Fabrinet(US:FN)2021-02-01 16:00Revenue Growth and International Expansion - The percentage of revenues generated from locations outside North America increased from 47.6% in Q3 2019 to 50.5% in Q3 2020, indicating a growing international customer base[159] - Revenues from regions outside North America accounted for 51.5% in the first half of fiscal 2021, up from 48.6% in the same period of fiscal 2020[160] - Revenues for the three months ended December 25, 2020, increased to $453.8 million, up from $426.2 million for the same period in 2019, representing a growth of 6.5%[192] - Revenues increased by $27.6 million, or 6.5%, to $453.8 million for the three months ended December 25, 2020, compared to $426.2 million for the same period in 2019[196] - Revenues from optical communications products increased by $25.8 million, or 8.0%, for the three months ended December 25, 2020[196] Financial Position and Cash Management - The company reported $481.0 million in cash, cash equivalents, and short-term investments, with total debt of approximately $45.7 million as of December 25, 2020, positioning it well for future capital needs[160] - Cash, cash equivalents, and short-term investments were $481.0 million as of December 25, 2020, compared to $442.8 million as of December 27, 2019[218] - The company held cash, cash equivalents, and short-term investments totaling $488.6 million as of December 25, 2020[230] - The company anticipates that its current cash and cash equivalents, marketable securities, and cash flow from operations will be sufficient to meet working capital and capital expenditure needs for at least the next 12 months[222] Profitability and Income - Gross profit for the six months ended December 25, 2020, was $103.5 million, compared to $95.1 million for the same period in 2019, reflecting an increase of 8.5%[192] - Operating income increased by $3.8 million to $35.9 million, or 7.9% of revenues, for the three months ended December 25, 2020[204] - The company recorded a net income of $35.4 million for the three months ended December 25, 2020, compared to $31.2 million for the same period in 2019, marking an increase of 13.5%[192] - Net income for the three months ended December 25, 2020, was $35.4 million, or 7.8% of revenues, compared to $31.2 million, or 7.3% of revenues, for the same period in 2019[215] Costs and Expenses - Employee costs are expected to rise due to increasing wages in Thailand and the People's Republic of China, which may impact profit margins[165] - The company anticipates incurring incremental costs of revenue due to planned expansion into new geographic markets, although specific amounts are not yet determinable[167] - Selling, general and administrative (SG&A) expenses for the three months ended December 25, 2020, were $17.2 million, slightly up from $17.1 million in the same period of 2019[192] - SG&A expenses increased by $0.1 million, or 0.5%, to $17.2 million for the three months ended December 25, 2020[202] - The company expects SG&A expenses to increase in fiscal year 2021 compared to fiscal year 2020 due to higher start-up costs related to its subsidiary in Israel[168] Manufacturing and Operational Capabilities - The company maintains a flexible low-cost manufacturing platform and expects to sustain favorable pricing despite anticipated price decreases over time due to competitive market forces[157] - The company’s manufacturing capabilities include low-volume, high-mix production, which is critical for complex products in optical communications and industrial lasers[150] - The company’s customer base includes OEMs in complex industries, with many relying on the company as their sole outsourced manufacturing partner[151] - The company’s current manufacturing capacity is deemed sufficient to meet anticipated production requirements for at least the next few quarters[223] Taxation and Foreign Exchange - The effective corporate income tax rate for the company's U.S. subsidiaries is currently 21% following the Tax Cuts and Jobs Act enacted on December 22, 2017[187] - The corporate tax rate for the company's subsidiaries in China and the U.K. is 25% and 19%, respectively[188] - The company has received preferential tax treatment from the Thai government, including a corporate tax exemption on income generated from certain projects until June 2026[186] - As of December 25, 2020, the company had $130.0 million of foreign currency forward contracts outstanding on Thai baht payables[174] - The company reported a foreign exchange loss of $0.5 million for the three months ended December 25, 2020, compared to a loss of $1.0 million for the same period in 2019[192] - A 10% weakening in the U.S. dollar against the Thai baht, RMB, and GBP would have resulted in a decrease in the company's net dollar position of approximately $3.4 million as of December 25, 2020[238] Cash Flow and Financing Activities - The net cash provided by operating activities decreased by $11.3 million, or 21.5%, to $41.3 million for the six months ended December 25, 2020, compared to $52.6 million for the same period in 2019[225] - Net cash used in investing activities increased by $18.6 million, or 324.8%, to $24.3 million for the six months ended December 25, 2020, compared to net cash provided of $5.7 million in the prior year[226] - Net cash used in financing activities increased by $15.9 million, or 204.3%, to $23.6 million for the six months ended December 25, 2020, compared to $7.8 million for the same period in 2019[227] - As of December 25, 2020, the company repaid $6.1 million of its term loan, resulting in long-term borrowings of $45.7 million[221] - The company had one outstanding standby letter of credit of €6.0 million related to a customer's manufacturing operations transfer, backed by cash collateral of $7.4 million[228] Supply Chain and Operational Challenges - The company expects to continue experiencing supply chain disruptions and fluctuating availability of parts and materials, which may negatively affect gross margins[160] - The company has implemented significant safety protocols in response to COVID-19, ensuring the health and well-being of employees while maintaining operations[154] - The company has not incurred material losses due to credit risk exposures, as cash and cash equivalents are held with banks rated A minus or above[239]