Jabil Circuit Inc. (

JBL

)

F1Q2012 (Qtr End 11/30/2011) Earnings Call

December 20, 2011 04:30 am ET

Executives

Beth Walters - SVP, Communications & IR

Forbes Alexander - CFO

Tim Main - President & CEO, Director

Analysts

Amitabh Passi - UBS Investment Research

Amit Daryanani - RBC Capital Markets

Brian Alexander - Raymond James

Louis Miscioscia - Collins Stewart

Wamsi Mohan - Bank of America-Merrill Lynch

Shawn Harrison - Longbow Research

Matt Sheerin - Stifel Nicolaus & Company, Inc.

Steven O'Brien - JPMorgan

Craig Hettenbach - Goldman, Sachs & Co.

Jim Suva - Citigroup Smith Barney

Steven Fox - Cross Research

Sherri Scribner - Deutsche Bank

Presentation

Operator

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Good afternoon. My name is Susan and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter of Fiscal Year 2012 Earnings Call. All lines have been placed on mute to prevent any background noise. (Operator Instructions). Thank you, Miss Beth Walters, you may begin your conference.

Beth Walter

s

Thank you. Welcome to our first quarter of 2012 earnings call. Joining me today are President and CEO Timothy Main and 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 Investor section. Our first quarter press release and corresponding webcast and slides are also available on our website. In these slides, you’ll find the financial information that we covered during this conference call. We ask that you follow our presentation with the slides on the website beginning with slide two, our forward-looking statements.

During this conference call, we’ll be making forward-looking statements including those regarding the anticipated outlook for our business, our currently expected second quarter of fiscal 2012 net revenue and earnings results, our long-term outlook for our company and improvements in our operational efficiencies and financial performance. These statements are based on current expectations, forecasts and assumption 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, 2011 and subsequent reports on Form 10-Q and Form 8-K in 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.

You may have noticed in our last earnings call and in our recently published annual report we have begun to highlight GAAP operating results. While, we are currently still reporting and publishing core results, it is our intention to move fully to GAAP beginning in fiscal 2013. In addition, we will also be providing guidance on a long term year-over-year outlook. This change to our guidance aligns more closely with how we run the business making strategic long-term decision. We believe providing guidance in this fashion gives investors the most appropriate view into our business.

Today's call will begin with our first quarter results highlights and comments from Forbes Alexander as well as guidance on our second fiscal quarter of 2012. Tim Main will follow with macroeconomics and Jabil’s specific comments about our performance, our model and our correct 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. Hello everyone. I would ask you to refer to slide 3. Our net revenue for the first quarter was $4.3 billion, an increase of 6% year-over-year. GAAP operating income was $170.8 million or 3.9% of revenue which compares to $156 million of GAAP operating income on revenues of $4.1 billion or 3.8% for the same period in the prior year. Core operating income excluding the amortization of intangibles, stock-based compensation increased 7% to $194.6 million and represents 4.5% of revenue. This compares to $181.9 million or 4.5% for the same period in the prior year.

On a sequential basis, revenue increased 1% in the first quarter while core operating income increased 4%. Core diluted earnings per share was $0.65, an increase of 7% over the prior year. GAAP diluted earnings per share for the first quarter were $0.54, an increase of 10% over the prior year.

Now I ask you to refer to slide four for segment discussion. In the first quarter our diversified manufacturing services segment increased 30% on year-over-year basis. Revenue was approximately $1.8 billion representing 42% of total company revenue. Core operating income expanded in the quarter to 6.8% of revenue. The enterprise and infrastructure segment increased 4% on a year-over-year basis. Revenue was approximately $1.2 billion representing 28% of total company revenue. And core operating income for the segment was 2% of revenue.

Our enterprise and infrastructure performance was below expectations as we experienced revenue reductions late in the quarter as a result of inventory leveling with specific large customers associated with a specific mix and inbound product transitions. We expect a return to revenue growth and improved core operating income performance the following of this fiscal year.

Our High Velocity segment performed above our expectations for the quarter, segment revenues decreased by 14% on a year-over-year basis. Revenue was approximately $1.3 billion representing 30% of total company revenues in the quarter. Core operating income for the segment was 3.8% of revenue and on a sequential basis we saw strength across the whole segment and core operating income performance exceeded our expectations primarily as a result of fixed cost leverage in a seasonally high quarter. It is also now interesting to note that we have one 10% customer in each of our segments.

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