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

Jabil Circuit, Inc.
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10800 Roosevelt Boulevard
St. Petersburg, FL 33716
(813) 577-9749
http://www.jabil.com

UNION CITY, CA (June 20, 1997)/FOOLWIRE/ --- Jabil Circuit reported their third quarter 1997 results on June 17th after the market close. Earnings for the quarter were a record $0.76 per share on record revenues of $248 million. These results reflect increased production levels in the US and internationally and the continuing shift of production mix to higher value-added products. Year-over-year, these results reflect a 130% growth in quarterly earnings per share.

QUARTER HIGHLIGHTS. Revenue for the quarter was $247.7 million with cost of revenue of $315.6 million resulting in a gross profit of $32 million. SG&A expenses were $9.3 million with R&D of $723,000 resulting in operating income of $22.1 million. Interest expense was $406,000 and their pre-tax income was $21.7 million. Income taxes were $7.1 million resulting in net income of $14.6 million or an EPS of $0.76 per share based on 19.2 million shares outstanding.

NINE-MONTH HIGHLIGHTS. For the nine months ended in May, their revenue is now $673 million. Operating income is $54.5 million. Net income is $34.5 million. And earnings per share is $1.80 based on 19.1 million shares outstanding.

CUSTOMER MIX. Their anticipated top 5 customers for the fiscal year are expected to be Cisco Systems and 3Com (very close), Hewlett-Packard, Quantum, and probably NEC. That is their best guess but they don't provide customer-by-customer guidance per quarter because it provides too much visibility into their proprietary order patterns. They think they will probably have possibly four customers in excess of 10% of sales and they have a couple customers that are close, along the lines of 8-10%. Taking a range of 4-6 customers, that might represent along the lines of 70-75% of their revenue. Things shift from quarter to quarter, but as a macro-trend they are focusing on adding customers that they anticipate becoming major customers. Moreover, what doesn't show up in the reporting mechanics is that they are spreading volume, like in the case of 3Com across 3 different divisions that are all significant. In the case of Cisco, they are going across two, going to three significant divisions. They are trying to do the same thing at HP and with some of the other business. That diversity issue continues to be one of their key strategic objectives that they are working on in the context of expansion of their current relationships is better for the business in the intermediate term. They think the business will continue to diversify along the same lines as they have done over the last several years. Generally, they target something on the order of 2/3 to 3/4 of their growth to come from their existing customers. Strategically that is where they would like to be. It is much better for their business to expand existing relationships than it is to continuously bring on new smaller accounts. That means that they would expect their performance over the next few quarters will probably reflect growth of that magnitude in terms of percentage of growth. They will also see some nice growth from customers they have just recently announced. They estimate that growth in current customers typically winds up being 2/3 existing products and 1/3 new products. Existing products are products that have been in production for more than two quarters.

BALANCE SHEET HIGHLIGHTS. As of the end of May, their cash balance was $56.4 million. Accounts receivable were $95.2 million. Inventories were $96.9 million. Property, plant, and equipment was $116.9 million. Total assets were $374.2 million. Current liabilities were $154 million and their stockholders equity was $161.9 million.

BREAKDOWN OF REVENUE GROWTH. Revenue grew 11% sequentially, a modest improvement over the 9% sequential growth rate from Q1 to Q2. In that growth, the communication segment grew at a 19% sequential rate compared to the prior quarter as a result of new products and increased production with existing customers. The PC segment was flat compared to the prior quarter. Growth in new production of desktop motherboards was tempered by lower production levels for notebook products during the quarter. The peripheral segment grew 11% sequentially as a result of continued growth in storage products.

GROSS MARGIN IMPROVEMENT. Gross margins increased sequentially to 12.9% of revenue from 11.9% in the prior quarter, reflecting a continuing shift in product mix to higher value added products along with continued improvement in plant loading. The largest factor in this improvement in gross margin was the economic loading levels in both their domestic factories and Malaysia. The second largest factor was a continuing shift in production mix to high manufacturing content, lower materials content products. Manufacturing value add commands a higher return than the pass-through costs 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 over the gains realized in the previous quarter. Margins continued to benefit modestly from declines in materials prices as well.

EXPENSES. SG&A expense increased sequentially to 3.7% of increased revenue from 3.6% in the previous quarter. Total expense increased by $1.3 million to $9.252 million. R&D decreased slightly to $723,000 or 0.3% of sales.

OPERATING INCOME. Operating income increased sequentially by almost 0.9% to 8.9% on increased revenue. This result exceeds Jabil's long-term targeted operating income range of 6-6.5% of revenue. Absolute operating income increased by 24% over the prior sequential quarter, the equivalent of 130% compound annual growth rate and well in excess of their 30% compound annual growth rate target for operating income. Operating income growth is their key financial objective.

