Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
QUARTER ENDED JULY 1, 1994
Commission File No. 1-4850
COMPUTER SCIENCES CORPORATION
Incorporated in the State of Nevada
Employer Identification No. 95-2043126
2100 East Grand Avenue
El Segundo, California 90245
Telephone (310) 615-0311
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
50,747,071 shares of Common Stock, $1.00 par value, were
outstanding on July 1, 1994.
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COMPUTER SCIENCES CORPORATION
Index to Form 10-Q
Page Number
Part I. Financial Information
Consolidated Condensed Balance Sheets -
July 1, 1994 and April 1, 1994 3
Consolidated Condensed Statements of Income -
First quarter ended July 1, 1994 and July 2, 1993 4
Consolidated Condensed Statements of Cash Flows -
First quarter ended July 1, 1994 and July 2, 1993 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Results of
Operations and Financial Condition 8
Part II. Other Information
Item 6 - Exhibits and Reports on Form 8-K 11
Exhibit 11 - Calculation of Earnings Per Share 12
Exhibit 28 - Additional Information - Revenues
by Market Sector 13
Signatures 14
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PART I. FINANCIAL INFORMATION
COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in thousands)
<CAPTION>
ASSETS July 1, April 1,
1994 1994
(unaudited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 39,170 $ 126,820
Receivables 725,885 665,253
Prepaid expenses and other assets 76,410 65,046
------------ ------------
Total current assets 841,465 857,119
------------ ------------
PROPERTY AND EQUIPMENT, at cost 722,974 695,796
Less accumulated depreciation and amortization 320,053 302,760
------------ ------------
Property and equipment, net 402,921 393,036
------------ ------------
EXCESS OF COST OF BUSINESSES ACQUIRED
OVER RELATED NET ASSETS, NET 340,468 324,145
OTHER ASSETS 241,646 232,080
------------ ------------
$ 1,826,500 $ 1,806,380
============ ============
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<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable $ 44,093 $ 17,772
Current maturities of long-term debt 32,962 32,685
Accounts payable 126,210 228,674
Accrued payroll and related costs 135,954 128,478
Other accrued expenses 181,228 175,005
Advance contract payments 31,038 24,454
Income taxes payable 62,536 54,176
------------ ------------
Total current liabilities 614,021 661,244
LONG-TERM DEBT,NET (Note A) 305,745 273,344
OTHER LONG-TERM LIABILITIES 72,935 66,112
------------ ------------
STOCKHOLDERS' EQUITY (Note B):
Common stock issued, par value $1.00 per share 50,953 50,807
Other stockholders' equity 782,846 754,873
------------ ------------
Total stockholders' equity 833,799 805,680
------------ ------------
$ 1,826,500 $ 1,806,380
============ ============
<FN>
See accompanying notes. -3-
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COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (unaudited)
($ in thousands except earnings per share)
<CAPTION>
Three Months Ended
__________________________
July 1, July 2,
1994 1993
____________ ____________
<S> <C> <C>
Revenues $ 738,145 $ 608,096
____________ ____________
Costs of services 583,661 492,811
Selling, general and admin. 75,962 52,712
Depreciation and amortization 37,904 30,067
Interest, net (Note C) 5,422 2,609
____________ ____________
Total costs and expenses 702,949 578,199
____________ ____________
Income before taxes 35,196 29,897
Taxes on income 13,374 11,735
____________ ____________
Net earnings before
cumulative effect of
accounting change 21,822 18,162
Cumulative effect of
accounting change
for income taxes (Note D) 4,900
____________ ____________
Net earnings $ 21,822 $ 23,062
============ ============
Earnings per common share
before cumulative effect
of accounting change $0.42 $0.36
Cumulative effect of
accounting change
for income taxes (Note D) 0.09
____________ ____________
Earnings per common share
(Notes B and E) $0.42 $0.45
============ ============
<FN>
See accompanying notes.
