<PAGE>
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 DECEMBER 29, 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 [ ]
55,908,055 shares of Common Stock, $1.00 par value, were outstanding on
December 29, 1995.
<PAGE>
COMPUTER SCIENCES CORPORATION
Index to Form 10-Q
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets,
December 29, 1995 and March 31, 1995......................... 3
Consolidated Condensed Statements of Income,
Third Quarter and Nine Months Ended
December 29, 1995 and December 30, 1994............ ......... 4
Consolidated Condensed Statements of Cash Flows,
Nine months ended December 29, 1995 and December 30, 1994.... 5
Notes to Consolidated Condensed Financial Statements............ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 7
PART II. OTHER INFORMATION
Item 2. Changes in Securities...................................... 10
Item 6. Exhibits and Reports on Form 8-K........................... 11
<PAGE>
<TABLE>
PART I, ITEM 1. FINANCIAL STATEMENTS
COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
Dec. 29, Mar. 31,
1995 1995
($ in thousands) (unaudited)
_____________ _____________
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 50,653 $ 155,310
Receivables 1,005,049 824,963
Prepaid expenses and other current assets 97,558 101,232
_____________ _____________
Total current assets 1,153,260 1,081,505
_____________ _____________
PROPERTY AND EQUIPMENT, at cost 1,101,339 905,469
Less-Accumulated depreciation and amortization 479,300 375,330
_____________ _____________
Net property and equipment 622,039 530,139
_____________ _____________
EXCESS OF COST OF BUSINESSES ACQUIRED
OVER RELATED NET ASSETS, NET 426,278 431,074
OTHER ASSETS 334,377 290,942
_____________ _____________
Total assets $ 2,535,954 $ 2,333,660
============= =============
CURRENT LIABILITIES:
Short-term debt $ 108,746 $ 126,317
Current maturities of long-term debt 6,340 11,111
Accounts payable 156,151 181,983
Accrued payroll and related costs 161,071 152,438
Other accrued expenses 254,586 227,852
Advance contract payments 35,974 30,329
Income taxes payable 44,081 47,882
_____________ _____________
Total current liabilities 766,949 777,912
_____________ _____________
LONG-TERM DEBT, NET 402,524 310,317
_____________ _____________
OTHER LONG-TERM LIABILITIES 106,359 96,872
_____________ _____________
STOCKHOLDERS' EQUITY (Note A):
Common stock issued, par value $1.00 per share 56,214 55,386
Other stockholders' equity 1,203,908 1,093,173
_____________ _____________
Total stockholders' equity 1,260,122 1,148,559
_____________ _____________
Total liabilities and stockholders' equity $ 2,535,954 $ 2,333,660
============= =============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (unaudited)
($ in thousands except earnings per share)
<CAPTION>
Third Quarter Ended Nine Months Ended
__________________________ __________________________
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
1995 1994 1995 1994
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
Revenues $ 1,110,416 $ 827,901 $ 3,081,913 $ 2,354,532
____________ ____________ ____________ ____________
Costs of services 863,704 661,815 2,441,271 1,877,354
Selling, general and
administrative 115,379 73,471 287,849 223,567
Depreciation and
amortization 64,378 41,812 176,460 119,644
Interest expense 9,371 7,876 26,600 20,164
Interest income (1,028) (401) (3,249) (1,694)
____________ ____________ ____________ ____________
Total costs and
expenses 1,051,804 784,573 2,928,931 2,239,035
____________ ____________ ____________ ____________
Income before taxes 58,612 43,328 152,982 115,497
Taxes on income 22,600 16,580 58,900 44,004
____________ ____________ ____________ ____________
Net income $ 36,012 $ 26,748 $ 94,082 $ 71,493
============ ============ ============ ============
Earnings per common
share (Note B) $ 0.63 $ 0.51 $ 1.65 $ 1.37
============ ============ ============ ============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
<CAPTION>
Nine Months Ended
___________________________
Dec. 29, Dec. 30,
($ in thousands) 1995 1994
____________ ____________
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 94,082 $ 71,493
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 176,460 119,644
Provision for losses on accounts receivable 14,977 11,436
