<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File No. 1-4850
COMPUTER SCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 95-2043126
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2100 East Grand Avenue
El Segundo, California 90245
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (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 [ ]
157,938,104 shares of Common Stock, $1.00 par value, were outstanding on
July 31, 1998.
<PAGE>
COMPUTER SCIENCES CORPORATION
Index to Form 10-Q
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Income,
First Quarter ended July 3, 1998 and June 27, 1997.............. 3
Consolidated Condensed Balance Sheets,
July 3, 1998 and April 3, 1998.................................. 4
Consolidated Condensed Statements of Cash Flows,
First quarter ended July 3, 1998 and June 27, 1997.............. 5
Notes to Consolidated Condensed Financial Statements............... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................... 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................. 14
2
<PAGE>
<TABLE>
PART I, ITEM 1. FINANCIAL STATEMENTS
COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (unaudited)
<CAPTION>
First Quarter Ended
------------------------------
(In thousands except per-share amounts) July 3, 1998 June 27, 1997
------------ -------------
<S> <C> <C>
Revenues $1,753,928 $1,488,750
---------- ----------
Costs of services 1,382,050 1,171,266
Selling, general and administrative 162,824 138,613
Depreciation and amortization 104,102 88,755
Interest expense 11,901 10,736
Interest income (3,384) (1,401)
Special charges (note A) 208,393
---------- ----------
Total costs and expenses 1,657,493 1,616,362
---------- ----------
Income (loss) before taxes 96,435 (127,612)
Taxes on income (note A) 32,100 (180,200)
---------- ----------
Net income $ 64,335 $ 52,588
========== ==========
Earnings per share (notes A and B):
Basic $ 0.41 $ 0.34
========== ==========
Diluted $ 0.40 $ 0.33
========== ==========
</TABLE>
[FN]
See accompanying notes.
3
<PAGE>
<TABLE>
COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
July 3, April 3,
(In thousands) 1998 1998
----------- -----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 199,983 $ 274,688
Receivables 1,566,872 1,456,330
Prepaid expenses and other current assets 265,144 251,618
----------- -----------
Total current assets 2,031,999 1,982,636
----------- -----------
EXCESS OF COST OF BUSINESSES ACQUIRED
OVER RELATED NET ASSETS, NET 522,366 538,408
OTHER ASSETS 595,202 568,558
PROPERTY AND EQUIPMENT, at cost 2,021,368 1,944,799
Less accumulated depreciation and amortization 1,049,520 987,606
----------- -----------
Property and equipment, net 971,848 957,193
----------- -----------
Total assets $4,121,415 $4,046,795
=========== ===========
CURRENT LIABILITIES:
Short-term debt and current
maturities of long-term debt $ 181,673 $ 28,921
Accounts payable 268,372 317,787
Accrued payroll and related costs 311,023 299,062
Other accrued expenses 350,282 403,860
Deferred revenue 153,068 127,337
Income taxes payable 98,874 37,849
----------- -----------
Total current liabilities 1,363,292 1,214,816
----------- -----------
LONG-TERM DEBT, NET 579,725 736,054
----------- -----------
OTHER LONG-TERM LIABILITIES 98,423 94,650
----------- -----------
STOCKHOLDERS' EQUITY (note C):
Common stock issued, par value $1.00 per share 158,103 157,325
Additional paid in capital 683,366 660,971
Earnings retained for use in business 1,301,303 1,236,968
Accumulated other comprehensive income (note E) (48,793) (39,691)
Less common stock in treasury (13,288) (13,029)
Unearned restricted stock and other (716) (1,269)
----------- -----------
Total stockholders' equity 2,079,975 2,001,275
----------- -----------
Total liabilities and stockholders' equity $4,121,415 $4,046,795
=========== ===========
</TABLE>
[FN]
See accompanying notes.
