Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
QUARTER ENDED JUNE 30, 1995
Commission File No. 1-4850
COMPUTER SCIENCES CORPORATION
Incorporated in the State of Nevada
Employer Identification No. 95-2043126
2100 East Grand Avenue
El Segundo, California 90245
Telephone (310) 615-0311
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
55,469,048 shares of Common Stock, $1.00 par value, were outstanding on
June 30, 1995.
<PAGE>
COMPUTER SCIENCES CORPORATION
Index to Form 10-Q
Page
Number
Part I. Financial Information
Consolidated Condensed Balance Sheets -
June 30, 1995 and March 31, 1995 3
Consolidated Condensed Statements of Income -
First quarter ended June 30, 1995 and July 1, 1994 4
Consolidated Condensed Statements of Cash Flows -
First quarter ended June 30, 1995 and July 1, 1994 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Results of
Operations and Financial Condition 8
Part II. Other Information
Item 6 - Exhibits and Reports on Form 8-K 10
Exhibit 11 - Calculation of Earnings Per Share 11
Exhibit 27 - Financial Data Schedule 12
Exhibit 28 - Additional Information - Revenues
by Market Sector 13
Signatures 14
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<TABLE>
PART I. FINANCIAL INFORMATION
COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in thousands)
<CAPTION>
ASSETS
June 30 March 31
1995 1995
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $27,239 $155,310
Receivables 930,740 824,963
Prepaid expenses and other current assets 114,429 101,232
____________ ____________
Total current assets 1,072,408 1,081,505
____________ ____________
PROPERTY AND EQUIPMENT, at cost 945,441 905,469
Less-Accumulated depreciation and amortization 408,145 375,330
____________ ____________
Net property and equipment 537,296 530,139
____________ ____________
EXCESS OF COST OF BUSINESSES ACQUIRED
OVER RELATED NET ASSETS, NET 436,735 431,074
OTHER ASSETS 310,924 290,942
____________ ____________
2,357,363 2,333,660
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Short-term debt $149,883 $126,317
Current maturities of long-term debt 11,271 11,111
Accounts payable 151,849 181,983
Accrued payroll and related costs 152,716 152,438
Other accrued expenses 230,421 227,852
Advance contract payments 30,010 30,329
Income taxes payable 42,172 47,882
____________ ____________
Total current liabilities 768,322 777,912
____________ ____________
LONG-TERM DEBT, NET 309,918 310,317
____________ ____________
OTHER LONG-TERM LIABILITIES 100,194 96,872
____________ ____________
STOCKHOLDERS' EQUITY (Note A):
Common stock issued, par value $1.00 per share 55,753 55,386
Other stockholders' equity 1,123,176 1,093,173
____________ ____________
Total stockholders' equity 1,178,929 1,148,559
____________ ____________
2,357,363 2,333,660
<FN>
See accompanying notes. - 3-
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<TABLE>
COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (unaudited)
($ in thousands except earnings per share)
<CAPTION>
Three Months Ended
___________________________
June 30, July 1,
1995 1994
____________ ____________
<S> <C> <C>
Revenues $966,783 $738,145
____________ ____________
Costs of services 774,381 583,661
Selling, general and
administrative 85,893 75,962
Depreciation and amortization 54,588 37,904
Interest expense 8,663 6,234
Interest income (1,559) (812)
____________ ____________
Total costs and expenses 921,966 702,949
____________ ____________
Income before taxes 44,817 35,196
Taxes on income 17,100 13,374
____________ ____________
Net earnings $27,717 $21,822
============ ============
____________ ____________
Earnings per common share
(Note B) $0.49 $0.42
============ ============
<FN>
See accompanying notes.
