01—Abstract
Summary
Summary of the 10-K filed October 21, 2014. Cited figures are marked; the original filing is the authoritative source.
Jabil Circuit, Inc. (now Jabil Inc.) reported fiscal year 2014 (ended August 31, 2014) net revenue of $15.76 billiona, down from $17.25 billion in fiscal 2013, a decrease the filing describes as approximately 8.6%.
The decline was largely attributed to reduced revenue from the company's disengagement with BlackBerry Limited and lower sales from certain existing customers, partially offset by new customers tied to the Nypro acquisition. Gross profit fell to $1.03 billionb (6.5% of net revenue) from $1.21 billion, and operating income dropped to $204.1 million from $452.4 million. Net income attributable to Jabil Circuit, Inc. was $241.3 million, or $1.19 per diluted share, compared with $371.5 million, or $1.79 per diluted share, a year earlier.
Results were helped by a $223.3 millionc net gain on the sale of the Aftermarket Services (AMS) business, which closed April 1, 2014 for $725.0 million in consideration. The company also reported core earnings (non-U.S. GAAP) of $108.1 million, or $0.53 per diluted share. Cash flow from operations was $498.9 million, versus $1.21 billion in fiscal 2013, and capital expenditures were $624.1 million.
At year-end the company held $1.0 billiond in cash and cash equivalents against $1.7 billion of notes payable, long-term debt and capital lease obligations. During fiscal 2014 Jabil repurchased 13.7 million shares for $260.3 million and paid $68.2 million in dividends. Management also announced a shift to two reportable segments, Electronics Manufacturing Services (EMS) and Diversified Manufacturing Services (DMS), effective September 1, 2014, and disclosed that its five largest customers accounted for approximately 45% of net revenue.
Apple, Inc. represented 18% of fiscal 2014 net revenue. For investors, the filing shows a sharp earnings decline driven by lower volume from key customers and higher restructuring charges of $85.4 million, with the AMS sale providing a one-time boost to reported net income. Customer concentration, a large international footprint (84.5% of net revenue from international operations), and the company's reliance on a small number of customers remain central risk factors.
02—Key points
Key Highlights
- Net revenue fell to $15.76 billion from $17.25 billion, down approximately 8.6%, largely due to the BlackBerry Limited disengagement and lower sales from certain existing customers.
- Operating income declined to $204.1 million from $452.4 million, and gross margin fell to 6.5% of net revenue from 7.0%.
- Net income attributable to Jabil Circuit, Inc. was $241.3 million ($1.19 diluted EPS), versus $371.5 million ($1.79) in fiscal 2013, helped by a $223.3 million net gain on the AMS business sale.
- Core earnings (non-U.S. GAAP) decreased to $108.1 million ($0.53 per diluted share) from $397.8 million ($1.91 per diluted share).
- Operating cash flow was $498.9 million, down from $1.21 billion, while capital expenditures totaled $624.1 million.
- Five largest customers accounted for about 45% of net revenue; Apple, Inc. represented 18%, and 84.5% of net revenue came from international operations.
- Jabil repurchased 13.7 million shares for $260.3 million and paid $68.2 million in dividends during fiscal 2014; restructuring charges totaled $85.4 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Jabil kept $0.02.
- Revenue$15.76B100.0%
- Cost of revenue−$14.74B93.5%
- Gross profit$1.03B6.5%
- Operating costs−$821.5M5.2%
- Operating income$204.1M1.3%
- Interest, other & tax$37.2M0.2%
- Net income$241.3M1.5%
Where FY2014 revenue went
$15.76B- Cost of revenue: $14.74B, 93% of revenue
- Operating income: $204.1M, 1.3% of revenue
- R&D: $28.6M, 0.2% of revenue
- SG&A: $675.7M, 4.3% of revenue
- Other operating costs: $117.2M, 0.7% of revenue
Kept 1.3% as operating incomeOperating income $204.1M · 1.3%R&D $28.6M · 0.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed October 21, 2014Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $15.76B$17.25B | −8.6% |
| Cost of Revenue | $14.74B$16.04B | −8.1% |
| Gross Profit | $1.03B$1.21B | −15.4% |
| R&D Expenses | $28.61M$28.41M | +0.7% |
| SG&A Expenses | $675.73M$614.29M | +10.0% |
| Operating Income | $204.07M$452.42M | −54.9% |
| Interest Expense | $128.06M$121.02M | +5.8% |
| Net Income | $241.31M$371.48M | −35.0% |
| EPS (Basic) | $1.19$1.83 | −35.0% |
| EPS (Diluted) | $1.19$1.79 | −33.5% |
| Shares Outstanding (Basic) | 202.50M203.10M | −0.3% |
| Shares Outstanding (Diluted) | 202.50M207.81M | −2.6% |
05—Questions
Frequently Asked Questions
Why did Jabil's revenue and profitability decline in fiscal 2014?
The filing attributes the 8.6% revenue decline to lower revenue from the termination of the BlackBerry Limited relationship and decreased revenue from certain existing customers, partly offset by new customers, principally from the Nypro acquisition. Gross profit fell because revenue from existing customers declined faster than certain fixed costs. Restructuring and related charges of $85.4 million and higher SG&A also weighed on operating income.
How did the sale of the Aftermarket Services business affect results?
On April 1, 2014, Jabil completed the sale of its AMS business (except the Malaysian operations, pending regulatory approval) for $725.0 million, consisting of $675.0 million in cash and $50.0 million of Senior Non-Convertible Cumulative Preferred Stock of iQor. The company recognized a gain on sale of discontinued operations, net of tax, of approximately $223.3 million, and AMS results are reported as discontinued operations for all periods presented.
What is Jabil's liquidity and debt position at fiscal year-end?
At August 31, 2014, Jabil had cash and cash equivalents of $1.0 billion, total notes payable, long-term debt and capital lease obligations of $1.7 billion, and $1.8 billion in available liquidity under its revolving credit facilities, plus up to $275.1 million under its receivables securitization and uncommitted sale programs. The company's $1.5 billion Amended and Restated Credit Facility, entered July 25, 2014, is scheduled to terminate July 25, 2019.
What changes to reporting segments did Jabil announce?
At August 31, 2014, Jabil reported three segments: Diversified Manufacturing Services (DMS), Enterprise & Infrastructure (E&I) and High Velocity Systems (HVS). Effective September 1, 2014, the company will report two segments: Electronics Manufacturing Services (EMS) and DMS. The EMS segment includes customers primarily in automotive, computing, digital home, energy, industrial, networking, printing, storage and telecommunications, while DMS includes consumer lifestyles, healthcare, mobility and packaging customers.
How concentrated is Jabil's customer base?
Jabil depends on a relatively small number of customers. In fiscal 2014, the five largest customers accounted for approximately 45% of net revenue, and 71 customers accounted for approximately 90%. Apple, Inc. represented 18% of net revenue in fiscal 2014, down from 20% in fiscal 2013. The filing notes that most customers do not commit to long-term production schedules and may cancel or reschedule orders.
06—Continue