Jabil Inc. (JBL) Q4 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. And welcome to Jabil’s Fourth Quarter Fiscal Year 2015 Earnings 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 call over to Beth Walters, Senior Vice President of Communications and Investor Relations. Please go ahead.

Thank you very much. Welcome to our fourth quarter and fiscal year 2015 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 at jabil.com in the Investors section. Our fourth 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 first quarter and fiscal 2016 net revenue and earnings results, the financial performance for 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, 2014, 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 our fourth fiscal quarter results and guidance for our fiscal first quarter of 2016 from Forbes. And then Mark will offer his observations on 2015 and outlook for 2016. Following Mark’s comments, we will open it up to questions from the call attendees. I would now like to turn the call over to Forbes.

Thank you, Beth. Good afternoon, everyone. I’d like to ask you to turn to Slides 3 and 4, where I’ll review our fourth quarter and fiscal year 2015 results. Net revenue for the fourth quarter was $4.7 billion, an increase of 15% on a year-over-year basis. GAAP operating income was $150 million, while GAAP net income was $88 million. GAAP net diluted earnings per share were $0.45 for the quarter. Core operating income, excluding the amortization of intangibles, stock-based compensation, restructuring charges, and other income was above our estimates at $163 million, and represented 3.5% of revenue. Core diluted earnings per share was $0.53. Revenue, core operating income, and core earnings per share exceeded the midpoint of our previous guidance, due largely to strength in demand within our DMS mobility and lifestyle businesses, supported by operational efficiencies across a number of product ramps during the quarter. For the full fiscal year, net revenue was $17.9 billion, an increase of 14% GAAP operating income was $555 million, while GAAP net income was $284 million. GAAP net diluted earnings per share were $1.45 for the year. Core operating income, excluding amortization of intangibles, stock-based compensation, restructuring charges, and other income was $670 million, and represented 3.7% of revenue. Core diluted earnings per share were $2.07. Turning to Slides 5 and 6, I’ll discuss our fourth quarter and fiscal year segments. In the fourth quarter, revenue for our Diversified Manufacturing Services segment was $1.9 billion, an increase of 47% on a year-over-year basis, and represented 41% of total company revenue. Operating income was 4.1%, reflective of ongoing investments in the quarter, associated with multiple product ramps within our Green Point division. Our Electronics Manufacturing Services segment revenue was $2.8 billion, an increase of 1% on a year-over-year basis, representing 59% of total company revenue. Operating income for this segment was 3% midpoint of our long-term range. Now, turning to the year. Our Diversified Manufacturing Services segment, revenue was $7.1 billion, an increase of approximately $2 billion, or 39% on a year-over-year basis, and represents 40% of total company revenue. Operating income for this segment was 5.2%. Our Electronic Manufacturing Services segment, revenue was $10.8 billion, an increase of 1% on a year-over-year basis, and represents 60% of total company revenue. Operating income for this segment was 2.8%, an improvement of 50 basis points over fiscal 2014. For the full fiscal year, we had one customer with revenues in excess of 10%, this being Apple, the 24%. I’d now like to review some of our cash and balance sheet metrics and ask you to turn to Slide 7. We ended the fiscal year with cash balances of $914 million. For the full-year, cash flows from operations were $1.24 billion. Net capital expenditures for the fiscal year totaled $947 million, supporting our previously planned capacity and capability expansions, thus resulting cash flows after capital expenditures totaled approximately $300 million. During the fourth fiscal quarter, we repurchased approximately 2.4 million shares, at a total cost of $46 million. Repurchases for the full fiscal year totaled 4.4 million shares, at a total cost of $86 million, or an average price of $19.46, while dividends paid in the year totaled $63 million. Share repurchases continued during the month of September and approximately $2 million remains outstanding under our current repurchase authorization of $100 million. Core EBITDA for the year was approximately $1.175 billion and represents 6.6% of revenue. Total debt to EBITDA levels at year-end were 1.8 times. Finally, core return on invested capital for the full fiscal year was 17.8%. In addition, during the fourth fiscal quarter, I’m pleased to note that we acquired Plasticos Castella for approximately $110 million. Established in 1974 and headquartered in Spain with operations in both Spain and Hungary, Plasticos Castella complements a growing Nypro rigid packaging business, bringing both new capabilities and market expansion opportunities across Europe. I’d now like to discuss our first fiscal quarter and full fiscal 2016 outlook and ask you to turn to Slide 9 and 10. For the first fiscal quarter, we expect revenue to be in the range of $5.1 billion $5.3 billion, an increase of 14% at its midpoint on a year-over-year basis. Core operating income is expected to be in the range of $220 million to $260 million with core operating margin in the range of 4.3% to 4.9%. Core earnings per share are estimated to be in the range of $0.72 to $0.88 per diluted share. And GAAP earnings per share are expected to be in the range of $0.56 to $0.74 per diluted share. Turning to our segment outlook for the quarter, Diversified Manufacturing Services segment is expected to increase approximately 33% on a year-over-year basis with revenues estimated to be approximately $2.55 billion. The Electronic Manufacturing Services segment is expected to remain consistent at $2.65 billion. Turning to the full fiscal year, the investments in infrastructure and capabilities we have made in fiscal 2015 positions us extremely well as we move into the new fiscal year. We expect to add approximately $2 billion in revenue with the full fiscal year revenue targeted to be approximately $20 billion. Core earnings per diluted share are expected to grow 25% over fiscal 2015 to $2.60. Our growth strategy continues as we enter the new fiscal year. We see continued opportunities for expansion in revenue, income, returns on invested capital and cash flows beyond those of 2016. And as such, we expect capital expenditure levels to be relatively consistent with those of fiscal 2015. Details of our expected investments can be found on Slide 12, the appendix of our presentation. These capital investments shall continue to be funded via cash flow from operations for their expectation of another very strong year in operational cash flow metrics, which will provide an opportunity for free cash flow in the range of $350 million to $450 million. I now like to hand the call over to Mark.

