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Exhibit 99.1

LOGO

Jabil Reports Second Quarter Results

Provides Solid Outlook for Fiscal 2015

St. Petersburg, FL – March 19, 2014...Today Jabil Circuit, Inc. (NYSE: JBL), announced preliminary, unaudited financial results for its second quarter of fiscal year 2014. As a result of the anticipated sale of Jabil’s aftermarket services business, this business is reported as “discontinued operations” in the unaudited financial results for all periods presented.

The company reported second quarter revenue of $3.6 billion.

Jabil’s three reporting segments delivered the following revenue results for the company’s second fiscal quarter:

 

    Diversified Manufacturing Services: $1.6 billion.

 

    Enterprise & Infrastructure: $1.2 billion.

 

    High Velocity Systems: $0.8 billion.

Generally accepted accounting principles (GAAP) operating income for the second quarter was $3.6 million and GAAP net diluted loss per share was ($0.19). The company indicated that $32.2 million in restructuring costs during the quarter impacted GAAP operating income.

As defined below, core operating income was $60.4 million and core diluted earnings per share was $0.10.

“We completed our second quarter largely as planned, with steady progress on finalizing our previously announced divestiture and winding down our relationship with our second largest customer,” said Mark T. Mondello, Chief Executive Officer. “The steadfast dedication of our global workforce has contributed to our ongoing performance despite the challenges we have faced,” he added.

(Definitions used: “GAAP” means U.S. generally accepted accounting principles. Jabil defines core operating income as GAAP operating income before amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, impairment of notes receivable and related charges, goodwill impairment charges, certain distressed customer charges, settlement of receivables and related charges, loss on disposal of subsidiaries and acquisition costs and purchase accounting adjustments. Jabil defines core earnings as GAAP net income before amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, impairment of notes receivable and related charges, goodwill impairment charges, certain distressed customer charges, settlement of receivables and related charges, loss on disposal of subsidiaries, acquisition costs and purchase accounting adjustments, income (loss) from discontinued operations, certain other expenses, net of tax and certain deferred tax valuation allowance charges. Jabil defines core diluted earnings per share as core earnings divided by the weighted average number of outstanding diluted shares determined under GAAP. Jabil calculates core return on invested capital by annualizing its after-tax core operating income for its most recently-ended quarter and dividing that by a two quarter average net invested capital base. Jabil reports core operating income, core earnings, core diluted and basic earnings per share and core return on invested capital to provide investors an additional method for assessing operating income, earnings, diluted earnings per share and return on invested capital from what it believes are its core manufacturing operations. See the accompanying reconciliation of Jabil’s


core operating income to its GAAP operating income, its calculation of core earnings and core diluted earnings per share to its GAAP net income and GAAP earnings per share, its calculation of core return on invested capital and additional information in the supplemental information.)

 

Quarterly Results

  Q2 2014   Q2 2013

Net revenue

  $3.6 billion   $4.2 billion

GAAP operating income

  $3.6 million   $133.0 million

GAAP net (loss) income

  ($38.7) million   $88.5 million

GAAP net diluted (loss) earnings per share

  ($0.19)   $0.43

GAAP return on invested capital

  0.1%   15.1%

Core operating income

  $60.4 million   $151.5 million

Core earnings

  $20.3 million   $94.0 million

Core diluted earnings per share

  $0.10   $0.45

Core return on invested capital

  6.2%   17.7%

 

Business Update

Jabil provided guidance for its third quarter of fiscal year 2014, which began on March 1, 2014.

 

Net revenue   $3.5 billion to $3.7 billion

GAAP operating (loss) income

 

($35) million to $25 million

GAAP net earnings per share

 

$0.74 to $1.04 per diluted share

Core operating income

 

$20 million to $60 million

Core (loss) earnings per share

 

($0.20) to $0.00 per diluted share

(GAAP net earnings per share for the third quarter of fiscal year 2014 are currently estimated to include $0.03 per share for amortization of intangibles, $0.07 per share for stock-based compensation expense and related charges, $0.16 to $0.06 per share for restructuring and related charges and income from discontinued operations of $1.20 per share.)

