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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 29, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
JABIL CIRCUIT, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 38-1886260
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
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10800 ROOSEVELT BOULEVARD
ST. PETERSBURG, FLORIDA 33716
(727) 577-9749
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
ROBERT L. PAVER, ESQ.
SECRETARY AND GENERAL COUNSEL
JABIL CIRCUIT, INC.
10800 ROOSEVELT BOULEVARD
ST. PETERSBURG, FLORIDA 33716
(727) 577-9749
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
<TABLE>
<S> <C>
CHESTER E. BACHELLER, ESQ. ALAN L. JAKIMO, ESQ.
ROBERT J. GRAMMIG, ESQ. BROWN & WOOD LLP
HOLLAND & KNIGHT LLP ONE WORLD TRADE CENTER
400 NORTH ASHLEY DRIVE NEW YORK, NEW YORK 10048-0557
SUITE 2300 PHONE: (212) 839-5300
TAMPA, FLORIDA 33602 FAX: (212) 839-5599
PHONE: (813) 227-6431
FAX: (813) 229-0134
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE(1) FEE(2)
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<S> <C> <C> <C> <C>
Common Stock, par value $.001 per
share................................. 12,075,000(3) $34.30(3) $414,134,766 $115,130
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933, as amended, and
includes shares that may be purchased by the Underwriters pursuant to an
over-allotment option.
(2) Calculated based upon the average of high and low prices reported on the New
York Stock Exchange for January 26, 1999, in accordance with Rule 457(c)
under the Securities Act of 1933, as amended.
(3) Adjusted to reflect a two-for-one stock split in the form of a 100% stock
dividend to stockholders that is expected to be reflected on the New York
Stock Exchange on February 18, 1999.
-------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two separate prospectuses. The first
prospectus relates to a public offering of shares of common stock of Jabil
Circuit, Inc., par value $.001 per share (the "Common Stock") in the United
States and Canada (the "U.S. Offering"). The second prospectus relates to a
concurrent offering of Common Stock outside the United States and Canada (the
"International Offering"). The prospectuses for the U.S. Offering and the
International Offering will be identical in all respects, other than the front
cover page, the "Underwriting" section and the back cover page. Such alternate
pages for the International Offering appear in this Registration Statement
immediately following the complete prospectus for the U.S. Offering.
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY 29, 1999
PROSPECTUS
10,500,000 SHARES
JABIL LOGO
COMMON STOCK
----------------------
Jabil Circuit, Inc. is selling 6,000,000 of the shares of common stock and
certain stockholders of Jabil are selling 4,500,000 of the shares of common
stock. The U.S. underwriters are offering 9,000,000 shares in the United States
and Canada and the international managers are offering 1,500,000 shares outside
the United States and Canada.
The common stock trades on the New York Stock Exchange under the symbol
"JBL." Except as otherwise indicated, all information in this prospectus has
been adjusted to reflect a two-for-one stock split in the form of a 100% stock
dividend to stockholders that is expected to be reflected on the New York Stock
Exchange on February 18, 1999. On January 28, 1999, the closing sale price of
the common stock as reported on the New York Stock Exchange was $35.47 per share
($70.94 per share on a pre-split basis).
INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
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<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public Offering Price................... $ $
Underwriting Discount................... $ $
Proceeds, before expenses, to Jabil..... $ $
Proceeds to the Selling Stockholders.... $ $
</TABLE>
The U.S. underwriters may also purchase up to an additional 1,350,000
shares from Jabil and the selling stockholders at the public offering price,
less the underwriting discount, within 30 days from the date of this prospectus
to cover over-allotments. The international managers may similarly purchase up
to an aggregate of an additional 225,000 shares from Jabil and the selling
stockholders.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares of common stock will be ready for delivery in New York, New York
on or about , 1999.
----------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SALOMON SMITH BARNEY
C.E. UNTERBERG, TOWBIN
THOMAS WEISEL PARTNERS LLC
----------------------
The date of this prospectus is , 1999
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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Prospectus Summary.................. 3
Forward-Looking Statements.......... 7
Risk Factors........................ 7
Use of Proceeds..................... 15
Dividend Policy..................... 15
Price Range of Common Stock......... 16
Capitalization...................... 17
Selected Consolidated Financial
Data.............................. 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 19
Business............................ 28
Management and Directors............ 37
Selling Stockholders................ 41
</TABLE>
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PAGE
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Shares Eligible for Future Sale..... 43
Certain United States Federal Tax
Considerations for Non-United
States Holders.................... 44
Underwriting........................ 47
Incorporation of Certain Documents
by Reference...................... 50
Where You Can Find More
Information....................... 50
Legal Matters....................... 51
Experts............................. 51
Index to Consolidated Financial
Statements........................ F-1
</TABLE>
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You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
The information in this prospectus may not contain all of the information
that may be important to you. You should read the entire prospectus, as well as
the documents incorporated by reference in the prospectus, before making an
investment decision. All references to "we", "us", "our", "Jabil" or the
"Company" in this prospectus mean Jabil Circuit, Inc. and its subsidiaries.
"Jabil Circuit" and the Jabil logo are trademarks of Jabil. This prospectus
also refers to trademarks and trade names of other companies.
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PROSPECTUS SUMMARY
The following summary contains basic information about this offering. This
summary may not contain all of the information that is important to you. You
should carefully read this entire document and the other documents we refer to
for a more complete understanding of this offering. In addition, we incorporate
important business and financial information into this prospectus by reference.
You may obtain the information incorporated by reference into this prospectus
without charge by following the instructions in the "Where You Can Find More
Information" section of this prospectus. Unless otherwise indicated, the
information in this prospectus assumes that the underwriters' over-allotment
options have not been exercised, and gives effect to a two-for-one stock split
in the form of a 100% stock dividend to stockholders that is expected to be
reflected on the New York Stock Exchange on February 18, 1999.
THE COMPANY
We are one of the leading worldwide independent providers of electronic
manufacturing services ("EMS"). We design and manufacture electronic circuit
board assemblies and systems for major original equipment manufacturers ("OEMs")
in the communications, computer peripherals, personal computer, automotive and
consumer products industries. We serve our OEM customers with dedicated work
cell business units that combine high volume, highly automated continuous flow
manufacturing with advanced electronic design and design for manufacturability
technologies. Our customers currently include industry leaders such as Cisco
Systems, Inc., Gateway 2000, Inc., Hewlett-Packard Company, Johnson Controls,
Inc. and Quantum Corporation. For the fiscal year ended August 31, 1998, we
achieved net revenues of $1.3 billion and net income of $56.9 million.
The EMS industry has experienced rapid growth over the past several years
as an increasing number of OEMs have outsourced their manufacturing
requirements. OEMs are turning to outsourcing in order to reduce product cost,
achieve accelerated time-to-market and time-to-volume production, access
advanced design and manufacturing technologies, improve inventory management and
purchasing power, reduce their capital investment in manufacturing facilities,
and achieve parallel manufacturing of the same product throughout the world. We
believe further growth opportunities exist for EMS providers to penetrate the
worldwide electronics markets.
We offer our customers complete turnkey EMS solutions that are responsive
to their outsourcing needs. Our work cell business units are capable of
providing:
- integrated design and engineering services
- component selection, sourcing and procurement
- automated assembly
- design and implementation of product testing
- parallel global production
- systems assembly and direct order fulfillment services
We currently conduct our operations in 11 facilities that are located in
four regions of the United States, and in Italy, Malaysia, Mexico and Scotland.
Two of these facilities
3
<PAGE> 6
include the operations of the LaserJet Formatter Manufacturing Organization that
we recently acquired from the Hewlett-Packard Company (the "HP Acquisition").
Parallel global production provides our customers with the benefits of improved
supply-chain management, reduced inventory obsolescence, lowered transportation
costs and reduced product fulfillment time.
We are focused on expanding our position as one of the leading global
providers of electronic manufacturing services to major OEMs in high growth
segments of the electronics industry with the size and growth characteristics
that can benefit from worldwide, high volume manufacturing. To achieve this
objective, we will continue implementing the following strategies:
- MAINTAIN AND ESTABLISH LONG-TERM CUSTOMER
RELATIONSHIPS. Historically, we have derived a majority of our growth from
existing customers. We seek to expand existing customer relationships to
include additional product lines and services, and develop relationships
with new customers.
- UTILIZE WORK CELL BUSINESS UNITS. Each of our work cell business
units is dedicated to one customer, and operates with a high level of
autonomy, utilizing dedicated production equipment, production workers,
supervisors, buyers, planners and engineers. We believe our work cell
business units promote increased responsiveness to our customers' needs,
particularly as a customer relationship grows to multiple production
locations.
- EXPAND PARALLEL GLOBAL PRODUCTION. Our ability to produce the same
product on a global scale is a significant requirement of our customers.
Accordingly, we have recently expanded our existing Malaysian facility,
commenced expansion of our Mexican facility and, as part of the HP
Acquisition, acquired operating facilities in Bergamo, Italy and Boise,
Idaho.
- OFFER SYSTEMS ASSEMBLY AND DIRECT ORDER FULFILLMENT. Our systems
assembly and direct order fulfillment services allow our customers to
reduce product cost and risk of product obsolescence by reducing total
work-in-process and finished goods inventory.
- PURSUE SELECTIVE ACQUISITION OPPORTUNITIES. An increasing number of
OEMs are divesting internal manufacturing operations to EMS providers. In
many of these situations, the OEM enters into a customer relationship with
the EMS provider. Our acquisition strategy is focused on obtaining from
OEMs manufacturing operations with consistent growth and experienced
management teams, and opportunities for long-term outsourcing
relationships.
Our principal executive offices are located at 10800 Roosevelt Boulevard,
St. Petersburg, Florida 33716, and our telephone number is (727) 577-9749. Our
website is located at www.jabil.com. Information contained in our website is not
a part of this prospectus.
4
<PAGE> 7
THE OFFERINGS
The offering of 9,000,000 shares of our common stock in the United States
and Canada (the "U.S. Offering") and the offering of 1,500,000 shares of our
common stock outside the United States and Canada (the "International Offering")
are collectively referred to in this prospectus as the "Offerings."
<TABLE>
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Common Stock Offered(1):
By Jabil.................................. 6,000,000 shares
By the Selling Stockholders............... 4,500,000 shares
-------------------
Total.................................. 10,500,000 shares
-------------------
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Common Stock to be Outstanding After the
Offerings(1).............................. 80,798,818 shares
Use of Proceeds............................. For repayment of outstanding
borrowings under our revolving credit
facility ($80.0 million as of January
29, 1999), and the remainder for
capital expenditures and general
corporate purposes, including
increasing our working capital and
possible acquisitions.
We will not receive any proceeds from
the sale of common stock in the
Offerings by the selling stockholders.
New York Stock Exchange symbol.............. "JBL"
</TABLE>
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(1) This information is based on 74,798,818 shares outstanding at December 31,
1998, and it excludes 6,099,950 shares of our common stock issuable upon
exercise of outstanding options, and gives effect to a two-for-one stock
split in the form of a 100% stock dividend to stockholders that is expected
to be reflected on the New York Stock Exchange on February 18, 1999.
RISK FACTORS
Before investing in our common stock, you should carefully consider the
risk factors set forth in the "Risk Factors" section of this prospectus and the
other information included in this prospectus and in the documents we
incorporate by reference into this prospectus. You may obtain the information
incorporated by reference into this prospectus without charge by following the
instructions in the "Where You Can Find More Information" section of this
prospectus.
5
<PAGE> 8
OUR SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED AUGUST 31, NOVEMBER 30,
-------------------------------- -------------------
1996 1997 1998 1997 1998
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<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net revenue................ $863,285 $978,102 $1,277,374 $319,512 $447,941
Operating income........... 45,406 81,854 85,104(1) 29,356 31,191
Interest expense, net...... 7,333 1,612 3,124 713 1,520
Net income................. 24,349 52,497 56,933(1) 19,071 19,286
Earnings per share(2):
Basic.................... $ 0.35 $ 0.72 $ 0.77 $ 0.26 $ 0.26
Diluted.................. 0.34 0.68 0.74(1) 0.25 0.25
Weighted average shares
outstanding(2):
Basic.................... 68,916 72,599 74,249 74,038 74,565
Diluted.................. 72,668 76,680 77,151 77,350 77,654
</TABLE>
<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1998
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ACTUAL AS ADJUSTED(3)
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital...................................... $102,464 $266,547
Total assets......................................... 616,309 780,392
Current installments of long-term debt............... 8,333 8,333
Note payable and long-term debt, less current
installments....................................... 81,667(4) 41,667
Net stockholders' equity............................. 267,793 471,876
</TABLE>
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(1) In connection with the HP Acquisition, we recorded an acquisition-related
charge of $20.8 million ($12.9 million after tax). Operating income
excluding this charge was $105.9 million. Net income excluding this charge
was $69.8 million, and diluted earnings per share was $0.91.
(2) Gives effect to a two-for-one stock split in the form of a 100% stock
dividend to stockholders that is expected to be reflected on the New York
Stock Exchange on February 18, 1999.
(3) We have adjusted these figures to give effect to our sale of 6,000,000
shares of common stock in the Offerings at our assumed offering price of
$35.47 per share (the closing sale price on the New York Stock Exchange on
January 28, 1999, adjusted for the announced two-for-one stock split),
deduction of the underwriters' discount and estimated expenses of the
Offerings, and application of the estimated use of proceeds. See "Use of
Proceeds" and "Capitalization."
(4) Total long-term debt was $121.7 million as of January 29, 1999, of which
$80.0 million was outstanding under our revolving credit facility.
6
<PAGE> 9
FORWARD-LOOKING STATEMENTS
We make "forward-looking statements" within the "safe harbor" provision of
the Private Securities Litigation Reform Act of 1995 throughout this prospectus
and in the documents we incorporate by reference into this prospectus. 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 prospectus or
in the documents that we incorporate by reference into this prospectus are set
forth in the "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections of this prospectus, and
elsewhere in this prospectus and in the documents that we incorporate by
reference into this prospectus.
You should read this prospectus and the documents that we incorporate by
reference into this prospectus 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 though our situation will
change in the future. All written or oral forward-looking statements
attributable to us are expressly qualified by these cautionary statements.
RISK FACTORS
Before you invest in our common stock, you should be aware that the
occurrence of any of the events described in this risk factor section and
elsewhere in this prospectus could have a material adverse effect on our
business, financial condition and results of operations. You should carefully
consider these risk factors, together with all of the other information included
in this prospectus, before you decide to purchase shares of our common stock.
OUR OPERATING RESULTS MAY FLUCTUATE
Our annual and quarterly operating results are affected by a number of
factors, including:
- the level and timing of customer orders
- the composition of the costs of sales between materials and labor and
manufacturing overhead
- price competition
- our level of experience in manufacturing a particular product
- the degree of automation used in our assembly process
- the efficiencies achieved by us in managing inventories and fixed assets
- fluctuations in materials costs and availability of materials
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- the timing of expenditures in anticipation of increased sales, customer
product delivery requirements and shortages of components or labor
The volume and timing of orders placed by our customers vary due to variation in
demand for our customers' products, our customers' inventory management, new
product introductions and manufacturing strategy changes, and consolidations
among our customers. In the past, changes in customer orders have had a
significant effect on our results of operations due to corresponding changes in
the level of overhead absorption. Any one or a combination of these factors
could adversely affect our annual and quarterly results of operations in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Quarterly Results."
WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS
For the fiscal year ended August 31, 1998, our three largest customers
accounted for approximately 48.0% of our net revenue and fewer than 20 customers
accounted for all of our net revenue. For the fiscal year ended August 31, 1998,
Cisco Systems, Inc., 3Com Corporation and Hewlett-Packard Company accounted for
approximately 20.0%, 18.0% and 10.0% of net revenue, respectively. We are
dependent upon the continued growth, viability and financial stability of our
customers whose industries have experienced rapid technological change, short
product life cycles, consolidation, and pricing and margin pressures. We expect
to continue to depend upon a relatively small number of customers for a
significant percentage of our net revenue. A significant reduction in sales to
any of our customers, or a customer exerting significant pricing and margin
pressures on us, would have a material adverse effect on our results of
operations. In the past, some of our customers have terminated their
manufacturing arrangements with us or have significantly reduced or delayed the
volume of manufacturing services ordered from us. We cannot assure you that
present or future customers will not terminate their manufacturing arrangements
with us or significantly change, reduce or delay the amount of manufacturing
services ordered from us. If they do, it could have a material adverse effect on
our results of operations. In addition, we generate significant accounts
receivables in connection with providing manufacturing services to our
customers. If one or more of our customers were to become insolvent or otherwise
were unable to pay for the manufacturing services provided by us, our operating
results and financial condition would be adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Customers and Marketing."
THE VOLUME AND TIMING OF CUSTOMER SALES MAY VARY
The volume and timing of sales to our customers may vary due to:
- variation in demand for our customers' products
- our customers' attempts to manage their inventory
- electronic design changes
- changes in our customers' manufacturing strategy
- acquisitions of or consolidations among customers
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<PAGE> 11
Due in part to these factors, most of our customers do not commit to firm
production schedules for more than one quarter in advance. Our inability to
forecast the level of customer orders with certainty makes it difficult to
schedule production and maximize utilization of manufacturing capacity. In the
past, we have been required to increase staffing and other expenses in order to
meet the anticipated demand of our customers. Anticipated orders from many of
our customers have, in the past, failed to materialize or delivery schedules
have been deferred as a result of changes in our customers' business needs,
thereby adversely affecting our results of operations. On other occasions, our
customers have required rapid increases in production, which have placed an
excessive burden on our resources. Such customer order fluctuations and
deferrals have had a material adverse effect on us in the past, and we cannot
assure you that we will not experience such effects in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Backlog."
WE ARE IN A HIGHLY COMPETITIVE INDUSTRY
The contract manufacturing business is highly competitive. We compete
against numerous domestic and foreign manufacturers, including SCI Systems,
Inc., Solectron Corporation, Celestica, Inc. and Flextronics International. In
addition, we may in the future encounter competition from other large electronic
manufacturers that are selling, or may begin to sell, electronic manufacturing
services. Most of our competitors have international operations and some have
substantially greater manufacturing, financial, research and development, and
marketing resources than us. We also face potential competition from the
manufacturing operations of our current and potential customers, who are
continually evaluating the merits of manufacturing products internally versus
the advantages of outsourcing. See "Business -- Competition."
OUR RAPID GROWTH MAY BE DIFFICULT TO MANAGE
We have grown rapidly. Our ability to manage growth effectively will
require us to continue to implement and improve our operational, financial and
management information systems; continue to develop the management skills of our
managers and supervisors; and continue to train, motivate and manage our
employees. Our failure to effectively manage growth could have a material
adverse effect on our results of operations. See "Selected Consolidated
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
WE MAY EXPERIENCE RISKS RELATING TO OUR COMPUTER INTEGRATION
We are in the process of installing a new Enterprise Resource Planning
system that will replace the current Manufacturing Resource Planning system and
financial information systems. Any delay in the implementation of these new
information systems could result in material adverse consequences, including
disruption of operations, loss of information and unanticipated increases in
cost. See "-- We May Experience Year 2000 Risks."
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WE MAY ENCOUNTER DIFFICULTIES WITH ACQUISITIONS
We cannot assure you that we will be able to successfully integrate the
operations and management of our recent HP Acquisition. Similarly, we cannot
assure you that we will be able to consummate or, if consummated, successfully
integrate the operations and management of future acquisitions. Acquisitions
involve significant risks which could have a material adverse effect on us,
including:
- Financial 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; and (5) possible adverse tax and accounting effects.
- Operating risks, such as (1) the diversion of management's attention to
the assimilation of the businesses to be acquired; (2) the risk that the
acquired businesses will fail to maintain the quality of services that we
have historically provided; (3) the need to implement financial and other
systems and add management resources; (4) the risk that key employees of
the acquired businesses will leave after the acquisition; and (5)
unforeseen difficulties in the acquired operations.
THE AVAILABILITY OF THE MANUFACTURING COMPONENTS WE NEED MAY BE LIMITED
Substantially all of our net revenue is derived from turnkey manufacturing
in which we provide materials procurement. While most of our significant
long-term customer contracts permit quarterly or other periodic adjustments to
pricing based on decreases and increases in component prices and other factors,
we typically bear the risk of component price increases that occur between any
such repricings or, if such repricing is not permitted, during the balance of
the term of the particular customer contract. Accordingly, certain component
price increases could adversely affect our gross profit margins. Almost all of
the products we manufacture require one or more components that are available
from only a single source. Some of these components are allocated from time to
time in response to supply shortages. In some cases, supply shortages will
substantially curtail production of all assemblies using a particular component.
In addition, at various times industry wide shortages of electronic components
have occurred, particularly of memory and logic devices. Such circumstances have
produced significant levels of short-term interruption of our operations, and
may have a material adverse effect on our results of operations in the future.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Components Procurement."
OUR INTERNATIONAL OPERATIONS MAY BE SUBJECT TO CERTAIN RISKS
We derived 31.0% of our revenues from international operations in fiscal
year 1998, and 32.0% in the first three months of fiscal year 1999. We currently
operate outside the United States in Bergamo, Italy; Penang, Malaysia;
Guadalajara, Mexico; and Livingston, Scotland. Our international operations may
be subject to a number of risks, including:
- difficulties in staffing and managing foreign operations
- political and economic instability
- unexpected changes in regulatory requirements and laws
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<PAGE> 13
- longer customer payment cycles and difficulty collecting accounts
receivable
- export duties, import controls and trade barriers (including quotas)
- governmental restrictions on the transfer of funds to us
- burdens of complying with a wide variety of foreign laws and labor
practices
- fluctuations in currency exchange rates, which could affect local
payroll, utility and other expenses
- inability to utilize net-operating losses incurred by our foreign
operations to reduce our U.S. income taxes
In our experience, entry into new international markets requires
considerable management time as well as start-up expenses for market
development, hiring and establishing office facilities before any significant
revenues are generated. As a result, initial operations in a new market may
operate at low margins or may be unprofitable. See "Management's Discussion and
Analysis of Financial Condition and Result of Operations -- Liquidity and
Capital Resources."
WE DEPEND ON KEY PERSONNEL
Our continued success depends largely on the efforts and skills of our key
managerial and technical employees. The loss of the services of certain of these
key employees or an inability to attract or retain qualified employees could
have a material adverse effect on us. We do not have employment agreements or
noncompetition agreements with our key employees.
