-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K4JVcPkRaLcgQlE2k8aSIllumRvfnz6Q8yG8q17Qajn55IeXRs70sI9YP5V/PRcF 8FYpwKBYSsNpDXJ9F+Z8vw== /in/edgar/work/20000614/0000898430-00-001801/0000898430-00-001801.txt : 20000919 0000898430-00-001801.hdr.sgml : 20000919 ACCESSION NUMBER: 0000898430-00-001801 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000614 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: 0402 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-04850 FILM NUMBER: 654896 BUSINESS ADDRESS: STREET 1: 2100 E GRAND AVE CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3106150311 MAIL ADDRESS: STREET 1: 2100 EAST GRAND AVE CITY: EL SEGUNDO STATE: CA ZIP: 90245 10-K 1 0001.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2000 OR [_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No.: 1-4850 COMPUTER SCIENCES CORPORATION (Exact name of Registrant as specified in its charter) [LOGO APPEARS HERE] Nevada 95-2043126 (State of incorporation or organization) (I.R.S. Employer Identification No.) 2100 East Grand Avenue El Segundo, California 90245 (Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (310) 615-0311 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on which Title of each class: registered - -------------------------------------- ---------------------------------------- Common Stock, $1.00 par value per share New York Stock Exchange Preferred Stock Purchase Rights Pacific Exchange
Securities registered pursuant to Section 12(g) of the Act: None 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, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] As of June 2, 2000, the aggregate market value of stock held by non- affiliates of the Registrant was approximately $15,289,000,000. A total of 167,987,084 shares of common stock was outstanding as of such date. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after March 31, 2000, are incorporated by reference into Part III hereof. TABLE OF CONTENTS
Item Page ---- ---- Part I 1. Business........................................................... 1 2. Properties......................................................... 6 3. Legal Proceedings.................................................. 6 4. Submission of Matters to a Vote of Security Holders................ 6 Part II 5. Market for the Registrant's Common Equity and Related Stockholder Matters............................................................ 9 6. Selected Financial Data............................................ 9 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................. 11 7A. Quantitative and Qualitative Disclosures About Market Risk......... 17 8. Financial Statements and Supplementary Data........................ 18 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................................... 44 Part III 10. Directors and Executive Officers of the Registrant................. 44 11. Executive Compensation............................................. 44 12. Security Ownership of Certain Beneficial Owners and Management..... 44 13. Certain Relationships and Related Transactions..................... 44 Part IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 45
PART I Item 1. Business INTRODUCTION AND HISTORY General Computer Sciences Corporation ("CSC" or the "Company") is one of the world leaders in the information technology ("I/T") services industry. Since it was founded in 1959, the Company has helped clients use I/T more efficiently in order to improve their operations and profitability and to achieve business results. CSC offers a broad array of professional services to clients in the global commercial and government markets and specializes in the application of advanced and complex I/T to achieve its customers' strategic objectives. Its service offerings include outsourcing, systems integration, and I/T and management consulting and other professional services, including e-business solutions. Outsourcing involves operating all or a portion of a customer's technology infrastructure, including systems analysis, applications development, network operations, desktop computing and data center management. CSC also provides business process outsourcing, which is the management of a client's non-core business functions, such as claims processing, credit checking, or customer call centers. Systems integration encompasses designing, developing, implementing and integrating complete information systems. I/T and management consulting services include advising clients on the strategic acquisition and utilization of I/T and on business strategy, operations, change management and business process reengineering. The Company also licenses sophisticated software systems for select vertical markets. In addition, CSC provides a broad array of end-to-end e-business solutions that meet the needs of large commercial and government clients and new e- commerce entrants. The company focuses on delivering business results by linking business innovation skills with seasoned delivery expertise to provide flexible and scalable solutions. To do so, CSC draws on its vast experience in designing, building and maintaining large, complex, mission-critical systems and applies this knowledge to today's e-business challenges. The Company has significant experience in creating Internet-based business-to-business solutions in Net Markets operations for established global companies, mid- sized companies and new entrants to the marketplace. In addition, CSC does not have exclusive agreements with hardware or software providers and believes that this "vendor neutrality" enables it to better identify and manage solutions specifically tailored to each client's needs. Major Markets CSC provides its services primarily to clients in global commercial industries and to the U.S. federal government. CSC has provided I/T services to the U.S. federal government for nearly forty years. In fiscal 1986, when U.S. federal contracts represented 70% of the Company's revenues, CSC decided to devote substantial resources to further develop global commercial business in order to accelerate its growth and take advantage of the competencies gained as a leader in the federal sector. Because of this strategy, CSC has increased its penetration of the global commercial market and has diversified its business. In the global commercial area, the Company's service offerings are marketed to clients in a wide array of industries including aerospace; automotive; chemical and energy; consumer goods; financial services; healthcare; manufacturing; media; public sector; retail/distribution; telecommunications; traffic and transportation; travel and hospitality; and utilities. Geographically, CSC has operations throughout North America, Europe and Asia-Pacific. During the last three fiscal years, the Company's revenue mix by major markets was as follows:
2000 1999 1998 ---- ---- ---- U.S. Commercial.......................................... 39% 40% 41% Europe................................................... 27 28 25 Other International...................................... 10 6 6 --- --- --- Global Commercial.......................................... 76 74 72 U.S. Federal Government.................................... 24 26 28 --- --- --- Total Revenues............................................. 100% 100% 100% === === ===
Fiscal Year 2000 Performance Overview During fiscal 2000, CSC announced awards valued at more than $11.3 billion, a record in the Company's history. In comparison, during fiscal 1999, CSC announced awards valued at more than $5 billion, excluding the value of the Internal Revenue Service ("IRS") contract. Although the value of the IRS contract has not been quantified, it has the potential to become the Company's largest contract. Continuing with its strategy of growth through acquisitions, CSC also acquired an additional five I/T services providers during fiscal 2000. Global Commercial Market: Highlights Within the global commercial market, there were several significant awards to CSC. United States: In the first quarter of fiscal 2000, CSC was awarded an 11-year, $1.1 billion business process outsourcing contract by Enron Energy Services, representing the Company's further expansion into the dynamic energy market. CSC assumed responsibility for Enron's back office administrative functions and is applying e-business technology solutions to functions such as meter reading, collection and related customer inquiries. CSC signed a master outsourcing agreement with United Technologies Corporation ("UTC"), a Fortune 50 diversified manufacturer, valued at $2.6 billion over 10 years. Under the contract, CSC will manage the I/T infrastructure for UTC's business units which include Pratt & Whitney, Otis Elevator, Carrier Corp., Sikorsky Aircraft, Hamilton Sundstrand and Pratt & Whitney Canada. CSC led a consortium of companies, called the Pennant Alliance, to win a project from the County of San Diego (California) to provide citizens with greater, more efficient access to the County's services. Under the seven-year, $644 million contract, CSC and its alliance partners will upgrade the County's networks, and establish online multilingual kiosks providing information about county services, as well as forms, applications, and job listings via the Internet. Saturn Corporation, a unit of General Motors, selected CSC and a team of other I/T leaders to design and build an integrated, open, real-time, Web- based automotive retail management system that will make car buying simpler and more flexible and improve customer service and support for consumers. About 15,000 Saturn retail team members located in over 400 retail facilities in the U.S will use the Next Generation Saturn Retail System. The contract is valued at $190 million over seven years. 2 The Company signed a $390 million, seven-year outsourcing pact with a consortium of oil firms representing the largest gasoline retail and refinery operation in the U.S. CSC is supporting the I/T operations of Equilon Enterprises LLC, Motiva Enterprises LLC, Equiva Trading Company and Equiva Services, which are joint venture companies of Shell Oil, Texaco and Saudi Aramco. CSC will streamline the widespread I/T operations and manage over 15,000 desktops, in addition to a host of other support functions. Three other commercial contracts awarded to the Company demonstrated the strength of CSC's client relationships. First, CSC and Fidelity & Guaranty Life Insurance Co. extended the original 1995 contract by five years and expanded the business process outsourcing relationship. The contract extension is valued at $425 million. The Company also successfully recompeted for the New York State Department of Health program to support the State's Medicaid program. The new agreement is valued at $351 million over six years. Finally, with the signing of an agreement with Computing Devices Canada ("CDC"), CSC further strengthened its relationship with CDC's parent company, General Dynamics. The $68 million, 10-year contract is the 11th agreement CSC has with global business units of General Dynamics and calls for the Company to manage the I/T infrastructure, including applications, desktops and network operations of CDC. Additionally, CSC continued to expand in the U.S. commercial area during fiscal 2000 through strategic acquisitions. With the acquisition of TRW Data Services, a developer of customized software and systems solutions for high- volume payment processors, CSC expanded its capabilities in the financial services market. The Company also acquired ECS Integrated Technology Solutions LLC, a Portland, Oregon-based I/T consulting services company specializing in Oracle applications, e-business, customer relationship management, data warehousing, supply chain management and infrastructure resource planning. Also in the U.S. financial services arena, the Company provides consumer credit reports to thousands of credit grantors nationwide. Through an agreement with Equifax Inc., a major consumer credit repository, the Company offers credit grantors the benefits of a national file of consumer credit histories. The national file enables customers to obtain credit information from a single source, instead of dealing with multiple reporting services. International: The Company's international operations provide a wide range of information technology services to commercial and public sector clients. CSC has major offices in the United Kingdom, France, Germany, Belgium, the Netherlands, Denmark, Italy, Australia, Singapore, Malaysia and Hong Kong, and provides substantially the same services to its international customers that it provides to its U.S. customers. During fiscal 2000, there were several significant international awards. Old Mutual plc, an international financial services group, signed an I/T outsourcing agreement with CSC. The Company will help Old Mutual meet the market challenges and the increasingly complex and sophisticated I/T requirements in the global financial services industry by managing the client's I/T infrastructure in South Africa under a $300 million, seven-year contract. This agreement makes CSC an I/T leader in South Africa and will clearly strengthen and support the Company's presence and future expansion plans in the region. CSC signed a ten-year, $300 million agreement with General Electric Company ("GE") to manage GE's and GE Capital's data processing operations, help desk and disaster recovery services in the United Kingdom and other European countries. The agreement has been designed to allow additional GE companies to join at any time. Strengthening the Company's presence in the world chemicals market, CSC signed a multi-year global outsourcing agreement with Avecia, one of Europe's leading specialty chemical companies. CSC will support Avecia's data centers in Wilmington, Delaware, the United Kingdom and the Netherlands. 3 Acquisitions also helped increase CSC's presence in the international markets. The Company acquired a majority interest in Servo Data, an Austrian I/T consulting firm based in Vienna. This acquisition significantly strengthened CSC's capabilities in Austria and provides a strategic doorway to expand services in Eastern Europe. Additionally, as part of its outsourcing agreement with GE, CSC acquired the Australian operations of GE Capital Information Technology Solutions, a leading I/T supplier to commercial and government organizations worldwide. With this acquisition, CSC will provide GE outsourcing services in Australia and has greatly enhanced its presence in the growing Australian market. U.S. Federal Government Market: Highlights The Company provides a broad array of services to the U.S. federal government, ranging from traditional systems integration and outsourcing to advanced technical undertakings and complex project management. CSC has extensive experience in the development of software for mission-critical systems for defense and civil agency applications, and also provides systems engineering and technical assistance in network management, satellite communications, intelligence, aerospace, logistics, and related high- technology fields. There were several significant awards to CSC during fiscal 2000 from within the U.S federal government. CSC was awarded a $680 million, 10-year contract by the U.S. Army Wholesale Logistics Modernization Program, commonly known as LOGMOD, to provide I/T services required to reengineer and modernize the Army's wholesale logistics business processes. As part of this outsourcing contract, CSC offered employment to all government employees affected by the award. The LOGMOD contract continues a trend by federal agencies to turn to the private sector to obtain best commercial practices for services. In fiscal 1999, CSC was awarded the first significant U.S. federal government outsourcing contract involving the voluntary transition of federal I/T employees to the private sector under the BREAKTHROUGH Program of the National Security Agency. CSC was among a select group of vendors chosen by the Health Care Financing Administration ("HCFA") to provide safeguard services in support of the Medicare Integrity Program. The overall HFCA contract is valued at $500 million over five years. A joint venture managed by CSC was re-awarded the U.S. Air Force Range Technical Services contract at the Eastern Range. This award marked the third straight win on this contract. CSC is the only company to win a services recompete award at Cape Canaveral in the last seven years. The National Aeronautics and