EX-99.1 5 d677902dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Fabrinet Announces First Quarter Fiscal Year 2019 Financial Results

November 5, 2018

BANGKOK–(BUSINESS WIRE)–Nov. 5, 2018—Fabrinet (NYSE: FN), a leading provider of advanced optical packaging and precision optical, electromechanical and electronic manufacturing services to original equipment manufacturers of complex products, today announced its financial results for its first quarter ended September 28, 2018.

Seamus Grady, Chief Executive Officer of Fabrinet, said, “With a strong start to the year, we exceeded our guidance for revenue and profitability in the first quarter. Our sequential growth, which was better than anticipated, was driven primarily by double-digit growth in both telecom and datacom optical communications products. We are optimistic that the momentum we experienced during the first quarter will continue into the second quarter, as we leverage the combination of our leading market position and strong execution to deliver further financial success.”

First Quarter Fiscal Year 2019 Financial Highlights

As of the first quarter of fiscal 2019, Fabrinet is reporting results under the new revenue recognition standard Accounting Standards Codification Topic 606 (“ASC 606”), using the modified retrospective method. Financial results for reporting periods prior to fiscal year 2019 are presented as previously disclosed in conformity with the new revenue recognition standard Accounting Standards Codification Topic 606 (“ASC 605”). A reconciliation to ASC 605 is included at the end of this press release.

GAAP Results

 

  •  

Revenue for the first quarter of fiscal year 2019 was $377.2 million, compared to revenue of $357.3 million for the comparable period in fiscal year 2018.

 

  •  

GAAP net income for the first quarter of fiscal year 2019 was $27.9 million, compared to GAAP net income of $21.0 million for the first quarter of fiscal year 2018. GAAP net income for the first quarter of fiscal year 2019 included a foreign exchange benefit of $3.1 million, or $0.08 per diluted share, compared to a foreign exchange loss of $1.9 million, or $0.05 per diluted share, for the first quarter of fiscal year 2018.

 

  •  

GAAP net income per diluted share for the first quarter of fiscal year 2019 was $0.75, compared to GAAP net income per diluted share of $0.55 for the first quarter of fiscal year 2018.

Non-GAAP Results

 

  •  

Non-GAAP net income for the first quarter of fiscal year 2019 was $34.1 million, compared to non-GAAP net income of $28.6 million for the first quarter of fiscal year 2018. Non-GAAP net income for the first quarter of fiscal year 2019 included a foreign exchange loss of $3.1 million, or $0.08 per diluted share, compared to a foreign exchange loss of $1.9 million, or $0.05 per diluted share, for the first quarter of fiscal year 2018.

 

  •  

Non-GAAP net income per diluted share for the first quarter of fiscal year 2019 was $0.92, compared to non-GAAP net income per diluted share of $0.75 for the same period a year ago.

Share Repurchase Program Update

There was no share repurchase activity during the three months ended September 28, 2018. As of September 28, 2018, Fabrinet had a remaining authorization to purchase up to an additional $17.6 million worth of its ordinary shares.

Business Outlook

The guidance provided below is based on ASC 605. As of the first quarter of fiscal 2019, Fabrinet is reporting results under ASC 606, which it is adopting for fiscal year 2019 on a modified retrospective method. A reconciliation to ASC 605 is included at the end of this press release.

Based on information available as of November 5, 2018, Fabrinet is issuing guidance for its second fiscal quarter of 2019 ending December 28, 2018, as follows:

 

  •  

Fabrinet expects second quarter revenue to be in the range of $380 million to $388 million.

 

  •  

GAAP net income per diluted share is expected to be in the range of $0.77 to $0.80, based on approximately 37.6 million fully diluted shares outstanding.

 

  •  

Non-GAAP net income per diluted share is expected to be in the range of $0.91 to $0.94, based on approximately 37.6 million fully diluted shares outstanding.

Conference Call Information

 

What:    Fabrinet First Quarter Fiscal-Year 2019 Financial Results Call
When:    Monday, November 5, 2018
Time:    5:00 p.m. ET
Live Call:    (888) 357-3694, domestic
   (253) 237-1137, international
   Passcode: 3789048
Replay:    (855) 859-2056, domestic
   (404) 537-3406, international
   Passcode: 3789048
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 optimism that our first quarter momentum will continue into the second quarter of fiscal year 2019 and that we will deliver further financial success; and (2) all of the statements under the “Business Outlook” section regarding our expected revenue, GAAP and non-GAAP net income per share, and fully diluted shares outstanding for the second quarter of fiscal year 2019. 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-K, filed on August 22, 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; severance payments; expenses related to our CFO search; debt administration expense; amortization of intangibles; business combination expenses; loss (gain) on foreign currency contracts; amortization of debt issuance costs; restructuring charges; and ASC 606 adjustments. 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

