What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-03 compared with 2020-05-05 · 394 added, 506 removed, 472 unchanged (66% of the section changed)

3 unchanged sentences

dollars, except share data and par value)

September 25,

Current assets

2 unchanged sentences

Short-term investments

Trade accounts receivable, net

Trade accounts receivable, net of allowance for doubtful accounts of $ 186 and $ 336 ,

Contract assets

3 unchanged sentences

Total current assets

Long-term restricted cash

Property, plant and equipment, net

8 unchanged sentences

Trade accounts payable

Fixed assets payable

Contract liabilities

Operating lease liabilit ies

, current portion

Operating lease liabilities, current portion

Income tax payable

5 unchanged sentences

Deferred tax liability

Operating lease liabilities, non-current

Operating lease liability, non-current

Severance liabilities

5 unchanged sentences

Preferred shares ( 5,000,000 shares authorized, $ 0.01 par value;

no shares issued and outstanding as of March 27, 2020 and June 28, 2019)

no shares issued and outstanding as

September 25,

2020 and June 26, 2020)

Ordinary shares ( 500,000,000 shares authorized, $ 0.01 par value;

38,460,931 shares and 38,230,753 shares issued as of

March 27, 2020 and June 28, 2019, respectively;

and 36,716,828 shares and 36,841,650 shares outstanding as of March

27, 2020 and June 28, 2019, respectively)

38,680,659 shares and 38,471,967 shares issued at September 25, 2020 and June 26, 2020, respectively;

and 36,936,556 shares and 36,727,864 shares outstanding at September 25, 2020 and June 26, 2020, respectively)

Additional paid-in

Treasury shares, at cost ( 1,744,103 shares and 1,389,103 shares as of March 27, 2020 and June 28, 2019, respectively)

Treasury shares ( 1,744,103 shares and 1,744,103 shares as of

September 25, 2020 and June 26, 2020, respectively)

Accumulated other comprehensive loss

5 unchanged sentences

Three Months Ended

Nine Months Ended

(in thousands of U.S.

dollars, except per share data)

September 25,

September 27,

Cost of revenues

Selling, general and administrative expenses

Expenses related to reduction in workforce

Operating income

1 unchanged sentence

Interest expense

Foreign exchange loss, net

Other income, net

Foreign exchange gain (loss), net

Other income (expense), net

Income before income taxes

1 unchanged sentence

Other comprehensive income (loss), net of tax:

Change in net unrealized (loss) gain on available-for-sale

Change in net unrealized loss on derivative instruments

Change in net unrealized gain (loss) on available-for-sale

Change in net unrealized gain (loss) on derivative instruments

Change in net retirement benefits plan – prior service cost

Change in foreign currency translation adjustment

Total other comprehensive (lo ss)

income, net of tax

Total other comprehensive income (loss), net of tax

Net comprehensive income

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)

For the Three Months Ended March 27, 2020

(in thousands of U.S.

dollars, except share data)

Ordinary Shares

For the three months ended September 25, 2020

Ordinary Share

Comprehensive

Income (Loss)

Balances at December 27, 2019

Other comprehensive loss

Share-based compensation

Issuance of ordinary shares

Repurchase of 355,000 shares held as treasury shares

Tax withholdings related to net share settlement of restricted share units

Balances at March 27, 2020

For the Nine Months Ended March 27, 2020

(Loss) Income

(in thousands of U.S.

dollars, except share data)

Ordinary Shares

Comprehensive

Income (Loss)

Balances at June 26, 2020

Other comprehensive loss

Share-based compensation

Issuance of ordinary shares

Repurchase of 355,000 shares held as treasury shares

Tax withholdings related to net share settlement of restricted share units

Balances at March 27, 2020

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

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

For the Three Months Ended March 29, 2019

(in thousands of U.S.

dollars, except share data)

Ordinary Shares

Comprehensive

Income (Loss)

Balances at December 28, 2018

Other comprehensive income

Cumulative effect adjustment from adoption of ASC 326

Share-based compensation

Issuance of ordinary shares

Repurchase of 100,000 shares held as treasury shares

Tax withholdings related to net share settlement of restricted share units

Balances at March 29, 2019

For the Nine Months Ended March 29, 2019

Balances at September 25, 2020

For the three months ended September 27, 2019

Ordinary Share

Comprehensive

(Loss) Income

(in thousands of U.S.

dollars, except share data)

Ordinary Shares

Comprehensive

Income (Loss)

Balances at June 28, 2019

Other comprehensive income

Cumulative effect adjustment from adoption of ASC 606

Share-based compensation

Issuance of ordinary shares

Repurchase of 100,000 shares held as treasury shares

Tax withholdings related to net share settlement of restricted share units

Balances at March 29, 2019

Balances at September 27, 2019

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Nine Months Ended

Three Months Ended

(in thousands of U.S.

September 25,

September 27,

Cash flows from operating activities

2 unchanged sentences

Depreciation and amortization

Loss on disposal of property, plant and equipment

Loss on disposal of intangibles

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

Accretion of premiums on short-term investments

on disposal of property, plant and equipment

(Gain) loss from sales and maturities of available-for-sale

Amortization of investment discount

Amortization of deferred debt issuance costs

(Reversal) allowance for doubtful accounts

Unrealized loss (gain) on exchange rate and fair value of foreign currency forward contracts

Unrealized loss on fair value of interest rate swaps

(Reversal of) allowance for doubtful accounts

Unrealized (gain) loss on exchange rate and fair value of foreign currency forward contracts

Unrealized loss (gain) on fair value of interest rate swaps

Amortization of fair value at hedge inception of interest rate swaps

1 unchanged sentence

Deferred income tax

Other non-cash expenses

Other non-cash

Changes in operating assets and liabilities

1 unchanged sentence

Contract assets

Other current assets and non-current assets

Other current assets and non-current

Trade accounts payable

8 unchanged sentences

Proceeds from maturities of short-term investments

provided to customer to support transfer of manufacturing operations (Note 9)

Purchase of property, plant and equipment

1 unchanged sentence

Proceeds from disposal of property, plant and equipment

Net cash used in investing activities

Net cash (used in)

provided by investing activities

Cash flows from financing activities

2 unchanged sentences

Repayment of long-term borrowings

Repayment of finance lease liabilities

Repurchase of ordinary shares

Release of restricted cash held in connection with business acquisition

Repayment of finance lease liability

Withholding tax related to net share settlement of restricted share units

Net cash used in financing activities

Net increase in cash, cash equivalents and restricted cash

Net (decrease)

in cash, cash equivalents and restricted cash

Movement in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash

at beginning of period

Increase in cash, cash equivalents and restricted cash

beginning of period

(Decrease) increase

in cash, cash equivalents and restricted cash

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

Cash, cash equivalents and restricted cash at end of period

Cash, cash equivalents and restricted cash at

end of period

investing and financing activities

4 unchanged sentences

(amount in thousands)

September 25,

September 27,

Cash and cash equivalents

6 unchanged sentences

Business and organization

Fabrinet (“Fabrinet” or the “Parent Company”) was incorporated on August 12, 1999, and commenced operations on January 1, 2000.

Fabrinet ” or the “Parent Company”) was incorporated on August

1999 , and commenced operations on January

The Parent Company is an exempted company incorporated in the Cayman Islands, British West Indies.

The “Company” refers to Fabrinet and its subsidiaries as a group.

The “Company” refers to

Fabrinet and its subsidiaries as a group.

The Company provides advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers (“OEMs”) of complex products, such as optical communication components, modules and sub-systems,

8 unchanged sentences

Basis of presentation

The accompanying unaudited condensed consolidated financial statements for Fabrinet as of March 27, 2020 and for the three and nine months ended March 27, 2020 and March 29, 2019 include normal recurring adjustments necessary for a fair statement of the financial statements set forth herein, in accordance with accounting principles generally accepted in the United States of America (“U.S.

The accompanying unaudited condensed consolidated financial statements for Fabrinet as of

September 25, 2020 and for the three months ended September 25, 2020 and September 27, 2019 includes normal recurring adjustments necessary for a fair statement 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”).

3 unchanged sentences

for the year ended June 26, 2020.

The balance sheet as of June 28, 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.

The balance sheet as of

June 26, 2020 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.

The results for the three and nine months ended March 27, 2020 may not be indicative of results for the year ending June 26, 2020 or any future periods.

The results for the three months ended September 25, 2020 may not be indicative of results for the year ending June 25, 2021 or any future periods.

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S.

2 unchanged sentences

The Company’s reported financial position or results of operations may be materially different under different conditions or when using different estimates and assumptions, particularly with respect to significant accounting policies, which are discussed below.

Significant assumptions are used in accounting for share-based compensation, allowance for doubtful accounts, income taxes, inventory obsolescence, goodwill and valuation of intangible assets related to business acquisitions, among others.

Significant assumptions are used in accounting for share-based compensation, allowance for doubtful accounts, allowance for expected credit losses, income taxes, inventory obsolescence, goodwill and valuation of intangible assets related to business acquisition, 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 be different from actual results, adjustments will be made in subsequent periods to reflect more current information.

The Company utilizes a 52 to

Additionally, the extent to which the evolving COVID-19

pandemic impacts the Company’s unaudited condensed consolidated financial statements will depend on a number of factors, including the magnitude and duration of the pandemic.

