<PAGE>
FILED PURSUANT
TO RULE 424(B)(4)
REG. NO. 033-57265
4,000,000 SHARES
[LOGO] COMPUTER SCIENCES CORPORATION
COMMON STOCK
($1.00 PAR VALUE PER SHARE)
--------------
Of the 4,000,000 shares of Common Stock offered by the Company, 800,000
shares are being offered hereby in an international offering outside the United
States and 3,200,000 shares are being offered in a concurrent offering in the
United States. The initial public offering price and the aggregate underwriting
discount per share will be identical for both Offerings. See "Underwriting".
The Company's Common Stock is quoted on the New York Stock Exchange under
the symbol "CSC". The last reported sale price of the Common Stock on the New
York Stock Exchange on February 8, 1995 was $51.00 per share. See "Price Range
of Common Stock and Dividends".
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT (1) COMPANY (2)
---------------- ------------- ----------------
<S> <C> <C> <C>
Per Share....................................... $50.75 $1.60 $49.15
Total (3)....................................... $203,000,000 $6,400,000 $196,600,000
<FN>
- --------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $287,000 payable by the Company.
(3) The Company has granted the International Underwriters an option for 30
days to purchase up to an additional 120,000 shares of Common Stock at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. Additionally, the Company has granted the
U.S. Underwriters an option for 30 days to purchase up to an additional
480,000 shares of Common Stock at the initial public offering price per
share, less the underwriting discount, solely to cover over-allotments. If
such options are exercised in full, the total initial public offering
price, underwriting discount and proceeds to the Company will be
$233,450,000, $7,360,000, and $226,090,000, respectively. See
"Underwriting".
</TABLE>
--------------
The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that certificates for the shares will be ready for delivery in New York, New
York, on or about February 15, 1995.
GOLDMAN SACHS INTERNATIONAL
MERRILL LYNCH INTERNATIONAL LIMITED
LEHMAN BROTHERS
BAYERISCHE VEREINSBANK NATWEST SECURITIES LIMITED
AKTIENGESELLSCHAFT
NIKKO EUROPE PLC SOCIETE GENERALE UBS LIMITED
-------------
<PAGE>
The date of this Prospectus is February 8, 1995.
<PAGE>
AVAILABLE INFORMATION
Computer Sciences Corporation (the "Company" or "CSC") has filed a
registration statement on Form S-3 (together with all amendments and exhibits,
the "Registration Statement") with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the securities covered by this Prospectus. This
Prospectus omits certain information and exhibits included in the Registration
Statement, copies of which may be obtained upon payment of a fee prescribed by
the Commission or may be examined free of charge at the principal office of the
Commission in Washington, D.C.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed with the
Commission by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Company's Common Stock, $1.00 par value per share (the "Common Stock"),
is listed on the New York Stock Exchange (the "NYSE") and the Pacific Stock
Exchange (the "PSE") under the symbol "CSC" and such reports, proxy statements
and other information concerning the Company should be available for inspection
and copying at the offices of the NYSE, 20 Broad Street, New York, New York
10005 and at the offices of the PSE, 301 Pine Street, San Francisco, California
94104.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
are by this reference incorporated in and made a part of this Prospectus: (1)
the Annual Report on Form 10-K for the year ended April 1, 1994, as amended
("Form 10-K"), File No. 1-4850 (including the portions of the Company's Proxy
Statement dated July 5, 1994 incorporated by reference in such Annual Report on
Form 10-K); (2) the Quarterly Reports on Form 10-Q for the quarters ended July
1, 1994 and September 30, 1994; (3) the Registration Statement on Form 10, as
amended, filed to register the Common Stock pursuant to the Exchange Act; (4)
the Registration Statement on Form 8-A, as amended, filed to register the
Company's Preferred Stock Purchase Rights pursuant to the Exchange Act; (5) the
Current Reports on Form 8-K dated January 19, 1995 and January 20, 1995; and (6)
all documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereby. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents or into this Prospectus) will be
provided without charge to each person, including any beneficial owner, to whom
this Prospectus is delivered, upon a written or oral request to the Company,
Attention: Investor Relations Department, 2100 East Grand Avenue, El Segundo,
California 90245, telephone: (310) 615-1700, or c/o Registration Department,
Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention:
Donald T. Hansen, telephone: (212) 902-6686.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE
PACIFIC STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
THE COMPANY
The Company was founded in 1959 and is among the world leaders in the
information technology ("IT") services industry. The Company offers a broad
array of professional IT services to industry and government, and specializes in
the application of advanced and complex IT to achieve its customers' strategic
objectives. The Company's services include:
- MANAGEMENT CONSULTING -- Advising customers on the acquisition and
strategic utilization of IT and on "business reengineering," which
involves fundamental redesign of operations to achieve efficiencies and
improve competitive position.
- SYSTEMS INTEGRATION -- Designing, developing, implementing and integrating
complete information systems.
- OUTSOURCING -- Operating all or a portion of a customer's technology
infrastructure, including systems analysis, applications development,
network operations and data center management.
For more than three decades, the Company has provided IT services to the
United States federal government, ranging from traditional systems integration
and outsourcing to advanced technical undertakings and complex project
management. After making a strategic decision in 1986 to focus on the
development of its commercial business and to reduce its dependence on federal
contracts, which then accounted for 70% of its total revenues, the Company has
increased its penetration of the domestic and international commercial markets
and diversified its businesses. The Company's strategy is to continue to expand
its market share in commercial markets through internal growth and acquisitions
in targeted services and geographic markets while maintaining its strong
position in the federal market (which contributed 46% of revenue in the first
six months of fiscal 1995). As a result of this strategy, the Company's revenue
from commercial markets has grown at a compound annual growth rate ("CAGR") of
27% from fiscal 1991 through fiscal 1994 and the Company expects that such
revenue will continue to increase as a percentage of total revenue of the
Company.
The Company believes that its technology and systems expertise and large
project management skills, gained through years of experience in providing IT
services to the federal government, position it to compete effectively in U.S.
and international commercial markets. The Company also believes that its
competitive position is enhanced by its leadership position in business
reengineering consulting, its vendor neutrality and the full spectrum of IT
services that it provides.
The Company serves its U.S. markets through four primary operating groups:
the CONSULTING GROUP offers management consulting, business reengineering and
systems integration services; the SYSTEMS GROUP is responsible for substantially
all business with the federal government; the TECHNOLOGY MANAGEMENT GROUP
provides a full range of outsourcing services; and the INDUSTRY SERVICES GROUP
provides systems operations and processing support and proprietary
industry-specific services principally to the consumer financial services,
insurance and healthcare industries.
Through its EUROPEAN GROUP, the Company operates in Belgium, France,
Germany, the Netherlands and the United Kingdom. In addition, the Company has
operations in the Pacific Rim through CSC AUSTRALIA, a leading systems
integration, outsourcing and software development company in Australia and New
Zealand. The Company provides substantially the same services to its
international customers that it provides to domestic customers. Certain of the
Company's U.S. groups have also developed business outside the U.S.
The Company is incorporated under the laws of the State of Nevada. Its
principal executive offices are located at 2100 East Grand Avenue, El Segundo,
California 90245, and its telephone number is (310) 615-0311.
3
<PAGE>
RECENT DEVELOPMENTS
On December 29, 1994, the Company entered into an outsourcing agreement with
Hughes Aircraft Company ("Hughes") pursuant to which the Company will provide a
wide range of IT services to Hughes' corporate offices and certain operating
units -- including Hughes Aerospace and Technology, Hughes Space and
Communications, and Hughes Missile Systems -- for eight years, beginning January
28, 1995. CSC intends to support Hughes in the areas of mainframe computers,
desktop computers, telecommunications, enterprise servers, applications
development/maintenance and engineering computing. To provide these IT services,
the Company purchased from Hughes all of the stock of a subsidiary of Hughes
that holds certain hardware and other information technology assets and
anticipates hiring approximately 1,100 Hughes employees. CSC estimates that the
Hughes agreement will generate approximately $1.5 billion of revenue for the
Company over the eight-year period. This agreement supersedes a prior contract
for an estimated $200 million of revenues over seven years. After the initial
eight-year period, the agreement renews for successive one-year periods unless
terminated by either company.
On January 2, 1995, CSC acquired a majority interest in Ploenzke AG
("Ploenzke"), Germany's largest independent computer services firm. Ploenzke had
consolidated revenues of approximately $170 million in calendar 1993. The
Company expects to acquire all of the outstanding stock of Ploenzke within six
years, pursuant to reciprocal put and call options. Ploenzke specializes in
consulting, systems integration and custom software development and serves both
commercial clients, such as Siemens and Deutsche Bank, and public sector clients
that include the German federal railway and postal service. Ploenzke's primary
industry strengths include manufacturing, financial services, energy and
transportation.
Recently, the Company has also announced outsourcing contracts with American
Medical Response, Autoglass, MONY, Polaroid, San Diego Gas & Electric, Scott
Paper and Southern New England Telephone, among others. CSC estimates that, over
their terms and if all renewal options are exercised, these contracts will
generate approximately $675 million of revenue. See "Business -- Technology
Management Group and -- International Operations".
