Jabil Circuit, Inc.
JABIL CIRCUIT INC(Form: 10-Q, Received: 01/11/2002 16:53:09)      
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

     
(Mark One)    
 
[X]   Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
    For the quarterly period ended November 30, 2001.
 
[  ]   Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
    For the transition period from _____________________ to _____________________.

Commission file number: 0-21308

JABIL CIRCUIT, INC.

(Exact name of registrant as specified in its charter)

     
DELAWARE
(State or other jurisdiction of
incorporation or organization)
  38-1886260
(I.R.S. Employer
Identification No.)

10560 Ninth Street North
St. Petersburg, FL 33716
(Address of principal executive offices, including zip code)

Registrant’s Telephone No., including area code: (727) 577-9749


Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes [X] No [  ]

As of January 4, 2002, there were 197,155,195 shares of the Registrant’s Common Stock outstanding.

 


TABLE OF CONTENTS

PART 1. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF EARNINGS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
Item 2: Changes in Securities
Item 3: Defaults Upon Senior Securities
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K
SIGNATURES
Amendment to Receivables Sales Agreement
Amendment to Receivables Purchase Agreement


Table of Contents

JABIL CIRCUIT, INC. AND SUBSIDIARIES

INDEX

           
PART I. FINANCIAL INFORMATION
       
Item 1. Financial Statements
       
 
Consolidated Balance Sheets at November 30, 2001 and August 31, 2001
    3  
 
Consolidated Statements of Earnings for the three months ended November 30, 2001 and 2000
    4  
 
Consolidated Statements of Comprehensive Income for the three months ended November 30, 2001 and 2000
    5  
 
Consolidated Statements of Cash Flows for the three months ended November 30, 2001 and 2000
    6  
 
Notes to Consolidated Financial Statements
    7  
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
    16  
Item 3. Quantitative and Qualitative Disclosures about Market Risk
    22  
PART II. OTHER INFORMATION
       
Item 1. Legal Proceedings
    22  
Item 2. Changes in Securities
    22  
Item 3. Defaults Upon Senior Securities
    22  
Item 4. Submission of Matters to a Vote of Security Holders
    22  
Item 5. Other Information
    22  
Item 6. Exhibits and Reports on Form 8-K
    23  
 
Signatures
    24  

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PART 1. FINANCIAL INFORMATION

JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

                     
        November 30,   August 31,
        2001   2001
       
 
ASSETS
               
Current assets
               
 
Cash and cash equivalents
  $ 492,383     $ 430,652  
 
Accounts receivable, net
    460,356       528,196  
 
Inventories
    405,664       431,499  
 
Prepaid expenses and other current assets
    43,830       38,619  
 
Deferred income taxes
    18,208       17,832  
 
   
     
 
   
Total current assets
    1,420,441       1,446,798  
Property, plant and equipment, net
    755,110       744,723  
Goodwill and other intangible assets, net
    170,403       148,888  
Other assets
    17,899       17,169  
 
   
     
 
 
  $ 2,363,853     $ 2,357,578  
 
   
     
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities
               
Current installments of long term debt
  $ 8,333     $ 8,333  
Accounts payable
    375,925       392,181  
 
Accrued expenses
    109,179       104,261  
 
Income taxes payable
    703        
 
   
     
 
   
Total current liabilities
    494,140       504,775  
Long term debt, less current installments
    361,667       361,667  
Deferred income taxes
    40,192       36,960  
Deferred grant revenue
    6,812       7,319  
Other liabilities
    37,598       32,781  
 
   
     
 
   
Total liabilities
    940,409       943,502  
 
   
     
 
Stockholders’ equity
               
 
Common stock
    197       197  
 
Additional paid-in capital
    870,012       868,869  
 
Retained earnings
    553,706       545,331  
 
Accumulated other comprehensive income
    (471 )     (321 )
 
   
     
 
   
Total stockholders’ equity
    1,423,444       1,414,076  
 
   
     
 
 
  $ 2,363,853     $ 2,357,578  
 
   
     
 

See Accompanying Notes to Consolidated Financial Statements

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JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except for per share data)
(Unaudited)

                   
      Three months ended
     
      November 30,   November 30,
      2001   2000
     
 
Net revenue
  $ 884,567     $ 1,128,955  
 
Cost of revenue
    802,959       1,017,482  
 
   
     
 
Gross profit
    81,608       111,473  
Operating expenses:
               
 
Selling, general and administrative
    49,603       44,080  
 
Research and development
    1,878       1,428  
 
Amortization of intangibles
    2,842       777  
 
Acquisition and merger-related charges
    2,011        
 
Restructuring charges
    14,142        
 
   
     
 
Operating income
    11,132       65,188  
 
Interest income
    (2,171 )     (2,494 )
 
Interest expense
    2,783       439  
 
   
     
 
Income before income taxes
    10,520       67,243  
 
Income taxes
    2,145       19,501  
 
   
     
 
Net income
  $ 8,375     $ 47,742  
 
   
     
 
Earnings per share:
               
Basic
  $ 0.04     $ 0.25  
 
   
     
 
Diluted
  $ 0.04     $ 0.24  
 
   
     
 
Common shares used in the calculations of earnings per share:
               
Basic
    197,012       190,526  
 
   
     
 
Diluted
    199,515       198,907  
 
   
     
 

See Accompanying Notes to Consolidated Financial Statements

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JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

                 
    Three months ended
   
    November 30,   November 30,
    2001   2000
   
 
Net Income
  $ 8,375     $ 47,742  
Other comprehensive income (loss):
               
Foreign currency translation adjustments
    (18 )     (26 )
Change in fair market value of derivative instruments
    (132 )      
 
   
     
 
Comprehensive income
  $ 8,225     $ 47,716  
 
   
     
 

See Accompanying Notes to Consolidated Financial Statements

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JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

                       
          Three months ended
         
          November 30,   November 30,
          2001   2000
         
 
Cash flows from operating activities:
               
 
Net income
  $ 8,375     $ 47,742  
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
   
Depreciation and amortization
    43,930       30,570  
   
Recognition of grant revenue
    (507 )     (210 )
   
Deferred income taxes
    2,856       7,739  
   
Deferred interest on acquisition payments
    615        
   
Non-cash restructuring charges
    12,338        
   
Provision for doubtful accounts
    8       391  
   
Loss on sale of property
    8       300  
   
Changes in operating assets and liabilities:
               
     
Accounts receivable
    67,832       (45,593 )
     
Inventories
    39,079       (163,966 )
     
Prepaid expenses and other current assets
    (9,816 )     (9,559 )
     
Other assets
    6,110       (1,583 )
     
Accounts payable and accrued expenses
    (23,101 )     65,993  
     
Income taxes payable
    5,325       7,196  
 
   
     
 
   
Net cash provided by (used in) operating activities
    153,052       (60,980 )
 
   
     
 
Cash flows from investing activities:
               
 
Net cash paid for business acquisitions
    (70,989 )      
 
Acquisitions of property, plant and equipment
    (22,262 )     (147,482 )
 
Proceeds from sale of property and equipment
    787       98  
 
   
     
 
   
Net cash used in investing activities
    (92,464 )     (147,384 )
 
   
     
 
Cash flows from financing activities:
               
 
Net proceeds from issuance of common stock
    1,143       1,829  
 
Proceeds from Scottish grant
           
 
   
     
 
   
Net cash provided by financing activities
    1,143       1,829  
 
   
     
 
Net increase (decrease) in cash and cash equivalents
    61,731       (206,535 )
Cash and cash equivalents at beginning of period
    430,652       337,602  
 
   
     
 
Cash and cash equivalents at end of period
  $ 492,383     $ 131,067  
 
   
     
 

See Accompanying Notes to Consolidated Financial Statements

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JABIL CIRCUIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1. Basis of Presentation

     The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the information set forth therein have been included. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes included in the Annual Report on Form 10-K of Jabil Circuit, Inc. for the year ended August 31, 2001. Operating results for the three month period ended November 30, 2001 are not necessarily an indication of the results that may be expected for the year ended August 31, 2002.