These estimates may change, as new events occur and additional information is obtained, as well as other factors related to the COVID-19

pandemic that could result in material impacts to our unaudited condensed consolidated financial statements in future reporting periods.

The Company utilizes a 52-53

week fiscal year ending on the Friday in June closest to June 30.

The three months ended March 27, 2020 and March 29, 2019 each consisted of 13 weeks.

The nine months ended March 27, 2020 and March 29, 2019 each consisted of 39 weeks.

Fiscal year 2020 will be comprised of 52 weeks and will end on June 26, 2020.

The three months ended September 25, 2020 and September 27, 2019 each consisted of 13 weeks.

Fiscal year 2021

will be comprised of 52 weeks and will end on June 25, 2021.

Reclassifications

For presentation purposes, certain prior period amounts have been reclassified to conform to the current period presentation.

These reclassifications do not affect the Company’s net income, cash flows or stockholders’ equity.

Except for the adoption of the new lease accounting standard and the derivatives and hedging standard described below, the Company has consistently applied its

accounting policies to all periods presented in these unaudited condensed consolidated financial statements.

oncentration of credit risk

As of June 26, 2020, the derivative assets and liabilities were measured at fair value and recognized by offsetting the fair value amounts under master netting arrangements.

Also, the Company chose not to separate a derivative into current and non-current

portions as follows:

A derivative for which the fair value is a net liability is classified in total as a current liability.

A derivative for which the fair value is a net asset and the current portion is an asset is classified in total as a non-current

If the current portion is a liability, it is presented as a current liability.

As of September 25, 2020, the derivative assets and liabilities were measured at fair value, but the gross fair value amount is presented in the unaudited condensed consolidated balance sheets.

Additionally, a classification of current and non-current

portion is determined by the maturity date of that derivative (e.g., a derivative that matures within one year is classified as current).

The reclassifications have been made to the consolidated balance sheet as of June 26, 2020 as shown in the following table:

June 26, 2020

(amount in thousands)

As previously

Reclassification

reclassification

Consolidated Balance Sheet

Current assets

Other current assets

Current liabilities

Accrued expenses

Other non-current

Adoption of New Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13,

“Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.” This standard requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.

The standard replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses.

The new standard also expands the required quantitative and qualitative disclosures surrounding expected credit losses.

On June 27, 2020, the Company adopted Accounting Standards Codification (“ASC”) 326 using the modified retrospective transition approach.

The modified retrospective method requires the Company to recognize the cumulative effect of the adoption of ASC 326, to the opening accumulated retained earnings.

Accordingly, the Company’s comparative financial statements as of June 26, 2020 have not been adjusted.

The Company implemented internal controls to enable the preparation of financial information upon adoption.

Management estimates the expected credit losses of financial assets using relevant available information from internal and external sources relating to historical credit loss experience, current conditions and reasonable forecasts over a financial asset’s contractual term.

Adjustments to historical loss information are made from qualitative and quantitative factors if economic conditions on the reporting date reflect stronger or weaker economic performance than the historical data implies based on management’s expectations of economic conditions on certain indicators of the Company, industry and economy.

The Company reviews factors such as past collection experience, age of the accounts receivable and contract assets balance, significant trends in current balances, internal operations and macroeconomic conditions.

In addition, the Company modified its impairment model to the Current Expected Credit Losses (“CECL”) model for available-for-sale

(“AFS”) debt securities and discontinued using the concept of “other than temporary” impairment on these AFS debt securities.

CECL on the AFS debt securities are recognized in interest income and other income (expense), net on the Company’s unaudited condensed consolidated statements of operations and comprehensive income, and any remaining unrealized losses, are included in accumulated other comprehensive loss (“AOCI”) in the unaudited condensed consolidated balance sheet.

As of June 27, 2020, the Company recorded a cumulative adjustment from CECL in the amount of $ 0.1 million, net of tax impact, to accumulated retained earnings in the unaudited condensed consolidated balance sheet.

On June 27, 2020, the Company also adopted ASC 820, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” This standard is intended to improve the effectiveness of disclosures in the notes to the financial statements, including (1) the development of a framework that promotes consistent decisions by the FASB about disclosure requirements and (2) the appropriate exercise of discretion by reporting entities.

The amendment modifies the disclosure requirements on transferring between level 1 and level 2 and valuation processes of level 3 fair value measurements.

The Company adopted this standard with no impact on its unaudited condensed consolidated financial statements.

Changes in Accounting Policies

Except for the adoption of ASC 326, the Company has consistently applied the accounting policies to all periods presented in these unaudited condensed consolidated financial statements.

Short-term investments

Management determines the appropriate classification of its investments at the time of purchase and re-evaluates

the designations at each balance sheet date.

The Company may sell certain of the Company’s short-term investments prior to their stated maturities for strategic reasons including, but not limited to, anticipation of credit deterioration and duration management.

The maturities of the Company’s short-term investments generally range from three months to three years.

The Company’s short-term investments, which consist of investments in U.S.

Treasury, fixed income securities, liquidity funds that invest in short-term debt securities and certificates of deposit and time deposits, have been classified and accounted for as AFS.

The AFS investments are carried at estimated fair value with any unrealized gains and losses, included in AOCI in the Company’s unaudited condensed consolidated balance sheet.

The Company determines realized gains or losses on sale of marketable securities on a specific identification method and records such gains or losses as interest income and other income (expense), net in the unaudited condensed consolidated statements of operations and comprehensive income.

AFS debt securities are required to be individually evaluated for impairment.

A security is considered impaired if the fair value of the security is less than its amortized cost basis.

An impairment is considered other than temporary if (i) the Company has the intent to sell the security, (ii) it is more likely than not that the Company will be required to sell the security before recovery of the entire amortized cost basis, or (iii) the Company does not expect to recover the entire amortized cost basis of the security.

If an impairment is considered other than temporary based on condition (i) or (ii), the entire difference between the amortized cost and the fair value of the debt security is recognized as interest income and other income (expense), net in the unaudited condensed consolidated statements of operations and comprehensive income.

If an impairment is considered other than temporary based on condition (iii), the amount representing credit losses (defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis of the debt security) is recognized in interest and other income (expense), net in the unaudited condensed consolidated statements of operations and comprehensive income, and any remaining unrealized losses are included in AOCI in the unaudited condensed consolidated balance sheet.

Trade accounts receivable

Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts.

The Company makes estimates of expected credit losses for the allowance for doubtful accounts based upon its assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers.

The estimated credit loss allowance is recorded as selling, general and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive income.

Contract assets

A contract asset is recognized when the Company has recognized revenues prior to generating an invoice for payment.

Contract assets are classified separately within the unaudited condensed consolidated balance sheets and transferred to accounts receivable when rights to payment become unconditional.

The Company makes estimates of expected credit losses for the allowance for contract assets based upon its assessment of various factors, including historical experience, the age of the contract assets balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers.

The estimated credit loss allowance is recorded as selling, general and administrative expenses in its unaudited condensed consolidated statements of operations and comprehensive income.

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, short-term investments, derivatives, accounts receivable and contract assets.

5 unchanged sentences

F1, or better.

The Company enters into derivative contracts with financial institutions

with reputable

credit and monitors the credit profiles of these counterparties.

The Company enters into derivative contracts with financial institutions with reputable credit and monitors the credit profiles of these counterparties.

The Company performs ongoing credit evaluations for credit worthiness of its customers and usually does not require collateral from its customers.

Management has implemented a program to closely monitor near term cash collection and credit exposures to mitigate any material losses.

Adoption of new accounting standards

On June 29, 2019, the Company adopted the new lease accounting standard, Accounting Standards Codification (“ASC”) Topic 842, which provides guidance for the recognition and disclosure of lease arrangements.

The Company adopted ASC 842 using the modified retrospective transition approach.

Accordingly, the Company’s comparative financial statements as of June 28, 2019 have not been adjusted.

ASC 842 also provides practical expedients for the Company’s ongoing accounting.

The Company elected the short-term lease recognition exemption for its operating leases with a term of less than 12 months, which will not require recognition of right of use (“ROU”) assets or lease liabilities for these leases.

For periods prior to adoption of ASC 842, the Company is required to present disclosures in accordance with ASC Topic 840.

Future minimum lease payments due under non-cancelable operating leases as of June 28, 2019 were as follows:

(amount in thousands)

Total future minimum operating lease payments

The most significant impact of the adoption of ASC 842 was the recognition of ROU assets and lease liabilities for operating leases with a term of greater than 12 months, while the accounting for finance leases will remain substantially unchanged.

See Note 11 for further details.

On June 29, 2019, the Company also adopted Accounting Standards Update (“ASU”) 2017-12,

“Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12

simplifies existing hedge accounting guidance in order to better portray the economic impact of risk management activities in the financial statements, including eliminating the separate measurement and presentation of hedge ineffectiveness.

Prior to the adoption of ASU 2017-12,

the Company 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 2017-12,

the Company no longer recognizes hedge ineffectiveness as earnings, but instead records the entire changes in the fair value of the hedged instruments as other comprehensive income.

Amounts recorded as other comprehensive income are subsequently reclassified to earnings in the same income statement line item that is used to present the earnings effect of the hedged item when the hedged item affects earnings.

