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 28, 2001. [ ] 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, 2001, there were 191,263,934 shares of the Registrant's Common Stock outstanding.
2 JABIL CIRCUIT, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets at February 28, 2001 and August 31, 2000........................... 3 Consolidated Statements of Earnings for the three and six months ended February 28, 2001 and February 29, 2000............ 4 Consolidated Statements of Cash Flows for the six months ended February 28, 2001 and February 29, 2000............. 5 Notes to Consolidated Financial Statements....................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk....... 14 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders.............. 15 Item 6. Exhibits and Reports on Form 8-K................................. 15 Signatures....................................................... 16 2
3 PART I. FINANCIAL INFORMATION JABIL CIRCUIT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) February 28, August 31, 2001 2000 ----------- ----------- (Unaudited) ASSETS Current assets Cash and cash equivalents $ 146,125 $ 337,602 Accounts receivable, net 535,763 523,096 Inventories 631,746 477,548 Prepaid expenses and other current assets 41,883 30,984 Deferred income taxes 18,053 18,040 ----------- ----------- Total current assets 1,373,570 1,387,270 Property, plant and equipment, net 742,985 587,494 Other assets 43,660 43,428 ----------- ----------- $ 2,160,215 $ 2,018,192 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current installments of long term debt $ 8,333 $ 8,333 Accounts payable 645,946 594,111 Accrued expenses 67,358 72,261 Income taxes payable 11,021 17,270 ----------- ----------- Total current liabilities 732,658 691,975 Long term debt, less current installments 25,000 25,000 Deferred income taxes 19,484 28,112 Deferred grant revenue 8,332 2,922 ----------- ----------- Total liabilities 785,474 748,009 ----------- ----------- Stockholders' equity Common stock 196 190 Additional paid-in capital 859,653 843,784 Retained earnings 515,282 426,814 Cumulative translation adjustment (390) (605) ----------- ----------- Total stockholders' equity 1,374,741 1,270,183 ----------- ----------- $ 2,160,215 $ 2,018,192 =========== =========== See Accompanying Notes to Consolidated Financial Statements 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 28, February 29, February 28, February 29, 2001 2000 2001 2000 ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> Net revenue $ 1,211,175 $ 837,562 $ 2,340,130 $ 1,527,384 Cost of revenue 1,102,737 753,479 2,120,219 1,369,914 ----------- --------- ----------- ----------- Gross profit 108,438 84,083 219,911 157,470 Operating expenses: Selling, general and administrative 46,892 31,612 90,972 58,663 Research and development 1,553 1,203 2,981 2,385 Amortization of intangibles 828 644 1,605 1,243 Acquisition-related charges 843 -- 843 5,153 ----------- --------- ----------- ----------- Operating income 58,322 50,624 123,510 90,026 Interest income (1,365) (32) (3,859) (1,212) Interest expense 2,320 1,474 2,759 2,039 ----------- --------- ----------- ----------- Income before income taxes 57,367 49,182 124,610 89,199 Income taxes 16,641 15,246 36,142 28,775 ----------- --------- ----------- ----------- Net income $ 40,726 $ 33,936 $ 88,468 $ 60,424 =========== ========= =========== =========== Earnings per share: Basic $ 0.21 $ 0.19 $ 0.46 $ 0.34 =========== ========= =========== =========== Diluted $ 0.21 $ 0.18 $ 0.45 $ 0.33 =========== ========= =========== =========== Common shares used in the calculations of earnings per share: Basic 190,931 175,715 190,729 175,268 =========== ========= =========== =========== Diluted 198,326 184,518 198,617 183,648 =========== ========= =========== =========== </TABLE> See Accompanying Notes to Consolidated Financial Statements 4
5 JABIL CIRCUIT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) <TABLE> <CAPTION> Six months ended February 28, February 29, 2001 2000 ----------- ----------- <S> <C> <C> Cash flows from operating activities: Net income $ 88,468 $ 60,424 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 72,203 43,524 Recognition of grant revenue (519) (606) Deferred income taxes (8,641) 10,702 Loss on sale of property 1,224 2,654 Changes in operating assets and liabilities: Accounts receivable (12,667) (114,960) Inventories (154,198) (132,146) Prepaid expenses and other current assets (10,899) (9,302) Other assets (1,622) 2,579 Accounts payable and accrued expenses 55,382 125,996 Income taxes payable (6,249) (9,648) --------- --------- Net cash provided by/(used) in operating activities 22,482 (20,783) --------- --------- 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 (228,983) (127,698) Proceeds from sale of property and equipment 1,670 1,608 --------- --------- Net cash used in investing activities (227,313) (131,999) --------- --------- Cash flows from financing activities: Increase in note payable to bank -- 73,499 Payments of long-term debt -- (2,656) Net proceeds from issuance of common stock 7,425 10,351 Proceeds from Scottish grant 5,929 2,251 --------- --------- Net cash provided by financing activities 13,354 83,445 --------- --------- Net decrease in cash and cash equivalents (191,477) (69,337) Cash and cash equivalents at beginning of period 337,602 125,949 --------- --------- Cash and cash equivalents at end of period $ 146,125 $ 56,612 ========= ========= </TABLE> See Accompanying Notes to Consolidated Financial Statements 5
