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Press release from Business Wire

Jabil Posts Second Quarter Results

<p class='bwalignc'> <i>Quarter Reflects Strength in Specialized Services Strategy</i> </p>

Tuesday, March 20, 2012

Jabil Posts Second Quarter Results16:03 EDT Tuesday, March 20, 2012 ST. PETERSBURG, Fla. (Business Wire) -- Jabil Circuit, Inc. (NYSE: JBL), today reported preliminary, unaudited financial second quarter of fiscal year 2012 net revenue of $4.2 billion. “We are continuing to see the benefits of investing in long-term solutions to drive growth in our Diversified Manufacturing Services business,” said Timothy L. Main, President and CEO of Jabil. Revenue from Diversified Manufacturing Services increased 33 percent year over year, climbing to 44 percent of total revenue in the second fiscal quarter of 2012. “Overall, we are pleased with being able to increase revenue eight percent from our second fiscal quarter of fiscal 2011 and post a solid operating margin,” said Main. Jabil indicated its High Velocity business represented 27 percent of total revenue and its Enterprise & Infrastructure business accounted for 29 percent of the quarter's revenue. (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.)Operational Highlights Fiscal Q2 2012 versus Fiscal Q2 2011 GAAP operating income increased 44 percent. GAAP net income increased 76 percent. GAAP diluted earnings per share increased 84 percent. Quarterly Results         Q2 2012         Q2 2011 Net revenue $4.2 billion $3.9 billion GAAP operating income $150.2 million $104.6 million GAAP net income $97.7 million $55.4 million GAAP diluted earnings per share $0.46 $0.25 GAAP return on invested capital 21% 15% Core operating income $176.2 million $168.4 million Core earnings $123.2 million $118.8 million Core diluted earnings per share $0.58 $0.54 Core return on invested capital 25% 26% Business Update “Our continued focus and investment in Diversified Manufacturing Services is paying off for Jabil,” said Jabil CEO Timothy Main. “We believe Jabil's global expertise in offering customers innovative solutions to their globally complex business needs will continue to allow us to outpace the lackluster global economic conditions in the second half of our fiscal year.” Jabil management also provided guidance for its third fiscal quarter of 2012.         Fiscal Q3 2012 Guidance Range         Y/Y Fiscal Q3 2012 * Net revenue $4.2 billion - $4.4 billion 2% Core operating income $185 million - $205 million 10% Core earnings per share $0.60 to $0.70 per diluted share 12% GAAP earnings per share $0.49 to $0.59 per diluted share 15% (GAAP earnings per share for the third quarter of fiscal 2012 are currently estimated to include $0.02 per share for amortization of intangibles and $0.09 per share for stock-based compensation). * Annual growth based on mid-point of guidance. FORWARD LOOKING STATEMENT: This news release contains forward-looking statements, including those regarding our anticipated financial results for our second quarter of fiscal year 2012; the benefits of investing in long-term solutions to drive growth in our Diversified Manufacturing Services business; the expected lackluster global economic conditions in the second half of our fiscal year; the belief that our global expertise in offering customers innovative solutions to their globally complex business needs will continue to allow us to outpace the expected lackluster conditions and our currently expected third quarter of fiscal year 2012 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 second fiscal quarter of fiscal year 2012 that our financial results and conditions differ from our current preliminary unaudited numbers set forth herein; the failure of our investments in long-term solutions to drive growth in our Diversified Manufacturing Services business; our inability to deliver innovative solutions to our customers' globally complex business needs; our inability to outpace the expected lackluster economic conditions in the second half of our fiscal year despite delivering the expected innovative solutions to our customers' globally complex business needs; unexpected, adverse seasonal impacts on demand; changes in macroeconomic conditions, both in the U.S. and internationally; 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 of the 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, 2011, 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.