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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-Q
____________________________
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended December 24, 2021
OR
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from__________to__________
Commission File Number: 001-34775
____________________________
FABRINET
(Exact name of registrant as specified in its charter)
____________________________
Cayman Islands
(State or other jurisdiction of
incorporation or organization)
98-1228572
(I.R.S. Employer
Identification No.)

c/o Intertrust Corporate Services
One Nexus Way, Camana Bay
Grand Cayman
Cayman Islands
(Address of principal executive offices)

KY1-9005
(Zip Code)
+66 2-524-9600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Ordinary Shares, $0.01 par valueFNNew York Stock Exchange
____________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  x    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer
Non-accelerated filer
Smaller reporting company
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.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    x  No
As of January 21, 2022, the registrant had 36,995,336 ordinary shares, $0.01 par value, outstanding.

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FABRINET
FORM 10-Q
QUARTER ENDED DECEMBER 24, 2021
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Page No.

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RISK FACTORS SUMMARY

You should carefully consider the information set forth below under the heading “Risk Factors” in Part II, Item 1A before deciding whether to invest in our securities. Below is a summary of the principal risks associated with an investment in our securities.

Our sales depend on a small number of customers. A reduction in orders from any of these customers, the loss of any of these customers, or a customer exerting significant pricing and margin pressures on us could harm our business, financial condition and operating results.

Consolidation in the markets we serve could harm our business, financial condition and operating results.

If the optical communications market does not expand as we expect, our business may not grow as fast as we expect.

Our quarterly revenues, gross profit margins and operating results have fluctuated significantly and may continue to do so in the future, which may cause the market price of our ordinary shares to decline or be volatile.

If we are unable to continue diversifying our precision optical and electro-mechanical manufacturing services across other markets within the optics industry, or if these markets do not grow as fast as we expect, our business may not grow as fast as we expect.

If we are unable to compete successfully against our current and future competitors, our business, financial condition and operating results could be harmed.

Cancellations, delays or reductions of customer orders and the relatively short-term nature of the commitments of our customers could harm our business, financial condition and operating results.

Our exposure to financially troubled customers or suppliers could harm our business, financial condition and operating results.

We purchase some of the critical materials used in certain of our products from a single source or a limited number of suppliers. Supply shortages have in the past, and could in the future, impair the quality, reduce the availability or increase the cost of materials, which could harm our revenues, profitability and customer relations.

Managing our inventory is complex and may require write-downs due to excess or obsolete inventory, which could cause our operating results to decrease significantly in a given fiscal period.

If we fail to adequately expand our manufacturing capacity, we will not be able to grow our business, which would harm our business, financial condition and operating results. Conversely, if we expand too much or too rapidly, we may experience excess capacity, which would harm our business, financial condition and operating results.

We may experience manufacturing yields that are lower than expected, potentially resulting in increased costs, which could harm our business, operating results and customer relations.

If the products that we manufacture contain defects, we could incur significant correction costs, demand for our services may decline and we may be exposed to product liability and product warranty claims, which could harm our business, financial condition, operating results and customer relations.

If we fail to attract additional skilled employees or retain key personnel, our business, financial condition and operating results could suffer.

We conduct operations in a number of countries, which creates logistical and communications challenges for us and exposes us to other risks and challenges that could harm our business, financial condition and operating results.

We are subject to governmental export and import controls in several jurisdictions that subject us to a variety of risks, including liability, impairment of our ability to compete in international markets, and decreased sales and customer orders.

We are subject to risks related to the ongoing U.S.-China trade dispute, including increased tariffs on materials that we use in manufacturing, which could adversely affect our business, financial condition and operating results.

Fluctuations in foreign currency exchange rates and changes in governmental policies regarding foreign currencies could increase our operating costs, which would adversely affect our operating results.

Political unrest and demonstrations, as well as changes in the political, social, business or economic conditions in Thailand, could harm our business, financial condition and operating results.

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We expect to continue to invest in our manufacturing operations in the People's Republic of China ("PRC"), which will continue to expose us to risks inherent in doing business in the PRC, any of which risks could harm our business, financial condition and operating results.

Natural disasters, epidemics (including COVID-19), acts of terrorism and other political and economic developments could harm our business, financial condition and operating results.

The loan agreements for our long-term debt obligations and other credit facilities contain financial ratio covenants that may impair our ability to conduct our business.

The phase-out of the London Interbank Offered Rate ("LIBOR") could affect interest rates under our existing credit facility agreement, as well as our ability to seek future debt financing.

