Fabrinet Announces Third Quarter Fiscal Year 2018 Financial Results

BANGKOK, Thailand--()--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 third quarter ended March 30, 2018.

“We again exceeded our revenue guidance in the third quarter of fiscal 2018. With stabilizing demand and increasing interest in our capabilities we are confident that we can deliver sequential growth in the fourth quarter and further strengthen our position in the marketplace.”

Tom Mitchell, Executive Chairman of Fabrinet, said, “We again exceeded our revenue guidance in the third quarter of fiscal 2018. With stabilizing demand and increasing interest in our capabilities we are confident that we can deliver sequential growth in the fourth quarter and further strengthen our position in the marketplace.”

Seamus Grady, Chief Executive Officer of Fabrinet, said, “We continue to benefit from a mix of established programs and new business, which contributes to our growth and diversification. Our position in the market continues to strengthen as our diverse customers look to Fabrinet to manufacture their most challenging designs.”

Third Quarter Fiscal Year 2018 Financial Highlights

GAAP Results

  • Revenue for the third quarter of fiscal year 2018 was $332.2 million, compared to revenue of $366.8 million for the comparable period in fiscal year 2017.
  • GAAP net income for the third quarter of fiscal year 2018 was $21.1 million, compared to GAAP net income of $21.7 million for the third quarter of fiscal year 2017. GAAP net income for the third quarter of fiscal year 2018 included a foreign exchange loss of $2.4 million, or $0.06 per diluted share, compared to a foreign exchange loss of $3.7 million, or $0.10 per diluted share, for the third quarter of fiscal year 2017.
  • GAAP net income per diluted share for the third quarter of fiscal year 2018 was $0.55, compared to GAAP net income per diluted share of $0.57 for the third quarter of fiscal year 2017.

Non-GAAP Results

  • Non-GAAP net income for the third quarter of fiscal year 2018 was $26.9 million, compared to non-GAAP net income of $30.5 million for the third quarter of fiscal year 2017. Non-GAAP net income for the third quarter of fiscal year 2018 included a foreign exchange loss of $2.4 million, or $0.06 per diluted share, compared to a foreign exchange loss of $3.7 million, or $0.10 per diluted share, for the third quarter of fiscal year 2017.
  • Non-GAAP net income per diluted share for the third quarter of fiscal year 2018 was $0.71, compared to non-GAAP net income per diluted share of $0.80 for the same period a year ago.

Share Repurchase Program Update

Fabrinet repurchased approximately 422,000 ordinary shares at an average price of $29.58 during the third quarter.

Business Outlook

Based on information available as of May 7, 2018, Fabrinet is issuing guidance for its fourth fiscal quarter ending June 29, 2018, as follows:

  • Fabrinet expects fourth quarter revenue to be in the range of $334 million to $342 million.
  • GAAP net income per diluted share is expected to be in the range of $0.55 to $0.59, 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 $0.73 to $0.77, based on approximately 37.9 million fully diluted shares outstanding.

Conference Call Information

   
What: Fabrinet Third Quarter Fiscal-Year 2018 Financial Results Call
When: Monday, May 7, 2018
Time: 5:00 p.m. ET
Live Call: (888) 357-3694, domestic
(253) 237-1137, international
Passcode: 4590788
Replay: (855) 859-2056, domestic
(404) 537-3406, international
Passcode: 4590788
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 our ability to continue to drive profitable growth; and (2) all of the statements under the "Business Outlook" section regarding our expected revenue and GAAP and non-GAAP net income per share for the fourth quarter of fiscal year 2018. 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 February 7, 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; executive separation costs; expenses related to our CEO search; 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

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 
(in thousands of U.S. dollars, except share data) March 30,

2018

June 30,

2017

Assets
Current assets
Cash and cash equivalents $ 142,407 $ 133,825
Marketable securities 169,444 151,450
Trade accounts receivable, net 243,997 264,349
Inventory, net 239,617 238,665
Prepaid expenses 9,466 6,306
Other current assets   11,049   4,159
Total current assets   815,980   798,754
Non-current assets
Restricted cash in connection with business acquisition 3,569 3,312
Property, plant and equipment, net 222,047 216,881
Intangibles, net 5,927 5,840
Goodwill 4,101 3,806
Deferred tax assets 3,046 2,905
Deferred debt issuance costs on revolving loan and other non-current assets   135   1,577
Total non-current assets   238,825   234,321
Total Assets $ 1,054,805 $ 1,033,075
Liabilities and Shareholders’ Equity
Current liabilities
Bank borrowings, net of unamortized debt issuance costs $ 52,464 $ 48,402
Trade accounts payable 193,374 215,262
Fixed assets payable 4,684 8,141
Capital lease liability, current portion 491 344
Income tax payable 298 1,976
Accrued payroll, bonus and related expenses 13,322 13,852
Accrued expenses 11,750 9,227
Other payables 10,776   14,068
Total current liabilities 287,159 311,272
Non-current liabilities
Long-term loan from bank, non-current portion, net of unamortized debt issuance costs 12,595 22,701
Deferred tax liability 2,172 1,981
Capital lease liability, non-current portion 671 1,024
Deferred liability in connection with business acquisition 3,569 3,312
Severance liabilities 10,103 8,488
Other non-current liabilities 2,993 2,723
Total non-current liabilities 32,103 40,229
Total Liabilities   319,262 351,501
Commitments and contingencies
Shareholders’ equity
Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares
issued and outstanding as of March 30, 2018 and June 30, 2017)
Ordinary shares (500,000,000 shares authorized, $0.01 par value; 37,640,215 shares and 37,340,496 shares issued, and
36,901,790 shares and 37,340,496 shares outstanding 376 373
as of March 30, 2018 and June 30, 2017, respectively)
Additional paid-in capital 147,958 133,293
Treasury stock at cost (738,425 shares and zero shares as of

