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
fourth quarter and fiscal year ended June 29, 2018.
Seamus Grady, Chief Executive Officer of Fabrinet, said, “Our
financial results for the fourth quarter exceeded our guidance for
revenue and profitability. Our sequential revenue growth was driven
by modest growth from optical communications products, and strong
growth from non-optical communications products, with a
particularly notable performance in the industrial laser and
automotive markets. We are encouraged by the broadly improving
demand dynamics we see and are optimistic that we will see
continued sequential growth in the first quarter of fiscal year
2019 as we expand our leadership as a manufacturer of complex
products.”
Toh-Seng Ng, Chief Financial Officer of Fabrinet, added, “On a
personal note, at my request, our board of directors has initiated
a CFO succession plan. We have retained an executive search firm to
assist in identifying and evaluating candidates, and there is no
set timeline for this process.”
Fourth Quarter Fiscal Year 2018 Financial Highlights
GAAP Results
- Revenue for the fourth quarter of
fiscal year 2018 was $345.3 million, compared to revenue of $370.5
million for the comparable period in fiscal year 2017.
- GAAP net income for the fourth quarter
of fiscal year 2018 was $22.8 million, compared to GAAP net income
of $27.4 million for the fourth quarter of fiscal year 2017. GAAP
net income for the fourth quarter of fiscal year 2018 included a
foreign exchange loss of $0.9 million, or $0.02 per diluted share,
compared to a foreign exchange loss of $1.0 million, or $0.03 per
diluted share, for the fourth quarter of fiscal year 2017.
- GAAP net income per diluted share for
the fourth quarter of fiscal year 2018 was $0.60, compared to GAAP
net income per diluted share of $0.72 for the fourth quarter of
fiscal year 2017.
Non-GAAP Results
- Non-GAAP net income for the fourth
quarter of fiscal year 2018 was $30.7 million, compared to non-GAAP
net income of $32.8 million for the fourth quarter of fiscal year
2017. Non-GAAP net income for the fourth quarter of fiscal year
2018 included a foreign exchange loss of $0.9 million, or $0.02 per
diluted share, compared to a foreign exchange loss of $1.0 million,
or $0.03 per diluted share, for the fourth quarter of fiscal year
2017.
- Non-GAAP net income per diluted share
for the fourth quarter of fiscal year 2018 was $0.81, compared to
non-GAAP net income per diluted share of $0.86 for the same period
a year ago.
Fiscal Year 2018 Financial Highlights
GAAP Results
- Revenue for fiscal year 2018 was
$1,371.9 million, compared to revenue of $1,420.5 million for
fiscal year 2017.
- GAAP net income for fiscal year 2018
was $84.2 million, compared to GAAP net income of $97.1 million for
fiscal year 2017. GAAP net income for fiscal year 2018 included a
foreign exchange loss of $6.6 million, or $0.17 per diluted share,
compared to a foreign exchange loss of $1.1 million, or $0.03 per
diluted share, for fiscal year 2017.
- GAAP net income per diluted share for
fiscal year 2018 was $2.21, compared to GAAP net income per diluted
share of $2.57 for fiscal year 2017.
Non-GAAP Results
- Non-GAAP net income for fiscal year
2018 was $113.5 million, compared to non-GAAP net income of $127.4
million for fiscal year 2017. Non-GAAP net income for fiscal year
2018 included a foreign exchange loss of $6.6 million, or $0.17 per
diluted share, compared to a foreign exchange loss of $2.9 million,
or $0.08 per diluted share, for fiscal year 2017.
- Non-GAAP net income per diluted share
for fiscal year 2018 was $2.98, compared to non-GAAP net income per
diluted share of $3.37 for fiscal year 2017.
Share Repurchase Program Update
Fabrinet repurchased approximately 551,000 ordinary shares at an
average price of $36.31 during the fourth quarter. As of June 29,
2018, Fabrinet had a remaining authorization to purchase up to an
additional $17.6 million worth of its ordinary shares.
Business Outlook
The guidance provided below is based on ASC 605. In the first
quarter of fiscal 2019, Fabrinet will report results under ASC 606,
which it is adopting for fiscal year 2019 on a modified
retrospective transition method, and will provide a reconciliation
to ASC 605 at that time.
