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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 7, 1997
Electronic Data Systems Corporation
(Exact name of registrant as specified in its charter)
Delaware 01-11779 75-2548221
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
5400 Legacy Drive
Plano, Texas 75024-3105
(Address of principal executive offices,
including zip code)
Registrant's telephone number, including area code (972) 604-6000
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Item 5. Other Events.
On August 7, 1997, Electronic Data Systems Corporation, a Delaware
corporation, issued the press release attached as Exhibit 99(a) hereto.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit Number Description of Document
99(a) Press Release of Electronic Data Systems
Corporation dated August 7, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ELECTRONIC DATA SYSTEMS CORPORATION
By: /s/ Joseph M. Grant
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Name: Joseph M. Grant
Title: Executive Vice President and
Chief Financial Officer
August 7, 1997
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CONTACT: Steve McGregor - EDS
(972) 605-6786
[email protected]
For release 3:05 p.m. CDT Thursday, August 7, 1997
EDS SECOND-QUARTER REVENUES UP, NET INCOME DOWN;
NEW BUSINESS SIGNINGS CONTINUE AT ROBUST PACE
Company no longer expects to achieve 1997 earnings estimates
PLANO, Texas - EDS, a leading global information services provider, today
reported that its operating revenues grew 5.3 percent in the second quarter of
1997 while the company's net income, excluding one-time charges, was down from
the corresponding period in 1996.
EDS said that it recorded operating revenues of $3.682 billion in the second
quarter of 1997, compared with $3.498 billion in the corresponding period last
year. The company recorded net income of $192.4 million in the second quarter of
1997, prior to a one-time charge of approximately $265 million. During the
corresponding period of 1996, EDS recorded $246.6 million in net income, prior
to one-time charges and split-off costs totaling $895.5 million. Including the
one-time charges, EDS reported net income of $22.9 million, or $0.05 per share,
in the second quarter of 1997 as compared to a net loss of $326.5 million, or
$0.67 per share, in the second quarter of 1996. The one-time charges reduced
earnings per share by $0.35 and $1.18 for the second quarters of 1997 and 1996,
respectively.
The charge in the second quarter of 1997 includes approximately $110 million for
people-related costs associated with EDS' previously announced business
transformation initiative, as well as approximately $155 million for the
write-down of certain assets in connection with the transformation initiative,
the exiting of certain lines of business and other write-downs associated with
uncertainty regarding the recoverability of certain of the company's
investments.
<PAGE>
EDS SECOND QUARTER EARNINGS
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The company said that second-quarter net income on a per-share basis declined 24
percent, from $0.51 to $0.39, excluding one-time charges. Second-quarter
earnings were negatively impacted by unanticipated adjustments totaling
approximately $80 million ($0.11 per share) for a limited number of contracts
that have not performed as expected or, in some instances, have been terminated.
However, the quarterly results were positively impacted by the recognition of
approximately $90 million of additional revenue resulting from productivity
improvements made on certain contracts accounted for on a
percentage-of-completion basis.
EDS said that its new-contract signings continued to surge, with $3.3 billion in
new business booked in the three months ended June 30, 1997. It was the fourth
straight quarter of strong new-contract signings, with $12 billion of new
business recorded during that 12-month period.
During the quarter, EDS continued to implement the first phase of its
enterprise-wide business transformation initiative, eliminating a number of
positions and consolidating or streamlining various business and service units.
The initiative, which will extend into next year, is proceeding as planned and
is expected to produce savings this year in excess of $250 million, with $500
million to $700 million targeted annually thereafter, the company said. To date,
nearly 8,500 positions have been identified for elimination under the
initiative, resulting in approximately 3,000 employees who have either left or
will leave the company.
While the initial phase of the business transformation initiative has focused on
cost-cutting, the second and more significant phase, which is now under way,
seeks to reengineer and improve EDS' fundamental business processes, including
the company's support infrastructure, its strategic business planning and the
way it markets, sells and delivers its services.
Despite the expected savings from business transformation and strong
new-business signings, the company said that it no longer expects to achieve its
earlier earnings estimate for 1997 of $2.30 to $2.35 per share before any
charge. Due to an expected erosion of anticipated revenues and earnings,
principally from a small number of other contracts booked prior to 1996, EDS now
anticipates 1997 earnings in the range of $1.90 to $2.00 per share before any
charge. The company's actual results will depend upon, among other things, the
performance of these contracts, EDS' ability to implement additional savings for
the year as planned, and new-contract signings.
