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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 November 30, 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 January 5, 2001, there were 190,810,842 shares of the Registrant's
Common Stock outstanding.
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
November 30, 2000 and August 31, 2000........................... 3
Consolidated Statements of Earnings for the three months
ended November 30, 2000 and 1999................................ 4
Consolidated Statements of Cash Flows for the three months
ended November 30, 2000 and 1999................................ 5
Notes to Consolidated Financial Statements...................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................... 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk...... 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................... 14
Item 6. Exhibits and Reports on Form 8-K................................ 14
Signatures...................................................... 15
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PART I. FINANCIAL INFORMATION
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
November 30, August 31,
2000 2000
----------- -----------
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 131,067 $ 337,602
Accounts receivable - Net 568,298 523,096
Inventories 641,514 477,548
Prepaid expenses and other current assets 40,543 30,984
Deferred income taxes 19,600 18,040
----------- -----------
Total current assets 1,401,022 1,387,270
Property, plant and equipment, net 704,785 587,494
Other assets 44,208 43,428
----------- -----------
$ 2,150,015 $ 2,018,192
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current installments of long term debt $ 8,333 $ 8,333
Accounts payable 664,467 594,111
Accrued expenses 67,898 72,261
Income taxes payable 24,466 17,270
----------- -----------
Total current liabilities 765,164 691,975
Long term debt, less current installments 25,000 25,000
Deferred income taxes 37,411 28,112
Deferred grant revenue 2,712 2,922
----------- -----------
Total liabilities 830,287 748,009
----------- -----------
Stockholders' equity
Common stock 191 190
Additional paid-in capital 845,612 843,784
Retained earnings 474,556 426,814
Accumulated other comprehensive income (631) (605)
----------- -----------
Total stockholders' equity 1,319,728 1,270,183
----------- -----------
$ 2,150,015 $ 2,018,192
=========== ===========
See Accompanying Notes to Consolidated Financial Statements
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
Three months ended
November 30, November 30,
2000 1999
----------- ---------
Net revenue $ 1,128,955 $ 689,822
Cost of revenue 1,017,482 616,435
----------- ---------
Gross profit 111,473 73,387
Operating expenses:
Selling, general and administrative 44,080 27,051
Research and development 1,428 1,182
Amortization of intangibles 777 599
Merger-related charge -- 5,153
----------- ---------
Operating income 65,188 39,402
Interest income (2,494) (1,180)
Interest expense 439 565
----------- ---------
Income before income taxes 67,243 40,017
Income taxes 19,501 13,529
----------- ---------
Net income $ 47,742 $ 26,488
=========== =========
Earnings per share:
Basic $ 0.25 $ 0.15
=========== =========
Diluted $ 0.24 $ 0.14
=========== =========
Common shares used in the calculations of
earnings per share:
Basic 190,526 174,820
=========== =========
Diluted 198,907 183,175
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See Accompanying Notes to Consolidated Financial Statements
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Three months ended
November 30, November 30,
2000 1999
--------- ---------
Cash flows from operating activities:
Net income $ 47,742 $ 26,488
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 30,570 23,006
Recognition of grant revenue (210) (317)
Deferred income taxes 7,739 11,473
Loss on sale of property 300 219
Changes in operating assets and liabilities:
Accounts receivable (45,202) (54,384)
Inventories (163,966) (78,297)
Prepaid expenses and other current assets (9,559) (7,938)
Other assets (1,583) (1,011)
Accounts payable and accrued expenses 65,993 85,435
Income taxes payable 7,196 (5,370)
--------- ---------
Net cash (used) in operating activities (60,980) (696)
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Cash flows from investing activities:
Net cash paid for business acquisitions -- (27,386)
Acquisition of property, plant and equipment (147,482) (61,884)
Proceeds from sale of property and equipment 98 750
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Net cash used in investing activities (147,384) (88,520)
--------- ---------
Cash flows from financing activities:
Increase in / (repayment of) note payable to bank -- (19,913)
Payments of long-term debt -- (2,656)
Sale of short-term investments -- 22,306
Net proceeds from issuance of common stock 1,829 4,533
Proceeds from Scottish grant -- 2,251
