Fitch Affirms Jabil Circuit's Ratings at 'BB+'; Outlook Revised to Positive

NEW YORK--(Business Wire)--
Fitch Ratings has affirmed the ratings for Jabil Circuit, Inc. (Jabil) as
follows:

--Issuer Default Rating (IDR) 'BB+';

--Senior unsecured revolving credit facility 'BB+';

--Senior unsecured debt 'BB+'.

The Rating Outlook has been revised to Positive from Stable.

The revision in Outlook reflects the following considerations:

--Fitch expects Jabil to utilize excess cash, generated in part from reduced
working capital requirements, to reduce outstanding debt over the next 12 to 24
months, potentially lowering leverage (total debt to total operating EBITDA)
below 2.0 times (x) or 2.5x to 3.0x on an adjusted basis (includes off-balance
sheet debt and operating leases). Fitch expects Jabil will aim to keep leverage
at or below 2.0x on a long-term basis, although temporary increases in leverage
may be necessary to fund small acquisitions or working capital necessary during
periods of significant revenue growth.

--Fitch believes that Jabil continues to increase its share of the global EMS
market as the company has been less negatively impacted from the global economic
downturn than its peers due to new program wins. Jabil's revenue for the latest
twelve month (LTM) period ending Feb. 28, 2009 is essentially flat versus down
in excess of 10% for the average of its Tier 1 North American peers
(Flextronics, Celestica and Sanmina) for the LTM period ending Mar. 31, 2009.

--Jabil's EBITDA margins for the LTM period have declined to 4.4% from 4.8%
while EBITDA margins for its peers collectively have fallen to 3.1% from 3.9%.
Fitch believes Jabil's relative superior margin performance is reflective of the
company's aggressive cost cuts over the past several quarters and disciplined
management approach to competing for new business.

The ratings continue to reflect the following considerations:

--Strong diversification relative to the industry and significant exposure to
non-traditional EMS sectors which are expected to exhibit higher long-term
growth rates as companies increasingly seek to outsource manufacturing
operations.

--Annual free cash flow on a normalized basis should average $200 million or
greater, although Fitch believes meaningful upside will be constrained by
significant capital spending needs. Quarterly free cash flow is expected to
remain volatile due to the industry's high working capital intensity.

--Strong working capital management with cash conversion cycle (CCC) days of 30
(adjusted for the sale of accounts receivable), ahead of most peers.

--Fitch anticipates Jabil will opportunistically pursue strategic acquisitions
to enhance its vertical integration capabilities going forward, which Fitch
believes could be at least partially debt financed.

Further positive rating action could occur if Jabil utilizes excess cash to
reduce debt as expected and is successful in maintaining its relatively strong
EBITDA margins. Conversely, the Rating Outlook could be stabilized if debt
reduction does not occur or the company suffers EBITDA margin or revenue
declines significantly below current Fitch expectations.

The ratings are supported by the following considerations:

--Strong management team with a track record of delivering best in class
execution with a disciplined approach to growing the business.

--Advantages in scale as one of the largest of the tier 1 EMS vendors with a
balanced global manufacturing footprint, including a strong mix of facilities in
low-cost regions.

--Significant working capital balance provides an alternate source of liquidity
during business downturns.

Rating concerns include the following:

--Need for vertical integration represents an on-going strategic shift and could
lead to additional debt financed acquisitions.

--Industry pricing pressure, driven by excess manufacturing capacity as well as
struggling competitors, has driven profitability levels below expectations for
all tier one North American EMS providers over the past several years.

--Significant execution risks in managing a large global manufacturing operation
are compounded by the inherently low profit margins in the business model.

Liquidity as of Feb. 28, 2009 was solid consisting primarily of $775 million in
cash and a fully available $800 million senior unsecured revolving credit
facility which expires in July 2012. Jabil also utilizes two accounts receivable
securitization facilities for additional liquidity purposes, including an
on-balance sheet $200 million committed foreign receivables and an off balance
sheet $250 million North American receivables securitization facility, both
expiring in March 2010 after being recently renewed.

Total debt as of Feb. 28, 2009 was $1.2 billion and consisted primarily of $300
million in 5.875% senior unsecured noted due July 2010; a $380 million senior
unsecured term loan due July 2012; $400 million in 8.25% senior unsecured notes
due March 2019; and $75 million outstanding under the aforementioned foreign
receivables facility. Jabil also had $227 million outstanding under its
off-balance sheet North American receivables securitization facility which is
included in Fitch's calculation of adjusted debt.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, New York
Jason Paraschac, 212-908-0746
Nick P. Nilarp, CFA, 212-908-0649
or
Media Relations:
Cindy Stoller, 212-908-0526
Email: cindy.stoller@fitchratings.com

Copyright Business Wire 2009