- Q4 Earnings per Share from
Continuing Operations of $(0.73) Includes Cumulative Impact of
Certain Items of $(1.48) per Share
- Q4 Non-GAAP Diluted Earnings per
Share of $0.73, up 3% YoY
- FY16 Diluted Earnings per Share from
Continuing Operations of $0.45 Includes Cumulative Impact of
Certain Items of $(2.07) per Share
- FY16 Non-GAAP Diluted Earnings per
Share of $2.52, up 13% YoY
- FY16 Net Cash Provided by Operating
Activities of $802 million
- FY16 Free Cash Flow of $319
million
- FY17 Non-GAAP Diluted EPS from
Continuing Operations Target of $2.75 to $3.00
CSC (NYSE: CSC) today reported results for the fourth quarter of
fiscal year 2016.
“In fiscal 2016, CSC took transformative steps forward in our
strategy of delivering next-generation capabilities to our
customers globally” said Mike Lawrie, chairman, president and CEO.
“Following the successful separation of our federal public sector
business, we acquired UXC and Xchanging, two leaders in enterprise
applications and insurance solutions, respectively. As we continue
to invest in our offerings, we reported solid profitability and
earnings growth in fiscal 2016, and are well positioned to deliver
revenue growth and margin expansion in the coming year.”
Financial Highlights
Financial Highlights - Fourth Quarter Fiscal 2016
- Earnings per share from continuing
operations was $(0.73) in the fourth quarter, compared with $(0.93)
in the fourth quarter of fiscal 2015, and includes:
- $(0.46) from separation, restructuring
and other transaction costs
- $(0.68) pension & OPEB actuarial
and settlement impacts
- $(0.43) in debt extinguishment costs,
and
- $0.10 related to the adoption of ASU
2016-09.
- Non-GAAP diluted earnings per share was
$0.73 excluding these items, compared with $0.71 in the fourth
quarter of fiscal 2015.
- (Loss) income from continuing
operations was $(101) million in the fourth quarter, compared with
$(131) million in the fourth quarter of fiscal 2015, and includes:
- $(64) million from separation,
restructuring and other transaction costs
- $(94) million of pension & OPEB
actuarial and settlement impacts
- $(60) million in debt extinguishment
costs, and
- $14 million related to the adoption of
ASU 2016-09.
- Non-GAAP income from continuing
operations was $103 million excluding these items, compared with
$102 million in the year-ago quarter.
- (Loss) income from continuing
operations, before taxes of $(187) million includes:
- $(78) million from separation,
restructuring and other transaction costs
- $(118) million of pension & OPEB
actuarial and settlement impacts
- $(100) million in debt extinguishment
costs.
- Non-GAAP income from continuing
operations, before taxes was $109 million excluding these
items.
- Adjusted operating income of $138
million compared with $196 million in the year-ago quarter.
Adjusted operating margin of 7.6% decreased from 10.3% in the
year-ago quarter.
- Adjusted earnings before interest and
taxes (EBIT) of $123 million compared with $151 million in the
year-ago quarter.
Financial Highlights - Fiscal Year 2016
- Earnings per share from continuing
operations was $0.45 in fiscal year 2016, compared with $(1.52) in
fiscal year 2015, and includes:
- $(0.38) from certain CSRA overhead
costs
- $0.16 of U.S. Pension & OPEB
impacts related to our separation from CSRA
- $(0.85) of separation, restructuring
& other transaction costs
- $(0.57) of pension & OPEB actuarial
& settlement losses
- $(0.02) of SEC settlement-related
items
- $(0.42) in debt extinguishment
costs
- $0.03 of tax valuation allowance
impacts.
- Non-GAAP diluted earnings per share was
$2.52 excluding these items, compared with $2.24 in fiscal year
2015.
- Income (loss) from continuing
operations was $65 million, compared with $(217) million in fiscal
year 2015, and includes:
- $(54) million million from certain CSRA
overhead costs
- $23 million of U.S. Pension & OPEB
impacts related to our separation of CSRA
- $(120) million of separation,
restructuring & other transaction costs
- $(81) million of pension & OPEB
actuarial & settlement losses
- $(3) million of SEC settlement-related
items
- $(60) million in debt extinguishment
costs
- $4 million of tax valuation allowance
and adjustments impacts.
- Non-GAAP income from continuing
operations was $356 million excluding these items, compared with
$326 million in fiscal year 2015.
- Income (loss) from continuing
operations, before taxes of $10 million includes:
- $(88) million from certain CSRA
overhead costs
- $38 million of U.S. Pension & OPEB
costs
- $(161) million of separation,
restructuring & other transaction costs
- $(99) million of pension & OPEB
actuarial & settlement losses
- $(5) million of SEC settlement-related
items, and
- $(100) million in debt extinguishment
costs.
- Non-GAAP income from continuing
operations, before taxes was $425 million excluding these
items.
