[February 09, 2016] |
|
Newly-Separated CSC Delivers Earnings Growth and Margin Expansion in Third Quarter Fiscal 2016
CSC
(NYSE: CSC) today reported results for the third quarter of fiscal year
2016.
"In the third quarter, CSC successfully completed its separation into
two industry-leading pure-plays, while delivering margin improvement and
earnings growth through disciplined cost management," said Mike Lawrie,
chairman, president and CEO. "Our results in the third quarter were
consistent with the long-term outlook we presented at our Investor Day
in New York. We are seeing strong momentum in our next-generation
offerings and a moderation of the headwinds in our legacy business, and
we delivered the strongest bookings this quarter in the last 2 years. We
are also making progress in our acquisition strategy. We are on track to
complete the UXC acquisition by the end of February and have
successfully moved into the regulatory approval stage of our Xchanging
acquisition."
Financial Highlights
-
Diluted earnings per share from continuing operations were $0.10 in
the third quarter and included the cumulative impact of certain items
of ($0.61) per share. These items included ($0.25) per share in
separation, restructuring and other transaction costs, $0.04 per share
in U.S. pension and OPEB impacts related to our separation of CSRA,
($0.10) per share in certain CSRA overhead costs, $0.09 per share in
pension & OPEB actuarial and settlement gains, and ($0.38) per share
from tax valuation allowance impacts. Excluding these items, non-GAAP
diluted earnings per share from continuing operations were $0.71, up
16 percent when compared with $0.61 in the third quarter of fiscal
2015.
-
Income from continuing operations before taxes was $78 million, which
includes the cumulative cost of certain items of ($46) million.
Excluding the impact of these items, non-GAAP income from continuing
operations before taxes was $124 million compared with $109 million a
year ago.
-
Operating income, adjusted for certain items, was $190 million and
compares with $174 million in the prior year. Operating margin on the
same basis was 10.9 percent, up from 8.9 percent in the prior year.
-
Income from continuing operations was $15 million for the third
quarter. Excluding the impact of the items discussed above, non-GAAP
income from continuing operations was $100 million, compared with $87
million in the prior year.
-
Preliminary free cash flow of $120 million.
Global Business Services
GBS revenue of $886 million in the quarter compares with $965 million in
the year ago quarter, a decline of 2.5 percent year-over-year in
constant currency. Modest growth in our Industry Software & Solutions
and Big Data businesses partially offset lower than expected Consulting
and Applications revenue. GBS operating margin, excluding the impact of
certain items, was 13.1 percent, up from 12.8 percent a year ago. New
business awards for GBS were $1.6 billion in the third quarter, up 35
percent year-over-year.
Global Infrastructure Services
GIS revenue of $864 million in the quarter compares with $984 million in
the year-ago quarter, a decline of 7.2 percent year-over-year in
constant currency. The decline in revenue from our legacy business
moderated and was partially offset by growth in next-generation
offerings. GIS operating margin, excluding the impact of certain items,
was 9.1 percent, up from 6.4 percent a year ago. New business awards for
GIS were $1.0 billion in the quarter, up 4 percent year-over-year.
Completed Spin-Off of Public Sector Business
During the third quarter, CSC completed the separation of the company
into two industry-leading pure-plays by spinning off its public sector
business and merging it with SRA International, Inc. (SRA). The new
company began trading as an independent public company on the New York
Stock Exchange ("NYSE") under the ticker symbol "CSRA." Concurrent with
the spin-off, CSC shareholders were paid a special dividend in aggregate
of $10.50 per share.
Returning Capital to Shareholders
During the third quarter, in addition to the special dividend associated
with the separation, CSC returned $42 million to shareholders consisting
of $32 million in common stock dividends and $10 million of share
repurchases. CSC repurchased 307,000 shares in the quarter at a weighted
average price of $32.40.
CSC had 138,816,691 basic shares outstanding on January 1, 2016.
Earnings Conference Call and Webcast
CSC senior management will host a conference call and webcast at 5 p.m.
ET today. The dial-in number for domestic callers is 866-290-0920.
Callers who reside outside of the United States or Canada should dial
913-312-0635. The passcode for all participants is 7639844. The webcast
audio and any presentation slides will be available on CSC's Investor
Relations website.
A replay of the conference call will be available from approximately two
hours after the conclusion of the call until February 16, 2016. The
replay dial-in number is 888-203-1112 for domestic callers and
719-457-0820 for callers who reside outside of the United States and
Canada. The replay passcode is also 7639844. A replay of this webcast
will also be available on CSC's website.
