☒ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
March 27, 2020
☐ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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) |
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation (§and post such files). Yes Non-accelerated filer ☐ (Do not check if smaller reporting company) January 26, 2018, 37,308,863
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| (in thousands of U.S. dollars, except share data) | December 29, 2017 | June 30, 2017 | ||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 134,831 | $ | 133,825 | ||||
Marketable securities | 149,403 | 151,450 | ||||||
Trade accounts receivable, net | 258,856 | 264,349 | ||||||
Inventory, net | 239,169 | 238,665 | ||||||
Prepaid expenses | 9,098 | 6,306 | ||||||
Other current assets | 7,974 | 4,159 | ||||||
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Total current assets | 799,331 | 798,754 | ||||||
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Non-current assets | ||||||||
Restricted cash in connection with business acquisition | 3,423 | 3,312 | ||||||
Property, plant and equipment, net | 222,539 | 216,881 | ||||||
Intangibles, net | 5,432 | 5,840 | ||||||
Goodwill | 3,933 | 3,806 | ||||||
Deferred tax assets | 3,056 | 2,905 | ||||||
Deferred debt issuance costs on revolving loan and othernon-current assets | 223 | 1,577 | ||||||
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Totalnon-current assets | 238,606 | 234,321 | ||||||
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Total Assets | $ | 1,037,937 | $ | 1,033,075 | ||||
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Liabilities and Shareholders’ Equity | ||||||||
Current liabilities | ||||||||
Bank borrowings, net of unamortized debt issuance costs | $ | 52,443 | $ | 48,402 | ||||
Trade accounts payable | 182,166 | 215,262 | ||||||
Fixed assets payable | 5,658 | 8,141 | ||||||
Capital lease liability, current portion | 477 | 344 | ||||||
Income tax payable | 1,185 | 1,976 | ||||||
Accrued payroll, bonus and related expenses | 11,244 | 13,852 | ||||||
Accrued expenses | 17,574 | 9,227 | ||||||
Other payables | 11,089 | 14,068 | ||||||
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Total current liabilities | 281,836 | 311,272 | ||||||
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Non-current liabilities | ||||||||
Long-term loan from bank,non-current portion, net of unamortized debt issuance costs | 15,969 | 22,701 | ||||||
Deferred tax liability | 1,989 | 1,981 | ||||||
Capital lease liability,non-current portion | 756 | 1,024 | ||||||
Deferred liability in connection with business acquisition | 3,423 | 3,312 | ||||||
Severance liabilities | 9,264 | 8,488 | ||||||
Othernon-current liabilities | 2,930 | 2,723 | ||||||
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Totalnon-current liabilities | 34,331 | 40,229 | ||||||
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Total Liabilities | 316,167 | 351,501 | ||||||
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Commitments and contingencies (Note 16) | ||||||||
Shareholders’ equity | ||||||||
Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and | ||||||||
outstanding as of December 29, 2017 and June 30, 2017) | — | — | ||||||
Ordinary shares (500,000,000 shares authorized, $0.01 par value; 37,597,301 shares and | ||||||||
37,340,496 shares issued, and 37,281,328 shares and 37,340,496 shares outstanding | 376 | 373 | ||||||
as of December 29, 2017 and June 30, 2017, respectively) | ||||||||
Additionalpaid-in capital | 142,914 | 133,293 | ||||||
Treasury stock, at cost (315,973 shares and zero shares as of December 29, 2017 and | ||||||||
June 30, 2017, respectively) | (9,910 | ) | — | |||||
Accumulated other comprehensive loss | (212 | ) | (348 | ) | ||||
Retained earnings | 588,602 | 548,256 | ||||||
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Total Shareholders’ Equity | 721,770 | 681,574 | ||||||
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Total Liabilities and Shareholders’ Equity | $ | 1,037,937 | $ | 1,033,075 | ||||
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(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; 0 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 outstandingas 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 | ||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| (in thousands of U.S. dollars, except per share amounts) | December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | ||||||||||||
Revenues | $ | 337,072 | $ | 351,156 | $ | 694,385 | $ | 683,199 | ||||||||
Cost of revenues | (299,906 | ) | (308,110 | ) | (616,887 | ) | (600,545 | ) | ||||||||
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Gross profit | 37,166 | 43,046 | 77,498 | 82,654 | ||||||||||||
Selling, general and administrative expenses | (13,157 | ) | (17,651 | ) | (28,835 | ) | (33,483 | ) | ||||||||
Expenses related to reduction in workforce | (1,776 | ) | — | (1,776 | ) | — | ||||||||||
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Operating income | 22,233 | 25,395 | 46,887 | 49,171 | ||||||||||||
Interest income | 596 | 320 | 1,405 | 757 | ||||||||||||
Interest expense | (826 | ) | (555 | ) | (1,679 | ) | (1,876 | ) | ||||||||
Foreign exchange (loss) gain, net | (1,348 | ) | 1,945 | (3,282 | ) | 3,602 | ||||||||||
Other income | 250 | 147 | 347 | 289 | ||||||||||||
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Income before income taxes | 20,905 | 27,252 | 43,678 | 51,943 | ||||||||||||
Income tax expense | (1,592 | ) | (1,960 | ) | (3,332 | ) | (3,885 | ) | ||||||||
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Net income | 19,313 | 25,292 | 40,346 | 48,058 | ||||||||||||
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Other comprehensive (loss) income, net of tax: | ||||||||||||||||
Change in net unrealized loss on marketable securities | (462 | ) | (353 | ) | (432 | ) | (540 | ) | ||||||||
Change in net unrealized loss on derivative instruments | — | — | (1 | ) | (158 | ) | ||||||||||
Change in foreign currency translation adjustment | 44 | (1,903 | ) | 569 | (1,162 | ) | ||||||||||
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Total other comprehensive (loss) income, net of tax | (418 | ) | (2,256 | ) | 136 | (1,860 | ) | |||||||||
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Net comprehensive income | $ | 18,895 | $ | 23,036 | $ | 40,482 | $ | 46,198 | ||||||||
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Earnings per share | ||||||||||||||||
Basic | $ | 0.52 | $ | 0.69 | $ | 1.08 | $ | 1.31 | ||||||||
Diluted | $ | 0.51 | $ | 0.67 | $ | 1.06 | $ | 1.28 | ||||||||
Weighted-average number of ordinary shares outstanding (thousands of shares) |
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Basic | 37,477 | 36,848 | 37,462 | 36,626 | ||||||||||||
Diluted | 38,156 | 37,805 | 38,160 | 37,567 | ||||||||||||
(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 income, net of taxss) | (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 | ||||||||||||||||
Basic | 36,987 | 36,891 | 36,970 | 36,786 | ||||||||||||
Diluted | 37,797 | 37,539 | 37,696 | 37,383 | ||||||||||||
| Six Months Ended | ||||||||
| (in thousands of U.S. dollars) | December 29, 2017 | December 30, 2016 | ||||||
Cash flows from operating activities | ||||||||
Net income for the period | $ | 40,346 | $ | 48,058 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 14,265 | 10,758 | ||||||
Loss on disposal of property, plant and equipment | — | 19 | ||||||
Loss from sales and maturities ofavailable-for-sale securities | 357 | 15 | ||||||
Amortization of investment (premium) discount | (163 | ) | 228 | |||||
Amortization of deferred debt issuance costs | 295 | 1,072 | ||||||
Allowance for doubtful accounts (reversal) | 5 | (40 | ) | |||||
Unrealized loss (gain) on exchange rate and fair value of derivative instruments | 1,740 | (3,033 | ) | |||||
Share-based compensation | 12,378 | 14,208 | ||||||
Deferred income tax | (153 | ) | 938 | |||||
Othernon-cash expenses | 962 | 586 | ||||||
Inventory obsolescence (reversal) | 654 | (100 | ) | |||||
Changes in operating assets and liabilities | ||||||||
Trade accounts receivable | 5,707 | (40,779 | ) | |||||
Inventory | (1,047 | ) | (29,286 | ) | ||||
Other current assets andnon-current assets | (6,801 | ) | 4,747 | |||||
Trade accounts payable | (33,626 | ) | 11,026 | |||||
Income tax payable | (791 | ) | 448 | |||||
Other current liabilities andnon-current liabilities | 2,985 | 887 | ||||||
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Net cash provided by operating activities | 37,113 | 19,752 | ||||||
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Cash flows from investing activities | ||||||||
Purchase of marketable securities | (48,679 | ) | (83,405 | ) | ||||
Proceeds from sales of marketable securities | 18,672 | 15,682 | ||||||
Proceeds from maturities of marketable securities | 31,427 | 38,142 | ||||||
Payments in connection with business acquisition, net of cash acquired | — | (9,917 | ) | |||||
Purchase of property, plant and equipment | (21,405 | ) | (44,412 | ) | ||||
Purchase of intangibles | (689 | ) | (319 | ) | ||||
Proceeds from disposal of property, plant and equipment | 35 | 127 | ||||||
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Net cash used in investing activities | (20,639 | ) | (84,102 | ) | ||||
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Cash flows from financing activities | ||||||||
Proceeds of short-term loans from banks | 5,000 | 15,744 | ||||||
Repayment of short-term loans from bank | (1,003 | ) | — | |||||
Repayment of long-term loans from bank | (6,800 | ) | (9,800 | ) | ||||
Repayment of capital lease liability | (174 | ) | (92 | ) | ||||
Repurchase of ordinary shares | (9,910 | ) | — | |||||
Proceeds from issuance of ordinary shares under employee share option plans | 990 | 5,848 | ||||||
Withholding tax related to net share settlement of restricted share units | (3,744 | ) | (1,008 | ) | ||||
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Net cash (used in) provided by financing activities | (15,641 | ) | 10,692 | |||||
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Net increase (decrease) in cash, cash equivalents and restricted cash | 833 | (53,658 | ) | |||||
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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 | 833 | (53,658 | ) | |||||
Effect of exchange rate on cash, cash equivalents and restricted cash | 284 | (401 | ) | |||||
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Cash, cash equivalents and restricted cash at end of period | $ | 138,254 | $ | 88,745 | ||||
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Non-cash investing and financing activities | ||||||||
Construction, software-related and equipment-related payables | $ | 5,658 | $ | 17,094 | ||||
(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 | ||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||
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 | |||||||||||||
(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 | ||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||
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 | |||||||||||||
UNAUDITED
(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 | ||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||
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 | |||||||||||||
(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 | ||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||
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 | |||||||||||||
(unaudited)
Nine Months Ended | ||||||||
(in thousands of U.S. dollars) | March 27, 2020 | March 29, 2019 | ||||||
Cash flows from operating activities | ||||||||
Net income for the period | $ | 85,455 | $ | 87,998 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 23,115 | 22,521 | ||||||
Loss on disposal of property, plant and equipment | 444 | 81 | ||||||
Loss on disposal of intangibles | — | 149 | ||||||
Gain from sales and maturities of available-for-sale securities | (93 | ) | (196 | ) | ||||
Accretion of premiums on short-term investments | (624 | ) | (604 | ) | ||||
Amortization of deferred debt issuance costs | 18 | — | ||||||
(Reversal) allowance for doubtful accounts | (17 | ) | 12 | |||||
Unrealized loss (gain) on exchange rate and fair value of foreign currency forward contracts | 942 | (5,351 | ) | |||||
Unrealized loss on fair value of interest rate swaps | 1,672 | 1,564 | ||||||
Amortization of fair value at hedge inception of interest rate swaps | (838 | ) | — | |||||
Share-based compensation | 18,301 | 13,373 | ||||||
Deferred income tax | 1,335 | 438 | ||||||
Other non-cash expenses | (559 | ) | (699 | ) | ||||
Changes in operating assets and liabilities | ||||||||
Trade accounts receivable | (23,136 | ) | (17,942 | ) | ||||
Contract assets | (3,966 | ) | (666 | ) | ||||
Inventories | 3,404 | (36,418 | ) | |||||
Other current assets and non-current assets | 5,830 | (1,568 | ) | |||||
Trade accounts payable | (15,571 | ) | 37,576 | |||||
Contract liabilities | (298 | ) | — | |||||
Income tax payable | 1,056 | 1,942 | ||||||
| Severance liabilities | 2,266 | 1,841 | ||||||
