-----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, BoTF3OPUDY25dxVbiUeaGbwKTP7yCB9wB5LTcTXACUinsmrN0oMXKGlX9zEt2jXR qi2+4amVqXYBH23l+t129Q== 0000950150-98-000305.txt : 19980330 0000950150-98-000305.hdr.sgml : 19980330 ACCESSION NUMBER: 0000950150-98-000305 CONFORMED SUBMISSION TYPE: DEFA14A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19980305 SROS: NYSE SROS: PCX 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: 0328 FILING VALUES: FORM TYPE: DEFA14A SEC ACT: SEC FILE NUMBER: 001-04850 FILM NUMBER: 98557718 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 PRER14A 1 SOLICITATION MATERIAL 1 SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [X] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [X] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12 COMPUTER SCIENCES CORPORATION - - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: --------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: --------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): --------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: --------------------------------------------------------------------- (5) Total fee paid: --------------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: --------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: --------------------------------------------------------------------- (3) Filing Party: --------------------------------------------------------------------- (4) Date Filed: --------------------------------------------------------------------- 2 CSC COMPUTER SCIENCES CORPORATION 1998 3 Computer Sciences Corporation cautions that any statements in this presentation as to future business results are forward looking statements and by their nature are necessarily subject to uncertainties concerning events beyond the Company's control, and no assurances can be given that such results will be achieved. 4 CA's Proposal of $108 Does Not Represent Fair Value to CSC Shareholders o CSC has far greater near-and long-term prospects o CA'S offer does not fairly value -- CSC'S achievements -- CSC'S accelerating performance Don't Tender! 5 CSC's Value Proposition Bright Prospects o Immediate AND Long-Term Leadership Position o Robust I.T. Services Market Momentum and Value o Accelerating growth + improving margins = shareholder returns 6 Bright Prospects - - ------------------------------------------------------------------------------- o Consulting & Systems Integration - - ------------------------------------------------------------------------------- o Outsourcing Strength - - ------------------------------------------------------------------------------- o Vital Federal Business - - ------------------------------------------------------------------------------- o Verticals & Strategic Acquisitions - - ------------------------------------------------------------------------------- o Equifax Arrangement - - ------------------------------------------------------------------------------- 7 Consulting & Systems Integration Y2K & EMU Opportunities - - -------------------------------- ---------------------------------- Y2K EMU - - -------------------------------- ---------------------------------- o U.S. Market o U.S. Market $140 to $290 billion $30 to $50 billion o Global Market o European Market $500 to $600 billion $100+ billion - - -------------------------------- ---------------------------------- Source: G2 Killen & Associates Gartner Group 8 OUTSOURCING STRENGTH J.P. Morgan DuPont [Graphic reflecting total CSC CY97 General Dynamics outsourcing revenue of $2.5 billion.] Mobil Oil CNA British Aerospace 9 Vital Federal Business Total 26-Month Window = $18.2 Billion [Graphic pie chart depicting FY98 $250 million, FY99 $12.77 billion (86 Programs) and FY00 $5.79 billion (28 Programs).] 10 Verticals & Strategic Acquisitions [Three-dimensional graph with "Industry," "Geography" and "Skill Set" as axes, and examples including "Dupont/Chemical," "APM/Healthcare," "Continuum/Financial Services" and "Kobra".] 11 Equifax Arrangement o Service Agreement o Put Option/Call Option -- Pricing o through July 31, 1998, formula based on revenue o after July 31, 1998, appraised value o Strong Source of Liquidity 12 Leadership Position O Offerings O Markets O Demand 13 Offerings Management Consulting - Strategy [Various Corporate Logos] - M & A - Industry consulting - Business reengineering - Digital commerce - Organization and culture Research And Advisory Programs - R&D [Various Corporate Logos] - Executive education - Benchmarking Systems Integration - I/T strategy and consulting [Various Corporate Logos] - Enterprisewide solutions architecture - Systems development - Program/project management - Human dynamics Outsourcing - I/T - Applications [Various Corporate Logos] - Desktop and distributed - Networks - Data centers - Facilities