Jabil Circuit CEO Discusses F1Q2011 Results – Earnings Call Transcript

Jabil Circuit CEO Discusses F1Q2011 Results â¿¿ Earnings Call Transcript
By Seeking Alpha ,

Jabil Circuit Inc. (JBL)

F1Q2011 Earnings Call Transcript

December 21, 2010 4:30 pm ET

Executives

Beth Walters – SVP, Communications and IR

Forbes Alexander – CFO

Tim Main – President and CEO

Analysts

Louis Miscioscia – Collins Stewart

Steven Fox – CLSA

Brian Alexander – Raymond James

Amit Daryanani – RBC Capital Markets

Craig Hettenbach – Goldman Sachs

Amitabh Passi – UBS

Wamsi Mohan – Bank of America-Merrill Lynch

Steven O'Brien – JPMorgan

Jim Suva – Citigroup

Sean Hannan – Needham & Company

Matt Sheerin – Stifel Nicolaus

Shawn Harrison – Longbow Research

Alexander Blanton – Ingalls & Snyder

Presentation

Operator

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Good afternoon. My name is Ashley and I will be your conference operator today. At this time, I would like to welcome everyone to the Jabil first quarter fiscal year 2011 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

Thank you, Ms. Walters. You may begin your conference.

Beth Walters

Thank you, operator. Welcome to our first quarter of fiscal 2011 call. Joining me on the call today are our President and CEO, Tim Main; and our Chief Financial Officer, Forbes Alexander.

This call is being recorded and will be posted for audio playback on the Jabil website, jabil.com in the Investors section. Our Q1 press release and corresponding webcast with slides are also on the website. In those slides, you will find the financial information that we'd cover during this conference call. We ask that you follow our presentation with the slides on the website and will begin now with our forward-looking statement.

During this conference call, we will be making forward-looking statements, including those regarding the anticipated outlook for our business, our currently expected second quarter of fiscal 2011 net revenue and earnings results, our long-term outlook for our Company and improvements in our operational efficiency and financial performance.

These statements are based on current expectations, forecasts and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially. An extensive list of these risks and uncertainties are identified in our Annual Report on Form 10-K for the fiscal year ended August 31, 2009, on subsequent reports, 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.

Today's call will begin with some comments and highlights from Forbes Alexander on our first fiscal quarter, as well as some forward guidance on our second fiscal quarter of 2011. Tim Main will then follow up with some macro environment and Jabil-specific comments about our performance, our model, and our current outlook. We will then open it up to questions from our call attendees.

I will now turn the call over to Forbes.

Forbes Alexander

Thank you, Beth, and hello everyone. Net revenue for the first quarter was $4.1 billion, an increase of 32% on a year-over-year basis.

GAAP operating income was $156 million this compares to $66 million of GAAP operating income and revenues of $3.1 billion for the same period in the prior year. Core operating income excluding the amortization of intangibles, stock-based compensation and restructuring charges for the quarter increased 71% to $181.9 million and represents 4.5% of revenue. This compares to $106.5 million or 3.4% for the same period in the prior year.

On a sequential basis the revenue increased 6% in the first quarter, our core operating income increased by 16%. Core diluted earnings per share was $0.61, an increase of 91% over the prior year.

As a reminder, at the end of fiscal 2010 we discussed our intent to provide revenue and core operating income under our new structure, a structure that aligns with the long-term strategic direction of the Company.

Please refer to slide five and six for revenue and core operating income by each of these segment for the first fiscal quarter.

Our Diversified Manufacturing Services segment grew by 11% sequentially, on a yearly basis growth of 47%. Revenues of approximately $1.4 billion representing 34% total Company revenue in the first quarter.

Core operating income was 6.8% of the revenue after absorbing 30 basis points associated with reductions in cost in our Japan site. In Enterprise & Infrastructure segment declined by 8% sequentially.

On a yearly basis, this segment improved by 29%. Revenue was approximately $1.2 billion representing 28% of total company revenue in the quarter. Core operating income was 4.5% of revenue.

Our High Velocity segment grew by 14% sequentially. On a yearly basis, this segment grew by 24%. Revenue was approximately $1.5 billion representing 38% of total company revenue in the quarter and core operating income for the segment was 2.3% of revenue.

Our top ten customers in the quarter accounted 59% of our revenue. I now ask you to refer to slide 7, 8 and 9 which will accompany my commentary on the elements of our first quarter operating and balance sheet performance.

Selling, general and administration expenses of $122.9 million represented 3% of revenue. Research and development costs were $5.7 million in the quarter and then intangible amortization was $6 million. Stock-based compensation was $19.5 million. Our net interest expense in the quarter was $21.1 million and the tax rate on net core operating income in the quarter is 17.4%.

Our sales cycle in the first quarter expanded by four days to 16 days. Days in inventory improved by 1 day while terms remained at 7. Cash flows due to an operation were $82.7 million. With the core return on invested capital in the quarter improving by approximately 200 basis points to 28%. Cash and cash equivalents were $630 million and there were no sums outstanding on our revolver at the end of the quarter.

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