What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-08-16 compared with 2021-08-17 · 190 added, 306 removed, 1191 unchanged (29% of the section changed)

2 unchanged sentences

Consolidated Financial Statements of Fabrinet

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of June 2 4 , 202 2 and June 2 5 , 202 1

34 unchanged sentences

Revenue recognition – Identifying and evaluating terms and conditions in contracts for the timing of revenue recognition.

As described in Note 3 to the consolidated financial statements, management applies the following steps in their determination of revenue to be recognized:

1) identification of the contract with a customer;

2) identification of the performance obligations in the contract;

3) determination of the transaction price;

4) allocation of the transaction price to the performance obligations in the contract;

and 5) recognition of revenue when, or as, the Company satisfies a performance obligation.

Since the control of the product is typically transferred to the customer depending on the terms of the contract, management applies judgment in identifying and evaluating any terms and conditions when the Company has an enforceable right to payment.

As described in Note 2 to the consolidated financial statements, management applies five-step in their determination of revenue to be recognized and the control of the product is typically transferred to the customer depending on the terms of the contract.

The management applies judgment in identifying and evaluating any terms and conditions when the Company has an enforceable right to payment.

For the fiscal year ended June 24, 2022, the Company’s revenue was $2,262.2 million.

6 unchanged sentences

(ii) tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements;

(iii) selected a sample of sales transaction from the period within a defined period before and after the Company’s fiscal year ended and obtained the invoice, customer contract, bill of lading and proof of delivery, to evaluate whether revenue was recognized in the appropriate fiscal year;

and (iv) selected a sample of credit memos from the period immediately subsequent to the Company’s fiscal year end and obtained the related invoice and purchase order to evaluate whether they relate to revenue recognition in the fiscal year ended.

(iii) selected samples of sales transaction from the period within a defined period before and after the Company’s fiscal year ended and obtained the invoices, purchase orders and proof of delivery, to evaluate whether revenue was recognized in the appropriate fiscal year.

/s/ PricewaterhouseCoopers ABAS Ltd.

14 unchanged sentences

Inventories 557,145 422,133

Other receivable — 24,310

Prepaid expenses 11,626 11,398

16 unchanged sentences

Contract liabilities 1,982 1,680

Capital lease liability, current portion 10 —

Operating lease liabilities, current portion 2,319 2,593

7 unchanged sentences

Deferred tax liability 6,001 5,107

Capital lease liability, non-current portion 75 —

Operating lease liabilities, non-current portion 1,476 3,850

40 unchanged sentences

Total other comprehensive income (loss), net of tax ( 6,527 ) ( 5,119 ) 1,239

Net comprehensive income (loss) $ 143,222 $ 114,718 $ 119,826

Net comprehensive income $ 193,853 $ 143,222 $ 114,718

Earnings per share

18 unchanged sentences

Net income — — — — — 113,479 113,479

Other comprehensive income (loss) — — — — ( 1,129 ) — ( 1,129 )

Cumulative effect adjustment from adoption of ASC 606

Other comprehensive income — — — — 1,239 — 1,239

Share-based compensation — — 22,203 — — — 22,203

6 unchanged sentences

Other comprehensive income (loss) — — — — ( 5,119 ) — ( 5,119 )

Cumulative effect adjustment from adoption of ASC 326

— — — — — ( 107 ) ( 107 )

Share-based compensation — — 25,462 — — — 25,462

3 unchanged sentences

Tax withholdings related to net share settlement of restricted share units — — ( 11,624 ) — — — ( 11,624 )

— — ( 4,889 ) — — — ( 4,889 )

Balances at June 25, 2021 38,749,045 388 189,445 ( 87,343 ) ( 6,266 ) 1,016,296 1,112,520

1 unchanged sentence

Other comprehensive income (loss) — — — — ( 6,527 ) — ( 6,527 )

Cumulative effect adjustment from adoption of ASC 326

— — — — — ( 107 ) ( 107 )

Share-based compensation — — 28,048 — — — 28,048

15 unchanged sentences

(Gain) loss on disposal and impairment of property, plant and equipment ( 101 ) 13 329

(Gain) loss on disposal of intangibles — — 149

Loss on impairment of goodwill — — 3,514

(Gain) loss from sales and maturities of available-for-sale securities 13 ( 187 ) ( 96 )

Accretion of premiums on short-term investments 2,093 ( 508 ) ( 592 )

Amortization of discount (premium) of short-term investment 3,691 2,093 ( 508 )

Amortization of deferred debt issuance costs 32 32 26

1 unchanged sentence

Unrealized loss (gain) on exchange rate and fair value of foreign currency forward contracts ( 2,832 ) ( 859 ) 1,963

( 859 ) 1,963 ( 6,980 )

Unrealized loss on fair value of interest rate swaps — — 1,672

18 unchanged sentences

Proceeds from maturities of short-term investments 133,632 179,532 142,508

Funds repayment from (provided to) customer to support transfer of manufacturing operations (Note 10) 24,310 ( 24,310 ) —

Funds repayment from (provided to) customer to support transfer of manufacturing operations — 24,310 ( 24,310 )

Purchase of property, plant and equipment ( 89,588 ) ( 46,060 ) ( 42,327 )

5 unchanged sentences

Proceeds from long-term borrowings — — 60,938

Repayment of long-term borrowings ( 12,188 ) ( 12,188 ) ( 70,079 )

Repayment of finance lease liabilities ( 7 ) ( 100 ) ( 400 )

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

3 unchanged sentences

2021 June 26,

Repayment of long-term borrowings ( 12,188 ) ( 70,079 ) ( 3,250 )

Repayment of finance lease liabilities ( 100 ) ( 400 ) ( 468 )

Repurchase of ordinary shares ( 59,915 ) ( 18,842 ) ( 20,722 )

Release of restricted cash held in connection with business acquisition — — ( 3,478 )

Withholding tax related to net share settlement of restricted share units ( 20,824 ) ( 11,624 ) ( 4,889 )

34 unchanged sentences

(“Casix”), Fabrinet West, Inc.

(“Fabrinet West”) and Fabrinet UK Limited (“Fabrinet UK”).

(“Fabrinet West”), Fabrinet UK Limited (“Fabrinet UK”) and Fabrinet Israel Ltd.

(“Fabrinet Israel”).

Summary of significant accounting policies

1 unchanged sentence

The Company utilizes a 52-53 week fiscal year ending on the Friday in June closest to June 30.

Fiscal year 2021 ended on June 25, 2021 and consisted of 52 weeks.

Fiscal year 2020 ended on June 26, 2020 and consisted of 52 weeks.

Fiscal year 2019 ended on June 28, 2019 and consisted of 52 weeks.

