Fabrinet(US:FN)2024-08-20 11:05Security and Risk Management - The company has not experienced any material security breaches in its systems or third-party systems in the past three years[168]. - The company has established a cybersecurity risk management process overseen by its board of directors and an internal IT security committee[169]. Shareholder Information - As of June 28, 2024, the company has a total of 6 shareholders of record for its ordinary shares[176]. - The company intends to retain earnings for business use and does not currently plan to pay dividends on its ordinary shares[177]. Share Repurchase and Authorization - During the three months ended June 28, 2024, the company repurchased a total of 20,887 shares at an average price of $186.49, totaling approximately $39.5 million[179]. - The company has a remaining authorization to repurchase up to $60.5 million worth of its ordinary shares as of June 28, 2024[179]. Revenue and Market Performance - Revenues from customers outside North America increased from 52.0% in fiscal year 2023 to 63.5% in fiscal year 2024, driven by increased sales to a customer in Israel[189]. - The percentage of total revenues from Asia-Pacific increased to 57.1% in fiscal year 2024, up from 43.2% in fiscal year 2023[191]. - Total revenues for fiscal year 2024 are expected to be impacted by ongoing inventory corrections in the optical communications sector[188]. - Total revenues for the fiscal year ended June 28, 2024, reached $2,882.97 million, an increase of 8.96% from $2,645.24 million in the previous year[220]. - Revenues for fiscal year 2024 increased by $237.8 million, or 9.0%, to $2,882.97 million compared to fiscal year 2023[226]. - Optical communications revenues represented $2,289.0 million, or 79.4% of total revenues for fiscal year 2024, increasing by $280.7 million, or 14.0%[226]. - Non-optical communications revenues decreased by $42.9 million, or 6.7%, to $593.9 million, primarily due to inventory absorption in the automotive market[226]. Financial Performance - Gross profit for the same period was $356.12 million, reflecting a gross margin of approximately 12.35%[220]. - Operating income increased to $277.61 million, up from $251.70 million, representing a growth of 10.29% year-over-year[220]. - Net income for the fiscal year was $296.18 million, compared to $247.91 million in the prior year, marking a 19.43% increase[220]. - Interest income significantly rose to $33.20 million from $11.23 million, indicating a substantial increase in financial income[220]. - Selling, general, and administrative expenses were $78.48 million, slightly up from $77.67 million, indicating a modest increase in operational costs[220]. Cost and Expense Management - Employee costs, a major component of cost of revenues, are projected to rise due to increasing wages in Thailand and the PRC[194]. - Charges for discretionary merit-based bonuses to non-executive employees were $7.1 million in fiscal year 2024, up from $6.8 million in fiscal year 2023[197]. - SG&A expenses are expected to increase in fiscal year 2025 compared to fiscal year 2024, primarily due to rising compensation-related expenses[198]. - The company expects an increase in selling, general and administrative (SG&A) expenses for fiscal year 2025 compared to fiscal year 2024[182]. Cash Flow and Investments - Cash, cash equivalents, and short-term investments increased to $858.6 million as of June 28, 2024, up from $550.5 million as of June 30, 2023[240]. - Cash provided by operating activities for fiscal year 2024 was $413.1 million, compared to $213.3 million for fiscal year 2023[244]. - The company had no outstanding debt as of June 28, 2024, down from $12.2 million as of June 30, 2023[240]. - The company reported a foreign exchange gain of $0.38 million, contrasting with a loss of $1.21 million in the previous year[220]. Taxation - The effective income tax rate for the company was approximately 4.87% for the fiscal year ended June 28, 2024[220]. - The corporate income tax rate for the Thai subsidiary is currently 20%, with various tax incentives available until 2031[210]. - A full valuation allowance of $2.7 million for deferred tax assets was set up for the subsidiary in Israel due to expected net operating losses[218]. Assets and Liabilities - Total current assets increased to $2,012.7 million as of June 28, 2024, up from $1,652.5 million as of June 30, 2023, representing a growth of approximately 21.8%[277]. - Total liabilities rose to $592.8 million as of June 28, 2024, compared to $511.0 million as of June 30, 2023, indicating an increase of about 15.9%[277]. - Shareholders' equity increased to $1,745.7 million as of June 28, 2024, up from $1,468.7 million as of June 30, 2023, marking a growth of approximately 18.9%[277]. Inventory and Receivables - Trade accounts receivable increased to $592.5 million as of June 28, 2024, from $531.8 million as of June 30, 2023, reflecting a growth of approximately 11.4%[277]. - Inventories decreased to $463.2 million as of June 28, 2024, down from $519.6 million as of June 30, 2023, indicating a decline of about 10.8%[277]. Derivatives and Foreign Currency - The company had $135.0 million of foreign currency forward contracts outstanding on Thai baht payables as of June 28, 2024[203]. - The company recognized a derivatives gain of $3,007,000 from foreign currency forward contracts in other comprehensive income for the year ended June 28, 2024[352]. - The unrealized gain from changes in fair value of foreign currency forward and option contracts not designated for hedge accounting was $0.7 million for the year ended June 28, 2024[349]. Accounting and Reporting - The critical audit matter identified was related to revenue recognition, specifically the evaluation of terms and conditions in contracts[270]. - The Company recognizes revenue primarily from product assembly and customized optics fabrication, following a five-step revenue recognition process[310]. - The Company is currently assessing the impact of new accounting standards issued in November and December 2023, which will be effective in fiscal years 2025 and 2026 respectively[324].