Jabil Inc.
Q1 2006 Earnings Call Transcript

Published: 23 Dec 2005

[Operator:]

At this time, I would like to welcome everyone to the Jabil Circuit first quarter 2006 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remark there will be a question and answer period. 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 “#”. Thank you, I would now like to introduce Mr. Alexander, Vice President of Corporate Communications and Investor Relations at Jabil Circuit. Mr. Alexander, you may begin your conference.

[Forbes I. J. Alexander:]

Thank you, good afternoon. This is Forbes Alexander and with me this afternoon is Tim Main, our CEO and President. During the course of this conference call we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are just predictions and that actual events or results may differ materially. We refer you to the documents that the company files from time-to-time with the SEC, including our most recently filed 10-K that was filed on October 28, 2005. These documents contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. This call is being recorded and will be posted for audio playback on the Jabil website in the Investor Relations section along with the press release and a slideshow presentation on the first quarter and fiscal year. Now I ask you to turn to slides 2 and 3. Results for the first quarter of fiscal ‘06 were as follows. On revenues of $2.404 billion, GAAP operating income increased 26% to $88.8 million. This compares to $70.3 in GAAP operating income for the same period in the prior year. Core operating income, excluding amortization of intangibles and stock-based compensation for the quarter was $111.8 million or 4.7% of revenue, as compared to $80.9 million or 4.4% for the same period in the prior year. Core earnings per share were $0.44. On a year-over-year basis, the quarter represents a 31% growth in revenue and 38% growth in core operating income. On a sequential basis, revenues increased 18% while core operating income increased 20%. Please turn to slide 4. Now I’d like to discuss results for the quarter and look at our revenues by sector. First quarter revenues increased 18% from the fourth quarter. Production levels in the Automotive sector increased 9% from the previous quarter. Computing and Storage sector increased 11% from the fourth quarter for fiscal 2005 as a result of higher production levels than forecast across a number of customers. Consumer Products sector increased by 46% in the quarter, reflecting seasonal higher levels of production and the ongoing ramp of existing and new products with our largest customers in this sector. The Instrumentation and Medical sector increased by 8% from the fourth quarter, reflecting the ongoing growth of assemblies across multiple customers in this sector. The Networking sector, increased by 2% from the previous quarter, Peripherals sector decreased by 7% over the previous quarter, and finally the Telecommunications sector increased 10% sequentially. If you’d now please turn to slide 5, our sector information for the quarter in percentage terms was as follows

[Timothy L. Main:]

Thanks, Forbes. What a great start to an early year of outstanding growth and outsourcing services. Year-over-year operating results tell the story well. Year-over-year fiscal Q1 revenue increased 31% and core operating income increased 38%. We also improved core return on invested capital to 23% from 17% in fiscal Q1 of 2005. Demand for outsourcing services is clearly very good, and the solid performance of our people in this environment is delivering better financial returns. In calendar 2005, we expect the 25 largest providers of outsourcing services to post revenue growth of approximately $20 billion. Demand is increasing as OEMs around the world seek to reduce costs and accelerate time to market for broadening product lines. Demand is also increasing as OEMs change their approach to outsourcing from one which primarily utilizes suppliers to manage portions of the supply chain to one in which we are asked to manage an end-to-end solution from design through assembly, to delivering service of their electronic hardware. Even in mature outsourcing markets such as computing and communications, there remain significant levels of vertically integrated activity, for example, configurative order of operations. Jabil’s growth reflects our demonstrated ability to capture a share of the growing outsourcing revenue stream. We now expect revenue in fiscal 2006 to be approximately $1.8 billion higher than it was in fiscal 2005. About half of that growth will come from customers converting to an outsource supply chain model. Primary sectors contributing to growth are the Consumer, Instrumentation, Medical and the Computing and Storage segments. In fiscal 2006, we expect our two largest segments to be the Consumer and the Instrumentation Medical segments. These two segments combined will drive us well over $4 billion in revenue for fiscal 2006. The environment for growth along our long-term front line is better than ever. We’re off to a great start for 2006 and anticipate sustained growth in coming years. All in all it was a great quarter and good prospects looking forward. So operator, I think we can begin the question and answer session of the call.