MRO Magazine

Jabil Posts Second Quarter Results


March 18, 2015
By Business Wire News

ST. PETERSBURG, Fla.

Today Jabil Circuit, Inc. (NYSE:JBL), reported preliminary, unaudited financial results for its second quarter of fiscal year 2015. The company reported second quarter net revenue of $4.3 billion, a 20 percent increase from the second quarter of fiscal year 2014.

“I am extremely pleased with our strong operational performance during the quarter. We’re having a great year, as we remain focused on our key priorities. Priorities being growth of earnings, delivering innovative solutions to our customers, taking great care of our employees, and expanding our broad-based capabilities,” said Mark T. Mondello, Chief Executive Officer. “We continue to have success in diversifying our business, which I believe will increase our resiliency during this time of ever-increasing change in the markets we serve,” he added.

U.S. generally accepted accounting principles (U.S. GAAP) operating income for the second quarter was $124.9 million and U.S. GAAP net diluted earnings per share was $0.27. Core operating income (as defined below) was $166.0 million and core diluted earnings per share (as defined below) was $0.50.

Jabil’s two reporting segments delivered the following revenue results for the company’s second fiscal quarter:

  • Electronics Manufacturing Services: $2.6 billion.
  • Diversified Manufacturing Services: $1.7 billion.

(Definitions used: “U.S. GAAP” means U.S. generally accepted accounting principles. Jabil defines core operating income as U.S. GAAP operating income before amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, distressed customer charges, acquisition costs and certain purchase accounting adjustments, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges and goodwill impairment charges. Jabil defines core earnings as U.S. GAAP net income before amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, distressed customer charges, acquisition costs and certain purchase accounting adjustments, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations and certain other expenses, net of tax and certain deferred tax valuation allowance charges. Jabil defines core diluted earnings per share as core earnings divided by the weighted average number of outstanding diluted shares as determined under U.S. GAAP. Jabil calculates its 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 diluted and basic earnings per share and core return on invested capital to provide investors an additional method for assessing operating income, earnings, diluted 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 U.S. GAAP operating income, its calculation of core earnings and core diluted earnings per share to its U.S. GAAP net income and U.S. GAAP earnings per share, its calculation of core return on invested capital and additional information in the supplemental information.)

Quarterly Results

   

Q2 2015

   

Q2 2014

Net revenue $4.3 billion $3.6 billion
U.S. GAAP operating income $124.9 million $3.6 million
U.S. GAAP net income (loss) $52.0 million $(38.7) million
U.S. GAAP net diluted earnings (loss) per share $0.27 $(0.19)
U.S. GAAP return on invested capital 12.1% 0.1%
Core operating income $166.0 million $60.4 million
Core earnings $98.3 million $20.3 million
Core diluted earnings per share $0.50 $0.10
Core return on invested capital 17.6% 6.2%

Business Update

“I am pleased to say that we are squarely on track to deliver targeted revenue and earnings for the fiscal year, all while continuing to invest for future growth,” Mondello said. Management maintained its fiscal year 2015 revenue outlook of $17.5 – $18.5 billion and core earnings per share of $1.85 – $2.15.

Third quarter fiscal 2015 guidance:            

— Net revenue

$4.35 billion to $4.55 billion
— U.S. GAAP operating income $118 million to $154 million
— U.S. GAAP net diluted earnings per share $0.29 to $0.44 per diluted share
— Core operating income $145 million to $175 million
— Core diluted earnings per share $0.43 to $0.55 per diluted share
— Diversified Manufacturing Services Increase 42 percent year over year
— Electronics Manufacturing Services Increase 7 percent year over year

(U.S. GAAP net diluted earnings per share for the third quarter of fiscal year 2015 are currently estimated to include $0.02 per share for amortization of intangibles, $0.07 per share for stock-based compensation expense and related charges and $0.02 to $0.05 per share for restructuring and related charges.)

