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Press release from Business Wire

Jabil Posts Third Quarter Results

<p class='bwalignc'> <i>Continued Strength in Diversified Manufacturing Services</i> </p>

Tuesday, June 19, 2012

Jabil Posts Third Quarter Results16:02 EDT Tuesday, June 19, 2012 ST. PETERSBURG, Fla. (Business Wire) -- Jabil Circuit, Inc. (NYSE: JBL), today reported preliminary, unaudited third quarter net revenue of $4.3 billion for fiscal year 2012. “We are pleased to post core EBITDA margins of 6.5 percent in the quarter, our highest level since 2005. Core operating margins also expanded to 4.5 percent,” said Timothy L. Main, President and CEO of Jabil. “This is particularly gratifying during a period of more subdued revenue growth for the company overall.” Revenue from Diversified Manufacturing Services increased to $1.9 billion, a 22 percent year over year increase, and accounted for 44 percent of total revenue in the third fiscal quarter of 2012. Jabil's High Velocity business represented 25 percent of total revenue and its Enterprise & Infrastructure business accounted for 31 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 calculates core operating margin as core operating income divided by net revenue. Jabil defines its core EBITDA margin as core operating income before depreciation expense divided by net revenue. 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 operating margin, core EBITDA margin, 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, its calculation of core operating margin, 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, its calculation of core EBITDA margin and additional information in the supplemental information.)Operational Highlights Fiscal Q3 2012 versus Fiscal Q3 2011 Core EBITDA margin increased to 6.5 percent. GAAP operating income increased 3 percent. GAAP diluted earnings per share increased 2 percent. Operating margins expanded 10 basis points year-over-year to 3.7 percent. Core operating margins expanded 30 basis points year-over-year to 4.5 percent. Cash flow from operations increased to $186 million. Repurchased $31 million worth of shares and returned $17 million to shareholders via dividends during the quarter. Cost of revenue was impacted by a $10.1 million distressed customer charge related to a specific solar customer. Excluding the charge, gross profit margin and GAAP diluted earnings per share would have been 8 percent and $0.53 for the quarter, respectively.                         Quarterly ResultsQ3 2012Q3 2011 Net revenue $4.3 billion $4.2 billion GAAP operating income $156.6 million $152.5 million GAAP net income $101.3 million $104.7 million GAAP diluted earnings per share $0.48 $0.47 GAAP return on invested capital 19% 24% Core operating income $190.3 million $177.8 million Core earnings $134.4 million $129.1 million Core diluted earnings per share $0.64 $0.58 Core return on invested capital 24% 29% Business Update “We are delighted with the outstanding performance of our Diversified Manufacturing Services sector overall and we are actively expanding our capacity in order to meet the growing demands of numerous customers and products,” said Jabil CEO Timothy Main. “The ramp-up of new products, combined with specific customer challenges and muted end-markets give us plenty to focus on in the fourth fiscal quarter,” said Jabil CEO Timothy Main. “We believe success in the fourth quarter will set the stage for a brisk fiscal 2013 and a continuation of record setting years.”         Fiscal Q4 2012 Guidance Range Net revenue             $4.1 billion - $4.35 billion Core operating income $170 million - $200 million Core earnings per share $0.54 to $0.66 per diluted share GAAP earnings per share $0.43 to $0.55 per diluted share (GAAP earnings per share for the fourth 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). FORWARD LOOKING STATEMENT: This news release contains forward-looking statements, including those regarding our anticipated financial results for our third quarter offiscal year 2012; the ramping of new products; specific customer challenges; muted end-markets; our focus in the fourth fiscal quarter; our fiscal 2013 performance and our currently expected fourth 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 third fiscal quarter of fiscal year 2012 that our financial results and conditions differ from our current preliminary unaudited numbers set forth herein;our inability to ramp the new products in our Materials Technology Group, an unexpected difference in our focus in the fourth fiscal quarter; 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 and other related customer challenges 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, 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 operating margin, core EBITDA margin, 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 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 June 19, 2012 at approximately 7:30 p.m. ET through midnight on June 26, 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: 88463058. 