6 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, 2000, contained in our 2000 annual report on Form 10-K. In our opinion, 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. The results of operations for the three-month and six-month periods ended February 28, 2001, 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> Three Months Ended Six Months Ended February February 2001 2000 2001 2000 -------- -------- -------- -------- <S> <C> <C> <C> <C> Numerator: Net income $ 40,726 $ 33,936 $ 88,468 $ 60,424 Denominator: Denominator for basic EPS- Weighted-average shares 190,931 175,715 190,729 175,268 Effect of dilutive securities: Employee stock options 7,395 8,803 7,888 8,380 -------- -------- -------- -------- Denominator for diluted EPS- Adjusted weighted-average shares 198,326 184,518 198,617 183,648 ======== ======== ======== ======== Basic EPS $ 0.21 $ 0.19 $ 0.46 $ 0.34 ======== ======== ======== ======== Diluted EPS $ 0.21 $ 0.18 $ 0.45 $ 0.33 ======== ======== ======== ======== </TABLE> 6
7 For the three-month and six-month periods ended February 28, 2001, options to purchase 759,846 and 475,449 shares of common stock, respectively, were outstanding 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 29, 2000, 21,377 and 172,924 of options, respectively, were excluded for the same reason. COMPREHENSIVE INCOME The Company's balance of accumulated other comprehensive income is composed exclusively of the cumulative foreign currency translation adjustment. For the three and six month periods ended February 28, 2001, the Company recorded foreign currency translation adjustments of approximately $241,000 and $215,000, respectively, resulting in total comprehensive income of $40.9 million and $88.7 million. For the three and six month periods ended February 29, 2000, currency translation adjustments of $1,000 and $(324,000), respectively, were recorded resulting in total comprehensive income of $33.9 million and $60.1 million, respectively. COMMITMENTS AND CONTINGENCIES 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 or cash flows. RECENT ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 133 - Accounting for Derivative Instruments and Hedging Activities. As amended by Statements 137 and 138, 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 adopted Statement 133, as amended, in the first quarter of this fiscal year. The adoption of the Statement did not have an impact on our financial position, results of operations or cash flows. 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. 7
8 NOTE 2. INVENTORIES The components of inventories consist of the following: In thousands February 28, August 31, 2001 2000 ------------ ---------- Finished goods $ 81,555 $ 54,477 Work-in-process 74,938 54,288 Raw materials 475,253 368,783 -------- -------- $631,746 $477,548 ======== ======== NOTE 3. SEGMENT INFORMATION Financial Accounting Standards Board Statement No. 131, Disclosures about Segments of an Enterprise and Related Information establishes standards for reporting information about segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available and that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. We derive our revenue from providing manufacturing services to major electronic companies on a contract basis. Operating segments consist of our manufacturing locations. The services provided, the manufacturing processes, class of customers, economic circumstances, operating margins and the order fulfillment process is similar and generally interchangeable across manufacturing locations. We have aggregated our operating segments into the Electronic Manufacturing Services ("EMS") segment. The following table sets forth segment information (in thousands): <TABLE> <CAPTION> Three Months Ended Six Months Ended February February 2001 2000 2001 2000 ----------- --------- ----------- ----------- <S> <C> <C> <C> <C> Net revenue $ 1,211,175 $ 837,562 $ 2,340,130 $ 1,527,384 Depreciation and amortization $ 41,633 $ 20,518 $ 72,203 $ 43,524 Interest (income) $ (1,365) $ (32) $ (3,859) $ (1,212) Interest expense $ 2,320 $ 1,474 $ 2,759 $ 2,039 Segment income before income tax $ 60,718 $ 51,827 $ 127,334 $ 97,564 Corporate (income) expense 2,508 2,645 1,881 3,212 Non-recurring charges 843 -- 843 5,153 ----------- --------- ----------- ----------- Income before income taxes $ 57,367 $ 49,182 $ 124,610 $ 89,199 =========== ========= =========== =========== February 28, 2001 August 31, 2000 ----------------- --------------- Long-lived assets $786,645 $630,922 </TABLE> 8
