MRO Magazine

Fabrinet Announces Second Quarter Fiscal-Year 2016 Financial Results


February 1, 2016
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 its second fiscal quarter ended December 25, 2015.

Tom Mitchell, Chief Executive Officer of Fabrinet, said, “We delivered a strong second quarter with record revenue and strong profitability. Upside in the quarter was driven by a combination of growth from new customer programs and increasing production from existing customer programs, as we benefit from technology investments that we continue to make. While we have sufficient capacity to meet our growing customer demand for several quarters, construction of the first new building at our new campus outside Bangkok is underway, which will help drive further profitable growth over the longer-term.”

Second quarter Fiscal-Year 2016 Financial Highlights

GAAP Results

  • Revenue was $233.0 million for the second quarter of fiscal year 2016, an increase of 24% compared to total revenue of $188.4 million for the comparable period in fiscal year 2015.
  • GAAP net income for the second quarter of fiscal year 2016 was $19.8 million, compared to GAAP net income of $8.7 million in the second quarter of fiscal year 2015.
  • GAAP net income per diluted share for the second quarter of fiscal year 2016 was $0.54, compared to GAAP net income per diluted share of $0.24 in the second quarter of fiscal year 2015.

Non-GAAP Results

  • Non-GAAP net income in the second quarter of fiscal 2016 was $18.2 million, an increase of 26% compared to non-GAAP net income of $14.4 million in the same period a year ago.
  • Non-GAAP net income per diluted share in the second quarter of fiscal 2016 was $0.50, an increase from non-GAAP net income per diluted share of $0.40 in the same period a year ago.

Business Outlook

Based on information available as of February 1, 2016, Fabrinet is issuing guidance for the third quarter of fiscal 2016 ending March 25, 2016, as follows:

  • Fabrinet expects third quarter revenue to be in the range of $240 million to $244 million.
  • GAAP net income per diluted share is expected to be in the range of $0.47 to $0.49, based on approximately 36.8 million fully diluted shares outstanding.
  • Non-GAAP net income per diluted share is expected to be in the range of $0.52 to $0.54, based on approximately 36.8 million fully diluted shares outstanding.
 

Conference Call Information

       
What: Fabrinet Second quarter Fiscal-Year 2016 Financial Results Conference Call
When: Monday, February 1, 2016
Time: 5:00 p.m. ET
Live Call: (888) 357-3694, domestic
(253) 237-1137, international

 

Passcode: 25405326

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

 

Passcode: 25405326

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 of America. 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 complete construction of a new manufacturing building in Thailand and continue to achieve profitable growth, 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 third 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); delays in construction of our new manufacturing building in Thailand; 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 3, 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, executive separation costs, investigation cost, expenses related to flooding, expenses related to reduction in workforce, amortization of debt issuance costs and unrealized gain or loss on foreign currency. 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
As of December 25, 2015 and June 26, 2015
   
(in thousands of U.S. dollars, except share data)

December 25,
2015

June 26,
2015

 
Assets
Current assets
Cash and cash equivalents

$

131,359

$

112,978

Marketable securities 135,199 142,866
Trade accounts receivable, net 147,430 134,952
Inventory, net 140,862 130,613
Deferred tax assets 1,555 1,662
Prepaid expenses 1,003 2,135
Other current assets   1,612   1,833
Total current assets   559,020   527,039
Non-current assets
Property, plant and equipment, net 159,415 140,654
Intangibles, net 321 137
Deferred tax assets 2,249 2,249
Deferred debt issuance costs and others   2,581   2,424
Total non-current assets   164,566   145,464
Total Assets $ 723,586 $ 672,503
 
Liabilities and Shareholders’ Equity
Current liabilities

Bank borrowings, including revolving loan and current portion of Long-term loan from bank

$

54,000

$ 36,000
Trade accounts payable 114,911 115,319
Income tax payable 1,757 1,470
Accrued payroll, bonus and related expenses 9,528 9,804
Accrued expenses 12,512 6,405
Other payables   14,445   12,050
Total current liabilities   207,153   181,048
Non-current liabilities
Long-term loans from bank, non-current portion 1,500 4,500
Deferred tax liability 1,043 737
Severance liabilities 5,767 5,477
Other non-current liabilities   1,899   1,797
Total non-current liabilities   10,209   12,511
Total Liabilities   217,362   193,559
Commitments and contingencies
Shareholders’ equity

Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of December 25, 2015 and June 26, 2015)

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 35,871,740 shares and 35,437,654 shares issued and outstanding as of December 25, 2015 and June 26, 2015, respectively)

359 354
Additional paid-in capital 95,482 89,390
Retained earnings 410,650 389,244
Accumulated other comprehensive loss   (267)   (44)
Total Shareholders’ Equity   506,224   478,944
Total Liabilities and Shareholders’ Equity

$

723,586

$ 672,503
 
 

Fabrinet

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income

For the three and six months ended December 25, 2015 and December 26, 2014

 
 Three Months Ended  Six Months Ended
(in thousands of U.S. dollars, except per share amounts)

December 25,
2015

 

December 26,
2014

December 25,
2015

 

December 26,
2014

Revenues $ 233,038 $ 188,353 $ 449,471 $ 377,678
Cost of revenues   (204,545)   (167,292)   (394,967)   (336,111)
Gross profit 28,493 21,061 54,504 41,567
Selling, general and administrative expenses (13,715) (10,314) (25,615) (19,051)
Other expenses in relation to flood (864)
Expenses related to reduction in workforce     (1,153)     (1,153)
Operating income 14,778 9,594 28,025 21,363
Interest income 455 324 897 698
Interest expense (419) (117) (821) (250)
Foreign exchange gain (loss), net 6,166 83 (4,326) (23)
Other income (expense)   106   (134)   209   (31)
Income before income taxes 21,086 9,750 23,984 21,757
Income tax expense   (1,283)   (1,024)   (2,578)   (1,995)
Net income   19,803   8,726   21,406   19,762
Other comprehensive loss, net of tax:
Change in net unrealized holding losses on marketable securities (262) (486) (175) (486)
Other   (48)     (48)  
Total other comprehensive loss, net of tax   (310)   (486)   (223)   (486)
Net comprehensive income $ 19,493 $ 8,240 $ 21,183 $ 19,276
 