Changes in assets and liabilities, net of
effects of acquisitions:
Increase in assets (165,229) (170,974)
Increase (decrease) in liabilities 8,048 (4,807)
____________ ____________
Net cash provided by operating activities 128,338 26,792
____________ ____________
Investing activities:
Purchases of property, plant and equipment (172,192) (149,289)
Acquisitions, net of cash acquired (27,469) (22,159)
Outsourcing assets (98,514)
Purchased and internally developed software (25,020) (12,190)
Other investing cash flows 978 (4,158)
____________ ____________
Net cash used in investing activities (322,215) (187,796)
____________ ____________
Financing activities:
Paydown of commercial paper, net (723) (1,941)
Borrowing under lines of credit, net 82,262 50,339
Borrowing under term debt issuance 150,000
Payment of outsourcing financing (114,403)
Principal payments on long-term debt (9,259) (42,143)
Proceeds from exercise of stock options 11,550 11,858
Other financing cash flows 5,390 8,953
____________ ____________
Net cash provided by financing activities 89,220 62,663
____________ ____________
Net decrease in cash and cash equivalents (104,657) (98,341)
Cash and cash equivalents at beginning of year 155,310 126,820
____________ ____________
Cash and cash equivalents at end of period $ 50,653 $ 28,479
============ ============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
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
56,214,355 shares at December 29, 1995 and 55,385,555 shares at March
31, 1995 of $1.00 par value common stock issued with 306,300 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 57,191,000 and 52,334,000 respectively, for the
nine months ended December 29, 1995, and December 30, 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 $28,973 and $17,034,
respectively, for the nine months ended December 29, 1995, and December
30, 1994. Cash payments for taxes on income were $40,426 and $38,769,
respectively, for the nine months ended December 29, 1995, and December
30, 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.
<PAGE>
PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Third Quarter of Fiscal 1996 versus
Third Quarter of Fiscal 1995
Revenues
The Company derived its revenues from the following market sectors for the
third quarter and nine months, respectively (dollars in millions):
<TABLE>
<CAPTION>
Third Quarter Nine Months
---------------- Pct. ---------------- Pct.
FY96 FY95 Growth FY96 FY95 Growth
------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
U.S. Commercial $ 405 $ 285 42.2% $ 1,118 $ 812 37.7%
International 293 175 67.2 796 475 67.8
------- ------- ------ ------- ------- ------
Total Commercial 698 460 51.7 1,914 1,287 48.8
U.S. Federal Government 412 368 12.2 1,168 1,068 9.4
------- ------- ------ ------- ------- ------
Total $ 1,110 $ 828 34.1% $ 3,082 $ 2,355 30.9%
======= ======= ====== ======= ======= ======
</TABLE>
During the quarter ended December 29, 1995, the Company's total revenue
increased 34.1%, or $283 million, over the same period last year. Commercial
revenue fueled the growth, increasing 51.7%, or $238 million. Nearly one-half
of the commercial growth came from the Company's international operations,
reflecting the acquisitions of Ploenzke AG in Germany (effective January
1995), and business associated with the outsourcing contract signed June 1995
with Lucas Industries PLC in the United Kingdom. The remaining international
growth was broad-based across the Company's operations in Europe and
Australia.
U.S. commercial revenue grew $120 million or 42.2%. Approximately three-
fourths of this growth came from outsourcing contracts, the largest of which
were with Hughes Aircraft Company, Scott Paper Company and James River
Corporation. The Company's U.S. consulting operations also contributed to the
growth with revenues 13.6% over the same quarter of fiscal 1995. U.S. federal
government revenue for the quarter increased $45 million, or 12.2%. The
Company has announced federal contract awards with a value of about $2.0
billion during fiscal 1996, compared with $1.8 billion for all of fiscal 1995.
However, many new and some existing contracts allow the Government discretion
as to the timing and extent of expenditures.
