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 third quarter ended March 28, 2014.

Fabrinet reported total revenue of $167.7 million for the third quarter of fiscal 2014, an increase of 7.8% compared to total revenue of $155.6 million for the comparable period in fiscal 2013. GAAP net income for the third quarter of fiscal 2014 was $47.7 million, or $1.33 per diluted share, compared to GAAP net income of $21.1 million, or $0.61 per diluted share, in the third quarter of fiscal 2013. Non-GAAP net income in the third quarter of fiscal 2014 was $12.3 million, or $0.34 per diluted share, an increase of 6.6% compared to non-GAAP net income of $11.5 million, or $0.33 per diluted share, in the same period a year ago.

Tom Mitchell, Chief Executive Officer of Fabrinet, said, "The third quarter was another period of solid execution for the company, with revenue and non-GAAP earnings per share demonstrating growth over the prior year. With industry demand showing signs of improving, I am confident that we will continue to execute on our vision of providing world-class service to our customers and delivering profitable growth for our shareholders."

Business Outlook

Based on information available as of May 5, 2014, Fabrinet is issuing guidance for the fourth quarter of fiscal 2014 as follows:

Fabrinet expects fourth quarter revenue to be in the range of $169 million to $173 million. GAAP net income per share is expected to be in the range of $0.29 to $0.31 with expected non-GAAP net income per share of $0.33 to $0.35, based on approximately 36 million fully diluted shares outstanding.

Conference Call Information

What:			Fabrinet Third Quarter 2014 Financial Results Conference Call
When:			Monday, May 5, 2014
Time:			5:00 p.m. ET
Live Call:			(888) 357-3694, domestic
			(253) 237-1137, international
			Passcode: 27086704
Replay:			(855) 859-2056, domestic
			(404) 537-3406, international
			Passcode: 27086704
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 presenting at the JP Morgan TMT Conference in Boston on Monday, May 19, 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 fourth quarter of fiscal 2014 and the statements regarding our delivery of profitable growth. 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 February 4, 2014. 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, income related to flooding, executive separation costs and follow-on offering expenses. 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 March 28, 2014 and June 28, 2013
(in thousands of U.S. dollars, except share data)							March 28, 2014				June 28, 2013
Assets
Current assets
	Cash and cash equivalents					$	233,664			$	149,716
	Trade accounts receivable, net						118,500				118,475
	Inventory, net						107,826				88,962
	Deferred tax assets						1,779				1,937
	Prepaid expenses						2,097				1,931
	Other current assets						2,357				3,505
			Total current assets				466,223				364,526
Non-current assets
	Property, plant and equipment, net						98,782				97,206
	Intangibles, net						93				164
	Deferred tax assets						2,905				2,905
	Deposits and other non-current assets						91				107
			Total non-current assets				101,871				100,382
	Total assets					$	568,094			$	464,908
Liabilities and Shareholders' Equity
Current liabilities
	Long-term loans from bank, current portion					$	9,660			$	9,668
	Trade accounts payable						101,531				77,139
	Income tax payable						699				1,825
	Deferred tax liability						2,191				2,481
	Accrued payroll, bonus and related expenses						9,182				6,220
	Accrued expenses						3,872				3,121
	Other payables						8,834				5,163
	Liabilities to third parties due to flood losses						-				9,812
			Total current liabilities				135,969				115,429
Non-current liabilities
	Long-term loans from bank, non-current portion						12,000				19,243
	Severance liabilities						4,539				4,382
	Other non-current liabilities						573				536
			Total non-current liabilities				17,112				24,161
			Total liabilities				153,081				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 March 28, 2014 and June 28, 2013)						-				-
	Ordinary shares (500,000,000 shares authorized, $0.01 par value; 35,104,766 shares and 34,634,967 shares issued and outstanding as of March 28, 2014 and June 28, 2013, respectively)						351				346
	Additional paid-in capital						79,393				71,101
	Retained earnings						335,269				253,871
			Total shareholders' equity				415,013				325,318
		Total Liabilities and Shareholders' Equity				$	568,094			$	464,908

Fabrinet Consolidated Statements of Operations For the three and nine months ended March 28, 2014 and March 29, 2013
			Three Months Ended						Nine Months Ended
			March 28,			March 29,			March 28,			March 29,
(in thousands of U.S. dollars, except share data)			2014			2013			2014			2013
Revenues		$	167,657		$	155,557		$	517,770		$	481,608
Cost of revenues			(150,374	)		(139,302	)		(461,312	)		(429,261	)
	Gross profit		17,283			16,255			56,458			52,347
Selling, general and administrative expenses			(7,352	)		(6,801	)		(20,959	)		(18,447	)
Income related to flooding, net			38,151			11,419			44,748			21,064
Operating income			48,082			20,873			80,247			54,964
Interest income			560			302			1,262			761
Interest expense			(172	)		(239	)		(566	)		(788	)
Foreign exchange (loss) gain, net			(254	)		978			46			1,085
Other income			173			139			544			512
Income before income taxes			48,389			22,053			81,533			56,534
Income tax expense			(727	)		(927	)		(135	)		(2,707	)
Net income		$	47,662		$	21,126		$	81,398		$	53,827
Earnings per share
	Basic	$	1.36		$	0.61		$	2.33		$	1.56
	Diluted	$	1.33		$	0.61		$	2.29		$	1.55
Weighted average number of ordinary shares outstanding (thousands of shares)
	Basic		35,078			34,596			34,878			34,532
	Diluted		35,790			34,909			35,504			34,794