- Adjusted operating income of $632
million compared with $687 million in fiscal year 2015. Adjusted
operating margin of 8.9% increased from 8.5% in fiscal year
2015.
- Adjusted earnings before interest and
taxes (EBIT) of $503 million compared with $513 million in fiscal
year 2015.
- Net cash provided by operating
activities was $802 million compared with $1,473 million in the
prior year.
- Fiscal 2016 free cash flow was $319
million versus $757 million in the prior year.
Global Business Services
GBS revenue of $941 million in the quarter compares with $980
million in the year-ago quarter, a decline of 1.1% year-over-year
in constant currency. Growth in the BPS and Big Data businesses
partially offset a decline in the Consulting business. GBS
operating margin, excluding the impact of certain items, was 11.1%,
down from 16.3% a year ago, reflecting incremental investments in
our BPS and next-generation offerings. New business awards for GBS
were $1.1 billion in the fourth quarter.
Global Infrastructure Services
GIS revenue of $866 million in the quarter compares with $930
million in the year-ago quarter, a decline of 3.7% year-over-year
in constant currency. Growth in our next-generation offerings
including Cloud and MyWorkStyle partially offset the moderating
decline in the traditional outsourcing business. GIS operating
margin, excluding the impact of certain items, was 6.0%, up from
5.8% a year ago. New business awards for GIS were $1.2 billion in
the quarter.
Completion of UXC and Xchanging Acquisitions
During the fourth quarter, CSC completed the acquisition of UXC.
CSC subsequently also completed the acquisition of Xchanging in the
first quarter of fiscal 2017.
Returning Capital to Shareholders
During the fourth quarter, CSC returned $65 million to
shareholders consisting of $20 million in common stock dividends
and $45 million of share repurchases. During the quarter, CSC
repurchased 1.5 million shares at an average price of $30.08.
For fiscal year 2016, CSC returned $603 million to shareholders
in the form of $430 million in common stock dividends and $173
million of share repurchases. During the year, CSC repurchased 3.8
million shares.
CSC had 138,384,835 basic shares outstanding on April 1,
2016.
Earnings Conference Call and Webcast
CSC senior management will host a conference call and webcast on
the same day at 5:30 p.m. EDT. The dial-in number for domestic
callers is 888-244-2416. Callers who reside outside of the United
States or Canada should dial 913-312-1384. The passcode for all
participants is 3124172. The webcast audio and any presentation
slides will be available on CSC’s Investor Relations website.
A replay of the conference call will be available from
approximately two hours after the conclusion of the call until May
31, 2016. 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 3124172. A
replay of this webcast will also be available on CSC’s website.
Non-GAAP Measures
In an effort to provide investors with additional information
regarding the Company’s preliminary and unaudited results as
determined by U.S. generally accepted accounting principles (GAAP),
the Company has also disclosed in this press release preliminary
non-GAAP information, and certain further adjustments thereto,
which management believes provides useful information to investors,
including: constant currency, operating income, adjusted operating
income, operating and adjusted operating margin, EBIT, adjusted
EBIT, EBIT and adjusted EBIT margin, free cash flow, and non-GAAP
results including non-GAAP income from continuing operations and
non-GAAP diluted earnings per share from continuing operations.
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, are
included below.
About CSC
CSC (NYSE: CSC) leads clients on their digital transformation
journeys. The company provides innovative next-generation
technology services and solutions that leverage deep industry
expertise, global scale, technology independence and an extensive
partner community. CSC serves leading commercial and international
public sector organizations throughout the world. CSC is a Fortune
500 company and ranked among the best corporate citizens. For more
information, visit the company's website at www.csc.com.
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.” 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 3, 2015 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 events or otherwise, except as
required by law.
Note: On November 27, 2015, CSC completed the separation
of CSRA. The Company’s results from the prior year have been
adjusted to reflect the separation.
Business Segment Revenues, Operating
Income (Loss) and Operating Margins
(preliminary and unaudited)
Revenues by
Segment
Quarter Ended (Amounts in millions)
April 1, 2016
April 3, 2015 % Change
% Change
inConstantCurrency(1)
Global Business Solutions $ 941 $ 980 (4.0 )% (1.1 )% Global
Infrastructure Services 866 930 (6.9 )% (3.7 )% Total
Revenue $ 1,807 $ 1,910 (5.4 )% (2.4 )%
Twelve Months
Ended (Amounts in millions) April 1, 2016
April 3, 2015 % Change
% Change
inConstantCurrency(1)
Global Business Solutions $ 3,637 $ 4,036 (9.9 )% (3.8 )% Global
Infrastructure Services 3,469 4,081 (15.0 )% (9.6 )%
Total Revenue $ 7,106 $ 8,117 (12.5 )% (6.7 )%
(1)
Selected references are made on a
“constant currency basis” so that certain financial results can be
viewed without the impact of fluctuations in foreign currency
rates, thereby providing comparisons of operating performance from
period to period. Financial results on a “constant currency basis”
are non-U.S. Generally Accepted Accounting Principle (GAAP)
measures calculated by translating current period activity into
U.S. dollars using the comparable prior period’s currency
conversion rates. This approach is used for all results where the
functional currency is not the U.S. dollar.
