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JABIL CIRCUIT INC – 10-Q – Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Overview
We are one of the leading providers of worldwide electronic manufacturing services and solutions. We provide comprehensive electronics design, production and product management services to companies in the aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, solar, storage and telecommunications industries. We serve our customers primarily with dedicated business units that combine highly automated, continuous flow manufacturing with advanced electronic design and design for manufacturability. We currently depend, and expect to continue to depend, upon a relatively small number of customers for a significant percentage of our revenue, net of estimated return costs ("net revenue"). Based on net revenue, during the three months ended November 30, 2011 , our largest customers currently include Agilent Technologies , Apple Inc. , Cisco Systems, Inc. , Ericsson , EchoStar Corporation , Hewlett-Packard Company , International Business Machines Corporation , NetApp, Inc. , Pace plc and Research in Motion Limited . During the three months ended November 30, 2011 , we had net revenues of approximately $4.3 billion and net income attributable to Jabil Circuit, Inc. of approximately $112.9 million . We offer our customers comprehensive electronics design, production and product management services that are responsive to their manufacturing and supply chain management needs. Our business units are capable of providing our customers with varying combinations of the following services: • integrated design and engineering; • component selection, sourcing and procurement; • automated assembly; • design and implementation of product testing; • parallel global production; • enclosure services; • systems assembly, direct order fulfillment and configure to order; and • aftermarket services. We currently conduct our operations in facilities that are located in Austria , Belgium , Brazil , China , England , France , Germany , Hungary , India , Ireland , Italy , Japan , Malaysia , Mexico , The Netherlands , Poland , Russia , Scotland , Singapore , South Korea , Taiwan , Turkey , Ukraine , the U.S. and Vietnam . Our global manufacturing production sites allow customers to manufacture products simultaneously in the optimal locations for their products. Our services allow customers to improve supply-chain management, reduce inventory obsolescence, lower transportation costs and reduce product fulfillment time. We have identified our global presence as a key to assessing our business opportunities. The industry in which we operate is composed of companies that provide a range of manufacturing, design and aftermarket services to companies that utilize electronics components. The industry experienced rapid change and growth through the 1990s as an increasing number of companies chose to outsource an increasing portion, and, in some cases, all of their manufacturing requirements. In mid-2001, the industry's revenue declined as a result of significant cut-backs in customer production requirements, which was consistent with the overall downturn in the technology sector at the time. In response to this downturn in the technology sector, we implemented restructuring programs to reduce our cost structure and further align our manufacturing capacity with the geographic production demands of our customers. Industry revenues generally began to stabilize in 2003 and companies began to turn more to outsourcing versus internal manufacturing. In addition, the number of industries serviced, as well as the market penetration in certain industries, by electronic manufacturing service providers has increased over the past several years. In mid-2008, the industry's revenue declined when a deteriorating macro-economic environment resulted in illiquidity in the overall credit markets and a significant economic downturn in the North American, European and Asian markets. In response to this downturn, we implemented additional restructuring programs to reduce our cost structure and further align our manufacturing capacity with the geographic production demands of our customers. Uncertainty remains regarding the extent and timing of the current economic recovery. We will continue to monitor the current economic environment and its potential impact on both the customers that we serve as well as our end-markets and closely manage our costs and capital resources so that we can respond appropriately as circumstances continue to change. 21
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Summary of Results
Net revenues during the three months endedNovember 30, 2011 , increased approximately 6.0% to$4.3 billion compared to$4.1 billion during the three months endedNovember 30, 2010 , largely due to increased revenue from certain of our existing customers, including new program wins with these customers. The following table sets forth, for the three month periods indicated, certain key operating results and other financial information (in thousands, except per share data): Three months ended November 30, November 30, 2011 2010 Net revenue $ 4,326,769 $ 4,082,181 Gross profit $ 340,010 $ 310,591 Operating income $ 170,842 $ 156,000 Net income attributable to Jabil Circuit, Inc $ 112,872 $ 106,677 Income per share - basic $ 0.55 $ 0.50 Income per share - diluted $ 0.54 $ 0.49 Cash dividend per share - declared $ 0.08 $ 0.07 Key Performance Indicators Management regularly reviews financial and non-financial performance indicators to assess the Company's operating results. The following table sets forth, for the quarterly periods indicated, certain of management's key financial performance indicators: Three Months Ended November 30, August 31, May 31, February 28, 2011 2011 2011 2011 Sales cycle 7 days 8 days 11 days 11 days Inventory turns (annualized) 7 turns 7 turns 7 turns 7 turns Days in accounts receivable 23 days 23 days 22 days 24 days Days in inventory 54 days 51 days 52 days 53 days Days in accounts payable 70 days 66 days 63 days 66 days The sales cycle is calculated as the sum of days in accounts receivable and days in inventory, less the days in accounts payable; accordingly, the variance in the sales cycle quarter over quarter is a direct result of changes in these indicators. During the three months endedNovember 30, 2011 , days in accounts receivable remained constant at 23 days as compared to the prior sequential quarter. During the three months endedNovember 30, 2011 , days in inventory increased three days to 54 days as compared to the prior sequential quarter largely due to increased levels of inventory to support the transition of certain program wins and higher revenue levels. During the three months endedNovember 30, 2011 , days in accounts payable increased four days to 70 days from the prior sequential quarter primarily due to the timing of purchases and cash payments for purchases during the respective quarters. The sales cycle was seven days during the three months endedNovember 30, 2011 . The changes in the sales cycle are due to the changes in accounts receivable, accounts payable and inventory that are discussed above.
