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Fabrinet

FabrinetFNEarnings & Financial Report

NYSE · Consumer Discretionary · Telephone & Telegraph Apparatus

Below is a list of companies having stocks that are included in the S&P MidCap 400 stock market index. The index, maintained by S&P Dow Jones Indices, comprises the common stocks of 400 mid-cap, mostly American, companies. Although called the S&P 400, the index sometimes contains more than 400 stocks when it includes two or more share classes of stock from one of its component companies.

What changed in Fabrinet's 10-K — 2023 vs 2024

Top changes in Fabrinet's 2024 10-K

188 paragraphs added · 196 removed · 171 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Competitors in the market for optical manufacturing services include Benchmark Electronics, Inc., Celestica Inc., Sanmina-SCI Corporation, Jabil Circuit, Inc. and Venture Corporation Limited, as well as the internal manufacturing capabilities of our customers. Our customized optics and glass operations face competition from companies such as Browave Corporation, Fujian Castech Crystals, Inc., Photop Technologies, Inc. and Research Electro-Optic, Inc.
Competitors in the market for optical manufacturing services include Benchmark Electronics, Inc., Celestica Inc., Sanmina-SCI Corporation, Jabil Circuit, Inc. and Venture Corporation Limited, as well as the internal manufacturing capabilities of our customers. Our customized optics and glass operations face competition from companies such as Fujian Castech Crystals, Inc., Photop Technologies, Inc. and Research Electro-Optic, Inc.
Industrial Lasers, Sensors and Others The optical and electro-mechanical process technologies used in the optical communications market also have applications in other similarly complex end-markets that require advanced precision manufacturing capabilities, such as automotive, industrial lasers, medical devices, and sensors. These markets are substantially larger than the optical communications components and modules market.
Automotive, Industrial Lasers, and Others The optical and electro-mechanical process technologies used in the optical communications market also have applications in other similarly complex end-markets that require advanced precision manufacturing capabilities, such as automotive, industrial lasers, medical, and sensors. These markets are substantially larger than the optical communications components and modules market.
We have inter-company agreements with certain of our subsidiaries in Thailand and the U.S. to provide manufacturing services to us, and we have inter-company agreements with certain of our subsidiaries in the U.S. and Singapore to provide certain administrative and business development services to us. Human Capital Resources Our workforce is distributed globally over seven countries.
We have inter-company agreements with certain of our subsidiaries in Thailand and the U.S. to provide manufacturing services to us, and we have inter-company agreements with certain of our subsidiaries in the U.S. and Singapore to provide certain administrative and business development services to us. Human Capital Resources Our workforce is distributed globally over six countries.
Corporate Structure Fabrinet was incorporated under the laws of the Cayman Islands in August 1999 and commenced business operations in January 2000. We have fourteen direct and indirect subsidiaries, all of which are wholly-owned.
Corporate Structure Fabrinet was incorporated under the laws of the Cayman Islands in August 1999 and commenced business operations in January 2000. We have thirteen direct and indirect subsidiaries, all of which are wholly-owned.
Our range of capabilities, from the design of customized optics and glass through process engineering and testing of finished assemblies, provides us with a knowledge base that we believe often leads to improvements in our 4 Table of Contents customers’ product development cycles, manufacturing cycle times, quality and reliability, manufacturing yields and end product costs.
Our range of capabilities, from the design of customized optics and glass through process engineering and testing of finished assemblies, provides us with a knowledge base that we believe often leads to improvements in our customers’ product development cycles, manufacturing cycle times, quality and reliability, manufacturing yields and end product costs.
We also monitor hiring, termination and pay practices to ensure compliance with established regulations across the world, and we track and report internally on key talent metrics including talent pipeline, employee promotions, employee turnover, and engagement of our employees. We provide employee career guidance and counseling through established employee development and training opportunities.
We also monitor hiring, termination and pay 13 Table of Contents practices to ensure compliance with established regulations across the world, and we track and report internally on key talent metrics including talent pipeline, employee promotions, employee turnover, and engagement of our employees. We provide employee career guidance and counseling through established employee development and training opportunities.
While to date we 12 Table of Contents are not aware of any material exposures, there can be no assurance that environmental matters will not arise in the future or that costs will not be incurred with respect to sites as to which no problem is currently known.
While to date we are not aware of any material exposures, there can be no assurance that environmental matters will not arise in the future or that costs will not be incurred with respect to sites as to which no problem is currently known.
While environmental regulations have not thus far resulted in a material adverse effect on our operations, changes in regulations could necessitate additional capital expenditures, modification of our operations, or other compliance actions.
While environmental regulations have not thus far 12 Table of Contents resulted in a material adverse effect on our operations, changes in regulations could necessitate additional capital expenditures, modification of our operations, or other compliance actions.
In many cases, we are the sole outsourced manufacturing partner used by our customers for the products that we produce for them.
In many cases, we are the sole outsourced manufacturing partner used by our customers for the products that we manufacture for them.
As of June 30, 2023, our facilities comprised approximately 3.7 million total square feet, including approximately 0.9 million square feet of office space used for general administration purposes and approximately 2.8 million square feet devoted to manufacturing and related activities, of which approximately 1.0 million square feet are clean room facilities.
As of June 28, 2024, our facilities comprised approximately 3.7 million total square feet, including approximately 0.9 million square feet of office space used for general administration purposes and approximately 2.8 million square feet devoted to manufacturing and related activities, of which approximately 1.0 million square feet are clean room facilities.
We maintain the following certifications: ISO 9001 for Manufacturing Quality Management Systems; ISO 14001 for Environmental Management Systems; TL 9000 for Telecommunications Industry Quality Certification; IATF 16949 for Automotive Industry Quality Certification; ISO 13485 for Medical Devices Industry Quality Certification; AS 9100 for Aerospace Industry Quality Certification; NADCAP (National Aerospace and Defense Contractors Accreditation Program) for Quality Assurance throughout the Aerospace and Defense Industries; ISO 45001 for Occupational Health and Safety Management Systems; and ISO 22301 for Business Continuity Management Systems.
We maintain the following certifications: ISO 9001 for Manufacturing Quality Management Systems; ISO 14001 for Environmental Management Systems; TL 9000 for Telecommunications Industry Quality Certification; IATF 16949 for Automotive Industry Quality Certification; ISO 13485 for Medical Devices Industry Quality Certification; AS 9100 for Aerospace Industry Quality Certification; NADCAP (National Aerospace and Defense Contractors Accreditation Program) for Quality Assurance throughout the Aerospace and Defense Industries; ISO 45001 for Occupational Health and Safety Management Systems; ISO/IEC 17025 for Testing and Calibration Laboratories Certification; and ISO 22301 for Business Continuity Management Systems.
During fiscal year 2023, Cisco Systems Inc., Lumentum Operations LLC, Nvidia Corporation, and Infinera Corporation contributed 15.6%, 15.4%, 12.5%, and 12.4% respectively, of our revenues. During fiscal year 2022, Cisco Systems Inc., Infinera Corporation and Lumentum Operations LLC contributed 25.4%, 12.5% and 10.3%, respectively, of our revenues. The production of optical devices is characterized by a lengthy qualification process.
During fiscal year 2023, Cisco Systems Inc., Lumentum Operations LLC, Nvidia Corporation, and Infinera Corporation contributed 15.6%, 15.4%, 12.5%, and 12.4%, respectively, of our revenues. The production of optical devices is characterized by a lengthy qualification process.
Historically, patents have not played a significant role in the protection of our proprietary rights. Nevertheless, we currently have a relatively small number of solely-owned and jointly-held PRC patents in various customized optic technologies with expiration dates between 2023 and 2040.
Historically, patents have not played a significant role in the protection of our proprietary rights. Nevertheless, we currently have a relatively small number of solely-owned and jointly-held PRC patents in various customized optic technologies with expiration dates between 2024 and 2044.
Based on our extensive experience and the positive feedback we have received from our customers, we believe we are a global leader in providing these services to the optical communications, industrial lasers and automotive markets. Our customers include companies in complex industries that require advanced precision manufacturing capabilities such as optical communications, industrial lasers, automotive and sensors.
Based on our extensive experience and the positive feedback we have received from our customers, we believe we are a global leader in providing these services to the optical communications, automotive, and industrial lasers markets. Our customer base includes companies in complex industries that require advanced precision manufacturing capabilities such as optical communications, automotive, industrial lasers, medical, and sensors.
Our dedicated process and design engineers, who have a deep knowledge in materials sciences and physics, are able to tailor our service offerings to accommodate our customers’ complex engineering assignments.
Our dedicated process and design engineers, who have a deep knowledge in materials sciences and physics, are able to tailor our service offerings to accommodate our customers’ complex 4 Table of Contents engineering assignments.
We expect growth in the industrial lasers, medical, and sensors markets will be driven by demand for: • industrial laser applications across a growing number of end-markets, particularly in semiconductor processing, biotechnology, metrology and materials processing; • precision, non-contact and low power requirement sensors, particularly in automotive, medical and industrial end-markets; and • lower cost products used on both enterprise and consumer levels.
We expect growth in the automotive, industrial lasers, medical, and sensors markets will be driven by demand for: • industrial laser applications across a growing number of end-markets, particularly in semiconductor processing, biotechnology, metrology and materials processing; • precision, non-contact and low power requirement sensors, particularly in automotive, medical and industrial end-markets; and • lower cost products used on both enterprise and consumer levels. 5 Table of Contents Outsourcing of production by industrial laser and sensor OEMs has historically been limited.
Therefore, we expect a significant percentage of our revenues will continue to come from a small number of customers. During fiscal years 2023 and 2022, we had four and three customers, respectively, that each contributed 10% or more of our revenues.
Therefore, we expect a significant percentage of our revenues will continue to come from a small number of customers. During fiscal years 2024 and 2023, we had two and four customers, respectively, that each contributed 10% or more of our revenues. During fiscal year 2024, Nvidia Corporation and Cisco Systems Inc. contributed 35.1%, and 13.4%, respectively, of our revenues.
Our revenues for the year ended June 30, 2023 (“fiscal year 2023”) increased by $383.0 million, or 16.9%, from $2.26 billion for the year ended June 24, 2022 (“fiscal year 2022”) to $2.65 billion for fiscal year 2023.
Our revenues for the year ended June 28, 2024 (“fiscal year 2024”) increased by $237.8 million, or 9.0%, from $2.65 billion for the year ended June 30, 2023 (“fiscal year 2023”) to $2.88 billion for fiscal year 2024.
We believe industrial laser and sensor OEMs are increasingly recognizing the benefits of outsourcing that OEMs in other industries, such as optical communications, have been able to achieve. 5 Table of Contents Our Competitive Strengths We believe we have succeeded in providing differentiated services to the optical communications, industrial lasers, medical, and sensors industries due to our long-term focus on optical and electro-mechanical process technologies, strategic alignment with our customers and commitment to total customer satisfaction.
Our Competitive Strengths We believe we have succeeded in providing differentiated services to the optical communications, automotive, industrial lasers, medical, and sensors industries due to our long-term focus on optical and electro-mechanical process technologies, strategic alignment with our customers and commitment to total customer satisfaction.
We believe our deep expertise, relationships and capabilities in supply chain and materials management often allows us to further reduce costs and cycle times for our customers. 6 Table of Contents Our Growth Strategy The key elements of our growth strategy are to: • Strengthen Our Presence in the Optical Communications Market: We believe we are a leader in manufacturing products for the optical communications market.
We believe our deep expertise, relationships and capabilities 6 Table of Contents in supply chain and materials management often allows us to further reduce costs and cycle times for our customers.
Our percentage of revenues from lasers, sensors and other markets increased from 21.2% in fiscal year 2022 to 24.1% in fiscal year 2023, while our percentage of revenues from optical communications products decreased from 78.8% in fiscal year 2022 to 75.9% in fiscal year 2023.
Our percentage of revenues from optical communications products increased from 75.9% in fiscal year 2023 to 79.4% in fiscal year 2024, while our percentage of revenues from automotive, industrial lasers, and other markets decreased from 24.1% in fiscal year 2023 to 20.6% in fiscal year 2024.
The Organization for Economic Co-operation and Development (OECD) announced that it has reached agreement among its member countries to implement Pillar Two rules, a global minimum tax at 15% for certain multinational enterprises. Many countries are expected to issue laws and regulations to conform to this regime.
There have been a number of proposed changes in the tax laws that could increase our tax liability. The Organization for Economic Co-operation and Development (OECD) announced that it has reached agreement among its member countries to implement Pillar Two rules, a global minimum tax at 15% for certain multinational enterprises.
These outcomes include improved conditions for workers, increased efficiency and productivity for customers and suppliers, economic development, and a clean environment for our communities. We are committed to implementing programs that focus on driving continuous improvements in social, ethical, and environmental compliance throughout all of our global operating units in accordance with our Code of Business Conduct.
We are committed to implementing programs that focus on driving continuous improvements in social, ethical, and environmental compliance throughout all of our global operating units in accordance with our Code of Business Conduct.
