EXHIBIT 99.1
FOR RELEASE 6:45 A.M. CDT APRIL 29, 2003
Investor Contact: MEDIA CONTACT:
Perot Systems Corporation Perot Systems Corporation
John Lyon Mindy Brown
phone: (972) 577-6132 phone: (972) 577-6165
fax: (972) 577-6790 fax: (972) 577-4484
John.Lyon@ps.net Mindy.Brown@ps.net
Perot Systems Corporation
2300 West Plano Parkway
Plano, TX 75026
972.577.0000
www.perotsystems.com
PEROT SYSTEMS ANNOUNCES FIRST QUARTER 2003
FINANCIAL RESULTS
Perot Systems signs new contracts valued at $752 million and
expands its federal IT services business through the acquisition of
Soza & Company, Ltd.
Plano, TX - April 29, 2003 -- Perot Systems Corporation (NYSE: PER) today
announced financial results for the first quarter of 2003. Revenue for the first
quarter of 2003 was $338 million, a 4% increase year-to-year, with earnings per
share (diluted), prior to the cumulative effect of a change in accounting
principle, of $.14.
Effective January 1, 2003, Perot Systems adopted Emerging Issues Task Force
Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables" ("EITF 00-21"), for all of its contracts with multiple elements,
which resulted in a charge for a cumulative effect of a change in accounting
principle of $.25 per share (net of tax). Under Accounting Principles Board
Opinion No. ("APB") 20, "Accounting Changes," Perot Systems is required to
report pro forma earnings as if EITF 00-21 would have been applied to all
periods reported. On this pro forma basis, earnings per share (diluted) would
have declined from $.15 per share for the first quarter of 2002 to $.14 per
share for the first quarter of 2003. This decline is primarily attributable to a
decline in profit from short-term consulting offerings and certain aspects of
the company's long-term account base, primarily resulting from reduced
discretionary spending.
Ross Perot, Jr., president and CEO of Perot Systems, said, "Against the backdrop
of a very challenging global economic environment, we continue to win new
contracts; have built a thriving government practice; and have visibility into
the areas where we can improve our performance. In many respects, 2003 has
started on solid terms, but broad economic weakness continues to pressure profit
margins and earnings, causing Perot Systems to begin 2003 on a lower earnings
base.
Page 1
Perot Systems Announces 1Q 2003 Financial Results Page 2 OF 9
"This challenging environment, however, will not be an excuse for our team, but
a catalyst for us to strengthen and focus our company even more. We continue to
evaluate all aspects of our company with the objective of increasing
productivity and efficiency, and to prepare ourselves for a range of potential
market conditions. This evaluation is not a one-time event, but a continual
process to ensure that our company achieves its long-term business objectives in
an efficient and effective manner."
First Quarter 2003 business highlights include:
o Signing new contracts valued at $752 million of total revenue, bringing
the total value of contracts signed during the past twelve months to
$1.6 billion.
o Revenue growing sequentially by 2% to $338 million.
o Perot Systems expanding its presence within the Federal IT Services
market through the acquisition of Soza and Company, Ltd. With this
acquisition, Perot Systems Government Services will expand to more than
$200 million of revenue for the full year 2003.
o SG&A as a percentage of revenue declining from 13.8% of revenue for the
first quarter of 2002 to 12.8% of revenue for the first quarter of
2003. Since Perot Systems began its process of increasing the
efficiency of its overhead structure during the third quarter of 2000,
SG&A, prior to the effect of acquisitions, has fallen by 16%.
o Perot Systems exceeding the 10,000-employee mark during the first
quarter.
For the first quarter of 2003, Perot Systems revenue of $338 million came from
three primary lines of business:
o IT Solutions, Perot Systems line of business that provides commercial
outsourcing solutions customized to specific vertical markets,
contributed first quarter 2003 revenue of $290 million, a decrease of
7% year-to-year, or a decrease of 1% on an organic basis, which
excludes activities the company exited and applies EITF 00-21 on a pro
forma basis to the first quarter of 2002.
o Perot Systems Government Services, the company's Federal IT Services
line of business, achieved first quarter 2003 revenue of $35 million,
all of which comes from the acquisitions of ADI Technology Corporation
completed during July of 2002 and Soza and Company, Ltd. completed
during February of 2003.
o Perot Systems Consulting line of business, consisting of its
project-based application development, systems integration and package
implementation practices, contributed first quarter 2003 revenue of $13
million, a 14% decline year-to-year.
