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Sector: Information Technology Sub-industry: Electronic Manufacturing Services EMS Jabil Circuit, Inc. JBL 10560 Dr. Martin Luther King N St. Petersburg, FL 33716 www.jabil.com (NYSE: JBL)

HOLD

$30.28-36.32

Highlights

• Jabil Circuit designs and manufactures electronic circuit board assemblies and systems for original equipment manufacturers in the communications, computer peripherals, personal computers & consumer product industries. For the FY ended 8/31/04, revenues rose 32% to $6.25B. Net income totaled $166.9M, up from $43M. Revenue for the 2nd ’05 quarter was $1.72 billion, compared with $1.49 million in ‘04.

• Jabil's customer base is fairly concentrated,

with the top three customers (Cisco, Philips Electronics, and Hewlett-Packard) accounting for 42% of 2003 sales and less than 40% in 2004. If big customers cut back on spending it can have a great negative impact on revenues.

• It has been one of the industry's faster-

growing companies on average 25% during last few years.

• Jabil has a unique operating model,

continuous-flow work floors and customer-specific work crews, which distinguishes it among competitors.

• Contract manufacturing is very

competitive. It is possible that competitors could copy aspects of Jabil's operations or find other sources of cost advantage. New big trend is outsourcing.

Key Stock Statistics Stock Price $28.80 52-Week Range $19.18-31.49 Market Capitalization (million) 5,849 Mill Shares Outstanding 206.5 Mill Float 171.40 Mill Average Daily Volume 1.53 Mill Institutional Holdings 70.6% Dividend Yield NA Annual Dividends Per Share NA # Of Analysts Covering 28 Beta 1.7 EPS (TTM) 0.81 PEG ( Forward ) 0.9 P/E (TTM) 31.98 Price/Book (MRQ) 3.29 Price/Sales (TTM) 0.95

MIROSLAV TSIBINOG slavjan@hotmail.com 716-866-2685

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Table of Contents

Industry Overview ____________________________3 Company Overview ____________________________3 Strategy ………………………………………..4 Management ………………………………………..5

Worldwide Operations …………………………..6 Growth ………………………………………...7 Revenue by Sector ………………………………….8 News/Updates ________________________________10 Additional Information _______________________11 Financial Statements Analysis __________________ 12 Insider Trading ____________________________16 Puts/Calls _________________________________16 Summary and Valuation ________________________17

Following pages include Financial Statements, Ratios and Valuation models which can be separated from the report for more comfortable use.

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Industry Overview

I had two major EMS industry sources by Richard Stice (SmithBarney), CFA and David Pescherine, CFA(Citigrgroup). I am gong to summarize their ideas and what happened in EMS sector.

• Since 12/1, EMS group (Jabil included) has declined 18.4%, underperforming both the Nasdaq and SOX (semiconductor index)by approx 1,230 and 540 basis points respectively. Underscores market’s "glass half-empty" view on EMS. They argue that this creates a trading opportunity.

• In contrast, they continue to believe fundamentals are improving, but not as quickly as some investors would prefer.

• Expect in-line 2004 December quarter earnings driven by improving margins, while revenues may be toward low/mid-range of guidance. Progress on inventories and stable end-market commentary keys to improving investor sentiment 2005 prospects. But analysts believe the group’s valuation is attractive, with many companies trading at notable discounts

to their historical price-to-sales averages as well as to their intrinsic value calculations based on discounted cash flow analysis.

In the past, EMS companies have garnered a significant portion of their revenues from telecom industry. However, in recent quarters, many have placed a greater emphasis on automotive, consumer, industrial and medical products, in an attempt to diversify their revenues bases and bolster their long-term growth prospects. Analysts believe this trend will aid profitability, particularly for those companies focused on the auto and medical sectors, as these markets offer the potential for higher gross margin performance.

A trend toward outsourced manufacturing is gaining momentum, in their opinion. Analysts believe companies are realizing the benefits of this strategy, which generally allows them to cut costs while devoting more resources toward their core competencies, such as marketing and R&D expenditures. In addition, customers are seeking to reduce the number of EMS providers with which they work, in an attempt to lower expenses and streamline the overall manufacturing process. Analysts believe this is a major plus for the top-tier industry players, since smaller competitors will likely not be able match the breadth of services offered by larger peers.

One of the interesting parts in David Pescherine’s report: the price performance of 12 EMS companies that they currently overlook shows that not even a single company had a positive performance during a last year February 2004-2005. It seems that somewhere around Summer-Fall 2004 was good time to buy EMS stocks as they were at their lowest historical levels and performed relatively well after.

Company Overview

Jabil Circuit, Inc. is a worldwide independent provider of electronic manufacturing services (EMS). The Company designs and manufactures electronic circuit board assemblies and systems for original equipment manufacturers (OEMs) in the aerospace, automotive, computing, consumer, defense, instrumentation, medical, networking, peripherals, storage and telecommunications industries. Jabil serves its OEM customers with work cell business units that combine high volume, highly automated, continuous flow manufacturing with advanced electronic design and design for manufacturability technologies. The Company's customers are Cisco Systems, Inc., Hewlett-Packard Company, International Business Machines Corporation, Lucent Technologies, Inc., Marconi Communications plc, NEC Corporation, Nokia Corporation, Quantum Corporation, Royal Philips Electronics and Valeo S.A. (www.reuters.com)

Jabil is one of the best firms in the electronics-manufacturing services (EMS) industry and should be growing for the next few years.

Jabil has a distinct operating strategy (but it can be copied by other manufactures). Most EMS firms structure operations on the "batch" model, where equipment is grouped by function (like making circuit boards) and customers' items are intermingled. This method usually makes sense because a single customer's demand is

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too volatile to dedicate a piece of equipment to it. Jabil takes on contracts with higher purchase commitments for goods with lower demand volatility. It can operate on the continuous-flow model--seen in high-volume sectors like food processing and auto manufacturing--where products move continuously along a line to make a single product. Jabil tailors the dedicated Work cell approach to meet low volume, high mix production needs.

This provides a faster production cycle with lower unit costs, which helps explain Jabil's top industry ranking over the past five years in inventory turnovers, gross margins, and returns on invested capital.

This operating model also allows Jabil to assign workers to "work cells" dedicated to a single customer, which tends to lead to greater ownership--and customer service--on the part of employees. This blends sales and production roles and is a key differentiating factor in a market where buyers are risk-averse and engineers play a key role in choosing vendors. Customer satisfaction tends to bring in new business from current clients and build loyalty.

Benefits of low volume, high mix Work cell:

• Allows for tailored processes based on customer needs • Allows for versatility and scaling of resources • Creates responsive and motivated teams • Drives continuous improvement • Intensifies a focus on profit and loss metrics • Promotes autonomous and timely decision making • Promotes peer-to-peer exchanges with customers

(Jabil circuit 10-k annual report 2004 and 8-k 2005)

Strategy: Jabil's goal is to offer a complete range of electronics-manufacturing services, from initial design through final assembly. The firm delivers these services to a select group of customers, mostly in telecom, computing, and consumer goods. Operations are unique in the EMS sector in that equipment is dedicated to individual customers, providing better service and lower unit costs. Next pictures show a basic idea of how JBL is operating:

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(www.jabil.com presentation)

Management: Jabil's management team is considered to be one of the best in the industry: long tenure of employment, substantial equity ownership, an excellent record, and a great system for managing the firm. Most of top management has been with the firm at least 10 years (see chart below) and has line experience managing day-to-day operations. Tim Main became CEO in 2000 after joining the firm in 1987 as a manager in production control and later serving in a variety of manufacturing and business-development roles.

Timothy L. Main President & Chief Executive Officer

Former CEO William Morean is now chairman and owns 11.6% of the firm (24 mill shares); his mother owns another 11%. Other directors and officers own 4% of equity. Jabil pushes a large amount of management responsibility down to its line managers, most of whom are dedicated to a single client.