For the nine months, revenue growth for all market sectors reflects the same
overall trends as those described for the third quarter above. As the
Company's commercial sector revenues have grown faster than federal, they
comprise a larger percentage of total CSC revenue, as shown by the following
table:
<PAGE>
<TABLE>
<CAPTION>
Revenue by Market Sector, Third Quarter Nine Months
as a percentage of total FY96 FY95 FY96 FY95
- ---------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
U.S. Commercial 37% 34% 36% 35%
International 26 21 26 20
------- ------- ------- -------
Total Commercial 63 55 62 55
U.S. Federal Government 37 45 38 45
------- ------- ------- -------
Total Revenue 100% 100% 100% 100%
======= ======= ======= =======
</TABLE>
Costs and Expenses
The Company's costs and expenses as a percentage of revenue are as follows
(dollars in millions):
<TABLE>
<CAPTION>
Dollar Amount Percentage of Revenue
---------------- -------------------------------
Nine Months Third Quarter Nine Months
FY96 FY95 FY96 FY95 FY96 FY95
------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Costs of services $ 2,441 $ 1,877 77.78% 79.94% 79.21% 79.73%
Selling, general & admin. 288 224 10.39 8.87 9.34 9.50
Depreciation and amort. 177 120 5.80 5.05 5.73 5.08
Interest expense, net 23 18 0.75 0.90 0.76 0.78
------- ------- ------ ------ ------ ------
Total $ 2,928 $ 2,239 94.72% 94.76% 95.04% 95.09%
======= ======= ====== ====== ====== ======
</TABLE>
Compared with the corresponding periods of the prior year, total costs and
expenses improved slightly as a percentage of revenue for both the quarter and
the nine months ended December 29, 1995. The third quarter above contains a
year-to-date adjustment of an expense classification between costs of services
and selling, general and administrative with respect to a recent acquisition.
For the nine months, costs of services and selling, general and administrative
expenses improved as a percentage of revenue, offset partially by an increase
in depreciation and amortization expense. The latter increase reflects the
Company's expansion in outsourcing, which is generally more capital intensive.
The Company's U.S. and European outsourcing business also had a lower cost of
services as a percentage of revenue than the company average, aiding the
improvement seen for the quarter and nine months above.
<PAGE>
Income Before Taxes
Income before taxes for the quarter was $58.6 million, up $15.3 million, or
35.3%, over last year's third quarter, reflecting the Company's revenue
growth. Compared with the like periods of the prior year, the Company's pre-
tax profit margin improved from 4.9% to 5.0% for the nine months and from 5.2%
to 5.3% for the quarter ended December 29, 1995.
Net Income
Net income was $36.0 million for the quarter ended December 29, 1995, up $9.3
million, or 34.6%, over the same quarter last year. The effective tax rate
was 38.6%, versus 38.3% for the same quarter last year. The higher current
tax rate includes the increases in state income tax rates and less tax exempt
income and income tax credits. This year's third quarter earnings per share
of 63 cents increased 23.5% over the 51 cents for last year's third quarter.
Fiscal 1996 includes the effect of a four-million-share common stock offering
completed February 15, 1995.
Cash Flows
Cash provided by operating activities was $128.3 million for the first nine
months of fiscal 1996, compared with $26.8 million for the same period last
year. A majority of the increase relates to higher non-cash expenses for
depreciation and amortization as the Company has expanded in more capital
intensive areas.
The Company's cash expenditures for investing activities totaled $322.2
million for the current period versus $187.8 million during the first nine
months of last year. The increase principally reflects greater investments
in acquisition and outsourcing related assets, as described above.
Cash provided by financing activities was $89.2 million for the nine months
versus $62.7 million for the same period last year. The increase is
primarily due to additional borrowing on available lines of credit.
Financial Condition
During the first nine months of fiscal 1996, the Company's capital outlays
included $298.2 million of business investments in the form of fixed asset
purchases, outsourcing asset purchases and acquisitions. These amounts were
funded from operating cash flows and additional debt and existing cash, which
decreased from $155.3 million to $50.7 million. As a result of the net
increase in borrowings, the Company's debt-to-total capitalization ratio
increased to 29.1% at December 29, 1995 versus 28% at March 31, 1995.