Perot Systems Announces 1Q 2003 Financial Results Page 3 OF 9
TREND INFORMATION, ACCOUNTING CHANGE, AND BUSINESS OUTLOOK
The information contained within this section and the accompanying footnotes to
the financial statements are important for understanding current and future
performance. Some of these statements involve projections of Perot Systems
future financial performance and are based on current expectations. These
statements are forward-looking, and actual results may differ materially. In
formulating the company's projections, the company has considered recent and
potential sales, acquisitions and current market conditions, with these factors
being subject to risks and uncertainties as detailed within this press release.
Effective January 1, 2003, Perot Systems adopted EITF 00-21 on both a
prospective basis and for existing customer contracts. This voluntary adoption
for existing contracts, which Perot Systems believes provides greater
transparency into the performance of its multi-element arrangements, resulted in
a charge for the cumulative effect of a change in accounting principle, net of
tax, of $.25 per share, and included a charge of $.11 per share to recognize an
estimated loss on a contract element included in an otherwise profitable
contract. On a GAAP pro forma basis, which applies the cumulative effect of a
change in accounting principle to the relevant prior periods as required by APB
20, earnings (loss) per share (diluted) for 2001 and 2002 would have been ($.09)
and $.52, respectively. The 2002 pro forma earnings per share includes the
previously mentioned $.11 per share charge to recognize an estimated loss on an
element of an otherwise profitable contract. Using this same pro forma method,
Perot Systems quarterly earnings per share (diluted) for the first, second,
third and fourth quarters of 2002 would have been $.15, $.10, $.13, and $.15,
respectively.
For the second quarter of 2003, Perot Systems expects revenue to range from $353
million to $363 million, representing year-to-year growth of between 6% and 9%.
On a sequential first quarter to second quarter basis:
o New sales and a full quarter of revenue from the acquisition of Soza
and Company, Ltd. are expected to add between $27 million and $37
million of revenue.
o The second quarter revenue range includes $10 million to $15 million of
potential sequential declines within Perot Systems account base. For
the second half of 2003, Perot Systems does not have indications of
further material sequential discretionary spending pressure within its
account base.
For the second quarter of 2003, earnings per share (diluted), is expected to
range from $.12 to $.14 with this range incorporating spending pressure in the
company's account base, as well as start-up costs on new contracts. This range
does not contemplate any costs stemming from changes or actions that may result
from management's ongoing review of operations. Perot Systems voluntary early
adoption of EITF 00-21 for existing contracts, as well as contracts signed
during the first
Perot Systems Announces 1Q 2003 Financial Results Page 4 OF 9
quarter of 2003, is expected to reduce forecasted second quarter 2003 earnings
per share by approximately $.03, and is incorporated into the previously
mentioned range.
CONFERENCE CALL
Perot Systems will hold a conference call to review first quarter 2003 results
of operations on April 29, 2003 at 10:15 a.m. EDT. Parties interested in
participating may join the conference call via the Internet at
www.perotsystems.com.
Perot Systems Announces 1Q 2003 Financial Results Page 5 OF 9
PEROT SYSTEMS CORPORATION
INCOME STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31
(MILLIONS OF USD, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<Table>
<Caption>
Three Months Ended March 31
-----------------------------------------------
2002 2003 % Change
---------- ---------- ----------
IT Solutions $ 310.2 $ 289.6 (7)%
Government Services -- 35.0 n/a
Consulting 15.1 13.0 (14)%
Other 0.5 0.4 (20)%
---------- ---------- ----------
Total Revenue 1) 325.8 338.0 4%
Direct Cost of Services 2) 251.8 272.1 8%
---------- ---------- ----------
Gross Profit 74.0 65.9 (11)%
Selling, General & Admin 45.0 43.4 (4)%
---------- ---------- ----------
Operating Income 29.0 22.5 (22)%
Earnings From Unconsolidated Affiliates 3) 1.9 1.5 (21)%
Other Income/(Expense) 4) 0.2 1.3 550%
Interest Income, net 1.0 0.7 (30)%
---------- ---------- ----------
Pretax Income 32.1 26.0 (19)%
Income Tax Expense 12.7 10.1 (20)%
---------- ---------- ----------
Income before cumulative effect of accounting change 19.4 15.9 (18)%
Cumulative effect of accounting change, net of tax 5) -- (28.6) n/a
