

 

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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02 Results of Operations and Financial Condition.

On May 8, 2017, Fabrinet issued a press release regarding its financial results for the fiscal quarter ended March 31, 2017. 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 May 8, 2017


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: May 8, 2017


EXHIBIT INDEX

 

Exhibit
No.

  

Description

99.1    Press release dated May 8, 2017

Exhibit 99.1

Fabrinet Announces Third Quarter Fiscal Year 2017

Financial Results

Revenue Exceeds High-End of Guidance Range

BANGKOK, Thailand – May  8, 2017 – 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

 

    Revenue for the third quarter of fiscal year 2017 was $366.8 million, an increase of 46% compared to revenue of $250.9 million for the comparable period in fiscal year 2016.

 

    GAAP net income for the third quarter of fiscal year 2017 was $21.7 million, compared to GAAP net income of $20.8 million in the third quarter of fiscal year 2016. GAAP net income for the third quarter of fiscal year 2017 included a foreign exchange loss of $3.7 million, or $0.10 per diluted share.

 

    GAAP net income per diluted share for the third quarter of fiscal year 2017 was $0.57, compared to GAAP net income per diluted share of $0.56 in the third quarter of fiscal year 2016.

Non-GAAP Results

 

    Non-GAAP net income in the third quarter of fiscal 2017 was $30.5 million, an increase of 46% compared to non-GAAP net income of $20.8 million in the third quarter of fiscal year 2016. Non-GAAP net income for the third quarter of fiscal year 2017 included a foreign exchange loss of $3.7 million, or $0.10 per diluted share.

 

    Non-GAAP net income per diluted share in the third quarter of fiscal 2017 was $0.80, compared to non-GAAP net income per diluted share of $0.56 in the third quarter of fiscal year 2016.

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:

 

    Fabrinet expects revenue for the fourth quarter to be in the range of $361 million to $365 million.

 

    GAAP net income per diluted share is expected to be in the range of $0.65 to $0.67, based on approximately 38.2 million fully diluted shares outstanding.

 

    Non-GAAP net income per diluted share is expected to be in the range of $0.82 to $0.84, based on approximately 38.2 million fully diluted shares outstanding.

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

 

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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

 

2


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.

SOURCE: Fabrinet

Investor Contact:

Garo Toomajanian

ir@fabrinet.com

 

3


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  
  

 

 

   

 

 

 

 

4


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  

 

5


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  

 

6


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  
  

 

 

    

 

 

 

 

7


FABRINET

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

     Three Months Ended     Nine Months Ended  
     March 31,
2017
     March 31,
2017
     March 25,
2016
    March 25,
2016
    March 31,
2017
    March 31,
2017
    March 25,
2016
    March 25,
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  

 

8


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  
  

 

 

 

 

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