Note 2. Inventories

     The components of inventories consist of the following (in thousands):

                 
    November 30,   August 31,
    2001   2001
   
 
Finished goods
  $ 45,053     $ 58,607  
Work-in-process
    62,891       58,555  
Raw materials
    297,720       314,337  
 
   
     
 
 
  $ 405,664     $ 431,499  
 
   
     
 

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Note 3. Earnings Per Share

     The following table sets forth the calculation of basic and diluted earnings per share (in thousands, except per share data):

      Earnings Per Share

                 
    Three Months Ended
    November 30,
   
    2001   2000
   
 
Numerator:
               
Net Income
  $ 8,375     $ 47,742  
 
   
     
 
Denominator:
               
Weighted-average shares – basic
    197,012       190,526  
Common shares issuable upon
               
exercise of stock options
    2,503       8,381  
 
   
     
 
Weighted average shares – diluted
    199,515       198,907  
 
   
     
 
Basic earnings per share
  $ 0.04     $ 0.25  
 
   
     
 
Diluted earnings per share
  $ 0.04     $ 0.24  
 
   
     
 

     For the quarter ended November 30, 2001 and 2000, options to purchase 3,248,614 and 16,341, respectively, shares of common stock were outstanding during the period but were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares, and therefore, their effect would be antidilutive. In addition, the calculation for the quarter ended November 30, 2001, did not include 8,406,960 common shares, issuable upon the conversion of the convertible subordinated notes as they would have been antidilutive.

Note 4. Segment Information

     The Company adopted the Financial Accounting Standards Board Statement No. 131, Disclosures about Segments of an Enterprise and Related Information in fiscal year 1999. Statement No. 131 establishes standards for reporting information about segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available and evaluated regularly by the chief operating decision maker for resource allocation decisions and performance assessment.

     The Company derives its revenues from providing manufacturing services to major electronic OEM’s (“Original Equipment Manufacturers”) in various countries throughout the world. The Company does not allocate corporate selling, general and administrative expenses to its segments, as management does not use this information to measure the performance of the operating segments. Operating segments consist of four geographic regions – the United States, Latin America, Europe and Asia. Revenues are attributed to the location in which the product is manufactured. The services provided, manufacturing processes, class of customers and order fulfillment process are similar and generally interchangeable across operating segments. An operating segment’s performance is evaluated based upon its pre-tax operating contribution.

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Pre-tax operating contribution is defined as revenue less cost of revenue and selling, general and administrative expenses and does not include research and development, intangible amortization, acquisition and merger-related charges, write-off of goodwill, interest income, interest expense or income taxes.

     The following table sets forth segment information (in thousands):

                 
    Three months ended November 30,
   
    2001   2000
   
 
Net revenue
               
United States
  $ 402,555     $ 665,175  
Europe
    186,642       153,310  
Asia
    125,005       181,128  
Latin America
    219,143       224,019  
Corporate
           
Intercompany Eliminations
    (48,778 )     (94,677 )
 
   
     
 
 
  $ 884,567     $ 1,128,955  
 
   
     
 
                 
Depreciation expense   2001   2000
 
 
United States
  $ 18,492     $ 16,837  
Europe
    7,303       3,775  
Asia
    5,858       1,493  
Latin America
    7,317       5,985  
Corporate
    2,118       1,703  
 
   
     
 
 
  $ 41,088     $ 29,793  
 
   
     
 
                 
Segment income and reconciliation of income before income taxes   2001   2000
 
 
United States
  $ 14,545     $ 47,652  
Europe
    10,569       9,309  
Asia
    15,325       15,759  
Latin America
    15,779       12,166  
Corporate and non-recurring charges
    (45,783 )     (18,777 )
Intercompany Eliminations
    85       1,134  
 
   
     
 
Income before income taxes
  $ 10,520     $ 67,243  
 
   
     
 
                 
Capital expenditures   2001   2000
 
 
United States
  $ 1,065     $ 62,339  
Europe
    12,936       17,735  
Asia
    3,211       20,390  
Latin America
    3,854       42,808  
Corporate
    1,196       4,210  
 
   
     
 
 
  $ 22,262     $ 147,482  
 
   
     
 

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    As of   As of
    November 30,   August 31,
    2001   2001
   
 
Long-lived assets
               
United States
  $ 293,157     $ 298,161  
Europe
    109,239       103,558  
Asia
    136,972       119,845  
Latin America
    174,689       178,293  
Corporate
    41,053       44,866  
 
   
     
 
 
  $ 755,110     $ 744,723  
 
   
     
 
Total assets
               
United States
  $ 743,719     $ 738,421  
Europe
    477,391       490,496  
Asia
    373,787       414,022  
Latin America
    399,090       390,475  
Corporate
    369,866       324,164  
 
   
     
 
 
  $ 2,363,853     $ 2,357,578  
 
   
     
 

     Total restructuring costs of $14.1 million were charged against earnings during the first quarter of fiscal year 2002. Approximately $9.3 million, $4.7 million and $0.1 million of restructuring charges were incurred in the United States, Asia and Latin America, respectively during the first quarter of fiscal 2002.

     Foreign source revenue represented 58% of net revenue for the first quarter of fiscal 2002 compared to 47% for the same period of fiscal 2001. The increase in foreign source revenue was primarily attributable to the acquisition of facilities in England and Italy during the fourth quarter of fiscal 2001 and the production in our Chihuahua, Mexico facility, which was not operational for a full quarter in the first quarter of fiscal 2001.

Note 5. Commitments and Contingencies

     We are party to certain lawsuits in the ordinary course of business. We do not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations and cash flows.

Note 6. Restructuring

     During the third quarter of fiscal 2001, the Company implemented a restructuring program to reduce its cost structure due to the economic downturn. This restructuring program includes reductions in workforce, consolidation of facilities and the transition of certain facilities into new product introduction sites.

     During fiscal 2001, the Company charged $27.4 million of restructuring costs against earnings. These restructuring charges included employee severance and benefit costs related to

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the elimination of approximately 3,700 regular employees, costs related to lease commitments, fixed asset impairments and other restructuring costs.

     For the first quarter of fiscal 2002, the Company charged $14.1 million of restructuring costs against earnings. These restructuring charges included employee severance and benefit costs of approximately $1.4 million, costs related to lease commitments of approximately $9.8 million, fixed asset impairments of approximately $2.7 million and $0.2 million of other restructuring costs.

     The employee severance and benefit portion of the Company’s restructuring charge is related to the elimination of approximately 855 employees during the first quarter of fiscal 2002, the majority of which were engaged in direct manufacturing activities in various facilities around the world. Lease restructuring costs consist primarily of future lease payments for facilities vacated as a result of the consolidation of facilities and the transition of certain facilities into new product introduction sites. The fixed asset impairment charge primarily results from a decision made in the first quarter of fiscal 2002 to dispose of an office building in Asia due to current macroeconomic conditions.