Fiscal years 2022, 2021, and 2020 ended on June 24, 2022, June 25, 2021, and June 26, 2020, respectively, and each were 52-week years.

Fiscal year 2023 will end on June 30, 2023 and be a 53-week year.

The additional week in a 53-week year is added to the first quarter, making such quarter consist of 14 weeks.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

11 unchanged sentences

These estimates may change, as new events occur and additional information is obtained, as well as other factors related to COVID-19 that could result in material impacts to our consolidated financial statements in future reporting periods.

Reclassifications

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

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:

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

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

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

As of June 25, 2021, the derivative assets and liabilities were measured at fair value, but the gross fair value amount is presented in the 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 and the consolidated statement of cash flows for the year ended June 26, 2020 as following table:

June 26, 2020

(amount in thousands) As previously

reported Reclassification After

reclassification

Consolidated Balance Sheet

Current assets

Other current assets $ 13,915 $ 593 $ 14,508

Current liabilities

Accrued expenses $ 12,104 $ ( 3,125 ) $ 8,979

Non-current liabilities

Other non-current liabilities $ 1,937 $ 3,718 $ 5,655

Consolidated Statement of Cash Flows

Changes in operating assets and liabilities

Other current assets and non-current assets $ ( 182 ) $ ( 593 ) $ ( 775 )

Other current liabilities and non-current liabilities $ 10,394 $ 593 $ 10,987

These reclassifications do not affect the Company’s net income or shareholders’ equity.

Changes in accounting policies

Except for the adoption of the Accounting Standards Codification (“ASC”) 326, “Financial Instruments—Credit Losses”, ASC 820, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement” and ASC 848, “Reference Rate Reform,” described within the sub-heading “New Accounting Pronouncements – adopted by the Company,” the Company has consistently applied its accounting policies to all periods presented in these consolidated financial statements.

Foreign currency transactions and translation

14 unchanged sentences

The short-term investments in debt securities are carried at either amortized cost or fair value.

Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity.

Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as available-for-sale with any unrealized gains and losses included in AOCI in the consolidated

balance sheets.

Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and

classified as held-to-maturity.

The Company determines realized gains or losses on sale of available-for-sale debt securities on a specific identification method and records such gains or losses as interest income in the consolidated statements of operations and comprehensive income.

Held-to-maturity debt securities are required to use the current expected credit losses (“CECL”) impairment model to assess the expected credit loss.

Held-to-maturity debt securities require the use of the current expected credit losses (“CECL”) impairment model to assess the expected credit loss.

According to the CECL model, the Company requires the immediate recognition of estimated expected credit losses over the life of the financial instrument through the allowance for credit losses account.

20 unchanged sentences

Cost is estimated using the standard costing method, computed on a first-in, first-out basis, with adjustments for variances to reflect actual costs not in excess of net realizable market value.

Market value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

Market value is the estimated selling price in the ordinary course of business, less the costs of completion and

selling expenses.

The Company assesses the valuation of inventory on a quarterly basis and writes down the value for estimated excess and obsolete inventory based upon estimates of future demand.

103 unchanged sentences

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.

(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.

32 unchanged sentences

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).

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 contract, legal advice, etc.) are expensed as incurred, unless such costs are explicitly chargeable to the customer.

8 unchanged sentences

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

Warranty cost allowances of $ 0.09 million, $ 0.02 million and $ 0.07 million were recognized in the consolidated statements of operations and comprehensive income for the years ended June 25, 2021, June 26, 2020 and June 28, 2019, respectively.

Warranty cost allowances were recognized in the consolidated statements of operations and comprehensive income for the years ended June 24, 2022, June 25, 2021 and June 26, 2020 with de minimis amount.

Share-based compensation

18 unchanged sentences

The defined benefit obligation is calculated using the projected unit credit method.

Annually the Company engages independent actuaries to calculate the obligation.

the Company engages independent actuaries to calculate the obligation.

The present value is determined by discounting the estimated future payments using market yields on high quality corporate bonds that are denominated in sterling and that have terms approximating the estimated period of the future payments (discount rate).

25 unchanged sentences

New Accounting Pronouncements—adopted by the Company

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 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 on 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 AFS debt security impairment model for AFS debt securities and discontinued using the concept of “other than temporary” impairment on these AFS debt securities.

The Current Expected Credit Losses (“CECL”) on the AFS debt securities are recognized in interest income and other income (expense), net on the Company’s consolidated statements of operations and comprehensive income, and any remaining unrealized losses are included in AOCI in the Company's 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 Company's 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 seeks to improve the effectiveness of disclosures in the notes to the financial statements and includes (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 the Company's consolidated financial statements.

On January 7, 2021, FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848).” This standard requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.

The amendments in this update clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

The Company immediately adopted this standard with no impact on the Company's consolidated financial statements.

New Accounting Pronouncements—not yet adopted by the Company

In December 2019, the FASB issued ASU2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.” The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.” The amendments in this update

simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify U.S.

GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

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.

The Company adopted this standard in the first quarter of fiscal year 2022 with no material impact on the Company's consolidated financial statements.

New Accounting Pronouncements—not yet adopted by the Company

In November 2021, FASB issued ASU 2021-10, “Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance,” which requires annual disclosures that increase the transparency of transactions involving government assistance, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements.

The amendments in this update are effective for all entities within the ASU's scope for financial statements issued for annual periods beginning after December 15, 2021.

This ASU will be effective for the Company in the first quarter of fiscal year 2023.

Early adoption is permitted.

The Company assessed the preliminary impact from the adoption of this update and expected no impact on the Company's consolidated financial statements.

The Company assessed the preliminary impact from the adoption of this update and expected no material impact on the Company's consolidated financial statements.

Revenues from contracts with customers

7 unchanged sentences

(amount in thousands) Contract

Beginning balance, June 27, 2020 $ 13,256

Balance as of June 26, 2020 $ 13,256

Revenue recognized 65,182

Amounts collected or invoiced ( 66,560 )

Ending balance, June 25, 2021 $ 11,878

(amount in thousands) Contract

Beginning balance, June 29, 2019 $ 12,447

Balance as of June 25, 2021 11,878

Revenue recognized 61,086

Amounts collected or invoiced ( 59,500 )

Ending balance, June 26, 2020 $ 13,256

Balance as of June 24, 2022 $ 13,464

(amount in thousands) Contract

Beginning balance, June 27, 2020 $ 1,556

Balance as of June 26, 2020 $ 1,556

Advance payment received during the year 18,360

Revenue recognized ( 18,236 )

Ending balance, June 25, 2021 $ 1,680

(amount in thousands) Contract

Beginning balance, June 29, 2019 $ 2,239

Balance as of June 25, 2021 1,680

Advance payment received during the year 5,927

Revenue recognized ( 5,625 )

Ending balance, June 26, 2020 $ 1,556

Balance as of June 24, 2022 $ 1,982

Revenue by Geographic Area and End Market

1 unchanged sentence

The Company operates primarily in three geographic regions:

North America, Asia-Pacific and Europe.

