Jabil declares honesty, dividend
The bay area's second-largest public company responds to a report accusing it of stock-option trickery.
By HELEN HUNTLEY
Published May 5, 2006
Tim Main started Jabil Circuit's annual analysts' meeting Thursday with a defense of the St. Petersburg company's integrity and ended it with a stunner of an announcement: Jabil will pay its first-ever annual dividend next month.
"Our long-term prospects have never looked better," Jabil's chief executive said. Main sees no reason Jabil can't continue its long-term trend of 20-percent-plus growth each year and pay for it out of cash flow.
The bounty for shareholders - 7 cents a share - will be payable June 1 to shareholders of record May 15. Main said that Jabil, an electronics manufacturer and the Tampa Bay area's second-largest public company, intends to pay regular quarterly dividends.
About 50 analysts came to the Don CeSar Beach Resort in St. Pete Beach to quiz Main and other Jabil executives and get a first-hand look at some of the company's latest product designs.
But before the dog-and-pony show could begin, Main had to deal with the fact that the Securities and Exchange Commission is investigating allegations the company had backdated grants of stock options - including many granted to Main.
"There was no backdating," Main said flatly. He said the company is the victim of a "witch hunt" by the Wall Street Journal, which named Jabil and five other companies in a March 20 story raising suspicions about the timing of stock option grants. At another of those companies, Converse Technology Inc., the chief executive and two other top executives resigned this week in the middle of an inquiry into backdating.
The Journal story pointed out patterns of large grants being awarded just before price increases and said the odds of them occurring by chance were remote.
However, Main said the timing was a matter of chance: "The math is right. The conclusions are wrong." Main said there were many other dates when the options could have been awarded with similar or even better results for those who got them. He said some options were priced so high they are still "under water" - below the current Jabil stock price of $40.50 a share.
Main displayed documents showing he was just one of hundreds of Jabil employees who got option grants on one of the dates the Journal questioned.
"I want to give you an appreciation for basically how p----- off I am about this whole thing," he told the analysts. "I guess this is part of being a successful, big company. People want to take shots at you."
In addition to being investigated by the SEC, Jabil is defending itself against its first-ever shareholder lawsuit, related to the option grants.
Several analysts said afterward that they found Main's explanations convincing.
"If they were backdating, they did a pretty bad job of it," said Amit Daryanani of RBC Capital.
Alex Blanton, an analyst with Ingalls & Snyder, said he thought the documentation proved Jabil's case.
"If you take a big sample of people, you'll find a small portion who do something unusual just by chance," he said. "The company's integrity is unquestioned. It's one reason they're so successful."
There is no question Jabil has been extraordinarily successful, reinventing itself in the wake of the dramatic decline in the technology sector in 2001.
"We're not a circuit board company anymore," Main said. Although Jabil still makes circuit boards, it has moved far beyond them to manufacture a diversified array of products built with Jabil's electronics. Those products are sold under the brand names of its customers, companies such as Royal Philips Electronics, Nokia Corp. and Hewlett-Packard Co.
At the Don CeSar, the company showed off a stair-climbing wheelchair, medical monitoring equipment, an LED television set with a super-sharp image and a dashboard screen that shows two images at once, depending on the viewing angle - the front-seat passenger can watch a movie while the driver sees a map on the same screen.
Jabil had revenues of $7.5-billion last fiscal year and now has more than 60,000 employees worldwide, including 25,000 in Asia. Main said the company sees opportunities for growth in computing and storage, aerospace and defense, and even in the troubled automotive sector.
Companies like Jabil with low-cost product and design, said Main, "have the antidote for what ails them."
Helen Huntley can be reached at firstname.lastname@example.org or 727 893-8230.
[Last modified May 5, 2006, 06:01:37]
[an error occurred while processing this directive]