Unfavorable worldwide economic conditions may negatively affect our business, financial condition and operating results.

We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our shareholders.

Our investment portfolio may become impaired by deterioration of the capital markets.

We are not fully insured against all potential losses. Natural disasters or other catastrophes could adversely affect our business, financial condition and operating results.

There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with U.S. GAAP. Any changes in estimates, judgments and assumptions could have a material adverse effect on our business, financial condition and operating results.

Our business and operations would be adversely impacted in the event of a failure of our information technology infrastructure and/or cyber security attacks.

Intellectual property infringement claims against our customers or us could harm our business, financial condition and operating results.

Any failure to protect our customers’ intellectual property that we use in the products we manufacture for them could harm our customer relationships and subject us to liability.

We are subject to the risk of increased income taxes, which could harm our business, financial condition and operating results.

We have incurred and will continue to incur significant increased costs as a result of operating as a public company, and our management will be required to continue to devote substantial time to various compliance initiatives.

Failure to comply with applicable environmental laws and regulations could have a material adverse effect on our business, financial condition and operating results.

If we are unable to meet regulatory quality standards applicable to our manufacturing and quality processes for the products we manufacture, our business, financial condition and operating results could be harmed.

Our share price may be volatile due to fluctuations in our operating results and other factors, including the activities and operating results of our customers or competitors, any of which could cause our share price to decline.

If securities or industry analysts do not publish research or if they publish misleading or unfavorable research about our business, the market price and trading volume of our ordinary shares could decline.

We may become a passive foreign investment company, which could result in adverse U.S. tax consequences to U.S. investors.

Our business and share price could be negatively affected as a result of activist shareholders.

Certain provisions in our constitutional documents may discourage our acquisition by a third party, which could limit your opportunity to sell shares at a premium.

Our shareholders may face difficulties in protecting their interests because we are incorporated under Cayman Islands law.

Certain judgments obtained against us by our shareholders may not be enforceable.

Energy price volatility may negatively impact our business, financial condition and operating results.
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FABRINET
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands of U.S. dollars, except share data and par value)December 24,
2021
June 25,
2021
Assets
Current assets
Cash and cash equivalents$276,531 $302,969 
Short-term restricted cash157  
Short-term investments243,339 244,963 
Trade accounts receivable, net of allowance for doubtful accounts of $70 and $100, respectively
384,725 336,547 
Contract assets13,148 11,878 
Inventories484,873 422,133 
Prepaid expenses8,765 11,398 
Other current assets28,449 22,619 
Total current assets1,439,987 1,352,507 
Non-current assets
Long-term restricted cash157 154 
Property, plant and equipment, net290,683 241,129 
Intangibles, net3,878 4,371 
Operating right-of-use assets5,478 6,699 
Deferred tax assets10,025 9,428 
Other non-current assets587 1,834 
Total non-current assets310,808 263,615 
Total Assets$1,750,795 $1,616,122 
Liabilities and Shareholders’ Equity
Current liabilities
Long-term borrowings, current portion, net$12,156 $12,156 
Trade accounts payable391,176 346,555 
Fixed assets payable28,740 19,206 
Contract liabilities1,894 1,680 
Operating lease liabilities, current portion2,631 2,593 
Income tax payable2,200 3,612 
Accrued payroll, bonus and related expenses18,382 20,464 
Accrued expenses19,826 17,134 
Other payables23,032 20,958 
Total current liabilities500,037 444,358 
Non-current liabilities
Long-term borrowings, non-current portion, net21,279 27,358 
Deferred tax liability5,082 5,107 
Operating lease liability, non-current portion2,581 3,850 
Severance liabilities19,834 19,485 
Other non-current liabilities2,791 3,444 
Total non-current liabilities51,567 59,244 
Total Liabilities551,604 503,602 
Commitments and contingencies (Note 15)
Shareholders’ equity
Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of December 24, 2021 and June 25, 2021)
  