See Note 6 for further details.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04,

“Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which temporarily simplifies the accounting for contract modifications, including hedging relationships, due to the transition from LIBOR and other interbank offered rates to alternative reference interest rates.

For example, entities can elect not to remeasure the contracts at the modification date or reassess a previous accounting determination if certain conditions are met.

Additionally, entities can elect to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain conditions are met.

The new standard was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022.

This ASU was effective for the Company in the third quarter of fiscal 2020 with no impact to the Company’s unaudited condensed consolidated financial statements.

New Accounting Pronouncements – not yet adopted by the Company

5 unchanged sentences

For public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

This ASU will be effective for the Company in the first quarter of fiscal 2022.

Early adoption is permitted.

The Company is currently evaluating the impact of the adoption of this update on its condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13,

“Fair Value Measurement (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13

is intended to improve the effectiveness of disclosures in the notes to the financial statements, including (1) the development of a framework that promotes consistent decisions by the FASB about disclosure requirements and (2) the appropriate exercise of discretion by reporting entities.

The amendment modifies the disclosure requirements on transferring between level 1 and level 2 and valuation processes of level 3 fair value measurements.

This update is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

This ASU will be effective for the Company in the first quarter of fiscal 2021.

The Company is currently evaluating the impact of the adoption of this update on its condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04,

“Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment.” ASU 2017-04

modifies the concept of impairment assessment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value.

Public companies that are SEC filers should adopt the amendment for annual and any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

This ASU will be effective for the Company in the first quarter of fiscal 2021.

The Company does not expect this update will impact its condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13,

“Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” which establishes a new credit impairment model for financial assets measured at amortized cost and available-for-sale

debt securities.

The FASB issued subsequent amendments to Topic 326, including ASU 2018-19,

and ASU 2020-02,

which provided further

guidance and transition relief.

For public business entities, this update

is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

This ASU will be effective for the Company in the first quarter of fiscal 2021.

This ASU will be effective for the Company in the first quarter of fiscal year 2022.

Early adoption is permitted.

The Company is currently evaluating the impact of the adoption of this update on its condensed consolidated financial statements.

The Company is currently evaluating the impact of the adoption of this update on its unaudited condensed consolidated financial statements.

Revenues from contracts with customers

The Company derives revenues primarily from the assembly of products under supply agreements with its customers and the fabrication of customized optics and glass.

The Company recognizes revenue relating to contracts with customers that depicts the transfer of promised goods or services to customers in an amount reflecting the consideration to which the Company expects to be entitled in exchange for such goods or services.

In 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 satisfied.

Revenue is recognized net of any taxes collected from customers, which is subsequently remitted to governmental authorities.

A performance obligation is a contractual promise to transfer a distinct good or service to the customer.

In contracts with multiple performance obligations, the Company identifies each performance obligation and evaluates whether the performance obligation is distinct within the context of the contract at contract inception.

The majority of the Company’s contracts have a single performance obligation, as the promise to transfer the individual goods or services is not separately identifiable from other promises under the contracts and, therefore, is not distinct.

The Company manufactures products that are customized to customers’ specifications.

However, control of the products is typically transferred to the customer at the point in time the product is either shipped or delivered, depending on the terms of the arrangement, as the criteria for recognizing revenue over time are not met.

Based on a review of its contracts, the Company determined that it does not have contractual rights to bill profit for work in progress in the event of a contract termination, an event which is expected to be infrequent.

Further, in limited circumstances, substantive acceptance by the customer will result in the deferral of revenue until acceptance is formally received from the customer.

Judgment may be required in determining if the acceptance clause provides for substantive acceptance.

Certain customers may request the Company to store finished products purchased by them at the Company’s warehouse.

In these instances, the Company receives a written request from the customer asking the Company to hold the inventory at the Company’s warehouse, and the ordered goods cannot be used to fulfill other customer orders.

In these situations, revenue is only recognized when the goods are completed and ready for shipment and transferred to the Company’s warehouse.

Our customers generally are obligated to purchase finished goods that we have manufactured according to their demand requirements.

Materials that are not consumed by our customers within a specified period of time, or that are no longer required due to a product’s cancellation or end-of-life,

are typically designated as excess or obsolete inventory under our contracts.

After materials are designated as either excess or obsolete inventory, our customers are typically required to purchase such inventory from us even if they have chosen to cancel production of the related products.

The excess or obsolete inventory is shipped to the customer and revenue is recognized upon shipment.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled.

The Company generally does not grant return privileges other than for defective products during the warranty period.

The Company generally provides a warranty of between one to five years on the product.

The Company has applied the practical expedient to not adjust the amount of revenue to be recognized due to the effects of a significant financing component when the Company expects, at contract inception, that the period between the transfer of goods and/or services and the payment for those goods and/or services will be less than one year.

Warranty provision

Provisions for estimated expenses relating to pr o

duct warranties are made at the time the products are sold using historical experience.

Generally, this warranty is limited to workmanship, and the Company’s liability is capped at the price of the product.

The provisions will be adjusted when experience indicates an expected settlement will differ from initial estimates.

Contract assets and liabilities

A contract asset is recognized when the Company has recognized revenues prior to generating an invoice for payment.

Contract assets are classified separately within the unaudited condensed consolidated balance sheets and transferred to accounts receivable when rights to payment become unconditional.

During the nine months ended March 27, 2020, the Company had no impairment for contract assets recognized.

A contract liability is recognized when the Company has advance payment arrangements with customers.

The contract liabilities balance is normally recognized as revenue within six months.

The following tables summarize the activity in the Company’s contract assets and contract liabilities during the nine months ended March 27, 2020:

(amount in thousands)

Beginning balance, June 28, 2019

Revenue recognized

Amounts collected or invoiced

Ending balance, March 27, 2020

(amount in thousands)

Beginning balance, June 28, 2019

Advance payment received during the period

Revenue recognized

Ending balance, March 27, 2020

Contract costs

The incremental costs of obtaining a contract with a customer are recognized as an asset (not expensed as incurred) if such costs are expected to be recovered.

Incremental costs of obtaining a contract are costs that the Company would not have incurred if the contract had not been obtained (e.g., sales commissions or similar incentive payments linked directly to new or modified customer contracts).

Costs that would have been incurred regardless of whether a customer contract was obtained (e.g., costs of pursuing the contact, legal advice, etc.) are expensed as incurred, unless such costs are explicitly chargeable to the customer.

During the nine months ended

March 27, 2020, the Company did no t have any incremental costs of obtaining a contract.

Shipping and handling

Shipping costs billed to customers are recorded as revenue.

Shipping and handling expense related to costs incurred to deliver product are recognized within cost of goods sold.

The Company accounts for shipping and handling activities that occur after control has transferred as a fulfillment cost as opposed to a separate performance obligation, and the costs of shipping and handling are recognized concurrently with the related revenue.

Revenue by geographic area

Total revenues are attributed to a particular geographic area based on the bill-to-location

of the Company’s customers.

Revenue by Geographic Area and End Market

Revenues are attributed to a particular geographic area based on the bill-to-location of

the Company’s customers.

The Company operates in three geographic regions:

North America, Asia-Pacific and Europe.

The following tables present total revenues by geographic region

The following table presents total revenues by geographic region:

(amount in thousands, except percentages)

As a % of Total

September 25,

As a % of Total

1 unchanged sentence

(amount in thousands, except percentages)

As a % of Total

September 27,

As a % of Total

North America

The following tables set forth our revenues by end market:

The following table presents revenues by end market.

(amount in thousands, except percentages)

As a % of Total

September 25,

As a % of Total

2 unchanged sentences

(amount in thousands, except percentages)

As a % of Total

September 27,

As a % of Total

1 unchanged sentence

Lasers, sensors and other

Contract Assets and Liabilities

A contract asset is recognized when the Company has recognized revenues prior to generating an invoice for payment.

Contract assets are classified separately within the unaudited condensed consolidated balance sheets and transferred to accounts receivable when rights to payment become unconditional.

A contract liability is recognized when the Company has advance payment arrangements with customers.

The contract liabilities balance is normally recognized as revenue within six months.

The following tables summarize the activity in the Company’s contract assets and contract liabilities during the three months ended September 25, 2020:

(amount in thousands)

Beginning balance, June 26, 2020

Revenue recognized

Amounts collected or invoiced

Ending balance, September 25, 2020

(amount in thousands)

Beginning balance, June 26, 2020

Additions advance payment received during the period

Revenue recognized

Ending balance, September 25, 2020

Earnings per ordinary share

4 unchanged sentences

Three Months Ended

Nine Months Ended

(amount in thousands except per share amounts)

September 25,

September 27,

Net income attributable to shareholders

1 unchanged sentence

Incremental shares arising from the assumed vesting of restricted share units and performance share units (thousands of shares)

Weighted-average number of ordinary shares for diluted earnings per ordinary share (thousands of shares)

Weighted-average number of ordinary shares for diluted earnings per

ordinary share (thousands of shares)

Basic earnings per ordinary share

1 unchanged sentence

Outstanding performance share units excluded from the computation of diluted earnings per ordinary share (thousands of shares) (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.

These performance share units were no t 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.