Other current liabilities and non-current liabilities | 5,712 | 1,453 | ||||||
Net cash provided by operating activities | 104,448 | 105,504 | ||||||
Cash flows from investing activities | ||||||||
Purchase of short-term investments | (123,980 | ) | (202,328 | ) | ||||
Proceeds from sales of short-term investments | 48,808 | 85,941 | ||||||
Proceeds from maturities of short-term investments | 97,358 | 50,370 | ||||||
Fund s provided to customer to support transfer of manufacturing operations (Note 9) | (24,310 | ) | — | |||||
Purchase of property, plant and equipment | (27,482 | ) | (13,211 | ) | ||||
Purchase of intangibles | (797 | ) | (290 | ) | ||||
Proceeds from disposal of property, plant and equipment | 1,482 | 473 | ||||||
Net cash used in investing activities | (28,921 | ) | (79,045 | ) | ||||
Cash flows from financing activities | ||||||||
Payment of debt issuance costs | (153 | ) | — | |||||
Proceeds from long-term borrowings | 60,938 | — | ||||||
Repayment of long-term borrowings | (67,032 | ) | (2,438 | ) | ||||
Repayment of finance lease liabilities | (304 | ) | (342 | ) | ||||
Repurchase of ordinary shares | (20,722 | ) | (5,378 | ) | ||||
Release of restricted cash held in connection with business acquisition | — | (3,478 | ) | |||||
Withholding tax related to net share settlement of restricted share units | (4,727 | ) | (10,427 | ) | ||||
Net cash used in financing activities | (32,000 | ) | (22,063 | ) | ||||
Net increase in cash, cash equivalents and restricted cash | 43,527 | 4,396 | ||||||
Movement in cash, cash equivalents and restricted cash | ||||||||
Cash, cash equivalents and restricted cash at beginning of period | 188,241 | 161,433 | ||||||
Increase in cash, cash equivalents and restricted cash | 43,527 | 4,396 | ||||||
Effect of exchange rate on cash, cash equivalents and restricted cash | (228 | ) | 578 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 231,540 | $ | 166,407 | ||||
Non-cash investing and financing activities | ||||||||
Construction, software and equipment-related payables | $ | 11,906 | $ | 3,286 | ||||
| (amount in thousands) | As of December 29, 2017 | As of December 30, 2016 | ||||||
Cash and cash equivalents | $ | 134,831 | $ | 85,619 | ||||
Restricted cash in connection with business acquisition(non-current assets) | 3,423 | 3,126 | ||||||
|
|
|
| |||||
Cash, cash equivalents and restricted cash | $ | 138,254 | $ | 88,745 | ||||
|
|
|
| |||||
(amount in thousands) | As of March 27, 2020 | As of March 29, 2019 | ||||||
Cash and cash equivalents | $ | 224,138 | $ | 166,407 | ||||
Restricted cash | 7,402 | — | ||||||
Cash, cash equivalents and restricted cash | $ | 231,540 | $ | 166,407 | ||||
(unaudited)
| 1. | Business and organization |
| 2. | Accounting policies |
28, 2019.December 29, 2017March 27, 2020 and for the three and sixnine months ended DecemberMarch 27, 2020 and March 29, 2017 and December 30, 2016 includes2019 include normal recurring adjustments necessary for a fair presentationstatement of the financial statements set forth herein, in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such information does not include all of the information and footnotes required by U.S. GAAP for annual financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in Fabrinet’s Annual Report on Form30, 2017.30, 201728, 2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.sixnine months ended December 29, 2017March 27, 2020 may not be indicative of results for the year ending June 29, 201826, 2020 or any future periods.On September 14, 2016, the Company acquired 100% shareholding in Global CEM Solutions, Ltd. and all of its subsidiaries (including Fabrinet UK), a privately-held group located in Wiltshire, United Kingdom. The unaudited condensed consolidated financial statements of the Company include the financial position, results of operations and the cash flows of Fabrinet UK commencing as of the acquisition date. See Note 8—Business acquisition for further details on the accounting for this transaction. Estimatesacquisition,acquisitions, among others. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. In the event that estimates or assumptions prove to differbe different from actual results, adjustments will be made in subsequent periods to reflect more current information.
Concentration26, 2020.
contract assets.
New
(amount in thousands) | ||||
2020 | $ | 1,746 | ||
2021 | 1,342 | |||
2022 | 1,219 | |||
2023 | 1,172 | |||
Thereafter | 230 | |||
Total future minimum operating lease payments | $ | 5,709 | ||
was required to separately measure and reflect the amount by which the hedging instrument did not offset the changes in the fair value or cash flows of hedged items, and to record the ineffective portion as earnings. Upon the adoption of ASU
In January 2017, the FASB issuedThis ASU2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings.” The amendment provides guidance to will be effective for the Company in relation to the disclosurefirst quarter of the impact that ASU2014-09, ASU2016-02 and ASU2016-13 will have on the Company’s financial statements when adopted. The Company is currently evaluating the impact of the adoption of this update on its consolidated financial statements.
In January 2017, the FASB issued ASU2017-01, “Business Combination (Topic 805): Clarifying the Definition of a Business.” This amendment clarifies the definition of a business to assist entities when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or business. For public companies, this ASU is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted for the transactions that occur before the issuance date or effective date of the amendment, only when the transaction has not been reported in financial statements that have been issued or made available for issuance.fiscal 2021. The Company does not expect that the adoption of this update will have a material impact on its condensed consolidated financial statements.
In February 2016, the FASB issued subsequent amendments to Topic 326, including ASU2016-02, “Lease (Topic 842).” The core principle
In January 2016, the FASB issued ASU2016-01, “Financial Instruments – Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This new guidance requires certain equity investments to be measured at fair value, use of the exit price notion and separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. The ASU on recognition and measurement will take effect for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.
3. | Revenues from contracts with customers |
In May 2014, the FASB issued ASU2014-09, “Revenue from Contractscustomized optics and glass. The Company recognizes revenue relating to contracts with Customers (Topic 606), issued as a new Topic, Accounting Standards Codification.” The core principle of this amendment iscustomers that an entity should recognize revenue to depictdepicts the transfer of promised goods or services to customers in an amount that reflectsreflecting the consideration to which the entityCompany expects to be entitled in exchange for thosesuch goods or services. This updateIn order to meet this requirement, the Company applies the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations under the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations under the contract, and (5) recognize revenue when a performance obligation is effectivesatisfied. Revenue is recognized net of any taxes collected from customers, which is subsequently remitted to governmental authorities.
New Accounting Pronouncements – adopted bywarranty period. The Company generally provides a warranty of between one to five years on the product.
In August 2017, has applied the FASB issued ASU2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvementspractical expedient to Accounting for Hedging Activities.” The amendments better align an entity’s risk management activities and financial reporting for hedging relationships through changesnot adjust the amount of revenue to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation ofbe recognized due to the effects of a significant financing component when the hedging instrumentCompany expects, at contract inception, that the period between the transfer of goods and/or services and the hedged item inpayment for those goods and/or services will be less than one year.
In November 2016,balance sheets and transferred to accounts receivable when rights to payment become unconditional. During the FASB issued ASU2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which requiresnine months ended March 27, 2020, the statement of cash flows to explainCompany had no impairment for contract assets recognized.
(amount in thousands) | Contract | |||
Beginning balance, June 28, 2019 | $ | 12,447 | ||
Revenue recognized | 58,037 | |||
Amounts collected or invoiced | (54,071 | ) | ||
Ending balance, March 27, 2020 | $ | 16,413 | ||
(amount in thousands) | Contract Liabilities | |||
Beginning balance, June 28, 2019 | $ | 2,239 | ||
Advance payment received during the period | 6,857 | |||
Revenue recognized | (7,155 | ) | ||
Ending balance, March 27, 2020 | $ | 1,941 | ||
In March 2016, the FASB issued ASU2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This ASU simplifies several aspects
(amount in thousands, except percentages) | Three Months Ended March 27, 2020 | As a % of Total Revenues | Nine Months Ended March 27, 2020 | As a % of Total Revenues | ||||||||||||
North America | $ | 206,751 | 50.3 | % | $ | 631,096 | 51.0 | % | ||||||||
Asia-Pacific | 141,639 | 34.4 | 401,209 | 32.5 | ||||||||||||
Europe | 62,820 | 15.3 | 204,418 | 16.5 | ||||||||||||
Total | $ | 411,210 | 100.0 | % | $ | 1,236,723 | 100.0 | % | ||||||||
(amount in thousands, except percentages) | Three Months Ended March 29, 2019 | As a % of Total Revenues | Nine Months Ended March 29, 2019 | As a % of Total Revenues | ||||||||||||
North America | $ | 195,504 | 49.0 | % | $ | 558,028 | 47.3 | % | ||||||||
Asia-Pacific | 151,263 | 37.9 | 469,921 | 39.9 | ||||||||||||
Europe | 52,184 | 13.1 | 151,259 | 12.8 | ||||||||||||
Total | $ | 398,951 | 100.0 | % | $ | 1,179,208 | 100.0 | % | ||||||||
(amount in thousands, except percentages) | Three Months Ended March 2 7 ,20 20 | As a % of Total Revenues | Nine Months Ended March 2 7 ,20 20 | As a % of Total Revenues | ||||||||||||
Optical communications | $ | 308,566 | 75.0 | % | $ | 933,013 | 75.4 | % | ||||||||
Lasers, sensors and other | 102,644 | 25.0 | 303,710 | 24.6 | ||||||||||||
Total | $ | 411,210 | 100.0 | % | $ | 1,236,723 | 100.0 | % | ||||||||
(amount in thousands, except percentages) | Three Months Ended March 29, 2019 | As a % of Total Revenues | Nine Months Ended March 29, 2019 | As a % of Total Revenues | ||||||||||||
Optical communications | $ | 298,139 | 74.7 | % | $ | 884,454 | 75.0 | % | ||||||||
Lasers, sensors and other | 100,812 | 25.3 | 294,754 | 25.0 | ||||||||||||
Total | $ | 398,951 | 100.0 | % | $ | 1,179,208 | 100.0 | % | ||||||||
| Earnings per ordinary share |
Three Months Ended | Nine Months Ended | |||||||||||||||
(amount in thousands except per share amounts) | March 27, 2020 | March 29, 2019 | March 27, 2020 | March 29, 2019 | ||||||||||||
Net income attributable to shareholders | $ | 28,267 | $ | 28,635 | $ | 85,455 | $ | 87,998 | ||||||||
Weighted-average number of ordinary shares outstanding (thousands of shares) | 36,987 | 36,891 | 36,970 | 36,786 | ||||||||||||
Incremental shares arising from the assumed vesting of restricted share units and performance share units (thousands of shares) | 810 | 648 | 726 | 597 | ||||||||||||
Weighted-average number of ordinary shares for diluted earnings per ordinary share (thousands of shares) | 37,797 | 37,539 | 37,696 | 37,383 | ||||||||||||
Basic earnings per ordinary share | $ | 0.76 | $ | 0.78 | $ | 2.31 | $ | 2.39 | ||||||||
Diluted earnings per ordinary share | $ | 0.75 | $ | 0.76 | $ | 2.27 | $ | 2.35 | ||||||||
Outstanding performance share units excluded from the computation of diluted earnings per ordinary share (thousands of shares) (1) | 50 | 401 | 50 | 401 | ||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| (amount in thousands except per share amounts) | December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | ||||||||||||
Net income attributable to shareholders | $ | 19,313 | $ | 25,292 | $ | 40,346 | $ | 48,058 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Weighted-average number of ordinary shares outstanding (thousands of shares) | 37,477 | 36,848 | 37,462 | 36,626 | ||||||||||||
Incremental shares arising from the assumed exercise of share options and vesting of restricted share units (thousands of shares) | 679 | 957 | 698 | 941 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Weighted-average number of ordinary shares for diluted earnings per ordinary share (thousands of shares) | 38,156 | 37,805 | 38,160 | 37,567 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Basic earnings per ordinary share | $ | 0.52 | $ | 0.69 | $ | 1.08 | $ | 1.31 | ||||||||
Diluted earnings per ordinary share | $ | 0.51 | $ | 0.67 | $ | 1.06 | $ | 1.28 | ||||||||
As of December 29, 2017 and December 30, 2016, there were no anti-dilutive share options.
