MRO Magazine

Fabrinet Announces Third Quarter Fiscal 2015 Financial Results


May 4, 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 third quarter ended March 27, 2015.

Fabrinet reported total revenue of $189.5 million for the third quarter of fiscal 2015, an increase of 13% compared to total revenue of $167.7 million for the comparable period in fiscal 2014. GAAP net income for the third quarter of fiscal 2015 was $10.8 million, or $0.30 per diluted share, compared to GAAP net income of $47.7 million, or $1.33 per diluted share, in the third quarter of fiscal 2014. GAAP net income for the third quarter of fiscal 2014 was positively impacted by $38.2 million, or $1.07 per diluted share, due to the collection of final insurance proceeds. Non-GAAP net income in the third quarter of fiscal 2015 was $13.0 million, or $0.36 per diluted share, compared to non-GAAP net income of $12.3 million, or $0.34 per diluted share, in the same period a year ago.

Tom Mitchell, Chief Executive Officer of Fabrinet, said, “Our third quarter results were solid, with revenue and EPS ahead of our expectations. Our initiatives to expand our new product introduction and advanced packaging capabilities are well underway and we are on track to ship our first products from our new west coast facility in the current quarter.”

Business Outlook

Based on information available as of May 4, 2015, Fabrinet is issuing guidance for the fourth quarter of fiscal 2015 as follows:

Fabrinet expects fourth quarter revenue to be in the range of $195 million to $199 million. GAAP net income per share is expected to be in the range of $0.33 to $0.35 with expected non-GAAP net income per share of $0.37 to $0.39, based on approximately 36 million fully diluted shares outstanding.

Conference Call Information

What:       Fabrinet Third Quarter 2015 Financial Results Conference Call
When: Monday, May 4, 2015
Time: 5:00 p.m. ET
Live Call: (888) 357-3694, domestic
(253) 237-1137, international
Passcode: 18428518
Replay: (855) 859-2056, domestic
(404) 537-3406, international
Passcode: 18428518
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 statements regarding the expected timing of shipping our first products from our new west coast facility and all of the statements under the “Business Outlook” section relating to our forecasted operating results for the fourth quarter of fiscal 2015. 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 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, and income (expense) 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 March 27, 2015 and June 27, 2014            
(in thousands of U.S. dollars, except share data)

March 27,
2015

June 27,
2014

Assets
Current assets
Cash and cash equivalents $ 128,946 $ 233,477
Marketable securities 125,398
Trade accounts receivable, net 120,054 101,168
Inventory, net 126,660 124,570
Deferred tax assets 1,486 1,561
Prepaid expenses 2,272 1,691
Other current assets 1,822 2,010
Total current assets 506,638 464,477
Non-current assets
Property, plant and equipment, net 133,998 97,244
Intangibles, net 45 72
Deferred tax assets 1,690 1,775
Deferred debt issuance cost 2,573 989
Total non-current assets 138,306 100,080
Total assets $ 644,944 $ 564,557
Liabilities and Shareholders’ Equity
Current liabilities
Bank borrowings, including revolving loan and current portion of long-term loan from banks $ 36,000 $ 6,000
Trade accounts payable 103,053 94,853
Equipment-related payable 4,170 1,130
Income tax payable 979 1,024
Accrued payroll, bonus and related expenses 9,977 8,612
Accrued expenses 7,120 4,345
Other payables 6,258 4,665
Total current liabilities 167,557 120,629
Non-current liabilities
Long-term loans from bank, non-current portion 6,000 10,500
Deferred tax liability 1,017 1,040
Severance liabilities 5,001 4,453
Other non-current liabilities 1,691 1,099
Total non-current liabilities 13,709 17,092
Total liabilities 181,266 137,721
Commitments and contingencies
Shareholders’ equity
Preferred shares (5,000,000 shares authorized, $0.01 par value;
no shares issued and outstanding as of March 27, 2015 and June 27, 2014)
Ordinary shares (500,000,000 shares authorized, $0.01 par value;
35,426,140 shares and 35,152,772 shares issued and
outstanding as of March 27, 2015 and June 27, 2014, respectively) 354 352
Additional paid-in capital 87,088 80,882
Retained earnings 376,210 345,602
Accumulated other comprehensive income 26
Total shareholders’ equity 463,678 426,836
Total Liabilities and Shareholders’ Equity $ 644,944 $ 564,557

Fabrinet
Consolidated Statements of Operations and Comprehensive Income
For the three and nine months ended March 27, 2015 and March 28, 2014

 
Three Months EndedNine Months Ended
March 27,March 28,March 27,March 28,
(in thousands of U.S. dollars, except share data)2015  2014  2015  2014
 
Revenues $ 189,453 $ 167,657 $ 567,131 $ 517,770
Cost of revenues (167,796) (150,374) (503,907) (461,312)
Gross profit 21,657 17,283 63,224 56,458
Selling, general and administrative expenses (9,670) (7,352) (28,721) (20,959)
Expenses related to reduction in workforce (1,153)
Income related to flooding, net 38,151 44,748
Operating income 11,987 48,082 33,350 80,247
Interest income 258 560 956 1,262
Interest expense (125) (172) (375) (566)
Foreign exchange (loss) gain, net (87) (254) (110) 46
Other (expense) income (75) 173 (106) 544
Income before income taxes 11,958 48,389 33,715 81,533
Income tax expense (1,113) (727) (3,108) (135)
Net income 10,845 47,662 30,607 81,398
Other comprehensive income, before tax:
Change in fair value of marketable securities 450 (43)
Less: Reclassification adjustment for net loss realized
and included in net income 62 69
Total change in unrealized gain on marketable
securities, before tax 512 26
Income tax expense related to items of other
comprehensive income
Total other comprehensive income, net of tax 512 26
Net comprehensive income $ 11,357 $ 47,662 $ 30,633 $ 81,398
 
