News Release

BANGKOK--(BUSINESS WIRE)-- Fabrinet (NYSE:FN), a leading provider of advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products, today announced its financial results for the second quarter ended December 27, 2013.

Fabrinet reported total revenue of $178.6 million for the second quarter of fiscal 2014, an increase of 6.7% compared to total revenue of $167.4 million for the comparable period in fiscal 2013. GAAP net income for the second quarter of fiscal 2014 was $14.5 million, or $0.41 per diluted share, compared to GAAP net income of $16.7 million, or $0.48 per diluted share, in the second quarter of fiscal 2013. Non-GAAP net income in the second quarter of fiscal 2014 was $16.0 million, or $0.45 per diluted share, an increase of 15.9% compared to non-GAAP net income of $13.8 million, or $0.39 per diluted share, in the same period a year ago.

Tom Mitchell, Chief Executive Officer of Fabrinet, said, "I am pleased with the results that we delivered in the second quarter, which included both sequential and year-over-year growth in revenue, gross margin and non-GAAP earnings per share. We remain committed to delivering world-class support to our customers and profitable growth to our shareholders."

Business Outlook

Based on information available as of February 3, 2014, Fabrinet is issuing guidance for the third quarter of fiscal 2014 as follows:

Fabrinet expects third quarter revenue to be in the range of $162 million to $166 million. GAAP net income per share is expected to be in the range of $1.31 to $1.33 with expected non-GAAP net income per share of $0.32 to $0.34, based on approximately 36 million fully diluted shares outstanding.

Conference Call Information
What:		Fabrinet Second Quarter 2014 Financial Results Conference Call
When:		Monday, February 3, 2014
Time:		5:00 p.m. ET
Live Call:		(888) 357-3694, domestic
		(253) 237-1137, international
		Passcode: 31255989
Replay:		(855) 859-2056, domestic
		(404) 537-3406, international
		Passcode: 31255989
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.

Investor Conferences

Management will be participating in the Stifel Nicolaus Technology, Internet & Media Conference in San Francisco on Tuesday, February 11, 2014; and the Morgan Stanley Technology, Media & Telecom Conference in San Francisco on Tuesday, March 4, 2014.

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 People's Republic of China and the United States. 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 all of the statements under the "Business Outlook" section relating to our forecasted operating results for the third quarter of fiscal 2014. 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 the U.S., Thailand and the People's Republic of China); 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 November 5, 2013. 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 and income related to flooding. We have excluded these items in order to enhance investors' understanding of our ongoing 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 financial and operational decision making. 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
As of December 27, 2013 and June 28, 2013
(in thousands of U.S. dollars, except share data)			December 27, 2013			June 28, 2013
Assets
Current assets
Cash and cash equivalents		$	180,058		$	149,716
Trade accounts receivable, net			121,772			118,475
Inventory, net			96,705			88,962
Deferred tax assets			2,014			1,937
Prepaid expenses			902			1,931
Other current assets			2,494			3,505
Total current assets			403,945			364,526
Non-current assets
Property, plant and equipment, net			97,316			97,206
Intangibles, net			113			164
Deferred tax assets			2,937			2,905
Deposits and other non-current assets			95			107
Total non-current assets			100,461			100,382
Total assets		$	504,406		$	464,908
Liabilities and Shareholders' Equity
Current liabilities
Long-term loans from bank, current portion		$	9,668		$	9,668
Trade accounts payable			88,025			77,139
Income tax payable			580			1,825
Deferred tax liability			2,778			2,481
Accrued payroll, bonus and related expenses			7,484			6,220
Accrued expenses			3,552			3,121
Other payables			5,800			5,163
Liabilities to third parties due to flood losses			1,538			9,812
Total current liabilities			119,425			115,429
Non-current liabilities
Long-term loans from bank, non-current portion			14,409			19,243
Severance liabilities			4,532			4,382
Other non-current liabilities			557			536
Total non-current liabilities			19,498			24,161
Total liabilities			138,923			139,590
Commitments and contingencies
Shareholders' equity
Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of December 27, 2013 and June 28, 2013)			-			-
Ordinary shares (500,000,000 shares authorized, $0.01 par value; 35,034,181 shares and 34,634,967 shares issued and outstanding as of December 27, 2013 and June 28, 2013, respectively)			350			346
Additional paid-in capital			77,526			71,101
Retained earnings			287,607			253,871
Total shareholders' equity			365,483			325,318
Total Liabilities and Shareholders' Equity		$	504,406		$	464,908

Fabrinet Consolidated Statements of Operations For the three and six months ended December 27, 2013 and December 28, 2012
			Three Months Ended						Six Months Ended
			December 27,			December 28,			December 27,			December 28,
(in thousands of U.S. dollars, except share data)			2013			2012			2013			2012
Revenues		$	178,562		$	167,426		$	350,113		$	326,051
Cost of revenues			(158,032)			(149,056)			(310,938)			(289,959)
Gross profit			20,530			18,370			39,175			36,092
Selling, general and administrative expenses			(6,913)			(5,787)			(13,607)			(11,646)
Income related to flooding			-			4,825			6,597			9,645
Operating income			13,617			17,408			32,165			34,091
Interest income			338			271			702			459
Interest expense			(188)			(263)			(394)			(549)
Foreign exchange (loss) gain, net			(788)			(170)			300			107
Other income			187			183			371			373
Income before income taxes			13,166			17,429			33,144			34,481
Income tax benefit (expense)			1,373			(747)			592			(1,780)
Net income		$	14,539		$	16,682		$	33,736		$	32,701
Earnings per share
Basic		$	0.42		$	0.48		$	0.97		$	0.95
Diluted		$	0.41		$	0.48		$	0.95		$	0.94
Weighted average number of ordinary shares outstanding (thousands of shares)
Basic			34,882			34,517			34,778			34,501
Diluted			35,583			34,804			35,361			34,737

