CSC Reports Fourth Quarter Results
News Release -- May 20, 2010
Strong Cash Performance, Record Annual Bookings, Dividend Instituted
FALLS CHURCH, Va., May 20 -- CSC (NYSE: CSC) today reported fourth quarter fiscal 2010 revenue of $4.2 billion and fully diluted earnings per share (EPS) of $1.66 compared to fourth quarter fiscal 2009 revenue of $4.1 billion and EPS of $2.51 (which included $1.11 of net favorable tax audit settlements).
For the full year, revenue was $16.1 billion (compared to $16.7 billion for the previous year), and EPS was $5.28 (compared to $7.31 for the previous year which included a total of $3.36 of net favorable tax audit settlements).
Highlights for the Quarter and Full Year include:
- New business awards of $4.3 billion for the quarter and $19.2 billion for the year, an annual increase of 18.5% and compares favorably to the latest guidance of $19 billion.
- Pre-tax margin of 7.13% for the quarter and 6.44% for the year which is a 72 basis point improvement from the previous year.
- Operating margin of 10.10% for the quarter and 8.75% for the year which is a 50 basis point improvement from the previous year and compares favorably to the latest guidance of 8.6% to 8.8%.
- Operating cash flow of $1,237 million for the quarter and $1,643 million for the year.
- Free Cash Flow of $951 million for the quarter, and $811 million for the year, representing 99% of net income attributable to CSC common shareholders, comparing favorably to 92% last year and our latest guidance in excess of 90%.
Commenting on the results, CSC Chairman and Chief Executive Officer Michael Laphen said, “We had a solid quarter and an outstanding year marked by robust cash generation, further increased profitability, and a significantly strengthened balance sheet. I am especially pleased with our success in capturing new business with another $4.3 billion of new awards in the quarter bringing our total year result to $19.2 billion, a record for CSC and $3 billion above last year.”
New Business Awards
The breakdown of the $4.3 billion of new business awards in the quarter by our three lines of business is as follows: North American Public Sector (NPS) contributed $1.4 billion ($7.1 billion for the full year), Business Solutions and Services (BSS) reported $0.8 billion ($3.4 billion for the full year), and Managed Services Sector (MSS) closed $2.1 billion of new business ($8.7 billion for the full year).
“Our fourth quarter revenue reflects a sequential increase of 7%, and that, coupled with the $19.2 billion of new business awards, positions us for a return to growth in Fiscal Year 2011,” said Laphen. “As the world economies gradually improve, our financial strength, market position, and innovative solutions will stimulate expansion across our three lines of business.”
Lines of Business
For the quarter, NPS revenue was $1.61 billion (up 8.8% sequentially and up 6.1% from fourth quarter last year), MSS revenue was $1.69 billion (up 4.4% sequentially and up 4.7% from fourth quarter last year) and BSS revenue was $0.97 billion (up 9.5% sequentially and down 4.1% from fourth quarter last year).
Laphen added, “Our focus on operational and financial excellence and particularly cash generation gives us the confidence that we can adequately fund the necessary investments in technology and strategic acquisitions while enhancing our return to investors.
Therefore, as a demonstration of that confidence in performance and commitment to our shareholders, the company’s Board of Directors authorized and declared a quarterly dividend of $0.15 per share payable July 2010.”
For fiscal year 2011, the company anticipates bookings in excess of $18 billion, revenue in the range of $16.8 billion to $17.2 billion (an increase of 4% to 7%) and operating margin between 9% and 9.25%, representing a further increase of 25 to 50 basis points. EPS is projected to be in the $5.30 to $5.40 range, representing an increase of approximately 20% when normalized for tax rate. Free Cash Flow is forecast to be in excess of 90% of net income attributable to CSC common shareholders.
Conference Call and Webcast
CSC senior management will host a conference call and Webcast at 11:00 a.m. EDT today. The conference call dial-in number for domestic callers is 877-604-9670. International callers will need to dial 719-325-4813. The pass code for all participants is 9342404. The Webcast and presentation slides can be accessed at www.csc.com/investor_relations.
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, free cash flow and free cash flow as a percentage of net income attributable to CSC common shareholders. 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. The company has been recognized as a leader in the industry, including being named by FORTUNE Magazine as one of the World’s Most Admired Companies for Information Technology Services (2010). Headquartered in Falls Church, VA., CSC has approximately 94,000 employees and reported revenue of $16.1 billion for the 12 months ended April 2, 2010. 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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