(1) | These performance share units were not included in the computation of diluted earnings per ordinary share because they are not expected to vest based on the Company’s current assessment of the related performance obligations. |
| 5. | Cash, cash equivalents and |
| Fair Value | ||||||||||||||||
| (amount in thousands) | Carrying Cost | Unrealized Loss | Cash and Cash Equivalents | Marketable Securities | ||||||||||||
As of December 29, 2017 | ||||||||||||||||
Cash | $ | 129,703 | $ | — | $ | 129,703 | $ | — | ||||||||
Cash equivalents | 5,128 | — | 5,128 | — | ||||||||||||
Corporate bonds and commercial papers | 106,783 | (302 | ) | — | 106,481 | |||||||||||
U.S. agency and U.S. treasury securities | 38,823 | (190 | ) | — | 38,633 | |||||||||||
Sovereign and municipal securities | 4,302 | (13 | ) | — | 4,289 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 284,739 | $ | (505 | ) | $ | 134,831 | $ | 149,403 | |||||||
|
|
|
|
|
|
|
| |||||||||
| Fair Value | ||||||||||||||||
| (amount in thousands) | Carrying Cost | Unrealized Gain/ (Loss) | Cash and Cash Equivalents | Marketable Securities | ||||||||||||
As of June 30, 2017 | ||||||||||||||||
Cash | $ | 131,240 | $ | — | $ | 131,240 | $ | — | ||||||||
Cash equivalents | 2,585 | — | 2,585 | — | ||||||||||||
Corporate bonds and commercial papers | 98,247 | 27 | — | 98,274 | ||||||||||||
U.S. agency and U.S. treasury securities | 50,768 | (102 | ) | — | 50,666 | |||||||||||
Sovereign and municipal securities | 2,507 | 3 | — | 2,510 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 285,347 | $ | (72 | ) | $ | 133,825 | $ | 151,450 | |||||||
|
|
|
|
|
|
|
| |||||||||
Fair Value | ||||||||||||||||||||
(amount in thousands) | Carrying Cost | Unrealized Gain/(Loss) | Cash and Cash Equivalents | Marketable Securities | Other Investments | |||||||||||||||
As of March 27, 2020 | ||||||||||||||||||||
Cash | $ | 202,610 | $ | — | $ | 202,610 | $ | — | $ | — | ||||||||||
Cash equivalents | 21,528 | — | 21,528 | — | — | |||||||||||||||
Liquidity funds | 20,954 | — | — | — | 20,954 | |||||||||||||||
Certificates of deposit and time deposits | 20,000 | — | — | — | 20,000 | |||||||||||||||
Corporate debt securities | 132,877 | (1,439 | ) | — | 131,438 | — | ||||||||||||||
U.S. agency and U.S. Treasury securities | 60,497 | 733 | — | 61,230 | — | |||||||||||||||
| Total | $ | 458,466 | $ | (706 | ) | $ | 224,138 | $ | 192,668 | $ | 40,954 | |||||||||
As of June 28, 2019 | ||||||||||||||||||||
Cash | $ | 178,019 | $ | — | $ | 178,019 | $ | — | $ | — | ||||||||||
Cash equivalents | 2,820 | — | 2,820 | — | — | |||||||||||||||
Liquidity funds | 20,552 | — | — | — | 20,552 | |||||||||||||||
Certificates of deposit and time deposits | 35,028 | — | — | — | 35,028 | |||||||||||||||
Corporate debt securities | 130,959 | 297 | — | 131,256 | — | |||||||||||||||
U.S. agency and U.S. Treasury securities | 69,552 | 105 | — | 69,657 | — | |||||||||||||||
| Total | $ | 436,930 | $ | 402 | $ | 180,839 | $ | 200,913 | $ | 55,580 | ||||||||||
| (amount in thousands) | Carrying Cost | Fair Value | ||||||
Due within one year | $ | 16,814 | $ | 16,808 | ||||
Due between one to three years | 129,579 | 129,095 | ||||||
Due after three years | 3,515 | 3,500 | ||||||
|
|
|
| |||||
Total | $ | 149,908 | $ | 149,403 | ||||
|
|
|
| |||||
March 27, 2020:
March 27, 2020 | June 28, 2019 | |||||||||||||||
(amount in thousands) | Carrying | Fair | Carrying | Fair | ||||||||||||
Due within one year | $ | 30,448 | $ | 30,472 | $ | 69,746 | $ | 69,830 | ||||||||
Due between one to five years | 162,926 | 162,196 | 130,765 | 131,083 | ||||||||||||
Total | $ | 193,374 | $ | 192,668 | $ | 200,511 | $ | 200,913 | ||||||||
As of December 29, 2017, cash, cash equivalents, and marketable securities included bank deposits of $40.0 million held in various financial institutions located in the United States in order to support the availability of the Facility Agreement (as defined in Note 11) and comply with covenants. As discussed in Note 11, under the terms and conditions of the Facility Agreement, the Company must maintain cash, cash equivalents and/or marketable securities in an aggregate amount not less than $40.0 million in unencumbered deposits, and/or securities in accounts located in the United States at all times during the term of the Facility Agreement. The Company must comply with this covenant from and after the effective date of the Facility Agreement.
| Fair value of financial instruments |
| Fair Value Measurements at Reporting Date Using | ||||||||||||||||
| (amount in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
As of December 29, 2017 | ||||||||||||||||
Assets | ||||||||||||||||
Cash equivalents | $ | — | $ | 5,128 | $ | — | $ | 5,128 | ||||||||
Corporate bonds and commercial papers | — | 106,481 | — | 106,481 | ||||||||||||
U.S. agency and U.S. treasury securities | — | 38,633 | — | 38,633 | ||||||||||||
Sovereign and municipal securities | — | 4,289 | — | 4,289 | ||||||||||||
Derivative assets | — | 105 | (1) | — | 105 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | — | $ | 154,636 | $ | — | $ | 154,636 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| Fair Value Measurements at Reporting Date Using | ||||||||||||||||
| (amount in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
As of June 30, 2017 | ||||||||||||||||
Assets | ||||||||||||||||
Cash equivalents | $ | — | $ | 2,585 | $ | — | $ | 2,585 | ||||||||
Corporate bonds and commercial papers | — | 98,274 | — | 98,274 | ||||||||||||
U.S. agency and U.S. treasury securities | — | 50,666 | — | 50,666 | ||||||||||||
Sovereign and municipal securities | — | 2,510 | — | 2,510 | ||||||||||||
Derivative assets | — | 15 | (2) | — | 15 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | — | $ | 154,050 | $ | — | $ | 154,050 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
(amount in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
As of March 27, 2020 | ||||||||||||||||
Assets | ||||||||||||||||
Cash equivalents | $ | — | $ | 21,528 | $ | — | $ | 21,528 | ||||||||
Liquidity funds | — | 20,954 | — | 20,954 | ||||||||||||
Certificates of deposit and time deposits | — | 20,000 | — | 20,000 | ||||||||||||
Corporate debt securities | — | 131,438 | — | 131,438 | ||||||||||||
U.S. agency and U.S. Treasury securities | — | 61,230 | — | 61,230 | ||||||||||||
Derivative assets | — | — | — | — | ||||||||||||
Total | $ | — | $ | 255,150 | $ | — | $ | 255,150 | ||||||||
Liabilities | ||||||||||||||||
Derivative liabilities | $ | — | $ | 11,977 | (1) | $ | — | $ | 11,977 | |||||||
Total | $ | — | $ | 11,977 | $ | — | $ | 11,977 | ||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
(amount in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
As of June 28, 2019 | ||||||||||||||||
Assets | ||||||||||||||||
Cash equivalents | $ | — | $ | 2,820 | $ | — | $ | 2,820 | ||||||||
Liquidity funds | — | 20,552 | — | 20,552 | ||||||||||||
Certificates of deposit and time deposits | — | 35,028 | — | 35,028 | ||||||||||||
Corporate debt securities | — | 131,256 | — | 131,256 | ||||||||||||
U.S. agency and U.S. Treasury securities | — | 69,657 | — | 69,657 | ||||||||||||
Derivative assets | — | 2,201 | (2) | — | 2,201 | |||||||||||
Total | $ | — | $ | 261,514 | $ | — | $ | 261,514 | ||||||||
Liabilities | ||||||||||||||||
Derivative liabilities | $ | — | $ | 2,591 | (3) | $ | — | $ | 2,591 | |||||||
Total | $ | — | $ | 2,591 | $ | — | $ | 2,591 | ||||||||
(1) | Foreign currency forward and option contracts with a notional amount of , and two interest rate swap agreements with an aggregate notional amount of $125.1 million. |
(2) | Foreign currency forward contracts with notional amount of |
(3) | Interest rate swap agreement with a notional amount of $64.2 million. |
financial instruments
As of December 29, 2017, the Company had 17 outstanding foreign currency forward contracts with an aggregate notional amount of $31.5 million and Canadian dollars 0.3 million, maturing during January to March 2018. These foreign currency forwardoption contracts were not designated for hedge accounting and were used to hedge fluctuations in the U.S. dollar value of forecasted transactions denominated in Thai baht and Canadian dollar. Duringdollars.
| (amount in thousands) | As of December 29, 2017 | As of June 30, 2017 | ||||||
Trade accounts receivable | $ | 258,901 | $ | 264,389 | ||||
Less: allowance for doubtful account | (45 | ) | (40 | ) | ||||
|
|
|
| |||||
Trade accounts receivable, net | $ | 258,856 | $ | 264,349 | ||||
|
|
|
| |||||
In September 2017,
| (amount in thousands) | As of December 29, 2017 | As of June 30, 2017 | ||||||
Raw materials | $ | 96,088 | $ | 88,640 | ||||
Work in progress | 112,157 | 105,732 | ||||||
Finished goods | 21,625 | 33,998 | ||||||
Goods in transit | 12,683 | 13,025 | ||||||
|
|
|
| |||||
| 242,553 | 241,395 | |||||||
Less: Inventory obsolescence | (3,384 | ) | (2,730 | ) | ||||
|
|
|
| |||||
Inventory, net | $ | 239,169 | $ | 238,665 | ||||
|
|
|
| |||||
On September 14, 2016,2019, the Company acquired 100% shareholdingrecorded an unrealized gain of $1.5 million from changes in Fabrinet UK (formerly known as Exception EMS), a privately-held group located in Wiltshire, United Kingdom, for cash consideration of approximately $13.0 million, net of $0.5 million cash acquired. Fabrinet UK provides contract electronics manufacturing services to the global electronics industry with innovative solutions, adding value to the design, manufacture and testing of printed circuit board assemblies. Pursuant to the acquisition agreement, the Company has placed $3.4 million of cash, net of foreign currency translation adjustment, for deferred consideration in an escrow account which is under the Company’s control. However, the Company has contractually agreed to remit this deferred consideration to the sellers of Fabrinet UK, subject to the resolution of claims that the Company may make against the funds with respect to indemnification and other claims, within 24 months from the closing date of the transaction.
The Company has accounted for this acquisition under the provisions of business combinations accounting, in accordance with Accounting Standards Codification Topic 805 – Business Combinations. Accordingly, the estimated fair value of the acquisition consideration was allocated to the assets acquired and the liabilities assumed based on their respective fair values on the acquisition date. The Company has made certain estimates and assumptions in determining the allocation of the acquisition consideration.
The allocation of consideration to the individual net assets acquired was finalized in the fourth quarter of fiscal year 2017. As the functional currency of Fabrinet UK is pound sterling (“GBP”), for the six months ended December 29, 2017 and December 30, 2016, the Company recognized a $0.6 million gain and a $1.2 million loss, respectively, fromthese foreign currency translation adjustmentforward and option contracts in itsearnings as foreign exchange loss, net in the unaudited condensed consolidated statements of operations and comprehensive income.
The Company’s allocation of the total purchase price for the acquisition is summarized below:
| (amount in thousands) | Purchase price allocation | |||
Cash | $ | 474 | ||
Accounts receivable | 4,064 | |||
Inventory | 3,490 | |||
Other current assets | 427 | |||
Property, plant and equipment | 5,678 | |||
Intangibles | 4,492 | |||
Goodwill | 3,883 | |||
Othernon-current assets | 516 | |||
Current liabilities | (6,796 | ) | ||
Deferred tax liabilities | (1,148 | ) | ||
Othernon-current liabilities | (1,563 | ) | ||
|
| |||
Total fair value of assets acquired and liabilities assumed | $ | 13,517 | ||
|
| |||
Total purchase price, net of cash acquired | $ | 13,043 | ||
|
| |||
In connection with the Company’s acquisition of Fabrinet UK, the Company assumed lease agreements for certain machine and equipment, which are accounted for as capital leases. As of December 29, 2017 and June 30, 2017, the Company included approximately $1.2 million and $1.9 million, respectively, of capital lease assets and $1.2 million and $1.4 million, respectively, of capital lease liability in the unaudited condensed consolidated balance sheets, associated with a portion reclassified from accumulated other comprehensive income into earnings at each reporting period based on either the accrued interest amount or the interest payment.
interest rate swaps were not designated as cash flow hedges and all changes in the fair value of these interest rate swaps were reflected in earnings. During the sixnine months ended December 30, 2016,March 27, 2020 and March 29, 2019, the Company incurred approximately $1.5recorded unrealized loss of $1.7 million and $1.6 million, respectively, from changes in transaction costs related to the acquisition, which primarily consistedfair value of legal, accounting and valuation-related expenses. These expenses were recorded in selling, general and administrativethese interest rate swaps as interest expense in the accompanying unaudited condensed consolidated statements of operations and comprehensive income.
