Fabrinet Earnings 2020-03-27

Fabrinet Earnings 2020-03-27

FN 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 27, 2020

☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from

Commission File Number:

001-34775

FABRINET

(Exact name of registrant as specified in its charter)


Cayman Islands		98-1228572
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


c/o Intertrust Corporate Services (Cayman) Limited 190 Elgin Avenue George Town Grand Cayman Cayman Islands		KY1-9005
(Address of principal executive offices)		(Zip Code)

+66

2-524-9600

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary Shares, $0.01 par value		FN		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act).

☐

Yes

☒

As of

April

, 20

, the registrant had

36,722,004

ordinary shares, $0.01 par value, outstanding.

Table of Contents

FABRINET

FORM

10-Q

QUARTER ENDED MARCH 27, 2020

Table of Contents


	Page No.
PART I. FINANCIAL INFORMATION		3

Item 1. Financial Statements		3

Condensed Consolidated Balance Sheets as of March 27, 2020 (unaudited) and June 28, 2019		3

Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended March 27, 2020 and March 29, 2019 (unaudited)		4

Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended March 27, 2020 and March 29, 2019 (unaudited)		5

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 27, 2020 and March 29, 2019 (unaudited)		7

Notes to Condensed Consolidated Financial Statements (unaudited)		9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		34

Item 3. Quantitative and Qualitative Disclosures About Market Risk		46

Item 4. Controls and Procedures		47

PART II. OTHER INFORMATION		48

Item 1. Legal Proceedings		48

Item 1A. Risk Factors		48

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		64

Item 6. Exhibits		65

Signature		66

Table of Contents

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FABRINET

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


(in thousands of U.S. dollars, except share data and par value)	March 27, 2020			June 28, 2019

Assets
Current assets
Cash and cash equivalents	$	224,138		$	180,839
Short-term restricted cash		7,402			—
Short-term investments		233,622			256,493
Trade accounts receivable, net		283,467			260,602
Contract assets		16,413			12,447
Inventories		290,208			293,612
Other receivable		24,310			—
Prepaid expenses		4,524			8,827
Other current assets		8,774			11,015
Total current assets		1,092,858			1,023,835
Non-current assets
Long-term restricted cash		—			7,402
Property, plant and equipment, net		218,043			210,686
Intangibles, net		3,999			3,887
Operating right-of-use assets		7,175			—
Goodwill		3,571			3,705
Deferred tax assets		4,353			5,679
Other non-current assets		262			124
Total non-current assets		237,403			231,483
Total Assets	$	1,330,261		$	1,255,318
Liabilities and Shareholders’ Equity
Current liabilities
Long-term borrowings, current portion, net	$	12,156		$	3,250
Trade accounts payable		240,028			257,617
Contract liabilities		1,941			2,239
Operating lease liabilit ies , current portion		1,893			—
Income tax payable		2,857			1,801
Accrued payroll, bonus and related expenses		19,959			16,510
Accrued expenses		19,798			8,997
Other payables		28,819			22,634
Total current liabilities		327,451			313,048
Non-current liabilities
Long-term borrowings, non-current portion, net		42,553			57,688
Deferred tax liability		3,684			3,561
Operating lease liabilities, non-current portion		5,024			—
Severance liabilities		16,143			15,209
Other non-current liabilities		1,997			2,713
Total non-current liabilities		69,401			79,171
Total Liabilities		396,852			392,219
Commitments and contingencies (Note 19)
Shareholders’ equity
Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of March 27, 2020 and June 28, 2019)		—			—
Ordinary shares (500,000,000 shares authorized, $0.01 par value; 38,460,931 shares and 38,230,753 shares issued as of March 27, 2020 and June 28, 2019, respectively; and 36,716,828 shares and 36,841,650 shares outstanding as of March 27, 2020 and June 28, 2019, respectively)		385			382
Additional paid-in capital		171,870			158,299
Less: Treasury shares, at cost (1,744,103 shares and 1,389,103 shares as of March 27, 2020 and June 28, 2019, respectively)		(68,501	)		(47,779	)
Accumulated other comprehensive loss		(10,383	)		(2,386	)
Retained earnings		840,038			754,583
Total Shareholders’ Equity		933,409			863,099
Total Liabilities and Shareholders’ Equity	$	1,330,261		$	1,255,318

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)


	Three Months Ended						Nine Months Ended
(in thousands of U.S. dollars, except per share data)	March 27, 2020			March 29, 2019			March 27, 2020			March 29, 2019
Revenues	$	411,210		$	398,951		$	1,236,723		$	1,179,208
Cost of revenues		(366,874	)		(352,193	)		(1,097,242	)		(1,046,610	)

