==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 29, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File No. 1-4850
COMPUTER SCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 95-2043126
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2100 East Grand Avenue
El Segundo, California 90245
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (310) 615-0311
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
168,605,970 shares of Common Stock, $1.00 par value, were outstanding on
January 26, 2001.
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COMPUTER SCIENCES CORPORATION
Index to Form 10-Q
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Income, Third Quarter and
Nine Months Ended December 29, 2000 and December 31, 1999 ...... 3
Consolidated Condensed Balance Sheets,
December 29, 2000 and March 31, 2000 ........................... 4
Consolidated Condensed Statements of Cash Flows,
Nine Months Ended December 29, 2000 and December 31, 1999 ...... 5
Notes to Consolidated Condensed Financial Statements .............. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ............ 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk ... 16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................. 17
2
PART I, ITEM 1. FINANCIAL STATEMENTS
COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (unaudited)
Third Quarter Ended Nine Months Ended
---------------------- ----------------------
(In millions except Dec. 29, Dec. 31, Dec. 29, Dec. 31,
per share amounts) 2000 1999 2000 1999
---------- ---------- ---------- ----------
Revenues $2,664.7 $2,360.1 $7,626.9 $6,795.5
-------- -------- -------- --------
Costs of services 2,085.8 1,843.1 6,033.2 5,353.7
Selling, general
and administrative 206.0 192.6 580.4 581.8
Depreciation and
amortization 166.9 145.4 467.0 393.8
Interest expense 27.8 14.4 67.6 42.7
Interest income (5.1) (4.3) (12.7) (13.7)
Special items 84.2 41.1 84.2 41.1
-------- -------- -------- --------
Total costs and expenses 2,565.6 2,232.3 7,219.7 6,399.4
-------- -------- -------- --------
Income before taxes 99.1 127.8 407.2 396.1
Taxes on income 33.5 45.5 136.6 136.1
-------- -------- -------- --------
Net income $ 65.6 $ 82.3 $ 270.6 $ 260.0
======== ======== ======== ========
Earnings per share (note A):
Basic $ 0.39 $ 0.49 $ 1.61 $ 1.57
======== ======== ======== ========
Diluted $ 0.38 $ 0.48 $ 1.58 $ 1.54
======== ======== ======== ========
[FN]
See accompanying notes.
3
COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
Dec. 29, March 31,
(In millions) 2000 2000
----------- -----------
(unaudited)
ASSETS
Cash and cash equivalents $ 171.3 $ 260.4
Receivables 2,831.7 2,191.5
Prepaid expenses and other current assets 433.1 314.4
-------- --------
Total current assets 3,436.1 2,766.3
-------- --------
Property and equipment, net 1,550.1 1,274.9
Outsourcing contract costs, net 520.3 374.6
Software, net 245.8 267.6
Other assets 1,247.6 287.5
Excess of cost of businesses acquired over
related net assets, net 986.2 903.2
-------- --------
Total assets $7,986.1 $5,874.1
======== ========
LIABILITIES
Short-term debt and current
maturities of long-term debt $1,210.7 $ 249.2
Accounts payable 470.3 406.9
Accrued payroll and related costs 514.8 485.8
Other accrued expenses 872.0 598.5
Deferred revenue 184.4 137.1
Income taxes payable 154.8 106.4
-------- --------
Total current liabilities 3,407.0 1,983.9
-------- --------
Long-term debt, net 1,071.5 652.4
Other long-term liabilities 207.7 193.8
STOCKHOLDERS' EQUITY (note C)
Common stock issued, par value $1.00 per share 168.9 167.9
Additional paid in capital 957.3 907.1
Earnings retained for use in business 2,331.7 2,061.1
Accumulated other comprehensive loss (note E) (140.5) (75.8)
Less common stock in treasury (17.4) (16.1)
Unearned restricted stock and other (.1) (.2)
-------- --------
Total stockholders' equity 3,299.9 3,044.0
-------- --------
Total liabilities and stockholders' equity $7,986.1 $5,874.1
======== ========
[FN]
See accompanying notes.