WE MAY EXPERIENCE YEAR 2000 RISKS
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the Year
2000. We are actively taking steps to ensure that our global information
technology infrastructure and business system applications, manufacturing
equipment and systems will be Year 2000 compliant. We are also seeking adequate
assurances of Year 2000 compliance from our suppliers, customers, and other
third parties with whom we conduct business. We have spent approximately $1.3
million to date, and intend to spend an additional $2.5 million by December 31,
1999 to address any Year 2000 issues. However, we cannot assure you that our
efforts are appropriate, adequate or complete. Based on our assessment of Year
2000 issues, we may face the following concerns:
- We believe our current legacy computer systems are Year 2000 compliant,
and we are in the process of replacing them with a new Enterprise
Resource Planning system, which we believe is also Year 2000 compatible.
This process is scheduled to be completed during the first half of
calendar year 2000. Any significant failure of these systems could have a
material adverse effect on our financial position, results of operations
and cash flows.
11
<PAGE> 14
- We have made one recent acquisition and plan to continue to pursue
additional acquisitions. In this regard, we may acquire a business with a
significant risk from Year 2000 issues.
- Our business operations utilize an electronic commerce system/electronic
data interchange with suppliers and customers to implement a variety of
supply chain management programs. While we are actively seeking
assurances of Year 2000 compliance from our suppliers and customers, the
failure by any one of these third parties to address Year 2000 issues can
result in our temporary inability to process these supply chain
management programs with such third parties.
As a result of these Year 2000 issues, we may suffer the following
consequences:
- We may experience a significant number of operational inconveniences and
inefficiencies that may divert our time, attention and financial and
human resources from our ordinary business activities.
- We may suffer serious system failures that may require significant
efforts by us or our suppliers, customers, and other third parties, to
prevent or alleviate material business disruptions.
- We may experience a significant loss of revenues or incur a significant
amount of unanticipated expenses.
WE MUST MAINTAIN OUR TECHNOLOGICAL AND MANUFACTURING PROCESS EXPERTISE
The market for our manufacturing services is characterized by rapidly
changing technology and continuing process development. We are continually
evaluating the advantages and feasibility of new manufacturing processes. We
believe that our future success will depend upon our ability to develop and
provide manufacturing services which meet our customers' changing needs,
maintain technological leadership, and successfully anticipate or respond to
technological changes in manufacturing processes on a cost-effective and timely
basis. We cannot assure you that our process development efforts will be
successful. See "Business -- Technology and -- Research and Development."
WE ARE SUBJECT TO A VARIETY OF ENVIRONMENTAL LAW COMPLIANCE RESPONSIBILITIES
We are subject to a variety of federal, state, local and foreign
environmental regulations relating to the use, storage, discharge and disposal
of hazardous chemicals used during our manufacturing process. If we fail to
comply with any present and future regulations, we could be subject to future
liabilities or the suspension of production. In addition, such regulations could
restrict our ability to expand our facilities or could require us to acquire
costly equipment, or to incur other significant expenses to comply with
environmental regulations.
CERTAIN EXISTING STOCKHOLDERS WILL CONTINUE TO HAVE SIGNIFICANT CONTROL
FOLLOWING THE OFFERINGS
After we sell shares of our common stock in the Offerings, our executive
officers, directors and principal stockholders and their affiliates collectively
will beneficially own 36.1% of the outstanding common stock as of January 29,
1999, (35.7% if the underwriters' over-allotment option is exercised in full),
of which William D. Morean will
12
<PAGE> 15
beneficially own 26.2% (25.5% if the underwriters' over-allotment option is
exercised in full). As a result, our executive officers, directors, principal
stockholders and their affiliates will continue to have significant influence
over (1) the election of our Board of Directors, (2) the approval or disapproval
of any other matters requiring stockholder approval, and (3) the affairs and
policies of Jabil.
OUR STOCK PRICE MAY BE VOLATILE
Our common stock is traded on the New York Stock Exchange. The market price
of our common stock has fluctuated substantially in the past and could fluctuate
substantially in the future, based on a variety of factors, including future
announcements covering us or our key customers or competitors, government
regulations, litigation, changes in earnings estimates by analysts, fluctuations
in quarterly operating results, or general conditions in the contract
manufacturing, communications, computer peripherals, personal computer,
automotive or consumer products industries. Furthermore, stock prices for many
companies, and high technology companies in particular, fluctuate widely for
reasons that may be unrelated to their operating results. Those fluctuations and
general economic, political and market conditions, such as recessions or
international currency fluctuations and demand for our services, may adversely
affect the market price of our common stock.
OUR CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW MAY HAVE CERTAIN ANTI-
TAKEOVER EFFECTS
The Corporation Law of the State of Delaware and our certificate of
incorporation and by-laws each contain certain provisions which may, in effect,
discourage, delay or prevent a change of control of Jabil or unsolicited
acquisition proposals from taking place.
WE ARE SENSITIVE TO CHANGES IN INTEREST RATES
We pay interest on outstanding borrowings under our $225.0 million
unsecured revolving credit facility at interest rates that fluctuate based upon
changes in various base interest rates. As of January 29, 1999, we borrowed
approximately $80.0 million under our revolving credit facility. An adverse
change in the base rates upon which our interest rate is determined could have a
material adverse effect on our financial position, results of operations and
cash flows. See "Use of Proceeds."
MANAGEMENT HAS DISCRETION CONCERNING USE OF PROCEEDS
We intend to use the proceeds of the Offerings for the repayment of our
outstanding borrowings under our revolving credit facility ($80.0 million as of
January 29, 1999). The remaining net proceeds will be used for capital
expenditures, and for general corporate purposes, including increasing our
working capital and possible acquisitions. Accordingly, management will have
substantial discretion in spending the proceeds to be received by Jabil. Pending
such uses, the net proceeds will be invested in short-term, investment grade
securities, certificates of deposit, or direct guaranteed obligations of the
United States government. See "Use of Proceeds."
WE HAVE A LARGE NUMBER OF OUTSTANDING SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, we will have 80,798,818 shares of common
stock outstanding. Substantially all of these shares will be transferable with
or without restriction
13
<PAGE> 16
or registration under the Securities Act of 1933, as amended (the "Securities
Act"), or pursuant to the volume and other limitations of Rule 144 promulgated
under the Securities Act. Approximately 30,558,982 outstanding shares of common
stock are subject to lockup agreements between the holders of those shares and
the representatives of the underwriters, pursuant to which the holders have
agreed not to offer, sell, contract to sell or grant any option to purchase or
otherwise dispose of common stock until 90 days after the date of this
prospectus, subject to limited exceptions. Following the expiration of this
period, substantially all of the shares subject to the lock-up agreements will
become available for immediate resale in the public market subject to the volume
and other limitations of Rule 144. See "Underwriting."
14
<PAGE> 17
USE OF PROCEEDS
We estimate the net proceeds from the sale of 6,000,000 shares of common
stock by Jabil in the Offerings will be approximately $204.1 million (based on
an assumed public offering price per share of $35.47, the closing price on the
New York Stock Exchange on January 28, 1999, adjusted for the announced
two-for-one stock split), after deducting underwriting discounts and expenses
(approximately $234.8 million if the underwriters' over-allotment options are
exercised in full). Jabil will not receive any proceeds from the sale of shares
of common stock by the selling stockholders.
We intend to use a portion of the net proceeds of the Offerings to repay
the outstanding borrowings under our $225.0 million unsecured revolving credit
facility with a syndicate of banks (the "Revolver"). At January 29, 1999,
borrowings under the Revolver were $80.0 million and the effective interest rate
was 5.69%. The Revolver expires on August 3, 2001 and outstanding borrowings are
then due and payable. We intend to use the remaining net proceeds of the
Offerings for capital expenditures and general corporate purposes, including
increasing our working capital and possible acquisitions. While Jabil frequently
engages in discussions with potential acquisition candidates, we are not
currently engaged in any discussions for any material acquisitions and we cannot
assure you that any such acquisitions will be consummated in the future. Pending
such uses, the net proceeds will be invested in short-term, investment grade
securities, certificates of deposit, or direct or guaranteed obligations of the
United States government. See "Risk Factors -- Management Has Discretion
Concerning Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Quarterly Results and -- Liquidity and
Capital Resources" and Note 4 of Notes to Consolidated Financial Statements.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock and do
not anticipate paying cash dividends in the foreseeable future. We intend to
retain any future earnings for reinvestment in our business.
15
<PAGE> 18
PRICE RANGE OF COMMON STOCK
Prior to May 5, 1998, our common stock traded on the Nasdaq National
Market. Since that date, our common stock has traded on the New York Stock
Exchange under the symbol "JBL." The following table sets forth the range of
high and low sale prices per share for our common stock as reported on the
Nasdaq National Market and the New York Stock Exchange for the fiscal periods
indicated. The table has been adjusted to reflect a two-for-one stock split in
the form of a 100% stock dividend to stockholders that is expected to be
reflected on the New York Stock Exchange on February 18, 1999.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR 1998
First quarter ended November 30, 1997....................... $36.00 $18.13
Second quarter ended February 28, 1998...................... $28.38 $14.75
Third quarter ended May 31, 1998............................ $26.63 $14.94
Fourth quarter ended August 31, 1998........................ $19.13 $11.50
FISCAL YEAR 1999
First quarter ended November 30, 1998....................... $29.88 $11.50
Second quarter (through January 28, 1999)................... $39.50 $28.25
</TABLE>
On January 28, 1999, the last sale price of the common stock as reported on
the New York Stock Exchange was $35.47 per share ($70.94 per share on a
pre-split basis) and there were 1,854 holders of record of our common stock.
16
<PAGE> 19
CAPITALIZATION
The following table sets forth the total capitalization of Jabil as of
November 30, 1998 (1) on an actual basis and (2) as adjusted to give effect to
the sale by Jabil of 6,000,000 shares of Common Stock offered hereby at an
assumed public offering price per share of $35.47 (the closing sale price on the
New York Stock Exchange on January 28, 1999, adjusted for the announced
two-for-one stock split), and after deducting the underwriters' discount and
estimated offering expense payable by Jabil, and assuming that the underwriters'
over-allotment option is not exercised. This table contains unaudited
information and you should read this table in conjunction with our Consolidated
Financial Statements and the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of this prospectus and similar
sections in the documents that we incorporate by reference in this prospectus.
<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1998
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current installments of long-term debt.................. $ 8,333 $ 8,333
======== ========
Long-term debt, less current installments:
Revolving credit facility............................. 40,000 --
6.89% Senior Notes due 2004........................... 41,667 41,667
-------- --------
Total long-term debt............................... 81,667(1) 41,667
Stockholders' equity:
Preferred stock, 1,000,000 shares ($.001 par value)
authorized, none issued and outstanding............ -- --
Common stock, 120,000,000 shares ($.001 par value)
authorized, 74,607,010 shares issued and
outstanding; 80,607,010 shares issued and
outstanding as adjusted(2)......................... 75 81
Additional paid-in capital.............................. 71,683 275,760
Retained earnings....................................... 196,035 196,035
-------- --------
Net stockholders' equity................................ 267,793 471,876
-------- --------
Total capitalization............................... $349,460 $513,543
======== ========
</TABLE>
- -------------------------
(1) Total long-term debt was $121.7 million as of January 29, 1999, of which
$80.0 million was outstanding under the Revolver.
(2) All outstanding share numbers exclude 6,139,970 shares subject to
outstanding options under our benefit plans, and give effect to a
two-for-one stock split in the form of a 100% stock dividend to stockholders
that is expected to be reflected on the New York Stock Exchange on February
18, 1999.
17
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected consolidated financial data for
the periods indicated. Such consolidated financial data as of and for the five
years ended August 31, 1998 have been derived from our consolidated financial
statements and related notes, which consolidated financial statements have been
audited by KPMG LLP, independent certified public accountants. The following
consolidated financial data as of November 30, 1998, and for the three months
ended November 30, 1997 and 1998, are derived from our unaudited consolidated
financial statements, and include, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary to present fairly the
data for the periods. The operating results for any quarter are not necessarily
indicative of results for any future period. The data presented below should be
read in conjunction with the consolidated financial statements and related
notes, and the information contained in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section of this
prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED AUGUST 31, NOVEMBER 30,
------------------------------------------------------ --------------------
1994 1995 1996 1997 1998 1997 1998
-------- -------- -------- -------- ---------- -------- --------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net revenue................... $375,815 $559,474 $863,285 $978,102 $1,277,374 $319,512 $447,941
Cost of revenue............... 351,608 523,338 790,311 857,245 1,115,647 278,167 397,366
-------- -------- -------- -------- ---------- -------- --------
Gross profit.................. 24,207 36,136 72,974 120,857 161,727 41,345 50,575
Selling, general and
administrative.............. 14,038 17,898 25,456 35,886 52,014 11,077 18,318
Research and development...... 1,768 1,819 2,112 3,117 3,784 912 1,066
Acquisition related charge.... -- -- -- -- 20,825 -- --
-------- -------- -------- -------- ---------- -------- --------
Operating income.............. 8,401 16,419 45,406 81,854 85,104(1) 29,356 31,191
Interest expense, net......... 3,470 6,347 7,333 1,612 3,124 713 1,520
-------- -------- -------- -------- ---------- -------- --------
Income before income taxes.... 4,931 10,072 38,073 80,242 81,980 28,643 29,671
Income taxes.................. 2,363 2,792 13,724 27,745 25,047 9,572 10,385
-------- -------- -------- -------- ---------- -------- --------
Net income.................... $ 2,568 $ 7,280 $ 24,349 $ 52,497 $ 56,933(1) $ 19,071 $ 19,286
======== ======== ======== ======== ========== ======== ========
Earnings per share(2):
Basic....................... $ 0.05 $ 0.12 $ 0.35 $ 0.72 $ 0.77 $ 0.26 $ 0.26
Diluted..................... $ 0.04 $ 0.12 $ 0.34 $ 0.68 $ 0.74(1) $ 0.25 $ 0.25
Weighted average shares
outstanding(2):
Basic....................... 56,625 58,356 68,916 72,599 74,249 74,038 74,565
Diluted..................... 61,788 62,200 72,668 76,680 77,151 77,350 77,654
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF AUGUST 31, NOVEMBER 30,
---------------------------------------------------- ------------
1994 1995 1996 1997 1998 1998
-------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital....................... $ 27,639 $ 33,333 $115,758 $ 97,349 $103,660 $102,464
Total assets.......................... 174,318 280,961 299,940 405,903 526,703 616,309
Current installments of long-term
debt................................ 48,562 81,130 2,451 2,475 8,333 8,333
Notes payable and long-term debt, less
current installments................ 18,215 27,932 58,371 50,000 81,667 81,667
Net stockholders' equity.............. 51,231 59,595 124,234 181,485 248,366 267,793
</TABLE>
- -------------------------
(1) In connection with the HP Acquisition, we recorded an acquisition-related
charge of $20.8 million ($12.9 million after-tax). Operating income
excluding this charge was $105.9 million. Net income excluding this charge
was $69.8 million, and diluted earnings per share was $0.91.
(2) Gives effect to a two-for-one stock split in the form of a 100% stock
dividend to stockholders that is expected to be reflected on the New York
Stock Exchange on February 18, 1999.
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<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the "Selected
Financial Data" section of this prospectus and our consolidated financial
statements and the related notes thereto in the "Financial Statements" section
of this prospectus. The forward-looking statements in this discussion regarding
the EMS industry, our expectations regarding our future performance and other
non-historical statements in this discussion include numerous risks and
uncertainties, as described in the "Risk Factors" section of this prospectus.
OVERVIEW
Jabil is one of the leading worldwide independent providers of turnkey
manufacturing services to electronics OEMs in the communications, computer
peripherals, personal computer, automotive and consumer products industries.
During the past several years, Jabil has experienced substantial growth in net
revenue, operating income and net income. This growth, as well as the growth of
the overall EMS industry, has been driven by the increasing number of
electronics OEMs who are outsourcing their manufacturing requirements. We
anticipate that this industry trend will continue during the next several years.
We derive most of our net revenue under purchase orders from OEM customers.
We recognize revenue, net of product return and warranty costs, typically at the
time of product shipment. The volume and timing of orders placed by our
customers vary due to several factors, including: variation in demand for our
customers' products; our customers' inventory management; new product
introductions and manufacturing strategy changes; and consolidations among our
customers. Demand for our customers' products depends on, among other things,
product life cycles, competitive conditions and general economic conditions.
Our cost of revenue includes the cost of electronic components and other
materials that comprise the products we manufacture, the cost of labor and
manufacturing overhead, and provisions for excess and obsolete inventory
adjustments. As a provider of turnkey manufacturing services, we are responsible
for procuring components and other materials. This requires us to commit
significant working capital to our operations and to manage the purchasing,
receiving, inspection and stocking of materials. Although we bear the risk of
fluctuations in the cost of materials, excess scrap and inventory obsolescence,
we periodically negotiate cost of materials adjustments with our customers.
Net revenue from each product that we manufacture consists of a component
based on the costs of materials in that product and a component based on the
labor and manufacturing overhead allocated to that product. We refer to the
portion of the sales price of a product that is based on labor and manufacturing
overhead costs as "manufacturing-based revenue," and to the portion of the sales
price of a product that is based on materials costs as "materials-based
revenue." Our gross margin for any product depends on the mix between the cost
of materials in the product and the cost of labor and manufacturing overhead
allocated to the product. We typically realize higher gross margins on
manufacturing-based revenue than we do on materials-based revenue. As we gain
experience in manufacturing a product, we usually achieve increased
efficiencies, which result in lower labor costs and manufacturing overhead for
that product.
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<PAGE> 22
Our operating results are impacted by the level of capacity utilization of
manufacturing facilities, indirect labor, and selling, general and
administrative expenses. Gross margins and operating income margins have
generally improved during periods of high volume and high capacity utilization.
During periods of low volume production, we generally have idle capacity and
reduced operating margins. As our capacity has grown during recent years, both
through the construction of new "greenfield" facilities and the expansion of
existing facilities, our selling, general and administrative expenses have
increased to support this growth.
We have consistently utilized advanced circuit design, production design
and manufacturing technologies to meet the needs of our customers. To support
this effort, our engineering staff focuses on developing and refining design and
manufacturing technologies to meet specific needs of specific customers. Most of
the expenses associated with these customer-specific efforts are reflected in
our cost of revenue. In addition, our engineers engage in research and
development of new technologies that apply generally to our operations. The
expense of these research and development activities are reflected in the
"Research and Development" line item in our Consolidated Financial Statements.
An important element of our strategy is the expansion of our global
production facilities. Substantially all of our revenue and materials costs
worldwide are denominated in U.S. dollars, while our labor and utility costs in
plants outside the United States are denominated in local currencies. We
typically hedge these local currency costs through the purchase of foreign
exchange contracts, the amount and cost of which have not been material.
RECENT ACQUISITION
On August 3, 1998, we acquired certain assets (primarily raw material
inventory and property, plant and equipment) relating to the LaserJet Formatter
Manufacturing Organization business unit of Hewlett-Packard Company located in
Boise, Idaho and Bergamo, Italy. The HP Acquisition price was approximately
$80.0 million and was accounted for under the purchase method of accounting. The
acquisition resulted in goodwill and other intangible assets of approximately
$11.2 million, which are being amortized on a straight-line basis over ten
years. The acquired assets were used by the Hewlett-Packard Company to
manufacture printed circuit-board assemblies for the LaserJet printer division
of Hewlett-Packard Company. Simultaneously with the HP Acquisition, we entered
into a manufacturing agreement to continue to produce the printed circuit board
assemblies being produced by the Hewlett-Packard Company operations in Boise and
Bergamo.
During the past several years, an increasing number of OEMs have divested
manufacturing operations to EMS providers. Acquisitions of such manufacturing
assets have permitted EMS companies to increase their capacity and solidify
relationships with OEMs. We believe attractive acquisition opportunities exist
that will support the expansion of our global manufacturing capabilities as well
as the establishment and maintenance of long-term customer relationships. We
plan to continue a strategy of selectively acquiring the assets of OEMs with
size and growth characteristics consistent with our customer profile.
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<PAGE> 23
RESULTS OF OPERATIONS
The following table sets forth, for the period indicated, certain operating
data as a percentage of net revenue:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED AUGUST 31, NOVEMBER 30,
------------------------ -------------
1996 1997 1998 1997 1998
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Net revenue............................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue........................ 91.5 87.6 87.3 87.1 88.7
----- ----- ----- ----- -----
Gross profit........................... 8.5 12.4 12.7 12.9 11.3
Selling, general and administrative.... 2.9 3.7 4.1 3.5 4.1
Research and development............... 0.2 0.3 0.3 0.3 0.2
Acquisition related charge............. -- -- 1.6 -- --
----- ----- ----- ----- -----
Operating income....................... 5.3 8.4 6.7(1) 9.2 7.0
Interest expense, net.................. 0.8 0.2 0.2 0.2 0.3
----- ----- ----- ----- -----
Income before income taxes............. 4.4 8.2 6.4 9.0 6.6
Income taxes........................... 1.6 2.8 2.0 3.0 2.3
----- ----- ----- ----- -----
Net income............................. 2.8% 5.4% 4.5%(1) 6.0% 4.3%
===== ===== ===== ===== =====
</TABLE>
- -------------------------
(1) In connection with the HP Acquisition, we recorded an acquisition-related
charge of $20.8 million ($12.9 million after-tax). Operating income
excluding this charge was 8.3% of net revenue and net income was 5.5% of net
revenue.
FIRST FISCAL QUARTER 1999 COMPARED TO FIRST FISCAL QUARTER 1998
NET REVENUE. Our net revenue increased 40.2% to $447.9 million for the
first quarter of fiscal year 1999, up from $319.5 million during the same period
of fiscal year 1998. The increase was due primarily to incremental revenue
related to the HP Acquisition and increased production of communications
products. Foreign source revenue represented approximately 32.0% of net revenue
for the first quarter of fiscal year 1999 compared to approximately 34.0% for
the same period of fiscal year 1998. The relative decrease in foreign source
revenue was attributable to increased production at our domestic locations,
which includes one acquired domestic plant from the Hewlett-Packard Company.
GROSS PROFIT. Gross margin decreased to 11.3% for the first quarter of
fiscal year 1999, from 12.9% during the same period of fiscal year 1998,
reflecting a higher content of material-based revenue from the HP Acquisition,
underutilization of assets in certain international factories, offset in part by
a one-time recovery of costs associated with defective materials from a
supplier.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased to $18.3 million (4.1% of net revenue) during the first
quarter of fiscal year 1999 from $11.1 million (3.5% of net revenue) in the
first quarter of fiscal year 1998. This increase was primarily due to increased
staffing and related departmental expenses at all the Jabil locations, including
the acquired Hewlett-Packard Company sites, along with increases in information
systems staff to support the expansion of our business.
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<PAGE> 24
RESEARCH AND DEVELOPMENT. Research and development expenses increased to
$1.1 million (0.2% of net revenue) during the first quarter of fiscal year 1999,
from $0.9 million (0.3% of net revenue) for the same period of fiscal year 1998
due to the expansion of electronic design activities.
