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CSC Reports Strong Q1 2014 Increase In Profitability

CSC (NYSE: CSC) today reported diluted earnings per share of $1.02 consisting of $0.91 from continuing operations and $0.11 from discontinued operations for the first quarter of 2014. During the quarter, CSC announced the sale of two businesses which are now included in discontinued operations. In the first quarter of 2013, CSC reported $0.26 of diluted earnings per share consisting of $0.10 from continuing operations and $0.16 from discontinued operations. Total revenue was $3.26 billion, a decline of 10% in constant currency when compared to $3.63 billion from the year ago period. However, on a more comparable basis, revenue declined by 6% in constant currency.

“We are encouraged with the pace of our turnaround. Our cost takeout actions are driving margin expansion and earnings growth,” said Mike Lawrie, president and CEO. “The company is beginning to pivot more towards growth and we are investing in offerings and partnerships that will enhance our differentiation and expand our market coverage. Based on our current progress, we are raising our target for EPS from continuing operations by 20 cents to $3.50 - $3.70.”

Financial Highlights
  • EPS from continuing operations of $0.91 compares with $0.10 in the year ago period.
  • Net income was $159 million for the first quarter, an increase of $117 million from net income of $42 million in the prior year.
  • Operating income was $304 million, an increase of $158 million as compared to $146 million for the first quarter of fiscal 2013. Operating income margin was 9.3%, an increase of 530 bps from 4.0% in the year ago period.
  • Earnings before interest and taxes (EBIT) was $241 million, an increase of $167 million as compared to $74 million for the first quarter of fiscal 2013. EBIT margin of 7.4% improved by 540 bps from 2.0% in the prior year.
  • Operating cash flow of $213 million in the quarter compares with the $221 million in the prior year.
  • Free cash flow of negative $9 million improved by $16 million when compared with negative $25 million for the year ago period.
  • Ending cash and cash equivalents were $1.93 billion as of June 28, 2013, an increase of $930 million over the prior year.

New Operating Model

As previously disclosed, CSC has implemented a new operating model to align the company’s leadership and assets with its strategy of leading the next generation of IT services and solutions. The new operating model resulted in a change to the Company's reportable segments for fiscal 2014 which are now: Global Business Services (GBS), Global Infrastructure Services (GIS), and the North American Public Sector (NPS).

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