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 4,000,000 shares of
Common Stock offered in the United States and international offerings are
approximately $196.3 million ($225.8 million if the Underwriters' over-allotment
options are exercised in full), after deduction of the underwriting discount and
estimated offering expenses payable by the Company. The net proceeds will be
added to the general funds of the Company and will be used for general corporate
purposes. Pending such application, the Company intends to use the net proceeds
to reduce indebtedness temporarily and invest in short-term instruments.
4
<PAGE>
CAPITALIZATION
The following table sets forth a summary of the current debt and
capitalization of CSC on a consolidated basis as of September 30, 1994, on a pro
forma basis as of such date to reflect certain additional indebtedness incurred
after September 30, 1994 as described in note 2 below, and as adjusted to
reflect (i) the sale by CSC of 4,000,000 shares of Common Stock pursuant to the
United States and international offerings and (ii) the application of the net
proceeds of approximately $196.3 million from such sale to repay temporarily
outstanding indebtedness, assuming that the Underwriters' over-allotment options
are not exercised. See "Use of Proceeds". The information set forth below should
be read in conjunction with CSC's consolidated financial statements and the
notes thereto, included in its Annual Report on Form 10-K for the year ended
April 1, 1994, and its Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1994 and July 1, 1994, which are incorporated herein by reference.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
--------------------------------------------
PRO FORMA
ACTUAL (1) PRO FORMA (2) AS ADJUSTED
------------- -------------- -------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Current debt:
Short-term debt.................................................. $ 96,514 $ 196,514 $ 50,201
Current maturities of long-term debt............................. 6,629 6,629 6,629
------------- -------------- -------------
Total current debt......................................... $ 103,143 $ 203,143 $ 56,830
------------- -------------- -------------
------------- -------------- -------------
Long-term debt:
Commercial paper................................................. $ 150,000 $ 150,000 $ 100,000
6.80% Guaranteed Notes due April 15, 1999........................ 150,000 150,000 150,000
Other interest-bearing liabilities............................... 11,314 11,314 11,314
------------- -------------- -------------
Total long-term debt....................................... 311,314 311,314 261,314
------------- -------------- -------------
Stockholders' equity:
Preferred Stock, $1.00 par value; 1,000,000 authorized; none
issued.......................................................... -- -- --
Series A Junior Participating Preferred Stock, $1.00 par value;
198,000 authorized; none issued............................... -- -- --
Common Stock, $1.00 par value; 75,000,000 authorized; 50,857,874
shares issued; 54,857,874 shares issued, as adjusted (3)........ 51,070 51,070 55,070
Additional paid-in capital....................................... 113,293 113,293 305,606
Earnings retained for use in business............................ 704,185 704,185 704,185
Foreign currency translation and unfunded pension adjustments.... 1,394 1,394 1,394
Treasury stock; 212,328 shares................................... (5,014) (5,014) (5,014)
------------- -------------- -------------
Stockholders' equity, net.................................. 864,928 864,928 1,061,241
------------- -------------- -------------
Total capitalization....................................... $ 1,176,242 $ 1,176,242 $ 1,322,555
------------- -------------- -------------
------------- -------------- -------------
<FN>
- ------------------------
(1) See Note 4 to the Company's consolidated financial statements included in
its Annual Report on Form 10-K for the year ended April 1, 1994 and Note A
to the Company's consolidated condensed financial statements included in
its Quarterly Report on Form 10-Q for the quarter ended July 1, 1994, which
are incorporated herein by reference, for information regarding outstanding
indebtedness.
(2) The pro forma adjustment reflects an additional $100 million of
indebtedness incurred on January 3, 1995 to fund the acquisition of a
majority interest in Ploenzke and the acquisition of certain assets under
the Hughes outsourcing agreement. See "Recent Developments".
(3) Excludes shares of Common Stock issuable upon exercise of options granted
to employees of the Company. The Company has reserved 6,475,930 shares of
Common Stock for issuance pursuant to option grants under its stock option
plans. On September 30, 1994, options to purchase 5,178,538 of these shares
of Common Stock were outstanding to employees of the Company.
</TABLE>
5
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is listed and traded on the NYSE and PSE under the symbol
"CSC".
The table below sets forth the high and low intra-day prices of the Common
Stock on the NYSE for the periods indicated. Per share prices have been adjusted
for a 200% stock dividend distributed January 13, 1994.
<TABLE>
<CAPTION>
COMMON STOCK
PRICES
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
1992:
First Quarter.............................................................................. $ 28.00 $ 22.50
Second Quarter............................................................................. 25.75 20.38
Third Quarter.............................................................................. 23.29 19.00
Fourth Quarter............................................................................. 26.75 21.96
1993:
First Quarter.............................................................................. $ 26.83 $ 24.54
Second Quarter............................................................................. 28.21 23.33
Third Quarter.............................................................................. 31.63 27.25
Fourth Quarter............................................................................. 33.42 29.96
1994:
First Quarter.............................................................................. $ 41.75 $ 31.63
Second Quarter............................................................................. 44.00 35.25
Third Quarter.............................................................................. 45.25 39.75
Fourth Quarter............................................................................. 52.63 41.00
1995:
First Quarter (through February 8, 1995)................................................... $ 52.25 $ 47.25
</TABLE>
It has been the Company's policy to invest earnings in the growth of the
Company rather than distribute earnings as cash dividends. This policy, under
which cash dividends have not been paid since fiscal 1969, is expected to
continue but is subject to review by the Board of Directors.
6
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial and other
information of the Company. The "Statement of Earnings Information" and the
"Balance Sheet Information" (i) for the years ended and as of March 30, 1990 and
March 29, 1991, and the "Balance Sheet Information" as of April 3, 1992 are
derived from audited consolidated financial statements of the Company not
included in this Prospectus, (ii) for the years ended and as of April 3, 1992,
April 2, 1993 and April 1, 1994 (other than the "Balance Sheet Information" as
of April 3, 1992) are derived from the audited consolidated financial statements
of the Company contained in its Annual Report on Form 10-K for its fiscal year
ended April 1, 1994, incorporated by reference in this Prospectus, (iii) for the
six months ended and as of September 30, 1994 are derived from the unaudited
consolidated condensed financial statements of the Company contained in its
Quarterly Report on Form 10-Q for its fiscal quarter ended September 30, 1994,
incorporated by reference in this Prospectus, and (iv) for the six months ended
and as of October 1, 1993 are derived from unaudited consolidated condensed
financial statements of the Company not included in this Prospectus. The
unaudited consolidated condensed financial statements include all normal
recurring adjustments management considers necessary for a fair presentation of
the consolidated financial data. The following selected consolidated financial
information should be read in conjunction with, and is qualified in its entirety
by, the Company's consolidated financial statements and accompanying notes
contained in its Annual Report on Form 10-K for its fiscal year ended April 1,
1994, and its unaudited consolidated condensed financial statements contained in
its Quarterly Reports on Form 10-Q for its fiscal quarters ended July 1, 1994
and September 30, 1994, and also should be read in conjunction with
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" appearing elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SIX MONTHS ENDED
---------------------------------------------------------- ----------------------
SEPTEMBER
MARCH 30, MARCH 29, APRIL 3, APRIL 2, APRIL 1, OCTOBER 1, 30,
1990 1991 1992 1993 1994 1993 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
INFORMATION:
Revenues................................ $1,500,443 $1,737,791 $2,113,351 $2,479,847 $2,582,670 $1,230,406 $1,526,631
---------- ---------- ---------- ---------- ---------- ---------- ----------
Costs of services....................... 1,238,738 1,447,367 1,723,973 2,006,449 2,065,023 1,000,561 1,215,539
Selling, general and administrative..... 131,702 144,751 179,578 210,217 227,003 103,519 150,096
Depreciation and amortization........... 34,014 40,203 81,701 118,668 130,704 60,077 77,832
Interest, net........................... 4,475 5,408 15,626 15,804 10,857 4,962 10,995
Other items, net (1).................... (11,686) (2,480) 3,250 460 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total costs and expenses................ 1,397,243 1,635,249 2,004,128 2,351,598 2,433,587 1,169,119 1,454,462
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before taxes..................... 103,200 102,542 109,223 128,249 149,083 61,287 72,169
Taxes on income......................... 37,668 37,551 41,046 50,100 58,153 24,858 27,424
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before cumulative effect of
accounting change...................... $ 65,532 $ 64,991 $ 68,177 $ 78,149 $ 90,930 $ 36,429 $ 44,745
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings............................ $ 65,532 $ 64,991 $ 68,177 $ 78,149 $ 95,830 $ 41,329 $ 44,745
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings per share before cumulative
effect of accounting change (1)........ $ 1.36 $ 1.34 $ 1.37 $ 1.55 $ 1.77 $ 0.72 $ 0.86
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings per share (1).............. $ 1.36 $ 1.34 $ 1.37 $ 1.55 $ 1.86 $ 0.81 $ 0.86
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Shares used to compute earnings per
share.................................. 48,341 48,518 49,647 50,276 51,385 50,988 52,247
BALANCE SHEET INFORMATION:
Working capital......................... $ 219,005 $ 262,865 $ 265,563 $ 332,273 $ 195,875 $ 354,849 $ 243,224
Total assets............................ 917,741 1,006,821 1,375,386 1,460,922 1,806,380 1,485,307 1,844,713
Total debt.............................. 135,678 141,559 389,710 312,039 323,801 305,544 414,457
Stockholders' equity.................... 458,072 526,226 606,810 695,380 805,680 742,373 864,928
<FN>
- ------------------------------
(1) Other items, net include: (a) for fiscal 1990, a gain of $19.6 million on
sales of the Company's 40% ownership interest in a former subsidiary,
reduced by provisions established for the phasedown of certain operations;
(b) for fiscal 1991, the net result of (i) a net non- operating gain of
$3.4 million, resulting from a gain of $8.3 million from the formation of a
general partnership partially offset by provisions of $4.9 million
established for the phasedown of certain operations, and (ii) European
severance payments and restructuring costs of $6.0 million less gains from
the disposition of certain European business activities of $5.1 million;
(c) for fiscal 1992, restructuring charges of approximately $5.5 million
incurred within the Company's European operations, primarily for severance
payments and related costs, partially offset by $2.2 million recognized as
the net increase in estimated amounts recoverable on completed contracts;
and (d) for fiscal 1993 (i) the Company's settlement of certain claims on
completed contracts, resulting in a gain of $4.7 million in excess of
estimated recoverable amounts, and (ii) provision for severance payments
and restructuring charges of $5.1 million relating to the Company's
European operations, particularly Belgium. The per share after tax effect
of these items was $0.15, $0.03, ($0.04) and ($0.01) in fiscal 1990, 1991,
1992 and 1993, respectively. After deducting these amounts from net
earnings per share shown above, net earnings per share in fiscal 1990,
1991, 1992 and 1993 would have been $1.21, $1.31, $1.41 and $1.56,
respectively.