North America;

Asia-Pacific and others;

The following table presents total revenues by geographic regions:

6 unchanged sentences

$ 2,262,224 100.0 % $ 1,879,350 100.0 % $ 1,641,836 100.0 %

The following table sets forth revenues by end market.

(amount in thousands) June 24,

2022 June 25,

2021 June 26,

North America

1,099,244 884,862 829,567

15,260 2,674 1,321

Total revenue in North America 1,114,504 887,536 830,888

Asia-Pacific and others

India 278,117 152,249 91

Malaysia 212,286 157,213 190,574

Israel 101,058 107,584 315

Hong Kong 83,651 87,235 92,655

Japan 60,121 69,779 101,588

China 55,201 51,597 48,192

Thailand 36,489 27,081 98,330

Others 11,128 15,859 21,178

Total revenue in Asia-Pacific and others 838,051 668,597 552,923

Ireland 133,225 193,103 110,747

90,921 60,516 67,589

Germany 40,794 28,163 45,628

Others 44,729 41,435 34,061

Total revenue in Europe $ 309,669 $ 323,217 $ 258,025

Total revenue $ 2,262,224 $ 1,879,350 $ 1,641,836

(1) Others includes revenues from external customers based in our country of domicile, the Cayman Islands, which for each year presented is $ 0 .

The following table presents revenues by end market.

(amount in thousands, except percentages) Year ended June 24,

3 unchanged sentences

Lasers, sensors and other 479,425 21.2 438,012 23.3 393,662 24.0

$ 1,879,350 100.0 % $ 1,641,836 100.0 % $ 1,584,335 100.0 %

Cayman Islands

Total $ 2,262,224 100.0 % $ 1,879,350 100.0 % $ 1,641,836 100.0 %

Fabrinet's effective tax rate is a function of the mix of tax rates in the various jurisdictions in which we conduct business.

Fabrinet is domiciled in the Cayman Islands.

1 unchanged sentence

Income of the Company exempted from corporate income tax in the Cayman Islands amounted to $ 171.0 million, $ 115.8 million and $ 101.9 million for the years ended June 24, 2022, June 25, 2021 and June 26, 2020, respectively.

Fabrinet Thailand is where the majority of the Company’s operations and production takes place.

The Company was not subject to tax from July 2012 through June 2020 on income generated from the manufacture of products at Pinehurst Building 6, and is not subject to tax from July 2018 through June 2026 on income generated from the manufacture of products at its Chonburi campus.

After June 2020, 50 % of our income generated from products manufactured at our Pinehurst campus Building 6 will be exempted from tax through June 2025.

Such preferential tax treatment is contingent on various factors, including the export of our customers’ products out of Thailand and our agreement not to move our manufacturing facilities out of our current province in Thailand for at least 15 years from the date on which preferential tax treatment was granted.

The majority of the Company’s operations and production take place in Thailand.

The Company was not subject to tax in Thailand from July 2012 through June 2020 on income generated from the manufacture of products at its Pinehurst campus Building 6, and is not subject to tax in Thailand from July 2018 through June 2026 on income generated from the manufacture of products at its Chonburi campus.

After June 2020, 50 % of the Company's income generated from products manufactured at its Pinehurst campus Building 6 will be exempted from tax in Thailand through June 2025.

Such preferential tax treatment is contingent on various factors, including the export of our customers’ products out of

Thailand and our agreement not to move our manufacturing facilities out of our current province in Thailand for at least 15 years from the date on which preferential tax treatment was granted.

Currently, the corporate income tax rate for our Thai subsidiary is 20 %.

People’s Republic of China

The corporate income tax rate for Casix is 25 %.

The United States

The Tax Cuts and Jobs Act enacted on December 22, 2017 provided for significant changes to U.S.

tax law, including a reduction in the U.S.

corporate income tax rate to 21 % effective January 1, 2018.

Accordingly, the Company’s U.S.

subsidiaries were subject to a Federal statutory tax rate of 21 % for fiscal year 2021 and fiscal year 2020.

The United Kingdom

The corporate income tax rate for U.K.

subsidiaries is 19 %.

The corporate income tax rate for Israel subsidiaries is 23 %.

The corporate income tax rates for our subsidiaries in the PRC, the U.S., the U.K.

and Israel are 25 %, 21 %, 19 % and 23 %, respectively.

At Spring Budget 2021, the UK government announced an increase in the corporation tax main rate from 19% to 25% effective April 1, 2023.

Our provision for income taxes is computed using the asset and liability method, under which deferred income taxes are recognized for differences between the financial statement and tax bases of assets and liabilities at currently enacted statutory tax rates for the years in which the differences are expected to reverse.

The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment.

The Company’s income tax expense consisted of the following:

20 unchanged sentences

Provision for uncertain income tax position 668 ( 403 ) ( 641 )

Utilization of loss carryforward ( 610 ) — —

Valuation allowance (reversal of) ( 1,822 ) 2,446 —

Others 944 ( 45 ) ( 770 )

Utilization of loss and tax credits carryforward ( 194 ) ( 610 ) —

Changes in valuation allowance (3)

— ( 2,146 ) 1,806

641 2,048 2,030

Corporate income tax expense $ 6,586 $ 2,143 $ 5,763

(1) Income before income taxes was mostly generated from domestic income in the Cayman Islands.

(2) Income not subject to tax relates to income earned in the Cayman Islands and income subject to an investment promotion privilege for Pinehurst Building 6 and the Company’s Chonburi campus.

(2) Income not subject to tax relates to income earned in the Cayman and Mauritius Islands and income subject to an investment promotion privilege for Pinehurst Building 6 and the Company’s Chonburi campus.

Income not subject to tax per ordinary share on a diluted basis was $ 0.96 , $ 0.63 , and $ 0.55 for the years ended June 24, 2022, June 25, 2021, and June 26, 2020, respectively.

(3) Changes in valuation allowances were due to adjustments based on management's assessment on the realizability of the related deferred tax assets.

(4) Others includes $ 1.2 million of deferred tax assets for a UK subsidiary from temporary differences from prior years, and $ 1.2 million of deferred tax assets due to the change in UK tax rate.

These amounts were fully offset with a corresponding valuation allowance.