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 29 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)     May 31, August 31, 2012 (Unaudited) 2011     ASSETS Current assets: Cash and cash equivalents $ 742,129 $ 888,611 Accounts receivable, net 1,127,794 1,100,926 Inventories 2,377,485 2,227,339 Prepaid expenses and other current assets 1,126,950 868,892 Income taxes receivable 7,410 33,855 Deferred income taxes   26,382     15,737     Total current assets 5,408,150 5,135,360   Property, plant and equipment, net 1,659,484 1,641,335 Goodwill and intangible assets, net 216,425 125,305 Deferred income taxes 69,788 74,989 Income tax receivable 15,393 - Other assets   76,711     80,951     Total assets $ 7,445,951   $ 7,057,940     LIABILITIES AND EQUITY Current liabilities: Current installments of notes payable and long-term debt $ 296,418 $ 74,160 Accounts payable 2,900,664 2,885,168 Accrued expenses 893,957 892,391 Income taxes payable 30,196 32,987 Deferred income taxes   3,116     5,182     Total current liabilities 4,124,351 3,889,888   Notes payable and long-term debt, less current installments 1,140,154 1,112,594 Other liabilities 69,607 67,423 Income tax liability 74,792 88,451 Deferred income taxes   21,170     15,761     Total liabilities   5,430,074     5,174,117     Commitments and contingencies Equity: Jabil Circuit, Inc. stockholders' equity: Common stock 231 225 Additional paid-in capital 1,723,910 1,649,431 Retained earnings 701,367 441,793 Accumulated other comprehensive income 109,265 194,706 Treasury stock, at cost   (521,207 )   (419,035 )   Total Jabil Circuit, Inc. stockholders' equity   2,013,566     1,867,120     Noncontrolling interests   2,311     16,703     Total equity   2,015,877     1,883,823     Total liabilities and equity $ 7,445,951   $ 7,057,940         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, 2012   2011 2012   2011   Net revenue $ 4,250,918 $ 4,227,688 $ 12,813,861 $ 12,238,532 Cost of revenue   3,921,595     3,909,312     11,822,364     11,313,165   Gross profit 329,323 318,376 991,497 925,367   Operating expenses: Selling, general and administrative 162,748 154,112 481,382 438,368 Research and development 6,518 6,544 19,053 18,825 Amortization of intangibles 3,454 5,187 13,399 16,821 Restructuring and impairment charges - - - 628 Settlement of receivables and related charges - - - 13,607 Loss on disposal of subsidiaries   -     -     -     23,944 Operating income 156,603 152,533 477,663 413,174   Interest and other, net   27,628     26,023     83,227     73,020   Income before income tax 128,975 126,510 394,436 340,154   Income tax expense   27,377     22,222     80,812     72,737   Net income 101,598 104,288 313,624 267,417   Net income (loss) attributable to noncontrolling interests, net of income tax expense   278     (407 )   1,734     642   Net income attributable to Jabil Circuit, Inc. $ 101,320   $ 104,695   $ 311,890   $ 266,775   Earnings per share attributable to the stockholders of Jabil Circuit, Inc.: Basic $ 0.49   $ 0.49   $ 1.51   $ 1.24 Diluted $ 0.48   $ 0.47   $ 1.47   $ 1.21   Weighted average shares outstanding: Basic   206,298     215,705     206,326     215,092 Diluted   211,541     222,337     211,749     220,773     JABIL CIRCUIT, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(Unaudited)   Nine months endedMay 31,2012   May 31,2011 Cash flows from operating activities: Net income $ 313,624 $ 267,417 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 262,186 234,312 Recognition of stock-based compensation expense 59,857 59,854 Settlement of receivables and related charges — 12,673 Loss on disposal of subsidiaries — 23,944 Other, net 6,959 8,062 Changes in operating assets and liabilities, exclusive of net assets acquired: Accounts receivable (22,634 ) 100,226 Inventories (162,076 ) (187,146 ) Prepaid expenses and other current assets (274,827 ) (145,384 ) Other assets (3,302 ) (10,011 ) Accounts payable and accrued expenses 20,673 148,289 Income taxes payable   (8,933 )   12,181     Net cash provided by operating activities   191,527     524,417     Cash flows from investing activities: Cash paid for business and intangible asset acquisitions, net of cash acquired (125,098 ) 3,985 Acquisition of property, plant and equipment (291,792 ) (320,965 ) Proceeds from sale of property, plant and equipment 12,555 13,669 Proceeds from disposal of available for sale investments — 5,800 Cost of receivables acquired, net of cash collections   517     (521 )   Net cash used in investing activities   (403,818 )   (298,032 )   Cash flows from financing activities: Payments toward debt agreements (6,783,726 ) (5,714,853 ) Borrowings under debt agreements 7,033,854 5,706,610 Dividends paid to stockholders (48,716 ) (45,306 ) Dividends paid to noncontrolling interest (333 ) — Net proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan 18,576 17,778 Payments to acquire treasury stock (70,991 ) — Treasury stock minimum tax withholding related to vesting of restricted stock (31,181 ) (9,739 ) Debt issuance costs (5,014 ) (14,549 ) Excess tax benefit related to stock awards 750 179 Cash paid to purchase noncontrolling interest   (20,501 )   —     Net cash provided by (used in) financing activities   92,718     (59,880 )   Effect of exchange rate changes on cash and cash equivalents   (26,909 )   311     Net (decrease) increase in cash and cash equivalents (146,482 ) 166,816 Cash and cash equivalents at beginning of period   888,611     744,329     Cash and cash equivalents at end of period $ 742,129   $ 911,145       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, 2012   2011 2012   2011 Net Revenue (GAAP) $ 4,250,918 $ 4,227,688 $ 12,813,861 $ 12,238,532   Operating income (GAAP) $ 156,603 $ 152,533 $ 477,663 $ 413,174 Amortization of intangibles 3,454 5,187 13,399 16,821 Distressed customer charge 10,149 - 10,149 - Stock-based compensation and related charges 20,123 20,053 59,857 59,854 Restructuring and impairment charges - - - 628 Loss on disposal of business - - - 23,944 Settlement of receivables and related charges   -       -     -       13,607   Core operating income (Non-GAAP) $ 190,329 $ 177,773 $ 561,068 $ 528,028   Operating income margin (GAAP) 3.7 % 3.6 % 3.7 % 3.4 % Core operating income margin (Non-GAAP) 4.5 % 4.2 % 4.4 % 4.3 %   Net income attributable to Jabil Circuit, Inc. (GAAP) $ 101,320 $ 104,695 $ 311,890 $ 266,775 Amortization of intangibles, net of tax 3,180 5,174 13,099 16,785 Distressed customer charge, net of tax 10,149 - 10,149 - Stock-based compensation and related charges, net of tax 19,792 19,268 58,656 58,279 Restructuring and impairment charges, net of tax - - - 628 Loss on disposal of business, net of tax - - - 23,944 Settlement of receivables and related charges, net of tax   -       -     -       13,607   Core earnings (Non-GAAP) $ 134,441 $ 129,137 $ 393,794 $ 380,018   Earnings per share: (GAAP) Basic $ 0.49     $ 0.49   $ 1.51     $ 1.24   Diluted $ 0.48     $ 0.47   $ 1.47     $ 1.21     Core earnings per share: (Non-GAAP) Basic $ 0.65     $ 0.60   $ 1.91     $ 1.77   Diluted $ 0.64     $ 0.58   $ 1.86     $ 1.72     Weighted average shares outstanding used in the calculations of earnings per share (GAAP and Non-GAAP): Basic   206,298       215,705     206,326       215,092   Diluted   211,541       222,337     211,749       220,773         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 May 31, 2012     Numerator:Operating income (GAAP) $ 156,603 Tax effect (1)   (27,625 ) After-tax operating income 128,978 x4   Annualized after-tax operating income $ 515,912     Core Operating Income (Non-GAAP) $ 190,329 Tax effect (2)   (28,183 ) After-tax core operating income 162,146 x4   Annualized after-tax core operating income $ 648,584     Denominator: Average total Jabil Circuit, Inc. stockholders' equity (3) $ 2,007,199 Average notes payable and long-term debt, less current installments (3) 1,126,315 Average current installments of notes payable and long-term debt (3) 289,010 Average cash and cash equivalents (3)   (724,740 ) Net invested capital asset base $ 2,697,784     Return on Invested Capital (GAAP)19.1%Adjustments noted above4.9%Core Return on Invested Capital (Non-GAAP)24.0% (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. AND SUBSIDIARIESSUPPLEMENTAL DATARECONCILIATION OF GAAP FINANCIAL RESULTS TO NON-GAAP MEASURES(In thousands)(Unaudited)CALCULATION OF Core EBITDA Margin The Company calculates Core EBITDA margin as operating income (calculated in accordance with U.S. GAAP) 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 the disposal of subsidiaries and depreciation expense divided by net revenue. The following table reconciles core EBITDA to net income and operating income in accordance with US GAAP as follows:     Three months ended May 31,   May 31, 2012   2011 Numerator:Net income attributable to Jabil Circuit, Inc. (GAAP) $ 101,320 $ 104,695 Other expense 1,899 1,771 Interest income (733 ) (897 ) Interest expense 26,462 25,149 Income tax expense 27,377 22,222 Net income (loss) attributable to non controlling interests, net of income tax expense   278       (407 ) Operating income (GAAP) $ 156,603 $ 152,533   Amortization of intangibles 3,454 5,187 Depreciation expense 84,997 77,250 Distressed customer charge 10,149 - Stock-based compensation and related charges   20,123       20,053   Core EBITDA (Non-GAAP) $ 275,326 $ 255,023       Denominator:Net revenue $ 4,250,918     $ 4,227,688   Core EBITDA Margin 6.5 % 6.0 % Jabil Circuit, Inc.Investor & Media Contact:Beth Walters, 727-803-3511Senior Vice President, Investor Relations & Communicationsbeth_walters@jabil.com