</TABLE>
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth certain items in the results of operations
for the periods indicated as a percentage of revenues:
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEARS ENDED ENDED
------------------------------------- -----------
<S> <C> <C> <C> <C>
APRIL 3, APRIL 2, APRIL 1, OCT. 1,
1992 1993 1994 1993
----------- ----------- ----------- -----------
Revenues.............................................................. 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Costs of services..................................................... 81.6 80.9 80.0 81.3
Selling, general and administrative................................... 8.5 8.5 8.8 8.4
Depreciation and amortization......................................... 3.8 4.8 5.0 4.9
Interest, net......................................................... 0.7 0.6 0.4 0.4
Other items, net...................................................... 0.2 -- -- --
----- ----- ----- -----
Total costs and expenses.............................................. 94.8 94.8 94.2 95.0
----- ----- ----- -----
Income before taxes................................................... 5.2 5.2 5.8 5.0
Taxes on income....................................................... 2.0 2.0 2.3 2.0
----- ----- ----- -----
Earnings before cumulative effect of accounting change................ 3.2% 3.2% 3.5% 3.0%
----- ----- ----- -----
----- ----- ----- -----
<CAPTION>
<S> <C>
SEPT. 30,
1994
-----------
Revenues.............................................................. 100.0%
-----
Costs of services..................................................... 79.6
Selling, general and administrative................................... 9.8
Depreciation and amortization......................................... 5.1
Interest, net......................................................... 0.8
Other items, net...................................................... --
-----
Total costs and expenses.............................................. 95.3
-----
Income before taxes................................................... 4.7
Taxes on income....................................................... 1.8
-----
Earnings before cumulative effect of accounting change................ 2.9%
-----
-----
</TABLE>
FOR THE FIRST SIX MONTHS OF FISCAL 1995 AND FISCAL 1994
REVENUES
During the six months ended September 30, 1994 (the "Fiscal 1995 Period"),
the Company's total revenues were $1,527 million, an increase of 24.1%, or $296
million, over the corresponding 1994 period (the "Fiscal 1994 Period"). Federal
revenue in the Fiscal 1995 Period totaled $700 million, up 17.9% from $594
million for the Fiscal 1994 Period, due to the acquisition during December 1993
of Atlantic Research Corporation's Professional Services Group ("PSG") and the
commencement after the Fiscal 1994 Period of a number of contracts, including
the Company's contract to provide comprehensive information systems support to
NASA's Marshall Space Flight Center (the "PrISMS Contract").
From the beginning of the fiscal year through December 30, 1994, the Company
has been awarded federal government contracts that it estimates will generate
approximately $1.4 billion of revenues over their terms, including the PrISMS
Contract, which the Company estimates will generate approximately $1.05 billion
of revenue over eight years if all renewal options are exercised.
Commercial revenue from domestic operations was $527 million for the Fiscal
1995 Period versus $510 million for the Fiscal 1994 Period, an increase of 3.3%,
or $17 million, with growth in consulting revenues partially offset by the
continuing phaseout of certain claims processing activities and a slight
decrease in revenues from existing outsourcing contracts as service efficiencies
were achieved. International revenue increased to $299 million from $127
million, an increase of 135.4%, or $172 million, reflecting the commencement of
the Company's outsourcing contract with British Aerospace ("BAe") during the
first quarter of fiscal 1995, the acquisition of CSC Australia during the third
quarter of fiscal 1994 and other revenue growth.
From the beginning of the fiscal year through December 30, 1994, the Company
has been awarded commercial contracts that it estimates will generate
approximately $1.9 billion of revenues over their terms.
COSTS AND EXPENSES
Costs of services for the Fiscal 1995 Period were $1,216 million, up 21.5%,
or $215 million, over the Fiscal 1994 Period. As a percentage of revenue, costs
of services were 79.6% for the Fiscal 1995 Period, versus 81.3% for the Fiscal
1994 Period. The improvement was widespread, with the largest benefit achieved
in the Company's European operations.
8
<PAGE>
Selling, general and administrative expenses increased to $150 million for
the Fiscal 1995 Period, up from $104 million for the same period last year. The
largest increases were in the Company's international, federal and U.S.
consulting businesses where revenue growth was also strongest. As a percentage
of revenue, the Company's selling, general and administrative expenses were 9.8%
for the Fiscal 1995 Period, versus 8.4% for the Fiscal 1994 Period, primarily
due to the higher proportion of commercial consulting and outsourcing business,
which generally requires higher selling expenses.
Depreciation and amortization expense increased to $78 million for the
Fiscal 1995 Period, up from $60 million for the Fiscal 1994 Period, representing
5.1% and 4.9% of revenues, respectively. The dollar and percentage increases
were primarily the result of the BAe contract and the acquisitions of PSG and
CSC Australia.
Net interest expense increased to $11 million for the Fiscal 1995 Period
from $5 million for the Fiscal 1994 Period. The increase was 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. A
reduction in cash and increased borrowings helped to fund the purchase of
outsourcing assets from BAe and to acquire PSG and CSC Australia during the
second half of fiscal 1994.
The Company also completed the phase-out of certain unprofitable operations
in Belgium during the first quarter of fiscal 1995.
INCOME BEFORE TAXES
Income before taxes was $72 million for the Fiscal 1995 Period, up $11
million, or 17.8%, over the Fiscal 1994 Period, reflecting the revenue growth
achieved and an operating income improvement in Europe of approximately $2
million, offset somewhat by the higher selling, general and administrative
expenses and net interest expense described above. The Company achieved a
pre-tax margin for the Fiscal 1995 Period of 4.7% of revenues, versus 5.0% for
the Fiscal 1994 Period, reflecting the above revenue and expense trends.
EARNINGS
Earnings were $45 million for the Fiscal 1995 Period, up $8 million, or
22.8%, over the Fiscal 1994 Period, before the cumulative effect of an
accounting change for income taxes. The effective tax rate was 38.0% in the
Fiscal 1995 Period, versus 40.6% for the Fiscal 1994 Period. The higher rate for
the Fiscal 1994 Period was principally related to the passage of federal income
tax legislation during August, 1993. The cumulative effect of the tax
legislation was recorded in the second quarter of fiscal 1994.
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. The Fiscal 1995 Period's
earnings per share were 86 cents compared to 72 cents for the Fiscal 1994 Period
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 $5 million, or 9 cents per share adjusted for the
split.
CASH FLOWS
Cash flows from operating activities were $15 million for the Fiscal 1995
Period, compared to $85 million during the Fiscal 1994 Period. Higher earnings
and non-cash expenses for the Fiscal 1995 Period compared to the Fiscal 1994
Period were more than offset by higher working capital needs, particularly for
the commencement of several federal contracts, including the PrISMS Contract.
The Company's cash outflows for investing activities were $114 million for
the Fiscal 1995 Period versus $84 million during the Fiscal 1994 Period. The
higher outflow reflected greater purchases of property, plant and equipment in
keeping with company growth, particularly in the asset-intensive area of
information technology outsourcing. The Company also had greater
acquisition-related expenditures for this period than in the corresponding 1994
period. These factors were partially offset by an absence of short-term
investment purchases during the Fiscal 1995 Period compared to the Fiscal 1994
Period.
