MRO Magazine

Fabrinet Announces Fourth Quarter and Fiscal-Year 2015 Financial Results


August 17, 2015
By Business Wire News

BANGKOK

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 fourth quarter and fiscal year ended June 26, 2015.

Fabrinet reported total revenue of $206.5 million for the fourth quarter of fiscal year 2015, its highest quarterly revenue to-date and an increase of 29% compared to total revenue of $160.1 million for the comparable period in fiscal year 2014. GAAP net income for the fourth quarter of fiscal year 2015 was $13.0 million, or $0.36 per diluted share, compared to GAAP net income of $10.3 million, or $0.29 per diluted share, in the fourth quarter of fiscal year 2014. Non-GAAP net income in the fourth quarter of fiscal 2015 was $14.5 million, or $0.40 per diluted share, an increase of 20% compared to non-GAAP net income of $12.1 million, or $0.34 per diluted share, in the same period a year ago.

For fiscal year 2015, Fabrinet reported total revenue of $773.6 million, an increase of 14% compared to total revenue of $677.9 million for fiscal year 2014. GAAP net income for fiscal year 2015 was $43.6 million, or $1.21 per diluted share, compared to GAAP net income of $91.7 million, or $2.58 per diluted share, in fiscal year 2014. GAAP net income in fiscal 2014 was positively impacted by $44.0 million, or $1.24 per diluted share, due to the collection of insurance proceeds. Non-GAAP net income in fiscal year 2015 was $56.4 million, or $1.57 per diluted share, an increase of 3% compared to non-GAAP net income of $54.6 million, or $1.53 per diluted share, in fiscal year 2014.

Tom Mitchell, Chief Executive Officer of Fabrinet, said, “We ended fiscal 2015 on a strong note with record revenue and growth across all our market segments. As we start fiscal 2016, I am confident that our initiatives to expand our new product introduction and advanced packaging capabilities, combined with our focus on total customer satisfaction and world-class quality will enable us to deliver another year of profitable growth in fiscal 2016.”

Business Outlook

Based on information available as of August 17, 2015, Fabrinet is issuing guidance for the first quarter of fiscal 2016 as follows:

Fabrinet expects first quarter revenue to be in the range of $206 million to $210 million. GAAP net income per diluted share is expected to be in the range of $0.33 to $0.35 with expected non-GAAP net income per diluted share of $0.41 to $0.43, based on approximately 36.5 million fully diluted shares outstanding.

Conference Call Information

 
What:     Fabrinet Fourth Quarter and Fiscal-Year 2015 Financial Results Conference Call
When: Monday, August 17, 2015
Time: 5:00 p.m. ET
Live Call: (888) 357-3694, domestic
(253) 237-1137, international

 

Passcode: 82275347

Replay: (855) 859-2056, domestic
(404) 537-3406, international

 

Passcode: 82275347

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, 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 our expectation that we will achieve profitable growth in fiscal 2016 and all of the statements under the “Business Outlook” section regarding our expected revenue and GAAP and non-GAAP net income per share for the first quarter of fiscal 2016. 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 May 5, 2015. 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, follow-on offering expenses, executive separation cost, investigation cost 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 June 26, 2015 and June 27, 2014
 

June 26,

 

June 27,

(in thousands of U.S. dollars, except share data)

2015

2014

Assets
Current assets
Cash and cash equivalents $ 112,978 $

233,477

 

Marketable securities 142,866
Trade accounts receivable, net 134,952 101,168
Inventory, net 130,613 124,570
Deferred tax assets 1,662 1,561
Prepaid expenses 2,135 1,691
Other current assets 1,833   2,010  
Total current assets 527,039   464,477  
Non-current assets
Property, plant and equipment, net 140,654 97,244
Intangibles, net 137 72
Deferred tax assets 2,249 1,775
Deferred debt issuance costs 2,424   989  
Total non-current assets 145,464   100,080  
Total assets $ 672,503   $ 564,557  
Liabilities and Shareholders’ Equity
Current liabilities
Bank borrowings, including revolving loan and current portion of long-term loans from banks $ 36,000 $ 6,000
Trade accounts payable 115,319 94,853
Income tax payable 1,470 1,024
Accrued payroll, bonus and related expenses 9,804 8,612
Accrued expenses 6,405 4,345
Other payables 12,050   5,795  
Total current liabilities 181,048   120,629  
Non-current liabilities
Long-term loans from bank, non-current portion 4,500 10,500
Deferred tax liability 737 1,040
Severance liabilities 5,477 4,453
Other non-current liabilities 1,797   1,099  
Total non-current liabilities 12,511   17,092  
Total liabilities 193,559   137,721  
Commitments and contingencies
Shareholders’ equity
Preferred shares (5,000,000 shares authorized, $0.01 par value;
no shares issued and outstanding as of June 26, 2015 and June 27, 2014)
Ordinary shares (500,000,000 shares authorized, $0.01 par value;

