CSC Reports Solid Second Quarter Results
News Release -- November 11, 2009
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).
- 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.
"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.
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 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.
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.
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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