Jabil Circuit (JBL)

Q4 2011 Earnings Call

September 27, 2011 4:30 pm ET

Executives

Beth A. Walters - Senior Vice President of Investor Relations

Forbes I. J. Alexander - Chief Financial Officer and Principal Accounting Officer

Timothy L. Main - Chief Executive Officer, President and Director

Analysts

Steven J O'Brien - JP Morgan Chase & Co, Research Division

Wamsi Mohan - BofA Merrill Lynch, Research Division

Louis R. Miscioscia - Collins Stewart LLC, Research Division

Sean K.F. Hannan - Needham & Company, LLC, Research Division

Amit Daryanani - RBC Capital Markets, LLC, Research Division

Brian G. Alexander - Raymond James & Associates, Inc., Research Division

Amitabh Passi - UBS Investment Bank, Research Division

Jim Suva - Citigroup Inc, Research Division

Sherri Scribner - Deutsche Bank AG, Research Division

Shawn M. Harrison - Longbow Research LLC

TheStreet Recommends

Craig Hettenbach - Goldman Sachs Group Inc., Research Division

Presentation

Operator

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Good afternoon. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Jabil Circuit Fourth Quarter and Full Fiscal year 2011 Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the conference over to Ms. Beth Walters, Senior Vice President of Communications and Investor Relations. Ms. Walters, please go ahead.

Beth A. Walters

Thanks, Julianne, and thank you, everyone, for joining us. Welcome to our fourth quarter and fiscal year 2011 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 Investors section. Our fourth quarter and fiscal year press release and corresponding webcast with slides are also available on our website.

In these slides, you will find the financial information that we covered during this conference call. We ask that you follow our presentation with the slides on the website and beginning with Slide 2 now.

Here's our forward-looking statements. During this conference call, we will be making forward-looking statements including those regarding the anticipated outlook for our business, our currently expected first quarter of fiscal 2012 net revenues 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, forecast 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, 2010, on subsequent reports on 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 our fourth quarter and fiscal year results, some comments and highlights from Forbes Alexander on the results as well as guidance on our first fiscal quarter of 2012. Tim Main will then follow 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 call attendees.

I will now turn the call over to Forbes.

Forbes I. J. Alexander

Thank you, Beth, and hello, everyone. I ask you to refer to Slide 3. Net revenue for the fourth quarter is $4.3 billion, an increase of 11% year-over-year. GAAP operating income was $165.6 million or 3.9% of revenue. This compares to $103 million of GAAP operating income and revenues of $3.9 billion or 2.7% for the same period in the prior year. Core operating income excluding the amortization of intangibles and stock-based compensation increased 19% to $187.2 million and represents 4.4% of revenue. This compares with $157 million or 4.1% for the same period in the prior year. On a sequential basis, revenue increased 1% from the fourth quarter. Our core operating income increased 5%. Core diluted earnings per share was $0.62, an increase of 19% over the prior year.

And I'll ask you to turn to Slide 4. In fiscal 2011, net revenue was $16.5 billion, an increase of 23%. GAAP operating income was $578.7 million, an increase of 77% and represented 3.5% of revenue. This compares to $327.6 million of GAAP operating income on revenues of $13.4 billion for fiscal 2010 and 2.4% of revenue.

Core operating income excluding amortization of intangibles and stock-based compensation increased 46% to $715.2 million and represented 4.3% of revenue for the full fiscal year. This compares to $490.9 million or 3.7% for the same period in the prior year. Core diluted earnings per share was $2.34, an increase of 54% over the prior year.

And I'll ask you to turn to Slide 5 for our segment discussion. In the fourth quarter, our Diversified Manufacturing Services segment grew 10% sequentially. On a year-over-year basis, this segment grew 35%. Revenue was approximately $1.7 billion, representing 40% of total company revenue. Core operating income expanded in the quarter to 6.7% of revenue. The Enterprise & Infrastructure segment grew 1% sequentially. On a year-over-year basis, this segment grew 10% for the quarter. Revenue was approximately $1.4 billion representing 32% of total company revenue in the fourth quarter. Core operating income for this segment was 2.6% of revenue. The decline in core operating margin this quarter is primarily attributable to license we were taking to restructure our operations in Italy, specifically severance cost, asset write-offs and other related charges of approximately $8 million. The balance of the decline in operating performance was attributed to the sequential increase in losses in Italy and infrastructure readiness for ongoing wireless program ramps in non-Western European geographies.

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