Attached files
| file | filename |
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| 8-K - CSC FORM 8K 11112009 - COMPUTER SCIENCES CORP | csc8k_11112009.htm |
| EX-99.2 - SLIDE PRESENTATION (FURNISHED HEREWITH) - COMPUTER SCIENCES CORP | exhibit99-2_11112009.htm |
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Contact Chris
Grandis
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FOR
RELEASE
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Media Relations
Director
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Moved
on PR Newswire
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Corporate
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November
11, 2009
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703.641.2316
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cgrandis@csc.com
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Bryan
Brady
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Vice
President, Investor Relations
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Corporate
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703.
641.3000
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investorrelations@csc.com
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CSC
REPORTS SOLID SECOND QUARTER RESULTS
Improvements
in Key Financial Measures Continue
FALLS
CHURCH, Va., Nov. 11 - - CSC (NYSE: CSC) today reported second quarter fiscal
2010 revenue of $4.0 billion and fully diluted earnings per share (EPS) of
$1.40, compared to second quarter fiscal 2009 revenue of $4.2 billion and EPS of
$2.95 (including net tax benefits of $2.27 from resolution of prior year
domestic and international tax audits).
Highlights
include:
|
·
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New
business awards of $4.58 billion;
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·
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Pre-tax
margin of 6.43%, a 204 basis points improvement from the previous
year;
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·
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Operating
margin of 8.44%, a 179 basis points improvement from the previous
year;
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·
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Operating
cash flow of $572 million, as compared to $401 million in
2Q09;
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·
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Free
cash flow of $429 million, as compared to $166 million in
2Q09.
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Commenting
on the results, CSC Chairman and Chief Executive Officer Michael W. Laphen said,
“We are pleased with our Q2 results, most notably our significant, sequential
and year over year, continuing performance improvements in cash flow, operating
income, and margin rate. Additionally, new business awards in the quarter also
increased sequentially and that momentum continues into the third
quarter.”
New
Business Awards
For the
quarter, the new business awards totaled $4.58 billion. Across the three lines
of business, North American Public Sector (NPS) contributed $3.23 billion,
Business Solutions and Services (BSS) reported $0.98 billion, and Managed
Services Sector (MSS) closed $0.37 billion of new business. Thus far
in the third quarter of fiscal 2010, the company has secured new business awards
of approximately $4.2 billion including the yet to be finalized Zurich Financial
Services Group contract.
Business
Outlook
“In MSS,
our new business activity is strong,” said Laphen, “benefitting from the
counter-cyclical pressure for businesses to look to outsourcing as a means of
achieving necessary cost reductions and earnings improvement. Our year-to-date
bookings support our optimism for the second half of this fiscal year. However,
demand for short term IT consulting projects is still subdued and this is
currently impacting our BSS sector. Our Federal business continues to experience
growth due to the company’s solid market position, performance and customer
satisfaction, and we remain confident that NPS revenue will grow at mid to high
single digits this fiscal year.”
Lines
of Business
NPS
revenue was $1.62 billion, up 8.5% from the previous year. MSS revenue was $1.58
billion, down 12.5% from the previous year and down 7.4% in constant currency.
BSS revenue was $0.86 billion, down 10.7% and down 7.5% in constant
currency.
Guidance
The
company re-affirmed its guidance for fiscal year 2010.
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·
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New
business awards of $17 to $18
billion,
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·
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Revenue
of $16.0 to $16.5 billion,
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·
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Operating
Margin expansion of 25 to 50 basis points over fiscal year
2009,
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·
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EPS
of $4.80 - $5.00, and
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·
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Free
cash flow in the range of 90% to 100% of net
income.
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Conference
Call and Webcast
CSC
senior management will host a conference call and Webcast at 5 p.m. EDT
today. The conference call dial-in number for domestic callers is
877-627-6581. International callers will need to dial
719-325-4747. The pass code for all participants is
4173888. The Webcast and presentation slides can be accessed at www.csc.com/investorrelations.
Non-GAAP
Measures
In an
effort to provide investors with additional information regarding the company’s
results as determined by generally accepted accounting principles (GAAP), the
company has also disclosed in this press release non-GAAP information which
management believes provides useful information to investors, including:
operating income, operating margin and free cash flow. A
reconciliation of the adjustments to GAAP results for this quarter and prior
periods, as well as the rationale for management’s use of non-GAAP measures, is
included in the tables below.
About
CSC
CSC is a global leader in providing
technology-enabled solutions and services through three primary lines of
business. These include Business Solutions & Services, the
Managed Services Sector and the North American Public Sector. CSC’s
advanced capabilities include system design and integration, information
technology and business process outsourcing, applications software development,
Web and application hosting, mission support and management
consulting. Headquartered in Falls Church, VA., CSC has approximately
92,000 employees and reported revenue of $16.0 billion for the 12 months ended
October 2, 2009. For more information, visit the company’s Web Site
at www.csc.com.
