Jabil Circuit, Inc. 10-Q Summary
Business Context and Reporting Period
This filing is a Quarterly Report (Form 10-Q) for Jabil Circuit, Inc. for the period ended May 31, 1998. The company operates as a turnkey manufacturer, primarily producing communications and computer peripherals. As of June 30, 1998, there were 37,185,048 shares of common stock outstanding.
Key Financial Metrics
| Metric | Three Months Ended May 31, 1998 | Nine Months Ended May 31, 1998 |
|---|---|---|
| Net Revenue | $309.6 million | $959.8 million |
| Gross Profit | $39.8 million | $125.2 million |
| Operating Income | $25.8 million | $85.4 million |
| Net Income | $17.3 million | $56.5 million |
| Diluted EPS | $0.45 | $1.46 |
| Cash from Operations (9mo) | $69.5 million | |
| Cash and Equivalents (May 31, 1998) | $43.3 million | |
| Total Debt (Current + Long-term) | $50.0 million |
Margins: Gross margin was 12.8% for the quarter and 13.0% for the nine-month period. The effective tax rate was 31.0% for the quarter and 31.8% for the nine-month period.
Material Changes vs. Prior Period
- Revenue Growth: Net revenue increased 25% for the quarter and 43% for the nine-month period compared to the prior year, driven by increased production of communications and computer peripherals.
- Foreign Revenue: Foreign source revenue grew to 33% of total revenue for the quarter and nine months, up from 26% and 31% in the prior year.
- Profitability: Net income rose 18.6% for the quarter and 64% for the nine-month period year-over-year.
- Working Capital: Inventories decreased by $12.5 million over the nine-month period, while accounts receivable increased by $6.9 million.
- Capital Expenditures: Net cash used in investing activities was $70.5 million for the nine months, reflecting significant spending on equipment and new facilities.
Outlook, Risks, and Contingencies
- Acquisition: In May 1998, the company signed a Memorandum of Understanding to acquire Hewlett-Packard's Laserjet Solutions Group Formatter Manufacturing Organization (FMO), including assets in Boise, Idaho, and Bergamo, Italy. Closing is expected in August 1998.
- Liquidity: The company maintains a $100 million committed line of credit. Management believes current cash, operating funds, and credit facilities are sufficient for the next 12 months.
- Tax Status: The lower effective tax rate is attributed to "pioneer" tax status granted to the Malaysia subsidiary, providing tax-free treatment through October 30, 2000.
- Risks: Results are sensitive to order timing, capacity utilization, material cost fluctuations, and customer concentration. Past terminations or reductions in customer orders have adversely affected operations.
- Commitments: Approximately $25 million in new facility and equipment purchase commitments were outstanding as of May 31, 1998.
Investor Verification Checklist
- Verify the closing status and financial impact of the proposed HP FMO acquisition.
- Monitor the sustainability of the 13.0% gross margin given the shift to higher value-added products.
- Assess the impact of the $70.5 million capital expenditure on future cash flow and debt levels.
- Review customer concentration risks and the stability of major manufacturing contracts.
- Confirm the continued validity of the Malaysia subsidiary's "pioneer" tax status.