4
COMPUTER SCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
Nine Months Ended
-----------------------
(In millions) Dec. 29, Dec. 31,
2000 1999
---------- ----------
Cash flows from operating activities:
Net income $ 270.6 $ 260.0
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization and other
non-cash charges 469.8 395.4
Special items, net of tax 42.9 19.2
Changes in assets and liabilities, net of
effects of acquisitions:
Increase in assets (650.5) (230.2)
Decrease in liabilities 217.6 48.8
-------- --------
Net cash provided by operating activities 350.4 493.2
-------- --------
Investing activities:
Purchases of property and equipment (579.1) (409.3)
Acquisitions, net of cash acquired (688.1) (193.1)
Outsourcing contracts (260.8) (157.3)
Software (93.0) (60.9)
Other investing cash flows 6.8 14.9
-------- --------
Net cash used in investing activities (1,614.2) (805.7)
-------- --------
Financing activities:
Borrowings under commercial paper, net 788.2 86.2
Borrowings under lines of credit, net 97.8 2.6
Proceeds from debt issuance 500.0
Principal payments on long-term debt (8.5) (171.7)
Repayment of Mynd Corporation debt (243.0)
Proceeds from stock option transactions 31.6 42.8
Other financing cash flows 9.8 (10.2)
-------- --------
Net cash provided by (used in) financing activities 1,175.9 (50.3)
-------- --------
Effect of exchange rate changes on cash
and cash equivalents (1.2) (3.6)
-------- --------
Net decrease in cash and cash equivalents (89.1) (366.4)
Cash and cash equivalents at beginning of year 260.4 617.9
Effect of pooling restatement (12.1)
-------- --------
Cash and cash equivalents at end of period $ 171.3 $ 239.4
======== ========
[FN]
See accompanying notes.
5
COMPUTER SCIENCES CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
(A) Basic and diluted earnings per share are calculated as follows (in
millions except per share amounts):
Third Quarter Ended
--------------------------------
Dec. 29, 2000 Dec. 31, 1999
------------- -------------
Net income $ 65.6 $ 82.3
====== ======
Common share information:
Average common shares outstanding
for basic EPS 168.431 166.574
Dilutive effect of stock options 2.370 3.330
------- -------
Shares for diluted EPS 170.801 169.904
======= =======
Basic EPS $ 0.39 $ 0.49
Diluted EPS 0.38 0.48
Nine Months Ended
--------------------------------
Dec. 29, 2000 Dec. 31, 1999
------------- -------------
Net income $270.6 $260.0
====== ======
Common share information:
Average common shares outstanding
for basic EPS 168.133 165.972
Dilutive effect of stock options 2.798 3.376
------- -------
Shares for diluted EPS 170.931 169.348
======= =======
Basic EPS $ 1.61 $ 1.57
Diluted EPS 1.58 1.54
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 128, the computation of diluted EPS did not include stock options
which were antidilutive, as their exercise price was greater than the
average market price of the common stock of Computer Sciences Corporation
("CSC" or the "Company") during the quarter. The number of such options
was 2,413,481 and 219,738 at December 29, 2000 and December 31, 1999,
respectively.
6
(B) Included in the consolidated condensed balance sheets are the following
accumulated depreciation and amortization amounts:
Dec. 29, 2000 March 31, 2000
------------- --------------
Property and equipment $1,656.2 $1,469.3
Outsourcing contract costs 237.2 189.3
Software 225.0 199.1
Excess of cost of businesses acquired
over related net assets 189.2 155.3
(C) No dividends were paid during the periods presented. At December 29, 2000
and March 31, 2000, there were 168,952,520 and 167,903,047 shares,
respectively, of $1.00 par value common stock issued, and 412,617 and
394,915 shares, respectively, of treasury stock.