INTEREST EXPENSE. Net interest expense increased to $1.5 million in the
first quarter of fiscal year 1999 from $0.7 million during the same period of
fiscal year 1998 as a result of increased borrowings related to the HP
Acquisition and increased working capital requirements.
INCOME TAXES. Jabil's effective tax rate increased to 35.0% in the first
quarter of fiscal year 1999 from 33.4% during the same period of fiscal year
1998 primarily as a result of the increased levels of domestic income as
compared to the same period of fiscal year 1998.
FISCAL YEAR ENDED AUGUST 31, 1998 COMPARED TO FISCAL YEAR ENDED AUGUST 31, 1997
NET REVENUES. Our net revenue increased 30.6% to $1.3 billion for fiscal
year 1998, up from $978.1 million in fiscal year 1997. The increase was
primarily a result of manufacturing services growth provided to existing and new
customers. Foreign source revenue represented 31.0% of our net revenue for
fiscal year 1998 and 30.0% of net revenue for fiscal year 1997.
GROSS PROFIT. Gross margin increased to 12.7% in fiscal year 1998 from
12.4% in fiscal year 1997, reflecting an increase in manufacturing-based
revenues and overall capacity utilization.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased to $52.0 million (4.1% of net revenue) in fiscal year 1998
from $35.9 million (3.7% of net revenue) in fiscal year 1997. This increase was
primarily due to continued increases in staffing and related departmental
expenses at our existing operations, new operations in Mexico, and acquired
Hewlett-Packard Company sites, along with increases in information systems staff
to support the expansion of our business in existing and new locations.
RESEARCH AND DEVELOPMENT. Research and development expenses in fiscal year
1998 increased to $3.8 million (0.3% of net revenue) from $3.1 million (0.3% of
net revenue) in fiscal year 1997 reflecting an increase in design-based
activity.
ACQUISITION RELATED CHARGE. During the fourth quarter of fiscal year 1998,
we completed the HP Acquisition and recorded a one-time acquisition-related
charge of $20.8 million ($12.9 million after-tax) consisting of an in-process
technology write-off of $6.5 million, work force related expenses of $10.0
million, and $4.3 million of other expenses.
INTEREST EXPENSE. Interest expense increased to $3.1 million in fiscal
year 1998, from $1.6 million in fiscal year 1997, primarily reflecting interest
expense on our 6.89% Senior Notes due 2004, offset in part by interest income on
cash balances.
INCOME TAXES. In fiscal year 1998, the effective tax rate decreased to
30.6% from 34.6% in fiscal year 1997. The effective 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
22
<PAGE> 25
granted to our Malaysian subsidiary. The Malaysian tax holiday is currently
scheduled to expire on October 30, 2000.
FISCAL YEAR ENDED AUGUST 31, 1997 COMPARED TO FISCAL YEAR ENDED AUGUST 31, 1996
NET REVENUE. Our net revenue increased 13.3% to $978.1 million for fiscal
year 1997, up from $863.3 million in fiscal year 1996. The increase was due
primarily to manufacturing services provided to both new and existing customers,
offset by the end of production of certain hard drive products. Foreign source
revenue represented 30.0% of our net revenue for fiscal year 1997 and 31.0% of
net revenue for fiscal year 1996.
GROSS PROFIT. Gross margin increased to 12.4% in fiscal year 1997 from
8.5% in fiscal year 1996 due to an increase in the mix of manufacturing-based
revenues and overall capacity utilization. In fiscal year 1997 the portion of
manufacturing-based revenue was significantly higher than in fiscal year 1996.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased to $35.9 million (3.7% of net revenue) in fiscal year 1997
from $25.5 million (2.9% of net revenue) in fiscal year 1996. This increase was
primarily due to increased staffing and related departmental expenses at all of
our locations, along with increases in information systems staff to support the
expansion of our business.
RESEARCH AND DEVELOPMENT. Research and development expenses increased to
$3.1 million (0.3% of net revenue) in fiscal year 1997 from $2.1 million (0.2%
of net revenue) in fiscal year 1996.
INTEREST EXPENSE. Net interest expense decreased to $1.6 million in fiscal
year 1997 from $7.3 million in fiscal year 1996 primarily reflecting
significantly reduced short-term borrowings and increased interest income on
cash balances.
INCOME TAXES. In fiscal year 1997, the effective tax rate decreased
slightly to 34.6% from 36.0% in fiscal year 1996, primarily as a result of the
granting of a tax holiday for our Malaysian operations.
23
<PAGE> 26
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly financial
information for the 1997 and 1998 fiscal years and the first quarter of fiscal
year 1999. The information presented has been derived from unaudited
consolidated financial statements that in the opinion of management, reflect all
adjustments (consisting of normal recurring adjustments and a charge related to
the HP Acquisition), necessary for fair presentation of such quarterly
information. The operating results for any quarter are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1998 FISCAL 1999
----------------------------------------- ----------------------------------------- -----------
NOV. 30, FEB. 28, MAY 31, AUG. 31, NOV. 30, FEB. 28, MAY 31, AUG. 31, NOV. 30,
1996 1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- -------- -------- -------- -------- -------- -------- -----------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue................ $203,070 $222,187 $247,637 $305,208 $319,512 $330,688 $309,599 $317,575 $447,941
Cost of revenue............ 179,978 195,711 215,603 265,953 278,167 286,628 269,826 281,026 397,366
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit............... 23,092 26,476 32,034 39,255 41,345 44,060 39,773 36,549 50,575
Selling, general and
administrative........... 7,727 7,918 9,252 10,989 11,077 12,858 12,941 15,138 18,318
Research and development... 705 804 723 885 912 879 1,065 928 1,066
Acquisition-related
charge(1)................ -- -- -- -- -- -- -- 20,825 --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating income (loss).... 14,660 17,754 22,059 27,381 29,356 30,323 25,767 (342)(1) 31,191
Interest expense, net...... 658 389 406 159 713 1,134 722 555 1,520
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income
taxes.................... 14,002 17,365 21,653 27,222 28,643 29,189 25,045 (897) 29,671
Income tax expense
(benefit)................ 5,174 6,306 7,081 9,184 9,572 9,050 7,764 (1,339) 10,385
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income................. $ 8,828 $ 11,059 $ 14,572 $ 18,038 $ 19,071 $ 20,139 $ 17,281 $ 442(1) $ 19,286
======== ======== ======== ======== ======== ======== ======== ======== ========
Basic earnings per
share(2)................. $ 0.12 $ 0.15 $ 0.20 $ 0.24 $ 0.26 $ 0.27 $ 0.23 $ 0.01 $ 0.26
-------- -------- -------- -------- -------- -------- -------- -------- --------
Diluted earnings per
share(2)................. $ 0.12 $ 0.14 $ 0.19 $ 0.23 $ 0.25 $ 0.26 $ 0.22 $ 0.01(1) $ 0.25
-------- -------- -------- -------- -------- -------- -------- -------- --------
Common shares used in the
calculations of basic
earnings per share(2).... 71,338 72,362 73,007 73,688 74,038 74,161 74,333 74,466 74,565
-------- -------- -------- -------- -------- -------- -------- -------- --------
Common and common
equivalent shares used in
the calculations of
diluted earnings per
share(2)................. 75,769 76,654 76,783 77,521 77,350 77,128 77,231 76,893 77,654
-------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
The following table sets forth, for the periods indicated, certain
financial information stated as a percentage of net revenue:
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1998 FISCAL 1999
---------------------------------------- ---------------------------------------- -----------
NOV. 30, FEB. 28, MAY 31, AUG. 31, NOV. 30, FEB. 28, MAY 31, AUG. 31, NOV. 30,
1996 1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- ------- -------- -------- -------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue............... 88.6 88.1 87.1 87.1 87.1 86.7 87.2 88.5 88.7
----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit.................. 11.4 11.9 12.9 12.9 12.9 13.3 12.8 11.5 11.3
Selling, general and
administrative.............. 3.8 3.6 3.7 3.6 3.5 3.9 4.2 4.8 4.1
Research and development...... 0.3 0.4 0.3 0.3 0.3 0.3 0.3 0.3 0.2
Acquisition related charge.... -- -- -- -- -- -- -- 6.6 --
----- ----- ----- ----- ----- ----- ----- ----- -----
Operating income (loss)....... 7.2% 8.0% 8.9% 9.0% 9.2% 9.2% 8.3% (0.1)%(1) 7.0%
Interest expense, net......... 0.3 0.2 0.2 0.1 0.2 0.3 0.2 0.2 0.3
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before income
taxes....................... 6.9 7.8 8.7 8.9 9.0 8.8 8.1 (0.3) 6.6
Income tax expense
(benefit)................... 2.5 2.8 2.9 3.0 3.0 2.7 2.5 (0.4) 2.3
----- ----- ----- ----- ----- ----- ----- ----- -----
Net income.................... 4.3% 5.0% 5.9% 5.9% 6.0% 6.1% 5.6% 0.1%(1) 4.3%
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
- -------------------------
(1) In connection with the HP Acquisition, we recorded an acquisition-related
charge of $20.8 million ($12.9 million after-tax). Operating income
excluding this charge was $20.5 million (6.5% of net revenue). Net income
excluding this charge was $13.4 million (4.2% of net revenue), and dilutive
earnings per share was $0.17.
(2) Gives effect to a two-for-one stock split in the form of a 100% stock
dividend to stockholders that is expected to be reflected on the New York
Stock Exchange on February 18, 1999.
24
<PAGE> 27
LIQUIDITY AND CAPITAL RESOURCES
During fiscal years 1996 and 1997, we primarily funded operations through
borrowings under credit facilities with several banks, a public offering of our
common stock in fiscal year 1996, and a private placement of debt in fiscal year
1996. During fiscal year 1998, we experienced continued growth in net revenue
and an increase in net cash provided by operating activities. Cash and cash
equivalents decreased from $45.5 million at the 1997 fiscal year end to $23.1
million at the 1998 fiscal year end, as a result of cash generated from
operations partially offsetting cash used in the acquisition of property, plant
and equipment, along with the HP Acquisition. At November 30, 1998, our
principal sources of liquidity consisted of cash and available borrowings under
our credit facilities.
Net cash provided by operating activities for the first quarter of fiscal
year 1999 was $23.2 million. This consisted primarily of $19.3 million of net
income, $11.5 million of depreciation and amortization, $54.5 million of
increases in accounts receivable, $23.2 million of increases in inventories, and
$69.2 million of increases in accounts payable and accrued expenses.
Net cash used in investing activities of $33.8 million for the first
quarter of fiscal year 1999 was a result of our capital expenditures for
equipment worldwide in order to support increased activities.
Net cash provided by operating activities for fiscal year 1998 was $98.4
million. This consisted primarily of $56.9 million of net income, $35.7 million
of depreciation and amortization, decreases of $10.6 million of inventories and
$4.9 million of other assets, and increases of $5.0 million in accounts payable
and accrued expenses, offset by $5.4 million of increases in deferred taxes and
$9.3 million in increases in accounts receivable.
Net cash used in investing activities of $162.1 million for fiscal year
1998 was primarily a result of our capital expenditures for equipment and
facilities in the United States, Malaysia, Mexico and Scotland to support
increased manufacturing activities. Additionally, the cash portion of the HP
Acquisition purchase price was $65.0 million.
Net cash provided by financing activities of $41.3 million for fiscal year
1998 resulted primarily from $40.0 million from our Revolver in August 1998 to
finance the HP Acquisition. Under the terms of the Revolver, borrowings can be
made under either floating rate loans or Eurodollar rate loans. We pay interest
on outstanding borrowings at interest rates that fluctuate based upon changes in
various base interest rates. At January 29, 1999, the effective interest rate
was 5.69%. We pay a commitment fee on the unused portion of the Revolver at
0.20% to 0.25% depending on our funded debt to total capitalization ratios. We
have pledged our interest in certain shares of three of our subsidiaries in
connection with the Revolver. The Revolver expires on August 3, 2001 and
outstanding borrowings are then due and payable.
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. In the event that we experience similar growth in the future, we may
need to finance such growth and any corresponding working capital needs with
additional borrowings under the Revolver, as well as additional public and
private offerings of our debt and equity. See Notes 4 and 6 of Notes to
Consolidated Financial Statements.
25
<PAGE> 28
We believe that during fiscal year 1999, our capital expenditures will
exceed $100.0 million, principally for machinery, equipment, facilities and
related expenses. We believe that our level of resources, which include the
proceeds from the Offerings, together with current cash balances, available
borrowings, and funds provided by operations, will be more than adequate to fund
these capital expenditure and working capital requirements for fiscal year 1999.
See "Use of Proceeds."
NEW ACCOUNTING STANDARDS
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 in its 1999 annual consolidated
financial statements. As this Statement addresses reporting and disclosure
issues only, there will be no impact on earnings from its adoption.
Statement 133 -- Accounting for Derivative Instruments and Hedging
Activities. Statement 133 establishes methods of accounting for derivative
financial instruments and hedging activities related to those instruments as
well as other hedging activities. The Company is currently evaluating this
Statement and has yet to form an opinion on whether its adoption will have any
significant impact on the Company's consolidated financial statements. The
Company will be required to implement Statement 133 for its fiscal year ending
August 31, 2000.
Statement of Position 98-5 Reporting on the Costs of Start Up Activities.
SOP 98-5 establishes standards on the financial reporting of start-up costs and
organization costs. SOP 98-5 requires costs of start-up activities and
organization costs to be expensed as incurred. The SOP is effective for
financial statements for fiscal years beginning after December 15, 1998. As the
Company has historically made a practice of expensing costs related to both the
establishment of "greenfield" manufacturing facilities and the set-up of
production lines as such costs are incurred, it does not anticipate that the
adoption of SOP 98-5 will have any material impact on its consolidated financial
statements.
YEAR 2000
We are actively taking steps to ensure that our global information
technology infrastructure and business system applications, manufacturing
equipment and systems will be Year 2000 compliant. A global team, overseen by a
corporate officer, has been formed and has implemented a proactive multi-phase
approach, which includes assessing the scope of work, prioritizing, certifying
compliance, and testing compliance.
As of December 31, 1998, approximately 85.0% of our equipment and systems
were certified as Year 2000 compliant. The remaining 15.0% are expected to be
certified as compliant by the middle of calendar year 1999. When Year 2000
compliance certification is complete, we will begin Year 2000 compliance testing
and verification which we expect to complete by the fourth quarter of calendar
year 1999.
We are also seeking adequate assessments of Year 2000 compliance from our
suppliers, customers, and other third parties with whom we conduct business. The
initial
26
<PAGE> 29
phase of the assessment was completed on December 31, 1998. In early calendar
year 1999, we will begin validating such third parties' Year 2000
representations where deemed appropriate, and will develop sourcing contingency
plans in areas where we determine that these third parties' readiness is
insufficient.
We estimate that we will spend an additional $2.5 million to complete our
Year 2000 compliance certification, testing and verification program. We are
unable to fully determine the effect of a failure of our own systems or those of
any third party with whom we conduct business, but any significant failures
could have a material adverse effect on our financial position, results of
operations and cash flows. See "Risk Factors -- We May Experience Year 2000
Risks."
27
<PAGE> 30
BUSINESS
GENERAL
We are one of the leading worldwide independent providers of electronic
manufacturing services ("EMS"). We design and manufacture electronic circuit
board assemblies and systems for major original equipment manufacturers ("OEMs")
in the communications, computer peripherals, personal computer, and automotive
and consumer products industries. We serve our OEM customers with dedicated work
cell business units that combine our high volume, highly automated continuous
flow manufacturing approach with advanced electronic design and design for
manufacturability technologies. Our customers currently include industry leaders
such as Cisco Systems, Inc., Gateway 2000, Inc., Hewlett-Packard Company,
Johnson Controls, Inc. and Quantum Corporation.
We offer our customers complete turnkey EMS solutions that integrate
advanced electronic design, high-volume, highly automated manufacturing and
direct order fulfillment. Our turnkey approach, coupled with our advanced
manufacturing technologies, provides our customers with reduced product cost,
accelerated time-to-market and time-to-volume production, improved inventory
management and purchasing power, and reduced capital investment in
manufacturing.
We serve our customers' needs for manufacturing global products through a
strategy of locating production facilities in the world's major electronics
markets. We currently conduct our operations in 11 facilities that are located
in four regions of the United States, and in Italy, Malaysia, Mexico and
Scotland. Parallel global production provides our customers with the benefits of
improved supply-chain management, reduced inventory obsolescence, lowered
transportation costs and reduced product fulfillment time.
EMS INDUSTRY BACKGROUND
The EMS industry is comprised of companies that provide a range of
manufacturing services for OEMs in the electronics industry. The EMS industry
has experienced rapid growth over the past several years as an increasing number
of OEMs have chosen an external manufacturing strategy. Industry sources
estimate that the EMS industry has grown at an average annual rate of 25.0% from
1988 to 1997, while the leading EMS providers have grown at a faster rate over
this same period. This growth has been impacted by OEMs divesting of internal
manufacturing capacity. Factors driving OEMs to favor outsourcing to EMS
providers include:
- REDUCED PRODUCT COST. EMS providers are able to manufacture
products at a reduced total cost to OEMs. These cost advantages result from
higher utilization of capacity because of diversified product demand and,
typically, a higher sensitivity to elements of cost.
- ACCELERATED PRODUCT TIME-TO-MARKET AND TIME-TO-VOLUME. EMS
providers are able to deliver accelerated production start-ups and achieve
high efficiencies in transferring new products into production. EMS
providers are also able to rapidly scale production for changing markets
and to position themselves in global locations that serve the leading world
markets. With increasingly shorter product life cycles, these key services
allow new products to be sold in the marketplace in an accelerated time
frame.
28
<PAGE> 31
- ACCESS TO ADVANCED TECHNOLOGIES. Customers of EMS providers gain
access to advanced technologies in manufacturing processes, as well as
product and production design. Product and production design services may
offer customers significant improvements in the performance, cost,
time-to-market and manufacturability of their products.
- IMPROVED INVENTORY MANAGEMENT AND PURCHASING POWER. EMS providers
are able to manage both procurement and inventory, and have demonstrated
proficiency in purchasing components at improved pricing due to the scale
of the operations and continuous interaction with the materials
marketplace.
- REDUCED CAPITAL INVESTMENT IN MANUFACTURING. OEMs are increasingly
seeking to lower their investment in inventory, facilities and equipment
used in manufacturing in order to allocate capital to other activities such
as sales and marketing, and research and development. This shift in capital
deployment has placed a greater emphasis on outsourcing to external
manufacturing specialists.
OUR STRATEGY
We are focused on expanding our position as one of the leading global
providers of electronic manufacturing services to major OEMs. To achieve this
objective, we will continue implementing the following strategies:
- MAINTAIN AND ESTABLISH LONG-TERM CUSTOMER RELATIONSHIPS. Our core
strategy is to maintain and establish long-term relationships with leading
electronics companies in expanding industries with the size and growth
characteristics that can benefit from highly automated, continuous flow and
global manufacturing. Historically, we have derived a majority of our
growth from existing customers. We focus on maintaining long-term
relationships with our customers and seek to expand such relationships to
include additional product lines and services. In addition, we have a
focused effort to identify and develop relationships with new customers who
meet our profile.
- UTILIZE WORK CELL BUSINESS UNITS. Each of our work cell business
units is dedicated to one customer, and operates with a high level of
autonomy, utilizing dedicated production equipment, production workers,
supervisors, buyers, planners and engineers. We believe our work cell
business units promote increased responsiveness to our customers' needs,
particularly as a customer relationship grows to multiple production
locations.
- EXPAND PARALLEL GLOBAL PRODUCTION. Our ability to produce the same
product on a global scale is a significant requirement of our customers. We
believe that parallel global production is a key strategy to reduce
obsolescence risk and secure the lowest landed costs while simultaneously
supplying products of equivalent or comparable quality throughout the
world. Consistent with this strategy, we have expanded our existing
Malaysian facility, commenced expansion of our Mexican facility and, as
part of the HP Acquisition, acquired manufacturing operations in Bergamo,
Italy and Boise, Idaho.
- OFFER SYSTEMS ASSEMBLY AND DIRECT ORDER FULFILLMENT. Our systems
assembly and direct order fulfillment services allow our customers to
reduce product cost and risk of product obsolescence by reducing total
work-in-process and finished goods inventory. We offer these services at
all of our manufacturing locations.
29
<PAGE> 32
- PURSUE SELECTIVE ACQUISITION OPPORTUNITIES. An increasing number of
OEMs are divesting internal manufacturing operations to EMS providers. In
many of these situations, the OEM enters into a customer relationship with
the EMS provider. Our acquisition strategy is focused on obtaining from
OEMs manufacturing operations with consistent growth and experienced
management teams, and opportunities for long-term outsourcing
relationships.
OUR MANUFACTURING SERVICES
OUR APPROACH TO MANUFACTURING
In order to achieve high levels of manufacturing performance, we have
adopted the following approach:
- WORK CELL BUSINESS UNITS. Each of our work cell business units is
dedicated to one customer and is empowered to formulate strategies tailored
to its customer's needs. Each work cell business unit has dedicated
production lines consisting of equipment, production workers, supervisors
and engineers. Work cell business units have direct responsibility for
manufacturing results and time-to-volume production, promoting a sense of
individual commitment and ownership. The work cell business unit approach
enables us to grow incrementally without disrupting the production of other
work cell business units.
- BUSINESS UNIT MANAGEMENT. Our Business Unit Managers coordinate all
financial, manufacturing and engineering commitments for each of our
customers at a particular manufacturing facility. Our Business Unit
Directors oversee local Business Unit Managers and coordinate on a
worldwide basis all financial, manufacturing and engineering commitments
for each of our customers that have both domestic and global production
requirements. Jabil's Business Unit Management has the authority to develop
customer relationships, make design strategy decisions and production
commitments, establish pricing and implement production and electronic
design changes. Business Unit Managers and Directors are also responsible
for assisting customers with strategic planning for future products,
including developing cost and technology goals. These Managers and
Directors operate autonomously, with responsibility for the development of
customer relationships and direct profit and loss accountability for work
cell business unit performance.
- CONTINUOUS FLOW. We use a highly automated, "continuous flow"
approach where different pieces of equipment are joined directly or by
conveyor to create an in-line assembly process. This process is in contrast
to a "batch" approach, where individual pieces of assembly equipment are
operated as freestanding work-centers. The elimination of waiting time
prior to sequential operations results in faster manufacturing which
improves production efficiencies and quality control, and reduces inventory
work-in-process. Continuous flow manufacturing provides significant cost
reduction and quality improvement when applied to volume manufacturing.
- COMPUTER INTEGRATION. We support all aspects of our manufacturing
activities with advanced computerized control and monitoring systems.