Space Administration ("NASA") deepened its relationship with CSC with the award of a $325 million, seven-year contract to support the operations of NASA's John C. Stennis Space Center. As the managing partner of a joint venture known as Mississippi Space Services, CSC is utilizing business process reengineering including Web-based applications and related new technology to improve productivity and reduce costs. CSC was named as one of 12 companies to provide services to the General Services Administration ("GSA") under the 10-year, $25 billion Millennia contract. CSC will provide the GSA with a broad array of I/T services and support. In fiscal 2000, CSC also enhanced its offerings to the U.S. federal government market with the acquisition of Nichols Research Corporation ("Nichols"), a leading I/T services provider to the federal government. Headquartered in Huntsville, Alabama, Nichols provides the U.S. Army, Air Force, Navy and intelligence agencies with extensive systems engineering, information technology and technical assistance for aviation, missile and space defense systems. Nichols is also a leading provider of defense technology services for the Huntsville-based Redstone Arsenal, which is home to several major U.S. Army organizations and has an aggregate annual budget authorization exceeding $15 billion, one of the largest in the U.S. government. The 4 combination of the two firms provides a large pool of highly qualified individuals with high-level security clearances. Nichols also supports the I/T services needs of commercial clients including the health insurance and healthcare provider markets. COMPETITION The I/T market in which CSC competes is not dominated by a single company or a small number of companies. A substantial number of companies offer services that overlap and are competitive with those offered by CSC. Some of these are large industrial firms, including computer manufacturers and major aerospace firms that have greater financial resources than CSC and, in some cases, may have greater capacity to perform services similar to those provided by CSC. The Company's ability to obtain business is dependent upon its ability to offer better strategic concepts and technical solutions, better value, a quicker response, or a combination of these factors. In the opinion of the Company's management, CSC is positioned to compete effectively in the global commercial and U.S. federal government markets based on its technology and systems expertise and large project management skills. It is also management's opinion that CSC's competitive position is enhanced by its recognized position as a leader in management consulting and the full spectrum of services that it provides. EMPLOYEES The Company has more than 700 offices worldwide, and as of March 31, 2000 employed approximately 58,000 persons, including more than 48,000 professionals. The services provided by CSC require proficiency in many fields, such as computer sciences, programming, mathematics, physics, engineering, astronomy, geology, operations, research, economics, statistics and business administration. 5 Item 2. Properties
Owned properties as of Approximate March 31, 2000 Square Footage General Usage - ---------------------- -------------- ------------- Copenhagen, Denmark...... 423,000 Computer and General Office Facility Falls Church, Virginia... 417,000 General Office El Segundo, California... 206,000 General Office Newark, Delaware......... 183,000 Computer and General Office Facility San Diego, California.... 175,500 Computer and General Office Facility Wilmington, Delaware..... 175,000 Computer and General Office Facility Norwich, Connecticut..... 147,000 Computer and General Office Facility Meriden, Connecticut..... 119,000 Computer and General Office Facility Moorestown, New Jersey... 99,000 General Office Herndon, Virginia........ 87,000 General Office Maidstone, United Kingdom................. 79,000 Computer and General Office Facility Shatin, Hong Kong........ 72,000 General Office Singapore................ 61,000 General Office Sterling, Virginia....... 45,000 General Office Various other U.S. and foreign locations....... 99,000 Primarily General Offices Leased properties as of March 31, 2000 - ----------------------- Washington, D.C. area.... 1,284,000 Computer and General Office Facility Texas.................... 809,000 Computer and General Office Facility Germany.................. 599,000 General Office Australia and other Pacific Rim locations... 528,000 Computer and General Office Facility United Kingdom........... 520,000 General Office New Jersey............... 508,000 General Office France................... 331,000 General Office Connecticut.............. 318,000 General Office Alabama.................. 258,000 General Office Massachusetts............ 255,000 General Office Ohio..................... 243,000 General Office New York................. 234,000 General Office Denmark.................. 139,000 General Office Michigan................. 119,000 General Office California............... 116,000 General Office Illinois................. 106,000 General Office Various other U.S. and foreign locations....... 1,089,000 Computer and General Office Facilities
Upon expiration of its leases, the Company does not anticipate any difficulty in obtaining renewals or alternative space. Lease expiration dates range from fiscal 2001 through 2018. Item 3. Legal Proceedings The Company is currently party to a number of disputes which involve or may involve litigation. After consultation with counsel, it is the opinion of Company management that the ultimate liability, if any, with respect to these disputes will not be material to the Company's results of operations or financial position. Item 4. Submission of Matters to a Vote of Security Holders None. 6 Executive Officers of the Registrant
Year First Elected as Term as Family Name Age an Officer Officer Position Held with the Registrant Relationship - ---- --- ---------- ---------- --------------------------------- ------------ Van B. Honeycutt* 55 1987 Indefinite Chairman, President and Chief Executive None Officer Leon J. Level* 59 1989 Indefinite Vice President and Chief Financial Officer None Harvey N. Bernstein 53 1988 Indefinite Vice President None Edward P. Boykin 61 1995 Indefinite Vice President None Bryan Brady 53 2000 Indefinite Vice President and Controller None Milton E. Cooper 61 1992 Indefinite Vice President None Hayward D. Fisk 57 1989 Indefinite Vice President, General Counsel and None Secretary Ronald W. Mackintosh 51 1993 Indefinite Vice President None Paul T. Tucker 52 1997 Indefinite Vice President None
- -------- * Director of the Company Business Experience of Officers Van B. Honeycutt was elected Chairman of the Board of Directors effective March 29, 1997. He was appointed Chief Executive Officer of the Company effective April 1, 1995. He joined the Company in 1975 and was elected President and Chief Operating Officer during 1993. Prior to his election he was a Vice President of CSC and President of the Industry Services Group. He was formerly President of CSC Credit Services, Inc. He has also held a variety of other positions with the Company. Leon J. Level joined the Company in 1989 as Vice President and Chief Financial Officer and as a member of CSC's Board of Directors. Former positions include Vice President and Treasurer of Unisys Corporation and Chairman of Unisys Finance Corporation; Assistant Corporate Controller and Executive Director of The Bendix Corporation; and Principal with the public accounting firm of Deloitte & Touche LLP. He is a Certified Public Accountant. Harvey N. Bernstein joined the Company as Assistant General Counsel in 1983. He became Deputy General Counsel and was elected a Vice President in 1988. Prior to joining the Company, he specialized in government procurement law at the firm of Fried, Frank, Harris, Shriver & Jacobson in Washington, D.C. Edward P. Boykin joined the Company in 1966 and has held numerous positions with several divisions of the Company. He was elected a Vice President in 1995. Since May, 1999, he has been President of the Financial Services Group. From 1998 to 1999, he was responsible for leveraging the capabilities that exist within the J.P. Morgan & Co. Incorporated ("J.P. Morgan") and E.I. duPont de Nemours and Company accounts. Previously, he was President of The Pinnacle Alliance, a CSC-managed organization providing information technology outsourcing and other services to J.P. Morgan, from 1996 to 1998, and President of the Technology Management Group from 1993 to 1996. Bryan Brady joined the Company in 1997 and served as Vice President, Finance of European Business Development and then Vice President, Finance and Administration of the United Kingdom Division. In February 2000 he was elected Vice President and Controller. Prior to joining the Company, he worked for International Computers Ltd. from 1985-1997 and held various executive-level finance positions. Additionally, he also spent seven years in South Africa and Saudi Arabia as general manager of a joint ventures division. Milton E. Cooper joined the Company in 1984 as Group Vice President of program development. He was named President of the Federal Sector, formerly known as the Systems Group, in December 1991 and became a Corporate Vice President in January 1992. A veteran of 36 years in the information industry, he has held senior 7 sales and marketing positions with IBM Corporation and Telex Corporation. He is a graduate of the United States Military Academy at West Point. Hayward D. Fisk joined the Company in 1989 as Vice President, General Counsel and Secretary. Prior to joining the Company, he was associated for 21 years with Sprint Corporation (formerly United Telecommunications, Inc.), in various legal and executive officer positions, most recently as Vice President and Associate General Counsel. Ronald W. Mackintosh joined the Company in 1988 as a result of the Index acquisition, where he was Managing Director of its London office. Previously he was a partner in the London office of Nolan, Norton & Company. In 1991, he was named Chief Executive Officer of the Company's U.K. Operations and, subsequently, President of the European Group. In 1993 he was elected a Vice President of the Company. Paul T. Tucker joined the Company in 1996 as a Corporate Development executive, and in August, 1997 was elected Vice President of Corporate Development. From 1990 to 1995 he was President and Chief Executive Officer of Knight-Ridder Financial, an electronic real-time financial market information company. Previously, he founded and served as President and Chief Technologist of HAL Communications Corp., a communications hardware and software company and was an Associate Professor and Senior Research Engineer at the University of Illinois. 8 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters Common stock of Computer Sciences Corporation is listed and traded on the New York Stock Exchange and Pacific Exchange under the ticker symbol "CSC." As of June 13, 2000, the number of registered shareholders of Computer Sciences Corporation's common stock was 9,630. The table shows the high and low intra-day prices of the Company's common stock as reported on the composite tape of the New York Stock Exchange for each quarter during the last two calendar years and through June 13, 2000.
2000 1999 1998 --------------- --------------- ----------------- Calendar Quarter High Low High Low High Low ---------------- -------- ------ ------ -------- -------- -------- 1st..................... 94 15/16 72 74 3/8 54 15/16 56 3/4 39 31/32 2nd..................... 99 7/8* 72 1/8* 69 7/8 52 3/8 65 49 1/8 3rd..................... 74 61 7/8 74 7/8 51 1/2 4th..................... 94 5/8 57 15/16 70 15/16 46 1/4
- -------- * Through June 13, 2000 Item 6. Selected Financial Data COMPUTER SCIENCES CORPORATION
Five-Year Review ------------------------------------------------------ March 31, April 2, April 3, March 28, March 29, In thousands except per-share 2000 1999 1998 1997 1996 amounts ---------- ---------- ---------- ---------- ---------- Total assets................. $5,874,124 $5,260,353 $4,274,131 $3,706,719 $3,101,340 Debt: Long-term.................. 652,367 399,672 739,002 634,867 431,418 Short-term................. 238,138 436,421 12,110 30,811 71,422 Current maturities......... 11,089 167,518 22,808 10,383 7,681 ---------- ---------- ---------- ---------- ---------- Total.................... 901,594 1,003,611 773,920 676,061 510,521 Stockholders' equity......... 3,043,974 2,588,521 2,171,022 1,820,028 1,535,165 Working capital.............. 782,369 661,489 845,804 602,676 505,171 Property and equipment: At cost.................... 2,744,240 2,368,764 1,992,245 1,707,277 1,280,192 Accumulated depreciation and amortization.......... 1,469,321 1,256,557 1,012,617 799,937 584,644 ---------- ---------- ---------- ---------- ---------- Property and equipment, net....................... 1,274,919 1,112,207 979,628 907,340 695,548 Current assets to current liabilities................. 1.4:1 1.3:1 1.7:1 1.6:1 1.5:1 Debt to total capitalization. 22.9% 27.9% 26.3% 27.1% 25.0% Book value per share......... $18.17 $15.67 $13.33 $11.43 $9.87 Stock price range (high)..... 94.94 74.88 56.75 43.25 40.38 (low)................ 52.38 46.25 28.94 30.81 23.25
9 Five-Year Review (continued)
Fiscal Year ------------------------------------------------------- In thousands except per- 2000 1999 1998 1997 1996 share amounts........... ---------- ---------- ---------- ---------- ---------- Revenues................ $9,370,694 $8,111,405 $7,027,881 $6,014,190 $4,997,365 ---------- ---------- ---------- ---------- ---------- Costs of services....... 7,352,544 6,349,471 5,500,478 4,760,673 3,908,588 Selling, general and administrative......... 779,367 735,756 640,624 509,407 491,469 Depreciation and amortization........... 545,723 456,897 397,805 339,333 276,742 Interest, net........... 40,523 34,408 41,387 31,690 31,728 Special charges......... 41,065 233,219 57,429 76,053 ---------- ---------- ---------- ---------- ---------- Total costs and expenses............... 8,759,222 7,576,532 6,813,513 5,698,532 4,784,580 ---------- ---------- ---------- ---------- ---------- Income before taxes..... 611,472 534,873 214,368 315,658 212,785 Taxes on income......... 208,600 179,371 (60,199) 118,546 93,291 ---------- ---------- ---------- ---------- ---------- Net income.............. $ 402,872 $ 355,502 $ 274,567 $ 197,112 $ 119,494 ========== ========== ========== ========== ========== Basic earnings per common share........... $ 2.42 $ 2.17 $ 1.71 $ 1.26 $ 0.78 ========== ========== ========== ========== ========== Diluted earnings per common share........... $ 2.37 $ 2.12 $ 1.67 $ 1.22 $ 0.76 ========== ========== ========== ========== ========== Average common shares outstanding............ 166,311 164,124 160,881 157,009 153,133 Average common shares outstanding assuming dilution............... 169,749 167,986 164,501 161,771 157,588
Notes: A discussion of "Income Before Taxes" and "Net Income and Earnings per Share" before and after special items is included in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"). A discussion of "Special Items" for fiscal years ended 2000 and 1998 is also included in MD&A. The Fiscal 1997 special charge of $57,429 (24 cents per share after tax) relates to costs and expenses associated with the acquisition of the Continuum Company, Inc. ("Continuum") and to a write-off of acquired research and development related to an acquisition by a company subsequently acquired by CSC and accounted for as a pooling of interests. The fiscal 1996 special charge of $76,053 (40 cents per share after tax) relates to two acquisitions by Continuum which was subsequently acquired by CSC and accounted for as a pooling of interests. The selected financial data have been restated for fiscal 1996 through 1999 to include the results of business combinations accounted for as poolings of interests. No dividends were paid by CSC during the five years presented. 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Revenues Revenues for the Global Commercial and U.S. Federal Sector segments for fiscal years 2000, 1999 and 1998 are as follows:
Fiscal 2000 Fiscal 1999 Fiscal 1998 ---------------- ---------------- ----------- Percent Percent Amount Change Amount Change Amount Dollars in millions -------- ------- -------- ------- ----------- U. S. Commercial................ $3,560.6 12% $3,181.2 12% $2,846.9 Europe.......................... 2,526.0 12 2,250.1 27 1,771.0 Other International............. 902.8 81 499.4 24 403.3 -------- -------- -------- Global Commercial................. 6,989.4 18 5,930.7 18 5,021.2 U. S. Federal Sector.............. 2,378.1 9 2,180.2 9 2,006.6 Corporate ........................ 3.2 .5 .1 -------- -------- -------- Total............................. $9,370.7 16 $8,111.4 15 $7,027.9 ======== ======== ========
The Company's 16% overall revenue growth for fiscal 2000 over 1999 resulted principally from the successful expansion of its broad range of end-to-end I/T services reflecting its geographic span and the markets served. Effective November 16, 1999, the Company acquired Nichols Research Corporation ("Nichols"), in a transaction accounted for as a pooling of interests. Accordingly, CSC's consolidated financial statements for periods prior to November 16, 1999 have been restated to include the financial position and results of operations for Nichols. The restatement combines results from Nichols' fiscal 1999 and 1998, which ended August 31, with results from CSC's fiscal 1999 and 1998, which ended April 2 and April 3, respectively. Therefore, the restated twelve month results for fiscal 1999 and 1998 reflect Nichols' twelve months ended August 31. The restated fiscal 2000 data include Nichols' results based on CSC's fiscal year. Due to the alignment of fiscal periods, Nichols' results of operations for the same five months of April to August 1999 are reported in both CSC's fiscal 2000 and 1999. Global commercial revenue grew 18%, or $1,058.7 million, during fiscal 2000. In constant currency, global commercial revenue grew 20%. Over 60% of the global commercial growth was provided by international operations. The Company announced over $6.9 billion in new global commercial business awards during fiscal 2000 compared with the $2.2 billion announced during fiscal 1999. For fiscal 2000, U.S. commercial revenue grew 12%, or $379.4 million. Nearly two-thirds of the growth was generated by increases in outsourcing activities. Fiscal 2000 outsourcing revenue growth was fueled by major new contracts including United Technologies Corporation and Enron Energy Services. The remainder of the U.S. Commercial growth was provided principally by consulting and systems integration services and increases from the Company's financial services and healthcare vertical markets. For fiscal 1999, U.S. commercial revenue grew 12%, or 16% when excluding fiscal 1998 revenue from activities in the Company's collections and telecommunications operations, which were subsequently sold or phased out. More than two-thirds of the U.S. commercial growth was generated by information technology outsourcing contracts. The remainder of the growth resulted from demand for consulting and systems integration activities and further expansion in the Company's financial services and healthcare vertical markets. The Company's European operations generated revenue growth of 12%, or $275.9 million, for fiscal 2000 compared to 1999. The growth was principally due to (a) expansion of outsourcing services provided in the United Kingdom, (b) the acquisition of two major Italian providers of information technology services and a partial year's benefit associated with the fiscal 1999 acquisition of Paris-based KPMG Peat Marwick SA ("KPMG"), a management consulting and information technology services firm, and (c) increased demand in 11 Germany for consulting and systems integration activities and enterprise resource planning ("ERP") services. For fiscal 1999 compared to fiscal 1998, CSC's European operations accounted for revenue growth of 27%, or $479 million. Three factors generated the Company's growth in Europe: (a) outsourcing services provided to British Aerospace plc, E. I. du Pont de Nemours and Company and Hartmann & Braun, (b) the acquisition of Paris-based KPMG, and (c) continued strong demand throughout Europe for consulting and systems integration activities and ERP services. Other international operations provided revenue growth of 81%, or $403.4 million, during fiscal 2000. The growth was primarily attributable to the acquisition of G.E. Capital ITS based in Australia, expansion of other business in Australia, and a partial year's benefit associated with the fiscal 1999 acquisition of Singapore-based CSA Holdings, Ltd. ("CSA"). During fiscal 1999, other international revenue increased 24% or $96.1 million. The growth was primarily attributable to the acquisition of CSA, expansion of the financial services sector and additional outsourcing activities in Australia. The Company's U.S. federal sector revenues were derived from the following sources:
Fiscal 2000 Fiscal 1999 Fiscal 1998 ---------------- --------------- ----------- Percent Amount Change Amount Change Percent Amount Amount Dollars in millions -------- ------- -------- ------ ----------- Department of Defense.............. $1,474.1 4% $1,421.6 2% $1,387.7 Civil agencies..................... 799.5 17 683.8 18 578.6 Other.............................. 104.5 40 74.8 86 40.3 -------- -------- -------- Total U. S. Federal................ $2,378.1 9 $2,180.2 9 $2,006.6 ======== ======== ========
Revenue from the U.S. federal sector increased 9% during fiscal 2000 versus 1999. The increase was principally related to activity with the Internal Revenue Service ("IRS") contract, the National Aeronautics and Space Administration ("NASA") Stennis Facilities Operations contract, and additional task orders on various Civil agency and Department of Defense ("DOD") contracts. Revenue for fiscal 1999 compared to 1998 increased 9%. The increase is attributable to additional task orders with the General Services Administration, increased ordering of a management information system for the DOD and the acquisition of the DOD Ballistic Missile Defense Organization support contract. Revenue gains during fiscal 1999 were partially offset by reductions in work performed for NASA and the winding down of several contracts. During fiscal 2000, CSC announced federal contract awards with a total value of $4.4 billion, compared with the $2.9 billion and $1 billion announced during fiscal 1999 and 1998, respectively. In addition, during December 1998, the IRS selected the CSC PRIME Alliance to enter into a strategic partnership with the IRS to modernize the U.S. tax system. This award, the value of which is not quantified, has the potential to become the Company's largest contract to date. Costs and Expenses The Company's costs and expenses before special charges were as follows:
Percentage of Dollar Amount Revenue -------------------------- ---------------- 2000 1999 1998 2000 1999 1998 Dollars in millions -------- -------- -------- ---- ---- ---- Costs of services................. $7,352.5 $6,349.5 $5,500.5 78.5% 78.3% 78.3% Selling, general and administrative................... 779.4 735.7 640.6 8.3 9.1 9.1 Depreciation and amortization..... 545.7 456.9 397.8 5.8 5.6 5.6 Interest expense, net............. 40.5 34.4 41.4 .4 .4 .6 -------- -------- -------- ---- ---- ---- Total........................... $8,718.1 $7,576.5 $6,580.3 93.0% 93.4% 93.6% ======== ======== ======== ==== ==== ====
12 Costs of Services For fiscal 2000, the Company's costs of services as a percent of revenue increased slightly to 78.5% from 78.3%. The change was driven principally by the Company's revenue mix including the expansion of operations in Asia which has a higher rate of cost of services and is less capital intensive in comparison with the rest of the Company's operations. For fiscal 1999, the Company's costs of services as a percent of revenue was unchanged versus fiscal 1998. Selling, General and Administrative Selling, general and administrative ("SG&A") expenses as a percentage of revenue decreased to 8.3% from 9.1% for fiscal 2000 versus 1999. The decrease was due to a number of performance improvements and management's increased focus regarding discretionary costs owing to the uncertainty of the marketplace in large part caused by the transition to the Year 2000. For fiscal 1999, SG&A as a percent of revenue was unchanged compared to fiscal 1998. Special Items Special items of $41.1 million ($29.8 million after tax), or 18 cents per share, were recorded during fiscal 2000. The Company recorded a special item of $39.1 million ($28.5 million after tax) representing merger-related charges and other transaction costs associated with the November 16, 1999 acquisition of Nichols. Also during fiscal 2000, the Company recorded a special item of $2 million ($1.3 million after tax) for legal and other costs, net of recoveries, associated with the final resolution of the remaining issues relating to the Company's fiscal 1998 response to a failed take-over attempt. There were no special items during fiscal 1999. The fiscal 1998 special items represent costs, expenses and benefits associated with developments at CSC Enterprises, the Company's response to a failed take-over attempt and merger-related charges associated with several acquisitions made by Nichols. The Company recorded a first quarter net special credit of $1.7 million, or 1 cent per share, at CSC Enterprises, a general partnership which then operated certain of the Company's credit services operations and carried out other business strategies through acquisition and investment. The net credit resulted from a tax benefit of $135 million and an after-tax charge of $133.3 million ($208.4 million before tax). During the first quarter, several partners withdrew from CSC Enterprises. These withdrawals caused CSC Enterprises to take actions which caused CSC to recognize an increase in the tax basis of certain assets. As required by Statement of Financial Accounting Standards ("SFAS") No. 109, this tax basis increase from the previous tax basis resulted in a deferred tax asset of $135 million and a corresponding reduction in the Company's provision for taxes. The tax basis increase is temporary and will be realized over time through an increase in depreciation and amortization expense for income tax purposes. In connection with the partner withdrawals and related developments, CSC Enterprises reviewed its operations, its market opportunities and the carrying value of its assets. Based on this review, plans were initiated to eliminate certain offerings and write down assets, primarily within its telecommunications operations. As a result of these plans, a pre-tax special charge of $208.4 million ($133.3 million after tax) was recognized. The charge is comprised of goodwill write-offs of $56.3 million ($35 million after tax), contract termination costs of $54.3 million ($33.8 million after tax), deferred contract costs and other assets of $33.1 million ($20.5 million after tax), telecommunications software and accruals of $35.8 million ($22.3 million after tax), telecommunications property, equipment and intangible assets of $18.9 million ($11.7 million after tax), and other non-deductible costs of $10 million. During the fourth quarter of fiscal 1998, the Company recorded a before-tax special charge of $20.7 million, or equivalent to 8 cents per share after tax, for costs relating to the Company's response to a failed take-over attempt. The charge is comprised of $14.4 million for investment banking expenses and $6.3 million for other expenses such as legal costs, public relations and shareholder communications. 13 Also, during fiscal 1998, special charges of $4.1 million, or 2 cents per share after tax, were recorded by Nichols. The charges were comprised of $2.2 million for purchased in-process research and development activities and other merger-related expenses in connection with several acquisitions made during the year and $1.9 million related to impairment of assets. Income Before Taxes The Company's income before taxes and margin for the most recent three fiscal years is as follows:
Dollar Amount Margin -------------------- ---------------- 2000 1999 1998 2000 1999 1998 Dollars in millions ------ ------ ------ ---- ---- ---- Before special charges..................... $652.5 $534.9 $447.6 7.0% 6.6% 6.4% Income before taxes........................ 611.5 534.9 214.4 6.5 6.6 3.1
Income before special charges and taxes improved during fiscal 2000 as a percentage of revenue. The .4% margin improvement to 7% principally relates to lower SG&A expenses as a percent of revenue in the Company's U.S. Federal sector and U.S. commercial operations. During fiscal 1999, income before taxes as a percentage of revenue improved primarily due to lower net interest expense. Taxes The provision for (benefit from) income taxes as a percentage of pre-tax earnings was 34.1%, 33.5% and (28.1)% for the three years ended March 31, 2000. The fiscal 1998 rate includes the tax benefit associated with the partnership withdrawals at CSC Enterprises during that year. Before special items, the tax rate was 33.7% and 35.4% for fiscal 2000 and 1998, respectively. The decrease in the fiscal 1999 tax rate from 35.4% to 33.5% is principally the result of utilization of foreign operating losses not previously recognized and research tax credits. Net Income and Earnings per Share The Company's net income and diluted earnings per share for fiscal years 2000, 1999 and 1998 is as follows:
Dollar Amount Margin -------------------- ---------------- 2000 1999 1998 2000 1999 1998 Dollars in millions, except EPS ------ ------ ------ ---- ---- ---- Net income: Before special items................... $432.7 $355.5 $289.3 4.6% 4.4% 4.1% As reported............................ 402.9 355.5 274.6 4.3 4.4 3.9 Diluted earnings per share: Before special items................... 2.55 2.12 1.76 As reported............................ 2.37 2.12 1.67
During fiscal 2000, the Company's net income margin decreased to 4.3% from 4.4%. The decrease is related to the special items incurred during fiscal 2000 which reduced net income by $29.8 million or .3% of revenue. For fiscal 1999, the Company's net income margin increased to 4.4% from 3.9%, primarily related to lower net interest, a lower tax rate and no special items recorded. 14 Before special items, the net earnings margin was 4.6% for fiscal 2000, 4.4% for fiscal 1999 and 4.1% for 1998. The improvement for fiscal 2000 was attributable to lower SG&A as a percent of revenue. Cash Flows
Fiscal 2000 Fiscal 1999 Fiscal 1998 ------------------ ---------------- ----------- Percent Percent Amount Change Amount Change Amount Dollars in millions --------- ------- ------- ------- ----------- Net cash from operations....... $ 946.3 12% $ 847.3 43% $ 593.4 Net cash used in investing..... (1,176.6) 58 (742.8) 24 (599.1) Net cash (used) provided by financing..................... (111.4) 227.7 41 161.9 Effect of exchange rate changes on cash and cash equivalents.. (3.7) (.3) (4.9) --------- ------- ------- Net (decrease) increase in cash and cash equivalents.......... (345.4) 331.9 151.3 Cash at beginning of year...... 617.9 286.0 134.7 Effect of pooling restatement.. (12.1) --------- ------- ------- Cash at end of year.......... $ 260.4 $ 617.9 $ 286.0 ========= ======= =======
Historically, the majority of the Company's cash has been provided from operating activities. The increases in cash from operations during fiscal 2000 and 1999 are principally the result of higher earnings and non-cash charges (depreciation and amortization) partially offset by increased working capital requirements. The Company's investments principally relate to purchases of computer equipment and software that support the Company's expanding global commercial operations. Investments include computer equipment purchased at the inception of outsourcing contracts as well as subsequent upgrades, expansion or replacement of these client-supporting assets. The Company's investments also include several acquisitions accounted for under the purchase method of accounting during fiscal 1998 through 2000. As described above, a majority of the Company's capital investments have been funded by cash from operations. During fiscal 1999 the Company, issued $200 million of 6.25% notes due in 2009. Proceeds were used for general corporate purposes and to repay $150 million of 6.80% notes due April 1999. Liquidity and Capital Resources The balance of cash and cash equivalents was $260.4 million at March 31, 2000, $617.9 million at April 2, 1999 and $286 million at April 3, 1998. During this period, the Company's earnings have added substantially to equity. At the end of fiscal 2000, CSC's ratio of debt to total capitalization was 22.9%.
