Electronics Production | December 28, 2007

Jabil expects lower revenue<br>in the second quarter

Jabil’s revenue rose 4.5% from the first quarter 2006/2007 to the first quarter 2007/2008 to $3.4 billion. However in the second quarter Jabil’s revenue is expected to decline to somewhere between $3 billion and $3.1 billion.
Jabil Circuit, a provider of electronic manufacturing services and solutions reported revenue of $3.4 billion as against $3.2 billion in the prior year quarter. Jabil Circuit, which is undergoing a restructuring program, incurred charges of approximately $9 million.

The company has entered into an agreement to lease two manufacturing facilities in Italy from Nokia Siemens Networks to produce GSM and the Radio Access products, microwave devices for wireline, and wireless networks.

GAAP operating income increased 62% to $98.9 million compared to $61.1 million for the same period of fiscal 2007.

GAAP net income increased 50% to $62 million compared to $41.4 million for the same period in fiscal 2007. GAAP diluted earnings per share for the first quarter of fiscal 2008 increased 50% to 30 cents compared to 20 cents for the same period of fiscal 2007.

The core operating income increased 44% to $122.1 million or 3.6% of net revenue compared to $85 million or 2.6% of net revenue for the first quarter of fiscal 2007. Core earnings increased 23% to $74.6 million compared to $60.5 million for the first quarter of fiscal 2007. Core earnings per share increased 24% to 36 cents per diluted share for the period compared to 29 cents for the first quarter of fiscal 2007.

The core operating income for the EMS division was approximately 3%. The consumer division, as a result of the seasonal nature of this division, was approximately 4%, and the aftermarket services division was approximately 7%.

Net revenue increased 4.5% to $3.4 billion compared to $3.2 billion for the same period of fiscal 2007.

The revenue of EMS division represented approximately 59% of total revenue or $2 billion. Sequential sector movements are as follows: production levels in the automotive sector were consistent with the prior quarter; computing and storage sector increased 8% from the fourth quarter; industrial, instrumentation and medical sector declined 8% from the prior quarter, reflecting the decline in product revenues associated with the housing and new construction. The networking sector levels of production decreased 3% from the previous quarter, as a result of lower production levels for the European customers in this sector. Telecommunications sector increased 15% sequentially, as a result of one month''s revenue from the recently announced Nokia Siemens Networks relationship.

The revenue from consumer division represented approximately 36% or $1.2 billion, in the first fiscal quarter. The sequential sector movements are as follows: mobility and display products sector increased 36% from the prior quarter, reflecting strong seasonal growth in each sector across both displays and mobile products. The peripherals sector increased by 12% over the fourth fiscal quarter, reflecting seasonal growth in this sector from printers and home entertainment products.

The aftermarket services division represented approximately 5% of overall company revenue in the first fiscal quarter, and saw revenues increase of 4% sequentially.

The divisional and sector information for the quarter in percentage terms is as follow:

In EMS division, automotive 4%; computing and storage 11%; industrial, instrumentation and medical 17% of revenue; networking 20%; telecom 5% and other 2%, for a total of 59%.

In the consumer division, 25% for mobility and display; 11% for the peripherals division in fiscal Q1, for 36% overall; and finally, in the aftermarket Services, 5%.

In first quarter, three customers - Cisco, Hewlett-Packard, and Philips - accounted for more than 10% of revenue. The top 10 customers in the quarter accounted for approximately 64% of the revenue.

Selling, general and administrative expenses declined $5million in the quarter.

This reflects the benefits of previously announced restructuring plans and approximately $1.6 million less in legal, and accounting fees associated with the recent review.

Research and development costs were $6.5 million in the quarter, or approximately $3 million less than the fourth fiscal quarter, reflecting an increased level of consumer-funded design projects than in previous quarter, along with some of the repositioning of design repurchase to lower cost regions.

Stock-based compensation expense in the quarter was $5 million. This expense is lower than estimated due to the reversal of stock-based compensation expense previously incurred as a result of performance-based restricted stock grants that is now no longer expected to vest.

The tax rate in the quarter was 21%, reflecting higher levels of income and higher tax jurisdictions in the quarter.

The firm estimates revenue in second quarter in be in the range of $3 billion to $3.1 billion.

Core operating income is expected to decline through revenue decline, consistent with historical seasonal pattern. Specifically, this year, and in each of the last two fiscal years, every dollar of revenue decline from the first fiscal quarter to the second carries with it approximately 18 cents of income decline. As a percentage of revenue, the firm estimates core operating margins to be in the 2.2% to 2.4% range.

- Selling, general and administration expenses are estimated to be $116 million, reflecting the addition of Nokia Siemens Networks relationship.
- Research and development costs are expected to be approximately $7 million in the fiscal quarter.
- Intangibles amortization is expected to be approximately $9 million.
- Stock-based compensation is estimated to be approximately $14 million in the second quarter.
- The interest expense is estimated to be $25 million.

Based upon the current estimate of production and income levels, the tax rate on core operating income is expected to be 16% for the second quarter, and the 18% for the full fiscal year.

Capital expenditures in the second fiscal quarter are estimated to be in the range of $60 million to $80 million, dependent upon the timing of the completion of building expansions which are underway.
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