9
<PAGE>
Cash used in financing activities was $14 million for the Fiscal 1995 Period
versus cash provided of $1 million during the Fiscal 1994 Period. Year-to-date
activity included the payment of $114 million of BAe outsourcing financing.
Additionally, a $150 million private placement of fixed-rate, term debt was
issued by CSC Enterprises, a consolidated affiliate of the Company, and was used
partially to repay commercial paper borrowings.
FINANCIAL CONDITION
During the Fiscal 1995 Period, the Company's capital needs included $114
million for the payment related to the BAe outsourcing contract and $115 million
for additional working capital. These needs were met by the use of existing cash
and additional debt. As a result of the additional borrowing, the Company's
debt-to-total-capitalization ratio increased to 32.4% at September 30, 1994,
versus 28.8% at the prior fiscal year-end. In all other respects, the Company's
financial condition has not changed significantly since the fiscal year-end.
Historically, the Company has been able to provide the capital needed to
meet its obligations and invest in growth opportunities through internally
generated cash flows and its debt capacity. 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.
FOR THE THREE FISCAL YEARS 1994, 1993 AND 1992
REVENUES
Revenues of $2.58 billion for fiscal 1994 were 4.1% higher than fiscal 1993
revenues of $2.48 billion, which were 17.3% higher than the $2.11 billion of
revenues for fiscal 1992. Revenue growth for each year was achieved through both
expansion of internal activities and acquisitions. For fiscal 1993, over half of
the 17% growth came from the General Dynamics and successor clients' outsourcing
contracts.
The Company's revenue from the U.S. Government declined 2.5% to $1.22
billion for fiscal 1994 from $1.25 billion in fiscal 1993. The decline was the
result of the phase-out of two large contracts, offset in part by the
acquisition of the Professional Services Group of Atlantic Research Corporation.
During fiscal 1994, CSC was awarded contracts with a value of $2.0 billion,
compared with $1.1 billion the prior year. Fiscal 1993 U.S. Government revenue
increased 3.5% to $1.25 billion from $1.21 billion for fiscal 1992. The growth
was broad-based across CSC federal operations. Revenues from the U.S. Government
comprised 47.4% of the Company's total revenues for fiscal 1994 versus 50.6% for
fiscal 1993 and 57.4% for fiscal 1992.
CSC's non-federal revenues comprised 52.6% of total revenues for fiscal 1994
versus 49.4% for fiscal 1993 and 42.6% for fiscal 1992. Commercial revenues of
the Company's U.S. operations increased to $1.04 billion for fiscal 1994, an
increase of 4.9% over $0.99 billion for the prior year, following a 43.7%
increase for fiscal 1993 over 1992. U.S. commercial growth for fiscal 1994 was
led by consulting and systems integration activities, offset by the impact of
the New Jersey JUA/MTF contract expiration. The Company's expansion into
commercial outsourcing was the largest source of revenue growth for fiscal 1993.
Consulting and systems integration activities were also significant contributors
to fiscal 1993 growth.
The Company's international revenues increased 36.6% to $321 million for
fiscal 1994, up from $235 million for fiscal 1993 and $209 million for fiscal
1992. Slightly more than half of international revenue growth for fiscal 1994
resulted from the acquisition of CSC Australia. The remainder of fiscal 1994
international revenue growth came from consulting and outsourcing efforts.
Fiscal 1993 growth was achieved through broad-based internal growth, except in
Belgium where the disposal of certain operations led to corresponding revenue
reductions.
COSTS OF SERVICES
Costs of services of $2.07 billion for fiscal 1994 were 2.9% higher than
fiscal 1993, comparing favorably to the 4.1% fiscal 1994 revenue increase. 1993
costs of services of $2.01 billion were 16.4% higher than the $1.72 billion of
costs for fiscal 1992, compared to the 17.3% fiscal 1993 revenue increase.
As a percentage of revenues, costs of services improved to 80.0% for fiscal
1994 from 80.9% for fiscal 1993 and 81.6% for fiscal 1992. The favorable change
for fiscal 1994 was due to broad improvement across the Company. The favorable
change during fiscal 1993 was primarily related to the change in the mix of
business toward outsourcing and improved performance in the Company's federal
business.
10
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE
Fiscal 1994 selling, general and administrative expenses of $227 million
increased by $17 million or 8.0% over fiscal 1993, which was $31 million or
17.1% greater than fiscal 1992. The most significant contributor to these
increases has been the expansion of the Company's commercial outsourcing and
consulting activities. As a percentage of revenue, the Company's selling,
general and administrative expenses were 8.8% for fiscal 1994 versus 8.5% for
fiscal 1993 and 1992.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense for fiscal 1994 of $131 million
increased $12 million, or 10.1%, over fiscal 1993, following an increase of $37
million or 45.2% for fiscal 1993 over fiscal 1992. For fiscal 1994, the increase
reflected growth in fixed and other assets from both internal expansion and
acquisitions. For fiscal 1993, approximately 70% of the increase was due to the
full year impact of the purchase of property, equipment and other assets in
connection with the General Dynamics outsourcing contract begun in fiscal 1992.
As a percentage of revenue, the Company's depreciation and amortization expense
was 5.0%, 4.8% and 3.8% for fiscal 1994, 1993 and 1992, respectively.
INTEREST AND OTHER ITEMS
Interest expense, net of interest income, was $11 million for fiscal 1994,
down from $16 million for each of fiscal 1993 and fiscal 1992. The reduction in
net interest expense for fiscal 1994 was due to both decreased interest expense
and increased interest income. The Company's effective rate of interest declined
as a result of declining market interest rates and the replacement of a $250
million bank borrowing with the same amount of commercial paper. Subsequent to
year-end, $150 million of the commercial paper was replaced by five-year
guaranteed notes at a rate of 6.8%, a rate higher than commercial paper rates at
the time. Interest income increased as the result of higher average cash
balances invested, despite lower rates of return due to declining interest
rates.
Net interest expense increased for fiscal 1993 due to the full year impact
of the $250 million borrowing during November 1991 to finance the purchase of
outsourcing assets and several acquisitions. The increase was substantially
offset by interest expense savings resulting from paydowns of $55 million on
Senior Notes (carrying an interest rate of approximately 9%) and approximately
$20 million of other debt.
For fiscal 1993, other items are comprised of (i) the Company's settlement
of certain claims on completed contracts, resulting in a gain of $5 million in
excess of estimated recoverable amounts, and (ii) provision for severance
payments and restructuring charges of $5 million relating to the Company's
European operations, particularly Belgium.
Other items for fiscal 1992 consist of restructuring charges of
approximately $5 million incurred within the Company's European operations,
primarily for severance payments and related costs. The charge was partially
offset by $2 million recognized as the net increase in estimated amounts
recoverable on completed contracts.
INCOME BEFORE TAXES
Income before taxes increased $21 million or 16.2% to $149 million for
fiscal 1994 from $128 million for fiscal 1993. Fiscal 1994 income before taxes
included net foreign operating income of $5 million versus fiscal 1993 net
operating losses of $16 million. Of this improvement, approximately half was
achieved in Europe, although losses there persisted, with the remaining
improvement achieved in the international operations of U.S.-domiciled entities
and as the result of the acquisition of CSC Australia. In the aggregate, CSC's
increase in income before taxes for fiscal 1994 was mainly the result of revenue
growth, cost of services improvement and a net interest expense reduction.
For fiscal 1993, income before taxes increased $19 million or 17.4% to $128
million, reflecting the 17.3% revenue growth achieved.
The Company achieved pre-tax margins of 5.8% of revenues for fiscal 1994 and
5.2% of revenues for fiscal 1993 and 1992, reflecting the above revenue and
expense trends.
11
<PAGE>
TAXES
The provision for income taxes as a percentage of pretax earnings was 39.0%,
39.1% and 37.6% for fiscal 1994, 1993 and 1992, respectively. The slight
decrease in the rate for fiscal 1994 was achieved, despite the increase in the
U.S. federal statutory rate and the cumulative effect of the August 1993 tax
legislation, by the ability to offset some European tax losses against taxable
income elsewhere.
The rate increase for fiscal 1993 was due to the Company's European losses,
for which there were generally no income tax carrybacks available and which
could not at that time be used to offset taxable income elsewhere.
Effective for fiscal 1994, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", and reported
additional net earnings of $5 million, or $0.09 per share as the cumulative
effect of an accounting change.
EARNINGS
Earnings for fiscal 1994 were $91 million before the $5 million effect of an
accounting change, discussed above, and $96 million after the effect. Net
earnings were $78 million and $68 million for fiscal 1993 and fiscal 1992,
respectively.
The upward trend of earnings for the three years reflects the Company's
revenue growth and improvements in costs of services as a percentage of revenue,
partially offset by increases in selling, general and administrative expenses
and depreciation and amortization expenses and, for fiscal 1993, a higher
effective tax rate.
CASH FLOWS
The Company's primary source of cash has been from operating activities.