(D) Cash payments for interest on indebtedness were $46.3 million and $43.7
million for the nine months ended December 29, 2000 and December 31,
1999, respectively. Cash payments for taxes on income were $31.5 million
and $43.4 million for the nine months ended December 29, 2000 and
December 31, 1999, respectively.
(E) The components of comprehensive income, net of tax, are as follows
(in millions):
Third Quarter Ended
--------------------------------
Dec. 29, 2000 Dec. 31, 1999
------------- -------------
Net income $ 65.6 $ 82.3
Foreign currency translation adjustment 29.7 (14.5)
Unrealized loss on available for sale
securities (3.2)
------ ------
Comprehensive income $ 92.1 $ 67.8
====== ======
Nine Months Ended
--------------------------------
Dec. 29, 2000 Dec. 31, 1999
------------- -------------
Net income $270.6 $260.0
Foreign currency translation adjustment (57.9) (12.6)
Unrealized loss on available for sale
securities (6.8)
------ ------
Comprehensive income $205.9 $247.4
====== ======
7
Accumulated other comprehensive loss presented on the accompanying
consolidated condensed balance sheets consists of accumulated foreign
currency translation adjustments, minimum pension liability adjustments,
and net unrealized gains on available for sale securities.
(F) The Company's business involves operations which provide management and
information technology consulting, systems integration and outsourcing.
Based on the criteria of SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," CSC has two reportable segments: the
U.S. Federal Sector and the Global Commercial Sector. The U.S. Federal
Sector operates principally within a regulatory environment subject to
governmental contracting and accounting requirements, including Federal
Acquisition Regulations, Cost Accounting Standards and audits by various
U.S. Federal agencies. The U.S. Federal Sector revenue reported below
will vary from U.S. Federal government revenue presented elsewhere in this
report due to overlapping activities between segments and reflects a
realignment of intersegment activities to attribute operating results to
the performing segment. Information on reportable segments is as follows
(in millions):
Global U.S.
Commercial Federal
Sector Sector Corporate Total
---------- -------- --------- --------
Third Quarter Ended
December 29, 2000
Revenues $2,027.9 $ 636.5 $ .3 $2,664.7
Earnings (loss) before
special items, interest
and taxes 171.8 39.0 (4.8) 206.0
Special items 77.4 6.8 84.2
Earnings (loss) before
interest and taxes 94.4 39.0 (11.6) 121.8
Third Quarter Ended
December 31, 1999
Revenues $1,808.5 $ 549.2 $ 2.4 $2,360.1
Earnings (loss) before
special items, interest
and taxes 146.8 31.4 .8 179.0
Special items 18.3 11.5 11.3 41.1
Earnings (loss) before
interest and taxes 128.5 19.9 (10.5) 137.9
8
Global U.S.
Commercial Federal
Sector Sector Corporate Total
---------- -------- --------- --------
Nine Months Ended
December 29, 2000
Revenues $5,732.7 $1,893.6 $ .6 $7,626.9
Earnings (loss) before
special items, interest
and taxes 429.5 131.1 (14.3) 546.3
Special items 77.4 6.8 84.2
Earnings (loss) before
special items, interest
and taxes 352.1 131.1 (21.1) 462.1
Nine Months Ended
December 31, 1999
Revenues $5,137.3 $1,655.0 $ 3.2 $6,795.5
Earnings (loss) before
special items, interest
and taxes 376.1 93.2 (3.1) 466.2
Special items 18.3 11.5 11.3 41.1
Earnings (loss) before
special items, interest
and taxes 357.8 81.7 (14.4) 425.1
(G) In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement requires all derivatives to be recorded on
the balance sheet at fair value and establishes accounting standards for
hedging activities. This statement was subsequently amended by SFAS 137
(June 1999) and SFAS 138 (June 2000). As amended, this statement is
effective for fiscal years beginning after June 15, 2000. The Company is
currently assessing the impact this statement will have and, based on
preliminary estimates, does not expect the adoption to have a material
impact on its consolidated financial position or results of operations.