Thanks, Forbes. Good afternoon. I appreciate everyone taking time to join our call today. And as always, I’d like to thank our team here at Jabil. They did an amazing job delivering outstanding results. Again, thanks to everyone on our team. I truly appreciate all you do. I’d like to share a few observations specific to the year. As Forbes highlighted fiscal year 2015 was a really good year for Jabil, both in terms of financial performance and key accomplishments. At $7.1 billion in annual revenue, our DMS business improves the lives of those around us by making our customers’ products more accessible, more affordable and more sustainable. The team is doing so by leveraging engineering aptitude while driving innovation in areas of material sciences, precision machining and tuning. Looking ahead, we expect growth to continue across our DMS business, as we capture additional opportunities in the markets we serve. These markets include audio, healthcare, consumer packaging, mobility, wearable technologies, and accessories. Facing a roughly $11 billion in annual revenue, our EMS business improved core operating margins by 50 basis points year-on-year. This anticipated improvement was the result of solution selling, operational execution, benefits from our restructuring program, and enhance value propositions. I’m excited to see what our EMS team can do, as they leverage secular trends; trends that include connectivity, radical advancements in transportation, cloud-based solutions, and optical communications. In combination with our core businesses, we continue to maintain focus on megatrends and non-traditional markets. Example of these being distributed energy, the aging population, urbanization, and the pervasive use of predictive analytics. From a centralized capabilities perspective, we’ve added several new tools to the company. These tools allow us to expand our solutions across the entire value chain. Add to this a handful of strategic acquisitions combined with our organic investments and the summation is further expansion and enhancements to our portfolio of capabilities. While we’re on the topic of capabilities and technology, I want to highlight one of the most impactful accomplishments from this past year, the opening of our Blue Sky innovation center. This energetic think tank displays a collection of Jabil’s capabilities all under one roof. It offers an environment for enhanced collaboration, where our partners can truly touch and feel what we do each and every day. Now, let me focus on our outlook for fiscal 2016. During our earnings call, roughly 90 days ago, I said, our success would be judged by the following; year-on-year growth for our EMS division of greater than 5%, year-on-year growth for our DMS division of greater than 15%, and year-on-year core EPS growth for the corporation of greater than 20%, I stand behind these success factors. As Forbes highlighted during his prepared remarks, we expect revenues of approximately $20 billion, core earnings per share of $2.60, and another year of strong cash flows. As I’ve stated in the past, we believe that investing in our business makes perfect sense, especially when capital is inexpensive and growth opportunities are present. So you can expect our capital investments this year to be $800 million to $1 billion. As I conclude our outlook, let me take you back to comments I made one year ago. At that time, we believe our efforts would yield quarterly revenues of $5 billion and core operating margins of 4%, as we moved beyond fiscal year 2015. Today, we’re well-positioned to meet these goals. I’d like to close out my prepared remarks by sharing a few final thoughts. I’m really proud of our team. Our team is innovative, dedicated, and proven. Together, we bring forward solutions and services firmly grounded to the hardware ecosystem. And one secular trend you can count on, hardware has not gone away. At Jabil, we have unique combination of scale, global reach, and resources. Today’s customer relationships are trusted, broad, and deep. Our team continues to listen carefully and work tenaciously in assisting our customers with our challenges and their needs. Nearly all of our 200 plus customers need to move with speed and redirect when necessary. They need to secure a reliable supply chain across all geographies, and they need to focus their capital on R&D and product marketing. This aligns perfectly with our abilities. The world is changing at a frenetic pace and we’re changing with it. Here are three simple takeaways of what’s driving our business today: engineering and technical expertise; addressing real problems with solution selling; and diversification of our solutions and the products we deliver. I believe this is evidenced in our growth. Thank you. I’ll now be happy to answer any questions that you might have. Beth?

