Fabrinet
Fabrinet (Form: 8-K, Received: 11/06/2017 16:29:32)

 

 

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) November 6, 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 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

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 November 6, 2017, Fabrinet issued a press release regarding its financial results for the fiscal quarter ended September 29, 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 November 6, 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: November 6, 2017

Exhibit 99.1

Fabrinet Announces First Quarter Fiscal Year 2018 Financial Results

BANGKOK, Thailand – November  6, 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 its first quarter ended September 29, 2017.

Tom Mitchell, Executive Chairman of Fabrinet, said, “Our first quarter revenue was within our guidance range. Growth from datacom and non-optical communications products were healthy compared to a year ago, with new programs and advanced technologies including silicon photonics and QSFP28 as notable contributors. However, tempered demand for telecom products resulted in a flat performance in that category compared to a year ago.”

“We believe our strategy to drive our growth by attracting new customers and winning new programs from existing customers, while supporting increased production of existing programs continues to be successful,” added Mr. Mitchell. “We are optimistic that by continuing to execute on this strategy we can continue to drive profitable growth as we look ahead.”

First Quarter Fiscal Year 2018 Financial Highlights

GAAP Results

 

    Revenue for the first quarter of fiscal year 2018, a 13-week quarter, was $357.3 million, an increase of 8% compared to revenue of $332.0 for the comparable period in fiscal year 2017, a 14-week quarter.

 

    GAAP net income for the first quarter of fiscal year 2018 was $21.0 million, compared to GAAP net income of $22.8 million for the first quarter of fiscal year 2017. GAAP net income for the first quarter of fiscal year 2018 included a foreign exchange loss of $1.9 million, or $0.05 per diluted share.

 

    GAAP net income per diluted share for the first quarter of fiscal year 2018 was $0.55, compared to GAAP net income per diluted share of $0.61 for the first quarter of fiscal year 2017.

Non-GAAP Results

 

    Non-GAAP net income for the first quarter of fiscal year 2018 was $28.6 million, compared to non-GAAP net income of $29.7 million for the same period a year ago.

 

    Non-GAAP net income per diluted share for the first quarter of fiscal year 2018 was $0.75, a decrease from non-GAAP net income per diluted share of $0.80 for the same period a year ago. Non-GAAP net income for the first quarter of fiscal year 2018 included a foreign exchange loss of $1.9 million, or $0.05 per diluted share.

Business Outlook

Based on information available as of November 6, 2017, Fabrinet is issuing guidance for its second fiscal quarter ending December 29, 2017, as follows:

 

    Fabrinet expects second quarter revenue to be in the range of $328 million to $332 million.

 

    GAAP net income per diluted share is expected to be in the range of $0.43 to $0.45, 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 $0.69 to $0.71, based on approximately 38.2 million fully diluted shares outstanding.


Conference Call Information

 

What:    Fabrinet First Quarter Fiscal Year 2018 Financial Results Conference Call
When:    Monday, November 6, 2017
Time:    5:00 p.m. ET
Live Call:    (888) 357-3694, domestic
   (253) 237-1137, international
   Passcode: 9499299
Replay:    (855) 859-2056, domestic
   (404) 537-3406, international
   Passcode: 9499299
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: (1) statements regarding our ability to continue to drive profitable growth; and (2) all of the statements under the “Business Outlook” section regarding our expected revenue and GAAP and non-GAAP net income per share for the second 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 Annual Report on Form 10-K, filed on August 23, 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

We refer to the non-GAAP financial measures cited above in making operating decisions because they provide meaningful supplemental information regarding our ongoing operational performance. Non-GAAP net income excludes: share-based compensation expenses; depreciation of fair value uplift; executive separation costs; amortization of intangibles; business combination expenses; gain on foreign currency contracts; amortization of debt issuance costs; and restructuring charges. 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


FABRINET

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

(in thousands of U.S. dollars, except share data)    September 29,
2017
     June 30,
2017
 

Assets

     

Current assets

     

Cash and cash equivalents

   $ 111,631      $ 133,825  

Marketable securities

     151,635        151,450  

Trade accounts receivable, net

     275,418        264,349  

Inventory, net

     255,104        238,665  

Prepaid expenses

     7,894        6,306  

Other current assets

     7,667        4,159  
  

 

 

    

 

 

 

Total current assets

     809,349        798,754  
  

 

 

    

 

 

 

Non-current assets

     

Restricted cash in connection with business acquisition

     3,414        3,312  

Property, plant and equipment, net

     217,985        216,881  

Intangibles, net

     5,657        5,840  

Goodwill

     3,923        3,806  

Deferred tax assets

     2,730        2,905  

Deferred debt issuance costs on revolving loan and other non-current assets

     1,497        1,577  
  

 

 

    

 

 

 

Total non-current assets

     235,206        234,321  
  

 