(H) The Company has reviewed Securities and Exchange Commission Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." As the Company's revenue recognition practices were
consistent with SAB No. 101, it had no impact on the Company's
consolidated financial statements.
(I) During December 2000, CSC completed the acquisition of all of the
outstanding equity securities of Mynd Corporation ("Mynd"), formally known
as Policy Management Systems Corporation, for a purchase price of $573
million. In addition, CSC assumed $243 million of outstanding Mynd debt.
Mynd is a provider of systems, services, sourcing and e-business solutions
to the global insurance and related financial services industries. The
purchase price allocation has not been finalized pending completion of
appropriate tangible and intangible asset appraisals. Therefore, the
December 29, 2000 consolidated condensed balance sheet reflects Mynd's
long-term assets as a component of "Other assets;" Mynd's current assets
and current liabilities are reflected in their appropriate balance sheet
accounts.
9
(J) The results for the third quarter ended December 29, 2000 include special
items of $84.2 million ($57.3 million after tax). In connection with the
Mynd acquisition, the Company reviewed its global financial services
operations, product strategies and the carrying value of its applicable
assets. The global financial services charge is comprised of $58.2
million related to non-cash adjustments to the carrying value of
capitalized software and the write-off of other assets and intangibles;
and $16.6 million related to employee severance costs of 800 financial
services employees. As of December 29, 2000, approximately $5.9 million
of severance costs had been paid. Upon completion of the integration of
Mynd into the Company's global financial services operations, the Company
may be required to record additional special items in the fourth quarter
of fiscal 2001. The special charge also includes $9.4 million related to
a legal settlement and the write-off of assets from operations previously
sold or phased-out.
The special items of $41.1 million ($29.8 million after tax) recorded
during the third quarter ended December 31, 1999 resulted from merger-
related charges and other transaction costs of $39.1 million ($28.5
million after tax) associated with the November 16, 1999 acquisition of
Nichols Research Corporation (Nichols), and other costs, net of
recoveries, of $2 million ($1.3 million after tax) associated with the
Company's fiscal 1998 response to a failed take-over attempt. The Nichols
charge is comprised of $9.3 million for investment banking and other
transaction expenses; $23.5 million related to the write-off of
capitalized software and the write-off of other assets and intangibles;
and $6.3 million related to employee severance and elimination of
duplicate facilities.
(K) The financial information reported, which is not necessarily indicative of
the results for a full year, is unaudited but includes all adjustments
which the Company considers necessary for a fair presentation. All such
adjustments are normal recurring adjustments. Certain reclassifications
have been made to the prior year's financial statements and notes in order
to conform to the current presentation.
10
PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Third Quarter and First Nine Months of Fiscal 2001 versus
Third Quarter and First Nine Months of Fiscal 2000
Revenues
During the third quarter ended December 29, 2000, the Company's total revenues
increased 12.9%, or $304.6 million, over the same period last year.
Global commercial sector revenue grew 12.1%, or $219.2 million over the same
quarter of last year. Global commercial revenue growth was negatively
impacted by approximately 8 percentage points as a result of currency
fluctuations, primarily in Europe and Australia.
U.S. Commercial revenue grew 11.9%, or $107.7 million to $1,010.8 million
during the third quarter of fiscal 2001 over the same period last year. The
growth was principally driven by major recent information technology
outsourcing ("IT") contracts announced during the past year, including Nortel
Networks, AT&T, United Technologies Corporation and Equiva.
European revenue of $703.4 million for the third quarter was up 7.5% from the
$654.3 million reported in the corresponding period last year. The revenue
growth was predominantly driven by outsourcing activities. Revenue growth was
negatively impacted by about 17 percentage points as a result of the impact of
European currency fluctuations.
Other international revenue for the third quarter grew 24.8% to $313.7
million. The increase was principally the result of a recent outsourcing
award in Australia from the Broken Hill Proprietary Company and the
acquisition of its IT services business unit. Currency fluctuations,
principally in Australia, negatively impacted other international revenue
growth by about 14 percentage points.