CONSOLIDATED BALANCE SHEETS

 

(in thousands of U.S. dollars, except share data)    September 28,
2018		     June 29,
2018		  

Assets

     

Current assets

     

Cash and cash equivalents

    $ 219,976     $ 158,102  

Restricted cash in connection with business acquisition

      —         3,331  

Marketable securities

      132,383       174,269  

Trade accounts receivable, net

      258,705       246,912  

Contract assets

      10,157       —    

Inventory, net

      278,397       257,687  

Prepaid expenses

      10,978       8,061  

Other current assets

      6,512       5,948  
  

 

 

    

 

 

  

Total current assets

      917,108       854,310  
  

 

 

    

 

 

  

Non-current assets

     

Property, plant and equipment, net

      216,849       219,640  

Intangibles, net

      4,590       4,880  

Goodwill

      3,822       3,828  

Deferred tax assets

      5,378       5,280  

Deferred debt issuance costs on revolving loan and other non-current assets

      57       80  
  

 

 

    

 

 

  

Total non-current assets

      230,696       233,708  
  

 

 

    

 

 

  

Total Assets

    $ 1,147,804     $ 1,088,018  
  

 

 

    

 

 

  

Liabilities and Shareholders’ Equity

     

Current liabilities

     

Bank borrowings

    $ 3,250     $ 3,250  

Trade accounts payable

      249,080       220,159  

Capital lease liability, current portion

      434       451  

Income tax payable

      2,389       709  

Deferred liability in connection with business acquisition

      —         3,331  

Accrued payroll, bonus and related expenses

      19,484       13,476  

Accrued expenses

      10,277       9,013  

Other payables

      20,862       19,728  
  

 

 

    

 

 

  

Total current liabilities

      305,776       270,117  
  

 

 

    

 

 

  

Non-current liabilities

     

Long-term loan from bank

      60,125       60,938  

Deferred tax liability

      2,387       2,284  

Capital lease liability, non-current portion

      414       516  

Severance liabilities

      10,835       10,162  

Other non-current liabilities

      2,110       3,062  
  

 

 

    

 

 

  

Total non-current liabilities

      75,871       76,962  
  

 

 

    

 

 

  

Total Liabilities

      381,647       347,079  
  

 

 

    

 

 

  

Commitments and contingencies

     

Shareholders’ equity

     

Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of September 28, 2018 and June 29, 2018)

      —         —    

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 38,118,609 shares and 37,723,733 shares issued, and 36,829,506 shares and 36,434,630 shares outstanding as of September 28, 2018 and June 29, 2018, respectively)

      381       377  

Additional paid-in capital

      147,869       151,797  

Treasury shares at cost (1,289,103 shares and 1,289,103 shares as of September 28, 2018 and June 29, 2018, respectively)

      (42,401 )      (42,401 ) 

Accumulated other comprehensive loss

      (1,170 )      (1,257 ) 

Retained earnings

      661,478       632,423  
  

 

 

    

 

 

  

Total Shareholders’ Equity

      766,157       740,939  
  

 

 

    

 

 

  

Total Liabilities and Shareholders’ Equity

    $ 1,147,804     $ 1,088,018  
  

 

 

    

 

 

  

FABRINET

CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

 

     Three Months Ended  
(in thousands of U.S. dollars, except per share amounts)    September 28,
2018		     September 29,
2017		  

Revenues

    $ 377,177     $ 357,313  

Cost of revenues

      (336,901 )      (316,981 ) 
  

 

 

    

 

 

  

Gross profit

      40,276       40,332  

Selling, general and administrative expenses

      (14,437 )      (15,678 ) 

Expenses related to reduction in workforce

      (85 )      —    
  

 

 

    

 

 

  

Operating income

      25,754       24,654  

Interest income

      1,444       809  

Interest expense

      (634 )      (853 ) 

Foreign exchange gain (loss), net

      3,068       (1,934 ) 

Other income

      77       97  
  

 

 

    

 

 

  

Income before income taxes

      29,709       22,773  

Income tax expense

      (1,859 )      (1,740 ) 
  

 

 

    

 

 

  

Net income

      27,850       21,033  
  

 

 

    

 

 

  

Other comprehensive (loss) income, net of tax:

     

Change in net unrealized gain on marketable securities

      288       29  

Change in net unrealized loss on derivative instruments

      (1 )      (1 ) 

Change in foreign currency translation adjustment

      (200 )      526  
  

 

 

    

 

 

  

Total other comprehensive (loss) income, net of tax

      87       554  
  

 

 

    

 

 

  

Net comprehensive income

    $ 27,937     $ 21,587  
  

 

 

    

 

 

  

Earnings per share

     

Basic

    $ 0.76     $ 0.56  

Diluted

    $ 0.75     $ 0.55  

Weighted-average number of ordinary shares outstanding (thousands of shares)

 