Non-GAAP Measures
In an effort to provide investors with additional information regarding
the Company's preliminary and unaudited results as determined by U.S.
generally accepted accounting principles (GAAP), the Company has also
disclosed in this press release preliminary non-GAAP information, and
certain further adjustments thereto, which management believes provides
useful information to investors, including: operating income, adjusted
operating income, operating and adjusted operating margin, earnings
before interest and taxes (EBIT), adjusted EBIT, EBIT and adjusted EBIT
margin, free cash flow, and non-GAAP results including non-GAAP income
(loss) from continuing operations and non-GAAP diluted earnings (loss)
per share from continuing operations. Reconciliations of the preliminary
non-GAAP measures to the respective and most directly comparable GAAP
measures, as well as the rationale for management's use of non-GAAP
measures, are included below.
About CSC
CSC (NYSE: CSC) leads clients on their digital transformation journeys.
The company provides innovative next-generation technology services and
solutions that leverage deep industry expertise, global scale,
technology independence and an extensive partner community. CSC serves
leading commercial and international public sector organizations
throughout the world. CSC is a Fortune 500 company and ranked among the
best corporate citizens. For more information, visit the company's
website at www.csc.com.
All statements in this press release and in all future press releases
that do not directly and exclusively relate to historical facts
constitute "forward-looking statements." These statements represent the
Company's intentions, plans, expectations and beliefs, and are subject
to risks, uncertainties and other factors, many of which are outside the
Company's control. These factors could cause actual results to differ
materially from such forward-looking statements. For a written
description of these factors, see the section titled "Risk Factors" in
CSC's Form 10-K for the fiscal year ended April 3, 2015 and any updating
information in subsequent SEC filings. The Company disclaims any
intention or obligation to update these forward-looking statements
whether as a result of subsequent events or otherwise, except as
required by law.
|
Business Segment Revenues, Operating Income and Operating
Margins
|
(preliminary and unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
(Amounts in millions)
|
|
|
January 1, 2016
|
|
|
January 2, 2015
|
|
|
% Change
|
|
|
% Change at Constant Currency
|
Global Business Services
|
|
|
$
|
886
|
|
|
|
$
|
965
|
|
|
|
(8.2
|
)%
|
|
|
(2.5
|
)%
|
Global Infrastructure Services
|
|
|
864
|
|
|
|
984
|
|
|
|
(12.2
|
)
|
|
|
(7.2
|
)
|
Total Revenues
|
|
|
$
|
1,750
|
|
|
|
$
|
1,949
|
|
|
|
(10.2
|
)%
|
|
|
(4.9
|
)%
|
|
|
|
|
|
|
|
Nine Months Ended
|
(Amounts in millions)
|
|
|
January 1, 2016
|
|
|
January 2, 2015
|
|
|
% Change
|
|
|
% Change at Constant Currency
|
Global Business Services
|
|
|
$
|
2,696
|
|
|
|
$
|
3,056
|
|
|
|
(11.8
|
)%
|
|
|
(4.7
|
)%
|
Global Infrastructure Services
|
|
|
2,603
|
|
|
|
3,151
|
|
|
|
(17.4
|
)
|
|
|
(11.3
|
)
|
Total Revenues
|
|
|
$
|
5,299
|
|
|
|
$
|
6,207
|
|
|
|
(14.6
|
)%
|
|
|
(8.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income and Operating Margins by
Segment
|
|
|
|
Quarter Ended
|
|
|
|
January 1, 2016
|
|
|
January 2, 2015
|
(Amounts in millions)
|
|
|
Operating Income
|
|
|
Operating Margin
|
|
|
Operating Income
|
|
|
Operating Margin
|
Global Business Services
|
|
|
$
|
101
|
|
|
|
11.4
|
%
|
|
|
$
|
128
|
|
|
|
13.3
|
%
|
Global Infrastructure Services
|
|
|
70
|
|
|
|
8.1
|
|
|
|
72
|
|
|
|
7.3
|
|
Corporate