During
Pro forma resultsunaudited condensed consolidated statements of operations and other comprehensive income:
Three Months Ended | Nine Months Ended | |||||||||||||||||||
(amount in thousands) | Financial statements line item | March 27, 2020 | March 29, 2019 | March 27, 2020 | March 29, 2019 | |||||||||||||||
Derivatives gain (loss) recognized in other comprehensive income: | ||||||||||||||||||||
Foreign currency forward contracts | Other comprehensive income | $ | (6,609 | ) | $ | — | $ | (6,609 | ) | $ | — | |||||||||
Interest rate swaps | Other comprehensive income | (1,239 | ) | — | (956 | ) | — | |||||||||||||
Total derivatives loss recognized in other comprehensive income | $ | (7,848 | ) | $ | — | $ | (7,565 | ) | $ | — | ||||||||||
Derivatives gain (loss) reclassified from accumulated other comprehensive income into earnings: | ||||||||||||||||||||
Foreign currency forward contracts | Cost of revenues | $ | 14 | $ | — | $ | 14 | $ | — | |||||||||||
Foreign currency forward contracts | SG&A | 1 | — | 1 | — | |||||||||||||||
Foreign currency forward contracts | Foreign exchange loss, net | 1,669 | — | 1,669 | — | |||||||||||||||
Interest rate swaps | Interest expense | (405 | ) | — | (838 | ) | — | |||||||||||||
Total derivatives gain reclassified from accumulated other comprehensive income into earnings | $ | 1,279 | $ | — | $ | 846 | $ | — | ||||||||||||
Change in net unrealized loss on derivatives instruments | $ | (6,569 | ) | $ | — | $ | (6,719 | ) | $ | — | ||||||||||
(amount in thousands) | March 27, 2020 | June 28, 2019 | ||||||||||||||
Derivative Assets | Derivative Liabilities | Derivative Assets | Derivative Liabilities | |||||||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||
Foreign currency forward and option contracts | $ | — | $ | (1,833 | ) | $ | 2,201 | $ | — | |||||||
Interest rate swaps | — | — | — | (2,591 | ) | |||||||||||
Derivatives designated as hedging instruments | ||||||||||||||||
Foreign currency forward contracts | $ | 31 | $ | (4,956 | ) | $ | — | $ | — | |||||||
Interest rate swaps | 83 | (5,302 | ) | — | — | |||||||||||
Derivatives, gross balances | $ | 114 | $ | (12,091 | ) | $ | 2,201 | $ | (2,591 | ) | ||||||
Derivatives, gross balances offset in the balance sheet | (114 | ) | 114 | — | — | |||||||||||
Derivatives, net balances | $ | — | $ | (11,977 | ) | $ | 2,201 | $ | (2,591 | ) | ||||||
Customer relationships representCompany recorded the fair value of future projected revenuesderivative financial instruments in the unaudited condensed consolidated balance sheets as follows:
Derivative Financial Instruments | Balance Sheet Line Item | |
Fair Value of Derivative Assets | Other current assets | |
Fair Value of Derivative Liabilities | Accrued expenses |
7. | Trade accounts receivable, net |
(amount in thousands) | As of March 27, 2020 | As of June 28, 2019 | ||||||
| Trade accounts receivable | $ | 283,546 | $ | 260,698 | ||||
| Less: allowance for doubtful account | (79 | ) | (96 | ) | ||||
| Trade accounts receivable, net | $ | 283,467 | $ | 260,602 | ||||
| 8. | Inventories |
(amount in thousands) | As of March 27, 2020 | As of June 28, 2019 | ||||||
| Raw materials | $ | 118,729 | $ | 113,321 | ||||
| Work-in-progress | 141,646 | 141,730 | ||||||
| Finished goods | 18,779 | 24,916 | ||||||
| Goods in transit | 11,054 | 13,645 | ||||||
| Inventories | $ | 290,208 | $ | 293,612 | ||||
| 9. | Other receivable |
| 10. | Restricted cash |
| 11. | Leases |
Backlog represents the fair value of sales orders backlog as of the valuation date. The $0.1 million in fair value of backlog will be amortized over the respective estimated remaining useful life of three years.
Goodwill
Goodwill arising from the acquisition is primarily attributable toCompany the ability to expand future productsextend the lease from one to five years following the expiration of the current term. However, the Company has excluded all lease extension options from its ROU assets and services andlease liabilities as the assembled workforce. GoodwillCompany is not deductiblereasonably assured that it will exercise these options.
Impact of Adopting ASC 842 | ||||||||||||
(amount in thousands) | Balance at June 28, | Adjustment | Balance at June 29, | |||||||||
Assets | ||||||||||||
Operating lease ROU assets | $ | — | $ | 5,370 | $ | 5,370 | ||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Operating lease liabilities, current | $ | — | $ | 1,601 | $ | 1,601 | ||||||
Operating lease liabilities, non-current | $ | — | $ | 3,769 | $ | 3,769 | ||||||
(amount in thousands) | ||||
2020 (remaining three months) | $ | 486 | ||
2021 | 2,131 | |||
2022 | 2,000 | |||
2023 | 1,895 | |||
2024 | 878 | |||
Thereafter | 15 | |||
Total undiscounted lease payments | 7,405 | |||
Less i mputed interest | (488 | ) | ||
Total present value of lease liabilities | $ | 6,917 | (1) | |
(1) | Include s current portion of operating lease liabilities of $1.9 million. |
As of March 27, 2020 | ||||
Weighted-average remaining lease term (in years) | ||||
Operating leases | 3.7 | |||
Finance leases | 0.5 | |||
Weighted-average discount rate | ||||
Operating leases | 3.8 | % | ||
Finance leases | 4.1 | % | ||
(amount in thousands) | Nine Months Ended March 27, 2020 | |||
Cash paid for amounts included in the measurement of lease liabilities | ||||
Operating cash flows from operating leases | $ | 1,794 | ||
Financing cash flows from finance leases | $ | 304 | ||
ROU assets obtained in exchange for lease liabilities | $ | 7,175 | ||
Finance lease assets | $ | 157 | ||
12. | Intangibles |
| (amount in thousands) | Gross Carrying Amount | Accumulated Amortization | Foreign Currency Translation Adjustment | Net | ||||||||||||
As of December 29, 2017 | ||||||||||||||||
Software | $ | 6,251 | $ | (4,240 | ) | $ | — | $ | 2,011 | |||||||
Customer relationships | 4,373 | (1,037 | ) | 43 | 3,379 | |||||||||||
Backlog | 119 | (78 | ) | 1 | 42 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total intangibles | $ | 10,743 | $ | (5,355 | ) | $ | 44 | $ | 5,432 | |||||||
|
|
|
|
|
|
|
| |||||||||
| (amount in thousands) | Gross Carrying Amount | Accumulated Amortization | Foreign Currency Translation Adjustment | Net | ||||||||||||
As of June 30, 2017 | ||||||||||||||||
Software | $ | 5,944 | $ | (3,850 | ) | $ | — | $ | 2,094 | |||||||
Customer relationships | 4,373 | (606 | ) | (88 | ) | 3,679 | ||||||||||
Backlog | 119 | (51 | ) | (1 | ) | 67 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total intangibles | $ | 10,436 | $ | (4,507 | ) | $ | (89 | ) | $ | 5,840 | ||||||
|
|
|
|
|
|
|
| |||||||||
(amount in thousands) | Gross Carrying Amount | Accumulated Amortization | Foreign Currency Translation Adjustment | Net | ||||||||||||
As of March 27, 2020 | ||||||||||||||||
Software | $ | 7,689 | $ | (5,365 | ) | $ | — | $ | 2,324 | |||||||
Customer relationships | 4,373 | (2,551 | ) | (147 | ) | 1,675 | ||||||||||
Backlog | 119 | (119 | ) | — | — | |||||||||||
Total intangibles | $ | 12,181 | $ | (8,035 | ) | $ | (147 | ) | $ | 3,999 | ||||||
( | Gross Carrying Amount | Accumulated Amortization | Foreign Currency Translation Adjustment | Net | ||||||||||||
As of June 28, 2019 | ||||||||||||||||
Software | $ | 6,582 | $ | (4,868 | ) | $ | — | $ | 1,714 | |||||||
Customer relationships | 4,373 | (2,096 | ) | (104 | ) | 2,173 | ||||||||||
Backlog | 119 | (119 | ) | — | — | |||||||||||
Total intangibles | $ | 11,074 | $ | (7,083 | ) | $ | (104 | ) | $ | 3,887 | ||||||
| (years) | As of December 29, 2017 | As of June 30, 2017 | ||||||
Customer relationships | 6.5 | 6.9 | ||||||
Backlog | 1.3 | 1.6 | ||||||
was:
(years) | As of March 27, 2020 | As of June 28, 2019 | ||||||
Customer relationships | 4.8 | 5.4 | ||||||
| (amount in thousands) | ||||
2018 (remaining six months) | $ | 794 | ||
2019 | 1,465 | |||
2020 | 987 | |||
2021 | 837 | |||
2022 | 571 | |||
Thereafter | 778 | |||
|
| |||
Total | $ | 5,432 | ||
|
| |||
(amount in thousands) | ||||
2020 (remaining three months) | $ | 628 | ||
2021 | 1,139 | |||
2022 | 908 | |||
2023 | 650 | |||
2024 | 423 | |||
Thereafter | 251 | |||
Total | $ | 3,999 | ||
| Goodwill |
| (amount in thousands) | Goodwill | |||
Balance as of June 30, 2017 | $ | 3,806 | ||
Foreign currency translation adjustment | 127 | |||
|
| |||
Balance as of December 29, 2017 | $ | 3,933 | ||
|
| |||
(amount in thousands) | Goodwill | |||
Balance as of June 28, 2019 | $ | 3,705 | ||
Foreign currency translation adjustment | (134 | ) | ||
Balance as of March 27, 2020 | $ | 3,571 | ||
| (amount in thousands) | Goodwill | |||
Balance as of June 24, 2016 | $ | — | ||
Addition in connection with business acquisition | 3,883 | |||
Foreign currency translation adjustment | (77 | ) | ||
|
| |||
Balance as of June 30, 2017 | $ | 3,806 | ||
|
| |||
| Borrowings |
| (amount in thousands) | ||||||||||||||||
Rate | Conditions | Maturity | As of December 29, 2017 | As of June 30, 2017 | ||||||||||||
Short-term borrowings: | ||||||||||||||||
Revolving borrowing: | ||||||||||||||||
LIBOR(1) + 1.75% per annum | | Repayable in 1 to 6 months |
| January 2018(2) | $ | 39,000 | $ | 34,000 | ||||||||
Short-term loans from bank: |
| |||||||||||||||
Bank Base rate +1.85% per annum | | Repayable based on credit terms of secured | | — | 1,003 | |||||||||||
Current portion of long-term borrowing |
| 13,600 | 13,600 | |||||||||||||
|
|
|
| |||||||||||||
| 52,600 | 48,603 | |||||||||||||||
Less: Unamortized debt issuance costs |
| (157 | ) | (201 | ) | |||||||||||
|
|
|
| |||||||||||||
| $ | 52,443 | $ | 48,402 | |||||||||||||
|
|
|
| |||||||||||||
Long-term borrowings: | ||||||||||||||||
Term loan borrowing: | ||||||||||||||||
LIBOR +1.75% per annum | | Repayable in quarterly installments | | May 2019 | $ | 29,600 | $ | 36,400 | ||||||||
|
|
|
| |||||||||||||
Less: Current portion | (13,600 | ) | (13,600 | ) | ||||||||||||
Unamortized debt issuance costs |
| (31 | ) | (99 | ) | |||||||||||
|
|
|
| |||||||||||||
Non-current portion | $ | 15,969 | $ | 22,701 | ||||||||||||
|
|
|
| |||||||||||||
(amount in thousands) | ||||||||||||||||
Rate | Conditions | Maturity | As of March 27, 2020 | As of June 28, 2019 | ||||||||||||
Long-term borrowings, current portion, net: | ||||||||||||||||
Long-term borrowings, current portion | $ | 12,188 | $ | 3,250 | ||||||||||||
Less: Unamortized debt issuance costs – current portion | (32 | ) | — | |||||||||||||
Long-term borrowings, current portion, net | $ | 12,156 | $ | 3,250 | ||||||||||||
Long-term borrowings, non-current portion, net: | ||||||||||||||||
Term loan borrowings: | ||||||||||||||||
1-month LIBOR +1.50% per annum (1) | Repayable in quarterly installments | June 2023 | $ | — | $ | 60,938 | ||||||||||
3-month LIBOR +1.35% per annum(1) | Repayable in quarterly installments | June 2024 | 54,844 | — | ||||||||||||
Less: Current portion | (12,188 | ) | (3,250 | ) | ||||||||||||
Less: Unamortized debt issuance costs – non-current portion | (103 | ) | — | |||||||||||||
Long-term borrowings, non-current portion, net | $ | 42,553 | $ | 57,688 | ||||||||||||
| (1) |
| Six Months Ended | ||||||||
| (amount in thousands) | December 29, 2017 | December 30, 2016 | ||||||
Opening balance | $ | 36,400 | $ | 54,500 | ||||
Repayments during the period | (6,800 | ) | (9,800 | ) | ||||
|
|
|
| |||||
Closing balance | $ | 29,600 | $ | 44,700 | ||||
|
|
|
| |||||
Nine Months Ended | ||||||||
(amount in thousands) | March 27, 2020 | March 29, 2019 | ||||||
Opening balance | $ | 60,938 | $ | 64,188 | ||||
Borrowings during the period | 60,938 | — | ||||||
Repayments during the period | (67,032 | ) | (2,438 | ) | ||||
Closing balance | $ | 54,844 | $ | 61,750 | ||||
| (amount in thousands) | ||||
2018 (remaining six months) | $ | 6,800 | ||
2019 | 22,800 | |||
|
| |||
Total | $ | 29,600 | ||
|
| |||
(amount in thousands) | ||||
2020 (remaining three months) | $ | 3,046 | ||
2021 | 12,188 | |||
2022 | 15,234 | |||
2023 | 12,188 | |||
2024 | 12,188 | |||
Total | $ | 54,844 | ||
facility agreements:
On February 26, 2015, the Company entered into the Second Amendment to the Facility Agreement. The amendment extended the availability period for draws on the term loan facility from May 21, 2015 to July 31, 2015. It also allowed the Company, upon the satisfaction of certain conditions, to designate from
Loans under the Facility Agreement bearterm loan bore interest, at Fabrinet’sthe Company’s option, at a rate per annum equal to a LIBOR rate plus a spread of 1.75%1.50% to 2.50%2.25%, or a base rate plus a spread of 0.75%0.50% to 1.50%, determined in accordance with1.25%. During the Facility Agreement in each case with such spread determined based on Fabrinet’s consolidated total leverage ratio for the preceding four fiscal quarter period. Interest is duenine months ended March 27, 2020 and payable quarterly in arrears for loans bearing interest at the base rate and at the end of an interest period (or at each three-month interval in the case of loans with interest periods greater than three months) in the case of loans bearing interest at the LIBOR rate.
