S&P Revises Liquidity Assessment on Jabil Circuit (JBL) Strong From Adequate; Ratings Affirmed

September 27, 2016 4:23 PM EDT

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S&P Global Ratings today said it affirmed its 'BBB-' corporate credit rating on Jabil Circuit Inc. (NYSE: JBL) The outlook is stable.

At the same time, we affirmed our 'BBB-' issue-level rating on the company's senior unsecured debt.

"The revision of our assessment of Jabil's liquidity position reflects its $912 million cash balance, nearly full availability under its $1.5 billion revolving credit facility, and our expectation for improvement in free cash flow to around $500 million in fiscal year ending Aug. 31, 2017 from about break-even in 2016 as capital expenditures moderate," said S&P Global Ratings credit analyst Christian Frank.

Our 'BBB-' corporate credit rating reflects the company's good position in the global outsourced manufacturing industry, focus on faster-growing, higher-margin end markets, and leverage in the high-1x area. Jabil's high customer concentration, competitive and cyclical industry conditions, and acquisitive growth strategy partially offset these factors. The company has flexibility for up to 3x leverage within the current rating.

The stable outlook reflects our expectation that Jabil's focus on growth in higher-margin manufacturing businesses will enable it to achieve revenue and EBITDA growth over the next 12 to 24 months, despite the potential for some volatility due to large customer programs. In addition, the rating incorporates our expectation that Jabil can manage acquisitions and shareholder returns while maintaining leverage below 3x.

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