2000 1999 1998 Dollars in millions -------- -------- -------- Debt........................................... $ 901.6 $1,003.6 $ 773.9 Equity......................................... 3,044.0 2,588.5 2,171.0 -------- -------- -------- Total capitalization........................... $3,945.6 $3,592.1 $2,944.9 ======== ======== ======== Debt to total capitalization................... 22.9% 27.9% 26.3%
During fiscal 2000, the Company replaced its expiring credit agreement with a new credit facility. The new credit facility replaced the $490 million credit agreement with a $250 million short term credit agreement and a $250 million long term credit agreement that expires in August 2004. At the end of fiscal 2000, approximately $84 million was available for borrowing under this program as compared to $115 million at the end of fiscal 1999. In addition, the Company had uncommitted lines of credit of $185 million available with a domestic bank and several foreign banks. 15 In the opinion of management, CSC will be able to meet its liquidity and cash needs for the foreseeable future through the combination of cash flows from operating activities, cash balances, unused borrowing capacity and other financing activities. If these resources need to be augmented, major additional cash requirements would likely be financed by the issuance of debt and/or equity securities and/or the exercise of the put option (as described in Note 11 to the Company's consolidated financial statements). Dividends and Redemption It has been the Company's policy to invest earnings in the growth of the Company rather than distribute earnings as dividends. This policy, under which dividends have not been paid since fiscal 1969, is expected to continue, but is subject to regular review by the Board of Directors. On February 27, 1998, the Board of Directors redeemed the stock purchase rights, which had been issued under the 1988 stockholder rights plan, for one sixth of one cent per right. The redemption was paid on April 13, 1998. Year 2000 As previously reported in the Company's fiscal 2000 third quarter 10-Q, the Company did not experience any significant problems caused by year 2000 issues related to the Company's internal systems, contractual obligations to customers or non-performance of suppliers. Based on currently available information, the Company does not expect any future year 2000 issues. Euro Introduction On January 1, 1999 the euro currency was introduced in 11 of the 15 member countries in the European Union. Although euro notes and coins will not be available until the latter part of the transition period in 2002, the euro is traded on the currency exchanges and is available for non-cash transactions. The Company established a European steering group during 1997 to determine the Company's approach to the euro and to develop plans to ensure that customer expectations and statutory requirements are met. The Company was ready by January 1, 1999 to deal with any customer or supplier who wished to transact in euros and all European intercompany transactions since January 1, 1999 have been invoiced and settled in euros in the participating countries. The Company's European operations has completed the development of the infrastructure that provides all the internal systems functionality required to deal with the euro during the transition period and thereafter. The transition period lasts until July 2002 when the national currencies will no longer be legal tender. The incremental system cost to CSC of introducing the euro will not be material. As of March 31, 2000, the transition to the euro has not resulted in any material adverse impact on CSC's financial position or results of operations. Furthermore, CSC will continue to review the impact of the euro conversion during the remaining transition period, but does not expect it to have a material impact on its overall financial position or results of operations. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement requires all derivatives to be recorded on the balance sheet at fair value and establishes accounting standards for hedging activities. In June 1999, the FASB issued SFAS No. 137, which amended SFAS No. 133 by deferring its effective date by one year to fiscal years beginning after June 15, 2000. The Company is currently assessing the impact this statement will have and, based on preliminary estimates, does not expect the adoption to have a material impact on its consolidated financial position or results of operations. 16 During 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This statement requires the capitalization of internal use computer software costs provided that certain criteria are met. These capitalized software costs will be amortized on a straight-line basis over the useful life of the software. The adoption of this statement effective April 3, 1999 had no material impact on the company's consolidated financial position, results of operations or cash flows. Forward-Looking Statements All statements contained in this annual report, or in any document filed by the Company with the Securities and Exchange Commission, or in any press release or other written or oral communication by or on behalf of the Company, 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 expectations and beliefs, and no assurance can be given that the results described in such statements will be achieved. These statements are subject to risks, uncertainties and other factors, many of which are outside of the Company's control, that could cause actual results to differ materially from the results described in such statements. These factors include, without limitation, the following: (i) competitive pressures; (ii) the Company's ability to consummate strategic acquisitions and alliances; (iii) the Company's ability to attract and retain key personnel; (iv) changes in the demand for information technology outsourcing and business process outsourcing; (v) changes in U.S. federal government spending levels for information technology services; (vi) the Company's ability to continue to develop and expand its service offerings to address emerging business demands and technological trends; (vii) changes in the financial condition of the Company's commercial customers; (viii) the future profitability of the Company's customer contracts, and (ix) general economic conditions and fluctuations in currency exchange rates in countries in which we do business. Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rates The Company has fixed-rate long-term debt obligations, short-term commercial paper and other borrowings subject to market risk from changes in interest rates. Sensitivity analysis is one technique used to measure the impact of changes in interest rates on the value of market-risk sensitive financial instruments. A hypothetical 10% movement in interest rates would not have a material impact on the Company's future earnings or cash flows. Foreign Currency During the ordinary course of business, the Company enters into certain contracts denominated in foreign currency. Potential foreign currency exposures arising from these contracts are analyzed during the contract bidding process. The Company generally manages these transactions by ensuring costs to service contracts are incurred in the same currency in which revenue is received. Short-term contract financing requirements are met by borrowing in the same currency. By matching revenues, costs and borrowings to the same currency, the Company has been able to substantially mitigate foreign currency risk to earnings. If necessary, the Company may also use foreign currency forward contracts or options to hedge exposures arising from these transactions. The Company does not foresee changing its foreign currency exposure management strategy. During fiscal 2000, 37% of the Company's revenue was generated outside of the United States. Using sensitivity analysis, a hypothetical ten-percent increase in the value of the U.S. dollar against all currencies would decrease revenue by 3.7% or $346 million, while a hypothetical ten-percent decrease in the value of the U.S. dollar against all currencies would increase revenue by 3.7% or $346 million. In the opinion of management, a substantial portion of this fluctuation would be offset by expenses incurred in local currency. As a result, a 17 hypothetical 10% movement of the value of the U.S. Dollar against all currencies in either direction would impact the Company's earnings before interest and taxes by $18 million. This amount would be offset, in part, from the impacts of local income taxes and local currency interest expense. At March 31, 2000, the Company had approximately $116 million of non-U.S. dollar denominated cash and cash equivalents, and approximately $107 million of non-U.S. dollar borrowings. Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements and Financial Statement Schedules Financial Statements
Page ---- Independent Auditors' Report.............................................. 19 Consolidated Balance Sheets as of March 31, 2000 and April 2, 1999 ....... 20 Consolidated Statements of Income for the fiscal years ended March 31, 2000, April 2, 1999 and April 3, 1998.................................... 22 Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2000, April 2, 1999 and April 3, 1998.................................... 23 Consolidated Statements of Stockholders' Equity for the fiscal years ended March 31, 2000, April 2, 1999 and April 3, 1998.......................... 24 Notes to Consolidated Financial Statements................................ 25 Quarterly Financial Information (Unaudited)............................... 43 Schedule Schedule VIII--Valuation and Qualifying Accounts.......................... 50
Schedules other than that listed above have been omitted since they are either not required, are not applicable, or the required information is shown in the financial statements or related notes. Separate financial statements of the Registrant have been omitted since it is primarily an operating company, and the minority interests in subsidiaries and long-term debt of the subsidiaries held by other than the Registrant are less than five percent of consolidated total assets. Financial statements (or summarized financial information) for unconsolidated subsidiaries and 50%- owned companies accounted for by the equity method have been omitted because they are inapplicable, or do not, considered individually or in the aggregate, constitute a significant subsidiary. 18 INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Stockholders Computer Sciences Corporation El Segundo, California We have audited the accompanying consolidated balance sheets of Computer Sciences Corporation and Subsidiaries (the Company) as of March 31, 2000 and April 2, 1999, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended March 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Computer Sciences Corporation and Subsidiaries as of March 31, 2000 and April 2, 1999, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2000 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Deloitte & Touche LLP Los Angeles, California May 22, 2000 19 COMPUTER SCIENCES CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS
March 31, April 2, 2000 1999 In thousands ---------- ---------- Current assets: Cash and cash equivalents............................ $ 260,403 $ 617,879 Receivables, net of allowance for doubtful accounts of $72,981 (2000) and $81,549 (1999) (notes 4 and 10)................................................. 2,191,519 1,890,461 Prepaid expenses and other current assets............ 314,413 296,352 ---------- ---------- Total current assets............................... 2,766,335 2,804,692 ---------- ---------- Investments and other assets: Software, net of accumulated amortization of $199,065 (2000) and $160,761 (1999)............................ 267,577 172,184 Excess of cost of businesses acquired over related net assets, net of accumulated amortization of $155,255 (2000) and $120,917 (1999)................. 903,194 726,951 Other assets......................................... 662,099 444,319 ---------- ---------- Total investments and other assets................. 1,832,870 1,343,454 ---------- ---------- Property and equipment--at cost (note 5): Land, buildings and leasehold improvements........... 413,741 364,168 Computers and related equipment...................... 2,067,988 1,798,784 Furniture and other equipment........................ 262,511 205,812 ---------- ---------- 2,744,240 2,368,764 Less accumulated depreciation and amortization....... 1,469,321 1,256,557 ---------- ---------- Property and equipment, net........................ 1,274,919 1,112,207 ---------- ---------- $5,874,124 $5,260,353 ========== ==========
(See notes to consolidated financial statements) 20 COMPUTER SCIENCES CORPORATION CONSOLIDATED BALANCE SHEETS (Continued) LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, April 2, 2000 1999 In thousands except shares ---------- ---------- Current liabilities: Short-term debt and current maturities of long-term debt (note 5)......................................... $ 249,227 $ 603,939 Accounts payable....................................... 406,905 403,154 Accrued payroll and related costs (note 6)............. 485,821 405,160 Other accrued expenses................................. 598,546 460,937 Deferred revenue....................................... 137,061 138,340 Federal, state and foreign income taxes (note 3)....... 106,406 131,673 ---------- ---------- Total current liabilities............................ 1,983,966 2,143,203 ---------- ---------- Long-term debt, net of current maturities (note 5)....... 652,367 399,672 ---------- ---------- Deferred income taxes (note 3)........................... 83,796 ---------- ---------- Other long-term liabilities (note 6)..................... 110,021 128,957 ---------- ---------- Commitments and contingencies (notes 6 and 7)............ Stockholders' equity (notes 5, 8 and 9).................. Preferred stock, par value $1 per share; authorized 1,000,000 shares; none issued......................... Common stock, par value $1 per share; authorized 275,000,000 shares; issued 167,903,047 (2000) and 165,520,548 (1999).................................... 167,903 165,521 Additional paid-in capital............................. 907,123 823,285 Earnings retained for use in business.................. 2,061,043 1,667,734 Accumulated other comprehensive loss................... (75,800) (53,235) ---------- ---------- 3,060,269 2,603,305 Less common stock in treasury, at cost, 394,915 shares (2000) and 369,607 shares (1999)........................ (16,140) (14,413) Unearned restricted stock and other (note 8)........... (155) (371) ---------- ---------- Stockholders' equity, net............................ 3,043,974 2,588,521 ---------- ---------- $5,874,124 $5,260,353 ========== ==========
(See notes to consolidated financial statements) 21 COMPUTER SCIENCES CORPORATION CONSOLIDATED STATEMENTS OF INCOME
Fiscal Year Ended ---------------------------------- March 31, April 2, April 3, 2000 1999 1998 In thousands except per-share amounts ---------- ---------- ---------- Revenues.................................... $9,370,694 $8,111,405 $7,027,881 ---------- ---------- ---------- Costs of services........................... 7,352,544 6,349,471 5,500,478 Selling, general and administrative......... 779,367 735,756 640,624 Depreciation and amortization............... 545,723 456,897 397,805 Interest expense............................ 58,135 49,358 51,418 Interest income............................. (17,612) (14,950) (10,031) Special charges (note 2).................... 41,065 233,219 ---------- ---------- ---------- Total costs and expenses.................... 8,759,222 7,576,532 6,813,513 ---------- ---------- ---------- Income before taxes......................... 611,472 534,873 214,368 Taxes on income (notes 2 and 3)............. 208,600 179,371 (60,199) ---------- ---------- ---------- Net income.................................. $ 402,872 $ 355,502 $ 274,567 ========== ========== ========== Earnings per common share: Basic..................................... $ 2.42 $ 2.17 $ 1.71 ========== ========== ========== Diluted................................... $ 2.37 $ 2.12 $ 1.67 ========== ========== ==========
