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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, 1998.
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 March 27, 1998, there were 37,169,780 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
August 31, 1997 and February 28, 1998.................................. 3
Consolidated Statements of Earnings for the three months
and six months ended February 28, 1997 and 1998........................ 4
Consolidated Statements of Cash Flows
for the six months ended February 28, 1997 and 1998.................... 5
Notes to Consolidated Financial Statements............................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................... 9
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....................................... 11
Signatures............................................................. 12
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PART I. FINANCIAL INFORMATION
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
August 31, February 28,
1997 1998
---------- ------------
(Unaudited)
ASSETS
Current assets
Cash $ 45,457 $ 55,680
Accounts receivable - Net 116,987 119,545
Inventories 96,187 90,114
Prepaid expenses and other current assets 776 1,054
Deferred income taxes 6,591 6,046
-------- --------
Total current assets 265,998 272,439
Property, plant and equipment, net 139,520 182,465
Other assets 385 370
-------- --------
$405,903 $455,274
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current installments of long term debt $ 2,475 $ 0
Accounts payable 125,741 126,530
Accrued expenses 34,248 34,093
Income taxes payable 6,186 9,977
-------- --------
Total current liabilities 168,650 170,600
Long term debt, less current installments 50,000 50,000
Deferred income taxes 3,663 3,824
Deferred grant revenue 2,105 1,699
-------- --------
Total liabilities 224,418 226,123
-------- --------
Stockholders' equity
Common stock 37 37
Additional paid-in capital 61,632 70,088
Retained earnings 119,816 159,026
-------- --------
Total stockholders' equity 181,485 229,151
$405,903 $455,274
======== ========
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 28,
---------------------- ----------------------
1997 1998 1997 1998
-------- -------- -------- --------
Net revenue $222,187 $330,688 $425,257 $650,200
Cost of revenue 195,711 286,628 375,689 564,795
-------- -------- -------- --------
Gross profit 26,476 44,060 49,568 85,405
Operating expenses:
Selling, general and administrative 7,918 12,858 15,645 23,935
Research and development 804 879 1,509 1,791
-------- -------- -------- --------
Operating income 17,754 30,323 32,414 59,679
Interest expense, net 389 1,134 1,047 1,847
-------- -------- -------- --------
Income before income taxes 17,365 29,189 31,367 57,832
Income taxes 6,306 9,050 11,480 18,622
-------- -------- -------- --------
Net income $ 11,059 $ 20,139 $ 19,887 $ 39,210
======== ======== ======== ========
Basic earnings per share $ 0.31 $ 0.54 $ 0.55 $ 1.06
======== ======== ======== ========
Diluted earnings per share $ 0.29 $ 0.52 $ 0.52 $ 1.02
======== ======== ======== ========
Common shares used in the calculations
of basic earnings per share 36,181 37,080 35,925 37,050
======== ======== ======== ========
Common and common equivalent shares
used in the calculations of diluted
earnings per share 38,327 38,564 38,105 38,620
======== ======== ======== ========
See Accompanying Notes to Consolidated Financial Statements
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
For the six months
ended February 28,
-----------------------
1997 1998
-------- --------
Cash flows from operating activities:
Net income $ 19,887 $ 39,210
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 11,447 15,303
Recognition of grant revenue (1,065) (406)
Deferred income taxes (1,695) 706
(Gain) loss on sale of property (308) 115
Changes in operating assets and liabilities:
Accounts receivable (5,999) (2,558)
Inventories (13,412) 6,073
Prepaid expenses and other current assets (123) (278)
Other assets 14 9
Accounts payable and accrued expenses 12,134 11,539
-------- --------
Net cash provided by operating activities 20,880 69,713
-------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (32,021) (58,420)
Proceeds from sale of property and equipment 369 63
-------- --------
Net cash used in investing activities (31,652) (58,357)
-------- --------
Cash flows from financing activities:
Increase in note payable to bank -- --
Payments of long-term debt (1,040) (2,475)
Payments of capital lease obligations (139) 0
Net proceeds from issuance of common stock 2,868 1,342
Proceeds from Scottish grant 922 --
-------- --------
Net cash provided (used) by financing activities 2,611 (1,133)
-------- --------
Net increase (decrease) in cash (8,161) 10,223
Cash at beginning of period 73,319 45,457
-------- --------
Cash at end of period $ 65,158 $ 55,680
======== ========
Non-cash transactions:
Tax benefit of options exercised $ 1,103 $ 7,114
======== ========
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 ("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, 1997 contained in the Company's
1997 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, 1998 are not necessarily indicative of the results that
should be expected for a full fiscal year.
EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128
(SFAS 128), "Earnings per Share," in the second quarter of fiscal 1998.
Under SFAS 128, the Company presents two earnings per share (EPS)
amounts. Basic EPS is calculated based on net earnings available to
common shareholders and the weighted-average number of shares
outstanding during the reported period. Diluted EPS includes additional
dilution from potential common stock, such as stock issuable pursuant
to the exercise of stock options outstanding. All earnings per share
amounts for all periods have been presented, and where necessary,
restated to conform to the Statement 128 requirements.
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In thousands Three months ended Six months ended
February 28, February 28,
1997 1998 1997 1998
----------------------------------------------
Numerator:
Net income $11,059 $20,139 $19,887 $39,210
Denominator:
Denominator for basic EPS-
weighted-average shares 36,181 37,080 35,925 37,050
Effect of dilutive securities:
Employee stock options 2,146 1,484 2,180 1,570
----------------------------------------------
Denominator for diluted EPS-adjusted
weighted-average shares 38,327 38,564 38,105 38,620
==============================================
Basic EPS $ 0.31 $ 0.54 $ 0.55 $ 1.06
==============================================
Diluted EPS $ 0.29 $ 0.52 $ 0.52 $ 1.02
==============================================
For the three-month and six-month periods ended February 28, 1998,
options to purchase 15,000 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, the
effect would be antidilutive. For the three-month and six-month periods
ended February 28, 1997, no such antidilutive options existed.
COMMITMENTS AND CONTINGENCIES
At February 28, 1998, the Company had approximately $25 million in new
facility and equipment purchase commitments outstanding.
The Company is party to certain lawsuits 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.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income. Statement 130
establishes standards for reporting comprehensive income. The Statement
defines comprehensive income as the change in equity of an enterprise
except those resulting from shareholder transactions. All components of
comprehensive income are required to be reported in a new financial
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statement that is displayed with equal prominence as existing financial
statements. The Company will be required to adopt this statement
September 1, 1998. As the Statement addresses reporting and
presentation issues only, there will be no impact on earnings from its
adoption.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, Disclosures About Segments of an Enterprise and
Related Information. Statement 131 establishes standards for related
disclosures about the products and services, geographic areas, and
major customers of an enterprise. The Company will be required to adopt
this Statement for financial statements for the fiscal year ending
August 31, 1998. As this Statement addresses reporting and disclosure
issues only, there will be no impact on earnings from its adoption.
NOTE 2. BALANCE SHEET DETAIL
The components of inventories consist of the following:
In thousands August 31, February 28,
1997 1998
---------- ------------
(Unaudited)
Finished goods 5,594 9,520
Work-in-process 15,160 16,124
Raw materials 75,433 64,470
------ ------
96,187 90,114
====== ------
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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 1998 increased 49% and 53% to $331 million and $650, million,
respectively from $222 million and $425 million in the second quarter and first
six months of fiscal 1997. This increase from the previous fiscal year was
primarily due to increased production of communications and computer peripherals
products. Foreign source revenue represented 31% and 33% of net revenue for the
second quarter and first six months of fiscal 1998, respectively, compared to
34% and 32% for the same periods of fiscal 1997. The decrease in foreign source
revenue in the second quarter was attributable to increased production at the
Company's domestic locations.