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<PAGE>
EDS SECOND QUARTER EARNINGS
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"Our results for the quarter and expectations for the year are not only
disappointing but unacceptable," said Les Alberthal, chairman and CEO. "Clearly,
we have work to do, which is one reason we undertook the most intensive
examination and redesign of our business in EDS' history earlier this year."
He continued, "The progress we've made reshaping our cost structure in the first
phase of EDS' business transformation is important, but only one aspect of the
work we are doing. In this next phase, we are thoroughly reviewing nearly every
aspect of our business and reengineering many of our most fundamental business
and support processes to enable us to compete more effectively in today's
competitive environment."
In other financial news, the EDS Board of Directors today approved the
acquisition by EDS of Neodata Services, Inc., a Colorado-based integrated
marketing communications services company. Neodata will become part of EDS'
CustomerSolutions business unit, which will create the largest direct marketing
services company in the world. EDS has held an equity interest in Neodata since
1993.
With the acquisition, CustomerSolutions will employ approximately 10,000 people
worldwide, with 1997 annualized revenues expected to be approximately $750
million. The acquisition of Neodata will complete EDS' continuum of integrated
marketing communications services to include design and execution of direct
marketing and loyalty and promotion programs for all companies in all industries
around the world.
The EDS Board also declared a third-quarter dividend on the common stock of EDS
of $0.15 per share, payable September 10, 1997, to shareholders of record as of
the close of business August 18, 1997.
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EDS SECOND QUARTER EARNINGS
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The statements in this news release that are not historical facts, including
those regarding 1997 earnings, EDS' business transformation initiative and
related savings, and the amount of new contract signings, are forward-looking
statements within the meaning of the federal securities laws. These statements
are subject to numerous risks and uncertainties, many of which are beyond EDS'
control, that could cause actual results to differ materially from such
statements. For information concerning these risks and uncertainties, please see
EDS' filings with the Securities and Exchange Commission. EDS disclaims any
intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
EDS is a leader in the global information services industry. The company's
approximately 100,000 employees specialize in applying a range of ideas and
technologies to help business and government customers improve their economics,
products, services and relationships. EDS, which serves customers in 42
countries, reported revenues of $14.4 billion in 1996. The company is
independent and publicly owned, and its stock is traded on the New York Stock
Exchange and the London Stock Exchange under the symbol EDS. EDS can be visited
via the Internet at http://www.eds.com.
(Editors note: For additional information on new business signed during the
second quarter, please call (972) 605-6791 and a list will be faxed to you.)
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EDS SECOND QUARTER EARNINGS
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<TABLE>
<CAPTION>
SUMMARY OF RESULTS OF OPERATIONS
(in millions, except per-share amounts)
Second Quarter Ended Six Months Ended
-------------------- ----------------
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Systems and Other Contracts
Revenues (1) $ 3,682.1 $ 3,497.8 $ 7,273.7 $ 6,864.7
Costs and Expenses
Cost of revenues 2,986.2 2,845.7 5,879.8 5,543.8
Selling, general & administrative 379.2 308.1 749.9 618.0
Restructuring charge 125.3 285.6 125.3 285.6
Asset write-downs 139.7 503.9 139.7 503.9
--------- --------- --------- ---------
Total Costs and Expenses 3,630.4 3,943.3 6,894.7 6,951.3
--------- --------- --------- ---------
Operating Income (Loss) 51.7 (445.5) 379.0 (86.6)
One-Time Split-Off Costs -- (45.5) -- (45.5)
Interest Expense and Other, Net (16.0) (19.2) (40.0) (36.2)
--------- --------- --------- ---------
Income (Loss) Before Income Taxes 35.7 (510.2) 339.0 (168.3)
Provision (Benefit) for Income Taxes 12.8 (183.7) 122.0 (60.6)
--------- --------- --------- ---------
Net Income (Loss) $ 22.9 $ (326.5) $ 217.0 $ (107.7)
========= ========= ========= =========
Earnings Per Share (2) $ 0.05 $ (0.67) $ 0.44 $ (0.22)
Cash Dividends Per Share $ 0.15 $ 0.15 $ 0.30 $ 0.30
</TABLE>
(1) Revenues related to General Motors Corporation and its affiliates
amounted to $1,133.6 million and $1,050.5 million for the second
quarters ended June 30, 1997 and 1996, respectively, and $2,152.6
million and $2,012.7 million for the six months ended June 30,
1997 and 1996, respectively.
