Jabil Circuit, Inc. (JBL)
Q1 2009 Earnings Call Transcript
December 19, 2008, 8:00 a.m. ET

Executives

Beth Walters – Vice President – Investor Relations and Communications
Timothy L. Main – President and Chief Executive Officer
Forbes Alexander – Chief Financial Officer

Analysts

Louis Miscioscia – Cowen & Co., LLC
Brian Alexander – Raymond James
Steven Fox – Merrill Lynch & Co.
Sherri Scribner – Deutsche Bank
Ryan Jones – RBC Capital Markets
Shawn Harrison – Longbow Research
Jim Suva – Citigroup
Sean Hannan – Needham & Co.
William Stein – Credit Suisse

Presentation

Operator

Good morning. My name is Rachel and I will be your conference operator today. At this time, I would like to welcome everyone to Jabil’s first quarter fiscal 2009 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. If you would like to ask a question during this time simply press “*” then the number “1” on your telephone keypad. If you would like to withdraw your question, press the “#” key. Thank you. Ms. Walters, you may begin your conference.

Beth Walters

Thank you. Welcome to our first quarter fiscal 2009 call. Joining me on the call today are 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 in the Investors section along with today’s press release and a slide show presentation on the first quarter. You can follow our presentation with the slides that are posted on the website, and begin with slide one now, 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 second quarter of fiscal 2009 net revenue and earnings results, our long-term outlook for the company and improvements in our operational efficiency, and in our 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, 2008, and 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.

I would like to turn the call now over to Tim Main.

Timothy L. Main

Thanks Beth. And as most of you know, we provided fiscal Q1 guidance in mid-September prior to the worst of the financial crisis and resulting abrupt reductions in end market demand. We don’t normally do this, but I think it would be helpful to review how we looked at our guidance then as will be instructed later on in the call when we cover our guidance for the second fiscal quarter.

In September, we were looking at customer schedules, which translated to $3.85 billion in revenue for fiscal Q1. The demand behind this revenue was broad based but also included a significant ramp up production for our mobility customer. Anticipating that our schedules could be reduced if the economy worsens, we handicapped our revenue guidance by 9% at the midpoint with a commensurate reduction in earnings. The launch of the new mobility program was delayed until very late in the quarter which reduced our expected revenue another 3% overall. Therefore, the total reduction from the beginning of the quarter revenue expectation was 12%. Excluding the effect of the new mobility program, the intra-quarter reduction was 9%, right on our expectations.

Given the rather severe reduction in orders over the course of the quarter, we’ve actually worked very hard and I think well to maintain inventory turns of eight. We are positioned to rapidly generate cash liquidity over the course of the current quarter as we collect receivables and liquidate inventory. We expect to exit fiscal Q2 with inventory turns of eight or better and with accounts receivables at normal levels. Our pace of capital expenditure will also slow as we adjust for the lower revenue levels. This should result in a cash flow of about $750 million by the end of February.

These are very turbulent times and I hope the additional transparency is helpful for you understanding the dynamics of our business. Recessions are unpleasant, but we have taken a fairly hard blow and it appears very clear to me that Jabil’s weathering it very well. Now, we will take a look at the detail we typically provide and then I will close with some additional commentary on our guidance and expectations.

Beth Walters

Okay. If we could please now turn to slide two and three for our results for the first quarter of fiscal 2009. On revenues of $3.38 billion, GAAP operating income was $77.7 million. This compares to $98.9 million GAAP operating income on revenues of $3.37 billion for the same period in the prior year. Core operating income, excluding amortization of intangibles, stock-based compensation and restructuring charges for the quarter was $101.2 million or 3% of revenue as compared to $122.1 million or 3.6% for the same period in the prior year.