Our overall competitive position depends upon a number of factors, including: • our manufacturing technologies and capacity; • the quality of our manufacturing processes and products; • our supply chain tools and data management systems; • our ability to safeguard and protect our customers’ intellectual property; • our engineering and prototyping capabilities; • our ability to strengthen and broaden our engineering services and know-how to participate in the growth of emerging technologies; • our ability to deliver on-time; • our ability to deliver continuous cost improvements; and • our responsiveness and flexibility.
Competition Although the manufacturing services market is highly competitive, we believe that there are significant barriers to entry in our existing and target markets, including lengthy sales cycles, the need to demonstrate complex precision optical and electro-mechanical engineering and manufacturing capabilities to a prospective customer and the ability to protect a customer’s intellectual property. 11 Table of Contents Our overall competitive position depends upon a number of factors, including: • our manufacturing technologies and capacity; • the quality of our manufacturing processes and products; • our supply chain tools and data management systems; • our ability to safeguard and protect our customers’ intellectual property; • our engineering and prototyping capabilities; • our ability to strengthen and broaden our engineering services and know-how to participate in the growth of emerging technologies; • our ability to deliver on-time; • our ability to deliver continuous cost improvements; and • our responsiveness and flexibility.
We are committed to developing our employees and supporting our employees’ well-being and safety. We advertise job openings and source candidates broadly to attract a diverse candidate pool.
None of our employees are represented by a labor union. We have not experienced any work stoppages, slowdowns, or strikes. We consider our relations with our employees to be positive. We are committed to developing our employees and supporting our employees’ well-being and safety. We advertise job openings and source candidates broadly to attract a diverse candidate pool.
Our customers in these industries support a growing number of end-markets, including automotive, biotechnology, communications, materials processing, medical devices, metrology and semiconductor processing.
The products that we manufacture for our OEM customers include selective switching products; tunable lasers, transponders and transceivers; active optical cables; solid state, diode-pumped, gas and fiber lasers; and sensors. Our customers in these industries support a growing number of end-markets, including automotive, biotechnology, communications, materials processing, medical devices, metrology and semiconductor processing.
The implementation of lean manufacturing initiatives helps improve efficiency and reduce waste in the manufacturing process in areas such as inventory on hand, set up times, and floor space and the number of people required for production, while Kaizen and Six Sigma ensures continuous improvement by reducing process variation. 11 Table of Contents Competition Although the manufacturing services market is highly competitive, we believe that there are significant barriers to entry in our existing and target markets, including lengthy sales cycles, the need to demonstrate complex precision optical and electro-mechanical engineering and manufacturing capabilities to a prospective customer and the ability to protect a customer’s intellectual property.
The implementation of lean manufacturing initiatives helps improve efficiency and reduce waste in the manufacturing process in areas such as inventory on hand, set up times, and floor space and the number of people required for production, while Kaizen and Six Sigma ensures continuous improvement by reducing process variation.
We will continue to monitor legislative and regulatory developments to assess the impact on our business, financial condition and operating results. Social Responsibility Our corporate social responsibility practices focus on creating better social, economic and environmental outcomes for all stakeholders in the global electronics supply chain.
Social Responsibility Our corporate social responsibility practices focus on creating better social, economic and environmental outcomes for all stakeholders in the global electronics supply chain. These outcomes include improved conditions for workers, increased efficiency and productivity for customers and suppliers, economic development, and a clean environment for our communities.
As of June 30, 2023, we employed approximately 14,663 full-time employees worldwide, with approximately 14,451 employees located in the Asia-Pacific region, 210 employees located in North America, and 2 employees located in Europe or the Middle East.
As of June 28, 2024, we employed approximately 14,213 full-time employees worldwide, with approximately 13,973 employees located in the Asia-Pacific region, and 240 employees located in North America. Of our total workforce, approximately 13,761 employees were involved in manufacturing operations and 452 employees were involved in business development and general and administrative functions.
Removed
Outsourcing of production by industrial laser and sensor OEMs has historically been limited.
Added
We believe industrial laser and sensor OEMs are increasingly recognizing the benefits of outsourcing that OEMs in other industries, such as optical communications, have been able to achieve.
Removed
These supply chain disruptions were exacerbated by recent global events, such as (1) COVID-related lockdowns in China, which caused freight and logistics issues and unforeseen delays during the first half of fiscal year 2023, and (2) the armed conflict between Russia and Ukraine.
Added
Our Growth Strategy The key elements of our growth strategy are to: • Strengthen Our Presence in the Optical Communications Market: We believe we are a leader in manufacturing products for the optical communications market.
Removed
While we have no significant direct business in Ukraine or Russia, the conflict has negatively impacted demand from some of our automotive customers that have other suppliers in the region.
Added
The OECD has issued Pillar Two model rules and continues to release guidance on these rules. Many jurisdictions have enacted tax laws that will take effect in 2024 and 2025 to implement Pillar Two rules. Other countries have announced plans to adopt tax laws to implement similar legislation with varying effective dates in the future.
Removed
There have been a number of proposed changes in the tax laws that could increase our tax liability. Several governments are considering tax reform proposals that, if enacted, could increase our tax expense.
Added
Certain jurisdictions in which we operate have not adopted corresponding legislation to date. These changes could increase tax uncertainty and may adversely affect our provision for income taxes and operating results. We will continue to monitor legislative and regulatory developments to assess the impact on our business, financial condition and operating results.
Removed
Of our total workforce, approximately 14,217 employees were involved in manufacturing operations and 446 employees were involved in business development and general 13 Table of Contents and administrative functions. None of our employees are represented by a labor union. We have not experienced any work stoppages, slowdowns, or strikes. We consider our relations with our employees to be positive.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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As a result, we devote significant resources to monitor 17 Table of Contents receivables and inventory balances with certain of our customers. If our customers experience financial difficulty, we could have difficulty recovering amounts owed to us from these customers, or demand for our services from these customers could decline.
As a result, we devote significant resources to monitor receivables and inventory balances with certain of our customers. If our 17 Table of Contents customers experience financial difficulty, we could have difficulty recovering amounts owed to us from these customers, or demand for our services from these customers could decline.
For example, any of the risks described in this “Risk Factors” section and, in particular, the following factors, could cause our revenues, gross profit margins, and operating results to fluctuate from quarter to quarter: • any reduction in customer demand or our ability to fulfill customer orders as a result of disruptions in our supply chain; • our ability to acquire new customers and retain our existing customers; • the cyclicality of the optical communications, industrial lasers, medical and sensors markets; • competition; • our ability to achieve favorable pricing for our services; • the effect of fluctuations in foreign currency exchange rates; • our ability to manage our headcount and other costs; and • changes in the relative mix in our revenues.
For example, any of the risks described in this “Risk Factors” section and, in particular, the following factors, could cause our revenues, gross profit margins, and operating results to fluctuate from quarter to quarter: • any reduction in customer demand or our ability to fulfill customer orders as a result of disruptions in our supply chain; • our ability to acquire new customers and retain our existing customers; • the cyclicality of the optical communications, automotive, industrial lasers, medical, and sensors markets; • competition; • our ability to achieve favorable pricing for our services; • the effect of fluctuations in foreign currency exchange rates; • our ability to manage our headcount and other costs; and • changes in the relative mix in our revenues.
Our customized optics and glass operations face competition from companies such as Browave Corporation, Fujian Castech Crystals, Inc., Photop Technologies, Inc., and Research Electro-Optic, Inc. Other existing contract manufacturing companies, original design manufacturers or outsourced semiconductor assembly and test companies could also enter our target markets. In addition, we may face new competitors as we attempt to penetrate new markets.
Our customized optics and glass operations face competition from companies such as Fujian Castech Crystals, Inc., Photop Technologies, Inc., and Research Electro-Optic, Inc. Other existing contract manufacturing companies, original design manufacturers or outsourced semiconductor assembly and test companies could also enter our target markets. In addition, we may face new competitors as we attempt to penetrate new markets.
Based upon estimates of the value of our assets, which are based in part on the trading price of our ordinary shares, we do not expect to be a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes for the taxable year 2023 or for the foreseeable future.
Based upon estimates of the value of our assets, which are based in part on the trading price of our ordinary shares, we do not expect to be a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes for the taxable year 2024 or for the foreseeable future.
However, despite our expectations, we cannot guarantee that we will not become a PFIC for the taxable year 2023 or any future year because our PFIC status is determined at the end of each year and depends on the composition of our income and assets during such year.
However, despite our expectations, we cannot guarantee that we will not become a PFIC for the taxable year 2024 or any future year because our PFIC status is determined at the end of each year and depends on the composition of our income and assets during such year.
Even with insurance coverage, natural disasters or other catastrophic events, including acts of war, could cause us to suffer substantial losses in our 24 Table of Contents operational capacity and could also lead to a loss of opportunity and to a potential adverse impact on our relationships with our existing customers resulting from our inability to produce products for them, for which we might not be compensated by existing insurance.
Even with insurance coverage, natural disasters or other catastrophic events, including acts of war, could cause us to suffer substantial losses in our operational capacity and could also lead to a loss of opportunity and to a potential adverse impact on our relationships with our existing customers resulting from our inability to produce products for them, for which we might not be compensated by existing insurance.
In addition, the recent failures of Silicon Valley Bank and Signature Bank created significant market disruption and uncertainty within the U.S. banking sector, in particular with respect to regional banks. During challenging economic times, our customers may face difficulties in gaining timely access to sufficient credit, which could impact their ability to make timely payments to us.
In addition, the failures of Silicon Valley Bank and Signature Bank in March 2023 created significant market disruption and uncertainty within the U.S. banking sector, in particular with respect to regional banks. During challenging economic times, our customers may face difficulties in gaining timely access to sufficient credit, which could impact their ability to make timely payments to us.
This may make it more difficult for our shareholders to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest. Subject to limited exceptions, under Cayman Islands law, a minority shareholder may not bring a derivative action against the board of directors.
This may make it more difficult for our shareholders to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest. 29 Table of Contents Subject to limited exceptions, under Cayman Islands law, a minority shareholder may not bring a derivative action against the board of directors.
In addition, our customers might pursue legal claims against us for any failure to protect their intellectual property, possibly resulting in harm to our reputation and our business, financial condition and operating results. 25 Table of Contents Tax, Compliance and Regulatory Risks We are subject to the risk of increased income taxes, which could harm our business, financial condition and operating results.
In addition, our customers might pursue legal claims against us for any failure to protect their intellectual property, possibly resulting in harm to our reputation and our business, financial condition and operating results. Tax, Compliance and Regulatory Risks We are subject to the risk of increased income taxes, which could harm our business, financial condition and operating results.
Fabrinet (the “Cayman Islands Parent”) is an exempted company incorporated in the Cayman Islands. We maintain manufacturing operations in Thailand, the PRC, the U.S. and Israel. We cannot determine in advance the extent to which some jurisdictions may require us to pay taxes or make payments in lieu of taxes.
Fabrinet (the “Cayman 25 Table of Contents Islands Parent”) is an exempted company incorporated in the Cayman Islands. We maintain manufacturing operations in Thailand, the PRC, the U.S. and Israel. We cannot determine in advance the extent to which some jurisdictions may require us to pay taxes or make payments in lieu of taxes.
If the arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of a corporation incorporated in a 29 Table of Contents jurisdiction in the U.S., providing rights to receive payment in cash for the judicially determined value of the shares.
If the arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of a corporation incorporated in a jurisdiction in the U.S., providing rights to receive payment in cash for the judicially determined value of the shares.
Our investment portfolio may become impaired by deterioration of the capital markets. We use professional investment management firms to manage our excess cash and cash equivalents. Our short-term investments as of June 30, 2023 are primarily investments in a fixed income portfolio, including liquidity funds, certificates of deposit and time deposits, corporate debt securities, and U.S. agency and U.S.
Our investment portfolio may become impaired by deterioration of the capital markets. We use professional investment management firms to manage our excess cash and cash equivalents. Our short-term investments as of June 28, 2024 are primarily investments in a fixed income portfolio, including liquidity funds, certificates of deposit and time deposits, corporate debt securities, and U.S. agency and U.S.
If we become a PFIC, our U.S. investors will be subject to increased tax liabilities under U.S. tax laws and regulations as well as burdensome reporting requirements. 28 Table of Contents Our business and share price could be negatively affected as a result of activist shareholders.
If we become a PFIC, our U.S. investors will be subject to increased tax liabilities under U.S. tax laws and regulations as well as burdensome reporting requirements. Our business and share price could be negatively affected as a result of activist shareholders.
As of June 30, 2023, we did not record any impairment charges associated with our portfolio of short-term investments, and although we believe our current investment portfolio has little risk of material impairment, we cannot predict future market conditions or market liquidity, or credit availability, and can provide no assurance that our investment portfolio will remain materially unimpaired.
