What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-08-20 compared with 2023-08-22 · 133 added, 158 removed, 1178 unchanged (20% of the section changed)

60 unchanged sentences

Cash and cash equivalents $ 409,973 $ 231,368

Short-term restricted cash — 220

Short-term investments 448,630 319,100

Trade accounts receivable, net of allowance for doubtful accounts of $ 965 and $ 1,271 , respectively

Trade accounts receivable, net of allowance for expected credit losses of $ 1,629 and $ 965 , respectively

592,452 531,767

4 unchanged sentences

Non-current assets

Long-term restricted cash — 149

Property, plant and equipment, net 307,240 310,350

17 unchanged sentences

Non-current liabilities

Long-term borrowings, non-current portion, net — 15,202

Deferred tax liability 4,895 4,799

62 unchanged sentences

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

34 unchanged sentences

Amortization of discount (premium) of short-term investments ( 3,399 ) 280 3,691

Amortization of deferred debt issuance costs 31 32 32

(Reversal of) allowance for doubtful accounts ( 307 ) 1,171 ( 343 )

(Reversal of) allowance for expected credit losses 664 ( 307 ) 1,171

Unrealized loss (gain) on exchange rate and fair value of foreign currency forward contracts ( 849 ) 175 ( 2,832 )

16 unchanged sentences

Proceeds from maturities of short-term investments 271,877 150,252 133,632

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

Purchase of property, plant and equipment ( 47,528 ) ( 61,360 ) ( 89,588 )

10 unchanged sentences

Movement in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at the beginning of period $ 231,368 $ 198,365 $ 303,123

Increase (decrease) in cash, cash equivalents and restricted cash 178,542 33,609 ( 104,231 )

Effect of exchange rate on cash, cash equivalents and restricted cash 63 ( 606 ) ( 527 )

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

3 unchanged sentences

2023 June 24,

Cash, cash equivalents and restricted cash at the beginning of period $ 198,365 $ 303,123 $ 232,832

Increase (decrease) in cash, cash equivalents and restricted cash 33,609 ( 104,231 ) 70,469

Effect of exchange rate on cash, cash equivalents and restricted cash ( 606 ) ( 527 ) ( 178 )

Cash, cash equivalents and restricted cash at the end of period $ 409,973 $ 231,368 $ 198,365

42 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, allowance for expected credit losses, income taxes, inventory obsolescence, goodwill and valuation of intangible assets related to business acquisition, among others.

Significant assumptions are used in accounting for share-based compensation, 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 the Company's estimates or assumptions prove to be different from actual results, adjustments will be made in subsequent periods to reflect more current information.

Reclassifications

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

The reclassifications have been made to the consolidated balance sheet as of June 24, 2022 and the consolidated statement of cash flows for the year ended June 24, 2022 and June 25, 2021 as follows:

June 24, 2022

(in thousands) As previously reported Reclassification After reclassification

Consolidated Balance Sheet

Current assets

Trade accounts receivable 439,330 13,340 452,670

Contract assets 13,464 ( 13,340 ) 124

Consolidated Statement of Cash Flows

Changes in operating assets and liabilities

Trade accounts receivable ( 103,970 ) ( 1,580 ) ( 105,550 )

Contract assets ( 1,586 ) 1,580 ( 6 )

Contract assets and contract liabilities are presented in the consolidated balance sheets under other current assets and other payables, respectively.

June 25, 2021

(in thousands) As previously reported Reclassification After reclassification

Consolidated Statement of Cash Flows

Changes in operating assets and liabilities

Trade accounts receivable ( 63,810 ) 1,496 ( 62,314 )

Contract assets 1,378 ( 1,496 ) ( 118 )

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

Foreign currency transactions and translation

6 unchanged sentences

Revenue and expenses for such subsidiaries are translated using rates that approximate those in effect during the period.

Gains and losses from these translations are recognized in foreign currency translation adjustment included in accumulated other comprehensive income (loss) (“AOCI”) in the Company’s consolidated balance sheets.