     The table below sets forth the significant components and activity related to restructuring during the first quarter of fiscal 2002:

                                         
    Liabilities at   Q1 Restructuring                   Liabilities at
    August 31, 2001   Charge   Non-Cash Charge   Cash Payments   November 30, 2001
   
 
 
 
 
Employee Severance & Benefits
  $ 972     $ 1,382     $     $ (2,158 )   $ 196  
Lease costs
    3,887       9,791             (2,071 )     11,607  
Fixed asset impairment
          2,766       (2,766 )            
Other
    661       203             (209 )     655  
 
   
     
     
     
     
 
Total
  $ 5,520     $ 14,142     $ (2,766 )   $ (4,438 )   $ 12,458  
 
   
     
     
     
     
 

     The macroeconomic conditions facing the Company, and the EMS industry as a whole, have continued to deteriorate. The Company expects a slower recovery of its business due to the recessionary economy, continued telecommunications carrier spending cutbacks and aggressive inventory reductions by customers. As a result, the Company will consider plant re-sizing and additional reductions to the workforce during fiscal 2002 to reduce its cost structure.

Note 7. Goodwill and Purchased Intangible Assets

     In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 141, Business Combinations (“SFAS 141”), and Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). SFAS 141 requires all business combinations initiated after June 30, 2001 to be

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accounted for using the purchase method of accounting and that certain intangible assets acquired in a business combination shall be recognized as assets apart from goodwill. SFAS 142 requires goodwill to be tested for impairment at least annually, as well as under certain circumstances, and written down when impaired, rather than being amortized as previous standards required. Furthermore, SFAS 142 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost less accumulated amortization.

     SFAS 142 is effective for fiscal years beginning after December 15, 2001; however the Company has elected to early-adopt the standard as of the beginning of fiscal 2002. As a result, the Company ceased all goodwill amortization and did not recognize $2.5 million of goodwill amortization expense that would have been recognized in the first quarter of fiscal 2002 under the previous accounting standard.

     The following table presents the impact of SFAS 142 on net income and net income per share had the standard been in effect for the first quarter of fiscal 2001 (in thousands):

                     
        Three Months Ended
       
        November 30, 2001   November 30, 2000
       
 
Reported net income
  $ 8,375     $ 47,742  
Adjustments:
               
 
Amortization of Goodwill
          757  
 
Income tax effect
          (220 )
 
   
     
 
   
Net Adjustments
          537  
 
   
     
 
Adjusted net income
  $ 8,375     $ 48,279  
 
   
     
 
Reported net income per share – basic
  $ 0.04     $ 0.25  
 
   
     
 
Adjusted net income per share – basic
  $ 0.04     $ 0.25  
 
   
     
 
Reported net income per share – diluted
  $ 0.04     $ 0.24  
 
   
     
 
Adjusted net income per share – diluted
  $ 0.04     $ 0.24  
 
   
     
 

     SFAS 142 requires the completion of a transitional impairment test within six months of adoption, with any impairments treated as a cumulative effect of a change in accounting principle as of the date of adoption. The Company will complete the transitional impairment test by the end of the second quarter of fiscal 2002. The Company will then be required to perform goodwill impairment tests on an annual basis. Under certain circumstances, Jabil may be required to test goodwill for impairment on a more frequent basis. There can be no assurance that future goodwill impairment tests will not result in a charge to earnings.

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     The following tables present the Company’s total purchased intangible assets as of November 30, 2001, and August 31, 2001 (in thousands):

                           
      Gross Carrying   Accumulated   Net
As of November 30, 2001   Amount   Amortization   Carrying Amount

 
 
 
Marconi purchased intangible assets
  $ 55,034     $ (2,880 )   $ 52,154  
Patents
    800       (267 )     533  
 
   
     
     
 
 
Total
  $ 55,834     $ (3,147 )   $ 52,687  
 
   
     
     
 
                           
      Gross Carrying   Accumulated        
As of August 31, 2001   Amount   Amortization   Net Carrying Amount

 
 
 
Patents
  $ 800     $ (247 )   $ 553  

     The amortization expense on purchased intangible assets was $2.9 million for the first quarter of fiscal 2001 and $20 thousand for the same period of fiscal 2001.

     The estimated future amortization expense of purchased intangible assets, based on a preliminary third-party valuation of the Marconi acquisition, is as follows (in thousands):

           
Fiscal Year   Amount

 
2002 (remaining 9 months)
  $ 7,071  
2003
    9,428  
2004
    9,428  
2005
    9,428  
2006
    9,428  
Remaining
    7,904  
 
   
 
 
Total
  $ 52,687  
 
   
 

     The following table presents the changes in goodwill allocated to the reportable segments during the first quarter of fiscal 2002 (in thousands):

                                   
      Balance at August                   Balance at November
Reportable Segment   31, 2001   Acquired   Adjustments   30, 2001

 
 
 
 
United States
  $ 26,077     $ 9,321     $     $ 35,398  
Latin America
    4,509                   4,509  
Europe
    117,749             (48,940 )     68,809  
Asia
          9,000             9,000  
 
   
     
     
     
 
 
Total
  $ 148,335     $ 18,321     $ (48,940 )   $ 117,716  
 
   
     
     
     
 

     See Note 8 — “Business Combinations” for further discussion of the goodwill and purchased intangible assets acquired during the first quarter of fiscal 2002. The adjustments are

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due to the reclassification of the purchased intangibles based on the preliminary third-party valuation of the Marconi acquisition.

Note 8. Business Combinations

     During the second quarter of fiscal 2001, the Company entered into a business sale agreement with Marconi plc (“Marconi”) to purchase certain operations of its communications division located in the United States, England, Italy and Germany. The Company acquired these operations to boost its European profile, enhance its U.S. presence, broaden participation in the communications sector and to invest in advanced technology manufacturing competencies. On June 13, 2001, we consummated the English and Italian portions of the acquisition and modified certain terms of the transaction. The acquisition price of the English and Italian portions was approximately $172 million and is accounted for under the purchase method of accounting. Based on a preliminary third-party valuation of the English and Italian operations acquired, the purchase price was allocated to inventory, property, plant and equipment, purchased intangible assets of approximately $41.6 million and goodwill of approximately $67.1 million. On September 4, 2001 the Company completed the portion of the transaction related to the United States. The acquisition price of the United States portion was approximately $34 million and is accounted for under the purchase method of accounting. Based on a preliminary third-party valuation of the United States operations acquired, the purchase price was primarily allocated to inventory, property, plant and equipment, purchased intangible assets of approximately $13.4 million and goodwill of approximately $9.3 million. The Company anticipates completing the German portion of the acquisition during fiscal 2002. Certain payments associated with the purchase will be made in three installments with the initial payment due upon completion of the German portion of the acquisition. The remaining two payments will be made 24 and 36 months after the final close. These payments have been recorded based on the net present value discounted at 7 percent. Imputed interest is amortized over the term of the payments and is recorded as interest expense.

     On October 25, 2001 the Company closed a purchase agreement with Intel Corporation (“Intel”) to purchase certain operations located in Penang, Malaysia. The Company acquired these operations to expand its manufacturing technology in the radio frequency access area, to broaden its relationship with Intel and to strategically expand its Asian manufacturing capability. The transaction is accounted for under the purchase method of accounting. Total consideration paid was approximately $37 million. Based on management’s preliminary valuation, the purchase price was primarily allocated to inventory, property, plant and equipment, and intangible assets, including goodwill. The Company is in the process of obtaining a third-party valuation, thus, the allocation of the purchase price is subject to adjustment. Management expects that a portion of the purchase price will be allocated to purchased intangible assets, with such assets requiring amortization. As the Company is unable to estimate the amount of purchased intangibles at this time, the entire $9 million excess of purchase price over the tangible net assets acquired has been allocated to goodwill as of November 30, 2001. As a result, no amortization expense related to this acquisition was recorded during the first quarter of fiscal 2002. The purchase price allocation will be adjusted during the second quarter of fiscal 2002. Funding for this acquisition was provided by current working capital. Simultaneous with the

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closing, we entered into a three-year product supply agreement to manufacture certain peripheral products for Intel.