|
|
|
(23
|
)
|
|
|
-
|
|
|
|
(22
|
)
|
|
|
-
|
|
Total Operating Income
|
|
|
$
|
148
|
|
|
|
8.5
|
%
|
|
|
$
|
178
|
|
|
|
9.1
|
%
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
January 1, 2016
|
|
|
January 2, 2015
|
(Amounts in millions)
|
|
|
Operating Income
|
|
|
Operating Margin
|
|
|
Operating Income
|
|
|
Operating Margin
|
Global Business Services
|
|
|
$
|
299
|
|
|
|
11.1
|
%
|
|
|
$
|
366
|
|
|
|
12.0
|
%
|
Global Infrastructure Services
|
|
|
187
|
|
|
|
7.2
|
%
|
|
|
211
|
|
|
|
6.7
|
%
|
Corporate & Eliminations
|
|
|
(64
|
)
|
|
|
-
|
|
|
|
(79
|
)
|
|
|
-
|
|
Total Operating Income
|
|
|
$
|
422
|
|
|
|
8.0
|
%
|
|
|
$
|
498
|
|
|
|
8.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Condensed Statements of Operations
|
(preliminary and unaudited)
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
(Amounts in millions, except per-share amounts)
|
|
|
January 1, 2016
|
|
|
January 2, 2015
|
|
|
January 1, 2016
|
|
|
January 2, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
1,750
|
|
|
|
$
|
1,949
|
|
|
|
$
|
5,299
|
|
|
|
$
|
6,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of services (excludes depreciation and amortization and
restructuring costs)
|
|
|
1,216
|
|
|
|
1,572
|
|
|
|
3,725
|
|
|
|
4,541
|
|
Selling, general and administrative (excludes SEC settlement related
charges and restructuring costs)
|
|
|
257
|
|
|
|
322
|
|
|
|
789
|
|
|
|
954
|
|
Selling, general and administrative - SEC settlement related charges
|
|
|
-
|
|
|
|
195
|
|
|
|
-
|
|
|
|
195
|
|
Depreciation and amortization
|
|
|
161
|
|
|
|
205
|
|
|
|
503
|
|
|
|
658
|
|
Restructuring costs
|
|
|
7
|
|
|
|
12
|
|
|
|
12
|
|
|
|
15
|
|
Separation costs
|
|
|
2
|
|
|
|
-
|
|
|
|
10
|
|
|
|
-
|
|
Interest expense
|
|
|
33
|
|
|
|
32
|
|
|
|
92
|
|
|
|
96
|
|
Interest income
|
|
|
(8
|
)
|
|
|
(4
|
)
|
|
|
(26
|
)
|
|
|
(14
|
)
|
Other expense (income), net
|
|
|
4
|
|
|
|
1
|
|
|
|
(3
|
)
|
|
|
5
|
|
Total costs and expenses
|
|
|
1,672
|
|
|
|
2,335
|
|
|
|
5,102
|
|
|
|
6,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, before taxes
|
|
|
78
|
|
|
|
(386
|
)
|
|
|
197
|
|
|
|
(243
|
)
|
Income tax expense (benefit)
|
|
|
63
|
|
|
|
(192
|
)
|
|
|
31
|
|
|
|
(157
|
)
|
Income (loss) from continuing operations
|
|
|
15
|
|
|
|
(194
|
)
|
|
|
166
|
|
|
|
(86
|
)
|
Income (loss) from discontinued operations, net of taxes
|
|
|
30
|
|
|
|
(119
|
)
|
|
|
216
|
|
|
|
80
|
|
Net income (loss)
|
|
|
45
|
|
|
|
(313
|
)
|
|
|
382
|
|
|
|
(6
|
)
|
Less: net income attributable to noncontrolling interest, net of tax
|
|
|
2
|
|
|
|
1
|
|
|
|
12
|
|
|
|
11
|
|
Net income (loss) attributable to CSC common stockholders
|
|
|
$
|
43
|
|
|
|
$
|
(314
|
)
|
|
|
$
|
370
|
|
|
|
$
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
$
|
0.11
|
|
|
|
$
|
(1.35
|
)
|
|
|
$
|
1.19
|
|
|
|
$
|
(0.60
|
)
|
Discontinued operations
|
|
|
0.20
|
|
|
|
(0.84
|
)
|
|
|
1.48
|
|
|
|
0.48
|
|
|
|
|
$
|
0.31
|
|
|
|
$
|
(2.19
|
)
|
|
|
$
|
2.67
|
|
|
|
$
|
(0.12
|
)
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
$
|
0.10
|
|
|
|
$
|
(1.35
|
)
|
|
|
$
|
1.17
|
|
|
|
$
|
(0.60
|
)
|
Discontinued operations
|
|
|
0.20
|
|
|
|
(0.84
|
)
|
|
|
1.45
|
|
|
|
0.48
|
|
|
|
|
$
|
0.30
|
|
|
|
$
|
(2.19
|
)
|
|
|
$
|
2.62
|
|
|
|
$
|
(0.12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividend per common share
|
|
|
$
|
2.39
|
|
|
|
$
|
0.23
|
|
|
|
$
|
2.85
|
|
|
|
$
|
0.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
138.864
|
|
|
143.279
|
|
|
138.359
|
|
|
144.346
|
|
Diluted EPS
|
|
|
141.183
|
|
|
143.279
|
|
|
141.003
|
|
|
144.346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Balance Sheet Data
|
(preliminary and unaudited)
|
|
|
|
|
|
|
|