Operating Income
(Loss) and Operating Margins by Segment
Quarter Ended April 1, 2016
April 3, 2015 (Amounts in millions)
OperatingIncome (Loss)
OperatingMargin
OperatingIncome (Loss)
OperatingMargin
Global Business Solutions $ 82 8.7 % $ 39 4.0 % Global
Infrastructure Services 29 3.3 % (49 ) (5.3 )% Corporate &
Eliminations (18 ) — % (29 ) — % Total Operating
Income (Loss) $ 93 5.1 % $ (39 ) (2.0 )%
Twelve
Months Ended April 1, 2016 April 3, 2015
(Amounts in millions)
OperatingIncome (Loss)
OperatingMargin
OperatingIncome (Loss)
OperatingMargin
Global Business Solutions $ 381 10.5 % $ 405 10.0 % Global
Infrastructure Services 216 6.2 % 162 4.0 % Corporate &
Eliminations (82 ) — % (108 ) — % Total Operating
Income $ 515 7.2 % $ 459 5.7 %
Consolidated Statements of
Operations
(preliminary and unaudited)
Quarter Ended Twelve Months
Ended (Amounts in millions, except per-share amounts)
April 1, 2016 April 3,
2015 April 1, 2016 April
3, 2015 Revenues $ 1,807 $ 1,910 $
7,106 $ 8,117 Costs of services (excludes
depreciation and amortization and restructuring costs) 1,460 1,618
5,185 6,159 Selling, general and administrative (excludes
depreciation and amortization, SEC settlement related charges and
restructuring costs) 251 266 1,040 1,220 Selling, general and
administrative - SEC settlement related charges — 2 — 197
Depreciation and amortization 155 182 658 840 Restructuring costs
11 241 23 256 Separation costs 9 — 19 — Interest expense 31 30 123
126 Interest income (12 ) (6 ) (38 ) (20 ) Debt extinguishment
costs 95 — 95 — Other (income) expense, net (6 ) 5
(9 ) 10 Total costs and expenses
1,994 2,338 7,096 8,788
(Loss) income from continuing operations, before
taxes (187 ) (428 ) 10 (671 ) Income tax (benefit) expense
(86 ) (297 ) (55 ) (454 ) (Loss) income from
continuing operations (101 ) (131 ) 65 (217 ) Income from
discontinued operations, net of taxes (25 ) 143
191 224 Net (loss) income (126 )
12 256 7 Less: net income attributable to noncontrolling interest,
net of tax — 3 12
15 Net (loss) income attributable to CSC common stockholders
$ (126 ) $ 9 $ 244 $ (8 ) (Loss) earnings per
common share Basic: Continuing operations $ (0.73 ) $ (0.93 ) $
0.46 $ (1.52 ) Discontinued operations (0.18 ) 0.99
1.30 1.46 $ (0.91 ) $ 0.06
$ 1.76 $ (0.06 ) Diluted: Continuing operations $
(0.73 ) $ (0.93 ) $ 0.45 $ (1.52 ) Discontinued operations
(0.18 ) 0.99 1.28 1.46 $
(0.91 ) $ 0.06 $ 1.73 $ (0.06 ) Cash dividend
per common share $ 0.14 $ 0.23 $ 2.99 $ 0.92 Weighted average
common shares outstanding for: Basic EPS 138.05 140.76 138.28
142.56 Diluted 138.05 140.76 141.33 142.56
Selected Balance Sheet Data
(preliminary and unaudited)
As of (Amounts in millions) April 1,
2016 April 3, 2015 Assets Cash and
cash equivalents $ 1,178 $ 2,076 Receivables, net 1,827 1,678
Prepaid expenses and other current assets 415 292 Assets of
discontinued operations — 806 Total current
assets 3,420 4,852 Software, net 712 718 Outsourcing
contract costs, net 334 326 Goodwill 1,272 838 Other assets 658 498
Deferred income taxes, net 338 392 Property and equipment, net
1,025 1,110 Assets of discontinued operations - noncurrent —
1,479 Total Assets $ 7,759 $ 10,213
Liabilities Short-term debt and current maturities of long-term
debt $ 781 $ 883 Accounts payable 341 295 Accrued payroll and
related costs 288 265 Accrued expenses and other current
liabilities 721 948 Deferred revenue and advance contract payments
509 457 Income taxes (receivable) payable (58 ) 23 Liabilities of
discontinued operations — 691 Total current
liabilities 2,582 3,562 Long-term debt 1,863 1,635 Deferred
revenue - long-term 348 354 Long-term pension obligations 298 287
Long-term income tax liabilities and deferred income taxes 497 463
Other long-term liabilities 160 209 Liabilities of discontinued
operations - long-term — 754 Total Equity 2,011 2,949
Total Liabilities and Equity $ 7,759 $ 10,213
Consolidated Statements of Cash Flows
(preliminary and unaudited)
Twelve Months Ended (Amounts in millions)
April 1, 2016 April 3, 2015 Cash flows from
operating activities: Net income $ 256 $ 7 Adjustments to reconcile
net income to net cash provided by operating activities:
Depreciation and amortization 767 977 Pension & other
postemployment benefits, actuarial & settlement losses 92 782
Stock-based compensation 46 68 Deferred taxes — (449 ) Gain on
dispositions (41 ) (22 ) Provision for losses on accounts