---------- ---------- ----------
Net income (loss) $ 19.4 $ (12.7) (165)%
========== ========== ==========
Per Share Data:
Income before cumulative effect of accounting change $ 0.17 $ 0.14 (18)%
Cumulative effect of accounting change 5) -- (0.25) n/a
---------- ---------- ----------
Earnings (Loss) Per Share (Diluted) 6) $ 0.17 $ (0.11) (165)%
Shares Outstanding (Diluted) 115.6 113.9 (1)%
</Table>
Perot Systems Announces 1Q 2003 Financial Results Page 6 OF 9
BALANCE SHEET
(MILLIONS OF USD)
(UNAUDITED)
<Table>
<Caption>
As of As of
12/31/2002 3/31/2003 % Change
---------- ---------- ----------
Cash 7) $ 212.9 $ 127.8 (40)%
Accounts Receivable, net 162.4 197.3 21%
Prepaid Expenses and Other 42.3 47.9 13%
---------- ---------- ----------
Total Current Assets 417.6 373.0 (11)%
Property, Equip. & Soft., net 62.5 61.9 (1)%
Long-term Accrued Revenue 74.5 45.4 (39)%
Goodwill, net 211.1 283.0 34%
Other Non-current Assets 76.6 104.0 36%
---------- ---------- ----------
Total Assets $ 842.3 $ 867.3 3%
========== ========== ==========
Current Liabilities $ 155.5 $ 188.9 21%
Long-term Liabilities 10.2 10.1 (1)%
Stockholders' Equity 676.6 668.3 (1)%
---------- ---------- ----------
Total Liabilities & Stockholders' Equity $ 842.3 $ 867.3 3%
========== ========== ==========
</Table>
FINANCIAL STATEMENT NOTES
1) For the first quarter of 2003, total revenue grew by 4% year-to-year.
Perot Systems IT Solutions line of business declined by $21 million
year-to-year. This decline is primarily attributable to a $23 million
year-to-year decline in short-term consulting offerings and certain
aspects of the company's long-term account base. Contracts signed
during the past twelve months contributed $19 million of revenue growth
year-to-year. Account activities that Perot Systems exited or is in the
process of exiting, which declined by $13 million year-to-year, include
two joint ventures the company exited during 2002. Additionally, Perot
Systems recorded $3.8 million more revenue in the first quarter of 2002
than what would have been recorded under the principles of EITF 00-21.
Perot Systems Consulting line of business declined by $2.1 million, or
14% year-to-year primarily as a result of lower revenue for custom
application solutions and package implementation services. Perot
Systems Government Services was formed during the past year through the
acquisitions of ADI Technology Corporation and Soza and Company, Ltd.
All of the revenue from this line of business is attributable to these
two acquisitions.
Perot Systems Announces 1Q 2003 Financial Results Page 7 OF 9
2) Direct cost of services for the three months ended March 31, 2003,
includes $2.0 million of expense associated with unfulfilled minimum
purchase commitments.
3) Amounts represent earnings from Perot Systems' 49.5% ownership interest
in HCL Perot Systems (HPS), its India-based offshore software solutions
and services provider.
4) Other Income/(Expense) for the three months ended March 31, 2003,
includes a $1.2 million non-investment interest payment.
5) In November 2002, the EITF reached a consensus on EITF 00-21, regarding
when and how to separate elements of a contract into separate units of
accounting. Perot Systems is required to adopt EITF 00-21 for all new
revenue arrangements entered into in fiscal periods beginning after
June 15, 2003, but also may apply the provisions of EITF 00-21 to
existing contracts and record the effect of adoption as a cumulative
effect of a change in accounting principle. Perot Systems adopted EITF
00-21 as of January 1, 2003, for both existing and prospective customer
contracts. This voluntary adoption for existing contracts resulted in a
charge for the cumulative effect of a change in accounting principle of
$46.1 million ($28.6 million, net of tax), or $.25 per share, which
includes an estimated charge of $19.5 million ($12.1 million, net of
tax), or $.11 per share, to recognize a loss on a contract element
included in an otherwise profitable contract.
6) Perot Systems accounts for its employee and non-employee director stock
option activity under APB 25, "Accounting for Stock Issued to
Employees" and related interpretations. Had the company elected to
adopt FAS 123, "Accounting for Stock Based Compensation," the pro forma
diluted earnings per common share for the three months ended March 31,
2002 and 2003, would be $.14 and ($.15), respectively.
7) For the three months ended March 31, 2003, net cash decreased by $85.1
million from $212.9 million at December 31, 2002. Net Cash Provided by
(Used in) Operating, Investing, and Financing activities were $8.3
million, ($96.0 million), and $0.8 million, respectively, for the three
months ended March 31, 2003.