Ordinary shares (500,000,000 shares authorized, $0.01 par value; 39,008,996 shares and 38,749,045 shares issued at December 24, 2021 and June 25, 2021, respectively; and 36,987,138 shares and 36,765,456 shares outstanding at December 24, 2021 and June 25, 2021, respectively)
390 388 
Additional paid-in capital185,940 189,445 
Less: Treasury shares (2,021,858 shares and 1,983,589 shares as of December 24, 2021 and June 25, 2021 respectively)
(91,776)(87,343)
Accumulated other comprehensive income (loss)(5,189)(6,266)
Retained earnings1,109,826 1,016,296 
Total Shareholders’ Equity1,199,191 1,112,520 
Total Liabilities and Shareholders’ Equity$1,750,795 $1,616,122 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FABRINET
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)
Three Months Ended Six Months Ended
(in thousands of U.S. dollars, except per share data)December 24,
2021
December 25,
2020
December 24,
2021
December 25,
2020
Revenues$566,633 $453,827 $1,109,955 $890,466 
Cost of revenues(497,262)(400,806)(976,987)(786,965)
        Gross profit69,371 53,021 132,968 103,501 
Selling, general and administrative expenses(17,791)(17,156)(38,378)(34,019)
Expenses related to reduction in workforce(135) (135) 
Operating income51,445 35,865 94,455 69,482 
Interest income295 1,111 1,056 2,215 
Interest expense(238)(265)(274)(516)
Foreign exchange gain (loss), net(364)(533)1,408 (405)
Other income (expense), net(1,055)158 (1,315)279 
Income before income taxes50,083 36,336 95,330 71,055 
Income tax expense(1,204)(952)(1,800)(2,620)
Net income48,879 35,384 93,530 68,435 
Other comprehensive income (loss), net of tax:
       Change in net unrealized gain (loss) on available-for-sale securities(947)(42)(1,160)(367)
       Change in net unrealized gain (loss) on derivative instruments3,294 2,385 2,077 (823)
       Change in net retirement benefits plan – prior service cost126 50 324 223 
       Change in foreign currency translation adjustment (146)(164)457 
Total other comprehensive income (loss), net of tax2,473 2,247 1,077 (510)
Net comprehensive income (loss)$51,352 $37,631 $94,607 $67,925 
Earnings per share
       Basic$1.32 $0.96 $2.53 $1.86 
       Diluted$1.30 $0.94 $2.50 $1.83 
Weighted-average number of ordinary shares outstanding (thousands of shares)
       Basic37,017 36,936 36,947 36,877 
       Diluted37,552 37,551 37,440 37,467 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FABRINET
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)
For the Three Months Ended December 24, 2021
 Ordinary ShareAdditional
Paid-in
Capital
Treasury
Shares
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
(in thousands of U.S. dollars, except share data)SharesAmount
Balances at September 24, 202139,000,843 $390 $179,670 $(87,343)$(7,662)$1,060,947 $1,146,002 
Net income— — — — — 48,879 48,879 
Other comprehensive income (loss)— — — — 2,473 — 2,473 
Share-based compensation— — 6,686 — — — 6,686 
Issuance of ordinary shares8,153 — — — — —  
Repurchase of 38,269 shares held as treasury shares
— — — (4,433)— — (4,433)
Tax withholdings related to net share settlement of restricted share units— — (416)— — — (416)
Balances at December 24, 2021
39,008,996 $390 $185,940 $(91,776)$(5,189)$1,109,826 $1,199,191 
For the Six Months Ended December 24, 2021
 Ordinary ShareAdditional
Paid-in
Capital
Treasury
Shares
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
(in thousands of U.S. dollars, except share data)SharesAmount
Balances at June 25, 2021
38,749,045 $388 $189,445 $(87,343)$(6,266)$1,016,296 $1,112,520 
Net income— — — — — 93,530 93,530 
Other comprehensive income (loss)— — — — 1,077 — 1,077 
Share-based compensation— — 15,978 — — — 15,978 
Issuance of ordinary shares259,951 2 (2)— — —  
Repurchase of 38,269 shares held as treasury shares
— — — (4,433)— — (4,433)
Tax withholdings related to net share settlement of restricted share units— — (19,481)— — — (19,481)
Balances at December 24, 2021
39,008,996 $390 $185,940 $(91,776)$(5,189)$1,109,826 $1,199,191 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.






