-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, bjBvpRfUQLuuJYaEnsx/QE3e1SfRUszo5ymrTwg8rUkN5yiBxsOM1sgQeWZHGq8v SKZl0Rs/KGvk7XlYInMq/Q== 0000023082-94-000006.txt : 19940215 0000023082-94-000006.hdr.sgml : 19940215 ACCESSION NUMBER: 0000023082-94-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPUTER SCIENCES CORP CENTRAL INDEX KEY: 0000023082 STANDARD INDUSTRIAL CLASSIFICATION: 7373 IRS NUMBER: 952043126 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 001-04850 FILM NUMBER: 94506784 BUSINESS ADDRESS: STREET 1: 2100 E GRAND AVE CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3106150311 10-Q 1 10Q 3RD QTR FY94 Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 QUARTER ENDED DECEMBER 31, 1993 Commission File No. 1-4850 COMPUTER SCIENCES CORPORATION Incorporated in the State of Nevada Employer Identification No. 95-2043126 2100 East Grand Avenue El Segundo, California 90245 Telephone (310) 615-0311 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] 16,818,491 shares of Common Stock, $1.00 par value, were outstanding on December 31, 1993, before giving effect to the stock split described in Note C of the accompanying financial statements. COMPUTER SCIENCES CORPORATION Index to Form 10-Q Page Number Part I. Financial Information Consolidated Condensed Balance Sheets - December 31, 1993 and April 2, 1993 3 Consolidated Condensed Statements of Income - Third quarter and nine months ended December 31, 1993 and January 1, 1993 4 Consolidated Condensed Statements of Cash Flows - Nine months ended December 31, 1993 and January 1, 1993 5 Notes to Consolidated Condensed Financial Statements 6 Management's Discussion and Analysis of Results of Operations and Financial Condition 8 Part II. Other Information Item 6 - Exhibits and Reports on Form 8-K 11 Exhibit 11 - Calculation of Earnings Per Share 12 Exhibit 28 - Additional Information - Revenues by Market Sector 13 Signatures 14 -2- PART I. FINANCIAL INFORMATION COMPUTER SCIENCES CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS ($ in thousands)
ASSETS Dec. 31 April 2, 1993 1993 (unaudited) ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 54,795 $ 111,477 Short-term investments 25,361 43,590 Receivables 628,145 538,122 Prepaid expenses and other assets 57,986 54,566 ------------ ------------ Total current assets 766,287 747,755 ------------ ------------ PROPERTY AND EQUIPMENT, at cost 612,040 525,742 Less accumulated depreciation and amortization 282,171 241,990 ------------ ------------ Property and equipment, net 329,869 283,752 ------------ ------------ EXCESS OF COST OF BUSINESSES ACQUIRED OVER RELATED NET ASSETS, NET 334,317 281,390 OTHER ASSETS 150,400 140,749 ------------ ------------ $ 1,580,873 $ 1,453,646 ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable (Note A) $ 110,919 $ 6,220 Current maturities of long-term debt 33,156 10,503 Accounts payable 92,979 105,941 Accrued payroll and related costs 115,372 115,915 Other accrued expenses 181,896 120,374 Advance contract payments 24,909 5,024 Income taxes payable 30,085 47,127 ------------ ------------ Total current liabilities 589,316 411,104 LONG-TERM DEBT,NET (Note A) 168,013 295,316 OTHER LONG-TERM LIABILITIES (Notes B and G) 57,616 51,846 ------------ ------------ STOCKHOLDERS' EQUITY (Note C): Common stock issued, par value $1.00 per share 17,014 16,812 Other stockholders' equity 748,914 678,568 ------------ ------------ Total stockholders' equity 765,928 695,380 ------------ ------------ $ 1,580,873 $ 1,453,646 ============ ============ See accompanying notes. -3-
COMPUTER SCIENCES CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (unaudited) ($ in thousands except earnings per share)
Third Quarter Ended Nine Months Ended ______________________ __________________________ Dec. 31 Jan. 1 Dec. 31 Jan. 1 1993 1993 1993 1993 __________ __________ ____________ ____________ Revenues $ 621,361 $ 608,364 $ 1,851,767 $ 1,829,524 __________ __________ ____________ ____________ Costs of services 494,176 496,449 1,494,737 1,499,963 Selling, general and admin. 56,121 48,112 159,640 147,103 Depreciation and amortization 33,292 29,830 93,369 85,016 Interest, net (Note D) 2,811 3,493 7,773 12,594 Other items, net 460 __________ __________ ____________ ____________ Total costs and expenses 586,400 577,884 1,755,519 1,745,136 __________ __________ ____________ ____________ Income before taxes 34,961 30,480 96,248 84,388 Taxes on income 13,285 11,659 38,143 32,344 __________ __________ ____________ ____________ Net earnings before cumulative effect of accounting change 21,676 18,821 58,105 52,044 Cumulative effect of accounting change for income taxes (Note B) 4,900 __________ __________ ____________ ____________ Net earnings $ 21,676 $ 18,821 $ 63,005 $ 52,044 ========== ========== ============ ============ Earnings per common share before cumulative effect of accounting change $0.42 $0.37 $1.14 $1.04 Cumulative effect of accounting change for income taxes (Note B) 0.09 __________ __________ ____________ ____________ Earnings per common share (Notes C and E) $0.42 $0.37 $1.23 $1.04 ========== ========== ============ ============ See accompanying notes. -4-