Cash flows from operating activities were $192 million, $194 million and $105
million for fiscal 1994, 1993 and 1992, respectively. Fiscal 1994 reflected
higher earnings and non-cash charges which were more than offset by reduced
growth in current liabilities when compared to the prior year. The significant
increase for fiscal 1993 principally reflected the Company's expansion of
outsourcing activities, where non-cash charges are a larger portion of the total
expenses than in the Company's other lines of business.
Net cash used in investing activities was $310 million, $130 million and
$323 million for fiscal 1994, 1993 and 1992, respectively. Fiscal 1994
investments included $119 million for capital expenditures and $114 million for
a major outsourcing contract. Capital expenditures increased from $95 million
and $53 million for fiscal 1993 and 1992, respectively. The increase was
principally the result of growth in the Company's outsourcing business. Fiscal
1994 investments also included $93 million for several business acquisitions.
The 1994 investing outflows were partially offset by liquidations of short-term
investments. The investment activity during fiscal 1992 included the purchase of
outsourcing assets for $184 million as part of the long-term agreement with
General Dynamics and expenditures of $132 million for several business
acquisitions.
Net cash provided by financing activities was $133 million for fiscal 1994.
Net cash used in financing activities was $68 million for 1993. Net cash
provided by financing activities was $260 million for fiscal 1992. During March
1994, the Company entered into an outsourcing contract for which a payment of
$114 million was made subsequent to the fiscal year-end. The resulting liability
provides a source of cash in the Company's fiscal 1994 financing cash flows. The
use of cash for financing during 1993 was principally due to payments of $69
million on long-term debt. Fiscal 1992 cash from financing included the $250
million borrowing on the three-year bank credit agreement. The proceeds were
applied to the purchase of outsourcing assets and several acquisitions.
FINANCIAL CONDITION
The balance of cash, cash equivalents and short-term investments was $127
million at April 1, 1994, $155 million at April 2, 1993 and $130 million at
April 3, 1992. For fiscal 1994, equity growth, mainly through retained earnings,
in excess of additional borrowings enabled the Company to again strengthen its
financial position, finishing the year with a ratio of debt to total
capitalization of 29%.
During fiscal 1993, repayment of $77 million of interest-bearing debt, along
with equity growth, enabled the Company to achieve an end-of-year ratio of debt
to total capitalization of 31%, a significant improvement from the April 3, 1992
ratio of 39%.
14
<PAGE>
BUSINESS
The Company was founded in 1959 and is among the world leaders in the IT
industry, providing consulting, systems integration and outsourcing services to
industry and government.
BACKGROUND AND STRATEGY
For more than three decades, the Company has provided IT services to the
United States federal government, ranging from traditional systems integration
and outsourcing to advanced technical undertakings and complex project
management. The Company is one of the largest IT services contractors with the
federal government, based on revenues.
In 1986, the Company made a strategic decision to reduce its dependence on
federal contracts, which then accounted for 70% of its total revenues, by
focusing on the development of its commercial business (which includes state and
local governments), both in domestic and international markets. While federal
contracts have provided a dependable source of revenue and earnings and are
expected to provide growth, the Company believes that the majority of its future
growth will occur in the commercial markets. Demand for CSC's services has been
increasing more rapidly in the commercial markets than in the federal market as
customers seek sophisticated methods to focus on their core businesses and
achieve efficiencies and cost savings. The Company believes that its technology
and systems expertise and large project management skills, gained through years
of experience in providing IT services to the federal government, position it to
compete effectively in U.S. and international commercial markets.
The Company has increased its penetration of the commercial markets and
diversified its businesses through internal growth and acquisitions, while
maintaining its strong position in the federal market (which contributed 46% of
revenue in the first six months of fiscal 1995). As a result, the Company
expects that revenue from commercial markets will continue to increase as a
percentage of the total revenue of the Company.
A significant portion of CSC's commercial revenue growth has come from its
consulting business, which grew at an annual rate in excess of 25% for each of
the three fiscal years after fiscal 1991. The Consulting Group is largely
comprised of businesses acquired since 1986: Consulting & Systems Integration
(formerly CSC Partners) (1986), CSC Index (1988), Cleveland Consulting
Associates (1989) and Communications Industry Services (formerly CSC Intelicom)
(1991). These companies now form the core of the Consulting Group, as discussed
below.
Outsourcing has been a key source of recent growth in CSC's commercial
business. Since the beginning of calendar 1994, CSC has entered into commercial
outsourcing contracts with U.S. and international companies that CSC estimates
will generate over $3.5 billion in revenue over their terms, including renewal
options. The Company expects to continue to seek new contracts with major
domestic and international corporations, targeting primarily Fortune 500
companies in the United States and Financial Times 500 companies in Europe.
The Company has also experienced significant growth in its international
business, from approximately 2% of the Company's revenue in fiscal 1986 to
approximately 20% of the Company's revenue in the first six months of fiscal
1995. Recent acquisitions in the international market include: CSC Australia, by
which the Company established a presence in the Pacific Rim; Ploenzke, Germany's
largest independent computer services firm; and Ouroumoff Consultants, a
management consulting firm in France.
Although the Company has experienced strong growth in revenues over the last
five years, no assurances can be given as to the future growth of the Company or
how effectively such growth will be managed by the Company.
COMPETITIVE STRENGTHS
CSC believes that the following key attributes strengthen the Company's
competitive position and have enabled it to maintain its strong presence in the
federal market and to grow its commercial business:
- TECHNOLOGY LEADERSHIP -- As a technology leader since 1959, the Company is
known for its ability to deliver creative solutions to complex problems by
utilizing the most current technology available. The Company's position in
the federal market has resulted in cross-fertilization of technology into
the commercial
15
<PAGE>
marketplace. Its technical specialties cover a broad range of emerging
technologies such as computer-aided acquisitions and logistics support,
massively parallel processing, data security, rapid system development
techniques and client/server applications.
- PREEMINENCE IN BUSINESS REENGINEERING -- With nearly a decade of
experience, the Company, through CSC Index, is at the forefront of
business reengineering. The Company believes reengineering is one of the
fastest growing IT sectors. Reengineering consulting has often led to
follow-on opportunities in its other businesses, especially systems
integration and outsourcing.
- EXTENSIVE PROJECT MANAGEMENT EXPERIENCE -- The Company's extensive
experience with large and complex federal and commercial contracts has
contributed to its reputation for excellence in project management. The
Company believes its proven ability to manage these contracts, which
require executing a vast array of tasks and applying multiple
methodologies simultaneously, strongly positions CSC to capitalize on the
future growth in outsourcing, both in the U.S. and abroad.
- VENDOR NEUTRALITY -- The Company does not manufacture any equipment and
generally does not market stand-alone packaged software products, enabling
it to integrate objectively the best products for its customers based on
their unique needs.
- FULL SPECTRUM OF IT SERVICES -- By providing a full spectrum of IT
services, the Company offers its customers "one-stop shopping", allowing
the tailoring of its offerings to customers' changing needs.
MARKETS
The Company offers a broad array of professional IT services to commercial
and federal, state and local government markets in the U.S. and internationally,
and specializes in the application of advanced and complex IT to achieve its
customers' strategic objectives. Industries served by CSC include aerospace,
banking, consumer financial services, distribution, healthcare, insurance,
manufacturing, retailing, telecommunications, transportation and utilities,
among others. CSC also provides systems integration and outsourcing services to
the U.S. federal market, which includes the Department of Defense, the National
Aeronautics and Space Administration ("NASA") and other civil agencies.
The following table sets forth the Company's revenues by major market sector
for fiscal 1992, 1993 and 1994:
<TABLE>
<CAPTION>
PERCENT OF TOTAL
REVENUE BY MARKET REVENUE
---------------------- ---------------------
1992 1993 1994 1992 1993 1994
------ ------ ------ ----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
U.S. Commercial......................... $ 692 $ 990 $1,039 33% 40% 40%
International........................... 209 235 321 10 9 12
------ ------ ------ ----- ----- -----
Total Commercial(1)................... 901 1,225 1,360 43 49 52
------ ------ ------ ----- ----- -----
Department of Defense................... 620 676 715 29 27 28
NASA.................................... 268 261 222 13 11 9
Civil Agencies.......................... 324 318 286 15 13 11
------ ------ ------ ----- ----- -----
Total U.S. Federal.................... 1,212 1,255 1,223 57 51 48
------ ------ ------ ----- ----- -----
Total................................. $2,113 $2,480 $2,583 100% 100% 100%
------ ------ ------ ----- ----- -----
------ ------ ------ ----- ----- -----
<FN>
- ------------------------
(1) Includes state, local and foreign governments.
</TABLE>
ORGANIZATION
The Company serves its U.S. markets through four primary operating groups:
the CONSULTING GROUP offers management consulting, business reengineering and
systems integration services; the SYSTEMS GROUP is responsible for substantially
all business with the federal government; the TECHNOLOGY MANAGEMENT GROUP
provides a full range of outsourcing services; and the INDUSTRY SERVICES GROUP
provides systems operations and processing support and proprietary
industry-specific services.