On July 24, 2017,March 29, 2019, the Company entered into anrecorded $0.5 million and $1.8 million, respectively, of interest rate swap agreement (the “Swap Agreement”), which the Company did not designate as hedging instruments. The Swap Agreement was used to mitigate interest rate risk and improve the interest rate profile of the Company’s debt obligations. The terms of the Swap Agreement effectively convert the floating interest rate of the term loans under the Facility Agreement to the fixed interest rate of 1.55% per annum through maturity of the term loanexpense in May 2019. The swap transactions are due and settled monthly. During the six months ended December 29, 2017, the Company included a net loss of $23.0 thousand from the settlement of the Swap Agreement as interest expenses in the unaudited condensed consolidated statements of operations and comprehensive income.
Fabrinet’s obligations under the Facility Agreement are guaranteed by certain of its existing and future direct material of its subsidiaries. In addition, the Facility Agreement is secured by Fabrinet’s present and future accounts receivable, deposit accounts and cash, and a pledge of the capital stock of certain of Fabrinet’s direct subsidiaries. Fabrinet is required to maintain at least $40.0 million of cash, cash equivalents, and marketable securities at financial institutions located in the United States. Further, Fabrinet is required to maintain any of its deposits accounts or securities accounts with balances in excess of $10.0 million in a jurisdiction where a control agreement, or the equivalent under the local law, can be effected.
The Facility Agreement contains customary affirmative and negative covenants. Negative covenants include, among other things, limitations on liens, indebtedness, investments, mergers, sales of assets, changes in the nature of the business, dividends and distributions, affiliate transactions and capital expenditures. The Facility Agreement contains financial covenants requiring Fabrinet to maintain: (1) a minimum tangible net worth of not less than $200.0 million plus 50% of quarterly net income, exclusive of quarterly losses; (2) a minimum debt service coverage ratio of not less than 1.50:1.00; (3) a maximum senior leverage ratio of not more than 2.50:1.00; and (4) a minimum quick ratio of not less than 1.10:1.00. Each of these financial covenants is calculated on a consolidated basis for the consecutive four fiscal quarter period then ended. As of December 29, 2017, the Company was in compliance with all covenants under the Facility Agreement.
The Facility Agreement also contains customary events of default including, among other things, payment defaults, breaches of covenants or representations and warranties, cross-defaults with certain other indebtedness, bankruptcy and insolvency events and change in control of Fabrinet, subject to grace periods in certain instances. Upon an event of default, the lenders may terminate their commitments, declare all or a portion of the outstanding obligations payable by Fabrinet to be immediately due and payable and exercise other rights and remedies provided for under the Facility Agreement.
Fabrinet intends to use the proceeds of the credit line to finance its future manufacturing buildings in the United States and Thailand, and for general corporate purposes including mergers and acquisitions of complementary manufacturing businesses or technology, although Fabrinet has no current commitments with respect to any such acquisitions.
Short-term loans from bank
In connection with the business acquisition in the first quarter of fiscal year 2017, the Company assumed a secured borrowing agreement. In the first quarter of fiscal year 2018,this term loan.
| Income taxes |
The effective tax rates for the Company for the six months ended DecemberMarch 29, 2017 and December 30, 2016 were 6.3% and 6.7%, respectively, of net income. The decrease was primarily due to the fact that the Company had higher income not subject to tax during the six months ended December 29, 2017, compared with the six months ended December 30, 2016.
On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJ Act”) was enacted into law. The TCJ Act provides for significant changes to the U.S. Internal Revenue Code of 1986, as amended (the “Code”), that impact corporate taxation requirements, such as the reduction of the federal tax rate for corporations from 35% to 21% and changes or limitations to certain tax deductions. The impact of the TCJ Act for the Company was a reduction of the value of deferred tax assets (which represent future tax benefits) of its U.S. subsidiaries as a result of lowering the U.S. corporate income tax rate from 35% to 21%. This reduction of the value of deferred tax assets was fully offset by a reversal of the valuation allowance on the related deferred tax assets. Therefore, there is no impact to the unaudited condensed consolidated financial statements.
| Share-based compensation |
Share-based compensation expense by type of award: Restricted share units Performance share units Total share-based compensation expense Tax effect on share-based compensation expense Net effect on share-based compensation expense In determining theequity awards, the Company is required to make estimates of expected dividends to be issued, expected volatility of Fabrinet’s ordinary shares, expected forfeitures of the awards, risk free interest rates for the expected term of the awardsrestricted share units and expected terms of the awards. Forfeitures are estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures differ from those estimates. The fair value of restrictedperformance share units is based on the market value of our ordinary shares on the date of grant.sixnine months ended DecemberMarch 27, 2020 and March 29, 2017 and December 30, 20162019 was as follows: Three Months Ended Six Months Ended (amount in thousands) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016 4,586 7,633 9,433 12,453 872 964 2,945 1,755 5,458 8,597 12,378 14,208 — — — — $ 5,458 $ 8,597 $ 12,378 $ 14,208
2020
2019 $ $ $ $
| Three Months ended | Six Months Ended | |||||||||||||||
| (amount in thousands) | December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | ||||||||||||
Cost of revenue | $ | 1,812 | $ | 1,514 | $ | 3,713 | $ | 2,528 | ||||||||
Selling, general and administrative expense | 3,646 | 7,083 | 8,665 | 11,680 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total share-based compensation expense | $ | 5,458 | $ | 8,597 | $ | 12,378 | $ | 14,208 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Three Months ended | Nine Months Ended | |||||||||||||||
(amount in thousands) | March 27, 2020 | March 29, 2019 | March 27, 2020 | March 29, 2019 | ||||||||||||
Cost of revenue | $ | 1,489 | $ | 1,237 | $ | 4,800 | $ | 4,384 | ||||||||
Selling, general and administrative expense | 4,629 | 3,187 | 13,501 | 8,989 | ||||||||||||
Total share-based compensation expense | $ | 6,118 | $ | 4,424 | $ | 18,301 | $ | 13,373 | ||||||||
2019.
Fabrinet maintains
On March 12, 2010, Fabrinet’s shareholders adopted the 2010 Plan. On December 20, 2010, December 20, 2012 and December 14, 2017, Fabrinet’s shareholders adopted amendments to the 2010 Plan to increase the number of ordinary shares authorized for issuance under the 2010 Plan by 500,000 shares, 3,700,000 shares and 2,100,000 shares, respectively. As of December 29, 2017, there were an aggregate of 34,057 share options outstanding, 1,163,994 restricted share units outstanding and 605,892 performance share units outstanding under the 2010 Plan. As of December 29, 2017, there were 2,547,960 ordinary shares available for future grant under the 2010 Plan.
On November 2, 2017, Fabrinet adopted the 2017 Inducement Plan with a reserve of 160,000 ordinary shares authorized for future issuance solely for the granting of inducement share options and equity awards to new employees. The 2017 Inducement Plan was adopted without shareholder approval in reliance on the “employment inducement exemption” provided under the New York Stock Exchange Listed Company Manual. As of December 29, 2017,March 27, 2020, there were an aggregate of 48,65324,327 restricted share units outstanding and 97,306 performance share units outstanding under the 2017 Inducement Plan. As of December 29, 2017, there were 14,041111,347 ordinary shares available for future grant under the 2017 Inducement Plan.
Share options
Share options have been granted
The following summarizes share option activity:
| Number of Shares | Number of Exercisable Options | Weighted- Average Exercise Price Per Share | Weighted- Average Grant Date Fair Value Per Share | |||||||||||||
Balance as of June 30, 2017 | 96,688 | 96,688 | $ | 15.70 | ||||||||||||
Granted | — | — | — | |||||||||||||
Exercised | (62,631 | ) | $ | 15.80 | ||||||||||||
Forfeited | — | — | ||||||||||||||
Expired | — | $ | — | |||||||||||||
|
| |||||||||||||||
Balance as of December 29, 2017 | 34,057 | 34,057 | $ | 15.52 | ||||||||||||
|
| |||||||||||||||
| Number of Shares | Number of Exercisable Options | Weighted- Average Exercise Price Per Share | Weighted- Average Grant Date Fair Value Per Share | |||||||||||||
Balance as of June 24, 2016 | 464,334 | 464,334 | $ | 15.95 | ||||||||||||
Granted | — | — | — | |||||||||||||
Exercised | (365,066 | ) | $ | 16.02 | ||||||||||||
Forfeited | — | — | ||||||||||||||
Expired | (5 | ) | $ | 5.75 | ||||||||||||
|
| |||||||||||||||
Balance as of December 30, 2016 | 99,263 | 99,263 | $ | 15.71 | ||||||||||||
|
| |||||||||||||||
The following summarizes information for share options outstanding as of December 29, 2017 under the 2010 Plan:
| Range of Exercise Price | Number of Shares Underlying Options | Weighted- Average Remaining Contractual Life (years) | Aggregate Intrinsic Value (amount in thousands) | |||||||||||||
| $14.12 | 21,638 | 0.86 | ||||||||||||||
| $15.16 | 5,369 | 0.63 | ||||||||||||||
| $18.60 -$25.50 | 7,050 | 0.93 | ||||||||||||||
|
|
|
| |||||||||||||
Options outstanding | 34,057 | 0.84 | $ | 449 | ||||||||||||
|
|
|
|
|
| |||||||||||
Options exercisable | 34,057 | 0.84 | $ | 449 | ||||||||||||
|
|
|
|
|
| |||||||||||
As of December 29, 2017, there was no unrecognized compensation cost for share options issued under the 2010 Plan.