The Company’s deferred tax assets and deferred tax liabilities, net of valuation allowance, at each balance sheet date are as follows:

8 unchanged sentences

Total 14,734 11,489

Valuation allowance ( 4,934 ) ( 2,061 )

Net deferred tax assets $ 9,800 $ 9,428

Deferred tax liabilities:

11 unchanged sentences

Additional 479

Reduction ( 2,146 )

Balance as of June 25, 2021 2,061

Additional 2,873

Reduction ( 2,146 )

Balance as of June 24, 2022 $ 4,934

During fiscal year 2021, one of the Company’s subsidiaries in the U.S.

generated taxable income sufficient for the utilization of loss carryforwards due to better operating performance and effective control of operating expenses.

Management determined that it was more likely than not that future taxable income would be sufficient to allow utilization of the deferred tax assets.

Thus, a full valuation allowance of $ 1.5 million for the deferred tax assets was released as of June 25, 2021.

During fiscal year 2021, one of the Company’s subsidiaries in the U.K.

During fiscal year 2020, one of our subsidiaries in the U.S.

generated net operating loss and management expected that such subsidiary would continue to have net operating losses in the foreseeable future;

therefore, management believed it was more likely than not that all of the deferred tax assets of such subsidiary would not be utilized.

Thus, a full valuation allowance of $ 2.1 million for the deferred tax assets was set up as of the end of fiscal year 2020.

During fiscal year 2021, our subsidiaries in the U.S.

generated taxable income sufficient for the utilization of loss carryforwards due to better operating performance and effective control of operating expenses and management determined that it was more likely than not that future taxable income would be sufficient to allow utilization of the deferred tax assets.

Thus, a full valuation allowance of $ 2.1 million for the deferred tax assets was released as of June 25, 2021 and no valuation allowances for deferred tax assets of our subsidiaries in the U.S.

have been set up as of June 24, 2022.

During fiscal year 2020, our subsidiary in the U.K.

also generated net operating loss and management expected that such subsidiary would continue to have net operating losses in the foreseeable future.

Therefore, management believes it is more likely than not that all of the deferred tax assets of such subsidiary will not be utilized.

Thus, a full valuation allowance of $ 2.1 million for the deferred tax assets was set up as of June 25, 2021.

Income tax liabilities have not been established for withholding tax and other taxes that would be payable on the unremitted earnings of Fabrinet Thailand.

Such amounts of Fabrinet Thailand are permanently reinvested.

Unremitted earnings for Fabrinet Thailand totaled $ 126.8 million and $ 112.3 million as of June 25, 2021 and June 26, 2020, respectively.

Therefore, management believed it was more likely than not that all of the deferred tax assets of such subsidiary would not be utilized.

Thus, a full valuation allowance of $ 1.6 million for the deferred tax assets was set up as of the end of fiscal year 2020.

A full valuation allowance of $ 2.1 million and $ 4.9 million were set up for the fiscal year ended June 25, 2021 and June 24, 2022, respectively.

Income tax liabilities have not been established for withholding tax and other taxes that would be payable on the unremitted earnings in Thailand, which are permanently reinvested.

Unremitted earnings in Thailand totaled $ 135.5 million and $ 126.8 million as of June 24, 2022 and June 25, 2021, respectively.

Unrecognized deferred tax liabilities for such unremitted earnings were $ 11.3 million and $ 12.2 million as of June 24, 2022 and June 25, 2021, respectively.

Deferred tax liabilities of $ 1.3 million and $ 1.1 million have been established for withholding tax on the unremitted earnings of Casix for the years ended June 25, 2021 and June 26, 2020, respectively, which are included in non-current deferred tax liability in the consolidated balance sheets.

Deferred tax liabilities of $ 1.5 million and $ 1.3 million have been established for withholding tax on the unremitted earnings in China for the years ended June 24, 2022 and June 25, 2021, respectively, which are included in non-current deferred tax liability in the consolidated balance sheets.

Uncertain income tax positions

Interest and penalties related to uncertain income tax positions are recognized in income tax expense.

The Company had approximately $ 0.1 million and $ 0.5 million of accrued interest and penalties related to uncertain income tax positions on the consolidated balance sheets as of June 25, 2021 and June 26, 2020, respectively.

The Company recorded (reversed) interest and penalties of $ 0.4 million, $ 0.1 million and $( 0.1 ) million for the years ended June 25, 2021, June 26, 2020 and June 28, 2019, respectively, in the consolidated statements of operations and comprehensive income.

The Company had approximately $ 0.1 million of accrued interest and penalties related to uncertain income tax positions on the consolidated balance sheets as of June 24, 2022.

The Company recorded interest and penalties of $ 0.4 million and $ 0.1 million for the years ended June 25, 2021 and June 26, 2020, respectively, in the consolidated statements of operations and comprehensive income.

The amount of interest and penalties reversed in fiscal 2022 provision for income taxes is not material.

With regard to the Thailand jurisdiction, tax years 2015 through 2021 remain open to examination by the local authorities.

The following table indicates the changes to the Company’s uncertain income tax positions for the years ended June 25, 2021, June 26, 2020 and June 28, 2019 included in other non-current liabilities.

The following table indicates the changes to the Company’s uncertain income tax positions for the years ended June 24, 2022, June 25, 2021 and June 26, 2020, excluding interest and penalties, were as follows:

(amount in thousands) June 24,

8 unchanged sentences

Diluted earnings per ordinary share is computed by calculating the effect of potential dilutive ordinary shares outstanding during the year using the treasury stock method.

Dilutive ordinary

equivalent shares consist of share options, restricted share units and performance share units.

The earnings per ordinary share was calculated as follows:

Dilutive ordinary equivalent shares consist of share options, restricted share units and performance share units.

Earnings per ordinary share was calculated as follows:

(amount in thousands except per share amounts) June 24,

22 unchanged sentences

Liquidity funds 31,477 — — — 31,477

Certificates of deposit 10,500 — — — 10,500

Corporate debt securities 234,689 ( 5,671 ) — 229,018 —

1 unchanged sentence

Treasury securities 20,007 ( 345 ) — 19,662 —

31,301 146 — 31,447 —

Total $ 484,170 $ ( 6,017 ) $ 197,996 $ 248,680 $ 31,477

3 unchanged sentences

Liquidity funds 30,000 1,226 — — 31,226

Time deposits 11,800 — — — 11,800

Certificate of deposits 10,500 — — — 10,500

Corporate debt securities 171,626 164 — 171,790 —

1 unchanged sentence

Treasury securities 31,301 146 — 31,447 —

49,130 544 — 49,674 —

Total $ 546,396 $ 1,536 $ 302,969 $ 203,237 $ 41,726

1 unchanged sentence

The effective interest rate on short term bank deposits was 0.5 % and 0.7 % per annum for the years ended June 24, 2022 and June 25, 2021, respectively.

As of June 25, 2021, the Company had $ 10.5 million of investments in certificate of deposit classified as held-to-maturity debt securities.