Through its EUROPEAN GROUP, the Company operates in Belgium, France,
Germany, the Netherlands and the United Kingdom. In addition, the Company has
operations in the Pacific Rim through CSC AUSTRALIA, a leading
16
<PAGE>
systems integration, outsourcing and software development company in Australia
and New Zealand. The Company provides substantially the same services to its
international customers that it provides to domestic customers. Certain of the
Company's U.S. groups have also developed business outside the U.S.
The Company's four U.S. groups and its international operations are
described below.
CONSULTING GROUP
The Company's Consulting Group was established in 1989 to strengthen CSC's
position in the commercial marketplace. Comprised largely of companies CSC has
acquired since 1986, the Consulting Group provides complementary capabilities
for the planning, development, implementation, integration (including business
reengineering) and management of information systems for the commercial markets.
The Consulting Group has experienced strong growth in revenues in recent years,
and International Data Corporation projects that U.S. industry revenue for IT
consulting will grow from $6.9 billion in 1993 to $13.8 billion in 1998, a CAGR
of 15%.
The Consulting Group consists of five operating units, as follows:
- CSC INDEX focuses on business strategy, business reengineering,
information technology and change management. CSC Index, a leader in
management consulting and business reengineering, has helped many of the
world's leading organizations in fundamentally redesigning operations to
achieve major improvements in cost, quality, service and efficiency.
- CONSULTING & SYSTEMS INTEGRATION provides systems integration and related
consulting services to a wide range of industries as well as state and
local governments. Specialized areas of expertise range from systems
development and information technology transformation to large-scale
systems integration and custom application development.
- COMMUNICATIONS INDUSTRY SERVICES provides software solutions and a broad
range of consulting services to clients in the telecommunications
industry. The unit is a leading independent supplier of specialized IT
services to the telecommunications industry in North America and has
recently extended its services to wireless industries in Europe, Latin
America, Scandinavia and other regions. Its capabilities include
applications software that supports the complete wireless communications
market, including GSM, the new European standard for digital cellular
networks and a billing and administration system being used by cellular
phone carriers in Canada, Mexico and Sweden.
- RESEARCH AND ADVISORY SERVICES conducts ongoing research on subjects
including business strategy, business and technology trends, business
reengineering, organizational change, management of information
technology, the business implications of emerging technologies and
computer systems development, and offers executive development programs
for large organizations on these and other subjects.
- IT MANAGEMENT CONSULTING is an information technology consulting service
designed to help clients transform their information systems
organizations. The unit provides consulting service for commercial and
government organizations on the management and use of information
technology.
SYSTEMS GROUP
The Systems Group, which has primary responsibility for the Company's
federal government businesses, targets business opportunities which emphasize
large and complex IT systems. The Group delivers IT services to various military
and civil agencies of the United States federal government in support of defense
and national security, aerospace and other programs. The Company's largest
customers in the federal government are the Department of Defense and NASA. The
Company also supports many other civil agencies, such as the Federal Aviation
Administration, and the Departments of State, Treasury, Justice, Commerce,
Energy, Interior and Health and Human Services.
Despite prevailing pressure to reduce growth of the federal budget and
shifts in government spending from military programs to civil agencies, the
Company anticipates continued growth in its government business as all sectors
of government seek to increase efficiencies, because IT is crucial to achieving
that goal. As of December 30, 1994, CSC had bids pending or was considering
bidding during the remaining three months of fiscal 1995 on 21 federal contracts
with an estimated total revenue over their terms of approximately $635 million
($212 million of which relates to contracts for which the Company is the
incumbent contractor).
17
<PAGE>
The following table sets forth the source, number and estimated revenue to
be generated over the terms of the federal contracts for IT services which the
Company has identified and expects to be open for bidding during the periods
indicated (including $1,041 million in CSC's fiscal 1996 and $1,003 million in
CSC's fiscal 1997 relating to contracts for which the Company is the incumbent
contractor):
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1997
------------------- -------------------
NUMBER REVENUE NUMBER REVENUE
------ ---------- ------ ----------
(MILLIONS) (MILLIONS)
<S> <C> <C> <C> <C>
Civil Agencies............................... 33 $ 2,978 29 $2,082
NASA......................................... 12 827 3 184
Department of Defense........................ 72 5,889 25 3,988
--
------ ---------- ----------
Total.................................... 117 $ 9,694 57 $6,254
--
--
------ ---------- ----------
------ ---------- ----------
</TABLE>
CSC has won approximately 40% of the estimated dollar-value (total revenue
over their terms, including renewal options and contingent award fees) of
contracts on which it has submitted bids in the federal market during the five
fiscal years ended April 1, 1994. During fiscal 1994, this percentage was
approximately 66% (estimated $1.9 billion won by CSC out of a total estimated
$2.9 billion bid and awarded). Over the first six months of fiscal 1995, this
percentage was approximately 54% (estimated $1.3 billion won by CSC out of a
total estimated $2.4 billion bid and awarded). The Company does not bid on every
federal contract it identifies, and no assurance can be given that the Company's
future win rate will match its historical rates.
Much of the Company's scientific and technological innovation and systems
expertise, some of which it has translated into its commercial IT activities,
can be attributed to the Systems Group. The Group has managed a number of
technologically advanced and complex projects, including design of high-speed
networks and mass storage systems for NASA's supercomputing centers, design of
telemetry for missile guidance systems for the Department of Defense, creation
of the first secure private data communications network for the Department of
the Treasury, and software system design for the United States' air traffic
control system.
TECHNOLOGY MANAGEMENT GROUP
The Technology Management Group engages in "outsourcing" the IT activities
of its domestic commercial customers. Outsourcing includes systems analysis,
applications development, network operations and data center management. The
outsourcing of all or a portion of a company's IT has become increasingly common
as companies have sought ways to manage IT expenses and gain competitive
advantage by having an IT specialist provide them with those services.
Outsourcing contracts often involve both fixed and variable price components
based on the number of transactions processed or the amount of computer
resources applied. Outsourcing arrangements can involve substantial up-front
expenditures by the IT services provider and tend to be long-term contracts. The
Company may purchase its customers' information processing equipment, hire the
customers' IT personnel and operate their facilities. International Data
Corporation estimated that, for 1993 through 1998, total U.S. outsourcing
revenues would grow from $6.5 billion to $11.8 billion, a CAGR of 13%.
In 1991, the Company signed outsourcing agreements with General Dynamics
Corporation to provide virtually all of the IT services required by General
Dynamics for an initial term of ten years (the "GD Program"). The GD Program
involved initial expenditures by the Company of approximately $180 million. The
Company believes that, at the time of signing, the contract was the largest in
the IT industry. Although General Dynamics has divested four businesses included
in the GD Program, the agreements provide for continuation by the successors
(Hughes Missiles Systems Co., Lockheed Fort Worth Company, Tracor, Inc. and
Martin Marietta Corporation) or a lump-sum payment to the Company in connection
with termination. All four successors independently elected to continue the
program with respect to such businesses.
18
<PAGE>
The GD Program marked the Company's debut as a major provider of outsourcing
services in the commercial market and since then the Company has actively
pursued further outsourcing contracts. Recently, the Company has been awarded
the following commercial outsourcing contracts in the U.S., among others:
<TABLE>
<CAPTION>
DATE TERM REVENUE (1)
ANNOUNCED CUSTOMER (YEARS) (MILLIONS)
- ----- ------------------------- -------- -----------
<C> <S> <C> <C>
American Medical
7/94 Response................. 10 $ 55
10/94 MONY..................... 7 210
11/94 Scott Paper (2).......... 3 90
1/95 Polaroid................. 5 10
1/95 Hughes Aircraft (3)...... 8 1,500
7 200
1/95 Southern New England
Telephone (4)............
-----------
Total.................... $2,065
-----------
-----------
<FN>
- ------------------------
(1) Revenue amounts are estimated over the indicated terms of the contracts.
(2) Term and revenue amount assume that all renewal options are exercised.
(3) See "Recent Developments" for a description of this agreement.
(4) A memorandum of understanding has been executed and a definitive agreement
is expected to be executed within the next few months.
</TABLE>
In addition to the agreements described above, the Company has entered into
other significant outsourcing agreements with companies outside the U.S. See
"International Operations".
INDUSTRY SERVICES GROUP
The Industry Services Group provides systems operations, processing support
and industry-specific services to private commercial enterprises, principally in
the consumer financial services, insurance and healthcare industries. The
group's operations include:
- CSC CREDIT SERVICES provides consumer credit reports, account-management
services and debt collection services to lenders and the federal
government on a nationwide basis. The Company has an option to put its
consumer credit reporting and collection businesses to Equifax Credit
Information Services, Inc., a subsidiary of Equifax Inc. ("Equifax"), with
which the Company has an agreement regarding certain credit reporting
assets and functions. According to the terms of the option, the price as
determined by the method therein defined was approximately $420 million as
of April 1, 1994 and in excess of $438 million as of September 30, 1994.