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COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
($ in thousands)
<CAPTION>
Three Months Ended
__________________________
July 1, July 2,
1994 1993
____________ ____________
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 21,822 $ 23,062
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 37,904 30,067
Provision for losses on accounts receivable 3,983 2,573
Changes in assets and liabilities, net of effects
of acquisitions:
Increase in assets (76,911) (4,377)
Increase in liabilities 33,713 14,460
____________ ____________
Net cash provided by operating activities 20,511 65,785
____________ ____________
Investing activities:
Short-term investments (42,274)
Purchases of property, plant and equipment (37,726) (22,803)
Purchased and internally developed software (5,001)
Acquisitions, net of cash acquired (9,228) (500)
Other investing cash flows (9,275) (4,235)
____________ ____________
Net cash used in investing activities (61,230) (69,812)
____________ ____________
Financing activities:
Paydown of commercial paper, net (113,474)
Borrowings (paydowns) under lines of credit, net 25,651 (2,021)
Proceeds from term debt issuance 150,000
Payment of outsourcing financing (114,403)
Proceeds from exercise of stock options 2,793 2,060
Other financing cash flows 2,502 (1,048)
____________ ____________
Net cash used in financing activities (46,931) (1,009)
____________ ____________
Net decrease in cash and cash equivalents (87,650) (5,036)
Cash and cash equivalents at beginning of year 126,820 111,477
____________ ____________
Cash and cash equivalents at end of period $ 39,170 $ 106,441
============ ============
<FN>
See accompanying notes.
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COMPUTER SCIENCES CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
($ in thousands except per share amounts)
(A) During April, 1994 the Company issued a 144A private
placement of $150 million of fixed rate, term debt through
its affiliate, CSC Enterprises, and paid down approximately
$150 million of CSC Enterprises' commercial paper. The
commercial paper program remains in use, supported by $250
million of standby credit agreements entered into by CSC
Enterprises and guaranteed by the Company.
(B) On December 6, 1993, the Company's Board of Directors
declared a three-for-one stock split in the form of a 200
percent stock dividend on the Company's common stock, with
no change in par value. The dividend was distributed
January 13, 1994 to shareholders of record as of December
22, 1993. All per share amounts contained in the statements
of income and the accompanying notes are based on the new
number of shares. No other dividends were paid or declared
during the periods presented. There were 50,952,702 shares
at July 1, 1994 and 50,807,452 shares at April 1, 1994 of
$1.00 par value common stock issued with 205,631 and 201,752
shares, respectively, of treasury stock.
(C) Interest, net consists of the following:
1st Quarter Ended
-----------------------
July 1, July 2,
1994 1993
-------- --------
Interest income $ (812) $(1,705)
Interest expense 6,234 4,314
-------- --------
Total $ 5,422 $ 2,609
======== ========
(D) The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes,"
effective April 3, 1993. The cumulative financial statement
effect of adopting SFAS No. 109 was to increase the
Company's net earnings by $4.9 million, or $0.09 per share
for the quarter ended July 2, 1993, adjusted for the stock
split described in Note B.
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(E) Primary earnings per common share are based on the weighted
average number of common stock and common stock equivalent
shares (dilutive stock options) outstanding of 52,192,000 and
50,733,000 respectively, for the quarters ended July 1, 1994,
and July 2, 1993 (see Part II - Exhibit 11). These share
amounts reflect the stock split described in Note B above.
(F) Cash payments for interest on indebtedness were $2,185 and
$5,025, respectively, for the quarters ended July 1, 1994,
and July 2, 1993. Cash payments for taxes on income were
$9,131 and $13,247, respectively, for the quarters ended
July 1, 1994, and July 2, 1993.
