FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

Jabil Circuit, Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: JBIL)") else Response.Write("(NASDAQ: JBIL)") end if %>
10800 Roosevelt Boulevard
St. Petersburg, FL 33716
(813) 577-9749

UNION CITY, Ca., December 19, 1996/FOOLWIRE/ --- Jabil Circuit reported their first quarter 1997 results after the market closed Tuesday. Revenues for the quarter were $203 million, down 13% from $233.9 million reported in last year's first quarter, but up 17% sequentially compared to Q4 1996. First quarter net income increased 69% to $8.8 million or $0.47 per share, compared with $5.2 million or $0.31 per share for Q1 last year. This beat analyst consensus estimates of $0.38 per share by 24%.

REVENUE BREAKDOWN BY SEGMENT. Revenue grew at 17% over the prior quarter, somewhat higher growth than they had anticipated previously for the quarter. The communications segment grew to nearly 45% of revenue during this quarter as schedules increased for most communications customers. The PC segment grew significantly as new desktop products attained mass production. Growth was limited by modestly lower production levels for notebook products during the quarter. Their speculation on notebook production levels is that the historical customer base in NEC that they serve has maybe been disrupted a little bit by the Packard Bell/NEC merger for the North American product. They are probably still working out their marketing assignments and maybe some large corporate folks haven't embraced the Packard Bell contribution as favorably as we think. The schedules Jabil is looking at right now are modestly softer. Those may recover after NEC gets things together on the marketing side, but Jabil isn't looking for it until they start seeing order levels improve. The peripherals segment grew largely as a result of new product production for Apple Computer in Scotland, Malaysia, and North America. They expect for fiscal 1997 that communications will account for 45% of revenue, computers about 25%, peripherals maybe high teens, automotive should be about 10%, and medical and other about 1% apiece.

REVENUE DISCUSSION BY CUSTOMER. Customers they expect to represent 10% or more of their revenues for the year include (in no particular order) Hewlett-Packard, NEC, 3Com, Cisco Systems, and perhaps Quantum as well. The results they are seeing during Q1 and the outlook are consistent with that view. The new business discussed below for Cisco Systems brings the number of divisions Jabil supports for Cisco to 3. In 3Com's case, their principle business is 3 divisions, although they are supporting as many as two or three others on a less-material basis. General Instruments has some fairly exciting potential for Jabil. General Instruments acquired a portion of the business of Compression Labs which included some products Jabil has been working on in the satellite compression market for both industrial and home use. Jabil has done some design work and, since their last earnings release have started working on prototype pre-production units and anticipate they will start to see some revenue on that in the Spring. They don't know whether that production is going to be a home run or relatively modest. General Instruments has very strong market share in cable set-top boxes, but they are relatively new players on the satellite side. They believe their relationship with Quantum is going very well. They are pleased to be part of the tape drive product because it is a very attractive product for both Quantum and Jabil. The product has been enjoying modest growth over the first quarter and they think will probably continue.

CAPACITY UTILIZATION IMPACT ON GROSS MARGINS. Gross margins increased sequentially to 11.4% of revenue from 10.8% of revenue in the prior quarter reflecting improved loading in Scotland and Malaysia and a continuing shift in product mix to higher value added product. The largest factor in this improved gross margin was the re-establishment of economic loading levels in the Malaysia and Scotland factories. Both factories benefitted from new Apple production. Scotland had additional growth for communication customers while Malaysia had additional growth for PC desktop customers. Component availability is great. They are suffering from no shortages anywhere, outside of isolated special products. Loading is really excellent as well. They are just at about optimum utilization in each of their factories right now. If they can maintain a nice, predictable, metered growth rate, they will be able to maintain that capacity utilization right where they want it by being able to time the expansion of capacity. And it looks like they are really well positioned to be able to do that this year.

PRODUCTION MIX IMPACT ON GROSS MARGINS. The second largest factor in the improved gross margin was a continuing shift in production mix to high manufacturing content/lower material content products. Manufacturing value-add commands a higher return than the pass-through cost of purchased materials. Products having a relatively high manufacturing content ordinarily have a higher profit as a percentage of revenue. This quarter saw an additional shift to high manufacturing content products in the communications sector over the gains realized in the previous fourth quarter. The company was asked if there were some customers that Jabil did on a "turnkey" basis that are now consignment and if that was part of what happened. The company responded that they have consigned elements in some of their relationships. In Cisco's case they are using direct implant stores that have the effect of a portion of the materials being equivalent of consignment economically. So, there are other wrinkles in materials arrangements they have with customers, but the biggest effect is just the raw size of the manufacturing content in these products. And, Jabil doesn't do consignment largely to control materials management because their customers make terrible suppliers. They made an exception with Cisco on this implant product and it has been quite successful. Margins were further improved during the quarter by continuing declines in materials prices.

