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Press release from Business Wire

Jabil Posts Solid Third Quarter Results

<p class='bwalignc'> <i><b>Performance Ahead of Long-Term Growth Goals</b></i> </p>

Tuesday, June 21, 2011

Jabil Posts Solid Third Quarter Results16:02 EDT Tuesday, June 21, 2011 ST. PETERSBURG, Fla. (Business Wire) -- Jabil Circuit, Inc. (NYSE: JBL), reported its preliminary, unaudited financial results for the third quarter of fiscal 2011, ended May 31, 2011. “Revenue growth was stronger than expected for our third quarter,” said Timothy L. Main, President and CEO of Jabil. “We are pleased to demonstrate continued growth above our long-term targets. As a result, Jabil is poised to deliver record revenue and earnings in fiscal 2011.” (Definitions used: “GAAP” means U.S. generally accepted accounting principles. Jabil defines core operating income as GAAP operating income before amortization of intangibles, stock-based compensation expense and related charges, restructuring and impairment charges, goodwill impairment charges, certain distressed customer charges, settlement of receivables and related charges and loss on disposal of subsidiaries.Jabil defines core earnings as GAAP net income before amortization of intangibles, stock-based compensation expense and related charges, restructuring and impairment charges, goodwill impairment charges, certain distressed customer charges, settlement of receivables and related charges, loss on disposal of subsidiaries, certain other expenses, net of tax and certain deferred tax valuation allowance charges.Jabil defines core earnings per share as core earnings divided by the weighted average number of outstanding shares determined under GAAP. Jabil calculates core return on invested capital by annualizing its after-tax core operating income for its most recently-ended quarter and dividing that by a two quarter average net invested capital base. Jabil reports core operating income, core earnings, core earnings per share and core return on invested capital to provide investors an additional method for assessing operating income, earnings, earnings per share and return on invested capital from what it believes are its core manufacturing operations.See the accompanying reconciliation of Jabil's core operating income to its GAAP operating income, Jabil's core earnings and core earnings per share to its GAAP net income and GAAP earnings per share, its calculation of core return on invested capital and additional information in the supplemental information.)Third Quarter 2011 Net revenue for the third quarter of fiscal 2011 was $4.2 billion compared to $3.5 billion for the same period of fiscal 2010. GAAP results: GAAP operating income for the third quarter of fiscal 2011 was $152.5 million compared to $96.5 million for the same period of fiscal 2010. GAAP net income for the third quarter of fiscal 2011 was $104.7 million compared to $52.0 million for the same period of fiscal 2010. GAAP diluted earnings per share for the third quarter of fiscal 2011 was $0.47 compared to $0.24 for the same period of fiscal 2010. Core results: Core operating income for the third quarter of fiscal 2011 was $177.8 million or 4.2 percent of net revenue compared to $131.9 million or 3.8 percent of net revenue for the same period of fiscal 2010. Core earnings for the third quarter of fiscal 2011 were $129.1 million compared to $86.7 million for the same period of fiscal 2010. Core diluted earnings per share for the third quarter of fiscal 2011 was $0.58 compared to $0.40 for the same period of fiscal 2010. Third Quarter Fiscal 2011 - Balance Sheet and Cash Flow Highlights Cash flow from operations for the quarter was $156.8 million. Sales cycle was 11 days for the third quarter of fiscal 2011. Annualized inventory turns were seven for the third quarter of fiscal 2011. Capital expenditures for the third quarter of fiscal 2011 were $113.6 million. Depreciation for the third quarter of fiscal 2011 was $77.3 million. Cash and cash equivalent balances were $911.1 million as of May 31, 2011. GAAP return on invested capital was 24.0 percent for the third quarter of fiscal 2011. Core return on invested capital was 28.5 percent for the third quarter of fiscal 2011. A $0.07 dividend was paid on June 1, 2011. Business Update Jabil management indicated that it expects net