1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the quarterly period ended February 29, 2000.
Transition report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the transition period from _______________ to ______________.
Commission file number: 0-21308
JABIL CIRCUIT, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 38-1886260
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10560 Ninth Street North
St. Petersburg, FL 33716
------------------------------------------------------------
(Address of principal executive offices, including zip code)
Registrant's Telephone No., including area code: (727) 577-9749
-------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes [X] No [ ]
As of March 31, 2000, there were 176,530,795 shares of the Registrant's Common
Stock outstanding.
2
JABIL CIRCUIT, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
August 31, 1999 and February 29, 2000....................................................... 3
Consolidated Statements of Earnings for the three months
and six months ended February 28, 1999 and February 29, 2000............................... 4
Consolidated Statements of Comprehensive Income for the three months and
six months ended February 28, 1999 and February 29, 2000................................... 5
Consolidated Statements of Cash Flows for the six months
ended February 28, 1999 and February 29, 2000............................................... 6
Notes to Consolidated Financial Statements.................................................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................................... 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk.................................. 16
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders......................................... 16
Item 6. Exhibits and Reports on Form 8-K............................................................ 18
Signatures.................................................................................. 18
2
3
PART I. FINANCIAL INFORMATION
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
February 29, August 31,
2000 1999
----------- -----------
ASSETS
Current assets
Cash and cash equivalents $ 56,612 $ 125,949
Short-term investments -- 27,176
Accounts receivable - Net 379,223 261,078
Inventories 353,326 217,840
Prepaid expenses and other current assets 24,129 14,794
Deferred income taxes 14,227 13,896
----------- -----------
Total current assets 827,517 660,733
Property, plant and equipment, net 439,879 353,522
Other assets 40,470 20,786
----------- -----------
$ 1,307,866 $ 1,035,041
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current installments of long term debt $ 8,333 $ 9,610
Short-term debt -- 21,501
Accounts payable 427,863 300,093
Accrued expenses 59,917 59,186
Income taxes payable 10,863 20,511
----------- -----------
Total current liabilities 506,976 410,901
Long term debt, less current installments 128,333 34,712
Deferred income taxes 21,232 10,199
Deferred grant revenue 3,443 1,798
----------- -----------
Total liabilities 659,984 457,610
----------- -----------
Stockholders' equity
Common stock 176 175
Additional paid-in capital 306,658 296,308
Retained earnings 341,590 281,166
Cumulative translation adjustment (542) (218)
----------- -----------
Total stockholders' equity 647,882 577,431
----------- -----------
$ 1,307,866 $ 1,035,041
=========== ===========
3
4
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
Three months ended Six months ended
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
--------- --------- ----------- -----------
Net revenue $ 837,562 $ 558,703 $ 1,527,384 $ 1,053,818
Cost of revenue 753,479 498,601 1,369,914 939,021
--------- --------- ----------- -----------
Gross profit 84,083 60,102 157,470 114,797
Operating expenses:
Selling, general and administrative 31,612 22,452 58,663 43,277
Research and development 1,203 1,432 2,385 2,889
Amortization of intangibles 644 294 1,243 651
Acquisition-related charge -- -- 5,153 --
--------- --------- ----------- -----------
Operating income 50,624 35,924 90,026 67,980
Interest income (32) (419) (1,212) (748)
Interest expense 1,474 2,311 2,039 4,240
--------- --------- ----------- -----------
Income before income taxes 49,182 34,032 89,199 64,488
Income taxes 15,246 11,778 28,775 22,218
--------- --------- ----------- -----------
Net income $ 33,936 $ 22,254 $ 60,424 $ 42,270
========= ========= =========== ===========
Earnings per share:
Basic $ 0.19 $ 0.14 $ 0.34 $ 0.26
========= ========= =========== ===========
Diluted $ 0.18 $ 0.13 $ 0.33 $ 0.25
========= ========= =========== ===========
Common shares used in the calculations
of earnings per share:
Basic 175,715 159,944 175,268 159,662
========= ========= =========== ===========
Diluted 184,518 167,006 183,648 166,280