U.S. Federal sector revenue increased 15.9% to $636.5 million during the third
quarter. Revenue gains were generated by increases from both civil agencies
and Department of Defense activities. The federal growth for the quarter was
principally associated with several recent awards including the Army's
Logistics Modernization contract, the IRS modernization program and GSA
activities.
For the first nine months of fiscal 2001, the Company's total revenue
increased 12.2%, or 17% in constant currency and the Company announced new
Global Commercial and Federal business awards of $9.4 billion. The Company's
continued growth has created a broad, long-term global revenue base across
numerous customers, industries, geographic regions and service offerings.
11
Costs and Expenses
The Company's costs and expenses before special items are as follows
(dollars in millions):
Dollar Amount Percentage of Revenue
-------------- ---------------------------------
Third Quarter Third Quarter First Nine Months
-------------- -------------- -----------------
Fiscal Fiscal Fiscal
------------------ -------------- ----------------
2001 2000 2001 2000 2001 2000
-------- -------- ------ ------ ------ ------
Costs of services $2,085.8 $1,843.1 78.3% 78.1% 79.1% 78.8%
Selling, general
& administration 206.0 192.6 7.7 8.1 7.6 8.6
Depreciation and
amortization 166.9 145.4 6.3 6.2 6.1 5.8
Interest expense, net 22.7 10.1 .8 .4 .7 .4
-------- -------- ------ ------ ------ ------
Total $2,481.4 $2,191.2 93.1% 92.8% 93.5% 93.6%
======== ======== ====== ====== ====== ======
Comparing the third quarter of fiscal 2001 to fiscal 2000, total costs and
expenses increased as a percentage of revenue. Increases in costs of services
and interest expense were partially offset by lower selling, general and
administrative expenses.
The increase in costs of services as a percentage of revenue was primarily the
result of higher labor costs experienced within our U.S. and Australian
consulting operations due principally to severance costs of approximately $6
million incurred during the quarter. The increase in net interest expense was
due to a combination of an increase in the level of borrowings outstanding and
higher interest rates on borrowings. Lower selling, general and
administrative expenses as a percentage of revenue were principally related to
continued focus on aggressive cost containment across the Company.
Comparing the first nine months of fiscal 2001 to fiscal 2000, total cost and
expenses improved as a percentage of revenue primarily related to lower
selling, general and administrative expenses as a percentage of revenue due to
integration synergies achieved as a result of the Nichols Research Corporation
acquisition and the focus on aggressive cost containment.
Special items
The results for the third quarter ended December 29, 2000 include special
items of $84.2 million ($57.3 million after tax). In connection with the Mynd
acquisition, the Company reviewed its global financial services operations,
product strategies and the carrying value of its applicable assets. The
global financial services charge is comprised of $58.2 million related to non-
cash adjustments to the carrying value of capitalized software and the write-
off of other assets and intangibles; and $16.6 million related to employee
severance costs. Upon completion of the integration of Mynd into the
Company's global financial services operations, the Company may be required to
record additional special items in the fourth quarter of fiscal 2001. The
12
special charge also includes $9.4 million related to a legal settlement and
the write-off of assets from operations previously sold or phased-out.
The special items of $41.1 million ($29.8 million after tax) recorded during
the third quarter ended December 31, 1999 resulted from merger-related charges
and other transaction costs of $39.1 million ($28.5 million after tax)
associated with the November 16, 1999 acquisition of Nichols Research
Corporation (Nichols), and other costs, net of recoveries, of $2 million ($1.3
million after tax) associated with the Company's fiscal 1998 response to a
failed take-over attempt. The Nichols charge is comprised of $9.3 million for
investment banking and other transaction expenses; $23.5 million related to
the write-off of capitalized software and the write-off of other assets and
intangibles; and $6.3 million related to employee severance and elimination of
duplicate facilities.
