Improvements in Key Financial Measures Continue FALLS CHURCH, Va.,
Nov. 11 /PRNewswire-FirstCall/ -- 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). (Logo:
http://www.newscom.com/cgi-bin/prnh/20090422/CSCLOGO) Highlights
include: -- New business awards of $4.58 billion; -- Pre-tax margin
of 6.43%, a 204 basis points improvement from the previous year; --
Operating margin of 8.44%, a 179 basis points improvement from the
previous year; -- Operating cash flow of $572 million, as compared
to $401 million in 2Q09; -- Free cash flow of $429 million, as
compared to $166 million in 2Q09. 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, "benefiting 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. -- New business awards of $17 to $18 billion, -- Revenue
of $16.0 to $16.5 billion, -- Operating Margin expansion of 25 to
50 basis points over fiscal year 2009, -- EPS of $4.80 - $5.00, and
-- Free cash flow in the range of 90% to 100% of net income.
Conference Call & Webcast CSC senior management will host a
conference call and Webcast at 5 p.m. EST 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 http://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 http://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. Revenues by Segment (unaudited) Quarter Ended
-------------------------------------- % of Total ---------------
October 2, October 3, Fiscal Fiscal 2009 2008 2010 2009 (In
millions) -------------------------------------- -------------
Business Solutions & Services $864 $967 21% 23% ---- ---- ---
--- Managed Services Sector 1,579 1,804 39 43 Department of Defense
1,210 1,040 30 24 Civil agencies 342 418 8 10 Other (1) 70 37 2 1
--- --- --- --- North American Public Sector 1,622 1,495 40 35
----- ----- --- --- Corporate & Eliminations (24) (27) 0 (1)
--- --- --- --- Total Revenue $4,041 $4,239 100% 100% ====== ======
=== === Six Months Ended -------------------------------------- %
of Total --------------- October 2, October 3, Fiscal Fiscal 2009
2008 2010 2009 (In millions) --------------------------------------
------------- Business Solutions & Services $1,702 $2,041 21%
23% ------ ------ --- --- Managed Services Sector 3,143 3,701 40 43
Department of Defense 2,330 2,061 29 24 Civil agencies 708 843 9 10
Other (1) 102 84 1 1 --- --- --- --- North American Public Sector
3,140 2,988 39 35 ----- ----- --- --- Corporate & Eliminations
(47) (54) - (1) --- --- --- --- $7,938 $8,676 100% 100% ======
====== === === Note (1): Other revenues consist of state, local and
foreign government as well as commercial contracts performed by the
North American Public Sector (NPS). Consolidated Statements of
Income (preliminary and unaudited) Quarter Six Months Ended Ended
----------------- ----------------- October October October October
(In millions except 2, 2009 3, 2008 2, 2009 3, 2008 per-share
amounts) ------- ------- ------- ------- Revenues $4,041 $4,239
$7,938 $8,676 ------ ------ ------ ----- Costs of services
(excludes depreciation and amortization) 3,215 3,410 6,371 7,012
Selling, general and administrative 246 285 493 563 Depreciation
and amortization 275 312 544 629 Interest expense 53 59 108 123
Interest income (7) (9) (13) (19) Other (income)/expense (1) (4)
(9) 5 --- --- --- -- Total costs and expenses $3,781 $4,053 $7,494
$8,313 ------ ------ ------ ----- Income before taxes $260 $186
$444 $363 Taxes on income $39 $(267) $91 $(214) --- ----- --- -----
Net Income $221 $453 $353 $577 ==== ==== ==== ==== Less: net income
attributable to noncontrolling interest, net of tax $5 $1 $7 $5 ---
--- --- --- Net income attributable to CSC common shareholders $216
$452 $346 $572 ==== ==== ==== ==== Earnings per share: ----- -----
----- ----- Basic $1.42 $2.98 $2.28 $3.78 ===== ===== ===== =====
----- ----- ----- ----- Diluted $1.40 $2.95 $2.26 $3.74 ===== =====
===== ===== Average common shares outstanding for: Basic EPS
151.835 151.396 151.687 151.288 Diluted EPS 154.126 153.107 153.373