========= ========= =========== ===========
See Accompanying Notes to Consolidated Financial Statements
4
5
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except for per share data)
(Unaudited)
Three months ended Six months ended
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
------- -------- -------- --------
Net Income $33,936 $ 22,254 $ 60,424 $ 42,270
Other comprehensive income (loss):
Foreign currency translation adjustments 1 (218) (324) (218)
------- -------- -------- --------
Comprehensive income $33,937 $ 22,036 $ 60,100 $ 42,052
======= ======== ======== ========
See Accompanying Notes to Consolidated Financial Statements
5
6
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Six months ended
February 29, February 28,
2000 1999
------------ ------------
Cash flows from operating activities:
Net income $ 60,424 $ 42,270
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 43,524 31,188
Recognition of grant revenue (606) (415)
Deferred income taxes 10,702 2,344
Loss on sale of property 2,654 956
Changes in operating assets and liabilities:
Accounts receivable (114,960) (100,631)
Inventories (132,146) (34,387)
Prepaid expenses and other current assets (9,302) (6,263)
Other assets 2,579 1,980
Accounts payable and accrued expenses 125,996 91,937
Income taxes payable (9,648) 5,171
--------- ---------
Net cash (used) in / provided by operating activities (20,783) 34,150
--------- ---------
Cash flows from investing activities:
Net cash paid for business acquisitions (33,085) --
Proceeds from sale of short-term investments 27,176 --
Acquisition of property, plant and equipment (127,698) (94,909)
Proceeds from sale of property and equipment 1,608 239
--------- ---------
Net cash used in investing activities (131,999) (94,670)
--------- ---------
Cash flows from financing activities:
Increase in/repayment of note payable to bank 73,499 53,737
Payments of long-term debt (2,656) (3,341)
Net proceeds from issuance of common stock 10,351 3,273
Proceeds from Scottish grant 2,251 395
--------- ---------
Net cash provided by financing activities 83,445 54,064
--------- ---------
Net decrease in cash and cash equivalents (69,337) (6,456)
Cash and cash equivalents at beginning of period 125,949 28,897
--------- ---------
Cash and cash equivalents at end of period $ 56,612 $ 22,441
========= =========
See Accompanying Notes to Consolidated Financial Statements
6
7
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements of Jabil
Circuit, Inc. and subsidiaries are unaudited and have been prepared
based upon prescribed guidance of the Securities and Exchange
Commission ("SEC"). As such, they do not include all disclosures
required by generally accepted accounting principles, and should be
read in conjunction with the annual audited consolidated financial
statements as of and for the year ended August 31, 1999, contained in
our 1999 annual report on Form 10-K. In our opinion, the accompanying
consolidated financial statements include all adjustments, consisting
of only normal and recurring adjustments, necessary for a fair
presentation of the financial position, results of operations and cash
flows for the periods presented when read in conjunction with the
annual audited consolidated financial statements and related notes
thereto. The results of operations for the three-month and six-month
periods ended February 29, 2000 are not necessarily indicative of the
results that should be expected for a full fiscal year.
EARNINGS PER SHARE
The following table sets forth the calculation of basic and
diluted earnings per share (in thousands, except per share data):
EARNINGS PER SHARE
(Unaudited)
In thousands Three months ended Six months ended
February February
2000 1999 2000 1999
-------- -------- -------- --------
Numerator:
Net income $ 33,936 $ 22,254 $ 60,424 $ 42,270
Denominator:
Denominator for basic EPS-
weighted-average shares 175,715 159,944 175,268 159,662
Effect of dilutive securities:
Employee stock options 8,803 7,062 8,380 6,618
-------- -------- -------- --------
Denominator for diluted EPS-
adjusted weighted-average shares 184,518 167,006 183,648 166,280
======== ======== ======== ========
Basic EPS $ 0.19 $ 0.14 $ 0.34 $ 0.26
======== ======== ======== ========
Diluted EPS $ 0.18 $ 0.13 $ 0.33 $ 0.25
======== ======== ======== ========
7
8
For the three-month and six-month periods ended February 29,
2000, options to purchase 21,377 and 172,924 shares of common stock,
respectively, were outstanding during those periods but were not
included in the computation of diluted earnings per share because the
options' exercise prices were greater than the average market price of
the common shares, and therefore, their effect would be antidilutive.
For the three-month and six-month periods ended February 28, 1999, 0
and 288,000, respectively, of options were excluded.
