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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): October 28, 1999
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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<PAGE>
Item 5. Other Events.
On October 28, 1999, 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
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Exhibit
Number Description of Document
------ -----------------------
99(a) Press Release of Electronic Data Systems Corporation dated
October 28, 1999.
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/ D. Gilbert Friedlander
October 28, 1999 -----------------------------------
D. Gilbert Friedlander, Senior Vice
President, General Counsel and
Secretary
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Exhibit 99(a)
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CONTACT:
Reed Byrum - EDS
(+1) (972) 605-6790
[email protected]
FOR RELEASE 3:05 CDT, THURSDAY, OCT. 28, 1999
EDS REPORTS 47 PERCENT GAIN IN INCOME
Company Reports Total Contract Signings of $5.1 Billion
- --------------------------------------------------------------------------------
PLANO, Texas - EDS reported today net income for the third quarter of 1999 of
$257.3 million, prior to a restructuring charge of $236.3 million and a net
pre-tax gain of $81.5 million resulting from dispositions of certain of the
Company's non-operating investments -- 47 percent higher than the comparable
results a year ago. Excluding the gain and restructuring charge, diluted
earnings per share were $0.51, 46 percent above the comparable results in 1998;
operating margins on a comparable basis increased to 8.7 percent from 6.8
percent in 1998. Including these items, net income was $158.2 million and
diluted earnings per share were $0.31. Revenues for the third quarter of 1999
exceeded $4.7 billion, a 10 percent increase over 1998 comparable revenues of
$4.3 billion.
Revenues for the third quarter of 1998 were $4.3 billion; net income was $174.5
million; and diluted earnings per share were $0.35, in each case excluding
revenue of $69.0 million, resulting from the sale of a portion of the Company's
leasing portfolio and a pre-tax charge of $36.7 million, related to executive
retirement. Including these items, revenues for the third quarter of 1998 were
$4.4 billion, net income was $195.1 million, and diluted earnings per share were
$0.39.
<PAGE>
Management Comments
"EDS is living up to its ambitious goals -- and its potential -- with sound
earnings and productivity growth. Quarter by quarter, EDS is delivering
consistently improved results," said Dick Brown, chairman and chief executive
officer of EDS. "Our $5.1 billion contract signings in the third quarter are
laying a clear path to future revenue strength, particularly when coupled with
the recent MCI WorldCom agreement. EDS is moving to regain its leadership in the
information services industry."
In September 1999, EDS realigned its organization on a global basis along the
following four lines of business: information technology (IT) outsourcing,
served by the Information Solutions unit; business process management, served by
the Business Process Management unit; solutions consulting, served by the
E.solutions unit; and management consulting, served by EDS' subsidiary A.T.
Kearney. These changes are designed to drive future growth at EDS by simplifying
the company's approach to the market, improving client focus, and creating fully
integrated, global businesses.
The third-quarter restructuring charge consisted primarily of charges associated
with the acceptance by approximately 3,000 employees of the company's July early
retirement offer, charges resulting from involuntary separations, and asset
writedowns.
As EDS takes advantage of additional opportunities for organizational
improvements and cost reductions in connection with its realignment, the company
expects to take further action that will result in an additional restructuring
charge in the fourth quarter of 1999. It is anticipated that this charge will be
of a similar nature and size as the charge taken in the first quarter of 1999.
Contract Signings
Total contract signings for the third quarter were $5.1 billion. Significant
improvement was also recorded in contract sales in the United States, with 53
percent of the total coming from that area. For the first three quarters of
1999, contract signings totaled $13.7 billion.
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<PAGE>
In the third quarter, EDS and Continental Airlines signed a global service
agreement expected to generate revenues of more than $1 billion over the life of
the contract. The contract calls for EDS to provide a range of existing and
expanded services, including inter-airline electronic ticketing and check-in, to
enable the airline to take advantage of the rapidly changing marketplace.
In addition, EDS entered into a 10-year $800 million (U.S.) IT services
agreement with Telecom New Zealand (Telecom NZ), which is the largest IT
services contract ever signed in New Zealand. Telecom NZ is negotiating to
acquire an equity position in EDS' New Zealand subsidiary, together with options
to increase such a position. In addition, Telecom NZ, EDS and Microsoft are in
discussions regarding an alliance that would develop and deliver electronic
business solutions to customers in New Zealand.
Early this week, EDS and MCI WorldCom concluded a $12.4 billion dual outsourcing
deal, comprised of a $6.4 billion IT outsourcing agreement from MCI WorldCom to
EDS and a $6 billion global network operations outsourcing to MCI WorldCom.