Gains and losses from these translations are recognized in

foreign currency translation adjustment included in accumulated other comprehensive income (loss) (“AOCI”) in the Company’s consolidated balance sheets.

Cash and cash equivalents

All highly liquid investments with original maturities of three months or less from the date of purchase are classified as cash equivalents.

Cash and cash equivalents consist of cash deposited in checking accounts, time deposits with maturities of less than three months, money market accounts, and short-term investments with maturities of three months or less at the date of purchase.

Cash and cash equivalents consist of cash deposited in checking accounts, time deposits with maturities of three months or less, money market accounts, and short-term investments with maturities of three months or less at the date of purchase.

Short-term investments

16 unchanged sentences

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

The Company estimates 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 Company estimates expected credit losses for the allowance for expected credit losses 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 consolidated statements of operations and comprehensive income.

2 unchanged sentences

Contract assets are recognized in the consolidated balance sheets under other current assets and transferred to accounts receivable when rights to payment become unconditional.

The Company estimates 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 Company estimates 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 the Company's consolidated statements of operations and comprehensive income.

13 unchanged sentences

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 Company's leases generally do not provide an implicit rate, nor is the implicit rate readily determinable.

When the implicit rate is not readily determinable, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payment.

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

27 unchanged sentences

Intangibles are stated at historical cost less amortization.

Amortization of customer relationships is calculated using the accelerated method as to reflect the pattern in which the economic benefits of the intangible assets are consumed.

Amortization of other intangibles is calculated using the straight-line method.

6 unchanged sentences

The Company has determined that its reporting unit is Fabrinet UK.

The Company may initiate goodwill impairment testing by considering qualitative factors to determine whether it is more likely than not that a reportable segment’s carrying value is greater than its fair value.

The Company may initiate goodwill impairment testing by considering qualitative factors to determine whether it is more likely than not that a reportable unit carrying value is greater than its fair value.

If the Company’s qualitative assessment indicates it is more likely than not that the fair value of a reporting unit exceeds its carrying value, no further analysis is required and goodwill is not impaired.

151 unchanged sentences

The accounting interpretation also provides guidance on measurement methodology, derecognition thresholds, financial statement classification and disclosures, recognition of interest and penalties, and accounting for the cumulative-effect adjustment at the date of adoption.

New Accounting Pronouncements—adopted by the Company

In November 2021, the Financial Accounting Standards Board issued Accounting Standards Update ("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.

The Company adopted this standard in the first quarter of fiscal year 2023 with no material impact on its consolidated financial statements.

Adoption of New Accounting Standards

No new accounting standard was adopted during the year ended June 28, 2024.

New Accounting Standards—not yet adopted by the Company

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, “Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosure requirements, primarily through additional disclosures about significant segment expenses.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

This ASU will be effective for the Company in fiscal year 2025.

The Company is currently assessing the impact to its disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740), Improvements to Income Tax Disclosures,” which requires more detailed income tax disclosures.

This ASU requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction.

This ASU is effective for all entities for fiscal years beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance.

This ASU will be effective for the Company in the first quarter of fiscal year 2026.

The Company is currently assessing the impact to its disclosures.

Revenues from contracts with customers

3 unchanged sentences

No impairment for contract assets was recorded for the years ended June 28, 2024 and June 30, 2023.

As of June 30, 2023 and June 24, 2022, the contract assets are de minimis .

As of June 28, 2024 and June 30, 2023, the Company's contract assets were de minimis .

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

31 unchanged sentences

Asia-Pacific and others

Israel 341,025 101,058 107,584

1,049,730 341,025 101,058

India 269,304 325,478 278,117

Malaysia 117,929 162,599 212,286

Hong Kong 132,136 83,651 87,235

China 65,497 73,094 55,201

Hong Kong 60,489 132,136 83,651

Thailand 47,339 58,850 36,489

9 unchanged sentences

(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.

(in thousands, except percentages) Year ended June 30,

Revenues Year ended June 24,

Revenues Year ended June 25,

(2) Due to increase in revenue from a significant customer.