4
<PAGE>
<TABLE>
COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
<CAPTION>
First Quarter Ended
----------------------
(In thousands, increase (decrease) July 3, June 27,
in cash and cash equivalents) 1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 64,335 $ 52,588
Adjustments to reconcile net income to net
cash provided by operating activities:
Special items, net of income tax effects (1,707)
Depreciation and amortization 104,102 88,755
Provision for losses on accounts receivable (921) (1,537)
Changes in assets and liabilities, net of
effects of acquisitions:
Increase in assets (126,639) (85,323)
Increase (decrease) in liabilities 1,617 (42,440)
---------- ----------
Net cash provided by operating activities 42,494 10,336
---------- ----------
Investing activities:
Purchases of property, plant and equipment (92,372) (90,936)
Acquisitions, net of cash acquired (22,200) (12,599)
Dispositions 37,947
Outsourcing contracts (20,182) (77,840)
Purchased and internally developed software (18,117) (12,925)
Other investing cash flows (15,049) 8,833
---------- ----------
Net cash used in investing activities (129,973) (185,467)
---------- ----------
Financing activities:
(Repayment) borrowings under commercial paper, net (1,131) 96,568
Borrowings under lines of credit, net 5,924 30,742
Principal payments on long-term debt (7,211) (2,127)
Proceeds from stock option transactions 14,508 13,131
Other financing cash flows 684 1,881
---------- ----------
Net cash provided by financing activities 12,774 140,195
---------- ----------
Net decrease in cash and cash equivalents (74,705) (34,936)
Cash and cash equivalents at beginning of year 274,688 110,726
---------- ----------
Cash and cash equivalents at end of period $ 199,983 $ 75,790
========== ==========
</TABLE>
[FN]
See accompanying notes.
5
<PAGE>
COMPUTER SCIENCES CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
(A) CSC recognized a net special credit of $1.7 million, or 1 cent per share
(diluted), during the first quarter of fiscal 1998 as a result of
developments at CSC Enterprises, a general partnership of which CSC,
through one of its affiliates, is the managing general partner. This
net credit resulted from a tax benefit of $135 million and an after-tax
special charge of $133.3 million.
During the first quarter of fiscal 1998, certain partners withdrew from
CSC Enterprises. As a result of these withdrawals, CSC Enterprises
took actions that caused CSC to recognize an increase in the tax basis of
certain assets. As required by SFAS No. 109, this tax basis increase
resulted in a deferred tax asset of $135 million and a corresponding
reduction of CSC's provision for income taxes.
In connection with these developments, CSC Enterprises reviewed its
operations, its market opportunities and the carrying value of its assets.
Based on this review, plans were initiated during the first quarter of
fiscal 1998 to eliminate certain offerings and write down assets,
primarily within its telecommunications operations. As a result of these
plans, CSC recognized an after-tax special charge of $133.3 million. This
special charge included goodwill, contract termination costs, deferred
contract costs and other assets, telecommunications software and accruals,
telecommunications property, equipment and intangible assets, and other
costs.
(B) During fiscal 1998, CSC adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share."
Basic and diluted earnings per share are calculated as follows (in
thousands except per share amounts):
<TABLE>
<CAPTION>
First Quarter Ended
---------------------------------
July 3, 1998 June 27, 1997
------------ -------------
<S> <C> <C>
Net income for basic and diluted EPS $ 64,335 $ 52,588
Common share information
Average common shares outstanding
for basic EPS 157,327 153,584
Dilutive effect of stock options 3,878 3,456
-------- --------
161,205 157,040
======== ========
Basic EPS $ 0.41 $ 0.34
Diluted EPS 0.40 0.33
</TABLE>
In accordance with SFAS No. 128, the computation of diluted EPS did not
include stock options which were antidilutive, as their exercise price was
greater than the average market price of the Company's common stock during
the year. The number of such options was 1,220 and 1,590,073 at
July 3, 1998 and June 27, 1997, respectively.
6
<PAGE>
(C) No dividends were paid during the periods presented. There were
158,103,074 shares at July 3, 1998 and 157,324,565 shares at April 3,
1998 of $1.00 par value common stock issued with 351,054 and
346,170 shares, respectively, of treasury stock.
(D) Cash payments for interest on indebtedness were $14.0 million and
$17.8 million for the three months ended July 3, 1998 and June 27, 1997,
respectively. Cash refunds received for taxes on income were
$56.5 million for the three months ended July 3, 1998 and cash payments
for taxes on income were $25.2 million for the three months ended
June 27, 1997.
(E) CSC has adopted SFAS No. 130, "Reporting Comprehensive Income," as of
the first quarter of fiscal 1999. SFAS No. 130 establishes new rules for
the reporting and display of comprehensive income and its components.
The adoption of this statement affects only financial disclosures and has
no quantitative impact on CSC's net income or stockholders' equity.
