Director, Investor Relations
Director, Media Relations
CSC REPORTS SECOND QUARTER REVENUE AND OPERATING INCOME GROWTH
News Release -- November 12, 2008
Significant Improvement in Free Cash Flow, Earnings and New Business Bookings
FALLS CHURCH, Va., Nov. 12 -- CSC (NYSE: CSC) today reported revenues of $4.24 billion for the second 2009 fiscal quarter, up 5.5% year over year, and earnings per share for the quarter of $2.95 (diluted).
Summary second quarter results include:
• Total revenues of $4.24 billion;
• Operating income of $282 million, up 4.1% year over year;
• Second quarter operating cash flow of $401 million as reported; free cash flow improvement of $181 million year over year;
• Net income of $451.7 million, or $2.95 per share (diluted);
• Total new business awards and orders of $4.6 billion.
Net income for the second quarter was $451.7 million, or $2.95 per share (diluted), compared to last year’s second quarter earnings per share of 43 cents. This year’s quarterly earnings per share includes a tax-related benefit of $371.4 million, or approximately $2.43 per share, due to the previously announced successful IRS tax resolution for years 2000 through 2004, and the negative impact of $24.1 million, or 16 cents per share related to provisions for international tax audits. This year’s quarterly earnings per share also include approximately 4 cents of adverse currency impact and IRS resolution advisory costs not previously reflected in the company’s announced guidance.
New business awards and orders announced for the second quarter were approximately $4.6 billion. These awards and orders were comprised of $3.2 billion from the North American Public Sector (NPS), $1.0 billion from Business Solutions & Services (BS&S) and $366 million for Global Outsourcing Services (GOS). Awards for the first six months of fiscal 2009 stand at approximately $10 billion, up 45% over the same period last year.
“Despite a difficult economic environment, we’re pleased with the increase in earnings year over year, our free cash flow improvement and solid quarterly bookings,” said CSC Chairman, President and Chief Executive Officer Michael W. Laphen.
Performance by Business Unit, Industry Vertical and Geographies
Lines of Business
CSC’s revenues grew by 5.5% (approximately 4% in constant currency) across the company’s three lines of business: Business Solutions & Services, Global Outsourcing Services and the North American Public Sector.
The quarterly revenue gain was led by BS&S, which grew in excess of 8% (approximately 6% in constant currency) and recorded $1.08 billion in revenues compared to $1.0 billion in the year-ago quarter.
Global Outsourcing Services posted a second quarter revenue total of $1.69 billion, up 6% (approximately 5% in constant currency) from $1.60 billion last year.
For the second quarter, NPS revenue increased 3.0% to $1.49 billion from $1.45 billion for last year’s comparable quarter.
The company’s revenue growth by industry group was led by the Healthcare, Manufacturing, and Chemical, Energy & Natural Resources verticals, up 32.2%, 10.1% and 8.6% compared to last year, respectively. Additionally, the Public Sector vertical contributed mid-single-digit growth year over year of 4.6%. Given the difficult discretionary spending environment and lower than anticipated software sales, revenue declined 3.2% year over year within the company’s Financial Services vertical sector.
All four of the primary regions served by CSC demonstrated revenue growth for the quarter. The Americas reported revenue of $2.64 billion, up 3.5%; EMEA delivered revenue of $1.20 billion, up 8.4%; Australia’s revenue was $249 million, up 7.5%; and Asia reported revenue of $165 million, up 20.4%.
“Clearly, we must remain cautious regarding the future impacts of current macroeconomic conditions and currency fluctuations,” said Laphen. “However, our solid base of recurring revenue, broad services portfolio across both the public and commercial markets worldwide, and diversified range of vertical industries provide us with advantages that should prove beneficial during these difficult market conditions. In addition, we will continue to act prudently and decisively to take steps to manage our performance. For example, as previously announced, we recently drew down our credit facility to help ensure our liquidity position and discontinued our reliance on commercial paper.
“CSC is well positioned to help companies and government agencies during economic turmoil,” Laphen added. “We can quickly assist customers in areas that can help in a challenging economic environment, such as application portfolio rationalization, IT optimization and business transformation. Our industry expertise, state-of-the-art processes and global reach provide a wide range of options to help organizations reduce costs and improve profitability.”
Given the significant volatility in the currency exchange rates and assuming the current rates remain unchanged for the balance of the year, the company now anticipates revenue for the third quarter, ending Jan. 2, 2009, to be in the range of $4.1 billion to $4.2 billion. Earnings per share for the third quarter, under the same currency parameters, are anticipated to be in the range of $1.00 to $1.10.
Considering currency volatility, full-year guidance for revenue is now estimated to be in the range of $16.8 billion to $17.8 billion and GAAP earnings per share in the $6.30 to $6.40 range, which includes the IRS resolution benefit and the adverse impact related to provisions for international tax audits recorded in the second quarter.
As announced in the company’s press release dated Oct. 20, 2008, a teleconference will be held today at 5:00 p.m. EST to discuss second quarter results. This teleconference can be accessed from the CSC Web site at www.csc.com/investorrelations, in a listen-only mode, and slides will also be available at this site immediately prior to the call.
CSC is a global leader in providing technology-enabled solutions and services through three primary lines of business. These include Business Solutions & Services, Global Outsourcing Services and the North American Public Sector. CSC’s advanced capabilities include systems 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 91,000 employees and reported revenue of $17.3 billion for the 12 months ended Oct. 3, 2008. 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 March 28, 2008 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 events or otherwise except as required by law.
Note to Analysts and Editors: Please see attached tables PDF, 112 KB.