Critical Accounting Policies and Estimates
The preparation of our Condensed Consolidated Financial Statements and related disclosures in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") requires management to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances. For further discussion of our significant accounting policies, refer to Note 1 - "Description of Business and Summary of Significant Accounting Policies" to the Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results Operations - Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the fiscal year ended August 31, 2011 . 22
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Recent Accounting Pronouncements
See Note 11 - "New Accounting Guidance" to the Condensed Consolidated Financial Statements for a discussion of recent accounting guidance.
Results of Operations
The following table sets forth, for the periods indicated, certain statements of operations data expressed as a percentage of net revenue:
Three months ended November 30, November 30, 2011 2010 Net revenue 100.0 % 100.0 % Cost of revenue 92.1 92.4 Gross profit 7.9 7.6 Operating expenses: Selling, general and administrative 3.6 3.6 Research and development 0.2 0.1 Amortization of intangibles 0.2 0.1 Restructuring and impairment charges - - Operating income 3.9 3.8 Other expense (income) 0.0 (0.0 ) Interest income (0.0 ) (0.0 ) Interest expense 0.6 0.5 Income before income tax 3.3 3.3 Income tax expense 0.7 0.7 Net income 2.6 2.6 Net income attributable to noncontrolling interests, net of income tax expense 0.0 0.0 Net income attributable to Jabil Circuit, Inc 2.6 % 2.6 %
The Three Months Ended
Net Revenue. Net revenue increased 6.0% to$4.3 billion during the three months endedNovember 30, 2011 , compared to$4.1 billion during the three months endedNovember 30, 2010 . Specific increases include a 57% increase in the sale of specialized services products; an 11% increase in the sale of industrial and CleanTech products; a 6% increase in the sale of healthcare and instrumentation products; and a 4% increase in the sale of Enterprise & Infrastructure ("E&I") products. These increases are primarily due to increased revenue from certain of our existing customers, including new program wins with these customers. These increases were partially offset by a 14% decrease in the sale of High Velocity Systems ("HVS") products which is primarily due to our reduced exposure to the mobility handset business and the television set displays business, partially offset by an increase in the sale of printer products due to new program wins. Generally, we assess revenue on a global customer basis regardless of whether the growth is associated with organic growth or as a result of an acquisition. Accordingly, we do not differentiate or report separately revenue increases generated by acquisitions as opposed to existing business. In addition, the added cost structures associated with our acquisitions have historically been relatively insignificant when compared to our overall cost structure. The distribution of revenue across our sectors has fluctuated, and will continue to fluctuate, as a result of numerous factors, including but not limited to the following: fluctuations in customer demand as a result of recessionary conditions; efforts to de-emphasize the economic performance of certain sectors, most specifically, our former automotive and display sectors; seasonality in our business; and business growth from new and existing customers. The recent flooding inThailand did not materially affect our net revenue for the first quarter of fiscal year 2012. While we currently expect this flooding to have an insignificant negative effect on our revenues for the second quarter of fiscal year 2012, due to possible supply shortages, we are assessing the impact for future quarters and cannot be certain of the effects. 23
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The following table sets forth, for the periods indicated, revenue by segment expressed as a percentage of net revenue:
Three months endedNovember 30 ,November 30, 2011 2010
Diversified Manufacturing Services ("DMS")
Specialized Services 22 % 15 % Industrial & CleanTech 13 % 12 % Healthcare & Instrumentation 7 % 7 % Total DMS 42 % 34 % Total E&I 28 % 28 % Total HVS 30 % 38 % Total 100 % 100 % Foreign revenue represented 86.7% and 86.4% of our net revenue during the three months endedNovember 30, 2011 and 2010, respectively. We currently expect our foreign revenue to slightly decrease as compared to current levels over the course of the next 12 months. Gross Profit. Gross profit increased to$340.0 million (7.9% of net revenue) during the three months endedNovember 30, 2011 , compared to$310.6 million (7.6% of net revenue) during the three months endedNovember 30, 2010 . The increase in gross profit on an absolute basis and as a percentage of net revenue was primarily due to additional growth