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It’s just rather impressive that so many people stayed with company for such long time. (Name, age, year when person have joined the company, position)

Alexander, Forbes 44 1993 Chief Financial Officer Brown, Scott D. 42 1997 Executive Vice President Charriau, Michel 62 2002 Chief Operating Officer - Europe Dastoor, Meheryar 38 2004 Controller Edwards, Wesley 52 1988 Senior Vice President, Strategic Operations Grafstein, Laurence S. 44 2002 Director Lavitt, Mel S. 67 1991 Director Lovato, John P. 44 1990 Senior Vice President Europe Main, Timothy L. 47 1991 President, Chief Executive Officer, Director McGee, Joseph A. 42 — Senior Vice President, Global Business Development

Mondello, Mark T. 40 1997 Chief Operating Officer Morean, William D. 49 1988 Chairman of the Board Muir, Jr., William D. 36 1992 Senior Vice President, Regional President for Asia

Murphy, Lawrence J. 62 1989 Director Newman, Frank A. 56 1998 Director Paver, Robert L. 48 1997 General Counsel, Secretary Peters, William E. 41 1990 Senior Vice President; Regional President of the Americas

Raymund, Steven A. 49 1996 Director Ryan, Courteny J. 35 1993 Senior Vice President, Global Supply Chain Sansone, Thomas A. 55 1983 Vice Chairman of the Board

(www.reuters.com)

Worldwide Operations (SOURCE 30 Mar 2005 Jabil Annual Analyst Meeting): Americas. The US plants have complex, high mix, low volume business. Target markets are showing decent growth and include medical, consumer, military/aerospace and automotive. Management believes that there are some auto, consumer and industrial opportunities for the Mexican and Brazilian sites. There is less manufacturing in the US, but the region remains a huge consumption market and which should be used for direct fulfillment and box build in Mexico and other low cost Latin American locations going into the US. America’s footprint:

• 9 manufacturing plants (5 in the US, 2 in Mexico and 2 in Brazil) • 2.5M square feet, 26% of total • 22,000 employees

Asia. Japanese and Chinese interest in outsourcing is slowly growing, and management believes in the next 12-24 months that Indian opportunities will increase. Attributes of the Asian footprint are as follows:

• 7 manufacturing sites (Huangpu, Shanghai and Shenzhen, China; Pimpri, India; Gotemba, Japan; Penang, Malaysia; and Singapore City, Singapore)

• 5 design locations (Huangpu, Shanghai and Shenzhen, China; Tokyo, Japan; and Penang, Malaysia) • 2 repair locations (Shanghai, China and Penang, Malaysia) • 3.5M square feet, 37% of total • Expansion plans in the works:

-Additional 100K sq ft of manufacturing space in Huangpu, China, to be open Spring ‘05

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-New 450K sq ft site in Wuxi, China outside of Suzhou, to come online Spring ‘05 -Startup 175K square foot facility in Ranjangaon, India, expected to be open Fall ‘05

Asian revenues should be 30% of ‘05 expected, being flat in ‘04. Asian operations have a well diversified base, with 20 new customers, of which 6 are Asian-based OEMs, added in ‘04. Asia’s top 5 customers represent 61% of the Asian’s revenue; and the largest end market is networking. 2005 objectives include increase more manufacturing opportunities, developing a local supply base and increase local spend, accelerating migration of higher complexity products into Asia. Europe. During last several months, the strong Euro had a bad impact on demand for domestic goods and services in Europe. Margin pressures caused business to migrate to low cost Eastern European sites. Eastern Europe is estimated to account for 51% of total European revenues in ‘05, up from 20% in ‘03. Majority of revenues are coming from the consumer business (Philips); 75% of Europe’s sales are derived from the top 5 customers. European sales account for 35% of the total sales. In ‘04, the region grew 40% year to year. New Ukrainian site offers ultra low cost production in the region, with costs on par with those of China. European footprint:

• 10 manufacturing sites (Scotland, France, Italy, Poland, Hungary and Ukraine) • 3 Incubation plants (2 in Belgium, 1 in Austria) • 2 design locations (Austria and Belgium) • 5 repair locations (Amsterdam, England, Ireland, Italy and Hungary) • 3.5M square feet, 37% of total • 10,000 employees

August 31 Net Revenue 2004 2003 2002 United States $ 970,146 $ 916,868 $ 1,396,915 Europe 2,316,034 1,616,616 665,263 Asia 1,775,377 1,164,130 639,357 Latin America 1,191,340 1,031,868 843,931 $ 6,252,897 $ 4,729,482 $ 3,545,466

Growth: Although revenue growth (33%) was inflated in 2003 by acquisitions, Jabil's annual pace over the past five years is impressive at 25%. Analysts expect annual growth of 20% beginning in 2005. Management’s and analysts’ an average sales growth varies from low 15-17% up to 22-25% for the next five years, which is still impressive even if you would like to be conservative. JBL is moving towards outsourcing model (Industry as well). This is a management quote from one of the analyst meetings: “20% of overall opportunity is currently outsourced and management believes the number can be as high as 75%”. JBL believes that over $20 billion of potential outsourcing opportunities that it sees today in the industry that could come out over the next two years. JBL’s 2005-2007 goals: (source: web cast Jabil Annual Analyst Meeting 03-30-05) • Revenue growth – sustainable CAGR of 20%-25% (Compound Annual Growth Rate The formula for calculating CAGR is (Current Value/Base Value)^(1/# of years) - 1.) (I have played with such numbers in my FCFF model. Low 20% adds ~ $2 to the price of $34; 25% adds around $3-5). • Operating margins of 5% • Inventory turns of 12x • ROIC rises from 14% to 25% Longer term goals remain unchanged: • Grow operating profits 30% annually • Produce ROIC of 18% to 25% CEO Tim Main, pointed out that Jabil remains one of the top performing companies in terms of revenue momentum, EPS growth and capital efficiency, when compared to the S&P 500 and Fortune 500 companies. Management confirms that the EMS industry remains a high growth industry, as additional business continues to

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be outsourced from OEMs. Company broke down the different sources of growth for 2005.

Vertical Conversions, 48%

Vendor Consolidations ,

22%

New Customers, 20%

Acquisitions, 6%

End Markets, 4%

Profitability: Jabil's operating model has delivered the best returns on capital--an average of 12% over the past five years--in the EMS industry. Although analysts expect gross margins to fall as acquisitions are integrated, the firm should still top the industry. Financial Health: Jabil had $640 million in cash and $310 million in debt in 2004 and even that it paid off 347.3 million debt in 2003. 2nd Quarter 2005 results showed that cash was up $160M to $780M. But after excluding $195M paid for the recently completed Varian acquisition, the cash balance should be $585M It is one of the best cash conditions between EMS firms

Revenue by Segment (Historical, Recent and Expected-Quarters) (Sources: 10-k, web casts, presentation)

Segment 2Q05

1Q05

4Q04

3Q04

2Q04

1Q04

4Q03

Revenue Changes

Revenue Expecations

2Q05/1Q05 3Q05/2Q05 Automotive 08% 07% 08% 08% 08% 08% 08% flat +10% Computer & Storage 14% 12% 12% 13% 14% 13% 15% up 10% down 5% Consumer 25% 31% 24% 22% 21% 31% 22% down 25% up 10% Instrument & Med 15% 14% 14% 12% 11% 10% 11% flat up 25% Networking 17% 16% 20% 21% 23% 18% 21% flat up 5% Peripherals 08% 07% 07% 07% 06% 06% 07% flat up 5% Telecom 09% 09% 10% 12% 12% 10% 12% flat up 10% Other 04% 04% 05% 05% 05% 04% 04% down 6% -

Annual Data 2004 2003 2002 Consumer 25% 20% 8% Networking 20% 23% 30% Computing and Storage 13% 15% 13% Instrum and Medical 12% 7% 5% Telecommunications 11% 14% 23%

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Automotive 8% 9% 7% Peripherals 6% 8% 10% Other 5% 4% 4% 100% 100% 100%

40 customers accounted for more than 93% of JBL’s net revenue. Automotive is expected to be up 10% in 3rd Quarter vs. 2nd Quarter in ‘05

Automotive production was flat in the February period, as expected. Revenues in the auto sector are estimated to be up 10% due to positive seasonality and the addition of one new customer in the sector. Customers in this segment include Valeo. Products: Alternate fuel modules, Alternators, Audio systems, Body controllers, Climate control modules, Cooling system modules, Driver information systems, Engine control modules, Hands-free cellular communicators, High density light modules, Ignition modules, In-car entertainment systems, Instrument panel cluster assemblies, Multimedia in-dash receivers, Power steering controls, Seat heater controls, Sensor and switch assemblies, Server based global navigation systems, Telematics, Transmission controls, Vehicle access and immobilizing systems, Wiper controllers

Computing and Storage is expected to be down 5% 3rd Quarter ‘05 The computing and storage segment was up 10% in 2nd quarter ‘05, better than management’s forecast of down 5%. The sector is then forecasted to be down 5% in 3rd Quarter ‘05. Management believes they will see increased programs coming to outsourcing from computing/storage OEMs in the coming quarters. Customers in this segment: HP, IBM, Intel, Network Appliance, QLogic, Quantum and Seagate. Products: Consumer and corporate desktop PCs, Low-end notebook computers, Mainframe computers, Network attached storage, Notebook computers, Servers - low end, mid range, high end, AlphaServer, Unix, Storage, Super tape drive mechanisms, Workstations