As of
|
(Amounts in millions)
|
|
|
January 1, 2016
|
|
|
April 3, 2015
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
1,830
|
|
|
|
$
|
2,076
|
Receivables, net
|
|
|
1,691
|
|
|
|
1,678
|
Prepaid expenses and other current assets
|
|
|
412
|
|
|
|
290
|
Assets of discontinued operations - current
|
|
|
-
|
|
|
|
806
|
Total current assets
|
|
|
3,933
|
|
|
|
4,850
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
1,028
|
|
|
|
1,110
|
Software, net
|
|
|
729
|
|
|
|
718
|
Outsourcing contract costs, net
|
|
|
335
|
|
|
|
326
|
Goodwill
|
|
|
1,026
|
|
|
|
838
|
Other assets
|
|
|
977
|
|
|
|
928
|
Assets of discontinued operations - noncurrent
|
|
|
-
|
|
|
|
1,457
|
Total Assets
|
|
|
$
|
8,028
|
|
|
|
$
|
10,227
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Short-term debt and current maturities of long-term debt
|
|
|
760
|
|
|
|
883
|
Accounts payable
|
|
|
211
|
|
|
|
295
|
Accrued payroll and related costs
|
|
|
305
|
|
|
|
265
|
Accrued expenses and other current liabilities
|
|
|
800
|
|
|
|
948
|
Deferred revenue and advance contract payments
|
|
|
463
|
|
|
|
457
|
Income taxes payable and deferred income taxes
|
|
|
100
|
|
|
|
-
|
Liabilities of discontinued operations - current
|
|
|
-
|
|
|
|
691
|
Total current liabilities
|
|
|
$
|
2,639
|
|
|
|
$
|
3,539
|
|
|
|
|
|
|
|
Long-term debt, net of current maturities
|
|
|
1,909
|
|
|
|
1,635
|
Income tax liabilities and deferred income taxes
|
|
|
446
|
|
|
|
523
|
Other long-term liabilities
|
|
|
817
|
|
|
|
850
|
Liabilities of discontinued operations - noncurrent
|
|
|
-
|
|
|
|
731
|
|
|
|
|
|
|
|
Total Equity
|
|
|
2,217
|
|
|
|
2,949
|
|
|
|
|
|
|
|
Total Liabilities and Equity
|
|
|
$
|
8,028
|
|
|
|
$
|
10,227
|
Non-GAAP Financial Measures
The following tables reconcile non-GAAP financial measures of operating
income, earnings before interest and taxes (EBIT), and adjusted EBIT, to
the respective most directly comparable financial measure calculated and
presented in accordance with GAAP. Also presented below are the
Company's non-GAAP results, which exclude certain items that management
believes are not indicative of the Company's operating performance. CSC
management believes that these non-GAAP financial measures provide
useful information to investors regarding the Company's financial
condition and results of operations as they provide another measure of
the Company's profitability and ability to service its debt, and are
considered important measures by financial analysts covering CSC and its
peers.
Management uses operating income to evaluate financial performance and
it is one of the measures used in assessing management performance. One
of the limitations associated with the use of operating income (as
compared to reported earnings) is that it does not reflect the complete
financial results of the Company. CSC compensates for these limitations
by providing a reconciliation between operating income and income from
continuing operations, before taxes.
Management uses non-GAAP income from continuing operations and non-GAAP
EPS to evaluate the Company's results, excluding the impact of items
that management believes are not indicative of the Company's operating
performance. CSC compensates for the limitations of these non-GAAP
measures by providing a reconciliation from non-GAAP results to reported
results.
Adjustments to operating results include:
-
Certain CSRA overhead costs - Reflects costs historically allocated to
CSRA but not included in discontinued operations based on Accounting
Standards Codification Subtopic 205-20 "Presentation of Financial
Statements - Discontinued Operations." These costs are expected to be
largely eliminated on a prospective basis.