     The unaudited consolidated financial statements include the operating results of each business from the date of acquisition. Pro forma results of operations have not been presented because the effects of these acquisitions were not material on either an individual or aggregate basis.

Note 9. UK Pension Plan

     During the first quarter of fiscal 2002, the Company established a defined benefit pension plan for all permanent employees of Jabil Circuit UK Limited. This plan was established in accordance with the terms of the business purchase agreement with Marconi. The plan provides benefits based on final average earnings. Our policy is to contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws plus such additional amounts as deemed appropriate. Plan assets are held in trust and consist mainly of common stock and fixed-income investments.

Note 10. New Accounting Pronouncements

     Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations. Statement 143 relates to the accounting for the obligations associated with the retirement of long-lived assets. The Company is currently reviewing this statement and the impact of its adoption on its financial position, results of operations and cash flow. The Company will adopt Statement 143 beginning in the first quarter of its fiscal year ending August 31, 2003.

     Statement of Financial Accounting Standards No. 144, Accounting for Impairment or Disposal of Long-lived Assets. Statement 144 establishes methods of accounting and reporting for the impairment of long-lived assets other than goodwill and intangible assets not being amortized. The Company is currently reviewing this statement and the impact of its adoption on its financial position, results of operations and cash flows. The Company will adopt Statement 144 beginning in the first quarter of its fiscal year ending August 31, 2003.

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JABIL CIRCUIT, INC. AND SUBSIDIARIES

      References in this report to “the Company”, “Jabil”, “we”, or “us” mean Jabil Circuit, Inc. together with its subsidiaries, except where the context otherwise requires. This Quarterly Report on Form 10-Q contains certain statements that are, or may be deemed to be, forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934, and are made in reliance upon the protections provided by such acts for forward-looking statements. These forward-looking statements (such as when we describe what we “believe,” “expect” or “anticipate” will occur, and other similar statements) include, but are not limited to, statements regarding future sales and operating results, future prospects, anticipated benefits of proposed (or future) acquisitions and new facilities, growth, the capabilities and capacities of business operations, any financial or other guidance and all statements that are not based on historical fact, but rather reflect our current expectations concerning future results and events. The ultimate correctness of these forward-looking statements is dependent upon a number of known and unknown risks and events, and is subject to various uncertainties and other factors that may cause our actual results, performance or achievements to be different from any future results, performance or achievements expressed or implied by these statements. The following important factors, among others, could affect future results and events, causing those results and events to differ materially from those expressed or implied in our forward-looking statements: business conditions and growth in our customer’s industries, the electronic manufacturing services industry and the general economy, variability of operating results, our dependence on a limited number of major customers, the potential consolidation of our customer base, availability of components, dependence on certain industries, variability of customer requirements, our ability to successfully consummate acquisitions, and to integrate operations following consummation of acquisitions, other economic, business and competitive factors affecting our customers, our industry and business generally and other factors that we may not have currently identified or quantified. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see our Annual Report on Form 10-K for the fiscal year ended August 31, 2001, any subsequent Reports on Form 10-Q and Form 8-K and other securities filings.

      All forward-looking statements included in this Report on Form 10-Q are made only as of the date of this Report on Form 10-Q, and we do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or which we hereafter become aware of. You should read this document and the documents that we incorporate by reference into this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We may not update these forward-looking statements, even if our situation changes in the future. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

      Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      Net Revenue. Our net revenue for the first quarter of fiscal 2002 decreased 21.6% to $0.9 billion, from $1.1 billion in the first quarter of fiscal 2001. This decrease from the previous fiscal year was primarily due to decreased production of computing and storage, peripherals and networking products. Foreign source revenue represented 57.8% of net revenue for the first quarter of fiscal 2002 compared to 47.5% for the same period of fiscal 2001. The increase in foreign source revenue was primarily attributable to the acquisition of facilities in England and Italy during the fourth quarter of fiscal 2001 and the production in our Chihuahua, Mexico facility, which was not operational for a full quarter in the first quarter of fiscal 2001.

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      Gross Margin. Gross margin decreased to 9.2% for the first quarter of fiscal 2002 from 9.9% for the same period of fiscal 2001 primarily due to lower capacity utilization in the United States, which was partially offset by an increase in the portion of manufacturing-based revenue, as compared to the same period of fiscal 2001. In absolute dollars, the margin decreased approximately $29.9 million versus the same period of fiscal 2001.

      Selling, General and Administrative. Selling, general and administrative expenses in the first quarter of fiscal 2002 increased to 5.6% of net revenue compared to 3.9% in the same period of the prior fiscal year, while increasing in absolute dollars from $44.1 million in the first quarter of fiscal 2001 to $49.6 million in the first quarter of fiscal 2002. The dollar increase was primarily due to expenses incurred at locations acquired or constructed after the first quarter of fiscal 2001 as well as increased information systems staff and other personnel to support the expansion of our business.

      Research and Development. Research and development expenses increased to 0.2% of net revenue for the first quarter of fiscal 2002 as compared to 0.1% for the same period of fiscal 2001. In absolute dollars, the expenses increased approximately $0.5 million versus the same period of fiscal 2001. Despite the current economic downturn, we continue to engage in research and development activities including design of circuit board assemblies and the related production process, development of new products and new failure analysis technologies.

      Amortization of Intangibles. Amortization of intangibles increased to 0.3% of net revenue in the first quarter of fiscal 2002, from $0.8 million to $2.8 million as compared to the same period of fiscal 2001. This dollar increase is primarily attributable to the increase in amortizable intangible assets resulting from the acquisitions of facilities in England, Italy and the United States during the fourth quarter of fiscal 2001 and the first quarter of fiscal 2002.

     We elected to early-adopt Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS 142”), effective the beginning of fiscal 2002. In accordance with SFAS 142, we ceased amortizing goodwill. SFAS 142 requires the completion of a transitional impairment test within six months of adoption, with any impairments treated as a cumulative effect of a change in accounting principle. We will complete the transitional impairment test by the end of the second quarter of fiscal 2002. We will then be required to perform goodwill impairment tests on an annual basis. Under certain circumstances, we may be required to test goodwill for impairment on a more frequent basis. There can be no assurance that future goodwill impairment tests will not result in a charge to earnings. For additional information regarding purchased intangibles, see Acquisitions and Expansion below, Note 7 - “Goodwill and Purchased Intangible Assets” and Note 8 — “Business Combinations” of the Notes to Consolidated Financial Statements.

      Acquisition and Merger-Related Charges. During the first quarter of fiscal 2002, we completed the acquisition of the United States portion of the Marconi plc acquisition (“Marconi acquisition”) and recorded non-recurring acquisition-related charges of $2.0 million ($1.3 million after-tax) consisting of professional fees and other integration costs. There were no acquisition-related charges recorded during the first quarter of fiscal 2001.

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      Restructuring Charges. During the third quarter of fiscal 2001, we implemented a restructuring program to reduce our cost structure due to the economic downturn. This restructuring program includes reductions in workforce, consolidation of facilities and the transition of certain facilities into new product introduction sites.