(See notes to consolidated financial statements) 22 COMPUTER SCIENCES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ended --------------------------------- March 31, April 2, April 3, 2000 1999 1998 In thousands ----------- --------- --------- Cash flows from operating activities: Net income................................ $ 402,872 $ 355,502 $ 274,567 Adjustments to reconcile net income to net cash provided: Depreciation and amortization........... 545,723 456,897 397,805 Deferred taxes.......................... 68,791 89,400 (96,343) Special items, net of tax............... 17,014 101,847 Provision for losses on accounts receivable............................. 6,070 9,226 20,411 Changes in assets and liabilities, net of effects of acquisitions: Increase in receivables............... (278,679) (243,188) (239,893) Increase in prepaid expenses.......... (9,035) (8,674) (86,815) Increase in accounts payable and accruals............................. 159,457 72,894 109,956 Increase in income taxes payable...... 44,446 98,385 99,047 (Decrease) increase in deferred revenue.............................. (4,019) 10,042 13,817 Other changes, net.................... (6,372) 6,867 (1,041) ----------- --------- --------- Net cash provided by operating activities. 946,268 847,351 593,358 ----------- --------- --------- Cash flows from investing activities: Purchases of property and equipment....... (585,593) (438,926) (358,589) Outsourcing contracts..................... (218,689) (85,286) (145,974) Acquisitions, net of cash acquired........ (294,239) (184,281) (116,447) Dispositions.............................. 29,875 37,947 75,827 Software.................................. (127,129) (87,598) (64,774) Other investing cash flows, net........... 19,219 15,357 10,834 ----------- --------- --------- Net cash used in investing activities..... (1,176,556) (742,787) (599,123) ----------- --------- --------- Cash flows from financing activities: Net borrowing (repayment) of commercial paper.................................... 40,504 (42) 77,953 Borrowings under lines of credit.......... 75,989 70,440 66,281 Repayment of borrowings under lines of credit................................... (89,671) (59,679) (83,022) Proceeds from term debt issuance.......... 200,000 32,568 Principal payments on long-term debt...... (179,471) (35,940) (12,260) Proceeds from stock option transactions... 57,079 49,684 67,048 Other financing cash flows, net........... (15,780) 3,190 13,356 ----------- --------- --------- Net cash (used in) provided by financing activities............................... (111,350) 227,653 161,924 ----------- --------- --------- Effect of exchange rate changes on cash and cash equivalents........................... (3,717) (301) (4,886) ----------- --------- --------- Net (decrease) increase in cash and cash equivalents................................ (345,355) 331,916 151,273 Cash and cash equivalents at beginning of year....................................... 617,879 285,963 134,690 Effect of pooling restatement............... (12,121) ----------- --------- --------- Cash and cash equivalents at end of year.... $ 260,403 $ 617,879 $ 285,963 =========== ========= =========
(See notes to consolidated financial statements) 23 COMPUTER SCIENCES CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Earnings Accumulated Unearned Common Stock Additional Retained Other Common Restricted -------------------- Paid-In for Use in Comprehensive Stock in Stock and In thousands except Shares Amount Capital Business Income (Loss) Treasury Other Total shares ----------- -------- ---------- ---------- ------------- --------- ---------- ----------- Balance at March 28, 1997................... 82,586,625 $ 82,587 $652,980 $1,116,728 $ (14,625) $ (11,982) $(5,660) $1,820 ,028 ----------- -------- -------- ---------- --------- --------- ------- ----------- Comprehensive income: Net income.............. 274,567 274,567 Currency translation adjustment............. (23,287) (23,287) Unfunded pension obligation............. (1,779) (1,779) ----------- Comprehensive income... 249,501 ----------- Stock option transactions........... 2,264,962 2,264 96,625 (1,047) 97,842 Amortization and forfeitures of restricted stock....... 109 109 Repayment of notes...... 4,282 4,282 Adjustments for pooling of interests........... (479) (479) Effect of two-for-one stock split............ 78,322,626 78,323 (78,323) Stock purchase rights redemption............. (261) (261) ----------- -------- -------- ---------- --------- --------- ------- ----------- Balance at April 3, 1998................... 163,174,213 163,174 749,605 1,312,232 (39,691) (13,029) (1,269) 2,171,022 ----------- -------- -------- ---------- --------- --------- ------- ----------- Comprehensive income: Net income.............. 355,502 355,502 Currency translation adjustment............. (12,860) (12,860) Unfunded pension obligation............. (684) (684) ----------- Comprehensive income... 341,958 ----------- Stock option transactions........... 2,346,335 2,347 73,680 (1,384) 74,643 Amortization and forfeitures of restricted stock....... 893 893 Repayment of notes...... 5 5 ----------- -------- -------- ---------- --------- --------- ------- ----------- Balance at April 2, 1999................... 165,520,548 165,521 823,285 1,667,734 (53,235) (14,413) (371) 2,588,521 ----------- -------- -------- ---------- --------- --------- ------- ----------- Comprehensive income: Net income.............. 402,872 402,872 Currency translation adjustment............. (30,547) (30,547) Unfunded pension obligation............. 1,060 1,060 Unrealized gain on available for sale securities............. 6,922 6,922 ----------- Comprehensive income... 380,307 ----------- Stock option transactions........... 2,382,499 2,382 83,838 (1,727) 84,493 Amortization and forfeitures of restricted stock....... 203 203 Repayment of notes...... 13 13 Adjustments for pooling of interests........... (9,563) (9,563) ----------- -------- -------- ---------- --------- --------- ------- ----------- Balance at March 31, 2000................... 167,903,047 $167,903 $907,123 $2,061,043 $(75,800) $(16,140) $ (155) $3,043,974 =========== ======== ======== ========== ========= ========= ======= ===========
(See notes to consolidated financial statements) 24 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands except per-share amounts) Note 1--Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include those of Computer Sciences Corporation, its subsidiaries and those joint ventures and partnerships over which it exercises control, hereafter collectively referred to as "CSC" or "the Company." All material intercompany transactions and balances have been eliminated. Business Combination CSC acquired Nichols Research Corporation ("Nichols") on November 16, 1999. Upon consummation of the merger, Nichols became a wholly owned subsidiary of the Company. Each outstanding share of Nichols common stock was converted into .423 shares of common stock of the Company and each outstanding option to purchase shares of common stock was converted into an option to purchase .423 shares of CSC common stock. The acquisition has been accounted for under the pooling of interests method, and previously reported consolidated financial statements of the Company for periods ended prior to November 16, 1999 have been restated. The restatement combines results from Nichols' fiscal 1999 and 1998, which ended August 31, with results from CSC's fiscal 1999 and 1998, which ended April 2 and April 3, respectively. Therefore, the restated twelve months for fiscal 1999 and 1998 reflect Nichols' twelve months ended August 31. The restated fiscal 2000 data include results based on CSC's fiscal year. Due to the alignment of fiscal periods, Nichols' results of operations for the same five month period of April to August 1999 are reported in both CSC's fiscal 2000 and 1999. As a result, Nichols' revenue of $220,551 and net income of $9,563 are included in both fiscal 2000 and 1999. On this basis for the six months ended October 1, 1999 and fiscal years 1999 and 1998 (periods prior to the merger), Nichols' revenues were $245,918, $451,440 and $427,043, respectively, and net income was $9,820, $14,345 and $14,198, respectively. Other Acquisitions During the three fiscal years ended March 31, 2000, the Company made a number of acquisitions in addition to the one described above which, either individually or collectively, are not material. In conjunction with business combinations accounted for as purchases, the Company acquired tangible assets with an estimated fair value of $146,000, $239,000 and $64,000; and assumed liabilities of $89,000, $195,000 and $49,000 for fiscal 2000, 1999 and 1998 respectively. The excess of cost of businesses acquired over related net assets was $262,000, $175,000 and $101,000 for the three fiscal years ended 2000. Income Recognition The Company provides services under time and materials, level of effort, cost-based and fixed-price contracts. For time and materials and level of effort types of contracts, income is recorded as the costs are incurred, income being the difference between such costs and the agreed-upon billing amounts. For cost-based contracts, income is recorded by applying an estimated factor to costs as incurred, such factor being determined by the contract provisions and prior experience. For fixed-price contracts, income is recorded on the basis of the estimated percentage of completion of services rendered. Losses, if any, on long-term contracts are recognized during the period in which the loss is determined. Revenues from certain information processing services are recorded at the time the service is utilized by the customer. Revenues from sales of proprietary software are recognized upon receipt of a signed contract documenting customer commitment, delivery of the software and determination of the fee amount and its 25 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 1--Summary of Significant Accounting Policies (continued) probable collection. However, if significant customization is part of the transaction, such revenues are recognized over the period of delivery. Depreciation and Amortization The Company's depreciation and amortization policies are as follows: Property and Equipment: Buildings.......................... 10 to 40 years Computers and related equipment.... 3 to 10 years Furniture and other equipment...... 2 to 10 years Leasehold improvements............. Shorter of lease term or useful life Investments and Other Assets: Software........................... 2 to 10 years Credit information files........... 10 to 20 years Excess of cost of businesses acquired over related net assets.. Up to 40 years Deferred contract costs............ Contract life
For financial reporting purposes, computer equipment is depreciated using either the straight-line or sum-of-the-years'-digits method, depending on the nature of the equipment's use. The cost of other property and equipment, less applicable residual values, is depreciated on the straight-line method. Depreciation commences when the specific asset is complete, installed and ready for normal use. Investments and other assets are amortized on a straight-line basis over the years indicated above. Included in software are unamortized capitalized software development costs of $168,663 and $122,208 as of March 31, 2000 and April 2, 1999, respectively. The related amortization expense was $34,337, $22,378 and $17,358 for the three fiscal years ended March 31, 2000. Included in other assets are deferred contract costs related to the initial purchase of assets under outsourcing contracts. The balance of such costs, net of amortization, was $155,757 and $92,717 as of March 31, 2000 and April 2, 1999, respectively. The related amortization expense was $26,893, $18,408 and $15,371 for the three fiscal years ended March 31, 2000. The Company evaluates at least annually the recoverability of its excess cost of businesses acquired over related net assets. In assessing recoverability, the current and future profitability of the related operations are considered, along with management's plans with respect to the operations and the projected undiscounted cash flows. Cash Flows Cash payments for interest on indebtedness and cash payments (refunds) for taxes on income are as follows:
Fiscal Year ------------------------- 2000 1999 1998 ------- -------- ------- Interest......................................... $59,429 $ 46,189 $51,376 Taxes on income.................................. 97,608 (20,510) 39,802
26 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 1--Summary of Significant Accounting Policies (continued) For purposes of reporting cash and cash equivalents, the Company considers all investments purchased with an original maturity of three months or less to be cash equivalents. The Company's investments consist of high quality securities issued by a number of institutions having high credit ratings, thereby limiting the Company's exposure to concentrations of credit risk. With respect to financial instruments, the Company's carrying amounts of its other current assets and liabilities were deemed to approximate their market values due to their short maturity. The Company has no material hedge contracts with respect to its foreign exchange or interest rate positions. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions, in particular estimates of anticipated contract costs utilized in the revenue recognition process, that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Stock Split All historical weighted average and per share amounts in the Consolidated Statements of Income have been restated to reflect a two-for-one stock split in the form of a 100% stock dividend paid on March 23, 1998. The Consolidated Statements of Stockholders' Equity reflects the actual number and par value of the issued and outstanding shares for fiscal 1998. The Consolidated Statements of Stockholders' Equity reflects the actual stock dividend in the period paid. Earnings per Share Basic earnings per common share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the incremental shares issuable upon the assumed exercise of stock options. Basic and diluted earnings per share are calculated as follows:
Fiscal Year -------------------------- 2000 1999 1998 -------- -------- -------- Net income for basic and diluted EPS........... $402,872 $355,502 $274,567 ======== ======== ======== Common share information (in thousands) Average common shares outstanding for basic EPS............................... 166,311 164,124 160,881 Dilutive effect of stock options............. 3,438 3,862 3,620 -------- -------- -------- Shares for diluted EPS....................... 169,749 167,986 164,501 ======== ======== ======== Basic EPS...................................... $ 2.42 $ 2.17 $ 1.71 Diluted EPS.................................... 2.37 2.12 1.67
The computation of diluted EPS did not include stock options which were antidilutive, as their exercise price was greater than the average market price of the Company's common stock during the year. The number of such options was 135,797, 88,451 and 95,310 for the years ended March 31, 2000, April 2, 1999 and April 3, 1998, respectively. 