Ladies and gentlemen, thank you for standing by and welcome to Jabil’s Third Quarter 2014 Fiscal Year Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. I would now like to turn today’s conference over to Beth Walters, Senior Vice President of Communications and Investor Relations. Please go ahead.

Thank you very much. Welcome to our third quarter of 2014 earnings call. Joining me today are CEO, Mark Mondello; and our Chief Financial Officer, Forbes Alexander. This call is being recorded and will be posted for audio playback on the Jabil website, jabil.com, in the Investors section. Our third quarter press release, slides and corresponding webcast links are also available on our website. In these materials, you will find the financial information that we will cover during this conference call. We ask that you follow our presentation with the slides on the website, beginning with Slide 2, our forward-looking statement. During this conference call, we will be making forward-looking statements, including those regarding the anticipated outlook for our business, our currently expected third quarter of fiscal 2014 net revenue and earnings results, the financial performance of the company and our long-term outlook for the company. These statements are based on current expectations, forecasts and assumptions, involving risks and uncertainties that could cause actual outcomes and results to differ materially. An extensive list of these risks and uncertainties are identified in our annual report on Form 10-K for the fiscal year ended August 31, 2013, on subsequent reports on Form 10-Q and Form 8-K and our other securities filings. Jabil disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Today’s call will begin with opening remarks from Mark. We will then move on to the third fiscal quarter results and guidance on our fourth fiscal quarter of 2014 from Forbes Alexander. We will then open it up to questions from call attendees. I will now turn the call over to Mark.

Thanks, Beth. Good afternoon. I appreciate everyone taking time to join our call today. I’d like to begin by recognizing all of our people here at Jabil. Thank you for your commitment. On to the quarter, the results were largely as planned. We delivered $45 million in core operating income on revenues of $3.8 billion and ended the quarter with a strong cash balance. Forbes will provide more detail and discuss our Q4 guidance during his prepared comments. As I think about where we stood today, a significant catalyst for future growth is the continued advancement of our capabilities. Our organizational structure intentionally houses our broad-based capabilities in an independent, standalone group led by our COO. Commercial leaders across our company leverage these capabilities to best serve their respective customers and end markets. This approach drives valuable collaboration and minimizes parochial behavior. I’d like to share a few examples of the solutions and activities ongoing within our capabilities group today. Advanced planning and supply chain optimization tools, which combined proprietary business intelligence with big data. Our continued acceleration and implementation of advanced automation and robotics across a large percentage of our factory floors. Expansion of our advanced design services such as enhancing the consumer experience by improving the interface with product packaging and/or product specific industrial designs. The last example specific to capabilities is the advanced modification made to our ubiquitous SAP platform combined with virtualization of our IT backbone. This results in better security, higher flexibility, and faster information flow across our Jabil network. These limited examples are a modest illustration of the type of outstanding work taking place within our capabilities group. With that, let me shift focus to our independent operating units. Our Nypro team has delivered ahead of plan. They are completing their integration into Jabil…

Thanks Mark. Good afternoon, everyone. Before I begin with reviewing the results for our third fiscal quarter, I’d like to remind everyone that during the quarter we did finalize the divestiture of our aftermarket services business. And all results associated with this business are reflected as discontinued operations. And as such, our results for the third fiscal quarter of 2014 and all comparative periods and discussion reflect this treatment. I’d now ask you to turn to Slide 3 of the presentation deck. Net revenue for the third quarter was $3.8 billion, a decline of 10% on a year-over-year basis. Our GAAP operating loss was $1.6 million during the quarter. Our GAAP net income was $188.3 million. GAAP net diluted earnings per share were $0.93 during the quarter. GAAP net earnings in the quarter included $12 million of restructuring and associated charges, $6 million associated with the amortization of intangibles and $15 million of stock-based compensation, along with a gain on sale of our aftermarket services business of some $240 million. Core operating income, excluding the gain on sale of discontinued operations, amortization of intangibles, stock-based compensation, restructuring and certain other expenses was $45.3 million and represents 1.2% of revenue. Core diluted loss per share was $0.06. As anticipated, our core diluted earnings per share negatively impacted by an elevated effective tax rate relative to historical levels. The core effective tax rate during the quarter was 188% or $24 million in tax expense. As I discussed in our last call, the higher rate driven by geographical mix of our profits and losses during the quarter is expected to continue into our fourth fiscal quarter. We would anticipate our tax rate to return to historical levels for the period of fiscal 2015. If you will now turn to Slide 4 for a…

Great. Thanks Forbes and Mark. Before we begin the question-and-answer session, I’d like to remind our call participants that in customary fashion, we will not address any customer or product specific questions out of respect for our customers and their specific products. Thank you so much for your cooperation. Operator, we can begin the question-and-answer session.