All
statements in this press release and in all future press releases that do not
directly and exclusively relate to historical facts constitute “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements represent the company’s intentions, plans,
expectations and beliefs, and are subject to risks, uncertainties and other
factors, many of which are outside the company’s control. These factors could
cause actual results to differ materially from such forward-looking statements.
For a written description of these factors, see the section titled “Risk
Factors” in CSC’s Form 10-K for the fiscal year ended April 3, 2009 and any
updating information in subsequent SEC filings. The company disclaims
any intention or obligation to update these forward-looking statements whether
as a result of subsequent event or otherwise, except as required by
law.
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CSC-Page
3
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11/11/2009
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|||||||||||||||
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Revenues
by Segment
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||||||||||||||||
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(unaudited)
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||||||||||||||||
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Quarter
Ended
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||||||||||||||||
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October
2, 2009
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October
3, 2008
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%
of Total
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||||||||||||||
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(In millions)
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Fiscal
2010
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Fiscal
2009
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||||||||||||||
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Business
Solutions & Services
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$ | 864 | $ | 967 | 21 | % | 23 | % | ||||||||
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Managed
Services Sector
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1,579 | 1,804 | 39 | 43 | ||||||||||||
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||||||||||||||||
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Department
of Defense
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1,210 | 1,040 | 30 | 24 | ||||||||||||
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Civil
agencies
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342 | 418 | 8 | 10 | ||||||||||||
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Other
(1)
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70 | 37 | 2 | 1 | ||||||||||||
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North
American Public Sector
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1,622 | 1,495 | 40 | 35 | ||||||||||||
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Corporate
& Eliminations
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(24 | ) | (27 | ) | 0 | (1 | ) | |||||||||
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Total
Revenue
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$ | 4,041 | $ | 4,239 | 100 | % | 100 | % | ||||||||
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Six
Months Ended
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||||||||||||||||
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October
2, 2009
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October
3, 2008
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%
of Total
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||||||||||||||
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(In millions)
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Fiscal
2010
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Fiscal
2009
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Business
Solutions & Services
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$ | 1,702 | $ | 2,041 | 21 | % | 23 | % | ||||||||
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Managed
Services Sector
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3,143 | 3,701 | 40 | 43 | ||||||||||||
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Department
of Defense
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2,330 | 2,061 | 29 | 24 | ||||||||||||
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Civil
agencies
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708 | 843 | 9 | 10 | ||||||||||||
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Other
(1)
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102 | 84 | 1 | 1 | ||||||||||||
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North
American Public Sector
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3,140 | 2,988 | 39 | 35 | ||||||||||||
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Corporate
& Eliminations
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(47 | ) | (54 | ) | - | (1 | ) | |||||||||
| $ | 7,938 | $ | 8,676 | 100 | % | 100 | % | |||||||||
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Note
(1): Other revenues consist of state, local and foreign government as well
as commercial contracts performed by the North American Public Sector
(NPS).
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CSC-Page
4
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11/11/2009
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Consolidated
Statements of Income
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||||||||||||||||
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(preliminary
and unaudited)
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||||||||||||||||
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Quarter
Ended
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Six
Months Ended
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|||||||||||||||
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(In
millions except per-share amounts)
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October
2, 2009
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October
3, 2008
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October
2, 2009
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October
3, 2008
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||||||||||||
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Revenues
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$ | 4,041 | $ | 4,239 | $ | 7,938 | $ | 8,676 | ||||||||
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Costs
of services
(excludes
depreciation and amortization)
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3,215 | 3,410 | 6,371 | 7,012 | ||||||||||||
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Selling,
general and administrative
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246 | 285 | 493 | 563 | ||||||||||||
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Depreciation
and amortization
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275 | 312 | 544 | 629 | ||||||||||||
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Interest
expense
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53 | 59 | 108 | 123 | ||||||||||||
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Interest
income
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(7 | ) | (9 | ) | (13 | ) | (19 | ) | ||||||||
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Other
(income)/expense
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(1 | ) | (4 | ) | (9 | ) | 5 | |||||||||
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Total