35,437,654 shares and 35,152,772 shares issued and outstanding as of June 26, 2015 and June 27, 2014, respectively)

354 352
Additional paid-in capital 89,390 80,882
Retained earnings 389,244 345,602
Accumulated other comprehensive loss (44 )  
Total shareholders’ equity 478,944   426,836  
Total Liabilities and Shareholders’ Equity $ 672,503   $ 564,557  
 

Fabrinet

Consolidated Statements of Operations and Comprehensive Income

For the three and twelve months ended June 26, 2015 and June 27, 2014

 
 Three Months Ended  Twelve Months Ended
June 26,  June 27,June 26,  June 27,
(in thousands of U.S. dollars, except share data)2015201420152014
 
Revenues $ 206,456 $ 160,084 $ 773,587 $ 677,854
Cost of revenues (181,907 ) (142,309 ) (685,814 ) (603,621 )
Gross profit 24,549 17,775 87,773 74,233
Selling, general and administrative expenses (10,739 ) (6,705 ) (39,460 ) (27,664 )
Income related to flooding 44,748
Restructuring charge     (1,153 )  
Operating income 13,810 11,070 47,160 91,317
Interest income 297 531 1,253 1,793
Interest expense (241 ) (147 ) (616 ) (713 )
Foreign exchange gain (loss), net 91 (70 ) (19 ) (24 )
Other (expense) income (46 ) 253   (152 ) 797  
Income before income taxes 13,911 11,637 47,626 93,170
Income tax expense (876 ) (1,304 ) (3,984 ) (1,439 )
Net income 13,035 10,333 43,642 91,731
Other comprehensive loss, before tax:
Change in fair value of marketable securities (150 ) (193 )
Less: Reclassification adjustment for net loss realized and included in net income 80     149    
Total change in unrealized loss on marketable securities, before tax (70 ) (44 )
Income tax expense related to items of other comprehensive loss        
Total other comprehensive loss, net of tax (70 )   (44 )  
Net comprehensive income $ 12,965   $ 10,333   $ 43,598   $ 91,731  
 
Earnings per share
Basic $ 0.37 $ 0.29 $ 1.23 $ 2.63
Diluted $ 0.36 $ 0.29 $ 1.21 $ 2.58
Weighted average number of ordinary shares outstanding (thousands of shares)
Basic 35,431 35,117 35,354 34,938
Diluted 36,320 35,843 35,984 35,589
 