STOCK SPLIT
All share and per share information presented herein and in
our Consolidated Financial Statements has been retroactively restated
to reflect a two-for-one stock split of our Common Stock, par value
$.001 per share on March 31, 2000, paid in the form of a stock
dividend, to holders of record on March 23, 2000.
COMMITMENTS AND CONTINGENCIES
We were named as a defendant, along with 87 other companies
engaged in the electronics and other industries, in a patent
infringement lawsuit filed by the Lemelson Medical, Education &
Research Foundation Limited Partnership ("Lemelson") in the U.S.
District Court for the District of Arizona on February 26, 1999. The
defendants include certain of our suppliers, customers and
competitors. The complaint alleges that Jabil and the other defendants
are each infringing upon as many as 18 patents held by Lemelson
relating to the defendants' manufacturing processes and products. The
complaint seeks to enjoin the defendants from further alleged acts of
infringement, an unspecified amount of damages to compensate Lemelson
for alleged past infringement, together with interest and costs, such
damages to be trebled due to alleged willful infringement, reasonable
attorney's fees, and such other relief that the court may award. We,
along with several other defendants, jointly hired legal counsel to
represent us in the litigation and filed an answer to the complaint
denying the substantive allegations in the complaint and raising
various affirmative defenses. Lemelson has offered to license the
patents alleged to be infringed. Based on our understanding of the
terms that Lemelson has made available to certain licensees, we
believe that obtaining a license from Lemelson under the same or
similar terms would not have a material adverse effect on our results
of operations or financial condition. We have not yet determined,
however, whether to seek such a license, and we cannot assure you
that, if sought, we would be offered the same or similar terms or that
the ultimate resolution of this matter will not have a material
adverse effect on us.
8
9
We are party to certain other lawsuits in the ordinary course
of business. We do not believe that these proceedings, individually or
in aggregate, will have a material adverse effect on our financial
position or results of operations.
NEW ACCOUNTING PRONOUNCEMENTS
Statement 133 - Accounting for Derivative Instruments and
Hedging Activities. Statement 133 establishes methods of accounting
for derivative financial instruments and hedging activities related to
those instruments as well as other hedging activities. We are
currently evaluating this Statement and have yet to form an opinion on
whether its adoption will have any significant impact on our
consolidated financial statements. We will be required to implement
Statement 133 in the first fiscal quarter of our fiscal year ending
August 31, 2001.
SEC Staff Accounting Bulletin Number 101 - Revenue
Recognition in Financial Statements. We will be required to implement
this bulletin in the first fiscal quarter of our fiscal year ending
August 31, 2001. As we have historically made a practice of
recognizing revenue in accordance with the provisions of this
bulletin, we do not anticipate that the adoption of the bulletin will
have a material impact on our consolidated financial statements.
NOTE 2. BUSINESS COMBINATIONS
On February 1, 2000 we acquired the net assets of Bull
Information Technology, an electronic manufacturing service provider.
The business currently operates from leased facilities in the City of
Contagem, State of Minas Gerais, in the Belo Horizonte region of
Brazil. We are acquiring approximately 30 acres in Contagem and will
be constructing a new facility to replace the currently leased
operations. The purchase price of approximately $6 million was paid in
cash. The acquisition was accounted for as a purchase and resulted in
approximately $5 million of goodwill, which is being amortized on a
straight-line basis over a period of 15 years. The consolidated
financial statements include the operating results of the acquired
business from the date of acquisition. Pro forma results of operations
have not been presented because the effect of the acquisition was not
material.
On September 1, 1999 we acquired, through our Jabil Global
Services subsidiary, the net assets of EFTC Services, Inc., an
electronic product service and repair business. Jabil Global Services
continues to offer repair and warranty services for existing and
future customers from its hub-based operations in Memphis, Tennessee;
Louisville, Kentucky; and Tampa, Florida. The purchase price of
approximately $27 million was paid in cash. The acquisition was
accounted for as a purchase and resulted in approximately $18
9
10
million of goodwill, which is being amortized on a straight-line basis
over a period of 15 years. The consolidated financial statements
include the operating results of the acquired business from the date
of acquisition.
