computer sciences 2nd Q 06
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  • 1. Quar terly Highlights Second Quarter Fiscal 2006 (Ended September 30, 2005) “We have continued our discipline around contract execution, cost management and opportunity About CSC qualification – pursuing only those engagements which provide the appropriate returns to our investors. This quarter’s operating metrics reflect our progress. Founded in 1959, Van B. Honeycutt Computer Sciences Chairman and Chief Executive Officer Corporation is a leading Computer Sciences Corporation information technology Computer Sciences Corporation results for its fiscal 2006 second quarter included: revenue of $3.57 billion, (IT) services company. up 5.3% over last year’s second quarter (approximately 5% in constant currency); net income was $99.5 CSC’s mission is to provide million, including a $33.1 million current period after-tax non-cash asset impairment special charge ($52.0 customers in industry million pre-tax) related to the Nortel Networks contract; net earnings per share (diluted) were 53 cents, and government with including the special charge. Excluding the special charge, non-GAAP earnings per share, diluted, from solutions crafted to meet continuing operations were 71 cents, up 26.8%, compared with last year’s second quarter earnings per share, their specific challenges diluted, from continuing operations of 56 cents; and major business awards were $2.5 billion. The drivers of revenue growth during the quarter were CSC’s U.S. commercial activities and federal govern- and enable them to profit ment operations. Significant contributors to the U.S. commercial revenue growth were recent outsourcing from the advanced use engagements along with the continuing improvement in the North American consulting and systems integra- of technology. tion activities. The U.S. federal revenue growth was led by gains within the company’s Department of Defense (DoD)-related business. The company’s operations in Australia and Asia also contributed to the quarter’s With approximately revenue growth. 78,000 employees, CSC The U.S. federal government opportunity pipeline over the next 17 months is approximately $30 billion, provides innovative comprised of over 350 programs distributed over a wide array of government agencies and departments. solutions for customers About one-third of those opportunities are scheduled for award during the remainder of this fiscal year. around the world by In North America, revenue derived from shorter-term consulting and systems integration services grew year-over-year, aided by improved demand and utilization. Similar shorter-term activities in Europe continued applying leading tech- to be impacted by lingering soft demand in certain country-specific markets, particularly Italy and Germany, nologies and CSC’s own with France showing improvement. advanced capabilities. As previously disclosed, the company has anticipated a working capital adjustment resulting from the These include systems February 14, 2005, divestiture of certain DynCorp activities. Under an agreement finalized on October 27, design and integration; 2005, between CSC and the buyer, the company will receive $65.5 million in additional proceeds. These IT and business process proceeds are payable in 13% preferred stock and will be recorded as a gain on sale of discontinued operations outsourcing; applications subject to a valuation allowance during the third fiscal quarter. software development; Second quarter global commercial revenue was up 4.1% from the year-ago quarter. On the same basis, Web and application U.S. commercial revenue was $1.01 billion, up 11.3%; European revenue was $983.7 million, a decline of 4.9% (down approximately 4% in constant currency); CSC’s non-European international revenue was $339.1 hosting; and management million, up 13.9% (approximately 8% in constant currency). consulting. For the second quarter, CSC’s U.S. federal government revenue increased 7.5% to $1.24 billion from the second quarter of fiscal 2005. Revenue derived from CSC’s DoD-related business was $835.4 million, up 19.9%. Headquartered in This growth was the result of incremental revenue from several existing engagements and the contribution El Segundo, California, of recent new business awards. CSC’s civil agencies activities generated revenue of $383.4 million, declining CSC reported revenue 8.7% compared to last year. The decline is attributable to the end of the Asset Forfeiture program and the of $14.5 billion for reduced scope associated with the Internal Revenue Service Modernization activity. Other federal revenue, the 12 months ended comprised of state and local government as well as commercial contracts performed by the U.S. federal September 30, 2005. sector reporting segment, was $25.3 million, down from last year. FINANCIAL HIGHLIGHTS 2ND QUARTER FISCAL 2006 REVENUES FROM CONTINUING OPERATIONS (unaudited) BY BUSINESS SEGMENT Second Quarter Six Months Ended $ in millions,except per-share amounts Commercial U.S. Federal 09/30/05 09/30/05 10/01/04 10/01/04 65% 35% ($ in millions) Revenues From Continuing U.S. Commercial – $1,005.7 Operations $ 3,572.6 $ 7,155.1 $ 3,394.0 $ 6,691.5 23% 28% Europe – $983.7 Net Income 99.5* $ $ $ 231.1* $ 130.5 240.9 Other International – $339.1 11% U.S. DoD – $835.4 Diluted Earnings U.S. Civil Agencies – $383.4 Per Share $ 0.53* $ $ 1.24* $ 0.68 1.26 28% 9% Other U.S. Federal – $25.3 1% * Includes a $33.1 million (18 cents per share) after-tax non-cash asset impairment Total – $3,572.6 special charge related to the Nortel Networks contract.
