This summary is based on the second quarter fiscal 2007 earnings call conducted by Jabil Circuit Inc. (JBL) on March 22, 2007.
Key Investors Issues
- Sales grew 27% over the prior year to $2.9 billion.
- The capital expenditures during the second quarter were approximately $74 million.
- For Q3, the earnings per share are expected to be in the range of 17 cents to 23 cents.
Second Quarter Fiscal 2007 Financial Highlights
The firm did not provide GAAP results and full financial statements at this time as it awaits the completion of ongoing review processes.
The firm shall be able to file its 2006 Form 10-K once its Board of Directors Audit Committee concluded its evaluation of historical financial statements and Jabil’s independent registered public accounting firm is able to complete its audit of the financial statements it included in Form 10-K. However, the management is pleased to be able to provide full forward-looking guidance. The ongoing inquiries have reached a stage where the firm is reasonably comfortable with the impact that it will have on the third and fourth quarters.
Revenue for the fiscal second quarter of 2007 was at the high end of the firm’s previous guidance at $2.935 billion.
This includes revenue from Taiwan Green Point acquisition for the period of 15th of January to 28th of February 2007, of approximately $59 million. The quarter represented a 27% growth in revenue on a year-over-year basis, and a 9% decline on a sequential basis, reflecting the seasonal nature of the Consumer sector. Excluding Green Point revenues, the revenues declined 11% sequentially.
- For the second quarter, production levels in automotive sector decreased 5% in the prior quarter, slightly better than expectations and consistent with seasonal patterns in previous years.
- The Computing and Storage sector decreased 5% in the first quarter, consistent with expectations.
- The Consumer Products sector including revenues associated with Taiwan Green Point, decreased by 31% from the first quarter, reflecting traditional seasonally lower demand levels for consumer products. While the overall sector met the firm’s expectations in terms of total revenue, it did experience lower unit volumes, offset by additional LCD panel flowing through the revenue stream.
- The Instrumentation and Medical sector was better than the firm’s expectations and increased 4% from the first quarter.
- Networking sector increased by 1% from the previous quarter and the Peripherals sector was consistent for the first quarter as expected.
- The Telecommunications sector increased 16% sequentially, as production levels with a major customer recovery.
The sector information for the quarter in percentage terms is as follows.
The Consumer sector includes revenues associated with Taiwan Green Point. Automotive was 5%, Computing and Storage was 12%, Consumer was 29%, Instrumentation and Medical was 17%, Networking was 20%, Peripherals was 7%, Telecom was 5%, and Other was 5%.
On a year-over-year basis, the firm has added revenue in the quarter of $550 million, with all segments except Consumer and Telecom contributing to this growth. Over the last three fiscal years, the firm has seen an average of approximately 3% decline of revenues from the first fiscal quarter reflecting the seasonal nature of the Consumer sector.
For the first time since entry into the Consumer sector, the firm is seeing double-digit sequential declines in overall revenues, which is more representative of the firm’s current revenue profile. Bringing along with it dilution to operating income as a result of the semi-fixed nature of cost supporting the seasonal demand. For the second quarter, two customers exceeded 10% of the revenue stream. The company’s top five customers, Cisco, Nokia, Hewlett-Packard, Philips, and IBM accounted for approximately 51% of the total revenue and the firm’s top 10 customers accounted for approximately 65%.
Excluding Taiwan Green Point, the company’s sales cycle in the quarter expanded by two days.
An improvement in the level of days sales outstanding was offset by two additional days in inventory and the reduction in account payable days outstanding. The firm’s inventory sale in dollar terms, days was 48 days a quarter or 7.4 turns. With the consolidation of Green Point, the sales cycle at the end of the second quarter was 29 days.
- Cash and cash equivalents were $559 million compared to $651 million at the end of the first quarter.
- Current debt at the end of the second quarter totaled approximately $1 billion as a result of drawing down approximately $870 million to fund the tender that Taiwan Green Point shares and draws of the combined company’s revolving credit facilities to fund operational activities.
- The capital expenditures during the quarter were approximately $74 million.
During the second quarter, the firm continued to manage its overall rationalization plan consistent with the previous comment.
The firm continues to expect the total restructuring charges to be at the high-end of $200 million to $250 million range. The cash costs of such charges for this plan remain an estimate in the range of $150 million to $200 million. Discussions with the employees and the representatives continue and the firm is complying with all statutory and consultation periods required of it.
Jabil Circuit is adding additional floor space and capacity in Poland, in Ukraine and India.
These facilities are expected to ramp production levels during the balance of calendar 2007, while the firm continues ramp significantly higher levels of productions in its existing Chinese sites. The firm’s investments in fiscal 2007 are expected to be related to the above locations, and existing plants, where the firm sees increasing levels of production, an estimate of capital expenditures remains in the range of $200 million to $250 million for the fiscal year.