As of June 26, 2020, the Company had $ 11.8 million of investments in time deposit classified as

held-to-maturity debt securities.

As of June 24, 2022, the Company had no investments in certificates of deposit classified as held-to-maturity debt securities.

As of June 25, 2021, the Company had $ 10.5 million of investments in certificate of deposits classified as held-to-maturity debt securities.

All investments mature within one year.

2 unchanged sentences

As of June 24, 2022 and June 25, 2021, 59 % and 65 %, respectively, of our cash and cash equivalents were held by the Parent Company.

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 June 25, 2021:

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 June 24, 2022 and June 25, 2021:

June 24, 2022 June 25, 2021

5 unchanged sentences

Total $ 286,173 $ 280,157 $ 232,927 $ 234,463

The following table summarizes the carrying cost of short-term investments classified as held-to-maturity securities based on stated effective maturities as of June 25, 2021:

The following table summarizes the carrying cost of short-term investments classified as held-to-maturity securities based on stated effective maturities as of June 24, 2022 and June 25, 2021:

(amount in thousands) As of June 24, 2022 As of June 25, 2021

2 unchanged sentences

Total $ — $ 10,500

During the year ended June 25, 2021, the Company recognized a realized gain of $ 0.4 million from sales of available-for-sale debt securities in interest income in the consolidated statements of operations and comprehensive income.

(1) Short-term investments classified as held-to-maturity securities as of June 25, 2021 matured in July 2021.

During the year ended June 24, 2022, the Company recognized a realized gain of a de minimis amount from sales of available-for-sale debt securities in interest income in the consolidated statements of operations and comprehensive income.

3 unchanged sentences

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

The Company assessed impairment at the individual security level according to accounting standard by comparing its fair value/market value with its amortized cost.

The Company assessed impairment at the individual security level according to the relevant accounting standard by comparing its fair value/market value with its amortized cost.

The Company considered factors such as the failure of the issuer of the security to make scheduled interest and principal payments and any changes to the credit rating of the security by a rating agency.

1 unchanged sentence

No impairment losses on available-for-sale debt securities were recorded for the year ended June 24, 2022.

As of June 25, 2021, the Company evaluated the expected credit loss for held-to-maturity debt securities at the individual security level within scope of CECL model by considering the historical information, current and future economic conditions and events.

Additionally, the Company considered the qualitative factors such as term and structure of the instrument and credit rating by rating agencies in determining if a zero-credit loss expectation is supportable.

As of June 24, 2022, the Company evaluated the expected credit loss for held-to-maturity debt securities at the individual security level within the scope of CECL model by considering historical information and current and future economic conditions and events.

Additionally, the Company considered qualitative factors such as term and structure of the instrument and credit ratings by rating agencies in determining if a zero-credit loss expectation is supportable.

The credit rating of the Company's invested securities are still in compliance with the Company's investment policy.

1 unchanged sentence

As of June 25, 2021, the Company considered the decline in market value of its available-for-sale and held-to-maturity debt securities 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.

24 unchanged sentences

Total $ — $ ( 7,579 ) (2)

$ — $ ( 7,579 )

Fair Value Measurements at Reporting Date

6 unchanged sentences

Treasury securities — 31,447 — 31,447

Derivative assets - current — 2,823 (3) 2,823

Derivative assets - current portion — 1 (3)

Total $ — $ 314,769 $ — $ 314,769

2 unchanged sentences

Total $ — $ ( 7,631 ) (4)

(1) Foreign currency forward contracts with an aggregate notional amount of $ 2.0 million.

(2) Foreign currency forward contracts with an aggregate notional amount of $ 128.0 million and Canadian dollars of 0.4 million and two interest rate swap agreements with an aggregate notional amount of $ 125.1 million.

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

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

$ — $ ( 7,631 )

(1) Interest rate swap agreement with notional amount of $ 64.2 million.

(2) Foreign currency forward contracts with an aggregate notional amount of $ 135.0 million and 0.5 million Canadian dollars and interest rate swap agreement with a notional amount of $ 60.9 million.

(3) Foreign currency forward contract with an aggregate notional amount of $ 2.0 million.

(4) Foreign currency forward contracts with an aggregate notional amount of $ 128.0 million and 0.4 million Canadian dollars and two interest rate swap agreements with an aggregate notional amount of $ 125.1 million.

Derivative Financial Instruments

17 unchanged sentences

As of June 24, 2022, the Company had 135 outstanding U.S.

dollar foreign currency forward contracts against Thai baht with an aggregate notional amount of $130.0 million and with maturity dates ranging from July 2021 through January 2022, and two foreign currency contracts with an aggregate notional amount of Canadian dollars of 0.4 million and with maturity dates in September 2021.

dollar foreign currency forward contracts against Thai baht with an aggregate notional amount of $ 135.0 million and with maturity dates ranging from July 2022 through January 2023, and one foreign currency contract with a notional amount of 0.5 million Canadian dollars and with a maturity date in September 2022.

As of June 25, 2021, the Company had 130 outstanding U.S.

dollar foreign currency forward contracts against Thai baht with an aggregate notional amount of $ 125.0 million, one foreign currency contract with a notional amount of 0.6 million Canadian dollars and one foreign currency option contract with a notional amount of $ 1.0 million with maturity dates ranging from July 2020 through January 2021.

dollar foreign currency forward contracts against Thai baht with an aggregate notional amount of $ 130.0 million and with maturity dates ranging from July 2021 through January 2022, and two foreign currency contracts with an aggregate notional amount of 0.4 million Canadian dollars and with maturity dates in September 2021.

As of June 24, 2022, the hedging relationship over foreign currency forward contracts which were designated for hedge accounting had been tested to be highly effective based on the performance of retrospective and prospective regression testing.

As of June 25, 2021, the amount in AOCI that is expected to be reclassified into earnings within 12 months as gain was $ 2.7 million.

As of June 24, 2022, the amount in AOCI that is expected to be reclassified into earnings within 12 months as loss was $ 4.8 million.

During the year ended June 24, 2022 and June 25, 2021, the Company included an unrealized loss of $ 0.8 million and $ 1.5 million, respectively, from changes in fair value of foreign currency forward and option contracts which were not designated for hedge accounting in earnings as foreign exchange gain (loss), net in the consolidated statements of operations and comprehensive income.

6 unchanged sentences

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 converts 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.

The combination of both

of these interest rate swaps effectively converts 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.

4 unchanged sentences

As of June 24, 2022, the amount in AOCI that is expected to be reclassified into earnings within 12 months as loss is $ 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 year ended June 26, 2020, 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 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 consolidated statements of operations and other comprehensive income:

46 unchanged sentences

Inventories $ 557,145 $ 422,133

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.