As of June 28, 2024, we did not record any impairment charges associated with our portfolio of short-term investments, and although we believe our current investment portfolio has little risk of material impairment, we cannot predict future market conditions or market liquidity, or credit availability, and can provide no assurance that our investment portfolio will remain materially unimpaired.
As a manufacturer of products for the optics industry, we are required to meet certain certification standards, including the following: ISO 9001 for Manufacturing Quality Management Systems; ISO 14001 for Environmental Management Systems; TL 9000 for Telecommunications Industry Quality Certification; IATF 16949 for Automotive Industry Quality Certification; ISO 13485 for Medical Devices Industry Quality Certification; AS 9100 for Aerospace Industry Quality Certification; NADCAP (National Aerospace and Defense Contractors Accreditation Program) for Quality Assurance throughout the Aerospace and Defense Industries; ISO 45001 for Occupational Health and Safety Management Systems; and ISO 22301 for Business Continuity Management Systems.
As a manufacturer of products for the optics industry, we are required to meet certain certification standards, including the following: ISO 9001 for Manufacturing Quality Management Systems; ISO 14001 for Environmental Management Systems; TL 9000 for Telecommunications Industry Quality Certification; IATF 16949 for Automotive Industry Quality Certification; ISO 13485 for Medical Devices Industry Quality Certification; AS 9100 for Aerospace Industry Quality Certification; NADCAP (National Aerospace and Defense Contractors Accreditation Program) for Quality Assurance throughout the Aerospace and Defense Industries; ISO 45001 for Occupational Health and Safety Management Systems; ISO/IEC 17025 for Testing and Calibration Laboratories Certification; and ISO 22301 for Business Continuity Management Systems.
These rules may also affect the sourcing and availability of 27 Table of Contents minerals used in the products we manufacture, as there may be only a limited number of suppliers offering “conflict free” metals that can be used in the products we manufacture for our customers.
These rules may also affect the sourcing and availability of minerals used in the products we manufacture, as there may be only a limited number of suppliers offering “conflict free” metals that can be used in the products we manufacture for our customers.
In addition, we expect that disruptions in our supply chain and fluctuations in the availability of parts and materials will continue to have a significant 23 Table of Contents impact on our ability to generate revenue, despite strong demand from our customers.
In addition, we expect that disruptions in our supply chain and fluctuations in the availability of parts and materials will continue to have a significant impact on our ability to generate revenue, despite strong demand from our customers.
Intellectual Property and Cybersecurity Risks Our business and operations would be adversely impacted in the event of a failure of our information technology infrastructure and/or cyber security attacks. We rely upon the capacity, availability and security of our information technology hardware and software infrastructure.
Intellectual Property and Cybersecurity Risks Our business and operations would be adversely impacted in the event of a failure of our information technology infrastructure and/or cyber security attacks. 24 Table of Contents We rely upon the capacity, availability and security of our information technology hardware and software infrastructure.
Further exacerbating the shortage is the long production lead-time for wafers, which can take up to 30 weeks in some cases. A shortage of semiconductors or other key components can cause a significant disruption to our production schedule and have a substantial adverse effect on our business, financial condition and operating results.
Further exacerbating the shortage is the long production lead-time for wafers, which can be as long as 30 weeks in some cases. A shortage of semiconductors or other key components can cause a significant disruption to our production schedule and have a substantial adverse effect on our business, financial condition and operating results.
We are subject to governmental export and import controls in Thailand, the PRC, the United Kingdom and the United States that may limit our business opportunities.
We are subject to governmental export and import controls in Thailand, the PRC, Israel and the United States that may limit our business opportunities.
In addition, tax returns that remain open to examination in Thailand, the PRC, the U.K. and Israel range from the tax years 2016 through 2022. The results of audits and examinations of previously filed tax returns and continuing assessments of our tax exposures may have an adverse effect on our provision for income taxes and tax liability.
In addition, tax returns that remain open to examination in Thailand, the PRC, the U.K. and Israel range from the tax years 2017 through 2023. The results of audits and examinations of previously filed tax returns and continuing assessments of our tax exposures may have an adverse effect on our provision for income taxes and tax liability.
We may not be able to increase our prices to adequately offset these increased costs, and any increase in our prices may reduce our future customer orders, which could harm our business, financial condition and operating results. ITEM 1B. UNRESOLVED STAFF COMMENTS. Not applicable. 30 Table of Contents
We may not be able to increase our prices to adequately offset these increased costs, and any increase in our prices may reduce our future customer orders, which could harm our business, financial condition and operating results. ITEM 1B. UNRESOLVED STAFF COMMENTS. Not applicable.
Any such financial difficulty could adversely affect our operating results and financial condition by resulting in a reduction in our revenues, a charge for inventory write-offs, a provision for doubtful accounts, and larger working capital requirements due to increased days in inventory and days in accounts receivable.
Any such financial difficulty could adversely affect our operating results and financial condition by resulting in a reduction in our revenues, a charge for inventory write-offs, a provision for expected credit losses, and larger working capital requirements due to increased days in inventory and days in accounts receivable.
While we are able to assert in this Annual Report on Form 10-K that our internal control over financial reporting was effective as of June 30, 2023, we cannot predict the outcome of our testing in future periods.
While we are able to assert in this Annual Report on Form 10-K that our internal control over financial reporting was effective as of June 28, 2024, we cannot predict the outcome of our testing in future periods.
Our customers are located throughout the world, and our principal manufacturing facilities are located in Thailand. Revenues from the bill-to-location of customers outside of North America accounted for 52.0%, 50.7% and 52.8% of our revenues for fiscal year 2023, fiscal year 2022 and fiscal year 2021, respectively.
Our customers are located throughout the world, and our principal manufacturing facilities are located in Thailand. Revenues from the bill-to-location of customers outside of North America accounted for 63.5%, 52.0% and 50.7% of our revenues for fiscal year 2024, fiscal year 2023 and fiscal year 2022, respectively.
During fiscal years 2023 and 2022, we had four and three customers, respectively, that each contributed 10% or more of our revenues. Such customers together accounted for 55.9% and 48.2% of our revenues during the respective periods.
During fiscal years 2024 and 2023, we had two and four customers, respectively, that each contributed 10% or more of our revenues. Such customers together accounted for 48.5% and 55.9% of our revenues during the respective periods.
From time to time, we engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. As of June 30, 2023, our U.S. federal and state tax returns remain open to examination for the tax years 2018 through 2021.
From time to time, we engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. As of June 28, 2024, our U.S. federal and state tax returns remain open to examination for the tax years 2019 through 2022.
As of June 30, 2023, the U.S. dollar had appreciated approximately 12.0% against the Thai baht since June 25, 2021. While we attempt to hedge against certain exchange rate risks, we typically enter into hedging contracts with maturities of up to 12 months, leaving us exposed to longer term changes in exchange rates.
As of June 28, 2024, the U.S. dollar had appreciated approximately 3.7% against the Thai baht since June 24, 2022. While we attempt to hedge against certain exchange rate risks, we typically enter into hedging contracts with maturities of up to 12 months, leaving us exposed to longer term changes in exchange rates.
In addition, our ability to access capital markets may be restricted, which could have an impact on our ability to react to changing economic and business conditions and could also adversely affect our business, financial condition and operating results. Inflation has also risen globally to historically high levels.
In addition, our ability to access capital markets may be restricted, which could have an impact on our ability to react to changing economic and business conditions and could also adversely affect our business, financial condition and operating results. In 2022 and 2023, inflation increased globally to levels not seen in decades.
In addition, these laws and regulations are relatively new, and published cases are limited in volume and non-binding. Therefore, the interpretation and enforcement of these laws and regulations involve significant uncertainties. 22 Table of Contents Laws may be changed with little or no prior notice, for political or other reasons.
In addition, these laws and regulations are relatively new, and published cases are limited in volume and non-binding. Therefore, the interpretation and enforcement of these laws and regulations involve significant uncertainties. Laws may be changed with little or no prior notice, for political or other reasons. These uncertainties could limit the legal protections available to foreign investors.
This restriction may limit our ability to invest the earnings of our PRC subsidiary. As of June 30, 2023, the U.S. dollar had appreciated approximately 12.4% against the RMB since June 25, 2021. There remains significant international pressure on the PRC government to adopt a substantially more liberalized currency policy.
This restriction may limit our ability to invest the earnings of our PRC subsidiary. As of June 28, 2024, the U.S. dollar had appreciated approximately 8.9% against the RMB since June 24, 2022. There remains significant international pressure on the PRC government to adopt a substantially more liberalized currency policy.
GBP are convertible in connection with trade and service-related foreign exchange transactions and foreign debt service. As of June 30, 2023, the U.S. 20 Table of Contents dollar had appreciated approximately 10.4% against the GBP since June 25, 2021. Any appreciation in the value of the RMB and GBP against the U.S. dollar could negatively impact our operating results.
GBP are convertible in connection with trade and service-related foreign exchange transactions and foreign debt service. As of June 28, 2024, the U.S. 20 Table of Contents dollar had depreciated approximately 2.9% against the GBP since June 24, 2022. Any appreciation in the value of the RMB and GBP against the U.S. dollar could negatively impact our operating results.
Revenues from optical communications products represented 75.9% and 78.8% of our revenues for fiscal year 2023 and fiscal year 2022, respectively.
Revenues from optical communications products represented 79.4% and 75.9% of our revenues for fiscal year 2024 and fiscal year 2023, respectively.
In addition, increased international political instability, evidenced by the threat or occurrence of terrorist attacks, enhanced national security measures, Russia’s invasion of Ukraine, conflicts in the Middle East and Asia, strained international relations arising from these conflicts and the related decline in consumer confidence and economic weakness, may hinder our ability to do business.
In addition, increased international political instability, the threat or occurrence of terrorist attacks, conflicts in the Middle East, Asia and Europe (including the Israel-Hamas war and the Russia-Ukraine war), strained international relations arising from these conflicts and the related decline in consumer confidence and economic weakness, may hinder our ability to do business.
Such developments, as well as the policies impacting these, could adversely affect our financial results. In particular, the economic disruption caused by COVID-19 has led to reduced demand in some of our customers’ optical communications product portfolios and significant volatility in global stock markets and currency exchange rates.
In particular, the economic disruption caused by COVID-19 has led to reduced demand in some of our customers’ optical communications product portfolios and significant volatility in global stock markets and currency exchange rates.
Department of Commerce prohibited the export and sale of a broad category of U.S. products, as well as the provision of services, to ZTE Corporation in early 2018, and to Huawei in 2019, both of which are customers of certain of our customers); • fluctuations in currency exchange rates; • inadequate protection of intellectual property rights in some countries; and • political, legal and economic instability, foreign conflicts, and the impact of regional and global infectious illnesses in the countries in which we and our customers and suppliers are located (for example, disruptions to international operations associated with the occurrence of the COVID-19 pandemic or the ongoing armed conflict in Ukraine).
Department of Commerce has prohibited the export and sale of a broad category of U.S. products, as well as the provision of services, to ZTE Corporation and to Huawei, both of which are customers of certain of our customers); • fluctuations in currency exchange rates; • inadequate protection of intellectual property rights in some countries; and • political, legal and economic instability, foreign armed conflicts (such as the Israel-Hamas war and the Russia-Ukraine war), and the impact of regional and global infectious illnesses in the countries in which we and our customers and suppliers are located.
We are subject to risks related to the ongoing U.S.-China trade dispute, including increased tariffs on materials that we use in manufacturing, which could adversely affect our business, financial condition and operating results.
We expect this ban to continue to adversely affect orders from our customers for the foreseeable future. 21 Table of Contents We are subject to risks related to the ongoing U.S.-China trade dispute, including increased tariffs on materials that we use in manufacturing, which could adversely affect our business, financial condition and operating results.
The current global economic downturn and volatility and adverse conditions in the capital and credit markets have negatively affected levels of business and consumer spending, heightening concerns about the likelihood of a global recession and potential default of various national bonds and debt backed by individual countries.
The current volatility and adverse conditions in the capital and credit markets have negatively affected levels of business and consumer spending, heightening concerns about the likelihood of a global recession and potential default of various national bonds and debt backed by individual countries. Such developments, as well as the policies impacting these, could adversely affect our financial results.
If customers choose to delay, defer or reduce transactions with us or do business with our competitors instead of us because of any such issues, then our business, financial condition and operating results would be adversely affected. In addition, our share price could experience periods of increased volatility as a result of shareholder activism.
If customers choose to delay, defer or reduce transactions with us or do business with our competitors instead of us because of any such issues, then our business, financial condition and operating results would be adversely affected.
If we are unable to assert in any future reporting periods that our internal control over financial reporting is effective (or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls), we could lose investor confidence in the accuracy and completeness of our financial reports, which would have an adverse effect on our share price.
If we are unable to assert in any future reporting periods that our internal control over financial reporting is effective (or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls), we could lose investor confidence in the accuracy and completeness of our financial reports, which would have an adverse effect on our share price. 26 Table of Contents Given the nature and complexity of our business and the fact that some members of our management team are located in Thailand while others are located in the U.S., control deficiencies may periodically occur.