revenue for its fourth quarter of fiscal 2011 to range from $4.1 billion to $4.3 billion. Jabil estimated that its core operating income for its fourth quarter of fiscal 2011 will range from $165 million to $185 million or 4.0 to 4.3 percent of net revenue. Jabil indicated that it expects its core earnings per share for its fourth quarter of fiscal 2011 to range from $0.52 to $0.60 per diluted share. GAAP earnings per share are expected to be in a range from $0.41 to $0.49 per diluted share for its fourth quarter of fiscal 2011. (GAAP earnings per share for the fourth quarter of fiscal 2011 is currently estimated to include $0.02 per share for amortization of intangibles and $0.09 per share for stock-based compensation). “We are gratified to see the new business opportunities in targeted segments continuing and are pleased with our operating performance, which remains ahead of our long-term goals for the company” said Main. Supplemental Information The financial results disclosed in this release include certain measures calculated and presented in accordance with GAAP. In addition to the GAAP financial measures, Jabil provides supplemental, non-GAAP financial measures to facilitate evaluation of Jabil's core operating performance. The non-GAAP financial measures disclosed in this release exclude certain amounts that are included in the most directly comparable GAAP measures. The non-GAAP or core financial measures disclosed in this release do not have standard meanings and may vary from the non-GAAP financial measures used by other companies. Management believes core financial measures (which exclude the effects of the amortization of intangibles, stock-based compensation expense and related charges, restructuring and impairment charges, goodwill impairment charges, certain distressed customer charges, settlement of receivables and related charges, loss on disposal of subsidiaries, certain other expenses, net of tax and certain deferred tax valuation allowance charges) are a useful measure that facilitates evaluating the past and future performance of Jabil's ongoing operations on a comparable basis. Jabil reports core operating income, core return on invested capital, core earnings and core earnings per share to provide investors an additional method for assessing operating income, earnings and earnings per share from what it believes are its core manufacturing operations. Included in this release are Condensed Consolidated Statements of Operations as well as a reconciliation of the disclosed core financial measures to the most directly comparable GAAP financial measures. Company Conference Call Information Jabil will hold a conference call to discuss the third fiscal quarter 2011 earnings today at 4:30 p.m. ET live on the Internet at http://www.jabil.com. The earnings conference call will be recorded and archived for playback on the web at http://www.jabil.com. A taped replay of the conference call will also be available June 21, 2011 at approximately 7:30 p.m. ET through midnight on June 28, 2011. To access the replay, call (800) 642-1687 from within the United States, or (706) 645-9291 outside the United States. The pass code is: 74556689. An archived webcast of the conference call will be available at http://www.jabil.com/investors/. About Jabil Jabil is an electronic product solutions company providing comprehensive electronics design, manufacturing and product management services to global electronics and technology companies. Offering complete product supply chain management from facilities in 24 countries, Jabil provides comprehensive, individualized-focused solutions to customers in a broad range of industries. Jabil common stock is traded on the New York Stock Exchange under the symbol, “JBL”. Further information is available on Jabil'swebsite: jabil.com. This news release contains forward-looking statements, including those regarding our anticipated financial results for our third fiscal quarter; our ability to deliver record revenue and earnings in fiscal 2011;the new business opportunities in targeted segments; and our currently expected fourth fiscal quarter net revenue, core operating income, core and GAAP earnings per share results and the components thereof.The statements in this news release are based on current expectations, forecasts and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include, but