I was wondering why Jabil had been weak relative to its peers for the past week or two. The answer is: a new shelf registration, this time for $1.5 billion. I am presuming that, as with the previous offering, this one will go smoothly and swiftly, and Jabil will make fine use of the funds. Is another takeover imminent? If so, it must be a big one! Moody's comments follow:
Jabil Circuit Shelf Registration Rated (P)Baa3: Moody's
Tuesday, August 29, 2000 10:25 AM
NEW YORK -(Dow Jones)- Moody's Investors Service Tuesday assigned ratings of (P, news, msgs)Baa3/(P, news,
msgs)Ba2/(P, news, msgs)ba2 to the $1.5 billion universal shelf registration for senior debt, subordinated debt, and/or
preferred stock, respectively, filed by Jabil Circuit Inc., a leading provider of worldwide electronic manufacturing services (EMS, news, msgs).
Moody's said Jabil's senior implied rating is Baa3, and its senior unsecured issuer rating is Baa3. This is the first time that Moody's has rated the debt of the company. The ratings outlook is stable.
Moody's said ratings reflect Jabil's solidly entrenched position as a manufacturer of complex electronic circuit board
assemblies and systems for original equipment manufacturers (OEMs) in the communications, computer peripherals,
PC, automotive, and consumer products industries. The company has a history of consistent profitability and Moody's
believes that Jabil is well positioned to benefit from the trend toward acceleration of EMS outsourcing among major
global OEMs. The ratings incorporate expectations that Jabil's revenue stream will become increasingly diversified
while remaining profitable, the rating agency said.
Moody's said Jabil has conservatively managed its balance sheet and reported only $213 million of debt as of May 31,
2000, to which Moody's adds the capitalization of operating lease payments, for a modest 31% adjusted debt to book
capitalization. Financial flexibility has been maintained through capital infusions from the equity market, rather than by
draws from its credit line or debt issuance, as Jabil funds its focused, controlled global expansion.
According to Moody's, Jabil has historically reported margins at the high end of its EMS peer group due to its unique
"work cell" strategy for supporting and expanding customer relationships, several of which span its 33-year history. Each
work cell is OEM customer-dedicated, and capable of providing integrated design and engineering services,
component selection, sourcing and procurement, assembly, order fulfillment, and post-sale support services such as
warranty and repair. OEM customers benefit from both Jabil's component purchasing leverage and its specialized
technical expertise. As a result, Jabil has enjoyed a five-year compound annual growth rate of "organic" revenues of
30%. Although margins have been trending down for Jabil and for the EMS sector overall, Moody's views this as a
function of a product mix shift toward increased lower margin, higher materials-content programs serviced in lower labor
cost geographies, rather than a decrease in value-added services.
Moody's said Jabil's blue-chip customer base had been highly concentrated, such that fewer than 20 customers
accounted for all its FY1997, FY1998 and FY1999 revenues. Management's focus on expanding Jabil's expertise and
broadening its customer base resulted in Jabil's top ten customers for FY2000 representing approximately 70% of
revenues. New program wins such as the recently announced agreement to provide EMS services to Sycamore
Networks, a developer and marketer of intelligent optical networking products for next generation transfer and switching
products, are expected to further enhance Jabil's revenue diversification, Moody's said.
(This story was originally published by Dow Jones Newswires) |