Consumer is expected to increase 10% in 3rd Quarter ‘05 The consumer segment declined 25% in the seasonally weakest quarter, a bit better than management expectations of down 30%. The sector is forecasted to increase 10% sequentially in 3rd quarter ‘05. The company’s consumer customers include Hughes, Nokia (mobile phones), Philips and Whirlpool. Products: Audio systems, CD players, Digital cameras, Display products, DVD systems, Electronic dictionaries, Gaming devices and peripherals, Keyboards, Microwave ovens, MP-3 devices, Projectors, Set-top boxes, Stereo systems, Televisions, VCRs, Video cameras, Washing machines and dryers

Instrumentation and Medical is expected to increase 25% in 3rd Quarter ‘05 The instrumentation and medical sector was flat, weaker than prior expectations of up 15%. The end market is projected to grow 25% in 3rd Quarter ‘05, with strong growth projected, on new customer programs and the Varian acquisition. This business is set to exceed $1.2B, or 16% of total company revenues and had higher margins than JBL prior acquisitions. Customers include Abbott, Agilent, Emerson, GE, Johnson Controls, LTX, Siemens, Schlumberger and Symbol. Products: Automated meter reading devices, Breast Biopsy Systems Repair, Blood Glucose Meter, Enteral pumps, Hematology equipment , Immunoassay diagnostic equipment, Industrial controls, Infrared Thermometer, Infusion Pumps, Patient Monitoring Systems, Relief Band for Motion Sickness and Pregnancy, Semi conductor test equipment with mixed signal devices, Urological Therapy Systems Repair, X-Ray

Networking is expected to grow 5% in 3rd Quarter ‘05

The networking segment was flat, as management forecasted. Networking production is estimated to be up 5% in 3rd Quarter ‘05. Management does not expect networking to be a big growth driver in 2005 and anticipates the segment to contribute 18% of revenues, which is down from 20% in FY04. Cisco brings the biggest chunk of revenues in this category, representing 10%-15% of Jabil’s revenues. Others: Alcatel, Avaya, 3Com, Intel (Xircom) and Nokia.

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Products: Bridges, Free space optics, Gateways, Hubs, Modems - cable, DSL, Passive optical network, Routers, Switches

Peripherals is expected be up 5% q/q in 3Q05 Peripherals revenues were in line with management’s expectations. Expected growth of 5% in the segment in 3rd Quarter ‘05. Customer: Quantum Products: Computer mice, Computer speakers, Copiers, Disk drives, External storage, Fax machines, Gamepads, Joysticks, Keyboards, Keypads, Lithium-ion battery packs, Modems, Monitors, Multimedia peripherals, Printers - deskjet, laserjet, Printer cartridges - high end plotter, inkjet, RF access, Scanners, Tape drives

Telecom is expected to increase 10% in 3Q05 The telecom was flat, as management’s forecast. Management believes there is a healthier landscape across a couple customers in the segment and assumes the group to be up 10% in 3rd Quarter ‘05. Customers: Alcatel, Lucent and Marconi. Products: Broadband switch, Central office switch, Intelligent optical switch, Long-haul transport, Metropolitan transport, Optical switch - high complex wavelength, PBX switch, IP-based PBX communications systems, Voice-over IP equipment

The major trend is diversification. JBL is trying to shift away from being concentrated too much in only in a few industries. Management seemed to be on its way to achieve this goal as shown in above.

News/Updates There was nothing much going on with JBL since December but an acquisition of electronics manufacturing business from Varian and Q2 earnings report. Summary of Q2nd Quarter Highlights 03/18/05

• Cash flow from operations was approximately $200million for the second quarter of fiscal 2005. • Sales cycle for the second quarter of fiscal 2005 was 23days. • Inventory turns for the second quarter of fiscal 2005 were 9. • Capital expenditures for the second quarter of fiscal 2005 were approximately $45million. • Depreciation for the second quarter of fiscal 2005 was approximately $46million. • Cash balances were $780million at the end of the second quarter of fiscal 2005(as I mentioned before should it be $585M now after acquisition). • Return on Invested Capital (ROIC) was 15percent for the second quarter of fiscal 2005.

Jabil management also increased its previous full fiscal 2005 guidance, indicating expectations of net revenue of approximately $7.5billion and core earnings per share in a range of $1.27 to $1.29 per diluted share, depending upon actual levels of production. (source 8-k)

Jabil Circuit after the closing bell on (03/17/2005) Thursday reported second-quarter earnings of $46 million, or 22 cents a share, up from $40 million, or 19 cents a share, a year ago. Revenue for the quarter was $1.72 billion, compared with $1.49 million in 2004. The company forecast third-quarter earnings of 27 cents to 29 cents a share, with revenue of $1.9 billion to $1.95 billion. For 2005, Jabil estimates earnings of $1.09 to $1.11 a share on revenue of $7.5 billion. Float was reduced from 166.2 to 171.4 (total shares 201.5) dates Dec 2005 to present. I’m expecting that float is going to be reduced more, which is most likely going to reduce a price as long as there are no positive news. Jabil Circuit, Inc. had acquired Electronics Manufacturing Business From Varian, Inc. For $195 Million 02/07/05 Jabil Circuit, Inc. announced that it has entered into a definitive agreement to acquire the electronics manufacturing business from Varian, Inc. for approximately $195 million in cash, subject to a working capital adjustment. The closing of the acquisition occurred in early March. Jabil has added a high-margin medical, aerospace, industrial, and communications manufacturing capability by buying Varian. It is also adding again to its diversity: 85% of Varian's $192 million in revenue last year was from other customers. This adds new 20 customers (including Varian) to Jabil's customers. Varian's 10% operating margins could improve JBL’s margins as well.

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Additional Information First Call Earnings Summary Last Updated: March 27, 2005

Period Ending Mean High Low #Brok Quarter End 2/5/2005 .27(actual) --- --- 26 Quarter End 5/5/2005 0.33 0.34 0.3 28 Quarter End 8/5/2005 0.36 0.39 0.33 27 Year End 8/5/2005 1.28 1.3 1.26 29 Year End 8/6/2005 1.56 1.62 1.5 29

December 2004 April 2005

(www.bloomberg.com)

The price targets of “BUY” analysts were around $30-35 and $35+ depending on if they are looking only one year forward or more and based on the future growth potential. Aside from the fundamental analysis, these recommendations should definitely influence general public and add to the value of the stock if supported by JBL’s earnings results.

1 year price vs. Russell 2000 and S&P500

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Source: msmoney.com

5 year price history vs. Russell 2000 and S&P500 This price volatility discussed in P/E valuation where I eliminated abnormal historical price movements in order to come up with a relative P/E.

Financial Statements Analysis

Majority of information here either comes from www.reuters.com or FORM 10−Q Filed: January 07, 2005 (period: November 30, 2004). All financial statements data I got from reuters.com and compared it to originals. I saw no differences what so ever. I might only suggest using reuters.com for next year GGF class. I decided to use a 5 year period as JBL is a growing company and older date might be irrelevant at this time. But I have included 10 year summary of Income Statement and Balance sheet. Also please feel to tear apart my report as it is meant to have a ratio discussion and ratio tables in front of you, same is attributable to Financial Statements. Company is using FIFO, which is an immediate and definite concern, more than this; it is rather hard to find more or less similar company as JBL which has such diversified product line. And it raises questions about Industry Averages and general peer comparison. My criterias for choosing peer group were similar products, close market capital and number of employees.

Ratios (see at the end of report):

A single value of many financial ratios is not really meaningful when you don’t compare them with industry average. I have 2 tables of ratios: 1) first table has ratios which I took from White and Sodhi book; I have used pretty much every single ratio that I could find and thought it would be useful; 2) I have other table with ratios that I got from www.reuters.com. I compared JBL to 4 companies (I tried to have companies that are very similar to Jabil in a sense of production, market cap and number of employees. You will be able to find there

• JBL ratios which are calculated by Reuters • Same JBL ratios which I calculated personally using Reuters formulas in order to be consistent • 4 companies ratios • Industry • Sector (not relevant to JBL, supplied for additional information) • S&P 500 (not relevant to JBL, supplied for additional information)

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Discussion of Internal Liquidity

The higher current ratio the more likely it is company will be able to pay its short term obligations. Industry average is 2.76 and JBL has 1.88 and 1.66 in 04’ and 03’. JBL had a Current Ratio as high as industry one in 02’ and 01’. There is a significant increase in Accounts Payables over the last 4 years which seem to drag the ratio down. Right away if you look at Payables Turnover Period it stays pretty much the same over time but Payables Payment Period does increase over time. It might show that company takes more time to pay its bills. JBL explains they increase as primarily related to their acquisition of certain operations in Poland. JBL has lots of cash.

Quick Ratio was declining over the years and now lower than an industry average, also lower than its close competitors. Company might have more troubles paying off its short-term bills. Cash ratio was two times lower for the past 2 years vs. ’02 and ’01.