We will continue to monitor legislative and regulatory developments to assess the impact on our business, financial condition and operating results. 26 Table of Contents We have incurred and will continue to incur significant increased costs as a result of operating as a public company, and our management will be required to continue to devote substantial time to various compliance initiatives.
We have incurred and will continue to incur significant increased costs as a result of operating as a public company, and our management will be required to continue to devote substantial time to various compliance initiatives.
These uncertainties could limit the legal protections available to foreign investors. Furthermore, any litigation in the PRC may be protracted and result in substantial costs and diversion of resources and management’s attention. Natural disasters, epidemics, acts of terrorism and political and economic developments could harm our business, financial condition and operating results.
Furthermore, any litigation in the PRC may be protracted and result in substantial costs and diversion of resources and management’s attention. 22 Table of Contents Natural disasters, epidemics, acts of terrorism and political and economic developments could harm our business, financial condition and operating results. Natural disasters could severely disrupt our manufacturing operations and increase our supply chain costs.
If the inflation rate continues to increase, the costs of labor and other expenses could also increase. There is no assurance that our revenues will increase at the same rate to maintain the same level of profitability.
Although inflation rates have recently declined, inflation can adversely affect us by increasing the costs of labor and other expenses. There is no assurance that our revenues will increase at the same rate to maintain the same level of profitability.
This had an 21 Table of Contents immediate impact on our customer orders in the three months ended June 28, 2019, which affected our revenue for that quarter. We expect this ban to continue to adversely affect orders from our customers for the foreseeable future.
This had an immediate impact on our customer orders in the three months ended June 28, 2019, which affected our revenue for that quarter.
Certain provisions in our constitutional documents may discourage our acquisition by a third party, which could limit our shareholders' opportunity to sell shares at a premium.
In addition, our share price could experience periods of increased volatility as a result of shareholder activism. 28 Table of Contents Certain provisions in our constitutional documents may discourage our acquisition by a third party, which could limit our shareholders' opportunity to sell shares at a premium.
Some of our customers and suppliers have in the past and may in the future experience financial difficulty, particularly in light of the global economic downturn and uncertainty due to COVID-19 and subsequent adverse conditions in the credit markets that have affected access to capital and liquidity.
Our exposure to financially troubled customers or suppliers could harm our business, financial condition and operating results. Some of our customers and suppliers have in the past and may in the future experience financial difficulty, particularly in light of adverse conditions in the credit markets that have affected access to capital and liquidity.
In addition, if we were found to be in violation of these laws, we could be subject to governmental fines, liability to our customers and damage to our reputation, which would also have a material adverse effect on our business, financial condition and operating results.
In addition, if we were found to be in violation of these laws, we could be subject to governmental fines, liability to our customers and damage to our reputation, which would also have a material adverse effect on our business, financial condition and operating results. 27 Table of Contents Risks Related to Ownership of Our Ordinary Shares Our share price may be volatile due to fluctuations in our operating results and other factors, including the activities and operating results of our customers or competitors, any of which could cause our share price to decline.
We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our shareholders.
Such adverse conditions could negatively impact demand for our products, which could adversely affect our business, financial condition and operating results. 23 Table of Contents We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our shareholders.
Removed
Our exposure to financially troubled customers or suppliers could harm our business, financial condition and operating results.
Added
Many jurisdictions have enacted tax laws that will take effect in 2024 and 2025 to implement Pillar Two rules. Other countries have announced plans to adopt tax laws to implement similar legislation with varying effective dates in the future. Certain jurisdictions in which we operate have not adopted corresponding legislation to date.
Removed
Natural disasters could severely disrupt our manufacturing operations and increase our supply chain costs.
Added
These changes could increase tax uncertainty and may adversely affect our provision for income taxes and operating results. We will continue to monitor legislative and regulatory developments to assess the impact on our business, financial condition and operating results.
Removed
Although we continue to take precautionary measures, including leaves of absence for affected employees and their close contacts, stringent contact tracing, and enhanced safe distancing measures, any worsening of the COVID-19 pandemic or the emergence of other infectious diseases may result in more stringent measures being implemented by local authorities, such as shutting down our manufacturing facilities, which would have a significant negative impact on our operations.
Removed
Such adverse conditions could negatively impact demand for our products, which could adversely affect our business, financial condition and operating results. The loan agreements for our long-term debt obligations and other credit facilities contain financial ratio covenants that may impair our ability to conduct our business.
Removed
The loan agreements for our long-term and short-term debt obligations contain financial ratio covenants that may limit management’s discretion with respect to certain business matters.
Removed
These covenants require us to maintain a specified maximum total leverage ratio, minimum debt service coverage ratio (earnings before interest and depreciation and amortization plus cash on hand minus short-term debt), a minimum tangible net worth and a minimum quick ratio, which may restrict our ability to incur additional indebtedness and limit our ability to use our cash.
Removed
In the event of our default on these loans or a breach of a covenant, the lenders may immediately cancel the loan agreement, deem the full amount of the outstanding indebtedness immediately due and payable, charge us interest on a monthly basis on the full amount of the outstanding indebtedness and, if we cannot repay all of our outstanding obligations, sell the assets pledged as collateral for the loan in order to fulfill our obligation.
Removed
We may also be held responsible for any damages and related expenses incurred by the lender as a result of any default. Any failure by us or our subsidiaries to comply with these agreements could harm our business, financial condition and operating results.
Removed
Many countries are expected to issue laws and regulations to conform to this regime.
Removed
Given the nature and complexity of our business and the fact that some members of our management team are located in Thailand while others are located in the U.S., control deficiencies may periodically occur.
Removed
Risks Related to Ownership of Our Ordinary Shares Our share price may be volatile due to fluctuations in our operating results and other factors, including the activities and operating results of our customers or competitors, any of which could cause our share price to decline.

Item 2. Properties

Properties — owned and leased real estate

1 edited+1 added−2 removed1 unchanged
The following table presents the approximate square footage of our principal facilities as of June 30, 2023: Location Owned/Leased Approximate Square Footage (Square feet) Pinehurst Campus, Bangkok, Thailand Owned 1,731,000 Hemaraj Campus, Chonburi, Thailand Owned 1,496,000 Fuzhou, Fujian, PRC Leased (1) 303,000 Santa Clara, California, United States Owned 72,000 Mountain Lakes, New Jersey, United States Leased (2) 28,000 Yokneam Illit, Israel Leased (3) 27,000 Grand Cayman, Cayman Islands Leased (4) 1,280 (1) Leased until September 30, 2023.
The following table presents the approximate square footage of our principal facilities as of June 28, 2024: Location Owned/Leased Approximate Square Footage (Square feet) Pinehurst Campus, Bangkok, Thailand Owned 1,731,000 Hemaraj Campus, Chonburi, Thailand Owned 1,496,000 Fuzhou, Fujian, PRC Leased (1) 334,000 Santa Clara, California, United States Owned 72,000 Mountain Lakes, New Jersey, United States Leased (2) 28,000 Yokneam Illit, Israel Leased (3) 27,000 Grand Cayman, Cayman Islands Leased (4) 1,280 (1) Leased until September 30, 2026.
Removed
(2) Leased until June 30, 2025. (3) Leased until October 5, 2024. (4) Leased until April 14, 2024. ITEM 3. LEGAL PROCEEDINGS. From time to time, we may be involved in litigation relating to claims arising in the ordinary course of our business. There currently are no material claims or actions pending or threatened against us. ITEM 4.
Added
(2) Leased until June 30, 2034. (3) Leased until October 5, 2024. (4) Leased until April 14, 2027.
Removed
MINE SAFETY DISCLOSURES . Not applicable. 31 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+0 added−0 removed5 unchanged
Our share repurchase program does not have an expiration date. During the year ended June 30, 2023, repurchases under our share repurchase program were made in accordance with Rule 10b-18, including pursuant to a pre-set trading plan adopted in accordance with Rule 10b5-1.
Our share repurchase program does not have an expiration date. During the year ended June 28, 2024, repurchases under our share repurchase program were made in accordance with Rule 10b-18, including pursuant to a pre-set trading plan adopted in accordance with Rule 10b5-1.
The following graph compares the cumulative total return to holders of Fabrinet’s ordinary shares with the cumulative total return of the NASDAQ Composite Index, and the NASDAQ Telecommunications Index. The graph assumes that $100 was invested in Fabrinet’s ordinary shares and in each of the indices discussed above on June 29, 2018, and that all dividends were reinvested.
The following graph compares the cumulative total return to holders of Fabrinet’s ordinary shares with the cumulative total return of the NASDAQ Composite Index, and the NASDAQ Telecommunications Index. The graph assumes that $100 was invested in Fabrinet’s ordinary shares and in each of the indices discussed above on June 28, 2019, and that all dividends were reinvested.
Historic stock performance is not necessarily indicative of future stock price performance. 33 Table of Contents ITEM 6. [Reserved]
Historic stock performance is not necessarily indicative of future stock price performance. ITEM 6. [Reserved] 34 Table of Contents
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our ordinary shares are listed on the New York Stock Exchange under the symbol “FN”. Holders of Record As of August 11, 2023, there were 5 shareholders of record of our ordinary shares.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our ordinary shares are listed on the New York Stock Exchange under the symbol “FN”. Holders of Record As of August 9, 2024, there were 6 shareholders of record of our ordinary shares.
As of June 30, 2023, we had a remaining authorization to repurchase up to $52.4 million worth of our ordinary shares. 32 Table of Contents Equity Compensation Plan Information The equity compensation plan information required by this item, which includes a summary of the number of outstanding equity awards granted to employees and directors as well as the number of securities remaining available for future issuance under our equity compensation plans as of June 30, 2023, is incorporated by reference to our Proxy Statement for our 2023 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of our fiscal year ended June 30, 2023.
As of June 28, 2024, we had a remaining authorization to repurchase up to $60.5 million worth of our ordinary shares. 33 Table of Contents Equity Compensation Plan Information The equity compensation plan information required by this item, which includes a summary of the number of outstanding equity awards granted to employees and directors as well as the number of securities remaining available for future issuance under our equity compensation plans as of June 28, 2024, is incorporated by reference to our Proxy Statement for our 2024 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of our fiscal year ended June 28, 2024.
In February 2018, May 2019, August 2020 and August 2022, we announced that our board of directors approved increases 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. The repurchased shares will be held as treasury stock.
In February 2018, May 2019, August 2020, August 2022, and August 2023, we announced that our board of directors approved increases 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. The repurchased shares will be held as treasury stock.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table summarizes share repurchase activity for the three months ended June 30, 2023: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased As Part of Publicly Announced Program (1) Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (1) April 1, 2023 – April 28, 2023 284,796 $ 95.56 284,796 $ 63,571,059 April 29, 2023 – May 26, 2023 119,824 $ 92.94 119,824 $ 52,434,440 May 27, 2023 – June 30, 2023 — $ — — $ 52,434,440 Total 404,620 404,620 (1) On August 21, 2017, we announced that our board of directors had approved a share repurchase program to permit us to repurchase up to $30.0 million worth of our issued and outstanding ordinary shares in the open market in accordance with applicable rules and regulations, including pursuant to pre-set trading plans adopted in accordance with Rule 10b5-1 under the Exchange Act of 1934.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table summarizes share repurchase activity for the three months ended June 28, 2024: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased As Part of Publicly Announced Program (1) Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (1) March 30, 2024 – April 26, 2024 16,640 $ 168.71 16,640 $ 61,253,848 April 27, 2024 – May 24, 2024 4,247 $ 174.14 4,247 $ 60,514,282 May 25, 2024 – June 28, 2024 — $ — — $ 60,514,282 Total 20,887 20,887 (1) On August 21, 2017, we announced that our board of directors had approved a share repurchase program to permit us to repurchase up to $30.0 million worth of our issued and outstanding ordinary shares in the open market in accordance with applicable rules and regulations, including pursuant to pre-set trading plans adopted in accordance with Rule 10b5-1 under the Exchange Act of 1934.
During the year ended June 30, 2023, 488,477 shares were repurchased under the program, at an average price per share (excluding other direct costs) of $97.38, for an aggregate purchase price of $47.6 million.
During the year ended June 28, 2024, 211,726 shares were repurchased under the program, at an average price per share (excluding other direct costs) of $186.49, for an aggregate purchase price of $39.5 million.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

69 edited+10 added−7 removed85 unchanged
We recorded income before income taxes of $260.1 million for fiscal year 2023, compared with $207.0 million for fiscal year 2022. Income tax expense . Our provision for income tax reflects an effective tax rate of 4.7% and 3.2% for fiscal year 2023 and fiscal year 2022, respectively.
Income before income taxes . We recorded income before income taxes of $260.1 million for fiscal year 2023, compared with $207.0 million for fiscal year 2022. Income tax expense . Our provision for income tax reflects an effective tax rate of 4.7% and 3.2% for fiscal year 2023 and fiscal year 2022, respectively.
