EL SEGUNDO, Calif., May 24 -- Computer Sciences Corporation (NYSE: CSC) today reported results for its fiscal 2005 fourth quarter, ended April 1, 2005. Revenue from continuing operations was $3.88 billion, up 7.9% over last year's comparable quarter. Net earnings per share (diluted) were $2.13, including an after-tax gain of $229.5 million, or $1.19 per share, on the February 11, 2005, divestiture of selected DynCorp business units, and a special charge related to the redemption of $1 billion of term debt of $18.4 million after taxes, or 10 cents per share. Fiscal 2004 fourth quarter earnings per share (diluted) were $1.01. Fiscal 2005 results also include the impact of charges resulting from the settlement of an overtime pay class action lawsuit, which the company has recorded as operating cost.
The company has provided an earnings-per-share reconciliation as one of the attached tables (see page 12) to this press release. The earnings-per-share amounts presented in this table include non-GAAP measures and should be read in conjunction with the Consolidated Statement of Income on page 9 in which the GAAP earnings-per-share measures are presented.
Revenue growth during the quarter was driven by CSC's global commercial activities in Europe and North America. This performance was the result of significant contract wins, particularly in Europe, in recent years. For the 12 months ended April 1, 2005, major business awards from continuing operations were up approximately 9%. CSC's global commercial revenue also continued to benefit from favorable currency movements.
For the fourth quarter (ended April 1):
-Revenue from continuing operations was $3.88 billion, up 7.9% (approximately 6% in constant currency); -Net income was $411.8 million, including $245.2 million from the results of and gain on discontinued operations and an $18.4 million special charge related to the debt redemption; -Earnings per share (diluted) were $2.13, including $1.27 from the results of and gain on discontinued operations and a 10 cent special charge related to the debt redemption; -and major new business announcements were $2.7 billion, all from continuing operations.
For the twelve months (ended April 1):
-Revenue from continuing operations was $14.06 billion, up 4.5% over fiscal 2004 (approximately 2% in constant currency); -Net income was $810.2 million, including $313.8 million from the results of and gain on discontinued operations and the $18.4 million special charge related to the debt redemption; -Earnings per share (diluted) were $4.22, including $1.64 from the results of and gain on discontinued operations and the 10 cent special charge related to the debt redemption; -and major new business announcements totaled $16.8 billion, with $16 billion from continuing operations.
There were notable highlights during the fourth quarter and full fiscal year 2005.
For the fourth quarter:
-Divestiture of non-core federal activities; -Record European revenue of $1.28 billion; -Redemption of $1 billion of term debt; -Announcement of Health Plans Solutions divestiture.
For the full fiscal year:
-Record major business awards from continuing operations of $16 billion; -Debt-to-total capitalization ratio improved to 17.6% from 30% last year; -Record annual free cash flow of $475 million.
"We are pleased with our performance for the fourth quarter and the year," said CSC Chairman and Chief Executive Officer Van B. Honeycutt. "Given the re-profiling of our U.S. federal government business due to the divestiture, the redemption of term debt and strong major business awards, we have enhanced our competitive position and financial flexibility.
"We will continue to focus on improving our returns through operational improvements, cost management and the diligent application of stringent operating hurdles as we bring on new business.
"The market for shorter-term discretionary projects in North America continues to show improvement in demand and growth in revenue in that market year-over-year," added Honeycutt. "The demand in Europe for similar shorter-term projects continues to be soft overall, varying by region and country.
"Our growth has created a broad, long-term global revenue base across numerous customers, industries, geographies and service offerings. These longer-term revenue sources continue to constitute approximately 80% of our total. For the fourth quarter, $2.7 billion of major business awards from continuing operations were announced, more than double last year's quarterly awards. Our fourth quarter awards brought the 12 months ended April 1, 2005, total from continuing operations to approximately $16 billion, a new fiscal-year record. Five of those awards exceeded $1 billion and an additional 19 were valued at $100 million or greater, with approximately 56% coming from the global commercial market.
"The pipeline of opportunities within the U.S. federal government market remains solid and well-distributed across a broad range of government agencies and departments," continued Honeycutt. "That pipeline over the next 22 months totals approximately $33 billion, with nearly $16 billion currently scheduled for award during this fiscal year.