-
U.S. Pension and OPEB - Reflects the impact of certain U.S. pension
and other postretirement benefit (OPEB) plans historically included in
CSC's financial results that have been transferred to CSRA as part of
the previously announced separation.
-
Pension and OPEB actuarial & settlement gains (losses) - Reflects
pension and OPEB actuarial and settlement gains (losses) from
mark-to-market accounting.
-
Separation, restructuring & other transaction costs - Reflects
non-recurring costs related to CSC's (1) previously announced
separation, (2) certain special accelerated workforce optimization and
real estate charges, and (3) previously announced acquisitions.
-
SEC settlement-related items - Reflects costs associated with certain
SEC charges and settlements.
-
Tax valuation allowance & adjustments - Reflects the adjustments to
tax valuation allowances in certain jurisdictions and the application
of a 20% tax rate, for the first and second quarters, which is at the
low end of the prospective targeted effective tax rate range of 20% to
25% and effectively excludes the impact of discrete tax adjustments
for those periods.
GAAP Reconciliations
Operating Income and Adjusted Operating Income
(preliminary and unaudited)
CSC defines operating income as revenue less costs of services,
depreciation and amortization expense, restructuring costs and segment
selling, general and administrative (SG&A) expense. Operating Income, as
defined by CSC, excludes corporate G&A, actuarial and settlement gains
(losses) related to CSC's pension and OPEB plans, and separation costs.
Operating margin is defined as operating income as a percentage of
revenue.
Adjusted operating income is computed by excluding from operating income
certain CSRA overhead costs, U.S. Pension and OPEB, and separation,
restructuring & other transaction costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of consolidated operating income to income from
continuing operations, before taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
(Amounts in millions)
|
|
|
January 1,
2016
|
|
|
January 2,
2015
|
|
|
January 1,
2016
|
|
|
January 2,
2015
|
Adjusted Operating income
|
|
|
$
|
190
|
|
|
|
$
|
174
|
|
|
|
$
|
494
|
|
|
|
$
|
491
|
|
Certain CSRA overhead costs
|
|
|
|
(12
|
)
|
|
|
|
(9
|
)
|
|
|
|
(48
|
)
|
|
|
|
(31
|
)
|
U.S. Pension & OPEB
|
|
|
|
10
|
|
|
|
|
13
|
|
|
|
|
38
|
|
|
|
|
38
|
|
Separation, restructuring & other transaction costs
|
|
|
|
(40
|
)
|
|
|
|
-
|
|
|
|
|
(62
|
)
|
|
|
|
-
|
|
Operating income
|
|
|
$
|
148
|
|
|
|
$
|
178
|
|
|
|
$
|
422
|
|
|
|
$
|
498
|
|
Corporate G&A
|
|
|
|
(58
|
)
|
|
|
|
(55
|
)
|
|
|
|
(171
|
)
|
|
|
|
(173
|
)
|
Pension & OPEB actuarial & settlement gains (losses)
|
|
|
|
19
|
|
|
|
|
(285
|
)
|
|
|
|
19
|
|
|
|
|
(286
|
)
|
SEC settlement related charges
|
|
|
|
-
|
|
|
|
|
(195
|
)
|
|
|
|
-
|
|
|
|
|
(195
|
)
|
Separation costs
|
|
|
|
(2
|
)
|
|
|
|
-
|
|
|
|
|
(10
|
)
|
|
|
|
-
|
|
Interest expense
|
|
|
|
(33
|
)
|
|
|
|
(32
|
)
|
|
|
|
(92
|
)
|
|
|
|
(96
|
)
|
Interest income
|
|
|
|
8
|
|
|
|
|
4
|
|
|
|
|
26
|
|
|
|
|
14
|
|
Other (expense) income, net
|
|
|
|
(4
|
)
|
|
|
|
(1
|
)
|
|
|
|
3
|
|
|
|
|
(5
|
)
|
Income from continuing operations before taxes
|
|
|
$
|
78
|
|
|
|
$
|
(386
|
)
|
|
|
$
|
197
|
|
|
|
$
|
(243
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating margin
|
|
|
|
10.9
|
%
|
|
|
|
8.9
|
%
|
|
|
|
9.3
|
%
|
|
|
|
7.9
|
%
|
Operating margin
|
|
|
|
8.5
|
%
|
|
|
|
9.1
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Before Interest and Taxes and
Adjusted Earnings Before Interest and Taxes
|
(preliminary and unaudited)
|
|
EBIT is defined as income from continuing operations less interest
expense, interest income and income tax expense. EBIT margin is
defined as EBIT as a percentage of revenue.