March 30, 2018 and June 30, 2017, respectively)

(22,407)
Accumulated other comprehensive loss (39) (348)
Retained earnings 609,655 548,256
Total Shareholders’ Equity 735,543 681,574
Total Liabilities and Shareholders’ Equity $ 1,054,805 $ 1,033,075
 

FABRINET

 

     

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

 
Three Months Ended Nine Months Ended
(in thousands of U.S. dollars, except per share amounts) March 30,

2018

  March 31,

2017

March 30,

2018

  March 31,

2017

Revenues $ 332,213 $ 366,837 $ 1,026,598 $ 1,050,036
 
Cost of revenues  

(295,280)

  (322,791)  

(912,167)

 

(923,336)

Gross profit 36,933 44,046 114,431 126,700
Selling, general and administrative expenses (12,418) (17,086) (41,253) (50,569)
Expenses related to reduction in workforce       (1,776)  
Operating income 24,515 26,960 71,402 76,131
Interest income 1,149 713 2,554 1,470
Interest expense (820) (641) (2,499) (2,517)
Foreign exchange loss, net (2,428) (3,702) (5,710) (100)
Other income   91   108   438   397
Income before income taxes 22,507 23,438 66,185 75,381
Income tax expense   (1,454)   (1,782)   (4,786)   (5,667)
Net income   21,053   21,656   61,399   69,714
Other comprehensive loss, net of tax:
Change in net unrealized loss on marketable securities (616) 49 (1,048) (491)
Change in net unrealized loss on derivative instruments (1) (158)
Change in foreign currency translation adjustment   789   227   1,358   (935)
Total other comprehensive loss, net of tax   173   276   309   (1,584)
Net comprehensive income $ 21,226 $ 21,932 $ 61,708 $ 68,130
 
Earnings per share
Basic $ 0.56 $ 0.58 $ 1.64 $ 1.89
Diluted $ 0.55 $ 0.57 $ 1.61 $ 1.85
           
Weighted-average number of ordinary shares outstanding (thousands of shares)
Basic 37,275 37,116 37,400 36,792
Diluted 38,055 37,872 38,125 37,750
 

FABRINET
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

         
Nine Months Ended
(in thousands of U.S. dollars) March 30,

2018

March 31,

2017

 
Cash flows from operating activities
Net income for the period $ 61,399 $ 69,714
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 21,288 16,956
(Gain) loss on disposal of property, plant and equipment (153) 7
Loss from sales and maturities of available-for-sale securities 362 407
Amortization of investment (premium) discount (31) 397
Amortization of deferred debt issuance costs 433 1,591
Allowance for doubtful accounts 44 3
Unrealized loss (gain) on exchange rate and fair value of derivative instruments 1,393 (718)
Share-based compensation 17,704 21,936
Deferred income tax 19 1,008
Other non-cash expenses 1,941 1,775
Reversal of inventory obsolescence (291) (72)
Changes in operating assets and liabilities
Trade accounts receivable 21,411 (50,839)
Inventory (973) (39,766)
Other current assets and non-current assets (9,853) 3,921
Trade accounts payable (22,518) 32,653
Income tax payable (1,678) 166
Other current liabilities and non-current liabilities   (703)   1,249
Net cash provided by operating activities   89,794   60,388
Cash flows from investing activities
Purchase of marketable securities (84,519) (100,751)
Proceeds from sales of marketable securities 22,169 33,812
Proceeds from maturities of marketable securities 42,977 54,745
Payments in connection with business acquisition, net of cash acquired (9,917)
Purchase of property, plant and equipment (28,268) (57,224)
Purchase of intangibles (1,487) (1,910)
Proceeds from disposal of property, plant and equipment   202   190
Net cash used in investing activities   (48,926)   (81,055)
Cash flows from financing activities
Proceeds of short-term loans from banks 5,000 27,665
Repayment of short-term loans from bank (1,003)
Repayment of long-term loans from bank (10,200) (14,700)
Repayment of capital lease liability (293) (182)
Repurchase of ordinary shares (22,407)
Proceeds from issuance of ordinary shares under employee share option plans 993 5,890
Withholding tax related to net share settlement of restricted share units   (4,030)   (1,272)
Net cash provided by (used in) financing activities   (31,940)   17,401
Net increase (decrease) in cash, cash equivalents and restricted cash   8,928   (3,266)
 
