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CSC Reports Continuing Improvement In Operations In Third Quarter 2013

CSC (NYSE: CSC) today reported third quarter 2013 diluted earnings per share of $3.27 consisting of $0.77 from continuing operations and $2.50 from two businesses that were divested during the quarter. This compares with a diluted loss per share of ($8.96) in the third quarter 2012, which included a charge relating to the UK National Health Service (NHS) contract of $9.93 per share. Total revenues were $3.78 billion compared with $3.69 billion in the year ago period, an increase of 2.8% in constant currency.

Financial Highlights

  • Diluted EPS from continuing operations of $0.77 per share included a workforce restructuring charge of $26 million, or $0.13 per share.
  • Income from continuing operations before taxes of $155 million compares with a loss from continuing operations before taxes in the year ago period resulting from the $1.5 billion NHS charge.
  • Operating income of $268 million compares with an operating loss in the year ago period resulting from the NHS charge.
  • Pre-tax margin of 4.1% compares with a loss in the prior year.
  • Operating margin of 7.1% compares with a loss in the year ago period. Operating margin excluding restructuring was 7.7% for the third quarter.
  • Operating cash flow of $413 million compares with $720 million in the previous year which included a US Claims settlement of $277 million.
  • Free cash flow of $245 million for the quarter compares with $499 million in the previous year which also included the US Claims settlement.
  • The company divested its credit services business and certain businesses in Italy during the quarter. The net impact of these transactions is reflected in the $2.50 of diluted EPS from discontinued operations.
  • During the quarter, CSC returned cash to shareholders by repurchasing approximately 1.97 million shares of common stock for an aggregate price of $77 million and paying $31 million in cash dividends, or $0.20 per share.
  • Ending cash and cash equivalents were $2.20 billion.

“Our turnaround is tracking to plan. We are transitioning to our new operating model and we are aligning our assets with our strategy of leading the next generation of technology services and solutions. Our cost takeout initiatives are yielding results as demonstrated by higher profit margins in all three lines of business when compared with the prior year. As a result, we are raising our target for fiscal year 2013 EPS from continuing operations to $2.50 - $2.70,” said Mike Lawrie, president and CEO. “During the quarter, we divested certain non-core businesses and we are using the proceeds to return cash to shareholders through our share buyback program and incremental contributions to our pension plans.”

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