|
|
Adjusted EBIT is computed by excluding from EBIT the impact of
certain items in the third quarter and first nine months of fiscal
2016, including certain CSRA overhead costs, U.S. pension and OPEB,
separation, restructuring & other transaction costs, SEC settlement
related charges, and pension and OPEB actuarial & settlement gains
(losses). Adjusted EBIT margin is computed as adjusted EBIT as a
percentage of revenue.
|
|
A reconciliation of adjusted EBIT and EBIT to income from continuing
operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Year to date
|
(Amounts in millions)
|
|
|
January 1,
2016
|
|
|
January 2,
2015
|
|
|
January 1,
2016
|
|
|
January 2,
2015
|
Adjusted EBIT
|
|
|
$
|
147
|
|
|
|
$
|
137
|
|
|
|
$
|
375
|
|
|
|
$
|
362
|
|
Certain CSRA overhead costs
|
|
|
|
(22
|
)
|
|
|
|
(28
|
)
|
|
|
|
(88
|
)
|
|
|
|
(80
|
)
|
U.S. Pension & OPEB
|
|
|
|
10
|
|
|
|
|
13
|
|
|
|
|
38
|
|
|
|
|
38
|
|
Separation, restructuring & other transaction costs
|
|
|
|
(51
|
)
|
|
|
|
-
|
|
|
|
|
(81
|
)
|
|
|
|
-
|
|
SEC settlement related charges
|
|
|
|
-
|
|
|
|
|
(195
|
)
|
|
|
|
-
|
|
|
|
|
(195
|
)
|
Pension & OPEB actuarial & settlement gains (losses)
|
|
|
|
19
|
|
|
|
|
(285
|
)
|
|
|
|
19
|
|
|
|
|
(286
|
)
|
EBIT
|
|
|
$
|
103
|
|
|
|
$
|
(358
|
)
|
|
|
$
|
263
|
|
|
|
$
|
(161
|
)
|
Interest expense
|
|
|
|
(33
|
)
|
|
|
|
(32
|
)
|
|
|
|
(92
|
)
|
|
|
|
(96
|
)
|
Interest income
|
|
|
|
8
|
|
|
|
|
4
|
|
|
|
|
26
|
|
|
|
|
14
|
|
Income tax (expense) benefit
|
|
|
|
(63
|
)
|
|
|
|
192
|
|
|
|
|
(31
|
)
|
|
|
|
157
|
|
Income from continuing operations
|
|
|
$
|
15
|
|
|
|
$
|
(194
|
)
|
|
|
$
|
166
|
|
|
|
$
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBIT margin
|
|
|
|
8.4
|
%
|
|
|
|
7.0
|
%
|
|
|
|
7.1
|
%
|
|
|
|
5.8
|
%
|
EBIT margin
|
|
|
|
5.9
|
%
|
|
|
|
(18.4
|
)%
|
|
|
|
5.0
|
%
|
|
|
|
(2.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Segment Operating Income and Operating Margin
|
(preliminary and unaudited)
|
|
Adjusted operating income is computed by excluding from operating
income certain CSRA overhead costs, U.S. Pension and OPEB, and
separation, restructuring & other transaction costs. Reconciliations
of adjusted operating income to operating income, for the quarter
and nine months ended January 1, 2016, are as follows:
|
|
|
|
|
Quarter Ended January 1, 2016
|
(Amounts in millions)
|
|
|
Operating income
|
|
|
Certain CSRA overhead costs
|
|
|
U.S. Pension & OPEB
|
|
|
Separation, restructuring & other transaction costs
|
|
|
Adjusted operating income
|
|
|
Adjusted operating margin
|
Global Business Solutions
|
|
|
$
|
101
|
|
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
|
18
|
|
|
$
|
116
|
|
|
|
13.1
|
%
|
Global Infrastructure Services
|
|
|
|
70
|
|
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
|
16
|
|
|
|
79
|
|
|
|
9.1
|
|
Corporate
|
|
|
|
(23
|
)
|
|
|
|
12
|
|
|
|
-
|
|
|
|
|
6
|
|
|
|
(5
|
)
|
|
|
|
Total
|
|
|
$
|
148
|
|
|
|
$
|
12
|
|
|
$
|
(10
|
)
|
|
|
$
|
40
|
|
|
$
|
190
|
|
|
|