Cash Ratio is declining over the last two years having the same amount of cash at the beginning of the period but increasing Current Liabilities.

Cash Conversion cycle was declining over last 3 years which is a good sign as usually high conversion cycles imply that the company has an excessive amount of capital investment in sales process.

I have an attached list of Liquidity ratios which is made by JBL in a quarterly manner, where they explain reasons for changes.

Operating Efficiency

Total Asset Turnover is slightly higher than Industry Average and higher than any other 4 companies on my list. Low Asset Turnover ratio might mean that company has too much capital tied up in its asset base. Too high is not good either as shows either too few assets or the asset base is outdated. JBL looks fine here. Fixed Asset Ratio, if too high, might suggest that there are obsolete capital expenditures and have to make capital expenditures in the near future to increase capacity to support growing revenues. I don’t have an Industry Average here. So I can just say there was an increase over the last three years from 3 to 4 and now 5. But it was 4,5 4 years ago. It is something of concern.

Equity Turnover is a measure of the employments of owners capital. There is an increase over the last three years which can be explained by fast growth of sales.

Operating Profitability

Analysts should be concerned if margin and return ratios are too low. Any margin ratio which calculation is based on parts before Depreciation and Amortization look in the same range. And ratios which do include parts below Depreciation and Amortization have some deviation. Net Profit Margin and Return on Total Capital look much lower in ’03 and ’02. It seems that JBL had relatively bigger Depreciation and Amortization accounts in those years. All these ratios are below an industry averages but right in the middle of 4 companies with which I compare JBL. But its interesting competitors either perform either much worse or much better (Different production/operations models). ROE was very low in ’03 and ’04 as company had very little Net Income.

Risk Analysis

It measures the uncertainty of the firm’s income flows. Industry Averages that companies have much higher debt burdens than JBL and competitors’ comparison shows that 2 companies have no debt at all and 2 other are very close to Industry Average. So as a result JBL has a higher Interest Coverage Ratio than Industry Average. Interest coverage ratio is improving nicely.

The Income statement

Big positive jumps in sales shows it is a growing company, which might give difficulties during a valuation process. Special Income/charges are pretty consistent over several years but company wants to

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make look like that are not actually consistent and using “Normalized Income” to show better income. I’m using Net Income in my ratio calculations as it shows a better picture. (Check Total Net Income and Normalized Income –Income Statement). (Source:10-k) These restructuring and impairment charges included cash costs totaling $47.7million consisting of employee severance and benefits costs of approximately $29.9million, costs related to lease commitments of approximately $14.9million and other restructuring costs of $2.9million. Non-cash costs of approximately $37.6million represent fixed asset impairment charges related to our restructuring activities. As of August31, 2003, liabilities of $12.9million related to these restructuring activities were expected to be paid out within the next twelve months and liabilities of $8.8million were expected to be paid out through August31, 2006.

The Balance sheet Accounts Payable is a concern as it there is a significant increase over last 2 years.(2004-$937 million;

2003-$712 and 2003-$431) Company relates it to acquisitions that took place during recent years. Quarterly updates: Inventories decreased $74M to $677M, related to product sales from the holiday

season. Inventory turnover increased slightly to 9.3 vs. 8.9 previous quarter. As the company experiences healthy jump in revenues, management thinks turnovers should rise to 10. Management looks to further improve the cash conversion cycle, mainly through better inventory turns, which will help free a significant portion of the working capital.

Cash flow from operations were a strong $200M in the quarter, the 17th consecutive quarter of positive CFO, helped by a decrease in inventory. For FY05, management reiterated continued generation of strong CFO. 2nd Quarter ‘05 capital expenditures totaled $45M with depreciation $46M. FCF for the quarter was $155M. Capital Expenditures for fiscal ’05 were increased to $200M-$225M from $180M-$200M, due to expansion plans for China, Eastern Europe and India. Cash was up $160M to $780M. After eliminating $195M paid for the recently completed Varian acquisition, the cash balance should only be $585M.

The Cash Flow Statement

Net cash provided by operating activities for fiscal year 2004 was $451.2million. This consisted primarily of $166.9million of net income, $221.7million of depreciation and amortization, $198.0million from increases in accounts payable and accrued expenses and $30.9million from increases in income taxes payable, offset by increases in inventory of $133.9million and increases in deferred income taxes of $43.1million.

The very first impression is that cash flow patterns have no consistency and same can be said about increases/decreases in accounts receivables, inventories and payables. Depreciation is pretty steady.

The Operating section tells you how the company's basic business performed. JBL’s Cash From Operating Activities are positive and growing with some ups and downs. Depreciation is steadily increasing as company continues its growth.

The Investing Cash Flow includes capital expenditures, purchase of investment securities, and acquisitions. This is how the company has invested its money for the future. JBL seems to invest on average 400-450 millions per year in new capital. Only 217 million were used on Property, Plant and Equipment. Patterns: JBL has a bigger expense every other year rather than every year. Plus when company is making acquisitions not all expense should be used as capital expenditures. It gives more complexity in FCFF model.

The Financing Section shows if the company borrowed money, or if the company issued or repurchased shares. Company had issued 462 million debt in 2003 and 337 million in 2001. JBL paid off 167 millions of its debt in 2003 and a bigger chunk 347 mill in 2004 with remaining 305 millions in its LT debt.

JBL being a profitable company with low financial leverage and taking on some new debt might also be a positive sign. JBL writes about its debt (source 10k): We could incur a significant amount of debt in the future.

We have the ability to borrow approximately $400.0 million under our Amended Revolver. In addition, we could incur additional indebtedness in the future in the form of bank loans, notes or convertible securities. An increase in the level of our indebtedness, among other things, could: • make it difficult for us to obtain any necessary financing in the future for other acquisitions, working capital, capital expenditures, debt service requirements or other purposes;

Golden Griffin Fund

15 April 10, 2005

• limit our flexibility in planning for, or reacting to changes in, our business; and • make us more vulnerable in the event of a downturn in our business.

There can be no assurance that we will be able to meet future debt service obligations. Our credit rating is subject to change.

Our credit is rated by credit rating agencies. For example, our 5.875% Senior Notes were rated Baa3 by Moody’s Investor Service, which is considered “investment grade” debt and BB+ by Standard and Poor’s Rating Service, which is considered one level below “investment grade” debt. If in the future our credit rating is downgraded so that neither credit rating agency rates our 5.875% Senior Notes as “investment grade” debt, such a downgrade may increase our cost of capital should we borrow under our revolving credit facilities, may make it more expensive for us to raise additional capital in the future on terms that are acceptable to us or at all, may negatively impact the price of our common stock and may have other negative implications on our business, many of which are beyond our control.

JBL had issued $542 mill in shares in 2000, which can be explained by its growth. Since 2001 company had issued a stock every year in a range of 16-28 million. A positive value, representing sale of stock, is generally a bad sign unless it is explained by rapid growth, which often requires additional equity capital, which is applicable to JBL.

It's a not very good sign that the sum of JBL’s Net Income and Depreciation is less than the sum of Capital Expenditures ( exception last 2004 fiscal year, 166+221-205=+182 ). Before that JBL had a deficit there every year with a range of negative 100-300 mill. If a JBL had positive Free Cash Flow, then it could finance its growth from internal sources. If not then it may have to sell equity, borrow money, and sell assets. But JBL is fast growing company so it’s typical that such company needs to borrow funds. Free Cash Flow equals Operating Cash Flow (net income plus amortization and depreciation) minus capital expenditures. Negative free cash flow is not necessarily an indication that company doesn’t perform well, company can put a lot of their cash into investments, which decreases their free cash flow. But if a JBL is spending so much cash, it should have a good reason for doing so and it should be earning a high rate of return on its investments.

Jabil has started the build-out of its 450K square foot site in Wuxi, China outside of Suzhou, in addition to its three current facilities in the area, to support Central and Northern China. The company has also broken ground on a 175K square foot facility in Ranjangaon, India. Both are expected to open in 1st Quarter 2006. In addition to expansion into the Ukraine in Eastern Europe, management also plans to add capacity for Jabil’s Global Services group (repair business). That’s why management has raised its 2005 investment expectation to $200M-$225M from $180M-$200M.

Foreign Exchange Effects shows the impact of fluctuations in foreign currency exchange rates on. It started to show up only during the last 2 fiscal years and looks pretty insignificant.

