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Jabil Circuit Reports Fourth Quarter and Fiscal Year 1998 Results

Annual Earnings Increase 32 Percent

6 October 1998
St. Petersburg, Florida

Forward - Looking Statement

Jabil Circuit, Inc. (NYSE: JBL), electronics contract manufacturer for circuit board assemblies, today reported earnings for the fourth fiscal quarter and the 1998 fiscal year ended August 31, 1998. Revenue for the fourth quarter of fiscal 1998 increased 4 percent and revenue for the fiscal year increased 31 percent compared to the same periods of fiscal 1997.

Fiscal Fourth Quarter 1998

Revenue for the fourth fiscal quarter of 1998 increased 4 percent to $317.6 million compared to $305.2 million for the same period of fiscal 1997. Pro forma net income, which excludes the one-time, non recurring charge for the Hewlett-Packard acquisition, was $13.4 million or $.35 per share for the fourth quarter of 1998, compared with net income of $18.0 million, or $.47 per share for the same period of fiscal 1997.

During the fourth quarter of fiscal 1998, Jabil completed the acquisition of Hewlett-Packard's LaserJet manufacturing operations for $80 million and recorded a one-time acquisition-related charge of $24.4 million. The charge relates primarily to write-offs of in-process research and development and work force-related expenses.

Jabil's actual net income for the fourth quarter, including the above-mentioned charge, was a loss of $1.8 million or a loss of $.05 per share, compared to $18.0 million or $.47 per share for the same period of fiscal 1997.

Fiscal Year 1998

Fiscal year revenues increased 31 percent to $1.28 billion, compared to $978.1 million in fiscal 1997. Pro forma net income was $69.8 million or $1.81 per share, compared with net income of $52.5 million or $1.37 per share for fiscal 1997, increases of 33 percent and 32 percent respectively.

Fiscal year gross profit increased 43 percent to $161.7 million compared to $120.9 million for fiscal year 1997. Pro forma operating income for fiscal year 1998 increased 29 percent to $105.9 million, compared to $81.9 million for fiscal year 1997.

Actual net income for fiscal year 1998 increased to $54.7 million or $1.42 per share, compared to $52.5 million or $1.37 per share for fiscal year 1997, an increase of 4 percent. All earnings per share amounts represent diluted earnings per share.

Jabil Circuit President Thomas A. Sansone said, "We are pleased to report record fiscal 1998 results that were above our expectations and continue on track to our key financial goals. These results are a gratifying accomplishment in light of the simultaneous integration of our first major acquisition and the overall turmoil in the global marketplace."

Income Statement -- Sequential Trend Highlights

  • Revenues in the fourth fiscal quarter increased 3 percent to $317.6 from $310 million in the third fiscal quarter.
  • Gross margin decreased to 11.5 percent of revenue, reflecting initial operations of the Hewlett-Packard acquisition, lower utilization in some locations and start up costs in California.
  • SG&A increased $2.2 million to $15.1 million, or 4.8 percent of revenue. This increase reflects administrative resources for the former Hewlett-Packard sites, additional information technology resources and expansion of corporate staff.
  • R&D decreased by $137,000 to $928,000, or .3 percent of revenue.
  • Pro forma operating income, excluding acquisition related charges, decreased to $20.5 million, or 6.4 percent of revenue.
  • Interest expense decreased by $167,000, to $555,000, or .2 percent of revenue.
  • Income taxes were 33.0 percent of income. (Normalized tax rate is 35.0 percent).
  • Pro forma net income after taxes was $13.4 million, or 4.2 percent of revenue, as compared to 5.6 percent in the prior sequential quarter. Pro forma earnings per share for the period were $.35 on an average 38,447,000 shares during the period, fully diluted.

Balance Sheet -- Sequential Trend Highlights

The Company continued to generate cash through operations during the fourth quarter of fiscal 1998. In addition, the Company increased its revolving credit facility from $100 million to $225 million and funded the acquisition.

  • The Hewlett-Packard acquisition was completed August 3rd for approximately $80 million. This acquisition was funded by cash balances of $40 million and $40 million of the company's credit facility. Significant balance sheet items included approximately $37 million for inventory and approximately $25 million for machinery and equipment and $7 million for intangible assets.
  • Cash balances were $23 million at the end of the quarter as compared to $43 million at the end of the third quarter. The decrease in cash was due to cash utilized to purchase the Hewlett-Packard operations, offset by cash generated by operations.
  • Accounts receivable increased by $2 million to $126 million in the fourth quarter as compared to $124 million in the third quarter. Calculated DSO and collection experience remained at 36 days.
  • Inventories increased by $39 million in the fourth quarter to $123 million as compared to $84 million as of the end of May. This increase is primarily attributable to inventory included in the Hewlett-Packard acquisition of approximately $40 million.
  • Fixed assets increased by $39 million to $225 million reflecting $25 million in capital expenditures relating to the Hewlett-Packard acquisition, $24 million of other capital expenditures, offset by $10 million in depreciation. Depreciation for fiscal year 1998 was $33.5 million.
  • Long-term debt and current installments of long-term debt increased by $40 million in the fourth quarter, to $90 million reflecting the $40 million utilized in our credit facility and the $50 million private placement debt funded in May 1996. Principal payments on this debt begin in mid 1999.
  • The Company's debt to capitalization ratio is now at 27 percent. Total liabilities-to-equity ratio at the close of the fourth fiscal quarter was 1.1 to 1.
  • Average return on assets for the fourth fiscal quarter was 11 percent, with an average return on equity of 21.7 percent, excluding the effects of acquisition-related charges. Average return on assets for the fiscal year was 15 percent, with an average return on equity of 32.7 percent, excluding the effects of acquisition-related charges.

Business Outlook

Fiscal 1999

The Company announced that it had begun a significant new manufacturing relationship with Nortel Networks.

Sansone stated that the Company expects revenue and operating profit to rebound more sharply than previously anticipated, reflecting higher production levels across all business sectors. "We are encouraged by the brisk pickup of business in the fall, our recent share gains and by the increasing potential for the use of outsourcing by traditionally vertical electronics companies," Sansone said.

New Factory Sites

Guadalajara. The Guadalajara work force has expanded to more than 800 employees, with plans for additional business units throughout fiscal year 1999. This new location was profitable in the fourth fiscal quarter.

Boise and Bergamo. Both acquired sites resumed operation with minimal disruption after the close on August 3. The Hewlett-Packard laser printer business unit volumes continue at levels consistent with prior expectations.

California. This greenfield plant continues on track with plans for relocating the current San Jose prototype and research and development operations in the new facility in the next several months. This site will concentrate on serving mid-volume turnkey manufacturing requirements for current and new customers and will help serve as a platform for product transition to multinational production in high volume plant sites. The Company anticipates production for existing customers in the winter quarter.

About Jabil

Jabil Circuit, Inc. is an electronic manufacturer of circuit board assemblies for international original equipment manufacturers in the data communications, personal computer, computer peripheral and automotive 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, Idaho, Scotland, Italy, 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 12/9/97.