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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 February 28, 2001.
[ ] 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.
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(Exact name of registrant as specified in its charter)
DELAWARE 38-1886260
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10560 Ninth Street North
St. Petersburg, FL 33716
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(Address of principal executive offices, including zip code)
Registrant's Telephone No., including area code: (727) 577-9749
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--------------------------------
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, 2001, there were 191,263,934 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
February 28, 2001 and August 31, 2000........................... 3
Consolidated Statements of Earnings for the three and six
months ended February 28, 2001 and February 29, 2000............ 4
Consolidated Statements of Cash Flows for the six
months ended February 28, 2001 and February 29, 2000............. 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 4. Submission of Matters to a Vote of Security Holders.............. 15
Item 6. Exhibits and Reports on Form 8-K................................. 15
Signatures....................................................... 16
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PART I. FINANCIAL INFORMATION
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
February 28, August 31,
2001 2000
----------- -----------
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 146,125 $ 337,602
Accounts receivable, net 535,763 523,096
Inventories 631,746 477,548
Prepaid expenses and other current assets 41,883 30,984
Deferred income taxes 18,053 18,040
----------- -----------
Total current assets 1,373,570 1,387,270
Property, plant and equipment, net 742,985 587,494
Other assets 43,660 43,428
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$ 2,160,215 $ 2,018,192
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current installments of long term debt $ 8,333 $ 8,333
Accounts payable 645,946 594,111
Accrued expenses 67,358 72,261
Income taxes payable 11,021 17,270
----------- -----------
Total current liabilities 732,658 691,975
Long term debt, less current installments 25,000 25,000
Deferred income taxes 19,484 28,112
Deferred grant revenue 8,332 2,922
----------- -----------
Total liabilities 785,474 748,009
----------- -----------
Stockholders' equity
Common stock 196 190
Additional paid-in capital 859,653 843,784
Retained earnings 515,282 426,814
Cumulative translation adjustment (390) (605)
----------- -----------
Total stockholders' equity 1,374,741 1,270,183
----------- -----------
$ 2,160,215 $ 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 Six months ended
February 28, February 29, February 28, February 29,
2001 2000 2001 2000
----------- ----------- ----------- -----------
Net revenue $ 1,211,175 $ 837,562 $ 2,340,130 $ 1,527,384
Cost of revenue 1,102,737 753,479 2,120,219 1,369,914
----------- --------- ----------- -----------
Gross profit 108,438 84,083 219,911 157,470
Operating expenses:
Selling, general and administrative 46,892 31,612 90,972 58,663
Research and development 1,553 1,203 2,981 2,385
Amortization of intangibles 828 644 1,605 1,243
Acquisition-related charges 843 -- 843 5,153
----------- --------- ----------- -----------
Operating income 58,322 50,624 123,510 90,026
Interest income (1,365) (32) (3,859) (1,212)
Interest expense 2,320 1,474 2,759 2,039
----------- --------- ----------- -----------
Income before income taxes 57,367 49,182 124,610 89,199
Income taxes 16,641 15,246 36,142 28,775
----------- --------- ----------- -----------
Net income $ 40,726 $ 33,936 $ 88,468 $ 60,424
=========== ========= =========== ===========
Earnings per share:
Basic $ 0.21 $ 0.19 $ 0.46 $ 0.34
=========== ========= =========== ===========
Diluted $ 0.21 $ 0.18 $ 0.45 $ 0.33
=========== ========= =========== ===========
Common shares used in the calculations
of earnings per share:
Basic 190,931 175,715 190,729 175,268
=========== ========= =========== ===========
Diluted 198,326 184,518 198,617 183,648
=========== ========= =========== ===========
See Accompanying Notes to Consolidated Financial Statements
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Six months ended
February 28, February 29,
2001 2000
----------- -----------
Cash flows from operating activities:
Net income $ 88,468 $ 60,424
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 72,203 43,524
Recognition of grant revenue (519) (606)
Deferred income taxes (8,641) 10,702
Loss on sale of property 1,224 2,654
Changes in operating assets and liabilities:
Accounts receivable (12,667) (114,960)
Inventories (154,198) (132,146)
Prepaid expenses and other current assets (10,899) (9,302)
Other assets (1,622) 2,579
Accounts payable and accrued expenses 55,382 125,996
Income taxes payable (6,249) (9,648)
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Net cash provided by/(used) in operating activities 22,482 (20,783)
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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 (228,983) (127,698)
Proceeds from sale of property and equipment 1,670 1,608
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Net cash used in investing activities (227,313) (131,999)
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Cash flows from financing activities:
Increase in note payable to bank -- 73,499
Payments of long-term debt -- (2,656)
Net proceeds from issuance of common stock 7,425 10,351
