Jabil Posts Second Quarter Results

 

Posted March 15, 2017

ST. PETERSBURG, Fla.--(BUSINESS WIRE)-- Today Jabil Circuit, Inc. (NYSE: JBL), reported preliminary, unaudited financial results for its second quarter of fiscal year 2017, including second quarter net revenue of $4.4 billion.

For the second quarter of fiscal year 2017, U.S. GAAP (as defined below) operating income was $83.2 million and U.S. GAAP diluted earnings per share was $0.11. Core operating income ((Non-U.S. GAAP) as defined below) was $152.2 million and core diluted earnings per share ((Non-U.S. GAAP) as defined below) was $0.48.

"The performance of our team during the second quarter was exceptional with nearly all of our businesses delivering at or above plan," said CEO Mark Mondello. "I believe our results reflect the effectiveness of our strategy to increase the quality and diversification of our cash flows and earnings," he added.

Fiscal Year 2017 Third Quarter Guidance:    
Net revenue   $4.25 billion to $4.55 billion
GAAP operating (loss) income   $(9) million to $51 million
GAAP diluted loss per share   $(0.34) to $(0.03) per diluted share
Core operating income (Non-U.S. GAAP)   $90 million to $130 million
Core diluted earnings per share (Non-U.S. GAAP)   $0.19 to $0.39 per diluted share
Diversified Manufacturing Services   Increase revenue 9 percent year-on-year
Electronics Manufacturing Services   Decrease revenue 1 percent year-on-year
Total company   Increase revenue 2 percent year-on-year

 

"Jabil's focus remains on our commitment to return capital to shareholders, our multi-year financial objectives and the goal of becoming the world's most advanced manufacturing solutions company," said Mondello.

(U.S. GAAP diluted earnings per share for the third quarter of fiscal year 2017 are currently estimated to include $0.05 per share for amortization of intangibles, $0.21 per share for stock-based compensation expense and related charges and $0.16 to $0.27 per share for restructuring and related charges.)


Definitions:

"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 quarterly 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 of its net invested capital base. Jabil calculates its annual core return on invested capital by taking its after-tax core operating income for its most recently ended fiscal year and dividing that by a two year average of its 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.)


Forward Looking Statements:

This news release contains forward-looking statements, including those regarding our anticipated financial results for our second quarter of fiscal year 2017; our guidance for future financial performance in our third quarter of fiscal year 2017 (including, net revenue, total company and segment revenue, U.S. GAAP operating income, U.S. GAAP diluted earnings (loss) per share, core operating income (Non-U.S. GAAP), and core diluted earnings per share (Non-U.S. GAAP) results and the components thereof, in each case for our third quarter of fiscal year 2017); and statements that relate to the Company's capital allocation framework, including our share repurchase program thereunder, the amount of shares to be repurchased and the timing of such repurchase. The statements in this press release are based on current expectations, forecasts and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially from our current expectations. Such factors include, but are not limited to: our determination as we finalize our financial results for our second quarter of fiscal year 2017 that our financial results and conditions differ from our current preliminary unaudited numbers set forth herein; unexpected, adverse seasonal impacts on demand; performance in the markets in which we operate; changes in macroeconomic conditions; the occurrence of, success and expected financial results from, product ramps; our ability to maintain and improve costs, quality and delivery for our customers; whether our restructuring activities and the realignment of our capacity will adversely affect our cost structure, ability to service customers and labor relations; 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; and our dependence on a limited number of large customers. Additional factors that could cause such differences can be found in our Annual Report on Form 10-K for the fiscal year ended August 31, 2016 and our other filings with the Securities and Exchange Commission. We assume no obligation to update these forward-looking statements.


Supplemental Information Regarding Non-GAAP Financial Measures:

Jabil provides supplemental, non-U.S. GAAP financial measures in this release to facilitate evaluation of Jabil's core operating performance. These non-U.S. GAAP measures exclude certain amounts that are included in the most directly comparable U.S. GAAP measures, do not have standard meanings and may vary from the non-U.S. GAAP financial measures used by other companies. Management believes these "core" financial measures are useful measures that facilitate evaluation of 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, return on invested capital, earnings and earnings per share from what it believes are its core manufacturing operations. Among other uses, management uses non-U.S. GAAP financial measures to make operating decisions, assess business performance and as a factor in determining certain employee performance when determining incentive compensation. The Company determines the tax effect of the items excluded from core earnings and core basic and diluted earnings per share based upon evaluation of the statutory tax treatment and the applicable tax rate of the jurisdiction in which the pre-tax items were incurred, and for which realization of the resulting tax benefit, if any, is expected. In certain jurisdictions where the Company does not expect to realize a tax benefit (due to a history of operating losses or other factors resulting in a valuation allowance related to deferred tax assets), a 0% tax rate is applied. Detailed definitions of certain of the core financial measures are included above under "Definitions" and a reconciliation of the disclosed core financial measures to the most directly comparable U.S. GAAP financial measures is included under the heading "Supplemental Data" at the end of this release.