COMPUTER SCIENCES CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited) ($ in thousands)
Nine Months Ended __________________________ Dec. 31 Jan. 1 1993 1993 ____________ ____________ Cash flows from operating activities: Net earnings $ 63,005 $ 52,044 Adjustments to reconcile net earnings to net cash provided by operating activities : Depreciation and amortization 93,369 85,016 Provision for losses on accounts receivable 5,085 6,848 Changes in assets and liabilities, net of effects of acquisitions: Increase in assets (27,203) (31,063) (Decrease)increase in liabilities (10,735) 17,309 ____________ ____________ Net cash provided by operating activities 123,521 130,154 ____________ ____________ Investing activities: Short-term investments 18,229 (10,841) Purchases of property, plant and equipment (89,799) (61,892) Purchased and internally developed software (24,123) (2,502) Acquisitions, net of cash acquired (96,750) (1,900) Other investing cash flows 2,570 (5,801) ____________ ____________ Net cash used in investing activities (189,873) (82,936) ____________ ____________ Financing activities: Borrowings under lines of credit 64,608 14,083 Repayment of borrowings under lines of credit (57,828) (19,218) Principal payments on long-term debt (10,509) (68,197) Proceeds from exercise of stock options 13,337 7,501 Other financing cash flows 62 1,913 ____________ ____________ Net cash provided by (used in) financing activities 9,670 (63,918) ____________ ____________ Net decrease in cash and cash equivalents (56,682) (16,700) Cash and cash equivalents at beginning of year 111,477 115,739 ____________ ____________ Cash and cash equivalents at end of period $ 54,795 $ 99,039 ============ ============ See accompanying notes. -5-
COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ($ in thousands except per share amounts) (A) During November, 1993 the Company issued $250 million of commercial paper through its affiliate, CSC Enterprises, and paid down CSC Enteprises' $250 million in bank borrowings. CSC Enterprises entered into new credit agreements to provide standby support for the commercial paper program. The standby agreements expire during November 1994 and November 1996 in the amounts of $100 million and $150 million, respectively. (B) The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," effective April 3, 1993. As reported in the Company's Form 10-Q for the quarter ended July 2, 1993, the cumulative financial statement effect of adopting SFAS No. 109 was to increase the Company's net earnings by $4.9 million, or 9 cents per share. For the quarter ended October 1, 1993, the Company's tax provision includes approximately $1.3 million, or 3 cents per share, for the net cumulative amount of additional taxes pursuant to new U.S. tax regulations enacted during the quarter. The Company's net deferred tax liability is included on the Company's balance sheet, with the long-term portion of $32,819 included as part of Other Long-Term Liabilities. (C) On December 6, 1993, the Company's Board of Directors declared a three-for-one stock split in the form of a 200 percent stock dividend on the Company's common stock, with no change in par value. The dividend was distributed January 13, 1994 to shareholders of record as of December 22, 1993. Because the additional shares had not been distributed, the related $33.6 million increase in common stock and decrease in retained earnings is not reflected on the Company's balance sheet at December 31, 1993. However, all per share amounts contained in the statements of income and the accompanying notes are based on the new number of shares. No other dividends were paid or declared during the periods presented. Before giving effect to the stock split, there were 17,013,860 shares at December 31, 1993 and 16,811,831 shares at April 2, 1993 of $1.00 par value common stock