Gross profit		44,336			46,758			139,481			132,598
Selling, general and administrative expenses		(17,111	)		(14,132	)		(50,189	)		(41,296	)
Expenses related to reduction in workforce		—			(323	)		(16	)		(727	)

Operating income		27,225			32,303			89,276			90,575
Interest income		2,042			2,144			6,080			4,770
Interest expense		(238	)		(1,423	)		(2,812	)		(3,673	)
Foreign exchange loss, net		(8	)		(3,055	)		(2,949	)		(408	)
Other income, net		203			159			977			798

Income before income taxes		29,224			30,128			90,572			92,062
Income tax expense		(957	)		(1,493	)		(5,117	)		(4,064	)

Net income		28,267			28,635			85,455			87,998

Other comprehensive income (loss), net of tax:
Change in net unrealized (loss) gain on available-for-sale securities		(1,356	)		513			(1,403	)		1,399
Change in net unrealized loss on derivative instruments		(6,569	)		(1	)		(6,719	)		(2	)
Change in net retirement benefits plan – prior service cost		294			—			478			—
Change in foreign currency translation adjustment		(600	)		486			(353	)		(219	)

Total other comprehensive (lo ss) income, net of tax		(8,231	)		998			(7,997	)		1,178

Net comprehensive income	$	20,036		$	29,633		$	77,458		$	89,176


Earnings per share
Basic	$	0.76		$	0.78		$	2.31		$	2.39
Diluted	$	0.75		$	0.76		$	2.27		$	2.35

Weighted-average number of ordinary shares outstanding (thousands of shares)
Basic		36,987			36,891			36,970			36,786
Diluted		37,797			37,539			37,696			37,383

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)

For the Three Months Ended March 27, 2020


(in thousands of U.S. dollars, except share data)	Ordinary Shares				Additional Paid-in Capital			Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total
(in thousands of U.S. dollars, except share data)	Shares		Amount		Additional Paid-in Capital			Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total

Balances at December 27, 2019		38,408,890	$	384	$	166,103		$	(47,779	)	$	(2,152	)	$	811,771	$	928,327
Net income		—		—		—			—			—			28,267		28,267
Other comprehensive loss		—		—		—			—			(8,231	)		—		(8,231	)
Share-based compensation		—		—		6,118			—			—			—		6,118
Issuance of ordinary shares		52,041		1		(1	)		—			—			—		—
Repurchase of 355,000 shares held as treasury shares		—		—		—			(20,722	)		—			—		(20,722	)
Tax withholdings related to net share settlement of restricted share units		—		—		(350	)		—			—			—		(350	)


Balances at March 27, 2020		38,460,931	$	385	$	171,870		$	(68,501	)	$	(10,383	)	$	840,038	$	933,409

For the Nine Months Ended March 27, 2020


(in thousands of U.S. dollars, except share data)	Ordinary Shares				Additional Paid-in Capital			Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total
(in thousands of U.S. dollars, except share data)	Shares		Amount		Additional Paid-in Capital			Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total

Balances at June 28, 2019		38,230,753	$	382	$	158,299		$	(47,779	)	$	(2,386	)	$	754,583	$	863,099
Net income		—		—		—			—			—			85,455		85,455
Other comprehensive loss		—		—		—			—			(7,997	)		—		(7,997	)
Share-based compensation		—		—		18,301			—			—			—		18,301
Issuance of ordinary shares		230,178		3		(3	)		—			—			—		—
Repurchase of 355,000 shares held as treasury shares		—		—		—			(20,722	)		—			—		(20,722	)
Tax withholdings related to net share settlement of restricted share units		—		—		(4,727	)		—			—			—		(4,727	)


Balances at March 27, 2020		38,460,931	$	385	$	171,870		$	(68,501	)	$	(10,383	)	$	840,038	$	933,409

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited) (Continued)

For the Three Months Ended March 29, 2019


(in thousands of U.S. dollars, except share data)	Ordinary Shares				Additional Paid-in Capital			Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total
(in thousands of U.S. dollars, except share data)	Shares		Amount		Additional Paid-in Capital			Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total

Balances at December 28, 2018		38,138,159	$	381	$	151,639		$	(42,401	)	$	(1,077	)	$	692,991	$	801,533
Net income		—		—		—			—			—			28,635		28,635
Other comprehensive income		—		—		—			—			998			—		998
Share-based compensation		—		—		4,424			—			—			—		4,424
Issuance of ordinary shares		78,072		1		(1	)		—			—			—		—
Repurchase of 100,000 shares held as treasury shares		—		—		—			(5,378	)		—			—		(5,378	)
Tax withholdings related to net share settlement of restricted share units		—		—		(1,324	)		—			—			—		(1,324	)


