<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended May 31, 2000.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to ______________.
Commission file number: 0-21308
JABIL CIRCUIT, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 38-1886260
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10560 Ninth Street North
St. Petersburg, FL 33716
------------------------------------------------------------
(Address of principal executive offices, including zip code)
Registrant's Telephone No., including area code: (727) 577-9749
--------------
--------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes [X] No [ ]
As of June 23, 2000, there were 189,969,765 shares of the Registrant's
Common Stock outstanding.
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at
May 31, 2000 and August 31, 1999............................................................ 3
Consolidated Statements of Earnings for the three months
and nine months ended May 31, 2000 and May 31, 1999......................................... 4
Consolidated Statements of Comprehensive Income for the three months and
nine months ended May 31, 2000 and May 31, 1999............................................. 5
Consolidated Statements of Cash Flows for the nine months
ended May 31, 2000 and May 31, 1999......................................................... 6
Notes to Consolidated Financial Statements.................................................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................................... 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk.................................. 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................................... 16
Item 6. Exhibits and Reports on Form 8-K............................................................ 17
Signatures.................................................................................. 18
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
May 31, August 31,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 38,999 $ 125,949
Short-term investments -- 27,176
Accounts receivable - Net 437,333 261,078
Inventories 409,983 217,840
Prepaid expenses and other current assets 36,872 15,174
Deferred income taxes 13,638 13,896
----------- -----------
Total current assets 936,825 661,113
Property, plant and equipment, net 501,322 353,522
Other assets 41,048 20,786
----------- -----------
$ 1,479,195 $ 1,035,421
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current installments of long term debt $ 8,333 $ 10,989
Short-term debt -- 21,501
Accounts payable 462,731 300,093
Accrued expenses 75,669 59,186
Income taxes payable 8,905 20,511
----------- -----------
Total current liabilities 555,638 412,280
Long term debt, less current installments 205,000 33,333
Deferred income taxes 23,211 10,199
Deferred grant revenue 3,165 1,798
----------- -----------
Total liabilities 787,014 457,610
----------- -----------
Stockholders' equity
Common stock 177 175
Additional paid-in capital 312,784 296,688
Retained earnings 379,763 281,166
Cumulative translation adjustment (543) (218)
----------- -----------
Total stockholders' equity 692,181 577,811
----------- -----------
$ 1,479,195 $ 1,035,421
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
3
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
May 31, May 31, May 31, May 31,
2000 1999 2000 1999
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenue $ 965,849 $ 582,238 $ 2,493,233 $ 1,636,056
Cost of revenue 871,307 518,417 2,241,221 1,457,438
--------- --------- ----------- -----------
Gross profit 94,542 63,821 252,012 178,618
Operating expenses:
Selling, general and administrative 34,327 22,902 92,990 66,179
Research and development 1,142 1,387 3,527 4,276
Amortization of intangibles 716 287 1,959 938
Acquisition-related charge -- -- 5,153 --
Goodwill write-off -- 3,578 -- 3,578
--------- --------- ----------- -----------
Operating income 58,357 35,667 148,383 103,647
Interest income (819) (1,507) (2,031) (2,229)
Interest expense 3,859 1,482 5,898 5,697
--------- --------- ----------- -----------
Income before income taxes 55,317 35,692 144,516 100,179
Income taxes 17,144 13,310 45,919 35,528
--------- --------- ----------- -----------
Net income $ 38,173 $ 22,382 $ 98,597 $ 64,651
========= ========= =========== ===========
Earnings per share:
Basic $ 0.22 $ 0.13 $ 0.56 $ 0.39
========= ========= =========== ===========
Diluted $ 0.21 $ 0.12 $ 0.54 $ 0.38
========= ========= =========== ===========
Common shares used in the calculations
of earnings per share:
Basic 176,674 173,130 175,736 164,152
========= ========= =========== ===========
Diluted 184,960 181,328 184,085 171,584
========= ========= =========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
4
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
May 31, May 31, May 31, May 31,
2000 1999 2000 1999
