computer sciences FY 2003 Q3


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computer sciences FY 2003 Q3

  1. 1. Computer Sciences Corporation QUARTERLY HIGHLIGHTS THIRD QUARTER FISCAL 2003 (ENDED DECEMBER 27, 2002) ABOUT CSC During challenging economic periods such as we have seen over the last 18 months, it is essential for us to concentrate on operating efficiency and client service delivery, as well as reducing our discretionary costs. We are quite pleased with our results gauged by those measurements, and with the dedication and commitment demonstrated by all Founded in 1959, our employees to achieve these goals. Computer Sciences Van B. Honeycutt Corporation is one of the Chairman and Chief Executive Officer Computer Sciences Corporation world’s leading information technology (IT) services Computer Sciences Corporation results for its fiscal 2003 third quarter, ended December 27, 2002 companies. CSC’s mission included: revenues of $2.8 billion, down 3.5% from last year’s third quarter (down approximately 6% in constant currency); net income of $105.7 million; and earnings per share (diluted) of 61 cents, up is to provide customers in 19.6%. Announced major new business awards were $1.8 billion. industry and government Effective for fiscal 2003, the company adopted SFAS No. 142, which eliminates the amortization with solutions crafted to of goodwill and certain intangible assets. Earnings per share before goodwill and employee workforce meet their specific challenges amortization were 62 cents for last year’s comparable quarter. and enable them to profit CSC’s U.S. federal government revenue growth partially offset continued softness in global demand for from the advanced use of commercial IT services in the financial services vertical market and for shorter-term project-oriented services. technology. The demand for IT services within the U.S. federal government remains solid, as does the global demand for commercial outsourcing, including infrastructure, business process and applications services. Indications of stabilization of demand for consulting and systems integration services in North America With more than 64,000 continue and CSC had a slight sequential increase in revenue during the quarter just ended. Markets employees, CSC provides outside North America continue to be under pressure from soft demand for IT services. innovative solutions for The U.S. federal government is one of the world’s largest spenders for IT services and CSC’s customers around the competitive position in that market is excellent. The total federal IT budget for the government’s fiscal world by applying leading 2003 is materially greater than last year and the Department of Defense budget shows the largest technologies and CSC’s increase in approximately 20 years. CSC’s pending acquisition of DynCorp will provide increased access to the growing federal IT services own advanced capabilities. market by expanding the company’s breadth of services and will deploy those services across a much These include systems broader array of agencies and departments. design and integration; Revenue provided by CSC’s U.S. federal government activities increased to $789.6 million, up 7.2% IT and business process from last year’s third quarter. Revenue from CSC’s civil agencies business rose to $325 million, up 17.7%, outsourcing; applications from last year, aided by increased work under the Immigration and Naturalization Service STARS program, software development; the IRS modernization activities and the GSA Federal Technology Services Millenia award. DoD revenue Web and application rose approximately 1% to $464.6 million from last year, with meaningful contributions from Missile Defense Agency engagements, intelligence community activities and other additional task orders. hosting; and management During the third quarter, global commercial revenues declined 7.1% (down approximately 11% in consulting. constant currency), to $2 billion. U.S. commercial revenue declined 11.2% over the prior year to $969.1 million. Both global and U.S. commercial revenues showed the effects of continued soft demand for Headquartered in project-oriented consulting and systems integration activities and discretionary project work on some El Segundo, Calif., CSC outsourcing contracts. European revenue was essentially flat, at $760.1 million compared with last year reported revenue of $11.3 (down approximately 9% in constant currency). billion for the 12 months Non-European international revenue was down 9.6% (down approximately 14% in constant currency), ended December 27, 2002. to $274.8 million from last year, as the Asian economies continue to struggle. FINANCIAL HIGHLIGHTS (a)(b)(c) 3RD QUARTER FISCAL 2003 REVENUES BY MAJOR MARKET (unaudited) Third Quarter Nine Months Ended U.S. Federal Commercial $ in millions, except 12/27/02 12/28/01 12/27/02 12/28/01 29% 71% per-share amounts ($ in millions) U.S. Commercial – $969.1 17% Revenues $2,893.5 $8,267.4 $8,344.1 $2,793.6 Europe – $760.1 35% 12% Other International – $274.8 Net Income $ 87.1 $ 277.5 $ 203.0 $ 105.7 9% U.S. DoD – $464.6 27% U.S. Civil Agencies – $325.0 Diluted Earnings Per Share $ 0.51 1.61 $ 1.19 $ 0.61 $ Total – $2,793.6 (a) During the third quarter of fiscal 2003, the Securities and Exchange Commission staff indicated the guidance in Emerging Issues Task Force (EITF) Issue No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer (including a Reseller of the Vendor’s Products)” should be applied broadly to all forms of consideration in which an entity pays cash or other forms of consideration to its customers. The Company acquires Information Technology assets from outsourcing clients and subsequently records the assets at their fair values. Any excess paid over the fair value amounts (premium) is included in outsourcing contract costs and amortized over the contract life. In accordance with EITF Issue No. 01-09, amortization of premiums have been treated as a reduction of revenue, rather than amortization expense. Prior period amounts have been conformed with current year presentation. The revenues and total costs and expenses were both reduced by less than 1%, with no impact on income. (b) During the third quarter of fiscal 2003, the Company reclassified the provision for doubtful accounts from costs of services to selling, general and administrative. Prior period amounts have been conformed to current year presentation. (c) The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets” effective March 30, 2002. One of the SFAS No. 142 requirements is that, upon adoption of the new standard, goodwill and certain intangible assets must no longer be amortized. Goodwill and employee workforce acquired amortization of $19.5 million ($18.7 million after tax), or 11 cents per share (diluted) was recorded during the third quarter ended December 28, 2001.