The following table presents revenues by end market and product category.

(in thousands, except percentages) Year ended June 28, 2024 As a % of Total

Revenues Year ended June 30, 2023 As a % of Total

Revenues Year ended June 24, 2022 As a % of Total

Optical communications

Lasers, sensors and other 636,890 24.1 479,425 21.2 438,012 23.3

Total $ 2,645,237 100.0 % $ 2,262,224 100.0 % $ 1,879,350 100.0 %

Datacom $ 1,150,307 $ 520,796 $ 361,306

Telecom 1,138,708 1,487,551 1,421,493

Total revenue - Optical communications $ 2,289,015 79.4 % $ 2,008,347 75.9 % $ 1,782,799 78.8 %

Non-optical communications

Automotive $ 327,188 $ 368,581 $ 204,407

Industrial laser 122,722 125,415 149,357

Others 144,042 142,894 125,661

Total revenue - Non-optical communications $ 593,952 20.6 % $ 636,890 24.1 % $ 479,425 21.2 %

Total revenue $ 2,882,967 100.0 % $ 2,645,237 100.0 % $ 2,262,224 100.0 %

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

1 unchanged sentence

Under the current laws of the Cayman Islands, Fabrinet is not subject to tax in the Cayman Islands on income or capital gains until March 6, 2039.

Income of the Company exempted from corporate income tax in the Cayman Islands amounted to $ 196.5 million, $ 171.0 million and $ 115.8 million for the years ended June 30, 2023, June 24, 2022 and June 25, 2021, respectively.

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

2 unchanged sentences

New preferential tax treatment is available to the Company for products manufactured at its Chonburi campus Building 9, where income generated will be tax exempt through 2031, capped at the Company’s actual investment amount.

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 %.

19 unchanged sentences

Effect of income taxes from locations with tax rates different from Thailand

( 945 ) 659 681

Income not subject to tax (2)

1 unchanged sentence

Income tax on unremitted earnings 1,488 2,452 1,417

Non-deductible expenses 10,347 35 68

Foreign operations ( 534 ) 1,968 ( 1,165 )

6 unchanged sentences

Corporate income tax expense $ 15,173 $ 12,183 $ 6,586

(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 and Mauritius Islands and income subject to an investment promotion privilege for Pinehurst Building 6 and the Company’s Chonburi campus.

(1) Income before income taxes was primarily generated from domestic operations in the Cayman Islands amounted to $ 306.0 million, $ 196.5 million and $ 171.0 million for the years ended June 28, 2024, June 30, 2023 and June 24, 2022, respectively.

(2) Income not subject to tax relates to income earned in the Cayman and Mauritius Islands and income subject to an investment promotion privilege in Thailand.

Income not subject to tax per ordinary share on a diluted basis was $ 1.72 , $ 1.19 , and $ 0.96 for the years ended June 28, 2024, June 30, 2023, and June 24, 2022, respectively.

23 unchanged sentences

Additional 2,873

Reduction ( 2,146 )

Balance as of June 24, 2022 4,934

Additional 498

Reduction ( 1,608 )

Balance as of June 30, 2023 3,824

2 unchanged sentences

Balance as of June 28, 2024 $ 3,613

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.

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 30, 2023 and June 24, 2022.

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

During fiscal year 2020, one of our subsidiaries 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.

1 unchanged sentence

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

During fiscal year 2023, our subsidiary in the U.K.

A full valuation allowance of $ 3.8 million, $ 4.9 million and $ 2.1 million were set up for the fiscal year ended June 30, 2023, June 24, 2022 and June 25, 2021, respectively.

During fiscal year 2024, deferred tax assets and valuation allowance were released due to our cessation of operations in the U.K.

During fiscal year 2023, the other subsidiary in the U.K.

generated taxable income and was able to utilize loss carryforwards.

1 unchanged sentence

Thus, a full valuation allowance of $ 1.6 million for the deferred tax assets was released as of June 30, 2023.

In fiscal year 2024, due to our cessation of operations in the U.K., management believe that

it will not generate sufficient taxable income to utilize the remaining deferred tax assets.

