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Jabil Circuit, Inc.$30.25($.11)(.36%)

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 Jabil Posts Second Quarter Results
   Thursday, March 14, 2019 4:05:00 PM ET

Diversification Strategy Continues to Drive Positive Results

ST. PETERSBURG, Fla.--(BUSINESS WIRE)-- Today, Jabil Inc. (NYSE:JBL), reported preliminary, unaudited financial results for its second quarter of fiscal year 2019.

“I’m extremely pleased with our outstanding second quarter results, which further demonstrate the success of our diversification strategy,” said CEO Mark Mondello. “Quite simply, our approach is working, both in terms of our strategy and operational excellence. This is well-illustrated by our performance in the first half of the fiscal year,” he added.

Second Quarter of Fiscal Year 2019 Highlights:

  • Net revenue: $6.1 billion
  • Diversified Manufacturing Services (DMS) year-on-year revenue decrease: 7 percent
  • Electronics Manufacturing Services (EMS) year-on-year revenue growth: 33 percent
  • U.S. GAAP operating income: $154.0 million
  • U.S. GAAP diluted earnings per share: $0.43
  • Core operating income (Non-GAAP): $191.1 million
  • Core diluted earnings per share (Non-GAAP): $0.64

Healthcare Business Update:

During the second fiscal quarter, Jabil successfully transitioned the first two sites from Johnson & Johnson Medical Devices Companies (JJMDC) as part of the previously announced strategic collaboration between the companies.

“I’m honored to welcome our new employees from these outstanding healthcare facilities,” said Mondello. “Our new team members bring forward terrific experience, elevating and expanding Jabil’s capabilities in our healthcare business,” he added.

General Business Update:

“As we move into the back half of our fiscal year, our outlook for revenue and core EPS remain strong, supported by strength in our healthcare, retail, cloud and industrial businesses,” said Mondello.

Third Quarter of Fiscal Year 2019 Outlook:

• Net revenue         $5.7 billion to $6.3 billion
U.S. GAAP operating income $106 million to $167 million
U.S. GAAP diluted earnings per share $0.19 to $0.46 per diluted share
• Core operating income (Non-GAAP) (1) $150 million to $200 million
• Core diluted earnings per share (Non-GAAP) (1) $0.47 to $0.67 per diluted share
• Diversified Manufacturing Services revenue Decrease 12 percent year-on-year
• Electronics Manufacturing Services revenue Increase 27 percent year-on-year
• Total company revenue Increase 10 percent year-on-year

(1) Core operating income and core diluted earnings per share exclude anticipated adjustments of $7.0 million for amortization of intangibles (or $0.05 per diluted share), $15.0 million for stock-based compensation expense and related charges (or $0.09 per diluted share), $6.0 to $3.0 million for restructuring and related charges (or $0.04 to $0.02 per diluted share) and $16.0 to $8.0 million for acquisition and integration charges (or $0.10 to $0.05 per diluted share).

(Definitions: “U.S. GAAP” means U.S. generally accepted accounting principles. Jabil defines core operating income as U.S. GAAP operating income before amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, distressed customer charges, acquisition and integration charges, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges and business interruption and impairment charges, net. Jabil defines core earnings as U.S. GAAP net income before amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, distressed customer charges, acquisition and integration charges, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges, business interruption and impairment charges, net, impairment on securities, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations and certain other expenses, net of tax and certain deferred tax valuation allowance charges. Jabil defines core diluted earnings per share as core earnings divided by the weighted average number of outstanding diluted shares as determined under U.S. GAAP. Jabil calculates its core return on invested capital ("ROIC") by annualizing its after-tax core operating income for its most recently ended quarter and dividing that by a two quarter average net invested capital base. The Company calculates its after-tax core operating income as its core operating income less a certain tax effect (the amount is determined by applying the core effective tax rate to core operating income less interest expense). The Company calculates its average net invested capital base as the sum of the averages of its stockholders’ equity, current and non-current portions of its notes payable and long-term debt less the average of its cash and cash equivalents. The calculation of the averages discussed in the previous sentence is based on the addition of the account balance at the end of the most recently-ended quarter to the account balance at the end of the prior quarter and dividing by two. Jabil defines adjusted free cash flow as net cash provided by (used in) operating activities plus cash receipts on sold receivables less net capital expenditures (acquisition of property, plant and equipment less proceeds and advances from sale of property, plant and equipment). Jabil reports core operating income, core earnings, core diluted earnings per share, core ROIC and adjusted free cash flow to provide investors an additional method for assessing operating income, earnings, diluted earnings per share and free cash flow from what it believes are its core manufacturing operations. See the accompanying reconciliation of Jabil’s core operating income to its U.S. GAAP operating income, its calculation of core earnings and core diluted earnings per share to its U.S. GAAP net income and U.S. GAAP earnings per share and additional information in the supplemental information.)

