Jabil Inc. 10-Q Filing Summary
Business Context and Reporting Period
This is a quarterly report (Form 10-Q) for Jabil Circuit, Inc. for the period ended February 29, 2000. The company operates as an Electronic Manufacturing Services (EMS) provider, offering turnkey manufacturing to major electronic Original Equipment Manufacturers (OEMs). All prior year financial data has been restated to reflect the pooling-of-interests merger with GET Manufacturing, Inc.
Key Financial Metrics
| Metric | Three Months Ended Feb 29, 2000 | Six Months Ended Feb 29, 2000 |
|---|---|---|
| Net Revenue | $837.6 million | $1.53 billion |
| Gross Profit | $84.1 million (10.0% margin) | $157.5 million (10.3% margin) |
| Operating Income | $50.6 million | $90.0 million |
| Net Income | $33.9 million | $60.4 million |
| Diluted EPS | $0.18 | $0.33 |
| Cash and Equivalents | $56.6 million (End of Period) | N/A |
| Total Debt | $136.7 million ($8.3M current + $128.3M long-term) | N/A |
| Operating Cash Flow | N/A | ($20.8) million (Used) |
Material Changes vs. Prior Period
- Revenue Growth: Net revenue increased 50% year-over-year for the quarter and 45% for the six-month period, driven by increased production of communications and personal computer products.
- Margin Compression: Gross profit margins declined slightly to 10.0% (quarter) and 10.3% (six months) from 10.8% and 10.9% in the prior year, attributed to a higher content of material-based revenue.
- Cash Flow: Operating cash flow turned negative, using $20.8 million for the six months ended Feb 29, 2000, compared to providing $34.2 million in the prior year. This was primarily due to significant increases in inventories ($132.1 million) and accounts receivable ($115.0 million) to support business growth.
- Acquisitions: The company acquired Bull Information Technology (Brazil) for ~$6 million and EFTC Services, Inc. for ~$27 million during the period. A one-time acquisition-related charge of $5.2 million was recorded in the first quarter related to the GET Manufacturing merger.
Outlook, Risks, and Management Commentary
- Liquidity: As of Feb 29, 2000, the company utilized $95 million of a $225 million credit facility. On April 7, 2000, this was renegotiated into a $500 million revolving credit facility expiring in 2003.
- Expansion: Management announced a greenfield expansion in Tiszaujvaros, Hungary (production start Sept 2000) and a campus expansion in Auburn Hills, Michigan.
- Legal Contingency: Jabil is a defendant in a patent infringement lawsuit filed by the Lemelson Foundation. Management believes obtaining a license would not have a material adverse effect, but the outcome is uncertain.
- Year 2000 Readiness: The company reports no material disruptions to date regarding Y2K compliance but notes potential risks from third-party failures.
- Stock Split: A two-for-one stock split was effected on March 31, 2000; historical per-share data in the filing has been restated.
Investor Verification Checklist
- Verify the sustainability of the 50% revenue growth rate given the decline in gross margins.
- Monitor the burn rate of cash due to working capital requirements (inventory and receivables buildup).
- Assess the integration progress and financial impact of recent acquisitions (Bull, EFTC, GET).
- Review the status of the Lemelson patent litigation and potential licensing costs.
- Confirm the timeline and capital requirements for the new Hungary and Michigan facilities.