Cash, cash equivalents and short-term investments

The Company’s cash, cash equivalents, and short-term investments by category is as follows:

The Company’s cash, cash equivalents, and short-term investments are as follows:

(amount in thousands)

As of March 27, 2020

September 25, 2020

Cash equivalents

4 unchanged sentences

treasury securities

As of June 28, 2019

June 26, 2020

Cash equivalents

9 unchanged sentences

The maturities of the Company’s short-term investments generally range from three months to three years .

The Company’s short-term investments consist of U.S.

Treasuries and fixed income securities and have been classified and accounted for as available-for-sale.

The following table summarizes the cost and estimated fair value of short-term investments classified as available-for-sale

securities based on stated effective maturities as of March 27, 2020:

March 27, 2020

securities based on stated effective maturities as of

September 25, 2020:

September 25, 2020

June 26, 2020

2 unchanged sentences

Due between one to five years

During the nine months ended March 27, 2020, the Company recognized a realized gain of $ 0.1 million

from sales and maturities of available-for-sale

As of March 27, 2020, the Company considered the decline in market value of its short-term investments portfolio to be temporary in nature and did not consider any of its securities other-than-temporarily impaired.

The Company typically invests in highly-rated securities, and its investment policy generally limits the amount of credit exposure to any one issuer.

The policy requires investments generally to be investment grade, with the primary objective of minimizing the potential risk of principal loss.

Fair values were determined for each individual security in the investment portfolio.

When evaluating an investment for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, changes in market interest rates, and the Company’s intent to sell, or whether it is more likely than not it will be required to sell, the investment before recovery of the investment’s cost basis.

No impairment losses were recorded for the nine months ended March 27, 2020.

As of September 25, 2020, the Company considered the declines in market value of its short-term investments portfolio to be temporary in nature and did not consider any of its securities other-than-temporarily impaired.

Fair value of financial instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

A fair value hierarchy is established ,

which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs for the valuation of an asset or liability as of the measurement date.

A fair value hierarchy is established which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs for the valuation of an asset or liability as of the measurement date.

The three levels of inputs that may be used to measure fair value are defined as follows:

8 unchanged sentences

(amount in thousands)

As of March 27, 2020

September 25, 202 0

Cash equivalents

5 unchanged sentences

Derivative assets

Derivative liabilities

Derivative liabilities – current portion

Derivative liabilities – non-current portion

Fair Value Measurements at Reporting Date Using

(amount in thousands)

As of June 28, 2019

June 26, 202 0

Cash equivalents

5 unchanged sentences

Derivative assets

Derivative liabilities

Foreign currency forward and option contracts with a notional amount of $ 126.0 million and Canadian dollars of $ 0.7 million ,

and two interest rate swap agreements with an aggregate notional amount of $ 125.1 million.

Foreign currency forward contracts with notional amount of $ 72.0 million and Canadian dollars of $ 0.6 million.

Interest rate swap agreement with a notional amount of $ 64.2 million.

Derivative liabilities – current portion

Derivative liabilities – non-current portion

Foreign currency forward contracts with a notional amount of $ 130.0 million and Canadian dollars of 0.8 million.

Two interest rate swap agreements with an aggregate notional amount of $ 125.1 million.

Foreign currency forward contracts with a notional amount of $ 125.0 million and Canadian dollars of 0.6 million, and option contract with a notional amount of $ 1.0 million.

Interest rate swap agreements with an aggregate notional amount of $ 125.1 million.

Derivative Financial Instruments

4 unchanged sentences

dollar equivalent values of the Company’s foreign currency denominated assets and liabilities fluctuate.

The Company uses foreign currency contracts to manage the foreign exchange risk associated with a portion of its foreign currency denominated assets and liabilities and other foreign currency transactions.

The Company uses foreign currency forward and option contracts to manage the foreign exchange risk associated with a portion of its foreign currency denominated assets and liabilities and other foreign currency transactions.

The Company enters into foreign currency forward and option contracts to hedge fluctuations in the U.S.

dollar value of forecasted transactions denominated in Thai baht and Canadian dollars.

The Company may enter into foreign currency forward contracts to hedge flu ctu

ations in the U.S.

dollar value of forecasted transactions denominated in Thai baht and Canadian dollars with counterparties that meet the Company’s minimum credit quality standard.

The Company may enter into foreign currency forward contracts with maturities of up to 12 months to hedge fluctuations in the U.S.

dollar value of forecasted transactions denominated in Thai baht, including inventory purchases, payroll and other operating expenses.

1 unchanged sentence

The Company may designate the forward contracts that hedge the foreign exchange fluctuation from inception through the forecasted expenditure as cash flow hedges.

The gain or loss on a derivative instrument designated and qualifying as a cash flow hedging instrument is recorded as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings.

The gain or loss on a derivative instrument designated and qualified as a cash flow hedging instrument is recorded as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings.

The reclassified amounts are presented in the same income statement line item as the earnings effect of the hedged item.

Once the forecasted transactions are recorded, the Company will discontinue the hedging relationship by de-designating

the derivative instrument and recording subsequent changes in fair value through contract maturity to foreign exchange gain (loss), net in the unaudited condensed consolidated statements of operations and comprehensive income as a natural hedge against the Thai baht denominated assets and liabilities.

the derivative instrument and recording subsequent changes in fair value through contract maturity to foreign exchange gain (loss), net in the unaudited condensed

consolidated statements of operations and comprehensive income as a natural hedge against the Thai baht denominated assets and liabilities.

The Company may also enter into non-designated

3 unchanged sentences

derivatives are recorded through foreign exchange gain (loss), net in the unaudited condensed consolidated statements of operations and comprehensive income.

As of March 27, 2020, the Company had 100 outstanding U.S.

dollar foreign currency forward contracts against Thai baht ,

with an aggregate notional amount of $ 101.0 million and

maturity dates ranging from April 2020 through October 2020 that were designated for cash flow hedge accounting.

he hedging relationship was determined to be highly effective based on the performance of retrospective and prospective regression testing.

During the three and nine months ended March 27, 2020, the Company recorded an unrealized loss of $ 6.6 million from changes in the fair value of these foreign currency forward contracts, designated as hedging instruments, in other comprehensive income in the unaudited condensed consolidated statements of operations and comprehensive income.

During the three and nine months ended March 27, 2020, the Company de-designated 20 foreign currency forward contracts against the Thai baht that had previously been designated as cash flow hedges and reclassified a loss of $ 1.7 million from accumulated other comprehensive income to foreign exchange loss, net, cost of revenues, and selling, general and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive income.

As of March 29, 2019, the Company had no foreign currency forward contracts designated as cash flow hedges.

As of March 27, 2020, the Company had 20 outstanding U.S.

dollar foreign currency forward contracts with an aggregate notional amount of $ 24.0 million, one outstanding U.S.

dollar foreign currency option contract with a notional amount of $ 1.0 million ,

and one outstanding Canadian dollar foreign currency forward contract with a notional amount of $ 0.5 million, and

maturity dates ranging from June 2020 through July 2020, that were not designated for hedge accounting.

These foreign currency option and forward contracts were used to hedge fluctuations in the U.S.

dollar value of forecasted transactions denominated in Thai b

aht and Canadian dollar s

During the three and nine months ended March 27, 2020, the Company recorded an unrealized loss of $ 2.1 million and $ 4.0 million, respectively, from changes in the fair value of these foreign currency option and forward contracts in earnings as foreign exchange loss, net in the unaudited condensed consolidated statements of operations and comprehensive income.

As of March 29, 2019, the Company had 45 outstanding U.S.

dollar foreign currency forward contracts with an aggregate notional amount of $ 98.0 million, one outstanding U.S.

dollar foreign currency option contract with a notional amount of $ 5.0 million ,

and one outstanding Canadian dollar forward contract with a notional amount of $ 0.4 million , and

maturity dates ranging from April 2019 through August 2019, that were not designated for hedge accounting.

These foreign currency forward and option contracts were used to hedge fluctuations in the U.S.

dollar value of forecasted transactions denominated in Thai b

aht and Canadian dollar s

During the nine months ended March 29, 2019, the Company recorded an unrealized gain of $ 1.5 million from changes in the fair value of these foreign currency forward and option contracts in earnings as foreign exchange loss, net in the unaudited condensed consolidated statements of operations and comprehensive income.

As of March 27, 2020, the amount in a cc

umulated other comprehensive

income which is expected to be reclassified into earnings within 12 months is $ 4.9 million.

As of September 25, 2020, the Company had

130 outstanding U.S.

dollar foreign currency forward contracts against Thai baht, with an aggregate notional amount of

$ 130.0 million and maturity dates ranging from October 2020 through April 2021 and one outstanding Canadian dollar foreign currency forward contract with a notional amount of Canadian dollars of 0.8 million and a maturity date in December 2020.

As of September 25, 2020, the hedging relationship over foreign currency forward contracts that were designated for hedge accounting was determined to be highly effective based on the performance of retrospective and prospective regression testing.

As of September 25, 2020, the amount in AOCI that is expected to be reclassified into earnings within 12 months was a loss

of $ 0.5 million .

During the three months ended September 25, 2020, the Company recorded an unrealized loss of $ 1.5

million from changes in the fair value of a foreign currency forward contract that was not designated for hedge accounting in earnings as foreign exchange loss, net in the unaudited condensed consolidated statements of operations and comprehensive income.