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FABRINET
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited) (Continued)
For the Three Months Ended December 25, 2020
 Ordinary ShareAdditional
Paid-in
Capital
Treasury
Shares
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
(in thousands of U.S. dollars, except share data)SharesAmount
Balances at September 25, 202038,680,659 $387 $171,715 $(68,501)$(3,904)$901,006 $1,000,703 
Net income— — — — — 35,384 35,384 
Other comprehensive income (loss)— — — — 2,247 — 2,247 
Share-based compensation— — 5,851 — — — 5,851 
Issuance of ordinary shares17,409 — — — — —  
Repurchase of 101,549 shares held as treasury shares
— — — (7,074)— — (7,074)
Tax withholdings related to net share settlement of restricted share units— — (441)— — — (441)
Balances at December 25, 2020
38,698,068 $387 $177,125 $(75,575)$(1,657)$936,390 $1,036,670 
For the Six Months Ended December 25, 2020
 Ordinary ShareAdditional
Paid-in
Capital
Treasury
Shares
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
(in thousands of U.S. dollars, except share data)SharesAmount
Balances at June 26, 202038,471,967 $385 $175,610 $(68,501)$(1,147)$868,062 $974,409 
Net income— — — — — 68,435 68,435 
Other comprehensive income (loss)— — — — (510)— (510)
Cumulative effect adjustment from adoption of ASC 326
— — — — — (107)(107)
Share-based compensation— — 11,878 — — — 11,878 
Issuance of ordinary shares226,101 2 (2)— — —  
Repurchase of 101,549 shares held as treasury shares
— — — (7,074)— — (7,074)
Tax withholdings related to net share settlement of restricted share units— — (10,361)— — — (10,361)
Balances at December 25, 2020
38,698,068 $387 $177,125 $(75,575)$(1,657)$936,390 $1,036,670 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FABRINET
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 Six Months Ended
(in thousands of U.S. dollars)December 24,
2021
December 25,
2020
Cash flows from operating activities
Net income for the period$93,530 $68,435 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization19,114 17,650 
Gain on disposal of property, plant and equipment(135)(24)
Gain from sales and maturities of available-for-sale securities(13)(86)
Amortization of investment discount2,079 1,003 
Amortization of deferred debt issuance costs16 16 
(Reversal of) allowance for doubtful accounts(30)(321)
Unrealized gain on exchange rate and fair value of foreign currency forward contracts(673)(290)
Amortization of fair value at hedge inception of interest rate swaps(513)(695)
Share-based compensation15,978 11,878 
Deferred income tax(986)(461)
Other non-cash expenses268 (657)
Changes in operating assets and liabilities
Trade accounts receivable(48,046)(45,410)
Contract assets(1,270)(2,967)
Inventories(62,740)(62,211)
Other current assets and non-current assets(5,568)(11,983)
Trade accounts payable44,078 45,179 
Contract liabilities214 248 
Income tax payable(1,323)548 
Severance liabilities1,708 1,350 
Other current liabilities and non-current liabilities1,880 20,112 
Net cash provided by operating activities57,568 41,314 
Cash flows from investing activities
Purchase of short-term investments(78,786)(126,701)
Proceeds from sales of short-term investments19,463 57,486 
Proceeds from maturities of short-term investments57,721 68,807 
Purchase of property, plant and equipment(51,917)(22,693)
Purchase of intangibles(446)(1,271)
Proceeds from disposal of property, plant and equipment188 26 
Net cash used in investing activities(53,777)(24,346)
Cash flows from financing activities
Repayment of long-term borrowings(6,094)(6,094)
Repayment of finance lease liability (100)
Repurchase of ordinary shares(4,198)(7,074)
Withholding tax related to net share settlement of restricted share units(19,481)(10,361)
Net cash used in financing activities(29,773)(23,629)
Net decrease in cash, cash equivalents and restricted cash$(25,982)$(6,661)
Movement in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at the beginning of period$303,123 $232,832 
Decrease in cash, cash equivalents and restricted cash(25,982)(6,661)
Effect of exchange rate on cash, cash equivalents and restricted cash(296)605 
Cash, cash equivalents and restricted cash at the end of period$276,845 $226,776 
Non-cash investing and financing activities
Construction, software and equipment-related payables$28,740 $7,748 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FABRINET
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (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 the same amounts shown in the unaudited condensed consolidated statements of cash flows:
(amount in thousands)
As of
December 24, 2021
As of
December 25, 2020
Cash and cash equivalents$276,531 $219,221 
Restricted cash314 7,555 
Cash, cash equivalents and restricted cash$276,845 $226,776 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FABRINET
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands of U.S. dollars unless otherwise noted)
1.    Business and organization
General
Fabrinet (“Fabrinet” or the “Parent Company”) was incorporated on August 12, 1999, and commenced operations on January 1, 2000. The Parent Company is an exempted company incorporated in the Cayman Islands, British West Indies. The “Company” refers to Fabrinet and its subsidiaries as a group.
The Company provides advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers (“OEMs”) of complex products, such as optical communication components, modules and sub-systems, industrial lasers, automotive components, medical devices and sensors. The Company 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, complex printed circuit board assembly, advanced packaging, integration, final assembly and testing. The Company focuses primarily on the production of low-volume, high-mix products. The principal subsidiaries of Fabrinet include Fabrinet Co., Ltd. (“Fabrinet Thailand”), Casix, Inc. (“Casix”), Fabrinet West, Inc. (“Fabrinet West”) and Fabrinet UK Limited (“Fabrinet UK”).

