Computer Sciences Management Discusses Q4 2012 Results - Earnings Call Transcript

Computer Sciences (CSC)

Q4 2012 Earnings Call

May 17, 2012 11:00 am ET

Executives

Bryan Brady - Vice President of Investor Relations

J. Michael Lawrie - Chief Executive Officer, President and Director

Michael J. Mancuso - Chief Financial Officer and Vice President

Analysts

Keith F. Bachman - BMO Capital Markets U.S.

Darrin D. Peller - Barclays Capital, Research Division

Nathan A. Rozof - Morgan Stanley, Research Division

Rod Bourgeois - Sanford C. Bernstein & Co., LLC., Research Division

David Grossman - Stifel, Nicolaus & Co., Inc., Research Division

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Moshe Katri - Cowen and Company, LLC, Research Division

Bryan Keane - Deutsche Bank AG, Research Division

Jason Kupferberg - Jefferies & Company, Inc., Research Division

Presentation

Operator

Good day, everyone, and welcome to the CSC Fourth Quarter and Year-End Fiscal Year 2012 Conference Call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Bryan Brady, Vice President of Investor Relations. Please go ahead, sir.

Bryan Brady

Thank you, operator. Well, good morning, ladies and gentlemen, and welcome to CSC's earnings call for the fourth quarter and full fiscal year 2012. We issued our financial results earlier this morning, so hopefully, you've had a good opportunity to review them.

On the call today are Mike Lawrie, our 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.

On Slide 2, you'll see a reminder about the risks associated with any forward-looking statements.

And 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.

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 to Slide #4, I'm pleased to turn the call over to Mike Lawrie.

J. Michael Lawrie

Okay, thank you, Bryan, and welcome, everyone. Thanks for taking some time with us this morning. I am joined by Mike Mancuso, who will cover the numbers. And as you probably know, this will be Mike's last earnings call with CSC as he will be retiring, and I just wanted to thank Mike for, what, almost 4 years of service, somewhat tumultuous, but service, but thank you very much.

And as I think, earlier this week, we announced Mike's successor CFO, Paul Saleh. Paul's recognized and a very much respected CFO for leading brands such as Gannett and Sprint Nextel and Walt Disney International. And he's led global finance functions for companies in the midst of significant change and industry transition, and knows the role that the finance community plays in that type of turnaround environment, and has a long track record of achieving profitability improvements and increasing shareholder value. So Paul will be on board May 23. And I'm sure at that point in time, he will begin to outreach to some of you on the call today.

Let me make a couple remarks before I turn this over to Mike. I've really got 4 key messages this morning. One is that our results are very poor, and they are unacceptable to us at CSC, and they're certainly unacceptable to our investors. The second message is that we are taking immediate actions to begin to move in a different direction. I will cover some of those actions today, and there'll be some more actions in the coming weeks and months. The third message is that although the negatives overwhelmed our results, there are some bright spots, and I do want to highlight some of those bright spots, particularly around some of our new offerings that I think represents the future of the company. And then the final message is that I've now completed a sort of tour of the world and visited many of our sites and many of our clients, many of our investors and many of the analysts that follow CSC, and have a pretty good handle on what the issues are, what the root causes of those issues are. And we are developing a plan to address these, as well as the underlying financial model. And we intend to share that in greater detail when we get together in early September for the Analyst/Investor Day.

So those are the 4 key messages. Now let me just quickly provide a little more detail around each of those messages. And as I said several weeks ago and again today, the results are very poor. The primary reasons for that are the NHS write-offs. The second principal driver was troubled contracts within our MSS business that resulted in impairment and restructuring charges. I don't think we managed our cost structure to adjust for some of these developments as they unrolled themselves throughout the second half of the fiscal year. I think we've got some organizational, what I call operating model alignment issues, which has made execution that much more problematic. And obviously, we continue to see some uncertainty, particularly in the federal sector and in EMEA. So those are the primary causes of the poor results, not substantially different than what we talked about before.

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