The components of comprehensive income, net of tax, are as follows
(in thousands):
<TABLE>
<CAPTION>
First Quarter Ended
---------------------------------
July 3, 1998 June 27, 1997
------------ -------------
<S> <C> <C>
Net income $64,335 $52,588
Foreign currency translation
adjustment (9,102) (6,510)
------- -------
Comprehensive income $55,233 $46,078
======= =======
</TABLE>
Accumulated other comprehensive income presented on the accompanying
consolidated condensed balance sheets consists of the accumulated
foreign currency translation adjustment and the minimum pension liability
adjustment.
(F) 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 except as described in
Note (A).
7
<PAGE>
PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
First Quarter of Fiscal 1999 versus
First Quarter of Fiscal 1998
Revenues
The Company derived its revenues for the first quarter from the following
market sectors (dollars in millions):
<TABLE>
<CAPTION>
First Quarter
--------------- Pct.
FY99 FY98 Change
------ ------ ------
<S> <C> <C> <C>
U.S. Commercial $ 718 $ 605 18.7%
Europe 489 381 28.4
Other International 103 99 3.9
------ ------ ------
Total Commercial 1,310 1,085 20.8
U.S. Federal Government 444 404 9.9
------ ------ ------
Total $1,754 $1,489 17.8%
====== ====== ======
</TABLE>
During the first quarter ended July 3, 1998, the Company's total revenue
increased 17.8%, or $265 million over the same period last year. Commercial
revenues grew 20.8%, or $225 million over the same quarter of last year.
U.S. federal revenues increased 9.9% or $40 million.
U.S. commercial revenues grew 18.7% or $113 million during the first quarter
of fiscal 1999 over the same period last year. Over half of the growth was
provided by information technology outsourcing contracts. The remainder was
derived principally from demand for consulting and systems integration
activities and continued growth within the financial services and healthcare
vertical markets.
European revenues grew $108 million during the first quarter or 28.4% over the
same period last year. Growth was generated principally from CSC's United
Kingdom and German operations reflecting growth in European outsourcing
business and expansion of enterprise-wide solution activities.
U.S. federal government revenue accounted for 25.3% of total revenue for the
quarter compared to 27.1% for the first quarter of last year. Federal revenue
increased 9.9% or $40 million, principally due to additional revenue from new
contracts and from the fourth quarter fiscal 1998 acquisition of Information
Technology Solutions, Inc. During the first quarter of fiscal 1999, the
Company announced $1.8 billion in new federal contract awards.
8
<PAGE>
As a result of the trends described above, the Company's revenues by market
sector are as follows:
<TABLE>
<CAPTION>
Revenue by Market Sector, First Quarter
as a percentage of total FY99 FY98
- ---------------------------- ------ ------
<S> <C> <C>
U.S. Commercial 41% 40%
Europe 28 26
Other International 6 7
------ ------
Total Commercial 75 73
U.S. Federal Government 25 27
------ ------
Total Revenue 100% 100%
====== ======
</TABLE>
Costs and Expenses
The Company's costs and expenses as a percentage of revenue are as follows
(dollars in millions, before special items):
<TABLE>
<CAPTION>
Dollar Amount Percentage of Revenue
-------------- ---------------------
First Quarter First Quarter
-------------- --------------
FY99 FY98 FY99 FY98
------ ------ ------ ------
<S> <C> <C> <C> <C>
Costs of services $1,382 $1,171 78.8% 78.7%
Selling, general & admin. 163 139 9.3 9.3
Depreciation and amort. 104 89 5.9 6.0
Interest expense, net 9 9 0.5 0.6
------ ------ ------ ------
Total $1,658 $1,408 94.5% 94.6%
====== ====== ====== ======
</TABLE>
Comparing the first quarters of fiscal 1999 and 1998, there were no
significant changes in the elements of costs and expenses as a percentage of
revenue.
9
<PAGE>
Special Items
As previously reported, the results of operations for the first quarter ended
June 27, 1997 included a net special credit of $1.7 million, or 1 cent per
share (diluted), resulting from developments at CSC Enterprises, a general
partnership which operates the Company's credit services operations and
carries out other business strategies through acquisition and investment. This
net credit resulted from a tax benefit of $135 million and a special charge of
$208.4 ($133.3 million after tax), as described in Note (A) of the
Consolidated Condensed Financial Statements (see Part I, Item I).