On September 13, 1999 we issued approximately 5.6 million
shares of our common stock for all of the outstanding common stock of
GET Manufacturing, Inc., a China-based electronics manufacturing
services provider. The business combination was accounted for as a
pooling-of-interests and, accordingly, our historical consolidated
financial statements presented herein have been restated to include
the accounts and results of operations of GET Manufacturing, Inc. In
connection with the merger we recorded a one-time acquisition-related
charge of $5.2 million ($4.7 million after-tax) consisting of key
employee severance and legal and professional fees associated with the
merger. Substantially all of the costs were incurred by November 30,
1999.
A reconciliation of the previously reported results of
operations for the three and six months ended February 28, 1999 to the
results included in this form 10-Q is as follows (in thousands):
Three months ended Six months ended
February 28, 1999
Net Revenue Net Income Net Revenue Net Income
-------- ------- ---------- -------
Jabil Circuit, Inc. $493,363 $21,616 $ 941,304 $40,902
GET Manufacturing, Inc 65,340 638 112,514 1,368
-------- ------- ---------- -------
Combined $558,703 $22,254 $1,053,818 $42,270
======== ======= ========== =======
NOTE 3. INVENTORIES
The components of inventories consist of the following:
February 29, August 31,
In thousands 2000 1999
--------- -------
Finished goods $ 56,607 $ 29,192
Work-in-process 46,699 30,728
Raw materials 250,020 157,920
--------- --------
$ 353,326 $217,840
========= ========
NOTE 4. SEGMENT INFORMATION
We derive our revenue from providing manufacturing services
to major electronic OEM's on a contract basis. Operating segments
consist of our manufacturing locations. The services provided, the
manufacturing processes, class of customers and the order fulfillment
process is similar and generally interchangeable across manufacturing
locations. We have aggregated our operating segments into the
Electronic Manufacturing Services segment.
10
11
The following table sets forth segment information (in thousands):
Three Months Ended Six Months Ended
February February
2000 1999 2000 1999
-------- -------- ---------- ----------
Net revenue $837,562 $558,703 $1,527,384 $1,053,818
Segment income before income tax $ 51,827 $ 37,356 $ 97,564 $ 70,869
Corporate (income) expense 2,645 3,324 3,212 6,381
Acquisition-related charges -- -- 5,153 --
-------- -------- ---------- ----------
Income before income taxes $ 49,182 $ 34,032 $ 89,199 $ 64,488
======== ======== ========== ==========
February 29,2000 August 31, 1999
---------------- ---------------
Long-lived assets $480,349 $332,751
11
12
JABIL CIRCUIT, INC. AND SUBSIDIARIES
We make "forward-looking statements" within the "safe harbor"
provision of the Private Securities Litigation Reform Act of 1995 throughout
this Quarterly Report on Form 10-Q and in the documents we incorporate by
reference herein. You can identify these statements by forward-looking words
such as "may," "will," "expect," "anticipate," "believe," "estimate," "plan"
and "continue" or similar words. We have based these statements on our current
expectations about future events. Although we believe that our expectations
reflected in or suggested by our forward-looking statements are reasonable, we
cannot assure you that these expectations will be achieved. Our actual results
may differ materially from what we currently expect. Important factors which
could cause our actual results to differ materially from the forward-looking
statements in this document are set forth in the following "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this document and the "Factors Affecting Future Results" and other
sections in our Annual Report on Form 10-K for the fiscal year ended August 31,
1999 and other filings with Securities and Exchange Commission.
You should read this document and the documents that we incorporate by
reference into this Quarterly Report on Form 10-Q completely and with the
understanding that our actual future results may be materially different from
what we expect. We may not update these forward-looking statements, even if our
situation changes in the future. All forward-looking statements attributable to
us are expressly qualified by these cautionary statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All prior year historical financial information has been restated to
reflect the merger with GET Manufacturing, Inc. in the first fiscal quarter of
2000 which was accounted for as a pooling of interests.
Our net revenue for the second quarter and first six months of fiscal
2000 increased 50% and 45% to $838 million and $1.53 billion, respectively,
from $559 million and $1.05 billion in the second quarter and first six months
of fiscal 1999. This increase from the previous fiscal year was primarily due
to increased production of communications and personal computer products.
Foreign source revenue represented 41% and 42% of net revenue for the second
quarter and first six months of fiscal 2000 compared to 39% for the same
periods of fiscal 1999. The increase in foreign source revenue was attributable
to increased production at our international locations.