issued with 195,369 and 190,747 shares, respectively, in treasury stock. (D) Interest, net consists of the following: 3rd Quarter Ended Nine Months Ended ------------------ ------------------ Dec 31, Jan 1, Dec 31, Jan 1, 1993 1993 1993 1993 -------- -------- -------- -------- Interest income $(1,746) $(1,035) $(5,145) $(3,482) Interest expense 4,567 4,528 12,918 16,076 -------- -------- -------- -------- Total $ 2,821 $ 3,493 $ 7,773 $12,594 ======== ======== ======== ======== -6- (E) Primary earnings per common share are based on the weighted average number of common stock and common stock equivalent shares (dilutive stock options) outstanding of 51,186,000 and 50,145,000, respectively, for the nine months ended December 31, 1993 and January 1, 1993 (see Part II - Exhibit 11). These share amounts reflect the stock split described in Note C above. (F) Cash payments for interest on indebtedness were $13,799 and $17,257, respectively, for the nine months ended December 31, 1993, and January 1, 1993. Cash payments for taxes on income were $44,502 and $45,214, respectively, for the nine months ended December 31, 1993, and January 1, 1993. (G) Effective April 3, 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." As reported in the Company's Form 10-Q for the quarter ended July 2, 1993, this statement has had no significant cash flow or earnings impact on the Company due to delayed recognition and the effect of recovery under government contracts. (H) The financial information reported, which is not necessarily indicative of the results for a full year, is unaudited but includes all adjustments which the Company considers necessary for a fair presentation. All such adjustments are normal recurring adjustments. -7- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Third Quarter of Fiscal 1994 Versus Third Quarter of Fiscal 1993 Revenues During the quarter ended December 31, 1993, the Company's total revenues of $621.4 million increased $13.0 million over the same period last year. Federal revenue totaled $283.8 million, down 9.7% from last year's $314.3 million due principally to the phaseout of two large contracts. Commercial revenue of $255.4 million from domestic operations rose 6.9% from $239.0 million last year, reflecting growth in the Company's consulting, systems integration and outsourcing services. International revenue increased 49% to $82.2 million reflecting strong outsourcing growth in Europe and a substantial contribution from the CSA acquisition, completed November 1, 1993. In the federal arena, the Company has been awarded approximately $1.8 billion of federal business during the first nine months of the current fiscal year, compared with $1.1 billion won for all of fiscal 1993. Costs and Expenses As a percentage of revenue, costs of services were 79.5% for the quarter ended December 31, 1993, a favorable result compared to the 81.6% for the same quarter last year. The improvement is mainly the result of a change in the Company's business "mix," with a larger portion of the Company's business coming from its U.S. commercial outsourcing activities, where costs of services by this measure are lower than the Company's overall average. Selling, general and administrative expenses increased 16.6% to $56.1 million, up from $48.1 million for last year's third quarter. The increased expenses relate primarily to the Company's federal business and U.S. commercial outsourcing activities. The Company's depreciation and amortization expense increased to $33.3 million for the current quarter, up from $29.8 million last year. The increase reflects higher amounts of depreciable and amortizable assets connected primarily with CSC's U.S. consulting activities. Net interest expense decreased to $2.8 million for the current quarter, down from $3.5 million for the same quarter last year. The decrease is substantially due to increased interest income on higher average cash balances invested. Income Before Taxes Income before taxes was $35 million, up $4.5 million or 14.7% over last year's third quarter, reflecting both revenue growth and margin improvement. As a percent of revenues, income before taxes for the two periods was 5.6% and 5%, respectively. The margin improvement is primarily due to the reduction in costs of services as a percentage of revenues, as described above. The improvement in net interest expense also contributed to the margin improvement by helping to offset the Company's higher selling, general and administrative costs and depreciation