CSC Reports Third Quarter 2012 Results
News Release -- February 08, 2012
FALLS CHURCH, Va., Feb. 8 – CSC (NYSE: CSC) today reported results for the third quarter of fiscal 2012 ended December 30, 2011.
The financial summary for the third quarter is as follows:
- Revenue was $3.76 billion net of a $204 million reduction relating to the U.K. National Health Service (NHS) contract. Excluding the NHS reduction, revenue was $3.97 billion, a decrease of 0.7% when compared to a year ago.
- EPS from continuing operations was ($8.97) and included two significant non-cash charges:
- On December 27, 2011, the Company issued a Form 8-K announcing that it would record a material impairment of the Company’s net investment in the NHS contract. Third quarter results reflect a charge of $1.49 billion, reducing EPS from continuing operations by $9.93.
- A further goodwill impairment review for the BSS-Health reporting unit took place in the third quarter and resulted in a net goodwill impairment charge of $60 million which represented all of the remaining goodwill at BSS-Health. This charge reduced EPS from continuing operations by $0.39.
- Excluding the impact of the above charges, non-GAAP EPS was $1.35.
- Pre-tax margin was -38.2% versus 5.8% in the previous year.
- Operating margin of -34.1% compares to 7.4% for the year ago quarter.
- Operating cash flow was $720 million for the quarter, as compared to $462 million for the year ago quarter.
- Free cash flow was $499 million for the quarter when compared to $250 million for the year ago quarter.
- New business awards were $4.1 billion for the quarter and $13.0 billion year to date, which represents an increase of 71% and 26%, respectively, when compared to last year.
New Business Awards
Across the three lines of business, new business awards for the third quarter were $4.1 billion. North American Public Sector (NPS) contributed $0.8 billion, Managed Services Sector (MSS) delivered $2.4 billion, and Business Solutions & Services (BSS) closed $0.9 billion of new business.
On a year-to-date basis, new business awards were approximately $13.0 billion which is a 26% increase compared to the previous year.
Revenue by Line of Business
For the quarter, revenue from BSS was $0.74 billion. After adjusting for the $204 million NHS reduction, BSS revenue was $0.94 billion (an increase of 5.0% from the third quarter last year and an increase of 4.9% in constant currency). NPS revenue was $1.38 billion (down 6.1% from the third quarter last year). MSS revenue was $1.67 billion (an increase of 1.0% from the third quarter of last year and an increase of 1.1% in constant currency).
“I am encouraged by our continued success in capturing new business, our strong cash generation, and the sequential improvement in MSS operating margin,” said Michael W. Laphen, CSC Chairman, President and Chief Executive Officer. “Notwithstanding the NHS charge, discussions continue toward defining a program scope and a market potential that builds upon our accomplishments to date.”
On December 27, 2011, the Company issued a Form 8-K regarding the NHS contract and withdrew its guidance for fiscal year 2012 pending clarity around the NHS situation. As discussions continue with the client, guidance will not be provided at this time but will be communicated at a later date after discussions are completed.
Conference Call and Webcast
CSC senior management will host a conference call and Webcast at 11:00 a.m. EST today. The conference call dial-in number for domestic callers is 800-723-6498. International callers will need to dial +1 785-830-7989. The pass code for all participants is 4001210. 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 preliminary results as determined by 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: adjusted data, operating income, operating margin, non-GAAP Earnings/(Loss) per share from Continuing Operations, free cash flow and free cash flow as a percentage of net income attributable to CSC common shareholders. A reconciliation of the adjustments to preliminary GAAP results for this quarter, nine months 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 business solutions and services. Headquartered in Falls Church, Va., CSC has approximately 98,000 employees and reported revenue of $16.0 billion for the 12 months ended December 30, 2011. 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 April 1, 2011 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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