Income Before Taxes
Reflecting the Company's revenue growth, income before special charges and
taxes increased to $96.4 million, up $15.6 million, or 19.4% compared with the
same quarter last year. The resulting margin before special charges was 5.5%
compared to 5.4% for the same quarter last year.
Net Income
Earnings before special items were $64.3 million for the first quarter of
fiscal 1999, up $13.4 million, or 26.4% over last year's earnings. This
year's first quarter diluted earnings per share of 40 cents increased 25% over
last year's first quarter diluted earnings per share of 32 cents, excluding
last year's net special credit of $1.7 million or 1 cent per share.
Cash Flows
Cash provided by operating activities was $42.5 million for the first quarter
compared with $10.3 million during the same period last year. An increase in
earnings and non-cash depreciation and amortization expenses were the primary
drivers of the improvement.
The Company's cash expenditures for investing activities totaled $130.0
million for the most recent quarter versus $185.5 million during the same
period of last year. The decrease principally relates to proceeds received in
the first quarter of 1999 in connection with the sale of the Company's
collection business and significant acquisitions of outsourcing assets made in
the prior year.
Cash provided by financing activities was $12.8 million for the most recent
quarter versus $140.2 million for the same period last year. The decrease is
principally due to CSC entering the new fiscal year with a larger cash balance
compared to the prior year and as a result the Company was able to use
available cash balances rather than short-term borrowings.
10
<PAGE>
Financial Condition
During the first quarter of fiscal 1999, the Company's capital outlays
included $134.8 million of business investments in the form of fixed asset
purchases, acquisitions and new outsourcing contracts. These amounts were
funded from operating cash flows, additional borrowings and existing cash,
which decreased from $274.7 million to $200 million. The Company's debt-to-
total capitalization ratio improved to 26.8% at July 3, 1998 from 27.7% at
fiscal 1998 year end.
The Company has an option to require a subsidiary of Equifax Inc. to purchase
the Company's credit reporting business. Prior to July 31, 1998, the exercise
price of this put option was determined by certain financial formulas.
Subsequent to July 31, 1998, the exercise price is equal to the appraised
value of the business.
It is management's opinion that the Company will be able to meet its liquidity
and cash needs for the foreseeable future through a combination of cash flows
from operating activities, cash balances, unused borrowing capacity and other
financing activities, including the issuance of debt and/or equity securities,
and/or the exercise of the put option described above.
Year 2000
Throughout its history, CSC has dealt with ongoing significant changes in the
information technology industry. As a result, resources are constantly being
employed to modify, upgrade and enhance systems and infrastructure on behalf
of clients and internal needs. The Year 2000 issue represents another one of
these changes. It is the result of computer systems which represent years as
a two-digit field rather than a four-digit field. Any of such programs that
utilize date sensitive data may not properly recognize a date field of 00 as
the year 2000, but as some other date, typically the year 1900. This could
result in possible system failure or miscalculations which affect normal
business activity.
The Company has established a comprehensive two-phase program to ensure that
its proprietary software and internal computer systems are Year 2000 ready.
The initial phase, which included planning, inventory and assessment, has been
completed. The final phase, which consists of correction, testing, deployment
and acceptance, is in process and is expected to be completed by mid-1999.
The Company expects that the cost of making its proprietary software and
internal systems compliant will not have a material effect on its overall
financial position or overall trends in results of operations.
The Company has initiated formal communications with all of its crucial
suppliers to determine whether they are or will be Year 2000 capable. By
mid-1999, the Company expects to have identified and replaced any such
suppliers who will not be Year 2000 ready.
The Company has also been working with its clients and has completed an
assessment of its obligations to make their systems Year 2000 ready. As a
result of this assessment, the Company does not believe that these obligations
will have a material effect on the Company.
The Company has experienced significant growth in Year 2000 engagements and
expects that trend to continue for the next few years.
11
<PAGE>
New Accounting Pronouncements
The Company has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," as of the first quarter of fiscal 1999. The
adoption of this statement affects only financial disclosures and has no
quantitative impact on the Company's consolidated financial position or
results of operations.
The Company has adopted the American Institute of Certified Public Accountants
Statement of Position ("SOP") 97-2, "Software Revenue Recognition" as of the
first quarter of fiscal 1999. SOP 97-2 supersedes SOP 91-1, "Software Revenue
Recognition." The adoption of SOP 97-2 has no material impact on the
Company's consolidated financial position, results of operations or cash
flows.