FORWARD-LOOKING STATEMENT: This news release contains forward-looking statements, including those regarding our anticipated financial results for our second quarter of fiscal year 2015; our performance during fiscal year 2015 and our related focus on key priorities; our resiliency during this time and the contribution of the diversification of our business to our resiliency; our continuing to invest for future growth; our currently expected fiscal year 2015 revenues and core earnings per share; and our currently expected third quarter of fiscal year 2015 net revenue (including that of our segments), core and U.S. GAAP operating income, core and U.S. GAAP diluted 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 quarter of fiscal year 2015 that our financial results and conditions differ from our current preliminary unaudited numbers set forth herein; fluctuations in our stock’s market price; fluctuations in operating results and cash flows; unexpected, adverse seasonal impacts on demand; changes in macroeconomic conditions, both in the U.S. and internationally; the occurrence of, success and expected financial results from, product ramps; 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; 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, 2014, subsequent Reports on Forms 10-Q and8-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 U.S. GAAP. In addition to the U.S. GAAP financial measures, Jabil provides supplemental, non-U.S. GAAP financial measures to facilitate evaluation of Jabil’s core operating performance. The non-U.S. GAAP financial measures disclosed in this release exclude certain amounts that are included in the most directly comparable U.S. GAAP measures. The non-U.S. GAAP or core financial measures disclosed in this release do not have standard meanings and may vary from the non-U.S. 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 related charges, distressed customer charges, acquisition costs and certain purchase accounting adjustments, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations and 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 diluted and basic 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 U.S. GAAP financial measures.

Company Conference Call Information: Jabil will hold a conference call to discuss the second quarter of fiscal year 2015 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 18, 2015 at approximately 7:30 p.m. ET through midnight on March 25, 2015. 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: 96451660. 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 and manufacturing 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.

JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
February 28,
2015August 31,
(Unaudited)2014
 ASSETS
Current assets:
  Cash and cash equivalents $ 966,414 $ 1,000,249
Accounts receivable, net 1,269,171 1,208,516
Inventories 2,105,183 2,008,077
Prepaid expenses and other current assets 935,063 1,057,562
Deferred income taxes 66,351 64,944
Assets of discontinued operations     19,669
Total current assets 5,342,182 5,359,017
Property, plant and equipment, net 2,435,704 2,271,705
Goodwill and intangible assets, net 618,594 627,700
Deferred income taxes 85,026 92,702
Other assets   96,650   128,622
Total assets $ 8,578,156 $ 8,479,746
LIABILITIES AND EQUITY
Current liabilities:
Current installments of notes payable, long-term debt and capital lease obligations $ 11,258 $ 12,960
Accounts payable 3,087,905 3,060,814
Accrued expenses 1,325,792 1,235,106
Deferred income taxes 785 5,094

Liabilities of discontinued operations

    7,123
Total current liabilities 4,425,740 4,321,097
Notes payable, long-term debt and capital lease obligations, less current installments 1,662,778 1,669,585
Other liabilities 73,597 79,471
Income tax liabilities 92,243 87,555
Deferred income taxes   59,829   61,670
Total liabilities   6,314,187   6,219,378
Commitments and contingencies
Equity:
Jabil Circuit, Inc. stockholders’ equity:
Preferred stock
Common stock 246 244
Additional paid-in capital 1,916,255 1,874,219
Retained earnings 1,340,972 1,245,772
Accumulated other comprehensive (loss) income (578) 86,962
Treasury stock, at cost   (1,012,330)   (965,369)
Total Jabil Circuit, Inc. stockholders’ equity 2,244,565 2,241,828
Noncontrolling interests   19,404   18,540
Total equity   2,263,969   2,260,368
Total liabilities and equity $ 8,578,156 $ 8,479,746
 
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
(Unaudited)
 