We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The evaluation results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Furthermore, in some cases, our efforts to identify and secure alternative supply chain sources has resulted in our customers or their end customers requiring requalification and validation of components, a process that can often be lengthy and has negatively impacted the timing of our revenue.
Furthermore, in some cases, our efforts to identify and secure alternative supply chain sources have resulted in our customers or their end customers requiring requalification and validation of components, a process that can often be lengthy and has negatively impacted the timing of our revenue.
Forward-looking statements include, but are not limited to, statements about: • our goals and strategies; • our and our customers’ estimates regarding future revenues, operating results, expenses, capital requirements and liquidity; • our belief that we will be able to maintain favorable pricing on our services; • our expectation that the portion of our future revenues attributable to customers in regions outside of North America will increase compared with the portion of those revenues for fiscal year 2023; • our expectation that we will incur incremental costs of revenue as a result of our planned expansion of our business into new geographic markets; • our expectation that our fiscal year 2024 selling, general and administrative (“SG&A”) expenses will increase compared to our fiscal year 2023 SG&A expenses; • our expectation that our employee costs will increase in Thailand and the People’s Republic of China (“PRC”); • our future capital expenditures and our needs for additional financing; • the expansion of our manufacturing capacity, including into new geographies; • the growth rates of our existing markets and potential new markets; • our ability, and the ability of our customers and suppliers, to respond successfully to technological or industry developments; • our expectations regarding the potential impact of macroeconomic conditions and international political instability on our business, financial condition and operating results; • our suppliers’ estimates regarding future costs; • our ability to increase our penetration of existing markets and to penetrate new markets; • our plans to diversify our sources of revenues; • our plans to execute acquisitions; • trends in the optical communications, industrial lasers, and sensors markets, including trends to outsource the production of components used in those markets; • our ability to attract and retain a qualified management team and other qualified personnel and advisors; and • competition in our existing and new markets.
Forward-looking statements include, but are not limited to, statements about: • our goals and strategies; • our and our customers’ estimates regarding future revenues, operating results, expenses, capital requirements and liquidity; • our belief that we will be able to maintain favorable pricing on our services; • our expectation that the portion of our future revenues attributable to customers in regions outside of North America will increase compared with the portion of those revenues for fiscal year 2024; • our expectation that we will incur incremental costs of revenue as a result of our planned expansion of our business into new geographic markets; • our expectation that our fiscal year 2025 selling, general and administrative (“SG&A”) expenses will increase compared to our fiscal year 2024 SG&A expenses; • our expectation that our employee costs will increase in Thailand and the People’s Republic of China (“PRC”); • our future capital expenditures and our needs for additional financing; • the expansion of our manufacturing capacity, including into new geographies; • the growth rates of our existing markets and potential new markets; • our ability, and the ability of our customers and suppliers, to respond successfully to technological or industry developments; • our expectations regarding the potential impact of macroeconomic conditions and international political instability on our business, financial condition and operating results; • our suppliers’ estimates regarding future costs; • our ability to increase our penetration of existing markets and to penetrate new markets; • our plans to diversify our sources of revenues; • our plans to execute acquisitions; • trends in the optical communications, automotive, industrial lasers and other markets, including trends to outsource the production of components used in those markets; • our ability to attract and retain a qualified management team and other qualified personnel and advisors; and • competition in our existing and new markets.
Capital investments by foreign-invested enterprises outside of the PRC are also subject to limitations, which include approvals by the Ministry of Commerce, SAFE and the State Development and Reform Commission. 38 Table of Contents Circular 142 regulates the conversion by a foreign-invested company of foreign currency into RMB by restricting how the converted RMB may be used.
Capital investments by foreign- 39 Table of Contents invested enterprises outside of the PRC are also subject to limitations, which include approvals by the Ministry of Commerce, SAFE and the State Development and Reform Commission. Circular 142 regulates the conversion by a foreign-invested company of foreign currency into RMB by restricting how the converted RMB may be used.
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 believed it was more likely than not that all of the deferred tax assets of such subsidiary would not be utilized.
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. Therefore, management believed it was more likely than not that all of the deferred tax assets of such subsidiary would not be utilized.
“We,” “us” and “our” refer to Fabrinet and its subsidiaries. 34 Table of Contents Overview For an overview of our business, see PART I – ITEM 1. BUSINESS. Fiscal Years We utilize a 52-53 week fiscal year ending on the last Friday in June.
“We,” “us” and “our” refer to Fabrinet and its subsidiaries. 35 Table of Contents Overview For an overview of our business, see PART I – ITEM 1. BUSINESS. Fiscal Years We utilize a 52-53 week fiscal year ending on the last Friday in June.
The compensation committee of our board of directors approved a fiscal year 2023 executive incentive plan with quantitative objectives based solely on achieving certain revenue targets and non-U.S. GAAP operating margin targets for fiscal year 2023. Bonuses under the fiscal year 2023 executive incentive plan are payable after the end of fiscal year 2023.
The compensation committee of our board of directors approved a fiscal year 2024 executive incentive plan with quantitative objectives based solely on achieving certain revenue targets and non-U.S. GAAP operating margin targets for fiscal year 2024. Bonuses under the fiscal year 2024 executive incentive plan are payable after the end of fiscal year 2024.
The Thai baht liabilities represent trade accounts payable, accrued expenses, income tax payable and other payables. We manage our 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.
The Thai baht liabilities represent trade accounts payable, accrued expenses, income tax payable, accrued employee benefits and other payables. We manage our 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.
In August 2022, the compensation committee awarded bonuses to our executive employees for Company achievements of performance under our fiscal year 2022 executive incentive plan. Discretionary merit-based bonus awards are also available to our non-executive employees and payable on a quarterly basis.
In August 2023, the compensation committee awarded bonuses to our executive employees for Company achievements of performance under our fiscal year 2023 executive incentive plan. Discretionary merit-based bonus awards are also available to our non-executive employees and payable on a quarterly basis.
In fiscal year 2022, the compensation committee approved a fiscal year 2022 executive incentive plan with quantitative objectives that were based solely on achieving certain revenue targets and non-U.S. GAAP operating margin targets for fiscal year 2022.
In fiscal year 2023, the compensation committee approved a fiscal year 2023 executive incentive plan with quantitative objectives that were based solely on achieving certain revenue targets and non-U.S. GAAP operating margin targets for fiscal year 2023.
We believe that our current cash and cash equivalents, short-term investments, cash flow from operations, and funds available through our credit facility will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months following the filing of this Annual Report on Form 10-K.
We believe that our current cash and cash equivalents, short-term investments, cash flow from operations, and funds available through our credit facility will be sufficient to meet our working capital and capital expenditure needs for at least the 46 Table of Contents next 12 months following the filing of this Annual Report on Form 10-K.
We consider the policies discussed below to be critical to an understanding of our consolidated financial statements, as their application places the most significant demands on our management’s judgment. A quantitative sensitivity analysis is provided where such information is reasonably available, can be reliably estimated, and provides material information to investors.
We consider the policies discussed below to be critical to an understanding of our consolidated financial statements, as their application places the most significant demands on our management’s judgment. 40 Table of Contents A quantitative sensitivity analysis is provided where such information is reasonably available, can be reliably estimated, and provides material information to investors.
The weighted average interest rate on our cash and cash equivalents for fiscal year 2023, fiscal year 2022 and fiscal year 2021 was 2.4%, 0.5% and 0.7%, respectively. Our cash investments are made in accordance with an investment policy approved by the audit committee of our board of directors.
The weighted average interest rate on our cash and cash equivalents for fiscal year 2024, fiscal year 2023 and fiscal year 2022 was 4.4%, 2.4% and 0.5%, respectively. Our cash investments are made in accordance with an investment policy approved by the audit committee of our board of directors.
The amounts used to assess sensitivity are included for illustrative purposes only and do not represent management’s predictions of variability. 39 Table of Contents Our critical accounting policies and the adoption of new accounting policies are disclosed in Note 2 – Summary of significant accounting policies. There were no changes to our accounting policies.
The amounts used to assess sensitivity are included for illustrative purposes only and do not represent management’s predictions of variability. Our critical accounting policies and the adoption of new accounting policies are disclosed in Note 2 – Summary of significant accounting policies. There were no changes to our accounting policies.
We expect to incur incremental costs of revenue as a result of our planned expansion into new geographic markets, though we are not able to determine the amount of these incremental expenses. 36 Table of Contents During fiscal years 2023, 2022 and 2021, discretionary merit-based bonus awards were made to our non-executive employees.
We expect to incur incremental costs of revenue as a result of our planned expansion into new geographic markets, though we are not able to determine the amount of these incremental expenses. 37 Table of Contents During fiscal years 2024, 2023 and 2022, discretionary merit-based bonus awards were made to our non-executive employees.
Our SG&A expenses increased during fiscal year 2023, compared with fiscal year 2022, mainly due to (1) recognizing an actuarial loss on obligation of $1.1 million in fiscal year 2023, compared with recognizing an actuarial gain on obligation of $1.5 million in fiscal year 2022; (2) an increase in executive benefits of $1.0 million; (3) an increase in R&D expenses of $0.8 million; (4) an increase in legal and consulting fees of $0.6 million; and (5) an increase in insurance expenses of $0.3 million; offset by a net decrease in allowance for doubtful accounts of $1.5 million.
Our SG&A expenses increased during fiscal year 2023, compared with fiscal year 2022, mainly due to (1) recognizing an actuarial loss on obligation of $1.1 million in fiscal year 2023, compared with recognizing an actuarial gain on obligation of $1.5 million in fiscal year 2022; (2) an increase in executive benefits of $1.0 million; (3) an increase in R&D expenses of $0.8 million; (4) an increase in legal and consulting fees of $0.6 million; and (5) an increase in insurance expenses of $0.3 million; offset by a net decrease in allowance for expected credit losses of $1.5 million.
Based on the short- and medium-term indications and forecasts from our customers, we expect that the portion of our 35 Table of Contents future revenues attributable to customers in regions outside of North America will increase as compared with the portion of revenues attributable to such customers during fiscal year 2023.
Based on the short- and medium-term indications and forecasts from our 36 Table of Contents customers, we expect that the portion of our future revenues attributable to customers in regions outside of North America will increase as compared with the portion of revenues attributable to such customers during fiscal year 2024.
Therefore, any financial difficulties that our key customers experience could materially and adversely affect our operating results and financial condition by generating charges for inventory write-offs, provisions for doubtful accounts, and increases in working capital requirements due to increased days inventory and in accounts receivable.
Therefore, any financial difficulties that our key customers experience could materially and adversely affect our operating results and financial condition by generating charges for inventory write-offs, provisions for expected credit losses, and increases in working capital requirements due to increased days inventory and in accounts receivable.
In addition, significant judgment is required in determining the groups of assets for which impairment tests are separately performed. Allowance for Doubtful Accounts We perform ongoing credit evaluations of our customers’ financial condition and make provisions for doubtful accounts based on the outcomes of these credit evaluations.
In addition, significant judgment is required in determining the groups of assets for which impairment tests are separately performed. Allowance for Expected Credit Losses We perform ongoing credit evaluations of our customers’ financial condition and make provisions for expected credit losses based on the outcomes of these credit evaluations.
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.
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 $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.
The foreign exchange loss was mainly due to (1) unrealized foreign exchange loss from revaluation of outstanding Thai baht assets and liabilities of $3.5 million for fiscal year 2023, and (2) realized foreign exchange loss from payment/receipt of $3.1 million for fiscal year 2023, offset by (1) foreign exchange gain from subsidiaries in the PRC and the U.K., totaling $1.5 million for fiscal year 2023, (2) unrealized foreign exchange gain from mark-to-market of forward contracts of $1.2 million for fiscal year 2023, and (3) unrealized foreign exchange gain from revaluation of other currencies of $0.4 million for fiscal year 2023. 43 Table of Contents Income before income taxes .
The foreign exchange loss was mainly due to (1) unrealized foreign exchange loss from revaluation of outstanding Thai baht assets and liabilities of $3.5 million for fiscal year 2023, and (2) realized foreign exchange loss from payment/receipt of $3.1 million for fiscal year 2023, offset by (1) foreign exchange gain from subsidiaries in the PRC and the U.K., totaling $1.5 million for fiscal year 2023, (2) unrealized foreign exchange gain from mark-to-market of forward contracts of $1.2 million for fiscal year 2023, and (3) unrealized foreign exchange gain from revaluation of other currencies of $0.4 million for fiscal year 2023.
Charges included in cost of revenues for bonus awards to non-executive employees were $6.8 million, $6.0 million and $5.6 million for fiscal years 2023, 2022 and 2021, respectively. Share-based compensation expense included in cost of revenues was $6.7 million, $6.0 million and $6.2 million for fiscal years 2023, 2022 and 2021, respectively.
Charges included in cost of revenues for bonus awards to non-executive employees were $7.1 million, $6.8 million and $6.0 million for fiscal years 2024, 2023 and 2022, respectively. Share-based compensation expense included in cost of revenues was $7.2 million, $6.7 million and $6.0 million for fiscal years 2024, 2023 and 2022, respectively.
