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 February 29, 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 March 31, 2000, there were 176,530,795 shares of the Registrant's Common Stock outstanding.
2 JABIL CIRCUIT, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION <TABLE> <S> <C> <C> PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets at August 31, 1999 and February 29, 2000....................................................... 3 Consolidated Statements of Earnings for the three months and six months ended February 28, 1999 and February 29, 2000............................... 4 Consolidated Statements of Comprehensive Income for the three months and six months ended February 28, 1999 and February 29, 2000................................... 5 Consolidated Statements of Cash Flows for the six months ended February 28, 1999 and February 29, 2000............................................... 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 4. Submission of Matters to a Vote of Security Holders......................................... 16 Item 6. Exhibits and Reports on Form 8-K............................................................ 18 Signatures.................................................................................. 18 </TABLE> 2
3 PART I. FINANCIAL INFORMATION JABIL CIRCUIT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) <TABLE> <CAPTION> February 29, August 31, 2000 1999 ----------- ----------- <S> <C> <C> ASSETS Current assets Cash and cash equivalents $ 56,612 $ 125,949 Short-term investments -- 27,176 Accounts receivable - Net 379,223 261,078 Inventories 353,326 217,840 Prepaid expenses and other current assets 24,129 14,794 Deferred income taxes 14,227 13,896 ----------- ----------- Total current assets 827,517 660,733 Property, plant and equipment, net 439,879 353,522 Other assets 40,470 20,786 ----------- ----------- $ 1,307,866 $ 1,035,041 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current installments of long term debt $ 8,333 $ 9,610 Short-term debt -- 21,501 Accounts payable 427,863 300,093 Accrued expenses 59,917 59,186 Income taxes payable 10,863 20,511 ----------- ----------- Total current liabilities 506,976 410,901 Long term debt, less current installments 128,333 34,712 Deferred income taxes 21,232 10,199 Deferred grant revenue 3,443 1,798 ----------- ----------- Total liabilities 659,984 457,610 ----------- ----------- Stockholders' equity Common stock 176 175 Additional paid-in capital 306,658 296,308 Retained earnings 341,590 281,166 Cumulative translation adjustment (542) (218) ----------- ----------- Total stockholders' equity 647,882 577,431 ----------- ----------- $ 1,307,866 $ 1,035,041 =========== =========== </TABLE> 3
4 JABIL CIRCUIT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (IN THOUSANDS, EXCEPT FOR PER SHARE DATA) (UNAUDITED) <TABLE> <CAPTION> Three months ended Six months ended February 29, February 28, February 29, February 28, 2000 1999 2000 1999 --------- --------- ----------- ----------- <S> <C> <C> <C> <C> Net revenue $ 837,562 $ 558,703 $ 1,527,384 $ 1,053,818 Cost of revenue 753,479 498,601 1,369,914 939,021 --------- --------- ----------- ----------- Gross profit 84,083 60,102 157,470 114,797 Operating expenses: Selling, general and administrative 31,612 22,452 58,663 43,277 Research and development 1,203 1,432 2,385 2,889 Amortization of intangibles 644 294 1,243 651 Acquisition-related charge -- -- 5,153 -- --------- --------- ----------- ----------- Operating income 50,624 35,924 90,026 67,980 Interest income (32) (419) (1,212) (748) Interest expense 1,474 2,311 2,039 4,240 --------- --------- ----------- ----------- Income before income taxes 49,182 34,032 89,199 64,488 Income taxes 15,246 11,778 28,775 22,218 --------- --------- ----------- ----------- Net income $ 33,936 $ 22,254 $ 60,424 $ 42,270 ========= ========= =========== =========== Earnings per share: Basic $ 0.19 $ 0.14 $ 0.34 $ 0.26 ========= ========= =========== =========== Diluted $ 0.18 $ 0.13 $ 0.33 $ 0.25 ========= ========= =========== =========== Common shares used in the calculations of earnings per share: Basic 175,715 159,944 175,268 159,662 ========= ========= =========== =========== Diluted 184,518 167,006 183,648 166,280 ========= ========= =========== =========== </TABLE> See Accompanying Notes to Consolidated Financial Statements 4
5 JABIL CIRCUIT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands, except for per share data) (Unaudited) <TABLE> <CAPTION> Three months ended Six months ended February 29, February 28, February 29, February 28, 2000 1999 2000 1999 ------- -------- -------- -------- <S> <C> <C> <C> <C> Net Income $33,936 $ 22,254 $ 60,424 $ 42,270 Other comprehensive income (loss): Foreign currency translation adjustments 1 (218) (324) (218) ------- -------- -------- -------- Comprehensive income $33,937 $ 22,036 $ 60,100 $ 42,052 ======= ======== ======== ======== </TABLE> See Accompanying Notes to Consolidated Financial Statements 5