and the 2017 Inducement Plan, and the 2020 Plan.two-year
| Number of Shares | Weighted- Average Grant Date Fair Value Per Share | |||||||
Balance as of June 30, 2017 | 1,058,605 | $ | 31.59 | |||||
Granted | 430,948 | 37.12 | ||||||
Issued | (285,902 | ) | 27.00 | |||||
Forfeited | (39,657 | ) | 35.97 | |||||
|
| |||||||
Balance as of December 29, 2017 | 1,163,994 | $ | 34.62 | |||||
|
| |||||||
| Number of Shares | Weighted- Average Grant Date Fair Value Per Share | |||||||
Balance as of June 24, 2016 | 1,181,402 | $ | 18.34 | |||||
Granted | 741,973 | 39.23 | ||||||
Issued | (423,035 | ) | 16.41 | |||||
Forfeited | (38,170 | ) | 22.35 | |||||
|
| |||||||
Balance as of December 30, 2016 | 1,462,170 | $ | 29.40 | |||||
|
| |||||||
Number of Shares | Weighted- Average Grant Date Fair Value Per Share | |||||||
Balance as of June 28, 2019 | 800,751 | $ | 42.48 | |||||
Granted | 343,792 | $ | 50.32 | |||||
Issued | (321,659 | ) | $ | 40.82 | ||||
Forfeited | (28,457 | ) | $ | 42.80 | ||||
Balance as of March 27, 2020 | 794,427 | $ | 46.54 | |||||
Number of Shares | Weighted- Average Grant Date Fair Value Per Share | |||||||
Balance as of June 29, 2018 | 1,073,580 | $ | 35.19 | |||||
Granted | 341,748 | $ | 48.77 | |||||
Issued | (496,854 | ) | $ | 34.08 | ||||
Forfeited | (104,194 | ) | $ | 38.50 | ||||
Balance as of March 29, 2019 | 814,280 | $ | 41.14 | |||||
| Number of Shares | Weighted- Average Grant Date Fair Value Per Share | |||||||
Balance as of June 30, 2017 | 227,268 | $ | 40.48 | |||||
Granted | 378,624 | (1) | 37.16 | |||||
Issued | — | — | ||||||
Forfeited | — | — | ||||||
|
| |||||||
Balance as of December 29, 2017 | 605,892 | $ | 38.41 | |||||
|
| |||||||
| Number of Shares | Weighted- Average Grant Date Fair Value Per Share | |||||||
Balance as of June 24, 2016 | — | — | ||||||
Granted | 234,678 | (1) | $ | 40.48 | ||||
Issued | — | — | ||||||
Forfeited | — | — | ||||||
|
| |||||||
Balance as of December 30, 2016 | 234,678 | $ | 40.48 | |||||
|
| |||||||
Equity Incentive Plans:
Number of Shares | Weighted- Average Grant Date Fair Value Per Share | |||||||
Balance as of June 28, 2019 | 548,500 | $ | 40.97 | |||||
Granted | 242,310 | $ | 48.65 | |||||
Issued | — | — | ||||||
Forfeited | (350,670 | ) | $ | 36.99 | ||||
Balance as of March 27, 2020 | 440,140 | $ | 48.37 | |||||
Number of Shares | Weighted- Average Grant Date Fair Value Per Share | |||||||
Balance as of June 29, 2018 | 605,892 | $ | 38.41 | |||||
Granted | 201,994 | $ | 48.02 | |||||
Issued | (227,268 | ) | $ | 40.48 | ||||
Forfeited | (27,954 | ) | $ | 39.35 | ||||
Balance as of March 29, 2019 | 552,664 | $ | 41.02 | |||||
| Shareholders’ equity |
sharesFabrinet’ssixthree and nine months ended December 29, 2017, FabrinetMarch 27, 2020, the Company issued 62,63152,041 and 230,178 ordinary shares, upon the exercise of options, for cash consideration at a weighted-average exercise price of $15.80 per share, and 194,174 ordinary sharesrespectively, upon the vesting of restricted share units, net of shares withheld.stockFabrinet’sthe Company’s board of directors approved a share repurchase program to permit Fabrinetthe Company to repurchase up to $30.0 million worth of its issued and outstanding ordinary shares in the open market in accordance with applicable rules and regulations, at such timeregulations. In February 2018 and such prices as management may decide.May 2019, the Company’s board of directors approved an increase of $30.0 million and $50.0 million, respectively, to the original share repurchase authorization, bringing the aggregate authorization to $110.0 million. During the three and sixnine months ended December 29, 2017, 315,973 March 27, 2020,$31.36,$58.37, totaling $9.9 million and $9.9 million, respectively. All such repurchased shares are held as treasury stock.$20.7 million. As of December 29, 2017, FabrinetMarch 27, 2020, the Company had a remaining authorization to purchase up to an additional $20.1$41.5 million worth of its ordinary shares under the share repurchase program. Shares repurchased under the share repurchase program are held as treasury shares.
| Accumulated other comprehensive income (loss) (“AOCI”) |
| (amount in thousands) | Unrealized net Losses on Marketable Securities | Unrealized net Gains (Losses) on Derivative Instruments | Foreign Currency Translation Adjustment (Losses) Gains | Total | ||||||||||||
Balance as of June 30, 2017 | $ | (72 | ) | $ | 34 | $ | (310 | ) | $ | (348 | ) | |||||
Other comprehensive income before reclassification adjustment | (75 | ) | — | 569 | 494 | |||||||||||
Amounts reclassified out of AOCI to foreign exchange loss in the unaudited condensed consolidated statements of operations and comprehensive income | (357 | ) | (1 | ) | — | (358 | ) | |||||||||
Tax effects | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other comprehensive (loss) income | $ | (432 | ) | $ | (1 | ) | $ | 569 | $ | 136 | ||||||
|
|
|
|
|
|
|
| |||||||||
Balance as of December 29, 2017 | $ | (504 | ) | $ | 33 | $ | 259 | $ | (212 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
The changes in AOCI for the six months ended December 30, 2016 were as follows:
| (amount in thousands) | Unrealized net (Losses) Gains on Marketable Securities | Unrealized net Gains (Losses) on Derivative Instruments | Foreign Currency Translation Adjustment (Losses) Gains | Total | ||||||||||||
Balance as of June 24, 2016 | $ | 399 | $ | 192 | $ | — | $ | 591 | ||||||||
Other comprehensive income before reclassification adjustment | (525 | ) | — | (1,162 | ) | (1,687 | ) | |||||||||
Amounts reclassified out of AOCI to foreign exchange loss in the unaudited condensed consolidated statements of operations and comprehensive income | (15 | ) | (158 | ) | — | (173 | ) | |||||||||
Tax effects | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other comprehensive loss | $ | (540 | ) | $ | (158 | ) | $ | (1,162 | ) | $ | (1,860 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
Balance as of December 30, 2016 | $ | (141 | ) | $ | 34 | $ | (1,162 | ) | $ | (1,269 | ) | |||||
|
|
|
|
|
|
|
| |||||||||
(amount in thousands) | Unrealized net (Losses)/Gains on Available-for-sale Securities | Unrealized net (Losses)/Gains on Derivative Instruments | Retirement benefit plan - Prior service cost | Foreign Currency Translation Adjustment | Total | |||||||||||||||
Balance as of June 28, 2019 | $ | 952 | $ | 32 | $ | (2,537 | ) | $ | (833 | ) | $ | (2,386 | ) | |||||||
Other comprehensive income before reclassification adjustment | (1,310 | ) | (7,565 | ) | 478 | (353 | ) | (8,750 | ) | |||||||||||
Amounts reclassified out of AOCI to the unaudited condensed consolidated comprehensive income | (93 | ) | 846 | — | — | 753 | ||||||||||||||
Tax effects | — | — | — | — | — | |||||||||||||||
Other comprehensive income (loss) | $ | (1,403 | ) | $ | (6,719 | ) | $ | 478 | $ | (353 | ) | $ | (7,997 | ) | ||||||
Balance as of March 27, 2020 | $ | (451 | ) | $ | (6,687 | ) | $ | (2,059 | ) | $ | (1,186 | ) | $ | (10,383 | ) | |||||
(amount in thousands) | Unrealized net (Losses)/Gains on Available-for-sale Securities | Unrealized net (Losses)/Gains on Derivative Instruments | Retirement benefit plan - Prior service cost | Foreign Currency Translation Adjustment | Total | |||||||||||||||
Balance as of June 29, 2018 | $ | (1,091 | ) | $ | 33 | $ | — | $ | (199 | ) | $ | (1,257 | ) | |||||||
Other comprehensive income before reclassification adjustment | 1,203 | — | — | (219 | ) | 984 | ||||||||||||||
Amounts reclassified out of AOCI to the unaudited condensed consolidated comprehensive income | 196 | (2 | ) | — | — | 194 | ||||||||||||||
Tax effects | — | — | — | — | — | |||||||||||||||
Other comprehensive income (loss) | $ | 1,399 | $ | (2 | ) | $ | — | $ | (219 | ) | $ | 1,178 | ||||||||
Balance as of March 29, 2019 | $ | 308 | $ | 31 | $ | — | $ | (418 | ) | $ | (79 | ) | ||||||||
| Commitments and contingencies |
December 29, 2017March 27, 2020 and June 30, 2017,28, 2019, the Company had one outstanding standby letter of credit of 6.0 million Euros, related to the Company’s support of a customer’s transfer of certain manufacturing operations from Berlin, Germany to the Company’s facilities in Thailand. As of March 27, 2020 and June 28, 2019, the standby letter of credit was backed by cash collateral of $7.4 million.banksa bank on behalf of Fabrinetour subsidiary in Thailand for electricity usage and other normal business amounting to $1.5asand $1.6 million, respectively, and there were other bank guarantees given by a bank on behalf of both dates.Operating lease commitmentsThe Company leases a portion of its office, capital equipment, and certain land and buildings for its facilitiesour subsidiaries in the Cayman Islands, China New Jersey and the United Kingdom under operating lease arrangements that expire in various calendar years through 2023. Rental expense under these operating leases amounted to $0.9 million and $0.8 million for the six months ended December 29, 2017 and December 30, 2016, respectively.As
On December 23, 2016, the Company entered into an agreement to purchase a parcel of land in Chonburi, Thailand, to support the expansion of the Company’s production in Thailand. The aggregate purchase price is approximately $5.6 million, of which the first installment of $1.1 million was paid by the Company on January 10, 2017 and the remaining balance of the purchase price was paid by the Company on December 25, 2017.
20 . | Business segments and geographic information |
| Three Months Ended | Six Months Ended | |||||||||||||||
| (amount in thousands) | December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | ||||||||||||
North America | $ | 152,167 | $ | 157,997 | $ | 309,158 | $ | 323,992 | ||||||||
Asia-Pacific | 130,354 | 136,692 | 273,217 | 251,437 | ||||||||||||
Europe | 54,551 | 56,467 | 112,010 | 107,770 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 337,072 | $ | 351,156 | $ | 694,385 | $ | 683,199 | |||||||||
|
|
|
|
|
|
|
| |||||||||
region:
Three Months Ended | Nine Months Ended | |||||||||||||||
(amount in thousands) | March 27, 2020 | March 29, 2019 | March 27, 2020 | March 29, 2019 | ||||||||||||
North America | $ | 206,751 | $ | 195,504 | $ | 631,096 | $ | 558,028 | ||||||||
Asia-Pacific | 141,639 | 151,263 | 401,209 | 469,921 | ||||||||||||
Europe | 62,820 | 52,184 | 204,418 | 151,259 | ||||||||||||
| $ | 411,210 | $ | 398,951 | $ | 1,236,723 | $ | 1,179,208 | |||||||||
21. | Subsequent events |
As part
In February 2018, Fabrinet’s board of directors approved the repurchase of up to an additional $30.0 million of Fabrinet’s outstanding ordinary shares, bringing the aggregate authorization under Fabrinet’s existing share repurchase program to $60.0 million.
| Three Months Ended | Six Months Ended | |||||||||||||||
| December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | |||||||||||||
North America | 45.1 | % | 45.0 | % | 44.5 | % | 47.4 | % | ||||||||
Asia-Pacific | 38.7 | 38.9 | 39.3 | 36.8 | ||||||||||||
Europe | 16.2 | 16.1 | 16.2 | 15.8 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
|
|
|
|
|
|
|
| |||||||||
region:
Three Months Ended | Nine Months Ended | |||||||||||||||
March 27, 2020 | March 29, 2019 | March 27, 2020 | March 29, 2019 | |||||||||||||
North America | 50.3 | % | 49.0 | % | 51.0 | % | 47.3 | % | ||||||||
Asia-Pacific | 34.4 | 37.9 | 32.5 | 39.9 | ||||||||||||
Europe | 15.3 | 13.1 | 16.5 | 12.8 | ||||||||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
The excess or obsolete inventory is shipped to the customer and revenue is recognized upon shipment.
