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Jabil Posts Second Quarter Results

Today, Jabil Inc. (NYSE: JBL), reported preliminary, unaudited financial results for its second quarter of fiscal year 2020.

“After a stronger than expected start to the fiscal quarter, our factories were adversely impacted by workforce and supply chain disruptions associated with COVID-19,” said CEO Mark Mondello. “First and foremost, the safety and well-being of our people is our number one priority. Despite the near-term financial setback, our long-term strategy remains unchanged,” he added.

The second quarter expenses directly associated with business interruption caused by COVID-19 were approximately $53 million.

Second Quarter of Fiscal Year 2020 Highlights:

  • Net revenue: $6.1 billion
  • Diversified Manufacturing Services (DMS) year-on-year revenue growth: 1 percent
  • Electronics Manufacturing Services (EMS) year-on-year revenue growth: 1 percent
  • U.S. GAAP operating income: $90.6 million
  • U.S. GAAP diluted loss per share: $(0.02)
  • Core operating income (Non-GAAP): $159.4 million
  • Core diluted earnings per share (Non-GAAP): $0.50

Employee Update:

“In times of uncertainty and disruption, such as these, I’m continually inspired by the collective spirit and resiliency of our global workforce,” Mondello added.

Fiscal Year 2020 Update:

Our FY20 full year guidance, previously issued on December 17, 2019, did not anticipate the impact of a global pandemic. As a result, given the rapidly changing situation, we are withdrawing our FY20 full year guidance until we are able to update and quantify the underlying business assumptions.

(Definitions: “U.S. GAAP” means U.S. generally accepted accounting principles. Jabil defines core operating income as U.S. GAAP operating income less 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 plus other components of net periodic benefit cost. 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, restructuring of securities loss, 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 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 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 2020. 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 2020 that our financial results and conditions differ from our current preliminary unaudited numbers set forth herein; the scope and duration of the COVID-19 outbreak and its impact on our sites, customers and supply chain; managing growth effectively; our dependence on a limited number of customers; competitive challenges affecting our customers; managing rapid declines in customer demand and other related customer challenges that may occur; changes in technology; the occurrence of, success and expected financial results from, product ramps; competition; our ability to maintain and improve costs, quality and delivery for our customers; retaining key personnel; our ability to purchase components efficiently and reliance on a limited number of suppliers for critical components; risks associated with international sales and operations; our ability to achieve expected profitability from acquisitions; risk arising from our restructuring activities; performance in the markets in which we operate; 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, 2019 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 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 today at 8:30 a.m. ET to discuss its earnings for the second quarter of fiscal year 2020. 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 manufacturing solutions provider that delivers comprehensive design, manufacturing, supply chain and product management services. Leveraging the power of over 200,000 people across 100 sites strategically located around the world, Jabil simplifies complexity and delivers value in a broad range of industries, enabling innovation, growth and customer success. For more information, visit jabil.com

JABIL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

February 29, 202

(unaudited)

August 31, 201

ASSETS

Current assets:

Cash and cash equivalents

$

696,745

$

1,163,343

Accounts receivable, net

2,314,055

2,745,226

Contract assets

1,057,656

911,940

Inventories, net

3,339,890

3,023,003

Prepaid expenses and other current assets

569,493

501,573

Total current assets

7,977,839

8,345,085

Property, plant and equipment, net

3,462,038

3,333,750

Operating lease right-of-use asset

373,413

Goodwill and intangible assets, net

935,574

879,108

Deferred income taxes

194,468

198,827

Other assets

196,346

213,705

Total assets

$

13,139,678

$

12,970,475

LIABILITIES AND EQUITY

Current liabilities:

Current installments of notes payable and long-term debt

$

637,841

$

375,181

Accounts payable

4,652,138

5,166,780

Accrued expenses

3,015,129

2,990,144

Current operating lease liabilities

100,033

Total current liabilities

8,405,141

8,532,105

Notes payable and long-term debt, less current installments

2,086,359

2,121,284

Other liabilities

315,875

163,821

Non-current operating lease liabilities

311,879

Income tax liabilities

143,161

136,689

Deferred income taxes

118,123

115,818

Total liabilities

11,380,538

11,069,717

Commitments and contingencies

Equity:

Jabil Inc. stockholders’ equity:

Preferred stock

Common stock

263

260

Additional paid-in capital

2,363,839

2,304,552

Retained earnings

2,048,954

2,037,037

Accumulated other comprehensive loss

(102,943

)

(82,794

)

Treasury stock, at cost

(2,563,282

)

(2,371,612

)

Total Jabil Inc. stockholders’ equity

1,746,831

1,887,443

Noncontrolling interests

12,309

13,315

Total equity

1,759,140

1,900,758

Total liabilities and equity

$

13,139,678

$

12,970,475

JABIL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except for per share data)

(Unaudited)

Three months ended

Six months ended

February 29, 2020

February 28, 2019

February 29, 2020

February 28, 2019

Net revenue

$

6,125,083

$

6,066,990

$

13,630,781

$

12,573,265

Cost of revenue

5,694,958

5,612,116

12,646,817

11,598,741

Gross profit

430,125

454,874

983,964

974,524

Operating expenses:

Selling, general and administrative

285,024

282,142

613,923

560,268

Research and development

11,290

10,155

22,060

21,298

Amortization of intangibles

13,577

7,777

29,717

15,423

Restructuring and related charges

29,604

817

74,855

6,842

Operating income

90,630

153,983

243,409

370,693

Impairment on securities

12,205

-

12,205

-

Interest and other, net

49,348

53,157

99,487

104,980

Income before income tax

29,077

100,826

131,717

265,713

Income tax expense

31,658

33,219

93,584

74,032

Net (loss) income

(2,581

)

67,607

38,133

191,681

Net income attributable to noncontrolling interests,

 

net of tax

702

253

994

727

Net (loss) income attributable to Jabil Inc.