Before we begin the Q&A session, I’d like to remind our call participants that in customary fashion, we will not be able to address any customer or product specific questions, as I’m sure you can appreciate. Thank you for your cooperation. With that, operator, we’re ready to take questions.

[Operator Instructions] Your first question comes from the line of Shawn Harrison with Longbow Research.

Hey, good afternoon. This is Gausia Chowdhury calling on behalf of Shawn. Congrats on a great quarter. First of all, I wanted to start off with EMS. You still said that you’re sticking to that 5% goal. When do we see that – when do we see EMS bottom? You’re expecting a flat quarter, so – year-over-year quarter. Is this the bottom?

I’m sorry. Can you – could you speak up a little bit. We’re having a really difficult time hearing you.

Sure, not a problem. Sorry about that. I was wondering about the EMS division. When do you see that bottom or are we at the bottom at this point or when do you see that bottoming?

I’ll try to answer it this way. I really don’t look it – and that was around EMS, correct?

Correct, yes.

Yes, so I don’t really look at that business so much quarter-to-quarter as I do year-on-year. So I don’t know if I characterize it as a bottom, but consistent with my prepared remarks I think our EMS business in fiscal year 2015 did in the neighborhood of $10.8 billion, something like that. And I do feel comfortable that our EMS business will grow at a minimum of 5% year-on-year. So I think the outlook is – again, we’re cautious because there’s a lot of uncertainty in the marketplace. But based on some of the secular trends I talked about, specifically the EMS, we feel good about the outlook for fiscal year 2016.

Okay, all right. And then, within the DMS division you said that this quarter there was mobility and Nypro. Is that same sort of trend for the rest of the peer? Is that where you’re seeing the growth?

I’d say we’re seeing growth across all areas of our DMS business, that’d be correct.

Okay. All right, and then, lastly, just wanted to check in on the SG&A. It seems like it fluctuated quite a little bit. So are we at the correct level here? I think the guidance for the first quarter is a little bit higher. Is that a correct one to use for the rest of the year? Do you see it staying at that 225 sort of level for the remainder of the year?

Yes, in dollars there’s some slight increases year-over-year, but in percentage terms you’ll see some leverage as we’re growing the top line in another, what, 14%, 15% next year. So I think modeling the 4% to 4.2% is a reasonable guidance at this juncture.

