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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, 1997.
--- 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.)
10800 Roosevelt Blvd.
St. Petersburg, FL 33716
(Address of principal executive offices, including zip code)
Registrant's Telephone No., including area code: (813) 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 February 28, 1997, there were 18,213,614 shares of the Registrant's
Common Stock outstanding.
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
February 28, 1997 and August 31, 1996.............................. 3
Consolidated Statements of Operations
for the six months ended February 28, 1997 and 1996................ 4
Consolidated Statements of Cash Flows
for the six months ended February 28, 1997 and 1996................ 5
Notes to Consolidated Financial Statements......................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................... 8
PART II. OTHER INFORMATION
Item 4. Submission of matters to a vote of security holders................11
Item 6. Exhibits and Reports on Form 8-K...................................12
Signatures.................................................................13
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share and per share data)
August 31, February 28,
1996 1997
---------- ------------
ASSETS
Current assets
Cash $ 73,319 $ 65,158
Accounts receivable - Net 84,839 90,838
Inventories 64,869 78,281
Refundable income taxes 0 0
Prepaid expenses and other current assets 340 463
Deferred income taxes 3,971 5,142
-------- --------
Total current assets 227,338 239,882
Property, plant and equipment, net 70,704 91,254
Other assets 1,898 1,882
-------- --------
$299,940 $333,018
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current installments of long term debt 1,979 1,979
Current installments of capital lease obligations 472 480
Accounts payable 78,600 93,372
Accrued expenses 24,550 24,745
Income taxes payable 5,979 3,146
-------- --------
Total current liabilities 111,580 123,722
Long term debt, less current installments 57,257 56,217
Capital lease obligations, less current installments 1,114 975
Deferred income taxes 2,883 2,359
Deferred grant revenue 2,872 2,729
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Total liabilities 175,706 186,002
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Stockholders' equity
Common stock 18 18
Additional paid in capital 56,924 59,792
Retained earnings 67,319 87,206
-------- --------
124,261 147,016
Less:
Unearned compensation from grant of stock option 27 0
-------- --------
Net stockholders' equity 124,234 147,016
-------- --------
$299,940 $333,018
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See Accompanying Notes to Consolidated Financial Statements
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
Three months ended Six months ended
-------------------------- ---------------------------
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
1996 1997 1996 1997
-------- -------- -------- ---------
Net revenue $235,628 $222,187 $469,483 $425,257
Cost of revenue 217,360 195,711 433,897 375,689
-------- -------- -------- --------
Gross profit 18,268 26,476 35,586 49,568
Operating expenses:
Selling, general and administrative 6,070 7,918 11,631 15,645
Research and development 528 804 927 1,509
-------- -------- -------- --------
Operating income 11,670 17,754 23,028 32,414
Interest expense 2,323 389 4,986 1,047
-------- -------- -------- --------
Income before income taxes 9,347 17,365 18,042 31,367
Income taxes 3,009 6,306 6,489 11,480
-------- -------- -------- --------
Net income $ 6,338 $ 11,059 $ 11,553 $ 19,887
======== ======== ======== ========
Net income per share $ 0.34 $ 0.58 $ 0.65 $ 1.04
======== ======== ======== ========
Weighted average number of
shares of common stock and
common stock equivalents 18,818 19,163 17,892 19,053
======== ======== ======== ========
See Accompanying Notes to Consolidated Financial Statements
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
February 29, February 28,
1996 1997
Cash flows from operating activities:
Net income $11,553 $19,887
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 8,624 11,447
Recognition of grant revenue (1,082) (1,065)
Deferred income taxes (1,102) (1,695)
(Gain) loss on sale of property (6) (307)
Foreign currency translation loss 80 0
Changes in operating assets and
liabilities:
Accounts receivable 4,059 (5,999)
Inventories (20,128) (13,412)
Prepaid expenses and other current assets 256 (123)
Refundable income taxes 2,154 0
Other assets (630) 14
Accounts payable and accrued expenses (5,768) 12,134
------- -------
Net cash provided by (used in) operating activities (1,990) 20,881
------- -------
Cash flows from investing activities:
Acquisition of property, plant and equipment (19,376) (32,036)
Proceeds from sale of property and equipment 197 375
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Net cash used in investing activities (19,179) (31,661)
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Cash flows from financing activities:
Increase/(Decrease) in note payable to bank (22,000) 0
Proceeds from long-term debt 9,222 0
Payments of long-term debt (6,405) (1,040)
Payments of capital lease obligations (445) (131)
Net proceeds from issuance of common stock 39,651 2,868
Proceeds from Scottish grant 0 922
------- -------
Net cash provided/(used) by financing activities 20,023 2,619
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Net increase (decrease) in cash (1,146) (8,161)
Cash at beginning of period 5,486 73,319
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Cash at end of period $ 4,340 $65,158
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Supplemental disclosure information:
Cash Paid:
Interest $ 2,252 $ 2,196
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Income taxes $ 1,550 $12,340
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Non-Cash Investing and Financing activities:
Tax benefit of options exercised $ 111 $ 1,103
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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)
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements of Jabil Circuit,
Inc. and subsidiaries ("the Company") 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 statements as of and for the year ended August
31, 1996 contained in the Company's 1996 annual report on Form 10-K. In the
opinion of management, 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 when read in conjunction
with the annual audited consolidated financial statements and related notes
thereto. The results of operations for the six month period ended February
28, 1997 are not necessarily indicative of the results that should be
expected for a full fiscal year.