Basic

      36,625       37,447  

Diluted

      37,140       38,163  

FABRINET

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     Three Months Ended  
(in thousands of U.S. dollars)    September 28,
2018		     September 29,
2017		  

Cash flows from operating activities

     

Net income for the period

    $ 27,850     $ 21,033  

Adjustments to reconcile net income to net cash provided by used in operating activities

     

Depreciation and amortization

      7,412       7,419  

Loss (Gain) on disposal of property, plant and equipment

      46       (131 ) 

Loss on written-off of intangibles

      149       —    

Loss from sales and maturities of available-for-sale securities

      178       353  

Amortization of investment (premium) discount

      (94 )      (216 ) 

Amortization of deferred debt issuance costs

      —         150  

(Reversal of) allowance for doubtful accounts

      —         (1 ) 

Unrealized (gain) loss on exchange rate and fair value of derivative instruments

      (4,232 )      2,026  

Share-based compensation

      4,980       6,920  

Deferred income tax

      3       (307 ) 

Other non-cash expenses

      590       629  

Reversal of inventory obsolescence

      (478 )      (292 ) 

Changes in operating assets and liabilities

     

Trade accounts receivable

      (10,887 )      (11,122 ) 

Contract assets

      (280 )      —    

Inventory

      (28,904 )      (16,032 ) 

Other current assets and non-current assets

      (1,029 )      (7,263 ) 

Trade accounts payable

      29,182       (11,323 ) 

Income tax payable

      1,680       493  

Other current liabilities and non-current liabilities

      8,427       4,610  
  

 

 

    

 

 

  

Net cash provided by (used in) operating activities

      34,593       (3,054 ) 
  

 

 

    

 

 

  

Cash flows from investing activities

     

Purchase of marketable securities

      (1,955 )      (26,969 ) 

Proceeds from sales of marketable securities

      24,181       11,730  

Proceeds from maturities of marketable securities

      19,863       14,947  

Purchase of property, plant and equipment

      (5,410 )      (11,203 ) 

Purchase of intangibles

      (78 )      (702 ) 

Proceeds from disposal of property, plant and equipment

      —         142  
  

 

 

    

 

 

  

Net cash provided by (used in) investing activities

      36,601       (12,055 ) 
  

 

 

    

 

 

  

Cash flows from financing activities

     

Repayment of short-term loans from bank

      —         (992 ) 

Repayment of long-term loans from bank

      (813 )      (3,400 ) 

Repayment of capital lease liability

      (123 )      (95 ) 

Proceeds from issuance of ordinary shares under employee share option plans

      —         931  

Release of restricted cash held in connection with business acquisition

      (3,478 )      —    

Withholding tax related to net share settlement of restricted share units

      (8,904 )      (3,550 ) 
  

 

 

    

 

 

  

Net cash used in financing activities

      (13,318 )      (7,106 ) 
  

 

 

    

 

 

  

Net decrease in cash, cash equivalents and restricted cash

      57,876       (22,215 ) 
  

 

 

    

 

 

  

Movement in cash, cash equivalents and restricted cash

     

Cash, cash equivalents and restricted cashat beginning of period

      161,433       137,137  

Increase (decrease) in cash, cash equivalents and restricted cash

      57,876       (22,215 ) 

Effect of exchange rate on cash, cash equivalents and restricted cash

      667       123  
  

 

 

    

 

 

  

Cash, cash equivalents and restricted cash at end of period

    $ 219,976     $ 115,045  
  

 

 

    

 

 

  

Non-cash investing and financing activities

     

Construction, software-related and equipment-related payables

    $ 3,830     $ 4,658  

FABRINET

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

 

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

 

(amount in thousands)    As of
September 28,
2018		      As of
September 29,
2017		  

Cash and cash equivalents

    $ 219,976      $ 111,631  

Restricted cash in connection with business acquisition (non-current assets)

      —          3,414  
  

 

 

     

 

 

  

Cash, cash equivalents and restricted cash

    $ 219,976      $ 115,045  
  

 

 

     

 

 

  

FABRINET

RECONCILIATION OF ASC 605 TO ASC 606

 

     Three Months Ended  
     September 28, 2018  
(in thousands of U.S. dollars, except per share amounts)    ASC 605     ASC 606     Impact  

Revenues

    $ 376,897     $ 377,177     $ (280 ) 

Cost of revenues

      (336,652 )      (336,901 )      249  
  

 

 

    

 

 

    

 

 

  

Gross profit

      40,245       40,276       (31 ) 

Selling, general and administrative expenses

      (14,437 )      (14,437 )      —    

Expenses related to reduction in workforce

      (85 )      (85 )      —    
  

 

 

    

 

 

    

 

 

  

Operating income

      25,723       25,754       (31 ) 