management - Health care and insurance operations - Credit services 14 Offerings Calendar 1997 Revenue = $6.3 BILLION Consulting/Professional Services $2.4 Billion 22% Systems Integration $1.4 Billion 17% 5-Year CAGR Outsourcing/Operations $2.5 Billion 21% 15 Markets Calendar 92 $2.5 Billion [Graphic Pie Chart Depicting Federal 51%, U.S. Commercial 40% and International 9%.] Calendar 97 $6.3 Billion [Graphic Pie Chart Depicting Federal 25%, U.S. Commercial 42% and International 33%.] Global Presence 60+ Countries 16 Worldwide Demand 1997 - 2002 [Bar Graph] $ in Billions CAGR 17.9% CAGR 19.6% CAGR 25.4% - - ----------------------------------------------------------------------------- 350 ------ $345 ------ $271 ------ $243 ------ $152 ------ $98 ---- $87 0 - - ----------------------------------------------------------------------------- IT Professional Systems Outsourcing Services Integration Source: G2 Research, Inc. (Jan 1998) 17 Momentum and Value - Revenue Growth - Margin Expansion - EPS/EBITDA Growth - Stock Market Out-Performance - Financial Outlook 18 Revenue Growth [Line graph depicting annual revenue growth of 20.4% for CSC compared with 6.5% for the S&P 500 from CY 92 to CY 97.] 19 Margin Expansion [Line graph depicting increase in margins for "Trailing 4 Quarters" from 7.0% in FY96 to 7.8% in FY98 with note "Improvement While New Contracts Coming On Line!" (excludes special items, includes Continuum).] 20 Margin Expansion [Line graph depicting cost structure from FY90 to CY97 (Continuum Included Since FY97).] 21 Quarterly EPS* [Bar Graph] FY87 FY98 (Amounts in Cents) Q1 15 65 Q2 15 74 Q3 16 87 Q4 23 97 *Excludes Special Items, Includes Continuum since FY97 22 EBITDA [Line graph depicting increase in EBITDA from $107 million for CY87 to $811 million for CY97, constituting 22.5% CAGR (excludes special items).] 23 STOCK MARKET OUT-PERFORMANCE S&P 500 CSC Out-Perf. ------- ----- --------- FY98 thru 2/10/98 34.1% 48.1% 14.0% 5 Years* 128.4 255.7 127.3 10 Years** 297.0 467.3 170.3 [Bar graph depicting share price between January 1993 ($25.54) and February 10, 1998 ($92.19).] * 5 Years from Feb 10, 1993 to Feb 10, 1998 ** 10 Years from Feb 10, 1998 to Feb 10, 1998 24 CSC P/E Premium to S&P 500 Daily through February 10th [Line graph from 2/95 to 2/98.] [Graph states that (1) CSC P/E's recent history shows a 40 to 90% premium to the S&P 500, and (2) IT Services Sector has traded down relative to the S&P 500 P/E = 25.8, on which a 40% premium indicates a P/E of 36.] 25 Financial Outlook [Bar graph depicting revenue of $6.576 billion (up 17%) for fiscal 1998, $7.826 billion (up 19%) for fiscal 1999 and $9.313 billion (up 19%) for fiscal 2000.] [Bar graph depicting EBITDA of $843 million (up 17%) for fiscal 1998, $1,025 million (up 22%) for fiscal 1999 and $1,276 million (up 24%) for fiscal 2000 (excludes special items).] [Bar graph depicting EPS of $3.43 (up 18%) for fiscal 1998, $4.20 (up 22%) for fiscal 1999 and $5.55 (up 32%) for fiscal 2000 (excludes special items).] 26 Computer Sciences Corporation cautions that any statements in this presentation as to future business results are forward looking statements and by their nature are necessarily subject to uncertainties concerning events beyond the Company's control, and no assurances can be given that such results will be achieved. 27 INFORMATION CONCERNING PARTICIPANTS CSC, the members of its Board of Directors, and certain other employees of CSC may be deemed to be participants in the solicitation of proxies, as such terms are defined in the rules of the Securities and Exchange Commission. The Board of Directors consists of the following persons, each of whom owns, directly or indirectly, or has the right to acquire, the number of shares of CSC common stock set forth after his or her name: Irving W. Bailey, II (2,000 shares of common stock, 2,289 restricted stock units or options), Van B. Honeycutt (37,242 shares of common stock, 409,363 options), William R. Hoover (244,905 shares of common stock), Richard C. Lawton (1,500 shares of common stock), Leon J. Level (11,265 shares of common stock, 93,400 options), Thomas A. McDonnell (9,271 restricted stock units or options), F. Warren McFarlan (2,400 shares of common stock, 2,968 restricted stock units or options), James R. Mellor (600 shares of common stock, 3,245 restricted stock units or options) and William P. Rutledge (200 shares of common stock, 1,371 restricted stock units or options). In addition, the following other employees of CSC, each of whom owns, directly or indirectly, or has the right to acquire, the number of shares of CSC common stock set forth after his or her name, may engage in solicitations on behalf of CSC: Edward P. Boykin (18,775 shares of common stock, 60,800 options), Milton E. Cooper (12,372 shares of common stock, 138,000 options), J. Spencer