Jabil Circuit (JBL)

Fourth Quarter 2008 Earnings

On September 26, 2008, Jabil Circuit, Inc. announced its preliminary results for the fourth quarter of fiscal 2008, ended August 31, 2008. Revenue for the quarter was $3,264.9 million, an increase of 4.3% from $3,129.8 million reported in the year-ago quarter. This was in line with the company's guidance of $3.2 billion to $3.3 billion range. GAAP EPS in the quarter was $0.28 versus $0.06 in the comparable quarter last year. This was above company's guidance of $0.21 to $0.25 range. Excluding amortization of intangible and restructuring and impairment charges of $0.01, but including stock-based compensation of $0.03, EPS for the quarter was $0.27 versus $0.26 in the year-ago quarter. Core EPS (GAAP EPS before amortization of intangibles, stock-based compensation and related charges, acquisition-related charges, restructuring and impairment charges, and certain other income/loss, net of tax) for the quarter was $0.30 versus $0.29 in the year-ago quarter. This was at the low end of the company's guidance of $0.29 to $0.33 range.

Gross margin fell to 7.0% from 7.3% in the comparable quarter last year due to higher cost of goods sold. GAAP operating margin was 2.7% versus 1.6% in the year-ago quarter. Excluding amortization of intangibles and restructuring & impairment charges but including stock based compensation, core operating margin decreased marginally to 3.2% from 3.3% in the year-ago quarter. Effective core tax rate for the quarter was 25.0%. During the quarter, Cisco and Hewlett-Packard accounted for more than 10% of revenue, and the top ten customers accounted for approximately 60% of the revenue.

During the quarter, Jabil used approximately $7.0 million cash from operations versus a cash generation of $147.0 million in the previous quarter. The sales cycle sequentially decreased by one day to 20 days in the quarter. Cash and cash equivalents sequentially decreased $87.1 million to $772.9 million and long-term debt (including current portion) decreased $26.0 million to $1,369.4 million at the end of the quarter. Debt to capitalization ratio remained at 34.0% in the quarter. Meanwhile, Core return on invested capital (ROIC) improved to 10.0% from 9.0% in the third quarter of fiscal 2008.

Guidance for First Quarter of 2009

For the first quarter of fiscal 2009, Jabil expects revenue in the range of $3.40 billion to $3.60 billion, with an estimated core operating margin range of 3.0% to 3.4%. Core EPS is anticipated to be in a range of $0.30 to $0.38 range. Selling, general and administrative expenses are estimated to be approximately $121 million, research and development costs are expected to be approximately $9 million, and amortization of intangibles to be approximately $9 million. Stock-based compensation is estimated to be approximately $15 million in the quarter, and interest expense is estimated to be approximately $23 million in the first quarter. Tax rate on core operating income is expected to be approximately 20% in the first quarter. GAAP earnings per share are estimated to be $0.20 to $0.28 per diluted share. This includes $0.03 per share for amortization of intangibles and $0.07 per share for stock-based compensation and related charges. Capital expenditures for the quarter are estimated to be in the range of $75 million to $90 million.

On a divisional basis, the EMS division is expected to grow 4% year-over-year during the first quarter of 2009. Of the total EMS revenue, the Automotive, Computing and Storage, and Industrial Instrumentation & Medical are expected to increase each 5% sequentially in the first quarter of 2009, while Networking, and Telecommunications are expected to decrease 12% and 5%, respectively. The Consumer division is expected to increase by 30% in Q109. Included in the Consumer division, Displays, Mobility, and Peripherals are expected to increase 15%, 55% and 10% respectively in the first quarter of 2009 over the fourth quarter of 2008. Aftermarket Services Division is expected to remain consistent in the first quarter. The company expects a cash payment of $23.0 million related to restructuring activities to be made in the first quarter of 2009. Jabil expects healthy cash flow in fiscal year 2009.

Expansion Plan

On September 12, 2008, Jabil announced its intention to remain headquartered in St. Petersburg, Florida to significantly expand both its local manufacturing presence and total employment over the next four years. The State of Florida pledged to provide direct project cash incentives of $20 million. Pinellas County approved $2.9 million in incentives, including a job creation grant and training support. The City of St. Petersburg committed to tax, utilities and job creation incentives of $1.7 million. The final incentive package from the State of Florida, Pinellas County and City of St. Petersburg, includes performance-based incentives that will allow Jabil to build new facilities, add 850 incremental employees to meet the growing need of its defense and aerospace business, and consolidate from a variety of locally-leased facilities. The State has pledged an additional $2 million towards Gandy Boulevard improvements to supplement the $11 million previously committed to Gandy Boulevard by the City from impact fees and federal grant.

Dividend

On July 17, 2008, Jabil announced that its Board of Directors has approved a regular quarterly dividend of $0.07 per share. Jabil will pay these dividends on September 2, 2008 to shareholders of record as of August 15, 2008.

Contract Wins

On June 25, 2008, it was disclosed that Jabil's Le Mans, France facility has commenced pilot production for Location Based Technologies' PocketFinder family of location devices.

On June 2, 2008, it was disclosed that Jabil had won a contract to manufacture location device PocketFinder from Location Based Technologies, Inc. Terms of the agreement were not disclosed. The PocketFinder device is not on the market yet, but is expected to be sold for $150 each.

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