Company Conference Call Information:

Jabil will hold a conference call to discuss its second quarter results and fiscal 2017 outlook today at 4:30 p.m. ET live on the Internet at Jabil. The call will be recorded and archived on the web at Jabil. A taped replay of the conference call will also be available March 15, 2017 at approximately 7:30 p.m. ET through midnight on March 22, 2017. 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: 77128570. An archived webcast of the conference call will be available at Investors.


About Jabil:

Jabil (NYSE: JBL) is a product solutions company providing comprehensive electronics design, production and product management services. Offering complete product supply chain management from facilities in 28 countries, Jabil provides comprehensive, individualized-focused solutions to customers in a broad range of industries. Further information is available on Jabil's website.

 

JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
           
  February 28,      
  2017   August 31,
  (Unaudited)   2016
ASSETS          
Current assets:          
Cash and cash equivalents $   755,098     $ 912,059  
Accounts receivable, net   1,433,676       1,359,610  
Inventories   2,498,137       2,456,612  
Prepaid expenses and other current assets   949,610       1,120,100  
Total current assets   5,636,521       5,848,381  
Property, plant and equipment, net   3,177,728       3,331,879  
Goodwill and intangible assets, net   877,096       891,727  
Deferred income taxes   175,300       148,859  
Other assets   148,183       101,831  
Total assets $   10,014,828     $ 10,322,677  
LIABILITIES AND EQUITY          
Current liabilities:          
Current installments of notes payable, long-term debt and capital lease obligations $   47,324     $ 45,810  
Accounts payable   3,301,826       3,593,195  
Accrued expenses   1,952,056       1,929,051  
Total current liabilities   5,301,206       5,568,056  
Notes payable, long-term debt and capital lease obligations, less current installments   2,055,545       2,074,012  
Other liabilities   85,301       78,018  
Income tax liabilities   96,080       90,804  
Deferred income taxes   49,598       54,290  
Total liabilities   7,587,730       7,865,180  
Commitments and contingencies          
Equity:          
Jabil Circuit, Inc. stockholders' equity:          

Preferred stock

 

     

 
Common stock   253

 

    250  
Additional paid-in capital   2,060,742       2,034,525  
Retained earnings   1,738,823       1,660,820  
Accumulated other comprehensive loss   (8,679 )     (39,877 )
Treasury stock, at cost   (1,379,831 )     (1,217,547 )
Total Jabil Circuit, Inc. stockholders' equity   2,411,308       2,438,171  
Noncontrolling interests   15,790       19,326  
Total equity   2,427,098       2,457,497  
Total liabilities and equity $   10,014,828     $ 10,322,677  
           
 
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 29,   February 28,   February 29,
  2017   2016   2017   2016
Net revenue $ 4,445,637     $ 4,403,594     $ 9,550,535     $ 9,611,571  
Cost of revenue   4,083,733       4,004,161       8,757,125       8,728,603  
Gross profit   361,904       399,433       793,410       882,968  
Operating expenses:                      
Selling, general and administrative   217,943       224,905       431,995       476,451  
Research and development   7,085       8,465       14,708       16,757  
Amortization of intangibles   8,766       8,599       17,088       16,439  
Restructuring and related charges   44,927       2,535       80,829       3,888  
Operating income   83,183       154,929       248,790       369,433  
Interest and other, net   34,882       34,142       69,951       66,879  
Income before income tax   48,301       120,787       178,839       302,554  
Income tax expense   28,177       42,354       72,014       92,206  
Net income   20,124       78,433       106,825       210,348  
Net loss attributable to noncontrolling interests, net of tax   (541 )     (497 )     (1,867 )     (467 )
Net income attributable to Jabil Circuit, Inc. $ 20,665     $ 78,930     $ 108,692     $ 210,815  
Earnings per share attributable to the stockholders of Jabil Circuit, Inc.:                      
Basic $ 0.11     $ 0.41     $ 0.59     $ 1.11  
Diluted $ 0.11     $ 0.41     $ 0.58     $ 1.09  
                       
Weighted average shares outstanding:                      
Basic   182,632       190,957       183,970       190,656  
Diluted   185,010       193,294       186,463       193,429  
 
 
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
           
  Six months ended
  February 28,   February 29,
  2017   2016
Cash flows from operating activities:          
Net income $ 106,825     $ 210,348  
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   380,317       329,301  

Restructuring and related charges

 

46,775

     