 

    

 

 

 

Total Assets

   $ 1,044,555      $ 1,033,075  
  

 

 

    

 

 

 

Liabilities and Shareholders’ Equity

     

Current liabilities

     

Bank borrowings, net of unamortized debt issuance costs

   $ 47,421      $ 48,402  

Trade accounts payable

     203,685        215,262  

Fixed assets payable

     4,658        8,141  

Capital lease liability, current portion

     343        344  

Income tax payable

     2,469        1,976  

Accrued payroll, bonus and related expenses

     14,538        13,852  

Accrued expenses

     14,858        9,227  

Other payables

     12,042        14,068  
  

 

 

    

 

 

 

Total current liabilities

     300,014        311,272  
  

 

 

    

 

 

 

Non-current liabilities

     

Long-term loan from bank, non-current portion, net of unamortized debt issuance costs

     19,338        22,701  

Deferred tax liability

     1,510        1,981  

Capital lease liability, non-current portion

     967        1,024  

Deferred liability in connection with business acquisition

     3,414        3,312  

Severance liabilities

     9,058        8,488  

Other non-current liabilities

     2,791        2,723  
  

 

 

    

 

 

 

Total non-current liabilities

     37,078        40,229  
  

 

 

    

 

 

 

Total Liabilities

     337,092        351,501  
  

 

 

    

 

 

 

Commitments and contingencies (Note 16)

     

Shareholders’ equity

     

Preferred shares (5,000,000 shares authorized, $0.01 par value; no outstanding as of September 29, 2017 and June 30, 2017)

     —          —    

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 37,572,302 shares and 37,340,496 shares issued and outstanding as of September 29, 2017 and June 30, 2017, respectively)

     376        373  

Additional paid-in capital

     137,593        133,293  

Accumulated other comprehensive income (loss)

     206        (348

Retained earnings

     569,288        548,256  
  

 

 

    

 

 

 

Total Shareholders’ Equity

     707,463        681,574  
  

 

 

    

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 1,044,555      $ 1,033,075  
  

 

 

    

 

 

 


FABRINET

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

 

     Three Months Ended  
(in thousands of U.S. dollars, except per share amounts)    September 29,
2017
    September 30,
2016
 

Revenues

   $ 357,313     $ 332,043  

Cost of revenues

     (316,981     (292,435
  

 

 

   

 

 

 

Gross profit

     40,332       39,608  

Selling, general and administrative expenses

     (15,678     (15,832
  

 

 

   

 

 

 

Operating income

     24,654       23,776  

Interest income

     809       437  

Interest expense

     (853     (1,322

Foreign exchange (loss) gain, net

     (1,934     1,657  

Other income

     97       143  
  

 

 

   

 

 

 

Income before income taxes

     22,773       24,691  

Income tax expense

     (1,740     (1,925
  

 

 

   

 

 

 

Net income

     21,033       22,766  
  

 

 

   

 

 

 

Other comprehensive income, net of tax:

    

Change in net unrealized gains (loss) on marketable securities

     29       (187

Change in net unrealized loss on derivative instruments

     (1     (158

Change in foreign currency translation adjustment

     526       741  
  

 

 

   

 

 

 

Total other comprehensive income, net of tax

     554       396  
  

 

 

   

 

 

 

Net comprehensive income

   $ 21,587     $ 23,162  
  

 

 

   

 

 

 

Earnings per share

    

Basic

   $ 0.56     $ 0.63  

Diluted

   $ 0.55     $ 0.61  

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

 

Basic

     37,447       36,404  

Diluted

     38,163       37,330  


FABRINET

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     Three Months Ended  
(in thousands of U.S. dollars)    September 29,
2017
    September 30,
2016
 

Cash flows from operating activities

    

Net income for the period

   $ 21,033     $ 22,766  

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

    

Depreciation and amortization

     7,419       5,113  

Gain on disposal of property, plant and equipment

     (131     (40

Loss from sales and maturities of available-for-sale securities

     353       100  

Amortization of investment (premium) discount

     (216     166  

Amortization of deferred debt issuance costs

     150       908  

(Reversal of) allowance for doubtful accounts

     (1     3  

Unrealized loss (gain) on exchange rate and fair value of derivative instruments

     2,026       (1,913

Share-based compensation

     6,920       5,611  

Deferred income tax

     (307     311  

Other non-cash expenses

     629       453  

Reversal of inventory obsolescence

     (292     (62

Changes in operating assets and liabilities

    

Trade accounts receivable

     (11,122     (11,876

Inventory

     (16,032     (21,290

Other current assets and non-current assets

     (7,263     3,285  

Trade accounts payable

     (11,323     3,103  

Income tax payable

     493       1,035  

Other current liabilities and non-current liabilities

     4,610       (8,675
  

 

 

   