2019 SG&A expenses.
2019.
| As of December 29, 2017 | As of June 30, 2017 | |||||||||||||||||||||||
| (amount in thousands, except percentages) | Currency | $ | % | Currency | $ | % | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Thai baht | 461,231 | $ | 14,114 | 52.3 | 395,123 | $ | 11,628 | 47.3 | ||||||||||||||||
RMB | 22,737 | 3,480 | 12.9 | 26,965 | 3,980 | 16.2 | ||||||||||||||||||
GBP | 6,986 | 9,403 | 34.8 | 6,896 | 8,982 | 36.5 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | $ | 26,997 | 100.0 | $ | 24,590 | 100.0 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Thai baht | 1,360,214 | $ | 41,622 | 82.7 | 1,875,338 | $ | 55,189 | 82.7 | ||||||||||||||||
RMB | 29,071 | 4,449 | 8.8 | 28,451 | 4,200 | 6.3 | ||||||||||||||||||
GBP | 3,168 | 4,264 | 8.5 | 5,625 | 7,326 | 11.0 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | $ | 50,335 | 100.0 | $ | 66,715 | 100.0 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
As of March 27, 2020 | As of June 28, 2019 | |||||||||||||||||||||||
(amount in thousands, except percentages) | Currency | $ | % | Currency | $ | % | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Thai baht | 885,394 | $ | 27,277 | 44.2 | 664,860 | $ | 21,628 | 60.0 | ||||||||||||||||
RMB | 189,575 | 26,918 | 43.6 | 53,393 | 7,767 | 21.5 | ||||||||||||||||||
GBP | 6,171 | 7,541 | 12.2 | 5,270 | 6,682 | 18.5 | ||||||||||||||||||
Total | $ | 61,736 | 100.0 | $ | 36,077 | 100.0 | ||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Thai baht | 2,047,689 | $ | 63,084 | 88.4 | 1,961,972 | $ | 63,825 | 90.0 | ||||||||||||||||
RMB | 37,561 | 5,333 | 7.5 | 26,373 | 3,836 | 5.4 | ||||||||||||||||||
GBP | 2,397 | 2,929 | 4.1 | 2,598 | 3,294 | 4.6 | ||||||||||||||||||
Total | $ | 71,346 | 100.0 | $ | 70,955 | 100.0 | ||||||||||||||||||
As of June 28, 2019, there was $72.0 million of foreign currency forward contracts outstanding on the Thai baht payables.
For the six months ended December 29, 2017 and December 30, 2016, we recorded loss of $0.1 million and $1 thousand, respectively, related to derivatives that are not designated as hedging instruments in the unaudited condensed consolidated statements of operations and comprehensive income.
gains until March 6, 2039.
On December 22, 2017, the.
U.S. subsidiaries.
| Three Months Ended | Six Months Ended | |||||||||||||||
| (amount in thousands) | December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | ||||||||||||
Revenues | $ | 337,072 | $ | 351,156 | $ | 694,385 | $ | 683,199 | ||||||||
Cost of revenues | (299,906 | ) | (308,110 | ) | (616,887 | ) | (600,545 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit | 37,166 | 43,046 | 77,498 | 82,654 | ||||||||||||
Selling, general and administrative expenses | (13,157 | ) | (17,651 | ) | (28,835 | ) | (33,483 | ) | ||||||||
Expenses related to reduction in workforce | (1,776 | ) | — | (1,776 | ) | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Operating income | 22,233 | 25,395 | 46,887 | 49,171 | ||||||||||||
Interest income | 596 | 320 | 1,405 | 757 | ||||||||||||
Interest expense | (826 | ) | (555 | ) | (1,679 | ) | (1,876 | ) | ||||||||
Foreign exchange (loss) gain, net | (1,348 | ) | 1,945 | (3,282 | ) | 3,602 | ||||||||||
Other income | 250 | 147 | 347 | 289 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Income before income taxes | 20,905 | 27,252 | 43,678 | 51,943 | ||||||||||||
Income tax expense | (1,592 | ) | (1,960 | ) | (3,332 | ) | (3,885 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income | 19,313 | 25,292 | 40,346 | 48,058 | ||||||||||||
Other comprehensive income (loss), net of tax | (418 | ) | (2,256 | ) | 136 | (1,860 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net comprehensive income | $ | 18,895 | $ | 23,036 | $ | 40,482 | $ | 46,198 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
(amount in thousands) | 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 (loss) income, net of tax | (8,231 | ) | 998 | (7,997 | ) | 1,178 | ||||||||||
Net comprehensive income | $ | 20,036 | $ | 29,633 | $ | 77,458 | $ | 89,176 | ||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | |||||||||||||
Revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of revenues | (89.0 | ) | (87.7 | ) | (88.8 | ) | (87.9 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit | 11.0 | 12.3 | 11.2 | 12.1 | ||||||||||||
Selling, general and administrative expenses | (3.9 | ) | (5.0 | ) | (4.1 | ) | (4.9 | ) | ||||||||
Expenses related to reduction in workforce | (0.5 | ) | — | (0.3 | ) | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Operating income | 6.6 | 7.3 | 6.8 | 7.2 | ||||||||||||
Interest income | 0.2 | 0.1 | 0.2 | 0.1 | ||||||||||||
Interest expense | (0.3 | ) | (0.2 | ) | (0.2 | ) | (0.3 | ) | ||||||||
Foreign exchange (loss) gain, net | (0.4 | ) | 0.6 | (0.5 | ) | 0.5 | ||||||||||
Other income | 0.1 | 0.0 | 0.0 | 0.1 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Income before income taxes | 6.2 | 7.8 | 6.3 | 7.6 | ||||||||||||
Income tax expense | (0.5 | ) | (0.6 | ) | (0.5 | ) | (0.6 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income | 5.7 | 7.2 | 5.8 | 7.0 | ||||||||||||
Other comprehensive income (loss), net of tax | (0.1 | ) | (0.6 | ) | 0.1 | (0.3 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net comprehensive income | 5.6 | % | 6.6 | % | 5.9 | % | 6.7 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
March 27, 2020 | March 29, 2019 | March 27, 2020 | March 29, 2019 | |||||||||||||
Revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of revenues | (89.2 | ) | (88.3 | ) | (88.7 | ) | (88.8 | ) | ||||||||
Gross profit | 10.8 | 11.7 | 11.3 | 11.2 | ||||||||||||
Selling, general and administrative expenses | (4.2 | ) | (3.5 | ) | (4.1 | ) | (3.5 | ) | ||||||||
Expenses related to reduction in workforce | — | (0.1 | ) | (0.0 | ) | (0.1 | ) | |||||||||
Operating income | 6.6 | 8.1 | 7.2 | 7.6 | ||||||||||||
Interest income | 0.5 | 0.5 | 0.5 | 0.4 | ||||||||||||
Interest expense | (0.0 | ) | (0.4 | ) | (0.2 | ) | (0.3 | ) | ||||||||
Foreign exchange loss, net | (0.0 | ) | (0.8 | ) | (0.2 | ) | (0.0 | ) | ||||||||
Other income, net | 0.0 | 0.1 | 0.0 | 0.1 | ||||||||||||
Income before income taxes | 7.1 | 7.5 | 7.3 | 7.8 | ||||||||||||
Income tax expense | (0.2 | ) | (0.4 | ) | (0.4 | ) | (0.3 | ) | ||||||||
Net income | 6.9 | 7.1 | 6.9 | 7.5 | ||||||||||||
Other comprehensive (loss) income, net of tax | (2.0 | ) | 0.3 | (0.6 | ) | 0.1 | ||||||||||
Net comprehensive income | 4.9 | % | 7.4 | % | 6.3 | % | 7.6 | % | ||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| (amount in thousands) | December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | ||||||||||||
Optical communications | $ | 241,889 | $ | 274,244 | $ | 517,501 | $ | 531,051 | ||||||||
Lasers, sensors and other | 95,183 | 76,912 | 176,884 | 152,148 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 337,072 | $ | 351,156 | $ | 694,385 | $ | 683,199 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
(amount in thousands) | March 27, 2020 | March 29, 2019 | March 27, 2020 | March 29, 2019 | ||||||||||||
Optical communications | $ | 308,566 | $ | 298,139 | $ | 933,013 | $ | 884,454 | ||||||||
Lasers, sensors and other | 102,644 | 100,812 | 303,710 | 294,754 | ||||||||||||
Total | $ | 411,210 | $ | 398,951 | $ | 1,236,723 | $ | 1,179,208 | ||||||||
March 29, 2019
revenues
Our total revenues increased by $11.2 million, or 1.6%, to $694.4 million for the six months ended December 29, 2017, compared with $683.2 million for the six months ended December 30, 2016.2019. This increase was primarily due to an increase in our customers’ demand for both optical andpartially offsetduring the three months ended March 27, 2020. Revenues from optical anda decrease$10.4 million and $1.8 million, or 3.5% and 1.8%, respectively, for the three months ended March 27, 2020.
2019.
revenues
Our cost of revenues increased by $16.3 million, or 2.7%, to $616.9 million, or 88.8% of total revenues, for the six months ended December 29, 2017, compared with $600.5 million, or 87.9% of total revenues, for the six months ended December 30, 2016. The increase in cost of revenues was primarily due to an increase in sales volume. Cost of revenues also included share-based compensation expenses of $3.7 million for the six months ended December 29, 2017,compared with $2.5 million for the six months ended December 30, 2016.
profit
March 29, 2019. The decrease was primarily due to a less favorable product mix and an increase in costs due to supply chain disruption resulting from COVID-19.
and effective cost controls.
expenses
Our SG&A expenses decreasedincreased by $4.6$8.9 million, or 13.9%21.5%, to $28.8$50.2 million, or 4.1% of total revenues, for the sixnine months ended December 29, 2017,March 27, 2020, compared with $33.5$41.3 million, or 4.9%3.5% of total revenues, for the sixnine months ended December 30, 2016. Our SG&A expenses decreasedMarch 29, 2019. The increase was primarily due to lower incentive-based(1) an increase in share-based compensation expenses of $4.5 million including $3.9 million from an increase in performance share-based awards granted in the period and lower$0.6 million from an increase in restricted share-based awards granted in the period; (2) an increase in executive and management expenses relatingof $2.0 million from bonuses and other benefits; (3) an increase in severance liabilities expense of $1.0 million due to mergera change in labor protection law in Thailand in May 2019 that increased the required severance payment compensation for employees with 20 years of service from 300 days of wage to 400 days of wage; and acquisition activities.
(4) an increase in new business
March 29, 2019. The decrease was primarily due to an increase in SG&A expenses.
incomeincome.
expense
Foreign exchange gain (loss), net.
Our foreign exchange gain, net, decreased by $3.3interest rate swaps of $1.7 million to foreign exchange (loss), net, of $(1.3) million, or (0.4)% of total revenues, for the three months ended DecemberSeptember 27, 2019, before applying cash flow hedge, as compared to an unrealized loss of $1.6 million for the nine months ended March 29, 2017, compared with2019; offset by the amortization of the fair value of interest rate swaps as of the hedge inception date of $0.8 million during the nine months ended March 27, 2020 in relation to applying hedge accounting which results in a decrease in interest expense.
Our$1.6 million for the nine months ended March 27, 2020 as compared to a $0.9 million realized foreign exchange gain net, decreased by $6.9 million to foreign exchange (loss), net, of $(3.3) million, or (0.5)% of total revenues,from receipts and payments for the sixnine months ended DecemberMarch 29, 2017, compared with foreign exchange gain, net, of $3.6 million, or 0.5% of total revenues, for the six months ended December 30, 2016. The decrease was primarily due to the fluctuation of foreign currencies, particularly the depreciation of U.S. dollars against Thai baht.
2019.
taxes
2019.
2019.
income
March 29, 2019. The decrease was primarily due to (1) an increase in SG&A expenses of $3.0 million and (2) a decrease in gross profit of $2.4 million; partially offset by (1) a decrease in foreign exchange loss of $3.0 million, (2) a net change in interest income and expense of $1.1 million; (3) a decrease in income tax expense of $0.5 million, and (4) a decrease in expenses related to reduction in workforce of $0.3 million.