--------- ---------
Net cash provided by financing activities 1,829 6,521
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Net decrease in cash and cash equivalents (206,535) (82,695)
Cash and cash equivalents at beginning of period 337,602 125,949
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Cash and cash equivalents at end of period $ 131,067 $ 43,254
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See Accompanying Notes to Consolidated Financial Statements
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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") for interim reporting. 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, 2000,
contained in our 2000 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 should be read in conjunction with
the annual audited consolidated financial statements and related notes
thereto. The results of operations for the three-month period ended
November 30, 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
November 30,
2000 1999
-----------------------------
Numerator:
Net income $ 47,742 $ 26,488
Denominator:
Denominator for basic EPS-
Weighted-average shares 190,526 174,820
Effect of dilutive securities:
Employee stock options 8,381 8,355
-----------------------------
Denominator for diluted EPS-
Adjusted weighted-average
Shares 198,907 183,175
=============================
Basic EPS $ 0.25 $ 0.15
=============================
Diluted EPS $ 0.24 $ 0.14
=============================
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For the three-month period ended November 30, 2000 and 1999,
options to purchase 16,341 and 286, respectively, shares of common
stock were outstanding during the period 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.
COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("Statement 130").
Statement 130 establishes standards for reporting comprehensive income.
The Statement defines comprehensive income as the changes in equity of
an enterprise except those resulting from shareholder transactions. The
Company's balance of accumulated other comprehensive income is composed
exclusively of the cumulative foreign currency translation adjustment.
For the three month periods ended November 30, 2000 and 1999, the
Company recorded foreign currency translation adjustments of
approximately $(26,000) and $(325,000), respectively.
COMMITMENTS AND CONTINGENCIES
We are party to certain lawsuits in the ordinary course of
business. We do not believe that these proceedings, individually or in
the aggregate, will have a material adverse effect on our financial
position, results of operations and cash flows.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133 -
Accounting for Derivative Instruments and Hedging Activities. As
amended by Statements 137 and 138, Statement 133 establishes methods of
accounting for derivative financial instruments and hedging activities
related to those instruments as well as other hedging activities. The
Company adopted Statement 133, as amended, in the first quarter of this
fiscal year. The adoption of the Statement did not have a material
impact on our financial position, results of operations or cash flows.
SEC Staff Accounting Bulletin Number 101 - Revenue Recognition
in Financial Statements. We will be required to implement this bulletin
in the fourth 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 as currently
interpreted, we do not anticipate that the adoption of the bulletin
will have a material impact on our consolidated financial statements.
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NOTE 2. INVENTORIES
The components of inventories consist of the following:
In thousands November 30, August 31,
2000 2000
------------ ----------
Finished goods $ 57,492 $ 54,477
Work-in-process 67,382 54,288
Raw materials 516,640 368,783
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$ 641,514 $477,548
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NOTE 3. SEGMENT INFORMATION
The Company adopted the Financial Accounting Standards Board Statement
No. 131, Disclosures about Segments of an Enterprise and Related Information in
fiscal year 1999. Statement No. 131 establishes standards for reporting
information about segments in financial statements. Operating segments are
defined as components of an enterprise about which separate financial
information is available and that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.
We derive our revenue from providing manufacturing services to major
electronic companies on a contract basis. Operating segments consist of our
manufacturing locations. The services provided, the manufacturing processes,
class of customers, economic circumstances, operating margins and the order
fulfillment process is similar and generally interchangeable across
manufacturing locations. We have aggregated our operating segments into the
Electronic Manufacturing Services ("EMS") segment.