and amortization expense. -8- Net Earnings Net earnings were $21.7 million for the quarter ended December 31, 1993, up $2.9 million or 15.2% over the same quarter last year. The effective tax rate was 38.0%, versus 38.25% for the same quarter last year. The lower tax rate reflects the reduction of European tax losses which the Company was unable to offset against taxable income elsewhere during the prior period, offset in part by a higher effective rate on US income due to the August 1993 tax legislation. During the quarter just ended, CSC's Board of Directors declared a three-for-one stock split in the form of a 200 percent stock dividend, and the additional shares were distributed January 13, 1994. Earnings per share for this year's third quarter compared with the same quarter last year and adjusted for the split were 42 cents versus 37 cents on a greater number of shares outstanding. Cash Flows Cash flows from operating activities were $123.5 million for the nine months ended December 31, 1993, compared to $130.2 million during the same period last year. The higher operating cash flow of the prior period includes approximately $22 million of higher trade payables associated with the Company's expanded outsourcing activities, while the current period is lower due to reduction of trade payables in the UK. The Company's cash outflows for investing activities increased to $189.9 million, up from $82.9 million during the nine months last year. The higher outflow reflects expenditures for acquisitions as described below. The higher outflow also includes higher expenditures for equipment and software, partially offset by utilization of short-term investments. Cash provided by financing activities was $9.7 million for the nine months, versus $63.9 million used in financing activities during the same period last year. The prior period outflow includes the first quarter extinguishment of the Company's $50 million Senior Note issue and paydowns of other debt. Financial Condition The Company's leverage has improved during the first nine months of fiscal 1994, as reflected by a debt-to-total-capitalization ratio of 29% at December 31, 1993, versus 31% at fiscal year-end. This improvement was achieved as stockholders' equity increased while debt levels generally remained unchanged. During November, 1993 the Company issued $250 million of commercial paper through its affiliate, CSC Enterprises, and paid down CSC Enterprises' $250 million in bank borrowings. CSC Enterprises entered into new credit agreements to provide standby support for the commercial paper program. The commercial paper program is expected to benefit the Company through lower interest costs. Although operating cash flows were $124 million for the first nine months of fiscal 1994, the overall level of cash and short-term investments decreased from $155 million to $80 million. This decrease is primarily the result of business investments in the -9- form of fixed asset purchases, acquisitions, and software development. These investments totaled $211 million. See further discussion below. In all other respects, the Company's financial condition has not changed significantly since the fiscal year-end. It is management's opinion that the Company will be able to fund its cash needs from operating activities and from short-term borrowings. It is also management's opinion that any major additional requirements can be financed by the use of unused borrowing capacity or by the issuance of new CSC securities. Other Matters As discussed in the Company's second quarter Form 10Q, on November 1, 1993 the Company announced the signing of a $300 million, 10- year outsourcing agreement with Australian Mutual Provident Society (AMP), Australia's leading insurance company, and the acquisition of Computer Sciences Australia (CSA), an AMP technology subsidiary. CSA is a leading systems integration, outsourcing and software development firm with about 1,100 employees. Under the outsourcing agreement, effective November 1, 1993, CSA is overseeing AMP's information technology operations and has acquired the assets of its major data center located in Bondi, a suburb of Sydney. CSA is also operating AMP's data network, which links offices spanning Hong Kong, New Zealand, Australia and the U.K. In addition, approx- imately 100 AMP information technology personnel have joined CSA. The annual revenue of CSA will approximate $110 million, including the outsourcing services. On December 30, 1993, the Company completed