On October 1, 2020, the Company extended the payment terms of the funds and the accrued interest from September 30, 2020 to April 1, 2021, and reduced the interest rate effective from October 1, 2020.

The extension was granted in connection with the customer’s agreement to transfer additional manufacturing operations to the Company’s facilities in Thailand beginning in November 2020.

These funds were repaid on April 1, 2021.

Restricted cash

As of June 25, 2021, the Company had long-term restricted cash of Chinese Renminbi ("RMB") 1.0 million related to bank guarantees of its subsidiary in the PRC to support the subsidiary's operations.

The bank guarantee was backed by cash collateral of $ 0.2 million.

As of 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 with the transfer of certain manufacturing operations from Berlin, Germany to the Company’s facilities in Thailand.

The standby letter of credit was backed by cash collateral of $ 7.4 million.

This standby letter of credit expired on December 31, 2020 and the corresponding cash collateral was released in January 2021.

The Company leases facilities under non-cancelable operating lease agreements.

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 .

The Company leases a portion of its capital equipment and vehicles, certain land and buildings for its facilities in Thailand, the Cayman Islands, the PRC, the U.S., the U.K., Israel and Singapore 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 may exclude lease extension options from its ROU assets and lease liabilities as the Company is not reasonably assured that it will exercise these options.

However, the Company may exclude lease extension options from its right of use ("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 which is a lease of office and manufacturing space between Fabritek and Fabrinet West.

The Company also has one intercompany lease transaction in the form of a lease of office and manufacturing space.

As of June 24, 2022, the maturities of the Company’s operating lease liabilities were as follows:

5 unchanged sentences

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 years ended June 25, 2021, June 26, 2020 and June 28, 2019 was $ 2.6 million, $ 2.1 million and $ 1.9 million, respectively.

Rental expense for short-term leases for the years ended June 25, 2021, June 26, 2020 and June 28, 2019 was $ 0.3 million, $ 0.2 million and de minimis amount, respectively.

Rental expense for long-term leases for the years ended June 24, 2022, June 25, 2021 and June 26, 2020 was $ 2.2

million, $ 2.6 million and $ 2.1 million, respectively.

Rental expense for short-term leases for the years ended June 24, 2022, June 25, 2021 and June 26, 2020 was $ 0.2 million, $ 0.3 million and a de minimis amount, respectively.

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 June 24, 2022, the Company had one finance lease agreement with a de minimis amount.

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

29 unchanged sentences

Net book value $ 45,099 $ 104,584 $ 71,180 $ 2,867 $ 118 $ 7,904 $ 9,377 $ 241,129

Leased assets included in manufacturing equipment comprise certain machine and equipment from finance lease agreements assumed from the acquisition of Fabrinet UK.

Leased assets included in manufacturing equipment comprise certain machine and equipment from finance lease agreements of Fabrinet UK.

(amount in thousands) As of June 24, 2022 As of June 25, 2021

4 unchanged sentences

The cost of fully depreciated property, plant and equipment written-off during the years ended June 24, 2022, June 25, 2021 and June 26, 2020 amounted to $ 25.1 million, $ 16.3 million and $ 2.9 million, respectively.

During the years ended June 25, 2021, June 26, 2020 and June 28, 2019, the Company recognized impairment reserves for property, plant and equipment of $ 0.8 million, $ 0.8 million and $ 0.9 million, respectively.

During the years ended June 25, 2021, June 26, 2020 and June 28, 2019, the Company had no borrowing costs capitalized.

During the fiscal year 2022, the Company wrote off impairment reserves of $ 0.2 million due to the disposal of property, plant and equipment.

During the fiscal years 2021 and 2020, the Company recognized impairment reserves for property, plant and equipment of $ 0.8 million.

The Company had borrowing cost capitalized of $ 0.9 million for the years ended June 24, 2022, and the Company had no borrowing costs capitalized for the years ended June 25, 2021 and June 26, 2020.

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

17 unchanged sentences

Total intangibles $ 14,259 $ ( 9,946 ) $ 58 $ 4,371

In connection with the acquisition of Fabrinet UK, the Company recorded $ 4.4 million of customer relationships and $ 0.1 million of backlog in the consolidated balance sheets.

As of June 25, 2021 and June 26, 2020, the weighted-average remaining life of customer relationships was 3.9 years and 4.6 years, respectively.

The Company recorded amortization expense relating to intangibles of $ 1.6 million, $ 1.5 million and $ 1.3 million for the years ended June 24, 2022, June 25, 2021 and June 26, 2020, respectively.

The weighted-average remaining life of customer relationships was:

(years) As of June 24, 2022 As of June 25, 2021

Customer relationships 3.1 3.9

Based on the carrying amount of intangibles as of June 24, 2022, and assuming no future impairment of the underlying assets, the estimated future amortization during each fiscal year was as follows:

(amount in thousand)

Thereafter 232

Total $ 3,508

38 unchanged sentences

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

During the year ended June 25, 2021, the Company recorded $ 0.7 million of interest expense in connection with this term loan.

During the year ended June 24, 2022, the Company recorded $ 2.3 million of interest expense in connection with this term loan, including impact from interest rate swaps.

$ 0.9 million of these interest expenses were capitalized during the year ended June 24, 2022 in a new manufacturing building at the Company's Chonburi campus.

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.

7 unchanged sentences

As of June 24, 2022, there was $ 27.4 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 “BofA Facility Agreement”).

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

During the year ended June 26, 2020, 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.

Severance liabilities

7 unchanged sentences

Benefit paid ( 322 ) ( 1,198 )

Unrealized loss (gain) on exchange rate ( 2,133 ) ( 550 )

Actuarial (gain) loss on obligation ( 1,542 ) 1,129

9 unchanged sentences

Underfunded status $ ( 18,250 ) $ ( 19,426 )

The following table sets forth our severance liabilities as of June 24, 2022:

(amount in thousand)

Thereafter 11,433

Total $ 18,588

The amount recognized in the consolidated balance sheets under non-current liabilities and non-current assets were determined as follows:

13 unchanged sentences

Total Assets $ 338 $ 208 $ 130

(1) The “Other” category represents the value of assets with Quilter and Royal London.

(amount in thousands) Fair value measurement as of June 25, 2021

3 unchanged sentences

Total Assets $ 356 $ 211 $ 145

(1) The “Other” category represents the bid value of the trustees’ insurance policy held with Old Mutual Wealth and the value of assets held with Royal London.

(2) The “Other” category represents the value of assets with Old Mutual Wealth and Royal London.