It is management's opinion that the Company will be able to fund its current
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.
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
a. Exhibits
Page
----
<S> <C> <C>
3.1 Restated Articles of Incorporation (d)
3.2 Amendment to Restated Articles of Incorporation (l)
3.3 By-Laws, effective January 31, 1993 (h)
10.1 Annual Management Incentive Plan (a)
10.2 1978 Stock Option Plan (h)
10.3 Amendment Nos. 1 and 2 to the 1978 Stock Option Plan (h)
10.4 Amendment No. 3 to the 1978 Stock Option Plan (c)
10.5 1980 Stock Option Plan (h)
10.6 Amendment Nos. 1, 2, 3 and 4 to the 1980 Stock Option Plan (b)
10.7 Amendment No. 5 to the 1980 Stock Option Plan (c)
10.8 1984 Stock Option Plan (i)
10.9 Amendment No. 1 to the 1984 Stock Option Plan (b)
10.10 Amendment No. 2 to the 1984 Stock Option Plan (c)
10.11 1987 Stock Incentive Plan (c)
10.12 Schedule to the 1987 Stock Incentive Plan for United
Kingdom personnel (c)
10.13 1990 Stock Incentive Plan (j)
10.14 1992 Stock Incentive Plan (l)
10.15 Amendment No. 1 to the 1992 Stock Incentive Plan (h)
10.16 1995 Stock Incentive Plan (n)
10.17 Deferred Compensation Plan (n)
10.18 Restated Supplemental Executive Retirement Plan, effective
August 14, 1995 (n)
10.19 Form of Indemnification Agreement for Directors (e)
10.20 Form of Indemnification Agreement for Officers (h)
10.21 Information Technology Services Agreements with General
Dynamics Corporation, dated as of November 4, 1991 (k)
10.22 Restated Rights Agreement dated as of December 21, 1988,
effective December 6, 1993 (g)
10.23 $100 million Credit Agreement dated as of September 15,
1994 (h)
10.24 $150 million Credit Agreement dated as of September 15,
1994 (h)
10.25 $350,000,000 Credit Agreement dated as of September 6, 1995 (n)
10.26 $100 million Credit Agreement dated as of January 3, 1995 (h)
10.27 Amended and Restated Rights Agreement, effective October 30,
1995 (n)
11 Calculation of Primary and Fully Diluted Earnings Per Share,
filed herewith
27 Article 5 Financial Data Schedule, filed herewith
28 Additional exhibit, Revenue by Market Sector, filed herewith
99.1 Annual Report on Form 11-K for the Matched Asset Plan of
Computer Sciences Corporation (h)
99.2 Annual Report on Form 11-K for the Hourly Savings Plan of
CSC Outsourcing Inc. (h)
99.3 Annual Report on Form 11-K for the Employee Savings Plan of
CSC Credit Services, Inc. (h)
99.4 Annual Report on Form 11-K for the CUTW Hourly Savings
Plan of CSC Outsourcing, Inc. (o)
</TABLE>
<PAGE>
Notes to Exhibit Index:
(a)-(h) These exhibits are incorporated herein by reference to the
Company's Form 10-K, Commission File No. 1-4850, for the respective fiscal
year noted below:
(a) March 30, 1984 (e) April 3, 1992
(b) April 3, 1987 (f) April 2, 1993
(c) April 1, 1988 (g) April 1, 1994
(d) March 31, 1989 (h) March 31, 1995
(i) Incorporated herein by reference to the Company's Form S-8 filed
on August 17, 1984.
(j) Incorporated herein by reference to the Company's Form S-8 filed
on August 15, 1990.
(k) Incorporated herein by reference to the Company's Form 8-K filed
on November 4, 1991.
(l) Incorporated herein by reference to the Company's Proxy Statement
for its August 10, 1992 Annual Meeting of Stockholders.
(m) Incorporated herein by reference to the Company's Form S-8 filed
on August 12, 1992.
(n) Incorporated herein by reference to the Company's Form 10-Q filed
on November 13, 1995.