Forward-Looking Statements
All statements contained in this quarterly report, or in any document filed by
the Company with the Securities and Exchange Commission, or in any press
release or other written or oral communication by or on behalf of the Company,
that do not directly and exclusively relate to historical facts constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements represent the Company's
expectations and beliefs, and no assurance can be given that the results
described in such statements will be achieved.
These statements are subject to risks, uncertainties and other factors, many
of which are outside of the Company's control, that could cause actual results
to differ materially from the results described in such statements. These
factors include, without limitation, the following: (i) competitive pressures;
(ii) the Company's ability to attract and retain key personnel; (iii) changes
in the demand for information technology outsourcing and business process
outsourcing; (iv) changes in the financial condition of the Company's major
commercial customers; (v) changes in U.S. federal government spending levels
for information technology services; (vi) the Company's ability to consummate
strategic acquisitions and alliances; (vii) the future profitability of the
Company's customer contracts; (viii) the Company's ability to continue to
develop and expand its service offerings to address emerging business demand
and technological trends; and (ix) general economic conditions in countries in
which the Company does business.
12
<PAGE>
PART I, ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
For a discussion of the Company's market-risk sensitive financial instruments
as of April 3, 1998, see "Market Risk" in the Part II, Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," of
the Company's Annual Report on Form 10-K for the fiscal year then ended. For
the quarter ended July 3, 1998, there has been no significant change in
related market risk factors.
13
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
a. Exhibits
<S> <C> <C>
3.1 Restated Articles of Incorporation, effective
October 31, 1988 (c)
3.2 Amendment to Restated Articles of Incorporation,
effective August 10, 1992 (j)
3.3 Amendment to Restated Articles of Incorporation,
effective July 31, 1996 (m)
3.4 Certificate of Amendment of Certificate of Designations
of Series A Junior Participating Preferred Stock,
effective August 1, 1996 (o)
3.5 Bylaws, amended and restated effective May 4, 1998 (g)
10.1 1978 Stock Option Plan, amended and restated
effective March 31, 1988* (n)
10.2 1980 Stock Option Plan, amended and restated
effective March 31, 1988* (n)
10.3 1984 Stock Option Plan, amended and restated
effective March 31, 1988* (n)
10.4 1987 Stock Incentive Plan* (b)
10.5 Schedule to the 1987 Stock Incentive Plan for
United Kingdom personnel* (b)
10.6 1990 Stock Incentive Plan* (h)
10.7 1992 Stock Incentive Plan, amended and restated
effective August 9, 1993* (n)
10.8 Schedule to the 1992 Stock Incentive Plan for
United Kingdom personnel* (q)
10.9 1995 Stock Incentive Plan* (k)
10.10 1998 Stock Incentive Plan*
10.11 Form of Stock Option Agreement* (u)
10.12 Form of Restricted Stock Agreement* (u)
10.13 Annual Management Incentive Plan, effective April 2, 1983* (a)
10.14 Supplemental Executive Retirement Plan, amended and
restated effective February 27, 1998* (u)
10.15 Deferred Compensation Plan, amended and restated
effective February 2, 1998* (s)
10.16 Severance Plan for Senior Management and Key Employees,
amended and restated effective February 18, 1998 (t)
10.17 Severance Agreement with Van B. Honeycutt, effective
February 2, 1998 (s)
10.18 Form of Indemnification Agreement for Officers (e)
10.19 Form of Indemnification Agreement for Directors (d)
10.20 1997 Nonemployee Director Stock Incentive Plan (r)
10.21 Form of Restricted Stock Unit Agreement (g)
10.22 1990 Nonemployee Director Retirement Plan, amended
and restated effective February 2, 1998 (s)
14
<PAGE>
10.23 Information Technology Services Agreements with General
Dynamics Corporation, dated as of November 4, 1991 (i)
10.24 Rights Agreement dated December 21, 1988, amended
and restated effective February 18, 1998 (t)
10.25 Rights Agreement dated February 18, 1998 (t)
27 Financial Data Schedule
99.1 Annual Report on Form 11-K for the Matched Asset Plan of the
Registrant for the fiscal year ended December 31, 1997 (g)
99.2 Annual Report on Form 11-K for the Hourly Savings Plan of
CSC Outsourcing, Inc. for the fiscal year ended
December 31, 1997 (g)
99.3 Annual Report on Form 11-K for the CUTW Hourly Savings
Plan of CSC Outsourcing, Inc. for the fiscal year
ended December 31, 1997 (g)
</TABLE>
15
<PAGE>
Notes to Exhibit Index:
*Management contract or compensatory plan or agreement
(a)-(g) These exhibits are incorporated herein by reference to the
Company's Annual Report on Form 10-K for the fiscal years ended
on the respective dates indicated below:
(a) March 30, 1984 (d) April 3, 1992
(b) April 1, 1988 (e) March 31, 1995
(c) March 31, 1989 (f) March 28, 1997
(g) April 3, 1998
(h) Incorporated herein by reference to the Registrant's Registration
Statement on Form S-8 filed on August 15, 1990.