10.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended January 1, 2016
|
(Amounts in millions)
|
|
|
Operating income
|
|
|
Certain CSRA overhead costs
|
|
|
U.S. Pension & OPEB
|
|
|
Separation, restructuring & other transaction costs
|
|
|
Adjusted operating income
|
|
|
Adjusted operating margin
|
Global Business Solutions
|
|
|
$
|
299
|
|
|
|
$
|
-
|
|
|
$
|
(11
|
)
|
|
|
$
|
31
|
|
|
$
|
319
|
|
|
|
11.8
|
%
|
Global Infrastructure Services
|
|
|
|
187
|
|
|
|
|
-
|
|
|
|
(27
|
)
|
|
|
|
25
|
|
|
|
185
|
|
|
|
7.1
|
|
Corporate
|
|
|
|
(64
|
)
|
|
|
|
48
|
|
|
|
-
|
|
|
|
|
6
|
|
|
|
(10
|
)
|
|
|
|
Total
|
|
|
$
|
422
|
|
|
|
$
|
48
|
|
|
$
|
(38
|
)
|
|
|
$
|
62
|
|
|
$
|
494
|
|
|
|
9.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Results
|
(preliminary and unaudited)
|
|
Non-GAAP results are financial measures calculated by excluding
certain items, which management believes are not indicative of the
Company's operating performance. A reconciliation of select non-GAAP
results to reported results is as follows:
|
|
|
|
|
Quarter ended January 1, 2016
|
(Amounts in millions, except per-share amounts)
|
|
|
As reported
|
|
|
Certain CSRA overhead costs
|
|
|
U.S. Pension & OPEB
|
|
|
Separation, restructuring & other transaction costs
|
|
|
Pension & OPEB actuarial & settlement gains
|
|
|
Tax valuation allowance & adjustments
|
|
|
Non-GAAP results
|
Costs of services (excludes depreciation and amortization and
restructuring costs)
|
|
|
$
|
1,216
|
|
|
|
$
|
(7
|
)
|
|
|
$
|
8
|
|
|
$
|
(5
|
)
|
|
|
$
|
16
|
|
|
$
|
-
|
|
|
|
$
|
1,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative (excludes restructuring costs)
|
|
|
$
|
257
|
|
|
|
$
|
(15
|
)
|
|
|
$
|
2
|
|
|
$
|
(13
|
)
|
|
|
$
|
3
|
|
|
$
|
-
|
|
|
|
$
|
234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, before taxes
|
|
|
$
|
78
|
|
|
|
$
|
(22
|
)
|
|
|
$
|
10
|
|
|
$
|
(53
|
)
|
|
|
$
|
19
|
|
|
$
|
-
|
|
|
|
$
|
124
|
|
Income tax expense (benefit)
|
|
|
|
63
|
|
|
|
|
(8
|
)
|
|
|
|
4
|
|
|
|
(17
|
)
|
|
|
|
6
|
|
|
|
54
|
|
|
|
|
24
|
|
Income (loss) from continuing operations
|
|
|
$
|
15
|
|
|
|
$
|
(14
|
)
|
|
|
$
|
6
|
|
|
$
|
(36
|
)
|
|
|
$
|
13
|
|
|
$
|
(54
|
)
|
|
|
$
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
$
|
45
|
|
|
|
$
|
(14
|
)
|
|
|
$
|
6
|
|
|
$
|
(36
|
)
|
|
|
$
|
13
|
|
|
$
|
(54
|
)
|
|
|
$
|
130
|
|
Less: net income attributable to noncontrolling interest, net of tax
|
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2
|
|
Net income (loss) attributable to CSC common stockholders
|
|
|
$
|
43
|
|
|
|
$
|
(14
|
)
|
|
|
$
|
6
|
|
|
$
|
(36
|
)
|
|
|
$
|
13
|
|
|
$
|
(54
|
)
|
|
|
$
|
128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
|
80.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS from continuing operations
|
|
|
$
|
0.11
|
|
|
|
$
|
(0.10
|
)
|
|
|
$
|
0.04
|
|
|
$
|
(0.26
|
)
|
|
|
$
|
0.09
|
|
|
$
|
(0.39
|
)
|
|
|
$
|
0.72
|
|
Diluted EPS from continuing operations
|
|
|
$
|
0.10
|
|
|
|
$
|
(0.10
|
)
|
|
|
$
|
0.04
|
|
|
$
|
(0.25
|
)
|
|
|
$
|
0.09
|
|
|
$
|
(0.38
|
)
|