Thus, a full valuation allowance of $ 1.0 million was recorded.

During fiscal year 2024, our subsidiary in Israel continued to generate 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 $ 2.7 million for the deferred tax assets was set up as of the end of fiscal year 2024.

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.

6 unchanged sentences

The Company recorded interest and penalties of $ 0.1 million and $ 0.1 million for the years ended June 30, 2023 and June 24, 2022, respectively, in the consolidated statements of operations and comprehensive income.

The amount of interest and penalties reversed in fiscal 2023 provision for income taxes is not material.

The amount of interest and penalties reversed in fiscal 2024 provision for income taxes is $ 0.2 million.

With regard to the Thailand jurisdiction, tax years 2018 through 2022 remain open to examination by the local authorities.

16 unchanged sentences

Net income attributable to shareholders $ 296,181 $ 247,913 $ 200,380

Weighted-average number of ordinary shares outstanding (thousands of shares)

36,515 36,876 36,872

Incremental shares arising from the assumed exercise of share options and 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)

36,855 37,394 37,555

Weighted-average number of ordinary shares outstanding 36,246 36,515 36,876

Incremental shares arising from the assumed exercise of share options and vesting of restricted share units and performance share units 318 340 518

Weighted-average number of ordinary shares for diluted earnings per ordinary share 36,564 36,855 37,394

Basic earnings per ordinary share $ 8.17 $ 6.79 $ 5.43

Diluted earnings per ordinary share $ 8.10 $ 6.73 $ 5.36

Outstanding performance share units excluded from the computation of diluted earnings per ordinary share (thousands of shares) (1)

(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.

Cash, cash equivalents and short-term investments

8 unchanged sentences

Cash equivalents 35 — 35 — —

Liquidity funds 41,104 — — — 41,104

Certificates of deposit and time deposits 134,288 ( 5 ) — 134,283 —

7 unchanged sentences

Liquidity funds 41,104 — — — 41,104

Certificate of deposits 64,278 329 — 64,607 —

Corporate debt securities 161,453 ( 3,375 ) — 158,078 —

4 unchanged sentences

The effective interest rate on short term bank deposits was 4.4 % and 2.4 % per annum for the years ended June 28, 2024 and June 30, 2023, respectively.

As of June 30, 2023, the Company had investments in certificates of deposit of $ 44.6 million and term deposit of $ 20.0 million which classified as available-for-sale debt securities.

As of June 24, 2022, the Company had no investments in certificates of deposit.

As of June 28, 2024, the Company had investments in certificates of deposit of $ 83.8 million and term deposit of $ 50.5 million which were classified as available-for-sale debt securities.

As of June 30, 2023, the Company had investments in certificates of deposit of $ 44.6 million and term deposit of $ 20.0 million.

As of June 28, 2024 and June 30, 2023, 74 % and 69 %, respectively, of our cash and cash equivalents were held by the Parent Company.

7 unchanged sentences

Total $ 449,807 $ 448,630 $ 322,377 $ 319,100

During the year ended June 28, 2024, the Company recognized a de minimis gain from sales of available-for-sale debt securities in interest income in the consolidated statements of operations and comprehensive income.

During the year ended June 30, 2023, the Company recognized a realized loss of $ 0.1 million from sales of available-for-sale debt securities in interest income in the consolidated statements of operations and comprehensive income.

During the year ended June 24, 2022, the Company recognized a realized loss 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.

As of June 28, 2024 and June 30, 2023, the Company considered the decline in market value of its available-for-sale debt securities by using the AFS debt security impairment model.

21 unchanged sentences

Cash equivalents $ — $ 35 $ — $ 35

Liquidity funds — 41,104 — 41,104

Certificates of deposit and time deposits — 134,283 — 134,283

12 unchanged sentences

Liquidity funds — 41,104 — 41,104

Certificates of deposit and time deposits — 64,607 — 64,607

Corporate debt securities — 158,078 — 158,078

4 unchanged sentences

Derivative liabilities - current portion $ — $ ( 5,236 ) $ — $ ( 5,236 )

Derivative liabilities - non-current portion — ( 234 ) — ( 234 )

Total $ — $ ( 5,236 ) (4)

$ — $ ( 5,236 )

(1) Foreign currency forward contracts with an aggregate notional amount of $ 8.0 million.