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Net Income $ 38,173 $22,382 $ 98,597 $64,651
Other comprehensive income (loss):
Foreign currency translation adjustments (1) -- (325) --
-------- ------- -------- -------
Comprehensive income $ 38,172 $22,382 $ 98,272 $64,651
======== ======= ======== =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
5
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
May 31, May 31,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 98,597 $ 64,651
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 71,084 47,951
Goodwill written-off -- 3,578
Recognition of grant revenue (885) (620)
Deferred income taxes 13,270 10,395
Loss on sale of property 4,150 2,697
Changes in operating assets and liabilities:
Accounts receivable (173,070) (81,378)
Inventories (188,803) (19,552)
Prepaid expenses and other current assets (21,665) (6,406)
Other assets 1,284 (7,248)
Accounts payable and accrued expenses 180,911 100,417
Income taxes payable (11,606) (9,036)
--------- ---------
Net cash (used) in / provided by operating activities (26,733) 105,449
--------- ---------
Cash flows from investing activities:
Net cash paid for business acquisitions (33,085) --
Proceeds from sale of short-term investments 27,176 --
Acquisition of property, plant and equipment (218,001) (134,568)
Proceeds from sale of property and equipment 2,128 788
--------- ---------
Net cash used in investing activities (221,782) (133,780)
--------- ---------
Cash flows from financing activities:
Increase in (repayment of) note payable to bank 180,000 (30,881)
Payments of long-term debt (32,490) (4,765)
Net proceeds from issuance of common stock 11,804 202,649
Proceeds from Scottish grant 2,251 395
--------- ---------
Net cash provided by financing activities 161,565 167,398
--------- ---------
Net decrease in cash and cash equivalents (86,950) 139,067
Cash and cash equivalents at beginning of period 125,949 28,897
--------- ---------
Cash and cash equivalents at end of period $ 38,999 $ 167,964
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
6
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements of Jabil
Circuit, Inc. and subsidiaries are unaudited and have been prepared
based upon prescribed guidance of the Securities and Exchange
Commission ("SEC"), for interim reporting. As such, they do not include
all disclosures required by generally accepted accounting principles,
and should be read in conjunction with the annual audited consolidated
financial statements as of and for the year ended August 31, 1999,
contained in our 1999 annual report on Form 10-K. In our opinion, the
accompanying consolidated financial statements include all adjustments,
consisting of only normal and recurring adjustments, necessary for a
fair presentation of the financial position, results of operations and
cash flows for the periods presented when read in conjunction with the
annual audited consolidated financial statements and related notes
thereto. The results of operations for the three-month and nine-month
periods ended May 31, 2000 are not necessarily indicative of the
results that should be expected for a full fiscal year.
EARNINGS PER SHARE
The following table sets forth the calculation of basic and
diluted earnings per share (in thousands, except per share data):
EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
In thousands Three months ended Nine months ended
May 31, May 31,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Numerator:
Net income $ 38,173 $ 22,382 $ 98,597 $ 64,651
Denominator:
Denominator for basic EPS-
weighted-average shares 176,674 173,130 175,736 164,152
Effect of dilutive securities:
Employee stock options 8,286 8,198 8,349 7,432
-------- -------- -------- --------
Denominator for diluted EPS-
adjusted weighted-average shares 184,960 181,328 184,085 171,584
======== ======== ======== ========
Basic EPS $ 0.22 $ 0.13 $ 0.56 $ 0.39
======== ======== ======== ========
Diluted EPS $ 0.21 $ 0.12 $ 0.54 $ 0.38
======== ======== ======== ========
</TABLE>
7
<PAGE> 8
For the three-month and nine-month periods ended May 31, 2000,
options to purchase 12,685 and 212,008 shares of common stock,
respectively, were outstanding during those periods but were not
included in the computation of diluted earnings per share because the
options' exercise prices were greater than the average market price of
the common shares, and therefore, their effect would be antidilutive.
For the three-month and nine-month periods ended May 31, 1999, 0 and
11,000, respectively, of options were excluded.
STOCK SPLIT
All share and per share information presented herein and in
our Consolidated Financial Statements has been retroactively restated
to reflect a two-for-one stock split of our Common Stock, par value
$.001 per share on March 31, 2000, paid in the form of a stock
dividend, to holders of record on March 23, 2000.