Earnings per share
Basic $ 0.55 $ 0.25 $ 0.60 $ 0.56
Diluted $ 0.54 $ 0.24 $ 0.59 $ 0.55
 
Weighted-average number of ordinary shares outstanding (thousands of shares)
Basic 35,812 35,349 35,695 35,289
Diluted 36,826 35,917 36,570 35,752
 
 
Fabrinet
Unaudited Condensed Consolidated Statements of Cash Flows
For the six months ended December 25, 2015 and December 26, 2014
   
Six Months Ended
(in thousands of U.S. dollars)

December 25,
2015

December 26,
2014

 
Cash flows from operating activities
Net income for the period $ 21,406 $ 19,762
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation 8,268 5,907
Amortization of intangibles 26 42
Gain on disposal of property, plant and equipment (49) (46)
Loss from sales and maturities of available-for-sale securities 124
Amortization of investment premium 457 298
Amortization of deferred debt issuance costs 358 228
Reversal of allowance for doubtful accounts (7) (3)
Unrealized loss (gain) on exchange rate and fair value of derivative 5,566 (19)
Share-based compensation 5,783 3,797
Deferred income tax 413 (84)
Other non-cash expenses 765 725
(Reversal of) inventory obsolescence (478) 317
Loss from written-off inventory 233
Changes in operating assets and liabilities
Trade accounts receivable (12,486) (2,949)
Inventory (10,004) (3,551)
Other current assets and non-current assets 1,019 (34)
Trade accounts payable (405) 3,852
Income tax payable 320 386
Other current liabilities and non-current liabilities   2,395   1,973
Net cash provided by operating activities   23,704   30,601
Cash flows from investing activities
Purchase of marketable securities (53,258) (143,684)
Proceeds from sales of marketable securities 25,709 1,056
Proceeds from maturities of marketable securities 34,460 543
Purchase of property, plant and equipment (26,407) (5,372)
Purchase of intangibles (210) (22)
Proceeds from disposal of property, plant and equipment   58   46
Net cash used in investing activities   (19,648)   (147,433)
Cash flows from financing activities
Payment of debt issuance costs (359) (1,746)
Proceeds from revolving loans 18,000
Repayment of long-term loans from bank (3,000) (3,000)
Proceeds from issuance of ordinary shares under employee share option plans 2,025 415
Withholding tax related to net share settlement of restricted share units   (1,711)   (293)
Net cash provided by (used in) financing activities   14,955   (4,624)
Net increase (decrease) in cash and cash equivalents   19,011   (121,456)
 
Movement in cash and cash equivalents
Cash and cash equivalents at beginning of period 112,978 233,477
Increase (decrease) in cash and cash equivalents 19,011 (121,456)
Effect of exchange rate on cash and cash equivalents   (630)   (50)
Cash and cash equivalents at end of period $ 131,359 $ 111,971
 
Non-cash investing and financing activities
Construction and equipment-related payables $ 6,657 $ 10,919
 
 
Fabrinet
Reconciliation of GAAP measures
(in thousands of U.S. dollars, except per share data)
(unaudited)
                   
Three Months EndedSix Months Ended
December 25,December 25,December 26,December 26,December 25,December 25,December 26,December 26,
2015  20152014  20142015  20152014  2014
Net incomeDiluted EPSNet incomeDiluted EPSNet incomeDiluted EPSNet incomeDiluted EPS
 
GAAP measures19,8030.548,7260.2421,4060.5919,7620.55
Items reconciling GAAP net income & EPS to non-GAAP net income & EPS:
Related to cost of revenues:
Share-based compensation expenses 540 0.01 360 0.01 1,077 0.03 728 0.02
Total related to gross profit 540 0.01 360 0.01 1,077 0.03 728 0.02
 
Related to selling, general and administrative expenses:
Share-based compensation expenses 2,570 0.07 1,570 0.04 4,706 0.13 3,069 0.09
Executive separation cost 552 0.01 552 0.01
Investigation cost 2,500 0.07 4,100 0.11
Total related to selling, general and administrative expenses 3,122 0.08 4,070 0.11 5,258 0.14 7,169 0.20
 
Related to other incomes and other expenses:
Expenses related to flooding 864 0.02
Expenses related to reduction in workforce 1,153 0.03 1,153 0.03
Amortization of debt issuance costs 187 0.01 228 0.01 358 0.01 228 0.01
(Gain)/loss on foreign currency (5,418) (0.15) 5,479 0.15
Total related to other incomes and other expenses (5,231) (0.14) 1,381 0.04 6,701 0.18 1,381 0.04
 
Related to income tax benefit:
Income tax benefit (187) (0.01) (187) (0.01)
Total related to income tax benefit (187) (0.01) (187) (0.01)
 
Total related to net income & EPS(1,569)(0.04)5,6240.1613,0360.359,0910.25
 
Non-GAAP measures18,2340.5014,3500.4034,4420.9428,8530.81
 
Shares used in computing diluted net income per share
GAAP diluted shares 36,826 35,917 36,570 35,752
Non-GAAP diluted shares 36,826 35,917 36,570 35,752

Investor Contact:
Fabrinet
Garo Toomajanian, 617-956-6728
ir@fabrinet.com