Income Before Taxes
Due to the Company's revenue growth, income before special items and taxes
increased $14.4 million to $183.3 million, up 8.5% over the same quarter last
year. The resulting margin before special items was 6.9% compared to 7.2% for
last year's third quarter and was 6.4% for both the nine months of fiscal 2001
and fiscal 2000, respectively.
Net Income
Earnings before special items were $122.9 million for the third quarter of
fiscal 2001, up $10.7 million, or 9.6%, over last year's third quarter. This
year's third quarter diluted earnings per share before special items of 72
cents increased 9.1% over last year's third quarter diluted earnings per share
before special items of 66 cents. On a year to date basis, diluted earnings
per share before special items was $1.92, up 21 cents, or 12.3%, over the
comparable period for the prior year.
Cash Flows
Cash provided by operating activities was $350.4 million for the nine months
ended December 29, 2000, compared with $493.2 million during the same period
last year. The decrease of $142.8 million primarily resulted from changes in
working capital partially offset by an increase in earnings and non-cash
depreciation and amortization expenses.
The Company's cash expenditures for investing activities totaled $1,614.2
million for the most recent nine months versus $805.7 million during the same
period of last year. The increase principally relates to the Mynd acquisition
and other acquisition activity, primarily in Europe and Australia, and
purchases of outsourcing assets and property and equipment across the Company.
Cash provided by financing activities was $1,175.9 million for the most recent
nine months versus cash used for financing activities of $50.3 million for the
same period a year ago. The change is principally the result of an increase
in borrowings associated with the Mynd acquisition and the ramp up of recent
outsourcing awards and acquisition activity in fiscal 2001. Fiscal 2000
activity reflects the repayment of the Company's $150 million 6.80% notes due
April 1999.
13
Financial Condition
During the first nine months of fiscal 2001, the Company's capital outlays
included $1,528 million of business investments in the form of fixed asset
purchases, acquisitions and outsourcing awards. These investments were funded
from additional borrowings and existing cash balances, which decreased from
$260.4 million to $171.3 million. The Company's debt-to-total capitalization
ratio increased from 22.9% at fiscal 2000 year end (March 31, 2000) to 40.9%
at December 29, 2000 principally due to the previously mentioned additional
borrowings.
During the third quarter of fiscal 2001, the Company filed a shelf
registration statement for up to $1 billion of debt and/or equity securities.
During the second quarter of 2001, the Company sold $500 million of 7.50%
notes due August 2005 and used the proceeds for general corporate purposes,
including the reduction of outstanding commercial paper instruments.
The Company has an option to require a subsidiary of Equifax Inc. to purchase
the Company's credit reporting business as further described in Note 11 of the
Company's Annual Report on Form 10-K, as amended, for fiscal 2000. The
exercise price of this put option is equal to the appraised value of the
business.
It is management's opinion that the Company will be able to meet its liquidity
and cash needs for the foreseeable future through a combination of cash flows
from operating activities, cash balances, unused borrowing capacity and other
financing activities, including the issuance of debt and/or equity securities,
and/or the exercise of the put option described above.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
statement requires all derivatives to be recorded on the balance sheet at fair
value and establishes accounting standards for hedging activities. This
statement was subsequently amended by SFAS 137 (June 1999) and SFAS 138 (June
2000). As amended, this statement is effective for fiscal years beginning
after June 15, 2000. The Company is currently assessing the impact this
statement will have and, based on preliminary estimates, does not expect the
adoption to have a material impact on its consolidated financial position or
results of operations.
Forward-Looking Statements
All statements contained in this quarterly report, or in any document filed by
the Company with the Securities and Exchange Commission, or in any press
release or other written or oral communication by or on behalf of the Company,
that do not directly and exclusively relate to historical facts constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements represent the Company's
expectations and beliefs, and no assurance can be given that the results
described in such statements will be achieved.
