Jabil Circuit, Inc. (Jabil Inc) - Form 10-Q Summary
Business Context and Reporting Period
This filing covers the quarterly period ended February 28, 2001 (Fiscal Q2 2001) and the six months ended on that date. Jabil Circuit, Inc. operates as an Electronic Manufacturing Services (EMS) provider, offering turnkey manufacturing to major electronic companies. As of March 31, 2001, there were 191,263,934 shares of common stock outstanding.
Key Financial Metrics
| Metric | Q2 2001 (3 Months) | Q2 2000 (3 Months) | YTD 2001 (6 Months) | YTD 2000 (6 Months) |
|---|---|---|---|---|
| Net Revenue | $1,211.2M | $837.6M | $2,340.1M | $1,527.4M |
| Gross Profit | $108.4M | $84.1M | $219.9M | $157.5M |
| Gross Margin | 9.0% | 10.0% | 9.4% | 10.3% |
| Operating Income | $58.3M | $50.6M | $123.5M | $90.0M |
| Net Income | $40.7M | $33.9M | $88.5M | $60.4M |
| Diluted EPS | $0.21 | $0.18 | $0.45 | $0.33 |
| Cash & Equivalents | $146.1M | $337.6M (Aug 2000) | $146.1M | $56.6M (Feb 2000) |
| Long-Term Debt | $25.0M | $25.0M | $25.0M | $25.0M |
Cash Flow (6 Months): Operating cash flow was $22.5M. Investing activities used $227.3M, primarily for capital expenditures ($229.0M). Financing activities provided $13.4M.
Material Changes vs. Prior Period
- Revenue Growth: Net revenue increased 45% in Q2 and 53% YTD compared to the prior year, driven by increased production of communications and personal computer products.
- Margin Compression: Gross margins declined from 10.0% to 9.0% in Q2 and from 10.3% to 9.4% YTD. Management attributes this to a higher content of material-based revenue and lower capacity utilization.
- Foreign Revenue: Foreign source revenue increased to 48% of total revenue (from 41% in Q2 2000), due to new facilities in Mexico and Hungary and acquisitions in Brazil and Ireland.
- Working Capital: Inventories increased significantly to $631.7M (from $477.5M at year-end), and accounts receivable rose to $535.8M, reflecting business expansion.
- Acquisition Charges: The company recorded $0.8M in acquisition-related charges in Q2 2001 related to the proposed Marconi deal.
Guidance, Outlook, and Risks
- Marconi Acquisition: On January 11, 2001, Jabil announced an agreement to purchase certain operations of Marconi plc for an estimated present value of $390M (payable over 2-3 years). The deal includes a 3-year supply agreement expected to generate over $4 billion in revenue. Closing is expected in summer/fall 2001 pending regulatory approvals.
- Future Charges: Management expects to incur $20M to $25M in pre-tax charges over the next two quarters for cost structure reductions and acquisition integration.
- Capital Expenditures: Capital expenditures for fiscal 2001 are projected to be $300M to $350M. The company intends to increase its revolving credit facility from $500M to $750M-$850M to fund these needs and the Marconi acquisition.
- Risks: The company noted a reduction in demand subsequent to February 28, 2001, due to deteriorating economic conditions in the industry. Risks include dependence on a limited number of customers, component shortages, and the ability to successfully integrate acquisitions.
Investor Verification Checklist
- Verify the status of regulatory approvals for the Marconi plc acquisition and the likelihood of closing in late 2001.
- Monitor the impact of the reported post-period demand reduction on Q3 2001 revenue guidance.
- Assess the company's ability to manage inventory levels ($631.7M) given the reported industry slowdown.
- Confirm the execution of the planned credit facility expansion to $750M-$850M to support capital expenditures.
- Track the realization of the $20M-$25M in expected restructuring and integration charges in the upcoming quarters.