Right. Thank you very much.

Your next question comes from the line of Steve Milunovich with UBS.

Thank you very much. Well, score one for the introvert. In terms of your outlook, you came in for the quarter talking about at least 15% growth for DMS and 260 next year, now you’re up at like 33%, and obviously, a higher EPS. Did you view change significantly during the quarter? I guess, same thing applies to CapEx. I’m of the impression you might be close to 700 million in CapEx for 2016 and obviously it’s a bigger number. So, in the last three months did your view of next year change fairly substantially, and if so, why?

Steve, let me try to break that down into two parts and if I don’t answer your question come back to me please. The first part was, I think something around our outlook for 2016 in EPS. I think in prior calls and communications we talked about the fact that we’re efforting to a 20% growth on core EPS. And at a time, we had anticipated our core EPS for 2015 to be on or about $2 a share. We delivered $2.07 a share and what we’re talking about now in – both in my prepared comments and Forbes’ prepared comments is a 25% growth on the $2.07, which I think gets in the $2.58 to $2.60 range for FY 2016. In regards to CapEx, I don’t know that we’ve spoken formally about any range of CapEx for FY 2016, and at least prior to this call and what Forbes and I are communicating in this call is that, we think our CapEx range is going to be somewhere $800 million to $1 billion this year. And as Forbes stated in his prepared comments, there is a chart in the appendix of our formal slide presentation that gives you a bit of a breakdown of how we anticipate that to be spent.

That’s helpful. Thank you. And your expectation for EMS seems to have gone up quite a bit and barely decelerated from the growth in 2015. On the Apple’s growth, obviously, it’s likely to decelerate. Can you give us anymore color in terms of your confidence in DMS of how broad base the growth is?

We can’t. I’m not going to give you a breakdown in that. What I did say in my prepared comments is that, we again serve a lot of different markets in our DMS sector, our segment. So everything from various parts of healthcare to packaging to mobility and wearable type of technologies and accessories, so again, it’s a combination of all of that.

Great. Thank you so much.

Your next question comes from the line of Matt Sheerin with Stifel.

Well, thanks and good afternoon. So, Mark, things have certainly come a long way since your first conference call, I think, two years ago or so certainly have turned things around. Looking at the guidance for the year of both revenue and in EPS, and particularly your EPS guidance for the November quarter, it looks like on the margin front that, margins will be peeking more front-end loaded towards the beginning of the fiscal year. Is that really a function of mix, where you expect EMS to grow in the second-half, as new programs ramp, and you’ve got seasonality in some of the DMS, particularly in the mobility business in the November quarter?

Hey, Matt, this is Forbes. Yes, let me answer about it for you. I think, you’ve characterized it pretty well. I’d ask you to think both the shape of this year, while it’s early, similar, which is really what you were describing to fiscal 2015, would maybe just a little bit more first-half weighted, as we’re seeing some pretty explosive growth here in DMS, as we’re moving into the first fiscal quarter. So, I think, that’s their characterization.

Okay. And then just following up on the last question regarding the customer breakdown within DMS and certainly appreciate that you can’t talk specifically about customers. But you talked about several end markets within DMS audio, mobility, wearable technologies, et cetera, and the impression is particularly with your biggest customer that most of that is all mobility, and then maybe now wearables. Just trying to get some comfort in terms of how faster growing the non-top customer business within DMS, and what that might look like in the next year or two?

Yes, I won’t – it’s – I won’t go too close to that question, because, again, I’m sensitive to our biggest customer. But I think a simple way to look at it is, when I talk and I talk often about diversification. It’s really not about diversification around the brands we serve, it’s really round diversification of the products that we built in the end markets that those products serve. So, I guess, I just leave it at that. I think from the DMS perspective and an EMS perspective, in combination, we serve about 230 different brands and thousands of different products. And as we move into 2016, we’re probably as diverse as we’ve ever been as a company.

Okay. Fair enough. Thanks very much.

Your next question comes from the line of Brian Alexander with Raymond James.