Based on information available as of August 20, 2018, Fabrinet
is issuing guidance for its first fiscal quarter of 2019 ending
September 28, 2018, as follows:
- Fabrinet expects first quarter revenue
to be in the range of $347 million to $355 million.
- GAAP net income per diluted share is
expected to be in the range of $0.58 to $0.61, based on
approximately 37.9 million fully diluted shares outstanding.
- Non-GAAP net income per diluted share
is expected to be in the range of $0.80 to $0.83, based on
approximately 37.9 million fully diluted shares outstanding.
Conference Call Information
What: Fabrinet Fourth Quarter and Fiscal Year 2018
Financial Results Call When: Monday, August 20, 2018 Time: 5:00
p.m. ET Live Call: (888) 357-3694, domestic (253) 237-1137,
international
Passcode: 9097326
Replay: (855) 859-2056, domestic (404) 537-3406, international
Passcode: 9097326
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 improving
demand and our ability to achieve sequential growth in the first
quarter of fiscal year 2019, as well as our ability to expand our
leadership as a manufacturer of complex products; and (2) all of
the statements under the "Business Outlook" section regarding our
expected revenue, GAAP and non-GAAP net income per share, and fully
diluted shares outstanding for the first quarter of fiscal year
2019. 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 May 8, 2018. 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; severance payments;
expenses related to our CEO search; debt administration expense;
amortization of intangibles; business combination expenses; loss
(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.
FABRINET
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars, except share data)
June 29,2018
June 30,2017
Assets Current assets Cash and cash equivalents $ 158,102 $
133,825 Restricted cash in connection with business acquisition
3,331 - Marketable securities 174,269 151,450 Trade accounts
receivable, net 246,912 264,349 Inventory, net 257,687 238,665
Prepaid expenses 8,061 6,306 Other current assets 5,948
4,159 Total current assets 854,310 798,754
Non-current assets Restricted cash in connection with business
acquisition - 3,312 Property, plant and equipment, net 219,640
216,881 Intangibles, net 4,880 5,840 Goodwill 3,828 3,806 Deferred
tax assets 5,280 2,905 Deferred debt issuance costs on revolving
loan and other non-current assets 80 1,577 Total
non-current assets 233,708 234,321
Total
Assets $ 1,088,018 $ 1,033,075
Liabilities and Shareholders’
Equity Current liabilities Bank borrowings, net of unamortized
debt issuance costs $ 3,250 $ 48,402 Trade accounts payable 220,159
215,262 Capital lease liability, current portion 451 344 Income tax
payable 709 1,976 Deferred liability in connection with business
acquisition 3,331 - Accrued payroll, bonus and related expenses
13,476 13,852 Accrued expenses 9,013 9,227 Other payables
19,728 22,209 Total current liabilities 270,117 311,272
Non-current liabilities Long-term loan from bank, non-current
portion, net of unamortized debt issuance costs 60,938 22,701
Deferred tax liability 2,284 1,981 Capital lease liability,
non-current portion 516 1,024 Deferred liability in connection with
business acquisition - 3,312 Severance liabilities 10,162 8,488
Other non-current liabilities 3,062 2,723 Total non-current
liabilities 76,962 40,229
Total Liabilities 347,079
351,501 Commitments and contingencies Shareholders’ equity
Preferred shares (5,000,000 shares authorized, $0.01 par value; no
shares issued and outstanding as of June 29, 2018 and June 30,
2017) — — Ordinary shares (500,000,000 shares authorized, $0.01 par
value; 37,723,733 shares and 37,340,496 shares issued, and
36,434,630 shares and 37,340,496 shares outstanding 377 373 as of
March 30, 2018 and June 30, 2017, respectively) Additional paid-in
capital 151,797 133,293 Treasury shares at cost (1,289,103 shares
and zero shares as of
March 30, 2018 and June 30, 2017,