News Highlights
In September, EDS announced its Board of Directors had authorized the repurchase
of up to 27 million shares of its common stock. The repurchase is intended to
serve as a hedge against the company's long-term exposure with respect to
outstanding options and restricted stock units. To fund the repurchase EDS
completed the sale, on Oct. 12, of $500 million in principal amount of its
6.850% Notes due 2004, $700 million in principal amount of its 7.125% Notes due
2009 and $300 million in principal amount of its 7.450% Notes due 2029.
Also in September, EDS with agency Fallon McElligott launched the new global
branding campaign to raise marketplace recognition and awareness of EDS.
Alliances
EDS announced a strategic alliance with Microsoft Corporation to integrate the
global service capabilities of EDS with Microsoft's enterprise solutions
platform, providing mutual clients worldwide with efficient and cost-effective
end-to-end information technology solutions.
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<PAGE>
Also in the quarter, EDS announced two more relationships to enhance services
for small and midsize clients. Participation in Cisco Systems' Cisco Resource
Network program is specifically designed to provide mid-sized businesses with
Internet solutions that help them compete as equals with large companies in
global electronic business. Through a newly created relationship, EDS, SAP and
Sun Microsystems are extending leading-edge enterprise applications solutions
designed specifically to meet the functional needs of small and midsize consumer
products companies.
In addition, Computer Associates International, Inc. (CA) and EDS announced the
availability of a unique inventory tool designed to help companies pinpoint any
remaining desktop Y2K vulnerabilities.
Corporate Information
EDS, a leader in the global information technology services industry for more
than 35 years, delivers management consulting, electronic business solutions,
business process management, and systems and technology expertise to improve the
performance of more than 9,000 business and government clients in about 50
countries. EDS reported revenues of $16.9 billion in 1998. The company's stock
is traded on the New York Stock Exchange (NYSE:EDS) and the London Stock
Exchange. Visit EDS via the Internet at http://www.eds.com.
The statements in this news release that are not historical statements,
including statements regarding the amount of contract signings, future revenues,
the benefits of our reorganization and estimated fourth-quarter restructuring
charges, 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, see EDS' most recent Form 10-Q. 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.
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<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF RESULTS OF OPERATIONS
(in millions, except per-share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues (1) $4,714.8 $4,352.7 $13,656.8 $12,480.8
Costs and Expenses
Cost of revenues 3,854.4 3,555.2 11,264.8 10,236.6
Selling, general & administrative (2) 451.5 475.1 1,353.0 1,325.2
Restructuring and other charges (3) 236.3 -- 616.1 70.3
-------- -------- --------- ---------
Total Costs and Expenses 4,542.2 4,030.3 13,233.9 11,632.1
-------- -------- --------- ---------
Operating Income 172.6 322.4 422.9 848.7
Other Income (Expense)
Gain on Sale of Stock of Subsidiary (4) -- -- -- 49.6
Interest Expense and Other, Net (5) 74.6 (17.5) 168.1 13.2
-------- -------- --------- ---------
Total Other Income (Expense) 74.6 (17.5) 168.1 62.8
-------- -------- --------- ---------
Income Before Income Taxes 247.2 304.9 591.0 911.5
Provision for Income Taxes 89.0 109.8 212.8 310.3
-------- -------- --------- ---------
Net Income $ 158.2 $ 195.1 $ 378.2 $ 601.2
======== ======== ========= =========
Earnings Per Share (1) (2) (3) (4) (5)
Basic $0.32 $0.40 $0.77 $1.22
Diluted $0.31 $0.39 $0.75 $1.22
Weighted Average Number of
Shares Outstanding
Basic 490.8 492.4 491.8 491.9
Diluted 503.7 494.1 503.2 494.6
Cash Dividends Per Share $0.15 $0.15 $0.45 $0.45
</TABLE>
(1) Revenues from General Motors Corporation ("GM") and its affiliates,
excluding Delphi Automotive Systems Corporation ("Delphi"), amounted to
$869.7 million and $900.1 million for the three months ended September 30,
1999 and 1998, respectively, and $2,647.5 million and $2,660.0 million for
the nine months ended September 30, 1999 and 1998, respectively. Delphi,
previously a wholly owned subsidiary of GM, was spun off from GM on May 28,
1999. In addition, revenues for both the three and nine months ended
September 30, 1998 include $69.0 million related to the sale of a portion
of the Company's leasing portfolio.
(2) Includes a charge of $36.7 million for the three and nine months ended
September 30, 1998 related to executive retirement.