INTEREST EXPENSE AND TAXES. Interest expense was comparable to the previous quarter. Income tax rates decreased to 32.7% of income compared to 36.3% in the prior sequential quarter. This takes into account a reduction of $712,000 in taxes relating to prior period tax benefit of Malaysia pioneer tax status. As they announced in May, this gives their Malaysian plant a tax-free status for a five-year period. Excluding this reduction, their effective tax rate would have been 35.7%, somewhat higher than their normalized rate of 34.5%.

PERFORMANCE IN EXCESS OF TARGETS. Net income after tax was $14.572 million or 5.9% of revenue, exceeding their long-term targeted goal of 3-3.5% of revenue on a typical mix of products. This resulted in an earnings per share of $0.76. They are pleased with these results reflecting improved operating income, improved composition of business mix and performance in excess of the targeted operating goals they have identified over the last several years.

STOCK SPLIT AND SETTLEMENT WITH EPSON. A couple of other interesting developments occurred during the quarter as well. First they are pleased to announce that the board of directors has approved a 2-for-1 stock split for shareholders of record on July 8th that will occur on July 22nd. In addition, during the quarter they were successful in settling litigation proceedings with Epson America Inc. Mutual releases have been executed by both parties with a confidentiality agreement as to the particulars. Results for the quarter were unaffected by the settlement. No future impact is expected.

BALANCE SHEET DETAILS. For the third quarter they have continued to maintain good asset turnover ratios, generating positive cash flow from operations for the sixth consecutive quarter. In reviewing major balance sheet accounts, accounts receivable increased by $4 million to $95 million in the third quarter. Calculated DSO and actual collection experience for the quarter was 35 days, somewhat below their second quarter which was 37 days. Inventories increased by $19 million in the third quarter. Calculated inventory turms were approximately 9, slightly below their overall goal of 10 turns as a company. This decrease in turns is largely a result of customer scheduling push-outs. They will be increasing their efforts in the fourth quarter to return their inventory turnover to 10 and they consider this more of an isolated case with the turns decreasing. Cash vouchers were $56 million at the end of the quarter compared to $65 million at the end of Q2. The decrease in their cash position was due to their continued capital expenditures in the quarter on buildings and machinery offset by positive cash generated from operations. Fixed assets increased by $26 million to $117 million, reflecting $33 million in captial expenditures offset by $7 million in depreciation. Their anticipated capital expenditures for the year are estimated to be $90 million, including $45 million for their four building sites. Depreciation is expected to be $25 million for the year.

DEBT. From a borrowing standpoint, as with last quarter, the company is currently not utilizing any of their $60 million credit facility. However, to continue to support the increased growth of their business, they are presently negotiating a new 3-year $100 million credit facility to replace their existing credit facility. Long term debt in the quarter decreased by $3 million to $55 million. As they mentioned in previous calls, the majority of their long-term debt is represented by the $50 million private placement that was funded in May of last year. The principal payments on this debt begin in mid 1999. Their debt-to-capitalization ratio is now at 27% with total liabilities to equity ratio of 1.3 to 1. They are pleased they were able to maintain similar asset turnover performance from their second quarter levels. With this performance and their increased profits, their average return on assets improved to 16.5% in the third quarter versus 13.9% in Q2. In addition, their average return on equity improved to 37.7% from 31.5% in the second quarter. They think the ROA and ROE results are the highest in their industry.

BACKGROUND -- FINANCIAL OBJECTIVES AND RATIONALE. Their key financial objective is to grow total operating income each quarter. They focus on growth at the operating income line because revenue and gross margin can be distorted by the mix of value adds and materials. SG&A is an important element for net income, but pre-tax and EPS can be distorted by finance and tax costs. Their stated goal is to deliver a 7% per sequential quarter growth of absolute operating income to achieve a compound annual growth rate of 30%.

OPERATING INCOME OUTLOOK. Operating income in the third quarter expanded at a remarkable 24% sequentially, the equivalent of about 130% compound annual growth rate. Operating income for the fourth quarter appears positioned to expand at a growth rate very close to the Q3 rate -- as of right now it's tracking close to 22%. As they move into the Fall, they look for a return to a more normalized growth rate of between 7% and 10% per quarter sequentially and for the balance of fiscal 1998. This is the equivalent of a 30-50% compound annual growth rate. This normalization of growth rates is expected as they bring on their three new factories and digest the growth occuring during the second half of fiscal 1997.