The Trustees have chosen to invest in the following funds:

1 unchanged sentence

2022 As of June 25,

Old Mutual Wealth Invesco Perpetual High Income — % 38 %

Old Mutual Wealth Creation Balanced Portfolio — % 59 %

Quilter Creation Balanced Portfolio 62 % — %

Royal London Deposit Administration 38 % 41 %

The Old Mutual Wealth assets are administered on unit-linked principles and allow access to a range of funds;

these have been treated as Level 2 fair value measurement.

The Quilter and Old Mutual Wealth assets are administered on unit-linked principles and allow access to a range of funds;

these have been treated as Level 2.

The Royal London assets are administered on a deposit administration basis.

This is similar to a with profits fund but with a lower exposure to the stock market.

The policy is invested in a mix of assets, mainly UK Government bonds and Corporate bonds, the returns of which are smoothed over time.

These assets are considered as unobservable inputs and have been treated as Level 3 fair value measurement because the fair value of which is based on the previous year end observable value and other unobservable inputs such as declared rates of bonus plus an enhancement on the policy for this scheme.

The policy is invested in a mix of backing assets with a smoothed regular bonus rate being declared every year, which stabilizes the rate of return over the longer term.

These have been treated as Level 3.

The principal actuarial assumptions used were as follows:

15 unchanged sentences

Share-based compensation

In determining the grant date fair value of share option awards, the Company is required to make estimates of expected dividends to be issued, expected volatility of Fabrinet’s ordinary shares, expected forfeitures of the awards, risk free interest rates for the expected term of the awards and expected terms of the awards.

Forfeitures are estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures differ from those estimates.

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

The effect of recording share-based compensation expense for the years ended June 24, 2022, June 25, 2021 and June 26, 2020 was as follows:

22 unchanged sentences

As of June 24, 2022, there were 310,242 restricted share units outstanding, 285,882 performance share units outstanding and 2,210,609 ordinary shares available for future grant under the 2020 Plan.

As of June 25, 2021, there were 391,409 restricted share units outstanding and 238,474 performance share units outstanding under the 2010 Plan.

As of June 24, 2022, there were 149,384 restricted share units outstanding under the 2010 Plan.

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

1 unchanged sentence

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 June 25, 2021, there were an aggregate of 12,164 restricted share units outstanding and 111,347 ordinary shares available for future grant under the 2017 Inducement Plan.

As of June 24, 2022, there were no awards outstanding and 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.”

4 unchanged sentences

Performance share units granted to executives will vest, if at all, at the end of a two-year performance period based on the Company’s achievement of pre-defined performance criteria, which consist of revenue and non-U.S.

margin or operating margin targets.

GAAP gross margin or operating margin targets.

The actual number of performance share units that may vest at the end of the performance period ranges from 0 % to 100 % of the award grant.

23 unchanged sentences

Granted 242,310 $ 48.65

Issued ( 227,268 ) 40.48

Forfeited ( 350,670 ) $ 36.99

1 unchanged sentence

Granted 184,718 $ 69.85

Issued ( 82,185 ) $ 48.02

Forfeited ( 115,645 ) $ 48.02

8 unchanged sentences

The aggregate intrinsic value of restricted share units and performance share units outstanding as of June 24, 2022 was $ 62.0 million.

As of June 25, 2021, there was $ 10.2 million and $ 7.3 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 2.3 years and 1.1 years, respectively.

For the years ended June 25, 2021 and June 26, 2020, the Company withheld an aggregate of 163,615 shares and 94,141 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.

As of June 24, 2022, there was $ 11.2 million and $ 6.4 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 1.0 year, respectively.

For the years ended June 24, 2022 and June 25, 2021, the Company withheld an aggregate of 213,884 shares and 163,615 shares, respectively, upon the vesting of restricted share units, based upon the closing share price on the vesting date to settle employee tax withholding obligations.

For the years ended June 24, 2022 and June 25, 2021, the Company then remitted cash of $ 20.8 million and $ 11.6 million, respectively, to the appropriate taxing authorities, and presented it as a financing activity within the consolidated statements of cash flows.

19 unchanged sentences

Shareholders’ equity

Share capital

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 year ended June 25, 2021, Fabrinet issued 277,078 ordinary shares upon the vesting of restricted share units and performance share units, net of shares withheld.

For the year ended June 26, 2020, Fabrinet issued 241,214 ordinary shares upon the vesting of restricted share units and performance share units, net of shares withheld.

For the year ended June 28, 2019, Fabrinet issued 507,020 ordinary shares upon the vesting of restricted share units, net of shares withheld.

For the year ended June 24, 2022, Fabrinet issued 299,655 ordinary shares upon the vesting of restricted share units and performance share units under the Equity Incentive Plans, net of shares withheld.

For the year ended June 25, 2021, Fabrinet issued 277,078 ordinary shares upon the vesting of restricted share units and performance share units under the Equity Incentive Plans, net of shares withheld.

For the year ended June 26, 2020, Fabrinet issued 241,214 ordinary shares upon the vesting of restricted share units and performance share units under the Equity Incentive Plans, net of shares withheld.

All such issued shares are fully paid.

3 unchanged sentences

During the year ended June 24, 2022, the Company repurchased 628,428 shares under the program at an average price per share (excluding other direct costs) of $ 95.32 , totaling $ 59.9 million.

As of June 25, 2021, the Company had a

remaining authorization to repurchase up to $ 81.2 million of its ordinary shares under the share repurchase program.

As of June 24, 2022, the Company had a remaining authorization to repurchase up to $ 21.3 million of its ordinary shares under the share repurchase program.

Shares repurchased under the share repurchase program are held as treasury shares.

37 unchanged sentences

Letter of Credit and Bank guarantees

As of June 25, 2021, the Company had no outstanding standby letter of credit.

As of 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.

The standby letter of credit was backed by cash collateral of $ 7.4 million.

This standby letter of credit expired on December 31, 2020 and the corresponding cash collateral was released in January 2021.

As of June 25, 2021 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 $ 1.6 million or Thai Baht 50.2 million and there were other bank guarantees given by a bank on behalf of our subsidiaries in the PRC and the U.K.

to support their operations.

As of June 25, 2021, the Company had an outstanding bank guarantee of its subsidiary in the PRC to support the subsidiary's operations totaling RMB 1.0 million.

The bank guarantee was backed by cash collateral

of $ 0.2 million.

The bank guarantee given on behalf of our subsidiary in the U.K.

was not material.

As of June 26, 2020, these bank guarantees were not material.

As of June 24, 2022, the Company had an outstanding letter of credit totaling $ 0.2 million on behalf of the Company's subsidiary in the PRC to support the subsidiary's operations.