Forward Looking Statements: This release contains forward-looking statements, including those regarding our anticipated financial results for our second quarter of fiscal year 2019 and our guidance for future financial performance in our third quarter of fiscal year 2019 (including, net revenue, total company and segment revenue, U.S. GAAP operating income, U.S. GAAP diluted earnings per share, core operating income (Non-GAAP), core diluted earnings per share (Non-GAAP) results and the components thereof, including but not limited to amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges and acquisition and integration charges). The statements in this release are based on current expectations, forecasts and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially from our current expectations. Such factors include, but are not limited to: our determination as we finalize our financial results for our second quarter of fiscal year 2019 that our financial results and conditions differ from our current preliminary unaudited numbers set forth herein; unexpected, adverse seasonal impacts on demand; performance in the markets in which we operate; changes in macroeconomic conditions; the occurrence of, success and expected financial results from, product ramps; our ability to maintain and improve costs, quality and delivery for our customers; whether our restructuring activities and the realignment of our capacity will adversely affect our cost structure, ability to service customers and labor relations; reliance on a limited number of suppliers for critical components; changes in technology; competition; anticipated growth for us and our industry that may not occur; managing rapid growth; managing rapid declines in customer demand and other related customer challenges that may occur; our ability to successfully consummate acquisitions and divestitures; managing the integration of businesses we acquire; risks associated with international sales and operations; retaining key personnel; our dependence on a limited number of large customers; and adverse changes in political conditions, in the U.S. and internationally, including, among others, adverse changes in tax laws and rates and our ability to estimate and manage their impact. Additional factors that could cause such differences can be found in our Annual Report on Form 10-K for the fiscal year ended August 31, 2018 and our other filings with the Securities and Exchange Commission. We assume no obligation to update these forward-looking statements.

Supplemental Information Regarding Non-GAAP Financial Measures: Jabil provides supplemental, non-GAAP financial measures in this release to facilitate evaluation of Jabil’s core operating performance. These non-GAAP measures exclude certain amounts that are included in the most directly comparable U.S. GAAP measures, do not have standard meanings and may vary from the non-GAAP financial measures used by other companies. Management believes these “core” financial measures are useful measures that facilitate evaluation of the past and future performance of Jabil’s ongoing operations on a comparable basis.

Jabil reports core operating income, core earnings, core diluted earnings per share, core ROIC and adjusted free cash flows to provide investors an additional method for assessing operating income, earnings, earnings per share and free cash flow from what it believes are its core manufacturing operations. Among other uses, management uses non-GAAP financial measures to make operating decisions, assess business performance and as a factor in determining certain employee performance when determining incentive compensation. The Company determines the tax effect of the items excluded from core earnings and core diluted earnings per share based upon evaluation of the statutory tax treatment and the applicable tax rate of the jurisdiction in which the pre-tax items were incurred, and for which realization of the resulting tax benefit, if any, is expected. In certain jurisdictions where the Company does not expect to realize a tax benefit (due to existing tax incentives or a history of operating losses or other factors resulting in a valuation allowance related to deferred tax assets), a reduced or 0% tax rate is applied. Detailed definitions of certain of the core financial measures are included above under “Definitions” and a reconciliation of the disclosed core financial measures to the most directly comparable U.S. GAAP financial measures is included under the heading “Supplemental Data” at the end of this release.