9 Foreign source revenue represented 48% of net revenue for the second quarter and first six months of fiscal 2001 compared to 41% and 42% for the same periods of fiscal 2000. The increase in foreign source revenue was attributable to increased production at our international locations, the acquisition of facilities in Brazil and Ireland, and the start of production in our greenfield facilities in Chihuahua, Mexico and Tiszaujvaros, Hungary. NOTE 4. BUSINESS ACQUISITION On January 11, 2001, we announced that we had entered into a business sale agreement with Marconi plc to purchase certain operations of its communications division. The operations are located in the United States, United Kingdom, Italy and Germany. Total consideration to be paid, subject to pre-closing adjustments, is estimated to have a present value of approximately $390 million payable two years from closing and an additional $20 million payable three years from closing. The completion of the transaction is subject to a number of customary and other closing conditions, including obtaining various anti-trust and other approvals and clearances in four countries, certain consents from third parties, including customers of the seller, and the seller being satisfied that the Company will be able to perform its obligations under the supply agreement to be entered into in connection with the closing that is described below. The transaction will be accounted for under the purchase method of accounting and will result in approximately $146 million of goodwill and other intangibles. Funding for this acquisition will be provided by our existing revolving credit facility. See "Liquidity and Capital Resources." Simultaneous with the closings, we will enter into a three-year product supply agreement to manufacture existing and new products for Marconi in new product introduction, printed circuit board assembly, final systems assembly as well as repair of access, optical transmission and broadband switching products. The company currently estimates that such agreement will generate in excess of $4 billion of revenue over the term of the agreement. Under the proposed terms of the deal, up to 2,900 employees in Bedford, Texas; Liverpool and Coventry, UK; Marcianise, Italy and Offenburg, Germany will progressively transfer to Jabil Circuit. No involuntary job losses are expected and existing employment rights will be protected. The transaction is currently intended to be implemented over the course of the summer and fall of 2001 assuming that all of the closing conditions occur. 9
10 JABIL CIRCUIT, INC. AND SUBSIDIARIES This Quarterly Report on Form 10-Q contains certain statements that are, or may be deemed to be, forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934, and are made in reliance upon the protections provided by such acts for forward-looking statements. These forward-looking statements (such as when we describe what we "believe," "expect" or "anticipate" will occur, and other similar statements) include, but are not limited to, statements regarding future sales and operating results, future prospects, anticipated benefits of proposed (or future) acquisitions and new facilities, growth, the capabilities and capacities of business operations, any financial or other guidance and all statements that are not based on historical fact, but rather reflect our current expectations concerning future results and events. The ultimate correctness of these forward-looking statements is dependent upon a number of known and unknown risks and events, and is subject to various uncertainties and other factors that may cause our actual results, performance or achievements to be different from any future results, performance or achievements expressed or implied by these statements. The following important factors, among others, could affect future results and events, causing those results and events to differ materially from those expressed or implied in our forward-looking statements: business conditions and growth in the contract manufacturing industry and the general economy, variability of operating results, dependence on a limited number of customers, limited availability of components, dependence on certain industries, variability of customer requirements, ability to consummate acquisitions and to integrate operations following consummation of acquisitions, other economic, business and competitive factors affecting our industry and business generally and other factors that we may not have currently identified or quantified. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see our Annual Report on Form 10-K for the fiscal year ended August 31, 2000, any subsequent Reports on Form 10-Q and Form 8-K and our other securities filings. All forward-looking statements included in this Report on Form 10-Q are made only as of the date of this Report on Form 10-Q, and we do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or which we hereafter become aware of. 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 Our net revenue for the second quarter and first six months of fiscal 2001 increased 45% and 53% to $1.2 billion and $2.3 billion, respectively, from $838 million and $1.5 billion in the second quarter and first six months of fiscal 2000. This increase from the previous fiscal year was primarily due to increased production of communications and personal computer products. Foreign source revenue represented 48% of net revenue for the second quarter and first six months of fiscal 2001 compared to 41% and 42% for the same periods of fiscal 2000. The increase in foreign source revenue was attributable to increased production at our international locations, the acquisition of facilities in Brazil and Ireland, and the start of production in our greenfield facilities in Chihuahua, Mexico and Tiszaujvaros, Hungary. Gross profit decreased to 9.0% and 9.4% for the second quarter and first six months of fiscal 2001 from 10.0% and 10.3% for the same periods of fiscal 2000 primarily reflecting a 10