(i) Incorporated herein by reference to the Registrant's Current
Report on Form 8-K dated November 4, 1991.
(j) Incorporated herein by reference to the Registrant's Proxy
Statement for its August 10, 1992 Annual Meeting of Stockholders.
(k) Incorporated herein by reference to the Registrant's Quarterly
Report on Form 10-Q filed on November 13, 1995.
(l) Incorporated herein by reference to the Registrant's Current
Report on Form 8-K dated April 28, 1996.
(m) Incorporated herein by reference to the Registrant's Proxy
Statement for its July 31, 1996 Annual Meeting of Stockholders.
(n) Incorporated herein by reference to the Registrant's Quarterly
Report on Form 10-Q filed on August 12, 1996.
(o) Incorporated herein by reference to the Registrant's Current
Report of Form 8-K dated August 1, 1996.
(p) Incorporated herein by reference to the Registrant's Quarterly
Report on Form 10-Q filed on November 12, 1996.
(q) Incorporated herein by reference to the Registrant's Quarterly
Report on Form 10-Q filed on February 10, 1997.
(r) Incorporated herein by reference to the Registrant's Proxy
Statement for its August 11, 1997 Annual Meeting of Stockholders.
(s) Incorporated herein by reference to the Registrant's Quarterly
Report on Form 10-Q filed on February 9, 1998.
(t) Incorporated herein by reference to the Registrant's
Solicitation/Recommendation Statement on Schedule 14D-9 filed on
February 26, 1998.
(u) Incorporated herein by reference to Amendment No. 2 to the
Registrant's Solicitation/Recommendation Statement on Schedule
14D-9 filed on March 2, 1998.
b. Reports on Form 8-K:
There were no reports on Form 8-K filed during the first quarter of fiscal
1999.
16
<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
Date: August 13, 1998 By: /s/ Scott M. Delanty
-----------------------------
Scott M. Delanty
Vice President and Controller
Chief Accounting Officer
17
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------- ----------------------
<S> <C>
10.10 1998 Stock Incentive Plan
27 Financial Data Schedule
28 Revenues by Market Sector
</TABLE>
18
EXHIBIT 10.10
COMPUTER SCIENCES CORPORATION
1998 STOCK INCENTIVE PLAN
Section 1: PURPOSE OF PLAN
The purpose of this 1998 Stock Incentive Plan ("Plan") of Computer
Sciences Corporation, a Nevada corporation (the "Company"), is to enable the
Company and its subsidiaries to attract, retain and motivate their employees
by providing for or increasing the proprietary interests of such employees in
the Company.
Section 2: PERSONS ELIGIBLE UNDER PLAN
Any person, including any director of the Company, who is an
employee of the Company or any of its subsidiaries (an "Employee") shall be
eligible to be considered for the grant of Awards (as hereinafter defined)
hereunder.
Section 3: AWARDS
(a) The Committee (as hereinafter defined), on behalf of the
Company, is authorized under this Plan to enter into any type of arrangement
with an Employee that is not inconsistent with the provisions of this Plan and
that by its terms, involves or might involve the issuance of (i) shares of
common stock, par value $1.00 per share, of the Company ("Common Shares"), or
(ii) a Derivative Security (as such term is defined in Rule 16a-1 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
such Rule may be amended from time to time) with an exercise or conversion
privilege at a price related to the Common Shares or with a value derived from
the value of the Common Shares. The entering into of any such arrangement is
referred to herein as the "grant" of an "Award."
(b) Awards are not restricted to any specified form or structure
and may include, but are not limited to, sales, bonuses and other transfers of
stock, restricted stock, stock options, reload stock options, stock purchase
warrants, other rights to acquire stock, securities convertible into or
redeemable for stock, stock appreciation rights, limited stock appreciation
rights, phantom stock, dividend equivalents, performance units or performance
shares, and an Award may consist of one such security or benefit, or two or
more of them in tandem or in the alternative.