(Operator Instructions) Your first question comes from the line of Mark Delaney with Goldman Sachs.

Thanks very much for taking the question. I was hoping first, Mark or Forbes, if you could elaborate on the outlook in fiscal ‘15 and if you could talk a little bit more about the DMS segment and if you could talk a little bit more about what gives you the confidence in those ramps and if you could just give us sense on the timing for some of those ramps and maybe when you can have the capacity more fully utilized?

Mark, I think based on my prepared comments, I just tell you that the color we have around the ramps today and it’s a multitude of ramps. I just – I’d leave it as we just feel comfortable that the ramps are going well and we are comfortable with the guidance provided.

Okay. For a follow-up question, you mentioned some new OpEx investments for some new end markets and I think you mentioned NRG as one of those, does that imply that the core business was actually tracking above your guidance for fiscal ‘15 because of the incremental OpEx that you talked about today on the call this brings it back in mind?

No. What I think it means is that the business, the earnings are strong enough in ‘15 to where we are going to have $25 million to $30 million of planned OpEx, which will take earnings down. So, we will still be in the $1.65 to $1.95 range, but we are going to make $25 million to $30 million in investments for the future. That’s correct.

Okay. I will turn it over. Thank you very much.

Yes, thank you.

Your next question comes from the line of Amitabh Passi with UBS.

Hi, thank you. Mark, maybe if I could try this slightly different way, I think if you look at the Street consensus estimates, everybody is assuming a pretty nice inflection in the November quarter with earnings, call it somewhere in the $0.35 to $0.40 range. I am not expecting to give us guidance for the November quarter, but I am just trying to figure out is that the right way to think about how we should plan to get to the $1.80 middle point for EPS guidance for next year? Is it a more gradual ramp? Any help you can give there just in terms of the trajectory?

Yes. I think what I would rather do is provide a little more color on that come September.

Okay. And then I wanted to just clarify on your $200 million buyback, can you remind us and I apologize if you said this, how much is still left in the program?

Yes. There is $70 million left. We did use $65 million during the third fiscal quarter.

Okay. Alright, thanks. I will step back in queue.

Your next question comes from the line of Wamsi Mohan with BoA Merrill Lynch.

Mark, can you talk a little bit about the DMS guidance here for the next quarter down year-on-year obviously adjusted for the MS divestiture, but is that more about tough comps from last year in specialized services or is it being driven more by a disproportionate decline on the industrial, clean techs, or non-specialized services area?

No, it’s not industrial clean tech, it’s just the overall product ramps we are going through heading into ‘15.

Okay, thanks. And as a follow-up, can you talk about the DMS margin profile, I mean given you EPS guidance which would probably still be expecting DMS margins below your longer term range at least for the August quarter, but is it fair to assume that as we go into the next fiscal year, we should start to think about DMS margins back into your long-term range?

That’s a fair assumption, yes.

Thank you.

You’re welcome.

Your next question comes from the line of Jim Suva with Citi.

Thank you very much. It sounds like if I heard correctly that we should wait for September I just want to ask the question about market and the step increase from basically breakeven now to a linear year of next year $0.45 per quarter, $0.40 per quarter you are saying just hold off until September because when we look at the restructuring it looks like some of the benefits should start meaningfully kick in, can you just kind of help us a little bit around if indeed we should expect to go up to that level or is it going to be more gradual or the timing, maybe you can talk about the timing of the benefits from the restructuring?

Yes. Jim, it is Forbes, in terms of the restructuring, we are well down the path to execute on that front. And I ask everyone to follow the cash if you will rather than the GAAP bookings. So we formerly announced a closure of a site in the United States that will be closed in August, so we will see some really positive results of that in our first fiscal quarter. And then as I look through the back half it will be more linear as we take costs out of Western Europe. So we don’t want to get into the particular quarter-by-quarter or EPS guidance at this stage. And as Mark said in his prepared remarks we got a large number of program ramps as we are moving into ’15. So we don’t control when those products are launched in the marketplace, we will see how that pans out and we certainly feel very well positioned to deliver a strong ’15.

And Jim, one thing to help you maybe a little bit in your model is if I had to guess I guess that the earnings would have a shape to them similar to what we delivered in FY ’13 on a quarter-on-quarter basis.

That’s very helpful. And then as we take a big step back and it’s a strategically big picture of Jabil, you are really changing the character of your company with Nypro and the acquisitions you have done, is it fair to say that that character post the restructuring once you come out that the operating margins would be materially higher because if we look at say a sales run rate of $16 billion to $16.5 billion which I believe you guided to and then your EPS that is meaningfully below what you have done at $16 billion to $16.5 billion of revenues and the EPS is kind of a disconnect I assume it’s masked by the restructuring and you should come out even much stronger profitability because of Nypro and the other options is that fair long-term?