the acquisition of ARC Professional Services Group (PSG), a systems engineering concern with approximately $170 million in annual revenues and 2,000 employees. PSG will complement CSC's existing Federal government business, and also contribute to the Company's commercial and international customer base. Also during the third quarter, CSC was selected by British Aerospace for a potential outsourcing agreement, expected to extend for an initial period of ten years with total projected revenue of approximately $1.3 billion. British Aerospace, a leading UK defense and commercial aerospace manufacturer, selected CSC as its preferred supplier for the outsourcing of a substantial portion of the information technology functions of its aerospace and defense businesses. Under the impending agreement, CSC would pay British Aerospace in excess of $100 million for existing information technology resources, including facilities, equipment and software. In addition, over 1,200 of British Aerospace's information technology staff would transfer to CSC. The contract is expected to be signed within several months. -10- Part II. Other Information Item 6. Exhibits and Reports on Form 8-K a. Exhibits Exhibit No. 11 - Calculation of Earnings Per Share Exhibit No. 28 - Additional Exhibits (i) Revenues by Market Sector b. Reports on Form 8-K: There were no Form 8-K reports filed for the third quarter of fiscal 1994. -11- EXHIBIT 11 COMPUTER SCIENCES CORPORATION CALCULATION OF EARNINGS PER SHARE (In thousands except earnings per share)
Third Quarter Ended Nine Months Ended _____________________ _________________________ Dec. 31 Jan. 1 Dec. 31 Jan. 1 1993 1993 1993 1993 _________ _________ ___________ ___________ Net earnings before cumulative effect of accounting change $21,676 $18,821 $58,105 $52,044 Cumulative effect of accounting change for income taxes 0 0 4,900 0 _________ _________ ___________ ___________ Net earnings $21,676 $18,821 $63,005 $52,044 ========= ========= =========== =========== Shares *: Weighted average shares outstanding 50,360 49,435 50,129 49,325 Common stock equivalents 1,192 950 1,057 820 _________ _________ ___________ ___________ Total for primary and fully diluted calculation 51,552 50,385 51,186 50,145 ========= ========= =========== =========== Earnings Per Share *: Earnings per common share before cumulative effect of accounting change $0.42 $0.37 $1.14 $1.04 Cumulative effect of accounting change for income taxes 0 0 0.09 0 _________ _________ ___________ ___________ Primary and fully diluted** $0.42 $0.37 $1.23 $1.04 ========= ========= =========== =========== * All share and per share amounts include the effect of the stock split described in Note C of the accompanying financial statements. ** The fully diluted calculation is submitted in accordance with Regulation S-K item 601 (b) (11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%. -12-
EXHIBIT 28 COMPUTER SCIENCES CORPORATION REVENUES BY MARKET SECTOR ($ in millions)
Fiscal Period Ended % of Total _________ ___________ ___________ _____________ Dec. 31 Jan. 1 Dec. 31 Jan. 1 1993 1993 1993 1993 _________ _________ ___________ ___________ Third Quarter U.S. Federal Government Department of Defense $167.6 $173.7 27 % 29 % NASA 54.6 61.8 9 10 Civil agencies 61.6 78.8 10 13 _________ _________ ____________ ____________ Total 283.8 314.3 46 52 _________ _________ ____________ ____________ Commercial: Domestic 255.4 239.0 41 39 International 82.2 55.1 13 9 _________ _________ ____________ ____________ Total 337.6 294.1 54 48 _________ _________ ____________ ____________ Total revenues $621.4 $608.4 100 % 100 % ========= ========= ============ ============ Nine Months U.S. Federal Government Department of Defense $519.2 $495.8 28 % 27 % NASA 163.2 204.4 9 11 Civil agencies 195.2 234.2 11 13 _________ _________ ____________ ____________ Total 877.6 934.4 48 51 _________ _________ ____________ ____________ Commercial: Domestic 764.9 725.2 41 40 International 209.3 169.9 11 9 _________ _________ ____________ ____________ Total 974.2 895.1 52 49 _________ _________ ____________ ____________ Total revenues $1,851.8 $1,829.5 100 % 100 % ========= ========= ============ ============ -13-
Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COMPUTER SCIENCES CORPORATION ----------------------------- Registrant Date: February 11, 1994 By: /s/ Denis M. Crane ----------------------------- Denis M. Crane Vice President and Controller Chief Accounting Officer -14- -----END PRIVACY-ENHANCED MESSAGE-----