Component inspection and vendor qualities are monitored electronically in
real-time. Materials planning, purchasing, stockroom and shop floor control
systems are supported through a computerized Manufacturing Resource
Planning system, providing customers with a continuous ability to monitor
material availability and track work-in-process on a real-time basis. We
are in the process of replacing our Manufacturing Resource Planning
30
<PAGE> 33
system with a new Enterprise Resource Planning system, which we believe is
fully Year 2000 compatible. Manufacturing processes are supported by a
real-time, computerized statistical process control system, whereby
customers can remotely access our computer systems to monitor real-time
yields, inventory positions, work-in-process status and vendor quality
data. See "-- Technology."
- SUPPLY CHAIN MANAGEMENT. We utilize an electronic commerce
system/electronic data interchange ("EDI") with our customers and suppliers
to implement a variety of supply chain management programs. Our customers
utilize the EDI supply chain management to share demand and product
forecasts and deliver purchase orders. We use the EDI system with our
suppliers for just-in-time delivery, supplier-managed inventory and
consigned supplier-managed inventory.
OUR DESIGN SERVICES
We offer a full spectrum of value-added design services for products that
we manufacture for our customers. We provide these services to enhance our
relationships with current customers and to help develop relationships with new
customers. During fiscal year 1998, approximately one-half of the products we
shipped to our customers included Jabil designs. We offer the following design
services:
ELECTRONIC DESIGN. Our electronic design team provides electronic circuit
design services including application specific integrated circuit ("ASIC")
design and firmware development. These services have been used to develop a
variety of circuit designs for cellular telephone accessories, notebook and
personal computers, radio frequency products, video set-top boxes and automotive
and consumer appliance controls.
PRODUCTION DESIGN. Our production design team provides printed circuit
board ("PCB") design and other related services. These services include PCB
design services using advanced CAD/CAE tools, PCB design testing and
verification services, and other consulting services which include generation of
a bill of materials, approved vendor list and assembly equipment configuration
for a particular PCB design. We believe that our production design services
result in PCB designs that are optimized for manufacturability and cost and
accelerate product time-to-market and time-to-volume production.
INDUSTRIAL/MECHANICAL AND OTHER DESIGN SERVICES. Our industrial and
mechanical design team often work with our customers to assist in designing the
"look and feel" of the plastic and metal enclosures that house printed circuit
board assemblies. In addition, from time to time we will procure additional
design services from third parties to meet our customers' needs.
OUR SYSTEMS ASSEMBLY, TEST AND DIRECT ORDER FULFILLMENT SERVICES
We offer systems assembly, test and direct order fulfillment services to
our customers. Our systems assembly services extend our range of assembly
activities to include assembly of higher level sub-systems and systems
incorporating multiple printed circuit boards. We maintain significant systems
assembly capacity to meet the increasing demands of our customers. In addition,
we provide testing services, based on quality assurance programs developed with
our customers, of the printed circuit boards, sub-systems and systems products
that we manufacture. Our quality assurance programs include circuit testing
under various environmental conditions to ensure that our products meet or
exceed
31
<PAGE> 34
required customer specifications. We also offer direct order fulfillment
services for delivery of final products we assemble for our customers.
TECHNOLOGY
We believe that our manufacturing and testing technologies are among the
most advanced in the industry. Through our research and development efforts, we
intend to continue to offer our customers the most advanced high volume,
continuous flow manufacturing process technologies. These technologies include
surface mount technology, tape automated bonding, ball grid array, chip scale
packages, flip chip/direct chip attach, thin substrate processes, reflow solder
of mixed technology circuit boards and other testing and emerging interconnect
technologies. In addition to our research and development activities, we are
continuously making refinements to our existing manufacturing processes in
connection with providing manufacturing services to our customers.
RESEARCH AND DEVELOPMENT
To meet our customers' increasingly sophisticated needs, we continually
engage in research and development activities. The development and refinement of
new manufacturing processes are performed primarily at our advanced engineering
facility in San Jose, California. From time to time, we perform research and
development related to new products on a project-by-project basis. The research
and development consists of design of the circuit board assembly, mechanical
design and the related production design necessary to manufacture the circuit
board assembly in the most cost-effective and reliable manner.
For fiscal years 1996, 1997 and 1998, and the first quarter of fiscal year
1999, we expended $2.1 million, $3.1 million, $3.8 million and $1.1 million,
respectively, on research and development activities. To date, substantially all
of our research and development expenditures have related to internal research
and development activities.
CUSTOMERS AND MARKETING
Our core strategy is to maintain and establish long-term relationships with
leading electronics companies in expanding industries with the size and growth
characteristics that benefit from highly automated, continuous flow and global
manufacturing. A small number of customers and industry segments have
historically comprised a major portion of our net revenue. The table below sets
forth the respective portion of net revenue for the applicable period
attributable to our customers who accounted for more than 10.0% of net revenue
in any respective period:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
----------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Cisco Systems, Inc. .................................... 10.0% 20.0% 20.0%
3Com Corporation........................................ 11.0 21.0 18.0
Hewlett-Packard Company................................. 20.0 15.0 10.0
Quantum Corporation..................................... 23.0 10.0 *
NEC Technologies, Inc. ................................. 15.0 * *
</TABLE>
- -------------------------
* Less than 10.0% of net revenues.
32
<PAGE> 35
Jabil's revenue was distributed over the following significant industry
segments for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
----------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Communications.......................................... 30.0% 51.0% 52.0%
Computer Peripherals.................................... 25.0 16.0 19.0
Personal Computers...................................... 36.0 21.0 16.0
Automotive and Other.................................... 9.0 12.0 13.0
</TABLE>
As a result of the HP Acquisition, the percentage revenues related to
Hewlett-Packard Company and computer peripherals increased in the first quarter
of fiscal year 1999.
In fiscal years 1996, 1997 and 1998, and the first quarter of fiscal year
1999, fewer than 20 customers accounted for all of our net revenue. We expect to
continue to depend upon a relatively small number of customers for a significant
percentage of our net revenue. As illustrated in the two tables above, the
historic percentages of net revenue we have received from specific customers or
industry segments have varied substantially from year to year. Accordingly,
these historic percentages are not necessarily indicative of the percentage of
net revenue that we may receive from any customer or industry segment in the
future. In the past, some of our customers have terminated their manufacturing
arrangements with us or have significantly reduced or delayed the volume of
manufacturing services ordered from us. We cannot assure you that present or
future customers will not terminate their manufacturing arrangements with us or
significantly change, reduce or delay the amount of manufacturing services
ordered from us. If they do, it could have a material adverse effect on our
results of operations. See "Risk Factors -- We Depend on a Limited Number of
Customers" and Note 7 of Notes to Consolidated Financial Statements.
Our principal source of new business is the expansion of existing customer
relationships to include additional product lines and services, referrals and
direct sales through our Business Unit Managers and executive staff. Our
Business Unit Managers and Directors, supported by the executive staff, identify
and attempt to develop relationships with new customers who meet our profile.
This profile includes financial stability, need for technology-driven turnkey
manufacturing, anticipated unit volume and long-term relationship stability.
Unlike traditional sales managers, our Business Unit Managers and Directors are
responsible for ongoing management of production for their customers.
INTERNATIONAL OPERATIONS
A key element in our strategy is to provide localized production of global
products produced for OEMs in the major consuming regions of North America,
Europe and Asia. Consistent with this strategy, we have established
manufacturing facilities in Italy, Malaysia, Mexico and Scotland.
Our European facilities target existing European customers, North American
customers having significant sales in Europe and potential European customers
who meet our customer profile. In fiscal year 1998 we completed a new
manufacturing facility in Scotland and acquired manufacturing operations in
Bergamo, Italy as a result of the HP Acquisition.
33
<PAGE> 36
Our Asian facility, located in Penang, Malaysia, enables us to provide
local manufacturing services to the Asian market in order to reduce costs,
freight and duties, to provide a more competitive cost structure for these
markets and to serve as a low cost manufacturing source for new and existing
customers. In fiscal year 1998, we completed a new 150,000 square foot Malaysian
facility to increase our capacity in this location.
As an addition to our North American manufacturing facilities, we completed
construction of a new manufacturing facility in Guadalajara, Mexico in fiscal
year 1998 to provide a competitive cost structure with close proximity to the
United States. In the first quarter of fiscal year 1999, we commenced expansion
of this Mexican facility. See "Risk Factors -- Our International Operations May
Be Subject to Certain Risks" and "Management's Discussion and Analysis of
Financial Analysis of Financial Condition and Results of Operations."
COMPETITION
The EMS industry is highly competitive. We compete against numerous
domestic and foreign manufacturers, including SCI Systems, Inc., Solectron
Corporation, Celestica, Inc., and Flextronics International. In addition, we may
in the future encounter competition from other large electronic manufacturers
that are selling, or may begin to sell, electronic manufacturing services. Most
of our competitors have international operations and some have substantially
greater manufacturing, financial, research and development and marketing
resources than Jabil. We also face potential competition from the manufacturing
operations of our current and potential customers, who are continually
evaluating the merits of manufacturing products internally versus the advantages
of outsourcing to us.
We believe that the primary basis of competition in our targeted markets
are capability, price, manufacturing quality, advanced manufacturing technology,
design expertise, time-to-volume production, reliable delivery and regionally
dispersed manufacturing. Management believes we currently compete favorably with
respect to these factors. See "Risk Factors -- We are in a Highly Competitive
Industry."
BACKLOG
Our order backlog at August 31, 1998 was approximately $456.0 million,
compared to backlog of $450.0 million at August 31, 1997. Although the backlog
consists of firm purchase orders, the level of backlog at any particular time is
not necessarily indicative of future sales. Given the nature of our
relationships with our customers, we frequently allow our customers to cancel or
reschedule deliveries, and therefore, backlog is not a meaningful indicator of
future financial results. Although we may seek to negotiate fees to cover the
costs of such cancellations or rescheduling, we may not be successful in doing
so. See "Risk Factors -- The Volume and Timing of Customer Sales May Vary."
COMPONENTS PROCUREMENT
We procure components from a broad group of suppliers, determined on an
assembly-by-assembly basis. Almost all of the products we manufacture require
one or more components that are ordered from only one source, and most
assemblies require components that are available from only a single source. Some
of these components are allocated in response to supply shortages. We attempt to
ensure continuity of supply of these components. In cases where unanticipated
customer demand or supply shortages
34
<PAGE> 37
occur, we attempt to arrange for alternative sources of supply, where available,
or defer planned production to meet the anticipated availability of the critical
component. In some cases, supply shortages will substantially curtail production
of all assemblies using a particular component. In addition, at various times
there have been industry wide shortages of electronic components, particularly
of memory and logic devices. We cannot assure you that such shortfalls will not
have a material adverse effect on our results of operations in the future. See
"Risk Factors -- The Availability of the Manufacturing Components We Need May be
Limited."
PROPRIETARY RIGHTS
We regard our manufacturing processes and electronic designs as proprietary
trade secrets and confidential information. To protect our proprietary rights,
we rely largely upon a combination of trade secret laws; non-disclosure
agreements with our customers, employees, and suppliers; our internal security
systems; confidentiality procedures and employee confidentiality agreements.
Although we take steps to protect our trade secrets, misappropriation may still
occur.
We currently have six patents and one patent application pending. However,
we believe that the rapid pace of technological change makes patent protection
less significant than such factors as the knowledge and experience of management
and personnel and our ability to develop, enhance and market manufacturing
services.
We license some technology from third parties that we use in providing
manufacturing services to our customers. We believe that such licenses are
generally available on commercial terms from a number of licensors. Generally,
the agreements governing such technology grant us non-exclusive, worldwide
licenses with respect to the subject technology and terminate upon a material
breach by us.
We believe that our electronic designs and manufacturing processes do not
infringe on the proprietary rights of third parties. However, if third parties
assert valid infringement claims against us with respect to past, current or
future designs or processes, we could be required to enter into an expensive
royalty arrangement, develop non-infringing designs or processes, or engage in
costly litigation.
EMPLOYEES
As of December 31, 1998, we had 6,313 full-time employees, compared to
4,429 full-time employees at December 31, 1997. Approximately 600 employees
joined us as a result of the HP Acquisition in August 1998. We believe our
employee relations are good.
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<PAGE> 38
FACILITIES
We have manufacturing facilities located in the United States, Scotland,
Malaysia, Mexico and Italy. The following table sets forth our facilities:
<TABLE>
<CAPTION>
YEAR APPROXIMATE
LOCATION COMMENCED LEASED/OWNED SQUARE FOOTAGE DESCRIPTION(1)
-------- --------- ------------ -------------- ----------------------------------
<S> <C> <C> <C> <C>
St. Petersburg, 1988 Owned 110,000 High volume mfg., corporate office
Florida
St. Petersburg, 1997 Owned 125,000 High volume mfg./design
Florida
St. Petersburg, 1997 Leased 91,000 Systems assembly
Florida
St. Petersburg, 1997 Leased 34,000 Operations
Florida
St. Petersburg, 1998 Leased 12,000 Corporate office
Florida
Auburn Hills, 1997 Leased 54,000 High volume mfg.
Michigan
Auburn Hills, 1993 Owned 125,000 High volume mfg./design
Michigan
Auburn Hills, 1993 Leased 30,000 Warehouse
Michigan
San Jose, California 1998 Leased 181,000 R&D/prototype mfg./medium volume
mfg.
Boise, Idaho 1998 Leased 129,000 High volume mfg.
Penang, Malaysia 1997 Owned 150,000 High volume mfg.
Guadalajara, Mexico 1997 Owned 150,000 High volume mfg.
Livingston, Scotland 1997 Owned 130,000 High volume mfg.
Bergamo, Italy 1998 Leased 102,000 High volume mfg.
</TABLE>
- -------------------------
(1) Our manufacturing facilities in Florida, Malaysia, Mexico and Scotland are
ISO-9002 certified, and our manufacturing facilities in Michigan are
ISO-9001 certified.
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.
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<PAGE> 39
MANAGEMENT AND DIRECTORS
The following table sets forth certain information regarding each of our
directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES
- ---- --- --------------------
<S> <C> <C>
William D. Morean................... 43 Chairman of the Board of Directors
and Chief Executive Officer
Thomas A. Sansone................... 49 Vice Chairman of the Board of
Directors
Ronald J. Rapp...................... 46 Vice President, Operational
Development and Director
Mel S. Lavitt(1).................... 61 Director
Lawrence J. Murphy(1)............... 56 Director
Frank A. Newman(2)(3)............... 50 Director
Steven A. Raymund(2)(3)............. 43 Director
Timothy L. Main..................... 41 President
Chris Lewis......................... 38 Chief Financial Officer
Robert L. Paver..................... 42 General Counsel and Secretary
Mark Mondello....................... 34 Senior Vice President, Business
Development
Wesley B. Edwards................... 46 Senior Vice President, Operations
Paul H. Bittner..................... 54 Vice President, Advanced Engineering
Randon A. Haight.................... 48 Vice President, Business Development
Beth A. Walters..................... 39 Vice President, Communications
Scott D. Brown...................... 36 Vice President, Corporate
Development
Jeffrey J. Lumetta.................. 35 Vice President, Design Services
Michael F. Ward..................... 47 Vice President, Information
Technology
Roland J. Burke..................... 57 Vice President, Materials
William E. Peters................... 35 Vice President, Operations
David S. Ebeling.................... 57 Vice President, Procurement
Frank Krajcirovic................... 50 Vice President, Quality Control
Forbes I.J. Alexander............... 38 Treasurer
</TABLE>
- -------------------------
(1) Member of the Audit Committee.
(2) Member of the Stock Option Committee.
(3) Member of the Compensation Committee.
WILLIAM D. MOREAN. Mr. Morean has served as Chief Executive Officer and
Chairman of the Board since 1988 and as a director since 1978. Mr. Morean joined
Jabil in 1977 and assumed management of day-to-day operations the following
year. Prior to serving as Chief Executive Officer and Chairman of the Board, Mr.
Morean served as President and Vice President and held various operating
positions with Jabil.
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<PAGE> 40
THOMAS A. SANSONE. Mr. Sansone has served as Vice Chairman of the Board
since January 1999, and as a director since 1983. Mr. Sansone joined Jabil in
1983 as Vice President and served as President of Jabil from 1988 to January
1999. Prior to joining us, Mr. Sansone was a practicing attorney.
RONALD J. RAPP. Mr. Rapp has served as Vice President, Operational
Development since January 1999 and as a director since September 1988. Mr. Rapp
joined Jabil in 1983 as Controller, was promoted to Treasurer in 1984, Chief
Financial Officer in 1988, and Executive Vice President of Operations in October
1996. Prior to joining us, Mr. Rapp was the Corporate Controller for Van Pelt
Corporation, a wholesale distributor of steel tubing products. Before joining
Van Pelt, Mr. Rapp was a certified public accountant with the accounting firm of
Ernst & Ernst.
MEL S. LAVITT. Mr. Lavitt has served as a director of Jabil since
September 1991. Mr. Lavitt has been a Managing Director at the investment
banking firm of C.E. Unterberg, Towbin (or its predecessor) since August 1992.
From June 1987 until August 1992, Mr. Lavitt was President of Lavitt Management,
a business consulting firm. From 1978 until June 1987, Mr. Lavitt served as an
Administrative Managing Director for the investment banking firm of L.F.
Rothschild, Unterberg, Towbin, Inc.
LAWRENCE J. MURPHY. Mr. Murphy has served as a director of Jabil since
September 1989. Since September 1997, Mr. Murphy has also served as an
independent consultant to Jabil. From March 1992 until September 1997, Mr.
Murphy served as a director of Core Industries, Inc., a diversified
conglomerate, where he held various executive level positions since 1981,
including the position of Executive Vice President and Secretary from September
1990 to September 1997. Prior to joining Core Industries, Inc., Mr. Murphy was a
practicing attorney at the law firm of Basey, Selesko, Couzens & Murphy, P.C.
and a certified public accountant with the accounting firm of Deloitte & Touche.
FRANK A. NEWMAN. Mr. Newman has served as a director of Jabil since
January 1998. Mr. Newman joined Eckerd Corporation, a drug store chain, in June
1993 as President and Chief Operating Officer, was appointed as President and
Chief Executive Officer in February 1996 and assumed the additional position of
Chairman of the Board in February 1997. From January 1986 until May 1993, Mr.
Newman was the President and Chief Executive Officer of F&M Distributors, Inc.
Mr. Newman currently is also a director of JoAnn Stores, Inc., Eckerd
Corporation and AmSouth Bancorporation.
STEVEN A. RAYMUND. Mr. Raymund has served as a director of Jabil since
January 1996. Mr. Raymund began his career at Tech Data Corporation, a
distributor of personal computer products, in 1981 as Operations Manager. He
became Chief Operating Officer in 1984 and was promoted to the position of Chief
Executive Officer of Tech Data Corporation in 1986. Since 1991, Mr. Raymund has
also served as Chairman of the Board of Tech Data Corporation.
TIMOTHY L. MAIN. Mr. Main was named President of Jabil in January 1999
after serving as Senior Vice President, Business Development since August 1996.
He joined Jabil in April 1987 as a Production Control Manager, was promoted to
Operations Manager in September 1987, to Project Manager in July 1989 and to
Vice President Business Development in May 1991. Prior to joining us, Mr. Main
was a commercial lending officer, international division for the National Bank
of Detroit. Mr. Main has earned a B.S. from Michigan State University and an MIM
from the American Graduate School of International Management (Thunderbird).
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<PAGE> 41
CHRIS LEWIS. Mr. Lewis joined Jabil as Treasurer in June 1995 and was
promoted to Chief Financial Officer in August 1996. From July 1989 to May 1995,
Mr. Lewis was U.S. Controller of Peek PLC, a high technology manufacturing
group. Prior to July 1989, Mr. Lewis was a CPA with the accounting firm of KPMG
Peat Marwick. Mr. Lewis holds a B.A. in Business Administration from Wittenberg
University in Springfield, Ohio.
ROBERT L. PAVER. Mr. Paver joined Jabil as General Counsel in 1997. Prior
to joining us, he was a practicing attorney with the law firm of Holland &
Knight LLP in St. Petersburg, Florida from 1995 to 1997, and a sole practitioner
in St. Petersburg from 1991 to 1995. Prior to 1991, Mr. Paver was with the law
firm of Ciarciaglino, Paver and Coyle and its predecessors. He has served as an
adjunct professor of law at Stetson University College of Law since 1985. Mr.
Paver holds a B.A. from the University of Florida and a J.D. from Stetson
University College of Law.
MARK MONDELLO. Mr. Mondello was named Senior Vice President, Business
Development in January 1999. He joined Jabil in 1992 as Production Line
Supervisor and was promoted to Project Manager in 1993 and Vice President,
Business Development in September 1997. Prior to joining us, Mr. Mondello served
as project manager on commercial and defense-related aerospace programs for
Moog, Inc. Mr. Mondello holds a B.S. in Mechanical Engineering from the
University of South Florida.
WESLEY B. EDWARDS. Mr. Edwards was named Senior Vice President, Operations
in August 1996 after serving as Vice President, Operations since May 1994. He
joined Jabil as Manufacturing Manager of its Michigan facility in July 1988 and
was promoted to Operations Manager of the Florida facility in July 1989. Mr.
Edwards holds an M.B.A. from the University of Florida.
PAUL H. BITTNER. Mr. Bittner has been Vice President, Advanced Engineering
since January 1992. He joined Jabil in 1986 as Manufacturing Engineering
Manager, was promoted to Director of Manufacturing Engineering in April 1987,
and was promoted to Vice President, Manufacturing Engineering, in June 1988.
Prior to joining Jabil, Bittner held various positions with United Technologies
Automotive Electronic Group.
RANDON A. HAIGHT. Mr. Haight has served as Vice President, Business
Development Europe since May 1992. He joined Jabil as a Project Manager in July
1989. Prior to joining Jabil, Mr. Haight was the President of Cardinal
Automotive, an automobile customizer from 1987 to July 1989. Before joining
Cardinal Automotive, he was a group Manager at Terry Barr Sales, Inc., a
manufacturing representative to the automotive industry. Mr. Haight holds a B.A.
in Liberal Arts from Hillsdale College and an M.A. from Eastern Michigan
University.
BETH A. WALTERS. Ms. Walters was named Vice President, Communications in
November 1998. She joined Jabil in 1992 as Marketing Communications Manager and
was promoted to Director of Communications in 1994. Prior to joining us, Ms.
Walters owned a marketing communications firm and served in a variety of public
relations positions with advertising and public relations agencies. Ms. Walters
holds a B.S. in Political Science from American University in Washington, DC and
an M.A. in Political Science from the University of Hawaii.