Meeting and Replay Information: Jabil will hold a conference call to discuss its second quarter results today at 4:30 p.m. ET. To access the live audio webcast and view the accompanying slide presentation, visit the Investor Relations section of Jabil's website, located at https://investors.jabil.com . An archived replay of the webcast will also be available after completion of the call.

About Jabil: Jabil (NYSE: JBL) is a product solutions company providing comprehensive design, manufacturing, supply chain and product management services. Operating from over 100 facilities in 29 countries, Jabil delivers innovative, integrated and tailored solutions to customers across a broad range of industries. For more information, visit jabil.com .

JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
  February 28, 2019  
(unaudited) August 31, 2018
ASSETS
Current assets:
Cash and cash equivalents $ 749,057 $ 1,257,949
Accounts receivable, net 2,543,615 1,693,268
Contract assets 832,889
Inventories, net 3,248,273 3,457,706
Prepaid expenses and other current assets 532,223   1,141,000  
Total current assets 7,906,057 7,549,923
Property, plant and equipment, net 3,279,505 3,198,016
Goodwill and intangible assets, net 901,735 906,876
Deferred income taxes 194,015 218,252
Other assets 195,282   172,574  
Total assets $ 12,476,594   $ 12,045,641  
LIABILITIES AND EQUITY
Current liabilities:
Current installments of notes payable and long-term debt $ 175,186 $ 25,197
Accounts payable 4,900,070 4,942,932
Accrued expenses 2,676,604   2,262,744  
Total current liabilities 7,751,860 7,230,873
Notes payable and long-term debt, less current installments 2,482,387 2,493,502
Other liabilities 132,882 94,617
Income tax liabilities 133,066 148,884
Deferred income taxes 117,547   114,385  
Total liabilities 10,617,742   10,082,261  
Commitments and contingencies
Equity:
Jabil Inc. stockholders’ equity:
Preferred stock
Common stock 260 257
Additional paid-in capital 2,264,966 2,218,673
Retained earnings 1,966,100 1,760,097
Accumulated other comprehensive loss (13,253 ) (19,399 )
Treasury stock, at cost (2,370,898 ) (2,009,371 )
Total Jabil Inc. stockholders’ equity 1,847,175 1,950,257
Noncontrolling interests 11,677   13,123  
Total equity 1,858,852   1,963,380  
Total liabilities and equity $ 12,476,594   $ 12,045,641  
 
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
(Unaudited)
   
Three Months Ended Six months ended
February 28, 2019   February 28, 2018 February 28, 2019   February 28, 2018
Net revenue $ 6,066,990 $ 5,301,101 $ 12,573,265 $ 10,886,633
Cost of revenue 5,612,116   4,903,968   11,598,741   10,020,215
Gross profit 454,874 397,133 974,524 866,418
Operating expenses:
Selling, general and administrative 282,142 243,940 560,268 536,995
Research and development 10,155 8,344 21,298 17,453
Amortization of intangibles 7,777 9,890 15,423 19,869
Restructuring and related charges 817   5,427   6,842   16,815
Operating income 153,983 129,532 370,693 275,286
Interest and other, net 53,157   43,270   104,980   81,585
Income before income tax 100,826 86,262 265,713 193,701
Income tax expense 33,219   48,734   74,032   92,254
Net income 67,607 37,528 191,681 101,447
Net income attributable to noncontrolling interests,
net of tax 253   220   727   344
Net income attributable to Jabil Inc. $ 67,354   $ 37,308   $ 190,954   $ 101,103
Earnings per share attributable to the stockholders
of Jabil Inc.:
Basic $ 0.44   $ 0.21   $ 1.21   $ 0.58
Diluted $ 0.43   $ 0.21   $ 1.19   $ 0.57
Weighted average shares outstanding:
Basic 154,725   174,635   158,160   175,792
Diluted 156,737   176,953   160,413   178,578
 