COMMITMENTS AND CONTINGENCIES
We were named as a defendant, along with 87 other companies
engaged in the electronics and other industries, in a patent
infringement lawsuit filed by the Lemelson Medical, Education &
Research Foundation Limited Partnership ("Lemelson") in the U.S.
District Court for the District of Arizona on February 26, 1999. The
defendants included certain of our suppliers, customers and
competitors. The complaint alleged that we and the other defendants
were each infringing upon as many as 18 patents held by Lemelson
relating to the defendants' manufacturing processes and products. The
complaint sought to enjoin the defendants from further alleged acts of
infringement, an unspecified amount of damages to compensate Lemelson
for alleged past infringement, together with interest and costs, such
damages to be trebled due to alleged willful infringement, reasonable
attorney's fees, and such other relief that the court may award.
Lemelson offered all defendants the opportunity to license the patents
alleged to be infringed. In June 2000, we entered into a license
agreement with Lemelson on terms that are not expected to have a
material adverse affect on our results of operations or financial
condition. In addition, Lemelson agreed to dismiss us, with prejudice,
as a defendant in the pending litigation.
We are party to certain other lawsuits in the ordinary course
of business. We do not believe that these proceedings, individually or
in aggregate, will have a material adverse effect on our financial
position or results of operations.
8
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SUBSEQUENT EVENTS
On June 6, 2000, the Company completed an equity offering of
13,000,000 shares of its Common Stock. The shares were offered at a
public offering price of $41.75 per share for total gross proceeds of
$542.8 million. Net proceeds to the Company were approximately $525.4
million after the underwriter's discount and fees and expenses. The net
proceeds of the offering of shares sold by the Company will be used for
repayment of debt under the Company's credit facility, for capital
expenditures and for general corporate purposes, including working
capital and funding possible acquisitions.
On July 5, 2000, the Company announced that it will acquire
Telenor Technology Services, a repair and logistics services division
of Telenor, a Norwegian provider of telecommunication, data and media
communication services. The purchase price of approximately $3.8
million will be paid in cash. The closing of the transaction is subject
to regulatory approval and is expected to be completed on or about July
20, 2000 and be accounted for as a purchase. Following the closing, the
acquired operations will allow Jabil Global Services to offer circuit
board repair and warranty services for European customers from Dublin,
Ireland.
NEW ACCOUNTING PRONOUNCEMENTS
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. We are currently
evaluating this Statement and have yet to form an opinion on whether
its adoption will have any significant impact on our consolidated
financial statements. We will be required to implement Statement 133 in
the first fiscal quarter of our fiscal year ending August 31, 2001.
SEC Staff Accounting Bulletin Number 101 - Revenue Recognition
in Financial Statements. We will be required to implement this bulletin
in the fourth fiscal quarter of our fiscal year ending August 31, 2001.
As we have historically made a practice of recognizing revenue in
accordance with the provisions of this bulletin as currently
interpreted, we do not anticipate that the adoption of the bulletin
will have a material impact on our consolidated financial statements.
NOTE 2. BUSINESS COMBINATIONS
On February 1, 2000 we acquired the net assets of Bull
Information Technology, an electronic manufacturing service provider.
The business currently operates from leased facilities in the City of
Contagem, State of Minas Gerais, in the Belo Horizonte region of
Brazil. We are acquiring approximately 30 acres in Contagem and will be
constructing a new facility to replace the currently leased operations.
The purchase price of
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<PAGE> 10
approximately $6 million was paid in cash. The acquisition was
accounted for as a purchase and resulted in approximately $5 million of
goodwill, which is being amortized on a straight-line basis over a
period of 10 years. The consolidated financial statements include the
operating results of the acquired business from the date of
acquisition. Pro forma results of operations have not been presented
because the effect of the acquisition was not material.