are not limited to: our determination as we finalize our financial results for our third fiscal quarter that our financial results and conditions differ from our current preliminary unaudited numbers set forth herein; adverse changes in the demand, or expected demand, of our customers; the expected new business opportunities in targeted segments failing to arise; adverse changes in current macro-economic conditions, both in the U.S. and internationally; the ongoing situation in Japan and its effects on our Japanese facility, supply chain, shipping costs, customers and suppliers; our financial performance during and after the current economic conditions; our ability to maintain and improve costs, quality and delivery for our customers; risks and costs inherent in litigation; whether our realignment of our capacity will adversely affect our cost structure, ability to service customers and labor relations; our ability to take advantage of perceived benefits of offering customers vertically integrated services; changes in technology; competition; anticipated growth for us and our industry that may not occur; managing rapid growth; managing rapid declines in customer demand that may occur; our ability to successfully consummate acquisitions and divestitures; managing the integration of businesses we acquire (including, with respect to the acquisition ofthe Italian and French sites, potential unknown liabilities and the costs associated with addressing potential reduced business activity at these sites); risks associated with international sales and operations; retaining key personnel; our dependence on a limited number of large customers; business and competitive factors generally affecting the electronic manufacturing services industry, our customers and our business; other factors that we may not have currently identified or quantified; and other risks, relevant factors and uncertainties identified in our Annual Report on Form 10-K for the fiscal year ended August 31, 2010, subsequent Reports on Form 10-Q and Form 8-K and our other securities filings. Jabil disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.JABIL CIRCUIT, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In thousands)(Unaudited)     May 31, August 31, 2011 2010 ASSETS Current assets: Cash and cash equivalents $ 911,145 $ 744,329 Trade accounts receivable, net 1,045,238 1,408,319 Inventories 2,257,984 2,094,135 Prepaid expenses and other current assets 807,666 349,165 Income taxes receivable 35,467 35,560 Deferred income taxes   19,040     22,510     Total current assets 5,076,540 4,654,018   Property, plant and equipment, net 1,593,406 1,451,392 Goodwill and intangible assets, net 129,080 132,568 Deferred income taxes 69,051 55,101 Other assets   87,491     74,668     Total assets $ 6,955,568   $ 6,367,747     LIABILITIES AND EQUITY Current liabilities: Current installments of notes payable and long-term debt $ 80,449 $ 167,566 Accounts payable 2,752,668 2,741,719 Accrued expenses 863,887 672,252 Income taxes payable 34,270 19,236 Deferred income taxes   4,584     4,401     Total current liabilities 3,735,858 3,605,174   Notes payable and long-term debt, less current installments 1,107,195 1,018,930 Income tax liability 86,718 86,351 Deferred income taxes 6,709 1,462 Other liabilities   69,713     63,058     Total liabilities   5,006,193     4,774,975   Equity: Jabil Circuit, Inc. stockholders' equity Common stock 224 220 Additional paid-in capital 1,619,003 1,541,507 Retained earnings 342,725 123,303 Accumulated other comprehensive income 190,188 122,062 Treasury stock at cost   (218,785 )   (209,046 )   Total Jabil Circuit, Inc. stockholders' equity   1,933,355     1,578,046     Noncontrolling interests   16,020     14,726     Total equity   1,949,375     1,592,772     Total liabilities and equity $ 6,955,568   $ 6,367,747     JABIL CIRCUIT, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except for per share data)(Unaudited)     Three months ended Nine months ended May 31,   May 31, May 31,   May 31, 2011   2010 2011   2010   Net revenue $ 4,227,688 $ 3,455,578 $ 12,238,532 $ 9,548,478 Cost of revenue   3,909,312       3,193,464   11,313,165     8,831,842   Gross profit 318,376 262,114 925,367 716,636   Operating expenses: Selling, general and administrative 154,112 151,409 438,368 429,226 Research and