respectively)
(42,401) — Accumulated other comprehensive loss (1,257) (348)
Retained earnings 632,423 548,256
Total Shareholders’ Equity
740,939 681,574
Total Liabilities and Shareholders’ Equity $
1,088,018 $ 1,033,075
FABRINET
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
Three Months Ended Twelve Months Ended (in
thousands of U.S. dollars, except per share amounts)
June 29, 2018
June 30,2017
June 29, 2018
June 30,2017
Revenues $ 345,327 $ 370,454 $ 1,371,925 $ 1,420,490 Cost of
revenues
(306,346)
(325,694)
(1,218,513)
(1,249,030)
Gross profit 38,981 44,760 153,412 171,460 Selling, general and
administrative expenses (16,559) (15,057) (57,812) (65,626)
Expenses related to reduction in workforce — —
(1,776) — Operating income 22,422 29,703 93,824 105,834
Interest income 1,371 507 3,925 1,977 Interest expense (1,107)
(804) (3,606) (3,321) Foreign exchange loss, net (877) (1,042)
(6,587) (1,142) Other income 35 112 473
509 Income before income taxes 21,844 28,476 88,029 103,857 Income
tax expense 924 (1,075) (3,862) (6,742)
Net income 22,768 27,401 84,167 97,115
Other comprehensive loss, net of tax: Change in net unrealized loss
on marketable securities 29 20 (1,019) (471) Change in net
unrealized loss on derivative instruments — — (1) (158) Change in
foreign currency translation adjustment (1,247) 625
111 (310) Total other comprehensive loss, net of tax
(1,218) 645 (909) (939) Net
comprehensive income $ 21,550 $ 28,046 $ 83,258 $ 96,176
Earnings per share Basic $ 0.62 $ 0.73 $ 2.26 $ 2.63 Diluted
$ 0.60 $ 0.72 $ 2.21 $ 2.57
Weighted-average number of ordinary shares
outstanding (thousands of shares) Basic 36,828 37,334 37,257
36,927 Diluted 37,766 38,118 38,035 37,852
FABRINETCONSOLIDATED STATEMENTS
OF CASH FLOWS
Twelve Months Ended (in
thousands of U.S. dollars)
June 29,2018
June 30,2017
Cash flows from operating activities Net income for
the period $ 84,167 $ 97,115 Adjustments to reconcile net income to
net cash provided by operating activities Depreciation and
amortization 29,087 23,793 Loss (gain) on disposal of property,
plant and equipment 18 (30) Loss on disposal of intangibles 447 -
Loss from sales and maturities of available-for-sale securities 364
822 Amortization of investment discount (506) (193) Amortization of
deferred debt issuance costs 994 1,396 Reversal of allowance for
doubtful accounts (23) (1) Unrealized loss on exchange rate and
fair value of derivative instruments 4,222 1,884 Share-based
compensation 22,581 26,507 Deferred income tax (2,074) 754 Other
non-cash expenses 2,133 2,173 (Reversal of) Inventory obsolescence
(436) 42 Changes in operating assets and liabilities Trade accounts
receivable 17,852 (64,142) Inventory (19,432) (53,802) Other
current assets and non-current assets (4,464) (2,231) Trade
accounts payable 3,502 38,293 Income tax payable (1,267) (67) Other
current liabilities and non-current liabilities 915
(1,379) Net cash provided by operating activities 138,080
70,934
Cash flows from investing activities Purchase
of marketable securities (152,908) (122,778) Proceeds from sales of
marketable securities 61,795 39,578 Proceeds from maturities of
marketable securities 67,417 72,361 Payments in connection with
business acquisition, net of cash acquired — (9,917) Purchase of
property, plant and equipment (33,825) (68,262) Purchase of
intangibles (1,577) (1,768) Proceeds from disposal of property,
plant and equipment 449 230 Net cash used in
investing activities (58,649) (90,556)
Cash flows
from financing activities Proceeds of short-term loans from
banks 5,000 27,500 Repayment of short-term loans from bank (1,003)
(157) Repayment of long-term loans from bank (11,212) (18,100)
Repayment of capital lease liability (417) (276) Repurchase of
ordinary shares (42,401) — Proceeds from issuance of ordinary
shares under employee share option plans 1,436 5,890 Withholding
tax related to net share settlement of restricted share units
(5,509) (1,425) Net cash (used in) provided by
