01—Abstract
Summary
Summary of the 10-K filed October 22, 2009. Cited figures are marked; the original filing is the authoritative source.
Jabil Circuit, Inc. (now Jabil Inc.) reported a difficult fiscal 2009 (year ended August 31, 2009).
Net revenue declined 8.6% to $11.68 billiona from $12.78 billion in fiscal 2008, as customer demand weakened amid the macroeconomic downturn. The company recorded a non-cash goodwill impairment charge of $1.02 billion (Consumer $400.4 million, EMS $622.4 million), producing a net loss of $1.17 billion, or $(5.63) per diluted share, compared with net income of $133.9 million in fiscal 2008. Gross margin fell to 6.2% of net revenue from 6.8%, and the company launched a 2009 Restructuring Plan expected to cost about $64.0 million and reduce headcount by roughly 4,500 employees across fiscal 2009 and 2010.
Liquidity remained comparatively stable. Operating cash flow was $557.3 millionb, driven by working capital reductions including a $283.8 million decrease in inventories and a $169.7 million decrease in trade receivables. Cash and equivalents ended the year at $876.3 million, and the company reported $1.23 billion of notes payable and long-term debt.
Stockholders' equity fell to $1.44 billionc from $2.72 billion. The filing notes that the goodwill impairment did not affect cash or debt covenant compliance. Customer concentration remains high, with the five largest customers representing about 43% of net revenue.
The company also agreed on September 24, 2009 to sell Jabil Circuit Automotive, SAS, with an estimated loss on disposal of $15.0 to $25.0 milliond expected in fiscal 2010. Quarterly dividends of $0.07 per share were maintained.
02—Key points
Key Highlights
- Net revenue fell 8.6% to $11.68 billion in fiscal 2009 from $12.78 billion in fiscal 2008, with declines across most sectors except mobility and AMS.
- Net loss of $1.17 billion, or $(5.63) per diluted share, driven primarily by a $1.02 billion non-cash goodwill impairment charge.
- Gross profit declined to $718.8 million (6.2% of net revenue) from $867.8 million (6.8%).
- 2009 Restructuring Plan expected to total approximately $64.0 million in charges and reduce headcount by about 4,500 employees, with annualized savings of approximately $55.0 million.
- Operating cash flow of $557.3 million, supported by a $283.8 million reduction in inventories; year-end cash of $876.3 million.
- Five largest customers accounted for approximately 43% of net revenue, and 83.8% of net revenue came from international operations.
- Stockholders' equity decreased to $1.44 billion from $2.72 billion; quarterly dividends of $0.07 per share continued.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2009, Jabil lost $0.10.
- Revenue$11.68B100.0%
- Cost of revenue−$10.97B93.8%
- Gross profit$718.8M6.2%
- Operating costs−$1.63B13.9%
- Operating income−$910.2M7.8%
- Interest, other & tax−$255.0M2.2%
- Net income−$1.17B10.0%
04—Financials
Financial Highlights
Figures from 10-KFY2009filed October 22, 2009Financial Statements
| Revenue | $11.68B |
| Cost of Revenue | $10.97B |
| Gross Profit | $718.82M |
| R&D Expenses | $27.32M |
| SG&A Expenses | $495.94M |
| Operating Income | -$910.20M |
| Interest Expense | $82.25M |
| Net Income | -$1.17B |
| EPS (Basic) | $-5.63 |
| EPS (Diluted) | $-5.63 |
| Shares Outstanding (Basic) | 207.00M |
| Shares Outstanding (Diluted) | 207.00M |
05—Questions
Frequently Asked Questions
Why did Jabil report a net loss in fiscal 2009 after profit in fiscal 2008?
The net loss of $1.17 billion was primarily caused by a non-cash goodwill impairment charge of $1.02 billion, recorded for the Consumer ($400.4 million) and EMS ($622.4 million) reporting units. The filing attributes the impairment to a significant and sustained decline in market capitalization, a deteriorating macroeconomic environment that reduced customer demand, and illiquidity in credit markets. The charge did not affect the company's cash balance or debt covenant compliance.
How did the business decline affect revenue and margins?
Net revenue decreased 8.6% to $11.68 billion. Management attributed the decline to reduced customer demand from the weakened macroeconomic environment. Gross margin fell to 6.2% from 6.8%, as revenue decreased faster than certain fixed costs. Selling, general and administrative expenses were $495.9 million, or 4.3% of net revenue, compared with 3.8% in the prior year.
What is the company doing to address the downturn?
The Board approved the 2009 Restructuring Plan in the second quarter of fiscal 2009 to better align manufacturing capacity and reduce the worldwide workforce by about 4,500 employees across fiscal 2009 and 2010. The company expects approximately $64.0 million in total restructuring and impairment costs and annualized cost savings of about $55.0 million, with about $14.0 million realized by fiscal year-end. The company also agreed to sell Jabil Circuit Automotive, SAS, expected to close in the first quarter of fiscal 2010.
How is the company's liquidity and debt position?
At August 31, 2009, cash and cash equivalents totaled $876.3 million, and total notes payable, long-term debt and capital lease obligations were $1.23 billion. Operating cash flow was $557.3 million. The company issued $312.0 million of 7.750% Senior Notes due 2016 and repurchased $294.9 million of its 5.875% Senior Notes. The filing notes that the $250.0 million U.S. and $200.0 million foreign asset-backed securitization programs expire in March 2010, and the company may be unable to renew one or both of them.
What are the main risks highlighted for investors?
Key risks include dependence on a small number of customers, with the five largest accounting for about 43% of net revenue; customer order volatility and limited long-term production commitments; a substantial share of revenue from international operations (83.8%); the possibility of further goodwill impairment; credit rating downgrades that could raise borrowing costs; and ongoing private litigation and a shareholder class action related to historical stock option grant practices.
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