receivable 6 2 Unrealized foreign currency exchange losses (gains)
43 (4 ) Impairment losses and contract write-offs 2 — Debt
extinguishment costs 95 — Cash surrender value in excess of
premiums paid (10 ) (9 ) Other non-cash charges, net — 39 Changes
in assets and liabilities, net of effects of acquisitions and
dispositions: Decrease in receivables 138 237 Increase in prepaid
expenses and other current assets (15 ) (36 ) Decrease in accounts
payable and accrued expenses (356 ) (313 ) (Decrease) increase in
accrual for SEC settlement related charges (190 ) 190 Increase
(decrease) in income taxes payable and income tax liability 33 (23
) (Decrease) increase in advanced contract payments and deferred
revenue (37 ) 11 Other operating activities, net (27 ) 16
Net cash provided by operating activities 802 1,473
Cash flows from investing activities: Purchases of property
and equipment (356 ) (381 ) Payments for outsourcing contract costs
(101 ) (68 ) Short-term investing (70 ) — Software purchased and
developed (184 ) (199 ) Payments for acquisitions, net of cash
acquired (554 ) (49 ) Business dispositions 37 (13 ) Proceeds from
sale of assets 61 155 Other investing activities, net (13 ) 19
Net cash used in investing activities (1,180 ) (536 )
Cash flows from financing activities: Borrowings of commercial
paper 821 — Repayments of commercial paper (263 ) — Borrowings
under lines of credit and short-term debt 2,206 — Repayment of
borrowings under lines of credit (1,825 ) (32 ) Borrowing on
long-term debt, net of discount 928 — Principal payments on
long-term debt (1,869 ) (242 ) Proceeds from stock options and
other common stock transactions 82 196 Taxes paid related to net
share settlements of stock-based compensation awards (48 ) (22 )
Debt extinguishment costs (95 ) — Repurchase of common stock and
advance payment for accelerated share repurchase (73 ) (842 )
Dividend payments (430 ) (128 ) Borrowings for CSRA spin
transaction 1,508 — Transfers of cash to CSRA upon separation
(1,440 ) — Other financing activities, net 13 (8 ) Net cash
used in financing activities (485 ) (1,078 ) Effect of exchange
rate changes on cash and cash equivalents (57 ) (204 ) Net decrease
in cash and cash equivalents (920 ) (345 ) Cash and cash
equivalents at beginning of year 2,098 2,443 Cash and
cash equivalents at end of year $ 1,178 $ 2,098
Non-GAAP Financial Measures
The following tables reconcile non-GAAP financial measures
of operating income, adjusted operating income, operating and
adjusted operating margin, earnings before interest and taxes
(EBIT), adjusted EBIT, EBIT and adjusted EBIT margin, and free cash
flow to the respective most directly comparable financial measure
calculated and presented in accordance with GAAP. Also presented
below are the Company's non-GAAP results, which exclude certain
items that management believes are not indicative of the Company's
operating performance. CSC presents these non-GAAP results because
management believes they assist investors in comparing the
Company's performance across reporting periods on a consistent
basis by excluding items that management does not believe are
indicative of the Company's core operating performance, and are
considered important measures by financial analysts covering CSC
and its peers. Management uses operating income (loss) to
evaluate financial performance and it is one of the measures used
in assessing management performance. One of the limitations
associated with the use of operating income (loss), as compared to
reported earnings, is that it does not reflect the complete
financial results of the Company. CSC compensates for these
limitations by providing a reconciliation between operating income
(loss) and (loss) income from continuing operations, before taxes.
Management uses free cash flow as one of the factors in reviewing
the overall performance of the business. Management compensates for
the limitations of this non-GAAP measure by also reviewing the GAAP
measures of operating, investing and financing cash flows.
Management uses non-GAAP income from continuing operations and
non-GAAP EPS to evaluate the Company's results, excluding the
impact of items that management believes are not indicative of the
Company's operating performance. CSC compensates for the
limitations of these non-GAAP measures by providing a
reconciliation from non-GAAP results to reported results.