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</TABLE>
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<TABLE>
COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
($ in thousands)
<CAPTION>
Three Months Ended
___________________________
June 30, July 1,
1995 1994
____________ ____________
<S> <C> <C>
Cash flows from operating activities:
Net earnings $27,717 $21,822
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 54,588 37,904
Provision for losses on accounts receivable 6,412 3,983
Changes in assets and liabilities, net of
effects of acquisitions:
Increase in assets (99,960) (76,911)
(Decrease) increase in liabilities (47,519) 33,713
____________ ____________
Net cash (used in) provided by operating activities (58,762) 20,511
____________ ____________
Investing activities:
Purchases of property, plant and equipment (41,641) (37,726)
Acquisitions, net of cash acquired (22,377) (9,228)
Purchases of outsourcing assets (21,108)
Purchased and internally developed software (3,933) (5,001)
Other investing cash flows (6,291) (9,275)
____________ ____________
Net cash used in investing activities (95,350) (61,230)
____________ ____________
Financing activities:
Paydown of commercial paper, net (1,338) (113,474)
Borrowing under lines of credit, net 25,524 25,651
Proceeds from term debt issuance 150,000
Payment of outsourcing financing (114,403)
Principal payments on long-term debt (715) (426)
Proceeds from exercise of stock options 3,493 2,793
Other financing cash flows (923) 2,928
____________ ____________
Net cash provided by (used in) financing activities 26,041 (46,931)
____________ ____________
Net decrease in cash and cash equivalents (128,071) (87,650)
Cash and cash equivalents at beginning of year 155,310 126,820
____________ ____________
Cash and cash equivalents at end of period $27,239 $39,170
============ ============
<FN>
See accompanying notes.
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COMPUTER SCIENCES CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
($ in thousands except per share amounts)
(A) No dividends were paid during the periods presented. There were 55,752,630
shares at June 30, 1995 and 55,385,555 shares at March 31, 1995 of $1.00
par value common stock issued with 283,582 and 215,047 shares,
respectively, of treasury stock.
(B) Primary earnings per common share are based on the weighted average number
of common stock and common stock equivalent shares (dilutive stock options)
outstanding of 56,829,000 and 52,192,000 respectively, for the quarters
ended June 30, 1995, and July 1, 1994 (see Part II - Exhibit 11). Fiscal
1996 amounts include the effect of a four-million-share common stock
offering completed February 15, 1995.
(C) Cash payments for interest on indebtedness were $12,084 and $2,185,
respectively, for the quarters ended June 30, 1995, and July 1, 1994. Cash
payments for taxes on income were $12,637 and $9,131, respectively, for the
quarters ended June 30, 1995, and July 1, 1994.
(D) The financial information reported, which is not necessarily indicative of
the results for a full year, is unaudited but includes all adjustments
which the Company considers necessary for a fair presentation. All such
adjustments are normal recurring adjustments.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
First Quarter of Fiscal 1996 Versus First Quarter of Fiscal 1995
Revenues
During the quarter ended June 30, 1995, the Company's total revenues of $966.8
million increased 31.0%, or $228.7 million, over the same period last year.
Federal revenue totaled $382.7 million, up 16.5% from last year's $328.4
million. The increase is due principally to the inception over the past year
of a number of contracts, including the provision of information systems
support to the NASA Marshall Space Flight Center.
Commercial revenue of $345.5 million from domestic operations rose 30.4% from
$264.9 million last year, principally due to the inception of operations on
outsourcing contracts with Hughes Aircraft Company (February 1995) and Scott
Paper Company (November 1994). The Company's U.S. consulting operations also
contributed to the growth with a 32.8% increase in revenues over the same
quarter of fiscal 1995.
International revenue increased 64.8% from $144.8 million to $238.6 million.
Nearly one half of the international growth is attributable to the acquisition
of Ploenzke AG effective January 2, 1995. The remaining growth includes new
outsourcing contracts with Autoglass, ICI Paints, United Distillers U.K. and
Lucas Industries PLC, as well as the acquisition of Lucas software and
consultancy businesses.
The Company announced approximately $1.2 billion of federal business during the
first quarter of the current fiscal year, including an eight-year, $756 million
(if all options are exercised) contract to provide support services at the Air
Force Arnold Engineering Development Center. During the quarter, the Company
also announced approximately $1.2 billion of multi-year commercial business,
including a $750 million, 10-year outsourcing contract with Lucas Industries
PLC.