6 JABIL CIRCUIT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) <TABLE> <CAPTION> Six months ended February 29, February 28, 2000 1999 ------------ ------------ <S> <C> <C> Cash flows from operating activities: Net income $ 60,424 $ 42,270 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 43,524 31,188 Recognition of grant revenue (606) (415) Deferred income taxes 10,702 2,344 Loss on sale of property 2,654 956 Changes in operating assets and liabilities: Accounts receivable (114,960) (100,631) Inventories (132,146) (34,387) Prepaid expenses and other current assets (9,302) (6,263) Other assets 2,579 1,980 Accounts payable and accrued expenses 125,996 91,937 Income taxes payable (9,648) 5,171 --------- --------- Net cash (used) in / provided by operating activities (20,783) 34,150 --------- --------- 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 (127,698) (94,909) Proceeds from sale of property and equipment 1,608 239 --------- --------- Net cash used in investing activities (131,999) (94,670) --------- --------- Cash flows from financing activities: Increase in/repayment of note payable to bank 73,499 53,737 Payments of long-term debt (2,656) (3,341) Net proceeds from issuance of common stock 10,351 3,273 Proceeds from Scottish grant 2,251 395 --------- --------- Net cash provided by financing activities 83,445 54,064 --------- --------- Net decrease in cash and cash equivalents (69,337) (6,456) Cash and cash equivalents at beginning of period 125,949 28,897 --------- --------- Cash and cash equivalents at end of period $ 56,612 $ 22,441 ========= ========= </TABLE> See Accompanying Notes to Consolidated Financial Statements 6
7 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"). 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 six-month periods ended February 29, 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): <TABLE> <CAPTION> EARNINGS PER SHARE (Unaudited) In thousands Three months ended Six months ended February February 2000 1999 2000 1999 -------- -------- -------- -------- <S> <C> <C> <C> <C> Numerator: Net income $ 33,936 $ 22,254 $ 60,424 $ 42,270 Denominator: Denominator for basic EPS- weighted-average shares 175,715 159,944 175,268 159,662 Effect of dilutive securities: Employee stock options 8,803 7,062 8,380 6,618 -------- -------- -------- -------- Denominator for diluted EPS- adjusted weighted-average shares 184,518 167,006 183,648 166,280 ======== ======== ======== ======== Basic EPS $ 0.19 $ 0.14 $ 0.34 $ 0.26 ======== ======== ======== ======== Diluted EPS $ 0.18 $ 0.13 $ 0.33 $ 0.25 ======== ======== ======== ======== </TABLE> 7
8 For the three-month and six-month periods ended February 29, 2000, options to purchase 21,377 and 172,924 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 six-month periods ended February 28, 1999, 0 and 288,000, 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 include certain of our suppliers, customers and competitors. The complaint alleges that Jabil and the other defendants are each infringing upon as many as 18 patents held by Lemelson relating to the defendants' manufacturing processes and products. The complaint seeks 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. We, along with several other defendants, jointly hired legal counsel to represent us in the litigation and filed an answer to the complaint denying the substantive allegations in the complaint and raising various affirmative defenses. Lemelson has offered to license the patents alleged to be infringed. Based on our understanding of the terms that Lemelson has made available to certain licensees, we believe that obtaining a license from Lemelson under the same or similar terms would not have a material adverse effect on our results of operations or financial condition. We have not yet determined, however, whether to seek such a license, and we cannot assure you that, if sought, we would be offered the same or similar terms or that the ultimate resolution of this matter will not have a material adverse effect on us. 8
9 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. 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 first 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, 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 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 15 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 9
10 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 six months ended February 28, 1999 to the results included in this form 10-Q is as follows (in thousands): <TABLE> <CAPTION> Three months ended Six months ended February 28, 1999 Net Revenue Net Income Net Revenue Net Income -------- ------- ---------- ------- <S> <C> <C> <C> <C> Jabil Circuit, Inc. $493,363 $21,616 $ 941,304 $40,902 GET Manufacturing, Inc 65,340 638 112,514 1,368 -------- ------- ---------- ------- Combined $558,703 $22,254 $1,053,818 $42,270 ======== ======= ========== ======= </TABLE> NOTE 3. INVENTORIES The components of inventories consist of the following: <TABLE> <CAPTION> February 29, August 31, In thousands 2000 1999 --------- ------- <S> <C> <C> Finished goods $ 56,607 $ 29,192 Work-in-process 46,699 30,728 Raw materials 250,020 157,920 --------- -------- $ 353,326 $217,840 ========= ======== </TABLE> 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. 10