Gross profit decreased to 10.0% and 10.3% for the second quarter and
first six months of fiscal 2000 from 10.8% and 10.9% for the same periods of
fiscal 1999 primarily reflecting a higher content of material-based revenue.
Selling, general and administrative expenses in the second quarter of
fiscal 2000 decreased to 3.8% of net revenue compared to 4.0% for the same
period in the prior fiscal year, while increasing in absolute dollars from
$22.5 million in the second quarter of fiscal 1999 to $31.6 million in the
second quarter of fiscal 2000. Selling, general and administrative expenses in
the first six months of fiscal 2000 decreased to 3.8% of net revenue compared
to 4.1% in the prior fiscal year, while increasing in absolute dollars from
$43.3 million to $58.7 million. The dollar increases were primarily due to
increased staffing and related departmental expenses at all
12
13
our locations as well as increased information systems staff to support the
expansion of our business.
Research and development expenses decreased to 0.1% and 0.2% of net
revenue for the second quarter and first six months of fiscal 2000 as compared
to 0.3% for each of the same periods of fiscal 1999. In absolute dollars, the
expenses decreased approximately $0.2 million and $0.5 million versus the same
periods of fiscal 1999.
Amortization of intangibles remained a constant 0.1% of net revenue in
the second quarter of fiscal 2000, while increasing from $0.3 million to $0.6
million as compared to the same period of fiscal 1999. Amortization of
intangibles increased from $0.7 million in the first six months of fiscal 1999
to $1.2 million for the same period in fiscal 2000, representing 0.1% of sales
for both periods. This dollar increase is primarily attributable to the $18
million of goodwill resulting from the EFTC Services, Inc acquisition. We are
amortizing the goodwill on a straight-line basis over fifteen years.
During the first quarter of fiscal 2000, we completed a merger with
GET Manufacturing, Inc. and recorded a one-time acquisition-related charge of
$5.2 million ($4.7 million after-tax) consisting of key employee severance and
legal and professional fees associated with the merger.
Interest income decreased to $32,000 in the second quarter of fiscal
2000 from $0.4 million in the second quarter of fiscal 1999 as a result of
decreased cash on hand. Interest income increased approximately $0.4 million in
the first six months of fiscal 2000 to $1.2 million from $0.8 million for the
same period in fiscal 1999 as a result of increased cash on hand in the first
quarter of fiscal 2000.
Interest expense decreased approximately $0.8 million in the second
quarter of fiscal 2000 to $1.5 million as compared to $2.3 million in the
second quarter of fiscal 1999. Interest expense decreased approximately $2.2
million for the first six months of fiscal 2000 to $2.0 million from $4.2
million. These decreases are primarily a result of the principal payment on our
private placement debt of approximately $8.3 million made in the fourth quarter
of fiscal 1999 and decreased borrowings to support working capital needs.
Our effective tax rate decreased to 31% and 32% in the second quarter
and first six months of fiscal 2000, respectively, from 35% in each of the
second quarter and first six months of fiscal 1999. The tax rate is
predominantly a function of the mix of domestic versus international income
from operations. Our international operations are being taxed at a lower rate
than in the United States, primarily due to the tax holiday granted to our
Malaysian subsidiary.
BUSINESS FACTORS
Due to the nature of turnkey manufacturing and our relatively small
number of customers, our quarterly operating results are affected by the level
and timing of orders, the level of capacity
13
14
utilization of our manufacturing facilities and associated fixed costs,
fluctuations in material costs, and by the mix of material costs versus
manufacturing costs. Similarly, operating results are affected by price
competition, level of experience in manufacturing a particular product, degree
of automation used in the assembly process, efficiencies we achieve in managing
inventories and fixed assets, timing of expenditures in anticipation of
increased sales, customer product delivery requirements, and shortages of
components or labor. In the past, some of our customers have terminated their
manufacturing arrangement with us, and other customers have significantly
reduced or delayed the volume of manufacturing services ordered from us. Any
such termination of a manufacturing relationship or change, reduction or delay
in orders could have an adverse effect on our results of operations.