Okay. I want to follow up on Matt’s question on the year being front-end loaded. So it looks like DMS margins are going to start the year very strong for your first quarter EPS guidance perhaps in the mid-6% range. So do we fall back well below 6% in DMS margins as we move through the year? And if so, what would be driving that? And is there a revenue level per quarter where you think you can achieve 6% margins more regularly? Are we going to continue to see this volatility in more front-half weighted profitability?

Hey, Brian, it’s Forbes. So I think it’s very similar to last year. In that you certainly see six-plus in the first-half of the year. As we’ve noted, we’re continuing some capital investments in the – that will come into fruition as we move into 2017 for continued growth. So there will continue to be investments in the back-half. So think of it as those higher-margins in the first-half of the year and then those lower margins in the back-half. I don’t want to get too close to specific numbers in the back-half yet. It’s early coming into the year. But certainly the year looks very bright as we continue to bring capacity online there. Then on the EMS side, we’re targeting – as we’ve been pretty consistent, messaging around 3% for the fiscal year and now businesses is in good shape with some growth in the back-half of the year on the revenue line there.

Okay. That’s helpful. Just a follow-up on the CapEx, if I look at the mobility CapEx in your slide deck, it looks like it’s around $150 million for fiscal 2016, that’s down from the 200 I think you spent in fiscal 2015. So what is that signal about the growth prospects for the mobility business if CapEx is actually coming down?

Brian, this is Mark. I don’t think it signals anything. It’s a great question. But it doesn’t really signal anything. We see strength across a good portion of all of our businesses. It’s really about the infrastructure that we have in place from prior investments, as well as operational efficiencies and productivity.

Okay. All right, thanks a lot.

You’re welcome.

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

Thanks a lot. Good afternoon, guys. A question for me as well, one, I guess, if I look at the DMS segment, the margin discussion, do you ever talk why didn’t you see a better margin expansion in the August quarter, because you certainly had a lot of revenue growth in August? And then, what are the levers that help you get the margin expansion in November?

I mean, I’ll take a swing at that and then Forbes can chime in if I miss anything. But I think it’s simple. You know how – you know historically how the shape of our DMS business is. As we talked about in the March call and the June call, the back-half of our fiscal year, because of how our fiscal year situated is pretty significant investments as we prepare for a variety of product ramps in different investments. So the revenue is strong, but we also had a lot of investments. And the nice thing is I think the returns were getting both in the CapEx and the OpEx investments are coming through in FY 2016 based on our Q1 guidance and the full-year guidance.

Got it. And then, I guess, if I look at – the customer concentration is always a big discussion point for you guys from a stock perspective. Do you think your largest customer will remain around where it is today for fiscal 2016 or is it going to be up or down? And I ask that, because you’ve had great growth this year, about 68% of the growth I think you had this year or new incremental dollars had been from that one customer. So I’m just curious, how do you see this thing flattening out or playing out in 2016?

Can you repeat that? Amit, you were hard to hear. It’s important, because you were making some comments and I’m not sure I caught all of them about some correlation between some number and our biggest customer.

Yes, no, excuse me, Mark, I was just trying think through, your largest customer is about 24% of sales this year. I’m just trying to think, as you go into fiscal 2016 on this $20 billion guide, do we think this customer or your largest customer stays about the same or it goes up or down in concentration. And I guess, the way I’m trying to think about this is, in fiscal 2015 you obviously have had really good growth. I think 65% of the incremental dollars you had this year away from that one customer. I’m just trying to think, do you get better diversity in 2016 versus 2015?

Yes, so now I heard you loud and clear, so thank you. Again, I don’t pay much attention to concentration issues around brands. I pay attention to concentration around risk. And I think we stated that Apple was a 24% customer, that’s public information. But one of the things that we spend a lot of time thinking about is, selecting partners with incredibly innovative management teams, and how do we manage risk and how do we manage concentration around that risk. And, I guess, I just leave it at that, because commenting about our biggest customer, we love them as a customer. They’re very innovative, and they’re playing a significant number of different areas and markets.