11 The following table sets forth segment information (in thousands): <TABLE> <CAPTION> Three Months Ended Six Months Ended February February 2000 1999 2000 1999 -------- -------- ---------- ---------- <S> <C> <C> <C> <C> Net revenue $837,562 $558,703 $1,527,384 $1,053,818 Segment income before income tax $ 51,827 $ 37,356 $ 97,564 $ 70,869 Corporate (income) expense 2,645 3,324 3,212 6,381 Acquisition-related charges -- -- 5,153 -- -------- -------- ---------- ---------- Income before income taxes $ 49,182 $ 34,032 $ 89,199 $ 64,488 ======== ======== ========== ========== </TABLE> <TABLE> <CAPTION> February 29,2000 August 31, 1999 ---------------- --------------- <S> <C> <C> Long-lived assets $480,349 $332,751 </TABLE> 11
12 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 second quarter and first six months of fiscal 2000 increased 50% and 45% to $838 million and $1.53 billion, respectively, from $559 million and $1.05 billion in the second quarter and first six 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 41% and 42% of net revenue for the second quarter and first six months of fiscal 2000 compared to 39% for the same periods of fiscal 1999. The increase in foreign source revenue was attributable to increased production at our international locations. Gross profit decreased to 10.0% and 10.3% for the second quarter and first six months of fiscal 2000 from 10.8% 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 second quarter of fiscal 2000 decreased to 3.8% of net revenue compared to 4.0% for the same period in the prior fiscal year, while increasing in absolute dollars from $22.5 million in the second quarter of fiscal 1999 to $31.6 million in the second quarter of fiscal 2000. Selling, general and administrative expenses in the first six months of fiscal 2000 decreased to 3.8% of net revenue compared to 4.1% in the prior fiscal year, while increasing in absolute dollars from $43.3 million to $58.7 million. The dollar increases were primarily due to increased staffing and related departmental expenses at all 12
13 our locations as well as increased information systems staff to support the expansion of our business. Research and development expenses decreased to 0.1% and 0.2% of net revenue for the second quarter and first six months of fiscal 2000 as compared to 0.3% for each of the same periods of fiscal 1999. In absolute dollars, the expenses decreased approximately $0.2 million and $0.5 million versus the same periods of fiscal 1999. Amortization of intangibles remained a constant 0.1% of net revenue in the second quarter of fiscal 2000, while increasing from $0.3 million to $0.6 million as compared to the same period of fiscal 1999. Amortization of intangibles increased from $0.7 million in the first six months of fiscal 1999 to $1.2 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 of goodwill resulting from the EFTC Services, Inc acquisition. We are amortizing the goodwill on a straight-line basis over fifteen years. 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 $32,000 in the second quarter of fiscal 2000 from $0.4 million in the second quarter of fiscal 1999 as a result of decreased cash on hand. Interest income increased approximately $0.4 million in the first six months of fiscal 2000 to $1.2 million from $0.8 million for the same period in fiscal 1999 as a result of increased cash on hand in the first quarter of fiscal 2000. Interest expense decreased approximately $0.8 million in the second quarter of fiscal 2000 to $1.5 million as compared to $2.3 million in the second quarter of fiscal 1999. Interest expense decreased approximately $2.2 million for the first six months of fiscal 2000 to $2.0 million from $4.2 million. These decreases are primarily a result of the principal payment on our private placement debt of approximately $8.3 million made in the fourth quarter of fiscal 1999 and decreased borrowings to support working capital needs. Our effective tax rate decreased to 31% and 32% in the second quarter and first six months of fiscal 2000, respectively, from 35% in each of the second quarter and first six months 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 13
14 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. 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 a greenfield expansion in Tiszaujvaros, Hungary. The initial facility will be approximately 250,000 square feet and is scheduled to begin production in September of 2000. We have also announced a 325,000 square-foot manufacturing and product development campus expansion of our Auburn Hills, Michigan facility. 14