The following table sets forth segment information (in thousands):
Three Months Ended
November 30,
2000 1999
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Net revenue $1,128,955 $689,822
Segment income before income tax $ 66,616 $ 45,737
Corporate (income) expense (627) 567
Merger-related charges -- 5,153
---------- --------
Income before income taxes $ 67,243 $ 40,017
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November 30, 2000 August 31, 2000
----------------- ---------------
Long-lived assets $748,993 $630,922
Foreign source revenue represented 47% of net revenue for the first
quarter of fiscal 2001 compared to 44% for the same period of fiscal 2000. The
increase in foreign source revenue was attributable to increased production at
our international locations, the acquisition of facilities in Brazil and
Ireland, and the start of production in our greenfield facility in Chihuahua,
Mexico.
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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,
2000 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
Our net revenue for the first quarter of fiscal 2001 increased 63.7% to
$1.1 billion, from $690 million in the first quarter of fiscal 2000. This
increase from the previous fiscal year was primarily due to increased production
of communications and consumer products. Foreign source revenue represented
47.5% of net revenue for the first quarter of fiscal 2001 compared to 43.6% for
the same period of fiscal 2000. The increase in foreign source revenue was
attributable to increased production at our international locations, the
acquisition of facilities in Brazil and Ireland, and the start of production in
our greenfield facility in Chihuahua, Mexico.
Gross margin decreased to 9.9% for the first quarter of fiscal 2001
from 10.6% for the same period of fiscal 2000 primarily reflecting a higher
content of material-based revenue.
Selling, general and administrative expenses in the first quarter of
fiscal 2001 remained at 3.9% of net revenue compared to the same period in the
prior fiscal year, while increasing in absolute dollars from $27.1 million in
the first quarter of fiscal 2000 to $44.1 million in the first quarter of fiscal
2001. The dollar increases were primarily due to increased staffing and related
departmental expenses at all our locations as well as increased information
systems staff to support the expansion of our business.
Research and development expenses decreased to 0.1% of net revenue for
the first quarter of fiscal 2001 as compared to 0.2% for the same period of
fiscal 2000. In absolute dollars, the expenses increased approximately $0.2
million versus the same period of fiscal 2000.
Amortization of intangibles remained a constant 0.1% of net revenue in
the first quarter of fiscal 2001, while increasing from $0.6 million to $0.8
million as compared to the same period
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of fiscal 2000. This dollar increase is primarily attributable to the $2 million
and $5 million of goodwill resulting from the Telenor Technology Services
Limited and Bull Information Technology acquisitions, respectively. We are
amortizing the goodwill on a straight-line basis over fifteen years and ten
years for the Telenor Technology Services Limited and Bull Information
Technology acquisitions, respectively.
During the first quarter of fiscal 2000, we completed a merger with GET
Manufacturing, Inc. and recorded a one-time merger-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. There have been no one-time
acquisition-related charges recorded during the first quarter of fiscal 2001.
Interest income increased to $2.5 million in the first quarter of
fiscal 2001 from $1.2 million in the first quarter of fiscal 2000 as a result of
increased cash on hand.
Interest expense decreased approximately $0.2 million in the first
quarter of fiscal 2001 to $0.4 million as compared to $0.6 million in the first
quarter of fiscal 2000, as a result of a principal payment on our long-term debt
during the third quarter of fiscal 2000.
Our effective tax rate decreased to 29.0% in the first quarter of
fiscal 2001, from 33.8% for the same period of fiscal 2000. 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. The tax holiday has expired and we have applied for an extension
from the Malaysian tax authorities for a minimum of five years.
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 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.
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ACQUISITIONS AND EXPANSION
The EMS industry has experienced rapid growth over the past several
years as an increasing number of electronics companies have outsourced their
manufacturing requirements and divested their manufacturing facilities, such as
our acquisition of certain manufacturing facilities from Hewlett-Packard Company
in fiscal 1998. Electronics companies 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. We also seek
and evaluate 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 during fiscal 2000. We also
intend to continue to evaluate strategic acquisitions of ancillary services to
round out our service offerings, similar to our recent acquisition of Telenor
Technology Services, a repair and logistics provider, based in Dublin, Ireland.
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 completed the greenfield expansion in
Tiszaujvaros, Hungary and continued construction in Chihuahua, Mexico. When
completed, the Chihuahua facility will consist of two 250,000 square-foot
facilities.