On September 1, 1999 we acquired, through our Jabil Global
Services subsidiary, the net assets of EFTC Services, Inc., an
electronic product service and repair business. Jabil Global Services
continues to offer repair and warranty services for existing and future
customers from its hub-based operations in Memphis, Tennessee;
Louisville, Kentucky; and Tampa, Florida. The purchase price of
approximately $27 million was paid in cash. The acquisition was
accounted for as a purchase and resulted in approximately $18 million
of goodwill, which is being amortized on a straight-line basis over a
period of 15 years. The consolidated financial statements include the
operating results of the acquired business from the date of
acquisition.
On September 13, 1999 we issued approximately 5.6 million
shares of our common stock for all of the outstanding common stock of
GET Manufacturing, Inc., a China-based electronics manufacturing
services provider. The business combination was accounted for as a
pooling-of-interests and, accordingly, our historical consolidated
financial statements presented herein have been restated to include the
accounts and results of operations of GET Manufacturing, Inc. In
connection with the merger we recorded a one-time acquisition-related
charge of $5.2 million ($4.7 million after-tax) consisting of key
employee severance and legal and professional fees associated with the
merger. Substantially all of the costs were incurred by November 30,
1999.
A reconciliation of the previously reported results of
operations for the three and nine months ended May 31, 1999 to the
results included in this Form 10-Q is as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
---------------------------- ------------------------------
May 31, 1999
-------------------------------------------------------------------
Net Revenue Net Income Net Revenue Net Income
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Jabil Circuit, Inc. $522,497 $ 24,403 $1,463,801 $ 65,304
GET Manufacturing, Inc 59,741 (2,021) 172,255 (653)
-------- -------- ---------- --------
Combined $582,238 $ 22,382 $1,636,056 $ 64,651
======== ======== ========== ========
</TABLE>
10
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NOTE 3. INVENTORIES
The components of inventories consist of the following:
In thousands May 31, August 31,
2000 1999
-------- --------
Finished goods $ 63,293 $ 29,015
Work-in-process 50,614 29,622
Raw materials 296,076 159,203
-------- --------
$409,983 $217,840
======== ========
NOTE 4. SEGMENT INFORMATION
We derive our revenue from providing manufacturing services to
major electronic OEM's on a contract basis. Operating segments consist
of our manufacturing locations. The services provided, the
manufacturing processes, class of customers and the order fulfillment
process is similar and generally interchangeable across manufacturing
locations. We have aggregated our operating segments into the
Electronic Manufacturing Services segment.
The following table sets forth segment information (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31,
2000 1999 2000 1999
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenue $965,849 $582,238 $2,493,233 $1,636,056
Segment income before income tax $ 59,499 $ 40,632 $ 157,063 $ 111,501
Corporate (income) expense 4,182 1,362 7,394 7,744
Acquisition-related charges -- -- 5,153 --
Goodwill write-off -- 3,578 -- 3,578
-------- -------- ---------- ----------
Income before income taxes $ 55,317 $ 35,692 $ 144,516 $ 100,179
======== ======== ========== ==========
</TABLE>
May 31 ,2000 August 31, 1999
------------ ---------------
Long-lived assets $542,370 $374,308
11
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JABIL CIRCUIT, INC. AND SUBSIDIARIES
We make "forward-looking statements" within the "safe harbor" provision
of the Private Securities Litigation Reform Act of 1995 throughout this
Quarterly Report on Form 10-Q and in the documents we incorporate by reference
herein. You can identify these statements by forward-looking words such as
"may," "will," "expect," "anticipate," "believe," "estimate," "plan" and
"continue" or similar words. We have based these statements on our current
expectations about future events. Although we believe that our expectations
reflected in or suggested by our forward-looking statements are reasonable, we
cannot assure you that these expectations will be achieved. Our actual results
may differ materially from what we currently expect. Important factors which
could cause our actual results to differ materially from the forward-looking
statements in this document are set forth in the following "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this document and the "Factors Affecting Future Results" and other
sections in our Annual Report on Form 10-K for the fiscal year ended August 31,
1999 and other filings with Securities and Exchange Commission.