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
  Six months ended
February 28, 2019   February 28, 2018
Cash flows provided by (used in) operating activities:
Net income $ 191,681 $ 101,447
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization 381,510 382,322
Restructuring and related charges (3,212 ) 9,263
Recognition of stock-based compensation expense and related charges 32,946 59,938
Deferred income taxes 23,921 (24,535 )
Provision for allowance for doubtful accounts 5,598 17,271
Other, net 38,559 (792 )
Change in operating assets and liabilities, exclusive of net assets acquired:
Accounts receivable (365,192 ) (1,245,493 )
Contract assets (815,144 )
Inventories 225,036 (418,307 )
Prepaid expenses and other current assets (4,895 ) (95,187 )
Other assets (10,170 ) (19,272 )
Accounts payable, accrued expenses and other liabilities 407,127   369,346  
Net cash provided by (used in) operating activities 107,765   (863,999 )
Cash flows (used in) provided by investing activities:
Acquisition of property, plant and equipment (537,140 ) (544,401 )
Proceeds and advances from sale of property, plant and equipment 144,968 236,316
Cash paid for business and intangible asset acquisitions, net of cash (80,778 ) (95,858 )
Cash receipts on sold receivables 96,846 1,162,184
Other, net (13,504 ) (2,360 )
Net cash (used in) provided by investing activities (389,608 ) 755,881  
Cash flows used in financing activities:
Borrowings under debt agreements 6,182,931 4,690,570
Payments toward debt agreements (6,046,181 ) (4,555,233 )
Payments to acquire treasury stock (350,323 ) (225,108 )
Dividends paid to stockholders (27,422 ) (30,431 )
Net proceeds from exercise of stock options and issuance of common stock under
employee stock purchase plan 14,587 12,838
Treasury stock minimum tax withholding related to vesting of restricted stock (11,204 ) (22,343 )
Other, net (1,500 ) (11,237 )
Net cash used in financing activities (239,112 ) (140,944 )
Effect of exchange rate changes on cash and cash equivalents 12,063   (61 )
Net decrease in cash and cash equivalents (508,892 ) (249,123 )
Cash and cash equivalents at beginning of period 1,257,949   1,189,919  
Cash and cash equivalents at end of period $ 749,057   $ 940,796  
 
JABIL INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA
RECONCILIATION OF U.S. GAAP FINANCIAL RESULTS TO NON-GAAP MEASURES
(in thousands, except for per share data)
(Unaudited)
 
  Three months ended   Six months ended
February 28, 2019   February 28, 2018 February 28, 2019   February 28, 2018
Operating income (U.S. GAAP) $ 153,983   $ 129,532   $ 370,693   $ 275,286
Amortization of intangibles 7,777 9,890 15,423 19,869
Stock-based compensation expense and related charges 15,697 15,039 32,946 67,784
Restructuring and related charges 817 5,427 6,842 16,815
Distressed customer charge 14,706 14,706
Business interruption and impairment charges, net 4,002 (2,860 ) 11,356
Acquisition and integration charges 12,785     21,675  
Adjustments to operating income 37,076   49,064   74,026   130,530
Core operating income (Non-GAAP) $ 191,059   $ 178,596   $ 444,719   $ 405,816
Net income attributable to Jabil Inc. (U.S. GAAP) $ 67,354 $ 37,308 $ 190,954 $ 101,103
Adjustments to operating income 37,076 49,064 74,026 130,530
Adjustments for taxes(1) (4,219 ) 29,771   (17,962 ) 29,054
Core earnings (Non-GAAP) $ 100,211   $ 116,143   $ 247,018   $ 260,687
Diluted earnings per share (U.S. GAAP) $ 0.43   $ 0.21   $ 1.19   $ 0.57
Diluted core earnings per share (Non-GAAP) $ 0.64   $ 0.66   $ 1.54   $ 1.46
Diluted weighted average shares outstanding (U.S.
GAAP and Non-GAAP) 156,737   176,953   160,413   178,578
 