  2. 2. • JPMorgan Chase -- Under a subcontract CSC’S SERVICES ENCOMPASS INVESTMENT DATA with IBM, CSC will support a portion SEVERAL BROAD AREAS NY SE: CSC • Outsourcing – Involves operating all of JPMorgan Chase’s IT environment. Recent Closing Price: 31.26 (2/28/03) or a portion of a customer’s technology CSC’s 1996 IT services agreement with 52-Week Range: 24.30 – 53.47 infrastructure. CSC also provides JPMorgan Chase expires in July 2003. Shares Outstanding: 172.2 million business process outsourcing, which Under the terms of the new agreement, Registered Shareholders: 10,300 is the management of a client’s non- CSC will continue to manage a portion Institutional Ownership: 81% core business functions. of the JPMorgan Chase distributed Average Daily Trading Volume: computing data processing environment 3rd Quarter F Y 2003 – 1,226,036 • Consulting, Systems Integration and assist IBM in the implementation Market Cap: $5.4 billion and Professional Services – Designing, of its new IT data processing delivery developing, implementing and integrat- strategy. RESEARCH COVERAGE ing complete information systems, as A.G. Edwards (Greg Gieber) well as advising clients on the strategic • TDC – TDC, a provider of communica- Bear, Stearns ( Jim Kissane) acquisition and utilization of IT. tions solutions and Denmark’s second Bernstein (Rod Bourgeois) largest company, has signed an IT CS First Boston (Dris Upitis) outsourcing agreement with CSC RECENT ENGAGEMENTS INCLUDE: Deutsche Bank (Bill Zinsmeister) • Basell – CSC has signed an IT outsourc- to support a broad range of TDC’s Goldman Sachs (Greg Gould) ing agreement with Basell, the world’s business-critical applications. This J.P. Morgan Securities (Dirk Godsey) largest producer of polypropylene agreement aligns with CSC’s strategic Jefferies & Co. ( Joe Vafi) and a leading supplier of polyethylene focus on the growing European IT Legg Mason (Bill Loomis) and advanced polyolefin products outsourcing market and significantly McDonald Investments (Michael Keller) based in the Netherlands. Under broadens its telecommunications Morgan Stanley (David Togut) the agreement, CSC will assume vertical industry presence and expertise Prudential Securities (Bryan Keane) responsibility for Basell’s global IT in Europe. SG Cowen & Co. (Moshe Katri) infrastructure to help Basell improve Salomon Smith Barney (Pat Burton) efficiency and focus on changing • U.S. Army – CSC is one of eight SoundView ( John Jones, Jr.) market and client needs. teams awarded the U.S. Army’s Rapid Standard & Poor’s ( Richard Stice) Response Program Government-wide Thomas Weisel Partners (David Grossman) • National Security Agency (NSA) – Acquisition Contract. The contract, UBS Warburg (Adam Frisch) CSC is one of four companies selected sponsored by the Army Communica- U.S. Bancorp Piper Jaffray by the NSA to provide IT services tions and Electronics Command (T. Brett Manderfeld) under a five-year blanket purchase (CECOM), will provide rapid support Value Line (George Niemond) agreement. CSC will support the to agencies across the government. Information Technology Infrastruc- CECOM’s mission is to develop, SHAREHOLDER SERVICES ture Services program at the acquire, field and sustain information For more information regarding CSC: NSA Washington campus and NSA technologies and integrated systems community sites worldwide. for America’s soldiers. • Shareholder services and literature request line – (800)542-3070 CSC REVENUE GROWTH 3RD QUARTER FISCAL 2003 REVENUES BY BUSINESS SERVICES* • Website – FY 1998- 2002* • Registrar and transfer agent – $ in billions $ 12 Mellon Investor Services 23% P.O. Box 3315 47% S. Hackensack, New Jersey 07606 25% 10 (800)526 - 0801 or (201)329- 8660 5% OUTSOURCING . . . . . . . . . . . . . . . . . . . 52% • CSC Investor Relations – 8 Global Commercial 47% Bill Lackey Federal Sector 5% Director, Investor Relations CONSULTING, SYSTEMS INTEGRATION AND PROFESSIONAL SERVICES . . . . . . . 48% (310)615 -1700 6 Global Commercial 23% FY98 FY99 FY00 FY01 FY02 Federal Sector 25% Lisa Runge 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 Email: 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, • Headquarters many of which are outside the Company’s control. These factors could cause actual 2100 East Grand Avenue results to differ materially from such forward-looking statements. For a description El Segundo, California 90245, USA of these factors, see the section titled “Forward-Looking Statements” in the Company’s (310)615-0311 Quarterly Report on Form 10-Q for the fiscal quarter ended December 27, 2002. Printed in U.S.A. WH# CC -3Q03