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
138.864
|
|
|
|
|
138.864
|
|
|
|
|
138.864
|
|
|
|
138.864
|
|
|
|
|
138.864
|
|
|
|
138.864
|
|
|
|
|
138.864
|
|
Diluted EPS
|
|
|
|
141.183
|
|
|
|
|
141.183
|
|
|
|
|
141.183
|
|
|
|
141.183
|
|
|
|
|
141.183
|
|
|
|
141.183
|
|
|
|
|
141.183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended January 1, 2016
|
(Amounts in millions, except per-share amounts)
|
|
|
As reported
|
|
|
Certain CSRA overhead costs
|
|
|
U.S. Pension & OPEB
|
|
|
Separation, restructuring & other transaction costs
|
|
|
Pension & OPEB actuarial & settlement gains
|
|
|
SEC settlement -related items
|
|
|
Tax valuation allowance & adjustments
|
|
|
Non-GAAP results
|
Costs of services (excludes depreciation and amortization and
restructuring costs)
|
|
|
$
|
3,725
|
|
|
|
$
|
(41
|
)
|
|
|
$
|
32
|
|
|
$
|
(5
|
)
|
|
|
$
|
16
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
|
$
|
3,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative (excludes restructuring costs)
|
|
|
$
|
789
|
|
|
|
$
|
(47
|
)
|
|
|
$
|
6
|
|
|
$
|
(15
|
)
|
|
|
$
|
3
|
|
|
$
|
(5
|
)
|
|
|
$
|
-
|
|
|
|
$
|
731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, before taxes
|
|
|
$
|
197
|
|
|
|
$
|
(88
|
)
|
|
|
$
|
38
|
|
|
$
|
(83
|
)
|
|
|
$
|
19
|
|
|
$
|
(5
|
)
|
|
|
$
|
-
|
|
|
|
$
|
316
|
|
Income tax expense (benefit)
|
|
|
|
31
|
|
|
|
|
(34
|
)
|
|
|
|
15
|
|
|
|
(27
|
)
|
|
|
|
6
|
|
|
(2
|
)
|
|
|
|
10
|
|
|
|
|
63
|
|
Income (loss) from continuing operations
|
|
|
$
|
166
|
|
|
|
$
|
(54
|
)
|
|
|
$
|
23
|
|
|
$
|
(56
|
)
|
|
|
$
|
13
|
|
|
$
|
(3
|
)
|
|
|
$
|
(10
|
)
|
|
|
$
|
253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
$
|
382
|
|
|
|
$
|
(54
|
)
|
|
|
$
|
23
|
|
|
$
|
(56
|
)
|
|
|
$
|
13
|
|
|
$
|
(3
|
)
|
|
|
$
|
(10
|
)
|
|
|
$
|
469
|
|
Less: net income attributable to noncontrolling interest, net of tax
|
|
|
|
12
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
12
|
|
Net income (loss) attributable to CSC common stockholders
|
|
|
$
|
370
|
|
|
|
$
|
(54
|
)
|
|
|
$
|
23
|
|
|
$
|
(56
|
)
|
|
|
$
|
13
|
|
|
$
|
(3
|
)
|
|
|
$
|
(10
|
)
|
|
|
$
|
457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
|
15.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS from continuing operations
|
|
|
$
|
1.19
|
|
|
|
$
|
(0.39
|
)
|
|
|
$
|
0.17
|
|
|
$
|
(0.40
|
)
|
|
|
$
|
0.09
|
|
|
$
|
(0.02
|
)
|
|
|
$
|
(0.07
|
)
|
|
|
$
|
1.82
|
|
Diluted EPS from continuing operations
|
|
|
$
|
1.17
|
|
|
|
$
|
(0.38
|
)
|
|
|
$
|
0.16
|
|
|
$
|
(0.40
|
)
|
|
|
$
|
0.09
|
|
|
$
|
(0.02
|
)
|
|
|
$
|
(0.07
|
)
|
|
|
$
|
1.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
138.359
|
|
|
|
|
138.359
|
|
|
|
|
138.359
|
|
|
|
138.359
|
|
|
|
|
138.359
|
|
|
|
138.359
|
|
|
|
|
138.359
|
|
|
|
|
138.359
|
|
Diluted EPS
|
|
|
|
141.003
|
|
|
|
|
141.003
|
|
|
|
|
141.003
|
|
|
|
141.003
|
|
|
|
|
141.003
|
|
|
|
141.003
|
|
|
|
|
141.003
|
|
|
|
|
141.003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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