September 27, 2019, the Company had 61 outstanding foreign currency forward contracts with an aggregate notional amount of $ 74.0 million and

maturity dates

from October 2019 through January 2020 .

These foreign currency forward 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.

During the three months

ended September 27, 2019, the Company recorded unrealized loss of $ 1.9 million from changes in the fair value of foreign currency contracts in earnings as foreign exchange gain, net in the unaudited condensed consolidated statements of operations and comprehensive income.

Interest Rate Swap Agreements

The Company entered into interest rate swap agreements to mitigate interest rate risk and improve the interest rate profile of the Company’s debt obligations.

As of March 27, 2020, the Company had two outstanding interest rate swap agreements with an aggregate notional amount of $ 125.1 million.

As of June 28

, 2019, the Company had one outstanding interest rate swap agreement with a notional amount of $ 64.2 million.

September 25, 2020

and June 26, 2020

, the Company had two outstanding interest rate swap agreements with an aggregate notional amount of $ 125.1 million.

On July 25, 2018, Fabrinet Thailand entered into an interest rate swap agreement to effectively convert the floating interest rate of its term loan under the Bank of America Credit Facility Agreement to a fixed interest rate of 2.86 % per annum through the scheduled maturity of the term loan in June 2023 (see Note 12

The Company did not designate this interest rate swap for hedge accounting.

On September 3, 2019, the Company drew down a term loan under a new Credit Facility Agreement with the Bank of Ayudhya Public Company Limited (the “Bank”) (see Note 14) and on September 10, 2019, repaid in full the outstanding term loan under the Bank of America Credit Facility (see Note 14).

On September 3, 2019, the Company entered into a new term loan agreement under a Credit Facility Agreement with the Bank of Ayudhya Public Company Limited (the “Bank”) (see Note 12

) and on September 10, 2019, repaid in full the outstanding term loan under the Bank of America Credit Facility (see Note 1 2

In conjunction with the funding of the new term loan, the Company entered into a second interest rate swap agreement.

The combination of both of these interest rate swaps effectively convert the floating interest rate of the Company’s term loan with the Bank to a fixed interest rate of

4.36 % per annum through the maturity of the term loan in

On September 27, 2019, the Company designated these two interest rate swaps as a cash flow

hedge for the Company’s term loan under the Credit Facility Agreement with the Bank.

The combination of these two interest rate swaps qualified for hedge accounting based on a regression testing result which proved the hedges are highly effective.

In addition, the Company has designated and documented contemporaneously the hedging relationships involving these interest rate swaps.

At least quarterly, the Company performs a qualitative effectiveness test on the interest rate swaps to support the continued application of hedge accounting.

As of March 27, 2020, the hedging relationship was determined to be highly effective based on the performance of a qualitative effectiveness testing.

While the Company intends to continue to meet the conditions for hedge accounting, if hedges do not qualify as highly effective, the changes in the fair value of the derivatives used as hedges would be reflected in earnings.

From September 27, 2019, any gains or losses related to these interest rate swaps will be recorded in accumulated other comprehensive income in the unaudited condensed consolidated balance sheets, 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.

As of March 27, 2020, the amount in accumulated other comprehensive income that is expected to be reclassified into earnings within 12 months is $ 17 thousand.

The combination of both of these interest rate swaps effectively convert the floating interest rate of the Company’s new term loan with the Bank to a fixed interest rate of 4.36 % per annum through the maturity of the term loan in June 2024 .

On September 27, 2019, the Company designated these two interest rate swaps as a cash flow hedge for the Company’s term loan under the Credit Facility Agreement with the Bank.

The combination of these two interest rate swaps qualified for hedge accounting because the hedges are highly effective, and the Company has designated and documented contemporaneously the hedging relationships involving these interest rate swaps.

While we intend to continue to meet the conditions for hedge accounting, if hedges do not qualify as highly effective, the changes in the fair value of the derivatives used as hedges would be reflected in our earnings.

From September 27, 2019, any gains or losses related to these interest rate swaps will be recorded in accumulated other comprehensive income in the unaudited condensed consolidated balance sheets.

The Company will reclassify a portion of the gains or losses from accumulated other comprehensive income into earnings at each reporting period based on either the accrued interest amount or the interest payment.

September 25, 2020, the amount in accumulated other comprehensive income that is

expected to be reclassified into earnings within 12 months is a ga in of

$ 0.5 million

Prior to September 27, 2019, these 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 nine months ended March 27, 2020 and March 29, 2019, the Company recorded unrealized loss of $ 1.7 million and $ 1.6 million, respectively, from changes in the fair value of these interest rate swaps as interest expense in the unaudited condensed consolidated statements of operations and comprehensive income.

During the three months ended September 27, 2019, the Company recorded unrealized loss of $ 1.7 million from changes in the fair value of these interest rate swaps as interest expense in the unaudited condensed consolidated statements of operations and comprehensive income.

The following table provides a summary of the impact of derivative gain (loss) of the Company’s foreign currency forward contracts and interest rate swaps which were designated as cash flow hedges on the unaudited condensed consolidated statements of operations and other comprehensive income:

Three Months Ended

Nine Months Ended

(amount in thousands)

Derivatives gain (loss) recognized in other comprehensive income:

September 25,

September 27,

Derivatives gain (loss)

recognized in other

comprehensive income:

Foreign currency forward contracts

2 unchanged sentences

comprehensive

Total derivatives loss recognized in other comprehensive income

Derivatives gain (loss) reclassified from accumulated other comprehensive income into earnings:

Total derivatives

recognized in other comprehensive income

Derivatives loss (

reclassified from accumulated other comprehensive income into earnings:

Foreign currency forward contracts

Cost of revenues

Foreign currency forward contracts

Foreign exchange loss, net

Interest rate swaps

Interest expense

Total derivatives gain reclassified from accumulated other comprehensive income into earnings

Change in net unrealized loss on derivatives instruments

Total derivatives (gain) loss reclassified from accumulated other comprehensive income into earnings

Change in net unrealized gain (loss) on derivatives instruments

Fair Value of derivatives

The following table provides the fair values of the Company’s derivative financial instruments for the periods presented:

September 25,

(amount in thousands)

6 unchanged sentences

Derivatives, gross balances

Derivatives, gross balances offset in the balance sheet

Derivatives, net balances

The Company presents its derivatives at net fair values in the unaudited condensed consolidated balance sheets.

Company’s netting arrangements allow net settlements under certain conditions.

The Company’s netting arrangements allow net settlements under certain conditions.

The Company’s derivative instruments are typically settled monthly or quarterly.

6 unchanged sentences

Accrued expenses

Trade accounts receivable, net

(amount in thousands)

Trade accounts receivable

allowance for doubtful account

Trade accounts receivable, net

Fair Value of Derivative Liabilities

Other non-current

(amount in thousands)

September 25,

Raw materials

3 unchanged sentences

Other receivable

On October 1, 2019, the Company provided funds in the amount of $ 24.3

million to a customer to support the customer’s transfer of certain manufacturing operations from Berlin, Germany to the Company’s facilities in Thailand.

e customer has agreed to repay this amount by September 30, 2020.

March 27, 2020, the Company recorded the $ 24.3 million

funds as other receivable in the unaudited condensed consolidated balance sheet.

For the nine months ended March 27, 2020, the Company classified th e

funds as an investing activity in the unaudited condensed consolidated statement of cash flows.

On October 1, 2019, the Company provided funds in the amount of $ 24.3 million to a customer to support the customer’s transfer of certain manufacturing operations from Berlin, Germany to the Company’s facilities in Thailand.

25, 2020, the Company recorded the $

24.3 million funds as other receivable in the unaudited condensed consolidated balance

The Company entered into the Amendment on October 1, 2020 to extend the payment terms of this amount and accrued interest and amend certain terms and conditions.

(See Note 19)

Restricted cash

As of March 27, 2020 and June 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.

September 25, 2020 and June 26, 2020, 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.

September 25, 2020 and June 26, 2020, the standby letter of credit w as

backed by cash collateral of $ 7.4 million .

The Company leases facilities under non-cancelable

operating lease agreements.

The Company leases a portion of its capital equipment and vehicle s

, certain land and buildings for its facilities in Thailand, the Cayman Islands, China, the United States, the United Kingdom and Israel under operating lease arrangements that expire at various dates through 2025 .

The Company leases a portion of its capital equipment and vehicles, certain land and buildings for its facilities in Thailand, the Cayman Islands, China, the U.S., the U.K.

and Israel under operating lease arrangements that expire at various dates through 2025 .

Certain of these lease arrangements provide the Company the ability to extend 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 lease liabilities as the Company is not reasonably assured that it will exercise these options.

None of the lease agreements contain residual value guarantees provided by the

The Company also has one intercompany lease transaction which is a lease of office and manufacturing space between Fabritek and Fabrinet West.

However, the Company has excluded all lease extension options from its ROU

assets and lease liabilities as the Company is not reasonably assured that it will exercise these options.

None of the lease agreements contain residual value guarantees provided by the lessee.

The Company also has one intercompany lease transaction in th e form of

a lease of office and manufacturing space between Fabritek and Fabrinet West.

Operating leases

The Company determines if an arrangement contains a lease at inception.

The Company applies the guidance in ASC 842 to determine whether a contract is, or contains, a lease.

A contract is or contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.