You should read this document and the documents that we incorporate by
reference into this Quarterly Report on Form 10-Q completely and with the
understanding that our actual future results may be materially different from
what we expect. We may not update these forward-looking statements, even if our
situation changes in the future. All forward-looking statements attributable to
us are expressly qualified by these cautionary statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
All prior year historical financial information has been restated to
reflect the merger with GET Manufacturing, Inc. in the first fiscal quarter of
2000 which was accounted for as a pooling of interests.
Our net revenue for the third quarter and first nine months of fiscal
2000 increased 66% and 52% to $966 million and $2.49 billion, respectively, from
$582 million and $1.64 billion in the third quarter and first nine months of
fiscal 1999. This increase from the previous fiscal year was primarily due to
increased production of communications and personal computer products. Foreign
source revenue represented 43% of net revenue for both the third quarter and
first nine months of fiscal 2000 compared to 38% and 39% for the same periods of
fiscal 1999. The increase in foreign source revenue was attributable to
increased production at our international locations.
Gross margin decreased to 9.8% and 10.1% for the third quarter and
first nine months of fiscal 2000 from 11.0% and 10.9% for the same periods of
fiscal 1999 primarily reflecting a higher content of material-based revenue.
Selling, general and administrative expenses in the third quarter of
fiscal 2000 decreased to 3.6% of net revenue compared to 3.9% for the same
period in the prior fiscal year, while increasing in absolute dollars from $22.9
million in the third quarter of fiscal 1999 to $34.3 million in the third
quarter of fiscal 2000. Selling, general and administrative expenses in the
first nine months of fiscal 2000 decreased to 3.7% of net revenue compared to
4.0% in the prior fiscal year, while increasing in absolute dollars from $66.2
million to $93.0 million. The dollar
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<PAGE> 13
increases were primarily due to increased staffing and related departmental
expenses at all our locations as well as increased information systems staff to
support the expansion of our business.
Research and development expenses decreased to 0.1% of net revenue for
the third quarter and first nine months of fiscal 2000 as compared to 0.2% and
0.3% for the same periods of fiscal 1999. In absolute dollars, the expenses
decreased approximately $0.2 million and $0.7 million versus the same periods of
fiscal 1999.
Amortization of intangibles remained a constant 0.1% of net revenue in
the third quarter of fiscal 2000, while increasing from $0.3 million to $0.7
million as compared to the same period of fiscal 1999. Amortization of
intangibles increased from $0.9 million in the first nine months of fiscal 1999
to $2.0 million for the same period in fiscal 2000, representing 0.1% of sales
for both periods. This dollar increase is primarily attributable to the $18
million and $5 million of goodwill resulting from the EFTC Services, Inc. and
Bull Information Technology acquisitions, respectively. We are amortizing the
goodwill on a straight-line basis over fifteen years and ten years for the EFTC
Services, Inc. and Bull Information Technology acquisitions, respectively.
During the first quarter of fiscal 2000, we completed a merger with GET
Manufacturing, Inc. and recorded a one-time acquisition-related charge of $5.2
million ($4.7 million after-tax) consisting of key employee severance and legal
and professional fees associated with the merger.
Interest income decreased to $0.8 million in the third quarter of
fiscal 2000 from $1.5 million in the third quarter of fiscal 1999 as a result of
decreased cash on hand. Interest income decreased approximately $0.2 million in
the first nine months of fiscal 2000 to $2.0 million from $2.2 million for the
same period in fiscal 1999 as a result of decreased cash on hand in the second
and third quarters of fiscal 2000.
Interest expense increased approximately $2.4 million in the third
quarter of fiscal 2000 to $3.9 million as compared to $1.5 million in the third
quarter of fiscal 1999. Interest expense increased approximately $0.2 million
for the first nine months of fiscal 2000 to $5.9 million from $5.7 million for
the same period in fiscal 1999. These increases are primarily a result of
increased borrowings to support plant expansions and working capital needs.
Our effective tax rate decreased to 31% and 32% in the third quarter
and first nine months of fiscal 2000, respectively, from 37% and 35% for the
same periods of fiscal 1999. The tax rate is predominantly a function of the mix
of domestic versus international income from operations. Our international
operations are being taxed at a lower rate than in the United States, primarily
due to the tax holiday granted to our Malaysian subsidiary.