Our interest income increased by $9.0 million to $11.2 million for fiscal year 2023, compared with $2.2 million for fiscal year 2022. The increase was primarily due to a higher weighted average interest rate in fiscal year 2023 compared with fiscal year 2022. Interest expense .
Our interest income increased by $9.0 million to $11.2 million for fiscal year 2023, compared with $2.2 million for fiscal year 2022. The increase was primarily due to a higher weighted average interest rate in fiscal year 2023 compared with fiscal year 2022. 45 Table of Contents Interest expense .
The increase in cash provided by operating activities for fiscal year 2023 as compared to fiscal year 2022 was primarily driven by higher net income and was also affected by cash-favorable working capital changes. Investing Activities Investing cash flows consist primarily of investment purchases, sales, maturities, and disposals; and capital expenditures.
The increase in cash provided by operating activities for fiscal year 2024 as compared to fiscal year 2023 was primarily driven by efficient cash-favorable working capital changes and higher net income. Investing Activities Investing cash flows consist primarily of investment purchases, sales, maturities, and disposals; and capital expenditures.
Charges included in SG&A expenses for bonus distributions to non-executive and executive employees were $6.1 million, $5.0 million and $4.6 million for fiscal years 2023, 2022 and 2021, respectively. Share-based compensation expense included in SG&A expenses was $20.9 million, $22.1 million and $19.3 million for fiscal years 2023, 2022 and 2021, respectively.
Charges included in SG&A expenses for bonus distributions to non-executive and executive employees were $6.4 million, $6.1 million and $5.0 million for fiscal years 2024, 2023 and 2022, respectively. Share-based compensation expense included in SG&A expenses was $21.2 million, $20.9 million and $22.1 million for fiscal years 2024, 2023 and 2022, respectively.
Years Ended June 30, 2023 June 24, 2022 June 25, 2021 Revenues 100.0 % 100.0 % 100.0 % Cost of revenues (87.3) (87.7) (88.2) Gross profit 12.7 12.3 11.8 Selling, general and administrative expenses (2.9) (3.3) (3.8) Restructuring and other related costs (0.3) 0.0 0.0 Operating income 9.5 9.0 8.0 Interest income 0.4 0.1 0.2 Interest expense (0.1) 0.0 0.0 Foreign exchange gain (loss), net 0.0 0.1 0.0 Other income (expense), net 0.0 (0.1) (0.2) Income before income taxes 9.8 9.1 8.0 Income tax expense (0.4) (0.3) (0.1) Net income 9.4 8.8 7.9 Other comprehensive income (loss), net of tax 0.2 (0.3) (0.3) Net comprehensive income 9.6 % 8.5 % 7.6 % 42 Table of Contents The following table sets forth our revenues by end market for the periods indicated.
Years Ended June 28, 2024 June 30, 2023 June 24, 2022 Revenues 100.0 % 100.0 % 100.0 % Cost of revenues (87.6) (87.3) (87.7) Gross profit 12.4 12.7 12.3 Selling, general and administrative expenses (2.8) (2.9) (3.3) Restructuring and other related costs 0.0 (0.3) 0.0 Operating income 9.6 9.5 9.0 Interest income 1.2 0.4 0.1 Interest expense 0.0 (0.1) 0.0 Foreign exchange gain (loss), net 0.0 0.0 0.1 Other income (expense), net 0.0 0.0 (0.1) Income before income taxes 10.8 9.8 9.1 Income tax expense (0.5) (0.4) (0.3) Net income 10.3 9.4 8.8 Other comprehensive income (loss), net of tax 0.2 0.2 (0.3) Net comprehensive income 10.5 % 9.6 % 8.5 % 43 Table of Contents The following table sets forth our revenues by end market and product category for the periods indicated.
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.
During fiscal year 2024, our subsidiary in Israel 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.
The following table presents percentages of total revenues by geographic regions: Years Ended June 30, 2023 June 24, 2022 June 25, 2021 North America 48.0 % 49.3 % 47.2 % Asia-Pacific 43.2 37.0 35.6 Europe 8.8 13.7 17.2 100.0 % 100.0 % 100.0 % Our Contracts We enter into supply agreements with our customers which generally have an initial term of up to three years, subject to automatic renewals for subsequent one-year terms unless expressly terminated.
The following table presents percentages of total revenues by geographic regions: Years Ended June 28, 2024 June 30, 2023 June 24, 2022 North America 36.5 % 48.0 % 49.3 % Asia-Pacific 57.1 43.2 37.0 Europe 6.4 8.8 13.7 100.0 % 100.0 % 100.0 % Our Contracts We enter into supply agreements with our customers which generally have an initial term of up to three years, subject to automatic renewals for subsequent one-year terms unless expressly terminated.
As of June 30, 2023, there was $143.0 million in foreign currency forward contracts outstanding on the Thai baht payables. As of June 24, 2022, there was $135.0 million in foreign currency forward contracts outstanding on the Thai baht payables. The RMB assets represent cash and cash equivalents, trade accounts receivable and other current assets.
As of June 28, 2024, there was $135.0 million of foreign currency forward contracts outstanding on the Thai baht payables. As of June 30, 2023, there was $143.0 million of foreign currency forward contracts outstanding on the Thai baht payables. The RMB assets represent cash and cash equivalents, trade accounts receivable, other receivables, and other current assets.
Revenues are attributed to a particular geographic area based on the bill-to-location of our customers, notwithstanding that our customers may ultimately ship their products to end customers in a different geographic region. The substantial majority of our revenues are derived from our manufacturing facilities in Asia-Pacific.
Revenues are attributed to a particular geographic area based on the bill-to location of our customers, notwithstanding that the products may be shipped to a different geographic region. The substantial majority of our revenues are derived from our manufacturing facilities in Asia-Pacific.
Years Ended (in thousands) June 30, 2023 June 24, 2022 June 25, 2021 Capital expenditures $ 66,712 $ 80,462 $ 52,054 During fiscal year 2023, fiscal year 2022, and fiscal year 2021, we invested in a manufacturing building at our Chonburi campus and continued to purchase equipment to support the expansion of our manufacturing facilities in Thailand, the PRC and Israel.
Years Ended (in thousands) June 28, 2024 June 30, 2023 June 24, 2022 Capital expenditures $ 49,270 $ 66,712 $ 80,462 During fiscal year 2024, fiscal year 2023, and fiscal year 2022, we invested in a manufacturing building at our Chonburi campus and continued to purchase equipment to support the expansion of our manufacturing facilities in Thailand, the PRC and Israel.
The other comprehensive income was mainly due to (1) unrealized gain from mark-to-market of available-for-sale debt securities of $9.1 million for fiscal year 2023, and (2) unrealized gain from mark-to-market of forward contracts and interest rate swap agreement of $2.1 million for fiscal year 2023. Comparison of Fiscal Year 2022 with Fiscal Year 2021 Revenues .
The increase in other comprehensive income was mainly due to (1) unrealized gain from mark-to-market of available-for-sale debt securities of $9.1 million for fiscal year 2023, and (2) unrealized gain from mark-to-market of forward contracts and interest rate swap agreement of $2.1 million for fiscal year 2023.
Our fiscal years 2023, 2022, and 2021 ended on June 30, 2023, June 24, 2022 and June 25, 2021, and consisted of 53 weeks, 52 weeks and 52 weeks, respectively.
Our fiscal years 2024, 2023, and 2022 ended on June 28, 2024, June 30, 2023 and June 24, 2022, and consisted of 52 weeks, 53 weeks and 52 weeks, respectively.
The RMB liabilities represent trade accounts payable, accrued expenses, income tax payable and other payables. As of June 30, 2023 and June 24, 2022, we did not have any derivative contracts denominated in RMB. The GBP assets represent cash and trade accounts receivable. The GBP liabilities represent trade accounts payable and other payables.
The RMB liabilities represent trade accounts payable, accrued expenses, income tax payable, accrued payroll, bonus and related expenses, and other payables. As of June 28, 2024 and June 30, 2023, we did not have any derivative contracts denominated in RMB. The GBP assets represent cash, trade accounts receivable, and other current assets.
Operating Lease As of June 30, 2023, we have certain operating lease arrangements under which the lease payments are calculated using the straight-line method. Our rental expenses under these leases which will be paid within one year is $1.2 million and after one year is $0.1 million.
Operating Lease As of June 28, 2024, we have certain operating lease arrangements under which the lease payments are calculated using the straight-line method. Our rental expenses under these leases which will be paid within one year is $1.6 million and after one year is $4.3 million.
Liquidity and Capital Resources Cash Flows and Working Capital We primarily finance our operations through cash flow from operating activities. As of June 30, 2023 and June 24, 2022, we had cash, cash equivalents, and short-term investments of $550.5 million and $478.2 million, respectively, and outstanding debt of $12.2 million and $27.4 million, respectively.
Liquidity and Capital Resources Cash Flows and Working Capital We primarily finance our operations through cash flow from operating activities. As of June 28, 2024 and June 30, 2023, we had cash, cash equivalents, and short-term investments of $858.6 million and $550.5 million, respectively, and no outstanding debt and outstanding debt of $12.2 million, respectively.
Cash used in financing activities was lower for fiscal year 2023 as compared to the fiscal year 2022 primarily due to less cash paid for share repurchases and a decrease in withholding tax related to net share settlement of restricted share units, offset by an increase in the repayment of long-term borrowings due to an additional installment from the additional week in the first quarter of fiscal year 2023.
Cash used in financing activities was lower for fiscal year 2024 as compared to the fiscal year 2023 primarily due to lower volume of share repurchases and a decrease in withholding tax related to net share settlement of restricted share units, and lower repayment of long-term borrowings due to one fewer installment from one fewer week in the first quarter of fiscal year 2024 compared to fiscal year 2023.
Material Cash Requirements for Contractual Obligations As of June 30, 2023, we had material cash requirements of $13.5 million including scheduled payments within one year of $13.4 million and after one year of $0.1 million. These material cash requirements consisted of the following contractual and other obligations.
Material Cash Requirements for Contractual Obligations As of June 28, 2024, we had material cash requirements of $5.9 million including scheduled payments within one year of $1.6 million and after one year of $4.3 million. These material cash requirements consisted of the following contractual and other obligations.
We expect our capital expenditures for fiscal year 2024 to increase compared to fiscal year 2023 mainly due to the purchase of manufacturing equipment to support the expansion of manufacturing facilities and investment in our information technology infrastructure. 46 Table of Contents Recent Accounting Pronouncements See Note 2 of the Notes to Consolidated Financial Statements for recent accounting pronouncements that could have an effect on us.
We expect our capital expenditures for fiscal year 2025 to increase compared to fiscal year 2024 mainly due to investment in the new manufacturing building and building improvements at our Chonburi campus. 47 Table of Contents Recent Accounting Pronouncements See Note 2 of the Notes to Consolidated Financial Statements for recent accounting pronouncements that could have an effect on us.
The increase in foreign exchange gain was mainly due to (1) realized foreign exchange gain from payment/receipt of $1.1 million for fiscal year 2022, as compared to realized foreign exchange loss from payment/receipt of 1.0 million for fiscal year 2021, (2) higher unrealized foreign exchange gain from revaluation of outstanding Thai baht assets and liabilities of $1.6 million, and (3) lower unrealized foreign exchange loss from mark-to-market of forward contracts of $0.7 million, offset by (1) realized foreign exchange loss from subsidiaries in the PRC and the U.K., totaling $1.2 million for fiscal year 2022, as compared to realized foreign exchange gain from subsidiaries in the PRC and the U.K., totaling $1.3 million for fiscal year 2021, and (2) lower unrealized foreign exchange gain from revaluation of other currencies of $0.1 million. 44 Table of Contents Income before income taxes .
The foreign exchange gain was mainly due to (1) lower realized loss from payment/receipt of $1.0 million, (2) unrealized gain from revaluation of outstanding Thai baht assets and liabilities of $0.9 million, and (3) higher unrealized gain from mark-to-market of forward contracts of $0.3 million, offset by (1) unrealized loss from revaluation of currencies other than Thai baht of $0.5 million, and (2) lower foreign exchange gain, totaling $0.1 million from our subsidiaries in the PRC and the U.K.
As of June 30, 2023 and June 24, 2022, we did not have any derivative contracts denominated in GBP. For fiscal years 2023 and 2022, we recorded an unrealized gain of $0.4 million and unrealized loss of $0.8 million, respectively, related to derivatives that are not designated as hedging instruments in the consolidated statements of operations and comprehensive income.
For fiscal years 2024 and 2023, we recorded an unrealized gain of $0.7 million and $0.4 million, respectively, related to derivatives that are not designated as hedging instruments in the consolidated statements of operations and comprehensive income.