in the DMS segment, which typically has higher margins than the E&I and HVS segments, increased revenue from certain of our existing customers, including new program wins with these customers, which allow us to better utilize capacity and absorb fixed costs and an increased focus on controlling costs and improving productivity. Selling, General and Administrative. Selling, general and administrative expenses increased to$157.8 million (3.6% of net revenue) during the three months endedNovember 30, 2011 , compared to$142.4 million (3.6% of net revenue) during the three months endedNovember 30, 2010 . Selling, general and administrative expenses as a percentage of net revenue remained consistent with the same period of the prior fiscal year. Selling, general and administrative expenses on a gross basis increased from the same period of the prior fiscal year due to additional salary and salary related expenses associated with increased headcount to support the continued growth of our business. Research and Development. Research and development expenses increased to$6.3 million (0.2% of net revenue) during the three months endedNovember 30, 2011 , compared to$5.7 million (0.1% of net revenue) during the three months endedNovember 30, 2010 . The increase is primarily due to new projects in targeted growth sectors. Amortization of Intangibles. Amortization of intangible assets decreased to$5.1 million during the three months endedNovember 30, 2011 , compared to$6.0 million during the three months endedNovember 30, 2010 . The decrease was primarily attributable to certain intangible assets that became fully amortized sinceNovember 30, 2010 . Other Expense (Income). We recorded other expense of$2.7 million</money> during the three months ended November 30, 2011 , compared to other income of$0.2 million during the three months endedNovember 30, 2010 . The increase during the three months endedNovember 30, 2011 was primarily due to the loss on sales of accounts receivable recorded in connection with the North American asset-backed securitization program and the foreign asset-backed securitization program (collectively referred to herein as the "asset-backed securitization programs"). During the three months endedNovember 30, 2010 , the loss recognized in connection with the asset-backed securitization programs was primarily recorded to interest expense because at that time the North American asset-backed securitization program was accounted for as a secured borrowing for a portion of the period and the foreign asset-backed securitization program was accounted for as a secured borrowing for the full period. Refer to Note 7 - "Trade Accounts Receivable Securitization and Sale Programs" to the Condensed Consolidated Financial Statements for further discussion of the asset-backed securitization programs. Interest Income. Interest income remained relatively constant at$0.6 million during the three months endedNovember 30, 2011 , compared to$0.9 million during the three months endedNovember 30, 2010 .
Interest Expense. We recorded interest expense of
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issuance of the 5.625% Senior Notes during the first quarter of fiscal year 2011 and higher interest rates on borrowings associated with our five year unsecured credit facility amended as ofDecember 7, 2010 (the "Credit Facility") which was entered into during the second quarter of fiscal year 2011. These increases were partially offset by the loss on sale of accounts receivable recognized in connection with the asset-backed securitization programs recorded to other expense during the three months endedNovember 30, 2011 . During the three months endedNovember 30, 2010 , losses recognized in connection with the asset-backed securitization programs were recorded to interest expense because the North American asset-backed securitization program was accounted for as a secured borrowing for a portion of the period and the foreign asset-backed securitization program was accounted for as a secured borrowing for the full period. Refer to Note 7 - "Trade Accounts Receivable Securitization and Sale Programs" to the Condensed Consolidated Financial Statements for further discussion of the asset-backed securitization programs. Income Tax Expense. Income tax expense reflects an effective tax rate of 20.5% during the three months endedNovember 30, 2011 , as compared to an effective tax rate of 20.4% during the three months endedNovember 30, 2010 . The effective tax rate remained relatively constant from the previous period. Most of our international operations have historically been taxed at a lower rate than in the U.S., primarily due to tax incentives granted to our sites inBrazil ,China ,Hungary ,Malaysia ,Poland ,Singapore andVietnam . The material tax incentives expire at various dates through 2020. Such tax incentives are subject to conditions with which we expect to continue to comply.