As of June 24, 2022 and June 25, 2021, there were outstanding bank guarantees on behalf of the Company's subsidiary in Thailand for electricity usage and other normal business expenses totaling $ 1.4 million and $ 1.6 million, respectively, or Thai Baht 50.2 million and an outstanding bank guarantee on behalf of the Company's subsidiary in the PRC to support the subsidiary's operations totaling Renminbi 1.0 million, which bank guarantee was backed by cash collateral of $ 0.1 million and $ 0.2 million, respectively.

In addition, there were other immaterial bank guarantees on behalf of the Company's subsidiary in the U.K.

to support its operations.

Purchase obligations

2 unchanged sentences

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

As of June 25, 2021, the Company had purchase obligations and other commitments to third parties of $ 918.7 million.

As of June 24, 2022, the Company had purchase obligations and other commitments to third parties of $ 1.51 billion.

Capital expenditure

In December 2020, the Company entered into a construction contract with a local contractor for construction of a new manufacturing building at the Company’s Chonburi campus.

The contract price is approximately $ 50.3 million.

In June 2021, the Company entered into an agreement to purchase a parcel of land in Pathumthani, Thailand to expand the Company's Pinehurst campus.

The aggregate purchase price was approximately $ 13.2 million or Thai Baht 418.8 million, of which the Company paid a 10 % deposit on May 14, 2021 and fully paid the remainder on June 29, 2021.

As of June 25, 2021 and prior to paying the remaining 90 % of the Pathumthani land purchase price, the Company had total outstanding capital expenditure commitments to third parties of $ 66.6 million.

As of June 24, 2022, the Company had total capital expenditure commitments to third parties of $ 24.8 million.

Indemnification of directors and officers

8 unchanged sentences

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 customer.

The Company operates in three geographic regions:

North America, Asia-Pacific and Europe.

The following table presents total revenues by geographic regions:

(amount in thousands) June 25,

2021 June 26,

2020 June 28,

North America

884,862 829,567 753,901

2,674 1,321 2,377

Total revenue in North America 887,536 830,888 756,278

Asia-Pacific and others

Malaysia 157,213 190,574 192,048

India 152,249 91 38

Israel 107,584 315 361

Hong Kong 87,235 92,655 110,732

Japan 69,779 101,588 122,226

China 51,597 48,192 62,262

Thailand 27,081 98,330 92,970

Others 15,859 21,178 27,749

Total revenue in Asia-Pacific and others 668,597 552,923 608,386

Ireland 193,103 110,747 109,890

60,516 67,589 31,164

Germany 28,163 45,628 37,431

Others 41,435 34,061 41,186

Total revenue in Europe $ 323,217 $ 258,025 $ 219,671

Total revenue $ 1,879,350 $ 1,641,836 $ 1,584,335

(1) Others includes revenues from external customers based in our country of domicile, the Cayman Islands, which for each year presented is $ 0 .

The following table presents revenues by end market:

(amount in thousands) June 25,

2021 June 26,

2020 June 28,

Optical communications $ 1,441,338 $ 1,248,174 $ 1,184,936

Lasers, sensors, and other 438,012 393,662 399,399

Total $ 1,879,350 $ 1,641,836 $ 1,584,335

For the Company’s revenues by geographic region, see “Revenue by Geographic Area and End Market” in Note 3.

The following table presents long-lived assets by the country in which they are based:

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Cisco Systems Inc.

25.4 % 10.7 % *

Lumentum Operations LLC 10.3 % 13.6 % 19.0 %

10 unchanged sentences

Cisco Systems Inc.

Acacia Communications, Inc.

* Represents less than 10% of accounts receivable.

20.1 % 15.0 %

(1) Includes of Acacia Communications Inc.

8 unchanged sentences

The Company enters into short-term foreign currency forward and option contracts to manage foreign currency exposures associated with certain assets, liabilities and other forecasted foreign currency transactions and may designate these instruments as hedging instruments.

The foreign currency forward and option contracts generally have maturities of

up to twelve months .

The foreign currency forward and option contracts generally have maturities of up to twelve months .

All foreign currency exchange contracts are recognized on the consolidated balance sheets at fair value.

1 unchanged sentence

Foreign currency risk

The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the Thai baht, RMB and Pound Sterling ("GBP").

As of June 25, 2021 and June 26, 2020, the Company had outstanding foreign currency assets and liabilities as follows:

As of June 25, 2021 As of June 26, 2020

(amount in thousands) Currency $ Currency $

Thai baht 1,472,249 $ 46,312 667,955 $ 21,617

RMB 98,056 15,145 158,060 22,402

GBP 5,111 7,119 6,220 7,726

Total $ 68,576 $ 51,745

Thai baht 2,250,514 $ 70,793 2,102,392 $ 68,039

RMB 40,112 6,195 42,586 6,036

GBP 2,656 3,699 1,545 1,919

Total $ 80,687 $ 75,994

The Thai baht assets represent cash and cash equivalents, trade accounts receivable, deposits and other current assets.

The Thai baht liabilities represent trade accounts payable, accrued expenses, income tax payable and other payables.

The Company manages its exposure to fluctuations in foreign exchange rates by the use of foreign currency contracts and offsetting assets and liabilities denominated in the same currency in accordance with management’s policy.

As of June 25, 2021 there were $ 130.0 million of foreign currency forward contracts outstanding on the Thai baht payables.

As of June 26, 2020, there were $ 125.0 million of foreign currency forward contracts and $ 1.0 million of foreign currency option contracts outstanding on the Thai baht payables.

The RMB assets represent cash and cash equivalents, trade accounts receivable and other current assets.

The RMB liabilities represent trade accounts payable, accrued expenses and other payables.

As of June 25, 2021 and June 26, 2020, there were no derivative contracts denominated in RMB.

The GBP assets represent cash, trade accounts receivable, inventory and property, plant and equipment.

The GBP liabilities represent trade accounts payable.

As of June 25, 2021 and June 26, 2020, there were no derivative contracts denominated in GBP.

For fiscal year 2021, fiscal year 2020, and fiscal year 2019, the Company recorded unrealized loss of $ 1.5 million, unrealized loss of $ 1.2 million, and unrealized gain of $ 4.8 million, respectively, related to derivatives that are not designated as hedging instruments in its consolidated statements of operations and comprehensive income.

The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the Thai baht, RMB and GBP.

For the Company’s foreign currency assets and liabilities, see “Additional Financial Disclosures” in Item 7.

Interest Rate Risk

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From September 27, 2019, any gains or losses related to these outstanding interest rate swaps will be recorded in accumulated other comprehensive income in the consolidated balance sheets, with subsequent reclassification to interest expense when settled.

Subsequent Event

In August 2022, the Company’s board of directors approved the repurchase of up to an additional $ 78.7 million of the Company’s outstanding ordinary shares, bringing the aggregate authorization under the Company’s existing share repurchase program to $ 247.2 million, with $ 100.0 million currently remaining.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data