Jabil Circuit, Inc.
Jun 15, 2016
PDF

Jabil Posts Third Quarter Results

Company Announces Two-Year Capital Allocation Framework

ST. PETERSBURG, Fla.--(BUSINESS WIRE)-- Today Jabil Circuit, Inc. (NYSE:JBL), reported preliminary, unaudited financial results for its third quarter of fiscal year 2016, including third quarter net revenue of $4.3 billion.

U.S. GAAP (as defined below) operating income for the third quarter was $59.6 million and U.S. GAAP net diluted earnings per share was $0.03. Core operating income (as defined below) was $87.2 million and core diluted earnings per share (as defined below) was $0.17.

"Our Electronics Manufacturing Services business performed ahead of plan supported by near-perfect execution during the quarter," said CEO Mark Mondello. "However as expected, our third quarter results also reflected a soft environment within our mobility business. These challenges will continue to negatively impact our Diversified Manufacturing Services business for the balance of our fiscal year," he added.

Fiscal Year 2016 Fourth Quarter Guidance:

-- Net revenue         $4.15 billion to $4.35 billion
-- U.S. GAAP operating income $60 million to $92 million
-- U.S. GAAP net diluted (loss) earnings per share ($0.02) to $0.19 per diluted share
-- Core operating income $95 million to $125 million
-- Core diluted earnings per share $0.15 to $0.35 per diluted share
-- Diversified Manufacturing Services Decrease net revenue 20 percent year-on-year
-- Electronics Manufacturing Services Consistent net revenue year-on-year
-- Total company Decrease net revenue 9 percent year-on-year

(U.S. GAAP net diluted earnings per share for the fourth quarter of fiscal year 2016 are currently estimated to include $0.05 per share for amortization of intangibles, $0.09 per share for stock-based compensation expense and related charges and $0.03 to $0.02 per share for restructuring and related charges.)

Management updated the fiscal year 2016 revenue outlook to approximately $18.2 billion; U.S. GAAP net diluted earnings per share outlook to approximately $1.20 and core diluted earnings per share outlook to approximately $1.85.

Capital Allocation Outlook

As part of a framework to increase capital returns to shareholders over the next two fiscal years, Jabil's Board of Directors authorized a $400 million share repurchase program. The overarching capital allocation framework is designed to return approximately 40% of cash flows from operations through dividends and share repurchases over the next two years, not to exceed $1 billion in total.

"This framework announced today reflects our confidence in our ability to generate in excess of $2 billion of cash flows from operations over the next two fiscal years," said CFO Forbes I.J. Alexander. "Moving ahead, we remain confident in our ability to effectively leverage our asset base, maintain relationships with both new and existing customers and grow earnings per share," he added.

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 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 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 includes "forward-looking statements," which are statements that are not historical facts, including statements that relate to our share repurchase program including the amount of shares to be repurchased and timing of such repurchases; the Company's updated capital allocation framework; and our projected fiscal year 2016 fourth-quarter and full-year financial performance including assumptions regarding our effective tax rate. 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 from our current expectations. Such factors include, but are not limited to, our determination as we finalize our financial results for our third quarter of fiscal year 2016 that our financial results and conditions differ from our current preliminary unaudited numbers set forth herein; unexpected, adverse seasonal impacts on demand; performance of the markets in which we operate; changes in macroeconomic conditions; expected financial results from, product ramps; managing rapid declines in customer demand and other related customer challenges that may occur; and our dependence on a limited number of large customers. Additional factors that could cause such differences can be found in our Form 10-K for the year ended August 31, 2015, Form 10-Q for the quarters ended November 30, 2015, and February 29, 2016 and in our other SEC filings. We assume no obligation to update these forward-looking statements.

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. Among other uses, management uses non-U.S. GAAP financial measures as a factor in determining certain employee performance when determining incentive compensation. 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 its third quarter results and fiscal 2016 outlook 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 15, 2016 at approximately 7:30 p.m. ET through midnight on June 22, 2016. 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: 19885929. An archived webcast of the conference call will be available at http://www.jabil.com/investors/.

About Jabil

Jabil is a product solutions company providing comprehensive electronics design, production and product management services to global electronics and technology companies. 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. Jabil common stock is traded on the New York Stock Exchange under the symbol, "JBL". Further information is available on Jabil's website: jabil.com.

JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
                May 31,
2016 August 31,
(Unaudited) 2015
ASSETS
Current assets:
Cash and cash equivalents $ 886,991 $ 913,963
Accounts receivable, net 1,296,924 1,467,247
Inventories 2,292,350 2,507,264
Prepaid expenses and other current assets 1,056,461 898,790
Deferred income taxes     79,045
Total current assets 5,532,726 5,866,309
Property, plant and equipment, net 3,218,141 2,804,333
Goodwill and intangible assets, net 893,615 745,918
Deferred income taxes 150,836 85,169
Other assets   110,756   101,478
Total assets $   9,906,074 $   9,603,207
LIABILITIES AND EQUITY
Current liabilities:
Current installments of notes payable, long-term debt and capital lease obligations $ 359,885 $ 323,833
Accounts payable 3,191,304 3,663,264
Accrued expenses 1,836,475 1,685,589
Deferred income taxes     2,455
Total current liabilities 5,387,664 5,675,141
Notes payable, long-term debt and capital lease obligations, less current installments 1,791,028 1,346,558
Other liabilities 68,275 67,951
Income tax liabilities 91,071 96,379
Deferred income taxes   56,779   82,167
Total liabilities   7,394,817   7,268,196
Commitments and contingencies
Equity:
Jabil Circuit, Inc. stockholders' equity:
Preferred stock
Common stock 249 247
Additional paid-in capital 2,024,526 1,955,104
Retained earnings 1,637,392 1,468,910
Accumulated other comprehensive loss (46,107) (50,854)
Treasury stock, at cost   (1,123,608)   (1,058,551)
Total Jabil Circuit, Inc. stockholders' equity 2,492,452 2,314,856
Noncontrolling interests   18,805   20,155
Total equity   2,511,257   2,335,011
Total liabilities and equity $   9,906,074 $   9,603,207
 
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONDENSED 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,
2016 2015 2016 2015
Net revenue $ 4,310,752 $ 4,358,641 $ 13,922,323 $ 13,218,382
Cost of revenue   3,989,665   3,982,804     12,718,268     12,091,739  
Gross profit 321,087 375,837 1,204,055 1,126,643
Operating expenses:
Selling, general and administrative 239,646 228,476 716,097 653,183
Research and development 7,675 6,997 24,431 19,502
Amortization of intangibles 9,711 5,724 26,150 17,097
Restructuring and related charges   4,460   (782 )   8,349     31,833  
Operating income 59,595 135,422 429,028 405,028
Interest and other, net   35,322   31,041     102,202     94,670  
Income from continuing operations before tax 24,273 104,381 326,826 310,358
Income tax expense   18,434   32,124     110,639     107,186  
Income from continuing operations, net of tax   5,839   72,257     216,187     203,172  
Discontinued operations:
Loss from discontinued operations, net of tax (1,514 ) (5,224 )
Gain (loss) on sale of discontinued operations, net of tax     1,681       (875 )
Discontinued operations, net of tax     167       (6,099 )
Net income 5,839 72,424 216,187 197,073
Net income attributable to noncontrolling interests, net of tax   626   221     159     756  
Net income attributable to Jabil Circuit, Inc. $ 5,213 $ 72,203   $ 216,028   $   196,317  
Earnings per share attributable to the stockholders of Jabil
Circuit, Inc.:
Basic:
Income from continuing operations, net of tax $ 0.03 $ 0.37   $ 1.13   $   1.05  
Discontinued operations, net of tax $ 0.00 $ 0.00   $ 0.00   $   (0.03 )
Net income $ 0.03 $ 0.37   $ 1.13   $   1.01  
Diluted:
Income from continuing operations, net of tax $ 0.03 $ 0.37   $ 1.12   $   1.03  
Discontinued operations, net of tax $ 0.00 $ 0.00   $ 0.00   $   (0.03 )
Net income $ 0.03 $ 0.37   $ 1.12   $   1.00  
 
Weighted average shares outstanding:
Basic   191,206   193,785     190,841     193,617  
Diluted   193,069   196,304     193,058     195,793  
 