 
Recognition of stock-based compensation expense and related charges   15,027       45,060  
Deferred income taxes   (31,680 )     (22,940 )
Loss on sale of property, plant and equipment   852       11,633  
Other, net   8,831       4,334  
Change in operating assets and liabilities, exclusive of net assets acquired:          
Accounts receivable   (77,649 )     20,027  
Inventories   (19,521 )     223,140  
Prepaid expenses and other current assets   145,527       (17,010 )
Other assets   (41,971 )     (3,486 )
Accounts payable, accrued expenses and other liabilities   (187,130 )     (727,749 )
Net cash provided by operating activities   346,203       72,658  
Cash flows from investing activities:          
Acquisition of property, plant and equipment   (320,674 )     (456,028 )
Proceeds from sale of property, plant and equipment   18,963       7,196  
Cash paid for business and intangible asset acquisitions, net of cash   (5,256 )     (206,670 )
Issuance of notes receivable       (28,500 )
Other, net   (1,360 )     (5,250 )
Net cash used in investing activities   (308,327 )     (689,252 )
Cash flows from financing activities:          
Borrowings under debt agreements   3,407,000       3,404,241  
Payments toward debt agreements   (3,424,939 )     (2,726,027 )
Payments to acquire treasury stock   (151,488 )     (54,567 )
Dividends paid to stockholders   (30,940 )     (31,795 )
Net proceeds from exercise of stock options and issuance of common stock          
under employee stock purchase plan   11,250       10,660  
Treasury stock minimum tax withholding related to vesting of restricted stock   (10,796 )     (10,329 )
Other, net   (1,499 )     (1,500 )
Net cash (used in) provided by financing activities   (201,412 )     590,683  
Effect of exchange rate changes on cash and cash equivalents   6,575       (4,834 )
Net decrease in cash and cash equivalents   (156,961 )     (30,745 )
Cash and cash equivalents at beginning of period   912,059       913,963  
Cash and cash equivalents at end of period $ 755,098     $ 883,218  
           
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 ended   Six months ended
  February 28,     February 29,   February 28,     February 29,
  2017   2016   2017   2016
Operating income (U.S. GAAP) $ 83,183     $ 154,929     $ 248,790     $ 369,433  
Amortization of intangibles   8,766       8,599       17,088       16,439  
Stock-based compensation expense and related charges   15,318       20,268       15,027       45,060  
Restructuring and related charges   44,927       2,535       80,829       3,888  
Core operating income (Non-U.S. GAAP) $ 152,194     $ 186,331     $ 361,734     $ 434,820  
                       
Net income attributable to Jabil Circuit, Inc. (U.S. GAAP) $ 20,665     $ 78,930     $ 108,692     $ 210,815  
Amortization of intangibles   8,766       8,599       17,088       16,439  
Stock-based compensation expense and related charges   15,318       20,268       15,027       45,060  
Restructuring and related charges   44,927       2,535       80,829       3,888  
Adjustments for taxes   (899 )     (988 )     (3,224 )     (1,975 )
Core earnings (Non-U.S. GAAP) $ 88,777     $ 109,344     $ 218,412     $ 274,227  
                       
Earnings per share (U.S. GAAP):                      
Basic $ 0.11     $ 0.41     $ 0.59     $ 1.11  
Diluted $ 0.11     $ 0.41     $ 0.58     $ 1.09  
                       
Core earnings per share (Non-U.S. GAAP):                      
Basic $ 0.49     $ 0.57     $ 1.19     $ 1.44  
Diluted $ 0.48     $ 0.57     $ 1.17     $ 1.42  
                       
Weighted average shares outstanding used in the calculations                      
of earnings per share (U.S. GAAP and Non-U.S. GAAP):                      
Basic   182,632       190,957       183,970       190,656  
Diluted   185,010       193,294       186,463       193,429  
 
 
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 the 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 the "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 29,  
  2017     2016  
Numerator:              
Operating income (U.S. GAAP) $ 83,183       $ 154,929    
Tax effect(1)   (28,808 )       (42,312 )  
After-tax operating income   54,375         112,617    
   

x

4

     

x

4

 
Annualized after-tax operating income $ 217,500       $ 450,468    
               
Core operating income (Non-U.S. GAAP) $ 152,194       $ 186,331    
Tax effect(2)   (29,344 )       (43,307 )  
After-tax core operating income   122,850         143,024    
   

x

4

     

x

4

 
Annualized after-tax core operating income $ 491,400       $ 572,096    
               
Denominator:              
Average total Jabil Circuit, Inc. stockholders' equity(3) $ 2,392,626       $ 2,424,798    
Average notes payable, long-term debt and capital lease obligations, less              
current installments(3)   2,061,629         1,814,834    
Average current installments of notes payable, long-term debt and capital              
lease obligations(3)   45,261         443,303    
Average cash and cash equivalents(3)   (751,257 )       (1,006,781 )  
Net invested capital asset base $ 3,748,259       $ 3,676,154    
               
Return on Invested Capital (U.S. GAAP)   5.8

%

 

      12.3

%

 

 
Adjustments noted above   7.3

%

 

      3.3

%

 

 
Core Return on Invested Capital (Non-U.S. GAAP)   13.1

%

 

      15.6

%

 

 

 

(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.

  

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Jabil Circuit, Inc.
Beth Walters, 727-803-3511
Senior Vice President, Investor Relations & Communications
beth_walters@jabil.com
or
Adam Berry, 727-803-5772
Senior Director, Investor Relations
adam_berry@jabil.com

 

Source: Jabil Circuit, Inc.

 

 

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