Net Income Per Share
Net income per share is computed using the weighted average number of
common shares and dilutive common equivalent shares outstanding during the
applicable period. Common equivalent shares consist of stock options, using
the treasury stock method.
Commitments and Contingencies
At February 28, 1997 the Company had outstanding approximately $14 million
in equipment purchase commitments, and approximately $30.0 million in
commitments related to the construction of new manufacturing facilities
During the 1994 fiscal year, the Company instituted a breach of contract
action against Epson of America Inc. requesting certain specified and
unspecified monetary damages. On July 21, 1995, Epson filed a counterclaim
citing damages for, among other things, breach of contract and negligent
misrepresentation. The Company expects discovery to conclude during the
second half of fiscal 1997 and the trial to commence in the second half of
fiscal 1997 in the United States District Court for the Middle District of
Florida. The parties have been unsuccessful in mediating or arbitrating the
dispute, despite participation in several non-binding mediation and
arbitration sessions. The Company intends to pursue aggressively its legal
claims and contest vigorously Epson's counterclaims. The Company believes
strongly in the validity of its claims and believes that any potential
exposure to the Company is substantially less than the amount claimed by
Epson. The Company believes that adequate provision has been
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made in its consolidated financial statements for adverse exposure related
to this matter. However, such litigation may result in substantial costs
and diversion of resources and, given the uncertainties inherent in
litigation, could have a material adverse effect on the Company's operating
results and financial condition, if decided adversely to the Company.
The Company is party to certain other law suits in the ordinary course of
business. Management does not believe that these proceedings, individually
or in aggregate, are material or that any adverse outcomes of these lawsuits
will have a material adverse effect on the Company's financial statements.
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
This management's Discussion and Analysis of Financial
Condition and Results of Operations contains trend analysis
and a number of forward looking statements. These statements
are based on current expectations and actual results may
differ materially. Among the factors which could cause actual
results to vary are those described in "Business Factors" below.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company's net revenue for the second quarter and first six months
of fiscal 1997 decreased 5.7% and 9.4% to $222 million and $425 million
respectively from $236 million and $469 million in the second quarter and first
six months of fiscal 1996. This decrease was primarily due to the end of
production of certain hard drive and personal computer products, offset by
increased production of communications products. Foreign source revenue
represented 37% and 34% of net revenue for the second quarter and first six
months of fiscal 1997 respectively, compared to 39% and 40% for the same
periods of fiscal 1996. The decrease in foreign source revenue was
attributable to decreased exports form the Company's domestic locations.
Gross margin increased to 11.9% and 11.7% for the second quarter and
first six months respectively of fiscal 1997 from 7.8% and 7.6% for the second
quarter and first six months of fiscal 1996. This increase resulted from a
shift in product mix to higher value added products along with increased
utilization of the Company's international operations.
Selling, general and administrative expenses in the second quarter and
first six months of fiscal 1997 increased to 3.6% and 3.7% of net revenue
respectively compared to 2.6% and 2.5% in the second quarter and first six
months of the prior fiscal year, or $1.8 million and $4.0 million in absolute
dollars. The increase was due to additional staffing at an operational level
and increased resources at a corporate level.