       Three months ended  Six months ended
February 28,  February 28,February 28,February 28,
2015201420152014
Net revenue $ 4,309,323 $ 3,577,315 $ 8,859,741 $ 7,920,026
Cost of revenue   3,941,504   3,364,165   8,108,935   7,372,625
Gross profit 367,819 213,150 750,806 547,401
Operating expenses:
Selling, general and administrative 210,326 164,522 424,705 306,992
Research and development 6,501 6,604 12,506 15,658
Amortization of intangibles 5,783 6,180 11,373 12,501
Restructuring and related charges   20,358   32,203   32,616   53,206
Operating income 124,851 3,641 269,606 159,044
Interest and other, net   31,797   33,367   63,630   67,141
Income (loss) from continuing operations before tax 93,054 (29,726) 205,976 91,903
Income tax expense   35,272   2,539   75,061   22,215
Income (loss) from continuing operations, net of tax   57,782   (32,265)   130,915   69,688
Discontinued operations:
(Loss) income from discontinued operations, net of tax (4,562) 2,704 (3,709) 18,816
Loss on sale of discontinued operations, net of tax   (947)   (8,955)   (2,557)   (8,955)
Discontinued operations, net of tax   (5,509)   (6,251)   (6,266)   9,861
Net income (loss) 52,273 (38,516) 124,649 79,549
Net income attributable to noncontrolling interests, net of tax   321   151   535   294
Net income (loss) attributable to Jabil Circuit, Inc. $ 51,952 $ (38,667) $ 124,114 $ 79,255
Earnings (loss) per share attributable to the stockholders of Jabil
Circuit, Inc.:
Basic:
Income (loss) from continuing operations, net of tax $ 0.30 $ (0.16) $ 0.67 $ 0.34
Discontinued operations, net of tax $ (0.03) $ (0.03) $ (0.03) $ 0.05
Net income (loss) $ 0.27 $ (0.19) $ 0.64 $ 0.39
Diluted:
Income (loss) from continuing operations, net of tax $ 0.29 $ (0.16) $ 0.67 $ 0.34
Discontinued operations, net of tax $ (0.03) $ (0.03) $ (0.03) $ 0.05
Net income (loss) $ 0.27 $ (0.19) $ 0.63 $ 0.38
 
Weighted average shares outstanding:
Basic   193,561   205,251   193,531   205,005
Diluted   195,473   205,251   195,534   206,892
 
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
 Six months ended
February 28,February 28,
20152014
Cash flows from operating activities:
Net income $ 124,649 $ 79,549
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 249,441 247,169
Restructuring and related charges 3,867 24,915
Recognition of stock-based compensation expense and related charges 32,982 (7,821)
Deferred income taxes (1,370) (28,265)
Loss on sale of property, plant and equipment 12,185 3,574
Other, net 13,177 6,840
Change in operating assets and liabilities, exclusive of net assets acquired:
Accounts receivable (97,859) 187,030
Inventories (112,993) 342,794
Prepaid expenses and other current assets 105,311 215,376
Other assets 24,067 (22,448)
Accounts payable, accrued expenses and other liabilities   171,968   (914,097)
Net cash provided by operating activities   525,425   134,616
Cash flows from investing activities:
Proceeds from sale of discontinued operations, net of cash 9,663
Acquisition of property, plant and equipment (468,207) (286,349)
Cash paid for business and intangible asset acquisitions, net of cash acquired (11,897)
Proceeds from sale of property, plant and equipment 4,629 12,945
Other, net   4,894  
Net cash used in investing activities   (460,918)   (273,404)
Cash flows from financing activities:
Borrowings under debt agreements 3,352,676 3,789,192
Payments toward debt agreements (3,358,147) (3,860,319)
Payments to acquire treasury stock (40,040) (64,051)
Dividends paid to stockholders (32,078) (35,792)
Treasury stock minimum tax withholding related to vesting of restricted stock (6,921) (32,845)
Other, net   9,061   4,908
Net cash used in financing activities   (75,449)   (198,907)
Effect of exchange rate changes on cash and cash equivalents   (22,893)   1,451
Net decrease in cash and cash equivalents (33,835) (336,244)
Cash and cash equivalents at beginning of period   1,000,249   1,011,373
Cash and cash equivalents at end of period $ 966,414 $ 675,129
 
JABIL CIRCUIT, INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA
RECONCILIATION OF U.S. GAAP FINANCIAL RESULTS TO NON-U.S. GAAP MEASURES
(in thousands, except for per share data)
(Unaudited)
 
 Three months endedSix months ended
February 28,February 28,February 28,February 28,
2015201420152014
Operating income (U.S. GAAP) $ 124,851 $ 3,641 $ 269,606 $ 159,044
Amortization of intangibles 5,783 6,180 11,373 12,501
Stock-based compensation expense and related charges 14,968 14,652 33,011 (7,934)
Restructuring and related charges 20,358 32,203 32,616 53,206
Distressed customer charges     3,742     3,742
Core operating income (Non-U.S. GAAP) $ 165,960 $ 60,418 $ 346,606 $ 220,559
 
