Fitch Ratings has affirmed the Issuer Default Rating (IDR) and outstanding debt ratings of Jabil Circuit, Inc. (Jabil) as follows:

--IDR 'BB+';

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

--Senior unsecured debt 'BB+'.

The Rating Outlook is Stable.

The ratings and outlook reflect the following considerations:

--Fitch expects leverage (total debt / operating EBITDA), which Fitch estimated to be 2.3 times (x) (or 3.1x when adjusted for off-balance sheet debt and operating leases) for the latest twelve months (LTM) ended May 31, 2008, will decline closer to 2.0x over the next few quarters;

--Fitch believes that Jabil will continue achieving better than average revenue growth relative to the overall EMS market as it gains market share from smaller rivals based on solid execution and a strong customer base, the diversification of which continues to increase across multiple end-markets;

--Fitch expects EBITDA margins to remain near 5% over the intermediate-term although a sustainable increase in EBITDA profitability beyond that could lead to positive rating action. Prior expectations for significant improvement in profitability have not been met in recent years due primarily to industry trends and competitive pressures;

--Annual free cash flow on a normalized basis should average $100 million or greater, although Fitch believes meaningful upside will be constrained by significant capital spending needs relative to EBITDA. Quarterly free cash flow is expected to remain volatile due to the industry's high working capital intensity;

--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.

Fitch believes that several macroeconomic trends including rising commodity prices, higher labor costs in traditionally low cost manufacturing regions, higher transport costs due to rising fuel prices as well as concerns for a broader global economic slowdown could negatively impact profitability for Jabil and other EMS vendors over the next several quarters. However, excluding concerns for a global economic environment, Jabil could also benefit from rising commodity and labor prices relative to many predominantly Asian based EMS and ODM competitors based on its global manufacturing footprint.

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 exposure to faster growing consumer and mobile handset end markets as well as the industrial, medical and automotive markets;

--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 May 31, 2008 was solid consisting primarily of $860 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 facility expiring in April 2009 and an off balance sheet $280 million North American receivables securitization facility expiring March 2009. Total debt as of May 31, 2008 was $1.4 billion and consisted primarily of the following:

--$300 million in 5.875% senior unsecured notes due July 2010;

--$400 million senior unsecured term loan due July 2012;

--$400 million in 8.25% senior unsecured notes due March 2019; and

--$152 million outstanding under the aforementioned foreign receivables facility.

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.

SOURCE: Fitch Ratings

Fitch Ratings, New York 
Jason Paraschac, +1-212-908-0746 
Nick P. Nilarp, CFA, +1-212-908-0649 
Cindy Stoller, +1-212-908-0526 (Media Relations)