development 6,544 6,331 18,825 21,453 Amortization of intangibles 5,187 6,206 16,821 19,954 Restructuring and impairment charges - 1,635 628 5,705 Loss on disposal of subsidiaries - - 23,944 15,722 Settlement of receivables and related charges   -       -   13,607     - Operating income 152,533 96,533 413,174 224,576     Interest, net and other   26,023       19,837   73,020     60,595   Income before income taxes 126,510 76,696 340,154 163,981   Income tax expense   22,222       24,009   72,737     52,591   Net income 104,288 52,687 267,417 111,390   Net income (loss) attributable to noncontrolling interests, net of income tax expense   (407 )     656   642     1,241   Net income attributable to Jabil Circuit, Inc. $ 104,695     $ 52,031 $ 266,775   $ 110,149   Earnings per share: Income attributable to the stockholders of Jabil Circuit, Inc.: Basic $ 0.49     $ 0.24 $ 1.24   $ 0.51 Diluted $ 0.47     $ 0.24 $ 1.21   $ 0.51   Weighted average shares outstanding: Basic   215,705       213,881   215,092     214,051 Diluted   222,337       216,522   220,773     218,089 JABIL CIRCUIT, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(Unaudited)       Nine months endedMay 31,2011   May 31,2010 Cash flows from operating activities: Net income $ 267,417 $ 111,390 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 234,312 211,943 Recognition of deferred grant proceeds (1,466 ) (1,467 ) Amortization of loss on hedge arrangement 2,963 2,963 Amortization of debt issuance costs and discount 3,990 2,770 Write-off of debt issuance costs 219 — Recognition of stock-based compensation expense 59,854 67,980 Deferred income taxes (2,305 ) (8,230 ) Restructuring and impairment charges 628 5,705 Provision (recovery) for allowance for doubtful accounts and notes receivable 1,150 (222 ) Excess tax benefit from options exercised (178 ) (118 ) Loss on sale of property 3,061 4,607 Settlement of receivables and related charges 12,673 — Loss on disposal of subsidiaries 23,944 12,756 Change in operating assets and liabilities, exclusive of net assets acquired: Trade accounts receivable 100,226 (70,093 ) Inventories (187,146 ) (607,742 ) Prepaid expenses and other current assets (145,384 ) (126,005 ) Other assets (10,011 ) 1,556 Accounts payable and accrued expenses 148,289 509,838 Income taxes payable   12,181     24,545     Net cash provided by operating activities   524,417     142,176     Cash flows from investing activities: Cash paid for business and intangible asset acquisitions, net of cash acquired 3,985 — Acquisition of property, plant and equipment (320,965 ) (245,118 ) Proceeds from sale of property, plant and equipment 13,669 7,257 Cost of receivables acquired, net of cash collections (521 ) — Proceeds on disposal of available for sale investments   5,800     —     Net cash used in investing activities   (298,032 )   (237,861 )   Cash flows from financing activities: Borrowings, net of repayments, under debt agreements (8,243 ) (109,500 ) Net proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan 17,778 6,210 Treasury stock minimum tax withholding related to vesting of restricted stock (9,739 ) (5,487 ) Dividends paid to stockholders (45,306 ) (44,901 ) Bond issuance costs (14,549 ) — Net proceeds from issuance of ordinary shares of certain subsidiaries — 586 Bank overdraft of subsidiary — 9,665 Excess tax benefit from options exercised   179     118     Net cash used in financing activities   (59,880 )   (143,309 )   Effect of exchange rate changes on cash and cash equivalents   311     (36,929 )   Net increase (decrease) in cash and cash equivalents 166,816 (275,923 ) Cash and cash equivalents at beginning of period   744,329     876,272     Cash and cash equivalents at end of period $ 911,145   $ 600,349     JABIL CIRCUIT, INC. AND SUBSIDIARIESSUPPLEMENTAL DATARECONCILIATION OF GAAP FINANCIAL RESULTS TO NON-GAAP MEASURES(In thousands, except for per share data)(Unaudited)       Three months ended Nine months ended May 31,   May 31, May 31,   May 31, 2011   2010 2011   2010   Operating income (GAAP) $ 152,533 $ 96,533 $ 413,174 $ 224,576 Amortization of intangibles 5,187 6,206 16,821 19,954 Stock-based compensation expense and related charges 20,053 27,487 59,854 67,980 Restructuring and impairment charges - 1,635 628 5,705 Settlement of receivables and related charges - - 13,607 - Loss on disposal of