     For the first quarter of fiscal 2002, we charged $14.1 million of restructuring costs against earnings. These restructuring charges included employee severance and benefit costs of approximately $1.4 million, costs related to lease commitments of approximately $9.8 million, fixed asset impairments of approximately $2.7 million and $0.2 million of other restructuring costs.

     The employee severance and benefit portion of the restructuring charge is related to the elimination of approximately 855 employees during the first quarter of fiscal 2002, the majority of which were engaged in direct manufacturing activities in various facilities around the world. Lease restructuring costs consist primarily of future lease payments for facilities vacated as a result of the consolidation of facilities and the transition of certain facilities into new product introduction sites. The fixed asset impairment charge primarily results from a decision made in the first quarter of fiscal 2002 to dispose of an office building in Asia due to current macroeconomic conditions. For additional information regarding restructuring costs, see Note 6 – “Restructuring” of the Notes to Consolidated Financial Statements.

     The macroeconomic conditions facing the Company, and the EMS industry as a whole, have continued to deteriorate. We expect a slower recovery of our business due to the recessionary economy, continued telecommunications carrier spending cutbacks and aggressive inventory reductions by customers. As a result, Jabil will consider plant re-sizing and additional reductions to the workforce during fiscal 2002 to reduce its cost structure. Based on our preliminary evaluation, we expect to take additional restructuring charges in the second fiscal quarter of $10 million to $15 million.

      Interest Income. Interest income decreased to $2.2 million in the first quarter of fiscal 2002 from $2.5 million in the first quarter of fiscal 2001 as a result of decreased interest rates on cash deposits.

      Interest Expense. Interest expense increased approximately $2.4 million in the first quarter of fiscal 2002 to $2.8 million as compared to $0.4 million in the first quarter of fiscal 2001, as a result of our issuance of convertible notes during the third quarter of fiscal 2001 and imputed interest on deferred acquisition payments related to the Marconi acquisition.

      Income Taxes. Our effective tax rate decreased to 20.4% in the first quarter of fiscal 2002, from 29.0% for the same period of fiscal 2001. The tax rate is predominantly a function of the mix of domestic versus international income from operations. Our international operations have historically been taxed at a lower rate than in the United States, primarily due to tax holidays granted to our sites in Malaysia, China and Hungary. Such tax holidays are subject to conditions with which we expect to continue to comply.

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Business Factors

     Due to the nature of turnkey manufacturing and our relatively small number of customers, our quarterly operating results are affected by the level and timing of orders, the level of capacity utilization of our manufacturing facilities and associated fixed costs, fluctuations in material costs, and by the mix of material costs versus manufacturing costs. Similarly, operating results are affected by price competition, level of experience in manufacturing a particular product, degree of automation used in the assembly process, efficiencies we achieve in managing inventories and fixed assets, timing of expenditures in anticipation of increased sales, customer product delivery requirements, and shortages of components or labor. In the past, some of our customers have terminated their manufacturing arrangement with us, and other customers have significantly reduced or delayed the volume of manufacturing services ordered from us. We cannot assure you that present or future customers will not terminate their manufacturing arrangements with us or significantly change, reduce or delay the amount of manufacturing services ordered from us. If they do, it could have a material adverse effect on our results of operations.

Acquisitions and Expansion

     The EMS industry has experienced rapid growth over the past several years as an increasing number of electronics companies have outsourced their manufacturing requirements and divested their manufacturing facilities, such as our acquisition of certain manufacturing facilities from Marconi plc in fiscal 2001. Electronics companies are turning to outsourcing in order to reduce product cost; achieve accelerated time-to-market and time-to-volume production; access advanced design and manufacturing technologies; improve inventory management and purchasing power; reduce their capital investment in manufacturing facilities; and achieve parallel manufacturing of the same product throughout the world. We believe that additional acquisition opportunities exist and we regularly seek and evaluate such acquisition opportunities. We also seek and evaluate acquisition opportunities that may arise as a result of consolidation in the EMS industry, as evidenced by our acquisition of GET Manufacturing, Inc. and Bull Information Technology during fiscal 2000. We also intend to continue to evaluate strategic acquisitions of ancillary services to round out our service offerings, similar to our acquisition of Telenor Technology Services, a repair and logistics provider, based in Dublin, Ireland during fiscal 2000. However, we cannot assure you that we will be able to consummate or, if consummated, successfully integrate the operations and management of any such acquisitions. Acquisitions involve significant risks which could have a material adverse effect on us, including financial and operating risks, such as (1) potential liabilities of the acquired businesses; (2) the dilutive effect of the issuance of additional equity securities; (3) the incurrence of additional debt; (4) the financial impact of potential future impairment write-downs of goodwill and the amortization of other intangible assets involved in any acquisitions, (5) possible adverse tax and accounting effects; (6) the diversion of management’s attention to the assimilation of the businesses to be acquired; (7) the risk that the acquired businesses will fail to maintain the quality of services that we have historically provided; (8) the need to implement financial and

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other systems and add management resources; (9) the risk that key employees of the acquired businesses will leave after the acquisition; (10) unforeseen difficulties in the acquired operations; and (11) the impact on us of any unionized work force we may acquire.

     During the second quarter of fiscal 2001, we entered into a business sale agreement with Marconi to purchase certain operations of its communications division located in the United States, England, Italy and Germany. We acquired these operations to boost our European profile, enhance our U.S. presence, broaden participation in the communications sector and to invest in advanced technology manufacturing competencies. On June 13, 2001, we consummated the English and Italian portions of the acquisition and modified certain terms of the transaction. The acquisition price of the English and Italian portions was approximately $172 million and is accounted for under the purchase method of accounting. Based on a preliminary third-party valuation of the English and Italian operations acquired, the purchase price was allocated to inventory, property, plant and equipment, purchased intangible assets of approximately $41.6 million and goodwill of approximately $67.1 million. On September 4, 2001, we completed the portion of the transaction related to the United States. The acquisition price of the United States portion was approximately $34 million and is accounted for under the purchase method of accounting. Based on a preliminary third-party valuation of the United States operations acquired, the purchase price was primarily allocated to inventory, property, plant and equipment, purchased intangible assets of approximately $13.4 million and goodwill of approximately $9.3 million. We anticipate completing the German portion of the acquisition during fiscal 2002. Certain payments associated with the purchase will be made in three installments with the initial payment due upon completion of the German portion of the acquisition. The remaining two payments will be made 24 and 36 months after the final close. These payments have been recorded based on the net present value discounted at 7 percent. Imputed interest is amortized over the term of the payments and is recorded as interest expense.

     On October 25, 2001, we closed a purchase agreement with Intel Corporation to purchase certain operations located in Penang, Malaysia. We acquired these operations to expand our manufacturing technology in the radio frequency access area, to broaden our relationship with Intel and to strategically expand our Asian manufacturing capability. The transaction is accounted for under the purchase method of accounting. Total consideration paid was approximately $37 million. Based on management’s preliminary valuation, the purchase price was primarily allocated to inventory, property, plant and equipment, and intangible assets, including goodwill. We are in the process of obtaining a third-party valuation, thus, the allocation of the purchase price is subject to adjustment. Management expects that a portion of the purchase price will be allocated to purchased intangible assets, with such assets requiring amortization. As the Company is unable to estimate the amount of purchased intangibles at this time, the entire $9 million excess of purchase price over the tangible net assets acquired has been allocated to goodwill as of November 30, 2001. As a result, no amortization expense related to this acquisition was recorded during the first quarter of fiscal 2002. The purchase price allocation will be adjusted during the second quarter of fiscal 2002. Funding for this acquisition was provided by current working capital. Simultaneous with the closing, we entered into a three-year product supply agreement to manufacture certain peripheral products for Intel.