BUSINESS FACTORS
Due to the nature of turnkey manufacturing and our relatively small
number of customers, our quarterly operating results are affected by the level
and timing of orders, the level of capacity
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utilization of our manufacturing facilities and associated fixed costs,
fluctuations in material costs, and by the mix of material costs versus
manufacturing costs. Similarly, operating results are affected by price
competition, level of experience in manufacturing a particular product, degree
of automation used in the assembly process, efficiencies we achieve in managing
inventories and fixed assets, timing of expenditures in anticipation of
increased sales, customer product delivery requirements, and shortages of
components or labor. In the past, some of our customers have terminated their
manufacturing arrangement with us, and other customers have significantly
reduced or delayed the volume of manufacturing services ordered from us. Any
such termination of a manufacturing relationship or change, reduction or delay
in orders could have an adverse effect on our results of operations.
ACQUISITIONS AND EXPANSION
The EMS industry has experienced rapid growth over the past several
years as an increasing number of Original Equipment Manufacturers ("OEMs") have
outsourced their manufacturing requirements and divested their manufacturing
facilities, such as our acquisition of certain manufacturing facilities from
Hewlett-Packard Company. 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 that additional acquisition opportunities exist
and we regularly seek and evaluate such acquisition opportunities, as well as
acquisition opportunities that may arise as a result of consolidation in the EMS
industry, as evidenced by our recent acquisition of GET Manufacturing, Inc. and
Bull Information Technology. We also intend to continue to evaluate strategic
acquisitions of ancillary services to round out our service offerings, similar
to our recent acquisition of EFTC Services, Inc., an electronic product service
and repair business, and pending acquisition of Telenor Technology Services, a
repair and logistics provider, based in Dublin, Ireland. However, we cannot
assure you that we will be able to consummate or, if consummated, successfully
integrate the operations and management of any such acquisitions. Acquisitions
involve significant risks which could have a material adverse effect on us,
including financial and operating risks, such as (1) potential liabilities of
the acquired businesses; (2) the dilutive effect of the issuance of additional
equity securities; (3) the incurrence of additional debt; (4) the financial
impact of amortizing goodwill and other intangible assets involved in any
acquisitions that are accounted for using the purchase method of accounting; (5)
possible adverse tax and accounting effects; (6) the diversion of management's
attention to the assimilation of the businesses to be acquired; (7) the risk
that the acquired businesses will fail to maintain the quality of services that
we have historically provided; (8) the need to implement financial and other
systems and add management resources; (9) the risk that key employees of the
acquired businesses will leave after the acquisition; and (10) unforeseen
difficulties in the acquired operations.
During this fiscal year, we announced greenfield expansions in
Tiszaujvaros, Hungary and Chihuahua, Mexico. The Hungarian facility will be
approximately 250,000 square feet and is
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<PAGE> 15
scheduled to begin production in September of 2000. In Chihuahua, two 250,000
square-foot facilities will be constructed to add capacity in Mexico. We have
also announced expansions of existing sites in North America.
LIQUIDITY AND CAPITAL RESOURCES
At May 31, 2000, our principal sources of liquidity consisted of cash
and available borrowings under our credit facilities. Prior to April 7, 2000, we
had a committed line of credit with a syndicate of banks that provided up to
$225 million of working capital borrowing capacity.
On April 7, 2000, we renegotiated our line of credit facility and
established a $500 million 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. We pay interest on
outstanding floating rate loans at the banks' prime rate. We pay interest on
outstanding Eurodollar loans at the London Interbank Offered Rate (LIBOR) in
effect at the loan inception date plus a factor of 1.125% to 1.875% depending on
our funded debt to total capitalization ratios. We pay a commitment fee on the
unused portion of the Revolver at 0.25% to 0.375% depending on our funded debt
to total capitalization ratios. The renegotiated Revolver expires on April 6,
2003 and outstanding borrowings are then due and payable. The Revolver, as
secured by all or part of the stock of certain subsidiaries, contains certain
affirmative and negative covenants customary for this type of agreement and
includes financial covenants with respect to coverage of fixed charges, net
worth and incurrence of indebtedness. As of May 31, 2000 we were utilizing $180
million under that facility.