Year over Year Third Quarter Segment Revenue Guidance:

 

    Diversified Manufacturing Services consistent.

 

    Enterprise & Infrastructure to decline 5 percent.

 

    High Velocity Systems to decline 40 percent.

“As we move through the back half of the fiscal year, I’m encouraged and pleased with activities surrounding multiple program ramps from new business wins,” said Mondello. “At a time when legacy EMS business is showing very modest growth, we are fortunate to have the scale and technical capabilities which allow us to embrace new growth opportunities,” Mondello stated. Management provided fiscal year 2015 guidance of $1.65 to $1.95 core earnings per share.

FORWARD LOOKING STATEMENT: This news release contains forward-looking statements, including those regarding our anticipated financial results for our second quarter of fiscal year 2014; our currently expected third quarter of fiscal year 2014 net revenue (including that of our segments), core operating income, GAAP operating (loss) income, core and GAAP earnings (loss) per share results and the components thereof; our currently expected fiscal year 2015 core earnings per share; our activities surrounding multiple program ramps from new business wins; and our scale and technical capabilities to allow us to embrace new growth opportunities. The statements in this news release are based on current expectations, forecasts and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include, but are not limited to: our determination as we finalize our financial results for our second quarter of fiscal year 2014 that our financial results and conditions differ from our current preliminary unaudited numbers set forth herein; fluctuations in our stock’s market price; fluctuations in operating results and cash flows; unexpected, adverse seasonal impacts on demand; changes in macroeconomic conditions, both in the U.S. and internationally; the occurrence of, success and expected financial results from, the expected multiple product ramps; our financial performance during and after the current economic conditions; our ability to maintain and improve costs, quality and delivery for our customers; risks and costs inherent in litigation; whether our realignment of our capacity will adversely affect our cost structure, ability to service customers and labor relations; our ability to take advantage of perceived benefits of offering customers vertically


integrated services; changes in technology; competition; anticipated growth for us and our industry that may not occur; managing rapid growth; managing rapid declines in customer demand and other related customer challenges that may occur; our ability to successfully consummate acquisitions and divestitures; managing the integration of businesses we acquire; risks associated with international sales and operations; retaining key personnel; our dependence on a limited number of large customers; business and competitive factors generally affecting the electronic manufacturing services industry, our customers and our business; other factors that we may not have currently identified or quantified; and other risks, relevant factors and uncertainties identified in our Annual Report on Form 10-K for the fiscal year ended August 31, 2013, subsequent Reports on Forms 10-Q and 8-K and our other securities filings. Jabil disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Supplemental Information: The financial results disclosed in this release include certain measures calculated and presented in accordance with GAAP. In addition to the GAAP financial measures, Jabil provides supplemental, non-GAAP financial measures to facilitate evaluation of Jabil’s core operating performance. The non-GAAP financial measures disclosed in this release exclude certain amounts that are included in the most directly comparable GAAP measures. The non-GAAP or core financial measures disclosed in this release do not have standard meanings and may vary from the non-GAAP financial measures used by other companies. Management believes core financial measures (which exclude the effects of the amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, impairment of notes receivable and related charges, goodwill impairment charges, certain distressed customer charges, settlement of receivables and related charges, loss on disposal of subsidiaries, acquisition costs and purchase accounting adjustments, income from discontinued operations, certain other expenses, net of tax and certain deferred tax valuation allowance charges) are a useful measure that facilitates evaluating the past and future performance of Jabil’s ongoing operations on a comparable basis. Jabil reports core operating income, core return on invested capital, core earnings and core diluted and basic earnings per share to provide investors an additional method for assessing operating income, earnings and earnings per share from what it believes are its core manufacturing operations. Included in this release are Condensed Consolidated Statements of Operations as well as a reconciliation of the disclosed core financial measures to the most directly comparable GAAP financial measures.