Davis (64 shares of common stock, 800 options), Scott M. Delanty (447 shares of common stock, 14,000 options), Gerard E. Dube (454 shares of common stock, 37,000 options), Hayward D. Fisk (276 shares of common stock, 16,400 options), J. Douglas Gray (45 shares of common stock, 67,000 options), Ronald W. Mackintosh (21,000 shares of common stock, 99,000 options), Thomas R. Madison Jr. (1,154 shares of common stock, 85,000 options), C. Bruce Plowman (599 shares of common stock, 9,200 options), Lisa M. Prukop, Thomas C. Robinson (30,000 shares of common stock, 70,000 options), James P. Saviano (1,788 shares of common stock, 40,800 options), Arthur H. Spiegel III (41 shares of common stock, 20,000 options), Paul T. Tucker (891 shares of common stock, 25,000 options), W. Brinson Weeks (3,004 shares of common stock, 17,400 options), and Thomas Williams (18,723 shares of common stock, 43,800 options). Share, restricted stock unit and option data do not reflect the two-for-one stock split, in the form of a 100 percent stock dividend, payable on March 23, 1998. In addition, certain of the above-named directors and employees of CSC are beneficiaries of compensation and benefit plans maintained by CSC, including certain severance arrangements, which are described in the Company's Proxy Statement, dated July 2, 1997, and the Schedule 14D-9 filed with the Securities and Exchange Commission on February 26, 1998, as amended, and which provide benefits in the event of a change in control of CSC. Goldman, Sachs & Co. ("Goldman Sachs") and J.P. Morgan & Co. ("J.P. Morgan") have been retained by CSC to act as its financial advisors with respect to the acquisition proposal which a wholly-owned subsidiary of Computer Associates International, Inc. ("CAI") has made for the stock of CSC; Goldman Sachs also has been retained as - MORE - 28 financial advisor to assist CSC in responding to any other acquisition proposals it may receive or any other attempts to acquire control of CSC. Pursuant to the terms of their engagement letters, Goldman Sachs and J.P. Morgan will receive the following fees for their services: (a) a quarterly retainer fee of $2,500,000 for Goldman Sachs and $1,000,000 for J.P Morgan, payable on the first day of each three-month period during which they provide such services; and (b) a fee of $10,000,000 for Goldman Sachs and $4,000,000 for J.P. Morgan (with the quarterly retainer fees paid under clause (a) above credited on a one-time basis against such fees), payable on February 11, 1999, and February 13, 1999, respectively, in the event that CAI (and, in the case of J.P. Morgan, any other person) has not, directly or indirectly, become the beneficial owner of more than 50 percent of the outstanding Shares on or prior to such date. The Goldman Sachs engagement letter also provides that in the event that CSC determines to undertake a specific transaction as referred to in such letter, Goldman Sachs will have the right to act on CSC's behalf in connection with such transaction on customary terms and conditions, including customary fee provisions. The J.P. Morgan engagement letter provides that in the event CSC determines to proceed with a sale, merger, consolidation, business combination, or certain other specified transactions, during the term of the engagement CSC will enter into an amendment to the engagement letter providing for fees to J.P. Morgan in an amount to be determined after taking into account the results obtained and the custom and practice among investment bankers acting in similar transactions. CSC has also agreed to reimburse Goldman Sachs and J.P. Morgan for their reasonable out-of-pocket expenses, including fees and expenses of counsel, and to indemnify Goldman Sachs and J.P. Morgan and certain related persons against certain liabilities in connection with their engagement. In connection with the Goldman Sachs and J.P. Morgan engagements, CSC anticipates that Gene T. Sykes, Managing Director of Goldman Sachs, Mark Dzialga, Vice President of Goldman Sachs, Gregg R. Lemkau, Associate of Goldman Sachs, Joseph Walker, Managing Director of J.P. Morgan, David Courtney, Managing Director of J.P. Morgan, Todd Marin, Managing Director of J.P. Morgan, and Dag Skattum, Managing Director of J.P. Morgan, none of whom will receive additional compensation for such solicitation, may communicate in person, by telephone or otherwise with a limited number of institutions, brokers or other persons who are shareholders. Neither Goldman Sachs nor J.P. Morgan will receive any fee for, or in connection with, such solicitation activities by its employees apart from the fees it is otherwise entitled to receive as described above. None of the above-named employees of Goldman Sachs and J.P. Morgan owns any shares of CSC's common stock. -----END PRIVACY-ENHANCED MESSAGE-----