The increase in other comprehensive loss was mainly due to (1) higher unrealized loss from mark-to-market of available-for-sale debt securities of $5.1 million, and (2) unrealized loss from foreign currency translation adjustment of $0.2 million for fiscal year 2022, as compared to unrealized gain from foreign currency translation adjustment of $0.6 million for fiscal year 2021; offset by lower unrealized loss from mark-to-market of forward contracts and interest rate swap agreement of $4.5 million.
The increase in other comprehensive income was mainly due to higher unrealized gain from mark-to-market of forward contracts and interest rate swap agreement of $1.0 million, offset by (1) lower unrealized gain from mark-to-market of available-for-sale debt securities of $0.6 million, and (2) lower gain from retirement benefits plan of $0.1 million.
Years Ended (in thousands) June 30, 2023 June 24, 2022 June 25, 2021 Revenues $ 2,645,237 $ 2,262,224 $ 1,879,350 Cost of revenues (2,308,964) (1,983,630) (1,657,987) Gross profit 336,273 278,594 221,363 Selling, general and administrative expenses (77,673) (73,941) (70,567) Restructuring and other related costs (6,896) (135) (43) Operating income 251,704 204,518 150,753 Interest income 11,234 2,205 3,783 Interest expense (1,472) (432) (1,100) Foreign exchange gain (loss), net (1,211) 2,302 508 Other income (expense), net (159) (1,627) (3,460) Income before income taxes 260,096 206,966 150,484 Income tax expense (12,183) (6,586) (2,143) Net income 247,913 200,380 148,341 Other comprehensive income (loss), net of tax 4,678 (6,527) (5,119) Net comprehensive income $ 252,591 $ 193,853 $ 143,222 The following table sets forth a summary of our consolidated statements of operations and comprehensive income as a percentage of total revenues for the periods indicated.
Years Ended (in thousands) June 28, 2024 June 30, 2023 June 24, 2022 Revenues $ 2,882,967 $ 2,645,237 $ 2,262,224 Cost of revenues (2,526,849) (2,308,964) (1,983,630) Gross profit 356,118 336,273 278,594 Selling, general and administrative expenses (78,481) (77,673) (73,941) Restructuring and other related costs (32) (6,896) (135) Operating income 277,605 251,704 204,518 Interest income 33,204 11,234 2,205 Interest expense (124) (1,472) (432) Foreign exchange gain (loss), net 382 (1,211) 2,302 Other income (expense), net 287 (159) (1,627) Income before income taxes 311,354 260,096 206,966 Income tax expense (15,173) (12,183) (6,586) Net income 296,181 247,913 200,380 Other comprehensive income (loss), net of tax 4,974 4,678 (6,527) Net comprehensive income $ 301,155 $ 252,591 $ 193,853 The following table sets forth a summary of our consolidated statements of operations and comprehensive income as a percentage of total revenues for the periods indicated.
In addition, unanticipated changes in liquidity or the financial positions of our customers or changes in economic conditions may require additional provisions for inventory due to our customers’ inability to fulfill their contractual obligations. As the market conditions or our customers’ product demands are inherently difficult to predict, the actual volumes may vary significantly from projected volumes.
In addition, unanticipated changes in liquidity or the financial positions of our customers or changes in economic conditions may require additional provisions for inventory due to our customers’ inability to fulfill their contractual obligations.
Foreign exchange gain (loss), net . We recorded foreign exchange gain, net of $2.3 million for fiscal year 2022, compared with foreign exchange gain, net of $0.5 million for fiscal year 2021.
We recorded foreign exchange gain, net of $0.4 million for fiscal year 2024, compared with foreign exchange loss, net of $1.2 million for fiscal year 2023.
We determine realized gains or losses on sale of available-for-sale debt securities on a specific identification method and record such gains or losses as interest income in the consolidated statements of operations and comprehensive income.
We determine realized gains or losses on sale of available-for-sale debt securities on a specific identification method and record such gains or losses as interest income in the consolidated statements of operations and comprehensive income. As of June 30, 2023, we had long-term borrowing under our credit facility agreement of $12.2 million.
In fiscal year 2024, we expect our SG&A expenses will increase compared with our fiscal year 2023 SG&A expenses, mainly due to increase in employee costs, sales and marketing cost and investing in information technology hardware.
In fiscal year 2025, we expect our SG&A expenses will increase compared with our fiscal year 2024 SG&A expenses, mainly due to increase in compensation related expenses and investment in information technology hardware.
The increase in cost of revenues was primarily due to a proportional increase in sales volume. Gross profit . Our gross profit increased by $57.2 million, or 25.8%, to $278.6 million, or 12.3% of revenues, for fiscal year 2022, compared with $221.4 million, or 11.8% of revenues, for fiscal year 2021. SG&A expenses .
Our cost of revenues increased by $217.8 million, or 9.4%, to $2,526.8 million, or 87.6% of revenues, for fiscal year 2024, compared with $2,309.0 million, or 87.3% of revenues, for fiscal year 2023. The increase in cost of revenues was primarily due to a proportional increase in sales volume. Gross profit .
We recorded income before income taxes of $207.0 million for fiscal year 2022, compared with $150.5 million for fiscal year 2021. Income tax expense . Our provision for income tax reflects an effective tax rate of 3.2% and 1.4% for fiscal year 2022 and fiscal year 2021, respectively.
Income before income taxes . We recorded income before income taxes of $311.4 million for fiscal year 2024, compared with $260.1 million for fiscal year 2023. Income tax expense . Our provision for income tax reflects an effective tax rate of 4.9% and 4.7% for fiscal year 2024 and fiscal year 2023, respectively.
Management determined that it was more likely than not that future taxable income would be sufficient to allow utilization of the deferred tax assets.
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 $1.6 million for the deferred tax assets was released as of June 30, 2023.
We also believe that our current manufacturing capacity is sufficient to meet our anticipated production requirements for at least the next few quarters. 45 Table of Contents The following table shows our cash flows for the periods indicated: Years Ended (in thousands) June 30, 2023 June 24, 2022 June 25, 2021 Net cash provided by operating activities $ 213,310 $ 124,246 $ 122,157 Net cash used in investing activities $ (98,717) $ (135,543) $ (8,934) Net cash used in financing activities $ (80,984) $ (92,934) $ (42,754) Net increase (decrease) in cash, cash equivalents and restricted cash $ 33,609 $ (104,231) $ 70,469 Cash, cash equivalents and restricted cash, beginning of period $ 198,365 $ 303,123 $ 232,832 Cash, cash equivalents and restricted cash, end of period $ 231,368 $ 198,365 $ 303,123 Operating Activities Cash provided by operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities.
The following table shows our cash flows for the periods indicated: Years Ended (in thousands) June 28, 2024 June 30, 2023 June 24, 2022 Net cash provided by operating activities $ 413,146 $ 213,310 $ 124,246 Net cash used in investing activities $ (169,751) $ (98,717) $ (135,543) Net cash used in financing activities $ (64,853) $ (80,984) $ (92,934) Net increase (decrease) in cash, cash equivalents and restricted cash $ 178,542 $ 33,609 $ (104,231) Cash, cash equivalents and restricted cash, beginning of period $ 231,368 $ 198,365 $ 303,123 Cash, cash equivalents and restricted cash, end of period $ 409,973 $ 231,368 $ 198,365 Operating Activities Cash provided by operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities.
Our ability to sustain our working capital position is subject to a number of risks that we discuss in Item 1A of this Annual Report on Form 10-K.
Our ability to sustain our working capital position is subject to a number of risks that we discuss in Item 1A of this Annual Report on Form 10-K. We also believe that our current manufacturing capacity is sufficient to meet our anticipated production requirements for at least the next few quarters.
We recorded other comprehensive loss of $6.5 million, or 0.3% of revenues, for fiscal year 2022, compared with other comprehensive loss of $5.1 million, or 0.3% of revenues, for fiscal year 2021.
Other comprehensive income (loss) . We recorded other comprehensive income of $5.0 million, or 0.2% of revenues, for fiscal year 2024, compared with other comprehensive income of $4.7 million, or 0.2% of revenues, for fiscal year 2023.
Our SG&A expenses increased by $3.3 million, or 4.7%, to $73.9 million, or 3.3% of revenues, for fiscal year 2022, compared with $70.6 million, or 3.8% of revenues, for fiscal year 2021.
Our SG&A expenses increased by $0.8 million, or 1.0%, to $78.5 million, or 2.8% of revenues, for fiscal year 2024, compared with $77.7 million, or 2.9% of revenues, for fiscal year 2023.
Operating income . Our operating income increased by $53.7 million, or 35.6%, to $204.5 million, or 9.0% of revenues, for fiscal year 2022, compared with $150.8 million, or 8.0% of revenues, for fiscal year 2021. Interest income . Our interest income decreased by $1.6 million to $2.2 million for fiscal year 2022, compared with $3.8 million for fiscal year 2021.
Our operating income increased by $25.9 million, or 10.3%, to $277.6 million, or 9.6% of revenues, for fiscal year 2024, compared with $251.7 million, or 9.5% of revenues, for fiscal year 2023. Interest income .
The decrease was primarily due to a lower weighted average interest rate in fiscal year 2022 compared with fiscal year 2021. Interest expense . Our interest expense decreased by $0.7 million to $0.4 million for fiscal year 2022, compared with $1.1 million for fiscal year 2021.
Our interest expense decreased by $1.4 million to $0.1 million for fiscal year 2024, compared with $1.5 million for fiscal year 2023. The decrease was primarily due to a decrease in the long-term loan balance. Foreign exchange gain (loss), net .
The percentage of our revenues generated from a bill-to location outside of North America increased from 50.7% in fiscal year 2022 to 52.0% in fiscal year 2023, which was partially due to a decrease in sales to our customers in Europe by 4.9%.
The percentage of our revenues generated from a bill-to location outside of North America increased from 52.0% in fiscal year 2023 to 63.5% in fiscal year 2024, primarily because of an increase in revenue from a customer in Israel and a decrease in sales to our customers in North America.
Differences in forecasted volume used in calculating excess and obsolete inventory can result in a material adverse effect on our business, financial condition and results of operations.
As the market conditions or our customers’ product demands are inherently difficult to predict, the actual volumes may vary significantly from 41 Table of Contents projected volumes. Differences in forecasted volume used in calculating excess and obsolete inventory can result in a material adverse effect on our business, financial condition and results of operations.
During fiscal year 2023, our subsidiary in the U.K. generated taxable income and was able to utilize loss carryforwards. Management determined that it was more likely than not that future taxable income would be sufficient to allow utilization of the deferred tax assets.
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.
Our revenues increased by $382.8 million, or 20.4%, to $2,262.2 million for fiscal year 2022, compared with $1,879.4 million for fiscal year 2021. This increase was primarily due to an increase in customers’ demand for optical communications manufacturing services, particularly telecom manufacturing services, for fiscal year 2022.
Our revenues increased by $237.8 million, or 9.0%, to $2,883.0 million for fiscal year 2024, compared with $2,645.2 million for fiscal year 2023. This increase was primarily due to an increase in our key customers’ demand for optical communication products.
During fiscal year 2023 and fiscal year 2022, a change of 10% for excess and obsolete materials, based on product demand and production requirements from our customers, would have affected our net income by approximately $1.0 million and $0.7 million, respectively. 40 Table of Contents Deferred Income Taxes Our deferred income tax assets represent temporary differences between the carrying amount and the tax basis of existing assets and liabilities that will result in deductible and payable amounts in future years, including net operating loss carry forwards.
Deferred Income Taxes Our deferred income tax assets represent temporary differences between the carrying amount and the tax basis of existing assets and liabilities that will result in deductible and payable amounts in future years, including net operating loss carry forwards.
Gains or losses on our forward and put option contracts generally present gross amount in the assets, liabilities, and transactions economically hedged. 37 Table of Contents We had foreign currency denominated assets and liabilities in Thai baht, RMB and GBP as follows: As of June 30, 2023 As of June 24, 2022 (in thousands, except percentages) Foreign Currency $ % Foreign Currency $ % Assets Thai baht 754,443 $ 21,198 61.1 753,924 $ 21,213 64.0 RMB 65,669 9,088 26.2 34,382 5,132 15.5 GBP 3,487 4,401 12.7 5,544 6,801 20.5 Total $ 34,687 100.0 $ 33,146 100.0 Liabilities Thai baht 2,956,730 $ 83,078 93.5 2,393,112 $ 67,336 84.8 RMB 40,477 5,602 6.3 61,191 9,133 11.5 GBP 114 144 0.2 2,379 2,918 3.7 Total $ 88,824 100.0 $ 79,387 100.0 The Thai baht assets represent cash and cash equivalents, trade accounts receivable, deposits and other current assets.