Balances at March 29, 2019		38,216,231	$	382	$	154,738		$	(47,779	)	$	(79	)	$	721,626	$	828,888

For the Nine Months Ended March 29, 2019


(in thousands of U.S. dollars, except share data)	Ordinary Shares				Additional Paid-in Capital			Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total
(in thousands of U.S. dollars, except share data)	Shares		Amount		Additional Paid-in Capital			Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total

Balances at June 29, 2018		37,723,733	$	377	$	151,797		$	(42,401	)	$	(1,257	)	$	632,423	$	740,939
Net income		—		—		—			—			—			87,998		87,998
Other comprehensive income		—		—		—			—			1,178			—		1,178
Cumulative effect adjustment from adoption of ASC 606		—		—		—			—			—			1,205		1,205
Share-based compensation		—		—		13,373			—			—			—		13,373
Issuance of ordinary shares		492,498		5		(5	)		—			—			—		—
Repurchase of 100,000 shares held as treasury shares		—		—		—			(5,378	)		—			—		(5,378	)
Tax withholdings related to net share settlement of restricted share units		—		—		(10,427	)		—			—			—		(10,427	)


Balances at March 29, 2019		38,216,231	$	382	$	154,738		$	(47,779	)	$	(79	)	$	721,626	$	828,888

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


	Nine Months Ended
(in thousands of U.S. dollars)	March 27, 2020	March 29, 2019

Cash flows from operating activities

Price	50.41	EPS	3
Shares	38	P/E	16
MCap	1,892	P/FCF	23
Net Debt	-137	EBIT	132
TEV	1,755	TEV/EBIT	13
TTM 2019-09-27, in MM, except price, ratios

10-Q	2020-03-27	Filed 2020-05-05
10-Q	2019-12-27	Filed 2020-02-04
10-Q	2019-09-27	Filed 2019-11-05
10-K	2019-06-28	Filed 2019-08-20
10-Q	2019-03-29	Filed 2019-05-07
10-Q	2018-12-28	Filed 2019-02-05
10-Q	2018-09-28	Filed 2018-11-06
10-K	2018-06-29	Filed 2018-08-22
10-Q	2018-03-30	Filed 2018-05-08
10-Q	2017-12-29	Filed 2018-02-07
10-Q	2017-09-29	Filed 2017-11-07
10-K	2017-06-30	Filed 2017-08-23
10-Q	2017-03-31	Filed 2017-05-09
10-Q	2016-12-30	Filed 2017-02-07
10-Q	2016-09-30	Filed 2016-11-09
10-K	2016-06-24	Filed 2016-08-17
10-Q	2016-03-25	Filed 2016-05-03
10-Q	2015-12-25	Filed 2016-02-02
10-Q	2015-09-25	Filed 2015-11-03
10-K	2015-06-26	Filed 2015-08-19
10-Q	2015-03-27	Filed 2015-05-05
10-Q	2014-12-26	Filed 2015-02-03
10-Q	2014-09-26	Filed 2014-11-05
10-K	2014-06-27	Filed 2014-10-16
10-Q	2014-03-28	Filed 2014-05-06
10-Q	2013-12-27	Filed 2014-02-04
10-Q	2013-09-27	Filed 2013-11-05
10-K	2013-06-28	Filed 2013-08-16
10-Q	2013-03-29	Filed 2013-05-03
10-Q	2012-12-28	Filed 2013-02-05
10-K	2012-06-29	Filed 2012-08-28
10-Q	2012-03-30	Filed 2012-05-09
10-Q	2011-12-30	Filed 2012-02-08
10-Q	2011-09-30	Filed 2011-11-09
10-K	2011-06-24	Filed 2011-08-31
10-Q	2011-03-25	Filed 2011-05-04
10-Q	2010-12-24	Filed 2011-02-02
10-Q	2010-09-24	Filed 2010-11-03
10-K	2010-06-25	Filed 2010-09-08

8-K	2020-05-04
8-K	2020-02-01
8-K	2019-12-12
8-K	2019-11-04
8-K	2019-08-20
8-K	2019-08-19
8-K	2019-08-14
8-K	2019-05-01
8-K	2019-02-26
8-K	2019-02-04
8-K	2018-12-13
8-K	2018-08-14
8-K	2018-06-15
8-K	2018-06-04
8-K	2018-05-03
8-K	2018-02-05
8-K	2018-01-09

EX-10.2	d902284dex102.htm
EX-31.1	d902284dex311.htm
EX-31.2	d902284dex312.htm
EX-32.1	d902284dex321.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company