REVENUE TARGETS AND OUTLOOK. Q4 1997 revenue is positioned to grow significantly above their targeted long-term growth rates, off the base in Q3 1997, with continuing growth in the first quarter of 1998 at targeted rates -- the 30% compound annual growth or 7% sequentially.

BUSINESS TRENDS. The communications segment continues to expand to more than 50% of total revenue for the year with continuing impact to their economic model. The production levels are expected to expand in Q4 to somewhat growth rate than their targeted 7% per quarter growth. Production levels in the peripherals segment will grow above targeted levels from Q3 as well through the Summer and are expected to continue to grow at targeted levels through the Fall. They are launching incremental business in this sector on a global basis. Production levels in the PC segment are expected to increase above the targeted levels for growth in Q4 as mass production of new PC products is established in the Summer and into the Fall. Production levels on notebook products are expected to resume growth in the Summer with moderate growth into the Fall. Consumer products appear positioned to become a meaningful factor in the business in the Summer and Fall. This business segment can actually expand to near 10% of Jabil's business in fiscal 1998.

APPLE IS NEW PC CUSTOMER. They were asked if they could name the new customer they mentioned last quarter in the personal computer products area for a multi-national computer company. They responded that they started doing some motherboards for Apple in Malaysia. Historically they were doing only peripheral cards for them.

GROSS MARGIN OUTLOOK. Gross margins are expected to remain at comparable levels to the results just reported for Q3 based on the continuing mix of high value-add, low revenue products and a high degree of utilization at all plants. This outlook will be affected by several factors. Continued margin improvements are anticipated in Malaysia and at the Florida campus in the fourth quarter as production levels further improve utilization of fixed costs. Margin improvements will be largely unaffected by startup costs related to the new Mexican plant in the fourth quarter. Some impact is anticipated for Q1 1998, but a relatively minor impact. The shift in business model apparent in Q3 results are expected to be representative of the financial results for the balance of fiscal 1997 and appear positioned to continue at current levels into the first quarter of fiscal 1998.

UPDATE ON MEXICO PLANT. Implementation plans are underway to establish the new factory in Guadalajara, Mexico with the start of mass production toward the end of the first quarter 1998 (before Thanksgiving). The building plans have grown to 160,000 square foot facility with construction having commenced last month. The cost is anticipated to come in at around $8 million. The building site was $2.9 million for 29 acres. From a staffing standpoint, general management staff has been on board since last Fall and has been actively recruiting functional managers. Various technical staff has been trained and is participating operationally in both the Florida and Michigan locations and this process will continue through the Summer and into the Fall. The factory site is expected to be utilized initially by current customers. Discussions are underway for volume production plans for 6 of their current customers. Most production plans contemplate that Mexican production will run in parallel with domestic production of products in the US. The startup costs associated with this are anticipated to have no gross margin impact in Q4. Q1 1998 is anticipated to see minimal impact as production levels grow to absorb local overhead costs towards the end of Q1 and into Q2 1998. They think this factory is targeted to achieve cost levels that will allow delivery of products to the North American markets at a price which is competitive with any location in the world. When combined with the localized production of global products in the US, Europe, and Malaysia, they feel their competitive position in the business will be very strong. They are very excited about growing this factory as rapidly as they can safely manage.

OTHER PLANTS TO OPEN. The Scotland plant is anticipated to be completed toward the end of their fiscal year with full occupancy by the end of October. The Malaysian plant is proceeding according to schedule with completion anticipated to be in September.

SG&A EXPENSE OUTLOOK. SG&A is anticipated to continue to grow modestly through Q4 over the $9.5 million run rate established in Q3, reflecting a buildup in MIS or IT resources at a plant and corporate level along with staffing for the Mexican operation. These SG&A levels are anticipated to stabilize at around 3.4-3.5% of increasing revenue, consistent with the financial model they have targeted over the last several years.

INTEREST EXPENSE OUTLOOK. Interest costs are expected to remain constant at 0.2% of revenue in the Summer, increasing slightly to 0.3% of revenue into fiscal 1998.

OVERALL EARNINGS OUTLOOK. Taxes should return to a normalized rate of 34.5% of income and overall fiscal 1997 is anticipated to be completed with significant earnings improvement over the previous fiscal year, with solid prospects for continued earnings growth into the Fall at their long-term targeted rates. If you take a look at the year-over-year comparables on a realistic model, as you look out to 1998 even a very low growth rate would show very favorably in year-over-year comparisons for all of fiscal 1998.

SUMMARY. Results for the third quarter were excellent and show superb growth rates in operating income with the expectation of continuing growth through the balance of the year. They are pleased with the apparent stabilization of 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 continue to be enthusiastic at the prospects for their new Mexico plant and the potential benefits it could bring to their customers and 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.