(3) Includes the following pre-tax charges: $236.3 million and $379.8 million
associated with restructuring activities recorded in the quarters ended
September 30, 1999 and March 31, 1999, respectively; $27.8 million for
certain asset writedowns recorded during the quarter ended June 30, 1998;
and $42.5 million for the write-off of acquired in-process research and
development recorded during the quarter ended March 31, 1998.
(4) Tax-free gain on the sale of stock by Unigraphics Solutions Inc, previously
a wholly owned subsidiary of EDS, on June 23, 1998.
(5) Includes net pre-tax gains of $81.5 million and $171.5 million,
respectively, for the three and nine months ended September 30, 1999
primarily resulting from the sale of certain of the Company's investments.
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<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF CONSOLIDATED BALANCE SHEETS
(in millions)
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Current Assets
Cash and marketable securities $ 811.6 $ 1,311.7
Accounts receivable, net 4,518.3 3,835.0
Prepaids and other 553.8 486.6
--------- ---------
Total Current Assets 5,883.7 5,633.3
--------- ---------
Property and Equipment, Net 2,591.9 2,708.1
--------- ---------
Operating and Other Assets
Investments and other assets 1,171.6 1,717.6
Software, goodwill, and other intangibles, net 2,794.5 1,467.1
--------- ---------
Total Operating and Other Assets 3,966.1 3,184.7
--------- ---------
Total Assets $12,441.7 $11,526.1
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 359.6 $ 329.8
Accrued liabilities 2,916.7 2,511.1
Deferred revenue 653.2 593.3
Income taxes 19.0 174.9
Current portion of long-term debt 393.2 47.7
--------- ---------
Total Current Liabilities 4,341.7 3,656.8
--------- ---------
Deferred Income Taxes 266.5 362.6
Long-term Debt 2,286.9 1,184.3
Redeemable Preferred Stock of Subsidiaries
and Minority Interests 410.1 405.9
Total Stockholders' Equity 5,136.5 5,916.5
--------- ---------
Total Liabilities
and Stockholders' Equity $12,441.7 $11,526.1
========= =========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF CONSOLIDATED CASH FLOWS
(in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Cash provided by Operating Activities (1) $ 474.1 $ 362.7 $1,160.1 $1,221.9
--------- --------- -------- --------
Cash Flows from Investing Activities
Proceeds from sale of marketable securities 24.0 31.5 107.6 85.8
Proceeds from investments and other assets 196.7 37.9 542.9 249.0
Proceeds from divestitures -- 348.5 9.0 371.5
Payments for purchases of property and equipment (147.2) (166.2) (505.3) (613.8)
Payments for investments and other assets (37.8) (141.3) (182.0) (347.9)
Payments related to acquisitions, net of cash
acquired (50.0) (5.9) (1,708.7) (108.1)
Payments for purchases of software and other
intangibles (24.8) (0.3) (78.3) (75.1)
Payments for purchases of marketable securities (8.3) (30.3) (33.4) (91.7)
Other 43.1 14.5 117.3 52.7
------- ------- -------- --------
Net cash provided by (used in) investing activities (4.3) 88.4 (1,730.9) (477.6)
------- ------- -------- --------
Cash Flows from Financing Activities
Proceeds from long-term debt 11,294.2 2,694.5 16,437.7 6,863.1
Payments on long-term debt (10,821.6) (2,759.3) (15,049.8) (7,332.8)
Proceeds from sale of stock of subsidiaries -- -- -- 65.1
Purchase of treasury stock (837.1) (16.3) (1,011.8) (93.3)
Employee stock transactions and related tax
benefits 56.1 10.3 104.5 53.8
Dividends paid (74.0) (73.8) (221.5) (221.4)
--------- --------- -------- --------
Net cash provided by (used in) financing
activities (382.4) (144.6) 259.1 (665.5)
--------- --------- -------- --------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (30.8) 8.6 (97.0) 5.9
--------- --------- -------- --------
Net Increase (Decrease) in Cash
and Cash Equivalents 56.6 315.1 (408.7) 84.7
--------- --------- -------- --------
Cash and Cash Equivalents at Beginning of Period 573.5 447.0 1,038.8 677.4
--------- --------- -------- --------
Cash and Cash Equivalents at End of Period $ 630.1 $ 762.1 $ 630.1 $ 762.1
========= ========= ======== ========
</TABLE>
(1) Depreciation and amortization for the three and nine months ended September
30, 1999, was $382.2 million and $1,066.4 million, respectively.
Depreciation and amortization for the three and nine months ended September
30, 1998, was $326.1 million and $1,005.8 million, respectively.
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