 

 

 

Net cash used in operating activities

     (3,054     (1,002
  

 

 

   

 

 

 

Cash flows from investing activities

    

Purchase of marketable securities

     (26,969     (32,737

Proceeds from sales of marketable securities

     11,730       13,061  

Proceeds from maturities of marketable securities

     14,947       13,230  

Payments in connection with business acquisition, net of cash acquired

     —         (9,664

Purchase of property, plant and equipment

     (11,203     (27,090

Purchase of intangibles

     (702     (178

Proceeds from disposal of property, plant and equipment

     142       107  
  

 

 

   

 

 

 

Net cash used in investing activities

     (12,055     (43,271
  

 

 

   

 

 

 

Cash flows from financing activities

    

Proceeds from revolving loans

     —         13,500  

Repayment of short-term loans from bank

     (992     —    

Repayment of long-term loans from bank

     (3,400     (4,900

Repayment of capital lease liability

     (95     —    

Proceeds from issuance of ordinary shares under employee share option plans

     931       2,708  

Withholding tax related to net share settlement of restricted share units

     (3,550     (867
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (7,106     10,441  
  

 

 

   

 

 

 

Net decrease in cash, cash equivalents and restricted cash

     (22,215     (33,832
  

 

 

   

 

 

 

Movement in cash, cash equivalents and restricted cash

    

Cash, cash equivalents and restricted cash at beginning of period

     137,137       142,804  

Decrease in cash, cash equivalents and restricted cash

     (22,215     (33,832

Effect of exchange rate on cash, cash equivalents and restricted cash

     123       267  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at end of period

   $ 115,045     $ 109,239  
  

 

 

   

 

 

 

Non-cash investing and financing activities

    

Construction, software related and equipment-related payables

   $ 4,658     $ 19,694  


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
September 29,
2017
     As of
September 30,
2016
 

Cash and cash equivalents

   $ 111,631      $ 105,860  

Restricted cash in connection with business acquisition (non-current assets)

     3,414        3,379  
  

 

 

    

 

 

 

Cash, cash equivalents and restricted cash

   $ 115,045      $ 109,239  
  

 

 

    

 

 

 


FABRINET

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

     Three Months Ended  
     September 29, 2017      September 30, 2016  
(in thousands of U.S. dollars, except per share data)    Net
income
     Diluted
EPS
     Net
income
    Diluted
EPS
 

GAAP measures

   $ 21,033      $ 0.55      $ 22,766     $ 0.61  

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

          

Related to cost of revenues:

          

Share-based compensation expenses

     1,901        0.05        1,014       0.03  

Depreciation of fair value uplift

     67        0.00        —         —    
  

 

 

    

 

 

    

 

 

   

 

 

 

Total related to gross profit

     1,968        0.05        1,014       0.03  
  

 

 

    

 

 

    

 

 

   

 

 

 

Related to selling, general and administrative expenses:

          

Share-based compensation expenses

     5,019        0.13        4,598       0.12  

Executive separation costs

     —          —          577       0.02  

Amortization of intangibles

     169        0.00        —         —    

Business combination expenses

     106        0.00        1,411       0.04  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total related to selling, general and administrative expenses

     5,294        0.14        6,586       0.18  
  

 

 

    

 

 

    

 

 

   

 

 

 

Related to other incomes and other expenses:

          

Gain on foreign currency contracts

     —          —          (1,713     (0.05

Amortization of debt issuance costs

     273        0.01        1,063       0.03  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total related to other incomes and other expenses

     273        0.01        (650     (0.02
  

 

 

    

 

 

    

 

 

   

 

 

 

Total related to net income & EPS

     7,535        0.20        6,950       0.19  
  

 

 

    

 

 

    

 

 

   

 

 

 

Non-GAAP measures

   $ 28,568      $ 0.75      $ 29,716     $ 0.80  
  

 

 

    

 

 

    

 

 

   

 

 

 

Shares used in computing diluted net income per share

          

GAAP diluted shares

        38,163          37,330  

Non-GAAP diluted shares

        38,163          37,330  


FABRINET

GUIDANCE FOR QUARTER ENDING DECEMBER 29, 2017

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

     Diluted
     EPS

GAAP net income per diluted share:

   $0.43 to $0.45

Related to cost of revenues:

  

Share-based compensation expenses

   0.05
  

 

Total related to gross profit

   0.05
  

 

Related to selling, general and administrative expenses:

  

Share-based compensation expenses

   0.14

Restructuring charges

   0.05

Business combination expenses

   0.01
  

 

Total related to selling, general and administrative expenses

   0.20
  

 

Related to other incomes and other expenses:

  

Amortization of debt issuance costs

   0.01
  

 

Total related to net income & EPS

   0.26
  

 

Non-GAAP net income per diluted share

   $0.69 to $0.71