(G) The financial information reported, which is not necessarily
indicative of the results for a full year, is unaudited but
includes all adjustments which the Company considers
necessary for a fair presentation. All such adjustments are
normal recurring adjustments.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
First Quarter of Fiscal 1995 Versus First Quarter of Fiscal 1994
Revenues
During the quarter ended July 1, 1994, the Company's total
revenues of $738.1 million increased 21.4%, or $130 million, over
the same period last year. Federal revenue totaled $328.4
million, up 10.1% from last year's $298.3 million due principally
to the acquisition during December, 1993 of Atlantic Research
Corporation's Professional Services Group (PSG). Commercial
revenue of $264.9 million from domestic operations rose 6.9% from
$247.7 million last year, reflecting continued growth in the
Company's consulting and systems integration services.
International revenue increased 133% to $144.8 million reflecting
the commencement of the Company's major outsourcing contract with
British Aerospace (BAe), the acquisition of Computer Sciences
Australia (CSA) during November, 1993 and other revenue growth.
The Company has been awarded approximately $1.2 billion of
federal business during the first quarter of the current fiscal
year, including an 8-year, $1.045 billion contract from NASA.
Costs and Expenses
As a percentage of revenue, costs of services were 79.1% for the
quarter ended July 1, 1994, improving on the 80.9% for the same
quarter last year. The improvement is mainly the result of
improvements in domestic outsourcing and European operations, as
well as a continuing change in the Company's business "mix," with
a larger portion of the Company's business coming from
outsourcing activities, where costs of services by this measure
are lower than the Company's overall average.
Selling, general and administrative expenses increased to $76
million for the quarter ended July 1, 1994, up from $52.7 million
for the same period last year. Of the increase, over half
relates to the Company's international consulting and outsourcing
business, where revenues more than doubled. The remainder of the
increase relates to the Company's U.S. commercial consulting and
outsourcing activities. The Company's depreciation and
amortization expense increased to $37.9 million for the current
quarter, up from $30.1 million last year. The increase is
primarily the result of the BAe contract and CSA acquisition.
Net interest expense increased to $5.4 million for the current
quarter from $2.6 million for the same quarter last year. The
increase is due to both decreased interest income and increased
interest expense as cash on hand and increased borrowings were
used to supplement cash flows from operations to fund the
purchase of outsourcing assets for BAe and to acquire CSA and PSG
since the first quarter of fiscal 1994.
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Income Before Taxes
Income before taxes was $35.2 million, up $5.3 million or 17.7%
over last year's first quarter, reflecting the revenue growth
achieved, offset somewhat by the increase in selling, general and
administrative expenses, as described above.
Net Earnings
Net earnings were $21.8 million for the quarter ended July 1,
1994, up $3.7 million or 20.2% over the same quarter last year,
before the cumulative effect of an accounting change for income
taxes. The effective tax rate was 38.0%, versus 39.25% for the
same quarter last year. The lower tax rate reflects the reduction
of European tax losses which the Company was unable to offset
against taxable income elsewhere as compared to the same period last
year. During the third quarter of fiscal 1994, CSC's Board of
Directors declared a three-for-one stock split in the form of a
200 percent stock dividend, and the additional shares were
distributed January 13, 1994. This year's first quarter earnings
per share were 42 cents compared to 36 cents for last year's
first quarter before the cumulative effect of the accounting
change, on a greater number of shares outstanding.
During the first quarter of fiscal 1994, the Company adopted
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," and recognized a resulting gain of $4.9
million, or 9 cents per share adjusted for the split.
Cash Flows
Cash flows from operating activities were $20.5 million for the
quarter ended July 1, 1994, compared to $65.8 million during the
same period last year. The lower operating cash flow is mainly
the result of higher accounts receivable on the Company's federal
business and the BAe contract initiated during the quarter,
partially offset by higher income taxes payable and other
factors.
The Company's cash outflows for investing activities were $61.2
million for the current quarter versus $69.8 million during the
first quarter of last year. The slightly lower outflow reflects
higher property, acquisition and other investments, offset by an
absence of short-term investment purchases.
Cash used in financing activities was $46.9 million for the
quarter versus $1 million during the same period last year.