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     The unaudited consolidated financial statements include the operating results of each business from the date of acquisition. Pro forma results of operations have not been presented because the effects of these acquisitions were not material on either an individual or aggregate basis.

     During this fiscal year, we continued the construction of a new manufacturing facility in Guangzhou, China that was begun in fiscal 2001.

Liquidity and Capital Resources

     At November 30, 2001, our principal sources of liquidity consisted of cash, available borrowings under our credit facilities and an asset-backed securitization program. We have committed line of credit facilities in place with a syndicate of banks that provide up to $750 million of working capital borrowing capacity, $500 million of which is provided under a three-year facility. An additional $250 million is available under a separate 364-day agreement. During the first quarter of fiscal 2002, we renewed our existing asset-backed securitization program with Bank One to provide for the sale of up to $100 million of eligible accounts receivables of certain U.S. plants. The agreement expires in May 2002. During the first quarter of fiscal 2002, we did not utilize our revolving credit facilities or the asset backed program.

     We generated $153 million of cash from operating activities for the three months ended November 30, 2001. This consisted primarily of $8.4 million of net income, $43.9 million of depreciation and amortization, $67.8 million from decreases in accounts receivable, $39.1 million from decreases in inventory and $12.3 million of non-cash restructuring charges, offset by $23.1 million of decreases in accounts payable and accrued expenses. The decreases in inventory and accounts payable were due to reduced levels of business during the first quarter of fiscal 2002 compared to the same period of fiscal 2001. As during the last half of fiscal 2001, we continued to experience reduced levels of demand from many of our customers in response to the general economic downturn. Inventory levels and purchases were decreased in line with new levels of expected demand. The decrease in accounts receivable balance was due to decreased revenue during the first quarter of fiscal 2002, accompanied by improved collections of outstanding balances.

     Net cash used in investing activities of $92.5 million for the three months ended November 30, 2001 consisted of our capital expenditures of $22.3 million for construction and equipment worldwide and cash paid of $71.0 million in the acquisition of certain assets of Marconi and Intel. Purchases of manufacturing and computer equipment were made to support our ongoing business. We also continued construction of a new manufacturing facility in Guangzhou, China to support our expected future capacity needs.

     Over the past several years, we have experienced significant growth. As a result, we have used cash to finance increases in our inventory and accounts receivable. We believe that during fiscal year 2002, our capital expenditures will exceed $100 million, principally for machinery, equipment, facilities and related expenses. We believe that our level of resources, which include cash on hand, available borrowings under our existing credit facilities, funds provided by our asset-backed securitization program and funds provided by operations, will be more than adequate

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to fund these capital expenditures and working capital requirements for fiscal 2002. Should we desire to consummate a significant amount of additional acquisition opportunities, our capital needs would increase and could possibly result in our need to increase our borrowings by accessing public or private debt and equity markets.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     There have been no material changes in our market risk during the three months ended November 30, 2001. Market risk information is contained under the caption “Quantitative And Qualitative Disclosures About Market Risk” of our 2001 Annual Report on Form 10-K for the fiscal year ended August 31, 2001 and is incorporated herein by reference.

PART II. OTHER INFORMATION

Item 1: Legal Proceedings

     We are party to certain lawsuits in the ordinary course of business. We do not believe these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations and cash flows.

Item 2: Changes in Securities

     None.

Item 3: Defaults Upon Senior Securities

     None.

Item 4: Submission of Matters to a Vote of Security Holders

     None.

Item 5: Other Information

     None.

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Item 6: Exhibits and Reports on Form 8-K

         
(a)   Exhibits    
    10.17   Amendment to Receivables Sales Agreement dated as of November 16, 2001, to Receivables Sales Agreement dated as of August 10, 2000, among Jabil Circuit Financial, Inc. as buyer and Jabil Circuit, Inc. and Jabil Circuit of Texas, LP as originators.
    10.18   Amendment to Receivables Purchase Agreement dated as of November 16, 2001, to Receivables Purchase Agreement dated as of August 10, 2000, among Jabil Circuit Financial, Inc. as seller and servicer and Jabil Circuit, Inc. as a sub-servicer and Falcon Asset Securitization Corporation and Bank One as agent for Falcon.
(b)   Reports on Form 8-K.
    On October 19, 2001, we filed a Current Report on Form 8-K reporting our adoption of a Stockholder Rights Plan.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

             
        Jabil Circuit, Inc.
Registrant
             
Date: January 11, 2002   By:   /s/ Timothy L. Main
         
            Timothy L. Main
President/CEO
             
Date: January 11, 2002   By:   /s/ Chris A. Lewis
     
            Chris A. Lewis
Chief Financial Officer

24

 

 
EXHIBIT 10.17

EXECUTION COPY

AMENDMENT NO. 1

Dated as of November 16, 2001

to

RECEIVABLES SALE AGREEMENT

Dated as of August 10, 2000

THIS AMENDMENT NO. 1 dated as of November 16, 2001 ("Amendment") is entered into by and among Jabil Circuit Financial, Inc., a Delaware corporation (the "Buyer"), Jabil Circuit, Inc., a Delaware corporation ("Jabil") and Jabil Circuit of Texas, LP ("Jabil Texas", together with Jabil, each individually, an "Originator" and collectively, the "Originators"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the RSA, as defined below.

PRELIMINARY STATEMENTS

A. The Buyer and the Originators are parties to that certain Receivables Sale Agreement dated as of August 10, 2000 (as the same may be further amended, restated, supplemented or otherwise modified from time to time, the "RSA").

B. The parties hereto have agreed to amend the RSA on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises set forth above, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Buyer and the Originators agree as follows:

SECTION 1. Amendments to the RSA. Effective as of the date hereof, subject to the satisfaction of the conditions precedent set forth in Section 2 below, the RSA is hereby amended as follows:

1.1 Sections 2.1(i), 2.1(j) and 4.2(d) are each hereby amended to delete the parenthetical "(other than the CISCO Receivables)" contained therein.

1.2 Section 4.1(b) of the RSA is hereby amended to delete clause
(vi) thereof in its entirety and replace it with the following:

"(vi) Jabil Mexico and Jabil Chihuahua. As soon as such Originator becomes aware thereof, notice of any action taken by Jabil Mexico, Jabil Chihuahua or any other Person to assert any claim against any property of Jabil, Jabil Mexico or Jabil Chihuahua in Mexico."

1

1.3 Section 4.1(g) of the RSA is hereby amended to delete the phrase "and with respect to the CISCO Receivables, other than the Adverse Claim in favor of CISCO Systems, Inc.," contained therein.

1.4 Section 7.1 of the RSA is hereby amended to delete clause
(xiii) thereof in its entirety and replace it with the following:

"(xiii) the operations of Jabil Mexico or Jabil Chihuahua and the enforcement of the Agent's and the Purchaser's rights under either Estoppel Letter; and"

1.5 Exhibit I of the RSA is hereby amended to delete the definition of "CISCO Receivables" contained therein in its entirety.

1.6 Exhibit I of the RSA is hereby further amended to add the following definition after the definition of "Jabil" contained therein:

" `Jabil Chihuahua' means Jabil Circuit de Chihuahua, S.A. de C.V., a corporation organized under the laws of Mexico as a Sociedad Anonima de Capital Variable."