Adjustments to results of operations include:
•
Certain CSRA overhead costs - Reflects costs historically allocated
to CSRA but not included in discontinued operations based on
Accounting Standards Codification Subtopic 205-20 "Presentation of
Financial Statements - Discontinued Operations." These costs are
expected to be largely eliminated on a prospective basis.
•
U.S. Pension and OPEB - Reflects the impact of certain U.S. pension
and other postretirement benefit (OPEB) plans historically included
in CSC's financial results that have been transferred to CSRA as
part of the separation.
•
Separation, restructuring & other transaction costs - Reflects
non-recurring costs related to CSC's separation of CSRA, as well as
infrequently occurring costs related to CSC's (1) certain
restructuring related to workforce optimization and real estate
charges, including the fiscal 2015 special restructuring (2)
previously announced acquisitions, and (3) process remediation
related to fiscal 2016 software implementation.
•
Pension and OPEB actuarial & settlement gains losses - Reflects
pension and OPEB actuarial and settlement losses from
mark-to-market accounting.
•
Debt extinguishment costs - Reflects costs related to the fiscal
2016 redemption of all outstanding 6.50% term notes due March 2018.
•
SEC settlement-related items - Reflects costs associated with
certain SEC charges and settlements.
•
Tax valuation allowance & adjustments - Reflects the adoption
of ASU 2016-09, adjustments to tax valuation allowances in certain
jurisdictions and the application of a 20% tax rate, for the first
and second quarters of fiscal 2016, which is at the low end of the
prospective targeted effective tax rate range of 20% to 25% and
effectively excludes the impact of discrete tax adjustments for
those periods.
GAAP Reconciliations
Operating Income
(Loss) and Adjusted Operating Income
(preliminary and unaudited)
CSC defines operating income (loss) as revenue less costs of
services, depreciation and amortization expense, restructuring
costs and segment selling, general and administrative (G&A)
expenses. Operating income (loss), as defined by CSC, excludes
corporate G&A, actuarial and settlement charges related to
CSC's pension and OPEB plans, SEC settlement related charges,
separation costs and debt extinguishment costs. Operating margin is
defined as operating income as a percentage of revenue.
Adjusted operating income is computed by excluding from operating
income certain CSRA overhead costs, U.S. Pension and OPEB,
separation, and restructuring & other transaction costs.
Adjusted operating margin is defined as adjusted operating income
as a percentage of revenue. Reconciliations of adjusted
operating income to (loss) income from continuing operations,
before taxes are as follows:
Quarter Ended
Twelve Months Ended (Amounts in millions) April 1,
2016 April 3, 2015 April 1, 2016
April 3, 2015 Adjusted operating income $ 138 $ 196 $
632 $ 687 Certain CSRA overhead costs — (7 ) (48 ) (38 ) U.S.
Pension & OPEB — 13 38 51 Separation, restructuring & other
transaction costs (45 ) (241 ) (107 ) (241 ) Operating
income (loss) 93 (39 ) 515 459 Corporate G&A (45 ) (57 ) (216 )
(230 ) Pension & OPEB actuarial & settlement (losses) gains
(118 ) (298 ) (99 ) (584 ) SEC settlement related charges and Other
— (5 ) — (200 ) Separation costs (9 ) — (19 ) — Interest expense
(31 ) (30 ) (123 ) (126 ) Interest income 12 6 38 20 Debt
extinguishment costs (95 ) — (95 ) — Other expense (income), net 6
(5 ) 9 (10 ) (Loss) income from continuing
operations, before taxes $ (187 ) $ (428 ) $ 10 $ (671 )
Adjusted operating margin 7.6 % 10.3 % 8.9 % 8.5 % Operating
margin 5.1 % (2.0 )% 7.2 % 5.7 %
(Loss) Earnings
Before Interest and Taxes (EBIT) and Adjusted Earnings Before
Interest and Taxes (EBIT)
(preliminary and unaudited) EBIT is defined as net income
less income from discontinued operations, net of taxes, interest
expense, interest income and income tax benefit. EBIT margin is
defined as EBIT as a percentage of revenue. Adjusted EBIT is
computed by excluding from EBIT the impact of certain items,
including certain CSRA overhead costs, U.S. Pension and OPEB,
separation, restructuring & other transaction costs, SEC
settlement-related charges, pension and OPEB actuarial &
settlement losses, and debt extinguishment costs. Adjusted EBIT
margin is computed as adjusted EBIT as a percentage of revenue.