11 higher content of material-based revenue as well as relatively lower levels of capacity utilization than the prior periods. Selling, general and administrative expenses remained at a rate of 3.9% of net revenue in the second quarter of fiscal 2001 as compared to the same period in the prior fiscal year, while increasing in absolute dollars from $31.6 million in the second quarter of fiscal 2000 to $46.9 million in the second quarter of fiscal 2001. Selling, general and administrative expenses in the first six months of fiscal 2001 were 3.8% of net revenue which is consistent with the same period of the prior fiscal year, while increasing in absolute dollars from $58.7 million to $90.9 million. The dollar 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 were 0.1% of net revenue for the second quarter and first six months of fiscal 2001, as compared to 0.1% and 0.2% for each of the same periods of fiscal 2000. In absolute dollars, the expenses increased approximately $0.4 million and $0.6 million versus the same periods of fiscal 2000. Amortization of intangibles remained a constant 0.1% of net revenue in the second quarter and first six months of fiscal 2001, while increasing from $0.6 million to $0.8 million and $1.2 million to $1.6 million, respectively, as compared to the same periods of fiscal 2000. During the second quarter of fiscal 2001, we announced a proposed acquisition of certain manufacturing operations of Marconi plc ("Marconi") and recorded an acquisition-related charge of $0.8 million ($0.6 million after-tax) consisting of costs to prepare for the integration of the business. We expect to incur certain charges totaling $20 million to $25 million pre-tax over the next two quarters associated with reductions in our cost structure and acquisition integration costs in the amounts of $13 million to $18 million and $7 million, respectively. Interest income increased to $1.4 million in the second quarter of fiscal 2001 from $32 thousand in the second quarter of fiscal 2000 as a result of increased cash on hand. Interest income increased approximately $2.7 million in the first six months of fiscal 2001 to $3.9 million from $1.2 million for the same period in fiscal 2000 as a result of increased cash on hand in the first quarter of fiscal 2001. Interest expense increased approximately $0.8 million in the second quarter of fiscal 2001 to $2.3 million as compared to $1.5 million in the second quarter of fiscal 2000. Interest expense increased approximately $0.8 million for the first six months of fiscal 2001, to $2.8 million from $2.0 million. These increases are primarily a result of increased borrowings to support working capital needs. Our effective tax rate decreased to 29% in both the second quarter and first six months of fiscal 2001 from 30% and 32%, respectively, in each of the second quarter and first six months of fiscal 2000. The tax rate is predominantly a function of the mix of domestic versus international 11
12 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 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. Subsequent to February 28, 2001, we experienced reduction in demand as a result of overall deteriorating economic conditions in our industry. 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 electronics companies have outsourced their manufacturing requirements and divested their manufacturing facilities, such as our acquisition of certain manufacturing facilities from Hewlett-Packard Company in fiscal 1998 and our impending acquisition of certain Marconi manufacturing assets. Electronics companies 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. We also seek and evaluate acquisition opportunities that may arise as a result of consolidation in the EMS industry, as evidenced by our acquisition of GET Manufacturing, Inc. and Bull Information Technology during fiscal 2000 and our proposed acquisition of operations from Marconi. We also intend to continue to evaluate strategic acquisitions of ancillary services to round out our service offerings, similar to our fiscal year 2000 acquisition of Telenor Technology Services, a repair and logistics provider, based in Dublin, Ireland. However, we cannot be assured 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 12
13 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; (10) the impact on the Company of any unionized work force it may acquire; and (11) unforeseen difficulties in the acquired operations. During this fiscal year, we completed the greenfield expansion in Tiszaujvaros, Hungary and continued construction in Chihuahua, Mexico. When completed, the Chihuahua facility will consist of two 250,000 square-foot facilities. On January 11, 2001, we announced that we had entered into a business sale agreement with Marconi plc to purchase certain operations of its communications division. The operations are located in the United States, United Kingdom, Italy and Germany. Total consideration to be paid, subject to pre-closing adjustments, is estimated to have a present value of approximately $390 million payable two years from closing and an additional $20 million payable three years from closing. The completion of the transaction is subject to a number of customary and other closing conditions, including obtaining various anti-trust and