Computer Sciences (CSC)
Q4 2011 Earnings Call
May 25, 2011 5:00 pm ET
Bryan Brady - Vice President of Investor Relations
Michael Mancuso - Chief Financial Officer and Vice President
Michael Laphen - Executive Chairman, Chief Executive Officer and President
Bryan Keane - Crédit Suisse AG
Nathan Rozof - Morgan Stanley
Rod Bourgeois - Sanford C. Bernstein & Co., Inc.
Darrin Peller - Barclays Capital
David Grossman - Stifel, Nicolaus & Co., Inc.
Previous Statements by CSC
» Computer Sciences' CEO Discusses F3Q11 Results - Earnings Call Transcript
» Computer Sciences Q4 2010 Earnings Call Transcript
» Computer Sciences Corp. F3Q10 (Qtr End 1/1/10) Earnings Call Transcript
Good day, everyone, and welcome to the CSC Fiscal Year 2011 Fourth Quarter Earnings Conference. Today's call is being recorded. Now for opening remarks and introductions, I'd like to turn the conference over to Mr. Bryan Brady, Vice President of Investor Relations. Please go ahead.
Thank you, operator. Good afternoon, ladies and gentlemen, and welcome to CSC's earnings call for the fourth quarter of our fiscal year 2011. We issued our preliminary financial results earlier this afternoon. So hopefully, you've had an opportunity to review them. With me today are Mike Laphen, our Chairman and Chief Executive Officer; and Mike Mancuso, our Chief Financial Officer. As usual, this call is being webcast at csc.com, and we've also posted slides to our website to accompany our discussion.
So moving to Slide 2, you'll see our reminder that statements made during this call that are not historical facts may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to known and unknown risks and uncertainties which could cause actual results to differ materially.
Additional information concerning these risks and uncertainties is contained in the company's filings with the SEC. Copies of these filings are available from the SEC, from our website and from our Investor Relations department.
On Slide 3, you'll see our acknowledgment that CSC's presentation includes certain non-GAAP financial measures. So in accordance with SEC rules, a reconciliation of these metrics to GAAP metrics is included in the tables of the earnings release and in the appendix to our slides. Both documents are available for your review at the Investor Relations section of the CSC website.
Please refer to Slide 4 for a statement on the ongoing investigation related to the Nordics, and Mike will comment further on this.
Finally, I'd like to remind our listeners that CSC assumes no obligation to update the information presented on this conference call except, of course, as required by law.
Now if you'll kindly move on to Slide #6, I'm pleased to turn the call over to Mike Laphen.
Thank you, Bryan. Good afternoon, ladies and gentlemen, and thank you for joining us today. As I'm sure you've seen in our earnings release, we are presenting preliminary unaudited financial results today, with the expected completion of our audit and filing of our 10-K by no later than June 15.
This delay is necessary to allow our audit committee to accomplish some additional investigative work related to our previously disclosed accounting irregularities in our MSS Nordics Region and to allow our auditors to then finalize the audit. We have filed a Form 12b-25 with the SEC today confirming that we expect to file our 10-K by no later than June 15.
Although fiscal year '11 was challenging given the NHS uncertainty, the unexpected difficulties in the Nordics, and the delays in the federal budgets, we are pleased with the positive revenue growth in our Commercial business both sequentially and year-over-year. Importantly, excluding these challenges, our underlying business is where we said it would be in terms of operating margin and free cash flow.
Additionally, we significantly strengthened our balance sheet by paying down debt, initiated the payment of a dividend, defined and activated an open market stock buyback program and secured a new backstop credit facility. We also continued to implement our strategy with positive results that signaled we're on the right path for future success. Our acquisitions have been focused on our high-growth segments in cybersecurity, acquiring important intellectual property for our healthcare vertical, and expanding in Brazil, a key geography.
With respect to new business, our fiscal year '11 bookings totaled $14 billion. As we indicated at our recent investor's conference, circumstances did not accommodate the timeframe we and our clients had envisioned for some $2 billion of additional awards. Of this amount, we are pursuing approximately $1.7 billion of pending awards which are either sole source or for which we have been down selected and are the only party in active client negotiations.
Additionally, there were further delays of some $1 billion of U.S. federal government opportunities who award announcements were anticipated to have closed in the fourth quarter. In the first few weeks of April, 4 of these opportunities worth approximately $200 million were awarded to CSC. These and the other said file will now be booked as fiscal year '12 awards.
Cash performance for fiscal year '11 was solid, as we delivered $620 million in free cash flow. While this is only 84% of net income, the performance in the rest of the business overcame 25 of the 35 points of negative cash impact resulting from the NHS program.
With respect to the NHS program, as you know, we've been in protracted negotiations on a nonbinding agreement in principle or MOU to realign our contract with the direction the NHS wants to take the program. The U.K. government is currently conducting a review of the entire NHS national program. The proposed MOU terms are included within the scope of this review and, therefore, signing an agreement is dependent upon the completion of the government's process. The financial impact of our proposed MOU terms are included in our Q4 and full year results. Mike Mancuso will provide further details in his comments.