Perot Systems Announces 1Q 2003 Financial Results Page 8 OF 9
PRESENTATION OF NON-GAAP FINANCIAL INFORMATION WITHIN THIS PRESS RELEASE
In an effort to provide investors with additional information regarding the
company's results as determined by GAAP, Perot Systems discloses certain
non-GAAP financial information, which management believes provides useful
information to readers of this press release. Management refers to three
non-GAAP financial measures within this press release:
Organic Revenue Decline for IT Solutions is Perot Systems reported revenue
decline for IT Solutions, excluding activities the company exited and applying
EITF 00-21 on a pro forma basis to all prior periods reported. Perot Systems
management team believes that this non-GAAP measure is meaningful and important
to investors because the company has exited, or divested, various operations
during the past few years. This non-GAAP measure provides investors with
additional information regarding the drivers of growth and contraction within
the company's business. Additionally, and consistent with APB 20, the company is
providing additional disclosure on how its adoption of EITF 00-21 has affected
revenue from period to period. The organic revenue decline from first quarter of
2002 of 1% for IT Solutions is calculated based on the reported revenue decline
of $20.6 million, adjusted for a decrease in revenue of $12.7 million associated
with exited activities and a decrease in revenue of $3.8 million related to
revenue recorded in the first quarter of 2002 that would not have been recorded
in that period under the principles of EITF 00-21.
SG&A, Prior to the Effect of Acquisitions, is Perot Systems reported SG&A for
the first quarter of 2003, less the SG&A expense associated with acquisitions
completed since the third quarter of 2000. Since the third quarter of 2000,
Perot Systems management team has actively targeted reducing SG&A and improving
the efficiency of its overhead structure. Perot Systems management team believes
that this non-GAAP measure is meaningful and important to investors to show how
organic SG&A has been reduced prior to the additional SG&A resulting from six
acquisitions completed since July of 2000. This non-GAAP measure provides
investors with additional information regarding the effectiveness of Perot
Systems activities aimed at reducing SG&A. For the first quarter of 2003, SG&A
prior to the effect of acquisitions was approximately $36 million, while total
company SG&A was approximately $43 million for the third quarter of 2000
(excluding $1.6 million of goodwill amortization that was recorded prior to the
adoption of FAS 142, "Goodwill and Other Intangible Assets," which was effective
January 1, 2002).
Projected Earnings Per Share (Diluted) Excluding Charges Relating to
Management's Ongoing Review of Operations is Perot Systems projected earnings
per share (diluted) range for the second quarter of 2003, excluding the effect
of any possible charges associated with actions that might be taken in response
to management's ongoing review of operations. Management's review of ongoing
operations may result in actions designed to reduce costs or otherwise improve
operational efficiency. If management determines that such actions are
appropriate, there may be expenses associated with
Perot Systems Announces 1Q 2003 Financial Results Page 9 OF 9
taking those actions. Perot Systems cannot currently estimate any expenses that
may be incurred and therefore cannot reflect those expenses in forward-looking
projections.
ABOUT PEROT SYSTEMS
Perot Systems is a worldwide provider of information technology services and
business solutions. Through its flexible and collaborative approach, Perot
Systems integrates expertise from across the company to deliver custom solutions
that enable clients to accelerate growth, streamline operations and create new
levels of customer value. Headquartered in Plano, Texas, Perot Systems has more
than 400 clients and reported 2002 revenue of $1.3 billion. The company has more
than 10,000 associates located in North America, Europe, and Asia. Additional
information on Perot Systems is available at http://www.perotsystems.com.
This press release contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "forecasts," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue" or the negative of such
terms and other comparable terminology. These statements are only predictions.
Actual events or results may differ materially. In evaluating all
forward-looking statements, you should specifically consider various factors
that may cause actual results to vary from those contained in the
forward-looking statements, such as: the loss of major clients; deterioration of
project and consulting-based revenue and profit associated with deteriorating
market conditions; the Company's ability to achieve future sales; changes in its
UBS relationship and variability of revenue and expense associated with its
largest customer, as well as other clients; a portion of client revenue and
profits represent spending above contractual minimums, which could be deemed as
discretionary by clients and result in lower revenue and earnings for the
Company with limited notice; the current and future performance of client
contracts; risks associated with non-recoverable cost overruns on software
development contracts; growing start-up businesses; the highly competitive
market in which the Company operates; risks associated with signed contracts
that must receive regulatory approval; the variability of quarterly operating
results; the reliance on estimates that involve successful completion of future
actions; guaranteed purchase agreements; changes in technology; changes to
accounting methods; risks associated with acquisitions and divestitures; and
risks related to international operations. Please refer to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2002, as filed with
the U.S. Securities and Exchange Commission and available at www.sec.gov, for
additional information regarding risk factors. The Company disclaims any
intention or obligation to revise any forward-looking statements whether as a
result of new information, future developments, or otherwise.
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