Non-U.S. GAAP Core Financial Measures
The following discussion and analysis of our financial condition and results of operations include certain non-U.S. GAAP financial measures as identified in the reconciliation below. The non-U.S. GAAP financial measures disclosed herein do not have standard meaning and may vary from the non-U.S. GAAP financial measures used by other companies or how we may calculate those measures in other instances from time to time. Non-U.S. GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. Also, our "core" financial measures should not be construed as an inference by us that our future results will be unaffected by those items which are excluded from our "core" financial measures. Management believes that the non-U.S. GAAP "core" financial measures set forth below are useful to facilitate evaluating the past and future performance of our ongoing manufacturing operations over multiple periods on a comparable basis by excluding the effects of the amortization of intangibles, stock-based compensation expense and related charges and restructuring and impairment charges. Among other uses, management uses non-U.S. GAAP "core" financial measures as a factor in determining certain employee performance when determining incentive compensation. We are reporting "core" operating income and "core" earnings to provide investors with an additional method for assessing operating income and earnings, by presenting what we believe are our "core" manufacturing operations. A significant portion (based on the respective values) of the items that are excluded for purposes of calculating "core" operating income and "core" earnings also impacted certain balance sheet assets, resulting in a portion of an asset being written off without a corresponding recovery of cash we may have previously spent with respect to the asset. In the case of restructuring charges, we may be making associated cash payments in the future. In addition, although, for purposes of calculating "core" operating income and "core" earnings, we exclude stock-based compensation expense (which we anticipate continuing to incur in the future) because it is a non-cash expense, the associated stock issued may result in an increase in our outstanding shares of stock, which may result in the dilution of our stockholders' ownership interest. We encourage you to evaluate these items and the limitations for purposes of analysis in excluding them. 25
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Included in the table below is a reconciliation of the non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP financial measures as provided in our Condensed Consolidated Financial Statements (in thousands):
Three months ended November 30, November 30, 2011 2010 Operating income (U.S. GAAP) $ 170,842 $ 156,000 Amortization of intangibles 5,074 5,969 Stock-based compensation and related charges 18,665
19,500
Restructuring and impairment charges - 432 Core operating income (Non-U.S. GAAP) $ 194,581
$ 181,901
Net income attributable toJabil Circuit, Inc. (U.S. GAAP) $ 112,872 $ 106,677 Amortization of intangibles, net of tax 5,061
5,958
Stock-based compensation and related charges, net of tax 18,269
19,005
Restructuring and impairment charges, net of tax - 432 Core earnings (Non-U.S. GAAP) $ 136,202 $ 132,072 Earnings per share: (U.S. GAAP) Basic $ 0.55 $ 0.50 Diluted $ 0.54 $ 0.49 Core earnings per share: (Non-U.S. GAAP) Basic $ 0.66 $ 0.62 Diluted $ 0.65 $ 0.61 Common shares used in the calculations of basic earnings per share (U.S. GAAP & Non-U.S. GAAP): Basic 205,388 214,395 Diluted 209,937 217,405 Core operating income increased 7.0% to$194.6 million during the three months endedNovember 30, 2011 , compared to$181.9 million during the three months endedNovember 30, 2010 . Core earnings increased 3.1% to$136.2 million during the three months endedNovember 30, 2011 , compared to$132.1 million during the three months endedNovember 30, 2010 . These increases were the result of the same factors described above in "Management's Discussion and Analysis of Financial Condition and Results of Operations - The Three Months EndedNovember 30, 2011 , Compared to the Three Months EndedNovember 30, 2010 - Gross Profit." Acquisitions and Expansion As discussed in Note 12 - "Subsequent Events" to the Condensed Consolidated Financial Statements, we completed our acquisition ofTelmar Network Technology, Inc. , during the second quarter of fiscal year 2012. Acquisitions are accounted for using the acquisition method of accounting. Our Condensed Consolidated Financial Statements include the operating results of each business from the date of acquisition. See "Risk Factors - We have on occasion not achieved, and may not in the future achieve, expected profitability from our acquisitions."