(c) Common Shares may be issued pursuant to an Award for any
lawful consideration as determined by the Committee, including, without
limitation, services rendered by the recipient of such Award.
<PAGE>
(d) Subject to the provisions of this Plan, the Committee, in its
sole and absolute discretion, shall determine all of the terms and conditions
of each Award granted hereunder, which terms and conditions may include, among
other things:
(i) any provision necessary for such Award to qualify as
an incentive stock option under Section 422 of the Internal Revenue Code (an
"Incentive Stock Option");
(ii) a provision permitting the recipient of such Award
(including any recipient who is a director or officer of the Company) to pay
the purchase price of the Common Shares or other property issuable pursuant to
such Award, and/or to pay such recipient's tax withholding obligation with
respect to such issuance, in whole or in part, by delivering previously owned
shares of capital stock of the Company (including "pyramiding") or other
property, and/or by reducing the amount of Common Shares or other property
otherwise issuable pursuant to such Award; or
(iii) a provision conditioning or accelerating the receipt
of benefits pursuant to such Award, either automatically or in the discretion
of the Committee, upon the occurrence of specified events, including, without
limitation, a change of control of the Company, an acquisition of a specified
percentage of the voting power of the Company, the dissolution or liquidation
of the Company, a sale of substantially all of the property and assets of the
Company or an event of the type described in Section 7 hereof.
(e) Notwithstanding any other provision of this Plan, the maximum
number of Common Shares with respect to which options or rights may be granted
under this Plan to any Employee during any fiscal year shall be 500,000,
subject to adjustment as provided in Section 7 hereof.
Section 4: STOCK SUBJECT TO PLAN
(a) The aggregate number of Common Shares that may be issued
pursuant to all Incentive Stock Options granted under this Plan shall not
exceed 9,000,000, subject to adjustment as provided in Section 7 hereof.
(b) At any time, the aggregate number of Common Shares issued and
issuable pursuant to all Awards (including all Incentive Stock Options)
granted under this Plan shall not exceed 9,000,000, subject to adjustment as
provided in Section 7 hereof.
(c) For purposes of Section 4(b) hereof, the aggregate number of
Common Shares issued and issuable pursuant to Awards granted under this Plan
shall at any time be deemed to be equal to the sum of the following:
2
<PAGE>
(i) the number of Common Shares which were issued prior to
such time pursuant to Awards granted under this Plan, other than Common Shares
which were subsequently reacquired by the Company pursuant to the terms and
conditions of such Awards and with respect to which the holder thereof
received no benefits of ownership such as dividends; plus
(ii) the number of Common Shares which were otherwise
issuable prior to such time pursuant to Awards granted under this Plan but
which were withheld by the Company as payment of the purchase price of the
Common Shares issued pursuant to such Awards or as payment of the recipient's
tax withholding obligation with respect to such issuance; plus
(iii) the maximum number of Common Shares which are or may
be issuable at or after such time pursuant to Awards granted under this Plan.
Section 5: DURATION OF PLAN
No Awards may be granted under this Plan after June 15, 2008.
Although Common Shares may be issued after June 15, 2008 pursuant to Awards
that were duly granted prior to such date, no Common Shares may be issued
under this Plan after June 15, 2018.
3
<PAGE>
Section 6: ADMINISTRATION OF PLAN
(a) This Plan shall be administered by a committee of the Board
of Directors (the "Committee") consisting of two or more directors, each of
whom is both a Disinterested Person for purposes of Rule 16b-3 promulgated
under the Exchange Act and an Outside Director for purposes of Section 162(m)
of the Internal Revenue Code, as such Rule and such Section may be amended
from time to time).
(b) Subject to the provisions of this Plan, the Committee shall
be authorized and empowered to do all things necessary or desirable in
connection with the administration of this Plan, including, without
limitation, the following:
(i) adopt, amend and rescind rules and regulations
relating to this Plan;
(ii) determine which persons are Employees, and to which of
such Employees, if any, Awards shall be granted hereunder;
(iii) grant Awards to Employees and determine the terms and
conditions thereof, including the number of Common Shares issuable pursuant
thereto;
(iv) determine whether, and the extent to which adjustments
are required pursuant to Section 7 hereof; and
(v) interpret and construe this Plan and the terms and
conditions of all Awards granted hereunder.