(2) Foreign currency forward contracts with an aggregate notional amount of $ 127.0 million and 0.4 million Canadian dollars.

(3) Foreign currency forward contracts with an aggregate notional amount of $ 3.0 million and 0.2 million Canadian dollars and interest rate swap agreement with notional amount of $ 60.9 million.

(4) Foreign currency forward contracts with an aggregate notional amount of $ 140.0 million.

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

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

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 with counterparties that meet the Company’s minimum credit quality standard.

14 unchanged sentences

As of June 28, 2024, the amount in AOCI that is expected to be reclassified into earnings within 12 months as loss was $ 1.2 million.

During the year ended June 30, 2023 and June 24, 2022, the Company included an unrealized gain of $ 0.4 million and unrealized loss of $ 0.8 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.

During the year ended June 28, 2024 and June 30, 2023, the Company included an unrealized gain of $ 0.7 million and $ 0.4 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.

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 June 30, 2023 and June 24, 2022, the Company had one and two outstanding interest rate swap agreements with an aggregate notional amount of $ 60.9 million, and $ 125.1 million, respectively.

As of June 28, 2024, the Company had no outstanding interest rate swap agreements and as of June 30, 2023, the Company had one outstanding interest rate swap agreement with a notional amount of $ 60.9 million.

On July 25, 2018, Fabrinet Thailand entered into an interest rate swap agreement to effectively convert the floating interest rate of the term loan under the Company's previous syndicated senior 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 13).

3 unchanged sentences

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 Bank of Ayudhya Public Company Limited.

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.

The combination of these two interest rate swaps qualified for hedge accounting because the hedges were highly effective, and the Company had

designated and documented contemporaneously the hedging relationships involving these interest rate swaps, one of which matured in June 2023.

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 AOCI in the consolidated balance sheets.

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

As of June 30, 2023, the amount in AOCI that is expected to be reclassified into earnings within 12 months as gain is $ 0.4 million.

From September 27, 2019, any gains or losses related to these interest rate swaps are recorded in AOCI in the consolidated balance sheets.

The Company reclassifies a portion of the gains or losses from AOCI into earnings at each reporting period based on either the accrued interest amount or the interest payment.

As of June 28, 2024, there is no amount in AOCI that is expected to be reclassified into earnings within 12 months.

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:

35 unchanged sentences

Trade accounts receivable $ 594,081 $ 532,732

Allowance for doubtful account ( 965 ) ( 1,271 )

Allowance for expected credit losses ( 1,629 ) ( 965 )

Trade accounts receivable, net $ 592,452 $ 531,767

The following tables summarize the movement in the Company’s expected credit losses during the years ended June 28, 2024 and June 30, 2023:

(in thousands) Expected credit Losses

Balance as of June 24, 2022 $ 1,271

Provision during the year 1,410

Reversal during the year ( 1,716 )

Balance as of June 30, 2023 965

Provision during the year 2,164

Reversal during the year ( 1,500 )

Balance as of June 28, 2024 $ 1,629

(in thousands) As of June 28,

6 unchanged sentences

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, 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.

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., Israel and Singapore under operating lease arrangements that expire at various dates through 2034.

Certain of these lease arrangements provide the Company the ability to extend the lease term following the expiration of the current term.

However, the Company has excluded all 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.