"To date during the first quarter of fiscal 2006, which ends July 1, we have announced approximately $820 million in awards. Included in these awards were a $335 million, 5 ½-year CSC-led joint venture to provide space command logistical support to the U.S. Air Force; a $230 million award from NASA to provide administrative, human resources, financial and procurement support services to the new Shared Services Center at Stennis Space Center; a $176 million, 10-year contract for infrastructure support services for the U.S. Department of Education; and a task order from the FBI to provide certification, accreditation and information security services.
"Also, during the current quarter, we completed the exchange of our Health Plans Solutions business with DST Systems, Inc. for approximately 7.13 million shares of CSC common shares held by a DST subsidiary," said Honeycutt. "This exchange enabled us to reduce our share base while continuing to emphasize our core offerings to provide outsourcing, consulting and systems integration services to both government and commercial customers in the global healthcare market.
"To recap, we had revenue from continuing operations of $14.1 billion for fiscal year 2005, and we anticipate revenue for our current fiscal year, ending March 31, 2006, to be in the $15 billion to $15.2 billion range. Fiscal 2005 earnings per share before special items from continuing operations were $2.68, and we anticipate a range of $3.20 to $3.30 diluted earnings per share for fiscal 2006, excluding further gains from discontinued operations. Our estimates for the first quarter, ending July 1, 2005, are for revenue of approximately $3.5 billion and diluted earnings per share in the mid-50 cent range."
A table profiling quarterly continuing operations for fiscal 2004 and 2005 appears on page 13.
BUSINESS RESULTS
Global commercial revenue was up 15.3% (approximately 13% in constant currency) to $2.67 billion from $2.32 billion for the year-ago quarter. U.S. commercial revenue was $1.08 billion, up 17.5%, compared with $915.5 million last year. European revenue rose 18.9% (approximately 14% in constant currency) to $1.28 billion from $1.08 billion in last year's third quarter. Global commercial and European revenues were the beneficiaries of meaningful recent IT services awards and favorable currency exchange rate movements. CSC's non-European international revenue was $316.1 million, down 2.9% (approximately 6% in constant currency), compared with last year's $325.4 million.
For the fourth quarter, revenue from continuing operations derived from CSC's U.S. federal government activities declined. Revenue was $1.21 billion, down 5.5% from last year's $1.28 billion. Growth on existing contracts and from new awards was offset by the end of, or reduction in scope, of several contracts, including Fort Rucker, NASA PrISMS, FBI Trilogy and the IRS Modernization. Revenue from continuing operations generated by CSC's civil agencies activities was $411.4 million, a decline of 15.9% from last year's comparable $489.1 million. CSC's Department of Defense-related revenue from continuing operations was $755.3 million, compared with $755.5 million for the fourth quarter a year ago.
Other federal revenue from continuing operations, comprised of state and local government business as well as commercial contracts performed by the U.S.federal sector reporting segment, rose to $39.1 million from $31.9 million in last year's fourth quarter.
As announced in the company's press release dated April 19, 2005, a teleconference will be held today at 5:00 p.m. EDT to discuss the fourth quarter results. This teleconference can be accessed from the CSC Web site at www.csc.com/investorrelations, in a listen-only mode.
Founded in 1959, Computer Sciences Corporation is a leading global IT services company. CSC's mission is to provide customers in industry and government with solutions crafted to meet their specific challenges and enable them to profit from the advanced use of technology.
With approximately 79,000 employees, CSC provides innovative solutions for customers around the world by applying leading technologies and CSC's own advanced capabilities. These include systems design and integration; IT and business process outsourcing; applications software development; Web and application hosting; and management consulting. Headquartered in El Segundo, Calif., CSC reported revenue of $14.1 billion from continuing operations for the 12 months ended April 1, 2005. For more information, visit the company's Web site at www.csc.com.
All statements in this press release 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 "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in CSC's Form 10-Q for the quarter ended December 31, 2004.
The Company disclaims any intention or obligation to update these forward-looking statements whether as a result of subsequent events or otherwise except as required by law.
Note to Analysts and Editors: Please see www.csc.com/investorrelations/notes_052405.htm