153.085 Selected Balance Sheet Data (preliminary and unaudited) (In
millions) October 2, 2009 April 3, 2009 ---------------
------------- Assets Cash and cash equivalents $2,407 $2,297
Receivables, net 3,850 3,786 Prepaid expenses and other current
assets 1,898 1,624 ----- ----- Total current assets $8,155 $7,707
------ ------ Property and equipment, net 2,345 2,353 Outsourcing
contract costs, net 680 684 Software, net 471 476 Goodwill 3,924
3,784 Other assets 562 615 --- --- Total assets $16,137 $15,619
======= ======= Liabilities Short-term debt and current maturities
of long-term debt $65 $62 Accounts payable 532 636 Accrued payroll
and related costs 841 822 Other accrued expenses 1,135 1,264
Deferred revenue 933 915 Income taxes payable and deferred income
taxes 285 317 --- --- Total current liabilities $3,791 $4,016
------ ------ Long-term debt, net $4,175 $4,173 Income tax
liabilities and deferred income taxes 477 486 Other long-term
liabilities 1,314 1,326 Stockholders' Equity 6,380 5,618 -----
----- Total liabilities and stockholders' equity $16,137 $15,619
======= ======= Debt as a percentage of total capitalization 39.9%
43.0% Consolidated Statement of Cash Flows (preliminary and
unaudited) Six Months Ended --------------------------------- (In
millions) October 2, 2009 October 3, 2008 -------------
--------------- --------------- Cash flows from operating
activities: Net income $353 $577 Adjustments to reconcile net
income to net cash provided by (used in) operating activities:
Depreciation and amortization and other non-cash charges 577 681
Stock based compensation 34 34 Provision for losses on accounts
receivable 15 12 Unrealized foreign currency exchange (gain)/loss,
net (65) (19) (Gain)/loss on dispositions, net of taxes (4) 2
Changes in assets and liabilities, net of effects of acquisitions:
(Increase)/decrease in assets (40) 159 Decrease in liabilities
(595) (1,100) --- ----- Net cash provided by operating activities
275 346 --- --- Investing activities: Purchases of property and
equipment (209) (362) Outsourcing contracts (77) (73) Acquisitions
(5) (63) Software (68) (99) Other investing cash flows 73 40 ---
--- Net cash used in investing activities (286) (557) --- ---
Financing activities: Net borrowings of commercial paper, net - 472
Borrowings under lines of credit 28 280 Repayments on lines of
credit (32) (161) Principal payments on long-term debt (17) (316)
Proceeds from stock options and other common stock transactions 30
12 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
--- --- 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
------ ---- Cash and cash equivalents at end of period $2,407 $742
====== ==== 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 (In millions) Operating Income Quarter Ended Six
Months Ended (preliminary and unaudited)
--------------------------------- October October October October
2, 2009 3, 2008 2, 2009 3, 2008 ------- ------- ------- -------
Operating Income $341 $282 $607 $564 Corporate G&A (36) (50)
(77) (92) Interest expense (53) (59) (108) (123) Interest income 7
9 13 19 Other Income/(expense) 1 4 9 (5) --- --- --- --- Income
Before Taxes 260 186 444 363 Taxes on income 39 (267) 91 (214) ---
--- --- --- Income from continuing operations 221 453 353 577 Net
income attributable to non controlling interest, net of tax 5 1 7 5
--- --- --- --- Net income attributable to CSC common shareholders
$216 $452 $346 $572 ---- ---- ---- ---- Free Cash Flow Quarter
Ended Six Months Ended (preliminary and unaudited)
--------------------------------- October October October October
2, 2009 3, 2008 2, 2009 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.
http://www.newscom.com/cgi-bin/prnh/20090422/CSCLOGO
http://photoarchive.ap.org/ DATASOURCE: CSC CONTACT: Chris Grandis,
Media Relations Director, Corporate, +1-703-641-2316, , or Bryan
Brady, Vice President, Investor Relations, Corporate,
+1-703-641-3000, , both of CSC Web Site: http://www.csc.com/
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