Company Conference Call Information: Jabil will hold a conference call to discuss the second quarter of fiscal year 2014 earnings today at 4:30 p.m. ET live on the Internet at http://www.jabil.com. The call will be recorded and archived on the web at http://www.jabil.com. A taped replay of the conference call will also be available March 19, 2014 at approximately 7:30 p.m. ET through midnight on March 26, 2014. To access the replay, call (855) 859-2056 from within the United States, or (404) 537-3406 outside the United States. The pass code is: 9550088. An archived webcast of the conference call will be available at http://www.jabil.com/investors/.

About Jabil

Jabil is an electronic product solutions company providing comprehensive electronics design and manufacturing product management services to global electronics and technology companies. Offering complete product supply chain management from facilities in 24 countries (excluding the AMS discontinued operations), Jabil provides comprehensive, individualized-focused solutions to customers in a broad range of industries. Jabil common stock is traded on the New York Stock Exchange under the symbol, “JBL”. Further information is available on Jabil’s website: jabil.com.

Investor & Media Contact:

Beth Walters

Senior Vice President, Investor Relations & Communications

Jabil Circuit, Inc.

(727) 803-3511

beth_walters@jabil.com


JABIL CIRCUIT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

     February 28,        
     2014
(Unaudited)
    August 31,
2013
 
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 675,129      $ 1,011,373   

Accounts receivable, net

     941,059        1,167,254   

Inventories

     1,821,815        2,118,583   

Prepaid expenses and other current assets

     905,719        1,136,003   

Income taxes receivable

     25,978        12,269   

Deferred income taxes

     53,591        45,532   

Assets of discontinued operations

     539,388        329,231   
  

 

 

   

 

 

 

Total current assets

     4,962,679        5,820,245   

Property, plant and equipment, net

     2,331,970        2,309,298   

Goodwill and intangible assets, net

     625,282        609,445   

Deferred income taxes

     88,946        91,383   

Other assets

     119,331        100,801   

Non-current assets of discontinued operations

     —          222,609   
  

 

 

   

 

 

 

Total assets

   $ 8,128,208      $ 9,153,781   
  

 

 

   

 

 

 
LIABILITIES AND EQUITY     

Current liabilities:

    

Current installments of notes payable, long-term debt and capital lease obligations

   $ 160,839      $ 215,448   

Accounts payable

     2,461,765        3,191,145   

Accrued expenses

     1,082,498        1,216,737   

Income taxes payable

     9,973        37,631   

Deferred income taxes

     1,014        6,004   

Liabilities of discontinued operations

     198,906        197,469   
  

 

 

   

 

 

 

Total current liabilities

     3,914,995        4,864,434   

Notes payable, long-term debt and capital lease obligations, less current installments

     1,675,322        1,690,418   

Other liabilities

     74,058        77,145   

Income tax liabilities

     85,702        76,315   

Deferred income taxes

     57,707        58,047   

Non-current liabilities of discontinued operations

     —          31,855   
  

 

 

   

 

 

 

Total liabilities

     5,807,784        6,798,214   
  

 

 

   

 

 

 

Commitments and contingencies

    

Equity:

    

Jabil Circuit, Inc. stockholders’ equity:

    

Preferred stock

     —          —     

Common stock

     243        238   

Additional paid-in capital

     1,851,781        1,853,409   

Retained earnings

     1,116,461        1,071,175   

Accumulated other comprehensive income

     94,571        81,248   

Treasury stock, at cost

     (767,679     (670,783
  

 

 

   

 

 

 

Total Jabil Circuit, Inc. stockholders’ equity

     2,295,377        2,335,287   
  

 

 

   

 

 

 

Noncontrolling interests

     25,047        20,280   
  

 

 

   

 

 

 

Total equity

     2,320,424        2,355,567   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 8,128,208      $ 9,153,781   
  

