01—Abstract
Summary
Summary of the 10-K filed December 7, 1998. Cited figures are marked; the original filing is the authoritative source.
Jabil Circuit, Inc. filed this Form 10-K for the fiscal year ended August 31, 1998.
The company describes itself as an independent supplier of custom manufacturing services for circuit board assemblies, subsystems and systems to OEMs in the communications, personal computer, peripherals, consumer and automotive industries, offering turnkey manufacturing with production design, component procurement, automated assembly and test. Net revenue rose to $1,277.4 milliona in fiscal 1998 from $978.1 million in fiscal 1997, and net income rose to $56.9 million from $52.5 million. Results were reduced by a $20.8 million acquisition-related charge tied to the August 1998 purchase of Hewlett-Packard's Formatter Manufacturing Organization assets in Boise, Idaho and Bergamo, Italy, which cost approximately $80 million.
Diluted EPS was $1.48b, compared with $1.37 in fiscal 1997. Customer concentration is significant: Cisco Systems (20%), 3Com (18%) and Hewlett-Packard (10%) accounted for approximately 48% of fiscal 1998 net revenue, and fewer than 20 customers accounted for substantially all revenue. Gross margin was 12.7% in fiscal 1998, up from 12.4% in fiscal 1997.
Backlog at August 31, 1998 was approximately $456 millionc. Cash flow from operations was $98.4 million, while capital expenditures were $99.8 million; cash fell to $23.1 million and total debt rose to $90.0 million, including $40.0 million drawn on a new $225 million revolving credit facility. The filing flags risks including reliance on a small number of customers, single-source component shortages, intensive competition from Solectron, SCI Systems, Celestica and Flextronics, and Year 2000 readiness, with remediation estimated at approximately $3 million.
Officers, directors and principal stockholders own approximately 43%d of common stock. The company has never paid cash dividends.
02—Key points
Key Highlights
- Net revenue of $1,277.4 million in fiscal 1998, up from $978.1 million in fiscal 1997
- Net income of $56.9 million in fiscal 1998 versus $52.5 million in fiscal 1997; diluted EPS of $1.48 versus $1.37
- A $20.8 million acquisition-related charge, including a $6.5 million in-process R&D write-off, reflects the August 1998 acquisition of Hewlett-Packard's Formatter Manufacturing Organization assets for approximately $80 million
- Customer concentration: Cisco Systems (20%), 3Com (18%) and Hewlett-Packard (10%) together accounted for approximately 48% of fiscal 1998 net revenue
- Gross margin of 12.7% in fiscal 1998, up from 12.4% in fiscal 1997, driven by a shift toward manufacturing-based revenue and higher capacity utilization
- Backlog of approximately $456 million at August 31, 1998, versus $450 million a year earlier
- Capital spending of $99.8 million and a $40.0 million revolver draw left cash at $23.1 million and debt at $90.0 million; the company has never paid cash dividends
03—Questions
Frequently Asked Questions
How much did Jabil's revenue and profit grow in fiscal 1998?
Net revenue increased 30.6% to $1.3 billion ($1,277.4 million) from $978.1 million in fiscal 1997. Net income rose to $56.9 million from $52.5 million, and diluted EPS was $1.48 versus $1.37. The acquisition-related charge of $20.8 million reduced operating income.
How concentrated is Jabil's customer base?
Highly concentrated. Cisco Systems, 3Com and Hewlett-Packard accounted for approximately 48% of fiscal 1998 net revenue (20%, 18% and 10%, respectively), and fewer than 20 customers accounted for substantially all revenue. The filing states that significant reductions in sales to any large customer would have a material adverse effect on results.
What was the Hewlett-Packard acquisition and what did it cost?
On August 3, 1998, Jabil acquired certain assets of Hewlett-Packard's LaserJet Formatter Manufacturing Organization in Boise, Idaho and Bergamo, Italy for approximately $80 million, funded by about $65 million of cash and assumed liabilities. Jabil also entered a manufacturing arrangement to continue producing the LaserJet circuit board assemblies for Hewlett-Packard.
How is Jabil's balance sheet and liquidity position?
Cash and cash equivalents fell to $23.1 million from $45.5 million. Total notes payable and long-term debt rose to $90.0 million from $52.5 million, including $40.0 million borrowed under a $225 million unsecured revolving credit facility, of which $185 million was available. Operating cash flow was $98.4 million, and management believes cash, borrowings and operations will meet working capital needs for at least 12 months.
What are the main risks flagged in the filing?
Key risks include dependence on a small number of customers, single-source component availability and shortages, intense competition from SCI Systems, Solectron, Celestica and Flextronics, rapid technological change, and Year 2000 readiness, with remediation estimated at approximately $3 million. Officers, directors and principal stockholders own approximately 43% of the common stock.
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