2.    Accounting policies
Basis of presentation
The accompanying unaudited condensed consolidated financial statements for Fabrinet as of December 24, 2021 and for the three and six months ended December 24, 2021 and December 25, 2020 include normal recurring adjustments necessary for a fair statement of the financial statements set forth herein, in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such information does not include all of the information and footnotes required by U.S. GAAP for annual financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in Fabrinet’s Annual Report on Form 10-K for the year ended June 25, 2021.
The balance sheet as of June 25, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
The results for the three and six months ended December 24, 2021 may not be indicative of results for the year ending June 24, 2022 or any future periods.
Use of Estimates
The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amount of total revenues and expenses during the year. The Company bases estimates on historical experience and various assumptions about the future that are believed to be reasonable based on available information. The Company’s reported financial position or results of operations may be materially different under different conditions or when using different estimates and assumptions, particularly with respect to significant accounting policies, which are discussed below. Significant assumptions are used in accounting for share-based compensation, allowance for doubtful accounts, allowance for expected credit losses, income taxes, inventory obsolescence, goodwill and valuation of intangible assets related to business acquisition, among others. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. In the event that the Company's estimates or assumptions prove to be different from actual results, adjustments will be made in subsequent periods to reflect more current information. Additionally, the extent to which the evolving COVID-19 pandemic impacts the Company’s unaudited condensed consolidated financial statements will depend on a number of factors, including the magnitude and duration of the pandemic. These estimates may change as new events occur and additional information is obtained, as well as based upon the occurrence of other factors related to the COVID-19 pandemic that could result in material impacts to the Company's unaudited condensed consolidated financial statements in future reporting periods.


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Fiscal years
The Company utilizes a 52-53 week fiscal year ending on the Friday in June closest to June 30. The three months ended December 24, 2021 and December 25, 2020 each consisted of 13 weeks. The six months ended December 24, 2021 and December 25, 2020 each consisted of 26 weeks. Fiscal year 2022 will be comprised of 52 weeks and will end on June 24, 2022.
Adoption of New Accounting Standards
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company adopted this standard in the first quarter of fiscal year 2022 with no material impact on its unaudited condensed consolidated financial statements.
New Accounting Pronouncements – not yet adopted by the Company
In November 2021, the Financial Accounting Standards Board issued ASU 2021-10, “Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance,” which requires annual disclosures that increase the transparency of transactions involving government assistance, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. The amendments in this update are effective for all entities within the ASU's scope for financial statements issued for annual periods beginning after December 15, 2021. This ASU will be effective for the Company in the first quarter of fiscal year 2023. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this update on its condensed consolidated financial statements.

































