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Jabil Circuit Reports Fiscal Year 1998 Second Quarter Results

Results Set Record: Earnings Increase 82 Percent

17 March 1998
St. Petersburg, Florida

Forward - Looking Statement

Jabil Circuit, Inc. (NASDAQ: JBIL), electronics contract manufacturer to the world market for circuit board assemblies, today reported record earnings for the second fiscal quarter of 1998 ended February 28, 1998. Revenue for the quarter increased 49 percent to $330.7 million compared to $222.1 million for the same period of fiscal 1997.

Jabil's second quarter of fiscal 1998 net income increased 82 percent to $20.1 million or $.52 per diluted share compared with $11.1 million or $.29 per diluted share for the second quarter of fiscal 1997.

Gross profit for Jabil's second quarter increased 66 percent to $44.1 million or 13.3 percent of revenues compared to $26.5 million or 11.9 percent of revenue for the corresponding quarter of fiscal 1997.

Operating income for the second fiscal quarter of 1998 increased 71 percent to $30.3 million or 9.2 percent of revenue compared to $17.8 million or 8.0 percent of revenue for the second fiscal quarter of 1997.

"We are pleased with the record revenue and earnings level for the second quarter of fiscal 1998," said Jabil Circuit President Thomas A. Sansone. "These results reflect a strong performance, although reduced revenues from our peripheral business slowed overall operating income growth to a 14 percent compound annual growth rate," he said.

Income Statement -- Sequential Trend Highlights

  • Revenue in the second fiscal quarter increased by $11.2 million, a three percent increase from the first quarter, reflecting an increase in production levels.
  • Gross margin increased to 13.3 percent of revenue, reflecting the ongoing concentration of product mix in high value added products and continued high levels of plant loading.
  • SG&A increased to $12.9 million, or 3.9 percent of revenue. The increase reflects increases in Mexico, information technology and corporate staff.
  • R & D decreased slightly in absolute dollars to $879 thousand, continuing to represent .3 percent of revenue.
  • Operating income increased sequentially to $30.3 million, or 9.2 percent of revenue. This represents a 14 percent compound annual growth rate (CAGR) over the first quarter. Operating income growth is the Company's key financial objective.
  • Net interest expense increased by $421 thousand, to $1.1 million, representing .3 percent of revenue.
  • Income tax rates decreased to 31 percent of income compared to 33.4 percent in the prior sequential quarter, reflecting an increase in profitability in lower tax rate areas.

Net income after tax was $20.1 million or 6.1 percent of revenue, as compared to 6.0 in the prior sequential quarter. Earnings per share for the quarter were $.52 on an average 38,564,000 shares during the period, fully diluted.

Balance Sheet -- Sequential Trend Highlights

For our second fiscal quarter, asset turnover ratios improved from November, generating positive cash flow from operations for the ninth consecutive quarter.

  • Accounts receivable decreased by $14 million to $120 million in the second quarter of fiscal 1998. This compares to $134 million in the first quarter of fiscal 1997.
  • Inventories decreased by $22 million in the second quarter to $90 million as compared to $112 million as of the end of February. Calculated inventory turns were approximately 13, as compared to 10 turns in the November quarter.
  • Cash balances were $56 million at the end of the second fiscal quarter, as compared to $43 million at the end of the first quarter of fiscal 1998.
  • Fixed assets increased by $18 million to $182 million reflecting $26 million in capital expenditures, offset by $8 million in depreciation.
  • The Company is not currently utilizing the $100 million credit facility.
  • Long term debt remained constant at $50 million in the second quarter. Long-term debt is represented by the $50 million private placement debt funded in May of fiscal 1996. Principal payments on this debt begin mid-1999.
  • The Company's debt-to-capitalization ratio is now at 18 percent. Total liabilities-to-equity ratio at the end of the quarter was 1 to 1.
  • For the quarter, average return on assets was 17.6 percent, with an average return on equity of 37.5 percent.

Business Outlook

Outlook

Sansone indicated that the while the Company's results for the second quarter were excellent, the overall business outlook is not as robust as has been over the last few quarters. "We believe that fears of the Asian economic situation may be leading some of our customers to reduce inventory levels for the sub assemblies we provide them," said Sansone. The Company indicated that it is currently seeing some near term softness in production schedules for several major customers. "History would suggest that global electronics production schedules will rebound after our customers' competitive positions are reset and that contract manufacturers will resume growth patterns amplified by the trend to outsourcing and growth in electronic products," said Sansone.

For the balance of fiscal 1998, the Company anticipates that revenue will slow to near the level of the first fiscal quarter of the year, with a resumption of growth in the fall quarter. The Company expects lower operating income over the next two quarters resulting from lower demand for production and new product transitions for existing customers.

About Jabil

Jabil Circuit, Inc. is an electronic manufacturer of circuit board assemblies for international original equipment manufacturers in the communications, personal computer, computer peripheral, automotive, medical and consumer markets. Jabil offers circuit design, board design from schematic, prototype assembly, volume board assembly and system assembly services from automated manufacturing facilities in Florida, Michigan, California, Scotland, Malaysia and Mexico.

This release contains certain forward-looking statements, which are subject to a number of risks and uncertainties. Some factors that could cause actual results to differ materially include: 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; and other risk factors described in the company's most recently filed SEC documents such as the Form 10-K, filed 12/1/97.