  • 2. initiative that expands the current CMS CSC’S SERVICES ENCOMPASS INVESTMENT DATA Drug Discount Card pilot program. SEVERAL BROAD AREAS NYSE: CSC • Outsourcing – Involves operating all Recent Closing Price: 54.20 (11/4/05) • Federal Emergency Management or a portion of a customer’s technology 52-Week Range: 42.31 – 59.90 Agency (FEMA) – CSC won a contract infrastructure. CSC also provides Shares Outstanding: 185.0 million by FEMA, a branch of the Department business process outsourcing, which is Registered Shareholders: 8,926 of Homeland Security, to continue sup- the management of a client’s non-core Institutional Ownership: 87% porting the U.S. federal government’s business functions. Average Daily Trading Volume: National Flood Insurance Program 2nd Quarter FY 2006 – 751,005 • (NFIP). This new agreement follows and IT & Professional Services – Designing, Market Cap: $10.0 billion is incremental to a prior contract with developing, implementing and integrat- FEMA. As the NFIP’s bureau and statis- ing complete information systems, as RESEARCH COVERAGE tical agent, CSC will continue to serve well as advising clients on the strategic A.G. Edwards (Timothy Willi) as the liaison between the government acquisition and utilization of IT. Banc of America Securities (Abhi Gami) and more than 90 independent property Bear Stearns ( Jim Kissane) and casualty insurance companies. RECENT ENGAGEMENTS INCLUDE: Bernstein (Rod Bourgeois) • Banca Intesa – Banca Intesa, the largest Deutsche Bank (Brandt Sakakeeny) • Ford – Automotive manufacturer Ford banking group in Italy, and CSC have Goldman Sachs (Greg Gould) has extended its IT outsourcing contract signed an IT application services contract. J.P. Morgan Securities (Tien-tsin Huang) for a third time with CSC. Under the Under the terms of the agreement, Jefferies & Co. ( Joe Vafi) new agreement, CSC will continue to CSC will be the preferred applications KeyBanc Capital Markets (Michael Keller) provide data center services and related provider for Banca Intesa, supplying Legg Mason (Bill Loomis) applications support, including the systems design and integration, archi- Lehman Brothers (Louis Miscioscia) development and maintenance of legacy tecture, application development and Merrill Lynch (Greg Smith) systems for Ford’s Customer Service management support of both custom Morgan Stanley (David Togut) Division across Europe. and packaged software. This agreement Prudential Securities (Bryan Keane) helps accelerate CSC’s growth in the SG Cowen & Co. (Moshe Katri) • General Dynamics – CSC signed four Italian applications services market. Smith Barney Citigroup (Pat Burton) IT outsourcing services agreements with Standard & Poor’s ( Richard Stice) • General Dynamics. The contracts bring Centers for Medicare and Medicaid Thomas Weisel Partners (David Grossman) the former Veridian business unit into Services (CMS) – A MemberHealth Inc. UBS Warburg (Adam Frisch) scope and extend services for General team that includes CSC has been selected Value Line (George Niemond) Dynamics Advanced Information Systems, by CMS to establish one of 10 national Wachovia Securities (Edward Caso) General Dynamics Network Systems and prescription drug benefit plans in accor- Gulfstream Aerospace. The scope of work dance with the Medicare Modernization SHAREHOLDER SERVICES for the units is the same and includes a Act, Part D. The drug benefit plan, called For more information regarding CSC: full range of IT services. the Community Care Rx program, is an • Shareholder services and literature request line – (800)542-3070 CSC REVENUE GROWTH FIRST SIX MONTHS FISCAL 2006 • FROM CONTINUING OPERATIONS REVENUES FROM CONTINUING Web site – www.csc.com FY 2001-2005* OPERATIONS BY BUSINESS SERVICE* • Registrar and transfer agent – $ in billions Mellon Investor Services $ 14 23% P.O. Box 3315 12 43% S. Hackensack, New Jersey 07606 10 (800)676- 0654 or (201)329- 8660 31% www.MellonInvestor.com 8 3% • CSC Investor Relations – 6 OUTSOURCING . . . . . . . . . . . . . . . . . . . . 46% Bill Lackey Global Commercial 43% 4 U.S. Federal Sector 3% Director, Investor Relations 2 (310)615-1700 IT & PROFESSIONAL SERVICES . . . . . . . . 54% Global Commercial 23% Lisa Runge U.S. Federal Sector 31% FY01 FY02 FY03 FY04 FY05 Manager, Investor Relations * CSC’s fiscal year ends the Friday closest to March 31. * Based on CSC estimates. (310)615-1680 All statements in this document that do not directly and exclusively relate to historical facts constitute “forward-looking statements” within the meaning of the Private Securities Litigation Email: InvestorRelations@csc.com 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 • Headquarters the Company’s control. These factors could cause actual results to differ materially from such 2100 East Grand Avenue forward-looking statements. For a description of these factors, see the section titled “Forward- El Segundo, California 90245, USA Looking Statements” in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter (310)615-0311 ended September 30, 2005. Printed in U.S.A. WH# CC-2Q06