ACQUISITIONS AND EXPANSION
The EMS industry has experienced rapid growth over the past several
years as an increasing number of Original Equipment Manufacturers ("OEMs") have
outsourced their manufacturing requirements and divested their manufacturing
facilities, such as our acquisition of certain manufacturing facilities from
Hewlett-Packard Company. OEMs are turning to outsourcing in order to reduce
product cost, achieve accelerated time-to-market and time-to-volume production,
access advanced design and manufacturing technologies, improve inventory
management and purchasing power, reduce their capital investment in
manufacturing facilities, and achieve parallel manufacturing of the same product
throughout the world. We believe that additional acquisition opportunities exist
and we regularly seek and evaluate such acquisition opportunities, as well as
acquisition opportunities that may arise as a result of consolidation in the EMS
industry, as evidenced by our recent acquisition of GET Manufacturing, Inc and
Bull Information Technology. We also intend to continue to evaluate strategic
acquisitions of ancillary services to round out our service offerings, similar
to our recent acquisition of EFTC Services, Inc., an electronic product service
and repair business. However, we cannot assure you that we will be able to
consummate or, if consummated, successfully integrate the operations and
management of any such acquisitions. Acquisitions involve significant risks
which could have a material adverse effect on us, including financial and
operating risks, such as (1) potential liabilities of the acquired businesses;
(2) the dilutive effect of the issuance of additional equity securities; (3) the
incurrence of additional debt; (4) the financial impact of amortizing goodwill
and other intangible assets involved in any acquisitions that are accounted for
using the purchase method of accounting; (5) possible adverse tax and accounting
effects; (6) the diversion of management's attention to the assimilation of the
businesses to be acquired; (7) the risk that the acquired businesses will fail
to maintain the quality of services that we have historically provided; (8) the
need to implement financial and other systems and add management resources; (9)
the risk that key employees of the acquired businesses will leave after the
acquisition; and (10) unforeseen difficulties in the acquired operations.
During this fiscal year, we announced a greenfield expansion in
Tiszaujvaros, Hungary. The initial facility will be approximately 250,000
square feet and is scheduled to begin production in September of 2000. We have
also announced a 325,000 square-foot manufacturing and product development
campus expansion of our Auburn Hills, Michigan facility.
14
15
LIQUIDITY AND CAPITAL RESOURCES
At February 29, 2000, our principal sources of liquidity consisted of
cash and available borrowings under our credit facilities. Prior to April 7,
2000, we had a committed line of credit with a syndicate of banks that provided
up to $225 million of working capital borrowing capacity. As of February 29,
2000 we were utilizing $95 million under that facility.
On April 7, 2000, we renegotiated our line of credit facility and
established a $500 million revolving credit facility with a syndicate of banks
("Revolver"). Under the terms of the Revolver, borrowings can be made under
either floating rate loans or Eurodollar rate loans. We pay interest on
outstanding floating rate loans at the banks' prime rate. We pay interest on
outstanding Eurodollar loans at the London Interbank Offered Rate (LIBOR) in
effect at the loan inception date plus a factor of 1.25% to 1.875% depending on
our funded debt to total capitalization ratios. We pay a commitment fee on the
unused portion of the Revolver at 0.25% to 0.375% depending on our funded debt
to total capitalization ratios. The renegotiated Revolver expires on April 6,
2003 and outstanding borrowings are then due and payable. The Revolver as
secured by all or part of the stock of certain subsidiaries, contains certain
affirmative and negative covenants customary for this type of agreement and
includes financial covenants with respect to coverage of fixed charges, net
worth and incurrence of indebtedness.
We used $20.8 million of cash in operating activities for the six
months ended February 29, 2000. The use of cash was primarily due to an
increase in inventories of $132.1 million, an increase of $114.9 million in
accounts receivable, offset by net income of $60.4 million, depreciation and
amortization of $43.5 million, and increases in accounts payable and accrued
expenses of $126.0 million. The increases in inventories and accounts
receivable were due to commensurate increases in levels of business.
Net cash used in investing activities of $132.0 million for the six
months ended February 29, 2000 consisted of our capital expenditures of $127.7
million for equipment worldwide in order to support increased activities and
cash paid in the acquisitions of EFTC Services, Inc. and Bull Information
Technology of $27.4 million and $5.7 million, respectively.
On September 13, 1999 we issued approximately 5.6 million shares of
our common stock for all the outstanding common stock of GET Manufacturing,
Inc., a China-based electronics manufacturing services provider.