(1) The six months ended February 28, 2019 includes a $13.3 million income tax benefit for the effects of the Tax Act recorded during the three months ended November 30, 2018. Includes $30.9 million, which is comprised of the provisional one-time transition tax as required by the Tax Act and the provisional impact of the Tax Act to the re-measurement of U.S. deferred tax attributes for the three months and six months ended February 28, 2018, respectively.

JABIL INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA
ROIC & Core ROIC
(in thousands)
(Unaudited)
 
Three Months Ended
February 28, 2019   February 28, 2018
Numerator:
Operating income (U.S. GAAP) $ 153,983 $ 129,532
Tax effect (1) (35,525 ) (51,827 )
After-tax operating income 118,458 77,705
x4 x4
Annualized after-tax operating income $ 473,832   $ 310,820  
Core operating income (Non-GAAP) $ 191,059 $ 178,596
Tax effect (2) (39,338 ) (19,730 )
After-tax core operating income 151,721 158,866
x4 x4
Annualized after-tax core operating income $ 606,884   $ 635,464  
Denominator:
Average total Jabil Inc. stockholders' equity (3) $ 1,869,546 $ 2,305,917
Average notes payable and long-term debt, less current installments (3) 2,485,149 1,937,456
Average current installments of notes payable and long-term debt (3) 100,190 227,089
Average cash and cash equivalents (3) (776,733 ) (843,527 )
Net invested capital base $ 3,678,152   $ 3,626,935  
 
Return on Invested Capital (U.S. GAAP) 12.9 % 8.6 %
Adjustments noted above 3.6 % 8.9 %
Core Return on Invested Capital (Non-GAAP) 16.5 % 17.5 %
 

(1) The tax effect is calculated by applying the U.S. GAAP effective tax rate for the three months ended February 28, 2019 and 2018 to U.S. GAAP operating income less interest expense.

(2) The tax effect is calculated by applying the core effective tax rate for the three months ended February 28, 2019 and 2018 to core operating income less interest expense.

(3) The average is based on the addition of the account balance at the end of the most recently-ended quarter to the account balance at the end of the prior quarter and dividing by two.

JABIL INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA
ADJUSTED FREE CASH FLOW
(in thousands)
(Unaudited)
 
Six months ended
February 28, 2019   February 28, 2018
Net cash provided by (used in) operating activities (U.S. GAAP)(1) $ 107,765 $ (863,999 )
Cash receipts on sold receivables 96,846   1,162,184  
Adjusted cash provided by operating activities (Non-GAAP) $ 204,611 $ 298,185
Acquisition of property, plant and equipment (537,140 ) (544,401 )
Proceeds and advances from sale of property, plant and equipment 144,968   236,316  
Adjusted free cash flow (Non-GAAP) $ (187,561 ) $ (9,900 )

(1) In fiscal year 2019, the adoption of Accounting Standards Update ("ASU") 2016-15, "Classification of Certain Cash Receipts and Cash Payments" resulted in a reclassification of cash flows from operating activities to investing activities for cash receipts for the deferred purchase price receivable on asset-backed securitization transactions. The adoption of this standard does not reflect a change in the underlying business or activities. The effects of this change are applied retrospectively to all prior periods.

Investor Contact:
Adam Berry
Vice President, Investor Relations
(727) 803-5772
Adam_Berry@jabil.com


Media Contact:
Michelle Smith
Vice President, Corporate Communications
(727) 803-3534
Michelle_Smith@jabil.com

Source: Jabil, Inc.



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