1 unchanged sentence

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

Operating leases

As of June 28, 2024, the maturities of the Company’s operating lease liabilities were as follows:

(in thousands)

Thereafter 1,305

Total undiscounted lease payments 5,921

Less imputed interest ( 21 )

imputed interest ( 931 )

Total present value of lease liabilities $ 4,990 (1)

4 unchanged sentences

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

As of June 30, 2023

As of June 28, 2024 As of June 30, 2023

Weighted-average remaining lease term (in years)

3 unchanged sentences

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

(in thousands) Year Ended June 30, 2023

(in thousands) Year Ended June 28, 2024 Year Ended June 30, 2023 Year Ended June 24, 2022

Cash paid for amounts included in the measurement of lease liabilities

23 unchanged sentences

The cost of fully depreciated property, plant and equipment written-off during the years ended June 28, 2024, June 30, 2023 and June 24, 2022 amounted to $ 10.7 million, $ 16.5 million and $ 25.1 million, respectively.

During the year ended June 30, 2023, June 24, 2022 and June 25, 2021, the Company recognized impairment reserves for property, plant and equipment of $ 0.6 million, $ 0.6 million and $ 0.8 million, respectively.

During the years ended June 30, 2023, and June 25, 2021, the Company had de minimis amount of borrowing costs capitalized.

As of June 28, 2024, June 30, 2023 and June 24, 2022, the Company recognized impairment reserves for property, plant and equipment of $ 0.3 million, $ 0.6 million and $ 0.6 million, respectively.

During the year ended June 28, 2024, no borrowing costs capitalized, and during the year ended June 30, 2023, the Company had a de minimis amount of borrowing costs capitalized.

During year ended June 24, 2022, the Company had capitalized $ 0.9 million of borrowing cost.

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Amount Accumulated

Amortization Foreign

Adjustment Net

Amortization Net

As of June 28, 2024

Software $ 11,398 $ ( 9,077 ) $ 2,321

Total intangibles (1)

$ 10,533 $ ( 8,139 ) $ — $ 2,394

(1) Customer relationships and backlog were written-off in March 2023.

(in thousands) Gross

Amount Accumulated

Amortization Foreign

Adjustment Net

Amortization Net

As of June 30, 2023

Software $ 10,533 $ ( 8,139 ) $ 2,394

Customer relationships 4,373 ( 3,610 ) ( 58 ) 705

Backlog 119 ( 119 ) — —

Total intangibles $ 14,976 $ ( 11,410 ) $ ( 58 ) $ 3,508

The Company recorded amortization expense relating to intangibles of $ 1.0 million, $ 1.3 million and $ 1.6 million for the years ended June 28, 2024, June 30, 2023 and June 24, 2022, respectively.

The weighted-average remaining life of customer relationships was:

The weighted-average remaining life of software was:

(years) As of June 28, 2024 As of June 30, 2023

Software 2.1 3.1

Customer relationships — 3.1

Total intangibles 3.1 3.8

Based on the carrying amount of intangibles as of June 28, 2024, and assuming no future impairment of the underlying assets, the estimated future amortization during each fiscal year was as follows:

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Long-term borrowings, current portion, net:

Long-term borrowings, current portion $ 12,188 $ 12,188

Unamortized debt issuance costs—current portion ( 32 ) ( 32 )

Long-term borrowings, current portion, net $ 12,156 12,156

Long-term borrowings, non-current portion, net:

Term loan borrowings:

1 unchanged sentence

quarterly installments June 2024 $ — $ 12,188

Current portion ( 12,188 ) ( 12,188 )

Unamortized debt issuance costs—non-current portion — ( 31 )

Long-term borrowings, non-current portion, net $ — $ 15,202

Unamortized debt issuance costs, current portion — ( 32 )

Long-term borrowings, current portion, net $ — 12,156

(1) The Company entered into interest rate swaps that effectively fix a series of future interest payments on its term loans.

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If the loan to value ratio is not maintained, the Borrower will be required to provide additional security or prepay a portion of the term loan in order to restore the required ratio.

The Company is also required to maintain a debt service coverage ratio of at least 1.25 times and a debt to equity ratio less than or equal to 1.0 times.

The Company is also

required to maintain a debt service coverage ratio of at least 1.25 times and a debt to equity ratio less than or equal to 1.0 times.

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

As of June 30, 2023, the Company was in compliance with all of its financial covenants under the Term Loan Agreement.