During the quarter ending November 30, 1999, we filed a "shelf"
registration statement registering the potential sale of debt and equity
securities in the future from time-to-time to augment our liquidity and capital
resources. We have not yet determined when or if any such securities may be
issued. We have not yet requested the registration statement be declared
effective by the Securities and Exchange Commission, and such securities may not
be sold until such act occurs.
15
16
We believe that cash on-hand, funds provided by operations and
available borrowings under our credit facility will be sufficient to satisfy
our currently anticipated working capital and capital expenditure requirements
for the next twelve months. However, to the extent we pursue additional
expansion opportunities through acquisition or construction of greenfield
facilities that require funding in excess of cash on-hand, funds provided by
operations and available borrowings under the credit facility, we may need to
finance such expansion with public and private offerings of our debt and equity
and there can be no assurance that we could effect such financing on
satisfactory terms, if at all.
"YEAR 2000" READINESS
We continue to actively monitor the Year 2000 compliance of our global
information technology infrastructure and business system applications,
manufacturing equipment and systems. While not all possible Year 2000-date
related disruption scenarios have been experienced, and there is a possibility
of disruptions in the future, to date we have not experienced material
disruption or other significant problems. We are continuing to evaluate our
exposure where appropriate.
We are unable to fully determine the effect of a failure of our own
systems or those of third parties with whom we do business, but any significant
failures could have a material adverse effect on our financial position,
results of operations and cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our market risk during the six
months ended February 29, 2000. Market risk information is contained under the
caption "Quantitative And Qualitative Disclosures About Market Risk" of our
1999 Annual Report on Form 10-K for the fiscal year ended August 31, 1999 and
is incorporated herein by reference.
PART II - OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At our Annual Meeting of Shareholders, held on January 13, 2000, the
following proposals were voted upon by the shareholders as indicated below
(these numbers have not been adjusted to reflect our two-for-one stock split to
shareholders of record as of March 23, 2000):
1. To elect the board of directors
Number of Shares
-------------------------
For Withheld
---------- --------
William D. Morean 76,296,911 290,781
Thomas A. Sansone 76,296,348 291,344
Timothy L. Main 76,297,048 290,644
Lawrence J. Murphy 76,181,088 406,604
Mel S. Lavitt 76,195,324 392,368
Steven A. Raymund 76,295,191 292,501
Frank A. Newman 72,293,638 294,054
16
17
2. To approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of Common Stock from
120,000,000 to 250,000,000.
For Against Abstain
--- ------- -------
73,892,497 2,657,223 37,972
3. To approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of Preferred Stock from
1,000,000 to10,000,000 shares.
For Against Abstain Broker non-vote
--- ------- ------- ---------------
46,741,051 23,384,138 59,599 6,402,904
4. To approve an amendment to the Company's 1992 Employee Stock Purchase
Plan to increase by 500,000 the number of shares reserved for issuance
thereunder.
For Against Abstain
--- ------- -------
76,214,730 260,174 112,788
5. To approve an amendment to the Jabil Circuit, Inc. 1992 Stock Option
Plan to increase the shares reserved for issuance under the plan from
5,892,472 as of October 21, 1999 to 9,392,472 shares.
For Against Abstain
--- ------- -------
46,374,854 30,047,990 164,848
6. To ratify the selection of KPMG LLP as independent auditors for the
Company.
For Against Abstain
--- ------- -------
76,405,698 52,129 129,865
17
18
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation of Jabil Circuit, Inc.
3.2 Bylaws of Jabil Circuit, Inc.
10.1 Amended and Restated Loan Agreement dated as of
April 7, 2000 among Jabil Circuit, Inc. and Certain
Borrowing Subsidiaries, The Banks Named Therein and
Bank One, NA As Administrative Agent and SunTrust
Bank As Syndication Agent
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
On March 16, 2000 we filed a Current Report on Form
8-K reporting financial results for the second
quarter and first six months of fiscal 2000 and
announced a stock split in the form of a 100 percent
stock dividend.
On March 29, 2000 we filed a Current Report on Form
8-K regarding our stock split.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Jabil Circuit, Inc.
Registrant
Date: April 13, 2000 By: /s/ Timothy L. Main
-------------- ----------------------------------
Timothy L. Main
President
Date: April 13, 2000 By: /s/ Chris A. Lewis
-------------- ----------------------------------
Chris A. Lewis
Chief Financial Officer
18