Operating leases are included in operating lease ROU assets and operating lease liabilities within the Company’s unaudited condensed consolidated balance sheets.

The Company rents certain real estate under agreements that are classified as operating leases.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments.

The operating lease ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred.

Variable lease payments are expensed as incurred and are not included within the ROU asset and lease liability calculation.

Variable lease payments primarily include reimbursements of costs incurred by lessors for common area maintenance and utilities.

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

The Company does not account for lease components (e.g., fixed payments including rent) separately from the

components (e.g., common-area maintenance costs).

The following table shows the impact of adoption of ASC 842 on the adoption date of June 29, 2019 on the consolidated balance sheets:

Consolidated Balance Sheets

Impact of Adopting ASC 842

(amount in thousands)

Operating lease ROU assets

Liabilities and Shareholders’ Equity

Operating lease liabilities, current

Operating lease liabilities, non-current

As of March 27, 2020, the maturities of the Company’s operating lease liabilities were as follows:

ber 25, 2020, the m a

turities of the Company’s operating lease liabilities w e

re as follows:

(amount in thousands)

2020 (remaining three months)

September 25,

Total undiscounted lease payments

mputed interest

Less imputed interest

Total present value of lease liabilities

current portion of operating lease liabilities of $ 1.9 million.

Included current portion of operating lease liabilities for the period ended September 25, 2020 .

Rental expense related to the Company’s operating leases is recognized on a straight-line basis over the lease term.

Rental expense for long-term leases for the three and nine months ended March 27, 2020 was $ 0.5 million and $ 1.5 million, respectively.

Rental expense for short-term leases for the three and nine months ended March 27, 2020 and March 29, 2019 was de minimis.

Finance leases

In connection with the acquisition of Fabrinet UK, the Company assumed the finance lease commitments for certain equipment, with various expiration dates through September 2020.

The equipment can be purchased at pre-determined

prices upon expiration of such contracts.

As of March 27, 2020, the Company had finance lease liabilities of $ 0.2 million, which were recorded under other payables in the unaudited condensed consolidated balance sheets.

The following summarizes additional information related to the Company’s operating leases and fi nance

As of March 27, 2020

Rental expense for long-term leases for the three months ended September 25, 2020 and September 27, 2019 was $ 0.6 million and $ 0.5 million, respectively.

Rental expense for short-term leases for the three months ended September 25, 2020 and September 27, 2019 w as

no t material.

The following summarizes additional information related to the Company’s operating leases:

September 25,

Weighted-average remaining lease term (in years)

Operating leases

Finance leases

Weighted-average discount rate

Operating leases

Finance leases

The following information represents supplemental disclosure for the statement of cash flows related to operating and finance leases:

The following table presents supplemental disclosure for the unaudited condensed consolidated statement of cash flows related to operating and finance leases for the three months ended September 25, 2020 and September 27, 2019:

Three Months Ended

(amount in thousands)

Nine Months Ended

March 27, 2020

September 25,

September 27,

Cash paid for amounts included in the measurement of lease liabilities

2 unchanged sentences

ROU assets obtained in exchange for lease liabilities

Finance lease assets

The following tables present details of the Company’s intangibles:

(amount in thousands)

As of March 27, 2020

September 25, 2020

Customer relationships

1 unchanged sentence

(amount in thousands)

As of June 28, 2019

June 26, 2020

Customer relationships

Total intangibles

The Company recorded amortization expense relating to intangibles of $ 0.3 million and $ 0.3 million for the three months ended March 27, 2020 and March 29, 2019, respectively, and $ 0.9 million and $ 0.9 million for the nine months ended March 27, 2020 and March 29, 2019, respectively.

The Company recorded amortization expense relating to intangibles of $ 0.2 million and $ 0.3 million for the three months ended September 25, 2020 and September 27, 2019, respectively.

The weighted-average remaining life of customer relationships was:

As of March 27,

As of June 28,

September 25,

Customer relationships

Based on the carrying amount of intangibles as of March 27, 2020, and assuming no future impairment of the underlying assets, the estimated future amortization during each fiscal year was as follows:

(amount in thousands)

2020 (remaining three months)

The changes in the carrying amount of goodwill from the acquisition of Fabrinet UK were as follows:

Based on the carrying amount of intangibles as of

September 25, 2020, and assuming no future impairment of the underlying assets, the estimated future amortization during each fiscal year was as follows:

(amount in thousands)

Balance as of June 28, 2019

Foreign currency translation adjustment

Balance as of March 27, 2020

Goodwill is not deductible for tax purposes.

Goodwill is reviewed annually for impairment or more frequently whenever changes or circumstances indicate the carrying amount of goodwill may not be recoverable.

During the nine months ended March 27, 2020 and March 29, 2019, there were no goodwill impairment losses.

The Company’s total borrowings, including current

and non-current

2021 (remaining nine months)

The Company’s total borrowings, including current and non-current

portions of long-term borrowings, consisted of the following:

(amount in thousands)

September 25,

Long-term borrowings, current portion, net:

6 unchanged sentences

3-month LIBOR + 1.35 % per annum (1)

Repayable in quarterly installments

LIBOR + 1.35 % per annum

Repayable in quarterly installments

quarterly installments

Current portion

3 unchanged sentences

Refer to Note 6.

The movements of long-term borrowings for the nine months ended March 27, 2020 and March 29, 2019 were as follows:

Nine Months Ended

The movements of long-term borrowings for the three months ended September 25, 2020 and September 27, 2019 were as follows:

Three Months Ended

(amount in thousands)

September 25,

September 27,

Opening balance

2 unchanged sentences

Closing balance

As of March 27, 2020, future maturities of long-term borrowings during each fiscal year were as follows:

September 25, 2020, future maturities of long-term borrowings during each fiscal year were as follows:

(amount in thousands)

2020 (remaining three months)

(remaining nine mo n

Credit facility agreements:

1 unchanged sentence

On August 20, 2019, Fabrinet Thailand (the “Borrower”) and Bank of Ayudhya Public Company Limited (the “Bank”) entered into a Credit Facility Agreement (the “Credit Facility Agreement”).

The Credit Facility Agreement provides for a facility of 110.0 million Thai b

aht (approximately $ 3.6 million based on the applicable exchange rate as of September 27, 2019) and $ 160.9 million which may be used for, among other things, an overdraft facility, short-term loans against promissory notes, a letter of guarantee facility, a term loan facility and foreign exchange facilities.

The Credit Facility Agreement provides for a facility of 110.0 million Thai baht (approximately $ 3.6 million based on the applicable exchange rate as of

September 27, 2019) and $ 160.9 million which may be used for, among other things, an overdraft facility, short-term loans against promissory notes, a letter of guarantee facility, a term loan facility and foreign exchange facilities.

The Bank may approve any request for extension of credit under the Credit Facility Agreement and may increase or decrease any facility amount in its sole discretion.

Under the Credit Facility Agreement, on August 20, 2019, the Borrower and the Bank entered into a Term Loan Agreement pursuant to which the Borrower drew down on September 3, 2019 a term loan in the original principal amount of $ 60.9 million.

The proceeds from the term loan, together with cash on hand, were used to repay outstanding obligations under the Company’s previous credit facility agreement with Bank of America, N.A.

The term loan accrues interest at 3-month LIBOR plus 1.35 % and is repayable in quarterly installments of $ 3.0 million, commencing on September 30, 2019.

The term loan will mature on June 30, 2024 .

The Borrower may prepay the term loan in whole or in part at any time without premium or penalty.

Any portion of the term loan repaid or prepaid may not be re-borrowed.

During the three and nine months ended March 27, 2020, the Company recorded $ 0.5 million and $ 1.1 million, respectively, of interest expense in connection with this term loan.

The proceeds from the term loan, together with cash on hand, were used to repay outstanding obligations under the

Company’s previous syndicated senior credit facility

The term loan accrues interest at

3-month LIBOR plus 1.35 % and is repayable in quarterly installments of $

3.0 million, commencing on September 30, 2019.

The term loan will mature on

June 30, 2024 .

The Borrower m a

y prepay the term loan in whole or in part at any time without premium or penalty.

Any portion of the term loan repaid or prepaid may not be

During the three months ended September 25, 2020, the Company recorded $

0.2 million of interest expense in connection with this term loan.

Any borrowings under the Credit Facility Agreement, including those borrowings under the Term Loan Agreement, are guaranteed by Fabrinet and secured by land and buildings owned by the Borrower in the Pathumthani and Chonburi Provinces in Thailand.

4 unchanged sentences

In the case of any payment of a dividend by the Company, its debt service coverage ratio must be at least 1.50 times.

At March 27, 2020, the Company was in compliance with all of its covenants under the Term Loan Agreement.

As of September 25, 2020, the Company was in compliance with all of its financial covenants under the Term Loan Agreement.

The events of default in the Term Loan Agreement include failure to pay amounts due under the Term Loan Agreement or the related finance documents when due, failure to comply with the covenants under the Term Loan Agreement or the related finance documents, cross default with other indebtedness of the Borrower, events of bankruptcy or insolvency in respect of the Borrower, and the occurrence of any event or series of events that in the opinion of the Bank has or is reasonably likely to have a material adverse effect.

At March 27, 2020, there was $ 54.8 million outstanding under the term loan.

At September 25, 2020, there was $ 48.8 million outstanding under the term loan.