A reconciliation of adjusted EBIT and EBIT to net income is
as follows:
Quarter Ended Twelve Months
Ended (Amounts in millions) April 1, 2016
April 3, 2015 April 1, 2016 April 3,
2015 Adjusted EBIT $ 123 $ 151 $ 503 $ 513 Certain CSRA
overhead costs — (24 ) (88 ) (104 ) U.S. Pension & OPEB — 13 38
51 Separation, restructuring & other transaction costs (78 )
(241 ) (159 ) (241 ) SEC settlement related charges and Other — (5
) (5 ) (200 ) Pension & OPEB actuarial & settlement losses
(118 ) (298 ) (99 ) (584 ) Debt extinguishment costs (95 ) —
(95 ) — EBIT (168 ) (404 ) 95 (565 ) Interest expense
(31 ) (30 ) (123 ) (126 ) Interest income 12 6 38 20 Income tax
benefit 86 297 55 454 (Loss) income
from continuing operations (101 ) (131 ) 65 (217 ) Income from
discontinued operations, net of taxes (25 ) 143 191
224 Net (loss) income $ (126 ) $ 12 $ 256 $ 7
Adjusted EBIT margin 6.8 % 7.9 % 7.1 % 6.3 % EBIT
margin (9.3 )% (21.2 )% 1.3 % (7.0 )%
Free Cash
Flow
(preliminary and unaudited) CSC defines free cash flow as
equal to the sum of (1) operating cash flows, (2) investing cash
flows, excluding business acquisitions, dispositions and
investments (including short-term investments and purchase or sale
of available for sale securities), and (3) payments on capital
leases and other long-term asset financings. Free cash flow is
further adjusted for certain non-recurring cash flow items, such as
(i) payments related to separation and transaction costs related to
fiscal 2016 acquisitions, (ii) payments related to restructuring,
(iii) SEC settlement related payments, (iv) benefit from the sale
of accounts receivables and (v) certain CSRA overhead costs.
A reconciliation of net cash provided by operating activities to
free cash flow is as follows:
Quarter Ended
Twelve Months Ended (Amounts in millions) April 1,
2016 April 3, 2015 April 1, 2016
April 3, 2015 Net cash provided by operating
activities $ 60 $ 295 $ 802 $ 1,473 Net cash used in investing
activities (447 ) (137 ) (1,126 ) (536 ) Acquisitions, net of cash
acquired 289 14 554 49 Business dispositions — — (37 ) 13
Short-term investments (1 ) — 70 — Payments on capital leases and
other long-term asset financings (31 ) (49 ) (166 ) (242 ) Payments
on separation and other transaction costs 8 — 79 — Payments on
restructuring costs 56 — 173 — SEC settlement-related payments — —
187 — Sale of NPS accounts receivables — — (239 ) — Certain CSRA
overhead costs — — 22 — Free cash flow
$ (66 ) $ 123 $ 319 $ 757
Adjusted Segment
Operating Income (Loss) and Operating Margin
(preliminary and unaudited) Adjusted operating income (loss)
is computed by excluding from operating income (loss) certain CSRA
overhead costs, U.S. Pension and OPEB, separation, and
restructuring & other transaction costs. Reconciliations of
operating income (loss) to adjusted operating income, for the
quarters and twelve months ended April 1, 2016 and April 3, 2015,
are as follows:
Quarter Ended April 1, 2016
(Amounts in millions)
Operating income
(loss)(1)
Separation, restructuring
and other transaction costs
Adjusted operating income
(loss)
Adjusted operating
margin
Global Business Solutions $ 82 $ (22 ) $ 104 11.1 % Global
Infrastructure Services 29 (23 ) 52 6.0 % Corporate (18 ) —
(18 ) — Total $ 93 $ (45 ) $ 138 7.6 %
Quarter Ended April 3, 2015 (Amounts in
millions)
Operating income
(loss)(1)
Certain CSRA overhead
costs
U.S. Pension and OPEB
Special restructuring
costs
Adjusted operating income
(loss)
Adjusted operating
margin
Global Business Solutions $ 39 $ — $ 4 $ (125 ) $ 160 16.3 % Global
Infrastructure Services (49 ) — 9 (112 ) 54 5.8 Corporate (29 ) (7
) — (4 ) (18 ) — Total $ (39 ) $ (7 ) $ 13 $ (241 ) $ 196
10.3 %
Twelve Months Ended April 1,
2016 (Amounts in millions)
Operating income
(loss)(1)
Certain CSRA overhead
costs
U.S. Pension and OPEB
Separation, restructuring
and other transaction costs
Adjusted operating income
(loss)
Adjusted operating
margin
Global Business Solutions $ 381 $ — $ 11 $ (53 ) $ 423 11.6 %
Global Infrastructure Services 216 — 27 (48 ) 237 6.8 Corporate (82
) (48 ) — (6 ) (28 ) — Total $ 515 $ (48 ) $ 38 $
(107 ) $ 632 8.9 %
Twelve Months
Ended April 3, 2015 (Amounts in millions)
Operating income
(loss)(1)
Certain CSRA overhead
costs
U.S. Pension and OPEB
Special restructuring
costs
Adjusted operating income
(loss)
Adjusted operating
margin
Global Business Solutions $ 405 $ — $ 16 $ (125 ) $ 514 12.7 %
Global Infrastructure Services 162 — 35 (112 ) 239 5.9 Corporate
& Eliminations (108 ) (38 ) — (4 ) (66 ) — Total $ 459
$ (38 ) $ 51 $ (241 ) $ 687 8.5 %
(1)
For a reconciliation between operating
income (loss) and (loss) income from continuing operations, before
taxes, refer to the reconciliation under the heading "Operating
Income (Loss) and Adjusted Operating Income."