Seasonality
Production levels for a portion of the DMS and HVS segments are subject to seasonal influences. We may realize greater net revenue during our first fiscal quarter due to higher demand for consumer related products manufactured in the DMS and HVS segments during the holiday selling season. Therefore, quarterly results should not be relied upon as necessarily being indicative of results for the entire fiscal year.
Liquidity and Capital Resources
At
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Cash Flows
The following table sets forth selected consolidated cash flow information during the three months ended
Three months endedNovember 30 ,November 30, 2011 2010
Net cash provided by (used in) operating activities $ 114,573
$ (82,728 ) Net cash used in investing activities (94,576 ) (108,359 ) Net cash (used in) provided by financing activities (32,479 ) 78,234 Effect of exchange rate changes on cash (14,225 ) (1,322 ) Net decrease in cash and cash equivalents $ (26,707 )
$ (114,175 )
Net cash provided by operating activities during the three months endedNovember 30, 2011 was approximately$114.6 million . This resulted primarily from net income of$113.8 million , a$147.1 million increase in accounts payable and accrued expenses,$85.9 million in non-cash depreciation and amortization expense and$18.7 million in non-cash stock-based compensation expense; which were partially offset by a$173.3 million increase in inventories, a$49.0 million increase in prepaid expenses and other current assets and a$29.7 million increase in accounts receivable. The increase in accounts payable and accrued expenses was primarily driven by the timing of purchases and cash payments. The increase in inventories was primarily to support the transition of certain program wins and higher revenue levels. The increase in prepaid expenses and other current assets was primarily driven by increases in the deferred purchase price receivables under our asset-backed securitization programs. The increase in the deferred purchase price receivable under the North American asset-backed securitization program was due to the timing of cash funding provided by the conduits of the unaffiliated financial institution, while the deferred purchase price receivable increased under the foreign asset-backed securitization program due to it being accounted for as a secured borrowing atNovember 30, 2010 . The increase in accounts receivable was primarily driven by an increase in sales activity during the three months endedNovember 30, 2011 , as well as the timing of when such activity occurred. Net cash used in investing activities during the three months endedNovember 30, 2011 was$94.6 million . This consisted primarily of capital expenditures of$103.2 million principally for machinery and equipment for new business, including new process technology within our DMS segment, maintenance levels of machinery and equipment and information technology infrastructure upgrades; which were partially offset by$8.1 million of proceeds from the sale of property and equipment. Net cash used in financing activities during the three months endedNovember 30, 2011 was$32.5 million . This resulted from our receipt of approximately$2.4 billion of proceeds from borrowings under existing debt agreements, which primarily included an aggregate of$2.3 billion of borrowings under the Credit Facility. This was offset by repayments in an aggregate amount of approximately$2.4 billion , which primarily included an aggregate of$2.3 billion of repayments under the Credit Facility. In addition, we paid$30.9 million to theIRS on behalf of certain employees to satisfy minimum tax obligations related to the vesting of certain restricted stock awards (as consideration for these payments to theIRS , we withheld$30.9 million of common stock related to this vesting) and we paid$15.5 million in dividends to stockholders during the three months endedNovember 30, 2011 .
Sources
We may need to finance day-to-day working capital needs, as well as future growth and any corresponding working capital needs, with additional borrowings under the Credit Facility and our other revolving credit facilities described below, as well as additional public and private offerings of our debt and equity. Currently, we have a shelf registration statement with theSEC registering the potential sale of an indeterminate amount of debt and equity securities in the future, from time-to-time over the three years following the registration, to augment our liquidity and capital resources. Any future sale or issuance of equity or convertible debt securities could result in dilution to current or future shareholders. Further, we may issue debt securities that have rights and privileges senior to those of holders of ordinary shares, and the terms of this debt could impose restrictions on operations, increase debt service obligations, limit our flexibility as a result of debt service requirements and restrictive covenants, potentially negatively affect our credit ratings, and limit our ability to access additional capital or execute our business strategy. We continue to assess our capital structure and evaluate the merits of redeploying available cash to reduce existing debt or repurchase common shares. We regularly sell designated pools of trade accounts receivable under two asset-backed securitization programs, a factoring program and three uncommitted trade accounts receivable sale programs (collectively referred to herein as the "programs"). Transfers of the receivables under the programs are accounted for as sales and, accordingly, net receivables sold under the programs are excluded from accounts receivable on the Condensed Consolidated Balance Sheets and are reflected as cash provided by operating 27
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activities on the Condensed Consolidated Statements of Cash Flows. Discussion of each of the programs is included in the following paragraphs. In addition, refer to Note 7 - "Trade Accounts Receivable Securitization and Sale Programs" to the Condensed Consolidated Financial Statements for further details on the programs.