Costs and Expenses
Costs of services increased by $190.7 million from $583.7 million during the
first fiscal quarter of 1995 to $774.4 during the first quarter of 1996. As a
percentage of revenue, costs of services were 80.1% for the quarter ended June
30, 1995, up from 79.1% for the same quarter last year. The rise in costs of
services as a percent of revenue is largely attributable to the inception of
outsourcing contracts and the integration of acquisitions having costs of
services above the overall company rate.
Selling, general and administrative (SG&A) expenses increased to $85.9 million
for the quarter ended June 30, 1995, up from $76.0 million for the same period
last year. The first quarter SG&A as a percentage of revenues decreased to
8.9% during 1996 from 10.3% during 1995 as revenues grew more rapidly than
these costs. The Company's depreciation and amortization expense increased
44% to $54.6 million for the current quarter, up from $37.9 million last year.
The increase is primarily related to assets purchased in connection with
outsourcing contracts and the Ploenzke acquisition.
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Interest expense increased to $8.7 million for the current quarter from $6.2
million for the same quarter last year. The increase is primarily due to
increased borrowings to fund the German acquisition and purchases of
outsourcing assets and other equipment. The increase in interest expense also
reflects higher interest rates compared to the same quarter of the prior year,
partially offset by higher interest income during the first quarter of fiscal
1996.
Income Before Taxes
Income before taxes was $44.8 million, up $9.6 million, or 27.3%, over last
year's first quarter, reflecting continued revenue growth. As a percentage of
revenue, increases in costs of services and depreciation expense were partially
offset by the decrease in SG&A as described above.
Net Earnings
Net earnings were $27.7 million for the quarter ended June 30, 1995, up $5.9
million, or 27.0%, over the same quarter last year. The effective tax rate was
38.2%, versus 38.0% for the same quarter last year. This year's first quarter
earnings per share of 49 cents increased 16.7% over the 42 cents for last year's
first quarter. The current quarter includes the effect of a four-million-share
common stock offering completed February 15, 1995.
Cash Flows
Cash used in operating activities was $58.8 million for the quarter ended June
30, 1995, compared to an inflow of $20.5 million during the same period last
year. The operating cash outflow is principally the result of higher accounts
receivable in the Company's federal and international operations, as well as a
decrease in accounts payable, principally in its federal business.
The Company's cash expenditures for investing activities totaled $95.4 million
for the current quarter versus $61.2 million during the first quarter of last
year. The increase principally reflects greater investments in acquisition and
outsourcing related assets, as described above.
Cash provided by financing activities was $26.0 million for the quarter versus a
cash outflow of $46.9 million during the same period last year. The increase is
primarily due to additional borrowing on available lines of credit during the
current quarter, as compared to the same quarter of the prior year when
financing activities included the paydown of $114.4 million of outsourcing
related financing.
Financial Condition
During the first quarter of fiscal 1996, the Company's capital needs included
$85.1 million of business investments in the form of fixed asset purchases,
outsourcing asset purchases and acquisitions, as well as $147.5 million for
additional working capital. These needs were met by the use of operating cash
flow, additional debt and existing cash, which decreased from $155.3 million to
$27.2 million. As a result of the net increase in borrowings, the Company's
debt-to-total capitalization ratio increased to 29% at June 30, 1995 versus 28%
at March 31, 1995.
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<PAGE>
The Company's financial condition has not changed significantly since the fiscal
year-end. It is management's opinion that the Company will be able to fund its
cash needs from operating activities and from short-term borrowings. It is also
management's opinion that any major additional requirements can be financed by
the use of unused borrowing capacity or by the issuance of new CSC securities.
- 9-
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit No. 11 - Calculation of Earnings Per Share
Exhibit No. 27 - Financial Data Schedule
Exhibit No. 28 - Additional Exhibits
(i) Revenues by Market Sector
b. Reports on Form 8-K:
There were no Form 8-K reports filed for the first
quarter of fiscal 1996.