Management believes that they will be able to generate sustainable free cash flow over the next several years due to maintaining a good sales cycle, with lower incremental capital investment. Investment in fixed assets and working capital as a percentage of sales is forecasted to remain at a low 2.5%. (source: web cast)

Payments due by period (in thousands)

Contractual Obligations Total <1

year 1−3

Years 4-5

years after 5 years

Long−term debt and capital lease obligations

$296,959 1,966 $ 3,268 $ 728 $290,997

Operating leases 142,421

33,370 56,396 33,687 18,968

Total contractual cash obligations

$439,380

35,336 $

59,664 $

34,415 $309,965

Net Present Value of Operating leases is roughly 125 million which should be added to LT Debt and PPE. It is going to impact all related rations immediately except Total Cash Flow which will stay the same. Increase: Assets, Liability, Cash Flow from Operations and Debt/Equity ratio; Decrease: Net Income, Cash Flow from Financing, CR, Working Capital (Current Assets-Current Liabilities), Asset Turnover, Return on Assets, Return on Equity. Discount rate (5.875%) Increases Long Term Debt about 30% but does not have huge effect on ratios.

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16 April 10, 2005

Insider Trading Name: MOREAN WILLIAM D Title: Director and Beneficial Owner of more than 10% of a Class of Security Remaining Shares: 24 Mil This person had 27 mill shares on 04/02/04 and sold 3 mill shares so far. Average trading volume is 1.5-1.6 mill/day, so this person’s shares can add more to price volatility. William Morean sells on average 50,000-100,000 shares 4-8 times per month. Name: PETERSEN AUDREY M Title: Unknown Remaining Shares: 20 Mil This person had 22 million shares on 04/05/04 and sold 2 mill shares so far. Market Expectations (Puts and Calls)

I was keeping my eye on puts and calls and market seemed to be very slightly bullish for extended period of time. 03-17-05 Price: 27.58 Change: +1.56 Volume: 8,434,700 (Regular volume is around 1.5-1.6 mill. This one is high due to 2nd Quarter 2005 earnings report). Put Call Ratio is 0.42 Slightly bullish as it was 2 months ago, but at that time price was around $23-24. 04-10-2005 Price: 28.80. Put Call Ratio 0.17 JBL Expiration Months: September 2005

Calls Puts

Symbol Last Chg Bid Ask Volume Open Int Strike Symbol Last Chg Bid Ask Volume Open

Int

Sep 05 Calls (158 days to expiration) JBL @ 28.80 Sep 05 Puts JBLIV 0 0 16.400 16.600 0 0 trade 12.50 JBLUV 0 0 0 0.050 0 0 tradeJBLIC 8.400 0 13.900 14.200 0 20 trade 15.00 JBLUC 0.350 0 0 0.050 0 2 tradeJBLIW 6.400 0 11.500 11.700 0 106 trade 17.50 JBLUW 0.150 0 0 0.100 0 105 tradeJBLID 8.800 0 9.200 9.400 0 52 trade 20.00 JBLUD 0.450 0 0.100 0.200 0 156 tradeJBLIX 6.300 0 6.900 7.100 0 541 trade 22.50 JBLUX 0.800 0 0.350 0.400 0 226 tradeJBLIE 4.900 0 4.800 5.000 0 1,503 trade 25.00 JBLUE 0.900 0 0.750 0.800 0 532 tradeJBLIY 2.850 0 3.100 3.200 0 3,025 trade 27.50 JBLUY 1.550 +0.15 1.450 1.550 15 103 tradeJBLIF 2.000 0 1.800 1.850 0 2,056 trade 30.00 JBLUF 3.100 0 2.600 2.700 0 202 tradeJBLIG 0.400 -0.05 0.400 0.450 20 213 trade 35.00 JBLUG 7.100 0 6.300 6.400 0 142 tradeJBLIH 0.050 0 0.050 0.100 0 5 trade 40.00 JBLUH 0 0 11.100 11.300 0 0 trade

( www.optionsxpress.com ) Summary and Valuation

Positive: • Foreign source revenue represented 84.6% of our net revenue for ‘04 and 80.7% of net revenue for ‘03.

The increase in the foreign source revenue was primarily attributable to incremental revenue resulting from JBL’ acquisitions in Austria, Brazil, Belgium, China, Hungary, India, Japan, Malaysia, Mexico, Poland and Singapore during fiscal year 2003. JBL expects foreign source revenue to continue to increase as a percentage of total net revenue. JBL’s operations won’t be affected as much by the weak US Dollar

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17 April 10, 2005

(which seems to be getting weaker and weaker) and the USA economy which is expected to be flat for next few years.

• Jabil has a big room to increase its debt. • Jabil's revenue is becoming more diversified. • Jabil's management has been slow to grow revenues through expensive acquisitions, unlike most of its

peers. • Jabil is one of the biggest contract manufacturers and has a great outsourcing potential. ( I actually started

to notice JBL’s products when I am shopping online and buying computer parts) • It has been one of the industry's faster-growing companies. • Jabil has a unique operating model, continuous-flow work floors and customer-specific work crews,

which distinguishes it among competitors. • Jabil didn't have a single quarter of losses even during 9’11 period.

Negative: • Jabil's customer base is fairly concentrated, with the top three customers (Cisco, Philips Electronics, and

Hewlett-Packard) accounting for 42% of 2003 sales and less than 40% in 2004. If big customers cut back on spending it can have a great negative impact on revenues.

2004 2003 2002Royal Philips Electronics 18% 15% *

Cisco Systems, Inc. 12% 16% 24% Hewlett-Packard * 11% *

Marconi Communications * * 13% *less than 10% revenue

• Contract manufacturing is very competitive. It is possible that competitors could copy aspects of Jabil's

operations or find other sources of cost advantage. • Concerns include volatile demand cycles, low margins that leave little room for production errors,

increased competition, the integration risks that accompany acquisitions and quality outsourcing. • It is hard to forecast revenue when annual growth rates are expected to be around 15% and more (possible

20-25%). • One sign that Jabil stock is expensive is that some large shareholders are selling substantial stakes.

Former CEO Bill Morean, who owned 17% of the company's shares in 2002, has sold roughly 13% of his shares since April 2003. There was a significant drop in stock price from $29 to$23 in June 2004 again due to similar reasons.

Since I started to monitor and analyze JBL’s stock the price movement was volatile as it was in previous years, as example during December 2004-Junary 2005 when JBL dint announce any good news then its price dropped from $27 to $22 with no particular reason for this company (volatile stock). I was rather conservative with JBL valuation when developing FCFF (lower expected sales; majority expense parts of this model at their highest or very close to it. Company definitely still in growth stage (fiscal ’04 30% sales increase; fiscal ’05 expected 20% sales increase), which makes valuation harder. Currently, stock is rather fairly valued. If company will be able to achieve its fiscal year goals then shares should be traded around $32-35 versus current price of $29, based on multiples and FCFF valuations. JBL is a definitely a very high risk company, especially for our Golden Griffin Fund. In my opinion, the current upside potential of JBL’ stock do not overweight the high risk which comes with it. I would be inclined to say buy if shares still were traded around twenty dollars like in September 2004 or valuations showed much higher numbers. HOLD.

Annual Income Statement ( Millions) Aug-04 Aug-03 Aug-02 Aug-01 Aug-00Sales 6,252.90 100.00% 4,729.50 100.00% 3,545.50 100.00% 4,330.70 100.00% 3,558.30 100.00%Cost of Sales 5,536.60 88.54% 4,106.40 86.83% 3,037.70 85.68% 3,787.00 87.45% 3,103.40 87.22%Gross Operating Profit 716.3 11.46% 623.1 13.17% 507.8 14.32% 543.7 12.55% 454.9 12.78%Selling, General & Admin. Expense 277.3 4.43% 253.6 5.36% 211.7 5.97% 190.5 4.40% 137.5 3.86%Other Taxes 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%EBITDA 439 7.02% 369.5 7.81% 296.1 8.35% 353.2 8.16% 317.4 8.92%Depreciation & Amortization 221.7 3.55% 224.4 4.74% 188.3 5.31% 155.4 3.59% 99.3 2.79%EBIT 217.3 3.48% 145.1 3.07% 107.8 3.04% 197.8 4.57% 218.1 6.13%Other Income, Net 0.8 0.01% 9.5 0.20% 9.8 0.28% 8.2 0.19% 7.4 0.21%Total Income Avail for Interest Exp. 216.8 3.47% 54 1.14% 57.9 1.63% 172.1 3.97% 220.3 6.19%Interest Expense 19.4 0.31% 17 0.36% 13.1 0.37% 5.9 0.14% 7.6 0.21%Minority Interest 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%Pre-tax Income 197.4 3.16% 37 0.78% 44.8 1.26% 166.2 3.84% 212.7 5.98%Income Taxes 30.6 15.50% -6.1 -16.49% 10 22.32% 47.6 28.64% 67 31.50%

Special Income/Charges -1.3 -0.02% -100.6 -2.13% -59.7 -1.68% -33.9 -0.78% -5.2 -0.15%Net Income from Cont. Operations 166.9 2.67% 43 0.91% 34.7 0.98% 118.5 2.74% 145.6 4.09%Net Income from Total Operations 166.9 2.67% 43 0.91% 34.7 0.98% 118.5 2.74% 145.6 4.09%