SCOTT D. BROWN. Mr. Brown was named Vice President, Corporate Development
in September 1997. He joined Jabil as a Project Manager in November 1988 and
served in that capacity through August 1997. Prior to joining us, he was a
financial consultant with
39
<PAGE> 42
Merrill Lynch in Bloomfield Hills, Michigan. Mr. Brown holds a B.S. in Economics
from the University of Michigan.
JEFFREY J. LUMETTA. Mr. Lumetta was named Vice President, Design Services
in November 1996. He joined Jabil in 1986 as a Design Engineer, and was promoted
to Manager, Design Engineering at the Florida facility in 1994. Mr. Lumetta
holds a B.S. in Electrical Engineering from Michigan Technological University.
MICHAEL F. WARD. Mr. Ward joined Jabil in 1993 as plant operations manager
and helped establish our first international "greenfield" site in Livingston,
Scotland. He was promoted to his current position of Vice President, Information
Technology in May 1998. Prior to joining us, he held various positions at
Seagate Technology, Honeywell and Burroughs Machines. Mr. Ward earned degrees in
Electronic and Electrical Engineering and Mechanical Engineering from Bell
College of Technology Hamilton, Scotland.
ROLAND J. BURKE. Mr. Burke joined Jabil in 1995 as the Operations Manager,
overseeing the Florida manufacturing facilities. He remained in this position
until April 1998, when he was promoted to his current position of Vice
President, Materials. Prior to joining us, he held executive positions at Conner
Peripherals, Cipher Data, Archive Corp. and Irwin Magnetics from 1981 to 1994.
Mr. Burke holds a Bachelor's degree from Oakland University in Rochester,
Michigan.
WILLIAM E. PETERS. Mr. Peters joined Jabil in 1990 and has served as
Operations Manager, Purchasing Manager and Buyer. Prior to 1990, Mr. Peters
worked for Electronic Data Systems as a financial analyst. Mr. Peters holds a
B.A. in Economics from Michigan State University.
DAVID S. EBELING. Mr. Ebeling joined Jabil as Vice President, Procurement
in November 1992. Prior to joining us, he held the position of Director of
Procurement, Quality & Traffic at NEC Technology, a manufacturer of personal
computers, printers and monitors. Mr. Ebeling also held the position of Director
of Materials at Eastman Kodak and held similar positions at Unisys, Wang Labs
and Motorola. Mr. Ebeling holds a B.S. in Industrial Engineering from
Northeastern University in Boston.
FRANK KRAJCIROVIC. Mr. Krajcirovic has been Vice President, Quality
Control since June 1988. He joined Jabil in 1982 as a Quality Engineer. Mr.
Krajcirovic was promoted to Manager of Quality in 1983 and to Director of
Quality in September 1987. Prior to joining us, he held various reliability
engineering positions with Massey Ferguson, Inc., a farm equipment manufacturer
and Fundimensions, Inc., Lionel Division, a toy manufacturer. Mr. Krajcirovic
holds a B.S. in Electrical Engineering from the City of Brno College,
Czechoslovakia.
FORBES I.J. ALEXANDER. Mr. Alexander was named Treasurer in November 1996.
He joined Jabil in 1993 as Controller of our Scottish operation and was promoted
to Assistant Treasurer in April 1996. Prior to joining us, Mr. Alexander was
Financial Controller of Tandy Electronics European Manufacturing Operations in
Scotland and has held various positions with Hewlett Packard and Apollo
Computer. He is a Chartered Management Accountant. Mr. Alexander holds a B.A. in
Accounting from Dundee College of Technology, Scotland.
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<PAGE> 43
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of our common stock by each selling stockholder at January
29, 1999, both before the Offerings and as adjusted to reflect the sale of
shares of common stock in the Offerings. This table has been adjusted to reflect
a two-for-one stock split in the form of a 100% stock dividend to stockholders
that is expected to be reflected on the New York Stock Exchange on February 18,
1999.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO THE OFFERINGS(1)(2) NUMBER OF AFTER THE OFFERINGS(1)(2)
---------------------------- SHARES -------------------------
PERCENT OF OFFERED BY PERCENT OF
TOTAL SHARES SELLING TOTAL SHARES
SELLING STOCKHOLDERS NUMBER OUTSTANDING STOCKHOLDERS(1) NUMBER OUTSTANDING
- -------------------- ------------ ------------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
William D. Morean(3).. 25,489,560 34.0% 4,000,000 21,489,560 26.2%
c/o Jabil Circuit,
Inc.
10800 Roosevelt Blvd
St. Petersburg,
Florida 33716
Thomas A. Sansone(4).. 4,023,896 5.2% 500,000 3,523,896 4.2%
c/o Jabil Circuit,
Inc.
10800 Roosevelt Blvd
St. Petersburg,
Florida 33716
</TABLE>
(1) The numbers in the above table assume no exercise of the underwriters' over-
allotment options. If the over-allotment options are exercised in full,
William D. Morean will sell 4,600,000 shares and will beneficially own after
the Offerings 20,889,560 shares or 25.5% of the total shares outstanding and
Thomas A. Sansone will sell 575,000 shares and will beneficially own after
the Offerings 3,448,896 shares or 4.1% of the total shares outstanding.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC") and includes voting and
investment power with respect to the shares shown as beneficially owned.
Unless otherwise noted and except to the extent that authority is shared by
spouses under applicable law, the nature of beneficial ownership is sole
voting and/or investment power. Shares of our common stock not outstanding
but deemed beneficially owned by virtue of the right of a person or group to
acquire them within 60 days of date of this prospectus are treated as
outstanding only for purposes of determining the number and percent of
outstanding shares of common stock owned by that person or group.
(3) Includes: 12,561,000 shares held by the William E. Morean Residual Trust
(the "Trust"), as to which Mr. Morean and Ms. Audrey Petersen (Mr. Morean's
mother) share voting and dispositive power as members of the Management
Committee created under the Trust; Ms. Petersen is also a co-trustee of the
Trust; (ii) 12,721,000 shares held of record by Cheyenne Holdings Limited
Partnership ("Cheyenne"), a Nevada limited partnership, of which Morean
Management Company is the sole general partner, as to which Mr. Morean has
sole voting and dispositive power; (iii) 200,000 shares held of record by
Eagle's Wing Foundation, a private charitable foundation of which Mr. Morean
is a director and with respect to which Mr. Morean may be deemed to have
shared voting and dispositive power; and (iv) 7,560 shares
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<PAGE> 44
subject to options. Of the 4,000,000 shares being sold in the Offerings,
1,000,000 shares are being sold by the Trust and 3,000,000 shares are being
sold by Cheyenne.
(4) Includes (i) 1,080,000 shares held by TASAN Limited Partnership, a Nevada
limited partnership, of which TAS Management, Inc. is the sole general
partner, as to which Mr. Sansone has sole voting and dispositive power; Mr.
Sansone is President of TAS Management, Inc.; (ii) 377,000 shares held by
Life's Requite, Inc., a private charitable foundation of which Mr. Sansone
is a director and as to which Mr. Sansone may be deemed to have shared
voting and dispositive power; and (iii) 2,566,896 shares subject to options.
All of the 500,000 shares being sold in the Offerings are being sold by
TASAN Limited Partnership.
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<PAGE> 45
SHARES ELIGIBLE FOR FUTURE SALE
Once the Offerings made by this prospectus are complete, we will have
80,983,890 shares of common stock outstanding (81,883,890 shares if the
underwriters' over-allotment options are exercised in full). Of these shares,
50,239,836 shares (51,139,836 shares if the underwriters' over-allotment options
are exercised in full) will be freely tradeable without restriction or
registration under the Securities Act by persons who are not "affiliates" of
Jabil, as defined in the Securities Act. The remaining 30,558,982 shares of
common stock outstanding will be "restricted securities" as defined by Rule 144.
In general, under Rule 144, a person, or a group of persons if their shares
are required to be aggregated, who for at least one year has beneficially owned
shares of our common stock that have not been registered under the Securities
Act or that were acquired from one of our "affiliates" as defined under the
Securities Act is entitled to sell shares of common stock subject to certain
limitations. The person or group may not sell within any three-month period a
number of shares that is more than the greater of (1) one percent of the number
of then outstanding shares of our common stock and (2) the average weekly
reported trading volume during the four calendar weeks preceding the sale. The
sales of the person or group under Rule 144 also are subject to notice
requirements and to there being current information publicly available about
Jabil. Also, these sales must be made in unsolicited brokers' transactions or to
a market maker.
A person, or a group of persons if their shares are required to be
aggregated, who is not our "affiliate" during the three months preceding a sale
and who had beneficially owned shares of our common stock for at least two years
is entitled to sell those shares without regard to the volume, notice,
information and manner of sale provisions of Rule 144.
As of December 31, 1998, we had reserved an aggregate of 6,099,950 shares
of our common stock for issuance upon the exercise of outstanding options
granted to our employees and directors. Except for any shares held by persons
that are our "affiliates" as defined under the Securities Act, shares issued
upon exercise of these options are freely tradeable.
We cannot predict the effect, if any, that sales of shares of our common
stock or the availability of shares of our common stock for sale will have on
the prevailing market price of our common stock. However, sales of significant
amounts of our common stock, or the perception that significant sales of our
common stock may occur, could adversely affect the prevailing market price of
our common stock. Significant sales of shares of our common stock could also
impair our ability to raise capital by issuing additional equity securities. See
"Risk Factors -- We Have a Large Number of Outstanding Shares Eligible for
Future Sale" and "-- Our Stock Price May be Volatile."
In lock-up agreements entered into in connection with the Offerings, we and
certain of our existing stockholders, executive officers and directors have
agreed, for a lock-up period of 90 days after the date of this prospectus, not
to make certain dispositions of any shares of our common stock. The
stockholders, executive officers and directors who have executed these lock-up
agreements hold in aggregate approximately million shares of our common
stock. The persons subject to these lock-up agreements have agreed, subject to
certain exceptions, not to directly or indirectly:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option or
right or warrant for the sale of, or
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<PAGE> 46
otherwise dispose of or transfer, in any way, any shares of our common
stock or securities convertible into or exchangeable or exercisable for
shares of our common stock, whether now owned or later acquired by the
person executing the agreement or with respect to which the person
executing the agreement later acquires the power of disposition
- file a registration statement under the Securities Act for the foregoing
- enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of our common stock whether
any such swap or transaction is to be settled by delivery of common stock
or other securities, in cash or otherwise without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated on behalf
of the underwriters.
The restrictions of the lock-up agreements do not apply:
- to the sale to the underwriters of the shares of common stock in these
Offerings
- to the issue of shares of common stock upon the exercise of outstanding
stock options
- to the issue of options pursuant to our stock option plans
CERTAIN UNITED STATES FEDERAL TAX
CONSIDERATIONS FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax considerations with respect to the ownership and
disposition of common stock applicable to non-U.S. holders. In general, a
"non-U.S. holder" is any holder of common stock other than: (1) a citizen or
resident of the United States; (2) a corporation or partnership created or
organized in the United States or under the laws of the United States or of any
state; (3) an estate, the income of which is includable in gross income for
United States federal income tax purposes regardless of its source; or (4) a
trust if (a) a court within the United States is able to exercise primary
supervision over the administration of the trust and (b) one or more United
States persons have the authority to control all substantial decisions of the
trust.
This discussion is based on current law, which is subject to change
(possibly with retroactive effect), and is for general information only. This
discussion does not address all aspects of federal income and estate taxation
that may be relevant to non-U.S. holders in light of their particular
circumstances, nor does it address any aspects of state, local or non-United
States taxes. Further, it does not consider non-U.S. holders subject to special
tax treatment under the federal tax laws (including but not limited to banks and
insurance companies, dealers in securities, traders in securities that elect
mark-to-market accounting treatment and holders of common stock held as part of
a "straddle," "hedge," or "conversion transaction"). Accordingly, prospective
investors are urged to consult their tax advisors regarding the United States
federal, state, local and non-United States income and other tax considerations
of holding and disposing of shares of common stock.
44
<PAGE> 47
DIVIDENDS
In general, dividends paid to a non-U.S. holder will be subject to United
States withholding tax at a 30.0% rate on the gross amount (or a lower rate
prescribed by an applicable income tax treaty) unless the dividends are either
(1) effectively connected with a trade or business carried on by the non-U.S.
holder within the United States or (2) if certain income tax treaties apply,
attributable to a permanent establishment in the United States maintained by the
non-U.S. holder (in which cases the dividends will be taxed on a net income
basis, in the same manner as if the non-U.S. holder were a resident of the
United States). Prospective investors should consult their tax advisors
regarding the applicability to them of a relevant income tax treaty. A non-U.S.
holder that is a corporation may be subject to an additional branch profits tax
at a rate of 30.0% (or such lower rate as may be specified by an applicable
income tax treaty) of its "effectively connected earnings and profits," subject
to certain adjustments. A non-U.S. holder may be required to satisfy certain
certification requirements in order to claim treaty benefits or otherwise claim
a reduction of, or exemption from, the withholding described above.
A non-U.S. holder of common stock that is eligible for a reduced rate of
U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for a refund with the
Internal Revenue Service.
GAIN ON SALE OR OTHER DISPOSITION OF COMMON STOCK
In general, a non-U.S. holder will not be subject to United States federal
income tax on any gain realized upon the sale or other disposition
(collectively, a "disposition") of such holder's shares of common stock unless:
(1) the gain either is effectively connected with a trade or business carried on
by the non-U.S. holder within the United States or, if certain income tax
treaties apply, is attributable to a permanent establishment in the United
States maintained by the non-U.S. holder (and, in either case, the branch
profits tax discussed above may also apply if the non-U.S. holder is a
corporation); (2) the non-U.S. holder is an individual who holds shares of
common stock as a capital asset and is present in the United States for 183 days
or more in the taxable year of disposition, and certain other tests are met; (3)
the non-U.S. holder is subject to tax pursuant to the provisions of United
States federal income tax law applicable to certain United States expatriates;
or (4) Jabil is or has been a United States real property holding corporation
for United States federal income tax purposes (which Jabil does not believe that
it is or is likely to become) at any time within the shorter of the five year
period preceding such disposition or such non-U.S. holder's holding period for
its common stock.
ESTATE TAX
Common stock owned or treated as owned by an individual who is not a
citizen or resident (as defined for United States federal estate tax purposes)
of the United States at the time of death will be includable in the individual's
gross estate for United States federal estate tax purposes unless an applicable
estate treaty provides otherwise, and therefore may be subject to United States
federal estate tax.
45
<PAGE> 48
BACKUP WITHHOLDING, INFORMATION REPORTING AND OTHER REPORTING REQUIREMENTS
We must report annually to the Internal Revenue Service and to each
non-U.S. holder the amount of dividends paid to, and the tax withheld with
respect to, each non-U.S. holder. These reporting requirements apply regardless
of whether withholding was reduced or eliminated by an applicable income tax
treaty. Copies of this information also may be made available under the
provisions of a specific treaty or agreement with the tax authorities in the
country in which the non-U.S. holder resides or is established.
Under the currently effective United States Treasury Department
regulations, United States backup withholding tax (which generally is imposed at
the rate of 31.0% on certain payments to persons that fail to furnish the
information required under the United States information reporting requirements)
and information reporting requirements generally will not apply to dividends
paid on common stock to a non-U.S. holder at an address outside the United
States. Backup withholding and information reporting generally will apply,
however, to dividends paid on shares of common stock to a non-U.S. holder at an
address in the United States, if such holder fails to establish an exemption or
to provide certain other information to the payor.
Under the current regulations mentioned above, the payment of proceeds from
the disposition of common stock to or through a United States office of a broker
will be subject to information reporting and backup withholding unless the
beneficial owner, under penalty of perjury, certifies, among other things, its
status as a non-U.S. holder or otherwise establishes an exemption. The payment
of proceeds from the disposition of common stock to or through a non-U.S. office
of a non-U.S. broker generally will not be subject to backup withholding and
information reporting except as noted below. In the case of proceeds from a
disposition of common stock paid to or through a non-U.S. office of a broker
that is: (1) a United States person; (2) a "controlled foreign corporation" for
United States federal income tax purposes; or (3) a foreign person 50.0% or more
of whose gross income from certain periods is effectively connected with a
United States trade or business, information reporting (but not backup
withholding) will apply unless the broker has documentary evidence in its files
that the owner is a non-U.S. holder (and the broker has no actual knowledge to
the contrary).
Under new United States Treasury Department regulations generally effective
for payments made after December 31, 1999, the payment of dividends or the
payment of proceeds from the disposition of common stock to a non-U.S. holder to
or through a broker having certain enumerated connections with the United States
may be subject to information reporting and backup withholding at a rate of
31.0% unless such recipient provides to the payor certain documentation as to
its status as a non-U.S. holder or otherwise establishes an exemption.
Prospective investors should consult their tax advisors regarding the
application of the new regulations to their particular circumstances.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a non-U.S. holder will be refunded or
credited against the non-U.S. holder's United States federal income tax
liability, if any, provided that the required information is furnished to the
Internal Revenue Service in a timely manner.
46
<PAGE> 49
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin &
Jenrette Securities Corporation, Salomon Smith Barney Inc., C.E. Unterberg,
Towbin and Thomas Weisel Partners LLC are acting as representatives of each of
the U.S. underwriters named below. Subject to the terms and conditions set forth
in a U.S. purchase agreement among Jabil, the selling stockholders and the U.S.
underwriters, and concurrently with the sale of 1,500,000 shares of common stock
to certain international managers, Jabil and the selling stockholders have
agreed to sell to the U.S. underwriters, and each of the U.S. underwriters
severally and not jointly has agreed to purchase from Jabil and the selling
stockholders, the number of shares of common stock set forth opposite its name
below.
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITER SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Salomon Smith Barney Inc....................................
C.E. Unterberg, Towbin......................................
Thomas Weisel Partners LLC..................................
---------
Total......................................... 9,000,000
=========
</TABLE>
Jabil and the selling stockholders have also entered into an international
purchase agreement with certain international managers outside the United States
and Canada for whom Merrill Lynch International, Donaldson, Lufkin & Jenrette
International, Salomon Brothers International, C.E. Unterberg, Towbin and Thomas
Weisel Partners LLC are acting as lead managers. Subject to the terms and
conditions set forth in the international purchase agreement, and concurrently
with the sale of 9,000,000 shares of common stock to the U.S. underwriters
pursuant to the U.S. purchase agreement, Jabil and the selling stockholders have
agreed to sell to the international managers, and each of the international
managers severally and not jointly has agreed to purchase from Jabil and the
selling stockholders, an aggregate of 1,500,000 shares of common stock. The
public offering price per share of common stock and the underwriting discount
per share of common stock are identical under the U.S. purchase agreement and
the international purchase agreement.
In the U.S. purchase agreement and the international purchase agreement,
the several U.S. underwriters and the several international managers,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of common stock being sold pursuant to
each such agreement if any of the shares of common stock being sold pursuant to
such agreement are purchased. In the event of a default by an underwriter, the
U.S. purchase agreement and the international purchase agreement provide that,
in certain circumstances, the commitments of non-defaulting underwriters may be
increased or the purchase agreements may be terminated. The closings with
respect to the sale of shares of common stock to be purchased by the U.S.
underwriters and the international managers are conditioned upon one another.
The U.S. representatives have advised Jabil and the selling stockholders
that the U.S. underwriters propose initially to offer the shares of common stock
to the public at the public offering price set forth on the cover page of this
prospectus, and to certain dealers at such price less a concession not in excess
of $ per share of common stock. The U.S. underwriters may allow, and
such dealers may reallow, a discount not in excess of
47
<PAGE> 50
$ per share of common stock on sales to certain other dealers. After
initially offering common stock to the public at $ per share, the
public offering price, concession and discount may be changed.
Jabil and the selling stockholders have granted options to the U.S.
underwriters, exercisable within 30 days after the date of this prospectus, to
purchase up to an aggregate of 1,350,000 additional shares of common stock at
the public offering price set forth on the cover page of this prospectus, less
the underwriting discount. The U.S. underwriters may exercise these options
solely to cover over-allotments, if any, made on the sale of the common stock
offered hereby. To the extent that the U.S. underwriters exercise these options,
each U.S. underwriter will be obligated, subject to certain conditions, to
purchase a number of additional shares of common stock proportionate to such
U.S. underwriter's initial amount reflected in the foregoing table. Jabil and
the selling stockholders also have granted options to the international
managers, exercisable within 30 days after the date of this prospectus, to
purchase up to aggregate of 225,000 additional shares of common stock to cover
over-allotments, if any, on terms similar to those granted to the U.S.
underwriters.
The following table shows (1) the per share and total public offering
price, (2) the underwriting discount to be paid by Jabil and the selling
stockholders to the U.S. underwriters and the international managers, (3) the
proceeds before expenses to Jabil and (4) the proceeds to the selling
stockholders. This information is presented assuming either no exercise or full
exercise by the U.S. underwriters and the international managers of their
over-allotment options.
<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
-------- -------- --------
<S> <C> <C> <C>
Public Offering Price....................... $ $ $
Underwriting Discount....................... $ $ $
Proceeds, before expenses, to Jabil......... $ $ $
Proceeds to the Selling Stockholders........ $ $ $
</TABLE>
The expenses of the Offerings (exclusive of the underwriting discount) are
estimated at $750,000 and are payable by Jabil.
The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the underwriters and certain
other conditions. The underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part.
Jabil, the selling stockholders, Jabil's executive officers and directors,
and certain of Jabil's stockholders, have agreed, subject to certain exceptions,
not to directly or indirectly (1) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant for the sale of or otherwise dispose of or
transfer any shares of common stock or securities convertible into or
exchangeable or exercisable for or repayable with common stock, whether now
owned or thereafter acquired by the person executing the agreement or with
respect to which the person executing the agreement thereafter acquires the
power of disposition, or file a registration statement under the Securities Act
of 1933 with respect to the foregoing or (2) enter into any swap or other
agreement that transfers, in whole or in part, the economic consequences of
ownership of common stock or such other securities, in cash or otherwise,
without the prior written consent of Merrill Lynch, Pierce, Fenner &
48
<PAGE> 51
Smith Incorporated on behalf of the underwriters, for a period of 90 days after
the date of this prospectus. See the "Shares Eligible for Future Sale" section
of this prospectus.
The U.S. underwriters and the international managers have entered into an
intersyndicate agreement that provides for the coordination of their activities.
Pursuant to the intersyndicate agreement, the U.S. underwriters and the
international managers are permitted to sell shares of common stock to each
other for purposes of resale at the public offering price, less an amount not
greater than the selling concession. Under the terms of the intersyndicate
agreement, the U.S. underwriters and any dealer to whom they sell shares of
common stock will not offer to sell or sell shares of common stock to persons
who are non-U.S. or non-Canadian persons or to persons they believe intend to
resell to persons who are non-U.S. or non-Canadian person, and the international
managers and any dealer to whom they sell shares of common stock will not offer
to sell or sell shares of common stock to U.S. persons or to Canadian persons or
to persons they believe intend to resell to U.S. persons or Canadian persons,
except in the case of transactions pursuant to the intersyndicate agreement.
