CSC Reports Solid First Quarter 2013 Results
News Release -- August 08, 2012
Strong Bookings of $4.0 Billion
Revenue Growth of 1% in Constant Currency
Operating Margins of 4.6%
Diluted EPS of $0.26
Substantial YoY Improvement to Free Cash Flow
FALLS CHURCH, Va., August 8 – CSC (NYSE: CSC) today reported first quarter 2013 diluted earnings of $0.26 per share, compared with diluted earnings of $1.17 per share in the first quarter of 2012 which included a one-time tax benefit of approximately $0.78 cents. Total revenue was $3.96 billion compared to $4.03 billion in the same period of last year.
- New business awards of $4.0 billion.
- Total revenue of $3.96 billion decreased by 2% on a reported basis and increased by 1% in constant currency when compared to the prior year.
- Operating margin of 4.6% increased by 16 basis points from the previous year and includes a restructuring charge of $27 million.
- EBIT margin of 2.9% decreased by 37 basis points year-over-year.
- Operating cash flow of $221 million for the quarter, an improvement of $267 million from the previous year.
- Free cash flow of negative $25 million for the quarter, an improvement of $378 million compared to the previous year.
- Ending cash and cash equivalents were $1.00 billion.
“Our first quarter performance reflects a first step in turning around CSC. While there is significant work ahead of us, I am pleased with our initial progress on operating margins and free cash flow,” said Mike Lawrie, President and CEO. “We have launched several action plans which will transform the company over the next several years and create value for our shareholders. As part of this transformation agenda, we are bringing a much needed focus to greater contract management discipline across the company. We are also simplifying our operating model to realize greater productivity and operational efficiency. We are attacking our cost structure and we expect to realize about $1 billion in cost improvement over the next 18 months.”
Lines of Business
Managed Services Sector (MSS) revenue of $1.64 billion increased by 1% from the first quarter of last year and increased 5% in constant currency, mainly due to new contracts and the AppLabs acquisition. Segment operating margin increased 525 basis points to 5.8% due to better contract performance versus the year-ago period. MSS signed $2.2 billion of new business during the quarter.
Business Solutions & Services (BSS) revenue was $0.99 billion, an increase of 2% from the first quarter last year and 7% in constant currency, primarily due to the iSOFT acquisition. Segment operating margin declined by 431 basis points to 1.6% primarily as the result of dilution from the iSOFT acquisition. BSS added $0.9 billion of new business in the quarter.
North American Public Sector (NPS) revenue of $1.37 billion declined by 8% from the first quarter last year primarily due the completion of three Department of Defense contracts. Operating margin declined by 57 basis points to 7.4%. NPS bookings of $0.9 billion were in-line with one year ago.
Conference Call and Webcast
CSC senior management will host a conference call and Webcast at 11:00 a.m. EDT today. The dial-in number for domestic callers is 877-627-6590. Callers who reside outside the United States or Canada should dial 719-325-4773. The passcode for all participants is 3550438. The Webcast audio and any presentation slides will be available at www.csc.com/investorrelations.
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: operating income, operating margin, earnings before interest and taxes (EBIT), EBIT margin, and free cash flow. Reconciliations of the preliminary non-GAAP measures to the respective and most directly comparable GAAP measures, as well as the rationale for management’s use of non-GAAP measures, is included below.
CSC is a global leader in providing technology-enabled business solutions and services. Headquartered in Falls Church, Va., CSC has approximately 96,000 employees and reported revenue of $15.8 billion for the 12 months ended June 29, 2012. 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 March 30, 2012 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.
Download a PDF version of this earnings release.