CSC Reports Fourth Quarter and Fiscal Year 2012 Results
News Release -- May 17, 2012
FALLS CHURCH, Va., May 17 – CSC (NYSE: CSC) today reported fourth quarter fiscal 2012 revenue of $4.11 billion and fully diluted EPS from continuing operations of ($1.02) compared to fourth quarter fiscal 2011 revenue of $4.20 billion and fully diluted EPS from continuing operations of $1.01. Fourth quarter revenue declined by 2.1% and declined 1.5% in constant currency.
The Company also announced full year revenue of $15.88 billion and fully diluted EPS from continuing operations of ($27.38) compared to fiscal 2011 revenue of $16.04 billion and fully diluted EPS from continuing operations of $4.51. Full year revenue decreased by 1.0% and decreased 2.9% in constant currency. The reduction in the Company’s earnings per share for fiscal 2012 as compared to fiscal 2011 is primarily due to goodwill impairment charges of $17.41 per share, a U.K. National Health Service (NHS) charge of $10.03 per share, a U.S. claims settlement of $1.06 per share, a restructuring charge of $0.88 per share, higher corporate general and administrative expenses, and dilution from acquisitions. These charges were partially offset by a lower tax rate.
The financial summary for the quarter and full year include:
- New business awards of $6.3 billion for the quarter, an increase of 40% year-over-year, and $19.3 billion for the year, an increase of 30%.
- Pre-tax margin of (3.79%) for the quarter and (27.38%) for the year.
- Operating margin of (1.73%) for the quarter and (7.88%) for the year.
- Operating cash flow of $496 million for the quarter and $1.18 billion for the year.
- Free cash flow of $231 million for the quarter and $59 million for the full year.
New Business Awards
Across the three lines of business, new business awards for the fourth quarter were $6.3 billion. The Managed Services Sector (MSS) reported $4.0 billion of new business, North American Public Sector (NPS) contributed approximately $1.2 billion, and Business Solutions & Services (BSS) closed $1.1 billion of new business.
For the full year, new business awards of $19.3 billion increased by 30% when compared to fiscal 2011. 2012 awards were comprised of $9.5 billion from MSS, $6.0 billion from NPS, and $3.8 billion from BSS.
Revenue by Line of Business
For the quarter, NPS revenue was $1.40 billion (down 6.6% from the fourth quarter last year), MSS revenue was $1.71 billion (a decrease of 2.3% from the fourth quarter of last year and a decrease of 1.3% in constant currency) and BSS revenue was $1.03 billion (an increase of 5.1% from the fourth quarter last year and an increase of 5.7% in constant currency).
For the fiscal year, NPS revenue was $5.70 billion (down 5.0% from last year), MSS revenue was $6.62 billion (an increase 0.5% from last year and a decrease of 2.2% in constant currency) and BSS revenue was $3.68 billion (an increase of 3.0% from last year and a decrease of 0.5% in constant currency).
CEO Commentary by Mike Lawrie
“We consider these results to be very poor as the Company is executing well below an acceptable level for CSC and its investors. There are many reasons for our under-performance – primarily NHS write-offs and challenges managing our cost structure, aligning our global organization, and in executing some of our MSS contracts. We are also experiencing some market headwinds in the Federal business and in Europe.
There were some positives in the quarter – namely our new business awards of $6.3 billion which showed particular strength in MSS and in North America.
As I said previously, our Company is in a turnaround situation and we are taking the first steps on that journey which include remediation plans for under-performing contracts, new leadership, revised compensation plans which reward business performance, implementing a more efficient operating model with updated lines of accountability, restructuring and cost re-balancing activities. This will be a multi-year journey, but we aim to place our business on a more profitable trajectory to the benefit of our employees, customers, and investors. I am confident that we can fix our current problems and start to deliver more acceptable results.”
The Company is still evaluating the impact of the turnaround initiatives and will issue annual guidance for fiscal year 2013 at a later date, probably during the next earnings call which will be held in August.
Conference Call and Webcast
CSC senior management will host a conference call and Webcast at 11 a.m. EDT today. The conference call dial-in number for domestic callers is 888-378-0320. Callers who reside outside the United States or Canada should dial 719-325-4856. The passcode for all participants is 4283894. The Webcast and presentation slides can be accessed at www.dxc.technology/investor_relations.
In an effort to provide investors with additional information regarding the Company’s results as determined by generally accepted accounting principles (GAAP), the Company has also disclosed in this press release non-GAAP information which management believes provides useful information to investors, including: operating income, operating margin, and free cash flow. A reconciliation of the adjustments to GAAP results for the quarter, and twelve months ended March 30, 2012, and prior periods, as well as the rationale for management’s use of non-GAAP measures, is included in the tables below.
CSC is a global leader in providing technology-enabled business solutions and services. Headquartered in Falls Church, Va., CSC has approximately 98,000 employees and reported revenue of $15.9 billion for the 12 months ended March 30, 2012. For more information, visit the company’s website at www.dxc.technology.
All statements in this press release and in all future press releases that do not directly and exclusively relate to historical facts constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements represent the Company’s intentions, plans, expectations and beliefs, and are subject to risks, uncertainties and other factors, many of which are outside the Company’s control. These factors could cause actual results to differ materially from such forward-looking statements. For a written description of these factors, see the section titled “Risk Factors” in CSC’s Form 10-K for the fiscal year ended April 1, 2011 and any updating information in subsequent SEC filings. The Company disclaims any intention or obligation to update these forward-looking statements whether as a result of subsequent event or otherwise, except as required by law.