Gains or losses on our forward and put option contracts generally present gross amount in the assets, liabilities, and transactions economically hedged. 38 Table of Contents We had foreign currency denominated assets and liabilities in Thai baht, RMB and GBP as follows: As of June 28, 2024 As of June 30, 2023 (in thousands, except percentages) Foreign Currency $ % Foreign Currency $ % Assets Thai baht 1,046,000 $ 28,385 72.5 754,443 $ 21,198 60.6 RMB 42,852 6,013 15.4 66,501 9,203 26.3 GBP 3,778 4,773 12.1 3,626 4,575 13.1 Total $ 39,171 100.0 $ 34,976 100.0 Liabilities Thai baht 3,263,391 $ 88,559 87.4 2,956,730 $ 83,078 87.0 RMB 78,418 11,003 10.9 74,652 10,331 10.8 GBP 1,359 1,717 1.7 1,625 2,050 2.2 Total $ 101,279 100.0 $ 95,459 100.0 The Thai baht assets represent cash and cash equivalents, trade accounts receivable, deposits and other current assets.
Thus, a full valuation allowance of $1.6 million for the deferred tax assets was released as of June 30, 2023. 41 Table of Contents Results of Operations The following table sets forth a summary of our consolidated statements of operations and comprehensive income. Note that period-to-period comparisons of operating results should not be relied upon as indicative of future performance.
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. 42 Table of Contents Results of Operations The following table sets forth a summary of our consolidated statements of operations and comprehensive income.
Cash used in investing activities was lower for fiscal year 2023 as compared to cash used in investing activities for fiscal year 2022 primarily due to lower capital expenditures and net proceeds from sales and maturities of short-term investments.
Cash used in investing activities was higher for fiscal year 2024 as compared to cash used in investing activities for fiscal year 2023 primarily due to an increase in investment purchases partially offset by lower capital expenditures.
Our SG&A expenses increased during fiscal year 2022, compared with fiscal year 2021, mainly due to (1) an increase in share-based compensation expenses of $2.8 million from an increase in awards of performance share units and restricted share units; (2) a net increase in allowance for doubtful accounts of $1.6 million primarily due to a specific provision set up for one customer in fiscal year 2022; and (3) an increase in executive bonuses of $0.6 million; offset by actuarial gain on obligation of $1.5 million in fiscal year 2022.
Our SG&A expenses increased during fiscal year 2024, compared with fiscal year 2023, mainly due to (1) an increase in sales and marketing expenses of $1.0 million; (2) a net increase in allowance for expected credit losses of $0.9 million; (3) an increase in information technology repair and maintenance expenses of $0.5 million; (4) an increase in R&D expenses of $0.3 million; and (5) an increase in share-based compensation expenses of $0.2 million; offset by (1) recognizing an actuarial gain on obligation of $0.4 million in fiscal year 2024, compared with recognizing an actuarial loss on obligation of $1.1 million in fiscal year 2023; (2) a decrease in legal and consulting fees of $0.4 million; and (3) a decrease in customer relationships amortization of $0.2 million.
As of June 30, 2023 and June 24, 2022, we had long-term borrowing under our credit facility agreement of $12.2 million and $27.4 million, respectively (See Note 13 of the Notes to Consolidated Financial Statements for further details). We anticipate that our internally generated working capital, along with our cash and cash equivalents will be adequate to repay these obligations.
As of June 28, 2024, we had no outstanding balance under our credit facility agreement (see Note 13 of the Notes to Consolidated Financial Statements for further details). To better manage our cash on hand, we held short-term investments of $448.6 million as of June 28, 2024.
Revenues from optical communications products represented 78.8% of our revenues for fiscal year 2022, compared with 76.7% for fiscal year 2021. Cost of revenues. Our cost of revenues increased by $325.6 million, or 19.6%, to $1,983.6 million, or 87.7% of revenues, for fiscal year 2022, compared with $1,658.0 million, or 88.2% of revenues, for fiscal year 2021.
Revenues from non-optical communications products, which represented $594.0 million, or 20.6%, of our revenues for fiscal year 2024, decreased by $42.9 million, or 6.7%, compared to prior fiscal year, primarily due to inventory absorption related to certain programs in the automotive market. Cost of revenues .
We recorded net income of $200.4 million, or 8.8% of total revenues, for fiscal year 2022, compared with net income of $148.3 million, or 7.9% of total revenues, for fiscal year 2021. Other comprehensive income (loss) .
The increase was primarily due to a full valuation allowance of $3.8 million for deferred tax assets set up in fiscal year 2024. Net income . We recorded net income of $296.2 million, or 10.3% of revenues, for fiscal year 2024, compared with net income of $247.9 million, or 9.4% of revenues, for fiscal year 2023.
Removed
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.
Added
The GBP liabilities represent trade accounts payable, accrued expenses, and other payables. As of June 28, 2024 and June 30, 2023, we did not have any derivative contracts denominated in GBP.
Removed
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 and June 30, 2023.
Added
During fiscal year 2024 and fiscal year 2023, a change of 10% for excess and obsolete materials, based on product demand and production requirements from our customers, would have affected our net income by approximately $0.6 million and $1.0 million, respectively.
Removed
Years Ended (in thousands) June 30, 2023 June 24, 2022 June 25, 2021 Optical communications $ 2,008,347 $ 1,782,799 $ 1,441,338 Lasers, sensors, and other 636,890 479,425 438,012 Total $ 2,645,237 $ 2,262,224 $ 1,879,350 We operate and internally manage a single operating segment. As such, discrete information with respect to separate product lines and segments is not accumulated.
Added
However, due to our cessation of operations in the U.K., management believed 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 as of June 28, 2024.
Removed
The decrease was primarily due to (1) interest expense capitalized to a new manufacturing building at our Chonburi campus of $0.9 million in fiscal year 2022, and (2) lower loan interest expense of $0.2 million in fiscal year 2022; offset by lower amortization of the fair value of interest rate swaps of $0.4 million in fiscal year 2022.
Added
Note that period-to-period comparisons of operating results should not be relied upon as indicative of future performance.
Removed
The increase was primarily due to higher income subject to tax as well as more income subjected to tax in jurisdictions with higher tax rate in fiscal year 2022, as compared to fiscal year 2021. Net income .
Added
(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 Revenues Optical communications 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 % Comparison of Fiscal Year 2024 with Fiscal Year 2023 Revenues .
Removed
To better manage our cash on hand, we held short-term investments of $319.1 million as of June 30, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Therefore, a substantial portion of our payroll as well as certain other operating expenses are paid in Thai baht, RMB and GBP. The significant majority of our revenues are denominated in U.S. dollars because our customer contracts generally provide that our customers will pay us in U.S. dollars.
Therefore, a substantial portion of our payroll as well as certain other operating expenses are paid in Thai baht and RMB. The significant majority of our revenues are denominated in U.S. dollars because our customer contracts generally provide that our customers will pay us in U.S. dollars.
Foreign Currency Risk As a result of our foreign operations, we have significant expenses, assets and liabilities that are denominated in foreign currencies. Substantially all of our employees and most of our facilities are located in Thailand, the PRC and the United Kingdom.
Foreign Currency Risk As a result of our foreign operations, we have significant expenses, assets and liabilities that are denominated in foreign currencies. Substantially all of our employees and most of our facilities are located in Thailand and the PRC.
If overall interest rates had declined by 10 basis points during fiscal year 2023, fiscal year 2022 and fiscal year 2021, our interest income would have decreased by approximately $0.5 million, $0.4 million and $0.5 million, respectively, assuming consistent investment levels. We also have interest rate risk exposure in movements in interest rates associated with our interest-bearing liabilities.
If overall interest rates had declined by 10 basis points during fiscal year 2024, fiscal year 2023 and fiscal year 2022, our interest income would have decreased by approximately $0.7 million, $0.5 million and $0.4 million, respectively, assuming consistent investment levels. We also have interest rate risk exposure in movements in interest rates associated with our interest-bearing liabilities.
Presently, we believe that we will not incur material losses due to our exposures to such credit risk. 48 Table of Contents
Presently, we believe that we will not incur material losses due to our exposures to such credit risk. 49 Table of Contents
The interest-bearing liabilities are denominated in U.S. dollars and until September 29, 2023, the interest expense is based on LIBOR, plus an additional margin, depending on the lending institution.
The interest-bearing liabilities are denominated in U.S. dollars. Until September 29, 2023, the interest expense was based on LIBOR, plus an additional margin, depending on the lending institution.
Our short-term investments as of June 30, 2023 are held in various financial institutions with a maturity limit not to exceed three years, and all securities are rated A1, P-1, F1 or better.
Our short-term investments as of June 28, 2024 are held in various financial institutions with a maturity limit not to exceed three years, and all securities are rated A1, P-1, F1 or better.
As a consequence, our gross profit margins, operating results, profitability and cash flows are adversely impacted when the dollar depreciates relative to the Thai baht, the GBP or the RMB. We have a particularly significant currency rate exposure to changes in the exchange rate between the Thai baht, the GBP, the RMB and the U.S. dollar.
As a consequence, our gross profit margins, operating results, profitability and cash flows are adversely impacted when the dollar depreciates relative to the Thai baht or the RMB. We have a particularly significant currency rate exposure to changes 48 Table of Contents in the exchange rate between the Thai baht, the RMB and the U.S. dollar.
As of June 30, 2023, our cash and cash equivalents were held in deposits and highly liquid investment products with maturities of three months or less with banks and other financial institutions having credit ratings of A minus or above.
As of June 28, 2024, our cash and cash equivalents were held in deposits and highly liquid investment products with maturities of three months or less with banks and other financial institutions having credit ratings of A minus or above.
We must translate foreign currency-denominated results of operations, assets and liabilities for our foreign subsidiaries to U.S. dollars in our consolidated 47 Table of Contents financial statements.
We must translate foreign currency-denominated results of operations, assets and liabilities for our foreign subsidiaries to U.S. dollars in our consolidated financial statements.
If the LIBOR had increased by 100 basis points during fiscal year 2023, fiscal year 2022 and fiscal year 2021, our interest expense would have increased by approximately $0.2 million, $0.3 million and $0.4 million, respectively, assuming consistent borrowing levels.
If the LIBOR had increased by 100 basis points during fiscal year 2024, fiscal year 2023 and fiscal year 2022, our interest expense would have increased by approximately $0.1 million, $0.2 million and $0.3 million, respectively, assuming consistent borrowing levels.
We recorded unrealized gain of $0.4 million and unrealized loss $0.8 million for the year ended June 30, 2023 and June 24, 2022, respectively, related to derivatives that are not designated as hedging instruments. As foreign currency exchange rates fluctuate relative to the U.S. dollar, we expect to incur foreign currency translation adjustments and may incur foreign currency exchange losses.
We recorded unrealized gain of $0.7 million and $0.4 million, respectively, for the year ended June 28, 2024 and June 30, 2023, respectively, related to derivatives that are not designated as hedging instruments. As foreign currency exchange rates fluctuate relative to the U.S. dollar, we expect to incur foreign currency translation adjustments and may incur foreign currency exchange losses.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Interest Rate Risk We had cash, cash equivalents, and short-term investments totaling $550.5 million, $478.2 million and $547.9 million, as of June 30, 2023, June 24, 2022 and June 25, 2021, respectively.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Interest Rate Risk We had cash, cash equivalents, and short-term investments totaling $858.6 million, $550.5 million and $478.2 million, as of June 28, 2024, June 30, 2023 and June 24, 2022, respectively.
For example, a 10% weakening in the U.S. dollar against the Thai baht, the RMB and the GBP would have resulted in a decrease in our net dollar position of approximately $6.0 million and $5.3 million as of June 30, 2023 and June 24, 2022, respectively.
For example, a 10% weakening in the U.S. dollar against the Thai baht and the RMB would have resulted in a decrease in our net dollar position of approximately $7.2 million and $6.0 million as of June 28, 2024 and June 30, 2023, respectively.
While we intend to continue to meet the conditions for hedge accounting, if hedges do not qualify as highly effective, the changes in the fair value of the derivatives used as hedges would be reflected in our earnings.
We designated the Swap Agreements as a cash flow hedge, and they qualify for hedge accounting because the hedges are highly effective. While we intend to continue to meet the conditions for hedge accounting, if hedges do not qualify as highly effective, the changes in the fair value of the derivatives used as hedges would be reflected in our earnings.
This locks the variable interest expenses associated with our floating rate borrowings and results in fixed interest expenses that are unsusceptible to market rate increases. We designated the Swap Agreements as a cash flow hedge, and they qualify for hedge accounting because the hedges are highly effective.
The terms of the Swap Agreements, one of which matured in June 2023, allow us to effectively convert the floating interest rate to a fixed interest rate. This locks the variable interest expenses associated with our floating rate borrowings and results in fixed interest expenses that are unsusceptible to market rate increases.
We therefore entered into interest rate swap agreements (the “Swap Agreements”) to manage this risk and increase the profile of our debt obligation. The terms of the Swap Agreements allow us to effectively convert the floating interest rate to a fixed interest rate.
As a result of the phase-out of LIBOR, we amended the Term Loan Agreement to replace the interest rate reference from LIBOR to the SOFR effective from September 29, 2023 (see Note 13). We therefore entered into interest rate swap agreements (the “Swap Agreements”) to manage this risk and increase the profile of our debt obligation.

Other FN 10-K year-over-year comparisons