CSC Delivers Continued Earnings Growth in Second Quarter 2015
News Release -- November 06, 2014
Diluted EPS from Continuing Operations of $1.18, up 17% YoY
Income from Continuing Operations of $177 Million, up 9% YoY
Operating Income of $349 Million and Operating Income Margin of 11.3%
Raising FY 2015 Target Range for EPS from Continuing Operations to $4.45 - $4.65
FALLS CHURCH, Va., Nov. 6, 2014 – CSC (NYSE: CSC) today reported results for the second quarter of 2015.
“Our transformation efforts at CSC continued to show good progress in our second quarter,” said Mike Lawrie, president and CEO. “In the commercial business, we delivered solid improvements in profitability and are showing good revenue growth in our next-generation offerings, which is helping to offset headwinds in the infrastructure business. Our public sector business has seen a normalization of revenue and continues to deliver strong margins, which is helping to drive overall earnings growth.”
- EPS from continuing operations of $1.18 for the second quarter, an increase of $0.17 or 17% when compared with $1.01 for the second quarter of fiscal 2014.
- Income from continuing operations was $177 million for the second quarter, an increase of $18 million sequentially and an increase of $15 million from the prior year.
- Operating income was $349 million, an increase of $45 million sequentially and a decrease of $12 million when compared with the prior year. Operating income margin of 11.3% for the quarter increased from 9.4% on a sequential basis and was unchanged from the prior year.
- Earnings before interest and taxes (EBIT) was $276 million, an increase of $28 million sequentially and $5 million when compared with the second quarter of fiscal 2014. EBIT margin of 9.0% improved from 7.7% on a sequential basis and 8.5% in the prior year.
- Operating cash flow of $217 million in the quarter compares with $270 million in the prior year.
- Free cash flow of $31 million compares with $86 million in the prior period.
Global Business Services
GBS revenue of $1.00 billion in the quarter compares with revenue of $1.02 billion in the year ago quarter. Segment revenue decreased by 3% in constant currency due to the ongoing repositioning of the consulting business towards higher value next-generation offerings and contract completions, partially offset by growth in applications modernization. Operating margin of 13.0% increased from 11.7% in the prior year and 9.9% in the prior quarter, primarily due to the company’s cost takeout efforts. New business awards for GBS were $1.2 billion in the quarter.
Global Infrastructure Services
GIS revenue was $1.04 billion in the quarter, a decrease of 8% in constant currency from the prior year. Growth in next-generation offerings of cloud and cyber helped to partially offset the impact of price-downs, restructurings and contract conclusions. Operating margin was 6.6%, which reflects continued investments in new offerings and strategic partnerships, and compares with 9.6% in the prior year and 6.3% in the prior quarter. GIS reported new business awards of $600 million in the quarter.
North American Public Sector
NPS revenue was $1.04 billion in the quarter, a decrease of 1% when compared with $1.05 billion in the second quarter of fiscal 2014. Growth in state and local government revenue largely offset declines from Department of Defense contracts. Operating margin of 15.4% compares with 15.5% in the prior year and 14.8% in the prior quarter, as the business continues to benefit from cost takeout and better contract performance. New business awards for NPS were $1.1 billion in the quarter.
Returning Capital to Shareholders
During the second quarter, CSC returned $310 million to shareholders consisting of $32 million in common stock dividends and $278 million of share repurchases. CSC repurchased 4.6 million shares through open market purchases at an average price of $59.77. In addition, the Company entered into an accelerated share repurchase agreement under which CSC retired an additional 1.3 million shares for $75 million. CSC had 140,454,364 basic shares outstanding on October 3, 2014.
Conference Call and Webcast
CSC senior management will host a conference call and webcast at 5 p.m. EST today. The dial-in number for domestic callers is 877-874-1588. Callers who reside outside of the United States or Canada should dial 719-325-4794. The passcode for all participants is 5068637.
A replay of the conference call will be available from approximately two hours after the conclusion of the call until November 13, 2014. The replay dial-in number is 888-203-1112 for domestic callers and 719-457-0820 for callers who reside outside of the United States and Canada. The replay passcode is also 5068637. A replay of this webcast will also be available on CSC’s website.
In an effort to provide investors with additional information regarding the Company’s preliminary results as determined by generally accepted accounting principles (GAAP), the Company has also disclosed in this press release preliminary non-GAAP information which management believes provides useful information to investors, including: operating income, operating margin, earnings before interest and taxes (EBIT), EBIT margin, and free cash flow. Reconciliations of the preliminary non-GAAP measures to the respective and most directly comparable GAAP measures, as well as the rationale for management’s use of non-GAAP measures, is included below.
Computer Sciences Corporation (CSC) is a global leader of next-generation information technology (IT) services and solutions. The Company's mission is to enable superior returns on our client's technology investments through best-in-class industry solutions, domain expertise and global scale. CSC has approximately 74,000 employees and reported revenue of $12.9 billion for the 12 months ended October 3, 2014. 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 March 28, 2014 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.
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