Fabrinet Consolidated Statements of Cash Flows For the nine months ended March 28, 2014 and March 29, 2013
				Nine Months Ended
				March 28,					March 29,
(in thousands of U. S. dollars)				2014					2013
Cash flows from operating activities
Net income for the period			$	81,398				$	53,827
Adjustments to reconcile net income to net cash provided by operating activities
	Depreciation			7,685					7,512
	Amortization of intangibles			72					185
	Gain on disposal of property, plant and equipment			(1	)				(23	)
	Income related to flooding			(45,211	)				(21,064	)
	Proceeds from insurers for business interruption losses related to flooding			-					4,741
	Proceeds from insurers for inventory losses related to flooding			7,416					11,419
	Reversal of allowance for doubtful accounts			(62	)				(94	)
	Unrealized loss (gain) on exchange rate and fair value of derivative			1,027					(1,566	)
	Share-based compensation			4,538					3,969
	Deferred income tax			(132	)				1,615
	Other non-cash expenses			255					598
	Reversal of uncertain tax positions			(1,538	)				-
	Inventory obsolescence (reversal of)			673					(589	)
Changes in operating assets and liabilities
	Trade accounts receivable			37					3,421
	Inventory			(19,537	)				8,945
	Other current assets and non-current assets			(889	)				(2,775	)
	Trade accounts payable			24,392					(11,671	)
	Income tax payable			351					818
	Other current liabilities and non-current liabilities			5,642					48
	Liabilities to third parties due to flood losses			(7,512	)				(8,059	)
	Net cash provided by operating activities			58,604					51,257
Cash flows from investing activities
Purchase of property, plant and equipment				(7,280	)				(8,634	)
Purchase of Intangibles				(1	)				(1	)
Proceeds from disposal of property, plant and equipment				1					25
Proceeds from insurers in settlement of claims related to flood damage				37,795					4,904
	Net cash provided by (used in) investing activities			30,515					(3,706	)
Cash flows from financing activities
Repayment of long-term loans from bank				(7,251	)				(7,251	)
Proceeds from issuance of ordinary shares under employee share option plans				3,956					528
Withholding tax related to net share settlement of restricted share units				(198	)				(21	)
	Net cash used in financing activities			(3,493	)				(6,744	)
Net increase in cash and cash equivalents			$	85,626				$	40,807

Fabrinet Consolidated Statements of Cash Flows For the nine months ended March 28, 2014 and March 29, 2013
				Nine Months Ended
				March 28,		March 29,
(in thousands of U.S. dollars)				2014		2013
Movement in cash and cash equivalents
Cash and cash equivalents at beginning of period			$	149,716	$	115,507
Increase in cash and cash equivalents				85,626		40,807
Effect of exchange rate on cash and cash equivalents				(1,678)		1,165
Cash and cash equivalents at end of period			$	233,664	$	157,479

Fabrinet Reconciliation of GAAP measures to non-GAAP measures (in thousands of U.S. dollars, except per share data) (unaudited)
				Three Months Ended									Nine Months Ended
				March 28,		March 28,		March 29,		March 29,			March 28,		March 28,		March 29,		March 29,
				2014		2014		2013		2013			2014		2014		2013		2013
				Net income		Diluted EPS		Net income		Diluted EPS			Net income		Diluted EPS		Net income		Diluted EPS
GAAP measures				47,662		1.33		21,126		0.61			81,398		2.29		53,827		1.55
	Items reconciling GAAP net income & EPS to non-GAAP net income & EPS:
	Related to cost of revenues:
		Share-based compensation expenses		290		0.01		275		0.01			888		0.03		919		0.03
	Total related to gross profit			290		0.01		275		0.01			888		0.03		919		0.03
	Related to selling, general and administrative expenses:
		Share-based compensation expenses		1,188		0.03		1,062		0.03			3,650		0.10		3,050		0.09
		Executive separation cost		547		0.02		-		-			547		0.02		-		-
		Follow-on offering expenses		-		-		472		0.01			-		-		472		0.01
	Total related to selling, general and administrative expenses			1,735		0.05		1,534		0.04			4,197		0.12		3,522		0.10
	Related to other incomes and other expenses:
		Income related to flooding, net		(38,151)		(1.07)		(11,419)		(0.32)			(44,004)		(1.24)		(21,064)		(0.60)
		Unrealized loss on exchange, net of interest income incurred from income related to flooding		744		0.02		-		-			-		-		-		-
	Total related to other incomes and other expenses			(37,407)		(1.05)		(11,419)		(0.32)			(44,004)		(1.24)		(21,064)		(0.60)
	Related to income tax expense
		Income tax expense		-		-		-		-			-		-		907		0.03
	Total related to income tax expense			-		-		-		-			-		-		907		0.03
	Total related to net income & EPS			(35,382)		(0.99)		(9,610)		(0.27)			(38,919)		(1.09)		(15,716)		(0.45)
Non-GAAP measures				12,280		0.34		11,516		0.33			42,479		1.20		38,111		1.08
Shares used in computing diluted net income per share
	GAAP diluted shares					35,790				34,909					35,504				34,794
	Non-GAAP diluted shares					35,790				35,225					35,504				35,132

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

Source: Fabrinet

News Provided by Acquire Media