As Reported Operating Margin of 7.7%; Adjusted
Operating Margin of 9.2% Excludes Restructuring
Free Cash Flow of $237 Million, a YoY Improvement of
Bookings of $4.2 Billion
FY2013 EPS Target Increased to $2.30 to $2.50
FALLS CHURCH, Va., November 6 - CSC (NYSE: CSC) today
reported second quarter 2013 diluted earnings of $0.83 per
share, compared with diluted EPS of $(18.56) in the second
quarter 2012 which included a goodwill impairment charge of
$18.21 per share and a U.S. Claims settlement of $1.20 per
share. Total revenues were $3.85 billion compared with
$3.97 billion in the year ago period, a decrease of 3% as
reported and a 1% decline in constant currency.
Diluted EPS of $0.83 per share included a workforce
restructuring charge of $58 million, or $0.25 per share.
Operating income of $298 million was compared with an
operating loss in the year ago period.
Operating margin of 7.7% increased compared with -1.9% a
year ago and 4.6% in the prior quarter. Excluding the
impact of a $269 million U.S. Claims settlement in the
prior year, operating margin improved by 289 basis
Operating cash flow of $444 million for the quarter,
improved by $438 million from the previous year.
Free cash flow of $237 million for the quarter improved
by $505 million compared to the previous year, as the
result of better contract management, cost takeout, and
the benefit of the NHS Interim Agreement.
The company raised $700 million of senior unsecured notes
and secured commitments for a new $250 million bank term
loan. Funds from these financings were used to redeem
maturing debt in October, 2012.
Ending cash and cash equivalents were $1.85 billion.
"Our second quarter results reflect continued progress
made on our contract management performance and cost
takeout program. As a result, operating margins improved
across all three lines of business when compared with the
prior year and we are raising our fiscal year 2013 EPS
targets to $2.30 to $2.50," said Mike Lawrie,
President and CEO. "During the quarter, we also
strengthened our offering portfolio through the acquisition
of a premiere software development company that specializes
in big data, analytics and advanced applications. This
action is consistent with our strategy of being a leader in
next generation technology solutions and services. We are
also taking steps to divest certain non-core assets such as
a smaller business in Italy. There is much work to be
completed but we are encouraged with the early results of
our turnaround program."
Lines of Business
Managed Services Sector (MSS) revenue of $1.58 billion
decreased by 2% from the second quarter of last year but
increased 1% in constant currency mainly due to the AppLabs
acquisition. Segment operating margin increased 278 basis
points to 5.6% due to better contract performance and cost
takeout partially offset by a $47 million workforce
restructuring charge. MSS signed $2.2 billion of new
business during the quarter.
Business Solutions & Services (BSS) revenue was $0.92
billion decreased by 3% from the second quarter of last
year but increased 1% in constant currency. BSS operating
margin expanded by 335 basis points to 6.9% primarily as
the result of improved contract performance and cost
takeout partially offset by a $10 million workforce
restructuring charge. New business awards for BSS were $0.9
North American Public Sector (NPS) revenue of $1.38 billion
declined by 4% from the second quarter last year primarily
due to the Department of Defense contract completions which
occurred at the end of fiscal year 2012. Operating margin
of 10.9% increased significantly year over year due to the
impact of the U.S. Claims settlement in the prior year. NPS
bookings of $1.1 billion declined from one year ago as new
business awards continue to be impacted by continued
uncertainty in government procurement.
Conference Call and Webcast
CSC senior management will host a conference call and
Webcast at 11:00 a.m. EST today. The dial-in number for
domestic callers is 888-401-4691. Callers who reside
outside the United States or Canada should dial
719-325-2132. The passcode for all participants is 1519747.
The Webcast audio and any presentation slides will be
available at www.csc.com/investorrelations.
A replay of the conference call will be available from
approximately two hours after the conclusion of the call
until November 12, 2012. The replay dial-in number is
888-203-1112 for domestic callers and 719-457-0820 for
callers who reside outside of the U.S. and Canada. The
replay passcode is also 1519747.
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
CSC is a global leader in providing technology-enabled
business solutions and services. Headquartered in Falls
Church, Va., CSC has approximately 95,000 employees and
reported revenue of $15.7 billion for the 12 months ended
September 28, 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.