1.7 Exhibit I of the RSA is hereby further amended to delete the term "Estoppel Letter" appearing in the definition of "Transaction Documents" contained therein and replace it with the term "Estoppel Letters".

1.8 Exhibit II of the RSA is hereby amended by to add the following information under the Guadalajara, Mexico information:

CHIHUAHUA, MEXICO
c/o Jabil Circuit de Chihuahua SA de CV Alejundro Dumas #11341 Complejo Industrial Chihuahua Chihuahua, Chihuahua, Mexico CP31109

1.9 Exhibit III of the RSA is hereby amended to add the following Collection Account information:

Collection Bank        Lockbox Address                    Related Collection Account
Bank One, NA           P.O. Box 22825                     10-93863 Jabil Circuit Financial,
                       Chicago, IL  60673-1228            Inc. (Texas)

Bank One, NA           P.O. Box 730802                    11-00221 Jabil Circuit Financial,
                       Chicago, IL  60673-3303            Inc. (Chihuahua)

Bank One, NA           P.O. Box 22275                     10-63544 Jabil Circuit Financial,
                       Chicago, IL  60673-3303            Inc. (Florida)

2

SECTION 2. Conditions Precedent. This Amendment shall become effective as of the date first above written, upon receipt by the Buyer of four (4) copies of this Amendment duly executed by each of the Buyer, Jabil and Jabil Texas and consented to by the Agent.

SECTION 3. Covenants, Representations and Warranties of the Originators.

3.1 Upon the effectiveness of this Amendment, each of the Originators hereby reaffirms all covenants, representations and warranties made by it, to the extent the same are not amended hereby, in the RSA, as amended, and agrees that all such covenants, representations and warranties shall be deemed to have been re-made as of the effective date of this Amendment.

3.2 Each of the Originators hereby represents and warrants, (i) that this Amendment constitutes the legal, valid and binding obligation of such Person enforceable against such Person in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and general principles of equity which may limit the availability of equitable remedies and (ii) upon the effectiveness of this Amendment, no Termination Event or Potential Termination Event has occurred or is continuing.

SECTION 4. Reference to the Effect on the RSA.

4.1 Upon the effectiveness of this Amendment, each reference in the RSA to "this Agreement," "hereunder," "hereof," "herein," "hereby" or words of like import shall mean and be a reference to the RSA as amended hereby, and each reference to the RSA in any other document, instrument or agreement executed and/or delivered in connection with the RSA shall mean and be a reference to the RSA as amended hereby.

4.2 Except as specifically amended hereby, the RSA and the other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

4.3 The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Buyer under the RSA or any of the other Transaction Documents, nor constitute a waiver of any provision contained therein, except as specifically set forth herein.

SECTION 5. Headings. Section headings in the Amendment are included herein for convenience of reference only and shall not constitute part of this Amendment for any other purpose.

SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF NEW YORK.

SECTION 7. Counterparts. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

3

SECTION 8. Fees and Expenses. Each Originator hereby confirms its agreement to pay on demand all reasonable costs and expenses in connection with the preparation, execution and delivery of this Amendment and any of the other instruments, documents and agreements to be executed and/or delivered in connection herewith, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel to the Buyer.

4

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

JABIL CIRCUIT FINANCIAL, INC.

By:

Name:
Title:

JABIL CIRCUIT, INC.

By:

Name:
Title:

JABIL CIRCUIT OF TEXAS, LP

By: Jabil Texas Holdings, LLC,
its sole General Partner

By: Jabil Circuit, Inc.
its sole Manager and Member

By:

Name:
Title:

Signature Page to Amendment No. 1

5

CONSENTED TO:

BANK ONE, NA (Main Office Chicago),
as a Financial Institution and as Agent

By:

Name:

Title: Authorized Signatory

6

 


 
EXHIBIT 10.18

EXECUTION COPY

AMENDMENT NO. 5

Dated as of November 16, 2001

to

RECEIVABLES PURCHASE AGREEMENT

Dated as of August 10, 2000

THIS AMENDMENT NO. 5 dated as of November 16, 2001 ("Amendment") is entered into by and among Jabil Circuit Financial, Inc., a Delaware corporation (the "Seller"), Jabil Circuit, Inc., a Delaware corporation (the "Sub-Servicer"), the financial institutions party hereto (the "Financial Institutions"), Falcon Asset Securitization Corporation ("Falcon") and Bank One, NA (Main Office Chicago), as Agent (the "Agent"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the RPA, as defined below.

PRELIMINARY STATEMENTS

A. The Seller, the Sub-Servicer, the Financial Institutions, Falcon and the Agent are parties to that certain Receivables Purchase Agreement dated as of August 10, 2000 (as the same has been amended prior to the date hereof and may be further amended, restated, supplemented or otherwise modified from time to time, the "RPA").

B. The parties hereto have agreed to amend the RPA on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises set forth above, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Seller, the Sub-Servicer, the Purchasers and the Agent agree as follows:

SECTION 1. Amendments to the RPA. Effective as of the date hereof, subject to the satisfaction of the conditions precedent set forth in Section 2 below, the RPA is hereby amended as follows:

1.1 Section 7.1(b) of the RPA is hereby amended to delete clause
(vii) thereof in its entirety and replace it with the following:

"(vii) Jabil Mexico and Jabil Chihuahua. As soon as the Seller becomes aware thereof, notice of any action taken by Jabil Mexico, Jabil Chihuahua or any other Person to assert any claim against any property of Jabil, Jabil Mexico or Jabil Chihuahua in Mexico."

1.2 Section 8.1(b) of the RPA is hereby amended to delete the parenthetical appearing in the fourth sentence thereof and replace it with the following:

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"(other than (x) Jabil Mexico with respect to those Receivables arising from the sale of products manufactured by Jabil Mexico and (y) Jabil Chihuahua with respect to those Receivables arising from the sale of products manufactured by Jabil Chihuahua)"

1.3 Section 8.5 of the RPA is hereby amended to delete clause (i) thereof in its entirety and replace it with the following:

"(i) on the fifteenth(15th) day of each month and at such times as the Agent shall request, a Monthly Report, such Monthly Report and the calculations on which the information in such Monthly Report is based not to include or otherwise give effect to any Unreported Receivable and"

1.4 Section 9.1(f) of the RPA is hereby amended to delete clauses
(ii) and (iii) thereof in their entirety and replace them with the following:

(ii) the average of the Dilution Ratios as at the end of such month and the two preceding months shall exceed 10% and the Dilution Ratio as at the end of such month shall exceed 14%; or

(iii) the average of the Default Ratios as at the end of such month and the two preceding months shall exceed 7.75% and the Default Ratio as at the end of such month shall exceed 9.25%."

1.5 Section 10.1 of the RPA is hereby amended to delete clause
(xv) thereof in its entirety and replace it with the following:

"(xv) the operations of Jabil Mexico or Jabil Chihuahua and the enforcement of the Agent's and the Purchaser's rights under either Estoppel Letter; and"

1.6 Section 11.1 of the RPA is hereby amended to delete the term "Estoppel Letter" appearing in the last sentence thereof and replace it with the term "Estoppel Letters".

1.7 Exhibit I of the RPA is hereby amended to delete the definition of "Dilution Horizon Ratio" contained therein in its entirety and replace it with the following:

" `Dilution Horizon Ratio' means, as of the last day of any calendar month, a percentage equal to (i) the Originator Sales during the most recently ended calendar month divided by (ii) the aggregate Outstanding Balance of all Eligible Receivables as of such date."