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 second fiscal quarter 2012 earnings today at 4:30 p.m. ET live on the Internet at http://www.jabil.com. The call will be recorded and archived on the web at http://www.jabil.com. A taped replay of the conference call will also be available March 20, 2012 at approximately 7:30 p.m. ET through midnight on March 27, 2012. To access the replay, call (855) 859-2056 from within the United States, or (404) 537-3406 outside the United States. The pass code is: 58592500. 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 aftermarket product management services to global electronics and technology companies. Offering complete product supply chain management from facilities in 27 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. JABIL CIRCUIT, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In thousands)     February 29, August 31, 2012 (Unaudited) 2011   ASSETS Current assets: Cash and cash equivalents $ 707,350 $ 888,611 Accounts receivable, net 1,122,529 1,100,926 Inventories 2,350,842 2,227,339 Prepaid expenses and other current assets 900,476 868,892 Income taxes receivable 10,157 33,855 Deferred income taxes   21,996     15,737     Total current assets 5,113,350 5,135,360   Property, plant and equipment, net 1,658,461 1,641,335 Goodwill and intangible assets, net 222,863 125,305 Deferred income taxes 75,287 74,989 Noncurrent income tax receivable 18,209 - Other assets   78,884     80,951     Total assets $ 7,167,054   $ 7,057,940     LIABILITIES AND EQUITY Current liabilities: Current installments of notes payable and long-term debt $ 281,602 $ 74,160 Accounts payable 2,723,132 2,885,168 Accrued expenses 819,209 892,391 Income taxes payable 24,943 32,987 Deferred income taxes   2,607     5,182     Total current liabilities 3,851,493 3,889,888   Notes payable and long-term debt, less current installments 1,112,475 1,112,594 Other liabilities 72,992 67,423 Income tax liability 94,712 88,451 Deferred income taxes   16,588     15,761     Total liabilities   5,148,260     5,174,117   Equity: Jabil Circuit, Inc. stockholders' equity: Common stock 231 225 Additional paid-in capital 1,703,986 1,649,431 Retained earnings 617,661 441,793 Accumulated other comprehensive income 169,009 194,706 Treasury stock, at cost   (490,055 )   (419,035 )   Total Jabil Circuit, Inc. stockholders' equity   2,000,832     1,867,120     Noncontrolling interests   17,962     16,703     Total equity   2,018,794     1,883,823     Total liabilities and equity $ 7,167,054   $ 7,057,940     JABIL CIRCUIT, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except for per share data)(Unaudited)     Three months ended Six months ended February 29,   February 28, February 29,   February 28, 2012   2011 2012   2011   Net revenue $ 4,236,174 $ 3,928,663 $ 8,562,943 $ 8,010,844 Cost of revenue   3,914,010     3,632,263   7,900,769     7,403,853   Gross profit 322,164 296,400 662,174 606,991   Operating expenses: Selling, general and administrative 160,811 141,807 318,634 284,256 Research and development 6,264 6,540 12,535 12,281 Amortization of intangibles 4,871 5,665 9,945 11,634 Restructuring and impairment charges - 196 - 628 Settlement of receivables and related charges - 13,607 - 13,607 Loss on disposal of subsidiaries   -     23,944   -     23,944 Operating income 150,218 104,641 321,060 260,641   Interest and other, net   27,953     25,885   55,599     46,997   Income before income tax 122,265 78,756 265,461 213,644   Income tax expense   24,020     23,038   53,435     50,515   Net income 98,245 55,718 212,026 163,129   Net income attributable to noncontrolling interests, net of income tax expense   547     315   1,456     1,049   Net income attributable to Jabil Circuit, Inc. $ 97,698   $ 55,403 $ 210,570   $ 162,080   Earnings per share attributable to the stockholders of Jabil Circuit, Inc.: Basic $ 0.47   $ 0.26 $ 1.02   $ 0.75 Diluted $ 0.46   $ 0.25 $ 1.00   $ 0.74   Weighted average shares outstanding: Basic   207,287     215,170   206,337     214,781 Diluted   212,148     221,022   211,410     219,469   JABIL CIRCUIT, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(Unaudited)   Six months endedFebruary 29,2012   February 28,2011 Cash flows from operating activities: Net income $ 212,026 $ 163,129 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 173,734 151,874 Recognition of stock-based compensation expense 39,734 39,801 Settlement of receivables and related charges — 12,673 Loss on disposal of subsidiaries — 23,944 Other, net (7,661 ) (208 ) Changes in operating assets and liabilities, exclusive of net assets acquired: Accounts receivable (1,024 ) 178,311 Inventories (119,816 ) (104,299 ) Prepaid expenses and other current assets (31,761 ) (14,590 ) Other assets (1,719 ) (10,723 ) Accounts payable and accrued expenses (259,021 ) (84,673 ) Income taxes payable   736     12,366   Net cash provided by operating activities   5,228     367,605   Cash flows from investing activities: Cash paid for business and intangible asset acquisitions, net of cash acquired (128,462 ) 3,985 Acquisition of property, plant and equipment (180,506 ) (207,347 ) Proceeds from sale of property, plant and equipment 9,666 9,817 Proceeds from disposal of available for sale investments — 5,800 Cost of receivables acquired, net of cash collections   497     (33,247 ) Net cash (used in) investing activities   (298,805 )   (220,992 ) Cash flows from financing activities: Borrowings under debt agreements 4,633,328 4,178,028 Payments towards debt agreements (4,425,749 ) (4,128,667 ) Treasury stock repurchases (39,964 ) — Dividends paid to stockholders (32,148 ) (30,214 ) Net proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan 14,403 14,794 Treasury stock minimum tax withholding related to vesting of restricted stock (31,056 ) (9,722 ) Debt issuance costs — (14,547 ) Excess tax benefit related to stock awards   750     72   Net cash provided by financing activities   119,564     9,744   Effect of exchange rate changes on cash and cash equivalents   (7,248 )   1,631   Net (decrease) increase in cash and cash equivalents (181,261 ) 157,988 Cash and cash equivalents at beginning of period   888,611     744,329   Cash and cash equivalents at end of period $ 707,350   $ 902,317     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 Six months ended February 29,   February 28, February 29,   February 28, 2012   2011 2012   2011   Operating income (GAAP) $ 150,218 $ 104,641 $ 321,060 $ 260,641 Amortization of intangibles 4,871 5,665 9,945 11,634 Stock-based compensation and related charges 21,069 20,301 39,734 39,801 Restructuring and impairment charges - 196 - 628 Loss on disposal of business - 23,944 - 23,944 Settlement of receivables and related charges   -     13,607   -     13,607 Core operating income (Non-GAAP) $ 176,158 $ 168,354 $ 370,739 $ 350,255   Net income attributable to Jabil Circuit, Inc. (GAAP) $ 97,698 $ 55,403 $ 210,570 $ 162,080 Amortization of intangibles, net of tax 4,858 5,653 9,919 11,611 Stock-based compensation and related charges, net of tax 20,595 20,006 38,864 39,011 Restructuring and impairment charges, net of tax - 196 - 628 Loss on disposal of business, net of tax - 23,944 - 23,944 Settlement of receivables and related charges, net of tax   -     13,607   -     13,607 Core earnings (Non-GAAP) $ 123,151 $ 118,809 $ 259,353 $ 250,881   Earnings per share: (GAAP) Basic $ 0.47   $ 0.26 $ 1.02   $ 0.75 Diluted $ 0.46   $ 0.25 $ 1.00   $ 0.74   Core earnings per share: (Non-GAAP) Basic $ 0.59   $ 0.55 $ 1.26   $ 1.17 Diluted $ 0.58   $ 0.54 $ 1.23   $ 1.14   Weighted average shares outstanding usedin the calculations of earnings pershare (GAAP and Non-GAAP): Basic   207,287     215,170   206,337     214,781 Diluted   212,148     221,022   211,410     219,469   JABIL CIRCUIT, INC. AND SUBSIDIARIESSUPPLEMENTAL DATARECONCILIATION OF GAAP FINANCIAL RESULTS TO NON-GAAP MEASURES(In thousands)(Unaudited)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 February 29, 2012     Numerator:Operating income (GAAP) $ 150,218 Tax effect (1)   (24,340 ) After-tax operating income 125,878 x4   Annualized after-tax operating income $ 503,512     Core Operating Income (Non-GAAP) $ 176,158 Tax effect (2)   (24,777 ) After-tax core operating income 151,381 x4   Annualized after-tax core operating income $ 605,524     Denominator: Average total Jabil Circuit, Inc. stockholders' equity (3) $ 1,949,666 Average notes payable and long-term debt, less current installments (3) 1,112,501 Average current installments of notes payable and long-term debt (3) 182,731 Average cash and cash equivalents (3)   (784,627 ) Net invested capital asset base $ 2,460,271     Return on Invested Capital (GAAP)20.5%Adjustments noted above4.1%Core Return on Invested Capital (Non-GAAP)24.6% (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.Investor & Media Contact:Beth Walters, 727-803-3511Senior Vice President, Investor Relations & Communicationsbeth_walters@jabil.com