Bank of America, N.A.

On May 22, 2014, the Company and a consortium of banks entered into a syndicated

senior credit facility agreement led by Bank of America (the “Bank of America Facility Agreement”).

On May 22, 2014, the Company and a

consortium of banks, entered into a syndicated senior credit facility agreement led by Bank of America (the “Bank of America Facility Agreement”).

The Bank of America Facility Agreement provided for a $ 200.0 million credit line, comprised of a $ 150.0 million revolving loan facility and a $ 50.0 million delayed draw term loan facility.

From time to time, the Company

From time to time,

amended the Bank of America Facility Agreement, before repaying all outstanding amounts under the agreement and terminating such agreement on September 10, 2019 .

The most recent amendment on June 4, 2018 (i) reduced the revolving commitments thereunder from $ 150.0 million to $ 25.0 million, (ii) refinanced the outstanding amounts under the revolving loan and term loan facilities into a $ 65.0 million term loan which was to be repaid in quarterly installments through the maturity date of June 4, 2023 , and (iii) reduced the interest rate margins and commitment fees.

and (iii) reduced the interest rate margins and commitment fees.

The term loan bore interest, at the Company’s option, at a rate per annum equal to a LIBOR rate plus a spread of 1.50% to 2.25% , or a base rate plus a spread of 0.50% to 1.25% .

During the nine months ended March 27, 2020 and March 29, 2019, the Company recorded $ 0.5 million and $ 1.8 million, respectively, of interest expense in connection with this term loan.

During the three months ended September 27, 2019 ,

the Company recorded $ 0.5 million of interest expense in connection with this term loan.

On September 10, 2019, the Company fully repaid $ 61.0 million in principal, accrued interest and other fees under the agreement.

The early termination of this agreement did not trigger any early termination fees.

At March 27, 2020, there were no amounts outstanding under the Bank of America Facility Agreement.

At June 28, 2019, there was $ 60.9 million outstanding

under the Bank of America Facility Agreement, related to the term loan.

As of March 27, 2020 and June 28, 2019, the liability for uncertain tax positions including accrued interest and penalties was $ 1.5 million and $ 2.1 million, respectively.

As of September

25, 2020 and June 26, 2020, the liability for uncertain tax positions including accrued interest and penalties was $ 1.5 million.

The Company expects the estimated amount of liability associated with its uncertain tax positions to decrease within the next 12 months due to the lapse of the applicable statute of limitations in foreign tax jurisdictions.

The Company files income tax returns in the United States and foreign tax jurisdictions.

As of March 27, 2020, the tax years from 2014 t hrough

2017 remain open to examination by U.S.

federal and state tax authorities

In addition, tax returns that remain open to examination in Thailand range from the tax years 2015 through 2019, and in

the People’s Republic of China and the United Kingdom range from the tax years 2015 through 2018.

The tax years from 2015 to 2019 remain open to examination by U.S.

federal and state, and foreign tax authorities.

The Company’s income tax is recognized based on the best estimate of the expected annual effective tax rate for the full financial year of each entity in the Company, adjusted for discrete items arising in that quarter.

Company’s estimated annual effective tax rate changes, the Company makes a cumulative adjustment in that quarter.

The Company’s effective tax rate for the three months ended March 27, 2020 and March 29, 2019 was 2.4 % and 5.2 %, respectively, of net income.

crease was primarily due to the fact that the Company had

income subject to tax during the three months ended March 27, 2020, compared with the three months ended March 29, 2019.

The Company’s effective tax rate for the nine months ended March 27, 2020 and March 29, 2019 was 4.2 % and 5.2 %, respectively, of net income.

The decrease was primarily due to the fact that the Company had lower income subject to tax during the nine months ended March 27, 2020 as compared to the nine months ended March 29, 2019.

If the Company’s estimated annual effective tax rate changes, the Company makes a cumulative adjustment in that quarter.

The effective tax rate for the Company for the three months ended September 25, 2020 and September 27, 2019 was 4.5 % and 5.0 %, respectively, of net income.

The decrease was primarily due to the fact that the Company had lower income subject to tax during the first quarter of fiscal year 2021 as compared to the same period in fiscal year 2020.

Share-based compensation

1 unchanged sentence

The grant date fair value of restricted share units and performance share units is based on the market value of our ordinary shares on the date of grant.

The effect of recording share-based compensation expense for the three and nine months ended March 27, 2020 and March 29, 2019 was as follows:

The effect of recording share-based compensation expense for the three months ended September 25, 2020 and September 27, 2019 was as follows:

Three Months Ended

Nine Months Ended

(amount in thousands)

September 25,

September 27,

Share-based compensation expense by type of award:

6 unchanged sentences

Three Months Ended

Nine Months Ended

(amount in thousands)

September 25,

September 27,

Cost of revenue

1 unchanged sentence

Total share-based compensation expense

The Company did not capitalize any share-based compensation expense as part of any asset costs during the three and nine months ended March 27, 2020 and March 29, 2019.

The Company did no t capitalize any share-based compensation expense as part of any asset costs during the three months ended September 25, 2020 and September 27, 2019.

Share-based award activity

1 unchanged sentence

Upon the approval of the 2020 Plan, Fabrinet’s Amended and Restated 2010 Performance Incentive Plan (the “2010 Plan”) was simultaneously terminated.

The 2020 Plan provides for the grant of equity awards thereunder with respect to (i) 1,700,000 ordinary shares, plus (ii) up to 1,300,000 ordinary shares that, as of immediately prior to the termination of the 2010 Plan, had been reserved but not issued pursuant to any awards granted under the 2010 Plan and are not subject to any awards thereunder.

The 2020 Plan provides for the grant of equity awards thereunder with respect to (i) 1,700,000 ordinary shares, plus (ii) up to 1,300,000 ordinary shares that, as of

immediately prior

to the termination of the 2010 Plan, had been reserved but not issued pursuant to any awards granted under the 2010 Plan and are not subject to any awards thereunder.

Upon termination of the 2010 Plan, 1,281,619 ordinary shares were reserved for issuance under the 2020 Plan pursuant to clause (ii) of the preceding sentence.

As of March 27, 2020, there were 30,262 restricted

share units outstanding, 3,836 performance share units outstanding and 2,946,847 ordinary shares available for future grant under the 2020 Plan.

As of March 27, 2020, there were 739,838 restricted share units and 436,304 performance share units outstanding

under the 2010 Plan.

As of September

25, 2020, there were 222,502 restricted share units outstanding,

182,844 performance share units outstanding and

2,572,597 ordinary shares available for future grant under the

As of September

25, 2020, there were 459,110 restricted share units outstanding and 238,474 performance

share units outstanding under the 2010 Plan.

No ordinary shares are available for future grant under the 2010 Plan.

On November 2, 2017, the Company adopted the 2017 Inducement Equity Incentive Plan (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.

On November 2, 2017, the Company adopted the 2017 Inducem e

nt Equity Incentive Plan (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 March 27, 2020, there were an aggregate of 24,327 restricted share units outstanding and 111,347 ordinary shares available for future grant under the 2017 Inducement Plan.

The 2010 Plan, 2017 Inducement Plan and 2020 Plan are collectively referred to as the “Equity Incentive Plans.”

As of September

25, 2020, there were 12,164 restricted share units outstanding

111,347 ordinary shares available for future grant under the 2017 Inducement Plan.

The 2020 Plan,

2010 Plan and

2017 Inducement Plan are collectively referred to as the “Equity Incentive Plans.”

Restricted share units and performance share units

Restricted share units and performance share units have been granted under the 2010 Plan, the 2017 Inducement Plan, and the 2020 Plan.

Restricted share units and performance share units have been granted under the Equity Incentive Plans.

Restricted share units granted to employees generally vest in equal installments over three or four years on each anniversary of the vesting commencement date.

4 unchanged sentences

performance criteria, which consist of revenue and non-GAAP

gross margin or

operating margin targets.

4 unchanged sentences

Balance as of June 26, 2020

Balance as of March 27, 2020

Balance as of September 25, 2020

Average Grant

1 unchanged sentence

Balance as of June 28, 2019

Balance as of March 29, 2019

Balance as of September 27, 2019

The following table summarizes performance share unit activity under the Equity Incentive Plans:

2 unchanged sentences

Balance as of June 26, 2020

Balance as of March 27, 2020

Balance as of September 25, 2020

Average Grant

1 unchanged sentence

Balance as of June 28, 2019

Balance as of March 29, 2019

As of March 27, 2020, there was $ 15.0 million and $ 7.7 million of unrecognized share-based compensation expense related to restricted share units and performance share units, respectively, under the Equity Incentive Plans that is expected to be recorded over a weighted-average period of 2.5 years and 1.3 years, respectively.

For the nine months ended March 27, 2020 and March 29, 2019, the Company withheld an aggregate of 91,481 shares and 231,624 shares, respectively, upon the vesting of restricted share units, based upon the closing share price on the vesting date to settle the employees’ minimum statutory obligation for the applicable income and other employment taxes.

For the nine months ended March 27, 2020 and March 29, 2019, the Company then remitted cash of $ 4.7 million and $ 10.4 million, respectively, to the appropriate taxing authorities, and presented it as a financing activity within the unaudited condensed consolidated statements of cash flows.

