How did Jabil's revenue and profitability change in fiscal 2007?

Net revenue increased 19.7% to $12.3 billion, but net income fell to $73.2 million from $164.5 million. Gross profit as a percentage of net revenue declined to 6.6% from 7.5%, and restructuring and impairment charges of $72.4 million weighed on operating income, which was $181.9 million versus $241.8 million a year earlier.

What is the status of the debt that funded the Green Point acquisition?

Jabil funded the approximately $891.0 million Green Point acquisition partly with a $1.0 billion bridge facility. At August 31, 2007, $400.0 million remained outstanding under it, and it expires December 20, 2007. The company stated it will need to refinance at least some of this indebtedness and is actively seeking a refinancing, with no assurance it will be available on attractive terms.

What legal and regulatory matters are disclosed?

The company disclosed shareholder derivative lawsuits, a putative shareholder class action, an SEC informal inquiry, and a U.S. Attorney's subpoena related to historical stock option grants, as well as an SEC review of revenue recognition for certain transactions from fiscal 1999 to 2002. On September 20, 2007, Jabil reached an agreement in principle to settle the derivative actions with no monetary damages, though the company noted it cannot give assurance a definitive agreement will be reached and approved.

How concentrated is Jabil's customer base?

Customer concentration is significant. In fiscal 2007, five largest customers accounted for approximately 52% of net revenue, and 50 customers accounted for approximately 90%. Cisco Systems represented 15% and Nokia 13% of net revenue in fiscal 2007.

What are management's expectations for the restructuring program?

The company expects total restructuring and impairment charges of approximately $250.0 million under its 2006 Restructuring Plan, with additional costs primarily in fiscal 2008 and some contract termination costs through fiscal 2011. Management expects net annualized cost savings of approximately $20.0 to $30.0 million by the end of fiscal 2008.

JBL 10-K FY2007 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed October 25, 2007. Cited figures are marked; the original filing is the authoritative source.

Jabil Circuit, Inc. reported net revenue of $12.29 billion^a for the fiscal year ended August 31, 2007, up from $10.27 billion in fiscal 2006, driven by increased sales across most industry sectors and acquisitions, including Green Point.

Net income fell to $73.2 million^b, or $0.35 diluted earnings per share, compared with $164.5 million ($0.77 diluted) in fiscal 2006. Gross margin declined to 6.6% of net revenue from 7.5%, and operating income dropped to $181.9 million from $241.8 million, reflecting $72.4 million of restructuring and impairment charges tied to the 2006 Restructuring Plan, which the company expects to total about $250.0 million. The balance sheet and financing picture changed materially during the year.

The company acquired Taiwan Green Point Enterprises for approximately $891.0 million^c in cash, funded by a $1.0 billion bridge facility that expires December 20, 2007. Total notes payable, long-term debt and lease obligations rose to $1.26 billion, with $501.7 million classified as current. Management stated it is actively seeking to refinance the bridge facility, and Fitch downgraded the 5.875% Senior Notes to BB+ on October 12, 2007.

Cash from operations was $183.9 million^d, versus $448.2 million in the prior year. The filing also discloses ongoing shareholder derivative and class action litigation and an SEC informal inquiry related to historical stock option grant practices and revenue recognition.

The company reached an agreement in principle on September 20, 2007 to settle the derivative actions without monetary damages. Customer concentration remains significant: five largest customers accounted for approximately 52% of net revenue in fiscal 2007, with Cisco Systems at 15% and Nokia at 13%.

02—Key points

Key Highlights

Net revenue rose to $12.29 billion in fiscal 2007 from $10.27 billion in fiscal 2006, with increases across most industry sectors and contributions from acquisitions.
Net income declined to $73.2 million ($0.35 diluted EPS) from $164.5 million ($0.77 diluted EPS) in fiscal 2006.
Gross profit as a percentage of net revenue fell to 6.6% from 7.5%, and operating income decreased to $181.9 million from $241.8 million.
Acquired Green Point for approximately $891.0 million in cash, financed with a $1.0 billion bridge facility due December 20, 2007.
Total notes payable, long-term debt and lease obligations increased to $1.26 billion, with $501.7 million current; the company is actively seeking to refinance the bridge facility.
Fitch downgraded the 5.875% Senior Notes to BB+ on October 12, 2007; Moody's rates them Ba1 and S&P rates them BBB-.
Five largest customers represented approximately 52% of net revenue; Cisco Systems accounted for 15% and Nokia for 13%.

03—Questions

Frequently Asked Questions

How did Jabil's revenue and profitability change in fiscal 2007?
Net revenue increased 19.7% to $12.3 billion, but net income fell to $73.2 million from $164.5 million. Gross profit as a percentage of net revenue declined to 6.6% from 7.5%, and restructuring and impairment charges of $72.4 million weighed on operating income, which was $181.9 million versus $241.8 million a year earlier.
What is the status of the debt that funded the Green Point acquisition?
Jabil funded the approximately $891.0 million Green Point acquisition partly with a $1.0 billion bridge facility. At August 31, 2007, $400.0 million remained outstanding under it, and it expires December 20, 2007. The company stated it will need to refinance at least some of this indebtedness and is actively seeking a refinancing, with no assurance it will be available on attractive terms.
What legal and regulatory matters are disclosed?
The company disclosed shareholder derivative lawsuits, a putative shareholder class action, an SEC informal inquiry, and a U.S. Attorney's subpoena related to historical stock option grants, as well as an SEC review of revenue recognition for certain transactions from fiscal 1999 to 2002. On September 20, 2007, Jabil reached an agreement in principle to settle the derivative actions with no monetary damages, though the company noted it cannot give assurance a definitive agreement will be reached and approved.
How concentrated is Jabil's customer base?
Customer concentration is significant. In fiscal 2007, five largest customers accounted for approximately 52% of net revenue, and 50 customers accounted for approximately 90%. Cisco Systems represented 15% and Nokia 13% of net revenue in fiscal 2007.
What are management's expectations for the restructuring program?
The company expects total restructuring and impairment charges of approximately $250.0 million under its 2006 Restructuring Plan, with additional costs primarily in fiscal 2008 and some contract termination costs through fiscal 2011. Management expects net annualized cost savings of approximately $20.0 to $30.0 million by the end of fiscal 2008.

04—Continue

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