Normalized Income 168.2 2.69% 143.6 3.04% 94.4 2.66% 152.4 3.52% 150.8 4.24%Extraordinary Income 0 0 0 0 0Income from Cum. Eff. of Acct. Chg. 0 0 0 0 0Income from Tax Loss Carryforward 0 0 0 0 0

Total Net Income 166.9 2.67% 43 ` 34.7 0.98% 118.5 2.74% 145.6 4.09%

Basic EPS from Cont. Operations 0.83 0.22 0.18 0.62 0.81Basic EPS from Total Operations 0.83 0.22 0.18 0.62 0.81Diluted EPS from Cont. Operations 0.81 0.21 0.17 0.59 0.78Diluted EPS from Total Operations 0.81 0.21 0.17 0.59 0.78Common shares used in the calculations of earnings per shareBasic 200,430 198,495 197,396 191,862 179,032Diluted 205,849 202,103 200,782 202,223 187,448Fiscal Year ends 08/05

Annual Balance Sheet ( Millions) Aug-04 Aug-03 Aug-02 Aug-01 Aug-00

Current AssetsCash and Equivalents 621.3 18.66% 699.7 21.6% 640.7 25.1% 430.7 18.3% 337.6 16.7%Receivables 777.4 23.3% 759.7 23.4% 446.9 17.5% 528.2 22.4% 523.1 25.9%Inventories 656.7 19.7% 510.2 15.7% 395.9 15.5% 431.5 18.3% 477.5 23.7%Other Current Assets 127.3 3.8% 124.3 3.8% 104.8 4.1% 56.4 2.4% 49 2.4%Total Current Assets 2,182.70 65.6% 2,093.90 64.5% 1,588.30 62.3% 1,446.80 61.4% 1,387.30 68.7%Non-Current AssetsProperty, Plant & Equipment, Gross 1,347.50 1,170.80 1,206.10 1,093.60 844.2Accum. Depreciation & Depletion 571.1 424.6 465.2 348.9 256.7Property, Plant & Equipment, Net 776.4 23.3% 746.2 23.0% 740.9 29.1% 744.7 31.6% 587.5 29.1%Intangibles 352.4 10.6% 381.3 11.8% 194.4 7.6% 148.9 6.3% 0 0.0%Other Non-Current Assets 17.9 0.5% 23.3 0.7% 24.2 0.9% 17.2 0.7% 43.4 2.2%Total Non-Current Assets 1,146.70 34.4% 1,150.80 35.5% 959.5 37.7% 910.8 38.6% 630.9 31.3%Total Assets 3,329.40 100.0% 3,244.70 100.0% 2,547.90 100.0% 2,357.60 100.0% 2,018.20 100.0%Current LiabilitiesAccounts Payable 937.6 28.2% 712.7 22.0% 431.6 16.9% 392.2 16.6% 594.1 29.4%Short Term Debt 4.4 0.1% 347.2 10.7% 8.7 0.3% 8.3 0.4% 8.3 0.4%Acrued Expenses 217 6.5% 203.3 6.3% 153.1 6.0% 104.3 4.4% 89.5 4.4%Total Current Liabilities 1,159.10 34.8% 1,263.20 38.9% 593.4 23.3% 504.8 21.4% 692 34.3%Non-Current liabilitesLong Term Debt 305.2 9.2% 297 9.2% 354.7 13.9% 361.7 15.3% 25 1.2%Deferred Income Taxes 0 0.0% 19.2 0.6% 41.3 1.6% 37 1.6% 28.1 1.4%Other Non-Current Liabilities 45.7 1.4% 76.8 2.4% 51.6 2.0% 40.1 1.7% 2.9 0.1%Total Non-Current Liabilities 350.9 10.5% 393 12.1% 447.6 17.6% 438.8 18.6% 56 2.8%Total Liabilities 1,509.90 45.4% 1,656.20 51.0% 1,041.00 40.9% 943.6 40.0% 747.9 37.1%Shareholder's EquityCommon stock 201.0 6.0% 199.0 6.1% 198.0 7.8% 196.9 8.4% 190.3 9.4%Additional paid-in capiatal 976.2 29.3% 944.1 29.1% 926.3 36.4% 868.9 36.8% 843.8 41.8%Retained Earnings 790.0 23.7% 623.1 19.2% 580.0 22.8% 545.3 23.1% 426.8 2111.0%Accu-d other comprehensive income 53.1 1.6% 21.1 0.6% 0.4 0.0% (0.3) 0.0% (0.6) 0.0%Common Stock Equity 1,819.30 54.6% 1,588.50 49.0% 1,507.00 59.1% 1,414.10 60.0% 1,270.20 62.9%Total Equity 1,819.30 54.6% 1,588.50 49.0% 1,507.00 59.1% 1,414.10 60.0% 1,270.20 62.9%Total Liabilities & Stock Equity 3,329.20 100.0% 3,244.70 100.0% 2,548.00 100.0% 2,357.00 100.0% 2,018.10 100.0%Total Common Shares Out-g Million 201.3 199.3 198.0 196.9 190.3Fiscal Year ends 08/05

Annual Cash Flow (in Millions) Aug-04 Aug-03 Aug-02 Aug-01 Aug-00Cash Flow from Operating ActivitiesNet Income (Loss) 166.9 43 34.7 118.5 145.6Depreciation and Amortization 221.7 224.4 188.3 155.4 99.3Deferred Income Taxes -43.1 -29 0.9 9.1 13.8Operating (Gains) Losses 11.2 59.5 -1 11.6 1.3Extraordinary (Gains) Losses 0 0 0 0 0Change in Working Capital(Increase) Decr. in Receivables 1.5 -286.6 80.4 -6.5 -257.8(Increase) Decr. in Inventories -133.9 68.6 154.5 97.7 -255.6(Increase) Decr. in Other Curr. Assets -1.8 -30 1.8 -9.7 -15.3(Decrease) Incr. in Payables 198 194.7 67.8 -171.4 307.3(Decrease) Incr. in Other Curr. Liabs. 30.9 18.8 -44.8 -21.9 -3.3Other Non-Cash Items 0 0 71.4 0 0Net Cash from Cont. Operations 451.2 263.5 554.1 182.8 35.4Net Cash from Discont. Operations 0 0 0 0 0Net Cash from Operating Activities 451.2 263.5 554.1 182.8 35.4

Cash Flow from Investing ActivitiesCash Flow Provided by:Sale of Property, Plant, Equipment 13.6 14.9 13.7 6.9 6.3Sale of Short Term Investments 0 0 0 0 27.2Cash Used by:Purchase of Property, Plant, Equipmt. -217.7 -415.1 -85.3 -309.2 -333.1Net Cash paid for business acquisitions -1.5 -117.2 -278.6 -139.3 -36.7Net Cash from Investing Activities -205.6 -517.5 -350.4 -441.5 -336.3

Cash Flow from Financing ActivitiesCash Flow Provided by:Issuance of Debt 0.1 462.4 0 337.5 0Issuance of Capital Stock 28.9 17.1 14.7 16.6 542.8Cash Used for:Repayment of Debt -347.4 -167.1 -8.3 -8.3 -32.5Repurchase of Capital Stock 0 0 0 0 0Payment of Cash Dividends 0 0 0 0 0Other Financing Charges, Net 0 0 0 5.9 2.3Net Cash from Financing Activities -318.4 312.4 6.3 351.8 512.6

Effect of Exchange Rate Changes -5.6 0.6 0.4 0.1 0Net Change in Cash & Cash Equivalents -78.4 59 210.1 93.1 211.7Cash Interest Paid 19.2 14.4 13.0 4.2 8.0Cash Taxes Paid 33.8 6.9 13.6 52.2 38.2Cash at Beginning of Period 699.7 640.7 430.7 337.6 125.9Free Cash Flow 232 -268.9 190 -265.6 -334.5

Fiscal Year ends 08/05

tIncome Statement - 10 Year Summary (in Millions)

Sales EBITDepreciati

onTotal Ne

Income

EPSTax Rate

(%)4-Aug 6252.9 216.8 221.7 166.9 0.81 15.53-Aug 4729.5 54 224.4 43 0.21 NA2-Aug 3545.5 57.9 188.3 34.7 0.17 22.31-Aug 4330.7 172.1 155.4 118.5 0.59 28.6Aug-00 3558.3 220.3 99.3 145.6 0.78 31.5Aug-99 2000.3 141.3 56 91.5 0.56 34.5Aug-98 1277.4 85.2 35.7 56.9 0.37 30.5Aug-97 978.1 81.9 24.9 52.5 0.35 34.5Aug-96 863.3 45.4 18.2 24.3 0.17 36Aug-95 559.5 16.5 12 7.3 0.06 27.5