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3.    Revenues from contracts with customers
Revenue by Geographic Area and End Market
Revenues are attributed to a particular geographic area based on the bill-to-location of the Company’s customers. The Company operates in three geographic regions: North America, Asia-Pacific and others and Europe.
The following table presents total revenues by geographic region:
(amount in thousands, except percentages)Three Months Ended
December 24, 2021
As a % of Total
Revenues
Six Months Ended
December 24, 2021
As a % of Total
Revenues
North America
   U.S.243,720 488,994 
   Others (1)
3,557 4,873 
   Total revenue in North America247,277 43.6 %493,867 44.5 %
Asia-Pacific and others 
   India74,121 139,054 
   Malaysia60,369 112,118 
   Hong Kong23,206 44,237 
   Israel22,801 50,434 
   Japan15,832 30,809 
   China14,146 27,781 
   Others11,565 23,790 
   Total revenue in Asia-Pacific and others222,040 39.2 %428,223 38.6 %
Europe
   Ireland54,900 104,384 
   U.K.22,941 42,519 
   Germany8,985 17,410 
   Others10,490 23,552 
   Total revenue in Europe$97,316 17.2 %$187,865 16.9 %
         Total revenue$566,633 100.0 %$1,109,955 100.0 %
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(amount in thousands, except percentages)Three Months Ended
December 25, 2020
As a % of Total
Revenues
Six Months Ended
December 25, 2020
As a % of Total
Revenues
North America
   U.S.224,046 430,996 
   Others (1)
626 1,078 
   Total revenue in North America224,672 49.5 %432,074 48.5 %
Asia-Pacific and others
   Malaysia34,546 80,188 
   India28,865 28,885 
   Israel27,102 57,217 
   Hong Kong18,092 41,598 
   Japan17,309 37,642 
   China12,563 26,340 
   Others15,257 27,510 
   Total revenue in Asia-Pacific and others153,734 33.9 %299,380 33.6 %
Europe
   Ireland48,954 102,730 
   U.K.10,004 25,315 
   Germany6,253 12,052 
   Others10,210 18,915 
   Total revenue in Europe$75,421 16.6 %$159,012 17.9 %
         Total revenue$453,827 100.0 %$890,466 100.0 %
(1)Others includes revenues from external customers based in our country of domicile, the Cayman Islands, which for each year presented is $0.
The following table presents revenues by end market.
(amount in thousands, except percentages)Three Months Ended
December 24, 2021
As a % of Total
Revenues
Six Months Ended
December 24, 2021
As a % of Total
Revenues
Optical communications$450,783 79.6 %$878,084 79.1 %
Lasers, sensors and other115,850 20.4 %231,871 20.9 %
Total$566,633 100.0 %$1,109,955 100.0 %

(amount in thousands, except percentages)Three Months Ended
December 25, 2020
As a % of Total
Revenues
Six Months Ended
December 25, 2020
As a % of Total
Revenues
Optical communications$347,840 76.6 %$691,757 77.7 %
Lasers, sensors and other105,987 23.4 %198,709 22.3 %
Total$453,827 100.0 %$890,466 100.0 %
Contract Assets and Liabilities
A contract asset is recognized when the Company has recognized revenues prior to generating an invoice for payment. Contract assets are classified separately within the unaudited condensed consolidated balance sheets and transferred to accounts receivable when rights to payment become unconditional.
A contract liability is recognized when the Company has advance payment arrangements with customers. The contract liabilities balance is normally recognized as revenue within six months.
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The following tables summarize the activity in the Company’s contract assets and contract liabilities during the six months ended December 24, 2021:
(amount in thousands)Contract
Assets
Beginning balance, June 25, 2021
$11,878 
Revenue recognized26,241 
Amounts collected or invoiced(24,971)
Ending balance, December 24, 2021
$13,148 
(amount in thousands)Contract
Liabilities
Beginning balance, June 25, 2021
$1,680 
Advance payment received during the period3,281 
Revenue recognized(3,067)
Ending balance, December 24, 2021
$1,894 


4.    Earnings per ordinary share
Basic earnings per ordinary share is computed by dividing reported net income by the weighted-average number of ordinary shares outstanding during each period. Diluted earnings per ordinary share is computed by calculating the effect of potential dilutive ordinary shares outstanding during the period using the treasury stock method. Dilutive ordinary equivalent shares consist of restricted share units and performance share units.
Earnings per ordinary share was calculated as follows:
Three Months EndedSix Months Ended
(amount in thousands except per share amounts)December 24,
2021
December 25,
2020
December 24,
2021
December 25,
2020
Net income attributable to shareholders$48,879 $35,384 $93,530 $68,435 
Weighted-average number of ordinary shares outstanding (thousands of shares)37,017 36,936 36,947 36,877 
Incremental shares arising from the assumed vesting of restricted share units and performance share units (thousands of shares)
535 615 493 590 
Weighted-average number of ordinary shares for diluted earnings per ordinary share (thousands of shares)
37,552 37,551 37,440 37,467 
Basic earnings per ordinary share$1.32 $0.96 $2.53 $1.86 
Diluted earnings per ordinary share$1.30 $0.94 $2.50 $1.83 
Outstanding performance share units excluded from the computation of diluted earnings per ordinary share (thousands of shares)(1)
 91  91 
(1)These performance share units were not included in the computation of diluted earnings per ordinary share because they are not expected to vest based on the Company’s current assessment of the related performance obligations.








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5.    Cash, cash equivalents and short-term investments
The Company’s cash, cash equivalents, and short-term investments are as follows:
Fair Value
(amount in thousands)Carrying
Cost
Unrealized
Gain/
(Loss)
Cash and
Cash
Equivalents
Marketable
Securities
Other
Investments
As of December 24, 2021
Cash$235,561 $—