Fabrinet

Consolidated Statements of Cash Flows

For the twelve months ended June 26, 2015 and June 27, 2014

 
 Twelve Months Ended
(in thousands of U. S. dollars)June 26, 2015  June 27, 2014
 
Cash flows from operating activities
Net income for the year $ 43,642 $ 91,731
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation 12,878 10,565
Amortization of intangibles 69 93
Gain on disposal of property, plant and equipment (42 ) (28 )
Loss from sales and maturities of marketable securities 120
Amortization of investment premium 985
Amortization of deferred debt issuance costs 527
Income related to flooding (45,211 )
Proceeds from insurers for inventory losses related to flooding 7,416
Allowance for doubtful accounts (reversal of) 13 (72 )
Unrealized loss on exchange rate and fair value of derivative 671 722
Share-based compensation 8,027 5,547
Deferred income tax (878 ) 65
Other non-cash expenses 1,722 634
Reversal of uncertain tax position (1,538 )
Inventory obsolescence 397 443
Changes in operating assets and liabilities
Trade accounts receivable (33,797 ) 17,379
Inventory (6,440 ) (36,051 )
Other current assets and non-current assets (283 ) (1,035 )
Trade accounts payable 20,466 17,714
Income tax payable 446 737
Other current liabilities and non-current liabilities 4,106 4,951
Liabilities to third parties due to flood losses   (7,512 )
Net cash provided by operating activities 52,629   66,550  
Cash flows from investing activities
Purchase of marketable securities (203,407 )
Proceeds from sales of marketable securities 29,036
Proceeds from maturities of marketable securities 30,356
Purchase of property, plant and equipment (51,398 ) (10,835 )
Purchase of intangibles (134 ) (1 )
Proceeds from disposal of property, plant and equipment 48 29
Proceeds from insurers in settlement of claims related to flood damage   37,795  
Net cash (used in) provided by investing activities (195,499 ) 26,988  
Cash flows from financing activities
Payment of debt issuance costs (1,946 )
Proceeds from revolving loans 30,000
Repayment of long-term loans from bank (6,000 ) (12,411 )
Proceeds from issuance of ordinary shares under employee share option plans

 

835

4,567
Withholding tax related to net share settlement of restricted share units (352 ) (327 )
Net cash provided by (used in) financing activities 22,537   (8,171 )
Net (decrease) increase in cash and cash equivalents $ (120,333 ) $ 85,367  
 

Movement in cash and cash equivalents

Cash and cash equivalents at beginning of period $ 233,477 $ 149,716
(Decrease) increase in cash and cash equivalents (120,333 ) 85,367
Effect of exchange rate on cash and cash equivalents (166 ) (1,606 )
Cash and cash equivalents at end of period $ 112,978   $ 233,477  
 
Fabrinet
Reconciliation of GAAP measures to non-GAAP measures
(in thousands of U.S. dollars, except per share data)
(unaudited)
 
 Three Months Ended  Twelve Months Ended
June 26,  June 26,  June 27,  June 27,June 26,  June 26,  June 27,  June 27,
2015  2015

2014

 

2014

2015  20152014  2014
Net incomeDiluted EPSNet incomeDiluted EPSNet incomeDiluted EPSNet incomeDiluted EPS
 
GAAP measures13,0350.3610,3330.2943,6421.2191,7312.58
Items reconciling GAAP net income & EPS to non-GAAP net income & EPS:
Related to cost of revenues:
Share-based compensation expenses 344   0.01   294   0.01   1,451   0.04   1,182   0.03  
Total related to gross profit 344   0.01   294   0.01   1,451   0.04   1,182   0.03  
 
Related to selling, general and administrative expenses:
Share-based compensation expenses 1,878 0.05 715 0.02 6,577 0.18 4,365 0.12
Executive separation cost 547 0.02
Follow-on offering expenses 344 0.01 344 0.01
Investigation costs (858 ) (0.02 ) 400   0.01   3,242   0.09   400   0.01  
Total related to selling, general and administrative expenses 1,020   0.03   1,459   0.04   9,819   0.27   5,656   0.16  
 
Related to other incomes and other expenses:
Income related to flooding (44,748 ) (1.26 )

Unrealized loss on exchange, net of interest incurred from income related to flooding

744

0.02

Expenses related to reduction in workforce 1,153 0.03
Amortization of debt issuance costs 150   0.00       527   0.02      
Total related to other incomes and other expenses 150   0.00       1,680   0.05   (44,004 ) (1.24 )
 
Related to income tax expense
Income tax expense         (187 ) (0.01 )    
Total related to income tax expense         (187 ) (0.01 )    
 
Total related to net income & EPS1,514  0.04  1,753  0.05  12,763  0.35  (37,166)(1.05)
 
Non-GAAP measures14,549  0.40  12,086  0.34  56,405  1.57  54,565  1.53  
 
Shares used in computing diluted net income per share
GAAP diluted shares 36,320 35,843 35,984 35,589
Non-GAAP diluted shares 36,320 35,843 35,984 35,589

Investors:
Fabrinet
John Marchetti, 203-990-0148
ir@fabrinet.com