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Jabil Reports Third Quarter Results

Thursday June 21, 4:01 pm ET
Revenue Increases 16 Percent

ST. PETERSBURG, Fla.--(BUSINESS WIRE)--Jabil Circuit, Inc. (NYSE:JBL - News), today reported results for its third quarter of fiscal 2007, ended May 31, 2007. "We are pleased with the improvements we have made both in operating efficiencies and progress on our balance sheet metrics," said President and C.E.O. Timothy L. Main.

Third Quarter 2007 Operational and Balance Sheet Sequential Highlights

GAAP operating margin decreased eight percent. Core operating margin improved 57 percent.
GAAP earnings decreased $.04 per fully diluted share. Core earnings increased $.09 per fully diluted share.
Cash flow from operations for the quarter was approximately $192 million.
Third quarter sales cycle improved from 29 days in the second quarter to 26 days.
Annualized inventory turns improved from seven turns in the second quarter to eight turns.
Core Return on Invested Capital increased to 10 percent from seven percent in the second quarter.
A $0.07 dividend was paid on June 1, 2007.
Third Quarter 2007 Year-over-Year Results

Net revenue for the third quarter of fiscal 2007 increased to $3.0 billion compared to $2.6 billion for the same period of fiscal 2006. On a GAAP basis, operating income for the third quarter of fiscal 2007 decreased to $33.6 million compared to $77.3 million for the same period of fiscal 2006. On a GAAP basis, net income for the third quarter of fiscal 2007 decreased to $6.2 million compared to $64.2 million for the same period in fiscal 2006. GAAP diluted earnings per share for the third quarter of fiscal 2007 decreased to $0.03 compared to $0.30 for the same period of fiscal 2006.

Jabil's third quarter of fiscal 2007 core operating income decreased to $87.1 million or 2.9 percent of net revenue compared to $93.4 million or 3.6 percent of net revenue for the third quarter of fiscal 2006. Core earnings decreased to $47.4 million compared to $78.5 million for the third quarter of fiscal 2006. Core earnings per share decreased to $0.23 per diluted share for the period compared to $0.36 for the third quarter of fiscal 2006.

Business Update:

"We will continue to focus on making step by step improvements in our operational efficiency and in our financial performance. We believe we are on the right path and intend to demonstrate this to our investors over the next several quarters," said President and C.E.O. Timothy L. Main.

Jabil said it expects revenue for its fourth fiscal quarter of 2007 to remain at the $3.0 billion level, with an estimated core operating margin range of 3.0 to 3.5 percent. The company said its core earnings per share are anticipated to be in a range of $0.25 to $0.31 per diluted share. Under GAAP, earnings per share are estimated to be $0.07 to $0.16 per diluted share. (Expected GAAP earnings per share for the fourth quarter of fiscal 2007 are currently estimated to include $0.04 per share for amortization of intangibles, $0.05 per share for stock-based compensation and related charges and $0.06 to $0.09 per share for restructuring and impairment charges.)

(Click the above link to view the full press release.)

I listened to the conference call and the tone sounded generally upbeat. Although earnings were down and SG&A expense was up significantly from a year ago, and they didn't say anything specific about fiscal 2008, I got the feeling that the worst is over for now and that they expect progress to be made over the next 18 months in restructuring operations. They also mentioned winning some new business.

They said the overall economic environment is not getting better or worse for them, although they mentioned that Flextronics purchasing Solectron continues an industry trend towards consolidation. They now feel they have the necessary scale to compete with the larger players in the industry. Jabil lists themselves third behind Foxconn (Hon-Hai) and Flextronics. I think they were also saying that through consolidation industry pricing might improve, rather than having the cut-throat pricing that has been making life tough for many companies in the industry.

JT :-)
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Seeking Alpha's website has the transcript of the recent JBL conference call. I have excerpted a section from the CFO and I encourage all interested parties to check out the full version...

Jabil Circuit, Inc.
F3Q07 Earnings Call
June 21, 2007 4:30 pm ET

Forbes Alexander - Chief Financial Officer:

...An update to restructuring; we continue to manage our overall rationalization plan according to our previously announced plan. During the third quarter, we recorded charges of approximately $25 million. Total charges recorded to date against our overall plan are $153 million. During the quarter, cash payments associated with these restructuring activities were approximately $13 million. Total cash payments of $57 million.

We continue to expect our total restructuring charges to be at the high-end of the $200 million to $250 million range we previously announced. The cash costs of such charges for this plan remain an estimate in the range of $150 million to $200 million.

With regard to capacity, as we've previously discussed, additional square footage in capacity is currently being added in China, Poland, the Ukraine and India. These facilities are expected to ramp production levels during the balance of calendar 2007, though we continue to ramp significantly higher levels of production in our sites throughout China.

In May, we announced the addition of 55,000 square feet of capacity in Ho Chi Minh City, Vietnam -- new product introduction production activity commencing during the upcoming fourth fiscal quarter with full production plans commenced prior to the end of the calendar year. Our investments in the fourth fiscal quarter are expected to be related to these locations and existing plants as we continue to invest for increasing production levels in the first-half of fiscal 2008. Capital expenditures for the fourth quarter are estimated to be approximately $65 million; an estimate of capital expenditures for the year of $280 million.

It is always difficult to hear everything being said in real-time, so I value being able to see the written record afterwards. The good news is that also has links to prior conference call transcripts, for those that are interested.

Happy reading!

JT :-)
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