Proceeds from Scottish grant 5,929 2,251
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Net cash provided by financing activities 13,354 83,445
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Net decrease in cash and cash equivalents (191,477) (69,337)
Cash and cash equivalents at beginning of period 337,602 125,949
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Cash and cash equivalents at end of period $ 146,125 $ 56,612
========= =========
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 normal and recurring adjustments, necessary
for a fair presentation of the financial position, results of
operations and cash flows for the periods presented. The results of
operations for the three-month and six-month periods ended February
28, 2001, 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)
Three Months Ended Six Months Ended
February February
2001 2000 2001 2000
-------- -------- -------- --------
Numerator:
Net income $ 40,726 $ 33,936 $ 88,468 $ 60,424
Denominator:
Denominator for basic EPS-
Weighted-average shares 190,931 175,715 190,729 175,268
Effect of dilutive securities:
Employee stock options 7,395 8,803 7,888 8,380
-------- -------- -------- --------
Denominator for diluted EPS-
Adjusted weighted-average shares 198,326 184,518 198,617 183,648
======== ======== ======== ========
Basic EPS $ 0.21 $ 0.19 $ 0.46 $ 0.34
======== ======== ======== ========
Diluted EPS $ 0.21 $ 0.18 $ 0.45 $ 0.33
======== ======== ======== ========
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For the three-month and six-month periods ended February 28,
2001, options to purchase 759,846 and 475,449 shares of common stock,
respectively, were outstanding 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 29, 2000, 21,377
and 172,924 of options, respectively, were excluded for the same
reason.
COMPREHENSIVE INCOME
The Company's balance of accumulated other comprehensive
income is composed exclusively of the cumulative foreign currency
translation adjustment. For the three and six month periods ended
February 28, 2001, the Company recorded foreign currency translation
adjustments of approximately $241,000 and $215,000, respectively,
resulting in total comprehensive income of $40.9 million and $88.7
million. For the three and six month periods ended February 29, 2000,
currency translation adjustments of $1,000 and $(324,000),
respectively, were recorded resulting in total comprehensive income of
$33.9 million and $60.1 million, 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 or cash flows.
RECENT 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 an 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 February 28, August 31,
2001 2000
------------ ----------
Finished goods $ 81,555 $ 54,477
Work-in-process 74,938 54,288
Raw materials 475,253 368,783
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$631,746 $477,548
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NOTE 3. SEGMENT INFORMATION
Financial Accounting Standards Board Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information
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 Six Months Ended
February February
2001 2000 2001 2000
----------- --------- ----------- -----------
Net revenue $ 1,211,175 $ 837,562 $ 2,340,130 $ 1,527,384
Depreciation and amortization $ 41,633 $ 20,518 $ 72,203 $ 43,524
Interest (income) $ (1,365) $ (32) $ (3,859) $ (1,212)
Interest expense $ 2,320 $ 1,474 $ 2,759 $ 2,039
Segment income before income tax $ 60,718 $ 51,827 $ 127,334 $ 97,564
Corporate (income) expense 2,508 2,645 1,881 3,212
Non-recurring charges 843 -- 843 5,153
----------- --------- ----------- -----------
Income before income taxes $ 57,367 $ 49,182 $ 124,610 $ 89,199
=========== ========= =========== ===========
February 28, 2001 August 31, 2000
----------------- ---------------
Long-lived assets $786,645 $630,922
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Foreign source revenue represented 48% of net revenue for the
second quarter and first six months of fiscal 2001 compared to 41% and
42% for the same periods 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 facilities in
Chihuahua, Mexico and Tiszaujvaros, Hungary.
NOTE 4. BUSINESS ACQUISITION
On January 11, 2001, we announced that we had entered into a
business sale agreement with Marconi plc to purchase certain
operations of its communications division. The operations are located
in the United States, United Kingdom, Italy and Germany. Total
consideration to be paid, subject to pre-closing adjustments, is
estimated to have a present value of approximately $390 million
payable two years from closing and an additional $20 million payable
three years from closing. The completion of the transaction is subject
to a number of customary and other closing conditions, including
obtaining various anti-trust and other approvals and clearances in
four countries, certain consents from third parties, including
customers of the seller, and the seller being satisfied that the
Company will be able to perform its obligations under the supply
agreement to be entered into in connection with the closing that is
described below. The transaction will be accounted for under the
purchase method of accounting and will result in 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. The company
currently estimates that such agreement will generate in excess of $4
billion of revenue over the term of the agreement.
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 currently intended to be
implemented over the course of the summer and fall of 2001 assuming
that all of the closing conditions occur.
