CSC REPORTS SOLID FIRST QUARTER RESULTS - EPS UP 8%
News Release -- August 06, 2009
FALLS CHURCH, Va., Aug. 6 - CSC (NYSE: CSC) today reported first quarter 2010 revenue of $3.9 billion and fully diluted earnings per share (EPS) of $0.85, compared to first quarter 2009 revenue of $4.4 billion and EPS of $0.79. Highlights include:
- New business awards of $3.5 billion;
- Revenue of $3.9 billion, down 12.2% from the previous year (down 6.2% in constant currency);
- Operating margin of 6.81%, a 46 basis points improvement from the previous year;
- EPS for the first quarter of $0.85 including a tax benefit of $0.11 per share;
- Operating cash flow of -$297 million;
- Free cash flow of -$462 million.
Commenting on the results, CSC Chairman and Chief Executive Officer Michael W. Laphen said, "We experienced another strong quarter of earnings improvement while also meeting or exceeding our other key financial targets for the quarter."
"We remain committed to our revenue guidance for fiscal year 2010," Laphen said. "We anticipate modest improvement in the economy which should drive an increase in short-term projects during the second half of our fiscal year. Long-term opportunities in our pipeline position us for growth in both our public and commercial sectors."
The company has enhanced its market position with several important strategic actions this quarter including:
- The investment in global cyber security and trusted cloud computing positions the company in these expanding markets. The company's recently-announced cloud computing alliance with Microsoft further enhances these business prospects.
- The company has consolidated its application management services business, including all offshore activities, and the Global Outsourcing Services business (GOS), into its Managed Services Sector (MSS) unit. The new MSS organization will enable better client service delivery and sales efficiency by leveraging CSC's over 30,000 application professionals servicing all of key enterprise solutions globally.
- Finally, CSC's recently announced Brazilian acquisition expands the company's presence in Latin America and in its largest, most important and growing market. The vertical competencies and the strong consultancy practices of this newest member of the CSC team perfectly complement the company's core businesses and benefit CSC's collective clients.
New Business Awards
Across the three lines of business, 2010 first quarter awards were $3.51 billion. North American Public Sector (NPS) contributed approximately $1.65 billion to that total. Managed Services Sector (MSS) closed $1.07 billion of new business, the majority of which were from new clients, and Business Solutions & Services (BSS) contributed awards of $0.79 billion.
Lines of Business
The results of the realigned operating segments have been recast for fiscal year 2009 to allow comparisons with fiscal year 2010 results.
The first quarter of fiscal year 2009 was 14 weeks in duration while the first quarter of 2010 was only 13 weeks. Normalizing for this effect, first quarter revenue in constant currency was down 2.5%.
NPS revenue was $1.52 billion, up 1.7% from the previous year (up 6.5% adjusting for the extra week).
BS&S experienced reductions in discretionary projects and consequently revenue of $0.84 billion was down 22% from the previous year and down 14.6% in constant currency (down 9.6% adjusting for the extra week).
MSS revenue was $1.56 billion for the first quarter, down 17.6% from the previous year and down 7.9 % in constant currency (down 6.1% adjusting for the extra week).
As previously stated, revenue for the fiscal year 2010 is expected to be $16.0 billion to $16.5 billion. An analysis of the FY 2010 tax liabilities and initiatives, in light of the benefits realized in the fourth quarter last year and first quarter this year, has resulted in a reduction of the full year tax rate from 37.5% to 28%. Consequently, the full year EPS guidance has increased from $4.20 - $4.30 to $4.80 - $5.00. Free cash flow is still expected to be in the range of 90% to 100% of net income.
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 888-587-0614. International callers will need to dial 719-325-2326. The passcode for all participants is 6217458. A Webcast can be accessed at http://www.csc.com/investor_relations. Presentation slides will also be available at this Web site at time of the call.
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 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.
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 $16.2 billion for the 12 months ended July 3, 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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