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
first fiscal quarter ended September 30, 2016.
Tom Mitchell, Chief Executive Officer of Fabrinet, said: “We are
off to a strong start in fiscal 2017 with first quarter revenue
that exceeded our expectations and grew more than 50% from a year
ago. We are benefiting from positive trends in the optical
industry, including increasing activity from new and existing
customer programs. We believe we are in a strong position to serve
industry demand with new capacity from the first building at our
new campus in Chonburi, Thailand, and our growing new product
introduction (NPI) operation in Santa Clara. Our recent acquisition
of Exception EMS, U.K. extends our NPI capabilities while
diversifying our customer base. With continued momentum, we are
optimistic we can again deliver strong growth in the second
quarter, as reflected in our business outlook.”
First Quarter Fiscal-Year 2017 Financial Highlights
GAAP Results
- Revenue for the first quarter of fiscal
year 2017, which was a 14-week quarter, was $332.0 million, an
increase of 53% compared to revenue of $216.4 million for the
comparable period in fiscal year 2016, which was a 13-week
quarter.
- GAAP net income for the first quarter
of fiscal year 2017 was $22.8 million, compared to GAAP net income
of $1.6 million in the first quarter of fiscal year 2016, which was
impacted by a $(10.9) million unrealized foreign exchange loss for
the mark-to-market adjustment of forward contracts.
- GAAP net income per diluted share for
the first quarter of fiscal year 2017 was $0.61, compared to GAAP
net income per diluted share of $0.04 in the first quarter of
fiscal year 2016.
Non-GAAP Results
- Non-GAAP net income in the first
quarter of fiscal 2017 was $29.7 million, an increase of 83%
compared to non-GAAP net income of $16.2 million in the same period
a year ago.
- Non-GAAP net income per diluted share
in the first quarter of fiscal 2017 was $0.80, an increase from
non-GAAP net income per diluted share of $0.45 in the same period a
year ago.
Business Outlook
Based on information available as of November 7, 2016, Fabrinet
is issuing guidance for the second quarter of fiscal-year 2017
ending December 30, 2016, as follows:
- Fabrinet expects revenue for the second
quarter, which is a 13-week quarter, to be in the range of $332
million to $336 million.
- GAAP net income per diluted share is
expected to be in the range of $0.65 to $0.67, based on
approximately 37.8 million fully diluted shares outstanding.
- Non-GAAP net income per diluted share
is expected to be in the range of $0.78 to $0.80, based on
approximately 37.8 million fully diluted shares outstanding.
Conference Call Information
What: Fabrinet First Quarter
Fiscal-Year 2017 Financial Results Conference Call When: Monday,
November 7, 2016 Time: 5:00 p.m. ET Live Call: (888) 357-3694,
domestic (253) 237-1137, international
Passcode: 1372730
Replay: (855) 859-2056, domestic (404) 537-3406, international
Passcode: 1372730
Webcast:
http://investor.fabrinet.com (live and
replay)
This press release and any other information related to the call
also will 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,
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 our expectation that we will
continue to achieve profitable growth and scale our business, as
well as 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 2017. 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 17, 2016. 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, executive separation costs, investigation
costs, income related to flooding, expenses related to reduction in
workforce, amortization of debt issuance costs, unrealized gain or
loss on foreign currency, business combination expenses and one
time cost resulting from a non-recurring warranty charge. 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 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
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS
(in thousands of U.S. dollars, except