The events of default under the Term Loan Agreement include failure to timely pay amounts due under the Term Loan Agreement or the related finance documents, 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.

As of June 30, 2023, there was $ 12.2 million outstanding under the term loan.

As of June 28, 2024, the term loan was fully repaid.

On March 9, 2023, Fabrinet Thailand and the Parent Company (the “Borrowers”) and the Bank entered into a credit facility agreement (the “2023 Credit Facility Agreement”), which provides a facility of $ 55.0 million.

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As of June 28, 2024, there was no amount outstanding under the 2023 Credit Facility Agreement.

As of June 28, 2024, the Company was in compliance with all of its financial covenants under the Term Loan Agreement.

Severance liabilities

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Actuarial (gain) loss on obligation ( 310 ) 1,089

Adjustment defined benefit obligation ( 212 ) —

Foreign currency translation — 7

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Balance, beginning of the fiscal year $ 349 $ 338

Actual return on plan assets $ — $ ( 13 )

Employer contributions — 38

Adjustment plan assets ( 349 ) —

Foreign currency translation — 11

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Discount rate 5.4 % 3.8 % 2.0 %

0.2 % - 2.9 %

0.4 % - 3.1 %

Expected long-term rate of return on assets 5.2 % 3.4 % 2.1 %

1 unchanged sentence

Share-based compensation

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 grant date fair value of restricted share units and performance share units is based on the market value of Fabrinet's ordinary shares on the date of grant.

The effect of recording share-based compensation expense for the years ended June 28, 2024, June 30, 2023 and June 24, 2022 was as follows:

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As of June 28, 2024, there were 306,660 restricted share units outstanding, 171,078 performance share units outstanding and 1,746,068 ordinary shares available for future grant under the 2020 Plan.

As of June 30, 2023, there were 27,059 restricted 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.

5 unchanged sentences

2020 Plan 306,660 171,078 1,746,068

2010 Plan 27,059 — —

2017 Inducement Plan — — 111,347

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Expected to vest as of June 28, 2024 171,078 $ 135.31

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.

The total fair value of restricted share units and performance share units vested during the years ended June 28, 2024, June 30, 2023 and June 24, 2022 was $ 26.0 million, $ 28.4 million and $ 24.2 million, respectively.

The aggregate intrinsic value of restricted share units and performance share units outstanding as of June 28, 2024 was $ 116.9 million.

As of June 30, 2023, there was $ 11.9 million and $ 6.6 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 2.5 years and 1.1 years, respectively.

As of June 28, 2024, there was $ 13.4 million and $ 6.8 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 28, 2024 and June 30, 2023, the Company withheld an aggregate of 104,892 shares and 177,139 shares, respectively, upon the vesting of restricted share units and performance shares units, based upon the closing share price on the vesting date to settle employee tax withholding obligations.

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For the years ended June 28, 2024 and June 30, 2023, the Company maintained an executive incentive plan with quantitative objectives, based on achieving certain revenue and non-U.S.

GAAP operating margin or gross margin targets.

GAAP operating margin or gross margin

During the years ended June 28, 2024, June 30, 2023 and June 24, 2022, discretionary merit-based bonus awards were also available to Fabrinet’s non-executive employees.

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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, August 2020 and August 2022, the Company’s board of directors approved an increase of $ 30.0 million, $ 50.0 million, $ 58.5 million and $ 78.7 million, respectively, to the original share repurchase authorization, bringing the aggregate authorization to $ 247.2 million.

In February 2018, May 2019, August 2020, August 2022, and August 2023, the Company’s board of directors approved an increase of $ 30.0 million, $ 50.0 million, $ 58.5 million, $ 78.7 million, and $ 47.6 million, respectively, to the original share repurchase authorization, bringing the aggregate authorization to $ 294.8 million.

During the year ended June 28, 2024, the Company repurchased 211,726 shares under the program at an average price per share (excluding other direct costs) of $ 186.49 , totaling $ 39.5 million.

