TEXT-Fitch affirms Jabil Circuit ratings

June 27 - Fitch Ratings has affirmed Jabil Circuit, Inc.'s
(Jabil) long-term Issuer Default Rating (IDR) and senior unsecured ratings at
'BBB-'. The Rating Outlook is Stable.

Rating strengths include the following:

--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;

--Favorable industry trends toward increased manufacturing outsourcing,
particularly in the emerging industrial, medical, and clean tech space where
Jabil has a leading position;

Strategic positioning in increasingly complex EMS product offerings including
product design, engineering, and product lifecycle management which enhance the
value of EMS partnerships for customers;

--Vertically integrated operations which typically drive higher margins in
periods of growth.

Rating concerns include the following:

--The potential for Jabil to pursue further vertical integration capabilities
which could lead to additional debt financed acquisitions or execution risk in
an industry with minimal room for execution missteps due to the relatively low
profit margin inherent in the business model;

--An intensely competitive environment which pressures profitability across the
industry;

--Significant customer concentration risk with Jabil's top five customers
accounting for approximately 48% of revenue as of May 2012.

The affirmation and Stable Outlook reflect the following considerations:

--While outsourcing growth is maturing in areas like high velocity consumer,
networking, and computing, Fitch expects Jabil to continue to focus on
under-penetrated, rapidly growing areas like the industrial, medical, and clean
tech space. This space's deeper customer engagements, longer product
life-cycles, and increased opportunity for cross-selling may offer reduced
revenue volatility, higher margins, and meaningful growth opportunities.

--After Market Services (AMS) continues to be a growth focus for Jabil. The
highly fragmented competitive landscape with multiple market niches is likely to
be an area for continued acquisitions and could provide revenue growth and
margin expansion opportunities as well as increased diversification.

--Fitch believes leading EMS providers, such as Jabil, are increasingly
strategic to the business operations and strategy of their customers given their
role in product design consultation, component sourcing, manufacturing,
fulfillment logistics, and AMS. When coupled with Jabil's global scale which
allows it to position its services in low-cost or otherwise strategic
geographies, Jabil maintains a significant competitive advantage versus smaller
competitors.

--Management recently lowered its revenue growth target to 3% from 5% for fiscal
2012 due to slowdowns in end market demand. Fitch expects revenues to perform in
line with these expectations as the fast growing diversified manufacturing
services (DMS) segment becomes a greater portion of company revenue somewhat
offsetting uncertain macroeconomic headwinds. Fitch expects revenues to grow in
the mid-single digits over the next three years fueled by an increasing
proportion of the expanding DMS segment revenues and positive outsourcing
trends.

--Fitch expects EBITDA margins to increase from 6.2% in the LTM to roughly 6.5%
over the next two years given upside from increased activity in higher margin
DMS segment, increased demand for Jabil's vertical integration capabilities, and
modest operating leverage. Conversely, Jabil's exposure to customers like
Apple, RIM, and Cisco (each greater than 10% of revenues) highlights
concentration risks, whereby customer disengagements and resulting capacity
underutilization can create significant negative operating leverage.

--Free cash flow is expected to be roughly flat in fiscal 2012, increasing in
fiscal 2013 as revenues grow and margins expand offsetting increased working
capital investment. Management has guided to roughly $500 million in capital
expenditures given expansion into new programs. Fitch expects fiscal 2013 free
cash flow to be roughly $300 million.

--Uses of cash flow and excess cash will principally go to fund organic growth
and working capital needs. Fitch does not expect Jabil to further reduce debt
beyond current levels. The potential for acquisitions remains although Fitch
believes the company is more likely to continue making smaller strategic
acquisitions which target specific products or technologies, similar to the
recent Telmar deal (aftermarket services; $145 million in revenue). Fitch does
not expect any substantial acquisition activity that would result in a material
leverage event.

--Jabil increased its dividend to $0.08 from $0.07 per share in October 2011 and
has roughly $29 million in remaining share buyback authorization. Fitch believes
Jabil has sufficient financial capacity to fund continued share repurchases and
dividends with excess cash on the balance sheet, and that this should not lead
to incremental leverage.

--Fitch expects leverage (total debt to total operating EBITDA) to remain below
2.0 times (x) going forward and under 3x when adjusted for off-balance sheet
accounts receivable securitization and operating leases. On a cash flow basis,
Fitch expects Jabil to produce funds from operations less capital expense and
dividends at least equal to 25% of total debt outstanding. Interest coverage
(EBITDA to total interest expense) is expected to exceed 10x in fiscal 2013.
Fitch estimates current leverage at 1.3x (2.2x on an adjusted basis) and
interest coverage at 9.7x.

Liquidity as of May 31, 2012 was solid consisting primarily of $742 million in
cash and $1.1 billion available in the recently upsized $1.3 billion senior
unsecured revolving credit facility expiring in March 2017. Jabil also utilizes
two accounts receivable securitization facilities for additional liquidity
purposes, both of which are located off balance sheet: a $200 million committed
foreign receivables facility and a $300 million committed North American
receivables securitization facility expiring in May 15, 2015 and October 2014,
respectively.

Total debt as of May 31, 2011 was $1.4 billion and consisted primarily of:

--$400 million in 8.25% senior unsecured notes due March 2018;

--$400 million in 5.625% senior unsecured notes due December 2020;

--$312 million in 7.75% senior unsecured notes due July 2016; and

--$280 million outstanding under revolving credit facilities.

Jabil also had approximately $316 million outstanding under its off-balance
sheet European and North American receivables securitization facilities and
additional amounts under its accounts receivable sales facilities as of May 31,
2012, which are included in Fitch's adjusted debt calculation.

Fitch has affirmed Jabil's ratings as follows:

--Long-term IDR at 'BBB-';
--Senior unsecured debt at 'BBB-'.