a. Asset-Backed Securitization Programs
We continuously sell designated pools of trade accounts receivable under our asset-backed securitization programs to special purpose entities, which in turn sell 100% of the receivables to conduits administered by unaffiliated financial institutions and an unaffiliated financial institution. Any portion of the purchase price for the receivables which is not paid in cash upon the sale taking place is recorded as a deferred purchase price receivable, which is paid from available cash as payments on the receivables are collected. Net cash proceeds up to a maximum of$300.0 million for the North American asset-backed securitization program and$200.0 million for the foreign asset-backed securitization program are available at any one time. In connection with our asset-backed securitization programs, atNovember 30, 2011 , we had sold$804.0 million of eligible trade accounts receivable, which represents the face amount of total outstanding receivables at that date. In exchange, we received cash proceeds of$306.1 million , and a net deferred purchase price receivable. AtNovember 30, 2011 , the deferred purchase price receivable totaled approximately$497.9 million which was recorded initially at fair value as prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.
b. Trade Accounts Receivable Factoring Agreement
In connection with a factoring agreement, we transfer ownership of eligible trade accounts receivable of a foreign subsidiary without recourse to a third party purchaser in exchange for cash. Proceeds from the transfer reflect the face value of the account less a discount. InOctober 2011 , the factoring agreement was extended throughMarch 31, 2012 , at which time it is expected to automatically renew for an additional six-month period
We sold
c. Trade Accounts Receivable Sale Programs
In connection with three separate uncommitted trade accounts receivable sale agreements with banks, the third of which was entered into during the first quarter of fiscal year 2012, we may elect to sell and the banks may elect to purchase at a discount, on an ongoing basis, up to a maximum of$200.0 million</money>, $250.0 million and$50.0 million of specific trade accounts receivable at any one time. The$200.0 million and$250.0 million uncommitted trade accounts receivable sale agreements have no defined termination dates and either party can elect to cancel the agreements by giving prior written notification to the other party of no less than 30 days. The$50.0 million uncommitted trade accounts receivable sale agreement will expire no later thanJune 1, 2015 , though either party can elect to cancel the agreement by giving prior written notification to the other party of no less than 30 days. During the three months endedNovember 30, 2011 , we sold$0.5 billion of trade accounts receivable under these programs and we received cash proceeds of$0.5 billion during the three months endedNovember 30, 2011 .
Notes payable and long-term debt outstanding at
November 30, August 31, 2011 2011 7.750% Senior Notes due 2016 $ 303,931 $ 303,501 8.250% Senior Notes due 2018 397,617 397,521 5.625% Senior Notes due 2020 400,000 400,000 Borrowings under credit facilities 82,132 72,100 Borrowings under loans 1,728 2,062 Fair value adjustment 10,977 11,570 Total notes payable and long-term debt 1,196,385
1,186,754
Less current installments of notes payable and long-term debt 83,859
74,160
Notes payable and long-term debt, less current installments $ 1,112,526 $ 1,112,594
At
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Uses
OnOctober 20, 2011 , our Board of Directors approved payment of a quarterly dividend of$0.08 per share to shareholders of record as ofNovember 15, 2011 . The total cash dividend declared of$17.4 million was paid onDecember 1, 2011 . We currently expect to continue to declare and pay regular quarterly dividends of an amount similar to our past declarations. However, the declaration and payment of future dividends are discretionary and will be subject to determination by our Board of Directors each quarter following its review of our financial performance. Our working capital requirements and capital expenditures could continue to increase in order to support future expansions of our operations through construction of greenfield operations or acquisitions. It is possible that future expansions may be significant and may require the payment of cash. Future liquidity needs will also depend on fluctuations in levels of inventory and shipments, changes in customer order volumes and timing of expenditures for new equipment. AtNovember 30, 2011 , we had approximately$861.9 million in cash and cash equivalents. As our growth remains predominantly outside ofthe United States , a significant portion of such cash and cash equivalents are held by our foreign subsidiaries. We estimate that approximately$387.2 million of the cash and cash equivalents held by our foreign subsidiaries could not be repatriated tothe United States without potential income tax consequences.