Current quarter activity includes the payment of $114 million of
BAe outsourcing financing. Additionally, a $150 million 144A
private placement of fixed-rate, term debt was issued by CSC
Enterprises, an affiliate of the Company and was used largely to
repay commercial paper borrowings.
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Financial Condition
The Company's leverage increased during the first quarter of
fiscal 1995, as reflected by a debt-to-total-capitalization ratio
of 31% at July 1, 1994, versus 29% at the prior fiscal year-end.
The increase in leverage reflects the Company's use of additional
debt to partially finance the purchase of outsourcing assets for
BAe and the acquisitions of CSA and PSG.
The overall level of cash and short-term investments decreased
from $127 million to $39 million. As explained under "Cash
Flows" above, this decrease is primarily the result of the
payment of $114 million of BAe outsourcing financing.
In all other respects, the Company's financial condition has not
changed significantly since the fiscal year-end. It is
management's opinion that the Company will be able to fund its
cash needs from operating activities and from short-term
borrowings. It is also management's opinion that any major
additional requirements can be financed by the use of unused
borrowing capacity or by the issuance of new CSC securities.
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Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit No. 11 - Calculation of Earnings Per Share
Exhibit No. 28 - Additional Exhibits
(i) Revenues by Market Sector
b. Reports on Form 8-K:
There were no Form 8-K reports filed for the first quarter of
fiscal 1995.
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EXHIBIT 11
COMPUTER SCIENCES CORPORATION
CALCULATION OF EARNINGS PER SHARE
(In thousands except earnings per share)
<CAPTION>
Three Months Ended
___________________________
July 1 July 2
1994 1993
_____________ ___________
<S> <C> <C>
Net earnings before cumulative
effect of accounting change $ 21,822 $ 18,192
Cumulative effect of accounting
change for income taxes 4,900
_____________ _____________
Net earnings $ $21,822 $ $23,092
============= =============
Shares *:
Weighted average shares
outstanding 50,700 50,458
Common stock equivalents 1,492 275
___________ ___________
Total for primary and fully
diluted calculation 52,192 50,733
=========== ===========
Earnings Per Share *:
Earnings per common share
before cumulative effect
of accounting change $0.42 $0.36
Cumulative effect of accounting
change for income taxes 0.09
___________ ___________
Primary and fully diluted** $0.42 $0.45
=========== ===========
<FN>
* All share and per share amounts include the effect of the stock split
described in Note B of the accompanying financial statements.
** The fully diluted calculation is submitted in accordance with Regulation
S-K item 601 (b) (11) although not required by footnote 2 to paragraph 14
of APB Opinion No. 15 because it results in dilution of less than 3%.
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EXHIBIT 28
COMPUTER SCIENCES CORPORATION
REVENUES BY MARKET SECTOR
($ in millions)
<CAPTION>
Fiscal Period Ended % of Total
___________ ___________ ___________ ___________
July 1 July 2 July 1 July 2
1994 1993 1994 1993
___________ ___________ ___________ ___________
<S> <C> <C> <C> <C>
First Quarter
U.S. Federal Government:
Department of Defense $ 189.9 $ 174.1 26 % 29 %
NASA 60.7 53.1 8 9
Civil agencies 77.8 71.1 10 11
___________ ___________ ____________ ____________
Total 328.4 298.3 44 49
___________ ___________ ____________ ____________
Commercial:
Domestic 264.9 247.7 36 41
International 144.8 62.1 20 10
___________ ___________ ____________ ____________
Total 409.7 309.8 56 51
___________ ___________ ____________ ____________
Total revenues $ 738.1 $ 608.1 100 % 100 %
=========== =========== ============ ============
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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
COMPUTER SCIENCES CORPORATION
Registrant
Date: August 10, 1995 By:/s/Denis M. Crane
Denis M. Crane
Vice President and Controller
Chief Accounting Officer
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