costs and expenses
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$ | 3,781 | $ | 4,053 | $ | 7,494 | $ | 8,313 | ||||||||
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Income
before taxes
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$ | 260 | $ | 186 | $ | 444 | $ | 363 | ||||||||
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Taxes
on income
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$ | 39 | $ | (267 | ) | $ | 91 | $ | (214 | ) | ||||||
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Net
Income
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$ | 221 | $ | 453 | $ | 353 | $ | 577 | ||||||||
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Less:
net income attributable to noncontrolling interest, net of
tax
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$ | 5 | $ | 1 | $ | 7 | $ | 5 | ||||||||
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Net
income attributable to CSC common shareholders
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$ | 216 | $ | 452 | $ | 346 | $ | 572 | ||||||||
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Earnings
per share:
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Basic
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$ | 1.42 | $ | 2.98 | $ | 2.28 | $ | 3.78 | ||||||||
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Diluted
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$ | 1.40 | $ | 2.95 | $ | 2.26 | $ | 3.74 | ||||||||
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Average
common shares outstanding for:
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||||||||||||||||
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Basic
EPS
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151.835 | 151.396 | 151.687 | 151.288 | ||||||||||||
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Diluted
EPS
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154.126 | 153.107 | 153.373 | 153.085 | ||||||||||||
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CSC-Page
5
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11/11/2009
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Selected
Balance Sheet Data
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||||||||
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(preliminary
and unaudited)
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||||||||
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(In
millions)
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October
2, 2009
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April
3, 2009
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||||||
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Assets
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||||||||
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Cash
and cash equivalents
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$ | 2,407 | $ | 2,297 | ||||
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Receivables,
net
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3,850 | 3,786 | ||||||
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Prepaid
expenses and other current assets
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1,898 | 1,624 | ||||||
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Total
current assets
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$ | 8,155 | $ | 7,707 | ||||
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Property
and equipment, net
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2,345 | 2,353 | ||||||
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Outsourcing
contract costs, net
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680 | 684 | ||||||
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Software,
net
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471 | 476 | ||||||
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Goodwill
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3,924 | 3,784 | ||||||
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Other
assets
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562 | 615 | ||||||
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Total
assets
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$ | 16,137 | $ | 15,619 | ||||
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Liabilities
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||||||||
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Short-term
debt and current maturities of long-term debt
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$ | 65 | $ | 62 | ||||
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Accounts
payable
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532 | 636 | ||||||
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Accrued
payroll and related costs
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841 | 822 | ||||||
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Other
accrued expenses
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1,135 | 1,264 | ||||||
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Deferred
revenue
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933 | 915 | ||||||
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Income
taxes payable and deferred income taxes
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285 | 317 | ||||||
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Total
current liabilities
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$ | 3,791 | $ | 4,016 | ||||
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Long-term
debt, net
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$ | 4,175 | $ | 4,173 | ||||
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Income
tax liabilities and deferred income taxes
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477 | 486 | ||||||
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Other
long-term liabilities
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1,314 | 1,326 | ||||||
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Stockholders'
Equity
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6,380 | 5,618 | ||||||
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Total
liabilities and stockholders' equity
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$ | 16,137 | $ | 15,619 | ||||
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Debt
as a percentage of total capitalization
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39.9 | % | 43.0 | % | ||||
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CSC-Page
6
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11/11/2009
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|||||||
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Consolidated
Statement of Cash Flows
|
||||||||
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(preliminary
and unaudited)
|
||||||||
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Six
Months Ended
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||||||||
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(In millions)
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October
2, 2009
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October
3, 2008
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||||||
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Cash
flows from operating activities:
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||||||||
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Net
income
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$ | 353 | $ | 577 | ||||
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Adjustments
to reconcile net income to net cash provided by
(used
in) operating activities:
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||||||||
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Depreciation
and amortization and other non-cash charges
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577 | 681 | ||||||
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Stock
based compensation
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34 | 34 | ||||||
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Provision
for losses on accounts receivable
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15 | 12 | ||||||
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Unrealized
foreign currency exchange (gain)/loss, net
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(65 | ) | (19 | ) | ||||
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(Gain)/loss
on dispositions, net of taxes
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(4 | ) | 2 | |||||
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Changes
in assets and liabilities, net of effects of acquisitions:
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||||||||
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(Increase)/decrease
in assets
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(40 | ) | 159 | |||||
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Decrease
in liabilities
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(595 | ) | (1,100 | ) | ||||
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Net
cash provided by operating activities
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275 | 346 | ||||||
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Investing
activities:
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||||||||
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Purchases
of property and equipment
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(209 | ) | (362 | ) | ||||
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Outsourcing
contracts
|
(77 | ) | (73 | ) | ||||
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Acquisitions
|
(5 | ) | (63 | ) | ||||
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Software
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(68 | ) | (99 | ) | ||||
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Other
investing cash flows
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73 | 40 | ||||||
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Net
cash used in investing activities
|
(286 | ) | (557 | ) | ||||
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Financing
activities:
|
||||||||
|
Net
borrowings of commercial paper, net
|
- | 472 | ||||||
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Borrowings
under lines of credit
|
28 | 280 | ||||||
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Repayments
on lines of credit
|
(32 | ) | (161 | ) | ||||
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Principal
payments on long-term debt
|
(17 | ) | (316 | ) | ||||
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Proceeds
from stock options and other common stock transactions
|
30 | 12 | ||||||
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Repurchase
of common stock, net of settlement
|
(3 | ) | (3 | ) | ||||
|
Excess
tax benefit from stock-based compensation
|
3 | 1 | ||||||
|
Other
financing cash flows
|
- | 2 | ||||||
|
Net
cash provided by financing activities
|
$ | 9 | $ | 287 | ||||
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Effect
of exchange rate changes on cash and cash equivalents
|
$ | 112 | $ | (33 | ) | |||
|
Net
increase in cash and cash equivalents
|
$ | 110 | $ | 43 | ||||
|
Cash
and cash equivalents at beginning of year
|
$ | 2,297 | $ | 699 | ||||
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Cash
and cash equivalents at end of period
|
$ | 2,407 | $ | 742 | ||||
CSC-Page 7 11/11/2009
Non-GAAP
Financial Measures
The
following tables reconcile operating income and free cash flow to the most
directly comparable financial measure calculated and presented in accordance
with accounting principles generally accepted in the United States (GAAP). CSC
management believes that these non-GAAP financial measures provide useful
information to investors regarding the Company’s financial condition and results
of operations as they provide another measure of the Company’s profitability and
ability to service its debt, and are considered important measures by financial
analysts covering CSC and its peers. Management uses operating income to
evaluate business unit financial performance and it is one of the measures used
in assessing management performance. One of the limitations associated with the
use of operating income (as compared to reported earnings) is that it does not
reflect the complete financial results of the Company. CSC compensates for these
limitations by providing a reconciliation between operating income and reported
earnings.
|
GAAP
Reconciliations
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||||||||||||||||
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(In millions)
|
||||||||||||||||
|
Operating
Income(preliminary and unaudited)
|
Quarter
Ended
|
Six
Months Ended
|
||||||||||||||
|
October
2, 2009
|
October
3, 2008
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October
2, 2009
|
October
3, 2008
|
|||||||||||||
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Operating
Income
|
$ | 341 | $ | 282 | $ | 607 | $ | 564 | ||||||||
|
Corporate
G&A
|
(36 | ) | (50 | ) | (77 | ) | (92 | ) | ||||||||
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Interest
expense
|
(53 | ) | (59 | ) | (108 | ) | (123 | ) | ||||||||
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Interest
income
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7 | 9 | 13 | 19 | ||||||||||||
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Other
Income/(expense)
|
1 | 4 | 9 | (5 | ) | |||||||||||
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Income
Before Taxes
|
260 | 186 | 444 | 363 | ||||||||||||
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Taxes
on income
|
39 | (267 | ) | 91 | (214 | ) | ||||||||||
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Income
from continuing operations
|
221 | 453 | 353 | 577 | ||||||||||||
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Net
income attributable to non controlling interest, net of
tax
|
5 | 1 | 7 | 5 | ||||||||||||
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Net
income attributable to CSC common shareholders
|
$ | 216 | $ | 452 | $ | 346 | $ | 572 | ||||||||
|
Free
Cash Flow (preliminary and unaudited)
|
Quarter
Ended
|
Six
Months Ended
|
||||||||||||||
|
October
2, 2009
|
October
3, 2008
|
October
2, 2009
|
October
3, 2008
|
|||||||||||||
|
Free
cash flow
|
$ | 429 | $ | 166 | $ | (33 | ) | $ | (163 | ) | ||||||
|
Net
cash used in investing activities
|
128 | 228 | 286 | 557 | ||||||||||||
|
Acquisitions,
net of cash acquired
|
(5 | ) | (1 | ) | (5 | ) | (63 | ) | ||||||||
|
Dispositions
|
12 | - | 12 | 0 | ||||||||||||
|
Capital
lease payments
|
8 | 8 | 15 | 15 | ||||||||||||
|
Net
cash provided by operating activities
|
$ | 572 | $ | 401 | $ | 275 | $ | 346 | ||||||||
|
Net
cash used in investing activities
|
$ | 128 | $ | 228 | $ | 286 | $ | 557 | ||||||||
|
Net
cash provided by (used in) financing activities
|
$ | 23 | $ | (12 | ) | $ | 9 | $ | 287 | |||||||
|
Operating
Income
|
$ | 341 | $ | 282 | $ | 607 | $ | 564 | ||||||||
|
Operating
Margin
|
8.44 | % | 6.65 | % | 7.65 | % | 6.50 | % | ||||||||
|
Pre-tax
margin
|
6.43 | % | 4.39 | % | 5.59 | % | 4.18 | % | ||||||||
Note:
Capital lease payments and proceeds from the sale of property and equipment
(included in investment activities) are included in the calculation of Free Cash
Flow (FCF).
Operating
Margin is defined as operating income as a percentage of revenue.
Pre-tax
Margin is defined as Income before taxes as a percentage of
revenue.