(o) Incorporated by reference to the Form 11-K filed on Feb. 6, 1996.
b. Reports on Form 8-K:
There were no reports on Form 8-K filed during the third quarter of
fiscal 1996.
<TABLE>
EXHIBIT 11
COMPUTER SCIENCES CORPORATION
CALCULATION OF EARNINGS PER SHARE
(In thousands except earnings per share)
<CAPTION>
Third Quarter Ended Nine Months Ended
______________________ ______________________
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
1995 1994 1995 1994
__________ __________ __________ __________
<S> <C> <C> <C> <C>
Net income $ 36,011 $ 26,748 $ 94,081 $ 71,493
========== ========== ========== ==========
Shares:
Weighted average shares
outstanding 55,781 50,951 55,550 50,824
Common stock
equivalents 1,699 1,554 1,641 1,510
__________ __________ __________ __________
Total for primary and
fully diluted 57,480 52,505 57,191 52,334
========== ========== ========== ==========
Earnings Per Share:
Primary and fully
diluted* $ 0.63 $ 0.51 $ 1.65 $ 1.37
========== ========== ========== ==========
<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> Dec-29-1995
<PERIOD-TYPE> 9-MOS
<CASH> 50,653
<SECURITIES> 0
<RECEIVABLES> 1,025,693
<ALLOWANCES> 20,644
<INVENTORY> 0
<CURRENT-ASSETS> 1,153,260
<PP&E> 1,101,339
<DEPRECIATION> 479,300
<TOTAL-ASSETS> 2,535,954
<CURRENT-LIABILITIES> 766,949
<BONDS> 402,524
<COMMON> 56,214
0
0
<OTHER-SE> 1,203,908
<TOTAL-LIABILITY-AND-EQUITY> 2,535,954
<SALES> 0
<TOTAL-REVENUES> 3,081,913
<CGS> 0
<TOTAL-COSTS> 2,426,294
<OTHER-EXPENSES> 176,460
<LOSS-PROVISION> 14,977
<INTEREST-EXPENSE> 23,351
<INCOME-PRETAX> 152,982
<INCOME-TAX> 58,900
<INCOME-CONTINUING> 94,082
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,082
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 1.65
</TABLE>
<TABLE>
EXHIBIT 28
COMPUTER SCIENCES CORPORATION
REVENUES BY MARKET SECTOR
($ in millions)
<CAPTION>
Fiscal Period Ended % of Total
__________________________ __________________
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
1995 1994 1995 1994
___________ ___________ ________ ________
<S> <C> <C> <C> <C>
THIRD QUARTER
U.S. Federal Government:
Dept. of Defense $ 252.4 $ 198.4 23% 24%
NASA 77.6 81.3 7 10
Civil agencies 82.5 88.1 7 11
___________ ___________ ________ ________
Total 412.5 367.8 37 45
___________ ___________ ________ ________
Commercial:
Domestic 405.2 285.0 37 34
International 292.7 175.1 26 21
___________ ___________ ________ ________
Total 697.9 460.1 63 55
___________ ___________ ________ ________
Total revenues $ 1,110.4 $ 827.9 100% 100%
=========== =========== ======== ========
NINE MONTHS
U.S. Federal Government:
Dept. of Defense $ 700.9 $ 588.7 23% 25%
NASA 234.1 219.4 8 9
Civil agencies 233.1 259.8 7 11
___________ ___________ ________ ________
Total 1,168.1 1,067.9 38 45
___________ ___________ ________ ________
Commercial:
Domestic 1,118.0 812.2 36 35
International 795.8 474.4 26 20
___________ ___________ ________ ________
Total 1,913.8 1,286.6 62 55
___________ ___________ ________ ________
Total revenues $ 3,081.9 $ 2,354.5 100% 100%
=========== =========== ======== ========
</TABLE>
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMPUTER SCIENCES CORPORATION
Registrant
Date: February 9, 1996 By:/s/ Denis M. Crane
-----------------------------
Denis M. Crane
Vice President and Controller
Chief Accounting Officer
</PAGE>