Balance Sheet - 10 Year Summary (in Millions)

Current Assets

CurrentLiabilities

Long TermDebt

Shares

Outstanding

4-Aug 2182.7 1159.1 305.2 201.3 Mil3-Aug 2093.9 1263.2 297 199.3 Mil2-Aug 1588.3 593.4 354.7 198.0 Mil1-Aug 1446.8 504.8 361.7 196.9 MilAug-00 1387.3 692 25 190.3 MilAug-99 587.9 330.8 33.3 164.5 MilAug-98 290.4 186.7 81.7 149.1 MilAug-97 266 168.7 50 148.0 MilAug-96 227.3 111.6 58.4 142.4 MilAug-95 218.2 184.9 27.9 118.2 Mil

Valuation RatiosRATIO COMPARISON

Valuation Ratios Company Calculated SANM APCC MOLXE SLR Industry Sector S&P 500P/E Ratio (TTM) 26.32 NM 22.1 26.51 NM 25.86 31.43 22.45P/E High - Last 5 Yrs. 228.86 NA 40.79 123.37 NA 41.62 62.64 43.35P/E Low - Last 5 Yrs. 23.01 NA 11.03 26.36 NA 13.26 18.17 15.3Beta 2.85 2.4 3.45 1.97 1.68 3.35 1.79 1.84 1Price to Sales (TTM) 0.73 0.72 0.31 2.56 2.21 0.4 1.98 5.23 3.2Price to Book (MRQ) 2.38 2.31 1.12 2.68 2.49 1.96 3.16 5.34 4.11Price to Tangible Book (MRQ) 2.92 2.83 3.41 2.77 2.71 2.07 5.31 6.98 7.5Price to Cash Flow (TTM) 21.32 19.39 21.31 17.65 12.31 72.29 19.77 23.57 15.75Price to Free Cash Flow (TTM) 27.3 25.86 35.2 109.89 57.74 29.42 27.9 26.07 26.22

% Owned Institutions 71.64 79.22 68.17 30.38 85.55 45.37 45.39 65.52

Growth RatesGrowth Rates(%) Company Industry Sector S&P 500Sales (MRQ) vs Qtr. 1 Yr. Ago 21.5 21.00% 20.87 12.18 28.88 -0.23 17.72 25.34 15.98Sales (TTM) vs TTM 1 Yr. Ago 27.21 32.21% 17.79 16.35 27.78 18.01 18.37 26.05 15.12Sales - 5 Yr. Growth Rate 22.81 15.15% 36.03 5.31 5.59 3.78 7.6 13.57 9.63EPS (MRQ) vs Qtr. 1 Yr. Ago 33.99 30.52% NM 21.66 74.85 NM 44.08 29.42 16.62EPS (TTM) vs TTM 1 Yr. Ago 134.32 377.27% NA 25 130.31 NA 58.49 40.34 26.18EPS - 5 Yr. Growth Rate 10.74 0.49% NM 2.88 0.13 NM 4.9 11.6 12.95Capital Spending - 5 Yr. Growth Rate 5.24 11.92% -9 -17.24 -3.67 -23.58 -7.7 3.92 5.12

Financial StrengthFinancial Strength Company Industry Sector S&P 500Quick Ratio (MRQ) 1.14 1.139 1 3.04 2.16 1.55 1.82 2.71 1.3Current Ratio (MRQ) 1.74 1.742 1.53 4.79 2.96 2.35 2.76 3.18 1.8LT Debt to Equity (MRQ) 0.15 0.151 0.39 0 0.01 0.48 0.49 0.18 0.63Total Debt to Equity (MRQ) 0.15 0.152 0.57 0 0.01 0.49 0.54 0.23 0.8Interest Coverage (TTM) 11.67 8.940 0.8 NM NM 0.31 6.92 11.24 12.73

Profitability RatiosProfitability Ratios (%) Company Industry Sector S&P 500

Gross Margin (TTM) 8.51 11.46% 5.08 40.3 34.98 5.24 29.7 53.33 46.7Gross Margin - 5 Yr. Avg. 9.29 12.86% 8.63 39.77 34.44 6.08 28.28 52.08 46.14

EBITD Margin (TTM) 4.22 7.02% 0.94 15.86 19.89 2.17 10.96 20.8 21.58EBITD - 5 Yr. Avg. 3.53 8.05% -3.99 17.76 19.91 -8.77 7.77 16.72 20.38

Operating Margin (TTM) 3.55 3.48% 0.87 12.91 10.26 0.31 7.63 17.01 21.61Operating Margin - 5 Yr. Avg. 3.1 4.06% -4.27 14.51 9.17 -10.43 2.98 11.33 18.01

Pre-Tax Margin (TTM) 3.26 3.16% -0.13 13.47 11.4 -1.3 7.22 18.71 18.03Pre-Tax Margin - 5 Yr. Avg. 3 3.00% -4.77 15.54 9.8 -11.15 2.63 14.06 17.03

Net Profit Margin (TTM) 2.74 2.67% -0.12 11.52 8.36 -1.31 5.01 12.99 13.98Net Profit Margin - 5 Yr. Avg. 2.28 2.28% -5.25 11.14 7.13 -11.69 0.66 8.29 11.28

Effective Tax Rate (TTM) 15.88 14.08% NM 14.43 26.64 NM 26.75 28.47 29.83Effective Tax Rate - 5 Yr. Avg. 24.53 19.54% 45.56 28.2 25.61 32.29 31.64 32.39 34.12

Management EffectivenessManagement Effectiveness (%) Company Industry Sector S&P 500Return On Assets (TTM) 5.16 5.01% -0.2 10.3 7.96 -2.44 5.2 9.3 7.38Return On Assets - 5 Yr. Avg. 4.59 3.99% -8.42 12.17 6.85 -11.69 1.16 6.08 6.61

Return On Investment (TTM) 8.33 7.86% -0.28 12.34 9.48 -4.24 6.79 12.83 11.2Return On Investment - 5 Yr. Avg. 6.89 5.98% -11.02 14.65 8.35 -17.29 3.06 9.36 10.69

Return On Equity (TTM) 10.11 9.17% -0.45 12.46 9.84 -7.67 11.22 16.32 20.07Return On Equity - 5 Yr. Avg. 7.91 5.10% -17.78 14.83 8.66 -32.06 4.06 13.13 19.02

EfficiencyEfficiency Company Industry Sector S&P 500Revenue/Employee (TTM) 193,449 183,909 250,500 254,471 112,612 204,072 259,399 468,227 701,659Net Income/Employee (TTM) 5,304 4,909 NM 29,320 9,418 NM 15,130 73,390 97,245Receivable Turnover (TTM) 7.87 8.14 7.45 5.93 4.78 7.54 6.63 7.85 10.19Inventory Turnover (TTM) 9.04 9.49 10.73 2.24 6.44 7.43 5.66 15.26 12.28Asset Turnover (TTM) 1.88 1.90 1.61 0.89 0.95 1.86 1.23 0.85 0.95

2004 2003 2002 2001 2000Internal LiquidityCurrent Ratio 1.88 1.66 2.68 2.87 2.00Quick Ratio 1.21 1.16 1.83 1.90 1.24Cash Ratio 0.54 0.55 1.08 0.85 0.49Rec. Turnover 8.14 7.84 7.27 8.24 6.80Avr Rec Col Period 44.86 46.56 50.19 44.30 53.66Inv. Turnover 9.49 9.06 7.34 8.33 6.50Avg Inv Proc Period 38.46 40.27 49.71 43.81 56.16Pay Turn Period 6.71 7.18 7.37 7.68 5.22Payables Pay Period 54.40 50.86 49.49 47.53 69.87

Cash Conver Cycle 28.93 35.97 50.41 40.58 39.94

2004 2003 2002 2001 2000Operating PerfomanceOperating EfficiencyTotal Asset Turnover 1.90 1.63 1.45 1.98 1.76Fixed Asset TurnOv 4.97 3.98 3.08 4.47 4.21Equity Turnover 3.77 3.08 2.45 3.31 2.92

Operating ProfitabilityGross Profit Margin 11.46% 13.17% 14.32% 12.55% 12.78%Operating Prof Margin 3.48% 3.07% 3.04% 4.57% 6.13%Net Profit Margin 2.67% 0.91% 0.98% 2.74% 4.09%Return on Total Capital 5.60% 1.85% 1.88% 5.28% 7.59%

ROE 9.17% 2.71% 2.30% 8.38% 11.46%NI/SALES 2.67% 3.04% 2.66% 3.52% 4.24%SALES/ASSETS 1.88 1.46 1.39 1.84 1.76ASSETS/EQUITY 1.83 2.04 1.69 1.67 1.59