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
This Quarterly Report on Form 10-Q contains certain statements that
are, or may be deemed to be, forward-looking statements within the meaning of
section 27A of the Securities Act of 1933 and section 21E of the Securities
Exchange Act of 1934, and are made in reliance upon the protections provided by
such acts for forward-looking statements. These forward-looking statements
(such as when we describe what we "believe," "expect" or "anticipate" will
occur, and other similar statements) include, but are not limited to,
statements regarding future sales and operating results, future prospects,
anticipated benefits of proposed (or future) acquisitions and new facilities,
growth, the capabilities and capacities of business operations, any financial
or other guidance and all statements that are not based on historical fact, but
rather reflect our current expectations concerning future results and events.
The ultimate correctness of these forward-looking statements is dependent upon
a number of known and unknown risks and events, and is subject to various
uncertainties and other factors that may cause our actual results, performance
or achievements to be different from any future results, performance or
achievements expressed or implied by these statements. The following important
factors, among others, could affect future results and events, causing those
results and events to differ materially from those expressed or implied in our
forward-looking statements: business conditions and growth in the contract
manufacturing industry and the general economy, variability of operating
results, dependence on a limited number of customers, limited availability of
components, dependence on certain industries, variability of customer
requirements, ability to consummate acquisitions and to integrate operations
following consummation of acquisitions, other economic, business and
competitive factors affecting our industry and business generally and other
factors that we may not have currently identified or quantified. For a further
list and description of various risks, relevant factors and uncertainties that
could cause future results or events to differ materially from those expressed
or implied in our forward-looking statements, see our Annual Report on Form
10-K for the fiscal year ended August 31, 2000, any subsequent Reports on Form
10-Q and Form 8-K and our other securities filings. All forward-looking
statements included in this Report on Form 10-Q are made only as of the date of
this Report on Form 10-Q, and we do not undertake any obligation to publicly
update or correct any forward-looking statements to reflect events or
circumstances that subsequently occur or which we hereafter become aware of.
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 second quarter and first six months of fiscal
2001 increased 45% and 53% to $1.2 billion and $2.3 billion, respectively, from
$838 million and $1.5 billion in the second quarter and first six months of
fiscal 2000. This increase from the previous fiscal year was primarily due to
increased production of communications and personal computer products. Foreign
source revenue represented 48% of net revenue for the second quarter and first
six months of fiscal 2001 compared to 41% and 42% for the same periods 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
facilities in Chihuahua, Mexico and Tiszaujvaros, Hungary.
Gross profit decreased to 9.0% and 9.4% for the second quarter and
first six months of fiscal 2001 from 10.0% and 10.3% for the same periods of
fiscal 2000 primarily reflecting a
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higher content of material-based revenue as well as relatively lower levels of
capacity utilization than the prior periods.
Selling, general and administrative expenses remained at a rate of
3.9% of net revenue in the second quarter of fiscal 2001 as compared to the
same period in the prior fiscal year, while increasing in absolute dollars from
$31.6 million in the second quarter of fiscal 2000 to $46.9 million in the
second quarter of fiscal 2001. Selling, general and administrative expenses in
the first six months of fiscal 2001 were 3.8% of net revenue which is
consistent with the same period of the prior fiscal year, while increasing in
absolute dollars from $58.7 million to $90.9 million. 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 were 0.1% of net revenue for the
second quarter and first six months of fiscal 2001, as compared to 0.1% and
0.2% for each of the same periods of fiscal 2000. In absolute dollars, the
expenses increased approximately $0.4 million and $0.6 million versus the same
periods of fiscal 2000.
Amortization of intangibles remained a constant 0.1% of net revenue in
the second quarter and first six months of fiscal 2001, while increasing from
$0.6 million to $0.8 million and $1.2 million to $1.6 million, respectively, as
compared to the same periods of fiscal 2000.
During the second quarter of fiscal 2001, we announced a proposed
acquisition of certain manufacturing operations of Marconi plc ("Marconi") and
recorded an acquisition-related charge of $0.8 million ($0.6 million after-tax)
consisting of costs to prepare for the integration of the business. We expect
to incur certain charges totaling $20 million to $25 million pre-tax over the
next two quarters associated with reductions in our cost structure and
acquisition integration costs in the amounts of $13 million to $18 million and
$7 million, respectively.
Interest income increased to $1.4 million in the second quarter of
fiscal 2001 from $32 thousand in the second quarter of fiscal 2000 as a result
of increased cash on hand. Interest income increased approximately $2.7 million
in the first six months of fiscal 2001 to $3.9 million from $1.2 million for
the same period in fiscal 2000 as a result of increased cash on hand in the
first quarter of fiscal 2001.