Fair enough. I guess, we have to have one customer at that level, it should be Apple, but congrats on the quarter, guys.

Yes. Thank you.

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

Hi. Thank you, guys. I wanted to ask about what you’re seeing in the EM segment, specifically the revenue has been relatively flat, and I think you said you expect it to accelerate in the back-half of the year. Are there any segments that are stronger or weaker? And what gives you confidence that revenue will accelerate in the back-half?

Sherri, I’ll take a swing at that. I think that sometimes what gets lost is and we probably own this, we call that segment of our business EMS, and the EMS business today incorporates different divisions for us. So, again, I remind you, it has our telco, it has our networking, research, some incredible brands. It’s got storage. We serve some incredible brands. Some of the legacy brands they’re absolutely not standing still. So they see some of the shifts in the market. The shifts in how data is stored, how data is transmitted, and we’re right there with them as far as some different innovative solutions. The second area of that business is our high velocity business. And our high velocity business arguably has one of our largest customer counts of any of the businesses in the company, and that cuts across an endless number of different end markets. And then the last area of EMS is industrial. And it’s not only industrial as a whole, but it’s light industrial, heavy industrial, and then energy, and that also is loaded up with a significant number of companies and brands. So when you take a look at it at that level, again, you combine that with the customer count, the brands we serve, and then some of the trends I talked about in my prepared comments around the fact that, we are in a secular trend of a lot of different hardware and a lot of different aspects of hardware being connected together, add that to what’s going on in the automotive space, add that to what’s going on in the cloud space, digitization, need for additional bandwidth, and that doesn’t even touch on some of the stuff we’re doing in high velocity or various parts of our industrial business. So that’s where we get some confidence that year-on-year, we will grow EMS at 5% or greater.

Okay, great. And then just, Forbes, maybe thinking about the margins for that segment, you’re at about the midpoint of your long-term guidance for that segment. How should we think about margins for that group, as we trend through the year? Thanks.

Yes, I think for modeling purposes, I’d use that midpoint of 3%, as we continue. In the back-half, we are expecting some ramps, but I think with efficiencies, we’ll certainly be around that midpoint.

Thank you.

Thanks, Sherri.

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

Hi, good afternoon. Can you hear me, okay.

We can hear you great, Steve.

Okay, thanks. Just first off, can you just provide a little bit more color on the acquisition you just talked about in your preamble? What did it do that Nypro doesn’t and then you could provide any financial supporting of $110 million purchase price, it would be helpful? And then I have a follow-up?

Sure, Steve. Yes, so Plasticos Castella, as I said in my prepared remarks really give us a presence now in Europe. If you recall somewhere a couple of years ago, we acquired Nypro, which houses our healthcare business and our rigid plastic business. So Plasticos really complements back rigid packaging side and really gives us a foothold now in Europe, Nypro really being a North American acquisition a couple of years ago. So we’re very excited about the addition of this. It brings both some new customers and some complement – yes, complementing European divisions of existing customers, and really helps us in the thin-wall plastic area in particular, and access to food and beverage type products throughout Europe. As I said, the purchase price about $110 million and it’s relatively modest in terms of our revenue expectations over the next year. But think of it in the $100 million to $125 million type range and just say there’s a full year baked in there on our guidance.

Okay. That’s helpful. And then, just as a follow-up as you look at the new fiscal year, you sort of ramped, expanded across the number of technologies over the last 18, 24 months. Are any of the newer component material sciences that you gotten into – are they becoming more drivers of revenue commercialized in a lot of products? Is there anything you would highlight as being more important this year than last year?

I won’t go into details or highlight it. But, absolutely, we are leading with a lot around where elastomers and material science is for sure.

Okay. That’s helpful. All right. Thank you. Thanks a lot.

Yes.