For discussion of our cash management and risk management policies see "Quantitative and Qualitative Disclosures About Market Risk."
We currently anticipate that during the next 12 months, our capital expenditures will be in the range of$300.0 million to $400.0 million , principally for machinery and equipment for new business, including new process technology within our DMS segment, maintenance levels of machinery and equipment, information technology infrastructure upgrades and construction of a new greenfield facility. We believe that our level of resources, which include cash on hand, available borrowings under our revolving credit facilities, additional proceeds available under our trade accounts receivable securitization programs and potentially available under our uncommitted trade accounts receivable sale programs and funds provided by operations, will be adequate to fund these capital expenditures, the payment of any declared quarterly dividends, the repurchase of$100.0 million of common shares which was approved by our Board of Directors in the first quarter of fiscal year 2012 and our working capital requirements for the next 12 months. Our$300.0 million North American asset-backed securitization program expires inOctober 2014 and our$200.0 million foreign asset-backed securitization program expires inMay 2012 , and we may be unable to renew either of these. Our$200.0 million and$250.0 million uncommitted trade accounts receivable sale programs do not have defined termination dates and either party can elect to cancel the agreements by giving prior written notification to the other party of no less than 30 days. Our$50.0 million uncommitted trade accounts receivable sale program will expire no later thanJune 1, 2015 , though either party can elect to cancel the agreement by giving prior written notification to the other party of no less than 30 days. As the sales programs are uncommitted, we can offer no assurance that if we attempt to draw on such programs in the future that we will receive funding from the associated banks which would require us to utilize other available sources of liquidity, including our revolving credit facilities. Should we desire to consummate significant additional acquisition opportunities or undertake significant additional expansion activities, our capital needs would increase and could possibly result in our need to increase available borrowings under our revolving credit facilities or access public or private debt and equity markets. There can be no assurance, however, that we would be successful in raising additional debt or equity on terms that we would consider acceptable. See "Risk Factors - Our amount of debt could significantly increase in the future." Contractual Obligations Our contractual obligations for short and long-term debt arrangements, future interest on notes payable and long-term debt, future minimum lease payments under non-cancelable operating lease arrangements, estimated future benefit payments to plan and capital commitments as ofNovember 30, 2011 are summarized below. We generally do not enter into non-cancelable purchase orders for materials until we receive a corresponding purchase commitment from our customer. Non-cancelable purchase orders do not typically extend beyond the normal lead time of several weeks at most. Purchase orders beyond this time frame are typically cancelable. 29
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Table of Contents Payments due by period (in thousands) Less than 1 After 5 Total year 1-3 years 4-5 years years Notes payable and long-term debt (a) $ 1,185,408 $ 83,859 $ - $ 303,932 $ 797,617 Future interest on notes payable and long-term debt (b) 525,785 80,819 159,360 150,427 135,179 Operating lease obligations 194,630 53,749 64,928 38,061 37,892 Estimated future benefit payments to plan 57,741 4,010 8,987 10,498 34,246 Capital commitments (c) - - - - - Total contractual cash obligations (d) $ 1,963,564 $ 222,437 $ 233,275 $ 502,918 $ 1,004,934
(a) The above table excludes an
the interest rate swap on the 7.750% Senior Notes.
(b) At
predominantly fixed rates.
(c) During the first quarter of fiscal year 2009, we committed
an independent private equity limited partnership which invests in companies
that address resource limits in energy, water and materials (commonly
referred to as the "CleanTech" sector). Of that amount, we have invested
the capital calls have no specified timing, this commitment has been excluded
from the above table as we cannot currently determine when such commitment
calls will occur.
(d) At
uncertain tax positions. We are not able to reasonably estimate the timing of
payments, or the amount by which our liability for these uncertain tax
positions will increase or decrease over time, and accordingly, this
liability has been excluded from the above table.
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