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As of June 28, 2024 and June 30, 2023, there were outstanding bank guarantees on behalf of the Company's subsidiary in Thailand for electricity usage and other normal business expenses totaling $ 2.0 million and $ 1.5 million, respectively, or Thai Baht 73.2 million and Thai Baht 53.0 million, respectively.

In addition, there were other immaterial bank guarantees on behalf of the Company's subsidiary in Israel to support the operations related to the Israeli Customs department.

As of June 24, 2022, there was an outstanding bank guarantee on behalf of the Company's subsidiary in the PRC to support the subsidiary's operations totaling RMB 1.0 million, which bank guarantee was backed by cash collateral of $ 0.1 million.

This bank guarantee was released in December 2022.

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

to support its operations.

In addition, there were other immaterial bank guarantees on behalf of the Company's subsidiary in Israel to support the subsidiary's operations related to the Israeli Customs department.

Purchase obligations

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

As of June 30, 2023, the Company had purchase obligations and other commitments to third parties of $ 1.06 billion.

As of June 28, 2024, the Company had purchase obligations and other commitments to third parties of $ 933.3 million.

Capital expenditure

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Fabrinet maintains a director and officer liability insurance policy that may enable it to recover a portion of any future amounts paid under the indemnification agreements.

Litigation and claim

On June 28, 2024, Ngan In Leng and First Laser Limited (collectively, the “Plaintiffs”) filed a complaint in the Fuzhou

Intermediate People’s Court (the “Court”) in Fuzhou, China against Fujian Enterprises (Holdings) Co., Ltd.

(“FEHC”), Jian An Investment Limited (“Jian”), and Casix, Inc.

(“Casix”), the Company's wholly-owned subsidiary located in the PRC.

The complaint alleges unjust enrichment related to a purported investment in Casix by the Plaintiffs in 1997, which predates the Company's acquisition of Casix from JDS Uniphase Corporation.

The Plaintiffs have requested that the Court order FEHC to return the unjust enrichment to the Plaintiffs in the amount of RMB 400 million, with interest from March 1, 2000, and order Jian and Casix to bear joint and several liability for all payment obligations of FEHC.

At this time, the Company is not able to quantify any potential liability in connection with this litigation because the case is in its early stages.

Restructuring and other related costs

Restructuring and other related costs may consist of voluntary or involuntary severance-related charges, asset-related charges and other costs due to exit activities.

The Company recognizes voluntary severance-related charges when an employee accepts the offered benefit arrangement.

The Company recognizes involuntary severance-related charges depending on whether the termination benefits are provided under an ongoing benefit arrangement or under a one-time benefit arrangement.

If the former, the Company recognizes the charges once they are probable and the amounts are estimable.

If the latter, the Company recognizes the charges once the benefits have been communicated to employees.

Restructuring and other related costs may consist of severance-related charges, asset-related charges and other costs due to exit activities.

The Company recognizes severance-related charges depending on whether the termination benefits are provided under an ongoing benefit arrangement or under a one-time benefit arrangement.

The Company recognizes the charges once the benefits have been communicated to employees.

Business segments and geographic information

2 unchanged sentences

As of June 28, 2024, June 30, 2023 and June 24, 2022, 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.

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

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

9 unchanged sentences

Others 439 498 1,878

310,350 292,277 241,129

Total 307,240 310,350 292,277

Significant customers

2 unchanged sentences

2023 June 24,

Nvidia Corporation 35.1 % 12.5 % *

Cisco Systems Inc.

1 unchanged sentence

Lumentum Operations LLC * 15.4 % 10.3 %

Nvidia Corporation 12.5 % * *

Infinera Corporation * 12.4 % 12.5 %

3 unchanged sentences

2024 As of June 30,

Infinera Corporation 20.5 % 17.1 %

Nvidia Corporation 22.7 % 14.0 %

Lumentum Operations LLC 13.7 % 11.8 %

Infinera Corporation 19.3 % 20.5 %

Cisco Systems Inc.

Lumentum Operations LLC * 13.7 %

* Represents less than 10% of total accounts receivable.

12 unchanged sentences

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

12 unchanged sentences

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