-10-
<PAGE> Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
COMPUTER SCIENCES CORPORATION
Registrant
Date: August 11, 1995 By:/s/Denis M. Crane
Denis M. Crane
Vice President and Controller
Chief Accounting Officer
-11-
>
<TABLE>
EXHIBIT 11
COMPUTER SCIENCES CORPORATION
CALCULATION OF EARNINGS PER SHARE
(In thousands except earnings per share)
<CAPTION>
Three Months Ended
___________________________
June 30, July 1,
1995 1994
____________ ____________
<S> <C> <C>
Net earnings $27,717 $21,822
============ ============
Shares:
Weighted average shares
outstanding 55,302 50,700
Common stock equivalents 1,527 1,492
____________ ____________
Total for primary and fully
diluted calculation 56,829 52,192
Earnings Per Share:
____________ ____________
Primary and fully diluted* $0.49 $0.42
============ ============
<FN>
* The fully diluted calculation is submitted in accordance with Regulation
S-K item 601 (b) (11) although not required by footnote 2 to paragraph 14
of APB Opinion No. 15 because it results in dilution of less than 3%.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<FISCAL-YEAR-END> Mar-29-1996
<PERIOD-START> Apr-1-1995
<PERIOD-END> Jun-30-1995
<PERIOD-TYPE> 3-MOS
<CASH> 27,239
<SECURITIES> 0
<RECEIVABLES> 949,437
<ALLOWANCES> 18,697
<INVENTORY> 0
<CURRENT-ASSETS> 1,072,408
<PP&E> 945,441
<DEPRECIATION> 408,145
<TOTAL-ASSETS> 2,357,363
<CURRENT-LIABILITIES> 768,322
<BONDS> 309,918
<COMMON> 55,753
0
0
<OTHER-SE> 1,123,176
<TOTAL-LIABILITY-AND-EQUITY> 2,357,363
<SALES> 0
<TOTAL-REVENUES> 966,783
<CGS> 0
<TOTAL-COSTS> 767,969
<OTHER-EXPENSES> 54,588
<LOSS-PROVISION> 6,412
<INTEREST-EXPENSE> 7,104
<INCOME-PRETAX> 44,817
<INCOME-TAX> 17,100
<INCOME-CONTINUING> 27,717
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,717
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.49
</TABLE>
<TABLE>
EXHIBIT 28
COMPUTER SCIENCES CORPORATION
REVENUES BY MARKET SECTOR
($ in millions)
<CAPTION>
Fiscal Period Ended % of Total
_________________________ ___________________________
June 30, July 1, June 30, July 1,
1995 1994 1995 1994
___________ ___________ ____________ ____________
<S> <C> <C> <C> <C>
Three Months
U.S. Federal Government:
Department of Defense $224.6 $185.2 23 % 25
NASA 79.0 60.7 8 8
Civil agencies 79.1 82.5 8 11
___________ ___________ _____________ ____________
Total 382.7 328.4 39 44
___________ ___________ _____________ ____________
Commercial:
Domestic 345.5 264.9 36 36
International 238.6 144.8 25 20
___________ ___________ _____________ ____________
Total 584.1 409.7 61 56
___________ ___________ _____________ ____________
Total revenues $966.8 $738.1 100 % 100
=========== =========== ============= ============
First Quarter
U.S. Federal Government:
Department of Defense $224.6 $185.2 23 % 25
NASA 79.0 60.7 8 8
Civil agencies 79.1 82.5 8 11
___________ ___________ ____________ ____________
Total 382.7 328.4 39 44
___________ ___________ ____________ ____________
Commercial:
Domestic 345.5 264.9 36 36
International 238.6 144.9 25 20
___________ ___________ ____________ ____________
Total 584.1 409.7 61 56
___________ ___________ ____________ ____________
Total revenues $966.8 $738.1 100 % 100
=========== =========== ============ ============
</TABLE>