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 8,928 (3,266)
Effect of exchange rate on cash, cash equivalents and restricted cash   (89)   271
Cash, cash equivalents and restricted cash at end of period $ 145,976 $ 139,809
 
Non-cash investing and financing activities
Construction, software-related and equipment-related payables $ 4,684 $ 12,409
 

FABRINET

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued)

   

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of same amounts shown in the unaudited condensed consolidated statements of cash flows:

 
(amount in thousands) As of

March 30, 2018

As of

March 31, 2017

 
Cash and cash equivalents $ 142,407 $ 136,634

Restricted cash in connection with business acquisition

 

3,569

 

3,175

(non-current assets)

Cash, cash equivalents and restricted cash $ 145,976 $ 139,809
 

FABRINET
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 
        Three Months Ended     Nine Months Ended
    March 30, 2018     March 31, 2017 March 30, 2018     March 31, 2017

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

 

Net
income

Diluted
EPS

 

Net
income

Diluted
EPS

Net
income

Diluted
EPS

Net
income

Diluted
EPS

 
GAAP measures 21,053 0.55 21,656 0.57 61,399 1.61 69,714 1.85
Items reconciling GAAP net (loss) income & EPS to non-GAAP net income & EPS:
Related to cost of revenues:
Share-based compensation expenses

1,564

0.04

1,657 0.04 5,277 0.14 4,185 0.11
Depreciation of fair value uplift

88

0.00

67 0.00 241 0.00 67 0.00

Cost resulting from a non-recurring warranty charge

-

-

-

-

-

-

-

-

 

Total related to gross profit

1,652

0.04

1,724 0.05 5,518 0.14 4,252 0.11
 
Related to selling, general and administrative expenses:
Share-based compensation expenses

3,762

0.10

6,071 0.16 12,427 0.33 17,751 0.47
Executive separation costs

-

-

-

-

-

-

577

0.02

Expenses related to CEO search

-

-

103 0.00 204 0.00 103 0.00
Debt administration expenses

-

-

320

0.01

-

-

320

0.01

Amortization of intangibles

205

0.01

179

0.00

582

0.02

408

0.01

Business combination expenses

-

-

120 0.00 117 0.00 1,630 0.04
Total related to selling, general and administrative expenses

 

3,967

 

0.11

 

6,793

 

0.18

 

13,329

 

0.35

 

20,789

 

0.55

 
Related to other incomes and other expenses:
Loss (gain) on foreign currency contracts

-

-

-

-

-

-

(1,713)

(0.05)

Other expenses in relation to reduction in workforce

-

-

-

-

1,776

0.05

-

-

Amortization of debt issuance costs 238 0.01 283 0.01 778 0.02 1,627 0.04
               
Total related to other incomes and other expenses 238 0.01 283 0.01 2,554 0.07 (86) (0.00)
 
Related to income tax expense
Non-recurring income tax expense

-

-

-

-

-

-

-

-

Total related to income tax expense

-

-

-

-

-

-

-

-

 
Total related to net income & EPS

5,857

0.16

8,800

0.23

21,401

0.56

24,955

0.66

 
Non-GAAP measures 26,910 0.71 30,456 0.80 82,800 2.17 94,669 2.50
 
Shares used in computing diluted net income per share
GAAP diluted shares 38,055 37,872 38,125 37,750
Non-GAAP diluted shares 38,055 37,872 38,125 37,750
 
FABRINET
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH FLOW
               
(in thousands) Three Months Ended Nine Months Ended
March 30, March 31, March 30, March 31,
2018     2017 2018     2017
 
Net cash provided by operating activities $52,681 $40,636 $89,794 $60,388
Less: Purchase of property, plant and equipment (6,863) (12,812) (28,268) (57,224)
Non-GAAP free cash flow $45,818 $27,824 $61,526 $3,164
 

FABRINET
GUIDANCE FOR QUARTER ENDING JUNE 29, 2018

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

     
Diluted
EPS
GAAP net income per diluted share: $0.55 to $0.59
Related to cost of revenues:
Share-based compensation expenses 0.04
Total related to gross profit 0.04
 
Related to selling, general and administrative expenses:
Share-based compensation expenses 0.12
Business combination expenses 0.01
Total related to selling, general and administrative expenses 0.13
 
Related to other incomes and other expenses:
Amortization of debt issuance costs 0.01
 
Total related to net income & EPS 0.18
Non-GAAP net income per diluted share $0.73 to $0.77

Contacts

For Fabrinet
Garo Toomajanian
ir@fabrinet.com

Recent Stories

RSS feed for Fabrinet

Fabrinet