subsidiaries   -     -   23,944     15,722 Core operating income (Non-GAAP) $ 177,773   $ 131,861 $ 528,028   $ 333,937   Net income (GAAP) $ 104,695 $ 52,031 $ 266,775 $ 110,149 Amortization of intangibles, net of tax 5,174 6,191 16,785 19,919 Stock-based compensation expense and related charges, net of tax 19,268 26,825 58,279 66,713 Restructuring and impairment charges, net of tax - 1,693 628 5,777 Settlement of receivables and related charges, net of tax - - 13,607 - Loss on disposal of subsidiaries, net of tax   -     -   23,944     15,722 Core earnings (Non-GAAP) $ 129,137   $ 86,740 $ 380,018   $ 218,280   Earnings per share: (GAAP) Basic $ 0.49   $ 0.24 $ 1.24   $ 0.51 Diluted $ 0.47   $ 0.24 $ 1.21   $ 0.51   Core earnings per share: (Non-GAAP) Basic $ 0.60   $ 0.41 $ 1.77   $ 1.02 Diluted $ 0.58   $ 0.40 $ 1.72   $ 1.00   Common shares used in the calculations ofearnings per share (GAAP): Basic   215,705     213,881   215,092     214,051 Diluted   222,337     216,522   220,773     218,089   Common shares used in the calculations ofearnings per share (Non-GAAP): Basic   215,705     213,881   215,092     214,051 Diluted   222,337     216,522   220,773     218,089   JABIL CIRCUIT, INC. AND SUBSIDIARIESSUPPLEMENTAL DATARECONCILIATION OF GAAP FINANCIAL RESULTS TO NON-GAAP MEASURES(In thousands)   CALCULATION OF RETURN ON INVESTED CAPITAL ANDCORE RETURN ON INVESTED CAPITAL The Company calculates (1) "Return on Invested Capital" by annualizing its "after-tax GAAP operating income" for its most recently-ended quarter and dividing that by a two quarter average of its "net invested capital asset base" and (2) "Core Return on Invested Capital" by annualizing its "after-tax non-GAAP core operating income" for its most recently-ended quarter and dividing that by a two quarter average of its "net invested capital asset base." The Company calculates: (1) its "after-tax GAAP operating income" by subtracting a certain tax effect (the calculation of which is explained below) from its GAAP operating income and (2) its "after-tax non-GAAP core operating income" by subtracting a certain tax effect (the calculation of which is explained below) from its non-GAAP core operating income. See elsewhere in this earnings release for a reconciliation of the Company's non-GAAP core operating income to its GAAP operating income. The Company calculates "net invested capital asset base" as the sum of the averages (the calculation of which are explained below) of (1) its stockholders' equity, (2) the non-current portion of its notes payable and long term debt and (3) the current portion of its notes payable and long term debt, less the average (the calculation of which is explained below) of its cash and cash equivalents. The following table reconciles (1) "Return on Invested Capital," as calculated using "after-tax GAAP operating income" to (2) "Core Return on Invested Capital," as calculated using "after-tax non-GAAP core operating income":   Three months ended May 31, 2011     Numerator:Operating income (GAAP) $ 152,533 Tax effect (1)   (22,381 ) After-tax operating income 130,152 x4 Annualized after-tax operating income $ 520,608     Core operating income (Non-GAAP) $ 177,773 Tax effect (2)   (23,153 ) After-tax core operating income 154,620 x4 Annualized after-tax core operating income $ 618,480     Denominator: Average total Jabil Circuit, Inc. stockholders' equity (3) $ 1,862,771 Average notes payable and long-term debt, less current installments (3) 1,103,871 Average current installments of notes payable and long-term debt (3) 108,979 Average cash and cash equivalents (3)   (906,731 ) Net invested capital base $ 2,168,890     Return on Invested Capital (GAAP)24.0%Adjustments noted above4.5%Core Return on Invested Capital (Non-GAAP)28.5%   (1) This amount is calculated by adding the amount of income taxes attributable to its operating income (GAAP) and its interest expense. (2) This amount is calculated by adding the amount of income taxes attributable to its core operating income (Non-GAAP) and its interest expense. (3) The average is based on the addition of the account balance at the end of the most recently-ended quarter to the account balance at the end of the prior quarter and dividing by two. Jabil Circuit, Inc.Beth Walters, 727-803-3511Senior Vice President, Investor Relations & Communicationsbeth_walters@jabil.com