2004 2003 2002 2001 2000Risk AnalysisDebt to Equity 16.78% 18.70% 23.54% 25.58% 1.97%LT Debt/Total LT Capital 14.37% 15.75% 19.05% 20.37% 1.93%Assets to Equity 1.83 2.04 1.69 1.67 1.59Total Debt Ratio= 43.98% 48.08% 37.21% 36.75% 35.53% =(CL+Tot LT Debt)/(Tot Debt+Tot Eq)

Total Interest-Bearing Debt toTotal Funded Capital 16.13% 16.88% 22.80% 23.58% 4.20%(calculated as Tot Int-Bearing Debt/(Tot Capital-Nonint bearing Liabilitis))

Interest Coverage 11.20 8.54 8.23 33.53 28.70

Cash Flow Forecasts 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012 2013Sales 6,253 7,503 9,004 10,355 11,908 13,694 15,338 17,025 18,727 20,225 21,439

Cost of Sales 5536 6,528 7,834 9,009 10,360 11,914 13,344 14,811 16,293 17,596 18,652 Gross Profit 975 1,171 1,346 1,548 1,780 1,994 2,213 2,435 2,629 2,787 SGA 360 459 559 679 781 859 953 1,011 1,052 1,072 R&D 13.8 17 21 25 30 36 41 48 54 61 66 Depreciation and Amortization 242 262 282 302 322 342 362 382 402 422 EBIT 357 429 480 538 642 752 850 987 1,115 1,227 Taxes 104 124 139 156 186 218 247 286 323 356 Unlevered NI (NOPAT) 254 305 341 382 456 534 604 701 792 871 Depreciation and Amortization 221.7 242 262 282 302 322 342 362 382 402 422 Capital Expenditures (219.2) (300) (225) (259) (298) (342) (368) (392) (412) (425) (429)Net Working Capital (336) (149) (123) (152) (161) (159) (147) (163) (144) (116) FCF (141) 193 241 234 274 348 427 507 625 748

NWC Worksheet 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012 2013Inventory 656.7 840 1008 1160 1334 1534 1718 1907 2097 2265 2401Accounts Receivable 777.4 1020 1225 1408 1619 1862 2086 2315 2547 2751 2916Other Current Assets 127.3 158 189 217 250 288 322 358 393 425 450Accounts Payable 938 1020 1225 1408 1619 1862 2086 2315 2547 2751 2916Other Liabilities 217 255 306 362 417 493 552 630 693 748 793NWC CF -336 -149 -123 -152 -161 -159 -147 -163 -144 -116

Assumptions:Sales growth of: 20% 20% 15% 15% 15% 12% 11% 10% 8.0% 6%Cost of Goods (% of Sales) at: 87.0% 87.0% 87.0% 87.0% 87.0% 87.0% 87.0% 87.0% 87.0% 87.0%SGA (% of Sales) at: 4.8% 5.1% 5.4% 5.7% 5.7% 5.6% 5.6% 5.4% 5.2% 5.0%RD (% of Sales) at: 0.22% 0.23% 0.24% 0.25% 0.26% 0.27% 0.28% 0.29% 0.30% 0.31%Taxes (% of Taxable Income) at: 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0%Depriciation changes each year 20 20 20 20 20 20 20 20 20 20Capital Expenditures changes: 176% 2.5% 2.5% 2.5% 2.5% 2.4% 2.3% 2.2% 2.1% 2.0%

Inventory (% of Sales) 11.2% 11.2% 11.2% 11.2% 11.2% 11.2% 11.2% 11.2% 11.2% 11.2%Accounts Receivable (% of Sales) 13.6% 13.6% 13.6% 13.6% 13.6% 13.6% 13.6% 13.6% 13.6% 13.6%Other Current Assets 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1%Accounts Payable 13.6% 13.6% 13.6% 13.6% 13.6% 13.6% 13.6% 13.6% 13.6% 13.6%Other Liabilities 3.4% 3.4% 3.5% 3.5% 3.6% 3.6% 3.7% 3.7% 3.7% 3.7%

Assumptions:Sales: I decided to go "concervative way" with sales and use lowest expected sales (S&P analyst believes that sales are

going to be increased 22% for the next 5 years, others believe around 16-19 %). Company is risky so lower=better. COGS: JBl was pretty consistent over years having 86-88% of salesSGA: I expect SGA to increase slightly over next 5 years (expected growth stage) and decline after that.RD: Slight increase over time, but JBL agrues that it will continue a hisorical .2% R&D expense of net revenuesTaxes: 10 year Average of 29%Depreciation: Steady growth of 30 millCap. Expenditures: Company will continue to spend more money on aquistions and PPE in growth stage and not as much later

2005-220 millions, 2.5% of sales 2006-2009 and decling from 2.5% afterInventory =>Accounts Receivable => it is really hard to predict changes in these parts so I decided to go with avearges for the next fiveOther Current Assets => years. Management shows its desire and results to improve turnover ratios. Accounts Payable => Averages would be rather a conservative estimateOther Liabilities Slight increase over time

K_e = 4.50% + 1.70 + 5.00% = 13.00%

Capital = 4.4 + 305 + 1819.3 = 2128.7(curr LTD+LTD) + SE = Capital

Senior Notes BAA3 5.785%

W_e 85.465% W_LTD 14.33% W_STD 0.21%

WACC 0.59% + 0.00% + 11.11% = 11.70%W_LTD*K_LTD*(1-TW_STD*K_STD W_e*K_e WACC

STD is insignficantInflation 2.00%

1Risk-free 4.50%Beta 1.7Market Premium 5%Cost of Capital: 11.70% 1 2 3 4 5 6 7 8 9 10

P/E 23TV of FCF's '2013 : 17,194 PV of TV 5,685

Present Values of FCF's 2005 2006 2007 2008 2009 2010 2011 2012 2012 2013-126.07 154.33 172.60 150.07 157.60 179.16 196.94 209.27 230.83 247.19

Total PV of FCFs: 1,572 IBD 305 # of shares 206.5Theoretical Stock Price 33.67

(PVofCF+PVofTV)/#shares TV PV of TV Price15 11,213 3708 2420 14,951 4944 3021 15,699 5191 3122 16,446 5438 32

Lowest P/E in 5 years 23 17,194 5685 3424 17,941 5933 3525 18,689 6180 3626 19,436 6427 3727 20,184 6674 3828 20,932 6921 4029 21,679 7169 41

Current P/E 30 22,427 7416 4235 26,164 8652 4840 29,902 9888 5445 33,640 11124 6050 37,378 12360 66

Highest P/E in 5 years 228

r

Prices to Sales10-k: Revenue Recognition JBL derives revenue principally from the product sales of electronic equipment built to customer specifications. They also derive revenue to a lesser extent from repair services, design services and excess inventory sales. Revenue from product sales and excess inventory sales is recognized, net of estimated product return costs, when goods are shipped; title and risk of ownership have passed; the price to the buyer is fixed or determinable; and recoverability is reasonably assured. Service related revenues are recognized upon completion of the services. JBL assumes no significant obligations after product shipment.

Expected '05 salesSales 2004 6,252,000 7,500,000$ Total of diluted Shares 206,500 206,500

30.28 36.32

Current Price 29 29

JBL P/S 0.958 0.798 Industry's P/S 2.04

JBL has very low allowance for doubtfull accounts(example below), also it’s a growing company, so P/S migth be a good multiple for it

Novembe August 31, 2004 2004 ASSETS

Accounts receivable, less allowance for doubtful accounts of $6,469 at November30, 1,066,416 777,357 2004 and $6,147 at August31, 2004

P/S multiple probably of the best for JBL as it it is not volatile as PE multiple and might be more reliable.On the other hand high growth sales do not indicate operating profits and it don’t capture differences in cost structure across companies.Again if you use 2006 expected sales the price will be only higher.

Own Historical P/E Comparison5 years 3 years Expected '05

P/E average 78.1 33.43 30 Industry average 26.63EPS 0.87 0.87 1.28

Justified Price 67.95$ 29.08$ 38.40$ Company was definitely taking a part in tech boom, so PE average was distorted. I eliminated the tech boom and 9'11 period and wanted to seePE between 1-05-02 and today. Average PE was 33.43. I got some numbers but still the distortion wont give me confidence to rely on this multiple.As well as volatile earnings make it harder and JBL's revenue recognition contributes to it.

P/BCommon Stock Equity 1819.30Total Common Shares Outstanding Million 206.50

8.81

Current Price 29.003.29 Industry average 3.29

Book value is more stable than EPS and is more useful than P/E wich is volatile. But also it don’t recgnize nonphysical assets such as humancapital. I dint start to make adjustements such as subtracting goodwill from acquisitons (which is not really an asset) because it going to increase P/b value and confirm that stock is fairly priced now.