$

(3,283

)

$

67,354

$

37,139

$

190,954

(Loss) earnings per share attributable to the

 

stockholders of Jabil Inc.:

Basic

$

(0.02

)

$

0.44

$

0.24

$

1.21

Diluted

$

(0.02

)

$

0.43

$

0.24

$

1.19

Weighted average shares outstanding:

Basic

152,058

154,725

152,579

158,160

Diluted

152,058

156,737

156,171

160,413

JABIL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

Six months ended

February 29, 2020

February 28, 2019

Cash flows provided by operating activities:

Net income

$

38,133

$

191,681

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

402,347

381,510

Restructuring and related charges

33,061

(3,212

)

Recognition of stock-based compensation expense and related charges

45,332

32,946

Deferred income taxes

3,087

23,921

Provision for allowance for doubtful accounts

10,185

5,598

Other, net

13,838

38,559

Change in operating assets and liabilities, exclusive of net assets acquired:

Accounts receivable

424,971

(365,192

)

Contract assets

(63,302

)

(815,144

)

Inventories

(279,664

)

225,036

Prepaid expenses and other current assets

(62,881

)

(4,895

)

Other assets

(8,438

)

(10,170

)

Accounts payable, accrued expenses and other liabilities

(472,503

)

407,127

Net cash provided by operating activities

84,166

107,765

Cash flows used in investing activities:

Acquisition of property, plant and equipment

(448,765

)

(537,140

)

Proceeds and advances from sale of property, plant and equipment

36,624

144,968

Cash paid for business and intangible asset acquisitions, net of cash

(141,195

)

(80,778

)

Cash receipts on sold receivables

96,846

Other, net

(2,013

)

(13,504

)

Net cash used in investing activities

(555,349

)

(389,608

)

Cash flows provided by (used in) financing activities:

Borrowings under debt agreements

5,063,358

6,182,931

Payments toward debt agreements

(4,835,697

)

(6,046,181

)

Payments to acquire treasury stock

(168,660

)

(350,323

)

Dividends paid to stockholders

(26,280

)

(27,422

)

Net proceeds from exercise of stock options and issuance of common stock under

employee stock purchase plan

16,179

14,587

Treasury stock minimum tax withholding related to vesting of restricted stock

(23,010

)

(11,204

)

Other, net

(11,617

)

(1,500

)

Net cash provided by (used in) financing activities

14,273

(239,112

)

Effect of exchange rate changes on cash and cash equivalents

(9,688

)

12,063

Net decrease in cash and cash equivalents

(466,598

)

(508,892

)

Cash and cash equivalents at beginning of period

1,163,343

1,257,949

Cash and cash equivalents at end of period

$

696,745

$

749,057

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 29, 2020

February 28, 2019

February 29, 2020

February 28, 2019

Operating income (U.S. GAAP)

$

90,630

$

153,983

$

243,409

$

370,693

Amortization of intangibles

13,577

7,777

29,717

15,423

Stock-based compensation expense and related

charges

15,109

15,697

45,332

32,946

Restructuring and related charges

29,604

817

74,855

6,842

Distressed customer charge

14,963

Net periodic benefit cost (1)

2,776

4,601

Business interruption and impairment charges, net

(2,860

)

Acquisition and integration charges

7,752

12,785

23,886

21,675

Adjustments to operating income

68,818

37,076

193,354

74,026

Core operating income (Non-GAAP)

$

159,448

$

191,059

$

436,763

$

444,719

Net (loss) income attributable to Jabil Inc. (U.S.

GAAP)

$

(3,283

)

$

67,354

$

37,139

$

190,954

Adjustments to operating income

68,818

37,076

193,354

74,026

Impairment on securities

12,205

12,205

Net periodic benefit cost (1)

(2,776

)

(4,601

)

Adjustments for taxes(2)

3,091

(4,219

)

3,588

(17,962

)

Core earnings (Non-GAAP)

$

78,055

$

100,211

$

241,685

$

247,018

Diluted (loss) earnings per share (U.S. GAAP)

$

(0.02

)

$

0.43

$

0.24

$

1.19

Diluted core earnings per share (Non-GAAP)

$

0.50

$

0.64

$

1.55

$

1.54

Diluted weighted average shares outstanding (U.S.

GAAP)

152,058

156,737

156,171

160,413

Diluted weighted average shares outstanding (Non-

GAAP)

155,714

156,737

156,171

160,413

  1. Following the adoption of Accounting Standards Update 2017-07, Compensation - Retirement Benefits (Topic 715) (“ASU 2017-07”), pension service cost is recognized in cost of revenue and all other components of net periodic benefit cost, including return on plan assets, are presented in other expense. We are reclassifying the pension components in other expense to core operating income as we assess operating performance, inclusive of all components of net periodic benefit cost, with the related revenue. There is no impact to core earnings or diluted core earnings per share for this adjustment.
  2. 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.

JABIL INC. AND SUBSIDIARIES

SUPPLEMENTAL DATA

ADJUSTED FREE CASH FLOW

(in thousands)

(Unaudited)

  

 

Six months ended

 

February 29, 2020

February 28, 2019(1)

Net cash provided by operating activities (U.S. GAAP)

 

$

84,166

$

107,765

Cash receipts on sold receivables

 

96,846

Acquisition of property, plant and equipment

 

(448,765

)

(537,140

)

Proceeds and advances from sale of property, plant and equipment

 

36,624

144,968

Adjusted free cash flow (Non-GAAP)

 

$

(327,975

)

$

(187,561

)

(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.

Contacts:

Investor Contact
Adam Berry
Vice President, Investor Relations
Adam_Berry@jabil.com

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