EXPENSES. SG&A decreased sequentially to 3.8% of increased revenues from 4.1% in the previous quarter although total expense increased by $514,000 to $7.72 million. R&D held steady at 0.3% of increased revenues or $705,000. Operating income increased sequentially by almost 1% to 7.2% on increased revenue. This result exceeds their targeted operating income range of between 6% and 6.5% of revenue. Interest expense held steady sequentially at 0.4% of increased revenue or $658,000 reflecting the absence of short-term bank borrowings during the quarter. The income tax rate was 37% of income because of relatively low contribution levels from Scotland and Malaysia compared to a normalized tax rate of 35.5%.

NET INCOME. Net income after tax was $8,828,000 or 4.3% of revenue, exceeding their targeted goal of 3% to 3.5% of revenue. This resulted in EPS of $0.47 on an average 18,942,000 shares fully diluted. They are very pleased with these results reflecting significantly improved operating results, improved composition of business mix, and performance in excess of the targeted operating goals they have identified over the last several years.

BALANCE SHEET HIGHLIGHTS. In reviewing the balance sheet, they have continued to place an emphasis on working capital management and are pleased to report that both accounts receivable days and inventory turnover have improved from fourth quarter levels. As a result of this effort, they have generated positive cash from operations in the quarter and continue to have a significant amount of cash on their balance sheet as of the end of November -- $72 million. This compares to $73 million as of the end of August. In reviewing major balance sheet accounts, accounts receivables decreased by $6 million to $78 million in spite of a 17% increase in revenue. Calculated days sales outstanding and actual collection experience for the quarter was 35 days, an improvement of 9 days for DSOs and 5 days for collection experience from the previous quarter. They have programs in place to work on these issues, but don't want to provide guidance that they can sustain the DSOs and collections at 35 days. Inventories increased by $2 million in the quarter to $67 million. Calculated inventory turns were approximately 11, exceeding their overall goal of 10 turns. This represented an improvement from 10 turns in the previous quarter. This is particularly impressive in light of the increase in number of assemblies that are required by Jabil's customers.

WORKING CAPITAL. From a borrowing standpoint, as with last quarter, the company is currently not utilizing any of their $60 million credit facilities. Long-term debt decreased by $1 million to $60 million. The majority of their long-term debt is represented by the $50 million private placement debt that was funded in May of last year. Principal payments on this debt do not begin until mid-1999. From a leverage standpoint, the company's debt-to-capitalization ratio is now at 31%, with total liabilities-to-equity at 1.3. They are pleased that they were able to improve their asset turnover performance from fourth quarter levels. They will continue to emphasize working capital management. Additionally, with current cash levels of over $70 million and an unused credit facility of $60 million, the company is in an excellent position to support new growth both on an internal and external basis.

OUTLOOK. Future business levels for existing customers appear well-positioned to grow at a moderate rate over the next several quarters with solidly grounded growth in targeted markets and for multi-national production. The mix of business for fiscal 1997 appears to be similar to that as they experienced in the first quarter of the year with continuing strength in the data communications segment. Longer-term revenue growth is anticipated to be enhance by a new manufacturing facility planned in Mexico.

DISCUSSION BY QUARTER OF 1997 OUTLOOK. The second quarter of 1997 appears positioned to grow slightly over Q1 1997, near flat but slight growth, followed by a return to an approximately 30% compound annual growth rate in sequential revenue growth in Q3 and Q4 (or about 7.5% per quarter sequentially). The communications segment continues to track towards 45% of total revenue for the year, with continuing impact to their economic models. Production levels are expected to expand in Q2, Q3, and Q4 as new products attain mass production levels.

OUTLOOK BY SEGMENT/CUSTOMER. In addition to the growth of current products, new product prodution is being established during the Winter and Spring for Cisco switching products resulting from the Stratacomm acquisition, Cellnet wireless communication products for new cities, Pairgain wired communications products, and most recently General Instruments set-top satellite converter boxes. Production levels in the peripherals segment will grow modestly from levels in Q1 through the Winter and Spring and are expected to increase more sharply in the Summer as new products reach mass production. Production levels in the PC segment are expected to increase in the second quarter as new desktop products continue to expand production levels in Scotland and Malaysia. Production levels on notebook products are expected to continue at modestly reduced levels throughout the year.

MARGIN OUTLOOK. Gross margins are expected to stabilize somewhat above long-term goals at 11% of revenue over the year, based on the unusual mix of high value add/low revenue products. This outlook will be affected by several factors. Margin improvements are anticipated in Scotland and Malaysia in Q2 and beyond as production levels further improve utilization of fixed costs. Margin improvements will be largely unaffected by start-up costs related to the new Mexican plant in Q2 and Q3, although Q4 should see about a 0.2% dilution of gross margin as the Mexican plant starts up mass production. The remaining quarters of the year are not anticipated to enjoy the benefit of reduced materials cost that occurred in Q1. In other words, the shift in business model apparent in Q4 and Q1 results are expected to be representative of the financial results for fiscal year 1997 and appear positioned to continue at the current levels during the year.