Earnings per share
Basic $ 0.31 $ 1.36 $ 0.87 $ 2.33
Diluted $ 0.30 $ 1.33 $ 0.85 $ 2.29
Weighted-average number of ordinary shares outstanding (thousands of shares)
Basic 35,406 35,078 35,328 34,878
Diluted 36,110 35,790 35,871 35,504

Fabrinet
Consolidated Statements of Cash Flows
For the nine months ended March 27, 2015 and March 28, 2014

   
Nine Months Ended
March 27,  March 28,
(in thousands of U. S. dollars)20152014
 
Cash flows from operating activities
Net income for the period $ 30,607 $ 81,398
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation 9,261 7,685
Amortization of intangibles 61 72
Loss from sales and maturities of available-for-sale securities 62
Gain on disposal of property, plant and equipment (41) (1)
Amortization of investment premium 757
Amortization of deferred debt issuance costs 377
Income related to flooding (45,211)
Proceeds from insurers for inventory losses related to flooding 7,416
Reversal of allowance for doubtful accounts 3 (62)
Unrealized (gain) loss on exchange rate and fair value of derivative (55) 1,027
Share-based compensation 5,806 4,538
Deferred income tax 137 (132)
Other non-cash expenses 1,141 255
Reversal of uncertain tax positions (1,538)
Inventory obsolescence 332 673
Changes in operating assets and liabilities
Trade accounts receivable (18,889) 37
Inventory (2,422) (19,537)
Other current assets and non-current assets (574) (889)
Trade accounts payable 8,200 24,392
Income tax payable (45) 351
Other current liabilities and non-current liabilities 5,763 5,642
Liabilities to third parties due to flood losses (7,512)
Net cash provided by operating activities 40,481 58,604
Cash flows from investing activities
Purchase of available-for-sale securities (159,396)
Proceeds from sales of available-for-sale securities 22,873
Proceeds from maturities of available-for-sale securities 10,332
Purchase of property, plant and equipment (42,980) (7,280)
Purchase of intangibles (34) (1)
Proceeds from disposal of property, plant and equipment 46 1
Proceeds from insurers in settlement of claims related to flood damage 37,795
Net cash (used in) provided by investing activities (169,159) 30,515
Cash flows from financing activities
Payment of debt issuance costs (1,780)
Proceed from revolving loan

 

30,000

Repayment of long-term loans from bank

 

(4,500)

(7,251)
Proceeds from issuance of ordinary shares under employee share option plans

 

736

3,956
Withholding tax related to net share settlement of restricted share units (334) (198)
Net cash provided by (used in) financing activities 24,122 (3,493)
Net (decrease) increase in cash and cash equivalents $ (104,556) $ 85,626
Fabrinet
Consolidated Statements of Cash Flows (continued)
For the nine months ended March 27, 2015 and March 28, 2014
     
Nine Months Ended
March 27,March 28,
(in thousands of U.S. dollars)20152014
 
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 (104,556) 85,626
Effect of exchange rate on cash and cash equivalents 25 (1,678)
Cash and cash equivalents at end of period $ 128,946 $ 233,664
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 27,  March 27,  March 28,  March 28,March 27,  March 27,  March 28,  March 28,
2015  20152014  20142015  20152014  2014
Net income  Diluted EPSNet income  Diluted EPSNet income  Diluted EPSNet income  Diluted EPS

 

GAAP measures10,8450.3047,6621.3330,6070.8581,3982.29

Items reconciling GAAP net income & EPS to non-GAAP
net income & EPS:

Related to cost of revenues:
Share-based compensation expenses 379 0.01 290 0.01 1,107 0.03 888 0.03
Total related to gross profit 379 0.01 290 0.01 1,107 0.03 888 0.03
 
Related to selling, general and administrative expenses:
Share-based compensation expenses 1,630 0.05 1,188 0.03 4,699 0.13 3,650 0.10
Executive separation cost 547 0.02 547 0.02
Investigation costs 4,100 0.11
Total related to selling, general and administrative expenses 1,630 0.05 1,735 0.05 8,799 0.25 4,197 0.12
 
Related to other incomes and other expenses:
Income related to flooding, net (38,151) (1.07) (44,748) (1.26)

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

744 0.02 744 0.02
Expenses related to reduction in workforce 1,153 0.03

Amortization of debt issuance costs

149 0.00 377 0.01
Total related to other incomes and other expenses 149 0.00 (37,407) (1.05) 1,530 0.04 (44,004) (1.24)
 
Related to income tax benefit
Income tax benefit (187) (0.01)
Total related to income tax benefit (187) (0.01)
 
Total related to net income & EPS2,1580.06(35,382)(0.99)11,2490.31(38,919)(1.10)
 
Non-GAAP measures13,0030.3612,2800.3441,8561.1642,4791.20
 
Shares used in computing diluted net income per share
GAAP diluted shares 36,110 35,790 35,871 35,504
Non-GAAP diluted shares 36,110 35,790 35,871 35,504

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