14
These statements are subject to risks, uncertainties and other factors, many
of which are outside of the Company's control, that could cause actual results
to differ materially from the results described in such statements. These
factors include, without limitation, the following: (i) competitive pressures;
(ii) the Company's ability to consummate strategic acquisitions and alliances;
(iii) the Company's ability to attract and retain key personnel; (iv) changes
in the demand for information technology outsourcing and business process
outsourcing; (v) changes in U.S. federal government spending levels for
information technology services; (vi) the Company's ability to continue to
develop and expand its service offerings to address emerging business demands
and technological trends; (vii) changes in the financial condition of the
Company's commercial customers; (viii) the future profitability of the
Company's customer contracts, and (ix) general economic conditions and
fluctuations in currency exchange rates in countries in which we do business.
15
PART I, ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
For a discussion of the Company's market-risk associated with interest rates
and foreign currencies as of March 31, 2000, see "Quantitative and Qualitative
Disclosures about Market Risk" in the Part II, Item 7A, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," of
the Company's Annual Report on Form 10-K, as amended, for the fiscal year then
ended. For the nine months ended December 29, 2000, there has been no
significant change in related market risk factors.
16
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
2.1 Agreement and Plan of Merger dated as of September 19, 1999
by and among the Registrant, Nichols Research Corporation
and Nevada Acquisition Corporation ............................ (w)
2.2 Agreement and Plan of Merger dated as of June 20, 2000 by
and among the Registrant, Policy Management Systems
Corporation and Patriot Acquisition Corp. ..................... (x)
3.1 Restated Articles of Incorporation, effective October 31, 1988 .. (c)
3.2 Amendment to Restated Articles of Incorporation, effective
August 10, 1992 ............................................... (j)
3.3 Amendment to Restated Articles of Incorporation, effective
July 31, 1996 ................................................. (l)
3.4 Certificate of Amendment of Certificate of Designations of
Series A Junior Participating Preferred Stock, effective
August 1, 1996 ................................................ (n)
3.5 Amendment to Restated Articles of Incorporation, effective
August 15, 2000 ............................................... (y)
3.6 Bylaws, amended and restated effective December 6, 1999 ......... (v)
10.1 1978 Stock Option Plan, amended and restated effective
March 31, 1988* ............................................... (m)
10.2 1980 Stock Option Plan, amended and restated effective
March 31, 1988* ............................................... (m)
10.3 1984 Stock Option Plan, amended and restated effective
March 31, 1988* ............................................... (m)
10.4 1987 Stock Incentive Plan* ...................................... (b)
10.5 Schedule to the 1987 Stock Incentive Plan for United
Kingdom personnel* ............................................ (b)
10.6 1990 Stock Incentive Plan* ...................................... (i)
10.7 1992 Stock Incentive Plan, amended and restated effective
August 9, 1993* ............................................... (p)
10.8 Schedule to the 1992 Stock Incentive Plan for United
Kingdom personnel* ............................................ (o)
10.9 1995 Stock Incentive Plan* ...................................... (k)
10.10 1998 Stock Incentive Plan* ...................................... (t)
10.11 Form of Stock Option Agreement* ................................. (s)
10.12 Form of Restricted Stock Agreement* ............................. (s)
10.13 Annual Management Incentive Plan, effective April 2, 1983* ...... (a)
10.14 Supplemental Executive Retirement Plan, amended and
restated effective February 27, 1998* ......................... (s)
10.15 Deferred Compensation Plan, amended and restated
effective February 2, 1998* ................................... (q)
10.16 Severance Plan for Senior Management and Key Employees,
amended and restated effective February 18, 1998 .............. (r)