Non-GAAP
Results
Non-GAAP results are financial measures calculated by
excluding certain items, which management believes are not
indicative of the Company's operating performance. A reconciliation
of non-GAAP results to reported results is as follows:
Quarter Ended April 1, 2016 (Amounts in millions,
except per-share amounts)
As reported
Separation, restructuring
& other transaction costs
Pension & OPEB
actuarial & settlement losses
Debt extinguishment
costs
Tax valuation allowance
& adjustments
Non-GAAP results
Costs of services (excludes depreciation and amortization and
restructuring costs) $ 1,460 $ — $ (116 ) $ — $ — $ 1,344
Selling, general and administrative (excludes depreciation and
amortization, SEC settlement related charges and restructuring
costs) $ 251 $ (40 ) $ (2 ) $ — $ — $ 209 (Loss) income from
continuing operations, before taxes $ (187 ) $ (78 ) $ (118 ) $
(100 ) $ — $ 109 Income tax (benefit) expense (86 ) (14 ) (24 ) (40
) (14 ) 6 (Loss) income from continuing operations $ (101 )
$ (64 ) $ (94 ) $ (60 ) $ 14 $ 103 Net (loss)
income $ (126 ) $ (64 ) $ (94 ) $ (60 ) $ 14 $ 78 Less: net income
attributable to noncontrolling interest, net of tax — —
— — — — Net (loss) income
attributable to CSC common stockholders $ (126 ) $ (64 ) $ (94 ) $
(60 ) $ 14 $ 78 Effective tax rate 46.0 % 5.5
% Basic EPS from continuing operations $ (0.73 ) $ (0.46 ) $ (0.68
) $ (0.43 ) $ 0.10 $ 0.75 Diluted EPS from continuing operations $
(0.73 ) $ (0.45 ) $ (0.66 ) $ (0.42 ) $ 0.10 $ 0.73 Weighted
average common shares outstanding for: Basic EPS 138.05 138.05
138.05 138.05 138.05 138.05 Diluted EPS 138.05 141.61 141.61 141.61
141.61 141.61
Twelve Months Ended April 1,
2016 (Amounts in millions, except per-share amounts)
As reported
CertainCSRA overhead
costs
U.S. Pension &
OPEB
Separation, restructuring
& other transaction costs
Pension & OPEB
actuarial & settlement losses
SEC settlement
related items
Debt extinguishment
costs
Tax valuation
allowance & adjust-ments
Non-GAAP results
Costs of services (excludes depreciation and amortization and
restructuring costs) $ 5,185 $ (41 ) $ 32 $ (5 ) $ (100 ) $ — $ — $
— $ 5,071 Selling, general and administrative (excludes
depreciation and amortization, SEC settlement related charges and
restructuring costs) $ 1,040 $ (47 ) $ 6 $ (55 ) $ 1 $ (5 ) $ — $ —
$ 940 Income (loss) from continuing operations, before taxes
$ 10 $ (88 ) $ 38 $ (161 ) $ (99 ) $ (5 ) $ (100 ) $ — $ 425 Income
tax expense (benefit) (55 ) (34 ) 15 (41 ) (18 ) (2 ) (40 )
(4 ) 69 Income (loss) from continuing operations $ 65
$ (54 ) $ 23 $ (120 ) $ (81 ) $ (3 ) $ (60 ) $ 4 $
356 Net income (loss) $ 256 $ (54 ) $ 23 $ (120 ) $
(81 ) $ (3 ) $ (60 ) $ 4 $ 547 Less: net income attributable to
noncontrolling interest, net of tax 12 — — —
— — — — 12 Net income
(loss) attributable to CSC common stockholders $ 244 $ (54 )
$ 23 $ (120 ) $ (81 ) $ (3 ) $ (60 ) $ 4 $ 535
Effective tax rate (550.0 )% 16.2 % Basic EPS from
continuing operations $ 0.46 $ (0.39 ) $ 0.17 $ (0.87 ) $ (0.59 ) $
(0.02 ) $ (0.43 ) $ 0.03 $ 2.57 Diluted EPS from continuing
operations $ 0.45 $ (0.38 ) $ 0.16 $ (0.85 ) $ (0.57 ) $ (0.02 ) $
(0.42 ) $ 0.03 $ 2.52 Weighted average common shares outstanding
for: Basic EPS 138.28 138.28 138.28 138.28 138.28 138.28 138.28
138.28 138.28 Diluted EPS 141.33 141.33 141.33 141.33 141.33 141.33
141.33 141.33 141.33
Quarter Ended April 3,