Net income (loss) attributable to Jabil Circuit, Inc.
(U.S. GAAP) $ 51,952 $ (38,667) $ 124,114 $ 79,255
Amortization of intangibles, net of tax 5,781 8,250 11,365 9,423
Stock-based compensation expense and related
charges, net of tax 14,827 14,192 32,527 (8,413)
Restructuring and related charges, net of tax 20,248 27,892 32,196 45,589
Distressed customer charges, net of tax 2,337 2,337
Acquisition costs and certain purchase accounting
adjustments, net of tax (9,064)
Loss (income) from discontinued operations, net of tax 4,562 (2,704) 3,709 (18,816)
Loss on sale of discontinued operations, net of tax   947   8,955   2,557   8,955
Core earnings (Non-U.S. GAAP) $ 98,317 $ 20,255 $ 206,468 $ 109,266
 
Net earnings (loss) per share (U.S. GAAP):
Basic $ 0.27 $ (0.19) $ 0.64 $ 0.39
Diluted $ 0.27 $ (0.19) $ 0.63 $ 0.38
 
Core earnings per share (Non-U.S. GAAP):
Basic $ 0.51 $ 0.10 $ 1.07 $ 0.53
Diluted $ 0.50 $ 0.10 $ 1.06 $ 0.53
 
Weighted average shares outstanding used in the calculations
of earnings per share (U.S. GAAP):
Basic 193,561 205,251 193,531 205,005
Diluted 195,473 205,251 195,534 206,892
 
Weighted average shares outstanding used in the calculations
of earnings per share (Non-U.S. GAAP):
Basic 193,561 205,251 193,531 205,005
Diluted 195,473 206,622 195,534 206,892
 
JABIL CIRCUIT, INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA
RECONCILIATION OF U.S. GAAP FINANCIAL RESULTS TO NON-U.S. GAAP MEASURES
(in thousands)
(Unaudited)
 
CALCULATION OF RETURN ON INVESTED CAPITAL
AND CORE RETURN ON INVESTED CAPITAL
 
The Company calculates: (1) its “Return on Invested Capital” by annualizing its “after-tax U.S. 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) its “Core Return on Invested Capital” by annualizing its “after-tax non-U.S. GAAP core operating income” for its most recently-ended quarter and dividing that by a two quarter “average net invested capital asset base.”
 
The Company calculates: (1) its “after-tax U.S. GAAP operating income” by subtracting a certain tax effect (the calculation of which is explained below) from its U.S. GAAP operating income and (2) its “after-tax non-U.S. GAAP core operating income” as its non-U.S. GAAP core operating income less a certain tax effect (the calculation of which is explained below). See elsewhere in this earnings release for a reconciliation of the Company’s non-U.S. GAAP core operating income to its U.S. GAAP operating income.
 
The Company calculates its “average net invested capital asset base” as the sum of the averages (the calculations of which are explained below) of its stockholders’ equity, current and non-current portions of its notes payable, long-term debt and capital lease obligations 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 U.S. GAAP operating income” to (2) “Core Return on Invested Capital,” as calculated using “after-tax non-U.S. GAAP core operating income”:
 
Three months ended  
February 28,February 28,
20152014
Numerator:
Operating income (U.S. GAAP) $ 124,851 $ 3,641
Tax effect(1)   (35,178)   (2,410)
After-tax operating income 89,673 1,231
  x4   x4
Annualized after-tax operating income $ 358,692 $ 4,924
 
Core operating income (Non-U.S. GAAP) $ 165,960 $ 60,418
Tax effect(2)   (35,459)   (7,016)
After-tax operating income 130,501 53,402
  x4   x4
Annualized after-tax core operating income $ 522,004 $ 213,608
 
Denominator:
Average total Jabil Circuit, Inc. stockholders’ equity(3) $ 2,239,861 $ 2,343,125
Average notes payable, long-term debt and capital lease obligations, less
current installments(3) 1,664,577 1,676,578
Average current installments of notes payable, long-term debt and capital
lease obligations(3) 11,372 139,035
Average cash and cash equivalents(3)   (943,959)   (722,176)
Net invested capital asset base $ 2,971,851 $ 3,436,562
 
Return on Invested Capital (U.S. GAAP)12.1%0.1%
Adjustments noted above5.5%6.1%
Core Return on Invested Capital (Non-U.S. GAAP)17.6%6.2%

__________

(1) This amount is calculated by adding the amount of income taxes attributable to its operating income (U.S. GAAP) and its interest expense.

(2) This amount is calculated by adding the amount of income taxes attributable to its core operating income (Non-U.S. 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, 727-803-3511
Senior Vice President, Investor Relations & Communications
beth_walters@jabil.com