share data)
September 30,2016
June 24,2016
Assets Current assets Cash and cash equivalents $
105,860
$ 142,804 Marketable securities 147,702 141,709 Trade accounts
receivable, net 212,684 196,145 Inventory, net 205,484 181,499
Deferred tax assets — 1,358 Prepaid expenses 3,511 3,114 Other
current assets 5,210 6,662 Total current assets
680,451 673,291 Non-current assets Restricted cash in
connection with business acquisition 3,379 — Property, plant and
equipment, net 205,845 178,410 Intangibles, net 5,091 499 Goodwill
2,994 — Deferred tax assets 2,503 1,806 Deferred debt issuance
costs on revolving loan and other non-current assets 1,040
1,851 Total non-current assets 220,852 182,566
Total Assets $ 901,303 $ 855,857
Liabilities and
Shareholders’ Equity Current liabilities Bank borrowings, net
of unamortized debt issuance costs $ 37,516 $ 24,307 Trade accounts
payable 179,741 172,052 Fixed assets payable 19,694 20,628 Capital
lease liability, current portion 122 — Income tax payable 3,077
2,010 Accrued payroll, bonus and related expenses 12,417 12,300
Accrued expenses 6,462 8,072 Other payables 10,214
16,356 Total current liabilities
269,243
255,725 Non-current liabilities
Long-term loan from bank, non-current
portion, net of unamortizeddebt issuance costs
32,759 36,100 Deferred tax liability — 854 Capital lease liability,
non-current portion
1,556
— Deferred liability in connection with business acquisition
3,379
— Severance liabilities
7,154
6,684 Other non-current liabilities
2,179
2,075 Total non-current liabilities
47,027
45,713
Total Liabilities 316,270 301,438 Commitments
and contingencies Shareholders’ equity
Preferred shares (5,000,000 shares
authorized, $0.01 par value; no sharesissued and outstanding as of
September 30, 2016 and June 24, 2016)
—
—
Ordinary shares (500,000,000 shares
authorized, $0.01 par value;36,700,468 shares and 36,156,446 shares
issued and outstanding as ofSeptember 30, 2016 and June 24, 2016,
respectively)
367 362 Additional paid-in capital 109,772 102,325 Accumulated
other comprehensive income 987 591 Retained earnings 473,907
451,141
Total Shareholders’ Equity
585,033
554,419
Total Liabilities and Shareholders’ Equity $ 901,303
$ 855,857
FABRINET
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS ANDCOMPREHENSIVE INCOME
Three Months Ended (in thousands of U.S. dollars,
except per share amounts)
September 30,2016
September 25,2015
Revenues $ 332,043 $ 216,433 Cost of revenues (292,435)
(190,422) Gross profit 39,608 26,011 Selling, general and
administrative expenses (15,832) (11,900) Other expense related to
flooding — (864) Operating income 23,776 13,247
Interest income 437 442 Interest expense (1,322) (402) Foreign
exchange gain (loss), net 1,657 (10,492) Other income 143
103 Income before income taxes 24,691 2,898 Income tax
expense (1,925) (1,295) Net income 22,766
1,603 Other comprehensive income, net of tax: Change in net
unrealized (loss) gains on marketable securities (187) 87 Change in
net unrealized loss on derivative instruments (158) — Change in
foreign exchange currency translation adjustment 741
— Total other comprehensive income, net of tax 396 87
Net comprehensive income $ 23,162 $ 1,690
Earnings per
share Basic $ 0.63 $ 0.05 Diluted $ 0.61 $ 0.04
Weighted-average number of ordinary shares outstanding
(thousands of shares) Basic 36,404 35,579 Diluted 37,330 36,315
FABRINET
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Three Months Ended (in thousands of U.S. dollars)
September 30,2016
September 25,2015
Cash flows from operating activities Net income for
the period $ 22,766 $ 1,603 Adjustments to reconcile net income to
net cash provided by operating activities Depreciation and
amortization 5,113 4,063 Gain on disposal of property, plant and
equipment (40) (26) Loss from sales and maturities of
available-for-sale securities 100 92 Amortization of investment
premium 166 298 Amortization of deferred debt issuance costs 908
171 Allowance for doubtful accounts (reversal of) 3 (4) Unrealized