10.17 Severance Agreement with Van B. Honeycutt, effective
February 2, 1998* ............................................. (q)
10.18 Employment Agreement with Van B. Honeycutt, effective
May 1, 1999* .................................................. (g)
10.19 Form of Indemnification Agreement for Officers .................. (e)
10.20 Form of Indemnification Agreement for Directors ................. (d)
10.21 1997 Nonemployee Director Stock Incentive Plan .................. (p)
17
10.22 Form of Restricted Stock Unit Agreement ......................... (f)
10.23 1990 Nonemployee Director Retirement Plan, amended and
restated effective February 2, 1998 ........................... (q)
10.24 Rights Agreement dated February 18, 1998 ........................ (r)
10.25 $321 million Amended and Restated Credit Agreement
(Long Term Facility) dated as of August 18, 2000 .............. (y)
10.26 $321 million Amended and Restated Credit Agreement
(Short Term Facility) dated as of August 18, 2000 ............. (y)
28 Revenues by Market Sector
99.1 Annual Report on Form 11-K for the Matched Asset Plan of the
Registrant for the fiscal year ended December 31, 1999 ........ (h)
99.2 Annual Report on Form 11-K for the Hourly Savings Plan
of CSC Outsourcing, Inc. for the fiscal year ended
December 31, 1999 ............................................. (h)
99.3 Annual Report on Form 11-K for the CUTW Hourly Savings Plan
of CSC Outsourcing, Inc. for the fiscal year ended
December 31, 1999 ............................................. (h)
18
Notes to Exhibit Index:
*Management contract or compensatory plan or agreement
(a)-(h) These exhibits are incorporated herein by reference to the Company's
Annual Report on Form 10-K for the fiscal years ended on the
respective dates indicated below:
(a) March 30, 1984 (e)March 31, 1995
(b) April 1, 1988 (f)April 3, 1998
(c) March 31, 1989 (g)April 2, 1999
(d) April 3, 1992 (h)March 31, 2000
(i) Incorporated herein by reference to the Registrant's Registration
Statement on Form S-8 filed on August 15, 1990
(j) Incorporated herein by reference to the Registrant's Proxy Statement for
its August 10, 1992 Annual Meeting of Stockholders.
(k) Incorporated herein by reference to the Registrant's Quarterly Report on
Form 10-Q filed on November 13, 1995.
(l) Incorporated herein by reference to the Registrant's Proxy Statement for
its July 31, 1996 Annual Meeting of Stockholders.
(m) Incorporated herein by reference to the Registrant's Quarterly Report on
Form 10-Q filed on August 12, 1996.
(n) Incorporated herein by reference to the Registrant's Current Report on
Form 8-K dated August 1, 1996.
(o) Incorporated herein by reference to the Registrant's Quarterly Report on
Form 10-Q filed on February 10, 1997.
(p) Incorporated herein by reference to the Registrant's Proxy Statement for
its August 11, 1997 Annual Meeting of Stockholders.
(q) Incorporated herein by reference to the Registrant's Quarterly Report on
Form 10-Q filed on February 9, 1998.
(r) Incorporated herein by reference to the Registrant's Registration
Statement on Form 8-A filed on February 25, 1998.
(s) Incorporated herein by reference to Amendment No. 2 to the Registrant's
Solicitation/Recommendation Statement on Schedule 14D-9 filed on
March 2, 1998.
(t) Incorporated herein by reference to the Registrant's Quarterly Report on
Form 10-Q filed on August 14, 1998.
(u) Incorporated herein by reference to the Registrant's Quarterly Report on
Form 10-Q filed on November 15, 1999.
(v) Incorporated herein by reference to the Registrant's Quarterly Report on
Form 10-Q filed on February 14, 2000.
(w) Incorporated herein by reference to the Registrant's Current Report on
Form 8-K dated September 20, 1999.
(x) Incorporated herein by reference to the Registrant's Current Report on
Form 8-K dated June 20, 2000.
(y) Incorporated herein by reference to the Registrant's Quarterly Report on
Form 10-Q filed on November 13, 2000.
b. Reports on Form 8-K:
There were no reports on Form 8-K filed during the third quarter of fiscal
2001.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMPUTER SCIENCES CORPORATION
Date: February 12, 2001 By: /s/ Bryan Brady
----------------------------------
Bryan Brady
Vice President and Controller
Chief Accounting Officer
20
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- ------- ----------------------
28 Revenues by Market Sector
21