1.8 Exhibit I of the RPA is hereby further amended to delete the definition of "Dilution Ratio" contained therein in its entirety and replace it with the following:

" `Dilution Ratio' means, at any time, a percentage equal to
(i) the aggregate amount of Dilutions which accrued during the calendar month then most recently ended, divided by (ii) the Originator Sales during the month ending one (1) calendar month prior to such date."

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1.9 Exhibit I of the RPA is hereby further amended to delete the definition of "Dilution Spike Ratio" contained therein in its entirety and replace it with the following:

" `Dilution Spike Ratio' means, as of the last day of any calendar month, a percentage equal to the highest Dilution Ratio as of the last day of any of the twelve (12) months then most recently ended; provided, that $8,000,000 shall be deducted from the Dilutions for the month of February 2000 in calculating the Dilution Ratio for such month for purposes of this definition."

1.10 Exhibit I of the RPA is hereby further amended to delete clause (iv) of the definition of "Eligible Receivable" in its entirety and replace it with the following:

"(iv) which by its terms is due and payable within 45 days of the original billing date therefor (or in the case of a Receivable for which Johnson Controls, Inc. is the Obligor, is due and payable on or prior to the last day of the month immediately succeeding the month in which the original billing date occurred), has not had its payment terms extended, and has not had its original billing date changed for any portion thereof,"

1.11 Exhibit I of the RPA is hereby further amended to delete clause (xx) of the definition of "Eligible Receivable" in its entirety and replace it with the following:

"(xx) which, if it arises from the sale of any product manufactured outside of the United States (other than a product manufactured by Jabil Mexico in Guadalajara, Mexico and other than a product manufactured by Jabil Chihuahua in Chihuahua, Mexico) such Receivable has been approved in writing by the Agent."

1.12 Exhibit I of the RPA is hereby further amended to delete the definition of "Estoppel Letter" contained therein in its entirety and replace it with the following:

" `Estoppel Letters' means each of (i) that certain estoppel letter agreement dated as of August 10, 2000 executed by Jabil Mexico for the benefit of the Agent, on behalf of the Purchasers and (ii) that certain estoppel letter agreement dated as of November 16, 2001 executed by Jabil Chihuahua for the benefit of the Agent, on behalf of the Purchasers."

1.13 Exhibit I of the RPA is hereby further amended to add the following definition after the definition of "Jabil" contained therein:

" `Jabil Chihuahua' means Jabil Circuit de Chihuahua, S.A. de C.V., a corporation organized under the laws of Mexico as a Sociedad Anonima de Capital Variable."

1.14 Exhibit I of the RPA is hereby further amended to delete the date "November 16, 2001" occurring in the definition of "Liquidity Termination Date" contained therein and replace it with the date "May 8, 2002".

1.15 Exhibit I of the RPA is hereby further amended to delete the definition of "Purchase Limit" contained therein in its entirety and replace it with the following:

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" `Purchase Limit' means $100,000,000."

1.16 Exhibit I of the RPA is hereby further amended to delete the term "Estoppel Letter" appearing in the definition of "Transaction Documents" contained therein and replace it with the term "Estoppel Letters".

1.17 Exhibit I of the RPA is hereby further amended to add the following definition after the definition of "Unconditional Liquidity Provider" contained therein:

" `Unreported Receivable' means a Receivable described on Schedule E, as such schedule may be modified from time to time by the Seller with the consent of the Agent."

1.18 Exhibit III of the RPA is hereby amended to add the following information under the Guadalajara, Mexico information:

CHIHUAHUA, MEXICO
c/o Jabil Circuit de Chihuahua SA de CV Alejandro Dumas #11341 Complejo Industrial Chihuahua Chihuahua, Chihuahua, Mexico CP31109

1.19 Exhibit IV of the RPA is hereby amended to add the following Collection Account Information:

Collection Bank        Lockbox Address                    Related Collection Account
Bank One, NA           P.O. Box 22825                     10-93863 Jabil Circuit Financial,
                       Chicago, IL  60673-1228            Inc. (Texas)
Bank One, NA           P.O. Box 730802                    11-00221 Jabil Circuit Financial,
                       Dallas, TX 75375-0802              Inc. (Chihuahua)
Bank One, NA           P.O. Box 22275                     10-63544 Jabil Circuit Financial,
                       Chicago, IL 60673-1222             Inc. (Florida)



1.20 The RPA is hereby amended to add Schedule E thereto in the form attached hereto as Annex A.

SECTION 2. Conditions Precedent. This Amendment shall become effective as of the date first above written, upon receipt by the Agent of:

(i) four (4) copies of this Amendment duly executed by each of the Seller, the Sub-Servicer, the Purchasers and the Agent;

(ii) each of the documents set forth on Schedule I hereto; and

(iii) the Amendment Fee (as such term is defined in the Fee Letter referred to on Schedule I hereto).

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SECTION 3. Covenants, Representations and Warranties of the Seller and the Sub-Servicer.

3.1 Upon the effectiveness of this Amendment, each of the Seller (individually and in its capacity as Servicer) and the Sub-Servicer hereby reaffirms all covenants, representations and warranties made by it, to the extent the same are not amended hereby, in the RPA, as amended, and agrees that all such covenants, representations and warranties shall be deemed to have been re-made as of the effective date of this Amendment.

3.2 Each of the Seller (individually and in its capacity as Servicer) and the Sub-Servicer hereby represents and warrants, (i) that this Amendment constitutes the legal, valid and binding obligation of such Person enforceable against such Person in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and general principles of equity which may limit the availability of equitable remedies and (ii) upon the effectiveness of this Amendment, no Amortization Event or Potential Amortization Event has occurred or is continuing.

SECTION 4. Reference to the Effect on the RPA.

4.1 Upon the effectiveness of this Amendment, each reference in the RPA to "this Agreement," "hereunder," "hereof," "herein," "hereby" or words of like import shall mean and be a reference to the RPA as amended hereby, and each reference to the RPA in any other document, instrument or agreement executed and/or delivered in connection with the RPA shall mean and be a reference to the RPA as amended hereby.

4.2 Except as specifically amended hereby, the RPA and the other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

4.3 The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Purchasers or the Agent under the RPA or any of the other Transaction Documents, nor constitute a waiver of any provision contained therein, except as specifically set forth herein.

SECTION 5. Headings. Section headings in the Amendment are included herein for convenience of reference only and shall not constitute part of this Amendment for any other purpose.

SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF ILLINOIS.

SECTION 7. Counterparts. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

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SECTION 8. Fees and Expenses. The Seller hereby confirms its agreement to pay on demand all reasonable costs and expenses in connection with the preparation, execution and delivery of this Amendment and any of the other instruments, documents and agreements to be executed and/or delivered in connection herewith, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel to the Agent.

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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

JABIL CIRCUIT FINANCIAL, INC.

By:

Name:
Title:

JABIL CIRCUIT, INC.

By:

Name:
Title:

FALCON ASSET SECURITIZATION

CORPORATION

By:

Name:
Title: Authorized Signatory

BANK ONE, NA (Main Office Chicago), as a Financial Institution and as Agent

By:
Name:
Title: Authorized Signatory

Signature Page to Amendment No. 5

ANNEX A TO AMENDMENT NO. 5 TO

RECEIVABLES PURCHASE AGREEMENT

SCHEDULE E

UNREPORTED RECEIVABLES

Receivables for which the Obligor is Redback Networks

Signature Page to Amendment No. 5