If the Company does not renew the agreement with Equifax or does not
exercise such option, or if there is a change in control of the Company,
Equifax has the option to purchase the same businesses at the same price
as the price under the Company's put option. The Company believes, based
on its investigation of Equifax, that Equifax is capable of consummating
such transaction.
- CSC LOGIC provides insurance companies and financial institutions with
services for administering life and disability insurance for credit loans
and mortgages, collateral protection insurance, and warranty insurance,
and provides processing and asset management services.
- CSC HEALTHCARE SYSTEMS serves health maintenance organizations ("HMOs"),
preferred provider organizations, clinics and physician groups, as well as
third-party claims administrators and traditional indemnity carriers.
INTERNATIONAL OPERATIONS
The Company provides substantially the same services to its international
customers that it provides to its domestic customers. International operations
have expanded significantly in the last five years, both through internal growth
and acquisitions, and certain of the Company's U.S. groups have developed
business outside the U.S. For fiscal 1990, international revenue totaled $147
million, compared with $321 million in fiscal 1994, a CAGR of 22%. In fiscal
1995, international revenues are expected to exceed $500 million.
19
<PAGE>
The Company expects Europe and the Pacific Rim to be important growth
markets, particularly as outsourcing becomes more widespread, as has been the
trend in the U.S. CSC has positioned itself to participate in this growth
through strategic acquisitions and by winning substantial outsourcing contracts
in Europe and Australia over the past few years. According to a 1994 study by
INPUT, an industry research firm, Europe's outsourcing and systems integration
markets are forecast to grow annually 21% and 19%, respectively, over the period
from 1993 to 1998. In the Pacific Rim, INPUT predicts that both the outsourcing
and systems integration markets will grow annually at 17% over the same time
period.
EUROPEAN GROUP
The European Group serves more than 120 government and commercial clients in
five countries -- Belgium, France, Germany, the Netherlands and the United
Kingdom. It operates in most major sectors of commercial activity, notably
financial services, retail, manufacturing, utilities, telecommunications,
insurance and transportation, as well as the public sector, including national
and international governmental agencies and ministries of defense.
Since the beginning of 1993, the European Group has become a significant
competitor in Europe's outsourcing market. The group's outsourcing wins are
highlighted by the contract with British Aerospace to provide a substantial
portion of its IT requirements. The group has been awarded the following
contracts in Europe, among others:
<TABLE>
<CAPTION>
DATE REVENUE (1)
ANNOUNCED CUSTOMER TERM (MILLIONS)
- ----- ------------------------- -------- -----------
<C> <S> <C> <C>
2/93 British home Stores...... 11 $ 200
11/93 RAET..................... 5 90
1/94 Ford of Europe........... 5 100
3/94 British Aerospace........ 10 1,500
1/95 Autoglass................ 10 50
1/95 ICI Paints............... 5 50
-----------
Total.................... $1,990
-----------
-----------
<FN>
- ------------------------
(1) Revenue amounts are estimated over the indicated terms of the contracts.
</TABLE>
In late 1994, CSC acquired Ouroumoff Consultants, a French firm which
specializes in business process reengineering, redesign, information technology
change management, logistics, quality management and marketing. It provides
these services throughout Europe in numerous industry sectors. With the
acquisition of Ouroumoff Consultants, CSC will be able to offer the full range
of information services, from business reengineering to systems integration and
operation, thereby improving its competitive position in France.
On January 2, 1995, CSC acquired a majority interest in Ploenzke, Germany's
largest independent computer services firm. Ploenzke had consolidated revenues
of $170 million in calendar 1993. The Company expects to acquire all of the
outstanding stock of Ploenzke within six years pursuant to reciprocal put and
call options. Ploenzke specializes in consulting, systems integration and custom
software development and serves both commercial clients, such as Siemens and
Deutsche Bank, and public sector clients that include the German federal railway
and postal service. Ploenzke's primary industry strengths include manufacturing,
financial services, energy and transportation.
CSC AUSTRALIA
CSC acquired CSC Australia (formerly Computer Sciences of Australia) in 1993
from Australian Mutual Provident Society ("AMP"). CSC Australia is the leading
outsourcing, systems integration and software company in Australia. It has
numerous contracts with government and commercial clients, principally in
Australia. A key goal for CSC Australia is to increase commercial business by
utilizing its consulting and outsourcing strengths to win new contracts in
Australia and throughout the Pacific Rim.
At the time of the acquisition, CSC Australia entered into a 10-year
outsourcing contract with AMP that the Company estimates will generate $300
million of revenue over its term. Under the outsourcing contract, CSC
20
<PAGE>
Australia provides AMP with all of its IT processing resources and a significant
percentage of its software development activities. In addition, CSC Australia
operates AMP's data network, which links offices in Hong Kong, New Zealand, the
United Kingdom and Australia, and provides a wide range of information systems
and communications services.
COMPETITION
The Company experiences significant competition in the IT industry from
firms providing information systems and services, computer and hardware
manufacturers and current and potential customers who choose to provide their
own business information systems and services. In the commercial market, CSC
faces different competitors in: (a) management and business reengineering
consulting; (b) systems consulting and integration; and (c) outsourcing. CSC's
main competitors for management and business reengineering consulting
engagements are McKinsey & Co., Boston Consulting Group, Bain & Company and Booz
Allen Hamilton Inc. CSC primarily competes with Andersen Consulting, the major
national accounting firms and Electronic Data Systems Corporation ("EDS") in the
systems consulting and integration business and with EDS and ISSC, a subsidiary
of International Business Machines, for outsourcing contracts. Among federal
government contractors providing IT services, primary competitors include
Planning Research Corporation, Science Applications International Corporation,
EDS, Loral, Boeing Computer Systems, Unisys, TRW, Northrop Grumman, Dyncorp and
C.D.S.I. Many of the Company's competitors in the federal government and
commercial markets are larger in size and have greater financial resources than
the Company.
21
<PAGE>
CERTAIN UNITED STATES FEDERAL TAX
CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a discussion of certain anticipated United States federal
income and estate tax consequences of the ownership and disposition of the
Common Stock applicable to Non-United States Holders of such Common Stock. For
purposes of this discussion, a "Non-United States Holder" is any corporation,
individual, partnership, estate or trust that is, as to the United States, a
foreign corporation, a non-resident alien individual, a foreign partnership or a
foreign estate or trust as such terms are defined in the United States Internal
Revenue Code of 1986, as amended (the "Code"). This discussion does not deal
with all aspects of United States income and estate taxation, does not consider
specific facts and circumstances that may be relevant to a particular Non-United
States Holder's tax position, and does not address foreign, state and local tax
consequences that may be relevant to Non-United States Holders. Furthermore, the
following discussion is based on current provisions of the Code, the regulations
promulgated thereunder, and administrative and judicial interpretations as of
the date hereof, all of which are subject to change possibly with retroactive
effect. Prospective Non-United States Holders are urged to consult their tax
advisors regarding the United States (federal, state and local) and foreign
income and other tax consequences of the ownership and disposition of Common
Stock.
DIVIDENDS
Dividends paid to a Non-United States Holder will be subject to withholding
of United States federal income tax at a 30 percent rate or such lower rate as
may be specified by an applicable income tax treaty unless, generally, either
(i) the dividends are effectively connected with the conduct of a trade or
business by the Non-United States Holder within the United States and the
Non-United States Holder properly files United States Internal Revenue Service
Form 4224 (or such other applicable form that may be required by the Internal
Revenue Service) with the Company or its dividend paying agent or (ii) if a tax
treaty applies, the dividends are attributable to a United States permanent
establishment maintained by the Non-United States Holder. If the dividends are
either effectively connected with such a U.S. trade or business or attributable
to such a United States permanent establishment, the dividends will be subject
to United States federal income tax (on a net income basis) at the same
graduated rates applicable to U.S. persons. In the case of a Non-United States
Holder that is a corporation, such effectively connected income may also be
subject to the branch profits tax (which is generally imposed at a 30 percent
rate (or lower treaty rate) on repatriated effectively connected earnings and
profits).
Under current United States Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country for purposes of the withholding discussed above and, under the current
interpretation of United States Treasury regulations, for purposes of
determining the applicability of a tax treaty rate. However, under proposed
United States Treasury regulations, a Non-United States Holder of Common Stock
who wishes to claim the benefit of an applicable treaty rate would be required
to satisfy applicable certification and other requirements. A Non-United States
Holder of Common Stock eligible for a reduced rate of United States withholding
tax pursuant to a tax treaty may obtain a refund of any excess amounts withheld
by filing an appropriate claim for refund with the Internal Revenue Service
within the time period applicable to such claims.