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
Nine months ended
May 31, May 31,
2016 2015
Cash flows from operating activities:  
Net income $ 216,187 $ 197,073
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 512,972 385,136
Restructuring and related charges 4,567
Provision for allowance for doubtful accounts 240 8,193
Recognition of stock-based compensation expense and related charges 58,505 53,101
Deferred income taxes (24,403) (14,143)
Loss on sale of property, plant and equipment 13,229 10,045
Other, net 5,906 9,856
Change in operating assets and liabilities, exclusive of net assets acquired:
Accounts receivable 180,830 (43,982)
Inventories 229,187 (253,579)
Prepaid expenses and other current assets (131,682) 37,687
Other assets (7,466) 14,417
Accounts payable, accrued expenses and other liabilities   (565,558)     474,550
Net cash provided by operating activities   487,947     882,921
Cash flows from investing activities:
Proceeds from sale of discontinued operations, net of cash 9,663
Acquisition of property, plant and equipment (668,505) (735,459)
Proceeds from sale of property, plant and equipment 18,710 13,187
Cash paid for business and intangible asset acquisitions, net of cash (206,039) (78,007)
Issuance of notes receivable (29,300)
Other, net   (5,250)     (6,645)
Net cash used in investing activities   (890,384)     (797,261)
Cash flows from financing activities:
Borrowings under debt agreements 4,748,060 4,723,083
Payments toward debt agreements (4,268,839) (4,731,894)
Payments to acquire treasury stock (54,567) (40,040)
Dividends paid to stockholders (47,122) (47,623)
Net proceeds from exercise of stock options and issuance of common stock
under employee stock purchase plan 10,660 9,004
Treasury stock minimum tax withholding related to vesting of restricted stock (10,490) (7,536)
Other, net   (1,696)     (99)
Net cash provided by (used in) financing activities   376,006     (95,105)
Effect of exchange rate changes on cash and cash equivalents   (541)     (28,010)
Net decrease in cash and cash equivalents (26,972) (37,455)
Cash and cash equivalents at beginning of period   913,963     1,000,249
Cash and cash equivalents at end of period $ 886,991 $     962,794
 
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 Nine months ended
May 31, May 31, May 31, May 31,
2016 2015 2016 2015
Operating income (U.S. GAAP) $ 59,595 $ 135,422 $ 429,028 $ 405,028
Amortization of intangibles 9,711 5,724 26,150 17,097
Stock-based compensation expense and related charges 13,445 20,094 58,505 53,106
Restructuring and related charges   4,460   (782 )   8,349   31,833  
Core operating income (Non-U.S. GAAP) $ 87,211 $ 160,458   $ 522,032 $ 507,064  
 
Net income attributable to Jabil Circuit, Inc. (U.S. GAAP) $ 5,213 $ 72,203 $ 216,028 $ 196,317
Amortization of intangibles, net of tax 8,959 5,528 24,066 16,893
Stock-based compensation expense and related
charges, net of tax 13,321 19,949 57,738 52,471
Restructuring and related charges, net of tax 4,470 (1,029 ) 8,358 31,172
Loss from discontinued operations, net of tax 1,514 5,224
(Gain) loss on sale of discontinued operations, net of tax     (1,681 )     875  
Core earnings (Non-U.S. GAAP) $ 31,963 $ 96,484   $ 306,190 $ 302,952  
 
Net earnings per share (U.S. GAAP):
Basic $ 0.03 $ 0.37   $ 1.13 $ 1.01  
Diluted $ 0.03 $ 0.37   $ 1.12 $ 1.00  
 
Core earnings per share (Non-U.S. GAAP):
Basic $ 0.17 $ 0.50   $ 1.60 $ 1.56  
Diluted $ 0.17 $ 0.49   $ 1.59 $ 1.55  
 
Weighted average shares outstanding used in the calculations
of earnings per share (U.S. GAAP and Non-U.S. GAAP):
Basic 191,206 193,785   190,841 193,617  
Diluted 193,069 196,304   193,058 195,793  
 
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
May 31, May 31,
2016 2015
Numerator:
Operating income (U.S. GAAP) $ 59,595 $ 135,422
Tax effect(1)   (18,516)   (31,830)
After-tax operating income 41,079 103,592
  x4   x4
Annualized after-tax operating income $ 164,316 $ 414,368
 
Core operating income (Non-U.S. GAAP) $ 87,211 $ 160,458
Tax effect(2)   (19,340)   (32,471)
After-tax core operating income 67,871 127,987
  x4   x4
Annualized after-tax core operating income $ 271,484 $ 511,948
 
Denominator:
Average total Jabil Circuit, Inc. stockholders' equity(3) $ 2,479,722 $ 2,278,112
Average notes payable, long-term debt and capital lease obligations, less
current installments(3) 1,801,124 1,661,320
Average current installments of notes payable, long-term debt and capital
lease obligations(3) 449,089 11,312
Average cash and cash equivalents(3)   (885,104)   (964,604)
Net invested capital asset base $ 3,844,831 $ 2,986,140
 
Return on Invested Capital (U.S. GAAP) 4.3 % 13.9 %
Adjustments noted above 2.8 % 3.2 %
Core Return on Invested Capital (Non-U.S. GAAP) 7.1 % 17.1 %

__________

(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.
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.

News Provided by Acquire Media