(2) On June 7, 1996, GM Class E common stock was exchanged for EDS
common stock on a one-for-one basis. Earnings and cash dividends
before June 7, 1996, are attributable to GM Class E common stock.
Amounts computed as earnings attributable to GM Class E common
stock are not materially different than amounts computed as
earnings per share of EDS common stock.
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<PAGE>
EDS SECOND QUARTER EARNINGS
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<TABLE>
<CAPTION>
SUMMARY OF CONSOLIDATED BALANCE SHEETS
(in millions)
June 30, Dec. 31,
ASSETS 1997 1996
--------- --------
<S> <C> <C>
Current Assets
Cash and marketable securities $ 762.3 $ 962.5
Accounts receivable 3,312.3 3,513.0
Inventories 141.6 141.6
Prepaids and other 322.2 391.2
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Total Current Assets 4,538.4 5,008.3
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Property and Equipment, At Cost Less
Accumulated Depreciation
Land 135.9 134.8
Buildings and facilities 600.2 586.3
Computer equipment 1,896.4 2,050.6
Other equipment and furniture 307.1 325.3
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Total Property and Equipment, Net 2,939.6 3,097.0
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Operating and Other Assets
Land held for development, at cost 86.2 89.1
Investment in leases and other 1,695.6 1,591.7
Software, goodwill, and other intangibles, net 1,310.3 1,406.8
--------- ----------
Total Operating and Other Assets 3,092.1 3,087.6
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Total Assets $ 10,570.1 $ 11,192.9
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 292.5 465.8
Accrued liabilities 1,915.6 1,843.6
Deferred revenue 431.4 592.6
Income taxes 107.7 127.5
Current portion of long-term debt 118.8 133.3
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Total Current Liabilities 2,866.0 3,162.8
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Deferred Income Taxes 328.3 429.4
Long-term Debt 1,610.5 2,324.3
Redeemable Preferred Stock of Subsidiaries
and Minority Interest 865.2 493.3
Total Stockholders' Equity 4,900.1 4,783.1
--------- ----------
Total Liabilities
and Stockholders' Equity $ 10,570.1 $ 11,192.9
========== ==========
</TABLE>
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<PAGE>
EDS SECOND QUARTER EARNINGS
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<TABLE>
<CAPTION>
SUMMARY OF CONSOLIDATED CASH FLOWS
(in millions)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 193.3 $ 90.0 $ 739.4 $ 578.9
------- ------- ------- -------
Cash Flows from Investing Activities
Proceeds from sale of marketable securities 20.2 11.4 47.4 37.4
Proceeds from investment in leases and
other assets 54.2 23.0 99.0 103.8
Payments for purchase of property and equipment (174.0) (262.4) (371.7) (512.9)
Payments for investments in leases and
other assets (76.0) (33.9) (165.8) (101.1)
Payments related to acquisitions, net of
cash acquired (66.8) 1.0 (73.2) (37.0)
Payments for purchase of software and other
intangibles (58.7) 2.9 (59.8) (26.6)
Payments for purchase of marketable securities (15.2) (24.5) (30.1) (46.2)
Other 28.2 28.9 45.1 38.8
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Net cash used in investing activities (288.1) (253.6) (509.1) (543.8)
------- ------- ------- -------
Cash Flows from Financing Activities
Proceeds from long-term debt 1,976.8 2,452.4 3,977.4 3,937.3
Payments on long-term debt (2,103.3) (2,078.6) (4,700.3) (3,315.4)
Proceeds from sale of redeemable preferred
stock of subsidiaries 73.8 -- 412.8 --
Employee stock transactions and related tax
benefits 16.8 (2.6) 49.3 17.5
One-time intercompany payment to GM -- (500.0) -- (500.0)
Dividends paid (73.5) (73.1) (146.6) (145.7)
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Net cash used in financing activities (109.4) (201.9) (407.4) (6.3)
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Effect of Exchange Rate Changes on Cash
and Cash Equivalents 6.1 (5.3) (4.1) (12.6)
------- ------- ------- -------
Net Increase (Decrease) in Cash
and Cash Equivalent (198.1) (370.8) (181.2) 16.2
------- ------- ------- -------
Cash and Cash Equivalents at Beginning of Period 896.8 935.9 879.9 548.9
------- ------- ------- -------
Cash and Cash Equivalents at End of Period $ 698.7 $ 565.1 $ 698.7 $ 565.1
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</TABLE>
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