Certainly, that’s what we are efforting towards. I think it’s too early to tell right now Jim, but yes, that’s what we are efforting for.

Great. Thanks a lot guys.

Yes.

Your next question comes from the line of Amit Daryanani with RBC.

It’s Bob. Thanks a lot guys. Two questions for me. One, I guess Mark on the fiscal ’15 guide that you are reiterating today maybe just talk about are you more comfortable with those numbers today versus you were 90 days ago and it almost sounds like the Enterprise and High Velocity segment revenues could be better than what you thought 90 days ago, but it’s getting offset by this $25 million OpEx investments, is that the right way we are going to read the change in our assumptions of that fiscal ’15 guide?

We will talk more about that in September. Right, but it’s hard to address that this far out but let’s have that conversation in our September call.

And then I guess if I just look at your August quarter guide right, you are looking for flattish growth on a sequential basis at least right now, if I look at the last few years when you had the big ramp with your customer, August tends to be up mid-single digits for you guys typically. So what is the offset from historically August being up mid-single digits to the guidance of flat, is it that you don’t have visibility or there any offsets to that?

Right. Amit, it’s Forbes I think it’s not that we don’t have visibility, I think it’s the offset is such that as we talked about a couple of quarters ago unfortunately the programs that we had geared up for this fiscal year didn’t come to fruition in terms of sell through. So it’s really that impact more than visibility.

Got it. And we will look forward to the September call. Thanks a lot guys.

Thank you.

Thank you.

Your next question comes from the line of Steven Fox with Cross Research.

Thanks. Good afternoon. First question, I was wondering Mark without getting into numbers of course if we look at what you are kind of looking at on the DMS business for next couple of quarters smoothed out and compare it maybe to the ramp that you have had in the last couple of years in the back half of the calendar year. How is it different, how is it the same, whether it’s on the level of complexity you are doing to serve markets, new programs versus maybe just second generation programs? I am just trying to get a handle on how different this is going to be and the challenges you may have or may not have for the rest of the calendar year with DMS?

Wow, good question. Challenges are – I mean, challenges are comparable. None of this is easy. Better diversification and I say better diversification and maybe some tweaks to overall business terms from a ROIC perspective. Other than that, it’s similar.

Okay. And then secondly just in terms of looking at the OpEx investments that you mentioned obviously aimed at like you said diversifying. What like if you invest a dollar on – today in OpEx, like what kind of return are you looking at to actually see revenues? Is this something that could pay off in the next fiscal year or is this something that is entering new markets and we may have to wait until maybe a year plus out to actually see revenue?

Yes. I think it would be aggressive to think about this having a big impact in ‘15. If it did, it would be Q4ish timeframe. So, think about it for future investment.

Okay. And is there a lot of real new markets that you are entering or is it sort of doubling down on some of these diversified efforts that you made over the years?

The 25 to 30 I talked about is all new markets.

Okay, alright, great. I appreciate that. Thanks.

Yes, thank you.

Your next question comes from the line of Sherri Scribner with Deutsche Bank.

Hi, thanks. I just was looking at the E&I segment and it looks like that was a little bit worse than expected, you mentioned server and storage and the guidance suggests that we see a deceleration in growth or as the declines get worse. Can you give us a little bit of color on what you are seeing in that segment?

Sherri, segment remains difficult, but I think what you are seeing in our results isn’t about the difficulty in the market, because the team is doing a great job. It’s about corporate allocation and the fact that we are slugging it through two tough quarters.

And would you expect those margins to start to improve in fiscal ‘15 or would you expect them to improve this year, because you’ve sort of seen those coming down over the past couple of quarters?

Yes, they won’t improve next quarter, but we do anticipate they will improve in ‘15.

Okay. And then, Forbes, a quick question, I think on the last call you said that you would finish the $200 million in buybacks this fiscal year, is that still your plan?

Yes. As we said today, we are methodically working our way through that at a pace of $65 million to $70 million a quarter. Yes, we see how that plays out as we move through the coming couple of months, yes.

Okay, thanks.

(Operator Instructions) And at this time, we have no further questions. I would now like to turn the conference back over to Beth Walters for any closing remarks.

Okay, thank you very much. Thank you everyone for joining us on the call today. As always, we will be available for any follow-up questions you have during the rest of the evening and the rest of the week and thank you for joining us today.

Thank you for participating in today’s conference. You may now disconnect.