27 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 1--Summary of Significant Accounting Policies (continued) Recent Accounting Pronouncements During fiscal 2000 the Company adopted the American Institute of Certified Public Accountants Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires the capitalization of internal use computer software costs provided certain criteria are met. These capitalized costs will be amortized on a straight-line basis over the useful life of the software. The adoption of SOP 98-1 had no material impact on the Company's consolidated financial position, results of operations or cash flows. In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement requires all derivatives to be recorded on the balance sheet at fair value and establishes accounting standards for hedging activities. In June 1999, the FASB issued SFAS No. 137, which amended SFAS No. 133 by deferring its effective date by one year to fiscal years beginning after June 15, 2000. The Company is currently assessing the impact this statement will have and, based on preliminary estimates, does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows. Reclassifications Certain reclassifications have been made to the prior years' financial statements in order to conform to the current presentation. Note 2--Special Items Special items of $41,065 ($29,845 after tax), or 18 cents per share, were recorded during fiscal 2000. During the third quarter ended December 31, 1999, the Company recorded a special item of $39,068 ($28,519 after tax), or 17 cents per share after tax, related to the November 16 acquisition of Nichols. This charge is comprised of $9,304 for investment banking and other transaction expenses; $23,462 related to the write-off of capitalized software attributable to duplicate market offerings and the write-off of other assets and intangibles; and $6,303 related to employee severance costs and elimination of duplicate facilities. The involuntary termination benefits accrued and expensed were $5,060 and related to 60 employees; as of March 31, 2000, approximately $4,232 had been paid. The Company also recorded a special item of $1,997 ($1,326 after tax) for legal and other costs, net of recoveries, associated with the final resolution, during the third quarter, of the remaining issues relating to the Company's fiscal 1998 response to a failed take-over attempt. There were no special items during fiscal 1999. Special items in fiscal 1998 represent costs, expenses and benefits associated with developments at CSC Enterprises, the Company's response to a failed take-over attempt and merger-related charges associated with several acquisitions made by Nichols. During the first quarter of fiscal 1998, CSC recorded a net special credit of $1,707, or 1 cent per share, at CSC Enterprises, a general partnership of which CSC, through one of its affiliates, is the managing general partner. This net credit resulted from a tax benefit of $135,000 and an after-tax special charge of $133,293 ($208,393 before tax). During the quarter, several partners withdrew from CSC Enterprises. These withdrawals 28 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 2--Special Items (continued) caused CSC Enterprises to take actions that caused CSC to recognize an increase in the tax basis of certain assets. As required by SFAS No. 109, this tax basis increase from the previous tax basis resulted in a deferred tax asset of $135,000 and a corresponding reduction of CSC's provision for income taxes during the quarter. The tax basis increase is temporary and will be realized over time through an increase in depreciation and amortization expense for income tax purposes. In connection with the partner withdrawals and related developments, CSC Enterprises reviewed its operations, its market opportunities and the carrying value of its assets. Based on this review, certain offerings and assets were eliminated, primarily within its telecommunications operations. As a result of these plans, CSC recognized a pre-tax special charge of $208,393 ($133,293 after tax). This special charge included goodwill write-offs of $56,300 ($35,000 after tax), contract termination costs of $54,300 ($34,000 after tax), deferred contract costs and other assets of $33,093 ($20,493 after tax), telecommunications software and accruals of $35,800 ($22,300 after tax), telecommunications property, equipment and intangible assets of $18,900 ($11,700 after tax) and other non- deductible costs of $10,000. During the fourth quarter of fiscal 1998, the Company recorded a before-tax special charge of $20,700, or 8 cents per share after tax, for costs relating to the Company's response to a failed take-over attempt. The charge is comprised of $14,400 for investment banking expenses and $6,300 for other expenses such as legal costs, public relations and shareholder communications. Also, during fiscal 1998, special charges of $4,126, or 2 cents per share after tax, were recorded by Nichols. The charges were comprised of $2,000 for purchased in-process research and development activities and $226 for merger- related expenses in connection with several acquisitions made during the year and $1,900 related to the impairment of assets within Nichols' insurance line of business. Note 3--Income Taxes The sources of income before taxes, classified as between domestic entities and those entities domiciled outside of the United States, are as follows:
Fiscal Year -------------------------- 2000 1999 1998 -------- -------- -------- Domestic entities.............................. $404,571 $380,606 $119,937 Entities outside the United States............. 206,901 154,267 94,431 -------- -------- -------- $611,472 $534,873 $214,368 ======== ======== ========
29 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 3--Income Taxes (continued) The provisions (credits) for taxes on income, classified as between current and deferred and as between taxing jurisdictions, consist of the following:
Fiscal Year -------------------------- 2000 1999 1998 -------- -------- -------- Current portion: Federal.................................... $ 40,375 $ 39,116 $ (2,509) State...................................... 5,517 6,493 (646) Foreign.................................... 93,917 44,362 39,299 -------- -------- -------- 139,809 89,971 36,144 -------- -------- -------- Deferred portion: Federal.................................... 50,832 77,373 (83,723) State...................................... 12,714 10,534 (9,129) Foreign.................................... 5,245 1,493 (3,491) -------- -------- -------- 68,791 89,400 (96,343) -------- -------- -------- Total provision (credit) for taxes....... $208,600 $179,371 $(60,199) ======== ======== ========
Included in the fiscal 1998 current portion is $27,000 (composed of $26,200 federal and $800 state) of the $135,000 deferred tax asset described in Note 2 and $81,900 related to the other fiscal 1998 special items, also described in Note 2. The fiscal 1998 deferred portion includes the remaining $108,000 (composed of $104,800 federal and $3,200 state) of the $135,000 deferred tax asset. The major elements contributing to the difference between the federal statutory tax rate and the effective tax rate are as follows:
Fiscal Year -------------------- 2000 1999 1998 ---- ----- ----- Statutory rate.......... 35.0 % 35.0 % 35.0 % State income tax, less effect of federal deduction.............. 1.9 2.1 2.3 Goodwill and other intangibles amortization........... (1.2) .4 .6 Utilization of tax credits/losses......... (1.7) (1.0) (2.0) Special items........... .5 (63.7) Foreign rate differential........... 4.7 (2.2) Depreciable asset basis adjustment............. (3.3) Other................... (1.8) (.8) (.4) ---- ----- ----- Effective tax rate...... 34.1 % 33.5 % (28.2)% ==== ===== =====
The fiscal 1998 special items percentage relates principally to the $135,000 tax benefit described in Note 2. 30 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 3--Income Taxes (continued) The tax effects of significant temporary differences that comprise deferred tax balances are as follows:
March 31, April 2, 2000 1999 --------- --------- Deferred tax assets (liabilities) Deferred income................................... $ 17,028 $ 7,816 Employee benefits................................. 24,900 21,396 Provisions for contract settlement................ 134 1,086 Currency exchange................................. 43,817 23,765 Other assets...................................... 44,221 45,748 Contract accounting............................... (101,065) (111,537) Depreciation and amortization..................... (207,504) (49,954) Prepayments....................................... (64,637) (79,676) Tax loss/credit carryforwards..................... 64,460 37,351 Other liabilities................................. (12,657) (13,863) --------- --------- Total deferred taxes................................ $(191,303) $(117,868) ========= =========
Of the above deferred amounts, $107,507 and $111,277 are included in current income taxes at March 31, 2000 and April 2, 1999, respectively. The IRS has substantially completed its examination of the Company's federal income tax returns for fiscal years 1992 through 1994. The results are not expected to have a material effect on the Company's financial position or results of operations. Note 4--Receivables Receivables consist of the following:
March 31, April 2, 2000 1999 ---------- ---------- Billed trade accounts................................ $1,634,239 $1,400,069 Recoverable amounts under contracts in progress...... 491,429 456,264 Billed trade accounts................................ $1,634,239 $1,400,069 ---------- ---------- $2,191,519 $1,890,461 ========== ==========
Recoverable amounts under contracts in progress generally become billable upon completion of a specified phase of the contract, negotiation of contract modifications, completion of government audit activities, or upon acceptance by the customer. The balance at March 31, 2000 is expected to be collected during fiscal 2001 except for $86,193 to be collected during fiscal 2002 and thereafter. Note 5--Debt Short-term At March 31, 2000, the Company had an uncommitted line of credit of $25,000 with a domestic bank. As of March 31, 2000, the Company had no borrowings outstanding under this line of credit. 31 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 5--Debt (continued) At March 31, 2000, the Company had uncommitted lines of credit of $220,053 with certain foreign banks. As of March 31, 2000, the Company had $59,876 of borrowings outstanding under these lines of credit. These short-term lines of credit carry no commitment fees or significant covenants. The weighted average interest rate on borrowings under these short-term lines of credit was 3.9% at March 31, 2000, and April 2, 1999. The Company also had outstanding borrowings of $12,687 with foreign banks as of March 31, 2000. The weighted average interest rate on these borrowings was 9.5%. At March 31, 2000, the Company had $415,575 of commercial paper outstanding of which $165,575 was classified as short-term debt and $250,000 was classified as long-term debt. The weighted average interest rate on the Company's commercial paper was 6.0% and 4.9% at March 31, 2000 and April 2, 1999, respectively. The Company's commercial paper is backed by two $250,000 committed credit facilities which expire on August 18, 2000 and August 20, 2004. The classification of the Company's outstanding commercial paper is determined by the expiration dates of these credit facilities. The Company intends to renew the short-term credit facility prior to expiration. Long-term
March 31, April 2, 2000 1999 --------- -------- Commercial paper....................................... $250,000 6.80% term notes, due April 1999....................... $150,000 6.50% term notes, due November 2001.................... 150,000 150,000 6.25% term notes, due March 2009....................... 200,000 200,000 Capitalized lease liabilities, at varying interest rates, payable in monthly installments through fiscal 2002.................................................. 6,062 11,425 Notes payable, at varying interest rates (from 3.5% to 11.0%) through fiscal 2005............................ 57,394 55,765 -------- -------- Total long-term debt................................... 663,456 567,190 Less current maturities................................ 11,089 167,518 -------- -------- $652,367 $399,672 ======== ========
Capitalized lease liabilities shown above represent amounts due under leases for the use of computers and related equipment. Included in property and equipment are related assets of $13,531 (2000) and $20,030 (1999), less accumulated amortization of $7,794 and $9,892, respectively. Certain of the Company's borrowing arrangements contain covenants that require the Company to maintain certain financial ratios and that limit the amount of dividend payments. Under the most restrictive requirement, approximately $1,942,000 of retained earnings was available for cash dividends at March 31, 2000. The carrying value of the Company's long-term debt is $663,456 and $567,190 at March 31, 2000 and April 2, 1999, respectively. The corresponding fair value is approximately $646 million using the current interest rates available to the Company for debt of the same remaining maturities. Maturities of long-term debt by fiscal year are $11,089 (2001), $157,340 (2002), $2,386 (2003), $1,071 (2004), $250,528 (2005) and $241,042 thereafter. 32 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 6--Pension and Other Postretirement Benefit Plans The Company and its subsidiaries have several pension and postretirement healthcare and life insurance benefit plans, as described below. A contributory, defined benefit pension plan is generally available to U.S. employees. Certain non-U.S. employees are enrolled in defined benefit pension plans in the country of domicile. In addition, the Company has a Supplemental Executive Retirement Plan ("SERP"), which is a nonqualified, noncontributory pension plan. The Company provides healthcare and life insurance retirement benefits for certain U.S. employees, generally for those employed prior to August 1992. Most non-U.S. employees are covered by government sponsored programs at no direct cost to the Company other than related payroll taxes. Net periodic cost for U.S. and non-U.S. pension and other benefit plans included the following components:
Fiscal Year ------------------------- 2000 1999 1998 ------- ------- ------- Pensions Service cost.................................... $76,673 $68,199 $54,629 Interest cost................................... 71,117 63,050 50,469 Expected return on plan assets.................. (84,544) (71,438) (54,314) Amortization of prior service costs............. 3,302 3,311 3,110 Amortization of unrecognized net loss........... 967 1,326 965 ------- ------- ------- Net periodic pension cost....................... $67,515 $64,448 $54,859 ======= ======= ======= Other Postretirement Benefits Service cost.................................... $ 763 $ 819 $ 662 Interest cost................................... 3,033 3,384 3,044 Expected return on plan assets.................. (2,312) (1,698) (944) Amortization of transition obligation........... 1,633 1,633 1,633 Amortization of prior service cost.............. 490 490 490 Recognized actuarial gain....................... (813) (292) (389) ------- ------- ------- Net provision for postretirement benefits....... $ 2,794 $ 4,336 $ 4,496 ======= ======= =======
33 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 6--Pension and Other Postretirement Benefit Plans (continued) The following tables provide a reconciliation of the changes in the plans' benefit obligations and fair value of assets for the fiscal years ended March 31, 2000 and April 2, 1999, and a statement of the funded status at March 31, 2000 and April 2, 1999:
Other Postretirement Pensions Benefits ---------------------- ------------------ Fiscal Year Fiscal Year ---------------------- ------------------ 2000 1999 2000 1999 ---------- ---------- -------- -------- Change in benefit obligation: Benefit obligation at beginning of year............................. $1,108,594 $ 912,984 $ 44,525 $ 47,826 Service cost...................... 76,673 68,199 763 819 Interest cost..................... 71,117 63,050 3,033 3,384 Plan participants' contributions.. 36,213 30,119 983 943 Amendments........................ 29,909 13,476 Actuarial (gain) loss............. (53,530) 65,012 (413) (5,815) Benefits paid..................... (54,494) (36,212) (1,909) (2,632) Foreign currency exchange rate changes.......................... (6,593) (8,034) ---------- ---------- -------- -------- Benefit obligation at end of year. $1,207,889 $1,108,594 $ 46,982 $ 44,525 ========== ========== ======== ======== Change in plan assets: Fair value of plan assets at beginning of year................ $1,098,444 $ 902,162 $ 27,729 $ 19,934 Actual return on plan assets...... 142,742 122,743 3,077 3,830 Employer contributions............ 70,294 65,539 6,458 5,654 Plan participants' contributions.. 36,213 30,119 983 943 Asset transfers................... 18,090 14,086 Benefits paid..................... (54,494) (36,212) (1,909) (2,632) Foreign currency exchange rate changes.......................... (4,379) 7 ---------- ---------- -------- -------- Fair value of plan assets at end of year.......................... $1,306,910 $1,098,444 $ 36,338 $ 27,729 ========== ========== ======== ======== Reconciliation of funded status to net amount recorded: Funded status..................... $ 99,021 $ (10,150) $(10,644) $(16,796) Unrecognized actuarial (gain)..... (162,689) (49,644) (16,037) (15,672) Unrecognized transition obligation....................... 4,229 5,314 20,460 22,093 Unrecognized prior service cost... 29,588 20,637 4,222 4,712 Contribution in fourth fiscal quarter.......................... 215 2,500 ---------- ---------- -------- -------- Net amount recorded............... $ (29,636) $ (31,343) $ (1,999) $ (5,663) ========== ========== ======== ========
Plan assets include equity and fixed income securities and short-term investments. Pension plan assets also include real estate investments and insurance contracts. 34 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 6--Pension and Other Postretirement Benefit Plans (continued) The following table provides the amounts recorded in the Company's consolidated balance sheets:
Other Postretirement Pensions Benefits ------------------ ----------------- March April 2, March 31, April 31, 2000 1999 2000 2, 1999 -------- -------- --------- ------- Prepaid benefit cost............... $ 20,718 $ 14,074 Accrued benefit liability.......... (57,230) (54,279) $(1,999) $(5,663) Intangible asset................... 1,946 2,301 Accumulated other comprehensive income............................ 4,930 6,561 -------- -------- ------- ------- Net amount recorded................ $(29,636) $(31,343) $(1,999) $(5,663) ======== ======== ======= =======
The following table lists selected information for the pension plans with accumulated benefit obligations in excess of plan assets as of March 31, 2000 and April 2, 1999. The reported amounts below consist only of unfunded plans.