Balance as of September 27, 2019

The fair value of restricted share units and performance share units is based on the market value of our ordinary shares on the date of grant.

As of September

25, 2020, there was $ 18.7 million and $ 14.6 million of unrecognized share-based compensation expense related to restricted share units and performance share units, respectively, under the Equity Incentive Plans that is expected to be recorded over a weighted-average period of 2.7 years and 1.6 years, respectively.

For the three months ended September 25, 2020 and September 27, 2019, the Company withheld an aggregate of 142,221 shares and 82,220 shares, respectively, upon the vesting of restricted share units, based upon the closing share price on the vesting date to settle employee obligations

for the applicable income and other employment taxes.

For the three months ended September 25, 2020 and September 27, 2019, the Company then remitted cash of $ 9.9 million and $ 4.1 million, respectively, to the appropriate taxing authorities, and presented it as a financing activity within the unaudited condensed consolidated statements of cash flows.

The payment was recorded as a reduction of additional paid-in

1 unchanged sentence

Share capital

The Company’s authorized share capital is 500,000,000 ordinary shares, par value of $ 0.01 per ordinary share, and 5,000,000 preferred shares, par value of $ 0.01 per preferred share.

For the three and nine months ended March 27, 2020, the Company issued 52,041 and 230,178 ordinary shares, respectively, upon the vesting of restricted share units, net of shares withheld.

For the three and nine months ended March 29, 2019, the Company issued 78,072 and 492,498 ordinary shares, respectively, upon the vesting of restricted share units, net of shares withheld.

Fabrinet’s authorized share capital is 500,000,000 ordinary shares, par value of $ 0.01 per ordinary share, and 5,000,000 preferred shares, par value of $ 0.01 per preferred share.

For the three months ended September 25, 2020, Fabrinet issued 208,692 ordinary shares upon the vesting of restricted share units, net of shares withheld.

For the three months ended September 27, 2019, Fabrinet issued 158,375 ordinary shares upon the vesting of restricted share units, net of shares withheld.

All such issued shares are fully paid.

Treasury shares

In August 2017, the Company’s board of directors approved a share repurchase program to permit the 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.

In February 2018 and 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 nine months ended March 27, 2020, 355,000

shares were repurchased under the program, at an average price per share of $ 58.37 , totaling $ 20.7 million.

As of March 27, 2020, the Company had a remaining authorization to purchase up to $ 41.5 million of its ordinary shares under the share repurchase program.

In August 2017

, the Company’s board of directors approved a share repurchase program

to permit the 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.

In February 2018, May 2019 and August 2020, the Company’s board of directors approved an increase of $ 30.0 million, $ 50.0 million and $ 58.5 million, respectively, to the original share repurchase authorization, bringing the aggregate authorization to $ 168.5 million.

During the three months ended September 25, 2020, no shares were repurchased under the program.

As of September

25, 2020, the Company had a remaining authorization to purchase up to an additional $ 100.0 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”)

The changes in AOCI for the nine months ended March 27, 2020 and March 29, 2019 were as follows:

Accumulated other comprehensive income (loss)

The changes in AOCI for the three months ended September 25, 2020 and September 27, 2019 were as follows:

(amount in thousands)

9 unchanged sentences

Other comprehensive income before reclassification adjustment

Amounts reclassified out of AOCI to the unaudited

condensed consolidated

statements of operations and

comprehensive income

Amounts reclassified out of AOCI to the unaudited condensed consolidated statements of operations and comprehensive income

Other comprehensive income (loss)

Balance as of March 27, 2020

Balance as of September 25, 2020

(amount in thousands)

9 unchanged sentences

Other comprehensive income before reclassification adjustment

Amounts reclassified out of AOCI to the unaudited

condensed consolidated

statements of operations and

comprehensive income

Amounts reclassified out of AOCI to the unaudited condensed consolidated statements of operations and comprehensive income

Other comprehensive income (loss)

Balance as of March 29, 2019

Balance as of September 27, 2019

Commitments and contingencies

Letter of credit and Bank guarantees

As of March 27, 2020 and June 28, 2019, the standby letter of credit was backed by cash collateral of $ 7.4 million.

As of March 27, 2020 and June 28, 2019, there were outstanding bank guarantees given by a bank on behalf of our subsidiary in Thailand for electricity usage and other normal business expenses

$ 1.5 million and $ 1.6 million, respectively, and there were other bank guarantees given by a bank on behalf of our subsidiaries in China and the United Kingdom to support their operations of

de minimis amounts.

As of September 25, 2020 and June 26, 2020, 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 September 25, 2020 and June 26, 2020, the standby letter of credit was backed by cash collateral of $ 7.4 million.

As of September 25, 2020 and June 26, 2020, there were outstanding bank guarantees given by a bank on behalf of our subsidiary in Thailand for electricity usage and other normal business expenses totaling to $ 1.6 million and $ 1.6 million, respectively, and there were other bank guarantees given by a bank on behalf of our subsidiaries in China and the U.K.

to support their operations.

As of September 25, 2020 and June 26, 2020, these bank guarantees were no t material.

Purchase obligations

Purchase obligations represent legally

binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements.

Purchase obligations represent legally-binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements.

Although open purchase orders are considered enforceable and legally binding, their terms generally give the Company the option to cancel, reschedule and/or adjust its requirements based on its business needs prior to the delivery of goods or performance of services.

Obligations to purchase inventory and other commitments are generally expected to be fulfilled within one year.

As of March 27, 2020, the Company had purchase obligations to third parties of $ 15.2 million.

As of September

25, 2020, the Company had an outstanding commitment to third parties of $ 10.0 million.

Indemnification of directors and officers

Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of directors and officers, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.

Cayman Islands law does not limit the extent to which a company’s memorandum

and articles of association may provide for indemnification of directors and officers, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.

Fabrinet’s amended and restated memorandum and articles of association provide for indemnification of directors and officers for actions, costs, charges, losses, damages and expenses incurred in their capacities as such, except that such indemnification does not extend to any matter in respect of any fraud or dishonesty that may attach to any of them.

2 unchanged sentences

Business segments and geographic information

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

Operating segments are defined as comp one nts

of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company’s chief operating decision maker is Fabrinet’s Chief Executive Officer.

As of March 27, 2020, the Company operated and internally managed a single operating segment.

As of September

25, 2020, the Company operated and internally managed a single operating segment.

Accordingly, the Company does not accumulate discrete information with respect to separate product lines and does not have separate reportable segments.

Total revenues are attributed to a particular geographic area based on the bill-to-location

of the Company’s customers.

operates in three geographic regions:

North America, Asia-Pacific and Europe.

The following table presents total revenues by geographic region:

Three Months Ended

Nine Months Ended

(amount in thousands)

North America

As of March 27, 2020 and March 29, 2019, the Company had approximately $ 29.9 million and $ 31.7 million, respectively, of long-lived assets based in North America, with the substantial remainder of assets based in Asia-Pacific and Europe.

revenues by geographic region, see “Revenue by Geographic Area and End Market” in Note 3.

As of September

25, 2020 and Sep t

ember 27, 2019, the Company had approximately $ 29.2 million and $ 30.8 million, respectively, of long-lived assets based in North America, with the substantial remainder of assets based in Asia-Pacific and Europe.

Significant customers

The Company had three and two customers that individually contributed 10% or more of its total trade accounts receivable as of March 27, 2020 and June 28, 2019, respectively.

The Company had two customers and three customers

that each contributed to 10% or more of its total trade accounts receivable as of September 25, 2020 and June 26, 2020, respectively.

Subsequent events

The outbreak of a novel strain of coronavirus (“COVID-19”)

was recognized as a pandemic by the World Health Organization on March 11, 2020.

The outbreak has spread globally, including to Thailand, the United States, UK and Europe.

The implications of COVID-19

on the Company’s business remain uncertain.

Measures taken by governmental authorities and private actors to limit the spread of COVID-19

may interfere with the ability of the Company’s employees, suppliers and other business providers to carry out their assigned tasks or supply materials at ordinary levels of performance.

While the Company’s operations are impacted as a result of this pandemic, the Company has not experienced a direct, materially adverse financial impact.

The future impact of this pandemic on the Company’s business, financial condition, results of operations and cash flows cannot be predicted.

The Company continues to monitor developments with the spread of COVID-19,

actions taken by governmental authorities and private actors, and impacts to the Company’s suppliers and customers.

The Company continues to work to minimize disruptions to its supply chain and manufacturing capabilities, and to ensure the safety of its employees.

While the Company’s operations are impacted as a result of this pandemic, including as a result of restrictions on employees’ ability to travel and requirements that portions of the Company’s workforce work from home, the Company has not experienced a direct, materially adverse financial impact.

The Company is not currently aware of any business interruption or loss contingencies related to COVID-19

that would require recognition in the third quarter of fiscal 2020.

On October 1, 2020, the Company extended the payment terms of $ 24.3 million in funds it had advanced to a customer and accrued interest from September 30, 2020 to April 1, 2021 , and reduced the interest rate effective from October 1, 2020.

The extension is due to the customer’s agreement to transfer additional manufacturing operations to the Company’s facilities in Thailand beginning in November 2020.

These funds will be offset by amount due to this customer for the purchases of certain inventories.

The Company has also committed to purchase $ 26.0 million worth of inventories from the customer.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements