CSC Delivers Solid Margin Expansion, Profit Growth and Strong Cash Flow Performance in Third Quarter 2015
News Release -- February 09, 2015
- Earnings (Loss) per Share from Continuing Operations of ($2.23) Includes Net Actuarial Pension and SEC Settlement-Related Charges of ($3.43) per Share
- Non-GAAP Diluted Earnings per Share of $1.18, up 9% YoY
- Income from Continuing Operations of $172 million, up 3% YoY, Excluding Pension and SEC-Related Charges
- Operating Income of $332 Million and Operating Income Margin of 11.3%, up 80 basis points YoY
- Net Cash Provided by Operating Activities of $653 Million, up 23% YoY
- Free Cash Flow of $498 Million, up 54% YoY
FALLS CHURCH, Va., Feb. 9, 2015 – CSC (NYSE: CSC) today reported results for the third quarter of 2015.
“We are delivering solid profitability improvement through our cost takeout initiatives," said Mike Lawrie, president and CEO. “We returned to top line growth in our public sector business and we expanded the operating margin through tight cost management and good contract performance. We continue to see significant growth from our next-generation offerings. However, these contributions are not yet large enough to offset headwinds in our traditional commercial business. Free cash flow was strong at $498 million due to better working capital management.”
- Earnings (loss) per share from continuing operations was ($2.23) in the third quarter and includes $2.05 from non-cash pension-related charges and $1.38 from a proposed SEC settlement-related charge. Adjusting for these items, non-GAAP diluted earnings (loss) per share was $1.18, up 9% when compared with $1.08 in the third quarter of fiscal 2014.
- Income (loss) from continuing operations of ($313 million) for the third quarter includes pre-tax pension-related charges of $462 million and a $195 million charge for a proposed SEC settlement and related expenses.
- Income from continuing operations, excluding these items, was $172 million, up 3% compared with $167 million in the prior year.
- Operating income of $332 million compares with $338 million in the prior year. Operating margin of 11.3% for the quarter increased from 10.5% in the prior year.
- Earnings before interest and taxes (EBIT) of $272 million compares with $278 million in the third quarter of fiscal 2014. EBIT margin of 9.2% improved from 8.6% in the prior year.
- Free cash flow of $498 million compares with $324 million in the prior year.
Global Business Services
GBS revenue of $965 million in the quarter compares with $1,093 million in the year ago quarter. Segment revenue decreased by 8.5% in constant currency due to the ongoing repositioning of the consulting business and contract completions, partially offset by growth in big data and applications modernization. Operating margin of 13.3% increased from 12.8% in the prior year and 13.0% in the prior quarter, reflecting the company’s cost takeout actions. New business awards for GBS were $1.2 billion in the quarter.
Global Infrastructure Services
GIS revenue was $984 million in the quarter, a decrease of 10.9% in constant currency from the prior year. Growth in cloud and other next-generation offerings partially offset the impact of price-downs, restructurings, and contract completions. Operating margin was 7.3% compared with 7.9% in the prior year, reflecting investments in new offerings and strategic partnerships. Operating margin was up from 6.6% in the prior quarter, driven by cost takeout benefits. GIS reported new business awards of $1.0 billion in the quarter.
North American Public Sector
NPS revenue was $998 million in the quarter, an increase of 0.8% when compared with $990 million in the third quarter of fiscal 2014. Growth from infrastructure services, business process outsourcing at civil agencies, and healthcare applications offset declines from Department of Defense contracts. Operating margin of 14.5% compares with 12.3% in the prior year and 15.4% in the prior quarter, as the business continues to benefit from cost takeout and better contract performance. New business awards for NPS were $0.5 billion in the quarter.
Returning Capital to Shareholders
During the third quarter, CSC returned $41 million to shareholders consisting of $32 million in common stock dividends and $9 million of share repurchases. CSC repurchased 150,000 shares through open market purchases at an average price of $59.09. CSC had 140,991,870 basic shares outstanding on January 2, 2015.
Conference Call and Webcast
CSC senior management will host a conference call and webcast at 5 p.m. EST today. The dial-in number for domestic callers is 877-548-7914. Callers who reside outside of the United States or Canada should dial 719-325-4824. The passcode for all participants is 5099320. The webcast audio and any presentation slides will be available on CSC’s Investor Relations website.
A replay of the conference call will be available from approximately two hours after the conclusion of the call until February 16, 2015. The replay dial-in number is 888-203-1112 for domestic callers and 719-457-0820 for callers who reside outside of the United States and Canada. The replay passcode is also 5099320. A replay of this webcast will also be available on CSC’s website.
In an effort to provide investors with additional information regarding the Company’s preliminary results as determined by U.S. generally accepted accounting principles (GAAP), the Company has also disclosed in this press release preliminary non-GAAP information, which management believes provides useful information to investors, including: operating income, earnings before interest and taxes (EBIT), free cash flow, and non-GAAP results including non-GAAP income (loss) from continuing operations and non-GAAP diluted earnings (loss) per share from continuing operations. Reconciliations of the preliminary non-GAAP measures to the respective and most directly comparable GAAP measures, as well as the rationale for management’s use of non-GAAP measures, are included below.
Computer Sciences Corporation (CSC) is a global leader of next generation information technology (IT) services and solutions. The Company's mission is to enable superior returns on our clients’ technology investments through best-in-class industry solutions, domain expertise and global scale. CSC has approximately 72,000 employees and reported revenue of $12.6 billion for the 12 months ended January 2, 2015. For more information, visit the company's website 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 March 28, 2014 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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