2015 (Amounts in millions, except per-share amounts)
As reported
Certain CSRA overhead
costs
U.S. Pension & OPEB
Pension & OPEB
actuarial & settlement losses
SEC settlement
related charges
Special restructuring
costs
Tax valuation allowance
& adjustments
Non-GAAP results
Costs of services (excludes depreciation and amortization and
restructuring costs) $ 1,618 $ (6 ) $ 11 $ (281 ) $ — $ — $ — $
1,342 Selling, general and administrative (excludes SEC
settlement related charges and restructuring costs) $ 266 $ (18 ) $
2 $ (17 ) $ (3 ) $ — $ — $ 230 (Loss) income from continuing
operations, before taxes $ (428 ) $ (24 ) $ 13 $ (298 ) $ (5 ) $
(241 ) $ — $ 127 Income tax (benefit) expense (297 ) (9 ) 5 (69 )
(2 ) (50 ) (197 ) 25 (Loss) income from continuing
operations $ (131 ) $ (15 ) $ 8 $ (229 ) $ (3 ) $ (191 ) $ 197
$ 102 Net income (loss) $ 12 $ (15 ) $ 8 $
(229 ) $ (3 ) $ (191 ) $ 197 $ 245 Less: net income attributable to
noncontrolling interest, net of tax 3 — — — —
— — 3 Net income (loss) attributable to
CSC common stockholders $ 9 $ (15 ) $ 8 $ (229 ) $ (3 ) $
(191 ) $ 197 $ 242 Effective tax rate 69.4 %
19.7 % Basic EPS from continuing operations $ (0.93 ) $ (0.11 ) $
0.06 $ (1.63 ) $ (0.02 ) $ (1.36 ) $ 1.40 $ 0.72 Diluted EPS from
continuing operations $ (0.93 ) $ (0.11 ) $ 0.06 $ (1.60 ) $ (0.02
) $ (1.34 ) $ 1.38 $ 0.71 Weighted average common shares
outstanding for: Basic EPS 140.76 140.76 140.76 140.76 140.76
140.76 140.76 140.76 Diluted EPS 140.76 142.81 142.81 142.81 142.81
142.81 142.81 142.81
Twelve Months Ended
April 3, 2015 (Amounts in millions, except per-share
amounts) As reported
Certain CSRA overhead
costs
U.S. Pension & OPEB
Pension & OPEB
actuarial & settlement losses
SEC settlement
related charges
Special restructuring
costs
Tax valuation allowance
& adjustments
Non-GAAP results
Costs of services (excludes depreciation and amortization and
restructuring costs) $ 6,159 $ (32 ) $ 43 $ (525 ) $ — $ — $ — $
5,645 Selling, general and administrative (excludes
depreciation and amortization, SEC settlement related charges and
restructuring costs) $ 1,220 $ (72 ) $ 8 $ (59 ) $ (3 ) $ — $ — $
1,094 (Loss) income from continuing operations, before taxes
$ (671 ) $ (104 ) $ 51 $ (584 ) $ (200 ) $ (241 ) $ — $ 407 Income
tax (benefit) expense (454 ) (40 ) 20 (135 ) (2 ) (50 ) (328 ) 81
(Loss) income from continuing operations $ (217 ) $ (64 ) $
31 $ (449 ) $ (198 ) $ (191 ) $ 328 $ 326 Net
income $ 7 $ (64 ) $ 31 $ (449 ) $ (198 ) $ (191 ) $ 328 $ 550
Less: net income attributable to noncontrolling interest, net of
tax 15 — — — — — — 15
Net (loss) income attributable to CSC common stockholders $
(8 ) $ (64 ) $ 31 $ (449 ) $ (198 ) $ (191 ) $ 328 $ 535
Effective tax rate 67.7 % 19.9 % Basic EPS from
continuing operations $ (1.52 ) $ (0.45 ) $ 0.22 $ (3.15 ) $ (1.39
) $ (1.34 ) $ 2.30 $ 2.29 Diluted EPS from continuing operations $
(1.52 ) $ (0.44 ) $ 0.21 $ (3.08 ) $ (1.36 ) $ (1.31 ) $ 2.25 $
2.24 Weighted average common shares outstanding for: Basic EPS
142.56 142.56 142.56 142.56 142.56 142.56 142.56 142.56 Diluted EPS
142.56 145.78 145.78 145.78 145.78 145.78 145.78 145.78
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160524006669/en/
CSCRichard Adamonis, Corporate Media
Relations862-228-3481radamonis@csc.comorNeil DeSilva, Global
M&A and Investor Relations703-641-3000neildesilva@csc.com
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