 

 

   

 

 

 


JABIL CIRCUIT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except for per share data)

(Unaudited)

 

     Three months ended     Six months ended  
     February 28,     February 28,     February 28,      February 28,  
     2014     2013     2014      2013  

Net revenue

   $ 3,577,315      $ 4,166,355      $ 7,918,271       $ 8,536,236   

Cost of revenue

     3,364,165        3,877,833        7,371,567         7,936,795   
  

 

 

   

 

 

   

 

 

    

 

 

 

Gross profit

     213,150        288,522        546,704         599,441   

Operating expenses:

         

Selling, general and administrative

     164,522        145,622        306,707         294,238   

Research and development

     6,604        7,655        15,658         14,862   

Amortization of intangibles

     6,180        2,204        12,501         4,370   

Restructuring and related charges

     32,203        —          53,206         —     
  

 

 

   

 

 

   

 

 

    

 

 

 

Operating income

     3,641        133,041        158,632         285,971   

Interest and other, net

     33,367        30,331        67,143         61,000   
  

 

 

   

 

 

   

 

 

    

 

 

 

(Loss) income from continuing operations before tax

     (29,726     102,710        91,489         224,971   

Income tax expense

     2,539        27,418        22,112         59,003   
  

 

 

   

 

 

   

 

 

    

 

 

 

(Loss) income from continuing operations, net of tax

     (32,265     75,292        69,377         165,968   

(Loss) income from discontinued operations, net of tax

     (6,251     12,797        10,172         27,705   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net (loss) income

     (38,516     88,089        79,549         193,673   

Net income (loss) attributable to noncontrolling interests, net of tax

     151        (444     294         (707
  

 

 

   

 

 

   

 

 

    

 

 

 

Net (loss) income attributable to Jabil Circuit, Inc.

   $ (38,667   $ 88,533      $ 79,255       $ 194,380   
  

 

 

   

 

 

   

 

 

    

 

 

 

(Loss) earnings per share attributable to the stockholders of Jabil Circuit, Inc.:

         

Basic:

         

(Loss) income from continuing operations, net of tax

   $ (0.16   $ 0.37      $ 0.34       $ 0.82   
  

 

 

   

 

 

   

 

 

    

 

 

 

(Loss) income from discontinued operations, net of tax

   $ (0.03   $ 0.06      $ 0.05       $ 0.14   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net (loss) income

   $ (0.19   $ 0.44      $ 0.39       $ 0.96   
  

 

 

   

 

 

   

 

 

    

 

 

 

Diluted:

         

(Loss) income from continuing operations, net of tax

   $ (0.16   $ 0.37      $ 0.33       $ 0.80   
  

 

 

   

 

 

   

 

 

    

 

 

 

(Loss) income from discontinued operations, net of tax

   $ (0.03   $ 0.06      $ 0.05       $ 0.13   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net (loss) income

   $ (0.19   $ 0.43      $ 0.38       $ 0.94   
  

 

 

   

 

 

   

 

 

    

 

 

 

Weighted average shares outstanding:

         

Basic

     205,251        202,458        205,005         203,393   
  

 

 

   

 

 

   

 

 

    

 

 

 

Diluted

     205,251        206,804        206,892         207,474   
  

 

 

   

 

 

   

 

 

    

 

 

 


JABIL CIRCUIT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     Six months ended  
     February 28,
2014
    February 28,
2013
 

Cash flows from operating activities:

    

Net income

   $ 79,549      $ 193,673   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     247,169        195,022   

Recognition of stock-based compensation expense and related charges

     (7,821     36,513   

Deferred income taxes

     (28,265     860   

Restructuring and related charges

     24,915        —     

Excess tax benefits related to stock awards

     (714     (330

Other, net

     11,128        4,989   

Changes in operating assets and liabilities, exclusive of net assets acquired:

    