(gain) loss on exchange rate and fair value of derivative
instruments (1,913) 10,855 Share-based compensation 5,611 2,673
Deferred income tax 311 157 Other non-cash expenses 453 386
(Reversal of) inventory obsolescence (62) 150 Loss from written-off
inventory due to flood loss — 233 Changes in operating assets and
liabilities Trade accounts receivable (11,876) (4,948) Inventory
(21,290) (13,150) Other current assets and non-current assets 3,285
(668) Trade accounts payable 3,103 3,053 Income tax payable 1,035
707 Other current liabilities and non-current liabilities
(8,675) (1,106) Net cash (used in) provided by operating
activities (1,002) 4,539
Cash flows from investing
activities Purchase of marketable securities (32,737) (38,773)
Proceeds from sales of marketable securities 13,061 16,687 Proceeds
from maturities of marketable securities 13,230 12,528 Payments in
connection with business acquisition, net of cash acquired (9,664)
— Restricted cash in connection with business acquisition (3,379) —
Purchase of property, plant and equipment (27,090) (8,452) Purchase
of intangibles (178) (68) Deposits for land purchase — (2,352)
Proceeds from disposal of property, plant and equipment 107
28 Net cash used in investing activities (46,650)
(20,402)
Cash flows from financing activities Payment
of debt issuance costs — (353) Proceeds from revolving loans 13,500
— Repayment of long-term loans from bank (4,900) (1,500) Proceeds
from issuance of ordinary shares under employee share option plans
2,708 1,547 Withholding tax related to net share settlement of
restricted share units (867) (878) Net cash provided
by (used in) financing activities 10,441 (1,184)
Net decrease in cash and cash equivalents (37,211)
(17,047)
Movement in cash and cash equivalents
Cash and cash equivalents at beginning of period 142,804 112,978
Decrease in cash and cash equivalents (37,211) (17,047) Effect of
exchange rate on cash and cash equivalents 267 (466)
Cash and cash equivalents at end of period $ 105,860 $
95,465
Non-cash investing and financing activities
Construction and equipment-related payables $ 19,694 $ 5,123
FABRINET
Reconciliation of GAAP measures to
non-GAAP measures
(in thousands of U.S. dollars, except per
share data)
Three Months Ended September 30, 2016
September 25, 2015
Netincome
DilutedEPS
Netincome
DilutedEPS
GAAP measures 22,766 0.61 1,603
0.04 Items reconciling GAAP net income & EPS to non-GAAP
net income & EPS: Related to cost of revenues: Share-based
compensation expenses 1,014 0.03 537 0.01
Total related to gross profit 1,014 0.03 537
0.01 Related to selling, general and administrative
expenses: Share-based compensation expenses 4,598 0.12 2,136 0.06
Executive separation cost 577 0.02 - - Business combination
expenses 1,411 0.04 - - Total related
to selling, general and administrative expenses 6,586 0.18
2,136 0.06 Related to other incomes and other
expenses: Expenses related to flooding - - 864 0.02 Amortization of
debt issuance costs 1,063 0.03 171 0.01 (Gain)/loss on foreign
currency (1,713 ) (0.05 ) 10,897 0.30
Total related to other incomes and other expenses (650 ) (0.02 )
11,932 0.33 Total related to net income & EPS
6,950 0.19 14,605 0.40
Non-GAAP measures 29,716 0.80
16,208 0.45 Shares used in computing
diluted net income per share GAAP diluted shares 37,330 36,315
Non-GAAP diluted shares 37,330 36,315
Fabrinet Guidance for Quarter Ending
December 30, 2016Items reconciling GAAP EPS to non-GAAP
EPS:
DilutedEPS
GAAP net income per diluted share: $0.65 to
$0.67 Related to cost of revenues: Share-based
compensation expenses 0.03
Related to selling, general and
administrative expenses:
Share-based compensation expenses 0.09
Related to other incomes and other
expenses:
Amortization of debt issuance costs 0.01
Total
related to net income & EPS 0.13
Non-GAAP net
income per diluted share $0.78 to $0.80
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Investor Contact:FabrinetGaro
Toomajanianir@fabrinet.com
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