Interest income

      1,444       1,444       —    

Interest expense

      (634 )      (634 )      —    

Foreign exchange gain (loss), net

      3,068       3,068       —    

Other income

      77       77       —    
  

 

 

    

 

 

    

 

 

  

Income before income taxes

      29,678       29,709       (31 ) 

Income tax expense

      (1,859 )      (1,859 )      —    
  

 

 

    

 

 

    

 

 

  

Net income

      27,819       27,850       (31 ) 
  

 

 

    

 

 

    

 

 

  

Other comprehensive (loss) income, net of tax:

       

Change in net unrealized gain on marketable securities

      288       288       —    

Change in net unrealized loss on derivative instruments

      (1 )      (1 )      —    

Change in foreign currency translation adjustment

      (200 )      (200 )      —    
  

 

 

    

 

 

    

 

 

  

Total other comprehensive (loss) income, net of tax

      87       87       —    
  

 

 

    

 

 

    

 

 

  

Net comprehensive income

    $ 27,906     $ 27,937       (31 ) 
  

 

 

    

 

 

    

 

 

  

Earnings per share

       

Basic

    $ 0.76     $ 0.76       —    

Diluted

    $ 0.75     $ 0.75       —    

Weighted-average number of ordinary shares outstanding (thousands of shares)

       

Basic

      36,625       36,625       —    

Diluted

      37,140       37,140       —    

FABRINET

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

     Three Months Ended  
     September 28, 2018     September 29, 2017  
     (ASC 606)     ASC (605)  

(in thousands of U.S. dollars,

except per share data)

    Net
income		     Diluted
EPS		     Net
income		      Diluted
EPS		  

GAAP measures

    $ 27,850     $ 0.75     $ 21,033      $ 0.55  

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

          

Related to cost of revenues:

          

Share-based compensation expenses

      1,847       0.05       1,901        0.05  

Depreciation of fair value uplift

      89       0.00       67        0.00  
  

 

 

    

 

 

    

 

 

     

 

 

  

Total related to gross profit

      1,936       0.05       1,968        0.05  
  

 

 

    

 

 

    

 

 

     

 

 

  

Related to selling, general and administrative expenses:

          

Share-based compensation expenses

      3,133       0.08       5,019        0.13  

Expenses related to CFO search

      190       0.01       —          —    

Amortization of intangibles

      192       0.01       169        0.00  

Business combination expenses

      182       0.00       106        0.00  

Severance payment

      585       0.02       —          —    
  

 

 

    

 

 

    

 

 

     

 

 

  

Total related to selling, general and administrative expenses

      4,282       0.12       5,294        0.14  
  

 

 

    

 

 

    

 

 

     

 

 

  

Related to other incomes and other expenses:

          

Restructuring charges

      85       0.00       —          —    

Amortization of debt issuance costs

      —         —         273        0.01  
  

 

 

    

 

 

    

 

 

     

 

 

  

Total related to other incomes and other expenses

      85       0.00       273        0.01  
  

 

 

    

 

 

    

 

 

     

 

 

  

Total related to net income & EPS

      6,303       0.17       7,535        0.20  
  

 

 

    

 

 

    

 

 

     

 

 

  

Non-GAAP measures

    $ 34,153     $ 0.92     $ 28,568      $ 0.75  
  

 

 

    

 

 

    

 

 

     

 

 

  

ASC 606 adoption impact on gross profit

      (31 )      (0.00 )      —          —    

Non-GAAP measures (ASC 605)

    $ 34,122     $ 0.92     $ 28,568      $ 0.75  
  

 

 

    

 

 

    

 

 

     

 

 

  

Shares used in computing diluted net income per share

          

GAAP diluted shares

        37,140          38,163  

Non-GAAP diluted shares

        37,140          38,163  

FABRINET

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW

 

(amount in thousands)    Three Months Ended  
     September 28,     September 29,  
     2018     2017  

Net cash provided by operating activities

    $ 34,593     $ (3,054 ) 

Less: Purchase of property, plant and equipment

      (5,410 )      (11,203 ) 
  

 

 

    

 

 

  

Non-GAAP free cash flow

    $ 29,183     $ (14,257 ) 
  

 

 

    

 

 

  

FABRINET

GUIDANCE FOR QUARTER ENDING DECEMBER 28, 2018

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

     Diluted
EPS		  

GAAP net income per diluted share:

    $ 0.77 to $0.80  

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

      0.09  

Expenses related to our CFO search

      0.01  
  

 

 

  

Total related to selling, general and administrative expenses

      0.10  
  

 

 

  

Total related to net income & EPS

      0.14  
  

 

 

  

Non-GAAP net income per diluted share

    $ 0.91 to $0.94  
  

 

 

  

View source version on businesswire.com: https://www.businesswire.com/news/home/20181105005920/en/

Source: Fabrinet

Fabrinet

Garo Toomajanian

ir@fabrinet.com