Interest expense increased approximately $0.8 million in the second
quarter of fiscal 2001 to $2.3 million as compared to $1.5 million in the
second quarter of fiscal 2000. Interest expense increased approximately $0.8
million for the first six months of fiscal 2001, to $2.8 million from $2.0
million. These increases are primarily a result of increased borrowings to
support working capital needs.
Our effective tax rate decreased to 29% in both the second quarter and
first six months of fiscal 2001 from 30% and 32%, respectively, in each of the
second quarter and first six months of fiscal 2000. The tax rate is
predominantly a function of the mix of domestic versus international
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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 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. Subsequent to February 28, 2001, we experienced
reduction in demand as a result of overall deteriorating economic conditions in
our industry. 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 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 and our impending acquisition of certain Marconi
manufacturing assets. 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
acquisition of GET Manufacturing, Inc. and Bull Information Technology during
fiscal 2000 and our proposed acquisition of operations from Marconi. We also
intend to continue to evaluate strategic acquisitions of ancillary services to
round out our service offerings, similar to our fiscal year 2000 acquisition of
Telenor Technology Services, a repair and logistics provider, based in Dublin,
Ireland. However, we cannot be assured 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
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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; (10) the impact on the Company of any unionized work force it may
acquire; and (11) 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.
On January 11, 2001, we announced that we had entered into a business
sale agreement with Marconi plc to purchase certain operations of its
communications division. The operations are located in the United States,
United Kingdom, Italy and Germany. Total consideration to be paid, subject to
pre-closing adjustments, is estimated to have a present value of approximately
$390 million payable two years from closing and an additional $20 million
payable three years from closing. The completion of the transaction is subject
to a number of customary and other closing conditions, including obtaining
various anti-trust and other approvals and clearances in four countries,
certain consents from third parties, including customers of the seller, and the
seller being satisfied that the Company will be able to perform its obligations
under the supply agreement to be entered into in connection with the closing
that is described below. The transaction will be accounted for under the
purchase method of accounting and will result in approximately $146 million of
goodwill and other intangibles. Funding for this acquisition will be provided
by our existing banking facilities. 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. The company currently estimates that such agreement will
generate in excess of $4 billion of revenue over the term of the agreement.
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 currently intended to be implemented over the course of the summer and fall
of 2001 assuming that all of the closing conditions occur.
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 2001 our principal sources of liquidity consisted of
cash, available borrowings under our revolving credit facilities and an
accounts receivable 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 accounts receivable securitization
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program provides for the sale of up to $225 million of eligible accounts
receivables of certain U.S. plants. As of February 28, 2001, we were not
utilizing our revolving credit facility or the accounts receivable
securitization program.
Operating activities for the six months ended February 28, 2001
provided $22.5 million in cash. The generation of cash was primarily due to net
income of $88.5 million, depreciation and amortization of $72.2 million, and
increases in accounts payable and accrued expenses of $55.4 million, offset by
increases in inventories of $154.2 million, increases in accounts receivable of
$12.7 million, increases in prepaid and other current assets of $10.9 million,
and increases in deferred and current income taxes payable of $14.9 million.
The increase in accounts receivable, accounts payable, and inventory was due to
commensurate increases in planned levels of business.
Net cash used in investing activities of $227.3 million for the six
months ended February 28, 2001 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. Excluding money needed to fund the Marconi acquisition and
any other significant acquisition we may pursue, we currently believe that
during fiscal year 2001, our capital expenditures will approximate $300 to $350
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 $250 to $350 million to a total of $750 to $850
million to fund our capital expenditures, working capital requirements and the
purchase of the Marconi operations in fiscal 2001.
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 28, 2001. 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.
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PART II. OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At our Annual Meeting of Shareholders, held on January 18, 2001, the
following proposals were voted upon by the shareholders as indicated below:
1. To elect the board of directors
Number of Shares
----------------
For Withheld
----------- ---------
William D. Morean 162,459,966 2,141,086
Thomas A. Sansone 162,458,598 2,142,454
Timothy L. Main 162,459,330 2,141,722
Lawrence J. Murphy 162,412,787 2,188,265
Mel S. Lavitt 161,652,436 2,948,616
Steven A. Raymund 162,607,484 1,993,568
Frank A. Newman 162,605,268 1,995,784
2. To approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common
Stock from 250,000,0000 to 500,000,000.
For Against Abstain
--- ------- -------
161,131,409 3,451,180 18,463
3. To ratify the selection of KPMG LLP as independent auditors
for the Company.
For Against Abstain
--- ------- -------
164,522,651 63,141 15,260
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
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: April 13, 2001 By: /s/ Timothy L. Main
-------------- -------------------------------
Timothy L. Main
President/CEO
Date: April 13, 2001 By: /s/ Chris A. Lewis
-------------- -------------------------------
Chris A. Lewis
Chief Financial Officer
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