Research and development expenses increased as a percentage of net
revenue in the second quarter and first six months of fiscal 1997 to 0.4% as
compared to 0.2% for the second quarter and first six months of fiscal 1996.
In absolute dollars, the expenses increased approximately $276,000 and $582,000
versus the same periods of fiscal 1996 due to expansion of circuit design
activities.
Interest expense decreased $2.0 million and $4.0 million respectively
in the second quarter and first six months of fiscal 1997 to $0.4 million and
$1.0 million from $2.3 million and $5.0 million in the second quarter and
first six months of fiscal 1996 due to a decrease in total borrowings, lower
effective interest rates and interest income earned on cash balances.
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The Company's effective tax rate increased to 36.3% and 36.6% in the
second quarter and first six months of fiscal 1997 respectively from 32.2% and
36.0% in the second quarter and first six months of fiscal 1996. Fiscal 1996
tax rates were lower due to utilization of net operating losses from
international operations.
Business Factors
Due to the nature of turnkey manufacturing and the Company's relatively
small number of customers, the Company's quarterly operating results are
affected by the levels and timing of orders; the level of capacity utilization
of its manufacturing facilities and associated fixed costs; fluctuations in
materials costs; and by the mix of materials 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 achieved by the Company 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 the Company's customers have
terminated their manufacturing arrangement with the Company, and other
customers have significantly reduced or delayed the volume of manufacturing
services ordered from the Company. Any such termination of a manufacturing
relationship or change, reduction or delay in orders could have an adverse
affect of the Company's results of operations.
Liquidity and Capital Resources
At February 28, 1997 the Company's principal sources of liquidity
consisted of cash and available borrowings under the Company's credit
facilities. The Company and its subsidiaries have committed line of credit
facilities in place with a syndicate of banks that provide up to $60 million of
working capital borrowing capacity.
The Company generated $20.9 million of cash in operating activities
for the six months ended February 28, 1997. The generation of cash was
primarily due to net income of $19.9 million, depreciation and amortization of
$11.4 million and an increase of accounts payable and accrued expenses of $12.1
million, offset by an increase in inventories of $13.4 million and an increase
in accounts receivable of $6.0 million.
Net cash used in investing activities of $31.6 million for the six
months ended February 28, 1997 was a result of the Company's capital
expenditures for equipment world-wide in order to support increased activities
and the construction of new manufacturing facilities.
Net cash of $2.6 million was provided by financing activities for the six
months ended February 28, 1997. This was primarily attributable to $1.0
million payments of long term debt offset by $2.8 million of proceeds from the
issuance of common stock.
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The Company believes that cash on hand, funds provided by operations
and available under the credit agreements will be sufficient to satisfy its
currently anticipated working capital and capital expenditure requirements for
the next twelve months.
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
At the company's annual stockholders meeting on January 23, 1997, the
following members were elected to the board of directors:
FOR: WITHHELD
---- --------
William D. Morean 16,620,268 93,790
Thomas A. Sansone 16,620,268 93,790
Ronald J. Rapp 16,619,268 94,790
Lawrence J. Murphy 16,637,768 76,290
Mel S. Lavitt 16,619,568 94,490
Steven A. Raymund 16,638,668 75,390
The following proposals were approved at the annual shareholders meeting:
AFFIRMATIVE NEGATIVE
VOTES VOTES WITHHELD
----------- -------- --------
1 To approve amendment of the Company's
1992 Employee Stock Purchase Plan to
increase by 200,000 shares the number
of shares reserved for issuance
thereunder. 16,563,604 143,986 4,468
2 To approve amendment to the Company's
1992 Stock Option Plan to increase by
400,000 shares the number of shares
reserved for issuance thereunder. 15,288,245 1,287,472 6,868
3 To ratify selection of KPMG Peat
Marwick as independent auditors for
the Company. 16,707,335 3,117 3,606
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
Part II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Statement re Computation of Net Income per Share
27.1 Financial Data Schedule (for SEC use only)
(b) Form 8-K
No Reports on Form 8-K were filed by the Registrant
during the quarter ended February 28, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities and 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.
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Registrant
Date: 4/14/97 /s/ Thomas A.Sansone
------------ ----------------------------
Thomas A. Sansone
President
Date: 4/14/97 /s/ Chris A. Lewis
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Chris A. Lewis
Chief Financial Officer
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