Jabil's common stock is listed on the New York Stock Exchange under the
symbol "JBL."
The U.S. underwriters and the international managers have informed Jabil
that they do not intend to confirm sales of the common stock offered hereby to
any accounts over which they exercise discretionary authority.
Jabil and the selling stockholders have agreed to indemnify the U.S.
underwriters and the international managers against certain liabilities,
including liabilities under the Securities Act of 1933 or to contribute to
payments which the U.S. underwriters and the international managers may be
required to make in respect thereof.
Until the distribution of the common stock is completed, rules of the SEC
may limit the ability of the underwriters and certain selling group members to
bid for and purchase common stock of Jabil. As an exception to these rules, the
U.S. representatives are permitted to engage in certain transactions that
stabilize the price of the common stock of Jabil. Such transactions consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price of
the common stock of Jabil.
If the underwriters create a short position in the common stock in
connection with the Offerings, i.e, if they sell more shares of the common stock
than are set forth on the cover page of this prospectus, the U.S.
representatives may reduce that short position by purchasing shares of the
common stock in the open market. The U.S. representatives may also elect to
reduce any short position by exercising all or part of the over-allotment option
described above.
In general, purchases of a security for the purposes of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might have been in the absence of such purchases.
None of Jabil, the selling stockholders or any of the underwriters makes
any representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the common stock.
In addition, none of Jabil, the selling stockholders or any of the underwriters
makes any representation that the U.S. representatives will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
49
<PAGE> 52
Purchasers of the shares of common stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase in addition to the offering price set forth on the cover
page hereof.
Mel S. Lavitt, a Director of Jabil, is a Managing Director of C.E.
Unterberg, Towbin, one of the U.S. representatives of the U.S. underwriters and
one of the lead managers of the international managers.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities and Exchange Act of
1934 until we sell all of the securities.
- Annual Report on Form 10-K for the year ended August 31, 1998 (including
information specifically incorporated by reference into our Form 10-K
from our definitive Proxy Statement for our 1998 Annual Meetings of
Stockholders).
- Quarterly Report on Form 10-Q for the quarter ended November 30, 1998.
- The description of Jabil's common stock contained in Jabil's registration
statement on Form 8-A dated March 3, 1993.
On request we will provide at no cost to each person, including any
beneficial owner, who receives a copy of this prospectus, a copy of any or all
of the documents incorporated in this prospectus by reference. We will not
provide exhibits to any of such documents, however, unless such exhibits are
specifically incorporated by reference into those documents. Written or
telephone requests for such copies should be addressed to Jabil's principal
executive offices, attention: Beth A. Walters, Vice President -- Communications,
10800 Roosevelt Boulevard, St. Petersburg, Florida 33716, telephone number (727)
577-9749.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Those reports, proxy statements and other information
may be obtained:
- At the Public Reference Room of the SEC, Room 1024-Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549;
- At the public reference facilities at the SEC's regional offices located
at Seven World Trade Center, 13th Floor, New York, New York 10048 or
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661;
- From the SEC, Public Reference Section, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549;
50
<PAGE> 53
- At the offices of The New York Stock Exchange, 20 Broad Street, New York,
New York 10005.
- From the Internet site maintained by the SEC at http://www.sec.gov, which
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC.
Some locations may charge prescribed or modest fees for copies.
We have filed with the SEC a Registration Statement on Form S-3 (together
with any amendments or supplements thereto, the "Registration Statement") under
the Securities Act covering the shares of common stock offered hereby. As
permitted by the SEC, this prospectus, which constitutes a part of the
Registration Statement, does not contain all the information included in the
Registration Statement. This additional information may be obtained from the
locations described above. Statements contained in this prospectus as to the
contents of any contract or other document are not necessarily complete. You
should refer to the contract or other document for all the details.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of common
stock offered hereby will be passed upon for Jabil and the selling stockholders
by Holland & Knight LLP, Tampa, Florida. Certain legal matters related to the
Offerings will be passed upon for the underwriters by Brown & Wood LLP, New
York, New York.
EXPERTS
The consolidated financial statements and schedule of Jabil Circuit, Inc.
as of August 31, 1997 and 1998, and for each of the years in the three-year
period ended August 31, 1998, have been included herein and incorporated by
reference herein and in the registration statement in reliance upon the report
of KPMG LLP, independent certified public accountants, appearing elsewhere
herein and incorporated by reference herein, and upon the authority of said firm
as experts in accounting and auditing.
51
<PAGE> 54
JABIL CIRCUIT, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Financial Statements:
Consolidated Balance Sheets -- August 31, 1997 and 1998... F-3
Consolidated Statements of Operations -- Years ended
August 31, 1996, 1997, and 1998........................ F-4
Consolidated Statements of Stockholders' Equity -- Years
ended August 31, 1996, 1997, and 1998.................. F-5
Consolidated Statements of Cash Flows -- Years ended
August 31, 1996, 1997, and 1998........................ F-6
Notes to Consolidated Financial Statements................ F-7
Unaudited Interim Consolidated Financial Statements:
Consolidated Balance Sheets -- August 31, 1998 and
November 30, 1998...................................... F-23
Consolidated Statements of Operations -- Three Months
ended November 30, 1997 and 1998....................... F-24
Consolidated Statements of Cash Flows -- Three Months
ended November 30, 1997 and 1998....................... F-25
Notes to Unaudited Interim Consolidated Financial
Statements............................................. F-26
Schedule of Valuation and Qualifying Accounts............... F-30
</TABLE>
F-1
<PAGE> 55
INDEPENDENT AUDITORS' REPORT
The Board of Directors
JABIL CIRCUIT, INC:
We have audited the accompanying consolidated balance sheets of Jabil
Circuit, Inc. and subsidiaries as of August 31, 1997 and 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended August 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Jabil
Circuit, Inc. and subsidiaries as of August 31, 1997 and 1998, and the results
of their operations and their cash flows for each of the years in the three-year
period ended August 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
St. Petersburg, Florida
October 6, 1998, except as to Note 10 which
is as of December 7, 1998, and the second
paragraph of Note 1(m) which is as of
January 28, 1999.
F-2
<PAGE> 56
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 31,
----------------------
1997 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 45,457 $ 23,139
Accounts receivable, less allowance for doubtful
accounts of $2,690 in 1997 and $3,079 in 1998
(note 7).......................................... 116,987 126,276
Inventories (note 2)................................. 96,187 123,097
Prepaid expenses and other current assets............ 776 1,772
Deferred income taxes (note 5)....................... 6,591 16,095
-------- --------
Total current assets......................... 265,998 290,379
Property, plant and equipment, net (note 3)............ 139,520 224,680
Other assets........................................... 385 11,644
-------- --------
$405,903 $526,703
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 4)...... $ 2,475 $ 8,333
Accounts payable..................................... 125,741 132,601
Accrued expenses..................................... 34,248 40,460
Income taxes payable................................. 6,186 5,325
-------- --------
Total current liabilities.................... 168,650 186,719
Note payable and long-term debt, less current
installments (note 4)................................ 50,000 81,667
Deferred income taxes (note 5)......................... 3,663 7,724
Deferred grant revenue................................. 2,105 2,227
-------- --------
Total liabilities............................ 224,418 278,337
-------- --------
Stockholders' equity (notes 1 and 6):
Preferred stock, $.001 par value, authorized
1,000,000 shares; no shares issued and
outstanding....................................... -- --
Common stock, $.001 par value, authorized 120,000,000
shares; issued and outstanding, 74,000,184 shares
in 1997, and 74,536,850 in 1998................... 74 75
Additional paid-in capital........................... 61,595 71,542
Retained earnings.................................... 119,816 176,749
-------- --------
Net stockholders' equity.......................... 181,485 248,366
-------- --------
Commitments and contingencies (note 9).................
-------- --------
$405,903 $526,703
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 57
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
----------------------------------
1996 1997 1998
-------- -------- ----------
<S> <C> <C> <C>
Net revenue (note 7)........................ $863,285 $978,102 $1,277,374
Cost of revenue............................. 790,311 857,245 1,115,647
-------- -------- ----------
Gross profit................................ 72,974 120,857 161,727
Operating expenses:
Selling, general and administrative......... 25,456 35,886 52,014
Research and development.................... 2,112 3,117 3,784
Acquisition-related charge (note 10)........ -- -- 20,825
-------- -------- ----------
Operating income............................ 45,406 81,854 85,104
Interest expense, net....................... 7,333 1,612 3,124
-------- -------- ----------
Income before income taxes.................. 38,073 80,242 81,980
Income taxes (note 5)....................... 13,724 27,745 25,047
-------- -------- ----------
Net income.................................. $ 24,349 $ 52,497 $ 56,933
======== ======== ==========
Basic earnings per share.................... $ 0.35 $ 0.72 $ 0.77
======== ======== ==========
Diluted earnings per share.................. $ 0.34 $ 0.68 $ 0.74
======== ======== ==========
Common shares used in the calculations of
basic earnings per share.................. 68,916 72,599 74,249
======== ======== ==========
Common and common equivalent shares used in
the calculations of diluted earnings per
share..................................... 72,668 76,680 77,151
======== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 58
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
UNEARNED
COMMON STOCK COMPENSATION
----------------------- ADDITIONAL FROM GRANT NET
SHARES PAID-IN RETAINED OF STOCK STOCKHOLDERS'
OUTSTANDING PAR VALUE CAPITAL EARNINGS OPTION EQUITY
----------- --------- ---------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at August 31,
1995.................. 59,099,628 $59 $16,674 $ 42,970 $(108) $ 59,595
Exercise of stock
options............... 259,600 -- 268 -- -- 268
Public offering......... 11,500,000 12 39,140 -- -- 39,152
Amortization of unearned
compensation.......... -- -- -- -- 81 81
Shares issued under
Employee Stock
Purchase Plan......... 333,664 -- 678 -- -- 678
Tax benefit of options
exercised............. -- -- 111 -- -- 111
Net income.............. -- -- -- 24,349 -- 24,349
---------- --- ------- -------- ----- --------
Balance at August 31,
1996.................. 71,192,892 $71 $56,871 $ 67,319 $ (27) $124,234
Exercise of stock
options............... 2,530,020 3 2,384 -- -- 2,387
Amortization of unearned
compensation.......... -- -- -- -- 27 27
Shares issued under
Employee Stock
Purchase Plan......... 277,272 -- 1,237 -- -- 1,237
Tax benefit of options
exercised............. -- -- 1,103 -- -- 1,103
Net income.............. -- -- -- 52,497 -- 52,497
---------- --- ------- -------- ----- --------
Balance at August 31,
1997.................. 74,000,184 $74 $61,595 $119,816 $ -- $181,485
Exercise of stock
options............... 384,780 1 513 -- -- 514
Shares issued under
Employee Stock
Purchase Plan......... 151,886 -- 2,320 -- -- 2,320
Tax benefit of options
exercised............. -- -- 7,114 -- -- 7,114
Net income.............. -- -- -- 56,933 -- 56,933
---------- --- ------- -------- ----- --------
Balance at August 31,
1998.................. 74,536,850 $75 $71,542 $176,749 $ -- $248,366
========== === ======= ======== ===== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 59
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
-------------------------------
1996 1997 1998
------- ------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................... $24,349 $52,497 $ 56,933
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................ 18,210 24,924 35,702
Recognition of grant revenue................. (2,073) (1,705) (827)
Deferred income taxes........................ (2,876) (1,840) (5,443)
Loss (gain) on sale of property.............. 168 (275) 160
Acquisition related in-process research and
development charge........................ -- -- 6,500
Change in operating assets and liabilities,
exclusive of net assets acquired:
Accounts receivable....................... 28,828 (32,148) (9,289)
Inventories............................... 26,789 (31,318) 10,566
Prepaid expenses and other current
assets.................................. 361 (436) 2,776
Other assets.............................. (1,241) 1,513 (2,828)
Accounts payable and accrued expenses..... (584) 56,838 5,059
Income taxes payable...................... 8,133 1,310 (861)
------- ------- ---------
Net cash provided by operating
activities.............................. 100,064 69,360 98,448
------- ------- ---------
Cash flows from investing activities:
Net cash paid for net assets acquired........ -- -- (64,990)
Acquisition of property, plant and
equipment................................. (27,252) (93,805) (99,782)
Proceeds from sale of property and
equipment................................. 358 368 2,698
------- ------- ---------
Net cash used in investing activities..... (26,894) (93,437) (162,074)
------- ------- ---------
Cash flows from financing activities:
Increase (decrease) in note payable to
bank...................................... (73,000) -- 40,000
Proceeds from long-term debt................. 57,994 -- --
Payments of long-term debt and capital lease
obligations............................... (33,234) (8,347) (2,475)
Net proceeds from issuance of common stock... 40,098 3,624 2,834
Proceeds from grants......................... 2,805 938 949
------- ------- ---------
Net cash provided by (used in) financing
activities.............................. (5,337) (3,785) 41,308
------- ------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. 67,833 (27,862) (22,318)
Cash and cash equivalents at beginning of
period....................................... 5,486 73,319 45,457
------- ------- ---------
Cash and cash equivalents at end of period..... $73,319 $45,457 $ 23,139
======= ======= =========
Supplemental disclosure information:
Interest paid................................ $ 7,639 $ 4,707 $ 5,135
======= ======= =========
Income taxes paid, net of refunds received... $ 8,578 $29,378 $ 31,351
======= ======= =========
Tax benefit of options exercised............. $ 111 $ 1,103 $ 7,114
======= ======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 60
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Jabil Circuit, Inc. (together with its subsidiaries, herein referred to as
the "Company") is an independent supplier of custom manufacturing services for
circuit board assemblies, subsystems and systems to major original equipment
manufacturers ("OEMs") in the communications, computer peripherals, personal
computer, automotive and consumer products industries. The Company's
manufacturing services combine a high volume, highly automated manufacturing
approach with advanced design and manufacturing technologies. The Company is
headquartered in St. Petersburg, Florida and has manufacturing operations in the
United States, Europe, Asia and Mexico.
Significant accounting policies followed by the Company are as follows:
A. CONSOLIDATION
The consolidated financial statements include the accounts and operations
of Jabil Circuit, Inc. and its subsidiaries, all of which are wholly-owned. All
significant intercompany balances and transactions have been eliminated in
preparing the consolidated financial statements.
B. REVENUE RECOGNITION
The Company recognizes revenue typically at the time of product shipment.
Such revenue is recorded net of estimated product return and warranty costs. At
August 31, 1997 and 1998, such estimated amounts for returns and warranties are
not considered material.
C. ACCOUNTING ESTIMATES
Management is required to make estimates and assumptions during the
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles. These estimates and assumptions affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the dates of the consolidated financial statements.
They also affect the reported amount of net income. Actual results could differ
materially from these estimates and assumptions.
D. INVENTORIES
Inventories are stated at the lower of cost (first in, first out (FIFO)
method) or market.
E. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and depreciated and
amortized on the straight-line method over the estimated useful lives of the
respective assets, primarily thirty-five years for buildings and three to five
years for other assets. Maintenance and repairs are charged to expense as
incurred.
The Company performs a periodic analysis of the carrying value of its
property and equipment balances to determine that no impairment exists. Such
analysis includes, but is not limited to, a comparison of the undiscounted cash
flows of production related assets in
F-7
<PAGE> 61
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
relation to their carrying value. As of August 31, 1998 the Company is of the
opinion that no such impairment exists.
F. CASH EQUIVALENTS
The Company considers all highly liquid instruments with original
maturities of 90 days or less to be cash equivalents for financial statement
purposes. At August 31, 1997 and 1998, cash equivalents totaled approximately
$281,000 and $0, respectively.
G. GRANT REVENUE
The Company has been awarded grants related to the development of its
Scottish operations. Grant funds are earned as certain milestones are met, and
are being amortized over two to five-year periods.
H. INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in the tax rate is recognized in income in
the period that includes the enactment date of the rate change.
I. PROFIT SHARING AND 401(k) PLAN
The Company has a contributory profit-sharing plan with a 401(k) feature.
Company contributions are at the discretion of the Company's Board of Directors.
To participate, an employee must have completed a 12-month period of service in
which the employee worked at least 1,000 hours. Vesting is immediate. The
Company contributed approximately $1,650,000, $4,483,000, and $6,317,000 for the
years ended August 31, 1996, 1997, and 1998, respectively.
J. FOREIGN CURRENCY TRANSACTIONS
Gains or losses on foreign currency transactions are included in the
determination of net income as the Company considers the United States dollar to
be the functional currency of its foreign operations.
The Company enters into foreign currency contracts in order to mitigate the
impact of certain foreign currency fluctuations. Gains and losses related to the
hedges of firmly committed and anticipated transactions are deferred and
included in the basis of the transaction when it occurs. Foreign currency
exchange contracts outstanding at August 31, 1998 are described further in Note
8.
K. NET INCOME PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128
(Statement 128), Earnings per Share, in the fiscal year ended August 31, 1998.
Under Statement 128, the Company presents two earnings per share (EPS) amounts.
Basic EPS
F-8
<PAGE> 62
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. Previously
reported earnings per share amounts have been restated to conform to the
Statement 128 requirements.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------
AUGUST 31, AUGUST 31, AUGUST 31,
1996 1997 1998
---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Numerator:
Net income........................... $24,349 $52,497 $56,933
======= ======= =======
Denominator:
Weighted average shares
outstanding -- Basic............... 68,916 72,599 74,249
Employee stock options and other..... 3,752 4,081 2,902
------- ------- -------
Weighted average shares
outstanding -- Diluted.......... 72,668 76,680 77,151
======= ======= =======
Earnings per common share:
Basic.............................. $ .35 $ .72 $ .77
======= ======= =======
Diluted............................ $ .34 $ .68 $ .74
======= ======= =======
</TABLE>
For the years ended August 31, 1996, 1997 and 1998, options to purchase
23,200, 212,000, and 80,000 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 anti-dilutive.
L. STOCK BASED COMPENSATION
Prior to September 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense would be recorded on the date of granting of stock
options only if the current market price of the underlying stock exceeded the
exercise price. Effective September 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 123, Accounting for Stock Based Compensation
(Statement 123), which permits entities to recognize as expense over the vesting
period the fair value of all stock based awards on the date of the grant.
Alternatively, Statement 123 allows entities to continue to apply the provisions
of APB Opinion No. 25 and provide pro forma net income and pro forma net income
per share disclosures for employee stock options made in fiscal 1996 and future
years as if the fair value based method defined in Statement 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure required by Statement 123.
F-9
<PAGE> 63
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
M. SUBSEQUENT EVENT -- CHANGE IN CAPITAL STRUCTURE
On June 17, 1997, the Company's Board of Directors approved a two-for-one
stock split of the Company's common stock, effected in the form of a 100 percent
stock dividend to holders of record on July 8, 1997.
On January 28, 1999, the Company's shareholders approved an amendment to
the Company's 1992 Stock Option Plan (see note 6) to provide annual limits on
the number of shares of the Company's common stock subject to options that may
be granted to each employee of the Company and to increase the number of shares
reserved for issuance under the 1992 Stock Option Plan to 6,397,040 shares.
Additionally, the shareholders approved an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
common stock from 60 million to 120 million shares. Also on that date, the
Company's Board of Directors approved a two-for-one stock split of the Company's
common stock, effected in the form of a 100 percent stock dividend to holders of
record as of February 5, 1999. Financial information included in the
accompanying consolidated financial statements and notes has been adjusted to
reflect the impact of the above mentioned events for all periods presented.
N. INTANGIBLE ASSETS
Intangible assets are comprised of goodwill and other intellectual
property. Intangible assets, aggregating approximately $11.2 million as of
August 31, 1998, are classified as a component of other assets in the
accompanying consolidated balance sheets. Such amounts are amortized over a
ten-year period.
The Company performs a periodic analysis of the carrying value of its
intangible assets in order to determine that no instances of impairment exist.
Such an analysis includes a comparison of the undiscounted future cash flows of
related assets acquired in relation to the carrying value of recorded intangible
assets. As of August 31, 1998, the Company is of the opinion that no such
impairment exists.
2. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31,
-------------------
1997 1998
------- --------
<S> <C> <C>
Raw materials..................................... $75,433 $101,319
Work in process................................... 15,160 15,955
Finished goods.................................... 5,594 5,823
------- --------
$96,187 $123,097
======= ========
</TABLE>
F-10
<PAGE> 64
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Land and improvements............................ $ 9,232 $ 13,679
Buildings........................................ 23,336 58,382
Leasehold improvements........................... 3,682 4,988
Machinery and equipment.......................... 123,294 186,747
Furniture, fixtures and office equipment......... 7,225 9,990
Computer equipment............................... 15,062 23,039
Transportation equipment......................... 3,937 3,884
Construction in progress......................... 30,743 23,627
-------- --------
216,511 324,336
Less accumulated depreciation and amortization... 76,991 99,656
-------- --------
$139,520 $224,680
======== ========
</TABLE>
During the year ended August 31, 1998, the Company completed new
manufacturing facilities for its Scotland and Malaysia operations to replace its
existing leased facilities in those locations, as well as a new "greenfield"
facility in Guadalajara, Mexico. During the years ended August 31, 1997 and
1998, the Company capitalized approximately $120,000 and $83,000, respectively,
in interest related to the constructed facilities.
Maintenance and repairs expense was approximately $4,320,000, $5,229,000,
and $9,341,000 for the years ended August 31, 1996, 1997, and 1998,
respectively.
4. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Term loans(a)...................................... $50,000 $50,000
Borrowings under revolving credit facility(b)...... -- 40,000
Mortgage, repaid in 1998........................... 2,475 --
------- -------
Total notes payable and long-term debt............. 52,475 90,000
Less current installments of long-term debt........ 2,475 8,333
------- -------
Notes payable and long-term debt, less current
installments..................................... $50,000 $81,667
======= =======
</TABLE>
F-11
<PAGE> 65
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- -------------------------
(a) In May 1996, the Company completed a private placement of $50,000,000 Senior
Notes due 2004. The Notes have a fixed interest rate of 6.89%, with interest
payable on a semi-annual basis. Principal is payable in six equal annual
installments beginning May 30, 1999.
(b) In August 1998, the Company renegotiated its unsecured line of credit
facility and established a $225 million unsecured revolving credit facility
with a syndicate of banks ("Revolver"). Under the terms of the Revolver,
borrowings can be made under either floating rate loans or Eurodollar rate
loans. The Company pays interest on outstanding borrowings at interest rates
that fluctuate based upon changes in various base interest rates. The
Company pays a commitment fee on the unused portion of the Revolver at .20%
to .25% depending on the Company's funded debt to total capitalization
ratios. The renegotiated Revolver expires on August 3, 2001 and outstanding
borrowings are then due and payable. As of August 31, 1998, there were $40
million in borrowings outstanding under the Revolver and $185 million of the
facility was available. As of August 31, 1997, there were no borrowings
under the previous $100 million revolving credit facility.