March 31, April 2000 2, 1999 --------- ------- Projected benefit obligation............................ $51,442 $39,139 Accumulated benefit obligation.......................... 45,158 35,054 Fair value of plan assets............................... 0 0
Weighted average assumptions used in the accounting for the Company's plans were:
Fiscal Year ---------------- 2000 1999 1998 ---- ---- ---- Discount or settlement rates............................. 6.9% 6.7% 7.1% Rates of increase in compensation levels................. 5.0 5.0 5.2 Expected long-term rates of return on assets............. 8.0 8.1 8.3
The assumed healthcare cost trend rate used in measuring the expected benefit obligation was 7.5% for fiscal 2000, declining to 5.0% for 2005 and subsequent years. A one-percentage point change in the assumed healthcare cost trend rate would have the following effects:
One Percentage Point ----------------- Increase Decrease -------- -------- Effect on accumulated postretirement benefit obligation as of March 31, 2000................................... $5,016 $(4,195) Effect on net periodic postretirement benefit cost for fiscal 2000............................................ $ 580 $ (386)
The Company sponsors several defined contribution plans for substantially all U.S. employees and certain foreign employees. The plans allow employees to contribute a portion of their earnings in accordance with specified guidelines. At March 31, 2000, plan assets included 6,040,431 shares of the Company's common stock. During fiscal 2000, 1999 and 1998, the Company contributed $49,164, $48,351 and $43,328, respectively. 35 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 7--Commitments and Contingencies Commitments The Company has operating leases for the use of certain property and equipment. Substantially all operating leases are noncancelable or cancelable only by the payment of penalties. All lease payments are based on the lapse of time but include, in some cases, payments for insurance, maintenance and property taxes. There are no purchase options on operating leases at favorable terms, but most leases have one or more renewal options. Certain leases on real estate property are subject to annual escalations for increases in utilities and property taxes. Lease rental expense amounted to $191,511 (2000), $192,094 (1999) and $171,315 (1998). Minimum fixed rentals required for the next five years and thereafter under operating leases in effect at March 31, 2000 are as follows:
Fiscal Year Real Estate Equipment ----------- ----------- --------- 2001................................................. $112,463 $ 47,096 2002................................................. 95,623 30,513 2003................................................. 77,256 19,598 2004................................................. 58,538 10,304 2005................................................. 40,894 5,859 Thereafter........................................... 85,840 5,723 -------- -------- $470,614 $119,093 ======== ========
DST Systems, Inc., a shareholder of the Company, provides data processing and consulting services and licenses certain software products to the Company. During the three fiscal years ended March 31, 2000, the Company incurred aggregate expenses of $28,618, $27,065 and $27,271, respectively, related thereto, which are included in costs of services. Contingencies The primary financial instruments which potentially subject the Company to concentrations of credit risk are accounts receivable. The Company's customer base includes Fortune 500 companies, the U.S. Federal government and other significant, well-known companies operating in North America, Europe and the Pacific Rim. Credit risk with respect to accounts receivable is minimized because of the nature and diversification of the Company's customer base. Furthermore, the Company continuously reviews its accounts receivables and records provisions for doubtful accounts as needed. The Company is currently party to a number of disputes which involve or may involve litigation. It is the opinion of Company management that ultimate liability, if any, with respect to these disputes will not be material to the Company's consolidated financial statements. Note 8--Stock Incentive Plans Stock Options. The Company has seven stock incentive plans which authorize the issuance of stock options, restricted stock and other stock-based incentives to employees upon terms approved by the Compensation Committee. In addition, on November 16, 1999, in connection with the acquisition of Nichols, the Company assumed outstanding employee options to purchase an aggregate of 1,432,842 shares of Nichols common stock at an average exercise price of $19.98 per share (which is equivalent to 606,170 shares of CSC common stock at an average exercise price of $47.24 per share). 36 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 8--Stock Incentive Plans (continued) At March 31, 2000, 8,039,754 shares of CSC common stock were available for the grant to employees of future stock options, restricted stock or other stock-based incentives. Information concerning stock options granted under stock incentive plans is as follows:
Fiscal Year -------------------------------------------------------------- 2000 1999 1998 -------------------- -------------------- -------------------- Weighted Weighted Weighted Average Average Average Number of Exercise Number of Exercise Number of Exercise Shares Price Shares Price Shares Price ---------- -------- ---------- -------- ---------- -------- Outstanding, beginning of year................ 11,403,487 $32.03 12,441,657 $26.05 13,760,265 $20.62 Granted................. 2,853,062 60.06 2,389,331 53.76 3,447,299 36.31 Exercised............... (2,435,399) 23.14 (2,280,512) 21.60 (3,973,324) 15.53 Canceled................ (1,123,180) 44.75 (1,146,989) 33.27 (792,583) 29.05 ---------- ---------- ---------- Outstanding, end of year................... 10,697,970 40.19 11,403,487 32.03 12,441,657 26.05 ========== ========== ========== Exercisable, end of year................... 4,120,304 $25.59 4,532,483 $19.82 4,394,946 $16.36 ========== ========== ==========
March 31, 2000 ----------------------------------------------------------------- Options Outstanding Options Exercisable -------------------------------------- -------------------------- Weighted Average Weighted Remaining Weighted Range of Option Exercise Number Average Contractual Number Average Price Outstanding Exercise Price Life Exercisable Exercise Price - ------------------------ ----------- -------------- ----------- ----------- -------------- $ .17-$25.94......... 2,688,621 $15.85 3.6 2,343,493 $14.89 26.45-35.69.......... 2,682,727 34.23 6.6 1,084,844 34.31 35.75-58.06.......... 4,344,314 52.99 8.0 638,472 46.83 58.88-93.25.......... 982,308 66.44 8.8 53,495 64.28
The Company uses the intrinsic value based method of accounting for stock options, under which compensation cost is equal to the excess, if any, of the quoted market price of the stock at the option grant date over the exercise price, and is amortized over the vesting period. Compensation cost recognized with respect to stock options was $525, $300 and $377 for fiscal 2000, 1999 and 1998, respectively. Restricted Stock. Restricted stock awards consist of shares of common stock of the Company sold at par value ($1 per share). Upon sale to an employee, shares of restricted stock become outstanding, receive dividends and have voting rights. The shares are subject to forfeiture and to restrictions which limit the sale or transfer during the restriction period. The restrictions on shares of the Continuum Company, Inc. ("Continuum") restricted stock lapse ratably on the first five anniversaries of the date of sale. The restrictions on shares of CSC restricted stock (other than Continuum restricted stock) generally lapse on the fifth, sixth and seventh anniversaries of the date of sale. At March 31, 2000, April 2, 1999 and April 3, 1998, 7,651, 66,304 and 165,302 shares, respectively, of CSC restricted stock were outstanding, net of shares forfeited by or repurchased from terminated employees, and shares for which the restrictions have lapsed. 37 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 8--Stock Incentive Plans (continued) The Company uses the intrinsic value based method of accounting for restricted stock, under which compensation cost is equal to the excess, if any, of the quoted market price of the stock at the date of sale to the employee over the sales price, and is amortized over the restriction period. Compensation cost recognized with respect to restricted stock was $203, $411 and $645 during fiscal 2000, 1999 and 1998, respectively. Restricted Stock Units. During fiscal 1998, the Company adopted a stock incentive plan which authorizes the issuance of stock options, restricted stock and other stock-based incentives to nonemployee directors upon terms approved by the Company's Board of Directors. As of March 31, 2000, April 2, 1999 and April 3, 1998, 25,777, 22,488 and 22,488 restricted stock units ("RSUs"), respectively, had been awarded to nonemployee directors under this plan and were outstanding on that date. When a holder of RSUs ceases to be a director of the Company, the RSUs are automatically redeemed for shares of CSC common stock and dividend equivalents with respect to such shares. At the holder's election, which must be made within 30 days after the date of the award, the RSUs may be redeemed (i) as an entirety, upon the day the holder ceases to be a director, or (ii) in substantially equal amounts upon the first five, ten or fifteen anniversaries of such day. There are two types of RSUs: (i) those awarded in lieu of vested retirement benefits under other plans ("Accrued Benefit RSUs"); and (ii) those awarded as a form of future retirement benefits ("Future Benefit RSUs"). When a holder of Accrued Benefit RSUs ceases to be a director of the Company, the number of shares of CSC common stock to be delivered by the Company upon redemption of the RSUs is equal to the number of such RSUs awarded. When a holder of Future Benefit RSUs ceases to be a director, the number of shares to be delivered upon redemption is equal to 20% or 33 1/3% of the number of such RSUs awarded, multiplied by the number of full years (but not in excess of 5 or 3, respectively) that the holder served as a director after the date of award. At March 31, 2000, April 2, 1999 and April 3, 1998, 8,778 Accrued Benefit RSUs and 16,999, 13,710 and 13,710 Future Benefit RSUs, respectively, were outstanding, and at March 31, 2000, 74,223 shares of CSC common stock remained available for the grant to nonemployee directors of future RSUs or other stock-based incentives. The Company uses the intrinsic value based method of accounting for RSUs, under which compensation cost is equal to 100% of the total number of the RSUs awarded, multiplied by the quoted market price of the stock at the date of award, and is amortized, in the case of Future Benefit RSUs, over the vesting period. Compensation cost recognized with respect to RSUs was $150 for fiscal 2000. Pro Forma Information. In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," the following pro forma net income and earnings per share information is presented as if the Company accounted for stock-based compensation awarded under the stock incentive plans using the fair value based method. Under the fair value method, the estimated fair value of stock incentive awards is charged against income on a straight-line basis over the vesting period.
Fiscal Year ----------------------------------------------------- 2000 1999 1998 ----------------- ----------------- ----------------- As Pro As Pro As Pro Reported Forma Reported Forma Reported Forma -------- -------- -------- -------- -------- -------- Net income............... $402,872 $381,355 $355,502 $337,590 $274,567 $258,912 Basic earnings per share. 2.42 2.29 2.17 2.06 1.71 1.61 Diluted earnings per share................... 2.37 2.25 2.12 2.01 1.67 1.57
38 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 8--Stock Incentive Plans (continued) The weighted average fair values of stock awards granted during fiscal 2000, 1999 and 1998 were $23.59, $19.68 and $12.84, respectively. The fair value of each stock award was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in fiscal 2000, 1999 and 1998, respectively: risk-free interest rates of 5.69%, 5.48% and 6.43%; expected volatility of 36%, 32% and 28%; and expected lives of 6.08, 5.96 and 6.06 years. Note 9--Stockholder Purchase Rights Plan On December 21, 1988, the Company adopted a stockholder rights plan pursuant to which it issued one right for each outstanding share of its common stock. On February 27, 1998, the Company's Board of Directors redeemed these rights for one sixth of one cent per right. The redemption price was paid on April 13, 1998, to the holders of record of rights as of the close of business on March 30, 1998. On February 18, 1998, the Company adopted a new stockholder rights plan pursuant to which it issued one right for each outstanding share of its common stock. These rights, which are attached to and trade only together with the common stock, are not currently exercisable. On the tenth business day after any person or entity becomes the beneficial owner of 10% or more of CSC's common stock, each right (other than rights held by the 10% stockholder, which will become void) will become exercisable to purchase, for $250, CSC common stock having a market value of $500. The rights expire February 18, 2008, and may be redeemed by the Board of Directors at $.0005 per right at any time before they become exercisable. 39 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 10--Segment and Geographic Information The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," during fiscal 1999. SFAS No. 131 establishes standards for reporting information about operating segments and related disclosures about products and services, geographic areas and major customers. All of the Company's business involves operations which provide management and information technology consulting, systems integration and outsourcing. Although the Company presents estimates of revenue by business service and geography, the Company's expenses and assets are not identified or accumulated in this manner due to, among other reasons, cross-utilization of personnel and assets across the Company. Based on SFAS No. 131 criteria, the Company's reportable operating segments consist of the U.S. Federal Sector and the Global Commercial Sector. The U.S. Federal Sector operates principally within a regulatory environment subject to governmental contracting and accounting requirements, including Federal Acquisition Regulations, Cost Accounting Standards and audits by various U.S. federal agencies. The U.S. Federal Sector revenue reported below will not agree to U.S. Federal government revenue presented elsewhere in the Annual Report due to overlapping activities between segments. The Company utilizes uniform accounting policies across all of its operating units (see Note 1). The table below presents financial information for the three fiscal years ended March 31, 2000, for the two reportable segments, and for financial items that cannot be allocated to either operating segment:
Global U.S. Commercial Federal Sector Sector Corporate Total ---------- ---------- --------- ---------- 2000 Revenues.......................... $6,989,391 $2,378,113 $ 3,190 $9,370,694 Earnings (loss) before interest and taxes........................ 548,279 150,540 (5,759) 693,060 Depreciation and amortization..... 511,601 27,319 6,803 545,723 Assets............................ 4,766,963 735,139 372,022 5,874,124 Capital expenditures for long- lived assets..................... 852,613 30,924 47,874 931,411 1999 Revenues.......................... $5,930,681 $2,180,203 $ 521 $8,111,405 Earnings (loss) before interest and taxes........................ 455,060 130,864 (16,643) 569,281 Depreciation and amortization..... 418,048 30,642 8,207 456,897 Assets............................ 3,980,689 815,681 463,983 5,260,353 Capital expenditures for long- lived assets..................... 565,788 24,608 21,414 611,810 1998 Revenues.......................... $5,021,212 $2,006,548 $ 121 $7,027,881 Earnings (loss) before interest and taxes........................ 399,154 113,616 (23,796) 488,974 Depreciation and amortization..... 361,012 31,207 5,586 397,805 Assets............................ 3,274,562 745,884 253,685 4,274,131 Capital expenditures for long- lived assets..................... 493,216 24,867 51,254 569,337
40 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 10--Segment and Geographic Information (continued) A reconciliation of earnings before interest and taxes to income before taxes is as follows:
Fiscal Year ---------------------------- 2000 1999 1998 -------- -------- -------- Earnings before interest and taxes............. $693,060 $569,281 $488,974 Interest expense............................... (58,135) (49,358) (51,418) Interest income................................ 17,612 14,950 10,031 Special charges................................ (41,065) (233,219) -------- -------- -------- Income before taxes.......................... 611,472 $534,873 $214,368 ======== ======== ========
Enterprise-wide information is provided in accordance with SFAS No. 131. Revenue by country is based on the location of the selling business unit. Property and equipment information is based on the physical location of the asset. Geographic revenue and property and equipment, net for the three years ended March 31, 2000 is as follows:
Fiscal Year ----------------------------------------------------------------- 2000 1999 1998 --------------------- --------------------- --------------------- Property Property Property and and and Equipment, Equipment, Equipment, Revenues Net Revenues Net Revenues Net ---------- ---------- ---------- ---------- ---------- ---------- United States........... $5,914,716 $ 851,473 $5,345,170 $ 748,191 $4,833,279 $713,907 Europe: United Kingdom........ 1,215,030 158,367 1,134,923 130,577 929,717 136,062 Other Europe.......... 1,311,000 107,086 1,115,174 110,139 841,238 87,046 Other International..... 929,948 157,993 516,138 123,300 423,647 42,613 ---------- ---------- ---------- ---------- ---------- -------- Total................. $9,370,694 $1,274,919 $8,111,405 $1,112,207 $7,027,881 $979,628 ========== ========== ========== ========== ========== ========