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

Thank you, and congratulations on really a robust and outstanding quarter to you and your team there. Great results. On the acquisition a housekeeping item, Forbes, I think I heard you correctly, but I broke up a bit on housekeeping. Did you say the assumed revenue contribution was about $110 million to $125 million? And if so, then that kind of puts you at just kind of say at $0.02 to $0.03 earnings help for next year. And then, Forbes, also the housekeeping item, the CapEx of $900 million, what kind of the math is now for a couple years is that? What was your kind of assumed for the run rate to kind of keep the Jabil machine running along just for a free cash flow assumptions going forward are relatively set? And then, for Mark a question, it appears that the non-DMS business didn’t contribute much this year and the DMS really did the big bulk of delivering, which is very impressive, don’t get me wrong. Had your visibility in the non-DS remained stable? And this economic condition improved or declined based upon the volatility around the world? Thank you.

Okay. Jim, I’ll take a swing at the two. So in terms of the acquisition in our rigid packaging area, you’re correct in terms of that revenue range of $100 million, $120 million for the year. So we’re very pleased with that. And, that will be neutral to modestly accretive for the fiscal year, so not a huge driver in terms of our revised outlook or our outlook for 2016, but certainly, very, very complementary and we’re looking forward to growing that business of the European footprint as we move through 2016 into 2017. In terms of the CapEx, the midpoint of the guide this year, $900 million, you’re correct, in terms of those levels being consistent year-over-year. As we move forward, it is very much – I wouldn’t say to you it is $900 million consistently year-over-year. This $400 million – of the $900 million this year, approximately $400 million is maintenance, which is really the type of level I see going forward for that replacement cycle based on the broad base of assets that we have in place. This fiscal year, if you refer to the detail we provided, we’re adding another $250 million worth of capacity and infrastructure. And what that really equates to is about another, what, 2 million to 3 million square feet of operational capacity. We’re growing the company in mid-teens. They’re closer to mid-teens in terms of revenue. We need to make sure that we have appropriate capacity in place to be able to meet customer demands that we’re seeing. So it’s a bit of a longwinded answer to say, no, don’t bank on $900 million a year. It’s around about $400 million a year in terms of maintenance levels. And clearly as we move into 2017, assuming we’re at maintenance levels, you’re going to see an excess of $1 billion in what I call free cash flow, operational cash flow less of that CapEx.

Hey, Jim. This is Mark.

Yes, hey, Mark.

Can you help me understand a little bit your question around non-EMS or EMS business, because just looking as an example, looking at FY 2015, our EMS business rough numbers contributed 44%, 45% of our income. So maybe you could help me understand your questions?

Yes, you bet. Again, congrats that DMS was just truly stellar and outstanding, but non-DMS business, I think, the annual increase this quarter was about 1% year-over-year. I was just wondering if your visibility in bookings and discussions with those customers, again, not the DMS side, but the EMS side has remained stable, say, versus six months ago have improved or gotten worse just because the EMS is kind of a broader base of everything and DMS is a little bit more customer concentrated in the news and the media has been pretty volatile about things going up and things going down, I was trying to get a sense of the pulse for the EMS side?

Yes. Okay, I understand your question. Good question by the way. I think the way we look at it is, our EMS business has the vast majority of our customers. And as I think it was answering one of Sherri’s questions when I was talking about the fact that it’s made up of different divisions. With that said, there is a lot of uncertainty in the world today, it’s all over the place, and there’s a lot of uncertainty in the financial markets, and there’s a lot of uncertainty about who is going to get elected in the U.S. and on and on and on. So we try to consider all that when we’re talking about our business certainly on these calls. So when we kind of put all that together given consideration, take a look at our approach, take a look at what’s in the pipeline, and what type of solutions we’re bringing forward, we kind of stir all that up and that’s what led us to talk about the fact that we think we can take the $10.8 billion we did in FY 2015 and grow that by 5% in FY 2016.

Perfect. Thank you.

[Operator Instructions] And at this time, there are no further questions. I would now like to turn the floor back over to Beth Walters for any closing remarks.

Excellent. Thank you, everyone, for joining us on the call today and for your questions and participation in the call. As always we will be available for any follow-up questions and inquiries that you have regarding our performance and our outlook. So thank you again for joining us and have a good evening.