Section 7: ADJUSTMENTS
If the outstanding securities of the class then subject to this
Plan are increased, decreased or exchanged for or converted into cash,
property and/or a different number or kind of securities, or if cash, property
and/or securities are distributed in respect of such outstanding securities,
in either case as a result of a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split or the like, or if substantially all of the property and assets of
the Company are sold, then, unless the terms of such transaction shall provide
otherwise, the Committee shall make appropriate and proportionate adjustments
in:
4
<PAGE>
(a) the number and type of shares or other securities or cash or
other property that may be acquired pursuant to Incentive Stock Options and
other Awards theretofore granted under this Plan;
(b) the maximum number and type of shares or other securities
that may be issued pursuant to Incentive Stock Options and other Awards
thereafter granted under this Plan; and
(c) the maximum number of Common Shares with respect to which
options or rights may thereafter be granted under this Plan to any Employee
during any fiscal year.
Section 8: AMENDMENT AND TERMINATION OF PLAN
The Board of Directors may amend or terminate this Plan at any
time and in any manner, subject to the following:
(a) no recipient of any Award shall, without his or her consent,
be deprived thereof or of any of his or her rights thereunder or with respect
thereto as a result of such amendment or termination; and
(b) if any rule, regulation or procedure of any national
securities exchange upon which any securities of the Company are listed, or
any listing agreement with any such securities exchange, requires that any
such amendment be approved by the stockholders of the Company, then such
amendment shall not be effective unless and until it is approved by the
affirmative vote of the holders of a majority of the securities of the Company
present, or represented, and entitled to vote at a meeting of the stockholders
of the Company.
Section 9: EFFECTIVE DATE OF PLAN
This Plan shall be effective as of June 15, 1998, the date upon
which it was approved by the Board of Directors; provided, however, that no
Common Shares may be issued under this Plan until it has been approved by the
affirmative votes of the holders of a majority of the securities of the
Company present, or represented, and entitled to vote at a meeting of the
stockholders of the Company.
5
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<FISCAL-YEAR-END> Apr-02-1999
<PERIOD-START> Apr-04-1998
<PERIOD-END> Jul-03-1997
<PERIOD-TYPE> 3-MOS
<CASH> 199,983
<SECURITIES> 0
<RECEIVABLES> 1,640,634
<ALLOWANCES> 73,762
<INVENTORY> 0
<CURRENT-ASSETS> 2,031,999
<PP&E> 2,021,368
<DEPRECIATION> 1,049,520
<TOTAL-ASSETS> 4,121,415
<CURRENT-LIABILITIES> 1,363,292
<BONDS> 579,725
<COMMON> 158,103
0
0
<OTHER-SE> 1,921,872
<TOTAL-LIABILITY-AND-EQUITY> 4,121,415
<SALES> 0
<TOTAL-REVENUES> 1,753,928
<CGS> 0
<TOTAL-COSTS> 1,382,971
<OTHER-EXPENSES> 162,824
<LOSS-PROVISION> (921)
<INTEREST-EXPENSE> 8,517
<INCOME-PRETAX> 96,435
<INCOME-TAX> 32,100
<INCOME-CONTINUING> 64,335
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,335
<EPS-PRIMARY> .41
<EPS-DILUTED> .40
</TABLE>
<TABLE>
EXHIBIT 28
COMPUTER SCIENCES CORPORATION
REVENUES BY MARKET SECTOR
(In millions)
<CAPTION>
Fiscal Period Ended % of Total
--------------------- --------------------
July 3, June 27, July 3, June 27,
1998 1997 1998 1997
-------- --------- -------- --------
<S> <C> <C> <C> <C>
THIRD QUARTER
Global commercial:
U.S. commercial $ 717.9 $ 604.8 41% 40%
Europe 488.9 380.7 28 26
International 103.6 99.7 6 7
-------- -------- -------- --------
Total 1,310.4 1,085.2 75 73
U.S. federal government:
Department of Defense 288.5 267.8 16 18
NASA 74.0 76.0 4 5
Civil agencies 81.0 59.8 5 4
-------- -------- -------- --------
Total 443.5 403.6 25 27
-------- -------- -------- --------
Total revenues $1,753.9 $1,488.8 100% 100%
--------- -------- -------- --------
</TABLE>
</PAGE>