other approvals and clearances in four countries, certain consents from third parties, including customers of the seller, and the seller being satisfied that the Company will be able to perform its obligations under the supply agreement to be entered into in connection with the closing that is described below. The transaction will be accounted for under the purchase method of accounting and will result in approximately $146 million of goodwill and other intangibles. Funding for this acquisition will be provided by our existing banking facilities. See "Liquidity and Capital Resources." Simultaneous with the closings, we will enter into a three-year product supply agreement to manufacture existing and new products for Marconi in new product introduction, printed circuit board assembly, final systems assembly as well as repair of access, optical transmission and broadband switching products. The company currently estimates that such agreement will generate in excess of $4 billion of revenue over the term of the agreement. Under the proposed terms of the deal, up to 2,900 employees in Bedford, Texas; Liverpool and Coventry, UK; Marcianise, Italy and Offenburg, Germany will progressively transfer to Jabil Circuit. No involuntary job losses are expected and existing employment rights will be protected. The transaction is currently intended to be implemented over the course of the summer and fall of 2001 assuming that all of the closing conditions occur. LIQUIDITY AND CAPITAL RESOURCES At February 28, 2001 our principal sources of liquidity consisted of cash, available borrowings under our revolving credit facilities and an accounts receivable securitization program. We have committed line of credit facilities in place with a syndicate of banks that provide up to $500 million of working capital borrowing capacity. The accounts receivable securitization 13
14 program provides for the sale of up to $225 million of eligible accounts receivables of certain U.S. plants. As of February 28, 2001, we were not utilizing our revolving credit facility or the accounts receivable securitization program. Operating activities for the six months ended February 28, 2001 provided $22.5 million in cash. The generation of cash was primarily due to net income of $88.5 million, depreciation and amortization of $72.2 million, and increases in accounts payable and accrued expenses of $55.4 million, offset by increases in inventories of $154.2 million, increases in accounts receivable of $12.7 million, increases in prepaid and other current assets of $10.9 million, and increases in deferred and current income taxes payable of $14.9 million. The increase in accounts receivable, accounts payable, and inventory was due to commensurate increases in planned levels of business. Net cash used in investing activities of $227.3 million for the six months ended February 28, 2001 consisted of our capital expenditures for construction and equipment worldwide in order to support increased activities. 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. Excluding money needed to fund the Marconi acquisition and any other significant acquisition we may pursue, we currently believe that during fiscal year 2001, our capital expenditures will approximate $300 to $350 million, principally for machinery, equipment, facilities and related expenses. It is our intent to increase the capacity of our existing $500 million revolving credit facility by $250 to $350 million to a total of $750 to $850 million to fund our capital expenditures, working capital requirements and the purchase of the Marconi operations in fiscal 2001. 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 28, 2001. Market risk information is contained under the caption "Quantitative And Qualitative Disclosures About Market Risk" of our 2000 Annual Report on Form 10-K for the fiscal year ended August 31, 2000 and is incorporated herein by reference. 14
15 PART II. OTHER INFORMATION ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At our Annual Meeting of Shareholders, held on January 18, 2001, the following proposals were voted upon by the shareholders as indicated below: 1. To elect the board of directors Number of Shares ---------------- For Withheld ----------- --------- William D. Morean 162,459,966 2,141,086 Thomas A. Sansone 162,458,598 2,142,454 Timothy L. Main 162,459,330 2,141,722 Lawrence J. Murphy 162,412,787 2,188,265 Mel S. Lavitt 161,652,436 2,948,616 Steven A. Raymund 162,607,484 1,993,568 Frank A. Newman 162,605,268 1,995,784 2. To approve an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of Common Stock from 250,000,0000 to 500,000,000. For Against Abstain --- ------- ------- 161,131,409 3,451,180 18,463 3. To ratify the selection of KPMG LLP as independent auditors for the Company. For Against Abstain --- ------- ------- 164,522,651 63,141 15,260 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - None (b) Reports on Form 8-K On December 20, 2000 we filed a Current Report on Form 8-K reporting financial results for the first quarter of fiscal 2001. 15
16 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, 2001 By: /s/ Timothy L. Main -------------- ------------------------------- Timothy L. Main President/CEO Date: April 13, 2001 By: /s/ Chris A. Lewis -------------- ------------------------------- Chris A. Lewis Chief Financial Officer 16