Fabrinet Consolidated Statements of Cash Flows For the six months ended December 27, 2013 and December 28, 2012
			Six Months Ended
			December 27,			December 28,
(in thousands of U. S. dollars)			2013			2012
Cash flows from operating activities
Net income for the period		$	33,736		$	32,701
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation			5,030			5,002
Amortization of intangibles			51			142
Gain on disposal of property, plant and equipment			(1)			(1)
Income related to flooding			(6,597)			(9,645)
Proceeds from insurers for business interruption losses related to flooding			-			4,741
Proceeds from insurers for inventory losses related to flooding			6,597			-
Reversal of allowance for doubtful accounts			(53)			(36)
Unrealized loss (gain) on exchange rate and fair value of derivative			681			(722)
Share-based compensation			3,060			2,632
Deferred income tax			188			1,443
Other non-cash expenses			232			703
Reversal of uncertain tax positions			(1,538)			(588)
Inventory obsolescence (reversal of)			104			(376)
Changes in operating assets and liabilities
Trade accounts receivable			(3,244)			(3,069)
Inventory			(7,856)			3,918
Other current assets and non-current assets			171			1,342
Trade accounts payable			10,886			(12,256)
Income tax payable			232			371
Other current liabilities and non-current liabilities			1,099			(1,573)
Liabilities to third parties due to flood losses			(5,974)			(6,797)
Net cash provided by operating activities			36,804			17,932
Cash flows from investing activities
Purchase of property, plant and equipment			(4,198)			(6,085)
Purchase of Intangibles			-			(1)
Proceeds from disposal of property, plant and equipment			1			2
Proceeds from insurers in settlement of claims related to flood damage			-			4,904
Net cash used in investing activities			(4,197)			(1,180)
Cash flows from financing activities
Repayment of long-term loans from bank			(4,834)			(4,834)
Proceeds from issuance of ordinary shares under employee share option plans			3,531			167
Withholding tax related to net share settlement of restricted share units			(162)			(10)
Net cash used in financing activities			(1,465)			(4,677)
Net increase in cash and cash equivalents		$	31,142		$	12,075

Fabrinet
Consolidated Statements of Cash Flows
For the six months ended December 27, 2013 and December 28, 2012
				Six Months Ended
				December 27,		December 28,
(in thousands of U.S. dollars)				2013		2012
Movement in cash and cash equivalents
Cash and cash equivalents at beginning of period			$	149,716	$	115,507
Increase in cash and cash equivalents				31,142		12,075
Effect of exchange rate on cash and cash equivalents				(800)		516
Cash and cash equivalents at end of period			$	180,058	$	128,098

Fabrinet
Reconciliation of GAAP measures to non-GAAP measures
(in thousands of U.S. dollars, except per share data)
(unaudited)
		Three Months Ended									Six Months Ended
		December 27,		December 27,		December 28,		December 28,			December 27,		December 27,		December 28,		December 28,
		2013		2013		2012		2012			2013		2013		2012		2012
		Net income		Diluted EPS		Net income		Diluted EPS			Net income		Diluted EPS		Net income		Diluted EPS
GAAP measures		14,539		0.41		16,682		0.48			33,736		0.95		32,701		0.94
Items reconciling GAAP net income & EPS to non- GAAP net income & EPS:
Related to cost of revenues:
Share-based compensation expenses		291		0.01		299		0.01			598		0.02		644		0.02
Total related to gross profit		291		0.01		299		0.01			598		0.02		644		0.02
Related to selling, general and administrative expenses:
Share-based compensation expenses		1,206		0.03		1,079		0.03			2,462		0.07		1,988		0.06
Total related to selling, general and administrative expenses		1,206		0.03		1,079		0.03			2,462		0.07		1,988		0.06
Related to other incomes and other expenses:
Income related to flooding		-		-		(4,825)		(0.14)			(6,597)		(0.19)		(9,645)		(0.27)
Total related to other incomes and other expenses		-		-		(4,825)		(0.14)			(6,597)		(0.19)		(9,645)		(0.27)
Related to income tax expense
Income tax expense		-		-		594		0.02			-		-		907		0.03
Total related to income tax expense		-		-		594		0.02			-		-		907		0.03
Total related to net income & EPS		1,497		0.04		(2,853)		(0.08)			(3,537)		(0.10)		(6,106)		(0.17)
Non-GAAP measures		16,036		0.45		13,829		0.39			30,199		0.85		26,595		0.76
Shares used in computing diluted net income per share
GAAP diluted shares				35,583				34,804					35,361				34,737
Non-GAAP diluted shares				35,583				35,190					35,361				35,086

Investor:
Fabrinet
Jennifer Predmore, 215-428-1797
ir@fabrinet.com

Source: Fabrinet

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