Gross margin increased to 13.3% and 13.1% for the second quarter and
first six months, respectively, of fiscal 1998 from 11.9% and 11.7% for the
second quarter and first six months of fiscal 1997. This increase resulted from
a shift in product mix to higher value-added products.
Selling, general and administrative expenses in the second quarter of
fiscal 1998 increased to 3.9% of net revenue compared to 3.6% in the prior
fiscal year, while increasing in absolute dollars from $7.9 million in fiscal
1997 to $12.9 million in fiscal 1998. Selling, general and administrative
expenses of 3.7% of net revenue in the first six months of fiscal 1998 were
consistent with the same period of the prior fiscal year, while increasing in
absolute dollars from $15.6 million in fiscal 1997 to $23.9 million in fiscal
1998. The dollar increases were primarily due to increased staffing and related
departmental expenses at all the Company's locations along with increased
information systems staff to support the expansion of the Company's business.
Research and development expenses decreased to 0.3% of net revenue for
the second quarter and first six months of fiscal 1998 from 0.4% for the same
periods of fiscal 1997. In absolute dollars, the expenses increased
approximately $75,000 and $282,000, respectively, versus the same periods of
fiscal 1997 due to the expansion of circuit design activities.
Interest expense increased approximately $745,000 and $800,000,
respectively, in the second quarter and first six months of fiscal 1998 to $1.1
million from $0.4 million and $1.8 million from $1.0 million due to an increase
in short-term borrowings and decreased interest income earned on cash balances.
The Company's effective tax rate decreased to 31.0% and 32.2% in the
second quarter and first six months, respectively, of fiscal 1998 from 36.3% and
36.6% in the second quarter and first six months of fiscal 1997. The fiscal 1998
tax rate is lower primarily due to the granting of
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"pioneer" tax status to the Company's Malaysia subsidiary. This status allows
tax free treatment of the subsidiary's income for the period November 1, 1995 to
October 30, 2000.
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 level and timing of orders, the level of capacity utilization of
its 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 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 on the
Company's results of operations.
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1998, 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 $100 million of
working capital borrowing capacity.
The Company generated $69.7 million of cash in operating activities for
the six months ended February 28, 1998. The generation of cash was primarily due
to net income of $39.2 million, depreciation and amortization of $15.3 million,
an increase of accounts payable and accrued expenses of $11.5 million and a
decrease of $6.1 million in inventories, offset by an increase in accounts
receivable of $2.6 million.
Net cash used in investing activities of $58.4 million for the six
months ended February 28, 1998 was a result of the Company's capital
expenditures for equipment worldwide in order to support increased activities
and the construction of new manufacturing facilities.
Net cash of $1.1 million was used by financing activities for the six
months ended February 28, 1998. This was primarily attributable to $2.5 million
in payments of long term debt, offset by $1.3 million in net proceeds from the
issuance of common stock.
The Company believes that cash on-hand, funds provided by operations
and available borrowings under the credit facility 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 Meeting of Shareholders, held on January 27,
1998, 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 15,699,844 257,202
Thomas A. Sansone 15,699,434 257,612
Ronald J. Rapp 15,692,779 264,267
Lawrence J. Murphy 15,699,874 257,172
Mel S. Lavitt 15,699,414 257,632
Steven A. Raymund 15,704,814 252,232
Frank A. Newman 15,698,399 258,647
2. To ratify the selection of KPMG Peat Marwick, LLP as independent
auditors for the Company
For Against Abstain
--- ------- -------
15,824,970 16,203 115,873
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the
Registrant during the quarter ended February 28,
1998.
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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.
Registrant
Date: April 13, 1998 By: s/ Thomas A. Sansone
------------- --------------------
Thomas A. Sansone
President
Date: April 13, 1998 By: s/ Chris A. Lewis
-------------- -----------------
Chris A. Lewis
Chief Financial Officer
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