CHICAGO, May 3 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has
assigned a 'D-1' (D-One) rating to the new extendible commercial notes (ECN)
program of Computer Sciences Corporation (CSC). DCR intends to withdraw the
'D-1' (D-One) rating of the ECNs issued by CSC Enterprises, a general
partnership substantially owned by CSC, when that program is terminated.
Additionally, DCR has reaffirmed its other existing CSC and CSC Enterprises
ratings: 'A+' (Single-A-Plus) for senior unsecured debt and 'D-1' (D-One) for
commercial paper.
With revenues of $7.7 billion for fiscal 1999 (March) and $9.1 billion for
the twelve months ended December 31, 1999, CSC is a leading participant in the
worldwide information technology (IT) services industry providing management
consulting/professional services, outsourcing and systems integration.
DCR's ratings reflect CSC's successful business strategy, its strong and
consistent operating cash flows and its ample financial flexibility. CSC's
revenue and profit growth have been impressive. Information services is an
attractive business from a credit perspective, with annuity-type receipts from
long-term contracts. A majority of CSC's business derives from multiyear
contracts. Industry trends include less use of capital to win outsourcing
contracts, reducing the impact of growth on credit measures.
DCR recognizes several potential issues concerning the rating. CSC faces
intense competition in IT services from existing and new participants. It has
won a substantial number of large new contracts, led by a revamping of IRS
systems. In the start-up period, new contracts tend toward lower
profitability and higher risk. Federal spending continues under pressure, but
CSC has reduced its exposure to 23 percent of fiscal 1999 revenues. CSC's
strategy includes acquisitions to complement its geographic coverage or
capabilities, but recent ones have been small or for stock.
In December 1999, when last reported, CSC had $965 million of debt
outstanding, 25 percent of invested capital. The November 1999 stock
acquisition of Nichols Research Corporation, an IT-services company primarily
serving the U.S. Federal government, had negligible effect on CSC's credit
measures. Additional liquidity is provided by CSC's option to sell its credit
reporting business to Equifax.
SOURCE Duff & Phelps Credit Rating Co.
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CONTACT:
Martin Ressinger, CFA, 312-368-5470,
ressinger@dcrco.com; or Nick Nilarp, 212-908-0649,
nnilarp@fitchibca.com, both of DCR
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