financing activities (54,106) 13,432
Net increase
(decrease) in cash, cash equivalents and restricted cash
25,325 (6,190)
Movement in cash, cash equivalents
and restricted cash Cash, cash equivalents and restricted cash
at beginning of period 137,137 142,804 Increase (decrease) in cash,
cash equivalents and restricted cash 25,325 (6,190) Effect of
exchange rate on cash, cash equivalents and restricted cash
(1,029) 523
Cash, cash equivalents and restricted cash at
end of period $ 161,433 $ 137,137
Non-cash investing
and financing activities Construction, software-related and
equipment-related payables $ 5,144 $ 8,434
FABRINETCONSOLIDATED STATEMENTS OF
CASH FLOWS (Continued)
The following table provides a reconciliation of cash, cash
equivalents and restricted cash reported within the consolidated
balance sheets that sum to the total of same amounts shown in the
consolidated statements of cash flows:
(amount in thousands)
As of June
29,2018
As of June
30,2017
Cash and cash equivalents $ 158,102 $ 133,825 Restricted
cash in connection with business acquisition
(non-current assets)
3,331
3,312
Cash, cash equivalents and restricted cash $ 161,433 $ 137,137
FABRINETRECONCILIATION OF GAAP
MEASURES TO NON-GAAP MEASURES
Three Months Ended
Twelve Months Ended June 29, 2018
June 30, 2017 June 29, 2018
June 30, 2017 (in thousands of U.S. dollars,
except per share data)
Net income
DilutedEPS
Net income
DilutedEPS
Netincome
DilutedEPS
Netincome
DilutedEPS
GAAP measures
22,768 0.60 27,401 0.72 84,167
2.21 97,115 2.57 Items reconciling GAAP net
(loss) income & EPS to non-GAAP net income & EPS: Related
to cost of revenues: Share-based compensation expenses
1,507
0.04
1,133 0.03 6,784 0.18 5,318 0.14 Depreciation of fair value uplift
89
0.00
80 0.00 330 0.01 147 0.00
Total related to gross profit
1,596
0.04
1,213 0.03 7,114 0.19 5,465
0.14 Related to selling, general and administrative
expenses: Share-based compensation expenses
3,370
0.09
3,438 0.09 15,797 0.42 21,190 0.56 Expenses related to CEO search
-
-
100 0.00 204 0.01 203 0.01 Debt administration expenses
-
-
-
-
-
-
320
0.01
Amortization of intangibles
199
0.01
199
0.01
780
0.02
607
0.02
Business combination expenses
-
-
160 0.00 117 0.00 1,790 0.05 Severance payments 2,142
0.06 - - 2,142 0.06 577
0.02 Total related to selling, general and administrative expenses
5,711
0.15
3,897
0.10
19,040
0.50
24,687
0.65
Related to other incomes and other expenses: Loss on foreign
currency contracts
-
-
-
-
-
-
(1,713)
(0.05)
Restructuring charges - - - - 1,776 0.05 - - Amortization of debt
issuance costs 634 0.02 257 0.01 1,412 0.04 1,884 0.05
Total related to other
incomes and other expenses 634 0.02 257
0.01 3,188 0.08 171 0.00
Total related to net income & EPS
7,941
0.21
5,367
0.14
29,342
0.77
30,323
0.80
Non-GAAP measures 30,709
0.81 32,768 0.86 113,509
2.98 127,438 3.37
Shares used in computing diluted net income per share GAAP
diluted shares 37,766 38,118 38,035 37,852 Non-GAAP diluted shares
37,766 38,118 38,035 37,852
FABRINET
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO
FREE CASH FLOW
(in thousands)
Three Months Ended Twelve Months Ended
June 29,2018
June 30,2017
June 29,2018
June 30,2017 Net cash provided by operating
activities $48,286 $10,546 $138,080 $70,934 Less: Purchase of
property, plant and equipment (5,557) (11,038) (33,825)
(68,262) Non-GAAP free cash flow $42,729 ($492) $104,255
$2,672
FABRINETGUIDANCE FOR QUARTER
ENDING SEPTEMBER 28, 2018RECONCILIATION OF GAAP MEASURES TO
NON-GAAP MEASURES
Diluted EPS GAAP net income
per diluted share: $0.58 to $0.61 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 0.16
Business combination expenses 0.01 Total related to selling,
general and administrative expenses 0.17
Total related to
net income & EPS 0.22 Non-GAAP net income per
diluted share $0.80 to $0.83
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Investor Contact:For FabrinetGaro
Toomajanianir@fabrinet.com
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