The Company derives a significant portion of its revenues from departments and agencies of the United States government. U.S. Federal government revenue accounted for 24%, 26% and 28% of the Company's revenues for fiscal 2000, 1999 and 1998, respectively. At March 31, 2000, approximately 32% of the Company's accounts receivable were due from the federal government. No single commercial customer exceeded 10% of the Company's revenues during fiscal 2000, 1999 and 1998, respectively. Note 11--Agreements with Equifax During fiscal 1989, the Company entered into an agreement (the "Operating Agreement") with Equifax Inc. and its subsidiary, Equifax Credit Information Services, Inc. ("ECIS"), pursuant to which certain of the Company's subsidiaries (collectively, the "Bureaus") became affiliated credit bureaus of ECIS and purchased credit reporting services from the ECIS system for resale to their customers. The Bureaus retain ownership of their credit files stored in the ECIS system and receive revenues generated from the sale of the credit information they contain. The Bureaus pay ECIS a fee for storing and maintaining the files and for each report supplied by the ECIS system. Pursuant to the Operating Agreement, the Company acquired an option to require ECIS to purchase the collections business (the "Collections Put Option"), and a separate option to require ECIS to purchase the credit 41 COMPUTER SCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollars in thousands except per-share amounts) Note 11--Agreements with Equifax (continued) reporting business and, if not previously sold, the collections business (the "Credit Reporting Put Option"). Both options require six months' advance notice and expire on August 1, 2013. On November 25, 1997, the Collections Put Option was exercised and the collections business was sold for approximately $38,000. The transaction was completed during May 1998. Since July 31, 1998, the exercise price of the Credit Reporting Put Option has been equal to the appraised value of the credit reporting business. The Operating Agreement has a 10-year term, which will automatically be renewed indefinitely for successive 10-year periods unless the Company gives notice of termination at least six months prior to the expiration of any such term. In the event that on or prior to August 1, 2013 (i) the Company gives such notice of termination and does not exercise the Credit Reporting Put Option prior to the termination of the then-current term or (ii) there is a change in control of the Company, then ECIS has an option for 60 days thereafter to require the Company to sell to it the credit reporting business at the Credit Reporting Put Option exercise price. The Company's rights under the Operating Agreement, including its right to exercise the Credit Reporting Put Option, remain exercisable by the Company through its affiliates. 42 COMPUTER SCIENCES CORPORATION Quarterly Financial Information (Unaudited)
Fiscal 2000 ------------------------------------------- lst 2nd 3rd 4th In thousands except per-share Quarter Quarter Quarter Quarter amounts ---------- ---------- ---------- ---------- Revenues.......................... $2,203,373 $2,232,025 $2,360,071 $2,575,225 Income before taxes............... 127,790 140,499 127,851 215,332 Net income........................ 84,564 93,147 82,329 142,832 Net earnings per share: Basic........................... 0.51 0.56 0.49 0.85 Diluted......................... 0.50 0.55 0.48 0.84 Fiscal 1999 ------------------------------------------- lst 2nd 3rd 4th Quarter Quarter Quarter Quarter ---------- ---------- ---------- ---------- Revenues.......................... $1,855,277 $1,946,387 $2,054,691 $2,255,050 Income before taxes............... 102,190 111,150 138,286 183,247 Net income........................ 67,824 74,168 91,696 121,814 Net earnings per share: Basic........................... 0.42 0.45 0.56 0.74 Diluted......................... 0.41 0.44 0.55 0.72
A discussion of "special items" for fiscal 2000 is included in Note 2 to the consolidated financial statements. 43 PART II--(Continued) Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions Information regarding executive officers of the Company is included in Part I. For the other information called for by Items 10, 11, 12 and 13, reference is made to the sections entitled "Voting Securities and Principal Holders Thereof," "Item 1--Election of Directors" and "Executive Compensation" in the Registrant's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after March 31, 2000. Such sections are incorporated herein by reference in their entirety, except for the material included in the "Executive Compensation" section under the captions "Report of Compensation Committee on Annual Compensation of Executive Officers" and "Comparison of Cumulative Total Return." 44 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) (1) and (2) Financial Statements and Financial Statement Schedules These documents are included in the response to Item 8 of this report. See the index on page 51. (3) Exhibits The following exhibits are filed with this report:
Exhibit Number Description of Exhibit ------- ---------------------- 3.1 Restated Articles of Incorporation, effective October 31, 1988 (c) 3.2 Amendment to Restated Articles of Incorporation, effective August 10, 1992 (i) 3.3 Amendment to Restated Articles of Incorporation, effective July 31, 1996 (k) 3.4 Certificate of Amendment of Certificate of Designations of Series A Junior Participating Preferred Stock, effective August 1, 1996 (m) 3.5 Bylaws, amended and restated effective December 6, 1999 10.1 1978 Stock Option Plan, amended and restated effective March 31, 1988* (l) 10.2 1980 Stock Option Plan, amended and restated effective March 31, 1988* (l) 10.3 1984 Stock Option Plan, amended and restated effective March 31, 1988* (l) 10.4 1987 Stock Incentive Plan* (b) 10.5 Schedule to the 1987 Stock Incentive Plan for United Kingdom personnel* (b) 10.6 1990 Stock Incentive Plan* (h) 10.7 1992 Stock Incentive Plan, amended and restated effective August 9, 1993* (o) 10.8 Schedule to the 1992 Stock Incentive Plan for United Kingdom personnel* (n) 10.9 1995 Stock Incentive Plan* (j) 10.10 1998 Stock Incentive Plan* (s) 10.11 Form of Stock Option Agreement* (r) 10.12 Form of Restricted Stock Agreement* (r) 10.13 Annual Management Incentive Plan, effective April 2, 1983* (a) 10.14 Supplemental Executive Retirement Plan, amended and restated effective February 27, 1998* (r) 10.15 Deferred Compensation Plan, amended and restated effective February 2, 1998* (p) 10.16 Severance Plan for Senior Management and Key Employees, amended and restated effective February 18, 1998. (q) 10.17 Severance Agreement with Van B. Honeycutt, effective February 2, 1998* (p) 10.18 Employment Agreement with Van B. Honeycutt, effective May 1, 1999* (g) 10.19 Form of Indemnification Agreement for Officers (e) 10.20 Form of Indemnification Agreement for Directors (d) 10.21 1997 Nonemployee Director Stock Incentive Plan (o) 10.22 Form of Restricted Stock Unit Agreement (f) 10.23 1990 Nonemployee Director Retirement Plan, amended and restated effective February 2, 1998 (p) 10.24 Rights Agreement dated February 18, 1998 (q) 10.25 $250 million Credit Agreement (Long Term Facility) dated as of August 20, 1999 (t) 10.26 $250 million Credit Agreement (Short Term Facility) dated as of August 20, 1999 (t) 10.27 First Amendment to $350 million Credit Agreement dated September 23, 1996 (p) 21 Significant Active Subsidiaries and Affiliates of the Registrant 23 Independent Auditors' Consent 27 Financial Data Schedule 99.1 Annual Report on Form 11-K for the Matched Asset Plan of the Registrant for the fiscal year ended December 31, 1999 (to be filed by amendment) 99.2 Annual Report on Form 11-K for the Hourly Savings Plan of CSC Outsourcing, Inc. for the fiscal year ended December 31, 1999 (to be filed by amendment) 99.3 Annual Report on Form 11-K for the CUTW Hourly Savings Plan of CSC Outsourcing, Inc. for the fiscal year ended December 31, 1999 (to be filed by amendment)
45 Notes to Exhibit Index: *Management contract or compensatory plan or agreement (a)-(g) These exhibits are incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal years ended on the respective dates indicated below: (a) March 30, 1984 (e) March 31, 1995 (b) April 1, 1988 (f) April 3, 1998 (c) March 31, 1989 (g) April 2, 1999 (d) April 3, 1992
(h) Incorporated herein by reference to the Registrant's Registration Statement on Form S-8 filed on August 15, 1990. (i) Incorporated herein by reference to the Registrant's Proxy Statement for its August 10, 1992 Annual Meeting of Stockholders. (j) Incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q filed on November 13, 1995. (k) Incorporated herein by reference to the Registrant's Proxy Statement for its July 31, 1996 Annual Meeting of Stockholders. (l) Incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q filed on August 12, 1996. (m) Incorporated herein by reference to the Registrant's Current Report of Form 8-K dated August 1, 1996. (n) Incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q filed on February 10, 1997. (o) Incorporated herein by reference to the Registrant's Proxy Statement for its August 11, 1997 Annual Meeting of Stockholders. (p) Incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q filed on February 9, 1998. (q) Incorporated herein by reference to the Registrant's Registration Statement on Form 8-A filed on February 25, 1998. (r) Incorporated herein by reference to Amendment No. 2 to the Registrant's Solicitation/Recommendation Statement on Schedule 14D-9 filed on March 2, 1998. (s) Incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q filed on August 14, 1998. (t) Incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q filed on November 15, 1999. (b) Reports on Form 8-K There were two reports on Form 8-K filed during the fourth quarter of fiscal 2000, all of which related to the Registrant's acquisition of Nichols Research Corporation ("Nichols") on November 16, 1999 in a transaction accounted for as a pooling of interests. On March 31, 1999, the Registrant filed a Current Report on Form 8-K 46 in which it released restated revenues of the Registrant by market sector, including Nichols on a pooling of interests basis, for the fiscal year ended April 2, 1999 and each of the quarters in such fiscal year, and for the first three quarters of the fiscal year ending March 31, 2000. On February 9, 2000, the Registrant filed a Current Report on Form 8-K in which it released preliminary, restated unaudited consolidated condensed statements of income of the Registrant, including Nichols on a pooling of interests basis, for the fiscal year ended April 2, 1999 and each of the quarters in such fiscal year, and for the first three quarters of the fiscal year ending March 31, 2000. 47 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 Dated: June 14, 2000 /s/ Van B. Honeycutt By: ___________________________ Van B. Honeycutt, Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Van B. Honeycutt Chairman, President and June 14, 2000 ____________________________________ Chief Executive Officer Van B. Honeycutt (Principal Executive Officer) /s/ Leon J. Level Vice President, Chief June 14, 2000 ____________________________________ Financial Officer and Leon J. Level Director (Principal Financial Officer) /s/ Bryan Brady Vice President and June 14, 2000 ____________________________________ Controller (Principal Bryan Brady Accounting Officer) /s/ Irving W. Bailey, II Director June 14, 2000 ____________________________________ Irving W. Bailey, II /s/ Stephen L. Baum Director June 14, 2000 ____________________________________ Stephen L. Baum /s/ William R. Hoover Director June 14, 2000 ____________________________________ William R. Hoover /s/ Thomas A. McDonnell Director June 14, 2000 ____________________________________ Thomas A. McDonnell
48
Signature Title Date --------- ----- ---- /s/ F. Warren McFarlan Director June 14, 2000 ____________________________________ F. Warren McFarlan /s/ James R. Mellor Director June 14, 2000 ____________________________________ James R. Mellor /s/ William P. Rutledge Director June 14, 2000 ____________________________________ William P. Rutledge
49 COMPUTER SCIENCES CORPORATION AND SUBSIDIARIES SCHEDULE VIII, Valuation and Qualifying Accounts Three Years Ended March 31, 2000
Additions ------------------------- Balance, Charged to cost Balance, beginning of period and expenses Other (1) Deductions end of period In thousands ------------------- --------------- --------- ---------- ------------- Year ended March 31, 2000 Allowance for doubtful receivables............ $81,549 $ 6,070 $(1,703) $12,935 $72,981 Year ended April 2, 1999 Allowance for doubtful receivables............ 75,907 9,226 4,032 7,616 81,549 Year ended April 3, 1998 Allowance for doubtful receivables............ 52,688 31,828 4,077 12,686 75,907
- -------- (1) Includes balances from acquisitions, changes in balances due to foreign currency exchange rates and recovery of prior-year charges. 50 EX-21 2 0002.txt SUBSIDIARIES AND AFFILIATES OF THE REGISTRANT EXHIBIT 21 COMPUTER SCIENCES CORPORATION Significant Active Subsidiaries and Affiliates As of March 31, 2000
Jurisdiction of Name Organization - ---- ------------ Advanced Marine Enterprises, Inc. Virginia Aerospace Center Support (Partnership) Tennessee Alliance-One Services, Inc. Delaware Automated Systems (HK) Limited Hong Kong Century Corporation Nevada Computer Sciences Canada Inc. Canada Computer Sciences Corporation Administration Services (Pty) Limited South Africa Computer Sciences Corporation Continuum--Informatica, Lda Portugal Computer Sciences Gestion S.A. France Computer Sciences International A/S Norway Computer Sciences Raytheon (Partnership) Florida Computer Systems Advisers (M) Bhd Malaysia Continuum (Deutschland) GmbH Germany Continuum Direct Limited United Kingdom Credit Bureau of Tulsa, Inc. Oklahoma CSA Automated Private Limited Singapore CSC Accounts Management, Inc. Texas CSC Asset Management Inc. Nevada CSC Australia Pty. Limited Australia CSC Computer Sciences (South Africa)(Pty) Limited South Africa CSC Computer Sciences B.V. Netherlands CSC Computer Sciences Consulting Austria AG Austria CSC Computer Sciences HK Limited Hong Kong CSC Computer Sciences Iberica, S.A. Spain CSC Computer Sciences Ireland Limited Ireland CSC Computer Sciences Italia S.p.A. Italy CSC Computer Sciences Limited United Kingdom CSC Computer Sciences N.V./S.A. Belgium CSC Computer Sciences Pte Limited Singapore CSC Computer Sciences S.A. France CSC Computer Sciences S.A. Luxembourg CSC Computer Sciences s.r.o. Czech Republic CSC Computer Sciences SARL Switzerland CSC Computer Sciences Sdn Bhd Malaysia CSC Computer Sciences Services Management GmbH Germany CSC Computer Sciences spol. s.r.o. Slovakia CSC Computer Sciences VOF/SNC (Partnership) Belgium CSC Consulting B.V. Netherlands CSC Consulting, Inc. Massachusetts CSC Corporation Limited United Kingdom CSC Credit Services, Inc. Texas CSC Danmark A/S Denmark CSC Domestic Enterprises, Inc. Nevada CSC Energy Services, Inc. Nevada CSC Enterprises (Partnership) Delaware CSC Enterprises, Inc. Nevada
Jurisdiction of Name Organization - ---- ------------ CSC Financial Services Canada Inc. Canada CSC Financial Services GmbH Germany CSC Financial Services Limited United Kingdom CSC Financial Services S.A. France CSC Foreign Sales Corporation Barbados CSC FSG Limited United Kingdom CSC Geographic Technologies Inc. Nevada CSC Healthcare Inc. California CSC Infogerance S.A. France CSC Informatica S.p.A. Italy CSC Information Systems A/S Denmark CSC Information Technology Solutions Limited New Zealand CSC Information Technology Solutions Pty Ltd Australia CSC Integrated Payments B.V. Netherlands CSC International Systems Management Inc. Nevada CSC Investment Services Management Limited United Kingdom CSC Japan, Ltd. Delaware CSC Kobra B.V. Netherlands CSC Logic, Inc. Texas CSC New Zealand Limited New Zealand CSC Outsourcing Inc. Nevada CSC Peat Marwick S.A. France CSC Pergamon GmbH Germany CSC Ploenzke (Austria) GmbH Austria CSC Ploenzke (Schweiz) AG Switzerland CSC Ploenzke AG Germany CSC Ploenzke IT--Services GmbH Germany CSC Ploenzke, S.A. Spain CSC PMF S.A. France CSC Professional Services Group, Inc. Maryland CSC Services Management B.V. Netherlands CSC Services No. 1 Limited United Kingdom CSC Servodata GmbH Austria CSC Sverige AB Sweden CSC Veneto S.p.A. Italy Elabora Media SRL Italy Eleda Informatica SRL Italy Key Choice Insurance Marketing Limited United Kingdom Mississippi Space Services (Partnership) Mississippi Mnemonic Systems, Inc. Virginia NCCIM, LLC Delaware Nichols InfoTec Corporation Delaware Nichols Research Corporation Delaware Nichols TXEN Corporation Delaware NRC Technical Services Company Alabama Paxus Australia Pty. Limited Australia Paxus Broker Services Pty. Limited Australia Paxus Corporation Limited New Zealand Paxus Financial R&D Pty. Limited Australia PT. CSC Computer Sciences Indonesia Sys-Aid Beheer B.V. Netherlands Welkin Associates, Ltd Virginia
EX-23 3 0003.txt INDEPENDENT AUDITORS, CONSENT EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 33-26977, 33-36379, 33-50746, 33-92155, 333-00733, 333-00749, 333-00755, 333- 00757, 333-09387, 333-33327, 333-75383 and 333-77599 of Computer Sciences Corporation on Forms S-8 of our report dated May 22, 2000, appearing in this Annual Report on Form 10-K of Computer Sciences Corporation for the year ended March 31, 2000. Deloitte & Touche LLP Los Angeles, California June 14, 2000 EX-27 4 0004.txt FINANCIAL DATA SCHEDULE
5 1,000 12-MOS MAR-31-2000 APR-03-1999 MAR-31-2000 260,403 0 2,264,500 72,981 0 2,766,335 2,744,240 1,469,321 5,874,124 1,983,966 652,367 0 0 167,903 2,876,071 5,874,124 0 9,370,694 0 7,892,197 779,367 6,070 40,523 611,472 208,600 402,872 0 0 0 402,872 2.42 2.37
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