THE NEW PLANT IN MEXICO. Plans are being finalized to establish a new factory in Guadalajara Mexico for start of mass production by the end of the Summer. An agreement to purchase 24 acres of land for $2.9 million has been reached. Construction plans for a 130,000 square foot facility are being finalized and are expected to be completed at a cost near $5 million. From a staffing standpoint, general management staff was hired in the Fall and recruiting and training of functional managers and their staff will continue through the next 3 quarters.

INITIAL CUSTOMERS FOR NEW PLANT. From a customer standpoint, the factory site is expected to be utilized initially by current customers. Discussions are underway for volume production plans for Cellnet, Pairgain, and General Instruments as well as Hewlett-Packard and Apple. Most production plans contemplate that Mexican production will run in parallel with domestic production in the US.

START-UP COSTS AND EXPECTED IMPACT. Start-up costs are anticipated to have a minimal gross margin impact in Q2 and Q3 and have about 0.2% gross margin dilution impact in Q4 as mass production begins. The first quarter of FY 1998 is anticipated to be free of earnings dilution as production levels grow to absorb local overhead costs. From a strategic standpoint this factory is targeted to achieve cost levels that will allow delivery of products to North American markets at a price which is competitive with any location in the world. When this factory is combined with local production of global products in the US, Europe, and Malaysia, Jabil feels the competitive positioning of the business will be very strong. They are very excited about growing this factory as rapidly as they can manage.

SUPPLIER BASE/CULTURAL ISSUES IN MEXICO. On the supplier base, Mexico really still is kind of a "third world" location manufacturing site from a materials/infrastructure standpoint. It is not nearly as well grounded and established in materials and component availability as one would see in, for example, Malaysia or even Scotland. But, they anticipate, and one of the reasons they are going to Guadalajara which is starting to get chock full of contract manufacturers, is that the concentration of electronic contract manufacturers in that market will greatly facilitate rapid development of component marketplace infrastructure in that market. And, they do intend to operate that factory as a standalone factory with its own procurement and conduct operations locally, the way they do in all their other factories. The biggest issue is whether they will be able to achieve the remarkable results that they did in Malaysia and Scotland given the Mexican culture. They anticipate having some human motivation engineering issues in terms of trying in that culture to have workers be self-directed, independently managing their own lines of business, etc. They think they have a great management team in place that is able to establish and instill those kinds of values in the new workforce, but that is something they will be watching very closely. In addition, they will be doing business there in Spanish whereas in all their other locations they do business in English, so their historical charismatic speakers could be out of the game because they don't speak the language. They think everyone wants to do a good job and wants to have the opportunity to grow and have their own areas of responsibility, so they think it will succeed. They think it will be a great factory. They have a lot of business they can move to this factory right now and it sets them up for being able to attain their growth objectives, top and bottom line, as they move into fiscal 1998.

CONSOLIDATION OF SCOTLAND INTO A SINGLE PLANT. Jabil received a grant in Scotland for $8.5 million contingent on a certain level of capital expenditures, headcount increases, and some other targets. They have not finalized arrangements for procurement of real estate yet, but they are in the final stages of doing that and anticipate building a factory there of about 130,000 square feet that will probably also come online sometime before the end of the fiscal year, but those construction plans have not been finalized. That will allow them to consolidate their operations from the two leased facilities they are in, into a single owned facility that will probably bring enhanced efficiencies to their operations. It will bring 60,000-70,000 incremental square feet to that location.

SG&A OUTLOOK. SG&A is expected to continue to grow modestly over the year from the $7.8 million per quarter rate in the Fall, reflecting a buildup in corporate staff. These SG&A levels are anticipated to stabilize around 3.5% of increasing revenues, consistent with the financial model they have targeted over the last several years. Interest costs are expected to increase to near 0.5% of increasing revenue in the Spring, and grow to near 0.6% of revenue by the final quarter of the year. These increasing costs will occur as funded capital expansion and working capital requirements begin to impact interest costs. Taxes should return to a normalized rate of 35.5% of income.

SUMMARY. So, overall, fiscal 1997 offers solid prospects for surpassing their historical operating goals of gross margin at 10%, SG&A near 3.5%, operating margins between 6% and 6.5% of revenue, and net income between 3% and 3.5% of revenue. In summary, results for the first quarter were excellent and on track for an excellent year. They are pleased with the emerging stability in margins and revenue growth and believe that this is the result of their improved diversity and the shift of business mix to the most attractive industries and products. They are really excited about the prospects for their new plant in Mexico and the potential benefits it can bring to their customers in overall business in fiscal 1998.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.