Accounts receivable

     187,030        (172,161

Inventories

     342,794        (222,645

Prepaid expenses and other current assets

     235,557        (6,349

Other assets

     (33,749     (2,799

Accounts payable and accrued expenses

     (912,599     288,004   

Income taxes

     (10,378     (9,093
  

 

 

   

 

 

 

Net cash provided by operating activities

     134,616        305,684   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Acquisition of property, plant and equipment

     (286,349     (371,472

Proceeds from sale of property, plant and equipment

     12,945        9,504   

Cash paid for business and intangible asset acquisitions, net of cash acquired

     —          (5,862

Investments in non-marketable equity securities

     —          (2,942
  

 

 

   

 

 

 

Net cash used in investing activities

     (273,404     (370,772
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Borrowings under debt agreements

     3,789,192        2,178,021   

Payments towards debt agreements

     (3,860,319     (2,091,043

Dividends paid to stockholders

     (35,792     (34,748

Cash paid to purchase noncontrolling interest

     (1,720     —     

Sale of noncontrolling interest, net of cash disposed

     (1,783     —     

Net proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan

     7,697        10,867   

Payments to acquire treasury stock

     (64,051     (129,262

Treasury stock minimum tax withholding related to vesting of restricted stock

     (32,845     (20,221

Capital contribution to noncontrolling interest

     —          316   

Excess tax benefit related to stock awards

     714        330   
  

 

 

   

 

 

 

Net cash used in financing activities

     (198,907     (85,740
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     1,451        (4,773
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (336,244     (155,601

Cash and cash equivalents at beginning of period

     1,011,373        1,217,256   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 675,129      $ 1,061,655   
  

 

 

   

 

 

 

 


JABIL CIRCUIT, INC. AND SUBSIDIARIES

SUPPLEMENTAL DATA

RECONCILIATION OF GAAP FINANCIAL RESULTS TO NON-GAAP MEASURES

(in thousands, except for per share data)

(Unaudited)

 

     Three months ended     Six months ended  
     February 28,     February 28,     February 28,     February 28,  
     2014     2013     2014     2013  

Operating income (GAAP)

   $ 3,641      $ 133,041      $ 158,632      $ 285,971   

Amortization of intangibles

     6,180        2,204        12,501        4,370   

Distressed customer charge

     3,742        —          3,742        —     

Stock-based compensation expense and related charges

     14,652        16,274        (7,934     33,186   

Restructuring and related charges

     32,203        —          53,206        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Core operating income (Non-GAAP)

   $ 60,418      $ 151,519      $ 220,147      $ 323,527   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to Jabil Circuit, Inc. (GAAP)

   $ (38,667   $ 88,533      $ 79,255      $ 194,380   

Amortization of intangibles, net of tax

     8,250        2,205        9,423        4,371   

Distressed customer charge, net of tax

     2,337        —          2,337        —     

Stock-based compensation expense and related charges, net of tax

     14,192        16,064        (8,413     32,783   

Restructuring and related charges, net of tax

     27,892        —          45,589        —     

Acquisition costs and purchase accounting adjustments, net of tax

     —          —          (9,064     —     

Loss (income) from discontinued operations, net of tax

     6,251        (12,797     (10,172     (27,705
  

 

 

   

 

 

   

 

 

   

 

 

 

Core earnings (Non-GAAP)

   $ 20,255      $ 94,005      $ 108,955      $ 203,829   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) earnings per share: (GAAP)

        

Basic

   $ (0.19   $ 0.44      $ 0.39      $ 0.96   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ (0.19   $ 0.43      $ 0.38      $ 0.94   
  

 

 

   

 

 

   

 

 

   

 

 

 

Core earnings per share: (Non-GAAP)

        

Basic

   $ 0.10      $ 0.46      $ 0.53      $ 1.00   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.10      $ 0.45      $ 0.53      $ 0.98   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding used in the calculations of earnings per share (GAAP):

        