The agreements related to the obligations described above contain a number
of restrictive financial and/or other covenants. In all cases, the Company was
in compliance with the respective covenants as of August 31, 1998.
Aggregate annual maturities for notes payable and long-term debt are as
follows (in thousands):
<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
1999................................................ $ 8,333
2000................................................ 8,333
2001................................................ 48,333
2002................................................ 8,333
2003................................................ 8,333
2004................................................ 8,335
-------
$90,000
=======
</TABLE>
F-12
<PAGE> 66
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INCOME TAXES
Income tax expense amounted to $13,724,000, $27,745,000, and $25,047,000
for the years ended August 31, 1996, 1997 and 1998, respectively (an effective
rate of 36%, 35%, and 31%, respectively). The actual expense differs from the
"expected" tax expense (computed by applying the U.S. federal corporate tax rate
of 35% to earnings before income taxes) as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
-----------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Computed "expected" tax expense.......... $13,326 $28,085 $28,693
State taxes, net of Federal benefit...... 698 1,352 895
Utilization of net operating loss from
Scottish subsidiary.................... (389) -- --
Income of Malaysian subsidiary........... -- (2,706) (5,957)
Other, net............................... 89 1,014 1,416
------- ------- -------
$13,724 $27,745 $25,047
======= ======= =======
</TABLE>
The Company's Malaysian subsidiary has been granted "pioneer" tax status
for the five-year period commenced November 1, 1995. This status allows tax-free
treatment by the Malaysian government for the subsidiary's income through
October 30, 2000. Malaysia's statutory income tax rate is 30%. The Malaysian
subsidiary generated income during the years ended August 31, 1997 and 1998,
resulting in a tax holiday of approximately $2,320,000 ($.03 per share) and
$5,106,000 ($.07 per share), respectively. The Company intends to indefinitely
re-invest income from all of its foreign subsidiaries. The aggregate
undistributed earnings of the Company's foreign subsidiaries for which no
deferred income taxes have been recorded was approximately $7,426,000 as of
August 31, 1998.
F-13
<PAGE> 67
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of income tax expense are (in thousands):
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -------
<S> <C> <C> <C>
1996:
Federal................................ $14,496 $ (2,360) $12,136
State.................................. 1,280 (204) 1,076
Foreign................................ 824 (312) 512
------- -------- -------
$16,600 $ (2,876) $13,724
======= ======== =======
1997:
Federal................................ $24,155 $ (1,800) $22,355
State.................................. 2,236 (156) 2,080
Foreign................................ 3,194 116 3,310
------- -------- -------
$29,585 $ (1,840) $27,745
======= ======== =======
1998:
Federal................................ $26,682 $ (4,001) $22,681
State.................................. 1,770 (449) 1,321
Foreign................................ 2,038 (993) 1,045
------- -------- -------
$30,490 $ (5,443) $25,047
======= ======== =======
</TABLE>
F-14
<PAGE> 68
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as follows
(in thousands):
<TABLE>
<CAPTION>
AUGUST 31,
-----------------
1997 1998
------ -------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance
for doubtful accounts.......................... $1,015 $ 1,171
Grant receivable.................................. 707 1,397
Inventories, principally due to reserves and
additional costs inventoried for tax purposes
pursuant to the Tax Reform Act of 1986......... 2,211 5,365
Compensated absences, principally due to accrual for
financial reporting purposes...................... 878 839
Accrued expenses, principally due to deferrals for
financial reporting purposes...................... 1,457 3,023
Intangible assets................................... -- 3,376
Other............................................. 490 1,168
------ -------
Total gross deferred tax assets................ 6,758 16,339
Less valuation allowance....................... 167 244
------ -------
Net deferred tax assets........................ $6,591 $16,095
====== =======
Deferred tax liabilities:
Property, plant and equipment, principally due to
differences in depreciation and amortization... $3,663 $ 7,724
====== =======
</TABLE>
Based on the Company's historical operating income, management believes
that it is more likely than not that the Company will realize the benefit of its
net deferred tax assets.
6. STOCKHOLDERS' EQUITY
A. PUBLIC OFFERING
The Company completed a public offering of 16,100,000 common shares on
November 3, 1995 in which the Company sold 11,500,000 shares (including an over-
allotment of 1,500,000 shares) and certain selling stockholders sold 4,600,000
shares. Net proceeds to the Company (net of underwriters' discounts and
commissions and other offering costs of approximately $350,000) were
approximately $39,152,000.
B. STOCK OPTION PLANS
As of August 31, 1998, options to purchase a total of 2,788,800 shares were
outstanding under the 1983 and 1989 stock option plans. The Board of Directors
terminated these plans in November 1992, and no additional options may be issued
thereunder. The exercise price of the outstanding options under these plans is
equal to fair market value, as determined by the Company, on the date of grant.
F-15
<PAGE> 69
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's 1992 Stock Option Plan (the "1992 Plan") provides for the
granting to employees of incentive stock options within the meaning of Section
422 of the Internal Revenue Code and for the granting of non-statutory stock
options to employees and consultants of the Company. The 1992 Plan was adopted
by the Board of Directors in November 1992 and approved by the stockholders in
December 1992. A total of 5,220,000 shares of common stock have been reserved
for issuance under the 1992 Plan, of which 1,600,000 were authorized during the
year ended August 31, 1998. As of August 31, 1998, options to purchase 1,852,120
shares are outstanding under the 1992 Plan.
The exercise price of all incentive stock options granted under the 1992
Plan is to be at least equal to the fair market value of shares of common stock
on the date of grant. With respect to any participant who owns stock
representing more than 10% of the voting power of all classes of stock of the
Company, the exercise price of any stock option granted is to equal at least
110% of the fair market value on the grant date and the maximum term of the
option may not exceed five years. The term of all other options under the 1992
Plan may not exceed ten years.
The following table summarizes option activity from September 1, 1995
through August 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------
SHARES WEIGHTED
AVAILABLE AVERAGE AGGREGATE
FOR GRANT SHARES OPTION PRICE VALUE
--------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Balance at August 31,
1995.................... 1,291,920 6,517,760 $0.76 $ 4,951,000
Options granted......... (728,000) 728,000 2.11 1,533,000
Options cancelled....... 74,160 (74,160) 1.41 (104,000)
Options exercised....... -- (259,600) 1.04 (268,000)
--------- ---------- ----- -----------
Balance at August 31,
1996.................... 638,080 6,912,000 $0.89 $ 6,112,000
Options granted......... (296,000) 296,000 12.62 3,734,000
Options cancelled....... 9,280 (9,280) 1.30 (12,000)
Options exercised....... -- (2,530,020) 0.94 (2,369,000)
--------- ---------- ----- -----------
Balance at August 31,
1997.................... 351,360 4,668,700 $1.60 $ 7,465,000
Options authorized...... 1,600,000 -- -- --
Options granted......... (357,000) 357,000 18.61 6,642,000
Options exercised....... -- (384,780) 1.34 (514,000)
--------- ---------- ----- -----------
Balance at August 31,
1998.................... 1,594,360 4,640,920 $2.93 $13,593,000
========= ========== ===== ===========
</TABLE>
At August 31, 1998, options for 3,653,720 shares were exercisable.
F-16
<PAGE> 70
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The range of exercise prices, shares, weighted average contractual life and
exercise price for the options outstanding as of August 31, 1998 are presented
below:
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED-
RANGE OF AVERAGE AVERAGE
EXERCISE PRICES SHARES CONTRACTUAL LIFE EXERCISE PRICE
- --------------- --------- ----------------- ---------------
<S> <C> <C> <C>
$ 0.44 2,788,800 3 $ 0.44
1.25 - 3.72 1,279,200 6 1.76
11.00 - 30.85 572,920 10 17.96
============== --------- == ------
$ 0.44 - 30.85 4,640,920 5 $ 2.93
============== ========= == ======
</TABLE>
The range of exercise prices, shares and weighted average exercise price of
the options exercisable at August 31, 1998 are presented below:
<TABLE>
<CAPTION>
WEIGHTED-
RANGE OF SHARES AVERAGE
EXERCISE PRICES EXERCISABLE EXERCISE PRICE
- ---------------- ----------- ---------------
<S> <C> <C>
$ 0.44 2,788,800 $ 0.44
1.25 - 3.72 780,360 1.66
11.00 - 30.85 84,560 17.05
============== --------- ======
$ 0.44 - 30.85 3,653,720 $ 1.08
============== ========= ======
</TABLE>
The per-share weighted-average fair value of stock options granted during
1997 and 1998 was $14.82 and $11.23, respectively, on the date of the grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions: 1997 -- expected dividend yield of 0%, risk-free interest rate of
6.2%, expected volatility of 76%, and an expected life of 5 years;
1998 -- Expected dividend yield of 0%, risk-free interest rate of 5.6%, expected
volatility of 78% and an expected life of 5 years.
C. PRO FORMA RESULTS
The Company applies APB Opinion No. 25 in accounting for its stock options
and, accordingly, no compensation cost has been recognized for its stock options
in the consolidated financial statements. Additionally, no compensation costs
are reflected for the discount related to shares granted to employees under the
1992 Employee Stock Purchase Plan. Had the Company determined compensation cost
based on Statement 123, the Company's net income would have been as follows:
<TABLE>
<CAPTION>
1997 1998
------------------ ------------------
NET DILUTED NET DILUTED
INCOME EPS INCOME EPS
------- ------- ------- -------
<S> <C> <C> <C> <C>
As Reported..................... $52,497 $ 0.68 $56,933 $ 0.74
Statement 123 Compensation (Net
of tax)....................... (262) -- (1,580) (.02)
Pro-forma disclosure............ $52,235 $ 0.68 $55,353 $ 0.72
</TABLE>
F-17
<PAGE> 71
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As discussed in note 1 (l) the disclosure presented above represents the
estimated fair value of stock options granted in fiscal 1996 and subsequent
years for which attribution is attributable to fiscal 1997 and 1998. Such
disclosure is not necessarily indicative of the fair value of stock options that
could be granted by the Company in future fiscal years or of all options
currently outstanding.
D. STOCK PURCHASE PLAN
The Company's 1992 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in November 1992 and approved by the
stockholders in December 1992. As of August 31, 1998, a total of 2,410,000
shares of common stock have been reserved for issuance under the Purchase Plan.
The Purchase Plan is intended to qualify under Section 423 of the Internal
Revenue Code.
Employees are eligible to participate after one year of employment with the
Company. The Purchase Plan permits eligible employees to purchase Common Stock
through payroll deductions, which may not exceed 10% of an employee's
compensation, as defined, at a price equal to 85% of the fair market value of
the Common Stock at the beginning or end of the offering period, whichever is
lower. Unless terminated sooner, the Purchase Plan will terminate ten years from
its effective date. As of August 31, 1998, a total of 1,703,066 shares had been
issued under the Purchase Plan.
The per-share weighted-average fair value of stock issued to employees in
1998 under the Company's 1992 Employee Stock Purchase Plan was $6.88 using the
Black-Scholes option-pricing model with the identical assumptions as those
listed for stock options granted during 1998.
7. CONCENTRATION OF RISK AND GEOGRAPHIC DATA
A. CONCENTRATION OF RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade receivables. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral. The Company maintains reserves for potential credit
losses.
F-18
<PAGE> 72
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Sales of the Company's products are concentrated among specific customers.
Sales to the following customers, expressed as a percentage of consolidated net
revenue, and the percentage of accounts receivable for each customer, were as
follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NET REVENUE ACCOUNTS RECEIVABLE
YEAR ENDED AUGUST 31, AUGUST 31, AUGUST 31,
----------------------- ---------- ----------
1996 1997 1998 1997 1998
----- ----- ----- ---------- ----------
<S> <C> <C> <C> <C> <C>
Cisco Systems, Inc........ 10% 20% 20% * *
3Com Corporation.......... 11% 21% 18% 14% *
Hewlett-Packard Company... 20% 15% 10% 13% 28%
Quantum Corporation....... 23% 10% * 13% *
NEC Technologies, Inc..... 15% * * * *
</TABLE>
- -------------------------
* Amount was less than 10% of total
B. GEOGRAPHIC DATA
The Company has defined the three geographic regions for the segment in
which it operates: North America (including Mexico), Europe and Asia. Sales to
unaffiliated customers are based on the location of the Company's operating
entity. Corporate assets include cash and cash equivalents, intangibles, and
deferred income taxes. Transfers between regions are not considered material.
The following data does not consider fully the extent of interrelated activities
between the regions including product development, manufacturing, engineering,
marketing and corporate management. Accordingly, the following amounts are not
necessarily indicative of the operating contribution of the geographic regions.
The following table sets forth information concerning these geographic segments
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
--------------------------------
1996 1997 1998
SALES TO UNAFFILIATED CUSTOMERS: -------- -------- --------
<S> <C> <C> <C>
North America......................... $595,941 $682,333 $911,419
Europe.............................. 161,195 207,850 222,524
Asia................................ 106,149 87,919 143,431
Export Sales.......................... 88,150 2,494 1,169
Operating Income:
North America....................... 40,811 62,770 62,393
Europe.............................. 3,244 11,381 5,831
Asia................................ 1,351 7,703 16,880
Identifiable Assets:
North America, including
corporate........................ 239,582 285,440 376,549
Europe.............................. 48,022 74,698 99,304
Asia................................ 12,336 45,765 50,850
</TABLE>
F-19
<PAGE> 73
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Foreign source revenue for the years ended August 31, 1996, 1997, and 1998
was approximately 31%, 30%, and 31%, respectively.
8. FOREIGN CURRENCY EXCHANGE CONTRACTS
The purpose of the Company's foreign currency hedging activity is to
protect the Company from the risk that the eventual dollar net cash flows
resulting from the sale and purchase of products in foreign currencies will be
adversely affected by changes in the exchange rates. It is the Company's policy
to utilize derivative financial instruments to reduce foreign exchange risks
where internal netting strategies cannot be effectively employed. The Company
does not hold or issue financial instruments for trading purposes. Fluctuations
in the value of hedging instruments are offset by fluctuations in the underlying
exposures being hedged, and deferred gains and losses on these contracts are
recognized when the future purchases and sales being hedged are realized.
The Company had approximately $5 million of net foreign currency exchange
contracts outstanding at August 31, 1998 related to the United Kingdom, with $26
million outstanding at August 31, 1997 related to the United Kingdom and
Malaysia. Unrealized gains and losses on these contracts were not material.
9. COMMITMENTS AND CONTINGENCIES
A. LEASE AGREEMENTS
The Company leases certain facilities and computer equipment under
non-cancelable operating leases. The future minimum payments under noncancelable
operating leases and related computer service agreements outstanding August 31,
1998 are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
AUGUST 31,
- ------------------
<S> <C>
1999................................ $12,593
2000................................ 11,871
2001................................ 4,393
2002................................ 294
2003................................ 74
Thereafter.......................... --
-------
Total minimum lease payments........ $29,225
=======
</TABLE>
Total rent expense for operating leases was approximately $3,354,000,
$3,868,000, and $5,311,424 for the years ended August 31, 1996, 1997, and 1998,
respectively.
B. LITIGATION
The Company is party to certain lawsuits in the ordinary course of
business. Management does not believe that these proceedings individually or in
the aggregate, will have a material adverse effect on the Company's financial
position, results of operations or cash flows.
F-20
<PAGE> 74
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. ACQUISITION
On August 3, 1998 the Company acquired certain assets (primarily raw
material inventory and property, plant and equipment) relating to the LaserJet
Formatter Manufacturing Organization business unit of Hewlett-Packard Company
located in Boise, Idaho, and Bergamo, Italy. The acquisition price was
approximately $80 million and was accounted for under the purchase method of
accounting. The acquisition resulted in goodwill and other intangible assets of
approximately $11.2 million, which is being amortized on a straight-line basis
over ten years.
Simultaneously, the Company entered into a manufacturing arrangement to
continue to produce the Laserjet circuit board assemblies being produced by the
Hewlett-Packard operations in Boise and Bergamo.
In conjunction with the acquisition, the Company recorded an
acquisition-related charge of $20.8 million consisting of an in-process
technology write-off of $6.5 million, work force related expenses of $10.0
million, and $4.3 million of other expenses.
11. NEW ACCOUNTING PRONOUNCEMENTS
During 1997 and 1998, the Financial Accounting Standards Board ("FASB")
issued several Statements of Financial Accounting Standards (Statements) which
are pending implementation by the Company. They are as follows:
STATEMENT 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 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.
STATEMENT 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 that began September 1, 1998. As this Statement
addresses reporting and disclosure issues only, there will be no impact on
earnings from its adoption. The Company is currently evaluating this Statement
and has yet to form an opinion on whether segment disclosure presented herein
will change significantly upon the adoption of Statement 131.
STATEMENT 133 -- ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES. Statement 133 establishes methods of accounting for derivative
financial instruments and hedging activities related to those instruments as
well as other hedging activities. The Company is currently evaluating this
Statement and has yet to form an opinion on whether its adoption will have any
significant impact on the Company's consolidated financial statements. The
Company will be required to implement Statement 133 for its fiscal year ending
August 31, 2000.
F-21
<PAGE> 75
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENT OF POSITION 98-5 REPORTING ON THE COSTS OF START UP
ACTIVITIES. SOP 98-5 establishes standards on the financial reporting of
start-up costs and organization costs. SOP 98-5 requires costs of start-up
activities and organization costs to be expensed as incurred. The SOP is
effective for financial statements for fiscal years beginning after December 15,
1998. As the Company has historically made a practice of expensing costs related
to both the establishment of "greenfield" manufacturing facilities and the
set-up of production lines as such costs are incurred, it does not anticipate
that the adoption of SOP 98-5 will have any material impact on its consolidated
financial statements.
F-22
<PAGE> 76
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 31, NOVEMBER 30,
1998 1998
---------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 23,139 $ 13,016
Accounts receivable, less allowance for doubtful
accounts......................................... 126,276 180,793
Inventories......................................... 123,097 146,272
Prepaid expenses and other current assets........... 1,772 3,367
Deferred income taxes............................... 16,095 14,960
-------- --------
Total current assets........................ 290,379 358,408
Property, plant and equipment, net.................... 224,680 246,496
Other assets.......................................... 11,644 11,405
-------- --------
$526,703 $616,309
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt.............. $ 8,333 $ 8,333
Accounts payable.................................... 132,601 192,764
Accrued expenses.................................... 40,460 43,939
Income taxes payable................................ 5,325 10,908
-------- --------
Total current liabilities................... 186,719 255,944
Note payable and long-term debt, less current
installments........................................ 81,667 81,667
Deferred income taxes................................. 7,724 8,484
Deferred grant revenue................................ 2,227 2,421
-------- --------
Total liabilities........................... 278,337 348,516
-------- --------
Stockholders' equity
Common stock........................................ 75 75
Additional paid-in capital.......................... 71,542 71,683
Retained earnings................................... 176,749 196,035
-------- --------
Net stockholders' equity.................... 248,366 267,793
-------- --------
$526,703 $616,309
======== ========
</TABLE>
See accompanying Notes to Unaudited Interim Consolidated Financial Statements
F-23
<PAGE> 77
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Net revenue.............................................. $319,512 $447,941
Cost of revenue.......................................... 278,167 397,366
-------- --------
Gross profit............................................. 41,345 50,575
Operating expenses:
Selling, general and administrative...................... 11,077 18,318
Research and development................................. 912 1,066
-------- --------
Operating income......................................... 29,356 31,191
Interest expense, net.................................... 713 1,520
-------- --------
Income before income taxes............................... 28,643 29,671
Income taxes............................................. 9,572 10,385
-------- --------
Net income............................................... $ 19,071 $ 19,286
======== ========
Basic earnings per share................................. $ 0.26 $ 0.26
======== ========
Diluted earnings per share............................... $ 0.25 $ 0.25
======== ========
Common shares used in the calculations of basic earnings
per share.............................................. 74,038 74,565
======== ========
Common and common equivalent shares used in the
calculations of diluted earnings per share............. 77,350 77,654
======== ========
</TABLE>
See accompanying Notes to Unaudited Interim Consolidated Financial Statements
F-24
<PAGE> 78
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30,
------------------
1997 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................... $19,071 $19,286
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization............................ 7,128 11,507
Recognition of grant revenue............................. (203) (201)
Deferred income taxes.................................... 706 1,895
Loss on sale of property................................. 18 718
Changes in operating assets and liabilities:
Accounts receivable................................... (17,370) (54,517)
Inventories........................................... (15,592) (23,175)
Prepaid expenses and other current assets............. (25) (1,595)
Other assets.......................................... (784) 32
Accounts payable and accrued expenses................. 28,544 69,225
------- -------
Net cash provided by operating activities............. 21,493 23,175
------- -------
Cash flows from investing activities:
Acquisition of property, plant and equipment............. (31,418) (34,006)
Proceeds from sale of property and equipment............. 10 172
------- -------
Net cash used in investing activities................. (31,408) (33,834)
------- -------
Cash flows from financing activities:
Increase in note payable to bank......................... 10,000 --
Payments of long-term debt............................... (2,475) --
Net proceeds from issuance of common stock............... 84 141
Proceeds from Scottish grant............................. -- 395
------- -------
Net cash provided by financing activities............. 7,609 536
------- -------
Net decrease in cash and cash equivalents.................. (2,306) (10,123)
Cash and cash equivalents at beginning of period........... 45,457 23,139
------- -------
Cash and cash equivalents at end of period................. $43,151 $13,016
======= =======
</TABLE>
See accompanying Notes to Unaudited Interim Consolidated Financial Statements
F-25
<PAGE> 79
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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, 1998 beginning
on page F-3 herein. 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 three-month period ended November 30,
1998 are not necessarily indicative of the results that should be expected for a
full fiscal year.
REVENUE RECOGNITION
The Company typically recognizes revenue at the time of product shipment.
Such revenue is recognized net of estimated product returns and warranty costs.
At November 30, 1998 such estimated amounts for returns and warranties are not
considered material.
In connection with the August 3, 1998 acquisition of the net assets of
Hewlett-Packard Company ("HP") laser printer operations, the Company entered
into an agreement with HP to produce laser printer component products. During
the first year of the agreement, the Company receives compensation for available
capacity, as well as compensation for the raw material content of actual units
produced. The available capacity compensation is recorded on a units produced
basis.
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.