15 LIQUIDITY AND CAPITAL RESOURCES At February 29, 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. As of February 29, 2000 we were utilizing $95 million under that facility. 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 1.25% 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. We used $20.8 million of cash in operating activities for the six months ended February 29, 2000. The use of cash was primarily due to an increase in inventories of $132.1 million, an increase of $114.9 million in accounts receivable, offset by net income of $60.4 million, depreciation and amortization of $43.5 million, and increases in accounts payable and accrued expenses of $126.0 million. The increases in inventories and accounts receivable were due to commensurate increases in levels of business. Net cash used in investing activities of $132.0 million for the six months ended February 29, 2000 consisted of our capital expenditures of $127.7 million for 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 ending 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 augment our liquidity and capital resources. We have not yet determined when or if any such securities may be issued. We have not yet requested the registration statement be declared effective by the Securities and Exchange Commission, and such securities may not be sold until such act occurs. 15
16 We believe that cash on-hand, funds provided by operations and available borrowings under our credit facility 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 credit facility, 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. "YEAR 2000" READINESS We continue to actively monitor the Year 2000 compliance of our global information technology infrastructure and business system applications, manufacturing equipment and systems. While not all possible Year 2000-date related disruption scenarios have been experienced, and there is a possibility of disruptions in the future, to date we have not experienced material disruption or other significant problems. We are continuing to evaluate our exposure where appropriate. We are unable to fully determine the effect of a failure of our own systems or those of third parties with whom we do business, but any significant failures could have a material adverse effect on our financial position, results of operations and cash flows. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in our market risk during the six months ended February 29, 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 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At our Annual Meeting of Shareholders, held on January 13, 2000, the following proposals were voted upon by the shareholders as indicated below (these numbers have not been adjusted to reflect our two-for-one stock split to shareholders of record as of March 23, 2000): 1. To elect the board of directors Number of Shares ------------------------- For Withheld ---------- -------- William D. Morean 76,296,911 290,781 Thomas A. Sansone 76,296,348 291,344 Timothy L. Main 76,297,048 290,644 Lawrence J. Murphy 76,181,088 406,604 Mel S. Lavitt 76,195,324 392,368 Steven A. Raymund 76,295,191 292,501 Frank A. Newman 72,293,638 294,054 16
17 2. To approve an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of Common Stock from 120,000,000 to 250,000,000. For Against Abstain --- ------- ------- 73,892,497 2,657,223 37,972 3. To approve an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of Preferred Stock from 1,000,000 to10,000,000 shares. For Against Abstain Broker non-vote --- ------- ------- --------------- 46,741,051 23,384,138 59,599 6,402,904 4. To approve an amendment to the Company's 1992 Employee Stock Purchase Plan to increase by 500,000 the number of shares reserved for issuance thereunder. For Against Abstain --- ------- ------- 76,214,730 260,174 112,788 5. To approve an amendment to the Jabil Circuit, Inc. 1992 Stock Option Plan to increase the shares reserved for issuance under the plan from 5,892,472 as of October 21, 1999 to 9,392,472 shares. For Against Abstain --- ------- ------- 46,374,854 30,047,990 164,848 6. To ratify the selection of KPMG LLP as independent auditors for the Company. For Against Abstain --- ------- ------- 76,405,698 52,129 129,865 17
18 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1 Certificate of Incorporation of Jabil Circuit, Inc. 3.2 Bylaws of Jabil Circuit, Inc. 10.1 Amended and Restated Loan Agreement dated as of April 7, 2000 among Jabil Circuit, Inc. and Certain Borrowing Subsidiaries, The Banks Named Therein and Bank One, NA As Administrative Agent and SunTrust Bank As Syndication Agent 27.1 Financial Data Schedule. (b) Reports on Form 8-K On March 16, 2000 we filed a Current Report on Form 8-K reporting financial results for the second quarter and first six months of fiscal 2000 and announced a stock split in the form of a 100 percent stock dividend. On March 29, 2000 we filed a Current Report on Form 8-K regarding our stock split. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Jabil Circuit, Inc. Registrant Date: April 13, 2000 By: /s/ Timothy L. Main -------------- ---------------------------------- Timothy L. Main President Date: April 13, 2000 By: /s/ Chris A. Lewis -------------- ---------------------------------- Chris A. Lewis Chief Financial Officer 18