March 29, 2019. The decrease was primarily due to (1) a net increase in SG&A expenses of $8.9 million, (2) a net change in foreign exchange gain (loss) of $2.5 million, and (3) an increase in income tax expenses of $1.1 million primarily due to the valuation allowance for deferred tax assets; partially offset by (1) an increase in gross profit of $6.9 million due to increased revenues and effective cost control, (2) a net change in interest income and expense of $2.2 million, and (3) a decrease in expenses related to reduction in workforce of $0.7 million.
income, net.
2019.
March 27, 2020.
In December 2015, we began construction of a new manufacturing facility at our Chonburi campus, which we substantially completed in the first quarter of fiscal year 2017.
| Six Months Ended | ||||||||
| (amount in thousands) | December 29, 2017 | December 30, 2016 | ||||||
Net cash provided by operating activities | $ | 37,113 | $ | 19,752 | ||||
Net cash used in investing activities | $ | (20,639 | ) | $ | (84,102 | ) | ||
Net cash (used in) provided by financing activities | $ | (15,641 | ) | $ | 10,692 | |||
Net increase (decrease) in cash, cash equivalents and restricted cash | $ | 833 | $ | (53,658 | ) | |||
Nine Months Ended | ||||||||
(amount in thousands) | March 27, 2020 | March 29, 2019 | ||||||
Net cash provided by operating activities | $ | 104,448 | $ | 105,504 | ||||
Net cash used in investing activities | $ | (28,921 | ) | $ | (79,045 | ) | ||
Net cash used in financing activities | $ | (32,000 | ) | $ | (22,063 | ) | ||
Net increase in cash, cash equivalents and restricted cash | $ | 43,527 | $ | 4,396 | ||||
Financing Activities
Net cash for financing activities decreased by $26.3 million, or 246.3%45.0%, to $32.0 million for the nine months ended March 27, 2020, compared with net cash used in financing activities of $15.6$22.1 million for the sixnine months ended DecemberMarch 29, 2017, compared with net cash provided by financing activities of $10.7 million for the six months ended December 30, 2016.2019. This decreaseincrease was primarily due to (1) an increase in ordinary shares repurchase of $9.9$15.3 million and (2) an increase of $3.7 million in the repurchasenet repayments of ordinary shares pursuantloans to our share repurchase program, (2) a decrease in the proceeds from our revolving bank loan of $10.7 million, (3) a decrease in the proceeds from the issuance of ordinary shares under employee share option plans of $4.9 million, and (4)banks. The increase was offset by (1) an increase in withholding tax related to net share settlement of restricted share units of $2.7$5.7 million comparedand (2) the release of restricted cash in connection with the same period last year. These were offset by a decrease in the repaymentbusiness acquisition of long-term loans from bank of $3.0$3.5 million.
We have not entered into any financial guarantees or other commitments
was backed by cash collateral of $7.4 million.
We maintain an investment portfolio in a variety of financial instruments, including, but not limited to, U.S. government and agency bonds, corporate obligations, money market funds, asset-backed securities, and other investment-grade securities. The majority of these investments pay a fixed rate of interest. The securities in the investment portfolio are subject to market price risk due to changes in interest rates, perceived issuer creditworthiness, marketability, and other factors. These investments are generally classified as
For example, in the three months ended March 27, 2020, we experienced some order cancelations and delays with respect to certain products that we manufacture for our customers due to COVID 19, which adversely affected our revenue.
Reliance
Natural disasters (like the 2011 flooding in Thailand), epidemics, acts of terrorism and other political and economic developments could harm our business, financial condition, and operating results.
Natural disasters, such as the 2011 flooding in Thailand, where most of our manufacturing operations are located, could severely disrupt our manufacturing operations and increase our supply chain costs. These events, over which we have little or no control, could cause a decrease in demand for our services, make it difficult or impossible for us to manufacture and deliver products and for our suppliers to deliver components allowing us to manufacture those products, require large expenditures to repair or replace our facilities, or create delays and inefficiencies in our supply chain. For example, the 2011 flooding in Thailand forced us to temporarily shut down all of our manufacturing facilities in Thailand and cease production permanently at our Chokchai facility in Thailand, which adversely affected our ability to meet our customers’ demands during fiscal year 2012. In some countries in which we operate, including the PRC and Thailand, potential outbreaks of infectious diseases such as the H1N1 influenza virus, severe acute respiratory syndrome (“SARS”) or bird flu could disrupt our manufacturing operations, reduce demand for our customers’ products and increase our supply chain costs. In addition, increased international political instability, evidenced by the threat or occurrence of terrorist attacks, enhanced national security measures, conflicts in the Middle East and Asia, strained international relations arising from these conflicts and the related decline in consumer confidence and economic weakness, may hinder our ability to do business. Any escalation in these events or similar future events may disrupt our operations and the operations of our customers and suppliers, and may affect the availability of materials needed for our manufacturing services. Such events may also disrupt the transportation of materials to our manufacturing facilities and finished products to our customers. These events have had, and may continue to have, an adverse impact on the U.S. and world economy in general, and customer confidence and spending in particular, which in turn could adversely affect our total revenues and operating results. The impact of these events on the volatility of the U.S. and world financial markets also could increase the volatility of the market price of our ordinary shares and may limit the capital resources available to us, our customers and our suppliers.
We are not fully insured against all potential losses. Natural disasters or other catastrophes could adversely affect our business, financial condition and operating results.
Our current property and casualty insurance covers loss or damage to our property and third-party property over which we have custody and control, as well as losses associated with business interruption, subject to specified exclusions and limitations such as coinsurance, facilities locationsub-limits and other policy limitations and covenants. Even with insurance coverage, natural disasters or other catastrophic events, including acts of war, could cause us to suffer substantial losses in our operational capacity and could also lead to a loss of opportunity and to a potential adverse impact on our relationships with our existing customers resulting from our inability to produce products for them, for which we could not be compensated by existing insurance. This in turn could have a material adverse effect on our business, financial condition and operating results.
Many of our customers and potential competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater resources than we have. These advantages may allow them to devote greater resources than we can to the development and promotion of service offerings that are similar or superior to our service offerings. These competitors may also engage in more extensive research and development, undertake more
For example, in the three months ended March 27, 2020, we experienced some order cancelations and delays with respect to telecom products that we manufacture for our customers due to
Our
We rely upon the capacity, availability and security of our information technology hardware and software infrastructure. For instance, we use a combination of standard and customized software platforms to manage, record, and report all aspects ofsimilar future events may disrupt our operations and in many instances, enablethe operations of our customers and suppliers and may affect the availability of materials needed for our manufacturing services. Such events
Despite our implementation of security measures, our systems are vulnerable to damages from computer viruses, naturalnot fully insured against all potential losses. Natural disasters unauthorized access and other similar disruptions. Any system failure, accident or security breach could result in disruptions to our operations. To the extent that any disruptions, cyber-attack or other security breach results in acatastrophes could adversely affect our business, financial condition and operating results.
turn could have a material adverse effect on our business, financial condition and operating results.
Volatilitycontinuing global economic downturn and disruptionuncertainty due to the effects of
rates. Uncertainty about worldwide economic conditions poses a risk as businesses may further reduce or postpone spending in response to reduced budgets, tight credit, negative financial news and declines in income or asset values, which could adversely affect our business, financial condition and operating results and increase the volatility of our share price. In addition, our ability to access capital markets may be restricted, which could have an impact on our ability to react to changing economic and business conditions and could also adversely affect our business, financial condition and operating results.
If we fail to adequately expand our manufacturing capacity, we will not be able to grow our business, which would harm our business, financial condition and operating results. Conversely, if we expand too much or too rapidly, we may experience excess capacity, which would harm our business, financial condition and operating results.
We may not be able to pursue many large customer orders or sustain our historical growth rates if we do not have sufficient manufacturing capacity to enable us to commit to provide customers with specified quantities of products. If our customers do not believe that we have sufficient manufacturing capacity, they may: (1) outsource all of their production to another source that they believe can fulfill all of their production requirements; (2) look to a second source for the manufacture of additional quantities of the products that we currently manufacture for them; (3) manufacture the products themselves; or (4) otherwise decide against using our services for their new products.
Most recently, we expanded our manufacturing capacity with a new facility in Chonburi, Thailand. We may continue to devote significant resources to the expansion of our manufacturing capacity, and any such expansion will be expensive, will require management’s time and may disrupt our operations. In the event we are unsuccessful in our attempts to expand our manufacturing capacity, our business, financial condition and operating results could be harmed.
However, if we expand our manufacturing capacity and are unable to promptly utilize the additional space due to reduced demand for our services, an inability to win new projects, new customers or penetrate new markets, or if the optics industry does not grow as we expect, we may experience periods of excess capacity, which could harm our business, financial condition and operating results.
On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJ Act”) was enacted into law. The TCJ Act provides for significant changes to the U.S. Internal Revenue Code of 1986, as amended (the “Code”), that impact corporate taxation requirements, such as the reduction of the federal tax rate for corporations from 35% to 21% and changes or limitations to certain tax deductions. While we are able to make reasonable estimates of the impact of the reduction in corporate rate, the final impact of the TCJ Act may differ from these estimates, due to, among other things, changes in our interpretations and assumptions, additional guidance that may be issued by the I.R.S., and actions we may take. We are continuing to gather additional information to determine the final impact.
We may encounter difficulties completing or integrating acquisitions, asset purchases and other types of transactions that we may pursue in the future, which could disrupt our business, cause dilution to our shareholders and harm our business, financial condition and operating results.
We have grown and may continue to grow our business through acquisitions, asset purchases and other types of transactions, including the transfer of products from our customers and their suppliers. Most recently, we acquired Fabrinet UK in September 2016. Acquisitions and other strategic transactions typically involve many risks, including the following:
Acquisitions are inherently risky, and we can provide no assurance that the acquisition of Fabrinet UK or any future acquisitions will be successful or will not harm our business, financial condition and operating results.
We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our shareholders.
We are subject to governmental export and import controls in several jurisdictions that could subject us to liability or impair our ability to compete in international markets.
We are subject to governmental export and import controls in Thailand, the PRC, the United Kingdom and the United States that may limit our business opportunities. Various countries regulate the import of certain technologies and have enacted laws that could limit our ability to export or sell the products we manufacture. The export of certain technologies from the United States, the United Kingdom and other nations to the PRC is barred by applicable export controls, and similar prohibitions could be extended to Thailand, thereby limiting our ability to manufacture certain products. Any change in export or import regulations or related legislation, shift in approach to the enforcement of existing regulations, or change in the countries, persons or technologies targeted by such regulations, could limit our ability to offer our manufacturing services to existing or potential customers, which could harm our business, financial condition and operating results.
shares.
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased As Part of Publicly Announced Program | Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program | ||||||||||||
September 30, 2017 – October 31, 2017 | — | $ | — | — | $ | 30,000,000 | ||||||||||
November 1, 2017 – November 30, 2017 | 315,973 | $ | 31.36 | 315,973 | $ | 20,089,748 | ||||||||||
December 1, 2017 – December 29, 2017 | — | $ | — | — | $ | 20,089,748 | ||||||||||
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Total | 315,973 | $ | 315,973 | $ | 20,089,748 | |||||||||||
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Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased As Part of Publicly Announced Program | Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program | ||||||||||||
December 28, 2019 – January 24, 2020 | — | $ | — | — | $ | 62,220,607 | ||||||||||
January 25, 2020 – February 21, 2020 | — | $ | — | — | $ | 62,220,607 | ||||||||||
February 22, 2020 – March 27, 2020 | 355,000 | $ | 58.37 | 355,000 | $ | 41,499,413 | ||||||||||
Total | 355,000 | $ | 58.37 | 355,000 | $ | 41,499,413 | ||||||||||
Incorporated by reference herein | ||||||||||||||||
Exhibit Number | Description | Form | Exhibit No. | Filing Date | ||||||||||||
10.1 | 8-K | 10.1 | February 3, 2020 | |||||||||||||
10.2 | ||||||||||||||||
31.1 | ||||||||||||||||
31.2 | ||||||||||||||||
32.1* | ||||||||||||||||
101.INS | Inline XBRL Instance. | |||||||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema. | |||||||||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase. | |||||||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase. | |||||||||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase. | |||||||||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase. | |||||||||||||||
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). | |||||||||||||||
Pursuant to the requirementsTable of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 7, 2018.
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. | ||
FABRINET | ||
Date: May 5, 2020 | ||
/s/ Csaba Sverha | ||
Csaba Sverha | ||
Executive Vice President, Chief Financial Officer | ||
(Principal Financial and Accounting Officer) | ||
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