SUBSEQUENT EVENT
On January 11, 2001, we announced that we had entered into an agreement
with Marconi plc ("Marconi") to purchase certain assets of its communications
division, Marconi Communications. The assets consist primarily of inventory and
property, plant and equipment of five manufacturing operations in the United
States, United Kingdom, Italy and Germany. Total consideration to be paid,
subject to pre-closing adjustments, will be approximately $390 million. The
transaction will be accounted for under the purchase method of accounting and
will result in
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approximately $146 million of goodwill and other intangibles. Funding for this
acquisition will be provided by our existing revolving credit facility. See
"Liquidity and Capital Resources."
Simultaneous with the closings, we will enter into a three-year product
supply agreement to manufacture existing and new products for Marconi in new
product introduction, printed circuit board assembly, final systems assembly as
well as repair of access, optical transmission and broadband switching products.
Under the proposed terms of the deal, up to 2,900 employees in Bedford,
Texas; Liverpool and Coventry, UK; Marcianise, Italy and Offenburg, Germany will
progressively transfer to Jabil Circuit. No involuntary job losses are expected
and existing employment rights will be protected. The transaction is intended to
be implemented by mid 2001. The closings are subject to regulatory approval in
each of the four countries.
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 2000, our principal sources of liquidity consisted of
cash, available borrowings under our credit facilities and an asset-backed
securitization program. We have committed line of credit facilities in place
with a syndicate of banks that provide up to $500 million of working capital
borrowing capacity. The asset-backed securitization program with Bank One
provides up to $225 million of eligible accounts receivables of certain U.S.
plants. As of November 30, 2000, we were not utilizing our revolving credit
facility or the asset backed program.
We used $60.2 million of cash in operating activities for the three
months ended November 30, 2000. The use of cash was primarily due to an increase
in inventories of $164.0 million, an increase of $45.2 million in accounts
receivable, offset by net income of $47.7 million, depreciation and amortization
of $30.6 million, and increases in accounts payable and accrued expenses of
$66.0 million. The increase in accounts receivable, accounts payable, and
inventory was due to commensurate increases in planned levels of business. The
increase in inventory resulted in an additional six days of inventory on hand
when compared to the previous quarter which will be consumed over the course of
the fiscal year.
Net cash used in investing activities of $148.2 million for the three
months ended November 30, 2000 consisted of our capital expenditures for
construction and equipment worldwide in order to support increased activities.
Over the past several years, we have experienced significant growth. As
a result, we have used cash to finance increases in our inventory and accounts
receivable. We believe that during fiscal year 2001, our capital expenditures
will exceed $350 to $400 million, principally for machinery, equipment,
facilities and related expenses. It is our intent to increase the capacity of
our existing $500 million revolving credit facility by $200 to $250 million to a
total of $700 to $750 million to fund our capital expenditures, working capital
requirements and the purchase of the Marconi operations in fiscal 2001.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our market risk during the three
months ended November 30, 2000. Market risk information is contained under the
caption "Quantitative And Qualitative Disclosures About Market Risk" of our 2000
Annual Report on Form 10-K for the fiscal year ended August 31, 2000 and is
incorporated herein by reference.
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
We are party to certain lawsuits in the ordinary course of business. We
do not believe that these proceedings, individually or in the aggregate, will
have a material adverse effect on our financial position, results of operations
and cash flows.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits- None
(b) Reports on Form 8-K
On September 19, 2000 we filed a Current Report on Form 8-K
reporting financial results for the fourth quarter of
fiscal 2000.
On November 27, 2000 we filed a Current Report on Form 8-K
reporting organizational changes to the company.
On December 20, 2000 we filed a Current Report on Form 8-K
reporting financial results for the first quarter of fiscal
2001.
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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: January 16, 2001 By: /s/ Timothy L. Main
---------------- -------------------
Timothy L. Main
President/CEO
Date: January 16, 2001 By: /s/ Chris A. Lewis
---------------- ------------------
Chris A. Lewis
Chief Financial Officer
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