F-26
<PAGE> 80
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30,
------------------
1997 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Numerator:
Net income....................................... $19,071 $19,286
Denominator:
Denominator for basic EPS-weighted-average
shares........................................ 74,038 74,565
Effect of dilutive securities:
Employee stock options........................... 3,312 3,089
------- -------
Denominator for diluted EPS-adjusted
weighted-average shares.......................... 77,350 77,654
======= =======
Basic EPS.......................................... $ .26 $ .26
======= =======
Diluted EPS........................................ $ .25 $ .25
======= =======
</TABLE>
For the three-month periods ended November 30, 1997 and 1998, options to
purchase 40,000 and 80,000, 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, the effect
would be antidilutive.
COMMITMENTS AND CONTINGENCIES
At November 30, 1998, the Company had approximately $40 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.
SUBSEQUENT EVENT -- CHANGE IN CAPITAL STRUCTURE
On January 28, 1999, the Company's shareholders approved an amendment to
the Company's 1992 Stock Option Plan to provide annual limits on the number of
shares of the Company's common stock subject to options that may be granted to
each employee of the Company and to increase the number of shares reserved for
issuance under the 1992 Stock Option Plan to 3,198,520 shares. Additionally, the
shareholders approved an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of common stock from 60 million to
120 million shares. Also on that date, the Company's Board of Directors approved
a two-for-one stock split of the Company's common stock, effected in the form of
a 100 percent stock dividend to holders of record as of February 5, 1999.
Financial information included in the accompanying
F-27
<PAGE> 81
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
consolidated financial statements and notes has been adjusted to reflect that
impact of the above mentioned events for all periods presented.
NEW ACCOUNTING PRONOUNCEMENTS
Effective September 1, 1998, the Company adopted 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. During the three months ended November
30, 1998, changes in stockholders' equity consisted of net income and the
exercise of stock options. Accordingly, comprehensive income as defined by
Statement 130 was equal to net income as shown in the accompanying unaudited
Consolidated Statement of Operations.
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 in its 1999 annual consolidated
financial statements. As this Statement addresses reporting and disclosure
issues only, there will be no impact on earnings from its adoption.
Statement 133 -- Accounting for Derivative Instruments and Hedging
Activities. Statement 133 establishes methods of accounting for derivative
financial instruments and hedging activities related to those instruments as
well as other hedging activities. The Company is currently evaluating this
Statement and has yet to form an opinion on whether its adoption will have any
significant impact on the Company's consolidated financial statements. The
Company will be required to implement Statement 133 for its fiscal year ending
August 31, 2000.
Statement of Position 98-5 Reporting on the Costs of Start Up Activities.
SOP 98-5 establishes standards on the financial reporting of start-up costs and
organization costs. SOP 98-5 requires costs of start-up activities and
organization costs to be expensed as incurred. The SOP is effective for
financial statements for fiscal years beginning after December 15, 1998. As the
Company has historically made a practice of expensing costs related to both the
establishment of "greenfield" manufacturing facilities and the set-up of
production lines as such costs are incurred, it does not anticipate that the
adoption of SOP 98-5 will have any material impact on its consolidated financial
statements.
F-28
<PAGE> 82
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. INVENTORIES
The components of inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, NOVEMBER 30,
1998 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
Raw materials................................ 101,319 130,725
Work-in-process.............................. 15,955 12,748
Finished goods............................... 5,823 2,799
------- -------
123,097 146,272
======= =======
</TABLE>
F-29
<PAGE> 83
JABIL CIRCUIT, INC. AND SUBSIDIARIES
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE ADDITIONS BALANCE
AT CHARGED TO AT
BEGINNING COST AND END OF
OF PERIOD EXPENSE WRITE-OFFS PERIOD
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
YEAR ENDED AUGUST 31, 1996:
Allowance for uncollectible accounts receivable........... $ 669 $ 501 -- $ 1,170
Reserve for excess and obsolete inventory................. $ 973 $ 5,178 $ 3,850 $ 2,301
======= ======= ======= =======
YEAR ENDED AUGUST 31, 1997:
Allowance for uncollectible accounts receivable........... $ 1,170 $ 1,520 -- $ 2,690
Reserve for excess and obsolete inventory................. $ 2,301 $ 3,690 $ 1,248 $ 4,743
======= ======= ======= =======
YEAR ENDED AUGUST 31, 1998:
Allowance for uncollectible accounts receivable........... $ 2,690 $ 1,789 $ 1,400 $ 3,079
Reserve for excess and obsolete inventory................. $ 4,743 $ 7,026 $ 3,432 $ 8,337
======= ======= ======= =======
THREE MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED):
Allowance for uncollectible accounts receivable........... $ 3,079 $ 317 -- $ 3,396
======= ======= ======= =======
Reserve for excess and obsolete inventory................. $ 8,337 $ 1,952 $ 235 $10,054
======= ======= ======= =======
</TABLE>
F-30
<PAGE> 84
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including , 1999, all dealers effecting transactions
in these securities, whether or not participating in this offering, may be
required to deliver a prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
10,500,000 SHARES
JABIL LOGO
COMMON STOCK
------------------------
PROSPECTUS
------------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SALOMON SMITH BARNEY
C.E. UNTERBERG, TOWBIN
THOMAS WEISEL PARTNERS LLC
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 85
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
ALTERNATE COVER FOR INTERNATIONAL PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY 29, 1999
PROSPECTUS
10,500,000 SHARES
JABIL LOGO
COMMON STOCK
------------------------
Jabil Circuit, Inc. is selling 6,000,000 of the shares of common stock and
certain stockholders of Jabil are selling 4,500,000 of the shares of common
stock. The international managers are offering 1,500,000 shares outside the
United States and Canada and the U.S. underwriters are offering 9,000,000 shares
in the United States and Canada.
The common stock trades on the New York Stock Exchange under the symbol
"JBL." Except as otherwise indicated, all information in this prospectus has
been adjusted to reflect the two-for-one stock split in the form of a 100% stock
dividend to stockholders that is expected to be reflected on the New York Stock
Exchange on February 17, 1999. On January 28, 1999, the closing sale price of
the common stock as reported on the New York Stock Exchange was $35.47 per share
($70.94 per share on a pre-split basis).
------------------------
INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public Offering Price................................ $ $
Underwriting Discount................................ $ $
Proceeds, before expenses, to Jabil.................. $ $
Proceeds to the Selling Stockholders................. $ $
</TABLE>
The international managers may also purchase up to an additional 225,000
shares from Jabil and the selling stockholders, at the public offering price,
less the underwriting discount, within 30 days from the date of this prospectus
to cover over-allotments. The U.S. underwriters may similarly purchase up to an
aggregate of an additional 1,350,000 shares from Jabil and the selling
stockholders.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares of common stock will to be ready for delivery in New York, New
York on or about , 1999.
------------------------
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SALOMON SMITH BARNEY INTERNATIONAL
C.E. UNTERBERG, TOWBIN
THOMAS WEISEL PARTNERS LLC
------------------------
The date of this prospectus is , 1999
<PAGE> 86
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS
UNDERWRITING
Merrill Lynch International, Donaldson, Lufkin & Jenrette International,
Salomon Brothers International, C.E. Unterberg, Towbin and Thomas Weisel
Partners LLC are acting as representatives of each of the international managers
named below. Subject to the terms and conditions set forth in an international
purchase agreement among Jabil, the selling stockholders and the international
managers, and concurrently with the sale of 9,000,000 shares of common stock to
certain U.S. underwriters, Jabil and the selling stockholders have agreed to
sell to the international managers, and each of the international managers
severally and not jointly has agreed to purchase from Jabil and the selling
stockholders, the number of shares of common stock set forth opposite its name
below.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
INTERNATIONAL MANAGER ---------
<S> <C>
Merrill Lynch International.................................
Donaldson, Lufkin & Jenrette International..................
Salomon Brothers International..............................
C.E. Unterberg, Towbin......................................
Thomas Weisel Partners LLC..................................
---------
Total........................................ 1,500,000
=========
</TABLE>
The selling stockholders have also entered into a U.S. purchase agreement
with certain U.S. underwriters in the United States and Canada for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation, Salomon Smith Barney Inc., C.E. Unterberg, Towbin and
Thomas Weisel Partners LLC are acting as representatives. Subject to the terms
and conditions set forth in the U.S. purchase agreement, and concurrently with
the sale of 1,500,000 shares of common stock to the international managers
pursuant to the international purchase agreement, Jabil and the selling
stockholders have agreed to sell to the U.S. underwriters, and each of the U.S.
underwriters severally and not jointly has agreed to purchase from Jabil and the
selling stockholders, an aggregate of 9,000,000 shares of common stock. The
public offering price per share of common stock and the underwriting discount
per share of common stock are identical under the international purchase
agreement and the U.S. purchase agreement.
In the international purchase agreement and the U.S. purchase agreement,
the several international managers and the U.S. underwriters, respectively, have
agreed, subject to the terms and conditions set forth therein, to purchase all
of the shares of common stock being sold pursuant to each such agreement if any
of the shares of common stock being sold pursuant to such agreement are
purchased. In the event of a default by an underwriter, the international
purchase agreement and the U.S. purchase agreement provide that, in certain
circumstances, the commitments of non-defaulting underwriters may be increased
or the purchase agreements may be terminated. The closings with respect to the
sale of shares of common stock to be purchased by the international managers and
the U.S. underwriters are conditioned upon one another.
The lead managers have advised Jabil and the selling stockholders that the
international managers propose initially to offer the shares of common stock to
the public at the public offering price set forth on the cover page of this
prospectus, and to certain dealers at such price less a concession not in excess
of $ per share of common stock. The international managers may allow,
and such dealers may reallow, a discount not in excess of $ per share
of common stock on sales to certain other dealers. After
<PAGE> 87
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS
initially offering common stock to the public at $ per share, the
public offering price, concession and discount may be changed.
Jabil and the selling stockholders have granted options to the
international managers exercisable within 30 days after the date of this
prospectus, to purchase up to an aggregate of 225,000 additional shares of
common stock at the public offering price set forth on the cover page of this
prospectus, less the underwriting discount. The international managers may
exercise these options solely to cover over-allotments, if any, made on the sale
of the common stock offered hereby. To the extent that the international
managers exercise these options, each international manager will be obligated,
subject to certain conditions, to purchase a number of additional shares of
common stock proportionate to such international manager's initial amount
reflected in the foregoing table. Jabil and the selling stockholders also have
granted options to the U.S. underwriters, exercisable within 30 days after the
date of this prospectus, to purchase up to aggregate of 1,350,000 additional
shares of common stock to cover over-allotments, if any, on terms similar to
those granted to the international managers.
The following table shows (1) the per share and total public offering
price, (2) the underwriting discount to be paid by Jabil and the selling
stockholders to the international managers and the U.S. underwriters, (3) the
proceeds before expenses to Jabil and (4) the proceeds to the selling
stockholders. This information is presented assuming either no exercise or full
exercise by the international managers and the U.S. underwriters of their
over-allotment options.
<TABLE>
<CAPTION>
WITHOUT WITH
PER SHARE OPTION OPTION
--------- -------- --------
<S> <C> <C> <C>
Public Offering Price............................. $ $ $
Underwriting Discount............................. $ $ $
Proceeds, before expenses, to Jabil............... $ $ $
Proceeds to the Selling Stockholders.............. $ $ $
</TABLE>
The expenses of the Offerings (exclusive of the underwriting discount) are
estimated at $750,000 and are payable by Jabil.
The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the underwriters and certain
other conditions. The underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part.
Jabil, the selling stockholders, Jabil's executive officers and directors,
and certain of Jabil's stockholders, have agreed, subject to certain exceptions,
not to directly or indirectly (1) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant for the sale of or otherwise dispose of or
transfer any shares of common stock or securities convertible into or
exchangeable or exercisable for or repayable with common stock, whether now
owned or thereafter acquired by the person executing the agreement or with
respect to which the person executing the agreement thereafter acquires the
power of disposition, or file a registration statement under the Securities Act
of 1933 with respect to the foregoing or (2) enter into any swap or other
agreement that transfers, in whole or in part, the economic consequences of
ownership of the common stock or such other securities, in cash or otherwise,
without the prior written consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated on behalf of the underwriters, for a period of 90 days after the
date of this prospectus. See the "Shares Eligible for Future Sale" section of
this prospectus.
<PAGE> 88
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS
The international managers and the U.S. underwriters have entered into an
intersyndicate agreement that provides for the coordination of their activities.
Pursuant to the intersyndicate agreement, the international managers and the
U.S. underwriters are permitted to sell shares of common stock to each other for
purposes of resale at the public offering price, less an amount not greater than
the selling concession. Under the terms of the intersyndicate agreement, the
U.S. underwriters and any dealer to whom they sell shares of common stock will
not offer to sell or sell shares of common stock to persons who are non-U.S. on
non-Canadian persons or to persons they believe intend to resell to persons who
are non-U.S. or non-Canadian person, and the international managers and any
dealer to whom they sell shares of common stock will not offer to sell or sell
shares of common stock to U.S. persons or to Canadian persons or to persons they
believe intend to resell to U.S. persons or Canadian persons, except in the case
of transactions pursuant to the intersyndicate agreement.
Jabil's common stock is listed on the New York Stock Exchange under the
symbol "JBL."
The international managers and the U.S. underwriters have informed Jabil
that they do not intend to confirm sales of the common stock offered hereby to
any accounts over which they exercise discretionary authority.
Jabil and the selling stockholders have agreed to indemnify the U.S.
underwriters and the international managers against certain liabilities,
including liabilities under the Securities Act of 1933 or to contribute to
payments which the U.S. underwriters and the international managers may be
required to make in respect thereof.
Until the distribution of the common stock is completed, rules of the SEC
may limit the ability of the underwriters and certain selling group members to
bid for and purchase common stock of Jabil. As an exception to these rules, the
U.S. representatives are permitted to engage in certain transactions that
stabilize the price of the common stock of Jabil. Such transactions consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price of
the common stock of Jabil.
If the underwriters create a short position in the common stock in
connection with the Offerings, i.e, if they sell more shares of the common stock
than are set forth on the cover page of this prospectus, the U.S.
representatives may reduce that short position by purchasing shares of the
common stock in the open market. The U.S. representatives may also elect to
reduce any short position by exercising all or part of the over-allotment option
described above.
In general, purchases of a security for the purposes of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might have been in the absence of such purchases.
None of Jabil, the selling stockholders or any of the underwriters makes
any representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the common stock.
In addition, none of Jabil, the selling stockholders or any of the underwriters
makes any representation that the U.S. representatives will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
Each international manager has agreed that (i) it has not offered or sold
and, prior to the expiration of the period of six months from the closing of the
Offerings, will not offer or sell any shares of the common stock of Jabil to
persons in the United Kingdom, except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or
<PAGE> 89
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS
otherwise in circumstances which do not constitute an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities Regulations
1995; (ii) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the common stock of Jabil in, from or otherwise involving the United Kingdom;
and (iii) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issuance of
our common stock to a person who is of a kind described in Article 11(3) of the
Financial Services Act of 1986 (Investment Advertisements) (Exemptions) Order
1996 or is a person to whom such document may otherwise lawfully be issued or
passed on.
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of shares of common stock, or
the possession, circulation or distribution of this prospectus or any other
material relating to Jabil, the selling stockholders or shares of common stock
in any jurisdiction where action for that purpose is required. Accordingly,
shares of common stock may not be offered or sold, directly or indirectly, and
neither this prospectus nor any other offering material or advertisements in
connection with shares of common stock may be distributed or published, in or
from any country or jurisdiction except in compliance with any applicable rules
and regulations of any such country or jurisdiction.
Purchasers of the shares of common stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase in addition to the offering price set forth on the cover
page hereof.
Mel S. Lavitt, a Director of Jabil, is a Managing Director of C.E.
Unterberg, Towbin, one of the lead managers of the international managers and
one of the U.S. representatives of the U.S. underwriters.
<PAGE> 90
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS
Through and including , 1999, all dealers effecting
transactions in these securities, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
10,500,000 SHARES
JABIL LOGO
COMMON STOCK
------------------------
PROSPECTUS
------------------------
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SALOMON SMITH BARNEY INTERNATIONAL
C.E. UNTERBERG, TOWBIN
THOMAS WEISEL PARTNERS LLC
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 91
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate (other than the SEC Registration Fee and the
National Association of Securities Dealers, Inc. (the "NASD") Filing Fee) of the
fees and expenses all of which are payable by the Registrant, in connection with
the registration and sale of the securities being registered:
<TABLE>
<S> <C>
Commission Registration Fee................................. $115,130
NASD Filing Fee............................................. 30,500
NYSE Fee.................................................... 54,800
Transfer Agent and Registrar Fees and Expenses.............. 10,000
Blue Sky Fees and Expenses.................................. 5,000
Legal Fees and Expenses..................................... 225,000
Accounting Fees and Expenses................................ 75,000
Printing, Engraving and Mailing Expenses.................... 150,000
Miscellaneous............................................... 84,570
--------
Total..................................................... $750,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by Section 145 of the General Corporation Law of the State of
Delaware ("DGCL"), each director and officer of the Registrant may be
indemnified by the Registrant against expenses (including attorney's fees,
judgments, fines and amounts paid in settlement) actually and reasonably
incurred in connection with the defense or settlement of any threatened, pending
or completed legal proceedings in which he is involved by reason of the fact
that he is or was a director or officer of the Registrant if he acted in good
faith and in a manner that he reasonably believed to be in or not opposed to the
best interests of the Registrant and, with respect to any criminal action or
proceeding, if he had no reasonable cause to believe that his conduct was
unlawful. If the legal proceeding, however, is by or in the right of the
Registrant, the director or officer may not be indemnified in respect of any
claim, issue or matter as to which he shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the Registrant unless
a court determines otherwise.
Article Tenth of the Registrant's Certificate of Incorporation provide for
mandatory indemnification of the Registrant's directors, officers and employees
and Article VI of the Registrant's Bylaws provide for permissible
indemnification of other agents to the maximum extent permitted by the DGCL. The
Registrant has entered into Indemnification Agreements with its officers and
directors with further indemnification to the maximum extent permitted by the
DGCL.
The general effect of the foregoing provisions may be to reduce the
circumstances in which an officer or director may be required to bear the
economic burden of the foregoing liabilities and expense.
Section 6 of the U.S. purchase agreement between the Registrant, the U.S.
underwriters and the selling stockholders and Section 6 of the international
purchase
II-1
<PAGE> 92
agreement between the Registrant, the international managers and the selling
stockholders each provide for indemnification by the Registrant of the U.S.
underwriters, the international managers and each person, if any, who controls
any U.S. underwriter or international manager, against certain liabilities under
the Securities Act of 1933, as amended (the "Securities Act"). The underwriting
agreement also provides that the U.S. underwriters and the international
managers shall similarly indemnify Jabil, its directors, officers, and
controlling persons, as set forth therein.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.1+ -- Form of U.S. Purchase Agreement by and among the Registrant,
the selling stockholders and the U.S. underwriters.
1.2+ -- Form of International Purchase Agreement by and among the
Registrant, the selling stockholders and the international
managers.
4.8* -- Specimen certificate representing the common stock.
5.1+ -- Opinion of Holland & Knight LLP.
23.1 -- Consent of KPMG LLP.
24.1 -- Power of Attorney (set forth on the signature page of this
registration statement).
</TABLE>
- -------------------------
* Incorporated by reference to the Registration Statement on Form S-1 filed by
the Registrant on March 3, 1993, (Registration No. 333-58974).
+ To be filed by Amendment.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to deliver or cause to be delivered with
the prospectus, to each person to whom the prospectus is sent or given, the
latest annual report to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the requirements of Rule of
14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); and, where interim financial information required to be
presented by Article 3 of Regulation S-X is not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to its Certificate of Incorporation, By-laws, by agreement
or otherwise, the Registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as
II-2
<PAGE> 93
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance on Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or Rule 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in St. Petersburg, Florida on January 29, 1999.
JABIL CIRCUIT, INC.
By: /s/ WILLIAM D. MOREAN
-----------------------------------
Name William D. Morean
Title Chairman of the Board of
Directors
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the persons whose signatures
appear below, constitute and appoint Chris Lewis, Robert L. Paver, and Forbes
I.J. Alexander, and each of them, as their true and lawful attorneys-in-fact and
agents, with full power of substitution, resubstitution and revocation, for them
and in their names, places, and steads, in any and all capacities, to sign the
Registration Statement to be filed in connection with the public offering of
shares of common stock of the Registrant and any and all amendments (including
post-effective amendments) to the Registration Statement, and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and the other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as they might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or their or his or
her substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on January 29, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ WILLIAM D. MOREAN Chairman of the Board of Directors and Chief
- ------------------------------------------------ Executive Officer (Principal Executive Officer)
William D. Morean
/s/ CHRIS LEWIS Chief Financial Officer (Principal Financial
- ------------------------------------------------ Officer)
Chris Lewis
</TABLE>
II-4
<PAGE> 95
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ THOMAS A. SANSONE Vice Chairman of the Board of Directors
- ------------------------------------------------
Thomas A. Sansone
/s/ RONALD J. RAPP Vice President, Operations and Director
- ------------------------------------------------
Ronald J. Rapp
/s/ LAWRENCE J. MURPHY Director
- ------------------------------------------------
Lawrence J. Murphy
/s/ MEL S. LAVITT Director
- ------------------------------------------------
Mel S. Lavitt
/s/ STEVEN A. RAYMUND Director
- ------------------------------------------------
Steven A. Raymund
/s/ FRANK A. NEWMAN Director
- ------------------------------------------------
Frank A. Newman
</TABLE>
II-5
<PAGE> 96
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.1+ -- Form of U.S. Purchase Agreement by and among the Registrant,
the selling stockholders and the U.S. underwriters.
1.2+ -- Form of International Purchase Agreement by and among the
Registrant, the selling stockholders and the international
managers
4.8* -- Specimen certificate representing the common stock
5.1+ -- Opinion of Holland & Knight LLP
23.1 -- Consent of KPMG LLP
24.1 -- Power of Attorney (set forth on the signature page of this
registration statement)
</TABLE>
- -------------------------
* Incorporated by reference to the Registration Statement on Form S-1 filed by
the Registrant on March 3, 1993, (Registration No. 333-58974).
+ To be filed by Amendment.
II-6
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Jabil Circuit, Inc.:
The audits referred to in our report dated October 6, 1998, except as to note 10
which is as of December 7, 1998, and the second paragraph of note 1(m) which is
as of January 28, 1999, included the related financial statement schedule for
each of the years in the three year period ended August 31, 1998, which is
included and incorporated by reference in the registration statement. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
We consent to the use of our reports included and incorporated by reference
herein and to the reference to our firm under the headings "Selected
Consolidated Financial Data" and "Experts" in the prospectus.
KPMG LLP
St. Petersburg, Florida
January 29, 1999