Basic

     205,251        202,458        205,005        203,393   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     205,251        206,804        206,892        207,474   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding used in the calculations of earnings per share (Non-GAAP):

        

Basic

     205,251        202,458        205,005        203,393   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     206,622        206,804        206,892        207,474   
  

 

 

   

 

 

   

 

 

   

 

 

 


JABIL CIRCUIT, INC. AND SUBSIDIARIES

SUPPLEMENTAL DATA

RECONCILIATION OF GAAP FINANCIAL RESULTS TO NON-GAAP MEASURES

(in thousands)

(Unaudited)

CALCULATION OF RETURN ON INVESTED CAPITAL AND

CORE RETURN ON INVESTED CAPITAL

The Company calculates: (1) its “Return on Invested Capital” by annualizing its “after-tax GAAP operating income” for its most recently-ended quarter and dividing that by a two quarter average of its “net invested capital asset base” and (2) its “Core Return on Invested Capital” by annualizing its “after-tax non-GAAP core operating income” for its most recently-ended quarter and dividing that by a two quarter average of its “net invested capital asset base.”

The Company calculates: (1) its “after-tax GAAP operating income” by subtracting a certain tax effect (the calculation of which is explained below) from its GAAP operating income and (2) its “after-tax non-GAAP core operating income” by subtracting a certain tax effect (the calculation of which is explained below) from its non-GAAP core operating income. See elsewhere in this earnings release for a reconciliation of the Company’s non-GAAP core operating income to its GAAP operating income.

The Company calculates “net invested capital asset base” as the sum of the averages (the calculations of which are explained below) of (1) its stockholders’ equity, (2) the non-current portion of its notes payable, long-term debt and capital lease obligations and (3) the current portion of its notes payable, long-term debt and capital lease obligations, less the average (the calculation of which is explained below) of its cash and cash equivalents.

The following table reconciles (1) “Return on Invested Capital,” as calculated using “after-tax GAAP operating income” to (2) “Core Return on Invested Capital,” as calculated using “after-tax non-GAAP core operating income”:

 

     Three months ended  
     February 28,     February 28,  
     2014     2013  

Numerator:

    

Operating income (GAAP)

   $ 3,641      $ 133,041   

Tax effect (1)

     (2,410     (27,727
  

 

 

   

 

 

 

After-tax operating income

     1,231        105,314   
     x4        x4   
  

 

 

   

 

 

 

Annualized after-tax operating income

   $ 4,924      $ 421,256   
  

 

 

   

 

 

 

Core operating income (Non-GAAP)

   $ 60,418      $ 151,519   

Tax effect (2)

     (7,016     (27,892
  

 

 

   

 

 

 

After-tax core operating income

     53,402        123,627   
     x4        x4   
  

 

 

   

 

 

 

Annualized after-tax core operating income

   $ 213,608      $ 494,508   
  

 

 

   

 

 

 

Denominator:

    

Average total Jabil Circuit, Inc. stockholders’ equity (3)

   $ 2,343,125      $ 2,124,908   

Average notes payable, long-term debt and capital lease obligations, less current installments (3)

     1,676,578        1,654,883   

Average current installments of notes payable, long-term debt and capital lease obligations (3)

     139,035        59,624   

Average cash and cash equivalents (3)

     (722,176     (1,045,845
  

 

 

   

 

 

 

Net invested capital asset base

   $ 3,436,562      $ 2,793,570   
  

 

 

   

 

 

 

Return on Invested Capital (GAAP)

     0.1     15.1

Adjustments noted above

     6.1     2.6

Core Return on Invested Capital (Non-GAAP)

     6.2     17.7

 

(1) This amount is calculated by adding the amount of income taxes attributable to its operating income (GAAP) and its interest expense.
(2) This amount is calculated by adding the amount of income taxes attributable to its core operating income (Non-GAAP) and its interest expense.
(3) The average is based on the addition of the account balance at the end of the most recently-ended quarter to the account balance at the end of the prior quarter and dividing by two.