DISPOSITION OF COMMON STOCK
A Non-United States Holder generally will not be subject to United States
federal income tax on any gain realized upon the sale or other disposition of
his or her Common Stock unless (i) such gain is effectively connected with a
United States trade or business of the Non-United States Holder or, if a tax
treaty applies, is attributable to a United States permanent establishment
maintained by the Non-United States Holder, (ii) the Non-United States Holder is
an individual who has a tax home in the United States or has an office or other
fixed place of business in the Unites States to which the gain is attributable
and is present in the United States for a period or periods aggregating 183 days
or more during the taxable year in which such disposition occurs and certain
other conditions are met, (iii) the Non-United States Holder is an individual
who is a former citizen of the United States whose loss of citizenship within
the preceding
22
<PAGE>
ten-year period had as one of its principal purposes the avoidance of United
States tax, or (iv) the Company is, or has been at any time during the five-year
period preceding the disposition, a "United States real property holding
corporation" for United States federal income tax purposes and the Non-United
States Holder disposing of the Common Stock directly or indirectly owned more
than five percent of the value of the Common Stock at any time during such
five-year period. A corporation is generally a "United States real property
holding corporation" if the fair market value of its United States real property
interests equals or exceeds 50 percent of the sum of the fair market value of
its worldwide real property interest plus its other assets used or held for use
in a trade or business. The Company believes it is not currently a United States
real property holding corporation for United States federal income tax purposes.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The Company must report annually to the Internal Revenue Service and to each
Non-United States Holder the amounts of dividends paid and tax withheld with
respect to shares of Common Stock held by such holder. These information
reporting requirements apply regardless of whether withholding was reduced or
eliminated by an applicable tax treaty. This information may also be made
available to the tax authorities of the country in which the Non-United States
Holder resides. United States backup withholding tax (imposed at a rate of 31
percent on dividends paid to certain holders that fail to provide in the
required manner certain identifying information, such as the holder's name,
address and taxpayer identification number, or under certain other
circumstances) generally does not apply to dividends that are subject to United
States withholding tax at the 30 percent statutory rate or at a reduced tax
treaty rate, dividends that are effectively connected with a United States trade
or business of the Non-United States Holder, or dividends paid to a Non-United
States Holder at an address outside the Unites States or otherwise to a
Non-United States Holder who is an "exempt recipient" (such as a corporation).
If a Non-United States Holder sells shares of Common Stock through a United
States office of a broker, the broker is required to file an information return
and is required to apply backup withholding unless the Non-United States Holder
is an exempt recipient or has provided the broker with the information and
statements, under penalties of perjury, necessary to establish an exemption from
backup withholding. Under existing regulations, if payment of the proceeds of
the sale of a share of Common Stock by a Non-United States Holder is made to or
through the foreign office of a broker, the broker will not be required to apply
backup withholding (provided, if certain proposed regulations are adopted, that
the foreign office "effects" the sale at that office) or, except as provided in
the next sentence, to file information returns. If, however, the broker is a
United States person, a controlled foreign corporation for United States tax
purposes, or a foreign person 50 percent or more of whose gross income for the
three-year period ending with the close of the taxable year preceding the year
of payment (or for the part of that period that the broker has been in
existence) is effectively connected with the conduct of a trade or business in
the United States, under the existing regulations information reporting is
required unless that broker has documentary evidence in its files that the payee
is not a United States person and certain other conditions are met (and, if
certain proposed regulations are adopted, the foreign office "effects" the sale
at such office), or the payee otherwise establishes an exemption. The backup
withholding and information reporting rules are under review by the Internal
Revenue Service, and their application to the Common Stock could be changed by
future regulations.
ESTATE TAX
Common Stock owned, or treated as owned, by a nonresident alien individual
at the time of his death will be included in such holder's gross estate for
United States federal income tax purposes and thus will be subject to United
States federal estate tax, unless an applicable estate tax treaty provides
otherwise.
23
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the International Underwriters named
below, and each of such International Underwriters, for whom Goldman Sachs
International, Merrill Lynch International Limited and Lehman Brothers
International (Europe) are acting as representatives, has severally agreed to
purchase from the Company, the respective number of shares of Common Stock set
forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
INTERNATIONAL UNDERWRITER COMMON STOCK
- ------------------------------------------------------------------------------------- ---------------
<S> <C>
Goldman Sachs International.......................................................... 200,000
Merrill Lynch International Limited.................................................. 200,000
Lehman Brothers International (Europe)............................................... 200,000
Bayerische Vereinsbank Aktiengesellschaft............................................ 40,000
NatWest Securities Limited........................................................... 40,000
Nikko Europe Plc..................................................................... 40,000
Societe Generale..................................................................... 40,000
UBS Limited.......................................................................... 40,000
---------------
Total............................................................................ 800,000
---------------
---------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The International Underwriters propose to offer the shares of Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession of $0.93 per share. The International Underwriters
may allow, and such dealers may reallow, a concession not in excess of $0.10 per
share to certain brokers and dealers. After the shares of Common Stock are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the representatives.
The Company has entered into an underwriting agreement (the "U.S.
Underwriting Agreement") with the underwriters of the U.S. offering (the "U.S.
Underwriters") providing for the concurrent offer and sale of 3,200,000 shares
of Common Stock in a U.S. offering in the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two offerings
are identical. The closing of the offering made hereby is a condition to the
closing of the U.S. offering, and vice versa. The representatives of the U.S.
Underwriters are Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters has agreed that, as a part of the distribution of the shares
offered hereby and subject to certain exceptions, it will offer, sell or deliver
the shares of Common Stock, directly or indirectly, only in the United States of
America (including the States and the District of Columbia), its territories,
its possessions and other areas subject to its jurisdiction (the "United
States") and to U.S. persons, which term shall mean, for purposes of this
paragraph: (a) any individual who is a resident of the United States or (b) any
corporation, partnership or other entity organized in or under the laws of the
United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters named herein has agreed pursuant to the Agreement
Between that, as a part of the distribution of the shares offered as a part of
the international offering, and subject to certain exceptions, it will (i) not,
directly or indirectly, offer, sell or deliver shares of Common Stock (a) in the
United States or to any U.S. persons or (b) to any person who it believes
intends to reoffer, resell or deliver the shares in the United States or to any
U.S. persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.
24
<PAGE>
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Company has granted the International Underwriters an option exercisable
for 30 days after the date of this Prospectus to purchase up to an aggregate of
120,000 additional shares of Common Stock solely to cover over-allotments, if
any. If the International Underwriters exercise their over-allotment option, the
International Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
to be purchased by each of them, as shown in the foregoing table, bears to the
800,000 shares of Common Stock offered. The Company has granted the U.S.
Underwriters a similar option exercisable up to an aggregate of 480,000
additional shares of Common Stock.
The Company and its directors have agreed that during the period beginning
from the date of this Prospectus and continuing to and including the date 90
days after the date of the Prospectus, not to offer, sell, contract to sell or
otherwise dispose of any securities of the Company (other than pursuant to
employee stock option or matched asset plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the shares of the Common
Stock or which are convertible or exchangeable into securities which are
substantially similar to the shares of Common Stock without the prior written
consent of the representatives, except for the shares of Common Stock offered in
connection with the concurrent U.S. and international offerings.
Each International Underwriter has also agreed that (a) it has not offered
or sold, and will not offer or sell, in the United Kingdom, by means of any
document, any shares of Common Stock other than to persons whose ordinary
business it is to buy or sell shares or debentures, whether as principal or
agent, or in circumstances which do not constitute an offer to the public within
the meaning of the Companies Act of 1985 of Great Britain, (b) it has complied,
and will comply with, all applicable provisions of the Financial Services Act of
1986 of Great Britain with respect to anything done by it in relation to the
shares at Common Stock in, from or otherwise involving the United Kingdom, and
(c) it has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issuance of the
shares of Common Stock to a person who is of a kind described in Article 9(3) of
the Financial Services Act of 1986 (Investment Advertisements) (Exemptions)
Order 1988 (as amended) of Great Britain or is a person to whom the document may
otherwise lawfully be issued or passed on.
Buyers of shares of Common Stock offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practice of the country
of purchase in addition to the initial public offering price.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.
25
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Gibson, Dunn & Crutcher, Los Angeles, California.
Certain legal matters in connection with this offering will be passed upon for
the Underwriters by Latham & Watkins, Los Angeles, California. Latham & Watkins
renders certain legal services to the Company.
EXPERTS
The consolidated financial statements and additional note and financial
statement schedules of the Company and its consolidated subsidiaries as of April
1, 1994 and April 2, 1993 and for each of the three years in the period ended
April 1, 1994 incorporated in this Prospectus by reference from the Company's
Annual Report on Form 10-K for the year ended April 1, 1994 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report which is
incorporated herein by reference and have been so incorporated by reference in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.............................. 2
Incorporation of Certain Documents by Reference.... 2
The Company........................................ 3
Recent Developments................................ 4
Use of Proceeds.................................... 4
Capitalization..................................... 5
Price Range of Common Stock and Dividends.......... 6
Selected Financial Information..................... 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 8
Business........................................... 14
Certain United States Federal Tax Consequences To
Non-United States Holders......................... 22
Underwriting....................................... 24
Legal Matters...................................... 26
Experts............................................ 26
</TABLE>
4,000,000 SHARES
COMPUTER SCIENCES
CORPORATION
COMMON STOCK
($1.00 PAR VALUE PER SHARE)
-----------
[LOGO]
-----------
GOLDMAN SACHS INTERNATIONAL
MERRILL LYNCH INTERNATIONAL LIMITED
LEHMAN BROTHERS
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