We used $26.7 million of cash in operating activities for the nine
months ended May 31, 2000. The use of cash was primarily due to an increase in
inventories of $188.8 million, an increase of $173.1 million in accounts
receivable, offset by net income of $98.6 million, depreciation and amortization
of $71.1 million, and increases in accounts payable and accrued expenses of
$180.9 million. The increases in inventories, accounts receivable and accounts
payable were due to commensurate increases in levels of business.
Net cash used in investing activities of $221.8 million for the nine
months ended May 31, 2000 consisted of our capital expenditures of $218.0
million for construction and equipment worldwide in order to support increased
activities and cash paid in the acquisitions of EFTC Services, Inc. and Bull
Information Technology of $27.4 million and $5.7 million, respectively.
On September 13, 1999 we issued approximately 5.6 million shares of our
common stock for all the outstanding common stock of GET Manufacturing, Inc., a
China-based electronics manufacturing services provider.
During the quarter ended November 30, 1999, we filed a "shelf"
registration statement registering the potential sale of debt and equity
securities in the future from time-to-time to
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augment our liquidity and capital resources. On June 9, 2000, we issued 13
million shares of our Common Stock pursuant to such shelf registration
statement. The shares were offered at a public offering price of $41.75 per
share for total gross proceeds of $542.8 million. Net proceeds to the Company
were approximately $525.4 million after fees and expenses. A portion of net
proceeds from such offering were used for repayment of debt under the Company's
Revolver, with the remainder to be used for capital expenditures and for general
corporate purposes, including working capital and funding possible acquisitions.
We believe that cash on-hand, funds provided by operations and
available borrowings under our Revolver will be sufficient to satisfy our
currently anticipated working capital and capital expenditure requirements for
the next twelve months. However, to the extent we pursue additional expansion
opportunities through acquisition or construction of greenfield facilities that
require funding in excess of cash on-hand, funds provided by operations and
available borrowings under the Revolver, we may need to finance such expansion
with public and private offerings of our debt and equity and there can be no
assurance that we could effect such financing on satisfactory terms, if at all.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our market risk during the nine
months ended May 31, 2000. Market risk information is contained under the
caption "Quantitative And Qualitative Disclosures About Market Risk" of our 1999
Annual Report on Form 10-K for the fiscal year ended August 31, 1999 and is
incorporated herein by reference.
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
We were named as a defendant, along with 87 other companies engaged in
the electronics and other industries, in a patent infringement lawsuit filed by
the Lemelson Medical, Education & Research Foundation Limited Partnership
("Lemelson") in the U.S. District Court for the District of Arizona on February
26, 1999. The defendants included certain of our suppliers, customers and
competitors. The complaint alleged that we and the other defendants were each
infringing upon as many as 18 patents held by Lemelson relating to the
defendants' manufacturing processes and products. The complaint sought to enjoin
the defendants from further alleged acts of infringement, an unspecified amount
of damages to compensate Lemelson for alleged past infringement, together with
interest and costs, such damages to be trebled due to alleged willful
infringement, reasonable attorney's fees, and such other relief that the court
may award. Lemelson offered all defendants the opportunity to license the
patents alleged to be infringed. In June 2000, we entered into a license
agreement with Lemelson on terms that are not expected to have a material
adverse affect on our results of operations or financial condition. In addition,
Lemelson agreed to dismiss us, with prejudice, as a defendant in the pending
litigation.
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ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10. San Jose lease
27. Financial Data Schedule.
(b) Reports on Form 8-K
On May 10, 2000 we filed a Current Report on Form 8-K
reporting audited restated financial statements reflecting the
Company's financial position and results of operations as if
GET were a wholly owned subsidiary of the Company since
inception of the Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Jabil Circuit, Inc.
Registrant
Date: July 17, 2000 By: /s/ Timothy L. Main
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Timothy L. Main
President
Date: July 17, 2000 By: /s/ Chris A. Lewis
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Chris A. Lewis
Chief Financial Officer
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